Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Check on markets. Some positivity still feeding through the back of that china data that came in better than expected in terms of the retail sales. S p futures on the front foot, up. 2 . Four days of gains. Closer to above 3000. How much farther does the rally have to go. We look ahead to earnings. The 10year yield is backed up a. 2 curve. Lets get the bloomberg first word news. President donald trump has been accused of racism this after suggesting four female lawmakers to back to their crime invested crime infested places they came from. Of the four women were born in the u. S. And are racial or ethnic my own minorities. The purchase of a Russian Missile defense system. The u. S. Says deploying the missiles jeopardized a fighter jet. The white house as picked a package of sanctions for turkey with an announcement coming soon. Dozens arrested as protests continue in hong kong. This includes clashes with the police in a shopping mall. Emmis traders were demanding demonstrators were demanding the resignation of carrie lam. It is reportedly told her to stay and fix the mess she created. India postponed its mission to the moon. The launch was canceled 56 minutes before liftoff because of a technical snag. Been rogeras federer. Defending champ winning. At one point the italian winner was a single point away from victory and a day earlier, simona halep beating Serena Williams in straight sets to win her first wimbledon. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. Nejra chinas economy has slowed to its weakest pace but monthly indicators did show output,at Factory Retail sales and investment meeting expectations. Import and export data came out on friday. That as domestic demand weakened. The positive figures signal measures may be feeding through, ssures remain on chinese great to have you with us. Roundup what your take away is. Are we seeing a bottoming out . A sign of a real inflection in the chinese economy . Clearly slow on a quarterly re at i think the big jump in retail sales, investment. Going forward there is a concern it may not be sustainable. Of course dont forget the external headwinds chasing the chinese economy facing the chinese economy. The net take away is, stabilization in the near term but there is plenty of challenge it is facing. Thank you so much. William hobbs with me here on set. Would you agree with that takeaway . Stabilization in the near term but many challenges ahead. William the implementation of new standards has created some distortions within the auto sector. Some of that will be paid back. You are seeing some signs that stimulus has come through. There is nothing to get too excited about. Nejra in terms of stimulus, how much more mike the pboc might have to do on the back half of this year and the start of next year based on where we sit with the data . And because we are seeing a dovish fed . William it is quite hard to gauge. It is an opaque economy and what setcan say the policymakers the heights of the economy so they have a few more levers to pull. Process feeling your way across the river. We will have to see. There has been some signs that inflation will increase so that may be a little less. There are still concerns for them about housing bubbles, financial success. There is no big bang coming down the pipeline. Nejra what are the key areas of concern for you . People point to fixed assets particularly in infrastructure. It has been up and down in terms of the data. Are there any areas you would point to underline what we are seeing . Storym the longterm with china is getting it down to Sustainable Growth rate. Not causing too much disruption. How they get there is going to be open to interpretation. What we want to do see is the consumer playing a larger role in the economy and continuing to want to see the state back away from the economy. Is that in the plans of the current authorities . It is open to some interpretation. Nejra we see anything more on the currency front . Seeing quite a bit of ethics stabilize you on. Do use suspect more yuan weakness . William that is going to be controversial. While these negotiations are ongoing, i suspect many people want to keep the economy stable. That is something i would expect them to keep for the moment. Certainly if there was significant weakness, they would have no choice but nejra what about the rest of asia . Do you feel increasingly positive . That that a National Initial stemless came in, we did expect stimulus came and, we did expect. Chains, weupply found that taiwanese data and certainly the external data that you referenced for china, that suggested the Global Trading backdrop still pretty poor and asia as a trait sensitive region. Trade sensitive region. Nejra William Hobbs from barclays stays with us. Up next, where next for trade revenue. We will tell you what to watch this week, plus expecting the unexpected. How president everyone expects significant president erdogan expects significant rate cuts this year. We will focus on turkey. This is bloomberg. Nejra economics, phonics, politics, this is bloomberg surveillance. I am nejra cehic. Lets get bloomberg this is flash. Julie out a greeting to play 1. 5 billion to raise its stake. Just to deepen its research. Julianne will play pay 400 billion up front. 22 . Ll boost its stake to ab inbevs decision to suspend have. And the near 10 billion share sale what doubled the amount raised. This dampens momentum generated in 2018. That is when more than 200 companies raised already 7 billion. Tos stash737 masses to Stay Grounded until 2020. That is according to the wall street journal. It says there is no timeline for the plane plain pasta return. Bitcoin tumbling after President Donald Trump criticism of cryptocurrencies put a spotlight back on the tokens recent jump in prices. The president saying he is in a fan of bitcoin, that they are not money. And their value is based on thin air. Nejra u. S. Banks kick off the earnings season this week with citigroup reporting late today. Investors will be watching to see where the falling Interest Rates hurt the big bank and of trading revenues have improved. We have a cut to the fed benchmark. Taking that into account, banks and investors alike, they might be naked they might be bringing down their expectation. Citigroup will be setting their bar. They joined the other wall street lenders warning there will be a profit top in trading. Analysts expect a drop of 3 . That is a smaller decline than forecast by several banks. As that forecast hits, Goldman Sachs is going to give more of a clue. They are going to report tomorrow. Management has spent a lot of time looking at the fed. Low rates means homeowners refinancing. That is good news potentially for wells fargo. Jp morgan, that same day, followed by bank of america. The biggest lenders think that Net Interest Income is going to respectfully. 3 keep those numbers in mind. If theres if they trimmed those significantly, the market is going to stand up and take notice. Credit quality, any deterioration going to be important. If you cannot make money on spread with those low rates, you make it on these. Morgan stanley, their earnings are out thursday and focus is going to be on their large Wealth Management this. It should be a decent quarter. The markets ended on a high note. Even so with all of those issues at stake, some investors are not waiting to assess the fallout from lower rates. When we look at how banks are treating compared to the s p 500, therapy multiple trading at the Biggest Discount to the Broader Market and more than a decade. Nejra will hobbs is still with us. I want to ask about that chart danny just showed. Is that justified . The markets have been responding to the yield curve story. The backdrop from the market perspective is that conducive profit story. The market may already be there. If you look at the negative pronouncements for the earnings season, i think youve got the s p now in terms of year on year growth expected for this quarter. It is 1 . Hugey as if there is a heads for the market. It is going to be meek earnings season. Markets may already be there. Nejra speaking of markets, the s p 500 hitting another record closing above 2000. Is now the time to be getting in . We have taken most equity risk out of our tactical portfolio. We are now left with a residual position which is a slight long to u. S. Equities balanced out by slight long to Global Equities sorry. Thatu think about that means a little bit of equity with that duration exposure. We dont think it is the time to be taking big equity risks. The earnings story is too unique. There is a valuation story but with the fed set to cut Interest Rates how much they cut as a matter for some debate. It is how much more you want to chase this. Nejra are you concerned that we got that weak earnings could lead to lower capex. William economists have looked from the top down perspective. There are ways you can make it work. Have a sort of a followthrough. If the trade war started to ,mpact the u. S. Retail sector theres already an embattled h street, that is retail there are ways to megan much more relevant. That still seems a bit of a leap. The economy looks ok. It looks ok. What has been going on is a bit of an inventory story. Is that enough to get you over the line in a recession . Nejra we will talk more about the u. S. In a moment. Washington prepares its punishment after erdogan Takes Delivery of a Russian Missile system. We will discuss that next. This is bloomberg. Nejra this is bloomberg surveillance. Washington is close to punishing turkey for receiving shipment for the Russian Missile system. A sentience package and preparing to announce them this week. To ent erdogan plans joining us now to discuss, management harvey. Benjamin harvey and will hobbs is still with us. President erdogan has downplayed the risk of u. S. Sanctions. They dont expect the reaction in the lyric to be as great as what we saw after the ousting of the central bank governor. Erdogan is taking his cues from trump. Seems to have placed to go easy on sanctions goes against everything that we have been hearing from the u. S. Government for the last two years that they want harsher measures imposed. Nejra what are you hearing when you talk in the office to investment analysts in terms of how they feel about turkey at the moment . Also of course as a downgrade we had on friday. Turkish markets have been resilient. Three major challenges for turkey, sanctions, eu sanctions and then the firing of the central bank governor. It is being held up by turkish i Interest Rates. Interest rates are coming down. It is about 14 . Social bank rates are still at 24 . View what is the central in istanbul . It was a significant loss for the ruling out party. They lost about 800,000 votes. Erdogan is therefore another four years at least. A lot of time in turkish politics. Nejra you are hoarding positions in the markets, why is that given we have the dovish symbol signal from the fed . In terms of markets, there seems to be an asymmetric reaction function in the curve. The good news for interest cut rates. Heavily. Is traded to that extent, we feel the bond market is estimated is estimating the health of the u. S. Economy. Do you want emerging markets during that time . Do you want to have emerging does keep for us, it us on the sidelines. And i like to that is all the world becoming terminally ill in terms of the cycle. Looknk quite a lot doesnt there are many big mispricing for the emerging market. It is one of the things we treasure in the modern world, the idea that you separate Interest Rates from political decisionmaking. Nejra we dont see that snapback in u. S. Yields we just talked about . You are always looking at the data coming in. The bond yields look too low relative to that economic health. Changes, then your em picture if you got legs to run on your economic cycle. We have that in our strategic portfolio. In that scenario, you prefer equities or bonds . Yeah, you probably want to take on equities. You should find some juice. Echo Benjamin Harvey nejra Benjamin Harvey and william us at howstays with low can you go with the fed cut the smart this month. Will it be a 25 basis point or something more extreme . We will ask that next. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Nejra chinas economy slows to its weakest growth in 27 years. The monthly data points to stabilization. Called off, the Worlds Largest drink maker. Where does the decision leave ab inbev . Places rate cuts this year. That. Owngrades countries i am nejra cehic in london. Lets get a check on what is moving in the markets. Dani burger with your stocks to march. Lot goes is the biggest mover, up 50 trading at a record high. This is after news that gilead is going to be buying a stake in the company for 5. 1 billion hoping boost some of their r d. On the downside, Sports Direct filing more than just saying they need more time for the report. The house of fraser acquisition adding some difficulties and complications. Analysts saying this is going to reduce some of the visibility into the company, baron burke saying that risks are increasing. Ab inbev officially stopping their plans for their asia unit ipo. The shares dropping 2 . This is their eighth day of decline meaning they have the longest streak of the clients since september 2018. Analysts saying this takes m a and asia off the table for them and their plan b, organic growth, doesnt look that attractive at this moment. Nejra lets get the bloomberg first word news. Chinas economy slowing to its weakest pace in nearly three decades. Gdp growing 6. 2 but there is evidence to those mergers to curb the slowdown may be starting to seep through. In june, factory output beating estimates. U. S. Companies may be approved huaweiart bills to within weeks. Techafter the chinese giant was blacklisted over National Security concerns. The wall street journal reports while way plans to cut jobs at its u. S. Subsidiary. Dozens arrested as protests continue and hong kong including clashes yesterday with police in a shopping mall. Demonstrators are demanding the resignation of carrie lam. Beijing refused her offer to step down. It has reportedly told her to stay and fix the mess she has created. Tornado warnings were issued in mississippi because of Tropical Storm barry. It weakened into a category tropical depression as it moves slowly inland. This weekend it for stays temporary shutdown of more than 70 of u. S. Oil production in the gulf of mexico. England winning the cricket world cup. The two sides tying after 50 overs. The event went into a super overtime breaker. Both sides scoring 15. They were crowned winners. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. Nejra jay powell left it all but certain that the fed will reduce Interest Rates this month for the first time in a decade. Charles evans said a couple of rate cuts a be needed to bring inflation above the 2 goal. President trump weighed in with his views on Central Bank Monetary policy in a tweet. He wrote the country is doing great despite the feds antiquated policy. William hobbs is still with us. Barclays was out in front in terms of calling for a 50 basis point cut in july. That has been walked back to 25. William seems that we are going to get some rate cuts or a rate cut. I think that is the right interpretation. The market seems to be exaggerating the risks of a recession. If you got a time varying element, and what i mean is the attractions can wax away over time, then as people worry about the next recession and as they extrapolate and assume the next recession looks like the last recession, the value of government bonds really does grow. That is what we have seen. The problem that you have is the hall of mirrors affect. You have the bond market trying to anticipate what the fed is going to do and in the fed reacting to try and keep the bond market happy. Us, looking at the u. S. Economy and looking at survey banks measures of inflation, that is trending. Doesnt look like theres too much of inflation problem or growth problem. Nejra right. It like youre saying the bond markets got a little disconnected from reality. If we take a look at the yield curve, we have seen a significant steepening. You can also see it on a threemonth 10 year. More intentional for a selloff more intentional for selloff in the curve . There is a bit of that. One of the things that has been talked about is the term premium. Do we need one . In a world where inflation seems to be predictable, how much inflation compensation should investors demand . We think probably that still is where you are. I want more compensation for that risk. The recent past tells me there hasnt been shock. Youre getting to the stage where you start to run out of stuff. That should mean you get a bit more price pressure. Shouldnt make us overconfident that it wont. Relationship between growth and inflation has always been a loose one. We want to be a bit careful. That humility in the face of what he knows about inflation and growth and that suggests we will be leaning in the other direction. What would be an attractive entry point of the 10 year or 30 year . William on the 10 year, it is a bit of an abyss. Nejra looking at u. S. Equities, how much more juice can we get out of the equity market rally on the prospect or the reality of a fed rate cut alone . William much of that should be priced in. So that is something we are a bit worried about. We are not taking we havent got much net equity in our tactical portfolio at the moment. When or if we see yields move higher, that may be a chance to rethink our position. Soy is being priced in right that is not so much the question. Historically even cycles tend to predated recessions. Anwe see the fed embark on easing cycle, do you take the view now is time to buy risk assets . Do you get concerned that a recession is coming in take risks off the table . William it is it depends on how the data evolves. Later this week, looking at the health of the global plc is going to be crucial. U. S. Private sector looks fine. If you think about two major things, past recessions. An overheating of the real economy and how did you get inflation and sharp Interest Rates rise. Neither of those look to be really present. If you look at the asset bubble story, that tends to happen when the u. S. Private sector is dipping into Free Cash Flow or dipping into deficit. That is not the case. The private sector is spending largely out of Free Cash Flow. At the moment, we say those risks are much less the market is pricing. We are watching incoming data. We suspect there may be more inflation. Nejra briefly on europe, we talk about what we are expecting from the ecb. Many new calls coming out about whether we get rate cuts and when or if the resumption of qe will begin. William you have done very well. We had a position in european equities at the beginning of the year which we pared because of the rally. Repaired back to quickly. I am not sure, it is not much of a Profit Growth story to get excited about. There will be more stimulus. ,he problem you have with ecb the more activity youve got to do to offset the Banking Sector which is complicated story. We cant find much to get excited about in europe at the moment. Nejra what does excite you . Yield curveor that to be closer to how we see the world and how others see the world, i guess. That is the major thing. The main story for our investors is the tacticals portfolio technical portfolio. The really exciting thing is the pace of innovation at the moment. That may not be showing up in the statistics. Humankinds innate inventiveness and restlessness. That doesnt look to be dead at all. Nejra what a note to end on. William hobbs from barclays stays with us. Crime against humanity. Amazon takes on the retail world with his annual sales event. Cash injection. Gilead injects into galapagos. We will speak to the biotech companys chief Business Officer. This is bloomberg. Nejra we are looking at live pictures from johannesburg. Minister african prime appearing before its Anticorruption Commission testifying on anticorruption. It is time to back a bargain. Amazon has kicked off its annual primed a promotion. It is running for an extra 12 hours. Boosting revenue by 50 to 5. 8 billion. That puts it behind alibabas day. Where should you look for the Biggest Discount . Joining us to discuss is stacey widlitz. Great to have you with us. What does this tell us about amazon . Are they under pressure . Stacy they do this every year. Number one they want to sell you devices. They want to sell that hardware to get into your home so they can sell you more stuff. The other thing is certainly there looking at selling more Prime Minister. Certainly they want to get that revenue, the prime members, they spend up to 3000 so they are much more profitable customers to get on the books. That is really the goal. Nejra are they likely to achieve that goal . Stacey yes what we have seen is almostthe amazon did 4 billion last year. For amazon, if you think about their prime membership, almost about 50 of households in the United States are prime members. That is huge and that is a way to lock down market share. The likes of ball mark that they have been battling with the likes of walmart that they have been battling with. Nejra upping the game, how worried should amazon be about the competition . Stacey walmart has done a really good job. They have gone to twoday shipping and now they are talking about one day shipping and they are meeting amazon titfortat. They are also doing Curbside Pickup and technology, they are doing an incredible job. It is why their stock is trading almost 20 times. Amazon and walmart will continue to battle it out. Today you are going to see the promotions out there, not only from all mark but kohls and macys talking about black friday events in july which is something unique. Ahead, how isook the Retail Sector looking to you at the moment . Stacey it is about the haves and havenots. We saw a slew of closures and 12,000 floors Stores Closing within the u. S. Retail is still about the winners and losers. Target and walmart winning. Kohls is struggling more. I think further closings need to happen. Nejra in terms of further trends, you have been keeping an eye on tourism, what should we be keeping our eyes on . Stacey tourism has been very interesting particularly in the states. That makes a huge dent for the Luxury Brands that are highly exposed in the u. S. We have seen in europe luxury trends have come down because of the repatriation of that luxury sent to china. Interesting as we anniversary that effect in q3. We will have to see will this be the vacuum of luxury sales that come down and china . That will be the true tale for luxury. Nejra great to have you with us. Thank you so much. Great to have you with us on surveillance. Galapagos falls hitting an alltime high. We will speak to the companys chief Business Officer of galapagos. This is bloomberg. Nejra economics, finance and politics, this is bloomberg surveillance. Galapagos is surging. The hitting an alltime high after a 5. 