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tv   Bloomberg Surveillance  Bloomberg  September 9, 2019 4:00am-7:00am EDT

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exceed, boris johnson will press for an election today. the city suffers another weekend of violent tests. the extradition bill does little to stem the situation. pilots go on strike. hitcost of the iag could $100 million. good morning and good afternoon. welcome to "bloomberg surveillance."
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i am francine lacqua here. first to the markets because there is a lot going on. we are covering brexit. it is not only about brexit. there is a lot going on in the wider market. i am looking at oil. the implication of the saudi arabia oil market, because the king will meet the minister for oil and petroleum. we will see what impact that has on their policy going forward. 6.92 for oil. you can see the index unchanged. chiefiller speaks to the executive at the herbert motor show. about brexiteaking with lord adonis soon. said the prime minister plans to defy legislation requiring him to ask eu for brexit delay.
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that comes after the resignation -- why she couldn't stay on. >> i supported boris johnson and his approach and i was right to do that. the consequences now, one senior .olleagues expelled this made my position untenable. francine: joining us now is andrew adonis. roles in thes labor government. lord adonis, thank you for coming on. we are back to two years ago where there is a multiple of options. what is the chance of a deal right now? drew & co. we go round and round in circles and come back to the same -- brexit has been happening imminently. looks like it is happening in the medium. what happened in parliament is important.
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parliament required the government to negotiate for further extension. whose members said to her die. he has to obey the law. havetory of the weekend threatened to resigned if boris johnson wouldn't give a clear commitment to uphold the law. even in the situation we are in, the idea of a british government breaking the law and the government and self being taken to the supreme court -- it self being taken to the supreme court is unthinkable. out.al, parliament is relentlessly but very painfully, we are moving forward to an election or referendum which i think will be the end of brexit. francine: is a boris johnson the person who will ask for an
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extension? drew code it is possible he will resign. boris johnson is not the type to resign. what will happen is he will do the extension with a massive amount of gusto. he is not going to take his case to the people and we will move to a referendum. francine: i have seen the photograph of boris johnson handing that photograph -- it will be more difficult for him to win the election. andrew: boris johnson will not be handing over the letter. he has a huge problem. he himself said do or die. it is basically suffered a massive defeat. the reason why he suspended parliament. parliament is being suspended for five weeks. he hoped the suspension would kick into soon -- kick in too
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soon. them wouldn't be time for to get together and pass this law banning no deal. boris johnson will have to obey it. francine: if we have elections, we have had various polls. i don't know if they are unreliable. how do you see it going? is thatwhat we do know boris johnson is on the back foot. he also has nigel faraj and the brexit party which is constantly pushing him toward a radical form of brexit. his problem with his base, my party, the labour party, we can only afford to be blunt if you have the liberals and agreements . we are increasingly united because as the urgent threat of , there's a good
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chance you will end up with an early election. my best judgment is the remain alliance will when -- will win. people are horrified the impact of no deal. would be the figurehead? is it jeremy corbyn? said,: what they have they would want to negotiate with jeremy corbyn and the labour party on the program which is reasonable. the first item in that program would have to be a referendum with an option to remain. if jeremy corbyn is clear. he hasn't been completely clear because he thinks a labor government will seek a different form of brexit. he is getting there.
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he will have to give firm undertaking that the first act will be referendum with an option to remain with the government itself will campaign to remain. francine: you think there's a 99% chance of extension. not want toeu does take responsibility for brexit which would happen if they didn't give us an extension. angela merkel looks on with amazement. nonetheless, she has been responsible and recognize if the eu puts conditions on an extension or deny it, they would be taking responsibility for brexit and that is not something that would look out badly on the eu but he would have stronger implications for ireland. that has been one of the biggest problems of brexit. i'm sure the eu will behave
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responsibly. now we need the british government to behave responsibly. francine: we have to come back. andrew adonis joining us from westminster. we have plenty more coverage on brexit. will have coverage of the violent protests over the weekend and hong kong. that is where we go to live next. this is bloomberg. ♪
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francine: economics, finance, politics. this is bloomberg surveillance. we have plenty going on here it covering brexit and all sorts of stories. let's get to the bloomberg first word news. here is viviana hurtado. viviana: china is cutting the
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amount of cash that can banks can hold -- that banks can hold since 2007. the move coming as china's exports unexpectedly contracted in august dropping 1% in dollars terms. shipment to the u.s. plunged from a year earlier pit saudi arabia has installed one of his sons as energy minister. prince abdulaziz is an older half-brother of the crown prince. he takes over after the removal over the weekend. the uae's entertainment minister -- could change as a result. >> i don't think there will be changes. i think with the personality that i know of the prince, he is very decisive.
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he has a strong personality when it comes to the market. viviana: british airways canceled hundreds of strikes -- hundreds of flights. it has canceled almost most of its daily flights today and tomorrow. the disruption will affect heathrow and gatwick. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. viviana, the hong kong government has condemned groups afterdical protests" protests with police. they set fires in the streets. earlier, tens of thousands marched to u.s. consulate. joining us now is our hong kong
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bureau chief. how untenable is the situation? >> you are right. over the weekend we did see some vandalism. there was a fire, pretty dramatic, at the entrance of one of the businesses here. teargas to disperse the protesters. even with the concession made by carrie lam last week, things still have not quieted down. the protests was about appealing to donald trump. francine: how much is this data hurting hong kong's economy? the more violent these protests are, the more it will push china to intervene. >> we are seeing morgan numbers coming in.
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the financial secretary said numbers --he tourist number has dropped by 40% in august. this is the number we are looking at. shopkeepers. they are not seeing a lot of business so that is making an economic impact. as far as china intervention, i think it is clear they are looking to separate the more peaceful demonstrators from the more radical ones. we can see from the last press conference they held. much.ne: thank you so joining us for the rest of the hour, the senior economist.
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[no audio] the first effort being directed stimulus measures could impact this year that are not working well to lift china demand as they did in 2015. this year expect more heavy hunters. you leverage it, you finance it. the next time or the third time we get the slowdown, it might be a big issue. francine: what kind of stimulus? is it going to be something else? >> that is on the credit side and the monetary side. francine: does it change their ability to shift the economy to
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be more consumer led? >> creates a temporary hiatus. more valuedeeds is you on. uan.ore valued y yuan devaluation would help. then you could spout -- spend the fiscal moneys on stimulating the side of the economy that you want to promote. the problem is the trade in china and the u.s. comes at a very bad time. it is very hard to devalue the yuan in this context. francine: when you look at some of the shocks out there that could impact the economy, what are your top three? is it u.s.-china? is it brexit? about theworry uncertainty coming from the u.s.-china trade war. i am worried about brexit. then i worry about all the
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smaller geopolitical events taking place in hong kong, and kashmir. these things create uncertainty and it makes markets nervous. the hong kong issue comes at a very bad time for china, in the sense, the communist party taking over. it is not about economics. geopolitical.re hong kong is a democracy. it is looking for the u.s. to back it. francine: do we think president trump wants a deal with china or no? kallum: i think we should get used to it. it is the question of how we get
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used to it as we go forward. in 2016, donald trump said i will go after china and i will do trade war's. trade wars. this is an effective policy to contain the rise of china. if we get the deal for soybeans, markets will relax a little bit. for the future we will see a less friendly atmosphere between the u.s. and china. pickering,allum thank you so much we talk about ecb. mario draghi is looking to go out with a bang. we will discuss what we can expect with this meeting. this is bloomberg. ♪
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francine: -- >> negative rates have a lot of reasons -- we need to talk for a longer time to get into all of the clove velti of that. the banks aren't happy about that. on the other side, the central banks are independent. it is something we have to respect. germany has built through the and certain policy has the power to react. at the moment, we see about that
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having not come yet. has swunghe pendulum a bit too far both in terms of restrictions placed on private individuals to invest into capital markets and on a lot of these secondary markets. we do not have internal markets yet and that is the great insufficiency that we have. we will talk about the negative growth implications for that. that is a big topic. francine: was the germany -- german deputy finance minister. let's focus in on germany. from kukies.g he was talk about fiscal spending, too early to talk about it. we all know that.
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we talked about negative rates. is germany the problem child i wouldn'tandrew: say germany is a problem child. what it has is the biggest .xport sector around about 40% so when you have the single downturn, germany looks exposed. when you have a cyclical upturn, germany looks good. now you have -- the domestic side of the economy is ok. stimulus toiscal stimulate gdp, what you are stimulating is the domestic side and you are offsetting the softness in the external side. there is a largely global phenomenon. they -- if you don't
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do any fiscal spending, i am going to go after you and put tariffs on your cars. shouldn't that be incentive? kallum: germany and the eu will feel -- will feel big enough to stand up to donald trump. that would be my best case. the one thing about the eu, despite all the internal problems, the one thing where you have some agreement is on trade and the eu believes it is big enough to stand up to donald trump. francine: what would you do with negative rates? is he going to do as much as he can now? that gives her advisor a couple of months. -- we will getve 10 basis points. it is a more credit-demand issue than a credit-supply issue.
