limit of still at the what the ecb can do and met them lagarde will have to push for -- madame lagardewith something different? julian: we are close to the limit and whether we can come up -- she can come up with a solution, we will see. one window of opportunity is the concept of a green bond in germany. if they were to declare an extraordinary event, they could get support and launch a green bond which would give them a little bit of power to give back to the systems. francine: let me bring up my chart, if you look at pmi services u.s., germany, and france, they are slowing. is that the only positive thing in europe? julian: today's numbers were not that unexpected. a slight improvement in german manufacturing and france was holding up ok, but at the end of the day, germany is probably going to technically be in obviously itq3 and will require something other than an ecb stimulus to get the economy going. it will be helpful for germany if the chinese-u.s. tariff war eased slightly. scarlet: something other than ecb stimulus, there is u.s. or china fiscal stimulus. overallny and europ

stand ready to act against a potential downturn however lagarde warned of the dangers that low rates pose to the banking sector thank you for joining us this morning. let's kick off there on various commentary we heard some relatively hawkish comments do you think there will be enough to prevent this from coming through in september? >> i don't think so. they were pretty clear that they want to act and that it's going to be a package. all the parts of that package were mentioned the asset purchase program as well as a change in adapted guidance perhaps a state or threshold based guidance yes there's resistant and you mentioned the usual suspects there but there's a clear majority for action. >> and in terms of the economic impact or potential economic impact, what do you think at this point how effective will lower rates more asset purchases be for stimulating growth in the euro area >> well, if you ask the question that way around you have to be skeptical. we are at the lower bound. interest rates are already very low. there's a little bit of stimulus to be had but it's not going to

as president lagarde a villain -- is president lagarde a villain or will she be a victim?ery much represent continuation. she has a mindset that is oriented towards easing. all the comments she made while being head of the imf were along the lines of need for policy accommodation to support growth and inflation. technology,oned, globalization are factors that are here to stay. they are factors that are raising the desire to save. as a result, they are depressing the equilibrium level of interest rates. i think easing is the name of the game. francine: what, when you look at the 2s/10s price, some of the inverted yield curve, in general, is it impending recession or impending something ugly? or do you not believe that? nicola: we don't place excessive emphasis on the yield curve as a sign of recession possibility at this point. it has been very rival in the past -- very reliable in the past, so we should not dismiss it. there are reasons to think that this time is different. the quantitative easing, forward guidance, liquidity operations of the central banks have led to ter

>> i'm very favorable tonle guard appointment. -- on the lagarde appointment.in isolation. in terms of a new leader, i think she is starting on november 1, i can't think of a better person to spend time in berlin trying to make the case that draghi was right and my hope is that she will be successful in that. anna: that he was right in calling for more fiscal loosening? because that was one of the things draghi -- we're talking about central banks and how politically evolved they should be. we want draghi's successor to go around europe talking about more fiscal spending. >> the reality is q.e., you can make the case, it hasn't really worked. now is the time to support that and try a different playbook. if that means talking to governments to make the case that we should have a two-pronged approach, i think that is a very sensible way forward. matt: all right. greg, it has really been a pleasure having you with us today. co-crimbings o. he will be continuing the conversation with us on bloomberg radio tune in at 9:00 a.m. u.k. time. if you're in the london city

the next head of the european central bank christine lagarde has told the european parliament that she would stick with the current controversial expends in ery monetary policy she said that as long as inflation in the eurozone was still low and growth stalling monetary policy had to be high in a commodity. that critics call it a life or death rating program china's so-called social credit system which it's expanding this year to include companies both foreign and domestic they have to install surveillance cameras in their premises and share the data with the government they're also being raided on their tax records and compliance a european business group says firms are ill prepared. a traffic light with facial recognition cross on red face a public shaming and loose social credit points in some chinese cities it's already a reality even those who sort their trash incorrectly have to reckon with point deductions in some places as well as the penalties for low scores like losing the right to ride the fast train the point system is scheduled for full implementation across china by the e

