aramco attack. oil and gas stocks attain. who spendsrump says on verification. borst johnson is said to defy the ban of a no deal at brexit. we will talk all things brexit and financial regulation.

good morning, everyone. this is bloomberg surveillance. there is quite a lot of going on in the markets. it is what is happening with crude oil, 59.21. that is nymex. brent is much higher. we have to look at some of the prices at nymex. it is having a huge impact across the board. we are seeing stocks relate to oil price as well. if we have a look at the airlines that have been impacted. let's get that board up, ryanair down 2.7%. bp worried about possible shortages. we will have a lot more on the story. a lot more on the barranco attack. get to thet's

bloomberg first word news with viviana hurtado. viviana: would begin with boris johnson. a law would stop him from forcing through a no deal brexit. we have been told he will reject any deadline extension. ahead of the prime minister's first negotiations today with european commission president. over to hong kong, this we can protesters set fire to a subway station. police hit back with tear grass and water cannons. it is now into its fourth month. the city had largely returned to normal. china's economy slowing further in august. the current stimulus policies may not be enough to shield it from the current trade war. it is also the lowest single figure since 2002.

retail sales also missing estimates. kim jong-un has invited donald trump to pyongyang according to reports from korea. it would be their third meeting. a local newspaper saying an offer came in a letter delivered last month. you will remember that ended without a deal. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am very hurtado -- i am viviana hurtado. francine: sticking with our top around was hit by -- saudi are in was hit by attacks this weekend. the attack since the world's facility and the kingdoms second oilfield. -- see rebels claimed joining us now for the latest

speaking to mohammed barkindo. lessons have to be learned from this. contact withn in the saudi oil ministry. out --ly our in will put they are all on top of it. there's been no forced is arabie customers that they are going to have to accept a grade of crude. this is half of the kingdoms production. a percent of the oil production. an attack on the global oil soprano -- supply. the u.s. may draw on their spr. the main focus now is geopolitics. that is become front and center.

trade wars have been dominating the price of oil. we have seen it weaken the price of oil. there's geopolitical risk in that. this attack is moving again change or an all summer, they have been saying the parameter is off about the pressure in the region now clearly everyone is -- francine: does it change lines? >> i don't think you will see russia change. they mean game changer in the market. the market is going to be focused on the risk and supply-side. forever the summer it is been a frenzy on the demand side when it comes to russia and opec, right now they don't think they don't need to have to boost production. they have a narrative that is completely changing. last week we were talking about opec needing to cut deeper to remove a glut even the fact they have the weakening of global demand. the narrative is two countries

need to talk more countries like nigeria and iraq who said they are going to meet their quotas. now they may be go outside of the rules. we are up 10% on brent. francine: when do we know the facilities can go back on track. >> this is the biggest question facing the market, how fast can saudi arabia get back to full capacity. they are talking about punctual capacity can come back as soon as today. folk up at the is the question -- full capacity is the question. they have millions of barrels in stock. netherlands, japan, egypt, those levels have been coming down since 2016. of fulle about 37 days

capacity to last. francine: annmarie hordern there. coming up, we speak to andrew bailey. we speak to him about all things brexit and financial regulation. this is bloomberg. ♪

francine: economics, politics and finance, i am francine lacqua. joining us is harry tchilinguirian. great to have you on an incredible date where we see shocks to the oil market. how do things stabilize. sauding will it take for

to go back to a normal place? harry: it is difficult to say because the details are sketchy. on sunday, saudi aramco said they would should have a report. we will have to wait until we get that report to draw any conclusions. francine: where do you see oil going? would -- this was so sudden, does it change the nature of the alliance between opec and russia? harry: in terms of the alliance, this doesn't change anything. we will be

in terms of prices, with a reaction in asia. oil prices have come down a little bit. what we are paying attention to is when the u.s. starts trading, because there are a lot of producers there will be using this oil price to hedge production forward. hedges going through and in which case some of the rally we have seen this morning may be mitigated by those producer flows. francine: does this show the ?ulnerability to attacks how will the market price this long-term? harry: up until now the market has been complacent about recent developments in the middle east. mutual downing of drones between the u.s. and iran, but this attack takes geopolitical tensions to a whole new level because they are targeting the oil heart land of saudi arabia. there is the risk that such attacks are reproduced in the future. the market is going to have to reprice the amount of geopolitical premium it is putting into oil. that premium will need to be higher. francine: does it mean we are going to have more volatility?

or how much higher? oney: i think it really is depend on the nature of damage, because we will know whether these drones are capable of doing severe damage and affecting the very important uptick processing of the facility that then allows saudi arabia to keep exporting its crude. in terms of making call, it is a little too soon. i would suspect given where the market is trading at now, we gain five dollars after settling from the speak of -- the spike of asian hours. naturally if these attacks were to become a recurring a phenomenon in the future, we would move from a higher geopolitical premium than that. francine: an extra five dollars, candy world economy withstand that? will it be a feedback move?

six dollars or seven dollars higher, does it hurt demand or kill the economy? at theif you look current price of brent, we are trading below $70 so we are not yet at a level that is going to be too harmful in terms of oil demand. depending on how quickly the economy slows down as we head into the fourth quarter, depending on the accommodation by central banks to support economic growth depending whether or not the international agency releases -- without the production outage until saudi gets back on its feet. necessarily not going to move that much higher and it is not going to be comparable to economic activity. francine: thank you so much for the briefing. harry tchilinguirian at bnp paribas. next, keeping coffee green. ,e will speak to illycaffe

andrea illy. this is bloomberg. this is bloomberg. ♪

>> we should find the necessary funding to fight against climate change. we need to have our own facsimile to be sure that the

finance is helping us to fight against climate change. >> i believe we have to invest in green energy and green solutions. two main reasons, one being to save the planet and the second one being to create jobs and growth. >> it is important that everyone knows that we now need to take steps to stop climate change created by humans. that means we have to do that in our countries but also internationally and of course on a european level. themeay well be a central of the european financial policy. francine: those were some of the finance ministers at the european meeting on friday. addressing climate change will be central theme. the man spearheading policy response, miguel arias canete joins us from brussels. he is responsible to including

developing policy for renewable energy have been at the forefront of what europe has been doing. commissioner, thank you. for we talk about climate change, i must ask you about the price of oil falling because of the attacks we saw on saturday facilities. is your prepare for something that could look like the supply shop to energy? miguel: we have a dependency and makesf 90% and oil energy energy consumptions about one third. we are still highly dependent on oil. our dependency will be much less. directives to regulate the supply and difficult conditions. -- theuation will be

sooner the better. francine: do you see a lesson to be drawn for the european policy because of what has happened in saudi arabia? we have to fight global warming and have climate change policies. that means getting out of -- elimination of subsidies and developing clean energy and increasing energy efficiency. we have put in action all of the inflation to go in that direction. that is where we are working. develop a percent of our energy. development sustainable energy would require huge financial growth. we have to deliver to the private sector. francine: commissioner, when are

we going to see national governments endorse these strategies to make that possible? 24 countries they will ask for more time. republic, hungary and discussing a fund to solve the problems to adapt to a new situation. i expect something will be delivered. the new commission is very keen on it. climate neutrality will be on the table. i suspect there will be action very soon and that will be the roadmap. francine: if you look at climate neutrality and figures, they are huge. after 2030 you need 500 billion

euros. to achieve our target, one entity bill -- 180 billion a year. investments ofd 250 million euros. euros.billion stable -- it will mean a framework. we will try to develop sustainable private finance with -- the private sector would invest in the energy is very clear. that will be done with the support from the private sector. we do have to create.

new policies in order to go in the direction. francine: one final question on the saudi arabia attacks. does it show the vulnerability of the saudi infrastructure? what does it mean for europe? miguel: what it means is we have to have sources of supplies. now we have very good infrastructure. .e are prepared also it shows vulnerabilities are very exposed. lessons have to be learned from any attack. francine: thank you so much, as always. miguel arias canete a joining us.

