♪ hike.ne: no need for a rosengrenesident eric says he's not sure a fed rate cut is necessary. boris' bid. the u.k. prime minister makes his first attempt to renegotiate a brexit deal. social media spat. twitter and facebook say they have proof of fake accounts backed by the chinese government meant to undermine hong kong's protests. ♪ welcome to "bloomberg surveillance."

i'm francine lacqua here in london. these are your markets. you see a little bit of a lift to the markets. 0.2%.600 gaining a little bit of optimism that the trade war between the u.s. and. china is not getting worse >>. there. worse.ing there is also a little bit of optimism after we spoke to the boston fed president, eric rosengren. conte, thecting mr. prime minister of italy, to address the senate later on. coming up, our exclusive conversation with boston's fed president, eric rosengren. we will hear a lot more from him about the inverted yield curve. let's get to the bloomberg first word news. leader,kong's embattled carrie lam, is trying to end over two months of protests during new dialogue.

the protest began over opposition to a controversial extradition legislation. they grew to a wider antigovernment movement. >> we will start immediately a platform for dialogue with people from all walks of life. this is something that we want to do in a very sincere and humble manner. i and my principal officials are committed to listen to what the people have to tell us. we want to reach out to the community as soon as possible. thatre than 900 accounts originated within china deleted by twitter. it says china used the accounts to undermine the hong kong protests. the social media company says they attempted to manipulate perspectives on demonstrations. acting on a twitter tip, facebook says it found similar operations on its china network. ready to cut again. that's the message from the reserve bank of australia.

it says it will loosen policy even further if the evidence suggests that would boost the economy. the central bank noting few signs of inflation pressure. of also warned expectations wage growth could hit household spending. jeffrey epstein wrote a will just two days before his suicide. he placed over half $1 billion trust.ts in a it could complicate the effort to collect damages by women who say he sexually abused them. prosecutors in manhattan say they will close the sex trafficking case against epstein but will continue to investigate others involved in his alleged crimes. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thank you so much. the white house dismissed the idea that the administration is looking to cut payroll taxes as a way to boost consumer spending

as indicators increasingly point to a potential downturn. president trump has insisted the economy is strong, while at the same time pushing for the fed to stimulate the economy. yesterday he called for a full percentage point cut. we spoke with the boston fed president, eric rosengren, one of the two members who voted against raising interest rates last month. take a listen to his thoughts. >> it was tied to the fact that economic conditions are still pretty good. 3.7% unemployment is still a very low rate. inflation is a little bit low. if you look at the core measure, it is 1.6%. if you take out some of the outliers, it is closer to 2%. in fact, it is exactly 2%. my own view was that we have to be careful not to ease too much when we don't have significant problems. so the focus is not to do something that affects the exchange rate or something that necessarily takes care of the world economy.

we are supposed to focus on unemployment and inflation in the united states. i think we are in a pretty good spot right now. there are costs to easing. >> what are the costs? >> one is one of the ways that monetary policy works is that it would cause people to buy houses and cars earlier than they otherwise would. you choose to make an investment now because you think interest rates will be temporarily low. you make expenditures you might not otherwise make. the second is that when we lower interest rates, we make the cost of debt lowered. that means household -- lower. that means households and firms are more likely to be leveraged. they are in much worse shape if they get leveraged before we have significant problems. how much do we want households and firms to be leveraged going into whenever we do actually have a significant downturn? >> how concerned are you about a

significant downturn? the signs from the global economy, the signs from the bond market in particular, even signs from wall street things that have cut their gdp forecast -- banks that have cut their gdp forecast. is the recession risk rising in your eyes? >> many of those indicators are tied to financial markets. let's start with what most economists think is the likely outcome. we just came off really gdp being at 2.1%. the blue-chip forecast for august had growth for the third and fourth quarter both at exactly 2%, roughly exactly the same as the second quarter. that is clearly not a recession. it is continued growth at a moderate pace. they also have unemployment rate at exactly basically where we are right now. economic forecasters are not seeing a lot of weakness in the data. what i think has people really focused on whether we will have

a recession is the combination of volatility in the stock market. we obviously had a very big movement a week ago when we lost 800 points on the dow. in subsequent days, we have moved back up. one of the reasons is the global weakness. the cure for global weakness is for countries around the world to expand either with fiscal or monetary policies in their own country rather than just the united states doing the easing. francine: that was the boston fed president, eric rosengren, speaking exclusively to kathleen hays. joining us for the hour is sonja laud, chief investment officer at legal and general investment management. congratulations on running the shop now. when you look at some of what we have seen in the markets which is fear, inversion, but a little bit directionless at certain times. what is the underlying fear that you have or that markets misunderstand?

sonja: is very clear that the market sits in between the desire for more stimulus from central banks. we have seen over the past six months a real effort from central banks towards easing and towards supporting markets. what we are seeing is that the underlying economy is still weakening. we have seen it in europe, germany, italy showing quarters with. negative growth. we see china slowing down further. there is this balancing act between would lower rates released in late the economy or is it just asset prices that really crave for more stimulus? francine: what is the answer to that? this chart looks at the fed still mandate. if the fed does not -- steel mandate. rates,fed does not cut it goes higher. sonja: we have a split in between -- and this is what mr. rosengren said.

the consumer is doing fine. where we have seen pronounced weaknesses across the manufacturing sector. this is very much dependent on the uncertainty around trade tensions on the health of the global economy. even if you were to lower rates, would that really stimulate companies in spending more an investing -- and investing? i doubt it. francine: you seem to be suggesting that we are almost at limit of monetary policy. is the market going to try and test that? sonja: i'm sure we will see tests. over the past couple of weeks you have seen this increasing demand for fiscal stimulus. that lower rates will probably not stimulate the credit market and investment we need. targeted investment from governance would help at least in part to address some of the weakness. we have heard rumors around further tax cuts in the u.s. and

lots of expectations around anda, who held back so far potentially thinking whether this is a longer-term resolve they need to prepare for. francine: we will spend a good chunk of time later talking about germany. overall, what is your base case for a recession? this could be what the inverted yield curve tells us or it could be because we talk ourselves into a recession. sonja: you have literally two ways of entering a recession. i think you see both coming along around the world. i think we clearly have to accept that the risk of procession has increased -- recession has increased. the problem is that there are political moves that could accelerate or decelerate the way into a recession. classically, what you would see is an overheating, inflation picking up. if you look at europe, that is an interesting one. germany has been very weakened

by the trade tensions. you see economic growth slowing down quite dramatically. you have event risk around brexit, which could trigger a potential recession in europe, which is very unusual compared to how recessions normally start. there was lots of attention around the inflation data more recently in the u.s., which obviously puts the fed in a bind. as mr. rosengren said, it is not we can of to really justify weak enough to justify further cuts. francine: we will get back to that inflation forecast and brexit shortly. sonja laud stays with us. with just 72 days to go until brexit, boris johnson makes his bid to scrap the backstop. will the eu budge? we will talk about that next. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua here in london. a new way to prevent a hard border on ireland. that's what u.k. prime minister boris johnson wants. in a letter to the european council president, johnson said he is looking to replace the irish backstop. he seeks a legally binding commitment not to carry out checks at the border as long as the bloc promises the same. joining us now is caroline simmons, deputy chief investment officer at ubs. still with us is sonja laud from legal and general investment management. looking at are we possibly perhaps maybe brussels giving in something to boris johnson? if boris johnson even comes

back with this, would it not be enough to come back to parliament? caroline: the johnson letter is probably the best confirmation they could ask for for why a legally mandated backstop is needed. he is saying, let's just dispense with the guarantees in the treaties that provide this insurance policy and instead just trust us that eventually if it comes to it, we will find a way to make the border work. i don't think that is going to fly with the eu. i don't think it is a serious offer to the eu, because there is nothing specific in it. it is more about the johnson administration saying, well, look, we tried. francine: do you not think he is serious at all about trying to get a deal? >> boris johnson set our preferred weight still to have way is tor preferred have a deal. >> if they could get a deal and

