Transcripts For BLOOMBERG Bloomberg Surveillance 20160722

, john browne. An what a morning we are having in new york. ,he real story of the morning 9 30 a. M. Mike youve got to call it the we told you so trade. Tom keene said that you and i had to keep things calm while he was gone today. [laughter] missingis going to be the fun because that is not going to be happening. Speed. Et everybody up to lets get the first word news. Donald trump said no one knows the system better than he does and that is why he is the only one who can fix it. Last night, he asked that did accepted the republican president ial nomination. Mr. Trump we must work with all of our allies who share our goal of destroying isis and stamping out islamic terrorism and doing it now, doing it quickly. We are going to win, we are going to win fast. He also blasted his opponent. New data shows the british economy has been hammered by the vote to leave the european union. A purchasing Managers Index fell below 50, the number that divides expansion and contraction. President erdogan in turkey is already signaling that the state of emergency may not be long enough. Thatys News Agency Says more than 10,000 people have been arrested in the wake of that failed coup. Athletes staying away from the summer olympics over concerns about the zika virus are being asked to reconsider. To athletes risk contracting the zika virus is basically zero. The Obama Administration will invest in creating nationwide stationsof charging for electric cars. This is bloomberg. Mike here is where we are setting up today for the last day of trading this week. We are seeing some green on the screen. S p futures up by 0. 2 . Oil off just a little bit today. Oing on to the next board we are looking at the fix vix trading lower. The yen gets a little bit stronger today. Overall, a weakening trend for the week. Brentoil is matching its counterpart. Guy you say there is nothing going on, but that is not how it feels over here. Take a look at the cable rate, up by 0. 3 . Look at the stoxx 600. 50. K at the ftse 2 ftse is actually trending in a different direction. Mike i want to show you something that illustrates what we have been talking about all week. The focus has been on the euro and the ecb did nothing yesterday. The bank of japan what is next . How much can they do . That is the issue in japan. I put together the balance major banks. Three the white line is japan. The orange line is the ecb, the fed is right in the middle. You can see how much the bank of japan has done, in terms of the percentage of appreciation on its Balance Sheet. The question is can they afford to do more . Guy you wonder whether mark carney has room to move, as well. Let me quickly show you my bloomberg. Since thet decline financial crisis. If you were to take the Services Number back all the way, you would never, ever see a decline in the service number. That is what we are seeing this time around. Brexit blues is what we are seeing this time around. Chief atfrom the imf the 2016 China Development forum. I was hoping to come today to, for the first time in six thes, revise upwards. Orecast for growth i would have done that because china, japan, the euro area were doing better than what we had expected. , the unitednately kingdom decided to go for brexit. So, we had to revise downward. Guy blame the brits. Mark carney says that the Global Economy is actually quite resilient. He was at the same event. This year, the Global Financial system has faced two spikes of uncertainty and periods that have demonstrated its resilience. Citigroups european economist is with us. The u. K. Economy is suffering. Is this in line with what you saw happening . Yes. We expected a pretty big impact of uncertainty. It has been a roller coaster this week. Pmis for the eurozone were quite strong. It puts everything into perspective. This is a major risk for the u. K. , the european, and the Global Economy. Have any mark carney choice but to go big . Christian this is one data point. It is soft data. The mere divergence between what is happening in the u. K. In the eurozone is something we need to look deeper into. I think the bank of england will look into it. Clearly, the worst economic data. The preventive response from the bank of england is still going to be to forecast a rate cut at the end of the august meeting. Mike it is not a surprise we saw the pmis go down. The sentiment is pretty bad. When do we start to see hard data . Is there sort of a j curve effect going on here, where we will see more and more bad data or do we get it all at once . Christian the Financial Market response to start with was sharp in the beginning and then things recovered pretty quickly. That was a sign that uncertainty was high in the beginning. Perhaps because of the new uk Prime Minister or the words from quite asone were not bad, the uncertainty was receiving. Receding. The European Central banks came to the rescue. So, i think, the shortterm impact was always bound to be quite strong. The pmis show that. I would expect some stabilization Going Forward. Mike Christian Schulz is with citigroup. Coming up in the next hour, we will speak with Morgan Stanleys industry of strategy. Guy im guy johnson in london. Mike mckee is in new york. Tom and francine are off today. Taylor factory output in germany has hit a 27month high. The record low unemployment in germany is bolstering the economy. If the u. K. Economy slumps, that could be a problem. Vodafone reported firstquarter Service Revenue that the estimates. Vodafone is trying to revive its european business. Pokemon go has come home. It has been all the rage in the u. K. , australia, and parts of europe. It is now available in japan. It has added as much as 20 billion to nintendos market value in two weeks. Mike thank you very much. Donald trump, officially the republican president ial candidate. ,n his acceptance speech painting a picture of america as a nation of under siege nation under siege. Lived eisenberg joins us from the convention. Was old donald trump. It was everything we have heard from him the last 100 days. How did it go over with people . Think people were surprised that it was more of a greatest hits speech than any pivot to a general election. We did not hear anything new. It was a long speech. That said, he succeeded as he has all week, in unifying some of the Republican Party faithful behind him. This was a tryout for the American People, but also for to engage witht donald trump. Is he going to start getting competitive in terms of money raised . Ever gete will n competitive in terms of total money raised. This still seems like faint praise, but he managed to deliver speech from a text last night. It was not necessarily a great delivery, but there was a sign of some discipline that we have not seen. Withople want to come away encouragement that he cant take orders from political professionals, there might be some encouragement here. Guy how about running those running for seats in the house and senate . Are they using trump . Are they running away from trouble . Trump . Fewer this convention had elected officials than anyone i have ever been to. Very few senators. Very who did come, came quickly to raise money. I think today, we will start to hear members not happy that donald trump was going back to his messaging on immigration, on refugees. It is not the type of message they want to take to a general election electorate. Guy i saw some great excuses. Im mowing the lawn. Im going flyfishing. Spectacular excuses to not be there. Hillary the rnc affect and how she picks her vp