francine: president trump of hers military strikes against iran but pulls back at the last minute. the s&p 500 climbed to a record high. fluctuate atures the latest development throws jitters in the markets. boris johnson and jeremy hunt are the last man standing in the fight to become britain's next prime minister. francine: welcome to "bloomberg: surveillance." we are getting a little euro area data coming in at 47.84.

the forecast was 48. we are seeing a little bit of a gain, practically unchanged, but up by 0.05%. a lot of stock markets are looking at decisive action from central banks around the world, signaling more dovishness and putting to one side concerns for iran. crude oil jumping and stabilizing 57.48. we are just getting the june the manufacturing forecast coming in at 47.8, a touch below estimates. anything below 50 indicates a contraction. speak shortly with the international rescue committee executive and former foreign secretary of the u.k.. later in surveillance, two days after the fed got rid of patients language, we speak to the vice-chairman. the day, we are joined

exclusively by the former fbi director james comey. hong kong headquarters are closed again today after demonstrators gathered to show opposition. despite a public apology from executive carrie lam, protest leaders are calling for her to resign. they also want the controversial proposal to be completely withdrawn. , at the annual mansion house dinner, protesters interrupting a speech by philip hammond. emerging of the scene of the u.k. foreign office minister appeared to forcibly remove a female protester. he now faces questions over his job, overshadowing the chancellor's speech on financial regulations and brexit. japanese inflation slipping last month with expectations it will weaken further. this adds pressure on the boj. it is already facing a strengthening yen. food prices increased from a

year earlier, .1 more than the median estimate. the u.k. will generate more energy from carbon sources than from fossil fuels, the first time since the industrial revolution. according to the national grid, coal supplied just 2.5% at the end of may, a sharp drop from nearly one third a decade ago. sources such as wind, solar, hydro, and nuclear account for nearly half of the country's power. the biggest u.s. banks have a chance to get it on facebook's new cryptocurrency. is association behind libre in talks with lenders to participate in the governing body. more than twoited dozen companies to be founding members of the association, including visa and paypal. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

francine: thank youfrancine:. let's kick off with the latest on tensions in the middle east. president trump has gone back on action against iran hours after approving it. he authorized military strikes after an iranian drone was shot down by armed forces. >> iran made a big mistake. this run was in international waters that we have it all documented scientifically, not just words they made a very bad mistake. francine: let's get the latest from the region. joining us is our correspondent. what has been the latest reaction from iran? the trump administration authorized strikes and then pulled back. how will the president of iran deal with this? >> it is interesting because so

far in official media and most of the new sites, the reaction has been quite muted -- news sites, the reaction has been quite muted. be because there is a sense there could be some kind of tactical leak. the story has been shared a lot on social messaging apps and it fears that add to amidsteady quite high concerns of something happening. but there is also recognition that this does feel like an attempt to try and test iran's reaction. but so far, we have had no direct response at all. francine: how are ordinary iranians feeling? >> they feel as though they are

of sanctions,ycle economic pressure and geopolitical pressure, tension, problems with their neighbors. , i thinkwhat i see they feel as though they can't get out of this trap, the cycle that continues. i think they are being cautious overall. they have experienced the longest land war of the 20th century. to an extent, they are used to conflict, to being a store with countries that are at war with the united states. war with countries that are at war with the nine states. but they are a lot more worried than they would have been a few months ago. francine: thank you. the s&p 500 has closed at an all-time high despite tensions in the middle east. investors have embraced a shift back to stimulus mode.

northern trust is one such money itsger putting more than $1.2 trillion stockpile into equities on the expectation that lower interest rate insure the economy avoids a recession and keeps profit margins high. however, the stock market record has drawn its share of skeptics with some see this as the beginning of the end. joining us is the head of global aggregate fixed income at the income.- fixed asset the market is ignoring this and focusing on central-bank action. does that make you aware he? -- you wary? the fed said they will act appropriately to sustain expansion paired --. would cutlied they aggressively in the short-term to achieve the dark -- directive. the next thing coming up is the

,20, trade, and what that means whether the outlook going forward is getting better or worse than the trend data we are looking at. market -- parts of the market, such as high-yield which perhaps looks more expensive, and there are other parts, investment-grade credit, where as long as you can sustain a low growth and avoid recession i think the central bank pricing power and its investor impact will dominate. francine: if something ugly turns in the middle east am a deal need to protect yourself -- middle east, do you need to protect yourself? ugly such a strikes. obviously, it impacts sentiment, it impacts the stock market and the fed is quite clear they would react to those because it increases the probability of u.s. growth.

so i think you by duration and the place where you by duration is the u.s.. francine: the stimulus is already being priced in and we could see a downturn. myles: they have to be more aggressive. francine: where is the limit? myles: look at europe. people are calling for rate cuts in september. we are talking 10 basis points. envelope andg the .he ecb is seeing analysts francine: is that priced in? the current economy does not necessarily warned that. -- warrant that. myles: long bond yields are near enough to the lows they were in previous cycles. to my mind, if the fed is really

going to act appropriately to sustain the expansion, and if, as they imply, they will be preempted in this, and that is in key thing -- preemptive this, and that is the key thing, they will have to do more than is just priced in. it is more than just calibrating the economic response. it is more about them sending the signal that they are going to do more. that basically sends the cost of capital down. if you were richard clarinex, what kind of message would you get to the markets? -- give to the markets? would you be worried that the market is almost forcing you to do something? think the market has moved very quickly but the fed is a difficult position. if they disappoint the markets, they run the risk of repeating what they saw in december.

financial conditions tighten and you end up with the worst economic outcome. they have got optionality and can't wait for the outcome of the g20. they have got time to wait for the data. want tohe moment, they keep optionality and don't want to create a bigger problem. which is a correction in risk assets just when you might find economic data turning down. clarida, i would try to endorse market pricing. francine: thanks very much. -- amundi quilvest stays with us. up next, we get a view on the situation with iran. and we are also talking about richard clarida. richard clarida at 11:30 a.m. london time. this is bloomberg.

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francine: this is "bloomberg: surveillance." let's get straight to your business flash in new york city. on its debut,ng becoming the second most valuable tech company to reach u.s. market. only topped by uber. shares closed 50% higher than the price set, giving them a workplace collaboration software that -- giving the workplace collaboration software a high-value. bloomberg lp is an investor in slack. foxconn announced a division chief will take the helm. the largest assembler of iphones named the replacement of a , buildinge terry guo

the company into a global electronics powerhouse. he is stepping down to focus on taiwan's 2020 presidential election. slumping after the company warns about the larger-than-expected impacts of awei,- quality -- hu seeing full-year revenue forecasts lower. francine: let's bring in the latest on the race for the uk's top job. conservative lawmakers have narrowed the field to become britain's prime minister. jeremy hunt will go head-to-head with boris johnson. meanwhile, the chancellor philip hammond uses annual speech to urge whoever wins to avoid a no-deal brexit. >> if the new prime minister

cannot end the deadlock in parliament, then he will have to explore other democratic mechanisms to break the events. if you fails, his job be on the line, and so to will be the jobs and prosperity of millions of .ur fellow citizens francine: so what does this mean for u.k. assets? still with me is our guest myles. markets, what are you waiting for to give an impetus on sterling? myles: we are waiting for mr. boris johnson as prime minister and for him to indicate what he plans to do in terms of brexit. francine: is he a done deal? myles: yes. elected, itnt work would be seen as a more constructive or hawkish brexiteer prime minister. francine: what does boris

johnson do? myles: i think what he does is he becomes a bit more conciliatory and tries to find compromises. i think you could find sterling getting a relief rally. it is unlikely in my mind that it is the lack of leadership that is the cause of the failure of parliament. it is about political gridlock. so whatever deal he comes back with, i think you will have the same problem as theresa may. probably, he knows that and they are thinking about elections. that is what philip hammond was alluding to. some kind of democratic vote to break the deadlock. francine: referendum or general election? myles: my bet would be a general election. it would be a bigger climbdown for someone like boris johnson to put this vote back to people then it would be to say this parliament is holding you back.

we need the people to give me a mandate to lead the country. francine: thanks so much. myles from amundi stays with us. speak to richard clarida, vice chair of the federal reserve. don't miss that interview. this is bloomberg. ♪

francine: "bloomberg: surveillance." look at that! london! finally, the sun is out. we have had so much rain, we would love to see a summer, even if it looks like that. my guest this morning don't with rising tensions in the middle east frequently during his time as foreign secretary. then he stood to become leader forhe labour party he wedding to go to america. as president and chief executive of the international rescue committee. thank you for joining us. a lot going on when it comes to tensions in the region. we understand president trump authorized some strikes and pulled back. how difficult is the middle east region at the moment? >> it is obviously really difficult.