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qe.ecb could do is do some that prevents the risky financial markets which originated in the real economy. spreading back into the real economy. the ecb can provide the financial backside. you can expand the balance sheet as much as you can. it is merely a political question whether the ecb is ready to do this? francine: callan pickering stays with us. we talk about saudi and oil. the energy minister is dismissed by the king. leadership shuffle mean for the markets? this is bloomberg. ♪
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francine: if at first you don't
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succeed, boris johnson will press again as the prime minister suffers another resignation. chaos in hong kong. the city suffers another weekend of protests. carrie lam does little to stem the situation. british airways cancels a majority of its flights today and tomorrow. good morning. this is "bloomberg surveillance." i am francine lacqua. your stock movers. some of theing at biggest losers on the stoxx 600. down nearly 3%. earlier in the year we heard they were looking at ipo in their elevator business. looks like that plan has changed . instead the ceo is signaling to private equity companies he would rather sell a minority stake. this is a business -- different business plan. markets not handling that well.
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iag canceling 100% of its flights over the next two days. apparently this is going to take a hit. iag is going to take 180 million pounds. the shares down more than 2%. also down more than 2%, lloyds. -- that also means there suspending thereby back for the rest of the year -- suspending thereby back for the rest of the year. much.ne: thank you so dani burger with your main stock movers. we are getting some u.k. gdp for the month of may to july. looking unchanged and that is something that -- i think it is a revision. we need to have a look at what exactly that means. 0.1% increase.s
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does one have to do with some of the bank holidays? pound is moving on the back 122.95.little bit, let's get to bloomberg first word news. viviana: today u.k. prime minister orson johnson goes to dublin irish counterparts. he moves ahead with his hard-line brexit strategy. he risk being taken to court and threat of more resignations. amber rudd put the cabinet with a ferocious attack on the government. she says it is no longer serious about a deal with ua -- with eu. -- despite an apparent agreement unless months g7 summit, a senior trumpet official confirmed the probe examined its effect on u.s. companies including facebook and amazon. french wine is among goods which
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could be hit by retaliatory american tariffs. landfall near tokyo. about 900,000 homes lost power. theside is the season for 15th typhoon. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine. francine: think is so much. saudi arabia's chief solomon -- putting royal family member in charge for the first time. prince abdulaziz named one of the top industry officials -- he takes over after the removal of been sela over the weekend. does not mean there will be
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change in the oil strategy or lease that is the view of the ues oil minister. minister.'s oil >> we are very happy for the prince. i think we are lucky to have someone with that knowledge of the industry. -- he will be in there for every decision. many of those, especially the corporation agreements between opec and non-opec, he was working with us. think we are getting or who who is not aware is going to be a shock. us, hen who said with would do whatever it takes. do you think or would you know
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the prince going to be more of the same to do whatever it takes? >> i think when it comes to what we decide as ministers, this comes from the leadership of the country. the support that we get from all leadership. it is not just the minister decision to do whatever it takes, it is the country's decision to do whatever it takes to balance the markets. at all think there will be changes. i am not expecting changes. with the personality that i know of the prince abilities, he is very decisive. he has a strong personality when it comes to market and he to allands the benefits , the leadership that it took to balance the market.
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i think it is going to be a continuation of the good work. manus: today you use the phrase whatever is necessary to balance the market. what do you mean by that? are you looking for deeper cuts? >> we need to do more in terms cuts, then wes or will decide and challenge that. debate, this is how the mechanics of it. we will raise recommendations. -- ifthis is a unanimous the ministerial sees that recommendation makes sense, they will take it. francine: for more, manus cranny joins us.
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reporterse of our just managed to speak to the new saturday and esther and says there's no radical change. there can be changes at the margin. francine, do you know how gutted i am. i spent 25 minutes chasing after that minister. there is a whole new level of the quorum. i have to hand it to the bloomberg team for the red-hot headline. this is important because what we want to know whether it is continuity, whether they are going to dig in for deeper cuts. this is not a new man in oil. a man who created a foundation of the leadership with opec plus members. he leads the charge. he made the point last night that the relationship is
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institutional, it is not about the individual. henry ford made that quote which replayed which is it is all about the group than the individual. what we really want to understand is every minister wants to make their mark on policy. go back to the 1980's, talking about rapidly cutting production for saudi arabia. what does that mean for the jam -- jm and see? trying to talk stabilize prices. and then prices with russia. to raisee mission was the price of oil, the objective goal of $85.hat
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that mission still exists which is to raise the price of oil to balance the boost inside saudi arabia. that is the number one objective . or is it? i think the bottom line is there will be a push for compliance. nigeria and iraq have not been brought in terms of compliance with the deal was undertaken by all of the -- compliance is going to be a hot issue. of course the uae, they used the language will do whatever is necessary. we are looking at the data. francine. francine: thank you so much. manus cranny in abu dhabi. know, oil inflation is not as high as it used to be. we are trying to figure out what this means, whether it is internal or has to do with saudi
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a ramp. investor, how we going to change because it actually change the way it goes? kallum: i would make the argument that the last four years the emergence of your shale means the u.s. is the big spring producer. opec or russia made big decisions which could make the oil market that is a longer as strong as the emergence from the u.s.. the oil price around $60 for brett. $10 up or $10 lower. pretty stable prices i don't care that much about price. i care about what is driving the price. if we have a surging oil demand, i don't care about the higher oil prices. it is however we get to political issues.
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oil.have 20% less a global that is a real economic issue. abstract from the price, the supply issue and make the u.s. the big game changer so i don't see any major issue with the global oil outlook. francine: if there's a downturn, do you see it in oil first? followed byill be supply. u.s. shale versus visit oil. it is more expensive to take it out of the ground. impresses.tability i have find it hard to believe we get to the low 20's are the high. 40's.the high one francine: coming up we have plenty more on oil and brexit. boris johnson stands in
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defiance. he is refusing to back down brexit strategy. we discuss that next. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." westminster, there's a lot going on and we do have that news anderence between the irish the u.k. prime minister, boris johnson. they are talking right now and he is saying the brexit story will not end on october 31. he is saying there is no such thing as a clean break.
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happens, the irish table after ahe possible no deal. we are expecting boris johnson to speak in ireland right now. kallum pickering is still with us. issues we are focusing so much on the exit that we haven't thought about the fact that there is no relationship between the eu and the u.k. and what that could look like. we have information back from gdp which looked better than expected. let's head to boris johnson. >> the irish government's priorities in all circumstances, we must protect the piece and also the burgeoning economy. the backstop continues to be a critical component on agreements until alternatives are fanned. we are open to alternatives they
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must be realistic once, completely binding and workable. spokeminister, i know we on the phone already. i know we have a shared desire to see northern ireland institution restored. the good friday agreement was the best example. together andn come -- old foes can come together. i look forward to exploring with repair working we can evolution. all that we hold dear. prime minister, i know that you are an admirer of the great winston churchill, as indeed mi. you have written about him.
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in the middle of the second world war, winston churchill and the army chief of staff made a long and perilous journey across the atlantic from washington biplane. they reached the coast of ireland shortly after 4:00 a.m. and alan brooks description on the first side of ireland is on -- is poetic. i would like to finish by sharing that with you. "out of the darkness, dark patches numeral the horizon which turned out to be the northcoast. we soon struck the coast only visible by moonlight. the pm was as thrilled as i was. when you flewista into dublin was not as -- at a crucial point in our history and the relationship between our two countries. we may sometimes differ but we
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are bonded by our shared past and our shared kinship. i think we have a shared dream, one of peace, freedom and prosperity. i look forward to our discussions today and i invite you to make remarks. >> thank you. it is wonderful to be here in dublin and i thank you for the very warm welcome you have given --in spite of a slightly congratulate the media on braving it as you are. you and i first met a few years ago when we appreciated at the st. patrick's day parade -- procession. occasion.retty joyous of course, within celebrated the contribution of the irish community to london. they are the vast crowds was the living embodiment of one of the
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densest and most intricate and most vital relationships in the world between any two countries. recognize thatth our peoples are the beneficiaries of the efforts of our peter assessor's, politicians who put aside differences and found compromises and who took our circumstancesn that are far tougher than now. of both the u.k. and ireland are not just a peaceful and open border but economic ship which we in the u.k. eat 50% of the beef produced in ireland which is a lot in the very captain of the world cup
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winning english cricket team was born in the city. i believe our job is to take that relationship forward and to build on it. we've got eight u.k.-ireland summit in november. there are all the ways in which the u.k. and ireland work together around the world. with shared values and shared interests, but as you rightly say, before november, there are two tasks that we simply have to do. we must restore the government in northern island and i promise to work with you on our shared objective. and, of course, we must get brexit done. because u.k. must come out on october 31 or else i fear the
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permanent damage will be done in the u.k. to trust in our democratic system. was not at brexit problem that ireland wished for. questionsk there are that we need to resolve, and there are three basic questions that we have to answer. can we ensure that we continue to have -- at the border of goods and people and cattle question mark the answer is yes. as someone who went to the border several times before the good friday agreement and shuttered to see watchtowers on u.k. soil, i can say now as i have said many times before, the u.k. will never to checks at the border. i hope our friends in the you would say the same.