illycaffe has been making espresso since the 1930's. the company want to double revenue in under 10 years i'll keeping the environmental impact sustainable. be -- italy may be a ,uintessential italian brand the coffee brent has been grown in 40 regions across the continent. the chairman joins us. we were just talking about climate change. we talked in the past about agricultural invasion you have been working on. how may that be accelerated? agriculture is responsible for 25% of the greenhouse gas emissions. this was reported in the last report. the good news is that not only

agriculture can reduce emissions by a sinking carbon into the soil which makes it more fertile and resilient to the effects of climate change. it is the same tactics, for adaptation and mitigation to climate change. the net possible outcome in the long-term is that agriculture can only suit dues -- kent not can -- this ist what i'm trying to do with my company. the goal of this soy to soy carbon cycle in 2033 wishes not a joke because we celebrate our century anniversary in 2033. i would like to reach this symbolic harvick of being -- symbolic target of being carbon free by then. francine: there's been talk

about some of the growers trying to scale them up. are you worried we could see something like a shock if there is a premium? shock. not really a coffee sector has always been cyclic, every 10 years we have low prices which leads to a decrease in production. then the demand makes the price increase again. it comes with our investment. in order to make this coffee cultural more sustainable, we need more investment. we invest no more than 300 million. we need to invest more than one million. francine: we need to get back to that investment and we talk about the u.s. market as well. this is bloomberg. ♪

francine: aramco attack. oil posts the biggest jump after a spike on the key saudi

facility in the single worst -- oil and gas stocks gained. locked and loaded as the u.s. points the finger at a rand, president trump says a response depends on verification. tehran denies the accusation. boris johnson is set to defy the ban on a no deal brexit and is ready to fight. good morning, everyone. this is bloomberg surveillance. i am francine lacqua. let's check in on our biggest stock movers. we are starting with oil. >> good morning. i'm looking at the oil and gas section on the stoxx 600. bp are higherlike and this is after we had oil post-its biggest intraday jump ever on record. this comes after saudi arabia was attacked on two of its

facilities. really at the heart of a ram coast -- aramco's oil production. -- the wto ruled in favor of the u.s. in a dispute over prohibited european aid for the plane maker and also to the downside is ams, down 4%. getting a lot of love this morning. it is looking at ams and a combined offer. ams is under pressure this morning. francine: annmarie hordern with your main stock movers. let's get to bloomberg first word news. viviana: oil surging after an attack on oil facilities in saudi arabia. the u.s. blaming iraq -- iran for the attack but iran denies response ability. they say saudi oil facilities will continue to be a target. despite the attacks, saudi a aramco -- saudi aramco continues

to push ahead with its plans for an ipo. purdue filing for chapter 11 in new york. -- by allegedly pushing illegally sales of the drug oxycontin. the settlement will see the sackler family hand the company over to a trust. exchangesong unsolicited bid for the london stock exchange hitting another roadblock. china has been about the move. the nation praising the rejection of the takeover. this weekend the newspaper said because of the unrest that are consistent worries about hong kong. 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: thank you so much. let's get back to andrea.

we were talking about the challenges and what you are doing to make your company up to scratch by 2033. we talked a little bit about some of the prices of coffee. i want to talk about your expansionary plans. it is the fastest growing market but you only have 20 shops. andrea: this is the first against market in the world. our penetration is lower compared to europe so we are going to make up so this is why i can outline what we are going to announce next week, that we are going to start a search of the possible partner in retail in order to grow our cafes and our shops. main builder and distribution for consumers.

francine: what kind of partner isn't going to be? retail? andrea: retail. in order to really accelerate, we need u.s. retailer helping us opening more and better stores in the next 10 years. francine: how many stores do you want to open? andrea: i don't think we are competition ofhe starbucks because they have so many locations. we aim 150 to 200 stores in the next 10 years. we now have 20. we think we are ready to really accelerate. francine: how much of an investment with that be? andrea: between one hundred million dollars and $200 million. francine: will it depend? andrea: nationally. we are there with air hub.

-- with the hub. saffer cisco, where we can start. we have to open the west coast with another city shortly, maybe next year. francine: that is exciting news. andrea: exciting and i think we will see -- we find this strategic partner and if we find this partner, this is interested in investing with us in this adventure. francine: thank you for joining us. come not we speak to the financial conduct authority, andrew bailey, about all things brexit. that is coming up next and this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua. fears -- after brexit are well-known. divorce from the eu will give an opportunity to reconsider the roles of the game -- the rules of the game. the country's finance regulator calls for a big debate. the financial conduct authority is andrew bailey. he is touted as one of the favorites to return to the u.k. central bank. andrew bailey joins us for an interview. thank you so much for joining us. first of all, last week the big story and we will get to the boe shortly. the biggest news was the hong kong exchange. do you have any reservations because government? clear, bothme be

sides have kept us well-informed in the last week about the intentions and plans. that is how it should be. one thing i want to be very clear on, there is no formal proposal on the table yet. we are in listening mode. we are very keen to hear all the proposals and the full implications but that is as far as it goes. francine: can you describe levels for us? is it medium level of scrutiny? andrew: it is a high level because of the stock exchange, yes. there is one transaction going on and there is one proposed transaction. we are already engaged in scrutinizing the transaction.

francine: are you expecting to have something on the table and a couple of weeks? andrew: under the takeover rules, we've got a few more weeks of positioning to go so we will watch that carefully. nothing more than that. francine: even the volatility in dealing with brexit, have banks altered their plans in dealing with it? andrew: brexit? francine: brexit. intensewe have seen engagement by banks. continuously planning -- deeply embedded in the dna. often in that task from immediately after the

referendum. we have made a lot of progress over the last three years. francine: if we were to have a new deal brexit, what role could you play and combing the market? -- in calming the market? andrew: an important part of that is we would behave pragmatically, reduce forbearance where appropriate, were frankly not to forbear would be to damage our objectives. we will do that. were ableefer that we to reach public understandings with other authorities around the world. i would prefer we have more understanding around public understandings of the markets could see it as it were about

how we would go about that, but we will be very pragmatic. responsibility if things go wrong in the financial system after brexit? after a no deal brexit? andrew: it depends on what it is. -- central banks banks would have a big role to play as most appropriate invest as they could. about assetlk to me management? andrew: we have had two things going on. complicatedmore because it is cross-border activity. limited.ment is quite both of them do raise important liquidity.nd

those are important issues. here, we need to balance -- we need public expectations on what the liquidity of their invested , this is important to think about, the -- we also need to support the objective of investment in startups, support innovation and that does mean being able to invest in liquid assets. i am very clear we can support all those objectives if we sacrifice one for the goal of the other, we have not done our job. francine: how do you make sure that h2o doesn't happen again? andrew: it gives us enough line of sight. and have enough

transparency and enough --mework to ensure ensure ensure investor expectations. it is important to look at different approaches around the world. the european union -- the u.s. has moved in a slightly different direction. fcc's new framework is an interesting one. we haven't used it directly but onn we wanted to get a hold liquidity, we have tended toward that approach. francine: overall, given the markets and negative rates in europe are general downward movement, are you worried that investors are taking more risks? that there is a shift that is difficult to measure? andrew: there are two things we should be concerned about. i think investors want to attend more liquid assets.

with yield comes risk. the second one is investors understanding particularly for long-term -- in the u.k. over the years, investors being more directly exposed to asset prices. employer -- employer approach to employee. that theys understand are exposed to asset prices. that is very important in that world. when asset prices go down, that is clear that would happen. it is important that our investors understand that an factor it into their assumptions. francine: can you talk to us about the strategy in the cvs market? andrew: manufactured credit

events. uss more direct experience. -- u.s. has had more direct experience. one of the things we said, frankly, some of the things we have seen. secondly, it would undermine the integrity of the market. would allow that sort of risk to be traded. is seen as -- market approved -- market integrity is our objective. and he said what he did said will you work with us? i said of course because we have the same objective. francine: do you know if the government is closer to choosing a governor for the bank of england? andrew: i don't tuesday governor. i have a job to do.

i don't spend my time on that subject. francine: have you ever spoken to him about it? to do: i have nothing with being the governor of the bank of england except for this one, mark carney. francine: if you look at the u.k. economy. today a lot of stories on the shocking oil price. how does that play into financial instability? the oil price, there are various talks that have been started. andrew: it does come of course. -- does, of course. that goes back to the conversation we were having about the exposure in markets and how much they realize. we are all very innocence akin to these sorts of risks we are seeing in volatility. you can point to brexit, trade.