you have got this tinderbox because there is active conflict in syria and yemen. and then there is a great power intervention as well. and the seesaw that seems to have happened last night can only add to the sense that there are games to be played. one has to run for the iranian regime is quite split within itself. different factions are looking for signs of what they perceived to be weakness. and that is a temp tension -- temptation that could lead us to the brink. francine: how should the u.k. deal with iran? david: in contrast to the u.s., we have diplomatic representation in terror and -- in tehran. despite the long history of concerns, if you like, not to say paranoia about what britain's role might have been

in the 1953 overthrow of the government. history matters a lot and iran, they think in centuries. putsiplomatic recitation us in a position to be a coolant in the region. to actually be a player role that tries to temper some of the efforts. we are consumed with brexit at the moment, but that is a different topic. francine: president trump warned and of talk was imminent, this was a flash reuters just put out. if you were foreign secretary and how would you deal with it? it seems it is much more difficult for people to come together and talk. is that fair? david: it is easier to talk now, they are all texting each other. francine: are they? david: that is the question. president trump is clearly at odds with some people around him. the people who do the talking around him are openly taking much more hawkish positions. trump, he to present

is saying we need to talk. he does not have any clarity about who he needs to talk to. obviously, the supreme leader is in a different position than the president. the fact that trump wants to talk gives a clue. written should be focusing on the second half of the sentence. he says strikes are imminent, he also says talks are necessary. francine: but because of brexit, the distraction, but also because it is leaving the eu, does the u.k. lose a lot of firepower? does it lose omnipotence it once had? david: omnipotence goes way too far. u.k. is a permanent member of the security council, we should not be under illusions of what a middle sized country can do. played fact that we have this active role in brokering the nuclear deal and continuing

talks about how to sustain it, it does not give us a leverage, but a place at the table. francine: does the u.k. lose clout? david: definitely. no question, when you withdraw from the leading, global, regional power, i have called it an act of political disarmament. the u.k. is weakening itself. the fact that it is consumed by brexit further cash trade's it's capacity. francine: plenty more with our guest, david miliband come international reckons you -- international rescue me president. -- rescue president. up next, there are protests in the civic center of hong kong calling for carrie lam to step down. this is bloomberg. ♪

francine: to the brink, president trump approves military strikes for iran for

shooting down the drown but pulls back at the last moment. global stocks truck chew wait as the latest iran developments serve jitters in the market. jeremy hunt is the last man standing in the fight to become britain's next prime minister. now some of our other top stories in hong kong with the controversial extradition bill has been suspended and today thousands of protesters are gathered outside police headquarters. pressure remains when carry stepped down after two weeks of unrest. peter angle who has been covering the protest from the beginning is there for us. they want the resignation of carry lamb. well, they get it. >> unlikely at this point because carrie is steadfast she's going to continue and her current term until 2022. she's even asked the people of

hong kong another chance to earn their trust and do the job they are selected for. those gathered in front of the police head quaffers not only want carrie lam to resign but want more police accountability and want the withdrawal, not just the suspension of this controversial extradition bill but want the complete withdrawal. they've been chanting a number of recent things. most recently they've been chanting about corrupt police and then shame on you. a lot of the ire focusing on the police today because they're not getting the kind of accountability they say is deserved after the june 12 protest that turned a bit violent. right now it seems as though the protesters we've spoken to they're focused on the friday afternoon on government offices, particularly the police headquarters but also at the immigration headquarters, -m revenue and maybe they

are waiting for the temperature to drop a bit and we also could see more people coming out. right now the estimate is several thousand. definitely the students and protesters who are here today are not happen with the answers they've gotten from the government so far. francine: thanks so much. stephen ingle in hong kong. sunday will be three years britain went to the polls on the referendum of membership of the european union. the shock accounts it has brought paralysis to westminister. where do we he go from here? david miliband is here and also is miles bradshaw. david, you're giving a lecture on this, boris johnson, prime minister, what does it mean for the shame and form brexit takes

place. >> boris johnson continues to talk about never, never land, a brexit that tries to put on the table things that have been rejected. we saw overnight mark carney rejecting the central plank of boris johnson's claim and we can use the gap 24 article and it's been made clear that's only for country with a trade agreement. so i think what strikes me about the conservative leadership campaign is it's not getting to grips with the reasons we have. you call it paralysis and i call it frenetic prarls. they're all running around in circles and seems to me we depend on jeremy hunt and bore miss johnson laysing and the real tradeoffs that exist and anyone that pretends we can go through the brexit program without tradeoffs is kidding you. there are only bad options on the table now. the only bad news is brexit is now so different than that that was offered in 2016 it does need to go back to the people

in the name of legitimacy as well as in the name of economic and social order. you know as well as i have britain's leadership has been tarnished and we know investment is on hold across many sectors of the economy and we know we're at the beginning of the process and what i'm trying to emphasis on election day. the difficult bid is negotiating the future with europe and right now we're dealing with our own debts as well as what to do at the irish border. francine: it's impossible to know what the u.k. wants. does the market prefer a second referendum or the markets? david: a second referendum and puts the prospect of remaining in the e.u. back on the table and would be brilliant, whereas the aelection, you could have the labor party doing very well which writes in other different economic issues for the market to deal with. if i may ask david a question

quick, is it politically feasible for a member of the tori party to be honest at the alec trit about the tradeoffs of brexit and to me doesn't seem to be feasible. which electorate? is it feasible for the candidate to be happy with the 160 members who will vote on the future or maybe not? is it essential a new prime minister fesses up the electorate more widely. i think it is essential. ght when teresa may said bad deal is really a bad deal. the unicorns have dominated the past three years and we're nowhere nearer getting that clarity, as well as labor and the tourist side. labor has the own version of unicorns they're chasing. francine: jeremy corbyn's position was not great? david: some would struggle to

define what exactly the position is. i do think we've seen a gapping of confidence in the democratic system here in it continue. david: i spent time opposing a referendum and now in the parliament to decide these things. you can't undo a referendum unless you have another one which can seem paradox cal which might be necessary and all the while the markets and electorates notice it, too. francine: when you coming back to the u.k.? david: i'm here now. i'm running a global humanitarian charity with 13,000 aide workers dealing ith multiplying. and several people we placed with war and prosecution and many are looking to me to focus on the day job and that's what i'm doing. francine: headed to an election

or second referendum. david: i'm skeptical because it's not in the interest of the main parties at the moment. the toris had the warnings from the brexit party. francine: if there was a second referendum, unclear this way it would go even with a had a deal brexit, what would happen to pound. david: if it's a resounding no, it reinforces the no deal brexit as the most likely solution to break the impasse. it can't be the same question but has to be presenting, this is the breast deal and has to be a research definition of what it means. myles: no deal brexit is lunacy. there's no other description for a major country itch meshed in the global economy to pull out of the central linkage and gearbox to the local economy.

the idea we're going to cut it off is lutter lunacy. a lot of people are behind it, right? myles: the fact it's been detonks find shouldn't blind us who know the fact. be fair to michael gove, he spent two years as secretary of state of agriculture beginning to understand what exactly no eal means, tariffs up to 40% for british farmers and president trump says i'll give you a deal straightaway. francine: he has a time line problem? >> not that he doesn't believe inette gooding a better deal for congress. anyone who knows you can't do it straightaway because congress hasn't passed a trade deal in several ages. francine: who is the next labor leader? stephen david: i'm one of the few members of the body who voted

labor at the european elections. so i have to say because the two candidates who are running in the constituency didn't agree with it and why i supported them. there isn't a jake eas there. if there's a general election would form alliance with someone else? stephen: it's very messy. david: anyone who knows what they're doing in politics don't know what they're talking about. francine: politics is messy. when do assets latch on to that? david: risk assets, property, generally trade cheap and two other global markets have the brexit rich premium attached to them. the bond market anltspates much more in terms of hikes the bank of ekland anticipates. we're not pricing in the tail of risk for a no deal brexit

but continuing in the narls. francine: thank you, president and chief executive and former executive. and up next as controversy mars the annual mansion house we speak to the lord mayor of the spi of london. coming up next, this is bloomberg.