it could pass parliament and doesn't have the bad bits that the brexiteers don't like, they would take it. a deal is better than no deal if it is acceptable. even without the backstop, this is a not -- this is not a deal we can accept, is what nigel farage said. he has to make some effort ahead of the g7. there are no real specifics on what the u.k. would offer. francine: what does it mean in terms of the chance of a no deal brexit? i hear the mood changing. they say it is almost at 60%, 70%. ubs is more cautious on that. you don't think it will happen? caroline: i think it is highly unpredictable. i don't think a no deal brexit is the aim, but we could get there. if you don't get what you want, you have to go through with it. i think there is a possibility of it happening. i think there is also on

elements of this is boris johnson sort of starting his negotiations. you have got to start again approaching some of the old ground and sticking points, which is the irish backstop. perhaps you start with the extreme view of let's just take it out so you end up compromising on something that could get more support. francine: the problem is if he restarts negotiations, to almost proved to the citizens you have done your due diligence. it does not make sense from a timeline point of view. sonja: absolutely. we have always been up against a deadline. the seriousness of whether he wants to negotiate, it seems he is simply blaming the eu for not engaging with him rather than wffering a serious way of ho they could find a middle ground. i still believe it seems rather

one-sided. i'm not very sure about the seriousness on what he wants to negotiate. francine: if you look at the political parties, it seems that with what happened yesterday, it enforces the idea that nigel boris's probably biggest problem. how does he deal with that? >> i think almost everything the johnson administration is doing is through the prism of a forthcoming election. they are very aware that the brexit party will field candidates and could, as they did in a recent by election in wales, actually divided brexit vote -- divide the brexit vote. johnson will not want to give ground to the brexit party. whether he does a deal with the bugs a party, i think he will hold -- brexit party, i think he will hold off on that. much depends on the labour party, which we see is very swift.

jeremy corbyn has not said he will campaign for remain in the referendum. francine: what does it all mean for assets? what is priced in at the moment? >> i think the best way to try to figure out what is priced in is to look at sterling. we think it is pricing in a higher probability of a hard exit at 50%. in a downside, we think you can cable.1.15 on inis leaning towards pricing a harder exit than not. in terms of how that feedthrough to the equity market, obviously the domestic stocks have been underperforming the international stocks. in terms of the overall equity market, it is actually not been that bad -- has actually not been that bad.

you are losing the marginal investor because they don't want to go near the u.k. until it gets clarity. the existing. investors are benefiting from the weaker currency. francine: are we underestimating the impact a possible no deal has on the european economy? sonja: that's what i highlighted earlier. i strongly believe that could be the kind of external event that pushes the european economy into recession. european assets, if you look at their performance, whether this is priced and will depend -- the disruption is. the shock event normally means there is a risk off event which most likely will show itself across asset markets in europe and the u.k.. francine: thank you all for joining us. sonja laud from legal and general investment management and caroline simmons from ubs global management both stay with us. shifting priorities.

chief executives of some of the world companies are saying their solelyill no longer be shareholder led. this is bloomberg. ♪

♪ this is "bloomberg surveillance." i'm francine lacqua here in london. some of the world's biggest corporate spenders, leaders say creating shareholder value is no longer their main focus. the business roundtable, led by jamie dimon, says it will leave

behind the investor centric model. chief executives like jeff bezos say they will serve our constituents, employees, customers, investors, and society at large. >> that group you are mentioning, led by jamie dimon, released a statement yesterday saying that while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all stakeholders. now is probably a good time to check in on where the state of investor rewards stands. we have seen buybacks decline about more than 10%. this likely is not any sort of altruism or goal the business roundtable set out. last year, we saw all of those tax cuts. companies actually overspent last year. we are likely to see buybacks pulling away from where they were last year. there is certainly room for corporates to cut, especially if the economy continues to be

weak. 77% is spent more on buybacks than dividends. at.dends nothing to sneeze this past quarter, they reached a record $14.24 per share. that goes into that lower yield story. investors love that dividend story, that bond proxy story. for evidence that this is not going anywhere, look no further than bhp, francine. francine: dani burger with the very latest. social issues. twitter and facebook say beijing used their platforms to sell unrest around the hong kong protest -- sow unrest around the hong kong protest. we will have more on that. this is bloomberg. ♪

♪ francine: no need for a hike. the boston fed president tells

bloomberg he is not convinced a rate cut is necessary, as president trump urges the fed two/rates by four percentage slash by a/rates -- full percentage point. britain hangs on the cliff edge of a no deal. twitter and facebook say they have proof of fake accounts backed by the chinese government meant to undermine hong kong protests. good morning, everyone. good afternoon if you are watching from asia. this is "bloomberg surveillance." i'm francine lacqua here in london. let's check in on the biggest stock movers this morning. >> let's kick it off with pandora, up more than 5%, one of the biggest gainers, this jewelry maker. they reported earnings and a climb of less than expected. the ceo saying their new strategy is taking hold. the ceo spoke to manus earlier saying they will spend more on marketing. casino to the upside, up more than.

4.5%.arket -- more than this is a supermarket. they are announcing additional debt burden. that will raise another 2 billion euros for them as they try to reduce this debt the company holds. ryanair to the downside, down 2% this morning as the pilots union ofs the company instead trying to block their strike should have went back to the negotiating table. now they say the walkout is almost certain. it comes on the busiest weekend for britt's to be traveling -- brits to be traveling. francine: annmarie hordern with your biggest stock movers. and deletedd hundreds of accounts it says china used to undermine the hong kong protests. the company took down more than 900 accounts that originated in china. it says they attempted to

manipulate perspectives on the demonstration and were attempting to sow political discord in hong kong. facebook says it found a similar china backed operation on its platform. first, what exactly did twitter and facebook find? facebookr and basically found that there was many social media accounts that were linked to the chinese government trying to influence in some way people's opinions about the hong kong protests. the first thing was getting rid of all of those accounts and taking them off of their platforms. the second thing that they did was saying we are no longer going to take advertisement money from state backed media companies across all countries. it came at the same time as kicking off the china government fake accounts. it was pretty clear as to which country they were targeting. francine: but are these actions

going to be strong enough to stop it happening again? >> it's a good question. people can still -- chinese officials can still hold twitter accounts. anybody who wants to can set up a twitter account. obviously, there is a big backing of the state government. they could continue trying to do this. twitter says it is trying to be vigilant, trying to keep its platform a place of discussion and public discourse. going up against the chinese government is definitely going to be a challenge for them. francine: thank you so much. our asia technology news reporter joining us from hong kong. let's get to the bloomberg first word news in new york city. >> pushing back against further rate cuts. . boston fed president eric rosengren saying he wants to see more evidence of a slow down before loosening policy even more. he is not convinced trade

concerns and a global slowdown will significantly dent the u.s. economy. >> if you look at the long bond, it is very low. it is around 1.6%. one of the reasons for that is the global weakness. the cure for global weakness is for countries around the world to expand, either with fiscal or monetary policy in their own country, rather than just the united states doing the easing. >> officials for the first time introduced a revamped market benchmark. the changes part of china's push to connect its interest rate system to conditions in financial markets. the aim is to help lower the countries sticky borrowing cost -- country's sticky borrowing cost and boost lending activity. replacing the so-called irish backstop is what u.k. prime minister boris johnson wants. he says he sees a legally binding commitment not to carry out checks at the border with ireland as long as the bloc promises the same.

apple planning to roll out its apple tv plus subscription service by november. it is part of their drive to reach $50 billion in service sales by 2020. we have been told over the next few months the company will introduce a small selection of shows but expand its catalog. there could be a free trial period. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thank you so much. warnedld's biggest miner that cooling growth in china and trade tensions were key risks to raw material products. bhp boosted its payout to a record on higher annual earnings. the chief executive says the s will have profit even in a downturn. >> we are ready for whatever the world might throw at us. we can profit from a downturn.

