without a fight. his deputy tries to topple the government. where's my inflation? core consumer inflation in china remains muted. u.s. ppi on deck. i'll see your soybeans and raise ei. while way -- you huaw the latest tit for tat in the u.s.-china trade war. welcome to "bloomberg daybreak" on this friday, august 9. i'm alix steel. david westin is off today. s&p futures off by about 6/10 of 1%, but the headlines are pretty gloomy. german exports falling the most in three years. france ip totally sinks. u.k. flipping into contraction territory. it could look a lot worse. euro-dollar up by about 2/10 of 1%. a totally different shift than

what we have seen a few days ago. aude up by over 1% despite cut in the outlook for global oil demand, yet still see i -- still seeing some kind of rally in place. we bring you this morning's market moving news from all around the world. joining us is bloomberg's enda leon, emmanando good chandra, and michael mckee. walk us through what we learned from the inflation front. enda: we had refractory data that should inflation in threed, the first years. it suggests factories in china are heading into deflationary territory. that is a clear negative for profits, and it will make it

much harder to repay debt. to take away from the inflation numbers, even if there was a bit of a tick higher in the consumer side, the ppi was the one to watch. all indications are that the central bank of china has more work to do and will probably have to bring down interest rates over the coming months. alix: and tricky work, too. on the flipside, we have the next tit for tat in the u.s.-china trade war. how is the news being received that we could see stopping sales at all costs for huawei? enda: that's right. we are not getting any clear read yet from china's next move on this, but it is a clear negative two where the talks are going between both sides. one of china's key demands was for some rollback of the curbs on huawei. it is a national champion, one of their biggest companies. there's no way that's going to happen now. we know china already plans to pull back on u.s. agricultural goods as part of its retaliation. when you take all of this music --and the mute

the mood music we had during the week of the u.s. labeling china a currency manipulator, there's no sign in the near term of a circuit breaker for these trade talks. much remains to be seen, whether or not over the coming weeks they can get back on track back to what was meant to be additional negotiations in september in washington. alix: thank you very much. now to our next story. prime minister giuseppe conte versus his deputy, matteo salvini. has the latest, the yield curve up 25 basis points. indeed ao: it is crisis that was a long time coming. the party of deputy prime minister matteo salvini has been behind in the polls, while his

coalition partner five-star movement has been collapsing. and ispopular support threatening to pull the plug on the government. it may take a few weeks for this to be formalized in parliament, and we could go to a new election in the autumn. investors are really concerned about what is going to come next. alix: thank you very much. now emma chandra is joining us , the first gdp drop quarterly contraction since 2012. kind of ugly. emma: it is kind of ugly, and it wasn't expected. we contracted by 0.2%, the first time we seen that happen, it contraction, since 2012. economists expected growth to be flat. it follows a fairly robust print from the first quarter of 0.5%. the reason for this contraction, we are seeing lower manufacturing here in the u.k. the effect of lower

global growth. also, of course, brexit uncertainty the thing that is really impacting the u.k. economy. business sentiment being described as dire. there could be a bit of a silver lining, some economists went into the fact that companies may be drawing down on inventories they built up ahead of that first deadline in march was ultimately missed, but brexit still looming. the next deadline, october 31. we seen the pound selling off against both the euro and the dollar today. we've got a great chart which shows you how the pound has been performing against the euro, the euro gaining against the pound now for 14 straight weeks, setting something of a record. when we look at what the pound has been doing with the dollar, we are seeing a lot more people talking about that reaching parity. all of this adding up to a not so great picture for the new prime minister and the u.k., boris johnson, prime minister

now for less than three weeks. alix: 1.20% on that cable right now. in new york, we are joined by michael mckee, taking a look at recent prices for the u.s. what can we expect today in light of the weakness in china? michael: a little less excitement than you got in china , the ppi expected to rise to tenths of 1% for the month of july. that would leave the year-over-year rate at 1.7%. much of what goes into the ppi doesn't translate to the cpi or the fed's preferred cpe index. a little less important to market trading then we saw from the chinese. still, some categories worth looking at, food might be an interesting increase, while trade services might drop. let me show you this year. we are looking at steel prices, the white line, they rose significantly because of the trump tariffs. now they are rolling over, and that is bad for steel companies and their shares. the blue line is bolts, nuts and

washers, things you pay directly for. prices are going up. alix: i'm talking about oil to. thatave weaker oil prices would be good for companies, but also how oil tracks inflation, and that could be bad for the overall reflation story. michael: it was later in july and into august that we saw prices rollover. iea did say that falling demand is curbing prices. they call the oil industry fragile. they say if the trade war drags on, it is going to be even worse. you can see the inflation, the five-year breakevens tracking oil prices almost directly. if this keeps going, it is going to be a problem for the fed trying to get to that percent target. alix: and they are continuing to downgrade their forecast. bloomberg's michael mckee, think you very much. coming up from italy's

government turmoil, what could affect your days trade. we will speak with sarah hunt, alpine woods portfolio manager, coming up. investorsng to ensure -- failing to assure investors it can post any profit. uber also reporting its biggest loss ever come over $5 billion. sales growth at the slowest rate in the company's history. this is bloomberg. ♪

♪ alix: time now for bloomberg's first take. first off, we want to kick it off with italy's government in crisis yet again. prime minister conti going toe to toe with his deputy.

trade war escalations continue to check of the market. here was more is vince cignarella, stephanie flanders, lisa abramowicz, and sarah hunt, alpine woods portfolio manager. i want to take a look at italy because sell be nice said, "we need some safety and politics in italy. it is pointless to go ahead with quarrels like in the last few weeks. italians need certainty and a government capable of acting." stephanie, sure, another government. the 62nd government since world war ii. that says safety. 70: they've had dismounted -- stephanie: they've had this , so we are debt still as close to an italian debt crisis now as we were five years ago because they still have that hanging over them. the much morecome powerful partner in that coalition, which we were always

worried about because the five-star movement was unpredictable. salvini has obviously established himself as very populist, quite anti-immigration, but he's quite fiscally prudent. he's from liga in the north of italy. i think bond traders are looking, saying they are quite fiscally prudent, but have been quite against being in the euro muscle it a difficult balance. is a quite difficult balance. salvini, as you said, the real worry is will he play on the populist front? will he move italy away from the euro zone or the eu, and will he do it from a standpoint of blowing the budget up a little bit to make himself more popular ? which is something the germans

have been dead set against. alix: but why not? you have a 25 basis point rise in bdp, but you are on par with 10-year gilts -- 10-year gilts. lisa: it is a rough comparison in the currency, but i will say this. going totly is incentivize italy to say i guess we better get our stuff together after 1000 years? i think we should probably try to get a government. i think there's a question why they should be pressured to do this, not to put pressure on germany and say, you know what? this whole austerity and budget thing you want to subject us to, no. remember, germany just came out the other day and said maybe we will let our budget deficit go. those are the little balloons that governments float and say, let's see how this plays out in the press. lisa: then why did they walk it back so quickly? vincent: because it didn't play

