Corporate bellwether. Manus warm welcome to zurich. The numbers hit the tape. Of linesa couple coming through. Net profits recovered considerably after a challenging 2018. Net profit attributable to shareholders, 343 million earnings per share. Adjusted net profit, 398 million, an increase of 18 p. M. When it comes to the numbers that matter, it is net new money, 6. 2 billion in net new money. Course thes of Succession Plan and julius baer. He will join me very soon in the next hour. 1. 7 years ago. To 400t this building up billion swiss francs. He joins me after 7 00 a. M. Some people say he spent two years, nearly two years, tidying it up. What will rickenbacker deliver . Million in net profits. The adjusted net profit, 390. 5. It is all about changing the nejra cehic julius baer. How changing the story act julius baer. T changing the story and julius baer. Nejra secondquarter revenue coming in at 4. 7 billion euros. Estimate with 4. 5 9 billion euros. 4. 59 billion euros. Margin ined ebita line. The Second Quarter adjusted tota coming in out of the, at a beat, too. It is maintaining its overall sales growth and adjusted ebit amargin views as well. One of the questions for analysts is to do with the u. S. China tariffs. Look for an update on that and of course we will be speaking to the ceo shortly as well. Manus. Manus a little bit more breaking news from them. This is on the chemicals business. Theeat deal of action on chemicals stage. Clarion is agreeing to sell. In thepected to close Fourth Quarter. 308 million. A little bit of breaking news on deals being done. I thought it would be disingenuous not to talk about euro swiss. Expenses building the in swiss francs. They say now it is a question of how much more will they have to do to match the moves expected from the ecb. Will they intervene in the market . Will it be a largescale intervention . They have history and form. That could hurt the americans. They can see the swiss strengthen. What will it mean as we hit those two years highs . Have a look at oil and the dollar. We have the worst week since may last week. Waking up to geopolitical risk in the market. The hedge funds are the most bullish in months. Oil as a barometer for risk is broken. It could be the new psychological dollars during geopolitical angst. 50 basis points. We made so much of it. It was a head fake according to one or two of the analysts. The question is this. Even in a writ cutting cycle, with double angst, is dollar your destination . Nejra we saw williams and clarida shake the market, looking more steady today. We did see gains in u. S. Equities off some dovish expectations for the fed. On a weekly basis, we saw losses. Looking atke we are a flat open. We have seen a little bit of curve flattening. That is reflected in what you are seeing today. The 10 year yield hold steady. Holds steady. Juliette in singapore. Juliette it is a bit of a cautious start to the trading week. We are seeing weakness in late trade from some of the key indices. The nikkei down by. 4 . Weakness in the end today. We are wait see whether or not shinzo abe is on that super majority. There are concerns about what impact it could have on the equity market as it looks like that higher sales tax is going to be pushed through. The hang seng index down by. 8 and it has been a choppy session regionally. The chipmakers are seeing some good buying today. In terms of the export story, we had a lead coming through read coming through from china. There has been another interesting story out of asia. Lets look at some of these massive moves you are seeing on the new star board in shanghai. 25 companies debuting. 390 on debut. 230 for this company. That will have been 11 days after happen 11 days after the new star board, which they are calling china lost nasdaq. Dayn of 75 to the index on one. Asahi drew brees maries. Asahi breweries munis has placed a song reviewing. Manus. Thank you very much. Great roundup on the markets. It is resolved season. We are on the move around europe. On the banks are also agenda. Mario draghi enters the final three months of his presidency of the ecb. Our guest host says Central Banks are distorting natural progression of the business in order to maintain peace and price stability. Nejra the last nail in the coffin according to Societe Generale once the ecb exploring a teetering mechanism. It is nothing more than the japanese asian ga japanization of europe. Really great to have you with us. It is a fascinating note that you have written. Global markets. Tell me what that means for what investors should look ahead to in the thirdquarter . It is effectively a reference to the secularization and ice age theory from Societe Generale. Trillionclose to 13 of bonds carrying negative yields and this is testimony to the fact that you could the heading towards an environment of lower growth for longer. You thisod to see morning. The imagery that you use is pretty phenomenal. You talk about the secular stagnation. The second phase is the ice age thesis. I get a sense that you might agree with j. P. Morgan that we could be heading towards this 0 in u. S. Treasuries over the medium term. Is that a reasonable concurrence . Kokou yes. If you look at the u. S. Business cycle, it is one of the longest in history. Cycles exist for a reason. You tend to have dislocation in terms of Balance Sheets and the massive rise of debt. This is what we saw in the u. S. In the highyield space. Currently, we have 2. 