>> president trump turns up that he china. iffs on $2 billion of good on china. beijing finds a way out of the tariffs for some of its products. elon musk announces a japanese villain will be the first person -- a around the moon on a japanese billionaire will be the first person to run the moon on a spaceflight. welcome to "surveillance." . am nejra cehic in londonder

francine lacqua is on assignment . the shanghai composite rebounding after it closed at a 14-year low yesterday. a similar picture in europe after a risk-on in equities, not by much, but the stoxx 600 to some .2%. ,peaking of commodities yesterday we saw a significant life in industrial metals. today, we did see copper dropping, but it did recoup itself in the asian session, and we are in the positive section now. meanwhile, the 10-year treasury yield not doing a lot. if anything, it was raising by one basis point earlier. 2% three the italian 10-year, some disagreement over the budget. coming up on "surveillance," we

will speak with howard shores at 9:30 a.m. u.k. time in this show. first words get to news, and we go to dubai and leslie humphrey. leslie: brett kavanaugh anti-woman who accuses him of decades-old sexual assault will testify before a senate committee. the committee will hold a new hearing, vowing rusher from democrats and republicans. the accuser says he assaulted her at a party. south korean president moon jae-in in in pyongyang to meet north korean leader kim jong-il. the landmark meeting is to result talk between the continent and the u.s. resisted spelling out a

timetable for giving up his nuclear weapons. the european council president has concerns that you leaders have not discussed how to finalize the brexit talks, including a council in november. letter also warned that a no deal outcome is still possible. most in thewon the awards of any tv network, capping a sudden and dramatic rise to the entertainment energy for a company that got its start in dvd by mail. overall, both records for the treatment -- tv giant. the biggest winner is "the crown" at "godless," in western many cities -- miniseries three.

global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nejra. nejra: leslie humphries in dubai, thank you. $2 billion on chinese tariffs. shaping up to be a prolonged shrink war between the world's butbiggest economies, china is not tha backing down. curran, our chinese correspondent, joins us. endo, what we heard so far? endo: may have made it clear that they have stopped short of detailing how exactly they will retaliate. for example, the economics of and they didffs, not put out a dollar figure out there. by the way, the foreign ministry said they will respond when the

time is right, so china is making it very clear they do plan to retaliate. they are not going to take this lying down. that is to be expected. but perhaps a hint of a conciliatory tone in terms of how they will retaliate hints maybe they are willing to come to the table. nejra: if this becomes the latest imposition on tariffs is likely to have a meaningful impact on chinese economy, endo? endo: there certainly is a view that the tariffs will of course her china's economy. the market was broadly expecting tariffs of 25% in one go. oncerump has said tariffs in percent initially, but ramping up to 25% in january. maybe half a percent or more china's gdp growth rate, then of

course they are a little bit secret in terms of how they in response. they cannot respond in dollar for dollar against the u.s. they can respond and non-tariffs ,.com as a cost for chinese own economy, to your chinese workers, -- too. esenese workers, chin companies ip. nejra: thank you so much to enda curran. morning, luiss citigroup global markets. gentlemen, great to have you with us. thank you so much for joining me. you could call it a shrugging off of release rally, despite what somewhere previously calling what could be the worst case scenario in a step up in

the trade negotiations your do you put this rally because we did not get the 25% levy? isst: you should remember it 25%, so it is already priced in, and i think we're waiting to see what the chinese reaction would be. i would like to say the tone is more important than the substance. for now, we have not seen the substance to it even though it is regulatory -- regularly office, it is the beginning of a new reach to say it is a low point, so i think we have to say the worst has not really happened, and we have to wait for the chinese reaction with this. bera: luis, is it going to worse from here? luis: we believe so. the trump administration gave several heads up in terms of their attention.

said it would get better than the midterm elections. why so? the has been a core of trump policies. the u.s. administration might resort a lot more to foreign with theory talked that everything will be fine after the midterms. the fact that they started with is0% hike on tariffs basically accepting the playbook. if china does not abide by the terms. the problem is there has been, in my view, very little interaction between those parts. the u.s. administration says we have been discussing, but we do not see a summit.

there was an intention to come up with a summit in it fell through. there has been very little tit-for-tat. nejra: low-level talks causing concern during does that mean the environment gets worse were emerging markets? luis: one saying that emerging markets is a asset class because of injury take it off of emerging markets, bonds or equities, they become a much weaker asset class. it will be a very important challenge. nejra: luca, you have not upgraded your allocations from equities to weight yet is that. based on waiting to see what will happen with the trade war? luca: we see some growth from an exceptional eye level, in particular the rising in the u.s., the tide turning during the trade war is one, but it is not the critical one.

expect the escalation, but uncertainty will have an impact on markets for the foreseeable future. nejra: ok, luis costa from citigroup will market and luca paolini of pictet stay with us. nouriel roubini, chairman and ceo of roubini global, will join us. this is bloomberg. ♪ this is bloomberg. ♪

nejra: economics, finance, politics, this is "bloomberg surveillance." i am there to its in london -- i am nejra cehic in london. let's get to leslie humphrey in dubai. for the next round of

tariffs, the trump administration has hit on the apple watch and others. the u.s. government released the finalists so about $200 billion of chinese products hit with a new 10% tariffs. products cover apples watch and pods, and items included by others, including fitbit, not on the list. clarion has appointed a new chief executive. assets from its largest investor, saudi-based industries. ernestocollaborate with and former dow chemicals executives. the outgoing ceo moves to the chairman role. we will be talking with clea lariant's cfo at 9:30 ok time. a japanese billionaire will take

the first spacex ride around the room and plans to invite as many as eight artists with him. the company's ceo may also joined the spaceflight. yusaku: i am really proud and really honored to share this announcement with you and with people all over the world. le wall street is back where it was before theslie: -- leslie: wall street is that it was before the financial crisis. to -- in 2017.

earnings were up a further 11% in the first half of this year. wall street is on track to 1700 jobs this year. that is the bloomberg business flash. dubai,leslie humphrey in thank you very much. about .2%e higher even after announcements that the trump administration will on chinese10% tariff goods next week. e.m. stops the drop as default rate rise among escalating trade conflicts three stick with us is luis costa from citigroup and luca paolini. what opportunities are we looking at within the space? the number one effect is on growth, right?

importantsome very figures here. old china is actually the infrastructure-based china. that is important for western europe in general. that is not giving, you know, major fines here, it is giving signs of deceleration. they are reacting to the. you have some lead indicators here showing that e.m. could be coming down. on top of that, you have the trade alliance, which we do believe we are seeing strong rates in emerging markets, like south africa. somewhere you can see the central bank slips that on hold, and we have rising in a little bit of hiking activity bond central banks -- by central banks.

but that may not be the case over the next six months to nine months. generally speaking, the currencies will remain under pressure. it is the big dollar. the big dollar, there is a magnet to the dollar now. the under performance of china versus the s&p. i mean, the world continues to follow a lot of u.s. stocks. nejra: we kept talking about the strong dollar all year, luca, but you can see the rallies kind of stalled since the end of june. of course it showed certain select e.m. currencies, but overall, the bloomberg dollar index not doing a whole lot since the end of june. with weighted and move from here -- which way does it move from here? luca: i believe the rally in the dollar is difficult, the u.s. was doing much better, and the fed was moving. it cannot go much higher. i see some indication that europe and japan will actually

get better. the dollar is very expensive. i really feel that also the fact that some signals, neither were soft, but i think we should be a little more cautious because with the dollar be a strong, lead indicators starting to weaken, i think the fed will soften. i think -- nejra: that makes you overweight e.m. equities? luca: yes i disagree that the emerging market growth is weaker, but it is weaker in developed markets. the chinese government will be more fiscally conservative going forward, which will be important for emerging markets available. low in emerging markets, that is reason to get

back in, what would be the response? luis: for the same reason. the bracket on the fixed-income side quite cheap. dragst the south african , and back in south africa, resilient bond. -- brazilian bond. it has not been necessarily driven by value. i think this is very important. the allocation we have been seeing or the change of allocation has been actually driven by other factors, or fear of outflows responding to the i am quitedollar, so skeptical here that this is the point to extract value at. i think we are still in a very cautious, very defensive market. global markets, specifically speaking, equities and bonds. nejra: i will break headlines for you guys -- jack ma alibaba

