Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Gulf. Earnings reports first since the u. S. Blacklist. Warnings of difficulties ahead. We speak to the companys chairman. Im matt miller, in for Francine Lacqua in berlin. Lets check on markets. Gains in london, drops across europe. Stoxx 600 down a half a percent. Bp holding it back from bigger losses. To pound continues to weaken see thes, and you japanese yen strengthening. By 108. Dollar can only. 6 of yen. The fed is expected to cut rates tomorrow. Yield and coming up we speak to the ceo of cap gemini, 9 30 a. M. London time. A lot to catch up on today as we have a slew of exclusive interviews. Lets get the first word news from new york. Ratesa mexicos interest are too high for the slowing economy according to the president. The central bank has cap the key high,t 8. 25 , a decade and this makes it one of the strongest currencies this year. The mexican economy may be in mild recession. [speaking foreign language] they are more cautious about inflation. ,his is not a bad thing, no, no this is not the wrong thing to do. I am not saying that. Important to lower the rate to encourage growth. Mexicos president was speaking exclusively to our editorinchief. Ultimatum to Boris Johnson. Talks withocart far, brussels have refused. Morning commuters in hong kong facing delays as protesters disrupted services on the subway, the second time in less than a week they have disrupted the railway, after beijing warned violence would not be tolerated, following clashes with police over the weekend. Seeing over the fed decision. Says 2 inflation remains out of sight, trimming projection to 1 for this fiscal year. Donald winning his fight to veto a block of arms sales to saudi arabia. The senate failed to override the move. Critics say saudi arabia must be punished for yemen and the murder of jamal khashoggi. 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. Im Viviana Hurtado, this is bloomberg. Matt lets kick off with the fed. The rate cut expected on wednesday would be the first in more than a decade. Scott minard, the ceo of Guggenheim Partners, doesnt think they should. He says they need to raise rates in order to keep the economy from overheating, a view that the president does not share. Trump tweeted that a small rate cut was not enough and that the fed had made all the wrong moves. The president has been a critic of jay powell. Take a listen. We have a gentleman that likes raising Interest Rates in the fed. A fed that would lower rates, would be like a rocketship. We have a gentleman that loves quantitative tightening. They really float us down. There is no inflation. We are paying interest and it is unnecessary. The fed has not been a help to us. We have a gentleman that likes a strong dollar in the fed. We are not playing on a fair field. We do not have a fed that knows what they are doing. Eventually he will do what is right, perhaps. Lets see what he does. Matt joining us now in london, jose, cio. Jones, berlin, Richard Bloomberg strategist. Jose, let me get your take on the president s comments especially the strong dollar comment. Isnt it a good thing for an economy to have a strong currency . Jose it depends. You can manage Interest Rates. You have to keep them how they are. Richard . Richard in one way a strong dollar is vote of confidence for u. S. Economy. For exporters, it becomes challenging. Exports become more responsive. There is tradeoff. The president has decided the latter is more important, in a world where there is competitive devaluation, he wants a piece. Matt jose, it looks like he will get what he wants. Scott minard does not win this time. What does that mean for asset prices . Are you concerned we could see bubbles inflated . Jose it is possible. I would not say we have a bubble now. Rates inut on interest u. S. , will have equity rise more, bonds, in terms of price will rise as well, probably we will be living in a more dangerous world. Probably, we need some margins for economic policy. We dont have margins on the fiscal side. Having margins on Monetary Policy, it would be key looking forward, in case we have any recession, what do we do then . That is the question. Than richard, we see more 1 trillion leveraged loans in the u. S. , we have private credit of almost 1 trillion, basically bonds to companies that cannot take out debts like that, zombie firms. The proportion of smallcap u. S. Firms without earnings stood at 32 at the end of may, the highest levels since the crisis. [no audio] richard the end of the cycle is coming. They want to smooth any recession so we have a recession that is more like the early 21st century, rather than the Great Recession in 200809. Matt the question of the day from the blog, for which richard writes, they are asking, can the fed sustain the everything rally . Now,he fed dovish pivot sustain the rally we have seen in which everything from equity pricesto sovereign debt continue to rise . Richard i would say yes. Jose especially in the short run. The question is not short run. Maybe it is longrun. If you use all the weapons you have at hand, in case something goes wrong, you have nothing to do. That is where we see a key risk. Tensions, theal political noise starts to reduce, we have a lot of things around which make us feel not comfortable. We have trade wars, the gulf, manyn the issues in britain, with brexit, and italy, we have elections. Living in awe are dangerous time, so we need to be prudent. Matt what do you think, richard . Great point that jose makes. One of the concerns scott minard brought up was that if the fed does not raise rates but instead lowers rates, the next downturn would be much more dangerous. Richard the fed realizes it does not have as much ammunition as it has previously had. The bet they are making is to get in front of this thing so they can smooth a slowdown so it is not really sharp like 10 years ago. There are different views on that. That is a big bet. That is the bet they are making. Matt richard. Heading back to the blog. Check that out on the bloomberg terminal. Jose, staying with us for the hour. You should stay with surveillance, as well. Still growing but slower huawei reports earnings for the First Time Since the u. S. Ban. Plus, we speak to the ceo of Technology Consulting firm, cap gemini at 9 30 a. M. U. K. Time. This is bloomberg. Matt economics, finance, politics, this is bloomberg surveillance, and im matt miller in berlin. Lets get the Bloomberg Business flash. Viviana citigroup preparing to ax hundreds of drops in the slumping trading division, including 100 positions in the equities unit, amounting to 10 of the division, as wall street banks faced the lowest trading revenue in the decade. Ning abraaj, citing serious wrongdoing, including unauthorized activities and misusing money. This is the largest, the imposed by their financial regulator. Bp bucking the trend of disappointing earnings. Flow in q2,ed cash offsetting the effect of lower energy prices. The ceo says it is too soon to determine the cost of tensions in the strait of hormuz. Extremely careful. Out,ve had ships in and some concerning incidents, right now we are not sending british troops, ships into the persian gulf. Viviana that is the Bloomberg Business flash. Matt thanks. Tech. , 23 rise in firsthalf 400 billionst over yuan. Attempted togiant withstand u. S. Efforts to curb the business but difficulties ahead could affect the pace of growth. Banjo, how has huawei managed to hold onto so much, 80 of the mobile phone market . Shelley two things. The first is they were able to stockpile american components before the ban went into effect. That helps the company now. In terms of smartphone shipments, they have increased sales quite a bit in china where they are taking market share makersom apple and other as sales and the rest of the world go down a little. Matt why are they so confident despite the u. S. Ban . Just bravado . Are they getting support outside . Shelly the company goes back and forth between saying they are really getting hit and this is ridiculous to this bravado, like you mentioned. We dont need the u. S. , we can do this just fine. Today they said, we can make our own operating system for the phone but we would prefer to use android and the u. S. Blacklist is going to hurt us on that sense. The truth probably lies in between. Huawei said it best themselves. Survival mode is their most important issue now. They want to survive and keep the Company Going for the future and continue investing and growing for the future. Matt thanks. Jose, still with us and i wonder, this brings us clearly to trade talks in shanghai kicking off today. Do you expect any positive results . Jose we hope so. Global trade is extremely important for the Global Economy. I dont think we can have a strong recovery if the talks fail. We have a lot of risk. We hope authorities reach agreement. Is, what is the downside . What are you concerned about . Could these talks fall apart and result in more and higher tariffs . As we haveownside, this situation on the markets and the pressure goes to the Central Banks to reduce Interest Rates, global trade is key. You cannot expect a strong economic recovery without global trade. Globalization is so important in our days that if it deteriorates, emerging markets in developed markets can suffer a lot. This will be the beginning of recession in Global Economy and this is something we should avoid at all costs. Matt how are you positioned . You have over 65 billion euros in assets around the world. You are in 51 countries. How are you positioned ahead of the talks . Stancee have a defensive on fixed income and equities. Fixed income, we are reducing duration. We are trying to go to the safest sectors. Side, we see opportunities. We have a value approach. Alternatives has grown much in the last year. We see opportunities on real estate. There is a few opportunities on private equity and private debt. Private debt is an issue. There are a lot of lows. We have to be careful. We have a better second half of the year, we hope the markets can continue giving support, unless something happens on global trade or with brexit or Something Else from the political arena. Jose, we will keep you with us. We speak exclusively with the chairman of huawei. Definitely want to get his take on the Earnings Report on the outlook. Up next, u. K. To spend the next few weeks pressing eu to negotiate a better brexit deal. Sterling drops to the lowest level against the dollar and more than two years. We focus on the pound, next. This is bloomberg. Matt economics, finance, politics, this is bloomberg surveillance, and im matt miller in the german capital. Update on sterling. The pound has dropped two year low in dollar terms as traders bet Boris Johnson will opt for no deal brexit. 