tv Bloomberg Surveillance Bloomberg July 10, 2018 4:00am-7:00am EDT
♪ francine: theresa may extensor brexit strategy aptitude cabinet members quit in one day. will she now face a leadership challenge? a new era in turkey. , with expanded powers. the lira slumps. president trump nominates brett kavanaugh to the supreme court, setting the stage for a contentious confirmation battle. mostuld create the conservative bench and
generations. welcome to bloomberg surveillance, i am francine lacqua here in westminster. our top story is president trump arriving in europe momentarily. and brexit. let's look at your markets across the board. it seems like all the angst we saw last week is a little bit dissipating. look at the european stoxx 600, it's gaining a touch and the pound is pretty much just sideways. i also just want to show you some of the u.s. treasury yields. this is a picture for theresa may. she has lost seven cabinet member -- ministers during her premiership. we'll be joined by jim o'neill and david merritt let's get to your city with first world news. has talked toel
china about opening up to four investments. she spoke after holding talks with chinese premier in berlin. the pair will go on to meet other european leaders at the business summit in bond brussels. -- in brussels. donald trump has nominated judge brett kavanaugh to serve on the supreme court in a choice that could create the most conservative bench in generations. if confirmed, he will replace anthony kennedy who sometimes sided with liberal judges in key cases. cavanaugh's 53, a law professor, and a judge of the court of appeals for the district of columbia circuit. independent that an to this year is the crown jewel of our constitutional republic. senate, ied by the will keep an open mind to every case. to i will always strive
preserve the constitution of the united states and the american rule of law. turkey's president has issued a decree empowering him to head of the central bank. it also trends the terms of governors and deputy governors at four. the latest change celebrates -- indicates his promise to tighten his grip of monetary policy under his new executive presidency. china's inflation some of -- it's accelerated -- inflation accelerated. the consumer price index climbed about 1.9% in june. , the third rescue operation has begun.
the official who is overseeing the mission says he hopes it will come out today. himeight boys rescued after being trapped for more than two weeks and were described as generally healthy. global news 24 hours a day on air and at tictoc on twitter. more than a hundred 20 countries. i'm taylor. this is bloomberg. thank you so much. withsa may is trudging on exodus by the resignation of two of her ministers. she is likely to survive any attempt to topple over for now as most of her party seems a proposal that would keep britain closer european union on trading regulation. she is now leaning on the opposition party to keep her plan. can theresa may engineer across party deal? join us now is david
merrick. bloomberg's european news director. also jim o'neill. he was also marshall secretary to the u.k. treasury. this is back in september 2008. sorry 2016. i'm going to get it right. you are here to talk about the football. what is happening in british politics? pre-brexit ministers. you look at the foreign exchange market, i think that tells you a lot. the real question is, why did this happen a year ago? a lot of people like myself been wondering why she said she didn't take on the hardline brexiteers quite some time ago.
summitestly went into a knowing that this was a risk. style of herhe former minister boris replied to the letter. backgroundson in the , what do i know, hanging around and playing the part and try to stick the party together is crucial. if he would have been with the more emotional guys, i think would've been a lot more to magic. -- dramatic. is it the deputy ministers trying to coalesce can rebel and take theresa may down? they may have enough backing to trigger some sort of contest. it's pretty clear they don't have the numbers to defeat her. the expectation that she would already win, mr. johnson made a
andshow of his resignation articles newspaper but does he have support? not only with the parliamentary members but the broader conservatives. he's not as popular as he was in the past. are thinkingsroots maybe one of the newer faces. we have is very high-level resignations. still maintaining the support. there are problems on the fringes but it seems like this is something she believes she can push through. if you have a leadership platform, and boris probably is quite popular, he's nothing like
he was. he was never the popular in the party itself. he's trying to wrestle himself from a very weak situation. he's going to have to do a lot of serious soul-searching. a cynic would say the only reason he resigns was because he was angry about the fact that somebody else was about him. he's trying to rescue himself from his standing. up look where the pound is -- you have to look where the pound is. if this had happened straight after last use election, i think the u.k. markets would've been a lot more worried about things and they seem to be. francine: what role does labor have to play? aren't blind to what she's
trying to do but they can't say it openly. politics is very tribal. she said the -- he said the worst thing theresa may could do is go to labour party for their support. that would trigger far more billion anything else she could do. wouldard to see how labor support. they will do anything they can to force a general election. has been trying to drive a wedge and the government try to force the government into a more liberal position. labor position has waxed and waned over the previous few months but the general drift has been towards a softer brexit. that's what brexit -- that's what worries the brexiteers. it's been shared by businesses, by the europeans. we had the ceo of airbus saying
it was good news and the pound. francine: how long you the prime minister can last? the negotiating position weakens because of the negotiation -- resignations. i wish you would me tomorrow. in a strange way, i think she is a lot stronger than she's been for some time because things have been there every day working the background. in terms of any immediate challenge to her, what do i know about anything. , she's in a stronger position than she has been in a while. and against the background of the ridiculous the fragile position because of the election results. there's always vulnerability.
another thing to throw when, if there really worried about corbyn coming on, wise the pound so-called? it's a great story but i'm not sure compare with some the other moments if it is quite as big a threat to the stability of the government as other events they have held. francine: i will remind you tomorrow or next week. thanks so much for joining us. jim o'neill stays with us. let's get straight to new york for a bloomberg is this flash. taylor: the world's largest really does market warned that return to be lower than expected this year. said securities would push earnings-per-share below the analyst expectation.
investigators in switzerland found that up to $700 billion that's up to $7 billion of runs or misappropriated. michael liebreich to set the country blocked a reporter million dollars when you began the investigation into 1mdb back in 2015. pledges to return part of the amount once the criminal investigation is finalized. fox is preparing a higher offer for sky to counter comcast -- comcast. bloomberg understands of the move is likely to come around the time of the formal approval by britain for fox's bid. that's expected to come as soon as this week. tesla's elon musk is due to be in shanghai an event with the government today as the u.s./china trade war enlarges the market for electric vehicles. he also plans to visit beijing tomorrow or thursday.
tesla has been working on setting up a production will be in china for more than a year. -- production the silty in china for the new year. about 50% of crypto startups die within four months. study.the results of a theyesearchers determined last only 120 days. world cup fever is boosting u.k. consumer spending on entertainment, barbecues, and television. a separate report from the british retail consortium shows that like to like sales gain an annual 1.1%. and that's the bloomberg business flash. francine: thank you so much.
helping teams actually with retail sales. this is what you want to talk about. it's the best thing about englishness ever and here they are wanting to play into englishness. do people care less about brexit because of the foot all? jim: i think people couldn't care anything about it because the footfall. the scale of the number of people that are suddenly interested in europe -- in england as a football team. francine: let's get back to theresa may's cabinet. it was the resignation of two key cabinet ministers. the compounds already bleak picture.
the financial times reports of some the biggest names in finance are now creating contingency plans. last week, jpmorgan said it's lost several dozens of its employees to other cities in the eu. now, trevor greetham. still with us, jim o'neill. jim: i just wander around the streets. francine: we were talking about the market reaction. the place you expect to see reaction is sterling and the gilt market. the question is has once happened the last one is for hours increase the disorderly u.k. exit from the eu. if you had disorderly no deal
the guilt would plunge of the pound would drop. which you hedge? i wouldn't just had sterling. there are three things to about brexit is investor. one is, you won't be able to predict the outcome. there's more than their peers. two, make sure you have some acids that do well in both scenarios. if you got commercial property as was equity, equities are really in overseas asset in the u.k.. you don't mind so much if you have those. the third thing, if you are at all cautiously minded, make sure you have a lot of natural sterling exposure in your portfolio if your basin u.k.. if you have a global portfolio you will be swung around the pound. francine: is there a danger?