incidents likeo this regrettable one in terms of the disruption in saudi oil production. what do we spend our time on? things.these sorts of there is a followthrough. francine: do we understand the linkage? in terms of the financial crisis, we hadn't fully understood the consequences of one single thing. do we have a better understanding of the linkages? andrew: we have done a huge amount of work on understanding potential extreme traces in markets in the move and asset prices and how moving through it. all of us should be humbled enough to know that events have away of moving on. different shops will -- shocks

will happen. that is what we have to do is authorities. never think you've got it licked. francine: andrew bailey, thanks so much. the chief executive of the financial conduct authority. next, we speak to john glen. we will be talking about brexit in the future of financial regulations. that is coming up next. this is bloomberg. ♪

francine: economics, finding, politics, this is work surveillance. the city of london's reign is at stake over brexit. --h of its future hinges on providing services across the continent if regulatory equivalents should allow that. u.k. will only grant access after a rigorous assessment. running me now is john glen. glen.ning me now is john first of all, what are the chances of a prime minister getting a dealand parliament being behind that

deal? john: that is what the prime in today and have been since he came into office. hard to findmely common ground, to remove some of the issues that will cause parliament not to support a deal. as a member of his government, i am supporting him. it would obviously be a difficult journey to get to deliver a deal but it is one that he is committed to. while brexit uncertainties are harmful to , doness, it is more harmful you think their cries are being ignored? john: no, i think the government has been very clear from the outset. boris johnson wants to secure a deal. he also recognizes the other imperative that he has to give citizens the about when we leave

and i will be the end of october. he has been clear about that. for over three years we have been delaying this. we have to get to a clear resolution so that businesses can plan. acknowledge the sentiments of many in the financial services sector who has done a significant amount of planning for no deal that is not the government preference and not what we are trying to achieve. francine: if it happens, what does it mean for the city? john: let's focus on what the government policies which is trying to secure a deal. what we have is a fully functioning regulatory regime that will come into play if we have a no deal. actually, what i want to be focused on is ensuring that regardless, we get into a situation where london continues to be the most competitive place for financial services we are doing a number of other things to make sure that is the case.

francine: we are hearing from -- it ise minister unclear what his government's policy and whether the city trust what is said is government policy is government policy. john: i think you need to listen to what i am saying, what i am saying is the government is working very hard to negotiate some changes so we can secure a deal and bring it before parliament and make sure that is delivered. that is our preference. leave byn objective to the end of october. therefore getting a deal is an absolute imperative what we have done is taken steps across elements of government to ensure we will be ready in all circumstances at the end of october. our priority is to get a deal but it will be contingent on parliament voting it through.

so far, the deal has been rejected so that is why the prime minister is seeking very hard to remove the challenges around the backstop and make some modest changes to make it palatable to parliament, so that it will get through and we will have a deal and a smooth pathway through a transition period. francine: john, thank you so much. john: thank you francine: secretary to the -- bloomberg surveillance continues. tom keene joins me in new york and we will continue the conversation on oil. is bloomberg. ♪

francine: aramco attack.

oil posted speaker ever jump after an aerial strike on a saudi facility. oil and gas stocks gain. the u.s. points the finger at iran. president trump says a response depends on verification. iran denies the accusations. boris johnson is said to defy the ban on no deal brexit and fight in court. we will talk all things brexit. good morning. this is "bloomberg surveillance." i am francine lacqua in london. tom keene in new york. a huge shift in the oil markets after the attack on saturday. a couple questions seeing whether there'll be a longer repricing in the oil market. , when the saudi infrastructure will be back online. we: the repricing overnight, will show that chart in a little bit.

the geopolitics we will look at through all of "surveillance" this morning. vivianat straight tothe hurtado with first word news. viviana: crude's biggest day ever prompted by the attack on the saudi oil facility. brent futures rising almost 20%. the attack removed almost 5% of global supplies. saudi arabia may be able to restore some of the supply within days. the u.s. blaming the attack on iran. yemen's iran-backed rebels are blaming responsibility. iran is taking a step to ease tensions in the region, saying within days it will release a british tanker it has detained for two months. after britisheld seized a ship carrying iranian oil. in hong kong, protesters at the entrance of a subway station on fire and threw gasoline bombs at

the government headquarters. police retaliated using tear gas and water cannons. this is the 15th weekend in a row of protest. more than 49,000 auto workers have gone on strike against general motors. it is united auto workers first strike against gm in 12 years and it could cost the company $15 million a day. gm offered $7 million of investment in eight u.s. factories and more than 5400 additional jobs, but the union says in several areas the offer fall short. 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. tom: thank you so much. let's look at a data check. we will finish off with the oil prices. futures with that oil shock, -15. right now sitting on 27,000. crude comes in again. , 1.1061.

there is west texas intermediate. showing thatd great market last week. a genuine lift in the market. the two oil prices, that is the wrong quote at the bottom. that is a typo. 58.97 andst texas, brent crude is 65.01. francine: brent crude is the one that went up $71 and then reversed a little bit. oil surging. havens climbing. all about heightened geopolitical risk. we need to figure out if this will have longer-term implications after the infrastructure is back to normal. now we understand they are vulnerable. european stops down. we did have china data missing estimates. hong kong equities underperforming and overall we are seeing a tilt to gold. tom: what francine and i want to

do is give you a perspective of what we have seen in saudi arabia. we have been doing that for years with our oil coverage. some great guest this morning to drive forward the conversation. here is the mother of all charts. oil, less inflation and less an approximation of our rising incomes over the decades. oil, lessthe double oil shock od it is not the same during other oil shocks. the price of oil nowthe price os inflation adjusted and richness adjusted, down and back to where we were pretty opec in the early 1970's. francine: i love your chart. minas a more simple chart and takes it back to the early 2000 as a percentage of what opec does. the global production of saudi arabia. weer the attack on saturday,

are still trying to figure out what happened or who attacked what and how long it will take for these facilities to get back online. productionorld's being taken off in one go is pretty huge. as we have been reporting, and attack on a saudi oil facility removed about 5% of local supply. it is the worst sudden disruption ever for crude. we spoke to the opec secretary-general earlier today. in order to maintain dependable supplies of oil, we have to secure our facilities -- i am suretions we are going to use this unfortunate experience to ensure not an incident does repeat. >> do other opec nations need to

increase to make up for the lost production we are seeing out of the kingdom? will be a collective decision of not only opec but .he opec plus at the moment -- begin to contemplate what will be done and when. >> what about what the united states is doing, capping the opr? does that worry your partners at opec and opec plus? u.s.mad: when we heard the is thinking of moving from the needed --is only if we will continue to wait to give

the saudi's enough time. there is no need to panic at the moment good what we are seeing in the markets today is an initial reaction. , the updates that will be coming from saudi arabia will further calm the markets. francine: we are joined by energy aspects chief oil analyst. no reason to panic. those were his words. given what we have seen, how reliable is saudi infrastructure? how vulnerable are they? >> that is the main question for the market. it is unprecedented. this is dale has never happened before. scaleou were sick -- this has never happened before.

like you were saying, 5% has never happened. people are waiting for clarity. 40% to 50% of the production could come back quickly, but full resumption could take weeks if not months. francine: is there any way saudi can also prevent themselves from further attacks? amrita: that is going to be the most important thing. i am sure they will put measures in place so attacks like this do not happen again. that is not going to happen overnight. my understanding from the media, set weels have already are threatening further attacks. given how much tensions are escalating, you cannot rule out further attacks. tom: good morning. thrilled you are with us. this is my theme, the president tweets out there is pretty of oil. yet you have spoken to us

several times about the narrowness of supply and demand, the tightness of 100 million barrels developed per day. islain how narrow the band that makes it so there is not "plenty of oil." amrita: absolutely, there is not plenty of oil. we have been running down inventories which have built over the summer at a pace of one million barrels per day since june. that is why the market has tightened so much. ngl, propane of and butane, but that will not help us. drawing the market is at close to 1.5 million to 2 million barrels a day. there is not much oil around at all, despite what has been said. the microeconomics is an idea of the substitution effect. oil will come in from someplace

else. ,n terms of moving boats around where is the most substitutable point to replace the 5% saudi outage? amrita: first and foremost, we do not have the capacity to substitute 5%, let's get that straight. we have identified about 800,000 barrels per day compared to the 507 million barrels off-line. most likely it will come from the uae and kuwait, and there is little more available in russia. these are the three countries that can step up. the other problem is the quality. sulfuril is very high in and has a lot of h2 s. the facility that has been taken off-line, the whole purpose is to stabilize the oil before exporting. we are losing a lot of light crude oil and substituting it with heavy crude. there is a quality problem as well. francine: do you have a level where it becomes dangerous?

startss at $71 or $75 it turning demand for oil and there's a feedback loop that says we could see a shop in the price of oil coupled with the trend downwards for the global economy? amrita: for sure. in the past, our calculations suggested it was above $80, but given where the macroeconomy is and that global growth is already slowing down, we would say it is around $70 to $75. that could really start impacting consumers in this environment. francine: thank you so much. energy aspects chief oil analyst. up next, we chief with blackrock street -- chief macro strategist. we also talk about brexit. this is bloomberg. ♪

francine: this is "bloomberg surveillance." our top story today was the saudi aramco attack, which sparked this record brent rally, then we were are off the days highs but something we need to watch out for as we were discussing with ann rita sent -- about whether it points to vulnerabilities. christian, let me start out with you. there is a level of the price of oil -- if it goes above $80 it deepens the likelihood of recession. how much could and oil shock tip over the world economy?