speaking and saying the china trade worker last 20 years, saying the trade war could be big and last longer than expected. a quick question, luca, on tech. we have seen tech hit since the trade war started. should we be positive on tech? luca: i do not always wanted talk about valuation, but i think tech is very old-fashioned. it is a cyclical sector. there is no question you want to be invested in tech. in a short-term, i think it is expensive, over own, and it is tougher from any impact. we are short-term on tech. pictetluca paolini of and luis costa of citigroup stay with us. coming up, how are source of short capital joins us to talk brexit -- howard shores of

short capital joins us talk brexit. this is bloomberg. ♪ this is bloomberg. ♪

>> raises the level of effectiveness. nejra: this is "bloomberg surveillance." the new finance minister speaking in milan. let's listen in. >> so in the near future, we will see a more confident overcape, distributed all europe. european countries have long been working to read horse

integration and domestic markets through the banking and the capital markets union plans. the banking union has significantly contributed to reduce risks. nejra: stick with us is luis costa from citigroup local markets and luca paolini from pictet asset management. will we continue to see it tighten up? we're at 240 basis points right now. luca: i think we will reach a level where the market is pricing in as the right kind of risk in italy. i think the government is confused, but it is popular right now, but i do not think there will be any big news in the coming days. nejra: luis? to agree, though if we are wrong, in my world, which is e.m., we have to continue

looking at spreads. spread,s of care of the we saw quite a lot of pressure, so i think this is a nice hedge to have in k's our assumption here is wrong. -- in case our assumption here is wrong. nejra: all right. luca paolini and luis costa stay with us. and coming up, we will speak with cfo patrick jamie next. this is bloomberg. ♪

nejra: economics, finance, politics. this is "bloomberg surveillance." let's check in on what is trending in the bloomberg universe. $200e impose tariffs on

billion worth of chinese goods. brett kavanaugh and the woman who accuses him of sexual assault will testify next week. south korean president moon pyeongchangves in to continue nuclear talks. announced the first passenger for the spacex flight around the moon. let's get to bloomberg first word news. china has this morning said it will levy retaliatory tariffs on the u.s.. that came in response to the trump administration announcing it will impose 10% tariffs on chinese goods next week.

what will be a prolonged trade war between the worlds two biggest economies. womankavanaugh and the who accuses him of decades-old sexual assault will. testify next week before a senate committee it will hold a new hearing on monday. she says cavanaugh assaulted her at a party when they were in high school. an hearing proves to be explosive showdown in the era of the metoo movement. south korean president moon jae-in is in north korea to meet with kim jong-un to solve its nuclear talks between the regime and the u.s. kim has resisted toempts from the u.s.

-- netflix earned seven awards during the primetime presentation of the emmys and 23 overall nominations. its biggest prizes came for "the drama about the royal family and "godless." 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. this is bloomberg. nejra: thank you so much. higher this morning after announcing management changes and a strategic review. the chemical company named a new ceo and said it will upgrade its plastic division. the two companies have been in talks all summer on how to .everage the relationship

zurich.joins us from great to have you with us. investors reacting positively from the news this morning in terms of governance in the strategic review. i want to ask you about the stake. thatu have 100% certainty they will make a full takeover of clarion? patrick: i think what we can talk about, they have released a statement today that they do not intend. to take over that is how we take it. they have a long-term investment and shareholder on the company. nejra: can you give us a

timeline on how you're going to approach this? allows for aupdate high-performance data area, the other is to invest in the remaining piece in more than two businesses. we will start the process now of doing a carveout and divesting those businesses.we expect this to be completed by 2020. nejra: speaking of some of your targets and what you expect to no, lifting the margi guidelines by 2020 is seen as ambitious by some analysts. how do expect to get to that margin? on the one hand, our current businesses are improving their performance based on innovation. on the one hand, creating a new

high-performance volume business. leveraging on synergies and on unique properties of those lasted materials that we are combining. on the other hand, we are divesting lower margin pieces, which also helps the group to improve its margin average. , it is a combined move which really reflects an upgrade in terms of quality of portfolio and earnings for the group as well. patrick, in terms of getting to the ideal size of $15 billion in sales, options are on the table for that, does it include more m&a? : patrick i think we first have a lot of work to do to make the exchange of reality in the next quarter's end year. -- and year. that is the main priority.

if you look longer term, we clearly look at other growth options. also external growth. it is about creating value. it is not only about size, it is about creating value for all shareholders like this move we announced today actually means. if there are other possibilities in the future, we will not guide for either today. today, we have a clear program for the next two years. hours, youhe past 24 have also had an escalation in the trade war between the u.s. and china. does this to your business at risk in any way? are in thethink we lucky position that we do have regionalized production, therefore we mainly serve regional markets at original production as well, which makes us less dependent on the es nowrs and trade them

being imposed here and there in the world. it doesn't make us and me and, but at least reduces -- immune, but at least reduces impact. nejra: thank you so much to patrick, the ceo of clarion. the european council president has confirmed that eu leaders are to discuss the final phase of the brexit talks, including the possibility of calling another european council in november. the informal meeting of heads of state and salzburg also warned a no deal outcome is still possible. one of the main points of contention is still the irish border question. luis and luca are still with us. irish ask you on the border question, are you confident a solution will be found? martin: i'm confident the u.k. and european union don't want

the rio position of an irish border, of physical infrastructure. with everybody striving towards the same objective, it should be possible to find a solution. there are obviously commitments from that government in relation to a backstop. we are getting to the point now where it is important that an agreement is arrived at in the 2019future given that mark -- march 2019 is the date. nejra: if they get a no deal or hard brexit, will that be positive for foreign direct investment? is --rall, i think brexit we respect the democratic will of the british people. it has a diverse impact on some of our indigenous factors that place heavily with the u.k.

having said that, since the brexit referendum, we have seen huge interest in ireland from foreign direct investment. that probably starts with financial services. any factors that are regulated into the european union are looking at a post-brexit solution in the event that there isn't a u.k.-eu trade deal. we are still a long way from that. we still have to agree on the long-term agreement. the outcome of that will dictate the extent to which it will be positive or negative in terms of investment. clearly, investors don't like the uncertainty they are seeing at the moment. because of that uncertainty, it is driving them to what they perceive as stable jurisdictions like ireland. nejra: the investment people are looking at, are we talking long-term or something for the interim until they get more clarity, not just through march

2019, but over the two years beyond that? martin: i think investors have been very clear in our engagement. they are planning for the long-term. there is no going back. they're placing all of their bets until they see how this unfolds. i think investors don't want to find themselves in the same situation again. we are seeing also that there is likely a more distributive model across europe. there will be the same level of concentration there has been in the u.k.. nejra: we have had positive signs recently in terms of their potentially averting the no deal scenario. what does that mean for how you look at the u.k. as an investment proposition? luca: i really believe that a lot has already priced in.

i think a lot of uncertainty will continue. what i can see is one of the most attractive, the currency is cheap. obviously, if we don't know what the outcome is going to be, this is not quick to be resolved in the next few weeks. nejra: how does this translate into your world of emerging markets? luis: it is an important satellite risk. theling has reacted to potential change of monetary cycle of the boe. we stopped reaction to that over the past couple of months. we normalized. it is now gaining traction once again. sterling is starting to react. uncertainty will continue. the main stumbling block is not the irish border, it is the fight for leadership at the very heart of the party.