candidate . Pence give a speech on wednesday that was totally confident, not particularly memorable. Guess is that that reaffirms to the Clinton Campaign that this is not going to be a campaign in which the Vice President ial nominees are major characters and will probably be inclined to go with somebody safe. I dont think she will be looking to make a splash year. Splash here. Mike traditionally, the opposition candidate disappears well the other party is having their convention. But what is donald trump going to do next . Sasha we dont know his particular schedule. Beguess is that he will not able to stay away. He even interrupted one night of his own convention. He will probably be a big character over the next week. Guy great stuff. Thank you for the reporting. Is still withz us. As the u. S. Economy woken up with respect to november . Christian i think the elections dont really play much of a role. It could affect timing at the fed. I dont think anybodys base case is that trump would win the election. We certainly believe the base case is that Hillary Clinton is going to win. Guy everybody said that about the brexit, too. Christian the u. S. Economy seems to be picking up if anything, at the moment. Mike does that suggest the markets would see a Hillary Clinton ministration as representing a status quo . Nothing to change your investment calculation . Christian that depends on the concrete policy proposals we will see over the next months or so. In general, given the alternative, which would be seend trump, she should be as the safer pair of hands, the safer alternative, and the more marketfriendly one at this stage. Mike thank you very much. It is an event you cant turn away from, sort of look a car crash or a train wreck. The american political campaign. Follow all of it on with all due respect. In newm Michael Mckee york along with guy johnson in london. Tom and francine are off today. Roger ailes is out as head of Fox News Channel following Sexual Harassment accusations, which he denied. He will be succeeded temporarily murdoch. Ss rupert what does this mean for fox . The important thing for wall street are not the charges and the countercharges, but the fact that fox news is a cash cow for 21st century fox. Is this going to affect the stock price . It should not have a huge effect. There are understandable reasons for investors to be concerned. I would argue that the charges are something that affected wall street and they do need to be mindful of it. There are bigger bigger it choose picture issues. Investors do not like to hear about this things these things. The issue under the old regime is that there is not a perfect command and control from the top of the box company 21st Century Fox Company into fox news. There was an inch you issue that was negative despite this being a quarter of the cash flow of the company. Most investors have been focused on it, but how do you make sure that the cash cow that is fox news continues to grow . Certainly, there is reason to be mindful, but it is also the case that it is unlikely that there is a meaningful negative impact, especially with putting Rupert Murdoch in for the time being. Mike there have been reports that a number of fox personalities have clauses in their contracts enabling them to walk away of roger ailes left. Yourut materially change outlook . If there arenot as money many problems that cannot solve. Also, they are not going to go across the street to msnbc. Im sure it is possible to find a venture that works independently, but none of them will have a meaningful impact on fox. Guy can i make a meaningful comparison to what happened to Rebekah Brooks . She was brought back into the fold and a very quickly. Brian fox news is going to be different than most major media organizations. I understand that fleet street is a beast of its own, but the scale of fox news fox news by itself carries more revenue than the entire british newspaper industry. It is the creation of really one person, with Rupert Murdoch, of course. That to a is maybe higher degree, in terms of how influential roger ailes has been. I think they have been built enough of an audience, so that with the right people in charge, they can mediate any consequences. Guy we will leave it there. Thank you for taking time to talk with us on the phone. Is going to stay with us. We will also talk about what has been happening with the u. K. Data. How did the relationship go with the french yesterday . This is bloomberg. A in newm Michael Mckee york. Guy johnson is in london. Lets get to the first word news. The convention is over, but the memories linger. Taylor it is. Donald trump is painting a dark picture of a fading nation that only he can save. Trump warned of a country beset by crime, terrorism, and bad trade deals. He said he is the only one who can fix the problem. Mr. Trump to every parent who dreams of their child and every child who dreams for their future, i say, these words to you, iight i am with will fight for you, and i will win for you. Taylor he used some of his harshest rhetoric on his opponent. He said Hillary Clintons legacy with us was death, destruction, and weakness. Hillary clinton will try to recapture voters attention after the weekend. She is poised to unveil a running mate as soon as today. She said the announcement will be made by a text message to her supporters. A french Prosecutor Says the man who carried out the truck terrorist attack in nice did not do it on his own. He planned for several months helped by five people. A house of lords panel urges british lawmakers to examine all aspects of the u. K. Withdrawal from the european union. They said parliament should scrutinize discussions and negotiations on a new relationship. A law has been filed to force theresa may to consult parliament before global talks. Riggserg news, im taylor. This is bloomberg. Guy lets carry on the conversation. Choice ofces a accepting Unlimited Administration or losing access to the single market. We are joined now by jonathan fenby. Also joining us is christian shulz. Nathan fenby, the author of the history of modern france, which is why he is sitting with us. Out of the french want this conversation . What did you make of the meeting . Hardlinehollandes was entirely expected. He wants to things. He wants to shore up his domestic political position ahead of next year. French want and the to use this crisis over brexit to reestablish france as the political coequal in europe. They have seen themselves slipping behind germany in recent years. There is an acceptance that the brits cannot trigger this instantly. I guess he is on a timetable, though, to make life very difficult. The may elections are coming up. How late is too late for him when it comes to this . Jonathan it is already too late for him. Goingld like to get this for france to take a stronger by thehip position beginning of next year. That is probably too quick. Mike countries dont have. Riends, they have interests how much weight is france going to be able to carry into negotiations if others feel it is within their best interest to maintain a stronger trading relationship with the u. K. . In a weakhollande is position. He is a weak leader and his opinion polls are low. French economy, having had a little upturn in the First Quarter of this year, gdp growth is down again, 0. 