lagarde takes the reins at the ecb in november. u.s. prosecutors are investigating huawei over new allegations of technology theft, this according to a dow jones report. beyond existing criminal cases against the company and features accusations intellectualaling property from multiple people and companies over several years. huawei said it is committed to complying with laws and proper ip process. oni can't really comment ongoing litigation and i believe related investigations. ip theftncerned about as anyone because we hold a significant number of patents and we want to see those issues addressed, but we are a process and due handling of ip in appropriate manners. su: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. still ahead, hong kong retail sales numbers show we are at decade lows as tourists -- we will preview another week. david: we are driving the path ceorofitability, the uber will tell us how the company is closer than ever to making

christine lagarde has told the european parliament that she would stick with the current controversial expends unary monetary policy she said that as long as inflation in the eurozone was still low and growth stalling monetary policy had to be high in the commodity. critics call it a life or death rating program china's so-called social credit system which it's expanding this year to include companies both foreign and domestic they have to install surveillance cameras in their premises and share the data with the government they're also being raided on their tax records and compliance and european business group says firms are ill prepared. a traffic light with facial recognition cross on red face a public shaming and loose social credit points in some chinese cities it's already a reality even those who sort their trash incorrectly have to reckon with point deductions in some places as well as the penalties for low scores like losing the right to ride the fast train the point system is scheduled for full implementation across china by the end of 2020 and it will also affect businesses

there is no doubt in my mind that christine lagarde would also have major challenges.a good communicator and that is what you need. there's not much else left in the toolkit. guy: thanks for stopping by to talk with us on a friday. bhanu baweja, ubs global head of strategy. european markets through the auction process. london got off to a slow start with a technical glitch. we wrapping up a reasonably quiet session after a very turbulent week. those are the final numbers in your. -- in europe. we will be continuing to talk about the markets on bloomberg radio. dab digital radio is where you'll find us. the cable show taking to the air at the top of the hour. this is bloomberg. ♪ vonnie: live from new york, i'm vonnie quinn. londonm guy johnson from . this is "the european close" on your -- on bloomberg markets. let's get a catch up on first word news with courtney donohoe. courtney: israel will allow rashida tlaib to visit the nation on a humanitarian trip. this is a reversal from the announcement yesterday that our country to two muslim members of the u.s. congress. -

easy-going orore politically adept person in christine lagarde. she is a politician.dhist bank flame has rediscovered himself and is perhaps pushing back, not against rate cuts, i think that is a given, but three buddhist three ecb voters have come out in the last couple of have come out and said they do not want to do more qe. vonnie: an interesting one in september. marcus, thank you for spending august with us and we will see you in september. that is tuesday and the united states. coming up, "balance of power" with david westin. he will be talking china trade and hong kong. the former u.s. ambassador to china will be our guest. ♪ david: from bloomberg world headquarters in new york, i'm david westin. welcome to "balance of power," where the world of politics meets the world of business. on the brief today, jonathan 11 from miami on hurricane dorian headed to the east coast of florida. emma kenny onn, what the narrowing lead of kenneth were president means, and teslas lead in china. let's go to you down in miami. what we expected to hit land. >> looking at labor da

ab lagarde will unlock it with a more -- maybe lagarde will unlock it with a more political sway. guy: let's get back to the industrials. airbus is up circa 50% this year. some other industrials are having a really horrendous time. phillips is up about 15%. guy: what about car companies? let's dig into the details. they are having a horrendous time. banks and autos. patrick: banks are something we have gravitated more to whoops -- more towards. if we have an economic slowdown, -- ink contention bonds think to mention a bonds are very well-capitalized. europe is probably up about 12% year to date with a dividend, which is not a terrible year to date performance. terms,put it in dollar it is a little more maybe. don't think itwe is doing much, but it is not falling us into a recession -- it is not falling into a recession either. vonnie: let's get a check on markets now. we have indices higher. the s&p 500 up 1%. the nasdaq is up 1.4%. symantec driving that higher. the dow, just a handful of stocks higher. it is just trimming some gains. amd the best performer in the s&p 500. this i

