willesident trump says he speak with president she as china prepares a tariff countermeasure. yields hit 2016 lowe's. new zealand's benchmark also dropped a record. and the u.s. threatens sanctions on some jets. u.k. trade ties could be at risk after gibraltar allows the release of an iranian tanker. good morning, everyone. welcome to bloomberg:

surveillance. these are your markets. we are seeing a bit of an upside as it comes to the stoxx 600. one thing, the lse is investigating some of the delays on what they are seeing in the stock price. there was a trade issue, which means we have delayed opening for some of the biggest stocks. we understand the lse, the london stock exchange, will give us an update in about 15 minutes from now at 9:15 bsc. there is a bit of a risk on. 1.55.0 year yield at if you look at dollars stabilizing, 110.85. later, we will review an exclusive interview with brian moynihan, a banc of america chief executive. in the meantime, let's get straight to the bloomberg first word news in new york city. >> a trading services issue.

trading some of the biggest stocks on the london stock exchange has been delayed, the second such outage in a little more than a year for one of europe's guest markets. been delayed for parts of the ftse 100 and to 50. other parts are operating as normal. is a special relationship in danger? the u.s. says it is gravely disappointed with the u.k. after gibraltar court allowed the release of an iranian tanker suspected of hauling oil to syria. the u.s. has threatens sanctions against ports, banks, and anyone who does business with the ship. washington says the decision could put the uk's hopes of a trade deal at risk. to twos barred entry muslim members of congress. that was after president trump said letting them into the country would be a sign of weakness. he added that the two hate israel and all jewish people.

bill on amar and rashida tie the -aloudot be loud in - and because of their support of the boycott of the country. chinese police have been seen gathering near the border of hong kong. dozens of carriers and trucks were parked at the stadium near a bridge linking the city and the mainland. some are interpreting it as a signal from beijing that it is ready to use increased force if necessary. comments from china's ambassador to the u.k. yesterday. situation is at a very critical moment, but we have a full trust and confidence in the chief executive and her administration to handle the situation. if the situation deteriorates further into unrest uncontrollable, i would say we are in trouble. the government will not sit by

and watch. end ababwe has a plan to 20 year standoff with its creditors. the country's finance minister had flagged rate cuts and bond sales. it will also privatize everything from state telecom companies to timber plantations. the nation hopes to access the financing needs to revive the economy. global news 24 hours a day, on air ann dowd tictoc on twitter, powered by more than 2700 journalists and analysts, this is bloomberg. thank you. president trump says he has a poem called with president xi coming up soon. but it is said the u.s. plans for additional tariffs has pushed the sides off track in resolving their dispute. beijing vowed to retaliate, seeing the new levees were a violation of the trade truce. joining us this morning, a the chiefconomist and

currency strategist. iq for joining us. how much does this have to do with the tariffs and traits, and how much does it have to do with just concern that never happens, central banks -- whatever happens, central banks do not have ammunition? >> at the top of the list has to be the trade story. things are more negative. let's be crystal clear. that is top of the list at the moment. we know immediate signs of that conclusion, clearly we could start moving to a broader story, and at that it does become, do central banks have anything left? personally, i think we are in an extraordinary world. what i would describe as the fourth carry trade, where the negative yields -- where are we, $16 trillion worth of bonds in negative territory, is forcing

people to take extraordinary risk. on the 30 day yield is -- it is a combination of that, but at the top of the list has to be the trade story. does this extra risk lead to a recession? >> it is difficult to say. in europe, we are on the brink of a stagnation or a recession. we have basically gotten rid of our expectation that there would be a partial trade deal between the u.s. and china over the next six months. we still don't know what's really coming after that. in spring of next year, we might have -- my game theory, the powers in play that trump is looking for reelection. the problems for china are too much so. we have less demand from donald trump, more concessions from china. but it is a major issue. francine: the inverted yield

curve and the lower yields, does that indicate a pending recession? i hear have say we need to take it seriously, the other half saying this time it is different. >> it depends on where we are talking about. if we are talking that the u.k., it is a good sign of a recession. if we are talking about the u.s., i am more ambivalent, because i think the drive into negative territory on the yield curve has been driven by that search for yield globally. numbers,ok at the u.s. have they been spectacular? no. have they been mixed? yes. have they been horrific? no. i do not think it is a signal of a recession to come. that said, it means the fed is in a difficult position, because -- captures the markets radically lower. he is taking and aim towards

gray, i think. francine: how much does it have an impact on psychology, executives not spending, and could that trigger a recession? florian: it does have an effect. you probably have three major issues with the yield curve. yes, it is one of the most reliable indicators for a recession. the fact that people like us are talking about it obviously has some dynamic. obviously, the big issue is not only what is happening if we have a recession, but what the policy response is. i think that is why we have gone so quickly so low in terms of yield and inversion of the yield curve. what is coming if things are worsening even more? francine: i have a chart looking at japanese yields, and i have a question for you on german yields, florian. this is one of our charts of the day, because we see japan's senior yield premium over germany climbing to a record. what does that tell us?

that we are in a fiction world, that the market is bonkers? ok, there are several minor things we can highlight. obviously, germany's unwillingness to maintain a balanced budget as part of that. the search for a safe haven of any kind, what we think about ecb. but really i think it says we are in a truly remarkable world. i've been watching markets for 30 plus years, and at no point can i remember japanese yields being significantly above german yields. it was a safe haven. you did not by the yen as a carry trade currency. francine: but this is a new reality. what does it mean for germany? florian: they are in two different kinds of safe havens. you have global safe havens, which japanese bonds are, and u.s. bonds as well, and the

german bonds. if you go into the euro zone perspective, you have safe havens within the euro zone. we have some that say re-domination risk still played in, even though we have a strong commitment by all the policymakers, especially the ecb, to basically put the euro zone together. this plays into the german yield curve being lower than the japanese one. francine: we will have more on the ecb shortly. simon and florian both stay with us. coming up, beware of the reese deepening u.s. curve inversion that is here, but have we learned a lesson from when this happened in the past? ♪

francine: this is "bloomberg: surveillance." let's get straight to the bloomberg business in new york city. theeneral electric plunged most in the 11 years after a prominent financial examiner accused the company of accounting fraud. examiner, famous for raising concerns about bernie made off, is working with a short seller he did not identify. a ge executive called the claims market manipulation. a new owner for the brooklyn nets. we have learned alibaba's chief executive chairman is paying about $3.5 billion for the basketball team and its arena. he previously bought a 49% stake and headed until 2021 to exercise his option to take control of the club.

the purchase may be announced as soon as today. sale of its construction chemicals unit is running out of steam. several private equity suitors are considering walking away, and the auction is becoming focused on corporate buyers. several buyout firms have been reluctanceon basf's to provide detailed information of the division's earnings for this year. that is your bloomberg business flash. francine: the most widely watched part of the treasury yield curve has finally inverted. what have we learned in the past? i am with marie for the latest. >> i am looking at the last time we saw this happen, just after christmas, december 27 of 2005. following that inversion, we saw asset classes really do well.

look at the assets in the blue ambon prices in gold. this continued until we had the reese deepening of the curve, and that came on june 6, 2007. following that is where we saw a bit of financial collapse. fell,0 fell, bond prices and gold outshined as a safe haven. if you are looking at this nine of environment as an investor, this is what you need to be aware of, the re-steepening and what that means. for many, more than a year before the lehman collapse, this was the moment that brought on the great recession. nnmarie with the latest on the yield curve inversion. meanwhile, investors are still confident that jay powell will cut interest rates next month, despite strong u.s. data that supports the central bank's forecast of solid growth and higher inflation. markets may get a hint of this

next week when powell speaks at the annual central bankers retreat in jackson hole, wyoming. florian, when you look at jackson hole, this historically has been the place where we get real policy stuff, but we have mark carney, the fed -- who has the toughest time at the moment trying to either explain the yield curve or calm down the markets? florian: probably powell, because i think, as simon was leading out earlier, recession risk into the u.s. yield curve is challenging, because the economy is doing still pretty well. , the job isaghi much more difficult. but obviously, as powell is the head of the fed, which is the number one central bank, his words probably matter the most.