christian: we are in a very fragile situation. if you look at global growth, manufacturing is already down. what was holding it up is consumption. consumption is dependent on the cheapness of oil to a large extent. if we now get this additional shop from a higher supply sector , that could tip us over. we have to wait how much the shock really is. we are not there yet. assess. a minute to francine: if we get the shop, where we will see it? rupert: in consumer spending and consumer sentiment. i think this is well within the range we can absorb. i think there is a long way to go before this becomes a significant macro threat. oxfordout a year ago the

institute for energy studies did dis-allocation of the oil price. are we seeing a new overlay of geopolitical price permits within the price of oil or can this be structured as a one-off? christian: it looks like right now it is a one-off and the sensitive it is supply shock. after the middle of 2014, oil prices came down. how much willbate this week growth and demand? the economic model does play a role, whether it is a supply shop or demand shock. this is a pure supply shock that happens in saudi. you are right in the larger context, and that is uncertainty. we are dealing with measurable higher uncertainty than we had over 20 years with u.s. china trade, with brexit, with hong kong. i walked into this weekend thinking there is a chance on

this week on brexit, on u.s. china trade talks, we get positive news and easing of that uncertainty. over the weekend that has changed. tom: i will put out the oxford institute paper, it is absolutely spectacular, on how a barrel of oil is generated. rupert harrison, i know over lunch today it will be snails, salmon, and cheese, and maybe oil will come up between johnson and jean-claude juncker. the british have such an and stood -- an interesting history within the persian gulf. how will the united kingdom play with united front with president trump wars that unthinkable? rupert: the key is president trump himself. we have three things to work through to understand is this going to be a significant disruption? how do we ease the immediate disruption impact? what is the likelihood of repeat attacks? third is the escalation issue.

at the moment, donald trump has no interest in hot escalation against iran. we might see increased action with the sallies against other -- with the sallies against sther actors -- with the saudi against other actors. i think the u.k. has other things on its plate. even though i'm sure boris johnson's natural impulse will be to align with the u.s. on most things, i do not think this will be a scene to begin a problem for him. francine: when you look at opec plus, we also had the removal of the saudi arabian oil minister last week who orchestrated this opec plus agreement. how can we be sure it holds? rupert: the fundamental incentives remain the same. they want to keep the oil price fundamentally in the range they have managed to achieve over the last few months. they have an interest in stability.

they certainly do not have an interest in the spike that drives the demand down or further supply response elsewhere in the world. although there are issues bubbling away under the surface within opec, fundamental pressures on those countries have not changed. tom: a data check to break. oil is up and it has eased back with a little bit of a bounce. you are watching it take by tick. good morning. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." purdue pharma filing for bankruptcy to protect itself or more than 2000 lawsuits accusing it of fueling the opioid epidemic. the maker of oxycontin has a settlement plan valued at more than $10 billion. produce owners are the sackler family, they would turn over the family to a trust controlled by the state cities and counties that have sued the company. another setback for the hong kong exchanges unsolicited takeover offer for the london stock exchange group. china's people's daily praising llcs rejection of the bid, saying the protests are prompting consistent worries about hong kong. china controls almost half of the board seats on the hong kong exchange. that is your bloomberg business flash. tom: right now, with all that is

going on in oil we will continue the saudi story. brent crude $65.97. christian keller with us from barclays and rupert harrison of blackrock. christian, is chairman piles wednesdays change because of mario draghi's thursday? you would think they anticipated the package from the ecb. i think they watch the dollar. i think he will look at the global context and look at domestic developments and there are signs that consumption is holding up well in the u.s.. the labor market has continued to perform solidly. now we are back to oil. pricel plays -- the oil plays an important role. so far there bit highlighted trade tensions, brexit, i think now oil comes back on the agenda.

this affects the statement he will give. tom: is blackrock modeling global recession? do you get under 3% global gdp? absolutely not. our view would be in line with the midcycle correction scenario the chairman set up previously. i think he will be satisfied with developments since then. the domestic economy is not signaling recession. that is one of the reasons we are seeing that being priced out over the last week or two. the fundamental driver for this cutting cycle is global uncertainty, particular driven by trade policy. that remains, despite some of the more positive mood music. conditions are still in place for a 25 basis point cut and in the context of a midcycle correction around 75 to 100 basis points. the speculation around of 50 basis point cut has gone away because that would be seen as a sign of panic and the macro news

does not justify it. francine: very quickly, independent of what happens in the u.s. china trade war? rupert: i think the underlying situation where you have that uncertainty persisting is the justification for this cycle. we have seen inflation weakness transitory as the chairman said. it is fundamentally still the uncertainty situation and growing fears about the impact of uncertainty. francine: thank you so much, rupert harrison and christian keller. coming up, we have plenty more. we talk about protests in hong kong entering their fourth month with no signs of slowing. we are live in hong kong next. this is bloomberg. ♪

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there is one transaction going on and one proposed transaction. that gives it an even higher level of scrutiny because we were already engaged in scrutinizing the transaction. >> we are in listening mode and anybody who implies any thing new is quite beyond the mark. we are very keen to hear all the proposals and understand them and the implications. that is as far as it goes. francine: that was the financial conduct authority chair andrew bailey talking to us about the fallout first of the asset management trying to ask weather they were going to take on much one scrutiny what was going liquid funds and governor of the bank of england and we talked about the snub of the hong kong exchange and clearinghouse. tom: really interesting how things have shifted in hong kong. it has been a sterile protest and then it has not been and

some of that violence was seen this weekend. ian marlowe is here to give us an update. the others have been on the streets witnessing what we see in the films. ian, i was really taken back by the violence this weekend. color for us the actual violence of physicality on the front line between the protesters and the police. ian: it was another remarkable weekend. the last few weekends have seen these really dramatic clashes ever since a couple weeks ago when they lit this barricade on fire and front pages around the world showed this flaming rack in the streets of hong kong. they have been smashing subway stations. last weekend it was the main business district where they set a fire outside the main business district subway station. this past weekend, we had

multiple fires outside one station. inside andsters went smashed windows and broke down railings and things like that, but there was also violence not just between protesters and police who made almost 100 arrests, there are also tensions between protesters and other groups of people, some of them wielding cleavers, sticks, quite dramatic scenes when they were actually fighting back and forth throwing punches and tackling each other, so there has been a lot of tension over the weekend. tom: we have seen the united states over 40 and 50 years at the point where police say we have enough. is there a risk that the police say a enough with this and almost on a unilateral basis on the streets go after protesters? ian: i think we have been seeing that in the last couple weeks. by north american standards

specifically, the response from the police looks a little bit light. in hong kong, people are not used to the heavy-handed approach and you get a lot of the violence that has been happening between the police and protesters, baton charges, water cannons, tear gas, rubber bullets, you have had quite a bit of injuries. some are saying given the scale and the -- of the violence on the protest, i think there were 80 petrol bombs thrown over the weekend alone. that is remarkable compared to any comparable protests around the world. at the moment, we are seeing the police using what they have. i think they still don't feel like they are outnumbered and that is something a lot of analysts have said, the sort of diehard protesters scuffling with police and lighting these fires. at most, it is several hundred, maybe 1000 and the police have

enough resources to counter that and i think the government and china are both sort of convinced they don't need to dramatically escalate anything with any sort of invasion or support from mainland chinese security forces because they have got things under control even though the images and footage look quite striking and remarkable. francine: ian, thank you so much. let's get back to christian keller and rupert harrison. this is the second first week -- second consecutive week of protests. how long can hong kong stay in this state? christian: it is a sign how difficult these things are to predict. we thought this would die down. you put this into bigger context and now china is happening what is -- watching what is happening. china also has to look -- how do they look with regard to

maintaining control of hong kong , they may have to give into some of the demands in the u.s. on trade. all of this is complicated and that makes it difficult to predict. francine: it also has implications. at the minute, it doesn't have an application on china, but it probably has an indication in the u.s. stock exchange bed. rupert: the risk here has been underappreciated for a long time. it is still under appreciated by financial markets. there is the risk of a and legislation in congress in the u.s. which has some momentum and would force some response from the chinese. it is the link between hong kong's negotiation that is key for markets here. they could get some development either in congress or hong kong that would make it much harder for donald trump to make necessary concessions in order to get improvement on trade. tom: we will get to dr. harrison

moment.berg in a $65.83.ude right now a little bump up in the last number of minutes. we need a monday briefing. our first word news, viviana hurtado. viviana: the u.s. blaming iran for the attack on a saudi oil facility causing prices to soar. that is the biggest intraday jump ever. the attack moved about 5% of global oil supplies. iranian rebel -- backed rebels claiming responsibility. iran denying it was involved. the economy in china slowing down again. that puts pressure on authorities to do more to support growth. last month, industrial output rising at the slowest pace since 2002.

