Transcripts For BLOOMBERG On The Move 20160727

Question. It is be prepared. There will be some negative statistics over the course of the next two or three months. They can impact confidence. We are not seeing that impact significantly at the moment. It is keeping a significant watch on that. Haveovernment and bank levers they can pull and are ready to pull them if necessary. Right now, i would not be are going strongly for those levers to be pulled. Manus that is pete redfern, the ceo at Taylor Wimpey. Thank you for joining us today. Anna that will do it for countdown. On the move. On the move is next. Anna it is 7 30 in london where caps on down to the start of european trade. This is on the move. I am anna edwards on site Caroline Hyde in berlin. Good morning to you. Caroline has the morning brief. Caroline good morning. Set for stimulus. The yen takes a dive after a with a ¥20 trillion boost will will and 20 trillion will a ¥20 trillion boost will and trading slop and overall charges hit the bottom line. Estimates. Ats we speak to the companys cfo in an hour. Apple needs sales false applebees sales fall shares surging in afterhours. Hillary makes history. Clinton is confirmed as the first woman to run as the president ial candidate of a major u. S. Political party. There is so much to be digging into today. You have been analyzing the features. A great interview you had with Taylor Wimpey about the implications of a brexit and we will dig into that as we talked to our guests. Talk to metro bank in a little while. Other futures market is opening us up for the opening of trade. It looks pretty buoyant. We could see again as we head into a less than a halfhour into the european open. Up. 4 as you look at the euro stoxx 60. A performing with the dax in germany. Look for Deutsche Bank but lets get over to the Bloomberg Business flash with tom mackenzie. Tom caroline, thank you. The yen has had a volatile morning following reports on the details of shinzo hobbies shinzo abes stimulus package. The Television Network reporting citing unidentified person that impacts will include ¥13 trillion of low interest loans. News agency kyotos stimulus will be more than 28 children yen. The legs ¥28 trillion. Hillary clinton will be the first woman to run for president in a Major Political party. It happened after Bernie Sanders took the megaphone to ask for his former rival to be named as the party nominee. Madam chair, i move that the convention suspend the procedural rules. I move that all votes cast by delegates be reflected in the official record and i move that Hillary Clinton be selected as the nominee of the Democratic Party for president of the united states. Meanwhile, bill clinton paid his own tribute to his wife. She is insatiably curious, a natural leader, a good organizer. She is the best change maker i have ever met in my entire life. Apple shares have jumped in extended trading. That is after the companys apple iphone as he gained no traction with users. The tech giant forecast sales would fall for a third convicted with which was better than most analysts estimated. The shares slumped after they slumped twitter shares as you do as user growth stagnates. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. This is bloomberg. Anna. Anna thanks very much. Lets get straight to the latest in the market. We got david ingles standing by for us. Youve got details on what has been happening in this session. Yes he has it he is joining us from hong kong. David we are talking about how a lot of these expectations in these price actions that we have seen so far. The markets are closed already in japan. Driven by these expectations and sometimes conflicting reports out of tokyo as to the size and the timing of this fiscal stimulus. I have here a when you look at the 10 year yield a japan just to show you how low we got. It has been turned on its head. We are now pushing toward negative. 30 on the tenure. You look at the twoyear, five year, also pushing toward record lows. On the expectation that not only will we get fiscal stimulus but the boj come friday is expected to announce maybe a doubling down. We will see what they announce. Have a look at what the dollar yen at the dollar yen. If you extend this into a two day look, its basically texas to103. 99 it takes us 103. 99. 105. 73 is your level right now. It is not just the top line on how large it is, but which part of that is actually called supplementary or incremental spending. Negated if 25 nikkei 225 close like this. 16,000 6064 here. 16,006 under 64 here. 16,664 here. I am getting mixed up. Asia is looking like this you put living together, it is basically flat asia is looking like this. Everything together, it is basically flat. The world could look totally different come friday afternoon. Anna. Anna i will pick up from here. Yes indeed. Will the world looks different. For more on japans stimulus package, we are joined by nicholas. Nicholas, what do you anticipate in terms of fiscal stimulus first, theres so much in terms of reports. It has been it is had a big effect on the yen. Everything i have heard from the Government People is they are going to try and push through the biggest fiscal package they think they can get away with. Exactly the same as the u. K. And u. S. And everywhere else. Then after big number and you try to find out what they have going out of the government coffers. They have announced a number of 20 children i number of 28 trillion a number of ¥20 trillion. From what i am hearing, it is going to be overwhelmingly in construction. Anna and construction. In terms of fiscal stimulus, we have become used to monetary stimulus dust to a currency. Keeping