Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Matt miller in berlin. Lets check in on whats going on in the market. We do have gains across some european indices, right now you can see the stoxx 600 up. 2 , the broader European Index is gaining. The dollar is also strengthening against the yuan, you can see one dollar now buys 689. 71 offshore, and the pound is weakening. You can see it down 123. 38. As we get closer to the possibility of hard brexit or new elections, investors continue to sell sterling. Now to the first word news with Viviana Hurtado in new york. Chief executive carrie lam has condemned the violence in her first News Conference on the city since the end of british rule. Fresheclaration follows demonstrations with Police Firing tear gas and rubber bullets at protesters. This week, u. S. China trade talks are set to resume in shanghai, the first since discussions broke down almost three months ago two days of talks are scheduled to begin after president s trump and xi reached a troop at the g20 although deep tensions remain. Neither side seems willing to compromise. The u. K. Is deploying destroyers to the strait of hormuz, which will operate alongside another Royal Navy Ship amid heightened tensions in the gulf, this coming as i ran and european powers discuss the 2015 nuclear deal stop you may remember the u. S. Abandoned it last year. Plans toicking to its have big Multinational Tech Companies in defiance of President Trumps suggestion that he may impose retaliatory tariffs on french wine. The french finance minister says they are completely different issues and shouldnt be lumped together. President trump says he plans to nominate a loyalist as director of national intelligence. Texas republican will replace dan coats, who announced he will be leaving the office on august 15. The u. S. Treasury department is expected to hold its Quarterly Sales at record levels again, with washingtons latest bubble deal showing the debt binge will continue. President trump would say he would eliminate the National Debt is now set to have a budget that will usher in a trillion dollar annual deficit. 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. Im Viviana Hurtado. This is bloomberg. Thank you very much. In london, Boris Johnson subject that cabinet holds its first saysng, the Prime Minister the u. K. Will gather every day to make sure that the country that the brexit cabinet will gather every day to make sure the u. K. Leaves the eu october 31, but as investors debate the potential fallout once the deadline arrives in less than a hundred days, something of the divide is forming. Dani burger has been taking a look. It is definitely the part where we are seeing the pain, with stocks acting like they are living on a different planet, and usually when we see the pound decline we see the larger stocks do better, because exporters like that weaker currency thats not what we are seeing. Instead we are seeing the ftse 100 decline while more domestically oriented are isperforming, so that falling well the domestically oriented index outperforms that. I know chris really told you that essentially this is because the 250 has a lot of exposure outside the u. K. , but still this picture is still forming in the options market, equity options are not showing any drama, but pound options are. In time forg out how much volatility options traders will think will occur around sterling. This jump is three months out, which is the october 31 deadline. This is what it currently looks like the top line is what the term premium looks like before the brexit referendum they look currently similar stop the fact that these two lines look so similar tells us that right now market following the same playbook as in 2016 where the referendum occurs. The pound continues to sell off while stocks quickly rebound. Burgerks very much, dani looking at some possible implication in the market split on brexit. Guests,scuss with our the em ea affect strategist at mccoury, let me first ask you about the pound, i guess you want to be short the pound, or do you think the move down has been overdone . We are definitely advocating low levels for sterling, and we see this on brexit. If you look clearly, the bank of england has one central bank where the markets have been quite reticent. Inhink the market is pricing 26 basis points of rate cuts in the bank of england. It is pretty much comparable to whats priced in with the Swiss National bank, the sab benchmark rate is at night is. 75 , whereas the bank of england is at. 75 , the bank of england has a lot more policy ammunition, and they are not going to be amused with this global slowdown in demand with whats happening in the Global Manufacturing sector. Will he want to do that . I thought mark carney was trying to steer expectations toward the you are saying we are pricing in cuts . The market currently is pricing in cuts, but i think it is reinforced at the sea change, mark carneys speech puts a lot of emphasis on whats happening globally, the global backdrop in terms of weaker demand seeping through into fixed investments. Really going into the Rate Decision this week, but will be key is how much emphasis carney puts on whats happening with global uncertainty in terms of what has happened domestically. What do you think about the euro . They are obviously already starting to get the ball rolling, although there is not a ton of reason to be gloomy i cant remember how they put it last week, but there is also kind of a split board, a split amongst opinion and the ecb how do you see it . Thatthink the key thing came from the ecb Rate Decision last week was that it was not a unanimous decision, theyre divides, and ecb easing is not guaranteed. They are only just starting to look at policy options we saw a massive rally and bond markets, and we saw that come data little, however the has been awful. Most of it was july pmi figures in germany, and we have key data coming out this week in terms of cpi and q2 gdp and germany unemployment rates. I think the key thing to watch is how and when the labor market and the euro zone really feels that effect from the slow down in manufacturing we see employment gains coming off and the ecb justification for inflation is really rising back up to target. Undermine hat olaf sholes was sitting with us in berlin and said theres no crisis, there is no reason for fiscal stimulus, theres no reason to cut Corporate Tax rate. At what point does berlin start to bend to the economic realities . Data, you havehe to think that point is coming soon. When you have growth at such a low level, and right now it looks like they will stagnate if not contract, you need to do something to pick up that growth you are so exposed to any kind of shock and obviously with brexit uncertainty germany is very vulnerable, the thing about being the next exporter is you are at risk. Knock one are implications into services, it certainly makes you think the point for fiscal support is coming soon. You are going to stick with us. We have more to ask you. Stay with surveillance. Plenty coming up, including the first cuts since 2008. The fed secretly anticipated meeting, and a likely 25 basis point reduction u. S. Target rates. Plus, more or rest . Police the ploy teargas and rubber bullets we bring you the latest hong kong. This is bloomberg. Economics, finance, politics. This is bloomberg surveillance. Lets get the Bloomberg Business flash. For that we go to Viviana Hurtado. The London Stock Exchange is in talks to buy the financial trading plan or more definitive. Worth 27cted to be billion. They say they will issue shares as part of the transaction with holder seeing just over a third. Bloomberg lp is the parent of Bloomberg News and competes with them to provide Financial News, data, and information. Ryanair posting a 21 drop in slumps that the discount carrier says will extend. Net income is low, 250 million euros, as fuel costs rose. It says right know the weakest markets are germany and the u. K. Being tough in the last overcapacity and the german and austrian market. The u. K. Is seeing a lot of price stimulation required due to the uncertainty around what may happen with brexit. Saudi arabian chemicals giants say that they have a tough secondquarter. Profits plunging the most in a decade. Net income tumbled almost 70 . They are said to receive support from saudi aramco, the Worlds Biggest Oil producer in the pockets of the 69 billion majority stake. Thats the Bloomberg Business flash. Thanks very much. Lets take a look at what you should be watching this week. Tomorrow, a bank of japan Rate Decision kicks off a busy few days for the world Central Banks, and u. S. Trade rep Robert Lighthizer will meet his chinese counterpart in shanghai. On wednesday, it is the term of jay powell in the fed, with his fomc and the herald. Thursday sees the policy decision from the bank of england. On friday watch, out for the u. S. Jobs report. Lets focus and a look at be the first cut by the fed this decade. Our guest is still with us. What are you expecting from the fed . And is it justified . 