Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Lets get a check in on the markets. European equities are pretty flat. The stoxx 600 struggling for direction. You heard and the headlines, three key things we heard. The dovish message from Jerome Powell reiterated and we got better than expected data in terms of retail sales and factory output, pushing the 10 year yield up. It also pushed the dollar higher and we hold on to those gains. The question as whether President Trump can have the weaker dollar at the same time as a strong economy. And can he have gains in stocks as the same time as a trade war continues . As you made those comments, the s p 500 took a hit, dropping for the first time in six sessions. Coming up, we speak to the oecd secretarygeneral. Dont miss that interview live. Lets get bloomberg first workers. Word news. The u. S. House voted to condemn comments from donald trump that are racist. Week, he tweeted for congresswoman should quote go back to where they came from. Trump says he is not racist and does not have a racist bone in his body. Of the lawmakers, he says it is quote my opinion they hate our country. President trump confirms turkey will not be able to buy a fighter after it began delivery of a Russian Missile defense system. Russia says they are working through a tough situation. The white house is weighing economic sanctions. Amazon faces a fullblown eu antitrust probe as the eu competition chief prepares a finale to her fiveyear crackdown on u. S. Tech giants. She plans a formal investigation into amazon. Amazon has this dual role. They are hosting businesses but also competing in the very trade they do. So now we are looking into their use of data to see if this is done in a fair way or if there will be a case for us. North korea is likely suffering its worst downturn since the 1990s when it battled floods and famine. That may have lost as much as 10 of its population. The bank of korea estimating if ,ontracted by 3. 5 in 2017 leaving the economy roughly the same size as the u. S. State of vermont. And bill gates, never ranking lower them number two in the sevenyear history of the bloomberg billionaires index, until now. He has been taken over by lvmh is bernard arnault, Company Shares rising to a record and pushing his net worth to 107. 6 billion, more than 200 million ahead of gates. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra . Nejra thank you so much. Lets kick it off with trade and the latest on the Worlds Largest economy. President trump has reiterated he could impose more tariffs, despite promising to hold off in a truce he reached last month. We have a long way to go, as far as tariffs are concerned. Billion wether 325 can put tariffs on. We are talking to china about a deal, but i wish they did not break the deal that we had. Nejra joining us is an economist at ubs Global Wealth Management Entity the chief economist for bloomberg economics. Welcome both, great to have you. Let me ask you first about these latest comments aired suppose he is stating the obvious. How much of a threat is it . Tom what we have think about on trade, and in particular the u. S. , is the looming president ial election. Away, but020 is a way the Campaign Drums are already beating. Tough on china is a votewinning message. So when we hear President Trump speaking, we have to keep in mind that he is speaking to that political base. Even if we dont get more tariffs between now and november 2020, we are going to have continued threats of more tariffs. That uncertainty is already going to be a significant drag on investment, and employment hiring decisions. Nejra it certainly provides a dragged yesterday. We saw the s p 500 fall from a record, futures pointing higher today. Can this rally go much further without a trump put . I would not much call it to the trump put. I would look at what is driving the rally, and that is the shift in stance from Central Banks globally. It is our expectation the fed does take an insurance cut at the next meeting. That comes against a backdrop where, for all intents and purposes, the u. S. Economy is growing. Other things being equal, that is relatively positive. Maintaining a moderate overweight, but when you see a reaction like yesterday, thousands of that talk to you about the fragility of this rally . I understand we need to talk about earnings, which will later , but how fragile is this equity rally . Dean i would not say its fragile on the basis of what is happening with trade. For some been with us time and there are a number of risks out there. The argument that is more likely to come into play could be the question of valuations. Clearly, what is happening with the trade vectra, and i agree with what was said earlier, going into the president ial election campaign, it is hard to see how the rhetoric around trade improves in the nearterm. Nejra lets stick with the conversation around the fed. Course, we have jay powell saying the central bank is threats,g threat, adding he will act appropriately. Uncertainties have increased, particularly regarding trade developments. Theddition, issues such as federal debt ceiling and brings it remain unresolved. Fomc participants have also raised concerns about a prolonged shortfall low the 2 target below the 2 target. Nejra meanwhile, Robert Kaplan adjustmentopen to an of calls and tactical rather than strategic. Your read on what we got yesterday from the u. S. Data . We had the message reiterated and that we get that better than expected retail sales and factory output showing a robust u. S. Consumer. Tom i think this underscores the fact that, very likely, the fed will cut, but cut in a cautious and an insurancedriven way. There has been some talk of a 50 basis point move in july. Our view, the jobs data is robust, retail sales is robust. But itde war is not over was better than expected, so some of the trade risk has come out. So our expectation is that the fed will not need to make an extreme move to support growth. We are expecting 25 basis points in july and another at the end of the year. Nejra i just want to ask whether you think the u. S. Consumer can offset the Global Manufacturing slowdown . Tom that is a great question. The economy has got three drivers. You got consumption, investment, and exports. When you think about the u. S. , investment has lost momentum. The strong dollar and weaker Global Demand is heading exports. Hitting exports. The consumer is the only show in town. But even with that engine firing, the economy can sell clock a comfortable 2 annual growth. That is roughly on trend, so certainly there are reasons for concerns. The trade war could escalate, the yield curve might be telling us something. But even with the just the consumption engine, we are not incredibly worried. Nejra all right. And just to pick up on what tom , atsaying about 25 bits ubs, you think we will get 50 in one go. The fed think that if will move, is more effective to do a one off insurance move. We are not expecting a prolonged cutting cycle. Last time i checked, the markets are pricing in close to what hundred basis points. That is overdone 100 basis points. That is overdone. We have a short bonds as one of the insurance calls within our folios portfolios. But in terms of the longerterm outlook how the trade situation unfolds. Consumer, we should not overlook that when we are looking at the data, unemployment, wage growth against a backdrop where whereion is up at levels the fed would like to see it, but is not running away, that tells us that real Household Income growth is a positive story. That should be enough to keep the economy moving along. Nejra just briefly, will the fed be able to on invert the invert thee un yield curve and sustain steepening . Dean that is a deeper challenge because we have to start discussing the fed balance sheet. Byy will start to move again the time we get into next year, if they wish to maintain a size relative to the u. S. Economy. I think that will be a more difficult one to engineer. We maintain a fair degree of skepticism around this question. There are multiple factors that can explain why we are seeing the yield curve the shape it is. It is not necessarily a sharp turn in growth. Nejra both stay with us, and stay with surveillance. The newament confirms president of the commission. We discussed the political and economic problems on her to do list. Plus, trouble in tech land. U. S. Tech giants face of biggest showdown with congress in 20 years. That story later this hour. This is bloomberg. Nejra this is bloomberg surveillance. Im nejra cehic in london. The next president of the European Commission has been the first she becomes woman to hold europes most powerful policymaking position. Meanwhile, finance ministers and Central Bank Governors are gathering in france that it in france today. , greenagenda is libra coins, and global tax. What can we expect from todays g7 gathering . Good morning. There is a lot happening today, but the big talker is libra, the facebook cryptocurrency. Wednesday to central bankers and ministers, they tell you they want to know exactly what is the purpose. They will tell you very clearly that this is just a payment system, we can work with us, but if this is the First Step Towards creating a currency that can compete with the dollar or the euro, that is simply not going to happen. They also worry about the size of facebook. Millions of people use this on a daily basis. In europe, they also worry about data privacy and the scandals we have seen play out. So there is a lot of focus and attention on libre, but you have but you also have to keep in mind the trade tensions and the digital taxes. Of course, those comments by the administration on the weak dollar could also be a big subject today. We also spoke with the president elect, what does she have to say . A very timely interview, i have to say. She managed to get that nomination approved, but it was just 383 votes, very tight. Senior members of parliament that anything below 400 votes is actually a very weak mandate and not a good start, not a good look. But she has a lot of challenges ahead. Shes got trade and the relationship with donald trump, and of course, brexit. We talk to her and she said that ultimately, what we need to keep in mind is that our relationship will have to be close. Lets take a look. It is not the end of something, it determines that beginning of the future relationship between the United Kingdom and the european union. We want to be partners. They are our neighbor. And ie common interests will put a lot of emphasis that we will have, if necessary, a brexit in a good way, knowing we have a common future. Was ursula von der leyen, president elect of the european union. Bloombergs maria tadeo, great to have you with us. Still with us is dean turner from ubs and the chief economist for bloomberg economics. Dean, you prefer u. S. Stocks to europe. Is that because you think the bad news is not priced in or you do not find them compelling enough . What is your thinking . My thinking is more the outlook and the potential for just see moree upside potential in the