tv Bloomberg Surveillance Bloomberg October 2, 2018 4:00am-7:00am EDT
francine: italian assets suffer a blow. we speak about it shortly. oil pushes higher. brent cracks $84 a barrel. about aed to concern global supply crunch. will boris johnson make a bid to be prime minister? we are live at the tory party conference. welcome to "bloomberg surveillance." i'm francine lacqua in london. these are your markets. the stoxx 600 down 0.3%.
a lot of pressure coming from italy that is having an impact on euro. this is on the back of a fresh downturn. to an italian lawmaker also coming up on the program, and he was insinuating that there was some concern with the euro and that was really freaking out the markets. coming up on "bloomberg surveillance," definitely a busy show this morning. shortly, we are at the conservative party conference, where we will talk brexit, with foreign secretary jeremy hunt. we are at the paris motor show, where we are joined by the president of the renault -mitsubishi alliance. let's get straight to the bloomberg first word news with taylor riggs. taylor: u.s. supreme court nominee brett kavanaugh is facing new questions about
drunken behavior after claims from a former fellow yale student. he told bloomberg about a 1985 bar fight involving kavanaugh, who he says was frequently belligerent and aggressive after drinking. he also said kavanaugh like to lawmakers about his alcohol use. the white house had no immediate comment when asked about the account. u.s. president donald trump be preparing for a potentially protracted economic fight with china as his administration cleared the decks for disputes -- of disputes with america's other trading competitors. in the last few weeks, he sent a trade great with south korea and convinced japan to begin bilateral economic negotiations, and signed agreements with canada and mexico. steve mnuchin said the white house is in no rush to settle the trade fight. speaking in an exclusive interview with bloomberg, the
international monetary fund warned that trade wars are darkening the outlook. >> six months ago, i pointed to clouds of risk on the horizon. well, it is not pouring, but there is a bit of a drizzle. because today, some of the risks have begun to materialize. and indeed, there are signs that growth has plateaued. taylor: the italian finance minister's effort to promote his government's new fiscal strategy ended in failure yesterday. the head of the european commission warned of a greek-style crisis. he is attempting to reconcile extensive campaign promises with euro-area rules that require member states to adhere to certain deficit targets. the death toll from that indonesian earthquake and tsun ami has risen to 1200. the first -- there are warnings
that the figure could be in the thousands. global news 24 hours per day and that tictoc on twitter. i'm taylor riggs, this is bloomberg. francine? francine: thank you so much, taylor. theresa may is preparing to make a significant new brexit offer to the european union in an attempt to all open the door -- to open the door to a deal. divorce talks are stuck on the question of how to avoid the need for police and customs checks on the border between the u.k. and ireland, but the british side now sees it has to reaching an agreement. brexit secretary said the comments were speculation. partyck to the tory conference. anna edwards is there. anna: i'm very pleased to say i'm joined by arlene foster at the conservative party conference.
let's get straight to the main order of business. is your party willing to accept ,ny checks across the north sea even if they are across a regulatory nature? >> no, it has been very clear all along that that has been our one red line that we cannot have either a customs border on the irish sea or regulatory border because that would make a separate from the rest of the united kingdom and that does not work from a constitutional perspective and from an economic perspective either. anna: what about a political declaration, but there is no way they can add some language that would make you happy with any kind of extra checks? >> no, because of course that would impede the constitutional integrity of the united kingdom and the prime minister has been very clear. she is a unionist and believes in the union of the four countries of the united kingdom and therefore there can be no borders, whether of a regulatory nature, or a customs union nature. anna: how closely is the government talking to you are working with you on this or to
these news headlines take the dup by surprise? the think dominic raab said story yesterday was speculation. we do recognize we are reaching crunch time in negotiations to her leaving of the european union, so it is important we continue to have those conversations, and that we understand what the proposals are in relation to the irish border. anna: given that theresa may is a unionist and said she believes in keeping the integrity of the union, what you think she would -- why do you think she would want to reach out with this proposal? >> we don't feel she is doing that yet and we think we should wait to see what the text says. i think the way in which the european union has dealt with this has been a misrepresentation of the belfast agreement. they don't understand that northern ireland is an integral of the european union.
that is not the way forward. the way forward is to have a pragmatic negotiation, when that works for the european union, and one that must work for the united kingdom. anna: if prime minister may wants to push forward with something that looks similar to the recording yesterday, would you vote against that deal and risk bringing down the government? >> we are not at that stage yet. let us wait and see what is being proposed. she is very clear about where we are in this. we have always said we have the one red line, we cannot be separated from the rest of the united kingdom, from a constitutional position and an economic position. anna: does something that looks like a candida-style trade deal sound more preferable -- canada style trade deal sound more preferable? would you favor that versus something that looked like what we were reporting? >> i think the difficulty with all of these proposals, people talk about canada, super canada, norway, for me, it is simple, we
have to see the text to see what it means in reality for northern ireland, the united kingdom, and the european union going forward. it is a very boring thing to say, but we have to see the text to see whether it reaches the red line or not. you cannot see whether it reaches the red line in a hypothetical. anna: if there were a choice, i assume that you would choose the border versus checks? >> at the moment, we have a different currency regime anna:. infrastructure on the border? beu.k. government will not putting any physical infrastructure at the border. we support that because we want to continue to have a good relationship with our nearest neighbors and continue to have people flow in the way that they go. anna: if you don't support the government, there could be no deal. with that the situation that you would support? >> we all want to see something that works for the united kingdom, but also something that works for the european union, as well.
anna: do you worry that no deal or a hard brexit solution could fuel efforts to drive a united ireland? is there going to be a vote on a united i'll -- isle? >> no, i don't see that. people recognize that being in a part of the united kingdom, imminently unionists in the traditional sense, but they recognize it is the best place to be. a national health service is very cherished in northern ireland. all of this talk from some people on the remain side about the irish border is quite, it is not just unhelpful, it is disrespectful to those of us to live in northern ireland, who to remain part of the united kingdom. i have to say the prime minister has been very on message in relation to this and we want to continue to support her in doing that. anna: you talked about the good friday agreement not being sacrosanct. what did you mean by that? it created a lot of buzz on twitter. >> [laughter] i don't know why that is the case. the belfast agreement has been
changed on a number of occasions. in number ofhanged times, so for people to talk about the belfast agreement as if it is infallible, that is not the right thing to do. it was an agreement of its time 20 years ago, of course things change, and lead to reflect that, and that's all i was saying when i said it was not sacrosanct. anna: arlene foster, thank you for joining us, the leader of the dup, of course. francine: thank you so much. and joined by arlene foster for a great interview. it gives us great insight into what is going on. there is a little bit of risk contagion from the italian budget and this is filtering through to euro. taking a beating right from the start. i'm looking at some of the moves relative to the meltdown in may. watch out for the 3.4% level in the 10-year and the 3.2% level in the 5-year.
jean-claude yunker, took a stronger line come a warning of a greek-style crisis. morgan stanley warned about the knock on effects to italian banks. says the euro is not sufficient to solve the country's problems and we will be speaking to him in about 15 minutes from now. how should investors be positioned around italian assets? joining us for the hour is the founder and chief investment officer at abt investment. are we doing too much, are the markets overly concerned about italy or are they doing it for the right reasons? >> think they are doing it for the right reasons. they are underlying structural issues that need to be worried about. we have the situation with greece that is very much with us. francine: but italy is not greece at the moment. >> by any means. at the significance of italy
a size is that a different magnitude and the institution surrounding it have many more advancements. francine: why our markets nervous now? there is the budget. the populist leaders still have to deliver something on what they campaigned and were elected for. is that fair? >> think it is fair. there was a little bit of complacency from markets. there were concerns around trade, china, trump, brexit. i think the market can -- missed a little bit of the risk. i don't think this will be a significant driver. we will get back to this --francine: we will get back to this girl let's talk autos -- we will get back to this. let's talk autos. the chief financial officer o said the spat between washington and beijing will cost 300 million euros in the second half
of the year. bmw has had to raise prices on cars it ships from south carolina to china or let's head to the paris auto show for more. over to you. i'm very happy to be joined by the chairman of the alliance between renault, nissan, and mitsubishi. >> good morning. >> first, we had this new trade deal between the u.s., canada, and mexico. was that a relief? >> yes, without any doubt. >> why was that a relief? does that mean it is going to help for your production in north america? i want to remind our audience is notuno -- renault present in the -- in north america, but nissan is. >> and mitsubishi.
