nejra: china sticks to its guns. beijing says it will negotiate with a knife to his neck. stocks drop. the argentine president tells bloomberg there's no chance country will default on its debts. founders are leaving facebook amid growing tensions with mark zuckerberg. welcome to surveillance, i'm nejra cehic in london. let's check in on the markets. we saw mixed session. japan shared gains.

europe, you're seeing the muted gains of stoxx 600 up almost 0.2%. to some extent could be weighing on markets. you see that with copper down 1.4%. a different picture for metals in shanghai. the london trade on the london metal exchange. in fixed it come -- fixed income, we are focusing a lot on italy's 10 year yield dropping nine basis points amid some calls that there are an areement for the budget and lower budget than some investors were expecting. a four-month high has gone above $81 a barrel. -- bob dudley joining us for an exclusive interview. let's get the first word news.

china has said it's up to the u.s. for when trade talks resume. fullyals said china is cable of offsetting the effects of the dispute and we use domestic investment and business sentiment. china does not want to trade worker we are not afraid of one. we have the confidence and capability to deal with all risks and challenges. china has kept the door open to negotiations but they must be conducted on mutual respect and credibility. >> u.s. president donald trump is excited to meet with rod rosenstein on thursday to discuss his future. this is after rosenstein told chief of staff john kelly he is resigning. his status and intentions were mired in confusion yesterday in

the aftermath of reports that he suggested that he was secretly recording conversations with trump. u.s. supreme court nominee brett kavanaugh says he never's sexually assaulted anyone. -- never sexually assaulted anyone. scrambling toe save kavanaugh's nomination as senate majority leader mitch mcconnell says he will get a floor vote soon. not going to let fall site is asians drive us out of and we are looking for a fair process where i can be heard and defend my integrity in my lifelong record of promoting unity and equality for women starting with the women who knew me when i was 14 years old. i'm not going anywhere. >> the uk's opposition labor party is prepared to vote down

any deal with the european union that theresa may may bring to parliament. will tell delegates at the labor's conference that theresa may cannot rely on his party. global news 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. this is bloomberg. thank you so much. chinese stocks and base metals have been hit today amid continued trade concerns. noting said it would negotiate with president trump with a knife to the throat after the u.s. and china exchanged new tariffs. -- isg us now is sarah sarah hewin and grace peters. sarah, let me start with you.

afterward tariffs stand and we can talk more about what might be implemented, what sort of hit are we talking about two chinese growth? the tariffsr with imposed, we think we will likely 0.3% shaved off china -- china's gdp. 0.5% to 1% ofe to gdp. is beijing iseing taking action to offset some of those risks. but certainly saw the signs are that growth is slowing. mean inhat does that terms of how the u.s. equity market will continue performing? we can talking about america first trade for a while. but that fate? sarah: we've seen great divergence to the course of this year. the around the rest of the world. we do still have the u.s. as our preferred market.

we see very strong drivers to the underlying earnings. and to the u.s. is preferred market. tactically we do see some opportunities emerging. measures that the government are implementing, as they see through into the data, we could see some convergence between china's emerging markets and the u.s.. expect int do you terms of further measures from china? we have seen a self-inflicted slow down from china. completely separate from trade. last year was on deleveraging. think we are not expecting to see any further tightening. if anything, we are making sure that the ed is adequate.

ratio.uired reserve also, encouraging local governments to bring forward infrastructure and make it more attractive to investors. our small business sentiment survey suggests that investment intentions are there particularly amongst exporting. especially in south china. there is a need, i think, for some more action to be taken but we are pretty confident that the economy is going to hold up well. in terms of potential upside. does it mean in terms of opportunities around industry groups that might in a fit or not as the trade war escalates? chinese market is trading

at 15 year lows. some aren't dissipate in profits that may come as a result of the softening of the economy. particularly when it comes to traits we like an industry groups, we still believe in the consumer. you can invest in the asian consumer in the equity markets but also in the developed world in the luxury names and other areas. when it comes to china specifically, we also like insurance. we see some similar trends with the rise of the middle class, the greater penetration of insurance products. technology. when you look at the divergence between the u.s. internet and the chinese equivalents, there's been a huge diversion there. grace mention convergence earlier, another buzzword we've been talking about this week. talkingtart of the year about the synchronized global growth. do we start to see synchronized

global growth again in 2019 you with the escalation of a trade war? sarah: the u.s. is going at a very good pace. we are confident that europe is there also. continuing to grow above trend. where we have seen some volatility in emerging markets, look at thoseto countries is idiosyncratic factors. go elections coming up or political issues that make an effort. overall i think we would expect things to continue into next year. there are a couple of risk factors. trade is one, high commodity for those countries the deficit is and to be quite negative. we need to be aware of what the risks are. our guests stay with us.

stay with surveillance, plenty coming up. mario draghi sees relative vigor in week european inflation. we will talk of the euro and bonds and european equities next.

nejra: economics, finance, politics, i'm nejra cehic in for francine lacqua in london. let's get the bloomberg business flash. >> the founders of instagram are leaving facebook after growing tensions with the ceo mark zuckerberg over the direction of the app.

they have been at the company since instagram's acquisition back in 2012. they have been able to keep the brand and product independent from facebook. were frustrated with it unusual uptick in day-to-day involvement from zuckerberg who is now overreliance on instagram for facebook's growth. its moore will increase share buyback program. they will return more money to investors. this comes less than a week after the number two minor company announced a 3.2 billion share buyback. -- shareholders got most of the $11 billion from the sales of its u.s. shale assets. starbucks is planning and organizational shakeup. chain triese coffee

to reverse stagnant sales and rekindle investors interest. employees, ceo then said we must increase experience that is relevant to our customers. it will detail an undetermined number of layoffs and shifts between -- and company shifts between employees. yesterday mario draghi ofe an optimistic projection inflation, sending the euro to a three month high. to annual forward rates inflation hitting higher levels in the coming months, projected to reach 1.7% each year now between -- between now and 2020. it's a slowing contribution from the known core components of the general index and a spike up an

underlying inflation. ecb's chiefso have economist speaking in london. we have some headlines coming through. he is saying the data has confirmed the base case on qe exit. wage increases are still moderate but picking up. fits with the ecb scenario. he says the guidance on how long the ecb will reinvest is vague. a number of things coming through here. we see the beginning of emerging price pressure. meanwhile, italian bonds have been reeling today. be nation's deficit will 1.9% under the plan, below the eu's 2% limit. we bring back in grace and sara. to go to mario draghi's comments, and yields spiked

bond yields and spiked yesterday. are you seeing these pressures? he used therah: word vigorous and i think that was seen as quite unusual way to define what is going on. the inflation story is relatively muted still and if you look at core inflation, we are still close to 1%. some ways to go. it does reiterate what was said at the last ecb meeting. there is a confidence which has been evident in recent meetings. governing council clearly sees that inflation is moving towards targets. they have the confidence to into qe at the end of this year. their formal guidance is still very cautious. our own view is that they will have to wait until september before we get the first rate hike. nejra: europe is not your

preferred market in terms of equities. why not? sarah: it's wrapped around the idea of the ecb and when they start to raise rates because europe is a value market. interest margins are very dependent on interest rates. financials are about a 20% weighting in the european stock market. exposed likes commodities, mining, and oil and all of these sectors tend to do well when bond yields are rising. feds pass ase the much more clear of the next 12 months, it's one of the reasons it feeds into the u.s. as the preferred. need tohat would you see to think europe is going to start putting forward more and make you want to put -- get back in? one would be to start to get a more hawkish. about the more

muted economic growth with cnet europe and that increase in political tensions, particularly around italy, that's really weighing on risk sentiment. any longer-term relief we see would also be positive for sentiment. think we will see any kind of longer-term relief out of italy? we have a little bit of good news on the spectrum today which is pushing btp yields lower. reliefand certainly a that there seems to be a more conciliatory reproach from the coalition. it's expected that there's a bit of flexibility on both sides from room. can take our time over implementing the manifesto promises. from brussels, maybe some flexibility on not rigidly sticking to the below 1% government deficit which was expected of italy for next year.