u. S. Right now. Thats not to say there are not pockets of value, it is clear there are. But we just see better opportunities for returns within the u. S. Nejra if you talk about corporate earnings as well, that is a challenge in europe, in terms of the negative rate environment. Makeeurope ever be able to its way out of this negative e environment the Smart Environment . Tom is not clear. The challenge is to balance a europe were growth is not disastrous. Is driving unemployment against the ecbs very limited policy space. How is he going to square that circle . Our expectation is that we will see a little bit of action on policy rates. We will see support from the banks to offset the impact of negative rates on their earnings and the beginning of a new round of qe your qb. Qe. Nejra when i asked a guest if it needs to be creative, he said it has already been creative. It is a question of when to use them. You saymberg economics, the qe expansion just needs a deeper get into the bond market. So what should they turn to buy next . We think there is sufficient space for the ecb to expand purchases. What is constraining the ecb is the selfimposed rules they have. Expansions to be an of the ecbs own rules to allow them to go a bit further. Billion is roughly where they come out. Nejra you dont expect to last into laps into recession, but what action do you expect on this front . We are expecting they will actually go towards rate cuts initially . Initially. For a qe program to be credible, especially at the state of the cycle stage of the cycle, it will have to be a big program. And the point made about limits, they would need to review to make this. Our consensus is that there is not full support on this yet. 20 basis points of cuts before the years and is likely. Nejra tom from bloomberg economics, thank you for joining us. Dean turner from ubs stays with us for the rest of the hour. Up next to them at swedens oldest bank slashes payouts and we rank banking earnings from the u. S. Thats next, this is bloomberg. Nejra this is bloomberg surveillance. Lets focus on banking. Swedens oldest bank says it will no longer be able to pay out one of the highest dividend ratios. That is as a swedbank deals with the fallout of a Money Lending scandal. Fine, when is a there is a fine, we will pay that fine. How that will pan out, it is too early to say. It is important to build a safety buffer in the environment we are in. Nejra lets round up what we have learned. Only two major u. S. Lenders are left to report, and for those that have, or revenue is starting to bite. Citigroup set the pace of but cost cuts helped lift shares. Surprised investors thanks to a jump in Equities Trading. Meanwhile, wells fargo posted its smallest lending income since 2016. Jpmorgan snap a streak. Still to report is bank of america and Morgan Stanley. For now, the question remains, how will lenders boost revenue . Up next, a throwback to 2017, we talk the pound and brexit. This is bloomberg. President trump warns he could impose further tariffs on chinese imports if the trade fed chairman jay powell sticks to the script as he says the central bank is monitoring downside risk. ,nd a busy day in trade clinching the European Unions top job. We should never forget that we are allies and friends. We sit on the same side of the table. This is bloomberg surveillance. Lets get to data out of the u. K. We are looking at cpi year on year coming in at 2 . The core number comes in at 1. 8 , in line with estimates. The june inflation rate staying at 2 as forecast and core inflation rising to 1. 8 as forecast. The pound unchanged, recouping some losses from yesterday. Lets check what is moving under the surface in terms of the big stock movers today. One of the big gainers up 4. 5 . The operating profit Beat Estimates and saw strong sales. Before the market even opened, they hope they get a positive reaction due to the fact that they have seen it as a low valuation. Foras really dealt a blow the first time reporting earnings that missed analyst estimates. Even though net income because highest analyst estimate. They cut 50 instead of 75 . You feel like they have been moneyg with this laundering scandal. It is the worst performing financial stock in europe. Bloomberg get to first word news with Viviana Hurtado from new york. Viviana the new president of the European Commission is ursula vonda ally and von der leyen. Shes the first german in over 50 years. He told lawmakers that most pressing issue is climate change. She seeks to bolster relations with the United States. We do have issues, but we should never forget that we are allies and friends. We stood on the same side of the table if i may put it that way. Therefore, we have to negotiate. He different topics but in the end, we know it is a better way to trade with each other. President donald trump said he might impose more tariffs on china after promising to hold off on more duties in a truce he reached with president xi. Ae deal is for china to buy large amount of u. S. Farm goods. Beijing says no agreement like that was made and there have been no largescale purchases. Falling in may by 2. 8 billion to just over 1. 1 trillion. That is the lowest in two years and marks the Third Straight month of decline. Says theJerome Powell u. S. Federal reserve is carefully monitoring downside. Isk he spoke at a paris event to commemorate the language similar to the congress that cemented expectations for Interest Rate cut later this month. And unveiling the first all electric supercar. It will cost 2. 1 million. The doors are operated by a key fob. It is the first new model in 11 years. It will be 130 units and will begin next year. Cars, it isese doing more than just selling 130 cars. It is actually a technology capability. We are investing a longterm plan. Global news 24 hours a day onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Nejra sterling is trading at the lowest levels since 2017. For is as contenders britains next Prime Minister tough and the rhetoric around a no deal brexit. Boris johnson would hold an early election while were Jeremy Corbyn is still in office. Pound hit a twoyear , particularly around comments from jeremy hunt and Boris Johnson around the backstop being dead. If you look at the chart, some have called to watch the april 17 low for the march 17 low. What is the level for you on sterling . We think sterling is interesting around these levels, quite frankly. The way we think about it, if we , given theal outcome downside from here, it has been a possibility. But it is not the base case. If we continue to see sterling around these levels, it is attractive because sterling is a cheap currency right now. I heard yesterday that the pound is like an emerging market currency. It could fall or rise 10 to 15 . Would you want to hedge that in any way . We have been reluctant to take directional positions for this very reason. The volatility is quite high. But we are getting to levels where sterling is starting to have some value. Sterling is low and if we think , we saw a sharp drop when and we see that theresa may really means brexit. For the pound to sustain those kind of levels, it is are a difficult because we see it by into the currency. Sterling assets are extremely attractive. Sterling has a number of positive aspects going for it. In terms of the corporate sector and the bond market. Nejra you say sterling assets are tractive and you started talking about the pound. It is hard to say that any bond markets are attractive at these levels. Highert they will grind once markets come to the view that the no deal brexit is unlikely to happen on october 31. There is an attraction there. I find it much more difficult to get on board with it. Were talking earlier about how you prefer u. S. Over european equities. Where do u. K. Equities sit in your global blue global view . We have a modest underweight on u. K. Equities. That is a bit of a view on the potential outlook for u. K. Companies. But that is a more mediumterm view within our strategic portfolios. Nejra great to have you with us. Dean turner stays with us. Gets aup, big tech grilling with Industry Leaders facing their largest antitrust frominy in years lawmakers. What amazon says about exploiting conflict of interests. And overtaking bill gates to become the worlds richest second the worlds second richest person. What is driving that wealth, coming up on bloomberg. Nejra this is bloomberg surveillance. Im nejra cehic in london. Big names in tech cafes to their largest scrutiny in years. Amazon, facebook, google, and apple defended against claims that they are too dominant. A Heated Exchange after amazon was grilled over the use of data. You use consumer data to favor amazon products. Analysts estimate between 80 and 90 of sales go to the amazon by box. You collect all this data by the most popular products and you dont use that in any way to change an algorithm to support the sale of amazon Branded Products . The algorithm aims to predict what customers will buy. Thats whether not you are a thirdparty seller. We want the customers to make the best purchase. Washe best purchase to you in amazon product. That is not true. Nejra and she said there were similar concerns. Hosting businesses and competing against those businesses in the very trade they do. So now we are looking into their use of data to say, is this done in a fair way . Us . His a case for bloombergs tech columnist joins us now. Alex, lets talk about amazon before we get to facebook. Can it successfully defend itself against lawmakers in the u. S. . Lawmakers go in with their mind made up. The thing that they have to do is try to change their opinion. Considerations are great because they are actively carrying out a study into whether facebook or amazon leverages data from the marketplace to see what products and compete with them. The eu has levied very heavy fines on these companies. The u. S. Follows what happens in europe and it imitates and mimics much of the regulation that has happened over there. Nejra we learned amazon and germany have reached a deal to amend terms. There has been a beating taken in washington. Tell us what we learned. Alex in particular, facebook was the really big hearing which dominated a lot of the oxygen in the tech ecosystem. Facebook is introducing this not quite a cryptocurrency, but a digital coin called libra. Have is concern that they fallen, in particular. A huge amount of criticism for the way it has approached it. There is a Conspiracy Theory that libra does take up a lot of the oxygen, which means you dont have that conversation about the antitrust positioning. Dean with all cryptocurrencies, there are more questions than answers. Like we saw at the it is hard to make a prediction and not if that particular cryptocurrency was the currency. If we take a step back, we think about the purpose of the currency as a store of value. We had a lot of concerns around that. But this idea that currencies can come to dominate or replace existing currencies where governments have a fair amount of interest in issuing sovereign currencies for a whole host