so well. [laughter] vincent: that didn't work. alix: italy has been the main beneficiary of ecb easing, and that is going to come more, right? sarah: i don't think there's any question you're going to keep easing. negative rates aren't working. it is amazing to me to see how much more negative they are coming across and parts of europe. the only reason it is at 1% is because germany is at -80 basis points. otherwise it would be much higher. the whole thing is not solving any of the problems. it is just creating very bizarre incentives and strange things going on with fixed income markets. in the end, you will have to try something more like fiscal spending. that is something they've been trying to avoid, but 10 years later, it is not working. alix: i feel like central banks continue to hit their head against the wall. you have the rba going to an easing cycle or getting more dovish. this is what we seen throughout the whole week, asia rate cutting central. i honestly wonder at what point

are central bankers going to have to say, we can't do this anymore. we need another option. stephanie: we knew we were going to end the turn in the monetary policy cycle at a much lower rate than any past. we were hoping it might get of bit further before you started to. ease again we don't know definitively that we are in the final stage of the cycle, but it is feeling more like that then it has any while. i think the emerging central banks are playing follow the leader. they can't afford to be behind this general easing move taylor: but you identify -- this general easing move. but you identify the key problem, the european central bank, particularly with problems with italy. weak point is italy and the combination with ecb policy. italy is only two notches away from the ecb not even being able to buy italian bonds as part of quantitative easing.

they are not as worried as they might be. vincent: i think it is what monetary policy can do. alix: we never agree. what is going on? [laughter] lisa: i'll disagree with you. [laughter] vincent: but what i've not heard at all in the conversation about monetary policy is money is essentially commodity. we've got to the demand. that's the side of the equation no one is talking about. if you have very low demand for money and you add more supply, all you are going to do is lower the price. you're not going to increase inflation. it works against itself. so i think what draghi said at the last ecb meeting press conference was almost a plea, finally. like, we really need fiscal intervention to make this work because the ecb and other central banks absolutely can't do anymore. lisa: there's something else at play here, which is inflation around the world just is coming down, even in the developing markets. in mexico overnight or

yesterday, inflation figures were below what people had expected. not a bad thing there, and yet what this shows is even in developing world, where inflation is still a potentially negative thing, in the developed world it is like a holy grail, but the idea of runaway inflation is real. it is interesting to see slowing inflation there. the engine is slowing in china, showing yet another contraction. this is leading to a slow down and the lack of the kind of inflationary pressures of the past, so all of those central bankers have no incentives to keep tighter policies. none. sarah: i also think you have a problem between inflation and things like food and goods, where you have deflation in goods but, in china specifically, they've got their own issues on the port price problem, but globally you have a slowing population growth, potentially overcapacity highest

everything -- overcapacitized everything. do i really need to build another factory? do i really need those kind of investments which people want to see, when all you are doing is making the more practical things that people need more of like food more expensive? you're not seeing the inflation in other places. i feel like that is where, all of the sudden, we are turning on our heads the post-world war ii era are we've got to keep increasing capacity. i am not sure right now that that is helping. vincent: none of those things are in the government's calculation for inflations, though. what is inflation? we keep hearing about this 2% target from central banks. but why is it 2%? it is a historical number they just picked out of the sky. if gdp growth is flowing from , shouldn't thers inflation target be lower, not higher?

the --lisa:ou read did you read the "economist" food-flation? the idea here is, how do you measure that? essentially, you are paying more per calorie. so how do you measure that? there was an article in the bloomberg that talked about how big retailers like walmart can put pressure on their suppliers not take on the price increase, so if walmart doesn't take it on, they are not passing it on to consumers. stephanie: we have seen some wage growth in the u.s., and that was the vanguard of inflation. we've been writing all these years for some inflation to come out. it has been extraordinary to me. we have over 100 economic reporters running around.

i get them to go and check wages going up, depositing onto prices, and companies are trying very hard not to raise wages, and when they do, they are trying even harder not to raise prices. so they shrink the size of something rather than having to raise the ticker price even though it is still an increase in price. alix: real quick, i wanted to touch on china. vents, overnight we had the -- vince, overnight we had the huawei story. how are the chinese government looking at everything? vincent: recently, they do this every summer, the chinese leaders go to what is essentially the hamptons of china. they meet, and president xi was there, and the story was the united states and trade. the issue brought up by xi is that it is not the chinese that have walked back the trade deal, but rather trump, and he's done it four times. every time they give him an inch, he takes a mile.

xi's speech to them was no more concessions. we don't want to give in anymore. we are going nowhere. the idea that we promised to buy agricultural products, not true. we promised to buy agricultural products if he backed away on huawei. he has refused to do so. therefore it will not step up on ag products. if they bump up terrace to 25%, the premier said they are preparing a package of retaliatory taxes on the united states, which includes rare earths, medicine, and things that are terribly important, so they are ready to step up the game. stephanie: this is a key challenge of the last few months on both sides. in march or april, you would have said both sides have incentive to do a trade deal. in the last few months, we have seen the change on both. we have lots of goodwill between the chinese and the americans. the chinese are just really getting fed up, not willing to do these kind of concessions if they are not getting support

from the administration. and president trump, seeing how this might play out on the campaign trail, thinking i prefer a kind of forever trade war then a deal to have to defend through 2020 and i have always democrats opposing it, the only question is is he going to ratchet it up? or is president trump willing to have a carry-on on the back burner, but without a resolution? the worrying thing about the last week is he has been willing to ratchet it up, and that is presumably going to continue for some time. alix: guys, appreciate it. sarah hunt of alpine woods will be sticking with me. coming up, bayer with an $8 billion settlement. you have the cable rate at a 2017 low. gdp continues to contract. this is bloomberg. ♪

♪ alix: bayer's latest settlement proposal could cost the company

$8 billion on lawsuits that it's herbicide causes cancer. joining us is emma chandra. walk us through the latest. isa: reports that bayer planning to spend $8 billion to settle some 18,000 lawsuits in the u.s. relating to its round up weedkiller and the allegations that it causes cancer, but what is significant about this is that $8 billion figure is lower than what many analysts had been estimating the company would have to pay to settle these lawsuits. remember, there have already been some trials that bayer has lost with regard to the roundup we color. the number is also lower than what we are hearing the plaintiffs want. sources familiar said they want $10 billion. this should tell you that negotiations for the settlement are ongoing. any deal would take months to work out. the fact that we are seeing that pop is shareholders perhaps seeing some light at the end of the tunnel with regard to this issue. has been going on since bayer

bought monsanto, paying some 63 billion dollars just over a year ago. in that time, the stock has lost some 30%. i think shareholders will be very pleased to see this issue finally put to bed. alix: and the question becomes, what do they do next? thank you very much. coming up, the doves continue to emerge. you've got emerging-market central bankers not holding back this week, particularly in asia, continuing to cut rates. the race to the bottom and what it means for the global yield market. my theme for the day, it could be worse. this is bloomberg. ♪

