Beijing holds purchases of american crops. Salvini pulled the plug. Italys deputy Prime Minister calls for early elections, saying the coalition no longer has majority. Rubber, burning money. Uber posts a loss of more than 5 billion. The stock falls more than 6 in late trading. Matt good morning. Im looking at the euro in pounds this morning as some for fair for repair for european vacations. We are almost at the highest level we have seen since the financial crisis. That this goes back to 1975, quite a long ways. This is 2008. This is the highest point on the chart and we are getting back up there is my point. Watch that closely. Looking red, but not as bad when you look at the green we saw yesterday. Klos across equity markets. The cac was at more than 2 . A loss,res pointing to but nothing compared to the gains yesterday. What do you see on the gmm . Anna volatility seems to be back. Overnight in the asian session, we see very risk on risk off signs as a result of that huawei news. The White House Holding back on approvals. That is leading to riskoff moves. In the asian equity session in general, higher on the asiapacific, so that is one reason to have oil prices remaining quite resilient. We have weaker iron ore prices. Weakness coming through. Aussie bonds rallying. We have a very mixed picture coming through of the asian equity session. I will show you that italian story. Italian yields are surging. You see the lack of demand for italian debt. We see Big Questions about when we are going to see another election in italy. Lets talk about whats going on in china. How did china show restraint with the yuan fixing today . Where the fixing is going to be, and will it be stronger or weaker than expectation . That will be the crucial thing. Good morning. Every morning we are focused on this like a laser. The recent pattern from china is a steady, moderate weakening. When the huawei news broke, everyone was thinking back to earlier in the month. President trump announcing his latest round of tariffs. Sident trump allowed President Trump labeled china a currency manipulator and through the World Markets into convulsion. People are speculating we are going to have another replay of that back and forth. The moderate to , it turned out to be a no drama event. Without the pboc around every oversee, the slow gradual would be, the yuan closer to 7. 2 than seven right now. Lets talk about jgbs. We see the yield coming down. You say this rally is coming to an end. Why . I guess i had been wrong. I saw the yield dropped bit more. Perhaps people thinking the boj is leaning more towards easing policy in some way or another, joining Central Banks around the world. I would look at this with caution. Today. Gdp the second gdp number was good. The First Quarter number was quite a bit higher. This will take pressure off the boj. Furthermore, the bank of japan comes to the market every day to buy bonds. Today it now says it is trimming the size of the purchases in the 10year area. The declineing to in yields we have seen. The bojs target for the yields, 20 basis points below zero, and i think that the 10 year yield will stay within that range. You touched on big themes of the week. Chinese fixing, the move into haven assets. Another one of the big themes has been Interest Rate cuts with global Central Banks. We heard today from the rba about a gentleg surgeon the economy. There was nothing gentle about the aussie dollar and the new zealand dollar. What did he mean by gentle . I think the governor really stood out. He said he gentle turned in the economy. He also said they are ready to ease further if needed. The other Central Banks, we are starting to get laundry lists. New zealand, india, thailand, the philippines, orleans this week. This week. He issued a more positive note. Himself. Entiated among Central Banks, he is probably the most influential central banker. , the note is always looking for trading patterns, something to think about is these rate cuts dont last forever. Have an effect on economic growth. Now. E in this frenzy the message from the rba, we can be on the lookout now for other central bankers to echo this turn,f looking for a looking for positive results of rate cuts. Matt thanks for joining us. Rest ofcheck out the on team by typing mliv your bloomberg terminal. Lets get the bloomberg first word news. The u. S. Is holding off on a decision about licenses for u. S. Companies to restart businesses with huawei after china said it was halting purchases of u. S. Farm goods. The licenses required after the u. S. Added the Telecom Giant to a blacklist. The Philippine Central Bank sees further easing this year. A quarterpoint cut could come as early as next month and policymakers may reduce the ratio of deposits banks much hold must hold in reserve. What we are contemplating is another rate cut of maybe 35 basis points as early as september or it could be the fourth quarter. We also cut another possible 100 basis points for requirement ratio cut. Japans economy grew more offsetted as slumping exports. Consumer spending was a key driver, rising the most in two years. Common sense. That is what Boris Johnson is urging as he tries to negotiate a new divorce deal with the eu. There are less than three months until the scheduled departure johnson says, but he believes there is plenty of time. Indias Prime Minister declaring a new era in cashmere. He claims he is ridding the region of entrenched corruption, but his pakistan counterpart is warning of violence. 