nejra: that is what a lot of people say could risk a hard pregnant -- brexit. is that a view you share as well? i think we are at the point where decisions have to be made. i think investors are craving certainty at this point. if we get to the point of march of next year and that certainty hasn't arrived, and the transition arrangement doesn't kick in, i think that would be detrimental for all involved. the u.k., most of all but also the eu and ireland. nara bank we have seen table volatility pickup. i guess that could sustain until we get the certainty. would you be buying sterling at this point with the levels where they are at now? luca: everybody is incredibly bearish about the u.k. economy. i think any surprise from that

point could have a big boost to the town. it is probably too early to attract this view. it is something that for the next year, we have to look at. nejra: thank you so much for joining us. stay with us. plenty coming up, including the japanese billionaire set to board a spacex rocket ship around the world. he'll be the first private citizen to make the journey. later, we sit down with the chairman of sure capital group to talk brexit and break down the company's results. this is bloomberg. ♪

nejra: this is "bloomberg surveillance." i'm nejra cehic in london. toapanese billionaire is set be the first private citizen to go around the moon. he is the head of japan's largest e-commerce company. he will make a journey only 24 astronauts have been on since the apollo era. >> finally i can say, i'm very glad to be here, and really exciting, and really honored. i really appreciate to be able , to share this announcement with you. money will help with the developments of this ship and ultimately, this system is going

isbe a part of our system, intended to carry anyone into orbit and to the moon and tomorrow -- to mars. helping themately average citizen to be able to travel to other planets. nejra: let's get to our editor, chris in berlin. good to have you on the show. tell us what we know so far? chris: one of the big things we don't know is what the price tag is. i don't know how much to save, how much do i put away? how many millions of years of my savings to i have to put aside? it is an ambitious project. you have this really feel-good atmosphere going on. you have this young, dynamic japanese billionaire, and he along.o bring artists

he wants to do these are projects to bring the experience to people that couldn't make the trip. it is a good feel-good project. nejra: this news a nice for spite from teslas recent troubles. it puts them back in the visionary camp. he has this dynamic guy talking about how he wants to get the role to the next level. -- world to the next level. to get him away from a lot of the troubles that i been dogging him with tesla lately. yesterday, audi came out with eac-tron, the next tesla keller. -- killer. you have saudi arabia who is supposed to be one of the funding secured backers for the going private, instead investing

money into arrival. this is -- a rival. he will ride with that for a while. nejra: thank you so much. let's switch gears. sure capital group focuses on alternative markets. yesterday, the firm resulted in a 6.5% increase in revenue. for more on shore capital results, as well as the potential headwinds facing the business, is the company's chairman. we are talking about a very diversified group here. was the performance strong across all the areas? >> overall, a strong performance, especially in asset management. a little tougher in capital markets. with think we made a lot of progress in terms of winds. we see a better outlook in the second half. we are quite positive about both

main components of the business. nejra: you say your optimistic about the future. what are you particularly optimistic about? it has been a tough business because of increased regulatory environment over the last 10 years. i think eventually we are going to get a landscape where there will be less competitors, global investment banks are withdrawing from the space and smaller investors are finding it difficult. there is big demand and it is growing from sme's to raise capital. i think we are fantastically well positioned to help those sme's raise the capital they are going to require to build their business in the coming years. nejra: have you been seeing increased demand for ip is in the u.k.? increase, i'm not sure. i think there is good demands. i think there is always

interesting deal flow that comes to the u.k. capital markets. that is going to continue very much post-brexit where fantastically open capital market, and we can raise capital's with a diverse range of businesses. nejra: what impact has that had on your research business? howard: in some ways it has helped because it focuses on people with a research value.in other ways, it puts revenue on hold for the whole industry. it is one of those challenges we need to overcome . we move forward. on visit, the cost of regulation has had an impact on the whole industry. a number of people i've spoken to said they were concerned that the rules of research on bundling and other things could have a negative impact on brokers, in particular. have you seen that at all?

howard: the biggest thing to focus on is, is a good for the consumer and good for the corporate? what it unfortunately led to was less coverage on smaller companies, which is not healthy. we are where we are. we need to move forward. what we have seen is a lot of customers take up our research and pay for it because they value it, because we have some really good analysts. nejra: want to talk about brexit as well. quite a big week with this and -- informal summit happening in salzburg. howard: there is going to be a deal. there is a 95% chance in my mind there will be a deal. unfortunately, it is going to be a similar kind of deal. eu is that of the the deals are always done last-minute. they always plan not extra time. i don't see anything happening

this week. we did see in the press, rumors that borneo is now accepting the proposal regarding the irish border. i think the eu, at the end of the day, when they are faced with a no deal scenario, will find a way to deal with the u.k.. it wouldn't be the deal i would do. i have always said that the key to advantage of leaving the eu is to deregulate. thehave to think about why u.s. stock market has been so strong. by the business community in the u.s. is so confident. it is not necessarily because they like trump, yes, there have been corporate tax cuts, but the big thing is deregulation. the big opportunity from leaving the eu is to deregulate. you can't do that if you tire soft to the eu rules. anyuld always say,

companies not trading in europe should not be business bound by eu rules. nejra: is there a risk that actually the u.k. will be in a bit of no man's land an end up being what people refer to as a taker? howard: yes, because of the deal he put on the table. i would offer a different deal. i think we have a stronger negotiating position there may have. i would insist that we are not a rule taker if we are not trading in europe. i would insist that financial service companies have full access to the eu market in return for continuing to allow their experts free access to our markets and paying them 40 billion quite. nejra: the other thing dominating markets is the escalating trade war between the u.s. and china? what impact is that having? impact,it has a global

uncertainty. some everybody is looking for what the trigger will be to reverse confidence and capital markets. one of the factors that people are concerned about is a global trade war. we will see whether the u.s. and china reach an accommodation. i think probably the chinese will wait for the midterm elections. if trump doesn't lose control of , they will probably think about making some compromises. nejra: you are saying earlier your capital markets could perhaps have been a little bit better. why the under performance if we have seen this volatility and many opportunities to trade? i don't think i said they could do a little bit better, but we can always do better. what i said was that business in the first half was slightly more

challenging than it had been previously. it has picked up. we are confident about the pipeline for the business. nejra: thank you so much for joining us today. "bloomberg surveillance. continues in the next hour. francine and tom join us. that is coming up. this is bloomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. tom: this morning, forget $200 billion of additional goods. your new tax is $20 billion

becoming $50 billion. who knows? it is a trump mass of the top trade war. quiet markets as turkish lira weekends. mr. erdogan distracted as he and mr. putin agreed to demilitarize along the syrian border. arrow onour, david banks. we will get to francine here in just a moment. fairly quiet market today, but i am watching turkish lira, not only with the politics, but with the finance of turkey. nejra: absolutely. it is one of the worst-performing em currencies. theall, as you have said,

market reaction to this escalation in the trade war has been very sanguine. we saw the shanghai composite rebounding. markets are almost saying so wet? -- what? tom: we are waiting for the response from beijing. right now, here is sebastian salek. president trump has ramped up the tray were with china. on u.s. will impose 10% about $200 billion of chinese tariffs. beijing doubt it to retaliate. wouldt happens, the u.s. put tariffs on an additional $200 billion worth of goods. the kremlin said the syrians were fighting off an attack by israel he warplanes, and the

russian plane was caught in the crossfire. all 15 on board were killed. high drama on capitol hill. an explosive showdown with a seat on the supreme court at stake. brettmen who accuses kavanaugh of sexual assault. will speak in court america's allies in the -- the u.s. has cut off funding for pakistani and refugees. everyone needs to work to it achieve stability and consolidate peace, but definitely there are many pressures that are created by unilateral decisions.

sebastian: 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. salek.astian this is bloomberg. headline out of saudi arabia here. this goes to the heart of the matter, which is oil. saudi arabia saying they are comfortable with oil above 80. when you look at $50, $60 oil down to $29. do a data check right now and get into it before we move on with an important our. futures up 4%. back up to 6.37. that is up nicely from a 6.20 lira. a weaker turkish

nejra: weaker by about .8%. when of the worst performers in the dollar in today's session. i am looking at markets that largely seem to be shrugging off the imposition of additional tariffs by the u.s. on chinese goods. the stoxx 600 up .2%. metals really interesting. sought copper drop as much as 1.5%. today.rebounding we are seeing reports in the italian media of more discussions, heated discussions over the budget. tom: thank you so much for getting us started. right now, we need to go to our bloomberg summit in milan, italy. francine lacqua is their right now with an esteemed guest. what is the summit, what is the character of this capital markets forum in milan? you, and goodg to

morning to all of our viewers and listeners. we just had a european capital markets panel. the new finance minister talks a little about funding. overall, we were joined by the chief executive of deutsche bank. we talked about brexit and how to avoid the next financial crisis. david haro would join us for the our. --ere is no one coul better that could do that. am i right there is a two point dollar dynamic right now? dollar versus euro, yen and the rest? and then there is this whole

separate idea of week em versus the dollar? it is difficult to separate the two, of the dynamic has been. very much a part of this dollar story i think we have seen capital outflow over the last couple of months pushing into the dollar. one of the questions is, what has of that capital output pushed more into those normal safe havens, swiss bank or the yen. this is really quite interesting. i think the strength of the u.s. economy this year, the interest rate differential in favor of the dollar, really has directed the flow back into the u.s.. it has been quite interesting in september, the discussion perhaps initiated none -- in the month, but certainly this discussion on whether or not the trade tariffs will slow u.s. growth. whether or not we will see a peek perhaps in inflation. the dollar cost bearing down on

inflation potentials. tom: waiting for a response from beijing before mr. trump does round three of these tariffs. we had the em this quiet. let's do physics with jane. bring up the chart here and it is turkish lira. here is the explosion level from five out to seven. textbook, cantely function,ff a classic which they turkish lira will break? or do you just wait for the evidence? jane: i think the evidence has got to be really important. i think from most investors point of view, it was late, but certainly better late than never.