5 trillion of trouble be rated that brated debt. Yes. The path of least resistance is for a slowdown. If you look at china and the difficulty with which the u. S. Is currently generating gross. A way to monetize this environment of lower rates beyond just wanting to buy bonds in the u. S. . Kokou one interesting trade we like a lot is ford volatility on rate. Today, the curve in dollar rates vol is downward sloping. Historically, not only do we see a flattening in of the curve or a pickup inyou see dollar rates volatility in the long end of the curve. You talk about this secular ice wave theme and you put it together very nicely, equity trade, vol trades, and x trades fx trades. You want to belong utilities and short banks against that. We are inrough where the cycle of that trade and how much more of it there is to come. Simply values versus quality. Or even lower yields negative yielding bonds. Financials and banks have a it has aime because net in impact on their margins. Beenis a trade that has classic but it is something that could generate more momentum Going Forward. Thank you very much. Much more today into to dig into. Time for a little bit of first word news. Debra mao is with the team in hong kong. Debra serious consequences. London is demanding the of the vesselase and is advising you case a thing of the increased threat in the persian gulf. Theresa may believe a meeting of the governments emergency committee, cobra. Philip hammond says he will boris if form Johnson Johnson becomes the next Prime Minister. He says he cannot accept johnsons demand for a Nodeal Brexit. It is important for the Prime Minister to have people closely aligned with him in terms of policy. I intend to resign to theresa may before she goes to the palace to tender her own resignation on wednesday. Debra the results of the leadership contest are due to be announced tomorrow. The tech index has seen all 25 stocks gain on the first day of trading. The initial group of companies to ipo on the platform drummed an average of 166 . Star market is chinas latest attempt to avoid losing the next alibaba or tencent to exchanges in new york or hong kong. Shinzo abe has claimed victory in yesterdays upper house election. His block is short of the super majority needed to push through revisions to the pacifist constitution. He is on course to be japans longest serving Prime Minister in november. 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 debra mao. This is bloomberg. Nejra. Nejra debra mao in hong kong, thank you so much. Phillips maintained its overall margin views. Nd the groups comparable sales rose 6. 1 , comfortably beating estimates. The Group Considers acquisitions to help bolster a push into medical monitoring devices. Ceo said the ongoing tensions between the u. S. And china are expected to cost the country 45 Million Euros in profit this year. ,oining us from amsterdam the ceo. Welcome to the show. Thank you for joining us. Would we get an up date first on and you are setting aside what you are expecting from the trade tariffs for 2019 . Whatou able to offset youre expecting to take in terms of a hit to profits so far . Yes. We think we can. Let me give you the Bigger Picture. We have strong traction in the market with 6 Revenue Growth and an Even Stronger order growth at 8 . That means customers really like our innovations. This momentum in growth helps the bottom line. We have always said we expect a stronger second half of the year wesus first half, and maintain that. The second half will see a further step up and we will get to around 14 operating profit. Also, the mitigating actions with regards to these duties that are imposed between china and the United States will find further impact in the second half of the year as we redesign supply chains and take other measures to offset the head window 45 million. Manus good morning to you. We will get deeper into what your plans might be but lets deal with this. The sales growth in china since the 1990s in autos, where is it coming from and the Product Division that is driving it . The strongest Product Division i can be clear about is our diagnosis and treatment business. That is the largest. We have seen strong traction in china. Both government hospitals but also the private sector hospitals in china are expanding. Pretty logical, because with a growing and aging population, more lifestyle disease, the capacity in china to treat all these patients is insufficient. This is government policy to expand. We have been seeing strong doubledigit growth in china for our Health Systems business for several years now. You saidjra nejra before that europe has been challenging. How is that region doing at the moment . Europe is a low singledigit market. Within that market, we are ok. Also in europe, good traction for our health care innovations. Nice order from the University Hospital in france, is taking aid diagnostic decisionmaking. Rutherford in the united kingdom, a chain of diagnostic centers, is upgrading and standardizing on philip. I think customers really like the fact that we have tied ourselves to their future and also that our innovations help what is referred to as the quadruple game in health care. Health outcomes, productivity, and a better experience. I expect this momentum to continue. E are well in our growth range in fact, at the higher end of it. We expect a stronger half year thanks to this momentum. Mitigating actions coming fully in place. You have used mitigating actions twice now. I want to know where the biggest supply disruptions are for you and what mitigating actions can we expect from philips . Are you prepared to put more into america has given the political acts we have been in the last four days and five days . Where are the mitigating moves going to be made . Frans we have a very strong footprint actually both in the United States, europe, and china. We are moving towards a Regional Manufacturing hub strategy where we manufacture in each of these large continents. We are a net exporter from the United States. I think we are contributing well to the economy. The rearrangement of the supply chain, we are in fact more able to then you capture a each ofproduct range in these younger fees thereby also serving closer to the customer with a shorter supply chain, making us more responsive. Nejra other than the tariffs, which we discussed, what is your biggest concern for the second half of the year . Is it the political environment in the u. S. . Frans i would put it at the top of my list, still, these trade wars that are divisive in the world, as a strong