1 billion investment from gilead that will help the company deepen his research into inflammatory diseases. Joining us on the phone. Great to have you with us what benefits will this deal bring to galapagos . Thank you for letting me join your show. The greatest benefit is the partnership we have because of gilead will accelerate our innovation, bring medicine to patients faster. We will double our r d over the years. We will be making use of the great expertise of gilead especially in manufacturing and commercial. We will remain independent. We keep the culture of acceleration and entrepreneurship within galapagos. Why is it is it so important for you to remain independent . The answer is innovation. We believe that biotechs are uniquely placed to be risktaking, to not shy away from innovation. The firm is focusing on late stage of element. Late stage development. If we remain independent, we will be continuing to push novel medicines to the patient. Nejra to achieve those goals, will you be hiring more . Yes, definitely. Gilead makes a very large investment into our company. We will be using those funds over the next years to grow our research, to get more novel targets and through research and development. We will be expanding our commercial capabilities. Gilead gets the noneuropean rights to our pipeline. We will be setting up a european infrastructure. We will double the size over the coming years. You expect u. S. Drug companies to increasingly look to european biotechs for growth . Do you expect more impact on the sector . This is a creative way to join forces where pharma gets access to all of our pipeline without m a. There has been an example in the past. I couldnt imagine that this could be a model for a future alliance between large pharma and biotechs. Where a firm is able to type into the pipeline of the biotech tap into the pipeline of the biotech. I think you will likely see more of these models. Nejra great to have you with us. Thank you so much for joining us. Get the Bloomberg Business flash. , nara, the main ingredient might not have support to win reauthorization. That is according to germanys agriculture minister. Swallow uldnt follow austria in products. Politicians are working on plans find safe alternatives. The boeing 737 max 8 is expected to Stay Grounded until 2020 according to the wall street journal. It cited sources in the faa saying there is no firm timeline for the planes return. They have removed the max from the schedule for the beginning of november. Onehe trade war heats up, is pivoting away from vietnam. It says the most important thing is diversification and clients dont want production basis in one country. The companies chairman says 50 of its garments are made in vietnam so it isnt diversified enough. Ab inbevs decision to suspend the asian union has cut the stock in half. The near 10 billion shale sale would have double share sale would have double the amount raised this year. This dampens momentum generated in 2018 when more than 200 companies raised 37 billion. Bitcoin tumbling after President Trumps criticism of cryptocurrencies. The president saying he isnt a fan of bitcoin. That they are not money and their value is based on thin air. Nejra. Nejra thank you so much. Surveillance continues in the next hour. Tom keene joins me. Conversation continues with miranda carr. We have seen a positive reaction in markets to the data. Gdp may have been the slowest on a quarterly basis since the early 1990s but that fixed Asset Investment all beating estimates. We were seeing gains in european equities earlier that we are flat now. Seeing the euro trading flat and the dollar is holding onto the weakness. Crude is slightly on the backslide and continued yield handled. Tom this morning, this week, there are eight days a week for Boris Johnson. He awaits tuesday, july 23. He and all of england celebrate the greatest victory in british sports since 1966. July 31. What will jay powell say . Equities richly priced. In washington, go back from which they came. Enough. T leave fast the president creates weekend uproar in washington, and no one cares that equities are richly priced. Good morning. This is bloomberg surveillance. Im tom this is bloomberg surveillance. Im tom keene in new york. Nejra cehic in off on vacation somewhere. Nejra pushback really growing for Boris Johnson suspending parliament. In the u. K. , what we are focused on is the fed. Last chance to hear from fed speakers this week before the quiet period, and we are heading to earnings season with u. S. Equities at record. Tom a Strong Equity rally friday afternoon. Right now with the first word news, heres viviana hurtado. Viviana chinas economy hasnt grown this slowly since at least 1992. Gross domestic product rising 6. 2 in the Second Quarter. The slowdown underscores the pressure beijing is facing as it tries to negotiate a trade deal with the u. S. Factory output and retail sales growth beating estimates. Thats a sign the economy is stabilizing. Democrats are accusing President Donald Trump of racism after a tweet aimed at four hungers moment at four congresswomen. The president suggested they go back to the crime infested places from which they came. Three of the lawmakers were born in the u. S. All our racial or ethnic all are racial or ethnic minorities. The president erdogan u. S. Has warned deploying a Missile System could undermine the uns capabilities. The hurricane that hit louisiana has now been degraded to a tropical depression. Still, it is expected to unleash more lifethreatening floods. Another foot of rain is expected in the South Central part of the state. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Tom thanks so much. Lets do a data check right now. Huge equity move there. 3019, remarkable. Oil does nothing. Euro does nothing. 12. 74. You would expect that to be a lower statistic. Yen position stronger today. Im starting to talk up eurosterling more. Nejra . Nejra youve really got your finger on the pulse there. A positive lift to equities in the asian session. The 10 year yield back at 2. 12 . We have been seeing some curve steepening. The dollar holding on to three days of weakness we had last week. Exchange on aal bit of a tear after betterthanexpected data. Oceanhe cable across the and sterling dollar, the number of dollars per pound, and the flip, the eurosterling, lets look at that right now. Brexit here, and the victor goes the other way in this direction with these peaks of weak sterling. We are not quite back to where we were in december or september, but that is something worth watching. Many people we talk to, including im sure orton im surehe 0. 9 0 jordan rochester, the 0. 9 level im sure. Im not sure what that means. Is it pence . Nejra euro cents, tom. If you look at the three month10 year, that has just about inverted, but you can see that steepening in the two tens. Turning back to china, chinas economy has slowed to the weakest pace of growth since quarterly data began in 1992, but monthly indicators for june did provide signs of stabilization. Gdp grew just 6 from a year earlier, but factory output, retail sales, fixed Asset Investment engine were bright spots, beating expectations. Export and import data from friday shrank as external demand was hit by tariffs. Stimulus measures to curb the slowdown may be feeding through. Pressure remains on chinese policy makers. Joining us from hong kong is miranda carr, Haitong International senior macro strategist. We had betterthanexpected threepronged monthly data. Does this mean we are seeing a bottoming out in the chinese data . Yes, the markets reflect a bit of release that the data can be a lot worse. The key point, there were a couple of perks in the data. Net exports on the gdp number were actually a positive contribution, 1. 3 on the 6. 2 growth. Theres also a bit of a rally on auto sales, whereas retail sales were much lower. Basically, you have a couple of quirks which indicate the q2 da ta might not last. There is still heavy lasting from the government side, and also on the infrastructure side, to make sure that growth doesnt slip further as we come through the rest of the year. With if we ask ourselves the prospect is for further easing, you pointed to two things, monetary and infrastructure. Is that where you expect it to fall . Infrastructure was actually surprisingly weak, only 4. 