Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Than expected. That means we have a bit of a risk off move. We had moves from the central bank of new zealand, and overall, new zealand stocks are gaining. There is quite a lot of movement when it comes to commodities and we will have a full roundup of centralbank action and its impact on stocks and commodities. Coming up, we speak to the commerzbank chief Financial Officer. Dont miss that interview live later on bloomberg surveillance. Lets get straight to bloomberg first word news in new york city. Chinas currency policy is staying at the forefront of the trade war. Referenceet todays rate at marginally stronger than seven a dollar. Avowing to keep the Exchange Rate is vowing to keep the Exchange Rate study. Westminster and brussels blame the other for the diplomatic breakdown. Michael gove is in charge of planning for a no deal and says the eu is not bracing for a new agreement. The Prime Minister has made it clear he will not sign a deal that includes the irish backstop from a red line for the eu. Korea hacks its Financial System to funnel billions into its Nuclear Program according to a new United Nations report. 2 billionents amassed dollars by stealing from institutions and cryptocurrency exchanges. They reportedly have 30 overseas agents handling these transactions. Face atrump is likely to cool reception when he tries to console residents of el paso, texas and dayton, ohio. The president is traveling to pay tribute to First Responders after Mass Shootings. The visits are complicated by his historic antiimmigrant rhetoric and his opposition to gun control measures. Attendance fell at disneys most highly anticipated themepark attraction. Top anda giant missed bottom line profits. Disney was also hit by spending on this new streaming service and the costly flop of marvel movie dark phoenix. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thanks. We want to bring you some news on Burford Capital. We brought you news that muddy waters was shorting burford cap. We had capital. We had a reply in anticipation, burford saying share volatility will impact activity or thats volatility is related to activity we have seen. They also believe the Share Movement is on the rumor. Where china to keep a balanced view on exactly what is going on. We are trying to keep a balanced view on exactly what is going on. Burford capital is falling 13 after the muddy waters report. That is the very latest. We will bring you any breaking news as and when we get. The kiwi dollar plunging after the reserve bank cut by 50 basis points, much deeper than expected. Most forecast a 20 basis point reduction. The bank says that without stimulus, it is difficult to revive inflation. And a surprise move out of the r. B. I. , delivering a 35 point rate cut. , it seems one of the most dovish officials at the Federal Reserve is not quite dovish enough. St. Louis fed president James Bullard is only forecasting one more rate cut this year and agrees with jay powell that julys cut was a midcycle adjustment. Joining us for the hour is the head of g10 fx research at someone fromle and bloomberg opinion. Of the day which we have covered on our mliv blog is due Central Banks have enough ammunition left to meet their aims . Im afraid to say the answer is no. More and more clients seem skeptical Central Banks will be able to deliver with the tools available. More and more are looking at the government for fiscal stimulus to produce that push towards inflation and growth targets they may have. From that point of view, the fact that more banks are doing the same, the race to the bottom we are seeing is turning into a vicious circle. Francine a circle that leads into recession . Valentin it will not stop a recession, a recession is following the national causes. There is a cycle the banks are trying to address but they are effectively unable to do so. From that point of view, the more banks are doing the same thing and the more they are jumping on that bandwagon of the race to the bottom because of fears they will be left out and have to experience currency the moreion tightening volatility causes. It may indeed precipitate a global recession down the road. Francine a lot of people think they do not have enough ammunition, they can become ever more inventive. Which is it . I just dont think they have enough impetus. I agree with valentin. This is a situation for Central Banks who have positive rates. When you have negative rates, it is even worse. More stimulus is having less and less impact. And creating a vicious cycle in the sense of pulling everything down into the quicksand of negative yield curves. It is not having any beneficial effects. It is upending the laws of economics and will create a worse recession than other was otherwise. Francine are we in the middle of currency wars . We can say it is bad, but unless the people in charge think it is bad and it will continue bad, it will continue. Valentin the Central Banks of the first line of defense and have been a very preemptive and aggressive. It is the case that, ultimately, what we are dealing with is precisely that. More market volatility on the back of sharp currency moves. Ultimately, even though the banks valiant effort to redress of the looming threat is there, it may backfire. Francine quickly, stronger dollar from here were not . Valentin it depends or not . Valentin it depends. We like it higher. It is the case that the unrivaled rate advantage will keep support. Andus the likes of the yen gold, the dollar will continue to suffer. The currencies where the Central Banks are are already at the proverbial rock bottom. Those currencies will likely continue to benefit. In the case of the dollar, the fed has further room to cut rates. Dollaryen is lower. Francine thank you both. Both stay with us. Surveillance plenty coming up. The worlds biggest park supplier car supplier prepares for job cuts. And we speak to the cfo of continental. And chinas policy courtesy policy at the forefront of the trade war, we discuss if the currency is being weaponize. Weaponized. Mberg this is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Continental is to cut jobs as it adjusts to a Challenging Market environment. The auto parts supplier is mulling options including the as itf some businesses seeks to keep pace with the shift to electric. Joining us is chief Financial Officer at continental. How many job cuts are we talking about . Actually, what we are cost improvement programs, efficiency improvement programs, and portfolio reviews. We did not give any numbers about job cuts or any specific measures. We just informed we are discussing these measures because we are in a market which is down 7 in the first half of the year and expected to further decline. To the changeust in our product portfolio. More electric cars will be demand in the future demanded in the future. Francine how much does this have to do with the shift towards electric cars and how much to do with pressure from trade wars supplant shifting supply chains and putting growth in a slower footing . Wolfgang a good question, but i split the numbers we are seeing and attribute them to the difference different sectors you rightly mention. There is overall a weaker Economical Development and a technological shift. Altogether are those affecting the actions we have to do now. If we do a breakdown of some of your units, are you looking to sell some off . What will that look like if i speak to you in 24 months . We are not talking about completed units complete nits, units, but product groups. To give you an example, were looking at fuel pumps, some of the components we deliver to the wet side of the motor, pumps. Products which will play a role in the world five years from now when there is more electric location on the road. Francine are you speaking to the ipo plan for the power transition, or because of market uncertainty, will you postpone it . Change tothere is no our plans in that regard. We are concentrating on preparing potential ipos. Righte markets have to be , we have to see that markets are willing to pay the right value. If this is the case, we are sticking to our plan. Francine how do you view the trade concerns . It seems there is a race to the bottom, how long will this continue for . Do you just need to get used to this for the next 510 years . The demand for cars was clearly affected by this, specifically in china. You are also mentioning supply chain issues where we have to the concerns of customers and to adjust ourselves. It is a longterm issue and a mediumterm issue and we have to adjust what we mentioned before, cost adjustments, portfolio adjustments, and productivity improvements. Francine can you do anything when comes to Foreign Exchange . I dont know whether you can head sure if it is just too hedge or to predict if it is just too difficult to predict. Wolfgang probability will probably continue. As a group, we are naturally hedged. This is not true for each division. Within the division, we sometimes have the Exchange Rate, for the group, it is ok. Francine chief Financial Officer at continental. Up, chinas currency policy is at the forefront of the trade war. We discussed if the yuan is being weaponized. This is bloomberg. Francine this is bloomberg surveillance. A lot of market moves out there, lets get straight to your business flash. Germanys commerzbank says it is becoming tougher to reach a target for higher profits. The Bank Reported a fourth straight quarter of falling revenues. Global trade tensions hit the key corporate client unit in particular. Supportedunicredit net income that missed the lowest estimates. The bank also cut revenue guidance for the year. ,nicredit cited Interest Rates expecting these to be lower for much longer. Less process, more action, that is what hsbcs interim chief wants. Call he made the comments on a call with bank bosses. He says hsbc needs to be honest about quote what is working and what is not. Occidental selling 13 billionaires 13 billion of debt. Debt since saudi aramco in april. We have been told the order book for the offering was to a peak of about 75 billion. That is your business flash. Francine chinas currency policy is staying at the forefront of the trade war. The pboc said the daily reference rate just marginally stronger than seven a dollar. Vowedg has a valid has to keep the Exchange Rate steady. Where do we go next on q1 on yuan . Valentin weaker still. Our call is it may reach 7. 3 or 7. 