20we are expecting with the point basis point cut. It probably isnt just the usual metrics in terms of what we drew last friday. Testimony was clearly a shift in viewpoint. They are looking at the labor market. Outline isecific that the u. S. Is one of the lowest labor Market Participation rates in its prime. Concern andly a this affects the longterm Growth Prospects of the u. S. Economy. Report what we will keep looking at is if participation is increasing in the u. S. Labor market. Up ans this risk blowing have already we seen alltime highs in u. S. Stocks. Prospect ofhink the Global Central Bank easing and what we are seeing in stock market valuations and bond markets so much of the European Space is now yielding negative and the system is being pushed out with that credit quality, degrading the balance sheet, which is definitely a risk. At the moment everyone is ting that easing pedal what that central bank is protecting and what they can do. For example, we are looking at the japanese yen. We dont have the policy ammunition to ease relative to their other central bank peers. Do you see the dollar . Against the dollar, do you see the larger dxy weakening because the fed moves . Yeah, we do. We think we are approaching the top of the dollar index, and it should weekend. I think the fed has the greatest policy ammunition, and what they are very clearly saying is that they are easing their cycle, the relative frontend pricing should mean a weaker dollar going forward. What about the inflation picture . Ive asked a number of guests today, almost no one sees u. S. Inflation increasing is a risk. What do you think . I think it is almost a global phenomenon, why havent we seen stronger inflation . We have very tight labor markets, why isnt this translating into faster acceleration in average earnings . Why isnt that translating into higher headlines . I think it is a rethink of whats happening structurally in the economy, with those inflation dynamics very much for Central Banks, as we get in front of it to ease policy, so they are becoming the bank of japan, not being able to reach their inflation target. You will see rhetoric from Global Central Banks around the symmetry of their inflation targets, and that is something we will be watching in the u. S. , if they change that inflation strategy, and if they narrow our view to be above target. You mentioned swiss franc and japanese yen, because they dont have a lot of room. What about the pound and the euro . What is your outlook for those currencies in dollar terms . I think the euro is probably the most interesting. We saw the Second Central Bank Rate Decision with the ecb not delivering on market expectations. Do think the ecb is running out of policy options, and they are kind of dependent on forward and they have this whole sector but can they deliver on the qe . We are forecasting the euro to end the year higher against the dollar. Of policylack ammunition to ease aggressively. For the pound, we are suggesting downward positions. Just a repricing a friend and rate prices. We think theres very little inflation pressure coming through in the pipeline for the u. K. U. K. Cpi is 2 at the moment. It has been on a downward trajectory over the last few years, and that is as the impact of sterling passes evaluation, the cpi calculation. It is a downward decline, and we expect lower inflation for bank of england targets to really trigger repricing. All right, we have a lot more to talk about. You will stick with us. China condemns violent protests in hong kong and an unprecedented News Conference. We will bring you the latest on the unrest, live from hong kong. This is bloomberg. Welcome back to bloomberg surveillance, im matt miller in berlin. After another week and the protests in hong kong, beijing condemns the demonstrators and comes out in full support of carrie lam. It is first news briefing on the city since the end of british rule. Joining us now for more is our Senior International editor, Jody Schneider in hong kong. Were there any surprises in the press conference, other than the fact that they held a press conference in the very first place . Right. Well, yes. In and of itself, this was an important briefing. We usually dont hear from the Chinese Government, and this Office Reports directly to the chinese cabinet about affairs in hong kong. After eight straight weekends of protests, the fact that this was being held was important. No real surprises. The brief basically said that they stood by carrie lam, they thought the police had the tools they needed to do the job. But they were restrained in their approach. They did not, for instance, mention the u. S. Or the critical language of the u. S. In terms of foreign influence, which has been said in some of the Chinese State press before about the protests. They were attempting to be restrained here and to make it clear that they dont want to see this kind of violence in hong kong, but that they think the police and the government can handle it. , all right very important ahead of tomorrows meeting. Jody schneider, thanks very much, joining us from hong kong. This is bloomberg. Matt feeling the heat. Boris Johnsons Brexit Cabinet Meeting says the split has to happen by halloween. The pound sinks. Boiling over after a weekend of violent protest in hong kong, beijing condemns the demonstrators in its first news Briefing Since 1997. And some like it hot. The fed leads decisions this week with a cut decision that would be the first in over a decade. Youre watching bloomberg surveillance. Im matt miller in berlin in for france in recall for Francine Lacqua. Morning we have been digesting earnings we have had including m a activity. The London Stock Exchange up more than 14 . Bes is a bid that will valued at 27 billion to really add to the fastestgrowing business at the force of at the force. Takeaway. Com is trying to acquire a bid for the company. If these two were to join together, it would intense the fight of the faster Delivery Companies and would be a big player against uber. And heineken down nearly 5. 5 this morning. That thereeports were higher cost as well as poor weather in europe. The cost is something that you can largely see coming because they keep you hedged. Aluminum is the most important. They knew that the hedges would be less favorable. Heineken cfoas the speaking to us earlier today. Stocks down on that earnings report. Matt thank you very much, andriy annmarie. Lets go to Viviana Hurtado. Viviana Boris Johnsons war cabinet held its first meeting. Lead the session unless the eu agrees to reopen talks. Leaving without a deal is the most likely outcome. Restricts shipping in the strait of hormuz. They will operate alongside a navy ship. The move comes as european powers need to discuss the nuclear deal. Last year, you may remember the u. S. Abandoned this agreement. Multinational Tech Companies acted in defiance of President Trumps suggestion that he may impose retaliatory tariffs on french wine. Two areold that the completely different issues. President trump attacking prominent africanamerican lawmaker Elijah Cummings. This after he opposed the at the new policy mexico border. He calls his district a disgusting rat and rodent infested mess. The saudi arabia chemicals giant had a tough Second Quarter with profits plunging the most in a decade. They are set to receive reports from saudi aramco. The french president emmanuel to vladimir to talk putin before the summit. In what wasticipate known as the group of eight. Global news 24 hours a day onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Matt . Matt thank you very much for that. U. S. Trade talks are set to resume in shanghai this week. It is the first facetoface meeting since discussions broke down three months ago. Two days of talks are scheduled to begin tomorrow after jinpingts trump and xi met last month. It neither side really seems willing to compromise. This. Get your take on how important are these trade talks . And if you consider how likely they are to reach out, how likely are they to reach conclusion . How does this affect your strategy . Probably pricing into market at the moment, trade talks continue. We wont have an agreement anytime soon, but this will continue on a path. Forecasting in the of. China trade war with 10 the remaining chinese imports into the u. S. We think that this could pose particular in the asiaem space. The highyield currencies are less affected and will likely be more insulated. Highyieldere is a environment for the russian ruble to be able to outperform in an environment where the Global Central Bank is easing in the Second Quarter. Matt what kind of run do you think those two can make . Is that one of your biggest plays here . I think ruble is the biggest goal. If you look at the fundamentals of the russian economy, they are very strong. And russia implemented a number to work the u. S. To work the economy against u. S. Sanctions. They also would reduce their opening to sanctions. In particular, fx liabilities. If you look at the substantial surplus, the government surplus, and fx reserves, they are running at 21 months of imports. They are really reading substantial offers. At this stage, considering weve performance, the risk is positioning. We do think that strong fundamentals and substantial yield on offer counterweight this. Matt what does the fed loosening, expected fed rate cuts and expected ecb rate cuts due to these kind of em currencies . A think it is positive for Global Central Banks. It allows these others to ease policy and really support this domestic economy. And we had reserve banks cutting policy rates. And russian Central Banks easing second time. And friends, south africa in france, south africa, they are supporting the domestic bond market. One of the issues in russia brought up by of your who in theing in, she or he longer term, five to 10 years, can continue to grow with the demographic challenges. They have too many old people and they are not reproducing quickly enough. Absolutely. This is the structural challenge. It we are positive on the russian ruble on a three month to six month basis. You kind of have to drill down into the demographics. If you look at the u. S. Or , it is a demographic population as well. Matt the situation in china we talked about briefly as well as the trade issues. Japan gets closer to 6. 9 today. Soon you expect 7 to come . What do you think of that . We are forecasting for the level to break. Think china policy makers have taken so much to deemphasize that. This is in line with what they say they want the u. S. To be. That this justifies the level. Corporate hedging by less blows and really justifying a weaker yuan. We think the seven level will only break when you get that stipulation of tensions going into negotiations now and it will be quite a negative signal as the level broke. Att stick with us we have more to talk about. Cohost. Ur guest will thissing, what mean for emergingmarket investors . We will discuss that next. Says a fair war or a price war or a price were is eating into profits. We focus on the troubles facing europes Airline Sector in 10 minutes time. This is bloomberg. Economics, finance, politics. This is bloomberg surveillance. Im matt miller in for Francine Lacqua. Lets go to Viviana Hurtado in new york. Viviana the London Stock Exchanges in talks to buy the financial Trading Platform definitive. Refinitiv. It will issue shares as part of the transaction. Olders receive just over one third. Bloomberg lp, parent of Bloomberg News, it competes with tiv to provide Financial Data and information. Deactivate the accounts of fired staff according to the Financial Times that reports 50 traders were able to access lenders after the first round of playoffs. 