♪ francine: europe's next leader. candidates for the job jostle for position today. the uk's conservative party has its own game of thrones. the art of no deal. president trump says he is not ready to make a trade agreement with china, saying that tariffs could go very substantially. --baba was a second sales.'s second set of ♪ welcome to "bloomberg surveillance." i'm francine lacqua here in london. these are your markets.

the stoxx europe 600 pretty much flat. thee look at some of volatility in pound, it has been a little bit volatile. [audio drop] -- with china on trade. coming up, as both labour and the conservatives get crushed in european elections, we would discuss what the election results mean for brexit. will be joined by andrew adonis. let's get to the bloomberg first word news. >> the two biggest parties in the u.k. both faced the wrath of voters. the day's big winner was nigel farage. his brexit party coming out on top with more than 30% of the vote. the anti-brexit liberal

democrats saw its share of the votes skyrocket, coming in second. the public gravitated toward parties on both sides of the spectrum, sending clear pro-or anti-european messages. chief haseu antitrust made a name for herself by taking on u.s. tech giants as eu leaders are holding a summit today to pick up discussions of who will be the bloc's next chief. the eu is reportedly considering penalties for italy over its failure to rein in debt. it could pave the way for a 3.5 billion euro fine. it would mark an escalation of rome's budget battle with brussels. salvini says he will push back against eu demands when crafting his next budget. an upper hand in the

government. bruno le maire saying the state would retain a 7.5% stake in the new entity. the french company's board says it will study what it calls the frontal proposal, as auto manufacturers are scrambling for scale. the chinese government's first big seizure in more than two decades is starting to spook investors. regulators assuming control of the bank site serious credit risk. this pushed bloomberg's index of hong kong listing chinese banks to -- it is reportedly being probed by chinese officials. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. president trump's visit to japan

focused more on pageantry than resulting deep differences -- resolving deep differences. japanese officials say there is no such talk of a trade deal. president trump: srs china is concerned, they want to -- as far as china is concerned, they want to make a deal. i think they probably wished they would have made the guilt that was on the table before trying to renegotiate. deal.ant to make a we are not ready to make a deal and we are taking in tens of billions of dollars of tariffs and that number could go up substantially very easily. francine: joining us for the hour is james athey from aberdeen standard investments from chathamlett house. what is this about? is a trade, tech supremacy, or who will lead the world in the next 20 years? dr. niblett: i think it's different for donald trump and

members of his administration. toa chance for donald trump reset the terms of trade the u.s. has worked on and get the advantage back to america. i think in the end, he will want to do a deal. he would love to go into the next election saying i took a tough line and look what i got. i think many in his administration, especially those who joined recently, this is a long, multi-administration battle to put china back in the box and make it pay a price for competing with the united states on the global stage. many advisers are looking for structural change. francine: is the market believe the president wants a deal -- does the market believe the president once a deal -- wants a deal? james: yes. the interesting thing is, i think most people would have expected it would be president trump who might scuttle things

at the last minute. it was actually china that seemed to have a change of heart with respect to what they were prepared to negotiate, such that even things we thought were in the past in terms of negotiation suddenly had a red line through them. that seems quite a dramatic change of stance on china. i'm sure there are plenty of conspiracy theories as to why. i don't think it was the desires necessarily of donald trump. potentially the methods were more of the issue from the china perspective. francine: does china want a deal? dr. niblett: china needs to keep growth going at a somewhat lower rate under all circumstances, because the legitimacy and strength of the communist party is paramount. there is a balance here between doing the deal and being seen to cave. being seen to cave into the united states at this time is

something that is incredibly difficult. lower rates of growth, unemployment rising a little bit, a little bit of unpredictability about the rates of growth going forward. they needed to balance out how looks to the chinese public at the same time. i think that aside of caving in, xi jinping had built up this notion that we are now an equal to the united states. we are going to divvy up the way the world is ruled. suddenly they find themselves put back into second position by the u.s. administration. francine: what does it mean for -- i mean, should the markets get ready for a possible trade work for the next 5, 10 years? even if president trump wants a deal, we don't know who comes next. i think markets have difficulty looking five weeks into the future, let alone five or 10 years.

there should be some risk premier attached to various asset classes in specific companies in specific countries. i think there is a far greater chance that this rumbles on. there are strategic goals at play here. within theent bodies chinese administration would see those as being more or less important. i think markets should be considering that this has the potential to move on. i think one of the conspiracy theories i found interesting and seemed to resonate with me was the idea that china would prefer to negotiate with a democratic president. if that's the case, maybe the time horizon for things to move on his slightly shorter -- is slightly shorter. francine: i have a million more questions. let me bring you to some more liquid proxies to the chinese equity markets, which we actually charted today. you, bring that up for what it shows us is that there is heightened anxiety. -- reoking at were nimby

minbi dropping. with a touch seven? if it -- will it touch seven? if it does, what happens? james: there a huge amount of focus among market participants. this latest sort of it change in the trade stance is one of a number of issues china is having to deal with. china is trying to keep the plate spinning and it cap necessarily have them all spinning at the same time -- cannot necessarily have them all spinning at the same time. th as possibly the easieste yuan isety valve -- the yuan probably the easiest safety valve. we know it has fears about capital outflow problems. it is difficult to see in the

very near term pushing past seven. francine: we will focus on huaweim, look at whether this is a trade war, then it becomes a full on fx war? are their signals you are looking out for? difficult to focus on the important stuff right now . at the moment, china has been able to manage tariffs some of the increase in on its goods -- some of the increase in tariffs on its goods. part of the reason i think china is perhaps a relatively laid-back about the way the negotiations are going is that they were able to balance out the cost on the economy by the change in the value of the currency. once you had to 25% tariff rates , that will cause a lot more pain. the chineset

government has unlimited firepower to try to prop up and manage the rate at which this grows, i'm not so sure. in the end, they will try to wait and see how serious is the trump administration about really turning this now in the short term into an explicit trade war? francine: thank you both for joining us. robin niblett from chatham house and james athey both stay with us. up next, part two of our exclusive interview with the huawei chief executive and founder. donis.o have lord a we will talk to him about brexit and what the labour party does from here. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua here in london. is caught in the crosshairs of the trade war, but denying accusations of ip theft. tom mackenzie spoke exclusively with the chief executive and -- founder ren zhengfei about the issues facing the company. >> american auditors audit us. you can ask for a report from them, right? this unfounded conclusion may not be right. now.our leading the u.s. if we were lagging behind, trump would not need to make someone efforts to attack us. he attacks us, because we are more advanced than them.

>> if at a moment of national crisis the government came to you and said, we need your help, we need your cyber skills, we need access to your network for the good of the country, for the good of the government, for the good of the chinese people, how would you respond? >> we absolutely would never install any backdoors. we would never do that. we serve human beings. we don't serve intelligence services. why should we install backdoors? >> what are the practical steps for denying a request like that in china? that.e have never done a german newspaper released an article saying they could not find any backdoors in huawei's systems. wasthe u.k., huawei whil under the world's. strictest scrutiny it was as if we took off all of our clothing to prove that we have nothing to hide, so the u.k. agreed to use our equipment. francine: that was the huawei

founder and chief executive, ren zhengfei, speaking exclusively with tom mackenzie. you can see more of our special. still with us is james athey from aberdeen standard investments and robin niblett from chatham house. how do you look at huawei? we are trying to figure how much huawei is integrated into the 5g system that will be rolled out in the u.k. think istt: huawei i obviously one of those companies that has been at the absolute front wave of china going global. chairman ren has always had a desire to enter the u.s. market, but i think he always thought it would be difficult, which is why he is focused on europe and the u.k. in particular.

