Transcripts For BLOOMBERG On The Move 20160729

We hear from both ceos. Man group exclusive. We speak to the man taking charge of the worlds biggest publicly traded hedge fund. Dont miss the conversation with incoming ceo luke ellis. Caroline less than half an hour to go until the market open and great sense of earnings interviews. Futures currently a little bit lackluster, but we are trading higher. We are seeking overall were seeing overall an increase on the board. Apologies, i just got to scroll through to get you to the right screen. Were having if you technical glitches. Having a look at some of the asset, it is all about the bank of japan, the affect on the yen. Were seeing the yen. Dollar falling, yen trading higher. 1. 2 , but i want to focus on commodities as well. Worst month in a year for wti crude. Were seeing inventories pick up. Lets have a look at the key news. David ingles. David thanks, caroline. Hillary clinton says america is at a moment of reckoning and has belittled Donald Trumps claims that he alone can solve the nations problems. She accepted the democratic nomination for president. Clinton said the u. S. Can only advance when members of each group work together. I will be a president for democrats, republicans, independents, the struggling, the striving, the successful, while those who vote for me, and those who dont, for all americans together. David alphabet has beaten sales. That is thanks to the business bringing in more money thanks to a swelling user base and cost controls. The firm is also investing in new areas, from cars to health care, as it looks for the next big thing. And, the banks now. Ubs Second Quarter profit slipped 14 as well management and Investment Banking generated less revenue. Ceo Sergio Ermotti told us that client activity is extremely conservative. Global news 24 hours a day covered by more than 2600 journalists in more than 120 countries. Anna thank you very much. David ingles with the headlines. We are getting headlines coming through from the bank of japan. Governor kuroda, his press Conference Starting in tokyo. He said the boj decided to strengthen their easing today. They stopped short of increasing the amount of online of bond buying they are going to do. They added easing to stop sentiment from worsening. This is what kuroda is saying now. The boj easing will help support government actions. Stimulust is pushing and structural reform. Lets go to tokyo. Great to have you on the program. You make of these latest comments . This is designed to go alongside with government activity. I talked to bob parker at credit suisse. He said they are really passing things over to the fiscal forces in japan. Yes, good morning. It has been busy here. The government has already come out that they appreciate the bank of japans move. The increased purchases of etfs to 6 trillion from 3. 3 trillion yen. There has been a mixed reaction in stocks. Bond yields are up in the yen is appreciating, which is not good news for japan. A lot of economists said they didnt do a lot today, but they wanted to say to the government that we are with the game, on board, so they did a little. They seem to have satisfied the government for a little. Anna they seem to be resolutely sticking to their target. They say they will it the target during 2017. What policy are they going to inject next . What is the outlook, do you think . We had some amazing statistics is morning. he boj is targeting a 2. 2 inflation rate, but prices are declining 0. 5 . That is worse than when kuroda came into office in april. This got a long way to go. Bojmately, people think the will come again later this year. Theyve already flagged in todays announcement that they are looking at how the policies have worked together. It seems like the yen has appreciated. That is the last thing the japanese want. Anna thank you for joining us in tokyo. Kuroda still speaking in tokyo, saying they are expecting cpi to hit 2 target during 2017, but the risks are high. Lets get this all to our guest, Luke Hickmore. Great to have you on the program. The boj, governor kuroda admitting that there are high risks surrounding the forecast of when japan is going to get to this 2 inflation target. Lots of people have suggested they need to get rid of this target. Luke whether they meet nominal gdp targeting rather than inflation targeting, this debate has been going on for years. Today it makes a lot of sense. Gdp nominal in japan. Move away from this inflation target and get more into thinking about growth. Weve seen the bank of japan get to the limits of what Monetary Policy on its own can do. Your point about baton passing is on point. Lets see what they are going to do there. We need to see that quickly too. Caroline you said you are expecting disappointment today. What are you anticipating in september . Japans got an awful lot of problems, not least of which is the demographic one. It is not going to be easy. Perhaps what we see is around 1 , 1. 