Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Francine welcome to bloomberg surveillance. These are your markets. A lot of focus is on the Corporate News and a lot of the focus on the data we have from the u. S. European stocks are pretty much unchanged. Technology stocks are better than expected. But some of them are still disappointed. If you look at it, a lot of it is stock by stock. Eurodollar at 1. 1134. And then you can see the pound at 1. 2428 after jeanclaude said no. Coming up, right here, we hear from the renault chief executive. That interview in around 15 minutes from now, plus, we speak to the u. S. Secretary of state, and later on, to the starbucks chief executive. All of that coming up and much more. Lets get straight to first word news in london. Governments need to pitch in with fiscal measures if conditions in europe keep deteriorating. That is according to mario draghi. He signals more monetary support in september buts comments suggest the central bank is getting close to the limits of its power. The outlook is getting worse and worse and it is getting worse and worse in manufacturing, especially and worse and worse in countries where manufacturing is very important. ,ut because of the value chains this propagates all over the eurozone. Tested a Ballistic Missile it cited an official, saying it did not pose a threat to shipping or u. S. Bases. But it is the latest move in escalating tensions. We spoke to mike pompeo about relations with tehran. Welcome the i would chance to speak to the iranian people. Sharif gets to come here and drive around and he speaks to the media and talks to the american public. Gets to put iranian public propaganda out into the airwaves. I would like a chance to go and speak the truth to the iranian people about what is their leadership has done what it is their leadership has done. North korea has called its missile test a warning to south korea. Between theting north Korean Leader and President Trump seemed to provide a step forward installed nuclear negotiations. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thank you so much, olivia. Amazons profit for the Second Quarter is marked by surging costs and shorter delivery times. They are now warning investors that oneday shipping has a big price tag. Alphabet shares rise as google announces a Share Buyback plan. Regulatory concerns from facebook. Joining us are our guests. Do you like tech at the moment, james . I do. Francine all kinds of tech . James i am concerned. The six Largest Companies represent 20 of the equity market and so active managers need to take punchy bets. Said, looking at the longterm growth credentials, i come out feeling there is more upside. Francine even amazon . James absolutely. Francine what do you do with tech . An ia, too, like tech. I say we favor more software over hardware and we are slightly skeptical about the semi argument, but overall, you be long. Ng francine this is on a regulation and the fact that they will break it up . The department of justice review is a high hurdle for facebook wheres i expect the others will be able to get through. Francine that means what, a splitting of facebook . James i think the whole challenge of putting in place the controls necessary to demonstrate is very expensive and risky. It is not doing either. Amazon, weooking at knew that oneday delivery costs but if it starts eating at margins, is it still a goodbye . James at the core, they made this point. You dont necessarily want to look at quarter numbers. I suspect that the prime offering will come through and our own view is that margins will continue to climb once they established themselves more firmly the other point that came through quite strongly was that you should not underestimate what they can do with the Cloud Business. Thats half. We always think of them as retailers but they actually generate half the quarterly revenue. Julian and the upcoming contract will be good news. They have established in the retail area and the real growth comes through. The amount of new, interesting ideas coming through in terms of making better use of the cloud and the way people will be getting rid of i. T. Departments. Francine do not think there is a risk the Trump Administration goes after them . We had Steve Mnuchin saying that it is because of amazon that the high street is dying and the department of justice announcing on tuesday that it is opening a very broad antitrust review. Francine it is interesting james it is interesting. I would say they are relatively safe on the competition front. It is the case that anyone can sell online or in the states and the overwhelming majority are still going through brick and mortar sales stores. So i dont buy that. But i do think amazon has a real challenge in terms of the amount of taxes it pays. He mr. Trump has an angle, would join the europeans and say that in the 21st century governments already to spend money. I think that is a big risk. Francine do you think taxes the biggest risk or is it regulation . Julian lets make a more historically correct regulation. If you look back at the breaking up of monopolies in the states oil, its of 25 years to break up standard oil. It took nearly 10 years to break up the telecom giants. So i think these things are much longer term than you think. I agree with james on tax. Those are a win for any regime. It is a good headline number and trump likes headline numbers. Francine due like any of the tech stocks that have moved away from china because of this trade war . Is there value . James taiwan semi conductors is a core holding for me. I believe it is one of the few companies with sufficient financial muscularity to invest in the chip foundries. Its dividend yield is to die for in a climate where i anticipate low cash yields and yo and low bond yields forever and a day. That is an adjusting approach. Francine julian and james both stay with us. Coming up, we speak with the twitter chief Financial Officer at the Company Reports secondquarter earnings. That interview a little bit later today. This is bloomberg. We are in a situation where any one of us has to deal with the Worldwide Development of the economy. We know due to all of the the not clearve development in the question of brexit that has an impact on the thatmy, mostly in the way many corporates who are willing to invest are waiting for the next month or the next month. Any one of us is waiting for a solution and all of this will have a impact on growth. Are you concerned we might be struck stuck in a japanese cycle where low rates the get low inflation . I dont think so. Expecting better growth next year and we will see it in the end of this year already this is due to what i said already. If these manmade problems we , which isolved something we can expect this year, we will have a better growth rates worldwide and this will have an impact on the european economy, and especially on the economy of germany, which is a really Global Society, exporting and importing from all over the world and to all over the world. This is what we should understand. Francine that was the german finance minister speaking exclusively to bloombergs matt miller. Lets have a look at your markets, a busy day because we have data out of the u. S. Stocks are pretty mixed because we had cloudy earnings, some of them were better but we also have a batch that was better than expected. So a lot of investors will turn their eyes towards next weeks Federal Reserve Interest Rate decision. Treasuries are hedging higher and you can see the pound fluctuating. Lets also bring you our first interview with the new boss of renault. Outlook forwered firstyear sales as they grapple with the downturn in the car market. The company now says revenue will be close to last years level rather than grow as previously forecasted. The chief executive spoke to bloomberg. The alliance for us is working very strongly. It is an industrial project. All the new cars we are preparing, all the new technologies we are preparing intensively. Thatange of cars, all of is the alliance. Is a dragging earnings down . No, because thanks to the alliance and all of the jobs, we are purporting performing. And we are sharing the cost of all of these elements. Otherwise, the results would not be these and not the ones we expect for the future. So we should never forget the alliance is a reality in terms of operation and industry. That is why we are so strong and resistant. That is why our visibility of what is happening that is our visibility and what is happening. I think it is very important have all the necessary conditions to make progress. This, it is not yet the case for the reasons you said. To helpop priority is nissan out of that situation thanks to the alliance. Does that perhaps mean changing the ceo of nissan . Afteris a lot of pressure plunged andits planning more than 12,000 job cuts. It is not a matter of persons, it is company to company. That is why im always getting. Ack to the operations at the end, what matters is to make sure that we are helping nissan out of that as quickly as possible. To you believe the difficult situation of nissan could actually help you revisit a possible merger . The key point for us is to make sure the alliance is on track. Renaulty has shown that and the alliance are extremely attractive. And we are getting more and more attractive, by the way. We have the experience of cooperation. That is up and downs. Day, wehe end of the have been experimenting and living with that and desiring that. That is why we are so attractive for the opportunities. But our First Priority is to make sure the alliances are working in this situation. Francine that was the renault chief executive speaking to bloomberg. Will have plenty more. Up next, the ecb scraps the the stimuluscrapes barrel as mario draghi promises new measures in september. We talk Central Banks next. This is bloomberg. Francine this is bloomberg surveillance. Governments need to pitch in the fiscal measures if conditions keep deteriorating. That is according to mario draghi who promises more monetary support but his comments suggest the central bank is getting close to the limits of its powers. This outlook is getting worse and worse. Is getting worse and worse in manufacturing, especially. And worse in countries where manufacturing is very important. ,ut because of the value chains this propagates all over the eurozone. Francine julian and james are both still with us. I dont think the markets liked it very much. But ifked it initially, the outlook was so bad, why didnt they do anything yesterday . Unlikelyt was highly because the ecb is a creature of habit and they are always going to come in in september. And he did