we will have a lot more cash in an upturn. i think there will be a big cash return to the shareholder. >> is the dividend sustainable? will you give a guarantee to shareholders that this is fotainable for xx period time? >> we don't have a progressive dividend. in my 10 year, we changed -- tenure, we changed it to a flexible dividend. down dependingnd on how markets perform. we have our portfolio that is smooths our cash flow and earnings. if markets turn down, of course our earnings will go down and the dividend we commit will be done as a consequence. it is one of the many -- down as

a consequence. it is one of the many tools we have to sail through choppy waters. we are very comfortable in paying this record dividend today. francine: that was the bhp chief executive speaking exclusively to bloomberg. a temporaryon reprieve in the u.s., with the trump administration extending a ban preventing companies from using their equipment. more than 40 affiliates are being added to a train blacklist -- trade blacklist. still with us is caroline simmons and sonja laud. thank you both for sticking around. when you look at the trade concern, do we just need to get used to it? will this be the next 5, 10 years? outld china just weigh it -- wait it out, see what the presidential election brings? >> what we see now is a

temporary extension of little snippets that should appease the other side and markets. so far, that is quite nice. i think if you add the big picture that we talked about earlier, this will not change. the uncertainty remains. in order to stimulate corporate behavior and corporate investment, obviously this will not do the trick. the presidential election is clearly a very important milestone. the risk is that the u.s. economy will slow further into the u.s. election. as we know, that historically has never boded well for the incumbent in his reelection campaign. we have to watch china as well. we have seen a bunch of weaker data points coming in. so the credit data, industrial production, consumer spending on the weaker side. it is for the chinese to balance the domestic developments with the trade tensions. , ituch, for us as investors

is understanding the big picture, understanding the potential binary nature a trade deal would have, but likewise, the longer it takes, the more negative the implication for the global economy. francine: with the kind of timeline you are looking at for either a resolution or escalation -- what is the kind of timeline you are looking at for either a resolution or escalation of the trade work? caroline: it has now become entwined with ip rights and technology rights. that is a much longer story that needs to play out. that is why we see this period of thee trade discussions. i think it is unlikely much will get resolved in the near term. we will see what happens in september and december. clearly, delegations are in china sort of currently trying to negotiate some things. over the next 12 months, there is a time where we can kind of forecast.

we are saying that we think that it is probably going to stay as it is but there is a higher risk of escalation now. francine: are they haven's havens changing? is it going to change over the next 2-3 years because the geopolitics are shifting? >> it would depend how things play out. what is quite interesting is that over the last few weeks of volatile markets, there was a question of, will the usb as be asive -- will the u.s. defensive? it was as defensive. it did outperform the more cyclical markets even though it's at the center of the trade dispute. we will not have a complete shift of what's safe. it may tweak a bit at the edges. francine: do you see it changing? sonja: i think unless we see a

real shift in -- for example, china opening up its capital markets so we can see a broader mix of available currencies, in particular broader asset markets, particularly across asia, i think that would rebalance the perception a little bit. with it, we would assume that china would potentially change their mix of currency reserves. lots going on. it clearly should be put into the context of the power shift between china and the u.s.. we are very much focused on trade. what is playing out as the idea of the preeminent global economy. we know this is rivaled right now. the u.s. has held this position for very long. with it comes the political implication of, who is driving the political agenda? francine: do you worry that china is much worse than we think and the economy will suffer and that would trigger a global recession? caroline: not majorly, actually.

in terms of the trade disputes come a we think it is having an affect on the chinese economy as it is on the u.s. economy. the transition within the chinese economy and the tightening in credit conditions they have been carrying out in the last few years was more of a reason why they recently restarted the easing. in terms of, you know, sort of credit event within china, we think it is likely you will have pockets of them as they move towards more liberalized markets. we don't see anything systemic that would affect a global situation from the credit markets. francine: thank you both. sonja laud from legal and general investment management, caroline simmons from ubs both stay with us. will italy's five-star movement -- italy's five-star movement and democratic party are considering forming an unlikely alliance. we will discuss the latest twists and turns in italian

politics. we will also look at the german economy. this is bloomberg. ♪

♪ francine: i'm francine lacqua here in london. let's get straight to the bloomberg business flash. >> we begin with shareholders coming first. that is the question, not according to the leaders of some of the world's biggest companies, including jamie dimon. they want to abandon the --g-held view as public growth over income inequality. the business roundtable says the purpose of a corporation is to serve all that's constituents, including employees, customers, investors, and society at large. lazard's success on saudi

aramco's bond sale has put it for a prime position for a spot on the ipo. we have been told in recent weeks that the boutique firm has been pushing hard. it is sending top dealmakers from around the world to meetings in the middle east. lexbidding war for osram could be heating up. bain capital and carlisle are considering increasing their bid for the lighting from if their rival goes ahead with a formal offer. the buyout firms are discussing whether a bumper that's close to our matches the competing bid would be sufficient to win over shareholders. apple plans to rollout its apple tv plus subscription service by november. it is part of the tech giants drive to reach $50 billion in service sales by 2020. the company will introduce a small selection of shows but

expand the catalog in the coming months. that is your bloomberg business flash. francine? francine: thank you so much. new coalition government in the making? italy's five-star movement and democratic party are weighing on alliance to undermine matteo alvini's power play. the prime minister is due to address parliament later today. it may lead to a confidence about and his potential resignation. still with us is caroline simmons from ubs global management and sonja laud from legal and general investment management. there is a political crisis that could be brewing. it could result in snap elections. how do you play that from a portfolio point of view? >> if you see the success that theously -- or the impact markets had on italian yield, if

you just looked at the bond yields, you probably would not tell there is a political crisis in the country. i think this is something we should not underestimate. with the expectation of a further ecb support, it seems to be some breathing space for the political parties to sort it out. there is no real risk the bond market would be too concerned. it is a very interesting timing aspect. if you look at the fixed date when they have to produce the budget because it has to go to the commission, and how to fit in potential snap elections, it is not very well thought through, it seems. the market gives them some base to find out where to head next. it is really the expectation morethere would be support, rate cutting, more qe. it helps to keep european bond yields and check. there might be less of a flare

up in terms of if snap elections were announced or if there is a real political power game going on. francine: the concern is that at some point in the markets may be testing ecb policy -- and the markets may be testing ecb policy. are we at that point right now? caroline: i think we are at the endpoint. the more stimulus you do, the less impact it has. we have been doing stimulus at a global level as well. there is this discussion about what other things can we do beyond just monetary policy? know, what, you impact it has on say the equity markets, it's very difficult for example for financials to make significant profit growth if the rates are lower and keep going lower. we are talking about putting measures in place to try and offset some of that. you need for the equity market

to perform, you need financials to do well. that's hard in this environment. francine: we will focus in on german banks and a second. overall -- in a second. overall, is christine lagarde a continuation of mario draghi? will she finally be able to persuade leaders of european countries to do more in fiscal? >> i think this is something the market will look out for very keenly. there is the understanding that yes, the ecb can do more. mr. draghi has hinted as much that they will continue to be very supportive. there is the understanding and knowledge that this will hurt the european financial system. as such, the real economic impact is rather doubtful. there will be a much stronger focus on fiscal policies. there is the hope that potentially with christine background,litical she might be more influential or has a better chance to convince policymakers in europe.

that remains to be seen. francine: thank you both. sonja laud from legal and general investment management, caroline simmons from ubs global wealth management both stay with us. germany prepares its stimulus package in case of a deep recession. we will get all the details next. this is bloomberg. ♪

♪ welcome back to "bloomberg surveillance." the german government preparing a contingency plan in case of a deep recession. sources told bloomberg that the program would try to bolster consumer spending and create new jobs. it is the latest indication that berlin is considering loosing its pursestrings as a prolonged downturn looms large. still with us is caroline simmons and sonja laud. this is one of the things we are talking about with fiscal spending. it is unclear whether this will make a huge difference or whether it's too late because the german economy is on a downtrend. it's possibly a way to placate president trump, who has been going after germany for quite some time. sonja: obviously, president

trump is more in general after germany addressing the surplus they are producing and obviously claims quite rightly that they are underspending, let alone in an economic downturn. germany is not investing enough. debt break asis part of their constituency -- part of the constitution since 2009. this is why they need a crisis to spend more than what they have put into law as their limit of what they can spend. less time they did this was in 2009 -- last time they did this was in 2009. now we are at -.1. you will see a lively debate in germany whether this is acceptable, whether this should happen now, because it has been such a fixture in the german debate and law. the surplus is so high that i think there is obviously the

request for infrastructure spending and more spending in general. francine: we are getting breaking news. saudi aramco has just named some rd and as some of their advisors for the world's biggest ipo. it is the first time we saw it from aramco. it fueled a lot of market chatter that they were indeed serious about this ipo. we understand that aramco is moelis select lazard and for the world's biggest ipo. no timeline on that. we will have plenty more on brexit and treasury yields on "bloomberg surveillance." this is bloomberg. ♪