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belfast good the friday agreement and all of its particulars? again i say the answer is yes. we protect the economic unity of the ireland -- the island of ireland and the gains ireland has one through its membership in the singer market? just a market? i believe the answer is yes. we can achieve these things while allowing the u.k. -- from the eu. of course, i acknowledge the complexities involved in the symbolism and the sensitivities evoked by the very concept of a border. politics andy the at the core of each problem, you find a practical issue that can be resolved with energy and the
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spirit of compromise. indeed, the current treating must logically envisage their problems can be solved or be present-- or the protocol would never be called a backstop. i have one message that i want to land with you today and that is that i want to find a deal. i want to get a deal. like you, i have looked carefully at no deal. bothe vested consequences for our country and yours. u.k. could it, the certainly get through it but being no doubt that that outcome would be a failure of state -- which we would all be responsible. and so, for the sake of
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business, of farmers and millions of ordinary people, who are counting on us to use our imaginations to get this done, i want you to know, i would overwhelmingly prefer to find an agreement. our governments have spent three problem.ticating this i think it is time to honor the achievements of our predecessors who have tackled far worse problems by cracking this one ourselves. i will not say we can do it all today. but i do believe that a deal can 31.one by october let's do it together. thank you very much. >> prime minister, we have an opportunity for questions starting with tommy goldman. >> prime minister, my questions to you first.
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you said that you traveled to the border before the good friday agreement. am i correct in suggesting that you have not been there since you were foreign secretary? see the we going to details of the compromise offer you are prepared to make in order to solve this problem between next-door neighbors? a question in relation to the future of northern ireland, it that direct room may be imposed in northern ireland if there's no deal. what would be the stance of the irish government in that situation in keeping with its responsibilities under the good friday agreement and the saint andrews? thank you. >> should i go first?
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i still work with him many years ago in brussels. tommy, i have seen -- i remember the old border. i have the new arrangements -- i have seen the new arrangements. on what we are bringing, the plan, i think it is fairly obviously needs to be done. the landing zone is clear to everybody. we need to find a way of ensuring that the u.k. is not kept locked in the backstop arrangement, so there is a way whilst givingk. ireland the insurances that it needs. there are two broad areas where progress can be made and they facilitation's that people have been talking about for a long time.
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there's a lot that can be done there. there is another area which is the concept of the unity of the island of ireland, in other words for foods. if you can do both of those things, you can get all the way through the problem, they are still issues to be resolved. there are other ideas we will be bringing forward to address the full range of complexity involved. i don't underestimate the difficulties that we face. the technical problems and the political ones. all i am saying to you today is i do think there is a way through that can satisfy the needs of irish business and farmers and everybody in this country, but also ensure that the u.k. is able to respect the democratic missions of the whole
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united kingdom. the --t fully that remains brussels and that is very important. want7th will continue to to have a shared position and we respect that. we want to be discussing very sincerely with our irish friends how we can jointly make progress because as i have been traveling around the eu and talking with other eu members, how are you getting on with your irish friends having made some progress there? it is incumbent on us as the u.k. to talk first to ireland. wille irish government host the reintroduction direct real were that happen.
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we consider it to be contrary to the agreement. we recognize that the u.k. is a sovereign government in northern ireland. if that were to happen, we would in the see institutions good friday agreement used in full effect, particularly the government to give us an opportunity to have a consultant role when it comes to decisions being made in northern ireland in that scenario recognizing there's so many citizens of ireland in northern ireland and the need to have a cross community element. >> prime minister, next question . >> question for boris johnson. parliament has been blocking your general election and it has -- how can you
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convince the irish prime minister that you have the power to get anything through parliament when the numbers are stacked against you? pres. trump: what i think --pm johnson: what i think anyone can see is that brexit negotiations have been going on for far too long. they want it done, and that is what i want done. 31,ill come out on october and i'm sure parliamentarians that andus doing honoring the referendum result, the democratic referendum result. undaunted byy whatever may take place in parliament. i think what the british people want us to do is to deliver a deal, and to get on and take a side on october 31. that's why i'm so glad to be
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here in dublin. i look forward to some constructive conversations in the next few minutes. i want to manage down expectations here. i don't think we are necessarily going to have a complete breakthrough here this morning. not today. but we are going to work at this. i think that is what the people of the u.k. would want us to do. to kevinxt question is doyle of the irish independent. >> you suggested nothing of substance has been brought to the table in recent weeks. is today the start of serious negotiations on alternatives to the backstop? what would it take to convince eu member states that they could put this off until january or into the new year? prime minister, when you talk about people being found dead in ditches, there's a sense in this country that you really don't understand what's at stake here.
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when is the last time you did actually go to the border? have you crossed the open border , like ministers from 12 eu countries have? do you still think it is like crossing from camden to islington? given you've lost your majority beparliament, will you browsing the dup like theresa may was? --mr.nson: i'm very varadkar: i think brexit has dominated british and irish politics for far too long now. i think there is an opportunity for us to see where there might be common ground, where there are still differences, and where we can work together with the european union and the commission on finding a solution. if it comes to a request for an extension, think the vast majority of countries around the table would prefer that there not be an extension.
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we would like to see this dealt with. if the u.k. is leaving, it should leave on october 31. but as the president of the commission has said, if there is a good reason to have an extension, we would consider it. but i think we would all prefer to have it resolved in october so that the u.k. can leave the european union so that we can continue with our to domestic priorities here in the european union can focus in all the other issues that we want to deal with , but because of brexit, the time to deal with those has been lost. pm johnson: that is exactly right, in my view. we've got to get on and do this. yes, of course, i think everybody in the u.k. and in ireland understands the fantastic political importance and sensitivity of the border. that is why we make our unilateral declarations under no circumstances will there be any
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checks at that border imposed by the u.k.. that will never happen. we must ensure that there is an and border, and that goods people can circulate in the normal way. we must also simultaneously allow the u.k.'s democratic decision to be honored, and that is the question that has bedeviled the talks over the last three years. i genuinely think it can be done. i think there is a way forward. i'm delighted that it is being approached in a very positive way by governments around the eu, but particularly here in dublin. >> final question is to carl tv.m i >> we just heard that the irish have received no new proposals from you. do you have something in your pocket to offer, and if you are
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talking about the all ireland zone for food and agriculture, doesn't that end up creating the kind of border in the irish state that the dup simply will not accept? and if i may, isn't it still the truth that as october 31 draws near, no backstop would still be better for ireland than no deal? all, there first of are an abundance of proposals that we have come a but i just don't think, if i may say so, it is entirely reasonable to share them with you today. ideas for producing our friends and partners, not least here in dublin, about how to take this way forward. i've indicated the areas in which we think progress needs to be made, and i think also progress will need to be made on the political declaration, as well as the body in the text of the current withdrawal treaty.
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doubt that we have the time to do it, and we are going to address this very enthusiastically. i think we have the ideal amount of time in which to get this kind of thing done. angela merkel said it should be 30 days. it would go on for 30 years. 30 days ought to be enough, she said, and i think she is totally right. if we really focus, i think we can make a huge amount of progress. >> in the absence of a great alternative arrangement, no backstop is no deal for us. all it does is kick the can down the road for another 14 months, on other 14 months of uncertainty for business, of uncertainty for people south of the border, so that is not an
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option we find attractive at all. >> thank you very much. that is all we have time for today. thank you. mr. varadkar: thanks everyone. pm johnson: thank you. francine:francine: the leaders f the u.k. and ireland talking about the backstop and brexit. boris johnson saying the u.k. must come out of the eu october 31. this is "bloomberg surveillance ." i'm francine lacqua, outside westminster in london. tom keene in new york. we saw a little bit of movement on pound. boris johnson saying that he wants a deal. this has been questioned, especially in the last couple of days, with high-profile resignations. the one used about half an hour ago, gdp a little better than expected. tom: it was an eventful week at westminster.