1. 21, the first time they have slipped below that since march of 2017. We will be watching that closely. Pose a from mapfre is still with mapfre is still with us. Would you be adding levels of sterling . We would like to see more clarity on brexit. It is not the best way to start a divorce by asking an ultimatum so we see more pain shortterm. Looking forward, we are considering the possibility of new elections in u. K. And everything is open, so probably, i would not say we will have had probably the u. K. Could remain. Brexit 531pect hard of october. By 31 of october. Matt we have a lot to talk about other than brexit. It is important to watch. The pound is interesting. The uncertainty you are expressing is something we hear from almost everyone and it gets seemingly more and more uncertain. To the ceowe speak of capgemeni and we will ask him about brexit as well. This is bloomberg. Harder brexit, softer sterling with the power sinking as the chance of a no deal under johnson grows. Beats expectations and their ceo says he is cautious around the strait of hormuz. Extremely careful, we have had ships in and out and concerning incidents, we are not sending british ships into the persian gulf. Matt huawei reports its first earnings since the u. S. Blacklist, warning of difficulties ahead, we will speak to their chairman. You are watching bloomberg surveillance. I am matt miller in berlin. The biggest stock movers, lets go to london. Bp, want to start with higher production for oil and gas which offset lower prices and their cash flow was up 17 from a year earlier, 8. 2 billion. With weakertrend than expected results from rivals. Lufthansa to the downside with gloom in the airline industry, down more than 5 after missing estimates, negative impact of rising fares particularly in germany and austria. Ckitt cut their growth target of a slowdown in inventory in china. At the same time, stronger growth in china. Matt very interesting. Looking at some of the big stock movers this morning. Lets get to the first word news with Viviana Hurtado. Cuts, theabout right the rate cuts, the fed should be hiking according to Guggenheim Partners who warns of a potential overheating, saying preemptive rate cuts will lead to unsustainable he high asset prices and that can only mean the next downturn worse. A 23 rise inng firsthalf revenue to the equivalent of 68 billion. An indication the Chinese Telecom giant is withstanding u. S. Efforts to curb its business. Shipments for six months jumped 24 to 118 Million Units while huawei has worked difficult could hurt the pace of growth. Beyond me plummeting, selling more than 3 million shares, a three month after it went public , the offering intended to help them Fund Increase production and marketing as they battle it out in an increasingly crowded the good marketplace. N marketplace. 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. Matt lets get to the exclusive interview, Technology Consulting Company Capgemini reported first the first profit, earning cents the parisbased firm says it will acquire all trans technologies in a 3. 6 billion euro deal. Joining us is their ceo, paul hermelin. What would you say in terms of growth was the biggest driver for the reporting period . Donie we exceptionally well in the u. K. And in france. We had steady growth in the , 6 ter, 5 organically including acquisition. Noticed is the progression of all operating our margin by 50 basis points which allowed us to increase by 22 . Matt what are the expectations you have as far as brexit . We are going into talks or refusal to talk, the uncertainty is high as Jose Luis Jimenez has told us. How has the outlook for you in terms of brexit or u. K. Business . Doas a company we do not u. K. Versus eu and trade, so the production of software in the so we willed locally not be directly impacted by the brexit deal. There will be indirect consequences. For a few quarters we have three focused our business in the u. K. , from the public sector, including a big account with matches to revenue and customs, and a good progression in the world of energy. The consumered good segment is somewhat soft, a pretension about consumer behavior. Analyst hear from an who writes that your Infrastructure Services was a hereart of the growth because of the end of the transformation process. How does that look Going Forward . The cloud disruption has impacted massively what we used to call managed service. Now we have completed the migration to the new cloud environment and we have more clients and drive their Cost Reduction and flexibility. For us, good news. Now you want to start growing. You have made an acquisition. Do you have any companies in your site other than that . That will be a significant move. We have been doing year after year, liquidating half of all Free Cash Flow generation too small acquisitions. This is something different. , a midget the equity value move more than 5 billion euro. We will have to develop that. We are focused on what we call the conversion between i. T. And operation technology. In a couple of years we will look beyond that. The lowat i asked how Interest Rate environment is impacting your business or the business of those who are your clients . We have noticed this quarter with the first time the group has moved to what we call digital and cloud, it exceeds 50 of the group revenue. This fuels further growth because there are Mission Technology products. Environment economy , it is final four companies to invest in digital. We are optimistic for the remainder of the year. Matt let me ask you, as lighthizer and his u. S. Counterparts go to shanghai for talks with the chinese, everyone is hopeful for a positive outcome but how has the trade war affected your business thus far . As we all see the biggest segment, the one impacted is the automotive segment. , thelowdown in china threat of the digital taxation over u. S. Imports. We have noticed a slowdown in automotive in the first half. We have seen good prospect of investment in automotive but that was the segment on which we are the most vigilant. Matt thank you very much for your time. Paul hermelin, ceo of capgemini. Thank you very much for joining us. Another earnings interview, we spoke with the bp ceo after they posted secondquarter results that buck to be trimmed seven by other a trend set by others , cash flowimates from operations reaching 8. 2 billion in the Second Quarter, the highest since late 2017. Had a good quarter, strong operating results, 93 night 5 of our facilities are running and good cash flow generation and we paid off the dhp acquisition and the gulf of mexico settlement. A big milestone for us. Business is working well. The view, you read a rated you is there risk to that number . 8 through 2021 and we are on track. That he talked about the price of oil. Read at 64 per barrel and the iaea predicting an oversupply of next year. Are you concerned with Global Growth issues, concerns about oversupply in the market . There is a lot of uncertainty and we are planning 55 per barrel and we are above that range but you have the downside issues potentially, venezuela,ran, lots of uncertainty there permian crude coming on and supply, chinese demand. , a little of the year bit of softness in demand but it is coming back up. Hard to predict but we will be fine. The Global Growth story, you set your price globally, into with the Global Growth story now. Nervous about Global Growth, where do your nerves focus . Energy demand fuels gdp growth, growth of over one Million Barrels per day this year. Right now we did not see softness and products, you can overcome simple demand growth. Right now, we fill comfortable going into 2020. Supplyside, concerns about the strait of hormuz recently, how safe do you feel it is sending ships full of crude through that waterway . We have been careful, we have had ships move in and out, we have had concerning incidents and we are not sending british ships and crews into the persian gulf. 20 of the worlds oil passes through it. If you look at the takers in the world one of every three passes through that small strait of hormuz. Dudley, ceoas bob us afteraking to better than expected secondquarter results with those shares holding the stoxx 600 back from losses. Earnings season, Jose Luis Jimenez from mapfre is with us. Are you disappointed does far i european earnings season thus far by european earnings season . No, we have spent a better signal, extremely correlated with growth, we expect growth i think we have margin for improvement on the earnings side and this will support equities. Sectorse there specific you want to take advantage of . If you think the second half will be recovery or continued stronger growth, are there sectors you want to get in on now . Focus in terms of risk is the Banking Sector. Related to the low Interest Rates environment. We would like to see in september the ecb keeps rates how they are rather than try to reduce or slow down the rate to. 6, this would not be good news for the Banking Sector. Sooner or later with the recovery, maybe the Banking Sector could recover and one or two years. Banking sectorg we will not see a strong recovery in the economy. Matt Jose Luis Jimenez, you will stick with us from mapfre. Coming up, more from the mexican president at what he had to say about the economy and the countrys relationship with the United States of america. This is bloomberg. Matt you are watching bloomberg surveillance. I am matt miller in for Francine Lacqua. Mexicos Interest Rates are too high for the economy according to president Andres Manuel Lopez Obrador. Itscentral bank has kept key rate at a decade high of 8. 