the market also wants to see that the finance minister. pushed through with his economic reforms the talk has been good, they can he really walk the walk? there is also the issue hanging in the background==== -- backdrop as well in of our to turkey. bank.st about the central i think there is further evidence that the investors on tuesday. i want to ask you about pound, the first renminbi. where do you see a going? jane: we have additional tariffs, trump threatening the next phase if china were to retaliate. that is all about weaker chinese growth. the market china to work out how much growth will be taken off the chinese potential. china hasat backdrop, to take some defense.

will he potentially see more physical/ with that backdrop, it does seem like the we will see further dollar weakening. francine: where do you see pound from here? jane: last week in the week before we have these glimmers of hope that we would get something in november. there is still a lot of that reality associated with it. a lot of fighting in westminster. it is going to be very difficult -- iheresa may to find think the young side will be limited as those sorts of input -- uncertainties really didn't exist. after that, if there is an agreement, in the pound is back. a lot of the uncertainty is theed into next year,

potential upside for that rally will be limited. tom: thank you so much. again, fairly quiet out there. turkish lira weaker. that new strength and pound sterling. us.ng up, david haro joins from milan, from new york, this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." shares of pandora are rising. capital are among

the investors that could be studying the product. the billionaire founder of japan's second largest e-commerce company will be the first paying passenger to fire on the moon. he will be on board a rocket built by spacex that is expected to blast off in 2023. the spacecraft will make a week long loop around the moon. no word on what he is paying. francine: thank you so much. investors appeared to be staying the course. for more on this growing confidence, we are joined by david haro. you, and of course only

were on the panel together where we were then joined by the finance minister of italy. he tried to allay market concern, but how is he going to fund it? is a going to be anxiousness in the markets? ,avid: that is the question financing it. there are certainly positive elements. investment infrastructure,, all of these things all very positive. the only factor i heard about paying for was the doing away with tax expenditures, tax breaks. whenever you flatten a tax code, you have to take away all of these deductions. that can pay for some of it. the question is, will it pay for all of it? i think they still need better detail on how they are going to have this 1.5% or 1.8% deficit.

tax expenditures will help, but what else? francine: do you like italian assets? on the panel, you are saying that on the dig in the summer, you actually took a bit more of a tie-in exposure. david: we didn't really feel that the fall in price, specifically earlier of cnh on the trade wars, was really indicative of underlining intrinsic value. we didn't see a real dip in intrinsic value at all. 20%-25%.ets drop they became very attractive to us as a result of the abrupt fall in price. excluding there was no corresponding fallen intrinsic value in our view. francine: you still have a populist government in italy. if the markets become anxious, do you buy on the dip or sell?

david: i think the populist government doesn't really have a lot of choice to flock the eu rules. they know the program will depend on having to invest. that means raising money via the capital markets. the priceep flaunting of investing, and the price of financing will keep going up. i think they understand that. it appears they understand that. tom: you are expert at the cross-border dynamics of europe. can the rest of europe come to the rescue of italy capitalism t o mergers, acquisitions, combinations. do you see that happening? topd: this was one of the ics discussed on the panel today. the need for europe is going to have a unified financial system, their news to be consolidation in the banking sector. however, you have to ensure that

you have the banking system in place before you do the cross-border consolidation. unless you have a unified banking system, the foundation won't work. if you just have all of these separate banking systems. until you see a more uniform regulatory environment, in a more unified banking system, it doesn't make sense to have consolidation cross-border. er consolidation in italy within the border. all of these european countries individually, perhaps before we do cross-border, we need more consolidation within the countries. we have a more unified banking system should you seek cross-border.

tom: within the cross-border is the idea of what to do. our you buy or sell? david: we are generally long eu banking, but very selectively. we are very bottom-up investors. these companies need to meet our value criteria. very big positions. -- an impressive what we think are really high-quality financial institutions, which are well capitalized, which are poised to do quite well when interest rate normalization happens. in fact, they are doing quite well without interest-rate normalization. they are all trading at extremely low valuations based on a lot of this macro noise. you think if you look around the globe, one of the last big pockets of equity value is in

european financials. we are selective. we just buy a basket, we look for what we think of the top performers. francine: thank you so much. trucksup, the volkswagen chief coming up at 10:00. i know they will talk about trade tariffs and the cost of fuel. this is bloomberg.

tom: good morning, everyone. markets quieter this morning. turkish lira moving in. remarkable stability within foreign-exchange. has been of course, it a trade story for quite some time. we may be walking back on some of that rhetoric. china says it will levy retaliatory tariffs on the u.s. in response to the trump administration's latest terrorist threat. then, the u.s. has -- tarrif threat. we're back with david haro. when you look at the rhetoric, there is a feeling in the market that maybe we have dialed back a little bit. do you worry about a trade were actually hurting gore investments? david: this is very binary. rhetoric,sult of the

there is a lasting trade war and no resolution in goods and services are prevented from crossing borders efficiently, this will hurt economic growth, which hurts income, which hurts cash flow, which will hurt share prices. that is one option. if as a result of the rhetoric and the trade war we have a system that results in a better trade system, and more level playing field with lower barriers, lower tariffs, this will lead to more trade. it will lead to more economic growth. it will aid to better corporate earnings, which will be good. it all depends on the endgame of the rhetoric and the initial shots of the trade war. the market at first assumed that from now until perpetuity, the result would be negative. i think there is a reason to believe that there could also be a positive outcome to the rhetoric of the trade war.

francine: what is pressing the markets right now? david: even-- though they have had tailwinds, weaker euro, lower tariffs in for imports going into china from anywhere other than the united states, the tariff was cut from 25% to 15%. because of this rhetoric, you still see a very strong negative influence on the price of german automakers. francine: on the panel, you said something that, attention. that is that we don't talk enough about japan.could it be the next positive in about five years . david:eems to be -- there seems to be evidence their moving in this direction. they move slowly. one of the issues japan has is an aging population and a shrinking population.

you really need some form of population growth, whether it be workers, higher birth rates, immigration,. something has to give we have seen movements in terms of workers. deregulating the increased productivity would be number two. it has been dead for a long time. tom: they would haro with us. let me tell you about gtb go. time to get perspective around equities, bonds and currencies. here is turkish lira, steel that chart from me. stay with us. this is bloomberg. ♪

tom:. good morning "bloomberg surveillance" from milan and new york. holding court with our first court -- first word news, here

is seb. seb: trump is giving a pass for goods, --f high-tech similar smart watches and fitness trackers will also be spared the 10% tariff. the south korean leader is visiting the capital of north korea for the first time in 11 years. he arrived for a landmark meeting to rescue stalled nuclear talks. saudi arabia is comfortable with rent oil prices rising above 80 -- $80 a barrel. hasworld's largest exporter tried to keep it below $80, but now the global market is adjusting to the loss of uranian oil -- iranian oil.

in wilmington, north kalanick, officials will hand out food and water to people stranded. 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 sebastian salek to you this is bloomberg. -- i am sebastian salek. this is bloomberg. chiefne: deutsche bank's executive called for a unionized -- unionizing banks. christian sewing called for a bank union here in milan. >> after the brexit, we have 450 inlion people in the e.u. asia and the americas, and we need one center. how can it be that an investor has a different documentation in spain than in germany?

we should not be surprised that people have more difficulties with our documentation. francine: we are back with david herro. where theon the panel deutsche bank chief executive was talking about the banking union. you made an excellent point, which was what if we do it, but without looking at the problems of tomorrow? what if it was a backward looking banking union? david: this could be a big issue. just look at some frontier markets like china, where you have a very different payment system forming, and you have peer-to-peer lending. all of these things that, if you do not incorporate into your new system, you're already going to be behind the times in your new unified banking system. the old system of someone goes , ao a branch, deposits money loan officer makes a loan, analyzes credit -- all of this has been compressed with technology.