he's imagined that he can do a global strategy without the u.s.. that if the u.s. ever froze him out, they would be able to have a global strategy. they cannot even have a global strategy if the u.s. is opposed. the u.s. has brought the hammer down on allowing firms to be able to interact with huawei. sudden or you are finding companies not been able to give them the chips -- suddenly you are finding companies not been able to give them the chips. they desperately require those. they might not be able to have a global strategy if the u.s. decides they cannot. why is the u.s. deciding they cannot? i think this is part of a bigger crotch on china -- crunch on china. it's sending a signal to the chinese government that we will not let you play in our space.

the british government believes they can see inside if there are any backdoors. they don't think they have found any to this point, as he noted. you can never be sure with the national intelligence law that some chinese individual could not be ordered to do point.ng at some the chinese have been able to survive very well. to me this is more about the strategic game, less about the danger of backdoors in huawei. francine: thank you. coming up, handing out the top jobs. the race to become the european commissions next president goes on. we are live from where the action is happening. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i'm francine lacqua here in london. let's bring you the most read stories on the bloomberg terminal. alibaba set to way raising almost $20 billion in a hong kong share sale. china's first big seizure in 20 years bank seizures. the dollar rally nears its end, according to one fund. starting to settle after elections to the european parliament. the focus, which is negotiations

over who will get the eu's top jobs. danish antitrust chief is looking at the european commission presidency as the nationalists, greens, and liberals gained seats in the parliament. at stake is arguably the blocks most power plant economic job, the ecb president. top contenders for the job are -- the race for top political appointments kicks off today in brussels. joining us from brussels is bloomberg's maria tadeo. first of all, how transparent is this? do they negotiate behind closed doors, then you have white smoke when they actually have found someone? >> francine, good morning. that's the big question. in principle, when you look at the european election yesterday,

the next commission president should be unofficial candidate and someone who participated in that election. that's why a christian democrat won the election, but lost seats sti; very much back to bitell angela merkel. it is not clear by any means, by any stretch that he could actually be commission president. in the meantime, you have emmanuel macron them re-much -- very much in campaign mode. he would say this needs to be a much bigger, open competition, which means somebody like michel barnier could be very much in the competition and maybe next commission president. francine: when are we going to find out the results? well, based on what we understand it will be a long negotiation. this is the concern, that there could be a long transition between one commission and another one. what i think we will get tonight is a clear sense of whether or

not leaders agree on the system by which the candidates should be agreed on, and whether we do see those unofficial names, like michel barnier, finally, officially in the competition. francine: thank you very much. still with us, james athey from aberdeen standard investments and robin niblett from chatham house. does this move euro? james: certainly has huge potential to be market moving short-term, but more medium-term because it will really set the tone about things will progress from here. what we know about the eurozone specifically at this point is that it looks to be quite late in the cycle, and yet the pace of growth seems to be declining rather than accelerating. inflation seems to be inclining rather than accelerating. and suggests this is a classic case were stimulus is needed. ,e know that from a fiscal side love them countries are already bumping up against, if not

breaching the rules. what to do next is eugene significant for the next phase of -- hugely significant for the next phase of policymaking. dr. niblett: i don't think it is a straightforward -- as straightforward as that. there have some -- have been some interesting comments from ecb presidential candidates. for example, the potential to relook at what exactly the ecb is starting. stable prices and inflation out just below 2% are not necessarily the same thing. francine: thank you so much. james and robin will be back with us. up next, we talk about brexit, labour, and the conservatives. this is bloomberg. ♪ the latest innovation from xfinity

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jostle for position at the summit today. the uk's conservative party has its own game of thrones. the art of no deal. president trump is not ready to make a trade agreement with china, saying that tariffs can go up substantially. the chinese e-commerce giant --siders raising $20 million $20 billion in hong kong. take a look at your stock movers. nnmarie: rio tinto on the upside today, we saw it popping in sydney. a new by rating from goldman sachs and we have the iron ore market moving about $100 a ton. a very red-hot market. downside alonghe some other italian banks. it is down nearly 2.5%. the european commission may be putting a penalty on italy for not being able to rein in debt. it could cost $4 billion

according to people close to the matter. airlinescandinavian down nearly 6% this morning. this as a said their pilot strikes have had their pretax results. and now they are revising your outlook. we have some of the main movers today. now let's get straight to the number first word news with viviana hurtado. viviana: the two biggest parties in the u.k. have both faced a round of voters. the public drawn to parties on both sides of the spectrum that gave clear pro-or anti-european messages. today's big winner was nigel farage. his brexit party coming out on top with over 30% of the vote. demshe anti-brexit liberal also saw its share of the vote skyrocket, coming in second. the french finance minister says a merger with fiat is a great opportunity for run all -- renault.

a 7.5% stakeintain in the new entity. the french board will start the -- study what it calls a lengthy proposal. in austria, sebastian was ousted as chancellor just a day after surging to victory in european elections ahead of a general election in september. they are hoping that out of power, the conservative whiz kid won't be as successful. he has now started his campaign to take back the chancellery. and spooking risks investors, they pushed bloomberg index of chinese banks to a four-month low. government'shinese first in more than two decades. the u.s. is not ready to make a trade deal with china. and japan, president donald trump saying that the chinese probably wish they had made a deal that was on the table before they renegotiated. he warned tariffs could go up very easily.

eventuallyntries may have a great trade deal. 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 viviana hurtado. this is bloomberg. bring youlet's bloomberg scoop. italian bond yields are rising after facing 3.5 billion euros fine. in response to the deputy prime thester, i am waiting till -- to read a letter from the eu. people voted for change it for growth. he added taxes will not be raised. his party won a resounding victory. guests.ing in our think above for sticking around. what does this mean for bdp's?

mean strength and tomorrow it could mean weakness. that is how it works. one can't says the ecb will not be tightening rates anytime soon. within that low yield environment, the yield curve carry certainly has europe. issuesre huge underlying to deal with both the italian and domestic level. they are not being accurately reflected and that means yields need to go higher as spreads need to go. this is the chart of the year. what level do you need to buy? >> you are asking me a question that will lead to quite a large number.

at what level i might be prepared to take some chips off the table is a lot nearer the level that i consider the level for the risks. in terms of the true risk being priced, we are talking way north of 400. chatham house started talking about populism before. now?do you look at there is kindat of a right-wing party there. but it is not enough to govern. >> i think it is one of the more extreme examples of populism heading into western europe. i think the drawnout weakness of the italian economy makes it particularly vulnerable to some of the ways that we have seen of populism across europe. there is a much better defense

mechanism. how do you govern when you're trying to promote identity politics? we are at the front end of the populace. the populace never gets checked out first time. that gives them a sense of how they govern italy and is a good way of understanding the parliamentary elections. how do you translate a feeling of anti-elitism into the direction the euro has been growing into a domestic agenda. francine: how do you do that? do you create new parties? >> they are an example of parties being created but these new parties are going back to the old toolbox of solutions.

the only one i can see that can thread the needle and the populist urge of the people is what macron has called the europe protected europe. the table -- dangers of globalization outside. this is against chinese .ompanies parliamentary elections have been relatively good for the spread of the party. it still leaves them with a very difficult agenda for the future. and trying to retain a relatively centrist agenda inside. what does this mean for economics? we're started to talk about monetary. . -- we have started to talk about

monetary theory. not to docted austerity. how does this change the dynamics? >> there is tension specifically at the heart of the eurozone that has always existed. it was just masked by cyclical a policy. support for essentially, the economies are not converging in a way the root -- the area requires them to. so you have an appropriate policy stages and the region needs to face up to these choices. politically, it is difficult to do. and actually the vision of the eurozone is not workable. that very tension will likely continue to dog the region faced up to buy politician. -- francine: both of our

guests will stay with us. we will discuss with the european election results mean for brexit. we will be joined by andrew do unis. that's coming up. this is bloomberg. ♪

lacqua ini'm francine london. this is bloomberg surveillance. let's get to the bloomberg business flash with viviana hurtado. viviana: making changes to a battery purchasing plant worth about 50 billion euros. .he deals might unravel samsung initially agreed to deliver enough batteries to power 200,000 cars. a bloomberg learned that they

