Earnings coming down overall and Chinese IndustrialCompanies Profits down in june feeding into one thing. The secondbiggest World Economy is getting a little bit nervous do you sell commodities . One the biggest demand is of copper. There goes copper. Clearly, this is feeding in and feeling the commodities and concern about china equally we will keep a close eye on oil as well. Oil being sold off. We are worried about supply. More rigs in the United States for the Third Straight week. They are still drilling when it comes to shell despite the concerns maybe iran will be adding to supplies and the middle east and saudi arabia and a supply glut to continue. Demand may be easing when youre the likes of china concerned about the consumer. I spoke to a philips ceo and he is worried about china and volatility in that market area 48 a barrel. Clearly the oil concerns continues. I want to check in on the euro. Walked through the asset classes. Clearly trading up by 0. 4 . Watch of the dollar this week. The Federal Reserve comment on wednesday. Will they signal we could see a rate rise come september . 50 50 if we will see a rate hike. That has been adding to the dollar going up and gold gold down. Less desire for that haven. A look at the equities. We did have a Earnings Release early by ubs. A little link from the swiss press and it was wrong. They corrected the numbers. As they put out the correct factual numbers. It was a gain. The market is selling off by 0. 4 despite those saying they have had the best Second Quarter since 2009 and in equities since 2012. Isnt this recipe working . The focus on Wealth Management and moving out of Investment Banking. We are looking at ubs. Manus cranny will have more. The ceo of ryan air. Down goal those shares. They are worried about the second half of the years. Capacity being added and they are adding. And they are worried what their competitors are doing. They are grounding fewer planes and the winter and they have no real idea what demand it will be. Some are going strong. And overall uptick in profit. Profits at 25 higher for ryanair. Some concern about where we see the fed going. They see the worst and other trajectory the second half. Meanwhile, that pop in philips. Up almost 4. 4 . We spoke to the chief executive and he told me he is worried about china but overall they see games and profitability whether health care, consumer. Gains in profitability or health care or consumer. Jonathan though ftse is up and a pull back on the dax. The moves in europe are boring compared to the most in asia. I cannot keep up. I hope juliet can. Over to you. Reporter thank you. A hard market to keep up with. We are seeing more coming through. China is closing so we will not see any more drops. We saw the market dropped from 5 to where it will close about eight point 5 lower on the shanghai composite. That is the biggest oneday drop since 2007. Eight years. That weakness into h shares. The hang seng looking like it will close down by 3 . A look at some of the damage on the shanghai composite. Every sector is heavily in the red. Industrial profit numbers coming through. Adding to concerns of the nations slow down is deepening. Industrial profits are down 0. 3 in june. We see big falls in industrials. Off by close to 10 . The banks hit hard down by 8. 4 . A lot of weakness from the big rock which does brokerages in china brokerages in china and hong kong. There is a red on the shanghai composite and consumer goods down by 9 . The big sly and commodities impacting the materials sector. I want to show you some of those big Financial Firms that were weaker. They were dreaming on the Financial Sector and one of the worstperforming. Securities down 8 . List on the shanghai composite is down by 10 . Looking to quite another ugly day in asia. A bit of a pop on the Australian Share market despite the fall in Commodity Prices area elsewhere in the region, a lot of a red. The big story for the rest of the week, we had chinese authorities trying to stop is a route and we are back to where we were july 9 ball for they put measures in. Coming in from analysts saying todays decline is a technical correction and the market needs to take a breather from the rebound we had seen in chinese equities. It looks like it has moved back in. Jonathan the big time. Thank you. We are down by over 8 . The biggest drop in 80 years on the shanghai composite. We will bring you more on bloomberg television. The big corporate story is in europe. Ubs impressive earnings beat profits. Equities rising to the highest in three years prethe ceo in three years and the ceo is optimistic. I am confident both our focus on managing pretax profits and serving our clients and the fundamental growth cost prospects makes me confident about the future. Jonathan more with manus cranny who spoke with Sergio Ermotti. And join me is chris. The manus cranny, the surprise a day early. Manus so, look, the numbers have come out a day early. When you look at the shanghai composite am part of the discussion with Sergio Ermotti is how concerned are you. Sergio said it is an opportunity to rebuild and did not directly answer. When he think of terms of ubs there a phrase that comes to mind, it has gone through substantial change. A bank