he is going to try to sort of have a calming town to markets without giving too much away like he did in july. francine: but jay powell's concern that the markets are trying to figure out, is he doing policy? is it to send off criticism from the fed? the attacks are coming fast and by the day. simon: they are actually massively complicated. i think if you did not have the constant comments coming in about his performance on twitter, then it would be far more straightforward for him to be able to make policy decisions. but the whole point of the fed at this point in time is they need to be able to share her dependence. takese central bank, it decades to build up its credibility and they could lose it within months.

even suggesting it is influenced by politics is negative in the long run. francine: but he is being influenced, jay powell, by trade. his president trump escalating trade on purpose so the fed does something, or is that too machiavellian? simon: i think he would be a brave man who tried to read too much into anything. the only thing you can say is right now the trade talks are taking place 18 months ahead of a u.s. election. china and u.s. tensions play well domestically in u.s. politics. any expectation this will be over soon i think would be brave. that's possibly the best way to express it. francine: this is our yield chart. we have been looking at in a duration of this and looking at the recessions that have not occurred while the curve was inverted, but were indicated just before. if you look at all the cheap money out there that has been for quite some time, does the

fed look at that and say, i'm not sure how to deal with the yield curve inversion right now? fed is data dependent, and that includes financial markets. they have a very careful look at this and see that, yes, in the past five or six decades, this was a reliable indicator. we may have a number of factors which are distorting the yield curve in a number of ways, their own asset purchases in the past and very lower long-term inflation expectations. and a number of their issues. having said that, we have probably explained away these yield curve inversions in the past, and then we had the recession. it really depends on a number of issues, like trade, like the chinese authorities getting a upon the economy, especially for

europe, the brexit saga. and last but not least -- francine: which we will get to in a second. i need to cut you off because we are getting headlines from the london stock exchange. this is after the open was delayed for some of the biggest stocks. start, orhey should some of the eds p options for the ftse 100 securities should start at 10:10. they are putting out a big release, and we are trying to get through it to give you the latest. they are saying the partition 1.2 will resume at 9:20. we will see if we have price movements when it comes to the lac -- lse. earlier they were saying there was a trade issue delayed by some of the biggest stocks on the london exchange. we will have a look at what that means for the ftse. we will bring you many big

movers when it comes to the stock movers shortly. we will be back with florian and simon. coming up, is europe's powerhouse powering down? germany catches a cold, but is a recession coming? ♪

francine: we are getting breaking news out of the london stock exchange. the ftse 100 securities are in an opening auction call. this was after a glitch means we did not have an opening in some

of the biggest stocks on the ftse, but we have been told i the london stock exchange that ftse 100 and 250 securities are in an opening auction call. as they open, we will review the prices. in the meantime, let's get back to the situation in europe. and simon still here. we were talking about policy reactions and you mentioned italy. is italy the biggest concern in italy right now? and if we do get snap elections, is the role of european question? florian: italy has turned itself into a basket case, and that probably started with the election in 2018. we see it as an accident waiting to happen. the thing is, with these probably snap elections coming up, not this year, but next year , because the president wants to get the 2020 budget out of the

way in mid-october, what we are probably going to see is a sort of right-wing coalition emerging. some beanie's party being so strong. then i would be worried. join forces with the moderates, i would be positively surprised relative to the situation now, even though there's obviously some rising euro skepticism. francine: thank you both for joining us. both stay with us. we talk about gdp next. ♪

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with the president as china prepares tariff countermeasures. yields tip to slide. the 10-year yield hits lows. more easing on the way. the u.s. threatens sanctions and suggests u.k. trade ties ould be at risk after by braulter releases a tanker. if you're watching from asia, one of the top stories this eek has put a lot of anxiouses and fear with what is happening in china. we're expecting some g.d.p. figures out of hong kong and just coming out as we speak. this is what we're getting, g.d.p. expanding for the second quarter. it is a little bit backward looking and doesn't have the full impact of the protests because yesterday we also saw chinese officials actually

downgrade a lot of their forecasts going forward. the second quarter g.d.p. for hong kong expanding and a touch below estimates but if you look at the time line where the g.d.p. counts, it's backwards looking. let's look what's happening how it's moving in the markets. >> let's kick it up to the upside, a.m.f. up 3%. we're seeing the tech industry in europe, the secretaryor rallying from lows and comes after nividia topped sales in the u.s. and we're seeing that across in trading. some of those potentially interested up for sale include singapore bank and the i.d.p. is plunging, down more than 15% and it is volatile with market conditions in the first half results and the biggest the

stock has been since they ipo'd in 2014. francine: calling for the e.c.b. to come up with a impactful stimulus package. it's been told it's better to overshoot measures. the policymakers are set to meet on the 12th and they will aannounce a cut in the deposit rate people think. simon, what is euro, the funding currency, it has a funny -- if there are tensions in the world you buy euro but maybe yours is the one that you lose the most. >> i would have argued totally when things started to turn negative the euro saw it but then in positive weight the euro was nothing but under pressure p. the market doesn't

know what to do with the euro. poor choice, though. i would argue if we do have a ratcheting up of tensions and we are kever "concerned about reception, the fact euro has been a part of the yields, down with the negative yields in other countries and we have a shot rally in the euro emerging. no signs of it emerging right now. >> your thoughts? usually the dollar appreciates in times of resoft mode and goes to the aemergencying markets where governments have in front of themselves struggle. the you're is in between and not sort of the risk stemming from the euro zone but obviously we have a risk from the euro zone or just across the channel right here with brexit. this euro is struggling

year. and unless we sort of get and establish some trade talks with china the euro will struggle at least against the dollar. francine: all right. we'll get back to you both. thanks for joining us. florian from berenberg and simon also with us. hi, renita. >> happy friday. china lost its status as one of the top four creditors for the first time in two years. him the economy rose to 1.12 trillion learning china's pile of u.s. debt rose for the first time in four months. this as the u.s. step you're wild quell below 1.5% for the first time in three years. investigators are confident jerome powell will cut interest

creates. the central baminge forecast supports higher inflation and markets may get a hint this time next week when powell speaks at the retreat in jackson hole, wyoming. japan's bond yield slipped to a three-year keeledgegs.of the bank to stepped a decline. the bank of japan cut its urchases to 5-10 more bonds to yield back to its parget range. the b. osm b. will have to give upen one of his targets. the so-called french spider-man scaled the sky to unfurl a banner calling for peace. -- just d a jukt .osed flag with a handshake

north korea fired two unidentified project i'lls into waters off the east coast, according to south korea's defense ministry. the launch comes a day after lip race day and a marked to celebrate the independence from california rules and are furthering for possible launches. global news powered by more than 2700 journalists andal insists. i'm renita young and this is bloomberg. francine? phillip: back to the news out of hong kong. the g.d.p. expanding and the estimate 0.6%. protests and political zpwruppings are taking its toll and the g.d.p. numbers came in a touch we low estimates but

think when the g.d.p. is from the for fresh. you look at the second quarter and a touch below estimates but not that bad. do we assume as we go forward the numbers are going to be orse for g.d.p. and hong kong? >> all indicators are they will get worse. the economy will be in a recession by the end of the year say economists. the numbers we have mostly reflects the u.s.a.-china trade war which has had an impact. and we're into our third month of the protests and that's having an impact on tourism and retail sales. from here to the end of the ear economic justs are too loud to see the foot pedal.

what industries are hurt the most? >> i think francine, there's a lot of commentary around the retail, the twure ace him sectors in kick glmbingts a lot of would-be journalists fwrks not to the degree they want to and could aeffect other vendors as well and eating out and dining out and that sort of thing and people are curtailing that. summertime is a relatively quiet time of the year with those that tariffle ground of solve a lot. the group to some extent announced $2 dillion in extra getting but i have a feeling. it would be necessary to put a floor on the economy in the coming months.