saw the pledged amount cut to less than a quarter of the original amount. raisingis considering $20 billion by a second listing in hong kong as early as the second half of the year. the e-commerce giant working with financial advisors on the planned offering to bring china's largest company owes her to investors in its own countries. tapping investors for fresh cash is the least favorite option. aware.ent is currently --: thank you so much francine: thank you so much. catastrophic results have left both labor and conservatives under pressure to embrace the brexit spectrum. being -- they were beaten

by the leftist democrats. the defeat pushed jeremy corbyn into supporting a referendum on any brexit deal. candidates have been calling for a faster exit from the eu. transport secretary and member of the house of lords still with us. are still with us. thank you so much for staying on. andrew, welcome to the program. >> did labor do so badly? people want the opportunity to vote remain. with nigel farage doing so well leading his brexit party, that was the real and present danger. he stands for a no deal brexit. theaid that these are extreme ends of the spectrum but remember the policy of the state was to remain in the european union and the policy of the labour party and everybody

except the extreme right. an uncertain message and it has been absolutely frank even though the policy was to have a referendum on a conservative deal. jeremy corbyn never came out and said that categorically. because he is a euro skeptic himself or he's positioning himself for a general election? >> he would like a general election and a change of government. if you seek to appeal to both sides, you might get both. but we got neither and there was a massive defection of the lib dems to the greens. the position we are in is a country is not a question of extremes, it is a question of being sensible. the policy is to have a referendum on something like theresa may's deal. this is where the politics are going to be. francine: you think people are

on the fence when it comes to brexit. will we have a strong idea of where people stand on brexit? >> leadership has been on the fence. most members of parliament came off the fence a long time ago. twice in the house of commons overwhelmingly for a referendum. the issue is for the labor leadership to come off the feds. i believe there will be a coalition in the house. francine: will jeremy corbyn do that? >> believe that he will. the number two came out in favor of a referendum. diane, the right hand, she said the same thing. the next leader of conservative party say they are in favor of a hard brexit if they can't get some new kind of deal through.

but the house of commons had more than 200 against no deal. there was not the remotest chance for the house of commons. vote with labor rather than no deal. even if boris johnson was committed to no deal, it's not going to happen. majority in the house of commons for the referendum. and then choosing between the role of parliament -- the rule of parliament and government. to not allowible the no deal option to run to the parliamentary process. has noted today, it would be an act of self harm for the conservative party. politically, you might be able to force through a no deal brexit. you would be driven to an election that they believe would

be deeply punished. i am wondering if i can throw a question back quickly. would you think labor, if there will be a new conservative leader of some sort, will they get a type of deal for the party to negotiate? will they allow a deal that it did not negotiate or support? because this would be part of the problem. ?oes it have to be a labor deal or could labor support a confirmation referendum on a deal negotiated by jeremy hunt? party has already voted in favor of a referendum on any deal with an option to remain. this would be a revised deal provided that the alternative was to remain. then they would vote in favor of remain. were boris johnson, i would want to get to that position as soon as possible.

it has now destroyed two prime ministers in a row and it will destroy them, too. deal,re in favor of no but what they actually want is the majority to assert itself in parliament and dispose of brexit so that we can move on. francine: i have a million pound questions. boris johnson renegotiating with the eu but puts forward a deal that will not be do similar to the one theresa may negotiated? >> he went along with hard brexit because it was opportunist. and heed strongly doesn't really believe for or against. he will go along with anything. can he say let's not do brexit? do that.'t but what he can do is allow a

referendum to happen in which he will campaign for no deal or and he canf brexit blame the voters and move on. is by far the most likely way forward. downine: pound up, pound -- what do we know about what it will do? volatile. >> the pound had been pricing a pretty good outcome. it is the bimodal sort of outlook, to say that outcomes are the more extreme. that means good news has to come out of the probability adjusted basis. the interesting story is versus the euro where the market overwhelmingly wants to play -- >> it is a range. >> it is much higher than any notion of fair value would suggest. the outlook is dramatically more

unstable absent brexit issues at this particular junction. a cliff edge or whatever pejorative term you want to apply to brexit, i think the market is overwhelmingly to bearish -- too bearish. francine: is boris johnson the next prime minister? there are plenty of candidates. will say that i think it is not a shoo-in. that's what i will say. put himself gove's into the mix with the potential's -- credentials of the brexiteers that drew boris he says you can trust me on brexit but i will do it the sensible way. you will get a bit of competition. can we get a true brexiteer that

the party base that has grown a .ittle bit we probably have a hard line in it. we can also appeal to undecided voters. they want power and they want to win. francine: thank you for joining us. to chatham house. coming up, closer to home, alibaba is said to be considering a $20 billion listing in his -- in its own country. this is bloomberg. ♪

francine: economics, finance, politics. raising $20 billion for a second listing in hong kong. bloomberg learned the e-commerce giant is planning to offer the second half of 2019. good afternoon. they tried to strike a deal before the 2014 new york ipo.

now? e they revisiting it >> they try to do a deal in hong kong in 2014. they did not really allow the class listing. hong kong stock exchange was really luring alibaba through hong kong and changing to allow individual directors to have instructors compared to ordinary investors. this was the trigger why alibaba was revisiting this right now because the regulation has been in place. china and escalating trade tensions, they consider a second funding option. it was probably a good time to have a contingency plan. francine: what are the obstacles?

>> hong kong only allows individuals to have voting rights when they direct exit the company. hong kong was currently having a consultation. having that structure. thank you so much, crystal, bloomberg's asia ipo reporter. bloomberg surveillance from -- next hour.n the we will be speaking to the former ecb director general and nonresident fellow. we will talk brexit and markets. this is bloomberg. ♪

europe's next leader.

candidates for the top job jostle for position at the summit today. the uk's conservative party has its own game of thrones. the art of no deal. president trump says he's not ready to make a trade you with china saying that tariffs could go up there is substantially. and alibaba's shares fall. they try to raise $20 billion in hong kong. good afternoon if you are watching from asia. i'm francine lacqua in london. marketinue looking at movements surrounding brexit and we look at the fallout from the european elections. look at politics with president trump in japan. thecine: them -- tom: market movements are absolutely extraordinary. there is no time to capture the history being made this morning. german yields are absolutely stunning. francine: we are on a second

renminbi wrought. viviana: president trump says the u.s. is not ready to make a trade go with china. he says the chinese probably wish that they made the deal that was on the table. he warns the tariffs could go up very easily. the president said eventually the two countries will have a great trade deal. in the u k, nigel farage was the big winner in european parliamentary elections. his brexit party was to take the country out of the european union without negotiating a deal. the vote rattling the uk's two major parties. jeremy corbyn has promised to support a referendum on any brexit deal. conservatives want to replace prime minister theresa may saying the election shows voters just want to leave the eu. and speaking of the eu, the

european union's antitrust chief is looking for ways to seize the blocks most powerful position. margaret has not been shy about her desire. european leaders began a special summit aimed at determining who will hold the eu's top job. a final compromise could impact policymaking for the next decade. members are studying the largest automaker. fiat chrysler was to be structured as a 50-50 ownership. they would get applied premium of about 10%. the carmakers are moving ahead. 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 viviana hurtado. this is bloomberg. to thet's get right markets. it's about bonds.

higher prices of bills, notes, and bonds. and lower yields as well. onlythough futures with the curveix, flattening. we are not to record flattening, but we are getting there. i'm to the next screen if we could. this is absolutely stunning. the vix is not correlated with a ..14% u.s. two-year the u.s. tenure is 2.28%. these are stunning yields. all of those should be read on the screen. miss -- is -- join or just picked the -.16. i will show that chart all through you reunification lows. chart.e: that's a good we like a little bit of history. it the dollar advance in.