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convinced a rate cut is not necessary. u.k.'s prime minister makes his first attempt to negotiate a brexit deal. discussing facebook fake accounts backed by the chinese government meant to undermine hong kong's protests. this is "bloomberg surveillance." i'm francine lacqua in london. scarlet, a lot going on when it comes to the chatter surrounding brexit with boris johnson trying to negotiate the backstop. scarlet: we look at yields around the world and it is amazing what fiscal stimulus can do for sensitive markets. in the u.s., we are looking at a fourth day higher for stocks.

germany is considering opening up their purse strings. francine: the last time they did economyasing, it was 5% downward's movement. let's get to the first word news. >> boston fed president eric againsteps pushing back interest rates cuts, telling bloomberg, he is not convinced that global growth will hurt the u.s. economy. he says he wants to see evidence the u.s. is going into something that is more of a slow down. the to hong kong is where chief executive is pledging a new effort at creating dialogue with government critics after more than two months of protest. she plans to look at the cost of the protests and a police responded to them the movement

-- responded to them. u.k., boris's bid to renegotiate brexit begins with the so-called irish border, with or sending a letter to the european union, writing, he wants to explore different ways to prevent a hard border on the island of ireland. jonathan promises not to build out --ructure or carry saudi aramco has selected lazard and moelis as advisors on the world's largest ipo. lazard was expected to have the inside track because of its work on aramco's huge bond sale. expected to favor advisors who have an existing relationship with the company.

this is bloomberg. francine: thank you. u.s. stocks look poised for now to open higher or a day, or rise for a fourth day. the white house says they will extend exemptions for another 90 days. that part is been clarified. scarlet: what hasn't been clarified is if there will be a payroll tax cut. in the treasury market, they are back to buying bonds. says when it is risk on, stocks rise in bonds don't do badly. that is what we have right here. gold is up by .1%. on theeping my eye better domestic growth outlook. francine: let's look at government bonds. for italy, were leaders seem to

be wanting to force action. there --they are showing declines. but treasuries climbing and the dollar gauge covering -- hovering. aboutjohnson is serious -- boris johnson is serious about negotiating brexit. rosen is pushing back against further interest rate cuts. he gave his own suggestion on how to help cure the global slowdown during an interview with bloomberg yesterday. longen you look at the bond, it is very low, around 1.6%. one of the reasons is the global weakness, but the cure for global weaknesses for countries around the world to expand,

either with fiscal or monetary policy in their own countries, rather than just the united states doing the easing. francine: joining us now is jacco.nd with what thew fed can or cannot do. dollar orargeting the looking around the world, saying we need to sell more dovish? -- sound more dovish? >> we achieved the unemployment rate being low. the other one is a bit and the balance. they can do an awful lot. that is not the right question. the question is what do they want to do? that is not very clear. we don't think they want to do with the market is currently implying. i think that is a better answer to your question. francine: all right. [laughter]

the question is,, or the question i was trying to ask to peter, is it a policy mistake if they cut too quickly? this is looking at where they are. >> their minds are changing very rapidly. we went from last year the market saying the fed had gone too far, to the market, now they are getting ahead of themselves with their intention to cut, and the data is catching up. we are seeing now because of the u.s.-china trade uncertainty. the feds insurance cut was talking about, all of a sudden seems -- is appropriate. data, they areut looking at that in the u.s. senate points to a slowdown.

seeing companies reducing hours before cutting workers. littlegetting a concerned about three to six months out. may be the fed's right to be cutting more over the course of the year. scarlet: we are looking for a lot of clarity at the end of this week. peter, is there too much depend on that right now? you had eric rosengren speaking on that yesterday. is the fed speaking from the same handbook? will be get a uniform message from the fed later this week, or will be get more contracting talk that will confuse investors? peter: what i was trying to say amended ago was that it is unclear at the moment what the fed wants to do. i think the way you phrased the question is another way of looking at that. what you see within the fed and within most of the central banks is there is a whole continuum of views. whohave guys like rosengren

are heavily opposed. on the other hand, you have extreme ducts who say we need to cut more. the key thing for the chairman is to strike a balance between these two factions. he could disappoint markets and that is never good. they will have to strike a tone that is quite realistic to be achieved. that is the trick. to your question, what we learn something from jackson hole? i am almost certainly will. scarlet: yet, another balancing act for jerome powell and his colleagues. are sticking with us because coming up, social issues across hong kong. twitter and facebook are saying they are using their platforms to help with the unrest. this is "bloomberg

surveillance."

♪ francine: this is "bloomberg surveillance." a warning from the world's largest minor. chinays cooling growth in as trade tensions could hurt my material process -- could hurt raw material processes. huawei's founder says the company is at a live or die moment. in an internal memo, they urged other underutilized employers to certain employees.

if not, they could lose their job. apple plans to roll out its apple tv plus movie and tv subscription service by november. the company is considering a $9.99 monthly charge, but bloomberg has learned apple is likely to offer a free trial while it builds up its library of shows. apple tv plus as part of a drive to reach $50 billion in service sales by 2020. that is your bloomberg business flash. scarlet: thank you. are with us, and i want to look at emerging markets. they have been trailing, especially u.s. stocks, so far this year. is tracking the s&p 500, and the white line is for emerging markets. clearly a lagging performance. when you look at the five-year

performance as well with the orange line well above the white line there. waitestion here is, as we jackson hole and wait for central bankers to talk about what is next, the most important thing for emerging markets seems to be what happens with the dollar. we know that the president has been pushing on the fed, on treasury, to do something about the dollar. to what extent are emerging markets held hostage to how the president pushes currency policy? yacov: they certainly are. they certainly are. when you compare u.s. stocks and emerging market stocks, the composition of the benchmark matters, right? it is a benchmark that is heavily weighted towards china and taiwan. it is a very asia and china-centric benchmark and suffers even more as we have this u.s.-china ongoing trade war. thatthe dollar, it is fair

-- it is fair to say that that the political noise is generating an unprecedented level of uncertainty, right? on the back of that, you have dollar.t going into the i have been curious to observe how we went from an alignment with the search for yield to an environment -- from an environment with a search for yield, to environment with a search of assets due to this background the political noise and uncertainty. scarlet: i am glad you bring up the search for yield because an opinion, ms. road that a significant funds for em is the opposite of sticky money. this is an search for yield abroad. they are likely to exit on any significant price balance. where is a significant investor base to compensate for the

cummings and goings of the top money? only true forot non-developed markets, but in the developed markets. gottenestor base has much more heavily invested. centric are they going to be, i don't know. but within the domestic, sorry, marketshe developed domestic space, i cannot see how that outflow changes the picture. the yield compression in the curve flattening is here to stay for all the various reasons underlined in the economy with central banks. francine: do you think we will at some point get a repricing unds?erman bo

peter: it is hard to say. if you think about repricing in relative terms to other spread markets, we see that to some degree already. in thetalk about change -- environment, growth is relatively slow and getting a bit weaker. the central bank is almost certainly going to hold their change. francine: thank you both for joining us. up, and exclusive conversation with the south african minister. that is coming up next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." scarlet, a crisis at south africa's security supplier is threatening the economy. but that is not the ugly situation. it has to contend with industrial action. what is at the top of the agenda. byare delighted to be joined gwede mantashe, the south african energy minister.

thank you for giving us a little bit of your time. there is so much talk about investors with what happens next. what can your department do to help them get out of that situation? i am part of the team where we are focusing on trying to find solutions. our --uite critical for overall. mining has the quickest victims with energy supply. we are working to get solutions for the challenges facing escrow. we are appreciating or it is

originating. francine: if the labor unions don't get behind the plan, and they have not so far, are you ready to fight them? at this point in time, [indiscernible] scarlet: we understand you will be taking the integrated resource plan to the cabinet in about two weeks time. itk about that plan because envisions the participation of independent power producers scom.y-side with

give us an update? gwede: one option, one other seegs is the forecast and how much energy is in coal. cleaner coal technologies -- [indiscernible] ,e are talking about hydro solar, and wind, all of that can coexist and will systematically to the end state. scarlet: do these other players, whether it is independent power

producers or municipalities, have any conditions with working with you on this? gwede: we do distribution. the discussion is to recover other government departments. everyone andg with involving everybody. involving communities into the discussion, so all of us are a part of the solution. francine: can you rule out a total collapse of eskom if the rescue fails? what happens if the rescue fails? in 1993 to1993 --