europe has so far failed to agree on a single candidate to replace christine lagarde at the fund we havet of contenders there. among them is the foreign president of the european group, what's of names in the mix silvia, give us a sense on what happens from here? europe then selects their leading candidate, walk us through the process. >> at the moment we have the european finance ministers voting on their own nominee to replace christine lagarde at the imf. ultimately the decision is made by the imf board there are more than 180 members in the imf so other countries could put forward a name as well until the nominations close, which is september 6th. until then we could see other names being put forward. but the europeans have always led the imf and they're keen on keeping that tradition >> the brits are not yet non-european, and theresa may and her government made a promise they would not interfere in european nomination processes after those european parliamentary elections that she didn't want to see british candidates stand in. i wonder has the uk put forward a candidate? are they l

i think, regardless of whatever christine lagarde says, europe is within 10, 20, 30 basis points of anective lower bound of what the central bank can do, which means probably more asset purchases rather than a move to lower rates further. vonnie: she's obviously signaling to the european parliament that she's going to continue the type of policies mario draghi has been effectuating. she says the precise mix deployed will have to depend on the nature of shocks and outlook on inflation. are there shocks affecting the outlook for inflation on the horizon? john: germany just printed a lower-than-expected inflation rate. german inflation is at 1%. germany may, quite likely is, in recession. is the problem with europe that too much emphasis is being put on monetary policy and not on fiscal policy. germany now has the fiscal space without breaking ecb rules to undertake significant fiscal stimulus. that's what tax cuts and stimulus in journey would be much more helpful for the european economy then making interest rates -- in germany would be much more helpful for the european economy than ma

that conversation leads to the conversation about what madame lagarde can do.or is the next leg of options something that one's more fiscal monetary policy? tom: mr. hildebrand the former president of the swiss national bank. right now in new york city, here is renita young. renita: china is signaling it is ready to retaliate against new u.s. tariffs, calling planned u.s. tariffs on $300 billion of goods a violation of accords between their leaders. china will take they called necessary countermeasures. this comes hours after president issuelinked the hong kong with the trade war, and called xi jinping a great leader. the economyw say will grow 1% at most this year, down from previous forecasts of 2% to 3%. in the u.k., opposition party party -- opposition leader jeremy corbyn has asked his opposition to support him to block jeremy corbyn. welcomedoverture was by the scottish national party but liberal democrats and welsh nationalists rejected it. multiple reports that john hickenlooper will drop out of presidentialthe nomination and instead could run for senat

lagarde takes the rain that the ecb in november. issued what agency it's called the strongest warning yet. the antigovernment protesters in hong kong. if as any activities that harm the security of china's sovereignty or challenge the one principal,o systems will not be tolerated. it comes a day after pro-democracy protest leader was attacked by masked man in a catalonia restaurant. -- kowloon restaurant. there are talks in beijing. president xi jinping met his philippine counterpart, if rodrigo duterte, but they failed but theyico dutere, fail to reach an accord. it is a loan agreement for a new rail contract. president trump says the u.s. is close to a deal with the taliban and is planning to withdraw more than 5000 troops from afghanistan. he did not offer any timeline for pulling folders out according to level levels to 8600 would bring the total down to roughly what it was when the president took office in january 2017. the fight against the taliban is the longest war in american history. global news, 24 hours a day, on air, an

we're getting close to underestimating potential growth in europe, underestimating some ecb, maybe lagardepushing for fiscal stimulus, maybe we get a trade deal with china. we could have a very strong shock to the treasury market. tom: margie, within all of this is the idea that i have to make money and not lose money. high yield is there a stability there, or is there instability in your market? margaret: i think high-yield looks very stable. one, because the quality of the high-yield market has never been better. typically, half of the issuance for the last dozen years has been to refinance on the debt. people are not doing crazy borrowing, huge dividends. they are really companies that have lengthened out their balance sheet in reasonable businesses, excepting energy, retail. i think the credit default risk is very low in high-yield at the present time. tom: this is interesting, we have to go to kathy jones on this, pushing against of what we're hearing from peter scheer and margie patel. let's come back and talk about the retail market. let's do a market check. this week was bonds, bon