began under control has been a target for policymakers in japan for so long. What do we expect this size of fiscal stimulus to do for the currency in japan . Nicholas it depends and what the real final number is. Ae yen is likely to take slide on this. Necklacecaroline nicolas, given that we have ¥20 trillion in terms of the physical side. Lets turn our to the monetary side here at your 20 Monetary Policy to inject or stimulus as most economists seem to. Alas theres a lot of lot of them seem to think the bank of japan there arent any more monster by. If they do lose something, they will be firing the last bullet which would be buying etfs. Once they have done so, they will open everyone up over they will open their moving up. My belief is probably they wont. Thinking of economists they will move. That is probably in the price. The risk of return is if you does what they would expect, the market does nothing. If it doesnt, the markets will slip a little. We have been there before. Heres a man who likes to surprise markets. Anna do you rule out any further cutting into further negative territory and Interest Rates . Necklace the last time he did it, it was time very well. Inflation swaps, you can see the whole thing started to fall apart immediately after he did that. He is really shocked that he thought it would help and the currency went the wrong way. Inflation expectation collapsed after that, and he is not his old self. He has been called into element 37 times this year, more than any full year for a decade and a half. I think the chances are the pressures on him to that Interest Rates. The pressure is on to not cut Interest Rate any further. Anna helicopter money, potentially could he denied it earlier in a report with the bbc. He denied it will go into negative territory as well. Nicholas and when i spoke to at the boj says kuroda cannot distance himself from talk of helicopter money in the form described by bernanke. It allior guy said to me depends on what you call helicopter money. Since kuroda came to power, increasing Government Debt ¥106 trillion. Increasing bank of japan holdings. They are monetizing at a rate of 240 . That sounds pretty close to helicopter money to me. They are doing it already. They are printing the money, now they just need to go out and spend some money. Anna it seems that is what a number of analysts are telling us. Nicholas, thank you very much. Up next, we will talk banking, to make profits evaporate as the trading slump and overall charges hit the bottom line. The market open, where watching the Banking Sector. Im holdings and Air France Klm to name a few. We speak to the scoping executives. It is the ceo of the challenger bank, metro bank. It is the chief Financial Officer. Lots to talk about. This is bloomberg. Anna welcome back. This is on the move. We find a david ingles, he has the Bloomberg Business flash. David thanks anna. Europes biggest bank recorded net income, 1. 2 8 billion euros. 1. 20 8 billion euros. This is focusing down to a onetime gain that was not repeated. The bank repeated that it does aim to raise its dividend this year. On the move will be speaking with the chief Financial Officer at tenant like a. M. U. K. Time at 10 00 a. M. U. K. Time. Jetss. Passenger experience passenger delays. It took a one billion euro hit against the cost of fixing fawlty boxes. Mark start deteriorating as fares fall as terrorist attacks have had an effect on tourism. It felt to 6. 2 2 billion euros. For the airline. Apple shares have jumped in extended trading. That comes as the companys lowercost iphone as he getting much action gaining more traction with consumers. Details giant forecast will fall for a third consecutive quarter, the range were looking at here is the rain the range for the current quarter. Our initial sales data tells us the iphone sd is popular in both developed and emerging markets and the percentage of se sales are going to customers who are new to iphone in greater than we have seen the last several years. David that is your Bloomberg Business flash. Caroline. Caroline which of banks profits have almost been Deutsche Banks profits have almost been wiped out. The german Bank Reported income of 18 Million Euros. That is down from 17. 96 Million Euros from a year earlier and is lost half of its market value over the last year. Is Michael Moore. Onlying to be expectations just it is a wide range of forecasts where we can see Deutsche Bank come in. The trading revenue has collapsed. . When there was volatility in the market helping the other companies out there . Michael more michael the. S. Banks posting gains at third of its up was caused by them pulling out of certain businesses or getting out of some of the securitized businesses to try getting capital boost. Another piece that may have been they talk about clients being spooked by all of the talk of Deutsche Bank being in trouble. People questioning deutsches financial strengths and their capital levels. Having so much talk about the bank and its issues seemed to force clients to take a step back. Caroline were following the development on Deutsche Bank at cla the where we blog the ongoing events. This is ongoing in the sense that analysts have moved on to the q a section of that, talking about capital at the bank. Restructuring, a big thing. It has been the focus of the business. We talked last hour about john something is that that is going to be put on today . Michael i think so. This is supposed to be the restructuring year. Sustainably lower costs and higher capital levels. They made some chris some progress and they talk about cutting jobs in germany. The cost piece of it is there. Now it is