medium-term,er the what is required a structural reform. debt is still very high. it structural reforms that are really necessary. that's a longer-term phenomenon. mines, how all that much of side you see to the euro? our euro forecast is 1:15 for the end of the year. a lot of that is still tied into the ecb and the pace of interest rates. our guests stay with us. up next, unfriended by instagram. the popular photo sharing apps put up with mark zuckerberg. this is bloomberg. ♪

nejra: i'm nejra cehic and for francine lacqua. instagram founders are leaving facebook amid tensions with ceo mark zuckerberg. reportedly unhappy with zuckerberg's influence over the photo sharing. -- facebook bot instagram in 2012 but it had remained largely independent. joining us now is alex webb.

grace and sara are still with us. alex, facebook still leaning more on instagram these days. user engagement is really trailing off on a spoken rapidly increasing on instagram. more than they try to monetize the product, it clearly detracts from the user experience and that's an element i would imagine is creating some of the tension between zuckerberg and the instagram founders. that: what is the risk instagram would more integrated with facebook? the huge revenue growth is coming from advertising stories and instagram feed. it still in the early days in the way they monetize that. the early adopters tend to have more savvy when it comes to placing ads. what are the reasons engagement is declining on facebook is because the long tail of growth

is coming from sme and they do not use advertising agencies. you probably experienced yourself to get all sorts of spam he adds in your feed. drivere growth they towards in the graham, you will get similar sort of spam he content. the risk incomes for engagement decline. instead of space best faith -- safe space to be intact? -- to be in tech? grace: we look for revenue growth ahead of the market. perhaps the margins coming through for the need of extra invest. but ultimately a solid earnings streak. are you on instagram? alex: i am but i have a private accounts. i use twitter for my public account. as -- alex webb as long

as well as grace and sara stay with us. and we, emerging markets hear exclusively from the leaders of south america's two biggest economies about presidents -- about the argentina and brazil. we talk more emerging markets and look ahead to the fed's have that rate hike. and we talk about brexit. this is bloomberg. ♪

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the founders of instagram are leaving facebook. sources told bloomberg that the excess follows growing tensions with mark zuckerberg over the direction of the photo sharing app. a russian billionaire is preparing his finances to start the threat of u.s. sanctions. and thirdead stories, place, starbucks is planning and organizational shakeup. supreme court nominee brett kavanaugh says he is not going anywhere in the face of sexual assault allegations. top, jamie dimon says it will take 25 years for a wall street bailout to be forgiven. for now, let's get to taylor riggs in new york. taylor: china has said it is completely up to the u.s. when trade talks resume.

is fully said china capable of offsetting the effects of the dispute and will boost domestic demand investment and business sentiment. >> china does not want a trade war, but we're not afraid of one. we have the confidence and capability to deal with all challenges.ks and china has kept the door open to negotiations, but negotiations must be conducted on the conditions of mutual respect and credibility. taylor: donald trump said he is looking forward to meeting with broad rosenstein on thursday to discuss his future. -- rod rosenstein on thursday to discuss his future. his future status and intentions were mired in confusion yesterday in the aftermath of you suggested he would secretly record conversations with trump. brett kavanaugh has said he

never sexually assaulted anyone. interview, he defended himself against allegations that threaten to unravel his confirmation. republicans are scrambling to save his nomination as mitch mcconnell comments he will get a floor vote soon. >> i'm not going to let a false accusation drive us out of this process. processoking for a fair where i can be heard, defending my integrity, my lifelong record of promoting dignity and equality for women, starting with the women who knew me when i was 14 years old. i'm not going anywhere. taylor: 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. nejra: thank you so much.

not to emerging markets and as world leaders gather in new york for the u.s. general assembly, -- u.n. general assembly, bloomberg spoke with south america's two biggest economies. there is no chance. the level of support that we are receiving from the countries, especially from the usa, and the level of commitment of my government, with this new exchange rate, argentina has a very competitive exchange rate. balancing our foreign accounts. exports are growing at the speed of 18%-20%. that shows that the numbers are starting to work very well.

fortunately, the weather forecast shows that we are not footings. -- floodings. the most important production, the grains, are going to rocket to a new record of production. argentinianwas the president speaking exclusively with bloomberg. now to brazil and the president told bloomberg that he can't see a ripple effect for other emerging markets impacting his nation's economy. although he has a very appropriate stance, he served as my minister of finance. enough, he seems --be unable

elections are always a surprise. we don't know what will happen. they are two weeks ahead. nejra: brazilian assets have sold off because of the political uncertainty. we also have weakness in argentina, emerging markets. is brazil vulnerable to contagion? >> no. not at all. idea, by wayyou an of foreign reserves, we have 380 billion. we haven't had to resort to any of those international foreign reserves. turmoiltanding all the in neighboring countries such as

argentina, which i'm sure they will certainly recover, there has been no ripple effect on the or thean economy confessions project underway in brazil. case of the oil department, the likelihood is dollarsy billions of will fall in, there has been no effect on the brazilian economy. nejra: that was the brazilian president speaking with bloomberg. you are talking earlier about the fact that you are selective in emerging-market equities. i have a chart that i showed yesterday. it is showing the forward valuation gaps, profit forecasts showing the persistent bets on divergence here.

what are you basing your preference and certain emerging markets on? is it largely to do with corporate profits? grace: they obviously play a huge part in that. we also look at policy levers each country has. ultimately, our belief is over the longer term. the region we are most focused on with an emerging markets. nejra: we were just hearing there from the argentine and brazilian leaders. i have a chart here showing argentina's credit default swaps higher than brazil's or turkeys. this is how the market views the risk. is this how you would view it in terms of market fundamental? sarah: we talking about free countries that clearly have vulnerabilities, both in terms of the economies, uncertainty over the politics, and with the brazilian elections coming up, heightened uncertainty over what

the next administration is going to look like. i think where you have had a situation in argentina going to the imf, that is clearly still risky for brazil and turkey. i think there are questions over the outlook for public finances, and more broadly, the political outlook. will either administration be able to really address the longer term structural issues and are they ready to influence structural reforms as needed to ensure sustainable growth in the future? when you think about argentina and turkey, they are not a huge waiting in the emerging market index. they are not regions we are focused on specifically in terms of opportunity because it is a smaller weighting of the index. what we are looking for is areas of hotspots and the assumption

that we are not going to see contagion into broader emerging markets because that would damage risk sentiment. nejra: we see quite a high correlation between em fx and em equities. space,look at the em fx the last couple of weeks were good, but if you look at technicals, we are seeing em currencies retreat. does that mean that in the short term, i understand the longer term you might want to take opportunities, in the short term are we going to see a pullback? grace: the dollar for us is a huge sentiment and overhang for emerging markets. it is really hard for us to see emerging markets bouncing back until we see the dollar give back some of the recent gains, which all feeds into the divergence because obviously, it is that underlying support the parteconomy on the fed's

that has lent itself to the dollar. ask,: i said they want to should the fed think more about the banker? sarah: in the past, we have seen that. at the moment, the fed is focused on domestic issues, half are they need to raise rates in order to maintain inflation. i'm not sure that the moment, powell is in a position to really think beyond the u.s. borders. as well thatthis we have seen a recovery bounce back in emerging markets. of course, some of those that were hardest hit, when we saw the biggest declines in fx, they're looking for opportunities. they look to be undervalued. the improved move we have seen is probably justified. grace and sarah stay with

us. up next, trouble by the curve. if you are worrying about inversion, it may be too late. this is bloomberg. ♪

nejra: you are watching "bloomberg surveillance." the fed will raise rates this week and hike by 25 basis points every quarter until june of next year. the forecast is a steadier pace than what the central bank --ected for a month ago

three months ago. grace and sarah are still with us. week, veryove this highly anticipated. what is more interesting is what is going to happen in 2019. do we see the fed pause? sarah: we think it will carry on for next year with a quarter a quarter. june, september and december. if we look at momentum in the economy and where the economy is , very low unemployment rate, we think the fed will want to carry on with rate hikes to make sure that inflation does it stay around that 2% level. nejra: woman talk about that as well, we keep going on about the yield curve. when i checked it earlier this morning, i think we were on a 25 handle, the curve flattening resuming. inversion,es to