not a position to say 30 billion euros do not make sense for us to have in our bank area take your deposit and goal elsewhere. Equities in the Investment Bank and in equity mark there believes into the west, i would worry. Thirdly, critically important he has readjusted his Investment Bank and set his marker down. Investment is where they want to grow the business. The rest of the landscape, Deutsche Bank and a state of change barclays in a state of change. Wonderful irish saying, a state of a place many years ago. And they are in a state of chance. As they do not know whether they are coming or going. And so in that landscape, you are pushing. One is opportunity in terms of Wealth Management and talent. The other side of the equation is it could be us correct. You can have a profit run. It could be a threat. Other people can punch away from sergio and the team. As did not quite get to. A good job of giving me long answers. They did not quite get to bring jonathan he was talking about china, a point where they look at the Wealth Management and some of the major swiss banks and what used to be a presence in asia looks like an weakness . Do we move in that direction . Chris asia will be a source of problems. Much more than that, were in a world where Interest Rates are as the rope and stick steep curve around the u. S. A u. K. And even in periphery europe. Increasing. Quite a bit of tailwinds as well as if i had went in check as well as a headwind in china. Jonathan he is optimistic. Manus he is cautious. Us were. He did not say i am worried or not worried. Thats as worth. The tailwinds are property prices. He swerved. The heigh mode. It is ultimately good news in terms of banks and returns. That has got to be a positive. The next six months is a push and poor in this story. He did not say he is worried about erosion. Push ample in this story push and pull in this story. Jonathan christopher, to you quickly. When you look at the Wealth Management business of ubs and credit suisse. Credit suisse for a lot of people entrenched of the core do you see an identity crisis in europe and how long do you expect it to last when you look at the financials . Ubs stock is down today. For a lot of people it has been the model of the European Bank do what you know and do it well. Does everybody become a ubs . Christopher mahon we are over trenching. It is diminishing. Not just the accessing capital and competition and the various banks and you will help with a return and profitability. Jonathan i hear you sitting at your terminal going through the numbers. Are we at a point where that is it for ubs . Manus one capital and constantly sort of been challenged by their regulator and the regular comes and goes smack. You have to set more capital aside. The phrase is at we at peak capital . Peak capital . A special dividend. By the end of the year, are they in the position, more than 50 of their pretax profit in terms of dividend . If you get a peak capital, you keep a building and building. You turn yourself into the apple of. Ranking not a bad place to be. And to the apple banking, not a bad place to be. Jonathan his show will be coming up in 45 minutes. Manus cranny is a bloomberg tv. More of the interview with Sergio Ermotti throughout the morning. Christopher will stay with us. Oil kicks off the week by extending is drop. Bp and shell and exxon report. Will big oil take a big hit . We break it down. More seas and more money for ryanair. A 25 profit jumped as it makes plans to boost winter capacity. Troika talks to greece. Beginners talks with creditors that and much more including the drop in china. We are back in two. Jonathan good morning and welcome back. This is bloomberg tv. I am jonathan ferro. Up today with top stories free ubs recorder second that recorded secondquarter profits that the estimates. 1. 5 billion swiss francs. An incorrect figure was put out on sunday in a newspaper. Teva is nearing a deal to vybuy allergans generic drug business. Ryan airs earnings rose 24 in the three months through june. It increase passenger numbers by 16 . The cfo told us the price of oil what it means for the companys bottom line. We expected it would deliver. A big savings for us. Fuel costs when we are growing. We are looking at savings cost at we think it should be a good performance. Jonathan we will stay with oil. The commodity extended is the client and the bear market. More from ryan chilcote. Another slide in prices over the last couple of weeks and then the rigs what is the story . Ryan brent is selling at 54. 58 and him was where it was at the start of the day. I want to show you a little drop in the price of about one hour ago. That is when we had the headlines. When we had it the shanghai composite had fallen 8 , why might that matter to traders . China is the biggest importer of oil about 7. 2 Million Barrels a day in june according to statistics. We see a better day above phil 0. 5 but sale 0. 