citigroup lowered its growth forecast for china for this and next year. governmenton and his are sounding more optimistic about reaching a brexit deal with the european union. today, johnson is ready to take a hard-line approach. he will have his first meeting with jean-claude juncker. if negotiations are not working, he will not pursue a delay to brexit. 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. francine: thank you so much. let's get more on brexit and the lunch tom is very well aware of the menu. we have it from various news reporting they will meet in luxembourg. christian keller and rupert harrison.

we always like to get his insight into not set menus for leaders, but weather there is a chance that we get a deal. rupert: maybe everything is deliberate. maybe the snails ra symbol for the pace of negotiations. think the expectations are overdone. the chance of a deal getting negotiated, the landings on getting through the house of commons very small. i think markets are groping for optimism, but i think it is overdone. equally, the threat from the law,nment of breaking the not abiding by legislation and going ahead with a no deal that is overdone.exit we are going for a general election and the uncertainty lies in the outcome. francine: an election, but first with an extension. rupert: you have got to get

through that. boris johnson could climb down. i suspect unlikely. we could end up in this situation where boris johnson jeremyesign forcing corbyn or some candidate to be a temporary prime minister with the function purely of requesting extension and triggering election. tom: i would be remiss if i did not bring up the bombshell in the times of london this weekend in david cameron's book in really the first public comments i have seen from prime minister cameron. how will that change the dialogue? the it have any impact on day today battle of remain and leave or is it derivative where cameron's past is due. christian: to the extent it has any relevance to today i think it is about the division within party,servative particularly the decision driven by boris johnson's decision to deselect mp's.

cameron- to the extent is criticizing the tone and actions of the government that will resonate with them and their moderate remainders. largely, this is about the past and particularly some personal scores. tom: what is the state of the conservative party? francine wants me to calm to london and do the brexit soiree and we are trying to figure out the appropriate date. what is the state of the conservative party? dividedn: the party is because you have the 21 mp's representing opinion that views no deal as an unacceptable outcome and they are willing to put their careers on the line to prevent that. i think the party as a whole is relatively united around boris johnson's strategy. i think there is no other real alternative plan, so saying we are going to do a deal, but we have to be willing to go with no

deal if necessary. i think there are some concerns, more shared within the parliamentary party about the tone and tactics coming out of downing street, but i think that is about detail rather than the core strategy. francine: what does this mean for the ark it's? are we going to see more volatility? public policy is to have a deal and then you have a million stories saying that is not what they want at all. rupert: volatility is a safe bet. when you look at probabilities in the predictions, no deal brexit went sharply down and pound wind sharply up. the market is longing for this silver lining that there could be a solution. over the weekend i read about a potential angry hulk turning green and we hear other news about possibly an extension onto .2

as you say and it was said earlier, we think the uncertainty remains very high and we think maybe market may have gotten too optimistic about resolution to be found. it's a long way ahead and we believe the chances of this turning out to be a no deal is very significant. francine: what would happen in an election? the polls are not 100% trustworthy, what hat -- but what happens if you have a four-way split? christian: when you put polls like this with four parties -- itg in double digits is basically anybody's guess. we should not believe the polls until we get into the early stages of the election campaign because that is the first time you see opinions starting to crystallize. the difficulty is there are battlegrounds that we never really had battlegrounds in before. conservative seats in the south of england. i would not overstate that, i go. you have's cottage -- have

scottish and conservative seats being lost. brexitgo by the sort of opinion, that might look possible. if you go by underlying popularity's, it looks difficult. tom: that was beautifully explained. i think i understood it. what about for roche -- faraje and the british party? what am i missing? christian: there is a key division between farage and the brexit party. the demand at the moment is for the conservative position to deal will do, what he calls a clean brexit is the only acceptable outcome. he does not want a suggestion the party might try to back a deal that is remotely similar to the deal theresa may negotiated. boris johnson would find it difficult to close that gap and adopt that position because he

would find a lot of mp's would be concerned and it was interesting, we saw very strong words coming out of downing street saying a deal with farage is not going to happen. tom: thank you so much. in this hour, lots going on, courts are watching riyadh and the response from riyadh and the response from washington over tweetable2 and 15 hours. we are focused on london and luxembourg where we are awaiting the meeting, the lunch. prime minister johnson with jean-claude juncker. stay with us worldwide from new york and london. this is bloomberg. ♪

tom: i think for americans, it is almost an enigma. who is this guy? francine: he is, of course, from luxembourg, tom. for many years, he was finance minister of luxembourg for about a decade. became commission president, you can see he is , whoed by michel barnier has been negotiating the conversations with the u.k., who i have to say has gotten very good at english. he refused to do interviews in anything other than french, but he is up to speed on that. we understand what -- they will

have a lunch when mr. johnson meets with mr. juncker. tom: christian keller with us on our london desk. what is the question you endorsed mr. juncker with? i am sure you have taken the francine lacqua charm school on how to get a good answer. christian: he does speak german as well, so that makes it a perfect negotiator. when he met president trump last year or so, he surprised everyone coming out with a quite harmonious statement. if someone is able to flesh out some sort of deal, it would be him. much different from barnier. itquestion is, look, is technically possible to overcome the backstop issue? talk of a union, i

don't know if the u.k. can go further. it seems to be a technical issue and they should come clean with it and we would be a big step ahead. tom: let's go to an oil chart before we get to mr. harrison of blackrock. this is not the rate environment, it is oil, but oil tied into the dollar and over to rates. the quiet of oil and the jump, we move up 19%, 20% as well and we pair off over the recent hours. still up 7% all in all and brent, we will be looking at that chart through the morning. for those in america, this is the global price brent crude. there are markets going on, there is a fed meeting going on. rate viewe blackrock after the turmoil of last week. how does your team adjust the rate call through thursday, through friday and publishing over the weekend? underweightave been

duration and had a view the moves have gone too far. it had been painful earlier in august and we have seen a dramatic unwind of strike positioning in rates i think triggered by a number of things. first of all, gradually emerging information that may be priced out some of the macroeconomic tail risks. maybe the bcb tate -- played into that. i think there is probably a little further to go into some of this unwind of the positioning in rates markets. we will see how this oil move plays out. if that becomes a bigger negative, that can change. still looking for rates -- interest rates to move up from here. we still see government bonds as an important part of any multi-asset portfolio. we think the correlation will be your friend in this scenario we

are worried about, the rollover of growth in the cycle. the directional view, we still think high yields from here. francine: when you look at the world in which we find ourselves with negative rates and all of that, what does a no deal brexit mean for the e.u. given that already it is tough? christian: we always highlighted what a main pain would be in the u.k., the e.u. would take a great deal of it in companies like -- countries like germany. germany is worse than france for a long time. it will probably reduce german growth to less than half a percentage point or so and the e.u. would feel additional pain and it already does as a manufacturing oriented region. it will be something that puts more pressure on the ecb, which has signaled it is very limited in what it can do and it will then probably increase the man's for some sort of fiscal program

-- demands for some sort of fiscal program. francine: thank you so much. rupert harrison and christian keller. we will have more on your oil markets, next. this is bloomberg. ♪

we saw pictures moments ago of mr. schon cloud euchre with michel barnier waiting to meet with boris johnson. let's get back to rupert harrison from blackrock. staff to chief of george osborne for years, you know the people involved. is there anything that would make mr. juncker soften a little bit with the specter of a new deal around the corner? rupert: one key dynamic is the specter of new deal has been -- no deal has been reduced by parliament. taking no deal off the table does change the dynamic. even then, the e.u. is willing to move and there is signs of movement on both sides, but the e.u. cannot and will not move in the extent that it -- to the extent that it --

still -- there is still some way to go before you can find the silver lining. you have to include customs and goods checks. i think the landing point is narrow and the parliamentary boundary is still where it is at. francine: we will follow that lunch closely. christian keller of blackrock and rupert harrison of barclays. tom: coming up, we have a spectacular hour for you. km partners.a of m stay with us, this is bloomberg. ♪ here, it all starts with a simple...