5 of fiscal stimulus into the economy. That could be tax cuts, more Infrastructure Spending. Dont think were going to see ben bernanke helicopter money, but i think were going to see abe pulling out his third arrow using it as much as he can. Caroline give us a sense for where we treat this, what you are looking at. The yield is crunching lower. Weve seen a spike in the debt. How do you trade this, given were seeing ever higher yen . They seem to be fighting a force they cant win. Luke they run into this problem of a haidi lun and lower inflation high yen and lower inflation like we were talking about. 10years isese something i really have trouble doing. It is the same thing you seeing from a lot of japanese clients. Looking overseas, getting mandates for european assets, sterling assets, dollar assets, right across that fixed interest spectrum. That is the sensible thing to do. Keep pushing the boundaries and hopefully we can find some way of geeking out a few games eking out a few gains. Anna bob parker told me there is a five times multiplier on infrastructure projects. It makes the question why we havent seen more infrastructure investment. Sticking to the japanese case, would that be a way forward . Does that risk they move into helicopter money territory . Luke theres always a chance that is where they go to finance it. They asked the bank of japan to step up. Youve got to have the Shovel Ready Projects to make a difference quickly. This could take 1, 2, 3 years to start having an impact on the japanese economy. It is whether theyve got the patience, the political will. These things take time to get off the ground and you have to be quite targeted. In japan, supporting the Elderly Population would be somewhere you could spend a lot of infrastructure. Inflation should help too. Redistribute wealth as well as get the Infrastructure Spending in. Starting to see really low unemployment in japan. The conditions are there for all of it to improve. It just needs that final push. Anna governor kuroda talking about fiscal and Monetary Policy mix increases the economic boost, but he doesnt think the boj has done everything it can. He says it has room for deeper negative rates. We will watch what happens to assets. , thank you very much. Stays with us. Caroline . Caroline thank you. Coming up on the show, ubs beats, but ceo Sergio Ermotti says client activity remains conservative. Then, a deal in disarray. Sterlings fall leaves some investors unsatisfied. Mega merger. We speak to one among them. Conversation with the incoming ceo of man group. This is bloomberg. Anna welcome back. This is on the move. You are looking at live shots from the bank of japan, governor kuroda speaking there. He says negative rates are having a positive effect on the economy. He doesnt think that bond purchases have come to their limit. Reiterating again and again, were not at the limits of negative rates and quantitative easing. The yen hovers around 103. Lets get the Bloomberg Business flash. Heres david ingles. David lets keep things in tokyo, where shares of nomura surged after it reported betterthanexpected firstquarter profit. Net income was three times more than what analysts expected last letter. The brokerage also announcing plans to buy back more shares. 31 to just over 30 billion for the Second Quarter. That the analyst estimates. The firm cast thirdquarter sales that they Beat Estimates. ,arclays Second Quarter profit 1. 9 billion pounds pretax loss from the union that houses these businesses. That is your Bloomberg Business flash. Caroline . Caroline thank you very much. The more breaking data. French cpi numbers. Slightly coming in lower than had been anticipated. 0. 2 growth in core cpi. The estimate had been for 0. 3 . Where is that 2 target . Intoar themes across japan the eurozone. French gdp missed earlier as well. Ubs reported earnings that Beat Estimates this morning. Profit still fell 14 . Ubs ceo Sergio Ermotti spoke to bloomberg about the results and the challenging business environment. Sergio im very pleased with the strong quarter. If i compare it to the Second Quarter of 2014, which was a miss in order, we are up. In absolute and relative terms, very strong results across all businesses. Quarter, therst phrase was paralyzing volatility. Is 2016 going to be a year that we have to get used to subdued activity . Sergio it looks like there is very little visibility about the near future on all fronts. Macroeconomic, geopolitical, and clearly this is translated by client risk aversion. We can measure it in terms of Cash Holdings. The average Cash Holdings of our clients outside the u. S. Is 28 . 