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i assume you will be planted there all week as well with our good brexit team. you really wonder how prime minister johnson fares one week from today. it will be a different world for the prime minister. francine: it certainly will. joining us now is anna edwards and david merritt. thank you both for joining us. let's kick it off with you, anna. this is the last day parliament sits, and then gets prorogued. is a vote tonight on whether a general election will be allowed. it seems it will not go the government's way. but he will certainly have a lot to think about during prorogation because he doesn't have a general election campaign to embark on, but we have seen him in full election year -- electioneering mode, haven't week? no deal would be "a failure of
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statecraft," he said, so that would reflect badly on him. you have to wonder whether the future here is some kind of all ireland deal which was countered by theresa may. it is not something the dup wants to see, but boris johnson has already lost his majority, so you might not be as worried about what the dup has to say. francine: when you look at the risk of a no deal brexit come of the house of commons, house of lords are doing everything they can to stop it, but there are questions and hence over the weekend that the prime minister may actually break the law and continue with a no deal. david: extra near suggestions, weren't they? headlines over the weekend -- extraordinary suggestions, weren't they? headlines over the weekend that he could refuse to implement that law passed last week, but , they said they will try and test the law. dominic raab said that
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yesterday. of course, we are in uncharted territory here. we had the opposition passing a law to tie the government's hands. we had the government calling for election, that the opposition has denied. there are so many twists and turns in this story that it is almost hard to keep up. senioris johnson's ministers resigning because they said there was no plan to avoid no deal. there have been no plans made to the european union or to ireland, so all of these questions remain unanswered as we go into what is a very eventful week here in westminster. tom: well said. anna edwards, what is your best guess of where we are one week from today? do you have a crystal ball
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you could ship across the atlantic to me? that would be useful in this case. really, we are all hanging out for any details of what will replace backstop. last week, we saw that the u.k. took new proposals to brussels, but really they were the old proposals with a lot of things that the u.k. doesn't like taken out. the eu said that is not going to fly. that does not replace the security of the backstop. really, we haven't progressed and moved on. more than three years after the initial vote, we haven't moved on. it remains a tough time for boris johnson, but dominic cummings behind him at number 10, we can't underestimate what he might have up its sleeves -- up his sleeves. tom: anna edwards, of course, with all of her work in the united kingdom. david merritt, bloomberg news director, as well.
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there are all sorts of corporate stories. we are thrilled to bring you in the six clocktower new york time steve eisman -- in the six clocktower new york time steep -- in the 6:00 hour new york time steve eisman. alcoa has come up with a stunning reorganization after a solid 10 years of underperformance. they've delivered under -4% total return in the last 10 years, and this morning, alcoa management radically restructures the former dow component. stay with us all morning. francine lacqua and westminster. i'm tom keene in new york. it's a monday. this is bloomberg. ♪
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♪ francine: this is "bloomberg " live from new york and westminster here in london. joining us now is john normand, head of cross asset strategy at jp morgan. backstopmething on the , boris johnson saying the right things, but we saw through high-profile resignations that they don't think he is looking for a deal directly with the eu. and we saw that gdp is not as bad as expected. what happens in three weeks? john: i assume we will have a little more detail on when the next election is going to be, and whether or not a hard brexit can happen. it is also some thing to be decided after the next election,
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to see what the competition in parliament is going to be. i don't think anything driving i think it has all been quite short-term. francine: can the economy volatility? how important is that july number, gdp? john: if you look at all the surrounding numbers, what you see is an economy that is slowing. it is not contracting, but neither is any other ager economy on the planet. i think it is just that the -- neither is any other major economy on the planet. tom: we are also focused on other central banks. activegin to be kind in september. are they constrained by the politics in dublin? john: he's constrained, but i
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don't think he can forecast how the economy will perform because he doesn't know what the outcome of exit is going to be. i think it is also constrained if we get a hard brexit because he doesn't have that much scope to lower interest rates. i'm skeptical that if we relaunch qe, you would see much stimulus to the economy. he's in the same situation as every other central bank. this is really an economy whose path is going to be set by what fiscal policy does in the next year or so. tom: do you have a conviction on year? i noticed on your report a real asian tilt, looking at opportunities in asia. is there opportunity within brexit and the dynamics of europe right now? john: i wouldn't call it opportunity so much as a bias. for me, there's a bias for sterling to go lower because it seems like the conservatives would win a majority if an early election were held. i think that maintains pretty
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high odds of hard brexit, that would constrained this economy and the euro area economy. it means more easing out of the ecb than the fed. the reason i don't use the word opportunity is because they are already weak assets, so it is markets that would move another few percent. aancine: are we going to see move downwards? what are the chances of a no deal? john: i don't think you would see eurosterling go to parity with no deal, because to get that kind of outcome, you would need interest rates move down much more quickly in the u.k. than the euro area. i think a required condition for that is a hard brexit. tom: john normand with us at westminster with francine. we begin an eventful week within the u.k. two prime ministers in dublin. we will continue with john normand.
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please stay with us throughout the day. this is bloomberg. ♪
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♪ francine: this is "bloomberg surveillance." i'm francine lacqua outside parliament in london. tom keene in new york. the hong kong government has condemned groups of what it calls "radical protesters" after clashes from police. earlier, tens of thousands marched to appeal for help in
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their bid for democracy. joining us now is karen leigh. after carrie lam last week said she would pull the extradition bill, where does it leave us? protests are becoming more violent. does china intervene, or wait to see what the situation takes? karen: we were waiting to see what was going to happen over the weekend. this was the first round of protests since carrie lam the biggest concession to protesters since this began earlier this summer, by withdrawing the extradition bill that triggered all of this. we saw tens of thousands of people marching peacefully through central city to the u.s. consulate to appeal for help from president trump come about shortly after, it devolved into something that has become quite normal for us. small clashes popped up through the city, protesters setting fire to things, riot police in metro stations. some people signaled that her concession hadn't been enough to
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ward this off. tom: i found extraordinary the images of american flags through the street. how are images of american flags through the street taken by the people of hong kong, by the business community, and by this government under siege? karen: it was interesting. we haven't seen that many of them of protests so far. this was the first concerted effort i can recall where they've marched to the consulate with the specific intent of trying to reach out to the u.s. government and keep this in the spotlight. it was quite a statement. the images reverberated quite widely here. this is something people are much more closely than in recent weeks because they went to see just how much protesters would react to the move by carrie lam. people here saying they are going to continue protesting until she's met all of their demands, and this was just one. we are looking ahead to the next couple of weeks to see how things will continue to be.
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tom: thank you so much. thank you for your reporting over the weekend. francine lacqua on the green at westminster with john normand of jp morgan. he synthesizes all of the work of jp morgan research. john normand was in the continuum of jp morgan research -- john normand, within the continuum of jp morgan research, situation in the hong kong? ahn: you already have situation which is entirely unpredictable and highly material for the markets. that situation can be aggravated by however the u.s. response to hong kong and china. [indiscernible] this is going to become incredibly complicated.
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francine: the impact on a possible recession would be that chief executives stop spending. is that one thing you need to monitor? john: the issue for the domestic economy is the lack of confidence which is being generated by the political tensions. it is certainly pushing that economy down. it is not enough to influence the chinese or u.s. economies, but if there were an adverse develop it with china and the u.s. increased sanctions as a result, i think that just continues the move down in the global economy we seen this year. francine: john, thanks so much. john normand of jp morgan stays with us. we will be back from london and new york. this is bloomberg. ♪ here, it all starts with a simple...
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a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. ♪ [inaudible] francine: this is "bloomberg surveillance."
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that is the italian prime minister giuseppe conte speaking in parliament just before a vote of confidence. this is what happened just last week. we had a new government in italy at the same heads, but they changed coalitions. there is no a coalition of the five-star with the democratic party, and mr. conte, who will stay on as prime minister of this new coalition. he is saying that the 2020 budget needs to foster solid growth. of course, we will keep a very close eye on what is going on in italy and any impact it has on btp's and euro. let's also get a check on sterling because the conversation for some of these exporting countries such as italy, but also germany, and what happens with brexit. cable currently at 1.2338. we are currently with john
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normand of jp morgan. the exitlook at flipside and what it means for germany and others, italy for now is stable as long as germany doesn't get extra tariffs from the u.s. john: i think it is sort of a sub trend rate. if the ecb weren't about to relaunch a bond buying program, we should be a lot more worried about the slowdown in growth meets for sovereign spreads, but if you had to pick one time to have economic stress and political stress, it's when the ecb is relaunching bond buying. it dampens volatility that would only result from this. francine: there's a search for yield, but there's still political uncertainty. john: exactly, so there's no value in europe, per se.
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but i would still rather be long spreads then neutral. that to me is the main policy support for markets. otherwise, there's a lot of political uncertainty. tom: one of the great notes of july and august was the jp morgan call an extrapolation of u.s. yield well down below 1%, even below 0%. ratesinking of negative in the united states. we've got negative real yields now big time in the united states. is there a permanence to that? become think it would permanent if the u.s. economy went into recession because i'm not sure how the u.s. is going to get out of the next recession if policy rates have to go down to zero to cope with those issues. you could see a permanence resulting in a few years, but you have to go through a major cyclical downturn first.
