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tv   Bloomberg Surveillance  Bloomberg  October 9, 2018 4:00am-7:00am EDT

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>> trade war takes its toll. the imf cuts its global forecast for the first time in more than two years on the escalating tensions. treasuries tested, u.s. yields flirt with new highs. morgan stanley abandoned its call for flattening of the curve. italy's budget standoff. the finance minister is set to defend his fiscal targeting parliament. it is said italian debt can be seen as too risky. good morning, everyone. "bloomberg:
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surveillance." i am francine lacqua in london and these are your markets. it is all about treasuries today. off seven-yeart highs, adding two pressures on risk assets. stocks mixed, stoxx 600 pretty flat. the finance minister of italy is starting to speak in parliament and a second. the italian 10 year yield is at 3.57. he did here on bloomberg surveillance. in 20 minutes, we talked outlook for oil. first, straight to the bloomberg first word news with taylor riggs. taylor: italy's deputy prime minister says britain's real enemy is jean-claude juncker and the brussels bureaucracy that pushes open borders. bonds and stocks tumbled as salvini attacked the eu. he said next year's election
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will be between austerity and those who want to create jobs. in the u.s., the trump administration has called on saudi arabia to -- for answers in the disappearance at a reporter, -- of a saudi journalist and a critic of the royal family, last seen entering the kingdom's consulate in a stumble. said he had been murdered inside of the consulate. that is a claim the saudi government has denied. donald is apologize -- has apologized to brett kavanaugh for the bitter battle over his confirmation to the spring court. -- supreme court. brett kavanaugh acknowledged the emotional fight and said he has no bitterness. >> he is a man of decency, character, tightness, encourage, who has devoted his life to serving his fellow citizens. now, from the bench of our
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nation's highest court, your father will defend the eternal rights and freedoms of all americans. allocated $2 has billion to track multinational companies with financial centers in its latest effort to rival to buy. companies will be provided free offices and tax incentives, as well as capital to cover five years of operating expenses, all in return for a commitment of at least a decade. >> the proposition is simple. in -- establish a company areb out of qatar, we looking toward providing free offices, tax incentives, and capital from the state of qatar to basically pay off your operating expenditure. taylor: global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in
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more than 120 countries. i'm taylor riggs. this is bloomberg. prancing? -- prancing -- francine? francine: the imf has cut its forecast for the most in two years. -- for the first time in two years. it says the economy will expand 3.7%. meanwhile, bond investors are bracing for a flood of treasury options over three days. $230 billion of government that is on offer. this has morgan stanley throws in the towel on one of the highest profile predictions for 2018, the treasury curve from the two to 30 year would flatten completely. what is next for the trade war and what does it mean for global growth? joining us for the hour, eric nielsen. thank you for coming in. you worry about the new imf projections? >> know, if anything, they are too timid for next year.
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3.25 global growth compared to 3.9 is not an important difference. underestimatethey the tension in trade next year and what i think is going to be the end of the cycle for america starting next year. those numbers, not a worry. francine: how difficult is it to measure the impact of trade? eric: it is very difficult because so far, the official tariffs trump has imposed and counter tariffs is only 2% of global trade. it is very little. int we see from our clients europe is it is starting to impact sentiment. people are nervous about where this is going, -- francine: is it impacting capex for spending? erik: that is the worry, it will take off an otherwise good development in. more of that than trade per se.
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it is the sentiment that doesn't feel good now. francine: which is exactly what the former pboc governor told us in italy. he worries about an impact psychologically on the way people consume and by the stock market. will that be a lasting effect? erik: sentiment is not long-lasting, but what i worry about is the trade -- it feels like trump has said he motion a big, long run battle with china and if we look at the nafta agreement with the provision other countries have to get permission to do something with china de facto, very nasty, separating the world and we will see how people fall down. this is not good. this a 20-year battle with china or a political play from the u.s. for the midterms? erik: i wish it was the latter, but it doesn't feel that way. if you read bob woodward's book about trump and any other
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we are called the globalists. he doesn't believe in this. as far as i can tell, he just doesn't believe in it. i wish it was a game for a few months, but i don't believe it. francine: erik nielsen's staying with us and we will talk more about what is going on in the u.s. and with the fed. stay with surveillance. after a weeklong standoff with eu officials, italy is now defending fiscal plans in front of a home audience is morning. we will bring you the latest from rome. later, we talk the outlook for oil with the international energy agency's chief executive. we talked to him about oil at 100. this is bloomberg. ♪
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francine: economics, finance, politics. this is "bloomberg surveillance. let's get to the business flash with taylor riggs. said tomark wilson is step down from his role effective immediately. he will remain with the company until april of next year to find his successor. during the transition, entry in montauk -- a dream on todd will responsibilities and lead a committee of three executive directors. apple has told lawmakers its servers were not compromised and soft to ensure them the company's local supply chain is secure. in a letter to the chairman and ranking democrats on the commerce committees, it dismissed a bloomberg report that china used a microchip to infiltrate and pewter networks. apple'ser, signed by vice president for security
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offered additional briefing for staff members of the chain. shares have fallen to the lowest in six years in mumbai after the company's jaguar land rover unit summer cells slumped -- sales slumped. volkswagen is close to hiring advisers to work on an initial public offering for its heavy truck division. bloomberg has learned citigroup, sachs,e bank, goldman and jpmorgan are likely to win mandates as global coordinators for the share sale. vw, as well as the banks, declined to comment. a crucial deal to save the a380 superjumbo is said to have stalled in a disagreement about engine. an initial order from emirates is worth about $16 billion and they disagreed with rolls-royce on price and fuel efficiency. the management board on airbus has selected its next ceo. enderset to succeed tom
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in april of next year. 'salth of that's -- alphabet google says it found a glitch that could have expose the personal data and as many as half a million users but decided not to tell the public until now. in a statement posted to its blog minutes after the report, the company says it plans to shut down the network for consumers and introduced privacy tools restricting how developers use information on products ranging from email to file storage. that is your bloomberg business flash. francine: thanks. thes talk about government's fiscal plans in parliament. he is expected to be grilled by opposition lawmakers on a plan that has caused a war of words. the 10 year yield jumped by as many 30 basis points, hitting the highest 2014.
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still with us, erik nielsen from unicredit. we hearing that italy's economic growth cap the eu is unacceptable. he is also seeing the italian budget is aimed at answering concerns of the citizens. what are they doing with the money? is it infrastructure or handouts? erik: it is a little bit of both . in the proposed budget, there are tax cuts as the league had promised. thee are some aspects of income, this social -- the social benefits -- benefits promised and initial public investment. a little bit of all sides to it, but the tape -- growth enhancing part should have been a bigger part of it. francine: will that change? we are looking at credit default swaps, basically insurance
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depending on the type of product and the country you take. i was amazed to find -- italy is in purple. you have in white brazil and in blue, south africa. italy is now right up there in terms of concerning levels. are they right, or is there market -- the market too pessimistic? erik: i think the market is a bit too pessimistic, but i can also see why people get nervous. here is the issue. if you look at just what they proposed on the budget and say this means this much in additional issuance, it is not completely straightforward, but that might justify maybe 10 to 15 basis points or higher borrowing cost. nothing of the order of magnitude you have seen. there is a lot of worry in it. part of that is sickly people worrying about the medium-term commitment of the government and then there are some practical
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things, which mean if the rating agencies downgrade italy, you get uncomfortably close to noninvestment grade, which would mean money can't be there anymore. people worry about the rating agencies and the commitment. francine: what are the chances of a downgrade? if you look at the cbs's -- 's, italy has a better rating than some countries. erik: rightly so, because it is not just a matter of the deficit, but the strength of the institutions and commitment of the partners and the rest of it. that, is fine. purely on economic data, i would argue the ratings are too harsh on italy because after the big financial crisis where all the rating agencies completely killed the peripheral -- portugal got 11 downgrades in 18 months. completely out of order in my opinion.
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has not been fully reversed, but now, with this fiscal plan and medium-term government, the agencies have become nervous again. we have to expect at least one downgrade. francine: investors -- if you look at the spread between bones and spat -- bunds and spanish yields, it is rising. yesterday, we heard salvini said it is the fault of brussels italians are doing bad. it is rhetoric meant for a domestic audience that is freaking out markets? erik: possibly, but it cannot be ihat solving he -- salvin and politicians anywhere can believe they have two audiences. in today's world, you can't separate. it is unfortunate you create this european enzi. envy.
