francine: fed chair jerome powell reiterates the case for lower rates is growing, but james bullard tells 50 basis points would be too much. , morequidity problems than 5 billion in assets is pulled. trump meets with xi jinping at -- this weekend your weekend. good afternoon, everyone. this is "bloomberg: surveillance."

these are your markets, the stocks europe 600 is down 0.3%. of course, what that means for easing against the backdrop of threats to global growth. ignore this, it is the wrong number. if you look at oil, it's up a touch, but definitely not at 9.74. will get an update shortly. there you go, american crude at $58 and $.85. coming up that we speak to the democratic national committee chair howard dean as the democratic debate takes place tonight in miami. ahead of that government let's get straight to bloomberg first word news. >> special counsel robert mueller agreed to testify on capitol hill, setting up a dramatic confrontation over the trump presidency. in his report, he said he could not conclude whether donald

trump's campaign conspired with russia the also said he could not exonerate the president from obstruction of justice. , that is whatorce president trump threatened iran with if they attack the u.s.. tensions continue to flare with the president warning republic of quote obliteration. last week, trump abruptly canceled air strikes against iran for shooting down a navy drone. there may be some reprieve from the next round of chinese tariffs as washington is prepared to spend duties as they restart trade talks. the decision is under consideration and maybe announced after the meeting between president trump and xi jinping on saturday. low as $30 a as barrel if china devalues of the yuan -- the yuan/ . it would shunt demand growth and china may even decide to i wrote

-- to ignore iran sanctions and resume crude imports. tesla could be about to set a delivery record. says the electric carmaker will need to go quote all out but could hit an all-time high in quarterly deliveries. the previous best was over 90,000 vehicles. and for the first time ever, clean energy supplied more of the u.s. is electricity than coal. that is according to energy administration data for april. generated aergy must 68.5 megawatt hours of power, the most clean energy the u.s. has ever made. 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? francine: thank you so much.

h2o asset management is let -- hemorrhaging money. monday saw its biggest ever single day drop. the money managers says net outflows have slowed since then but this is a remarkable reversal of fortune. until last week, h2o had defined the slumping industry and post stellar returns. -- posted stellar returns. why are we seeing these huge outflow numbers? story is about one week old and is linked to a liquid bond securities tied to german financier -- a german finance or -- financier. the fund manager has taken aggressive steps to call its investors. but according to the data, they don't appear to be calling. -- calming. francine: what is this about? about theis is

underlying credibility and the ability to trade a small proportion of funds. francine: when you look at some of the big positions and why it is having a dramatic effect on that can we explain it or is it too soon. -- soon? thomas: the danger is that this thing has its own momentum. h2o is dangerous for that they want daily liquidity funds, many investors can pull money at any time. if you are an investor watching this unfold, you might not want to wait for the sort of surety h2o may or may not provide your -- provide. francine: is there anything they can do to get a grip on this? what they have done is sold a sizable portion and marked down the reminder.

clearly, they have not communicated enough because outflows accelerated on monday after these communications, rather than slowing them. but they say things have turned a corner, so we will find out if they have. francine: thank you very much. coming up, jay powell reinforces the case for lower interest rates, saying downside risks have increased. u.s. stocks fall the most in three weeks. we bring you our exclusive conversation with st. louis fed president james bullard. this is bloomberg. ♪

francine: economics, finance,

politics, this is "bloomberg: surveillance." but get straight to the bloomberg business flash in new york city. >> fedex says 2020 will be a quote transition year. it sees and improving outlook for e-commerce and the companies have already made progress with revenue per package over 2% but that is tempered by concerns trade tensions will worsen as china considers adding the courier to a list of unreliable entities. we have been very disappointed over the last few years with the assumptions that we made on the growth in international trade. particularly with the trump administration. francine: micron resumed some shipments to china's huawei. the largest maker of computer memory chips says a subset of products are not subject to the export ban.

sales generate about 13% of micron's annual revenue. it was forced to halt to them after the trump administration added huawei to its blacklist. that is your bloomberg business flash. francine: thank you. jay powell warned about rising threats to the economy. onaking of the council foreign relations, he said the lack of progress in the trade war and economic data are stoking concerns. havee crosscurrents reemerged with progress turning to greater uncertainty and with incoming data raising renewed concerns but the strength of the global economy -- about the strength of the global economy. market seven pricing and 50 basis points, but james bullard spoke about expectations in an exclusive interview. >> 50 basis points would be overdone. i don't think the situation really calls for that. i love my fellow committee members, but by not cutting,

we're putting high probability on the july meeting. slow down tod to something below 2% in the second half of the year. that is not the end of the world. francine: joining us now is the global head of emerging markets at pimco and jane foley, head of fx at rabobank group. thanks for coming in to talk trade, china, and the fed. jane, are pricing in too many interest-rate cuts? jane: you got to keep in mind james bullard is a dove. and his comments that 50 basis points is too much, if you look at the growth data, yes, it has slowed. but it is not at panicking levels yet, but the market has been reacting as though the fed will give us an awful lot of cuts too soon. if we are looking at next year, we are of the view that the u.s. will be in recession. but i don't think that

necessarily requires a 50 basis point interest rate cut. i think 50 basis points might even give off the wrong signals. it might even panic the markets. francine: is the dollar too strong? jane: no, i don't think it is, to be honest. again, the market might be overreacting in selling off the dollar. ofo think it is in some sort easing position, but i don't think we have necessarily see the end of the dollar strength. dependent on is the answer of whether or not you think the fed can save the world from all of the issues we've got. concernsgeopolitical and the issues between the u.s. and china. if you think those will retain, the dollar has more strength. francine: i don't know if the fed it can save the world, but they are giving a bit of a helping hand to emerging markets.

>> that is essentially what we are seeing in the rally so far. a huge discount of the geopolitical risks. and a lot of comfort from the fed put. the question is, to what extent can this really helped em? the dollar has always been a key factor in driving returns in the local space. and we still have a lot of idiosyncratic risks that are not going away anytime soon. a lot of these are going to be exacerbated by geopolitics and trade disruptions. francine: i know it is very country-specific, but a strong dollar also means more defaults on debt. , and whatabout debt are the countries that are actually doing good structural reforms that give hope to investors? lupin: i do worry about defaults in the corporate space rather than sovereign. it takes a lot for a sovereign to default.

but you can see price disruptions on the external credit side. arecountries where we seeing strong structural reforms are very very gradual and piecemeal. so we are seeing movements in places like mexico, movements in places like brazil. quite aa is facing crisis, but they are moving in the right direction, in terms of macro policy. but as i mentioned, all of these risks are very idiosyncratic. the take a long time to implement. -- they take a long time to implement. francine: we could be reading this wrong. could inflation suddenly take hold? we are pricing in the wrong cut. jane: probably not. in terms of inflation in the g10 , generally, we have had some real struggles. at wage inflation, i think inflation is currently at 3.1% year on year. when you think about how tight

labor markets have become, that is not a strong number. and you could apply that argument to australia or be talking about japan. are structural issues across the g10 and try to push of wage inflation and cpi inflation. i don't think we will suddenly get a boost to headline inflation or oil prices. but if we look through that into the underlying inflationary pressures, i do not think they are there. francine: where do you see value in em? lupin: in external credit. there are countries where there -- thatng backstops backstops. value in ukraine and argentina, in spite of the crisis. and i see value in the emerging asian countries like sri lanka and indonesia. francine: one of the things we have been trying to figure out is the supply chain moving away from china as u.s. companies try

to move it away. could the some of the neighboring countries really benefit from it? lupin: i think if we see supplies moving away from china, the first order of impact is going to be negative. this is a negative for global trade. there are going to be some countries that benefit. we are seeing some on shoring -- on-shoring in countries where you would not expect that. one country that would benefit is mexico, but mexico has its own issues with the u.s.. some countries like taiwan or korea may see some on-shoring of investments that had previously been done in china, but now we are seeing that come back home. theerms of overall impact, first order seems negative, but over the long-term, some countries are going to. see marginal benefits. francine: are we going to see more volatility?

see it either being stuck in a range or volatility making it difficult. you were to look in a textbook, the answer would be yes. as we get more uncertainty, volatility tends to go up. but this has been a really topical in the last few months. expectations for further easing. of course, it is not just the fed them it is various others as well. this is like a comfort blanket to investors. however, if the situation with the u.s. and iran were to worsen , yes, is very likely we would get an increase in volatility. ,f the u.s. goes into recession it is likely we would get an increase in volatility. the other question is what happens between the u.s. and china. yes, we are all talking about , but we are in a world that has become a lot more vocal. that is containment.