of reasons. That the pressure is going to maintain. It will be difficult for them to succeed. Nejra yesterday, facebook script a was called delusional. The word trust kept coming up. Is it fair to conflate those two issues on the antitrust and libra as well . Alex yes. When Mark Zuckerberg was in front of congress a year ago, his argument was about faith and good actors. They have done very little to demonstrate they are good actors. I think we should be looking at a brock, that it is an advertising model. Amazon going very hard into ads. It knows when someone has bought something. It knows purchasing intent. People are more inclined to buy this product. Facebook does not know if someone has bought a product. , thaty have a currency means it is closing the loop on that scenario. All that stuff about Financial Products and the new business is fair up to a point. But the main point fundamentally is that they work on them together. Nejra does all this scrutiny make you at all nervous about investing in tech . Dean tech has been under pressure for a while. We have downgraded the sector in the u. S. Quite recently. It goes beyond a lot of the sharing. Around faith i have focused on some of the moves we have seen from governments around taxation. France with the 3 bristol tax. I do not see the u. K. Changing its rhetoric on the taxation of Digital Companies. This is a trend that will be with us for quite some time. It will be a topic with finance ministers. That said, we should not become too pessimistic. There are great growth opportunities. Nejra great to have you both with us. The European Tech columnist and dean turner from ubs Global Wealth management. Up next, a life of luxury. The ceo overtakes bill gates to become the worlds second richest person. We will look at what is driving the frenchmans wealth, next. This is bloomberg. Finance, andics, politics. This is bloomberg surveillance and im nejra cehic in london. French wealth is playing out on the bloomberg billionaires index. A ceo has overtaken bill gates to become the worlds second richest are some with a net worth of 107 billion. It is the first time the microsoft founder has fallen lower than second place since he joined the ranking. Why has the fortune grown so much . I would look at the performance of luxury goods stocks that he and his family own. Be lvmh, of course. It is up 49 this year. Of christian most dior which is up 48 this year. The Stock Performance is added 30 billion to his net wealth in six months. How did his fortune compared to other europeans . Away thefar and billionaire in the european market. Spain, thets from second he is in the 60s. 60 billion. He is about 50 . There is no danger of him being superseded anytime soon. Is there any chance he could top bezos. Before the divorce, we wouldve said no. But that settlement was 36 billion to 38 billion to mckinsey bs oce. Bezos. Jeff bezos is within reach. He is at 125 right now. It is possible. Goods stocks would have to rally in the second half of the year to get close. Nejra ed robinson from bloombergs european wealth team, great to have you with us. Its get to the Bloomberg Business flash with Viviana Hurtado in new york. Viviana a rare setback for ericssons turnaround efforts. A swedish equipment maker posting earnings that missed estimates for the first time in six quarters. Iggkson said the rollout of five g networks would weigh on profits. It will be able to stick to the goals of one of the highest ratios and nordic finance. It will hit 50 of profits rather than 75 . Swedens oldest bank is dealing with the fallout of a moneylaundering scandal. This year is europes worst performing financial stock. If there is a fine, we will pay that fine. And we will deal with the fallout. I think it is important to be to build ald and safe offer in the environment we are in. Viviana an activist now has an activist of his own. They on 3 of Pershing Square holdings. Against 20shing back year debt without consulting shareholders. To help plan and pursue a more aggressive buyback program. And the npr are reportedly working on a deal to transfer over prime broker assets. We learned it could involve technology of potentially hundreds between the lenders. Billions of dollars of funds a day and going elsewhere. Bhp with the potential 1 billion hit from operational setbacks. These include fires and a train derailment. It comes ahead of next months financial results. It also confirms output in iron or and the first annual decline this century. Saw theand bd firsthalf profit jumped 49 with the biggest bank again from of the car processing unit. Fx incomes, higher and increased activity in investment bank. That is the Bloomberg Business flash. Thank you so much. There are key corporate results on the docket today. As things wrap up tomorrow and the nordic region, money roll along. Candals i couple of banks also reporting with a former giant and advertising standardbearer. Next up, a german business and ,wedish Telecoms Group expecting to have only made modest progress toward the 2019 cash flow targets. Earnings season in terms of how the markets are set up, the stoxx 600 trading into todays session. Of a hits took a bit yesterday on concerns that President Trump ramped up the rhetoric in terms of chinese tariffs. The u. S. ,ut of eurodollar sits at 112. 10. Oil taking a little bit of a hit on concerns about trade. The 10 year yield edged higher yesterday following the u. S. Data steady today. There we are in terms of european equities and a touch of red coming through their on the ftse 100. Cable hit the lowest in more than two years yesterday on concerns about a no deal brexit. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. That from the g7 later today. 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. Tom this morning, the sterling grinds ever weaker. With23 and october 31 back Boris Johnson and Prime Minister johnson liking an early election. Of october 31, we take 383 votes where mr. Juncker took 422 votes. The good doctor has a majority. And the future of Asset Management. There are too many players on the buy side. Good morning, everyone. Im tom keene with nejra cehic in london. Francine is off this week. A really interesting year on the Bank Earnings of the United States and what it means for Global Banking in the coming quarters. Nejra absolutely. The takeaway seems to be that the u. S. Has quite a few places ok. Banking did Goldman Sachs surprisingly did well on the trading side of things. It, how the big banks do well organically. Some of the revenue numbers are flat. Right now with first word news in new york, here is Viviana Hurtado. Viviana the u. S. House voting to condemn comments that have been criticized as racist. Several republicans joined democrats in voting for the measure. Some democrats complain Party Leaders are not punching back at the president hard enough. House Speaker Nancy Pelosi says that she sees Forward Motion after talks with treasury secretary Steven Mnuchin on raising the debt limit. Poulos is trying to negotiate higher spending levels. A budget breakthrough could depend on veterans health. Ofr to russia where a number economic reports are casting doubt on the government. Business activity falling for the First Time Since 2016. Last month, car sales continue to fall. Russian exports were down 14 in may from a year ago. Jumping over bill gates to become the number two ranked person on the bloomberg billionaires list. The luxury good maker climbed to a record. It is estimated at a little under 108 billion. He is about 200 million ahead of gates. Global news 24 hours a day onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Much. Hank you so equities, bonds, currencies. A little quiet out there, but lets continue. Up we go this morning. Some currency dynamics in a moment. Brent crude really getting down to the low 60 level. Lets move onto the next screen with the vix showing the good bull market. Sterling with a 123 print. A number of hours ago, eurosterling going the other way. Going i put in bitcoin. The bitcoin move is fascinating. We opened a bit weaker. Right now, really falling better than expected. 2. 10 with the Jerome Powell announcement. At the no deal brexit risk, i actually want to show that as well. We stock we saw the u. S. Tariffs take a hit. 10 it rally futures with there at 12. 63 . Cracks and what an important Federal Reserve meeting. Let me show the bloomberg right now. And what an important Federal Reserve meeting. Let me show the bloomberg right now. This shows the currency. You rarely see a forced standard deviation. These are two standard , and in a matter of days, we have four standard deviations with bitcoin. That does not describe currency stability. It does not. The Something Else that caught my attention. Saw it slide back with the s p. The real yield, where is the attraction . Negative. Ield is i think that is something to Pay Attention to. Lets kick off trade. President trump reiterated he could impose more tariffs on chinese imports if he wants. Joining us now, international ceo. And we did see a little bit of a wobble on President Trump. I think that throughout the year, we have seen equities vulnerable to noise around trade. Market participants try to look and see when there might on the negotiated tariffs question. The concerns continue anytime there is a tweet. Nejra it becomes difficult to make directional bets. It is kind of looking below the surface and some of it is specific in terms of where the winners and losers could be. Countries or regions could win out . With a large group of global clients last week. As investors try to dig through , we have to look at the underlying trends that were happening regardless of the trade issues. Chinese consumers are growing. There are new places that are manufacturing that are generating business that might be worthy of investment. The tariff question can be accelerating moves toward those countries. Take a look at vietnam, indonesia, and india. The made in India Campaign has been ongoing and might be getting a little bit of a spur from the question of, where will the large global Multinational Companies that have built these supply chains over years, where will they hedge their bets . That is something that every investor we have is digging into. I am thrilled you are with us today and bring with you the mathematics of the derivatives space. Yesterdayderstruck over Asset Management. I want you to tell me the future of the long only by side that you see five years out. Doesnt looklculus all that good. What will you do about it . If you are looking for , you see that were focused on active management throughout the different asset classes. Space, it the equity is very much related to where the opportunity set is. If you think about emerging markets, this is not a space where indexes have worked with investors kindly. Space where it is necessary and Stock Selection is critical. What we have tried to do is think about where beta matters and where alpha metals. It will be about driving that out. This is really well said. Is theow, the gamma index. Had you perceive the industry stops