not want to give any element of panic to get. What i do have to say is that i completely concur that the situation in the last six weeks have not helped matters either. So consequently, the basis point cut is coming, more bond buying, is that enough . Question mark, for me. Francine we also have the ecb surveyed looking at inflation. That dropped to record lows. To they even have the tools to change the inflationary dynamic . James the quick question is if i share julians view, i certainly think we will see a 10 basis point cut. That is the usual ecb response function. Thatems reasonably clear will happen. Whether that is appropriate or necessary is a really different issue. Is notus on inflation wrong until this case. Is a very difficult demographic and we know that the german people and the government are all increasing their savings rates. Francine the pmi was pretty terrible. Factory orders were terrible. James absolutely. But the premise that central bankers can stoke up inflation expect the oldstyle economics. It is not a monetary phenomenon. The challenges are disruptive technology, high levels of longterm indebtedness, these are all cocktail items that make me see low inflation for an extended time. We need policy to drive activity levels. Does it mean we are going to see a recession . Is low inflation still a red alarm signal . James no, i do not believe we are do a global recession. I do not anticipate a u. S. Recession. This is perhaps the critical issue because i think the yield curve that many have hung their hat on his simply turning out a wrong signal in current market conditions. Francine we are expecting gdp out of the u. S. And this is our mlivs question. What secondg quarter u. S. Gdp numbers will keep fed cuts alive . James 2 . Julian 2 . James they will definitely cut. I think a 25 basis point cut next week is absolutely going to happen. Francine where do you see dollar at the yearend . Julian against sterling . Francine or euro. Julian lets throw sterling into the mix. 1. 30 year and year end, 1. 30. The market may be surprised that there may not be another cut this year. I think that is very dependent on the trade talks, i really do. Francine you think it would be good or bad . Julian who knows, because it is how much either side will give. Thep needs to get Agricultural Products being bought or something on huawei. That is a very difficult call this congress does not want them to do so. Francine will have plenty more to say on trade and the u. S. Coming up, less than 48 hours into his premiership, Boris Johnsons demands for changes to the Withdrawal Agreement are rejected by the eu. Francine late delivery. Amazon misses estimates and disciplines forecasts. Amazon web service also comes short. Deskn secretary of state secretary of state mike pompeo says he is willing to travel to tehran. And, the e. U. Immediately rejects ellis johnsons demand for a better brexit deal. Jeanclaude juncker says the current agreement is the best and the only two possible. Good morning everyone, good afternoon if you are watching from asia. This is . . Bloomberg surveillance, i am Francine Lacqua in london. Shares are moving higher by more than 7 for vodafone, spinning off their european business, saying that they might ipo. Still, it will be officially super and entity in may of 2020, so we are seeing big gains. Kering is on of the bigger losers unlike vodafone, dropping 7 , on track for the biggest loss since 2018. It is all about gucci, gucci is not so gucci anymore. Sales flatlining after three years of breakneck pace. Some of the comes are difficult. Analysts are still bullish on the stock despite the sum of today. Finally, Anglo American had. Positive earnings yesterday but today, that is reversed. We saw one of the biggest shareholders sell his stake. He held about 20 of the company. So there are some questions about the outlook for the company. Francine thank you so much, dani berger with the latest on the stock moves. Now lets get to the bloomberg first word news. Olivia germany is not in crisis and has no plans to add stimulus to the economy, that is according to the finance minister, olaf scholz. He says increasing spending would not help Economic Growth. He says a reduction in global tensions will boost the outlook for 2020. This amendment problems which , it is something we can expect this year, but will have a better growth rate and it will impact the european economy, especially on the economy of germany, which is a really Global Society. Olivia nestle is forecasting the fastest growth in three years, by that may not be enough on a list, who were expecting a big increase. The Worlds Largest food company says sales should claim through percent. U. S. Showed the strongest quarterly growth in eight years. Amazon is wanting investors that one day delivery has a big price tag. The results were marred by shipping. The companys finest chief says it will put a strain on earnings for the rest of the year. But it is already leading to customers by purchasing more. Bayer has presented a jury to verdictrdict a amount. Buyer could be liable for hundreds of billions of dollars. Global news, 24 hours a day, on air and at tictoc on twitter,. Powered by more than 2700 journalists and analysts in over 120 countries. Fran gish olivia, thank you so much. Things are not going well for Pedro Sanchez. The acting foreign minister. Has failed in his second attempt acting Prime Minister has failed in his second attempt to form a government. Regard to our bloomberg reporter in ledger did. Roger go, where does pain go from here, are we going to see fresh elections . The big question is whether we will seek elections right away. That is not going to happen because they have a window of two months in which somebody can come up with a solution and try to form a new government. Would have to request the king to ask them to do so. They have two months to negotiate. Whether they will or will not reach an agreement is a big . Mark. On if they dont come at there will be elections in november. Francine why is it so difficult . And what options does Pedro Sanchez actually have . Structure,e national there are basically four parties, to them on the right, two that two of them on the right and two of them on the left. To ones on the right have demanded assuming hard terms for him to accept especially regarding catalonia,. It is likely he would govern if you had support from the podemos party, which is to the left, he is socialist, but he has been unable to agree with them on small issues. It seems to be coming down to a vanity fight right now. They may try to brush of those problems out. If they can, that will be great for them to form a government. Right now, that seems to be the cracks of it. Francine thank you so much, orihuela, our bloomberg reporter from a trade. Now, according to Boris Johnson ,s office he told the European Commission president , young cloud juncker that the Withdrawal Agreement would have to change. Young cloud juncker has rejected that. Evolving . You see this if the e. U. Do not even want to negotiate, is a general election almost a given . Not. absolutely mr. Johnson i expect when still avoid a general election for the time being because it were a general election to be forced upon him, he would emerge the winner. I think he will want to strengthen his position and ensure that the winner of the general election, has a commanding lead in the polls, he wants to be it were to blame mr. Corbyn for any failings in government and he will certainly want to spend more money. So i think we should expect much easier fiscal policy in the u. K. Leading up to a general election. Francine but will he deliver brexit by october 31 . I think he will say that . It cant be done. Francine i didnt know whether you agree with that, but if you does not deliver brexit i october 31, how does he win the election . This is what he keeps on promising day in day out. I would agree with james but i think it is highly likely that there will be an extension and that will run to the 31st march. And it will be harder to go past that because of the e. U. Budget. March, ittober and depends at how negotiations go from there on in. I dont think a lot will be achieved within the first 99 days, and i also think we are happens ining europe until september, then i ,hink there will be intense negotiations which would not go very far and there will be no movement on the irish backstop which he has pinned, his hopes on trying to change. I think he has to have more time. If you cant get anywhere, he may francine what attached to . He is james and Withdrawal Agreement is where much dependent on resolving the irish backstop. He wants a solution, the rest of europe needs a solution. He needs to find a longterm agreement that specifies exactly. Hat will happen in the 1970s, when there was Armed Conflict in northern ireland, the british army attempted to shut down the border and it did not work at all. Francine ok, what does it mean for a, the bank of england, and b, the u. K. Economy . I think uncertainty will continue, with an extension, hence my comment about sterling having a bit of a bounce, when he asked me about the sterling rate. But i also think that the uncertainty in the economy will remain reasonably weak. To the point about james is making, yes, i think the new chancellor will be test with producing some stimulus packages best tasked with he will be test with producing some stimulus packages. He also has to realize a degree of prudence he required as well. Both, bothhank you of you are staying with us. Coming up on bloomberg, forget the hipster coffee shop. Americans are falling back in love with starbucks. The coffee chains stoxx climbing after reporting its fastest global sales growth in three years. Later tonight, we speak with starbucks chief executive. You can catch the interview at 3 00 p. M. London time. This is bloomberg. Our mission when we came in was to create a much the lament in the middle east as we. Could we watched iran engaging in this behavior. We had a terrible deal that the goneous administration had into which had the side effect of creating an arm us for the leadership in iran. So we broke out of the deal. We stopped putting money into the Iranian Regime. And we are forcing them to make tough decisions about how they behave. We wants change in behavior from the leadership so that the iranian people can get what they deserve. How do you get that change in behavior when the foreign minister the other day is saying that the sanctions are going to . Ackfire her how do you get the change in behavior . For the foreign minister, and on. Nt matter what is going at the end of the day, the ayatollah is the ultimate