francine: mario draghi heads into his second to last ecb meeting. a rate cut looks certain, but how much stimulus is enough? stocks gain as president trump delays tariff increases. beijing considers resuming farm imports. and a boris johnson's government faces the worst case raise outcome. operation yellow hammer once of food and fuel shortages -- warns of food and fuel shortages. welcome to "bloomberg surveillance." there is quite a lot going on today. we focus on brexit, yellow hammer and the ecb meeting that

could move the euro-dollar. we also focused on the oil markets. saudi arabia faces a daunting oil market surplus. up, they hear from the former lng executive. he proposed a takeover offer by the hong kong exchange and we will have plenty more on the corporate story. it broke about 24 hours ago. they will have a look at the exact response of the london stock exchange. let's get straight to bloomberg first word news. >> bloomberg has learned in a show of goodwill that china may resume u.s. farm inputs. this comes as donald trump says he is postponing a 5% tariff increase by two weeks. the delay causes u.s. levies on

chinese imports at 25%. sweeping cats from a no deal brexit. -- chaos from a no deal brexit. the warnings outlined in a u.k. government paper. the internal document is called operation yellow hammer. ministers were forced to release it to comply with the deadline. law intendeding a to prevent boris johnson from forcing through a no deal brexit but he says he is ready to do it anyway. and john bolton left after arguments with president donald trump over easing sanctions with iran. this is according to sources within the white house. we are told the president mold a meeting with iranian leaders but bolton argued forcefully against the -- it's. -- against it. hasident trump says vaping become an urgent public health concern. the u.s. have -- u.s. health

secretary says 5 million kids this year have vaped. investigators are racing to identify a mysterious lung disease linked to the use of e-cigarettes. t boone pickens has died at the age of 91. he became a billionaire energy investor and supported for windows and natural gas power. three years ago, he suffered several strokes and a bad fall. in the 1970's and 80's, he achieved fame for a takeover by earned much of his wealth correctly betting on oil and gas. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thanks so much. ecb officials are expected to cut interest rates today. expected drama at mario draghi's second to last meeting. he is likely to go big but there

have been protests that tools such as bond purchases are not yet needed. officials have expressed skepticism over the need for bond buying. they said it would be disproportionate to economic conditions. maria tadeo is in frankfurt with the latest. deliver dashcam mario draghi deliver -- can mario drahgi deliver? >> this is the first meeting since the july decision when the european central bank sent a clear signal they are going to take measures to prop up inflation. when you look at what has been priced in, that is a rate cut. the only real debate is whether we go for 10 basis points or 20. but in either case, you are

going to see another record low. there is very little clarity on qe, whether mario draghi will go back to buy bonds and investor expectations are all over the place. consensus will tell you we are looking at an announcement of 30 billion but many will tell you .t could be much more modest that's because we are seeing more governing council members come out and say they are not sure the state of the economy warns another ratcheting of qe. and today might see the introduction of a tier system. many banking ceos will tell you that, if we do go lower, banks will need some relief. francine: thanks so much. maria tadeo in frankfurt. the head ofs multi-assets at royal london asset management. we're also joined by jamie from bloomberg economics.

peggy for joining us as we try to figure out exactly what the you for do -- thank joining us as we try to figure out what the ecb will do. while mario draghi do what he can to appease the market? >> i think you will be able to deliver. if you look at the past behavior , listening to much to the hawks before a meeting has not been the best strategy. it is likely that although he has encountered resistance, he will still be able to persuade enough members to coalesce around more stimulus. francine: what do the markets want? >> the markets want stimulus. i have been suffering from increasing take tensions -- trade tensions. a lot of expectations are factored in but i would tend to agree that draghi will be making a real effort to leave some kind of legacy.

and to hand over the difficult political decisions. when lagarde comes in, they do -- have to grapple francine: a helping hand? selective survey couple of months when madame lagarde shows up. >> i think it takes some pressure off of her to have a program in place already. takekes a bit of a stock and figure out what the bigger issues are, whether it involves fiscal stimulus or a change of strategy. it buys time. of sense in lot getting this and the way and going big. francine: what do the markets

expect? >> the consensus is 30 billion a month and a 10% rate cut. potentially tiering as well. a lot of it because down to whether we get this additional adjustment to the capital to basically reload qe. but also on the statement. statement and then there's the q&a for you get much more of an idea what drug is trying to set out -- draghi is trying to set out. we are now trying to talk about symmetric inflation targeting. it is a very dovish stimulatory message and that's what we are looking for. francine: looking at the health of the european economy, what does it actually warrant?

if you were to take away the specter of the trade, would it be in a much healthier position? concernsare structural , particularly germany and its manufacturing sector. . but we estimate that since the december forecasts, gdp is likely to be lowered by 1% and they have got quite a big gap to make up. if you wanted to make it up completely, you could need to buy 1.3 million euros of assets. that is what studies themselves show. so the need for stimulus is very great. whether it works, that's another issue, but the need is there. how will madame lagarde be different? >> i think she will be trying gently at first that fiscal

policy should be eased. gently at first and the not so gently. >> she has been in political circles. market,ook at the they're screaming out that governments can borrow for free at the moment, so why aren't germany has got this massive diesel prices as the trade war goes on, it does not seem right. francine: but will anyone listen? [laughter] quickly, can she used monetary policy as a tool? saying that if you don't spend fiscally are not doing it anything? >> i think it's too provocative. it's the same situation in the u.s.. every time trump and of trade rhetoric, they feel they have to

ease. francine: thank you both. coming up, a stimulus showdown. expected drama at mario draghi's penultimate meeting. you can follow the news conference at 1:30 p.m. london time. or you can watch it on tv. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to your bloomberg business flash. for an ipo of its asia business for the world's biggest brewer. scrappedter ab inbev

the hong kong listing, bloomberg understands it is aiming for an ipo by the end of september. the revised application excludes its australian operations are being sold to asahi. a-shares in the hong kong stock exchange fell sharply after its unsolicited for its counterparts in london. offered the equivalent of $36.6 billion. is set to reject the bed amidst a doubt of political risk. the stock traded well below the offer price. oracle ceo is taking a leave of absence for health reasons. the founder and co-ceo will resume responsibilities. the companies did not give more details. oracle shares fell in after hours trading as adjusted first-quarter revenue missed the lowest estimates.

francine. francine: but get back to our top story. the consensus trade has been knocked back over the past week as a central banks refrain from sounding a dovish. the ecb is expected to cut below zero but the rise of doubt over draghi's radical measures have caused markets to rethink the extreme easing. here with mars dani burger. doubters isowd of sizable enough to chip away the likelihood of a largest it was package. policy -- stimulus package. policymakers have expressed opposition to qe and one of the telltale signs is the bank of france governor signaling that a cut in guidance over the passive rate cut. that it itself might be enough. but it is not just europe. the ecb cut followed by a half-point from the fed next week, it's all starting to look dicey.

so policymakers backed away from adding more stimulus and markets have also responded over the past few days. you seem government yield on both sides of the atlantic pickup from multiyear lows. so this could be the beginning of a sweeping recalculation. ,ut we have to keep in mind there is amro for those that are heavily invested in the story of large easing measures. than 80 percent of economists surveyed sees the ecb restarting the bond purchases. is most market sensitive to policy action. the latest data shows a positioning across euro-dollar is at a record net long. so we have really got the set up for a showdown to. -- today. francine: thank you. we are back with trevor from the royal london asset management and jamie from bloomberg economics. looking at the fed, how much is

the ecb looking at the fed? the fed is going to kick this off. in december, the markets were selling off because people were worried the fed did not understand something was going on. , that there was a bit of a slowdown. the ecb is obviously helped by the fact the fed is easing in central banks are following the fed's lead. by the fact stocks are at an all-time high again. we are saying things are ok and the fed does not need 50 basis points this week. someone in the white house will pick up the signals and i worry we'll get another bombshell from trump. he really wants that 50 basis point cut. the he sent out after jackson -- the tweet he said after

jackson hole, then the china tariffs. ratests negative interest and so he might start the europeans are being unfair, i'm going to get them on tariffs. francine: yesterday, the president was tweeting on fed policy. is he going to tweet what mario draghi is answering questions? >> quite possibly. , the bigger stuff impact it is having on europe is uncertainty. it is not to the direct effect of weaker trade flows. it is the uncertainty and the possibility of tariffs. huge andffs would be would radiate out across the rest of europe. aboutis uncertainty whether the eye of sauerbrun

will switch -- of sauron will switch to europe. -- gine: trevor greek

francine: this is "bloomberg

surveillance." china may resume a u.s. violence as a show of goodwill ahead of it costs u.s. levies on chinese imports at 25%. trevor from royal london asset management is still with us. we are talking about the fact does tooario draghi much, president trump may force the fed's hand but doing something ugly on trade. but would that not hurt the economy more than others? member old enough to when some central banks were not independent. in the u.k., the government used to control the central bank and there were always reasons for big interest rate cuts the year before an election. you have an independent central bank and can't tell the fed to

cut it just rates but you can slap tariffs of china. or europe. i do thinkruirng up the trade tensions with an open desire to see negative interest rates. he wants to be paid for lending money. i think he is trying to get the fed to do a lot this summer to boost the economy. it remains to be seen whether he winds back the strait of hormuz next year. year.se trade wars next francine: if he puts extra tariffs, it could have a direct impact on consumer prices. it could put into question his reelection campaign. >> i think he does not want to be the grinch that stole christmas. there is pressure to ease up on the broader tariffs around christmas. but german carmakers are fine, aren't they? francine: what would that do to the german economy?