or diminishes the flow over index funds. Clients using indices and active investing. A lot of it hinged on fees. It also hinged on of active look at these returns. Delivering offer, questioning the indices of tomorrow. Is at cap waiting, it it generic index when you see so much market activity moving into the private market side where you have the s p and complete turnover. Every company is looking at it today versus 15 years ago. A much smaller pool to draw on. So much change in the marketplace and indices have remained stagnant. Investorsplace where can question if they do something better. The Quantitative Strategies that come up with better constructs. I think those are the Investment Opportunities of the future. Nejra where are you seeing opportunities in the bond market . Concerns around trade and jay dovishsticking to his message again. It would be nice to listen to him. It has been interesting watching investors react to the dovish message. We see much more demand at an interesting moment. Issuance and a lot of refinancing as opposed to new opportunities to invest as investors look at the fed noise. It takes a bit longer for this to run. And also you look at how the cash is being used. Look at the triple bs face and see more of the cash being used to bring down debt levels. You see higher Investment Grade and higherquality bond spaces. And so it is driving people to look in different ways as well and look at highyield. This is particularly about the future of Asset Management across global wall street. Right now and germany, there is a future for angela merkel. Powers of transfer of a very troubled Defense Department or ministry, rather. She will join the European Commission and we have much more on after the hour. And she has her own reputation in germany, taking over as defense minister. This is a symbolic moment for new germany. It is. It was interesting. Winning that vote by quite a thin margin. We will keep an eye on that and we have a lot more to discuss in terms of europe and the economy. And a new europe overall. We will be back with more on that, next. This is bloomberg. A lot of things are dependent. So to convince our friends from the you and i did states from the United States that we need to find a compromise to Work Together, because there are way more issues and problems that concern the two of us together. That would be my way to address it. And i think there are a lot of good arguments for working together. It is not the end of something. It determines the beginning of a future relationship between the United Kingdom and the european union. And we want to be partners. They are our neighbors. Emphasis onof knowing that we have a common future. That was germanys ursula von der leyen, becoming the first woman set to assume europes most powerful policymaking post. International ceo still with us. Sheila, how much conviction do clients have right now in investing in europe . I think lions are extremely challenged on europe. As we moved to a more dovish thee, it is supportive of market and extending the opportunity set for the marketplace. They look at relatively sluggish growth with real divergence across the region. In germany, we see potential opportunities in places like france and the overhang of brexit. Pulled not necessarily back, but not jumping in with two feet in the waters of europe. Makes sense. If you have a global mandate, are there opportunities when you can find it elsewhere in emerging markets . I think the yield has been very challenging. Placesoking at japan as with a valued perspective, it might provide more opportunities in europe. I think we get a second look as people look toward september and of a more proactive asset buying program by the ecb. That is raising some interest. Second, people are looking at it being more active. Ittoms question, maybe makes sense to not be index oriented. There are companies with global footprint based in europe that will be beneficiary in the year ahead. Tom when we look at negative Interest Rates, youre one of the few people that understand the mathematics involved. The you have any understanding when we come out of negative the zerorates across bound into some form of normal bond debt territory that we can do it with stability . What europe is in with stability and without risk . Isevery client i talk to worried about the left tail risk. Given the overall situation from a Global Growth perspective and a markets perspective, particularly the positioning of companies that are already in not quite defensive mode but may be cautious mode because of the winds of change they have around them with tariffs, concerns over where rates head. Questions over the supply chains. Putting all that together, trying to cross the zero bound without a major disruption in some ways becomes more possible. Everybody is watching for it. I strongly agree with that. Everyone is focused on three or four things. Let me tell you about our banks. Goldman sachs is yesterday. We are moving on to bank of america. These are all the worries down at the bottom of the wall. Is the down on the wall use of cash, dividends, Share Buybacks, bank to bank to bank. This is bloomberg. Viviana this is bloomberg surveillance. Lets get the Bloomberg Business flash. In europe, car sales resume their downward spiral. 2. 9 , thehey fell worst monthly decline since december. At the years halfway mark, europe is facing the Second Annual sales drop. Are cities been spared a profit. Arning bmw reported a quarterly loss. It is a rare setback for ericssons turnaround efforts. The Swedish Network equipment were down estimates for the first time in six quarters. Networks would5g weigh on profits. Elon musk says the startup narrow link is ready to begin brain surgery. They want to implant paralyzed patients with electrodes. It will elect them Work Computers with their minds. The process has only been tested on rats. To start trials on humans, they need u. S. Government approval. A special guest, the Goldman Sachs Asset Management. They bring years of work and equity and derivatives with that position. I want to talk about the arch issue out there. It is about people trying to catch up or people that have not participated in the equity boom. How do we catch up . One of the challenges is trying to step away from the philosophy and going into things with too much risk. The day, catching up becomes a question of putting enough money to work. Question toting your point, the u. S. Pension space where so many people have not saved enough. You see the state initiate working for People Companies that dont offer 401 k plans, really offering people with opportunity to put their money to work. It is a very straightforward way. Risk. In risk is over the main thing to do is to save. This would be a bit more than we otherwise would have. Say a lot ofuld people have caught on to the fact that it doesnt usually and well. End well. Nejra with low volatility in trade, what might we be missing in these markets . People see the fed taking action and they feel better about that. It seems positive. As they look for the underlying thing that might be disruptive, there is a positive and negative disruption. Certainly the negative disruption possibility that are worried about is geopolitics. Issues in the middle east. A flareup in the strait of hormuz. An issue that is unexpected in terms of conflict is one area. Questions of u. S. Government interaction with other powers around the world. Come onr surprises that that front. And i also think disruption on the Technology Front is something that i have clients talking about and worried about. Look at the automotive space. Patel, we would like to have you what a delight to have you with us today. Up, sterling trading the lowest since 2017. We will discuss. This is bloomberg. Tom it is berlin and it is a symbolism. S is ursula delaying ursula von der leyen who will head to the ecb. Well a new defense minister, and acolyte of chancellor merkel, and the symbolism is extraordinary. The defense minister of germany but immense domestic challenges of their domestic commitment, there is an uproar in germany about the state of the military and equipment, where they are significantly underfunded. Berlin on a beautiful july afternoon. Right now with our first word news. Viviana on capitol hill, republicans called the measure a harassment and some say the party is not going far enough. That was the reaction after the u. S. Voted to condemn donald trump for comments criticized as racist. Today, the mexican drug lord el chapo will be sentenced today. He was convicted on multiple conspiracy counts in an epic Drug Trafficking case. Ae guilty verdict triggered sentence of life without parole. The question is whether he will speak. North koreas economy is in the worst shape since the 1990s. Famine killed up to 10 of the population. That may be the conclusion of a report coming out today. U. S. Sanctions have hurt north korea. Last year, the economy probably shrink more than 5 . Justice John Paul Stevens died. He was age 99. Gerald ford nominated him to the court, but he became the anchor of its liberal wing. He retired as the second oldest justice ever. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. This is bloomberg. Nejra thank you so much. Staying with the u. S. Conversation, jay powell said the central bank will act as appropriate to sustain the expansion. Hopingkaplan said he is to discussing a downward adjustment in the policy rate, but call such a move more tactical than strategic. Is still Lena Komileva with us. It gets difficult when you talk about fine tuning monetary policy, but lets assume a 25 basis point cut is to reverse the hike at the end of last year. Needst that mean the fed to go bigger in the first cow . Lena it depends in the first go. Lena it depends on what the fed wants. For the last four weeks, we have repricing of fed easing risk in the context of dramatic change of the geopolitical climate, financial conditions, and dynamics of u. S. Data. Now that we are at this point where financial conditions have eased, the risk has not disappeared but the intensity has stabilized somewhat. Other Central Banks are also stepping up, so there is a wall of liquidity hitting capital markets. They could probably afford to finetune the message and signal that this is moving towards a more appropriate policy stance that balances the risk. Nejra finetune the message rather than policy, seems to be what you are suggesting. The strengthhowing of the u. S. Consumer, some of that reflected in Bank Earnings. Can the u. S. Consumer offset the Global Manufacturing slowdown . Lena that is been the big question. It hasnt happened so far. We have an extraordinary imbalance in the economy of domestic demand. The Global Economy does not appear to be demand deficient, nor is there a case in terms of more monetary stimulus because unless we can afford a new Business Cycle leverage boom in china after a decade of hyper debt growth, or a new leverage cycle for the consumer in the i think the key question is what happens on fiscal policy. That will be the Pivotal Point in terms of going