it is the relationship between the u.s. and china. not just about soybeans are trade tariffs, it is about the u.s. containing china's growth. and if that gets a lot more headway, that is something i think will worry markets and could create volatility. francine: thank you both, jane and lupin both stay with us. coming up, head of this weekend's g20 meeting, bloomberg sources said the u.s. is to delay the next round of chinese tariffs. we bring you all the latest on the negotiations next. this is bloomberg. ♪

thomas: this is -- francine: this is "bloomberg: surveillance." larry be summer preview from the next round of chinese tariffs. the u.s. is willing to suspend tariffs as they restart trade talks. the decision that may be announced after the meeting between president trump and xi jinping at the g20 summit on saturday.

from pimcois lupin and jane foley from rebel bank. first -- rabobank. does the outlook change because these leaders are sitting down? lupin: they will probably expect some headlines and will focus on the outcome of these meetings. but we are not pricing in a major event. i think this is not going to be a one and done. what we are looking for is progress in terms of negotiations. we don't see an escalation in terms of tariff expansion. will see some positive headlines in terms of progress towards a further meeting in november. that is what markets are pricing for and why we are still seeing a rally in terms of these trade tensions. francine: this is our question of the day.

i urge everyone to go out and check out our live blog, it's pretty cool. : is it are asking is inevitable the next heard the war will begin at this week's g20? jane: you could say it has already begun. it was quite interesting when we had draghi's speech with a dovish commentary and almost immediately a tweet from trump criticizing that. inevitably come up when you have an environment where central banks are easing and low inflation, the makings are there for a currency war of sorts. clearly, it is in the interest of most central bankers to consider whether to dilute that. commentary from new zealand's central bank officials over the next few months. indicating that they are considering currencies when they are cutting interest rates and the fact that they wanted to get ahead was a function of getting ahead of the rest of the central

banks who could also be cutting. is alreadyrs embedded in the thinking of central banks. they probably will not admit that, but i think it is already there. francine: do you agree? lupin: to a certain extent. but the term currency war really embodies a huge escalation in terms of having exchange rates that really deviate from the fair value. i don't think we are really there. central banks that are easing because of growth concerns or behalf's -- or perhaps see inflation has more tempered resulting in weaker currency government to me, is not depicting a currency war. what i would like to see is for china to have a different policy on the yuan. that to me with signal that things are getting serious on the trade side and cannot be resolved through negotiations. francine: and 20 seconds, under what circumstance would they do this?

that would be getting the bazooka out. the 25%f we get escalation and tariffs to the rest of chinese exports to the u.s.. you might actually see china really rethink that. francine: do you agree? jane: it would be foolhardy to say that is off the cards. jane foley from rebel bank -- rabobank and lupin from pimlico. up next, to u.s. chipmakers say they have resumed sales to a chinese tech giant. that's next, this is bloomberg. ♪ . the latest innovation from xfinity

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point move would be too much. client will more than 5 billion and goodwill from washington as the u.s. was set to deliver the new round of china tariffs and the trump michi xi jinping this weekend. -- meets xi jinping this weekend. francine lacqua in london. let's check the movers in the market. >> one of the biggest gains this morning on the stoxx 600 after a report of a bid for their elevator unit. upside.he they are shipping some products to china. this is very positive for the chip space which has been under

pressure give me trade war continuing in washington and beijing. to the downside, a high-level, the government is talking about concessions, they have a cabinet meeting last night at the transport minister going in said he would propose revoking their toll concessions. francine: thank you. let's get to the bloomberg first word news. downside risks have reinforced the case for lower interest rates according to federal reserve chairman jerome powell. this has market consensus is building the fomc will cut rates in the coming months. we asked james bullard about the size of a potential reduction. >> today, 50 basis points will be overdone, i do not think the situation calls for that. to 25. be willing to go

things can change. is whathelming force president donald trump threaten iran with if it attacks the u.s. as tensions flare between the nations with the president warning the islamic republic of "obliteration." donald trump canceled airstrikes abruptly for shooting down a u.s. navy drone. how bad is the heat wave in europe? and germany then that speed restrictions on the autobahn which usually has no limits as the fear is high temperatures could create dangerous cracks. san francisco is the u.s. city -- first u.s. city to ban e-cigarettes which would make it not legal to sell the products in stores and for online retailers to deliver them to addresses in the city. that is your business flash. francine: thank you. get a glass of water. a trooper for continuing despite

losing her voice. the biggest american maker of computer memory chips has -- they say they have determined products it sells to the chinese company huawei are not subject to rules. open --t to typical tim. what changes are we seeing global tech hardware inventory? >> it has been a long march for the whole industry the last year with things up and down. a lot of people focusing on the iphone launch which seems so long ago but only six or eight months ago, a yearly thing we look at. inventories have grown and what i am telling -- what i have seen in the data is that we have an increase in sales in the last few months of last year because while way was building inventory

, not selling in product but stockpiling and saving for a rainy day which came in today when u.s. president donald trump said we will not sell our and sinceo huawei then micron said we have a loophole where we can sell some products. they did not elaborate what their subset was they mentioned but company such as mike braun are finding ways -- micron is getting ways -- are finding ways to get around the restrictions and will ship products to huawei again. francine: will others fight the loophole at will the u.s. stop loopholes asap? >> that is the key issue as mike braun found -- mike braun founded issue and intel as well, a gap in the regulations, what we will see as u.s. companies affected by this will have their lawyers looking closely at

regulations and at their own products. looking at where these products are manufactured. a lot manufactured in taiwan and japan and in singapore. some of it in china and they will say, maybe it does not apply here and there and look for ways to get around it and making the case this does not fall into the category the u.s. is saying and it will be a big issue for u.s. tech companies, finding loopholes. francine: do we have any idea what huawei has been doing the last couple of months, lobbying the u.s. or finding loopholes? >> they are doing all of those things, they are doing a lot of public interface, according the media very heavily, they were quite an understated and executive but he has done all sorts of tv interviews and spoken to bloomberg and others.

behind the scenes, they are doing lobbying directed at government and to telcos and other industry players tried to get their message across and paid the picture clearly about huawei is not a threat. they are working hard to be independent of u.s. technology, they have done pretty good chip technology themselves and working with other companies and geta with the government to themselves off western technology so they do not have to face this issue going forward. they are very active and preceding that they were building stockpiles of weston components. this is something -- western components. thank you so much for staying late for us. trade, fedex, 2020 will be a transition year,

because proper is tempered by concerns international trade tensions were worsen. -- will worsen. china may list them as unreliable entities. >> we have been disappointed over the last few years with the assumptions that we made on the growth in international trade, particularly with the trump administration. francine: let's get back to our guest hosts, lupin rahman from pimco and jane foley from rabobank group. certain companies are finding loopholes and president trump and xi jinping meeting come and you told is the ultimate weapon could be doing something with renminbi for china. twohis about trade or supreme powers fighting over who is the bigger dog in the next 5-10 years, will they stabilize

digits without escalating? lupin: this is about powers, one emerging and one at the top of its game. emergencyestall the -- the emergence of one. that will stay with us for some time, one of the issues in the u.s. that has broad-based political support, not a bipartisan issue. i do expect these types of tensions to continue and not just be resolved, even with an agreement on a trade site. francine: i ask you about renminbi every time you are on. do we care it is a seven? jane: tried to downplay that level or any level but the markets will take care of it -- i agree about the outlook over

the next 5-10 years, not just about tariffs, the headlines out of washington, a love of skepticism on both sides about china. -- a love of skepticism on both sides about china, about containment, concerns the u.s. has the belgian road and china spreading economic wings. comments out of u.s. military generals. they said they compared their military might to the u.s., not to russia but to china. wars, this will carry on in some form of another well after this weekend's g20 meeting. francine: how do you play china? lupin: we focus on economies that will benefit from a chinese

acceleration and focusing on countries within latin america that are more anchored toward the u.s., sheltered from china. and g4 countries where you have idiosyncratic stories. francine: plenty more on the other emerging markets with lupin rahman and jane foley. drone shot american down last week was found inside iranian territorial waters. we will discuss rising tensions in the middle east coming up next. this is bloomberg. ♪

this is bloomberg surveillance. i am francine lacqua in london. let's get to new york city. a company is hemorrhaging money, 5.5 billion euros over four days, monday with the biggest single day drop, the money manager says since then net outflows have slowed, a remarkable reversal of fortune. h2o saw stellar returns until last week. fedex says 2020 will be a transition year, it's easy improving outlook for e-commerce as they have party made progress , revenue for packages over 2% but tempered by concerns trade tensions will worsen. them is considering adding to a list of unreliable entities. >> we have been very

disappointed over the last few years with the assumptions that we made on the growth in international trade, particularly with the trump administration. >> tesla could be about to set a deliberate record, elon musk says the electric carmaker will couldo go all out, they hit an all-time high in quarterly deliveries, their previous best was just over 90 dozen vehicles in the last three months of 2018. let's talk geopolitics some leaders say to ignore president trump, the iranian leader accused the u.s. of being crazy and ridiculous language. is our opinion columnists and jane foley and lupin rahman are still with us.