the worst situation is uncertainty. , wehe automotive industry like to have visibility. in a certain way, it is more important to have visibility with a rule that we don't like then no visibility at all. in this case, there have been a lot of risks around the future of nafta. the fact that the three countries have agreed on something is very important for us. get into theing to merits of who wins and who loses and is it more difficult today than before? that is really irrelevant. we have an agreement that is going to give visibility to the relationship for many years to come and this is a big deal. big factoriestwo in the u.s. making about 60% of the 1.5 million cars sold there. do you think you may increase your production in the u.s. following this deal? carlos: without any doubt.
market, isca, as a alive again through this agreement. we are very happy. we have large capacities in the united states. we have large capacity in mexico serving the three countries and exporting outside north america. this evolution of the market will encourage us now that we know exactly what the rules are to invest. now, knowing the rules, we know how we are going to optimize plans and invest more capacity in the united states and mexico. investmentt mean new increases there? carlos: i don't know if it will be an increase in investment, but there was a period of time not knowing the agreements that we had a hold on some investments waiting for the rules. now that the rules have been decided by the three countries, investments are going to resume again because we know exactly
what is going to be the rules. >> however, the trade war with china remains. how are you impacted by the trade war with china and all the retaliation we are seeing in china for imports of u.s. cars? carlos: very little. obviously, we don't like trade friction in general. we think it is not good for business, it is not good for the global trade, it is not good for global companies, in general. but in this case of trade frictions between the united states and china, we as an alliance, we have very little impact from it. it does not mean that we don't care, we care about free trade, we care about open borders. we care about minimized friction between the countries. that is just our situation. >> does that mean you can
increase local production in china? carlos: we have always done that. in china, we are 95% local. like most of the other carmakers. the people who are going to be affected are the people exporting cars from the united states to china or china to the united states. or obviously when it comes to raw materials. , aluminum,ron ore etc. but the alliance does not have a big impact. >> we are sitting in front of the car -- you announced an all electric suv for the chinese market as well. do you think the difficulties encountered by tesla are giving you more pace? carlos: we are not competing against tesla. tesla's maine offers on the premium market. most of our offer is on the middle market in terms of electric cars. now, with the entry-level market. we are really not very competitive.
in a certain way, we are allied into the promotion of the massmarketed affordable electric cars. i don't consider tesla as a competitor. competes with mercedes, audi, bmw, jaguar. not so much nissan or renault. musk made aink elon mistake by these tweets? carlos: i'm not going to make an evaluation of somebody in the industry running his own company. -- carmakers are already under a lot of constraint. we try to make the best out of all the constraints for the benefit of our stakeholders. >> what do you think about the fact that the model 3 electric tesla quietly became number one in the u.s. over the summer? carlos: unfortunately, the u.s. is not the largest market for electric cars.
today, most of the competition is taking place in china, in europe, and japan. there is a kind of lack of interest for electric cars in the u.s. not soecause there is much support for the development of electric cars. we don't see the support for electric cars that we are seeing from the chinese government or the european governments or the japanese government. but i'm sure it will come back. i'm sure it will come back. everybody is getting ready for the next phases. we are very bullish on electric cars worldwide. we made the forecast that for the 14 million cars that should be selling, we are forecast to sell by the end of 2022, 10% of these will be pure electric. we are doing about 1.4 million cars between nissan, missed to be she and renault to electric worldwide -- mitsubishi, and r enualt worldwide. >> we are seeing the return of
sanctions on iran. carlos: i still believe that the iranian market is a very interesting market and potentially will grow one day. , but weot exiting iran are protecting ourselves from the u.s. sanctions by saying we will do everything necessary to avoid u.s. sanctions. we are directly in contact with the state department and treasury department in the united states to make sure that anything we do in iran is totally compatible with sanctions. so far, so good. obviously, we have to reduce our activities in iran. --do you think carlos: i don't think it works in our case area -- case. the sanctions are very strict. we will abide by them because we don't want to be touched by the sanctions.
this being said, we still consider that in the future iran is still a very promising market. the day they find an agreement around iran, this is a market -- [indiscernible] >> finally, the french government owns about 15% of renault. exit a condition for the japanese for a merger with nissan? carlos: first, nobody is talking about a merger. we are talking about creating a group that would reassure the stakeholders about the viability of the alliance long-term and the stability of the alliance. there are many forms we can take. i don't think anybody is putting conditions here. everybody has one preoccupation and two certainties. the alliance is good and working well and everybody wanted to continue and to prosper. second, something needs to be done in order to reassure stakeholders about the sustainability.
that is very clear. now, it is up to top management of the alliance to find the way which is going to answer the preoccupation of all the stakeholders. this is my challenge and i'm ready for it. >> the chairman of the alliance between renault, nissan, and mitsubishi. very interesting conversation. i hope you enjoyed it. francine: great interview. carlos never fails to deliver, especially when it comes to trade. it was great to get his thoughts on tesla, even though he was quite shy. don't miss this month's "leaders with laqua." fish that interview on thursday. let's get back to thanos. trade, when you look at are carmakers the one that could be hurt the most or does the nafta 2.0 deal allay a bit of
tension? thanos: it does a little bit. is not trade war, but trade friction. i believe that in is -- it is an president trump's interest not to create a trade war. going to your answer, i think it is very critical for the eu and germany. francine: thank you very much, thanos. coming up next, what is next for italy? it has jolted the markets further. this is bloomberg. ♪
let's check out what is trending across the bloomberg universe. the streaming giant developing a choose your own adventure version of "black mirror." it could bring interactivity from the realm of reality tv to narrative drama. a former classmate of brett kavanaugh says a visit to a bar during his college years reu -- erupted into a fight. stories on the bloomberg terminal. four-years near a high. trump clears the deck for a china trade war. you can find out more on your bloomberg terminal. we are getting breaking news out of the u.k. this is some housing data. it is a touch below what we were
expecting. if you look at pound and pound reaction, i think a lot of that is actually more on the back of what we are seeing at the conservative party. i'm looking forward to hearing from boris johnson a little bit later on this afternoon. let's get straight to the bloomberg first word news with taylor riggs. looks toresident trump be preparing for a potentially protracted economic war with china. they have cleared the deck with america's other traded competitors. he struck a last-minute do with canada and mexico, signed a trade agreement with south korea, and convinced japan to begin bilateral economic negotiations. newtony secretary seema -- steve mnuchin said the white house is in no hurry to end the trade fight. the international monetary fund cut its forecast for global growth. managing director christine lagarde warned that trade wars
and tighter credit are darkening the outlook. ago, i pointed to clouds on the risk -- on the horizon. it is not pouring, but there is a bit of a drizzle, because today some of the risks have begun to materialize. and indeed, there are signs that growth has plateaued. taylor: u.s. supreme court nominee brett kavanaugh is facing new questions about questionshavior after raised by a former gail classmate,-- yale who says he was frequently belligerent after drinking and said he lied under oath about his alcohol use. the death toll from that indonesian earthquake and tsunami has risen to more than 1200.
the final figure could be in the thousands. there are fears some survivors may still be trapped in mudslides and collapsed buildings. global news 24 hours per day on air and on tictoc on twitter. this isor riggs, bloomberg. francine? francine: taylor, thank you so much. italy's attempt to sell a new budget to the eurozone ended in failure. finance minister, giovanni tria, theed for an acceptance in deficit, but found little backing from his peers. the head of the lower house budget committee says the euro is not sufficient to solve italy's problems. let's get more from the lawmaker. joining us now is claudio bo rgi.
thank you so much for giving us a little bit of your time. talk to us about market reaction. are you concerned about market reaction today and future market reaction to spending plans? claudio: well, it is quite funny because our spending plan does reflect compared to the standard budget in the past years. italy is in the last line of gdp growth in the whole world, so it means there is a lot of potential for the italian economy, if only it is possible to push a little bit, the growth, with a little bit of incentive from the government. if the european commission thinks that the italian economy would be better off keeping the deficit at 0.8%, raising the
taxes, because that was the plan, well, i don't think so. i simply think that if there is a struggling economy and you keep on raising taxes, the outcome is going to be more recession. we have already seen this movie. is awe are trying to do very standard fiscal expansion maneuver. that thisvery strange is considered such a revolutionary move. francine: i think the markets are a little worried about what you said about the euro. are the fiscal targets and attempts to get italy out of the euro or out of the european union? claudio: this is very strange. you know very well i have been a very vocal supporter of the fact that italy is going to be better in the union, but there is no plan for leaving the euro within this government.
sometimes, you know, you look at it and pieces -- bits and pieces to make a statement that can rock the market, but the very fact that the market is so volatile, that it is enough to take my word of something that i said thousands of times and it does not imply at all that we are planning to leave the euro to understand the actual situation that is very fragile. it is possible probably to address in a very sensible way because we are considering in eurozone that the debt after the qe ending, the debt is a problem. the central bank is not guaranteeing the debt of any european country.