forward, the dan amec between europe and dynamic between europe and the u. S. , and europe will determine tom that is where i wanted to go. Every Research Note from Lena Komileva, there is one paragraph that sticks out, your idea that we are back to Risk Management risk back to serious tail or potential left tail risk, and there is a hedge. What is the hedge in place right now to diminish or lessen the probability of left tail risk instability . Lena i think you nailed it with your question. Political uncertainty has been the driving factor behind the concerted global slowdown in the industrial cycle and the contractionary trade flows and investment in capital goods and symptomsary price coming out of china. Hedge, when you have this kind of regime uncertainty tom while said. Well said. Risks. Ou have two tail it has been a master class of market fragility and vulnerability. The markets were pricing in the left tail risk of extreme global deceleration caused by a policy through the trade tensions brings down to recession levels. They are at the other end of the risk sector spectrum, that Central Banks will manufacture a boom. It is clear we are past the peak of the cycle and Political Risk will remain the key input. Central banks will have the ability to manage the downside risk. Is clear that supplyside when Interest Rates have been so low for so long, there is less dividend and that is beyond the control of the ecb. Tom how can a central bank hedge the risk away without fiscal policy support . Isnt that the question going into july 31 . Lena yes, i think so. The fiscal question is by far the number one issue because Central Banks are looking at the policy effectiveness frontier. What happens next will very much depend on the tradeoff between strong domestic demand conditions and the reflationary impact of more fiscal stimulus versus contractionary global trade wars and disinflationary supply tradelesale resulting from trade disruptions. Nejra we are seeing the friends finance ministers speaking now, headlands coming through french finance minister speaking now, headlines coming through. The french digital tax does not target specific companies. He is speaking with the g7 getting underway. We will come back to that in a moment. Of the big themes that you talked about a lot that is really crucial is rate repression. I showed a chart of the 10 year real yield in the u. S. Saidtil now, people have what is still positive about the u. S. Is you have positive real yields. We have gone negative. What does that tell you . Lena in a world where 30 billion that is trading with negative yields, the value of the 10 year treasury is probably closer to 2. 5 . That is probably explaining why we are at current levels. When you have a global some 25 to 50 basis points, one in the form of a cut and one in the form of a signal. The ecb and boj, we have that wall of liquidity and a shortfall of productive capital you have a dichotomy, and imbalance between real conditions. You have a lot priced into the u. S. Tenyear. You have Political Uncertainty and everything you talk about on the phone. Tom Lena Komileva with us. The finance minister of france talking about domestic issues. Oecdg up, secretarygeneral anna gurry out anna gurry out to speak guriel to speak on the change. Nejra francis finance minister current speaking in chantilly frances finance minister currently speaking in chantilly. He is saying france will not give up on the digital tax plan and it does not target u. S. Companies. We are getting more headlines, saying conditions have not met ,oday for the libra creation interesting in the light of the hearings we had on the Tech Companies and with facebook on libra in the senate. Tom Lena Komileva with us in london. We have been talking about the tail risks. There has to be a massive victory lap for the equity market. Chairman greenspan was always clear, equity markets matter. What does the boom in stocks mean . Been right now, there has an extraordinary disconnect between economic and financial conditions which was born a decade ago when quantitative easing started, but has escalated. In the current environment, you have record high valuations when the u. S. Economy is coming off the sugar highs of the 2018 tax cuts. Industrial yearlong global slowdown cycle which will be highly likely not reversed by Central Banks. Against that backdrop it is difficult to see. You look at the flatness of the yield curve and it is clear we are nowhere near a Recession Risk environment, and yet negative term liquidity premia suggest we are in an environment that will Central Bank Risk hedging. The only common denominator is the surplus of liquidity suppressing yield and volatility , which tells little about the health of the Global Economy and probably tells us we should be careful about the bubble bursting down the line showed that kind of geoPolitical Risk raise its head. Xm my measurement is the axis where we are trying to figure out the length of time of some of these oddities of the day. The x axis is true in American Banking as well. Alison williams is providing leadership to our team, not only looking at the too big to fail banks but the medium, small, and regional banks. What is the single thing you want to look for from bank of america . Alison interest margin. Tom the wall came up. It is all the gloomy stuff, Net Interest Margin and that. Is it that they are up to their eyeballs in cash . Alison the net interest markets margin story is about the worsening environment. They are gathering deposits but loan growth is slowing. The second side of things where we saw the biggest disappointment at wells fargo is caused. Citi said cost cuts are coming through. Goldman and j. P. Morgan said we will both spend on technology. Will comeo says they in at the higher end of the range. Part of that has to do with investments and related business costs, but the part that is more negative is more money on operational risks, compliance, et cetera. Tom bring in the finance minister. Minister, henance has been talking on digital tax and libra. The need for strong commitments and obligations for that project, and for the time being i think that the necessary requirements are not fulfilled by the project libra. Does it pose a threat to the euro . Is it a concern about Money Laundering, a volatile instrument, or about the ability of sovereign nations to carry on making money in printing more money to fund their enormous deficit and huge debt to gdp . This is a question of sovereignty. You have the United States, france, germany, italy, all sovereign states with sovereign currencies. They are sticking to some very strong commitments, some very strong rules. We cannot accept to have a new currency having exactly the same kind of power without the same kind of rules, without the same kind of commitments, and without the same kind of obligations. There is also a concern about Money Laundering, and the funding of terrorism. We have spent many years before addressing that issue and being able to fix the issue of Money Laundering and the funding of terrorism. How could we accept to have now a new currency which would not stick to the same kind of obligation when we spent so much time to define very strong rules and make them applied all over the world. This is an existential threat to the euro. Huge amount is the growth in sovereign debt, not only in countries like france and the United States but emerging debt. When you say the countries are sticking to certain rules, they are printing money and creating more debt. How is that creating more stability . On the question of over indebtedness, of course there is the issue. Oforganized on the seventh may in paris a conference about over indebtedness because you have the question of national serenity. Sovereignty. Sticking to rules and some commitments. I think this is a timely meeting, the g7 meeting in chantilly, to have a careful and indepth look at the socalled libra and to look at the necessary regulation, the risks associated with the creation of such a project, and to try to fix the issues. That is the right time and place , and you have the right people with the ministers of finance and governors of Central Banks. What are you hoping to get from your meeting with mr. Mnuchin . You could see retaliation. Are you thinking you get something out of this meeting . I am waiting for i would discussionslively about digital taxation because im fully aware of the concern expressed by the United States. I am fully aware the Trump Administration has decided to open a 301 procedure against france. This is the first time in the history of the friendly relationship between the u. S. And france that the administration decided to open a 301 procedure against france. This is not the best way of sorting out difficulties between allies. We have a difficulty on that issue, we should gather around the table. That is what we will do with Steven Mnuchin, and try to sort out the issues through discussion and compromise. I really hope we will be able to pave the way for a compromise between him and myself at the g7 level on the question of digital taxation. If we are not able to find compromise at that level, i cannot imagine we would be able cooperation ind the oh acd oecd. I cannot imagine that 29 states will find compromise. I have been speaking with him for many years, why have you gone ahead unilaterally . Why didnt you wait for the oecd deal to come through . I am ready to wait, but not for eternity. People are waiting for decisions, not only for discussions. We have been working more than two years at the european level to find a compromise on digital taxation. We had the support of 24 Member States. If at the end we had decided to go alone this way, it is just to open the way for an international compromise. Withnk people are fed up discussions among leaders. They are waiting for decisions. If you are looking at the rise of nationalism all over the whyd, one of the reasons there is such a rise of populist parties especially in europe is because of the lack of decision. People are waiting for leadership. We have the leadership of Emmanuel Macron in europe. He is putting the pressure to get decisions on the euros on budget, on the digital taxation, and he is right. A lack of leadership in europe leads directly to nationalism and populism. We are fully determined with Emmanuel Macron to move on, to open a way to fair taxation. We have to build the taxation of the 21st century. We have new economic models. We cannot rely on the models of the 20th century. We need to build the taxation system of the 21st century and with the french president , we are. Do you worry about President Trump talking down the dollar . Do you worry about the dollar visavis the euro . I dont have any worry. I dont want to make any comment on sovereign decisions taken by President Trump or the fed. Once again, we have to be respectful of sovereign decisions taken by sovereign nation. Do you agree the tax program should apply to all multinational countries not just the giants . Of course. I want to be clear on that key question. The french taxation is based