if, through technology, someone could lend to a friend, or if there are safe people to deposit money with, or you have all of tech, modern syntax -- fin- if you do not incorporate these, any banking union would be dead on arrival. any banking union has to incorporate what the information age and digitalization has allowed in terms of financial services. francine: you are a big shareholder in credit suisse. about thea story swiss regulator talking about one of the risks. one trader in particular. you worry about how risk is taking a lot of swiss banks -- this particular case was a legacy issue. david: it is a legacy issue, but it brings up a good point. with today's technology and information and artificial intelligence and all of these tools, which credit suisse has started to implement and use,

you can get much better visibility into individuals and enterprises, which will allow for better decision-making. clearernformation, a picture, will allow for better decision-making, whether you are underwriting a loan or an insurance policy. that is what i think should be enhanced and encouraged. if the sharing of information, which therefore will make underwriting for more efficient and less risky. tom: when we look at european banking, it is a question of efficiency. can they find more efficiencies or are they running lean and mean? there should be continuous improvement, because as we transition from this traditional branch network, renting space on the corner -- when i walked here from my hotel, i probably passed 50

banks. in 20 years, no one is going to walk into these branches. and with new financial payment systems, with new financial technology, so much of this will be done on your smart phone and digital. so you can do this in a more efficient manner. assets, and ad more capital-like way, you can services fromial walking into a branch in talking to a person who takes her proposal and walks it up the ladder, and you get an answer on whether your loan is approved in a week or a month. this has been changing in the last decade. this means that there is continual opportunity to cut costs and get deficiencies. tom: guess what -- i do care. we have to get to the serious matter.

if you are in milan, italy, we have an un-american scandal of ties in the football league. your green bay packers had a tie with the minnesota vikings. vince lombardi is rolling in his grave. how did we come to a point where we are like francine's european soccer and are allowing ties in the nfl? david: you know, i agree with you. let them duke it out until the end. has gone- whole league soft anyway. the product is changing, perhaps not for the better. francine: i should have known better. i thought he would talk about the midterm elections. we will get to that in a second. david herro of harris associates stays with us. coming up, we will ask about open skies and what consolidation is to come at 10:30 in new york with the head

of contests -- qantas. ♪

francine: this is "bloomberg surveillance" from milan and new york. david herro is still with us. he knows the republican party like no other, being a donor for many years. we have the midterms, and i do not know whether the rhetoric in the trade is to win votes in the midterms or whether the saga surrounding the nomination of the supreme court will change women voters' minds. how do you see it playing out? david: the rhetoric of trade is to bring their trade rules more

in balance is more to the u.s.'s benefit. actually, it could be hurting votes. as a free market economists, i am happy to see the democrat party and the media his -- has now become ardent free traders. it is something that has been lacking for a long time. but i do not think this is necessarily helping republicans. in fact, it may be hurting republicans. even though the objective is deliver a -- is to more level playing field. but it will all be about turnout in the midterm elections. we are hearing, basically, most prognostications saying that perhaps democrats will regain the house. not turn america does out the vote, there will be a hypermobility of that, because the left wing of the democrat party and non-democrat party will vote. they will have 100% voter participation. the big bubble

of middle america -- are they going to vote? if they do, republicans have a good chance of maintaining both houses. francine: what do they vote on? the fiscal plans? do they vote on the economy and how much more money to have in their pocket? david: a lot of this does have to do with the economy. the u.s. economy has broken out of its right in the last two years. -- broken out of its rut in the last two years. it is because of policies that have focused on more flexibly in the economy, lower regulatory environment, or at least an attempt to lower regulatory burdens on the economy, as well as the tax reform that has especially impacted corporate investment. these are the factors that have broughtelped and positive expectations, so people hire more, people invest more. this is what we have been lacking for eight years. tom: i want to dive into

wisconsin politics. you know it extremely well, as an identified republican. it is a mystery to a lot of americans and certainly to a global audience. from smith is a senator wisconsin. she is from the people's republic of madison. republicans go up against the democratic tendency in wisconsin? do they do it with talkshow radio hosts that are on the more popular side of mr. trump, or do they have to go more mainstream like mr. thompson? david: i think what you're seeing in wisconsin -- by the way, it is a great test case, because there is a very progressive element to it. there is a middle working-class, ine-collar attitude wisconsin. and, of course, you have a more conservative side.

whoever wins the hearts and minds of that hard-working middle-class blue-collar battle wins wisconsin. in the last residential election, you saw mr. trump do quite well. scott walker, the governor -- he won, got recalled, then won again, and he is up for reelection again. i think the results have been positive in terms of economic development in wisconsin. it is very robust. it is doing far better than the rest of the country. you do not have problems like illinois has, with each pension .eficits and fiscal unbalances it is a sound, growing place. part of it has been because of -- as a result of some republican policies. but in order for republicans to answer to those policies, they need the support of that middle-class, which they have got. the question this fall is where

does the go? the middle class will go to tammy baldwin and company. the question is will the middle class come out and vote for republicans again? tom: let's stay with the medicine people, the mining people. there's always a discussion on miner and trading house glencore. the chart at the core is really interesting. the stasis of three and four -- 300 and 400, then the plummet and the recovery. what is the "now what?" for this investment? have: the "now what?" is a completely de-leveraged their balance sheet. they are generating a lot of free cash. the conventional wisdom was, in the past, that they would use that for a relatively busy m&a. but i think now the border of glencore sees valuation as their

own business and how well their own business is doing compared to that valuation. and you are already seeing greater cash flow returns to the owners of the business. they recently announced a stock buyback. i believe the stock buyback is still ongoing, but i would not be surprised to see more buybacks going for because of the valuation of glencore stock. be goodthey continue to deal makers. they have not made any huge deals. they make small deals. and they continue to do well in terms of the key areas of which they are mining and trading. i think the stock is extremely undervalued at this stage, and the management recognizes that, and perhaps you will see more capital returns. francine: what if the china slowdown is deeper than we think it is? david: the china slowdown will first impact copper prices. china has been consuming roughly

half of the world's mined copper. on the other hand, the man for copper, as we become more of a digital economy, continues to go up. between automobiles and housing and all of these things. it is hard to imagine the demand for copper completely falling off a cliff. keep in mind, copper is just one of three of war of the key elements that glencore mines. cobalt, all of these other things that glencore mines. but copper is usually number one or two in terms of the earners. and certainly a softer china, all else equal, will be a negative. but there are things to make up for that, especially if you believe that we will see, in the next decade, mass elective ofasion -- electrification vehicles. francine: and you are a big owner of h&m?

why then? david: we look at the price for what we are getting. why -- trade that iss premium is because h&m made from stumbles. our view is the stumbles are structural. the biggest error has been their ability to do what they used to do very well, which is adapt very quickly around the world to changing tastes and preferences in fashion retail at low priced fashion. as a result of rapid growth, response times were hindered. and the last year or so, they have worked quite aggressively at correcting this problem. in order to correct a problem, you have to recognize it exists. we are happy that h&m seems to have recognized this problem. goneionally, they have rapidly into digital.

if you look at their online sales, we see they have moved quite rapidly into digital. so i think now it is having systems that can accurate -- accurately replenish where problems are. francine: but what about its competitors? david: when we talk to managements, they have multi-sourcing from all of -- over the world. at some point around the edges, it will have some impact. but in terms of fashion, you see people still source and move product around. these things have very short duration. you would be surprised how vietnam or turkey or other places are able to supply fashion. tom: within fashion -- we see this in new york city, where h&m is a stone's throw from zara, it ise and

merchandising, but it is merchandising against amazon. revenue trajectory so great that it has global value? inid: we have owned amazon the past and some of our global value funds. we did think three or four years ago that the market -- every time they did not hit a number, the stock would actually be quite weak. so one has to minute -- one has to measure what they believe they can get in free cash then compare it to the price you are paying. right now, it looks a bit rich. all of the good news is baked into it, despite the fact we are starting to see, in certain instances -- i think retailers are getting a little smarter. and you have to be careful not tolift the surrender flag

amazon to a they cannot afford to lose control of the connection they had to the consumer. amazon is a very viable entity. but all good things come to an end. forces succeed, the fighting against them will learn how to fight against amazon. we have been seeing some success. i have been looking at tj maxx and even, to some degree, and itex and h&m have done well at defending their turf. tom: what part of the international landscape will be the opportunity within and out of this trade war? twod: well, you have assumes a will hit -- you will get hit first hardest and most. not today, but if the trade war is not resolved. the trade war could get resolved