2 in the Second Quarter, and france is in quite a lot of trouble. It is former difficult for him to assert this leadership role. He has to do that for his domestic, political purposes. Mike does the French Economy have any particular hope about it at this point . The numbers were not too bad today, but france has been struggling along without a lot of growth. Christian the French Economy is actually not doing too badly. It is clearly underperforming. Some of the reforms are kicking in. We have a labor market reform almost done. There is some sign of progress. It is very domestic oriented, dependent on domestic demand. Tois far less vulnerable swings elsewhere than the German Economy is. Guy it is going to be interesting to see how the u. K. Economy and the pain that it may feel translates into a negotiating position. I was talking earlier on to the ceo of heathrow. This was an interesting conversation. It hit a number of areas. I asked him about brexit. What is too early to say the impact of leaving the eu will be. We have not seen an impact on the number of people choosing to use heathrow and we will have to wait 35 months to see any impact. Even during the recession in 2008, we did not see a significant reduction. That is because there is so much demand to fly through heathrow. We are more a Global Economy than just the u. K. Economy. Guy i guess there probably is sort of a pound factor in all of this. Probably making it more desirable to fly into heathrow. When we think about the negotiating position, we have seen huge fiscal turmoil. Economy is. K. Weakening, according to the new data. If you are french or german sitting there and the concern you have is that your domestic race will see the brits base will see the brits succeeding that is exactly what we are not getting at this point. Are the brits succeeding enough . Jonathan probably not yet. The other element in france is to recognize that Marine Le Pen will probably finish top in the first round of the president ial election she has welcomed brexit and has said that is the kind of model for where france should go. From the mainstream, politicians is aaying that britain strong electoral card. Mike this the u. K. Have any potential friends in these elections . Im thinking about the Eastern European economies. May they be more sympathetic and give some negotiating room to theresa may . Jonathan except that if you look at eastern europe, poland, romania, and other countries want to keep free migration into britain. For their domestic political constituencies, they will have to stick to that. It is difficult to see where the continentends on the are. Nobody wants a complete breakdown or breakup. They would like some sort of amicable arrangement. Dont see anybody going to bat for the u. K. In brussels. Christian i think for the Eastern Europeans and for many others what matters most is how the eu changes after all of this. There are some ideas of more europe, more integration, some federal state, even. In eastern europe, there is a lot of skepticism. If the eu goes in that direction, we will see a lot more skepticism arriving in these countries. There may be the risk of more referendums. It matters even more what happens to the eu itself than the relationship with the u. K. Guy one of the most politically important events coming up we have the austrian elections, the hungarians are in the mix, these are important events. Jonathan most important, the referendum in italy on the constitution. If we have a Bank Meltdown in italy, that risks turning into a kind of political, economic, questioning of the Eu Referendum. A really messy referendum. Ino skepticism is increasing italy. Matteo renzi is quite isolated. The fivestar movement, whose politics are basically to have no politics, are shown to be the most Popular Party and the country, although they say they are not really a party. This is the big story for the autumn. Then we go to the french elections, the german elections, and half a dozen other elections , mainly in eastern europe. This is going to be a period where the politics of the eu are more important than the economics coming forward and economics will be very much informed by how the politics go. Mike i want to follow up and ask christian what economics will be affected. What is the most important data and which are the most important countries . Christian in terms of data, we have seen quite a lot. We have seen Investor Confidence tank. We have seen pmis tank. Be a lotstill going to of focus on the property markets Going Forward in the u. K. Some indications were pretty bad. Next week, very important. , that is not just what is happening in germany and europe, but it gives us a lot of input from the global side because germany is so involved in Global Markets via export. That will be a very important gauge in terms of impact. That is going to be a highlight. Guy another busy week. Christian, great to see you. Thanks for stopping by. Jonathan fenby stays with us. Coming up, we will speak to john. Rowne at 6 30 a. M. In new york this is bloomberg. Guy im guy johnson in london with mike mckee in new york. I want to talk about foxtons. The stock is down hard this morning. We have more earlier on in the session. Nervousness surrounding what is happening with the u. K. Property exposed tofoxtons the London Property market, in particular. This is when brexit actually happened. Another move lower. People are trying to figure out where the London Property market goes from here. About whereorried the future is going to be for the u. K. And, in particular, london. Jonathan fenby is still with us. What is the more compelling argument . That the pound is cheaper and you invest or that the brexit story is going to cause problems . Jonathan i think, for the moment, if sterling goes on falling, you would never say London Property is cheap, but it might still be attractive to the chinese and others. Guy why the real estate warning . Jonathan they may be nervous. Guy who is going to be the the asianvestor economies were walking away who is going to be the biggest investor . The asian economies were walking away. Jonathan i think it is still going to be the chinese. That is a certain class of buyer, but, overall, talk to us about the demographics of the housing industry. There seems to be a mismatch. Not enough houses to go around. Doesnt that keep property supported . Jonathan you have the top and property demand from overseas buyers, chinese and others. But further down below, you havent got the kind of solid, substantial demand youve got the demand, but you havent got the money from the british middleclass to keep the market sustained. Mike what do you think happens to family formation . The group of people that are going to want to move into houses. Are we going to see a reaction like after the financial crisis, maybe this is not a good time to start a family, so we will see a drop off Going Forward . Jonathan that is possible. But that is not my specialty, so i dont like to speculate on it eerie at guy lets talk about where we go from here. Sense of whether or not we are going to be seeing some of the banks moving personnel to frankfurt, paris, dublin, wherever else . Jonathan they are not going to move at the moment. This will be one of the Main Elements in the negotiation with the eu. If they say we are going to stop passporting, we need to put clamps on the londonbased Financial Institutions operating in the eurozone, that will be a very strong negotiating card indeed. Fenby isthan going to stay with us. We are watching the markets do not quite a whole lot. What am i supposed to say . It is a grind. Say is what tom keene would. No change at all in the euro. Mike good friday morning. It is friday in new york and london. I Michael Mckee in new york. Guy johnson is with us in london. Lets get to the Bloomberg Business