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. Next on the program, italys deputy Prime Minister calls for elections. We will look at Political Risk in italy next. Matt welcome back to bloomberg markets. This is the european open. Matteo salvini is pulling the plug on italys Ruling Coalition. The deputy Prime Minister called for early elections thing the government has no longer gotta majority. That sent italian yields surging and the spread with bunds widening. Joining us as bloombergs editor in milan. How long does this government have . Start andthe process the count down to an election . The process is underway. A number of bureaucratic moves are necessary. There is a National Holiday on august 15. We are in the midst of summer vacations. Parliament is on recess technically. Them tois pushing for get back in their seats next week. It looks like he has sufficient votes to bring down this government. It is a matter of time. Anna what does the Prime Minister have to say about this . Salvini wants to do this now. He is certainly trying to cash in on his popularity. In his officeht was not happy at all with salvini trying to control the levers. He wants parliament to decide. He feels he has been betrayed by salvini. He wants to have his say. The chances of him winning a are good. Vote matt thank you. Ats take a look right now futures after some big rallies yesterday. Across the globe, we saw the cash trade jump. 2. 3 . C was up the dax was up 1. 7 . It is not unusual to see a drop in futures after such big gains. Dax futures and ftse futures are unchanged. Now lets get the Bloomberg Business flash. Risk as ubsd be at is considering an overhaul at its Investment Bank. Executives are keen to revamp the decision yielded volatile results. Uber has failed to assure investors of its potential or that it can turn a profit. Reported adjusted sales that fell short of estimates and posted a net loss of over 5. 2 billion, the largest ever for the business. Is u. S. Justice department googles Search Operations as officials step up antitrust efforts. Officials have been meeting with companies that could have grievances against google. Broadcom has agreed to buy a division less than a month after discussions for a full merger fell apart. That is your Bloomberg Business flash. Breaking news coming through on the french economy. Productionfacturing falling by 6 from a year ago. The industrial output numbers unchanged. Theindustrial outputs, month on month number down 2. 3 . The numbers do seem to be worse than anticipated. Number of to be a negative stories around the euro right now. Coveredian one we just and deterioration against expectations. Next, we will take a look at stocks we are watching at the ,pen, including novo nordisk fueled by a nextgeneration drug. The u. S. Is going to implement round four, the final 300 billion of tariffs. A lot of that is consumer related. A trade deal looks like its not going to happen for at least another six to nine months or even post the election. Baseline expectation is no deal. The first thing you are going to see playing out in the data is a pullback in capex. Executives are watching the situations. Data will be less. Services providing companies are less subject to tariffs on imports as well as retaliatory tariffs. Some of our guests giving their outlooks on how the trade war is likely to play out in the markets. Your stocks to watch right from around the newsroom, dani burger looking at italian banks. Paul jarvis covering on the beach, and Annmarie Hordern is focusing on novo nordisk. Lets start with the danish Pharmaceutical Company. The worlds biggest maker of insulin is exciting strong performance, raising their 2019 outlook saying sales are going to come in for percent to 6 , that is up from two to 5 . On thego to paul on beach. Not a business we talk about that often. This is likely to be the biggest in london this morning. Fullyear performance will be below Market Expectations because the weakness of sterling has affected their price competitiveness. This business does not hedge against currencies like its rivals. It is able to offer lower prices. Theyre pricing differentiation has become less and as a result, you can expect shares to be really weak. Matt lets talk about italian banks. Matteo salvini calling for early polls. We have been talking about this all morning. We are seeing ptp yields move higher. This should affect anything sensitive to btps, but especially italian banks. That includes unicredit. A lot of possibilities. Anna thanks very much. All the latest on the stock stories that move markets. First go is the function on your bloomberg or the mobile app. Some of the news around huawei has move markets, huawei calling a developer conference in china. While ways Consumer Business Group ceo currently speaking. He says the u. S. Ban kills huaweis chance to be the top smartphone maker, all on the day we have seen markets rocked once again by the latest on the white houses position. The white house has held off on granting licenses to american businesses to supply huawei. American businesses need a license if they want to supply this business because they added the Telecommunications Giant to a trade blacklist in may over National Security concerns. Back to the markets. Matt lets check whats going on in the bond market right now. Especially italian yields. Spreads are blowing out between yields. And german bund italian yields are rising to 1. 