>> now how are you trepping after the rounds we saw at the airport, are things a little bit quieter? enda: the protests continue and we'll have another round of protests every day over this weekend and the biggest one will be on sunday afternoon on hong kong island itself marching towards the finance district and will be interesting to see the scale and high on that as an kind ducation they're falling after school and say there's not a no term rescue and we'll seize up any time soon. francine: thanks so much. our chief air a jags correspondent. what it means for the markets? b.y.u., well aware of which explains, what people were worried about but 10 things on

there, no central bank policy, brexit, trade, there's a protest, more on this and how it impacts market capacity or a zero link to trade? >> one of the most remarkable things you've seen this year is g.d.p. paul off the risk of fires. the congress congress story is alive and you can see something clearly from what's failed. think what's been happening in the gulf where we've had -- the ghest tensions there with it dp and italy, the threat there, the political collapse and move towards montgomery. that's not impacting much at all. i think what it tells you is

this, we've moved to a world of such extremes in yield for everything else to basically center a central bank. it will be a central bank, this and that. we actually have knowledge in price from the ftse which means we need to go route warp. and they were having ditches and delayed the open. but now the foots see 200 and 250 shares have resumed trading. i can see it on my screen and back on track don't thinked revenge, the journal boot could, beat back to been of the quarter that's happened in 10 days or so was at the threshold for namimbe

was up on the yield. >> i think that's it but now it's how that decline is managed. >> i think from mier with expective, i never could say haw it could get badgic, there's no sign of numbers taking place. this is an actual motor. i think china's two main concerns are the correct volatility and hong kong dealted, if i could. no thing threarm consistent so from their perspective they will allow the u.n. to make them but will do it in a measured fashion and lean in so make sure nothing else targets level. is there a argument level? there. want it

that's why he did that. and the release of the iranian sector with syria. we'll talk about that next. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. the last minute the ftse 1 hunl aned ftse reopened following other indices higher after a delay of one hour and 40 minutes because of a glitch at the london stock exchange. let's speak with patrick bernard in frankfurt. first of all, tell us a little bit about why and what happened this morning. it's a glitch and means trade was delayed.

>> we don't have a full explanation on what exactly happened but has to be something severe because it took them so long before a first announcement they need to investigate further and took over an our to tell us they could resume trading. has to be something biller there and hopefully will explain what it really was. francine: j.p., has it had any impact on traders? j.p.: that's the final spot on a difficult week, right? we put all the trade headlines going on. and when i exchanged stuff and open for more in more than and however and manage to -- their positions. thank you there. francine: for the moment we're trying to do some digging of our own waiting for if the

london stock exchange. now to other news and the iranian oil tanker retained by the u.k. has been released but the u.s. is threatening sanctions against anyone who supports the vessel. would lur the u.k.'s action psms the greatest one is six eks ago under suspension ofling food. we're here with mark. first of all, you have a new prime minister in charge, boris johnson. and he needs to figure out whether he's going to be asidelined with trump or the u.s. takes more on its course. simon: he's in a tough position, like him or loathe him. he's alived. breakfast is parksly coming, the u.k. will leave with or

without a deal and when that happens nobody can be exactly sure, just how bad the hit will be on u.k. trade. because all of its trade deals are through the e.u. so that's all yet to be found. so for the dufment to get a ade deal with the pacific, something will compensate for the issue there is. it's important for any prime minister arriving at this moment. and here you have an issue amendment where this thanker was taken. british commanders took the ankor in july and the seized flagged him down for he and the crew and for the u.s. they're between a rock and a hard place. on the one hand they want to get their own vessel alone and end the problem with the

iranian talker. much upside for the u.k. the u.s. is against it because of the iran policy which the him u.k. doesn't serve and is a tough position. does it change, maybe not in the course of pounds but does it increase currencies, northern policy by tanker almost? >> i combine what we talked about earlier, the v politics isn't having an independentance act. made people think of the brexit. and therefore brings the focus 74 as weo come into this days this is a market that's genuinely cuesed by what's happening. when i am speak to the vessels,

they'll understand what's happening. in westminister, therefore, i think sum olizes as people didn't nention a thank you both. simon from international affairs and up next, with friends like these will julian mockee, what are the chance of a no deal brexit. that's up next. this is bloomberg. ♪

>> we are still capable of resolving this crisis. we're still seeing they're not backing down. >> after what was a chaotic night at the hong kong international airport. but certainly a lot of questions on what comes next. ♪ francine: economic finance policy exists. this is "bloomberg surveillance." i'm francine lacqua in london. the labor leader suggested rival party leaders would back him to stop johnson from a brexit but the idea was rejected among the leader and others. the developments have sent sterling on a roller coaster ride when the plan for alliance was announced, the pound rising today.

simon, i guess the concern is that people want to know whether a no deal is a real possibility and if parliament can stop it. simon: yes, the default deal is a no look brexit and nothing has to happen from here until october 31 for us to be able to be totally without a deal. and there's been enough delight about whether he's possible to postponement. >> we'll get to brexit in a second but a lot of news is coming out fast. the latest is the cafe pacific chief executive, rupert hog has resigned, coorgd to the etwork, c 999. pacific was in the storm the last couple days because they had a huge crackdown on some of the protesters because some of

their employees were among the protesters and the airline was under precedented restrictions with china. this would be big news we have conformation the chief executive has resigned. i don't know -- if you look at the impact of the protest, it's lift take talk to the protest. this feels significant, right? it's that corporate story that infringes on politics. is it more difficult for europeans to read that region? simon: yes. i think if you're going to look at that, people's first reaction, one secretaries that to interpret that as being yes or no. the other side of increasing pressure from china is the way people will interpret it rightly or wrongly and wherever

just sbines phi the focus what . happening the next few days we'll get you back to talk about pound. the news the last couple minutes the katrina aye chief executive resigned according to tv. the aviation organization was saying the task forceway provided much needed relief for the hong kong airline that was under scrutiny because some of their employees were taking part in the protests in hong kong. we'll have plenty more on brexit. ♪ ♪

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francine: call waiting. threatening sanctions and suggests u.s. trade ties could be at risk after by braulter allows the -- after gibralter allows release of a tanker. i'm francine lacqua. tom, the last five minutes we had a big piece of news, i think. the katrina aye pacific board accepted the -- the cathay pacific board accepted the resignation. this from the chinese network. yesterday we had heard news from the chinese aviation authority that cathay had complied with regulatory emand.

after they really came under scrutiny with their employees. tom: interestingly, francine, they've not seened shared gains as we have in the united states. we saw the challenges with with 2% or cathay 3% return. it's been a financial mediocrity over the years and it's overlaid over the events of the last few weeks. francine: it certainly is. we'll get back to that. it's one of our top stories. we look at the week we had in the markets when it comes to yield inversions. first let's get to bloomberg in new york city. here's renita. >> a glitch at the london stock exchange delayed the opening for some of the biggest exchange stocks.

the ftse indexes. trucks were parked at a stadium near a bridge linking the city and mainland. some are interpreting it as a signal from beijing it's ready to use increased force if necessary. it mirrors comments from china's ambassador to the u.k. from yesterday. the u.s. says it's greatly disappointed with the u.k. after a gibralter court allowed the release of a tanker. it had been detained after hauling oil to syria. the u.s. threatened anyone who does business with the ship. washington said the decision could put the u.k.'s hopes of a trade deal at risk. president trump says he has a phone call with president xi

coming very soon. but chinese officials are saying the u.s. plan for additional tariffs have been pushed back. the two side off track in resolving their dispute. yesterday beijing vowed to retaliate saying the renewed levees were a violation of the trade truths. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 companies. this is bloomberg. francine and tom? tom: news out of hong kong we resign anded a back and there tang will be the head of cathay. this is just brage in the friday evening in hong kong. let's break to the data check. what an extraordinary week with the lift right now. the curve, very importantly, it went from inversion to a positive. we can talk all day about this. tony is scheduled to be with us in the next hour. the euro is weaker, to me the

dollar stronger. on to the next screen, please. and a little bit of a rebound being shown yesterday, waiting for the second screen. we'll get it there. sort of a friday speed today for the team. we don't have a second screen. francine, why don't you pick it up? francine: i'll pick it up. stocks are actually climbing at the end of really volatile week. looking at bonds. they're finally steady. treasuries paring some of the gains. there was a glitch on the ftse 100. we'll scene an -- we'll keep an eye for an adjustment. i'm looking overall what gold is doing. you see gold, tom, steady and a little lower. tom: i'm glad you put that in there. it's one of the indicator of dollar dynamics which is the lead story. we have a good guest on that coming up. over to the bloomberg, and i use my best survey of the dollar, the bloomberg dollar

index. this is really good mathematics. in 2014 the scale on the dollar, the real story here amid all the political uproar is the range bound nature of the dollar. with that said are we seeing presidential tweets. the selector is up and we're right up here against a short term resistance of the last year and a quarter maybe to a year and a half. and you wonder when strong dollar chat will click into the great economic debate. francine: good chart, tom. i also love my chart. it's quirky to say the least. i don't want to editorialize it but it has been a little bit bonkers out there and basically shows j.d.p. over bund hitting a record. if you talk to market participants a couple years ago on what this means and why it would happen, it would be pretty difficult to actually have justified it back then.