. >> verizon is up when we come back, david lipton joins us after taking the reins from christine lagardes on the global economy, the trade tensions, the fed and more add the impossible bhoper. we will hear from jose cil on the meatless burger and the big announcement today when "squawk on the street" comes right back. >> delivering to the guests what they want, what they are looking r,nd it's something that we feel very passionate about ...when a plan stops being a plan and gets set into motion. today's merrill can help you get there with the people, tools, and personalized advice to help turn your ambitions into action. what would you like the power to do? - stand up if you are first stand up if you're a mother. if you are actively deployed, a veteran, or you're in a military family, please stand. i will tell you this, southern new hampshire university can change the whole trajectory of your life. here, hello! starts with -hi!mple... how can i help? a data plan for everyone. everyone? everyone. let's send to everyone! [ camera clicking ] wifi up there? -ahhh. sure, why not? how'd he get

francine: what christine lagarde be worried -- would christine lagarde be worried about these negativelds in germany? is there anything she can do to try and help? >> not much, really. she has to bet on the fiscal weapon, the one that needs to be used. and certainly, there are signals or little hints. , the new monetary is becoming fiscal around the world. even in the u.s., trump has been floating certain test balloons. this is the way we are going to go. later, we might be surprised by inflation. the pendulum will swing from one way to the other. cutting rates for the ecb's, it doesn't make any sense. 10 basis points won't make any difference. tltro's would maybe be more appropriate. cutting rates, i don't see what kind of impact there can be, but again, we have to see what lagarde will do. i do think it will be very different than what we have seen before. so i don't think we should expect anything dramatic. francine: how much of a worry is that? and if she is not going to do anything radical, where does this leave us in 18 months? >> they'll be at least some kind of fiscal package.

who will be the new head of the imf now, after christine lagarde is off to head up the european centralt nominated a candidate and is reported to be unhappy that not enough time has been given for the process. royal bank of scotland just announced a £1.7bn dividend after half—year—profits beat analyst forecasts. however, the bank is yet to replace outgoing chief executive ross mcewan and has warned of a tough economic environment in coming months. it's another big weekend in the world of e—sports. this weekend's london's o2 arena hosts the fifa eworld cup grand final. up to 30 million people are expected to watch competitors play the football video game at some stage this weekend. mosaad aldossary from saudi arabia is the defending champion. the prize pool is worth $500,000. these are the markets at the moment. that is iag, i promise you. oil prices moving up 2.73%. the price of oil there, looking a bit stronger having fallen off yesterday. look at the euro, the pound down against the euro below one .10. still a better way before the lowest it's been, but not looking too strong at the m

meanwhile, christine lagarde offered a clear sign that she is ready to follow in mario draghi's footstepsin her first comprehensive comments on monetary policy is winning the job, she said the ecb has the tools to tackle a downturn and must be ready to use them if needed. still with us is freddie lait. we are hearing it's not time yet, what is your view? freddie: the european economy is in a pretty run state. keys not doing much and indicators like german growth and car production, youth unemployment, are still are bad -- still at bad levels. basically, i think they should do everything they can to try and stimulate the economy. but will it actually work and do we need more fiscal stimulus? there's only so much more quantitative easing can do to stimulate an economy without the demand side and animal spirits that fiscal stimulus might help inspire. at a moment where everyone seems to be asking .erlin for fiscal stimulus this is from whence it would come. do we make that bet? do we say this is where i think fiscal stimulus will help my ?tock freddie: it is quite difficult to predict where

christine lagarde now she is leaving the organization after being tapped to head up the european central bank and that essentially leaves mccree without an international ally on his economic initiatives during this re-election bid so while the $57000000000.00 i.m.f. bailout remains there are questions if the next managing director will be a sympathetic to the president in argentina since legard included some interesting provisions on social spending and gender equality and she worked also to sell the deal to the public understanding that the organization didn't have the best reputation in latin america and she was trying to make some of the. you know basically acquiescence to that loan to try to renew support for the i.m.f. in latin america so considering the country's economic struggles continuing struggles impressed rationed and marquees lost by a wide margin of votes it was a political risk he took when he made that deal with the i.m.f. made that loan but it looks as if it did not pay off it might have been a gamble it hurt his chances as you saw he lost in this primary election and h