believer in what globalization has brought to the world. We can see people coming closer to each other, and that will be good for the world economy. Can we ask you just finally, any update on the corruption bribery investigations in brazil or china to round off . Frans sure. Not much to say. I mean, the case in brazil dates back many years. It is being investigated by the chilean authorities as a consequence and was followed up by the american authorities. Inquiry tohere is an our compliance policies. That is perhaps the same way to say that, you know, at philips, we have a zerotolerance policy with regards to any wrongdoing. We have a strong compliance program. And we look with confidence to these inquiries. We are a large company. In a big company, they can lets something say, going wrong. At this moment, i am not aware of that so we will just have to wait and collaborate, which we are doing. Manus thank you so much for joining us this morning. Frans van houten, ceo of philips. Coming up on the show, no respite. Unrest continues in hong kong. We are live on the ground. That is next. This is bloomberg. Manus it is bloomberg daybreak europe. I am manus cranny in zurich. Nejra i am nejra cehic in london. A little bit of caution on a headline level at the msci asiapacific index. It is a quiet week for the fed. Biters closer to a 25 point for july. Geopolitical risk in the gulf tanker. N seizing the dollaryen on the front foot. A little bit of yen weakness. That is about dollar strength. Manage. Check and on copper. A little bit of a move higher. It is weaker according to citigroup. They are saying we are at end of cycles doldrums. 2. 05 . You want to buy those yields potentially as you see any kind of a backup. Use the s p futures rising. There will be some pretty big earnings. Adjust your strategy rather than going to underweight risk. Overweight in equities. Lets talk about the mass demonstrations that turned out last night. They turned into violence in hong kong as Police Clashed with demonstrators. Police fired the or grass tear gas to clear the streets. Protesters defaced the National Emblem of the buildings entrance. Inid tweed is on the ground hong kong. Always good to get your perspective on these things. Why is it the china Liaisons Office . Why are they responding so strongly to last night protest . David there were three things that happen in hong kong yesterday in broad strokes. One was a peaceful protest of several hundred thousand demonstrators. Thing that happened was a group of the more radical of those protesters broke off and they came here to the china liaison office. This is the office which is chinas Representative Office here in hong kong. A lot of the protesters think that the bureaucrats working in this building are the ones behind the influence peddling and the undermining of the one country to systems they are systems theytwo are concerned about. It was attacked with bricks, graffiti. All sorts of paint was thrown at the emblem of china on the front. Beijing response very strongly. This is an attack on beijings sovereignty. In hong kong. Weed thank you so much for joining us up next, we will talk more about the tensions around iran and the impact on oil market and beyond. If you are traveling to work, listen to bloomberg radio. This is bloomberg. Manus it is bloomberg daybreak europe. I am manus cranny on the road in zurich. Nejra i am nejra cehic in monday. Joining us is and annmarie hordern. Lets kick it off with you. You have been looking at lending stocks which are finally correcting. What has been impacting the highquality names . The central bank has been commented on that as well. You hit it on the head. An interview of the Central Bank Governor on the bloomberg website as well, but having said that, both friday and monday, we had the private lenders, which are the highquality lenders, having the book starting to correct. , a word ofgest bank caution on unsecured lenders. That led to these quality names thesenot often we see highest quality names in terms of asset quality in india and all of them have started to come up because even those books might have some problems if not now but in the next couple of quarters. Anyone and india should watch out for that. Indian markets are underperforming and lagging asian counterparts. Talk to you. Manus thanks for the round back to you. Manus thanks for the roundup. Biggest banks coming from the oil market. Oil is not out correctly pricing the barometer of risk in the persian gulf. Annmarie we are seeing an escalation of tensions, up 1 on brent. It is higher. To not where was five years 10 years ago, given what is going on in the strait of hormuz. It is leading losses lower, singapore. Hong kong as well down more than. 7 . To ownf a cautious starting monday morning. The japanese yet it down. 3 . The swiss franc is down, manus, and a lot of this has to do these are two big of the worlds most sought after havens. In commodities, besides oil, iron ore down 1. 9 . Citigroup sees prices falling with the steel slowdown looming in china. Their price target is for 95 for the Fourth Quarter and you can see we are trading about 1. 