♪ francine: this is bloomberg surveillance. i'm francine laqua in london.

let's go to new york city. >> hi, francine. the biggest banks have a chance to get in on the crypto currency. the leader in coin is in talks with lenders to participate in the governing body but not clear which banks were involved in the talks. facebook has concluded several companies to be a part of it including visa. nissan has reached a cease-fire in the spat over governance. the car company welcoming them. the accord could help mend relations which hit new depths recently. paypal's chief operating officer is leaving the end of the year. pills ready acquire the his startup brainfree and owned multiple patients at venmo which became paypal's fastest

growing product and will offensive board signed to several executives and doesn't plan to remain a pisht. that's the newscast. francine? francine: it was meant to be a speech focusing on brexit but last night's lecture mentioned the house in the city of london was overshadowed by protest and shows mark field, a u.k. foreign office minister appearing to forcibly remove a female protester from the dinner. the issue will prove a test for the leadership contender during hunt who leads off the department. and the lord mayor of the city hosted last night's dinner and phillip bradshaw from amundi. welcome to surveillance. the footage is uncomfortable to watch. should he resign? >> that's not for me to say and mark to protest.

in one sense it was uncomfortable and achieved what they wanted to do and asked them to leave because it was my personal house and i was having a dinner party. francine: kindly asked is different to the footage. were people talking about the incident and the fact it seems like it was pretty heavy-handed the way the protestor was removed. >> it is a big room and i didn't see the footage until this morning and the concentration was on the larger group of people much less in my eye line. so in practice, that's for him to deal with. i thought my staff handled it very well. sadly we had one of my staff injured so at the end of the day i have to look at concern for them. boich when you talk about brexit and crypto currencies, yesterday was an homage to the chance loir, right? it's amazing it is ending this way and what shape or form will brexit take place.

>> what he outlined is realistically as we in the city have always said we want a deal and if that's what we voted for we want a deal. what he went on to outline controversy is the financial services needs to tackle these larger items, whether it's the government committing to climate change or the angles we're taking around green finance. the city doesn't like the uncertainty and we want a deal and clarity to where we're going because it's not helpful. francine: the city of london is the financial heart of london and you can argue of europe, it doesn't seem to be the city of lost government. is that fair? in terms of brexit negotiations. peter: it's been extremely frustrating and there's a huge amount of innovation taking place, whether it's the growth of fintek and the emerging growth industries. francine: will it be the priority of the government to

safeguard and finance, the finance allege services no matter what happens with the brexit. one, we need to involve the current situation with brexit. uncertainty is not helpful. secondly we need a vision of where we're going in terms of the digital strategy. francine: finance? peter: it's a physical part of it. if we look what we're doing with sin tech and fiber, we're leding the bay in green bombs. the u.k. is ranked number one in tackling if climate change and practicing nationalic solution and need to focus energy and resources on that and the government needs to put the policies in place but the city and others need to get behind that and deliver solutions. >> does the city of london survive brexit? him >> the city of london when i

started is not as prominent as centers are today and you're seeing fragmentation and sales people and what have you but i think it probably dm remain standing. for any u.k. government, the city remains an important source of tax revenues and economic activity. it may be less important than brexit but won't be written off by anyone. francine: does the city of london have a favorite candidate to become prime minister because it changes the way they look at financial services? myles: we only have a choice of two so whichever one of them is going to get us a deal or get resolution, then take us forward. so that's going to be up to 160,000 people to vote and i'm not one of them. francine: how many questions you get from banks about brexit or have a lot of them, because of the deadline that passed in the spring, they've already taken their solution? peter: the banks in the city lastly have prepositioned

themselves. transactions that we're focusing on now whether in my trip to canada in the u.s. next week and back to asia the week after that, area all interests, if the court doesn't stop in vegas, there's a lot of distraction and physical activity going on out there that we have opportunity fulfilled it. that's where the interest is. francine: thank you very much. myles bradshaw stays with us. up next, back to square one. the candidates are abandoned for the e.u.'s top jobs. this is bloomberg. ♪

francine: economic finance and politics, this is bloomberg surveillance. i'm francine lacqua in london. let's look what is moving the markets. >> we've gotten the i.p.o. debut of the u.k.'s second largest offering, train line, the online ticketing company. we're seeing prices surge in its debut, up more than 19%. this valuation now puts the company at more than $2 billion. big gains there.

it was up as much as 3% earlier and erasing those gains and headed for losses of more than 3%. it's seen some outflows in the h-2-0 fund the outpost for june 20th and is sending investors away from the shares. finally, capita doing things for companies, including human resources and hardware and barclays having a note saying the shares are very undervalued. the way the stocks are priced assumes there will be a massive failure from the company but there's upside as much as 50% given how strong the management looks for a turn around, francine. francine: european leaders have abandoned the formal candidates to be the formal e.u. president and will start from scratch before a self-imposed deadline. none of the three frontrunners would see parliament and they

look to find a solution. we have myles bradshaw. i know it's kind of important at the margin but it has implications for the e.c.u. as well because there are a lot of jobs up for grabs in the next six months, what does it mean for markets? even if you have the german heading we'll change the way thinings are seeing. myles: to state the obvious is the market drop they're focused on and if the german get the european commission or the e.u. presidency, probably not the e.c.b. if a german gets the e.c.b., what's the market reaction? it's immediately there will be a low idea of inflation and longer low term deals and makes it less likely they'll gather inprogramation. in practice i don't think you'll suddenly go for a switch at the e.c.b. and is a

institutionalized organization, the executive board and not just the president but the executive board is intent on raising the kids. the chairman of the e.c.b. may do things more creative by the nature of being german and communicating that to the german people bhu there would be the second or third corner down the road and the first corner will be the market testing they do believe inflation is symmetrical around the 2% target. francine: do central banks around the world have the power to change inflation. myles: the first part of the question is yes. the question has to work alongside other policies. and what's more important to market is what groggy said, the e.c.b. is not resigning itself to low inflation and power a would have used if they'd not endorsed that phrase and we are not resigning ourselves to low

inflation. what dragi mentioned at the end of the packages, physical stimulus. it's not on its own and has to work with other policy cools but the central banks can expect improv indications. francine: myles bradshaw. bloomberg surveillance continues in the next hour. tom keene joins me from new rk and we'll talk to richard clarinex and don't miss that interview on "bloomberg surveillance." and this is bloomberg.

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every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ francine: to the brink, president trump approves military strikes against iran for downing a drone but pulled

back at the last moment. he s&p 500 hit strikes and the latest iran development serves jitters in the market. then there were two. boris johnson and jeremy hunt are the last men standing to become britain's next prime minister. good morning, everyone. francine lacqua in asia. tom keene with the interview of the day. what will you ask dr. clarinex? zillion ve done it a times but rogoff would say this time is different. utes the vice chairman of the federal reserve system after drag i had and that sensational press conference. michael mckey brought the press conference to absolutely silence about what will rate cuts accomplish p. that will be one of the questions for the vice chairman.

francine: you wonder if they still have a target on inflation or can move inflation. let's get straight to bloomberg with the first word news. >> president donald trump pulled back from a strike with iran hours after approving them. him reuters warned tiffany.com and this in retaliation of the drowning of the zone including delta and qantas are diverting planes away from iran and bars american operators from the region. today hong kong headquarters are closed again. you're taking a live look at pictures. these are the crowds baring on the seem. ese are handling the extradition bill and protest leaders are still calling for her to resign and want the

profsal proposal pants to be completely done. european leaders will try to be the next president and will start from scratch with less than two weeks before a self-imposed deadline and concluded none of the three front runners would be able to move the department until june 30 to find a solution. sorene is the second most valuable company to reach u.s. markets. the shares are 50% higher than the listing and gives the work person a value of around $21 billion. bloomberg beta, the arm 6 loomberg r.p. is a investor. 4 powered by more than 26700 journalists and natural lists -- analysts in many countries. tom? tom: a reset to data worldwide.

let's look at a calmer day today after the gyrations we've seen the last three days. our journey off the extraordinary list and chairman toweling and the europeo setting stronger. eunice: is exactlied by so much more than central bank discussions with a further elevations. that's american oil at 57.25. on to the next we can, frankly. s $ 14.78 and the dow with a close that was troorneart. a two year judgment and two-year germany. francine: european stocks are drifting and the end of the billish week for equity and was spurd on by this desurvivity thanks. iran de led is settling

being the focus of all conversation. tom: particularly with a city towards london and can do that with the senior advisor of the governor of the bank of england and for years looked at a student of our banking km and he paid particular attention to the state of london and i might say a leaver remaining in london and won't ask his opinion on brexit. bruce potter with us. of course adjusting to the market. looks get a market adjustment. you've got tree log ins from your tournament and 12 screens in front of you. what matters with the markets? it feels like they're exhausted. he gerl bank triggered and extraordinary deal.