1 , rather than having any sign of local governments going out and spending huge amounts more money. We expect those heavy special bond issuances in june boosted numbers on friday, so that should begin coming in. Else . En, what you have the Industrial Production potentially slowing because of the slower export growth. It is more like the consumer has to pick up the growth, and theres also got to be potential easing on the Monetary Policy side to really make sure that it can withstand a lot of the second round pressures that we expect to see from the trade war. Tom does anybody believe these numbers . I dont know if they were managed in the 1970s, 1980s, 1990s, in the boom decade. Does anyone believe the manufacture of these statistics . Target, youve got the and the guest indication is whether they are too far below target or too far above target. If they are too far below, you know youre going to get stimulus. That is the best indication that you can take these gdp numbers. We still got another year of growth to go. That means youre going to see some support for the economy. That is probably, for investors, the biggest take away from the gdp numbers. Tom from where you sit with your synthesis of international relations, what is the Financial Stability of the chinese system right now . Honest, itse under a lot less pressure than it has been. There was pressure on the currency, significant pressure, when the spreads were narrowing. This time last year, they were below 30 basis points. They are now over 100 basis points, so you have less pressure on the currency. That means they can easily bit more. They can ease a little bit more. Contractings friday, but actually a lot more bond issuance. Capital markets and the banks are lending. In terms of there being a massive squeeze on the economy, to be honest, this is one of the times where it doesnt actually look like china is having too much of a problem. That is largely because youve also had the u. S. Also taking a much more easing stance. That gives china a little bit more room, particularly in managing the currency, to give a bit more stimulus to the economy. Tom as you look at the various tiny language press, what is the position the various chinese linkage press, what is the xi . Tion of president does he have more power, or is it a new era of fragility . Miranda not seeming to capitulate to a lot of u. S. Pressure, being able to keep the economy going because, as the figures showed, we are not in all out collapse into a sort of major problem. So being able to manage the strength of the economy, yes, growth may slow, but if you can keep things overall stable, that gives a lot of strength to the current administration. It means that you do have this withstanding the trump pressure becomes a positive rather than a threat to the administration, which obviously some people would be hoping for. Tom miranda, thank you so much. Thrilled to see you at our hong kong studios today. Miranda carr at Haitong International, always good to see you. Coming up tomorrow, david lipton , the acting managing director of the International Monetary fund. This is bloomberg. Tom let the political wars continue, as they do in washington. Much going on in d. C. News, reporting that trump that ousting his secretary of commerce wilbur ross. This is clearly on the back and forth and the defeat of the census measure that the president faced. We will put this under speculation. This is people familiar, nbc news reporting that this morning. People also familiar with the dynamic of the markets, the incredible equity story and bonds pressed to perfection. Jordan rochester joins from riley joinsnd david from Bluebay Asset Management. David, let me start with you. What do those equity prices signal . David i think those equity prices signal that the market is anticipating not only that the fed will deliver a perfect series of cuts will allow the economy to not only stabilize, but then rebound. If you look at what has been priced within the s p at the moment, it is quite a strong rebound in corporate earnings to the end of this year and into next. I think that is a potential source of vulnerability entering q2 earnings season. I think that will be important to watch, particularly for guidance into the second half and beyond. Tom jordan, what is the litmus paper of your what does the litmus paper of your world say . What does fx say, particularly with yen at a 1. 07 handle . Jordan the dollaryen has been very tricky to trade. We wanted to belong the yen because global trade means safe havens. Typically dollaryen goes lower at this stage of the business cycle, but s p is at the high end u. S. Performance all over Asset Classes outstripped the global story, therefore the dollar has a bid, too. Youbusiness cycle telling you should not be long assets, but the dollar yen ok, treading water. Nejra i always hesitate to ask about currency wars, but when currencygoldman saying risk, whatn is a low happens when we get any intervention into the dollar . Jordan when donald trump took office, this is something we really looked into. At that time, it was very difficult to do because the Federal Reserve was raising Interest Rates. This would go against the dollar intervention policy. Now it can work in the shortterm because if the fed is cutting Interest Rates, loosing monetary conditions, combined with dollars selling, it can work. It can soften the dollar. I wouldnt say that the dollar would selloff in the shortterm. I think you need to tensions on trade to escalate even further. Right now, talks are ongoing, whatever that means. Lets see how things pan out in september. I think thats when things could kick off. The ecb will have to cut rates first, and he would need to see a big move in dollar before any of this happens. Nejra interesting. Ahead of the Bank Earnings you sit inre do terms of whether you hold any bank credit in the u. S. . David we hold some of the bank credit in the u. S. The major wall street banks, we think some of that debt offers some value. I think we will be looking at, in terms of the Bank Earnings coming out this week, firstly, what is happening in terms of asset quality and guidance for new lending. I think that is part of a broader macro indicator on the outlook for the u. S. Economy, but also looking at things like Net Interest Margin. One of the challenges, one of the reasons why thank equity has been beaten up is because flattening yield curve, lower for longer Interest Rates is not generally a good story for bank profit ability. Nejra we will talk more about that next. Jordan and david staying with us. Coming up tomorrow, former ecb sident jeanclaude ecb president jeanclaude trichet. This is bloomberg. Viviana this is bloomberg surveillance. Is boosting its stake in galapagos. Pay 5. 1 billion to increase research into inflammatory diseases. 8 reportedly7 max may Stay Grounded months longer than the company is telling customers. According to the wall street journal, the latest scenario calls for it to Start Playing again in january. American airlines has already said it will keep the plane off its schedule until november. Chinese media is hinting at the possibility of sanctions against u. S. Companies for arms sales to taiwan. Among the Companies Mentioned for a possible left list, raytheonneywell and honeywell. That is the Bloomberg Business flash. Nejra thank you so much. Jay powell last week left it all but certain that the fed will reduced Interest Rates this month for the first time in a decade. Chicago fed president Charles Evans said friday a couple of rate cuts may be needed to bring inflation above the 2 goal. Jordan rochester from number a from the mora from nomura and david riley from Bluebay Asset Management are with us. Is it time to take some profit on the longer end, say 10 years and further out . Is some do think there potential for further steepening because i think the u. S. Economy is in a pretty strong state. I think some of the fed speak weve been getting, and we get , are goinghis week to start pushback on the amount of fed rate cuts priced into the market. They are going to deliver july, as you alluded to. I think another 25 basis point cut is then fairly likely, but i do think they will then try to pause and see how the data evolves from that point onward. The market is still pressing 75 to 100 basis points over the next six to 12 months, so the bias at the moment for me would be to tactically short u. S. Duration. Nejra would you say as well that the market has gone too far in pricing a made an easing cycle . Gone too far in pricing in an easing cycle . Jordan the 50 to 75 zone is fair game. The fed doesnt really do 25 basis points rate cuts. They tend to do chunks of 50. But we are on the 25 side because the fed talked about insurance rate cuts, trying to get ahead of the game before growth in the labor market slowdown together. We had the growth slowdown, but not the labor market slowdown yet. The fed is trying to get ahead of the game, boost inflation, and do a few small rate cuts like 1998. Maybe 75 in total. That actually is a weird place to be because the markets overly priced, so you could see Dollar Strength resulting from the cut. Tom whats interesting here is the dynamics of the rate cut and quarter to quarter, and what is going to happen next week or tomorrow. Are we all managing to a new terminal value . When everything is said and done within the adjustment of the equity market, are we just speaking finally about a new longer terminal value that has dampened down . David i think you are absolutely right to step if you like and look at what is the mutual sustainable Interest Rate. When the fed met in june, not only did they signal the potential for rate cuts in the also did, but they lower their assessment of the longerterm beach will rate. I think that is the longterm mutual rate. I think that is the world we are in, where Interest Rates stay low for very long. Tom we will come back and talk on this. Jordan rochester and david riley with us. Coming up, stephen king of hsbc. This is bloomberg. Xfinity mobile is a Wireless Network designed to save you money. Whether you use your phone to get fit or to find the perfect gift, youll use less data with a network that automatically connects to millions of wifi hotspots and the best lte everywhere else. So you save hundreds of dollars a year on your wireless bill. Xfinity mobile has the best network. Best devices. Best value. Simple. Easy. Awesome. Click, call or visit a store today. Tom news flow out of washington continues. Theres been a story from nbc news suggesting the president is unhappy with secretary of commerce wilbur ross over the census debacle of recent days, and that secretary ross is being considered to leave the administration sometime this summer. We had a quick conversation with Martin Schenker to look at other Washington Events in our next hour. Hes 81 years old, and theres allowed to be change in administration. Secretary ross is dramatically different in the exit of secretary acosta, isnt it . Marty it absolutely is. Hast of all, secretary ross been on for nice almost since the time he joined the administration. Fact that donald trump has been unhappy with weber ross has been the case for quite some time. Tom wilbur ross is a financial guy, also a social friend of the president. Would you suggest that he still has a job only because of his close affiliation with the president . Marty i think he still has his job because he was an effective implementer of Donald Trumps policies. That said, there have been reports very early about his attendance at meetings, and some reports that he even dozed off during meetings, which did not endear him to donald trump. Be that as it may, his handling of the census question was failed to get a key policy tool done that donald trump wanted. Ross internal communications on this were a big reason why the courts questioned whether the census question was legitimate. Nejra great to have you with us. Should a global audience read anymore into this beyond the census question that you just talked about . Marty i dont think so. The other thing is that donald trump, if he were to ask wilbur ross to leave, would probably want to appoint a real hardliner stead, so thes only thing beyond the census question people need to consider is what kind of commerce secretary you would get after wilbur ross. One of the things you would definitely get is an acting commerce secretary because that seems to be donald trump game plan, to avoid Senate Confirmation and just appoint people. Tom thank you for the quick conversation. We look forward to speaking with you in the next hour. Right now, heres viviana hurtado. Viviana President Donald Trump reportedly may replace commerce secretary wilbur ross, as youve been discussing. According to nbc, that is prompted by the administrations lost to the u. S. Supreme court on adding a Citizenship Question to the u. S. Census. It has been almost three decades since the chinese economy grew this slowly. Gross domestic product rising 6. 