5 . The reason is the rig count. It increased last week for the third time in three weeks and went up by 20 rigs. Shell oil approved does producers are proving that are more resilient. Maybe more oil. It has people concerned. We have been below 55 bucks a barrel before. We have been there twice this year. We saw the price climb to as much as 67 a barrel. That does not help the Oil Producers bottom line in sense of what they are getting when they know but help operations. We will have to see what happens with the price. Will a break above 55 . That is what everybody will watch the Jonathan Ryan chilcote, thank you. A huge week for the oil majors. B. P. Kick it off for us. We have shell on thursday and ask son on friday. Keeping up with all of this, one mans job. Javier joins us and also with us is christopher mahon. And ask son on exxon on friday. Q1, we thought it would be ugly but it is ok. Will q2 be a repeat . Reporter it will probably be better. Extraordinarily high in the months previous to june. A big refining business as selling and europe should be doing quite well. Companies like bp made between 300 million and 400 million above the normal. Trading in q2 probably more subdued but we think it will be adding to the bottom line and the refining sector it is where they will make money. Jonathan why are profit so much better . Why so much better . Javier blas the demand continues to be strong. When you look at consumption in the united kingdom, we have seen some the best gasoline and diesel consumption in a decade. Intercontinental europe has been contracting for the last five years until this year. Low prices and recovery in the economy especially germany and france and italy and spain putting drivers on the road and that is good for the refineries. Judge bank christopher, the worst week jonathan christopher, the worst week last week for Oil Producers on the s p 500. Now it is time to pick up the pieces. When is it time to pick up the pieces . Christopher mahon i think they will drift lower. Incredibly low prices. The lack of support for this sector is quite profound. What is interesting when you compare in the mining side, you have got this whole slew of slowing potion of demand. Much more significant. We have been here at how the demand side for oil is holding up. Very different from the mining part. You have china slowing down. The whole part for so long running out of steam. Jonathan the demand picture is different in mining or he is the supply side every . When i look at the secondbiggest production number on a record, rio pumping iron ore like no tomorrow, going for volume. Is it different in the energy space . Javier blas no they are announcing huge consumptions. A big series of announcements at the end of the day. Were expecting q2, telling the market we will invest less. Enstar providing for next year. Jonathan huge cuts. Talk to me about longterm consequences and why they huge disruption to the fundamentals of future supply and not feeding into the prices on my screen . Christopher mahon you hit on something. He is is easier for the oil majors to cut than then minors. Given over to expiration as it were. Much more difficult for them to come up with cost savings. For longterm, the Commodity Prices much more likely to drift lower over the next three years particularly going back to china. Nobody expected china to be growing nearly at 7 in three years time. Jonathan you will pick the stocks for energy . Christopher mahon energy. Jonathan people saying i want my dividend. Will they get it . Javier blas i think they will get it. They can sell more access a Huge Networks of pipeline they could sell. Really appreciated by private equity investors. The measures could sustain the dividend. If you look at the dividend you are gaining, look at 7 . Interest rates at 1 or even negative in some countries. Some investors looking at big oil and winking this is a very and thinking this is a very good deal. In general, the view is jonathan a tough question. Do you respond do you prefer spanish 10 year or shell . Christopher mahon you will get dividend cuts at some point. Very difficult for them to continue to run when you have oil at the 60 range. Very tough. And iran, although people expected that to be something any a years time, all the evidence suggests it will be quicker. Jonathan consolidation, where is it . Javier blas other than bp and shell, we have not seen anything. People have told me evaluations are too high and People Holding for the next leg goes down. Prices have come down and we operate below 55. If the prices remain as they are today we could see some really distress particularly in the u. S. Shell sector. It has been very resilient and a surprise. How resilient the valuations have been. Going forward to the second half of the year and end of the year as we see another pickup. Jonathan do you expect the pickup in consolidation . When you look at energy and mining, can you make the consolidation play . Christopher mahon we are starting to see it. A little bit of that coming through. Much more difficult for the miners. Both sectors have their headwinds. One has even more. Judge the bank thank you jonathan thank you for joining us. Christopher mahon and javier blas. We talked china. Stocks sink the most since 2007. The shanghai composite having the worst day in eight years for the break. We are back in two. Jonathan good morning and welcome back to on the move. I am jonathan ferro. 30 minutes into your trading day. Lets see how the markets are shaping up. Ftse 100 off a by 0. 