5. We think the fixing policy at the pboc and the communication has been that they are not afraid to let it slide a bit more. The key would be to offset any negatives coming from the trade war between the u. S. And china. , the factor that may contain further appreciation about financial stability, especially given the experience where the deterioration triggered a rebalance of payment. But it does seem to be a different set up. A you want is a reserve currency. So they are committed buyers. Plus, we still have the chinese fx reserve outweighing liabilities. And we think there is pentup demand from corporates. It may be the pboc is still comfortable with more weakness from here. Francine the fact they have been labeled a currency manipulator, does it change anything . Marcus not really, it is outdated because everyone is currency when it would. Is everyone is currency. Anipulating it is a less meaningful phrase. The reality is the peoples bank of china has served notice it can use currency. Now,ll choose not to right but it means that, steadily, the yuan will continue to weaken unless there is some clear pact whereby it is explicitly made they will not do that. It is not freefloating, but there is some possibility. At the moment, they have it under control and wants to keep that. Francine are we underestimating the impact of some of the neighboring countries . Valentin i think that what is happening with the central bank of india and thailand cutting part of the story is indeed the global trade war. The devaluation of global currencies and the devaluation of the competitive advantage. No bank wants to be left out of that. Cheap and their currencies, the pressure on the remaining banks to follow suit. That race to the bottom is informing the trade war, a culprit in the currency war. Highlighting francine i want to talk about the new Zealand Dollar. Valentin we have been bearish for it while. I have to say, it still looks overvalued. 63 is still a level we could hit. It is further to go. It is also the case that amongst the g10 space, it is also one of the more vulnerable ones. It is not only be dovish Central Banks but exposure to china, that is not a currency you want to buy. Francine i will come back and ask about ruby as well. Valentin and marcus. Commerzbank says it is getting tougher to read reach profit targets. More on that up next, plus, your stock movers. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Click, call or visit a store today. Francine global easing in india rocks the market. Bloomberg learns chinese ficials are saying the economy wont continue to fall. Lets check in on what is moving in the markets. Your market movers. Hi. I want to start with glencore this morning. It is down 2 after a profit miss. They reported the worst profit this three years. They have been hit by a slowdown in Commodity Prices in what matters to them. Copper, zinc, cobalt. They decided confirmed the bloomberg scoop that they will be shutting one of their cobalt mines. Missed the lowest analyst estimates and cut their Revenue Target for the year. They are seeing a slowdown in lending and fees. Ambro is down. This bank is very vulnerable to a lower Interest Rate environment. Francine thank you. Were getting some breaking. Ws we are i think expecting to speak to the chief executive a little bit later on. Well have plenty more with russell hardy. Here is vivianna. Vivianna st. Louis fed president is only forecasting one more rate cut this year. He agrees the july cut was a id cycle adjustment. The flattest close since december. The kiwi dollar down after the rate cut. Point rateed a. 25 reduction. The nations central bank will take new zealands lead and cut by more than expected. Money markets are pricing in a 70 exkt change of the rba cutting 25 basis points. The r. B. I. s fourth reduction this year for indias slowing economy. The repo rate is 4. 5 . The lowest since 2010. This year india has been the most aggressive nation in cutting rates. Kim jong un is trying to pressure the u. S. To end joint military exercises with south korea. President trumps new defense secretary says the drills are needed to maintain readiness. Global news 24 hours a day on air and on tick tock and twitter. This is bloomberg. Frape thank you so much. Commerzbank says it is becoming tougher to reach a target since november. For more, lets get straight to maurt miller in frankfurt. I know youre talking to the chief financial offense later on. What are the highlights in the numbers we got this morning . Matt the highlight really is a low light, francine. The problem is that the forecast, which had been to raise profit this year to a higher level than last year, is now seen as a danger. They say it is increasingly ambitious and using this word ambitious has become german corporate code for they are not going to hit their profit targets. We heard this last week from a buyer and heard the same thing from commerzbank last year in regards to its revenue and it later cut that target. The worry is in markets and thats why you see the shares falling here in frankfurt. This phrase ambitious when talking about profit targets is a precursor to a reduction or removal of those targets completely. Francine how difficult is it just to be a german bank at the moment . Forget what commerzbank is facing. If youre operating in that business with negative rates, it is hellish. Matt we see yields at alltime lows. The e. C. B. Set to move rates even lower makes it very difficult for the c. E. O. Of commerzbank whose aim really is to bring the bank back to that basic business, the bread and butter of banks lending money to individuals and corporations and in a negative rate environment, that is getting increasingly worse, that makes it incredibly difficult for him to make nough money four quarters of negative revenue. He has to cut costs rather than building up the i. T. Side which is what he should be or would like to be doing. This is of course mainly what im going to ask the c. F. O. About today at 11. Francine thank you so much. Matt miller in frankfurt wholl speaking to the chief Financial Officer at 11 00. M. London time. Comments deep an standoff between two sides less than three months before the u. K. Is due to leave the block. The bank of england may be readier than before to tolerate aggressive weakness. If youre the bank of england now, lets say there is a Nodeal Brexit. Do they initially cut and then have to raise . Do they look through inflation . Are we clueless . No. Hey will need time to assess whether it is demands or a supply short. Potentially a hike. They like to keep it this way. But it does seem that the message is not getting to the customers. Most expect easing is more likely than not either way. A Nodeal Brexit will come with some easing package that is trained to support domestic demand and potentially the bank of england will be looking in any through any temporary sprike in inflation on the back of sterling depreciation. The recent development, global rate is making that call stronger. Fact being that with everyone easing or in a dovish the pound really doesnt look as ugly as it used to. Francine i have a million questions. Eally a million about pound. Were getting news from china. Serves coming in at 310 rillion. I want to ask you some pound to a point valentin, if you were to take out brexit, the stance of the bank of england is pretty hawk irk. Could they still be as hawkish given what is going on in emerging markets and the fed . No. I think they continue to get it wrong. Their approach to recent events, not preparing for ullly what is going to be a chance of a Nodeal Brexit. They should be getting ready for a rate cut but they continue to have this dream of hiking rates. Of course they will have to assess what happens. We need to go in practically to a situation that is going to be an economic shock. They overreacted on the results of the referendum. Why would they not be prepared like they were last time and learn from that mistake and be ready to do what is needed . Thats where they need to give some guidance here and they are trying to hold off and claim they are looking at a smooth brexit. They say they have prepared the financial sector. Why are they not preparing the markets . I guess certainly i wish yblingd answer that question, but it is difficult to be a central banker these days. In view of the uncertainties ahead while providing a fairly positive scenario that comes across less and less credible by the day. It is the case coming back to the point about the need to be a bit more clear about the ability to ease and address any headwinds to grow from here. It is the case that the Global Environment is making it easier for them to really sound more dovish because they wont be risking such a sharp sell. The global currency war is on and as you said, the central the b. O. E. Is one of the few Central Banks that would tolerate. We would love to have a stronger currency but because of brexit they may have to go for a slide. Francine what is your view on a Nodeal Brexit . 6040. I would call it assistantal Nodeal Brexit. Time may run out before they really get there. We could see a situation where article 50 is not extended in time to avoid that. Francine thank you so much. Oming up, 16 billion pounds in outflows. Our interview with the chief executive. Thats next. This is bloomberg. Francine bloomberg surveillance. Im Francine Lacqua in london. A lot going on in your markets and news around the world. Hi, vivianna. Vivianna income falling at disneys most attractive theme park. Profit at its domestic resort slumped in third quarter. It was hit by the costly flop of the movie dark phoenix. The muddy waters firm is questioning u. K. Financial companys reporting and governance. They said they will review muddy waters report thoroughly and rapidly. Later today we speak to their founder and c. Oimbings. Dont misthat interview coming up at 3 00 p. M. London time. Quarterly profits beat the highest analyst estimates due to evaluation gains from investments in its 100 billion fund. And thats your Bloomberg Business flash. Francine . Francine thanks so much. Clients pulled almost 16 billion pounds in the First Six Months of the year, more than the overple 13. 