18 . Meanwhile, german yields are falling to 59 basis points. That spread increases as investor jitters grow over the amidstc health of italy political turmoil. Coming up, the market open. Futures are mixed with the exception of cac futures, which are really pointing down right now. After gain yesterday, the start of trading is next. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Anna a minute until the start of cash equities trading. Lets look at what has happened in asia and how that plays into markets. Fairly mixed. U. S. Futures pointing downwards and u. S. U. K. Futures. A mixed bag to deal with. Signs of risk aversion and tension in italian markets as yields flow out and yields spread against the blood flow out, bund blowout. This is the 10 year yield. Pickup in oil prices on the mac of the story suggesting the saudis are willing to do something about the fall in oil prices. Oil price, fairly range bound in the mornings session, which is not what you can say about iron ore as they drop. Keep that in mind at the start of the trading day. Looking at the london market and the mining stocks. London futures point higher, dax flat, cac down by. 4 . That be delivered as we open up the markets for the final trading day of the week . What will friday bring . The ftse 100 fairly flat, flat to negative. The spanish ibex, down. 6 . Will the italian story have read across in the periphery . The ibex is weaker. Little movement in the euro around the italian story. Plenty of movement in btp markets. The euro, fairly flat. The dollar itself, fairly flat overnight. At the start of the trading day, it is dominated by moves to the downside. Mary maybe there is a periphery story. Waiting for the italian market to open up or down. Waiting to see the impact on italian banks. This timeweaker yesterday as we saw a blowout in italian yields yesterday. Lets look at what is going on on the sector picture. Pretty mixed. Emphasis on the downside on the overall indexes. This is the sector perspective and weve got mix. It is staples and health care pushing any upside. Financials, an area of ofativity and the area bright red, i wonder if it has anything to do with the italian Banking Sector. Energy stocks are stronger and health care a stronger this morning. What do you see in individual movers . Financials are under pressure but we are seeing a mixed trade if you look at the breadth. 330 stocks down, 240 up. In terms of winners, novo nordisk raising its fullyear outlook helping that Pharmaceutical Company gained 2. 5 , adding that most of any company to the stoxx 600. You see some big oil companies, bp and Royal Dutch Shell putting up gains. If you look at the downside, it ed down byof banks, l e hsbc but you see the italian banks. You see banko santander, unicredit. Lloyds,p. Paribas, so you see an International List of banks on the downside this morning. Opening prettys mixed, but still with the red arrow on the stoxx 600. Asian shares were mixed, as well. U. S. Futures are retreating after the big gains yesterday. The positive sentiment from a strong session on wall street being offset by trade tensions. Joining us now, jane foley, head k. Fx strategy at raboban let me start with a question spurred by President Trump. He is complaining about the strength of the dollar so we are asking the question on mliv, what impact would a dollar intervention have across assets . What is your take on that . It depends on whether or not you are talking long or short term. Shortterm it would be a massive surprise. I think it is unlikely but with President Trump at the helm, it is hard to rule out totally. If we did see something, it would be a shock. They would have initial impact but im not convinced it would be lasting. Centralok at the times banks have intervened, it is fair to say that generally when weve seen the currency turnaround on the back of intervention, it is because in hindsight, the fundamentals were moving in that direction anyway and im not convinced the fundamentals right now are moving in favor of a weaker dollar. Shorttermve a reaction but i dont think it would have an impact because it is unlikely any other central bank would follow the intervention we might see from the u. S. Anna it is more difficult to intervene on your own, even if you are the size of the fed or the u. S. Treasury. What defines a fullblown fx more . As we look back at this weekend what we have seen around china and the allegations of fx will come up a lot, what defines that . How do we know when we are in one. Jane we will know when we see a lot of Central Banks cutting Interest Rates and with the result there is no real net impact for anyone. You