2 in the Second Quarter, the lowest figure since at least 1992. It is a sign beijings strategy to boost the economy by cutting taxes and fees wasnt enough. The trade war with the u. S. Is having an impact, exports falling in june from a year ago. In hong kong, more pressure on chief executive carrie lam is being felt. Police arresting more than 40 demonstrators who fought with Police Inside a suburban shopping malls. Protesters marched against lam and her controversial plan to allow extraditions to mainland china. China refused lams offer to resign. Beijing wants her to fix the mess she created. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This. Is bloomberg this is bloomberg. Tom thank you so much. Certainly the story continues in hong kong. Weve enjoyed terrific coverage on the streets and from our building in the central district. Joining us now, caringly of bloomberg karen lee of bloomberg. Give us an update on the size of this protest. It wasnt tens of thousands on the street, was it . Smallert was a little than protests in recent weeks. In recent days, protesters have started to take their message to the mainland, to Chinese People themselves who would have a very hard time finding out about this protest behind chinas firewall. They started protesting rather near the chinese border. We saw these surreal images of people protesting inside of a mall, facing off against riot in this giant mall atrium. We havent seen any images like that specifically before. Tom what is the significance to the chinese and the people of hong kong from moving from the streets hong kong in moving from the streets of the financial district to a mall . Karen the protesters have vowed in recent weeks that they would take this protest wider than just the city center. This is a relatively farflung district, closer to the chinese quarter, so it gets it out of the area it has been in and takes it further away. The fact they were able to still get these kinds of numbers out weeks and weeks after this movement started really shows that the movement has momentum into the summer. That is going to cause political gridlock and worry carrie lam, keep idling pressure on her and her backers in beijing keep piling pressure on her and her backers in beijing. Nejra what are the prospects of carrie lam resigning in the bill being completely withdrawn, not just referred to as dead . Karen in terms of her resignation, she has really dug her heels in. She said today she will continue to govern, that she still has a significant chunk of her tenure left. There was a report over the weekend that said she had offered to resign numerous times, but that beijing would not let her. It does look like shes going to stay in office, at least for the for the perceivable future. Shes trying to urge people to return to a sense of calm, but this is continuing to spook people and businesses. Got to the point where people are worried that this is going to continue maybe even for months, and what does that mean for the ability to do business here . Leigh,bloombergs karen thank you. Up next, resistance building on Boris Johnsons threat to block parliament to force through a no deal brexit. This is bloomberg. Inra im nejra cehic london, with tom keene in new york. The u. K. Government may go to court again if oris johnson attempt to suspend parliament if Boris Johnson attempts to suspend parliament to force through a no deal brexit. Jordan, you are bullish on sterling, particularly against the euro. Why . Jordan we were the opposite until last week, and that position worked quite well. The dollar starts to be a bit softer. Then i look at the pound versus the euro, now at historical levels. This is what we call the value sign. When you are at historical lows matched only by the 1992 crash and the 2008 global crisis, selling is pretty cheap. These aretart to see good levels to be buying. Next week weve got a new Prime Minister, most likely Boris Johnson. Therefore, we have a new cabinet within the chancellor. They will be raising the risk of a no deal brexit, but we already know that. The markets have that priced int priced in to some extent. They will be talking about tax forrm and even stamp duty housing. Boris will mention brexit is hard to avoid, but bring it about two more positive things. There will be some chances of value by an in sterling and a little bit of sterling strength on the back of those reforms, but then we get to september, completely different ballgame. When parliament gets back, we see the risks of no deal go up and down, and volatility will rise. Nejra does any of this convince you to maybe be tactically long sterling, even if longterm, you are bearish . David no. [laughter] perfectly reasonable position, but as an investor and the way we are petitioning our point are petitioning are positioning our portfolios, we dont really like the outlook for the u. K. Is the two most likely scenarios are either an early general election or any of deal brexit, and in both of those scenarios, i think sterling is weaker. Right where i wanted to go. , buts a date calendar out the bottom line is we are headed for a general election. The proverbial at some point, does an investor invest knowing that, or do they ignore it . David i think if you have exposure to sterling assets, you cant ignore that potential or prospect. You have to think in terms of what is going to be the most appropriate hedge to those kind of risk scenarios. As i say, i do think a general election is looking increasingly likely, and there will be a huge amount of uncertainty around that, given where the opinion polls are. It is a pretty unpalatable choice between a johnson government versus a corbyn labou r opposition. Either one of those outcomes is frankly not one which is very attractive for International Investors into sterling assets. Tom we had over the weekend a lot of call about what Central Banks will do at the margin. What is governor carneys task to get to these different calendar dates, including a general election . Is he a central banker in name only . A central hes still banker of course, but he has a difficult set of circumstances. He wants to raise rates once a year. When the august meeting comes and goes, that will be kind of the window because the gross data in the u. K. Is among the worst of the g10. No matter how you spin it, its been pretty poor. But the bank of england has a slightly different date set of the Central Banks. Ecb has below target inflation. The event of a nonhas high inflation in terms of ofectations the vanke england has high inflation in terms of expectations. Therefore, the bank of england will do nothing for the rest of the year. At best, hopefully we see Brexit Delayed and a positive outcome, and that will lead the bank to raise rates. But that is a big if. Youre right, election is a big concern. If you see a no deal brexit, the bank will have to react to cut Interest Rates and may be and may be more qe. Tom the idea that we get anything more towards a new deal a no deal means more competition. Nejra and there was means more accommodation. Commentingthere was about that. We keep talking about these dovish pivots from Central Banks globally. Ubs changed its called today. Two cuts of 10 basis points each. What sort of credit might you want to buy in europe . Jordan i think it is whether the ecb will resume on buying will resume bond buying. I think rate cuts are priced in, so dont think thats news. I dont think qe is fully priced in. , particularly qe on the Corporate Bond purchasing program, the area with the least resistance within the iserning council of the ecb, unequivocally good news for Corporate Credit and the sovereign periphery as well. I do like greece as well, and i like some of the european credit. Some of the longer dated European Investment grade, and also European Bank debt. If they introduce tiering to partially mitigate the negative impact of negative rates on banks, that will be good for bank stocks and capital. Nejra very interesting stuff. Jordan rochester and david riley staying with us. After removing his central bank governor, turkish president erdogan promises significantly lower Interest Rates by the end of the year. What does that do for the policy and forl the lira . This is bloomberg. Viviana this is bloomberg surveillance. The Worlds Largest beer maker is looking for a plan b. The brewer needs to find a way to reduce its 100 billion debt pile and keep shareholders happy. Possibilities include cost cuts, asset sales. On friday, anheuserbusch in bev scrapped plans to take its asian unit public. Shares of Sports Direct dropping the most in seven months. The company delayed publishing its results while auditors increased scrutiny of its accounting. They blame the complicity of integrating the house of Fraser Department store chain. Investor peter thiel is calling google seemingly treasonous for agreeing to work closely with china. He says the fbi and cia should investigate whether alphabet has been infiltrated by foreign intelligence agencies. Thiel is one of President Trumps top Silicon Valley supporters and donors. That is the Bloomberg Business flash. Nejra thank you so much. Washington is close to punishing turkey for receiving shipments of a Russian Missile system. Officials have settled on a ctions package and a pet and are preparing to announce this week. Joining us is Benjamin Harvey, bloombergs managing editor for the middle east. David riley and jordan rochester are still with us. Listen to these risks . President erdogan mentioned he would be lenient, but it is clear that functions will be opposed, and the message President Trump mentioned he would be lenient, but it is clear that sanctions will be imposed. Showsaction in markets that there will be a relatively light package of sanctions that can range anywhere from sanctionsimpositions uncertain Turkish Defense companies, to completely blocking turkey from the u. S. Financial system or turkish entities. The expectation is that trump will go for the light option. Tom what is the state of turkeys ability to go to Global Markets, either in lira denominated debt or dollar denominated debt . Do they have access to Global Markets . Benjamin they do, impressively so. Turkey has borrowed