flash. Will stoplkswagen selling cars implicated in the emissions scandal. The ban covers 34 models. Vw informed investors that the suspension will last at least three months. They are among the top imported cars in south korea. About to starts raising money for its First Private Equity Fund since the financial crisis. They want to raise as much as a alien dollars. The firm will contribute a relatively small amount of capital. Rupert murdoch take over as head of the mostwatched news network in the u. S. Roger ailes has resigned from Fox News Channel over accusations of Sexual Harassment. Ceo of will be acting the news channel. The newses created channel as an alternative to more liberal competitors. Guy thanks. Dont count on the number two come to the rescue. Jonathan, you have written the book on the chinese team. The chinese feel very cautious at the moment in a way that we have not seen over the last few years. What does that signal to us . Jonathan it signals confusion at the very top. Xi jinping has taken over control. He has done a takeover of economic all us he policy. Xi and the leading group around him have taken over economic policy, but they dont know what to do, basically. They still want growth. They have sent set 6. 5 for the next few years, but it can only be achieved through artificial purposes. We are in a period of confusion and uncertainty. talking about the words periods of confusion and uncertainty, mark carney was highlighting one of them. We discussed and recognize that chinese entities are models ofng in new consumer and potentially sme finance, consistent with the more inclusive globalization. Guy leapfrogging more developed markets. The chinese have been very good at leapfrogging when it comes to industrial processes. Are they now leapfrogging the west when it comes to the economy in certain ways . Jonathan in the Financial Sector, certainly. Look at the size of china. When you have alibaba going into finance, you are going to get hundreds of millions of people involved in that. Youve got the numbers. Is like the velocity of movement in china which pushes them right ahead. This has happened in all kinds of years. It may happen in renewables. If the chinese going to renewables, there will be a huge takeoff. The trouble is that china still does not invent very much itself. T is its basic problem original innovation. It still needs to import that from the west. Mike what are we seeing in terms of the Financial Sector . It is growing, but people are pointing out that nonperforming loans are growing and, at some point, there is going to be a financial crisis. Is it a systemic one for the rest of the world . Beathan it probably will because china has so many links to the rest of the world now and you have the whole question at the basis of the chinese economy , which is the confidence of chinese households and their savings. As soon as they lose confidence and start to move money out of china, you will start to get a major systemic problem. That there is also a view they can forestall this for quite a while because they still have a lot of policy options, even if they dont know exactly what they want to do. Jonathan she is quite right. They have a lot of policy options, although they cannot decide exactly what they want to do. They are trying to have the best of both worlds, which will not be possible. We are dealing with a communist already state that has party state that has an enormous amount of assets, it must be said. A lot of these assets, you could not monetize immediately, but the Chinese State is very rich and it will use those assets to defend the regime. Mike thanks to jonathan fenby. Coming up at our next hour, we speak with john browne, the former ceo of bp. What would a ceo do about brexit now . This is bloomberg on a cloudy day in london. A dramatic deterioration in the u. K. Economy. A dystopian view of americas future. In this hour, matthew hornbuckle Morgan Stanley on a 1 world ahead. We waved goodbye to cleveland. We say hello to philadelphia. And mario surprises again. This time good morning, this is bloomberg surveillance. Live from our World Headquarters in new york, i am Michael Mckee. Guy johnson is with us from london. Good morning, guys. It is a good morning for most of the world but not for the u. K. , at least in terms of the economy. Guy it does not feel like a very good morning. Services andthe the Manufacturing Sector up 50. Mines, the 40ists eight is the line in the sand for pmi. Brexit is coming back to bite us. Michael coming back to bite the republicans, would be donald trump . Here is taylor. Trump is the only one who can fix it. Billionairehe accepted the republican nomination for president. He vowed to go after islamic state. Mr. Trump we must work with all of our allies who share our goal of destroying isis and stamping terrorism and doing it now, doing it quickly. We are going to win, we are going to win fast. Taylor trump also blasted his opponent, saying that hillarys legacy is death, destruction, and weakness. A survey found that Business Activity in the u. K. Shrank at the fastest pace since the financial crisis. The pmi fell below 50. In turkey, president erdogan is signaling that the state of emergency may not be long enough. Told reuters there is no it allows the government to detain suspects for longer periods without trial. Turkeys News Agency Says the more than 10,000 people arrested in the wake of the failed coup. One of aviations greatest mysteries may remain unsolved. The hunt for the missing malaysian jetliner will be suspended once the current search in the indian ocean is completed. Officials from malaysia, china, that thealia admit likelihood of finding the plane is fading. National Basketball Association is looking for a site for next years allstar game. It is moving it from charlotte, north carolina, because of the about lesbian, gay, transgender people. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. This is bloomberg. Mike . Michael the markets this morning not a whole lot going on. Take a look at s p futures. They were up 4, now they are up just under 3. No big news in the u. S. 10 year. You have to go out for decimal places to find a move in the euro. Oil prices are lower on the day, lower in the u. S. Benchmark as well. The vix index is down. It was at the touch yesterday. It has been falling and has not been this low in quite some time. The yen keep an eye on that come a little bit weaker today. Guy anything but boring in london, i can tell you that, mike. We are of maybe 4 . At. 70 618. Ng. 7618. Two is interesting is the hundred 50 is down. The ftse 100 most of the ftse 100 International Dollar denominated top line, as a result of which, when the pound goes down, it goes up. Mike people are talking about what the bank of england is going to do, but this whole week has been about what the Central Banks of the world are going to do. I have three of them up on my screen here, suggesting there are some questions about how much more they can do, particularly for the japanese. The bank of japan that is the white line, the percentage change in their Balance Sheet since the financial crisis. You can see how much they have done. Can the bank of japan take on a lot more debt . There are questions about that being raised, not the least by the governor of the bank of japan. The orange line they have more room to go. Guy i am going to take you to the work function on the bloomberg. I have to talk about it when it comes to the bank of england. The probability of a rate cut this is from the august meeting, the line that you can see here