14 a ton. The chart has to be oil given what is going on in the geopolitical sense and supplyside of the market. I am looking at the bullish bets, seeing the highest net longs since may. We did see these spikes and oil on friday as well, but still, it ended down for the week about 6 lower. It will be interesting to see how much we see moving into the net longs given the geopolitical concern. British likeed the tanker and it is in iranian possession. Look at the supplyside and what is going on in libya. An Unidentified Group gained hold of their biggest field. That production did initially, off the market. Nejra it is really interesting in terms of how the persian gulf conflict could impact prices. Lng may rise even more. A lengthy conflict could accelerate the move away from fossil fuels as well. Bloomberg first word news with debra mao in hong kong. Hey, debra. Debra serious consequences. That is what the u. K. Has want iran will face over the future of a reddish tanker in the strait of hormuz. London is demanding the Immediate Release of the vessel. Theresa may will lead a meeting of the emergency committee, cobra. Chinas new nasdaq style tech index has been all 25 stocks gain on the first day of trading. The initial group of companies to ipo on a plan and jump an average of 166 . Chinas market is latest attempt to avoid losing the next alibaba or tencent to exchanges in new york or hong kong. There are signs of fragility in indias Banking System according to the reserve bank of indias. Overnor speaking in an interview with bloomberg, he says the central bank is monitoring the mortgage lenders and other shadow banks to prevent contagion and the collapse of a nonbank lender last year. A president has dominated ukraines parliamentary election. He vowed to end the conflict with russia backed separatists. His servants of the people party won a record 42 of the vote. It is named after the Television Show that propelled the former comedian to fame. British airways suspended all flights to cairo. Has beener says it reviewing security arrangements and will never operate a flight unless it is safe. Cairo is playing down any threats, saying there is no reason to halt light. Avengers and game has toppled avatar as the highest grossing film of all time. It has taken an estimated 2. 79 billion worldwide. According to box office mojo, endgame only takes 15th. 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. This is bloomberg. Manus. Debra, you cannot throw me a line like that. I am not saying thank you very much in hong kong. Gone with the wind. We have been covering a whole host of issues on the show. They are seeking to calm down the tensions with iran after the Islamic Republic seized an oil tanker in the strait of hormuz. Story, our the middle east and north african executive editor joins us now from dubai. It is interesting. Shinzo abe is speaking about the very issue. Where are we in this cycle . World toran wants the focus. Shinzo abe said this morning that the world is aware of the importance of being able to talk with iran. Do you think that is critically important that the u. K. Get to that stage, but they have to get their ship back before they can begin . Is that a fair take . Yes. Im in, we spoke earlier today. I said that for the iranians, this is not just for the ship. This is about, you know, the ship in gibraltar. They see this as part of the Bigger Picture. They want to be talked to. They want to make sure the world is listening to them than the world comes to the table and talk to them and strikes a deal, because iran is under a lot of pressure because of the u. S. Sanctions at the moment, and they are trying to put some water pressure on the rest of the world. For example europe, especially europe, to come to its aid. To stick to the nuclear agreement, you have to make our economy work. Nejra what Bargaining Power does the u. K. Have here . Philip said himself over the are sanctionshere already against iran, so it is not clear there are immediate additional things we can do but we of course are looking at all of the options. What are the options . Riad there are some options like they can put sanctions on specific individuals in iran. They can also ask allies to resume sanctions, to resume european and u. N. Sanctions against iran, which is obviously not positive for iran. From the Iranian Press s2, that is not going to be a game changer, even if the u. K. Does not put those measures in place yuan do notand the join the u. S. Sanctions. At the end of the day, European Companies are not willing to cross u. S. Sanctions. They are not willing to do business with iran even if their governments say it is allowed to do business with iran, so for the iranians, i do not think this will be a big change to the difficult situation that they are now in and to the pressure they are facing now, and i think that is one of the reasons why the u. K. Is saying we need to deescalate. We need to talk about this diplomatically and try and find a way for this specific situation regarding the two tankers. Thank you very much. Our middle east and north africa executive editor joining us from dubai. Kokou is from Societe Generale. He is our guest post in our london studio. When we look at global risks this morning, i look at oil spiking higher. It is a broken barometer. In other words, Eurasia Group would say that if there is a war or risk of war, we go to 100 and the 100 is now the new 80. When you look at the risk of escalation in the strait of hormuz and in my region, how do you prepare for that kind of escalation in the second half . Kokou this is a crucial point. The old price is also reflecting a slowing global growth, and also, a slowing in nation. When you look at fiveyear breakeven inflation in dollars or in euro, the euro area. You have to take into account the structural downward pressure that is pulling oil down and the geopolitical risk. It is important to bear in mind that historically over the past 12 to 18 months, asian geopolitical risk has been deescalated through time. Think about the north korean situation. From an investor standpoint, and buying oilly as an insurance policy could be difficult in terms of markets. There is a bit of skepticism in terms of how far things can and will ultimately go. Nejra there is a Bigger Picture here as well and people are taking a step back and saying a lengthy conflict could accelerate the move away from fossil fuels. Would this be a time to may be put on some of those trade that give you exposure to the sg stocks esg stocks . These are longterm megatrends, if you will. This is clearly an interesting catalyst. Theis more than environmental aspects. It is social and governance as well. There is increasing in for showing if you cant do that, you would limit the drawdown Going Forward. You got a lovely summation for the third quarter. How to capitalize on secular themes. When i look at the fx