4 billion. We spoke to the chief executive earlier this morning. The industry is tough out there. There is a lot of change and a lot of change in client demands. Flows are definitely hard to come by. What can we do to change it . Well, that is already in hand. One of the things we have announced this morning is we have a significant improvement in our Investment Performance something we have been working at for sometime. Sums are ahead of benchmark, that important threeyear period and we have seen a strong pil pickup in performance in the First Six Months of this year which i think will start to have an impact and i would point out that the net flows, the outflows in the first half of the year were substantially below those we experienced in the second half of last year. So that pickup in performance you talk about, what is that down to if were trying to get our heads around how sustainable that is . It is down to three things, i think. First of all, we put in place and we did it over 18 months ago, some things we call performance enhancement plans. A whole bunch of technical stuff about idea generation and the way we run our process. We put some improved leadership in place it is a two teams came together and i think youre beginning to see the product of those two things. I think the other thing you need to accept in this business is the market has come our way. That has benefited performance but from what i have seen, in the volatility around the First Six Months of the year, actually we continued to progress through that. I think performance is in a very good shape. You say that the Asset Management environment remains tough. What is at the forefront of your mind when you say that, keith . You talk about the low yield environment. What is it that makes it so tough for you . I think it is the changing nature of client demands and in a world which is volatile, where growth is slow and returns are pecressed, clients for, that for helps you meet that risk budget. What you need to do is be prepped for the future and make sure that you are launching stuff that will be well held and liked by clients. There is just a lot of change around. Aberdeen that was chief executive speaking to us. Coming up, brent crude enters a bull market. Thats next. This is bloomberg. Bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Gold is topping 1,500 an ounce as investors flock to the safe haven. Iron other is experiencing a selloff oreis experiencing a selloff. Our guest is still with us. We have these moves that have seen a lot of the commodities. This is directly linked to trade. Were seeing a huge diverge wrans gold is going versus iron ore. There was a lot of fly worries. Too much fly splie in the market. If you look at where the prices were, w. T. I. Can fall to 45 a barrel. This trade war exacerbates what were the supply concerns. For iron ore, same thing. Just weeks ago, we were losing 120 a ton. The trade war has worried investors concern. Now iron ore is trading below 90 a ton. Really insane. Francine the chief executive of the Worlds Largest Independence Oil exchanger. We are concerned about growth. The numbers are not as strong as they were. I think the market is reflecting that. Prices have come off a little bit, sub60 now. That is baking in a little bit of the problem that we have got with growth. Francine that was russell hardy. Of vitol. Xecutive when you look at some of the currencies linked to some of the commodities. There are a couple of trades you can do as long as they are not linked to dollar. A strong preference for oil currency. I think where oil may be experiencing periods of underperformance, supply cuts by opec down the road may prop up the prices. Relatively speaking, we have been more bullish on oil than ron ore. The Canadian Dollar looks interesting against the aussie dollar or new Zealand Dollar. The bank of canada, are nowhere near cutting rates or joining that wave of dovish Central Banks. Crer sounding more neutral like bank of canada. In orderice bank is outright nordis bank is more hawk herb. We stick with both Central Banks will stick with their point of view. Francine reporting oil now . Probably the opec cuts are the only thing. How much more do they need to cut . And will they . What is their reaction . You look at brent under 60 a barrel and youre one of these countries in the gulf that has a budget of targeting 80 a barrel. How do you prop up prices . That will be interesting to see where their reaction is. Right now oil is so focused on the demand side. We saw already this summer, two tankers in the gulf damage pd. The oil market brushes it off. Francine is there anything that you could see in the markets that that could be inked . We are long nokei versus stocki. These value trades we expect to outperform. In the case of noki stocki what we like about it is the Global Growth concerns, impacts have a greater impact on manufacturing, the Global Business cycle. The global trade is really slowing down. Sweden, very exposed from that point of view. In the case of oil, it is much less sensitive to the Global Business cycle and from that point of view, that is makes it or Oil Currencies are as a result more attractive relative to other small currencies or other small currencies. They are holding about 1 5 of the worlds production now that will come off the market. The prices since april last year dropped some 70 . Many thought they would be the leader in this. The prices have become so high they had to take it off the market. One thing i thought was interesting, the c. E. O. Was saying demand is not bad. Sentiment is not great. A little bit of an update about a trade wars. Francine thank you. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. Well be talking with muddy waters chief investment officer. Noo the n the meantime, there is a lot going on when it comes to your markets. Im look at treasuries. They are climbing but some of the Central Banks moves especially from new zealand on ndia shes beal currency watch for the next few hours. This is bloomberg. Francine global easing. New zealand and india rock the markets cutting more than expected. The yawn weakens again. Yuan weakens again. Commerzbank says it will be difficult to hit its targets as trade tensions hit home as a german lender. Gomple, everyone. Good afternoon if youre watching from asia. Im Francine Lacqua in london. Tom keene in new york. Tom, if you look at Central Banks, it is really the only gain in town. A lot of people are wondering whether they have the ammunition to deal with the job at hand. You saw the indian and new Zealand National banks cut more than expected. Tom all about economic contraction. We see that again today with new lows in yields. Some record lows and some not. Im focused on the longterm yields. A 30year bond in the United States with a 2. 20 handle. That is stroird. Francine it certainly is. Well have plenty more on the market moves throughout the day. Lets get straight to the first word news in new york city. Hi, vivianna. Vivianna in china the central bank set its daily current reference rate at slightly strong to the dollar. During the trade dispute with the u. S. , they want to allow more flexibility with the yuan. Y and joining new zealand with better than expected Interest Rate cuts. The reserve bank of india lowering its rate by 35 basis points. India has cut rates to reduce growth from a fiveyear low. New zealand shocking markets with a half of percentage point cuts. Donald trump is likely to face a cruel reception when he tries to console residents of el paso, texas and dayton, ohio. The visits are complicated by the president s historic antiimmigrant rhetoric plus he opposed gun control measures demanded by some local politicians after the attacks. Today shares of disney lower. Posting Quarterly Earnings and rever knew that missed estimates. Profit at disneys domestic theme parks slumped despite the much touted opening of the star wars attraction at the Disneyland Resort in california. Global news 24 hours a day on air and on tictok and twitter. This is bloomberg. Tom thank you. Let me go through data now. Equities down. Currencies. Commodities. It is not monday but there is still some tension there. Dow futures about to stop at 36,000. Curve flat g. It is a really big deal. A different breakdown in yields than what we saw yesterday and the day before. Its curve flattening out there with euro weaker. Brent caruth crude under 60 a barrel. The vix comes in with a better market. There is the 30year bond i just mentioned. German 10year, negative 0. 57. Matt miller will do that early in the next hour. I put renminbi up there because france cheen demanded it. Francine were on a renminbi watch. They are not expecting any violent moves from that. Well see what happens. Im looking at my market check. A little bit different actually. I dont often look at new Zealand Dollar. If you look at bonds over all, they are extending gains. Stocks climbing and of course you know, new zealand was something to watch out for. The u. S. Dollar steady now against Australian Dollar dropping to a decade low on speculation that they would follow the new zealand counterparts. Tom royal bank of new zealand cutting Interest Rates substantially today. Then there is the long rates and then there is the really, really long rates. We go, go to a german viewer. Thank you so much for bringing this to my attention. This is the austrian 100year piece. 