Hello, welcome to the pulse, live here in london. Im mark barton. This is our market board for today. Stocks are marginally lower. The stoxx europe 600 down by. 25 . Up by 2. 2 this week. The worstperforming industry group, travel and leisure stocks down in the wake of the attack in the south of france overnight. Easyjet, thomas cook, air france, klm among the biggest decline is. The euro is up against the dollar today, the best run since may. The yield on the french 10year is up by a basis point bond yields rising in germany and the u. K. Stocks and bonds are lower. Yields are rising this week in france after falling for three consecutive weeks. The record low for the 10year,. 73 . Right, lets get to bloomberg first word news. Nic nejra chinas economy stabilize. Gdp jumped 6. 7 from a year earlier. Industrial output and retail sales could Beat Estimates while investment slow. The credit surge has been a prop to growth. May will visit edinburgh on her First Official appointment outside london since becoming uk Prime Minister. She will deliver a pledge in an attempt to dampen renewed calls for independence following the brexit vote. More fed officials have played down the impact of brexit on u. S. Growth. The atlanta fed chief says he except expects negligible nearterm effects from the e. U. Vote. My own sense is the impact on the u. S. Economy probably is going to be modest. To reallyearly understand all the elements of that will be, and of course, will be watching how the u. K. Begins to react to that vote. Nejra global news powered by 2600 journalists and analysts in 120 countries. This is bloomberg. Mark lets bring you the latest news from france. Has extendedlande the state of emergency. He will deploy 10,000 members of the Security Forces after the bastille day attack. A truck loaded with weapons including hand grenades throw for more than a mile along the least 84, killing at people and injuring hundreds. The truck driver has been identified. Officials say the driver was killed in a shootout with police. Hiscois hollande and interior say the country is at war with terrorism. Attack that has all the elements to be called a terrorist attack is once again of an incredible violence and it is clear we have to do everything in our power to fight this terrorist plague. Of terroristsr who want to strike us at any price and in a very violent way amid strong mobilization by the Security Services such as the ones ive seen tonight in nice. Mark lets bring in phil and the french government reported in paris. You were in nice. Describe the scene for us. Phil sure. Scene we haves a seen other times after the attacks in paris in november. Soldiers police and everywhere with automatic weapons and shotguns and ride gear. I was just at the site. It is still closed off. There is a huge crowd of people gathered just to observed the site. It really does feel like there is a state of emergency. A police boat came along the beach and ordered people off. They have reopened part of the promenade to strollers. You see people taking selfies and enjoying the weather, but it still does feel like something horrible happened. Mark you have written a piece about it today. Explain to us how you avoided being caught up in this massacre. Phil sure. My wife and i arrived yesterday afternoon to visit friends for the just festival this weekend. We thought about going to the fireworks but we were having dinner with friends and never got motivated to go out. We discussed it briefly and ended up not going. The place we are staying is 800 meters from where the attack happened. Sheer goodust by luck we ended up not going to watch the fireworks. Majorthis is the third terrorist incident in france since january last year. More otherbeen smaller incidents. What is likely to be the impact on the economy, especially when it comes to tourism . See an Immediate Impact in the short term. The jazz festival is canceled. A Big International event with artists from around the world and people traveling from all over to attend. That is a five day event that has been canceled. I think longerterm, just people think twice about booking vacation to france. I spoke to a tourist who said he thought about it twice before coming to nice. He thought nice was better than paris. Then this happened. Mark thank you for joining us. In nice. Lets get over to paris. Greg covers the government. Tell us first what we know about the attacker. We are hearing reports from afp. What do we know . Greg if it is the attacker whose identity papers were left in the car, the police are trying to match the papers to the body of the dentmon. The the dead man. The tunisianld of ascent, not known by Security Forces. Was known to the police for commonlaw, acts of violence in the past. I mean, that does actually fit the profile of many other attacks. Petty criminals who suddenly tust switch from very shor notice into carrying out an attack, which underlines the incredible challenges in preventing this kind of attack. Mark were just hearing from air france. It says that its passengers to nice can postpone travel at no cost. A spokesman has commented. Air france confirming it has not canceled flights to nice. The first round of the president ial election is barely nine months away. Will this help or hinder president hollandes chances . Greg its very hard to say. After all the, every attack before, the common thinking is that this will hurt hollande and help the national front. In the end, it did not do either to either of them. Hollandes lack of popularity is based more on his promise to reduce unemployment when it has risen for most of his time in office. And it does often bring out the best in him. E rightn finds th words, he shows authority but he also finds the right tone. So far, the previous attacks really didnt move the political meter all that much. At a certain point, you have to wonder, we have been on a state of emergency for quite some time. It