the pitcher is taking shock. we're in a holding palt earn on pours the rise and the central bank, dovishness and potential for stimulus. what we also have in the background is the iranian news and potential stress there that there are other risks out there and we had europe seen b.m. i's. still laws and will policies are not yet a given and are not automatically given. after the p.m.i.'s we had avenue reaction to the hoorkt. bruce brownstein is a gonor of omaha turney b. i know i can't can you did this most pucked if made elsa or made gains given all these gyrations or will it

be a time we'll see bosses looked out into the future? >> i don't think i should be here as a equity strategist. but i think there is a global slowdown and think investors i'm engaging with, i'm trying to think what is the rewiring of the trade system potentially mean for global free-throw and the economy and what you should debate regularry and not just the u.s.-europe or u.s.-china ut is one ofed supply team and much of the work will be done over the summer. francine: you published a huge review of the financial system which we'll definitely in quicker. ex-ter and at yunis tell us in a low ranking environment, it's tough for

banks to make money. a lot of the work we've been thinking about is how can we have a level playing field and make it more afashte. we've been looking at plat forms to be much cheaper, 30%, 40% cheaper and we also thought with levinning the playing field and new funds can expect to the banks layer system. they're for lost financials to make money and will really have to quite into initialal reporter that you would recommend the b.o.e. didn't take on board? huw: i'm excited for five big sends that came to the report. it's all of them. francine: what do you make overall, when you look at combubbles and equities and something like that, is there something the market is mispricing?

>> one of the things we're hitting on including the last foush weeks is the type of defense if they wand protectly and brought socks in this devilishness and brings the numberen down and good for bond proxies. at the moment the divergence nd disparity between defensive socks and more sickical and value knots are at an sthre and by some measures the highest it's ever been. so really when i look at the market now, i feel like there is -- there's going to be a turninging point. there is talk maybe the yield collapse has gone a bit far and that people have been pricing too much devilishness. it remains to be seen. we've spread it and eept going

down. tom: thanks for the gyrations the next three days and just joining us, aings more calmer. the senior advisor to governor carney p. ♪ ♪

♪ francine: this is bloomberg surveillance. tom and francine from london and washington. tom of course with the interview of the day and will be talking to the vice president president of the fed. it's richard clarinex. now to the latest on the tensions in the middle east. president trump has gone back on negotiations with iran after approving it. the initial issued mitch strikes after a american drone was shot down by iranian armed forces. joining us now is our iran correspondent. how would the president be taking this, the fact there were strikes and we under they were almost ready to go and he called them off at the last minute? >> it will be hard to predict how impeian officials respond but so far this kind of pattern of truck going back and taking a few feps back in the let sick which obviously is much more

serious than stepping back on the rhetoric. i think iranians or iranian officials might see this shows the u.s. administration is polluted in its policy and want thrant to bait. someone scant be negotiated with because we can't trust what he says. my sense is they might couch their response within those stories of terms but as of yet we haven't had a direct official response from iran over any of these requests that have come out since last night and earlier or are they polden about speculation and are people prepared for an escalation? golnar: i don't get a sense there is tehran sbeared there. at dee it keeps innovating

and how self-lens p. the relationship seems to go into the peaks and troughs which really damages their lives economically. so i think they're being cautious. i think they avoid the experience, a long hall, the in the 1980's and know what it's like to live under rationing and evacuate their children to provinces outside of the countryside but having have to ask that term as a long time. profble that's rather not be in this position at all an overwell mingly they feel they've been in this competition of turt policy and

he pib fall out. tom: "the new york times" article talks about potential attacks against military bases and missile defense, etc. who is assisting iran in the deployment of their defense? russian ume it's a assistant or is it more complex than that? >> very interesting question and one very difficult to answer because year not often given information and that type of information is obtained pofferly at all. we know the russians have assisted the americans in gaining the s-300 missile system and there are reports earlier this month that iranian officials have denied that iran wanted russia to sell the s-400 and we know of course over syria, iran and russia have cooperated extremely closely over their military actions in

syria and their interventions. china in the past had also been a source of military equipment for iran but on the ground, though,. but again we don't know how that might change and how those relationships might change and progressively develop as things escalate, that is it they scalate. and we have a situation with turkey with sanctions that have been threatened if they purchase from russia. ndered juan -- andered juan -- and erdogan has been critical of the united states. tom: thank you golnar motevalli. coming up, monetary policy on the markets. the vice president chairman of the fed. this is bloomberg. ♪

>> if the new prime minister cannot end the deadlock in parliament then he will have to explore other democratic mechanisms to break the impasse. because if he fails, his job will be on the line and so, too, will be the jobs and prosperity of millions of our fellow citizens. >> the bank of england approaches with an open mind but not an open door.

unlike social media for which standards and regulations are only now been debated and legislated well after they've been adopted by billions of users, the terms of engagement for innovation like libra must be adopted well in advance of any launch. francine: first, the u.k. phillip hammond and mark carney speaking at the annual mansion house dinner last night. the bank of england releasing a report entitled the future of finance takes a look how the economy is changing and how finance can serve these changes and what it can actually mean for the central bank. the central advisor to governor carney who put this report together is with us for the hour. when you look at the recommendations you put in there and what the b.o.e. has said, are you worried the next governor will unwind some of it?

mark: that's a great question and certainly the way i tried to operate the last nine months takes us on a journey. the average supervisor gets two copies of complete works of shakespeare for a week. the rule book for the u.k. is longer than the old testament. without intelligence it's unintelligible. steve schwartzman was on the other day championing it and the bank will be coming forward. one of the big announcements last night was mark may was seen having a stress test for financial systems and that is something that won't happen for another two years but i think the catalyst of the importance of the issue and then the bank itself is going to be the first central bank in the world exposing its own carbon footprint and is a good place to start. francine: i don't know who you would give me a name of who you want want to see the next governor of the bank of england but what attributes would you need to see what you put in place and what governor carney

has supported. huw: apart from yourself, it's a tough job because you're being in charge of monetary stability, monetary policy, financial stability and regulation and you're probably the chief ambassador for the financial system globally. so to have all those attributes in one individual is extremely difficult. one thing i always felt passionate about when we used to talk in the private sector was the importance of understanding the financial system because when rates are this low you need a healthy banking system to transmit credit to the economy so having a keen appreciation for what technology is doing and how is finance changing, could be libra or the chinese, those regulations are important. francine: how big could libra be and could it be a threat? huw: the honest answer is you probably have more questions than answers at this point on the stage. like mark said nicely, we want to be open minded. is it cheaper or better or more

secure or well regulated. the admittance market is huge and one thing that hasn't been in the press is that on finance will and wechat have block chain to do remissions across the border and were doing block chain. and hypothetically which we don't yet know and if libra were to be one of the three channels globally and could take out costs from a complex chain and that is interesting. 's tom: i'm going to interview clarida today. and in the boardroom is the famed map of america and the way the central bank of america disperses across america. mark carney had real leadership in getting outside of london. how does the future of the bank of england affect the rest of the united kingdom ex-london? huw: it's very important. i think in doing the work i've

been hosting roundtables in belfast and leeds and many places you can watch football matches in the future. stwirds of financial services jobs are outside of london and there's a hub in belfast and a great a.i. hub is edinborough. it's important for the entire country and technology allows jobs to be more distributed. it's clear it's imported for the whole country. good i give you one example, though, it's payment. in the last decade we've got transactions being cashed to 1-3 and the difference between london or the major cities or regions for mobile and broadband is huge and one recommendation has been to have a much more reasonable strategy among payments and something the bank can be influential in the whole country having an advantage

from financial services. tom: my colleague and i look forward to attending a game with you at the new spurs stadium to do research for the bank ofening landed and hoich we move forward. thank you so much. the report is great and i point out to you on global wall street the executive summary that's been put together and really addresses the challenges forward. right now an important issue. the bloomberg summit in asia is the leadership when we speak with has linda amin. this is bloomberg. >> we'll have to examine the case.