3 . The cac 40 also down by over 1 . The stock 600 miners up today but last week the worst week for the stock 600 miners since 2011 down by almost 10 . The ftse and Energy Companies and that is why the ftse struggled for the worst week so far in 2015. Losses extended this morning. Losses extended in shanghai. The shanghai composite closing down over 8 the worst day in eight years. Stocks to watch with caroline hyde. Caroline some of the biggest movers. Some the biggest followers and key among them is merlin entertainment. I could give you plenty about roller coaster ride for it is the owner of austin powers. You remember the crash in june on their main roller coasters . It made everybody nervous and hit them hard. They posted a profit warning that could see profits at less than half where it was this time last year. The stock is being hammered. What they call their critical summer period. Therefore cutting down their forecast to reflect the significant reduction in sales and the requirement to maintain investment. Not only in their rides but Customer Service and marketing. A tragedy of across so many levels above mainly for the people in that accident. See at chrysler is down Fiat Chrysler down 2. 5 . A company having to a greater record penalty, 105 million from the u. S. Department of transportation but cause a big investigation. Did as a delay acting on safety defects in their trucks and cars . The u. S. Traffic think so and find them, you have to actually allow people to trade in their jeeps for above market value and installing an independent monitor. A lot of challenge Fiat Chrysler. Meanwhile phillips on a slightly higher note even though a down day of across the board. 3. 7 on the back of his earnings. A company trying to reorient itself. It is doubling down on health care in particular and consumer lifestyle goods for backing out of lighting. It has done lighting for more than 100 years. They say earnings of 27 . Up 27 . They are happy with their sales growth in health care in the u. S. And i spoke to the cfo and said he likes what is happening with health care in u. S. But is nervous about china and russia. Jonathan finishing on a high note. I will take into the red. The route is back in shanghai. China stocks down 8. 5 , the lowest since february 2007. Chief asia correspondent enda curran joins us. When i was counting my producer said why are you sounding off and i said sometimes it does not need an excuse. Is there an excuse . Enda curran well, a sense of calm. The excuse might be a bit of subdued mood on the chinese economy after relative calm. Last week, pmi reading what showed, one of the first readings for the economy for the Third Quarter was pretty weak which was to be expected. It may people think if you take away the stop workable maybe the economy stock market boom maybe the underlying economy is weak. Into the Third Quarter, a bit of a reality check for china a feeding it to the stocks today. Jonathan we have a ipos suspended. We have had a rate cut after rate cut and suspended trading for a lot of companies that trade on the exchanges. The question this morning is hasnt the intervention failed . Is the reputation of the government very much on the line here . Enda curran well it it would not seem to inspire much confidence. You listed at the laundry list of items as they have done so more so far to shore up stock prices and still correcting and under 8 today. People are quite worried about the underlying chinas economy and a lot of downward pressure on chinese stocks for some time. It would take a lot of effort from the government. It will require a long haul and getting the economy back on track. The credibility point, we know the imf has ticked off chinese authorities as saying intervention is one thing but you cannot let it go on forever. At some point soon. The credibility of china is underlined. The damage much more open and liberal market economy as they want to internationalize the currency and sure ups. Com if it does not succeed, they have explaining to do. Shoring up it does not concede scene, they have explaining to do. Jonathan people have said the fed it will keep easing, is it good or bad scenario for the rest of the world . Or look at lack of promarket credibility and say that should be the priority and build the credibility again . Enda curran that is a very interesting point. The real economy will ultimately drive the pboc on the rate side and cut Interest Rates four times and took steps to get a lending a going in the economy. Most economists would say they are not off just yet. The pboc has so much ammunition and so much arsenal. So much conventional Monetary Policy left all like peers around the world. People would say the chinese will be cutting rates again before the year is out. To get banks lending and perhaps the question is at the extent of the actions it wants to take is unknown. Jonathan enda curran thank you for joining us. For more, lets bring in Kevin Corrigan. Kevin, china, you look at the market. We know it is artificially managed and a drop of more than 8 . I have no direct exposure to equities but a huge amount of exposure to the chinese economy should i be worried . Kevin in terms of participation in chinese stocks, the natural wealth effect from