exposed to and the news from the white house is what it is. if you think the economy will be expanding, we will be in good shape, great, by the stocks that you think will benefit and are and today we clearly saw the reaction to what they call the cycle of absurdity, down 2.6% on the s&p 500. 619.ow, just romaine: this is looking to be the third worst day of the year. the two worst days of the year were also in august. this is going to be the third worst day. thinkingrted this day it would be all powell and the odds of a 25 or 50 basis point cut. the odds have risen

significantly. that brings back the question of, how do you unwind that trade? makeine: he really did clear that they are trying to work with the fed when it comes to trade. >> let's get a deeper dive into the action. i'll start with you, abigail. what are you watching? >> this may come as a surprise. one area that has outperformed is ems. the emerging market index, outperforming in a huge way the s&p 500. the same thing for the russell 2000. it seems shocking that they are not selling off more. but the answer may lie in this chart, because e.m. has been underperforming for some time. index, the e.m. equity

the s&p 500. the s&p 500 stuck in the middle. e.m. for quite some time had been nicely higher on the year. there were liquidity issues with china. the s&p 500 as well. e.m. has been right around even for some time. ahead for thelook broader equity markets, renita. gold, whichlook at is extending earlier games, as investors worry about trade and the fed, they piled into the safe haven along with others. jay powell said the economy faced significant risks. that bolstered expectations that the central bank will cut interest rates further. gold rose after china announced plans to impose additional tariffs.

gold has been steadily increasing during the year and breaking far past that $1500 an ounce level. caroline: thank you. and mike regan, i want to start with you. i'm interested in the companies. we were hearing from george. you've got to know your companies. you've got to be sure about where your risk is area how hard is it when you get individual companies being called out in certain tweets? we had companies being singled out because of deliveries in china. do you expect certain companies to respond to this? expect somek we can response from fedex and ups on how they can accomplish that if they are legally obligated to accomplish what the president wants. the big issue is, there is not

necessarily complete transparency when it comes to what companies' costs are derived from china. we have data on sales, but the cost is murky. it is not universally reported and catalogued. it gets tricky. as the sort of bellwether, usual suspects. tech hardware and semiconductors especially. that makes a lot of sense. cost and sales are heavily dependent on china. caroline: george, does this sort of drive more investors out of u.s. equities and into equities elsewhere? we saw the relative outperformance of e.m. stocks. we've seen pretty significant outperformance of non-u.s. stocks versus u.s. stocks. george: i don't think the trade

issues specifically are doing much to drive large flows. for instance, indian these as opposed to the u.s. , if wely speaking, e.m. are seeing a global growth uptick, you would expect e.m. to outperform. we have seen tentative signs of that. we've been looking for that for quite a while and have been disappointed, so maybe this isn't the point where things start to outperform, but in terms of relative performance, the trade war stuff is going to have lots of idiosyncratic impacts on specific companies, but in terms of the aggregate asset cost level, e.m. is going to be much more driven by the sentiment around the global economy and the asset class. i don't think the trade war

stuff is going to make the u.s. market less attractive, although that may be true in individual basis. renita: full of that information when it comes to the dollar. -- muhammad ali area cap saying don't phase the dollar out. do you agree? george: i don't agree that there's no reason the dollar should weaken. it is dependent on global risk sentiment. if you look at the cross currency interest rate differentials, even compared to other emerging markets, those are relatively tight. the dollar carries a lot more interest relative to other economies than it has in recent history. that said, everyone knows this. the difference between u.s.