decisionmaker. The irgc has the capacity to do all the activity youre talking about, the seizure of ships and the bad behavior and malign activity. It is all driven by the irgc leader. Those are the two that decisionmakers. Those other people upon whom we are trying to apply sufficient pressure to show that the cost is not worth it. To convince them that if they simply behave like a normal nation, that the iranian people can live normal lives. Would you go to tehran . Sure. I would happily go there. Would you up here on Tehran Television . I would welcome the chance to speak directly to the iranian people i have talked about this before. The foreign minister comes to new york, he speaks to the media and gets to put iranian propaganda out to the american airwaves. I would like to go, not to put propaganda but, to speak the truth to the iranian people. To speak to the leadership about how they have harmed iran. The reason they will not permit that to happen is because they know the truth as well. Francine that was the u. S. Secretary of state mike pompeo. Speaking to Kevin Cirilli of bloomberg. Us. Wo guests are still with risks,when you look at it is iran, it is north korea, all the geopolitical concerns, is there a go to safe haven, and has that changed in the last few years . Gold . Cash . [laughter] james no, those are not good places. Good quality equity. Went thing when you think about what is going on around the road, equity premium from Good Companies that are able to grow revenues and maintain margins increments of low inflation and low Economic Growth look to me like the winner, and low risk from i440 lowning perspective risk from a portfolio planning perspective. I would agree with james and that we are indeed neutral inequities send having been the states, that is where we are lacing one of our larger position bets. But we have added to gold of the best gold as an insurance of the. Bigyet francine multinationals, if you look at the actual valuation, they are nothing compared to the new tech firms. Capacity see enormous in a climate of low inflation to create longterm real wealth from good Quality Companies doing the basics well and i would look at tech, i would look luxury,of health care, it would be careful in terms of the political risks, and it auld certainly not expect cyclical bounce around the economy anytime soon. Francine ok, thank you both so much for joining us today. Up next, venturing it alone. We focus on european Venture Capital and victim mattias ljungman, cofounder of atomico, as he launches his own seed fund. Thats coming up next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance i am Francine Lacqua here in london. The next guest cofounded a vc firm atomico, a dozen years ago. It invests in dozens of startups including skype. Now he is planning to start a new startup. Much yes youngman. Mattias ljungman, welcome to bloomberg. So you are trying to get into startups much area with much more risk. Mattias yes. Investing. T of seed we have been damning of little bit doubling a little bit. Francine where do you expect to find value. What do you look for in a company . Is that the person who founded it . Is in the region . How nimble they are . Mattias it is a whole bunch of that. The founder is extremely important because they ultimately are able to for all level. Pany to another what i like to see in founders is one select to develop themselves over time. What i say is in a short a rate of time, they do on reasonable they do a reasonable model of growth and build a reasonable company. That is what venture is about. Francine is there a space you are looking at the moment . The hot new thing that we will be talking about in three years . Mattias i think there are still loads of great rings in the best great things in the sector. Or example, in fintech s was investor in climatecorp which went on to sell to monsanto. But also, the gaming industry is another area i have spent a lot of time in. Francine gaming in the u. K. Or in europe . Mathias im talking about video gaming. For example, super cell was a company i backed earlier on. I think that world is changing very much. The way we consume media will changed electrically. It will be a lot more interactive it will changed dramatically. Francine does this mean on screen and ondemand . It seems to be a crowded space. Mattias it is crowded but it has a lot of opportunities for growth. Particularly now because you see the platforms merging. Before it was ec and mobile consoles,. Now they are all the same platform. Francine you are looking for investment in europe or worldwide . We are seeing a lot of European Fintech Companies going to the u. S. That often changes the dynamic. Mattias it is really cool. We underestimate europe quite a lot. One area we are strong at is fintech. We have had a history of this. Europe is a great place for fintech companies. It is a great opportunity for them to most to the u. S. And it is a big market. But i dont think the u. S. Will be the sole focus. We will think globally as well. Francine do you think worry about brexit the you worry about brexit . Mattias companies are dynamic. They will find the avenue that works best for them. I dont spend a lot of time thinking about brexit. Is present becomes a problem finding divisional company, they will move, they will change, and they will deal without. It is part of being an entrepreneur. Francine do you want 10 investments in the next couple of years or is it a casebycase . Mattias i think it is important to have consistency in terms of the scale of investments you are doing. Volume is important in that space, too, so it is not his just a sharp shooting exercise. Francine the european listing process, does that change the vc the factory have companies in the u. S. Of that spin off does it change the way you see future investments . Mattias now. It is the basics of finding greater entrepreneurs, grade technology, and europe is full of that. We have an amazing industry here europe. We have invented many of the most amazing technologies over the last 50 years and we will continue to do so. Francine but the problem is scalability. Mattias yes, i think fragmentation in europe has been a problem. I went to that is a vulnerability i want to attack. Using technology in harnessing that. That is something venture has not been very good at. A little bit of eating our own dog food. Francine what is on your priority list for the next five months, who are you meeting . Mattias it is about building a business, finding the right team, meeting up with investors. I am looking at companies all the time. It is really exciting. Francine i am excited to have you on the program. Hope it will be a regular thing. Mattias ljungman. Atomico. F. Thank you. So much we are getting breaking news out of turkey from president erdogan picking in ankara. President erdogan saying that he hopes the u. S. Acts with good sense. 0e also says that the as40 will be operative as soon as april of 2020. All caps of geopolitics. Keep an eye on that. We are looking at the lira, pretty steady as of today as the bonds extended the rally. Bloomberg surveillance continues in the next hour. Taylor riggs joins me out of new york. We will be talking to the chief finance officer of twitter, as a Company Reports secondquarter results. In the markets, it is a bit of a lopsided day. A lot of focus will be on Boris Johnson. The e. U. Just moments ago saying no to Borris Johnson. That increases in Nodeal Brexit. Risk. The scale of the challenge facing Boris Johnson was laid bare in the first hours of this morning when mr. Junker said the uks withdrawal deal is a what best they will get. We are also looking at treasuries on the back of gdp of the u. S. , the fed next week, the boe is also next week. European stocks are mixed. Treasuries are ever steady. Euro is the drifting lower a day after fluctuating in the wake of that European Central bank meeting. Check. The latest you can see in europe, some of the Equity Stocks are doing much better than expected. Plenty more throughout the day. We have a luxury theme going on also. Expected onter than the back of sales of Christian Dior and Louis Vuitton caring downothership of gucci today. Disappointing figures from gucci. This is bloomberg. This is bloomberg. Fran amazon misses estimates and disappoints on forecast as costs surge for its one day delivery service. Its web service also come short. Secretary of state mike pompeo tells bloomberg he is willing to travel to iran, as the Trump Administration applies pressure on the islamic republic. The e. U. Immediately rejects Boris Johnsons demands for a better brexit deal. Jeanclaude juncker says the current agreement is the best and on the deal possible. Good morning, this is bloomberg surveillance. I am Francine Lacqua in london. Taylor is in new york for tom keene. Taylor, we will focus a lot on the gdp figures in the u. S. , figuring out what that means for the fed. And we will also look at brexit negotiations, with Boris Johnson being told no, we will not reopen the Withdrawal Agreement. Taylor so much going on with brexit. You are right. Secondquarter gdp numbers coming out at 8 30. Morgan stanley reiterating their 2. 5 analyzed gdp forecast. All eyes are on that. A dovish fed, after a pretty ecb. H francine and will have plenty more of course on earnings. Tech is left, right and center. First lets get the news. North korea says its test of a new missile was missed as a warning. North korea is unhappy with Weapons Development, and plans to hold military drills with the u. S. A recent meeting between north korea kim jongun who supervised the test launch, and President Trump, seems to provide a step forward in stalled nuclear negotiations. Iran reportedly testfired a mediumrangeBallistic Missile that traveled 1000 kilometers. That is according to cnn. It cited an official saying the test did not pose a threat to shipping or u. S. Bases in the region. But it is the latest move in escalating tensions. We spoke with secretary of state mike pompeo about relations with tehran. Mr. Pompeo we welcome the chance to speak directly with the iranian people. The foreign minister comes to new york, theaters around in the most wonderful city in america, and speaks to the media, talks to the american public, gets to put iranian propaganda out into the american airwaves. I would like a chance to go. Not to do propaganda. But to speak the truth about. The iranian people, what their leadership have done to harm iran. The European Union has rejected u. K. Prime minister Boris Johnsons demand for a better brexit deal. Johnson seems to be willing out minor changes. He is calling for the irish backstop agreement to be scrapped. If neither side backs down, britain will be on course to drop out of the e. U. On october 31 without an agreement. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Renita young. This is bloomberg. Francine we are just getting some breaking news. We were trying to listen to what the president was saying in ankara at the moment. S400 missilese a40 will be active as early as april of 2020. Mike pompeo, has warned turkey not to render these s400 missiles operational, and said that otherwise, they will face sanctions. In retaliation, president erdogan, remember, this is a Missile System that turkey bought from russia, in retaliation, president erdogan has just said the actually, they may have to think on its orders of boeing. So that is a huge headline. Feels like a titfortat. If you put sanctions, i will stop buying boeing orders. That will have an impact on boeing at the opening. So keep an eye on that. Overall, the market is a little weary, moving sideways before gdp figures are out of the u. S. European stocks, investors trying to figure out the latest batch of corporate earnings. I am looking at treasuries, they are pretty much steady. Pound is a 124. 37, after president juncker told Boris Johnson, we will not negotiate. Taylor we are seeing Dollar Strength across the board relative to the euro and the pound, giving futures are lift u. S. Like you saw with tech earnings coming out yesterday with alphabet and amazon after the bell, toppling Revenue Growth looks strong for those companies. Dont get me started on the margins in the bottom line. But tech is leading the way. This is interesting. 19three month 10 year, basis points. Jay powell is happy about this number, it is now only 3 basis points. Francine the chance of the Nodeal Brexit is growing as the e. U. Rejects premised on johnsons demand for a better deal. If neither side downcomer britain will be on course to drop out of the e. U. On october 31 with no agreement in place. Joining us is Derek Halpenny, european Global Markets research , and we alsoank have a camera, bloomberg senior editor. And we show you may charge, it is looking at cable volatility. We have not seen the volatility we saw in march. Are they expecting a no deal in the markets or a bunch from Borris Johnson . We have a rates model and we see the divergence between the two. Historically over the last years, that has diverged when we had moments in relation to brexit. At the moment, it is about a 6 or 7 risk premium. I think we are moving in the direction of markets increasingly pricing in the risk of a Nodeal Brexit. That have been built up in terms of short positions, it is the largest since 2017. So it has clearly been priced. Francine when you look at the composition of government come at what does it tell us about is hes johnson prepared to go for a Nodeal Brexit . He certainly wants to create the impression that he is willing to go through with a Nodeal Brexit. But after the e. U. Rejected the initial request yesterday, he would argue that there are still 98 days to go before that would actually happen. And he will still continue to argue that may be the e. U. Will bank and offer some different terms and render a Nodeal Brexit, not necessarily. Certainly, the composition of the government is a message domestically and also a message to the e. U. Taylor i want to continue on darrennversation with crawford joining us from our berlin bureau. Can you bring us the e. U. s perspective . We know that the u. K. Would be harder hit if it left the e. U. Without a deal. Still, how much does that e. U. Want to avoid a Nodeal Brexit . The au undoubtedly wants to brexit. Nodeal whether that actually means they are willing to rip up the existing deal that was negotiated over two years and start again as Boris Johnson would like is very doubtful. There is a sentiment of that has been prevalent in london since the referendum three years ago, that somehow the e. U. Is one of the stick and bluffing and that they will come under pressure tom businesses and companies do everything politically possible to avert in Nodeal Brexit. But frankly, this is not about the e. U. , it is about National Governments in berlin and in paris, and in other capitals. They have come to this conclusion over many hardfought rounds of negotiation. Frankly, i dont see any evidence that european governments are prepared to just start again. Withr Derek Halpenny, your european markets research, do have a base Case Scenario of further Downside Risk for the u. K. Now that Boris Johnson is in power relative to theresa may, if there is a Nodeal Brexit, what further Downside Risk could we see in the market . Derek i think clearly there is plenty more scope in terms of pricing in a Nodeal Brexit when we going to october. I think things will really get messy. . Ut i think where are we going that is important in terms of making forecasts. I think it is very likely were going to a general election. When you see the cabinet that has been picked, it was as much a preparation for a general election as it was forgetting brexit through on the 31st of october. Dont forget, if you consider the members of the tory party, 94,000on voted for Boris Johnson. Everyone saying that it was because of his brexit policy, were out on october 31, and that is it. But there are other elements. When you consider those members, how many of them truly believed what he was saying about getting out on october 31 . Are i think more of them convinced about is the ability to win a general election. And i think that is why he got such an overwhelming vote in the leadership election. Francine there are so many questions. Because if he delays leaving by 1st, that will not be good. Would a new European Commission and the president or celeb von der leyen the more amenable to giving the u. K. Something ursula von der leyen be more amenable. Alan we know that she is very loyal to Angela Merkel. As far as i am concerned, i know she has the same exact brexit policy is Angela Merkel which is to stick with this agreement. Either Boris Johnson and the u. K. Government dont understand the workings of the e. U. And the National Government come up which is possible, and or it could be the case that cause a fight in the e. U. Works in britain, which also adds to the idea of the general election looming. Francine thank you both for joining us. In the meantime, we are still getting breaking news from president erdogan, just talking in ankara, saying again that turkey needs to continue cutting rates gradually. We had the central bank, and also the news from president erdogan, is that not only will they go ahead with making his missiles from russia workable, but they may have to think on their boeing orders. This is bloomberg. Francine this is . Bloomberg surveillance, im Francine Lacqua in london. Mario draghi signaled more monetary support is coming in europe, by the government will need to pitch in with fiscal measures if Economic Conditions keep deteriorating. Still with us is Derek Halpenny from mufg. There was a bit of a wobble in the News Conference where the markets turned a little bit. I guess they were word there were not acting sooner if that outlook was deteriorating so much. How much will mario draghi actually do before he goes in september . Derek we thought he should have gone yesterday. I think that was a mistake, but you have 25 people sitting around the table who dont have the ability to act quickly like other Central Banks do. Consensus. O build. That is probably why they did not go yesterday i think they should have gone yesterday and shown. They were being aggressive. By holding back, the markets are not going, was there any consensus . Francine what was the market theory . I feel like he said, we did not discuss going today, cutting yesterday. Is that what the market took badly . Derek he made reference to the fact that there was not a consensus around the package of measures included in the statement that they are looking at Going Forward. So i think that has curtailed expectations to some degree. If they are going to be ng deposit a tieri system like switzerland, denmark, japan, they need to act aggressively. We expected 20 basis points. We still have the same argument. If they want to show the market they have plenty more of ammunition Going Forward, they have to act more aggressively. 20 basis points, an indication that kiwi will begin in you for indication the quantitative easing will begin in q4 and perhaps, an abandonment of the exquisite reference of a defined inflation target of close to but below. 2 and that has been abandoned, that is important as long as it allows for a change in behavior policy. Of monetary it is another argument of being more aggressive at the september meeting. Taylor talk me through some of the changes in policy around inflation. Mario draghi knows better than anyone, you cant cut Interest Rates, you cant cut your way to inflation. What other tools can they do to boost inflation . Derek again, you are completely right. I dont disagree with that at all, but if you had any central banker sitting here, they would ill tell you, weve got plenty more we can do. In terms of central bank hinking in terms of going lower with Interest Rates more negative, the ecb staff has written a publication on the fox about negative rates have a student is it effect the stimulative effect on the economy negative Interest Rates have a stimulative effect on the economy. But of course, mario draghi yesterday was acknowledging in a roundabout way that it cannot be left to the ecb. Especially where we are right now. I think that will put increasing pressure on european governments to play a more Important Role Going Forward in terms of reinforcing what to the ecb is doing with greater fiscal stimulus. Taylor i wonder with the increased communication from global Central Banks how much of the disinflation is self perpetuating . The fed did not cut in june. They signaled they would cut in july. Did not buy anything in june because they thought prices would be lower in july. Mario draghi said they will wait until september, so maybe they will wait until september when it is cheaper. How much of this is self perpetuating . Derek there could be an element of that. But as i mentioned earlier, in terms of the history of Central Banks achievements of its inflation goal, up until this point has been poor. 95 of the time, the fed has failed to be above 2 . They clearly have a bias to the downside. The ecb and the boj. When you get to a period of deceleration in Global Growth like we are in at the moment, you have this much to the downside in terms of efficient expectations. I guess the Financial Markets are becoming more sensitive to the fact that increasing amounts of history