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how'd he get out?! 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. tom: this morning, iran, yemen,

and the middle east, a saudi response to an attack on their oil fields. the president releases a strategic oil reserve if needed. still, he tweets, there is plenty of oil. there will be plenty of questions as chairman paul avoids doing a draghi. if it meeting midweek. johnson and juncker -- they will meet over snails. [speaking french] thank you, google translate. who is picking out lunch here? johnson or the host, juncker? francine: i think it is probably the host, tom. we were just speaking with rupert harrison, who knows these lunches. when he was former chief of staff to george osborne. he said there is probably a

little bit of psychology in this . maybe it is the way the host, jean-claude juncker, telling boris johnson that it is going at is a -- going at a snails pace. right now we need to get to an eventful weekend, an event will first word news with viviana hurtado. crude's we begin with biggest jump ever, prompted by the attack on the saudi oil facility. brent jumped almost 20%. the attack removed about 5% of global surprise -- global supplies. i ran-backed rebels claimed responsibility. is directlyabia blaming iran. tehran is saying within days it

a british tanker it has detained for almost two months. over to hong kong, that is where protesters set the entrance of a subway station on fire. they also threw gasoline bombs at the central government headquarters. police using tear gas and water cannons to disperse the crowds. this is the 15th weekend in a row of protests. 15,000 auto workers have gone on strike, the first uaw strike against gm in 12 years. gm offered $7 million of investment in eight u.s. -- $7 billion of investment in u.s. factories. in several areas, the officer falls short. 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. tom: let's do data.

gold up $12. i will call this a moderate tendency correlation in the markets off the shock of the asia opening in the newark evening. futures at -13, dow futures at -110 as well. a dampening, but i do not oversell it. the next screen. up 20% earlier the big 15.2. there is the dow closed, showing a in thechael darda markets, enjoying this move up. brent crude, nicely out 9%. 65 point 59. we will show that intraday chart 65.59. all -- we will show that intraday chart throughout the day. geopolitical risks have been heightened, also an impact on volatility. european stocks down, u.s.

futures down. we also had china data missing estimates a touch. tom: very good. i want to show a chart. da said hed i -- dar would not come on unless i show this chart. adjustment is a proclamation -- is an approximation of our rising income over many decades. the 80's, persian gulf one. we come over an oil set now. it is back where it was in the 70's as well. francine, more on escargot. francine: boris johnson is just arriving in luxembourg with mr. juncker. the first face-to-face talk with european commission president jean-claude juncker. we understand it is a working lunch. as you rightly say, we understand it will be a lunch of snails, salmon, and cheese in luxembourg. is probablygh

unlikely at the moment, but we will be interested in the body language. also flankeduncker by the brexit negotiator. whether we will see a breakthrough or not, for the unlikely, but it depends on whether the prime minister of the u.k. says he is pushing hard for a deal in the next month and whether he will warn juncker that he will reject any brexit be interestingll to figure out. the sterling, showing johnson strength in sterling over the last days and weeks. we continue on oil. andbloomberg economy government reporter has had a long weekend working on this story. develop for us monday, tuesday, and wednesday. what are you and our other experts waiting for in the persian gulf?

>> we are all still waiting for saudi arabia to come out, for saudi officials to come out and tell us what exactly happened. who do they blame? what is the course forward and what do they plan, how do they want to retaliate? and above all, the oil markets want to know how long it will take for this facilities to be repaired. so far no word from the saudi government at all, which is kind of strange because before when there were attacks on tankers and other facilities, we have seen the saudi government very quick to come out and blame iran theiran's proxies, the who -- the houthis. tom: you have at abu dhabi with moral ill and on and on. looking at from the different states come up to polities of the persian gulf?

zainab: the whole region, really, it is anchored on oil. whether it is dubai or abu dhabi. it gets a lot of business from the oil economies around it. what has happened in saudi arabia is a very big shock to the entire region. wider vision, because everyone is worried about the escalation into a regional war that would engulf not just saudi gcc probably if it got to that, and iran. it would be extremely destructive to the region. at the same time, everyone is trying to figure out what just happened and what is the way out is ais at a time there vacuum of information officially from the government of saudi arabia so far. francine: the fact that we have not heard from saudi arabia yet, does it suggest that they have been hit may be stronger than certain media reports out there?

and what does it mean for the security and reliability of saudi arabia oil infrastructure? we don't know why they have not talked yet. they could still be in assessment mode. all indications that this had been a major hit so far, knocking out the oil supply come at the same time, it shows the vulnerability of the oil infrastructure. at the time saudi arabia had been engaged in this war with the e-minis, a proxy for iran, it seems like that with the yemenis comeh the a proxy for iran. this is totally a shocking development for the government of saudi arabia, and the royal family of saudi arabia, whose main purpose would have been to make sure that these installations that are vital to its economy are safe and kept out of harm's way. zainab fattah, thank you so

much. marty schenker is with us as well, the bloomberg chief content officer, and ran the ship in washington for years. the president is locked and loaded. i thought the new york giants were locked and loaded as well. would you translate what locked and loaded means? what is he talking about? is it a pentagon issue? >> i think he is saying he would be willing to adopt an aggressive stance if it is proven that iran was directly responsible for this attack. but we have seen in the past that he has essentially said he is locked and loaded a number of times in the gulf region, and nothing has really happened. and you have been a critic of president trump. the president and his aides just try to falsify information about a hurricane. why believe them about an attack in the middle east if the root

of the problem is the president decision to outsource to saudi arabia, unlikely allies. way,e--- every step of the trump either cheered the saudis or look to the other way, and iran deserves an outsize share of the blame for destabilizing the middle east. who are the saudi allies in this, besides president trump? that thes interesting region has become so unstable because ever since the u.s. withdrew from the iranian missile cord -- the missile accord, the nuclear record, there has been a lack of a coordination to any of iran plus actions. europeans have been more tolerant to the u.s. especially with john bolton have been saber rattling, and there doesn't seem to be any real fundamental communication between the nations in a coordinated response. francine: i was going to ask

about john bolton, mardy and how significant is the timing of this? was this almost done on purpose? this is a week after john bolton is no longer there. marty: i think it is merely coincidence. to assume they are reading the headlines and said he -- and saying this would be a great time to attack the saudi oil fields is a far-fetched notion. at the same time, mike pompeo is in charge and has taken a less strident approach to iran. mistake, donald trump is meeting any response. we do not know if it was officially an attack for sure. francine: marty schenker stays with us. we will have plenty more on the use of saudi oil fields and we looking into whether

they are as reliable as they were. guest whoar from a says there are lessons who will be learned but doesn't think it will be change -- be changing the production agreements. this is bloomberg. ♪

>> the decision that will be taken will be a collective decision. much at the moment to begin to contemplate on what in council forum

and when. the supplies, of they have reassured their customers. we have not had any -- so far they have ample supplies. francine: that was our exclusive interview with opec secretary muhamed barkindo, speaking with merry hoarder in today. boris johnson -- speaking with us is robert. with us is robert. we had of course the houthis in yemen saying they can strike more facilities and they have these aircraft equipped with a new type of engine that can strike even further. how does saudi arabia protect their facilities from now on? definitely ais question the market is focused

on. ofrastructure on the scale -- of that of the saudis is hard to predict. like are traditional modes cruise missiles that are being discussed. and then there are possibly cyberattacks. so they can do all of those possible it is, given the tensions between the u.s. and iran and the saudi's, the markets, we are spec and more problems. expecting,ho are you robert, for saudi arabia to assign the blame to? why have they been so quiet until now? robert: it must be that they have been considering their options, and unfortunately their options are not very good. if you retaliate against the who houthis in yemen, that could cause a conflict that could go on for years. if you have a proportional response against iran's infrastructure, does that

trigger a cycle of escalation that leads to more significant destabilization and potentially more attacks on the infrastructure, or do you do nothing and then iran gains leverage and the effort to stand up to the u.s. and saudi pressure? i am sure they are reviewing their options, but everyone is waiting to hear what they are going to do. tom: robert johnson, i am thrilled that you are here with us today. you have an group, exceptionally provocative phrase -- "iran is building leverage." discuss that. what leverage are they building? robert: the leverage they are building is to try to get a deal. to get sanctions, at least back to higher-level oil exports are the where they have been doing that is a couple things. number one, they have been --dually reversing their they have been operating centrifuges again, starting to move toward building more highly enriched uranium. they have been attacking tankers

routing tanker traffic in the gulf. all of these things together i think show that, to the u.s. and , we have ways to hurt you as well. tom: let's talk about the microeconomics of oil. we have had an exogenous shock, i guess. what is demand dynamics right now, given the supply shock? robert: i think the other provocative phrases that we were talking about the geopolitics of oil on the demand side, and now it has gone back to the supply side. the story in the last 12 months had been about the trade war with china, multiple rounds of downward revisions by the eia. in 48 hours, the focus back to the supply side. that said, those underlying demands have not improved, and you have to imagine that

businesses around the world will be affected by this as well. i think that markets are not pushing back. i think they recognize that we have some spur capacity and weak demand conditions, which means -- tom: robert johnson with us. just thrilled to have mr. johnson on with us. let me do some data here. we will come back with michael dardaon the fed, michael on the constraints that the central bankers have come a given where interest rates are, and of course record highs in the market. marty schenker with us as well. oil, a 9% lift. this is bloomberg. ♪