prasm, how does that work . I am a natural protector of myself in yen, gold, negative thes, political risk, i run risk of centralbank interference. Is that my biggest risk on protective trade and currency . Bank clearly, central intervention has been quite aggressive over the past 12 months, and is is clearly because they are desperately fighting the inevitable, the end of the business cycle, and the slowdown in growth. By morey thing is that intervention, they increased dislocations. The angle we are looking at is owning volatility in eurodollar as a way of capturing that trend and telling rate volatility selling rate volatility. The eurodollar could be the dollaryen of tomorrow if europe stays in a lower negative yield for longer. Threat that would shake Central Banks from all of this gains and inflation to fight for it is not something being priced at all in the inflation market. You were talking about the fiveyear five years and break evens coming down in the u. S. Would you be buying those or sitting on the sidelines . Inflation has been something that Central Banks have had a tough time getting up, so it is a bit like this being broken. The bestperspective, way is to look at other asset classes. K versusequities, wea strong Balance Sheets, and looking at the movements within sectors by owning volatility and selling Index Volatility against it. The second order effects versus the first order of that. Manus i love that. By the power of my bloomberg, from me to you, at home in london, look at this but i want you to pick a vol. I know this is perhaps your favorite area. You have a bit of vix, g7 vol. Where or how do you want to play the biggest volatility that could come to play in the second half of the year . This is an interesting chart. So clearly, when you look at volatility, it is more a story or a tale of the tailwagging the dog or the opposite because you have to think about the massive amount of dislocation coming from supplier volatility. In the rates market, you have the product out of is a. Sort of income and in the equity space among you have structural paradigms that yield enhancing i instruments. The best way to own volatility ,oday is clearly equities because i find the risk premium being the most dislocated. Out of the money options, systematically or tactically, it looks quite interesting. Second to that would be dollar rate volatility. As the fed starts cutting Interest Rates, presumably from july 31 onward, we should see forward volatility in rates start to pick up as it typically does when you have an easing cycle starting. Stacy kokou agbobloua lewis. Here is a look at what you should be watching this week. Who will be the next u. K. Prime minister. Boris johnson or jeremy hunt . On wednesday, we get results from deutsche bank. Investors will be watching for any more details on the chief plans. Ve and turnaround manus on thursday, it is a big difference Central Banks. We get the results from the ecb and turkey. All eyes will be on the new governor and the Central Banks independence. To close out the week, we get growth data from the u. S. It is forecast to hit the slowest pace since 2016. Coming up on the show, if you then, i am out. Philip hammond says he will resign if Boris Johnson becomes Prime Minister. This is bloomberg. Manus this is bloomberg daybreak europe. I am manus cranny in syrup. Nejra i am nejra cehic in london. Here is debra mao in hong kong. Philips introduced a slew of new products to rekindle growth at its Consumer Health division. The chief executive is betting investments in innovation will through an economic slowdown but he is concerned about the trade war. These trade war that are divisive in the world, and as a strong believer in what globalization has brought to the world, i hope that we can see people coming closer to each other, and that will be good for the world economy. Debra Bridgewater Associates fund has lost 4. 9 in the first half of the year according to the financial times. It is one of the worst performances in two decades for the fund. Firm was hurt as global stocks and bull market rebounded on hopes of looser monetary policy. Shares of a sake falling the falling the most in more than a year. They unveiled a deal to buy australian operations. It gives them a major inroad into the country. The stock move suggests investors are concerned about paying top dollar to buy into a region with slowing growth. And that is your Bloomberg Business flash, nejra and manus. Manus thank you very much. I will pick it up from here. Philip hammond says he will resign if born johnson become Boris Johnson becomes the next Prime Minister. He said he cannot accept the demand that members of his government except a Nodeal Brexit. Accept a no deal brexit. He is closely aligned with him in terms of policy. I therefore intend to resign to theresa may before she goes to the palace to tender her own resignation on wednesday. Manus the results of the contest argued to be announced tomorrow. It could be a busy week outside parliament. We had an mliv question on the go. Were all there. Will they give the new leader a honeymoon period or will the challenge of brexit weigh to o heavyn sentiment to on sentiment . Our guest host this morning kokou agbobloua, Societe Generales analysts. I was drawn to the bank of America Survey. There is a richness. It is the most hated market for 41 consecutive months. The u. K. Market. 