117. Is a maturity of 2 francine and i will will still be doing surveillance then. It has enjoyed a 200 price aappreciation. That is not yield. That is price from 100 up to 192. Once again, you cannot make money in bonds. Francine you certainly cant. Well still be doing surveillance and Central Banks will still be trying to ease. This is my chart. It is actually looking at some of the dividends out there. For the First Time Since 2016, the s p 500 dividend yield is actually higher. Higher than the u. S. 10year yield. When you look at returns, you look at these record yields, it is interesting to have that correlation with equities. Thank you for bringing that to my attention. The kiwi dollar plunging. They cut their benchmark rate by 50 basis points. The bank is saying without stimulus, it will be difficult to revive inflation. Of course india also joining new zealand with this bigger than expected rate john i feel like it is a race to the bottom and im not sure whether that race to the bottom will only end if the u. S. Treasury intervenes in the money markets. Psychologically, people are talking about that now. I think the race to the bottom ends when the trade war ends. All of these rate cuts are coming in response to if stress that tariffs are creating. The fed is obviously not interested in pursuing this quick path down in policy rates and the comments from overnight where you talked about the fed doesnt need to respond to every threat around tariffs is an interesting contrast to other Central Banks who are much faster out of the block when responding. Francine when you look at bond yields, do they go ever lower . What is the pain threshold there . To me, there is a consequence, lower yeels but a consequence that tom alluded to earlier. Part of the reason the u. S. Curve is flattening is this belief the fed is not going to respond to every tariff threat by cutting the rate. Thats what is causing the curve to flatten. Tom i want to congratulate your firm on the nuanced notes. They have been a joy to read. Your comment on trumps math. What is the calculus he gets wrong right now . I dont know if he studied it or made it up on the fly but i think his arithmetic, if he hikes tariffs and growth will remain stable and asset markets will remain level. I think that is off. As we have tariffs go up, there is a rationing down in confidence and corporate spending and it is not clear to me these fed cut also provide any kind of relief in the near term. His risk even though the fed might restore growth eventually, early 2020, if it doesnt, you can see a deeper correction lower in equities and wider correction in spreads. Tom calibrate for the pacific rim. Speak to the Jpmorgan Morgan clients across all of the pacific rim. I dont buy for a minute, new zealand, their massive knock down effect. What are what is the effect for the leadership of these adjacent nations to china . The reason t of they cut Interest Rates is because of conditions in the local house markets. It is extreme to see across all of the Central Banks. What is interesting is they are willing to maybe a large cut when the starting rate was pretty low. That feeds the idea some feds going big about when rates are low. Francine how much do you think they will move by . I think if tariffs are going up on september 1, they will probably have to cut a couple more times this year. If tariffs dont go up. That is always a possibility the president responds to drops in his approval rating, if they dont go up, the fed is only going to cut once more this year. Francine if President Trump what is possibility of him only doing this because he wants to cut rates. Is this like youre not cutting rates so let me put on trade tensions. I get a better deal from china and force the fed to move. I dont think that is the first objective of the policy. I think the first objective is to have some deal with china before the 2020 Campaign Season starts in ernest in january and because the chinese are being much slower in delivering any concessions the president feels he has to ratchet up the pressure. Tom thank you so much for being with us. Mr. Norman will be with us throughout the hour from our norman desk. There is so much more to talk about this morning. It is always an important conversation made more so today. Nancy miller and Stephan Engels with us in the next hour. Stay with us. This is bloomberg. This is bloomberg. Policy actions taken so far, it is prudent to remain accommodative. While remaining consistent with inflation mandate, they considered it necessary to to the dynamics of the situation. Francine that was the reserve bank of india governor speaking a little bit earlier today, lowering their benchmark Interest Rates by an unconventional 35 basis points, its fourth reduction this year to support a slowing economy. Lets gets straight to justin. He is an emerging markets editor and john norman from jpmorgan. He is still with us. Are we going to see many more surprises like we saw from india and new zealand . That actually the only way to make an impact is to surprise the markets and cut more . I think we will see it is exactly what we saw today. The india cut was largely expected. It was just the size was a little bit more and i think it basis unconventional 35 point cut which i dont think has ever been enacted before. We have had four cuts now from india in succession. Was completely unexpected. If you look at the swaps they and the fact that are not happy with it right now. It has been unexpectedly strong and gone against the grain in asia, to some extent that may not have been so unexpected but i think so the answer to your question is we will see more of this. The old argument that Central Banks in the emerging marks had more wherewithal to cut rates given the differences with the major Central Banks of the world and the rates hat they are at currently is gradually diminishing, there is less and less room to maneuver. We will see more surprises yet to come for sure. Tom in your years of work in the commodities base and john with us from jpmorgan in london. Let me bring up the chart now. This is a bloomberg Commodity Index adjusted for inflation and it is the ugliest chart out there for e. M. Now. How ugly is it justin is the decline in Commodity Prices for e. M. . Is it like no big deal or is it a real Tipping Point . A real necks us . Nexus . If you had asked me that question five or 10 years ago, tom, then my answer would have been very different. Yes, it is going to have a big impact but as the economies of the emerging markets have evolved over the years, they have become to some extent less dependent on commodity exports. There has been more tech concentration, particularly in asia. If you look through prism of the stock market, for example, you wont see so much impact from commodities decline on the stock market. It is not a good thing, that said, but it is not going to have the same effect it used to. Tom we have brent under 60 a barrel. Commodities were not talking about. How are you writing about commodities, copper, iron ore and the rest as they fold into this global slowdown . Im writing about them as two different basketsor commodities. The cyclicals, base metals are going down. The defense on gold are going up as Interest Rates rally and real Interest Rates look like they are going to go negative. I think it helps to distinguish between the different types of commodities. They are not one asset class. Phil if we look at this as a race to the monetary bottom, who is going to get the toughest deal . Is there one emerging market that stands out as they cant fight or they will just lose out . Well, i think, you know, completely, from the hip here, francine, i would say maybe south korea is in one of the toughest situations at the moment because its rates are already very low. You look at some of the east European Countries where yields are falling to zero and below zero. You look at some of the Baltic States as well. These are places where there is not much room for maneuver. I would say south korea is one. Not only is the rate so low, it is closely entwined with china in terms of trade and now it is encountering this political standoff with japan. I wont go into detail there but it has just got a lot of factors playing against the south korean story at the moment. Francine john . I think in southeast asia, rates are low. South africa, given the high financial requirement and the fiscal deaf it the. Francine all right. Thank you both for joining us. Bloomberg news emerging markets. Ming up, we discuss if the yuan is being recognized. This is bloomberg. This is bloomberg surveillance. Germanys commerzbank says this year it is becoming tougher to reach a target for a higher profit. The Bank Reporting a fourth straight quarter of falling revenue. Global trade tensions hitting customers banks bank, operating profit fell. The bank put aside more money for bad loans. More cost cuts on the way atwal greens. They will close 200 locations in the u. S. They said the cuts are necessary to overhaul many parts of its operations. It will result in charges up to 2. 4 billion. A falcon 9 rocket lifting off from Cape Canaveral as you see there was carrying a Communication Satellite for sraels space communication. Spacex is flying this one for free. Francine thank you so much. We need to mention a couple of breaking news on british air ways. If you need to fly today with british air ways just check because they have delayed or canceled some short haul flights from heathrow, gatwick and london city because of i. P. I. T. Problems. A lot of the strikes have been called off. There was also a strike by easyjet that has been called off. They are having i. T. Issues. If youre due to fly check with them or go on their homepage. Tom . Tom very good. I want to talk about what changed in the last 24 hours. Finally the vanla yield curve, the difference between the 10year and the twoyear has come in under 12 basis points. Are we going to get to an inverts two cent spread . I think you can easily get there in a few days. It is the quality of that recession signal that you really have to question. When we have had an inverted curve it has been anywhere from six monthses to two years before the recession actually starts. It is not just the slope of the yield curve. It is better represented by the rates. Tom i dont mean to interrupt but what permeates all of your wonderful research is were looking at these yield dynamics. Can we use norman 1010 analysis or make it up as we go . I think what you have to recognize is when yields are at such low levels there is by definition less scope to provide additional stimulus. The fed still has room to cut but not as much room as they have had historically when the u. S. Goes into a recession. You really have to windower what the situation could look like in a years time wonder what the situation is going to look like in a years time. Thats why you have to be pretty nervous about markets. It is notlessly the near term but the medium term issue. Francine when you say nervous about markets is that they create asset bubbles or Something Else . It is more the lack of the policy backstop. The reason why markets are always eventually recovered from Financial Market shots, geopolitical sfress, recessions is that the fed had some ability to ease out of that. But if rates are starting from a much lower level you have ess capacity to manage those shocks. Europe is effectively at the ero and have no scope to provide meaningful stimulus thrls unless there is a meaningful fiscal easing out of germany which i dont think s going to happen. Francine john norman from jpmorgan stays with us. Glencore actually down 2 . First half profits at glencore tumbled as cobalt prices collapsed. We spoke to the chief executive of vitol. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. All, bloomberg surveillance, worldwide. Actionates, centralbank with em cutting rates led by new zealand. Curve flattening. We just spoke to john norman of jp morgan with that. Our first word news with viviana hurtado. Viviana kim jongun saying north koreas latest missile tests are a warning to the u. S. , trying to pressure the u. S. To end joint military exercises with south korea. They say the drills are needed to remain readiness. Gold is rising above 1500 announce. It has since paired some gains. Investors are concerned about the u. S. China trade war and slow growth. The fbi is investigating the mass shooting in dayton, ohio, looking into the shooters interest in mylan ideologies, and violent ideologies. Joe biden maintaining a significant lead in the democratic president ial race. 32 , followed by elizabeth warren, bernie sanders, and kamala harris. That is a sizable jump for warren and a slump for harris. 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. Tom when the facts change, they change. Economists and strategists looking at the some of the parts of this august 2019. With us, john norman, and by television Carsten Brzeski with us telephone Carsten Brzeski with us. Hsbc has gone down to wait 10 bond d 2k 10 year how does europe change . Carsten at will only change if you see fiscal policy acting. I think we will get over rates from the ecb, but this will not be the big game changer. The curve is in negative territory which means the government should enter fiscal stimulus into the economy to get growth to a higher level. Tom your headline is domestic stronghold starts to crumble. Matt miller will speak to the cfo of commerzbank. Politically, what do negative Interest Rates mean for germany . Carsten politically, it means the cost fors will increase four banks will increase and savers will not get yields. They are pushed into riskier assets which they do not like. Politically, there is less and less support for monetary easing. At the same time, the political criticism on the ecb does not lead to more fiscal stimulus, because if you say no to more monetary easing, he would have to say yes to more fiscal stimulus from the government. Francine the Euro Currency has a funding status. Will that be more and more enhanced . John i think it will be undermined by ever lower Interest Rates in europe. There is some belief by some clients that you will get fiscal stimulus out of germany eventually. And could be a long time the fact that you have a german in charge of the European Commission increases the chance of stimulus over the next year or two. It will be a while to get enough stimulus to support the Interest Rates and the euro. Francine we had a headline from commerzbank saying they have not been hurt by negative Interest Rates in the first half. A lot of the european economies, especially germany and the carmakers, will they be hit by tariffs . Carsten i think the world has changed over the last couple of weeks. We had the story that there is the trade conflict, uncertainty out of china, but only limited to the industrial sector. Domestic demand was resilient enough to shield everything. We see this shield is crumbling, this domestic stronghold in germany and other countries is crumbling. Just add a couple of more months and we will see the domestic economy in the euro zone will start to weaken. Tom let me go to this chart. The german two year and 10 year yield. I am talking about gamma or acceleration or convexity below the zero bound. It was not in my textbook. What is the symbolism of the speed of decline of the german 10 year yield . John it tells you the fear factor is growing every week and this underlying scarcity of safe because therope, ecb owns roughly one third of the german on market, when you have those issues at play, you can imagine rates continuing to rally even at crazy low negative levels. Tom what does it mean for the liquidity or stability of Continental Europe when we hear mr. Europe say mr. Norman say the ecb owns one third of german bonds. Carsten it is not in the textbooks. I think there is clear scarcity on german bunds. If you look at what the ecb is holding from other countries, there is more headroom for them to purchase french and italian bonds. This is making the case for a euro zone safe asset, bringing back the case for come up with a euro zone budget that is significant so we will get a european safe asset. If germany were to continue running fiscal surpluses, the debt to gdp ratio will drop to low 50 in the next years. Even more scarcity. Francine we have a great viewer question asking is an fiscal policy a dirty question that was used in the 1970s . Well fiscal policy have the same effect now as the low interest . Ate level explained carsten i think fiscal policy in germany and the euro zone would not bring relief in the trade conflict, that is for sure. Look at the German Economy. There have not been structural reforms. There is pentup demand for investment in digital, infrastructure, and education. There is the point to be made to invest. It does not have to be public investment. Create tax incentives for companies to invest more in the domestic economy and then you would get imminent stimulus for the economy, an increase potential growth for the German Economy in the longer run. John it depends on the whole mix. If you are delivering Fiscal Relief and response to tariffs, you have not changed the net growth. A fiscal expansion is coupled with an end to the trade war, you could have a good outcome. Tom have to get out in front of the news flow i have to get out in front of the news flow. Everybody else is in the mood to cut their Interest Rate forecast. Are you at j. P. Morgan going to give us a bombshell in the next 24 hours of a new view on Interest Rates . John we only publish on friday. The view on Interest Rates is conditional on what happens with trade. If the president backs down from the threat to increase tariffs in september, you can draw down the line for now, but this will be a rolling crisis in terms of the trade conflict. The bias will be lower. Tom how does the president affect a facesaving full pull back from the trade war cliff . How does he execute a pullback . Is not dont think he concerned with saving face, meaning has position on a particular issue can change 180 degrees from day one today to. Accept a weako deal from china, he could so that is a better deal than any american president has ever gotten. I dont think it is difficult to come up with a winning strategy. Francine why have we not had that . John the chinese have different incentives. They believed they might have a different negotiating adversary after 2020. Trump i think would settle for a weak deal sooner and the chinese , a deal much later on. Tom what is the level of recession in europe . Give us the overall measure of gdp out 12 months. Carsten it is more a stagnation than a recession. We are moving in the japanese footsteps so this means flat growth in the second half of this year and conditional on trade and brexit. Francine thank you both. Carsten brzeski and john norman stay with us. Disneys surprise stumble, profit slumps in the latest quarter but bob iger hopes the new streaming service may provide investors with a thrill. This is bloomberg. This is bloomberg surveillance. Iron ore extending an epic selloff as singapore prices fell as much as 7 . Hurts thehina trade appetite for raw materials, iron or has gone into freefall. The price has fallen into the 80s. Shares of Burford Capital are plunging. They are the latest hospital target of muddy waters. Questioning the use of fair value accounting. Burford has the following response burford has never watersntacted by muddy and never had prior side of its work. We will respond as quickly as possible. Cash position burford position and access to liquidity is strong. Burford has used consistent accounting policies for many years. Standard Life Aberdeen failing to stop the bleeding of assets that has persisted since the creation of a merger in 2017. Clients withdrew 19. 3 billion. We spoke with the ceo. The industry is tough and there is a lot of change and a lot of change in client demands. Flows are definitely hard to come by. Viviana the company was formed by the combination of aberdeen Asset Management and standard life, designed to create a heavyweight to compete with low fee passive money managers. Abu dhabi oil company acquiring a 10 stake in the worldwide fuel storage business, boosting its capacity to store crude. They are the largest independent oil trader, the ceo telling bloomberg given the risks, crude oil is underpriced. Are we underpricing it . Yes. The market seems to be putting its weight kind economic slowdown and underpricing the risk. Viviana when asked about a trade war, hardy said we are not planning for the worst. That is the Bloomberg Business flash. Francine disney shares are lower today. They posted Quarterly Earnings and revenue that missed estimates. Profits at the domestic theme parks slumped, despite the opening at the star wars Disney Resort in california. To the program. Disney is also betting on content and streaming. No it go to plan . Will it go to plan . Eileen everyone was surprised. The plan was to gain content to feed and digest into their services, taking a 17 billion acquisition and not seeing it return the fruit of its labors is a bit of a problem. Francine are we oversaturated . Eileen what is really interesting as everybody had been talking about that consumers would be cutting the cord and breaking away from Cable Operators and cable packages. It seems we are swinging back to packages and bundles for consumers so they will be tethered different way. Is yourt of your term look at what the customer is going to do. Thisneed to pay 12. 99 for that streaming service . Proofre any validity or that the public wants this . Eileen i dont know that there is validity but there is probably a valid point that there is competition in the market that is warranted. Netflix has had a run on things and consumers are excited there might be another offering. I think you are seeing a pendulum shift back the other way. People were cutting the cord, getting away from cable and thinking they would like to independently decide what content they would like to consume. Netflix anduy disney, you have hulu plus, you are back to two providers giving everything. You might see a shift where we go back to more you can eat allyoucaneat for a lower fee. Tom price is everything, and one dollar here, . 