with a better trade system, where there will be a lot of winners. or there will be a trade war that will not resolved. one of the arguments mr. trump --es is with the 5 billion $500 billion trade deficit, they will get hurt more than we are. they export huge amounts to the united states. the u.s., areas where we export to them -- there are some other german automakers, companies like boeing, and agriculture. the question is what can china do without bowing over the short -- without boeing in the short and medium terms? can china do without u.s. soybeans and pork? the odds are kind of stacked in america's favor of getting some theessions, because of massive and balance. if there was a balance, there is

no sense to have a trade war. i think because of the imbalance of the trade situation and the intellectual property issues -- this is very important. we need until actual property protection, which is something that's we need intellectual property -- we need intellectual property protection. of: mr. herro in chicago curious associates. here is seb salek. sebastian: the european union launched an antitrust investigation into volkswagen, daimler, suspected of colluding over the development of clean emissions technology for cars. there has been a big acquisition in the insurance industry. its consulting

services pay the cash order is -- the british cave diver who cap voice andthe tylan sued elon musk for calling him a pedophile. he called it a pr stunt the had no chance of working. tom: thank you. greatly appreciate it. now on energy, with the idea of saudi arabia comfortable with an $80 price on brent, william kennedy joins us, looking at the pronouncements out of saudi arabia. where did that come from? who is comfortable in saudi arabia? overam: the background is an earlier part of the summer in may and june, donald trump made clear, that he wanted opec to

lid on prices. our understanding was that was interpreted as keep being it somewhere around under $80 a barrel. but sanctions are having a much bigger impact than people expected on iranian oil exports. in, before sanctions kick it is approaching 40% of countries like south korea, which seized buying iranian oil altogether. s, when talking to people in the market, are saying we may not be able to avoid prices barrel, at$80 a least in the short term. francine: i think opec are meeting in all jerry a over the weekend -- algeria over the weekend. what will they agree on? david: i am --

will: i am not sure we will see dramatic changes in policy. you are likely to see a lot of complaining from iran, that opec members are doing what the u.s. wants and not looking after their fellow opec member. but it is clear the saudi's and russians have an agreement to put barrels back into the market to compensate. what today's story tells you is it is not clear they can do that at a pace which would keep a lid on prices give that is partly because if saudi arabia were to pump every barrel it could, it would replace iranian barrels but also remove spares from the market. tom: will kennedy, thank you. onatly appreciate it petroleum and the idea of $80 brand. and i should look at terminal --

brent crude a nice -- there were 842 look backs to lehman. but how about professor roubini looking forward to 2040? oning up, professor roubini 2020. much more to talk about with nouriel new roubini -- nouriel roubini. please stay with us. this is bloomberg. ♪

ow tom: this morning, forget $200

billion of goods, your new taxes $20 billion becoming $50 billion -- who knows? taxes. million in new no word from beijing, but they will retaliate. quiet markets as the turkish lira weakens. mr. erdogan distracted as he and demilitarizeeed to syrian border. and the perfect 2020 storm -- we look at it with professor roubini. in new york, i am tom keene. in milan, francine lacqua. what did you learn in milan? francine: i learned, first of all, that there is a little bit chiefst among european executives that u.s. investment banks are stronger than them. i also learned from david herro that he is adding to some of the earns in europe

because he sees they have a. and not everyone on my panel useful a ship that is for banking unions. sewing ofeving -- deutsche bank has comments as well. sebastian: the president has ramped up the trade war with china. the u.s. will impose a 10% tariff on about $200 billion worth of goods on china next week. beijing vowed to retaliate paid if that happens, the u.s. bad to impose further tariffs. the president says china has been unwilling to give fair and reciprocal treatment to american companies. a russian altera common sense plane has been shot down mistakenly by syrian forces, and the kremlin blames israel. all 15 people on board were killed.

high drama on capitol hill. showdownive public with a seat on the supreme court at stake. the white house's pick for the supreme court, brett kavanaugh, and the woman who accused him of sexual assault will testify next week. america's allies in the middle east are trying to contain the fallout of the president's attempt to rewrite rules that have underpinned piece talks for decades. bloomberg spoke with's foreign minister. >> it is on everyone to avoid violence, to work to achieve stability, to consolidate the peace. but definitely, there are many pressures created by unilateral decisions. sebastian: 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 sebastian salek. this is bloomberg. tom: thanks. let me look at the data. equities, bonds, currencies, commodities. up six.o turning, , 6.37 as well. discussion on trade. there is no one better to do that with then nouriel roubini of new york university. he was acclaimed of getting out front of the crisis of 2007. i personally do that with him in 2005 at somem in point. let me bring up from enda curran, in hong kong, a chart which is great because it is hard to read. i really mean that. -- it is the massive disproportion of u.s. imports of

china stuff versus what they take from us. here we are with the tariffs here, the tariffs there. and china is just tiny. this is the arch and balance of the president's certitude. in the this yesterday economic club of new york. they speak of us as equals in trade dynamics to we are not, are we? nouriel: not in terms of trade dynamics, but china, and many other ways, will retaliate. only 130 billion of imports of the u.s., but let's , gm, andt that apple others have done hundreds of thousands of dollars of investment in china. , they took action against foreign investments, so they can retaliate. china can also retaliate by letting its currency weaken.

then, there is the nuclear option of them selling u.s. treasury. cannotink that china retaliate is the wrong argument. tom: your heritage of being born in istanbul, your study in milan , your international sense, your old world sense, is the study of how china will react. how would you presume that china will react to this approach by mr. trump? nouriel: first of all, the chinese can deflect. they need to do some reforms, but china cannot lose face. what happens is the united states is starting not just a trade war but geopolitically once to contain -- wants to contain china. china has its made in china 20 tony five program, for example. china,tried to contain

china will become more aggressive and less corporative. they will retaliate in many different ways. do we underestimate chinese gdpof slowing down, or even the size of shadow banking in china? nouriel: there has been a slowdown in china, but every time there is excessive slowdown after tightening of monetary fiscal policy, china is not going to run out of tools. there has been significant correction of the stock market, but there was the fact that default rates have gone up, because they have reduced leverage and are apply more flexibly. but that is manageable. the currency weakening is occurring right now. and their capital controls will not freefall like 2015. that helps china. if they can to goes down a

percent and the u.s. imposes tariffs of 10%, it is kind of a wash. cana so far has kicked the down the road to they are not dealing with too much, too fast. but china will do it gradually. china will take the long-term view. china will be in a long-term competition with the united states. asked -- china takes an approach that is long. we have elections every two years. china has no elections, so they can take control of their own policies and threatened the u.s. over the medium long-term. so they may win the war. francine: what i am trying to get at is they do have the tools to manage a slowdown, but if they only focus domestically on what they need to do, do they let the emerging markets down,

and what does that mean for markets overall? nouriel: of course, the emerging markets are hurting right now for a number of global factors. china is one of them. the risk of trade wars is one of them. but then u.s. fed policies and fiscal policy matters, stronger dollar, and a stronger dollar means a lower dollar price of commodities. these of the global factors all em is facing. but if china were to react by boosting domestic demand and maintaining its own economic growth closer to the 6.5% target -- and recently, they are growing faster than 6.5% -- then that will be an box top for emerging markets. in my view, china is still -- has still some of the most to manage a slowdown. -- he worked for, dr.

kissinger, or robert kaplan, my book of the summer, writing about china and the pacific rim. what is the -- all of that is the neorealist view. what is the neorealist it response? nouriel: the chinese know that on china, itariffs will increase the cost of lots of goods used u.s. consumers. 10% to getat it is pushed to 25% refers to they do not want sticker shock over the holiday period. at: but this is roubini 101 stern school at new york university. is ae able to say a tariff tax on the american consumer? nouriel: yeah, that is absolutely true. whenever you impose tariffs, it