quite a lot this year. The lira has held up. Turkey is benefiting from relatively high real Interest Rates, especially in a world of lower negative returns. Tom david riley, it is interesting. It is all the idiosyncratic problems, but then it is not idiosyncratic. Im not loading the boat in terms of turkey because i think german is absolutely right that erdogan i think benjamin is absolutely right that erdogan risks the potential for u. S. Sanctions. Whatever President Trump says, there is quite a lot of pressure building within congress in the United States for every action Missile System going into turkey and the ousting of the central bank governor. I think the market hasnt reacted much because theres not many people in it, at least in terms of International Investors. It is a very managed market now. The liquidity being very much controlled by the central bank, and also where you have state banks more or less under instruction to intervene whenever theres some weakness. That being said, you made the point about high real rates, and i do like high real rates when they are comfortable with the fundament those. I like them with the fundamentals. I like them in indonesia and mexico, for example. In a world where the upside to the dollar is capped by President Trump as much as by got relatively low ethics volatility. If you pick your spots, it is potentially quite an attractive place to be. We have an active overweight on strategies in local debt. Nejra youve mentioned the dollar, the fed, china, global growth. Jordan, what is your take on where we are in the global cycle at the moment, particularly with the data from china at the top of this hour . Jordan we all assume that the delegates to strong the gets too strong, donald trump will talk it down. At some point, the government is not going to be able to bailout markets. It is just getting the timing right. The. Com guys who got bubble the dotcom bubble right regret it because they got the timing wrong. When the s p makes that turn and becomes the bear trade, we are just seeing the governments at this point extending the cycle, but at some point that will turn. We have to watch out for that. What has all of this in the last few years done to tourism in turkey, not just istanbul, but across this historic land . Give us a tourism update. Benjamin actually, tourism is booming in turkey right now. When turkeyperiod was a high terror threat. That has pretty much ceased. There was a time when turkey and russia were at odds, and now they are back. Turkey is also benefiting from a massive depreciation the currency. It is a good deal now. Tom Benjamin Harvey, thank you for your coverage of istanbul throughout all these years. Benjamin harvey is our managing editor for russia, africa, and the middle east. It has been a most interesting our. , david riley,er nice to see the two of you disagree on whatever you disagreed on 40 minutes ago. Theres no disagreement, Bank Earnings matter. We begin with citigroup, and then the earnings start out. We will see what it is this week on revenues and earnings. This is bloomberg. Wanna take your xfi to the next level . Now you can with xfi advantage. Giving you enhanced performance and protection. When devices are connected to your homes wifi, theyre protected. Helping keep outsiders from getting inside. And if someone tries, well let you know. So you can stream, surf and game all you want, with confidence you can get coverage where you need it most. Thats xfi advantage. Make your xfi even better. Upgrade today. Call, click or visit a store. Tom this morning, this week, there are eight days a week. Bars johnson celebrates the greatest victory in british sports since 1966, the sterling is stable and equities are richly priced. July 31 beckons and what will chairman powell say about september 18. We consider a stronger yen this morning and equities are richly priced. Washington, go back from whence they came, you cannot leave fast enough, the president creates a weekend uproar in washington, no one cares. Equities are richly priced. Good morning, this is bloomberg surveillance from new york, from london as well. It is remarkable that equities are richly priced. Thats the quiet story into this july. Nejra even though we saw the s p 500 hit another record on friday, the four days of gains, you saw a gain of no more than 5 2110 of a percent. Theyearnings consistent say will not look stellar. Is this all about the pricing a fed rate cuts . Tom we will see as we go into the dreaded summer. Viviana President Donald Trump may replace labor secretary wilbur ross. Furor of is over the oil adding a Citizenship Question. Are accusing President Trump of racism after a tweet aimed at four congresswomen. The president suggested they go back to the broken and crime infested places from which they came. The lawmakers are led by alexandria of casio cortez in four of them were born in the u. S. And all our racial or ethnic minorities. Chinas economy having grown this slowly since at least 1992 and the Gross Domestic Product growth six point 3 in the Second Quarter and the slowdown underscores the china pressure as they try to negotiate a trade you with that u. S. Retail sales growth Beat Estimates. Day,l news, 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom thank you so much. Equities, currencies, commodities, futures higher. With thehe s p 500 curve steepening as well. Crude oil is not doing much. The dow closed extraordinarily on friday with the yen stronger. Thank you for joining us and eurosterling is up. Nejra i never make to mans on you. European equities are turning negative right now stop there was better than expected data out of china but not feeding through into the session. The 10 year yield has had steepening in the curve in the dollar holds on to weakness and copper is on their front foot. Tom it is an extraordinary weekend in washington. We lead with their washington coverage, the uproar, not outrage but certainly the uproar we see in washington is extraordinary with decades of experience on this and perspective, Martin Schenker joins us. In in thee this fits relative uproar of the trump years. Is this the worst ever or just another weekend at the races . This is trump and his campaign best. He recognizes this is a winning issue for him and certainly for his base and he will exploit it and hes doing a masterful job of that. Tom some of the reports that maybe the president was watching tucker carlson. I believe this was written before the uproar. The Democratic Candidates should join in an informal union and agree to stop answering raise your hand questions in the debates. The nominee will certainly need middle of recognize what a disaster the presidency has been. Can anyone here play a long game . That being ramped up by the uproar over the four congresswomen . I think the momentum of the democrats shifted up. There is no western that this , the of immigration democrats are having a hard time figuring out where they should stand on immigration. Donald trump is going right there too so divisions within the democrats which could threaten their chances to take the white house in 2020. Nejra that is a great piece. We were earlier talking about these reports by nbc that wilbur ross could be ousted by President Trump. Have any significance for a global audience in terms of who might replace him question mark i think it actually does. Wilbur ross has been a very loyal, implementer of Donald Trumps policies. If he were to leave and i make it a sickly 50 50, hes been on thin ice since he got the job, he would be replaced by a hardliner on trade. Thats the way donald trump has anyd his Administration View thought wilbur ross was tough on trade, his successor would be more so. ,ejra on the theme of trade youve got more and more calls coming out for goldman and pimco being concerned about these low but rising risks of fx intervention to weaken the dollar. President trump has been quiet on this but is this something he would like to keep pushing . That hisis reporting economic advisers are stressing to donald trump its not the fed that implements dollar policy, its the treasury. Beating the been bush within the administration on trying to weaken the dollar against the advice of his own economic advisers. Publicly, i think he will stay just keep pushing that button but whether he actually horses any real action is questionable. Actually forces any action is questionable. Tom you have studied the middle ground. If we begin with the fact that the Republican Party has no middle ground, will it matter anyway . Is it going to matter 18 months forward . Its interesting the way the polling is going. I think the Republican Party is redefining itself. When you get 90 of people voting for donald trump, where did the moderates in the Republican Party go . The same is true with the democrats. Tom its the same tune for the democrats . It is but i dont think a democratic candidate can win without drawing the moderate part of the party into those elections. Male, oldero be voters and those the ones who turn out. Ultimately, it comes to the issue of turnout. Who will actually vote question . Tom what does joe biden need . A week of stability and quiet at and may be that the democrats can coalesce around some version of unity but it will be very difficult. Tom thank you very much. Tomorrow morning, an important and timely conversation, a new job description, acting managing director of the International Monetary fund is president lagede considered . This is bloomberg. Time in london with tom keene in new york. Has slowed economy to its weakest growth since 1992 with gdp growing only 16. 2 per only 6. 2 in the Second Quarter. The bright spot, joining us now hunghong kong is our chief asian economic reporter. European equities have reacted to that betterthanexpected news from june but despite that come are the risks still tilted to the downside with the risk of sub 6 growth . Takeawaynly, the key as you mentioned is that the monthly indicators for june did Beat Estimates on the upside, ofd rebounding retail sales economists are saying some of those numbers are not sustainable because the retail due to ance was promotion on car sales or measures to promote them. They dont see the fixed asset Market Holding up. We see some domestic challenges coming up. Growth slowing up means slower demand for chinese goods and a trade war with the u. S. No one quite knows where that will go next. Now, there isght stabilization with plenty of reasons for caution going forward. Nejra is stimulus still on the table . These take from it what you will. Clearre saying that its that the relatively disciplined stimulus they rolled out so far as having some impact and that means there will be less pressure on policy makers to do more going forward. On the flipside, if the other risks materialize like a trade war or if terrorists go up emerald growth slows down, that puts pressure back on the do more things. There is no expectation that the central bank will put it spent will change its benchmark rate for the big picture is that the government and other authorities will have work to do. The dampening function of gdb croaked is simple. Just of deep of gdp growth is simple. Is it always above 6 growth in china or the authorities frame less than 6 . The set growth this year is the target range between six by between six and 6. 