23 of Global Investors are underweight. Are you as this reality in your positioning as sentiment is in the bank of America Survey on the u. K. . Kokou it is understandable. Signs pointing to a slowing growth. Credit have equities and defying gravity and continuing to perform. Steeringorced buyers missing out. When it comes to the u. K. , how do you trade the noise . Kokou it is basically the same someegy where you buy of them are exposed to the domestic economy that offer from a Nodeal Brexit and the other exposed to the international, which in effect from weaker currencies. Is quitee noise important and quite interesting as an asset class to investing in derivatives. What would be your chosen choice position on a hard brexit . We have lots of his strategies for those who want to be the chancellor of the exchequer by fiscal boosts, fiscal shocks. That actually could be quite a decent trade going into 2020 if we are completely agnostic about trading versus what a hard brexit might mean. Kokou one of the favorite strategies could simply be to go short smallcap companies, so the ftse 250, and go along with the largecap companies, so the ftse 100. More dollar has revenues, more resilience, where as the others are more exposed to the domestic gdp. The risks are more tilted to the downside. Nejra we are focusing on the ecb as well. When we have conversations on this set, a lot of for phase they want to be buying european credit on the expectations of more qe from the ecb. Is that a view you would share . Kokou this is a fascinating topic, because we talk about the japanification of europe. Tend to see is credit outperforming equities because the equity of a zombie tends to towards zero. Zombies have enough cash to service their debt but not enough to invest longerterm so you tend to see the sort of default ratesng delayed in time. Once they go bust, they go bust with more regularity. This is why we see on in bonds for the next two years to three years is of a strategy. 14 issuers in highyield in europe carried negative yields. I think that is ultimately the tangible evidence of zombification of europe, similar to the 1990s. Manus quite a worrying statistic. In 40 seconds, if the ecb cuts new lendingarts a program, will it really have a meaningful impact on the real economy . 30 seconds. Kokou it is very difficult throwing there philosophy at the same problem. We think it will effectively give funds more to zombies. Banks being weak art are having to take more losses and have nonperforming loans. Manus there is a movie with a lot of zombies, walking dead, kind of close lipped europe. Great reading ideas. Kokou agbobloua, global head of strategy and solutions at Societe Generale. Next up, the ceo of julius baer. We are in europe. 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. Manus good morning from zero. I am us penny. Zurich. I am manus cranny. Oil extends gains. Leadsminister theresa may an emergency government meeting on the crisis this morning. Act, the fed looks primed to cut rates by 25 basis points next week, but ahead of that, a pivotal ecb meeting. Will mario draghi surprised the market or will he hold fire on stimulus until september . Usius baers ceo joins imminently for his last Earnings Call at the helm. This after the inflows slowed for the third trait sixmonth period. Street sixmonth periods. Meanwhile, phillips Second Quarter comparable sales beat estimates. Gave us hisns, take. Frans trade wars that are divisive in the world, and that is strong believer in what globalization has brought to the seed, i hope that we can people coming closer to each other, and that will be good for the worlds economy. Nejra welcome to bloomberg daybreak europe. We are just under an hour for mr. Of cash equity trading in europe. Futures starting to turn positive. We also saw a weekly loss in europe. We had a tiny bit of again on friday but it looks like we are treading water a little bit, struggling direction. The big story today is oil spiking on the tensions in the persian gulf with the seizure of a british tanker by iran. We start getting more earnings coming through and reaction to that when we get going. Markets, the focus turns to the fed even though it is the quiet period this week. Manus yes. There is nobody going to be making a week from the fed. Squeak from the fed. What do you believe is the underlying tone . A healthy discourse or bad medication . You are seeing is bad communication . It is about the ecb. Will they go for a fast and furious rate cut this week . And as kokou agbobloua from Societe Generale just discussed, it is about driving out the noise in the background and focusing on the real risk. In asia, it is monday morning. Juliette saly has your asian rap in singapore wrap in singapore. Juliette monday afternoon here. 5 percent. Ff by it has been a bit of a cautious days trade. A lack of clear direction while they are in that quiet period, having investors stay on the sidelines. Weaker asn closing well. In thailand, some Inflation Numbers and export numbers. We saw those dropped by 2. 15 year on year in june. Earnings season weighing on indian stocks. We have been watching the debut of the star board in saying high that shanghai. Have a look at this stock, up 400 . There is no index tracking this. It started 11 days after the 30th company is listed on this board. But cap bloomberg data, it looks like the index alone is up 75 on gave you. I want to show you the chart on inflation in indiana as well. It is below what the r. B. I. Is that before. Have been three rate cuts from the r. B. I. This year, but when they turned to that accommodative stance, that was another 25 basis points. You have to wait for all of that to play catchup. There has been an improving monsoon rains. Lower oil prices are positive for inflation. That will be the key of what they look at. Manus, nejra. Manus thank you very much for that round up. We are in zurich. We are onto her on tour. Slow. Flows, they net new money grew by 3. 