We saw a little bit of volatility with stocks starting the day on a down note. Crude oil is the one to watch after this attack on oil tankers after the tanker incident in the gulf of oman. We will be speaking to reporters on the ground. This is the picture for the u. S. 10 year yield. Also looking at the pound but this is the first day were we have u. K. Lawmakers doing the first round of voting. Voting to choose the next Prime Minister want to choose the leader of the tory party. Minister and to choose the leader of the tory party. Coming up next, we speak to the chief executive of the Swiss National bank after their policy decision. But first, lets get bloomberg first word news. Hong kong lawmakers have scrapped a debate on controversial extradition legislation as tensions remain high between police and protesters. The question turns to what happens next and if this will become a prolonged protest. Some say hong kong is not a safe place to keep assets. If you are an investment banker in hong kong, you have absolutely no rationale to stay in hong kong. You would move to singapore or move assets out of hong kong. Seeing spikes are is because there is a massive liquidity shortage. The japanese Prime Minister shinzo abe has urged iran to avoid conflict. He is a rare friend of washington and tehran and has done his utmost to ease tensions. It is the first visit in irans fortyyear history and comes as the u. S. Shows little sign of reducing sanctions. Bernie sanders has lashed out at jamie dimon after criticizing socialism. The executive said it would be a huge mistake. The president ial hopeful hit back saying he did not hear jamie dimon socialism when the federal government about wall street bailed out wall street. Spacex has launched three satellites. They were deployed successfully an hour later. Say they will provide 250,000 images a year to monitor teamsvironment and health monitored deal with natural disasters. Global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you so much. Lets bring you the latest on a moving story. The u. S. Navy says to tankers two tankers have been damaged. Incident has been described as a suspected attack in crude jumped on the news. Lets head to the region. What do we know so far . As you said, it is a developing story. Have beeno tankers involved in an incident. One owner said it was a. Uspected attack we have no confirmation yet. This a very tense area after four other tankers were attacked in this area. Involved today had already passed the strata for moose the strait, about 14 miles from iran. But transiting through waters where they had loaded oil and were headed to asia. Were still seeing the impact on the oil price and some in price of the shipping market as well as we get more details about the incident. Francine is this the first time we have had this type of incident . Anthony no, this goes way back to the iraniraq war when there was that tanker war in the gulf. ,hips get going at that time there was no stoppage to oil transit. These fears every time iran rattles a saber saying we could close this strait. We have got to attacks on other tankers we mentioned just a couple of weeks ago. They were at work in the uae. They were hit. We dont know what or who caused that. Authorities said it was sabotage, probably caused by a state actor. U. S. Officials have pointed the finger at iran, saudis have pointed the finger at iran. So this is a really tense period. We had recent attacks, a drone attack on a saudi pipeline, just days after, and now we have this incident. The owners are saying it is an attack and that is just going to fires flame to the add to flame to the fires of tension in the gulf. Francine thank you. Bloomberg subscribers can get the latest on the story on our special live blog. Just access the bloomberg terminal and type tliv. Joining us for the hour to talk trade and oil is paul donovan, global chief economist at ubs and the chief Investment Officer at london in capital. Paul, you were really in the news about the social media furor about something you wrote. Issued ants, and i apology this morning and i reiterate i apologize to anyone who took offense for my remarks. I got it wrong. I made a mistake and i unwittingly used culturally insensitive language. I apologize publicly for that and am glad for the opportunity to reiterate. When you look at the dynamics of these oil tankers, do your models based themselves on a range . Or is it too difficult to guess . The issue is the price of oil is very complicated. It is not just oil prices, it is what it is doing in Different Countries and taxation rates. So we tend to operate in ranges. It is one of the easier ways of dealing with fluctuations in the oil price. It makes big news if you are an oil trader. Less relevant if you are looking in terms of the direct economic impact. We are not necessarily to worried about the event these events. But the general tenor of uncertainty we now have is something with an economic consequence. Difficult to quantify, but that is where i would put the main economic response. There was a sustained surge in the price of oil, can the World Economy deal with it . Be the course, it will last thing they will be able to sustain. A are already in disinflationary environment and a slowdown, the last thing the world could deal with his with a supply shock event that would exacerbate inflationary pressures. I dont really see oil going anywhere, in terms of breaking barriers. Toc has limited ability , veryively impact prices different from where we were in the past. And let us not forget there is a significant amount of capacity coming from the u. S. Overall, we might see a little bit higher prices, but nothing sustained. Francine we have a wealth of information on this live blog. Most of our Energy Correspondents are on it and we are being reminded that, if you look at the history of this. Last time oil tankers were targeted was during the docalled tanker war how much we need to