♪ everyone.morning, ," fromrg "surveillance our studios in washington, d.c., and in london, francine lacqua with huw von steenis. right now, i want to go to bill lee of the milken institute. mr.ave a great quote from clarida. as i noted, the u.s. economy is in a good place, and the question and answer with dean henry of nyu, there is a lot to keep track of on my screen. if we saw a downside risk to the outlook, then that would be a factor that could call for a more accommodative policy.

were not handcuffed to any one particular mathematical formula. is there any mathematical's we are in? will the only mathematics be the bifurcation of the u.s. economy where the manufacturing and trade sectors are doing badly but the service sector is doing quite well. which part of the u.s. economy are you looking at? tom: my president for rida.chairman clair will seep in and pull down the services sector economy, can that happen? bill: we are great friends. tom: you are on speaking terms of our clays? bill: -- at barclays? bill: he got me into wall street. he has to figure out where does

the manufacturing sector council much and how is it that interest rates will help the economy celebrate when the cost of capital is not the issue. well monetary policy backstop the u.s. economy or do we need something else? , has to make people want to invest. it is not the capital that is keeping them from investing, but making profit. tom: i have to be careful how to phrase this delicate question. what will global finance listen for today from vice-chairman clarida? huw: tough to give you a comment, but investors want to uncertaintyhe around global trade, how that is weighing on their thinking, how much the global economy will slow down. size and pace.

francine: how much time do you spend worrying about the fact that it seems markets are boxing in central banks? if you look at the interest rates probabilities, 80% priced in they will do something and the economy does not quite warrant it. argue theould also data insist upon some of the rate increases in the first place. we are in a low rate environment, over $12 trillion of negative yielding bonds. the tools to the downside are not great, so that is probably why the market is assuming an asymmetry. francine: what is your take on this? do we need to make sure markets analyze the data instead of assuming this dovish stance is here to stay? bill: the manufacturing and trade sectors are a small share

of the u.s. but a huge share in europe. the fear is that low confidence will translate -- the next pin to go in the united states is labor. will the labor market start to we can? -- weaken? i will bring up with the chairman his substantial academic work on inflation. he is one of the gifted people on thinking about inflation. all of the research is worry about inflation. none of the research is about worry of disinflation. are we flying blind right now? models and the ones i have worked with are being overturned by technology. we have a lack of pricing power because technology has changed things to the point where it is

so competitive, the firms that are doing well have massive increase in returns to scale. are you happy with the ambiguity of the powell press conference? they are in a difficult place. data dependent, but also being uncertainty dependent. bill: the most uncertainty is where is inflation going? they do not know. tom: this is a critical point. you do not blame the president. there is a mercantilistic president, but that is more than that. bill: this has befuddled bernanke, yellen, and now paddle -- powell. we have to get a handle on how the new phillips curve looks. the variables on the right side clearly are not unemployment. francine: how does this get impacted in your world? we were talking about libra and

whether it is a cryptocurrency or digital wallet. how does this shift the world? huw: in terms of the monetary -- policy stance, technology is tearing up walls between businesses. these are a tremendous shift and it is deflationary. from the point of view of the bank, there is not many positives for customers. payments that are cheaper, faster, better are in the interest of smaller businesses, but system stability is important, thinking through the scenarios of how disruptive is it. francine: are you worried that regulators are too late or do not understand what they are looking at? huw: i strongly recommended we should look at scenarios on how

disruptive things are. a level playing field is so important. theirks are forced give data out, what will they get in return? third is better coordination, in europe and the u.s. mean financiales firms are playing twister and we need a better coordinated market to respond better to technology. francine: huw von steenis is the advisor to governor carney and bill lee stays with us. breaking news out of iran. drone.v showing the president trump had ordered strikes on iran and then at the last minute, calling them off. bring us up-to-date with some of the headlines. agencynian students news basically saying iran gave u.s.

drones numerous warnings before the strike. tom: i am fascinated by that. drone, and inned was shocked at the cost. i wonder what numerous warnings means and what the response will be from pentagon officials today. fromll have much more bloomberg and with golmar in iran. at 6:30 this morning, you can begin your day with the vice chairman of the fed. a conversation with columbia's richard clarida. viviana: we begin with trauma at the annual mansion house dinner, -- drama at the annual mansion house dinner, protesters interrupting the speech of oflip hammond, and footage

him forcibly removing a protester. thepean leaders abandoning formal candidates to be the next e.u. commission president. they will start from scratch with less than two weeks -- two weeks before a self-imposed deadline. none of the front runners could win the approvable of parliament. u.s. banks have a chance to get in on facebook's cryptocurrency. landers to talk with participate -- lenders to participate with their government bodies, but it is not clear which organizations. 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: happening now, haslinda amin and conversation

with the malaysian prime minister at the bloomberg asian business summit in bangkok. >> consolidation? >> that is coming along fine. we are not in desperate stakes. you should mention, when we are left with a trillion dollar debt --he country will be financially, but we are able to carry on. workers, andment we are able to do the normal things that governments do. you came toen power, you changed the leadership of the government linked companies. can we expect further changes, or is this what the investment community can expect going forward? that took many by surprise.

>> many government companies, most of them were run by politicians who have no ideas about business. they lost a lot of money. we cannot keep them. we get rid of them and appoint new professionals to take over.

♪ this is bloomberg "surveillance," tom and francine from london and d.c. protesters in hong kong renewed demonstrations, gathering outside headquarters despite the controversial extradition bill having been suspended. demonstrators are calling on carrie lam to step down. -- joining us from

hong kong is stephen engle. what are the chances that carrie lam resigns? this point.ikely at thatas given no indication she has the intention of resigning. they want carrie lam to resign. she has apologized, but they want her to withdraw and retract this extradition bill. i have only suspended it, and they are worried that between now and the end of the legislative session, it is plenty of time to resume debate on this extradition bill. that is a whole year. they are sticking to the streets. one protester told us "the point is to paralyze the government today because they do not police." in front of the headquarters, several thousand people have gathered. i have gone to the immigration

department as well as the tax office and over to the high court. various government places protesters are concentrating their angst, but so far, fairly peaceful and police have stayed at day. -- at bay. francine: how would china and beijing be looking at this? stephen: china obviously is looking at this with great interest because they do not want it to extend for a long period of time like the occupied crippled transport and kept the world's attention for so long. china would like to see this blow over, but it is a tricky situation for the chief executive, how to please beijing and pacify the hong kong residents.

it is a stalemate for sure. francine: are we expecting more protests? how long can they go on for? stephen: we asked the same question and everyone says, until our demands are met. the demands are carrie lam step down, withdraw the bill, and have accountability from the police for the june 12 violence they perceive was disproportionate, too heavy-handed by the police. they also want the detained protesters to be released, and so far, those demands have not been met. one thing i have noticed, i have asked many of the protesters where are you going next, and they say, we are just staying here. they are leaderless so they are going to stay put. francine: stephen engle on the ground in hong kong.

bill lee of the milken institute is with us and he previously served as deputy division chief at the imf. he was the hong kong representative in the early 2000s. when you look at these images, stephen engle explaining they will continue protesting until something happens, how much of a risk is this for beijing? bill: it is a serious risk. ands in hong kong last week i saw how the issue of hong kong independence has catalyzed the population in a way i have never seen before. the reply from the protesters is, we will stay as long as it takes. one other interesting aspect is the entire set of protesters i saw in hong kong are all young. that implies it is the youth movement carrying most of the force because they will have to live with this transition period

between now and when beijing takes over hong kong. francine: what are the chances of carrie lam stepping down? she is extremely weak at the moment. bill: she is between a rock and a hard place, and like every other chief executive over the last several decades, she may have to step down because she failed to accomplish her goal of tying together hong kong with the needs you talked about, independence as well as respect in beijing. francine: bill lee stays with us. 15.3 billion dollars deal in the software space, we will talk space -- salesforce's acquisition of tableau. this is bloomberg. ♪

♪ this is bloomberg the 15.3 billion

dollar acquisition of tableau by salesforce marks the era of leading sales software. add more business capabilities for its customers. joining us is the tableau president and chief executive, adam selipsky. are there any product overlaps? adam: there are tons of project symmetries -- product symmetries. francine: but no current ones? adam: we will go through and figure out how to get it all in customers' hands. francine: anything that makes you worried because you are competing in a space? adam: i think it will be highly complementary. salesforce has analytics with ai and machine learning. tableau is the leading analytics platform in the world we serve every use case. cannot wait to see what we can

put together and integrate. francine: what are the cost synergies? adam: we are more focused on growth. the impetus is to get better products and be able to market together and sell together and be part of the broader salesforce 360 customer view. francine: how much money will you save? adam: we are focused on the growth opportunities. francine: there are no cost synergies? adam: hopefully there will be over time. you always want a business to get more efficient and that has been a focus of mine irrespective of the combination. are thertunities customers are telling us they are interested in talking to salesforce and tableau. francine: what about sales growth expectations? do they change after the acquisition? adam: i think they significantly accelerate our growth if we do

our jobs well, because we will have better products and because of the field cooperation we can do. tableau will continue to run independently within salesforce with our community and conference. i know there will be a lot of cooperation. salesforce has a lot of reps in the field. francine: what do you worry about? talent retention, is that one of your main focuses? adam: i am not worried about it, but it is incredibly important. the reaction internally and with , andmers has been positive salesforce has a fantastic track record of having talent stick around long after their acquisitions. i think the country does companies are well aligned from a values perspective and focus on the user community.