i heard it walking around london and got a few calls. is your danger that for investors misunderstand these resignations of people saying forget brexit, it's not working out? trevor: i don't know. i think there are wide-open possibilities still. the time is getting quite short. one possibility is that theresa may's compromise soft tissue brexit gets through. and it happens. then there are the two fail risks. there's the disorderly exit and there's the more likely reaction against that in the country and parliament. if you think you're confident about will finally have with brexit, get on a plane
to moscow and go watch the world cup semifinal because that will give you more reality. idea of a second referendum what the d something i never believed in. but i do think the probability of that has risen slightly. not just because of the past 24 hours but because of the fact that the pm has gotten closer and it's going to divide not just the tories but also the labour party. someo there will be at point a strange mutual agreement by both wings of both parties that it's not what we wanted which will allow those in the middle who believe we should never done in the first place, let's take it back to the people. less unlikelyes than it was before but i still think it's not likely.
she made a side of the best way to get her deal through his election. trevor: she could do that. than parliament would fall behind. francine: one of the chances, percentage? of the u.k. chances crashing out of the eu? thani think it's more five. 15-ish percent. another not impossible thing is that at the end of having to summer persuade the eu for an on article 50 to give them more time. figure out what it is. as he had day, we forget. it's a very complicated proposal which, my guess is, you will not want to reject outright. -- the eu will not want to
reject outright. the eu itself might say how about having more time. francine: is the city of london the biggest you -- biggest loser in all this? it doesn't protect them. it's a shamer: that services have taken such a backseat. we argue we have a surplus and services, we are known for services. it's important. there are one million people working in finance. but i think there will be side deals. the most important thing is the areas that were highly hard-core global supply chain manufacturing, you got a protect them and that's what looks like she's ended up doing. the world of finance is so creative and flexible, clearly
there will be marginal shifts of staff in terms of some huge consequence for the finance. new year changes its time zone by five hours, that might be a bit of a threat to the future of the city of london. unless you get france and germany having dramatically more flexible labor markets, i think by and large finance will be able to cope even though it's not as good as what we've got today. francine: will mark carney be able to raise rates in august even the political turmoil? trevor: give me a the 24 hours and all have an answer on that. in the background, what is interesting is the very latest u.k. data has gotten a bit stronger again. right now, it looks like a reasonably strong field in my view. we will see what next month thanks. francine: let's talk trade and
tariffs. china merkel has praised for opening up foreign investments. cars have been some of the early victims of a u.s./china trade or. daimler facing higher cost is a import luxury models from china. trump is showing up in europe and nato. germany has been asking for more defense spending. trevor: i cannot see that. have no idea. people who follow trump in great detail don't see a pattern in the things that happen. francine: do you own german carmakers? a strong business
there and has a value. the trade tensions are another wildcard to try to digest. i view it a bit like a central bank raising interest rates. effectnot have a straight away but will have an effect. the usual things like general economy confidence. but i think the economy is quite strong globally. intrigued on what you said about merkel praising the chinese. i have a growing feel that vision the past 20 years where i think the u.s. is making a major strategic mistake. even if you assume that this would bear fruit, 30 years ago it might have been clever but
today, more south/south trade has been bigger the north/north trade. you see someone like merkel saying that, china has become germany's number one trade partner. if the rest of the world action intensified intensified that global trade engagement, i don't think they have the slightest chance of coming to how the u.s. thinks. it could accelerate the decline of the u.s.. though the markets seem to be in love with the u.s. relative to everyone else. view, seems like a very near frequency cyclical big picture wise thing. trump was brexit is like the english-speaking world stepping back from global trade leadership.
the vacuum will be filled. dollar is theu.s. reserve currency. how long does it take that to take a backseat. jim: that's been around since i was still in my shorts. the dollar will go up and down. this is not about the reserve currency been under threat. it's a very slow-moving thing. in some ridiculous nonsense about sums to -- about a severe conference that's crisis with the u.n.. strategically, is far from clear to me how the u.s. can be a long-term winner. francine: while china ever use trade currency? they can't upset america.
if the u.k. doesn't win, you support? i think i would have to go belgium. trevor: it's got to be a nato country. -- jim: will trump be at the world cup final? will he sit next to pretend? francine: thanks for joining us. jim o'neill and trevor grantham -- greetham stay with us. coming up next, we talked turkey and the scotus confirmation. this is bloomberg. ♪
we are getting some gdp for may. this is what we see right now. if you look it gdp for the u.k., gives this -- this gives us some idea of the strength of the u.k. economy. 132 .91.ee it should be coming any second now. we are counting down the seconds until we get that gdp figure. we did see a little bit of a the u.k. is because doing so well in the world cup. that means people are spending. you can see the pound is not really moving on the back of the gdp which is in line with what we expected. 0.2% through may. that is the latest figure on gdp
for the u.k.. let's get to one of our other top stories, donald trump has nominated brett cap to the supreme court. this could be the most conservative bench and generations. he will replace anthony kennedy. professor, and a judge on the court of appeals. he spoke after trump nominated him last night. >> i believe an independent judiciary is the crown jewel of our constitutional republic. senate, ied by the will keep an open mind in every case. preserveways strive to the constitution of the united states and the american rule of law. francine: let's get to our senior writer stephanie baker.
chances of him getting confirmed? stephanie: this will be a big fight. do have a simple majority in congress. senate rules of changed. they just need a simple majority to confirm him. i think his views on a number of issues will be very divisive. i think you will come down to about five senators. whether or not they will flip and vote and break party ranks. in particular, to republican women, lisa murkowski and susan collins, they are pro-choice and support a right to abortion. if they will be crucial to this fight. the pressure on them is intense. this is a litmus test for
whoever gets on the court. it's very important because he is more conservative than the justice he is replacing. more of a moderate and a swing vote, particularly on the abortion ruling in 1973. thecine: how will it change court's decision on issues such as abortion, the environment, health care? stephanie: he is not ruled directly on abortion. recently with the trump administration, saying he would've declined to give an undocumented woman and abortion. he would challenge that. pro-business,is he has anation, expansionist view of executive power. he has ruled against issues like
the environmental rejection neutrality, the consumer financial protection bureau, his decisions are hostile to obamacare. it's abortion which is going to be the major campaigning force around this decision. you already have abortion rights states.allying in those they are trying to put pressure on them to oppose his confirmation. issues, hisso big views on presidential power could have an impact on the smaller investigation. -- robert mueller investigation. he worked for 10 star. -- 10 star. he thinks a sitting president
should not be subject to lawsuits, it's too much of a distraction. this could make it very difficult for robert mueller if trump resists an interview and , iturns into a court fight could go to the supreme court and cavanaugh could be the crucial vote. francine: thank you so much. nellis great to see new york city with the news. u.k. appears likely to survive any attempts to oust theresa may. despite the resignation of two of her most senior ministers in one day, most of her conservatives are content. her proposal would keep britain close to the european union on trading regulation.
she is leaning on the biggest opposition party to get the plan through parliament and counter a mutiny by her own. angela merkel has praised china for opening up to foreign investment. she spoke after holding talks with the chinese premier in berlin. they now go on to meet other european leaders at the eu china business summit in brussels. the opec president has told bloomberg the cartel is doing all they can to offset shortfalls that have kept global supplies tight and prices high. it comes after president trump told them to cut prices illegally. they don't want to overdo it. i think they are doing their part. the market needs time.
there are things outside of our hands, the geopolitics and how much production is coming from the shale oil and canadian sand. we cannot predict that. taylor: the price of commodities held up. the producer price and stacks was up from a year earlier. compute -- time, the consumer price index climbed in june, matching the forecast. the third rescue operation has begun to bring the last four boys and their coach from a flooded cave. the officials say he hopes they will come out today. fareight boys rescued so were described as generally healthy. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is
bloomberg. i am taylor riggs. francine? francine: thank you so much. ofy have issued a degree power to name the head of a central bank. the latest change signals erdogan will follow through on to tightenn pledge his grip on monetary policy. this is our istanbul bureau chief who is in london. how many powers does he have? benjamin: what we see now is him making good on a promise that he made two months ago in the studio, where he said he would take care of the economy and monetary policy. we are seeing that happen. son-in-lawnted his as head of the economy. tohas given himself power
appoint the governor of the central bank. he has no advice or consent from anyone. know about the appointments? we know he picked his son-in-law to run the finance ministry. benjamin: he is head of the science -- finance ministry and the treasury. those of an occupied by a very trusted names in markets. this is a brand-new era for turkey and erdogan taking full control of the economy. francine: thank you so much. let's get more on emerging markets. that is a latest from turkey. what does it mean for emerging markets as a whole?