didnt prevent this attack or prevent any smaller attacks we had earlier. Didnt preven t the brussels attacks, but i was linked to the paris attacks. So, at some point you have to figure it is going to hurt his attacksty if continue. So far, we have not seen that much political fallout after each terror attack. The nationale pen front leader, her popularity did increase after the last two major terrorist attacks. How will this impact her chances ahead of the election . Greg her popularity did not go her, butdidnt hurt she was at a high level. She added a point or two here. Boost her. Idnt she has a solid base of support. Not only based on these kinds of attacks. Its based on fear of immigration or fear of migrants. A lot of it is her antiglobalization economic message. Shes got this extremely solid block of support. Overwhelmingan number of french voters that say they will never vote for her. That divide does not seem to budget after each attack. It wont hurt her. I would caution against expecting some kind of breakthrough because of this attack. The we are hearing from security council. It condemned what it says is a barbaric act, cowardly terror in nice. Condemning the barbaric and cowardly terror in nice. Stay with the pulse. Plenty coming up including the pound heading for its best week against the dollar since 2009, after the bank of englands surprise by not cutting rates. Well focus on the u. K. s post brexit economy. Chinas economy studies as Consumer Spending picks up. We will bring you all the breaking headlines out of france as the country grapples with a third major terrorist attack in 18 months. This is bloomberg. Mark lets get an update on the situation in france. Behind theman terrorist attacks that killed at least 84 people in nice has been formally identified. That is according to the Afp News Agency citing a police source. Early official says he was killed in a shootout with officers. The truck loaded with weapon including hand grenades throw for more than a mile along the boulevard packed with people celebrating the bastille day holiday. The french president hollande and his interior minister said the country is at war with terrorism. Has all theck that elements to be called a terrorist attack is once again of an incredible violence, and it is clear we have to do everything in our power to fight this terrorist plague. Of terrorists war who want to strike us on any price and in a very violent way the strong mobilization by interior ministry and Security Services such as the ones ive seen tonight in nice. Nejra European Council forident added his support the people in france in the wake of the attack. Sad day for france, for europe, for all of us here in mongolia. The attack were people celebrating liberty, equality and fraternity. Nejra european car sales growth slowed in june as the brexit wade on consumer confidence. 6. 5 to 1. 51rose million vehicles. In march, the 34th consecutive month of gains, though the smallest. Mark another week of shocks for watchers of the u. K. s political outlook. Yesterday saw mark carney surprised economists by not cutting rates along with increased political uncertainty. Sent the the news pound heading towards its best the dollar. Against john, great to see you. Although the markets arent confident that we will see a rate cut in august, following yesterdays move. Probability of a cut 56. 6. Before yesterday, august was 87 . July was 82 . Should we be less confidence that the boe will move in august following yesterday, or as confident . John i think we should be very confident they are going to do something. There was talk in the minutes about the measures they had different, plural, packages of response. With rates already so low, they are clearly looking around for other ways they can simulate stimulate the economy or cushion the slowdown. Mark what is the best bang for your buck, the best way of balancing the Brexit Threat to the economy . John we would expect them to cut rates next months. It is a token move at these levels but it sends out a signal they are willing to do everything they can to help. Beyond that we think they will reintroduce q. E. As soon as next month. Now, that some would argue is a question of a policy as well. No one is quite sure what it achieved last time round. Bare. E cupbard is fairly they want to keep sterling down. It has been acting as a shock absorber. Policies like that should achei ieve that. It will keep sterling under pressure. Mark what extent could sterling declined further. We touched intraday last week 1. 27. We have gone back above 1. 30. How low could we go when it comes to pounddollar . John what is interesting is how orderly things have been. After the first two days post referendum what it was a shock to the markets we saw huge declines in sterling. Since that it has been pretty stable. As the data starts to confirm what we think is an economy slowing the second half of the year, so sterling is likely to slide. We think it goes back into the 120s against the dollar. We think that eurosterling heads up to 90 pence from the low 80s. Another 5 or 10 over the coming six months. Mark if we get more q. E on top of the 375 billion pounds, we have an interesting yield curve. Two years, 16 basic points. 10 years 81 basis points. Whats that going to look like in six months, one years time . John q. E. Does not do a lot for short yields. What it does it keep investors pushing further down the yield curve. Once the ecb was clearly going to start q. E. In early 2015 we saw the curve flattened. 