>> it is already very weak in terms of the open parts of the economy. looking at the domestic economy house prices and wages are rising and it is doing well. it is all abouthe xport engine, which is very important globally. you are he got a diesel crisis. extra tariffs, that might be the kind of thing that pushes towards opening up the fiscal coffers. francine: but that would be what , gdp down two or 3%? >> i don't think it is that serious at the moment, but there must be a real temptation for trump to either mess up the nice friendly markets ahead of the fed meeting to get a bigger rate cut. where we do get 25 in september, the day after you can imagine a tweet that messes up the markets. so i am nervous about the

recovery we have seen. francine: what does that mean about european assets? >> european equities are coming up second. the u.s. still looks the best. europe is coming out second. we are underweight on the euro and we have a slight preference for the u.s. dollar. but you're actually looks better at the moment them asia-pacific and the emerging markets. francine: trevor, thanks so much. coming up, codename yellow hammer. we did into the details of the worst case no deal brexit scenario. that's next. this is bloomberg. ♪ here, it all starts with a simple...

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goodwill gestures. stocks gain as president trump delays a tariff increase for china. beijing considers resuming farm imports. no deal scenarios. boris johnson's government publishes its worst-case brexit outcome. "operation yellowhammer" warns of food and fuel shortages. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua here in london. let's check in on the biggest stock movers. >> good morning. i want to start with the upside, ab invev up more than 3.5% after scrapping its plans to months ago. people -- two months ago. they are looking at share sales of its asia unit in hong kong. this comes after they scrapped this idea. if they were to come to market with this, it would be the second-biggest share sale this year after uber. m.wn more than 5%, alsto

is just raising questions if they are going to exit this long-held investment. bouygues currently owns about 15% anin alstom. down 23%.rtainment francine: annmarie hordern with your main stock movers. the london stock exchange looks set to reject a takeover offer ong kong exchange. the former head of the london stock exchange says a consolidation of global exchanges is inevitable. >> the emergence, which we have been talking about for years, of

a very small number, probably exchanges,e global global financial infrastructure companies is inevitable. francine: joining us now is bloomberg's finance reporter. how much do we actually know about what the london stock exchange wants and does not want? unsolicited. they're continuing to push forward with their own purchase. that is all we know so far. the lse board has not met yet. we are hearing from sources that there are a number of issues that stand in the way. francine: do we know why? >> there are security issues. the government said yesterday there are security issues on a foreign company taking over international exchange. are an iconhanges

of the city and a treasure, if you would like. it is woven into the fabric of the city of london. chinese power having influence it wouldd have -- over have significant pushback from government. francine: thank you so much. we are getting some breaking news out of the british petroleum chief, saying he will sell oil projects to meet climate targets. a lot of the oil companies have been under pressure for a very long time to try and meet climate targets. they have talked the talk. this seems to be the first real impact of somebody trying to possibly do something. let's get may be a bit of reaction from trevor greetham. we just had the bp chief executive says he'll sell oil projects to meet climate targets. does that change your view of the oil industry? trevor: there is a big push to meet climate targets and fulfill

more environmental and social gornance needs for companies and -- needs. companies and institutional investors are pushing towards that as well. he will sell these oil projects to someone else. is anything really changing or are the deck chairs just moving around? francine: a fair comment. let's get straight to the bloomberg first word news. >> bloomberg has learned in a show of goodwill ahead of upcoming trade talks, china may resume u.s. farm imports. this coming as president donald trump says he is postponing a 5% tariff increase by two weeks. the delay pauses u.s. levies on china imports at 25% until october 15. u.s. national security advisor john bolton left after arguments with president donald trump over easing sanctions with iran. this is according to sources in the white house. we are told the president considered a meeting later this month with iranian leaders.

bolton argued forcefully against this. the u.s. government is promising to increase oversight of the e-cigarette industry. president trump saying vaping has become an urgent public health concern. u.s. health secretary alex azar saying this year, 5 million kids vaped. this is a jump from 3.6 million in 2018. state and federal investigators are racing to identify a mysterious lung disease. it has been linked to the use of e-cigarettes. for a second straight month, electric car sales falling in china in august. this is the latest sign one of the most durable pillars of the auto market is crumbling. from a year earlier, deliveries of new energy vehicles declined to 85,000 units. and veteran oilman turned corporate raider t. boone pickens has ed at the age of 91. the wildcatter became a billionaire energy investor and a vocal supporter for wind and natural gas power.

three years ago, he suffered several strokes and a bad fall. in the 1970's and 1980's, he achieved fame for a takeover bid -- for takeover bids, correctly betting on oil and gas. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thank you so much. the full scale of the damage of the deal brexit could cause u.k. has been revealed. warned ofyellowhammer food and fuel shortages, disruptions to the supply chain, public disorder if the u.k. crashes out of the eu without an agreement. the scenario undermines prime minister boris johnson's assertion that the u.k. can actually cope with a no deal brexit. mp's have passed a lot intended

to prevent the prime minister from forcing through a no deal brexit. he says he is ready to do it anyway. trevor greetham is still with us. rosalind. is how do i read this yellowhammer? this is kind of worst-case scenario. it could be better, it could be worse. >> there is nothing incredibly startling in this report. some of it was coming out already last month. you put it all together in a document boris johnson did not want released. andpart of it was redacted reports say that involves oil prices. it really undermines his assertions that a no deal exit would not be the equivalent, essentially, to one apocalypse, that it would actually be ok. lawmakers have moved in parliament to avoid a no deal

brexit but we will see the public concern about that rise. managing those public expectations is really the key. francine: what does it mean for the possibility of no deal brexit? would this force the government to cool off? they can break the law. even if parliament does not want a no deal, they could go ahead. >> boris johnson seems to want this on the table no matter what. he's convinced that having this in his back pocket will help his strategy of dealing with the eu in the coming weeks. hit much more than theresa may, he's willing to -- he's much -- much more than theresa may, he's willing to go ahead. the perverse scenario out of this, is that it forces boris johnson to the table rather than the eu towards boris johnson. francine: how should the markets read this, trevor? we are still unclear about whether the u.k. could actually crash out or whatever you want

to call it. trevor: yes. well, the sterling markets have seen a big drop in volatility. we have got a chart. we have got the trevor chart. this is sterling volatility against the dollar. when it is on the high levels, it is rivaling equity market volatility. you can see the collapse in volatility after the march and april deadlines were extended, we had a quiet summer. withee it ramping up again boris becoming prime minister on the right-hand side of the chart. that peaked. the collapse is the currency market saying thank goodness for that. i think there is still substantial two way risk for sterling. it is possible some kind of deal is coupled together with north ireland backstop. it might be the last chance to save brexit. on the other hand, you can find

that the government is willing to effectively break the law and leave with no deal. there is another possibility as you come to the point where parliament is returning. you could get a vote of no-confidence, an interim prime minister, and then everything is on the table, referendum, election, all possibilities are still there and a day is a long time in politics. francine: andrexit is 49 days away. if you look at the timeline of all this, i know there are a couple of rulings. the supreme court says whether it is lawful or unlawful. >> there is likely to not be much in between, to be honest, because parliament is sitting and waiting. the supreme court sitting september 17 to hear the scottish case, the belfast case today. all of those decisions get handed to the supreme court. do they rule if they agree that boris johnson has to go back to the queen and ask again the question about suspension of parliament? how does that play out?