2 in the first half, missing the mediumterm goal of 1 to 6 growth. The group was hit right outflows from the italian subsidiary. Bernard is the man in charge of the bank. He joins me now. Good to see you this morning. Welcome to the show. Lets talk about these numbers. On reflection, they do not make for great reading. The third set of numbers missing the mark. Net new money is not quite there. The markets are flying high. Why are these markets not better . Ofi am happy with the set numbers we produce. Profit, 391 million net it is one of the best results in the history of julius baer. Quite robust, are from the core Wealth Management business, particularly from asia, europe, and the middle east. You are right. We had some outflows. Target range the of 4 to 6 . At the margins and revenues compared to the second half last year, they have substantially recovered and we fully benefited also from the better markets. I think what is very important Going Forward is the program that i explained in february, is a nicely on contract. They willyou think have to do more aggressive cost cuts . Bernhard the cost cut up the beginning of this year was aggressive. He will see the second half of certainly,y, and is in 2020, so i feel comfortable knowing that with these cost measures, we will get back into the ratio. It is always dependent on the markets, but there is a good chance that we get back. Were they reaching for risk in this world of negative yield or cash . Clients i talked to, they are still pretty cautious. Clients stillt of quite heavily into liquidity, which i think is also positive. We do not see a real tomorrow. They will be on the sideline still. More activity than we saw. Manus as you go to exit the think in better shape . Bernhard i think it is in better shape. I am very proud. If i look back, we created together the largest wealth manager. When i am particularly proud of our three things. One is we gave the firm a Clear Strategy direction in the last two years with regard to focus. The market coverage. Secondly, you know, this holistic advisor. We are focusing more on feebased income and we have started quite to boost in terms of technology and digital transformation, so with that, i think we are on a very good situation to be successful going lower. Manus did you Going Forward. Manus did you have full support of the board . Were you given enough time . Bernhard i was fully supported, manus. This longterm Succession Planning, i was very much involved with the longterm Succession Planning. A veryrd has nominated strong candidate to take over from me. I worked for the last 14 years sure iilip, and i am will hand over julius baer in good shape. Were, for want of better words, just a caretaker . Justard i did more than caretaking. We stabilized the firm. The columns down the market. ,edl more we lmed the market we ca down the market. Manus this bank was mortally wounded. To talkyour moment about that. Was it mortally wounded . Bernhard the franchise is something we built together. If i look at the team, the executive management team, that built back, together with me contrast still here, still going very strong. Are thetioned, we largest pure wealth manager globally. Manus you worked with rickenbacker, the new ceo. Do i look at the stock how do i look at it . A growth stock or are we stabilizing . I have to make my decision on where to allocate. Do you think we are moving into a new phase of growth here . Bernhard the great thing with our stock and what investors light, right, is that the combination manus it was a tough year last year. We clockedook, record profits julius baer. P set of numbers we present today is a johnson of numbers as well. Is a strong set of numbers as well. Manus they are beginning to grapple with a tsunami of negative rates. What a sec on to meet at julius baer . Is there a capitulation point where the clients have to take more pain on negative rates . Bernhard we did that the beginning of the year when we realized the negative rates would stay a bit longer. That is currently hitting our net new money. For us, what is important is not only the level of Interest Rates, but also the steepness of the curve. If i look at the u. S. Dollar, ment wet of reverse had for sometime. Maybe our competitors suffer even more because we have a Balance Sheet and a credit book we can use for the liability side, but clearly, another negative Interest Rate environment is not helpful for banks. Manus in terms of this discussion around negative rates , what is the biggest unintended consequence for markets because of this movement . It is very, very difficult for clients to come up Asset Allocation for us to advise on the right allocation. Negative Interest Rates are certainly not helpful, and what we have seen over the last couple of years is to try to offer alternatives to clients for liquid assets, and i think that is something we have done quite well. You well with the next room in your career. Thank you so much for the time you have afforded to bloomberg. We wish you well. Bernhard hodler, the ceo of julius baer. Have a lovely autumn. Nejra, goodrning morning. Lets go to debra for the first word news. Debra serious consequences. That is what the u. K. Has warned iran will face over the seizure of a british tanker in the strait of hormuz. It is advising you can shipping of the increased threat in the persian gulf. Theresa may will today lead a meeting of the governments he committee, cobra. Says he willd resign if Boris Johnson becomes the next Prime Minister. He says he cannot accept johnson demand that members of his government except a Nodeal Brexit. It is important that they have a chancellor closely aligned with him in terms of policy. I therefore intends to resign to theresa may before she goes to the palace to render her own resignation on wednesday. Debra the results of the tory leadership contest are due to be announced tomorrow. Protests continue in hong kong as the default rally turned violent on sunday. In thefired tear gas city. Hundreds of thousands marched as hong kongs biggest political crisis in a generation shows no signs of abating. Victorybe has claimed in yesterdays upper house election, but his flock is short block is short of the super majority needed. He is on course to be japans longest serving Prime Minister in november. 