Markets, where we see a fourth week of gains. U. S. Futures point to a third day of losses, and that is what we are seeing in u. S. Equities. It, butear dipped below safe havens are clearly big, the yen, treasuries, gold on a tear. Markets areof these being reflected across assets. The dollar is steady after a few days of losses. Coming up, we will speak to the hsbc ceo exclusively, one of a range of top interviews from our emerging and Frontier Forum today. Lets get the first word news. President donald trump imposing sanctions on irans Supreme Leader, the ayatollah, who says the penalties would deny him access to financial control resources. Trump claiming that the Supreme Leader is ultimately responsible for the hostile conduct of the regime. Tehran says this means the diplomatic path is closed forever. The president has held the door open to real negotiations, to completely and verifiably eliminate irans new your weapons program, its pursuit of Ballistic Missile delivery systems, its support for international terrorism, and its behavior worldwide. All that iran needs to do is to walk through that open door. Bloomberg learning the premium for a tanker and oil cargo on the gulf can now cross upwards of 500,000. Earlier this year, the same insurance would have cost less than 1 10 of that, as Tensions Mount about a third of all seabourn petroleum. The dallas fed president wording cautions about Interest Rates. He says easing policy could add to economic and market imbalances. These could be painful to manage. He says his base case is for solid Economic Growth this year, but Downside Risk to the outlook has increased. A bloomberg scoop, President Donald Trump privately musing about ending a longstanding defense treaty with japan. We have been told he thinks the deal treats the u. S. Unfairly. The pact was signed more than 60 years ago, forming the basis of the relationship between the two powers after world war ii. Japan says there has been no talk of reviewing the alliance. 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. U. S. And chinese officials are discussing arrangements for the highly anticipated meeting between president s trump and xi at the g20 in osaka. Trump says must return to concessions it made earlier talks, but that the aim would be compromised on both sides. Joining me on set to discuss is julian schillings worth. Great to have you with us. Equities are pricing a 20 chance of a deal at the g20. Let equity markets are pricing in your mind . 20 might be a bit high. The best outcome in reality is and they sit down together agreementreach an where no further tariffs are imposed on china. Quite a lot that could go wrong between now and the g20. Obviously theres a demonstration in hong kong on wednesday. If donald trump made the wrong sort of tweet, the president may not be prepared to meet him at all. I think markets havent fully factored that in, and we need to take that on board. Ok. If the bond markets took that on board, where could we go on the 10 year yield . The consensus seems to be lower yields moving lower. It takes something great to go against that. In the very short term, you are right. Obviously, longerterm, if there were further tariffs, i think the argument could rightly be put that it would be longterm inflationary for the state, and perhaps that as much as donald trump keeps hectoring Jerome Powell about his policy, he could reverse it and think about putting inflation up due to increased tariffs. And that also might hurt gold. I was talking at the top about what a tear gold has been on. Is this something you would want to put in a portfolio right now, given not just he 20 but the geopolitical risk around the middle east and other risks . We have been adding to our gold exposure. It is always quite a small part but yes. And in the last couple months we have been looking on good buying opportunities, and although im not a Technical Analyst at all, technically gold has in the shortterm broke now from its previous range. I think a lot of Technical Analysts who follow gold will be pushing that point. So perhaps a bullish signal in terms of the technicals for gold. Absolutely. Looking at the euro zone as well, if we are going to talk about technicals, i have a great chart that shows it rising above the 200 day and week moving averages. It is not of the data because we had some disappointing data. It seems to be a bet that if we get a fed rate cut, its the narrowing of the Interest Rate differential. Do you think euro strength has further to go from here . I think its a very shortterm play. I think most money has been made. But the dollar side, then, if we are getting this geopolitical risk, you could argue that means dollar strength. But the fed on the other side, weaker dollar. I think the fed the market factored in the rate cuts in july. Obviously we have some pc numbers and if that gives more of an inflationary part then perhaps we will get nervous but it does not look likely. A lot of commentators are talking about a further cut in september, possibly october. I think we currently feel that theres always one cuts this year, not two or three, but we should have to see how quickly the u. S. Economy slows, and obviously donald trump the reason hes badgering Jerome Powells hes worried he could slow into 2020. At rath folk stays with us. Of are looking at pictures the bloomberg emerging markets forum. Michael bloomberg, Majority Shareholder at bloomberg lp, opening the emerging Frontier Markets forum. The flagship event will convene heads of state, ministers, central bank governors, and top executives, to share their insight into opportunities, risk, and growth potential. We will give you our exclusive conversation