22 , which is the highest level we have been seeing for a wild. It is a challenging environment. Anna Sergio Ermotti speaking to manus cranny. Us in theill with studio. Ceo andto the barclays he was putting up a fight for european Investment Banking, saying the Barclays Investment Bank has performed well in the last three months. The question came from the contrast in hell american banks have been doing against europeans. Luke weve seen this in some of our businesses. Completing [indiscernible] commitment to the market, to the balance sheet, and the confidence of using it, has made a big difference to the americans. The europeans in particular care to back on their use pared back on their use of balance sheet. Caroline give us a sense of what we are anticipating as we going to the stress tests later today. Weve seen such worries about the italian Banking System. Perhaps some shocks could come from the larger lenders. Are you interested in the stress tests at all . Looking,will be back but it is going to be important to help us form an opinion. Were going to be watching deutsche bank. Were going to have to see some reaction from nps and monte dei paschi. We should get some sense of a deal. Today,eds to happen before the stress test. Those are the key highlights. Other than that, riskweighted assets have been coming down. I dont think theres going to be many other surprises. Anna famous last words. Anything can happen. Are they cheap enough for you yet . Got a chart that shows how cheap they are compared to the sector. They are getting cheaper and cheaper compared to the sector but theyve got a lot of problems. Luke if you are buying equity in banks, you need to confident about the outlook. That is really difficult ask at the moment. Whether this is cheap enough or not, im not sure. In the mediumterm, you could probably get paid to wait a little longer. Caroline Luke Hickmore staying with us. We are moving from banks to beer. It is all about ab inbev, the brewer that reported earnings this morning as a deal with sab miller looks set to happen. This is bloomberg. Anna caroline welcome back. One stock youve got to keep an eye on, ab inbev, profit missing analyst expectations. They did report earnings that managed to rise. Estimates atsing the moment in terms of ab inbev. We want to keep a close eye on the figures coming out of the post brexit collapse in sterling as some shareholders object to the terms of the proposed takeover of sab miller. That majornderstands shareholders say that newest bid revised one. More from Aberdeen Asset management. Your house is quite a Significant Shareholder in sab miller. They were putting of a front and been happening. They didnt like it too much. They wanted more money coming in from the sab miller front. You are in the debt of ab inbev. Are you liking the deal as it stands . Luke this pushes leverage up again for ab inbev. They go for a cycle, due in , that is when we buy. Waiting for it to get a little bit cheaper, which is not easy. Particular, youve got the time your entry. Anna you said youve seen them do this before. They build up their gearing then reduce their debt and you anticipate another deal is coming. Going to take a long time this time around. Normal cycle could be a 2, 3, 4 year cycle. Getting your timing right, thinking about that from probably more of a longerterm investment than we have in the past, will be important. Right at the moment, it does look rich. Leverage will rise. Watchmeanwhile, we will for how the shares opened up. Thank you for joining us, Luke Hickmore. Exclusively, we will be joined by the incoming ceo of man group, luke ellis. That conversation is coming up next, right here on bloomberg. This is on the move. Weve got the market open next. The market is expected to open on the front foot as this man keeps talking, governor kuroda at the boj. This is bloomberg. Anna good morning and welcome to on the move. Hyde inngside caroline berlin. We are moments away from the start of the european trading day. Caroline at the limit, boj requires the yen surges in disappointment. Mixed bag for banks. Estimates. We hear from both ceos. Men group exclusive. We speak to the man taking charge of the World Biggest publicly traded hedge fund. Dont miss this conversation next with luke ellis. Marketrevving up to the open. Future seven painting a mixed picture. We have been signaling we are on the green. Laggard seems to be the when you look at the futures market. How will some of the earnings play and how will our cleese play barclays play . 10 seconds in. Let us get how we have open. It is up 0. 3 . The cac 40 climbing higher. Climbing up into the green, up zero point 4 . Such a wealth of earnings report. We will dig into ubs and how it needs while barclays missed. Anna a lot in the mix this friday morning. Let us look at how the markets have opened. Where weet an idea of are seeing the moves to the upside in the downside. Broadly speaking, it is a positive session shaping up around europe. Financials leading the way. Utilities are not are not far behind. Consumer spending as is the industrial spending is also up. Stocksget to some of the specifics for you and have a look at how they are performing. This hour. By 2. 