400 and 50 messages were sent remotely after being let go. Pfizer plans to combine off patent is this to form a generic drug giant. That mylanas learned investors would get more than 40 of the new entity. We have been told the deal could be announced as early as today. Thats the Bloomberg Business flash. Matt japan kicks off a big week for the worlds Central Banks and the Rate Decisions tomorrow. The boj is expected to stand pat. But one third of the economists to beef up against future moves. Lets get more from our cohost for the hour. What do you think about the boj . It used to be so exciting but it doesnt seem to be making much of a difference. Will it be different tomorrow . The focus on the market is expected guidance. Expecting guidance. Room to had very little ease policy further. We are forecasting on the dollaryen backed to buy outflows coming out of japan. Pricing and a slow story. This leads you to that performance. It should outperform if we do have insulation of u. S. China tariffs. Matt what is the timeline for dollaryen . It has been a long time since we have seen this level. We are forecasting that mid2020, we see a trajectory slow grind downwards on the basis of the outflow coming out. Since 2016s been that we touch that level. Haven trades around that level you think are going to go there. You mentioned the swiss franc. What about gold and bitcoin . Do you look at that . We dont look at bitcoin. Gold is interesting in this environment but it is not really our area. Dont focus on gold . It seems like it could be an alternative take the yen and the frank. Although it seems kind of stuck around these 2014 levels. Of focusnot my area but we do. This kind of risk off environment, the trade wars are crossing up. , china, japan. People are acting out these diplomatic tensions in terms of economics and trade wars. Even prospective currency manipulation. Those trades should come into play. Matt and in terms of currency manipulation and Central Banks moving to reduce the value of their currencies for the benefit of exports, do you expect that to become a major theme . Are we in a currency war . I think more Central Banks will justify lowinflation. They are very much of the view that they will get funds and will ease policy now. There is a situation where they will run out. Easing justicy coming through, it will always be a relative play. This is what the central bank has the ability to do. To ease policy. For joining us. We appreciate your time today. Strategist joining us for the hour. A price war is eating into profits. We focus on the troubles facing europes entire Airline Sector, next. This is bloomberg. Matt economics, finance, and politics. Im matt miller in berlin. Ryanair has stuck to the fullyear earnings outlook. But with a fair war and the grounding of the boeing 737 max jetline is eating into First Quarter profits, the Discount Airlines is the situation is particularly tough here in germany. Some are selling excess seats below cost after the takeover of air berlin. We spoke with ryanairs chief financial officer. There is a lot of overcapacity in the german and austrian market. This is due to the uncertainty about what may happen with brexit. Ryanairs cfo. Lets bring in the managing editor for Global Business looking at the airlines. It will start with ryanair. What do you think about this company saying overcapacity is a real problem. Singling out germany and austria, the u. K. As well. Simply speaking, too many seats available. That means they are making serious cuts. It is engaging in a price war. They will tell you the same thing about ryanair. They are accused of offering tickets belowmarket prices. It is a strategy that is not very sustainable. In this case, you call it the auxiliary revenue. They have more money out of baggage allowance. The kinds of things that they never really used to do themselves. D diming exactly. Well see how the year turns out. That is going to be a real issue. Matt he seemed confident that boeing would stop delivering. And they would be allowed to fly. It does that make sense . I thought it was a little surprising that it could be that soon. By the end of the year, give or take, it will be the end of the air. Is what the producers are working towards. Ryanair built a strategy around the penthouse. And they really need that plane. Assuming that they wanted it, there is a lot of cost. We talking as many as 5 million seats that they would lose out on. There is already overcapacity, apparently. Will ryanair play a part in m a . I was told this morning there would be consolidation and bankruptcies. But they declined to say if they would be making any purchases. That is the perennial debate. Will we see more m a or consolidation . You had my answer the other day. We talked about that. And if you compare europe to the , you need to take out some more rivals. Other Companies Like air berlin. But they are struggling. So whether ryanair becomes a consolidator in the market, that is the point. Matt the extreme weather and heat has been insane. I have had Flights Canceled for other reasons. His Climate Change hurting airlines . It is hurting airlines. Disrupted ularly disruptive. A lot of flights were canceled. Planes are displaced. It has a massive effect. I was traveling from london over the weekend. It was a real mess with a lot of Flights Canceled. And yes, the weather does play an increasingly large role. Benedict, managing editor for Global Business talking to us about the airlines sector. Anna edwards in london is joined by scarlet fu in new york. Good morning, scarlet. This is bloomberg. Some like it hot. The fed is expected to cut rates this week. U. S. China trade talks on the jobs report. The London Stock Exchange seeks to buy riff finitude re finitiv. The earnings season rolls and. Heineken misses estimates while ryanair slumps. Brexit uncertainty means lower fares. Pricing has been tough and the last quarter. This is in the german and austrian market. In the u. K. , we see a lot of price emanation required. Edwards in new york. Francine lacqua and tom keene have the day off. Scarlet, i am very focused on the brexit narrative. The deal is increasingly getting into the psyche of the government as they prepare for what could be a no deal brexit and could be on the radar for investors. Feels like a slowmoving train wreck. Something that has the attention of investors are the ongoing protests in hong kong. It is starting to have an impact on markets. Hong kongs assets were relatively resilient. ,hina responding directly curiously enough. Anna we will get to the markets. Lets get a first word news update. The u. S. Representative John Radcliffe will be nominated by president donald director of national intelligence. The texas republican and trump loyalist will replace dan coke who will leave the office on august 15. China backed hong kong chief executive carrie lam and china is condemningong the violence in the city. This is part of a News Conference, the first in hong kong since the end of british rule. Firing tear gas and rubber bullets to clear protesters. Was tomp administration construct 100 miles of fencing along the u. S. Mexico border. It lets the pentagon diverge 2. 5 billion to replace barriers. The move marks the first time the Supreme Court has weighed in on the Trump Administrations Controversial National emergency declaration. Brexit workns habit has their first meeting. They will work to make sure the country leaves the eu on october 31. Unless the eu agrees to reopen talks, leaving without a deal is the most likely outcome. Global news 24 hours a day onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Looking at what seems to be a flat open for now after the s p and the nasdaq closed at record highs on friday. We had a bunch of earnings that will come out and help set that direction. A big week for Global Economic data. You have the july jobs report and big earnings from the likes of apple, ge, rio tinto, bmw. It dropped as much as 1. 6 . Told us thatne many are more calm and cavalier. Treasuries are moving higher. The yield ticks down to 2. 06 . And keeping a very close eye on cable at a twoyear low, not yet at a 122 handle. But Boris Johnson getting things ready for a no deal brexit. That is increasingly on the investors radar. Saw what cable was big this morning, my holiday prospect is not looking much better. The equity session in europe is quite positive. Very much lifted by u. K. Assets. The ftse 100 is up 1. 2 partly because of the pound. It is in retreat by about. 5 . And we have the ftse 250 making gains of. 4 because it is not entirely a domestic story. In scarlet, what are you looking at on the bloomberg . We have the dollar that typically means lower oil prices. But this is kind of a bigger perspective on how investors are positioned. We have seen oil settle in the trading range. The bti and positioning on wti is showing that the contracts are on the rise. A month ago, speculators were not long on the price. Is at the highest level since last august. A lot of different push and pull factors but the concern of weakening demand seems to be the one that trumps everything. Weak manufacturing data including the u. S. That is interesting given the supplyside concerns. Let me show you my bloomberg chart this morning. , thed a great conversation underwhelming nature of the european earnings season. Fed thiset from the week is 25 basis points on cuts. How long before the market moves on that . If that is what we have for insurance, what we make of the earnings season . The downgrade outnumbering the upgrade is what this chart refers to. We mentioned, scarlet, that a number of themes will dominate this week. It is the beginning of a very big week for Global Markets. The bank of america Rate Decision kicks off a busy few days. U. S. Trade representative Robert Lighthizer will take his team to china to meet their chinese counterparts and shanghai. And jay powell in the fed as the fomc is expected to cut rates for the First Time Since 2008. Data foriday, we get the u. S. Jobs report. Joining us is jeffrey you, head of the u. K. Investment office on set in london. You with us this morning. Start with the fed and how generous they will feel this week. How do you see them explaining the Interest Rate explaining cutting Interest Rates . That is what is important. That is more important than what they are cutting. There is not much wrong for the economy at this point. I would say external factors in particular and the trade side of. Hings there is no need to panic and no recession on the horizon. On the other hand, is this something more aggressive . Is there something more aggressive . Insurance now, insurance in the quarter. That is a bit more problematic as well. I think it is really signaling the behavior. Carefullynaging very in the markets. I think they could affect their expectations as well. Anna what the fed is doing, that will be key . What are you expecting . 