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i don't think we are going to permanently negative real yields in the u.s. just because what is happening on the trade war side. it would have to get a lot worse. tom: form where you sit at jp morgan, are the central bankers ignoring or insensitive to the effect of negative real yields and negative nominal yields on commercial banking? awarei think they're very of the potential downside risk. the reason i call it potential is because rates to date don't seem to have any impact in terms of dampening loan growth, and it doesn't seem to be dampening consumption by consumers who favor negative rates. think it essentially drives why they move very slowly for further rate cuts. even though the ecb might cut rates -- [indiscernible] francine: thank you so much,
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john normand from jp morgan. it is getting quite rowdy with demonstrators, so time to go to new york for our bloomberg first word news. here's viviana. viviana: president donald trump underscored his setbacks on forest policy. he canceled a secret -- on foreign policy. he canceled secret plans to host afghan and taliban leaders at for peace talks. the trump administration once the uae to tighten screws on iran. a top official is in the emirates to meet with banks and shipping companies. the u.s. is seeking to ratchet up sanctions against the iranian government. iran says it won't negotiate unless sanctions are lifted. the u.s. air force reviewing its hotel policy over concerns that officers have been staying in
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trump properties. the result, higher fuel costs. a house committee is also investigating. more violence in hong kong. protesters marching peacefully to the u.s. consulate to appear for help, but then small groups set fires and vandalized subway stations. new figures show in august, arrivals to hong kong plunged almost 40%. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. tom: thank you so much. an eventful morning, of course. we are watching all of the green with john normand of jp morgan. we continue to consider trade with china, and so much of that conversation is u.s. and china, and china in u.s.. out a whole another world
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there, and it begins in south america with chile. joining us now is dr. lorraine, a distinguished scholar in chile, and his earned his stripes as finance minister for chile. it is wonderful to have you with us today at bloomberg. i think i must begin with a ,hile relationship with china which goes back to the early 1960's. it is the earliest trade agreement with south america. of the the uniqueness chile-china relationship. guest: pleasure to be here with you, tom, at bloomberg. chile's main trading partner right now is china, and by far. about 1/3 of chilean exports go to china. the u.s. is our second largest trading partner, and it happens that we have a trade war between our most important trading partners. chile has a uniqueness that it
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is not only that we are very on corporate's, close to half of our exports, but we have trade agreements with 64 countries in the world, so we are suffering as aldi, most of the world, are suffering from this trade war because of the effects on trade. we had a drop of exports for the first time in several years. a slight drop of exports and some of our main markets. we have also had slower growth war,result of this trade but we are in the process of improving our chances for the second half of the year. we will have better growth, and we will also likely have a free-trade agreement, very important, which is tpp 11,
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approved in the chilean congress very soon. tom: that's right where i wanted to go. i think of benjamin friedman at harvard or even the work with imf, and the idea of interdependencies. some would say president trump harkens back to elizabeth i. how advantaged is chile by the trade policies of president trump? all, inain: first of chile, trade is a very important issue. we are, by many standards come of the most open economy in latin america. is lessage tariff rate than 1% for imports. we have these trade agreements with 64 economies. we are expanding them, like with tpp 11. we are the first country to have a trade agreement with the u.k.
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era, meaning after brexit. we already have a trade agreement approved by chilean congress to continue our relationship, and we are expecting to be been that agreement -- to deepen that agreement. so we are looking at ways to improve our ties to all the world without, of course, failing to understand that asia is our main market. 50%, more than 50% of chilean exports go to asia. in latin america, we are part of the pacific alliance. mexico, colombia, peru, and chile. we are trying to diversify this. francine: minister, good morning from london. how much are you impacted by the federal reserve, by dollar strength? what can you do to mitigate that? well, wer. larrain: looking with a lot
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of interest at the federal reserve, in general the monetary easing around the world. thecentral bank has cut benchmark monetary policy interest rate by about 50 basis aints in the last week and half. this follows another 50 basis point drop. in total, we've had this year 100 basis points reduction. we have the lowest rates of history in mortgage loans, for example. green placing our latest bond, which we place in london, actually, in the london stock 0.83%.e, in euros at we are certainly in this environment of high liquidity
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monetary easing. it is also impacting what is happening internally in our economy. about the same time, we have a very controlled interest rate. 2%.interest rate is above our conditions for monetary easing, we are also pursuing some fiscal expansion because we've been able to consolidate this is the, and kind of competition we have. we have easy money. have expansion. francine: given what you've just said, how much are you expecting the chilean economy to grow in 2019 and 2020? we've had some encouraging data points after a pretty big slowdown. dr. larrain: that's right. grew iar chile's economy about 4%. we had a number of -- grew by about 4%. we had a number of events that impacted us.
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for example, flooding in the in ary impacted production few important mining operations in the first half of the year. we had the worst drought in 60 years, which is probably part of the global time it change -- the global climate change. we will be growing in the second half of the year, above 3%. next year he expects 3% to 3.5% growth. -- next year we expect 3% to 3.5% growth. francine: should chile be concerned with some of the situations in latin america? we have a populist government and demonstrations in venezuela, and now i possible default in argentina. dr. larrain: well, yes. we are the gross moderation -- the growth moderation, but within a growth, three countries growing more than the rest, colombia, peru, and chile.
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they are doing better than most of the other countries with growth around 3%. this is very significant considering this year, the world economic growth forecast has been cut four times by the main international institutions. it would be barely above 3%, if at all. tom: i've got to ask a question, and i guess it could be on the 2015 chilean wine, or i could ask you another boring question on copper mines in chile. i've got to ask you about the recurring event in the united states of america, and that is article after article says chile is a place americans need to retire. how bad do we want to move to santiago? do you want to see american retirees moved to your chile? dr. larrain: well, we welcome retirees from america, from all over.
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, in terms of the quality of living, is one of the best in latin america. i think we have a number of advantages. , we have a very important role in the climate meetings. we had 25 in santiago. we are deciding the pacific alliance, and we are leading the coalition on climate action, so we are a country very much concerned and involved in our responsibility with the environment. we have some unique features. ,s you mentioned, chilean wine and i would say, as some of you have heard, life is too short for bad wine, so come drink chilean wine. -- felipe larrain
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is the finance minister for chile. john normand with us right now. it is interesting to see chile, with all of its independence and uniqueness within south america. how do you determine an emerging market economy or a developed economy, or the in betweenness of it now. he's chile and emerging-market -- is chile an emerging market? john: typically people define emerging markets by the income, but we have two economies that are very dependent on the relationship with china, both big commodity exporters, even before the trade war emerged. both of those economies are going to face a challenge from china's structural slowdown and the structural reduction in demand for copper exports and
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bulk commodity exports. what is interesting is that australia has managed that transition because they have liquid natural gas. i'm not sure where the diversification comes from in terms of chile. i think that is where it is an interesting economy. how did they manage the decline in demand from china, which is really independent of the trade conflict? francine: john, thank you so much. john normand they are, head of cross asset strategy at jp morgan. our correspondent with the opec six very general. -- the opec secretary-general. reporter: thank you. i'm told there is no big change in oil policy. what does that mean? what are you expecting from the new delegation? guest: we expect, under this
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leadership, we will continue to provide strong leadership not only to opec, but to the non-opec partners in the declaration operation. willter: do you think he bring more pressure to the price of oil? guest: he will provide leadership. that is the most important thing, not only for opec, but for world. recall the demonstration to the whole world their capability and passion in providing leadership to the group, this has worked in the last three years. part of this process. is he a builder of relationships? he's got to get russia, the non-opec relationship, really
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bang on. is he a builder of relationships? guest: everybody in opec will tell you he is a bridge builder. he is a diplomat. groomed from day one for leadership. he will bring this to bear in his new responsible these. reporter: are you hearing discussions -- his new responsibilities. hearing: are you discussions about new opec cuts? guest: we will review the heari, and based on the outcome of the decisionspropriate and recommendations will be made to the conference. reporter: i caught up with the deputy u.s. energy secretary this morning. he said we will hit 13 million barrels by the end of this year.