could probably already say we have begun to have one and you could argue a few months ago, as well. The backdrop for a currency war has to be an environment with a lot of Central Banks wanting to see or in an environment of low inflation and weak growth. That is the backdrop we are in. You see Central Banks coming in and surprising the markets with some moves. Centralthe new zealand bank, they were the first to cut rates this year. Earlier this week, they went with 50 basis points and shocked the market. The market had anticipated 25 basis points. The news from the philippines today. Been extremely dovish with the intention probably of surprising the market and therefore getting ahead of other Central Banks. I think you could possibly say to some extent, we are in a currency war already but it hasnt hit the big banks yet. Matt is there any chance of a currency war winner . If you look back in history, do you see episodes, for example, weakening and as a result, selling a ton more cars and it doing good for the economy . Again, with a currency war one of the definitions is it is difficult to have a lot of gainers because a lot of Central Banks are trying to gain the same thing. The net gain is limited and yes, there will be examples with the smallest Central Banks were they can probably get an advantage without too many people worrying but if we walked into a situation with the ecb and the fed on moving. You question, what will that do next to eurodollar . It is difficult to say. Yes, it has a big effect but then early speaking, Central Banks over time have an enormous impact on their currency. Look at japan. This is an interesting case because if you look at the bank of japans trade rated index, it has been languishing at multidecade lows for quite a while now, the last few years. You could say they have been successful in that point of view. You wouldnt necessarily see the same story if you look at dollaryen. Anna what does the weakness in the chinese currency mean for china . I was reading your notes and you made the point a weaker yuan isnt necessarily all good for china and i told somebody yesterday who made the point a lot of their International Trade is done in dollars so it doesnt necessarily have the positive impact you would expect. Jane this is right. They would inputs, be about two sell more goods abroad. Weak, probably reflecting the economy. The c. P. A. Headline cpi headline, strong. Things like food prices, for instance, up strongly. That will affect consumers pockets. That is because they put tariffs on imports but that would work the same way with a decline in the exchange rate. Inflation is one thing and bad for them but for china specifically, what they are trying to do is raise the profile of china as an international powerhouse. They want to raise the profile particularly of the Chinese Renminbi and if it appreciates a lot, that sets them back. Anna they want to play that bigger role, dont they . Jane indeed. Matt you said the phrase textbook economics, which made me think about the turkish lira. If you look at this threemonth chart, you can see the turkish lira has really strengthened and that makes no sense, right . They are cutting rates to spur to calm inflation, which also makes no sense. What is going on with the turkish lira . The storyink part of here is because of the expectation with respect to the fed, as well. We are quite worried about the turkish lira over the mediumterm. For investors to become confident again in turkey, you need to the Economic Reforms and you need to see more of those over the next few years, so yes, we have seen a movement here, which perhaps is a little unexpected but i think it is related to what is going on overseas, as well. Anna jane foley, head of fx strategy at rabobank stays with us. We started with the big picture and of the latest on the u. S. And what that has done to currency markets this week. We also need to give you the latest on italy and the italy story is making itself felt on the European Equity markets. If we look at the grr, break the performance of markets down by sector, the Banking Sector is far and away the worstperforming this morning, down 1. 5 for banks and a host of periphery names. The italian, benchmark is down 1. 8 . A weak performance coming through from the italian markets. Plug salvini pulls the calling for early elections saying the government no longer has a majority. That is why btp yields are spiking higher. We will take a look at what this means for the euronext. This is bloomberg. Anna welcome back to the european open. 12 minutes into your trading day and this is equity markets right now. Down on the italian market, 1. 