does parliament come back earlier than boris johnson would want? what does that look like? does that create the space for a no-confidence vote in him? does it bring down the entire government? francine: how much do we know about how the parliamentarians opposed to brexit are organizing themselves? are they on the same page to try and stop a no deal brexit? >> we are seeing some movement between pro eu tory and the labour party. how far is that willing to go? there are still fundamental differences between these parties, not just on ideology, but concerned that if they push too far, they might actually even push jeremy corbyn into power. certainly, the tories, even if they are pro eu, do not particularly want that. francine: thank you so much. our executive editor for international government and trevor greetham stays with us. coming up, opec plus offers reassurances that their commitment -- they are committed

to cutting production. there is a challenge in managing the market into 2020. we will discuss that next. this is bloomberg. germany's angela merkel speaking at the frankfurt auto show. we will see if she talks about possible tariffs from president trump or not. you can follow that on live go. ♪

♪ francine: this is "bloomberg surveillance." i'm francine lacqua here in london. let's get straight to the bloomberg business flash. >> we begin with that news that

you broke moments ago on british petroleum. the ceo plans to sell some oil projects and curb others to align with the paris accord on climate change. senior executives meeting recently to discuss how to cut carbon. it is grappling with the shareholder resolution on this issue. the british energy company agm report back to its later this year. new plans for an ipo of its asian business for the world's biggest brewer. two months after ab inbev scrapped the hong kong listing, it is now aiming for an ipo of budweiser brewing by the end of september. the revised application excludes its australian operations. they are being sold to asahi. today shares in hong kong's , stock exchange falling sharply after its unsolicited bid for its counterpart in london. hkex is offering the equivalent of $36.6 billion. the ft reporting the llc is said to reject the bid amid doubts

about political risk and deal structure. the stock is trading well below the offer price. that is your bloomberg business flash. francine: oh plus is gathering in abu dhabi as they are looking -- opec plus is gathering in abu dhabi as they are looking to reassure that they are cutting production. says opec plus faces a significant challenge in managing the market into 2020. trevor greetham from royal london asset management is still with us. i don't know if this could be a litmus test or the first thing to go if there is a sharp downturn in the world economy or if the surplus could be beneficial for the world economy. price is goodl for the world economy. a collapse in the oil price usually tells you something bad is happening to demand. the outlook for the world

economy i think is not too bad if central banks like the ecb today and the fed next week do sufficient easing to get things moving. inflation is low. they will be using policy as much as they need to -- easing policy as much as they need to. francine: are they going to get much worse? trevor: it depends on various things. i think we are pretty close to a but itin global growth, depends particularly on the politics. if you have a no deal brexit and ramping up of a trade war, i think things get quite worse. francine: brexit is a local issue. would it be a shock? spending, i mean, what exactly -- trevor: i don't think it is a local issue. not only are you already seen quite a big disruption in the u.k. and european economies, but

you see on impact on third-party trade. if germany is trying to get a contract with the chinese customer, the fact that the chinese customer is worrying about their supply chain in the u.k. is affecting them. remember, even in the 2016 referendum, global stock markets so that. there is a global issue. we are heading towards october when markets tend to have peak volatility. there are a lot of things we have to get through. generally speaking, we would be buying debt. francine: would brexit coupled with extra tariffs be enough to put the world at recession risk? trevor: i think a lot of countries are close to recession, possibly already in recession. i am not too hung up on the precise definition of recession. central banks are already easing policy, inflation is very low, and the worst things get, the more they will ease. francine: all right, thank you

so much. trevor greetham from royal london asset management stays with us. ipo.rk's troubled major changes are being considered for the governance structure to address investor concern. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua here in london. now to a story we are continuing to follow. we work's troubled ipo. major changes are being considered to its governance structure to address investor concerns. are worriedad banks about going ahead with a share sale that can value the company as $15 million. -- $15 billion. trevor greetham is still with us. there are a number of articles

suggesting that whatever is happening with we work, it puts a cloud over unicorns. does it change the way you look at the ipo space? trevor: i am not a stock picker. i am a more macroeconomic person. you can understand that companies want to ipo. stock market valuations are high. volatility in the market is around the corner at any moment. that is the danger. quitee we are constructive about stocks over the next year, we think we will see more ipos coming through. the technology sector is still favored within the u.s. stock market certainly from the top-down point of view. i think you will continue to see quite a lot of activity. francine: do you worry about regulation? yesterday, there was a story about amazon possibly being investigated for its market price and how it does that. it has started in europe and other u.s. is looking at it.

i imagine there will be similar cases for others, right? trevor: yeah. they are a victim of their own success, in that sense. it is one of the sort of clouds in the silverlining, if you like. i would expect the technology sector to outperform. in the next year. . francine: what is your take on fixed income? i want to ask you about negative rates in the u.s.. trevor: i don't think you get negative rates just because you asked for them. francine: what if you ask forcefully? to rig the have economy to get negative interest rates in the u.s., and i don't think trump will go quite that far. somebody said negative german bond yields were not mathematically possible. francine: it is possible, now we

know. how much lower can it get without really killing the banks? trevor: it will put pressure on the banks. if it's part of easing general monetary policy, it is the right thing to do. you will get very low interest rates if you get a very deflationary economy. at the moment, the u.s. economy does not look very deflationary to me. globally, if you stripped out trade, which has weakened this year, domestic activity is not that that in most countries -- that that in -- bad in most countries. over the next year, i would expect bond yields to be rising again as central banks step back from their easing. we talked about the near-term dangers. things could get worse before they get better for the world economy. francine: trevor, thank you so much for joining us today. royal greetham, head of london asset management. tom keene joins me out of new

york as the clock ticks down to the eagerly awaited ecb meeting. we will speak to janet henry and alberto gallo from algebris investment. some breaking news when it comes to brexit. overall, stocks rising. there seems to be a little bit of easing on the trade tensions side. bonds easing up. angela merkel speaking at the frankfurt auto show. we will follow anything she does and i am looking at euro rising. policymakers expected to lower the -- risk. this is bloomberg. ♪ devices are like doorways

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goodwill gestures. president trump delays a tariff increase for china. beijing considers resuming farm imports. no deal scenarios. boris johnson's government publishes its worst-case brexit outcome. "operation yellowhammer" warns of food and fuel shortages. good morning, everyone. good afternoon if you are watching from asia. this is "bloomberg surveillance." i'm francine lacqua here in london. tom keene in new york. we are keeping a close eye on the new york stock exchange. numerous reports on the fact that they are not backing the london stock exchange to be taken over by the hong kong exchange. tom: price will matter. we will see what hong kong does in rebuttal. is ecb meeting, i love what said in our article this morning. this will be a tense meeting and press conference. francine: it certainly will. we will see how markets react

and if president trump tweets while president draghi is talking. let's get straight to the bloomberg first word news. theome goodwill between u.s. and china as the countries prepared to resume trade talks. president donald trump is postponing a 5% tariff increase on chinese goods by two weeks. that means china can celebrate october 1 national day without an escalation in duties. china may allow renewed imports of u.s. farm goods including soybeans and pork. in the u.k., a government document warns of chaos if the country leaves the european union without a deal. the paper predicts food shortages, disruptions to the supply chain, public disorder, and pressure to return to the bargaining table. bps ceo says he will sell some oil projects so he can meet climate targets set by the paris accord.

dudley is also willing to curb the development of other projects. climate concerns are affecting investment decisions of the biggest oil producers. pickens had enough careers perhaps for a dozen people. yesterday, pickens died in texas. he was 91. he earned much of his wealth after turning 75 by betting on rising prices for oil and natural gas. that is your first word news. tom: thank you so much. boone was great. he was a gracious gentleman. it was a great loss not only in the oil business, but just the grace of a wall street from another time and place. equities, bonds, currencies, commodities. a lift to the markets. this is what happens when the president changes his mood on tariffs.