they want to set the table to enabling lagarde to be more dovish.arly, the weakness in growth numbers we're seeing from germany and the rest of the euro zone is weighing on monetary policy. what powell is pointing to they want to make sure that weakness in growth we're seeing abroad doesn't materialize, and supporting the inflation metrics, avoiding deflation at the same time. the cut we saw yesterday was more insurance oriented to both of those aspects. not exactly clarifying his equation on which one carried more weight. vonnie: when you see mark carney saying there are limits to what , thennk of england can do you have the fed chair talking about this is an insurance cut, partially because of obstructions that may come down the pipe, what do you tell your clients? the boe is maintaining their insurance policies and their ammunition so if they get a hard brexit, they can react. today's announcements were perceived a little hawkish because they did not do anything in anticipation of a hard exit. this is a long game. we will not see immediate reconc

had a lot of comments today alone on the ecb, and while you talk about easing, we have christine lagarde revealing a pretty dovish position. she told the european parliament she would basically follow mario draghi's policy, and that there wasn't an end to the lower bound , that there is still room to maneuver. then we have some on the ecb saying conditions do not yet warrant the need for further qe. how do things proceed? alberto: i think the last comments are definitely a tale of hawkish comments. i wouldn't take them too seriously. but we will probably include a tiering to smooth the impact of negative rates on banks on deposits, and a resumption of qe. the euro zone does need a return to qe. however, negative rates for a prolonged time tend to have a lot of collateral effects, particularly on an economy that depends on banks. is from banks, and if you keep rates low, banks have problems lending to small businesses. , someinders job creation on the one hand, the ecb wants to keep the euro low, but we think they should focus on quantitative easing and helping interest rates converge to

the next head of the european central bank christine lagarde has told the european parliament that she would stick with the current controversial expends unary monetary policy she said that as long as inflation in the eurozone was still low and growth stalling monetary policy had to be high in the commodity. critics call it a life or death rating program china's so-called social credit system which it's expanding this year to include companies both foreign and domestic they have to install surveillance cameras in their premises and share the data with the government they also be rated on their tax records and compliance a european business group says firms are ill prepared. a traffic light with facial recognition cross on red face a public shaming and loose social credit points in some chinese cities it's already a reality even those who sort their trash incorrectly have to reckon with point deductions in some places as well as the penalties for low scores like losing the right to ride the fast train the point system is scheduled for full implementation across china by the end of 2020

maria: what is the difference in your view with christine lagarde coming in?ership does she exhibit versus mario draghi once she gets on the wheel. >> you and know that christine is amazing, that her ability to communicate and influence policies are great. the great hope with christine there, is that while continuing the ecb policy stand, she will be more effective in convincing governments they need to do more. the problem with the ecb is that it is the only game in town when it comes to policies in europe and it can not produce genuine growth. maria: you've got seven leaders meeting this weekend for the g-7 meeting and currency has to be part of that conversation, right? you look at where the dollar is, there's also some conversation i was receipting one analyst reporter, from jp morgan, mention sed aed an fx transactix as a way to get the dollar lower. what's your take. >> imagine two l columns. what the g-7 should be getting done, trade tensions, currency tensions, iran, south korea, japan, north korea, the list is really long and of course the threat of g

offering lagarde is clear signs she will stay on the dovish path set by mario draghi. the toolshe bank has to tackle the downturn in europe and must be ready to use them. policymakers meet in two weeks and are expected to launch another round of stimulus. she takes the reins of the ecb in november. chinese news agency has issued what it calls the strongest for antigovernment protesters in hong kong. it says any activities that challenge the one country, two systems sensible or harm security will not be tolerated. the message comes a day after a pro-democracy leader was attacked by two masked man in a restaurant. agreements to be no on territorial disputes in the south china sea, despite top level talks in beijing. met with xi jinping his counterpart but the two accord.o reach an the leaders did sign a range of deals including a loan agreement or a new rail project across the island. global news 24 hours a day on air and at tictoc on twitter. powered by more than 2700 journalists and analysts and more than 120 countries. i'm jessica summers. this is bloomberg. paul: tha