when you look at turkey as a standalone case or hurting emerging markets to have so much debt. a point whereis they are doing the same thing with jared kushner. it doesn't send a very good signal. he is out, the son-in-law is in. economy the world hitting a soggy patch. chinese growth is decelerating. interest rates are going up. the dollar has been strengthening for the last few months. that combination is bad for emerging markets across the board. until we see those trends change , we may go into 2019 and emerging markets may be under a cloud. time is continuing
because of the cycle. is that a fair assumption? trevor: you're always closest to the next recession by definition. i think the u.s. economy has some legs to it. there is a willingness to lend. the rest of the world's been slowing down. weakness,e currency we are starting to see europe positively. you could see a real acceleration next year, that could help emerging markets. there is very little evidence for this. i wouldn't be surprised if emerging markets get a reprieve. francine: is turkey different? trevor: i tend to buy emerging markets as a whole.
i don't get into individual country selection. i think there will be opportunities as the summer progresses. i am pretty neutral. we will wait and see what happens. francine: thank you very much. coming up next, we talk more about trade. theld investors worry about tension between america and china? our interview with the former treasury carry -- secretary. this is bloomberg. ♪
francine: we are at westminster with coverage on brexit. tom keene will be joining me shortly. now let's check in on wants trending across the bloomberg universe. for starbucks, 2020 will be the final straw. tick-tock.y on trump made his choice for the supreme court. we will put all of this aside. will look at the upcoming u.s. earnings season. , is london the big
post-brexit loser. those are questions we have here at westminster. rising, u.s. futures are closing higher. says there are reasons to worry. he spoke exclusively to bloomberg. jack: the tension over trade right now is a matter of grave concern. i think the challenges facing the u.s. economy are not principally coming from trade. beingof people who are addressed are going to hurt the u.s. economy. how much of a headwind it could a u.s. trade war be? we have the chief executive of the chamber of commerce.
let me first start off with you. the trade or is at the forefront minds.tors' what do they see that we don't? susan, we are concerned about the trade war. i don't think the concerns are passed at all. u.s. business in europe is concerned about the escalation, the responses we see are not good for business at all. francine: if you will be hit the most, we spend a lot of time looking at carmakers and german carmakers, what industry groups would you worry about? represent the supply chain, over 150 companies from all sectors. i believe they are going to be hit. business is taking a deeper dive, taking some time to see
what the impact of the retaliation measures will be. out companies have spoken forcefully on this. harley davidson spoke to one of our members, they are prepared to move operations from the u.s. outside to europe. it they are indicating that the by $3200.d go up we will see more of that. the going to be across range of sectors, from agriculture. we are very concerned about this. francine: what is your take? we were talking about the trade war taking a long time to come to the forefront. how much will this take of global growth? trevor: there are various estimates. there is no doubt that what we see is a combination of an
inflationary hit and a negative growth it. you're going to see prices rise because things are made more expensive places or tariffs force prices to be higher. you will also see disruption. you can't change your locations overnight. this is a time when globally you see growth slowing down and inflation rising anyway. francine: at the same time it, afraid -- trade is increasing. we assume the trade doesn't go down. it just gets redistributed. trevor: you've got to think about life has the global trade system decided to produce certain goods in certain parts of the world. it can be cheaper to produce in foreign countries and import.
it benefits your consumers. they have more disposable cash. basically, if you are trying to wind back globalization, you will wind up with a weaker economy. francine: do you see anything positive emerging from these trade wars for europe? could chinese money meant for the u.s. come to europe instead? susan: we don't see anything positive at the moment. maybe it's pushing everyone forward to try and work together on common problems. the eu and u.s. business recognize we have common challenges. global overcapacity. we also recognize there are unfair trading practices that need to be addressed. we could work together more.
there are talks going on behind the scenes. the eu and the u.s. are talking to each other in the wto system. the positive signals are let's try and show this is needed and we need to work together to find common solutions. thank you so much. executive ofief the chamber of commerce to the eu. first, let's get to the bloomberg business flash in new york. taylor: they fired the ceo as the largest derivatives broker. they warned that returns will be lower than expected. they sit increased costs with brexit and security when push earnings for 2018 below the
bottom end of expectations. counteringy foxx is complex. this is the latest takeover conquest. bloomberg understands the move is likely to come around the formal approval of the bid. is due to be in shanghai today as the trade war upends the market for electric vehicles. he wants to visit beijing. working oneen setting up productions in china for more than a year. startups diecrypto within four months after initial coin offerings. that's the finding of a boston college study that analyzed the tweets.
the researchers determined that only 44.2% of startups survive after 120 days. world cup fever is boosting u.k. consumer spending. spending are year-over-year in june. a report from the british retail consortium shows sales gained 1.1%. that is your bloomberg business flash. francine: thank you so much. let's get back to the top story. theresa may is pressing on with brexit despite the resignations. any attempt toe topple her for now. her party is content. joining us now is alastair campbell.
us.or stays with good morning. is this labor's big moment? alastair: it could be. i think both of the main parties are not showing the leadership needed. ifo honestly believe that they came up with a tougher, clear position against the proposals that she has brought forward, this idea that is a soft brexit is the worst of all worlds. 80% of the economy is excluded from it. don't you agree with the white paper? alastair: they've spelled out a number of disagreements. from the word go, we've had a position where they are saying that whatever happens, breaks it happen because the people voted for it.
together.y will come the country did not come together. i've never seen it more divided. what we have seen in the last 48 that thethe reality parties are irreconcilable on this. there is no way of doing this without real damage to the economy. i think this will go back to the people at some stage. int happens, we are uncharted water. this determination to hit this deadline is part of what is driving this so badly. theresa may's strategy wasn't about the country, it was about holding the conservative party together. trevor: do you think the soft proposal, she has outflanked labor?
she says we will stay in. alastair: they were on the radio this morning saying we should stay in the single market. i think both positions are fluid. i don't think there is an intellectual consistency to the position they brought forward. i think that will unravel. i think the labour party got ahead of that. you will have to come back when we have more time. bying up, we will be joined tom keene. we will talk about brexit and the supreme court. ♪ phones have made our lives effortless.
cabinet ministers quit in one day. what she will now face is a leadership challenge. we are live outside westminster. term,n is in for another is expanding his hours. nominated brent cap amount of the supreme court, setting the stage for a contentious confirmation. he could create the most conservative bench in generations. this is bloomberg surveillance. carpetgiving tom the red tour. this is all about what happens next with the tory party. people are trying to figure out what to come. see it was extraordinary to how the government is in crisis, she could be strengthened by the resignation of the foreign
secretary. francine: we will talk more about that. the pound is not reacted. let's get to the first word news. british prime minister theresa may appears likely to survive any attempt to ouster over brexit. she is counting on the labour party to get the plan through parliament. two of her senior ministers quit over her proposal that would keep the u.k. close to the eu on trade and regular -- regulation. president trump may be creating the most conservative court in generations. he has named brett cap to fill the slot left by anthony kennedy. he is a washington insider who work for president george w. bush. he has been a skeptic of regulatory power. deyverson tylan to become the
third rescue mission inside a flooded cave. they hope to bring out the last four boys and their soccer coach. a navy seals that has stayed inside the cave with them will also come out. the boys rescued are in high spirits. opec is doing what it can to supply the oil market. the cartel doesn't want to overdo it. it's important to avoid bringing the market back to the kind of excessive place that led to the downturn in prices. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. tom: thank you so much. let's do a data check. we are doing so much with international relations. there is a market open, a little bit of movement. we are focused on the turkish lira.