25 , making the peso one of the strongest currencies this year. The mexican economy may be in a mild recession. Andres Manuel Lopez Obrador spoke with our editor and chief John Mickelthwait in mexico city. Thing is what is to the desired is a different thing than what is possible. I would like the central bank not only to work on controlling inflation but for it to be thinking about growth as well. More about growth . We are talking about what the central bank is doing. They are more cautious about inflation. This is not a bad thing. This is not the wrong thing to do. I am not saying that. But it is important to lower the rate to encourage growth. This isno issue an issue i am leaving for the central bank to decide because we trust, we are not just going to be able to grow, and also to develop, not only growth, development, because growth is what we want to change. And to create new paradigms. Growth is creating wealth but not necessarily distribution wealth. Growing andis distributing wealth. Our administration, our government, what it is now doing better than before is. Istributing income so then, although growth is , there isttle growth a better distribution of wealth. That is, there is more wellbeing. Matt that was mexican president Andres Manuel Lopez Obrador speaking exclusively to our editor and chief, John Mickelthwait. Jose luis jimenez from mapfre is still with us. We have a few are writing in with an interesting question, one i often think about as well, especially as we prepare for the Federal Reserve tomorrow. , how doewer writes in the u. S. U. S. Centralbank Interest Rate decision, expecting a cut, affect profits of local banks in mexico or other parts of the developing world . How do you see the fed decision hitting em banks . A bigger questions, Interest Rates in the u. S. Probably will be reduced by 25 basis points. This is less pressure for most emerging markets, specifically on fx and good news for the whole economy, the Global Economy. This has an effect on the Banking Sector. As we have heard, mexico has the highest real Interest Rates in the world now, probably wise to reduce a bid. Important to keep in mind that we have to respect independence from the Central Banks and the Mexican Central Bank has my respect and trying to keep Interest Rates. You are managing so much money, how much do you put into mexico . What do you think about the returns you are getting there right now . Mexico is an important country for us, we have a strong business unit, they are doing extremely well with growth. The performance of the mexican portfolio is extremely good. It is true that the currency is helping us and we see, even if they decrease Interest Rates a little bit, which is happening in other emerging markets, it could mean another increase on fx of the peso. We are extremely positive about the mexican economy continuing to do the right thing. Matt Jose Luis Jimenez, a pleasure having you, thank you for joining us. With 65 billion euros in assets under management. Next, as the euro area secondbiggest economy, unexpectedly slows on the Second Quarter, we break down the numbers from france and look at the echoes data due later this week. This is bloomberg. Finance,nomics, politics, this is bloomberg surveillance. I am matt miller in berlin. Stoxx 600 in terms of the sectors, grr is the breakdown of an index into group rate returns and we see the banks posting a year to date loss. Earlier in the program i said, do you want to see the banks rally at the Broader Market will rise and i was wrong because earlier the stock 600 has been up and every other sector, with the exception of telecom come has shown year today gains and we see banks joined the telecoms with year to date losses, down 1 now as most bank shares across europe are down. French Economic Growth came in weaker than expected, another blow for policymakers who are already fighting fires across the euro area. It could be the first disappointment for europes economy this week. Dani burger has more. 2 for theme in at Second Quarter come estimates sweden also posted contracting growth, even though they forecasted to grow. 3 . That is setting the stage for euro area gdp tomorrow, which made ms. Estimates which are pretty weak. This is what analysts see secondquarter growth coming in, the trend is falling, it was. 4 last quarter and this feeds into , a moreure from the ecb dovish ecb where they take action of easing in september. Uncertainty is high. This is the bloomberg gauge for economic uncertainty. The left side of the chart is the gain in recent months, 1. 6, standard deviations above the average. Uncertainty is high and consumer confidence, other confidence measures for the euro area later today, and germany, adding to a gloomy picture and that justify some of the pricing we have seen in september cuts. Matt thank you. Dani burger giving us the possibly pessimistic outlook for European Data we will get throughout the week, disappointment and france as she point out the pound index is now at an alltime low. While cable false to below as , the pound 2017 index against the broader back of currencies falling to an alltime low. We have been tracking it since 2005. More surveillance coming up. This is bloomberg. U. N. Charter trade talks resumed after a twomonth pause with the fed little hope of a breakthrough in shanghai. Huawei with 23 sales growth despite efforts to curb business by the trump administration. We speak to their german. Weept up in says it will speak to the german. The mexican president says their Interest Rates are too high for the slowing economy. Sterling slumps to a twoyear low against the dollar as Boris Johnson steps up plans for a no deal brexit even as he presses the eu new do negotiate a better deal. Withthey vucevic in london i i am very chairman that am nejra cehic with scarlet fu. We have Earnings Reports and a resumption of the trade talks and the big question is, is this a market set up for disappointment in terms of the fed, not rate cuts, but Forward Guidance from Jerome Powell . Scarlet centralbank action but everything focused on what the fed does and how Jerome Powell spins it forward. Considering scenarios but it comes down to how he walks the tightrope of making sure he leads the door open for further rate cuts without disappointing a bond market that seems to always get what it wants. Scarlet we have data out of the eurozone, the pound is on the move. You have great functions on the bloomberg to show that. Data out of europe, euro area july Economic Confidence falling to 102. 7. It comes after a little bit of a disappointment in terms of french data earlier which but the euro under a tiny bit of pressure. Thats get the first word news with Viviana Hurtado. The bank of japan is taking a wait and see stance, keeping daytary policy unchanged a before tomorrows expected Interest Rate cut by the u. S. Federal reserve. Growing expectations the boj will need to increase stimulus. Andres Manuel Lopez Obrador is calling on the central bank to he spoke tost rate, bloomberg editorinchief John Micklethwait in his first interview with International Media since taking office. Cautious aboute inflation. This is not a bad thing. This is not the wrong thing to do. I am not saying that. But it is important to lower the rate, to encourage growth. Andres Manuel Lopez Obrador says President Trump has toned down his rhetoric against mexicans. The nextnson was then few weeks pressing the European Union to agree to a better brexit deal. The alternative, a kayak a kayak no deal divorce which is sent the pound to the lowest level against the dollar in more than two years. Citigroup preparing to cut hundreds of jobs in this trading group, new evidence an industrywide slump in revenue this year may be permanent. Will jobs acrostics income and stop trading operation. 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 scarlet a data check with s p futures at session lows , mixed day of trading in europe with the ftse doing better while continental European Index under pressure. Looking at the twoyear yield, that is actually the 210 spread, 21 basis for an the eurodollar at about 11. 42, with nymex crude moving up, building on the rally yesterday, the biggest in almost three weeks. Whether the expected fed rate cut, resumption of u. S. China trade side, supplyside, data tomorrow expected to show domestic supplies are also falling. Nejra looking at european equities, under pressure in the session on a headline level of the stoxx 600, the 10 year yield down a basis point. A little bit of curve steepening on the 210, we could see resume flattening with disappointment from Jerome Powells outlook. Table under pressure with a twoyear low. 122 for the First Time Since march 2017 which is made weeks which may brought , Deutsche Bank saying it is not cheap. 108. 55. En we have a big earnings week out of the u. S. 170 companies on the s p 500. Thirdquarter guidance the worst since 2011, yet s p 500 with another record on friday and leverage is loved, since the end of may a basket of stocks compiled by Goldman Sachs with weaker Balance Sheets have rally 13 , beating those stronger one since may. It comes back to the hunt for yield with lower rates, is a howl pivot giving these companies cover . Scarlet i am looking at your neck of the woods, u. S. Dollar strength today as much about how to weakness for the pound trading at a 121 handle, not limited to today where the pound is the worst performer, or it was earlier, now overtaken by the swedish krona. Over the past one month, the pound is the worst performer, down. 41 , the pound under pressure, down 6. 5 the last six months and down 7. 