across parts of the curve, we are already seeing it. and have a chart here showing the five and tens curve has already inverted. : ahead of early recessions, we have always seen a deal. some people sending out warning signals. we take the view that we are in a particularly interesting environment at the moment having had qe and expansion of the fed's balance sheet is one of the factors behind the flattening yield curve. so so concerned about an inverted yield curve is signaling a recession anytime soon. if we look at how the indicators, in terms of debt distress, corporate profitability, the ongoing rise in unemployment. all of these factors suggest there is still plenty of focus for further upswing in

the u.s. economy. it might start is question of what happens beyond 2020? over the next 18 months, we certainly continue to see the economy doing well. nejra: in terms of the equity market, and where we see the fed going from here, if the fed likely to step in to stop exuberance in the equity market learning? that is the other argument. grace: bradley, we agree with your set up, sarah, we agreed there will be hikes on a quarterly basis. the yield curve is something we do watch. i think whilst the inversion of the yield curve is a flag indicator, it is important to remember there is a long lack posted version, and when recession then hits, usually about 10 months plus. theefore, when you look at spurt we have at the moment,

that is consistent with equity market returns around 10%. not an unhealthy place to be. certainly something we are watching, but not something we are overly concerned with at this point. nejra: how are you balancing between value and growth stocks at the moment? type has been relatively unnerved versus growth this year. we are stretching more into secular growers. globalu have strong synchronize growth that we saw at the start of the year, that favors a very practical stance. industrials is an example of play on growth. started to seewe flattening often grows in regions outside of the u.s., we started to shift portfolios into secular growth, like health care, 15 consecutive years of growing including during the financial crisis. that is how we are adjusting portfolios. thinking more about what are the structural drivers to keep

profits growing at a healthy place. essentially, you are advising to position a portfolio to be late in the cycle, but not end of cycle. grace: exactly. we don't think we are at the end, but we are obviously seeing indicators the old curve -- yield curve indicates we are in a slower down phase rather than the acceleration phase of the economy. nejra: would you also say we are late cycle? sarah: absolutely. by this time next year, we will have seen the largest upswing in 100 years. grace stay with us. up next, pressure grows on prime minister may as labor says it will note down any deal she gets with the european union. we talk the pound and chances of a second referendum next. this is bloomberg. ♪

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

let's focus on brexit. the u.k. opposition labor party is preparing to vote down any deal with the eu that theresa may brings to parliament. morning, and i spoke with the brexit secretary and asked him what his party was prepared to do. now worried we are going to get a bad deal or even no deal. i set out the number of tests that these are the tests we will apply to what every bring back from this.if you don't meet them, we will vote against it. at the time, the prime minister said i'm determined to meet your test, but things have gone very well. while we are indicating is that she is not on course to meet our test. if she doesn't, we are going to vote against any deal she brings back. nejra: grace and sarah are still with us. we have actually just got headlines coming through from german chancellor angela merkel. she is addressing an industry conference in berlin.

what she is saying is that a u.k. exit deal is possible in october or november. she is saying there are 6-8 weeks of very hard brexit work lying ahead. i don't want to say it is a statement of the obvious in terms of very hard work ahead over the next 6-8 weeks, but in some senses, a lot of people have been saying it is one thing for the eu to say it ideal to be possible in october or november, but what is more of a concern is what happens in the u.k. parliament. we have always seen concern even if a deal can be agreed between the eu -- when it came to the voting parliament, we knew it was going to be very close. we have had confirmation from labour and we would expect --tty much all in position opposition will vote against whatever deal is put in front of them.

after last week, we know we may not get a deal.how we close the gap between brussels and westminster is still quite a challenge. even though merkel is anticipating there will be a deal, as a hurdle of the irish border still remains. nejra: when you talk to your colleagues, they'll tell me we are our. expecting a soft brexit how do we get there from here? grace: with volatility. the jpmorgan base case is a negotiated outcome. even within a negotiated outcome, there are shades of gray. we do think regardless, there will be volatility along the way. you're likely to see a deal done, in our opinion by the end of this year, possibly pushing into next year, really taking it up to the line. the challenge becomes around getting that into the u.k. parliament.that is in the volatility begins to kick in . ultimately, we think there will

be a scenario where the outcome is negotiated.the risk of a no deal has risen over the course of this year. that is something we watch. on the other side of that, the chance of a new referendum of the u.k. withdrawing article 50 is also a possibility. with that brings other risks around politics and which part is in charge. nejra: is sterling priced correctly for the possibility of a no deal? sarah: it is very ornery. if there is no deal, we would expect sterling to sell off dramatically. if a deal is concerned and it looked like it is going through parliament, then there are good upside risks for sterling. our own forecast is that the selling will be slightly stronger by this time next year on the basis that we assume there will be a deal, which goes through parliament that will be

in a transition period by then. nejra: are you neutral on equities? grace: yes. it is a binary nature of the outcome. grace and sarah, a real pleasure to have you as guest hosts for this hour. "bloomberg surveillance." continues in the next hour. tom keene and francine lacqua are together in new york. this is bloomberg. ♪

francine: china sticks to his guns.

chinese of stocks drop. here exclusively from brazil's president. instagram founders are leaving facebook with growing tensions with mark zuckerberg. francine: we are still on speaking terms. we focus on theresa may and the global business forums that are very unlike lubricant putting together. tom: before that, president trump at the united nations. francine: a lot of things are happening in new york which is why we are covering this event. theresa may is now more in trouble than 48 hours ago coming we have people out saying they want to see the final time before giving any votes to parliament. she negotiates a deal, but then it has to go through parliament and any to approve it. tom: one is a conservative

meeting? francine: it is a pretty busy day for the prime minister. she will give a speech right here tomorrow in new york at the global business forum, and a little bit later, bank executives this cuss global finance during one of our panels at the annual bloomberg global business forum at 4:30 p.m. london time. let's get straight to the bloomberg first word news. for a global view, here is taylor riggs. taylor: china says it is open to trade talks with the u.s., but beijing will not negotiate with what it calls a knife at its throat. china will not back down after the two countries impose new tariffs on each other's products yesterday. embattled supreme court nominee brett kavanaugh says he never sexually assaulted anyone and he is not going anywhere. he defended himself last night,

appearing with his wife in an news.iew on fox the senate judiciary committee will your testimony from him and his principal accuser on thursday. in sweden, nationalists join ofces, and four years central democratic role. the prime minister was voted out of office by parliament. the center-right alliance is now split on whether or not to receive help from the right nationalists. almost all groups now favor structural limits on immigration. as you are mentioning in the u.k., the opposition labor party opposition on theresa may. >> everybody is now worried we are going to get a very bad deal or even no deal. i set out a number of tests at the beginning of the exercise and said these are the test that

will apply to it every bring back. if you don't meet them, we will vote against them. the time, the prime minister said i'm determined to be your tests. but things have gone very well. what we are learning today is that she is not course to meet our tests. if she doesn't, we are going to vote against whatever she brings back. trump's speechnt today will be marked with -- brazil's prime minister will speak at the global forum today. theassie a few words about level of the multilateral system. taylor: 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. tom: thank you so much. yields grinding higher. euro, 117.16. 12.15 showing good resiliency in equities. here are the yields. 324 on a 40 year bond. the german two-year really moved yesterday. lesser.a it is really interesting what is going on with the german two-year. a weaker yen this morning. francine: that is critical. i'm so glad to show the german two-year. the euro extending against the dollar. -- stressing that wage increases are still moderate.