let's go to the next screen. the turkish lira is something of interest today. it has weakened with the changing of the new government for mr. erdogan. we are looking at european stocks and they are on the rise little bit. there is some anxiety because of trade last week. yeart to show you the 10 u.s. yield. at 2.8.see one is you can see that. you a little bit also on the pound. despite the turmoil we are reporting on, theresa may is pressing on with brexit despite the resignation of her most senior ministers yesterday.
the prime minister looks likely to survive any attempt to topple her for now. contentthe party is with the proposal that would keep the u.k. close to the eu on trading regulation. she is relying on the labour party. london is aow in strategist. she writes speeches for theresa may. thank you for joining us. when you look at the political very few people would want her job. it would be very difficult to get the support. >> i think we will see theresa may surviving in the short term. for the same reason that she survives, it's not her parliamentary colleagues uniting
around any other candidate to replace her. is surviving by default. francine: do we have a hard brexit? do we haven't chance of the u.k. crashing out of the u.k. -- eu? adopted the campaign position of the believe campaign. years, she has had to roll back her position to meet the reality of coming out of the eu. brexit disappointed the until, she postpone that friday. that's when she later cards on the table with the type of will exist.hinks that doesn't meet the reality she's been dealt with.
tom: frame for us morgan stanley's thoughts on the economy of the u.k. is it struggling? is their sustenance to it? >> growth is been pretty reasonable. consumer spending has been strong. forre also starting to get the first time a lot of homegrown inflation. some of the effects of brexit are already being felt in terms of tighter labor markets, higher internal costs. the weaker pound had an effect on that. ok.ar, growth is we think the bank of england will hike in august. tom: if you live all of the mayomics of what theresa has to deal with, what you expect her to do in the coming days.
the cornwall of another time and place, what does the prime minister do on the edge of collapse? or malcolm, everyone has these types of flareups. john major was in a terrible whole in the 90's. he faced down his skeptics. it's not without precedent that she could stave off these challenges. muchgoing on today is very surviving day today. the shoring up her position. there will be tactical positioning through the recess. the most near-term thing is the white paper. francine: this is really important for the global audience. you assume we've got the u.k.
economy services making up 80% of the u.k. economy. malcolm: what we have seen as a heavy bias towards goods. we have mutual recognition or managed to virgins? those two things are playing out now. what we will see is a lot of horsetrading for the detail in the white paper. i think the white paper has been pushed back. francine: why the markets so cool about it? the pound is barely moving. >> i think one reason the market might not be moving much is because this is still step one. all of this debate and focus and what we are talking about here is what is the position in the negotiation it going to be? a negotiation has two sides.
once the position is decided on, how much of it will be possible to agree on with the rest of the eu. thatthat negotiation part is the greatest sense of uncertainty and volatility. isn't moment, the market reacting much and that's understandable. we think volatility for sterling will rise. there is a wide range of possibilities. theon't think that prevents tank of england from raising rates in august. there is uncertainty weighing on business and investment. i think that matters to the bank of england. francine: what do you think it ?ill take to counter the range is there a positive scenario? be morehave to
forceful? andrew: i think it's important to watch what does the european union say about the white paper once it's published. that's where the rubber meets the road. these statements are probably only going to excite the market to the extent that they seem agreeable to the european union. that's where the next couple of months look tricky. the morgan stanley team does not think there will be an agreement reached by the october meeting. this thing will go down to the end of the year and there is still a bit of uncertainty out there. tom: i think this is so important for the global audience. we hear about a norway solution, a candidate solution. i don't know what soft brexit is. what is the best outcome for prime minister may?
is it something new? will she have to come up with a new plan? croatia plan? : it's what we saw friday. what they believed to be in the best interest of the u.k. economy, there are a lot of details behind that. what they are trying to say is the goods element of the economy has to have that alignment. services they believe can survive and thrive and compete and converge. in essence, the city of london and the financial services believe you should be allowed to drift apart and compete on the same terms. francine: we are expanding coverage. tom: he will be with us next hour.
malcolm: i think we have seen for us. tom: what is parliament doing today in this chaos? what are those people doing today? malcolm: they are trying to regroup with what happened. i think the main thing they are focused on is preventing any more fallout when they published a white paper. boris johnson and david davis were anticipating that. any more fallout would be difficult to sustain. they've got to keep the new cabinet together. that is the main focus, making sure the white paper doesn't great anymore division. tom: it's like game of thrones. i hear the bells. francine: they will stay with us. coming up, we will be joined by rupert harrison.
increased expenses would push earnings per share below the bottom end of expectations. it didn't take long for investors to change their mind on xiaomi. shares of the chinese automaker rose by double digits. the index later this month. china's insurer is considering a divestment. bloomberg has found that they are exploring the sale of the belgium insurer. they shot to fame by acquiring assets around the world. china sees the company in february to curb risk. that is your bloomberg business flash. francine? tom? tom: thank you so much. we are here at westminster abbey. you may hear the bells in the background. this is an emotional day for the united kingdom.
huge thinghis is a at 1:00 london time. there will be 100 aircraft. this is 100 years of the royal air force. i wonder what the conversations in the corridors will be like today. tom: it will be different to stay -- say the least. there will be a conversation about the events last night. the announcement of a new supreme court nominee. kevin cirilli is in washington. was the president pleased with the performance? it had an element of show business. did he give the process high marks? kevin: in terms of the speech, it was well received last night inside the east room. he was joined by every republican in the senate as well
as steve mnuchin. rudy giuliani was looking at the front row. he was sitting in front of rod rosenstein as the judge appeared with his family. himself in present an opening statement of what is sure to be a divisive battle in the senate, even though the process appears to be looking smooth. democrats are ready to pounce and position him as more of an extremist. he wants to appear as more of a centrist to the supreme court. tom: the sales job begins. he will make the rounds on capitol hill. what will he say and do? how will he convince senators on the fence? said ifusan collins has
any nominee must have a position that roe v. wade is settled. this will be a key conversation. senator collins is a centrist from maine. he will begin his meetings with senators privately today. the second point i would make is the president did invite centrist democrats to the white this will be a key conversation. house last night. they declined. theh mcconnell deployed nuclear option during the the sameonversation, would appear for this confirmation. they just need a majority. that's where john mccain gets more interesting. republicans, mitch mcconnell wants this to get past.
it would take less than 66 days. they wanted ahead of the midterms. i know you are about to make your way to europe. what will the president talked to his nato allies about? kevin: he's going to get a chilly response. he is going to urge them to pay more money. this comes at a time with me trade applications are remarkable. secretary mnuchin was in the east room last night. so was peter navarro. when you have that differentiation in terms of trade policy at a time when north korea is making fun of the secretary of state and those negotiations and the meeting with vladimir putin, the stakes have been intensified following
the g7. interesting toe see the frosty response the president will receive from his european allies. tom: who will travel with the president? kevin: in terms of the itinerary, the official manifests is unknown. the president will depart for andrews air force base and then depart for europe later this morning after 7:00. i can tell you the president met yesterday with the vice president, discussing the russian meeting as well as the europe trip. kevin it, thank you so much and safe travels. here at westminster abbey,
malcolm is with us. malcolm, the prime minister and the british government, they have to appear at nato. how changed will they be with boris johnson? how changed are they in the last 48 hours? malcolm: we will see a difference in tone rather than substance. i think it will be more somber and businesslike. do you worry about the president showing up at nato, going after germany and trade? where does that leave german carmakers? >> i do think it would be a concern if trade barged back onto the headlines. markets of been relieved there was focus on trade up until last week. that died down a little bit.
that has been a major point of contention and would refocus. that will be a big deal for the second half. trade is a risk to growth. gdp numbers are lower than a consensus. that's a challenge the markets will have to face in the second half. that hasn't gone away. francine: does this mean you are short european equities? andrew: i'm optimistic for equities over the near term. if you think about what happened in the second quarter, the euro was quite a bit weaker. global gdp growth was pretty good. if you wanted a combination of three factors, i think it would be those things. that that is as
good as it will be. maybe that's the point. my colleague has lowered the target for european equities. he is taken down his estimate for what the multiples should be. earnings season could be good, we have to be aware of the risk to trade the europe is exposed to. reading your note. it is,azing how outdated things are moving so quickly. whether you're looking for just to get to friday? think with trump in nato and couldn't, we could see some interesting developments. i think people will see more volatility there. we know he likes to challenge norms.
i think we need to keep an eye on that. anotherwe will see flare up around the publication of the white paper with the brexit people complaining and challenging misses made to go further. tom: how long is the white paper? is it triple spaced? malcolm: 124 pages. note,ne: on a serious when you look at the trump/may relationship, is she going to be distracted with the domestic policy? she is invested in the relationship. there is a chance she can get a deal. trump wants to show that he can do deals.
he offered macron a good deal. trump likes to play games. he wants to help the u.k. in this situation. tom: thank you so much for being with us today. we greatly appreciate it. up, columbia university, someone who knows russia pretty potent and early gluten. early vladimir putin. please stay with us. worldwide, this is bloomberg. ♪ retail.