is showing you that the failure of Central Banks to influence inflation Going Forward. Francine thank you so much, Derek Halpenny from mufg. He stays with us. Coming up next, the chief Financial Officer will talk about the trade war. He joins us from paris at 9 30 a. M. In new york, 10 30 a. M. In london. This is bloomberg. She went 5 30 went 5 30 taylor i am taylor riggs in for tom keene in new york, with Francine Lacqua in london. Amazons profits yesterday after the closing bell, for the Second Quarter was marred by surging costs. Amazon now one investors that one day shipping has a pretty big price tag. Joining us from tokyo is the Bloomberg Media editor. Lets start with amazon. First time in a while we have started to see a margin miss. Are we assuming lower margins for longer . David i think so, and i think as long as the company is adding to its Customer Base and still getting really strong growth into its Cloud Business, i think investors will be happy. The kind of growth may have had in the past is hard to maintain, and that certainly includes margins. Theyve had to invest a lot in that business. It is a cost intensive business. So i think investors have some tolerance for that kind of decline. Taylor talk to me about the Cloud Business like you mentioned. I keep hearing that it is not is you are some game not a zerosum game, that alphabet Cloud Service and microsoft as were and others can all microsoft azure, they can all gain. Is that true, is there room for all these companies to grow their Cloud Business or is it is sum game . David when a company has more competitors, they have to take some margin hit. Obviously, there is growth in this business. You have so many major corporations expanding demand for Cloud Services that it is possible for Major Players to continue to grow at these amazing paces that we have seen. But they may have to take some hit in margin. This is a high cost business. Those engineers dont come cheaply. To win the big accounts, they have to work hard because the competition is fierce in that space. Francine days, is Regulatory Risk and regulation the number one concern for Big Tech Companies including amazon dave . There seems to be an effort in the results here to sidestep that question. The regulatory pressure on these companies had been ramping up. We have seen multibilliondollar fines for facebook and a lot of pressure on amazon, political pressure and regulatory pressure at the same time. That is a looming threat for all these companies. I think that is one reason they are happy to get the emphasis on their actual results. While these pressures loom, they are still doing great business. Demand for Cloud Services is still growing very quickly and they are adding customers to that end being it would to maintain some amazing margin levels that they have had in this business. To continue to grow revenue and profit as well. So i think even though there are some regulatory threat, they are still going good. Taylor thank you that was mccombs. s dave later today, we will speak to 8 30 inof twitter at new york. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. This is bloomberg surveillance. Francine lacqua in london, taylor riggs in new york. Protesters staged a sit in at hong kongs Main International terminal. The demonstrators sat on the Ground Holding signs and chanting slogans including free hong kong. Demonstrators are calling for democratic reforms to the dissolution of their. Urrent legislature in china, at least 20 are dead and more than two dozen others are still missing after a landslide earlier this week that buried more than 20 homes in southwest china. Heavy seasonal rains have caused extensive flooding and land flood. Landslides. Germany is not in crisis and has no concrete plan to add stimulus to the economy, according to the finance minister. He says increasing spending now could fuel inflation without helping Economic Growth. He says this will boost the outlook for 2020. Withoblems which we have detentions, that is something we cannot expect this year. We will have a better growth rate worldwide and this will have an impact on the european economy, and especially on the economy of germany which is a Global Society. Renita 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 renita young and this is bloomberg. Francine lets focus on european manufacturing. Is no longer forecasting growth but rather see the figure little changed from last year. The industry faces falling spending asecord they wrap up the earnings results. Night dani it might not be a surprise, sales weakening with weakening demand. Specificsget into the because some were able to shrug off these difficulties, and vw peogeot fell during trading yesterday after their earnings, however analysts say they are well on track. Ault joined the group of Companies Cutting or missing expectations. The profits are not keeping up with weakening demand. Nissan stood out, not for good reasons. Over plunge in job cuts of 12,000. Francine the standout was nissan so we will look at the share price. Michelin shares down after the company cut its outlook for the auto industry. They stuck to their annual target but did caution the rest of the year would be tougher than expected. Joined byighted to be the mitchell and chief finance officer michelin chief finance officer. How much worse is the car market going to get before it starts Getting Better . Good morning. Thank you for inviting me. Market, it is about 12 of michelin, has been down about 7. 5 over the first half, and we forecast it to be finishing the year around 4. 5. But one ofacting us, the interesting points of the tire industry and michigan as it is only one part of our michelin is it is only one part of our business. We have the specialty parts linked with mining. That is why michelin suffered somewhat in volume in the Passenger Car business but globally, mitchell and posted earnings ted because we maintain and hold firm our position on pricing. That is the strength of the company. Francine are you expecting your expenses to rise in the next six months and do you think you can pass this on to your consumers . Globally ourct costs to be stable. Some are going up, some are going down. Rising, just a call costs. Logistical costs. We will continue our fair pricing policy over the next six months and the years to come, and we are ready to pass on europeprice increases in and Passenger Cars and trucks to cope with the expenses that are rising. Francine well your stock be affected will your stock be affected by your costcutting measures in france . Marc in the same time we forinue our longterm plan competitiveness, it will continue to generate positive impact versus inflation of the cost. Our reduction of cost will continue. It is part one of the key strategy for the future of the company. We will continue to work on the Continuous Program for cost measures and productivity. Taylor as we heard from ford motors on their earnings announcement, what caught the market by surprise was not her than expected demand from china, weaker than expected demand from china, but weaker than expected demand in the u. S. What areas look weakest to you . Marc i would say we have seen markets,trends in all europe, america, china, which are the main ones, for different reasons. The u. S. Is more classic up and down turn. Europe is more cynicism of customers linked to what kind of motorization you need to buy. That hasmore something been more profound, but we to be the negative trends mitigating in the second part of the year, staying at a lower level but not being more negative. Those three markets have been on a negative trend. On the Replacement Market, it is different. China has been very good. North america is in good shape. Europe is on the negative side, specifically in germany. Talked about how the auto market is in a downturn. Give us the brights part, mainly spot, mainlyright aircraft tires improving. Marc the bright spots are definitely in the Mining Industry. The Mining Industry demand has been growing for percent and 5 4 and 5 . Uscraft is a key market for and has been growing, 5 to 6 . We are also outgrowing the market. Those are definitively the bright spots for michelin. We have the replacement target market, and also for sporty cars, luxury cars, growing about 9 to 10 per year on the Replacement Market so those of the bright spots. Taylor a wonderful conversation and a great gauge on where we stand in the global economy. Coming up, forget hipster coffee shops. Americans are falling back in love with starbucks. Their stock is climbing after reporting their fastest Global Growth in three years. We will speak to the ceo of starbucks, kevin johnson, at 3 00 p. M. London. This is bloomberg. This is bloomberg surveillance. Nault is lowering its outlook for fullyear sales as they grapple with the not a market slowdown. Revenue will be close to last years level. The results cap a mostly gloomy week for the automotive industry. The chief executive says the biggest risk is a hard brexit. The biggest risk we have at the moment is a hard brexit, but it is not only true for us as a company or sector. It is true for the economy. Anything that is around hard brexit is something of a concern , and anything which can be done to avoid that is extremely important and positive. Renita softbank announced a Second Vision Fund and is aiming to raise 700 billion, making it figure than the first. Investors are expected to be apple and foxconn. This is part of the strategy to extend his reign as the most influential investor in the industry. Barneys new york is looking for ways to remain open if it files for bankruptcy. Bloomberg learned they are talking with existing lenders including wells fargo about a new loan. The company has been hobbled by steeply rising rent as cash runs short and consumers defect to other outlets. That is the Bloomberg Business flash. In u. S. We have a fad gdp conversation with Derek Halpenny. It was so interesting earlier this hour, talking about the ecb and you wanted a 20 basis point cut. We did not get that. As we look to the Federal Reserve, would you argue instead of a 25 basis point cut we need 50 basis points . We are so close to lower bounds that you need to act quickly and swiftly to get the results you want, is that an argument . Derek and is an argument, but making a comparison with the ecb, the ecbs argument for making that case is far more important than the fed. There has been progress from the sheet terms of balance shrinkage. The economic data, when you look at the United States compared to europe, in particular germany where the Manufacturing Sector has become much weaker, 25 basis points is more reasonable. The markets have been speculating