it is right for the market reaction to have averted after the comments. this is important because you had a risk reversal for how fast the ecb could raise rates. tom: to see where european growth goes as well. let me paint the picture in new york city this morning. avenue,ng down fifth you were stopped by what seemed to be federal officials letting traffic by, but studying each and every automobile. then, there was the famed nypd doing the same exercise. if you are lucky, you are able to turn left on 59th street. all of this in new york, a distraction for what is going on in washington. not only mr. rosenstein yesterday, but here is judge kavanaugh on fox. >> i'm not going to let false accusations drive us out of this process. we are looking for a fair process where i could be heard and defending my integrity, my

lifelong record of promoting dignity and equality for women, starting with the women who knew me when i was 14 years old. i'm not going anywhere. tom: we now begin a conversation with our chief washington correspondent, kevin cirilli. you look lonely, that photograph a visit yesterday, just extraordinary. with judge kavanagh, what i most focused on is the senator from iowa and the president. what is the tension are now between president trump and senator grassley? kevin: nine. i'm hard-pressed to find a republican in washington who thinks that kavanaugh will ultimately not be confirmed. mitchlly does appear that mcconnell has effectively ushered in the notion that judge cap not will be confirmed, if not ahead of october 1 when the

supreme court reconvenes, sometime later. democrats pressing for an fbi investigation. again, i'm hard-pressed to find a republican who doesn't think that ultimately, this move will move in his direction. gop on the same page with the deputy attorney general? kevin: no. will be at the white house when the president returns from the unc a meeting on thursday -- unga meeting on thursday, same day as judge kavanaugh's hearing. we don't know whether or not the president will fire his deputy attorney general, but many folks in the conservative movement has effectively put out there that they believe this new york times report from friday which says he had advocated for putting folks in the cabinet to invoke the 25th amendment, which would remove the president from

office, also recording the president with a secret recording device. francine: are we going to see more accusations for judge kavanaugh? the overall theme is actually that this is a left-wing conspiracy. will they continue? kevin: yes. yes on all counts. we have seen other accusations surfaced within the last 48-72 hours. think what you have seen is the republicans try to acknowledge the backdrop of all of this being the metoo movement. democrats argue as well that this hearing should not be scheduled for thursday, that it are to be scheduled until after the conclusion of fbi investigations. --man jet grassley saying chairman chuck grassley saying they have tried to accommodate ms. ford as much as they can.

it is an extremely polarized time here in washington. -- rosenstein had offered to resign, but expected to be fired. he was headed to the white house and then we had nothing, at least for now. it also seems a lot of stuff is probably slipping through the cracks and we won't notice it until later. is there any business as usual being done in this administration? but i also think it depends on which lends you look at it from. clearly, yesterday was a chaotic news flow day, to say the least. procedurally speaking, the president had confirmed through the senate, 69 u.s. attorneys that have already gone through senate confirmations. should he decide to ultimately oust his attorney general, he has personally interviewed many of the folks a part of that list

who have gone through senate confirmations process, which democrats are already saying poses a potential conflict of interest. this has been a remarkable week. francine: what is he going to say at the yuan? kevin: -- un. kevin: i think he is going to say that he is against the iran nuclear deal, against unfair trade practices from other allies. what i'm going to be watching today is how other global dignittaaries reacts to him. tom: exactly. remarkable yesterday with the line above administration officials for the president as he spoke about drugs with ambassador haley at the united nations. just think, tomorrow is wednesday. we are going to come back with george. coming up later, an important

conversation. we will look at america, china and it is convergence. michael spence in the 6:00 hour. stay with us from new york. this is bloomberg. ♪

taylor: "bloomberg surveillance." this is -- this is "bloomberg surveillance." the founders of instagram are leaving facebook. there have been growing tensions between them and mark zuckerberg over the direction of the photo sharing app.

zuckerberg is now more reliant on instagram in the founders were frustrated with his growing day-to-day involvement. payday willch's increase. he was already in line to receive billions in cash and billionrom disney's $70 offer. the knockout offer has sent sky shares soaring. bank will consider possible deals after it finishes an 18 month period to improve profits. that is from the ceo responding to her question about a possible merger with commerzbank. german government officials support the idea of combining the country's two largest banks. much.hank you so george.us now,

i want to tell you first about our fed special coming up tomorrow. the former vice chairman of the federal reserve system will join us. 2:00 p.m. tomorrow, scarlet fu weeding our coverage. will be greathere curiosity as to where the fed 's. let's go right to the press conference. what will you listen for? george: really just the telnet powell sets. really their conviction on where we are headed from here in any concerns about inflation. if there's any mention on financial imbalances, which has been a hot topic among a lot of fed speakers. tom: i'm thrilled to have you here after tony yesterday. we have george with a different world than the short-term rate world. let's bring up the 30 year bond,

the old benchmark. up we go off the present selection. there is every indication here that we are breaking out of a 320. are we and what does it signal? george: i would not get so overly concerned that it is the end of the 30 plus year bond bull market. we could go sideways for many years. we had to break out rates, we are having another breakout in race. we don't have to have a complete reversal just because we with her one. -- went through one. francine: what would derail the fed? is there anything in the data point, lower inflation, wage growth or something that could actually make the fed postpone their hiking? george: the fed is on track for at least two more hikes. even next her, we are at two more hikes. many episodes

throughout the summer from turkey, from other headline risks. flinched.s a truly as long as we don't see any sort of contagion back to the u.s., the fed is going to keep hiking rates. francine: could we see contagion? what does dollar do from here? at this time, it is great to see other central banks joining the fed on their path to normalization. if we get europe to get rates higher, and we get the rest of the world raising rates, the dollar will not get unhinged. i think that is quite a be important for other e.m. asset classes. by and large, the dollar has in a large move. if the fed raises rates on the path it is projecting, the dollar will stay strong. tom: if we are range bound, is the basic idea here that you click the coupon and forget about total return, or can you actually manage for total return, given the number?

george: you could. if you are being on a more defensive side and take a strategic view -- tom: i don't want to be in the stock market, i want to be in the world of george goncalves. what do you do? george: cash is an asset class. you are seeing it in the way that crowd funds have been growing.there is a barbell strategy of having short-term paper and long-term paper makes sense. francine: cash as an asset class gives me the shivers. there is something wrong, is in there? george: why? francine: its unworldly. does it pay that something unworldly is around the country? tom: can i tell you how old i feel? i remember most cash last year, 3%, 4%.

what was cash? digits,close to double right? tom: can you believe that? george: the fed is on track to normalize how the banking system used to work. does create that sort of flexibility to have a barbell strategy. it is a buffer. you can move money down the curve. you have the chart of the 30 year.30 year rates keep getting higher . could also be an opportunity as well. francine: what is your favorite currency? is there a favorite currency? george: i think the dollar still value. historic i think the euro will pick up here with transition again as the fed passes the baton to the ecb. tom: where's my time magazine? francine: we will find it in the papers and talk a lot more about

euro with peter. georgia stays with us. salesforce.com co-ceo is coming up. they will talk trade and tech. this is bloomberg. ♪

francine: good morning, everyone. this is "bloomberg surveillance." we are in new york for the u.n.

general assembly. ands focus on brexit now the german chancellor says an exit deal between the u.k. and eu might be achievable in october. she says we have 6-8 weeks of very hard work ahead. the shadow brexit secretary spoke with bloomberg this morning and says the option to remain is not ruled out in the event of a second referendum. >> we don't even know if there will be a deal to argue about, or no deal. we have to cover the basis. the motion today is not ruling anything out, not ruling out remain as an option, but we are going to have to wait and see what the situation we are actually confronted with, either later in the year or early part of next year. francine: joining us from germanyt is carson, ing chief economist. georgia still with us.

being a german economist, you also have to look at what is happening with brexit. what is the probability of no deal, the probability of staying in the customs union at this point? carson: i think there are still a high probability we get a deal. the typical european fudge we are going to get. don't forget, to really get a , we needade agreement ratification, so that is good to take a long while. agreement on the exit is feasible. francine: what kind of agreement? is it one that would get parliament approval? if you are an economists are market participant, do you still need to look at all options or will we have a decision by december? carsten: i think we will get a

decision on december on the exit, but there will be this percentage of uncertainty because there will be no deal on the future trade agreement. there will be a vague statement on how the future trade relationship could look like. therefore, there will always be uncertainty, even if we have a deal on the withdrawal. tom: within that, is the eu response. time and time again, i don't understand the incentives for the eu to get it going. is delay their best friend? carsten: i think delay is one of their best friends, but i think the eu is also realizing the world has become so concerned. they don't want to have a new problem outside of the eu borders. they want a friendly divorce between the u k and eu. no interest at all to have a new problem area just outside of the border. tom: friendly divorce. i love that phrase. tell me about from a divorce.