monetary policy and the rest of the world has been a trend for basically since 2013. i disagree that there's no outlook for a weaker dollar. if you think the fed is going to that the global economy , then iing to worsen think you can make a good case that the dollar is not attractive relative to other currencies right now, and that is driven by risk sentiment and positioning as opposed to some sort of interest rate differential. one of the other key eye wasthat caught my related to the dollar's dominance. mark carney putting a pretty radical proposal out there for a bank issued cryptocurrency to

take on the strength or the dominance of the u.s. dollar. did you get your head around that at all and mark -- at all? george: i haven't read anything that carney said today. i will say that in terms of a global multilateral currency unit, that is not a new idea. not,er carney is right or i wouldn't describe it as some revolutionary new idea. i would agree that moving away singlestrictly national nation currency system, which is basically what we've been doing with the u.s. dollar since the 1980's, would have some benefits. the problem is that it requires multilateral commitment from everyone involved. other emerging market currencies.

and it involves giving up some sovereignty in different ways. as we've seen with the euro zone, that can create political headwinds. if you think of the political environment, it is hard to imagine a political environment where giving up national sovereignty is less compelling than it is right now. i don't know about the details, but as a general concept, it is not new and i can't see it going far. romaine: george, always great to get your insight. joining us from north carolina. and thanks to bloomberg's michael regan in new york. that does it for the closing bell. "what'd you miss?" is up next. we have much more on the closing bell and the view from jackson hole. ♪

caroline: live from bloomberg's world headquarters in new york, i'm caroline hyde. romaine: i'm romaine bostick. >> and i'm taylor riggs. caroline: the markets sold off hard today. romaine: "what'd you miss?" caroline: the escalation in the trade war, concerns for global growth. centralnsions rising as bankers gather in jackson hole. fed chair powell warning of significant risks. bids send shares to fresh lows. the ceo defends the deal. last on the from

u.s. china trade war. tariffs ratcheted up just as the federal reserve gathers for their annual conference in jackson hole. here's what they had to say about the latest developments. this trade war is triggering other actions around the world, other countries thinking about reevaluating their trade relationships. >> trade uncertainty is with us. express as leaders fair amount of uncertainty and concern about knowing where export markets are going and what their opportunities are going to be. >> we have to keep monitoring whether firms are going to keep reacting the way they have, whether it will spill into their hiring plans as well. caroline: let's get even more up-to-date reaction from michael mckee. mike, how has the response been

to china acting on new tariffs and the reaction and the response we await from president trump? mike: everybody is waiting to see what the president wants to do next, but his tweets did not go over well here. many people thought he crossed the line by comparing jay powell to xi jinping. there's also a feeling that this is donald trump, it is what he does, and maybe it is best to ignore the whole thing. specific comments came from stanley fischer, who said the trouble is not in the international monetary financial system. it is in the president of the united states. things are getting worse day-to-day and it is the behavior of the united states that is causing problems around the world, which is kind of the general view of many participants around here. caroline: mike, i don't know if

you can see this chart, but basically what we are looking at is what i would call extreme correlation between the manufacturing index and the five-year breakevens, both of which are falling. i loved your interview with jim theard, really highlighting inflation expectations going forward. tweeting, bring us back to u.s. economics. what are the views on cutting rate? basically, jay powell set up a framework for the fed considering what to do about the trade war's and the impact on the economy that didn't really include inflation. for people like jim bullard, it does. decline are seeing is a in inflation expectations in part because the neutral rate has fallen and that has pulled

down the fed funds rate, the effective rate. that is still above the overall yield curve. that gives the fed less room to work. problem for them going forward. did they give you any insight as to what other tools they might use other than rate cuts? ake: no, that is still discussion for another day. it is something that does get talked about here. is doing its review of its monetary policy framework. that is being discussed more in the abstract. they do have some room to cut rates. that is goingd, to be their primary tool. probably wouldn't see extraordinary policy unless we

get into a recession. caroline: mike mckee, great job at jackson hole for us. thank you. rounding up the trade war, president trump bear down on china in a series of tweets after retaliatory tariffs. writing in part, our country has lost trillions of dollars with china. they've stolen our intellectual property and they want to continue. i won't let that happen. i will be responding this afternoon. this is a great opportunity for the united states. let's welcome in a university professor of economics and a senior fellow. wonderful to have you with us. he says the u.s. can do without china. can it? >> yes, the u.s. can do without china. the question is at what cost. there will be a big cost of decoupling. the rest of the world will not