on 50, but most recent communication from the fed has been trying to pull back the Market Expectations from that. The case for 25 is stronger for the fed than 50. Francine if we saw a deal between the u. S. And china on trade, should the fed still cut . The economy is doing ok. Derek it is, and you make an important point. Three policy uncertainties trade, brexit, and the debt ceiling, those are the three explicitly mentioned by powell. The debt ceiling has gone away and the spending cuts were raised or than expected. With u. S. More than expected. Negotiationsna next week, will that risk disappear . Not completely. We are not in the same situation there so i would not expect a complete removal of trade risk. Francine what would a policy mistake from the fed look like, cutting too soon or not cutting enough . Derek there is little risk and cutting too soon. If you look at 10 years of data, the mist inflation has been nearly always to the downside alwaysinflation has nearly been to the downside. Points of cuts into a decelerating economy, decelerating from the 3 growth from the tax stimulus from trump, in that context i see little risk in terms of taking the steps that are likely. Taylor francine Derek Halpenny stays with us. We are looking at live pictures of hong kong. Hundreds of protesters staged a sit in at hong kongs international airport. Signs and held up kong. Thise hong is bloomberg. I am taylor riggs in new york, along with Francine Lacqua in london. , Big Conversation yesterday mike pompeo told bloomberg he would be willing to travel to tehran to address the iranian people. He would happily discuss Foreign Policy, as the Trump Administration applies maximum republic. N the our mission set was to create as much stability in the middle east as possible. In this behavior and there was a terrible deal, creating enormous wealth for the leadership and they were using that in malign ways, so we broke out of the deal and put pressure on the Iranian Regime and have forced him them to make important decisions. The iranian people can ultimately get what they deserve. Kevin how do you get that change in behavior when the foreign minister in new york as saying sanctions will backfire . How do you get that change . Foreign minister rivas is no more in charge then the man in the moon. This is driven by the ayatollah. He has the possibility to do all this activity, seizing ships and the malign activity is driven by leader. C theres other people upon whom we are trying to put sufficient pressure, to prove the cost is not worth it and if they simply behave like a normal nation iranians can live normal lives. Kevin what you go to tehran . Happily. Kevin would you go on Iranian Television . I would welcome that opportunity. He speaks to the media, talks to the american public, gets to put iranian propaganda out on the airwaves, i would like to speak the truth to the iranian people about what their leadership has done and how it has harmed iran. They will not permit that to happen because they know the truth as well. Francine that was u. S. Secretary of state mike pompeo speaking to Kevin Cirilli. You know everything geopolitical is difficult to decipher, what we had but we have the interview where he addressed iran and the koreas. What is the biggest Foreign Policy risk for the u. S. . Mark i took a couple of things away from that. One has to do with a run. Iran. He said, it is not going to happen, they will not allow me to go. He was not saying, i have some important stuff to talk to the leadership about. He was saying, i would like to go to the people. He is saying this is about pressure, not diplomacy. Contrast with korea is interesting, where he says this is all about diplomacy. We are treating them in a very different way, and the entire approach is very different and the outcomes are different. Francine how should we look at iran . Boris johnson will have to have his first big policy test and whether he sides with President Trump or the e. U. , what are the chances that the straight of of hormuz getst close down . Gets closed strait down, it will have a Significant Impact on all markets. It is unlikely to get closed down, but it could become quite nasty, driving up insurance rates. That happens fairly quickly when the traffic becomes interfered with. There is a game already a foot and the iranians are playing it. The brits are having to escort ships through. They do not have enough of a navy to do that anymore, so they will have to do it with others. There is a question on whether they do it with the europeans, do they want to do that, or will they do it with the americans . That changes their whole position in the iran negotiation. It is a complicated question for the brit and we dont know which way they will fall. Taylor with u. S. Equity markets at a record high, our markets accurately pricing in this geopolitical risk . Derek you could argue certainly they are not, but it is very difficult to trade in a world where there are so many geopolitical risks that could emerge. The safest that is for markets to look at the fundamentals bet is for markets to look at the fundamentals and corporate earnings and stick to what they believe are the key drivers of decoding markets. Equity markets. We are in a world of intense, notable geopolitical risks from places around the world. I think as they become escalated, or gets are driven by the fundamentals. Markets are driven by the fundamentals. Later, wecoming up speak to tom perez, dnc chairman. This is bloomberg. Francine delayed delivery. Amazon misses estimates and disappoints as costs search. Web Services Also come up short. Mike pompeo tells bloomberg he is willing to travel to iran as the Trump Administration applies pressure. The e. U. Immediately rejects Boris Johnsons demands for a new brexit deal, saying the existing deal is the current and only deal possible. I am Francine Lacqua from london, taylor riggs in new york. We have a lot of tech earnings, we look at brexit and gdp figures. Taylor nasdaq futures up for 10th of 1 . All eyes 4 10 of 1 . All eyes on gdp. There is a whisper number of 2. 1, so we await and count down to that data. Lets get a bloomberg first word news. Renita north korea says its test of a new missile was meant as a warning for what they call south Korean Military warmongers. North korea is unhappy with their Weapons Development and plans to hold military drills with the United States. Trumpngun and president seemed to provide a step forward installed negotiation. Mike pompeo would be willing to travel to tehran to address the iranian people about u. S. Foreign policy. Goi would like a chance to to not do propaganda but speak the truth about what their leadership has done and how it has harmed iran. Renita the secretary of state was reporting hours before the media announced they had announced launched a Ballistic Missile. The u. S. Is aware of reports of a projectile launched from iran. U. K. Uropean Union Rejected Prime Minister Boris Johnsons demands for a better brexit deal. He seems to be rolling out cosmetic changes, calling for the irish backstop to be scrapped. Britain will be on course to drop out from the e. U. October 31 without an agreement. 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 renita young. This is bloomberg. Francine thank you so much. We are looking at pictures of hundreds of protesters staging a sit in at hong kongs Major International airport terminal today, the debonair demonstrators dressed in black, holding up signs and chanting slogans including free hong kong. If you have to travel to and from hong kong, check the details. It seems like a peaceful protest , but we will see how things develop. Let me get to the market. The european stocks are inching higher. We had some good corporate earnings. The latest batch for tech is pretty good, apart from amazon which disappointed and is filtering through to the european stocks. The market wants to know the gdp figure in the u. S. And what it means for the Federal Reserve Interest Rate decision. Aftere seeing a lower day europeanons from the meeting. Taylor it is Dollar Strength across the board that has been the trade of the year. Thisght firmer strength morning, lifting futures in the tech leaving leading the gains. In that threemonth 10 year, you were at 20 basis points and the fact that that is now only 4 is something i imagine jay powell is happy about. Francine i go back to cable because we have the news from the e. U. From Jean Claude Juncker saying it is the only deal the u. K. Will get. Suddenly at the forefront is the scale of the challenge facing Boris Johnson to the brexit deadlock. With the e. U. Immediately saying no, i wonder if cable forecasters have changed their call. My chart looks at volatility spiking, but before the march deadline not as much as much as the march deadline. Taylor it will be all about the bond market for me. David einhorn yesterday said he is shorting Investment Grade and highyield corporate debt. , so ist is so cheap looked at the credit default swaps in white on the left. Spreads coming down only 367 basis points over treasuries. Int number, 550 basis points december so contracting to protect against debt that cheap. We fold in the credit markets back over here into the global macro environment. We will get secondquarter gdp for the worlds biggest economy. A rise in 1. 8 would be the slowest growth rate in two years. You heard the number about 1. 8 percent gdp. What does the hood, the number tell us . Cameron that is pretty fascinating, the dispersion and the drivers of this number. If you look at the advanta that fed,and a fed, atlanta they forecast 1. 3 , which is even weaker than the economist consensus. Household consumption is thecast to rise 4. 