3 earnings missing estimates on latin american downturn. That is a headline coming from Bloomberg News in terms of what is driving there. The takeover story. Under pressure in some of their western markets so they went on the hunt for another deal and boy did they find one in the shape of sae sab miller. Hoping this one will stick. Ubs just opening fairly flat. Thisple of ways to slice one. The numbers were better than estimated but on the other hand, there was a quarterly profit fall of 14 . Certainly not standing his most enthusiastic. Talking about the challenging environment. Is open justver over 1 . Missing some analysts estima tes. A lot of news coming out of the boj this morning. Caroline governor kuroda still speaking. They are resolutely sticking to that 2 target. The boj will not alter the statement that they are aiming for a 2 target on inflation as soon as possible. Even though we see cpi continuing in negative territory, they are looking to drive at higher to 2 as quickly as possible. Two minutes into trade. Now, let us talk about the Worlds Largest publicly traded hedge fund. Ceo who will a new start in a few months time. Luke ellis is with us here in the studio in london. Congratulations. You are taking the helm after mandy moved over to best man manny moved over to pimco. Give us where you see the performance of men group going . Luke ellis the easiest answer is that manny and i have been working together. It was very much a Management Team. The strategy is our strategy. The new strategy will be more of the same, essentially. That is not an exciting statement but that is the truth. Diversifying business continues to be the right thing. Concentrating on performance and serving our clients it is not that complicated a business, actually. Assets continuing to fall. You talk about diversification. Could that be through m a . The us paul is just a currency affect that we have seen earlier also. Japan was pretty negative over the first half of the year. You have a natural wall in the a aum from that. We will be very disciplined in looking at anything. We look at a lot of opportunities. If we find something where we like people, where we believe there is a true source of output that we dont have today, and where we can make the numbers work for the shareholders, then, yes, of course, we will do something. If it doesnt meet that criteria, we wont do anything. Caroline talk a little bit about the different types or parts of your business. The computerdriven parts. Prospering in the wake of brexit. Take us through the human side and how their funds your funds are positioned . Moves we havee seen in bonds and affects since the brexit vote and fx since the brexit vote it has been a reasonably nice time frame. We have a different difficult second half i had of us were markets given that here in europe we have the italian referendum coming up, we have relations in australia, we also have the whole donald trump question coming up later in the year. We expect the second half of the year to be a continuation of the volatile market. Ahl that sounds good for then. This geopolitical confusion we have with the global trade environment that sounds good for you. Luke ellis one of the things cannotrn is that you predict when the returns will come. I would never try to predict forward returns. At managementlook businesses and think that recent performances are a good prediction. The recent performance does not tell you much where hedge funds it will be tomorrow. Caroline thank you very much. El group copresident luke lis staying with us. Coming up next, Business Leaders on brexit. Discusses thers uncertain discuss the uncertainty. We have more from tokyo on the doj decision. Ubs talks about brexit. This is bloomberg. Caroline welcome back. Let us have a look at what is coming out of the bank of japan. Governor kuroda is saying they will communicate well with the government. They did not feel any government pressure before todays decision. Only sing that they did not have a cut to the rates. 2 olutely sticking to the target. They will not alter the statement aiming for the 2 as possible. N all eyes on the bank of japan and governor kuroda. You have a market check ahead of these movements we are seeing across the board when it comes to the bank of japan. Anna let us look at what the markets are doing. You can see the ftse 100 is a clear laggard. The Oil Companies are losing ground. Shell is under pressure, bp is under pressure. The stocks generally speaking are up by 0. 4 . The dax and the attack both in and the cac both in positive territory. David Hillary Clinton says america is at a moment of reckoning and has belittled donald trump saying he is the only one that can fix the countrys problems. Clinton says the u. S. Can fragmentnly when each of society will work together. For will be a president democrats, republicans, the independents, for the struggling, thus driving, for all of those that for me and for all of those that do not. David googles Parent Company earning estimates thanks to a swelling mobile user base and better cost controls. The firm is also investing in new areas from cars to health care as it looks for the next big thing to replace its aging though still profitable business. Toes at amazon gained 31 30. 