2 , only year to date do we see the pound the new eclipse by the swedish krona. The weakness reflects concern over and under orderly or no deal brexit and adding to the pressure is the boe shift to neutral, removing the hawkish by. Y. Bu nejra i got a message from you this morning, it just is not cheap, talking about the pound. What you mean . We spent a lot of time talking with sterling with clients and the pushback we get is that it is starting to look cheap. We do not agree. Given the level of stress a hard brexit would entail would require distressed sterling valuations. , that isnst turning the key cross, only fair value and we think purchasing power in u. S. Sterling is around 90. Warriors sterling to get expensive and the pound cheap come it would need to go above one. It is simply just not cheap. Nejra how would you trade it, stay on the sidelines or looked at sterlingyen . We would not stay on the sidelines, we have the negative on the pound, we think it should be pricing more hard brexit risk as the odds of a hard brexit or r 50 and for the pound to price that eurosterling would need to be closer to 95. We are slowly getting there and over the last few days a large move. We do not think the pound is cheap enough. Scarlet in the United States, they said you do not listen to what the president says, you watch what he does. Matchnot always max the action and you could make the same argument for forest johnson. Boris johnson. Is that how you should look at Boris Johnson . Look at the substance and the negotiations and the reality is there is no negotiations taking place. Both sides have set their positions and they are not even meeting. Negotiators to change as far as the backstop come if that is the u. K. Requirement to start negotiations, the only time that can take place is in october because it needs the eu council to make meet and european positions can change slowly. October. Uncil meets in some of it may be bluster but the reality is they are not even meeting and the clock is ticking. The u. K. Parliament could cause an early election but if we do get that, the risk of hard brexit would be quite high given where the curve in government is fully current government is polling. Scarlet markets are pricing in more than a 60 chance that the boe may cut Interest Rates by 25 basis point i december, what are you thinking . We will see what happens in the bank of england meeting later this week. It boils down to one thing, brexit. The bank of england will change the way they present their forecast, conditional forecast depending on the assumptions around brexit. We think rates will go back down to zero if hard brexit materializes and the risk of a hard brexit is 50 . You can back out what the market implies what should be there for us initially 50 or 75 basis points cut. That is not high enough based on our assess ability scarlet you are sticking with us and coming up, an exclusive interview with the huawei german liang hua. , chairman, liang hua. This is bloomberg. This is bloomberg surveillance. Bp bucking the trend of disappointing oil and gas earnings common the Second Quarter they beat expectations and increased cash flow with higher production offsetting the effects of lower energy prices. Their ceo bob dudley says they are on target after the fiveyear plan. A warning from a German Company bad weather is threatening the performance of , and Agricultural Division the roundup lawsuit an increase in the number of plaintiffs. Taking steps to move past the scandal, the swiss asset manager naming blackrock veteran Peter Sanderson as its new ceo. A year ago they suspended star bond trader kim haworth and later dismissed him for what it calls gross misconduct which led to outflows of 7. 7 billion in assets. That is the Bloomberg Business flash. The u. S. Trade team has arrived in shanghai for their talks with chinese counterparts and expectations are fairly low. Huawei is at the center of discussions and they reported a 23 rise in firsthalf revenue to just over ¥401 billion, equivalent to 58 billion, they said difficulties ahead could affect the pace of growth. Our executive editor joins us from tokyo. We are talking about a 23 sales , buth, sounds impressive down sharply from the 39 pace in the previous quarter. That is right. It is worth taking a step back. Company andprivate does not have to report financial details the way publicly Held Companies do. You see performance art, huawei this talking about their financials because they want to signal to the outside world they are still here and still growing. From theslow down earlier figures but still pretty strong and they are trying to open up and move away from the secretive practice it had in the past where it did not talk about these things. It wants to signal it will fight against the u. S. Sanctions, u. S. Blacklist and continue to supply customers as best as it can. Giving more pivot open reflected in the chairman speaking to our Tom Mackenzie and we will get more details. Huawei is bracing for the worst because of the u. S. Limitations on what it can do. Give us a sense of the preparations it has been making. Our china team has been reporting deeply from this, from the outside the u. S. Has blacklisted the cup and stopped it from buying the American Technology it needs to make a lot of its front. ,nternally they have been rally they feel like they have been under attack and are working around the clock trying to reengineer their products so they do not need some of these american components they have been buying historically, trying to stockpile components so they have a steady supply as they can get. And paying bonuses to employees who make these things happen. They are rallying, it is a different perspective than the u. S. Take on this that they are a threat, that they are helping out the Chinese Government and some of these dangerous activities around the world. Nejra thank you for joining us. Hour, tomnext mackenzies interview with huaweis chairman liang hua. George saravelos of Deutsche Bank joins us. Resuming trade talks this week and there are Sticking Points on either side. Assuming you expect the trade war good to you for the rest of the what is your safe haven in terms of fx . Yen and swiss, going back to brexit, what is important is people look at these different negotiations in isolation but what is going on is the u. S. China trade talks, brexit discussion, they fall into the same bucket around trade relationships, a wholesale across the board, whether europe , the discussion between the u. S. And europe around auto tariffs, tax on french wine, it is about trade relationships seeing challenged and causing large uncertainty to Global Corporate come and is a result slowing down. Capex slowing down. Even with a temporary truce between u. S. And china, we still have brexit and europe and the u. S. , the yen and swiss should still continue to do very well and we like being long. With recordequities after record and volatility some assumption is the volatility will remain subdued in fx . One thing going on is low yields are supporting equity valuations and all of our equity models suggest equities are overvalued, they should be lower given the level of growth. The other thing going on, Central Banks are supporting, services sector, i feel strong even in places like germany, the question is, if you get continued weakness in manufacturing, the spread between how well services are doing in manufacturing, could the risk the service is not getting pulled down . That would look more dangerous and i really do worry that is the risk and quarter three and quarter for if we focus on brexit and the europe u. S. Trade war. Scarlet swiss and yen safe haven currencies, what about gold . It is a six year highs. Gold is a safe haven because it cannot be printed. The reason the swiss and the yen are doing well is because the Central Banks are running out of capacity to print because yields are already so low. , a can beent for gold mined and there is limited supply, the ecb will announce qe in september, the fed is cutting rates, gold is a natural safe haven because it cannot be devalue in the same way Central Banks are trying to devalue other currencies. Nejra George Saravelos stays with us. We have a conversation coming up with guy johnson. This is bloomberg. Bloomberg is surveillance. Your question for george is there a possibility of a saved exit in the u. K. From the eu instead of a heart exit, a negotiated transition without defining the in state of brexit . The short answer is no. The only safe exit is a Withdrawal Agreement and the three reasons why i do not think europeans will back down from the Withdrawal Agreement, the first one is the backstop is a matter of principle for europe, an issue of the u. K. Respecting the good friday agreement and it is unlikely that changes. That reason ises negotiation tactics come Economic Cost to the u. K. Of hard brexit will be far larger for europe. From a negotiating perspective, especially if the u. K. Parliament would block the decision anyway, the reason for europe to change. And europe is slow to change negotiating mandates and it will need and eu council which is only scheduled for midoctober. Either a Withdrawal Agreement or a hard brexit. , wee get a hard brexit think sterling against the dollar could drop to as low as tossed, best is a quite for the markets priced 50 probably that would take it below 120 in cable. Attention. 