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i struggled to see why he would do this but at the same time, when you look at the spreads and now, it doesn't make sense to me that on the one hand, there is isolated italy. worried about the medium-term in a severe sense for italy, you cannot possibly believe that the rest of europe would not be impacted. the swiss franc would be much stronger in this disaster scenario. there is a little bit of a disconnect between things. francine: thank you. erik nielsen from unicredit stays with us. for more, join us on life go on the bloomberg -- live go on the terminal. find the finance minister speaking of parliament. next, the outlook for crude. we are joined by the executive director of the iea next. this is bloomberg. ♪
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francine: good morning, everyone. this is "bloomberg surveillance ." wti, trading or $75 a barrel. shedding 90% of oil production in the gulf of mexico. this year asd 20% volatility surged on uncertainty over a potential supply crunch. how likely is $100 oil?
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joining us now, executive director at the iea, fatih birol. last month, and he warned the oil market was getting tighter. where is it now? and i very tight now, think what we have been seeing since march, tightening of the oil markets toward the end of the year, is unfortunately materializing and this is not good news for the global economy. in fact, not only the oil, but coal and natural gas are going up, and i can tell you that it looks like expensive energy is back. expensive energy is back at a time -- a bad time when the global economy loses momentum. in majorcrises
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countries and trade disputes in countries. a high oil prices not good news for the global economy, both for importers, consumers, but i believe also for the exporters. if not today, tomorrow. francine: you think it is tighter than a month ago, correct? fatih: definitely so, because demand is still strong and we have been losing oil from iran isa and also, going down. francine: this is crucial. when does it start hurting demand? is it in the fourth quarter? fatih: we will assume in a few days using our model, market report. if not in this report, i am sure next year's report. lower demand because, for example, one of the major drivers for global oil
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growth has hurt badly. francine: you are not seeing signs of slowing demand yet. where will you see it first? fatih: emerging countries, india. current account deficit. the fiscal deficit of india is the current indian toestic prices are equal $100 in terms of rupees. it is a lot of value. francine: are you satisfied with how saudi arabia and allies are responding to this? should they be putting more oil on the market to make up for lost production? fatih: we are losing production from venezuela and iranian exports are going down, and the demand is still strong. we really need more oil. what saudi arabia did is an excellent move.
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7 million barrels per day, but we need more oil to comfort the markets, especially in the fourth quarter this year. francine: i want to bring in erik, but why are they not bringing in more oil? there is always a timeline, you don't just switch it on. fatih: i have confidence saudi arabia and other gulf producers and other parts of the world see the situation, it is a very situation -- sensitive situation, fourth quarter is crucial, and they will do everything they can to increase production. otherwise, it is bad news for consumers and them. francine: it is a problem of timeline? they wouldn't be able to do it until -- the 10.7 they are producing now, there is still a way to go around that level. francine: do you see $100 oil, and what would the impact on demand, emerging markets, and a dollars? erik: we don't have $100
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forecast and reflecting on what you said, we think extraordinary issues are at play right now. prices have gone to hide, but we are not good at forecasting this, so maybe we have to start to think more carefully about it. the answer to your question is, in a america, there is not a big effect on growth, but there is a redistribution issue. very efficient. there is a reallocation of forces. every -- measured in offs, you take 0.1, 0.15 and in the emerging markets, you see more vulnerability. can the imf forecast, it is the em taken down a bit. francine: do you see $100 oil? fatih: i cannot give a number to you, but if there are no major
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moves from the producers fourth quarter this year is a very challenging quarter. francine: why have they not done the moves you are talking about? fatih: i think they did some, but there is room to bring more oil because we are focused on iran, but another issue is venezuela. there is a freefall of production and we may see downlian production going which is a very challenging for the markets. venezuela is a fragile state and what is happening in libya and nigeria. ,f there is a major catastrophe as you read a few minutes ago, if it comes on top of that, it is the perfect storm. francine: is it possible saudi arabia and opec keep pumping because they see demand?
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and they are trying to catch up, but somehow, they couldn't actually make up for all the production loss? , viennaaudi arabia agreement participants from opec countries, russia and others may well push production up, but the important thing, in my view, they have to understand, those priceses, today higher may make handsome revenues and consumers are losing, but tomorrow, it may be bad news for them. in terms of demand, growth weakening, but also giving impetus to alternative technologies and alternative production from somewhere else. francine: how likely is it there is going to be an iea stockpile released to make up for lost production? fatih: month -- we monitor markets very closely on a daily
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or hourly basis. right now, it is not something we are discussing at iea. francine: is there a price you monitor? fatih: we don't do it in order to impact the prices. francine: iran wouldn't be enough? fatih: the civil war, in those cases we release stocks, but at that time, it isn't on the table. francine: great to finally host you in the studio after interviewing you many other places. fatih birol, executive director at the iea. erik nielsen from unicredit stays with us for the hour. let's get the first word news with taylor riggs. has lowered its global forecast for the first time in more than two years. -- down from 3.9
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predicted in july. that chinaibility and the u.s. resolve their disagreements would be a significant upside to the forecast. at some level, i think it is not surprising that we are more tentative in our optimism than we were six months ago. taylor: will seek a bailout from the international monetary fund as the government tries to stabilize the economy and funding finances dwindles. "leading economists" the company will formally approached the imf for support and the finance minister will hold talks with officials during the lenders' annual meeting in bali this week. he told bloomberg in a august
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the government may need more than $12 billion. in the u.s., the trump administration has called on saudi arabia to provide answers and support a thorough investigation into the disappearance of the saudi journalist and a critic of the country's royal family, last seen entering the kingdom's consulate in a stumble. a turkish official who spoke anonymously and didn't provide evidence said the journalist had been murdered inside of the consulate. that is a claim the saudi government has denied. qatar has allocated $2 billion to track multinational companies with financial centers in its latest effort to rival to buy. -- dubai. companies set up there will be provided free offices and tax incentives, as well as capital to cover five years of operating expenses, all in return for a commitment of at least a decade. >> the proposition is simple. if you establish a company in -- a headquarters company out of
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qatar, we are looking toward providing free offices, tax incentives, and even seed capital from the state of qatar to basically pay off your operating expenditure. taylor: 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'm taylor riggs. this is bloomberg. francine? francine: now to emerging markets and south africa has effort most from the $4.5 million slumping emerging-market equities. the lowest level since 2013 for the index. the fastest-growing economies of india and the philippines haven't been spared as they slid to deeper lows. what is next for emerging markets and it is down -- is it down to the dollar? still with us, erik nielsen from unicredit. is it down to the dollars? it seems emerging markets don't have much going for them. erik: it is not just down to the
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dollar. that is the simple answer. the way i would characterize it is this. when you have a world economy that has been doing quite well, and the fiscal measure, you have u.s. treasury yields moving much higher. if you look around the world coming you sick yourself, which countries are the most exposed? it is late cycle stories. have -- some of the emerging markets with a big current-account deficits, that probably shouldn't happen. turkey, south africa, and some of the other ones. normal late is cycle, but you are also caught in the crossfire of a trade were, right? you are at the mercy of the president tweeting if you are the south african president. how do you deal with that? erik: the market has come to a
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stage where trump's tweets are amusement or any rotation -- an irritation, but it doesn't drive the underlying thing. it is often the trigger of the u.s. pastor in turkey and the fight between the two became clearly a trigger, but not the cause of the problem. the cause of the problem was a current-account deficit that was way too high and financing in a vulnerable way. francine: that didn't spread contagion -- did spread contagion. erik: but not too much. in italy, the whole world in equity markets is challenged. late cycle story, but the first thing you do is get out of the biggest credit risk. the reason -- where does the money go? katie didn't go into safer assets. it went into high-yielding america and europe, also very risky assets. it is a sign to me we are not
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heading into a systemic em crisis, but investors are correctly picking out where the vulnerabilities are. francine: but it could go higher, because of what the fed is doing. i have the imf lowering forecast. how do you choose between the e.m. winners and losers? is it current-account deficit? and china. erik: that is simply demographics and they have been on steroids and are now giving it more steroids, monetary easing. dangeroustually quite on a medium-term, in my opinion, but you are right. the dollar could go stronger and it was talking about -- shown in research in the new world of value chains across borders, a stronger dollar leads to a lower global trade growth, which is problematic. francine: does that change over time? do we need a new currency? erik: the dollar is probably all
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valued in our view, at least. the reserve currency stimulated the economy into trade restrictions or tariffs boosts currency for a while. we could be in this for another year maybe. francine: erik nielsen from unicredit stays with us. stay with surveillance. the trump administration calls for answers on the disappearance of the journalist. later, we will talk tech with the chief executive of adobe systems. we are joined for an exclusive interview at 12:30 p.m. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." i am francine lacqua in london. toald trump has apologized brett kavanaugh for the terrible pain and suffering the judge was forced to endure. trump made the comments at the swearing-in of the judge kavanaugh. on bloomberg.com, president macron is keeping french in the dark about his cabinet overhaul plans. to be inm is expected place for tomorrow morning's cabinet meeting and here are the most current stories on the bloomberg terminal. the imf says, venezuela's annual inflation rate will surge by year-end and in second place come apple has told u.s. lawmakers its servers