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mattress is designed for every body. providing strong support, pressure relief and optimized airflow to keep you cool. hello bed of my dreams. order online, we'll build it, box it and ship it to your door - so you can try the leesa mattress at home. love it, or get a full refund. and rest assured, returns are free and easy. i love my leesa. today is gonna be great. find out why so many people love the leesa mattress, then try it in your own home. order now to get big savings - but only for a limited time. just go to leesa.com today. you need this bed. alix: this is "bloomberg daybreak." if you are still trading, congratulations. you made it to friday. it was a really unbelievable week, and we seem to be setting up for another day in the red.

s&p futures are off by 7/10 of 1%. factoring in all the information we are getting, it could have been worse. you have a rollover in contraction -- rollover and contraction in ppi in china. yields moving higher over in italy because you may have a change of government. everyone taking that on the downside. you can see this huge move in btp's, yet still at 1.79% for the 10 year yield. you could argue that's not a lot of incentive for the 1 -- for the italian government to -- not a lot of incentive for the italian government to get it together. ,he spread here in the 2-10 nine basis points. still holding around 2900 for the s&p. crude really being driven by saudi arabia. the saudis say they are not

going to deliver all of the oil their customers want. you get instant price action in the oil price. one really interesting thing that happened this week is flows into emerging markets. they are leaving. no one wants to own em. you can see the daily outflows from eem, the equity etf for emerging markets. --ning ms. michael mckee joining me is michael mckee, and sarah hunt of alpine woods is still with me. bondis as simple as global yields at record lows, their fight don't -- record lows, therefore don't buy em? michael: basically, can these countries repay their debts? it is something like 69 trillion dollars worth of debt in emerging market countries, and there is concern about what happens if we continue to see the same dynamics play out. we are not at a crisis yet. other central banks around asia this week cutting rates to try

to prop things up, but the reason for why people are concerned is pretty obvious at this point. alix: it feels like it is caught between a rock and a hard place. if you want yield, don't you still have to go to emerging markets? sarah: i think that is the reason the lire is up, because turkish yields are still very high even though erdogan is trying to get rates down by changing out the entire central bank. i think it is very tough when you are in a situation when a lot of emerging markets also depend on commodities for cash flow. a lot of those prices have come down, so you have the double way me of lower commodity prices, higher dollar, and it is very difficult for those economies to perform. i think people have been looking at them as a way to get the u.s. and other into -- another international markets as a way to get growth, but i think you are really seeing people start to get worried. we saw a rate cuts in

asia, like new zealand, devon shielding from australia, the philippines. yielding from australia, philippines. how to they play out against each other? michael: that is why you try to avoid currency wars in general. australia is at 50 basis points. they can't really go a whole lot lower until they go into negative rates. the reserve bank of new zealand talking about studying negative rates and the possibility of doing that. you are getting to that kind of downward spiral where everybody is doing that, and you are going to have real problems. alix: to that point, is it only fiscal? you mentioned it before. it is that our only hope? sarah: i'm flabbergasted by the idea that you would study negative rates, because it hasn't really done anybody any good. you have to think about what are the other options.

you don't want a negative devaluing world to keep going. there's a reason gold is sitting at $1500. they are looking at everybody essentially looking at the currency fight, and they don't want to be in the middle of it. you want something with more stability. givengiven the fact we had sucha protracted period of time with negative interest rates across europe, it hasn't really seems to do a lot of good. once everybody is going in a direction, it is hard to be a standout because then you are going to suffer. alix: the conversation we heard a lot this week was because -- was could the u.s. see negative rates. here's what someone it pimco had to say. >> it is probably not around the corner, but i think what it would take is a serious downturn in the economy, a recession in which the fed will take the rates all the way down to zero, restart qe, and at that stage we

may see negative yields in the u.s. as we are seeing them and many other parts of the world. alix: mike, it is crazy that you have a chief analyst for pimco saying something like that. michael: you had a constraint on negative rates in the u.s., despite the fact the fed doesn't want to do it, but you could see a cost for carrie negative -- a cost per carry negative rate. until recently, we are not allowed to have negative coupons. now the treasury introduced floating rate notes a couple of years ago so that they could issue bills that could have a negative rate, and we will see if they have to do that. alix: this is a broader question. allocationlooking at for equities, do have to be in the u.s. because we have the longest to go to get to negative rates? what is the answer? sarah: i think this is going to go back to where is the best of a bad situation, and the best of

a bad situation is still the u.s.. at least you have positive economic growth. you still have some sort of yield on your fixed income, not as bad across other places. to get some sort of growth out of the u.s., it is still going to be a place people want to go and invest in relative to other things at this point in time. alix: michael mckee, really appreciate that. sarah hunt is going to be staying with me. viviana hurtado is here with first word news. viviana: it is a blow to the newly installed reddish prime minister boris johnson. and the second quarter, the u.k. economy unexpectedly shrank. that hasn't happened since 2012. gross to domestic product falling since 2/10 of 1%. many companies running down ahead of buildups from brexit. bloomberg learning the white

house delayed a decision on licenses for u.s. companies to restart business with china's huawei technology after beijing said it was halting purchases of chinese farm products. the u.s. put china on -- the u.s. put huawei on a trade blacklist citing national security concerns. finance professors examining customers of ashley madison, the dating site for married people looking to have affairs, a computer hacks exposed the names of personal data of 30 million members. professors found a strong correlation between adultery and workplace misconduct by corporate executives and financial advisors. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: so what was that video? that ad was bananas.

it's funny, but it is also indicative of how people need to a way up in some ways. basically, they don't invest in companies where the ceo is overweight. sarah: maybe if they are traveling so much, they don't have time to exercise. alix: that's true. sarah: these are things where you have to feel that someone is heading one direction in their personal life, they could be heading the other way in other parts of their life. in the end, i think there is some sort of continuum. alix: to that point, as esg gets more focused and you get big investors like pension funds pushing back in that respect, you can see how something like that would actually be meaningful in terms of shareholders. sarah: of course, because people are going to lose faith in somebody having problems in other areas. certainly with those kind of

accusations, you don't want that at the head of a business because the last thing you want is a distraction over what they should be doing, which is running the business. alix: if you look at the ad and then decide you want to use that product, i don't know. that is bananas. sarah, great to have you on set with me. sarah hunt of alpine woods. german bonds at negative yields. we will holdents your money. if you have a bloomberg terminal, check out tv . interact with us directly at tv on your terminal. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in just a few minutes,

ben carson my u.s. housing and urban development secretary. -- ben carson, u.s. housing and urban development secretary. here's your bloomberg business flash. u.s. justice department is looking into google's digital advertising and search operations. bloomberg has learned it is part of a broad antitrust review of the market power of giant internet companies. antitrust officials have met with third-party companies that could have grievances with google. among them, publishers and consumer facing websites. thereerg has learned could be hundreds of job cuts at ubs to boost collaboration between d makers and its wealth management unit. the investment bank's return on equity in the first two quarters was roughly half that of other ubs divisions. over to malaysia, where criminal charges have been filed against

