francine: big protests. the hong kong government suspends a massive bill after the magicians. -- after demonstrations. wilbur ross held just said a trade agreement can be done with china. the rivals battling to be next. boris johnson refuses -- more backing from pros. good morning, everyone. good afternoon if you're

watching from asia. this is "bloomberg surveillance." i am francine lacqua. these are your markets taking a little bit of sideways trading. a lot of focus on central banks. we not only have the fed, boj at the boe of those extending monetary policy this week. we are following anything going on with oil. those tankers last week in saudi arabia being attacked. we will continue keeping an eye on what brent does. let's look at lufthansa shares after the company -- profit warning. lufthansa down 12%. coming up, we will bring you some of our conversations with bob swan. lifted to bloomberg first word news in new york city. >> a bloomberg scoop from the paris air show.

paris -- airbus is said to have 1 -- the playmaker soon to be unveiled xlr. later the deal could be announced. it may reach as much as $11 billion. mike pompeo says the u.s. will guarantee safe commercial navigation in the waterway going forward because he says "there is no doubt iran was responsible for the attack on to tankers in the persian gulf." iran denies any wrongdoing and is blaming the trump administration. huawei is preparing for a drop in international smartphone shipments as the trump administration blacklist is starting to hammer one of the tech giants most important is this is. it's not domestic sales accounts for half of the 200 million phones it moved in 2018. argentina says it is not ruling out a cyberattack after a major

power blackout left millions without electricity. the president says the event that it five south american countries was unprecedented. primaryrattack isn't a explanation though. it could've been humidity. --the first tv the pain debate. boris johnson was mocked for not taking place. outside of raw restored accusing his colleagues of engaging in a macho showdown. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am vivienne our title. francine: we are getting some breaking news out of iran. they were probably going to threaten the scaled-back for the

commitment on the nuclear deal today. iran is expected or will exceed the cap on iranian -- uranium. we understand that will not be extended. we will watch out for any repercussion it has on global markets as there is a little more asked out there especially when it comes to that region. hong kong blows up in defiance after carrie lam suspended the controversial extradition bill. protesters are calling on her to resign and the legislation to be fully withdrawn. a record 2 million people took part in the march. atice put the figure 240,000. joining me now is stephen engle's. massive protests which seems to have achieved what they were laying out to achieve. >> the move is jubilant and

affiant. many of the student leaders came here to the legislative council konging in central hong and have been rallying most of this morning. several hundred -- probably about 1000. as you can see, you can see a moving heard of protesters on their way. they were congregated all right here for the better part of the morning. now they are on their way about 100 meters that way to the residents of the chief executive, carrie lam -- the office of carrie lam. that is one of their chief demands still, and that is carrie lam needs to resign. among their big demands still, after, of course, nearly 2 million hong kong people turned out in the streets all day yesterday. we were right there in the middle of it. they want carrie lam to step down. they want the extradition to be, not toll,

suspended, they want it withdrawn. francine: how did this -- how will this play out at the g20? yeah, well it is going to be brought up. we heard from the secretary of state, mike pompeo, saying they are watching what is happening very closely. he said that donald trump been a long champion of human rights. he is watching the situation, as well. the special relationship that hong kong does have -- the special privileges hong kong gets including that u.s. dollar peg to the hong kong dollar. they are watching it and they said they will bring up hong kong if he has a meeting with xi jinping which is up in the air for the summit later this month. francine: thank you so much. stephen engle there. we'll have much more throughout the day. the trade war -- global supply

chain. he said the chipmaker doesn't believe tariffs are affected and is encouraging the government to engage in talks. >> since the tariffs started last year, with what our manufacture and operations, as well as the us of the operations, we have been working to mitigate the impact of tariffs i looking to have more effective ways for the movement of goods, so that our products will not be more expensive at point of sales. francine: how does this all play out? patrick armstrong, thank you for coming in. trade, and some of the protests, what is going to be your impetus? patrick: for the next few days, the fed.

the protests may be very important on the direction. -- orl basically ensure does it embolden china that they have to be more powerful and ensuing hong kong? there is potential when you get these movements and it is very binary. you can move very strongly in one direction. eventually you will not see it coming but this is one of those things that can be catalysts for a directional move. francine: i guess everything is interlinked. this protest, it is it likely the china will be tougher on the u.s. >> i cannot see how it is going to matter too much. anything that creates a headwind for the economy. the more headwinds you have, the more you have to get the solution. --the protests have to have protests have more of an impact, if the protests turn more

violent, that is we get economic impacts. right now, it has been relatively peaceful. resign,et ms. lam to pulling that back, that might be the end to it. i don't think this is the catalyst for a trade deal between the united states and china. we spoke to wilbur ross and he said he is confident we will get a deal, just not a g20. patrick: we will get a deal it --ther or not it is that g20 shop is very much influenced by the stock market in the general economy. we are starting to see a little bit of a weakness in the economy . we are starting to see some weakness in the stock market. those two forces drive trump than they do china. can think about the

long-term. something's about the election -- trump thinks about the election. francine: up next, the ecb's vice president says the central bank will act as inflationary expectations become the anchored. the latest from the fed. that is coming up next. this is bloomberg. ♪

francine: central-bank leaders will make key decisions this week. central bank officials me up. likely on the agenda is more stimulus.

speakers include mario draghi and mark carney. on wednesday, sufficient time for all. economist expect the fed for clearing a path for a cut. thursday we get announcements from the bank of japan and bank of england. i'd expect the ink of england to leave the -- bank of england to leave the rate unchanged. that's focus in on the fed. joining us now is neal wilson he is the chief executive of ej you investment. still with us, patrick armstrong. neal, how do you get set on trade? neal code we would agree with the sentiment that you expressed his -- expressed. the fed has interest and lori rates over the course of the next six to nine months. the fed wants to wait for the g20 to take place later this month, to see if any trade can listen up from china.

secondly i think the fed doesn't want to look like they are reacting to the market. they want to -- they don't want to look like they are reacting to the tweet storms from president trump. the farther the decision can come from december, look at the fed is the best decision was a mistake. i do think alike goldman sachs saying they don't believe there is going to be any cuts this year, we would probably think there would be some cuts because the yield curve, if not inverted from a to 10 perspective, it is more the three-month t-bill. more consumer loans are extended. about the am more it june statements because right now if you look at june, people don't expect the cuts but everyone ensure the cuts are coming in july. francine: is it too much? patrick: they want to give themselves some optionality. it will be too much.

right now -- you get trump coming out and saying obstructed view. -- deal. all of a sudden confidence may go up. the fed may not want to be cutting into that. they have no optionality if they keep their statements the same. they are going to want to give themselves some optionality in the markets are not priced for that optionality. neal: gilly thing i wanted to respond to patrick -- i don't reactive.p, he is i do think he has a timing issue. the election is so far off. for him, the optimal time to cut a trade deal would be closer to the election. he is spending the downturn, the market, kind of premium to do that, but a later trade deal. he wants to -- he has to have a trade deal if you want to get reelected. patients, their

attention span is really quite short. francine: that is debatable. is this about trade? has got to play two opposing forces at his base release response -- opposing forces. his base really response to trade. i think you've got to start thinking about recession. that is a big amount of tariffs. yet higher costs for the u.s. consumer -- you have higher costs for the u.s. consumer. a status quo may be the best scenario. an escalation that he says is coming if we don't get a deal. you look the fed, do they look at the inverted -- francine: when

you look at the fed, do they look at that inverted yield curve? patrick: the fed is going to be very couple where we are. unemployment is 3.6%. five-year five-year forward on inflation -- everything is exactly where you want them to be. if the cut happens, it is for insurance. things are slowing in manufacturing but the backward looking measures, they will look good. neal: on the u.s., there's a dichotomy of the economy. 75% of the jobs in the united states are in small to medium-sized distances. -- medium-sized businesses. it is not immune from the trade tariffs but it is more insulated. if you look at the small bank segment, you will see a big contrast between the monte center banks -- the money center

banks. deposit growth. -- had over 7% loan growth you have had over 7% loan growth. i am not saying the recessionary risks are there but it isn't as weak is a lot of people say china trade war tariffs, absolutely a recession. francine: thank you. onl wilson and passive arms do -- and passive armstrong stay with us. -- that is according to press reports. we will delve into that deeper. more on that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua here in london. deutsche bank is considering -- the up a 50 billion plan is seen as an overhaul to the banks trading operation as they shift germany's slender away from the bank. equity in rates trading outside -- and response, deutsche bank has said it is working on measures to accelerate this transmission to improve its profitability. added it will updated -- it will update all stakeholders. still with us, patrick armstrong and neal wilson.