7 . Elsewhere, a little,. Calmer. Cac, down. 3 . Futures call looks fairly accurate versus those that were flat, so. Salvini is pulling the plug on italys Ruling Coalition. The deputy Prime Minister has called for early elections, saying the government no longer has and majority. The still at rabobank with us. We dont see much of a reaction from the euro on the story. Does it stick to the euro or is this an italian stocks, bank, btp yield story . Jane it could stick to the euro. The election is probably october. That is the date mentioned. Investors could get nervous but this is perhaps a reasonable environment because we do have the ecb and Market Expectations can come in with quantitative easing. We have an environment with bond yields pressured lower so if you like, in terms of scare for investors, perhaps this is relatively contained but if we have a peripheral story developed in europe the next few weeks, anna we could get real volatility in october, then . Jane with brexit, as well. There is the potential for that. Matt italian banks stocks right now, extending losses, down 4. 1 . You saw a long list of italian banks on the losing side of the ledger on the stoxx 600 earlier. Concern, aside from the political problem italy faces. How much concerned the you have when you look at italian banks . Jane the Italian Economy nearly as part of this and when you throw in the environment of growth, the environment of economic pressures, potentially adding to the woes of the italian banks, clearly the story is not good. Environmentn an where growth was strengthening, Consumer Confidence was on the increase, that takes the pressure off of any bank but in this environment, you lay the economic woes on top of the political concerns and clearly youve got a scenario where investors are going to be more cautious. Anna negative Interest Rates, this is a global dominant theme and we touched another record this week. Two records on the amount of negative yielding debt we have globally. Some of this falls in sovereigns. I have sent stories all week about this. A couple have risen to the top that site the same thing and it is to do with the aging population. A couple of commentators pointing out, along with pimco, the number of savers we have, the aging population is changing the supply and demand of money and therefore the time value of money. Does this work for you as an explanation . Jane there is a glut of savings and if we want the best example, look no further than japan because clearly this has been a situation where japan has the sorst demographics and term of aging population in any country in the world. Would have a terrible scenario for the authorities and the bank of japan where you have real inflation,wnward on and real difficulty trying to get out of that issue. Budget problems are a concern. Again, another story for october when we have the impact of japans next consumption tax hike. I think the example of japan, like in many cases, gives us a real snapshot of these effects. Matt i want to show you a couple of charts i stole from john authors. And theyseen these have been passed around but they are pretty incredible. In blue here, the bund yield and in white in blue, the bund price and in white, the dax. People bid up bunds and selling the dax. If you look at the austrian 100 year, it is even more shocking. You see the price on these bonds go up and it reminds us it is maybe not just a glut of savers looking to save their money but the price appreciation on these instruments is still pretty incredible. Are people getting too greedy . Jane usually when we see big movements like that, you see a correction so i think people are getting more accustomed to the negative yield and they are looking for depreciation in the price, but clearly back and correct. There are other connotations surrounding this and what we are also seeing is investors moving more into credit, into corporate bonds, more into emergingmarket corporate bonds. Potentially investors 20 years ago would have had quite a cautious risk profile, being forced to take more risks because of the low or negative yields. Again, this is something that could backfire in the future. Anna now you can get a 20 year mortgage in denmark with no interest. That is what we have gotten to on this negative yield story. Interesting to ask, what turns this around . What changes the direction for bond markets . Matt and i were looking at this news flow around reports that suggested the germans were going to move away from their balancedbudget and that saw yields go higher in germany. Then there was a denial and things moved back again. Is a little bit of fiscal looseness somewhere going to be what starts this ever lower yield story . Jane this is the ever natural argument. Is Monetary Policy running out of steam . Central banks have little ammunition, but it is a little circular because the reason in the last 10 years there has been so much focus on Monetary Policy is because fiscal policy was running out of steam. During the financial crisis, we had significant concerns about levels of debt. If we look at the levels of debt of many countries, they are still concerning. If we look at deficits, they have been brought back into many developed countries but if we look at countries with little firepower in terms of fiscal theding, germany has been one many economists point to and say germany could go but we know culturally, politically, it is difficult for a case to be made for germany. This is where the rumors come from. They will have to do some extra fiscal giveaways and then we get these headlines that suggested they will remain cautious. Beo think the pressure will on germany to do something fiscally in the next few years. A little looser already, but perhaps more. Matt there is a lot of concern about the infrastructure falling apart. If you drive along the autobahn, you see constant construction sites and nobody working on them. Maybe because unemployment is so low already. Jane foley, head of fx strategy at rabobank stays with us. Coming up, stock movers including wpp, soaring after better than expected firsthalf revenue, keeping its outlook, keeping its dividend. Up 7 . This is bloomberg. Matt welcome back to the european open. We are 20 minutes into the trading session and looking at losses across the board. The ftse, down. 4 . The dax and cac off. 5 . 