and it has spiked since the brexit. We are now trading at the highest level since we saw the brexit coming through. The market is pricing in the possibility or even the certainty of something happening with the bank of england when it means very early on guy we have not seen numbers mike we have not seen numbers like that from the fed. It is certain the donald trump is the official republican president ial candidate now, and he has accepted that mental. Last night, that mantle. Last night painting america as under siege, promising to lead the country back to safety, prosperity, and peace. Megan murphy joins us from cleveland. The views of this speech are scathing. But does donald trump actually care . Megan i certainly do not think he does. He will say it was a fantastic night and a fantastic speech. That is what he has done all week with a convention that by any measure has been unconventional, has been at times very difficult to see how they will put together a vision for the future, get their team in order, get that discipline, get that message. We saw a plagiarism scandal, we saw ted cruz refused to endorse him on the very floor of the convention. I think he will not care because he just rolls out no matter what was said. Mike there were very few members of the republican establishment, particularly those in congress. Those who are there you have spoken with how did they take this week . Megan i was down underneath the floor after the speech. Yan. Oke with speaker reic i can only describe his face in one way, which was stricken. This was an incredibly long speech, running one hour and 15 minutes. The longest since 1972. I think one because donald trump delivered it in a very plodding manner. Dystopian, graham, pugnacious however you want to describe it his characterization of america spiraling into descent i am not sure many people are willing to accept that right now. Guy what happened in cleveland has what effect does it have on the democrats . Megan we are going into philadelphia next week where the democrats have a startling line of speakers or they have obama, joe biden, michelle obama, bill clinton, Hillary Clinton. This is a real starstudded cast of characters. It is going to be a very different convention, a very organized convention, a convention that resembles a typical political convention. Most times a convention gives you a 3 general fourpoint boost. Ple say they do not expect he is running at a fivepoint deficit. In his most negative weeks of campaigning, he does get some kind of pop. Hes is not something that himself or his campaign would have wanted. Whether the American People are watching, with a more than made up their minds is yet to be seen in the polls. Mike the big news that may come out today or tomorrow, Hillary Clintons choice of a running mate. What are you hearing, megan . Megan we expect to release this message by text message. She has promised that to her supporters, that she will roll it out and give her supporters the firsthand of who her vp nominee will be. It has always been down to two people, tim kaine and tom vilsack, the agricultural secretary from iowa. Bring quiten similar things to her ticket. She is looking for someone who will round her out and give her that really rocksolid credibility amid questions that she faced over her email, her integrity, and finances. She wants a figure that will essentially almost cleanser with the American People, enhance her favorability and her likability, but first and foremost is not going to drop the ball and have the kind of incident that will call into question their own campaign together. She wants someone she will feel comfortable with. She is not a national campaigner, not the most natural politician. She is not her husband, who has such an incredible touch with people. She is looking for someone who will round her out and will not cause any more damage to the campaign. Mike megan murphy, stick with that twitter account, pack up the uhaul. Cleveland in the rearview mirror, on to philadelphia. Matthew one back will join us in a little bit. He sees a little bit of Donald Trumps world in the bond market. Markets churning. Not much going on in the world this morning. Guy i am guy johnson in london. Mike mckee is in new york. N istanbul, the friday prayers we now have a state of emergency that may be extended the on three months. Those are the hints that we got yesterday from president erdogan, as the administration putting out notes economy, theyish should be released to the administers in first. Taylor accruing to a report from marketing on mice, suggesting that if the u. K. Bumped because of a brexit vote, that could be a problem. Britain is germanys Third Largest export market. Paypal and visa have ended paypal has been urging customers from linking accounts to visa cards. It will share more data with visa for it in return, visa will offer certainty on the feasible charge paypal. Shares of paypal rose as much as 7 on the news. Pokemon go has come home. The smartphone game that has become all the rage in the u. S. , australia, britain, and europe, is now available in japan. That is where the pokemon franchise began two decades ago, adding 20 billion to nintendos market value in two weeks. That is your Bloomberg Business flash. Mike lets bring it back to the markets. We saw bad news in the u. K. For the market pmi numbers. We also saw good news in germany. We will get to market numbers in the u. S. Later this morning. That, aieting follows member of the economic fraternity trigger morning, steve. The u. S. Has been doing better, not only than the rest of the world, but better than people think the u. S. Is doing. You look at the surprise indexes, and they have been moving up. The one exception is in manufacturing. Is that going to come back . We did not see a huge move in the dollar after brexit. Will manufacturing be the last these to fall into place . Has i doacturing not think we will be running away on manufacturing strength. Clearly, the First Quarter weakness, Second Quarter strength is a mirage that has been with us in five of the last six years. First quarter gdp growth since 2010 has averaged 1. 1 . Second quarter, 2. 9 . It has followed this pattern consistently. There is a problem with seasonal adjustment. The economy has not had a market difference. You can see this with payroll data, too, where you get a weak may, that apparently strong june, and the economy has turned. It is not for real. The economy has been on the same course of just above 2 growth for the duration of the cycle, and it is slowing down some. Few of these sources of stronger growth the energy boom have come off. Guy if we have this mike if we have this inability to tell where the economy is going, how does the fed figure out what to do, and how do investors know what to do . Not think thei do fed has even reacted to this. There have been plenty of studies blaming the weather. It is probably not the weather that is distorting it. Datahave added unadjusted to a series that has been seasonally adjusted. All of this trouble has been that we ended up with a tightening in december. The Federal Reserve began a tightening last year for the first time in the history of the fed in the month of december. Finally at the end of the year, all of the data had shown consistency that they needed. It may be the case that this year we have wait for the ups and downs. The economic surprises have picked up tremendously. Denly everyone is over at suddenly everyone is underestimating the economy where they overestimated it before. Guy how important is the fed right now, inasmuch