5 so the government will not let growth go below 6 . That theys suggest are comfortably on the glide path. It doesnt mean they will not test the lower bound of that range but it suggests that they have a red line and they do approach to closely, you can be seenthe stimulus you have will get ramped up in government will make sure the growth remains on track. To thank you as always and all of our hong kong team. Boodle joins us with an interesting finance computer background. Lets start with a money question how far are we from global recession or selected recessions worldwide . It colors everything we do, right . When you look at the s p 500 with an alltime high, the market is not telling you that a mark that a recession is around the corner. The conundrum and equity markets, derivatives, gamma, is it a jump condition, a melt up or is it a grind . Like we are getting reluctant bulls to pull into the markets we could run the risk with the fed potentially easing at the end of the month. Up inuld get a grind equities and Monetary Policy has been the driver this year. Earlier i said we were seeing a reluctant rally. Where would you put on the protection as you buy u. S. Equities . I think adding protection is the right thing to do. We have the vix at relatively low levels in the s p at alltime highs. We have a pretty lackluster and globally,ses growth is slow so its a backdrop for equity positions. Nejra how much of the rally is based purely on the expectation of fed rate cuts this year and next . I think its huge. When you look at the price action over the last year or yearandahalf, its been very coincident with where weve seen fromh more dovish message the fed. If you try the s p against the more cyclical data like manufacturing ism, you see a the decoupling so very much fed has been the key driver for the price action. If you change your enthusiasm for equities, whats the nuance at the margins . Timing these things is always difficult. The expectations for this quarter and next quarter or not particularly challenging. Next year, the expectations for markets are that we will see earnings reacts hillary and i think that will be challenging so the guidance this quarter will be very important. Thank you for staying with us. Coming up tomorrow, former ecd president jeanclaude trichet at 10 30 a. M. London time. Allen kuring will be on the new 50 pound note. Tom while. Wow,. Turing was a british mathematician. Tom i had my money on baby archie. Nejra this is bloomberg. This is bloomberg surveillance. Viviana. Gilead Sciences is boosting its investment in galapagos laboratories. 5. 5 billion dollars to increase research into inflammatory diseases. Gilead hasve 22 and been hurt by increased competition for its hepatitis b drug. The boeing 737 max may Stay Grounded longer than the month months than the companys has has been saying. American airlines already said it will keep the plane Office Schedule until november. Chinese media is hinting at the possibility of sanctions against u. S. Companies for arms sales to taiwan. Among the Companies Mentioned for a possible blacklist are raytheon, honeywell, and general dynamics. The u. S. State department has recommended the u. S. Go ahead with a proposed 2 billion deal with the taiwanese military. Thats the Bloomberg Business flash. Lets bring up a chart which is the immediacy of the vix index. Besides the agony of 2007 2011 is on a daily basis, we got up to 15 not too long ago and we enjoyed december and once again, where falling down. Greg boutle is with us from bnp paribas. The gamma is the acceleration out there but is there a g amma risk . It feels like we are not going to get a shock but we need something to break us out of this low at the moment. This environment is typically quite selfperpetuating until you get something to break you out of that environment. Theta. E catalyst goes to are we lowering ourselves where we are off the mark word do you see an acuity in the market for shocks that may come . It feels like we are in a little contrived calm. Tom i love that. It very much feels like the fed has been a huge, depressing impact on equity volatility and the vix. I think they will struggle to have the same impact if we see to terry ration coming in from corporate earnings, some kind of exogenous shock or a general slowdown in the macro backdrop. The risk of a spike in the vix at some point, that could be elevated. Tom go ahead, please. Nejra the risks of that volatility climbing might also be evident in the fact that they vvix has been climbing. We are getting towards seven on x was in april. Does this chart cause you concern. There is not as much confidence in the low level of the vvix as it appears. Is just telling you how many people think the vix might move. There is some cause for concern as far as volatility markets but going into a in earnings a season, its interesting to note stocksparity between volume between index volume has been high for a long time. On aning that although index level, market looks calm and people are more worried about under the surface. What sort of trades would you put on given everything we talked about . Thate simplest answer to question is with the s p at an alltime high and volatile he aneled and volatilitys alltime low, the backdrop has the jury headed in that means its a pretty attractive time to try to strike hedges. We are looking at the greek letters today. Its been extraordinary to see. Matt, the most on bull market since time began. Stephen king of hsbc is next. This is bloomberg. Good morning, everyone, bloomberg surveillance. There is a lot going on particularly in an underreported story in hong kong over the weekend. That would be more protests. Eric lam joins us. It was below the radar and much of the restaurant world. And much of the western world. What was the protest this weekend . Im not sure you have seen the video from those protests but over the weekend, they were pretty violent. We saw about 40 people arrested after violent clashes with police in a New Territory in hong kong. From the reports from the police come about 10 officers were injured including one who reportedly have their have their finger bitten off. Protesters were sent to hospital including several in critical condition. It was an overall pretty violent clash sunday. Tom there is the geography of hong kong as well. What was distinctive about this geography. Its not the same scene we have seen before, is it . In terms of the geography, says not quite the same location is where we saw the central protests that were around the legislative buildings near where our bloomberg offices are. These protests were in the New Territory and it coincided with some protests as well that work processing other issues including parallel traders who come in from the mainland and by local goods to resell across the border. There is a differentiation in these kind of protests as well. Nejra how much work could the protests get given that there doesnt seem to be the prospect lam resigning or the bill being withdrawn . We had reports from the Financial Times that carrie lam offered to resign but was rebuffed by beijing. Those reports have been denied. It looks like she is sticking around then she said today she thou to see the end of her term. When it comes to further protests, we are seeing a potential for further protests in other cities, talking about demanding further investigations for the police use of force in these past protests. We are talking about other protests and longstanding concerns about things like parallel trading. Its not just about the hill, its many different grievances at the hong kong citizens have with china. Nejra great to have you with is, thank you so much for the update. Lets get to bloomberg first word news. Viviana its been three decades since the economy grew this slowly. That it only Gross Domestic Product only grew since six point 2 . It is a sign that beijing strategy to boost the economy by cutting 291 billion in taxes and fees was not enough and the trade war with the u. S. Is having an impact with exports falling in june from a year ago. In turkey, president erdogan says u. S. Sanctions are unlikely at the country but a Russian Missile defense system. He says President Donald Trump is not in favor even though some u. S. Officials do want sanctions. The u. S. Has warned deploying the system could undermine natos military capability. There is the pontiff questions this morning after saturday night blackout that left parts of manhattan in the dark for a few hours. The president of the Electric Company says the outage did not happen because of high demand on the electric grid. He said it would take some time to determine what exactly did happen. Officials are ruling out terrorism. 50 face of the new british pound note will be code breaker and the father Artificial Intelligence allen turing. He was selected from almost 1000 eligible nominations suggested by the public. He was a war hero for breaking nazi germanys enigma code his work on his question of whether computers can think laid the groundwork for Artificial Intelligence. This is bloomberg. Tom thank you so much. We will simply stop what we are doing to understand that everything of the bloomberg world was based off of a select few people including dr. Turing who took his phd at present a princeton. He also studied at cambridge for that barely describes his contribution and mathematics to the United Kingdom and also his social contribution. A gentleman ostracized in the 50s, he was singularly pardoned by Queen Elizabeth in recent years. I note the leadership of Prime Minister brown and resurrecting the reputation of alan turing. Areing us from the u. K. Alex webb with a unique perspective and greg boutle is still with us as well. This mean for your world . You went to the same high school as dr. Turing. Its extraordinary his place in mathematics in the bloomberg world. Absolutely, his name lives on. He decided whether ai has reached a level whether it can fool people into thinking its human. The secondution to world war was incalculable. He had a decoding machine to decrypt enigma and played a significant role in winning the sorts ofhere are all modern pieces of Artificial Intelligence. Pdq so big for the lg Lgbtq Community because he was ostracized for his homosexuality after the war. Tom its amazing what he went through. Taking of dr. Elerian over Queens College in cambridge of a celebration of the mathematics of another time and place. Do you sense a rekindling in the United Kingdom of the innovation for mathematics or is