27,184.ures out to 15, 14.71.l under can you tell i have got the plague? two-yearthe three yields. that big positive u.s. yield. francine? francine: well done. i am looking at equities. they are a little on the upside -- or, they were on the upside. overall, markets this morning were more joyous about the fact that trade tensions might be easing. bonds up a touch. there is a lot of uncertainty. the euro rising. european bonds also rising ahead of the ecb, where policymakers are expected to lower the deposit rate and start a new round of monetary stimulus. pound a study.

investors -- pound is steady. investors trying to figure out what comes next in this brexit saga. tom: i want to show a chart that has been floating around. this is a great chart. thank you for this. the standard minus dividend yield. we've never been here, essentially. we have plunged down to where the dividend yield is becoming near equivalent to your average run-of-the-mill bond. that is extraordinary and a persistent trend. the idea of stock dividend is yield equivalent, all my radar goes up, but that's where we are. francine: i like that chart. mine isquite simple -- quite simple. trevor greetham alerted me to it. you can see it is coming down. the second peak is basically the last time we had the stud line.

what trevor took issue with is that implied volatility came down after the vote in the house of commons to for bid a no deal rbid a no deal brexit. he thinks they will ignore the lot, so implied volatility sould be higher -- law, implied volatility should be higher. officials expected to cut rates at the ecb meeting today. there have been protests amongst mario draghi's ranks. officials are among those who have recently expressed skepticism over the need for bond buying, saying they would be disproportionate to economic conditions. we are delighted to be joined by janet henry, hsbc's global chief economist and alberto gallo from algebris. when you look at what mario

draghi can and may do and will not do, is he going to disappoint the market? janet: it's always possible. we have been promised, the markets have been promised a packet of measures. there needs to be something on , and, something on qe something on forward guidance. don't forget the enforcement of the communication we get from mr. draghi and the governing council. sometimes when he has under delivered a little bit on the actions, he has managed to prevent markets falling by the language associated with it. francine: he is in a transition period. in two muncie leaves. the soup -- months he leaves. does he want to do the package as much as it can? -- as much as he can? janet: it's important he follows through from the previous meeting. some of the critics were not being vocal and some of their

criticisms about some ecb policies. we had those initial comments regarding the fact that if you are delivering policy at this stage, you need to overdeliver, at which point the markets expect this massive over delivery. now there has been this measure pullback. i think yes, he needs to deliver. it could be that he just raises the issue or limit. i sit -- issuer limit. we are looking for 20 basis points on the deposit rate, raise the issuer limit. tom: we are thrilled to have both of you with us. do not adjust your tv set at home or your radio set on the road. that's how the new york times takes its day looking at the topsy-turvy world of negative interest rates. alberto gallo, what do you actually do when it is a bond world flipped upside down?

how do you process an ecb meeting when you have real money at risk? alberto: first of all, qe is not a solution to europe's problems or in general to a world of stagnation. and helps, but economies are becoming more addicted to -- it helps, but economies are becoming more and more addicted to rate cuts. would try to invest in companies that are deleveraging -- we try to invest in companies that are deleveraging. there are a lot of zombies around. argentina went into distress this year. this creates a lot of opportunities for investors that can distinguish between the alive and the zombies. in this particular case with the have loweredthey expectations to be able to surprise with less. andink they will deliver

restart qe for a much longer time, maybe 9-12 months. smaller amount, but longer time to bring down the cost of fiscal easing in europe. hopefully germany follows. tom: we will see. we thank mohamed el-erian for watching from denmark, where he is in the process of trying to keep agreement from denmark -- keep agreement for denmark -- keep greenland for denmark. theory draghi's game with that great map we just put up of the austerity crew versus everybody else in europe? is a key decision or a more complex game theory as he tries to hand up to madame lagarde? janet: i think you have divergences of opinions, no doubt. we have divergences of opinions on the fed as well. i think within europe, there are

different views of the interpretation of the ecb's mandate. theirow, how rigidly interpretation of the mandate. there is a divergence of opinions on how effective qe should actually be. the are those that think things are slowing down, the risks are to the downside and you have limited ammunition. you need to go in and the perfect world -- in in the perfect world. it's not just about monetary policy. we know the issues in europe that will eventually deliver stronger growth cannot be delivered by monetary policy as t all. tom: absolutely fascinating. we are thrilled to bring you janet henry of hsbc and alberto gallo of algebris. we will launch into many other hours of "surveillance" this morning leading up to the ecb

announcement. at 8:30, i will say this clearly, the most fascinating press conference in ecb history. what will draghi say and not say? stay with us. this is bloomberg. ♪

♪ tom: good morning. "bloomberg surveillance." the day of an ecb meeting. much other news as well that we will touch upon through "surveillance today. we are thrilled to be joined by janet henry of hsbc and alberto gallo from algebris. what i want to do, because you demanded it, is give you a standard deviation study on a paul volcker era bond trend of bond yield lower and lower and s&pdividend flat --

dividend flat. alberto gallo, what does the ecb to the incentives to own yield or by dividend growth out into the future? weerto: this year so far, have seen investors being very long central banks but still sure on growth. essentially, everyone has about ands, bunds, treasuries, semi-court bonds. very few have bought into assets that require growth to stay height, so high-yield that, for somple -- high, high-yield debt, for example. we have a bipolar market. assets that require growth that

are linked to some momentum in growth are still unloved. qe accompanied by some fiscal stimulus or some positive news on u.s.-china, these cyclical assets that everyone is underweight squeeze higher. we have seen it with credit spreads, bank equities in the last few days. there needs to be a sustained fiscal effort or more certainty on u.s.-china. it is a very polarized market. we were also long central banks in the first half. now we are focusing more on the growth assets, because we think there can be a catch-up of credit to the very low level of yields in government bonds. tom: janet henry, explain to me what greece, portugal, even spain want from draghi today versus what germany and the netherlands want from draghi today. janet: i think they probably have a lot of divergences. where they particularly have

divergences is not just on the effectiveness of qe, but on the need for or magnitude of any deposit rate cut and the extent to which a tiering is involved. in the peripheral countries were interest rates tend to be tied to more variable interest rates, they can feel the pain, feel the cuts in deposit rates but not necessarily the relative benefits that the german banks would see if there was a tieirng introduced that meant they were penalized less for negative deposit rates. there is a lot of detail involved that will impact the different countries. certainly, the peripheral countries would be more in favor generally -- this is a generalization -- certainly the spanish will be in favor of more quantitative easing. francine: overall, if it is much more negative, even with the tiering system, can the banks

actually fund this? janet: i think the countries in europe that have the most excess reserves are obviously the core countries. it is the likes of the german and austrian banks. i don't think there is much of a risk of a credit crunch in those countries. the issue is that there is a demand issue rather than a supply issue. there is no evidence of a credit crunch, whereas in the peripheral banks, i suspect it is more of a margin story. are we already at that low level or any further reductions would be counter effective? francine: thank you both. we will get back to janet henry from hsbc and alberto gallo from algebris investments. the u.k. government warns of protests, chaotic borders, and food shortages after operation yellowhammer, a document that was going to be kept secret. this is bloomberg. ♪

♪ >> you are watching "bloomberg surveillance." let's get the bloomberg business flash. job cuts on the way of british american tobacco. by january, the new ceo plans to eliminate 2300 positions that will affect one in five management positions. in major markets, cigarette sales arctic lining. british american faces pressure to jumpstart its underperforming portfolio of cigarette alternatives.

opec and its allies facing a significant challenge next year in managing the oil market. the iacs oversupply returning -- over supply returning next year. oracle co-ceo mark hurd is ill. he is taking a leave of absence for health-related reasons. announcementhe after bloomberg contacted the company in relation to a story about hurd's health. francine: thank. you so much. . in the u.k., a government document warns of chaos if the country leaves the european union without a deal. the paper warned of food shortages, disruption to the supply chain, public disorder, and pressure to return to the bargaining table. we will have plenty more on that. joining us now is the bloomberg

opinion editor. thank you for joining us. markets are not really moving on the back of it. is it because part of it was leaked or is it because this is just worst case scenario? >> the news of the yellowhammer report was leaked a couple of weeks ago. it is not a huge surprise what is in there. the main difference is that the leak referred to as a base case scenario. the actual report says it is a reasonable worst case scenario. i think much of this has been taken, sort of priced in. my own feeling with the yellowhammer revelations is that the real problem of no deal is not the immediate disruption that we might see in the days after or weeks after. those things are pretty likely to be mitigated, at least to some extent, by a lot of the planning taking place. what happens after that?