5 gets my what about parity, what would it need to happen for poundsdollar to get to parity . A hard brexit would get us there. Given the precise huge amount of uncertainty around these estimates of the exact Economic Cost. Nejra you talked about in your research sterlingyen, why do you think that is a good way to express views on valuation of sterling or yen . Yen is one of the cheaper currencies in the developed countries and we think the fair value on purchasing power parity basis for the dollar against the yen is below 100. On top of that, brexit, weaker Global Growth expectations, yen does well as a safe haven. What about your forecast for eurodollar . Where does that go with the ecb indicating it is waiting until after the fed meeting this week to take any action . As a currency analyst, i am sad to say our forecast is quite boring. We do not predict large moves in the euro. The risk is over the summer months we try to blake break below 110, 108. Ab in september will announce package, qe, the key will be the verbal guidance, to attorney the and they will keep trying until inflation is higher. The euro on the other hand has extremely positive external accounts, europeans have already bought all of the fixed income they could buy. Should be much lower if you look at the weak growth picture. On a balance of payments basis, it is looking like japan. Scarlet George Saravelos from Deutsche Bank sticking with us and coming up, an exclusive interview with the president of mexico, coming up at 6 30 a. M. In new york. From new york and london, this is bloomberg surveillance. Nejra i am nearer a chariot in london with scarlet fu nejra fuic in london with scarlet in new york. Viviana a toplevel u. S. Trade delegation arriving in china to resume negotiations. Stephen mnuchin and Robert Lighthizer may be sitting with their counterparts at dinner, but they are farther apart than they were three months ago when talks rope down. Desh broke down. Police in hong kong straining under pressure. They have been responding to whether they have been too slow to respond and to quick to reserve too quick to resort to violence. Two u. S. Senators want stronger sanctions against russia next year. Pattenubio and chris van are calling for penalties that would triggered by future election meddling. Theirmocrats attempt to stopped donald trump from selling weapons to saudi arabia. Overrided not get the wanted. They 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. Scarlet thank you so much. Lets move on to the Federal Reserve, because a rate cut is widely expected on wednesday, the first in nearly a decade. Trump may be hoping for a bigger cut than the fed gave. He said a small rate cut is not a enough not enough. Former fed, the president said the fed may not cut Interest Rates more than once and he is expecting a 25 basis point cut. What is the cut case for them not to be one and done . George the cases inflation. The Unemployment Rate has been dropping and inflation is not symmetrically around 2 . We expect the fed to cut tomorrow, but our focus will be on the forwardlooking language. Weakuse week growth cut, eurosustify the growth has been holding up well. Desh u. S. Growth has been holding up well. Inflation target, there is more potential to cut rates because then you are shifting to discussion around average inflation targeting. It is all about why they are cutting rates, what do they decide to emphasize in terms of dual mandates. Scarlet if they say anything about the data dependent, will that be interpreted as hawkish . George it depends on what data they emphasize. The growth data, that will be interpreted as hawkish. ,f they talk about inflation they will need to cut a lot more to really get inflation back to the 2 target symmetrically, and there is the average inflation tightening discussion of why you need to go well above 2 for the average numbers to get to 2 . It is about what they decide to focus on. Nejra how high is the risk of the market disappointed by the Forward Guidance and a curve flattening . George there is a risk of disappointment. The market is pricing quite a lot. We saw it with the ecb. The market did not initially move on the day. The fed does not make a large shift focusing on inflation and as a result potentially argues the dollar could rally over the summer. Nejra is that something you expect to continue into next year . George the risk into next year is the fed is forced to cut even more. The market immediately jumped when the fed signaled price rate cuts, the fed jumped on the weak dollar trade and we pushed back against that. The dollar is still a highyield or. The dollar will still be the highest yielding currency in the world. Year,y start cutting next the risk is that feeds into a lower dollar. The fed fun pricing is dropping below 1 fed fund pricing is dropping below 1 . Scarlet you and your team at Deutsche Bank were out front because august 2018 you had a report asking whether the u. S. Could intervene in the dollar. What were your reasons and how have they changed . George we took a Historical Perspective on intervention, and if you look at the challenge President Trump is making on trade, that is unusual. The postworld war ii trade weime has been stable and looked up in the report, how has the u. S. Administration behaved . Intervention is not unusual at all. Clinton was doing it in the 1990s, so a shift toward intervention will not be unusual, especially coming from this president who is challenging norms. Over the last 12 months, the emphasis on intervention has been rising and if you break at psychological levels, 1. 10 the euro being one of them come at the risk is the trump rhetoric escalates and all he has to do is direct treasury to intervene. He said he could ask for intervention in a few minutes, and he could. Scarlet how broad is your definition of intervention . Is it going into the market and buying and selling currencies . George we could be in a situation where there is active intervention in selling dollars. Intervention is the responsibility of the president , not the fed. The fed can decide to join in, but selling dollars is for mr. Trump. Nejra if we get this rate cutting cycle from the fed, what does that achieve . Does it achieve concerns around bubbles, which they have been warning that the fed should hike and not cut, or is it an extension of the cycle . George i have a pessimistic answer. I dont think it is achieving much at all. If you look at the source of the slowdown over the last 12 months, it is a global uncertainty shot to business confidence. It will not make a difference if 20 two 40,o from it is fundamental uncertain see around china and the u. K. Central banks are not that relevant. Nejra great to get your thoughts with us this morning. Mackenziesom exclusive interview with liang hua. This is bloomberg. Cehic inam nejra london with scarlet fu in new york. Has arrivedde team in shanghai for talks with their chinese counterparts but expectations are low. U. S. Representatives are said to attend enter tonight with chinese negotiators attend a dinner tonight with chinese negotiators. Is there anything about the talks this time that strikes you as different . Thank you for having me. I think the location, the choice of location a special. Communications in the United States was in 1972, so the chinese are sending a clear message, they would like to normal the u. S. Relations. , what they arely trying to do is exclude these political discussions and focus on the business and economic side of the story. Nejra do you expect to much to come out of the talks other than an agreement to talk so more talk some more . Thenot so much, expectations are fairly low on both side. Chinese Agriculture Sector a great to buy more soybeans and sorghum and pork, but also taking a defined tone toward the United States, saying look at the wto deal towards china which should be considered a developing country. It is a mixture of good and bad. Nejra mentioned how Steve Mnuchin and Robert Lighthizer have arrived in shanghai. Kudlow warned about the inclusion of hardliners in this round of discussions and how it could complicate efforts to secure a deal. Signalingijing including someone like jeong . Not find somebody who is a hardliner and soft liner because they all have to live to listen to president xi. He wants to send a clear message where we are purely dealing with the commerce act and do not want to have political factors. Signal,im is sending a commerce, tariffs, and trade are the key things for the u. S. China trade relationship. Is whether they take the bait to not include politics. The expectations are fairly low. As the goal to get back to where they wore before the talks broke down, or is that too much to ask . Yu i dont think at is too much. Both sides are clear what they want, but the Sticking Point will be the agreement, what is the enforcement can is him . We have not gotten enforcement mechanism. Clear ongotten a the chinese side. Yuan, we havee had a lot of stability, and a little bit of weakness coming through. Do you expect chinese authorities to try to maintain stability in the yuan or will they allow it to weekend . Weaken . Yu all i can say is the Chinese Government is not offering any itong package, which is how should be, rather than deliberately strengthening it or weakening it. Nejra what sort of signals should we look out for in terms of the tone and the language that might come out of these talks that might give Market Participants or political pundits a sign of where we go next . Oped tells what kind s touch what kind of tone what kind of tone is set. If it is something to find, it show the two back to square one and start from the very beginning. What would count as a success from the beijing side and what would count as a success from the u. S. Side from the u. S. Side . Yu what will be the next date for the next round of negotiations . , thathave a precise date will indicate success. If there is no clarity regarding the next round, then the problem will arise, i would say. Scarlet yu jie in london. Blocked the trend of disappointing earnings. We discussed the sectors results and what is to come. This is bloomberg. Viviana this is bloomberg surveillance. Capital one says a massive data ofach exposed information 106 Million People in north america. A former amazon employee was charged. Capital one says it is unlikely the data was used for fraud. ,hares of plunging announcing a plan to sell more than 3 million shares. Just three months ago, beyond meat went public in the stock has soared almost 800 . In dubai have imposed their largest fine ever. The collapsed firm will have to pay 350 million, after being accused of wrongdoing including an this using investors money misusing investors money. There could be conspiracy charges in the u. S. Scarlet when it comes to corporate earnings, bp has blocked the trend, posting net income of more than 2. 