christine lagarde resigned this month to lead the european central bank. next leader will confront a world economy at its weakest since the aftermath of the financial crisis. bank of england governor mark cohen calling out mark gary his former -- out cohn after his former colleague jumped into the debate over brexit, telling him simply, "he's wrong." global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. vonnie: big energy beats. chevron and exxon posting better-than-expected earnings today, thanks in part to the oil output surge in the permian basin. meanwhile, oil headed for a week of declines, posting its biggest one-day drop in more than four years on the back of trump tariff threats yesterday. today, oil is recovering just slightly, but still trading in the $55 a barrel range. let's bring in tina davis, bloomberg managing editor of commodities. exxon can't catch a break. they beat, and as soon as the market opened, they are downhil

arguably you have christine lagarde coming into the ecb presidency in october. been known as adept politician when it comes to negotiating with governments and getting them to come together to the table. the argument is she will be forceful behind getting governments to do a little bit more. el-erian telling bloomberg yesterday you can talk yourself into a recession if you're not careful. what is in the reaction to that. yields continue to drop. katherine: there is a point to be made -- there is low liquidity right now, so the moves are building up each other. with trade headlines, there has been a lot of anxiety in the market. the point remains that we are breaking through big technical levels right now. definitively breaking through them. that is going to remain in the prices. both.: thank you to you guy: thank you both. katherine greifeld and kristine aquino. keep an eye on the euro ftse. second quarter filings have been released, giving a glimpse into how some of the biggest and most secretive money managers are position. let's bring in a bloomberg hedge fun

i thing mario draghi has been pretty clear about that, and i'm sure christine lagarde will continue toe that case in the future as well. in a way, it is almost the inverse of what we are seeing in the u.s., where the fiscal theort has been there for u.s. government, but the cutter approach for monetary policy. vonnie: ben, thank you for joining us today and being so generous with your time. aberdeenen ritchie, head of u.s. equities. the familyma and that controls it has made an $11.2 billion offer to declare settle alland opioid-related cases. for the latest on all of this, let's bring in bloomberg pharma reporter cynthia koons. offermily have made this of purdue for $11.5 billion worth of settlement. does yesterday's johnson & johnson finding change anything about this offer? cynthia: they sort of tell two different stories. what j&j did in oklahoma is decide to take their case to trial. while it was a good day in the market, concerns that had could have been worse, it spoke to the idea that it might be better to settle. the companies that had settled prior didn't have to pay nearly a

continue to go lower, but we feel that despite mario draghi leaving, his last meeting coming up, with lagarde joining, we feel that there must be some continuation of the monetary path they've taken to ease economic tensions while there is no fiscal backstop coming. prime minister johnson has come to say they are leaving at the end of october, come what may. the bank of an led will make sure they sail through. guy: you bring up the issue of fiscal, and i appreciate germany being kicking and screaming in that direction. most people think it will in up there. brexit will probably end up there as well with some kind of fiscal stimulus. other parts of europe may or may not, depending where they are with their debt levels. if we get significant amount of fiscal spending and europe, the bond market is out of position for that. how out of position to you think it is? grant: if we have a large, concerted fiscal stimulus package across the euro zone, ultimately we see yield curves steepen into an inflationary dynamic that will cause inflation expectations to go up, not just because of the issue insigh

he wants the eurozone to be anding when he leaves christine lagarde takes over. he has the problem no matter what he does, he controls monetary policy and is not on the same page with anybody in terms of fiscal policy. we talked to the german finance minister who says there is no crisis with the german economy and he is not planning on spending more are cutting tax rates. what can draghi really do? he provides some support for the economy, but interest rate have gone a long way down. lending is accelerating. quite but, not getting closer. this is true of several other countries in the eurozone itself. line that will lead to financial stability risk. lendinglooking at bank growth of this magnitude and interest rates in germany going negative. you have to worry about financial stability risk down the line. at these levels of yields, there are problems, insurance companies, fund managers trying to find returns. anna: you worry about financial risk, but isn't that the point, they want to spur that? david: when you listen to the bank of england, they have a .onetary p