joining us is jane bevin, the chief investment officer, senior f.x. strategist. i want to talk yield curve inversion but this is using j.d.b. as a carry. where does it tell us where the market is. >> if we get back to say this is happening at all is because global participants worry about deflation and environment where demographics in germany are beginning to develop to something similar what japan has lived through. at the same time, we have a situation where savings rates in germany across the corporate sector, the government sector and high sale sector are rising and with a we have for the inflationary environment with tech bonds low and we have 15 trillion of government bonds now with negative yield. francine: what does it mean for

risk of recession? james: i don't believe the yield curve is talking about recession at all. i think the yield curve is an indicator the next expectations the central fwangse will push rates lower and long rates will rise when people wake up to the fact we're not facing a global economic recession. and the possibility of recession looks remarkably low and don't subscribe to a u.s. recession within the next 12 months. i realize about the availability of credit which for the moment credit looks fine. tom: i'm thrilled you're both with us. dominic, i'm beginning to see a strong dollar, is the outcome of this historic week, historic dollar we finally get dollar strength in a true dollar breakout? >> hi, tom. we've had a strong dollar for some time. tom: you nailed this. >> the occasional pat on the

back for us. we don't always get it right but now and again find one. the dollar is still in the strong path. when we look at the different scenarios what might cause that to change we find all those areas being quite plausible. and what led up to the dollar in the first place are still there. if you think about it from a cyclical perspective and james mentioned the chance of a u.s. recession in his mind looks pretty low. the u.s. is still growing faster than most of those other g-10 economies. yes, it's slowing a bit but still growing at a faster pace and yields are higher in the u.s. so from a cyclical carry, the u.s. is the number one currency in the g-10 but if we flip it and say what if we end up in a more negative scenario? the dollar maintains its status. we like it in both scenarios. tom: keep the screen up. james, there's the yield curve that went from a true inversion back to a global slowdown yield

curve. with that said, can you own with confidence equities this morning? james: absolutely, tom. i look at the free cash flow yield from equity markets and the forward looking equity risk premium and see an attractive long-term possibility so i anticipate we can see the g.d.p. increased and subject only to the caveat that at some point the u.s. treasury will issue a lot more paper and don't really know what will happen to the balance sheets at the treasury and federal reserve. and if it's on the availability of credit we need to keep an eye on. as for the yield curve, i don't think it's sending a negative message for equities at all. francine: we look at the concerns the last 10 days, does it change how j. powell navigates the interest rate environment?

dominic: the fed has an eye on what's happening and if you look at the u.s. domestic situation on its own, would they be cutting this year? >> probably not but we've looked at the risk factors. and they have room to do that because that's fair to say the global risk factors has increased, what's happening on the emerging markets and the volatility, geopolitical factors or just the ongoing release in trade tensions. it looks likely the fed will continue on the path of insurance cuts. for the currency world, even if they do, other central banks of having to do more. and for rate cuts it might not be that bad for the dollar. francine: are we in a currency war? we saw yesterday one of the most hawkish central banks left because we dealt with their

currency and where everyone is dovish, you can't fight that. dominic: in some respects it's the market driving the currency war. if you think about it from a european perspective, they don't have policy room left and how can they go further? they can cut basis points 20 extra points but how much will that provide for the european economy? probably not that much. and your economy needs a financial security that we'll deliver for you but there's a confidencal world going on and the driver extending it. tom: james, glad you're with us and dominic with the call of stability and even a strong dollar. much more to talk about here with strong dollar today. the conversation will move forward to mr. moynihan, bank of america, in the 10:00 hour

with david weston. this is bloomberg. ♪

paying about $3.5 billion for the basketball team and its arena. he previously bought a 49% stake until 2021 to exercise his options to take control of the club. the purchase may be officially announced as soon as today.

wal-mart has posted strong second quarter sales boosting employer outlook despite escalations of the trade war with china. 7% on thursday and most since august. apple will create 20,000 new u.s. jobs by 2023. the tech company is expected to contribute more than $350 billion to the u.s. economy in the next four years. apple currently employs 90,000 people in all 50 states. and that's the bloomberg business flash. tom and francine? tom: thank you so much. it's been an extraordinary week for our team in asia with our coverage led by ottis and our media coverage led by the man who camped out at the hong kong airport day after day, spearheading the coverage is fione lee on twitter particularly on the weekend with important messaging on the protests and thrilled she can get to the t to

weekend protest in hong kong. he tanks on the border, etc. first we must speak of cathay pacific. it harkens back to the great industrialist of hong kong over generations, how shaken are swire and the others now after what we've seen? fiona: thank you, tom. i think it's unprecedented time here. i think in the past few days we've seen conglomerates and tycoons that came out with statements supporting the government, condemning others. so how cathay got singled out in the past two weeks,, and actually it's been reported the c.e.o. has resigned and haven't gotten an official announcement from that from the company. again, we'll have to wait and see the next few hours

confirmation from the company. tathay is part of swire. tang with stus pacific for the last 12 or 13 years and so is mr. hogg. is this an interior company or is cathay pacific intertwined with the community and hong kong government? fion: intertwined -- i think cathay pacific is a household name here. most people in hong kong have the experience of the airlines. so i would say definitely defer defined with the community. the government doesn't have a stake so i would not say it's intertwined relationship with the government in this case. francine: what are we expecting this weekend? are we expecting more protests? what type of protests will we

get? will they be the violent ones we had this monday and tuesday or will they be more tempered? fion: we certainly will see more protests. actually tonight in hong kong. we'll have one near our office organized by students. tomorrow on saturday we have at least two protests. they're not approved by the police. so we'll see what will happen. on sunday that would be a big one for us, a massive one. we are expecting in victoria park which is a historic site for a lot of mass protests including at least one million people that showed up. whether they will unrest the situation we'll wait and see but definitely expect a large number of people will show up. tom: look for fion on social media. the immediacy of twitter as

well. the immediacy is john fair sell on sabbatical. there's a show at 1:00-ish called "the real yield." i picked the short straw. i'm doing it. smart conversation after a historic week, margaret patel on the high yield and peter tchir on the state of the market. ♪

dd

♪ francine: this is "bloomberg surveillance." president trump has a phone call with president xi coming

soon. the chinese officials saying the u.s. plan for additional tariffs has pushed the two off track in resolving their dispute. yesterday beijing vowed to retaliate saying u.s. levies are a violation of the trade truce. james, when you look at the trade concerns, is this the sell-off and further inverted yield curve a product of trade concerns or is it something else deeper? james: i think the market is right to have concerns over trade. that the ticipate deal will get cut is looking unlikely on the basis that china believes they'll get a softer time negotiating with the democrats were they successful with trump. francine: what is this about, i keep hearing this is u.s. versus china supremacy? james: absolutely.

francine: if this is it will last 125 years. james: and continue to bubble along and surface in various ways. but it's correct to say china has not really embraced free trade in the correct sense of the word and mr. trump is quite correct to say he wants fair trade. we have a long history of countries being admitted to the world trade organization on terms, frankly, inappropriate. we had japan and korea and now china. in a world where north asian planned economies export deflation, it's important we get this right. tom: one of the hallmarks with a terrific article by greg in the "wall street journal" and jeffrey curry from goldman sachs on the partial differentials of exports and imports. do you assume the bolt on to growth is just reduced world trade which dampens everything down? james: no, absolutely not. i think the volume of world trade is deeply important and indeed we did see a shift down

in world trade leading up to the slowdown invisible growth we have at the moment. i would go back a bit and talk about the great credit boom of 2017 that allowed the global economy to appear to have a period of stability and relative growth. i would trace that all the way back to the actions of the federal reserve that allowed the u.s. banks to issue credit, that credit taken up by the european banks and asian banks and ultimately lent on to china. the delicious irony in all this of course is that mr. trump's strategy has led to the expansion of credit in china and really it's the unwind of that excess credit coming home to roost now and causing all these problems. tom: at hsbc, how will the unwinding of the credit and dedollarization play out dominic? dominic: we're in for a period of slower growth than what we've seen in the last few years. that's already happening. until you get some kind of resolution, it's kind of hard to really see a big rebound,

whether it's in the trade cycle or underlining growth story. there's a lot of cross currents when you think about trade, clearly volume add and various economies and substitution effects and all these things that play out in a longer period of time. in f.x. markets we care about the here and now and not looking that far ahead. quite frankly, until things go resolved it's hard to see a significant reversal in some of the moves we've seen whether in the rmb or the other currencies impacted by slower glouble trade. francine: we'll get to the -m-b-to see if there's another psychological effect. on balance of power, carlos gutierrez, former u.s. commerce secretary coming up at 12:30 p.m. new york time, that's 5:30 p.m. london time and this is bloomberg. ♪