17 current or former open sex employees in the 1mdb's gamble formernst 17 current or goldman sachs employees in the 1mdb scandal. i'm viviana hurtado. that is your bloomberg business flash. alix: thanks so much. the 1mdb's gamble has been hanging over goldman for some time now -- the 1mdb scandal has been hanging over goldman for some time now. we asked the ceo about it back in april. >> we are very focused on getting this resolved in the best way we can. we will do that for our shareholders and clients. alix: but there are still some hidden risks. goldman addressed the matter in 10k filing and said it is not always possible to deter or prevent employee misconduct, and the percussions we take to prevent this activity may not be respective in all cases.

we turn now to our weekly bloomberg businessweek feature, where we profile the stories in the latest issue on stands today. first up, one bloomberg reporter attempts to fight big tech with the help of big tech. then the non-weirdness of negative interest rates. the new normal kind of makes sense. and that her birth control could actually exist. big pharma skims on innovation -- big pharma skimps on innovation because there's no money in it. basically, you have all these gadgets that wind up invading your privacy like echo, and one reporter decides he's trying to fight it. reporter: he found a number of gadgets and services you can pay to take down all of the information posted about you on the internet. he went from basically a closed

version of the home assistant like the echo, but one that doesn't actually share any data with any third parties. fascinating to me the sheer number of steps he had to take to protect credit abilitya, google maps' to track him. it just goes to show that for one human being to try to get a handle on all of their data out there that big data has control over, it is just a massive exercise. i don't know if it is feasible for most human beings. we've come to rely on this technology to make our lives easier. >> alix: those glasses looks really bizarre. silvia: i have an iphone, and sometimes when i wear big sunglasses, it doesn't recognize my face. there are ways you can sort of

change the way you look. there's a creepy image on the cover as well. you've got this pot of our mask of someone else's face, and that is to confuse all of those cameras picking up your face and able to track everywhere you've ever been. alix: the cover is actually really freaky. we want to get to another story on how negative rates actually make sense. it is on the digital area for businessweek." he makes the analogy of if you have a bar of gold, you have to store it. you pay to store it. how is that different from having to put your money in a german bank and having to pay to store it? silvia: exactly. he takes us back to the time before banks, when you had to pay to store goods that could disappear or degrade. you would have to pay for the actual storage space for that. when you think about money come up money is basically entered in a digital ledger. but you think about when you have $10,000 in a bank, that $10,000, bank owes you

and the only way to get that is by another borrower. the whole set of interconnected borrowers. brooke: it is really a supply and demand question. it gets back to the fundamental basics of finance. if you don't necessarily have borrowing, struggling with rage growth -- with the wage growth we've had, where are the banks getting the offset to store your money? he gives the example of ubs in switzerland. switzerland is obviously a very desirable place to store vast amounts of wealth. so if you want that, there's limited capacity to pay out interest rates. that maybe why you're seeing ubs start to charge customers to house their wealth. alix: it was pretty fascinating, i have to say. wrapping it up with something that bothered me, but didn't surprise me, basically some research shows there is better birth control out there for women that doesn't involve any kind of hormone therapy, but it is not getting produced because it is just not profitable. brooke: because when you think

about gene therapy that you can charge $2000 for a single dosage or some of the blockbuster drugs like humira, birth control doesn't really register on that level, which is depressing. it make you think about what else is out there we could be solving that pharmaceutical companies aren't investing in right now. alix: ok. silvia killingsworth and brooke sutherland, thank you for being here. you can read all of these in the latest issue of "bloomberg businessweek," on newsstands and digital. coming up, we speak to ben carson, u.s. housing and urban development secretary. if you are heading out, don't lose touch. tune into bloomberg radio, heard across the u.s. on sirius xm china 119 and -- sirius xm channel 119 and on the bloomberg business app. ♪

alix: u.s. home prices gains are

slowing, while the supply of extensive properties is stacking up. the government taking big steps to try to fix the home affordability problem. one thing they are targeting is opportunity zones. aboutg us to talk more that is ben carson, secretary of housing and urban development. thank you for being here. opportunity zones are basically trying to incentivize investors to develop property for the longer-term, and they get tax breaks to do that. what has been the uptick so far in the investment community? sec. carson: it's been very good. i've had an opportunity to visit multiple places, like on a foundry in st. louis which was serving as the opportunity zone there, and they were bringing in a supermarket and workforce housing. down in florida, excellent things going on. multiple places around the country. me isas really inspired

every time i go and visit one of these, there are both republicans and democrats there, actually working together. alix: do you have a read on how much money has so far been developed? sec. carson: at least $43 billion has been committed so far. secretary mnuchin has estimated it would be about $100 million a year, and i think that is very realistic. alix: is there going to be a third step to tweaking the opportunity zones? one criticism is that it is only going to wind up benefiting areas that are already going to be gentrified because of the fact it is not the land value, but the value of property that has to appreciate, and that is more of a gentrified area than lower income. sec. carson: i know people are saying that, but we are constantly looking at things that can be done. for instance, we are expanding the section 220. in fact -- this is the announcement right here.

we are expanding section 220 so that the lenders can be protected not only in the urban renewal areas, but also in the code enforcement areas, and even in some of the rural areas with their investment. 30% of the gross income that comes in can now be from commercialized areas. that will encourage grocery stores to come in. that will encourage places that can employ people to come in. and then in conjunction with this, we are doing things like enhancing section three of the housing act, which says if you are getting hud federal money, you have an obligation to hire, train, or give contracts to low income people in that area. it's been on the books for a long time, but it's hardly been

used because it is so cumbersome. we are removing a lot of the obstacles to using it. in addition to that, we are working to remove a lot of the incentives for low income people that have to report that so their rent can go up. that is not a fair incentive. if you bring someone to the household that makes money, you have to report that so the rent goes up. don't even think about getting married. those things have kept people mired in poverty. so it is not just the opportunity zones. it is a bunch of things we are doing in tandem with that. alix: another part of that potentially is you are investigating facebook, adsifically in housing discriminating based on race, religion, gender, etc. why facebook?