only on Digital Companies. We have made a very clear step in the direction of our american friends by accepting to taxation a new global on digital activities, not only the Digital Companies but digital activities including those of other companies. That is clearly a step in the direction of Steven Mnuchin and the Trump Administration, so im waiting for the same kind of step from the Trump Administration and the u. S. [indiscernible] it has been agreed thanks to the decision of Emmanuel Macron to be ready to discuss the u. S. Proposal. I also want to have not only the digital activities of all companies, but the specificity of the Digital Companies being taken into account. If we are ready to bridge the gap between the friends, the year french, the european, and american position, he will have a strong basis to have the digital taxation at the oecd level. We are not far from a compromise. We need just one step further, so lets do that and we will have a successful digital taxation. Tom he is the finance minister of france, bruno le maire. Ascending within the french government, important comments. We have Lena Komileva and Alison Williams. Do the big banks in america want libra to succeed . They will say they do not know, but do they have any interest in zuckerberg coin or bitcoin or the others . Alison i think the banks are each working on their own internal coin for their own purses. This is maybe like an intraaccounting method within the bank, but if you think about the payment flows that go through banks and that facility, there is a huge interest in banks being involved. Tom a nice summary to the extensive comments of the French Foreign finance minister. Far more on what nationalities will do with libra. Lena komileva, thank you so much for joining us. Much more to talk about, bank of america earnings coming out, Morgan Stanley tomorrow. Christopher marangi will join us. This is bloomberg. Tom this morning, bank of america will report the messages of the too big to fails, they have too much cash. Net interest margin, what a world. Markets are calm. Boris johnson considers an early election. It is a clear understanding of Steven Mnuchin, they want to solve the debt ceiling crisis now. Does President Trump . This is bloomberg surveillance, live from new cehic in keene, nejra london. Boris is talking up a general election. Do we have any idea when that would be after october 31 . Nejra i am sure france is listening in. The pound hit more than a twoyear low last year with comments we got from Boris Johnson and jeremy hunt in terms of removing the backstop. We have had inconsistent messages in the market is trying to find its footing, cable taking a hit on the increase of no deal risk. Now. 1. 2404 on sterling the house voted to condemn comments from donald trump that have been criticized as racist. Several republicans joining democrats in voting for the measure. Some democrats complained Party Leaders are not punching back hard enough. Nancy pelosi sees Forward Motion after more talks with secretary Steven Mnuchin on raising the debt limit. Pelosi is trying to negotiate higher spending limits and a budget deal that she wants to attach which could depend on funds for veterans health. In russia, economic reports are casting doubt on the governments up the outlook. Business activity falling for the First Time Since 2016 and last month, car sales continue to fall. Retired u. S. Supreme Court Justice John Paul Stevens has died he was 99. In 1975, gerald ford nominated him to the court but he became the anchor of its liberal wing. In 2010, he retired as the second oldest justice ever. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. This is bloomberg. Equities,ata check, bonds, currencies, commodities, sterling on the move, futures up fractionally. Oil cannot get a bid. At bull market, the vix 12. 60, quite a move. And goingpair the other way, eurosterling nicely above. 90. Nejra with sterling you have got to ask about the general election, what will it be worth for investors . No deal or a corbyn government . Up. X 600 edging hitid see a little bit of a to u. S. Equities dropping from a record high as trump made more comments about chinese tariffs. Futures slightly higher. Tom monday, it was a good interview and on tuesday, we knew it would work and this morning we know it is a brilliant interview. Christopher marangi. Michael moore darkens the door and our finance efforts in new york. Christopher, i have to go to you. Give us the money. And the banking sector, there is going, but the number one thing to me is every Conference Call is a cavalli Conference Call, more Share Buyback and dividend growth. Shareopher we believe in buybacks and that it is a good use of capital. Goldman sachs and others are reinvesting in their business and technology, making their businesses more efficient, investing in new products. Those are better uses of capital. That is why we are giving capital to these management teams to reinvest. After those Investment Opportunities, give it back. Tom the arch question is the technological superiority of these large major banks. Are we becoming canadian like . Michael there is a gap between the banks that can spend 10 billion a year on tech and those that cannot. Some people predict a coming wave of consolidation among regional banks to keep up on the Technology Front because you have jp morgan and bank of america putting so much into those efforts. Nejra on jp morgan, we saw the shares close higher eventually. There was a bit of flipflopping around, jp morgan signaling it is investing for the long term even with the Net Interest Margin pain. Is that what gives the investment proposition, continuing to invest in the long term even with the lack of Revenue Growth . Michael i think so. It is a question of the absolute levels versus the momentum and the momentum is perhaps turning with the fed cutting. Forecasts are coming down for nii. Consumer businesses are doing quite well. Trading has been weaker, but overall these banks are very profitable so they have that wiggle room to continue those investments for the longerterm. Nejra given a lot of the data we have had on the u. S. Consumer, what a wise way to invest in banks be to look at those benefiting more from the u. S. Consumer and maybe that is a more study longterm investment . Christopher that is wise. We are invested in american express. Their credit card business has a lot of good and mess of the bad as big banks. There less of the bad as big banks. We still like that one. Tom within the banks and nonbanks, are the too big to fails becoming nonbanks . Are they moving so fast away from the traditional mandate . Christopher i think they are. Tom they are doing everything they can to not do traditional banking. Christopher i am a chase customer. They dont want me to do my utility banking with them anymore. They have too much capital. There is a striation in the business. Tom what have you observed . What is the three dave summary read a summary and your financed three days summary in your financed team . Christopher mostly the things they cannot control like the fed and the environment. They are trying to predict where the economy is going. They have had a bit of a tailwind for the last three years and perhaps that is turning. Nejra in terms of looking ahead, you could argue that goldman has upped the pressure on bank of america and Morgan Stanley on the trading front. What else will you be listening for in the coals . Christopher as are both critical elements in the calls . Christopher those are both critical elements. Asset management is changing rapidly. Companies like Morgan Stanley and goldman, how they will thrive in a new environment of passive and other changes. What wehat conclusion come to wet the end of the week . At can probably come to the end of the week . Michael it will all be in the outlook. There is a lot of changes in these businesses and our bank is on the front foot when it comes on the frontks foot when it comes to business . For the big commercial banks, what does that outlook look like . Tom Christopher Marangi and michael moore, thank you for joining us. Bank of america today. They are all different stories. Everyone has their unique story. All i want is the clarity of the press release. Right now, elevated a little bit along with futures up. S p futures up five. This is bloomberg. Viviana this is bloomberg surveillance. Lets get the Bloomberg Business flash. In europe, car sales resumed their downward spiral. It is the worst monthly decline since december. At the halfway mark, europe is probably facing its Second Annual sales drop. Daimler issuing profit warnings. Bmw reported a quarterly loss. It is a rare setback in ericksons turnaround. They posted earnings that missed estimates for the first time in six quarters. They rolled out they said their rollout of a 5g network would weigh on profit. Elon musks start up is ready to implanting surgery, paralyzed patients with electrodes that will let them Work Computers with their minds. Humans, theyls on need u. S. Government approval. Tom thank you so much. It has been an extraordinary set of days in washington, truly historic within americas arch debate on race. Biggestdealing with the bully i have ever had to deal with in my lifetime and trying to push back on that, and trying to do the job we have been sent to do, centered around the people at home. This is a distraction and a person who wants to vilify immigrants and communities of color. Tom on cbs this morning, Kevin Cirilli joins us, our chief washington correspondent. For as a you look response from the white house by tweetathon, a response . Trumpkevin president continue to reiterate his comments. I am focusing on whether or not the squad, those for lawmakers theyy aoc, whether escalate their tension with nancy pelosi because yesterday i dont want to get too in the weeds but yesterday Speaker Pelosi having the condemnation vote on the house floor, she was facing pushback within members of her party that she was not going far enough and that is the wedge right now within the Democratic Party that will illustrate where democrats are at as they head into the primary season. Set isur singular sill the marble hallways of capitol hill. What is the reasoning of republicans for not speaking out in a larger way about these direct comments of our nations histories . Orcannot be gerrymandering districts or getting elected the next two years. What is there reason for the Group Silence . Kevin i will be blunt. Their constituents agree with the president. That is why. Nejra on that note, to pick up on reasoning, what could be the reasoning of President Trump to have done this in the first place and in terms of what he might do next . Kevin i was speaking with republican strategists on why he is using this rhetoric and continuing to use it. His say he wants to pick opposition. He essentially has elevated alexandria a cost so cortez cortez. Mitch mcconnell got out yesterday and defended the president and said he is not a racist. They are acknowledging the tension between democrats in wash aoc last week criticized for some of the rhetoric she used against Speaker Nancy Pelosi for what some said was aoc playing the race card against nancy pelosi. Iss is such a mess that it really fascinating to cover. It is completely unlike any other week i have ever covered in congress. Tom i think you can take that back to lincoln or maybe president one, two, or three. Lets try to do one question on the view forward on fiscal. Minutia is talking to pelosi kevin in the middle of all of this. Tom is mnuchin talking to the president . Kevin not that we know of right now. Asked himmnuchin, i about this in the briefing at the white house this week and he said he is continuing to have discussions with nancy pelosi. They spoke via phone and were scheduled to talk today. Those conversations are continuing. The backdrop to all of this, the final deal will have to be between Speaker Pelosi and President Trump. If this week is any indication of their relationship, it is a rough one. Hera President Trump saying could impose more china tariffs if he wants. Kevin cirilli, thank you so much. Lets take it global and have a look at leaders arising for the ,7 meeting in chantilly, france no doubt discussing the limits of monetary policy. We have already heard from bruno le maire, the french finance minister on the digital tax and libra. Nejra u. K. Brexit secretary Steven Barclay answering questions about exiting the european union. Riskn barclay saying the of no deal underpriced. 