thank you both. patrick, how do we view deutsche bank? what is the likelihood? patrick: a lot of the banks that are trading below half the book value, you have to do something to give the market confidence that your balance sheets, you can remain solvent. -- it may not be in the interest of shareholders. deutsche bank is trading at .2 book value so it is pricing in a big discount. a 90% discount to attract hedge fund. it might make a reliable good bank. i'm not sure the national bank of germany will want to be known as a takeover candidate. that is what you set up with a bad bank. francine: with an m&a speculation, at the end of the

day, does deutsche bank need to merge? neal: at a note that it needs to merge -- i don't know that it needs to merge. maybe merging with ing or unicredit, you have a lot of headwinds to do mergers. you have unions, cross-border out of issues, you don't have one regulator. just to contrast it from the u.s. perspective, we have 200 to 250 mergers of banks per year since the crisis. francine: they were cleared straightaway, right? fixed in three or four years from 2008 onwards. neal: that's correct but you're getting the regulator passing rules. it encourages the smallest banks to consolidate for cyber security concerns, to profitability concerns. they are allowing capital

structure where they can be used as currency to take over. here it is a much more cattle of fish. each individual country has a concern. germany is worried about deutsche bank. now they have these crosswinds. francine: you don't have a banking union here. patrick: for years we have been asking that every years we have been saying that is around the corner. i don't know how do we get there right now. it is always in the midst of a crisis where those things become the focal point. we have to wait for that to get some real momentum. inncine: are you invested european financials? neal: in april we started selling them. ing,rench bank, bnp, trading about 90% of book value so the market doesn't completely give up on them. if you do have a slowing economy, you don't want to be in the banks. if you do have a recovery in the

ozone, banks become more attractive. francine: the european banks when it comes to investment banks in this region. neal: the strength of those franchises would suggest that is the direction of travel. jpmorgan and other international franchises have done well. their profitability is quite exceptional, even with a young curve that is essentially inverted -- yield curve that is essentially inverted. that is the projection. francine: neal, thank you. we will be back with hasek armstrong. -- patrick armstrong. this is bloomberg. ♪

francine: economics, finance and politics. this is this is bloomberg. let's get out to paris where the air show kicks off for boeing.

the trade for will be exercising damage control after the grounding of its 77 max aircraft. let's get to guy johnson who is there. francine, thank you very much. we are going to talk about the max in just a moment. we are going to talk now to one of the companies that will provide engines for the max. that is ge aviation. it is ceo david joyce. david: how are you? guy: i am very well. let's talk about how high the bar is. you are the group desk your group cfo said the aviation is .retty recession resilient issue right? david: the balance of business is very favorable for us. we have a great production run going. we are going to increase production by 50%. we have an -- by 15%.

we have an incredible aftermarket. middle of a real growth market when it comes to military. we are seeing 10% compound growth rate through the middle of the next says if you have a recession perhaps in the commercial market on new make equipment but people are still flying and we represent two out of every three departures in the world. 75 departures a minute right now , two thirds of which are powered by ge. we have a pretty good growth story on military. guy: that is a yes. david: it is a strong business model. 8 billion budget. it is a bedlam scale.

is bigger better? david: as you and i talked about before, any of these mergers have two really create incremental value versus the two companies. i have a lot of respect for tom and what he has done with raytheon. they are in the process right now of proving integrated value of the company. when it comes to jet engines, our competition is rolls-royce. i feel good about our position -- i feel confident about our position. we have the right technology to be competitive and i'm not that uncomfortable. us. let's turn behind it is a pretty big engine. david: want hundred 34 inches in diameter. -- 134 inches in diameter.

it will fly this year. we will certify this year and the triple seven fly this year. 2020.es in you know as well as i do, we have had an issue on the engine. let me go through that. this -- eight engines have been through an incredible amount of testing, certification. we have over 2700 hours on the motors. do is wee last test we take the engine and we run it way outside of its design -- operating and we do it on purpose to make sure we like the margins of engineering design. test, weere doing that found in the front of the compressor, we had more aware than anticipated. where -- we are redesigning a little bit. we have to go back on test and then will put that piece inside the engine. all of that will be done in

plenty of time for the certification of the engine and for the flight test to begin. guy: let's talk about the boeing max. how much longer do you think you are going to produce that engine? how does it fly for? david: i think the max is an incredible product. we have been sole-source under the 737. this is our third generation. they're all at 7500 aircraft out there. it is a stalwarts of the industry. i think the airworthiness will be reestablished. the faa has a process. they will finish their process so then reestablish deliveries can begin again. we believe that is going to happen sooner rather than later. we feel confident in the airplane.

guy: you see yourself producing engines for that aircraft. david: yeah. more than 10 years. i believe that thing will fly well into the next decade and 2035., into 2030, that me give you a perspective. in 2029, the overhauls in cfm cfm.be 50% late and 50% the quantity -- the current fleet in 2030. a gives you perspective on how long the tales are. guy: the last engine you put on the max? >> you would have to ask boeing. i don't think they are going to take that airframe for the next generation past 2030. my own opinion is they will be some bearing of that. -- some varying of that. they are going to find

themselves into that marketplace by the time they are ready. guy: great to talk to you. david joyce, the ceo of ge aviation. francine, back to you. francine: thank you so much. guy johnson at the paris air show. we will have plenty more on that. that is a huge implication for trade. let's check in on what is moving in the markets. here is annmarie hordern. >> look tons of plunging down more than 12% this morning -- lufthansa plunging down more than 12% this morning. especially in their home market of germany. we are seeing a read across. ryanair down nearly 4%. all of these companies are moving on that profit warning. another german company is

deutsche bank up 2%. they are considering a plan to that couldr bad bank have assets as much as 50 billion euros. --se risk rated risk-weighted assets. this is deutsche bank trying to shift away on that investment banking. francine: annmarie hordern on the largest. -- on the latest. >> defiance in hong kong, a day after carrie lam suspended the controversial extradition bill. protesters are calling on her to resign. they also want the legislation to be withdrawn. organize to a record 2 million people taking part in the march. police putting the peak figure at 340,000. and advisor said there is no chance debate on the bill will resume. the u.s. federal reserve will likely cut interest rates this year, but not as aggressively as

investors expect. the consensus is still the central bank will not rush into a rate cut. stanley fischer says he thinks resonant donald trump will not renominate chairman jay powell if trump is reelected. wilbur ross downplaying the prospect of a major trade deal from the potential meeting of president trump and xi jinping. he says the most that will come out of g20 is an agreement to resume talks. earlier it may remember negotiations broke down. both sides blame the other. >> you never have a deal until you have a deal on everything. in that sense, with things as complicated as trade negotiation, there is always going to be a degree of uncertainty until you really get to the finish line. >> argentina says it is not ruling out a cyber attack after a major power blackout left millions without electricity.

the president said the event that hit five south american countries was "unprecedented." a cyberattack isn't the primary hypothesis. it could've been technical issues or humidity. boeing is confident it's max will return to service this year according to the chief executive. he says the company's long-term strategy hasn't changed and with more than 4000 max jets still in the order backlog, boeing has no plans to accelerate the development of a successor. >> i expected to happen before the end of this year. we're making good progress. we will take the time necessary to make sure they are safe. we expect it to happen this year. >> global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries.