how does the government sit down with the european union and negotiate a new trade relationship? what about all these nontariff barriers that will be a factor of life as a third country, not as an eu member? i think those are the kinds of things that will worry markets, but not yet. francine: what do we know about what happens in the next 2 weeks? do we just wait for the supreme court to see whether pro roguin parliament wasg awful -- lawful. >> i think we will see boris johnson -- he is trying to get the public to focus not just on brexit but what the conservative party can certain voter populations. we are likely to see a move to recall parliament but what can

parliament do between now and october 31 that it has not already done? i'm not sure it can do very much about it will seek to hold the prime minister to account, to make him uncomfortable. a lot of the battles between executive and parliament that we saw in the last couple of weeks would return to the fore. tom: describe the level of confidence that the no deal leavers have that there will be x number of weeks of turmoil and things will get back to normal. what is their level of confidence, their level of belief that that will occur? >> it's hard to say what their real level of belief is, but they are maintaining the view that any disruption would be short-lived. i think a lot of businesses and economists would contest that and say that in fact, you know, you may get the disruption to say fresh food supplies or, you

at bordererms of cues posts may be short-lived. there is a lot of long-term uncertainty that would have an impact. you now have both sides insisting that the other is exaggerating the consequences of either no deal or refraining from that. francine: thank you. so much. coming up, the markets rise on some hopeful signs of rugrats in the trade war but is it just baby steps or an actual breakthrough? one of the other angles we are trying to explore is whether mario draghi's press conference, president trump may impose tariffs. this is bloomberg. ♪

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

show of goodwill, as president trump says he is postponing a 5% tariff increase by two weeks. the delay pauses u.s. levies on china imports at 25% until october 15. janet henry and alberto gallo are still with us. let's say you remove the risk of trade. what does it mean for the global economy? alberto: we have got a lot of uncertainty which has lowered expectations. and you are an entrepreneur you want to invest in a country, you cannot deal with the flip-flopping that has been happening and you just get out. investment has stalled across most developed countries. you need a medium-term deal for this to come back. we are in a kick the can economy with risks to the downside.

investment would resume a little , butf we had a brexit deal elections next year are another piece of uncertainty. we would see markets rallying, but growth still positive but average. francine: how would you describe the fed of the world economy? janet: the global economy is slowing and the risks are to the downside. this is what central banks are against a to, risks backdrop where things are slowing and in revisions to the u.s. data, it is clear the slowdown began earlier than was previously thought. of a 10 yearstages expansion, things are slowing down across all regions of the economy, but there are no acute warning signals we will slide into a recession. trade uncertainty is the one thing that could lead to a more

severe downturn. tom: the hong kong and shanghai banking corporation has an interesting view on china. what is your estimate on china, sub 6%? 5.8% fors, we are at 2020. we expect further policy stimulus. we have reserve requirement cuts and we expect more this year and in 2020, and we expect more infrastructure spending. we are not seeing in china across the board easing to deliver a cyclical upturn. that it will be weaker and trade tensions will be with us for the foreseeable future. tom: in new york city with our first word news, here is viviana hurtado. viviana: a victory for president

trump on a signature issue, the supreme court says the government can limit who can apply for asylum. a series of lower court rulings putting the law on hold, but the supreme court lifted the delay. president trump ruling out cutting capital gains without going through u.s. congress. he does not feel the benefit would go to the middle class. thomas piketty's last -- he is out with a new book on how governments should get rid of billionaires. long,more than 1200 pages but you will have to wait until next year for the english addition. his capital has sold more than two and a half million copies.

global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: thank you so much. it was stunning yesterday as all scrambled on this transaction of 18 hours, 18 time zones, the hong kong stock exchange going to acquire the london stock exchange, demanding they blow up their transaction with were refinitive.-- perspective,y two .e drag in bloomberg opinions a fabulous essay more on the cultural asset. paragraphke finance 42, page 12, or just a cultural disaster?

more.is we have one company that is so strong in equities, the hong ko stock exchange, and the stock exchange with fixed income. there will be regulatory problems and hurdles in getting this deal done. the hong kong stock exchange is trying to make it elf out to be a pure global hong kong company. tom: you should have heard sarah yesterday. she was out of control. let's get a day to up date -- let's get a day two update. or can dead on arrival they nudge this forward? >> it is still a breaking news story and so many things are still in the air. we need to see whether the lsc will engage or reject.

they are leaning toward rejecting the offer in its current form. there are a number of obstacles in place. we saw both stock exchanges rise on the news and that has to do at the number of issues in place, mainly political. that is driving concern. francine: what is driving concern executive west -- exactly? are they asking for a better price? sarah: on the geopolitical perspective, you have the concern about whether a hong kong or chinese business comes in and buys a gem in the u.k., and since brexit, the u.k. government has said it is open to business. this would be a peer test of test ofthe u.k. -- pure whether the u.k. is truly open for business.

for the u.k. to be seen doing a deal, there are so many political sensitivities and the u.k. has to be mindful. the question the lsc needs to ask, does iteds to want to become a data powerhouse or continue on the exchange route and become a larger exchange power? francine: what can you tell us about how much do we know the hong kong exchange will pay up the price for it? is this a deal they want at any cost? up,a: they are happy to pay because at the moment as we know, there is a lot oproblems ishong kong and also, china opening up its national markets. we saw the shanghai stock exchange going straight to

london and listing chinese companies. there is a feeling by the chinese stock exchange that if they do not become bigger, they will be bypassed by their big story which has always been the china gateway. that story is getting more eroded as time goes on. francine: thank you both for joining us. up next, signs that greece is returning to normal after a decade of financial crisis. at an year bond yield is all-time low. this is bloomberg. ♪

♪ surveillance."is

in"surveillance." let's zone on the fundamentals of the european economy with janet henry and el beltre gallo -- alberto gallo. there is lack of inflation which mario draghi is trying to spur. you have a difficult and patchy -- growth patches because all countries are so difficult -- different. janet: that is true. they will probably say growth has been in line with expectations but the outlook deteriorated. the forward story in europe is extreme weakness in the industrial sector. germany has been in an industrial recession for over a year because of the auto story.

the industrial recession has been marked everywhere. -- service sector has been and even the consumers have been marked. whatg rates have risen and doesn't in what have been some of the larger economies. -- in what have been some of the larger economies. one thing we keep saying is whether europe is becoming more like japan. alberto: there is a japanification process. the ecb has taken a lot of the burden for stimulus, but it has been like the ecb was pushing on the accelerator when governments were pulling the handbrake because of low deficit limits across the board. when the u.s. started qe, the deficit was double digit. there has not been the fiscal push.

there could be a positive risk if there is in the future more fiscal push, now that you have governments getting paid to borrow. there are other risks like car tariffs that could push the euro zone towards much lower than 1% growth next year and maybe some countries and a technical recession. we have a big diversions between core countries and periphery. we have a big gap between german and italian growth. thatgap is due to the fact a lot of the effort has been to push the euro down, which benefits exporters and germany, while structural policies and fiscal spending has not happened, particularly in some periphery countries. we have low growth diverging. japan is one country, very cohesive.

in the euro zone if you have japanification and diversions, things can break. tom: alberto gallo in janet henry with us as well. -- and janet henry with us as well. we single-handedly moved greek gdp with a wedding south of athens and many of our staff enjoying athens as taurus over over the-- tourists last few weeks. bringstelis in new york with him the pedigree of merrill lynch and working with william dudley of goldman sachs. we are not talking about what is the euro going to do. congratulations on the recovery of greek gdp. ago in the years gloom of this prime minister or that, no one believed it would

happen. how did greek gdp recover? alex: it is a great pleasure. it is extraordinary, we have the most extraordinary economic data. tom: what is the driver, tourism? alex: the new government. people know there is predictability and stability, lower taxes, more reforms, and a government focused on reforms. tom: ages ago i had a finance minister, when greece was flat goal wasck, said the to get greeks to bring their money back to greece. is there evidence of that? alex: deposits are increasing and we will be making reforms. a program well in incentivize wealthy foreigners to greece. it is all about confidence in governance, putting the right

people in the right place to create the right institutional framework and trust returns. tom: you studied with ben bernanke. this is what went on in the u.s. and -- depression, we needed integrity. likere the greek banks not the german banks? how are they doing? alex: we have been through a long recession. the government has a minister responsible only for the financial sector. the previous government used to regularly attack central governor. francine: how well the european will the european commission approve it? alex: we are in conversations toh digit, and we want

continue with the aps scheme to introduce a sovereign guarantee to transfer the bonds to allow a rapid deceleration. we have all the tools in the toolkit including the bank of greece plan, and we will move aggressively to move banks forward. francine: if that is approved, what is your estimate of how much could be cut from the balance sheet? alex: we are still in negotiations, but it is likely to be at the higher end of estimates. francine: higher end of what we are hearing? alex: correct. francine: give a sense of how difficult it will be for your country to grow given the trade and downturn? sentimentt economic hit the highest level since 2007. european sentiment continues declining.