25 basis point . 50 is something that we are looking at. It is just an additional insurance because it would have a much stronger oneoff push. Reinforce the view that fundamentally there is nothing wrong. Something chairman powell said toward the end of last year, why does every quarter and in recession . Always dangerous to say that. Everybody talks about the and cycle, ourselves included. Do they preempt . He is very clear that he wants to extend the expansion to help the segment of the population that hasnt benefited from it and are only starting to. The knock against cutting rates is that it will feel like an asset bubble. Would be 25 basis points fuel that bubble . Mario draghi always says that Monetary Policy will create the condition. It is not a Central Banks job to redistribute to guarantee that trickledown effect. Reform toructural happen in the economy affected. Thee talk about politics in fed, that is a big topic right now, the fed is justified moving. We know structural reform is needed. Lets create the condition by making sure the policy is a positive. Exactly. What about the idea that the Federal Reserve has an unofficial third mandate . Is it the s p 500 or the industrial average . Jest, but there is a concern that the fed is looking very carefully at stock rices overall. Stock prices overall. If you look at the mandate, take a step back and analyze which were exposed. I think about 55 or 54 has a significant investment in stocks. A measurable wealth affected the u. K. And other areas. It is much more tied to property. Monetary policy effects property a lot more than equity markets. Ever look bank would at that again. That is where the clash of Public Policy and economics meet. Lot over thea weekend about how the improving jobs market is reshaping communities. Maybe that will be something the fed uses to justify this. About if theyk can bring those into the economy left behind. Does this come from nowhere . I think it just depends on the community. See thosenities segments of the economy. If you look at investment manufacturing, it would start to pick up. When lazarus comes back from the dead, it is a surprise. Fed,hen we talk about the how hot is hot right now . I wouldnt have taken that 10 years ago. Coming up, race against the clock as exit becomes a very real process. Boris johnson has formed with the u. K. Calls a royal cabinet. This is bloomberg. Is bloomberg surveillance. Lets get the Bloomberg Business flash. Being askedhnson is to put a cancer warning on baby powder products. The company is pushing back on a Texas Law Firm that is calling for the warning. The new jerseybased health care conglomerate is facing more than 14,000 lawsuits accusing it from hiding the health risks of baby powder for more than 40 years. To business off 10 with mylan to deliver a generic drug giant. Mylan investors would get more than 40 of the new ncp. Rest. Investors get the other deals could be announced as soon as today. Deutsche bank is investigating of client data was compromised after the bank failed to deactivate the accounts of fire staff according to the Financial Times. After the first round of playoffs, 50 traders were able to access lenders systems. Messagesng 450 remotely after being let go. And that is the Bloomberg Business flash. Boris johnsons cabinet holds the first meeting today. The u. K. Prime minister says it will gather every day to make sure the country leaves the eu by october 31. Bless the eu reopens talks, leaving without a deal is the most likely outcome. Go for thets latest. Weekend in brexit land. There is an onslaught of getting ready for the brexit. It is the messaging going out. It is a domestic message and eu. A message to the so there is a consistency here since Boris Johnson has taken office that it will be much more determination to prove the u. K. Is ready to leave in october whether there is a deal or no deal. Anna to that end, way in. We have volatility spiking. How are you preparing . No deal is not our base case. Either through a general election or a second referendum. And right now, in terms of sterling and cable, they tend to agree. Not just inertainty terms of brexit but the u. K. Political makeup. But was that certainty is established, it will be upside from there. But when is the trigger . Scarlet when is the trigger . That has been the question for a while now. That everyone is to prepare for a no deal brexit. What about the corporate sector and the u. K. . The business lobby came out pretty strongly over the weekend to say that from their perspective, a no deal brexit is impossible to prepare for fully. The government is very determined to say it is possible. The fact that theyve come in to office. Coming into turbocharge, the preparation suggests they have a lot of work to do to be able to carry out that policy by the end of october. I would suggest there is still time for momentum to shift on that. Nevertheless, the moment and the messaging is very much giving way. Looking at without a deal. What would happen in order for the second referendum to happen . What is the Tipping Point . Very hard to see a second referendum without a general election first. And a lot of variables in there as well. They say it is now official government policy. If that does become government policy, i think that is when some conservative rebels may bring some plans openly into the equation. Now,here sterling is right it is a referendum that more recently seems to show that position right now. I think that is why the bulls are sort of contained. Scarlet contained for now. Jeff, thank you for sticking with us. Later today, the bloomberg editorinchief John Micklethwait will be sitting for with mexicos president a wideranging interview in mexico city. From new york, this is bloomberg surveillance. Scarlet im scarlet fu in new york with anna edwards in london. Both tom and Francine Lacqua have the day off. An avalanche of Companies Reporting results across different sectors. For creditwatching suisse, bnp paribas, and barclays. All these results are near the end of the week. The pharmaceutical sector, you as well. R later this week, apple reports results with general electric. Results look at the that we have heard from u. S. Companies and european companies, what is the most reassuring part of earnings season for you . It is something of a base case. Underwhelming for europe. If we look at equities, europe is really our biggest underweight. Underweight europe against the u. S. , underweight against the japanese market. Theres just too much recovery. What kind of stimulus would cause you to rethink that conclusion . Fiscal . Be something we know it is chinese demand. But it has been an ongoing story. It seems like a Holding Pattern until the lagarde regime. Again, we discuss the trade tensions. Winner europe has a productivity issue. No matter how big the stimulus , we have the government coming next. Is it with a global index are within the United States in the s p 500 . How much more outperformance does the tech sector have in it . I think that the death of the investment cycle in tech was grossly exaggerated. Consensus bigger takes last year, we are seeing signs of it come back to life. On the Software Side is welcome the sector has really done well. Cash tog and using the thrive. Scarlet stay with us for the hour. Coming up on daybreak, americas ceo will be joining allison david. That is coming up later. This is bloomberg. Im anna edwards in london with scarlet fu in new york. Tom keene and Francine Lacqua have the day off today. Its get a bloomberg first word news update. The u. K. Deploy to worship to the strait of hormuz to help escort commercial ships. This comes after recent threats to oil tankers in the region. Officials are meeting with their counterparts to help ensure the freedom of navigation. President donald trump has attacked prominent africanamerican lawmaker Elijah Cummings after the Oversight Committee chair criticized policies on the mexico border. The president described his district as a disgusting rat and rodent infested mess. Trump and acting chief of staff rejecting accusations that his comments are racists. Meetse negotiators will for talks in shanghai after a truce reached last month by President Donald Trump and xi jinping at the g20 summit. U. S. Is still looking at easing restrictions on huawei. Condemned has violence in the city of hong kong. The office spoke this morning as ,art of a rare News Conference one of the first since the end of british rule. This system cannot be tolerated. Towould never allow them participate in violence. Firing tear gas and rubber bullets. Global news 24 hours a day onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Scarlet lets stick with what they the honor was what viviana was telling us. Joining us is Jodi Schneider. Thank you for staying late with us. What was rare about the chinese officials, there was no mention of direct intervention. Thats right. It was a pretty restrained tone. The interesting thing about all this is that the press conference, that the News Conference occurred at all. , two of the highest have come out with that statement. Protesters, ieen happening inthat hong kong. Carrie lam basically decried the violence. When they didnt say was interesting. They didnt talk about beijing coming in. Certainly nothing about a military presence. They said the police need to be able to do their job. Be peaceful demonstrations. And they have some vale threats about the rule of law. Threatsd veiled about the rule of law. And that any violation of that would be punished. And politicians in western countries fanning the flames. The china make a direct accusation of the u. S. Playing a role in stoking demonstrations . If so, what would they be pointing to . Moreey have been much pointed and criticism of western countries, in particular the u. S. , in previous statements in the state run media. Today they did not mention the u. S. Interesting that this is on the evil of trade talks between u. S. And chinese officials. They did not go there. They did not mention america but they did say that they were concerned about potential foreign intervention. But they were pretty restrained on that point. They made much more pointed remarks about the potential influence of the u. S. As the u. S. Has come out with a. Tatement today, not so much on that front. Trump appears restrained, but there was a warning to the protesters. For carrie lamce and her government who has been widely criticized in hong kong. Anna Jodi Schneider with the latest there. Still ahead, this person from the civil human rights branch, that person from China Hong Kong and Macau Affairs has a different take. This is from the prodemocracy civil human rights front. Some of it is in cantonese and some of it is in english. Lets get an investors perspective. Thoughtst are your echo we see the hong kong share price on a day when violence really kicks off. It . How overall damaging as is it . You can understand that everyday day life is being disrupted. And people worry about it. Way that sends the , a tightening of Financial Markets. The longerterm, that is what our client offers. This is from a Financial Markets point of view. The presence of commonlaw. The signing of the u. K. Declaration in place. That will change in the future, fori think that that point shorter terms, it is generating noise. Markets are reacting to that. And the meetings are taking place. We will have to see how this taste how this plays out. And we want your take on the chinese investment. Resolution there, we need that trade front. Is very close to the manufacturing hub of china. It is very much exposed. The economic heartland is affected. Investorsof hong kong , there are bigger sources. There is the first foreign certificate number. It is one that is actually issued for beijing. For the exposure there hong kong economy. Reallyomething that has sprung to life. The cantonese region, you do see a lot of synergy. Is something the hong kong region can benefit from as well. Protest and unrest, what do you think about the longterm durability . This is what is going on in hong kong. And if we look at the economic issues, the economic elements to look at from the hong kong point of view is that they want Better Living standards improving. And all of that to calm , that is all over the world right now. You see them in developed nations as well. Overall right now, were focused on the economics and the trade side. We ignore the daytoday noise of modern reactions. Speaking with us, a reminder that we will have coverage and highlights of the Second Democratic president ial debate tuesday and wednesday on bloomberg television. From london and new york. This is bloomberg surveillance. Scarlet im scarlet fu in new york with anna edwards in london. Tom keene and Francine Lacqua have the day off. Lets talk trade because u. S. China trade talks are set to resume in shanghai tomorrow. This marks the first facetoface meeting since discussions broke down a few months ago. This is after president and xi jinping reached a truce last month. But neither side seems willing to compromise. Let me start with you, brendan. Both sides seem intent on making sure expectations are fairly low. Expectations that low enough that any kind of positive detail that gets leaked would be seen as progress and not shared by investors . You correctly point out that expectations are very low. Months to had a few cool off and go back to their respective corners and return this week. The u. S. Wants china to ramp up commodity purchases. Huawei, a much wants technology company, to be eased off of u. S. Restrictions. There are real Sticking Point and theres no real sign ahead of these talks that either side is willing to budge. Scarlet what is the number one question your clients are asking. It is clear that there is not going to be the kind of resolution that china and the u. S. Seeks. There is a lot of client interest focusing on the tech side of things. Diverge intoo differing standards. And it means that there will be two sets of standards. There are other opportunities for what will happen to china. I think that is an interesting angle to pursue. Topics on inefficiencies, correct. Soybeans and interests there. We have a chart showing the china soybean import, how that collapsed over the last year or so. This is at the front of trumps mind. Below we see them give some ground . What chinald be needs anyway. It is open to discussion. If that will be active to prevent china from innovating. Much are you looking at what is going on between china and the u. S. Right now . Being morphed, isnt it, into conversations around splintering technology, around security, around geopolitics. There is more going on here. There are a number of fronts. You mentioned technology. There is the currency war brewing in the background. See yet another sort of weapon in the u. S. s arsenal brought out to try to address the trade imbalances that the u. S. Is trying to do. We heard from larry kudlow saying that the president dismissed the idea of currency intervention and trump came forward saying i did not quite say that. Will there be breaks in the trade community . Right tok this gets the white house. This is the trick the hardliners to do, useo currency manipulation. You have Steven Mnuchin saying that you dont want to get into the Financial Markets. It sets all sorts of bad signals without a great outcome. And that is what will happen during the talks in beijing scarlet and in shanghai. And this is in beijing and in shanghai. Scarlet and this is what happens with u. S. Trade talks. Whether it is u. S. , japan, or south korea. Is this all linked . There is a lot of discretionary power coming. Tariffs, the view that have been normalized. The interesting trade discussion is what happened between japan and korea. Name two more tradefriendly countries. I think this is what the u. S. Has achieved. That is my fear of global trade talks going around. You have rewritten the tariff narrative and narrative and trade talks. John micklethwait sits down with mexicos president for a wide ranging interview. The conversation the conversation taking place in mexico. This is bloomberg. Is is bloomberg. Viviana this is bloomberg surveillance. Im Viviana Hurtado, lets get the bluebird business flash. Saudi arabia had a tough Second Quarter. Profits plunged the most in a decade. Net income tumbling almost 70 . Set to receive a report from is in theco, it process of buying a 69 billion majority stake. This is for 2. 8 billion. Bolstering the cancer testing capabilities, science focusing on Early Detection of cancer just like Health Businesses can a lot criticizing oncology tests. Refinitiv, a deal that will issue shares as part of a transaction with shareholders receiving the most. They compete with a providing Financial News data information. And that is your business flash. Scarlet, anna. Scarlet go ahead. Anna yes, indeed. Editor,mberg executive they are still with us. Lets talk about a couple of the stories that viviana was referencing. M a storiesther this morning to take away from. Cases, thethese shares are going higher. Is that your take away from this morning . It shows that if aco does a makes sense if it takes out a competitor or spans an area that investors will applaud it. They have been wanting to expand and Financial Data and the trading area. This adds a huge boost to that strategy in the case of takeaway. They would be taking out a competitor so that they can raise prices. Investors would support that. Your thoughts on m a at this point . These deals maybe pushup margins that investors may like. For m ayour appetite driven deals at this point . It is all point, about growth at the end of the day. Now, cash is very high and you can treat that as a sign of health in the market. Demand from the investment side, maybe m a is the way to go. Consequence of the market we are in right now. Get want to turn to you and a view of refinitiv. Its not as if there is a kind of data to snap up right now but it could be a game changer for them. I fully agree. The new cfo has been quite aggressive. The businesshrough and done a strategic review. I think he has placed his bet on Financial Data. It is a pretty consolidated market. They are turning around this investment in just over a year. They are keeping a big stake, but it looks like a bet that is reflected in the surge of the stock price today. Mean when yout have Central Banks cutting rates and currencies devalued. What does it mean in terms of these cross continental deals for the next six months to 12 months . We know the u. K. In particular, that has been evident for many rich pickings at this point. The euro valuation is interesting. Same in terms of Cross Atlantic m a. That was the big theme in terms of Cross Atlantic m a. But valuations on the currency are just that base. Let me ask you about the role of activists. Your point about cash hoards will attract investors, isnt it . Her you buy something or and there is a more interesting take on this. The resources are more interested in engaging what we wanted to be in terms of the framework. I think that will be a theme that we can have for some time to come. So much for your time today. From ubs wealth management, thank you for joining us. To reiterate that point, Bloomberg News competes with ref initiv to provide financial information. At it that is cleared up, the head of macro trading strategy joins us to talk fx markets. This is bloomberg. Scarlet some like it hot. The fed leaves a wrap of decisions this week. Feeling the heat. Boris Johnsons Brexit war cabinet meets for the first time, saying this is what had to happen. And oiling over. After a weekend of violent protests in hong kong, beijing condemns the demonstrators in the first statement since the end of british rule. Live from our World Headquarters in new york, i am scarlet fu, with anna edwards in london. Tom keene and Francine Lacqua have the day off. There is no shortage of catalysts this week. You have big earnings from apple, stevens, ge number rio tinto, bmw. The bank of japan, Federal Reserve, bank of england, and of course trade talks and the u. S. Jobs report friday. Anna a lot of central banking activity to focus on, and some extra data to digest. Interesting to see what kind of explanation we get from the fed. What kind of explanation we are going to get from the fed for their rate cut if that is what they deliver because the reasoning will be allimportant in shaping the scarlet at how widely they leave the door open for future rate cuts down the road, especially if they only cut by 25 basis points. Lets get you bloomberg first word news in the meantime heres here is viviana or totter. Viviana at least eight people were killed and at least 60 people are injured in a series of earthquakes in northern philippines. , theremors Striking Government promises about three quarters of a Million Dollars of aid to the stricken product the stricken province. The department of treasury will hold its quarterly note and bond sales at checkered at record levels. Trump wants tod eliminate the National Debt. He is set to approve a budget that will help usher in a trillion dollar annual deficit. President trump said he plans to nominate a loyalist, u. S. Representative john back with as that she will replace dan coats, who announced he will be leaving the office on august 15. Wanda vasquez says she does not want to take on the job. After weeks of political crisis that have shaken the u. S. Territory. 31, heal position is not old enough to be governor. The minimum age is 35. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 27 her new 2000 2700 journalists and analysts. Count you down toward the u. S. Market open in about 3. 5 hours, we have s p futures little changed right now after the s p and the nasdaq both closed at record highs on friday. Keeping an eye on hong kong, it fell as much as 1. 6 , but then losses as that briefing in china from china on hong kong seems to not at least materialize and bear out peoples worst expectations. , tosuries are moving higher 2. 06 . Boris johnson, the new Prime Minister, is having his highest level brexit Cabinet Meeting every day until october 31, determined to prepare for that no deal brexit. Anna a lot of planning to do if no deal eventually becomes the proper head. That is not proper government policy just yet, although it is increasingly on the radar, something businesses will have to prepare for, and certainly investors have to prepare by setting off the pound. It is not the base case for ubs. We spoke to geoff yu earlier. He said other things could happen. Lets talk about what is going on with the pound and how that reflects on my data board. We have the 5100 making decent gains. Marketntirely the u. K. That props of european equities this morning. Cac, theular on the strength of the u. K. Market the ftse up. Up as well. Really with the weakness on the pound and those none pound earnings will translate back into pounds once these companies report. Scarlet what is not rallying at the moment is oil. Wti is little changed, now stuck in a Training Range in a trading range around the high 60s. I have a chart that shows the positioning on wti, and it tracks shortselling contracts. We have this big spike right at the, and it is now highest since almost a year ago. Now the highest since last august. There are a lot of different catalysts that drive oil up and down, with tensions in the middle east, u. S. China trade talks. But weakening demand seems to be the big culprit here. Anna yes, weakening demand. We talk about the earnings story here in europe as well. Europe, and itup shows profit downgrades have outnumbered the upgrades. A sad story for european corporates. If what we get this week is a 25 basis point cut from the fed, how quickly does the market leave that said come sir seshan that fed conversation behind . Scarlet shifting tension right back to the fundamentals again. Lets go on with that theme. It is the beginning of a big week for the global economy. Tomorrow the doj Rate Decision and shanghai, two days of discussions per on wednesday, the fomc is expected to cut rates for the First Time Since 2008. On thursday, we see a policy decision from the bank of england, and then friday we get the u. S. Jobs report for the month of july. Lets bring in now our guest oft, Credit Suisse head trading strategy. The consensus here is that we will get a 25 point rate cut. If we getkets respond that . How do markets respond with a 50 point rate cut . A couple of weeks ago the market was taking it recently that the data was good enough to put the 50 point rate cut on the back burner. Get 25 basis points, which is what the market expects, the question then will what they get for the rest of the year. They will need to validate pricing per it if they fail to do that, and a lot of it could go higher as u. S. Rates go higher. Scarlet obviously the u. S. Is not cutting rates in a vacuum because we have seen how the ecb is panning on doing that planning on doing that. What does that mean for the u. S. Dollar . Shabab although you have had a very large moving rates across the world, if you take the dollar, it has been in the range for most of that time, reflecting the fact that everybody is cutting rates right now. I think with the ecb having mildly disappointed the market last week, the key now is what kind of message does the fed give us about the future . If they are focused more on the fact that recent data has been fine in the dollar could move materially higher . Scarlet what is material . Shahab a 1 to 2 move is material against the euro. On the other hand, what i would forct is leaving open room more cuts going forward. Scarlet that is interesting. What kind of explanation are we going to get from the fed for the move this week . A lot of the data, the most recent iteration of the data, has not been all that disastrous. What is it that they are going to use as their narrative . Shahab i think the idea of thes being material will be underlying source of that narrative. What are those risks . The trade risk is still live. Even brexit could be used as a risk if need be. They could even look backwards wassay growth into money 18 down significantly from what we originally thought it was. They could point to low inflation expectations, low core pce numbers. There are a number of things they could pick up on if what they want to do is maintain the markets pricing. Apparently it was 1970 three that the economist suggested a highpressure economy could lead to upward mobility. This seems to be a story that the fed has been talking about. We had Jerome Powell talk about this when he was in paris. The idea that if you run the economy hard, there could be more and more people marginalized putting them back into the jobs market is this a narrative that you see building . Shahab i think so. 2018 gdp was revised down to. 5 to 3 . 2. 5 to 3 . Ed down the fed probably believes it has room to take things hotter than where we are now because we are not that hot anyway. That is the message i would take from where we are right now. And i think it gives them a lot of bandwidth to be dovish, which i expect them to be. Anna thank you so much, Shahab Jalinoos. Bloombergy, our editorinchief, john mickelthwait, will sit down with the mexican president for a wideranging interview. That comes to us from mexico city. This is bloomberg. Scarlet this is bloomberg surveillance lets get the Bloomberg Business flash. This deepens a career crisis that began last month. That is when the stock picker stunned the financial world by freezing his flesh it fun. Woodford sold 50 of his trust to help pay taxes. Since woodford locked down his main fund after a run of redemption requests, the trust shares have plunged 31 percent. Johnson johnson says it will fight a lawsuit that asked the company to put a cancer warning on his baby counter baby powder products. The conglomerate places more than 14,000 lawsuits. It is accused of hiding the health risks of baby powder, for more than 40 years to protect one of its bestknown b rands. According to the Financial Times, they report after the first round of layoffs come about 50 traders were able to access deutsche banks systems. Sending messages remotely after being let go. That is the Bloomberg Business flash. Haslet President Trump attacked a logic companies for a second day on twitter following the House Oversight attacked Elijah Cummings for a second day on twitter. Continuing to rebuff accusations that his comments had been racist. Joining us now is marty schenker. Marty, the president slamming the congressman from baltimore, calling his district a discussing a disgusting, rat infested district. Rattleust trying to nancy pelosi, or are we overthinking this . Marty i think we are overthinking this. Ilot of people frankly, think he saw something on fox news that got him riled up and decided to tweet about it. It is not like his advisors are sitting there with his twitter account open saying this is what you should say. This is vintage john trump vintage donald trump, and it is not strategic. It is an emotional outburst. This,t so how do we read his feed, on china, for example, as we get to trade talks . His thinking that the chinese might want to wait until after the election is just what he thinks at the moment. I mean, it is really the people on the ground doing the negotiating who have to determine whether or not there is a deal to be done. Are you thinking about trade discussions as we get closer to tuesday . How closely will you be watching them for any kind of movement that would have a direct impact on fx . Shahab i think the market over the months that have gone by got used to the idea that not much will happen this year, enough to move the dial. I think the surprise would be that there is some progress which is more meaningful. The chinese have their own conditions. They are wellknown now, so there are lots of space issues over the past. We watch it closely, but maybe not as closely as other areas. Anna marty, good morning to you. If President Trump is not bound to stick by positions he has taken in the past, what should we think about what he says about the dollar . During the friday sections the friday sessions, there were comments about kudlow, and then the president sort of said he did not want to he had not made those comments. What is the latest thinking on where he goes on the dollar and whether he really would act . Marty i do think even if he