are you rapping in google, etc.?er, sec. carson: i can't say too much except that they had these algorithms that allowed them to target certain audiences and exclude others. housing, is focused on that violates the law. we simply cannot allow that to happen. alix: are you going to be investigating google and twitter for something also similar? sec. carson: we are looking at everybody on those platforms, and we will investigate everybody appropriately. but some people are starting to recognize that they have been on the wrong end of this, and are voluntarily beginning to change their activities, so that's good. alix: to wrap it up, develop and's that have happened, what has been the results so far in the community? what has been the biggest take away for you? sec. carson: the biggest take

aty -- at hug, you mean -- hud, you mean? the biggest take away is that we controls. if you can imagine tens of billions of dollars that flowed through there, it was horrible. now that's allowed us to put the right financial controls in. the cio has come in. alix: so you can run it like a business. sec. carson: that's exec lee what we are doing. alix: mr. secretary -- that's exactly what we are doing. alix: mr. secretary, think you so much. this is bloomberg. ♪ ♪

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inflation? core consumer inflation in china remains deflated. u.s. cpi on deck. u.s. junk bonds see the largest outflow this year, while investment-grade record inflows of $2.8 billion. how to trade all of that. bayer's a -- and billion-dollar offer to settle lawsuits related to weedkiller round up. welcome to "bloomberg daybreak" on this friday, august 9. it has been a very long and difficult week if you've been trading. we are coming to a close on that, but it looks like we could develop into a relatively ugly day potentially. s&p futures down 7/10 of 1%. it could be worse. lots of eco-data that is not great. exports at a three year low out of germany. euro-dollar holding onto gains, up to 10th of 1%.

crude giving up some earlier gains. that's all about the saudi arabian put in the market. it was u.s. treasuries shaping up to be the bond market's trade of the year. market purchase pins braced for yield to go lower. just how low can those go? respect to investors about the path for rates. >> 10 year bonds can go to 1%. the questions around the timing. >> we may well see negative yields in the u.s. as we are seeing them and many other parts of the world. >> i am not in the negative rates camp for the u.s. ten-year. >> this concept of negative rates in the u.s. or 1% rates has really taken on a lot of steam. >> the process of lowering the rates causes assets to inflate. >> people with money are going to have trouble getting good returns. alix: joining me now are amy wu silverman, rbc capital markets managing director and equity derivatives strategist,

and jim paulsen, leuthold group chief investment strategist. i want to start with the volatility, amy. this is bank of america merrill lynch's skew indicator. the higher the line goes, the more expensive it is to buy protection. seen?t have we amy: the most common question i am getting from clients is is it too late to buy protection? the short answer is it is not. when markets go down, you're going to see that indicator pickup. the one distinction i would really like to make is the difference between the market potential he going down 10% or theor 30%, the tail versus catastrophic risk protection, that is still not that expensive. when you think about that, there are a lot of reasons why we could have a catastrophic event on the table. i think there are sort of these flashbacks as we get to the end

of the gear, to the last quarter, of exactly what happened last year. when the market goes down 5% and even trades up, of course protection is a little bit more expensive, but on a 15 year basis, it is in the 20th percentile. alix: wow, ok. amy: of cheapness. so it is still really not that expensive. alix: so what amy just said that kind of worried me is there is still room for a catastrophic event that isn't out of the realm of possibility. what did you do this week? what are you going to do next week? jim: i think we've been worried about catastrophic events this entire recovery. reinforces every time the vix explodes, it reinforces the wall of worry that's been a big part of this bull market. i still think that's going on overall. there's always a chance of a catastrophic event.

we certainly sunday will have a bear market. there's no doubt about that. but i think right now, the fundamentals in the economy are far better than they are being given credit. there's a lot of under invested portfolios, so if it goes down very much, i think there's a lot of buying the dip money that will probably keep the really bad event out of focus. a 10% decline, we could certainly have that anytime, but i think the deeper decline is certainly possible, but not very likely. alix: you echo what we've seen this week in terms of where investors put their money in u.s. equities, and that is low volatility stocks, the safety trade, or utilities. is that what you do? those areas of protection even though they are quite expensive? jim: i don't think so. you certainly own some of those. the barbell approach makes some sense, but i think on weakness

to add more to cyclicality a little bit, and also to growth. it is true that defensive stocks are doing well, but so are much of the rest of the sectors. i think the s&p this year is up 17%, around that area, and maybe nine of the 11 sectors are up 13% or greater. been not like there's only winners in defensive stocks. there are a lot of more cyclical areas that have been winners. tech is leading. comms are up there. industrials are in the top five, consumer discretionary in the top five. five sectorsop year to date are not defensive sectors. i wouldn't pay up just to sleep well at night with defensive stocks because they could be where the greater risk is if this market keeps running. alix: that's a good point. when we see volatility inequities come down but holds

up another asset classes, that is something different, too. when you look at this, the white line is the vix. how do you think about that now, with volatility coming down for the s&p, but up for other asset classes? amy: one of the things we look at is what makes sense. calls orter to buy vix s&p puts? you can look at the ratio of those two indicators. essentially what that is telling us now is a few months ago, it really made sense to play your hedges through vix. given the move we've had, if you itback to that ratio again, actually makes a lot more sense to express hedges right now through s&p as opposed to vix. that's what i would be doing if i were going to express any sort of downside. the one other thing i would say, it was interesting what jim said. that's exactly what the options market is pricing. it is pricing the risk of a 10% down market, but also giving no

weight to a catastrophic event. one thing we are seeing traders on our side do is because that catastrophic event risk is cheap , and historically has been so, you are seeing a lot of people play what i would call extreme payout scenarios. so the likelihood of this happening is very low, but i am getting a 70 times payout on this kind of trade. the thesis there is at some point, it is not about the prop abilities of it happening. it is about how much risk-reward you are getting if it does happen. so we are really seeing that play out in terms of what option traders are doing right now. alix: if you have the option traders just thinking about the 30% decline, jim, what do you do as an equity guy when it comes to bonds? i'd be pretty minimally exposed to bonds. it's interesting. when we are talking about negative yields in the united states, there is an impression

we've never seen yields this low, and they could go a lot lower. in this recovery alone, since 2010 we have been lower in the 10 year yield then we are right now probably three or four other times. the most recent was in 2016, when we had the global manufacturing recession. so it has been quite common for yields to spike downward in this recovery when we slow down globally. every slow down we had come of the 10 year yield has come down into this neighborhood or even lower. i don't think it necessarily means rates are going to fall below 1%. i think at least in this recovery, the right thing to do is to get out of bonds. the right thing to do is start thinking about the risk of yields going back up again. i think that is how i'd play it. i would own some just for diversification, but i would be pretty minimally exposed to high-quality u.s. bonds. amy: just to add on top of that,

more a more a tourist in the se come about a lot of our clients have expressed interest in euro-dollar options, which are essentially taking a view on libor. what has been interesting in this particular set of options is you are starting to see people pulling strikes that would essentially say rates are going to go negative in the u.s. it would imply there's now a possibility of that happening, and you are seeing them do that through the december 2020 futures contracts, one and one and a half years out. alix: not that far away. amy wu silverman and jim paulsen will be sticking with me. coming up, it is the pboc dilemma. you've got china's latest price data, a look at the worst possible world. we will take a look at that with henrietta treyz of veda

partners, director of economic policy. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." bayer is proposing to settle more than 18,000 u.s. lawsuits that accuse its roundup weed killer of causing cancer. reports say the company is willing to pay up to $8 billion. shares surging even though a deal maybe months away. more shots fired in the trade dispute between the u.s. and china. the white house delayed a decision on licenses for u.s.