99 there, how price inelastic is the public . Eileen they are pretty insensitive to pricing if they get the content they want feud not sure Everybody Knows the value of espn plus so clearly disney is pushing this and almost offering it for free. You could get disney plus with hulu for about the same price. Maybe they will try to get people hooked on it and you see dem increasing prices or bundling. Francine we are focused on uber and lyft. What are investors focused on . They are at each others throats and the entry to barrier is not that high. Eileen uber and lyft have a big foothold, so the entry for any other new entrants will be difficult. But competition was driving prices down and that was a big concern for investors. Investors are probably relieved they are raising prices again so Topline Revenue and what is going back to the companies is increasing. However, losses continue to increase and that has been a big problem with uber. Tom give me a unicorn update. Our way into 2020 . August,it is only just but we are pretty unicorny today. What is happening in china and hong kong, what is happening with brexit, it could be a rough q4. Tom eileen garbage with us. E with us. Burbidg it is a bank that does not get that does not get the promotion of the german banks in terms of crisis, but unicredit, a stunning chart going back to the heyday 14 years ago. To 10 peak of 200 down and struggling, coming up, we will talk about unicredit. This is bloomberg. ,om continued market coverage Francine Lacqua in london, tom keene in new york. Curve flattening is different from the last few days. Brent crude under 60 a barrel. John norman with us, and i want to go to the future of the city going into 2020. I know you cant talk individual banks, but will london be dominant within these challenges . I dont understand how other european cities can hit the margin and prosper and finance. As london still the place to be . John at is the top of the league table. Becher will diminish as a function of the brexit its share will diminish as a function of the brexit conflict. That is something that reduces the market share of london but still leaves that far ahead of other centers. Tom what is the premium that the United Kingdom and United States have avoided negative Interest Rate . Is that a special relationship . John i think it has to do with inflation being higher in the u. K. And u. S. Relative to the euro area and japan that has led to Monetary Policy being less aggressive on the downside. Francine bitcoin has made a revival. You one dropping you one dropping, going yuan dropping, bitcoin and gold going up. John it is a drop in confidence in fiat currencies. There is devaluations and a broadening out of interest into other assets. Francine is it a reserve asset, bitcoin . John gold is the more but fornal reserve investors with no faith in any of these, that is where crypto comes into play. Francine how much more volatility will we see currencies and does that give legitimacy to bitcoin at the margin . John volatility will go up because it is abnormally low. A macro environment is becoming less predictable because of trade and this argues for above average volatility. The more investors start to imagine a dystopian state in a few days a few years time, the greater the use case for crypto. I can understand why people would want something more extreme in private money. , jp morganormand head of cross asset financials. In the next hour, the interview of the day. The chief Financial Officer of commerzbank, Stephan Engels with our matthew miller. It is an extraordinary time for commerzbank and other banks of germany. Curve flattening, futures advance up above 11. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Tom hsbc stuns with a forecast of deeper negative rates. Matthew miller with the chief Financial Officer of commerzbank on their survival. Are you going to pay 12. 99 for frozen . Iewing of Stephan Engels to join us later. Of course, we have yield moving to ever lower yields. Some interesting issues with disney as well. We have all of that for you, some interesting stuff coming out. Tom keene in ework, Francine Lacqua in new york, Francine Lacqua in london. Frozen it2. 99 for keeps our kids happy. More than expected from the Central Banks of india and new zealand. Is this race to the bottom going to continue and who is next . Tom this is out from the asian fx team at citigroup. In 15 yearseen this or 20, a Research Article on intervention by the treasury of the United States on the dollar. Citigroup highlights japan, singapore, australia, and possibly south korea as being the intervention targets versus renminbi. That is an extraordinary note for an extraordinary week. Always extraordinary, here is viviana hurtado. The China Central bank is setting its daily currency reference rate at slightly stronger than seven yuan per dollar. During the trade dispute with the u. S. , Chinas Central Bank wants to allow more flexibility. At the same time, they want to avoid depreciation and capital slice. India joining new zealand with figure than expected Interest Rate cuts, lowering its benchmark by an unconventional 35 basis points. India cutting rates four times this year. New zealand shocking markets with a half a percentage point cut. Donald trump is like to face a cool reception trying to console anddents of el paso, texas dayton, ohio after Mass Shootings over the weekend. Visits are complicated. Today, shares of disney lower. The Largest Entertainment Company posting Quarterly Earnings and income that messed revenues missed revenues despite the touting of the star wars attraction at the Disney Resort in california. 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. Tom lets get to the data. Equities, bonds, currencies, commodities. It is extraordinary, two days in a row a lift to the market. The 210 spread in the United States, the Great Recession indicator, 10. 44. That is different from monday and tuesday. Oil cannot find a bid. The commodity complex is fascinating. A gold surge. , very important for our conversation, 0. 58. C forecasting zero point 0. 81. Francine i am looking at a similar data check. Stocks are rebounding. Bunds is where we are looking at the most moves. Dove essential banks and futures in the u. S. Higher. Calmer in asia asia. The new Zealand Dollar tumbling after the greater than expected rate cut. The yuan tumbling. I am on yen want because it is a litmus test to risk. In oury dont you bring important guest in germany . Francine commerzbank saying it is becoming tougher to reach profit for that after a fourth straight quarter of following revenue, and warned of weaker results. Joining us from frankfurt is matt miller, speaking to the chief executive of commerzbank, Stephan Engels. Matt i am here with the finance chief Stephan Engels. They are talking about the forecast from hsbc, 81 basis points by yearend. We are already at 58. How hard is it to do business . Stephan it is getting harder to an exterior to an extent, if you believe the forecast. The question is not how hard is it. The question is what do you have to counter the issues . Growingtain extent, assets has been a successful way of dealing with it through the last years and quarters. Lets see what happens and find out how to tackle. Matt that has been your plan, scaling up on the corporate side and the retail side. What are your best practices to make that happen . Scale asou continue to the Second Largest Bank in germany . Stephan you have appropriate product offerings, make appropriate services, and move into digitalization and also mobile to pick your customers. Make sure you grow your loan book to get a better balanced balance sheet. Our growth yearoveryear is a good key measure and indicator for what we have been doing and what is helping us to get through this obviously difficult world. Matt you have got to invest more in i. T. To do that. You also cut costs . You have been trying, have not been hitting your costcutting targets. How can you do those things at the same time . Stephan it is something you need to balance very well over time. ,utting costs in terms of i. T. Which is something that needs investment. We are prioritizing and the interesting part of the discussion is what will happen with the Interest Rates and other stuff, what do we need to do to have the best strategic set up in the short term . Matt what do you say to policymakers and economists running this negative rate experiment . As commercial bankers, what do you say to get things back to normal . Stephan interesting on a personal level, what really changes if you lower the Interest Rates another 10 or 20 basis points . Is there any house that you want to buy additionally . It is unclear what the additional benefit of this low Interest Rate is. Nevertheless, if it happens you need to deal with it and it will put additional pressure on the sector in general. We will need to see how the answers can look. Matt because of the geopolitical issues in the global trade war, they have got to do that to glow dutch row the economy grow the economy and that helps your customers. Does not not make sense . Stephan that is the core benefit of the last years. The question is, does an additional. 2 or. 1 create an additional effect, or are the collateral damages which it reduces speaking about reduces, speaking about pension plans, outweigh the positives . Matt how important is the fiscal side of things. I spoke with ola schulz last week and he said there is no fiscal crisis, germany does not need additional spending and he will not increase his spend on infrastructure. Does germany need to do that . Stephan i dont think that is anything we can see right now. The economy is growing this year, albeit at a lower pace. We will probably see some contraction in q2 and we are going for a growth rate like a percent for next year. In that sense, doing a Fiscal Stimulus Program would be helpful and welcome especially for the Industrial Base, that is clear. Onhink what has been done the Monetary Policy side, and it is unclear whether you can add with additional stimulus additional results. Matt germany is where you need to be when it comes to digitalization and infrastructure . Stephan if i look at our Industrial Base and what we have been doing, we are in good shape. Matt when it comes to your outlook, hitting your profit and increasing your profit over last year has looked increasingly ambitious. When do you expect that to be a problem . Stephan it is more than corporate speak. It is a reflection of the fighting spirit you have in an organization. It is clear if you look at what is happening around us, especially with the escalation of the trade conflict, the easiest way is to give up. Matt how much does that hit your bottom line and your clients, this escalating trade war . Stephan it is too fresh to see what exactly will be the result of the last few days, but we have seen impacts on the Industrial Base. Exports are getting slower. It is having its impact, that is clear. The growth rate in germany is probably around. 