how do you do it? carsten: a from a divorce, first of all -- friendly divorce, includes access from the eu to the u.k. europeans living in the london and u.k. will remain the same. all divorces are always about money. there has to be an agreement on how much the u.k. will have to continue to pay on the eu budget. then, this is where the from a divorce stops, and then we get to the hard part which will be the future trade agreement. francine: talk to me about the german economy. we have a great chart showing the differential between 10 year u.s. treasury yield and german bunds. the bigger problem is a trade war, brexit, possible tariffs on their carmakers. where does germany go from here? carsten: thing germany is still

extremely strong. when you compare germany with the u.s., they are experiencing the same recovery right now. 10 years of almost consecutive recovery. unemployment rates are similar in the u.s. and germany. obviously, trade is an important issue here. we have to make the distinction between facts and threats. the facts are that we only have a few tariffs on aluminum and steel. their trade war is really focus on the u.s. and china. right now, it is not a big issue for germany. you might even argue that political tension in germany could become a problem. i think if we get more investment, it looks like we will get more domestic investment, the cycle in germany could easily continue for a couple of years. francine: what is your take on germany? it is a strong economy and probably the one that has the most to lose. for nearly a decade, you

have had artificially low rates in europe. if you think about what is happening with the u.s. bond market, we have the euro crisis that drove the quality into bunds. german rates are very stimulative. as the rate had higher, it could cause an issue for the economy. tom: this is so important because it is the great miss call of the last 18 months. everybody is waiting for those rates to normalize. they haven't. it has been painful. when does the pain stop? george: you really new to get behind the idea that the ecb is going to normalize after the fed completes its normalization. tom: negative rates aren't a permanent feature? george: they shouldn't be. as you get out of that move, that is when he start to see those rates had higher. francine: talk to me about inflation expectations in europe.

we have mario draghi talking about inflation yesterday, repriced the markets. peter saying it is not that much of a difference to a we thought inflation would do. cartsen: when you look at the staff projections, the ecb revitalized. their projections i was a bit these remarks. which corn inflation has been more wishful thinking than reality. inflation is not a big issue. we will see the ecb stopping qe by the end of the year. before we get any great hi, this will be after the summer of 2019. talking about when will the negative deposit rates end, this will be the end of 2019. francine: i need to show this great chart looking at core

inflation and inflation in the eurozone. we will take the time to say good morning to our radio listeners. what is your take on inflation in europe? >> when you lower your expectations, -- by and large, if there is wage pressures especially coming out eurozone,, and the the ecb is having in the right direction. it is not necessarily a problem yet. globally speaking, everyone is pretty pessimistic. the u.s. has to get back its gains. if the u.s. maintains its growth, the people whatever underestimated how high rates can go. tom: i went to slip and one more question here. this leads to michael spence in our next hour. that is how germany adapts to the america and china attention on trade. is germany malleable enough

where they can boost exports to china? but germany is struggling. they have to reinvent their global role. germany used to have a passive role. now they have to take a more active role in geopolitics. they can work to china. the biggest risk is when you look at the stretch, china can become the big competitor. much more than only a nice export destination for german exports. a viewer we just have question. we love your questions. keep those questions coming. this person is writing and, what about productivity in europe? is it measured ok and is it accurate? >> i think it is accurate. it is a global issue. europeu dig deeper in

and go into the sectors, you see productivity growth is picking up in sectors that are in relationship with -- it is not spreading across the entire economy yet. digitization is feeding into productivity growth. it remains to be seen whether we see that in the economy. tom: i am in the camp were productivity in europe is the same or greater than in america. suggest higher productivity and x hours. if you are productive and work less days, why work more? we will pick up the conversation. tom: we will pick up the argument in our next break. why don't you take us out of

this painful exercise. francine: he will send usfrancine: some productivity charts. george will stay with us. let's check in on what is trending on tictoc. the founders of instagram are leaving facebook. exittold bloomberg or follows growing tensions over the direction of the photo sharing app. the piece charting the final days of leningrad -- of london grad. the russian billionaire is preparing his finances to skirt the threat of u.s. sanctions. starbucks is planning and organizational shakeup including cutting jobs. supreme court nominee brett kavanaugh says he is not going anywhere in the face of sexual assault allegations. jamie dimon says it will take 25 years for wall street bailouts

to be forgiven. instagram founders are leaving founders because of tensions with mark zuckerberg. first of all, how much of a surprise was it? they have largely kept instagram independent. we have any idea what facebook was to do with instagram? >> we know that user engagement is declining with facebook. it is surging with instagram. they have been slower to monetize instagram then with facebook. -- than with facebook. sarah frier reported that the engagement with the facebook executive team has increased. they are going to instagram on a daily basis and are interfering with how that is run. francine: what do we mean by interfering? does that mean more ads? do they want to change the layout? >> we do not know for sure. if you look at what is happened

with facebook, one of the reasons facebook has declined is the quality of the content has also declined. the long tail of growth from facebook ads is coming from smaller enterprises. these are companies that do not spend as much on their advertising content. new growth driver -- that implies that quality is also going to decline on instagram. that poses a risk. if the quality is declining, why would people keep using instagram? once they have used that up, they have to move on to something else. my: i am showing it on brand-new iphone. it is francine. come on, alex. this is the reality of instagram. it is there. what is the value of this to mr. zuckerberg?

is it quantifiable? is it moral? they certainly did get a lot luckier than they knew at the time. our colleagues at bloomberg intelligence valued instagram alone at 100 billion a few months ago. i would point towards the brilliant cover story that sarah frier wrote that instagram is facebook's next help. a lot of people do not know that facebook owns instagram. when they complain that facebook influences society, they then go on to instagram not realizing they are sending more dollars in zuckerberg's direction. tom: the jpmorgan institute makeson the gig economy it out to be a complete total fraud. london is dealing with this and new york is dealing with this.

alex, what is your study of the wage economics of the gate economy -- of the gig economy? >> it is advantageous towards the people running the platforms. when it comes to places like europe where the rules are stricter, it is harder for those companies to operate. we have seen greater oversight and london -- in london. companies trying to get into it like a volkswagen, they say the drivers are going to be employees. gig means the mass of that economy stops adding up. tom: alex we will see out on instagram. i am showing everyone the wonderful copy -- wonderful coffee. now we must look towards new

york city and the gathering of government leaders. one of them is the most interesting individual from south america and brazil. there is a terrific election there. brazil in. tamura of conversation with shery ahn. my party's candidate although he has a very appropriate stance , he said my minister of finance was instrumental in helping us recover. he seems to have been unable -- gains we have achieved in my administration. rates for the time being are low. elections are always a surprise.

ahead.e two weeks let us see what happens. have shownn assets out -- have sold off because of the political uncertainty. we have weakness in argentina emerging markets. is brazil vulnerable to contagion? >> not at all. there is no potential for contagion. reserves, weeign have 380 billion of stocks. resort to anyd to of the foreign reserves. i am sure argentina will recover itself. there has been no ripple effect or contagion effect on the job creation pattern.

of the oil deposits, the likelihood is that many billions of dollars will flow into the economy. there is the no effect on the brazilian economy. francine: 13 candidates are vying for the presidency. be faced with two main choices between the left and the far right. before, argentina's president told bloomberg there is a zero chance of his country defaulting again. >> zero. the level of support we are receiving from the united states of america, the level of commitment of my government and my citizens with this next injury -- with this new exchange rate.