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13.5 is there ambition for next year that is the biggest threat for you guys. guest: we don't see it as a threat because the global economy will continue to require more and more supplies of hydrocarbons. despite all the heroic efforts being made on the renewable side, including in our member countries, the world will continue to depend on oil and gas for the foreseeable future. the united states is probably the biggest producer of hydrocarbons. there exports are rising. therefore, they are welcome to join our operation that brings together all producing countries. 97 producing countries in the world on one platform. reporter: compliance is going to be a critical issue. does nigeria and iraq need to do better on compliance? guest: there is no doubt that both countries have been having
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in meeting up to their obligations. reporter: have you spoken to the leaders of nigeria and iraq? guest: i have spoken to the minister who is here and i would've a -- who is here in abu dhabi. that he clears all these challenges and remains fully compliant. otherct to meet with the here in abu dhabi. ensure thatinue to the market remains stable on a sustainable basis, and as i've said before, to do whatever it takes to ensure that we do not .elapse into the last cycle reporter: using that means extending cuts through 2020 for
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continuity of this market? already in july extended our decision to march 2020. we are increasingly looking at 2020. reporter: thank you so much. the opec secretary-general on his way to the big moment on the platform. tom, good morning. tom: thank you so much. greatly appreciated this morning. we've got much more coming up. we are with john normand of jp morgan. we are going to come back in touch on these markets. from london, from new york, this is bloomberg. ♪
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♪ francine: this is "bloomberg surveillance." i'm francine lacqua outside parliament in london. tom keene in new york. john normand of jp morgan is still with us. we spoke to lisicki very general of opec -- to the secretary-general of opec. what is the biggest unknown you are concerned about? john: one: is- whether these minor shocks accumulate, and the other is
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whether monetary policy will be affected at all. these are pretty similar risks. the only reason clients should be in equities is because i do feel like the problems we are facing are very man-made, by president trump, and he has the incentive to change tack at some point in the next two months. if it weren't for that particularity, i would be much more bearish. francine: is there anything in a bubble right now that is maybe created by monetary policy? john: i think there are bubbles in bond markets in the sense that you have extreme valuations and very extended client positioning, but there's always a question around who would be the catalyst for that bubble to deflate. to me, the catalyst has to be monetary policy tightening. i think the odds of that in the next year are pretty much zero. for fixed income, that is quite
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overvalued. tom: thank you so much. greatly appreciated this morning. he's head of cross asset at a -- of cross asset and fundamental strategy at jp morgan. there's the matter this morning of september markets risk on. we are seeing the dow breakout. we will have a great chart on that in the next hour. we are thrilled to bring you in the next hour steve eisman of the iceman group -- of the eisman group. maybe we can even get him to talk about we. stay with us. this is bloomberg. ♪
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and this morning, simply
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finally, markets break out of the narrow august range. this hour,eaker in steve eisman, on banks, global industrial recession. steve eisman, we will have him talk about we company. a tumultuousnson, week. face time with the prime minister of ireland, face time with the house of commons this afternoon. extraordinary press conference in dublin. in hong kong, american flags are unfurled. good morning, everyone. this is bloomberg surveillance. i am tom keene. francine lacqua, do we assume you are on the green at westminster all week? francine: well, we assume that be parliament behind me will suspended later this week, so maybe we will have a couple days here. it all depends on what happens. over the weekend, we had someone
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who was very well respected, in the conservative party, saying she will leave the party. we will see if we have any more resignations and what boris johnson does in that vote this evening in the house of commons. tom: we will have some explainers on this throughout all of bloomberg surveillance. right now to explain first word news, viviana hurtado. viviana: afghanistan is bracing for more taliban violence, after donald trump calls off peace talks. there were secret meetings planned for those leaders. the stimulus debate in china is not ending for a new figures show that chinese exports fell last month by 1% in dollar terms. a 60% drop. many say china needs more stimulus to shore up growth. tolle bahamas, the death
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has risen to 44 after hurricane dorian. survivors are fleeing the worst hit areas of the bahamas for other parts of the island chain. in saudi arabia, the new energy minister says there will be no radical change in oil policy. dismissing the energy minister and replacing him with one of his sons are that if the first time a royal family memory has been put in charge of saudi oil policy. opec'sthe face of diplomacy, but last week he was removed as chairman of saudi aramco. he was also stripped of overseeing industrial melon -- industrial development. 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 am viviana hurtado. this is bloomberg. tom: thanks so much. right to the data, to get to steve eisman. equities, bonds, currencies, commodities.
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up nine, dow futures up 66. advance.ntinues to euro not playing in oil. next screen, quickly. 30 year bond stays well about -- well above 2%. 15.40 down to risk -- down to 1517. i am looking at bonds in europe. bold steps for monetary stimulus. i am also looking at the impact it cutoc, the fact that the cash amount. that may be gave a little input is to asian markets, and then we are looking at cable.
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we heard that news conference with boris johnson and the irish prime minister. we had the crucial vote on whether the house of commons will vote for fresh elections. that is later this evening. it is the new year for business. a used to be by wednesday or thursday after labor day, and by all accounts it is monday after labor day. that is today. we begin with steve eisman. people lean forward as he dovetails economics and policy into trying to not lose money as well. is that the game right now, to not lose money, or is it to make money, be opportunistic? steve: it is to be opportunistic. tom: you are calling for a global -- --ve: i am not calling for pmi is over 50 all over the globe. you could describe that as a global is roadshow slowdown.
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there is not a question that we are in a global slowdown. whether that translates into a recession is another debate. tom: how do you respond to the zeitgeist, the blog, the internet, as a go to cash? i don't see you as a go to cash guy. to cash am not a go guy. tom: what about those who say the world is coming to an end? steve: the world is not coming to an end. we are in a global industrial recession, and the debate is whether or not it becomes a recession. even if it does, we will not have a systemic blowout because the banks are healthier. tom: u.k. banks on the green, francine lacqua. good morning, tom, steve. does a recession happen even if the u.s.-china trade concerns are dealt with?
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if we have a deal, will we still be in a possible recession? steve: the industrial slowdown was taking place before the trade war really heated up, so i think -- i mean, there are two major issues paired one, will there be a deal between china and the u.s.? i have my doubts but i don't have any more insight into that than anybody else. the more interesting thing to talk about is what the global central banks are doing, including the fed, and how long that will take to work or whether that will work. the fed started lowering rates in june. any economist will tell you that transmission mechanism takes at least a year. so the earliest that the u.s. economy should start to pick up his next summer. that seems to be missing some people's and analysis these days. people think the fed lowers interest rates and things get better all of a sudden, but it does not work that way. does the normal transmission of
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the fed lowering rates work at this lower level of rates? i am starting to have my doubts about that. francine: the answer? steve: i am not sure, i just have my doubts. the problem is -- and this is not discussed that much -- at this low level of rates, money has become free, so every deal has been done, every project has been funded, every stock has been bought back, every vc deal has been done, every private equity deal has been done. every startup has been funded. what free money has done is soate global overcapacity, why lowering rates should solve my doubts.-- i have i really do. it has not worked in europe with negative rates. be very clear paired negative rates in europe are not working. francine: so let's talk about negative rates.
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we spoke to phil hildebrand, and he said central bank should really be focusing on only disturbing money. it is not quite helicopter money, but it kind of -- in distributing money. it is not quite helicopter money, but -- steve: i don't know what she means by that. you have negative rates in europe. why will more negative rates help when that doesn't work? you need massive fiscal stimulus, which europeans do not want to do. the central banks are not a substitute for that. tom: i have a question. we would love to talk about -- i want to talk about the lack of diversification in smart guys, alternative investors, people in movies, undiversified or less diversified. and everything is great until every x number of years, they get run over, like in argentina.
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you, makingys like bets -- what is the behavior about concentrated bets until they work or do not work? steve: that is not my style. tom: that's why i ask. steve: diversification -- that is fine. your first job as a portfolio manager is to preserve clients' capital, and then make money. i tend not to operate in fixed income markets, especially in the emerging markets which are risky. that is not what i do. francine: steve, thank you so much. steve eisman there. he stays with us, and we will have plenty more from steve throughout the hour. in the meantime, we're seeing prime minister, giuseppe conte.