1997, i was at eskom. i know it is a very prestigious company. it is a good company. it must move ahead. transmission is well classed. [indiscernible] distributes -- [indiscernible] francine: i understand, minister. but the fate of this company is so tied to the state of your country. they are against the brexit plan? gwede: no, no. is tied to the

workforce. dutyleadership, we have a to do what is right for the country more than what is just right for unions. save theo what can country. gwede mantashe, thank you for joining us from johannesburg. next hour, twitter found and deleted hundreds of accounts that they say china try to use to undermine the protests in hong kong. we will discuss that coming up. this is "surveillance." ♪

♪ francine: this is "bloomberg surveillance." francine in new york new york andry --

london. we are back with our guests. this is your wheelhouse. does this get delayed or does it have the potential to give investors a lot more angst when it comes to south africa? yacov: we are all hoping that there is a cohesive comprehensive plan that is announced, whether there is union backing for it, nevertheless, so far, we have only received delays and have not seen as much detail as the market has wanted. assets has had corruption and investigations. realistically, as an investor, you can try to come up for a case for the country, and you

realize that everything is already bearish. as a result, you can see it's not back on any sense of good snapbackou can see a on any sense of good news. the markets are concerned about what the plan for state-owned utilities looks like. was he not close enough to getting the reforms? has he been too slow? yacov: he has been stymied by investigations lost against him -- investigations launched against him and has not been able to implement as many informs -- as many reforms as he would've liked. a bit of disappointment they are. scarlet: another big question about eskom is whether south

africa will need to go to the imf to ask for help and rescue the economy. peter, i want to bring you into the conversation. what kind of message with that sand to investors overall -- what kind of message would that sand to investors overall? one of the things we are seeing in markets by and large is there is more and more local fires burning, be that in argentina, south africa, and asia. a bid into the safer assets around, which is my will house. i think that some of these areas are definitely helping to underpin the developed markets as well. scarlet: when you put this all together, how attractive does south africa look for an investor who perhaps is more willing to get in at a time that things look dire?

yacov: to your earlier question about the imf, south africa should not need the imf. there debt profile is very manageable. you have to give them, you have two tip your hat to the fact that they have been prudent in terms of issuing their maturities. imfs premature to mention with south africa, but still vulnerable. when we look at countries, we look at the balance sheet. there is a balance sheet and an income statement, being currency which is a lot more vulnerable, which is why we have seen this rapid decline in the rand. soundlance sheet is very on the debt side. we have to see whether the sovereign needs to extend more guarantees -- the sovereignty needs to extend more guarantees. that is the big question mark

investors are asking. -- but this has been a sound story from a debt management standpoint. francine: every time you come on, i talked to you about fund dynamics. what does argentina need from emerging markets? were these warning shots? think one of the things we are watching and following is contagion. contagion has been very limited. it will stay very limited. brazil is a mass of economy. it is many times the size of argentina. but the rand is more vulnerable because it is more integrated. other than that, at the end,

what will be the driver will be china, fed policy, and consequently the dollar. yacov areeter and sticking with this. we have breaking news with aramco buying the animal's health business. this would create one of the biggest veterinary medicine companies in the world. it will finance this acquisition with a mix of cash and stock. we will be speaking with the ceo later on bloomberg television. he will be joining alex and david. get to thewe want to bloomberg first word news. >> we begin with the white house. it is rejecting a report in may cut payroll taxes to boost consumer spending. according to the washington post, the administration had

preliminary talks about a payroll tax cut as a useful tool to avoid a slowdown. in white house official says more tax cuts for individuals are being considered, but right now, payroll taxes are not on the table. can just may borrowing costs a little cheaper for companies. for the first time, the central bank introduced a revamped market benchmark rate. the one your reference rate for bank loans will start at 4.5 quarter percent -- 4.25%. trump isdent donald trying to calm tensions between india and pakistan over cashmere. the president spoke separately to the leaders. since grabbing the region's autonomy, moldy has kept cashmere under lock down for two weeks in. . countries claim the area on twitter president trump calls it a tough situation. jeffrey epstein may have complicated efforts to collect

money from his estate by women who say he abused them. two days before he killed himself, he placed $570 million been assets in a trust. assets in a trust and that trust does not have to be disclosed. this is bloomberg. scarlet: thank you. let's get back to trade. us.guests are still with with u.s. and china trade discussions, every day, we seem to get different headlines on whether they are on or off. seems like things are ok right now. i want to explore the idea that the president is linking the protest in hong kong to the trade discussion -- the protests in hong kong to the trade discussion. is that their way to get beijing to engage that china needs to

work things out in a humanitarian fashion, and oflence will hamper the odds making a deal? peter: trying to understand the dynamics between the countries. be akong is unlikely to part of the u.s.-china equation. it is probably more important sureresident xi to make things don't spiral out of control. incentives lot of and they are following a lot of political calculus. one is this milestone. the second one is much more protracted is the u.s. electoral campaign. that will influence how the u.s., how the white house is

thinking about a potential deal with china, given that we are just entering the electoral campaign, which will heat up next year, and whether the white house wants to be seen to strike --eal with china, then china, which will be open to president trump in the race. scarlet: what do you think about china's and the u.s.'s political calendar? yacov: certainly, it is not just the portfolio manager who have been that you have become political scientists. what you can currently make out is there already some kind of blame game going on in the u.s.. it is not only the fed he is attacking, but he is putting hong kong in the realm of debate. he is also sayingstrike a deal,t

china is very desperate, but he does not deal, so i think he drives to create -- he tries to create this air of we can continue to go in the direction we are going. but if the economy takes a leg lower, administration in the u.s. and the guidance around his campaign will be quite worried about it. francine: scarlet, save me. we had a great viewer question. let's go back to south africa very -- south africa. asked --er writes, do do you expect moody's to take south africa to negative outlook? yacov: the probability is increasing with every passing day.

it is compromising moody's ratings. i think at the same time, we have to recognize there has been awareness of this risk for months, or probably over a year, so the more time goes on, this event -- so the more time goes on, the more time investors have two position. people are reducing their positions. the more time passes, the more disruptive it is likely to be. with that, we are generally kind of pretty flat on exposure. just waiting for more clarity. in the end, it will reconcile. there are 30 balance sheets positive with these ongoing risks to the income statement and growth risks. i certainly think it is still -- there are raise of sunshine --

rays of sunshine. francine: thank you so much. stay with us. to go until days brexit, prime minister boris johnson makes his bid to scrap the backstop, but will the e.u. budget? we will discuss that next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." in francine look while london -- i'm francine lacqua in london and scarlet is in new

york. boris johnson wrote a letter saying he's looking to replace his so-called average backstop and sees a legally binding commitment not to carry out checks at the border. our guests are still with us. johnson goes boris to the u.n. and goes, i don't like the backstop. is there a chance they renegotiate -- we open the negotiations? >> he is proposing this legally binding agreement is reminiscent of what theresa may suggested and really similar, dear i say. what he is trying to do is avoid having the u.k. totally bound and the u.k.'s customs and trading rules, but the irish

prime minister saying no, i am not interested in renegotiating this. he will see the leaders of france and germany in the coming days on his way to the g7 i will carry the same message. they have been clear as a collective, they have no interest in renegotiating the backstop. that is the biggest point of contention between the two. francine: he writes this letter yesterday, saying it is the best option to leave with a deal. is he serious, or is it just political posturing so he can say, guys, i tried my best? >> everything seems to be about the messaging that we will leave whether or not we have a deal. that is an effort for the e.u. to say, ok, we will give you something to talk about it again. hopingelping -- he is that they will finally agree to something.

maybe they will be willing to talk about it. for boris johnson to say, i tried, to show europe with the british people really want. scarlet: throughout all this, as we listen to boris johnson negotiate, or attempt to negotiate, we are looking at the one dollar oh three cents. you have to wonder, is it going to get back to that 118. 41 level that we saw. if it does, what does that signal to investors? >> i do not think it will be seen as a technicality. over the last three months, the pound has come from, from its stronger levels to some of the

weakest levels we have seen in quite a while. that doesn't mean that is the end of the road. if he really crystallized the risk of a no deal access, that is a very, very clear risk on one hand, but for other assets within the u.k. more generally. i think that is a risk that is only priced to a certain degree at the present. scarlet: does the pound go to parody? >> the parody with the euro is a likely scenario. scarlet: thank you very much. we want to thank rosalyn mathis for her take on the goings on of brexit. coming up next, germany prepares a stimulus package in case of a recession. from london and new york, this is "surveillance." ♪ ♪