♪ bloomberg "surveillance," good morning on a friday. francine lacqua in london, tom keene in new york.

the market is rebounding but a nuanced difference. the vix comes higher, futures up. dollar strength is a real story. renminbi does not play. there are some terrific nuances to get the new york friday started. right now, our first word news. renita: a glitch at the london stock exchange delayed the opening for some of the biggest stocks. ftselayed the ftse 100 and 250. this is the second such outage in a year. israel will allow u.s. representative rashida to leave to visit on a humanitarian reason, a reversal from yesterday.

this comes despite pressure from president trump who said letting them into the country would be a sign of weakness. investors are confident that jerome powell will cut interest rates next month, despite strong u.s. data that supports the forecast of's stronger growth and higher inflation. markets get a hint next week when powell speaks in jackson hole, wyoming. 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. young.nita this is bloomberg. on: it is perhaps the knock to what we are seeing in the markets, in the bond market, the fragility not of banks but of specifically european banks. she has been spirited our coverage through the week.

what story matters as we try to get to september on e.u. banking? sri: the deteriorating signs coming out of germany are definitely -- these are headwinds we need to keep an eye on, especially in light of banking giants like deutsche bank and commerzbank. all of these european banks have been under tremendous pressure what the prolonged interest rate environment, and now we are seeing what other deteriorating signs for the outlook, these banks are under pressure even more. tom: which bank is most upset? matt miller's interview with the cfo of commerzbank was an outrage, stunning how he said there was no problem. are you looking at unicredit and commerzbank? is it deutsche bank or some bank i don't know? sree: deutsche bank is one of

the ones we have been watching closely. factoredit has been into the big revamp and restructuring they have been doing of late. on the commerzbank side, it is hard to see how we can be sanguine about this. they are very focused on the retail and consumer segment. it would be one of the hardest hit in case we see a big pullback on the retail side. there is not a lot of good news out here when it comes to european banking, and the trading environment for those with large exposure is not looking promising. francine: we had a great article trying to go through how many jobs have been lost in the finance sector and how many more could be lost. will that accelerate if the economy takes a turn for the worst?

sree: well, because the numbers don't even factor in some of the numbers we are expecting. unicredit, the expectation is 10,000 jobs could go. we have not seen many of these jobs actually -- these have been announced cuts. we have not seen them play out in the market as of yet, so there will be a leg down before we see stabilization. francine: thank you, bloomberg news european editor. let's get back to james bevan bunning.ic [simultaneous speaking] francine: the problem with european banks as the business

models, a lot of them are unclear but they are cheap. james: you cannot have a business model if you are central bank is told to send money to support the economies of italy and spain, so the pundits bank is providing a trillion euros -- bundesbank is providing a trillion euros. francine: you don't own any? james: i don't. how are people supposed to make money? we have excess deposits from the government, from companies, and households in germany all relating to the shifting demographics and challenges of negative rates. francine: a concern for the european central bank and the new president's she will look at the banks and no matter how she tiers them, they will be in trouble. what does that mean for monetary policy, is it the end of the road? dominic: we are getting there.

pointsnother 20 basis and more qe next year, but you are kind of pushing on a spring. negative,a lot of unperceived consequences. we have a forecast where 10 year points.e at -80 basis there are long-term structural problems. what can they do? we would say increasingly we have to think about fiscal forcy, but it is too early the core european countries to go down that route. tom: steve majors got the vector right. james bevan, i want to walk through the accounting statement dynamics of the banks. down, share price comes

there has to be a trigger. there has to be a catalyst for regulators. what is it part e.u. banking? clearly they are concerned, but they don't trust the book value because there is a wide expectation that the german banks still sit on unresolved greek debt problems, which have never been dealt with. that is an issue. at the same time, the quality of the loan book is challenging. there have been a certain number of bubbles rebuilding in the global economy. i would look at the housing markets of canada and australia and sweden, norway, as all having gone up. that is another headache for regulators. tom: i remember the day james dimon bought bear stearns.

we are not going to get drama in europe because it is europe. how do you see german regulators regulating out the glide path of these b-shares? james: i -- these equity shares? james: i think they are unwilling passengers and a journey that has to involve far more coordination than we have at the moment. this is critical. we will talk deutsche bank because it is big and visible. what you see is the way that deutsche bank moves out of moving from six to five euros per share? james: it continues to shrink as a business. it continues to reorganize it that, continues to be conservative and recognize it has to shed labor.

very sad. tom: different from what we observed in 2008 and 2009. james bevan and dominic running. -- dominic bunning. -- german ten-year to c&a descending. david westin and conversation with esther moynahan, bank of america -- mr. moynahan, bank of america, 10:00. this is bloomberg. ♪

♪ this is surveillance." these are the stocks we should be watching in the u.s.

these are some of the premarket u.s. movers. we made a board to track corporate stories. afterterday was tumbling being accused of accounting fraud. , profits top estimates amd is up. we will get to a lot more corporate stories. tom: james bevan and dominic running -- dominic bunning. let me give you the chart right now. this is how far we are from a traditional correction of 10%. i will call this a james bevan because he has been in cash flow companies for ages and ages. his and another by the date or do we wait -- is it another by

the depth or do we wait -- buy the dip, or do we wait? james: this would be the 54th correction since the rally and 2009 and normally i would expect a full recovery. inorry about a deterioration the position and outlook for china, in particular if china devalues its currency significantly. i worry that will have global consequences. the second aspect i worry about his bond issuance and liquidity flows in the fourth quarter. if you have not committed cash now, i would suggest hanging around to see what happens before getting fully invested. tom: this is really important, and i will do this today with jonathan ferro on "real yield."

dominic, along idea of moving out into september and october, theyou some the hsbc -- sum hsbc dominic bunning call on what is to come? dominic: as we go through the back of the year, the likelihood is we will be done with fatcats in our view -- fed cuts, in our view. that is dollar positive. brexit and all the issues involved, and the binary outcome we will see from that. that will shake things in the u.k. in europe, we will get more clarity as to what they will do on the monetary policy side of on the backdrop of the u.s.-china trade tensions. there is a huge amount of uncertainty.

a broadly stronger dollar. we still like the yen and safe haven assets. francine: i need a brexit update. tom: here we go again. francine: we will get some pound calls from dominic. will we see a no deal and then an election more an election and then no deal? james: that is rather unpredictable. i put a 35% probability of no deal brexit, softened by an increase in fiscal policy. i would expect mr. johnson and money to makepend sure the economy does not sink. francine: what is priced in and how much lower could we go? dominic: calculations have told us sterling would move to about 1.10 versus the dollar if we got andw deal -- no deal

otherwise, back up near 1.45. when we are sitting near 1.20, the market is telling us they are pricing in a 60% to 70% chance of no deal. the market has swung with the change of leadership in the u.k. , and the closer you get to the 31st of october without anything being done. if we get a no deal brexit, sterling has to adjust lower. the country runs a current account deficit and you are likely to see rates fall lower. we think that would require undervaluation in sterling. on the flipside, get a deal, you get bank of america -- bank of england hiking rates. the consumer remains can sell it -- resilient. it is a pretty binary guess on what happens on brexit and i don't think anyone can tell you

how things will play out. francine: that is probably fair. james, we do not have time. we will hire you as a coanchor. james bevan and dominic bunning. we are watching the strait of gibraltar where iran's vessel after its release was allowed. the u.s. has section thank -- threatened sanctions. the oil tanker has been freed. what happens next? this is bloomberg. ♪