2 , strongest rate of Household Spending since the end of 2014. The real issue here is investment, Business Investment in equipment, intellectual property, nonresidential structures, and residential, which are expected to contribute nothing to gdp growth. The business sector is most acutely impacted by trade war insert t, and we can see that and infested delve. Manifest itself. This historically hanging over the head of businesses is acting as a headwind to growth. Heard tesla this week, the only reason they are able to beat or match on the bottom line is they are cutting capex. How afraid are you that businesses are cutting back on spending and capex . Peter before go to your question, i think cameron nailed it. One is holding up growth in our own projection is and our own projection is slightly above consensus, the very strong backdrop. It has been holding up the economy for years now, the circle between hiring and job creation and consumption. Back to your question, it is a concern. It is not only a concern in the u. S. , it is a concern globally that the medium turn outlook eating turn outlook is rmteriorating medium te outlook is deteriorating. If this uncertainty is threatening that virtuous or virtuous circle, we might have a potential problem. U. S. ,cessarily for the the rest of the world is more of a concern. Francine i stole your chart on the terminal. What are the chances that a recession is around the corner . You look at the recession probability model and the yield curve inversion. Cameron i have this model that attempts to distill what markets are pricing the likelihood of a recession next year. That looks at the level of the yield curve, ellet of change, credit level of change, credit and equity markets, and at theaked at the panic end of last year and beginning of this year 50 . Once the president rekindled the trade concerns, we went back up to 25 , 30 and now we are at , which isrobability higher than the president or Jerome Powell would like, but well off of the panic where we were six months ago. It is an interesting dichotomy that we are having this consumer who is in better shape than they have been in years and the fed is about to cut rates. The business sector is one rationale for that, but broadly i think the fed would like to see the recession probability at zero. That realistically will not happen because the yield curve is what it is. Theor alluded earlier that fed might be happy to see the yield curve diss invert, but but be careful what you wish for. That is probably the best indicator a recession is intimate imminent. People focus on a recession as being a harold of doom, isnt. Of do and it this is myfrancine ersion of the yield curve chart i stole from you. Up next, the Morgan Stanley chief economist joins Bloomberg Markets at 7 00. This is bloomberg. Situation where any one of us has to do with the Worldwide Development of the economy. Due to all the tensions we have between china and the United States, the not clear development in question of the brexit will have an impact on the economy, mostly in the way that any corporates that are willing to invest waiting for the next month, the next month, so all of us are waiting for a solution in this will have a good impact on growth. You concerned we might be stuck in a japanese vicious cycle where low rates beget low growth . I dont think so. Everyone is expecting better growth next year and we will see it at the end of this year. This is due to what i have said already. If these manmade problems we have with the tensions are solved, and we can expect it will be this year, we will have better growth worldwide. This will have an impact on the european economy and the economy of germany, which is a Global Society exporting and importing from all over the world and to all over the world. Francine that was the german and philanthropist speaking to s matty own bloomberg miller. Look at the wobble in the markets about the ecb, given there was no consensus about the full package they could implement soon, should they have given a clear message that they meant business and cut rates . Peter i have a completely different take on what the ecb said. I think they have given that message clearly. Francine what did the markets misinterpret . Peter the market was hung up about that they did not move yesterday. It does not matter whether they move today or in september. We have been forecasting september anyway. We have been implying for basis points of rate cuts yesterday and i thought that was wrong. Pleasantlyb did very implicitly, they spoke about inflation expectation, the reaction and the symmetry, and it will take some time for the market to get to grips with it. There are at least three periods over the last 10 years where the ecb started hiking or talking hawkish. The ecb now wants to pull that rug out from the markets expectations. Taylor what do you make of the ecb and the fed of trying to move quickly and swiftly, and some commentary from fed acres have said fed makers have said, you have to move lower than target to get where you want to get. Does that work . Cameron that was only an academic treatise from mr. Williams last week. That was swiftly pulled back. I dont know, is the short answer. The problem is we are kind of in alice in wonderland through the looking glass, particularly in europe and japan with negative Interest Rates. It is so much of central bank lc policy that is not the implementation but the guidance of those policies. The ecb did indicate clearly and explicitly what they are going to do on the rate front in september. Once they do it, there is no surprise. Francine we will come back to the ecb and fixed income in europe. Shaffer and Cameron Crise both stick with us. This is london and this is bloomberg. This is bloomberg surveillance. Francine the claw in london, taylor riggs and new york. Francine lacqua in london, taylor riggs in new york. Amazon drops. Alphabet talking about tech is alex webb. Welcome to the program. When you look at what ties all of these companies together we tend to forget that amazon is not only a retailer. Half of that is from the cloud. Should we worry about regulation . Alex not when it comes to the Cloud Business but regulation big broadly, it has a picture in ecommerce. When we think about the antitrust conversation, it is not just about scale. It is potentially about how they have used the scale. Think not quite as high for amazon than facebook or google. Francine what is your take away from alphabet . Tox they are still managing wring more dollars out of the. That goes to the antitrust question, how do they do that when theres concern about how much of the value chain they control and whether they are able to leverage that to squeeze higher prices out of advertisers. It is potentially a risk. Lor talk to me about alphabet ceo spoke to emily chang yesterday and said, we are aware of it and in ongoing conversations. The market does not care facebook shareholders do not care, alphabet investors do not care. How big of an element is antitrust . Alex i think the market does care about the risk has been built in already. If there is a breakup of google or facebook, it is a long way of google or facebook coming, it is a long way out. Twice aboutink being as aggressive as they might have been historically. I do not want to bring back their hackneyed phrase, move quickly and break things, be more circumspect. Ago,microsoft 20 odd years it became less aggressive and lost a bit of its edge. Taylor premium based on the forward pe basis very much inflates on tech. As long as tech leads the gains, do you trust the rally . Cameron i guess to a degree yes, and so far is the trade war stuff is a primary headwind for earnings confidence and what tech, amazon,ual alphabet, facebook, it will be a lot more difficult for china to countervailing measures on those companies. Vulnerableps is more insofar as they sell things that and are subject to tariffs. Taylor that was a great conversation. Later today, we will speak with the cfo of twitter at 3 30 p. M. In new york, eight 30 p. M. In london 8 30 p. M. In london. Twitter out with earnings, mostly positive. We will hear from twitter. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. Keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Experience the leesa hybrid mattress. Right now, its on sale. Order today. Go to leesa. Com. This is bloomberg surveillance. We are just getting breaking news come at the u. K. Prime minister Boris Johnson spoke by phone with the french president emmanuel macron. Macron is the headline, saying the backstop must be removed from the brexit deal. Fromstand the u. K. The u. K. Government spokesman but they have no plans for an emergency budget in the fall. This as Jean Claude Juncker said they will not renegotiate the Withdrawal Agreement. I dont know what to do with this headline. Boris johnson is making calls saying, we want this change. If the e. U. Does not renegotiate or give him anything, what happens . Peter i think the current u. K. Government is preparing for an election. You can see what the people they brought into the fold, in my mind what they are doing as they know they have to beat the brexit party and a potential election so they have to go down that path. There is a small chance the e. U. Will renegotiate, lets call it 5 , and they stake out their claim going into a general election. Francine i have heard that a lot, but what i have heard differ is the timeline. Will it be a short time or way out . Peter parliament is not sitting until the beginning of september and it was only sitting for a short time and then there is conference season, which will be a field day for you guys. Francine every day is. Peter one Parliament Comes back, i reckon this is one a vote of no confidence would be tabled. It will be tricky. The general election would probably be after the current brexit date and the question is, what do we do with the brexit date . Francine we will have more. We have the bank of russia lowering its key Interest Rate to 7. 25. We will see if that has any impact on wearables. Lets get rubles. Protestersdreds of staged a sitting at hong kongs main terminal today, dressed in signs andding up chanting slogans including free hong kong. Demonstrators are calling for democratic reform, the dissolution of the current legislator, and an investigation into alleged police brutality. In china, at least 20 are dead and dozens of others are missing after a landslide this week that buried more than 20 homes. Heavy seasonal rains have caused extensive flooding and landslides across much of the region. Boeing fell the most in more than two months as the 737 max 8 over got worse. Southwest airlines scrapped the plane from its schedule until early 2020. It was the biggest operator of the grounded jet. Unit withdrew from the race to withdraw to bid for u. S. Missiles. 