we have so much in common, so i'm optimistic everybody will think it is an exciting place to grow. francine: do you worry about the combination of the culture? acquisitionsthin six to nine months down the road, and that is more difficult to measure. adam: both companies have done a good job of understanding each other's cultures and values. we are focused on customers and innovation and our user corporates, and on philanthropy and giving back to the local and global community. francine: how long have you been talking to salesforce about this? adam: they approached us a little while ago, but in fortunately until the papers get filed we cannot go into details. francine: a couple of months, even longer? was this always a dream of yours? adam: really the dream is to

build the broadest, deepest analytics platform in the world and the leading platform adopted by customers, we have been well on our way to that journey and accomplishing our mission. this gives us the ability to i hope dramatically accelerate progress in that mission. francine: tableau president and chief executive adam selipsky. hour, anxt half interview with the federal reserve vice chairman, richard clarida. that is 6:30 a.m. in new york, and this is bloomberg. ♪

♪ francine: president trump approves military strikes against iran but pulls back at

the last moment. the s&p 500 hits a global high but global stocks and futures fluctuate. boris johnson and jeremy hunt are the last man standing in the fight to become the next prime minister of the u.k. good morning. this is bloomberg "surveillance," francine lacqua from london, tom keene joining me shortly with a conversation with richard clarida, the vice chair of the federal reserve. does he still think central banks have clout over inflation? treasuries and concerns they have addressed, including trade. viviana: iranian media reporting tehran recovered the u.s. drowned downed. they say they gave "numerous warnings" before striking the

craft. writers reporting president trump went as far as to warn imminent.attack was airlines are dividing -- diverting planes away from iran. today, hong kong's government headquarters closed again as demonstrators gathered to show opposition to the handling of the immigration bill. they are calling on carrie lam to resign. these are live pictures of people jamming in. they want the controversial proposal to be completely withdrawn. abandoning --rs they will now start from scratch with less than two weeks before a self-imposed deadline. they concluded none of the three front runners could win the

approval of parliament and have scheduled another meeting to find a solution. 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: these are your markets , a lot of focus on what the fed has been doing, the dovish stance from central banks around the world and what it means for the market. dollar is pretty much steady this week. european stocks edging up. u.s. futures nudging lower. a pretty bullish week for equities. treasuries fluctuating. you can see dollar pretty much stable. there was a big move on gold. the st. louis fed president james bullard released a statement on his dissent. he said lowering the rate would

be the most appropriate action. he is worried about poor and headline pce measures declining substantially. an important interview with d clarida. -- richard clarida. joining us now is michael mckee and bill lee is still with us. two central banks still believe they have an impact on inflation? michael: they do. it has been a tradition for fed officials who dissent to release a statement on friday morning and explain themselves. onhad jim bullard dissent wednesday, the first one of jay powell's chairmanship. bullard saying the market is or 50g 40 or 50 is -- 40 basis points below the target,

so lowering the target range for the federal funds rate would provide insurance against in expectedines inflation and a slowing economy subject to elevated downside risks. more rapidomote a return of inflation expectations to target. he is building his case around inflation and the fact that the fed can push it up. francine: we definitely saw the dollar drop after the move was amplified by bullard's dissent. if they had cut, how what the market have taken it? michael: you would have expected the dollar to drop. it was unexpectedly strong going into this because normally when the fed is cutting rates, the dollar is weakening. people wonder if the fed can generate inflation even through the forex channel.

given that the euro is dropping and the japanese yen has been getting stronger, but they might take action as well. will inflation come out of this? that is an interesting question. francine: how do you view all of this? i don't know if there is a worry the fed seems to be following the markets. bill: jim bullard has always believed we were in a different regime than the rest of the m -- fomc and has a low targeted interest rate. when they lowered the long run target, that was not enough for him. i think that is where the thinking is differing from the rest of the board, the rest of the board feel that by lowering the target rate a quarter-point, we are indicating r-star or inflation will be below target. jim felt we need action. francine: our people talking about the fed not having any

tools left? if you look at and cycle, is there -- end cycle, is there a worry that if you use too much toolkit now that there will not be any at the downturn? michael: that has been the subject of a couple of fed conferences. there is the feeling that quantitative easing would not have the impact it had in the past. the fed does not have far to cut rates. one reason perhaps they were reluctant to do it, forward guidance, will that work? the markets are pricing in the idea of low interest rates and some people are looking for up to four rate cuts. hard to see how the fed wins this. it looks like they are being pushed around by a market that does not believe they can get anything done. francine: because it is priced in, what does the fed need to do

to startle the markets? go early and go often, in july if they were to cut rates 50 basis points, that might get the market's attention. the problem for the fed is they do not know what will happen between now and july 31. next weekend with the president meeting with xi jinping, what will happen? that will be important to the fed's future if they reach a trade agreement, even just to keep negotiating. that takes market pressure off and changes the equation. if they reach a trade deal, that rewrites the playbook. they do not want to make a mistake so they figure they can wait a little bit longer. huw: don't you think -- bill: don't you think the fomc has to take draghi's line of doing whatever it takes to bolster

confidence? no one saying they are short of liquidity or the price of capital is too high. below are not confident enough to invest that capital. michael: you could argue that in a situation like december where the markets were going down, but they are going up. there does not seem to be a lack of confidence. the fed does not want to be seen as a slave to the markets. they want to do what is best for the overall economy and they do not see the chance of recession. they worry about the possibility of creating financial market bubbles, not just in equities, but they have been warning about the leveraged loan market and fixed income. there are concerns if they cut now that could be a mistake. bill: investing is going only into financial assets. time,ne: we do not have bill lee taking over as tom

keene goes to interview richard clarida. coming up, richard clarida, federal reserve vice chairman at 6:30 a.m. in new york. this is bloomberg. ♪

♪ airlines including united are diverting planes away from southern erode amid high tensions after pulling back from strikes on iran just hours after

approving them. kammelring in benedikt who joins us from berlin. how often is it that flights are nimble is may be how the airline business? benedikt: it doesn't happen too often, but every now and then, given the situation in a region. faa, u.s. we had the aviation regulator put out a notice to airmen to avoid that andon, the gulf of arabia the gulf of oman. this is a densely used route. you have some major airlines in that region. flying,a popular way of but they can circumnavigate that easily and we are seeing it on some of those popular apps where you can track planes that they

are taking different routes. all of the u.s. registered airlines are doing this, but companies like ba, klm, and qantas have joined in. malaysian air is still really from the shootdown of an aircraft over ukraine years ago, so the airlines are saying, we want to be extra careful. we do not want a disaster. what is this exactly, a precautionary measure because they worry about the safety of the airspace? benedikt: this is very much precautionary and the companies and airlines are saying, we can easily add a couple minutes to a route so long as we remain in safe airspace. for the u.s., at is not a precaution for the u.s., it is an order, so they have to follow

that, but a lot of airlines are following the example. the faa holds a lot of sway and whatever they say, airlines around the world might follow. some have said when monitoring sayings, you will probably over the next few days say more airlines fall into line particularly if tensions reached another boiling point. francine: thank, benedikt kammel. let's get back to central banks as we await our conversation with richard clarida. michael mckee and bill lee are both with us. we had a hint when it came to pmi in the euro zone today that the weak sentiment seems to have peaked. there is a turning point for the pmi figures. what does it mean for the ecb after the powerful speech from mario draghi? pushes: presses -- it

off the idea that they don't have to do anything immediately and they can watch for the data. when you are looking at german industrial production, if that turns around, maybe they don't have to do anything and may be draghi's statement was enough to boost confidence. the same story may be the case in the united states. we will see what happens with the jobs report. if we get better numbers and the trade tension gets lifted, maybe they do not need to do anything. it is an interesting time when you have a call from the leadership of the central banks for action with data pushing against that. francine: how difficult is it to be a central banker today? they need to reassure the market they are ready to act without the market pricing it in because that takes away some of the toolkit. michael: the u.s. central bank

joining the european central bank and having a deal with political leaders with strong opinions about what they should be doing. that puts pressure in our -- pressure on them. mohamed el-erian wrote a book a couple of years ago, "the only game in town," and that seems to be where we are. that barrel seems to be empty and there is no fiscal stimulus coming from european union countries, so the central banks are where everyone turns even if they cannot solve the problem. the ecb in particular is beholden to the interaction between president xi and president trump because europe is so tied to the china trade, and they are such an open trading economy that any hiccup in trade routes will cause major disruptions in the european economy and will prevent them from taking off.