can they solve the capital piece of it . Capital has been relatively flat for the last couple of quarters. They are looking at a couple of sales and businesses to boost the number. Whether they can get that done this year, i think it will determine a lot of whether this restructuring year is a success. Caroline Michael Moore, think you very much indeed. We get the breaking news that Deutsche Bank will be around 11 around the end of the year it will be speak to another cfo in a moment. Well be discussing the banks with santander ceo. Now, moving away from that, we are going to be eyeing up all of the other stocks you have to keep an eye on ahead of the open up your we are 10 minutes away. A busy morning of earnings. This is bloomberg. The main reason that we are in the market today is in the very strong growth of supply and the market the week we have seen the market [indiscernible] where we are seeing some headwinds [indiscernible] of course the building up of the impact of the terrorist attack and we see definitely a strong impact. That was pierpont swap speaking exclusively to Bloomberg Television following eroding all of the benefits of the weaker fuel prices. It lifted the Second Quarter profits, the status of europes top tourist market really under threat as a result of the terrorismated incidents we have seen in france over recent months. The Banking Sector really a focus for us this morning. Beoline we are going to keeping a close eye on italian lenders, german lenders, spanish lenders. Were going to be speaking to the cfo of staff and their. By santander expedia expectations and saying that beating expectations and saying they are going to be raising going to be keeping an eye on Deutsche Bank. Lightading revenue being and we were discussing with Michael Moore that the reasoning behind that could be the bit of concern about the stability of the letter itself. People not wanting to do trades at the moment, put them back the trading revenue. Unicredit as they mull the stock sales. Now just on the call right , a bit of a catch up on Deutsche Bank. Talk about cost development, depending on i. T. And costs being backed and loaded. The analysts call going on at the moment. You can follow that if you are a bloomberg customer. Well be speaking to close a garcia on the move at 8 30 u. K. Time here it time. Caroline welcome back. Good morning and this is on the move. Im anna edwards, alongside Caroline Hyde in berlin. Wearoline has your morning brief. Caroline tye the yen takes a dive after it is confirmed that fresh stimulus is on the way in japan. Will it be enough to revive the worlds thirdlargest economy. Deutsche banks profit evaporates as a trading slump and overall charges hit the bottom line. Air profits drop. , as the cheaper iphone saves the day. Anna, we have the duty they close eye on what futures are doing. It is pointing to a green day at the moment across the board. We can see Deutsche Bank potentially in focus when looking at the dax. We are up. 6 on the cac 40, similar for the dax. This is currently wei. On the ftse 100. France is pushing higher and air france is in focus. I want to look at the individual markets on the move. Overall, we seem to be in the green when it comes to germany, france, and the u. K. Anna that seems to be the vibe we are getting in european markets as we open up this mornings session. Generally, that is not the impression you get from the stoxx 600. Consumer discretionary stocks seem to be up by the most in. 8 . Of the sector, up. 4 . Stocks are up all of the major sectors are in positive territory, clearly one of the takeaways from this mornings early trade. Lets get into the individual stock movers we have been tracking. Deutsche bank, up. 3 . John cryan saying Deutsche Bank needs to accelerate its costcutting. An overhaul of costs and trading area,n as a weak especially in comparison with what we saw from the united states. By 2. 6 eklm is up Deutsche Bank going unchanged there. 4. 3 . S up by those were impressive according to analysts over at barclays. Some breaking news, caroline. Caroline we have been obsessing about this nintendo stock. Pokemon go has been fueling some appetites, and some concerns. For the First Quarter, we have not seen the implications of the pokemon go of session. We had firstquarter operating losses of more than 5 billion yen, double what expectations were. The expectations called for a 2. 1 billion yen loss. First Quarter Sales came in at 62 billion yen, again shy of estimates. And they are booking an fx charge of 55 billion yen. They are not yet able to show the positive reaction from pokemon go. We will see how those shares trade because it has been on a roller coaster since pokemon go has been obsessing the market action. Anna lets talk about the Banking Sector, but this time from a challenger perspective. Andl revenue is up 63 deposits have increased 74 year on year. Jeffries said the company is said to be profitable at the year end. Turning us now is vernon hill, founder and chairman of metro bank. Great to have you on the program, vernon. Business, thethe highlights and how it has been developing recently. Where do you stand as a business . How far through your ambitious growth agenda are you at metro bank . Vernon metro bank had another great quarter. As you said, our loans are up 110 . Deposits are up 74 . Over 800,000 people bank with us now. We are hardly in our first step of growth. This can be a major player over a very long period of time focusing on service and convenience in the banking world. Anna so, is jefferies right, vernon . We had just a small tax loss of 4 million pounds. Vernon yes, our guidance is, we will turn a profit