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together with the five stars. we will have plenty of that. this is bloomberg. ♪
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tom: bloomberg surveillance. good morning, everyone. the prime minister on his way from dublin back to london for a spirited afternoon. alcoa with a massive restructuring. british airways -- i don't even know if any planes are flying. they have a huge strike. and we company, maybe a little r then on saturday for a couple weeks ago. in "theant essay washington post" this morning that we can go to marty
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schenker. can one time harvard process or in pennsylvania, wisconsin, could the sexism that helps undermine secretary clinton also undercut senator warren? 45% say biden is the candidate. having the best chance of defeating the president. only 24 said he would debt only 24% said he would make the best resident paired biden has to reinforce the idea that he is the safest choice. start with the obvious. how can vice president do that on a monday morning? marty: he is not falling, which i think is the best that can be said, whereas elizabeth candidate is rising -- elizabeth warren is rising in the polls, narrowing the gap, but joe biden is the front runner. with -- i know that she
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is with the people's republic of massachusetts. great. clear hereker, to be as well, do you see any indication a liberal senator from massachusetts can get 47% of the national vote? marty: that is the key question. those two stark issues -- electability versus policy -- are the things that are going to determine who the next president is. i think the left side of the democratic party is pulling the party to the left, and that threatens their ability to beat donald trump. do you know senator warren? met her many times. this is not an endorsement. she is head and shoulders smarter than anybody. by far. tom: ok. but is it tocqueville? this is what marty schenker
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does, helps me with my pronunciation. let's go to took the paired an intellectual from massachusetts will take wisconsin? steve: she has a better life story than most of the candidates. tom: ok, i'll go with that. francine, you want to dive in here, please? yeah, marty, i was looking at some of the polling here that we are seeing -- i notice the early days, things change completely. if we do not have a recession in the u.s., is president trump a two-term president? marty: it is quite possible, and i do think all this pontification at this point in the race is really just guessing. until there is a democratic candidate who you can compare --h donald trump, pulling
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polling is almost meaningless. if the economy is strong and the democrats adopt a far-left platform, donald trump has a better chance of being reelected than most people think. are seeing ayou manufacturing recession, is there anything that the president can do now to reverse that? steve: the only thing he can really do is cut some sort of deal with china. china ission is that not backing down on anything, so that is a deal that trump basically has to give in. whether he does so or not, i don't know. tom: steve eisman with us and marty schenker. more coming up. right now a conference happening right now within the middle east. this is an important discussion going on among oil ministers, managing the message forward. with all the tumult, in saudi
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arabia over the weekend. we will come back. this is bloomberg. ♪
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tom: it is september, and that means a discussion of oil, hydrocarbons, the message forward. an important world energy
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congress, where they are trying to make the headlines, all of it centered on saudi arabia. francine? tom, we areah, looking at the new saudi energy minister, prince abdulaziz, talking there. we're are also talking about brexit, and just about 20 but it's go we heard from boris johnson, talking with the prime minister of ireland. it is very clear that the prime minister demanded some guarantees on the irish forger. he says the u.s. -- the u.k. needs to make promises to 19 free flow of goods across the irish border. something that so far has not happened. pound, 1.2348. we are back with steve eisman, eismaneman group -- from
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group. could a no deal still be possible and what it means for banks -- boris johnson's fighting spirit hinting at the fact that he could break the law and push the no deal through. think i know deal brexit possibility is very very high. no one is really focusing on the fact that just because the u.k. vote against the no deal brexit does not mean they get one. europe has to grant the extension, and obviously there is some noise out of the e.u. that they are not going to grant the extension. i still think the probability is quite high. quitene: the probability high, what, 25%, 30%? steve: i think it is 50% or the europeans could just say no. why should europe say yes? more importantly, the people who in parliament voted for an extension, they have no proposal as to what deal should be struck
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with e.u. so it just is a delaying tactic. tom: i want to talk about the banks of europe. an acclaimed investor from chicago has been patient long come on the valuation of banks. book values are extraordinary on e.u. banking. is it a value trap or a place where a guy like you can take a 2-3-five-year view and make a lot of risk and make money down the road? steve: i have been short on e.u. banks for three years. i have not covered -- tom: why not? isve: profitability constantly diminishing, and the capital positions of most of the e.u. are not nearly as strong as people think. tom: take deutsche bank with a 5. you get down to where the equity becomes derivative like,
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optionality and a news event. is deutsche bank at the point where it is an effective call option on corporate action or government action? i am not calling for the german government to bail out deutsche bank. the problem with deutsche bank is that the plan that they boost several months or -- that they produced several months ago is about five years too late. it is possible they could solve their problems, but i think it is unlikely. that mean,hat does steve, that they will go bankrupt? steve: you don't have to go bankrupt. i amt to be very clear, not talking about the bankruptcy of deutsche bank. it has been a slow deterioration in profitability for years, and it is probably going to continue. one of the things we have learned postcrisis is one of the hardest things for banks is to
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shrink yourself from profitability. that is what they are trying to do. tom: this is really important. deutsche bank has a book value of 0.23. it has come down and down. are you shorting european banks looking at financial ratios to deteriorate, or is it another relationship that allows you to stay in these successful banks? steve: profitability deteriorates and the regulators are forcing european banks to continue to improve their capital ratios. it is a combination of both. tom: what is the catalyst to get out short other than share prices? what are you looking for to say enough? an overpriced cup of coffee on central part, i get that idea. i am sipping my fancy tea. steve: fancy tea.
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tom: you don't drink tea? what do you drink? steve: water. tom: what about for big decisions? steve: for big decisions i drink seltzer water. tom: ok, seltzer water. what do you see with that? steve: if the e.u. would get away from negative rates, that would be a massive catalyst. the probability of them getting away from negative rates is about zero. tom: steve eisman. do you think we could talk about extrapolation with him? i have a movie idea. uber extrapolated, lyft extrapolated. this is bloomberg. good morning. ♪ devices are like doorways
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and if someone trys we'll let you know. xfi advanced security. if it's connected, it's protected. call, click, or visit a store today. tom: bloomberg surveillance. good morning. steve eisman is with us. an important discussion on the markets as well. francine lacqua awaits the prime
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minister of united kingdom landing. are you going to speak with prime minister johnson today? manyine: there are so protests, probe brexit against brexit. i imagine he will go straight to the house of parliament, through a back door. interesting,be coverage from our brexit team all throughout the day. right now with coverage of first word news in new york city, viviana hurtado. viviana: president trump failed peace talks in afghanistan are in hisother setback foreign-policy. he plans to host afghan and taliban leaders at his camp david retreat. mike pompeo says the president wants to speak directly with taliban negotiators. that is similar to his approach with both china and north korea. the trump administration once the uae to tighten the screws on iran. a top u.s. treasury official is in the emirates meeting with
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banks and shipping companies. once.s. wants to wrap -- to ramp up sanctions against the iranian government. iran says it will not negotiate unless sanctions are lifted. and u.s. airports lifting policies over concerns about one of president trump's properties. higher fuel costs. a house committee is investigating more violence in hong kong. tens of thousands of protesters arching peacefully to the u.s. consulate to appeal for help. august,res showing in visitor arrivals to hong kong plunged almost 40%. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianatries, hurtado. this is bloomberg. francine? tom? francine: thank you so much. for more on the hong kong
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protests, we are joined by jean lee. said that last week she would get rid of the expedition -- the extradition bill. what are protesters asking for now? >> yes. wouldcarrie lam said she get rid of the bill, protesters are asking for four major demands -- elections of hong kong plus leader. we are not -- of hong kong's leader. there not seeing signs that governor would yield to any of these demands, so i think it is likely we will see continued protests in hong kong in the coming weeks. tom: thank you so much for your coverage, particularly your leadership of our hong kong bureau. we now see american flags. not all the time, but occasional. has that shifted the debate? what is the response of the
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people in hong kong to american flags on the street? lee: thank you for the kind words. if you look at the sunday protest in particular, they were asking for trump's help. they were asking for the askings to think about for a democracy and human rights act. that is why you saw a lot of american flags yesterday. some of them even saying the u.s. national anthem yesterday at the protests. i think it is a way to get international support in how we see the president's of this -- at some point, even the united nations flag. thank you so much for joining us there, fion lee updating us on the various you test protests. such asook at an event the hong kong protests, how
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should that factor in investors minds? is it just one of many shocks that, if they come together, that is bad news for the economy? steve: all i would say is my heart goes out to the people of hong kong, who only want what we have here. turnsaid, if things violent in hong kong, meaning the chinese army comes into hong kong, i think you would see a real correction in global markets. what, becauseuse -- steve: because of the probability of a trade deal. if that were to happen, the probability of a trade deal between the united states and china would probably go to zero. you could just take that off the table, and that would have negative implications for the economy. tom: what is an international opportunity that you see right now?