this just a look back to the past . Moment thely, the u. K. Celebrated the golden triangle, the heart of a lot of innovation of Artificial Intelligence, the great story this week recently about how neuroscience feeds into a lot of the innovation in Artificial Intelligence and the medical schools in those parts of the world are very strong. We are seeing that play out with a lot of the big tech firms like google. There are plenty of other instances where they are doing bleeding edge stuff. Tom you have lived this as well. Kids in the u. K. Are superior in mathematics. Got computational degrees with a finance degree as well and there is a heritage that will be in a 50 pound note but its a heritage that people like you live every day. , what doese dynamics this mean for you in the modern world . I think technology is such a fastmoving industry with the race of it changing over the last 20 years for for their work 50 years ago to impact wealth today is important. Is the bloomberg are what you deal with every day, you have a massively global bank and its amazing how that is still with us all these years. Technology march of is still in its infancy and we andthat the way we use Ai Technology in our work. That will only accelerate. Tom was that nerdy enough for you . Nejra absolutely. Your knowledge on his biography was astounding to think you went to the same high school as alex webb. That he went to the same high school as alex webb. The other thing we need to discuss is washington having this rare i partisan moment where President Trump and the democrats have actually united in their discuss for the crypto proposal of facebook. That will be put to the test this week. Going to defend its labor currency so what do you expect . I think they will have a tough time. Sometimes the format of these hearings does not help. We think of the lines of questioning from journalists. Time for eached number of questions and mark had four minutes for the house of representatives in the senate, for its hard to get things across. They have to come just after convince senators to buy into what they are doing. Thats harder than making sure you dont mess anything up. Well theknow how public faces executives. Its going to be interesting to see what they are picking on. Nejra there is a question of whether can just the concern is over libre or whether facebook itself and their privacy issues. There are 22 distinct elements. Libra is the stable coin itself and then theres calibra that facebook is the wallet that facebook will use. Calibra i think will be important for facebook and that advertising model. They dont know when you book product that was advertised on facebook. Calibra could close that lupin mess the concern. Libra is the concern on the actual finance side of things. Nejra the regulatory scrutiny is in the u. K. As well and you have written a column about britains look at the digital ad market. What can we learn from that . There have been investigations and studies that been going on but no one has come to grips with is the Digital Advertising market. Google and facebook control each piece of that. One person describes this as andine you have an auction there is a painting where sothebys is the buyers agent and the auction house and the sellers agent and you dont really have any sense of whats going on there. There is a huge opportunity to unravel some of that. Tom i think you just described bitcoin. Bitcoin a legit market . I struggled to get my head around the legitimacy of bitcoin. It seems like there is a huge number of believers. I think there are reasons why the blockchain can be useful but bitcoin to me remains a very difficult sell. Tom this has been the single best segment you have ever the and ever done with us. Thank you so much. The j. P. Morgan securities chief investment strategist will be with us later. This is bloomberg. Vivian thea world s largest beer makers looking for a plan lookseuserbusch in the to reduce its 100 billion debt pile and keep shareholders happy. Possibilities include cost cuts, asset sales and taking a shot at the ipo. On friday, it scrapped plans to take its asian unit public. Buye is dropping efforts to surcor. 359 billion bid. Billionaire investor peter thiel is causing is calling google seemingly treasonous for agreeing to work closely with china. He says the fbi and cia should investigate whether google parent alphabet has been infiltrated by foreign intelligence agencies. Peter thiel is one of Donald Trumps top Silicon Valley supporters and donators. Tom thank you so much. On chinadent tweeting i will not read the whole thing. To state that at the end of the second tweed, the president goes into his tariff mac at mathematics again and we will have more throughout the morning. Boutle is still with us and this is a chart of the emotion of the weekend, the silence out there of the few select people who have missed this great bull market. With seven spx randomly selected pulled pullbacks. What do you do . Go to cash . Wow, what do you do . Its been difficult. Part of it is when you get a pullback in equities and you think it will be another pullback that will reverse quickly. By the feddriven stepping in and sending a dove us message or is there a risk for the next pullback that could ask that could escalate . Tom where are read where are we right now. We are out one and two standard deviations. A very aggressive move since the lows in december. If you look at where we are we haveanuary, 2018, not made that much headway and its been a more volatile period over the last 18 months than the five years prior. Nejra if you have a global mandate, is now the time to stop chasing the rally in the s p 500 and look elsewhere to emerging markets for example . That we make the argument the most bullish thing for equities is the fed rather than the data, i think that is that will favor things. If the fed is being dovish, that potentially allows the dollar to weaken and thats the environment we would expect em to farewell on a relative basis to the s p. Nejra if you are investing mainly in the u. S. Kumal kind of sector rotation might we see from here that you want to take advantage of below the surface . We have been more cautious and focused more on earning some of the more defensive sectors like Consumer Staples rather than Consumer Discretionary or industrial names. Investorsa pullback, are looking to access cyclical exposure and tech is somewhere where we would want the cyclical exposure rather than industrials. Tom thank you so much. Up, it begins, Bank Earnings which will be interesting thanks to allison what he hims setting us up. Look at that at 8 00 a. M. This is bloomberg. Surveillance,g good morning everyone and we begin a week of Bank Earnings and no one better to do that with then kenneth leon, director of Equity Resources who has won all sorts of trophies over the years. Thrilled to have you to begin our coverage for the week. What i see is jpmorgan is an example, the best run bank, and operational income glide path of 34 billion, jumps up to 41 billion and maybe a new jump up to 43 billion. Is it accurate to say these tanks are minting money . The banks are executing very strong. Even in a declining Interest Rate environment, operating businesses are doing well on the broad global theme is that u. S. Banks are taking market share to other areas like European Banks which are having some trouble. Tom are they restricted by government pressure or indirect pressure not to deploy cash back to shareholders . We just saw back in late june that the Federal Reserve approved their capital plan for the next 12 forward 12 months with significant increases and Dividend Increase and buybacks. This is significant because banks are returning almost significant capital. Banks are trading with the Biggest Discount in years. I heard what you said in terms of u. S. Banks taking market relative tourope the broader s p 500 index. Those bank stocks are not doing buying is this a opportunity based on earnings . We do, we have several banks with buy recommendations like citibank and Goldman Sachs. The valuation is below book value and this is like the debate about the inverted yield curve, whether we will have recession or not. Nonetheless, the banks are going to be posting any good results this week. Nejra what do you expect from Net Interest Margins . They are likely to be flat, slightly down. What contributes to that is the lower rate so the Net Interest Margin will be flat to down. Banks are frome the Capital Market so if they have increased accounts overnight, that will partly offset and easing rate environment. Tom its amazing to see the resistance of jpmorgan at 115 and 120 and im sure that will be a catalyst for them to break out. Is wells fargo a different charge . Give us an update. Wells fargo successfully completed the capital plan. The return of capital is coming. Ceo and a its a new new strategy and new leadership and the management team. The stock has held up really well over the last 12 months given all the Regulatory Compliance issues they have had. Tom thank you so much. Idea of an update a year before we get into the earnings season. Can join us for when citigroup announces later on. What an interesting week it will be. What does Boris Johnson do this week . Is he visible or will he hide somewhere question mark nejra im sure he will be visible but he has resistance he is facing in terms of trying to lock in a kind of move in parliament for no deal so that will be the focus. Looking k, we are toward earnings season and we talked about the u. S. Banks and how much juice we can get from the equity rally. We didnt have a cricket conversations that we were successful. Stay with us, in washington, reaction to the president weekend. This is bloomberg. G. Most of us dont know how much data we use, but we all know were paying too much for it. Enter xfinity mobile. Americas best lte with the most wifi hotspots, combined for the first time. When youre near an xfinity hotspot, youre connected to wifi, saving on data. When youre not, you pay for data by the gig. Use a little, pay a little. Use a lot, just switch to unlimited. Get 400 back when you buy the new lg g8. Call, visit or click today. Lowest on record. China gdp growth slowed in the Second Quarter, but then started to rebound in june, responding to stimulus. Financial earnings reports begin today. What do fed cuts mean for the banking business . And times may be changing. Bond yields are down, with many saying theres no reason for them to climb, but some people warning there could be big surprises ahead. Welcome to bloomberg daybreak. Im david westin, here with lisa abramowicz. Did you keep your lights on in manhattan . Lisa i did come about 72,000 customers did not with that power outage hitting a lot of the west side of manhattan. Still no answers as to why. They had plenty of capacity left. It wasnt too many people running their air conditioning units. Something else was the problem