in the second half of this year. And i believe the guidance is right on. Anna we spoke yesterday to the ceo of virgin money, another challenger bank. There are quite a few challenger banks out there. Do you think this sector must consolidate . Vernon actually, there are not that many banks in britain. Remember, in america there are still 7000 different banks. Here in britain, we have five major banks. There is a lot of room for major change. This is a market that needs to be changed. Termsne and in therefore, of the amount of people that will be moved over by the challenger banks, we are not going to see consolidation. How many more will you be pulling away from the larger competitors, rbs and lloyds for example . Vernon well, this last quarter, our deposits were bo osted by 74 and we have been growing at that rate are more since the bank started. We will see sustained growth for a very long periood of time in the commercial segment and in the consumer segment as we give the British Public a real choice. Anna tell us about your loan book, then. This is a business that has not been through a full credit cycle. How sure of the quality of the loan book can you be . Vernon you can never be 100 sure. This is the fifth new bank i have done from scratch and we have a loan book that is both consumer and commercial banking. Frankly, we feel very confident about our loan book. Caroline loans are up 110 year on year. We will be speaking about the implications of brexit, next. Up next, uncertainty abounds. We hear how businesses are coming to terms with the impact of the brexit vote. This is bloomberg. Anna welcome back to on the move. 10 minutes into your trading day. France is outperforming. We are currently up. 6 on the stoxx 600. The ftse is up 0. 5 . Lets have a little look now at how Deutsche Bank shares are trading down this morning after the company said its secondquarter profit was almost wiped out by a trading slump and overhaul charges. They are now concerned that brexit could have impact on the business as well. For more, bloombergs Ryan Chilcote joins us. We are hearing from Bloomberg Companies aplenty, ryan. What the Deutsche Bank have to say about the potential worries about losing the past rights, in particular . Ryan as a result, the Investment Bank and revenues did pped. They also said that as a result of a brexit, and the political negotiations, which will determine how much Market Impact as all has, they might have to impair or write down some of their assets. Clearly, it is a very big deal. The context when talking about Deutsche Bank, you are talking about the bank that runs europes biggest Investment Banks. Secondly, this is the worst valued Investment Bank out there, out of the worlds nine biggest. Clearly, theyre concerned this is just another cloud out there on our already stormy outlook. Anna ryan, good morning. Away from the Banking Sector, what are other companies br telling utelling us about brexi. Ryan we got a very buried response from companies we got a very varied response from companies today. Some will see an impact because the dollar is stronger on the back of brexit, which will have consequences on their results. Arm, talking about how 1 5 of th eir employees within the u. K. Ar e eu citizens from outside the u. K. They are concerned about their ability to hire and retain up employees. One big theme is no big deal just yet. O, vallejo, which is a car parts maker, saying they only see an upside in the market out there, no negative trend from brexit. Taylor wimpey, a Company Whose Share Price Fell by almost 39 the day after brexit, well, they said things are not nearly as calamitous as some people thought they might be. So, you really have to look around to make comments about how companies see this. Anna lets pick up that theme with our guest. Vernon hill is still with us. We were hearing from ryan there. Some of the comments from corporate have been quite comforting on the brexit front, suggesting things to look quite as dire. Wimpey accused us tooier of being londoncentric. This is consistent with market parameters. probability of a rate cut and that is now down to 50 . The ultimate question is whether we will have a soft brexit or a hard frexit and so far, it seems like we are moving towards a soft brexit. Also, the fact that they want to the a u. K. Solution at negotiation table. Caroline so, let me go back to vernon hill. As a metro bank chairman, you are talking in your results about no change to Customer Behavior because of brexit, no impact on business flows. Why . Is it because they are just optimistic, as we heard from kokou there . Why is this not affecting your bottom line . Vernon it has just happened on the markets are trying to shift. We have seen no affect on our flow of new business, our credible, or our new business. Maybe this will take some of the fraud of the high hand housing market. A personally, i dont see any change in the poor Growth Numbers in britain. Caroline lets dig in. You are not seeing any change, but what about the policy changes . Every economist we speak with sees a rate cut. Is that on making the banks life harder when it comes to deposits . Vernon of course, we would like the yield curve to be higher. We would like it to be steeper. Whether rates go down 1 10 or 1 4 does not change the outlook for our bank. Has the united the brexiteof e of development . Vernon an interesting question. From the political point of view, many see the brexit vote as similar to the trump phenomenon, a rebellion against the establishment. The Investment Community sees britain on sale. I have heard, this is my chance to invest even more in britain with the pound so low. Anna