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ontictoc. our most read stories on the bloomberg terminal over the past few hours. trump makes his pick for the supreme court. political chaos. are looking at earnings for wells fargo ver. let's find out more on the brexit loser. morales joins us from westminster to talk all things brexit. aged 24 hours. francine: i love your stuff.
alex, he brought the resignation letter of boris johnson with him. he?liberate was punches.ls no may theetter he tells dream of brexit is dying. cover ofn the front the telegraph and times. about a lengthy changing cabt london.in trucks in about whatnyone care boris johnson writes or says? has a base iny
the grassroots of his party. eaves waivering until the vote. -- eve of the he came out with a gusto. tom: this is the mecca of tourists. how does boris johnson play outside of london? >> he has obviously been foreign secretary for the past couple of years. amongst foreign diplomats, he has not gone down well. he has a history of making gaffes. tom: does he still have the eurosceptic support in the united kingdom as he led the nation to brexit? >> he does. there are a lot of people in the
countryside that support boris johnson's views. ood hasntry's m little changed in the years since the vote. tom: alex morales here with us at westminster abbey. there is taylor riggs. taylor: president trump has triggered a major showdown over the future of the supreme court. the president has nominated brett kavanaugh to fill the retirement of justice anthony kennedy. if he is confirmed, that could make it the most conservative court in a generation. democratic senator chuck schumer says he will oppose kavanaugh with everything he has. roseroducer price index 4.7% in june, but analysts expect that pace to
slowdown. in western japan, officials say 134 people have died from heavy rains, flooding, and mudslides. more than 50 people are still missing. the rain has now stopped. thousands evacuated have returned to their homes. isturkey, president erdogan following through on his pledge to tighten monetary policy. he has issued a decree giving him the power to name the head of the central bank and its governor. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thanks so much. let's continue the brexit conversation. at's get back to andrew
morgan stanley. when you look at brexit and the major risks, last week it was about trade. risks across the globe, is brexit number three or four, or does it fall to 20th place in your biggest risks to the world economy? think brexit is pretty far down that list because our economists think this is going to be an ongoing process where you are not going to reach an ultimate resolution until the end of the year. the market will continue to view this as an uncertainty that continues to roll along. other factors are likely to dominate. story have an emerging where inflation is back and real, u.s. cpi released this week will have a debt 2.9%,
rising inflation in the eurozone, we think inflation picks up in japan, chinese producer prices. that is a major theme. central-bank tightening ahead of us. there is some giveback for growth as some of the tax effects are temporary. one thing that is interesting is how the bank of england is more fractious than the other central banks. are they going to lead in the onate as we see more dissent rates rising and inflation? does the bank of england lead that that they? >> what the bank of england is confronting is a negative supply shop in the form of brexit, smaller labor force, less
migration, higher domestic prices. central banks have not had to confront negative supply shocks very often. the last 20 years has been about greater migration and greater trade. that dynamic where inflation could go up even if growth is not improving, which is a very realistic way to look at our longer-term u.k. forecast under a more negative brexit outcome, that is a scenario central banks have not had to deal with for a while, but it is a real possibility for the bank of england and a real challenge. tendency away a from soft brexit, a norway solution, towards something more amenable to mr. johnson and the other brexiteers, what does that do to gdp in the united kingdom? >> i think the point francine made earlier about the balance between goods and services, that
80% of the u.k. economy is services, and that is a part that has a lot of questions around it. i think it is a major risk to growth. it is a risk to growth because services is a big part of the economy. uncertainty always causes businesses and households to pull back and reduce investments. it is a really large question that still hangs over markets. that is why we have been surprised that volatility in sterling has not gone up more. that is something we think will happen, should happen. there is a lot of uncertainty. francine: you know what also surprises me is we are talking so much about the internal politics of you -- u.k., but we should also be talking about the eu. do we have any idea how brussels
is going to respond to the white paper? >> that is a fascinating point. the last 48 hours of news coverage in the u.k. has obviously been focused on, great, there is a deal, the u.k. government has coalesced around a position. that is just step one of the negotiation, deciding on your position. step two is how does the other side feel about that position? all negotiations involve some level of compromise. once this white paper is published, how does the european union respond? there will probably silly have to be some concessions. -- obviously have to be some concessions. the questionis more people should be asking because it is still a big uncertainty. francine: if you look at euro
pound, which i know tom likes to look at because it is what the at, what is driving it? >> in our view, the euro has been driving it were recently on the back of trade concerns. u.s. growth was much stronger than eurozone growth in the third quarter. we are reconstructive long-term on the euro. 3%is running a surplus of gdp. if we think longer-term, we see the potential for greater fiscal action given a lot of countries are looking better. we are positive on the euro longer-term. tom: i think this is an incredibly important question francine brought up, the partial differentiation between any pair in the euro right now. you look at germany's surplus
today, what level of euro do we need to break the trend of german trade surplus? >> that is a hard question, one that is certainly about my ability to model. when our fx strategy team looks at it, they think there are reasonable arguments to say that fair value for the euro is closer to 1.35 against the dollar. tom: wow. >> that is something they think would be a reasonable fair value on a current account faces and purchasing parity basis. tom: francine, that is an extraordinary number, how far we have to go to get to fair value. francine: we will talk more about their value later. andrew, thank you. albng up, over to gallo -- erto gallo at 6:00 a.m. in new
francine: bloomberg at westminster. tom and francine from london today. expecting the president of the united states to show in europe any moment. he goes to nato, then london, then helsinki. let's focus on turkey. president erdogan has tightened his control over turkey's economy by giving himself exclusive power to name central-bank appointments.
this comes after erdogan made sweeping changes, including naming his son-in-law as the new economy chief. for the latest, bloomberg's government reporter joins us. great to have you on surveillance. we spoke to him at the imf in d.c. a couple of months ago. the markets.y he was a safe pair of fans. what do we know about the new man -- of hands. what do we know about the new man? >> he has been replaced in the cabinet by a former energy minister and happens to be president erdogan's son-in-law. that was clearly a source of some disappointment for a tankeds since the lir
more than 3% on the news when he was named as -- new economies are and and finance minister. confidence ineat simsek. that is gone. do we have a tip point on dollar-lira? >> it is hard to pinpoint a tip point. are facing huge pressures every time the lira comes under attack. that was the case when the lira
lost more than a quarter of its value in a matter of months this year. that is why the central bank was forced to act to hike interest rates and keep the floor under lira. renewedency came under pressure last night. it is too early to say whether the pressure will continue. it is hard to pinpoint a tipping point. tom: thank you so much. we greatly appreciate your coverage this morning. with us this morning is andrew sheets from morgan stanley. he knows how to spell the word idiosyncratic. that is what i am hearing in so many conversations, turkey unique to turkey, argentina unique to argentina. are we anywhere near these individual stories coalescing into some form of em crisis or upset? >> i think crisis is too strong a word.