,ncreases the price of goods for most of the business sector. and it is a very regressive tax, because those kinds of consumer goods from china are usually bought from walmart and others. so not only the tax, but it is an extremely regressive tax. tom: and the bottom line is this is not a tax on gucci, is it? francine: well, let me ask, away from gucci, is this a tax that could plunge the u.s. into a recession the next 18 months? nouriel: i do not think that alone will plunge the u.s. into recession. a variety of other factors can push the u.s. into recession by 2020. fiscal policy,, the trade war, other frictions. but certainly, people underestimate the impact of this

trade war on the economy. because they say the trade impacts are indirectly small -- that is not true. first of all, you have retaliation. as long as you have retaliation, the impact is bigger. second of all, it will slow down consumption. three, it will affect business and consumer confidence. this will push down emerging markets. it will hurt them. and finally, it will have an effect on investor confidence. the stock market in china has gone down 20%. later in the summer, the u.s. market was going down as well. billion, and0 there will be retaliation and other things -- there will be a bigger impact. and right now, it is not just a trade war. the u.s. will restrict in words -- inwards fdi

from china and so on. ip, fdiout technology, inwards and outwards. it will become de-globin eyes, e-globalized. that is the danger of this trade war. francine: that gets us started, certainly. numeral roubini stays with us. coming up, corrado passera, spa xs ceo and founder. we will talk about european banking and italian banks. this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." let's get the bloomberg business flash. shares of hindu or are rising. kkr are among the private equity groups. could be studying the company. pandora is a perfect target, and activist funds may also try to buy a stake in the company. one of the biggest ego battles in the tech company may end. says his company and apple have -- the two companies will soon face legal proceedings. qualcomm and apple have sued each other over licensing fees. the billionaire founder of japan's second e-commerce company will be the first passenger to fly around the moon. he will be on board a rocket scheduled to last off in 2023.

the spacecraft will make a week long trip around the moon, but no word on what miyazawa is paying. francine: in nine days, italy's populist coalition government will present new fiscal growth targets. by a few pledges ministers to stick to it european rules. italian bonds fell. investors appear to be staying the course. i am pleased to be joining by spaxs' ceo and, founder. answer with us, nouriel roubini. -- still with us, nouriel roubini. at italy, there was a lot of anxiousness over the summer. you think investor concerns have been a late, because -- have

been allayed? corrado: absolutely. and it was justified because of some of the announcements made in the first weeks after the creation of the government. but even today, these statements, the announcements made were the right ones. because he talked about growth and growth through investment, increased investment, both public and private here that is the key word, in my opinion. we will stick to our commitments in terms of that reduction. commitment, a, edition of things that markets expect. that we will look at the stability of in detail. but these three announcements are good ones. francine: is there a discount to italian banks because of the political situation? you are starting a challenger bank. nicheo: challenger and

are two concepts that do not resent -- convey the right message -- francine: but for now. corrado: the bank is small but the market is really booming. on the other side, challenger is the right message, but we will be a specialty bank. things to do a number of that are interesting and profitable and useful for the company. we will do it and a new paradigm way. at the end, it is a challenge to others, but in a number of ways, we will also collaborate with incumbents, because we will buy unlikely to pay's, we will help manage second tier smp's that have potential to grow. francine: what is your take

overall on italian banks and the italian gdp? should we worry about it? or should markets remain cool about it? nouriel: there are some positives about italy. is that the market constraints will forcehe e.u. them -- the euro mentorship is not on the table. so they are being controlled and contained by market discipline. but spreads on italian debt are still -- even if you maintain around 2% of gdp, it will be problematic, because they want to spend more and cut taxes by 1% pure they do not know how to finance it. they may find it by making .rowth too high many policies are leading to a

reduction of potential growth rather than increased potential growth. a reverse in the forum of pension. restricting labor market flexibility. so actual growth is following. potential growth is following. -- actual growth is falling. potential growth is falling. it will be hard to reduce the debt ratio and go higher. so italy is still on a knife's edge. it is simply at risk. after budget laws, they may go to election, which would create more uncertainty. so things will stabilize given the fiscal commitment. but italy is facing a number of economic, fiscal challenges. takano -- the body language we see on

camera, like if i am this, i am really bored. and then you sit up straight and listen. can rogoff sat up -- ken rogoff sat up straight when the topic was italy to it why is a guy like him totally focused on italy? nouriel: it is not just ken rogo ff. it is the market. from 250 to over 300 overnight. and they flip-flopped in 24 hours. tom: is at the heritage of italy, the adjacent's -- adjacense of italy? why the focus on italy? nouriel: italy has become a country run by populists for the first time. italian debt is the largest in absolute terms after a u.s. in japan in the world economy. greece could eat bailed out -- greece could be bailed out.

2.33% on public debt problems. it is too big to fail but too big to be saved. is systemic for italy, for the eurozone. if italy were to leave, there would be systemic shock to the eurozone. that is why people have a lot of interest in italy. francine: i would go a step further and say this is not an obsession with italy, but also on italian banks. to the markets actually discount them and forget sometimes all of the work done on nonperforming loans? are a social proxy of the old country. --if all of the wrong things there will be troubles. but i do not think the wrong things will be done. we all know the so-called government contract, the two

coalition parties have agreed upon, is not feasible. in myld be implemented, opinion, only partially and only gradually. banks have gone through at least three main crises, the financial asset crises, reasonably well managed. the credit asset crisis. we are getting out of it. stilld utp's are important components of our balance sheets, but they are being diluted. we have a number of single bank crises, some of them very bad ones. , partially paid by taxpayers, but now gone. and now, we are going through the more structural transformation, the reshaping of the industry, because of digital technologies.

monetary policies are making traditional business models unsustainable. but you winners are coming in that area. francine: do we need banking consolidation in italy? it is difficult to deny that italy is not overbank. -- overbanked. inrado: it is not overbanked the sense we will have a new mix of players the next couple of years. traditional will get out of the market, for sure. keepof the big ones will investigating innovation and will be players. some entrants from other industries will be players. but we can expect a number of specialty players. i'm kind of players in terms of the business market. so the market will change a lot. in terms of consolidation, italy

is one of the countries that has consolidated most. for example, germany. much more than germany. and now with the loan cost on 300 ofity and banks, them will become three. around 100.ave around 100. that is still a large number, but compared with 1800 banks in done a, it shows we have good part of the overhead. francine: do using we will see a banking union in our lifetime, and will that help consolidation? nouriel: i fear that it will not be eight full banking union, -- it will not be a full banking union. germany fears that shares are shifting, and fiscal unions will become like a transfer union. and given the political

uncertainties in italy, germany is pushing back. even the proposals of macron have not been accepted. therefore, any agenda about finalizing the banking union and increasing re-sharing will not happen until germany and other parts of the north will have more security about what is happening. tom: nouriel will be with us in new york. and we think corrado passera in milan. gtv , your charts, your briefing, including log turkish lira. this is bloomberg. ♪

tom: good morning. affectalks canada, and

on major american trade partner in america. the story is about washington. joining us is kevin's really come our chief washington correspondent. both bloomberg and "the washington post" look for an immediate response. what will we see from china and how will the trump administration react. kevin: they were respond with tariffs of their own. how the administration will react and add additional tariffs that go in billion effects september 24, we do not know. officials on the briefing last night did not say. we should note there is no scheduled meeting between u.s. and china officials at this time. there does not seem to be a clear and point. i was talking with republicans in the beltway and they do not know at the end goal is. kudlow withlawrence gathered elitehe

in new york circled back constantly and constantly to give us time. do they have the time allotted -- are the people of the midwest agriculture, all the different traded people in texas and california with china going to give lawrence kudlow and donald trump time? know, in fact, you have seen from republican lawmakers who have try to urge the president to continue trade policies, but they like but he have done on intellectual properly -- property. the base of the republican party has not deserted the president, particularly on agriculture. politicians and executives are making one argument, the constituents and the base and populist movement have not deserted the president as he has negotiated on trade. talk to us about the midterms.

does the president think about the midterms in everything he does? we talked about hurricane --rence and judge kavanaugh is his object is getting to the term -- midterm kevin: elections win? midterms win? kevin: i spoke with democrats on inhington -- and publicans washington and they think that votersde wars will get in ohio and wisconsin out to and those who were favoring bernie sanders, or get them out to vote. we are now hearing there could be a public hearing next monday. that might motivate progressives to get to the polls and midterm elections. tom: thank you for the update,

kevin cirilli, our chief correspondent in washington. word news,with first here is sebastian salak. sebastian: the trump administration getting made in china apple products in the latest round of terex -- tariffs. they will slap tariffs on chinese made products. it will include a number of high-tech products. fitness trackers and smartphones will be attack. a south korean leader is visiting the council of north korea. he was greeted by kim jong-un for a landmark meeting to mr. nuclear talks between north korea and the u.s. it is the third leader -- meeting between the leaders. saudi arabia not comfortable rices rising above 80 bowels -- $80 a gallon.