is that something you have seen as well, kokou . Arm, definitely getting the headlines. And i know we have been running analysis before the brexit vote. Kokou i think this is more the case when it comes to ftse 100 companies with a lot of dollar revenues. It is interesting to see the performance of the large cap and the small cap. A lot of these companies are becoming a lot more attractive post brexit. Caroline vernon, has anybody approached your business . Are you on sale . Vernon we are absolutely not on sale, and we are not going to be on sale. Anna just going back to comments we have heard from various businesses, including yours, vernon. I have a chart that shows the forecast for the u. K. Economy. We have gdp figures coming out later today, but they are very backward looking, of course. Analysts expect to see a drop in in gdp over the next two quarters. So, is it just that we are too close to the boat to see what vote to see what the damage will be on the economy . Vernon that is true, but some players can succeed with a low gdp, and some cant. You cant paint it with a broad brush. Everybody has their niche and learns to live in it. Caroline kokou, what about the policy was asking vernon about, the bank of england policy . You said, it might not be about bond buying, but about the regulation that must be changed. Kokou absolutely. One of the big challenges for Central Banks has been the diminishing returns of their Monetary Policy when it comes to negative Interest Rates for example, and the negative impact it has on currency. I think what mark carney has done is very interesting going into regulatory easing. He has taken down the Capital Requirements for banks by 0. 5 , which led to 160 billion pounds of lending capacity. This is probably the new thinking out of the box with Monetary Policy. Caroline vernon, how much lending have you been doing since the brexit vote, versus before . Have you seen an uptick . Has this been an opportunity for you . Vernon it has only been a couple weeks. We have not seen a huge change. Our growing rates are going up, ntot down. Remember, this is a very large market but a lot of market shares to take. I would say, it is pretty much the same as it was before the vote. See what would you want to in terms of opportunities for regulatory change for your own bank, vernon . You think it is time to the less than the capital desire for these Smaller Banks . How could brexit be a positive element for you in terms of the negotiations theresa may is going into at the moment . Vernon the capital burden on the Smaller Banks is much harder than it is on the larger banks. The government has made several statements about it. They are going to adjust the Capital Requirements to make it more fair for the newer and Smaller Banks. That is the number one big change we need. Anna metro banks chairman, vernon hill joining us. Gbobloua stays with us. This is bloomberg. Anna welcome back to on the move. A glorious day here in berlin. The dax is up. 8 . Deutsche bank is tugging this particular index lower as the rest of the overall Market Sentiment tends to be quite bullish. The Second Quarter profit, just a measly 18 Million Euros. They are morning that people might be backing away witfrom trading. Moving on to right move, up 8 . They say july trading are very strong. Brexit, what brexit . Airfranceklm had to do with terrorist attacks and the impact on consumer sentiments, but it does seem to be trading higher this morning. Some reprieve for this particular airline, anna. Anna . About the macro agenda. W lets talk about the macro agenda. We cannot forget that we have a Rate Decision today. Keeping rates low has unintended consequences. The answer to high growth in Financial Stability is not in the hands of the fed, but of the other policymakers. Fed continues with Interest Rates being too low it risks unintended consequences. Markets however, see no chance of a market hiking this time around. Still with us, kokou agboblous. Kokou, if you look at the work function on bloomberg, you can see there is not yet a 50 chance of a rate hike being priced in this year by markets. Not yet, 49 , though. Has been moving up steadily and has changed a lot since june 24. Kokou absolutely. Many do not expect a rate hike this year. They do however, expect two rate hikes next year. This is ultimately, because of all of the banner events. When you look at the italian referendum, for example. But you also have the u. S. Election, which could be a catalyst for more volatility. The fed is essentially telling us they will take their time before going into a full and aggressive rate hiking cycle. Caroline as head of flow strategy, give me a sense of the interesting trades you have surrounding the Federal Reserve and surrounding the united states. Is the dollar going to be pushing higher and where do we move in terms of assets . Kokou i think our ultimate view is that the u. S. Economy is reaching the end of its business cycle. We are expecting a recession to hit the u. S. Economy within two years. As a result, we are buying european equities and japanese equities. And when and comes to u. S. Equities, we do not think that the Share Buyback that has been driving u. S. Shares is likely to persist. Therefore, owning european equities against u. S. Equities is one of the trades we advocate going into the next six months. Anna does that reflect optimism around the earnings story as well, kokou . Kokou it does reflect the fact that a lot of the stimulus by Central Banks have been the driver of financial assets. The same recipe should ultimately lead to the same results in the has been the trading strategy for the last five years. Anna you mentioned just before that the Federal Reserve is taking a very global perspective, and maybe even looking at the italian banking crisis. Risksre the key two facing the economy, and where should we go in terms of italy in particular . Kokou italy is a very interesting story because the nonperforming loans are worth 360 billion euros, and the bulk of them are marked on . 