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weren't compromised. in first place, we have been telling you the imf has cut its global growth forecast. we are talking about yields. the huge move we saw in yields, and a lot of people saying the outsized u.s. yield jump jolted those who expected it to raise. let's get back to erik nielsen. did this move catch you a little by surprise? erik: i mean, the timing of it always surprises me when things actually happen and the speed of it. as several economists have been talking about for a while, when you have an economy that is growing as fast as the u.s. you see signs of wage growth and the phillips curve steepen's, it is possible to keep the 10-year below 10%. it has no business downing their. there. -- being down
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francine: what was surprising is how quickly it went up and that had a repricing on all assets. could it go up even more like that? erik: i think it can, because uncle sam is coming to the party every single day and borrowing a lot of money, because of the deficit. we haven't even seen the full impact of this. i think you could easily see another jump of another quarter percent or something. usually, history tells you when you have these kind of moves, there is a little pushback for a few days. it is never a straight line, but my money would be that we end up at higher levels. francine: but there is a downturn, right? is million-dollar question at the moment, the fed is raising and raising. are they trying to get enough tools when there is a downturn and is the downturn because we are late cycle but also the end of the tax cuts? the fed doesn't hike just to get a tool for the
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downturn. they are trying to do the right thing. if they hike more than they should to get the tool, they are triggering what would happen. i'm sure that is not happening, but what they feel is there is a risk they are getting behind the curve. because the economy is piling ahead, the phillips curve is starting to steepen, and history tells you the fed keeps hiking and the downturn comes. typically, the fed stops hiking only about a year before recession sets in. three quarters before the recession sets in. at that time, growth is to decline because growth starts to decline around three, four quarters before the recession. i think we have the picture lined up. francine: we are also getting breaking news, daimler set to work with geely on the ridesharing in china. there are questions about intellectual property, spying on are we going to see
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more european countries trying to get that lucrative tech story in china? erik: i think that has been going on for a while and china is a major power in this area. the big question is what do you have to give to be in their? -- there? will they force you to transfer technology? , -- bought learned in a little sneaky way. a joint: do you need venture to make it in china and what does it mean? and that make winners losers and here, it is ride-hailing, we are talking about daimler, but it could be tech space, even retail, how do you sell to the chinese? , it ishat, in a sense difficult for me to say, but this is where trump is right. it is ultimately -- china has not been playing -- is still not playing with our rules in terms
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of technology transfer and investment. in that sense, the west needs to confront china in one way but i would like to be more constructive than how trump is doing it. that you hidet be yourself behind her government systems and send people to do this and that and when you come in and want to sell to their big market, you have to transfer technology. europe be behind that initiative and is it something -- countries, the u.s., should approach with europe against china? erik: absolutely. wto is a great place to do it and you can do it with europe and japan combined, but the idea that he does is crazy. --risks spinning the world splitting the world in two, which is not the right way of doing it but he is right and most of the american political and economic elite would agree
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with him. obama in a sense started it, but that has to be addressed. francine: erik nielsen from unicredit stays with us. the company opens its first pop up in the u.k.. we will ask investors what is next for e-commerce. this is bloomberg. ♪
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francine: economic, finance, and politics. this is "bloomberg surveillance." let's get straight to the business flash in new york city with taylor riggs. taylor: aviva's's ceo is stepping down from his role effective immediately. he will remain until april of next year to help find his successor. theng the transition, nonexecutive chairman will take over his responsibilities and need a committee of three executive directors. apple has told u.s. lawmakers servers were not compromised and socks to ensure them the company's global supply chain is secure. in a letter to ranking democrats of the house and senate companyes, the
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dismissed a report that spies used a microchip to infiltrate u.s. networks. offered additional briefings for staff members of the committee. shares in -- motors have fallen to the lowest levels in six years in mumbai after the company's jaguar land rover unit said monthly sales had slumped. the u.k. based carmaker will close -- due to weak demand. volkswagen is working on an initial public offering for its heavy truck division. bloomberg has learned citigroup, deutsche bank, goldman sachs, and jpmorgan are likely to win mandates as global coordinators for the share sale. vw, as well as the banks, declined to comment. that is your bloomberg business flash. let's talk to our next guest, 20 years and industry working as an entrepreneur and venture capitalist. he is the founder of felix capital, which calls itself the
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venture capital firm for the creative class. delivery andood was one of the first investor in gwyneth paltrow's lifestyle brand goop. welcome to surveillance and erik nielsen from unicredit is still with us. longer-term, talk us through how you see your investments. about it six weeks ago, but there is a repricing in the market. do you worry about external factors? >> we worry about potential andges in consumer demand potential changes in the economic situation, but the fundamental trend of transformation of our life thanks to technology is not changing and that is only going one way. felix capital is trying to find brands, businesses that are going to transform our lives and
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offer new products and services in direct to consumer platforms. francine: you could have the same business model, and it is all about execution. how do you find those founders? frederic: that is a good question. that is our daily focus and it is all about finding -- look at today. tech companies in the world. google.facebook, led and that is why they have been able to take difficult risks. , whicheption of apple had an amazing transition. you are looking for those founders that have vision and also the ability to execute. that is very rare. domain knowledge -- we are doing, 10 years ago,
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connection and we could go a long way together. francine: far-fetched, we were talking about daimler and some of the concerns out there when you do a joint venture with china. of retail as another way measuring the strength and spending. do we spend differently? from your economic models, the companies -- investment makes it more difficult to invest? is incredibly difficult and there is a big shift toward internet buying and retail. any high street in london and most of them look -- if not in a very fancy neighborhood, it looks pretty sad and there are many places -- the way e-commerce has problems is how it compresses consumer prices. i have seen research that
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suggests on average, you save about 7% compared to retail. it is a low total percentage of consumption, it is growing rapidly. it has a big impact on how we think about the world and how policymakers react to it. physical retail will exist for a reason and the reason is finding the product -- no longer finding the product. experience is increasingly important. yesterday, we had the opening of the goop store, more of a premium offering but the experience is phenomenal. you are inspired. it is like entertainment, it is a lifestyle choice. basic things you need for your everyday life, amazon is going to be great. francine: why did you choose to invest in this higher-end? in certain ways, the market is more crowded but maybe you are a little more immune to the economic swings? frederic: our strategy is not
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focused on premium, it is more focused on finding organic community built around a center of interest and driven by passion. goop andanies we buy others. we are trying to find something people need and want, where you don't have to spend years and money to connect the customer to the product. that is why many of those founder led companies are doing that and larger companies led by employed management find it harder to do, reinvent themselves. francine: you've spent a lot of times looking at strategies to get into china? or is it risky? frederic: most of the companies we look at, china will be relevant but down the line. our early advice was to goop,
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not to launch in europe, just command a large market in the u.s. and we can start to look internationally and larger scale. china will be down the line, but one step at a time. you can pick your time. ofre is no window opportunity you have to address now. everybodympeting with and nobody, so we are looking for companies that have distinctive points of view. francine: have you ever shopped at goop? erik: i may not be cool enough. i haven't, but i need to. i agree with you. it is about the experience of going into a place, right? you need to find the communities with the right them a graphics. but also -- demographics. also, age. yourric: you will talk to
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children about what they are doing in line, connected to brands relative to them. thank you both for a nice conversation. .rederic court and erik nielsen bloomberg surveillance continues in the next hour. tom keene joins us out of new york. we will be talking to the chief executive of adobe systems. he joins us at 12:30. treasury yields hitting a seven-year high. ♪
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francine: the trade war takes its toll. the imf cuts its global forecast
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for the first time in more than two years on u.s.-china tensions. u.s. yields flirt with no highs. , the's budget standoff output gap with other euro area nations unacceptable according to finance minister. tom keene is in new york. we look at the imf. there is quite a bit of market movement when it comes to treasuries. the imf downgrading their market forecast. tom: two-part news flow. yields are higher. it is an immovable force driving the conversation. to newnd indonesia go up weakness today in their currency. it is buried in the news. this cm currency weakness just
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will not go away. francine: it may go away, but for the moment it is not. we may need to dig deeper. let's get to first word news with taylor riggs. global trade war is coming to global economic growth. the imf has reduced its forecast for the first time in more than two years. the fund projects global expansion of the 7% this year and next, down from two more -- next, downs year and . venezuela will hit a staggering one point 1,000,000% this year. venezuela's gdp will shrink 18% this year. it is the third straight year of double-digit declines. my compares trip to asia did not go as planned. he found himself facing the
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limits of president trump's efforts to woo kim jong-un while confronting china. he was publicly rebuked by china's foreign minister. brett kavanaugh here's his first arguments as supreme court justice today. yesterday, kavanaugh and his family went to the white house for a ceremonial swearing-in. president trump apologized for a contentious swearing-in process. what happened to kavanaugh and his family violates every notion of fairness and decency and due process. in our country, every man and woman must be presumed innocent unless and until proven guilty. historic under scrutiny were proven innocent. belor: kavanaugh promises to
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a team player. 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: thank you so much. high yields, higher yields i should say, front and center. we will get to the vix in a moment. 24-28 hike. curve steepening. yields drive the curve higher. 74.79 in america. 16.31. is there is the yield. 3.44 now. that is up for solid basis points. it should be green on the screen. on the a higher yield bond. the indian rupee is 74.22. that is not a typo.