♪ is "bloomberg surveillance." plans to overcome revenue has been involved. they filed a series of

whistleblower tips with the sec, telling market watch employers that disney's parks division overstated revenue by billions of dollars. fired ands -- was made false claims. apollo global management could pay 20% premium for hilton grand vacations, according to "the new york post." they have a market cap of $2.4 billion. the company manages timeshare resorts. over in france is where supermarket operator casino plans to put another $2.2 billion of assets up for sale. it is in the process of selling $2.8 billion of holding. their market share has been shrinking. last month, casino counseled next year's dividend payment to hold onto the cash. that is your bloomberg business flash. scarlet: thank you. preparing avernment

contingency stimulus plan that could bolster spending and create new jobs in case of a deep recession, marking the latest indication that berlin is considering easing its purse strings. let's bring back our guests. mo?r, what is germany's how much telegraphing do they need to do before they deployed this kind of spending? peter: first of all, they have to differentiate two things. , recordingthey said government officials, let the automatic stabilizers work. that is one thing. previously, the government has always tried to counteract any potential budget tightening. this time around, they are willing to let it run. chosener one would be a spending program, more likely a

tax-cut program. we also have to dereference j between what has been talked about -- we have to also differentiate about what has been talked about. on top of that, whether something else comes. i think all of these things will be looked at. so far, we don't know what will come. come is at that will massive program, hundreds of billions because the constitutional limits are there, and secondly, it is not in the nature of this government to do that in one fell swoop. scarlet: that would be a huge departure from their playbook. talk a little bit about the political backdrop that may be driving germany to talk up the prospect of stimulus. that is one of the biggest catalysts in my mind

that germany could loosen the purse strings much more significantly. , and i a grand coalition used to jokingly say it is not that grand. there is an incentive to make the government fall at one point. if that is the case, there are two options. either, the existing parliament officialsnd merkel's finding a new government. if you go to an election, what is the likely outcome of that? probably all the parties will promise more spending. if we come to a point where the government falls, then there would be a significant, at least promised chance of decreased spending. francine: how much of the onus

is on the ecb? peter: a lot of the onus is on the ecb. ecb has been calling for this pillar to come on stream for years really. they have just refused to do so. mostcularly, one of the perceived countries comes on scene can change the pace, but the onus is a lot on the ecb. francine: thank you so much for joining us. moreg up in the next hour, of our exclusive conversation with the boston fed president eric rosengren, and we look at the italian economy. this is bloomberg. ♪

♪ francine: no need for a hike.

eric rosengren is not convinced a rate cut is necessary. the u.k. prime minister makes his first public attempt to renegotiate a brexit deal. twitter and facebook say they have proof of face -- fake undermine hong kong's protest. london,ncine lacqua in scarlet fu in new york. we look at the metrics and data points in the u.s., the inverted yield curve diss inverting and ting happened -- disinver and what happens next. francine: especially with jackson -- scarlet: especially with jackson hole coming up, questions on how the federal reserve will address that.

optimism building up as the united states delayed restrictions on u.s. companies from selling parts to huawei. we have heard this story many times. scarlet: some data checks -- francine: some data checks, just to make sure. viviana: boston fed president eric rosengren keeps pushing back against further rate cuts, telling bloomberg he is not convinced slowing trade and global growth will hurt the u.s. economy and wants to see evidence the u.s. is going into more of a slowdown. ishong kong, carrie lam pledging a new effort at creating dialogue with government critics after two months of protests. she plans to look at protest causes and how police responded. demonstrators want her resignation and they want more democracy.

bidhe u.k., boris johnson's to renegotiate brexit begins on the irish border, saying he wants to prevent a hard border on the island of ireland. he promises not to build infrastructure or carry out checks between northern ireland and the republic of ireland and wants the e.u. to do the same. lazard ando selected onlison company as advisors the world's largest ipo. planning to list shares as soon as next year and is expected to favor advisors with an existing relationship with the company. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana this is bloomberg. scarlet: we are looking at u.s.

futures drifting, slightly positive as perhaps a fourth day of gains. some optimism building in that trade talks will go well after the white house delayed restrictions preventing u.s. companies selling parts to huawei. treasuries recovering some of yesterday's losses. bloombergs telling investors should buy gold at any level, now at 1514 announce. withdepot coming out latest numbers, missing analyst estimates. we see home depot cutting its full-year comparable outlook. analysts were looking for a gain of three to dust 3.2% and they now see a 2.3% gain. home depot bouncing around in the premarket trade about one half of 1%.

francine: i like home depot. we are less familiar with it u.k., but gives a good indication as a bellwether of housing. about, to write home probably my favorite u.k. expression never. bones are climbing a touch in europe -- bonds are climbing a touch in europe. watch for the prime minister of italy talking in about four hours. overall as you said, treasuries climbing in the dollar holding close to the year's high. stories,one of our top fed president rosengren is pushing back against interest rate cuts. president trump called for them to cut by "at least 100 basis points." eric rosengren is not

convinced slowing trade and global growth will dent the u.s. economy. >> was tied to the fact that economic conditions are still pretty good, 3.7% unemployment is very low. inflation is a little bit low. the core measure is 1.6%, but if you take out the outliers using the dallas trim mean, it is closer to 2%. my own view was we have to be careful not to ease too much when we do not have significant problems. the focus is not to do something that affects the exchange rate or necessarily takes care of the world economy. we are supposed to focus on unemployment and inflation in the united states, so we are in a good spot, and there are costs of easing when you do not need to ease. >> what is the cost? >> one of the ways monetary policy works, at causes people

to buy houses and cars at an earlier time than they would. you choose to make an investment now because you think interest rates are temporarily low so you make expenditures you might not otherwise make. rates, wewer interest make the cost of debt lower. households and firms are likely to be leveraged and they've they get more leveraged, they are in worse shape. we have to think about the financial stability characteristics, how much do we want households and firms to be leveraged going into when we have a significant downturn? about aoncerned are you significant downturn? the signs from the global economy and the bond market, even signs from wall street banks that have cut their gdp forecasts, and indicators suggest the recession risk is rising. >> many of those risks are tied

to financial markets. is way to gauge the outcome to look at blue-chip forecasts. we came off real gdp at 2.1%. the blue-chip forecast for august has grows for the third and fourth quarter at exactly 2%. that is clearly not a recession. it is continued growth at a moderate pace. they have the unemployment rate where we are now, 1/10 less in the blue-chip forecast. forecasters are not seeing weakness in the data. what has people focused on whether we will have a recession is a combination of volatility in the stock market -- we had a big movement a week ago losing 800 points on the dow -- but in subsequent days we moved up, and the long bond is very low, 1.6%.

is cure for global weakness for countries around the world to expand with fiscal and monetary policy in their own countries, rather than the united states doing the easing. eric rosengren speaking exclusively to kathleen hays. joining us now is gregory daco. mentionedgren recession indicators that are market,the financial the inverted yield market and following bond yields. do you say recession indicators and the real economy? gregory: we are seeing rather signs of a slowdown. one element that was missing from rosengren's description is the u.s. economy is not an island. the slowdowns we are seeing around the world in germany, america,ia, and latin

are having an effect on the u.s. economy. add to that trade tensions, and looking further out you will see weakening in the u.s. economy. some easing from the fed makes sense. if you add to that the financial conditions that have tightened about half of what they tightened in q4 last year, there is a need for easing. canlet: eric rosengren point to the u.s. consumer as an island of strength. the consumer sometimes behaves as if the rest of the world does not exist. can a strong u.s. consumer lift the manufacturing and business side, or will they drag the consumer lower? gregory: that is the important point about the u.s. economy, consumer spending represents about 70% of gdp. if you have consumer spending trending around 2.5% or 3%, that

is a significant buffer against any downturn. when it comes to manufacturing, it is represented over the years a smaller and smaller share over the u.s. economy, so yes, the drag is weighing on business investment but not to the extent it would pull the u.s. economy into recession. one area to pay attention to is what is this investment does more broadly, is there a risk of confidence faltering investors pull back because they foresee a potential slowdown? this investment -- recession bias. is that as declining, concern for the u.s. economy? that is a concern on the business side. francine: what does that mean for what the fed should do? greg: they should continue to cut rates. they already implemented a rate

cut and we think there'll be two more of 25 basis points this year. the key question is whether that is enough to assuage market fears of an imminent recession, and that is the question for the global economy, this recession bias. people have difficulty distinguishing between an economy that is growing and an economy contracting. we see a slowdown in the u.s. economy, so the key role for the fed is to reassure markets the economy is not headed into a -- withn, and with out monetary policy stimulus there will be support for the u.s. economy. francine: thank you so much. chief -- on bloomberg, pimco chief investment -- chief officer of global investment,

they will talk about worldwide investment in corporate spreads. this is bloomberg. ♪