we are balancing our foreign accounts. at the speedrowing of 18 to 20%. that shows the numbers are starting to work very well. the weather forecast shows we are going to have neither growth -- neither drought or footings. grains are going to rocket to a new record of production. francine: that was a very valuable interview with the argentinian president. george stays with us. later tomorrow, banking

executives discuss global finance during our panel at the bloomberg global business for. we will be asking of them about technology. that is at 11:30 a.m. in new york. this is bloomberg. ♪

francine: good morning. the u.n. ga. president trump a little bit later on at the united nations. tom: that will be spirited. last year was something to say the least. francine: it is how the other heads of state will receive it that we will be looking out for. here is taylor riggs. taylor: president trump now has

his first major trade deal. the president and south korea's president signed a free-trade agreement on the sidelines of the united nations general assembly. thatis amid optimism american farm goods will not shut down and expand. president trump will meet with the justice department official overseeing the russia investigation, deputy attorney general rod rosenstein. they will discuss what is going on. bloomberg told -- bloomberg learned that rosenstein told chief of staff john kelly he is resigning. a new survey says the federal reserve will raise interest rates this week and stake a quarterly packet -- there is a steady pace of increases over the next few months. says ane president

revised agreement with the imf will help shore up investor confidence. a currency route placed argentina into recession and the imf gave argentina a $50 billion credit line. >> the level of support we are receiving from the countries especially from the united states, the level of commitment of my government and my citizens with this new exchange rate has a very competitive exchange rate. we are balancing our foreign accounts. taylor: global news 24 hours a day and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 270 countries. market oru are in the

you should be in the market or you are not in the markets and you are guilty, this is a conversation of the day. frederick lane has spent an apparent generation helping people stay in the cup -- they in the market. fred, this statement from your bio. streamlined solutions for a lifetime of needs. the major need right now is courage to be in the markets. where do you find the courage? >> history. you have to look at the past. you have to look at current inputs. if you look at the past and current inputs, this is a good time to be in the market. tom: you have a comfortable clientele. they like to be in comfortable stocks. what does comfortable mean? >> when you are in the equity

market, you should never be comfortable. too relaxed.ver be tom: is amazon comfortable? everybody is on board. >> those are generally stocks that people should be cautious about. it has a great runway. i would rather not comment about amazon specifically, but there are stocks -- amazon pervades our life. technology pervades our life. i like to invest in sectors where there is secular growth. health care is one and technology is another. these are all important themes that are going to be going on for 10 or 15 years. amazon is such a theme in terms of the shopping patterns. whether it is a doomsday or not, the market has to crack.

when does it crack? >> i do not care. it fact of the matter -- sounds like a very cavalier comment, but you are right. we are going to crack. they corrected in 2015. i told clients, expect one. we are keeping some money on the too when there is a correction of 10 or 15%, it will not be fine. we are going back in fisher. what i -- for sure. if gdp starts to lag and corporate earnings starts to decrease or growth slows down, then we have a recession that we have to confront. we are not there. francine: george, do you agree with that? >> we are due to have a correction at some point. it is on point that we will have these episodes. people are still fearing the

financial crisis. we will have these episodes of corrections, which will be opportunities to get back in the market. tom: comcast is being absolutely trashed. is, boy, does it look like -- how dodiscern a value -- you discern a value in comcast? >> that is a difficult question because the media space is as roiled as i have seen it. ownears ago, if you could cable stations, it was the greatest thing. this is a very different world. when we do not understand industry patterns and there is a lot of crosscurrents, we stand -- weekend is steer clear of that. there are more betting elements to it than investment elements. francine: is there 50% of the

future that we do not understand? we are always on social media. what does that have -- what impact does that have? do you stay away from all of that? >> quite the opposite. i want the tools. i want to be investing in the tools that allow that to happen. i like the semi conductor that reason. i am not recommending any semi conductor stocks to you. i like technology for that reason. likealth care, i happen to the life sciences place. those of the tools where the research is being done. the individual bets on the biotechnology companies -- the individual investments i should say, those are valid. the tools companies are even more attractive. francine: george, do you agree with that overall assessment? markets, isat the there anything that looks like there is in a bubble?

there is the question of thinking that central bankers are taking a big gamble. they are taking away easy money. we are going to see if we can stand on our own two feet and take away the training wheels. that is the litmus test. once you get rates high enough and the spread starts to widen, they could be a repeat of 2015 and 2016 of certain sectors. tom: this is what we love to do. we have an equity guy and a bond guy. they are sort of crossing when you look at the dividend. bring this chart up. i will probably show it tomorrow with scarlet. it is a real fed funds target. we are not even near a positive real rate. when real rates get real, what happens to friends world -- to fred lanes world? combined with the fiscal

stimulus, that could become an issue. we are not there. we have one year until it happens. tom: we have seen this before. all of a sudden georges world is going to become competitive with dividend and dividend growth. >> i doubt that is going to happen. i think there is such a strong demand demographically for fixed income assets. think we are going to see 5% and 6% interest rates anytime soon. to me, it is unimaginable. let me see if i can find disagreement on the recession. cuts areoint, the tax going to run out. are we going to see a u.s. recession? >> we could have a growth recession.

either way, it is going to be a garden-variety recession. andre still spooked thinking we could have some kind of downcast. >> i agree with that. my bigger concern -- let me throughout one other detail -- throw out one other detail. we have fewer than half the number of publicly traded u.s. stocks and we did 20 years ago. the supply and demand imbalance for u.s. equities in general. i know that sounds like a strange concept that supply -- but supply and demand matters. until -- and less interest rates get to a level that is competitive with any low and estimate of earnings growth of the s&p 500, over time, that is a very low interest rate. i think equities remain highly competitive. tom: i want to congratulate you

on staying in the market from 2009. i want to congratulate you on driving fed policy. this has been a spirited conversation. that is what we like. we will continue that trend we hope into the next hour. one of the most important people in economics, michael spence will join us. you know he is from nyu. one of the great essays on the financial crisis and how we get regulation wrong. michael spence on china. i swear we will talk about italy as well. it is london. the weather is perfect. in new york, the weather is not. ♪

tom: yields continue to grind ever hire. even the negative german

two-year moves to a lesser negative rate. the fed will raise rates tomorrow. today, president trump will speak to the united nations. the assembled will not include judge kavanaugh or deputy attorney general rod rosenstein. in this hour, michael spence of nyu. this is bloomberg surveillance. we're live from new york. francine is in town for the festivities. the headline has to be prime minister may. francine: this is on the back of the labour conference. there is a speech by the shadow brexit secretary. with the european union, whether she can get a new parliament. tom: this is the opposing party. francine: they hold the key to parliament. if you count the numbers, this is what we are doing. whatever deals she gets, she

needs 50 labor ministers to support that. this is a big deal. she will be showing up at our conference tomorrow to talk about it. tom: a lot to talk about. michael spence will join us in moments to look at china. right now, you need a news briefing. what a 24 hours. it is open tosays trade talks with the u.s. but beijing will not negotiate what they call -- with what they call a knife at his throat. -- at its throat. china will not back down after the two countries imposed new tariffs on each other's products yesterday. embattled supreme court nominee brett kavanaugh says he never sexually assaulted anyone and he is not going anywhere. he defended himself last night. with his wife on interview on fox news. the judiciary committee will hear testimony from him and his principal accuser on thursday.

in sweden, nationalist and center-right alliance join forces. the prime minister was voted out of office by parliament. the center-right alliance is now split on whether to seek more help from a nationalist. that party has been successful when tipping the debate and sweden -- in sweden. as you remember -- as you were the opposition party in the u.k. is stepping up the pressure on the you can -- in the u.k.. with labors shadow secretary. >> everybody is now worried we are going to get a very bad deal or no deal. these beginning, i said are the tests we will apply. at the time, the prime minister said i am determined to meet

your tests, but things have gone very wrong. we are indicating today that she is not on course to meet our tests. brazil the president of says his speech to the united general assembly today will be marked by optimism. he told bloomberg he will target his remarks to other global leaders. may i say if you words about the relevance of the financial system. taylor: global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. we have lots to talk about. equities, bonds, currencies,

yields higher. next screen please with the curve. a 30 year buyout to 3.2%. a lesser negative germany of. -- german yield. francine: we did see the euro meal of on the back of inflation comments by mario draghi. europe overall edging higher. a mixed session in asia. investors still trying to figure out what the politics mean for them and the outlooks for global trade. it is a little bit on the move. drop.ended its late they quite a crucial figure to white out -- to watch out for. tom: much to talk about. the story continued last night.