let me try to figure out what iran,f sanctions with maximum sanctions has worked in the past but this time they are different. >> i think it is different and the reason is the trump administration has not shown a serious commitment to what needs to follow any kind of sanctions, a genuine push for diplomacy. particularly sanctions applied earlier this week targeting the supreme leader, several commanders, and potentially later this week their foreign minister. that put a chill on the idea of opening talks with the u.s. sanctions,hat extra what would the u.s. sanction? , it isal services, banks difficult to see what he would go after. in tone, extra sanctions or do they back away more? >> economically speaking, the

new sanctions are meaningless because the iranian economy is under a huge array, multilayered sanctions regime but politically very significant because the timing and the intention behind the new sanctions put forward by some of donald trump's close advisers was to hobble the chance of diplomacy. it appeared that his and stakes winner brought iran to the diplomatic table, donald trump said he was ready to talk and promised iran could be prosperous again but unfortunately the new action to target senior leadership in iran has made people. whether there is a genuine push for diplomacy and whether donald trump would allow it. francine: what would it take for iran to go and sit down at the table with the u.s.? i think there is a deficit of trust. the iranians have say

consistently is they need to see some movement on the maximum pressure campaign, a little step to roll back the cap thing so they can believe that if they come to the table and allow the u.s. to join the table again, there is a pathway to sanctions relief. importance to release the lessons for iraq, even if you sign a deal with the u.s., the u.s. will struggle to effectively implement sanctions relief and that will be bad on this administration or future democratic administrations with any diplomacy. francine: this turmoil in the middle east, what does it mean for the markets? it flares up at the moment and we ignore it. will that change? jane: to some degree, the asset class we see mostly is fx at the particularly the yen, the one most -- we have seen it gave

ground. with the additional sanctions, you saw the use of the word military in the headlines and immediately it creates investors running to safe havens such as the yen. we have not seen the yen get to significant strong levels, we are at 107 and if we sell 105 that would be a significant shift in investor sentiment. itcould get there but depends on the headlines at what happens in the coming weeks. francine: how do you see this, do we get used to geopolitical concern? is it something we need to live with as investors, or something that goes away and we will get back to a more normal state of affairs in the next four years, five years? lupin: something we will have to

live with in terms of a clear strategic policy tool this administration is willing to use against any of economy that has some kind of tensions. we have seen it in russia and venezuela, mexico, iran. something we will have to live with and without emerging markets, we are looking for the impact on the oil price and the opec negotiations coming in july will be an important indicator for the markets to see what extent the rest of the emerging markets will be affected. francine: what do you think will happen in the next 2-3 weeks? the iranian president says many world leaders told him to ignore donald trump and the enemy pressure will have no impact on the nation. will president trump change tactics? >> the concern iran say they will resolutely push forward on the loosening of commitments on

the nuclear deal which will change the political landscape. it is not immediately clear how long the europeans will continue behalfto work on iran's for a diplomatic solution if iran begins to enrich uranium at a high level that it is permitted under the deal. that would seem to give a green light to some of the more hawkish elements in the trump administration to pursue a military option. at the same time, iran is trying to buy time. in the short-term they have done something's to give them economic resiliency, they -- the real have been stable over the next -- last three months and we are seeing the first shipments of iranian oil to china to have taken place after the donald trump administration revoked the oil wavers. that suggest iran may have been a bit of breathing room. francine: thank you for joining us.

at pimco and jane foley from rob opec, stay with us. how far can mario draghi go to stimulate the euro area's sluggish economy. this is bloomberg. ♪

finance, economics, politics, this is "bloomberg surveillance." mario draghi testing legal boundaries with his plans to resume quantitive easing and said rules could be changed to make space for a new large-scale government bonds but those would trigger a legal battle because they are designed to make sure the ecb does not illegally fund governments through the program. jane foley from rabobank is with us and lupin rahman from pimco. surely mario draghi making there is a less elbow before he goes as the markets believe they have the ammunition to deal with whatever comes next but do that? and a there is skepticism long time and ecb will not give in but carry on trying to give

it to marcus they do have the ammunition. it is their job to do so but it will be interesting, we have a handover to the next ecb president, interesting to see who that is and how he picks a the baton and runs with it. we see the risk the ecb before he goes in september will cut rates again and we think that will be -- francine: what happens to the euro? lupin: you have the fed -- >> the dollar is softer in recent weeks but if the ecb -- that should offset any gains the euro may see the do notat point of view i see the euro is having -- stand up and rally against the u.s. dollar. francine: even with -- because

of negative yields in europe, if you are looking for yields, maybe emerging markets? of a: the culmination dovish fed and admittedly dovish ecb makes the case for a local duration stronger than before, especially with 11 trillion and negative assets and you see that in terms of the flow into the asset class, a lot more coming into fixed income as a result of the dovish estimates. francine: great hour with jane foley of rabobank and lupin rahman of pimco. bloomberg surveillance continues , the 2020 democratic debate. ♪

francine: easy does it, jay

powell makes the case for lower rates but his colleague james bullard says 60 basis point move would be too much. as's liquidity problem client pull more than $5 billion of assets. goodwill from washington, the u.s. will delay the next round of china tariffs as donald trump meet with xi jinping this weekend. this is "bloomberg surveillance." we need a brexit update, mark carney speaking soon and policies in the u.s. with the democratic debate later, and foreign policy of the u.s. with mike pompeo speaking shortly on iran. now, ie price of oil would point out kevin cirilli in miami for the first of the debates you will see in the next 48 hours. francine: plenty more on that

but first the bloomberg first word news in new york city. >> special counsel robert mueller agreed to testify on capitol hill in the middle of july which sets up what should be a dramatic confrontation over the trump presidency. in his report, robert mueller could not conclude whether president trump conspired with russian and could not exonerate the president from obstruction of justice's. u.s. prosecutors running a crackdown on insider trading, bloomberg learning the investigation focuses on a group of traders in europe and the middle east suspected of having infiltrated banks and companies to obtain confidential information on megadeals. to the u.k. where boris johnson toughened his brexit rhetoric with a do or die pledge to leave the european union on october 31, the favorite to succeed theresa may says he wants to negotiate a new deal but the eu says that is not possible.

an underdog rival try to persuade conservative party members, johnson says it could lead to an election defeat for the party. the world's most expensive city for expatriates for the second year in a row is hong kong followed by tokyo and singapore according to a report by the consulting firm mercer, hong kong's housing market keeping it at the top of the list. 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. this is bloomberg. we have two quick screens on the data, not much going on, oil, ailey ii equities going nowhere over the last three days. -- $58.74.l $50.74 isnt crude, global price