8 billion dollars, above the highest estimates. Anna edwards sat down with bob dudley. Bob how to good quarter. Our weref running and we also paid off our gulf of mexico sediment. Settlement. Capex, 16 billion to 17 billion, what is the risk to that number . What would make a change to capex . Bob we are right in the range of that. I think by the end of the year we will be bang on the end of the range we set. We are on track for that. Anna let me talk about the price of oil. Brent at 64 a barrel. Is signaling a big oversupply next year. Are you concerned about oversupply . Bob we are planning bp around 55 a barrel, but you have big downside issues, venezuela, iran, permian crude, chinese demand. The first half of the year comes softness in demand but it is coming back up. Hard to predict but we will be fine. Anna what clues do you have for us as far as the Global Growth story . If we are nervous about Global Growth, where do you focus . Bob Energy Demand generally tracks gdp growth and we are seeing growth of 1. 1 Million Barrels a day. We do not see softness in our products. You can overcome simple demand growth, so we feel pretty comfortable. Side, there supply geopolitical concerns around the straight of hormuz. Hormuz. T of how do you feel sending ships through . Bob we would be extremely careful. We have had some incidents. We are not setting sending into the strai t. One of three tankers passes through and that is why it is getting a lot of attention. Nejra that was bob dudley with anna edwards. We will be getting more earnings with shell, exxon, and chevron. Blocked thebp has big oils trend set by total . Annmarie therefore percent compared to a year earlier and 4 t is how they they are compared to a year earlier that is how they be. It is due to low energy prices, particularly natural gas. They are trading around three year lows and that is really what is suffering. Acquisitiont there of bhp. Those assets boosted reduction. There cash flow was up 17 from a year ago, 18. 2 billion. It was a pretty strong quarter. We will see how the next leg of Big Oil Majors do. We have shell, exxon, and chevron coming up. Highlighted for bp . Annmarie he is definitely talking about the persian gulf and erode. Iran. Month, the British Defense Ministry Said the iranian navy had to tried to intervene. They do not want to send british ships there. They went to go unload cargo in the gulf and ended up leaving emptyhanded. Iranian vessel near gibraltar, many say that oil is going to siri, so that syria, so that could be a political situation. Scarlet talk about oil prices now and the push and pull factors driving them. Have a lot of macro trade tailwind. On the supply side there remains concerns. Annmarie he alluded to not just iran but venezuela, libya, angola, and other countries where we could see supply risk. The market is focused on the demandside. So many are talking about this oversupply into next year and the iea is saying it is going to squeeze opec less. Opec plus. We could see the growing glut increase. Bob dudley did not seem that concerned about demand. He said they are planning for oil to be at 55. Nejra annmarie hordern, thank you. Asna will not use property shortterm stimulus. You have the trade talks resuming and china will boost consumption to balance easing and tightening in Monetary Policy. Scarlet we know what it will not include. A lot coming up on surveillance. Tom mackenzies interview with liang hua. This is bloomberg. Scarlet u. S. And china trade talks resume after a twomonth pause but there is little hope for a breakthrough. Huawei posts 23 sales growth despite the trump administrations efforts to curb its business, but the Company Warns of trouble ahead. Sterling slumps to a twoyear low against the dollar as Boris Johnson steps up plans for a no deal brexit as he presses the e. U. To negotiate a better deal. Good morning, this is bloomberg surveillance. I am scarlet fu with nejra cehic. Hua just coming in, liang sat down with Tom Mackenzie moments ago and we have a snippet of the. That. Do not know when the u. S. Government to make the decision so we have to make preparations forever products. We walked over if we are not able to use android forever smartphones, we can develop our own operating system and ecosystem which would become the basis of the service for customers. Scarlet that was liang hua speaking with Tom Mackenzie and as trade negotiators get ready to resume their trade talks, huawei looms large. David lou said he has had to get schooled on everything related to huawei because it is at the center of this. Want to hear more from that interview. We got an update in terms of chinas pull it euro saying they will not politburo saying they will not to they will withwith trade division policy, and strike the balance between easing and tightening in Monetary Policy, the economy facing downward pressure. That is the response we are hearing if the trade talks lead to a worse outcome. Viviana the bank of japan is taking a wait and see stance, keeping their Monetary Policy unchanged the day before the expected cut by the u. S. Federal reserve. There are growing expectations the boj will need to increase stimulus. Ismexico, the president calling on the central bank to lower Interest Rates. He spoke with John Mickelthwait. Inflationutious about , this is not a bad thing. No, this is not the wrong thing to do. I am not saying that. But it is important to lower the rate to encourage growth. His firsthis was interview with International Media taking office. He says President Donald Trump has toned down his rhetoric against mexicans. Boris johnson will spend the next few weeks pressing the e. U. For a better brexit deal. The alternative a chaotic divorce. The pound at its lowest level in more than two years. Citigroup preparing to cut hundreds of jobs in its trading group. The industrywide slump may be permanent and citi plans to slash jobs. 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. Turkey, headlines from theyinance minister saying will announce a new Economy Program in september. We will expect significant rate cuts coming through this period. Overshot a lotnt of market expectation and we have seen the lira string for the past five days. Expect to manage the gdp debt restructuring themselves and they cannot expect the government to rescue the housing sector. Scarlet the lira holding near session highs at the moment. We are looking at u. S. Index Futures Holding near session lows. Mixed trade across europe. Gdp numbers out of france not helping. The gdp yields moving down to 1. 84 . Up by more than 1 as everyone gets ready for the fed decision tomorrow and the u. S. China trade talks to yield headlines. Nejra the weakness indicated by u. S. Futures is happening in europe, the stoxx 600 lower 6 10 of one part 6 10 of 1 . Ifld we reflect on the curve Jerome Powell is disappointed in terms of the guidance . 1. 22 forpping below the First Time Since march. Dollaryen 108. 55. Scarlet it all comes back to the Federal Reserve in a rate cut is widely expected tomorrow, the first in more than a decade. President trump might be hoping for more of a move than the fed is willing to give. He said a small rate cut is not enough but we will win anyway. Cut is almost baked in. What about how the fed signals its next move . Lindsay the question, if the fed will signal if this is one of many rate cuts. The fed is prepared to signal to the market they are willing and able to provide additional accommodation but they will not commit. They want to buy themselves time to impact assess the impact of the first round of rate cut, and they are still addressing the Balance Sheet so they want to push out normalization ahead of the Balance Sheet. We want to see those dates lineup. Scarlet bill dudley just wrote today the fed might not cut Interest Rates more than once. He definitely does not see a 50 basis point cut. Does it hurt or help when you have fed officials and former fed officials sounding off, or does that not that are . Water. it muddies the. It adds to the uncertainty. Is alreadyoint cut baked in. Up, itinions do not line adds unnecessary confusion. I think it will come down to this statement that the fed is watching and will provide additional accommodation as needed, which should provide welcome comfort. Commitshardly ever whether they will move forward. There is uncertainty on the International Stage and if those risks improve, we could see the fed back off or pause at the september meeting before taking additional action. It remains to be seen. Nejra great to have you with us. It will be difficult for the fed to do anything other than cut and there is a risk that powell will disappoint the market. Scott miner of guggenheim said the fed should cut rates because assees the fed easing policy making the next economic slump worse. Ifl it be a policy mistake the fed capitulates to the market . Lindsay i dont think it will be a policy mistake. The fed has been clear, they are not concerned about they are not cutting rates because they are concerned about the domestic economy but because of potential headwinds in the future. They are not saying they are actively engaging in the early stages of an aggressive easing cycle, but they are taking out insurance type rate cuts. I think 25 basis points will ease market tension and demand for an immediate change in policy, but will not put the fed on a longterm declining trend. Nejra the question becomes if the insurance cut does not work, what happens then . Coming up, Tom Mackenzies exclusive interview with liang hua. This is bloomberg. I am nejra cehic in london with scarlet fu in new york. Reported a price after they commissioned new wind farms in the first half and so from greenerfit power and Energy Management services. Joining us as the cfo judith hartman. Great to have you with us on the show. How would you characterize the first half earnings . Judith we are very happy with our first half angst. 