1. 9 . Se mib is down as we reach the end of another week in the markets, lets look at the markets through the numbers. Megawallt numerology for you now. The number one number they moved to the markets this weeks seven. Chinas central bank fixing became a watch. The biggest lost in the yuan since 2015. This episode led to the u. S. Labeling china a currency manipulator, the latest n in the trade war led investors to haven assets. Worldslion, the stockpile of negative yielding bonds. That went up because of the safe haven rush and another number because of the safe haven seeking investor, 1500. Gold futures hit a sixyear high on wednesday, one of the chief beneficiaries of the trade dispute with washington and beijing. Lets get our final thoughts and jane, what do you think about gold as an alternative to negative yielding funds . Does it make more sense to pay for storage or pay the cost of a gold etf rather than paying a country to hold your money . Jane i suppose it does. If you look back to win gold lost its luster, which was the 1990s, one of the reasons was why would you pay storage costs are gold when you can get yield on the Government Bond . Vote seemed very safe assets but now, that is turning where we are seeing more negative yields and it makes sense that people are looking at gold. Ultimately, in this scenario where you have this big push back into negative yields, gold will remain or become significant as a safe haven. Anna thanks for your thoughts this morning. Jane foley, head of fx strategy at rabobank. She will continue her conversation with matt and i on bloomberg radio, 9 00 a. M. U. K. Time. Lets get to our top stories now with Annmarie Hordern. She starts with one mover helping to lift the sector. Wpp, up more than 7 . They kept their guidance. The direction of travel for the company is very encouraging. Novo nordisk, also to the upside 1. 5 . Theyve raised fullyear guidance and seeing sales come 4 to 6 , up from 2 to 5 . It is boosted by a diabetes drug. Unicredit, down nearly 4 . We saw the move in the bond market and now it is hitting the stock market as salvini is calling for snap elections. Matt thanks very much. Annmarie hordern. Considers job cuts at its Investment Bank while an internal activist is in position to become hsbcs ceo. We will talk shake ups in european banking. 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 preorder a new samsung note. Click, call or visit a store today. Headlines for you. Tit for tat, the white house delays allowing u. S. Companies to do business with huawei. Italysalso plug Prime Minister says the ruling majority no longer has a majority. Yields surge. Wpp stock jumps after ebay and instagram have help stem a slump. This is the european open. I am matt miller in berlin alongside anna edwards in london. Anna this is what the stoxx 600 looks like. 412 going down, 179 to the upside. So a bias to the downside, focus of the italian Banking Sector. Lets start with the movers higher. 10 andup by as much as they produced organic sales numbers. This Pharmaceuticals Company in london also going higher. Keiss, also anrt earnings story. A number of stocks managing to buck the downward trend because of the internal growth stories. Lets turn to the downside, here you will see a lot of italian names. Salvini talking about how the governing government no longer has a majority. Yieldss we see the blowing out on italian debt and has a read across into the italian Banking Sector. Unicredit trading weaker. Intesa sao paulo, also weaker. We also see some of the mining names weaker. Lets get a bloomberg first word news update. The u. S. Is holding off on a decision about licenses to u. S. Companies wanting to restart business with huawei. Required after the white house added the telecoms giant to a blacklist your blacklist. Googler has failed to reassure investors. Uber has failed to reassure investors, posting losses. Japans economy grew more than expected in the Second Quarter as a stronger Consumer Spending and Business Investment offset slumping exports. Gdp grew 1. 8 . Consumer spending was a key driver, the most in two years. 