decouple. romaine: mary, it looks like this decoupling is going to happen unless the president has some remarkable turnaround in his outlook. i'm just wondering, when you look at it from the perspective of other nations, what opportunities exist for them? >> clearly we already have seen brazil being able to sell a lot of soybeans to china with the u.s. being blocked from sales there. we are going to see it on products that are already subject to tariffs and that opens up opportunities for europe or japan. other companies in crude oil and perhaps fruits and nuts. that opens up export opportunities for our competitors. taylor: i wonder who still needs the deal more. we thought it was china.

their economy was weakening more than the u.s. the timing of china's let yuri -- retaliatory tariffs made me think that china felt like they were in a position of strength. who needs this deal more? >> frankly i think both economies need a deal. the rest of the world would benefit by the two countries coming to an agreement. i think china is having a difficult time. wondering when is the slow down going to come, so we could clearly do well with an agreement. i'm not convinced that decoupling will come in the sense that american multinationals will not decouple from china. they have to compete with businesses around the world which won't face higher costs.

talking of the global markets, the beneficiaries, if there have been any, seem to have been vietnam, maybe even singapore. do you expect that change to continue? itself see china hurt with its manufacturing power when it comes to u.s. companies importing? >> we are seeing some manufacturing firms move out of china. firms are also finding that other countries like vietnam are not as well equipped to deal with manufacturing and the cost are higher than they expected. these supply chains were created over a period of 25 years. do,s going to be hard to especially as you get into products, where the tolerance is much lower, including things like medical devices and

electronics. there is a limit. we've already seen companies like icicle manufacturers move some assembly out of china to sell only to the u.s. market. we are seeing the creation of a fortress america with higher prices for products that people in other parts of the world don't have to face. romaine: the large corporations can kind of adjust to this, but a lot of the forces we are dealing with in the u.s., these aren't unique to the political system here. we are seeing this rhetoric out of politicians in south america, europe, and asia. do you not see a fundamental shift in global trade? i see fundamental shift toward countries' attitudes toward china. but we don't see any other

countries taking the steps we are. they would rather band together and try to work through the wto. i see them preferring to take a different route. we are seeing the importance of u.s. leadership. we are seeing increasing trade conflicts. is the u.s. leadership important in the global economy? i think we are seeing that the answer is yes. we are seeing what happens when the u.s. fails to lead. taylor: thank you. that was mary from syracuse university. coming up, much more on today's market news as the trade tensions escalated. s&p having one of its worst weeks this month. this is bloomberg. ♪

romaine: the s&p 500 closing lower for a fourth straight week. let's talk about what happened today and why. dave wilson joining us right now with another great tie and hopefully a little comic relief to break the tension. was there anything positive today? >> i suppose boeing was up. the only company on the dow jones that rose. that is a positive. people getting more optimistic about when the 737 max 8 gets back in service. beyond that, it is a pretty broad-based decline. act,u kind of take a step and you look at smaller company indexes like the russell 2000, they are a bull market going back to 2009. you had a drop of more than 20%

in the likes of the russell. the s&p 500 has been hanging in there. to see this kind of weakness now is not entirely a surprise. thisr: we should point out is what we are looking at. the russell 2000 relative to the s&p. almost getting there. as you said, after 2018 wiping out a lot of that outperformance. you've also been looking at the fundamentals and gauging sentiment from ceo's. we've talked about third-quarter earnings and expectations for growth on the bottom line starting to go down. looking at -2.4%. is this trade related? >> that has come down. the latest numbers, you are talking 2.9%. the trade issues, they just

raise the question of other it is going to be worse than that. going intoe negative the reporting seasons, but companies were able to dig their way out. the question becomes now, is that going to change in a meaningful way? more to raise cost for companies? these are the sort of issues that come front and center as the dialogue gets ratcheted up. taylor: thank you. that was bloomberg's dave wilson. $4.8 billion. why the company is dropping costs and analysts weighing the prospects. this is bloomberg. ♪ from the couldn't be prouders