4 this year. Matt when you look at the corporate side, which is , what doy important you need to do to get that back up to speed in 2020 . Stephan that has been a successful first half and that we have been growing our new customers by about 10,000. We have added substantial new business with international corporates. Yes, it is a challenge to get this business profitable over the time because you normally start out low. Now you need to go to cross sell and additional business. That is the task for the second half of the year. Matt Stephan Engels with a fighting spirit, from commerzbank. Tom greatly appreciate that. I want to show a chart that any chief Financial Officer of any bank, always in control with a good message. How about, remain calm . I have never seen this chart. Plungingn tenyear is to an ever greater negative yield. That is five basis points, lower yield this morning, moving out toward the twoyear yield. That is a historic chart. This is bloomberg. Surveillance, i need to go to a chart. We are making this up as we go. This is the 30 year bond in the United States. We are throwing this up real quick. July 31, which seems a million years ago, we are now breaking down to what appears to be new intraday lows for the United States longterm p set. We have been focused on europe with that great matt miller interview. How about the United States . Joining us as Conrad Dequadros. What is your call for u. S. Economic growth now, out 12 months . Or you a grizzled optimist on the edge of gloom . Conrad around two and a quarter percent growth this year, pretty solid growth, but that has come down. We have adjusted growth a little bit lower and that is all in the Business Investment side. The consumer is doing great. We have a solid labor market and an elevated savings rate. Our fear is what is happening with the uncertainty related to trade policy in addition to what we have seen on the profit side where the data was revised lower so the data is not as good as we thought at the macro level. Tom you and john writing have watching. About fed analog . Se the golf can chairman powell get on the golf course or does he have to stay in the clubhouse . Conrad the Biggest Issue we have right now is a crisis in communication. It is difficult for us to understand what is driving policy. The fed has enough eight view on the has an up the view on the outlook up eight view on the outlook. It is clear whether those risks will push rates lower. You mentioned the 30 year note yield. The markets are sifting out the move after the rate cuts and looking for a more aggressive on Interest Rate cuts than the fed has, and saying, what is next . What is next is qe. The markets are looking at the euro zone and the fed, seeing Interest Rates that are quite low and being cut they are not exactly sure why. Lower. Riving funds onthe one hand, francine the one hand, the yield curve is projecting protracted weakness. We have Central Banks from india and new zealand cutting. As the World Economy edging close to a recession . Conrad i dont think so. The risks have risen and they are associated with trade. My concern is that in an environment where we do not quite have the corporate profit question that we thought we did, particularly in the u. S. Where profits were revised lower, that declining profit origins margins combined with uncertainty related to trade, an environment where Business Investment has been on the softer side over the last year or so, if that tips further downward and if businesses start to show some restraint on hiring, that is your path to much lower growth and potentially recession. I am not seeing that data yet. On the labor market side, some of the leading indicators are holding up well. We had that yesterday with the jobs report. That is one of the first things that will tip down when businesses are showing restraint. A pullback on job openings and that has not happened yet. It does not look large enough for them to stop hiring. The data on the labor market has been strong and that is what is supporting the economy. Francine Conrad Dequadros stays with us. Lets take a look at what is moving in europe. Unicredit cut its fullyear Revenue Target. Unit in the Online Banking are weighing on the italian lender, down some 3. 1 . This is bloomberg. Surveillance. Monday was a bloodbath. Today is nuanced, but really interesting. I want to go to a bloomberg inside terminal function. Toooes not look good on tv, many moving parts. This is what the pros look like look at, the curves. The headline this morning as the 210 spread breaks 10 basis points. It is flattening out with a vengeance. Francine we were having the conversation with Conrad Dequadros whether this had an impact on his thoughts about a recession. At the margins, this must have an impact on chief executives. They must look at the spread and say, we mail we must invest less. Does investment get worse and worse and does that push the world into recession . Conrad we need to watch the business surveys. In september, we will get the duke cfo survey. We have had trade uncertainty for some time, ramped up over the last few weeks. Shows those investing. If you look at what is happening at the long end in europe, the declines have been even sharper. It is a central bank overhang. People are looking at the Central Banks around the world moving toward easier policy, expecting the ecb will do the same. The moves on rates and qe, there will be less time between them. Tom we will feature Mohamed Elerian with a brilliant editorial. The cliche phrase, it is a race to the bottom, provide nuance to that is it a game of chicken on the highway or a different form . Conrad i am not sure they are doing it on the currency front. When those arguments are made, there is a notion Central Banks are trying to push currencies lower. I dont think so. Central banks feeling they need to do something because of react to risks. I dont agree with that policy. Wem not necessarily saying will look at data that might be lacking, but there are leading data we should be looking at. Tom markets on the move, german 10 year yield. 59. 30 year bond is a 2. 19 . We consider washington, coming up. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Tom good morning, everyone. Francine lacqua in london, tom keene in new york. Curve flattening. Viviana we begin with some tweets from President Trump on south korea. The president tweeting south korea has agreed to pay substantially more money to the United States to distend itself from north korea, and claims the relationship is strong. All this as north korea says the missile toast is a warning test is a warning to the u. S. New defenses secretary says the drills are needed. Gold rising above 1500 an ounce, it has since pared some gains. This year, gold is up 17 . The fbi investigating Mass Shootings in dayton, ohio, looking at the shooters interest in violent ideologies and if anyone chose helped him. Joe biden maintaining a significant lead in the democratic residential race, at 32 , 2 , followed followed by elizabeth warren, bernie sanders, and kamala harris. 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. Tom the markets really on the move. Turning to the bloomberg with the equity lift. Curves flatter. Want to peak with people speak with people like Conrad Dequadros. Yesterday, paul krugman in his wheelhouse. Look at palmetto area and, Mohamed Elerian with cambridge university. He is definitive on an english Cottage Industry which is game theory and the application into with. The rationale for a more aggressive or as some like to say, less accommodating approach toward china, how do you get there . If not then, when . The opportunities to level the Playing Field are viewed as increasingly few and fleeting. Is it if or when . Our expert is Kevin Cirilli in washington. I know the president did not study game theory, but what is the game theory of the white house as they see bond markets price up to global slowdown . Kevin they are looking to september, which is shaping up to be a crucial month for u. S. China trade talks. Larry kudlow yesterday giving a briefing to reporters, and he was asked whether or not they will take this to the next level and the Treasury Department to get involved in the forex market. Says thats no, and chinese negotiators are still planning to come in september. Tom citigroup out with an Asian Research note, speculating on treasury intervention. I have not seen that in 20 years. Do they have the luxury of getting to september or do they need to get to august 15 . Kevin great point. Before september when the chinese negotiators come, there are two deadlines in terms of huawei. Chinese Telecom Company which has been a major flashpoint in the u. S. China trade talks, huawei news likely to happen and potentially even an escalation of which in the shortterm, and the month of august. A source at the Treasury Department told me this puts a lot of pressure on the imf because labeling china a currency manipulator worsens the Treasury Department to work with the imf. There is some changes in the Democratic Party happening in a leadership change at the imf, some interesting dynamics on that front. Francine Kevin Cirilli, thank you so much. Lets get back to Conrad Dequadros. Given what kevin was saying come saying, thenow problem now is using the yuan could be a huge weapon against the u. S. Does the u. S. Back down . Conrad it is kind of problematic for china to use. Over the past few years, they have had problems trying to stem capital flight. They are going in the direction of a further significant devaluation. They will be dealing with capital flight again. They have efforts looking at a longerterm trying to internationalize their currency. That will become more problematic if they use the currency in competitive devaluations. We have been talking about this titfortat. They looked at what the president said thursday last week, they had to respond. This response, and the treasurys response labeling them a currency manipulator, i dont see that as a significant ramping up of the trade war. The countries feel like they need to respond but i dont think this is something that is necessarily ongoing or stops them from continuing to talk. Francine lets say that treasury we were hearing it from kevin we have not heard about this in decades that we are talking about the u. S. Treasury intervening into the fx market. What it had of an