companies to restart business with china's huawei technologies after beijing said it was halting purchases of american farm products. a may, the u.s. put huawei on trade blacklist, citing national security concerns. that is your bloomberg business flash. alix: thanks so much. speaking of china, the data was pretty mixed. if you come inside the bloomberg, it is the red bar. that is the ugly part. now for more of a breakdown on what this means is henrietta treyz, veda partners director of economic policy. is this because of trade, or is this the underlying economic fundamentals of china? henrietta: honestly, i think everything is related to trade. this is so globalized now. people forget that tariffs have been on for over a year now, and we are only now ripping up -- only now revving up to the 40%

tranche. i would say it is all associated with the trade war in some fashion. alix: you still have the cpi holding up relatively well. henrietta: i think you have the people's bank of china essentially saying, we are digging in here. we are going to not come to an agreement with president trump. that is in line with our view as well, that the president is not in a position to negotiate a final deal at this point. i was listening to your colleagues early this morning, and it is the same view that we are going to be in this for the long haul. just like our federal reserve is involved, the people's bank of china needs to be involved, these are all of the different aspects of the two economies. whatever measures you can take to rectify the trade war or mitigate any of the unintended or intended consequences, they are all working in lockstep to make that happen. alix: so in the u.s., that means

the fed cutting rates and big companies pushing back on positive to prevent price increases. what is the story and china? henrietta: i think when you look at what the u.s. companies push back on that a little bit, and terms of being passed on to the consumer, we have seen in cases of the washers and solar panels industries, consumers are taking the price hits. i think inventories have been built up in the last six months or so so substantially that you can maybe stave off the increases. i was speaking with a client who said we have already done the back-to-school shopping, already got through that component, which i haven't yet done, but need to get on that. the expectation is that all of these price increases are just a little bit further down the road then maybe the immediate headlines suggest. so the lag effect of these trade wars is really important to watch and be mindful of. i think the market is correcting many months later after the escalation in tariffs back in

may and he tranche back in september. there's a lag time associated with these trade war that i think people are unfamiliar with. that's why it seems like the indicators are a bit wonky, when really there is just a delay. alix: that is a great point. what is the story and china -- the story in china? henrietta: i think we will get a lot more stimulus from them. i would take the example of the automotive industry in china. -- they'veback their scaled back their subsidies. one company had a 20% to klein in the last quarter. i think china knows that they can preemptively impose domestic stimuli in a way that u.s. federal government and president trump cannot. you see them in advance of any u.s. moves, francis, this $300 billion basket of tariffs -- for

instance, this $300 billion basket of tariffs, by providing tax cuts, further incentives, i think we see them advocate for boycotts and china of u.s. industries, they have their effective watchlist. you have our export control packages. they have their own. i think instead of being focused on national security the way we think about, they will focus on what domestic industries can we prop up. they see the move from huawei today to roll out their own operating system. that's exactly the kind of long-term market trend i think china can embrace that the u.s. is not used too. alix: make a quick distinction between that. for things like caterpillar, john deere, china can make inroads for the sort of lower quality, easy to make stuff, but not the higher end things. does that change in the next 18

months or so, or does that continue to make these companies interdependent? henrietta: it is interesting. the chinese government is indicating overnight that they are going to try to bring in a whole bunch more high-tech components right now, as fast as humanly possible, because they are trying to get out in advance of what our federal agents are rolling out from all different agencies. fcc, allland security, of them. a serious round of restrictions on what products in the high-tech space you are able to send over to china. that is going to impact two dozen different sectors, ai to digital technology, to get our high-tech stuff made fast as possible for whatever window remains. our long-term thesis is that the tariffs are all flash and bang, but the real substance is the iron curtain coming down in the

high-tech space. that is going to be a permanent fixture once it gets in. china is trying to get everything it can right now, and then they will hunker down going into the second half of the trump administration next year, or into a new administration from some other democrat if the white house flip's hands in 2020. they just don't see this ending, and i think that is a very rational approach to take. alix: really great to get your perspective. thank you, henrietta treyz of veda partners. still with me, amy will silverman of rbc capital markets and jim paulsen of leuthold group. how do you buy tech in that environment? jim: i think tech has been doing well, and likely to continue to do well. to -- i aminclined more inclined to, if you look at investment, almost all of that has been economy investment, construction spending or

manufacturing equipment. of information processing or intellectual property investment has actually been accelerating in the last 18 months. i think that is why the tech stocks have continued to do well. there's actually a lot of fundamental support under that. while we are talking about areas of the economy that have slowed, that area continues to do fairly well. i think we are just going to get used to having economic battles global event that goes on. it is new now, but i think we will be dealing with this forever. global capitalism has exploded in the last 30 years. what we are now doing is fighting the rules of the road. i think it is just going to go on for a long time, so i think we are going to get less sensitive to these kinds of battles as we go forward.

alix: less sensitive, ok. so amy, i know you are not the fx expert, but this is you on volatility -- this is yuan volatility, backup to what we saw in 2015. how does this influence how you look at the equity market, how you look at long-term issues? amy: we've been in a process of slowly reflate think -- slowly reflate think -- slowly reflating. seeing it from this one-month volatility and august to last year, i think we are up 10 points. psychologically, we have to stop thinking about august is a quiet volatility month because it just hasn't been. we have to take vacation in july instead. in terms of tech, some of the trades we are seeing is actually on the upside.

for instance, in chinese internet. we are seeing people play that through the call. again, it comes down to maybe the probability of it happening is low, but if it does, the payouts are very high. so let's say this trade war does get resolved earlier than expected, we do get some kind of increment or solution. adr's havehinese really big opportunities to flip leverage to the upside. you do see call buying in those names in the interim from here until year end. that is people playing for that leverage scenario. alix: good stuff. amy will silverman of rbc and jim paulsen of leuthold group will be sticking with me -- amy wu silverman of rbc and jim paulsen of leuthold group will be sticking with me. this is bloomberg. ♪