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15,238 and a nation rupiah. i don't do this everyday. rupee, rupiah. i have to remember which is which. francine: he will help you remember. treasury yields is the only story in town. manley italian yields. the 10-year yields creeping up to a seven-year high. futures falling on the back of it a little bit. european equities giving up earlier gains. i am looking at italy. e have a nice spread on credit default swaps. at the moment, that 10-year 3.62. tom: this is a chart that i dices to the imf that
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out currencies. 1997, all the agony of em asia falling off a cliff. the ever stronger basket of asian currencies over 20 years. only once have they come outside to standard deviations down, and that is right now. they are really getting weaker quicker, down over two standard deviations. francine: what i am looking at is the italian concerns, and the italian finance minister warning about the negative effects of a global trade slowdown and saying that the budget he put through that riled the markets is really for the citizens of italy. this is my cdf chart. they are wider than brazil and south africa. that is pretty incredible to look at the italian cdf. that is critical.
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for those of you listening on radio, good morning. we will push it out on social media. tom: very good. it was so exciting to be at the imf asked madame lagarde announced a new chief economist for the international monetary fund. wonderful as well was the gentleman who wrote a textbook to this study, -- rogoff. chief economist, reset spelled. the possibility that china and the u.s. resolve their differences would be an upside to the forecast, and at some level, i think it is not surprising that we are more tentative in our optimism then we were 10 months ago. tom: table published a green
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book, a redbook, a yellow book. chris, let me start with you. in the similarities to the massive divergences of 1998, the major message is developing countries versus the em tensions that are out there. are there whispers here of the ?hosts of previous crises >> i think we are getting into one of those environments were u.s. interest rates are getting neutral or even tight next year. talking about india, and energy importer with energy prices high and the dollar high as well. that is a double whammy for those em energy importers. it will be a tricky time for emerging markets over the next three to six months. just going to your concerns
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about dollar asia, the imf cut world trade forecasts from 5% down to 4% in 2019. world trade might even grow slower, close to 2% in 2019. tom: bring this up if you can, jason. dollar inl in u.s. white. in orange india. everything we know about history is this cannot go on. we saw it last week with subsidies for the poor of india for fuel. bali,annot ignore this in can they? but it, they want to, takes some time in india. sorting out what is a very politically charged issue like subsidies to fuel is something
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that will probably not be determined in the next 12 months. that is pressure on the immune economy through higher fuel prices and the stronger dollar. this is about the strength of the dollar and quantitative tightening. that is where the pressure pushes offer these emerging economies. francine: this is not going away. the dollar is going higher. what do emerging markets have going for them? >> in asia, they have much stronger economies then in 1990. the reference point then was thailand, a complete disaster. that is not the case in south korea, singapore, etc.. you have decent economies now. the peg switchad and future current account deficits, which exploded in
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1998. that pent-up pressure that there was in the late 90's 90's is not there today. -- 1990's is not there today. francine: you will be staying with us. coming up is harm bandholz, unicredit chief u.s. economist. this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." i am taylor riggs. mercedes is working with its biggest investor to start on ride hailing and car sharing in china. the project would take on the industry leader in china,
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didi. guided adidas through the last eight years. he is stepping down. adidas says it is time for new leadership. world tells bloomberg that trade impact will not have a huge impact on his business. see a net reduction in trade. that is your bloomberg business flash. francine: let's talk italy. the finance minister says the y's economic growth cap with the eu is unacceptable. this comes as he defends his
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country's budget. by ferdinando juliano. you are pretty skeptical of the finances of italy currently. are these handouts? this is actually being reinvested in infrastructure? >> it is not just me who is skeptical. i think the finance markets are making it clear. the problem is that first of all the size of the debts and the persistence of the debts. italy has always aimed for a balanced budget over the medium-term. deficitstural account will stay constant over the next three years at 1.7%. this is something markets are concerned about.
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the second point is what you were mentioning, the quality of the budget. most of these were either handouts or lowering the pension age. lowering the pension age will have consequences on the stability of the finances in the long run and will do little to produce growth. where this 1.5% growth forecast that the italian government is talking about will come from, especially in slowing global growth. francine: how much do we worry, and how much to the markets worry about a downgrade making italy almost uninvestable? >> i think a downgrade is a concrete possibility. obviously, the rating agencies have wanted to wait a little bit to hear what the fiscal plans of this government are. there was a lot of confusion over the last few weeks ago because the technocratic finance
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minister was talking about 1.6% budget deficit, or anything below 2%. the we had at the end was higher than that. raising a downgrade is a possibility. there is a broader issue. investors are looking at italy. ministerave a finance who is going to be a strong check on the populist leaders, the five-star movement and lega. that perception has changed. it is quite clear that the populist leaders are in charge. i don't think investors particularly like this. tom: let me go to a chart. this is italy as compared to germany spread. the difference in italy and germany yield. crisis, when do these bond market indicators indicate slowing growth in italy?
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can they slipped by? >> i think we should keep them into perspective. over the last two years, italy has enjoyed very low interest hass, which actually debt been issued at a very favorable rates. there are no immediate debt sustainability concerns. the indicator you pointed to, ,he spread over german bunds will eventually have an effect on the cost of borrowing, which companies and families will one day have to take a loan from an italian bank that is going to make it hard to manage public finances. future debt will become progressively more expensive. we have these headwinds which are coming on an economy that is ofeady weak in terms growth rate. slowing of the economy
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is very concrete. francine: thank you, still with and ijulian chillingworth guess you could argue both sides, that they are overdone or underdone. which side are you on? spreadsthe btp bund negative downgrade on movies, it does not have the negative downgrade from s&p, which is stable. i think that will be the significant one. that is not in the price of the moment. we are looking for a shift from stable to negative, but not an outright downgrade. we think spreads can hold here. francine: what about you? >> i would say in the short-term it is approaching fair value.
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overall, we are in for a very bumpy ride for the autumn through italy. the bond market could sell off again. this is all about challenging andauthority of the eu taking on brussels, which the coalition is angling for another collection in q1. they're looking to come back with the largest majority in q1 and execute on their pledges. we are focusing on e.m.. i am not saying italy isn't e.m. nation. what is the call on the euro? can you make money on that moved? >> it is difficult. it is a question of survival into the end of the year, which julian has mentioned the italian situation will be confused for the next one to two months. dollar rates will stay pretty firm.