tried to act, the u. S. Government has limited ability to affect the longterm value of the dollar. The Global Markets are huge. Obviously the currency markets. So i think you can expect donald trump to keep jawboning, but i think as the Administration Officials pointed out, their ability to even affect dollar value longterm is quite limited. So just expect more of the same. Anna that plays toward your wheelhouse, shahab. What could the Trump Administration do with the dollar if they wanted to . Shahab the easiest thing they could do is to keep the pressure on the fed. That uc that usually works to weaken the dollar. If we go into next year and you have an environment where the u. S. Economy is weakening, where maybe the odds of trump losing the election are going up and therefore the market worries about leftwing policies in the future, weaker growth in the future, maybe the dollar would start to fall anyway. It is at that point that they raise the odds of intervention materially, then you can help the dollar fall once it is already in a downward trajectory. But it is difficult to turn it around simply through intervention when there is no further underlying logic at this point in time. Scarlet i have to ask you about the Second Democratic president ial debate coming up this week. Whose debate is it to lose . Marty clearly the front runner is joe biden. His performance was widely criticized the first time around. He has got to show he can be more assertive and be prepared for the odd question. Theseearly, a number of candidates have to have breakthrough performances, or else it will be finished for many of them. Scarlet marty schenker, thank you so much for joining us. Shahab jalinoos from Credit Suisse will be sticking with us to get a sense of how you should position your portfolio. We will bring you coverage and highlights of the second president ial democratic debate on tuesday and wednesday. This is bloomberg surveillance. Back. Welcome this is bloomberg surveillance. We check on the pound. The pound versus the u. S. Dollar, down by. 4 . Inflation is the weekend newspaper headline. Boris johnson postbrexit cabinet holds its first meeting today the u. K. Prime minister says it will gather every day to make sure the country leaves the e. U. On october 31. But as investors need as investors debate the fallout, something of a divide is forming in markets. Shahab jalinoos from Credit Suisse is still with us. We see the pound retreating today as investors once again try to get their heads around they thel chance percentage chance they attach to no deal. What percentage chance do you attach to know deal . Shahab i think the issue is whether we get no deal or not, in the near term, it appears that the government is obviously raising the probability of one. Not in order to get the pound to go down, but in order to suggest that it is serious about its position. The reason the pound is reacting to this is that before all this, for the new government materialized, there were some that hoped it would swing to the center once the government was tendd, and by that i mean more toward conciliation with the europeans. That is what is being disappointed at this point in time. That is what the pound is reflecting. The pound go . Can we wonder how much of this is intent and how much his bluff still, because it served the end of the u. K. Government to have israel. 27 leavitt policy. What kind of level for the pound do you think to have the e. U. 27 believe it is real policy. What kind of level for the pound do you expect . Shahab frankly speaking, given how long we have between now and october 31, it is easy to imagine the pound testing 1. 20 in the weeks and months ahead, because what you have right now is an environment where the market, you have the conservative Party Confidence at the end of september. That often can lead to conversations that can disturb the markets. You also have conversations around parliament as well. They can build up in the weeks ahead. There are a few Different Things the market is focused on. None of them look like there is going to be a shift to the center. Gotrprise would be if we from Boris Johnsons trips to europe some kind of a policy surprise from some of those conversations. At this point that would be in the surprise category. The meeting matter then . Shahab it still matters. If the boe gives a stronger signal, that rates need to be lower for longer in the u. K. , that can be another problem. Scarlet Shahab Jalinoos from Credit Suisse is sticking with us. Coming up, china condemns violent protests in hong kong in an unprecedented News Conference. We go to all the latest. This is bloomberg surveillance. Scarlet i am scarlet fu in new york, with anna edwards in london. Lets get you started with bloomberg first word news. We check in with Viviana Hurtado. Viviana france is sticking to its plan to pack big Multinational Tech Companies, in defiance that donald trump may proposed territory retaliatory tariffs on french wine. Today Prime Minister Boris Johnsons brexit cabinet holds its first meeting of the government says it will meet every day to ensure the country leaves the e. U. On october 31. Michael will leave the set will lead the sessions. He says leading leaving without a deal is the most likely outcome. The two leaders are expected to meet august 19. Russia participated in what was then known as the group of eight. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over i am vivianas, hurtado. This is bloomberg. About what islk going on in hong kong. Hong kongback to the chief executive carrie lam, who has also condemned violence in the city. Office the hong kong the hong kong and Macau Affairs office gave a briefing. Crossed the redline of the principle of one country, two systems, and by must test by no means must be tolerated. The rule of law would never allow such random violence. This declaration follows fresh demonstrations this weekend. Police fired tear gas and rubber bullets to clear protesters are lets get the latest now. Bloombergs Greater China government reporter. Good to have you with us. Of the the significance briefing that we got from the hong kong macau office. Anthis appeared to be attempt to calm the fears that cropped up over the last week that china could move to take a more drastic action to calm the unrest we have seen as it has spikes. Protesters last week had defaced the National Emblem at the Chinese Liaison Office that sparked some of the harshest criticism of the protests from china. Over the weekend we saw that violence flair again in a way that really concerned people. Teargasclouds of hovering over parts of the city that is normally a buzzing shopping and dining area. It almost looks like a conflict zone. People were concerned that maybe china would step in. After they spoke, people seemed to take a bit more of a breath. They did not announce any imminent policy change and they did not appear that they were going to, and they calmed down a bit. This looks like a move by china to say nothing is coming right now, but what this means in the long run for the protests, we do not know. They are planning to protest in the coming weeks, and opposition lawmakers have said that they sit that the comments from china were disappointing. How does china move things forward when the officials gave their News Conference . How are they projecting things forward . It is very significant that they had this kind of a briefing. It is reportedly the first such Briefing Since it was returned to chinese rule in 1997. This was seen as perhaps they way to say maybe we are not going to be doing anything. At the same time, china is concerned about the protests, concerned about the momentum that they are sustaining through. It is a very hot summer, the fact that you are getting hundreds of thousands of people in the streets, that people are getting angrier about what they see about as growing chinese influence about Police Tactics used against them. That is sustaining this as we go into the summer, and that is making people nervous about what that means for business and overall stability here. All of that is really going to concern the Chinese Government. Scarlet thank you for joining us from hong kong and giving us the set up. We want to welcome from washington, the policy advisory founder. Walk us through what you see as the next challenge for china, how it addresses carrie lam and the ongoing protests because they did mention they tamps down things a little bit and they are more restrained than perhaps many expected at todays News Conference. What is it setting up to do for the future . There are short, mediumterm problems and longerterm problems. The short, mediumterm, as i read it, the Chinese Government, the central Chinese Government, is putting the Hong Kong Government over a barrel. They expressed confidence that confidence in carrie lams leadership, but they have made it clear that the Peoples Liberation army is available to the Hong Kong Government coming and the peoples daily today is talking about the need for more forceful action. How that reads to me is that if carrie lam does not take steps as thedown disorder, Chinese Government would put it, the threat of direct chinese intervention of some kind is still out there. That increases uncertainty in the markets, and concern in the markets, and concern among hong kong business people. The longerterm problem, simply stated, is whether or not china decides it wants to take up this opportunity to disestablish hong kong a bit as a world Financial Capital in favor of shanghai, which has been long eluded. Scarlet they moved the trade talks from beijing to shanghai, in part because they thought that was china messaging to the u. S. , look what we have done with shanghai. What can china do to further move hong kong away from being a World Financial Center and replace it with shanghai . Terry generally speaking i dont want to pretend i have a crystal ball, hong kongs preeminence in that part of the world exists in no small part inause of the revolution 1949. And what they would like to do very much is get it back. There is a world where, in the chinese world, shanghai is prominent in getting is prominent and getting ever more prominent, in becoming much more of a business of than anywhere, including hong kong. If this crisis could be used this is my speculation if this crisis could be used to continue