they are taking a little bit of a cautious outlook after the u.s. and u.k. holiday. i am looking at a renminbi renminbi weakened. mainstream european parties seem to have held their ground against the assault from populist and the eu elections but far right groups gained significant ground in france and italy. they pulled better than in the past held by the highest turnout in two decades. the global head of ethics research, thank you both for joining us. last 48 we learn in the hours? it seems that the populists did well, but kind of as expected. they will not be a huge party for change within the european moment. does that change in the five or six years upcoming echo -- upcoming?

not gotten anywhere near where they needed to but the ability to disrupt parliament and the fact that the populists are confirmed in hungary and in particular in italy, that shows there will be a significant disruption coming from the member states. i am assuming italy being the main source, the one that is most consistent with the financial crisis. they are now pushing for tax cuts. this is the fiscal overflow scenario that would've of been there and any other scenario. this is whyu said they got elected, to promote growth. peopleu look at why voted, it is immigration and fiscal spending? >> it is

immigration. there would be some support in the north. and they matter a lot. that electorate would give sort of the baseboard of 34%. support a very strong and claim to leading the next coalition. i'm so thrilled that we have both of you with us today. particularly on dollar dynamics, and wolfgang has been definitive on no deal. we will talk about that in a bit. what does no deal mean for all of europe? what does no deal mean or stasis mean for cell the need of italy italy or the guy

running poland or europe? not trye will probably to avoid it was desperate measures, but europe will try to obviously consolidate. it will be clear and they are trying to manage that disruption . you will find the eu has an that is not particularly obstructed. is against the other stuff that they would need to agree to in any case. both sides will have to see what happens. will they try to manage it in some way? 's ofll benefit the salvini the world greatly. he might be strengthened by faragefor roche -- nigel as part of a wider group of nationalists or eurosceptics. i would assume that it would benefit the radicals because he

is a country leaving the eu. i assume that there would be a short-term bump. and that might boost some of the eurosceptics in other countries. george is with deutsche bank. how do you change your euro call after these results? >> we are not changing the euro call because the outcome has been very close to expectations. but the big shift in view we have had is that we have become much more concerned about global growth. we are worried a global recession is coming. i think that's what the fixed income market is telling you. the dollar tends to do reasonably well around these

periods until the fed cuts rates. part of it is due to concerns around brexit, but the fundamental issue for markets is just prevailing uncertainty through the end of the year. eight minutes ago, we had this area of confidence improving. is that mean the soft indicators were right? or how do you look at the dynamics in europe right now? wrecks i worry about downside risk. the crucial numbers that came the pmi only partially incorporated uncertainty around the trade war. that is what we're discussing now. we have brexit and the auto tariffs. we are in the glass half-full camp. brexit is not progressing, the trade war is deteriorating. if you look at global trade

volumes, they are shrinking for the first time since lehman. it is hard to predict a recession. you can only predict it with the benefit of hindsight. is happening that is the global economy is faced with a confidence shock. that is what worries me for the next few months. francine: we will get back to george and wolfgang of the euro intelligence both staying with us. jeremy hunt warning that a no deal brexit would be suicide for tories. also this hour, the former ecb director general at 6:30 a.m. in new york, 11:30 a.m. in london. this is bloomberg. ♪

this is bloomberg surveillance. tom and francine from london and new york. in theophic results european election have left both labour and the conservatives under pressure to embrace the extreme ends of the brexit spectrum. beating one third with brexit party taking seven times as many as the conservatives. corbyn says he will support a referendum on any brexit deal while the tory leadership candidate is calling for a faster exit from the eu. why don't we bring in the next guest? tom: really extraordinary. it was something to see some evening in the u.s. when the headlines rolled out. george's from deutsche bank and we are thrilled. wolfgang has been absolutely

exquisite getting out front of the no deal story. published all of this after the punditry and analysis. let's go to raphael on the wisdom that we see. let's get to it. get to it. it is after memorial day. anthony is still on the grill. showed the public if anything is more polarized. i love this. more than 9 million people voted against a no deal. nigel farage said we are pretty much where we were three years ago. how do the remain people get ? >> they together now are fragmented as the party has a simple message that was so

successful. togetherget their act when it comes to any parliamentary matters that have to do with brexit. but we keep craving this every time we have this discussion, how has it changed? do we want to provoke article 50 or have those put it to a vote. elections into the county, there is huge criticism. says we need to move toward a second referendum. parliament would have to decide what question he will put to the people. and it would be any kind of decision on that front. what about the next 24

hours? timing is of the essence and everybody takes a 47 week vacation in the summer -- a 4-7 week vacation in the summer. what do they need to do in the next 48 hours? >> they need to move toward a leadership resolution. i don't think that we will see any final resolution. question is boris johnson. he is clearly the front-runner. and therty membership question is, will he stick with this idea that a no deal brexit is still the best scenario? and how will he get that through? it's tough to see how this parliament would support it. if we gont said that to a general election, the tories would likely be decimated . i think we looking at the future

of the tory party in the balance here. it would depend on how the tory leader takes it forward. francine: think you so much. from bloomberg opinion, an important story. that's get back to wolfgang and george. at the leadership contest to become the next prime minister, are we not closer to a hard brexit then we were? i think we are closer to a hard brexit than most people think. the probability is larger than markets expect. but we are closer in terms of the political process. at the end of this contest, at one hardre will be brexit year. it could be boris or one of the others. most likely boris is my guess. it could be somebody else. arehere is one hard brexit -- brexiteer on the team,

membership will vote for that person. they will have the choice of trying to get a new deal which they want. maybe it changes the political declaration. but cosmetically only. or the big misunderstanding of the british debate, parliament doesn't have to vote for hard brexit. a prime minister can force it. would you are saying is that if boris johnson or another progress prime minister said that it is now government policy to leave the eu without a deal, he could force it through parliament without going to general election? just do it without forcing it through parliament. article 50 was already triggered by parliament. francine: so why do they keep on voting? >> because theresa may was bringing in agreements for

meaningful votes. if there is nothing to amend, there is technically no need for it. all they can do is call a vote of no-confidence in the government. it would require a very large number of tory mps willing to vote against their own government in a vote of no-confidence. and i'm sure some would but i do not think it would be a majority. george, from the deutsche bank standpoint, looking at the linkage of economic growth or lack thereof, what would happen three months after no deal? clue?eutsche bank have a one-month out or three months out? >> is being quite humble in terms of predictions on brexit. but i think it would be sufficient to tip us into recession. we are already at very weak levels. at least in three months to six

months, i think you will be looking at recession both in the u.k. area and globally as well. tom: we have a lot to talk about. we want to focus on the effects of any potential no deal. we have a lot to discuss on foreign exchange. we will drive forward in the next hour. we are thrilled to bring you carl weinberg, a high frequency -- signaling to bankers and politicians that they better clear markets. we know for certain that they are not this morning. the u.s. two-year, 2.14%. this is bloomberg. ♪

tom: francine lacqua in london and tom in new york. a reset in the interest rate market. with us is wolfgang and george. let me bring up a chart right now. i want to spend some time on fx. we will get back to wolfgang and no deal in a minute. back to john major, that was a few years ago, george. here we are rolling over. with this be down to john major lows? >> it is a great chart to use because many people have focused on the dollar.

it gives you the most accurate proxy of what the market is pricing for hard brexit. we are essentially at the middle of that range. market was pricing in a resolution up to a few weeks ago. so we are nowhere near the or the worries that people had just a few months ago. given the uncertainty of the electoral process, the market should be pricing higher risks of a hard brexit. or potentially the high-risk of an early election and a corbyn premiership which would also be negative for the pound. that is the potential for sterling to move lower. is a jeremy corbyn premiership possible? >> it is possible. it could happen if the tories decide to accept a second

referendum. this would not be a particularly winning strategy for them, but if it decided it andd be easier for them have another election, then that someendum might produce further political uproar's that might get corbyn into government. that is another possibility. there are avenues open that were closed before. it would not be my main scenario. francine: thank you both, george and deutsche bank here on bloomberg. stay with us. coming up, a conversation with our next guest. this is bloomberg. ♪ the latest innovation from xfinity