emerging markets broadly have had a very weak run of things. equities or foreign-exchange relative to those developed markets is the weakest it has been in recent history. those things have added up. for all they are related to hear and now events, it is facing the usual pattern where emerging markets tend to struggle late in the cycle. that is still going to be something in the background as a drumbeat for emerging markets. the policy is going to continue to tighten. that creates some challenges for those markets. there are other areas with think that risk premium has risen enough. we have become positive on mexican local rates. there are pockets where value has opened up.
generally speaking, these challenges are going to stay with us the rest of the year. tom: it is interesting to see the em currencies buttressed up against new weakness. 4.71e turkish lira at this morning. i will be doing surveillance from westminster abbey on television and radio through the morning. to get your morning briefing in the u.s., bob menendez moscow, coast-to-coast, sirius xm, radio london. yourberg daybreak, get breathing there. from westminster abbey, this is bloomberg. ♪ s bloomberg. ♪
according to customer growth partners, school shopping will rise more than 5%. that will be doing part to higher disposable income and a stronger labor market. that will indicate a strong christmas season for retailers. that is your bloomberg business flash. francine: thank you so much. captions, is danielle a conservative mp, one of the brexit hardliners we are having on "bloomberg surveillance." you are part of a research group, which i believe -- what was discussed yesterday? did you meet? >> we did. it was larger than normal with 80 mp's attending. many are concerned. they think we are caving in
too much already. francine: where's michael gross? >> that's the key issue. i voted for him to be leader of the aprty -- party. as long as he stays in the cabinent, i think the prime minister has a chance of getting this through. tom: how outside of london the hard brexit debate playing this summer? >> that is a good question. farpresent a constituency away from london that is very rural.
tom: it is like wisconsin? oryes, either like wisconsin michigan. london arein creating a brexit in all but name. francine: leave the white paper out, you are against it i am but service is 80% of this economy. doesn't this leave the u.k. in ruins? horriblee had the reports. this is the beginningof the staunch brexit process. wait and see what the
eu comes back with. y constituents want to be a sovereign nation state again. there are many things you would not accept in your country. tom: we need to go. we need to continue this another time. thank you to andrew sheets of morgan stanley. westminsterfrom abbey. this is bloomberg. ♪ this is bloomberg. ♪
cabinet in london. prime minister theresa may fights for her lyrical life. it is either the second coming of justice thomas or the second coming of chief justice roberts. europe.ump in which president trump will show up in brussels, windsor castle, and helsinki? good morning. i am tom keene with francine lacqua. this is "bloomberg surveillance." .ehind us the house of looks the whole thing is a construction site. it is amazing. francine: it is like five years of construction. it just makes it easier for people to go for coffee or figure out their next move against theresa may. i have heard in interviews today is that this is an ongoing story.
question and big the rumors making the rounds is are we going to have more resignations from the cabinet? there are still a few more pro-brexit cabinet members left. that is in the rumor mill. we don't have any information on that yet. tom: we will continue from london. in new york city, here is taylor riggs. taylor: divers in thailand have resumed the rescue mission at the flooded cave. cnn reports that have already brought out two boys that are trapped, meaning just two boys and their coach remain. british prime minister theresa may appears likely to survive any attempt to oust her of her brexit policy. she is counting on the opposition labor party to get her plans through parliament. two of her senior ministers quit over her proposal that would
keep the u.k. close to the eu on trade and regulation. president trump may be creating the most conservative supreme court in a generation. he has named brett kavanaugh to open by thet left retirement of justice anthony kennedy. brett kavanaugh worked for president george w. bush and has skeptic of government power. minister saysgy it is important to bring the from excessive energy supply. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine, tom. tom: thanks so much. a quick data check.
we are really focused on turkish lira. we had that interview moments ago. weaker lire today. future is up fractionally. the next screen please. resilient equity markets. , 12.47.with a 12 handle turkish lira with 4.72, weaker off of the erdogan restructuring. francine: looking at european stocks, they are struggling for a little direction today. investors contemplate the beginning of earnings season. we could see more trade tensions. looking at energy companies that are counterbalanced by a drop in telecom firms. this is the power of the bloomberg terminal.
we are in westminster, and i can check the market minute by minute on my mobile phone. tom: you can. it works with keeping up with the markets. alex morales has never used the bloomberg mobile app. he does politics for our london team. you don't even check sterling, do you? >> you can look at your emails in the mobile app. i use it for that. tom: what are you focusing on today in the maelstrom of all the news? what matters right now? >> what matters right now is what happens in the tory party. these grassroots mp's, whether they are willing to go further and try to unseat the prime minister. there were rumblings yesterday that these two resignations would lead to a stream of letters and a confidence vote. those letters have not materialized in sufficient
quantity. we saw earlier in the parliamentary style, the winter of discontent, the collapse of the callahan government, is this to what happened with margaret thatcher? >> there are rumblings within theresa may's party that are unhappy, but i don't think we are at that stage yet. francine: are we going to see more resignations? >> that is the big question. yesterday, some of the brexiteers were saying there will be more resignations coming, and they will keep going until theresa may changes tack on brexit. most of the brexiteers in her have come out to support the policy. francine: what is the chance of the prime minister surviving a confidence vote? if she does survive it, she is untouchable for 12 months. >> yes.
the first stage is it requires 48 letters from act bench and tose to trigger -- mp's trigger a confidence vote. at that point, you need more than half of the mp's to vote against theresa may. i don't think you have that number. people recognize you. you talk to them. how much of a talking about negotiations with the eu? havee last 72 hours, we spoken so much about the tory party and infighting and resignation. how is the eu going to take this? >> there is a clear idea amongst mp's that time is ticking down on brexit. we have nine months to go. we have not even begun to negotiate the substance of our relationship of the bloc.
bey had warned returns will lower than expected this year. increased expenses would push earnings per share below the bottom and expectations. it did not take long for investors to change their mind on xiaomi. shares rose by double digits. rm is seekingled fi investment after being controlled by the government. been acquiring assets around the world. the chinese government acquired the firm in february. that is your bloomberg business flash. tom: thank you.
it is always good to speak to alberto gallo. we usually speak about fixed income across europe and southern europe. now we look at maybe the banana republic or fractured political economy of the united kingdom. what was the tweet yesterday? francine: that made my day. alberto at 5:00 p.m. tweeted saying the u.k. is looking like a periphery country, winning at football, good weather, and their government may be toppled. tom: within this discussion, is the credit rating at risk in years to come given a brexit england? >> we think there is a serious risk that the u.k. will have to print its way out of trouble. in doing that, they will issue more debt. right now, unemployment is very low, and the issue is very
divided. tomorrow, you will either have a hard brexit or a corbyn government winning. it is becoming more binary. francine: we have to resignations, could have more, could have a vote of confidence. >> short-term, the market is too comfortable. pound mispriced. the bank of england is changing its stand on hikes. the market thinks they will hike once this year. we think that is wrong. we don't think the bank of england can hike rates. francine: what do you see the pound doing? >> we think it should be much lower, much closer to 1.2 versus the dollar. we think the bank of england may be on hold like the ecb has done rather than continuing to hike
one or two times in the next two years. tom: you have currency depreciation and wealth reduction, how does that fold into the spirit of business and kingdom?in the united >> the real issue with the u.k. is the consumer. consumers have re-leveraged. the never delivered like u.s. consumer with the ability to restructure mortgages. debt an onsumer unsecured. chiccup,ve a hit up -- you could have losses to banks. tom: in the time we have with you today, we usually talk about europe, and with the nato
meetings, we can do that, but i am fascinated how england looks at germany. >> now being potentially the best case something like switzerland. if you look at the agreement, which was deemed as a moment of y, thatn the tory part is still considered cherry picking by germany. they want free movement of goods but not free movement of people. that is unacceptable to germany. francine: are we going to see euro under pressure in the coming weeks as president trump shows up to speak to his nato allies?
we understand he will talk trade. >> over the past few days, there has been some relief about trade with the potential news that carmakers may have a truce. we think the u.s. administration has all the incentives to continue their hard stance on trade until the midterm elections. their goal is to create more u.s. jobs. that is now with the german carmakers are doing. we think the trade risk will remain elevated. a lot of european companies are very em-exposed. tom: when you look at the european continent, where can alpha be made? >> on the short side, the pound is too high relative to the dollar. the bank of england is too close to the fed. we think they are closer to the ecb.
they are going to be on hold in our view. they are not going to hike two and a half times in the next two years. credit is starting to become interesting in some emerging markets. you can now get the high single digits for bonds maturing in two or three years. tom: as president trump comes to europe, does the president come to a europe that has a more anglo-american business structure than four years ago or eight years ago? >> europe needs to do more growth on reforms. we know angela merkel has been , the pressure from the csu extreme far right party. there needs to be more progrowth measures. france is calling for it. italy is somewhat calling for. we still need a moment of unity in europe. francine: i want to ask you how
brussels will react to this white paper, but first we have a viewer question. hi,viewer is asking, alberto, the obr out of trouble and independent -- >> that is what we have been worried about. we think that over time there may be more government influence on the central bank and a partial loss of independence. that is the worst-case scenario. francine: who will replace governor mark carney? >> there are a lot of candidates under discussion. i think it will be very hard to currentthe fop's of the tom: members. --seconds, italy or england actually croatia or england. >> i think it is good to be
we are at westminster in london. washington correspondent kevin cirilli joins us after the moment last night of the nomination of a new supreme court justice. what will justice cap not, judge kavanagh do today? kevin: he is heading to capitol hill to meet with key lawmakers, including centrists republican lawmaker susan collins from maine who has said she will not be on board to support any cap candidate who disagrees with roe v. wade. the senate majority is so slim, mitch mcconnell wants to get this through in the 66 days or fewer that it took them to get judge gorsuch -- justice gorsuch through. with centrist democrats and republicans really questioning this, the margin of error is so
small. it appears he has got the opening. i was quite taken by noah feldman of harvard law writing for bloomberg opinion who gave judge kavanagh a rave review as these nominations. >> everyone invited to the white house last night, including senators donnelly, height camp, heitkamp,ned -- and manchin declined their invitation. last night the east room at the white house, the president was joined along with judge kavanagh and his family by virtually every republican in the senate as well as rob rosenstein and rudy giuliani in the front row. treasury secretary steven
mnuchin was there as was peter navarro, clearly a showing of support that they back judge kavanagh, who gave an opening argument, presenting himself as a centrist on the bench. this is a very heightened political environment so close to the midterms. trumpne: is president going to strike a deal with president putin in helsinki next monday? kevin: we don't know if they are going to strike a go. there is intensifying skepticism among republicans about this meeting between president trump and president putin. you are hearing those concerns in terms of what will be brought up. senior administration officials have noted there will be four meeting,cs in this ukraine, syria, weapons disarmament, and election meddling. no doubt that will face a lot of
scrutiny from political observers in washington, d.c., so close to the beltway. i would note that they will meet one-on-one privately before they have their respective teams coming together to meet. cirilli, thank you so much. gallo joined by alberto here in westminster. what is the state of russian debt? we forget how fragile their economies. what is the state of the fiscal debt? >> the economy is in a sluggish environment, has been in a sluggish mode for a long time with rising inflation, declining localnd yields on currency bonds widening this
year. with oil prices at current levels, it is an economy that through, but if you have declining oil, you have serious problems. tom: i would say there is not enough discussion on the russian economy in politics. see it will depreciation as well continue with "bloomberg surveillance" this morning on television and radio. rupert harrison the moment. a special guest jeffrey sachs will join us. we will look at sustainability pressure.ssor sachs this is bloomberg. ♪ his is bloomberg. ♪
benjamin harvey with us. for years, head of all of our turkey operations working out of a stumble. he is best out of a stumble best out of istanbul. what is the nature of the new erdogan government? reporter: this is very much a what you see is what you get cabinet he has appointed. the changes he's made as a whole paint the picture of a leader who wants no restrictions in his ability to formulate economic it.icy and implement there were moderating influences in the cabinet. those are all gone now. leader of every government is a slave to their foreign exchange, in this case the turkish lira.
are we anywhere near where the turkish lira comes a dominating force for mr. erdogan? reporter: not yet, i think. we are still quite a ways away from the levels we seen previously. lira was heading towards five. it is now at 4.7. the reaction in markets last night was very intense. the lira losses were heading towards 4%. the last time we saw a loss attemptt was the coup in 2016, so this was a very negative reaction for markets. francine: what did the changes to the central bank appointments actually mean for turkey, and so what does that mean for lira? reporter: the changes include erdogan removing any sort of advice and consent clauses on his ability to appoint central-bank and deputy governors -- central bank governors and deputy governors.
the prime ministers, deputy prime minister, an entire cabinet had to sign off. there are also removals of institutional restrictions. for instance, qualifications of deputy governors. they don't longer have to be in the service appointed sector for 10 years, so he can appoint anyone he wants. he wants lower interest rates. markets for years have been saying turkey's interest rates are already too low. check -- whatshim do we know about the new guy in charge of finance for mr. erdogan? does he have any experience managing an economy? reporter: on paper, his qualifications are quite good. he studied finance, had an mba, ran one of turkey's biggest holding companies. that said, he's not very well known to international
investors. he simply doesn't talk to them, or hasn't in the past. he talks to his pro-government media groups. what we can expect is he's very much going to influence his father-in-law's vision for the economy. much, our you so bureau chief for istanbul and all of turkey. with our first word news, here's taylor riggs. taylor: in thailand, three more boys have emerged from the flooded cave today according to cnn. that makes 11 of the 12 boys that have been rescued. one more boy and the soccer coach are inside, along with several thai navy seals who have been staying with them. president trump facing a major showdown over the future of the supreme court. the president has nominated appeals court judge brett kavanaugh to replace justice anthony kennedy. it could make it the most conservative court in generations. democrats are promising a fight.
democratic senate leader chuck schumer says he will oppose kavanaugh with everything he has. in china, the producer price index rose higher than expected in june, but analysts expect that to slow down. meanwhile, inflation at the consumer level hits 1.9%. as we were discussing in turkey come up president erdogan is following up on his pre-election pledge to tighten his grip on monetary policy, giving them the power to name the head of the central bank and its deputy governors. in the past, other members of the turkish government joined the president in making the appointment. 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. i'm taylor riggs. this is bloomberg. tom, francine? francine: thanks so much. let's continue with one of our top stories.
here at westminster, rupert harrison of black rock. the inside workings of westminster like no other. what is happening right now? are we expecting more resignations? does the tory party break apart? predictions in the short-term have to be taken with a grain of salt. the guide to what is going to happen is lyndon baines johnson's first rule of politics , which is you have to count. at the moment, theresa may have the numbers. there are probably enough numbers to challenge her, but she has the numbers to win that challenge and stay in place. for the moment that is a stabilizing factor. francine: they say she is
untouchable for 12 months. once you are challenged in a year, you can't be challenge for another year. they don't want to mount a challenge that then fails. i think they are going to bide their time and see another opportunity to change their policy. francine: and the pound is not moving. guest: it is interesting. this is happening at the same time as people see a general move towards a softer brexit, and i think the u.k. political system realizing that no deal is not an option for the u.k. and they are going to have to make some compromises. tom: tell me about the political middle in the united kingdom. -- has almost a centrist towards a middle, a talking point. multiple on are
brexit, but what we seen is the middle in parliament and the conservative party reasserting themselves. you get a lot of noise from the brexiteers. we've heard from david davis, boris johnson, but the core of the conservative party and in parliament, i think they think >> it has to happen, but they want a smooth brexit that is deliverable and doesn't deliver a big economic shock to the u.k.. that is the direction economic policy is headed. tom: is that doable with the europeans? do they want to hand that to the british? guest: that is the key issue. the day we are focused on british domestic politics. the keel shoe is the european side. the u.k. has moved towards what the european side are asking, but there's still very much a hard take on views at the moment.