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we see such a difference between large-cap dominance and everything else. you go with the pack and look at large-cap? there are opportunities there for things that have lagged. steve: u.s. large-cap with the exception of financials, where i am light. tom: can you short u.s. banks? steve: i have some longs and some shorts. there is a conference taking place i think in boston today and tomorrow, where pretty much all the banks are going to report and give what is happening -- and given what is happening with the yield curve and interest rates, i would bet every single bank would lower guidance. tom: are you surprised we have not seen more mergers like we saw last year? steve: i am surprised and not surprised. i am surprised in the sense that that take place -- the big story in banks today is technology, and the larger banks are spending $10 billion a pop,
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and the small banks cannot compete, so they should merge. the ceo of the bank of whatever likes being the ceo of the bank of whatever, and does not feel the pressure. tom: i am shocked to you would say that. steve: he doesn't feel the pressure to sell, and there's really no activism in banks because they are so heavily regulated. aancine: what would be catalyst for this merger, these mergers? steve: that somebody has to agree to say yes, and it is just not happening. does it have to get worse? if i am the ceo of whatever, and i want to stay the ceo -- steve: the problem is it is glacial, slow. citianks of j.p. morgan, are spending. they keep taking market sharing
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deposits, but it is very slow, and your -- human beings react poorly to things that happen glacially. that is pretty good. i just made that one up. tom: welcome to "bloomberg surveillance." i do that every day. steve: until things reach a point of no return where it is obvious to everybody, i don't see these bank ceo's selling out. [siren] have somes like we technical difficulties here. steve eisman with us. we are going to really dive into the corporate stories of the moment, particularly steve -- cover to cover he read on equities. stay with us. ♪
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viviana: you are watching bloomberg surveillance let's get the bloomberg business flash. microsoft says the trumpet ministration is treating huawei unfairly. -- says the trump administration is treating huawei unfairly. president brad smith tells bloomberg businessweek huawei should be taken off a blacklist that bars it from buying u.s. technology. he says the way the u.s. government treats huawei is un-american. jp morgan is reportedly close to winning the lead advisory role for saudi aramco's ipo. if i'm a decision is expected next week. morgan stanley also is competing role but was said
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to be hurt by misjudging demand into uber ipo. role but was said according to dow jones, some investors are pushing the bloombergmpany to -- reporting last week we work was going to cut its violations far below the $47 billion it was worth at the start of the year. that is the bloomberg business flash. tom: thank you so much. now a three hour conversation on the time of this odd ipo market. we can do this with steven eisman, steve eisman of neuberger berman. let's look at the single best chart. private money comes in, extrapolate out value, and then not. lyft upt lyft in pink, big, then down, down we go. on the daily close. uber pretty much the same the parallelism is something as
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well. company an uber list bank -- lyft, or is it something more than that? steve: the savings and loan industry had a business model of borrowing short and lending long, and that worked for decades until there was inflation. and then there was bankruptcy. i did read the prospectus there there is some analogy to be drawn because what they do is, they go to landlords and a takeout very long-term leases, 10 years or so, and then they go out and they release those those -- they re--lease leases on a short-term basis. what happens if we go into recession and they call members -- their members go bankrupt?
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have long-term leases with no short-term clients. i did a lot of word searches. you and i read a million perspectives. we can all agree it is a different prospectus. what is the word that we use? misleading,s, naive? what is the character of that document that was supposedly walld by steve eisman's street? steve: i will call the language promotional. it tries to make what the company is doing revolutionary. tom: how does that get through bankers? steve: anything gets through. a lot of things get through bankers because -- the fact that something gets taken public does not mean it has been vetted appropriately. tom: when you look on the income thereent at the ebitda -- is 14 -- i'm kidding, folks, not 14 ways. there are all these other
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variables as well. alibaba was in china, running through the cayman islands, and we are in an uproar because it is through the cayman islands. we do not need the cayman islands for we company, do we? it is a business model that i think, in my opinion -- look, i am not a re-desperate, a real estate expert that a read expert, a real estate expert. any downturn you are running very large business risks. steve, we are also getting some breaking news out of saudi aramco. this is an ipo we have been watching closely. saudi arabia is one of the kingdom's richest to anchor the saudi aramco ipo. would you invest in saudi aramco? generally have small allocations to the energy sector. me personally, i find the energy sector difficult to invest in because it is so driven by the
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price of oil, which i personally find it impossible to predict. overall, what do you worry about in the markets? this goes back to our initial conversation, does the search for yield mean that a lot of these ipo's are priced and there is almost this fictitious demand as people want to get into something? steve: i think there is something like that. what is the slogan? tina? there are no -- there is no alternative? i am more focused on something else which is come as i said earlier in the show, we are in the global industrial slowdown/recession, and is that going to become something worse? the consumer in the united states is still very healthy. people are employed. consumers are spending. that is to the positive peer the question is what is happening in the industrial sector. is that the canary in the coal
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mine or not? that is the important question to address. right.e: are you able to see that canary in the next couple of months, or -- steve: i think we will definitely know by the end of the year, one way or the other. tom: i want to ask about your acclaim in real estate, we have the fannie mae, freddie mac restructuring starting. it is 12 years late and everybody has an opinion on that. what i would like to ask you is, there were shadows in shadow banking, 14, 13 years ago. where are the shadows now? steve: the shadows are smaller. where is the risk, i think it is in business development corporations, which have done lending that the banks won't do. and probably in private equity if there is a downturn. tom: steve eisman, thank you so
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much. we have much more coming up. right now, though, a conversation with todd from guggenheim partners. erik schatzker. let's listen. >> we believe that investment grade corporate bonds are an asset class that provides more risk than returns. used to be you have cash in the bank, get a 6% rate of return on it, and the cash would be sitting there, doing nothing for the economy. we think as competition has increased at the rate of return on cash is going down, and we don't think that is going to change anytime soon. we don't have to go back and look at a double-digit 10-year when we think about the challenges because there shouldn't be a double-digit 10-year if you are making zero or 1% on cash assets. everyone is kind of screaming at each other for alarmist purposes, and now you have platforms where everyone can speak and say whatever they want whenever they want.
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you have people sounding the alarm about clo's there it i am not sure they really understand. brexit to me is man-made. man-made problems generally end up working out ok. the opportunity that we had with -- was really about a -- with the dodgers was really about a partnership with los angeles and how are we going to win, drive partnerships come and how are we going to drive passion? it is the high-quality play, the best players. ♪
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>> is someone who went to the agreement and shuttered to see watchtowers on u.k. soil, i can say now, as i have said many times before, the u.k. will never, ever institute checks at the border. that was prime minister boris johnson speaking earlier in dublin about the future of the irish border. in the last few minutes, his spokesperson has confirmed parliament will be suspended at the close of business today. let's get straight, from all angles, our brexit coverage.
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from brussels, a european government reporter, and from dublin is a bureau chief. let's pick it up with you. that headline coming seconds ago, saying that parliament will be suspended after the session today for what will they vote on? >> this evening boris johnson is going to ask again for an election. jeremy corbyn and the other opposition parties will likely vote it down. if parliament debt what it means is we are not likely to have an october election or an election before october 29 per and one way around that might be if the government -- for october 29. one way around that come if the government tables a vote of today, takesself place tomorrow, we could see an election on october 30. but in order for that to happen, the government would need to vote against itself.
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francine: so what you're saying is that things have gotten so crazy, we are not sure what it is going to happen, most of them are just saying to me i am really not sure what is going to happen. boris johnson has said he would rather be dead than delay brexit, so could he may be resign? that is another option. we don't know. francine: we don't know from that. when we look at the body the prime minister of demanding once again guarantees when it comes to the irish border. is there any kind of deal? he was pressed, boris johnson, quite a lot on the fact that they have not given anything to the e.u. as a compromise. mean, there was little new in the way of news on the surface when we had a press conference with boris johnson and lee overawed can -- johnson did appear to be giving the
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impression that he wanted to do a deal, but at the same time was very clear there were certain red lines that the u.k. would not cross. so for his part, he came across like he was actually lecturing boris johnson on the realities of brexit he told boris johnson it would be a herculean task for the u.k. to negotiate trade deals with the u.s. and the e.u.. a way of just in reminding boris johnson of the reality here. what is going on? i suspect what is really happening is that boris johnson took too much optimism from the conversations with angela merkel and emmanuel macron the possibility of the deal. leah was very keen to remind him that there would be no compromise on the backstop. where we are right now is stalemate, i guess. francine: on the back of that news conference, what is interesting -- on the back of
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better-than-expected gdp, we are hearing from traders that there is a softer tone with boris johnson saying he does actually want a deal. someone askingas the e.u. for an extension, can we be sure that they get it? >> ultimately it needs the approval of 27 prime ministers and presidents sitting around the negotiating table. we can never make sure that they will all agree, but they have given some indication that if the u.k. were to ask for an extension, the e.u. would probably grant it. they just do not want to propel a country out of the european union without a deal against its will. so i think if the extension request came, the e.u. would say, yes, we will go for it. francine: thank you all. we will have commentary from them throughout the day.
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for the next 12 hours, trying to get mp's to talk to her. surveillance with tom keene and jonathan ferro. i will be here a little bit on daybreak to find out what we will get. this is what the data tells us. this is what the market is telling us. a couple of traders, a lot the banks are trying to figure out whether we will see fresh stimulus moves from the world's central banks. that is on the back of that reserve ratio on oil with china on friday, and then we have the ecb this week. watch out for any euro moves. this is bloomberg. ♪
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♪ china's trade pain.
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machinetry's export almost stops growing. first up to bat, mario draghi. the ecb is the first g3 central bank to set monetary policy in this new era, with deeper negative rates on the table. new management, same strategy. the new saudi oil minister promises no change to oil policy as the kingdom makes a step towards its ipo dream. david: welcome to "bloomberg daybreak" on this monday, september 9. i was up late last night. five hours almost playing in the u.s. open championship. nadal versusg, medvedev. serving 125 miles an hour. it was extrude mary. it got better -- it was extraordinary. it got better as it went on.

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