40 on the dollar. You are potentially talking about 372 billion euros of markdowns. This is ultimately one of the key concerns. Anna thank you very much, kokou agboblous. We are just getting numbers nissan, 175. 8 billion yen, which is above the estimate. When we come back, we talked to santander. Hohey s woiit ghong, estcak . Hoestcak. Th lais p hceotas hkeca hyso wn arett ey llsekeg lica hotkes . Cwithstomcain business tean fid wi, pro cthey bould e. Ju ddst aus a czetomid ey age yltowiour rofi pas splgeh pa an ud yo ll year cusomerer wheie thesr ey a aredylrea ju ddst aus a czetomid ey age on dheiresevic pas splgeh pa. Or upder its hare tstn jui, wif c itelan howp grr younebusiss. U ydone t se ethat dveryay odintrg ucin pwifiwiro, fi hthatelyorow usur bs. Ines ascomct. Ness t builbufor sssine anna welcome back. This is on the move. A bit more detail coming in form the japanese automaker. Those are better than expected numbers on net and operating profit. The sales number just flashing up there on your screen. Caroline . Caroline yeah, interesting, these coming from japan. We are 30 minutes into the trading session. One stock we want to check on this morning, santander on the rise after the Second Quarter profit fell 50 as a onetime gain was not repeated. Low Interest Rates and weak demand for credit has been hitting the bottom line. Overall, it is sticking to raising the dividend and earnings for this year. We are now joined by jose garcia cantera. He is the chief Financial Officer of santander, turning us live from madrid. Thank you for joining us on the show this morning. Talk to us about the challenges santander faces. The compression you face in the overall Interest Rate. How are you changing the business to tackle this . Jose good morning. In our case, given the well diversified portfolio of banks that we manage between emerging markets and developed markets, most of the pressure is coming in europe, particularly in spain and in the u. K. But we have been able to compensate most of the pressure with very good performance in emerging markets, particularly in brazil and mexico. Anna brazil, a real area of growth for you at the moment. Talk to us about the challenges in europe at the moment. You have a significant presence in the united kingdom. How has the vote changed your business . Are you worried about the longterm performance for santander . Jose well, has been just a month after the referendum. I think it is fairly early to tell what the longterm impact will be. So far, we have seen no impact whatsoever in the evolution of consumer loans, or the use of credit cards. We have been a little bit affected in the mortgage portfolio. Though, remember there was a change in the First Quarter. Tois very difficult to know what extent it was related or not. Longer term, we need to see what the World Economy does and what Interest Rates will be. Obviously, we are highly committed to the u. K. We think the adjustment will be temporary. In any case, we continue to strive to gain market shares and have a stronger presence in the u. K. Anna with the low Interest Rate environment in mind, what message do you have for the bank of england as it considers whether to cut Interest Rates in early august . Jose well, i think, in our case, again, we are going to be if Interest Rates were to go down, that would affect our business in the enear term. However, what we are much more interested in is the whole evolution of the economy. We will do well if the u. K. Economy does well. So, that is what we will be looking at. Anna the plans have you made, can you tell us, in terms of investing in the u. K. . Lots of businesses based in the rest of europe talked about how incremental Investment Decisions would be threatened by the brexit. Is that the case for santander . Jose not in our case. We have a substantial amount of our capital from the u. K. Our dividend policy is to keep at least 50 of what we make in the u. K. We are not going to change that dividend policy. Looking into the future, clearly, we will continue to invest in the u. K. Caroline what about the political turmoil that affects you in your domestic market as well . Spain, still no government or overall spending plan at the moment. Where do you want to see the Politics Movement go in spain . How much is it affecting your business . Economy isthl, the doing very well. When we spoke after the First Quarter results we said the economy was thriving. It is going to grow very close to 3 this year. Obviously, we would like the political situation to be resolved as soon as possible. The longer it takes, the more these good performers will be at risk. Eantime, theantim economy is doing very well. We dont trust the politicians from the institutionsin spain. So, we will find a solution sooner rather than later. Caroline in terms of the united states, without profit down some 27 . Uponar light shown santander, but it failed the stress test yet again. How do you plan to tackle the Federal Reserves concerns . Is strategic for us. We think we can have value in the u. S. Given our presence in latin america and europe, there are many trade flows between the u. S. And these economies. We can add value to companies and individuals in the u. S. It is just as you have two different components. The quantitative component, which