this is clearly a different mindset. it is a new government focused on reforms. we want to double greece's growth rate to 4% and we are ready to do the reforms to achieve that growth. we are ready to put in place the right governance and people to attract foreign investments. tom: you bring the holistic view, the quantitative you, and have made a conviction call of being wrong. with that said and how you know the market can be brutal, what do you need for mario draghi today? greece is a periphery, a success story, but what do you need so we don't screw up the recovery? alex: we are fortunate enough to be in a position where we can benefit from the ongoing decline in yellow. -- yields. tom: what is your optimum euro?

government are ready to talk rates under the framework of monetary policy. it is determined by the market. we don't believe in devaluation, we believe and reforms. -- in reforms. tom: alex answered that so well. he never would have done that at merrill lynch. francine: what does greece need from germany? do you need fiscal stimulus from the euro zone to help your country? alex: we are not in the business of asking for favors or help. we are now equal partners with the rest of the european union. i want to highlight that two days ago, the great commissioner was nominated to become vice president of the european commission.

this is an example of how far things have gone. grace is no longer the pariah. the new government achieved a 40% growth -- vote at the election. tom: economists that have thought about the future of europe, how does europe clear the debris of this great recession? how does europe move on? does this eliminate the debt down to zero? alex: we always believe in the spirit of cooperation, and we need to do the reforms to make the economy grow faster to allow the debt to become more sustainable. tom: alex patelis, chief economic advisor to the prime minister of greece. ec we have to have a countdown clock, six hours, 54 minutes.

how can it be six hours? i am trying to do the math. eight: 30 is when it matters. matters.s when it ♪

♪

francine: this is bloomberg "surveillance." we have talked about the ecb, greece, and brexit, but we have not focused on jay powell. janet henry and alberto gallo are still with us. if you were to set rates for the u.s., what do they need? janet: starting with a blank , -- we are not starting with a blank piece of paper. midcycle easing as we will get more rate cuts, so i expect next week will be a rerun ,f the last minute -- meeting 25 basis point cut with a couple of dissenters. inhave had some better news terms of headlines on the trade front, but it is clear that global growth is still slowing

and uncertainty, they are concerned about. they have concerns about how much policy stimulus the rest of the world can deliver if things surprise on the downside. francine: there was a little bit of communication bundling with markets not understanding what they should be focused on. will it be different this time? alberto: we hope the information will be clearer. sometimes when the central bankers delivery cut, the information around it is as important as the cut itself. generally, it depends on china. step, peacefulby run-up to the anniversary of the chinese republic -- francine: 17th anniversary. alberto: then tensions will come back in october and we could see

three cuts this year rather than two. if the trump administration comes back at china after the anniversary, we could see the fed being pressured to cut more after 25 bps this month and maybe another in december. tom: thank you. driving forward the conversation to an exceptionally important ecb announcement. we will move forward into our next our, joyce chang scheduled to be with us. the jp morgan view on china, europe, and rates. this is bloomberg. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ tom: this morning, quantitative easing, it is a theory that will

be tested again. 8:30, mario draghi will speak. germans and greeks and the markets will listen and just. -- adjust. the dow 27,000. problem in have a the era of apollo. who will get more airtime -- binding or warren? -- biden or warren? "surveillance." good morning. what are your thoughts on what we will see for mario draghi at this press conference? it is truly extraordinary. francine: the market consensus has a powerful package for mario draghi. will he be able to deliver enough for the markets to be pleased?

when he just came short of expectations in the past, he was always in the language able to talk up expectations. it will be interesting to look or signs of tiering, language that they are looking at the impact of banks to mitigate that. before the second to last news conference when madame lagarde takes over. dynamics, and we will give you coverage across bloomberg. right now, here is viviana hurtado. some good well between the u.s. and china as the countries resumed trade talks. president trump is postponing a 5% tariff increase by two weeks. that means china can celebrate their international -- there national day without import of duties.

u.k. where a government document warns of chaos if the country leaves the predictingt a deal, tod shortages and pressure return to the bargaining table. bps ceo bob dudley will sell oil projects so he can beat climate targets set by the paris accord and is willing to curb the development of other projects. pickens had enough careers for a half dozen people. or and a oil wildcat vocal supporter for wind and natural gas power. he died. he was 91. tom: thank you so much.

mr. pickens was a total class act. let's go to the data. we have an esteemed guest to drive forward the conversation. s&p futures up five, dow futures up 58. year-round does nothing. 15, 14.77.l under i lay out the negative rate sure of germany and the extraordinary experience, the japanification of japan and the u.s. is a clear outlier. francine: i am looking at the bonds. central banks, the ecb meeting and about an hour and a half. i am looking at chinese renminbi, it strengthened a touch. we saw the european structs --

stocks erasing earlier gains. drifting as investors are trying to figure out what happens next in the brexit saga. tom: i want to hit this twice in this hour. this is the essay of the summer. down we go on lower and lower interest rates. modeling out how to get to a 10 year yield below zero. the extrapolation is somewhere in the vicinity of 2021, the rollover is evident. some of the tension that is in that meeting with nestor draghi today. -- mr. draghi today. francine: financial conditions a crown's the world -- across the world have been more accommodative. the problem at the euro zone's poor credit demand. to look at on ecb

day. --: way bring in joyce chang we bring in joyce chang, head of global research at jp morgan. bringing in the holistic view of jp morgan. you often hear from mr. norman and others on equities and fixed income, and certainly within the greater economics. i want to go with this as a backdrop to draghi. this was clearly the most talked about essay of the summer. it is not a forecast, it is a model of what if. how close is this stunning jp morgan call of nominal negative interest rates in america close to being a forecast? joyce: it is not a forecast, but if you look at the negative yielding debt, 33% of global bond debt has a negative yield.

in the euro area it is 60%. what is the possibility of zero interest rates in the united states? we have extrapolated, is there an inevitability that china will go through some form of japanification as well? times today york with a negative interest rate renew. do not adjust your television set. it is an upside down world. how does mr. draghi deal with the negative interest rate experiment? s-landau is fuming. do you agree. joyce: there is concern about weak earnings growth so there is a question of whether this

experiment has worked. i think negative rates are here to stay and our expectation is euros foroints, 30 nine months for qe. it is the language everyone will be looking out, which will push this out to the end of 2020 with the possibility of acting when they need to and bringing the rates lower. i am not expecting you will see as much as the market is hoping to see today as we go into this transition in leadership. this debate is only beginning. we have 20 out of 22 central banks still easing, including emerging markets. we have three fed cuts in our forecast. this is a debate, along with the risk of the recession debate, we have seen a huge move. last fall, the negative yielding

debt was $8.5 trillion. we have seen negative yielding trillionh of 13.7%, $7 on our index and $17 trillion on the bloomberg bark is index, and risk a recession at 40%. francine: overall, when you look at negative rates, are they more of a hindrance than benefit? what: the concerns are will be the impact on banking and calm? it will intense the debate on deposit schemes. you are seeing a lack of instruments. the ecb and boj have more room with asset purchases, but you are running out of policy tools. you have easing, negative rates, and a number of things that are self-fulfilling. for every 10 percentage point increase in negative yielding debt, that flattens the five to

30 treasuries. the yield curve has a linkage to the negative yielding debt. francine: when you look at where we are in the global economy, when will we see a repricing of fixed income? what does that mean for the kind of world we live in? joyce: they will be focused on bank income and what this means for profitability in europe in particular, given that 60% of debt is at a negative yield. you have a debate that has started, will the u.s. go to zero interest rates? there is a question on whether china may have to contemplate given their demographics and the high level of debt. predictingmorgan china will see a nominal negative rate?

joyce: let me walk you through the longer-term numbers. we have jake -- taken chinese growth down to 5.8% next year and we think it could go to about 4.5% growth. they have a debt to gdp around 300%, and if you look at the consolidated fiscal deficit, it is 10% of gdp. 70%ou look at their credit, is used for debt service. are you going to continue to see yields go lower in china, that those are the policy levers they will use, that this is more of a japanification scenario not just for the euro area but for china, given the challenges they have which have parallels in japan? tom: the joyce chang model, how china goes to a lower gdp, 6% down to 5% down to 4.5%.

this is irving fisher, how the chinese economy adjusts to the lower growth rate and terminal value is extraordinary. joyce: this is the longer-term story. francine: we spoke to an official familiar with what the ecb had been doing and they said the meeting started yesterday. exchangeden officials their views and presented economic scenarios. we understand from this official it was pretty difficult and longer than usual what the markets are expecting from the ecb. we will be back with joyce chang. a stimulus slowdown -- showdown, expect drama at mario draghi's last meeting as ecb president. yorkan see that 8:30 new or on your terminal. this is bloomberg.

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>> discuss this issue, and we for this issue when it happens. >> well it a below 7 million as well? >> it is in the meeting. >> what about at the end of the year? >> your highness, what about the eurozone? we will continue the discussions positively and diagnose the discussions. when the elections come the situation will be [indiscernible] with our friends diligently and

seriously. iraq andance in nigeria, did you feel you had to ask? for those who know me, the moment they walk into our , they break out in the most courteous way telling me what they will do. that is why i was so taken aback. that is why we decided we needed to [indiscernible] >> how do you get on with mr. novak now that you are minister and he is minister? >> it has been the first time i in him, and january --

january. two hours and here was [indiscernible] in that visit, i spent a couple of hours with him and ever since that he has been a friend of mine. he has been a friend of china. more important is the more important friendship with thing king salman -- within king salman on and -- -- is we expect to see that an important moment in the oil market? words, and iith think i know english.

it means that we were coming together. be -- thetinuing to particular alliance we have with russia. [indiscernible] how well it be used? >> you have to divide it. will be roughly around 200 -- share of that will be roughly around 200. indiscernible] to 400.e coming back are talking about two or three years, however it will be part of our production

portfolios. we are sustaining the 9.9, even though we have not yet. more important for the market is the 9.9. 9.189 zero. >> there is a rumor there could be a ipo. a bed of a preview on what that might be? -- bit of a preview on what that might be? >> i am privileged to be part of that deal. time, keeping in mind my commitment to my to waites, i will have for the discussion of this. timeline.with the explain what you [ant about the market is not

indiscernible] are you talking about now? that question was as if somebody was overproducing. i was trying to put a correction that what we have done is to make sure that the market, the inventory is coming down. what we are doing now successfully is inventory is coming down. francine: that is an interesting conversation, an interesting exchange between the oil minister and manus cranny. this comes on the back of the iea saying there could be a surplus which would be more difficult for the opec bus alliance to hold -- opec plus alliance to hold to getting the

surplus down. that was the saudi oil minister saying iranian output would return in about two to three years when they restart. joyce chang of jp morgan, head of research, modeling for gdp.y 5% -- 4.5% china 5% china gdp sub into oil demand and that is where you get a chart where west texas is below $50 a barrel. i believe we have breaking news on the brexit ballet. francine: there are quite a lot of legal challenges to what boris johnson has been doing. the latest comes from belfast where the prime minister has won the ruling on a no deal brexit. we had one yesterday that went against the prime minister. there are a number of legal

challenges to see whether no deal would be against the goodfriend agreement. with whethero prayer rubbing parliament was lawful. parliament was lawful. something we need to talk about more, ecb officials are widely expected to cut interest rates today. draghi'sama at mario second to last meeting as president. he is expected to go big, but there are protests that on purchases are not needed. expressed skepticism over bond buying, saying it would be disproportionate to economic conditions. joining us in frankfurt is matt miller. question-- is the only

disappointo draghi markets or not? matt: that is a good question. the market expects 30 billion euros of new bond purchases over the next year so it will be disappointed with less. bloomberg is forecasting a 45 billion euro program, totaling more than half $1 trillion in new bond buying. a number ofhat hawks have expressed skepticism, but they do all the time when it comes to mario draghi's policy. the interesting thing is the french ecb president expressed some skepticism, and that is not the normal course of action from him. it will be an interesting conference to say the least.

we are looking for bond purchases, 10 basis point cuts, and tiering. those things will be interesting for a euro that is rising in dollar terms but not strong against the pound. tom: matt miller, thank you so much. joyce chang with us from jp morgan. you put your considerable efforts into this. what is mr. draghi's best outcome coming out of the press conference? joyce: everyone will be looking at the language, the leadership changes, and looking forward to november. we expect he will talk to pushing out to the end of 2020, keeping the current stance. tom: is this a gift to lagarde 2020 orhe clock out to 2021? joyce: it is about where the global economy is.

we have seen a deterioration in sentiment for the trade reliant european countries. we are in the 10 basis point camp and we think it is 30 billion euros for nine months. i don't think you will see the most aggressive forecast in the market. indicatorseading have another move downward. francine: it certainly has, and it is something the market will be interested in. when you look at composition that the ecb and composition of the euro zone, is it becoming more like japan, and is there any tool they can use to get us out of it? joyce: there is more talk of a technical recession in germany. they need to use fiscal policy. negative interest rates have not produced the growth outcomes that have actually led to a

different scenario for growth. policy become more important moving forward, that is the key question. francine: well we get fiscal policy? joyce: the leadership change coming throughout many european willtutions, and that become more part of the debate. will that be seen in the u.s. and transferring into europe as we see growth numbers come down? percenta, everyone decline in chinese group has about a .5% decline -- europe is more trade reliant. tom: joyce chang of jp morgan with us, lots to talk about, including the view on global slowdown as approximated through china. huge breaking news through the morning. we did have oil move off manus

cranny's questions to the saudi oil minister, and part of that has to do with a reframing of always tough to guess global oil demand. brent crude may be back under 60. kevin cirilli up early in houston. debateportant democratic as vice president biden and senator warren will no doubt go out it. day, septemberul 12 in new york. ♪

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kong stock exchange because of political and regulatory obstacles. the hong kong exchange made an unsolicited 36 billion dollar bid yesterday. mean, they are concerned because it is a hong kong company or are they trying to angle for a better price? >> it is probably both. people are baffled by the whole situation. you have brexit, protests and hong kong, and then the hong kong stock exchange comes with a proposal for lse. it well come down to what shareholders think and they have the optionality between two deals. we should have a second look at that. people are saying there are merits to that. if you look at the deal they are

pursuing, it will probably yield results in three to five years. francine: is the thinking that the london stock exchange does not want to be taken over by hong kong because part of the prescription as they do not buy itive?ffended to -- refin >> the stock exchange was clear that the deal must be canceled in order for this deal to go through. dealuestion is, is this better than the deal with refinitiv? this is something we should watch out for. i don't believe the board has made up its mind and the story is premature. tom: let's assume china has an unlimited pocket book coming from mainland or hong kong. what happens when they raise the

bid? >> they could raise the cash component. some people in the market say they may have something up their sleeve. for now, they are not going to make another move. they will probably raise the cash component, but it is something they could do if london stock exchange were to engage in talks. the ball is in the court of the london stock exchange and they would have to come back and say, we are engaging in discussions. they have china backing this potentially, and they have more firepower to do a bold move. this is not about price at the moment. tom: someday it will be. covering the hong kong stock exchange story. ,t was an interesting debate

made more interesting in the last number of hours by a unique politician. when ed rendell speaks on the democrats, all democrats and people politically engaged listen. he has written a scathing essay on senator warren of massachusetts. here is the mayor of philadelphia -- the senator appears to be trying to have it both ways, get the political upside from skewing donations from higher level donors and running a grassroots campaign, while at the same time using money obtained from those donors in 2018. warren didn't seem to have any trouble taking our money in 2018, but suddenly we were powerbrokers and influence peddlers in 2019. did he write this for joe biden? kevin: he literally calls her a hypocrite.