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. Anna ubs is considering a drastic overhaul of its Investment Bank. Coeds sources say coheads are working on a shakeup of the plans could entail hundreds of job cuts. Ralph joins us from rome. Why is ubs doing this overhaul . Going first of all, this is not been one of the strongest divisions. It is something they have got to look for improvement somewhere with. It has been quite volatile, the last quarter was very strong. Trading is something hard to bank on. More importantly, the focus has been wealth. What we have been reporting before and what we are hearing now is that it is more about ways to integrate more Investment Banking is something they would see as a service to attract wealthy clients and put managers together to work on packages for which clients. Rich clients. Matt how is the Investment Bank doing compared to other units . Said, its not one of their better units. On the deal side, we are looking at a reconstruction of the upper management. It is more about bigger job cuts possibly. They might be looking at a retreat in trading. It has not been one of the stronger things, but this is not necessarily an indication they are throwing in the towel. Anna meanwhile, management shakeup. Hsbc surprising the market. Now we have got a story that suggests cfo, who has not been there that long, is seen as taking the ceo position. What is the latest there . It means the choice might not be the acting ceo. It means that she appears he appears to be a rising star. He has been described as an internal activist. We have seen some of the things he has been saying sound more like an angry shareholder sounding like why arent we fixing this. I should mention, he was brought in for quite a lot of money. They may have had great ambitions for him for the very start from the very start. He has been very serious about cost savings and was a big job cutter at rbs. That will be key. Matt ross, thanks for joining us. Bloombergs finance editor joining us from rome. Pulls the plug on the Ruling Coalition calling for early elections. That sent italian yields surge in. Surging. Guests andare our the chief economist for the Italian Ministry of finance. First, what do you think of the political situation . What kind of outcome do you expect . First of all, this political crisis is the most unlikely crisis. Parliament isn already in recess and has to be reconvened to have a noconfidence vote to trigger a crisis. Secondly come it is just ahead of the budget. The budget season is always perceived as a difficult time for having elections and stuff like that. It is a very unusual timing, so to speak. Salvini is a big gambler. He is trying to get the most out of the rising opinion polls and crystallize a much larger majority in parliament. He is claiming it was no longer possible to work with the fivestar movement and government andn the Tipping Point was devoted on the Rail Connection between , for which thee fivestar movement voted against and the league voted in favor. However, there might be deeper divisions within the government. Be trying to get the most and even an outside majority without relying on any other party. Anna if that is his intention and he wants to capitalize on his popularity and try to secure a majority for the league, what would that mean for italian finances . In the past, the shifting government was not necessarily taken as a negative event on the assumption it would have led to a centerright government. But we are no longer talking about centerright. Salvini is trying to get an alternate majority with the brothers of italy, which is a party close to its own. It would be clearly a right to government. Right government. A government with a clear ajective to what he calls sharp reduction in taxation, which italy can hardly afford. I think it would be worrying for investors. We have seen signs that markets are getting jittery. Happen to needs to get italys economy that country back on track . We need more nominal growth. Given that the high level of debt to gdp and the constraints on policy, italy cant get out of the situation. Growth,tronger economic you need to go through a number of deep reforms which im not sure the league might deliver. The only project that seems to be high on the agenda is a sharp reduction in taxation. Other than that, there seems to be no overall strategy to prop up the Italian Economy. , no suchnks very much thing as a summer lull in the italian political story. Lorenzo, former chief economist for the Italian Ministry of finance. Bloomberg economists see the u. K. Contracting in the Second Quarter. Can the country avoid recession . We look ahead to the data due later this morning. This is bloomberg. Matt welcome back to bloomberg markets. 45 minutes into the trading session, looking at red arrows with the dax down almost. 5 . Mib down. Ee the ftse stay, ity is here to looks like. Set to spread and a weeks that such trade conflicts saw trade conflicts. Nerves remain frayed in a traditionally rocky month. Here with more is dani burger. Dani its august, when traders take off for the month. Low sos volumes are volatility is high. That has been true, especially when trade tensions pop up. One of the remarkable things is how we see traders flocked to protection. Is tail Risk Protection against extremist wings extreme swings. You can see demand for these options has picked up over the last week. The level has gotten so high, it matches what we saw in 2018 when the vix exploded. That does gives you an idea of how concerned traders are. Are of the favorite trades getting hurt by this renewed volatility. It is no secret that it has made the