yelling in the background, does he work for you in government? [laughter] whycine: if you look at boris johnson resigned, do we thatto try and understand he was forced to harden the brexit stance? does he have a chance to be prime minister? guest: he doesn't have the numbers, so i don't see that happening at the moment. the manner of his resignation yesterday didn't do any favors. it looks like he was forced into acting by david davis, thinking more about how his vision was perceived that his precision -- his position was perceived rather than his actual principled objection. let's have some speculation.
does it change the dynamic for theresa man anyway? -- theresa may in any way? tom: explain for our global audience who michael go be is. guest: he's a long-standing believer in brexit. he and theresa may have clashed over the years. y differenter styles -- they have very different styles and views on the world. i think that thinking is what is going to deliver a decent outcome to the u.k. let's get brexit done in a way that is deliverable and probably carry on fighting other details
for another decade. francine: [inaudible] -- delayed in the publication that triggered resignations. parts of theow white paper weren't included. were you disappointed by that? what does it mean for the u.k. economy? it is a clear problem for the services sector, but i don't think it is surprising. sector, these just ined supply chains time delivery, products crossing borders several times for the final product, those will not survive unless you are in the customs union and single market. it is sadly a victim at the moment of the politics. the services sector, most of the services sector, is less
vulnerable to that change. francine: isn't that cherry picking? if it is, will brussels ever agree to it? guest: in the end, will the allow a relationship little bit of free movement? if we don't get that for stability, we are really heading for a crisis moment. if you force the u.k. to choose between u.k. and canada -- between norway and canada, you get a last-minute crisis. tom thought he was coming to europe to follow donald trump. tom: i was so intimidated in with rupert harrison that i corn a bot -- wrote about laws and peel. maybe we can talk about investment at some point.
♪ foror: microsoft is going the low end of the personal computing market, coming out with a cheaper service pro tablet to compete with the ipad. it goes for $399, half the price of the current service pro tablet -- current surface pro tablet. according to customer growth partners, school shopping will rise more than 5% due in part to
higher disposable income and a strong labor market. that may indicate retailers will also have a strong christmas season. excitement about england's performance in the world cup has boosted consumer spending on televisionsues, and , up 5.1% in the past year. much.ne: thank you so we are back here at westminster. our main focus will be on brexit , but donald trump, the president of the united states of america, also arriving in europe a little later today. first meeting with nato allies in brussels, they come into the u.k., meeting the queen and the prime minister, and then on to helsinki to meet with president putin of russia. not only a man looking
at sustainability, but one of the foremost experts when it comes to russian-u.s. relations. he is jeffrey sachs of columbia university. first of all, you're doing a lot of work on sustainability. is there a danger that all of this work gets lost because of trade tensions and geopolitics? a huge danger because sustainability requires looking at the longer-term fairness,e climate, pollution. we are not even looking at the . we areerm these days looking at the trade war the battle within our alliance, all the noise. we are hardly paying attention to the long-term future. the united states just ranks very low on looking ahead.
francine: where does the -- where is the incentive when we look at sustainability? it has to start with a common decision that we are going to save the it has tostopt other species and the climate change, with his -- which is very serious and advanced, but we do not pay attention to in the united states. we need energy transition. we need to move to renewable energy. but we are doing the opposite, in washington at least. in the states it is a little different in some parts of our country. but in our policies, we are trying to pump up as much fossil fuel use and business as possible, exactly going in the wrong direction, and very dangerous for the future.
maybe not for the next month or six months, but the next 10 years, 20 years, 40 years. absolutely reckless. i want to get rupert harrison in just a minute, but you are one of the experts on the u.s. and russia. president trump will meet with president putin in helsinki. what does that mean for nato allies? guest: we don't really know what it means, and we won't know precisely what it means until we have robert mueller's report taylor: the truth -- report. the truth is there is a mystery that continues to be very russia about meddling in u.s. politics. we would be naive to make any .lear judgments right now
we are still waiting to know. francine: rupert harrison of black wok -- of blackrock with me. when you look at trump in defend orll he antagonizes allies? how will the market the reacting? guest: people expect him to put pressure on defense and trade. european policymakers are not focusing on long-term arguments about sustainability. they are trying to put out the fires the donald trump has lit, ,hich is his commitment to nato trying to avoid a significant shift in u.s. policy towards and defending u.s.-eu
trade. that's a key issues where people will be trying to persuade donald trump that we agree about points you make about china, why are you fighting this trade war at the same time? francine: willie go after germany? if -- will he go after germany? guest: i'm not going to try to predict donald trump. we expect him to make comments about defense spending and protectionism, and for example, auto tariffs. there is a potential to increase defense spending. i don't think it will increase in a way that will satisfy donald trump. i think germany is certainly the country that feels most under
pressure by many of the things and is trying to lead the response. whether they can be solutions in the short-term is much more uncertain. --ncine: professor sachs [inaudible] what does that mean for president trump's policy? guest: again, we don't really know what is going out of this man's head because he's making conflict and crises that didn't exist before. but right now the trade rhetoric and the first steps in raising tariffs are both bizarre and dangerous. right now it looks like a skirmish, a game. but it is not a game at all. the president is using authority recklessly.
all of his steps are under the claim of national security. it is incredible that this is not scrutinized more, that one person basically can make decisions like this on a vacuous claim of national security to break up the trading system and create crises. the problem is we are putting out fires that an arsonist has set, basically, while not anding at the real problems investments we need to make for the future. it is rather bizarre, but that's what he has us talking about everyday. our sense of -- our system is not working because it is letting one person do this right of any rule of law. francine: he's still the president of the united states, and a lot of people may give him the benefit of the doubt. maybe you will get a better deal. he has is based fired up on what he's going to do.
guest: i don't get any benefit of the doubt on this. i think it is just bizarre from night. till it is a fantasy world. we are not doing anything other than undermining trust, undermining rule of night. law, undermining longer-term thinking . everyone is scurrying moment to moment to guess what will be for an extraordinarily odd president. this is not a case of benefit of the doubt. this is a case of every day, some kind of damage control. francine: rupert harrison, cares about the markets. when will they take notice of some of the policies president trump is putting in place? >> when we look at markets
across the world, it is very difficult to see any premium priced in already. we talk about it a lot. it is a key issue. but if we look at recent moves in emerging markets, we see fundamentals of the u.s. economy remains strong. there's going to be a limited response. get escalation, we will see the market response when that comes through in court. until then, i think it is mainly noise. francine: this is one of the points a lot of investors are saying. if you were to start a trade war, this is almost the only time the u.s. had because of strong fundamentals in the u.s. economy. >> i think the word fundamental needs to be used carefully.
i think it is absolutely right that the markets are looking at the short term. i don't think they are looking at the fundamentals in terms of the five-year, 10 year, 15 year forward direction of our economy are you have massive deficits rapidly rising, public debt. taking care of climate change. the question of fundamentals is a real issue. tunedt think markets are to fundamentals looking forward. they are tended to the business cycle. .he business cycle is strong i think rather than trade, the question starting to be asked is how we seen -- is have we seen the best of this current cycle in the u.s. maybe the fed has raise rates to
high. that spread of macro uncertainty going into 2019 is probably the major focus. francine: thank you both for joining us today, rupert harrison joining us at westminster, and jeffrey sachs for thebia university united states secretary-general. joining "bloomberg surveillance" on radio. this is bloomberg. retail.
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nominates brett kavanaugh to the supreme court, a washington insider. theresa may's brexit plan triggers the resignation of multiple officers. erdogan namesdent his son-in-law as a commerce minister. happy tuesday, everybody. welcome to "bloomberg daybreak." i'm alix steel in new york. david westin is in washington. what was the big surprise to you last night? david: i think the attorney general for ronald reagan being there. brett kavanaugh was not a big surprise. he clicked for justice kennedy -- he clerked for justice kennedy. it was quite a drama that the