francine: thank you so much. coming up, boris bales. tori rivals battle it out. we will talk more about that next. this is bloomberg. ♪

francine: this is bloomberg surveillance. imf francine lacqua. the front runner to be the next u.k. minister s tory rivals battle it out. boris johnson came in from widespread criticism as he declined to take part. dominic rob was criticized for suspending parliament to push through brexit. the outsider -- an outsider

accused rivals of engaging in a macho showdown. >> it is not all about one man, is about all of us and i believe the best way is to utilize the talents of everyone in the conservative party. i would use the party -- use the talent of every we won in the team here. we have to do everything we can to avoid that no deal brexit. if that is the only way to lead, then so be it. that should not be our first choice. , wever becomes a captain should all unite behind that person. that is the only way we are going to get a deal. it on thelet's keep leadership contest. patrick armstrong and joining us , david merrick. was there a clear winner? david: you can debate it was a

person who was not there. it was a bizarre spectacle. yet the clear front runner not there. yet the person coming last really getting the best reaction from the audience, that was rory stewart. everyone squabbling amongst themselves about how to deliver no deal. no one offering an answer. it was a bit of a mess. candy, mr.ttle johnson, for ducking this one. any person who accused him was jeremy. there is nothing stopping his momentum this morning. francine: i keep hearing that boris's biggest concern is what boris might say. the more likely he becomes prime minister. david: it seems like he is not showing up for that. this is in parliament with a room full of journalists. he is preparing for debate

tomorrow. he is going to make an appearance at the bbc debate tomorrow night after the second round of voting. which may have already whittled down the list. deadis looking did said -- set. he is the clear front runner. francine: how do you trade all of this, patrick? patrick: you got to be ewen: sterling expectations -- you have to be weak sterling expectations. we are going to accept our exit because it will allow us to negotiate. the high brexit is going to be looking more and more likely. that is where all the rhetoric has to go. francine: is that were all the rhetoric is shifting -- were all the market is shifting? david: it has to be

overwhelmingly we are going to accept a no deal brexit because that is all the promises still be made in this leadership campaign that we accept a high brexit. we believe in the european union. i think everyone will still want to deal. if not, you are going to get a no-confidence to stop a no deal brexit. francine: what is likely? i know it is difficult to see how we get out of this. people say horse johnson -- boris johnson may be the only person. he is so hard and is campaigning that this will not happen. it is hard to see how anything else it's through this parliament. whoever is the prime minister doesn't change the fact that the only thing parliament has voted for is to block no deal. you have various members of their own party who says they will be willing to bring the government down.

that brings us back to we are heading toward an election. whoever takes over, they will not give to get anything through this parliament. they are working majority. everything else will come back to the fact that this is a minority government with no mandate to push through anything controversial. francine: if there is a general election at the end of the year, what kind of government could we look at? patrick: going to be a minority government. the polls are indicating that labor would lead a minority government with the scottish party. francine: how do you trade that? patrick: everything in the next few months is negative per pound. none of those are good for the pound. anything that creates a deal would be good for the pound. it is hard to see how to get there. francine: what is jeremy corbyn doing for the moment?

is he laying low? david: he is hugely unpopular. the leader coming out saying we really need to pivot our strategy on brexit. the labour party should be standing for remain. those folks bring back and have a clear position on brexit. jeremy corbyn is not playing border. still being torn apart by this question. we have seen how jeremy corbyn's grip on that policy has been maintained. francine: thank you both. up, we bring you a conversation with danny blanchflower. don't miss that conversation. more on that next. this is bloomberg.

francine: economics, finance and politics. this is "bloomberg surveillance." china's biggest state owned infrastructure companies excluding ubs from a bond deal. this after the banks global

chief economist sparked a furor with his use of the phrase -- the corporation is the first issuer to distance itself with ubs over the scandal. this company's the lenders efforts to push into the chinese economy. goldman sachs is embracing its status as a private equity giant. the bank will rely less low -- less on its own balance sheet. it is looking to consolidate multiple units to add more heft to its baking division. -- banking division. francine: saudi arabia has joined the u.s. and accusing iran -- and accusing iran of attacking oil tankers. -- in accusing iran of attacking oil tankers. saudi oil facilities at an

airport while iran denies involvement. >> going to guarantee freedom of navigation through the straight. it is an international challenge. the united states is going to make sure we take all the actions necessary, diplomatic and otherwise to achieve that outcome. francine: still with us, patrick armstrong. when you look at the models and fed and global growth and trade, what is your range like? patrick: we think we are going to stay around these levels. if you look at demand, it is falling. supply hasn't really slowed down so you got increasing levels which is negative oil prices. at on oil isooking implied volatility on oil, 25%. 45% today. it is making sense to sell some production right now.

you collect the premium. you get a big premium with 47%. thanine: if it goes higher that, when does it start hurting the global economy? patrick: it is hard to see it goes higher unless there is a significant geopolitical event in the middle east. strong.s quite i don't see that getting shut down. i don't think there will be a spike higher unless there is a delay -- a geopolitical event. francine: in europe we haven't seen that much of an upswing when it comes to consumer demand. the levelt is at where nobody is panicking on the producing side. on the demand side, it is not pricing anyone out. there is a lot of forces that will keep it range bound. opec is not going to change their views. demand is not going to lessen significantly. demand falls a little bit.

francine: what does this all mean for inflation? the inflation we look at isn't necessarily the one that has been influenced by the oil price. on five-year five-year forward inflation, it is shocking. oil prices to create a mindset when all prices get lower, expectations get lower. that is something fed and markets have to take account for. if we see oil prices, it is not going to have a significant impact. francine: does it make oil makers attractive? pietro: that is what we are playing it for, and height dividend deal -- a high dividend deal. francine: patrick, thank you so much. bloomberg surveillance continues in the next hour.

tom keene joins me. stay with us. the chiefew with executive officer of qatar airways. mixed teacherf a in asia. we do have a big week for central-bank policy as that gets underway. treasuries are down. the fed, the oj among those extending monetary policy this week. watch out for any movement and currency. this is bloomberg. ♪

francine: big protest. hong kong government loans been

its extradition bill after massive demonstrations. the protesters want carrie lam to resign. no deal yet. wilbur ross tells bloomberg the trade agreement can be done with china but not at the g20. the empty podium. for a rivals battling to be the next p.m.. boris johnson refusing to take part but with more backing from trump. good morning. good afternoon if you're watching from asia. this is "bloomberg surveillance." i am francine from london. there is a tilt to central-bank policy this week. we are expecting the boe. we have the fed later on this week. we are trying to figure out this dovish tilt what it means for treasuries. tom: inflation in europe. we will show the five-year five-year chart in a moment. friday, it was extraordinary. it is more extraordinary this

monday. francine: let's get to bloomberg first word news. >> for the first time i ran may break a landmark agreement which was meant to keep it from developing the nuclear bomb. on its it will exceed inventory of rich uranium. last month iran said it will start withdrawing from the nuclear agreement and 60 days unless europe through it a lifeline. the u.s. drew out of the deal a year ago. protests in hong kong has sent a message to china. hundreds of thousands of demonstrators jamming the streets over the bill. it would allow extradition to china. carrie lam suspending the measure and issued a formal apology but ignoring calls to resign. don't expect a major trade deal coming out of the meeting between donald trump and xi

jinping. that is according to wilbur ross. he told the wall street journal that the most that would come out of a meeting is an agreement to resume talks. this year's paris airshow will be different. it will be dominated by the crisis of the grounding of the boeing max. guy johnson speaking to boeing ceo. >> something we expect to happen before the end of the year. we are making good and steady progress. i will not give you a specific timetable. we will take the time necessary. we expect it to happen this year. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. tom: thank you so much. equities, bonds, equities. futures turn, curves flattening. euro middle tendency.

let's move on to the next screen . the next showing the equity market. 15.28 and a big 54 points. germany isr yield of absolutely extraordinary. -0.70. we saw that about 18 months ago but nevertheless rolling over to an ever greater two-year yield. sterling, i don't know. it is up for debate. it is quite difficult to see what the next couple of months will bring in terms of brexit negotiations. stocks are turning to central banks. we do have the fed boj -- the fed, boj, boe extending monetary policy this week. also looking at oil. on the back of all the news last week that we had because of the saudi oil tankers.

today, little bit mixed for oil but brent unchanged. american oil at 52.37. chart --s so the same let's show the same chart we showed several times last week. five-year forward inflation expectations. it has worsened. can we have a moment of silence for all the cfa in london? francine: what are we doing? 30 seconds? tom: they will need more than 30 seconds of silence. let's move down here. we're getting down to three standard of deviation moves. stunning chart. --ryone including francine: i am going to be really quick with my. a good way of looking at volatility.

where volatility spiked the most in the second half -- in the first half of 2019. historic routes shutdown central hong kong or second straight sunday after carrie lam suspended and extradition bill. testers are calling on her to resign -- protesters are calling on her to resign. here is what he told stephen engle. that is the reason for us to organize to ask for free election. it is time for us to vote to freely elect the leaders of our city. francine: stephen engle joins us now. i know we were talking before about the move next is one of euphoria and the protesters feel like the achieved something. stephen: they have

something quite dramatic with the hong kong government led by chief executive, carrie lam. she did a dramatic reversal of this reading in the legislative council in the building behind me of the extradition bill. ethically tabling it. -- basically tabling it. we heard that it is pretty much dead. it will not come up in his current session. the students feel emboldened by this. you just heard from joshua you long -- joshua long. movemente face of the here in hong kong that lasted for 79 days. it is born of a different struggle. this was born over the extradition bill. five is it was over universal search -- universal suffrage. carrie lam really has an impossible job. how do you please, placate or pacify the hong kong people