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. This is bloomberg. Nejra. Kong, debra mao in hong thank you so much. Coming up on bloomberg, we speak exclusively to mervyn king. That conversation after 4 30 p. M. London time. This is bloomberg. Nejra 7 18 a. M. In london. This is bloomberg daybreak europe. I am nejra cehic in london. Manus i am manus cranny on the road in zurich. Lets get a business flash. Debra mao is with the team in hong kong. Is opening its Financial Sector to more foreign investment. International holders can control Wealth Management units, pension fund managers, and currency brokers. Rising riskst facing its finance industry. Philips is recording Second Quarter profits that beat estimates. Executive is betting investment in innovation will see them through any economic slowdown but he is concerned about the trade war. Free trade wars that are divisive in the world, as a strong believer in what globalization has brought to the world, i hope that we can see people coming closer to each other, and that will be good for the worlds economy. Debra Avengers Endgame has toppled avatar. According to box office mojo, endgame ranks 16th. The top spot is held by 1939s gone with the wind. That is your Bloomberg Business flash. Manus. Manus thank you very much. Lets check in on your market map for this morning. I am in zurich. There is money in cement. It is up 6. 3 . Brent is up. Geopolitical risk. Is the oil barometer the real barometer of risk . New 100. 100 is on the card. Bunds, it is ecb week. At negativepe rates. Good morning. The markets seem to be in a Holding Pattern. We really sort of flirt around the flat line on s p futures. The bond markets in the u. S. Were shaken on thursday and friday by williams and clarida. Pricing in a 50 basis point cut. The dollar on the front foot. Dollaryen, 108. 04. Peter, great to have you with us. Quiet week this week. We are in a Holding Pattern today. The vix is back at levels of complacency that lead to a shakeout. There is termination towards dovish policy that we seem to be getting from Central Banks. Peter if you look at it realistically, i am observing a real contradiction. You have a massive fund flow into bonds, you have got ers, andonary spend systematic exposure, risk parity products, all your highest. Bond yields continue to collapse. That is a contradiction. They both cannot be right. Somewhere in this is possibly a correction. I think people will buy it. Supportis deciding to tina. She is a fine lady. Ism afraid the fund flow against any fundamental analysis and it has been for ages. If you took the u. S. Economy, came down, and said what is wrong with this economy . The answer would be nothing. It is a shame powell fell into line, but he is reading the trump tea leaves and saying stay with me. Manus peter, good morning from zurich. Interesting that you talk about this breakup. It is asays recalibration and it is not the easing cycle of the 1990s. A slight challenge to you on that front. Thisys we have gone from convincing ourselves we need a series of insurance cuts to we need shock and awe. 1990s for much less . Peter what was the jobs number last week . Not in an economy that is collapsing. The fed is raising rates to create headroom. Putting in raising rates. That rationale changes in terms of donald has shouted so someone decides to cut rates. Where is the fundamental formula for cutting rates in the u. S. . Have we got an asian crisis . Onthing in particular going in the world that demands this . Still, cut rates. What is the reason for the cuts today, the rational reason for doing this cut, given they spent the whole time raising rates to create headwind for the next downturn . Nejra i am sure a lot of people agree with you. How do you monetize the situation, cash, gold . Peter gold is an easy one to rationalize, because obviously, the appeal of bond yields, certainly no appeal to negative bond yields comes into play. The overall impression must be that you are going to at some point goose inflation here. Cut the ecb. It joins this policy of lets continue to print. One assumes, and it is a huge is antion, that gold actual Hunting Ground for easy defensiveness risk off or for the idea that i do not want to pay a German Government to hold my money. Even some manus european insurers said to hold your money. To hold your money. Take a look at this chart, peter. [laughter] manus we have only got two minutes left. Lets nots bar. Two roads diverged in the woods. Yields dropping. Credit suisse says this is a top worry. This convergence, so to speak. People want to move to a convergence trade, that the s p comes back correct, but contingent on a move on the 10 year swap. Which falls first . Which issue drops first shoe drops first . Peter massive winning the equity move. No disrespect to the rest of the world. The dax is where it was at the end of 2014. Most of asia has been making headway. I have been reminding everybody that most equity markets have gone nowhere and the s p 500 is was inshake of where 2014. It was in 2014. What bull market . We are not going anywhere furiously fast . We are going nowhere fast. Bond yields have been supported by flow. I would argue flow is quite dangerous. You are just doing flow for the sake of flow. Look at what the 10 year treasury is doing. At the moment, it is going to look like any correction. I think it is ridiculous. If we end up allocating to equities the fed is desperate. Trump isone for mr. Saying everyone is a currency manipulator. If the dollar is easing away, that is off you go for goldilocks, i suspect, one more run. Manus one more run and we could almost be done. Tina and goldilocks running off into the woods. Peter toogood. Keep rolling off the tongue. Peter toogood, thank you for joining nejra and myself. Cio at embarq. I will be back again tomorrow morning. Intervention bringing up the road in the s p . That is the question we need to ask. Nejra great interviews lined up this week, manus. The european open is up next. That is it for daybreak europe. We are 30 minutes from the open. This is bloomberg. Good morning. Welcome to bloomberg markets, the european open. Im anna edwards in our European Headquarters in the city of london. Tech shares surge on chinas new star board, but it is not enough to shake off negativity on the main stock indexes. European futures, points lower. Oil gains as the u. K. Looks to