as global Central Banks around the world we will get this from the boj and from the ecb, the bank of england now certain to do something else. All of this money is flowing into the treasury market. What effect is the fed having . Steve the fed is predicted to be on the sidelines generally, that it is not priced in. If you think about the month of september, obviously the Federal Reserve does not want it to be an election issue. They are probably underrating the possibility that the Federal Reserve could tighten as soon as september. In december, certainly on afterwards. The bigger issue you said here is easing, and i think markets underrated the impact of the European Central banks credit bojng, potentially what the will do Going Forward. That is powerful easing compared to previous years. The ecb waited and they did not want to do it, and then they did so much more. But markets really misinterpreted that. We saw the strengthening of the euro earlier in the year and when qe currencies were strengthening, essentially it made everyone in equities markets believe Central Banks were ineffective. But the cost of capital for firms if you look at the spill over to the United States, you see Corporate Bond yields fall 125 basis points. These narrow Interest Rates you see in bond markets around the world, that is not it. We have seen doubledigit returns in highyield bond markets and Long Duration credit. That is a powerful message. What is fascinating is that the crowding out effect is massive in europe. Steve, stay with us. We will talk more about what is going to be happening and we will speak with lord brown, the former ceo of bp. This is bloomberg. Mike good tgif morning. I am Michael Mckee, along with guy johnson in london. Roger ailes is out as head of Fox News Channel, following Sexual Harassment allegations, which he denies he will be succeeded by Rupert Murdoch. What does that mean for the future of fox . Lets bring in paul sweeney. Even though fox news is 20 to 25 of profits is that because Rupert Murdoch runs the country and there will not be much change . About 25 of total cash flow, so it is extraordinarily important, but there is such a strong position relative to the cu competition there. They by far have the biggest audience by far over all the cable news networks. Nearterm probably not much of an issue, particularly going into an election. The audiences are going to be big, the advertisers will be there in a big way. Longerterm, investors are concerned. It looks like James Murdoch had a big hand in making the change. If they have a bigger influence on the company and on fox business and fox news, will they change the editorial focus of this channel Going Forward . Toe that is where i wanted go. There are reports that a number of the talent at fox has clauses in their contracts that they can walk away if roger ailes is no longer there. Does the talent matter as much as the focus, the right wing conservative focus of the brand . Paul i think it is both. One of the advantages that roger ailes brought to fox is his ability to identify and bring talent on the air and keep the talent on the air. Bill oreilly and megyn kelly, for example. Cnn might be more of a broader newsgathering organization. Fox news has built itself on the talent. I think that is a risk, but the question is, their editorial focus has really found a significant niche in the viewing public. It has allowed them to build a big audience, bring advertisers in and support this network. If it changes, there could be an issue. Guy let me pick up on that point. Does that mean we are likely to see an internal candidate, or will they risk a next terminal candidate to replace and . Because murdoch will not be doing this forever. Paul you are right. Rupert stepped in because this came up very quickly. They will look both internally and externally. If they go external, they need to make a big splash. It has to be a big name, but it also has to be a name that is consistent with the editorial focus of fox news. You will not want to change that. That is something investors are concerned about. If you change the focus, does it dilute the fox brand and make it less competitive . Average demographic age is 65. This is an aging population that effectively fox has. Is this a high watermark . Paul it may be. One of the challenges fox has as a brand is to develop its digital businesses. They have not done a good job these of the cnn they have not done a good job vis a vis cnn in doing that. How do they bring their brand down to a core demographic . And a new reader who comes in any new leader has to develop the digital business. Mike paul sweeney, thank you. When we come back, Steve Whiting is still with us, and we will be joined by Morgan Stanley head of global Interest Rate strategy matt hornbach. This is bloomberg. Mike welcome back to bloomberg surveillance. General electric, often seen as a bellwether of the industrial economy in the United States and around the world, i would earnings that are better than forecast on an earnings per share basis. We are getting the numbers now, breaking down all the revenue figures. Bloomberg news has added together the figures, and they get . 51 per share, better than the consensus estimate for . 46. We will give you more on what they did and how is the morning goes on. Lets get to bloomberg first word news with taylor. Taylor donald trump is painting a dark picture of a nation that only he can save. The billionaire accepted the Republican Partys nomination for president. He warned of a country this at by crime, that trade deals. He says he is the only one who can fix the problem. The trump so to every parent who dreams for their child and mr. Trump so for every parent who dreams for their child and every child who dreams of their future i say these words tonight i am with you, i will fight for you, and i will win for you. Used some of his harshest rhetoric on his opponent. He said Hillary Clintons legacys death, destruction, terrorism, and weakness. Hillary clinton is poised to unveil her choice of a running mate as soon as today. The announcement will be made by text message to supporters. One of the leading contenders, senator tim kaine of virginia, is said to have the ear of former president bill clinton. A house of lords panel urges british lawmakers to examine all aspects of the u. K. With troll from the european union. In negotiations on a new relationship in a lawsuit has been filed to force Prime Minister theresa may to convene parliament before triggering the start of the brexit exit. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. This is bloomberg. Mike . Mike a little bit more on general electric, just releasing its earnings. . 51 per share better than the . 46 consensus on wall street. Revenue of 33. 5 billion, which will be better than the 31. 9 billion that was forecast to there are some questions about how comparable the two numbers are. General electric says there is a currency honeywell is just out, reporting a split of their automotive and control solutions group. That could be of great interest to investors as those headlines continue to cross and we will bring you more news on that. It is a dystopian world, according to donald trump. According to Morgan Stanley, it is a dystopian economy, according to Matthew Hornbach. He has revised his forecast to be more bullish than just about anyone else. Treasury we yields treasury yields will fall to 51 basis points before the First Quarter of 2017, he says. Also, steven wieting. You are the black cloud on wall streets Silver Lining right now. You see things fading enough that bond yields are going to go to levels we have basically never seen. Matthew i do not know if it is a black cloud for investors and Government Bonds, but we have had a tremendous rally so far this year. The 10 year has fallen, and we expected to fall another we expect it to fall another 25 basis points before the end of the year. The issue is the Global Economy. Our economists are expecting Global Growth particularly in the g 10 to suffer over the course of the next couple of years. G10d 1. 