4 billion beating analysts estimates. Thirdquarter sales may also beat analysts estimates. Britains First Nuclear power plant in more than 20 years. The u. K. Government says it will not make a ruling until later this year. Df already operates 15 Nuclear Reactors in great britain. Global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Earnings season is in full season and ceos around europe have been waiting out the impact of brexit on their businesses. Here is what we have been hearing. Are entirely committed to the United Kingdom to our customers and employees. We do manufacturing in the u. K. We expect a slowdown in the economy next year. This will have an impact on the u. K. Advertising market. If there was good news relating to brexit it is that as investors are back in the market trying to understand what to do. Wondered if we would see a slowdown post brexit and we have now. Investors are moving more quickly on their mortgages. The thing that is most important to us is that we keep trade conditions good. We are not saying that we have seen all of the impacts. Somerterm, there may be longerterm impacts on the market. Effect onseeing no our credit book or our growth numbers. London is a Dynamic Growth market. There are political uncertainties on the horizon. It is too early to say. Until article 50 is triggered we will continue to operate in the eu and under their frameworks. The executives from european businesses reacting to the brexit vote and what it means to their businesses. Luke ellis joins us now from man group. Movementoned bonds, fx have been good for systematic macros. Give us your thoughts on brexit and what it means for the city of london. A big question, a big topic of conversation. Everyone is talking about it but i am not sure we know much more today than we did a month ago. What one could say is up for Asset Management it is unlikely to mean much of anything. We are all set up. The market is set up already to run on short funds in europe. Obvious there will be any impact on Asset Management. It is more difficult for the banks given that it is easier for government to push them if they have to move people. One could see some impact on the banks. To me, brexit is just part of an ongoing process where we have an electorate voting for things which are essentially more about globalization. It is not suddenly going to happen. In the next two months. Caroline in terms of opportunities, interesting that we have seen far more europe hedge funds growing up. 16 launched in the last quarter have been europe focused. Are you anticipating more competition . You want to focus yourself when it comes to European Investment . Luke ellis i suspect that new funds opening up is a bit of coincidence to be honest. Look, we invest across a very broad range of markets with different styles. Keep adding teams and keep trying to diversify the offerings we have for clients. Wherever we find good ways to make money. The noise around brexit will not change that in any particular way. Over the course of the next six months, we have a lot of political events which may create significant volatility for bonds and equities and that will be interesting to trade i would think. You keep talking about diversification. Give us a hint on where you are looking . Sure, look, the thing i have learned over the years is that if you invest in something which looks like a good Market Segment but has a bad Management Team or an average fund Management Team, you want make money. You need Excellent Fund managers. What we look for is the best Fund Management talent we can find. When you look at a firm there are three basic ways to make money in life. Value. Which i am convinced is a key way to make money and we are well covered. Carry and ad way is investors a lot of are interested in that. Anna one of the big challenges that you mentioned or phenomenon is electric questioning the status quote. Appetite is there . Clients are trying to find some way of making money. There is more realization that yields,ave got low bond you arent making money out of bonds and the bond yields are low because they are applying low growth rate. People are looking for other ways to make money. I dont know if you would call it Risk Appetite that creativity appetite is very high . Anna whats your best suggestion for creativity . Luke ellis any of our products. It is very interesting that you can see people looking at emerging markets pretty hard at the moment having been out of favor for a long time after you have the thing where europe looks uncertain, the election is coming along in the u. S. , the number of conversations on emerging markets are a lot higher. Anna thank you very much. Luke ellis will stay with us a little bit longer on the program. Caroline up next, we are dealing with the world of hedge funds even more. Some are saying that there are too many and they have been formed off the back of a successful fuse of the industry. We will discuss the industry when we return. This is bloomberg. Anna welcome back. We remain resolutely watching what is happening in japan. Governor kuroda taking questions saying they will not alter their statement aiming for the 2 target as soon as possible. We did not see any cuts in the interest rate. It looks as though the governance governments reaction to this is that they will further of a economics. They willt they further a economics. Be economics. Let us big into these headlines a little bit more. We are joined exclusively by ceo ellis, currently designate of men group man group. Are you surprised by the lack of movement in assets . Luke ellis when you look at sectors in japan, the overall but is somewhat confusing the interesting thing is that rip upe seen the banks pretty hard today and that is what is supporting the bank in london. The biggest pressure on banks has been the idea of negative rate. Negative rates are very difficult for bank models, especially in japan where there is little prospect of being passed on to clients. The fact that he did not go to further negative rates today is good for banks. If people come to believe that this really is the potential end to the policy, and maybe he has pushed as far as he can with Monetary Policy and he is putting pressure back on the government. Third arrowthe right with supplyside improvements, japan has a lot of room for growth and a lot of up with inflation but Monetary Policy has pushed as far as it can. You were talking about the fx movements down. Is this an area you are committed to . Are you seeking for growth from that country . We have a very active business in japan. , wellknowna large equity fund, we also run a couple of hedge funds focused on japan. We have an active sales operation and we have a lot of good japanese clients. It is an important market to us. It is close to me because my first job there 30 years ago was good. Witnessing are battle in passing, here in the japanese context does it throw up more infrastructure bonds. What other opportunities is a producing . Luke ellis does this put pressure on europe to go the same way. These things do not happen in a month. But it is a potential sign that we are getting to the end of trying to get things to happen. So it has to be fiscal side changes which creates a lot of opportunities. Anna what kinds of operative on opportunities are in infrastructure . Luke ellis in the less liquid there are a lot of interesting opportunities there. Anna thank you so much for joining us. Use ellis talking to exclusively this morning. Up next, more on the doj. After the bank of japans move, we will get feedback out of japan. This is bloomberg. 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 yeastr cusomerer wheie thesr ey a aredylrea ju ddst aus a czetomid ey age on dheiresevic pas splgeh pa. Or upder. ithare 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 to on the move. 30 minutes into your trading day. Stoxx 600 up 0. 4 . At whatthe laggard today. R let us take a look at individual stock movers. They are talking to create a new company with new arriba. A 6 move. Being getting near a deal reported in the Italian Press to say this italian lender. Economic minister in italy could take over as the ceo. Gucci is on fire. Earnings up six percentage points. Swedish second gdp rising 3. 1 on the gear. Year on year number. Secondquarter gdp rising 0. 3 on the quarter. That is more sluggish than the estimate. Number of 0. 3 is the knees is beneath the estimate. Something a little more sluggish than expected coming out of sweden. The boj is making headlines. Take a look at what the yen has been doing. The bank of japan expanded its purchases and doubled the size of its u. S. Dollar lending upgram but crucially until now, a cornerstone of the bojs Monetary Policy. Get that in mind, let us more from tokyo, from the chief economist at japan macro advisors. Withisappointed are you what happened here or are you pleased to see the bank of japan pausing or reassessing the impact of Monetary Policy so far . As for the etf purchase, it and or reckless even bold or reckless easing measure by the bank of japan. It shows how much it is limited in its policy options. Sensene give us a regarding this token easing. You said there is risk taking on the monetary french. What about fiscal . When will the third arrow strike . Not aays easing was token easing, it was significant although it did not satisfy the market. In terms of what possibly could work steps toward helicopter money could be the only way to inflation andto higher growth. However, these are the extreme measures. I dont think japan is yet facing such extreme circumstances to use such a drastic measure. Caroline what makes you feel that we dont need such dramatic measures at the moment . On my screen at the bloomberg, we are showing our viewers that we are seeing assets continuing to climb. Japanese unemployment sliding now. 3. 1 . Is it those sorts of fundamentals that make you not quite so concerned about japan . Exactly. As you mentioned, unemployment in japan is 3. 