--le pleasing, classifying pacifying beijing? the four chief executives we 1997, they have all had failure in balancing this act. tom: what happens when the protests are over? when do the police run out of patience when there is one million people protests and they have to get back to business? they can i get back to business, can they? -- they cannot get back to business, and they? stephen: there was a call for protests today but it was suspended after -- the police have really backed away. yesterday i was in the middle of that as some say 2 million person march. police, they just stood back. they took a lot of abuse but

they stayed back. they took a lot of heat. one of the big reasons carrie lam backed down was because of the violence that happened on wednesday. rubber bullets, tear gas and the like and they really took a hammering in public opinion. tom: did the police hold back because of carrie lam or the hong kong leadership? or because of signaling from beijing? is the bigat question because how much of this is coming from beijing. beijing has officially said we support carrie lam. they are saying they support the actions to table this or suspend this bill. let's face it, carrie lam does take direction from beijing. however, she says this extradition bill and the withdrawal was not at the orders of beijing.

that still debatable and a lot of the students who are congregating right here on the hong kong harbor front do not believe her. that is life they are calling on her to resign among many reasons. francine: stephen, thank you so much. at 7 a.m. in new york. will field a couple of questions on what that means for ages financial capital. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom: francine from london and new york. as dovishness sweeps the world,

leaders make key decisions against a challenging backdrop of ongoing trade war. this is a week that matters. officials meet. -- mario the agenda, draghi and mark carney will be live in central portugal this week could wednesday, decision time for powell. , this expect the fed -- economists expect the fed -- from the bank of japan, commerce expect the boe to leave the rate unchanged. policymakers are starting to splinter. thisthe strength of all of , from draghi to carney, they all want stability. -- davidly joins us wiley joins us. let me bring up a chart that is decidedly unstable. standard the

deviations. from late last year starting my we are also in a four standard deviation mode. david riley, that is anything but the stability the bankers want. david: that is absolutely correct, tom. the big concern for the ecb's clearly the expectation of the market coming unanchored. i think there will be some discussion around what are the policy options available to the ecb. whether this action they need to take in order to get a hold of these inflation expectations which is spilling over into extra new report performance of bonds within the european government bond market. tom: there is no center for

investors. what do you do if you have price up/yield down in your portfolio benchmark you got a coupon -- in your portfolio? you got a coupon, what does it do right now? david: in the case of european assets, i think there are some opportunities. that is the case within the periphery. likeyields on countries greece, italy. they are attractive. longer dated european investment grade credit, as well, offers some opportunities. there is room to make some money to generate some carries. it is more check to than being stuck in bunds or negative cash rates. francine: when you look at the

yield curves in treasuries, we are discussing a lot more volatility when it comes to treasuries. david: with treasuries the going from if we are an inversion of the curve into a full steepening, as the market moves into pricing cuts. the fed needs to validate that on wednesday. i am quite skeptical that the fed will be able to deliver anything like what the market is anticipating in terms of, not only setting up for july fed the fed is a bit fortune and to political actions outside of their control. francine: inflation is not looking great. is inflation outside of their control? is inflation linked to trade? ofid: i think in the case

-- they'venflation got in inflation challenge in terms of getting sustainably to the 2% target. they are not that far off. europe, you're right. to, that is where the real problem is. that is in part you to global trade, global manufacturing to which europe is exposed to. europe has a lot of spare capacity. this is one of the challenges they have. they need to sustain this economic upturn, unemployment to come down to break out this low inflation trap. bonds?ere any value in -- francine: is there any value in bonds? david: we are seeing a bit move into bonds.

the way your being compensated for those risks. italy offers value at the moment . some segments of the european credit market including european .anks i like some of the dollar denominated emerging-market debt. you're getting a reasonably sized pickup relative to what you can get into your. -- into europe. tom: financial times finally trotting out which many have widely anticipated, the only solution for deutsche bank is good bank/bad bank. we are going to have a lot of -- and this critically it means a lot of trading a broad. that is a monthly chart. -- and ugly chart. "bloomberg surveillance." bloomberg ♪ .

>> this is "bloomberg surveillance." let's get to bloomberg this is flash. goldman sachs has been racing its status as a private equity giant. it is looking for ways to raise more funds and rely less on its balance sheet. it will consolidate its activities of multiple units to add more heft to its merchant banking division. deutsche bank is considering setting up a bad bank unit. according to the financial times, they could hold as much as $56 billion of risk-weighted assets. the plan includes shrinking or closing deutsche's equity and rates trading businesses outside of europe.

that is the bloomberg business flash. tom: david rally with us. we are thrilled to have with us lisa martinuzzi. , want to cut to the chase there are two key questions. 14% of the balance sheet. you and i went back and forth. when you narrow it down to what is on the balance sheet you get as much as 21% of the balance sheet. if -- is that true? >> we are talking about the investment bank balance sheet. according to the story, this would be derivative but not so core toxic assets. that would mean it wouldn't cost them too much. tom: what do you hear about employment, particularly in new york city? you cut the balance sheet, by definition you cut jobs. ,o they do it in the margin

little bit here and there? >> yet to read a little bit in between the lines. it does appear the u.s. is where the business would be trimmed the most. unprofitable. .hat would mean jobs i am sure people would love to learn about that soon. we may not hear about anything for several weeks according to the report. francine: when we going to see a deutsche bank with that the forefront. we did hear from the chief executive who said he would do cuts but we haven't seen that. investors are clamoring to understand a little bit more about what he has in mind, particularly given the pushback of the agm. there's desire for there to be

strategic plan to return the bank to sustainable profitability. doncine: how much time shareholders give to the current management team? >> he has been on the job for over a year. he had to push his own plan aside to push them to considering this merger. you need to give him some time to come up with something. you are looking at the first half going into the autumn for putting the stamp. tom: bring up the chart. change.ge david riley, i want to go to you because there is a lot of institutional cardinal rules about five dollars, five euros for shares. riley, is there a euro amount where you just can't own a company?

there is always a situation where you cannot own a company if you really don't like the fundamental story. however attractive valuations might seem to be. in the case of european banks and bank equity more generally, the challenge they face at the moment is a situation of negative interest rates. it is a de facto tax on european banks flattening of the yield curve which is also placing pressure on them. there has -- as is been discussed, like institutions like deutsche bank,, some of their own structural problems. i would advise against trying to catch a falling knife. selective. bit more francine: thank you both.

david riley stays with us. boris bales well toy rivals battle it out. race to lead the trade party next. plenty more on that and plenty more on where the markets are. this is where i am looking at pound. a little bit of a shift. looking at a possible coalition between scottish national party and labor. certainly pound traders will be looking at models. this is bloomberg. ♪ we're the slowskys.

we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands!

check it out! now you can schedule a callback or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not. ♪ tom: "bloomberg surveillance." good morning, everyone. francine lacqua, tom keene. a new book on the real story on

the labor economy. really looking forward to that. right now with your first word news is viviana hurtado. inn hong kong --viviana: protesters demonstrating against a bill that would allow extradition to mainland china. demonstrators one carrie lam to resign. secretary of state mike pompeo is bowing the u.s. will protect shipping in the persian gulf. pompeo was on two talk shows. he says there's no doubt iran was behind attacks on oil tankers in the gulf last week. argentina isn't ruling out a cyberattack for causing a massive blackout. it struck five south american countries. uruguay, paraguay, chile, and

brazil were also affected. super rich are descending on london's housing market. the proportion of homes in the city's best district selling to americans this year has almost doubled. one of the best-known buyers, hedge fund billionaire ken griffin. he bought a 100 hundred billion dollar home near buckingham billion home120 near buckingham palace. 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. francine: thank you so much. now over to the u.k. rivals to be the next u.k. prime minister hit at each other in the first tory leadership debate. front boris johnson was mocked for refusing to take place. here are some of the highlights. >> it>> is not all about one man. it is about all of us. i believe the best way to deliver brexit is to utilize the talons of everyone within the conservative party.