the entire german yield curve is negative with the new ecb change, with lagarde, there's a chance for more dovishness, not just cutting rates but doing more qe. >> again and again and again this earnings season we heard from european banks saying this low rate environment makes our job difficult. does that matter for the broader economy from where you stand therefore is there a knock-on effect that we should be watching closely >> two things. one, european banks are still in better shape than they were ten years ago. the core ratios are up >> from a capital perspective. two, where we would be worried is if you start cutting off credit we're not seeing that yet. we're seeing the opposite. we're seeing a lot of credit put out in the market. that's where i would get worried. >> it's an issue of demand, not ve availability there is not a lot of demand, particularly if you look at demand out of periphery countries, despite years of quantitative easing, interest rates, forward guidance, you're not seeing that much of a pick up in activity in peripheral lending. >> part of it is uncertainty

draghi, the ecb that will be of lagarde, is there a linkage of politics and economics like mr.a: i think when we look inside the euro area, what we have seen for some time already is the ecb warning the government they cannot make up for the fact that there are a number of structural issues that need to be addressed in the euro area. we need to complete banking union, the capital markets union. we need to work on the energy union and we probably need a fiscal adjustment tool. it is clear the ecb has been giving this message to governments for some time that they cannot indefinitely compensate for these missing structural arrangements. as we look to the next commission, hope is that we will see some progress, and the european political process is not a simple one. i was struck by the article yesterday, because the dynamics europeferent, where in there is a common consensus we should move ahead on the european project. there is not agreement on how we should do it, which is where the complexity is. the article yesterday was a fedle bit more edgy in the potentially standing up to

however, look at christine lagarde, who will soon take over as the new ecb chairperson, and i think she'slls to do what they need to do, which is to get the governments that have a little fiscal stimulus. charles: mario draghi has been very loud. he's on his way out, he can kind of speak his mind. he's like listen, guys, we are doing everything we can to prime the pump here but we can't have a fiscal policy, by the way, yellen and bernanke used to say the same thing about president obama. we are lowering rates, printing money, and you are raising taxes. that's a bad combination. it hurts what we are trying to achieve here. so maybe those governments do but i think they crossed the rubicon. they promised their citizens so much, i'm not sure if they can ever cut taxes or do the pro-growth policies people want. >> they are democracies over there. if times get tough enough, they will do what it takes. i think we actually have been very successful here with the late 2017 tax cuts. i think something like that could ultimately be on the table in europe. that would help lift them, it would help l

i think in europe, there are going to be interesting plays when, you know, you have christine lagardes going to be more talking about fiscal policy and as that happens, you are going to start to see some of the negative interest rates come out of the system. liz: okay. you are shorting french sovereign debt, correct? now, how can our viewers do something like that? >> well, you can go with the futures market. we are being very tactical about it and looking at it where the entry points that are out there, and we may not be there yet, but there's certainly an interesting trend because if you look at germany, germany is really the bellwether of europe right now, they are legislationally cannot go above 35% debt to their gdp, which is really putting pressure on their system. so they can't borrow extra to put money to work at a time where their entire yield curve is negative. so they are getting their current account balance is actually very positive so they are taking that money and putting it back into their bonds. france doesn't have that problem. france can actually borrow more. i thin

. >> incoming ecb president christine lagarde said she is willing to follow mario draghi draghi's pathe eu has the address the downturn. int would you be advising terms of trading expectations? >> they have moved quite a bit. our economists are expecting a comprehensive package. end, 20 basisont points. forward guidance. are of these categories affecting different assets. front end cut seems to be quite well flagged. the things which seem to have a lot of disagreements and potentially not fully priced, certainly the qt. it depends how aggressive of you you want to take. the narrative is shifting into this meeting. you have had italian political risk come down. need from ais less civility point of view. you are in a tough spot. it is similar to the fed. hard not only driven by data on inflation and growth, but insurance cuts, where central banks have to make forward-looking judgments. that is why it is difficult. >> going more negative, will it possibly spur inflation? there is a study showing banks and negative rate regions actually lend less money out. help if the ecb lowers the rate