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a little bit of banking news and the e.u. elections and the process there. tom: it is really not the agenda because it is every day, but deutsche bank cannot find a bid. francine: it cannot. multiple sources tell us it is a funding story. bank,r recover deutsche it probably will have resolution so i would look to the german government. tom: absolutely amazing to watch. steven arons of our team burning the midnight oil. this is a movable feed. they are talking about principles of the firm exiting stage right. now, first word news with viviana hurtado. resolving deep differences as president trump wrapped up a visit to japan. was persistently

at odds with the japanese. he brushed off recent north korean missile per tests -- missile tests, shinzo abe calling them a violation. australia's chancellor is the first to be thrown out of office since world war ii. partners joined the opposition in a vote to dismiss him. he started a campaign to get back into power. bill fromd face a big the european union for failing to curb its debt. the e.u. may launch a disciplinary process and a $4 billion penalty. has never fined a country over its budget. turkey may be trying to avoid a confrontation with the u.s. over the purchase of a missile

defense system. acknowledgingals the delivery may take place later than expected and could collect intelligence on american warplanes. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: china's huawei is caught in the crosshairs of the and-china trade war accusations of theft. chiefke with the executive on troubles facing the company. >> it is more likely the u.s. steals our technology and now we are leading them. kpmg can audit. american auditors audited us. you can ask for a report from them. this unfounded conclusion may not right.

we are leading the u.s. now and if we were lagging behind, trump would not make efforts to attack us. he attacks us because we are more advanced than them. nationala moment of crisis the government came to you and said, we need your help, your cyber skills, access to your network, because it is for the good of the country, the people, how would you respond? >> we absolutely would never extort any backdoors. we would never do that. we serve human beings, not intelligence services. why should we install back doors? >> what are the practical steps for denying a request like that in china? >> we have never done that. anerman newspaper released article saying they could not find any backdoors to always systems. systems.k. -- huawei's

in the u.k., we have worked to gain trust. it is as if we took off our clothing to prove we had nothing to hide and the u.k. used our equipment. francine: that was the huawei founder and ceo. you can catch more from our interview. ago, andn a few days managing the message for his company. .oining us now, james mayer with us in london, george soros saravelos andrge wolfgang munchau. is huawei a private company or is there no illusion about anything and it is basically run

by the chinese government? james: there are no private companies in china as such, but there are also -- it is hard to draw a distinction between what is a state owned enterprise and what is not. some companies are clearly owned by the state. others are listed on the stock exchange was shareholders of what we would call a private company. they still have some shareholders or government connections or some nebulous thing in the background that indicates the government has some kind of control. huawei seems to be one of those companies. they say it is owned by the workers,ers -- its own and then said they did not have stock rights or rights in the company. less ownership and more control of the company. the question is not who owns the

company, but what could the government do to get the company to do what it wants? the denials you see from people like the chairman here will not a suede the few people -- assuade the few people. tom: where is huawei? do they have a cupertino? do they have a seattle? do they have a place? james: they have a large campus in shenzhen. they have other options around the world and in nordic companies -- countries. the interview we did with them over the weekend to lace at their campus in shenzhen, -- placed at their campus at shenzhen, which looks like someplace in europe. they have created european towns

in this campus near the border with hong kong. francine: the higher tariffs from the u.s. and china should kick in this week. are the two sides still talking? what we see a deal or are we further apart? james: there is no indication the two sides wach a deal anytthe new sanctions the u.s. announced on huawei will make that more difficult. donald trump said recently they were close to a deal and the u.s. is were not ready for a deal even though china wants one. they will not back down on what are their redlines for a deal with the u.s., so a deal looks further and further, and we will get new tariffs. it is just pushing any kind of resolution to this trade war further into the future. francine: thank you so much.

george saravelos and wolfgang munchau still with us. when you look at the dynamics, what is this about? is this about trade or something bigger? chinaace in the world of or the u.s. in the next 10 years? wolfgang: this is not primarily about trade, but indeed a geopolitical battle that includes european youths -- europeans. warpect this kind of cold to continue for a while. have problems with -- and are dependent on it. some countries have opted into huawei technology that will lead to deterioration over tensions with the united states. i would expect that to overlap into u.s.-e.u. trade talks which

have been put on ice, or the tariffs have been put on ice. that will come back in the chinese story is telling us this tends to run a long time. we will get hopes and setbacks and this will last. greeted in huawei the salons of europe? you are a gentleman and all of the salons. how is huawei greeted in paris, in germany? wolfgang: with great respect. one has to understand about germany, germany has the worst telecoms network in all of the e.u., hard to believe, but it is an outdated system. they use in part huawei technologies and their 5g technology is germany's great hope to get standard, modern technology. if germany cannot use huawei,

that hope is gone and there is a costs forck, massive the german telecom operators. yes, they see the security as the huawei chairman was saying, founder was saying, germans do not believe that while way has trapdoors in it systems. it is not something they have seen evidence of. they have not made up their mind. my hunch is they will go for huawei. tom: give me your renminbi call from deutsche bank. what is your call on yuan? george: we think dollar-china will move through seven. i would make two observations. this while way discussion is not only a -- huawei discussion is not only a micro discussion but a macro discussion.

credit is an important driver of global growth over the past five years. the imf did a study on how much the iphone x drove asia growth. 40% of taiwan gdp growth. when the tech cycle was being disrupted, it is very bad for growth. what happens post the first round of tariffs in q3, global trade in q4 collapsed. the downgrades and growth were bigger than the market was expecting and we got the equity selloff and the fed pause. the market is underestimating the degree of disruption and downside risks on the back of the tariffs and the tech war. francine: thank you both. we will get mac -- get back to more of george's calls on the renminbi. when it touches seven, what happens to the asset classes?

we will talk about whether the atiffs impact his company, 8:30. this is bloomberg. ♪

tom: bloomberg "surveillance," francine lacqua and tom keene. the four-day workweek in the united states and let's show a chart that shows the amazing dynamics based on the e.u. votes, this is the five-year forward inflation gauge. george saravelos has a tattoo on

this test of this on his left arm. what is this new low on inflation in the future mean for mario draghi? george: he has only got a few meetings left. the meeting in just a few days, we think they will deliver on the t ltro. the pricing may have to be more friendly to the banks then we were assuming. the key risk is because draghi is leaving, whoever replaces him whether it is why do men or someone from -- wide men or someone from finland, they will president the new will have a tough time building up credibility, building up a dialogue with the market, particularly the environment you are describing and presenting with the -- continued drop in inflation expectations and the

global slowdown. tom: we have wolfgang munchau with those. january -- with us. january 20 you wrote in the financial times no one knows how it will end. here we are wandering forward five months later and it looks to be a no deal brexit. what actually happens if there is no deal? i see very little writing or punditry about what actually happens given a no deal. wolfgang: what will happen first of all is that on the day of a no deal, there would have to be tariffs. period inbe a short which the e.u. and u.k. agree, amen a translation -- transition -- a mini transition of a few days, but they would have to boost tariffs on each other

under the wto rules. there would be a number of would very much reflect what is in the withdrawal agreement, on youzens rights, on what ko's the e.u. for the departure. this would have to be -- what owes the-- the u.k. e.u. for the departure. this would have to be agreed before trade talks. there would be a customs agreement about the regulation of various goods that would have to be arranged quickly. it would be a period of turmoil, no question. it is a disruptive seeing. -- disruptive thing. wereine: earlier on, you saying there is no chance of renegotiating with the e.u.

not even under a different commission? is there anyone you could see them saying, we will give the u.k. a better deal? wolfgang: the problem is the european council which will not change. the new commission will not come in until november, so by the time a new leader is installed the old commission will still be in place. leader so i do not see any shift in the e.u.'s willingness to open the withdrawal treaty. they said they would be open -- willing to open a political declaration about the future. francine: if we have a second referendum, what does that mean for pound? george: it all depends on the question and how it is asked. if you look at the polling, the outcomeit -- ultimate depends on how people are asked.