$65.72, the spread not unusual, to year yield because i did not know -- two-year yields i put because i did know what else to put. francine: stocks dropping in europe, investors weighing the prospect for the fed easing against the backdrop of threat of global growth and trade tensions, president xi jinping and president trump meeting saturday at the g20. vix is down 1.4%. francine: a little -- tom: let's go to oil, a chart back to $100 to barrel, 2014, down we go $29 a barrel and the average over the fall is $46 per barrel. coming out of that a little bit of a rise now marking up near $60 per barrel. a snapshot of oil from $100 per

barrel. francine: looking at what kind of cuts you market is pricing in for the fed and to note a 25 basis point cut is no longer being priced into the july contract. another chart, i have thanks to hillary, three cuts almost priced in for the end of the year. plenty more on that and we will look at treasuries. james bullard is difficult water on hopes for a 50 basis points cut from the next month and chairman powell maintains a close watch on the impact of trade tensions. fellow committee members but by not cutting we are putting high probability on the july meeting, generally speaking i do not like that as a tactic, say we will not do something, we will go next time, i do not like that as a tactic. if you think the conditions are

today, you should go to the. inflation is below target, surprising given that the economy has surprised to the upside over the last two years, growth has been higher than people expected. markets have been very strong and unemployment at a 50 year low but still inflation running below target by a preferred measure and inflation expectations deteriorating, growth still ok looking backward but looking forward it looks like a slowdown with some downside risk. you have an inverted yield curve . seems this is a good chance to make us insurance rate cut and try to re-center inflation and inflation expectations. >> the cross currency have reemerged with the current progress on trade turning to greater uncertainty and with incoming data raising my new concerns about the strength of the global economy. francine: that was the federal reserve chairman jay powell and

st. louis fed president james bullard. joyce, great to have you with us. when you look at the fed, is the market pricing yet right, maybe a couple of cuts by the end of the year, or are they ahead of themselves if we have a trade deal between u.s. and china, that would change the dynamics for the fed. >> i do not think we will get it radio between u.s. and china and maybe there is a recent troubling holding off on other tariffs but i do not think you will get the comprehensive trade deal that would give you more clarity. i think the uncertainty is there and concerns about business sentiment. we do have two rate cuts, 25 basis points in july and in september but markets pricing in a bit more at this stage in the game and it is showing you there is a lot of concerns about business confidence and we are a global. francine: is the dollar too strong? >> the time of lower global

economic growth the dollar tends to do very well as there is a preference for safety of currencies and we are long be dollar and japanese yen. the frank as well. it still has the highest yield and the dollar i do not think will weaken. tom: one single sentence laying out the gdp numbers for the different regions, if i have an ancient theme of 3% growth being recession for a global economy, how close am i to a global recession? joyce: our recession tracker last fall was at 25% and we have moved it up to 40% mostly off of a couple of factors, business sentiment and the labor market. recession, 40% is not predicting a recession in the next 12 months but risk is higher. the global economy with tracking growth butend, 2.75% in the second half of the year

it come off quite a bit. guy whoex yesterday, a you would expect to go after the president but he went after the president. we will show that later. if fedex is talking about abruptness in slow down, will that be a topic it g20? joyce: we are seeing the business community talking about the global slowdown and one of the challenges i have been hearing, during a business like fedex, how can you make sure you are in compliance with these things, making sure you're not transporting parts of huawei, you do not know what is inside of the packages and you are creating uncertainty. it is fitting -- francine: how would you plan investment? when you look at your global are we doing a slowdown that could end in recession in the next 18 months or is that too pessimistic?

-- tootoo has a mystics pessimistic. if these days three tariffs going to place, that could go to cost to taxpayer, they of -- we $1550,hat could go up to that wipes away the benefits of the tax-cut. if you saw the phase three tariffs going to place. we run different scenarios and look at the impact of the tariffs have on consumers and our business confidence and business sentiment, and whether this could bring global 20. global capex to zero. leaders inlobal japan for the g20 summit, live coverage starts on thursday. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the business flash, elon musk says the electric carmaker could be on the verge of an quarter record for willery, he said employees have to go all out the last few days of june to set the mark, buyers may be motivated by a firstne as on july the the u.s. tax credit for electric cars will be cutting have been bitcoin resumes as rally as it went over $12,000 for the first time in almost a year-and-a-half, this year bitcoin has more than tripled as cryptocurrencies have been gaining acceptance and attracting more interest from mainstream institutions. a dubious record for h2o asset

management, the firm backed by a french bank as assets at its largest -- the biggest single day drop in four days, declining by more than $6.4 billion. h2o defied a slump with stellar returns but last week clients pulled money out because of concerns over you liquid holdings. tom: they will go to japan and the question is, what will hong kong mean? we are on the streets in hong kong, they are boring streets, a boring moment as we get ready for protests combining hong kong with a g20. how large will the protests be on this wednesday and thursday? >> i have just spoken to an organizer and she is expecting about 10,000 people to come into this where in about three hours.

the idea is they want to send a message, hong kong people and the protesters want to send a leaders message about meeting on friday at the g20 to convey their concerns directed at xi jinping. the number one purpose is they want to listen to the message is president donald trump who will be meeting with president xi jinping. it is all about sending the message to the international community so the international community can stand up and -- tom: what you observed any recent weeks was millions, thousands of protesters, no question about that. is the community not linked with the protesters, have they gone back to the every day in hong kong? >> one of the amazing things about this protest is that, when you have 2 million people coming out in a population just over 7

million, the protests cannot really -- organized,s are compared with occupy central, which took over central hong kong for nearly three months, this time the organizers do not want to disrupt the community and they are trying to have targeted protests like the one we expect here tonight. it is on a square and in the public and they will not take over streets. they want to send this message to the international community to talk directly to xi jinping, a message not just about the extradition bill but the democracy they will argue they were promised before the british handed hong kong back to china 30 is ago. -- 30 years ago. francine: china morning against foreign interference -- warning against foreign affairs. joyce chang, how does this

impact your world? there are questions about hong kong as a financial have any future, theb in the impact on china if it is handled in the not correct way. joyce: that is what the markets are focused on, how will china responds? the sheer number of people who turned up at these protests and they have been sustained over weeks, the g20 is a signal for theare looking message china will sit on this topic and approach trade talks. protests do not seem to dissipate. how will china handle that? joyce: china right now has been careful in what its response has been and they have not taken steps to contain it. they are at a delicate point. they will be very measured at the g20 on the trade issues. tom: i have to go to your claim,

fixed income, this is wicked, i feel like i am channeling jonathan ferro, which is the most attractive, nation, coupon, or dollars to nominated coupon in em? ayce: if you want more than five percent yields you have to be in emerging markets fixed income in some form of levers loan. i still think the dollar debt makes more sense because you have more pressure on emerging markets. we will have to see what comes out of the talks between the u.s. and china. if you have disappointment, you could see room for depreciation. tom: i am lost, what is your dollar call within what i just heard from you versus what norman is doing with smoke and mirrors in london? what is the dollar call? joyce: john and i on the dollar

see if the same way, with low economic growth, the dollar does very well here. the more you have uncertainty about growth and geopolitics and trade overhanging, the dollar is attractive because of the yield and concerns about growth in the rest of the world. , you heard the smartest thing this week with everyone collect all the weakness and jpmorgan pushing against that on global slowdown. francine: i agree. if we are on speaking terms, everyone else is. wars come up at the g20/ joyce: they will stop short of currency worst but the issue is not going away. the focus at the g20 will be u.s.-china but a question about the deadlines in europe, will you see secessions on auto tariffs come back? the best we can hope for from the g20 is a reset, you do not

get a comprehensive agreement but a reset to restart the discussions and can we progress? other issues before the g20, concerns about cyberattacks, and whether some chinese banks are complying with disclosure. i do not think you will see something comprehensive come out of the discussions. francine: what does your dollar call me for emerging markets? the dollar has huge impact on funding. joyce: emerging markets weaker in the second half of the year, we are working on our midyear forecast and you had such a strong market rally across fixed income and bond markets but the one asset class could weaken in the second half of the year of ,his, not a tremendous amount but the weaker is em fx. , shethank you, joyce chang is with jpmorgan. kevin cirilli in miami, we will do coverage not only on g20 in

japan but the democrats in miami. we will do that over the next number of days. stay with us. this is bloomberg. ♪

,rancine: two news coverage is monetary integration but it testimony as the bank of england governor mark carney testifying before you can lawmakers and you

are looking at the treasury fed committee head, a regular on the program. they are talking about inflation and how they see brexit. --make it news on exactly what is the news you can get? we are planning for every eventuality. deal givenng for no the prime minister that could be chosen in a couple of weeks. it has margins in fact. is doe dead until july 23? francine: until we have a new promised are and what they want to do or whether they want a no deal on the table. geely think people care about with boris johnson is that, if -- if boris --

tom: this press conference in india as the secretary of state of the united states with a message no doubt very much will be on iran. mike pompeo in the mideast, india, spreading message and a lot of feedback loops in washington. it is interesting to have multiple press conferences going , it is about politicians managing the message and to meet it is about global slowdown. francine: global slowdown, a lot of these g20 leaders react to it. heard, what should worry markets is that, central-bank policy and they came together, the central bankers in the 2000 and crisis, what geopolitics 2008 crisis, what is your policy does come in a crisis there is

no commonality between leaders which impact the markets longer-term. more, a lot of bloomberg coverage in japan with the g20 beating starting tomorrow and kevin cirilli is in miami -- g20 meeting starting tomorrow and kevin cirilli is in miami. governor carney in london. speaking as well. today,oing on, oil is up touching to recent highs. us. with we are live. this is bloomberg. ♪

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good morning from london and new york. back to buttons of my childhood. everybody has got their own design. they all have -- he is not in miami because he got in too late. two days of debates. , theyare so many debaters cannot get them on the stage. david westin will do a lot of coverage. francine: it is very clear that elizabeth warren is rising in the polls. how could that shift the debate? policy, and the zeitgeist for our global audience, what is so important is the house passed an immigration bill. we will talk about that in the next hour with howard dean, but

immigration will not go away, campaign after campaign. francine: it could actually change when you look at the 2020 presidential debate, could constitution of the u.s. economy. joyce chang is following that closely. is it too soon to see what kind economy could be under a democratic candidate? joyce: it is too early, and you will not see a lot of clarity until six months before the election how the field will narrow. a couple of things stand out and the platforms of the democrats. half are talking about the green new deal. the numbers are astronomical. john norman has created this populist sentiment index and it looks at the key buzzwords.

socialism tops them all. you are seeing a progressive movement. it is something markets and the population are very focused on. francine: there is also a lot of commonality when you look at trade and the tough talk the administration has been doing in china, it is getting support from the democrats. joyce: it is getting quite a lot of support from the democrats and i don't think this issue will go away. i think trump will keep it as a key campaign issue, so the trade issue will stay with us. i think there will be some test. we will see will the democrats support the passage of the usmca? that remains to be seen. seen, thens to be compromise on the house bill going forward. it is an emergency border aid bill. here is viviana hurtado.

viviana: the u.s. is willing to hold off on imposing more tariffs on china. the decision may be announced after a meeting between president trump and president xi this weekend. they are preparing to resume trade negotiations. the u.s. threatened to slap $360 billionffs on more of imports. reportersard telling he is not planning to leave his current job. he is a member of the fed's policymaking committee, and his views on low rates are similar to president trump. kazakhstan is expected to support an extension of oil production cuts due to expire this month. bloomberg speaking to the president in an exclusive interview. >> we will be continuously cooperating with opec.

my point is that we want to be in full compliance with the opec plus agreement. our commitment is very strong because we are open to the international cooperation and we want to have good cooperation with opec. viviana: that view should please opec's de facto leader saudi arabia, who wants limits extended because of slumping demand and overflowing stockpiles. how bad is the heat wave in europe? in germany, they have imposed speed restrictions on parts of the audubon. the fear is that high temperatures could create dangerous crashes. by friday, southern france could hit 113 degrees. 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: thank you so much.

let's talk geopolitics and get the latest from iran. the american drone shot down was found four miles inside iranian territorial lines. donald trump imposed the sanctions on monday and vowed to use an overwhelming force as retaliation for any attacks. secretary of state mike pompeo is holding a news conference in new delhi. by -- and joyce chang is still with us. when you look at the standoff, how much worse will it get? we heard from president rouhani addressing state tv an hour ago, saying if you push us we are not going to the negotiating table. neve: despite the shot across the bow of last week, there has only been a war of rhetoric.

it will not get a huge amount worse in the next three to six months because it is in neither party's interest. in indiathat pompeo is and is making his most --stantial statement is ultimately i think president trump is aware of that. francine: if it doesn't escalate, does it mean that iran will not shy away further from the agreement? niamh: that is a risk. in terms of military confrontations or elements insecurity, i think there is a high likelihood we will see a replication of the 1980's tanker 1984.983, we have seen pompeo's efforts to build up support for naval

presence, a greater naval presence. negotiations,o the iranians can set quite comfortably. there economy has taken a massive hit, but they are playing the long game. we don't know what the next 18 months looks like in terms of the presidential campaigns. they will be patient. they are going to commit to that. tom: the president's view of our overwhelming force -- any attack from desh by iran on anything american will be met with great an overwhelming force on to obliteration. how does iran respond? is it david and goliath or something different? niamh: for us, it is more a relationship between equals, but they are certainly parallel from a security perspective. iran has security interests in

the region as does the u.s. what is key in your comments that if american interests are attacked. we have not seen other than the drone incident, direct action against other american interests like naval vessels traveling through, or direct targeting of specifically american assets. tom: if the president -- let's say there are events that are bad and we get towards the edge of obliteration or whatever the president is talking about, do you assume a defensive iran or are they relying on allies? niamh: a bit of both. they can call on elements of the houthi movement in yemen. we have seen the movement increasing their activity concurrently. sometimes at matches iranian interests and sometimes it does

not. we imagine iran will improve the incentive. they can also call on has below and they have not -- has bella llah and it has not gotten their. -- there. francine: what does this mean for instability in the middle east, is no good for anyone. doesn't have an immediate impact on the economy or is it longer term investor sentiment, less capex? joyce: all eyes are on the sanctions. i don't see them using military force. the preferred instrument trump has used with foreign policy has been sanctions. it is the economic impact that we will look at and what impact this could have on allies affected by the sanctions, particularly the european

companies. that is the key thing the markets are focused on. we are also focused on what this means for commodity prices. the opec meeting and pressure on iran will keep oil prices here. meantime, wethe are following what boe governor mark carney is saying in front of u.k. lawmakers at the treasury select committee. he has been testifying for about 35 minutes on the inflation report in may. he was explaining the difference of what the market perceives and what the boe is forecasting. the market is taking an average, whereas the boe is taking the mode. we will get a couple of charts on that, but it will be interesting to see where lies the difference. this is bloomberg. ♪

♪ this is bloomberg "surveillance." gasoline futures in new york rising after a report the refinanced -- the largest refinery may close. philadelphia solutions may shut down the facility after a fire last week and two weeks before. american companies think they have found a legal way around the blacklist of huawei. they are taking advantage of exceptions to the export restrictions. the companies may be able to classify their technology as foreign-made, not made in the u.s. fedex is forecasting 2020 will be a transition year.

they suspect e-commerce will concernstempered by international trade tensions will get worse. here is the cdo -- ceo. >> we have been disappointed over the last few years with the assumptions that we made on the growth in international trade, particularly with the trump administration. viviana: fedex says earnings for the fiscal year will fall by a mid-single digit percentage. that is the bloomberg business flash. tom: we had a real turn in the markets with futures up 15, dow 119, with yields moving two basis points higher. mr. mnuchin talking about the idea of china, xi and trump closer together. what a joy to have a head of research with prodigious market

abilities out of columbia and princeton, joyce chain, expert on -- joyce chang, expert on the fixed income market. what to the markets say about the tension of the g20 meetings? --ce: if you look at etf's, eps, it has taken about four dollars off. inthe trade tariffs go off full force, this could be up to eight dollars off. this will have an impact on the u.s. equity market. tariffs and we could see the s&p i does s&p 500 at i guess the idea is you come out of g20, and let's say there is a middle ground where they move the can down the road. how will that affect the american economy and the yield market? joyce: bruce has done some

excellent work and is trying to look at it is happening with the manufacturing sector, with pmi. you can see growth down to levels of 2012. the consumer support remains strong and the second half of the year and this is where we have more hesitation. on the capex numbers, he points out the risk where this goes to zero if the business sentiment and context continues to deteriorate. from the g20, can we get common interests to work together? one area we see synchronized actions as central bank easing. we see the ecb cutting the deposit rate in september, the fed moving twice this year, bank hold,an moving, boe on scandinavian central banks on