has faired very well. We were the second best performing bank in the quantitative stress test. Had the fedest saying we were making significant progress. So, we want to build a strong bank of its foundation in the u. S. So, we want to have a strong bank bills from a strong foundation. Anna is there anything you will change in the way the u. S. Business operates then, with regards to this failure as you say, and only part of the stress test, for nevertheless, for a third year in a row . Jose we were focused on creating the intermediate holding company. All of our investments in the u. S. Will be included within the intermediate holding company, which was incorporated as of june 30. This is like reading a bank from scratch. So, it honestly takes a very long time. We were putting underneath our Consumer Finance business in the u. S. , and also the bank we have along the east coast. So, this takes time. This is not something you do immediately. As i said, the focus is to create a strong bank for the longterm. Caroline a strong bank in the emerging markets as well . We spoke to the progress in mexico and brazil. How much of your overall revenue the want to see coming from the emerging markets . And how will you respond to Federal Reserve policy as we see rates potentially move higher . Jose in the first half, 40 of our earnings came from emerging markets and 60 from developed economies. We are doing very well in brazil, despite the macro conditions in brazil that are weak right now. Everything points towards a recovery in brazil. Brazil is very important because we are in a substantial amount of our profits from there. Also, mexico doing well. What we have seen recently is substantial flows into emerging markets. So, clearly, so far, i think the impact has been the impact of the potential Federal Reserve and interestrate policy, has resulted in basically flows into emerging markets, and particularly, into brazil, which clearly has benefited santander. Anna really great to have you on the program today. Thank you for your input, jose garcia cantera. Caroline, we have more breaking news from the car sector this morning. Caroline it is all going on in japan, isnt it . Now Mitsubishi Motors is announcing a net loss of 129 billion yen. So, ekeep an eye on that. Anna lets talk a little bit more about what we have seen in japan, specifically around the currency. We have seen a great deal of volatility. The yen yoyo certainly seems to sum this up. The fiscal stimulus announcement might come today. Pick strengthened a little bit when that was downplayed and we had this suggestion that we might get this next week. Then, we started to talk about the numbers. Lets talk more to kokou agboblous, still in the video. Kokou, will kind of stimulus are you looking from from a fiscal perspective from the japanese . Is that where the spotlight needs to fall now . Fiscalyes, though the is something to have already occurred. This is topping out a pretty ambitious fiscal side of things. On the fiscal side, we need to see more investment in the japanese economy, helpin g companies to develop more fx. You gete argument, Interest Rates low enough and companies will go spend and invest. That is nothing to be the case in japan. that is because those companies, when they get all of the inflows because of lower currencies, have not been investing or raising wages. They are actually doing Share Buybacks to improve their equity return, which is a bit of the Collateral Damage of Monetary Policy. Caroline talk to us about the potential trades, particularly surrounding volatility. The yen is weakening once again today. On my bloomberg, i am looking at the one week volatility on a one week basis. You can see the large red circle on your screen, you can see it has spiked the most since 1995. We can see a surge in expectations between the dollaryen rate. Had you make money out of this implied volatility . How do you make money out of this implied volatility . Kokou this is clearly pricing a big move on july 29. One of the ways investors could take advantage of the implied volatility is essentially to purchase shorterterm go options and sell higher struck go cooptions. Some of the other strategies would be to think about calendar structures. You will make the bet that it will normalize downwards after the news is discounted by the currency. Anna would you go anywhere near japanese credit right now, considering the significantly negative yields . Are they going to push even lower . Kokou i think this is an interesting point. One of the issues with negative rates is it is hurting banks margins. What clearly is going to happen is more asset buying, which is similar to what the bank of the ecb is doing with its Corporate Bond buying program i europen. Anna kokou, great to have you on the program. Up next on the program, apples on with ane catches better than expected firstquarter for the tech giant. This is bloomberg. Anna welcome back to on the move. Lets get straight to the Bloomberg Business flash. David a lot of earnings today. But start things with Deutsche Bank. The Second Quarter profit was almost wiped out. We are talking trading revenue slumping and money was set aside for job cuts. Still have been forecasting a loss here of 22 Million Euros. Now airfranceklm, the group says its markets are deteriorating because of the terrorist attacks, which have impacted tourism. The Second Quarter revenues fell 6. 2 billion euros. Analysts have been penciling in 6. 5 6 billion euros. The worlds biggest luxury maker has provided profits in line with estimates. Profits from recurring operations showed little change, 2. 9 6 billion euros. Analysts have been expecting 2. 