the only administration that would do a referendum would likely be more pro-european. with the pound, you would expect expectations to rise and the outcome is very binary. tom: george saravelos with deutsche bank, thrilled you could join us. hau has no deal with us and is forced to stay. week. conversation last jonathan ferro demanded, had a total frenzy fit, demanded that walter piecyk come back. it -- this is bloomberg. ♪

good viviana: this is -- viviana: this is bloomberg "surveillance." amazon poised to complete its purge of small suppliers who will lose bulk orders. legorands like png and

will be immune from the changes. is beingllustrated" sold to authentic brands for $10 million. they plan to make money licensing out the magazine's name. they will continue publishing it in for two years, run its website. deutsche bank considering a capital increase as part of a wider overhaul. they may need the money to fund cuts to its -- investment bank. they are aware asking investors for cash could trigger a black -- backlash because of its low stock price. francine: alibaba considering raising $20 billion by listing in hong kong. this would be a second listing after its record-breaking new york debut. they are aiming to file a confidential application as

early as the second half of 2019. joining us is alex webb, who covers tech. we need to talk about 5g and huawei, but let's talk about alibaba. they tried this before and did not succeed. alex: there are political reasons and reasons they might need the money. , the trade warte with china, it is good optics to have your big tech champion listed. biggest techof the companies around listed in new york and not the home market. having 20 billion in cash is something they could put to good use. there is a big price war in developing markets, things like food delivery, where extra capital could help. it is a question of helping

softbank, one of their bigger investors and maybe they could buy out the stake or invest. francine: talk to me about 5g. there has been talk of the u.s. shutting out huawei. can the europeans do the same? alex: it is tricky because huawei is in a lot of equipment already. when it comes to building out 5g networks, it is layering on software and some hardware to the existing structure. it is easier to use the company you already have than to put another company in. is alibaba like amazon? i look at the margins. the income statement is completely different. alibaba is trading at eight times sales and amazon is 3.8 times sales. is it a compare and contrast?

alex: there are a lot of similarities. alibaba is piling quickly into cloud computing, the most profitable part of amazon. alibaba is more of a marketplace offering whereas amazon, the marketplace is just part of it. buyers just connects with sellers. tom: thank you so much, terrific reporting out of asia on the cash call at alibaba. much to talk about. bloomberg with a extraordinarily low interest rates. , international relations, and rates, carl weinberg next. ♪

♪ tom: this morning, from coal to

schroeder to merkel, record low german kneels, grinding -- yields, grinding ever lower. on the decade-long failure to reinflate the global economy. the president returns to pelosi, schumer, the chairman of the joint chiefs of staff, and select judges. it is summer in the city and wall street as well. will deutsche bank cut jobs in may? this is bloomberg "surveillance." tom keene and francine. let's do deutsche bank. it is lower today and the play over the weekend, garth ritchie got a lousy vote and he may be out. how big a deal is that in london? francine: it is a big deal with anything deutsche bank.

they are trying to hang onto what do we do next because they have come up with five or six plans that have not worked. i think people are trying to hold on to see what happens next and how they will turn this around or merge it or put it out of its misery. people want to know the plan b. i was listening to your headlines and i do not know whether a central bank can be a lame-duck. they are still setting policy. there is all this jostling for who gets to be ecb president and the european commission. tom: we will frame for you the markets. interest rates ever lower. trumpa: president donald says the u.s. is not ready to make a trade deal with china. in japan, he said the chinese probably wish they had made the deal that was on the table

before trying to renegotiate, and warns tariffs could go up " very easily." he said eventually they will have a great trade deal. in the u.k., nigel farage was the big winner in european parliamentary elections. they want to take the country out of the e.u. without negotiating a deal, the vote rattling the two major parties. pledged toyn has support a referendum for any deal. theresa may says the vote shows voters want to leave the e.u. -- margaretays basinger has not been shy about her desire to head the european commission and they begin a special summit to decide who will hold the top job. affect economic

policymaking for the next 10 years. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: thank you so much. let's do the data checks, yields so important. futures low. curve flattening. currencies not part of the play. the vix, 16.73. no trading yesterday in the united states. the u.s. yields are all lower on the screen. 2.29%.. 10 year, ten-yearp the german as an example of the shock in -0.15%.et, 0.15% -- continentse had some unexpectedly improving for may,

and my terminal is spread between italian btp's and german bones -- bunds. i would mention offshore yuan weakening. if you look at pound as we enter into full swing of those lobbying who will be the next conservative leader and prime minister, the pound is not moving much. tom: let's do some charts before we get to two guests. five-year forward, europe inflation. this is logarithmic. i know logarithmic after memorial day is too much for our american viewers. slope is ugly, down to a new ever lower indication of inflation. you wonder, when does the patient's run out for monetary theorists? francine: we have been talking a lot about mmt which is quite surprising given what we thought

of it just five years ago. this one i am looking at, italian bonds trimmed declines after the e.u. saying they do not favor sanctions on italy, after reports saying they were considering disciplinary measures over the failure to rein in debt. you can see the widening spread between btp and bunds. tom: we are thrilled to have a team. in london, they did not do memorial day. over here, they were working on the grills in central park and they were able to get us two guests. we are glad heu, is able to stay with us, and carl weinberg joins us now. to get you to stay, i had to show this chart, the fate of

germany, which ties into the e.u. vote. firm reunification, a migration down and roll over to new disinflation. the reflation trade has failed for germany, hasn't it? wolfgang: it has. where we are.lly we have lost an understanding in inflation, the inflation dynamics. alwaysnow looking at -- looking at core inflation obviously, and they are basically telling the story all along. the ecb never managed to get one struggledabove 1% and throughout the entire period. it is weak. tom: the granularity of your ,otes for 12 to 15 years about

we have to clear markets, why are we still unable to clear markets and move on from what happened 12 years ago? carl: we are clearing markets. let's focus on the labor market. the unemployment in europe is two percentage points higher than 11 years ago, outside of germany. there is slack in the labor market. germany imports labor transparently, so even though the domestic unemployment rate is very low, the unemployment rate that matters is the total pool of all of europe. there is no wage pressure in germany or in europe, nor can there be because europe never 2007, 2008, 2009. monetary policy has not been transferred to the bank. francine: what are the lessons we should take from the european

elections? wolfgang: certain countries that labor, -- labor immigration, that have this recessionary impact, depression area impact, the populists are doing well in the east and south, and italy in particular. we need to fix the economy, is the message i would take. francine: how? wolfgang: you mentioned mmt. you need to revise the fiscal rules and except a significant amount of fiscal overspend. the easiest way is through a euro security rather than allowing national governments to do this. you would get a massive investment program, maybe sponsored tax cuts. you need some fiscal reprieve that has to be significant, not

just one decimal. tom: i am thrilled you could stay with us into this our. schroeder, kohl, merkel. where is the next dramatic drop? you are one of the experts on manictic culture -- ger culture. wolfgang: the culture in germany has been towards austerity on the right and left. , theis the unique aspect constitutional law that forces germany to essentially run a surplus was instigated by a social dent -- social democratic finance minister, and has the overwhelming support of the german political class. that will not change. even if there was a shift in views, it takes two thirds of

parliament to change the constitution and this will not happen. tom: thank you so much for starting our 6:00 hour. tol weinberg is just shaking get in on the conversation, and we will do that as well. coming up on bloomberg "markets," i last conversation was really outstanding. this is worth watching, the 2:00 hour. this is bloomberg. ♪