♪ alix: italian bonds falling

fast. deputy prime minister matteo salvini called for a snap election, raising uncertainty. acting us is bloomberg's rome bureau chief. what is going to happen in the next 72 hours? reporter: the next 72 hours is going to be the weekend, so not much happens in italian politics. but on monday, the leaders of the main parties in parliament for meet and set the agenda the coming days. prime minister conte once to have a no-confidence vote in parliament, so what we decided when this will happen, most likely the week after next. alix: in the meantime, what is the rhetoric of what is happening in the bond market? does anyone even care? alessandro: they seem to care quite a lot. it is unclear what is going to happen to italy. there's also the possibility of a salvini government after new

elections in october. this probably means more clashes with european partners and more indexed spending to tax cuts, and a large investment program. this is what salvini has promised italians. much.thank you very i think this will be something like the 62nd government since world war ii for italy. coming up, trade uncertainty. we have ppi out in just a few moments after china cpi dipped to contractionary territory for the first time in three years. it could be worse, maybe. we will see, after a tumultuous week in the markets. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. 30 seconds away from the latest read on inflation in the u.s.. down in the equity market,

particularly when it comes to italian banks. 10-year btp in italy up 26 basis points on the yield. not helping banks as government issues continue to percolate. roster --r losing its losing its luster. go. we the numbers have dropped. producer price index on a month on month basis if you back out of energy down .1%. on a year on year basis, still holding but down sequentially, coming in at 2.1%. missed expectations and lower than the june reading. final demand holding steady at 1.7%. a lot of things going into this going to be somewhat of a number that is movable. you have oil had an insane month as well. nonetheless you see the producer price index down one point -- .1%.

michael mckee is joining us. polson arean and jim still with us. mike, was your first read on this? expectedpretty much as , nothing unusual in the breakdown. food prices were up. people who are looking at oil prices today would be surprised energy was up 2.3% prior to the big drop-off in july. trade up .2%. transportation and warehousing, which had been affected by tariffs, up .2 as well. declines in services because people have been counting on service industry inflation to try to boost the overall inflation rate. they are down .8%. not seeing anything to exciting in the overall breakdown here. looking for steel, not seeing

it. those prices have been rolling over. something we want to keep track on because the steel tariffs had made a big difference in prices to producers. it does not tell us a lot about where we are going in the sense that ppi does not feed directly into the cpi ortiz the, but it gives a general view. the good news is alcohol prices are down. alix: surprising. michael: those going on vacation, i've good news. [laughter] alix: thank you for that. i appreciate it. if you take a look at where we are, the first of klein in court ppi, amy, when do you need to hedge inflation? amy: it has not been that much of a problem. when powell talks about it he is

saying that will be one of the triggers. for us is always short-term in the options market. the longer-term you go is your end. alix: you cannot go longer than that. amy: you have to see what happens with the iowa caucuses. there are so many inflection points you have to see that i would not give too far out. alix: if you are not going to be buying yields in the u.s., what do you do when you still have inflation going nowhere? why doesn't the 30 year make sense? yieldsthink you have down to 170. sitting right on top of the consumer price inflation rate. if you will buy that, you're getting no real return. it is not so much the yields cannot fall further with low inflation. they have already done it. i think it benefits stocks.

you get low inflation. we have multiples that are relative to the bond yield that are lower than 70% of the time since 1950. 70% of then higher time. it is a very cheap market on a relative basis to bonds and inflation overall. i think that is where you want to focus. if you need income, there are expensive income generating defensive stocks which we have talked about you can look at. or cheap dividend yielding energy stocks. i think that is a better way to go than to play the bond market on a long basis. michael: i have a question. somebody said the definition of genius is being able to hold two opposing thoughts at the same time. i do not know about the definition of stable genius.

buthe strong dollar is bad the strong dollar is pushing down on inflation, and you say that is good for stocks, which should i prefer? , i was thinking on the ppi that where this is good as we are not seeing more weakness in pricing. if we had more weakness, that would be concerning about the underlying economy. i do not think we want to see inflation go lower. i think if inflation starts to pick up a little bit, that might calm people's fears the economy is not strong. i do not think it is good for valuations, but it going forward , stocks need to see a pickup in overall growth. one of the things that would do that is stronger pricing. if we could take the cpi from 1.7 back to 2.3 on the basis of

continued good job numbers and consumer spending, i think that would be a positive. alix: as we round out the conversation, i want to get your top paul. -- your top call. amy: if you do not want to get caught up sides with the s&p up 17% with a repeat of what happened last year with the december s&p, a cheap, good hedge, high payout that gives you reasonable protection if you get a turn. you can cheapen that further by making a call. alix: jim, your favorite call? jim: i would at the emerging markets. i think the intensity of this trade war and all of the hype, i am looking at citigroup economic surprise index in china that has popped up. it is up in japan. i think economic reports are turning better and emerging markets will be a winner if

people give up the recession ghost. alix: great to get your perspective. amy wu silverman and jim paulsen, thank you. and michael mckee, great to have you set. the core producer price index had its first decline in two years, down .1% as the market continues to trade after a difficult week. the dollar one of the weaker performers in the g10 space. now we get updates with what is making headlines outside the business world. a blow to newly installed british prime minister boris johnson. the u.k. economy unexpectedly shrank. that has not happened since 2012. gdp falling. many companies running down inventories built up ahead of the original march deadline for brexit. british manufacturing falling by the most in a decade. more fallout from the mass shootings. donald trump says congressional leadership is now having serious

talks on background checks for gun buyers. the president also tweeted he has been talking with the nra and others so their views can be represented. he says guns should not be placed in the hands of mentally ill or deranged people. those mass shooting prompting espn to delay the scheduled broadcast of a videogame competition. game made byis the electronic arts that features gun violence. president trump said video games glorifying violence could be contributing to the shooting epidemic. bloomberg has learned the segment will air in october. 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'm viviana hurtado. this is bloomberg. alix: that question of whether videogame violence leads to real violence is not a new one. studies have shown there is no .orrelation

executive say video games are popular in countries such as japan that do not have a mass shooting crisis. shares of electronic arts and other game producers did all. according to bloomberg intelligence analysts, there are no long-term ramifications. they believe the first amendment makes tighter regulation unlikely your walmart has announced it is taking down displays of violent video games. alix: coming up, over needs a lift. -- uber needs a list. analysts call the quarter -- uber needs a lift. analysts call quarter messy. more on today's bottom line. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." i'm viviana hurtado in the hewlett-packard enterprise greenroom. coming up later on "balance of

u.s.," can to jelly -- immigration services acting director. here is your bloomberg business flash. global oil for demand is fragile according to the latest report from the iea. they say of global economic slowdown squeeze consumption growth this year to the weakest in a decade. the u.s. justice department is looking into google's digital advertising and search operations. bloomberg has learned it as part of a broad antitrust review of the market power of internet giant companies. antitrust officials have met with third-party companies that could have grievances with google. among them publishers and consumer website. of --rld's biggest maker boosting its outlook. the next generation diabetes drug boosting the danish drugmaker.

it expects lower prices due to changes in the u.s. program and global market weakness. alix: time for bottom line. we will look at three companies worth watching. joining me is brooke sutherland. i am taking a look at uber. an analyst said a little bit of something for the bulls, a little but of something for the bears, and by the way of $5 billion quarterly loss. brooke: a big part is they have to give out bonuses to the drivers. revenue growth coming in weaker than expected, which is a big deal. alix: totally. something for everyone. a growth company has to be your revenue numbers, but at bloomberg intelligence we have stable pricing that will help margins. brooke: you have lyft coming out with a beat and arrays and it looks great, and then uber is messier it does not boost confidence. alix: you like wrangler.