they wanted to leave it below $80 that now the global market is adjusting to the loss of a reading oil because of u.s. sanctions. wilmington, north carolina, officials will hand out food, water, and supplies to residents stranded by flooded. military trucks were able to bring in some supplies. some were brought in by helicopters. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm sebastian salek. this is bloomberg. tom: thank you so much. it is one thing to talk about immigrants, there is a generational doing of it. an.person who knows this is of new york university and thisni global economics -- is nouriel roubini of new york university and roubini global economics.

i sawroubini: and i saw the currency plunging their. is it traditional economics where the currency links into inflation and shows potential dampened gdp and crisis? prof. roubini: there is a severe and in theital corporate sector. the currency has gone from three to five to seven and now 6.3 third it is a massive negative balance sheet affect on the corporate and financial segment. leading toy is not an economic stimulus. for jus is projected

for -- it will lead to inflation and the bank will hike rates. fiscal andssive credit stimulus in the economy policy.there is fiscal there is a regional election next march and they want to avoid a recession to win the local elections. they are tightening the rains as much as i should. toncine: what will it take put turkey on a more stable footing? haseems the central bank done it and convinced -- investors are not convinced. prof. roubini: policy went to turkey, it went towards 24%. that is positive, and it could signal to the central bank that

it is slightly more independent. the present keeps attacking the central bank. you have massive and balances on the fiscal side and expanding in the private sector. tighteningnetary because inflation will rise, fiscal and credit tightening. that implies a recession. the economy is going into a you have and election coming next spring. i do not think they will be doing enough. they will plunge the economy into a recession. this is unavoidable. weakening of currency will continue even after the monetary tightening that we have seen in the last couple of days that the currency is weakening. they are not doing enough. argentina was doing enough and

the currency weakened. thecine: how do you find turkish lira? untilt continue falling the ruling class accept they could going to recession? prof. roubini: first of all, inflation will go higher given the depreciation. even tightening will need to be done. the main imbalances are not on monetary side but fiscal and credit. they promised fiscal tightening and it has not occurred. politically, for them accepting a recession will be painful, and they will try to kick the can down the road at least until march with the election. even if it has fallen significantly, it could fall

more if inflation gets higher. tom: i want to talk about this because people say what is the big deal with nouriel roubini? to 2005 in 2007, this is a fancy physics question which is a sine wave function. what nouriel roubini is famous for is this right here, the amplitude of a given wave. this goes back to 2006, which was the amplitude of the crisis that everybody underestimated. is that where we are right now, where we don't understand amplitudes of turkey to amplitudes of argentina or frankly the aptitudes that could come out of the trade war? prof. roubini: we don't know because we do not know what the be in responses will turkey and argentina. the market gives uncertainty and tends to overreact and overshoot prices.

now they are saying they will not adjust. it could be of mobile trade war. tom: do overlay a new kind of shadow banking where we underestimate the amplitude of a potential shock? do you know shadow banking? chinaroubini: it is in and there is shadow banking in the global system. lesse say they have leverage and more capital. a lot of transactions have gone into the shadow banking globally pairy. this time, it might be the rest of capital marketing in shadow banking come in china and even the united states. you have trading and open-ended a variety of things

and the market makers are not there. those are sources of liquidity. nouriel roubini with us. tom keene in new york. francine lacqua in milan. listen in to bloomberg surveillance. this is bloomberg. ♪

tom: 10 years out from lehman. let's do that with an article from nouriel roubini. esther kudlow did not want to talk about that yesterday. in 2008 -- mr. kudlow did not want to talk about that yesterday. policymakers must confront the next downturn. they will have their hands tied while overall debt levels are higher than during the previous crisis. this is a surprising essay. why will the policymakers have their hands tied? is that were doing a great job. prof. roubini: on fiscal policy, we are running a $2 trillion debt. when the next recession comes, the fed will not have much headroom before the next recession.

-- it will not be enough. it is going to be difficult. backlash. populist and all thetell out tools will be much more constrained with an overall debt level higher. tom: the one that is immediate is yesterday mr. kudlow made clear he believes you can grow your way out of the deficit and he cited not once but twice in his conversation, that they already have modeled out new trupian growth that will be in growth that will bring in money. what does history tell us? prof. roubini: reagan tried ambush tried it.

look at the latest numbers. the deficit since last year has almost doubled. a $2 trillion budget deficit. next year, you'll have a budget deficit that will be $1 trillion. it is that they cut taxes and will get a short term growth. over a decade, 0.1% in gdp level. then you will have fiscal drag in short trade on the dollar. rapidly to increase taxes on the housing sector in 2024. there will be a massive drag and a fiscal drag in 2020. fiscal stimulus.

it will go from 3% to 2% and below 2%. it'll be the first time ever during a recession and it will crowd out economic growth over time. francine: what does that mean for yields -- treasury yields? the. roubini: overtime, combination of monetary policy and tightening and fiscal stimulus implies long-term going higher. a lid on long-term rates is that while the feds control the short end of the curve, central banks are controlling the long-term because there are unconventional policies in other parts of the world. are going to start normalizing next year. other central banks in europe will do the same thing. global liquidity will shrink. when you have the stimulus,

long-term interest will go higher and the daughter will strengthen. there will be a crowding out by late next year of the economic recovery into a fiscal drag in 2020 and tightening by the fed , and that fiscal policy tightening of monetary tightening could stall the economy by 2020 if you add the trade and capital market and slowdown in emerging markets in europe and china and asset prices. slowdownmarket sees a in 2020, the market correction will have a negative affect. i 2020, you could have a perfect storm for the u.s. and global economy. what the central bank

have enough tools to deal with this perfect storm if we have a by 2020? prof. roubini: there are differences this time around and we have policy that is inflationary and reduced growth and curb inflation. the last time, always inflationary, lower growth and the central banks were doing policies. if you have trade restriction and restriction to capital flows and fdi and technology, restrictions on migration, and you don't invest into renewable areces, all those inflationary and will reduce growth and force inflation higher and the economy will overheat and force the fed to hike more, faster, and sooner. it happens whenever you have .olicy that is inflationary a

the type of holocene that will be followed by the u.s. will imply forcing the fed to have to tighten rather than ease, even if growth slows down. that is the difference in the willingness of the fed and other central banks to react to economic slowdown by negative supply-side shocks. francine: thank you so much for all of that insight. us.iel roubini stays with coming up, u.k. secretary of state for international trade two tove a thing or say about brexit and what kind of divorce he sees. sure he will talk about the challenge to theresa may's leadership. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the "bloomberg

business flash." the italian supercar maker unveiled a new model as the ceo outlines a five-year business plan. it includes a number of new vehicles and hybrid suv. shares fell in free market trading. these and mastercard have agreed to pay money to settle a lawsuit for retailers -- a visa and mastercard have agreed to pay money to settle a lawsuit for retailers. that is the "bloomberg business flash." let's look at something we have avoided with nouriel roubini this morning. copper looks lousy. this is just a textbook depressed commodity chart. you taught at one of your

sessions at nyu, this is the elite chart. we seeing in the dampening in copper? prof. roubini: a potential slowdown in global economy. will slowdown in china will slowdown. correlation between the budget of the dollar and commodities. i would say the weakening in copper is an ominous signal and iso increasing oil prices i anonymous signal. the oil prices are led by the fact of the sanctions on iran and there is a supply-side shock. that is a negative. heil oil prices usually imply growth. -- higher oil prices usually imply growth. tom: this has been wonderful. t do i

congratulations on your essay. much more to talk about today. i am looking at turkish lira. it is now 6.41. francine, safe travels from milan back to london. francine: i will see you from london tomorrow. tom: much more ahead on bloomberg today. heathan ferro rumored the will let me in the new radio studio. we will do that next. this is bloomberg. ♪ xfinity mobile is a new wireless network

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tariffs on chinese goods and more to come. apple avoids the worst-case scenario. china vows retaliation. officials hope for negotiations. market panic -- what market panic? investors opt for calm here and officialshow much bad news is p? david: welcome to "bloomberg markets." it is here. >> the markets are very calm. investor state you need clarity. we have it. if you are ceo, you know what you are up against. david: maybe we warned them. alix: we will talk about market reaction. s&p futures higher and it was a led lower in asia. i should point out the shanghai had its best