♪ "surveillance," francine lacqua in london, tom .eeled -- tom keene in new york lower yields in the united states. that is what the president comes

home to. kevin cirilli is with us. does the president come home to what? pelosi, schumer? another federal judge telling him what to do? a pentagon furious with him? what does he come home to? kevin: there is routine and the chaos. the democrats are continuing to discuss impeachment. the question is whether or not onwill deal with democrats bipartisan or nonpartisan issues relating to infrastructure and lowering the cost of prescription drugs. there was a war of words last week between speaker pelosi and president trump. gap now?gappy is the is it basically gridlock? kevin: they are in a political stalemate. president trump decided he would

rather be politically sparring with democrats versus dealing with republicans in his party. speaker pelosi has decided she would rather spar with president trump then deal with the more progressive wing of her caucus. francine: talk to me about the trade war. there seems to be an understanding on whether president trump wants a deal with china or not going into the 2020 elections. kevin: the markets are barely blinking on the political drama, the political theater between president trump and speaker pelosi, but there is a lot of confusion about the trade fronts. from the perspective of the treasury department, they are optimistic a deal gets done but they are playing hardball. a new talk to political consultants on the republican side, they would argue playing hardball with china serves them

politically and would serve them economically. just as the chinese have threatened retaliatory tariffs, secretary mnuchin and the president say if that is the route they want to take, they are happy to ramp it up. ideaine: do we have any how a democratic president would deal with china? kevin: in terms of how they would deal with china, i think what you will see is there are areas of bipartisanship elements on the u.s.-china trade front when it comes to intellectual property and huawei on a national security front, and china trying to get access into chinese markets. where there is the biggest difference is stylistically, that is what i hear from the president. -- the democrats. agreement.bstance of

he saysten to cirilli, it does not have any effect on the markets. tosn't this fold through forecast and gdp? carl: just a little bit. the impact on gdp has been relatively small, and the risk is that financial conditions will feed back into the state of the economy and investment. 2.14% on the united states to year yield. we are becoming europe like which is becoming japan like. carl: we are not becoming japan like. the president just came back from japan. we are not facing a shrinkage of people in our economy and we are not facing a shrinkage in the overall size of our economy. what is the u.s.' problem, the

accelerating inflation is lower than we thought it was and we are headed to lower employment. tom: this is brilliant. kevin, i am not going to ask if you know what it is. there is not a single politician that can deal with it. the heart of the matter is washington needs to give us an america like we used to know. well democratic candidate give us america like we used to know, mr. biden? setn: it depends on which of principles you are arguing is the america we used to know. the tension will be for the democrats that there is a streak of populism that runs not just on the right that on the left. -- but on the left. we will look to see how senator sanders and senator elizabeth warren draw the contrast on

economics, not just from former vice president joe biden but from president trump. the populist streak is alive and well. negotiating with china aggressively is alive and well, and appealing nafta and skepticism of global agreements, that is alive and well on the democratic side. it could be the 1950's, 1970's, 1990's. coming up, francesco papadia. we will talk a little bit about the successor to mario draghi and brexit. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." bloomberg learning global payments agreed to by -- and atvices at a deal valued $21.5 billion. it will be the third megamerger of the year. the all stock transaction will be announced today. alibaba is considering a megadeal that will bring china's largest company closer to investors in its home country. billion by raise $20 a second listing in hong kong. in 2014, they raise $25 billion in new york and the world's largest ipo.

is proposing to create the third largest automobile owner. would get anolders implied premium of about 10%. here is the fiat chrysler chairman. >> we are encouraged by this successful merger of fiat and chrysler, and this is the region for our proposal. the automobile industry has gone through huge changes. more can be done. viviana: that is the bloomberg business flash. tom: thank you so much. we are thrilled to bring you today carl weinberg, whose storied career at lederman -- lehman, and far with the development of international oecd,ics for the imf and someone with great experience.

the litmus paper of the global system is the dollar. the dollar is grinding higher. the dollar, the best index i have got, grinding higher. is that the vector we are in, strong dollar? carl: there seem to be bigger flaws in other economies besides the u.s. if you look at europe, there are clear issues with economic growth, financial system stability with the banking system. in japan, there are demographic challenges. some countries have investment challenges. as anllar is looking investment vehicle, the better place to be. tom: me and jon ferro are flipping beyond meet burgers. they are ok, what can i say? cyprus and greece to call a new election.

greece gotm crew, better, didn't it? carl: i think greece has delayed the inevitable and that point of view is better because the inevitable is not coming up in three or six months, but more in 24 months. we have a reprieve in terms of greece and cyprus. the new current problem in europe is certainly going to be governmente populist got a reinforcement shot in the arm from the european elections, and we's -- we may see new elections for that government and another standoff from the european union on budgets, that could be a crisis. francine: what do you do with italy at the moment? people are fed up with austerity and want engines of growth. do we first need to see a europe

that starts spending instead of raising taxes? carl: there are two problems. monetary policy is not working so you need to use fiscal policy, so we need a kickstart from fiscal policy everywhere in europe. in germany, it is harder because of constitutional restrictions. it is not going to come from germany, it will come from elsewhere. they also have to fix the banks, get more credit in. francine: those are the two pieces missing. tom: lower interest rates, as what you need to know. this is bloomberg. ♪

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where -- crosshairs of the trade war but is denying claims of ip theft. tom mackenzie spoke to the founder on the troubles facing the company. >> it is more likely the u.s. steals our technology. now we are leading them. whether we have a government background, kpmg can audit. .mericans have audited us these unfounded conclusions may not be right. if we were lagging behind, trump would not need to make so many efforts to attack us. he attacks us because we are now more advanced than them. nationalt a moment of crisis the government came to you and said, we need your help, we need access to your network for the good of the country, for the good of the chinese people,

how would you respond? >> we absolutely would never extort any back doors. we serve human beings, not intelligence services. why should we install back doors? tom: what are the practical steps for denying a request like that in china? >> we have never done that. a german newspaper released an article saying they could not find any back doors. in the u.k., we were under the most strict scrutiny and we earned their trust. aser strict scrutiny, it is if we took off all of our clothing to prove we had nothing to hide, so the u.k. agreed to use our equipment. francine: that was the huawei founder and chief executive speaking exclusively with tom mackenzie. you can catch more of our interview this saturday on the

special "huawei, connected and contested." pageantry thenn resolving differences, president trump wrapped up a visit to japan. his statements were persistently at odds with the japanese. japanese officials say there is no talk of a deal. he brushed off recent north korean missile tests, with shinzo abe calling them a violation. the first chancellor to be thrown out of office in australia since world war ii. he has started a campaign to get back into power. italy could face a big l from the european union for failing to curb its debt. the e.u. may launch a disciplinary process that could pave the way for a $4 billion penalty.

has never fined a country over its budget. turkey may be trying to avoid a looming confrontation with the u.s. over a russian built missile system. the delivery of the system may take lace later than planned. -- place later than planned. system could the collect intelligence on american warplanes. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: one of our good conversations last week was with the gentleman from capital economics, writing for "the telegraph." he was absolutely heated that what to watch on brexit and what it means to the market is to watch brussels. maria tadeo is in brussels, out front on the story.

what does jean claude juncker do months,n two weeks, two and critically on october 31? maria: jean claude juncker will want to find out who was going to succeed him. this is where the timing of this thing is difficult for the european commission. he will be gone by the end of the year. every institution is in transition in brussels and he would like to see the man in charge of the institution he has led. weber,ould be manfred but we understand it is difficult for him to pull a majority. we also have emmanuel macron showing his cards that he will push for michel barnier, who we all know. tom: within this is the power between brussels as the new political experiment, and the

nations of europe. who won, the nations and national leaders, or brussels? youa: many would tell turnout was very high. we did get europeans to go out and vote on a european election, not just the national ones. when you look at the making of this new parliamentary, the pro-european majority is holding despite brexit, despite the economic crisis and the many issues we have talked about. when you see the national populist threat take off places like italy, that was never going to be a surprise, but it makes things more difficult. there will be tension between berlin and paris for who becomes .he commission president francine: maria tadeo in brussels.