to nudge world financial business toward shanghai, i think the chinese might well be interested in doing that. That is a longterm goal. Reading a narrative this morning that suggested isbe what hong kong wants singapores gain. The violence in hong kong, how you see that linking back into the trade talks some are linking them, including the Chinese Government, in places, linking this, suggesting they be there is encouragement from the west that is leading the violence suggesting maybe there is encouragement from the west leading the violence in hong kong. Terry two things i would say. One is that there is simply there is a disturbing trend building from the Chinese Government where difficulties are linked to foreign problems, foreign intervention. The trade talks in one way. When the Chinese Government lity asbout enforceabi being an affront to sovereignty. You see it in another way, where the implication from the chinese Central Government is that this would not be happening were it not from some kind of were it not for some kind of foreign instigation. I think both of those are not correct, but that trend is a problem. The other thing i think is that, you know, what is going on in hong kong is not bad for the trade talks, but it is not good either. From the United States perspective, the United States is not going to hesitate to do a trade deal to its advantage with china if it can get an enforceable deal, which is the linchpin of all this. Is even lesshere reason for the United States to want to compromise with china at a time when, from the American Point of view, Human Rights Violations and the lack of rule of law and the lack of support for the one government, two systems policy, is coming from its opposite number in beijing. Head toward this trade conversation this week, with lights on the ground in china, what is the biggest stumbling block . There are a number of hurdles, what is the biggest barrier he . Terry the biggest barrier to getting a deal done has been and remains enforceability. There is an awful lot of dust that gets thrown up about this issue or that issue or another issue. The barrier that prevents a deal getting done and i do not mean to suggest i am taking a side. I am not. But the barrier is enforceability. The United States insists on a deal that is enforceable. China at one point seemed to consider that was necessary. And they back from that earlier has caused, which the lack of progress for the last few months. If china wants to do a deal that is enforceable, i think the deal is for the taking in the United States. But the United States will not do a deal that is not enforceable. That has been clear since the beginning of the Trump Administration. Scarlet terry haynes, thank you so much. In the meantime, we have some breaking news. Mylan, the drugmaker, reporting results. And ins adjusted eps, the earnings report, the earnings disclaimer, mylan lists a proposed pfizer deal, listed as something to be on the watch out for because this follows reports that mylan planned to withne a patent business pfizer. Yet mylan has listed the pfizer unit deal in its earnings disclaimer. Mylan shares are up by 27 on this reporting, and pfizer is up by. 72 . Anna i am anna edwards in london, with scarlet fu in new york. Based on tom keene and Francine Lacqua have the day off. Scarlet, you just talked about these headlines. Fore is the significance the drug industry. We will get to that shortly. Mylan has listed the proposed combination of mylan and upjohn, and there is a factor that may cause differences in results with its forwardlooking statements of disclosure of all of that suggests all of that Market Reaction suggests that these things are all more likely than not. Thise already seeing prestart of equities trade. Higher, pfizer is also which is interesting that it interestingwhich is that the acquirer would get the bigger deal. Eps alongadjusted with listing the pfizer unit deal as something that could change guidance. Anna lets get some analysis here. I am joined by the Bloomberg Intelligence director of leasers of research. What does the disclaimer mean . Sam i have never seen a deal announced this way. I am wondering whether they actually meant to have it in there, because there is no announcement that there is a deal. There is lots of speculation, which is fine and good from the right sort of people. I am surprised it has ended up in there. Maybe this is an oversight. I dont know. I have never seen it done this way. What about what this would mean, the combination of what less lucrative what would be the rationale of thing them together . Of pfizer asontext a whole, youre right. Upjohn is less liquid of, but it has testy margins. So this is something that i think a lot of companies have been doing. They have been simplifying their businesses, focusing on drugs. Product,innovative a the more likely there is Pricing Power and traction with it. They had tried to sell this business before. Into jbed up putting it with class of smith kline. With glaxo smith kline. The question is how will it happen. Buy mylan, merger the two businesses . How is it going to be executed. Scarlet we dont have any details of that yet, and pfizer shares are turning lower. What does this mean for the pharmaceutical industry . Who is likely to follow up with their own deals . Sam if you are asking me if there will be a counter bid potentially, i dont think so. This isnd of the day, what is right for mylan. Typical in the past few quarters to say the least, and it solved a lot of their problems in terms of the growth story or putting the new management and charge et cetera. In terms of other pharma companies, there has been quite a Movement Toward being more focused, so novartis, as you gsk to business to gsk. Know, eli lilly did the same thing with animal health. So something is going on within the industry that is getting there more focused getting them more focused. Anna scarlet, we are getting more headlines coming through. Scarlet lets take a look. In terms of mylans headlines, the company says fire pfizer share holds says pfizer shareholders would get more than 57 of the company. Upjohn will issue 12 billion in debt prior to separation, and upjohn will be split off to pfizer shareholders. Sam, do you know what a reverse trust transaction is . Cuff. O, not off the sorry. Scarlet it sounds complicated. Sam it does sound complicated. Let me go back to my desk and ask other folks what they can make out of this. Now seeingr is revenue at 50s 52. 5 billion. They are also getting us adjusted eps. 2. 76 2. 86. It sounds like they are bringing down expectations. Sam if upjohn is leaving the business, they are simply adjusting for that. At the end of the day, i think this is the right thing to do for pfizer. It is good they found a home for it. It creates a behemoth. And it really puts the rest of the industry on alert. Generic pharmacy businesses. It will be an interesting outcome for both companies. Sam fazeli, thank you for rushing onto the set and giving us analysis. Once again, mylan to combine with pfizers upjohn in an allstock deal. Shahab jalinoos is still with us. Singapore is a clear victim of the u. S. China trade war. To someone from tokyo. Sincenow the weakest 2001. All of that could fuel speculation for monetary easing out of singapore. How significant a warning sign is this, given that singapore is seen as a bellwether economy because of its trade ties . Shahab you obviously cannot ignore numbers like this. I think as far as asia generally goes, the countries are the biggest linkages directly to the Global Supply chain. They are probably more vulnerable. So than lets say indonesia or india, where you have a large domestic economy which can do its own thing to some extent. So i think these kinds of numbers are important, but they are also important for the fed because ultimately if the fed is making a case of monetary easing, partly based on the risks coming from the trade war, then even weak asian numbers fit into that narrative. Drawn to a headline earlier today, Goldman Sachs seeing the asian trade slump, showings lines of showing signs of bottoming out. Do you see signs that the trade war tensions have bottomed out . Or without mentioning the trade war, is it hard to say . Out,b these can bottom but bottoming out at a very low level is something that is unhealthy, and you still need to manage easing. Bottoming out is more effective than not bottoming out, but it is not sufficient, so why the turnaround in sentiments . Particularly we will see that with the fed when they moved to movies when they move to ease Interest Rates. Scarlet from new york and london, this is bloomberg. Scarlet i am scarlet fu in new york with anna edwards and london. Tom keene and Francine Lacqua have the day off. We do see gains in mylan shares, and this comes as the company had concern that it will be pfizers off patent unit. This is a 27 billion deal. Pfizer shares are down about 5 from their record high in late november. Equities are becoming very valuable currency of late. Ina which is often the case the case of Drug Companies are that seems to be the form that this deal is going to take, and i do not seem to think that this will be a tax efficient way of doing things. The stalls the question of what big pharma businesses do with these profitable but older products. They are older, still profitable. We seem to have the answer. Scarlet pfizer also says that it now sees earnings up for the full year lower than what it had previously indicated. At least the rangers, while mylan had affirmed its fullyear forecast. We have much more coming up on bloomberg television, including a conversation with mexicos president later on. This is bloomberg. Teargas, batons, pepper spray, china stands behind carrie lam and the policy while while. Policy wall. China calls this move goodwill but sticking the red line of the u. S. Removing additional tariffs. Pfizer and a drug deal, combining with their generic drug business, a move that could trigger more consolidation in the pharmaceutical space. Welcome to bloomberg daybreak. Im alix steel. Im going to lay it out for you, go to sleep and wake up at tuesday, 2 p. M. , nothing big is going to happen ahead of the fed Rate Decision. Futures are down by two points. We saw the s p closing at a record high on friday. Eurodollar goes nowhere, generally a stronger dollar story