this is a problem for me. the solution in my opinion is going to be that the central numberould find a fixed intervene tos and curb if it goes beyond that level. , you can rock the market in a way that is not sensible in a way that should be stable. francine: what can you do to reassure the markets? the budget target of 2.4% this just the start, you will spend more to deliver the promises that you did during the campaign? 2.4% of a budget deficit is not something that is to be considered such a revolutionary move. france is doing 2.8%.
spain is doing 2.8%. values, theyacro are worse off than italy. we have a primary surplus budget. we have a trade surplus. of capital.n need i don't understand what is the anderence from us to france we have been much more cautious than france in the last 10 years if you see the numbers of the deficit. we are still more cautious than france, so i don't see what is the difference between us and them. francine: but, if you were facing a situation where you either had to change the 2.4% target to make it higher or cut your programs to meet the 2.4% target, what would you choose? claudio: well, if we decided
that we are keeping a number, then we are working together to stick to this number. our program and we are going to deliver our program, it is a five-year program. so, we have a lot of time to develop what we plan to do and what we promised to our stakeholders to do. but, of course, we are not mad. we are not nicolas maduro and venezuela or something like this. we know we are in the common currency. it is going to be not useful to exceed in the deficit because, if not, we are going to shift back to a trade deficit and that is not something that we want to do. so, we are going to stick to the numbers. if we have to delay our
electoral program, we are going to do it in a five-your time spent. francine: so, you are telling ghi, and there are a lot of investors watching us, that you won't break your 2.4% target even of growth falls short of expectations. claudio: yes, because we did not say 2.4% because we simply picked the number out of the bag. we thought that this number is enough to start the reform pledge and the electoral that we did with our elector without endangering the numbers. and i can tell you that these numbers, the debt to gdp is going to shrink, that is something that the investors should care about. we have seen what happens when you go too far with this type of
consolidation. 13 quarters of recession and the debt to gdp spiked up. we are going to do something more sensible in terms of the economy. francine: was the finance minister ready to quit and did someone have to persuade him to stay on? claudio: no, i don't think so. ands a very good technician he has personal skills in terms for theoping a strategy public-sector efficiency of spending. i'm sure he is going to stay in place. there has been a little bit of mistake in communication. he is a technician. he never did any type of politics. part thathat was the was not so clear.
some political stakeholders of can create urging beyond what a pure technician can do. francine: how satisfied do you think the government's with the work of the finance minister and could he quit after parliament approves the budget? claudio: it is really too early to say. we just started. that a one can think month is a lot of time, but stepping into a cabinet where there was no one who came in from the previous government, it tobarely enough to start make recognition of where we were. us, me included. early toittle bit too
throw in a document to say whether we are good or not. francine: are you concerned the european commission could reject the budget? are you concerned that the president could send the budget law back to parliament? well, for the second opinion, i don't think so. we are coming from six years where the budget was around this level or higher. , it isng the commission a good question. we have to know if the commission is interested in the growth of italy, or if they are interested in the rule. if they are only interested in the rule, regardless of what is
good for the economy of italy, then probably that rule should be explained a little bit better. i've heard that the limit of the debt was 60%. they are beyond, there is no difference between a country that has 100% like france or spain and another one that has 130%. , but the rule should be that for anyone. a final question on the euro. with the campaign promises take center stage? claudio: as i told you, it is quite different between being convinced that italy is going to
be better off. getting out requires at least a coordinated idea. doing something unilaterally at the moment is unthinkable. if ever there is any kind of , we are going to discuss. the subject of getting out of the euro unilaterally is off the table. , thanke: claudio borghi you so much, the head of the italian head of lower house budget committee. i hope this is one of many interviews he will give to bloomberg. that stock markets. banks, a little but on the lower side. let's bring up the board for you. 1.2%.se moved down from
we were tracing some of the false as we were speaking to mr. borghi. president trump has failed the north american trade deal as a bigwi -- big win. trump says mexico and canada are now wonderful partners. president trump: it is the largest trade deal the united states has ever negotiated and it is also a great deal for our country. it is going to produce jobs and countries are not going to be leaving and firing everybody and making products and sending it back into the united states no tax. [cheers] president trump: it is fair, it is modern, it is balanced. and we have two wonderful partners. now they are partners. mexico and canada. that is a good thing. francine: the international monetary fund is set to cut its forecast for global growth
seeing the trade war is darkening the outlook. says she is node longer so optimistic. sixrde -- madame lagarde: months ago, i pointed to clouds of risk on the horizon. well, it is not pouring, but there is a bit of a drizzle. because today, some of the risks have begun to materialize. and, indeed, there are signs that growth has plateaued. , thanos, still with us thank you for your patience today. we have a lot of newsmakers around the world. when you look at the imf and forecasts of world growth, our trade pressures deflationary or inflationary for the world? thanos: that is critical. inflation is going to be the key concern for me rather than trade in 2019. to think that trade frictions
will continue, we have a way of seeing how this could be operated by the bilateral processes. my concern is on the inflationary side through more official -- fiscal expansionary policies to avert populist measures to deal with discrepancies between those who are better well-off and those liking behind with a lot of the -- lagging behind. francine: is china the biggest risk or is it shadow banking? thanos: i think the chinese have been dealing with shadow banking. they can deal with the trade war. china could potentially win a trade war versus the u.s. because it is a medium to long-term strategy. mr. trump a given amount of time, president xi can take as much time as necessary. and he can channel the economic growth accordingly to the other sectors within the economy. francine: is there a danger that china becomes much more inward looking? because they are dealing with gdp that they need to stimulate,
that does not give the support to the emerging markets around them. thanos: on the contrary, i would say that china is being much more open internationally and they are much more keen to terms andtronger trades. we have seen it with russia and japan. i think key with germany. i think china is coming out, rather than being more inward facing with this. francine: but how do they do with imbalances back him? thanos: i think they are dealing with them. there will be a little bit of a slowdown with growth. just significant. i think there is a 20% probability of inflation in the u.s. i think there is a 0% probability of inflation in the eu. tom: thank you so much --
francine: this is "bloomberg surveillance," from london. let's get straight back to anna edwards at the tory party conference. anna: francine, thank you very much. i'm pleased to say i'm joined by jeremy hunt, the uk's foreign secretary. foreign secretary, and -- very good to have you with us. do you regret comparing the european union to the soviet union? jeremy: good morning. i think if you read the speech properly, you can see that i was not saying the eu was like the soviet union. i'm saying it is set up to counter the soviet union, but they've got to be very careful that they are negotiating from the approach, if they really think that the only outcome that is exceptional from these talks is to punish britain for wanting to leave the club, than that is
not consistent with european ideals and we should remember why we were set up because there were organizations that did take that approach. anna: do you think it would be helpful to make that kind of comparison when getting a brexit deal? because it has angered some politicians in europe. sec. hunt: i think they need to understand that we are very angry, as well. if the eu's view that every time we put constructive proposals on the table all they have to do is to say no, come back with something different, then that is not a negotiation. the point i was making in my speech is that the extraordinary success that we have seen in europe, the peace and prosperity since 1945, has been because there has been a partnership and a friendship between the u.k. and continental europe and we need to make sure that continues. anna: it was not diplomatic language, arguably and some diplomats have made that point, is that something you feel you need to use to convince the audience? sec. hunt: i would say was a very diplomatic argument.
what i was saying is that our future in europe, because burton is not leaving europe, we are leaving the eu, but our future in europe will be more secure, more safe, more prosperous, if britain and the eu are friends, and that is a diplomatic argument, which i think i put forward a great deal of passion and i think it got a lot of response from the whole, and i think that is what britain wants. people want to leave the eu, but they want to stay friends with eu countries. they don't want to throw the baby out with the bathwater. the thing that has been so important to keeping the peace over the past 65 years is that the u.k. has helped defend the borders of the eu, and let's keep the good things about that relationship. anna: we have been reporting that the government is going to with a new proposal on the irish border. is the plan that theresa may is
planning -- planning to take to brussels already dead without either support? sec. hunt: i have not seen the plan. all i can say with total certainty is that theresa may will not agree to a deal which put the border down the irish sea, because no prime minister -- anna: no checks? sec. hunt: she would not agree to the u.k.'s border being down the irish see because that would be to give up sovereignty of parts of the united kingdom. anna: thank you so much. francine? francine: thank you so much. "bloomberg surveillance" continues. we will go back to the tory party conference. tom keene joins me out of new york. ♪
oil near a four-year high. drop in exports from iran and concerns over global supply crunch. tol boris johnson make a bid the prime minister? we are at day two of the tory conference. i am francine lacqua in london. tom keene is in new york. you had an amazing conversation about the global economy. what surprised you? tom: what surprised me was the concern back to europe and italy, your amazing discussion moments ago with the budget director. i think it slipped by with all the other news. italy is tangible now not only to europe, but madame lagarde. francine: it is moving the market significantly. where messing the extremes we
saw in may. italian yields keep getting hit. here is taylor riggs. islor: president trump clearing the deck for what could be a protracted trade fight with china. this week he signed a last-minute trade deal with mexico and canada. at a news conference announcing the revised nafta, president trump said it is too early to talk with china because beijing is not ready yet. the head of the european commission says italy could face a greek style crisis. jean-claude juncker spoke. the italian prime minister is trying to reconcile expensive campaign promises with euro area rules on deficits. indicated the budget may not meet their rules.