look at history to try and understand the shapes of these regions and tensions . Paul i am inclined towards the new world order. What we have seen over the last 30 years is the rise of shale and alternative energy. It is changing oil dependency. When we look at alternative routes for getting oil out, it does not all have to go through this strait. That does not mean he dismiss the lessons of history, but it means we are not going to be able to draw direct parallels. This is a somewhat different environment. Francine is it safe to say the oil price will be stable . Pau probably, yes. As long as it holds. The wars in this day and age will not be fought. Oil will not be the main character in geopolitical uncertainty. It will be other elements like tech, and indeed, when you talk about trade wars, that is where you have the potential to destabilize the World Economy. Thank you both. And paullondon capital from london Wealth Management from ubs london Wealth Management. Trump lashes out at a germany over nordstrom to. To two. Eam plus, we bring you the very latest live from hong kong. This is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. But get straight to your Bloomberg Business flash. Alibaba is moving closer to hong kongs biggest ever share sale. Chinas Largest Corporation has filed confidentially for a listing in the city. They could raise as much as 20 million 20 billion in the Worlds Largest ever ipo. Flix is stepping at stepping up efforts to turn its media empire that turn its streaming service into a media empire. Stranger things the game will come out on the same day as the third season debuts. They are not developing games but licensing characters to outside studios. Renaults chairman has kept the door open for a future tie up with chrysler but told shareholders they must work to repair the broken relationship with nissan. He also went on the offensive, saying the failure send him saddened him. Fromalcon nine rocket spacex took off from a base in california. Says they willy provide 250,000 images a year to help monitor the environment and in Emergency Team to deal with natural disasters. Francine donald trump has lashed out at germany over a planned gas pipeline with russia. They threatened sanctions to block nord stream 2. He has previously warned the project will leave berlin captive to moscow. That is as they hope to export their own liquefied natural gas to germany. Andl with us is pau paul. First, lets get to annmarie, who should be here looking at some of the things we are looking at. I think we have a map up. Lets bring it up to see what exactly it means. Just a couple of months ago, they were talking about if this is another way of putting germany . N we will get back to that shortly. Talk about some of the oil tankers, how does this pipeline fit in to the narrative . Is this a first step on imposing tariffs . Is good at doing is sending salvos and seeing how opinion in the u. S. Reacts. Im sure he is doing a onnificant amount of surveys these middleclass voters which seem to gravitate towards him whenever he presses a button that they feel emotional about. I do not think this will escalate but is the beginning of something more serious in terms of tariffs. Or oil related tariffs. Dangereed, there is a that if this class were to react to these comments, trump would do so. The danger we have with trump, and that is why it is difficult , but the whole protectionism stance is not out of strong conviction but out of a lever that he pulls up and down with 2020 elections in sight. Francine when you look at the trump administration. On mexico andfs saying they have a deal because of Foreign Policy linked to immigration, does it mean europe is next . He is going after nord stream 2, he is going after cars. Is there any pattern . Pau im not sure there is a paul im not sure there is a particular pattern with the u. S. President. There has been a change. Mmething broke it may in ay. Trade policy is being used as a political weapon and that is different. Ways,hat does is, in many challenge the whole structure of multilateral capitalism. I think that is where the risks come in, i agree. I frankly dont think people in the midwest care much about where germany gets their gas from. But what we are running the risk of now is this increased risk premium. Do anythingwant to that is in some way associated with the United States, what happens if you are subject to sanctions, tariffs, taxes in the future . That is a problem. Francine a problem that will be resolved when . When it starts ruining the economy . Paul that is the difficulty. In the 70s when nixon advantage abandoned wage and price controls the there was an uptick in inflation. , but for yearsng afterwards, there was an uncertainty risk premium. Moving towards the stage whether maybe u. S. Trade risk premium built into any investment that is even the slightest hint of an american accent. We move in this direction, it does not matter with what happens with this. It becomes very troubling for growth. Francine do you agree . Pau absolutely. Issue we have is that if it was to become a structural feature of any relationship between any particular country and the u. S. , whether direct or indirect, indeed about we will not only be facing a smaller size of the pie, the inevitable conclusion of protectionist , which like a domino also, extend the globe t extend around the globe extend around the globe. It is not looking very good. The close we are to the 2020 elections, the more there is the danger that words might quickly translate into action. If we were to see impact on the auto industry, for instance, it would have significant implications on things like consumer spending. Last time in 2010, we had significant layoffs in the auto market. That is something very, very relevant indeed. Francine thank you so much. Pau and paul stay with us. Lawmakers scrapped a debate on extradition of legislation for the second day, we bring you the latest from hong kong. This is bloomberg. Francine this is bloomberg surveillance. Hong kongs Legislative Council has canceled a debate on the controversial extradition bill for a second day. This is amidst threats of a massive protest. But the chief executive says she is not backing down. Our chief asia correspondent is in hong kong. What is the picture like . Hen of course, we are at the epicenter of a large protest on sunday, anywhere between 250,000 to one million plus a relatively in peaceful protest. But as we have seen yesterday, that has kind of devolved into a protest of several thousand and a conflict with the police. Now it has gotten to this point. I want to point your attention to that bridge over there. By the way, it is raining quite heavily here. The protesters have done ,ispersed have dispersed about 75 of them gathered on that bridge. They are facetoface with heavily protected rights police, basically a standoff right now. It is fairly goodnatured, there has been some singing by the student protesters and there has not been any violence i have seen. But it has been a tense call most of the day in admiralty. We are waiting to see what the next move is. And if you bring the camera back to be, i can show you what the students are holding up. Theyre are holding up signs in the face of the police, saying stop shooting hong kong students. As well as signs that say hong kong, add oil, jia you, in mandarin. Rally, to stand up and to fight. Thank you very much, Stephen Engle. President is weighing in on the turmoil yesterday, saying he is sure hong kong and china will work it out. Coming up, todays Euro Group Meeting will be closely watched for something not on the agenda. We bring you more on italy and the eu next. This is bloomberg third bloomberg. Two periods damaged in the gulf of oman. Sanctions in the pipeline, President Trump threatens actions against germany over a gas project at russia says the efforts amount to blackmail. Hong kong lawmakers with a debate on a next tradition bill with tensions high after violent protests. We will have more on the markets. At the open, some stocks regaining losses. Lets get to the first word news. A developing story, oil is rebounding after reports in the gulf of oman with the u. S. Navy says takers have been damaged, one suffered a suspected attack and another reported on fire and it was hit by a suspected torpedo. President trump threatens he sanctions over germany sanctions over germany come he previously warned a gas project and that he could shift troops away from the nato allies. The u. S. Budget deficit has widened to nearly 740 billion in the first eight months of the fiscal year, 200 billion increase. Describe despite the revenue did nothe budget gap shrink because of tax cuts and increased spending. President trump says he has no deadlines for china to return to talks, he has threatened tariffs if xi jinping does not meet him in japan. Talks with beijing broke off plasma with both sides blaming the other. The Swiss National bank with loose Monetary Policy and a pledge to battle a currency strain by the dow shipped to the Global Economy and the shift i other Central Banks means the president is likely to see we speak to the president later today. 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. This is bloomberg. Francine thank you. Italys government that comes back into focus with the eurogroup meeting. This comes as European Commission disciplines italy for failing to rein in debt. Here. Onovan from ubs is is there anything you like . Italian yields are attractive. A good time on that time to weigh into it . A bad time, it is catching a falling knife. If italy is as very negative feedback loop from slow growth and low labor productivity. Power on the back of the expansionary fiscal ,olicies in the north and south they are not going to do what the European Commission expects. Germany, it as dictating at the expansionist populism is clashing with german austerity. It does not make for a very good picture. I suspect the European Commission will have to go further than they did the last time this flare happened in relationships back in autumn. Francine you could argue that, if democratic elected Commission Government needs hst spur growth. Does the commission me to back off . Need to back how do we manage a dysfunctional Monetary Union to make sure you do not get this force where there are countries with weak growth for a long time . That is challenging. You have different demographics and other parts of europe. We should not just obsess about the gdp number. High standard of living and a very wealthy in the context of europe. It is a complicated picture. I have sympathy with the idea of a neurotic growth picture with germany, italy needs more growth. The challenge is about how this is being achieved. Once you say you cannot have more growth, you say how you go about this . We have got with the coalition is a Shopping List of single issues they care about but they do not come together. That is troubling about how successful the similar setup may or may not be. Francine there are changes in the european with ecb president and a new commission, a new council head, does that move the markets . I dont think so. Of fiscalt the lack cohesion. Dismembered collection of countries with different dynamics without the. Ackstop, without germany , the europeanthat experiment is potentially doomed. We are ready here how italy is trying to do these backstops of issuing these bonds which may be able to deliver the money. Slope fordangerous ,taly if it were to do that that would paint them as not a member of the union. That would be dramatic for the whole european union. It is an interesting time. Investorsortunity for to tap into euro denominated yield. Whether dollark is overvalued, is the euro undervalued . More a dollar valuation story. Overvalued dollar is against a number of currencies but not by much. Not by dramatic distortions in the currency market. Currencies m