30 first half earnings. Revenues, eve it a isncreasing 3 ebitd increasing 3 . Beyond that it is the Strategic Progress that is giving us confidence. You have mentioned some of this. , wewind and solar events will install three gigawatts this year versus 1. 5 gigawatts last year. We have bought a company on gas networks in brazil, a good market for us. Our Client Solutions business was 10 sales growth and is coming along, so lots of confidence going into the second half. Which is why we confirmed guidance earlier this morning. Nejra you said you were confident regarding the fouryear guidance. Pricesto ask about gas because european consumers are benefiting this year. Do you expect that to continue into next year or are their causes for concern on the supply side . Judith the gas prices will vary with market, so it is not a concern to us. For the consumers, from our side it is a passthrough and for the consumers, there is an adjustment on a monthly basis, so they will see a slight fluctuation, but we do not see any major reason for concern. Scarlet you see a continuation at least into next year. You credit lower than average temperatures improving group results. Kind of impact will the recordbreaking heat wave have on your results Going Forward . In the Second Quarter, we were able to offset the impact we had in the First Quarter. Where interesting year two months of the First Quarter normal, ander than then april and may are much colder. This is more than 100 million netting almosts, to zero for the first half. This is an impact for sure. The temperatures are different this year than in many of the statistics we are looking at, so we will see what it means for the second half. Most of the impact traditionally seen in the early winter months so most of that should be behind us. Like i said on the Earnings Call , this is one of the reasons giving us confidence going into the second half. Scarlet i want to talk about the uncertainty in the u. K. Is there any evidence brexit uncertainty slowing your business in that country . What assumptions are you making in terms of a no deal brexit . That is what they are preparing for. Brexit will probably impact us less than most companies. We produce electricity in the u. K. And we also provide Energy Efficiency solution to customers in the country, so we have much less crossborder transport of products and services than other people do so i think it will impact us less. If it did lead to a more generalized pressure on gdp u. K. , in europe or the that could have an impact. Frankly, most of our revenue drivers are more related to the megatrends when it comes to renewables and Energy Efficiency, and less related to gdp growth. Engie made aonth, big acquisition in brazil and you said they are looking to the u. S. For small and mediumsized acquisition. In terms of the vestments, you have divested most of your coal assets. What is next for sales . Judith we announced an hour Capital Market day earlier that we would make 6 billion a day of divestments. About 45 of that is already done, related mostly to cold estmentsnts coal div in various countries. A few topics like that we will work on, but very much aligned with the previous three years, ourly around greening portfolio and reducing exposure. Reducingcoal coal exposure. The pound slumps to a twoyear low against the dollar as Boris Johnson steps up plans for a no deal brexit. This is bloomberg. This is bloomberg surveillance. Bp bucking the trend of disappointing oil and gas earnings, beating expectations and increasing their cash flow. Higher production offsetting lower energy prices. The ceo says the company is right on target at the midyear of its fiveyear plan. Naming asset manager Peter Sanderson its new ceo. They suspended tim haywood last year and later dismissed him for gross misconduct that led to outflows of seven point 7 billion in assets. That is the Bloomberg Business flash. Nejra the pound has dropped to a twoyear low with bets that Boris Johnson will opt for a no deal brexit. He says he will not start talk brexit brussels unless they whichto reopen the deal, so far they have refused. What looks more likely, no deal brexit or general election . Adam that is a tough question. If Boris Johnson continues to play hard all and refuses to negotiate a deal with the European Union without substantial changes to the deal theresa may struck, that puts the u. K. On a collision course with e. U. Unless they change their mind, and they have given no indication they will. A no deal brexit looks very likely, but mr. Johnson appears to be lots of observers are saying he and his government are positioning themselves to perhaps go to the public before the october 31 deadline and say, give us the mandate to do what we need to do, whether that is some deal or no deal he may negotiate. He is very tooled up to fight an election if one is needed. Nejra i was thinking in the break before we started talking, maybe there is rationale in talking about the prospects of no deal and something happens at the last minute and the pound rallies. Is that a possibility . Adam anything is a possibility. It is famously different for coal to predict the u. K. Difficult to predict the e. U. Economy. Was whenharder than it theresa may perhaps was in power , because of the statements he has been making around, we are going to leave on the 31st of october do or die, the backstop must go, which the e. U. Says will not happen, and the ticking clock, under 100 days. All of those ingredients make it harder to see if there is not something going on behind the scenes, how the deal might be struck to rally the pound. We wait to see what will happen. Nejra it is almoststruck to rar guess is as good as mine. Adam they are going on recess over the summer and he is trying to build his case. Nejra adam, thank you so much for joining us. Lindsay piegza stays with us. A. M. Li lilly ceo at 7 30 in new york. This is bloomberg. He has been doing a lot less of that now. When i was in the United States, this was a different discourse. Of an antimexican discourse. But now, President Trump is more moderate. No, we are doing fine. We are doing fine and doing well. The economy is not growing as we would want it to grow, and on the other hand, there are no risks of recession. We have other indicators as well that show that the economy is fine. For instance, the peso has been strengthened. This is the currency with the levels inrength and the world. Scarlet that was mexicos exclusivelyeaking with John Mickelthwait in mexico city on monday. We want to welcome back lindsay piegza. In that wideranging conversation with the president of mexico, they talked about the usmca. Ratifieds. , it has not and we see how Business Investment has been slowing, leading the fed to put emphasis on that as a cause of concern. What is your thinking on usmca and how much it is holding back distances from doing what they need to do . Lindsay we talk about lack of a trade deal with mexico and deteriorating trade relations with china, this is creating uncertainty. Business does not know the rules and is hesitant to it to invest. Impressive, but when we look at the details we see a missing component that was Business Investment, down over 5 . That was a Slower Growth in inventories but we are still seeing the drop in terms of Business Capital investment. When we talk about the risks the fed is highlighting, they are looking at these uncertainties, these international risks stemming from lower growth and deteriorating trade relations which are causing uncertainty for businesses. Scarlet you draw a Straight Line to businesses. Lindsay absolutely. Scarlet what does it mean for consumers . Consumer growth is still very strong. How does trade uncertainty with mexico and canada affect the consumer . Lindsay they were stronger. I would not say outright strength. It is reflecting a lower pace of expenditures partially driven by the government shutdown. We are still seeing positive spending metrics but not necessarily a robust consumer. If the trade tensions weigh heavily on growth, that will impact businesses decisions to higher and this will filter back indirectly to the dutch consumer. Consumer. There is indirect impacts that could weigh on the consumer and undermine the temporary support in the Second Quarter. If the consumer is not healthy and happy, we cannot expect the u. S. Economy to maintain this growth level. Nejra it will be interesting to see whether services follows the trend we have seen in manufacturing with Global Growth. If you have growth being triggered by consumers, is that something that reassures you or worries you because consumers are the last to know . Lindsay when a look at the divide of gdp, the vast majority of growth came from the consumer. It was limited in terms of sectors of contribution. We would like to see a more broadbased contribution across the u. S. Economy. If we do not see housing, manufacturing, Business Investment improve, it does not paint a stable story for the second half of the year, which feeds into the motive of offering a potential rate cut. The economy is not falling off a cliff, but there are potential headwinds and a risk of a slowdown if we do not see further improvement into the second tough of the year and into 20. Into 2020. Nejra Viviana Hurtado has the first word news. Tradea a top level delegation arriving and china to continue negotiations. They may be setting with chinese counterparts at dinner but they are further apart than they were three months ago when talks broke down. Huawei is withstanding u. S. Efforts to curb its is nice. Business. They posted a 23 increase in revenue the first half of this telling bloomberg they have a backup plan. Liang if we are not able to use android for our new smartphones, we have the ability to develop our own operating system and ecosystem to become the basis of our services to customers. Viviana executives have told huawei employees to brace for a tougher time. Two u. S. Senators want stronger sanctions against russia in next years defense bill. They are calling for penalties that would be triggered by future election meddling and could hit russia sovereign bet sovereign debt. 