brooke: i like wrangler. they are seeing a sales pop because of little -- it is the song of the summer. alix: i'm not one to ask. brooke: people love it and there is a line in the story where they do not even know he was going to mention wrangler and the song and all of a sudden they started seeing a huge pop in sales. they have been working with him. they have the branded song title on the back of the jacket and they are selling out like wildfire. they will continue working with more diverse cast of characters. they want to see they can reach a wider population. they have worked with brett favre, dale earnhardt, and now they are saying we can be something for everybody. spinoff and is was wondering if that was financial engineering, and they are finding a way to diversify themselves. alix: that is like accidental publicity. brooke: it makes you think of

the toy companies where they get a hit from the movie and then can you follow up. my mom is a big fan, so their customer there. alix: if brooks mom likes it. our third company is bayer. a bloomberg intelligence consumer litigation analyst joins us. if it is $8 billion they will offer, is that going to be enough? holly: i do not think so. demandsthere will be for more because they have had such huge verdicts. i said they can average about 500,000 aps, which would bring the -- a piece which would bring them to about $10 billion. brooke: something you've written about is it does not protect them if you have future gains down the road. is there any way you can head

these off at the pass? holly: i think what they would try to do is get the plaintiffs lawyers to agree they would not take on more cases. that is how they would stem the flow, the huge tide. they would probably try to get plaintiff lawyers agree to not take on more cases. they cannot stop plaintiffs from bringing lawsuits. if they are still selling a product that allegedly causes cancer, they will still be subjected to these suits. to keep the wind out of their sales of the lawyers who are driving, they would get an agreement with those people not to take on more cases. alix: thanks a lot. holly from bloomberg intelligence. also joining us on the phone as , is the chemical sector

coverage and head of research. deal, if it does not happening goes to $10 billion, does that change i you value the stock? marcus: not at all. we currently have 15 billion euro as a potential settlement. when i look at estimates from other broker houses, that is more or less the average raise of the expectations. brooke: if you do get a settlement, what does that mean for this contemplation of her breakup? there's been some speculation about whether we could see spinoff. do you think a settlement moves us further down the path? would takehink it pressure from the management and from the breakup case. there is a bigger case -- not completely gone but the pressure would be significantly less.

yer recoverdoes ba from this? what is their underlying business, their earnings potential? markus: the underlying business is running well despite the negative effects. for 23 billiong euro cash flow for the next three years. close to 6 billion euro free cash flow per year and i think the settlement would be most likely split up for several bayer could handle. brooke: does that take away firepower from the pharma division to do deals? markus: it would take firepower off bayer for the pharma division, but i think right now

it is more important that the on theent can focus more -- and less on the settlement cases. brooke: there were reports earlier this week that they are making progress in selling their animal health division. what sort of price you expect for that? markus: in our models we have 4.5 to 5.5 ilion -- $5.5 billion. we have had amounts close to 8 billion euro, which would be a positive surprise. right now we are calculating around 5 billion. , in: to wrap it all up order to move forward with other parts of their business, highlight their underlying growth, how quickly do they need to resolve the monsanto/roundup thing? markus: if they would be quick in settling this, i think they

could do it by the end of this year or at least the beginning of next year. them told then help focus on the restructuring , and alsohich is huge a portfolio change. alix: thanks so much. er and brooke sutherland, thank you very much as well. coming up, taking look at crude, a brutal week for the commodity. the outlook is fragile. oil is climbing higher. more on what i'm watching next. the pound dropping to the lowest level since january 2017 after the u.k. economy unexpectedly fell in the second quarter. it has not happened since 2012 and gdp fell .2%. a lot of companies running down inventories and building them up ahead of the march deadline -- the original march deadline for brexit. if you are jumping in your car,

do not lose touch. tune in to bloomberg radio on sirius xm channel not 19 -- sirius xm channel 119 and the bloomberg business app. this is bloomberg. ♪

alix: do not roll your eyes, but here's what i'm watching, that is oil. it is for good reason. oil palmer today after a tumultuous week. equities down .5% in the futures market. level, contracting for the first time in a while. in other asset classes, i mentioned oil, but you're seeing buying on the margin and also seeing the dollar continued to be one of the losers in the g10 space. brent able to maintain above that $55 level, up 1%. joining me is bloomberg oil trading reporter. a couple of things happening. on the fundamentals side you have the ia saying oil is fragile and then you have the saudi's and the markets propping it up.

what is leading? alex: today it seems to be the saudi's. crude has gone higher today and yesterday. it goes in contrast to those iea reports and figures you say we saw this morning. the iea cutting its demand outlook and saying january to may this year saw the slowest oil demand growth since 2008, which shows what many traders have been talking about. we are in crisis levels of oil demand. the saudi's and opec are looking for higher group vices -- higher crude prices. that appears to put a floor under crude. alix: what is also interesting is they still see demand growth for this year at 1.1%, and 1.3% next year. -- i mean 1.3 million barrels a day growth. that feels to have a. haoo heavy.s to bank

still significantly lower than the iea figure. if you look at their numbers, most of that is spewed toward the third quarter in the fourth quarter, particularly the fourth quarter. what you have to remember is you have these new fuel rules that should see refineries having to turn out more crude. demand does pick up. if we see monetary loosening the world over, that should be bullish crude demand. it seems a punchy number to have for the fourth quarter. alix: totally agree. you mentioned saudi arabia withholding oil. customers forced under the market to buy oil, thus the priceline is rising. you have any sense of it will work? alex: it remains to be seen what happens with demand. that is the first thing most traders are saying.

january 1 was saying opec and do what it wants, but the oil market is in big trouble. that has been the case. saudi arabia and their allies have been good with her upset and of not -- there offset pricing. if we see that worsening of trade tensions than what we will find is saudi will have to keep cutting. not just coming from the u.s. but places like norway, brazil, and that will hammer on crude prices down the ride. alix: bloombergs alex longley joining us from london. that does it for us. coming up on the open, dan suzuki will be joining on a rough week in the markets. this is bloomberg. ♪

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lisa: coming up, risk off returning with futures and treasury yields sliding as thursday's optimistic tone meets trade tension. german exports registering their steepest annual decline in three years. u.s. ppi posting its first decline in two years. italy back due to growing market uncertainty. the deputy prime minister calls for a snap election. 30 minutes into the opening bell. it is -- until the opening bell. shaping up to be an unpleasant end to the week. s&p futures down .5%. the dollar weakening versus the euro. 10-year gilts are the lowest since october 2016. at an ten-year yields record low. u.s. core ppi unexpectedly falling in july, posting its first decline in two