>> what really makes you different is that you are in several months -- several markets in africa, every country in south asia. marty schenker with us. francine lacqua in london, marty schenker with us in new york. michael darda. right now, a chart that gives us not to the friedman grant, but the michael darda grant from his last essay for to we have seen the fed funds rated, inflation rolled over with another field experience. all we are going down to is a new terminal rate. forcing us down to a terminal rate of growth, terminal rate of interest, terminal rate of our limited constraints. is that is what is going on right now? on, andis what is going

the bond market has been proved correct. think about where the debate was last year many people thinking the fed will be continuing to raise rates this year as bond yields rollover and the market started to pricing rate cuts. had some saying this is just a so-called term premium, the bond market is distorted. well, here we are. slowing growth, and the fed highly likely to deliver that second rate cut this week. tom: is there a dampening nominal gdp? 2000 schenker has reporters working with his weight on him. is that a way of dampening gdp? we had the data that suggested things were cooling off. now we have data at least through q2. there has been a basis point slowdown in year-over-year nominal gdp growth rates from about a 6% run rate to 4% year-to-year per that is not terrible. that has basically been the nominal growth trend for this recovery. but that alone can explain the

big drop in bond yields from where they were last year. now in recent weeks we have had yields coming back up. this trade tensions -- as trade tensions have started to ease and maybe hard brexit fears have started to recede a bit. but this big move down in the 10 year yield from above 3 to below 2 really has the fingerprints of a nominal gdp slowdown all over it. orncine: a slowdown, mike, actually a recession? and if there is a recession, you can the price of oil be the final ticking point? mike: great question. no recession yet. i think there is certainly an elevated risk considering we have had key parts of the yield or 17now inverted for 16 consecutive weeks. we have had the 10 year yield below the three balance that the three-month t-bill. it is a long leading -- the three-month t-bill. if we look at the shorter-term indicators of the business cycle, it also leads jobless

claims, for example, they are still ok. we are not getting data that is falling off a cliff, retail sales last week were above expectations, and so we are not in recession now, but over the course of the next year, i think the risk is elevated, and the fed could be falling behind the curve here. oil price shock or hard brexit -- these things maybe would not tip the economy if growth momentum were strong, but if growth momentum is weakening, then we do need to worry more. francine: mike, thank you. mike darda stays with us. our thanks to marty schenker, our chief content officer. coming up, we will have plenty more on euro markets. this is bloomberg. ♪

tom: bloomberg surveillance. 65.26, upching oil,

8% on brent crude. we are watching luxembourg as well. francine, what is the singular import of this meeting? francine: is the first time the two leaders meet face-to-face. they will hold a press conference with the luxembourg prime minister later, and i think mr. juncker is saying it presents detailed plans as time is running out. we are not inspecting a real breakthrough, but we are trying to look at body language and whether the two sides can come together with concessions on either side. tom: we will continue to monitor luxembourg. right now, in new york city come with first word news come here is viviana hurtado. viviana: iranian bath rebels are claiming responsibility for the attack on saudi oil fields. officials say the weapons used are too sophisticated for the rebels. oil posting its biggest intraday jump ever before falling back to

the attack moved about 5% of the global oil supply. north korea posco is making another attempt to restart -- 's kim jong-un is making another attempt to restart. there is no response yet from the white house. are being put -- there's is pressure for more -- six acid investment also excel ready. citigroup lowered its forecast for china next year. british prime minister johnson and his government sounding more optimistic about reaching a brexit deal with the european union. johnson, as we know, ready to take a hard-line approach. he will have his first meeting right now with european commission president jean-claude juncker. they are having a working lunch

of snails, salmon, and cheese. yeah. johnson is expected to tell juncker if goshen's are not working, he will not pursue a delay for brexit. 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. tom: thanks so much. we will get back to michael darda, lots to talk about on the markets. right now we get a primer and update from edward alden. i cannot say enough about his book, "failure to adjust: how americans got left behind in the global economy." it was prescient a couple more years ago, even more prescient now. how would the president play into this? very would do it prominently. obviously he has tried to remake u.s. international economic policy on the premise that american companies, american workers in particular, are getting harmed. a radically different

place when we were when the book came out a couple years ago. it was reasonable for me to write that politicians in washington had not been looking seriously at this problem. clearly now the problem is front and center and the responses of the administration have been damaging. tom: declarant calling houston and 40 pushing aside 30 years of a migration to globalization free trade -- the gatt agreement, uruguay, wto -- is all that dead? ago -- aote a year and year and a half ago that it has been dead. nothing has come to light. i hope i am wrong. revivethere is a way to the wto. but the democrats are not enthusiastic about it either. no one is running as a champion of the wto, nobody making a strong argument for the benefits of trade. thee are some criticisms of

president's tariffs, but there are no -- there's nobody running on the wto now. francine: if you get the americans getting less behind the global economy, what is a policy that could make a difference to them? ted: the problem right now is a lot of the harm has taken place in the manufacturing dependent states. the trump terrace provided a bit of an initial boost, then they started -- the trump tariffs produced a bit of an initial boost. now you have a strike at general motors. i think the outlook for the key states, the electoral he key states, is not very good. what they need is a focus on long-term competitiveness, innovation, leadership in the global economy. we are not getting that from the administration and not much of it from the platforms of the democratic candidates. ted, how does that change? when you look at the democratic candidates at the moment, what

changes from left to centrist? or: if bernie sanders elizabeth warren gets the nomination, i think they will double down on the approach there they are leaning toward benefits from workers, which the trump seems to have got -- seems to have forgotten a bit. if joe biden is the candidate, i think we are looking at more of a centrist kind of policy. biden has stuck closely to the obama legacy, which was largely favorable to international trade. i think it does depend a lot on who gets the nomination. but i actually do not see the democrats not -- running on the campaign as a trade friendly candidate, which is ironic, because if you look at a public opinion polls, americans are saying strongly than they ever have before that they see trade as beneficial, as a good thing for america. tom: michael darden, you are listening to ted alden.

down to the partial differentials of exports and imports. there were prices five days ago, inflating as well. are we importing inflation because of the word of ted alden? certainly in the throes of a slow down and arguably even a mild manufacturing recession. we had a more severe slump in manufacturing in 2015 and 2016. it is happening again. you mentioned the trade figures. if you look at the evolution of the so-called trade deficit, it has actually worsened over the course of the trump term. the goal of the tariffs was to reduce the trade deficit and buoy manufacturing. we have failed in that respect. -- where you have tariff on tariff -- or is the inertial force of those tariffs having effect? would raiseink it

prices and reduce real output as it disrupts global supply chains, but you also have these second derivative effect. if it is hurting business confidence, there can be a demand-side indication that is what the bond market has been telling us. that has been one of the most interesting experiments. ted alden, what do you make of the walk-back here. a tariff here, a tariff there. soybeans here. is this a negotiating ploy, oral is this the beginning -- or is this the beginning where there could be a saving face walking back of the damage done? mike: the first two walk backs were in june and then december of 2018. both times that was followed by escalation. this time i think there are incentives on both sides to try to do some sort of small deal. president trump does not want to go into 2020 with a trade war

with china. it will not be good for the economy, not going to be good for reelection prospects. the chinese economy is taking a hit, not as severe as the president claims, but they are hurting as well. there is incentive on both sides. the problem is anything they come up with is going to be small. president trump will take a lot of criticism not just from the democrats but within his own party if he does a deal. it is a difficult situation to walk away with a small deal that the americans can say credibly, look, this is good for the country. francine: overall, as we go into the election period, do we know how president trump wants to position himself? does he want to be the guy who brought the deal or the guy who is still fighting for a better deal? ted: i think he is better off to be in a position of fighting for a better deal because he will not get the big deal he has promised. that is not going to happen.