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withm mark crumpton bloomberg's word news. there are major developments in the trade war between the united states and china. president trump has ordered all american companies with operations in china to begin looking for alternatives. his tweets were response to news from beijing that it will impose tariffs on american goods. mr. trump is also ordering fedex, amazon, ups and the u.s. postal service to begin searching for fentanyl in all packages from china. in hong kong, protests are gearing up. thousands tried to form a human

chain across the city. the protests originally were about extradition to china. now they have broadened into a wider movement. supreme court justice ruth bader ginsburg has been undergoing treatment for cancer. she's completed radiation therapy for a malignant tumor on her pancreas and there's no evidence of the disease remaining. no further treatment is needed at this time. justice ginsburg has had several bouts with cancer. in 2018, she had surgery for cancer in her left lung. under increasing international pressure to contain fires devastating the eva's on, the brazilian president said today he might send the military to battle the massive blazes. ofnce accused the president

-- with efforts to deal with climate and biodiversity. france is threatening to block a european union trade deal with several south american states. ireland joined in that threat. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. taylor: breaking news out of qualcomm. they are getting a stay of injunction in the case from the appeals court. they will not have to renegotiate their licenses, pending appeal that they are maintaining status quo. according to the appeals court, qualcomm saying they raised serious questions on the court ruling. looks like qualcomm will not have to renegotiate licenses while it is appealing this

antitrust ruling from the u.s. ftc. that the interim cfo will be retiring. cfo anded the interim are continuing to search for a permanent cfo. we will bring you the headlines as they develop. caroline: trade uncertainty may loom large, but some companies are still willing to flash the cash. are announcing it will buy carbon black as it seeks to expand its reach. however, investors are not holy convinced. shares are down today. let's get the inside track now with vmware ceo pat gelsinger. i'm interested because some of the analysts have written large but not transformative deal,

likely better uses of capital, execution risk. why are you convinced this is going to help your revenue and your ability to service your cloud and security clients? >> thank you, caroline. let's look at both deals. on the cybersecurity side, with carbon black, we believe the security industry is broken. too many products, too many companies in that industry. what customers want is more security. we are going to deliver a end and this is where carbon black helps us. we are going to leverage technology across the platform. we believe we have an opportunity to be a disruptor and consolidator and this is a perpetual top priority.

the pivotal -- go ahead -- on the pivotal side, the number one thing we see in digital transformation is, can i build ,nd deliver a great experience and the pivotal technology complemented what vmware was doing. we believe we are uniquely positioned to leverage this asor transition and it is significant as cloud and java and we are going to deliver a full environment to enable our customers' digital transformation. we are quite excited about both and are moving forward in this way. i wanted to take that opportunity to tell the story to our 20,000 plus assembled in san francisco. romaine: i don't understand how pivotal and carbon black fit in

together. some of the concerns being raised are just about the amount of acquisitions and the money being spent on acquisitions. when you look at the current debt load and cash position, do you think the return on this investment is going to make up for some of those concerns? >> we are positive on that. we are spending a little less than $5 billion. if you look at multiples, this is a steel in comparison to what is being position with other companies. a billion dollars of revenue feels pretty good. we are also confident in our ability to accelerate these businesses and turn them profitable and they fit in our strategy now that we can build, run, manage, protect, and connect applications.

turn thesewe can profitable and make it great for our customers and shareholders very rapidly. taylor: do these two deals sort of bring you up to speed with transition to the newer tech generation and give you the size and scale you need to take on competitors or do you feel like there are deals on the horizon that you need to compete in this space? >> i sort of take it in the last chapter, laying out a comprehensive strategy. this was ushered in by our major amazon partnership. we announced a partnership as well with microsoft and google. positioned in a multi-cloud world. that piece of our strategy is now well underway. we believe these acquisitions fill out the next phase of our strategy.