breaking news by the spokesperson for theresa may, the outgoing prime minister of the united kingdom. minding everyone that the u.k. agreed with the e.u. it would not seek to reopen the deal, and the no deal brexit planning never stopped. let's get straight to the bloomberg news senior executive editor, and carl weinberg. do we care what mr. slack is doing? we will have a new president and prime minister. can the sides sit down and renegotiate? >> that is why the focus is going not on what number 10 is telling us. britain needs to use this deal if it will exit the european union. maybe, but as we see the tory hopefuls joshing for position to take over, they say they will

reopen the agreement and get a deal that we can move on from. everyone will be different at the table. you will have a different head of the european commission as well. everything is very much up in the air. francine: who was the next prime minister? is it a given it is a pro brexit person? david: that is what you would imagine because the constituency is a brexit leaning entity. they have to when the mps. we have nine or 10 tory hopefuls out there. the front runner is boris johnson. the front runner rarely wins in these cases. if you go back to the tory leadership contests, it is someone else who becomes a compromise candidate. history tells us mr. johnson may

be at a disadvantage for being so far out front. tom: your thoughts on brexit? carl: i don't really care who is prime minister. the parliamentary arithmetic has not been changed. we have a government that does not have agreement and cannot go to hard brexit. we do not have enough hard brexiteers to hold off the moderates and enough moderates to hold off the hard brexiteers. there is no way this parliament can agree on anything. we will have to go to general elections at some point. tom: dr. one berg brings up -- up a goodrg brings point, the brexit party does not have the vote. --id: they are the clearest your guest is right, the numbers

don't change in parliament with a different prime minister. a general election is one way outcome the idea of the conservatives consenting to that, given the drubbing they have just seen, makes that unlikely. we are hearing this question of another referendum coming up, the labour party overnight and today saying this will be the only way out of it, put it back to the public and have another vote. the labour party perhaps would be campaigning to stay in the european union. francine: the way you choose a prime minister, for an international audience, parliamentarians go for the vote and within the conservative party, they would choose someone with no deal. it is clear, new prime minister who wants a hard deal could push it through. if they do not ask for an

extension, we could have a hard deal and parliament would not have a say. david: there is a constitutional question. to forcen possible through? we had a vote in parliament and parliament rejected it. that number does not change. could the prime minister come up against parliament? philip hammond has come out and said if the prime minister was driving us towards a no deal brexit, i would vote for my own government. that takes us back to a general election. francine: thank you very much, david merritt, and carl weinberg stays with us. next, we speak with francesco talked to hime about the markets, the next ecb president, and brexit. this is bloomberg. ♪

♪ tom: bloomberg "surveillance," an eventful tuesday. it is a four-day workweek for america. francine: and the u.k. it is four days. we are back from holiday. london,ncine lacqua in tom keene in new york, and carl weinberg with us. the single best chart is in blue. my bowtie is columbia university , because one of my great staff got the parchment from columbia university over the weekend, so i got a bowtie. here is a columbia university chart, the two year yield looks

a lot like the german yield, a chart of disinflation. do we disinflation, or need to worry about the dallas trim cpi as chairman powell would like? carl: inflation is low and slow and steady. we are not in any danger of deflation, i believe. we are at a historic low in inflation, and bond yields are appropriate low. that due to to all the retirees? what do the fossils do? do they need to save? what do they do? carl: they live a little bit less large than they thought. certainly imbalance between people's retirement expectations and what they realize. at some point, interest rates will go up and inflation will go

up. the fed will be tightening they higher degree of intensity because there will be clear signs it is needed. it is not at this moment. we are at a transition point, but this is not forever. the future will be different. francine: when is at some point? carl: it will be when prices start responding to a low unemployment rate and when the unemployment rate gets unsustainably low. the fed has to stop it from falling and probably has to push it up over time. when that point comes, the fed will raise rates with intensity and we will see bond yields go up. tom: carl weinberg on what we are going to do, and his insight early in the hour about wage growth, very important as well. he is with high frequency economics.

i have a columbia bowtie today. coming up, david westin, "balance of power," this is an interesting guy. governor clinton, governor hutchinson. this is bloomberg. ♪

francine: this is bloomberg "surveillance," tom and francine from london and new york. the dust is starting to settle after the european parliament elections and switching to negotiation over who will get you use top jobs. top contenders are -- the race for top political appointments kicks off today and brussels. papadia,s is francesco former ecb general. thank you so much for joining us. what we are trying to figure out is if you look at the odds of a german replacing mario draghi,

the market is skeptical because of the hawkish stance we heard for such a long time. is there anything the germans can do now to better his chances of succeeding mr. draghi? francesco: i think it will depend on the sharing of i am not sure i have anything specific to say on that. on the economics of it, the judgment on whether to have mr. weidmann or someone else will depend on how much the ecb has to continue doing in terms of policies. policy wouldtional be more difficult to be conducted by a person like weidmann, and if there is need for it, it would not be wise to have him as president of the ecb.

if instead it is felt the unconventional time is over, it would be easier to have him as president of the ecb. francine: do you believe the unconventional time is over? how do the markets react to the appointment of mr. weidmann? francesco: if he is chosen, he -- by themediately market. market would want to know whether he is still in the opposition mode or whether he would accept. to find a will try way to get this message. tom: we are thrilled to have francesco papadia with us. breaking news we have come at the ramifications of the vote.

mr. tsipras in greece a few days macron, andpen and in germany, declining confidence for her appointed successor. angela merkel has decided her chosen successor as chancellor is not up to the job. you have interviewed all these players before. there is a chosen successor. cdu ines that say about germany? francine: this is something that is open to debate. this is basically saying that the german chancellor's heir apparent who we interviewed in davos, has seen her popularity slide since taking over leader of the christian democratic union in december. sunday, oversaw the cbo's worst results in an election. just hitting the bloomberg

terminal, angela merkel has concluded that she is not up to the job. let's get back to francesco papadia for some insight, the former ecb general director. this story just hitting the bloomberg terminal, what happens to the cdo and german politics? francesco: i would rather start from europe. curiosity or preoccupation before the election, what would be the share of the votes between those in favor and those against the european union? that was my main issue. now, this has not changed much. the word that comes to my mind to describe what is happening in european politics is

instability. these antagonistic forces did not gain much, and the differences which exist among the four parties that are needed to make a majority in the european parliament, are possibly less divided than the democrats and republicans in the u.s., or the division and polarization in the u.k. i think the european level, i would use the term stability. this is not a term i would use for italian politics. francine: given the outcome of the european elections, what does that tell us about the chances of a potential draghi successor and how quickly do you expect that decision to take lace? francesco: i am afraid it will because i said stability, yes, but the relative

forces among the four parties that would be needed to achieve a majority in parliament, will need to take some time to come to an agreement. of course, the european parliament is decisive in all these nominations. i am afraid it will not be so quick. if anything, i think the probability of a more neutral candidate -- you mentioned olli and ben walker ray -- might be more likely than an extreme candidate like mr. weidmann. tom: mr. pop adia, thank you so much. -- papadia, thank you so much. we are going nation by nation to

the ramifications of the selection. the bloomberg's group, this is a story mainly because of three reasons. angela merkel has decided her succession plan is unraveling because the person that is her heir apparent may not be up to the job. crucially, there is not much the chancellor can do about it now. we will keep looking at the developments in germany. tom: plots going on in the markets right now. -- lots going on in the market right now. more negative, in the u.s., negative yields this morning. this is bloomberg. ♪

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make a deal. we are not ready to make a deal, and we are taking in tens of billions of dollars of tariffs. alix: president trump sticks with tough talk on china. and let the horse trading begin. who will lead the eu and ecb starts today. chrysler renault? to create the third-largest automaker now up to politicians. david: welcome to "bloomberg daybreak."as we come to the air, there is news out of germany. the name of a potential successor to angela merkel has been displaced. alix: