francine: jay powell faces congress today, but only one question matters to the markets, will he pushed the fed cut rates -- push the fed to cut rates? the candidates for the next u.k. p.m. clash over brexit. front.ther president moon jae-in tells companies to prepare for a prolonged trade battle. u.s. and china resume high-level good morning, everyone.

thank you for watching "bloomberg: surveillance." the stocks europe 600 down a touch. a lot of the focus is on the jay powell. you can see the u.s. 10 year yield at 2.10. and we are looking at the pound. boris johnson is the person who will probably become the prime minister and keep saying no deal brexit should still be on the table. we seeing market movement with the pound extending. you can see cable at 1.2458. coming up, we talk commodities with blackrock at 10:30 a.m. london time. but first, let's get straight to bloomberg first word news. china are. and holding the first high-level talks since a truce was called in the trade war. top trade officials are speaking on the phone. larry kudlow says the initial talks were positive. >> there was headway last winter

and spring, then it stopped. hopefully, we can pick up where we left off. ambassador lighthizer and secretary mnuchin are exploring all that. discussions today went constructively. but it's too soon for details. factories and barely escaped deflation in june, unchanged from a year earlier. the deceleration raises fear of eroding profits and trouble repaying debt. the world's largest supplier of consumer goods warns that the trade dispute threatens the very existence of some chinese factories. spencer: now, the trade corridor is being disrupted by whether there is a deal or not or tariffs or not. lot of u.s.-based customers are trying to diversify outside of china. not leaving china, but

diversifying to spread at the risk. >> south korean president moon jae-in's warning business leaders of an extended trade battle with japan over export controls needed to produce semiconductors and computer displays. there are concerns it could disrupt global supply chains. 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. let's kick off with the fed and investor expectations. jay powell begins at of testimony to congress later today. he will face a barrage of questions, but only one matters to the markets. is ready to push the fomc towards its first interest rate cut since 2008. joining us is the unicredit group chief economist.

thank you for joining us. does the fed have any choice but to cut? >> no. [laughter] francine: so they will cut because the market says? >> yes, but it is because they have indicated it. you could say that the market has a driven it, but they have been leaning in that direction and have not taken it back. now, it is too late. --ncine: if you litter listen to richard clarida, he was saying it was much more tempered and that the market cap -- priced in. fed going to worry they are facing a lack of independence not just from president trump but the markets? erik: it is always the problem. there, i think the fed has been to state its independence, in a sense. thisntral banks don't do

-- when a central banks don't do this, it is because the markets tell them. let me look at my chart showing one of the preferred yield curves the fed looks at. if you look at our question of the day, will the treasury curve the flatter or steeper after jay powell's doubleheader? erik: i think it will be flatter. but i am not sure if there is a whole lot left in it in the sense that it is priced. the market has understood what they intend to do. i don't think they will correct us at the stage. francine: if you look at the fact that the three month 10 year yield has inverted since may, is the fed worried about that? is it an impending recession? the message out of the fed

has always been that we should not be so worried about the inversion of the curve. there are different issues at play. i never really bought it. it is a pretty good predictor for recessions. in the fed cannot prevent it from happening. they can cushion the blow from it coming out early. and if they do go ahead in terms of cutting, they are earlier in the cycle than any of the other previous downturns. so that will help cushion the downturn. but you are right, you also refer to the labor data. all of the probabilities we have on the recession are all flashing red. so we have lots of reason for them to start to become more dovish. francine: is this with a trade war that is here to last? we heard from mr. kudlow that the talks seem to be back on track. specter of worsening

trade tensions it's taken off the table, what does that mean for trade policy? erik: i don't think it means anything because the fed cannot change policy based on trumps tweets. it is a tv reality show. on the off, love each other, don't love each other. the underlying problem is the guy is a protectionist. he is out to change the way the world is working in putting trade infringements on. that is bad for growth. the central bank knows it. the key reason we are seeing the change in tone from the fed and the ecb is because they are getting nervous about this. francine: if the fed cuts, is it one and done? erik: no chance. there is this insurance idea, but that is not the way it works. can you ever member a weakening economy and you do one? when they start, and they will

start, i guess they will do for cuts in all -- four cuts in all. but the risk is for more rather than less. francine: thanks, we will get back. we are getting some news saying that in south africa, they may cut some 2000 jobs as part of the restructuring program. 's we will have a good look at some of the steel prices and its impact on these producers. coming up, we talk about deutsche bank's rating. that's coming up next. this is bloomberg. ♪

francine: economics, finance,

politics, this is "bloomberg: surveillance." let's get straight to the bloomberg business flash. >> tesla says it is exploring plans to boost production. that is according to an internal email. teslave is coming after achieved record deliveries in the second quarter, beating expectations and easing fears over demand or electric cars. another 200 $14 million in equities sold by spacex, the third offering his company has undertaken. it was identified in regulatory filings and the ontario teachers pension plan has announced it has back to the company. richard branson's virgin galactic will become the world's first publicly traded is a company. spacefunny -- traded exploration company.

it will help fund the company until spacious can fund profits. >> we had a deal from saudi is and if weot possible were to actually take this public a long time so i think this approach seems to work very well for us. >> that is your bloomberg business flash. francine: deutsche bank will pay bonuses to deserving staff according to christian sewing speaking at a conference call. despite the lender posting its fourth loss in years, they are trying to prevent its best remaining employees from jumping ship. shares in deutsche bank are down over 7% over the past three days. joining us is the associate in -- associate managing director at moody's. welcome to the program.

when you look at deutsche bank, what has the plan changed in your eyes? >> how has it changed? francine: what does it mean for the creditworthiness? >> the key thing from our point of view is that the recently announced construction plan is bond friendly when and if achieved. francine: will it be achieved? the share price rose when restructuring was announced and that people said that this may be too ambitious. so do you have similar concerns? aurie: we think there are three main challenges of the group will face in achieving this plan. the first thing is that they have to achieve a massive reduction of this capital relief addition, they need to restrain the franchisor roshan in their remaining fixed

youme business -- franchise roshan and their remaining fixed income business. erosion in their remaining fixed income business and have to do it in a difficult environment. francine: is there a worry that by cutting too much into equities, they will lose customers elsewhere? laurie: that is what i was referring to. they want to retain a sizable fixed income franchise. their corporate bank which is now at the core of the business model. , butey expect some erosion more than they desire will work against what they are trying to achieve. francine: what are you seeing in tokyo's -- cocoas? laurie: the spreads have

cvs ond a bit, as have their nonpreferred and senior unsecured. as compared to the equity market, which is down. about are not concerned their ability to meet the coupons on those instruments. francine: what are you doing in terms of the credit rating? laurie: on the back of the announcement, basically we affirmed our baseline credit assessment which is be a one and our long-term deposits. but we kept our negative outlook which we had in place. that is a reflection of the challenges they will face in delivering this plan and the persistent low profitability they have been producing.

we expect it will remain at least through this year and probably flatten next year. francine: the concern is that this is a bank that will be very tied to the german economy at a time when the german economy is not doing great. erik: yeah, i'm worried. as he said correctly, the profitability is terrible. -- as you said correctly, the profitability is terrible. and also the issue of how much revenue you could realistically expect to generate at a time when the german economy is not doing well and headed for a downturn. then you have all the competition and the rest of it. so this is a tough one in the overall market. and german banks have been lacking. in the peripheral, we have cost to revenue ratios down. the last for deutsche bank was like 90 -- laurie: 97, yeah.

erik: is absurd. and the german banking market is still challenged by the fact that you have subsidized banks. so it is going to be tough, i think. francine: if the german economy gets better, how much is that impact the rating for deutsche that impact the rating for deutsche bank? laurie: a strengthening operating environment and rates going up would definitely be a boost for the plan. are done onmates the basis that that does not happen. and a deutsche's would be able to achieve about a 7% return on tangible equity by 2022. so it is still below what they are trying to achieve at 8%. francine: fabulous, thanks so much. associate managing director at moody's and erik from unicredit

stays with us. as trade talks resume, south korea's president warns a business leaders to dig in for an extended trade battle with japan. we talk trade. this is bloomberg. ♪

francine: this is "bloomberg: surveillance." the u.s. and china have held their first talks since president trump and xi jinping called a truce. top trade officials spoke on the phone.

larry kudlow says the initial talks were positive. let's get to another front in the trade war. president moon has warned the country's top business leaders they may have to dig in for an extended trade battle after japan lifted export controls on key components. joining us from soul is our reporter -- seoul is our reporter. >> present moon jae-in invited all of these company leaders and executives of the nations top 30 companies to the presidential office. suggested was that these companies focus on domestic products and domestic production. it is a bigger wave of rejectionism within the region for not only an extension of the china-u.s. trade spent, but also also making a

stretch to korea and japan. he is saying that korea's economy being heavily reliant on importers, south korea should shift to focus on domestic reducers -- producers. francine: what is the purpose of this meeting and to actually would attend -- who actually would attend? >> the companies include samsung, and they motors, lg, these are the companies that would be directly impacted. what moon jae-in is trying to do is send out a message, saying the government will that these companies up, pushing for an extra budget bill within the national assembly to protect these companies should they be

impacted by these export curbs. francine: thank you for the update. from korea.ining us we focus so much on the u.s. and china that we forget the chip -- the korea-japan tensions. are we expecting a currency war? are trade tensions something we just have to get used to? erik: i think that is right. even though we have the wto where people usually went to settle these things, it takes a long time. so there is nothing unusual about two countries gearing up a bit. but it is within the bigger framework and discussion of u.s.-china and the future of multilateralism. francine: what does it mean for the world economy? if you look at supply chains and things moving around, is it permanent? or does it drag everyone lower? erik: i think it drag everyone

lower. on the effectudy of some of these tariffs. in particular, the u.s.-china. but the numbers are enormous. looking at just tariffs trump has suggested, it can shave something like 2% off global trade over three years. this is massive. it means that global growth under 4% to aund little bit over 3%. -- within you are in a shiver of a recession. francine: do countries not adapt? erik: exactly, that is the short-term effect. and one of the interesting things in the dispute is that exports from vietnam to america have exploded. , butu redirect quickly long-term gains, all of the

effect they have had in the world, all of the positive effects of globalization, particularly in emerging markets where we have never seen such success before, that is being challenged by this. francine: we have to come back and ask you about renminbi at seven and what that means for trade. erik from unicredit stays with us. coming up, the candidates for the next u.k. prime ministers clash over brexit, we ask if they are ready for the october 31 deadline. we have more from the debate and the latest polls. if you look at what happened yesterday, parliament was flexing its muscles as boris johnson doubled down on a no deal brexit. this is the word. -- this is a bloomberg. ♪ xfinity mobile is a wireless network

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best devices. best value. simple. easy. awesome. click, call or visit a store today. powell faces congress today. fed to cuth the

rates for the first time since 2008? candidates for the u.k. prime minister clash. investors are ready for the october deadline. president moon jae-in tells companies to prepare for a trade battle with japan. the u.s. and china prepare high-level talks. this is "bloomberg surveillance." this is gdp. gdp in line with expectations. becausebackward looking it is for the month of may. 0.3% higher month on month. three month on three month, that is in line with expectations. belowrial production is at 1.4%. is lagging.g, that

1.4% instead of 2.2%. 1.2471.d is at we are dealing on whether we should leave the eu without a deal. that is what the candidates debate. does gdp in may make a difference to traders? know. these numbers are being revised. they are backward looking. if you are sitting on the trading floor and you trade currencies or interest rates, these are not particularly important. in an environment where we are hitting a cliff in this country. u.k. mps have voted in favor of preventing the next prime minister of forcing through a no deal brexit.

betweene led to a clash the two men vying for the party leadership. we will hear what they had to say about delivering brexit by october 31. >> i am not going to take anything off the table. >> it is a curious thing to do if it is about taking control back from parliament to shut it down. you to keen as boris and leave by october 31. no deally handled brexit could be costly. >> you are telling businesses they do not need to prepare for no deal. >> i don't think we will end up with a no deal exit. i do not think there will be a disruptive or disorderly brexit. >> we need leadership that is going to guide us through a

crisis and make a great success. that means being honest with people. the way to do that is to get brexit done. francine: let's get the latest our executive editor and erik. we had this vote in parliament. what does that mean? positions,ing of particularly if boris johnson becomes prime minister. lawmakers are saying we do not want to be bypassed. boris johnson says i am keeping option on the table. point, he is a hard-line brexiteer. instead of saying i would negotiate with the other parties or have discussions, he is

saying this is what i want from a deal and i am going to get it done in time. if he gets the leadership, it is an antagonistic relationship with parliament. a fight, if there was who would win? rosalind: john major saying he would sue to stop johnson prime minister from suspending parliament. it is unclear how that would work. parliament should have the right to vote on the deal, whatever deal boris johnson would negotiate or try to renegotiation -- try to renegotiate. francine: i thought that is what the gina miller thing did. if he negotiates something else with brussels, does that need to get voted on by parliament? rosalind: that is unclear. the aspect they wanted to get

through parliament last night they did not. if there is a no deal exit, there is no deal to get through parliament. that is not an option he sees as likely. he wants it on the table because he wants to use it to go to brussels to negotiate with. francine: the market is in position for a possible no deal brexit. there is a lot of confusion. what does this mean for where brexit ends up and where the economy ends up in 12 months? erik:'s it is bad. uncertainty is bad. there has been some misunderstood optimism that it is not so bad because you have seen the households have taken savings down to keep conception up. growth has been held up from the underlying -- and the uncertainty is very clear. there is a common sense feel that surely this country will

not crash out like this. investment has not crashed completely. i am worried. you see this debate and you say where is this country going? it is not about inside, outside so much. what kind of deal are we going to get now? i am getting very nervous this could be very ugly. francine: there are a lot of people who do not want a no deal brexit. there are still people in parliament that do not want brexit at all. what is the probability of no deal and what is the probability of no brexit? erik: both probabilities have gone up in a way. the no brexit is a very low probability in my view, but it has gone up from extremely low to not completely impossible anymore. there is possibility boris johnson, with all of his charlatan attitude, goes off and

tries to sell something that is -- to theresa may's deal. maybe the declaration gets a little bit of something and he somehow cannot get it through. i do not know. i was surprised the vote yesterday and parliament was by one vote. it tells you the conservatives are not obeying all of the whip. it is one vote. francine: when does the commission in europe -- when is it fully up and running? is it a done deal that boris johnson prime minister? i keep looking at polls and it looks like he is the clear winner. rosalind: he is well in front. his popularity base is with tories in rural areas. they like what he is saying, they like he is going to bring power to the conservative party, re-energize the tory party. for all of his flaws and comments, he is the guy that can

do that. francine: he says he is going to negotiate, but there is a commission in place who needs to sort out their own thing. the 31st of october, can he go to europe and try to --? francine: he seems to think he can. are remains the day people looking at. thank you. to bloombergaight first word news. viviana: more legal fighting over whether the white house can add a citizenship question to

the 2020 census per day judge blocked the request. he says the government must show replacing lawyers will not add further delays to the lawsuit. second-quarter deliveries sliding 54% after the global grounding of its 737 max 8 after two fatal crashes. airbus is a net 207 orders ahead of boeing. chairman jerome powell will lead rate -- will likely leave rate cuts on the table when he testifies today and tomorrow. that is after the jobs report died doubt -- dial down the --ency for a qatar airways purchased boeing

737 freighters. climate change is undercutting the drive to and poverty and hunger according to a report. track to endnot on extreme poverty by 2020. the number of people living in poverty has declined, but the pace is slowing. global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's check in on what is moving in your markets. >> one of the big movers to the downside is page group, worrying that the 2019 operating profit is going to be at the lower end of the range. the recruiting firm saying there are macro issues. brexit uncertainty shares on track for the biggest drop since 2016.

half net results coming in at a loss. biggest selloff of the year. expectations were low heading into these numbers. warning about their sales this year. shares dropping by more than 3%. francine: thank you. up next, why wait until september? data out of europe is hardly inspiring. why would mario draghi wait six weeks to ramp up stimulus? we discussed the risk of underpricing the ecb. this is bloomberg. ♪

francine: this is "bloomberg surveillance." will wait until september to ramp up monetary stimulus, underestimating the risk of earlier action. the economy is still limping, giving mario draghi reasons to follow through on the pledge to act if the outlook does not improve. this as we get the european commission's economic for coast in the next hour. the commissioner will be 8:00 a.m. london time.

would mario draghi do something to help her out before, to put extra stimulus so she does not have to do it or would it be better for the outgoing president to wait? erik: i don't think that is the way he thinks. mario draghi thinks of it in the following way. the world is looking troublesome. arectations and europe coming down. he does not want uncertainty about the change from him to the next one. what he is trying to do, people say he is trying to tie in his successor. i see it as a way of securing continuity. that is what he was doing. he paved the way. the question is whether he delivers before he leaves or whether he gives it to her. my guess is he will do some before he leaves. francine: does it make a difference for the markets? if he does something, is the outlook worse than we think? erik: the market gets excited about whether you cut rates one month or the next month. francine: very excited.

erik: it doesn't matter. have heard nobody suggesting christine lagarde would reverse course or not follow on his line. in that sense, it does not matter. francine: we have a couple of bond sales that were big auctions. erik: it has been an incredible rally. rhetoric part of the against europe has gone away. people have been more comfortable with italy. with all of this monetary easing coming, you have to buy something. you buy things you did not buy before. there are corporate bonds. money is flowing down, as it is

supposed to do in the circumstances. francine: it is still risky. are they mis-priced? erik: not compared to corporate bonds. been euros always zone countries do not default. that how do you estimate the implied probability is a bit of a wrong game when it comes to a euro zone country like this. i am not worried about it in that sense. mexico's up next, currency falls when the prime minister quits due to a dispute with the president. this is bloomberg. ♪

this is bloomberg surveillance. let's talk emerging markets. mexico's finance minister is promising to meet the fiscal target. bank a former world

official who is nominated after his predecessor onyx actively quit. wasenounced what he claimed political interference. i don't know whether you are following mexico specifically or if we should look at mexico as a political risk. it was pretty tame until someone has to resign. i don't follow mexico that closely, but it is a clear example of what is going on in the world with political interference. we saw it in turkey. we may need to be more exposed to it. it is a place where checks and balances are not as strong as what we are used to in the area.

very clearly, people are looking -- we have been through several months of scaling back. the whole story of monetary easing is bringing you back to the more risky assets. francine: let me go back to what happened in mexico. the resignation of carlos. all, the timing of the resignation seems tricky. the man was meant to put mexico on better footing. good the timing is never on such an event like this for mexico. a recovery phase following the better news on the

tariffs issue with the united states. ,e have a man largely trusted but also by the market. optics, the the tone of his resignation wasn't good, either. he talked about questionable policy decisions. story ofomething of a a thing going on beneath the surface. francine: what does that mean for the peso from here? >> i was looking at the volatility of the peso and there was a sharp rise yesterday following this announcement. that clearly tells the story that the peso is going to be in for a rough ride.

the market will be looking for soothing words from the new man in the hot seat. that would put a little bit of calm back into the markets. there are a lot of challenges coming up for mexico. decisionome kind of awaiting on what replaces nafta and there is this threat of downgrade to the credit rating, which would put the cat among the pigeons. thecine: thank you for update. let's go back to eric nielsen. we are looking at some of the risks out there.

south america, i don't know if it is closer or further away to a spat with the u.s. erik: you have to look at the country.d country by these are individual countries with different stories. is very dependent on america. when america has become the core center of trade, that is not good. this has always been an issue. you have to go down the continent to pick them individually. francine: what about something like vietnam? erik: this is a good example.

story. good a steady sort of story. china gets in trouble. intoee this shift of trade vietnam. francine: bloomberg surveillance continues in the next hour. tom keene joins me. we will be talking commodities. a full round up of the said, treasuries, and italian bonds. this is bloomberg. ♪

powell faces congress

today. will he push the fed to cut rates for the first time since 2008? theno deal debate between future prime minister's. moon jae-in tells korean companies to prepare for a prolonged trade battle with japan. the u.s. and china resume high-level talks. we have a powell testimony with all of the market trying to figure out whether we will get a cut and what happens after we get a cut. thant, with better expected gdp figures. tom: the brexit debate is heated up. dialoguesed on how the has changed over the last week.

let's get to bloomberg first word news. in the u.k.,egin where high drama in parliament is happening. lawmakers merrily passing a measure that would keep the next prime minister from pursuing a no deal brexit without a fight. that is aimed at boris johnson, who is likely to be the uk's next leader. he has argued we need to act seriously about a no deal brexit from the european union, to persuade the eu to shift its position. trade was not the only issue as the china -- as the u.s. and china resumed negotiation. the fate of huawei technologies will also come up. limiting huawei's access to goods and services. the u.s. and china spoke by phone yesterday. the white house wants to add a

2020enship question to the census. a federal judge blocked an attempt to assign a new legal team to the battle. ders are certain the federal reserve will cut interest rates but are unsure about what will happen next. they are pricing in a full quarter-point decrease at the end of july. traders have scaled-back how much easing will take place in 2019. global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: not much going on here. euro a little stronger over the last 24 hours. to 14.32.t

that is the 10 year yield. -- 199 to 211. we have a weaker japanese yen, something to watch. treasuries,s. talking about that with erik. two .1.ear yield, european stocks are undecided about what to do. has declined. the u.k. economy rebounded for the month of may. tom: deutsche bank rebounded and gave it up. that would be the stock and the equity. of theirhe price bonds. orover here is yielding 11

12 percent. it has been a vector down over the last year and a half. it is the ugliest chart in banking. that is a pretty ugly chart. up big.own, yield francine: some of the italian trouble banks are not listed. we can compare ugly charts. this is an ugly chart, looking at pound. yesterday, members of parliament potential crisis, aimed at preventing the new prime minister from forcing through a no deal brexit. i watched the debate last night in the front runner, boris johnson, has refused to rule out suspending parliament if it is the only way to leave the european union. i appreciate this context

you give to this. it is amazing. i love how your campaign is compressed. really cool how it is compressed into a number of months. i have learned a lot the last couple of days. the itv thing seemed to be really interesting. the fed of the central bank of the world. erik can join us for perspective. peter, what are you going to listen to from chairman powell? what is the nuance? peter: how much is the focus on the state of the u.s. economy and how much is the focus on the state of the global economy? this dramatically shifted from to beingbally focused domestically focused and back to being globally focused. if they remain focused on the

global economy, there are strong arguments for him remaining on a dovish path. that is what the market expects. long as that is maintained, the market can overcome recent turbulence and treasuries can rally and stocks can go up a little higher. had a strong vector to an economy -- to accommodate a fed. to almostven it up stasis by the fed. that is a completely different discourse than what we would have seen two weeks ago. it is a difficult set up to see the data or understand the data in front of them. the market has already priced this rate cut and they have not

done anything about it so far in terms of this thinking. i would be shocked, almost rule he would use this opportunity to start to correct a market misperception if that is the case. is the market misconceptions the right way? don't think so. this is a central bank looking at the downside risk to global trade and is trying to ensure against the impact that would have on the domestic economy. in many ways, they have changed the paradigm they are focusing on. the otherocusing on part of the mandate, on the inflation side, as the reason to deliver a monetary policy path. if they were to roback expectations and think about the

expectations, it is what the president would not want, what the domestic economy would not want. if they rolled back those expectations, they would have to deliver the expectations, but they would be further behind the curve. francine: after the testimony of jay powell, what will happen to the yield curve? will it steepen or flatten? rik said it would flatten. peter: we differ. there have been a lot of focus on the steepening in the longer end of the curve. it looks like fast money, leveraged accounts have been taking off. , theyf the steepeners reinitiate them once they have confidence the july cut will materialize and they get confirmation that the fed is globally focused. do they have to deal with a

europe in recession? erik: i don't think that is the story. driving thehe u.s. recession, or just a slow down if they manage to cushion it enough. isestic demand in europe running at about 2% growth. the story is that global trade is not doing very well. europe will suffer some, but the underlying story is that it has been very long and labor markets are tight and coming to a slowdown. i do not think it has to be more than that. francine: thank you. we are back with peter. coming up, as the candidates for the next u.k. prime minister clash over brexit, we ask if

investors are ready for the october 31 deadline. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." investment managers are trying to recover from a scandal. assets under management rose. it is on track to liquidate funds tied to top form a bond trader tim haywood. he was suspended. that clears the way for a possible sale of the company. second quarter deliveries from boeing from a year ago plunging. best-sellingeing's

aircraft. none have been delivered since the plane crashed in march. tesla ready to increase productions. tesla delivered a record number of electric cars in the second quarter. they make all of their cars at assembly plants in fremont, california. francine: thank you. u.k. mps have voted in favor of aimed at preventing the next prime minister from forcing through a no deal brexit. it passed by just one vote. it led to a clash between the men vying for the party leadership. here is what boris johnson and jeremy hunt had to say on delivering brexit by october 31. takeam not going to anything off the table. >> it is a curious thing to do if it is about taking control

back from parliament to shut it down. >> it is vital we come out on october 31. by octobern to leave 31. >> a badly handled, disruptive no deal brexit could be costly. >> what you are telling businesses as they do not need to prepare for no deal. that is very dangerous. >> i do not think we are going to end up with a no deal exit. i do not think there will be the disruptive or disorderly brexit you fear. >> we need leadership to guide us through a constitutional crisis and make a success of brexit. that means being honest with people. path tout us on the long-term success. the way to do that is to get exit done. francine: joining us as the brexit editor at bloomberg. peter is with us as well. we watched the debate, most of us watched the debate. it feels like parliament does

not want a no deal, but boris johnson is doubling down, saying i am going to have to fight with parliament if i need to. takings johnson is not off the table this option. be, there it would would be a precedent for it, but it would be controversial. parliament would have to come might take their revenge on a prime minister that has sent them away. he would takeing the government to court if it tried to suspend parliament. boris is talking to this electorate who are voting. they are pro-brexit. that heot to make clear would pursue no deal if that is

the only option. francine: we are getting reviews out of the european union. the figures for their outlook are forecast for 2020. they are cutting euro area growth and inflation forecast for next year. they talked about trade tensions. they say policy uncertainty is weighing on the region. strengthens the case of mario draghi's stimulus. presidentone here for draghi and president lagarde's accommodation. it is stunning, the mathematical nominations of gdp. that is a stunning statistic. it is unbelievably tepid. francine: it is. to put this into context, we

nominatedtine lagarde as ecb president. the question is whether mario draghi does stimulus before she takes over to make her life easier or not. the other question is because we have an incoming commission, if you go back to brexit, it will be difficult to go back to brussels and get an answer back. people forget the 31st of october deadline seems like it is around the corner as you need to give brussels time to get the new people in place. the new commission takes over after the deadline. the question is, if there were another extension, which people indeed, it would force the new commission. tom: i have an important question. let's wring this up. charts the most important

on twitter. this is the chart of what will happen in parliament. there are all of these options. this is brilliant. does force johnson or the other guy, did they know this chart? are they aware of the optionality forward? emma: i think so. been johnson's team has wargaming the possibility of an early general election. that is one of the options in that chart. several arrows lead to a general election. if you have parliament deadlocked and parliament will not let the new prime minister pursue a no deal, and the eu does not budge, which is looking likely, one of those options is an election, a risky strategy for any conservative prime minister to take before brexit has been delivered. tom: thank you for the

translation on brexit. we will continue with peter chat well -- we will continue with peter. chart earlier.o this is the equity at 20 years. the glory of the 2000's. deutsche bank on top of the world. down we go. here, is what i would say. two decades at deutsche bank. this is bloomberg. ♪

and ise: "bloomberg surveillance." . news out of brussels. the headquarter coming out with their forecast for inflation and growth. fore cutting their forecast 2020. this is because of policy uncertainty. this is also because of trade tensions. this strengthens mario draghi's case for further stimulus measures. we will have more on inflation. let's get back to peter. i don't know whether this is a huge surprise given the trade tensions. peter: forecasts are in line with expectations. it would have been disruptive if there were any disagreement.

this is the case the european areission's forecast similar to the ecb. francine: what does it mean for euro? is dollar to strong? is it overvalued? peter: i believe it is. can the ecb deliver the monetary easing to offset the monetary theng from the fed to allow dollar to depreciate? that is a difficult point. this is a currency war. behaves bizarrely in a currency war scenario. monetary easing is not very effective in a currency war scenario. you have to think about who is going to be effective in getting the currency low, probably no one. that means 100 basis points cut from the fed, and equivalent cut from the ecb do not have the desired impact historical models

would suggest. make oft do you five-year five-year forward inflation? out furtherapolate disinflation or is it a coincidence chart? policy makersy would like to say it is coincidence. it is sensitive to growth expectations. it to theeen skewing downside. i would trust the markets forecast than the central banks. what is moscovici's goal today and managing the message coming in? hencine: it goes back to -- is trying to lay out what they discovered. he is on his way out. this latest warning, mr. moscovici will continue

explaining in the next couple of minutes, the latest warning comes two weeks before the next policy meeting or the ecb may lower interest rates or signal stimulus is imminent. this has an impact on euro dollar and the psyche of mario draghi and the european central bank. it will be an interesting day of central banking, folding into all asset lasses, including commodities. fromg up, a guest blackrock. signal of china. stay with us. this is bloomberg. ♪

♪ this is bloomberg "surveillance." that is the european commissioner talking -- whyhy the euro area

the commission cut the euro area growth forecast for 2020, mentioning trade tensions and policy uncertainty. they trimmed their gdp 1.5%ction to 1.4% from amid what it said was increased downside risks on inflation. this year and next were lowered modestly, a reminder the ecb aims for inflation just over 2%. we will have more. about theng today ecb, and what i notice is a nominal gdp that is shockingly different than the united states. that has to do with relative interest rates as well. viviana: in south korea, the president warns there will be an

extended battle with japan over export controls on vital materials. --y are targeting the korean japan accusing moon of targeting japan. that could disrupt global supply chains. the case for china's policy makers to ramp up economic stimulus growing stronger. last month inflation falling 20. they are concerned about a return to deflation that would profits and make it tougher to repay debts. arabia saying the middle from jaredplan kushner is up in the air. statehout a palestinian and its capital in jerusalem and its identity as a viable and

sovereign state, there will not be any peace in the middle east. viviana: the kushner plan is believed to hinge partly on wealthy arab gulf states. an error that began in nazi germany ends and mexico. was hired tosche fulfill the promise for a people's car. it became a hit in the u.s. in the 1960's and has been only made in mexico since 1978. 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 a bloomberg -- this is bloomberg. francine: gold lower as investors await key testimony from fed chairman jay powell today. talksn the radar, trade

resuming between the u.s. and china, speaking with their counterparts in beijing. by evy hambro. peter chatwell is still with us. talking about gold, where is that headed? should we go cash and gold? thatwe have had a good run started in q4 last year with the turnaround in rate expectations. it was that momentum that has continued and in the last month or so has started to accelerate. it feels as if the alternative --d dust alternative of gold alternative of gold should remain well supported and we are seeing a lot of demand. francine: what does it mean for the sector there's? were we see more m&a?

evy: we have had a series of transactions that took place last year and one that concluded at the beginning of this year, and some are ongoing at the moment. it will be a theme. the challenge for most gold mining companies is the short lives of their assets. after the assets are depleted, they rush to get them from the ground. i have companies enjoying higher prices and you could start to see some oscillation taking place. -- francine: where do you see the reversal when it comes to industry consolidation or the price of gold? evy: central banks are a few huge -- a huge factor and always have been. seven or eight years of buying gold after consecutive decades

of selling, central banks being the drivers. frome seeing fiscal demand individuals looking for a safe place to put their capital. getting very little return on your cash and the prospect of rates going lower, the competitiveness of gold becomes better. tom: i want to use copper as a global proxy and a china proxy. this is a chart everybody knows well, inflation-adjusted chopper -- copper with long-term lowering inflation, a lower price adjusted for inflation, a china boom, down we go, and a huge ambiguous move. what is your call on the direction of something as foundational as copper? evy: that is a great question. copper has always been a barometer of world economic

growth and activity. we had some slower data coming out of many of the economies around the world. backe copper prices trade below three dollars a pound. the supply side is really intriguing to us. a lack of investment into new supply combined with high levels of disruption and low levels of inventory and warehouses, makes the copper market look tight. as we look forward to the future with demand likely to rise with electrification, the prospects to the demand-supply balance is one where we should see copper trading higher. tom: in your report, a single sentence is critical. they really straightened out the expense side and that whole silly vision thing from tenant 20 years ago. -- 10 and 20 years ago.

have they done it or will they get stupid again? evy: i think the evidence is the best thing to look at. the companies have been resilient on their strategy, focused on free cash flow generation and debt reduction. they have not been spending unwisely and i have been returning money to shareholders. these make a compelling story for resource equities. others that are struggling through with regard to technology and the disruption taking place their business, ratiosu look at the pare of the core companies that many people own, the resource companies have little debt and high cash flow, i cannot understand why the sector is not that are rated. francine: let me ask you about

u.s.-china. how much do the trade tensions hurt economic growth worldwide? significantly, we can extrapolate. i would much rather be holding gold and treasuries. francine: gold or treasuries? peter: gold. francine: do you worry? peter: i would worry if there was a consensus. earliert i was making on free cash flow generation, it is extraordinary how much they are making. we are seeing healthy commodity prices. margins will not be at risk. as tom says, if the companies disciplined, it will come through. tom: we will dive into the rate market and just a minute.

grizzly bear sightings have been "surveillance" in sun valley, idaho. paul sweeney with his team, sun valley, idaho through the day. this is bloomberg. ♪

♪ bloomberg "surveillance," chairman powell later, testimony, q and a with the house. it will be interesting to see the management of the politics of the house. francine lacqua and the comb of the public -- calm and the politics of london with peter

chatwell and evy hambro. sustainability, what we are doing with commodities around the world, first, peter chatwell on the cost of money. well it maintain a -- will it maintain a free lunch where money means nothing? peter: i believe we can assume that, especially if you are forward-looking. there will be this fed monetary easing starting a currency war. andlesson we had in 2011 2013 as it takes three years to finish, so if we think of how long it could go on and how ineffective central bank s'monetary easing will be for external demand, we have to think of policy rates which are currently negative in europe and switzerland and other

jurisdictions, becoming more negative. this would be a global trap, liquidity trap for central banks. tom: how many basis points on the german ten-year is more negative? is it a nuance of five basis points or can it be something more substantial? peter: the market is assuming the ecb cuts by just over 20 basis points over a one-year horizon. that is fine, and then starts doing qed, that is an assumption -- qe, that is an assumption. what if that does not work? francine: what does that mean for treasuries? peter: the fed would be cutting rates and we are in a world where any safe security with a positive nominal yield will be seen as attractive. the idea that governments can fund negative rates is becoming

commonplace, a common school of thought internationally. francine: give us the backdrop, which is not that positive in terms of where interest rates go and the outlook. you have a new hat on that looks investing that will transform our daily lives such as nutrition and food security. how much appetite have you had from investors? evy: a good pun. something that is exciting for me, i have done this coming up for a year, and we have seen more and more clients trying to invest their money in things they understand. the things they understand are what they use and see every day. going to beyou are in japanese derivatives, you

lose their intent -- attention, but you talk about food and the change in transportation, fintech, it brings investment to life and makes it real. that is having a positive level of engagement with clients. we are seeing money moving in this direction. a fund in the u.s. around next-generation technologies was just raised, $4.6 billion. with the are coming up one-year anniversary in september so the track record is building. this momentum of money is exciting. esg andr factor is the we are seeing a heavy flow. tom: what are you seeing on profit neutrality or profit pickup from esg? evy: that is the biggest change we have seen when it comes to

esg expectations in the last few years. you go back a few years before that, clients would assume that by investing around esg and choosing to go in that direction , they would be sacrificing an element of return. ,ow the expectation has shifted if you are investing in this way , surely the companies being run along the esg parameters well do the best in time because they have the opportunity to grow their business against companies that are not following those policies. from returns going costing more to returns being higher. francine: thank you so much, evy hambro and peter chatwell. coming up, plenty more on deutsche bank, shares trading higher. they were down some 7.3%. today, gaining 2%.

credit investors uneasy about the probability of the restructuring. this is bloomberg. ♪

♪

bloomberg "surveillance," tom and francine from london and new york. let's try to -- talk about deutsche bank, corporate bonds, . joining us is filippo alloatti. the restructuring we are seeing bettercreditors are in a place than equity, but is there a danger that you cut so much you lose customers elsewhere because they cannot reach their targets? as ito: there is, because is deeper in the franchise and you try to reduce the foot, there will be some attrition in terms of revenue. growth,y planned 2%

still allegedly, it seems like the equity market is not buying into this. francine: what do we do with co cos at deutsche bank? filippo: essentially, the bank ratio.cing its cet1 theyme extent, one can say are paying for the restructuring. equity is not very happy. they have not been asked to foot the bill. tom: there is a meeting this afternoon, i believe it is london or frankfurt time, where these managers will describe to animals like you what they will do with their plan to sustain price of credit. can they succeed in doing that? can they sustain the price of we see further

price erosion and yield expansion? filippo: in terms of the coco development, it is a little bit surprising because all the targets were telegraphed before the supervisory board meeting, so the market should have been surprised by the fact that they were lower in the cet1 rates. if you look at the size of the internal bank, they increase from 50 to 74 billion euros. out and waiting for the execution. tom: you know in every single case, bonds lead equity. what are the signals we are seeing in the debt market on this troubled bank? filippo: in that case, when the

equity price was driving the bond price, the first day after the announcement on sunday the spreads were tightening. when america opened up in the was aoon in london, it three-hour strategic presentation, and the equity price going down and brought with it the price of the bond. pointsst four to five since monday morning. there was one case where the equity was driving the bond action. francine: what happens to bonds now? filippo: today, they are stabilizing and it is a question of, are they able to execute on the plan? they don't really have a pristine record in terms of executing on restructuring. one would find this time they have to execute. francine: can you rule out

capital raising? filippo: you cannot. a capital raise will be good for the bondholders, but it seems not the main avenue for that. we need to wait towards the end of the year, q3 or q4. we can always come back to that. tom: that is right where i wanted to go, the x axis of bond guys like you versus the x-axis of the stock market. they want to go out to 2022. they don't have that luxury. they have to get out to q3 and q4 of this year. filippo: there is a credibility deficit which is more due to the past management than the current one which has been in place for only about a year. ,he approval they are putting we need to see some traction in q3 and q4.

the ecb afteret the summer, instead of hiking rates they likely will cut. the market is pricing a cut in the deposit rate so that is not conducive to a businesslike deutsche bank. tom: i was talking to my colleague yesterday about the different tranches of debt. we get more information from the bank, or of deutsche the quality paper of deutsche or 89.ving from 93 to 91 which tranche level matters more? filippo: the discovery prize will be in the coco, the most subordinate trench. the bankers have gone out saying they will do everything to pay the coupon on that cocos so they

are aware that if they were not a -- soit could trigger they have to make sure they pay the coupon on the coco. tom: we look forward to your call on deutsche bank. filippo alloatti today with us. coming up, mr. powell will testify. mr. stanley will join us. we will look at the american economy. we are thrilled to bring you robert albertson on the future of new york wall street. this is bloomberg. ♪

♪ tom: this morning, hungry hawkins has become today

testimony. wall street will endure the k-1 -- q and a. day well the fed accommodate and cut july 31? day three for deutsche bank and the future of wall street. in this hour, robert albertson. the linkage of the economy to corporate revenue growth. good morning, this is bloomberg keeneillance." i am tom getting over the debates in london last night, francine lacqua as well. we played them back and forth. they looked almost american going out it. francine: they are also two public school educated boys who are used to debating. the question of course is that boris johnson who is the front

runner and widely expected to become prime minister, is not taking no deal off the table. that would mean he could have a big fight with parliament. emma ross thomas and her team for coverage on this. here is viviana hurtado. viviana: and the u.k., high drama and parliament. lawmakers narrowly passing a measure that would keep the next prime minister from pursuing a no deal brexit. that is aimed at boris johnson who is likely to be the next leader and has argued the u.k. needs to act seriously about a no deal exit, to persuade the e.u. to shift its position. trade was not the only issue in play as the u.s. and china resumed talks. hong kong protests and the fate of huawei will also come up. the u.s. agreed to tone down

criticism of hong kong. yesterday, the u.s. and china spoke by telephone. whetheral fighting over the white house can add a citizenship question to the 2020 senses, a federal judge blocking legalon to assign a new value. traders are certain this month the federal reserve will cut interest rates, but are unsure about what will happen next. they are pricing in a quarter-point tea carries -- decrease. traders have scaled-back views on how much easing takes place for 2019. 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: let's do the data now. i was going to do one screen but

i will do two. futures negative five, euro stronger. the vix 14.63. 1.98s have gone from 19 -- to 2.10. what is important is yen moved last night out near 109. weaker yen catching up with the rest of the data. francine: i like the fact that we are looking at yen because it is important. crude oil is gaining. they year on the tas year year treasuries moved above 2.1% for the first time in a month. dollar is steady and the pound strengthening for the first time in four days as data showed the u.k. economy rebounded in may. is a 6% yield and

it is trading at par. it is not. it has been south for a year and a half and we are trading here at $.86 on the dollar. that is not good. that is a junk yield of 12%. francine: i am looking at pound levels. we did not have economic data that site rebound for the month the house ofrday commons mps voted to back a plan to prevent the next prime minister from forcing through a no deal brexit. boris johnson has declined to say whether he would quite if they failed to deliver brexit. markets are nervous about what is going on. you can see the next levels to watch, 1.2351. tom: he is acclaimed for his calls on gdp, stephen stanley.

rate ofthe 12 month run mr. powell's economy? stephen: we were close to 3% last year. everybody expected it to slow down and i think it will, but not as much -- tom: the gloom is unfounded. we talked about a solid economy. are we still solid? so.hen: i think the line has been that the economy is in good shape but there are greater downside risks , and the question is how does the fed balance those? powell hinted at a rate cut in june and it is time to deliver or not. francine: what happens if he doesn't deliver? stephen: the markets have gotten into a bit of frenzy pricing in rate cuts. today is probably the key day

between now and the july 31 decision. if the fed does not think they will go, powell needs to tell us today so the markets can take the air out of the balloon. francine: the concern is that if they disappoint the market, they will have to double down the stimulus to go back to the level we are now. is it more likely that those cuts are because the market put them in a corner? stephen: i look at last friday as an encouraging development on that front. the employment number was good. there was a pretty significant adjustment in rates and fed expectations, and the market went down but not much. we could afford to lose a few percentage points and still be at good levels. the fact that if the fed has to ease or the market will crater,

that seems to be less acute. tom: stephen stanley has aged. ,ere is a chart inflation-adjusted fed funds target rate. here is the normal interest rate of the last decade. we come back to the free lunch we have all enjoyed, culture accommodative. -- ultra accommodative. we are only trying to give up this tiny yield. discuss now versus the reality of a higher real rate or teen years ago. -- teen years ago. -- 13 years ago. stephen: we are still at levels well below what i consider to be equilibrium. is running aed monetary policy that is easy and performance -- reflects that.

growth continues to be above trend. francine: if you look at what the fed is watching, the three-month 10 year yield curve has been inverted since may. how have they been looking at that? stephen: there has been a little bit of hemming and hawing where they are like, it has to be inverted for a certain period before we pay attention. the yield curve is telling you the market thanks the economy will turn down. the market is not always right and in my view, the market is excessively pessimistic. if i was on the fed, i would try to pump some sunshine into the market and talk up the economy. tom: you are solid, stephen stanley stop -- solid today. we will see if we can get stanley verbiage out of the chairman. we will have full coverage of the market.

two days of full coverage. powell, 10:00 a.m., full coverage. ♪

viviana: this is bloomberg "surveillance." shares of a swiss investment manager trying to recover from a scandal are going up. dam management is on track to liquidate funds associated with tim haywood. he was suspended. pain fromfeeling the the grounding of the 737 max 8, shares plunging 54% from last

year. the max is the best-selling aircraft and none have been delivered since march following fatal crashes. is tellingsla employees at is ready to increase production after delivering a record number cars. they make all their cars at their only assembly plant in fremont, california. francine: u.k. mps have voted in favor of a plan aimed at preventing the next prime minister from forcing through a no deal brexit, the key amendment passed by just one vote and leading to a clash on tv of the two men. here is what they had to say. >> i am not going to take anything off the table anymore than i will take no deal off the table. >> it would be a curious thing to do if this was about taking

control of parliament, to shut it down. >> we prepare for no deal. you am as keen as boris and to leave by october 31. , no dealy handled disruptive brexit could be costly. >> what you are telling businesses as they don't need to prepare for no deal. >> i don't think we will end up by any means with a no deal exit. i don't think that will be the disruptive or disorderly brexit you fear. >> we need leadership that will guide us through a constitutional crisis and make a success of brexit, and that means being honest. >> put us on the path to long-term success in the way to do that is to get brexit done. tom: we need everybody debating for the democrats, et cetera better. -- it sounds better.

the quality of that debate is so much more intelligent, concise, and precise than what we witnessed the other day with nbc in miami. francine: it wasn't bad, but it was also edited. tom: so much more intelligent than what we put up with in america. francine: it is an interesting point you make. the person that we heard, the two people, one will be prime minister and will take charge in two weeks. is the focusrexit of the mind. that is a difference from the presidential race in the u.s. emma ross thomas is in charge of our brexit coverage. when you look at the debate yesterday, what is freaking out the markets as boris johnson is keeping no deal on the table and

we could see a constitutional crisis because parliament will try for no deal to not happen. emma: i think it will bring a full-blown constitutional crisis. they have modeled along and now because of various problems, the country is very divided, parliament is divided, and required a mass of legislation to get it done, parliament definitely has a majority against no deal. boris johnson says he will leave the option on the table of suspending parliament to push through a deal. what we saw last night was a weak effort. strongest one was not selected, so we saw a weak amendment approved by just one vote. john major saying if boris

johnson were to suspend parliament, he would take him to court. all the bits of democracy potentially coming into play. we will even be talking about the queen, i suspect, because the queen suspends parliament. u.s.is country, unlike the , a prime minister is chosen by the queen based on the results of parliamentary elections, and if he does not command a majority in the house of commons he cannot govern. a fight between the executive and parliament brings back memories of the 17th century. it will be an interesting few months for constitutional experts. tom: will they in the coming where thee a majority dup of northern ireland is the key vote? emma: that is an interesting

question. both candidates have said they want to rip up the irish backstop. that is the bit that deals with the irish border and the dup objects. it is not just the dup that objects to the backstop. conservatives and even some of the labour benches. it will depend on what e.u. comes up with for now. the noise is from brussels that they will not negotiate. well we see pressure -- well we see pressure on ireland? perhaps. yesterday they acknowledged there would have to be checks, not necessarily at the border. it will be an interesting few months. tom: emma ross thomas, greatly .ppreciate you being with us stephen stanley with us.

country to country, it is a different story. it is rebelling over a tepid gdp. stephen: there is definitely a global element to that. the question is can a populace govern effectively? tom: it is an experiment in real time. stephen: we see that in the u.s. and we may see that in the u.k. tom: nominal gdp was 3%. where is the animal spirit in america? can we get to a run rate of 5%? stephen: i think it is south of that, but a little better than 4%. the consumer is pulling the wagon. businesses have pulled back because of uncertainty around the trade situation, but if we get that resolved i think we get back to a decent run rate. tom: really interesting to have

a's -- to have stephen stanley with us this morning. this is a treat. coming up, robert albertson of sandler o'neill, chief investment executive. this is bloomberg. ♪

♪ this as bloomberg "surveillance," tom and francine from new york and london.

inflationowngrade in and growth for the euro area, linked to tensions with trade and uncertain policy outlooks. let's get straight to stephen stanley who is with us. what does that mean for ecb policy? if it goes to the message mario market,as sent to the will he act before he leaves presidency? stephen: it certainly smells that way. there is not a lot of light at the end of the tunnel for the european economy so it sounds like draghi thinks it would be good to get the ball rolling again before he leaves to make it easier for his successor. francine: what does that mean for whether -- the market is so focused on whether they cut or stimulate before christine

lagarde comes in. does it make a difference? is it mario draghi to tie her hands or giving her a hand in laying out policy? stephen: probably more the latter. to start the sure taper process before yellen came in, who started the tightening before powell came in. helping out by what might be considered as a tough or controversial step before your successor comes into office to make it easier. tom: 12 years ago, we did not know what quantitative easing was. what have we learned? stephen: the jury is still out. at the fed, they feel like it was somewhat effective. i am a little more skeptical. at lowered interest rates. to what end? tom: the asset market, we have

delayed the normal workout to get back to the incentives of a correct financial system. stephen: the fed has been doing that for 20 years and we have just gone through from cycle to cycle, and as powell has acknowledged, the cycles lately do not end because of the , butic economic downturn it is financial related. francine: we saw bond auctions in italy that turned out ok. is there an appetite to look for yield and does that help periphery europe, or do you worry about tariffs on german car manufacturers? stephen: we have still got negative rates in europe, and i worry what happens if the economy turns down. they do not have any ammunition and it seems like we are shaping up into what we have seen in

japan, a lost decade or two. tom: stephen stanley, thank you so much. paul sweeney in sun valley, idaho, the meeting conference of alwaysnd company, important, various sundry media types showing up in search of scale. we will have that today and some more important conversations on media and scale. chairman powell this morning at 10:00 a.m. this is bloomberg. ♪

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korea, thed south president morning there will be an extended battle with japan over export controls on vital materials. moon accusing japan of targeting the korean economy for political gains. curbs onounced products korea needs and that could disrupt global supply chains. inflation falling to zero from a year ago. chinese manufacturers are concerned about a return to deflation which would hurt company profits and make it tougher to repay debt. -- a saudi arabian arabian prince saying the piece plan pushed by jared kushner is up in the air. statehout a palestinian

and its capital in jerusalem and identity as a rival and solemn state -- sovereign state, there will not be peace. viviana: the plan hinges partly on support from wealthy gulf area states. beaglee of volkswagen rolled off the assembly line. the beetle was resurrected after world war ii and became a big hit in the united states in the 1960's. it has been made only in mexico since 1978. 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. hurtado.ana this is bloomberg. julykevin cirilli, it is and washington, d.c., nothing going on.

let's get a centre tendency. biggestthe president's headache? kevin: the cost of growing controversy is continuing -- growing controversy is continuing. st putting out a statementa yesterday saying he is hopeful there will be more -- that jeffrey epstein will be brought to justice. that is in the short-term. in the long term, this ongoing democratic presidential primary, he doesn't know who his competition is. francine: how worried is he about a strong dollar? kevin: i think he is very worried because if you look at his comments, and how he has been critical of fed chair jay

powell who will be on capitol look ater today, if you how he has tried to be critical of powell and the ecb and china, at shows it is definitely on his mind. tom: kevin cirilli, too short a visit today. this is a joy, stephen stanley with us, and we are thrilled to bring you in these tumultuous street, global wall robert albertson of sandler o'neill. he is a chief investment strategist. it is inappropriate if i ask about the news from yesterday. we are thrilled he is with us. out of carnegie mellon and harvard, robert albertson does decks like nobody else. people have aged going through this. it is on a need to know basis.

i will not give you a copy. we protect the copyright of robert albertson. page 1 -- we will talk deutsche bank later -- shadow backing collapse -- banking collapse, you have a phenomenal chart showing shadow banking is still there. how different is it versus 2006? robert: it has shrunk and is still bigger than banking. it dropped after the crisis as much as our entire banking system had, so there is a huge hole for credit creation if we get a hot economy or need to broaden. asset-backed securities and finance companies , has flattened and not recovered. tom: you link economics and all of your work and stephen stanley

is encouraged on a solid american economy. can you agree? place: we are in the same although i am not an economist. we would clear to me have a 2% trendline economy which means at would last longer cyclically than anything, and i think that is where it will gravitate down to. i don't see anything in the economy that worries me. bookwe are supposed to people that disagree with each other. that makes for better show business. chart ofbertson has a the 10 year yield and nominal gdp and they are not working. gdp downsume nominal as the yield comes up? no, the yield will come up somewhere. stephen: if i held my breath i would be dead. it should.

the normal economic relationship should come back in overtime, but that is an indication of just how much these there is in the system in the u.s. and globally. robert: it is comforting we have a fed chair who admits, we don't know for sure what has happened and we will wait and find out. it is a slower cycle. maybe it takes longer. tom: let's bring in francine. francine: let me bring you to a chart i showed a while ago, the spread between the three month and 10 year yield, inverted for a couple of months. when does this change? robert: when the market starts thinking the economy is not ending. everyone seems to be and of cycle and mentality -- end of cycle and mentality and it makes sense that the long rates are going different way than short rates.

if we get growth in gdp, that ought to restore its normal slant. francine: why fight the market? what if the market is seeing something no one else is? robert: a lot of us would argue strongly it is not supposed to be this way, but as we all know, it can be that way for a long time until normal see surfaces. i wish -- normalcy surfaces. i wish there was a stronger answer. people are assuming it is usually eight years when we have a recession, it is 10, and i think it will be 15. andcine: why are economists why have they been so badly at predicting recession? because usually it is recessions are caused by something unexpected, a shock to the system no one is looking for

. the other thing is you get complacent in a current situation and it is hard to look around the corner. has not had a good track record and private economists have not. -- i lookn i throw in back since world war ii we have had 11 recessions and almost half were caused by the fed, which will not happen this time. the last time it happened was volcker. the other times have been primarily bubbles, real estate twice, residential, and oil several times. people talk about a tech bubble, but it is something else we are not seeing about the cycle. tom: we're showing more from the supersecret debt. the labor economy just is not

getting it done. why are we not working in america? the average that albertson has here over a million years of a labor -- america. why is that? stephen: the aging of the population. the other thing is the incentives to work. we have set up a more robust 30, 50, 100han 20, who mightso people not be working in a hardscrabble economy have managed. robert: we are twins here. tom: i am liking that. we will come back. robert albertson on global and new york wall street, all of that coming up. a touch on deutsche bank's

challenges as well. the senator from pennsylvania, senator toomey. this is bloomberg. ♪

♪ "surveillance," francine lacqua in london, tom keene in new york. we will get to wade discussion of global -- get to a discussion of global and manhattan wall street. with robertchart albertson and stephen stanley, inflation-adjusted fed funds target rate, and it is so different from 2006. the yellow circle is stan fischer. -- evenven knew there we stillrality or are

highly accommodative? stephen: the fed has evolved their view. a year ago they would say it was accommodative but now they say it is neutral. i would still say they are accommodative. i don't think we are at neutral. a house withe in republicans supporting their theident, will suggest president wants lifetime accommodation. stephen: pretty much every president who was a year out on election once accommodative monetary policy. we have seen in the past how that can be damaging. i think it is a good thing that the fed has independence and hopefully will keep it. francine: i am looking at a nice bloomberg story today saying has first the president

he has been asking people around him to cast a ballot for ways to weaken the dollar. what does that tell us about what could happen and the currency market? stephen: it tells you a lot about president trump's mindset. he knows he needs a strong economy to win the election and is looking for every possible way to make sure that happens. a weaker dollar would be helpful in terms of boosting growth into 2020. i am not sure there is that much that can be done from the perspective other than trying to pressure the fed to ease more. in some ways, it may very well be the game plan is not so much to get anything done as to have a scape goat in the event that the economy slows down. president trump will look for

someone to point the finger at. --ncine: do you agree robert agree, robert? havet: i agree again but i a primitive view of monetary policy being a good break and not a fiscal accelerator. if we want to get the economy growing faster it will not be because they are lowering rates. have a labor force constraining on gdp growth, and all i can see is attempting to find a neutral stance -- i don't know where it is -- but it cannot be constructive. you are getting your foot closer to the break at best. tom: this is hugely important, talking about a 50 basis point rate cut. burnsa return to arthur where the fed is jumping around more. what is the thing that you have learned of greenspan's measured approach?

has it been real value or efficacy to a measured fed? robert: a measured fed is a good thing. a fed that does not shadow too much as a good thing. powell has done a good job of getting the average american to understand this thing, so i don't think it is a big deal. back when interest rates or two or three times this level, a quarter basis point did not make much difference and now it makes a lot. francine: stephen stanley and robert albertson both stay with us. more on deutsche bank, shares trading higher today. down 7% over three trading days but today gained some 1.8%. we will look at the overhaul and the possibility some -- so far denied about capital raising. ♪

♪ francine: prime minister questions like every wednesday.

hour, theybout an are about to start. theresa prime minister may labour opposition jeremy corbyn will debate as the two candidates to become the next prime minister did last night on tv. we will have plenty more. there has been movement when it came to the pound on the back of a better-than-expected economy in the month of may. tom: deutsche bank tells fixed income traders they will keep jobs. i don't know really what else to say. this is the head of their fixed income staff making assurances it says, in a staff call. this is the cacophony we have seen over the last few days in deutsche bank where they are leaving the jogger fee where they are at -- geography where they are at and others saying

they are moving. that is a good segue to talking about the state and future of new york wall street. and stanleytson o'neill. is very big on logarithmic charts. may of 1984 back to when you and i were weaned on continental illinois. are our guards down now? that wegs so stabled will not see the next continental illinois? robert: i don't think and the banking system. dodd-frank can be thanked for that. tom: and jamie dimon. robert: i am always looking for trouble, which you always have to do if you follow this industry, i don't see anything within the banking system that

is worrisome in terms of risk. i really doubt there will be at the end of the cycle, whenever it happens, any kind of mass loss issue. it is a different industry in psychology. the largest banks have been moving out of lending. tom: the commercial aspect. robert: look at their capital ratios now, much higher than they used to be. for lendingooking opportunities, -- you don't run a bank like that if you are looking for lending opportunities. you are looking for fee opportunities. francine: there are questions whether deutsche bank will meet their target and whether they need to raise capital. how well this and? -- end? seen for all of

that sector, all of wall street, solid double-digit trendline growth. it was substantial. it is no longer. goldman sachs is a good example of ingesting for that -- adjusting for that. the bankers trust combination with deutsche's pushed them further into the trading side then maybe they should have gone , so it is the pain of getting it right sized. i hope that institution survives on its own because it will be good for europe, and i am betting it will, but the numbers are gone now. it will be a different business model and hopefully clear for investors. francine: it is a business model on a german economy going through a lot of hardship. how difficult is that? whereot see anywhere

deutsche bank is getting a helping hand. they are not -- robert: they are not. interest rates hurt them and every bank in general. the european economy is flirting with recession, and europe needs friends, not trade skirmishes. they are not a german bank, they are a european bank. nothing will make this easier for them. tom: tell me about global wall street in new york. you have got to be here but there is all of this technology. look at the kids today. i got a brilliant email today saying, they will hire the young turks for three or four years and then higher than a strong. what is the future? robert: i think young turks or turks in general will be passe.

a little more professional businesslike. industry seeing in the -- and we are an example, sandler is an example. we picked a great sector to focus on. tom: you are narrow. robert: even that is not good enough, which is why it is a relief to have us and piper join. tom: are you in trouble with jimmy done for talking about this? robert: he made the deal and it makes a lot of sense. tom: bear stearns, there it is, robert albertson. francine: there is a little bit of breaking news. majesty'sm derek, her announcer to the united states, will resign after being mired in controversy because of a leaked memo.

the president taking no prisoners, saying he was an adequate. stuckminister theresa may by her ambassador for a couple of days. we are just hours ago that he was determined to get on with business as usual and the fact that he is resigning feel significant in the relationship between the u.k. and u.s. tom: i guess expected is how i would put that. much more on this from our london office. robert albertson thank you so much, from sandler o'neill. chairman powell in the 10:00 hour. ♪

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great fed debate. morgan stanley says a 50 basis point in july. markets pare back expectations. growth herek tuesday. the european commission cuts growth and inflation forecasts. 's and parliament kickoff the next crisis of trying to avoid a no deal brexit. david: welcome to "bloomberg daybreak." just before we came to air we the u.k.involving the ambassador to the u.s. has resigned. alix: did he really have any choice? david: