Is breathtaking. It has the benefit of surprise. July is here. The fomc has signaled rate cuts may be coming. Clevelands fed president shares exclusive insights on the policy outlook. I think the fed funds rate is about at neutral right now. Plus, expert perspective on what is ahead for the global economy. I think the market is getting a little bit greedy in terms of rate cuts. Ahead onall straight bloomberg best. Viviana hello and welcome. This is bloomberg best, your weekly review of the most important this is news, analysis, and interviews from Bloomberg Television around the world of Business News, analysis, and interviews. A note ofegan on optimism after president s trump and xi met at the g20 summit and agreed to restart trade talks. The u. S. And china have agreed to a trade truce and say they will revive stalled negotiations after talks on the sidelines of the g20 summit in japan. President trump says he will also scaledback restrictions on Chinese Technology giant huawei. The president saying the u. S. Is winning the trade war and that he will hold off additional tariffs. Is it all connecticut, or is something going on is it all something going in the right direction . I think we are moving in a bit of a positive situation. Will it hold . Thats the one milliondollar question, right . More than 1 million. Steve mnuchin talking about 90 of the deal is done, is always the last 10 . Will it hold . Who knows . How successful was the weekend for president xi and all of china . The potential concession on huawei was more than a lot of people expected. Markets in china really like it. They are off the most in two months they are up the most in two months. Did the president sheet in sheet did the president in osaka did the president at in osaka . What he gave up is not known. Those talks will drag on for weeks if not months before we know what the u. S. Has given up. Added more eu products to a list of goods that could be hit with tariffs as part of the longrunning dispute over subsidies paid to airbus. He u. S. Has added this is not a new story, of course. How significant are these potential tariffs, and why are they being identified now . They are quite significant, potentially. All, 4 billion now, but there has already been 21 billion the u. S. Has identified previously. Talking 25 billion in tariffs, which starts to add up. This comes in retaliation for. Uropean subsidies to airbus European Union leaders have reached an agreement on some. Obs at the European Parliament imf chief Christine Lagarde will be nominated to the european. We have what . , not 20 hours of talks decision. Finally, we have more clarity. A record 20 hours and three days of trying to figure out who will do what appeared Christine Lagarde, the head of the imf, will be nominated to replace mario draghi at the European Central bank. This is really the big job that investors had kept an eye on. The top of the european commission, which is the other holy grail of european politics, is a german, who currently serves as defense minister in. He Angela Merkel government it is breathtaking. It has the benefit of surprise, and it elevates the ecb sweepstakes above these issues does he support qe or not, and where does the finnish guy stand . Should a bank of france governor the given the role again . For those who think decisionmaking in the eu has , its hopelessly sporadic a really great set. [bell tolls] dow jones at a record close. S p at a record close. Nasdaq composite and nasdaq 100 at a record close. All these records the s p, the dow, the nasdaq. It indicate . Im usually also focused on the technical aspect of the market, but the issue right here is confidence. That Consumer Confidence report that came out late last week showed a continued rollover in some of the key Conference Board measures. My concern is that a setback in the market that could be enough to crush confidence for good. I think the stock market will have a big say as to if this economy lapses into recession over the next six to 12 months. U. S. President donald trump moving the euro and yuan a little bit after tweeting in part, china and europe playing a big currency manipulation game and pumping money into their system in order to compete with the u. S. The president clearly has a be in his bonnet about currencies. He sees the dollar as overvalued. Is it . Do you think the currency market should expect more . Donald trump is accusing everyone else of currency manipulation, and its exactly what he is doing himself. In truth, everyone plays this game. The ecb claims it does not look at the effects, but absolutely they do. They must be worried. If dollareuro rose to 1. 25, the european economy, which is nearing recession would certainly tip into it. Is the dollar overvalued . I think it probably is, and the Federal Reserve are going to cut rates. We will get a weaker dollar which will result in all sorts of conditions at the ecb, which is why they are responding already with talk about cutting the bonds rate even further. U. S. Employment has been the bedrock of the economy, but may numbers were disappointing, which puts more focus on what happened in june with expectations for a bounce back but still a somewhat slowing pace of jobs growth. 