biden's headquarters is in philadelphia. democrats want to win back pennsylvania, a state that went to republicans for the first time since 1988. the political gloves are off in houston and that will be a texas tough battle. joe biden, elizabeth warren, bernie sanders all on the same stage. well biden fall into the same trap that clinton fell into when she tried to go after obama? they would like to have a contrast on populism and big donors every single day of the week. this could backfire. tom: we could chat this up until the philadelphia eagles try to win again. asideernie sanders step tonight to give the senator from

massachusetts more air, more facetime? kevin: i think senator sanders will say senator warren's campaign has refused big dollar donations just for the primary and sanders will say, i have refused them for the entire election cycle. this has been so much in the pundit class been made a three-way race, but look for the other candidates to season anning to make it a -- seize opening to make it a four-way race. francine: looks like there is a philosophical or bigger question whether the democrats choose someone who is more left that they believe will be able to counter president trump more, or whether they go more centrist? tryingthe centrists are to say they are not making a

centrist argument, they are making an electability argument. the question is, will that be strong enough to convince voters from the base and grassroots movement to back them? biden still leads at the top of the polls. if you are around the world watching this debate, look to see the economic populism message these other candidates are making. look to see when china comes up, if warren and sanders would use tariffs. based on their historical record, they would use tariffs in navigating trade policy around the world. the populist streak in the democratic party is alive and well. francine: can the debate tonight change the paul's? -- polls? kevin: you will see strong this coming from biden and sanders

and warren. if warren crumbles, she could have a damp. senator harris has not been able to recapture the momentum she had. resurgenceng for a but has had a difficult last couple of months. we will look to see whether another candidate catches fire tonight in houston. tom: it will be a long day and ciri for mr. surreally -- lli. right now, our first word news. viviana: huawei technologies adding a trio of well-connected lobbyists in washington to persuade the trump administration to take it off a blacklist. company executives deny allegations its equipment could be used for spying by beijing.

a victory for president trump a signature issue. the supreme court said the government can enforce the law -- who files for asylum. the u.s. supreme court lifted the delay. putas piketty's bestseller -- his new bestseller explains how the governor -- government should release -- eliminate billionaires. it is more than 1200 pages long. thanapital has sold more 2.5 million copies. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: have you read

"capital"? tom: as the late great martin feldstein said, you buy some of these books and you own them and they are good holding up a window. how many people cover to cover? you have fingers left over. francine: china may resume u.s. farm imports as a sign of good well for upcoming trade talks as president trump postpones a 5% tariff for two weeks. is diana choyleva and joyce chang is also still with us. how do you see this going? i have heard both things. is it president trump long-term wants to stem the rise of china so we could get used to this for the next 10 years without much giving, or he is trying to

pressure the fed to cut rates? diana: i am on the first side of this debate. we see what we call the great decoupling, the fundamental force driving the global economy and markets and politics for the foreseeable future. it is the bifurcation of the world in two spheres of influence, the chinese sphere and the u.s. sphere. the trade aspect of it is probably the least contentious. is real challenge and fight in the sphere of technology. huawei iso way getting off that entity list. francine: how does this end? does president trump back away on tariffs if it hurts domestic products because that will hurt consumption?

joyce: tariffs have already cost the average household $1000. the tariffs have been postponed because the three tariffs go all across chinese imports. there were concerns how this could hurt christmas sales. you see these postponements and delays, but we see questions on whether consumer sentiment will deteriorate if he moves forward past the postponements. luckier,cannot get joyce chang and diana choyleva. we will come back with a killer single best chart. i did not come up with this chart. chart on us, a superb the future for china and the pacific rim. draghi at 8:30, this is bloomberg. ♪

tom: right now, bloomberg "surveillance" in london, new york. we will do a conversation on this chart, single best chart. thank you, joyce chang. we have diana choyleva to comment as well. log china gdp with the persistence last decade of long gdp growth. fore chang is modeling out .5% run rate gdp out there -- there, andn rate out these effects are extraordinary. diana: the chinese growth model is changing dramatically.

2017, it was in the right direction of getting more consumer spending, which had evaded the impact on the rest of the world. but in the context of the trade war and what i say is overall geopolitical pressure, they are going back to investment and this is bad news. even if we get cyclically more growth out of china -- tom: out of the great work out of the western world, bnp paribas, your bank, the belief has always been of structural shifts and she is suggesting it is not happening. joyce: the chinese are trying to see if they can stimulate consumption through the tax cuts. tom: do you observe that? joyce: they are trying not to accrue more debt.

they would have to bring the yields down more, something they have to contemplate in china over the longer-term. that has not been working so far, but the tariffs have taken a toll on china. offave taken about .4% because of the tariffs. that will hit the short-term forecast, but 4.5% over the next decade is a healthy forecast and some would say quite optimistic. ifwill raise the question, you have every percent decline takes about .4% off global --wth, what is the percent potential growth in europe? how much do you take that down depending on what their reliance on trade is? francine: our rate ever going to negative rates in the u.s.? joyce: i think that discussion

was laid out beautifully. it is a full on debate. i would not say they debate is about negative rates, it is about zero interest rates. we put the same question out about china when we look at the longer trends going forward. negative for quite some time, but it has been a rapid move. thative yielding debt is $13.5 trillion in a year. is there japanization in europe and will that had china? -- hit china? francine: what is one thing the pboc and chinese authorities have no control over? is there something we should worry about? diana: the number one worry domestically from an economic

force point of view for the chinese authorities is actually inflation, because this is something that is felt throughout the country, whereas higher unemployment can be regionalized and that's secondary effects -- it's secondary effects on confidence can be swept under the carpet, whereas you cannot hide inflation with propaganda. it affects every single person in the economy and it is bad luck that we have the poor price situation which is a supply-side issue. it is coming at a bad time for china. tom: diana choyleva and joyce chang as well. morganput out that jp 4.5% call on twitter, very much near the 15 year trend. withll look at the trend gerard cassidy.

this is bloomberg. ♪

♪ bloomberg "surveillance." francine lacqua in london, tom keene in new york.

--is that time where gainers bankers get together at one given bank and try to figure out the forward into q4 earnings. gerard cassidy gets out front. what is the message at these bank conferences? gerard: what we are hearing is the banks are feeling pressure on their net interest margins, the spread they earn. tom: will they lay off more bodies? gerard: it is not that severe, nothing like the credit cycle. it has been a slow degradation in the market because of what has happened to the yield curve. back, want to bring you all sorts of legacy firms did not get out front on tech knology. -- technology.

are the farthest behind james dimon? gerard: probably the smaller community banks. tom: what about the bigger banks, which is losing in the technology battle? gerard: the big banks are all spending billions of dollars. with bankis up there of america at the top of the list, but if you look at the regional banks and the technology spending as a percentage of revenue or assets, it is similar to what jp morgan and brian moynihan are doing. -- tom: the network effects as they are larger in scale. the big surprise is there are not more suntrust and bb&t's. where are they? gerard: we would have expected more names to come out. it is up to the ceos of these

institutions. tom: they just want to play golf and go to lunch and go to another soiree with gerard cassidy. they do not want to merge. francine: i thought you were talking about "surveillance" anchors. how do they survive this interest rate environment and can andwhich banks cannot survive? gerard: that is the key question . if this rate environment turns into a european or japanese rate environment, it will be troubling for the u.s. banking system. we are not calling for negative interest rates, but if that is somebodies base case that in the next months the u.s. will have negative rates, the banking system will be heart and investors will get -- hurt, and investors will get on the sidelines.

you will see cost savings driving earnings and consolidation would come into play. francine: one thing we are trying to figure out is whether recession would be started by shadow banking in the u.s. is there anything that could be the start of a financial recession? gerard: not yet. to the point about the bank conferences, all the banks are telling us credit is still very strong, even in the shadow banking industry. if rates fall, the most levered institutes benefit because their rates go down. tom: could there be a merger of regionals that makes another too big to fail, or are we so far beneath that we will never get there? there, we will never get and i do not think regulators would allow. tom: give me some names?

gerard: you have to look at the ohio banks. we have three banks. they certainly do not need three independent banks in ohio. tom: why can't they do what we did on the eastern seaboard where we cannot keep up? gerard: when profits come under pressure, that will be a driving factor. assuming third and fourth quarters are not bombs, we will have earnings. tom: we love that you are paying attention in ohio and we will be on "wk rp in cincinnati" as well. no, we won't. good morning. ♪

♪ alix: trump and china take baby steps. president trump pushes back the

next tariff increase, while china considers whether to allow imports of u.s. farm goods. to dodraghi's last chance whatever it takes, like rate cuts or extend qe. in the world faces a daunting oil surplus. of a surplus next year. david: welcome to "bloomberg this thursday, september 12. we are waiting for the turkish central bank to come out with its rate decision. interesting. it cut 50 basis points. it was 70%. it is now 16.5%. alix: i heard expect -- it was 17%. it is now 16.5%. expectations that were different. david: