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tv   Bloomberg Surveillance  Bloomberg  July 11, 2019 4:00am-7:00am EDT

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>> a sure thing. jay powell signals a cut is coming as concerns. rising tensions. .he british navy intervenes deutsche bank in the crosshairs. u.s. investigators probe and involvement with malaysia. welcome to "bloomberg surveillance." good morning. good afternoon if you are watching in asia. i am francine lacqua. these are your markets. a cheer across the market for a dovish tilt for central banks.
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we heard from jay powell. we will hear from him again today. the euro-dollar, 1.1278. there is a lot going on, not only about trade. official taxes that france will vote on. there is a mood on what happened to euro depending on what we get from the ecb minutes that will be released after midday. we will watch for that and any movement on currency. coming up, we speak with the sao paulo governor, he is joao doria . plus we will speak to sheriff brown about u.s. politics. let's get to the work first word news. >> deutsche bank is now being probed u.s. justice department as an expanded investigation.
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the u.s. is reportedly taking a closer look at a former goldman sachs executive who later worked at the german bank. authorities haven't accused which a bank of wrongdoing. another federal probe, the u.s. investigating france's plan to tax tax giants. so-called 301 investigation is the same tool donald trump used to impose tariffs on china. korear japan nor south has much political incentive to climb down on their trade complex. last week it escalated when tokyo moved to curve the export of the vitals to south korea's tech center. tomorrow the two sides plan to meet. hedge funds have seen the best first half of the year in a decade. the average multi-strategy fund has gained 6%.
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the stand at -- stand out, said adele. and --ck simcity blackrock's obsidian returning. the switch is now more affordable. nintendo is releasing a smaller version called the switch light. it will cost about $200, $100 less than the original. last year nintendo sold 17 million. amazon starting with $1 trillion valuation again after posting a seven day winning streak. this today's close seeing its market cap rose to $993 billion, a gain of less than 1% would push it above the 10 figure mark. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg.
4:04 am thank you so fed chair jay powell has made it clear he is preparing to cut rates for the first time in a decade. no sign of overheating in the jobs market at home. here are some highlights of his congressional testimony. >> the overall economy is performing well but we see what we call crosscurrents, principally trade developments and concerns over global growth. .e see those many participants saw those as weighing on the outlook and calling for possibly more accommodative policy. 3.7% is in low -- is a low on up limit rate. to call something hot, we need to see some heat. we see a lot of reports of companies having a hard time finding qualified labor. nonetheless, we don't see wages
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responding. i don't see that as a current issue. the bottom line for me is the uncertainties on global growth and trade continue to look at the outlook, and inflation continues to be muted. those things are still in place it i said what i intended to say on the subject and what i have me ais the law gives four-year term and i intend to serve it. francine: s&p 500 above 3000 for the first time ever. joining us is mark burgess. columbia threadneedle has more than $459 billion in assets under his management. mark, always great to have you on the program. seems like a done deal for the fed. are they bark stand by the market? -- are they boxed in by the market?
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mark: inflation is pretty nonexistent. growth is slowing globally. trade talks weigh heavily. the irony is much of the trade of uncertainty. to usk that does lead going into lower interest rates. he is very concerned about the future. yes, there is room for cutting rates. francine: he is using firepower to cut more than expected? how would you describe the economy right now? is it the beginning of something ugly? left from the language he has used, he has left himself opened to a 50 basis point cut. i don't think that is necessary. francine: let me bring you to the s&p which is a great chart.
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we put in some of the averages and record highs. this comes five years after the -- how much higher can this go? mark: the u.s. equity market looks fully valued. by some measures, it looks ok. given there's a lot of growth stocks in the u.s. equity market. i think the other thing we need to remember is you've got the trump running for president again for the second term. he is very focused on the economy. having a strong u.s. economy will underpin his bid for a second term. i think he will do what he can to make sure the economy isn't good shape and the stock market is in good shape. chartne: this is another looking at the june inflation. report for jobs. mean a policy
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mistake? because we are not seeing that much inflation, it wouldn't do much? do you worry that they need to reverse it? mark: all investors are keeping a very close eye on inflation. there really is no signs of an uptick. i don't know if that is due to technology or demographics but inflation is pretty nonexistent. francine: i have another chart. i am like on fire. i will bring it in a second. where do you worry we will be badly surprised by? mark: we could get badly politicians are where we are most concerned. policy mistake is the key risk for markets. francine: markets are struggling to miss price. the impact it has on the economy.
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this is a chart i want to show you. looking at the disappointing economic reports in the u.s. and globally. mark: i don't think monetary policy is in a place where we will see a surprise. it is something that will fall down to the trade talks. escalation between china and the u.s. francine: mark, thank you so much. he stays with us. markets price in a rate cut from the fed. how will mario draghi respond. we will look ahead. the latest from the gulf as tensions rise between iran and the u.k. later we will focus on south america's biggest economy, brazil. domestic our interview with the governor of sao paulo, joao at 9:30 u.k. time. this is bloomberg. ♪
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francine: economics, finance, politics, this is bloomberg surveillance. i am francine lacqua. let's get to bloomberg business flash in new york city. the ceo of norwegian air shuttle calling it quits just as a turnaround plans start to take whole. stepke hold he wanted to down after leaving norwegian's rapid expansion. the airlines reported second quarter earnings soared 6%. more news about the biggest ipo , avme year, agee and beth bear -- it is offering 1.6 billion shares between 40 and 47 hong kong dollars, about 5.1 t
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six u.s. dollars apiece. that is the bloomberg business flash. francine: let's keep you up-to-date with news from the middle east, the british navy has intervened to stop iran from carry oil -- the ship can as much as $1 million of -- one million barrels of oil. track all of these vessels by using our bloomberg terminal. riad hamade. the main source of information is from the british avernment which is saying three training vessels tried to impede the british tanker and that the royal navy shipped intervened and warned those
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vessels to get out of the way and they did. that is what we know. we also know the tanker is now through and as past. -- and has passed. incident should be seen in the context of the spat between iran and britain over an iranian oil tanker which was held by the british authority in gibraltar on suspicion it is delivering oil to syria. francine: what are the wider implications? >> the wider implications is, it is another -- it is a complicating factor in that the iranian spat with the british which the british arguing should not be confused with the argument over the nuclear accord which was kind of dominant on the iranian minds. they are trying to say, ok, this argument of the iranian tanker
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is limited to sanctions on syria . the rains see it in the wider -- the iranians seated in the wider context. prevent iran from selling its oil and hurting the iranian economy. they are showing and threatening in a way saying, if the u.s. puts pressure on us and you are not willing to do anything to stop the american sanctions from having an impact on us, then we have our own way of retaliating. francine: thank you so much. europe and on investors will scour today's minutes of the june meeting to see how strong was the push for more easing and how great are the chances for change this month? aro draghi virtually gave the -- mario draghi virtually gave the game away. mark burgess is still with us.
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first of all, the question is if the stimulus under president draghi, does it make a difference for markets? mark: i don't think it does. the key issue is what they actually do. for us, looking at the data, the interesting thing is european growth is soft. it has been soft for a while. it doesn't appear to be deteriorating. i don't know if draghi has been seeing something that we haven't seen. there has been an uptick to european industrials. i wonder if that is a signal he is focusing on. after that, nothing seems to be deteriorating. francine: this they were saying was partly policy, partly the trade concerns. how much is it the trade fault? mark: i think it is a range of issues.
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trade with china is a big issue for many companies. , i don't think things have gotten worse. francine: what is the question you get most by clients? is it about negative rates? mark: at think they have gotten used to negative rates. clients are concerned about geopolitics, brexit. they want to know how we are going to navigate that. they want to understand what the means.tions of trump francine: does your mandate change at all? mandatethink the doesn't change. the way you apply risk has to change because it is less for castable. forecastable. you cannot predict it in the way you predict other things.
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francine: for the ecb, the markets keep on testing whether they have enough tools. you worry about the ecb if there is a downturn? we are not seeing it now. they don't have the firepower to deal with it. that if there is something would worry me, it would be the -- the sectors not banking system in europe is key to lending into the real economy. it doesn't act like the u.s. economy does. funded.s in europe are if the interest rate environment positivityport bank -- i don't see how negative rates can help that. francine: i was going to say what is the solution for that question mark mark: i don't know.
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for europe to move over we need to see a better banking system. everything we see is counter to that. francine: mark burgess stays with us. deutsche bank confronts more essential problems. it now faces an investigation is a part of the u.s. justice department's probe. more on that next. this is bloomberg. ♪
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francine: this is "bloomberg surveillance."
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i am francine lacqua. let's get the latest on the trouble facing germany's biggest bench. deutsche bank is likely to face an investigation from the u.s. state department as a part of malaysia's probe. dr. cut ties with jeffrey epstein as authorities were waiting to charge -- joining us is nicholas comforts. why is deutsche bank now a part of this probe? one of the employees that came from goldman that went to deutsche's that basically could have been a link. >> precisely. the goldman employee that moved onto deutsche bank and also this business relationship continued with the 1mdb. it is important to note that either the bank nor the
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individual has been accused of wrongdoing at this stage but obviously the u.s. will be interested in seeing whether deutsche bank did indeed do everything that needed to be done. properly.pervised deutsche bank says, look at the files he has already made public. they clearly state that deutsche bank was used by 1mdb on this. is -- doj ishe boj looking to see if there's anything more to it. francine: we will have plenty more from nick and a connection. comforts.olas let's go back to mark burgess. the question we were trying to answer is are we going to have more consolidation? is that a catalyst for solutions
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? will it create more problems in the banking sector? bank on thatto route unsuccessfully. there is so much uncertainty around the balance sheets. sure what you are putting together. investors were being nervous about bad bank and a bad bank coming together. francine: do you need to raise capital? mark: there is no question which needs more capital. at the moment investors, there's too much uncertainty. the questions facing deutsche bank are candy execute this restructuring? can i get cost down at a faster rate? when they get to the point, does that business makes sense from a neck and three respect -- from an equity perspective?
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the investors do not believe that at the moment. francine: mark, thank you so much. he stays with us. south america's biggest economy struggles to get its growth back on track, the governor of sao paulo joins us here in london for an interview. that is coming up next. this is bloomberg. we will have plenty more on euro markets. jay powell giving strong signals to the market about what he is doing. looking in front of the other movers. the pound is moving. dollar is weakening as treasuries rising and the rate cut fats -- rate cut fence are mounting. this is bloomberg. ♪ hey! i'm bill slowsky jr.,
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excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. francine: a sure thing. jay powell signals a cut is coming this month as economic concerns mount.
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rising tensions as britain intervenes to stop iran's blocking of a tanker in the persian gulf. deutsche bank in the crosshairs. investigators probe the lenders involvement the latest 1mdb event. in morning everyone. good afternoon if you're watching from asia. this is "bloomberg surveillance." i am francine lacqua. let's check in on what is moving in the markets. >> we are seeing u.k. homebuilders doing well across the board. one of them is barrett, up 1.3%. there are new homebuyers coming into the u.k. market for the first time since 2016 even with the uncertainties. they are seeming more confident and more reliability and people buying homes. the consumer goods company also railing this morning come up about 2.6%. this is after they settled in opioid case. shares rallying. the idea is doj overhang and
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they are settling for $1.4 million. the swiss company, shares dropping 4%. they had downgrades saying it is not necessarily overall weakness. momentum showing after the shares gained. the company has a lot of fx headwinds. thank you so much, dani burger. let's get to the bloomberg first word news. >> the federal reserve is getting ready to cut interest rates for the first time in a decade. it sees a cooling global economy and weak manufacturing around the world. speaking in testimony to the u.s. congress, jerome powell says the strong jobs report didn't change that you. >> the bottom line for me is the uncertainties around the global growth and trade continue to
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weigh on the outlook, in addition, inflation continues to be muted. those things are still in place. >> the u.k. confirming an incident with iran. it said three vessels tried to "impede passage of a tanker." causing intervention from the royal navy. semi -- the night a confrontation. -- is europeanne commission president. she has yet to win over a sizable number of socialist to get a majority. this roadblock highlighting the risk that parliament might veto this slate of nominations. ryanair is warning extended grounding might hit its growth plans. push for a specific date
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for the planned return to surface. he says boeing is indicating the max should fly again by the end of september. >> if it gets much beyond --tember, >> staying with the aircraft story, we were able to speak with iag chief executive. he was optimistic about the max -- prospectsh sex for returning to the skies. >> when it comes back into service. inspected -- i think the most inspected aircraft. i have no i.d. the -- have no the issues have been identified. >> global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries.
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this is bloomberg. francine: let's focus on south america's fixed economy. forecasters expect the brazil gdp to expand more than 1% this year after two years of weak growth. government boost the economy and return brazil to its story?story? -- global he is known for hosting the brazilian version of the apprentice. welcome to bloomberg. i'm delighted to be joined by a former central bank president of brazil. us onyou both for joining bloomberg surveillance. mr. doria, talk to me about the economy. we are expecting the economy to
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expand less than 1% after two years of weak growth. how did you get back on track? joao: working hard. especially sao paulo. probably 20% to 25% over the brazilian growth and sao paulo is the largest date of brazil. the largest economy of south america. argentina, than chile and peru and colombia. we have the strongest position in south america and also are doing in great britain to convince investors to go to sao paulo and make new investments in our industry and our science and technology sector. francine: missed an array us
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when you look at the challenges of the brazilian economy, what are the main obstacles for growth? >> today, social security. the good news here social security is being approved. important point looking forward. after that, to have a tax reform which is also on the way. with basic reforms, we will be restoring the growth rate. after that, we will have a little -- that is more grad levels. francine: are you worried? why is this difficult for the joao: at thisw? moment, the approval of the social security reform. yesterday, the good news, the congress approved in the first
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this social security reform. the division and opposition in the brazilian economy for the next four weeks, probably we will have a second run of the senate and we will get approval of this. approval, wer this can go fast. we can go directly to the investors. to come to sao paulo, the come to brazil and to make good investments. i have to add, in case of sao paulo, we have a very powerful program. parks, 62 different areas of the state department we put in the private hands. francine: i want to talk about privatization later.
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policy we are seeing -- what we are hearing from jay powell -- a gift to brazil? >> it is very important at the end of the day that the fed provides the right monetary policy for the economy. generatestimulus bubbles and possible inflation which is less likely. on the other hand, if it doesn't side atthe incentive the right moment, the economy can grow at the lower rate. what is possible, i think the fed is trying to set the right pace. i think they are on the right track.
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-- we are convinced that is the best way to invest. francine: how much are you expecting to raise from this? >> in dollars, could be around almost $20 billion. francine: what comes after?
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this is the next privatization. is there another company you are looking at? >> we are open to new investments, roads, airports. we have 20 original airports and sao paulo state. to bee more than 50 roads privatized. now a part of sense of us young. -- san sebastian. new investors and sao paulo. francine: you were talking about wanting to advertise that. transform that. is that one of your priorities? >> yes. it is not exactly the same but it is important. will be transformed in the big park. park in the big middle of sao paulo city.
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we will transfer airplanes to by.her private airport near it will be a big amusement park for the public. francine: how much do you worry about trade wars? these trade tensions between president trump and other parts of the world. it does that make you worry about mobile growth impacting brazil and impacting sao paulo state? >> the trade war at least in words so far is something but the american economy is a story enough not to create enough problems for other economies. which are doing well and brazil. the basic reform at the country
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is performing is so important part of the resilient economy. approved. is to grow brazil is going a little bit less related to the u.s. economy. investorsdo you think in 2019 into 2020 will be back in emerging markets? henrique: i think so. we have been talking to investors here. before that, here in new york. with the approval of the reforms, definitely [indiscernible] it is by itself.
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it is a living factor for investors. evidently, if there is more resources going toward emerging markets, that also helps brazil, but brazil today is in a situation that is not so dependent on the general flow of global markets. joao: if i can add, especially in sao paulo. sao paulo is a nation within a nation. francine: 45 million people to put it in context. have a big infrastructure also in the state. roads, ports, airports. the infrastructure and sao paulo is heavy. market is very strong. points an attractive extra to investors to go to brazil.
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have been close to present bolsonaro. do you intend to run for president? >> it is not time to talk about that. we are in the beginning. it takes months. we have 3.5 years ahead. the time now is to make a good administration. not to tell or to debate president elections. francine: come back to bloomberg and telus. -- and tell us. we will be back. plenty more from bloomberg surveillance. we will talk about testimony and bring you the latest on treasuries. this is bloomberg. ♪
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francine: -- >> i cannot hear you. [laughter] >> my answer would be no. i kind of said what i intended to say on the subject. what i have said is the law clearly gives me a four-year term and i fully intend to serve them. francine: that was jay powell and maxine waters question whether he would leave his post if president trump asked him to. technology giants are coming under scrutiny from washington. so-called pier 1 investigation is the same tool trump used to impose tariffs on china. joining us now is alex webb. we are back with mark burgess.
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alex, why is france the first country to do this? alex: the u.k. as well. in 2020 there will be a 2% tax in the u.k. the thing is, this seems to be a push from france and u.k.. to really try to set the agenda on how this global tax is going to change. everything is working at the moment on new proposals. with the hope they get adopted by the g20 next year to ensure there is a uniform language that people use, a uniform tax system that is adopted to adapt to the new realities of the global economy. germany doesn't like the idea but france and u.k. do. it seems as though there could retribution of
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tariff on french imports. it is weird there targeting france given the u.k. is doing this. over trade with france. this organizations from the regime. francine: mark, what does this mean for you tech? i don't know this changes because it becomes a proxy for a trades match. mark: whether it is tax or antitrust, regulation is the biggest risk for tech companies. at some states, these companies are going to be sufficiently begging the authorities to do something about it. they need to raise taxes. they seem like easy targets. they don't appear to make very much money. this is another means of getting
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around that. it is an understandable response as the u.s. are saying. neither themaging french or the u.k. in that way. francine: think you both. tech,ebb, he writes on that is why is not wearing a tie. us. burgess stays with coming up, the latest episode of leaders from blackrock. talking sustainability and ensuring the future. that is at 7:30 p.m. u.k. time. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." looking at european equities climbing a little bit. futures, we have these investors, a lot of participants cheering for such a bank for the first time rates are heading lower. talking about ecb, the fed, the treasury could what we didn't talk about was emerging markets. them anda buy on
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whether it is structural reform or because there is all of this dovishness out there. >> i think it is a combination of everything. one, rate talks. the idiosyncratic risks that you see whether in turkey or mexico. the composition you are having just now on the outlook on regards to a weaker u.s. dollar, u.s. bond yields as a positive backdrop to the emerging markets. secondly, growth is scarce around the world. and there is a lot of big gives. -- big if. if the brazilians get this -- there isption is something that needs to be sorted out. believes he is very pro-business
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and as a pro-business agenda. to broaderoing back conversation on emerging markets, how do you stack the fact that a strong dollar hurts a lot of these emerging markets? mark: we think the dollar will weaken going forward. dovishness being dismayed by the central bank won't support that. the dollar looks a bit overvalued. that will be supportive backdrop. francine: is that your most important call? there are so many points of tension. sense of whate your portfolio looks like? mark: asset markets everywhere have had in a norm is run this year. -- and no miss run this year. -- enormous run this year.
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still look attractive. we think investment grade still looks attractive. we don't have positions in anything. the outlook is very uncertain. francine: mark, thank you so much for joining us. he is mark burgess. we will have plenty more throughout the day from jay powell. we have those ecb minutes. french finance minister speaking at the france senate about this tax on global text companies -- tech companies. ♪ xfinity mobile is a wireless network
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concerns mount. rising tensions. deutsche bank in the crosshairs. u.s. investigators probe the lender's involvement with one of malaysia's investment funds. "bloomberg surveillance." "bloomberg surveillance." this is -- this is "bloomberg surveillance." i'm francine lacqua here in london. tom keene is in new york. i have some pound calls, dollar cause. i have treasuries. the market is trying to figure out what the dovish message means. tom: bruce cassidy joining us in the next hour by telephone. it will be interesting to see how it pushes against the 50 cut basis point -- 50 basis points. francine: we will see what it means for market pricing for the future. let's get straight to the
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bloomberg first word news. in new york city, here is viviana hurtado. >> nothing seems likely to keep jerome powell from cutting interest rates later this month. after his testimony on capitol hill, traders wonder if he may cut rates more than the quarter-point the market has priced in. powell siding risks to the global outlook and too low inflation. the royal navy coming to the rescue of a british tanker. the u.k. says it was escorting the tanker went three iranian vessels tried to block it. off.ranians were warned iran denies the report. this comes after british forces seized a british tanker suspected of carrying iranian oil to syria. the u.s. will investigate a french plan to impose taxes on tech companies like facebook and google. robert lighthizer will have up
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to a year to examine whether the plan would hurt u.s. companies. that could lead to remedies, such as tariffs on french goods. the justice department investigating deutsche bank's role in a scandal. investigators have spent years looking at goldman sachs' involvement. now they are examining a former goldman executive who later worked at deutsche. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. bloomberg. tom: thank you so much. currencies,nds, commodities. we have made back 60% of the retracement at least. t.tures with a further lif 3004 on xps futures. euro stronger on dollar weakness. handle. a 12.96
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much lower earlier. there is the close on the s&p 500. 1.80.o year yield, what do you got, francine? francine: i have a similar data check. i feel like we have been on the same page for a couple of weeks. stocks, bonds climbing. it is all about the rate cuts, right? which is why our data checks are similar. there are fresh signs from central banks that rates are heading lower. investors are cheering that now. it depends on how big the fed cut is. we are looking at crude because of what is happening with that british oil tanker. tom: this is what happened yesterday. this is the physics of the market getting out in front of any central bank. just needs -- this needs a little explanation. this is the u.s. to year yield with three moving averages --
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two-year yield with three moving averages. what you need to know is how these three moving averages go to one point. they are converging with a massive conviction down to a point. this is massive inertial force. this screams lower in yields. francine: yes, it does. i love that chart. i have a more simple chart looking at the s&p 500 moving above 3000 yesterday. it did not finish above 3000 but it touched 3000. ms. comes near the five-year -- this comes near the five-year mark of one the index had its last round number. we are seeing a couple of european companies coming out with profit warnings. back to the fed. jerome powell has made it clear he is preparing to cut rates for the first time in a decade due to a slowing global economy and no signs of overheating in the
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jobs market. here are some of the highlights of his congressional testimony. chairman powell: the overall economy is performing reasonably well, but we see what we call crosscurrents, principally trade developments and concerns over global growth. many fomcse and participants at the last meeting saw those as weighing on the outlook and calling for possibly more accommodative policy. 3.7% is a low unemployment rate. to call something hot, you need to see some heat. while we hear lots of reports of companies having a hard time finding qualified labor, nonetheless, we don't see wages really responding. i don't see that as a current issue. the bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook. in addition, inflation continues to be muted. those things are still in place.
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i have kind of said what i intended to say on the subject and what i have said is that the law clearly gives me a four-year term and i fully intend to serve it. francine: joining us now is gene frieda, pimco global strategist. what does it mean for the markets when you listen to jerome powell? how much more can central banks do? gene: we still have a little over 200 basis points that they could do. it is interesting that the market has been reluctant to believe in the concept of uninsurance cut. the for -- an insurance cut. the fed has led the market to focus on the labor market as the sole barometer of the economy. as you look at inflation, manufacturing, you see a significant weakening and pressure. from that perspective, i think there was very much a saly rumor by the fact -- sell the rumor by the fact.
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was quite a big move before and after. francine: is 50 basis points what you are expecting? this 25 make a difference? gene: i don't think it makes a huge difference based on current market pricing. they will probably cut 25. it will not be horrible if they cut 50. this is really an insurance cut. the closer you are to the zero lower bound, the fewer chances you want to take with allowing disinflationary pressures to take hold in the economy. there has got to be at least some argument to surprise the market positively. i think the market will tend to overprice the possibility of a second cut and going 50-50 on a 50 basis point. tom: it is physics thursday here on "bloomberg surveillance." the two-year yield chart i showed, i made it for gene.
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we have three moving averages converging in a massive downtrend. how do they break this trend? or do they just simply have to wait for the markets to clear and for gdp to lift? can they actually break the trend of yield? gene: break the declining trend of yield? tom: yes. how do they do that? gene: in the front end of the curve, i'm not sure you necessarily want to break declining trend in. yield the focus is. on getting inflation expectations back up. that comes down to how aggressive you have to be or you can credibly be with monetary policy when the economy is already very late cycle. it is hard to stoke the interest rate at this stage. i don't think it is so much about breaking the front end trend. yields have a reasonable chance of going lower. the dollar probably goes with it. that will impart a significant
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easing of monetary conditions globally. tom: this is really important. give us scope and scale. when you say to year yield goes yield goeso-year lower, give me the number of basis points. gene: i will give you a weak answer. it is what the central bank says, data contingent. tom: you sound like a banker! gene: i gave that up a long time ago. i think if we look at the stay of the economy today, i would say yields do not have to go that much lower. you can probably get away with an insurance cut for the course of this year. call it 50 in one go or 25 in two goes. we are in a very fragile phase of the global business cycle. it will take one or two minor shocks on the trade front to tip us over. i think that is why you have to be a little bit flexible and say
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, if you asked me today, i would say 50 basis point cut is enough the second half of the year and we will continue on our merry way. if we get another couple of shock,s related to trade, you can imagine them going much deeper. tom: i love that, weakest. from pimco providing wisdom on "bloomberg surveillance." jerome powell's testimony, but far more important, a first conversation with someone from the important richmond fed. this is bloomberg. ♪
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♪ francine: this is --
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>> this is "bloomberg surveillance." to 1.4 billion dollars to settle a u.s. investigation into the sales and marketing of an opioid addiction treatment. the treatment was made by ricket's former unit that has been spun off. the british company deceived doctors. any wrongdoing. the world's second-largest reinsurer sites weak demand among large institutional investors. the offering applied a market value of up to $4.1 billion. the ceo of norwegian air shuttle is calling it quits just as the turnaround plan starts to take hold. he is indicating he wanted to step down after leaving norwegian's rapid expansion. he is 72. we spoke with him last month. years or more.e
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i'm not sure i would like to be in the background like in an advisory role. you really have to work 24/7 if you are a ceo. >> he has been the ceo of norwegian since 2002. that is the bloomberg business flash. tom, francine? francine: british politics continue to weigh on the pound. runner, borisont johnson, -- the loss of the current front runner, boris johnson, would cause a rally in the currency but not for long. aberdeen standard investments senior political economist. -- thank, thanks you you for joining us. i'm not sure the market is pricing in the fact that boris johnson could lose this one. there is so much anxiousness in
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the case. of a no deal. is that the most likely scenario for the market? stephanie, i don't know if you can hear me. i think we have a couple of concerns. this happens technically. let's also ask gene frieda what he thinks about pound. i'm not sure how you view brexit , whether it is a political risk we need to get over or can have far stronger political repercussions. gene:gene: i think it can have severe political repercussions. the market is not fully priced for a no deal brags it. the concerns are -- brags it. the concerns are building over boris johnson. he has to make the other side believe he will walk out without some kind of change in the withdrawal agreement or if he is
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ready to walk away most anyway because of domestic political considerations. the tory party is concerned about the threat from the brexit party. boris johnson and jeremy hunt seem to be reacting to that so you have to see as a reasonably credible threat. tom: what is the pimco view on european and united kingdom use of austerity? it is from eight, nine years ago. is austerity as a fiscal tool dead? gene: it certainly has not died in germany. even if you look across europe, where there is a clear reluctance to engage in significant physical easing, the pursestrings are loosening. after years of are stare, there is probably -- austerity, there is probably scope to use fiscal policy and the u.k. how do you do it? do you do in ways that basically by u-boats in the next six
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you s -- by you -- buy votes in the next six months. tom: let's go back to stephanie kelly. i want to go to your work on a synthesis of all of this politics and economics. do you understand the economic program of mayor johnson? stephanie: i mean, it in so far as he has provided the details of it, i think yes. i think we are looking at a much more fiscally loose approach. he is going for an october 31 deadline. don'tr, realistically, i know if he will get the chance to implement that policy because a general election might be forced upon him before he can do so. francine: if there is a general election in the next eight months, how do you model that? what do pound traders a look at there is a chance that labour become the people in charge?
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stephanie: i think that is the big challenge for markets, is going to be weighing off the labour party benefits and cons. there are huge concerns. clients are saying to me they are nervous about a labour party government because of the risk binnedonalization unless -- and less business friendly policy. they are willing to do a referendum. the referendum can be supportive of staying in, which we know is supportive of pound. we do multiple scenarios for different kinds of a labor government. if the labour government has a large majority, there is more of a risk you get that less business friendly policy, in which the pound might suffer. the temporary counterweight is the referendum. and it comes down to how big of a majority they can get and to
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what extent markets are so itieved about no deal brags -- brexit, that they are willing to deal with a nationalist policy. francine: what does this mean for the bank of england? stephanie: everybody talking about the bank of england. the big question is about how the boe behaves. they are in a wait and see mode. can you give any kind of bank of england strong signal against the risk of a no deal brexit? that would certainly have implications for the bank of england in terms of having to loosen policy significantly. in the context of a labour party government, it becomes more nuanced. it depends on the extent to which the policies can be passed through. in a world where the u.k. remains a member of the eu, you are looking at more of a normal environment in which they you eat can start to make these
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eu can start to make these decisions. tom: we will continue with gene frieda and stephanie kelly. please stay with us. much more to come. this is bloomberg. ♪
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♪ everyone.morning, lagarde,all of madame the politician, former finance minister of france. and maybe a gentleman you do not know, the wonderful philip lane of ireland.
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a lot of academic courage at the beginning of the financial crisis. he will provide economic advice to madame lagarde. gene frieda with us providing advice with pimco and we are thrilled to bring you stephanie kelly of aberdeen standard. the real way to understand these heavy hitters is to talk to their students. you studied with professor lane at trinity college. what is the economics of the good professor? stephanie: i mean, i think he is economist whod of is hugely experienced in this realm. since the beginning of the financial crisis, particularly -- on policy issues. it is not particularly surprising he will get the appointment. it is a good counterbalance. tom: the irish did europe differently.
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they have the courage to get way out front and clear markets in 2007 and 2008. what are the lessons you learned in the irish study of how they cleared markets and what fellow plane learned -- philip lane learned? the reality think with the irish crisis is that it was unusually problematic because of the open nature of the irish economy. the extent to which the banks were taken on by a bank that was taken on by the government, the extent was quite punitive and ireland -- in ireland. it was a case study for the challenges austerity can bring and sustainability. lane will go into the ecb mindful that the ecb is in a position relative to the beginning of the debt crisis where it has the tools, the potential to use them.
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i think he will carry out this technical assessment of how you can repurpose tools so you don't end up with an empty toolbox. tom: stephanie kelly, thank you for that excellent perspective on the economy. stephanie kelly is senior political economist at aberdeen standard. gene frieda of pimco with us as well this morning. we will get to him on the bond market in a bit and the strategies. the strategy for paul sweeney in .daho, it is to gorgeous there an important discussion. this is bloomberg. ♪
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♪ berg "surveillance -- this is bloomberg "surveillance." let's get
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straight to the bloomberg first word news. viviana: the city of new orleans under the threat of floods on two fronts, a storm that could turn into a hurricane has flooded the city and could drench the region with a foot of rain. the mississippi river could be pushed to its hires that highest levels in -- here's. not be able toay avoid a prison term after pleading guilty to lying to the fbi. causew legal strategy deal.o reassess their flynn backed off earlier statements. when fork., a surprise jeremy hunt would probably cause the pound to rise but not for long. hunt is more likely to avoid a
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new deal brexit but will still have to renegotiate a deal the e.u. has refused to reopen. boris is the overwhelming favorite. andasy exit between china -- the fight stems from a series of south korean court rulings. courts ordered seizures of japanese assets to compensate miness forced to work in one japan ruled the country. 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 viviana hurtado. francine: thank you so much. we are getting breaking news out of the boe, the financial stability report. mark carney giving an update on the strengths, weaknesses, and worries.
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in debtsees risks corporate leverage. he is talking about a no deal brexit, saying it could cause material economic disruption. he is acknowledging a perceived likelihood of a no deal brexit in the market and that has risen. chat ands the no deal how it has risen up. it is really good to have gene frieda with us of pimco as we look at these liquidity mismatches. francine: they are saying the u.k. will step up its review of open-ended funds to prevent a growing industry becoming a threat to the financial industry and the economy. do these things change the composition of the market or the industry? ,he fact that the boe is saying
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we are going to look at this and maybe regulate, and the possibility of a no deal brexit. gene: it forces funds to think carefully about the liquidity. when you can take your money out on any given day and you invest in long-term, less liquid assets , you have to be careful to manage your liquidity. u.k. personal property funds that froze redemptions, so definitely. francine: is the market better prepared this time? gene: i think it is. it is no surprise we are discussing the risk of a no deal brexit. seen in the economy how that uncertainty has grown and how it is evident in investment decisions. in realcisions are both economy stuff and portfolio investment decisions.
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the other point i would make his most people still do not see a no deal brexit. i do not think it will be significantly priced until the itent it actually happens if happens, because it seems illogical. it is difficult to argue it is priced in at this stage. tom: the headline that is not there as they are worried about short-term paper in money market funds will break the buck. is that what this comes down to? gene: i don't think so. tom: i agree. what is it? gene: the boe has been at the forefront of looking at liquidity mismatches and focused intensely on the bank sector and the nonbanks. they are trying to send a warning to manage liquidity carefully. there is self-management of the
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risk, doing your own internal stress testing rather than being imposed. that has not been the case because we have not seen a problem where this open-ended problemh a redemption causes any systemic threat. problem causes any systemic threat. tom: this explanation is extremely important. i want you to define "this "mismatch" within these open-ended funds. gene: it is the same with the bank, you deposit money in a fund. you may deposit that overnight or for three months. in an open-ended fund, typically you can take your money out within a day. those funds invest in assets like a two-year treasury or tenure
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corporate bond or 30 year -- 10 year corporate bond or 30 year ill liquid paper. it is impossible for funds to continually test for shock. shocks can all be different. one day it may be interest rate shock or an exchange rate shock. we make sure our reporters are robust to those shocks. francine: when we talk about open-ended funds, they came to the spotlight because of woodford and h2o. what have they taught us? gene: we have a series of examples. one thing that it teaches you is that internal monitoring of funds, you have to be careful about fraudulent activity. that is why compliance is extremely important. it teaches you there are performance incentives that lead
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some people to get out over their skis and say, the way i will beat my benchmark is going into riskier stuff. that generally means less liquid which is fine if the money comes in, but if the money flows out you have a larger block of illiquid paper. francine: my chart looks at the negative yielding debt comprising 25% of the investment grade total. what does the growing world of negative yields mean for your investment strategy? gene: it means from our perspective that you need to be more diversified. runave a 30 plus share bull in developed economy fixed income. we see alternatives, that it also probably tells us valuations are inflated and we need to be careful, whereas in an environment where we would have described fixed income as
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cheap. francine: what happens if you cannot find safe bonds with a reasonable yield? gene: we can. you can play with the yield and the duration holding of your bonds. if we can hold a two-year treasury and get the same yield or better than a 10 year, we are encouraged to do that. what we have seen across less-developed markets as they have become safer over time. they exhibit safe s8 characteristics, so we have alternative -- asset characteristics, so we have alternatives. someixed income, credit, foreign currencies, and you still have a pretty robust portfolio. where we are in the cycle is telling us we do not want to have tons of risk. francine: gene frieda of pimco
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sticks with us. we will discuss deutsche bank, the lender. some investigation is going on with him -- one mbd. -- the share down one half a percent. this is bloomberg. ♪
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♪ chairman powell: of course i would not do that. >> i can't hear you. chairman powell: my answer would be no. i have said what i intended to say on the subject and what i have said is the law clearly gives me a four-year term and i fully intend to serve it.
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tom: we are in the united states with chairman powell, really interesting on what was behind that not only from maxine waters. bothwas interesting was on sides, a lot of different people really saying to the chairman, we have your back. that was over yesterday. francine: italian bonds rallying with btp yields near year lows. clues when theet fed -- joining us now is the global head of economics and market strategy, formerly with the treasury of italy. thank you for joining us. when you look at the italian auction, there is quite a lot of appetite.
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what is going on? the government -- 2000 policy funds. they had a budget. it was quite painless because they were able to find some resources which were not used before and there were someone signs andfrom the tax some good improvement from what is called the digital advice, bringing in more money than they were supposed to. it is a permanent flaw, so it will be closer to the budget next year. francine: is the only question we need to ask, can a euro sun country default? gene: i don't think that is the case. ecb andthe europeans,
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governments have put a lot of foam on the runway, we still have a conditional lender of last resort problem where if the italian government were to do something deemed irresponsible by the european commission, bond yields can sell before that government decides to go on the straight and narrow and get support from the ecb. btp'su have a selloff in 300 to 500 basis points? sure. tom: within that comment is the entrance of president lagarde. does she have the might to change the political dialogue given price down, yield up across troubled europe? gene: i don't think she is enough in her own right, but we are pleased with the appointment . she brings the political gravitas that is probably needed. we are fortunate we have had the current ecb board create these
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new precedents. the new ecb will be able to follow through with. we need people with political gravitas to push integration forward. it will depend on the evolution of the german government and to a certain extent, what happens in brussels. tom: when we listen to this, we are waiting for these countries to clear. each story is different, and what i find fascinating is the criticism of italy toward the fiscal stance of france. what would you like to see from the france government -- french government to see the fiscal debate? fabrizio: the french government has been part of fiscal reform across the euro zone. success, because reform came only from one country. there has been some resistance in the nordic.
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i don't know how much different it will be taken up by the new commission. there are some indications the interestednt will be in having a conference for europe. we don't know the details. some countries will back that. we need also a better understanding of what the composition of the commission will be and that will happen only by september. francine: what does europe need now, fiscal spending, a banking union? how do you find growth? gene: the first point i would make is a lot of the metrics are outdated. we are at a point when the master criteria were established, 60% debt limit, we are in a different interest rate and growth environment. with current yields, italian
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debt is sustainable. even with weak growth, they are sustainable. that is an important point. if you want countries to play by the rules, you may need to rethink the roles to something more realistic in the current environment. we would like to see more focus on completing banking union. that seems to be an important source of vulnerability. huged that, we do not have hopes of fiscal integration, but a banking union would go a long way to making europe safer to external shock. tom: gene frieda, thank you for joining us this morning from pimco. will continue with us. this will be a timely conversation to our global -- ande, agricultural
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the midwest absolutely hammered by the weather. senator rounds. ♪
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that's as bloomberg "surveillance." trump saysonald lockheed martin agreed to keep it helicopter factory in pennsylvania open. last month lockey said -- blockade said it would cut down -- lockheed martin said it would shut down the sikorsky factory. european discount airline ryanair will have to pay back plans ifer's growth the grounding of the boeing 737 max 8 drags on. here is the ceo. >> we have some 50 of these aircraft on order for 2020 and if it gets must -- much beyond september, we may have to slow our growth rate. ceoana: we spoke with the of british parent iag who is optimistic.
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>> no doubt it will fly again. it is going through a very thorough evaluation. when it comes back into service i think it will be the most inspected aircraft of any flying in the sky. i have no doubt the regulators will give it a green light when they are satisfied the issues have been addressed. viviana: bowing indicated the 737 maxwell fly in september but regulators have -- boeing indicated the 737 max 8 will fly in september. withey epstein charged operating a sex trafficking ring. it is unclear how much money he has in the account. francine: more on deutsche bank as they unveiled a big overhaul on monday.
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the market is not convinced how they would stick to their targets. people are questioning whether they need to raise capital and concerns about the german economy and they are tying themselves to this economy. let's get back to you. when we look at the concerns deutsche bank has in the fact that investors do not believe they will get through this, what does that tell us about what investors expect of a bank and the impossible situation deutsche bank is in? fabrizio: the first issue is the there is profitability. essential. the largest bank in the largest european country and trouble is not good news. we all hope this is the final restructuring plan.
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markets are not fully convinced. we will see out the management and will be able to implement it and get out of it. it is a retrenching for the bank because obviously, some of the global ambitions have been cut out. it is a treat -- retrenching for the european investment bank because the competition has been lost. the largest american banks are coming out as winners of these competitions. francine: does it mean any kind of consolidation effort is currently on hold? fabrizio: i think consolidation is the key for european bank's. interestent which has in the united states and some european countries in terms of consolidation in spain and france, has not happened in germany or italy.
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it is necessary to have banks that are more profitable. banks have challenges on several fronts. there is regulatory pressure on the banks from the new regulators. some practice has still to be established and the banking unit is not complete. there is technological pressure from competitors like fintech and capital market pressure. centrics much more bank than the united states so the market will have and develop and take out some business from the banks. for what is the opportunity e.u. banking? do they leave deutsche bank alone or by off pieces of it? fabrizio: at will depend on how the plan pans out. if it is successful, deutsche bank could become the largest commercial bank in germany and stay that for a while.
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out, there't work are more fundamental issues which have to be asked. the banking union has to be completed from a regulative point of view, but that will not be enough. important to do all the steps that are necessary, but more important for the european banking unit is consolidation. thank you so much. kasman --t our, bruce hour, bruce kasman and chris grisanti. ♪
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♪ tom: this morning, powell testifies with a vengeance. markets adjust.
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the federal reserve to the summer of 2020. can you buy in july and stay? resistance, chris grisanti will translate the markets for us. speaker pelosi, the debt ceiling , and the ever-growing deficit. "his is bloomberg "surveillance live from our headquarters in new york. i am tom keene, francine lacqua in london. what well the governor speak about? francine: the stability report, open-ended funds which we spoke to gene frieda about. he will talk about the boe, but the big news is they will step up work on this open ended fund withdrawal issues following to phrase stock --
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and related to h2o. tom: here is viviana hurtado. viviana: nothing seems likely to keep jerome powell from cutting interest rates later this month. after his testimony on capitol hill, traders wonder if he may cut rates more than the quarter-point the market has priced in. powell citing risks to the global outlook and too low inflation. the royal navy coming to the rescue of a british tanker. it was being blocked by iranian ships in the persian gulf. the u.k. says it was escorting the tanker when three iranian vessels tried to block it. it got between the tanker and iranians and warned them off. iran denies the report. this comes after british forces seized a british tanker suspected of carrying iranian oil to syria. the u.s. will investigate a french plan to impose taxes on tech companies like facebook and
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google. u.s. trade representative robert lighthizer will have up to a year to examine whether the plan would hurt u.s. companies. that could lead to remedies, such as a threat to impose tariffs on french goods. bloomberg learning the u.s. justice department is investigating deutsche bank's role in the 1mdb scandal. investigators have spent years looking at goldman sachs' involvement with the malaysian fund. now they are examining a former goldman executive who later worked at deutsche. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: equities, bonds, currencies, commodities, what flash the powell headlines. futures stunning. euro stronger, dollar weakness, oil lifts. 12, 12.80.n to a
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, 1.80.r yield a lower yield. i have deutsche bank as well. francine: i am looking at treasury yields overall. there seems to be a new pricing --four rates headed lower for rates headed lower. i am looking at shares across asia and europe outperforming we saw yesterday. emerging market stocks climbing. the pound rebounding from a two-year low. the market is in a wait and see situation. tom: important comments from chairman powell and now the governor of the bank of england is speaking. what i thought was extraordinary is the idea on the stability of the financial system. let us listen to the governor. carney: 250 billion
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pounds. global risk, brexit developments are taking place against the -- global backdrop confidence has been hit by the fact that trade tensions may become more persistent and damaging. financial markets are pricing in lower growth in corporate earnings expectations declining. were trade tensions to crystallize, their impact on the global economy would be amplified by underlying financial vulnerability. history shows the private credit ounces are among the best interest -- indicators of aether a shock turns into slump. some emerging market economies
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with large current account deficits or high amounts of currency debt remain vulnerable to cap does corporate outflows. -- corporate outflows. lending to riskier corporate is growing rapidly. the financial policy committee judges while global vulnerabilities are material, the court remains resilient to risk. francine: that is governor carney, the start of his opening statement. he has reiterated the risks of brexit and that the u.k. has prepared for a no deal brexit. the statement i am sure he will be quizzed about is the fact that the boe will step up work on this open ended fund withdrawal issues. tom: chris grisanti with us today. he has had an extraordinary first half of 2019.
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are thrilledce, we to bring you bruce kasman with jp morgan. outfrontcks, barclays and morgan stanley making major burnsnes on an arthur -like rate cut in july. will we go back to arthur burns or stay greenspan measured? bruce: if we talk greenspan measured, 25 basis points is where we stand. the fed told us yesterday in the minutes and with testimony they are going to ease, but we do not see the weakness in the economy, nor do we see stress in the financial system giving us the case for 50. tom: are they giving up credibility? away forttering chairman powell and his fed? bruce: i don't think they are losing credibility in terms of
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the case for easing not being significant, as you heard from carney and as we are seeing. there is a global downturn taking place in business sentiment that is spilling to the u.s. shores. the risks have gone up and i think an insurance of 25 would make sense but 50 basis points would be hard to justify given where the economy is. francine: what does a policy mistake look like from the fed? cutting too much? bruce: we have to recognize we are in the midst of absorbing a shock we have not seen before and we do not know how big it is. and weks are two sided may find ourselves easing when we don't need to or we may find a hit from global drags on trade that are bigger than we think. i think either way the fed will
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make a mistake but 25 basis points seems right. francine: what if they cut by 50 basis points? does that change the dynamic? bruce: certainly will. if the fed cuts 50 basis points, it is hard to do that and say you will sit for a while. a 50 basis point ease will give us an idea that the fed will go closer to 100 basis or more cumulatively. that is a stronger signal to the market than what powell gave yesterday, and a much more measured step in the face of the uncertainty is to do 25 and keep the door open. tom: thank you so much for the visit, bruce kasman. chris grisanti with us. this is his in-house note, and somehow it is one number and you go, that is not.
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beating the s&p like very few people here. how did you do that? christopher: we only own about 18 stocks and hold them three to four years each. sometimes we beat by a lot and sometimes we underperform. tom: everybody is way behind. 3000, we never even framed that. bruce kasman is talking about a fed that has the punch bowl overflowing. is that good or bad? good. volatility is the wild swings in the stock prices allow us to invest in some terrific prices that look great in retrospect. the whole point of this quarter's letter is you cannot predict what the court, britain,
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or donald trump will do, so we focus on the company. francine: are these companies helped more by loosening of monetary policy than they are hurt by trade wars? chris: i think so. almost everyone helps in the short-term by loosening monetary policy. the problem is we are doing it at a time we have never done it for, with unemployment less than 4%. by, whatis disquieted do they know that we don't know or what you do when things really get bad? tom: chris grisanti with us, we will look at use of cash for those trying to be brave and get into the market. we will be brave with day two of chairman powell's testimony. his first interview out of the unique regional bank, the
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richmond fed, the new guy on the block of richmond with our michael mckee. this is bloomberg. ♪
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♪ this is bloomberg "surveillance." $5 billion to to settle an investigation into an opioid addition -- addiction treatment. it has still been spun off. reckittors arguing -- denying wrongdoing. the ceo of no region air shuttle
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is calling it quits. -- norwegian air shuttle is calling it quits, indicating he wanted to step down after leading the restructuring. we spoke with him last month. >> at least five years more time. i would much rather like to be in the back room, like in an advisory role. if you are ceo, you really have to work 24/7. sincea: he has been ceo 2002. bloomberg learning deutsche bank shut down the accounts of jeffrey epstein as federal authorities were preparing to charge him with operating a sex trafficking ring. it is unclear how much money he had. that is the bloomberg business flash. francine: thank you so much. germany's biggest bank facing more trouble. deutsche bank is likely to face
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an investigation from the u.s. justice department as part of the 1mdb fund. they are looking into goldman sachs executives who later work at deutsche's. joining us is elisa martinuzzi follows deutsche bank, and still with us is chris grisanti. thank you for joining us. this is a week where we found out it is overhaul time from christian sagan. now, the doj is investigating deutsche bank because of its link to 1mdb. mind, we have to bear in it appears deutsche bank may -- when itisled in handed out this loan in 2014, and called some of that back when they realized the collateral could not be seized, a slightly different position
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from goldman sachs when one of its own bankers was misleading. 10 days ago, they post the u.s. stress test, deutsche bank did, getting a vote of confidence in its controls after a myriad of misconduct that made the regulator uneasy. i think a few things to balance out. francine: does this level out? does this settle concerns about the overhaul? elisa: what you were seeing is particularly the equity investors being worried they will have to fund the restructuring. deutsche bank says they can do it by delving into the capital buffers and revenue will be growing, but investors are not convinced. for two years, they will have to forfeit their dividends so they are taking an immediate hit. tom: has the timeline changed yet?
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i am waiting to see the modification of 2020 to something else or 2022 to something else. does that await an earnings call or is it already waiting to be jawbone amended? elisa: you have to give it a little bit of time. restructuring is only a few days old and we have earnings later this month, though they have given us a sense of what revenue will look like, further decline and erosion. investors will want to see how that execution unfolds in you at least have to give it another quarter. tom: how does the chairman media play this? you are fluent in like eight languages. from frankfurt, how have the german press played this? -- i: they focus mostly focus mostly on international press, but most of these jobs
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will link with the investment bank, so that is something germans will not be opposing because those will be in london and new york. we have seen labor groups supportive of the plan. francine: thank you so much, elisa martinuzzi. we will get back to chris grisanti. the boe governor mark carney speaking at a news conference. the stability report conference following the publication of the financial stability report. the news is he has declined to say if he is interested in heading the imf. this is bloomberg. ♪
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♪ "surveillance." bruce kasman pushing against the 50 basis point cut. chris grisanti with us on value with a terrific six month solid double-digit return. cash andack on use of this is where i said go to cash. this is to the end of last year, boom, down, worse. chart, december
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24, 25, 26, 2018. where do you find the courage to be in the market, free cash flow analysis? chris: i don't know that it is courage but it is math. about a half-dozen companies we had on our radar suddenly became too cheap to not by. tom: on what basis? chris: if it is a bank priced to book, a company priced to earn. tom: where are those stocks now? chris: up 30%, 40%. valuations are no longer screaming attractively but they are attractive companies like lockheed martin. these companies are not going away. that was a christmas present. tom: francine wants to invest. francine: i am looking at a good
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chart of the s&p 500. i am typing as we talk. it touched 3000 yesterday but closed just below. is it time for a correction? chris: i don't know, but probably not. it feels like the wind is that our back. usually when it breaks through, we are not going back down but perhaps to a higher level. i would not be a seller with the fed poised to ease and accommodation in every part of the world. francine: what action looks expansion -- expensive? chris: the equity markets, not so much. for those who were old enough to remember, we are in the late 1990's where things kept going up but did not reach real bubble characteristics until 1999. we are much more afraid of trade. china, talking to
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john butler. apple is a value relative to some of these multiples. do you buy apple today? buis: it is not a screaming y, but if you are a holder, i would not do anything. right in the target of the trade wars. tom: chris grisanti. francine: mark carney still giving his address to reporters and analysts for the financial stability report, talking about , saying's fund freezing that issue is symptomatic of a broader problem. consistent with the uncertainty effects on business. we take note of that. that firstcial is
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and foremost, we maintain elements that make the united kingdom such an attractive place for investment, starting with the macro economic framework, which this is one part, an important part. that focus is on openness to trade and investment which has been a hallmark of this economy. governor, there are not any jobs bigger than what you are doing but being governor of the imf, are you interested in that? point, it is an absolute privilege to have this role. ♪
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where you need it most. that's xfi advantage. make your xfi even better. upgrade today. call, click or visit a store. ♪ the country needs to go carbon neutral -- francine: governor carney talking about supervision of the
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open-ended funds and brexit. he just got a question on the imf job. mark carney choosing to praise the work of christine lagarde and saying there is no need -- there is a need to respect my profession, not answering whether he will be part of that process are not. tom: really important comments by the governor. right now with our first word news, here is viviana hurtado. orleans the city of new on the threat of flooding. they could trench the region with a foot of rain. the mississippi river could be pushed to its highest level in 90 years, the storms cutting almost one third of oil output in the gulf of mexico. michael flynn may not be able to avoid a prison term.
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federal prosecutors say his legal strategy prompted them to reassess their no prison cooperation agreement. --has been dropped against as a witness against a former business partner. china endorsing the embattled chief executive of hong kong. beijing saying the government supports carrie lam's efforts to safeguard the city. marchers are continuing to protest the controversial extradition bill. 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 viviana hurtado. this is bloomberg. tom: thank you so much. it is two generations in year. denmark, born in 1977 and born in 1954,
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chancellor of germany. chancellor merkel has been at it 14 years. francine: she has been a bastion of stability in europe, a lot of people asking what her legacy will be. there are questions about her health, which investors have been asking, which politicians have also been asking. tom: lots going on today. we will continue to monitor this meeting. in washington, monitoring the heat of summer before we get to a good political discussion with the gentleman from south dakota, jack fitzpatrick. with a vengeance to me in the last 24 hours, the debt and the deficit is upon us. give us a calendar of when nancy pelosi really has to focus on debt ceilings and deficits on
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controls. jack: that is the question of the day in washington. nobody knows the exact answer. you may be familiar with the phrase "extraordinary measures" that the treasury is using because they passed the debt ceiling deadline in the spring. the real deadline may be as early as early september. that would mean that congress needs to act probably before august recess unless they will skip that. the question is how seriously house democrats take that, if they think they can wait until october. these discussions are combined with spending discussions and we do not know if it will decouple those. zeitgeist is the big media press focusing on the
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progressive liberals of ms. pelosi's party. what pressure is she facing from moderate democrats who barely won in the last go around? be thanite a bit, may from progressives. when you have a large caucus, you want a lot -- a lot of large districts. we will need to see if they will sign off on a budget caps deal they want to include in the debt ceiling. oniously they want action the debt ceiling as quickly as possible. if they a question of do spending cuts in other areas to offset a budget deal, that is not answered yet. tom: jack fitzpatrick, thank you. onlyshington also, the senator i know will rise this early. he is mike rounds, senator and
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former governor of south dakota. i need to go to the weather. viscerally understanding the weather of america in the alfalfa fields and the soybean field. how bad is it? sen: round: the crops are very late. a lot did not get put in at all because it was too wet. the crops that did get put in are behind schedule. corn and soybeans are behind schedule. we talked about the file for. -- alfalfa. it is just beginning to bloom and it should be in mid bloom. we have some serious problems with regards to the weather, but that in conjunction with low commodity prices and after five years of decreasing farm income, i think we are down 50% in the last five years, particularly
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the upper midwest, that is hurting and a lot of producers will not make it much longer without improvements. south dakotas itself need from the president of the united states? sen: round: the president has been to south dakota and understands our needs. he wants good, long-term trade policy and that is what our producers are asking for, a fair price and fair market. while we are working through that, our producers are on the tip of the spear when it comes to the trade war with china because soybeans have dropped billion%, half a dollars not coming into our state to begin with. the president understands we are on the tip of the spear, but nonetheless, the sooner we can get something done the better.
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what they tried to do with regard to market assistance has been received well within the state, but what producers really want is that open market, the ability to not just work with but in then china, rest of the pacific rim as well. it would be great to have tpp on the books. francine: how would you describe the current arrangement with china? we keep hearing talks are back on track or have restarted. how do you see this relationship developing and what does it mean for the supply chain? sen: round: it is complicated because we have some issues with national security. huawei is not so much a trade issue but a national security issue. prospecthave a trade in which we will have to have the long-term discussion that china was not expecting us to have.
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china looks 50 years down the road and expect that we look until the next election. they were hoping to simply outweighed us. centralt to have the trading around the pacific region around them. they do not care what the international norms are with regard to intellectual properties. they did not want to have a trading prospect in which you did not dump commodities in and try to ruin other people's markets, and they are playing hardball. the president has irritated some people in doing that. francine: do you believe jay powell is doing an ok job? should he be replaced? sen: round: i think the president has confidence in chairman powell. i do. what you have are two people who want exactly the same thing, but
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the fed looks at it differently than the president. the president looking at what he can do to make the economy grow very quickly, but the fed has other obligations to keep unemployment low and inflation in check. chairman powell has done a good job of looking at the big extra and as he says, -- picture, and as he says, the big threats are outside the united states looking in, concerned about international economics and whether that will have an impact. i think they both want the same thing. the president has a unique way of lobbying for his position, but i think the chairman's job is safe. tom: kevin cirilli says i must ask you about the beltway gossip, the epstein uproar. ta step aside?s sen: round: mr. acosta did very
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well speaking for himself yesterday. he knows as much about the issues surrounding this whole issue as anybody does. we will continue to let him speak for himself and see where he goes. tom: senator arounds, greatly rounds,te -- senator greatly appreciated, hammered by wet weather across the midwest. another senator and agriculture is part of his issue, david perdue of georgia. perdue,stin with david this is bloomberg. ♪
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>> of course, i would not do
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that. >> i can't hear you? [laughter] >> my answer would be no. i have kind of said what i intended to say on the subject, and what i have said is that the law clearly gives me a four-year term and i fully intend to serve it. tom: like all of them, he has improved with time, has press conferences getting a pace we had not seen early and certainly with maxine waters, a more relaxed chairman powell. aristopher grisanti has had better 2019. the ibbotson chart, the dow log slope matters, and you are a little bit below trend but we are not above 2000 trend, are we? chris: no, we are not.
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havenot recall a period we climbed a wall of worry such as this. we have people screaming from all corners that the world is slowly, people adding accommodation when unemployment is low because they are worried. the path of least resistance is upward. tom: health care got hammered. down go the issues and people step by them. what is the time of recovery? tough health care is a one because of the few areas where president trump and democrats can agree, drug companies are gouging. tom: then you are like, where are the pills? chris: it is tough to get in front of the train so we are almost devoid of health care. there is the abbvie deal where they are down.
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other than those one-off, we would stay away from most health care stocks, not because they are not great companies but because they are not investable. francine: what about tech companies? we saw apple and others trying to redistribute where their supply chains are made because of the trade concerns. are the supply chains permanently changed? chris: i don't think they are quite permanently changed, but if you are a china in a company as big as apple or samsung or sony are changing, these are not things you change willy-nilly. these changes take months to decide and years to play out. china wants a quicker end to this problem than you realize because as you get each headline that sony is moving out of china, that has got to weigh on the policy.
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rather than looking at the tech companies, i would look at what this says about the trade negotiations. francine: can you find value with supply chains that change? we saw huge outflows of export from vietnam. chris: we try to avoid situations where we need to predict the policy moves, because with this administration especially, it is so difficult. dealxt week they have a and we bought all these supply chains that rely on vietnam, you do not want to rely on short-term decisions so we try to go to competitive situations. hold ae president will social media summit today, and i guess he is scheduling -- this is by tweet -- a beautiful rose garden for a conference on the citizens and citizenship.
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we will see what this means in washington. the president has got his wish. powell delivered the stock market the president wants. is it an asset bubble? what is the risk that all of us are wishing for too much joy? chris: the risk i think is the trade get solved and by the end of the year, the fed is not lowering, it is raising again. tom: interesting. chris: we have all the ingredients -- what does it take to cause inflation? low unemployment, slack on the supply chain, consumer spending. we are starting to get that so i'm scratching my head on why the fed is lowering. we are heading towards an election year and if the fed starts hiking, it will be a problem for the president. tom: chris grisanti with us this
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morning, really appreciate his efforts. a lot more coming up, chairman powell's comments, and a washington with a little bit going on. the white house saying they will back down on pharmacy rebates, the drug war in washington is tangible. ♪
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♪ this is bloomberg "surveillance." president donald trump says lockheed martin agreed to keep the helicopter factory in pennsylvania open. last month, they said they would shut down the sikorsky plant, prompting a conversation between the president and the lockheed martin ceo. european discount airline ryanair will have to pare back next summer's growth plans with the grounding of the 737 max 8. here is the ceo michael o'leary. some 50 we have aircraft on order for 2020 and if it gets late beyond september we may have to slow our growth
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update -- forecast. viviana: we spoke with the ceo of iag, who is optimistic about the 737 max's return. >> i have no doubt that will fly again. it is going through thorough evaluation and when it comes back into service, it will be the most inspected aircraft of any aircraft in the sky. i have no doubt regulators will give it a clean bill of health after they are sure it has been addressed. theana: boeing indicated 737 will fly in september. second-largest -- the reassure than $1.3red more billion. francine: let's bring you the
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latest from the middle east, a british navy intervened to stop iran from blocking commercial oil tankers leaving the golf. -- gulf. the golf -- the ship was through theo cross strait of hormuz. this feels like my picture of the map you can only see on the bloomberg terminal, but what does this devolve into? riyadh: it feels big because about one third of the world's oil goes through the straight of hormuz, and iran has made threats in the past that if it does not get its way it will try to close the straight. the fact is in this case, the tanker has gone through and has exited, but it feeds into the
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bigger story of american pressure on iran and the iranian reaction. there is also the story of the iranian tanker the british have taken injure altar and there is a feeling -- in gibraltar, and there is a feeling that might be retaliation. the iranians want to keep up the pressure on the europeans to try to find a way to keep iranian oil flowing to global markets. francine: you said it beautifully, this is basically repeated tanker incidents that has rattled oil markets. are we expecting more? said repeated tanker incidents. there were these attacks on tankers, minds being attached. attached.eing
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it feels like something is happening in the strait of hormuz. it feels like that is being used as a pressure point in order to push back against american sanctions. tom: we have breaking news out of dubai, barclays will cut 20% of their jobs in their dubai wealth management area. you know dubai better than anyone i know alive, including the leader. is the game over for wealth management in the middle east? riad: no, i don't think it is. it is a difficult time in the middle east. back, oil prices really went down and across the region suffered. as a result, we have seen the banks cutting back on some of the headcounts and rearranging things to respond.
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i think this is what this is about. things are not booming. tom: thank you so much. a good perspective on the barclays announcement. i have that headline on governor carney, bank of england governor s often deliver an uncomfortable message. some of these headlines were really something. francine: they were something. it started by looking at more regulation or the bank of england looking at open-ended funds, but people want to know about the imf. governor carney would not really rule out his interest in it. ♪
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that it is a faint heart. alix: fed chair jay powell warns on global risk, week inflation, a tight labor market. u.s. cpi takes on new importance. deutsche bank drags in to a scandal on anti-money laundering laws. a tropical storm hurtled towards the gulf of mexico, while the british navy interferes in the strait of hormuz to protect an oil tanker. geopolitical and climate risks prop up prices. david: welcome to "bloomberg this thursday, july 11. we had some earnings just come out. alix: basically, general economic activity was positive, but part of their issue was there was less sa


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