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. Hurtado. Ana this is bloomberg. Scarlet tonight marks the Second Democratic national debate, live from detroit, michigan, and candidates will be fighting to raise their profiles. Lets bring in kevin cirilli, who is on the scene in detroit and will bring us extended coverage. What will the main event, harris versus biden or warren versus sanders . Kevin all eyes will be on Bernie Sanders and Elizabeth Warren. I am told by the Sanders Campaign they will not go after senator warren, but it is an opportunity to see a contrast in delivery styles between the socalleds self called socialist Bernie Sanders and Elizabeth Warren. Pete to pete good gig look to see if he has a breakout moment. Also, Amy Klobuchar from minnesota has positioned herself more to the middle of someone then senator Elizabeth Warren, and on capitol hill has deep ties trying to get policy on russian interference across the finish line. Will be a line, this largely policy driven debate and an opportunity for those jockeying for the more progressive lane of the party to show how they would go against President Donald Trump. Scarlet thank you for highlighting a couple of the names. We know donald trump will be watching carefully. He is always monitoring who he is likely to be running against. Who is his preferred opponent . Kevin i have asked about virtually every way to republicans in washington, and they say they are confident. I was struck in recent weeks how the president has gone on the attack against democrats, choosing not to go after any of insteadidates but freshman congresswomen, and in ,he recent days Elijah Cummings and using racist rhetoric, reigniting the debate about how to best respond to those types of attacks. You can bet tonight and tomorrow night, those Democratic Candidates will be asked docifically how they will that. Scarlet you mentioned this will be a policy driven debate. Do we expect any candidates to come out with a policy and announce it at the debate . Kevin i think in terms of policy, it will be interesting to see how they jockey on issues like to care for all, wall street, environmental protection, and gun rights. Something like wall street regulation, look to see how senator Elizabeth Warren talks about things like reinstating glasssteagall, a plan she put forth in the past weeks. There are policy nuances to keep your eye on because Something Like reinstating glasssteagall is being openly talked about and something that could have lasting repercussions regardless of who becomes the democratic president ial nominee. Scarlet especially considering that senator warren has led the way by sticking out those positions. Kevin cirilli is on the ground in detroit and will be bringing you highlights and coverage of the democratic debate. It will be live on bloomberg radio. From new york and london, this is bloomberg. This is bloomberg surveillance surveillance. Capital one says a massive data breach expose the data of 106 Million People in north america and a former amazon employee was charged. Capital one says it is unlikely it was used for fraud. Plunging,beyond meat as they announced a plan to sell more than 3 million shares. Publiconths after going the stock has soared. Regulators in dubai have imposed their largest fine ever. The company will have to pay 15 million, thereby accusing them of serious wrong doing including unauthorized activities and misusing investor money. Guilty toed conspiracy in the u. S. Scarlet it is time for single best chart lindsay pas go p exact. Lindsay piegza. Thes good to examine consequences and this is an inflating bubble. The s p 500 is the blue line. Stocks. E line is faang 10dsay is chuckling, up times more than the s p 500. Tech could be a potential bubble for the next few years. Bubble, whether people agree on the or not, this is part of the everything rally we have seen as a result of low rates. Fed sustained the everything rally . Target the fed does not equity markets. The fed wants to continue to perpetuate the longest expansion in history, but cannot be ignored what is happening in the equity markets. I think we have to look at what is occurring in part of that has to be blamed on Monetary Policy. It is not the growing divide between the haves and havenots but the asset holders and nonasset holders with unprecedented policy intervention. We have seen shift capital flows seeking at yield wherever they can find it and that is driving investment into riskier assets and other equity classes. Scarlet should the fed interpret this as a bubble . We have heard janet yellen make comments in the past. What would chairman powell say . Nodsay i think he would say and described this as optimism or exuberance in response to the longest expansion. If they did see a bubble, they would have to presumably adjust policy. What we are seeing is the fed doing the opposite, talking about and easing cycle which would further push capital to seek higher yields other sectors. Nejra one thing that caught my attention is stocks with week Balance Sheets have been outperforming those with strong Balance Sheets since the end of may. Should the fed be concerned about corporate leverage . Lindsay the fed was asked about the leverage levels of corporate that and they responded corporate debt they responded this is not an area of concern. They have answered that question. Whether or not we buy that is the question. Focused on the broader picture of getting the economy to a sustainable dutch sustainable sustainable point. They want to continue to use their tools to keep the u. S. Economy and a good place. Nejra how far does the fed go to achieve that . Lindsay that is a good question, and we dont have much room for the fed to provide additional stimulants. Stimulus. We are starting at the upper bound of 2. 5 , meaning if we give back 50 basis points to write the yield curve right the yield curve, that only leaves 50 basis points of stimulus to the economy. Andou think back to 2007 2001, the fed added twice as ratestimulus, lowering for hundred and 500 basis points. Points and500 basis may have to rely on nontraditional methods to provide support to a faltering economy, in the form of the Balance Sheet. Aroundct not to stop 3. 5 trillion, and we have seen the fed lower rates. We could be talking about additional trillions of dollars being added. Nejra thank you for joining us, lindsay piegza. Coming up, we speak to jalal bagherli. This is bloomberg. Scarlet it is earnings season. Scarlet fu and nejra cehic in london. The results are coming in fast and furious. Work adjusted bps, raising its revenue outlook. Shares were up almost 5 in premarket trading. We are getting a lot of other pharmaceutical companies which have been under pressure over concerned on what these president ial candidates have suggested on how they will pursue making medicines cheaper for the broader public, something President Trump has also discussed heavily and tried to make moves on. Nejra i know you are looking at eli lilly numbers as well. In year, pharmaceuticals in europe, pharmaceuticals have been standout. One hundred 70 companies only s p 500 porting this week, the biggest being apple, but you have numbers from eli lilly. Scarlet rising 1 in trading after the full year eps will be 567 25 77. Fullyear adjusted eps forecast has been boosted and the stock is rising. At cfo will be on bloomberg 7 30 a. M. In new york. Nejra the u. S. Trade team has arrived in shanghai for talks with their counterparts but expectations remain low. Always says difficulties ahead could affect the huawei says difficulties ahead could affect the future of their company. Liang we dont know when the u. S. Will make the decision on android and when that will come, so we have to make reparations for our products. We will evaluate our strategy for the overseas market. If we are not able to use android, we have the ability to develop our own operating system and ecosystem to become a basis as a server to the customers. Nejra that was liang hua speaking with Tom Mackenzie, great work. What do you want to highlight from your conversation . Mentioned the 58 billion in revenue in the first half. The growth of 23 on that front. The chairman expects that growth to continue into the second half and thinks growth of 2019 will top that from 2018. Significant,d particularly as the Company Faces major pressures from the u. S. Like the black list. Ban and a and Pressure Campaign for other countries to block out huawei. How sustainable is that Going Forward . Forward, what happens with respect to the 5g rollout . Did the chairman say anything about how u. S. Pressure is affecting that . 5g, he said in terms of they have not seen a major impact. They have signed 50 contracts they have chips in place. It is the Consumer Division that faces the pressure. Hence the soundbite regarding android, because if they rollout their site devices and cannot use android, that is a problem. The Consumer Division provides more than 50 of their revenue. 5g seems to be sustaining itself, but the question is how long can this go on for and what trump decides in terms of easing up on these curves. More from mackenzie, his interview with liang hua in the next hour. Betweenlks are underway the u. S. And china in shanghai. Jon ferro continues on radio with scarlet fu. Bombshell. S they have and havenots of earnings season. We speak to eli lilly cfo josh smiley. And Central Banks race to the bottom. Mexican president amlo says his countrys Interest Rates are too high. Will all of the banks look to the fed . And citi will cut hundreds of jobs in its trading division. David welcome to bloomberg daybreak on this tuesday, july 30. Im david westin, right here with alix steel. A big earnings day. Alix first of all, welcome back. Good news actually for the drugmaker so far. Merck beat on earnings revenue and took their estimates up as well. Eli lilly also beat, not quite as much. Pfizer i think we are still waiting for. Alix all pressure being put on it. David a lot of attention. Alix