♪ bloombergis is "surveillance." let's get to the bloomberg's newsflash. chief executive officer has resigned. the board accepted his resignation. the executive director has also

resigned. this comes months after anti-beijing demonstrations in hong kong. the protests had taken over the hong kong airport. the sale of construction chemicals unit is running out of steam. several private equity suitors are considering walking away and the auction is increasingly focused on corporate buyers. several firms have been frustrated by the reluctance to provide detailed information for the earnings of the year. deutsche bank hit a record low several firms haveyesterday jusr rebounding on optimism. shares fell to a new low. the stock is trading down 93% down from its 2007 peak. that is the bloomberg business flash. francine: thank you so much.

the u.s. says it is gravely disappointed with the u.k. after a gibraltar court allowed the release of an iranian tanker. the u.s. has threatened sanctions against anyone who does business with the ship and the u.s. says it could hurt their chances for a post brexit trade deal. james bevan from ccla is still with us. stuart sat down and showed me the best function, and you can look at the true -- crude tankers. let me bring this awesome chart in real-time. is this foreign policy something else? stuart: it is everything. the difficulty is the u.s. is proceeding on the basis of its own sanctions which were not adopted by the e.u.. providingares about -- in syria but does not care

about banning the experts overall. the u.s. seems to be suggesting it will link these issues to a trade deal process brexit -- post-brexit. coming, weblowout is will not do a trade deal if you keep hating this way. -- behaving this way. francine: how difficult is it to establish it is iranian oil? stuart: a lot of the times we down because they turn the trends -- transponders on. this time at clearly signaled it was picking up iranian crude and it signaled all the way up along africa and the mediterranean. it is now an iranian flagged vessel so there is no question about what it is doing. tom: i guess it is a tanker switch, they took hours, we took there's. our,are going -- they took

we took theirs. when is the next marginal tanker capture? are particularly concerned about hormuz, where the action has been. they have tended to go after the smaller vessels, tiny ones in comparison to the one off gibraltar. it is a game of cat and mouse in terms of trying to show their intent in trying to disrupt shipping but not to the extent where the west would have no option other than to retaliate in military fashion. it is a difficult game, particularly in the context of the buildup of the military along the persian gulf. the chances of something going wrong or the wrong ship being put --d or a mind being

mine being put on a different side of the hall and sinking the ship, neither side wants a war but they could end up with something quite nasty. tom: saudi arabia and the united arab emirates, what is their best outcome? stuart: the best outcome is a containment of iran from the saudi point of view. i think the proxy wars in yemen and syria are starting to fade disappear, that have already played out. we saw the emirates making attempts to repair the relationship with iran. saudi arabia is very much in the camp of seeing a run as the number one opponent in the ,egion in terms of influence military and economic potential. that started decades ago and continues today. how doyou -- francine:

you view the price of oil? bull, i am not able, -- a particularly because the companies continue to make bad investments. tom: you have been very valuable, james bevan. good to hear your optimism. stuart wallace, and all of our hydrocarbon team. crescenzi of pimco will talk about the bond market and the signals of the two-year. tony crescenzi to get you to monday, this is bloomberg. ♪

♪ this morning, this friday is different from monday

previous. bonds tell a new and different story, a story of an impending global recession. the dollar strengthens, german yields touch new lows. it is almost jackson hole time and this jackson hole will be different. the market and federal -- president trump will fed watch. hong kong has to get to monday next. everyone, this is bloomberg "surveillance." i am tom keene, francine lacqua in london. i thought our conversation on hong kong was extraordinary. talking about hundreds of thousands, even millions protesting on sunday in hong kong. francine: this has a huge implication. there was a great story in bloomberg businessweek, longer-term this is all about 2048. there is an interesting dynamic where it have been 50 years and

the role of the u.k. will slowly fade. it is a longer-term piece about where hong kong goes next. there is quite a lot of market action, not like we saw yesterday. things are stabilizing a little bit. and the yield curve means the dynamics. tom: right now in new york city, our first word news. renita: a glitch at the london stock exchange delayed the opening for some of the biggest stocks. 250ftse 100 and ftse indexes were delayed. the outage comes amid rocky markets within the u.k.'s looming departure from the e.u. israel will allow u.s. representative rashida talib to visit the nation, a reversal

from yesterday that barred entry to two members of u.s. congress from entering. this comes despite pressure from president trump, who said letting them in would be a sign of weak this. -- weakness. twoh korea fired unidentified projectiles into the waters off its east coast. this comes the day after byeration day, a day marked both korea's liberation from japan. president donald trump is weighing in on the hong kong protests. the president says he suggests xi jinping of china meet directly with protesters. easter trump says he has "no doubt that meeting what diffuse dayson." this comes after of protest at hong kong's airport.

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 renita young. this is bloomberg. tom: let's get to the data. on to tony crescenzi. futures advance, a bounce. dow futures up 235 points. curve this inverts yesterday rts yesterdaynve afternoon. the vix showing better equity markets and a better tone. two year yield is still unimaginable. dollar strength, and i put renminbi up. francine: i am looking at a similar data check, but i put gold as a different way of looking at things. i am looking at stocks climbing, bonds following, and things seem to be stabilizing. tom: this is maybe the

summation, and maybe we are getting out in front of presidential tweets, we have dollar strength. we are right at resistance up to these record levels seeing into thousand 16. -- in 2016. the weekeased to sum with tony crescenzi with pimco, definitive on short-term paper markets. i cannot fathom a cup of coffee on wednesday or thursday with you and jerome schneider. what was the heat on your desk within the short-term space on tuesday, wednesday, or thursday? tony: we have to behave as long-term investors and most of us watching and listening should think that way. there has been a lot of erotica moves. -- erratic moves.

teens, it in the high has still been a good year. tom: people are sweating bullets . tony: the prominence of the yield curve has a lot to do with that. a lot of regulars, those not involved in the industry or care are telling me about the yield curve because it made news. tom: we call the regulars our people. tony: i am a regular with everything but bonds. this has become front-page news. worryne: overall, do you about the market movements we saw this week? were you worried about the violence at which it happened? tony: yes, because this is uncomfortable for me personally, for many investors generally because what we are used to doing is reading different sorts of tea leaves. those tend to be in the dozens of economic data points we receive on a daily basis.

incoming information informs us about the future, but these days the volatility is starting to political risk and political related uncertainties. a great website that has been giving some credence to the fed and policy uncertainty, it is the highest it has ever been going back several decades. volatility could return and we don't know what will cause it. it could be a tweet or something abroad. it is not the data, not the typical things. francine: how do you explain what happened this week? i have heard it was trade. was it something else? is it because it was august? is there something that worries you? tony: one thing pimco discussed when we look at the three to five-year outlook is the

possibility of numerous disruptions in the markets. this relates to technicals. primary dealers hold very few corporate funds. -- bonds. before the crisis they held a few hundred billion dollars worth of so-called inventory. they are intermediaries between the buyer and seller. these days, they are not playing the game as much because of regulatory pressures and it is causing problems with people who want to get out and transfer risk. tom: i did a chart yesterday back to 1790. i looked at a classic 1965 article from the fed on the short-term paper market. 101, thecenzi, summation of that article is it is all about trust. this trust in the short-term paper market adjusted in this historic week? tony: without a doubt. there are various ways to look

at it. we have mathematical formulas that can show it graphically. the term premium and bonds, the amount of risk they could demand to encompass risks in the future, they are saying it is negative. i am so worried about the future, please, take my money. pages androte 1200 you did not write that on the short-term paper market and this ephemeral thing, trust in a negative yield space. new ones look like? tony: the trust factor is idle. we are in a fractional reserve banking system. banks create money, paper money. it is not real. it requires faith in the future and we don't have it. banks, a very technical point, are the only entity that can create new money.

if there is a lack of trust, faith, confidence in the future, banks will not create new money and when you go to the store, there will not be as much new money that exists. was brillianta with those earlier in the week, bring us to the european banking crisis. how are the trust meters of germany now? tony: it has been good. the leap of faith has been relatively high thanks to the words of mario draghi and doing whatever it takes to save the banking system. bank lending was negative for several years, which means money was being destroyed. were ind fewer euros the economy. of new moneyot being created to be spent, but much lower than before the crisis.

money creation has improved, but it could easily we can again and we could see this -- we can again and we could see that is again and we could see the destruction. francine: coming up, david westin sits down with brian moynihan, that interview at 10:00 a.m. in new york. this is bloomberg. ♪