220 4000 jobs were created in june, well above consensus and a big rebound from may, which was revised even lower 224,000 jobs. It looks like rate cuts are off the table. Bond rate going up for quota quote the right reasons quote, unquote, the right reasons. A lot of other data has been softening and even with this number as you look at the trend, it is still for slightly slower job growth. When you look at the pace of the economy, wages times the amount of jobs destin number of jobs times the amount of hours worked, that is still downward trajectory wages times the number of jobs times the amount of hours worked, that is still downward trajectory. What is the case for a rate cut after this labor Market Report . When 10year treasury paper is trading well below the fed funds rate or the threemonth Treasury Bill rate, i think that is a message to the fed that their target rate is too high, frankly. I think they are looking at that. Im not sure that our views are much different than the feds views. I do not know when they will act. They are an independent agency. That is my basic point. This is not so much about stimulus as putting more balance into the Financial Sector and the juncker. If we had a fed that would lower interest rates, it would but we a rocket ship, dont have a fed that knows what they are doing, so it is one of those little things. Viviana still ahead, trade talk with peter navarro, a key policy voice within the white house. Plus, an exclusive conversation with clevelands fed president. Next, opec and its allies will keep oil outputs lower for longer as russia takes a leading role in the bloc. This is bloomberg. Is bloomberg best. Lets continue our global twerp the weeks top business stories. In hong kong, massive protest against the government continued. Tensions escalated. New protests hit hong kong today as chief executive carrie lam commemorated the anniversary of and over, china of andover, china. Protesters have gained entry and are roaming the lobby and the main chamber with no police or security to be seen. On the periphery, we have protesters dismantling steel gates and taking Construction Materials to wrestle through the crowd. Demonstratorss smashing their way into the Legislative Council building. What is the significance . Therotesters prepared for police against a backdrop of increased activity. Organizers of the official july joint statement with Lawmakers Said they had reached out to chief executive carrie lam to engage in a ague and request request she had reportedly rejected, so they say she is responsible for the events today and she should be held in the public view to reach a conclusion when it comes to responding to the five demands that are key to the protest today. Kongs in battled leader condemning leaders who stormed the legislative building as protests against the government escalated rapidly. This is something we should hear from them. Nothing is more important than the rule of law in hong kong. We had it up things going on in hong kong, a peaceful protest , yet at the same time, you had a much more Aggressive Group of protesters who were bashing down the windows of the Legislative Council. That was around then at around 9 00, police fell back, which allowed no test to actually flood inside the building where they ransacked this council, and they basically trashed the place. Police cameght, the back and fired tear gas and effectively cleared the area. Final question, though, why did the police pullback . What were their tactics . It will be a couple of days before we find out what happens to public opinion. Extend agreeing to production cuts. Saudis and russians saudis and russians once again pulling all the strings. This move was really baked into the markets, considering that even in june and they sat side by side, they talked about the need for further cooperation. He said to me a rollover is in the bag, they just into workout logistics. The president in osaka saying a deal is coming, and they just need to work out logistics. Communications are coming from high levels, the leaderships of these countries, and not even from an opec member. Remember, russia is part of the opec plus group. Our reporters as they have finished their takeover of russia of opec and putin is the absolute oils are oil cz ar now. We are down about 5 on wti now. That does not seem like an endorsement of what opec was attempting to pull off. The Russian Oil Minister came out of the meeting saying their goal today was to avoid volatility. That goal was not achieved given this market reaction. It is probably one of the worst days we have seen for some time. I was looking at the numbers before i came over. Have beenwo meetings up 2 or 3 , and we were wondering if this has been the worst reaction since the 2014 meeting went opec famously said, go ahead and produce whatever you want, we dont care in the face of lower oil prices. Viviana this growing concern the Nuclear Treaty with iran is about to collapse. President trump yesterday want tehran not to step up in richmond. He told iran to be careful with threats because they can come back to bite you. The comments come after president rouhani said the Islamic Republic with step up in richmond enrichment if they did not receive economic aid by sunday. This is donald trump threatening iran in response to irans threat. Clearly, tehran wants to push things right now, being it attacks in the persian gulf or stepping up uranium enrichment, but even as donald trump goes from saying i want to have talks to threatening action, it is clear he does not want a conflict coming up. That said, iran is telling europe it needs to give economic , so that is something to watch out for. Carrying a radiant oil to syria in violation of european and u. S. Sanctions was targeted off the coast of gibraltar. The british are saying this wereeized because they shipping this oil to syria in violation of sanctions from the u. S. And european countries. Those sanctions have been ramping up over the past few years, particularly over the thatyear as the u. S. Left nuclear agreement, but at this point, iran is not happy about this action. The british are standing by it saying it is not happy as well, saying that that is actually an area they control. President trump became the first sitting u. S. Leader to set foot in north korea. He met kim jongun at the demilitarized own in a hastily arranged photo opportunity at the Demilitarized Zone in a hastily arranged photo opportunity. It was full of symbolism. As you mentioned, the first sitting president to step onto north korean soil. At first we thought it was going to be 18 upminute handshake, as trump had mentioned, but it ended up being a more bilateral meeting we thought it was going to be a twominute handshake. Reading of the chinese economy shows continuing fragility and the need for a trade deal with the united states. Manufacturing pmi data, 49. 4 last month, slightly weaker than forecast, and highlights the effects of the trade war. How much of the slowdown that we saw was a direct consequence of the trade war . We definitely saw that within the index that new export orders did slow as well, so that would be partly the impact of the u. S. China trade war, but also we have global trade slowing generally, so that impacted new export orders. Interestingly, we also saw that the jobs numbers within that index were also quite soft. That will be a bit of a concern the domestic authorities. We will likely see a step up in trying to support domestic activities. President trump has announced his latest nomination to the fed board. He named st. Louis official Christopher WalkerChristopher Waller as his next hit. Was previously a professor of economics at notre dame university. Chris waller from the st. Louis fed i wonder if this is not laying the grounds for the administration to continue pushing towards jim bullard coming on as the fed chair. Certainly, they have had some outreach to him, and the president is not happy with jay to policy. Proach maybe this is laying the groundwork. We will see how that pans out. It is an interesting effort by the president to definitely politicize the fed, particularly when you see what judy shelton said about her nomination yesterday. Statement that a said, the president really gets it. His progrowth economic agenda should not be undermined by wrongheaded phillips curve thinking that punishes Economic Growth and subverts continued gains. She is going to go into that board room defending the president. Strong jobgot really numbers today. How could the fed justify a cut with those kind of numbers . We can see the economy is on a good footing here. The Unemployment Rate was the back of and the Unemployment Rate was actually a Favorable Development showing more people entering the workforce the backup in the Unemployment Rate. Nonetheless, the inversion of the yield curve is a pesky problem that the markets are signaling policy tightening has been a little overdone, so the fed should recalibrate accordingly. The fed has to walk a fine line of not entering a sustained easing cycle, which will squander their ammunition, right . If they give the market what it wants when it wants it, the market is going to call for a lot more than what they want to offer up. Based on the strong data, jay powell and his testimony in his testimony next week can say the easing is coming, not coming at the end of the month, but they will hold out until september when the Balance Sheet has run its course. Viviana cleveland fed president Loretta Mester joined bloomberg. We have to keep an eye on inflation data and Inflation Expectations data. My forecast as the most likely outcome is inflation will move gradually back to 2 , but that washis year, data softer means it will take a little longer to do that, but right now i still have that is my most likely outcome. However, you do have to think about the underlying trend in inflation. Factorsit is cyclical, affecting inflation, but also structural factors. Things like businesses with new models of how they are competing with one another, pricing behavior, consumer search behavior, and those structural factors are probably weighing on inflation as well. You mentioned the fed funds rate is below neutral. I think the fed funds rate is about at neutral right now, but as the economy dictates where the accurate rate is, we need to move our rate with it. If it is true, we are entering a new phase where it is a week Growth Scenario a weak Growth Scenario, the economy would move down, and that would be one reason to move our interest rate. Im not indicating things are necessarily going there. I want to see more evidence before we get to that point. Viviana coming up, more news on Monetary Policy with rate swedens bank and the bank of australia and we will visit more of the weeks compelling conversations. Peter navarro advises President Trump on trade. He said at the g20, the u. S. And china made plenty of progress. We had a Frank Exchange of views and a strong commitment to going back to the negotiating table. Viviana this is bloomberg. Most of us dont know how much data we use, but we all know were paying too much for it. Enter xfinity mobile. Americas best lte with the most wifi hotspots, combined for the first time. When youre near an xfinity hotspot, youre connected to wifi, saving on data. When youre not, you pay for data by the gig. Use a little, pay a little. Use a lot, just switch to unlimited. Get 400 back when you buy the new lg g8. Call, visit or click today. Welcome back to bloomberg best. Anticipation of the u. S. China trade deal, as well as dovish Monetary Policy around the world, help to bolster Global Markets and economies in the first half of 2019. Guests on many Bloomberg Television discussed the factors i could sustain or. Elians, who spoke with Jonathan Ferro about u. S. Growth and the fed. The one thing that economies are going back and trying to figure out is do we have such deep structural changes in the economy that we can run this economy at high growth and low inflation . That is critical for the fed as well. Theres a lot of work to be d