it really is building on what we've done the last couple years. i think this is the center of our strategy. we will be doing some other acquisitions, but we think these are the core assets we need to effectively grow in this next chapter of vmware. caroline: let's talk about the next chapter. how solid is this investment? how worried are you about the macroenvironment considering the tensions between china and the united states? >> in our q1 earnings call, i commented on the macroenvironment, and this was maybe a little bit startling. reputationn a good on visibility into the future. optimistic that we are seeing a stabilization. we actually grew in china.

strong execution in the americas. we do believe that technology is in this raise where it is a digital transformation for every business. it used to be that if the business got a cold, tech got the flu. now tech is transforming the business. wherever gdp is, tech is higher. well-placed software companies are going to be better than that. businesseing very good into the future. we reaffirmed our guidance yesterday. romaine: real quick, the trade war, all the impact with regards to china, how is that affecting your business? >> i think everybody should be pausing and thinking about this carefully. twore increasingly seeing a

trading block world. both of those will be putting pressure on suppliers and on the supply chain to align against those trading blocs. i don't think giving these supply chain issues, this is not going to change overnight. this is a long-term restructuring. i think every business needs to say, how do i participate in those trading blocs? i think every ceo is working on figuring that out. china?we participate in we are firmly committed to that market. but increasingly, we have to say, how do we participate in the non-china trading blocs? we need to be part of how every company thinks about their strategy. even as we have to adjust near-term decisions. romaine: interesting times for

the industry as a whole. we are glad that you took time to be with us. coming up, we are going to hear from the dallas fed president, who shares his thoughts on whether a rate cut will stave off economic slowdown. this is bloomberg. ♪

dominatedhe fed discussions out of jackson hole today. jay powell big announced reinforcing bets by the markets for another rate cut next month. not all fed presidents are so convinced. robert kaplan sat down with mike mckee and said he doesn't believe monetary policy will solve the problems facing the

u.s. economy. robert: i talked to businesses today. about,e said something availability, cost, and capital is not my problem. you guys are not my problem. my problem is trade uncertainty and other issues related to that. here's the issue. if you look out over the horizon and the job of a central banker is not to look at what the situation is today, but what it is going to be, if the policy-setting is too tight, then eventually you are going to see credit tighten. you will see that ultimately tighten financial conditions which will impact the economy. i think my job is to look ahead and balance these risks and try to make risk management decisions so the policy is more appropriate. if it is too tight, it may seem

innocuous, but i think that will lead to a tightening of financial conditions down the road. searchre you a hammer in of a nail here? people expect that fed rate cuts -- it is not going to do that? robert: quite the contrary. i've been very vocal in saying the fulcrum or the center of gravity is u.s. monetary policy. , integrationinty policy to some extent. infrastructure spending. trade policy and immigration policy. that is the center of gravity in u.s. economic policy. it is not that monetary policy doesn't have a role to play, but it is not the fulcrum of economic policy. i don't believe monetary policy

is causing -- if we have a slow down, i don't think it is causing the slowdown, and i don't think monetary policy is going to be enough to arrest it either, but it still has a role to play and we have to make decisions about it. mike: you probably know more about wall street than anybody else on the fed. do you worry that by cutting rates you are going to encourage financial mess allocations? worry, and always this is one of the reasons i said even though i'm open to an prefer not to have to make any adjustment, because if you lower the fed funds rate, it reduces the rate for savers. it encourages risk-taking. i will also acknowledge, if you look along the whole treasury

curve, to some extent that horse has left the barn. for investors, your fixed income alternatives have already declined substantially. extent thesome incentive to increase debt or leverage, that is already there because the treasury curve is where most businesses borrow. use the treasury curve. i'm balancing that and i'm concerned about it, but i think foremost in my mind right now is, can we take steps that will or help with this that couldslowing seep into the rest of the economy? those are the issues i'm trying to balance. taylor: that was dallas fed

president robert kaplan with bloomberg's mike mckee. for more, i want to bring in peter. regan and mike, let me start with you. stocks,alking about the the chipmakers. perhaps not only is it a gauge of sentiment, but also some concern over that tweet, the president saying, i'm ordering people to move operations. we know it is not that simple. is that why we are seeing so much of the tech sector in a selloff? it is not clear the president has any power to order a company to do something like that, but he said, i'm going to announce my plans later today, and people are left wondering what his plan was.