♪ scarlet: i am scarlet fu in new york with francine lacqua in london. we are a little over a year away from the 2020 election and despite a barrage of poles saying the president will lose, his reelection hopes are far from doom. the president's approval rating is 43%, in-line with the 40% average he has seen. the growing economy has been an asset for the president.

cirilli,s now is kevin bloomberg's chief washington correspondent. i know you are up every day at this hour, but to put makeup on is an extra step. talk about the president's latest pronouncement about trade and huawei, delaying a decision to restrict u.s. companies from selling parts. is he looking at the potential reaction to that decision or his reelection prospects when he makes those decisions? kevin: a little bit of both. when you take the president with regard to huawei, the commerce department announced this in the last 24 hours, providing a 90 day reprieve for u.s. based businesses to work with huawei. when you couple it with last week's decision to kick the can

down the road about $160 billion worth of additional tariffs that would be tacked onto chinese goods. the president is saying it is because of american consumers, back and holiday shoppers, but the bottom line is that china has proven time and time again when the president goes tough, china goes tough, and they do it in the agricultural sector. it hits the president politically and states he needs to win. ,rancine: what does that mean that he is going to shy away from being more aggressive, or does he change tactic? kevin: i think the latter. candidly, that has been much to the joy of some prominent republicans in washington, d.c. ,hen they return from recess

they will have to address the new reality that economists are debating whether there will be a recession. kellyanne conway at the white not to talk folks into a recession, as they continue to say they believe they have strong economic data on their side. francine: kevin cirilli, thank you so much. let's get back to greg daco. how difficult is it -- and this kind of goes back to the conversation on fed, fed policy, and how they communicate -- how difficult is it for the president and the fed to understand what impact the trade skirmish has on the economy? greg: it is not that hard to understand that protectionism is hurtful for the u.s. economy. we have known this for a while, and the imposition of tariffs vis-a-vis china and other

trading partners is hurting u.s. businesses and consumers. i think there is a gradual realization that by imposing tariffs, he will hurt the consumer which is a key pillar to the u.s. economy. the main reason the economy is consumers are spending at a good clip. tariffs, thatre will weigh the u.s. economy down. that is a key realization i the administration at this juncture. said it seems like the moves on huawei and trade depend on financial markets. if financial markets stay in this range through 2020, what does that mean for the trade war? greg: there is a possibility we continue to see uncertainty. in the past couple of weeks, the

president and administration have been going from an all-out trade war with tariffs on all imports, naming china as a currency manipulator, to backing off on some of these tariffs. we see a lot of movement, even on the huawei front, despite the reprieve. there has been new huawei officiate dutch affiliates to the end to -- affiliates to the entity list. the administration does not want to see steep losses on the financial market firm, and the indicator.- is a key we are likely to see volatility on the trade fund -- front pushing at some and pulling at others. francine: we are seeing a little bit of pound movement on the bid for johnson to go to the e.u. to renegotiate the backstop just 72

days before brexit. johnson makes the bid to scrap the backstop but it is unclear whether e.u. will budge. this is bloomberg. ♪

♪ francine: this is bloomberg "surveillance." let's go straight to brexit and a donald tusk tweet saying the

backstop is an insurance to avoid a hard order on the island of ireland. just giving some context, this is after the u.k. prime minister made his first public attempt to renegotiate the brexit deal by telling the e.u. he wanted to explore different ways of a hard order on ireland and donald tusk saying this goes back to the point of those against the backstop and not proposing real alternatives are opposing the border. both sides are really entrenched on this. what you were telling us earlier, that it almostike boris johnson knows full well the e.u. will not agree to this because theresa may tried this in the past. is he trying to speak to citizens of the u.k.? letter ist seems this

designed for domestic consumption and is not offering the year pn union -- european union a negotiating gamut. one part of the letter, boris johnson is saying the backstop is not awful just because parliament rejected it three times. suggests ally, he violation of the good friday agreement, and that is a departure from theresa may who saw the backstop as a way of bolstering and honoring the good friday agreement. johnson is saying, not only do we not need to worry about the irish border to maintain peace in ireland, this policy will not undermine that agreement. the other thing he does is say we can arrive at alternative arrangements and just commit to doing something that keeps trade moving.

if you are going to have an insurance policy, you need to spell out the terms. this suggests he would like parliament to get on with the vote of no-confidence and get a new election going because he has left no room for the e.u. to come back and propose something. scarlet: therese raffaella, thank you so much. we look at home depot, shares are moving higher in premarket trading after the company cut its full-year comparable sales and the second quarter missed estimates. we will get more on the results and the outlook. this is bloomberg "surveillance." ♪

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save up to $400 a year on your wireless bill. plus get $250 back when you pre-order a new samsung note. click, call or visit a store today. scarlet: -- francine: this is bloomberg "surveillance." talking about brexit and getting

briefed by one of the spokespeople of the european commission, and she is just saying they have received the letter that the prime minister of the u.k. sent on brexit, that they welcome the u.k. engagement, and boris johnson did not set out an alternative backstop. this is diplomatic speak for, we did not get much but we are waiting and open to any suggestions. me like lingo speak for we did not get anything new. how do the two sides come together for an agreement? the e.u. will not budge on the backstop and boris johnson asked to soften the current backstop. therese: he has always said, we would be happy to consider

alternative arrangements if you can find them. three government conditions are looking at the possibilities and we don't know what they will say and when. boris johnson gave a lot of credence to the one by two conservative mps who propose trusted traders schemes, giving a free pass to micro-businesses, products andral for the sanitary side of trade, it is impossible to have an open border without checks. the e.u. is going to say, we will look at something if you propose it but it has to be specific. francine: you have so many e.u. citizens and you heard from the home office saying it is no deal. -- arepanies and people companies and people -- do they need to get use to a 50% chance

of no deal? therese: the home office was surprising, given that boris johnson said we will not use e.u. citizens as upon. -- as a pawn. he is telling them to prepare for an election. these things can happen by default, which is why we are seeing things -- people acknowledge no deal is no longer an outlier scenario. it is hard to see how they pull back from it if the e.u. line is, we cannot change. scarlet: the chief u.s. economist for oxford, that you worked at the belgian embassy in australia so you have been thinking about the ramifications of brexit. if you had to quantify the odds of no deal and how that might affect the world, what is the

likelihood before or by october 31? byg: the odds of brexit october 31 are fairly high. the odds of a delay by the e.u. are about 30%. the key question is what happens in the case of brexit. you would see a significant drag on the u.k. economy, worth about 5/10 of a percent for the next three years. the consequences of no deal are significant. re-engagingext of between two big nations, a lot of uncertainty has to be dealt with. scarlet: uncertainty begets more uncertainty. herese rafael, -- thank you. isiana: the white house

rejecting a report it may cause payroll tasks -- taxes to boost spending. they had preliminary talks of a payroll tax cut to avoid a slowdown. more tax cuts for individuals are being considered but payroll taxes are not on the table. china has made borrowing costs cheaper for companies. the central bank introduced a revamp market benchmark rate, starting at 4.25%. china is trying to connect its interest rate system to conditions and the financial market. in italy, the prime minister raised the prospect of tax cuts and a boost on government tonding, and a final attempt put an end to his alliance with the five-star movement. conti addresses

parliament and almost certainly signals an end to his administration. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. francine: thank you so much. home depot's second quarter sales missed expectations and they lowered their outlook amid the trade war fears. emma chandra has been going through the numbers. this is a bellwether for the u.s. economy. diypeople worried about because they don't know how the trade war will impact them? emma: the comments made as they are concerned how the trade war will affect consumer sentiment and that is why we have seen the full-year guidance cut. there is some concern if the trade war is not resolved and we see tariffs in september and december, that will affect the consumer.