1. 24 again. Withgeorge sarah bellows an extremely Important Note from george sarah bellos sterling is fairly priced and with negative news, could price weaker. Christopher marangi with us. I want to get to investment. We have too many people telling us they want to get offensive. Bank of america says the entire world is defensive. Christopher now is the time to zig when everybody else is nagging. That has been the way to make money. Tom where is the zig you are zagging . Christopher it is more confounding than usual. You have a strong u. S. Consumer and the industrials rolling over. Csx amongst others signaling things are getting weaker. We look at that and we are looking for cheap stocks. Tom is there Movement Financially for companies to adapt to the new condition of weaker growth, or have they used at all . Christopher they are going to get a kickstart intentionally from the fed over the next several quarters. There is still the opportunity for growth. Companies reinvesting in new products and services, marketing, things like that. They all seem relatively healthy. Nejra you say you are always looking for achieve stocks. Jp morgan cheap stocks. Jp morgan saying the gap has to close between value and low volatility stocks. Christopher i have been saying that for 10 years and probably been wrong. Tom you are on air. Christopher exactly. Value will have its day. I dont think it is structurally broken. Since 1920p stocks or whenever it goes back to you, has worked and we think that will work again. Nejra what kind of sector rotation are you expecting below the surface of low volatility . Christopher we are not allocating on a sector by sector basis. We are looking generally at industries where companies can create for themselves a sustainable advantage. That is what we are looking to buy, at good prices. Telecom, industrial, media, health care are some of the big ones. Tom i want to bring up the ibbotson chart from yale university. I do it with a dow going back, slope matters and price change matters, obviously the depression. We get on trend and we are not above the 2000 surge that we had. We are by no means equivalent to 2000, do you agree . Christopher the market has gone nowhere in the last year and neither has the economy so we are treading water. Tom longterm, we are above trend as well. Let us go back to the core issue, the bank stocks. What do you do with the group that did not perform . Christopher you look within the banks, they are all unique stories. The stories that Goldman Sachs are different than jp morgan and bank of america and bank of new york. Tom what is the best story right now . What is the best Christopher Marangi story of the banks . Christopher we still like american express, those with exposure to the consumer that are less sensitive to nims and deposit data. Beta. Nejra will the fed managed to sustain the expansion . Christopher that is the question. The double edged sword of a rate cut is what if the fed is right to be worried . What if what they are seeing comes to for russian and we are seeing a slowdown they cannot arrest . That is the concern. I think things are not too far gone for the fed to keep give the economy a jolt. Marangi withher us, we are thrilled he could join us today. Value investing and media front and center. Hour,f america in the this is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Morning, everyone, bloomberg surveillance. Nejra cehic in london, tom keene in new york. Viviana on capitol hill, some republicans called the measure harassment democrats say the party is not going far enough. That was the reaction after house voted to condemn donald trump for her as racist. Republicans voted as well. El chapo guzman on will be sentenced in a new york courtroom. The guilty verdict triggered a mandatory sentence of life without parole. The biggest question is whether el chapo will speak. North koreas economy is probably in the worst shape since the 1990s. Famine killed up to 10 of the population. That may be the conclusion coming out from south koreas central bank. U. S. Sanctions have hurt north korea and last year the economy probably shrank more than 5 . Arnaud jumpingd over bill gates to become the second richest person on the bloomberg billionaire index. His wealth is estimated at a little under 108 billion dollars, about 200 million ahead of gate. Dates. Gates. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Nejra thank you so much. Germanys Ursula Ursula von der leyen spoke to bloomberg. That should never forget we are allies and friends and on the same side of the table, if i might put it that way. We have got to negotiate hard about the different topics. In the very end, we know it is better to be in a healthy way trading with each other. It is not the end of something. It determines the beginning of the future relationship between the United Kingdom and the european union, and we want to be partners. They are our neighbor. We have common interests. I will put a lot of emphasis that we will have if necessary, a brexit in a good way knowing we have a common future. Tom we have seen her many times in davos, a historic moment for europe. A terrific oped in Bloomberg Opinion today. Let me go through it before we speak about this moment. For those of you in america, this is a huge deal for the history of europe. A razor thin margin of nine votes, a sign of tough times bloc. For the 28 nation an unemployment benefit scheme, free beer, mechanisms to bolster the rule of law, and a stronger portal border force. The socialists endorsed her at the 11th hour. Socialistsget the and the far right on the same page . Lionel this is the secret outlet so there is a lot we dont know about the micromechanics, but it is still all about horsetrading at the National Government level and at the parliamentary level. Oft you do in this world increasingly tough coalition building, fragmented party s, what do you do . Promise everyone something. Everyone got a ribbon and it is up to the parliament who has said, we will let you go this time but we will keep an eye on you. Tom within the world war ii sphere and the ark of the 20th century into this new 21st century, has it come more today the United States of europe . Lionel i think the dream is whatever europe whenever europe hits a rough patch, we talk about more europe as a solution. Donald trump keeps heading trade,on issues like like military protection under nato, and the response is always , he just might have a point. We need to become more integrated and independent. Think this whole saga around who gets to run the commission shows that the Member States running the show in brussels and that will be down to them whether they can Work Together or whether they want to keep brussels as a nice sideshow where people can talk a lot. Nejra we heard from the brexit secretary saying the risk of no deal is being underpriced. How do the risks we have seen in europe impact the risk of a no deal . Lionel there is the e. U. Side and the u. K. Side. On the e. U. Side, this Brexit Process is in the hands of the council and the government, not in the hands of von der leyen and the commission. Governments have shown no desire to unplug the u. K. And throw them overboard. The rhetoric as if they want to keep the process going, we will support them. The issue is well the next Prime Minister cut off all the possible facesaving exits and throw his own country over the cliff . Nejra finally in terms of underpricing risks, how might how much might we be underestimating an escalation in the e. U. U. S. Trade war . Trying to guess where trumpe. U. Goes because we cannot rationalize trump or his tweets. The e. U. s biggest strength is the Single Market. The u. S. And china know that. I dont think the e. U. Is fully aligned on this. Butp can still surprise us, their strength is the Single Market and trump will not find the bullying as easy with europe as with others. You. Lionel laurent, thank we will hear much more from Brian Moynihan on the nuances of these Different Bank stories. Christopher marangi mentions bank of new york also out with earnings, the bank weak as we begin the earnings season. This is bloomberg. Viviana this is bloomberg surveillance. Today, shares of swatch are higher. They are cracking down on socalled gray market distributors who make unauthorized sales which is cutting into their pricing power. They saw a revenue from hong kong fall more than 10 . Political protests have kept tourists away. A parent of United Airlines joining delta in raising its forecast. Helping united absorb rising cost pressures from the grounding of the bow and seven max boeing 737 max. Visa has become the latest investor in go jack. Neither company is discussing the size of visas investment. Go jack is valued at 10 billion. That is the Bloomberg Business flash. Tom banks, boring. Jon ferro told me to buy type pods. Ds. Ould save tie po i would save money on prime day. Did you do prime day . Christopher of course. Tom what did you buy . Christopher i have four kids, so almost everything on amazon. Tom we will go to a value stock with Christopher Marangi and it has got to be amazon, a prime marangi chart. A linear run rate for 14 years. Is this a value stock . Christopher i would say no. We are sad we missed it way back. Tom why dont you get on board now . Christopher we dont buy companies. We prefer Smaller Companies where we can have an edge. Tom it has grown five times nominal gdp. Christopher it has an impact on companies we invest in so we follow it closely and jeff bezos has done an amazing job of building a culture and business that is taking over the world. Nejra what are you buying in the tech sector . Christopher