here is judge kavanaugh on fox. >> i am not going to let false accusations driverless out of the process -- drive us out of the process. we are looking for a fair process where i can be heard defending my integrity. my lifelong record of promoting dignity and equality for women. starting with the women who knew me when i was 14 years old. i am not going anywhere. tom: i know mike yellen feature this as one of the themes. our kevin surreally joins us. -- kevin cirilli joins us. american politics off the rails. how far off the rails are we this morning, kevin? >> we cannot see the track. to find apressed

republican who feels that judge kavanaugh will not ultimately be confirmed. senate majority leader mitch mcconnell has been working behind the scenes to continue to lobby senators particularly senators who might be more inclined to go against the nomination. senator collins and michalski. -- murkowski. if you look at the swing senators, they have signaled they are ultimately going to support judge kavanaugh and lest there be any other bombshell allegations. francine: what are the chances of more bombshell allegations? >> we have seen bombshell allegations within the past 72 hours. kavanaugh has refuted them. democrats have said there ought to be an fbi investigation and until the conclusion of the investigation, they should not have a hearing. talk about a split screen. that is the same day deputy attorney general rod rosenstein is going to be meeting with

president trump. tom: where do we stand this morning with the deputy attorney general? what is the moment for him? >> he has to fight for his job. president trump speaking with him via telephone yesterday. when the president returns from is goingga meeting, he to be meeting with foreign dignitaries all week, he is going to have the one-on-one meeting with his deputy attorney general. the reports were seen as a blow for the molar probe -- for the robert mueller probe. this new york times report suggests that the new york times wanted for the president to be recorded. tom: thank you so much. greatly appreciated. our keith washington correspondent. it is always a joy to have

michael spence with us. his contribution to education at stanford and now at new york university. of course, the nobel laureate. wonderful to have you with us. i want to talk about china later. and you are new or essays, you are focused on multilateralism. -- some form of bilateral discussions. we have the fear of regional blocs of the 1930's. i have a phrase that you are allowed to steal called trump lateral. how are we doing with my way or the highway? >> we are moving in that direction. reinforcing it is a pattern of rising nationalism anywhere. i would say the foundations of the multilateral world we lived inand so many benefited from developing countries is at least

under threat if not worse. tom: what have you observed in europe? you are a student of europe. there, what is the character of new italian politics that leads to this populism? >> i call it nationalism. populism has lots of different flavors. what seems pretty clear is that nationalism and parties that represent nationalist approaches, are rising everywhere. in italy, we have it and full-blown form -- have it in full-blown form. we do not know what is going to come out of the. the markets are worried about it. level, whatat some we have got is a situation in which countries and citizens could not really deal with the

multilateral world we created. we are seeing a retrenchment going on. francine: are we really or is it technology? we talk about trade tensions and anti-globalization, but what will be the wheel impact on how we do business in supply chains? >> the anti-globalization movement covers all four dimensions including technology. you are seeing a rising pattern of regulation of digital technologies. differential patterns of regulation across different countries. walls going up you did not see going up before. tom: you have been a world leader on this. the use of technology. can technology benefit the working class or is it nothing but the territory of the elite in a gilded age? technology cand,

benefit poor people, the working class, developing countries, and so on. you can see signs of that. i think the mobile internet and these bones we carry around with us are the way the developing country's poor are going to have access to financial services and so on. we will address his china as well. the president will address the united nations today. last year was extraordinary. the president is out in full force with ambassador bolton and ambassador haley. look for this at 10:15 this morning. stay with us. this is bloomberg. ♪

taylor: this is bloomberg surveillance. the founders of instagram are leaving facebook. bloomberg has learned there has been a growing tension between and the founders of instagram. zuckerberg is now more reliant on instagram for facebook's future growth. the founders were frustrated with his involvement. robert -- rupert murdoch was already in line to receive billions of stock from disney's offer for most of fox's assets. shares offer has set sky soaring.

considerbank will possible deals after it finishes an 18 month. month period. 18 german government officials support the idea of combining the country's two largest. tax. . -- two largest banks. tom: if you are ever so lucky, at stanford, you run into chad jones. he is a young genius on growth. say, go to logs. so does michael spence. you go to logs to get smarter. christopher verrone does this every day at strategas. what a joy to have you with us. i want to go right to oil. everybody is frothing at $80 a

barrel. you call for an oil breakout. >> the spread goes to 90. the spread has been sideways most of the year. just starting to breakout year. wti is not too far behind. look at the credit markets. energy high-yield credit continues to tighten. energy credit is very stable. tom: let's go to the charge it -- to the chart. it is not a linear chart. it is a log chart of crude. we do that every day. professor spence, slope matters. first and second derivative matters. what does that signal to you? >> very strong global growth. tom: help us out with the second derivative with oil. >> when we look at the strength we are getting from oil, it is

reflected in other assets. tom: like 4% gdp. >> german yields starting up. two-year yields at cycle highs. this is a stronger economy and people are giving it credit for. francine: let me bring that chart up. it is an excellent chart. when you look at oil and not copper gold -- why do you look at oil and not copper for gold? >> copper is coming off its best week in about two and a half years. indicators we can put in that category. or bottomed all the way -- iron ore bottomed all the way back in july. thingne: what is the one

people are getting wrong in this kind of market? tariffs.s impacted by >> i think they are focused too much on the headlines. earnings are up 25%. the fundamental story behind the market is robust. you can say global equities have been in different. go back to 1994. market was sideways. growth was strong. those who were patient were rewarded in 1995 and 1996. use that as a framework. we think this is more midcycle than end of cycle. francine: what is the one thing that you disagree with? is there something we are getting wrong in how we measure the world's economy? >> i think so. i think what you are seeing is an ability -- and an inability

to play the longer scenario out. are seeing and markets is short to medium-term strength. more or less across the board with the exception of some emerging market problems recently. i do not think there is anywhere near an adequate risk premium for the divergence between governance and short run economic performance on the other. francine: thank you both. we will get back to you, chris. executivesrow, bank discuss global finance during our pie now -- during our panel at the global business form. -- for him. -- this is at 11:30 in new york. this is bloomberg. ♪

francine: this is bloomberg surveillance. we are talking a little bit about the risks out there and the fact that the -- the fact that there are these geopolitical risks. what is the main risk ec? >> but i am trying to figure out is you have s&p up a -- of eight. you have shanghai down 15. the message on who is winning the trade war seems to be pretty clear. i would not sure what do --

what we are trying to figure out is, are we underestimating how serious the emerging market crisis is? tom: this goes back here essay, which was on regulation. so much of that is is what we can't see out there? what are we missing right now within our certitudes? >> i guess the simplest way to say it is we are missing a tectonic shift in the way the global economy is organized. we are seeing the first sign of it and we cannot see the end point. we are blundering around trying to figure it out. out thattive comes this trade war will not go on forever. critical.is our fearless leaders have the

responsibility to look forward and try to find the unknowable. how are they doing? >> not well is the simple statement. that varies. tom: it is a mystery, isn't it? >> it is not entirely. i think fairness requires one to say they are fairly constrained by the politics going on in their country. they do not have a free hand to do what they might think is the sensible thing. brexit would be an example. francine: are the markets aware of that? it is very difficult for markets. it is very difficult to measure these politics shifting into the market. >> where we began the conversation was on crude oil. what is not being discussed is an inflation scare.

we just got back from a week in asia. the big thing and every meeting is trade war and shape of the .ield curve tom: an important conversation on a more fun bill -- more fundamental basis. do not forget today, our special coverage of president trump. it is an

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we are honored to bring you michael spence on what is an andysis of china particularly a china not in a vacuum.