while you look at the home depot numbers, they are concerned about price inflation when it comes to lumber. that is something the ceo called out specifically to say that lumber price inflation has been the reason they have seen sales fall. francine: the u.s. consumer is doing quite well, so how does home depot compared to rivals? emma: lowe's is their biggest rival and we get results from them tomorrow. home depot has been doing well throughout the year, their share price up 20%. there is a bit of a choppy environment with wet weather, tariff concerns, but they have been doing well in terms of the housing market. it has maintained relatively strong, not on a tear that we

have seen the past few years, but still doing well. there are concerns the tariffs will cause people to stop spending. scarlet: talk about the housing market and how it is tied to home depot. when thet does well market slows down because people want to increase the value. emma: when people are doing well and they are thinking about selling their homes and they might engage in updates. if they are not doing so well, people are not thinking about buying a home but might want to update. they are impacted by mortgage rates which have been coming down. the ceo saying they are encouraged to the health of the u.s. consumer and the stable housing environment which is giving them momentum. they are concerned about the

impact of the tariffs on the health of the consumer. scarlet: homes -- shares of home depot are little changed after cutting the full-year comparable outlook. talking about home depot as a gauge on the health of the u.s. economy, i am looking at a snapshot over fall -- overall. eric rosengren sees a more robust economy than his peers and say we will see a second half of the year closer to 2%. the atlanta gdp fed forecast is the blue line. talk a little bit about how the trade tariffs factor into economic growth. have we seen the impact already or is there a delayed effect? greg: we have started to see the effect. the drag on the economy from 3/10 offre worth about

of gdp growth. we are seeing the negative effect of trade tensions affecting the u.s. economy. what is important is not so much when gdp is doing in any particular quarter. if you look at the trend over the last few quarters, you see a significant slowdown as the fiscal stimulus has facilitated and is global growth has remained strong and the u.s. economy has remained elevated. q2 last year was the inflection point in terms of growth. we are in a cooler environment, and from the fed perspective it matters what is likely to happen tomorrow. that is a key in deciding to loosen or tighten policy. waslet: the white house talking about cutting payroll taxes. would that keep growth at the current level?

the white house dismissed that report. greg: paid is typical of the administration. -- it is typical of the administration. yes, it would boost consumer spending but the real issue today is not consumer spending, which is doing well. what is hurting the u.s. economy is the fact that exports and business investment and housing are struggling. that requires a pullback in trade tensions and tariffs rather than stimulating consumer spending. francine: greg daco, thank you so much. -- found and deleted hundreds of accounts at said china used to undermine the hong kong protests. this is bloomberg. ♪

♪ scarlet: i am scarlet fu in new york with francine lacqua in london. twitter found and deleted hundreds of accounts at says china used to undermine hong kong protests. they took down over 900 accounts originating within china, saying they chose to a lemonade perspectives on the project -- -- eliminate perspectives on the protests. facebook found similar china backed operations on its network. joining us as brian wieser. we talked about how they were inauthentic tweets or postings. do we understand how they go about looking for these account in these postings?

is it something where somebody has to put in a request or they do it on their around? brian: they do it on their around. trying to root out inauthentic activity or anything that doesn't foster real human discourse, this highlights there is a ton of it out there. certainly investors react more negatively when it sounds like there is a lot of fraud, which is a bad thing. it is a good thing they are cracking down. the fraud in this case, i mean inauthentic person-to-person conversations. the more they make it about real people, forget about the specific issues and politics, the better it is for brands and advertisers. is, ate authentic it all is healthier for these businesses, but it is also a to the advertising

community and investors that there is a lot of activity going to deshese platforms that does not relate to humans -- does not relate to humans. scarlet: do we have in a sense of how many twitter users may be fake or inauthentic accounts? if we were to put a number on it , is there a way to figure that out? brian: facebook has more clearly stated something to the effect of they estimate about 5% of their users are duplicates or inauthentic. i am not sure what twitter's numbers are. there is some number, whether it is state owned actors propping or not real human beings, individuals, it is some percentage. they are constantly cracking down on those.

post" had aton piece last year when they talked about tens of millions of accounts every day. i think it is an ongoing battle for these platforms. francine: when you look at how this happened, facebook was acting on a tip from twitter. does this happen often? is there anything they can do to change the younger rhythm for making sure they can prevent this in the future, or every day they have to start from scratch? brian: i have heard them referring to coordinating more aggressively in response to what happened with russian interference in various elections. this is one of the first times i have heard them talk about it publicly. the idea of a referral should not be surprising, but it is interesting and noteworthy they are talking about it.

that is one of the more healthy ways of making sure inauthentic activity is dealt with. francine: does it change anything for regulators? regulators need to regulate these companies. are they doing better than two months ago, or is this a drop in the ocean? andn: we don't really know, from a regulatory perspective, these platforms remain powerful. if you are a regulator, if any of the social platforms do not aggressively curtail activity involving state actors, that it can form the discourse of societies around the world. it probably amplifies concerns regulators have. more news around that in the united states with the attorneys general coordinating their activity with regard to the platforms.

it probably amplifies the concerns they already have. francine: brian wieser stays with us. --are getting breaking news we brought you that about 20 minutes ago. bang -- failure veterinary health services. coming up, we will speak to jess america." "daybreak this is bloomberg. ♪

♪ bloomberghis is "surveillance." companyays claims overstated revenue for years are patently false. a former accountant filed with sir blower claim -- whistleblower claims with the sec, saying they systematically overstated revenue by billions of dollars. disney said she was fired for cause and made false claims. apple plans to rollout its tv

subscription service by november , considering a $9.99 charge but is offered -- likely to offer a trial. huawei warns the company is that a "live or die moment." in an internal moment, employeesnderutilized to form new projects or they may lose their jobs. that is the bloomberg business flash. scarlet: federal trade commission chairman joseph simons telling the financial times that all options are on the table as they investigate facebook for antitrust violations but forcing them to

develop businesses would be difficult. he said the integration of different trends including whatsapp, messenger, into facebook, comp of flies that complicates that effort. greg: it is obviously true, but to acknowledge it -- brian: it is obviously true, but to acknowledges -- acknowledge it tells us they are willing to put it out there. if they want to take action, they probably have to do so sooner rather than later, because from a public policy perspective if they decide these apps cannot exist together, it would violate whatever laws they believe it violates, that they would need to act and cause more disruption rather than less, which is why it is so interesting they said as much.

we know there is action in germany and australia and elsewhere, where there is a real push to try to break up or prevent facebook from sharing data across the apps, and facebook has gone forward with sharing data. it will be harder to break up and does not mean it will happen. francine: is this because they are integrating things? brian: the more tightly integrated, there could be consumer benefits, but on the other hand if there is a belief among regulators that this is anticompetitive, it will be messier to break up for advertisers who depend on facebook. we have done the u.s.-china trade war to death and one thing we have not explored is what you write up

neatly in your notes, what are the implications for advertising companies? how big are they? brian: potentially significant, and i don't think many investors are paying as much attention to this. many of the largest american and global brands are more important in china than chinese brands are to most in the united states. if you make it harder for international brands to sell, make them more expensive for consumers, you might see a negative impact on chinese media owners but you would not see that impact on american media owners because there are not that many chinese brands. facebookhe thing, probably generates between $5 fromon and $10 billion chinese brands who advertise domestically. twitter identified something

similar. of incomeerates a ton from chinese operators operating abroad. these are just entities based in china who advertise abroad whatever product you might buy. those entities, because they can ship stuff into the united states without hitting the tariff wall because it is under $800, the personal exemption, they will not be impacted. francine: brian wieser, thank you. plenty more from year markets and bloomberg "surveillance" continues on radio. this is bloomberg. ♪

♪ alix: show me the slowdown.

rosengren president wants to justify evidence for a rate cut. desperate for growth. the white house considers options to avoid a recession as countries look to prime the recession pump -- primed the stimulus pump. orlando -- a lancome be set up lanco beefs up its pipeline. alix: coles came out early, missing comp sales -- koh l's came out early, missing comp sales. lightalso coming in a bit , and margins a bit light. none of that seems to be necessarily a surprise to me, but