the question is, do you do know deal at all and say, well, the chinese want to see a democrat elected because he or she will not be as tough as i am on trade ? that could be ok as long as there is no severe economic impact. but i imagine a partial deal, saying i am fighting for something better, but if you elect a democrat, it will go back to where it was before, i think that is a tenable position. about cannot say enough "failure to adjust." it is decidedly not dated. it is a primer of the last four or five decades as well. we will come back with michael darden and jump into market rate dynamics. this is a commemorative bloomberg that goes back on climate and the micro solutions to climate. some of that has to do not only with cities and with regions, with divisions within economies and societies, but also what can larger governments do. this will be the e.u. finance

ministers addressing climate change. they will do that on friday. this is bloomberg. key to fight against climate change. we should provide the necessary funding for fighting against climate change. we need a green finance and we venues,have european our own european taxonomy to finance is the helping us against climate change. >> i believe we have to invest in green energy and green solutions for two main reasons, one being to save the planet, and the second one being to create jobs and growth. >> it is important that everyone knows we need to take further steps to stop climate change created by humans.

that means we have to do that in our countries but also internationally, and of course on a european level. it is good also that this will be a central theme of the european financial policy. ♪

tom: "bloomberg surveillance." so much going on. our dubai team watching all that is going on across the middle east, and of course washington helping out there this morning as well. francine, off the bloomberg, my eyes are failing me. 65.51 on brent crude. single best chart on michael darda, phenomenal on the underlying theory about what is going on. this is obviously the chart of the summer. in the essay of the summer.

thanks for joyce chang on good conversation on this last week. michael darda, not a forecast but a model on what you have been so good on for decades, and that is the migration of lower rates. is it feasible that the new terminal rate can drive the 10-year yield down to 0%? we are not zero, we are not japan, right? mike: we are not, but if you have a slow growth economy and the fed makes a mistake in rate hiking,, the rate hiking campaign, which you could arguably say at least the last rate hike last year clearly was gratuitous, given the slowdown we are seeing, and now the fed being forced to reverse course, so we do go into a recession because the fed raised rates too much in 2017, 2018, and was too slow to reduce them this year, you could have the 10-year yield falling toward zero in a recessionary outcome. no doubt about it. that is not just structural

reeked -- structural weaknesses, but policy errors on top of it. tom: we saw the movement, the snapback that we saw as well. there is a belief that well-meaning elites can reflate an economy, that they can provide a policy and comfort and governance that can lift us out of a malaise. is there any theory to that? mike: i think if we are talking about the nominal economy, on a terry policy has the power to do that. the power you have in -- the problem you have in the euro zone and japan is that after tight money, not loose money, inht money policy shocks 2008 and 2011 that drove nominal inflation into a ditch, markets do not believe policymakers are going to stick with it long enough for it to have meaningful influence. you can see that. even with the ccb announcement last week that i think was meaningful, at least they are moving away from calendar-based

guidance toward goal-based guidance, markets reacted in a way that would suggest a policy being expansionary, but there was not an enormous reaction. there was some concern that policymakers have this shift, from draghi to lagarde coming into place, that they will not stick with it. that is a problem. francine: when are we going to get fiscal policy from e.u. countries? is that the only thing the market wants to hear about? mike: that seems to be the flavor of the day. the problem is the central banks tend to -- even if they argue that they will not, they tend to offset the demand-side impacting the fiscal policy. you can even see that in the u.s. central bankers said they want it so they can do less. the question is, if that is the case, monetary offset, as scott some there would argue, the economists that tom and i follow closely, it may not -- it may knock that up to additional

growth. unless you have policies on the supply side to bootstrap the structural drivers of growth -- the problem is, in the u.s., lowering the corporate tax rates, strap productivity, while we have had adverse shocks on trade immigration -- trade migration, that has offset that. francine: ok, what does the policy in effect look like now? is it central banks moving too quickly or too slowly? mike: i think now, especially for the u.s., it would be too slowly to reverse the rate hikes from last year and the year before. my argument -- and i was fine with most of the fed tightening that was occurring in 2017 and 2018 -- but my basic directive was, do not hike rates enough to invert the yield curve, and if the yield curve threatens to expeditious in an manner to reverse that.

unfortunately, that has not been the case. we have had sustained inversion in key parts of the yield curve that would tell you that the fed is likely behind the curve moving too slowly to reduce the target rate. mike, thank you. mike darda. we will get back to mike shortly. we will look at what is happening with brexit. tom, as we know, a lunch of cheese, escargot, and salmon. that probably sounds bad to a lot of our viewers, but that is what boris johnson and jean-claude juncker our luncheon and on. they are talking about brexit. they have also been briefed by the spokesperson for boris johnson, saying that any brexit implementation period will end in december, 2020. looking at pound, 1.2453. this is bloomberg. ♪

viviana: you are watching "bloomberg surveillance." let's get the bloomberg business flash. h&m is posting a six straight

quarter of failed growth. the chief says in the three months that ended in august, sales rose 12%. h&m is trying to reduce an inventory build up and add a three year slump in earnings. -- the iphonee maker will tell the european union general court it pays more taxes than any company in the world. that will not be enough for the e.u. antitrust chief. she has ruled apple's tax deals with ireland, that the company pays far less than other businesses. in the wake of the 737 max crassus, boeing reportedly may make changes in the way the company is structured. according to "the new york times," a small group of boeing directors will call for new groups focused on safety. the directors will also ask for changes in the reporting arrangement for engineers who identified problems. a federal ash federal officials -- federal officials are --

bloomberg has learned the government is looking to charge people higher up the chain at the bank. it is getting help from at least two former jp morgan traders. they pleaded guilty. that is your bloomberg business flash. tom and francine? francine: boris johnson and jean-claude juncker are holding their first face-to-face talks over a working lunch. a breakthrough is unlikely. but the british prime minister is said to be pushing hard for a deal in the next month. let's get a straight dude -- let's get straight to luxembourg. first of all, if a breakthrough is unlikely, are we going to see a dance about the possibility of a deal within the next four weeks? >> good morning, francine. what you see behind me is the restaurant where they are meeting for the first time. they coming face-to-face. the prime minister said he was going to -- he was not going to

meet the e.u. negotiating team unless substantial changes were made to the deal. they both said they were cautiously optimistic. the europeans were very cautious. they did not see the level of detail that we wanted, given the time to seal the deadline. then you had communications behind the scenes telling us that prime minister will be very clear today that he is not going to ask for more time passed october 17. -- at this point, it seems unlikely that we are going to get any kind of brexit today. to at least when it comes the european perspective, the hope is that the meeting today between juncker and johnson will serve to accelerate negotiations, which in their eyes is running behind schedule. francine: maria, do we know if the u.k. has put any proposal about how to deal with the backstop?

is the major sticking point at this point, what to do between the republican -- the republic of ireland and northern ireland. the u.k. says they feel the negotiation has gained traction, but the europeans will say they have not actually seen anything that will replace the backstop. there will be nothing fully operational by the time the u.k. leaves. if that continues to be the sticking point, the europeans will tell you it is all talk, will action when it comes to the u.k. government. tom: thank you so much. there will be much more on this story through the day and no down into the week as well. francine, i thought the coverage on oil here was great. thank you to our team, working on this through sunday. may, the big mystery come as you mentioned earlier, is the idea of windows saudi get oil back on -- is the idea that when does saudi get back online? francine: we don't know.

i think we are still waiting for an official answer on who is to blame their and second, what they will do about it. third, the extent of the damage. fourth, when they can get back to a normal situation. this because it crosses between markets and geopolitics. it will be a delicate way of answering it, which is why i imagine we are still waiting for the answer. tom: it will be interesting through the day. our team in dubai is working on this, in riyadh, as well. we will have more on this throughout the day. coming up on bloomberg radio, we drive forward with the conversation with michael darda. this is bloomberg. say hello to everybody in norwich. ♪ devices are like doorways

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to second gear. slowdown, ando a an attack on oil fields. the middle east down into chaos. 5% of global oil supply offline. it is the type and crude quality that matters. president trump says the u.s. is locked and loaded gm strikes for the first time. in years. welcome to "bloomberg daybreak" on this monday, september 16. i am alix steel. in the markets, it is all about oil, all the time. futures are down by point .4%.nt -- money coming out of equities and you can see where the dominant factor is, the currency market, the young getting a boost. particularly on the long end. brent seeing its biggest jump

ever.