the kleins in terms of the damage to consumption is reason to be limited. You should be a little less spooked than what we might be. Secondly in terms of the actual impact that china and chinese demand declines seem to be having yes, we should be worried. As a consequence of some of the disinflation coming out and people will relook and revisit the narrative for Federal Reserve policy, higher rates or even thinking about european economies with oil prices declining. Jonathan in the middle this massive commodity rally. The world a fixed income. It may not be long bonds. Lower the expectations. What does it mean now . Any different . Kevin corrigan a little bit. If you look at what has happened and nonsovereign markets and fixed income, First Quarter supported because we had qe from your. The safety blanket was there. People may be reaching and say the safety blanket may be the pboc cutting rates and the fed going on pause. Highgrade credit, fairly attractive. Where the worry is a natural reason is some Investment Grade credits, more leverage borrowers, very high constituency participation in those markets from commodity producing companies. For example in u. S. Highyield incredible weighting of 25 to basic materials and energy. Every time people look at their portfolios and our market, they need to they and constrained liquidity environments, can my active manager provide me with that blanket and that cover . Jonathan you look at highyield and i would oppose a question and say the default rate and wouldve not seen the markets and the way a lot of people thought it would be. What would you say . Kevin corrigan a familiar Kevin Corrigan a familiar one in credit for many years. In default, it was quite small in that sector. It is a bit of a misleading notion. What people have to focus on for fixed income is the contraction illiquidity, this idea of hurting and the imf pointed this out. That ultimately means you can still occur quite substantial losses in your portfolio if you are constrained about the traditional approach and do not need to wait for default. The default argument is almost like a Rearview Mirror type comment and one we do not attend. Jonathan and then the problem is already here. When you look at u. S. Highyield a energy specifically, surprised by private equity venture that has replaced . Kevin corrigan not really. Financing has in very common for this sector. If you look at these entities and traditional benchmarks before and 2000 area before the crisis, they were very low. As we have had this surgeon expiration and financing window has been open since the financial crisis, a lot of potential investors looking to land to these type of entities. Finding a situation where it is not just default rates we need to focus on but it may be some of these guys will find it difficult to refinance. Ability to cut may be capx maybe restrained. Jonathan to me, it does not seem like something the said it should be looking at. Kevin corrigan maybe. The domestic economy looks pretty good. Initial claims last week which was the lowest since 1973. Often played of evidence the domestic economy looks pretty good. For a bond investors, we might end up with one hike before the end of the year. The actual trajectory and which rates will move looks unknown. Jonathan is the trade flattening . Kevin corrigan a little bit in the u. S. And it is different in europe. A bigger case in europe for a weaker currency and lower Commodity Prices and bond yields have risen this year. Steve and until now. The environment in europe looks better. It has steepened now. You have got leverage and Federal Reserve hikes coming. It does not low like a valid trade given the pace of rate hikes. Long in bonds looked reasonably attractive. I would remind people of the highgrade sector looks to be the more attractive compared to highyield. Jonathan Kevin Corrigan thank you for joining us. We talk greece. Tsipras marks six months in office. Troika back for another talk. Jonathan good morning and welcome back to bloomberg tv. I am jonathan ferro. It is time to get the latest on degrees. The countrys cashstrapped the countrys cashstrapped government will talk about the financial situation with the creditors. Hans with a more. Talk me through the deadlines are you we through the deadlines. We have become immune. Hans not you and me. We have no resistance to deadline talk. August 20, they all owe to the ecb. We thought that would be a package and you get an agreement. That was very optimistic. What we have now is the potential debate and that the fourth of whether there will be a second bridge loan for they got the 7 billion bridge loan a couple of weeks ago and maybe in they need 5 billion euros. They do not have an actual package. They have now started negotiated. Troika is in athens and hope to start talks today. They have not been given full access to all of the ministries. According to officials, that is a problem. You need to have the creditors with clean numbers and it does not look like they are getting the access they want or need. The second holdup seems to be a dispute among the creditors whether they are united on the idea of does greece need to do prior actions. That means you need to pass something in parliament to get