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

gdb growth -- gdp growth in the region expanded more than expected as booming unrest in the city. mainland china is saying the plan for tariffs pushed the two sides off-track. let's bring in enda curran. , what are wets expecting this weekend? enda: it is going to be another weekend of rolling protests. we are into our third month and we have a large one scheduled for sunday. all eyes will be on to see whether that escalates into more violent confrontations. news indrop is that the the economy can tears -- continues to deteriorate. it was being hit of trade war before the protests began, and

the protests are impacting tourism and growth spending. non you consider there is near circuit breaker insight for the protests, the outlook remains quite downbeat. francine: what are the sectors and industries that are hurt the most? enda: i think the big one getting hurt is obviously logistics and transportation because of the u.s. and china trade war. then more generally, retail spending and tourism is hit because of a slowdown in china's economy. when you bring the protests into the mix, you see that get compounded and people are going out and spending less. certainly there is a hit to the hotel vacancy rates. are sayingt people the hong kong economy is headed for recession if it is not already in one. tom: one of the things we are

seeing in the west, here is a cover of the ft with tanks in china. the optics, the depth of field on a friday is sort of genesee cream ale. various green things on the border. is that in the consciousness of hong kong on a friday evening? enda: it is one of the big talking points for sure. it is important to say that there is a significant military presence in hong kong. there are thousands of soldiers based here. the intervention remains speculative. authorities in beijing have made it clear the violence must come to an end or they will consider escalating their own response. it is somewhat of a battle between protesters and police on

the ground, and if this continues to escalate from here, the speculation of a more pronounced intervention by beijing will only grow. francine: thank you so much for that update, endocrine from hot -- enda curran from hong kong. deere cutting its full-year net income forecast, i imagine from jitters facing the global economy impacting u.s. farming need. they are just coming out with earnings and we will delve deeper into exactly what they worry about that they have cut their full-year net income forecast. down 2.3%. general election -- general election also down significantly yesterday. this is bloomberg. ♪

♪ renita: this is bloomberg "surveillance." chief pacific airways executive officer has resigned. the board accepted his resignation. andchief customer officer the second of officer have also resigned after months of anti-beijing demonstrations in hong kong. days, protesters have taken over cathay pacific's main hub, the airport.

walmart posted strong second-quarter sales, boosting its full-year outlook. miss shares rose as much as 7% on thursday, the most intraday since august. general electric plunged the most in 11 years after a financial examiner accuse them of accounting fraud. harry mark coppola's is working with a short seller he did not identify. the ge chief executive called the claims market manipulation. he bought about $2 million of shares amid a row. -- amid the row. tom: tony crescenzi with us of --co, we look at the market the bond market and the challenges with equities, but without we would check on the trade war and fold into industrial america.

we have to go back to general electric with karen mobile heart -- oblehart. what is the next thing? what is next for ge? karen: you come out swinging. they are in the middle of the insurance premium review and it would be a smart idea if it round,ut being, ok, this he should disclose that is quickly as possible. if he is signaling so strongly the rebuttal, i don't think he will come out with a big surprise. he probably knows the answer or is very close. going --e it is not is going to cut this or that, how does the trade

war effect these iconic american industrials? re is hit very badly because of soybeans and corn. china has stopped buying our grain and they are the biggest buyer of soybeans. they are getting hurt very badly. they have been giving the money back, $12 billion and $16 billion, but they do not buy equipment and large equipment sales are going down. withas a problem in china equipment demand down. they are losing share because chinese prefer local names and they are being aggressive. volhas more of an asia low issue and deere is more focused on china. francine: if we have a resolution with china and the u.s., does it mean that they are back on track almost immediately

after, these purchases are just being put off? karen: i think the stock will balance on relief, but result has been replacing that demand and i don't think it will come back overnight. swineis other problems, affecting the pig population. i don't think they get they grain demand overnight. francine: is there something else we should watch for in industrials that are not on our radar? karen: the impact is broadening. they were able to say they impact -- they offset the impact with christ -- price increases. you are seeing the demand broadening more globally so it is a bigger issue. trade has spread like a contagion. tom: it is 93 miles from peoria to moline.

employees, 174,000 like a too big to fail almost. is it the first order condition to start laying off bodies? karen: that will happen next. you are seeing the cost cuts come across broad industrials, and deere is cutting production and people. the consumer is strong, but it will filter out with job losses. tom: what would you say to the president? he has given farm subsidies because soybeans are flat. , caterpillar, and the get paid out? karen: that has been bothering me, but they are a big contingent for president trump and that is a political move. tom: do you want to get in? tony: in the retaliation from

china, one of the major things they could do is make it difficult for us to make things, and that would be a huge disruption to the united states. karen: what we are seeing as they are starting to prefer locally chinese. itterms of the supply chain, is mostly hitting distributors because they get a lot of goods from china. tom: thank you so much for the ,riefing on ge, deere caterpillar, and industrial america. our most interesting secretary of commerce, gutierrez, in the 12:00 hour. ♪

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morning person. the leesa 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. francine: this is bloomberg "surveillance." this is our wall of worry we have been looking at all week.

it crystallizes the concerns market disciplines have. -- participants have. monetary policy and the lack of brexit, hongtaly, kong protests, earnings recession, and the china's slowdown. we are seeing stabilization of the craziness we saw monday, tuesday, and wednesday, european stocks inching higher, euro-dollar 1.1080. tom: it is an interesting morning with dollar strength seen throughout the yield market, flip yesterday to some form of normality signaling global recession. right now, here is renita young. renita: a glitch at the london stock exchange delayed the opening of some of the biggest stocks. 250 wereone ftse

delayed. this is the second such outage in just one year, amid rocky markets with the looming departure from the e.u. donald trump reportedly wants to buy greenland. denmark is the current owner. mr. trump has an apparent interest in striking a deal and has asked the white house counsel to explore the purchase. the u.s. is gravely disappointed in the u.k. after a gibraltar court releases an iranian tanker suspect that of hauling oil to syria. has threatened sanctions against anyone who does business with the ship. washington said it could put the u.k. trade deal at risk. zimbabwe has ended a 20 year standoff with its creditors,

flagging rate cuts and bond sales, and will privatize everything from state telecom companies to timber. they hope to access finance they need to revive the economy. 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. young.nita this is bloomberg. markets,in all of the within this historic week, i will be doing jon ferro "real is thelater today, there debt and deficit. my chart of the year last year has become ever more interesting. this is the rate in between deficit and we are getting there quickly, and it is all a fiscal deficit. we have seen the financial crisis as well. there is no one i know within the bloomberg fold that

understands our debt and deficit in the machinery of capitol hill like nancy. we are thrilled she could join us. i want to cut to the gentleman somealabama in 1986 and at point shelby will have to explain to president trump it is out of control. how close are we to the mood on capitol hill being the debt and deficit is out of control? nancy: we are not close to vetted all. it used to be that everyone was talking about the deficit and growing debt. in the past couple years you don't hear much about that at the except democrats remind 2017 tax law made the debt likely to increase quite a bit. meanwhile, we keep spending a lot of money through these appropriations bills and defense budget is going up again.

tom: i know you never look at markets on your bloomberg terminal, but it has been a sporting week for bonds. , a summary is yields lower gift to our senators and congressmen, isn't it? nancy: how? tom: they don't have to pay interest. nancy: that is true. when they come back in september, they are getting ready to pass another huge set of bills if they can do it. they are not talking about these things. tom: what are you looking for into september? everyone but you is on recess. what is the thing you are looking for as we set up for september? nancy: i am looking to see how much momentum senator shelby and other appropriators can have in the first few weeks, because if they don't really get going and pass a bunch of bills, the

likelihood of a really ugly november/december is looming. even if they do pass their bills, they have a difficult outlook and they are already talking about another short-term --p cap going to september december 6. tom: nancy, thank you so much. there is somebody who is really expert on our fiscal affairs. his pimco concerned about our -- is pimco concerned about our debt and deficit? tony: there is a lot going on in september. the calendar is crowded. how does congress get to nafta? there is discussion of so-called nafta 2.0. might it caused some concern of pulling out of nafta? the count is getting crowded out. yes, we worry about debt and deficit in that it is crowding out the private sector and we are not seeing money allocated

toward investment to raise productivity, which boosts the standard of living for people. in new york we have subways and we would all like more subways and subway lines and less crowded conditions. moneys by government are not these-- spent toward transformative projects like they were 100 years ago. it has been 100 years since we had major projects in new york that made it better for my morning commute. how about a second tunnel between jersey? fromyou want another ferry stop -- long island. francine: we have lost half of the international viewers, plus tom has never been on a new york subway so i suggest we go to germany or something like that. tony: taking his helicopter. francine: the bloomberg