1 . What other developed nation has such a low unemployment rate. The economy is doing ok. Is still up and japans exporters can still make an ample profit on that. Japan is not facing any serious risk. Caroline but inflation is definitely low. In terms of Market Reaction today the Financial Service businesses moving strongly higher. Anna are investors interpreting this as the end of the move towards negative rates even though the boj says they can go more negative or do more quantitative easing has Monetary Policy reached the end of the road . Has reached the end of the road. If japan is to face a more serious risk, there are more things japan can do that as things stand, negative rates will hurt the japanese financial institution, not a good policy. The etf purchase has come to an end. The bank of japan cannot purchase more. The bank of japan only has a trillion yen. A significant downward trend in equity could wipe out the capital of the bank of japan. I dont think the bank of japan can do much more. Anna what are you expecting from the fiscal stimulus . When we hear more details of that from the prime minister, are you expecting Infrastructure Spending . Oldfashioned public work like bridges, to know where, ports with no boats. It will not be effective which is a pity. A Silver Bullet that japan has is for government to spend more in the bank of japan to support it. That will be the only way but for many constraints, the japanese government cannot take that bold move. Caroline what about the yen . Byhave seen it spike higher 2 . You see it appreciating even further. Exportershat hurt the even more and dent the Growth Prospects if we did get the fiscalMonetary Policy that you hope for . Japanese exporters are more resilient than we tend to think. As we all remember, japanese yen was at only four years ago, they can adjust with some time to that rate. Priests yen of 19, it wont be a big problem for exporters. To get yourgreat take on what is happening with the markets today and the news out of japan. Brexit is just one of the risks weighing on the Banking Sector. We get a live shot of zurich for you as we set you up for the latest in the ubs conversation. Than 3 this more morning. That is next on bloomberg. Anna welcome back. This is on the move. The ftse 100 is gloomy, a bit of a laggard amongst the European Equity markets. The oil majors are writing some downdraft on that index. To offset the positivity in the market. Let us get the Bloomberg Business flash. Here is david inglis. Sales, gaining more than 30 for the Second Quarter. That is a number that beat analysts. Shares rose. Google Parent Company, alphabet has beat earnings estimates thanks to the ad business. Thanks to a swelling mobile base. Are also investing in new areas from cars to health care as they look for the next big thing to replace its aging though highly profitable ad business. After better than reported firstquarter profits. Income worth three times more than what analysts expected last quarter. The japanese brokerage also announced plans to why back more shares. Second quarter profit fell by more than half. 1. 9 billion pound pretax loss from the unit that houses the business with the nasdaq. That is your Bloomberg Business flash. Anna thank you. Let us talk about the Banking Sector more because you be a secondquarter profit slipped 14 amid huge client activity but came in ahead of estimates. They generated less revenue during a rocky timeframe with markets including brexit and geopolitics posing a triple threat to the industry. Ubss cranny spoke to the ceo and he joins us now from zurich. You asked the ceo how brexit might impact his business and his clients. What did he have to say . Is on the analyst call right now. He says the brexit vote had a positive impact on revenue. Hopingwent into brexit to go yes, we will really make money. It is interesting that he is making that comment. Margins are under pressure. From a client perspective, i asked if there were opportunities for clients. There are always opportunities but we need more clarity about exactly what kind vote willis brexit will be then, people able to evaluate where there are opportunities. There are also a lot of challenges. Not only for the u. K. But for the entire european system. Manus the key thing is the past porting right. Is that the only key risk . Large by far the largest risk. We have a high degree of flexibility. We have a strong local presence in europe, in frankfurt and luxembourg and other cities. Should be able to adapt it be necessary. But the outcome could well be that the u. K. Rick retains its access to europe. Trader ike every good used the phrase, imf hedged. Amy have a mighty i hedged. They have a beautiful new building around the corner. He sounds like a ceo ready to move with the flow but it is too early for anyone to call in terms of brexit. Some of talking about the challenges they face in terms of brexit but also the record low yields we are seeing. Manus this came up and it has come up on a number of occasions. One of the benchmarks the market looks like is return on tangible equity. Bootedeluded that that to 2017. It is a very challenging environment. It is challenging because if you look at where we stood in october or november of last year as we were planning for 2016, the consensus in the market was for five or six rate hikes by the fed and now we are struggling if or not the fed will do any move at all. Manus Central Banks doing nothing to help anyone today. Here is the fact of the day the turnaround at ces may be subdued. Caroline very beautiful zurich it is. A great interview with the ubs chief executive. European banking authoritys latest stress tests tonight. In a break from the past, they special veal or specify capital shortfalls. They will focus on the euros in bad loans in italys Banking System. Our