bridge financing. Jonathan one big focus is waiting for is waiting for the greek banks to open. If i want to trade penny stocks when is the Athens Stock Exchange going to open up . Hans not today. It looked like it may have been today. Greek officials indicated they wanted it to be today but they do not have enough restrictions. We are look for ministerial decree to be approved by the ecb. The key thing, how do you protect the liquidity of the greek banks . Prevent their stocks from collapsing . On the exchange one thing they need to figure out. Jonathan back in berlin. Thank you for joining us. Still with us is Kevin Corrigan. Kevin greece, it is killed everyone. It is really killing the greek people. When you look at the implementation will they be able to do it and how long before left the talk about a series late again at what it means for fixed income . Kevin corrigan a very dysfunctional situation. We started to revisit yet again are not really the major issue. The major issue is on debt relief as start to see movement. The german saying no haircuts and the imf saying we want relief. If you look at the nation saying a corporation and look at debt restructure. Equities swap or something. I thing that will be where the narrative my occur going forward. Fixed Income Investor even though you are not invested in greek bank debt, europe got to look at the default risk and fundamental credit quality when you think about what bonds you will be buying. Traditional markets is a constraint indices that say i have the most debt, please lend more to me and that typically what happens and what we follow. The lesson from greece, if you do not get to that point, you might be better. Jonathan to extend your analogy, how long before they look for a new Prime Minister . Kevin corrigan probably look to another one. Tsipras has said of late because of the acceptance of the negotiations so far a little bit unsatisfactory. That is self is not the issue, not management but at the key issue. Jonathan Kevin Corrigan will stay with us. Things that matter throughout the day. Stay with on the move. The greeks saw that hit german confidence numbers. We will bring you the preview. Financial markets in europe. Equities are lower and spreads are wider. We are back in two. Jonathan good morning and welcome back to bloomberg tv. I am jonathan ferro. A big week for data. The first comes out. German consumer confidence. Over to hans nichols for a preview. Hans it will be interesting to see what is a effect has been on the german economy. We have seen a slow erosion. The number has declined for five straight month. Last month, it disappointed at 107. 4. The expectations for this month is 107. 2. With past soft data. Look for the first glimpse for july. We have had soft data. Is there a rebound or how much effect by greece and china on a business . German sentiment and that is what we will get you looking at six minutes area back to you looking at six minutes. Back to you. Jonathan lets bring in Kevin Corrigan. The bleeding effect from the greek crisis to the rest of europe may not be in financial. Will it show up in the data . Kevin corrigan it may. If you look at the price action over the past few weeks, people have been sanguine. The pmi revealed a little bit better outcome than other periphery countries which is supportive. Six Income Investors looking at the firewalls in the marketplace in europe and saying greece is an isolated case and maybe the transition will be toward what extent will of the exit or not area for now, the firewalls working well. Jonathan i am looking at a weaker dollar and a euro above 110. The spurs are wider. Italy versus china, 160 basis points, trading at 120 now. Do we test of the 90 again . Kevin corrigan we might well do. People in short by the events that there is a firewall in place and sustain peoples interest. The reach for yield will return. Not that it perhaps ever went away. But it will come back on again. Numbers out of china and the fact that inflation levels are contained and these will refocus peoples mind. Jonathan we saw bonds and equities moving in lockstep for the first half of 2015, will we get there repeat . Do we see these breakaway . Kevin corrigan we might to do. Both markets supported by the extraordinary intervention of qe type policies. We have not got a queue tomorrow and does not appear to be. People will think and look at in different ways. We have disjointed economic progress and look at europe and china and u. S. And a difference. People will have to reflect on that weather than the support of qe or anything else. Jonathan Kevin Corrigan thank you for joining us. That is it for me. The pulse is next with manus cranny inferencing loquat. A route in china. Manus cranny and francine lacqua. You want to talk about these markets, i am on twitter ferrotv. Best of luck with your day. Francine shanghai slump. Chinas benchmark index has its worst drought since 2007 amid concerns of a rally sparked by Government Intervention being unsustainable. Manus income from managing funds for the wealthy more than doubles. Francine and, drug deals. Teva is said to buy a generic drug business for more than 40 million. Welcome to the pulse live from bloombergs european london headquarters