where the fed is, and how the economic outlook is shaping up >> want to hear from your friend miss lagarde at some point. >> she doesn't take the spot theoretically if she gets final approval until october what she is walking into is a very difficult situation in the middle of a trade war, a currency war, a lot less ammo than her predecessor had. >>> meantime, sue herera has a cnbc update. >> good morning everyone here's what's happening. moments ago president trump addressing the shootings over the weekend in el paso, texas, and dayton, ohio he called them evil attacks and crimes against all humanity and called for capital punishment for those who commit mass murders and hate crimes. >> i am directing the department of justice to work in partnership with local, state, and federal agencies as well as social media companies to develop tools that can detect mass shooters before they strike. >> the nyse and the nasdaq observed a moment of silence in memory of the victims of the mass shootings in el paso, dayton, and gilroy, california >>> and police in hong kong showered tear gas on a residen

newhere a scenario where a ecb president christine lagarde jointer central-bank and starts going arounditals and say, look, we are prepared to offer this big package of easing, but we cannot generate growth out of that, you have to help us, yes, there is that prospect, but is it a 2019 scenario? i don't really think so. 2009 you mean? viktor: no, is it going to happen between now and year-end? matt: do you expect germany to fall into recession? do you expect two consecutive quarters or more of contraction? strong i don't have a view on exactly the number of negatives they are going to have. as long as global trade is slumping and as long as china in particular is weighing on global manufacturing, these are super important catalysts for germany and its economy. as long as they remain negative, i don't see how germany pulls itself out short of a substantial fiscal package. have seen italy being one of the beneficiaries of ecb stimulus. talk to me about how you would play that in terms of what you would buy? viktor: i'm quite bullish on italy and italian credits. particularly the italian b

we don't want to see or draghi does not want to see a stronger euro, and lagarde will not either.g to see central banks start to cut, some of them at faster rates than anticipated. war,e in a global currency or will we enter into a global currency war? john: you hit the nail on the head. i thought the question was about two in into. -- was about to end. you see the australian central bank and the rbnz mentioning currency as well. when you run a policy and you are doing q. week, you look for ways to devalue on a currency basis, and that is the environment we are shifting into. nejra: and you would want to short which currencies most? john: i think the dollar is actually longer-term, versus the japanese yen, eventually towards the euro as well. i think the dollar yen is the more straightforward trade. the fed being forced to respond and the need for dollar liquidity around the world to bring that liquidity. the rest of the world is more difficult because he met this appetite angle on things, so emerging markets -- because you have this appetite angle on things, so emerging markets c

maria: what do you think the impact of christine lagarde coming from the imf going to the ecb will ben commentary about that, saying she's not an economist. she's more of a politician. what kind of a sentiment will that bring with her in the chair at the ecb in terms of stimulus? will she buy equities, for example? >> i don't know what her policies will be. but i know that she really is looking to have a europe that can grow faster. you know, they've really slowed and they don't have the policy reforms that would move them forward. one thing i've learned over this 40 years doing development economies is leaders matter and the policies matter. they have a choice of whether they want to change to more growth oriented policies. so one of the challenges is for europe to find that direction and get out of the rut that they're in. maria: you're right. but aren't these issues around fundamental federal policy as opposed to -- talking about national policies, as opposed to of monetary policy, right. she's taking the helm at the ecb. there are issues around labor, around the workweek in europe

i think we will get a slightly different mandate out of lagarde .ights that mean be attracted to certain parts of europe based on that outlook for the ecb? perhaps corporate credit among some of the risk assets? peter: i like the italian bond market. corporate credit market i think is a little tight. i do like the banking system there. i think the banking system will benefit. i think that's going to be swingingty coming into into q4. nejra: would europe be one place you want to deploy money, or would you rather look at emerging markets? peter: i would stick more to europe. i think european banks are going to offer up some opportunities. any perception that the ecb is going to be supportive of's fiscal stimulus. nejra: peter tchir stays with us. turning to hong kong, we started the show with the update on the turmoil. authorities canceling flights after protesters swarmed the terminal building for the biggest disruption yet to the city's economy since demonstrations began in early june. joining us from the hong kong airport is bloomberg's yvonne man.