9 growth in the in 2015. That will fall to 1. 4 this year, down again to 1. 2 in 2017. We have global economies slowing in terms of growth, and we think core inflation will remain below centralbank targets. That is going to mean that Central Banks will keep their , and upative policies the ante depending on what region you are looking at. Fed hikedew, can the rates and 10year yields go lower . Matthew i think they can if the rest of the world is continuing to slow, and i think that is the real issue here when you are talking about longerterm treasury yields what is going on in the Global Economy . The u. S. Looks ok, but the rest of the world not so much. That is what we think is determining the direction of the longer dated Government Bond yields globally. Guy where is the biggest blow coming from in terms of the treasury market . A lot of the buying we are seeing this year is coming from japan. Are looking at treasury yields, we have yields about the same level as they were in 2012. But when you look at yields in japan, they are talking about yields that are 100 basis points lower from where they were in 2012. So you can start to see why investors in japan who are dealing with extremely low Interest Rates are coming to the United States to enjoy the higher yields offered here. Where does the bottom come . The boj is going to carry on doing what it is doing, for a very long time. There is a talk of perpetual bonds being used in japan. Is the trajectory the one we years,en for the last 15 yields continuing to crawl ever lower and lower . If so, where do they bottom out . Matthew that is a great question. That will in part depend on the policies of the Federal Reserve. We are not expecting the Federal Reserve to take Interest Rates negative, and we are not expecting them to do much of anything for the next 18 months. Our chief u. S. Economist, ellen zentner, is calling for the fed to remain on hold for the next 18 months. I think the bond markets could price in some additional action if ellen and her team are correct on what is happening with u. S. Growth over the coming period. Mike many me give you an update on honeywell. We got the headline as part of their Earnings Report that they are splitting their automation and control solutions group. The company also reporting earnings per share for the Second Quarter of 1. 66, better than the 1. 64 they projected. They are raising the lower end of their forecast for the year, so a major change in the way they do business and an upgrade to their outlook. Who is ouring, global chief strategist sorry, getting her title right r citis private bank. Stephen co youre seeing a those orders, looking back up a quarter past, the estimates have been two low have been too low review have been beating the lower estimates, deep into a mature cycle with earnings levels very high, and all of the Corporate Action you are seeing in essence is a cheaper way than building capacity to grow into the future. That is unfortunately where we are and gets into the story that we have on Interest Rates. You are saying that you cannot get topline moving, so you are going to buy back shares or do something that is going to keep the share price moving but not necessarily the top line. Steve that will be the attempt. Capital spending has grown, but has it grown very robustly . No, it has grown very moderately. Demographics around the world, there is not a big country in the world with accelerating populations under these circumstances, you get full economies with high levels of earnings, and you do not grow very fast from that. Mike the store you are telling us what we have been hearing all along, that it is a model through that it is a muddle through economy. Matthew is much more optimistic. What is your view . Steve part of it will be the shift from Global Markets straight to a bit of recovery in emerging markets. The Global Petroleum industry is big on its own, but there are trillions of dollars of assets in economies closely correlated to it. We have had a deep bust and we will see some restoration to this. Strengtheningr remarkably over recent years, and we are probably going to see some strengthening with some of the em currencies where credit returns and yield spreads you look at brazil, where short are in therrency double digits. Those yields can fall. The interesting story matt was bringing up on Government Bonds around the world, we have corporate yields in the eurozone that our local that are lower than u. S. Treasury yields. The break point between highyield debt and highgrade debt. You can get u. S. Treasury at a hield yield at a higher yield. Mike it is a conundrum because we are seeing these low Interest Rates but we are not seeing them stimulate anything, let alone inflation, matthew. Right now you see tips yields and other inflation indicators continuing to fall. Matthew that is something on the mind of the Federal Reserve. We have had longer dated breakeven inflation rates, which for most of the last 18 months were thought to have been affected by the fall in the price of oil. Now we have had a rebound in the price of oil, but longer dated breakeven inflation rates have not rebounded. It is starting to cause people to think this could be a slight downshift in inflation expectations, not simply the risk premium around the view on inflation. Are looking for 60 oil in the coming year. I would say that whether Central Banks take this seriously or not, we have seen u. S. Vpi 2. 5 . 3. 5 is not that far if you get a rebound in oil to half the level it was in 2014. Guy the inflation story here is fascinating because one of the things we are not seeing his Wage Inflation at the moment, and we are not seeing the sort of jobs being created and being generated with decent wages attached to them. How much tolerance do you think there would be, matthew, for a big Infrastructure Spending story in europe . Governments that are effectively borrowing at zero or negative germany can borrow at negative why dont we go out and spend that money . With a be tolerance for that . Matthew Government Bond yields would move higher if there was an unexpected fiscal stimulus package to come out of one of these sovereigns in europe. We are expecting to see that in japan. Our economists expect a trillion trillion to come out of it. That is not something that we are expected to come out of europe. If that was the case, Government Bond yields would be put on the back foot, and you would see some increase. Mike Morgan Stanleys Matthew Hornbach, and morgans and jpmorgans steven wieting. Ge shares are up. 8 in the premarket. Honey where honeywell shares up over just 1 . A conversation with come all srikumar with come all srikumar. Hes even more pessimistic than matt hornbach. Guy i am guy johnson in london. Mike mckee joins us in new york. Lets get back now to Morgan Stanleys head of global Interest Rate strategy, matthew with stevend wieting. Take on where yields go from here we have seen disappointing data out of the u. K. This morning. Give us the outlook when does mark carney start to act, at how far does he go . Matthew the view of our chief u. K. Economist is that we will have a rate cut by the end of august. We are looking for 40 basis points easing from the bank of england, and we think that overall is going to support gilt yields. Even more than that, we think on the strategy side the bond market has probably started to quantitativetional easing from the bank of england. That is something we think could be in the offing, depending on what happens with the u. K. Economy in the wake of the Eu Referendum vote. Guy does carney go first . Is draghi waiting for carney to go first . Matthew i do not know if he is waiting for carney, but it is up for mark carney to decide how best to handle the situation that is coming out of the u. K. We have some data this morning on some of the u. K. Pmi indices, but i think it is probably still too soon to tell what the full impact of brexit is going to be. The bank of england will want to see more data. Once they see that data, they will make a decision. We think that will be by the end of august. Mike 1 on a 10 year treasury by the First Quarter of next year. Could it go lower than that . Matthew certainly it could. Ultimately what is baked into our numbers is the idea that the Investor Base is going to start to smell qe on the horizon. That is not a call that we have, but i think it is possible investors could start to anticipate some additional qe from the fed if our numbers are correct on the Global Economy. Curve is if the yield the sum of the rates and what does it say about the short end . Doesnt that automatically call for some fed rate cut or qe . Matthew if you are talking about qe, yes great yield can go much lower with a large qe program coming out of the fed. Right now you are not seeing any term premium out in the rate structure. The rate expectation embedded in the yield curve does come from expectation about policy rates. But when youre talking about term premium, the additional ared investors demand, some near zero or negative on some models because of quantitative easing. Mike is that nuts . Steve let me interject one thing. The u. S. Has had six years now gainsaverage unemployment average employment gains have been low and we are deep into this labor market recovery. But every time the Federal Reserve has tightened, the yield curve has flattened. So if we continue on this trend of nothing any slowdowns anywhere else, whether it is the u. K. Or if it is broader the federalon and reserve will focus on domestic conditions and tighten monetary policy, international flows will take down the yields that are available. End of the the long curve, still relatively steep, and will come down. Whati am trying to think will move treasury yields higher after this conversation. Stephen, steve, price information what is the number that the u. S. 10year would be as donald trump is president of the United States . Steve that is one of the risks, that International Investors feel that this is unpredictable, that international cohesion, things would be different. Look at the comments on nato. And they want to move out of the u. S. Dollar assets compared to where they would otherwise be, compared to the status quo. Guy were going to wrap it up there. Our thanks to Morgan Stanleys Matthew Hornbach and citi private banks steven wieting. Up next, we will speak to the former bp ceo, lord brown. This is bloomberg. Mckee in newchael york. Guy johnson is with us from london. Time for a quick forex report. Not much going on unless you are trading cable today. The pound is the big mover, down 1 . Move is in second place as people consider the idea of stimulus from the bank of japan. But not a lot of movement in the euro rate. Look at the lira it has been a rough week for the turkish currency, but it is hanging in there. Hanging in there with us is john browne, former bp ceo. He was there to make the case that britain should not leave. He was as surprised as anybody else. A month on, what does he think . Lord brown is with us this morning. Morning,ome data this bmi indexes that reflects concern about what is going on. A month on. Have you changed your feeling about how bad or good it will be for the overall u. K. Economy . Lord brown we quote our new Prime Minister, brexit is brexit. Everyone has appreciated that. I think everyone is looking to quite a long period of uncertainty. Ftse is higher this morning. Investors do not seem to be as concerned. Browne people are looking carefully about what theyd should do for investment, and certain sectors are affected more than others. Sector is looking to what will happen to pass porting and things like that. There are a lot of uncertainties. People will live with uncertainty, recognizing they need to do the best i possibly can given the circumstances which have occurred. Guy lord browne, good morning. How low is the pound need to go to overcome that uncertainty . Lord browne i do not know. The Exchange Rate is the most unpredictable part of the economy. This is no exception at all. I do think that time is very important. We will know more by the end of the year. We will know a lot more about yearsnomy in several time. Between then and now there will be a lot of changes. Guy u. K. Workers, if they are working in a sector not dominated by the pound lets say the oil industry in aberdeen became a lot cheaper. Are there advantages that can begin here . Lord browne there are dominated industries were the functional currency is just that. And in the Energy Business and the functional currency of dollars, many investors are investing dollar for dollar. So local goods and Services Become much cheaper, and the margin therefore expands. It is exactly what happens during the time of Weak Oil Prices where the currency for several nations has dropped significantly, allowing people to keep the margin on production up. The russian ruble is the biggest case in point. Mike what do you do if you are a ceo these days, with all of this uncertainty and you do not know where it is going to end . Do you invest for the future or sit tight and control expenses so your shareholders do not get mad there is an adverse headline . I think you have to average the cycle. There is always uncertainty of some sort, whether it is elections in the u. S. , whether it is brexit, whether it is what is happening to the Banking System in different parts of the world. I think for a corporation, use it you should average for the cycle. It is an incredibly difficult time for an exchange movement. And you codedne, theresa may at the beginning, brexit means brexit. Does brexit means brexit . Lord browne it does. The people have spoken, and it is clear we need to do something about it now. Negotiation takes place between us and 27 other nations remains to be seen. We need to get some great trade negotiators to do that. Mike lord browne is going to remain with us on bloomberg surveillance, which continues on radio. Stay with us for that. Bloomberg is up next on television. Markets more or less calm this morning on this tgi friday. This is bloomberg. Id process and risk Recession Risk rises. This is the fastest pace in seven years. It is official, donald trump except in the republican nomination. Jonathan for our viewers worldwide, welcome. From bloombergs Global Headquarters right here in new york, the global rally taking a little bit of a breather. David the dow was down yesterday after nine Straight Days of gains. Today european stocks may have a second day of losses after those weak pmi numbers. Alex we will then every asset class over the next few hours. Happy friday, everybody. We have to start with the