next guest says italy should stop trying to preserve its current banking structure. He joins us from frankfurt. Great to have you on the show. Ofe us a sense therefore what you want to see from italy. Going banking stress test to fast forward or accelerate some of the changes they need in terms of their low performing loans . That would be something we would all desire to happen but it is unlikely to be the case. Test is an exercise by the supervisor which allows the banks to learn how they would perform under very diverse circumstances. In doing this, they could adjust beforehand so they could really restructure for instance if the industry like in italy is too large. If you have over banking like in italy, you would like to see the sector shrank in response to the heightened requirement that is coming forward from the new regulation. Is ress tests the stress test that we will probably see results tonight should in the end lead to Decisive Action on the side of italy with respect to letting banks go. What i expect though to happen is that banks will be rescued as before and that this will basically continue with an over banked structure with some time to go. Anna how will banks be rescued . Not going to contravene the regulations set out by the European Union . Follow the rules in the intended in way. The intended way is that we would see a tale in and from there on we would see a restructuring. What we will more likely have is that there will be a joint fund that the good banks are also contributing to and the states indirectly as well and from that k banks will be rescued and be allowed to continue to operate. Caroline you are talking about consolidation in italy. What about consolidation elsewhere in the sector . . What about germany . A move in terms of share price erosion . Think it would be a good time to see Something Like what used that, consolidation within the Banking System in germany as well which is similarly overbank as italy. I dont think that the stress test will be the trigger for that happening but the erosion of profits across the board in the Banking Sector will hopefully be the signal that it cannot continue in the way it is operating today. I hope it is something that will happen and i expect something to happen in the next 12 years. Anna thank you for joining us. Up next, Hillary Clinton has been crowned the democratic candidate for president. We are live from philadelphia, next. This is bloomberg. Anna welcome back to on the move. We are talking politics now. Hillary clinton has accepted the democratic nomination for u. S. President becoming the first woman from any major party to do so. In a speech that directly challenges donald trump, she struck an optimistic tone and called for unity. Let us be stronger together my fellow americans. Let us look to the future with courageous and confidence. Let us build a better tomorrow for our love it children and country for our b eloved children and country. Be you have been watching all of the convention. How was this speech richard received . She is making a case for Democratic Party unity. Trying to win over some Bernie Sanders disgruntled supporters. This was a moment of history. She became the nations first female major party nominee. She also tried to contrast herself directly to donald trump, her republican opponent. She made the case that the democrats are trying to unite the country. Trying to work on issues ranging from health care reform, to womens rights and childrens rights. Let us take a listen to what she had to say. Clinton you did not hear any of this from donald trump during his convention, did you . Minutes, and70 odd i do mean odd. And he offered zero solutions. Kevin Hillary Clinton trying to present herself as the morris steady as the more alternative. Donald trump still gaining momentum. Seeline are we going to this in passing on the opinion polls . A bump in the polls in favor of hillary . Remains to be seen but the Clinton Campaign will certainly hope so. She will continue to campaign here in pennsylvania today and then she will head to ohio, another key battleground state where donald trump will also campaign for the next several days. The battle lines are being drawn. It is game on here in america for donald trump and Hillary Clinton. Anna thank you for joining us from philadelphia. A look at your day ahead. Get the samen, we from that united states. Watch out for earnings from exxon mobile, chevron, and ubs in the u. S. Session. At 9 00 p. M. , European Banking Authority will release the results of its latest stress test. Caroline all to be digested on a friday night with a beer potentially. For the pulse. The chief Financial Officer of swiss re. Outperforming up 1. 8 . This is bloomberg. Francine limited stimulus. The bank of japan focuses on buying etfs. The yen drops. Very little visibility. Ubss ceo site a challenging environment of profit as ubs slumps. And, stronger together. Hillary clinton accept the democratic nomination as she blasts trumps vision for america. Ms. Clinton so lets be stronger together, my fellow americans. Lets look to the future with courage and confidence. Francine