sikorsky. tom: ferro has it. piece whichustrian is a hundred year maturity. what is wrong with the united states issuing 50 year bonds or a hundred year bond? isn't that a cool thing? everybody would buy it. tony: they have a policy of being regular and predictable. there are a lot of things to say about that. that is something they should depart from now and think about long-term borrowing, because there could be long-term returns as i suggest, perhaps, toward infrastructure. tom: everybody would buy a hundred year bond and give it to the kids and the dog. tony: who knows. election,ter the perhaps there will be thoughts like that and if interest rates are here, there will be that

discussion. the issue of entitlement spending and the difficulties the united states faces in meeting those financing needs over the years, and negative interest rates if they happen, which would be harmful to the united states, could make it difficult for the united states to borrow money in the future, could harm its reserve currency status, et cetera. it is important the u.s. address the debt and deficit issue. francine: are you talking about germany? germany has negative rates. states,rope, united japan all have entitlement issues that complicate the political issue. francine: if you look at president trump going after germany for not spending enough, will they do fiscal spending? tony: it seems lately from the rhetoric from the leaders they might be moving in that direction, but it seems they are

taking a wait and see attitude because they are not sure to what extent they will be needed, because the private sector in the long run has fared well. there is a political matter in the mercantilist trade area globally that is complicating and they probably want to see that playoff and not get too far ahead of the ship. francine: what does a repricing for the rest of the world and when does it happen? tony: what if you had lots of sure we alland i'm would like to have it -- but you did not have lots of places to store them. you would probably pay up to get them stored. imagine the money you have in euro and yen and dollar are storage. -- dimons. amonds. -- di

you are willing to pay. the storage value against the loss of those valuable properties. tom: what are retirees supposed to do? forget about this phd mumbo-jumbo. what does saving america do after the week we have seen? tony: it is complicated. one does not earn much in the bank if anything. island,able in staten and they have to figure out what to do with a pot. what do they do? tony: it depends on age and other factors, but it requires a closer look in alternative investments and real assets and potentially moving away from financial assets. it does not mean they should be trying to market-ize the benefits of bonds.

what if the 10 year went to zero? how much would that mean in price? 16 points higher. the german level, 25% gain in price. there is still a diversification benefit to offset the risk of other components of a diversified investment portfolio where fixed income still has value. tom: and tangible investments. to buy stamps. tony: we are substituting real estate for credit. tom: tony crescenzi, thank you. david westin, an important and timely conversation with mr. moynahan of bank of america in our 10:00 hour. this is bloomberg. ♪

♪ renita: this is bloomberg "surveillance." i am renita young. cathay pacific airways chief executive officer has resigned and the board has accepted his resignation. the chief customer officer and the executive director have also resigned, after months of anti-beijing demonstrations in hong kong. the protests have taken over the main hub, hong kong's airport. apple will create 20,000 new jobs in the united states by 2023. they are expected to contribute more than $350 billion to the u.s. economy in the next four years. they currently employ 90,000 people. the smile direct club has filed its ipo. they have applied for a listing on nasdaq, aiming for a $1

billion ipo for september. that is the bloomberg business flash. tom: tony crescenzi with us of pimco. we need a single best chart that shows the dynamics of the moment. he brought this up the term premium and i'm going to bring it up with the five-year five-year forward. it has been a 12 months of have aation, and we substantial united states retest of it. what is the gamut, the acceleration observation. tony: we are not expecting that to change. thehighest number we expect ecb to have is zero over the next five years. tom: how can commercial banking sustain with what you just said? they would say that is an

impossibility. tony: it is a huge risk to the global financial system in the long run. so are negative interest rates. they could cause banks to cut back on lending because it is not appealing. the money you have in your pocket, in your bank account, it exists because of banks creating money, not because of central banks. central banks put the seeds to make it grow so it gets lent and relent. central banks can destroy money in that sense because it is no longer being created and it can be damaging in the long run. negative interest rates in the united states might not serve well and the dollar is a reserve currency. what if the dollar have low or negative interest rates? china who wants to be the thed's leader in 2049 -- 70th anniversary is october 31,

a major dynamic in the trade talks which will affect how things go. china will probably be tougher. could losethe u.s. its reserve currency status and ability to borrow money due to the aging population. francine: yesterday, we actually had philip hildebrand from blackrock presenting a paper with three former central bankers essentially saying that europe should put cash handouts because that is the only way to get out of what we are seeing. we are not talking about helicopter money but it is pretty close. is that the only way? tony: it does not necessarily work. in 2000 nine, the recovery and reinvestment act delivered out 350 million checks for $250. where is that money? i did not go toward anything

that would last. we don't have the items that were bought 10 years ago. tom: we will have tony crescenzi with those on bloomberg radio, i believe lisa abramowicz will be with me. we don't talk to each other, our people talk to each other, but we will do bloomberg "surveillance" on radio and tony crescenzi will be there. yield," ion "real will darken the door. this is bloomberg. ♪

francine: this is bloomberg "surveillance." cathay pacific quit tochief executive "take responsibility" after months of anti-beijing demonstrations. the airline has emerged as the most visible corporate victim of the political unrest in hong kong as some of the employees were protesting. matheson. is roslyn this happened just a little while ago. it it come as a shock, or is the only way to clear the air?

roslyn: they had to do something for a variety of reasons. they were affected by the protests and some of their employees took part in the protests. china cracked down pretty hard. presided in the turnaround in fortunes, and he transformation, something had to happen to clear the jam. maybe a fresh start china, something had to do it. francine: we have had protests for quite some time, at 10 weeks, and we saw the violence monday and tuesday and now protesters are no longer allowed to protest in the airport. do they quiet down? rosalind: we think they will be protesting in different areas.

accountants are holding a protest. you are seeing a splintering which makes it harder for people to control in hong kong, because they will pop up in various places, including tonight, making it difficult for the police to manage. we can expect those protests to turn across weekend. francine: do we know what china will do? rosalind: they have made it clear they are watching closely and well intervene. they are doing visible drills at the border and are saying, we will do what it takes. since hong kong has been managing the protests, there is no reason to come in. even though there is teargas and clashes, beijing is saying they feel the hong kong government has it under control. newsine: you have loads of

on your plate and they seem to be coming thick and fast. the last one seems to be the u.s. threatening sanctions because of the iranian tanker and the court ruling that it was released. rosalind: the u.s. is suggesting it might take further legal action in gibraltar. they are upset about that. there is a number of things that could stall it sailing away from gibraltar. the crew is on board, but they need mariners to get it released. the u.s. is saying anyone sailing on that tanker could be subject to sanctions and if it sails away, there will be a problem. if it goes, the flipside is perhaps the iranians will release the reddish flag -- british flag tanker. tom: there is a great function

-- francine: there is a great function on the bloomberg where you can follow the tankers. this goes back to boris johnson and foreign policy, whether he is a real friend to donald trump. rosalind: we will see this come up at the g7, the first time they will meet as leaders. it will be interesting to see how iran plays out, does boris johnson break with france and germany and side with the u.s.? a this an effort to send message before the g7? it will be interesting to watch. francine: our executive editor for international government. coming up, david westin since down with bank of america chairman and chief executive brian moynihan in about three hours now, 10:00 a.m. from new york. after a week that was pretty bruising for a lot of market

participants, it seems things are stabilizing a little bit, treasuries paring some of the declines yesterday. if you look at the tumultuous week, it is all about trade uncertainty and fears of global growth coming to an end. we will have a lot more on the inverted yield curve and what that needs for a global recession. this is -- means for a global recession. ♪

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♪ pres. trump: we have a full schedule. president xi, we'll be speaking with him very soon. david: president trump says that he will speak with president xi, but that he's compared to get much tougher on china.

markets caught in the middle. a volatile week ends as stocks try to stabilize and the u.s. 10 year dips below 1.5%, recovering just a little bit. welcome now to "bloomberg daybreak" on this friday, august 16. i'm david westin, here with taylor riggs. alix steel is off. taylor: probably not with the markets and wanted. this was a technical glitch, nothing to do with any fundamentals going on, but it just sort of highlights everyone is on their toes. it feels tense. tensions are running high.