, scandinavian central banks on hold, and 13 emerging-market central banks easing. francine: this is not a race to the bottom, this is synchronized? joyce: this is real concerns about global growth, the points that tom was pointing to come at the slowdown in the second half of the year, how sharp will it be? it is not a recession this year, but the risk has been rising. , last recession tracker fall it was at 25% and it is 40% today. that has been the deterioration in business sentiment and confidence. francine: if you worry about the debt level overall of the emerging economies and real economies, while that start fighting us? joyce: the debt level is a concern across emerging markets. the repayment schedule is pretty manageable because you can do the borrowing cheaply over a

long time, and a lot of it is held by the government's. tom: when we come out of g20, i guess we move onto the next thing. could there be any success in true bilateral discussions between china and the united states, or do you perceive that as too big a task? joyce: if it were just about technical issues, you could see progress, but it has become a tech war, issues involving geopolitics and cyberattacks, so i don't think you will find something comprehensive. everyone is hoping for a reset for a series of bilateral discussions restarting. if you look at the work that had been done on the trade side, a lot of work had been done. we thought they were close to being able to do something, so how will they be able to reset that? francine: joyce chang, thank

you. single days biggest drop after clients pull more than 5 billion euros of assets. intelligence next with more. this is bloomberg. ♪

francine: it is a really catchy tune. don't miss the boston pops fireworks spectacular, july 4 at 8:00 eastern. the cruelest thing was when you will -- you would go for nothing more than the canons at the end.

yearsps changed about 30 ago, but in my childhood it was a huge deal. this is before air-conditioning. before air-conditioning, it was so hot you did everything you could to get cooler by the river. air-conditioning changed the dynamics on a lot of these events across america, including new york and washington. francine: i am sure there is a graphic. here, we do not have air conditioning and a lot of european cities and people still go to fireworks. let's talk about h2o hemorrhaging money. they saw their biggest ever single day drop, declining by more than $6.4 billion. joining us now is jonathan tyce. i feel like i have a million questions, but how worried should we be? jonathan: we put the press

release from bnp with their suspension of the dynamic money market funds, this is not all asset classes that will go south and cause a chain reaction. this is clearly for h2o, a name specific issue. what we are pointing out in the report is that liquidity, most people do not understand what it is. foldet cetera went up 20 -- it's assets went up 20 fold. mean we arees it going to have a similar problem with others? case, as a woodford liquidity crisis, but this feels different. am i wrong? thee: -- jonathan: large-cap income stocks were in trouble. it is the article

talking about when horse and the liquidity of those names. one, where you have had a lot of growth and cheap money and leverage, things they are looking at at the moment, almost certainly there are a lot of funds where we have not had to worry about market to market. do we need to start thinking about this? the answer is yes. work atathan tyce's bloomberg intelligence is must-read. you just mentioned the key issue. masquerading as long only by side but with leverage. leverage.e but with fundhan: i used to run a and i remember some of the freedoms you have.

the issue we have to bear in mind is the trillions that are flooded into the market, the levels the markets are. some of these guys have dabbled into isa tarik assets. likethey have loan features for h2o? you look at an asset, a fund, you understand what the underlying assets are. the answer is no. tom: jonathan tyce, it read of the day for global wall street on want in london passes for a prospectus investment. coming up, bullard speaks to kathleen hays. we get an important perspective from john ryding. ♪

♪ tom: this morning, there will be

two debates in miami. only one issue -- emigrations. immigration.ts -- can there be compromise with senate republicans? kevin cirilli is in miami. be mueller on july 17. president trump says it is "presidential harassment." john ryding on the new fed, call it powell regime change. this is bloomberg "surveillance," live from world headquarters in new york. speakingey spanking -- -- is he a lame-duck? francine: mark. tom: mark carney, excuse me. francine: he is meant to go by the end of the year. i do not think he is a lame-duck yet, that it will be interesting

to have us forecast. it is interesting to have him explain why there are boe forecasts about inflation that are different from the market. it is just the way they calculate things. he is still a mover and shaker when it comes to pound. cardi -- johnhn carney because john ryding would be eminently qualified. viviana: special counsel robert mueller agreed to testify on capitol hill in the middle of july, setting up a dramatic confrontation over the trump presidency. mueller said he could not conclude whether the campaign conspired with russia and said he could not exonerate the president from obstruction. u.s. prosecutors joining a multinational crackdown on bloombergading, learning the investigation focuses on traders in europe and

the middle east, suspected of and full trading banks to obtain confidential information. in the u.k., boris toughened his brexit rhetoric with a do or die pledge to leave the e.u. succeed theresa may says he wants to negotiate a new divorce deal but the e.u. says that is not possible. jeremy hunt is trying to persuade conservative members johnson's strategy is flawed. the most expensive city for ex-pats is hong kong, followed by tokyo and singapore. hong kong's red-hot housing market and fluctuations in currency are keeping the city at the top of the list. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: thank you so much.

the data has changed in the last 60 minutes. the minutia and comments, a lift to the market -- mnuchin comments, a lift to the market. oil up 1.8%. the vix showing a better than good shift, 15.81 off of yesterday's challenging markets. , $59 is the spread on oil and $66. francine: i am looking at similar data. weyou look at the reversal are seeing in european stocks, it is quite noticeable after these comments by the treasury secretary, rekindling hopes for a trade deal with china. , earlier itsome 3% was down 1%. tom: where are we on oil?

on fifth in his hummer avenue the other day and i guess he is paying the price of gas. $29, a $46 average over that low price with a little bit of a lift out to $60. we have had a wonderful string of officers of central banks recently. we move on to the great dissenter, kathleen hays speaking with bullard. james: 50 basis points is overdone. i don't think the situation calls for that. i love my fellow committee members, but by not cutting we are putting high probability on the july meeting. you expect things to slow down to 2% in the second half of the year. that isn't the end of the world. >> the crosscurrents have

reemerged trade turning to greater uncertainty and data raising renewed concerns about the strength of the global economy. there is noak, and one better to drive the conversation forward then john ryding. stearns, withear his public service to the bank of england and the fed, john ryding on this moment of regime change. is it a regime change for chairman powell? john: is -- it is an extension of the pivot that started to emerge january this year. in december, the fed raised rates. the balance sheet was on autopilot. we had a first quarter gdp number around 3% and we pivoted to winding down the balance sheet more quickly. out,taking the rate hikes and the markets are pricing in a

100% chance of the fed cutting rates on july 31. what is the motivation? i along with some of your colleagues, i was at the fed conference in chicago, and fed communications and the difficulty they have communicating and who they are commuting to touch communicating to a big topic. they are out of tune. and richardlard clarida to both communicate they are not sure they see the data for rate cuts. you are acclaimed for your model of putting green. part of the model of the game of golf -- my game is painful, to say the least -- but you are on the course and you need to know what you want to accomplish with a shot. does the fed know what they want to accomplish with a rate cut? john: i am not sure because if

the economy were running into trouble, and the fed is taking out insurance against a potential downturn, 25 basis points does nothing. if the fed is making the argument that inflation is persistently low and the different inflation issue is more than transitory, and they are tweaking the level of the funds rate to keep in unchanged policy stance, that would be a different argument. they seem to kind of want to make it both ways at this point. my fear is that if the fed makes 31, the risk market interpretation what the first, the fed sees trouble coming and it becomes counterproductive in terms of the potential impact. market is saying, i think the economy is ok but it looks like the fed will cut so we can enjoy the party.

francine: what do you think they should do, given what you explained? john: i would be more comfortable if the fed would hold and signaling that it was on hold. -- wems a very dovish talked about it, it seems to be a classic weakness bias where the fed looks like it is going to cut rates unless the data talks it out of that. 3.6%,employment rate at and with inflation where it is, the 100%n't see probability case for a rate cut july 31. fedthe question is, has the choked the markets? come july 31, the fed will not disappoint the markets if they are still saying we are going to cut rates. francine: is this off of them

trying to keep up with the other central banks around the world? joyce chang of jp morgan said this feels like coordinated action from central banks to deal with the possible downturn. if the fed is the only one without the dovish bias, the dollar suffers. john: the dollar strengthens. francine: that is bad for the economy. if the dollar policy, as the chair reminded us yesterday, it is not within the policy , that is for fed the treasury. all of this, going back to the conference in chicago, this latest move of the markets was amped up when the chair said at the beginning, long-term rethinking monetary policy, but there is this trade stuff going on and we are watching it and we

will take whatever steps we judge of popular dutch appropriate. -- appropriate. francine: they must be looking -- i know currency is not something central banks want to action on, but how much does a strong dollar hurt exports? john: i don't think much at all now. we are not talking about the kind of strengthening of the dollar we have seen in times past. you are talking about a move of 10% or so depending on what measure you look at over the last year. for the u.s. economy, only about 13% of gdp goes through trade. inre is a lot more going on the trade policy area, tariffs, and retaliations, then there is in the currency area. tom: i want to talk about your work over 15 years and politicians having to deal with the lower nominal gdp and

terminal value. central bankers are no different. is what we are seeing central bankers worldwide jawboning ourselves to a new terminal rate which could be under 2%? expect to seeot the 10 year at 2%. tom: he have been good at that. it is a whole new world. that there are some things thateal in the economy brought the nominal growth rate down. demographics is slowing the labor force growth and productivity growth has been disappointing over the last decade. on the latter part, there are hopeful signs to me and some of the fed like vice-chairman richard clarida looking over a two-year horizon, a pickup.

inflation has been tickler lilo been are -- inflation has low so we are looking at a trend nominal growth rate of 4%. does it require 2% rates? up chairman would not draw what he thinks of long-term real yields yet. tom: john ryding with us. we drive forward the conversation on central banking and its impact on your life, from michael mckee. mary daly of the san francisco fed in the 11:00 hour. this is bloomberg. ♪

♪ viviana: this is bloomberg

"surveillance." let's get the bloomberg business flash. elon musk says the electric car maker could be on the verge of a quarterly record for deliveries. he will have to go all out the last few days of june to set the mark. buyers may be motivated by a deadline on july 1 for the u.s. tax credit on electric cars. rally --eserved its resumed its rally, going over $12,000 for the first time this year. cryptocurrency has been gaining a septa and's and attracting attention -- acceptance and attracting attention. management had its biggest single day drop in four days. slump in the industry with seller returns, but last week clients started to

pull money out because of concerns over pill liquid holding. -- illiquid holdings. kong, protestsng are expected. they want the leaders to raise the issue with president xi. let's get straight to our senior reporter in hong kong, david tweed, who is with the protesters. the protesters will start protesting later on. how has china reacted so far? is there still danger they handle the protesters with a heavy hand? case, i think not in this because one week or two weeks ago outside the legislative council when the bill was going through, you had tens and thousands of protesters, some of

them turned violent, setting up police action. the protests we have seen since the 2 million people came into the streets were very quiet, and the police have been careful not to get in their way or cause violence. we can be pretty sure there will not be any of that sort of activity. tom: can you extrapolate forward to the weekend where we could see larger protests than the some 10,000 today? david: i think what the interesting thing is that we are looking at, we are seeing a morphing of the protests beyond the extradition bill, which they want completely withdrawn. you get a sense of that from this poster. it says "free hong kong, democracy now." you get a sense this is not just about extradition. withdraw the extradition and bring back our freedom. this has morphed into a

discussion about the democracy that the hong kong people feel they were promised by the british when the british and chinese agreed to hand the colony back to china 30 years ago, and they never really got. back, we have a letter to the g20 talking about extradition and also, questions like does hong kong deserve democracy? these are the questions hong kong people wants the world leaders to ask xi jinping and osaka over the weekend. desh in osaka over the weekend. -- in osaka over the weekend. francine: we will bring you coverage of global leaders gathering at the g20 summit. we expect president trump to meet mr. she -- president xi on saturday. live on the web and on tv, this

is bloomberg. ♪

♪ this happening now, emmanuel macron and shinzo abe

holding a news conference in tokyo. after these talks, we understand abe and mr. macron will issue a five-year plan for cooperation. the long shadow is carlos ghosn and we are trying to figure out if mr. macron brought it up with shinzo abe, and they will probably travel separately to the g20. osaka to a g20to meeting that will be most interesting. we will have a full group at g20. mr. carney managed the message. you wonder what will be accomplished other than monitoring of the united kingdom economy. maybe he will make some discussions on global economics. john ryding with us. with your work at the bank of england, let's take a more global view. how coordinated are the central

bankers? john: i don't think they are coordinated in the sense of traditional g-7 coordination, but as you alluded to, the facing a common set of problems in much of the world and on top of that, the shock about the threats of the global trading system and the uncertainty about the global trading system with tariffs, having reemerged this year. problem, yourmon responses tend to be similar. the u.k. has a problem which potential, a quite high probability for a no deal brexit on halloween. tom: it can be a different number for the global economy with china and india with 5%, 6% growth, but in the united states we have a recession concept of negative gdp. what does -2% growth mean to

john ryding? is somewheret now close to the economies potential to grow -- economy's potential to grow. got to thep growth 1% area and business gdp flirted with negative in response to the oil shock in part that you were showed earlier, when oil fell from $100 a barrel to $26 a barrel. it had a big impact on capital spending. did that require a monetary response? no, it required a fiscal response that we got, the cut in corporate tax rate which helped rekindle business profitability. the pro-form has been from that is the missing link -- problem from that has been the missing link to capital spending, and i think that is because uncertainty about trade.

can me, that is the real issue. are we going to get trade uncertainties settled? it is a difficult world when your potential growth rate is 2% rather than 3%. tom: particularly moving minute to minute as we do in the financial markets. a risk on feel this morning, mr. smith of fedex pushing against that. coming up, my conversation on politics of the day. dr. dean will join, has prescription on 2020. 25 candidates. ♪

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francine: this is bloomberg "surveillance," tom and francine from london and new york. a lot going on with the markets, the positive inference from secretary mnuchin on the fact that there is a 90% chance of a trade deal between the u.s. and china, markets moving to a positive stance. let's get to the bloomberg first word news. viviana: the u.s. is willing to hold off on imposing more tariffs on china. the decision to be announced after a meeting between president trump and xi in japan. they are planning to resume trade negotiations and steven mnuchin saying a u.s. try -- u.s.-china deal is 90% complete. trump approached james bullard about becoming a federal reserve governor, but bullard is not planning to leave his job. he is a member of the policymaking committee and his views on low interest rates are similar to president trump. the heatwave and europe is bad enough that in germany, they

have imposed speed restrictions on the autobahn where there are normally no limits. the fear is high temperatures could create dangerous crashes. by friday, southern france could hit 113 degrees. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you so much. says, let thes" season get started. debaters or 52, all with their buttons, warren tonight and sanders and biden coming up on thursday. kevin cirilli is in miami now. i am absolutely fascinated by how liberal and progressive this debate will be. we have the house democrats vote last night on immigration.

will that be the touch point for a very progressive debate? kevin: yes, i think you will hear about immigration, iran, big tech, big business, and the divide between the democratic party with the socialist wing and the centrist wing. yesterday when i was coming here at of reagan airport, cory booker was in the zone and did not want to talk to virtually every reporter descending upon miami. in terms of what to expect, no opening remarks on either night. the candidates will have 60 seconds to answer the question, 30 seconds for a follow-up, and a minute to give a closing remark. i spoke with sean spicer yesterday. , getn your political cap rid of the ideological, and he said it is all about crafting a moment, crafting a standdown

moment -- standout moment. he will be watching elizabeth and -- tory booker, see if they can stay in the top tier. the spin room, i don't know if we had a spin room eight years ago. we certainly did four years ago. what will you look for tonight? kevin: i will be looking for who is in talking because if that dutch if you are not talking, -- if you are not talking, that means you won. it is all about that moment of trying to get into the top tier. we are about a month away from the second debate in detroit, so how do you get on the top tier debate stage to compete with former vice president joe biden? tomorrow night, everyone will watching -- will watch how biden

contrasts himself from bernie sanders, who is really the inheritor of the democratic socialist movement. francine: who needs this the most? i imagine not biden, sanders, and warren. ,evin: everybody is saying biden has the pushback on the segregationist remarks. we have not seen any movement from the polls. who needs this the most are the candidates who need to get into the top tier. beto o'rourke will be on the date -- debate stage tonight with amy klobuchar and they have to prove they can hang tough with vice president joe biden, elizabeth warren, cory booker. it is all about getting into the top six to eight candidates as we fuel into the back half of the summer into the fall. donors will be watching as well,

not just voters. francine: are they going to talk policy or is it just forum? kevin: i think it is a mix. it is a great tension on a crowded stage. time when republicans had virtually everybody running, now it is the democrats' turn. somebody like sanders has captured that by showing the -- authenticsc's with a democratic-socialist pitch. elizabeth warren has risen the tension quite well and has been able to bolster her campaign steps and bolster -- develop a policy plan. they are trying to position her as the missus fixit -- mrs. fixit. tom: on to biden and sanders tomorrow.

some of you may be wondering, who do we blame? how did we get to a 50 state strategy? only one person to blame, howard dean. we welcome dr. dean today. hoursd i could go for two beginning with the medical conditions on the border. because of the immediacy of the debate, let's go to miami. what will you watch and listen for? howard: there is room for a few more candidates near the top, so i'm watching for one or two or three who will break out of the group of people nobody has apparently heard of and get it in the top, my honing a message that is consistent and easy to remember. anyone who gives eight policy points tonight or tomorrow will not make an impression. they need genuineness and a memorable moment. spoke with the

admiral of pennsylvania the other day, the 25th debate running for president. how do you parse the progressive liberal tone of the democrats versus those in swing districts, swing states, more moderate? howard: i think this business progressivesion -- and liberal is overhyped. inyou look at where we won 2018, most of the seats came from oklahoma and texas and the middle of pennsylvania and kansas, so those are the votes we are going to win. i think the old conservator of dutch conservative liberal dichotomy has been pushed upside down partly by the republicans and the democrats as well. i don't think it is a matter of how progressive you are, but a matter of what you have to say. tom: with the house passing the emergency border act, should

these candidates touch upon immigration aggressively or is it a third rail they don't want to go near? howard: they should touch upon it. those pictures of the guy and his daughter face down dead in the river have a galvanizing effect. that is a picture that shows donald trump's policy at its worst, and you will hear a lot about that. francine: where do the policy issues go to? if you look at 2020, the day of voting, what will people be thinking about in that booth? one,d: three things -- losing their health care to pre-existing conditions. two, they don't like donald trump. the majority of americans think donald trump is not a sound president. three, they will be thinking about the economy, what about the people who voted for trump

whose position has not improved? you cannot eat anger for supper and people will figure that out. francine: the employment is pretty good, the numbers are pretty strong. trump a second term president no matter who runs against him? howard: the biggest problem is the wealth gap. when you have people who made a fortune in housing suggesting a wealth gap, that is extraordinary. it is not suggesting people are suffering and cannot find jobs. the problem is there wages are not going up. i am not saying that because i am left or right, that is a fact, and it drives people crazy because they work as hard as everybody else. why should they be in the bottom 25 to 30%? tom: why are there so many candidates? howard: that is a good question.

i have no idea. i think trump has something to do with it. they saw lightning strike and the republican four years ago and figured, why not me? tom: maybe they said, why not me, but here we are beginning the dash. give us the howard dean calendar forward. when do i have to concentrate on your insane business? howard: probably around the first of december this year. tom: i like that. howard: otherwise, it's pretty much a parlor game. i thought kevin made a lot of sense but a couple of things i disagreed with. it does not matter what big donors think of the debate tonight. in the democratic party, they have not had control for some time. it is what the grassroots thanks. they are ideologically and

emotionally dedicated to getting some 30 -- somebody terrific and they will weigh in with their $20 donations. francine: one of the things i was talking about with stephanie baker, who follows this closely, is how much is the democratic voter looking for someone who they think can beat president trump, versus looking for someone who shares their worldview? , twice it is about 2-1 as many want to vote on beating trump and one third will vote on the basis of who is most like my view. nate silver has done some good work, about twice as many people , the vast majority of democrats want to beat trump. francine: usually polls this far out do not tell us anything this this time ass it far as biden's lead? howard: it may be, but i don't

think the polls this month are any better than they were -- i wish they did, because i was leading at this time in 2003. i wish i could say the polls were incredibly accurate. i came in third in iowa and that was the beginning of the end for me. everything is going to change and you will find out what is going on about a week and a half before iowa. candid. dean, always with his prescription for democrats forward, the former chair of the party known as democrat. leading tonight, warren and tomorrow, biden and sanders. we will have a careful analysis. i spoke with david westin. he is more than enthused to speak of the themes, policies, and politics of the debate. lined up today and tomorrow, it will be more than interesting.

look for this coverage over the next 48 hours. this is bloomberg. ♪

♪ bloomberg "surveillance," good morning morning to all of

you worldwide. a little bit of lift to the market and a risk on feel in the last 90 minutes. with us, john ryding and you would expect for the single best chart we would dash into monetary policy. then i want to make a debatable shift. this is the real fed funds target rate, the yellow circle stanley fischer altar accommodative. do you presume that rolls over and we go back to a negative adjusted fed funds rate? john: it is getting close. tom: we don't know that? john: it is getting close. i would rather see the fed give us a clearer strategy, and i think the fed's policy of is the nominal fed funds rate is low so we don't

have much headroom to cut during the next recession. the phillips curve is flat so we cannot get inflation up, and we are persistently sing on the low side of inflation. -- missing on the low side of inflation. tom: i am going to rip up the script. kevin cirilli in miami. you mentioned, how will we pay for these well-intentioned bills of the democrats? is everyone including chairman by ourconstrained growing debt and deficit? john: if you think back to the theory that none of us understand monetary theory and modeled monetary thinking as it, refer to, just refer to -- refer to it, the central bank can print money but if we have an inflation problem it is up to

congress to act, not the federal reserve. tom: that is why they made the fed in 1912. john: the question is, are we getting back door of this by keeping a large balance sheet? if the country goes into recession, the fed will add 10 percentage points of gdp again to its balance sheet, if it wants to cut the equivalent of what is typically cut in recession. we are have a fed that is funding the government indirectly through qe. there treasury portfolio will be rising. tom: this will be interesting, and we will have coverage of the debate. i don't think modern monetary theory will come up. coming up tomorrow, this is well-timed, keeping the banking issues in europe. harris associates,

what a challenging time for international investment. this is bloomberg, risk on. ♪

♪ this is bloomberg

"surveillance." fedex is forecasting 2020 will be a transition year. the package delivery service expects e-commerce to improve but that is tempered by concerns trade tension will get worse. >> clearly, we have been disappointed over the last few years with the assumptions that we made on the growth in international trade, particularly with the trump administration. earnings forx says the current fiscal year will fall by a mid-single digit percentage. american companies think they have found a way around the black list of huawei by shipping takingmponents, advantage of export risk actions -- restrictions. they may able -- they may be

able to classify their technology as foreign-made. francine: more on that story on micron and huawei, let's get to tim cole been. the firstcron for time, a company admitting they found a way around the tariffs to sell components to huawei. will we see other companies trying to do the same? tim: i think we are. some have started doing that. intel is another of the companies that found a loophole and started shipments again to huawei after pretty much every company from the united states was not shipping to them. we will see executives from u.s. tech companies sitting down with their lawyers, going through the rules and regulations, having a look at where their factories are based and where they are manufacturing their products, and seeing if there are ways they can get around it and make

the argument that this product or chip or component is not american and is not subject to the ban. that is going to be a very lucrative thing. if they can find ways to get around this, they will be able -- get product and so revenue. huawei is one of the companies. more are being added to this entity list the u.s. has going, so they understand they need to deal with it now on the understanding that there could be more companies added to that list that they will not be able to sell to. they will be looking for the loopholes because there are money. francine: we are seeing changes in global tech hardware inventory. how will this play out over the next couple of months? tim: this has been a big problem for six to 12 months, because the macro economic headwinds we

have been speaking about on smartphones is not quite as fixed as it used to be, and not as strong as it was two years ago. this is a perfect storm causing a slowdown in the tech industry, and what i think happened according to the numbers i looked at, the huawei effect gained a bit of an artificial spurt of growth in the sales of components, because they were anticipating a ban and building up there stockpiles. inalculate a 76% increase there stockpiles of components last year, but they are not doing it to buy the product and sell it out to market, but put it on the shelf and save it for a rainy day, which came in may when the van was slapped on them -- ban was slapped on them. that may be giving full signals to the sector that the demand is

still there, and what we will see the rest of the year is a off.off has to get sold forcine: thank you so much making us smarter on anything lpan.ology, tim cu michael mckee sits down with festivaly at the aspen at 11:00 a.m. in new york. watch for impact on treasury. this is bloomberg. ♪

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fed chair powell says the case is getting stronger for cuts, while bullock says he is ready for an insurance cut of 25 basis points right now. treasury secretary mnuchin says the china deal may be 95% of the way done. and feeling the pain. fedex says trade tensions will leak into its profits for the rest of the year, saying they are disappointed in the trump administration. welcome to "bloomberg daybreak" on this wednesday, june 26. here with carol massar. alix steel is off today. the thing i sort of missed yesterday is that mr. mueller is going to testify after all. that sort of came in under the radar. carol: this will probably be one of the most well televised events in terms of politics this year. what is fascinating is he was subpoenaed. he has to appear before this hearing.