i would utilize the talents of the team here and everyone in civil society in order to make sure we could deliver it. >> we have to do everything we can to avoid that no deal brexit. in the end, if that is the only way to leave, then soviet. but that should not -- then so be it. but that should not be our first choice. >> whoever it is, we should all unite behind that person. that is the only way we are going to get a deal, so we should be very clear about that. [applause] francine: joining us now is antonio pasqual, chief economist at barclays. david is still with us. , we all watched the debate. boris johnson was mocked, but by not being there, he kind of won it. is it is to lose? >> i don't think it hurt him not being there. he was able to say tories have

been squabbling with each other for three years. do we really want more of that with me in there? he is so far ahead of the pack right now that he doesn't really need to stand with everyone else this early in the game. i think what he's hoping for is after tuesday's vote, rory stewart, who is sort of the outsider who has disrupted the entire field, will be out of it, and boris is then much more comfortable taking on gove and jeremy hunt. that is a much more comfortable place for him. i don't think it has hurt him terribly. i don't think any great winter emerged from that debate, although it was clarifying on a few points. ,> at some point, rory stewart this is britain's international aid minister, accused his of a showdown. >> whether or not he stays, he has throwdown a gauntlet of

sorts for the tory party, saying what do you want to be? are you a party for the hard brexiters? if so, how are you going to make it happen? the alternative is a party that reclaims the center ground of british politics, where the conservatives have won all of their races in the past. that is something the party numbers it doesn't seem inclined towards. the conservative members are older, largely over the age of 56, and they want to hard brexit. an uphill battle, but he's speaking to the country as a whole. his intervention has changed the race and made it very interesting for whoever does win it, who we assume will be boris. tom: in america, americans have an understanding of where the senior cabinet officers fit in andy junior cabinet officers. is everyone in this debate running for the cabinet?

are the running -- are they running for a certain vision into government? at this point, it is fair to say that they are, some more explicitly than others. we heard various members say, whatever happens, we all need to support the eventual leader. the question is, i think that is what will happen right after the tories have chosen their new leader. you will see a sort of catharsis coalesce. but how long that will last, i think we could see that consensus breakdown by october 31, when the real choices have to be made. tom: let's go to antonio garcia pasqual and make what we can out of economic growth right now. what is the economic growth of kingdom?d we saw some ugly numbers a few weeks ago can we sustain 2% gdp in the united kingdom?

antonio: the demands to come in the second half of the year, definitely not. the question is whether the gdp can sustain 1% growth towards the end of the year. weakness beyond the trade sector. you see weakness in investment and investment sentiment, and it doesn't bode well. suggestioneasonable is something that would be close to under 1%. but not 2%. izzy -- i do the think that the outlook for the economy is further weakness for the near term. we are seeing weakness in terms of business investment because of brexit. the one thing where i've been kind of underestimating has been the resilience of the u.k. consumers, rather like the u.s. consumer.

are running out of stable credit, they seem to find some more. they have kept the u.k. economy moving along at an ok pace. know iffrancine: do we there is any policy on what they would do with the economy? is there a candidate from the tory party that the markets would encourage or like or take well? david: i think it is hard to see. i think the market would probably, amongst the candidates that are there now, probably prefer someone like jeremy hunt because he's been come although he hasn't taken a new deal exit off the table, he's clearly signaling that that is the worst case scenario, as far as he's concerned. i think the concern around boris johnson is he may flip and do something very different to what he says. but at the moment, what he is saying is i'm going to leave the

u.k. -- going to lead the you could -- going to lead the u.k. out of the eu come october no matter what, and there is not time for them to get a deal. francine: it will also be up to chancellor come about why hasn't this been part of the debate? therese: antonio: i think it --therese: i thing it has been part of the debate, but minister.to the prime all of these candidates are talking about cutting taxes and increasing spending, and no one is talking about how they are going to do both. how they are going to increase spending on all of the things that theresa may called the burning injustices while cutting taxes. that will be the next battle, but the key is keeping jeremy corbyn out of power, and that is something they all agree on. "the no"the ft" today,

deal response from brussels." what do using about no deal -- what do you think about no deal? how does brussels respond to ascendant prime minister johnson? havese: brussels doesn't much of a response before november, when a new commission takes place. jean-claude juncker, the commission president, is on his way out. there is a massive turnover of personnel. i don't think we are going to get much from brussels before then. the other thing to remember is much the same team is in place. number two take his place. there's not going to be a lot of scope for change. any movement is going to have to come on the u.k. side, and it is probably not going to happen before we get a new commission. francine: thank you, therese

rafael, for joining us on this discussion. antonio and david both staying with us. coming up, we stop -- we talk oil with the head of iea markets. and saudi oilran tankers with neil atkins. this is bloomberg. ♪

♪ is "bloomberg surveillance." lufthansa lowering its profit forecast for this year, citing falling prices in europe, in particular from its home markets of germany and austria.

lufthansa blaming too many lights and competition from low-cost rivals. ubc is still seeing the employee'srom its use of the phrase "chinese pig." paul donovanmist has apologized. he has been placed on leave. the trade war between the u.s. and china has intel reviewing its global supply chain. bloomberg speaking to the chipmaker's ceo in tel aviv. >> since the tariffs started last year, our manufacturing and a sibley operations have been working to mitigate -- and assembly operations have been working to mitigate the tariffs i looking at more effective ways for the movement of goods around the world so that our products won't be more expensive at point-of-sales. viviana: that is the bloomberg

business flash. francine: thank you so much. let's turn to italian politics. italian policymakers tried to stabilize proposals and make it catch -- and make budget cuts. david, you are a big owner of italian btp's. are you adding to that position, or cutting them? david: we are certainly not cutting them. we've got a long position across a number of strategies in btp's. as spreads have been tightening, we will take some off of that and realize some of those profits. market point is that the in the current environment is fiscal and the italian exit risk. you do have a strong technical

search for yield, as we were discussing before. be a bit of positive income, and the curve is seeing the carry in the rolldown. ofhink the prospect international investors taking flight, that has kind of already happened as well. there's going to be some volatility, but if think it is a good bet. francine: but then you have a million questions on what you do , how this coalition will hold. how do you look at this overall? antonio: i think the good news for italy is cicely what we just discussed, the search for yield. we tend to speak a lot about the spread between the bund and the btp. fine. but what matters is the overall yield. at -25 basis points,

and the overall yield is down. and you have italy actually funded at 10 years, at 2.2%, 2.3%. the average cost of all of the debt is 3%. the margin is still below the average, making the debt more sustainable paradoxically. i think that is the key. that is what is holding everything together. everywhere else you look, the fiscal consolidation, the politics, there are risks everywhere. the question is where there are not risks for italy. funding isthe naturally going to spike. that is the key. tom: into the summer and into 2020, we need a crisis to make things change. do we kick the can down the road in germany, or do we have a crisis embedded in what we are doing now, where we can actually

get something done? europe: it is true that has made progress after the crisis. a lot depends on what happens in the u.s. remember the whole tariffs story. europe is a bit on the sidelines. if you tell me that car tariffs , that is very severe, as we discussed before. europe is going to be hit by around 50 basis points less growth in the baseline because of the china-u.s. if you overlay tariffs, you actually engineer that kind of recession, including germany, that may push europeans. next ecbnds on who the leader will be and how much cassidy they will have -- how

much capacity they will have. yearse now see the five descend ever further. thank you so much, antonio david pascual and riley. it is the paris air show, and the air show has airplanes, and the airplanes are under careful scrutiny. it has been a difficult 24 hours for scrutiny -- for boeing. guy johnson in paris. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." boeing is confident is beleaguered 737 max 8 will return to seven this year -- will return to service this year. the company's long-term multi-decade strategy has not changed. they spoke to bloomberg's guy johnson from the paris air show. >> we are very focused on safety. that is our paramount focus, and that is the tone for the entire show. we are making good, solid progress on bringing a max

backup -- bringing the max back up. flight the certification shortly, and get it back in the air. all of this is being done through the lens of safety. we will do whatever is necessary to make the airplane is safe. it is something we expect to happen before the end of this year, so we will make good, steady progress. i don't want to give a specific timetable. we will take the time necessary to make the planes safe. guy: are the regulators going a little deeper than you anticipated in the examination of the aircraft? dennis: we expect that, and in fact we encourage it. we are working with regulators around the world. two weeks ago, the faa hosted a multi-regulator forum in dallas. we are working with bodies around the world, and it is important we do this in a thorough and disciplined way.

guy: you keep mentioning thorough. are regulators going further than you would have expected initially? dennis: i think we are going even deeper than normal, and i think that is good. we encourage that. we are looking at every dimension of the max. not only the airplane itself, also the training and education materials, and the overall design certification progress -- certification process. guy: are the regulators all on the same page? dennis: they are very well aligned, and i see more convergence. we are encouraged by the collaboration between the regulators, and we are seeing growing convergence between them. guy: using the air climb -- the aircraft will fly first in the u.s., and then the rest of the world? dennis: we are having meaningful discussions as we work through regulation. we will support whatever the regulators want to do.