structural reasons or trade reasons are holding back growth in europe. francine: thank you so much, michael mckee and bill lee stays with us. slack shares in premarket stay positive after the direct listing on thursday. it's market value, $19.5 million. this is bloomberg. ♪

♪ this is bloomberg

"surveillance," john -- tom joining us from the federal reserve. i am francine lacqua in london. protesters in hong kong gathered outside police headquarters to resume demonstrations. demonstrators are calling on carrie lam to step down after two weeks of social unrest. joining us from hong kong is stephen engle who has been following the protests. well it only take a resignation for the protesters to step down, and if not, how long can these continue? stephen: they say they are going to keep the pressure on until they get their demands. among them is carrie lam to step down, but also accountability from the police they perceived to be disproportionate.

they are heron -- carrying signs like this, don't shoot us. they want accountability from the police. there are more ridiculous claims , president, liberate hong kong. that is unlikely to happen. something that could happen would be a withdrawal of the bill. no indications yet. we had the chief executive suspend debate of the bill. these protesters want a complete withdrawal of the bill. the concern is that over this next legislative session, they could resume it if the protests died down. protesters say they are going to keep the pressure on until they meet their demands. francine: thank you so much. we will have plenty more from stephen engle in hong kong at the protests. criseg us now is cameron

and bill lee is still with us. interviewis about to richard clarida. what exactly is the biggest headache for the fed now? cameron: inflation expectations. they are operating under an academic framework that it is expectations that drive future inflation. if you look at market derived measured -- measures like the measures,urvey based they have both shown a deterioration which clearly is worrying most members of the fed , given the recent press conference. francine: does the fact that the president tries to remove powell every two days, does it change the thinking of the fed? cameron: they would say no.

givenk they would probably -- to distance themselves from the political pressure, but in the back of your head, it has got to have some impact. stan fischer said maybe the reason they hiked rates in december was to subconsciously press back again some of the pressure from donald trump. francine: we have not really touched on this. we are talking about inflation expectations and the rest. bill: political production -- political pressure something the fomc has been dealing with. well and chesney martin was removed because he did not do what the president wanted. right now, president trump has returned to the old regime of criticizing the fed. i don't think they will take a

political stance one way or the other. francine: how do you think the fed is looking at these trade concerns? looking at the trade war, does realitye the economically or does it further the scenario of a downtown? -- downturn? cameron: it increases uncertainty, and you have seen that in the data. business sentiment has deteriorated because businesses do not know the regime they will be operating under in terms of tariffs and their chinese supply chain. the irony of everything is if you look at the economic projections in the latest icp from the fed, those downside risks were not evident. if anything, the range of possible outcomes for the economy this year was tightened to the upside. it was a little befuddling. francine: you had a great piece,

picking up on michael mckee's own question at the press conference, saying what do the fed hope to accomplish? cameron: i think it is kind of hope.e, hit and when you are a hammer, everything looks like a nail. this is the only policy tool they have got at the moment. they are looking at inflation expectations. they are moving in the wrong direction. this is what they are trying to do. francine: cameron crise and bill lee stay with us. coming up, richard clarida in conversation with our very own tom keene. that is next. ♪

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the federal reserve vice chair. european stocks edging up, u.s. futures nudging down. there is a lot more dovishness from central banks but much more geopolitical risk. a bullish week for equities, spurred by the decisive shift from central banks back to stimulus. above $1400 announce for the first time since 2014. oil on the back of the iran's -- tomoil extending its keene is joined by vice chairman richard clarida. tom: we welcome all of you worldwide on bloomberg television and radio, an important conversation with richard clarida. made important by the events of

this week. we talk about the broader scope and scale of economics, but this time is different. the news flow is extraordinary. thank you so much for joining bloomberg. it is important to be in this room. jewel of 1930's architecture and we are in the special library with all of these books, most of them a first edition from the private collection of adolph miller. three volumes of alan melzer. inany of these books matter the modern economics we have? dr. clarida: i think they do. context is important. history does not repeat, but it rhymes and i am a student history -- student of modern history. tom: as they brought us in from security we looked at where fdr

dedicated the building. wrotean bernanke exclusively about those challenges and they had a challenge of disinflation and deflation. this challenge is different than then. dr. clarida: we are in a world globally of lower inflation in the euro zone and japan, and in the u.s., we are close to our 2% objective. there are some global trends impacting the u.s. and other countries. francine: let's begin with the word "solid." we have a solid economy. what is a solid economy? dr. clarida: the outlook is for sustained economic expansion and that is important. a week from now, this will become the longest expansion in u.s. history. we had strong growth in the first quarter north of 3%. the baseline outlook is good, sustained growth, a strong labor

market, and inflation near objective. tom: why are we speaking of cutting interest rates? dr. clarida: in this environment, there has been ella to touch elevated uncertainty about the outlook. -- elevated uncertainty about the outlook, uncertainty about international trade. there is evidence it is weighing on sentiment, so we will act as appropriate. tom: let's begin with this new uncertaintyainty." is non-policy shocks, focusing on the trade and the president. there are many others shocks, mr. draghi dealing with his shocks and mr. kuroda, and the north -- norwegian bank raising rates. what is the nonpolicy shack -- shock that matters? dr. clarida: we have uncertainty

in the sense that there is geopolitical uncertainty and uncertainty how the global economy navigates. you have negative interest rates in the euro zone and japan. they are well away from where they want to be, and that is a factor. tom: when you ran columbia economics or some would say reinvigorated it their acquisition of talent, there was a demand about a study of economic history. within our economic history, have we ever had an american central bank that is central banker to the world because of negative interest rates and challenges in asia? dr. clarida: that is an interesting question. the fed has played a dominant role in central banking throughout most of my professional career. one is unusual this time is the u.s. is closer to where it wants to be in terms of employment and

inflation than other major economies. because we have a more globalized capital market then we did 40 years ago, that has an impact as well. tom: when i do these interviews, i always bring in the resources of bloomberg. michael mckee asked an important question, and chairman powell gave a graceful answer, it may be dodged the glide path of what you hope to accomplish. cuts,have 1, 2, 3 rate what does that accomplish given your 2% statistic for growth? dr. clarida: let me remind your viewers that we made no adjustment to policy, but did say we were monitoring closely the crosscurrents facing the economy. indicated, there was broad agreement around the table that the case for

providing more accommodation has increased since our may meeting. looking andwill be will be very attuned to the incoming data flow. the important thing about our policy is we have the tools necessary to sustain expansion, a strong labor market, and stable prices. we will deploy those tools to achieve those goals. tom: we welcome you all on bloomberg tv and radio, a conversation with the vice chairman of the fed, richard clarida. he is a student of the history of economics. "lack,"ith the word clarida with the word "solid." what are the degrees of freedom you feel you have given the global events and realities of a solid american economy and yet a need for rate cuts? how stock in this position is

the fed -- stuck in this position is the fed? dr. clarida: i don't think we are stuck. our primary tool is the federal funds rate. we are far away from the zero down, so we have some room if we need to and we will act as appropriate. i don't think we are stuck at all. we have a tool kit and objective assigned to us by congress and we will do our best. tom: this is incredibly important, the idea of being near the zero bound and we have a rate cut -- i will get to the rate cut in july in a minute -- but is it linear if you cut 25 basis points, 50, 75, is it a linear effect on the american economy or is there inertial force, increasing force? dr. clarida: first of all, a lot of our models are linear and as

someone who wrote down models, i am aware of that. the world is not linear and we factor that in. the linear response is the starting point, but in that room we are alert to nonlinearities. tom: market economists are judging draghi and the powell press conference, and now richard clarida. alan ruskin at deutsche bank and others go, july 5 matters. a multi-unemployment report -- moldy unemployment report. what will be the reaction if you get a tepid labor economy? dr. clarida: the labor market has been strong. andou look at payroll gains the unemployment rate, we had a soft print, but we are not looking at any one data point. we get data on gdp toward the end of july, on pce inflation