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. Young. Nita this is bloomberg. Francine geopolitical headaches mount in washington. Among them, tensions from turkey on the rise. Secretary of state mike pompeo told us how he will respond if u. S. Demands are not yet. Met. Everyone is working together. We made clear to the turks that the operation is unacceptable and we have taken the operation of curtailing the f35 program. There could be more sanctions to follow. What we would like is the f400 not to become operational. We have told them for months and months it is incompatible with the f35. They have taken delivery of some of the components today and we are urging them to reconsider. Kevin there is so much going on around the world. Within the last 24 hours, the north koreans test firing two short range Ballistic Missiles on thursday. How does this impact denuclearization talks . Everyone tries to create leverage and risk for the other side. President trump has been consistent. We want diplomacy to work. We want chairman kim to deliver on his promise to denuclearize. I was there when they signed the document. We remain convinced there is a diplomatic way forward, a negotiated solution. Chairman kim told President Trump he would send his working team to negotiate with hours. Kevin next week . A few weeks. Date,mportantly than the to make sure we have had enough conversations that there can be productive dialogue when the teams get together, that is the objective. Kevin the situation in china, the protests in hong kong, authorities have rejected a request to take to the streets on saturday. Are you concerned about chinas military intervening . We needresident said china to do the right thing and we hope they will do that. We hope the protests will remain peaceful. That is important to avoid violent. Violence. That is the case. Taylor that was u. S. Secretary of state ike pompeo talking to Bloomberg Mike pompeo talking to bloombergs Kevin Cirilli. Democratic president ial candidates are sharpening their tools into the debate next week. According to an early ohio quinnipiac poll, joe biden has taken the lead over even President Trump while all Democratic Candidates tie the president or are slightly behind. Kristol, the bill Weekly Standard cofounder and editor of defending democracy better. The first story i want to touch week,e debates into next what is the key message we need to hear from democrats . Are stillmployment very strong so what do we need to hear . Not so focused on the general election message. That will be the critique of the Trump Presidency and it has been done pretty comprehensively. Biden is the big story in the debate. He faltered in the first debate. He allowed others to get some air. The question is, does he hold the lead or does he look weak again . How fast could the erosion go . I have talked to a lot of people and that for them is the big question. Maybe someone likes like harris makes a move by contrasting him or herself with biden. Taylor biden had a misstep the last debate and was able to recover. Behind him, who is the next leading contender . Bill warren or harris. Sanders, five or six months ago people thought certainly a finalist, got 43 of the democratic vote against hillary clinton. The big story has been his kamaladown to a tie with harris and if he is on the decline and they are on the rise, i dont think that will change. Sanders is unlikely to be the nominee. Does the other 75, 76yearold gentleman fade . Andhave harris and warren someone could still surge, especially if biden falters. It is an interesting race. A lot depends on the real world and how voters react. Is there a recession coming . Francine bill kristol, when i wanted to ask you about is the economy. Given the state of the u. S. Economy, which is strong now, is President Trump not de facto a twoterm president . , even now he is behind in the polls. Any other president would be coasting to reelection but people have deep doubts about his character, judgment, divisiveness. I think Foreign Policy is a big wildcard. Is that people and the markets are under rating the geopolitical risk. Theres so many places where things could spiral out of control but havent over the last couple of years, close calls and a lot of responsibility on the part of donald trump and weakness on the part of the u. S. , but the system has held together more or less. Will that continue into next year . I dont know. I think trump is not a favorite to win. Having said that, someone has to beat him and the question is, do the democrats nominate someone who can . Francine the Approval Rating on the economy amongst american citizens is pretty good. What should the democrats message on the economy be today, not in a year from now when we could have deterioration . Bill their message has to be a standard democratic message, spread the wealth a little more. A lot of low income americans need to benefit. Scaremocrats need to not americans that they will tank the economy. They will win and other animal touch areas in other areas. If they think the democrat will cause them to lose health insurance, if the democrat is not scary on these issues of personal wellbeing, economic wellbeing, health care, they have a good chance to win. Taylor we got some information on the debt ceiling. How would you rate the Republican Party . Bill nowhere. It is pathetic. A few republicans are worried about it. It is astonishing. Maybe that can go on forever. I doubt the laws of economics have been fundamentally repealed. There is not much left in the arsenal. If the fed can cut rates a little bit, on fiscal policy there is nothing left to do. You will not decrease the deficit that much more and that will face consequences. The Republican Party, it is trumps party now and in that respect it is not a party that even nods or beckons to fiscal responsibility. Taylor like a good bloomberg commentator bringing it back to the fed, thank you for joining us, bill kristol. Coming up later today, tom perez, dnc chairman at 3 00 p. M. London, a8 00 p. M. Great conversation about the future of the democratic party. This is bloomberg. This is bloomberg surveillance, taylor and francine from london and new york. Time for single best chart, one of my favorites from the very beginning. It did come to the forefront that cable volatility before the march deadline, now we have the new Prime Minister and we have had a few surprises. He has surrounded himself with brexiteers and loyalists. Its look of the outlook at the outlook of the boe. You were telling us before you are expecting a general election to come close. What might the chart look like if we saw the general election with labour doing better and gerald jared lyons is the next boe governor . Peter i think we would see more weakness. The implied odds have gone up and we have not seen much of a correction. I would expect if it becomes a live issue, to see some weakness in sterling and increases in volatility. When we look at the potential outcomes, if we stick with the tories and the pledge to leave with jared lyons, we certainly probablyw, it would apply in easier monetary and fiscal policy. That will not be a positive scenario for sterling. On one hand, we have the traditional labour stuff about widening the budget deficit, however if we dont think that this election is very much about brexit, what is the position of a potentially labour but government . Led to government . What does that mean . If we have a potential reversal of brexit, that could be a scenario. Taylor are the markets accurately pricing in cable volatility . Cameron lets not forget that brexit day is halloween, october 31. The threemonth fall does not yet capture or go over that deadline. As peter was saying, there are so many moving parts, i agree with his view that boris is playing for an election primarily rather than brexit as a pure philosophical thing. Until we get a better sense of the timeline, it is difficult to price anything with conviction. Taylor we await that key deadline. With a heavy heart, we want to pause to pay our respects to a member of the extended bloomberg family. Helped map the moon and gained International Recognition for his images of eclipses. Inspired many. George keene passed away at 89 years old. This is bloomberg surveillance, Francine Lacqua in london, taylor riggs in new york. Lets bring you our first interview with the chief of renault. They grapple with the downturn of the market and the dismal results of nissan. There level will be closer to last year rather than the increase. Alliance in terms of operation is working strongly. It is an investor project. All the new cars we are preparing and all the new tech elegies we are technologies we are preparing diligently. Is it dragging earnings down . Dragging earnings because thanks to the alliance, thanks to the job we have done, we are sharing the costs of these elements. Otherwise, our results will not be the ones we are expecting for the future. We should never forget the alliance is a reality in terms of operation, in terms of industry, and that is why we are so strong and resistant the moment. That is why the visibility of what has is happening, that is our experience. It is very positive. It is important for us, the concern, because we have all the necessary conditions to make progress for renault. Concerning nissan, it is not yet the case. Our top priority is to help nissan get out of that situation thanks to the alliance. Does that mean perhaps changing the ceo of nissan . There is a lot of pressure at the moment after nissans profit plunged 99 yesterday and they are planning more than 12,000 job cuts globally. It is a matter of company to company, that is my goal. I am always getting back to the operations and what is happening. Changing people which is something that is the life of the industry. What matters is making sure we are helping the company get out of that as soon as possible. Do you believe the difficult situation of nissan could help you revisit a possible merger with fiat . The key point for us is to make sure our alliances on track. To winry has shown that the lines is extremely attractive, and would be more attractive because we have the technology, the models, and the cooperation of organization. It is ups and downs. We have been experimenting and living with that. That is why we are so attractive for any opportunities beyond the alliance, but our First Priority is to make sure the lyons is working in this it that alliance is working in this alliance is working in this situation. Taylor a lot of things francine a lot of things going gdp, theecond quarter protestersndreds of staging a protest at hong kongs main terminal. A lot of flights have been canceled and the city is bracing for a weekend of protest amid fears of possible violence. Taylor the fact that these strikes have been going on for weeks now and carrie lam is still the executive of hong kong, calls for her risen nation, resignation, this shows the strength and power of these protesters. Francine we will continue updating you to everything in hong kong. This is bloomberg. Growth, tech growth comes with a big price. Twitter is on deck. Mario draghi delivers the latest message, leaving the ball in the feds court. Fast, bojo. Says it would have to change the brexit deal to get it passed parliament. We areare writing waiting right now for twitter. It just came out as i spoke. Monetize will daily active users where the thing people were really looking at. Revenuethirdquarter 815 to 875. Second quarter