betweenthere a gap where the faa is and jan -- and the others? dennis: there is a trend emerging, and the alignment is encouraging. if i look across regulators around the world, i see convergence across that entire group. i am encouraged by that progress. our focus is to remain steadily unsafely. tom: managing the message, mr. rg with our guy johnson at the paris air show. here's the reality in the united states, written up in "business insider." "american airlines plans to use its execs as guinea pigs to convince people that the boeing 737 max won't crash again." this isn't about managing the message. what is the level of sweat in

paris from boeing? is clearly deeply concerned about this. they need to get this aircraft back in the air. it keeps getting pushed back. it looks like it is going to be a tough ask to make it happen this year. boeing is convinced it will be. they are convinced that the regulators will sign off. dennis was talking about the idea regulators are coming otherer, but there may be regulators taking a long, hard look at what is happening here. they know they need to convince their public about how safe this aircraft is. this an uphill battle company has got on its hands right now. it is putting everything else to one side. there was an expectation there would be launching a new aircraft soon, the 797. all of that is still going on in the background, but the focus right now is very much on what is happening with this aircraft, getting it back, and convincing

people it is safe. francine: very quickly, are we losses thise more year because of trade concerns? guy: trade concerns are front and center. it is going to be a quieter show. h theof that to do is wit cycle. orders are getting lower and lower. i talked a little earlier on about the trade story with the commerce secretary. he was downplaying expectations of what is going to happen at the g20. this story is going to be with ask for quite some time. tom: very good. thank you so much. we will continue. this is bloomberg. good morning. ♪

kong,his morning in hong

hundreds of thousands become millions as beijing adapts to the sunday protests. stephen is with those carrying umbrellas. do?urope, what can draghi can the central banker to the world ignore global deflation on wednesday? deutsche bank. model this. there is not a moment to lose. good morning. this is "bloomberg surveillance ," live from our headquarters in new york. i am tom keene with francine lacqua. focusing on deutsche bank after the ft summary. i thought they went further on the future of investment banking at deutsche bank. francine: we were having a great conversation. he writes his opinion on banking matters. the chief executive has been in charge for just over a year. he has not really been able to be upfront.

we still don't have the details. you wonder when they will have a complete plan they will unveil the shareholders and if that will be the end of the speculation. tom: an undercurrent on the future of deutsche bank in new york city. we look at the future of asia, of china come of hong kong. meredith joins us after a spirited weekend. how are these protests different this sunday from others? alone tomthe numbers mark these protests. this is not a protest of a particular group. these were hong kongers. young, old, civil, religious groups. all of them have come out to the streets, taking the chief executive and beijing by surprise. 'sm: meredith sumpter competency in various china sandwiches.

what d.c. in the chinese press that we don't where we speak only english? meredith: what was remarkable is following the sunday protests, if you look at chinese media, most have come out saying beijing will continue to back the embattled chief executive. this comes amid calls for her resignation. daily,bly the people's the most authoritative of the chinese official media came out with a statement that backed the hong kong government but failed conspicuously to mention carrie lam. this shows perhaps beijing is itself taken by surprise by this and will try to find some ways to ease the tensions that have boiled over in the economist city and autonomous region over the city. francine: let's also bring in stephen engle.

he was on the streets for the weekend. if you look at the job description of chief executive of hong kong, how will that change after these protests? that is going to be a question you have to ask beijing. that is what joshua wong, the face of the movement five years ago told us in an interview a couple of hours ago. does she have an impossible job? i'm talking about carrie lam. you have to please beijing and please the hong kong people. often times their goals are very different. who is going to replace her if indeed she just stepped down as the protesters in front of her office -- that is her office back there -- they are surrounding her office. about 1000 stragglers from yesterday's estimated 2 million person march. they are calling for her to step down. it is a really tough, tough job

description to be the chief executive of hong kong when you have to fulfill the one country, two system framework. francine: meredith, can she stay on? meredith: it depends on the extent to which the numbers of hong kongers continue to push. i'm not sure if you have interviewed carrie lam, but she is not a pushover. she will not give up easily. watch for her to try to keep her job over the extradition bill, perhaps by asking or allowing a withdrawal of the bill. or look for a resignation of other officials. i look at hong kong and i guess we have to get to next sunday. what will you presume to occur in stephen engle's hong kong? what will you look for through the week? for whethertch these protests keep momentum up until july 1. this is the key date by which

the british turned back over rule to the mainland -- they turned back over hong kong to the mainland on the first of july. a key date for democracy protesters. watch for whether or not they are able to keep the momentum up through july 1 with the extent to which they can bring to bear much more pressure on carrie lam to resign. tom: stephen, what do you think? can they keep the pressure of for july 1? stephen: they say they are going to. they have a long list of demands. they got that victory on saturday when carrie lam backed away and did a pause of this extradition bill. they want a complete withdrawal of the bill. they want carrie lam to resign. they want the police to stop classifying wednesday's action by a riot by protesters because that is all kinds of legal ramifications. they want accountability of the police using tear gas and rubber

bullets and the injuries, upwards of 80 injuries. what they are chanting now is that basically want carrie lam to come out of her office and face them and talk to them and have dialogue. the apology they came out late yesterday was in a statement. they said carrie lam, in years past you have been writing your face, get down with the protesters and negotiate. not a chief executive. francine: stephen engle on the ground in hong kong for us, and meredith sumpter, thank you both for joining us. let's get to the first word news. iran maye first time, break a land market agreement that was meant to keep it from developing a nuclear bomb. the islamic republic saying it will exceed agreed-upon limits on its inventory of low enriched uranium on june 27. last month, iran said it was start withdrawing for the nuclear agreement in 60 days unless europe flew in an economic lifeline.

the u.s. pulled out of the deal a year ago. where candidates traded insults over brexit in the first debate of the conservative party leadership contest. the winner will become the country's next prime minister. boris johnson refuses to take part and was mocked for this no-show decision. candidates are arguing over the -- parliament of to deliver a new deal brexit. for boeing, this week's paris air show will be different from others. he will be dominated by the crisis over the grounding of the 737 max 8. boeing will try to convince customers it has a strategy in hand. guy johnson speaking to boeing's ceo. >> something we expect to happen before the end of this year, certainly. we are making good, steady progress. again, we will take time necessary. we expect it to happen this year. >> global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over

120 countries. i am viviana hurtado. tom: thank you so much. we are thrilled to have david blanchflower of dartmouth college. exceptionallys important book for the year. right now x bank of england. the times we are living in. it seems to me with a plunging thatflation expectation the degrees of freedom of all central bankers are narrowing very quickly. are there choices drinking down? david: pretty quickly. i've said many times the fed made mistakes. when you make mistakes they can have a really big repercussion later. there is a credibility gap between what the fed has been

saying and what the markets think. when you get to turning points suddenly things change. we look back to 2008 and what happened, the issue right now is it looks like a turning point driven by macro error, a slowing global economy with trade wars going on, slowing in china and elsewhere. this thate sum of all we are unable to retire failure like used to do been crises? david: yes. the story i thought the last decade or so, this is the second great financial crisis. here we have this enormous crisis. it has gone on for a long time. i warned about the long draghi conditions of the semi slump. the world from 1945 to 2008 is gone. we are in a new world. people say the fed was in the last cycle, that's a new world. basically there are not that many tools.

think about the u.k. right now. the u.k. does not have a credible government. plans seeing four big potentially closing. in the past the government would have stop that from happening. there is not even a credible government now. they are fighting over fantasy politics. the politics and economics have come together at a point where we are in crisis. there is not much weaponry available. francine: are we going to see an nmd? -- ndb? the ecb and japan have negative rates. that is completely unpalatable and unthinkable. the concern in the u.s. is could we go negative? if you don't go negative, what are you going to do and what could the fed buy? only limited things.

i tried to ask way to american audiences the bank of england bought u.s. corporate bonds, which the fed cannot buy. maybe we are at a complete turning point. francine: what are you telling me? the skies the limit? because of negative rates? david: i set it a meeting at the bank of england where we started to think about qe. the assumed wisdom was you could buy anything. i'm not saying you should or you would but potentially central banks could buy anything. tom: we will come back. david blanchflower is with us. it is like a professorial thing with blanchflower. this has been hugely anticipated. we will come back and dive into not working. where have all the good jobs god? david blanchflower, i get more mail on this topic than any other topic.

stay with us. this is bloomberg. good morning. ♪

francine: -- airbus kicking off the paris air show by announcing a big deal. forcompany winning in order 100 single aisle planes. they could be valued at $11 billion. airbus is close to a $4 billion deal to sell the new version of the a330 to virgin atlantic. virgin expected to buy 14 of the airplanes. goldman sachs is breaking its status set u -- as a private equity giant.