9 2 billion euros. Forecast thirdquarter revenue that fell well short. Thefirm is struggling to win more advertising dollars. That is your Bloomberg Business flash. Anna . Anna david, thank you. Apples cheapest iphone gained more traction than what was expected with users. Though the tech giants sales would fall for a second consecutive quarter, the profit for the current period was better than most analysts had expected. Here to talk with to the latest is nate langston. Great to have you on the program. Of the se, a surprise star the quarter. Is that fair . Nate that is fair. This device was a bit of a gamble. It was smaller than the rest of the devices on the market, and certainly smaller than the ones apple was doing. There was some real hope that this was going to be the saving grace for a certain period of time, in the markets have reacted nicely to it, too. Caroline nate, interesting that they needed a saving grace because some money bets have been put on expansion in china. They seem to be making up for it, diversifying into other emerging markets. Nate absolutely. China is an interesting one. China tends to have some very big highs after the release of a major new product, which is what we are looking ahead to later in the year when apple releases its next iphone. Also, iphone is doing a lot in to region of india expand. The iphone se was very much targeted at developing economies and it seems to perform very well there, as well as japan. Anna so, a positive reaction. What about the forwardlooking guidance . They are estimating a Third Quarter of falls in revenue. Revenue. How will the analysts be weighing this out . Nate the thirdquarter revenue was better than what everybody expected. Not only that, but this is the product before a major product cycle. Apple tends to release a major product every two yeras. Coming up in september, we are expecting the next major big release, tentatively the iphone 7. Analysts seem very positive at the moment, with this quarter not being too bad, and with a major release around the corner, which is always interesting to see how china takes to those devices, i think it is quite positive and people are quite optimistic. Anna the smart money is on the next monday called iphone 7 . We dont know that for sure, but that is putting two and two together, or three and four. Nate we have had iphone 3, four , and six. So, i would say it is very possible. Anna up next, bill clinton makes the case fo rhir his wifen the white house. We head to philadelphia for the latest on the Democratic National convention. This is bloomberg. Anna welcome back to on the move. 9 53 in ondon and berlin. Lets check out the best performers. The stoxx 600, up 9. 3 . July looks strong. Meanwhile, telecomitalia up 8. 3 , the best day since october of 2015. It is looking good in broadband and is performing well domestically. And peugeot up 7 after profit jumped 32 , anna. Anna Deutsche Bank is down by 4. 8 at this hour, signaling deeper cutting of costs could be in the cards. Unicredit, down 3. 2 . We understand they could be considering a 5. 5 billion stock an exit. D caroline now, lets turn our attention to the u. S. The democrats have formally nominated Hillary Clinton for president , making her the first female major president ial party nominee. Husband and former president bill clinton was the keynote speaker on the second night of a fractured Democratic National convention. He made the case for his wifes candidacy. Kevin is in philadelphia for us. Kevin, how was bill clintons speech digested. Kevin well, former president bill clinton delivering a largely personal pitch for his wife Hillary Clinton, focusing on the first half of his speech with how they met. And that he got into more policy areas, focusing on Hillary Clintons involvement over the course of several decades on issues like health care, womens rights, as well as childrens rights. He presented his wife to the packed Convention Hall as a change maker. Lets take a listen to what he had to say. Bill clinton some people say well, we need to change. She has been around for a long time. She sure has. And she sure has been worth every single year she put into makeing peoples lives better. Kevin clearly, he was not focusing on the disgruntled senator Bernie Sanders supporters, many of whom in the progressive base are still upset with how this process played out. Instead, targeting independent swing voters. This is a very close election, as polls indicate. Anna Hillary Clinton made a surprise appearance. Kevin she did. The democrats focusing on this element of history that was made last night. She appeared via video, along with stars, such as Academy Awardwinning Actress Meryl Streep and grammy awardwinning songwriter and singer alicia keys. She said they had place the highest crack int h the glass feeling. S glass ceiling. Anna and the crowd went wild it seems. Thank you very much indeed. Kevin, at the Democratic Convention in in philadelphia, where history was made. The pulse is next. They have a busy show lined up. Francine lacqua speaking to the ceo of persian group. All of this is coming up in the next hour. Reporter we have a lot to talk about in terms of the macro picture as well. We have the fed, giving us their Interest Rate decision at 7 00 a. M. U. K. Time. The pulse is up next. This is bloomberg. Francine abe we fires his first and jobs on the fourth day. How will that affect fridays boj decision . More cuts from crimes young Second Quarter profits and hillary makes history. Clinton becomes the first woman to run as a president ial candidate of a major u. S. Political party. We are live in philadelphia. Francine welcome to the pulse