we look for technology within companies that are not necessarily Tech Companies. A Little Company called tcp applied technologies makes cement additives and they have a Software System that monitors the quality of cement on a truck. Some of the Media Companies investing in technology, disney is transforming itself into netflix. Netflix reports tonight. Disney is a better way to play the change in Consumer Behavior to direct to consumer. We look at some of the value tech names, hbe, ebay. There are some bargains, just not amazon. Nejra we will pick up on netflix, but i just want to ask if you see any opportunities in the redistribution of Global Supply chains as a result of the trade war and that part of the tech sector your. Tech sector. Christopher every Corporate Board room with manufacturing outside the United States is thinking about redistributing the supply chain, and we think mexico will be a beneficiary. Emerging markets go, relatively bullish on mexico. Tom as we go to bank of america , i want to come back to the banking issues. We have a chart, jp morgan, wells fargo before the recent challenges doing well, and a fivepart system, citibank and bank of america just not getting it done. What has been the distinction among too big to fail out performers and underperformers . Is it all legacy or are there other issues . Christopher a lot of it is legacy and the cards that each of these companies were dealt. Some of it is management. You look at someone like jamie dimon who has been dealt good cards and played them extraordinarily well. Jp morgan would be in outperform or. Outperform or. Outperformer. Brian moynihan has dealt a set of cards that were not quite as good. Nejra if we see more consolidation among mid tier banks, or that present more buying opportunities or fewer because there are fewer banks . Christopher we pick some of the small banks. There will be consolidation. There has been regulatory headroom allowed for consolidation and you are seeing more and more bank deals. Scale does matter. Nejra we are awaiting bank of america, but i want to pick up what you were talking about with netflix. Talk a little bit more about the opportunities you see. Christopher netflix is a great company. Reed hastings has built a tremendous culture. One distinctive thing about netflix is their focus. They are focused on providing video to their consumers. They are not involved in china or the privacy issues or cryptocurrency, all these other distractions that make other faang stocks targets for washington. Much of that is priced into the price stock. Tom is a new disney, one of the big surprises of the last 18 months . Christopher i think it did nothing and suddenly came to life. Tom confidence over the streaming project . Christopher it is largely that. Bob iger has done a good job in buying key content assets, and now he is going to monetize that in a direct to consumer fashion in a way that only disney can. Tom we have bank of america earnings, the first look. We are bringing it up as we can. The issue of bank of america is line by line, it will come out on this consumer juggernaut. At the first information that we see, use of cash is where i am mentioning the return. Of net income available to common shareholders and the book value increases by 10 . Nejra that net income up 8 , something i focused on. Second quarter epfs coming in at . 74 versus . 63. Second quarter Net Interest Income, 12. 91 billion. Billion soe, 12. 44 coming in slightly soft. Tom deposits increased by 12 as well. Let me bring in Alison Williams again. Why is bank of america different from jp morgan . They are much more an American Consumer bank, do i have that right . Alison jp morgan would argue they do well on the Consumer Banking front. Some of the key differences with bank of america as the wealth franchise, the merrill business. That is what we are looking for in terms of a bright spot this quarter, hoping to see an expansion in their wealth margin. Tom can i ask the dumb question of the day . Down 8 , equities down 13 . As the general statement, the emphasis on trading, is it over . Is it like what we remember is gone . Alison in general, there is a shifting focus to more reoccurring revenue type businesses. A lot of secular changes, structural changes in terms of electronic acacian of the business electronification of the business. They are focusing on access touch Assets Management and transactions for corporate banking. That is a business that jp morgan is a global leader. Deutsche bank is continuing to focus on that area and goldman is investing. Nejra the other part of that picture when you are struggling to grow the revenue is the costcutting. Will that be as important for bank of america as citigroup . Alison at welby, and it has been across it will be, and has been across the banks. The fact that they guided to the higher end of their cost rates, saying 2020 costs would be in line, whereas citigroup is a positive because they are cutting back. Tom we are on the edge of intel. Paul donofrio, the cfo, in the last 12 months they have repurchased 7 of their shares. Months,trapolate out 36 21 of their shares disappear. Is that what we will see from these banks . Is it a private roll up in real time . Christopher a lot of these banks were laggards and were not able to buy stocks back for years. They have gone back and certainly caught up. Not a surprise that you are seeing this consistently. Tom what else do you see . Alison i did not see the actual credit margin. Tom they are hiding it. Alison credit coming in better than expected, their chargeoffs better. Solid credit is something that will continue. Tom Christopher Marangi, 8 users, thatve zell is the important line is everyone is going to digital like you and me. Christopher almost every company is a tech company these days. Tom Christopher Marangi, thank you so much. Lets continue into this. I dont see Net Interest Margin yet. Alison i dont see that. Tom what a shock. Alison we are looking for the guidance. In april, they cut their to up 3 for up 6 net interest revenue. What we see a further cut today and what kind of fed cuts are they pricing in . That is what analysts are looking for to see what is in the expectations. Nejra you wonder whether we could see more choppiness in the share price when the market gets going because we saw that with jp morgan. What were they need to say to give a lift to the share price . Alison i think investors need to feel confident in the run rate of earnings. That is always what we are looking for with the report, how we feel about the future. What is the guidance on Net Interest Income . How can they manage through the environment . Their profile is more like wells fargo. That has been on the negative side of that story. The other side is are there offsets, ways to cut costs . If the revenue environment will be weaker, are there areas where they can cut . We dont want them to cut tech spending. We are hearing about positive developments. The bank is making progress on their digital front but there are areas they can improve efficiency. The credit story continues to be positive across the banks, chargeoffs and provisions coming in better than expected for bank of america. Nejra that seems to be the reaction premarket is a reaction to the Net Interest Income missing estimates. Much in lineretty with analyst expectations. Equities also just in line with what was expected. Why are we not seeing any offset from the trading numbers as a reaction from the share price with the net income . Alison the trading numbers look inline but if you have one thing in mind and one thing missing, that is the net i get of. Negative. Fees came in a little better. The expectation is for a Margin Expansion in the wealth business. On the cost side, im just looking to see if we have gotten anything on guidance. Again, i have not been through the release and if there is something in there, talking things down, that is not a good thing. Tom over the last 10 years, jp morgan 13. 9 , fortress moynihan 14. 1 . What is the difference . Alison stock return . Tom right. It will depend on their starting point. Is what this comes down to. Alison if you think about the fact that bank of america, during the crisis they acquired a bad Mortgage Business with a ton of legacy stuff and had to pay for that for years and years , but they also required acquired merrill. Tom tomorrow, i have got Morgan Stanley and james gorman. Wealthredefined management dynamics and Asset Management dynamics. What can these bankers learn from james gorman about the topic including Deutsche Bank is talking about . Alison Wealth Management is the big story for them as well. That is the key metric they are focused on. Tom i would suggest james gorman reframed what we do with Wealth Management. Alison they reframed how to think about the overall franchise of a bank. They shifted the overall mix to a more sustainable to a more stable revenue. That is something banks broadly are trying to do. Nejra i want to highlight a comment from brian moynahan, saying we have seen improvement in our Investment Banking market share as we have repositioned that business. How much do the big banks in the u. S. , how much of a tailwind are they likely to get from Deutsche Banks retreat in Equities Trading . Alison that is the expectation, and over the last few years, looking at 2018 versus 2015, even though overall trading revenue shrank, they were able to grow in actual terms because of the pullback of Deutsche Bank and Credit Suisse and other competitors. To the extent that you are getting more of a pullback in europe, there could be an opportunity. Tom thank you so much, as we waltzed through the week. Alison williams driving all of our banking coverage at bloomberg intelligence. Bank of america shares down a little bit, but mass abuse of buyback dividend and front and center with brian moynahan, and a general statement that everyone will have to dive in and see how this Consumer Bank does better than jp morgan. Nejra the take away we are getting from bank of america as the consumer Business Results seem solid. You get the sense investments investors are trying to get their head around the Net Interest Income, missed mixed trading in line. Tom we will continue through the morning analysis of bank of america and the uproar in washington. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. We have a long way to go as far as tariffs in china is concerned. President trump says he can impose more tariffs. China says that would complicate negotiations. Another bank victim. Bank of america missed just by the peak of trade revenue. U. S. And europe sound off on big attack. Amazon faces an antitrust investigation in europe, facebook faces more questions from the house and congress pulls no punches him a calling tech giants on trustworthy, delusional and like a toddler. David welcome back. Alix i felt like i was gone forever. Have one david we have one today, bank of america. Alix we are trying to parse through whats what. They had a beat on the bottom line but it seems like a distinction between for the Investment Banking, trading