carry trade very popular. Basket,is a diversified and you can see it has been taken to the woodshed. This trade needs low volatility to sustain itself. Instead, we have seen fx volatility crop up. It means the carry trade, once the favorite, is to be hurt massively. Anna thanks very much. Could we see further volatility in u. K. Assets . Bloomberg economics sees the countrys economy contracting slightly in the Second Quarter. Is a seniorow european economist at legal and general. Good to have you with us today. We brace for this quarter is gdp number, it is expected to be flat. Negative, how much do we explain that away by the stockpiling we have seen . Extent, we sawe much stronger than expected gdp, save the stockpiling. Spillover over into other domestic demand indicators. Business investment, which had until the First Quarter fallen. This is related to Contingency Planning and the like. And a small negative versus a small positive, it is still pretty weak for the Second Quarter. Thatave look at the fact we are seeing a significant slowdown from the First Quarter. Anna quite extraordinary. Matt i wonder what kind of tailwinds the weaker pound provides. Hetal i think that, to some extent of the weaker pound does help improve competitiveness, but only to a point. We have relatively high import content, so any competitive advantage we get is stalled by the fact that import costs have also gone up. We saw the same on 2007, much bigger depreciation of sterling. And when we think about the environment of global growth, it boostd to see a big coming through to exports. Anna matt keeps mentioning the weaker sterling, im due to go on holiday which is why he is doing this. He is goading me. The bank of england, according to markets, theyre pricing in the bank of england cutting rates after mark carney leaves. What is your expectation for how they platonists . Play this . Hetal given that we are facing this bimodal outcome, the bank of england base case, or a significant tail risk to the england the bank of showed with their forecasts they have to tread this path of assuming there is a transition. Dealn the event of a no that we have heard from a number of members they would be willing to cut rates. On top of that, theyre doing a doing vasts quantities of cuts, making sure banks passed on those rate cuts as well. Sibling similar to the tltros. Anna the full toolbox. Matt i am not going and goa ding anna, there is just a motorbike im waiting for in sheffield. We are seeing at the euro really climb against the pound here, as you can see from this chart. Does it continue if the ecb cuts rates and brings back bond purchases . Hetal we have to bear in mind that sterling has fallen quite significantly. Of may, the costs time of the last inflation report, we have seen an 8 fall. Both against the euro and the dollar, quite consistently. This pointthink, at if we saw a no deal outcome could certainly fall further with the ecb easing and the bank of england still in this state of paralysis. If you dont know what the outcome would be, we could see further weakness. Mehta, senior european economist at legal and general. Uber dives in late trading, can the company do anything to convince investors at can turn a profit it can turn a profit . This is bloomberg. Matt we have got breaking news. The german owner of monsanto is saying it will propose an 8 awayon settlement to wipe 18,000 u. S. Lawsuits. Is proposing to pay as much as 8 million to settle more than 18,000 u. S. Lawsuits. As a result, the stock is rising, spiking up 8 . It should be pointed out that 8 billion for 18,000 lawsuits works out to less than half 1 million per plaintiff. And over the last three losses buyer has suffered bayer has suffered, the judge has awarded 50 million to each plaintiff. So the question is, is that enough . Investors are taking it as a positive sign. Anna lets talk about some earnings stories that developed in the u. S. Last night. Afterlumped in late trade Second Quarter results slumped below estimates. Coming in at an eye watering 5. 25 billion. Joining us is immediate and technology analyst. Lyft seems to be doing better, is that whats going on . Its hard to compare directly. Lyft is a u. S. Company, uber is global, but does seem the momentum is stronger. These are very volatile markets and its hard to draw too many conclusions. I think one of the issues is is doing better managing analyst expectations. Matt thanks very much. Unfortunately, weve got to get back. Im looking at the prompter and got the screen. Screen. E billion isarlier, 8 the proposed settlement for 18,000 u. S. Lawsuits. Investors really like that number, you can see shares up more than 11 . Again, this is interesting. This works out to come if 444,444 per plaintiff. Bayer last three cases, has been forced to play 50 50,000. Pay anna this is bloomberg. Francine the White House Holds off on a decision to let u. S. Companies restart business with huawei. Salvini calls for early elections but the Prime Minister says he is not going anywhere. Rating, thee star ridehailing giant posts the biggest losses on record. Shares plunge in extended trading. Welcome to bloomberg surveillance. Quite a lot going on in the markets