if they are not alone, where is china right now? >> the united states has the capacity to hurt them. there is risk they will take measures to counter the blow to the economy which are unwise in the long run, something similar .o the response and credit china's longer-term goal is to become a technologically sophisticated country that will not be deterred. tom: you are one of our links to the economic past when you started with jon hicks. we have a nostalgia about china. it is a link back to jonathan spence and the imagery of the 20th century. are we to nostalgic about china? way.s, in a

quickly evolving so that it is hard to keep up with it. sense, the perception lags the reality. all, do weirst of understand china fully? what a challenge the u.s. dollar? one, theon that chances of that happening at least in my lifetime are very low. is not a system set up to provide reserve currency. they will be the biggest economy in the world and very powerful long before they become a reserve currency. they heed that will not happen. francine: chris also has a question for you. last: when we look at the

episode of chinese weakness, there was capital flight. fx reserves. they are now stable. is that a signal that the chinese weakness is less serious this time around than 2014, 2015, 2016? the government is sufficiently in control of capital markets and private sector. they has imposed capital control. thinkot necessarily capital flight is gone, it is just the opportunity has been reduced substantially. they keep falling and i asked about trade wars. word that would filter through the real economy in

china. i saw that interview. i think he is right. the psychological impact good easily be bigger than the real economy impact of these things. , while the stock market is becoming more important, it is still too in china that the housing market is the dominant asset for households and so housing crash would do way more damage then shanghai. you discuss the view and tone of an america represented by the press are by dr. navarro and what does he get along with his certitude that america's hurting china? i don't think navarro

is wrong to point no that there were significant impacts on specific communities and specific industries as a result of china's successful rise. there is general agreement on that. others who are distinguished scholars have documented this. unwise, if i can put it that way, is to approach this issue of renegotiating the , whether itagement is investment, technology, trade with china in a confrontational way. michael spence with us on china and the american response. we will continue. this is always an important conversation preview read christopher verrone talk about the breakout in oil. robert dudley is in british petroleum. he is the bp ceo. look for bob dudley on the new

valuation of oil in the 8:00 hour. please stay with us worldwide. this is "bloomberg surveillance." ♪

>> this is bloomberg -- this is bloomberg surveillance. i'm taylor riggs. rpi wants to deal with the conservatives who feel their views are being censored online. hill,ers on capital google denies it makes content decisions on politics. google has been accused of silencing conservative voices. the founders of instagram are leaving facebook. blue book has learned of growing tengion between the direction of

the photo sharing app. zuckerberg is more reliant on instagram for facebook future growth and the founders were frustrated with his growing day-to-day involvement. your "bloomberg business flash." want to say hello to all on twitter. we are thrilled that "bloomberg is tweeted out and it is a perpetual screen. we are humbled at the response so far good thank you for joining us on twitter. spence told us to do this. i use this chart with the dow. huge changeg of over on the left and the many re-affirmations along the way. this trend.

how above trend are we in this great market? >> the biggest misconception is -- and this has been one of the longest bull markets. 1948 to 1965, along bull market. 1982 two 2000, an 18 year bull market. where five years since taking out the 2007 highs. there is more time here. spence, there is always in capitalism the success and rising valuation, with a nominal or real. the threat of socialism and marks and all of the evil names of american capitalism. how large a threat are they now to the capitalism we have lived? michael: at one level, they are a threat, and at one level they aren't. there is no known substitute if growing,a dynamic,

successful two markets and capitalism. in that sense, if you don't have are facingive, you the threat. the noise comes from the distributional issues. right now we have growth patterns in a number of capitalist economies where benefits are flowing disproportionately to the top. this is been much researched and discussed. there are corrective actions that don't amount to throwing capitalism overboard. i expect those to come. is that: the problem when you look at populist governments and what they are trying to do, the markets keep on telling them no. if they decide to redistribute youth, with the markets cannot do that and that is anticapitalist and we're back to square one. michael: that is true and a good point. , italy gotr hand

itself in a box in terms of opportunities and constraints on the fiscal side. the markets are telling them do whatever you want but do it within a sensible set of fiscal parameters, and that does not leave a lot of wiggle room. christopher: when we look historically, a lot of the distribution and ballesteros our function of -- imbalances are a function of trade. three-month paper is to 25 come into your paper is to 80. 280.e is finally -- is to ultimately it will be bullish. tom: we alluded to capitalism and the threats in europe. a lot has been written about not so much faster zone but elements fascism, do you

see larger tendencies in the coming years or is that overplayed? my impression is the vast majority while they sympathize with the immigration discussion and inability to absorb massive numbers of people fascism.eaning toward they are basically committed democrats, if you put it that way. confused things get because the most strident of the nationalists or populists are also some of them anti-immigrant and it's sort of sounds like the same thing. ,rancine: what happens professor? will stickc is they

to the rules and find some compromise on immigration. that is a very good question. the answer depends on how well europe responds. europe is not working very well for a number of countries. a part of the problem is those countries' fault, the structure is way short of adjustment mechanisms. you could imagine a scenario, and it is not the most likely one that italians thought hands and say this is a going to work. then you have a central goal force operating in europe. francine: thank you both. government leaders and business leaders gathered tomorrow for forum.omberg theresa may will give a keynote speech. tomng up, we talk brexit as

goes to radio. this is bloomberg. ♪

francine: this is "bloomberg surveillance.". i'm francine lacqua. let's focus on brexit. an exit deal with u.k. and the eu might already be achievable. we have six to eight weeks of very hard work ahead. the option to remain is not rolled out in the second referendum. or nore will be a deal deal. we have to cover the basis. the motion today is not ruling anything out. we are going to have to wait and see what situation we are confronted with. that was the shadow brexit secretary speaking with bloomberg care joining us is bloomberg's european director.

and we have michael spencer. we are just out of the labour party conference. the key for theresa may and negotiations are the opposition party support a referendum are not. david: it has a habit of boxing politicians and political parties into a possible situations. labor is divided in the conservative party when you lift the lid on this issue. we had mr. mcdonald saying we could have a second vote but there would be not an option to remain. today we have the opposite. a said we could still have vote to remain. it applauded and that was very popular. -- problem forp

labor because they frustrate the government and block theresa may mma get them into a general election and possibly into power. be seen for the electorate to block this process. if that happens, they will have unhappy voters on their hands. you cannot keep everyone happy. francine: this goes back to the concerns that theresa may should have that depending on the type of deal, she will not get it through parliament and how much support does she need from labor parliament to push it through? vote will be on a nofe age regardless -- edge matter what she comes back with. not everyone in her party will be happy. she only needs a few people against her. she will have to be appealing to some of those labor mps who have a very leaning vote constituency

and getting them to defy and vote with them. that is a dangerous game winning on your labor part -- labour party to get it through. it is impossible to say which way this could go. we will have to wait and see what deal images out of the talks and it is going to have to be in the next two weeks if there will be a deal. there will be the all-important crunch vote that will happen in parliament. the numbers will be far too close to call. francine: have you see this panning out? will he be a good deal or a bad deal or will they come together and what you do with ireland? michael: that sounds right. if they were unified in a way they are not, inside both parties you could easily imagine working out a deal with the europeans. it is domestic politics that seems to be the stumbling block.

that than ie about do, but the conservative party seems to be badly split for reasons i don't completely understand. the labour party is hitting left at a rapid rate. another party is trying to stay somewhere near the center. we are gettinfrancine: we are gg breaking news out of the united states sang the president trump will not meet with iran. what would you like to hear from him today? yesterday he spoke to the president of south korea, what message should america be giving right now? michael: what i would like to hear from the president in this international form is a statement that what he is interested in and what the united states is interested in is renegotiating the terms of

engagement on multiple fronts with multiple parties in a way that seems fair to everybody. but in a respectful way and then a return to letting the significant dynamic elements of various economies and societies function. this is supposed to something more combative. disrespectful and it gets you to the point where you break down that intangible asset, which is predictability, confidence, and trust and other things we need. francine: thank you so much. we will continue right here on "bloomberg surveillance e." this is bloomberg. ♪

>> the world awaits president

trump set to speak at the u.n. laying out america first and targeting iran's nuclear programs. andu.s. is being blamed president trump thinks a new deal with south korea. what he meant to say was mario draghi has been downplayed. to raise ratest is it convergence or diverges? david: welcome to "bloomberg daybreak." tweeted that has he will not meet with the president of iran. you can see the rhetoric in a run. at least in the commodity market, the u.s. is taking a harder stance.