investors are grappling with doubts that opec can replace oil exports from iran that has accrued hovering at a four-year high. rallied 14% since august. opec and its allies have shown little enthusiasm for boosting output. international monetary fund is ready to cut its forecast for global growth. managing director christine lagarde warns that trade fights and tighter credit are darkening the outlook. she spoke in washington. >> work together to build a global trade system that is stronger, fairer, and fit for the future. stakes are high because the fracturing of global supply chains could have a devastating effect on advanced economies. it could prevent emerging and low income countries from reaching their full potential. macedoniae leader of is warning to call snap
elections if he fails to change the country's name. only 37% of those eligible turned out in a referendum to change the country's name. he will hold a talk with lawmakers to get the majority needed to make the name change official. 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. tom: thanks so much. let's do a data check. this is mr. erdogan speaking in ankara. dow futures at -1.19. that is at the bottom of the range of a persistent set of days. while elevated. weaker euro -- oil elevated. weaker euro. print, $15 an 85 away.
i put euro in there to confuse everyone. erdogan speaking. i am looking at the bloomberg terminal. mr. erdogan says turkey faces attack on foreign exchange. he says turkey will do what is necessary against orders. francine, pick up the data check. francine: i am seeing caution across the board. there seems to be a downbeat mood. i think there are fears surrounding the populist italian government fiscal plan. that seems to talk the list of reasons to because this. euro is dropping for a fifth day. european futures following declines. advancings.nd bund tom: this superb bloomberg opinion piece today on oil and emerging markets. the white line is u.s. oil in
u.s. dollars with the recent leg up towards $85 a barrel. this is brent crude. the red is the same thing in turkish lira. notice how they are dovetailed. stability, and then it all falls apart. this is what mr. erdogan is talking about. the domestic effect of hoarding petroleum products. you can see this across all emerging markets. it is something i addressed with madame lagarde yesterday as she looked to indonesia, which has its own effect. francine: we will delve deeper on indonesia. this is what i am looking at now. we spoke to one of the closest lawmakers, and he said at the moment there are no plans right now for italy to leave the euro. he says our deficit is not a revolutionary move and blamed france of doing worse.
the markets are still worried about italy. you can see that spread between btp and bunds increasing significantly. theirn bonds dropped to lowest level in more than four years. the european commission president warned that italy is headed for a greek style prices. joining us now is peter chatwell, mizuho international head of rate strategy at edmund shing, bnp paribas global head of equity derivative strategy. he says there is a lot of anxiousness. what are people worried about? >> the problem with that statement is that if there is a plan to leave the euro, they have to keep it secret. it is kind of tautologically is a politicalga
force, one of the objectives in secret would be to push antihero. secrete: if this is a plan, how does it happen? you cannot have a referendum on it. >> no. it would happen in the january election. the current system is interesting. i think the sequence of events that would have to materialize is you would have to have significant conflict, rhetorical conflict between the italian populist government and the eu. they would need to be able to paint the picture of the eu being the back person so antihero sentiment would rise, -- anti-euro sentiment would rise. then they could collapse the government and run with that in the general election. francine: what i don't understand is 2.4% is not 2.8%. what is the difference between 2.4%, freaking out markets, and 2.8%?
we hear there is a lot of potential for the italian economy if only we push growth from a little more incentive from the government. >> i agree with that statement. i was say the market is looking for 2% or less. i would say 1.6%. to remain credible, you have to be in the ballpark of that figure. maybe you could stretch it to 2%. 2.4% tells you that the populist parties are in charge. guy that ist the executing the plan. that is why the markets don't like it. your growth estimates on which this is all based are unrealistic because when is the last time italy had 1.6% growth? good luck with that. it is not going to happen. we could see them getting to 1.3%, that is still quite a way away. on, francine.
this is business as usual for italy. francine: it might be. we have got through how many governments in 63 years. if you are a finance minister, you are at the mercy of the person in charge. at the end of the day, you work for your prime minister or deputy prime minister. why is it now that the market says he is not independent? of course he isn't. he is not in charge. >> i think that is it. the market says we don't like either of them. we don't trust them. was a knownea quantity. he is not in charge. that is what freaks people out. what is it really going to be next year? we don't know. >> sorry to interrupt, but the next stage is if the market is concerned he may be leaving, who
is the candidate to replace them? there have been some scary candidates that were submitted that have explicit anti-euro sentiment with them. that is really problematic for the market. tom: i think this needs team coverage from the spanish steps in rome. francine: i think so. of course. we will fly out tonight. tom: team coverage. francine: peter chatwell and edmund shing stay with us. coming up, or exclusive interview with the bank of santander chairman. -- monaco santander chairman. this is bloomberg. ♪ this is bloomberg. ♪
taylor: this is "bloomberg surveillance." i am taylor riggs. it is the turning point for canada in the global gas industry. ll and its partners have agreed to invest in the project for the fastest route to asia for natural gas. it will be canada's largest infrastructure project. construction will begin immediately. rewardings investors for fighting uplands of a takeover attempt. -- fighting plans of a takeover attempt. rebuffed the takeover approach from ppg industries. cfo nicholas peter says the dispute has not been cheap for the german automaker. can definitely
.uantify the trade impact we are shy of 300 million in negative impact in 2018. this is a half year impact taylor:. -- impact. taylor: that is your bloomberg business flash. tom: thank you. you know the line, young resident, there is no need to feel down. i butchered yesterday with madame lagarde usmca. she corrected me, quoting the team from that legendary song. we went on to talk about the new trade agreement of canada, mexico, and the united states. >> the impact is there already. of the impact of
all the measures that have been floating around that would have on global growth, then you're really talking about a major ,isk that would impact china because it is obviously one of the targets. also all the other countries that are part of the supply supply run materials. you're talking about emerging where a lot of the hardships and difficult decisions and financing are needed. how can we advocate domestic africa if theyin can no longer participate in trade and supply chain organizations because of the threat to trade at large? tom: to bring into this weekend and canada and the united states, the usmca, i had to
write it down because it is such a new phrase. ymca.nk of it is usmca. tom: now i have a song in my head. i am not going to dance it. at usmca and look at the dictate of what president advocated.learly it is an effort that brings in canada and mexico. i don't want to get you in trouble. i'm going to ask him to canada and mexico cave into the rhetoric of president trump? is that something we're going to look at in the coming years as the president looks at multilateral and brings it over to a unilateral approach? >> it is hard for me to make any comment about the agreement because we have not had a chance to review it. it has been in the making for 13
months. it is obvious there must have .een back and forth bargaining that is the whole point about negotiations. two things i am pleased about, one is it exists. to have this trilateral agreement between mexico, the u.s., and canada is a very positive thing. i am encouraged with that. not so long ago, many of us were in fear that there would be nothing. there is an agreement. what i hear is that the services are also partly or entirely -- i don't know, i haven't read it yet -- covered. tpp is showing the way that was doing, expanding beyond the products that cross borders to services that also do, but not physically because many of them are digital. there is a lot of outside to be
to from services -- upside be had from services being included in the reduction of barriers. tom: christine lagarde. she had important comments for the investor of indonesia on the , terrible and tsunami trauma we have seen in indonesia. we will continue from london and new york. stay with us. worldwide, this is bloomberg. later today, jerome powell speaking. michael mckee is there. this is bloomberg. ♪
tom: good morning. york witheene in new francine and london. edmund shing and peter chatwell. you guys are market guys. you have to deal with international trade. whether it is the usmca or the new unilateral or bilateral discussions with china. you atlet me start with mizuho and the idea of markets telling the politicians what to do. ,s that what we are seeing now the markets are telling the politicians, these are the global dynamics, and this is where we are going to price things? peter: that is normally will how things work. -- that is normally how things work. we price things according to the
economic outcomes we see as probable. i don't see any change if there is government intervention with policy. it is only really in the economies, the less open economies where you can expect to see some sort of government intervention. it's all of this pushed aside because we are in more of g voting rate regime -- floatin rate regime? it is. i am seeing a very productive environment and rates. there is a lot more chaos in the markets. that means it is a lot more productive. you have a lot of dynamics that are going in opposite directions. you have the fed doing one thing. you have other major economies effectively on pause. you have to deal with the ramifications of this in the
emerging economies. it is extremely complicated. one where the consensus view can have a strong tendency for being caught out. tom: bring it over to the equity markets. here, it is about relative valuation. have you had to markdown calls because of trade negotiations? edmund: not yet. i would say that i am trying to resist the temptation to go a big buyer of chinese equities. chinese assets have fallen a lot alongside the currency on the back of trade tensions. i don't think it is about trade anyway. this is a strategic battle between the u.s. and china for global dominance over the next decade plus. this is not just about trade. i think the chinese administration knows they miscalculated when they thought this was just about trade so that if they gave an entree, everything would be fine. it is not because that is not
the core of the matter. francine: is there a concern that we are miscalculating gp, that it could be much worse -- gdp, that it could be much worse? i think we could be miscalculating -- peter: i think we could be missed cap waiting gdp in just one year. miscalculating gdp in just one year. there is the danger we could fall off the cliff in the u.s. next year. looking at the global economy, we are probably ok in terms of the impact we have on china. there is a lot of capacity to absorb the negative impact of the tariffs. tom: do you worry about china? about their economic stimulus and how much they have to pile on the economy to make sure it is stable? i think they have the
capability and capacity to offset a lot of the negative connotations on the growth of their economy by giving tax benefits for exporters for example. i think they have the capacity to deal with this. the question is what does it mean they have to put on pause. it means they have to put a lot of their current accounts on pause. francine: thank you. peter chatwell and edmund shing sticking around. coming up, the co-vice chairman of pepsico at 9:00 a.m. in new york, 2:00 in london. this is bloomberg. ♪ ♪
let's take a look at what is trending across the bloomberg universe. the stream giant is developing its own choosing an adventure version of black mirror. report, he was aggressive. he was violent. our most read story on the bloomberg terminal, aig is said to hire great cobol from goldman sachs. concerns.ts stoke aump clears the deck for china trade war by striking a deal with canada and mexico. intify's strategic partner china, tencent music, will file for its u.s. ipo. the plan would give the service new funds to use to purchase
content. joining us is lulu chen. does this make sense? could we have too many music streaming service is already? >> tencent music is one of the lost highly -- most highly anticipated tech ipos in this space today. the company last month was seeking a valuation of $30 billion. the reason for that is they see themselves as a company that is on spar with -- on par with spotify. around $32t cap is billion. tencent music is on par with spotify and maybe even larger. investors are looking whether they can make money from that and from the filings today, maybe we could see more details of from that.
for?ine: what am i looking is the company simple enough, or do they have to simplify the structure further? >> you can think of tencent music as one of those wasriments that tencent conducting earlier last year and this year. they have a very spun off their literature business. music was the second part of the puzzle. you will see more of tencent doing this in the future. we expect them to do this with the movie business as well. , ithis ipo is successful lays a good roadmap for tencent to unleash valuation for shareholders. tom: they are at the heart of what donald trump hates, which is respect for copyright. are they going to respect copyright? >> you are right that tencent music did not have a good
reputation when they started out the business. china's music industry in general in the early 2000's, you could say, was known for their copycatting and illegal distribution of music rights. that has changed over the years, especially since tencent music has been releasing a lot of music rights with sony and helping rihanna and taylor swift introduced their music to china. of music models, subscriptions, selling songs to users in china is helping them get their reputation on track. francine: thank you very much. lulu chen joining us from hong kong. now to brexit, where theresa may is expected to make a significant new offer to the european union in an attempt to open the door to a deal. according to one official, the talks are stuck on how to avoid
the need for police and customs checks on the border with ireland. bloomberg, the democratic unionist party leader says the border is the red line. >> it has been clear all along line,hat is our one red either a customs border of the irish see or a regulatory border. that would make a separate from the european union. that does not work. francine: they're joined by tim ross, who has written two books on the country's revolution and why the tories won, the inside story of the 2013 election. what would be the successful party conference for theresa may now? >> first of all, she has to get through the ordeal of watching her rival boris johnson deliver
his speech, which we expect this afternoon, to a group of adoring pro-brexit, traditional tories who will probably cheer his push for a clean break from the eu much more loudly than they will the prime minister probably the the prime minister will truck -- probably. the prime minister will try to her.nce her party to keep she will try to get through this with her authority intact. francine: are there real leadership bids to unsettle theresa may? who would actually want that job right now? >> right now it is probably the most difficult job you could do in politics in the u.k. because negotiations are stuck for brexit. there are six months left. i don't see a huge queue of people lining up now. the danger for her is that there are enough conservatives who
could force a vote of confidence. that could lead to a leadership election if she loses that though. the likes of johnson, perhaps the brexit secretary dominic ross. these with beautiful people putting earnings forward. be the types of people putting their names forward. francine: what do you see with brexit? >> i feel like the conservative party at the moment is stuck in the same way brexit is stopped. they are not clear how to get through. when you're talking to lawmakers, they are not clear where the party is headed even if there could be an election, who would lead the party in an election. there is a sense that what people need to do is finish this conference and then get back to london and brussels and
breakthrough. the brexit negotiations, get on with finishing that job. they have got to actually talk to their constituents. do they do that in the u.k.? the parliament process seems to be so focused on may and johnson, to these people actually go home and get an earful? >> they certainly do. one of the features of u.k. politics is that these lawmakers will have their meetings every single week with their constituents, people that live in the area that they represent. media, they like to
characterize these politicians as being out of touch, but on the whole, they are in regular contact with the people they represent. you have seen already some delegates talking about how they see this damage being done. concerned that that is actually going to make it even harder for the party to win the next election when it takes on jeremy corbyn's labor party. chatter about a second referendum? >> they have definitely been spoken about. that is one of the big threats you can see theresa may's chief whip using to get his rebellious politicians into line. if you vote against her version of brexit, you might find there is another referendum, and then brexit will not happen at all.
that is the stick that the tory party officials are using to try to beat their members into line and keep theresa may and her plan on track. there is another group that wants to say much closer to the european union. they are actively campaigning for that. it is probably going to continue to develop as we get near to that crunch moment in march when the leaves the european union. cost-effective peter chatwell of bnp paribas. what is priced in the pound and what needs to happen to move it significantly? >> to move it significantly, there has to be a significant shift from the conservative party towards the canada deal. that is probably the only thing that theresa may would still get support from the european research group from, but that would also be the catalyst for
another shift towards the right from the labour party away from supporting a second referendum. that actually makes it an explicit part of their campaign noting that that could be the catalyst for them to get to a general election. if you look at equities, they are in a reared space. -- weird space. ftse goes up because there is this nature reaction of an inverse coalition. -- correlation. global companies that actually for the most part have nothing to do with the global economy. what do they care about brexit? it does not actually affect them at all. dollar goes down, ftse goes up. francine: there we go. thank you both. you both are staying with us.
he will still have to convince congress and the american public that the reworked nafta will bring economic gains for workers who have been hurt by globalization. the senate is likely to vote for brett kavanaugh's nomination for the sprinkler. senator mitch mcconnell says the time for ms the late and obstruction has come to an end. the senate will first need to vote to cut off debate before taking a final confirmation vote. the fbi is conducting a week long investigation into sexual assault a allegations against kavanaugh. in indonesia, many survivors of that tsunami are going desperate for food and fuel. they have received little assistance because roads are impassable. era of zero interest rates ended with the federal reserve
latest rate hikes. the average interest rate according to jpmorgan in developed countries has passed 1% for the first time since 2009. five rate hikes last week was the most since 2001. 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: thank you so much. oil is hovering near the highest level in almost four years as investors grapple with doubts over opec's ability to replace falling exports from iran. sincehas rallied 16% august as supplies continue to rattle global markets. joining us is peter chatwell and edmund shing. we were talking about yesterday on air, and brent is at 85, which is a kind of psychological
move. can it go to 100 quickly? >> they can. what is going to happen is going to depend on venezuela and iran. that is going to be much harder than we originally thought. it is going to come down to geopolitical tensions. if those do not happen, maybe we stave off that 100 barrels -- hundred dollars a barrel price. if that does not happen, i cannot say how bad that is going to look. francine: how will we know? >> we want. that is what is going to keep it interesting. you tell me when venezuela is going to calm down. that is hard to predict. learned is aesson goes up and down like you to rio. today inrb essay bloomberg opinion on the emerging-market affect. this shows turkish lira. this is in indonesia.
rupiah devaluation, and you know, this is the price of brent crude with a nice leg up. isyou price in rupiah, it .gly with a growing gap how long can i go on for? >> this answers to things, stronger dollar, almost everybody forgets that every commodity is priced in dollars. the second-most important thing is what we saw last week in asia that we will get this week in europe, what is going to happen to demand. supply is important, but let's think about what $85 does to the consumer. as a whole, it may not have that much impact, but on an individual consumer, it is
pretty bad. president trump is in the u.s. and wants saudi arabia to fix it. i don't see anything that says saudi arabia can fix it. can they? >> maybe they can persuade the kuwaitis or the emirates to do it, but i question whether the pressure is there. you are below three dollars of gallon in the u.s.. we are at a dollars a gallon in the u k. that down to $15 or something not that, look for the euro consumer is pretty bright. francine: what does that mean for the industry? >> it is bullish for equities. if you are and oil equity guy, you are thrilled. in earnings.g
they are about to get a boost in earnings over the next two months. francine: we have heard from producers that 100 hertz demand, and they are underinvested. is bad news. i would be interested to hear what stewart has to say. at 100, it starts to get painful. a lot of them will see demand destruction. francine: what does it mean for emerging markets? we could see the eu contagion affecting emerging markets. they are not in great shape. >> you need to extrapolate the recent strain and think it has to have a negative connotation on the quality of their credit. you also need to think about the impact this can have on other developed central banks. they could be on further tightening pats.
tom: good morning. francine lacqua in london. i'm tom keene in new york. the book is called the idle investor. edmund shing is with us. not only are they idle, but they are worried, worried, worried. trees are going to grow to the sky. everything is great, but every friday, all the gloom articles come out. how do you go forward day after day in the market given all the gloom out there? >> you have to be an internal optimist, tom. works when you're on the equity side of things. on the equity side of things, the glass is still half full. looking at the u.s., let's not forget that economic growth and
profit growth has been remarkably strong. i think there is still evidence that can persist over the next few months. the real question for the u.s. is what happens at the midterm elections. do we get the republicans hanging on by their fingertips to the house of representatives. do, you can bet that tax reform will be on the way, which will boost profit growth in 2019. that is clearly what is not yet christ. ist is tom: not yet christ -- priced. nine lagarde said a weakening gdp that there would be a markdown. do you have to markdown revenue growth as well? >> potentially, yes. this may be a longer-term story. i think this is not even particularly in 2019 story. from our point of view, we see
growth coming off of a fast level next year in the u.s. absent another tax reform. we have a very widespread of opinion from clients. some of our u.s. based clients remain bullish on the prospects of the economy into next year. they don't see a big slowdown, which is shocking. francine: that is part of the prevalent opinion of their. the woodshop markets -- what would shock markets? >> the threat of regulation would be one thing. i think a real intent vacation of the trade war between the u.s. and china, going beyond just trade. the question is is china usurping the u.s. position. it is clear china is going beyond a domestic, economic growth story and expanding its
economic growth potential and its geopolitical influence into the middle east and eastern europe. that makes the u.s. very nervous. francine: thank you. morgan,p next, nicky we'll ask her a thing or two about brexit. we had a great interview with anna edwards speaking with jeremy hunt. we will continue our coverage of the tory party conference coming up later this afternoon. ask, is forced johnson's speech a leadership bid? will he talk about the deranged as he calls the checkers plan. this is bloomberg. ♪ rs plan. this is bloomberg. ♪
emerging markets, marc chandler. italy won't go away. euro weakens and italian paper cannot find a bid. perhaps i return to the bearable solve everything. in the culture wars, kevin also this -- kavanaugh vote this week. i'm tom keene and london, francine lacqua. vote.at matters is this the senator from kentucky says they are moving to a vote this week. it is that together with trade and whether there is a tenuous link and rather the distraction we are seeing is hindering or helping trade. wes look to italy. weking at the markets -- also look to italy. emerging affect
markets. tom: first word news in new york and here is taylor riggs. >> president trump has cleared the decks for a protected trade war with china. he struck that last-minute trade mexico and canada and convince japan open one-on-one talks. at a news conference, president trump says it is to early to talk with china because you beijing is not ready yet. the senate is likely to know -- vote on brett kavanaugh's nomination to the supreme court. the senate first need to vote to cut off debate before the vote. the fbi is conducting a week long investigation into sexual allegations against kavanaugh. the head of the european commission warns italy could
face a greek style fiscal crisis. italy's attempt to promote its new budget crisis ended in failure. --lian finance manager minister is trying to settle campaign promises. eu officials already have indicated the budget may not meet its goals. opec can replace opec.ing oil prices from oil has rallied about 16% since august. irani and exports have fallen to 2.5 year low in opec and allies have shown little enthusiasm for boosting output. the international monetary fund is ready to cut its forecast for global growth. the managing director awards trade wars and credit are darkening the outlook. she spoke in washington. >> countries need to work together to build a global trade system that is stronger, fairer
for the future. the stakes are high because global budget change could have a devastating effect on many countries. it would also present emerging and low income markets from reaching their full potential. >> macedonia threatening to call snap election if they win support to change the country's name appeared over the weekend, a name change. only 37% of those eligible turned out. the prime minister will hold talks with lawmakers. will they get the vote needed? global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. there are headlines that come across the bloomberg that
are changing and societal headlines paired we see that from jeffrey bezos and amazon. we have seen it before in smaller operations but never scalehe scope and sale -- of amazon. they support a new 15 dollar an hour minimum wage and they are going to put it in effect in days. this is an historic headline there you have to wonder how many other companies must follow mr. bezos on this. francine: if amazon starts doing it, it may have a ripple effect. it went to walmart 67 months ago. -- six or seven months ago. will go back to where i interviewed the head of aetna in connecticut, and he was adamant the pushback he got from certain board members over at not putting in a new higher minimum wage because they realize so
many of their staff literally could not survive in some of the northeast urban cities. you see this permeating to a giant like amazon. amazon, and will bring up the famous bloomberg description seen, and you can seen it is -- 575,000 people . on societal changes, there could be nothing more than what i witnessed yesterday in washington is there is one topic , and it was not in the rose garden yesterday with an historic greatest ever trade , thank you george marshall and the plan, and it is judged kavanaugh and the vote to come. kevin cirilli is the chief washington correspondent. will there be a vote later this week? kevin: all signs look like there will be. the question is when we are in a holding.
and waiting for the weeklong fbi investigation. there is not a formal ending points for that. they have begun work on the investigation and it is anticipated to be sometime midweek to the end of the week. mitch mcconnell would like to see a vote immediately. there have been reports overnight that judge kavanaugh will not be going back to harvard in january. he was expecting to be on the supreme court. we are showing holding period. is the fbi investigation widening? kevin: the president yesterday said he wanted to see this and he did not want the notion that he was limiting the investigation. democrats has raised that it was too limited. a democrat from delaware has worked across the aisle on this.
the president has said he would like it to be done within the week. it is really tough. there is so much speculation in terms about the fbi doing it will no when they released the report. tom: haven't, thank you so much. cavan, much going on -- thank you's -- kevin, thank you so much. on, we need going on to speak with marc chandler, chief market strategist with bannockburn global forex. right now within this do of trade of dollar and oil, what is the single point you are telling clients? marc: the dollar is getting stronger. it is not just emerging market problems. the dollar is near 114. the sterling is below 130.
the dollar is getting big since the federal reserve met. we have a second story with oil weighing on emerging markets and other countries. the u.s. is in the best position to weather the storm. tom: does the oil move the dollar or does the dollar move the oil? there is first order, second quarter, third round affects, what is it? marc: it is a supply issue. we think about how successful company has been in the new nafta agreement. one area that trump deserves credit for is the embargo against the iranians. it looks like many countries are participating in it, even before the early november deadline. , a week ago my friends were talking about how the europeans were coming up with a perfect vehicle to bypass u.s. sanctions. that is not happening.
all cutting back on oil from the iranians. francine: thank you so much and we will get back to marc chandler shortly. it is day three of the u.s. -- u.k. conservative party. after you years of trying for whatop job and politics, will the foreign secretary say in his speech? let's get over to anna edwards who spoke to his successor, jeremy hunt. he says the u.k. is angry about where negotiations stand. >> they need to stay we are -- understand where angry. if the eu'sif the eu's view is y time we approach constructive proposals, all we have to do is say no, come back with something deferred. that is not a negotiation. anna joins us now. anna: i am joined by nicky morgan. , we thinkd of warning
boris yeltsin could walk out at any moment. i apologize in advance if it gets noisy. great have you with us. thank you for talking with us. we are having lots of conversations about what kind of deal will be agreed between the eu and the u.k.. is it still possible to do some sort of deal and we will get the approval of parliament? nicky: i think it is. it is a negotiation. the two sides have got to get back to the table and talk to the council about what compromise might be necessary. it is very clear that a majority and the public wanted to be a negotiation and something for parliament to improve and we can move on. anna: it is still evolving and it needs to be agreed on. is it still agreed upon? the prime minister and
the ministers seem to think it is still on the table and will evolve. we do not know how changes will take place and what they will be. ares clear that the calls becoming increasingly desperate. having a candidate trade style deal has been taken apart. those advocating a don't know how they will get there. my suspicion is they go there a deal at all. anna: do we need another referendum and how do we define it? last two have been so divisive and i think there is a
way through and potentially a deal which could command parliamentary support. they need to move on as a country and talk about what people want to talk about. a second vote, the question is what will be on the ballot and the discussion will be a rerunning of 2016? without ad we end up deal and will they support theresa may in a no-confidence vote and where does that leave the prime minister? .icky: there are a lot of is trying to make ahead of what might actually be happening. minister could possibly say i believe this is in the national interest. to ask is whether this is something we should
support and the national interest. those who support the prime will want to say get rid of what you put on the table and they are not acting in the national interest there are compromises and regulatory standards that will have to be discussed and put in place to support this. we need businesses to be confident and there is certainty about employment and investment. thatve to continue to do to enable our country to be prosperous. you expecting from the speech on boris? talk. there's lots of it is difficult to know. i have no idea what he will say. anna: i hear two narratives, one that says a time is now and one say his star is fading.
can he carry the party? nicky: there is overall support for boris. he is a big conservative party figure. do i think it is enough for him to be the leader? no, i don't. i think it would be a bad idea to do it before brexit. -- hownd theresa may long do you think? nicky: march of next year is up his own -- pivotal moment. i think the prime minister is not the person to leave them. much.thank you very from the conservative party
as the cameras flashing in the distance. we'll keep our eyes peeled. francine: i am looking forward to when you speak to boris johnson. an edwards, great work on the ground. we will be back with marc chandler of bannockburn global forex. excuses --our .xclusive interview i will be asking about emerging topet and changes at the and the appointment of a new chief executive. this is bloomberg. ♪
outrage over global dynamics in the turkish financial markets. we will get to that at some point. marc chandler on the u.s. dollar . jerome powell give a speech today which will be as interesting as his conference a week ago. speechee will be at the at the national business economics. the dollar right now -- bring up a chart, the dollar with the classic, elegant blended dollar
weakness in the index. what is the range of stability? marc: it is a bit of a holding pattern. you have the federal reserve raising rates and policy in the u.s. the next big move we for the european central raise interest rates and some people think there is the end of divergence and beginning of convergence. also, that there are -- dollar overextended. people are taking a pause here but are prepared for the leg up in the dollar that has been happening. always been an expert about the futures marketing position. go deeper. is it speculators or also the bet of commercial interests. the futures market is a hedging market. speculators are taking on risk.
that is a discretionary view. right now they are betting dollar stronger. marc: some people think it is over week. you are seeing wider interest rates. foreigners cannot get enough u.s. assets and that is helping to make the dollar higher. the fed hiking rates andthey see impact on trade that being on the u.s. economy. is that right? marc: in general, it goes much against what powell has said. page thatk at the bloomberg tracks for the fed fund expectations, and you will see an 80% chance higher for a december rate hike. problem,sions are a but so far they are not impacting the economy, and we've
not seen that impact in the most recent data and we got job data friday, and we will not see if there. francine: wenzhou expected to impact the economy? impact do you expect the for the economy? the impact is partly because of trade tensions and what it means is the u.s. economy has cushion in the sense that the federal reserve says trend growth is 1.8%. it looks like it is something like twice that. that gives trump the ability to pursue these hard-line negotiating tactics and be able to take a hit on the u.s. economy without a falling behind trend growth. should we go to distribution? this is something that chandler and the pros look at. jason, put your lens on that. .his is a pro distribution
for those on radio, two hands on the wheel right now. .n september we are here here is december. what interests me is the flattening of the bet on what the fed will do in the future. that value of on where rates will go? marc: this is where the fed and market are parting ways. tom: i agree. marc: the market is saying it is below where the fed says. they say the equilibrium rate is 3% and the market says fed won't get above 2%. the market thing they could raise rates to the middle of next year and take a long pause and that could be the end of the cycle. tom: this goes back to the question to jerome powell. does marc chandler look at the dots? marc: the fed wants it both ways. medium. there is no
it's not like you can put all the people and used together and you get an average view. tom: francine, if you say there statistically and a new school you flunk. is that with the fed is doing? francine: maybe, it is funny. do we misunderstand. thatu have the agreement doesn't need to trade tensions n.ck down is it deflationary? marc: as you have seen from the wto, the imf has given us a warning. how it is distributed -- the u.s. fiscal stimulus is the key here. this is providing the cushion where the u.s. can take hits whether it is trade or other factors like high oil prices. at the same time, protections
a tax oner tariffs is consumers. this will boost price pressures in general. this is the problem. has slower growth impulses and higher prices. it is not the opposite that a lot of classic economists think you cannot have inflation and slow growth at the same time. undervalued inis the markets right now? is there anything in a bubble? marc: this is a trick question in the sense that the emerging markets have been crushed the sheer and varies valuation models look cheap. they could be cheaper as long as the fed is raising interest rising, and aces headwind of policy hedging the market. despite being good value, i'm not ready to stick my money in there. if you look at emerging markets, is there one you would sell off right now? marc: i think mexico took a big
rally from the nafta and i think it is getting that back. you have countries like turkey which has had a good bounce. they have not changed policies sufficiently. we will get the inflation numbers this week and it should jump above 21%. tricky has downside after upside correction in the last few days. turkey has some downside after upside correction in the last two days. francine: you can grab the gtb graphics. graphics.gtv log on to the bloomberg. this is bloomberg. ♪
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deal gets president trump something to brag about a month before midterm elections. he reached an agreement with mexico and canada. the president will have to convince congress and the american public that the rework of nafta will provide economic gains for workers who have been hurt globalization. likely to vote on brett kavanaugh's nomination to the supreme court. senate majority leader mitch mcconnell says the time for endless display -- delay has come to an end. senate will need to cut off debate before taking a final confirmation vote. a weeklongconducting investigation into sexual assault allegations against kavanaugh. indonesia, survivors of the earthquake and tsunami are growing desperate for a few -- food and fuel. they have received little assistance because roads are impassable. there are more than 1200 confirmed deaths and the number
is expected to rise. amazon is raising its minimum wage for all u.s. employees to $15 an hour beginning november 1. more than 250,000 permanent employees as well as 100,000 holiday workers will benefit here at amazon also says it's public policy team will begin lobbying for a higher federal minimum wage. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. much.hank you so we want to make note that the first lady is visiting africa. this is part of a tour of the continent. the festivities begin their your this is a trip on health and with the new ebola actions in the west african nations, that is of great importance. she has been quoted as saying
these are for beautiful countries she will visit from ghana east and over northeast to egypt. this is to promote health care and education programs run by u.s. foreign aid organizations. onto italy. we are not man and we're not been a soweto appeared this is the head of the lower houses budget committee. he added the populace government has no plans -- joining us now is the deputy director from brussels. thank you for joining us. anxious markets so about? >> i think they probably are. tore has been a agreed number that will be consistent with the fiscal policy.
anything from this is reason to worry about. the numbers are small. they are not insignificant. they could really cause a problem, because the problem is that the deficit. it is the debt. have you bring the debt in a position that will help italy recover? this is the issue here. any deviations on economic terms can be quite detrimental for italy. beyond the economics, i think the importance here is the symbolism. how does a country like italy go against the commission? we are in for possibly a fight between them and the question is how it's going to end. francine: when i spoke to the , he may, is about the euro and he said it is unfair because italy -- france
had 2.6% and italy is well within its wins at 2.4%. do you feel like the markets are targeting italy because they were badly positioned? maria: this is an important point to make. from the rules, we need to know why. italians arehe pointing to. the fact remains, you cannot fix one mistake by a second one. it is important we stick to the rules we have and what can help the european economy and what can help italy. the european commissions reputation will be at stake. manage that and how does the commission mattis that? francine: if it is below 3%, it is within the rules -- commission that?
francine: if it is below 3% it is within the rules. maria: we have other numbers that are varying from country to country heading on the fiscal space. countries in europe has different fiscal spaces. some can do things and others cannot do that to insured the path.s on a sustainable they need to get these to table. sustainable t debt. francine: still with us is marc chandler. how you view italy? we were looking at the markets impacting not only euro but the
possible emerging markets? italy.he focus is on the italian deficit was bigger than many expected after hints it could come below 2%. the difference between 2% in 2.4% given the size of the italian economy is 7 billion euros, which seems like small change. i agree with the previous guest saying it was a symbolic importance. it has left the markets unsure what is going to happen. i think they time bond is under pressure. the big buyers of italian bonds in the last couple of months, portfolio bonds have loss of value. .talian banks tax selling off some of the peripheral european countries pushing up those yields. it is part of the risk off weighing on emerging-market currencies we spoke of. tom: a delicate question to the leader of the imf and we did that with madame lagarde
yesterday, the idea of the power shift from people that presume europe and america over to asia led by china. is italy still a g7 country? think of course it is, given the size of the economy. tom: we don't know that. the size of the economy is big. marc: it is the third biggest in europe after germany and france. all the major treaties to bring europe together, italy was a founding member. it is not greece. italy is significant. there will be greater latitude from the eu because the italians are arguing that their budget will reduce the debt. we're not talking about deficit, reducing debt by 1% a year. the key is whether growth can be sustained and whether measures will boost growth. tom: you featured this in your book, but if it's between the deficit and the debt. the key is just to get the vector of the debt in the right
how much, just show that the debt can be reduced or flatlined. marc: we are measuring the debt not in dollar terms or euro terms but relative to the size of the economy. the best thing for italy is stronger growth. that is a lesson we learned from greece. all the fiscal austerity and tighter fiscal policy and it weighs on growth. what italy needs is growth. tom: thank you very much, marc chandler. we have a chart coming up that will touch on italy and germany. coming up, an important speech from market moving press conference, the idea of a fed behind. jerome powell speaking in boston. our michael mckee is there. this is bloomberg. ♪
>> this is "bloomberg surveillance ." that is your "bloomberg business flash.". note.g on a high the north american beverage unit returns to growth in the latest beater and helps pepsi estimates. the maker of mountain dew and tostitos got a boost from frito-lay salty snack unit. for's a cut expectations profits because of currency headwinds. for this weeks aston martin ipo in london is narrowing toward the bottom and of the market. slow thisrings were week.
investors talking at the higher valuations are the carmakers owners. ofy had sought evaluation $6.5 billion. that is likely to come and more at $5.6 billion. bmw says it can maintain its place in the world's largest car market despite the trade between the us and china. the dispute has not been cheap for the german automaker. tradecan quantify the impact. we are shy of 300 million in in 2018. trade this is a half your impact. raised rice's on cars imported to china by about 7.5%. will not beutomaker making out of iran despite u.s. sanctions. the ceo spoke to francine at the paris auto show. >> we will do everything
necessary to avoid u.s. sanctions. we are in direct contact with the state department and treasury department in the united states to make sure that anything we do in iran is sanctions.with the to use a lot. taylor: and leaders with lacqua, we talked trade and future and distinctive leaders to styles. that is thursday on bloomberg tv. that is your "bloomberg business flash." now to the devastating indonesian earthquake and tsunami. the death toll at 1200 people. authorities scrambling to bring food and medicine to the thousands displaced by the nation's deadliest such disaster in a decade.
we are joined now from jakarta. is a very difficult time paying what do we know about the rescue efforts? there are thousands of military police personnel on the ground. >> that is right. earthquakes today a thousand miles south. the pointnd proves that this is an area that is prone to earthquakes and that comes as authorities scramble to those still cut off. we are hearing reports of people who were sucked into the earth when the ground liquefied or what they called the gulf occasion -- what they called the liquification.
tom: within this disaster and what we saw years ago, you mentioned the various earthquakes, how will this change indonesia, or is it crisis as usual? it is a good question. it is a country that is used to these kinds of disasters, it is fair to say. in ady, they are party presidential election campaign. it is called the unity and they .ave halted campaigning we will see the country come together. you look at the economic implications, this is an already struggling economy in emerging-market selloffs. push to 15,000.
it is a 20 year low. there is probably a bit of pain to come. the finance minister described this as a new equilibrium for the economy. this is a government that has an already stretched touch it the cost will be enormous. knockedations network out. the recovery process will go on for quite so long. tom: thank you so much. with us is marc chandler. we can rebut the script and bring up a chart. i will get this out on gtv in a bit. this is the 1997 crisis in indonesia and it hugely hit the market. today, the symbolism, it seems indonesia forn
grinding weakness. has to be a point where the system breaks, don't they? marc: you see what happened in the late 1990's, it was like a dam burst. rather than a continuous function, if you like it is a step function. to go sideways before it takes the next leg up. this is typical for indonesia. the general challenge is that they have to rebuild. they have exploited the fiscal room they have that means the currency will have to we can to help cheapen up the assets and make the funds available. when you look at some of the things in emerging markets, how can the contagion get worse? one, if other countries began blowing up, not just , but some ofturkey the other emerging markets more
pressure. factor that is driving the emerging-market problems are a few things, fed policy, strong dollar, high oil prices, weaker commodities in general. these factors will make downside on the emerging-market currencies. tom: the persistent grim and the adjacency of these currencies, about the indian currency? forceful you write about the moves in india. do you care about cross rates are only the majors? marc: i do not watch how the other currencies trade against won. or maybe the korean it is a dollar-based world, especially east asia and emerging markets. francine: take you so much, marc chandler.
tom: we are doing this for francine in gene green. -- gucci green. this one of our most famous charts. for a chart.h the telling year versus the deutsche mark, lira weakening. are combined and they flat line. that would set their at 1000 per deutsche mark. what would happen if the lira had floated? one idea is extrapolation out. you get out to 2600 per deutsche mark. the idea of floating the lira is insane. it would be amazing, the wealth destruction in italy. francine: i don't know whether
that is the right chart. there are a lot of interconnected the's with the ness with the world. this could be a crunch point for the eurozone and whether they keep together or not. could this be the one to break them apart? could.heoretically it the talk about the eurozone is one of the perennial issues. it will not go away. there is no plan b. the alternative? there was an article in foreign thatrs and it was warned if it were to fail, there could be another war on the continent. in our generation, peace in europe for the first time in several hundred years. i think economic integration is part of it. it was a natural evolution from where europe was and trying
different things like the erm and finally realizing that the only thing they have to do is go to a single currency. this is still the only solution. i would play down the risk of italy or some other country leaving here it i would still be willing to bet another country will join the monetary union before the country leaves. , how do theerall populations connect with the euro? they need to feel the benefit for themselves and not the idea of peace that they forgot because the second world war was a long time ago. marc: survey show that most countries, and italy might be the weakest, but still has over half the people supporting the common currency. this idea that the people want to leave the euro, i don't see it. the stuff with the u.k. and brexit. again. goes to brexit
bring up the chart one more time. , and itere in the now is not about the drama of going up to 2600 lira per deutsche mark. it could be the in between which gets us wealth reduction for all of italy, right? marc: that is exactly what is happening. it looks like it is worth a million or whatever it is. the italian limiting -- living is suffering. in japan, the gdp is going up, it is not in italy. tom: they have saving dynamics an. marc: whether italy floats the currency and made a breakout of the eurozone. regardless, the underlying problem is that italian standards of living are falling
and there is not a future for young people. you i must admit, francine, have been way out front on this three to five months ago on italy not being a marginal move but something substantial as we have seen in the last few days. we say thank you to marc chandler. we will continue to forward the discussion with jonathan ferro on bloomberg radio. if you are reading today, finance in the world, oil at 8469. this is bloomberg. ♪
negotiated. and it is also a great deal for our country. likes hisdent trump new trader with canada and mexico. u.s. auto and dairy companies rally and relief. a budget with the european union and italian official suggested mainly it is not a good thing after all. rain clouds start to drizzle is how imf managing director christine lagarde talks about growing challenges coming from trade tensions and tightening monetary lessee. ,elcome to bloomberg daybreak i'm david westin all by myself in new york as alix steel has gone to the sea. a lot to straighten out down there. in the bar, i assumed it would be about kavanaugh but everybody was talking about nafta. i was very impressed. david:
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