with john flint, the hsbc ceo, at the form shortly. This is bloomberg. This is bloomberg surveillance. London will always be open as the Brexit Debate rebels on, thats the message from the mayor. He hosted londons firstever summit for leaders of european cities. The mayors of berlin, warsaw, dublin, and others are getting together to discuss tackling global challenges, including Climate Change in the rise of the far right. Live from joins me city hall. Great to have you on the program. How are your eu counterparts responding to you saying that london is open . What have you been hearing in your conversations . Well, i think they are pleased and reassured to hear that message from me. It is really important that we remind our friends in europe that even if we do leave the European Union, if brexit does happen, we will still very much be part of europe. We are proud to be european. But it is also important to realize that as cities across work closer together to address the challenges we face, from climate tonge to air quality countering violent extremism, and it is good to have friends and they are friends from all the major cities in europe. Of Financial Services companies right now saying to you about their futures in the u. K. . They are really worried about the possibility of october 31, of us leaving the European Union with no deal whatsoever. They are very concerned about the possibility of us falling off the cliff edge. What they are hoping is that the new Prime Minister, whoever he is, realizes the consequence of a no deal situation and that, or heads prevail. More is the them capacity of a no deal brexit. On the new Prime Minister, at the moment, Boris Johnson is the frontrunner, and he has pledged to take the u. K. Out of the eu on october 31, even as members of his party are trying to prevent him from doing that without a deal. You succeeded Boris Johnson as london mayor. For their areas of his style of working a legacy that give an indication to you of what he might be like as Prime Minister . Predictnly thing i can nobody can. Whats important is for him to be challenged on some of the assertions he made and he has been hiding from scrutiny. The question he has to answer is how he will persuade the eu to change their mind over the course of a few weeks and offer a better deal than theresa may. How will he persuade not just his cabinet and his party but parliament to accept any new deal . One of the consequences of us leaving the eu without any deal and with the question of what to do with the border between Northern Ireland and Southern IslandBig Questions he cant answer which is why he has been ducking scrutiny. Ok. So answer me, then, what is the labour partys position on brexit . Is it time to stop sitting on the fence . My view is very simple. We are in a bad situation with the deal being offered that is a million miles away as promised during the referendum. The British Public for the first time should be given an option do they accept the deal negotiated, with the option of remaining in the European Union. I am pleased that my party is moving closer towards my position it is important with the right clarity i think it is important for the party to have further clarity as well. We are looking ahead to the g20 as well, where markets are bracing for a meeting on the sidelines between President Trump and xi jinping. President trump before had not been totally complementary about you. I dont want to go back over old ground. But do you think the danger that the disagreements between the two of you because lasting harm to the relationship between london and the u. S. . Not at all. Loveke many londoners, americans. We have so much in common and we commemorated the 71st anniversary of dday as a reminder that in times of adversity we stand shoulder to shoulder with one another. One of the things about that relationship the expectations of one another are different than expectations of a friend or acquaintance, and that includes having a relationship where you can call each other out to say i disagree with you about these issues but lets get on the work for the other issues. I do disagree with the president and his policies, as do many londoners. Thing that the president has criticized is crime in london, and hes not the only one that has done so. Would you say it is still out of control . There is an issue of increasing Violent Crime across cities across the world over the last four or five years. We are one of the safest Global Cities in the world. What i dont want to do is point fingers at american cities, which are more dangerous. What i would rather do is work in collaboration with other city leaders to see how we can learn lessons from each other. The good news is over the last year in london weve seen a 20 reduction in knife injuries of those under 25 and a 30 reduction in homicides. I am happy to work with other leaders of our cities and other countries and commissioners, to work to see how we can fight this challenge. Not just across the country but over the world. Are seeingws is we progress made to bring it down. Finally, if we do get a no deal brexit, will you be having more summits of the kind you have been having over the past when he four hours with your eu counterparts, or do you think you will be having fewer . Thats a good question. One thing i am keen to get across is not withstanding brexit, we need to make sure we remind our friends in europe and across the world that we will carry on being an openminded and forwardlooking place. I dont want the impression to be created that we will become inwardlooking and insular. I think the time for protectionism and insular behavior is gone. It is important whether you are the president of the u. S. , the Prime Minister of the u. K. , or the mayor of london, berlin, amsterdam, dublin, you Work Together to find solutions for common challenges, and we also trade together, stay together, uphold each others cities and countries to make sure we get to know each other and not be strangers. Sadiq khan, mayor of london, great to have you with us on the program today. Lets get back to the emerging and Frontier Forum, where Francine Lacqua has an exclusive conversation with the hsbc ceo, john flint. We are being organized to serve the east. You can pick out anecdotal soybeans the flow of china consumes an enormous but i soybeans think that i mentioned that often gets overlooked is the impact that the trade friction is having on investment. You can definitely see a postponement in Investment Decisions because of the uncertainty created by this dispute. Longer this tension continues without a resolution and certainty, the greater the potential that the investment will accelerate. Is that worldwide . The postponement . Or is it particularly in the u. S. And china . I think its a worldwide thing. We already have europe experiencing reasonably soft Economic Conditions theres a different reason for postponing investment in the u. K. The u. S. China trade tension is the dominant economic thing. I think its affecting sentiment everywhere. Is this about trade or is this something bigger . Is it about who will rule the world . I think we have learned it is definitely about something bigger. Trade is the first chapter in this particular story. But when we get past trade, i think it is clear that there is a broader desire to see china contained in some way. I think we will move into a chapter that covers technology and may be a bifurcation of technology standards. Mike in his opening remarks referenced how much good has been done, from a human perspective, over the last 50 or 60 years. Chinas economic story taking 500 million people, 800 million people, whichever number you choose to prefer whatever that number is, its an amazing story. And its remarkable for many reasons, but it gives western its amocracies deeply socialist system and it has been a convenient narrative to point to socialist systems that fail, and heres one that has delivered an extraordinary economic transformation. I think it does go beyond trade. Its a new geopolitical front that we will all have to navigate. We are hanging on this meeting between President Trump and president xi. What can it achieve . I really dont know. And i think the personalities involved its difficult. I dont know what either of them are going in with. I think what we try and construct that view, i think it is probably helpful to try and look back from next years president ial elections. I think President Trump needs to engineer a Strong Economy to really bolster his chances of being elected, and i think he will be sitting with his strategist and trying to figure out how to do that, and im sure i would imagine there is a desired outcome i have no idea what it would be. We were speculating upstairs, maybe another impasse would be celebrated by the markets because they will extrapolate that the fed will immediately rescue the markets i cutting although i hope thats not what happens. I really dont know. Im waiting for the tweets. Are emerging markets to dependent on fed policy . They certainly are dependent. , the bus at the time was are we about to enter a new emergingmarket crisis . Argentina was looking vulnerable, there were questions about some other countries, and that was all driven by the fact that there was still very much a tightening mode. I think it is helpful for emerging markets, particularly those with foreign currencies, that the fed is paused and looks like it might be entering a meeting cycle. It is definitely helping. Course there are two sides to that story theres lower demand from the west, which is consistent with the fact that the Central Banks feel there might be easing. It means that will be the heart of the emerging markets. You are a great scholar of china. What do investors misunderstand about the chinese economy or chinese politics . In my role, i have the privilege of spending a lot of time in london and a lot of time in hong kong. We have a great history there, and im really privileged to have that access. There is definitely a bias in the west. Theres a bias that i think comes from a lack of understanding, a lack of knowledge, a lack of experience navigating that system. Its a very different system. It is one that works commercially. We built a great business there is a foreign bank. I think success in china is about being patient, taking time to understand fundamentally different governments. It is one that it is serving its people well for now. Should we worry about debt . Chinas debt . Yes. I think theres always a concern. There should always be a concern that there will be pockets of debt in the system which are not great, that will definitely have been some resource misallocation. Its worth or mentoring that china post Global Financial crisis was one of the reasons the western economies recovered so well. China through the coordination of the g20 played a huge part in helping stabilize the Global Economy at the time. Careful aboutry the segment and sectors that we bank in china, debt performance is good for now but the thing to remember with china is that crisis only becomes a problem if there isnt a lender of last resort or there arent resources to make the debt good. If there are pockets of weakness in the domestic system they have the resources to deal with it. And they have lots of fiscal room, too. They employed a big fiscal expansion, most of which ha