would it be some kind of executive order to force these companies to stop doing business with china? that is almost impossible to do in the near term. bust cycles boom and where there's a lot of optimism scenario 5g, but this puts a monkey wrench to that. i think that is why we are seeing these massive selloffs and really big rebounds, because people want to be optimistic, they are just not sure how it is going to play out. romaine: we've been talking about the strength of the u.s. economy. the business confidence isn't there. the manufacturing data isn't there. a lot of this has to do with whether they get any clarity as to what are the rules, the parameters. >> i wonder how much consumers

are locked in on what is happening with this trade war. romaine: they are all downloading taylor swift's new album. >> you might see it when prices start to go up, but that is the hard thing to figure out. why would a price go up? if they are watching our tv show, they are probably getting a little worried. romaine: we are the number one rated show. taylor: on this channel. , the onlyoynihan said thing we have to fear about a recession is the fear of recession. i think there's something to that, which is an argument in favor of the fed taking more drastic action than would necessarily be called for. but if you are trying to get this talk about inversion of the yield curve off the table and get the talk of the fed off the table, the best way would be to

cut in september and probably get a big relief rally that might overcome the fears of trump stepping up the trade war. caroline: what of the inverted yield curve? we are back in negative when we are looking at the 210. how much was that plaguing people's focus today? >> everyone's got their favorite part of the curve, where they think is the most predictive. the 210 kind of keeps dipping into inverted territory. it has been inverted for months now since march. i don't think the curve itself is going to cause a recession, but the more this trade tension plays out, people have been

looking at the curve and the data as fleeting, just until we get through the trade negotiations. but the longer this goes on and the worse it gets, that is what is going to cause a recession. taylor: no one knows inflation like you do. we started off the conversation talking to kaplan and bullard, talking about low inflation expectations. quickly here, what is the take tweets, theom the lack of inflation going forward? >> some people say that if the fed was trying to make a clear message about why it cut in july, instead of the elaborate message, they should have said, we haven't reached our inflation target. we keep falling short. if you want to tell the market you are determined to get the breakevens up, the best way is

to do something pretty impressive that would make people think inflation could be on the way. caroline: like tariffs? >> that is not how you want to do it. caroline: nevertheless, we thank you for spending your time on a friday night. from new york, this is bloomberg. ♪

taylor: let's get a quick check of the headlines. google has posted new internal rules that discourage employees from debating politics. guidelines tell employees to not have disruptive conversations and warns workers they will be held responsible for whatever they say at the office. amazon is moving to bolster its presence in retail markets. the company struck a deal that gives it the right to buy a stake in india's future

retailer. amazon has been in the battle with walmart. walmart spent $16 billion to acquire a retailer. it is the battle of the burgers. nestle is tweaking the recipe of its legendary -- its vegetarian patty. the burgers will be juicier and have more of a grilled flavor. that is your business flash update. caroline: where do we go from that? i'm looking forward to those incredible burgers. donald trump and boris johnson are among the leaders set to meet in france on saturday. taylor: and i'll be watching speeches from the fed presidents on wednesday and thursday. romaine: and on friday, look out for policy decision from the bank of korea. bloomberg technology is coming up next in the u.s. taylor: have a great evening.

this is bloomberg. ♪

i am emily chang in san francisco. trade tensions tighten. china retaliates by vowing to slash tariffs and president trump signals that he's prepared to escalate. we will tell you about u.s. tech stocks taking a hit. plus, vmware has agreed to buy carbon black and pivotal in the la