is relying less on its own balance sheet. bloomberg learning that goldman will consolidate the investing activities of multiple units to add more to its purchase banking division. h&m gaining for a fifth straight quarter, beating estimates. the swedish company has been trying to reduce a bill and and a three year slump in earnings. and has beengled investing heavily in online platforms. that is the bloomberg business flash. tom: thank you so much. you are a professor at dartmouth college and that barely describes the pact seminar rooms that david blanchflower has for his various treatments of macroeconomics. here is the reality. networking. where have all the good jobs gone? a follow-up to 1995, the wage curve. it is the most anticipated economic book.

they say shut up and read it. why do we need to read "not working"? trying to reality i'm explain is the world changed in 2008. the wage curve got it wrong. everything fundamentally changed and policymakers got it wrong. i try to explain why wage growth is low and why policymakers have made things worse. the importance of decent jobs, good jobs, stable jobs. tom: something horrible happened. is it about the full-time conundrum, the shift from benefits we have seen in the world? what is this something horrible that happened? david: the world shifted into thousand eight. workers got scared. workers were scared senseless. "saferf the phrase

houses." your house was not safe, perhaps your pension was not safe. people have not restored their standards of living compared to the past. pay packages are 6% below where they were in 2008. ofhave never seen a period so-called recovery like that. policymakers say all is well. the fed raises rates and the people say we are hurting and don't feel that. we vote for populism around the world. the politics in the economics come together. good jobs are not really delivering, especially for those with less education. it tries to explain that. francine: how would you fix it? arguedthe big story i've is central banks should allow the economy to go to full employment. therefore it was a huge mistake on the part of the fed. i said over the last three years endlessly that was a mistake.

let's put the pedal to the metal. it's about subsidizing work. the story about ai and technology, you can fix that in many senses by making the price of labor lower. lowering the price of labor. giving subsidies for work, encouraging those at the line, but run the economy hot. why did you raise rates when we were a long way from full employment? the full talks about people who are underemployed. their pay is less than they would like and they would like more hours, even at the going wage rate. it's a complete misunderstanding that policy makers on how the labor market works. francine: who is getting it right? is there a government that has a good mix of policies to address this? david: not really. the place we have seen the best has been in germany. 3.5% on employment rate. if you compare that to how well they did prior to the great recession, they have done a lot better but they have issues of their own.

germany is probably looking the best. tom: the democratic candidates, 25 candidates. they will all go up to hanover, new hampshire to talk to lord the cure forfor our unhappiness in the labor economy. what is your prescription for the senator from massachusetts? for the senator from vermont? what is your prescription for the vice president from delaware? david: the most important thing is work. we should try to encourage people to work, giving them incentives to work. the evidence in the book is unemployment and joblessness makes people unhappy. my assumption is if you do everything you can to try to deliver good jobs, they will vote for you. this seems like a vote winner. tom: is this socialist theory? david: it's about how markets work. the one thing we know about behavioral economics is the cabinet job make you happy. having a decent job that is stable and secure make you happy. the logic seems to me is go to the labor market.

think about delivering decent jobs and presumably the votes will follow. come up with a plan to improve the performance of the labor market. i have listened to the debates in the u.k. by six candidates. not a single one has talked about anything like that. francine: that is a distraction, isn't it? if you were to look at the candidates they want to be prime minister, who has the best policy? david: very hard to say. they are in the land of fantasy politics. none of them were talking about the economy. none are talking about how you put britain back to work. the crucial issue in the u.k. israel wages is 6% below what they were 11 years ago. what are you going to do about that? the prime minister has been trying to think about a boost to the economy and people are stopping it. francine: thank you so much, david blanchflower from dartmouth. a great new book. anti-podium as tory

rivals trait insult on tv. boris johnson refuses to take part. that story is next. this is bloomberg. ♪

>> it is not all about one man. it is about all of us. i believe the best way to brexit issues

utilized the tone of the team here to make sure we can deliver it. we have to avoid that no deal brexit. in the end, if that is the only way to leave, so be it. that should not be our first choice, whoever becomes captain amongst us. whoever it is, we should all unite behind that person. >> the only way we will get a deal. [applause] tom: the future chancellor of the exchequer, david blanchflower. what happens to labor here? labour get its act together. david: the deputy is trying to turn the party to a remain party and fighting against its leader who is a leaver. towards a second vote and contrast against these folks, that will be good. be bank ofho will

england governor? david: what a tough one. francine: 20 seconds. david blanchflower. this is the picture for the equity future. actually edging higher. we had a little bit of a mixed session in asia. a big week for central banks. treasury falling, the dollar study. we will get back with david blanchflower and asked why he thinks he may be the banking when governor. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

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excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. tom: there is, a lineup of central bankers beginning on monday. an important forum with chairwoman young. scarlet fu leading our coverage

and looking forward to a great set of what has become more than a routine meeting. thursday we dash to with a few decisions. i have no idea how governor carney does on friday with the constraints. ,rancine: david blanchflower author of the new book, tell us more about how he would set fed policy in this environment. pity think the governor is? does it need to be somewhat international? you said raghuram rajan. does it need to be international to deal with investor concerns surrounding brags it? -- brags it? -- brexit? david: the big question is what he do it. to have someone like rajan there , if you like taking all the

brickbats coming his way, the question is whether they can pay him enough. tom: whether they can pay him enough? david: i assume he will think it is a terrible job in may will not be keen to take it. tom: david blanchflower with us and we are devoting an hour to the american labor economy. we are doing that with martin schenker. andill rip up the script talk to him about the labor economy. you have enough experience to remove her journalism that was thriving and now as we will now is basically in technological chaos. washington has to deal with the new technology. it benefits some and it seems to harm so many. what do you see the democratic candidates doing as they approach technology in this election? martin: the people who know how to use technology to their benefit are the ones who are going to emerge.

buttigieg is one of those people who has clearly figured out how to get the zeitgeist. tom: don't we see that from president trump as well? everyone, including the president was done he won but, this was a different trump this time around. martin: he's just doubling down on the strategy that worked for him in 2016. he has outspent all the democratic rivals on facebook already. he has a war chest that overwhelms of the democratic candidates. he will use his social prowess and the force of his personality to breakthrough. david: it doesn't look like he is doing that well at the moment in the polls. martin: a year before the 2016 election you could have taken those poles and said there was no way he could win and he did. francine: if you look at the

polls, to the american citizens what donald trump at war with china or signing a trade deal? what makes it more popular with his base and others? martin: you can clearly overstate the applications of actual policy versus the personality. aree look at it now there 20 democratic candidates and one president. when it comes down to the election it will just be donald trump against an unknown democrat. that is the real number that counts. this speculation a year ahead of the election or more than 17 months is purely that, speculation. this unknownt can democrat do to get votes? does he or she need to be anti-trump? does it need to be policy? economic policy, trade policy? martin: that is the internal debate.

whoever the democrat is goes head-on and confronts donald trump or actually advocates policy? book,avid blanchflower's "not working." the movie rights have been sold. it will be called "voodoo economics." you are to the left of socialism and these are job ideas not palatable in america. we still have this individualist thing going on in our labor though we are fully employed. in thisthere are people country who are doing extraordinarily well in whatever jobs they have. there is this vast number of people living paycheck-to-paycheck who do not feel that. tom: how do we not jeopardize those doing well and lift up the paycheck-to-paycheck? david: maybe the winners have not compensated the losers enough.