soon. we get a lot of global data. we are looking at the global manufacturing cycle and the downward estimates to global growth. a lot of factors. we are not a one note central bank. tom: a research note, you made me miss this research note from barclays with the idea of a 50 point rate cut -- 50 basis point rate cut in july. i don't want you to comment on that -- dr. clarida: and i won't. tom: the underlying theme, these whilenges, uncertainties, move from goods producing and manufacturing producing in america and the rest, or a more buoyant service sector? is that a risk? dr. clarida: for the last 50 years, we have seen the economy

become more of a service economy. that is a trend of global development. the u.s. economy is a complex organism and the overall growth rate is important. markets will work to allocate resources and we focus on the overall aggregate picture. it is not the fed's job to look at the service sector versus any other. we are trying to support price stability. tom: you have left a paper trail of act adamic -- academic -- dr. clarida: i have left a paper trail for sure. tom: i like to pick one paper and study it for you. 2007 is aldman brilliant walk-through of inflation shock. did you ever think we would be here where we are looking the other way at dish inflation shock? -- disinflation shock? dr. clarida: that paper was

intten in 2006 and published 2007, and my crystal ball did not indicate almost anything that has happened. that paper argued that in the old world, the way exchange rates would respond to inflation was to weaken. if you have targeting of central banks, that can go the other way , and other papers since then that has held up in the data. tom: this is a historic week for economics, the draghi discussion, the delicacy that chairman powell faced. his credibility of our banking at risk? -- is credibility of our banking at risk? dr. clarida: i don't think so. our mandate is assigned to us by congress in black-and-white. though law says -- the law says we have a goal and we have the

independence to achieve those goals, but we are accountable for our results and for trying to explain what we are doing and why. i don't think our independence is under threat. tom: we say this in honor of martin feldstein, a huge loss. dr. clarida: one of my teachers and mentors. of profound mentor linkage of policy with academics that we have. we are at a moment where we are asking for other people to help central bankers. are we so fiscally constrained that you guys feel alone, given the growth of the debt and deficit? dr. clarida: let me say this. our mandate is monetary policy, so we don't way into fiscal policy. we take fiscal policy into our

outlook and calibrating our appropriate policy response. we are in a world where not just in the u.s., we need to recognize important policy issues that are fiscal policy issues that are not the purview of central banks. to the extent the public feels the central banks are the answer to every concern about the economy is not the correct one. we have a narrow mandate and we focus on that. or: i have no idea the law process of demotion at this great institution. it is in the air in washington. we have a president who speaks his mind, and his modern communication method. how has his building responded to the gossip of a demotion? dr. clarida: we have known each other 20 years. we are just doing our job.

we have a clear and crisp mandate. we have a good staff. we sit around that table across the hall. we have an objective, we have the tools, and a very collegial committee. we reached good decisions. tom: vice-chairman clarida, thank you so much. on tv and radio, back to you. francine: at the federal reserve in washington, d.c., an important conversation with vice-chairman richard clarida. dr. clarida saying they are not looking at a single data point. the labor market seemed strong but they got a soft print recently. that gives an indication of how dr. clarida sees the relaxation of what that means for inflation . finally, the comments about central bank independence, saying they are not under threat

and they are just doing their job. michael mckee is with us. bill, what is your take away? bill: i love the way he dodged the question about inflation. he did say we are consistently below target. we need to backstop the real economy and make sure growth continues. that indicates to me they are willing to go 50 basis points because they recognize they need to build confidence, and that would be the nonlinear fact to backstop the growth of the economy. francine: this is a tom keene kind of question. do they see themselves as central bankers to the world? richard clarida saying there is more uncertainty on how the global economy navigates. are they trying to keep it all together? never say, wewill

are making monetary policy for the world, but the u.s. being the world's largest economy, what the fed does resonates. they are taking global considerations into impacting their policy deliberations. if you look purely at the u.s. domestic situation, clarida admitted growth is solid and inflation is close to target. that does not sound like an environment they central bank contemplating half a basis point interest rate cut. richard clarida also saying the case for providing more accommodation has increased. how quickly can that be reversed? michael: that is an interesting question, because it will depend on data and political developments the fed has no control over, like trade and the g20 meetings and whether the president wants to go ahead with

tariffs on the e.u., the fed has to watch for those -- they have to watch for those things. them a difficult time for and that is why they are sticking to the talking points, trying to make the case that we are on the job without committing to do anything yet. francine: this is an interesting point. we have heard so much about president trump putting pressure on president xi to meet at the g20 and there is a time and place. if this does not happen, does it change the course of the fed? bill: i think the fed will stick to the notion that we are not a single indicator fed. what other indicators besides the labor market? i think his answer would be orders and durable goods, because that is a drag on the economy now. if that metastasized to the service sector, that would be a

problem. metastasis will be -- much,ne: thank you so bill lee, cameron crise, michael mckee. tom keene with a great interview of the chairman of the central reserve. futures drifting lower, european stocks also lower. we had a bullish week on equities. central banks back to stimulus mode but concerned about geopolitics. this is bloomberg. ♪

♪ this is bloomberg "surveillance." tom and francine, francine lacqua in london, tom keene wrapping up that great interview with richard clarida. here is viviana hurtado. viviana: hong kong's government closed again as demonstrators gathered to show opposition to the handling of the extradition bill.

protest leaders are calling for carrie lam to resign and they want the proposal to be completely withdrawn. protesters interrupted a major speech by the chancellor of the exchequer philip hammond as the annual mansion houston are. a u.k. foreign minister suspended after footage of him appearing to forcibly remove a female protester. we spoke to the lord mayor of london. >> the whole incident is surprising and nonsensical, but they got their message across and i asked them kindly to leave because this is my house and i was having a dinner party. viviana: a fire at philadelphia energysolutions after a reported explosion, the fire is not yet under control. the philly fire department calling on biz it ends and residents to the east of the

fire to stay inside. 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: iranian media reporting tehran uncovered the u.s. drone it grounded. they say they gave numerous warnings before striking the aircraft. fromdent trump backed action, but he warned tehran an attack was imminent. what do we actually know about what happened? we had a justification from president trump saying, this is a loose cannon doing this, but if they received multiple warnings this would go against the president's theory. robert: the question i think the president was getting at, and we have seen this before, if a

local commander acted without authority from more seen your officials in -- senior officials in tehran, senior officials are now claiming the attack, but if it was a local commander who went rogue, it is not inconceivable they would claim responsibility. that is certainly a possibility, and the president may have more knowledge with intelligence. francine: do we know if the two presidents will speak on the phone? robert: i don't think we know that, and we are a bit of a ways from that. spoke to trump president kim of north korea and that surprised a lot of people so it is possible. francine: from your point of view, does the president try to diss -- de-escalate and that anything could happen in the next few weeks? robert: i certainly think

anything could happen. if we launched a strike and called it off, the only thing that would motivate that would be new information has emerged. perhaps the president and senior advisers are evaluating that. there are a lot of tensions and things can quickly spiral out of control. francine: a military assault by the u.s. could have been immediate and that would have huge and far-reaching consequences. who does president trump listen to to de-escalate or make sure it doesn't get done like it was done yesterday? there is a lot of voices close to the president who have been fairly bellicose about iran. john bolton has been fairly bellicose for a long time, senator cotten and senator graham. there is congressional wavering on some of this. the president lessons to a lot

of people but keeps his own -- listens to a lot of people but keeps his own counsel. perhaps his instinct is to de-escalate. francine: robert levinson, bloomberg senior reporter. we are looking at pictures of donald tusk what jean claude juncker. -- with jean claude juncker. they met a long time during the night, and the three candidates that were favored to have the top jobs of the e.u. were ruled out. they will talk about europe's economy showing signs of stabilizing, plenty more on that throughout the day. this is bloomberg. ♪

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closely, and we will act as appropriate to sustain expansion. alix: vice chair rich clara says ita says -- richard clar the case has increased. analysts start to question a sub 1% 10 year. trump's you turn on iran. the president ordering a strike on iran, than calling it off. david: welcome to "bloomberg this friday, june 21. there was uncertainty not just in iran, but in the white house overnight. the president ordered a strike, then pulled it back. alix: the question is why. it seems to indicate reports iran a windowave that said i do want to talk. i don't want war. iran took him up on it by talking to the swiss ambassador. david: we got a