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we have u.s. wages may be breaking 3% year on year next month. skewed toe risk is 13 or so.12 or 1.1 tom: that is not a lot of drama. speaking of drama, in this bull market, the last time i had a decent cup of coffee. we will talk to kathleen fisher of alliancebernstein about can you even get close to index returns? this is bloomberg. ♪
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francine: this is "bloomberg surveillance." a380cial deal to save the superjumbo has failed. the management board of airbus has lifted its next chief executive. all the very latest on airbus. what changes are we expecting under the new chief executive? >> it will be an interesting time to see how it goes forward. we are only expecting him to take over in april next year.
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interesting. he has a lot of challenges ahead of him, most predominantly the bribery and corruption probe being investigated by the u.k. and french authorities. of course the production and ramp up sales, all the normal stuff that keeps them awake at night already. francine: i really like your story. it is basically new person, five hole problems. you mention sales are stumbling, but also the superjumbo. priorities? >> to main priority will be this probe and how to navigate it. the sales team, there is a morale issue in the company could it is a problem when you are being investigated from different parts of the world into practices. that is the main focus. he may be confronted with the decision of what to do with the k-a380.
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the deal with emirates has fallen into an unknown with engine talks with rolls-royce not really progressing the way that it should be. quite a few things confronting him. francine: thank you so much. benjamin katz, our aerospace aviation innovation reporter. some cool charts. i don't know if tom did an airline chart. he usually does. we track the latest forecast of the imf. if you are a bloomberg customer, we sincerely hope you are. you log onto your bloomberg and go to gtv . this is bloomberg. ♪ is bloomberg. ♪
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tom: what you need to know right now, francine lacqua in london, and i am tom keene in new york. higher yields is driving all within the market. francine: the highest in seven
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years. significantush repricing for all of the asset classes. let's look at what is trending across the bloomberg universe. on tictoc, donald trump has apologized to brett kavanaugh for the terrible pain and suffering the judge was forced to endure. we will see how that apology and the story plays in the midterm election. keepingch president is the legislature in the dark about his cabinet replacement plan. here are the most read stories on the bloomberg terminal. the imf says venezuela's annual inflation rate will surge by 1. 37 million percent by year end. the imf has cut its global growth forecast.
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it's get straight to bloomberg first word news. taylor: for the first time in more than two years, the imf has cut its forecast for double growth. it is projecting the global economy will grow 3.7% this year from its down 0.2% forecast one month ago. it blames escalating trade fights and stresses in emerging markets. pakistan will seek a bailout from the imf. the finance minister will meet with the lender this week during its annual meetings in indonesia. bloomberg thetold government may need more than $12 billion. it is the 13th time pakistan has turned to the imf or help since the late 1980's. the trump administration is demanding answers from saudi arabia on that missing saudi journalist. he disappeared after entering the kingdom's consulate in his
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simple. one turkish official says he was murdered there. the saudi's deny that allegation. the u.s. is calling on saudi arabia to investigate. hurricane michael is strengthening and could be category 3 before it slams into the florida panhandle tomorrow. it has shut down 19% of oil output in the gulf of mexico and is threatening the region's cotton crop. 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. you so much.nk let's talk oil, the vti trading near $75 a barrel. on its way to florida, shutting down 19% of oil production in the gulf of mexico. volatility has surged on the unpredictability of a supply crunch. we talked to international
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energy supply minister. we have beenat saying since march is we will be tightening through the end of the year in markets, which is unfortunately materializing. this is not good news for the global economy. but coal and natural gas are going up. i can tell you that it looks like expensive energy is that. back. francine: joining us is julian chris.gworth and it feels like the market is getting tighter and tighter and saudi arabia is just not making up for lost production. why not? >> it is. francine: not enough. >> kid has certain types of oil,
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which is not suitable to replace what you're losing from venezuela. if you are a refinery, you have to be specific. francine: they cannot make up for lost production, or they can, but it will take longer? >> they can. it will take longer. it is the global trading game to get the right barrels to the right places at the right time. the market is good at doing that, but it does take a few weeks to reorder the trading patterns. we will stay high through the end of the year. tom: inform us on the marginal effect of iran, iraq, and other smaller regional players. what do they mean for saudi arabia and president trump? >> in terms of saudi arabia, it is looking for its allies in the gulf to help out where possible, the emirates and she wait. -- kuwait.
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for trump, the u.s. markets are somewhat insulated from the rest of the world. in terms of gasoline prices, which is what i suspect he really cares about, we are still three dollars a barrel in the national average. that is pretty good going into the midterms, but there is a real risk, particularly with that tropical storm heading into florida will lead to a spike in crude oil and gasoline. the we are looking at hysterical nature of hurricane store. stewart, it all comes down to politics. what do they actually talk about now in those meetings? supply the theme on within those big player meetings? >> number one, what do we do about iran? iran is a member of opec and the opec plus group. we have seen the invasion of kuwait and so on and so forth.
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we think they will stick together. to have that illusion of unanimity, and to work at one we produce those barrels and when we bring those onto the market. saudi arabia try that a couple months ago and did not really find any customers for those additional barrels. we have seen stockpiles swell around the world. it comes down to, isn't it the right kind of oil for the right kind of customer? i love this. there is a terminal function which is bmap. you can play around with it. i am trying to get vessels where , which isnd oil exactly what you're talking about. you need a match. can russia put more oil on the market? >> it is probably close to maxing out. i'm hesitant to say that because you never know. looking at one month is different from six months. the issue with spare capacity is how long does it take to bring it on and how long can it last?
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look liket does not al there are a whole lot of barrels left. will become is oddities be derailed -- will be commodities be derailed by china-u.s. trade. do you worry about the effect of china on commodities overall? >> yes, the slowdown in commodities means oil could come under pressure. the point stewart makes is relevant. in the short-term, we could see the oil volatility in price. that means higher dollar. that does not bode well for emerging economies around asia. tom: how much do they make in profit at $80 a barrel? this used to be a huge deal.
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there are a couple of of the onte house used to make fame this a few years ago. what is the point of $80 a barrel oil? >> it depends on where you are in the world. if you are in the arctic circle, versus saudi arabia, it is a difference in cost. we think about it in those terms. in saudi arabia, i'm not thinking about profit per barrel or that simply. i am thinking about what is the breakeven price for my budget? that is a different target. for most of the opec members from $80 a barrel gets there. tom: what you just heard is the heart and soul of oil economics. they have to make the fiscal budget. where is that number? it used to be $64. where is it now? >> i don't have it off the top
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of my head. probably in the mid-70's. high 70's. that is going to have an enormous impact. i would be surprised if it is anything less than $75 to $80. tom: thank you. that is an important number to pay attention to. it will be part of our dialogue in the coming weeks. stewart wallace for bloomberg. chris turner and julian chillingworth with us. the timely conversation with the gentleman with a must-read book for global wall street. we will do a major play on that as we go into year and. howard marks writing on investment. shut down, shut down, shut down. this is bloomberg. ♪ rg. ♪
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francine: this is "bloomberg surveillance." tom and francine from london and new york. the trade war rolls on. joining us for an exclusive interview for what impact he sees on the trade war between the u.s. and china. >> we see slow growth concern countries. ourink these reactions to the trade war's, psychological. trade is going to continue. finds difficult to sell to the u.s., they will sell elsewhere. i do not see a net reduction in trade. what isot really judge
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happening based on these periods we see. it is a reaction. financiala lot of analysts will try to explain that in a negative way. >> can i ask you, as you look at the global stage of the moment, who has the upper hand in the trade war at the moment? >> i look at this negotiation. people look at it as a trade war. this is a negotiation. these are two big economies that have been trading. each of them have potential advantage. what is happening today is the u.s. does not feel fairly, claiming our market is open. >> you see a justification for this renegotiation? >> i think the trade war is about fair trade. how can we may trade between our countries fair?
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how can i balance my trade with the counterpart? it is a matter of negotiation. negotiation, you affect. francine: that was the chairman and chief executive of ep world. this has changed significantly from 12 or 13 years ago. raisedd last month billions of dollars from bonds as the divide trader is trying to get advantage from the silk and road initiative and china. tom: very good. oil a little light of where we are with record highs. $80 a barrel brent crude. for international relations briefing, this is very important . we are thrilled to have meredith sumpter with us. you need to look to this with eurasia group. meredith sumpter with eurasia group. look at that and the 10:00 hour.
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taylor: this is "bloomberg surveillance."
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i am taylor riggs. it is a blow to the new head of the world's largest advertising group. ford has transferred a chunk of its business to rival comic-con. ford says it shows on it, after a five-month review. fallenpany's shares have 17% this year nelson fells reportedly has a buy on papa john's. according to the wall street journal, they are considering a takeover bid. owns about 30% of pop accounts shares and is still on the board. aside $30 billion contract financial services to take on divide. they tell bloomberg tv that there give incentives for a company to commit to a 10 year agreement.
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>> proposition is simple. here, establish a country a headquarters company, then we are looking at providing tax incentives and even increased fail your operating expenditure. uaeor: saudi arabia and the are using the same tactics relaxed company ownership rules. that is your bloomberg business flash. tom: this is important. it is always important to see an oil guy using a phrase from the american football league. if you are inside the other guy's 20 yard line, that is called the red zone. francine lacqua, this bounces off your interview. this is bloomberg news talking about entering the red zone. francine, where is the red zone?
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francine: i guess it is towards $100. i pushed him towards if we are going to $100 a barrel? he said legally we cannot comment on that. it is getting tighter and tighter. he has now gone a step further and said we are now entering a red zone. i don't know if redstone is where it starts hurting demand. that is how i am interpreting it. usually if you look at how it happens, oil price goes this way, and demand drops off as countries cannot afford it so much. we have not seen that yet. we have seen demand going up and oil going up. i don't know if my hands can do it. tom: the hands are doing it. it is very good time. very geometric term at with -- chart map with francine.
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we are thrilled to bring in julian chillingworth today. it is a disease with a great bull market. the wall street journal today, 1, 2, 3 hedge funds shutting down. bring up the chart. this is the ball off the lehman low. trying to participate in this market with all sorts of reasons to not be in the market. this is front and center, equity outperformance by indices. what is an investor to do to catch up? tom,think in all honesty, you have to look at it from where do you think you can actually add value and beat those indices? where are you going to use more etf's, etc.,tment, and that is exactly what we do. we look around the world and decide where we can add value. tom: where is that right now? if i am of 8%, and the s&p 500
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%, where can you add value now? companies, undoubtedly, in technology. if you want s&p, you buy that as your court and add satellites around it. francine: we saw this usually pricing in yields. oil is also part of the story. is this almost a perfect storm where there is not just one big thing but the confluence of five or six factors? >> exactly. for energy importers out in emerging markets, it is a difficult environment. as was mentioned, it u.s. pushes above 3% next months wage growth, that is pushing us to 340. i think that pressure is going to be unabated. francine: what does that mean
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for china? two treasuries go up to 4%? what do the chinese do at that point? >> we are not thinking 4%. arehink treasury yields topping out around 3.5% next year. i think the fx guy, the china, the key issue for investors is the dollar level, which is crucial. china has shown a want to resist the renminbi weakening. what do you see in equity flows? forget about what people are saying. what are they actually doing in the market? is there appetite to own shares? >> yield will play to a certain degree. most investors are remaining fully invested in equities. they are musing what they should do in the bond market.
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putting aside places like italy, the attraction of the european bond market and takei bond market are less so. -- u.k. bond market are less so. tom: go ahead, please. >> i think we will see more talk about u.s. treasury. i think 3.50 is an interesting level. for .0.worry if we see 4.0.would weigh on -- that would weigh on equities. that could be the red zone. tom: is it yield competition or slowing, going to lagarde and the imf, slowing global gdp? >> it is rising cost of capital versus the return on capital. you need to make sure you can in companies that can return on capital.
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that is crucial going forward. you need to look at companies with solid cash flow and companies that are going to prosper in the next few years and not be affected by the cyclicality of their economies. francine: treasuries are up. how much does it hurt? >> in terms of percentage down? what do you mean? francine: sentiment as well. >> i think we have seen a nervey equity markets since yields broke out last week. i think that will continue. tom: thank you for the morning briefing. julian chillingworth of restaurant and chris turner as well. francine, ford motor company after a 75 year relationship with j walter that is an
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advertising story. we will get in equity briefing. kelly fisher joining us from bernstein. on data, yields front and center. the idea of where for an exchanges, the eurodollar 1.1 453, not part of that story. india, indian rupee and indonesian rupiah go out to new weakness. that is the story this morning. from london and new york, trounced by the red sox. trounced, i said. this is bloomberg. ♪ ♪
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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. tom: this morning imf suggest lower growth. they demand an end.
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yields higher. the dollar stronger. india and indonesia see new record weakness in ruby and rupiah. -- to the first tuesday of november. good morning. this is "bloomberg surveillance.". i'm tom keene. in london, francine lacqua. higher yields in the u.s. will not go away. they won't go away. i don't know if there is a plateau. will try to figure out what it means for asset classes. across alltraders the floors globally are looking at. the link to some foreign exchange as well. first word news in new york. trade war islobal
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cutting into global economic growth. the international monetary fund reduced its forecast for the first time in two years. it projects global expansion at 3.7% this year and next, down .2% from three months ago. the imf blames escalating trade tensions and stresses in emerging markets. the imf predicts inflation in venezuela will hit a staggering one point 4,000,000% by the end of the year. that is more than 100 times faster than the estimate in january. the imf forecasts venezuela's gtp will be the third straight year of double-digit kleins. pompeo's of state mike trip to asia did not go as planned. he found himself facing the limits of president trump's limits to move kim jong-un. he was forced to negotiate on the tarmac over who could attend his markets -- meetings with kim.
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brett kavanaugh here's his first argument as supreme court justice today. yesterday, kavanaugh and his family would to the white house for a ceremonial swearing-in. president trump apologized for the contentious confirmation process. pres. trump: what happened to the kavanaugh family violates every notion of fairness, decency and due process. , a man or woman, must always be presumed innocent unless and until proven guilty. you, sir, under historic scrutiny were proven innocent. thank you. taylor: kavanaugh says he has no bitterness and promised to be a team player. 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. bonds, currencies
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commodities. a little weakness. -15 on spx. dosages at -140. curve steepening, part is tens and 30's up more than the two-year euro plays weaker paired oil with a list after a couple days of record highs. that gets my attention. 30 year yield down 3.43. that should be up to basis points in yield and in the nation ruby -- rupee. to 238.nesia, rupiah up that is a big move in those two emerging marketing countries. francine: as you say, treasury yields front and center, 10 year could be into a seven-year high. european equities giving up gains. let's not forget about italy, by
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neil and sentiment here we'll see whether the country gets downgraded and that will have a huge impact. tom: this is interesting to frame the tension between em and develop world's purposes asia without yen. the yen strength and everything weaker appeared here is the 1997 crisis, nasa plunge, slow rebuild over time of the strength of the currencies. are up to standard deviations and we broke through new trend weakness in a basket of asian currencies. francine: what i'm looking at is credit default swap. this is the five-year. it is amazing because of market sentiment and concern that we had despite the italian finance minister appealing for calm amid
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the war of words and government and brussels and european authorities. the cds is very close to the one in south africa and above the one of brazil. now, to get coverage the imf.n the in let us hear from berkeley and a chief economist. the possibility that china and the u.s. resolve their disagreements would be a significant upside to the forecast. at some level, it is not surprising that we are more tentative in our optimism than six months ago. tom: distilling pages of phd
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work at the imf. kathy fisher joins us from bernstein this morning. is joining us. dynamic of the international economy? what is the key thing making us into disequilibrium. when is we saw over the last several the upswing has become less synchronized. that is one area of strength that we talk about when we had outlook saying every was synchronized and it gives more robustness to the recovery. we see sometimes of weaker development in events economies. looking forward, that is what
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everyone is looking at, the risk of intensification of trade wars, and that would be a drag on growth. tom: you mentioned robust. kathy fisher, robust is tom sergeants word appeared your world is more robust than anything i have seen. chasing a robust equity market. how robust is robust and madame lagarde talking about growth. when does it end? kathleen: the only market that is robust is the u.s. equity market. tom: bernstein is 120% u.s. equities? kathleen: know, we have been focused on non-us for decades. we recommend a meaningful way. typical investor is surprised that accounts are not out more than they are because if they have non-us stocks, they are not feeling as flush.
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the question is, how does the market adjust to this conundrum where the u.s. is strong in the global economy is in positive territory? where selloff in non-us markets, but a real tug going on and how it plays out will take time. what is theactly impact of higher treasury yields on equities? is there a correlation or does it depend sector by sector? kathleen: when chairman powell talked about the fact that rates are not in or near neutral, the market recognize rates are going up. we have been talking about the fact that if rates rise because the economy is strong, it should not significantly impair equity markets. in the u.s., high profit margins and things are good. looking ahead, we all know it will not be as good. that is why the market has sold off so much. everybody knows the factors that have contributed to strength for
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so long are indeed waning. caused ates have knee-jerk reaction can we expect to see increased volatility or he to to come. there will be good news and bad news here in the earnings coming out in the coming weeks will be quite good. the question is, what will the guidance be as management's talk about what impact they are seeing from the trade related changes to their business models? francine: harm, when you look at yields, this goes back to if what dollar does yields do and the trade wars, where do you see yields? does it go to 4%? harm: we don't think so. that the economic growth momentum has picked and is about to's -- peaked and is about to slow.
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of next the middle year, growth will slow down and the fed will not raise as much as it thinks it will. at some point, treasury markets will realize it. you are seeing a catch-up. yield have been low for some time. the upside is our view is limited because the economic cycle is turning in the not-too-distant future. francine: thank you so much harm bandholz and kathleen fisher. co-founderhe capital . will get his take on yields and some of his investment strategy. in the meantime, breaking news out of turkish foreign ministry on the investigation ongoing in the consulate. this is bloomberg. ♪
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>> this is "bloomberg surveillance.". her say these bends and time are working with its biggest investor for ride-hailing and car sharing services in china. talks are set for a joint venture. the ceo of aviva is stepping down. he shaped the company over the past five years through sales and deals. aviva says the turnaround looks to achieve has been achieved and it is time for new leadership. dp world seesr
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the market softening, but the chairman tells bloomberg it will not have huge impact on his business. >> one thing is for sure, trade will continue. if china finds it difficult to sell in new york state, they will find it somewhere else. that is your "bloomberg business flash." cirilli, as everyone tries to move on what we have done and the effect mr. cavanaugh -- judge kavanaugh has had on the election, it's time to get briefed to lead want to go to bill nelson and rick scott , toss up in florida. how did judge kavanaugh affect nelson, scott in florida? kevin: it will motivate the parties.both political
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in florida, what are the most impactful in a presidential well,and the midterms as what you are going to see is democrats really trying to get out to suburbanite voters, particularly women voters in the suburbs and to see how that parlays itself following justice kavanaugh who hears his first case today. you have the expense of going coast-to-coast. i leave the city and maybe get to the suburbs. here is a must read from professor summers a former secretary treasury. he got in a car and drove west. we drill for two weeks from chicago to portland and across the great plains -- we drove for two weeks from chicago to portland and across the great plains. television, bars, restaurants were rarely tuned. the united states is a
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remarkable place because it is of remarkable places. kevin cirilli, you have done our in spades, what does election coverage get wrong about the america you have lived in an election cycle? and i i would note this was speaking to a trump supporter just the other week who said, i have never read twitter period have seen the president's tweet on the news, but i have never actually logged into twitter and said what the president was feeding on his account. in news talks about it, but my life, i'm not loving into social media and on twitter. was anht that illustration of what the media gets wrong. the contours of the justice kavanaugh confirmation process are much more divisive and much than he wants them was covered in the media. francine: again, why does the president apologized to brett kavanaugh for what he calls a
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battle over the confirmation? kevin: he is looking at polls that suggest his base is with him on that. he is looking at polls in middle american states like michigan and wisconsin and ohio, where working-class voters were completely perplexed by the process that had occurred. indifferent, he is looking at polls of middle america that really felt that the entire process was out of touch and not in line with due process. is ace, does he need to go beyond his base but does he need to solidify his base ahead of midterms? calculation that this administration is making is that they need to ramp up the base and boost enthusiasm amongst conservatives because they are looking at polls that show the democrats' and busy as an is fired up to get to the polls. the women's movement is very
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fired up to get to the polls and other progressives for a host of different reasons are fired up to get to the polls. the administration is saying they need to stoke the flames. this will be a base election. we talk about independent voters, but this midterm will be a base election. francine: thank you so much, kevin cirilli. harm bandholz and kathy fisher of bernstein stay with us. research operations and she will be asked about midterms at 10:00 a.m. in new york and 3:00 p.m. in london. this is bloomberg. ♪
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tom: the message in budapest. president are one of turkey. extraordinary headlines. he takes the eu to task. they have not lived up to the pledge for refugees. turkish banks resilient. to be kind, others would disagree. is note: the president only speaking to an international audience, but his base. it is trickier in these times of social media and news everywhere. politician 20 years ago, you talk to your base at home and it was domestic and it would not translated abroad. it is difficult to see how some of the speeches if they are done
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for the global audience or domestic to rally the troops and interpreted. on hold is with us. we're happy to bring you kathy fisher on wealth and investment strategies which is his polite way to say how do i stay in this market. is there still a lot of that out there? a lot of people are still scared 809 years on. made thisthat is what cycle very different. no one forgot 2008. they have been looking for the next shoe to drop since then. it is not surprising that one rates rose and it could be transitioned going on, you saw money starting to flow. i was also -- would also argue that over the long-term, people are recognizing a pause after a couple of good years. not a surprise. tom: how nifty are weak or harm
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is too young to remember this, but there was a phrase about nifty 50 was concentration. how nifty 50 are we? clearly people were making an analogy. the banks had good earnings. tom: and revenue growth. kathleen: you can make the case the google and facebook had terrific earnings and valuations were not unusual. now we are seeing a rotation. what is interesting in this market is despite rates going up, you'll oriented stocks -- yield oriented stocks have done well. expect summer tatian as the market starts to feel where it can be comfortable and longer duration stocks -- we do expect to see -- cyclene: how does the end
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and the fiscal boost play out. are we looking at a severe downturn in 2020? kathleen: that is the question everyone is asking. we do not see a recession in the near-term. what can happen in the years to come is the question. it would be fully to think you can do something now in anticipation of a recession that will come. we think it is quite a ways away at this juncture. francine: when will you have more of an idea? what do you look at for signs in the economy or in stocks that it is a good time to get out? kathleen: you are looking for changes in volatility and correlations and signs of anything of risk being beaten down. today, the selloff has been modest -- quite modest, and that
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is surprise and -- surprising that after years of low rates, we are seeing sustained momentum across the globe and rates moving up, still from modest levels, but we are seeing a much broader basis. tom: we will touch on yields. bernstein with us and also harm bandholz of unicredit. the interview of the day on international relations, and the projection of the united states across the pacific. former nato supreme allied commander. this is bloomberg. ♪
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francine lacqua in london. tom keene in london. what you need to know, higher yields and you see it in weaker emerging-market currencies.
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president erdogan speaking in budapest on refugees and his domestic banks. with your news update, here is taylor riggs. taylor: for the first time in more than two years, the imf cut its forecast for global growth. is projecting global economy will grow 3.7% this year and next, down to 10th of 1% from the forecast three months ago. from the forecast three months ago. pakistan will seek a bailout from the imf. week during this annual meeting in indonesia in august. he told bloomberg the government may need more than $12 billion. they have13th time returned to the imf for help since the late 1980's. 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. thank you so much
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great let's talk italy and the finance minister has said the country's output gap with nations is unacceptable. he defended his fiscal plans in poland. yesterday, the 10 year yield jumped by as much as 30 basis points, the highest since early 2014. we are joined by marcus ashworth and harm bandholz is still with us. thank you for sticking around or coming on. how you look at the italian situation? i don't know what the endpoint is. marcus: it does not look like much good news. weeked valiantly last and i'll at the fine were some payments coming up. this month, the first month of less qe, there is decent cash flow back in.
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nonetheless, the market does not care about that. you can imagine how much worse it would be if it weren't for the 20 billion coming back to investors. is that athe concern some point italy may be downgraded. if it is downgraded, does it become investable or uninvestable? marcus: it is not uninvestable yet. yields reflecting below investment grade rating anyway. the market has priced in one rate cut from s&p. triple b, down to there literally one fit over the edge -- foot over the edge. sell.unds will have to it remains investable with better yield. , 4% isrm charts of italy a cute level. and moving to a
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better space, if you go about it, it would flip back to 2013 to 2015 range which would be unpleasant. tom: commenting on the travails of italy, greece, and manchester united. we have harm bandholz of unicredit. we will sidestep italy. we will go to the tensions in europe that the imf faces. asia,cus to me is asia, the u.s. is great. then there is greater europe. from where you sit harm, is it thumb up with him down on europe? harm: it is maybe sideways right now. tom: we heard that in the last hour with chris turner on for stable euro. it is still solid around
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2% roughly for the next couple of years. it is characterized as being solid and that is in line with our expectations. better, got -- could be is progress. we have a couple of countries taking a step that from your and integration. germany is not an exception. pressure.kel is under the conservative wing within her party is gaining power. they are not as much in favor of fast reforms. that is the issue where europe is not moving in the right direction fast enough. a number of days ago, it was said brexit was grim. andhe eu, tensions of italy
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what we are seeing is front and center. it is a real beginning of the brexit heat, isn't it? marcus: we are. is not a good development. we have to acknowledge that when the referendum took place, there were better forecast for economic development. tom: they aggressively pushed against that. kathleen: we are not quite there. -- harm: we are not quite there. the divorce is coming. we have to figure out how to do with the border. nobody seems to have a clear view of to solve the conundrum. francine coming on marcus
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can figure out the border in the next 20 minutes, can't you? francine: marcus was drying up plans and giving it to the prime minister in the previous hour. on a serious point, the sterling tone, the trend gets fixed. it is hot and cold. the eu and u.k. don't get along what are working on a plan. if you are a sterling investor, who do you look at to give you clarity? >> theresa may is dragging her heels. they are pushing the u.k. towards it and she made out of a job. it is her turn to step back and let them sweat and see if they come up with anything different, and they haven't. francine: is the you sweating? marcus: let's see if they are pitch is under no pressure herself.
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she will see if there's anything coming out of the eu. she does not want to be the prime minister that made the u.k. crash, but she still wants to do. to'ss: she would once death she wants to stretch it -- she wants to stretch it out. .om: your morning briefing a team to get you fired up and get a summary of the news. this is bloomberg. ♪
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taylor: this is bloomberg surveillance. let's get your "bloomberg business flash." the head of the largest advertising group, a big client, .ord, has moved to on the calm om. --omnic the company has fallen 17% this year. has his eye on papa john's. they are considering a takeover bid. the pizza chain was up for sale in a mixed for a fight over the founder. the founder of rome's 30% of papa john's and is still on the board. a country's latest attempt to take on divide. tv there areomberg
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plenty incentives for a company to commit to a 10 year agreement. >> the proposition is simple. company out .f c qutar and basicallyital pay off operating expenditures. taylor: saudi arabia and the uae are using the same tactics, including plans to relax the company ownership rules. that is your "bloomberg business flash." francine: now to emerging markets and the imf has slashed growth for turkey. businessing, at a forum in budapest, the turkish president erdogan says the nation has been the target of attacks.
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web marcus ashworth of unicredit bank. when you look at -- we haven't marcus ashworth of unicredit bank. when you look at what the president is saying, will they meet half way are will there be more market movement for the leadership in turkey to take action to fix it? marcus: we have the plan coming up from the finance minister later. we will hopefully come up with something substantial. we have not seen anything of any market changing impact. the forecasts are interesting and they drop from 3.5% to 0.4 next year. it almost certainly were swing to recession. i do not think whatever the imf says that turkey has any interest in listening to it. francine: what would it take to get investors back in turkey?
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marcus: an awful lot. there is no way on the current -- even if the central bank hikes rates that the turkey is investable. tom: michaud a chart on turkey. -- let's michaud a chart on turkey. me show a chart on turkey. standard deviation 4.2. is textbookz, this dampening function. is this because the world compensates now and we are in a lot more floating exchange environment and turkey is not buffeted? we mentioned the strong dollar and high interest rates in the u.s.
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that is hurting all emerging markets. there are all problems in some countries and turkey is one of them. you have a group of countries with deficits who always need capital inflow and dollar funding. if you have a political system that investors do not trust in, that is a triple whammy. indian rupee.t is i want to go to italian. bring up the banner to dazzle francine with my italian. the butterflies are flapping. did i do ok? francine: i am impressed. tom: there are butterflies.
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this chart is not funny. be butterflies are flapping in turkey, india, indonesia. tell me about the other flies? are nice, buties for emerging markets, it is a concern. higher interest rate and it starts with the countries with weaker fundamentals. we started and emerging-market and the issue started because of ideas and credit issues. it looks like it is becoming more widespread. chart.t me show you this this is india and the long-term depreciation. hereutterflies clicking with the trump election. we get the strength of rupiah, and it falls apart because of strong dollar. francine: we talk about emerging
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markets and idiosyncratic andets and venezuela argentina, turkey. problems.domestic overlaid is the huge account deficit in dollar denominated currency, which means they are struggling. marcus, how much pain are these emerging markets going to see if the dollar goes higher? marcus: a lot more. it is relentless with the fact that u.s. yields are dragging. a lot of foreign funding is done by these countries in dollars. the local currency yields are moving to new highs as well. oil is higher as the dollar strengthens. the pain gets worse. the localized problems, nothing looks like it has been solved. africa has itself in trouble
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over the finance minister and upcoming budgets. that's similar things in india. hikinghike rates but got -- hacking. turkey has rampant inflation. a narrower account deficit. thecine: should the fed be central bank row the world? marcus: no, and it won't be. powell has made that quite clear. that. is above if the u.s. economy goings -- keeps going, yes to do his job. sparta,x emails from like in greece somewhere. --says what this
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francine: the butterfly effect. tom: did i do it ok? i will have to get you some rosetta stone. marcus, not speaking italian but doing a good job. " from unicredit stays with us. coming up, chief international economy of deutsche bank. this is bloomberg. ♪
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tom: francine lacqua in london. i'm tom keene in new york. whochart with harm bandholz came to international acclaim with an oil essay years ago. this is a chart. i suggested to francine the only .ne that matters in bali and dollars when you convert it to yen currency, in this case
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rupee, it looks different than rupiah and lira. i am sorry, this is totally unsustainable. how long does this go for? it can go a long time, can it? harm: note cannot. there is unrest in some areas. the government tries to control it by supporting the population. in general, this is another oilor, heil oil -- higher prices and emerging markets for countries that have a deficit. there is a deficit facing strong dollar. this is all adding up as a mix of negative. you fold bilateral
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trumpism and a meeting with the secretary of state in north korea and china? that is an overlay different than this chart, isn't it? politics is not -china trade.s. politics. economics has two things. when his trade price and one is supporting domestic economy. the second one may have a bigger impact on domestic. beefing up growth and supports the dollar. it is more from that part of trump politics where we may see it from the rate hike. where do see it going from here? surprised china has
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watched its currency weakening to potentially offset part of the higher tariffs in the u.s. how much they add to it or let , they don't want to weaken too much because they will be facing other problems maintaining control over it. was not against their will. overall, is there a concern that china is slowing down to a point where it will be a skewed commodity? harm: not at this point, as we have seen. prices remain competitive. we see moderate slowdown in china. the imf has not been too concerned. some of it was wanted anyway, as china's gdp per capita levels
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have gone up. look at tech and economic. you could think the growth would come down at some point. they could not stay at double digits and 6.5% to 7% forever. thequestion is how much of trade war escalations and how much is it normal slowdown because of a maturing economy? tom: thank you so much. out inon numbers coming today's. -- in two days. francine, a diplomat emails in and loved my italian. he wants more. think i should get to work on this? francine: i think you should. cover the spread and look at the possible follow-up from markets and brussels. i think you should do that and italian. lagarde cannot decide if my
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french or italian is worse and much more to drive the conversation for us. kevin cirilli in washington, looking 28 days away to elections. worldwide, it will you need to focus on is higher u.s. yields -- 30 year bonds will adjust the housing market to say the least and effect selecting emerging markets, including india and indonesia. don't forget, we continue bloomberg surveillance on bloomberg radio coast-to-coast, even digital. we say good afternoon to london. this is bloomberg. ♪
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alix: the big yield breakout, 10
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year treasury yields hit a 10 year high. morgan stanley throws in the towel. a imf cuts the global forecast. stresses in emerging markets leads them to gut the global growth forecasted two years. risetion in venezuela will . the italy italian -- italian finance member -- minister defends their policy. david: i am david westin right here with alix steel. we are not in the panhandle of florida. you can see this is the satellite photographs of how the storm is entering the gulf of mexico. it is going to take a right-hand turn and go at cross -- across the panhandle. alix:

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