the crucial thing in the end will be the state of the economy. if the economy turns, all the stories we have told will be thrown away. it will be the economy again and it will turn and then we are really going to decide. martin: then you blame jay powell. tom: are you in a mood to blame jay powell? david: i have taken the few the fed was mistaken and should not have raised rates. right, you should cut. right now. tom: in june you would do it? david: get right out front. tom: the ramifications to the market? david: the fed says we understand what is going on and if we need to act, we will. they recognize they made a mistake in the past. if it was me, i would get ahead of the game. tom: david blanchflower and marty schenker, thank you so

much. kong, hundredsg of thousands of demonstrators protesting the bill to allow extradition to china for the first time. carrie lam apologizing and ill, but the b protesters one her to resign. putting pressure on china to compromise on demands or risk further unrest. mike pompeo is vowing the u.s. will protect shipping in the persian gulf. he was on public affairs talk shows and says there is no doubt iran was behind the attacks on two oil tankers in the region last week. republican senator tom cotton says the attacks warrant a military retaliation. argentina is not ruling out a cyberattack for causing a massive blackout. it struck 5000 men thinking 5000.ies -- cyber terrorist not considered the primary -- it struck five

south american countries. super rich descending on london's housing market. homesoportion of selling this year has almost doubled. one of the best-known buyers is hedge fund billionaire ken griffin. he bought a winter $20 million home near buckingham -- $120 million home near buckingham palace. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.. i am viviana hurtado. this is bloomberg. tom: i'm looking over by buckingham palace as well. i hope to get one of those no-meat things that david blanchflower has everyday. where have all the jobs gone? coming up, one of the questions for michael mccaul of texas. maybe we need to be more like texas. this is bloomberg. ♪

tom: "bloomberg surveillance." i'm tom keene. francine lacqua in london. where have all the good jugs gun? you mentioned raghuram rajan. this may be nudging towards book of the year. this is an important, not academic but important book on the angst. i getthe number one mail on the labor economy. i want to go to her single best charts, how the have's are living, the fully employed are living and enough money to buy apple shares. with thek 20 years moonshot coming out in 2003 on apple. technology in your book is not working. discuss what we need to do

forward to harness technology to lead to a better employed america. david: the discussion gets mixed up somehow because technology has been hugely job enhancing. think of all the people that work at apple stores. it creates lots of good jobs. the question is why are they not creating enough of them? the price of labor is so high. firms decide to go to technology. tom: you have thrown chalk in your dartmouth lectures. multifactor productivity. it's a mystery what is in there right now. estimating productivity? david: i don't think it actually is. we have got lots of poor jobs. people who feel insecure. they don't feel motivated. that weakness and instability has had a productivity effect.

a bad productivity effect. francine: what is the consequences? what we thought was a hiccup in productivity is something much deeper and more structural. david: it is not clear you need to change the -- they talk about maximizing employment. if you look back, they tried to focus on unemployment which i argues the wrong indicator. how good a job are they doing? the employment rate in the u.s. is 2.5 percentage points below what it was in 2008. take the mandate and focus on it and get to understand there is not any inflation. raising rates on nonexistent inflation has not come. go emphasize the part of the mandate you were actually given. maximizing employment does not mean saying you are at full employment when you are to .5% below where you were a decade ago. they just got hung up in nonexistent inflation.

time to change. francine: time to change what? the way you measure things? thed: start to focus on post great recession economy and not space or politics on what happened in 1975. the labor market has changed. tom: when we went to a part-time ago, weization 20 years went to a part-time economy. people working two or three jobs. the full-time job evaporated. did that occur because we incentivized executives through shareholder return versus more salary? david: i think so. even if they were more productive with the get the benefits of the increase profit? it goes to the ceos. tom: how do you bring back the nostalgia of a full-time america? can we actually get back to a full-time benefited america with

more family stability? david: it is hard to legislate it. if you were to able to move the full employment, that balance of power actually shifts. tom: why are we not a full employment? yemen appointment rate -- the unappointed rate is going down. david: why would so many people be saying i can't get enough hours? around the world that phenomenon is the thing that is driving stuff. that is the phenomenon. underemployment has not returned back to pre-existing levels. that explain why there is weak wage growth. no one else has an excellent nation. francine: david blanchflower, thank you so much for joining us. dartmouth professor and former boe policy committee member. oil ticking up from last week as attacks on tankers raise

concerns. they -- joining us alwaysneil atkinson, great to have your wisdom and how we should be looking at the oil market. saudi and russia, does the alliance end -- the closeness actually last? neil: we think it probably will. we will have to wait until the end of the month when have the next get together in vienna. you said in your introduction the current market outflow that they put out last friday 2020sts as we move into that they call on opec crude is likely to be lower than it is this year. challengece a major in keeping oil prices at the kind of levels which is suitable for their interests. francine: if you look at the

kindlitical risks, is it of range bound in terms of price? obviously the tanker attacks we have seen in the last , this is obviously raising risks. there was no doubt about that. so far the market has reacted in terms of the price in a very limited way because there has not been a significant supply interruption so far. essentially the markets have taken the view there is plenty of supply out there from other countries available. we are seeing expanding production for the united states. stocks are fairly healthy. it has been clear from the political messaging put out that an interruption of significant interruption of supplies through the straight of hormuz is not something that would be accepted. tom: there is a fancy cross. you do this on a monday and you get sophisticated on supply and

demand dynamics. it's always been assumed it is a tight relationship and not much wiggle room. i sense that ebbing away right now. the market is not as tight as it has been for the last couple of years. 2018 inat we saw in anticipation of sanctions on iran was huge increase in production from saudi arabia, iraq, russia. we saw a big buildup in stocks. in the first part of this year, we saw another big buildup in stocks. there is plenty of stock in reserve. production capacity is idle because of the opec production cuts. the market is not perceived as being tight. on fundamentals the market is expecting to get tighter through the second and third quarters. tom: within that is who controls the price. the belief still is there is a

cartel economics that controls the price. he is the cartel dad? -- dead? neil: it is not dead. if you have decided as an organization and invited other like-minded countries to join you to withdraw 1.2 million barrels a day from the market, that is a decisive action which affects the direction of the price. you have that power. we will have to wait and see when the countries meet again if they decide to continue to exercise that power. francine: as the trade war drags on what kind of impact does it have an oil demand? the report we published we cut our expectations for oil demand growth for the second month in a row. we had been fairly consistent for several months but now we have gone down to 1.2 million barrels a day. a large part of that is due to what we can see before our very

eyes and the tray growth is slowing. we saw a downgrade in gdp growth from another institution the other week, the oecd. are fairly bearish for the time being. we are seeing real oil demand numbers for the early part of 2019 confirm there is lower growth then we had first thought. francine: but if there was a trade deal to be signed at the g20 or shortly afterwards, does the market automatically rebalance itself quickly? neil: if that were to happen, that would remove one of the current huge uncertainties. it is that uncertainty, the fact that for one week we seem to be getting a positive outlook to talks in next week it is less effective. that would do a great deal to restore confidence in the

economy and that would have a more positive impact on all the growth. tom: thank you so much, neil atkinson. let me do a data check. a quieter monday but there is some new wants. -- nuance. the curve coming in a little bit. the euro with a rebound over the last few days. yield.28 sterling under 26 of those debates. stay with us worldwide. this is bloomberg. ♪

viviana: let's get the bloomberg business flash. pbs is feeling the aftershock from its chief economist use of the phrase "tiny pigs." -- chinese pigs." bloomberg learned that was prompted by the remarks. the economist apologized and the bank is put them on leave. lufthansa lowering profit forecast for this year citing

falling prices in europe. particularly from its home market, germany and austria. lufthansa has too many empty seats as a result of competition for low-cost rivals. deutsche bank may exit its u.s. equities trading business and create a bad bank to wind down legacy assets. bloomberg learned that is all part of a broader overhaul to be announced next month. the bad bank could hold up to 56 valiant dollars -- $56 billion of weight risk. that is the bloomberg business flash. tom: thank you so much. i look at deutsche bank and what we covered this morning, the follow-up to what the ft was writing. my basic take is what are they waiting for? francine: i think that is everyone's basic take away. if you look away boy to bank now says, considering it is looking revamp, at a

shareholders want to know where they are cutting and how much they are cutting. for the moment the answer is pretty slow in coming. tom: this is industrials. not a big deal. a lot to chat about. no crane to go after sir corp.. that is all fine and well but maybe this is what is the coming cancer therapy. arry.are 298 employees at they are being taken up by rmous amount ofno money with a 62% pop in the stock this morning. i'm not sure what that valuation is but that is a ginormous statistic given how small arry is in cancer care. francine: that acquisition was announced a short while ago. pfizer saying they are adding to

the company at the beginning of 2022. for have agreed to by arry $48 per share in cash. tom: guy johnson at the paris air show. we will have good conversations through the morning. -- of interviewing airbus. he has some interesting ideas and insights coming off of mr. johnson's interview with the leadership of boeing. from new york, from london, from paris, this is bloomberg. ♪ the latest innovation from xfinity

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muilenburgo dennis speaks at the air show in paris. central banks do no harm. --officials had to officials head to central. and administration officials downplay any results from president trump and president xi meeting at the g20 as market volatility picks up. david: welcome to "bloomberg daybreak." in hong kong, carrie lam pulled back. they still had a lot of people out. demonstrators say it was 2 million people. alix: it feels like maybe over the weekend, it grew to a larger issue than just the bill. now it is about carrie lam's resignation.