impact on would it have an impact on the dollar or what it a symbol . Conrad it would be symbolic. I think it would be a combined effort between the fed and treasury. When these interventions are successful, they are usually coordinated with other countries and that will not happen. There might be a sentiment reaction in the dollar market. I dont think it would be something that would see a sustained move in the dollar. It will be a one off move by treasury, symbolic move, not one they get other countries on board. Tom i mentioned the lineup the white house line at the white house as they have to get to september. The fed has to get to september 18 and october 30. Do they have the luxury of doing that . How do they jawbone the message . Conrad i would love to see less communication but im not sure we will see that. Given how bad the communication has been, i would like to see less. I would like to see the fed tell us what they are looking out on the data, not just risks and something we cannot measure, but what are they looking at to signal those risks are feeding through to the u. S. Economy and something they have to react to . I think the markets are now driving the fed. It would be a shock if the fed did not cut rates again in september. Tom you are picking up on larry and doing and if when analysis. Conrad is it based on the upcoming information and unemployment data . That is unlikely. It is based on risks. I dont think the fed feels it is an appointment in a position where it can disappoint markets. Francine Conrad Dequadros stays with us. Lets take a look athe centralbank action from the asiapacific region, australia shocking with a 50 basis point cut, india with a 35 basis point cut, and thailand with an unexpected cut. That is rolling markets roiling markets, a race to the bottom. Surveillance, Francine Lacqua in london, tom keene in new york. We now bring in the mechanical engineer from penn, david earl. And we do in equities, will rip up the script and do bonds because equities are boring. What do you do in this rate environment, back to our grandparents yields . Change intelligent security analysis . David equities are attractive relative to fixed income so there has clearly been demand for companies with high cash flow paying big dividends. The defensive flow of the u. S. Market has risen quite a bit. Consumer staples companies are at year highs. Tom do you have to sell out and find something that hasnt moved . David we look for opportunities and that is in other areas like financial. Yield curve aside, most large banks are not that sensitive to the long end anymore. And theyor plus two are having record profits and returning almost 100 of profits to shareholders. There is a lot of yield in that area and they are at 10 times earnings where utilities and staples are 25 times earnings. Various ones,ks, have 2 to 3 dividend yields. Francine this is my chart of the day, the difference between the s p 500 dividend yields compared to the u. S. 10 year yield. 2016he First Time Since you can see it higher than the u. S. 10 year yield. How long does this continue . David for a while, because Companies View this as something they need to do for their profit. They should not be returning cash. Y should be returning it they are increasing dividends at a steady rate. We will see more share buyback. There is no point in leaving it in the bank to get 0 and a low Interest Rate environment. This is part of stockpicking. Companies that can grow and pay you back is the best Investment Strategy in this low Interest Rate environment. Francine what about reinvesting . David very few companies will earn their cost of capital. We will look at the earnings for uber and lyft over the next few weeks. They are not earning their cost of capital so if you invest one dollar and get . 80 back, that is a bad idea. The absolutes to heart of the work on cash flow, the vogue is to grow for growth. How does the game and . End . David with some of these companies, when you look at the junkbond market or credit, who would lend somebody money when you know they will lose more in the next two years . How will they pay you back . Tesla, netflix, they have a huge amount of debt and every year they lose more money. Tom what do you do with disney . If disney is a legitimate profitmaking company, how do you discern disney versus the other dogs question dogs . David disney is an Incredible Company and they have the right strategy. They had to move from cable to overthetop streaming, but it will be a big investment period. The problem is, the valuation is at risk now for disney. Tom how do you synthesize the blather we are talking about . Conradyou shut off dequadros world . David the thing about the United States, most of the companies are domestically oriented. A big one like disney is a global champion, but the majority of earnings come from u. S. Consumers and business customers, and the economy continues to beat the rest of the world. You would like to be more u. S. Centric as a strategy and we have gone smaller, because Midcap Companies are mostly domestic and are not affected. Any Consumer Oriented Company in the United States is seeing good returns because consumers are feeling reasonably good. It is corporate spending that has been affected by the tariff issues. 1. I would make, effectively up and take one point i would make effectively up until now u. S. Companies have told chinese vendors, we cannot pass these prices through. The chinese have said, we will continue to make it and sell it to you because we cannot stop producing. Francine thank you both. Conrad dequadros and david earl stay with us. David earl stay with us pearl stay with us. Bonds are gaining. Ofrencies roiled by a series dovish centralbank moves in asia. The treasury 10 year yield falling to 1. 7 . This is bloomberg. Viviana this is bloomberg surveillance. Lets get the Bloomberg Business flash. Iron ore extending an epic selloff. Singapore prices fell as much as 7 . Iron ore has gone into freefall. A month ago it traded for 124 a ton and it has fallen into the 80s. Shares of Burford Capital are plunging. Burford is the latest targeted short seller part of money waters muddy waters. The company have the following response burford has never been contacted by muddy waters and has not had any prior site of this work. We will review the report thoroughly and respond as rapidly as possible. That is the Bloomberg Business flash. Tom markets on the move. I want to show you the bond move, 30 year bond. I set the circle two hours ago and im going to move it back up to show the price up and yield lower that we are seeing in europe, germany, and the United States. As theto bring this up price moves higher with curve flattening. Francine we are seeing quite a lot of market moves, especially when it comes to the asianpacific currencies, on the back of england india and new zealand cutting more than expected. The force is not with the walt disney company, posting earnings that is estimates. Mostafter they opened the highly anticipated Amusement Park and its history and profits fell. They go head to head with netflix in streaming. Joining us now is paul sweeney. David pearl is still with us. I was shocked. They need to compete with streaming so they needed the parks and films to do well in the did not happen. Paul it is a sloppy quarter. This is the First Quarter they are consolidating 21st century fox. Analysts and investors have little guidance, but certainly a big miss on revenue and eps. When people look at the parks business, it was a disappointment. Historically, parks are predicted a predictable revenue and contributor. They launched the new attraction in california that came in lighter than expected, but longterm that will be fine. Star wars content travels really fine. Investors remain confident. The movies, they took a rate down on one of the fox films, but the disney films quarter after quarter, year after year, generate Huge Box Office profits. The big issue will be the ability to pivot to a streaming business, and that will take money,ars and a lot of probably another three to four years before they break even on the streaming investment. If you are a disney investor, you are in this for the long haul. Francine do they have longterm concerns about the star wars attractions . Paul i dont think they do. They may have mispriced it or did not promote it because they thought the demand would be overwhelming. They do need to promote it and be more creative how they price it and integrate it. Just given the history of disney, i suspect they will figure this out and it will be a good driver of growth. Up the last 10 years, 20. 5 . David from what i have been seeing, star wars was so popular with fans that season pass holders did not want to go to the park. It was overcrowded in that one section. It was really a misallocation of park attendance foray period for a period of time. Tom Michael Nathanson writing it up right now. Avril lavigne, Michael Nathanson says, why do you have to get so complicated . It has become complicated. Iger is not a complicated guy. Is it becoming complicated because there is no profits . David i was going backandforth and forth with Michael Nathanson this morning. It is hard for analysts and investors to model this quarter. Michael took his best stab at it this morning, but over time investors think this will work. Tom can you buy disney shares this morning . David i one, because this is a tough yearoveryear. This is the end of the marvel year marvel character universe. Boy the bestr Avril Lavigne song ever . Paul possibly. David pearl,rl, paul sweeney with us. Jonathan ferro and i will consider lower yields, flatter yield curve. Maybe even play some avril. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Alix Central Banks raced to the bottom. New Zealands Central Bank unexpectedly cuts rates by 50 basis points and warns of negative rates. Of lowerbanks warn Interest Rates and margin compression. And the force is not with you. Disney surprises the street with disappointing earnings after bungling the opening of a star wars theme park. David welcome to bloomberg daybreak on this wednesday, august 7. Cbs just out with earnings. They had a nice beat on earningspershare. Also took up their forward forecast on earnings. Alix we are looking at 30 year yields that just hit its lowest level since 2016. One of these things is not like the other. David stocks dont agree with bonds at the moment. Alix which in essence, you could make the argument that this is what fed president jim bullard is referencing