20 years fell sharply. Mark give me a figure. John we think 10year gilts head down to 65 basis points from around 80. Because q. E. Is factored into a degree. The yield curve will flatten sharply now. 30 years has moved in tandem with the 10year. That part has been steady. It has been flattening quite sharply in core eurozone markets for some time. We think the same dynamic should apply in the u. K. Mark is there a sense that the political environment has stabilized . Obviously we have uncertainty two years ahead of us but the bringing forward of a leader can only be seen as a good thing. Weakness in sterling, the nervousness and markets after the referendum was exacerbated by the political vacuum that suddenly appear to swap. As you say, we were not expected to get clarity on who was going to be running the government for another six weeks or so. The fact that happened earlier and we saw the Market Reaction has been taken a somewhat reassuring. But clearly, the brexit negotiation, which is such a big part of what this new government will have to do, have not even begun yet. There is a huge amount of doubt of where we are heading next. That is why sterling is where it is an rates are where they are. Mark we have yet to see the full impact on the economy. We have seen some surveys. The heart impact will only be felt in midaugust. John that is one reason why the mpc stayed their hand. They have more information, a lot of agents out and about gauging sentiment. It is very early. We have seen these market moves. They themselves have an impact on monetary conditions and so on. They want a bit more time to just see exactly where we stand. Let the dust settle and we do not doubt theyll act. Youll stay with us. As we had to the break, these are live pictures from the elysee palace in france. Hollande is holding a meeting of the security cabinet before flying down to nice with the Prime Minister valles. We will bring you headlines out of france as they break. This is bloomberg. Talk more about the hunt for yields of the world of superlow rates. The big discussion around the ecb program, is it time to tweak the rules . As some say it will run out of bounds. Below that deposit rate. Time to tweak the rules . John they are not yet running up against those constraints. If yields keep falling in the core markets than it does take some bond bounce out of their pool of potential purchases. That is something they will have to keep under review, but for now we think in light of all the other uncertainties around they will want to keep things study. Steady. Mark perpetual bonds is the phrase when it comes to japan. Ben bernanke met with government ministers. Helicopterion was money was put forward. The idea of potential bonds. Hard work tolways secondguess what the bank of japan is going to do are not to, but you can see in the move in dollaryen markets are expecting something significant now. The bank of japan has been wanted to get the yen weaker for some time without success because of its safe haven status and all these other risk events with beng as you say bernanke and going to japan, speculation is growing is something major is any offing. Get somethingnt at the next meeting on july the 29 there has been quite a lot of reaction in the eyyen are expectations building up . John absolutely. We have been disappointed. The reaction tells you what the markets make of that. Dollaryen will go backward came from. The confusion about why they are not doing anything and why they are sending out mixed signals. Mark thanks for joining us. The head of u. K. Rate strategy at ubs. Up next, president hollande holding an emergency meeting in paris following the attack in nice. Prime minister valles is due to speak. We will bring the latest out of france. This is bloomberg. Mark the french Prime Minister valls speaking in the wake of the murderous rampage in paris. The deadly attack in the coastal city of nice yesterday on bastille day. Injurede killed, 20 when a truck drove into a latenight crowd on the day of national pride. The french Prime Minister is speaking. We will renew the headlines as soon as we come back. Nejra the man behind the terrorist attacks that killed at least 84 people in nice has been formally identified. A police source. Earlier official said he was killed in a shootout with officers. The truck loaded with weapons including hand grenades drove for more than a mile along the boulevard packed with people celebrating the bastille day holiday. The french president franc cois hollande says their country is at war with terrorism. European Council President donald tusk added his support for the people of france and the wake of the attack speaking at a summit in mongolia. A sad day for france, for europe for all of us here. Here in mongolia. Subjects oft, the the attack were people celebrating liberty, equality, and fraternity. Nejra global news 24 hours a day powered by more than 2600 journalists and analysts in 120 countries. This is bloomberg. Mark thank you. Manuel valls the french Prime Minister has said that paris prosecutors have started an inquiry into the events in nice that have taken place overnight. He continues to speak. We will continue to update you on any headlines out of that. Some of the worlds top Money Managers are warning about the global stocks rally. Check out the chart of the hour. This is the World Exchange market cap index. More than 4. 5 trillion dollars has been added to Global Market values since the monday after the brexit vote. But laurence fink, howard mark joining the likes of bill gross threatening and cautioning buyers. They may be ignoring sluggish Economic Growth in the hunt for yield. Have a look at what is happening to equity markets here in europe today. The stoxx europe 600 is little bit lower. Nejra were seeing european stocks retreat from a three week high. E stoxx 600. Th french stocks falling following that deadly attack in nice. Let me show you how different Industry Groups are performing on the stoxx 600. Keeping an eye on travel and leisure. They are some of the worst performers, down. 9 at the moment. Looking at individual stocks on our mrr function on the bloomberg we could see thomas cook down 3. 8 . Europes Biggest Hotel company 3. 3 . Down. And easyjet down more than 3 as well. Those travel stocks are seeing an impact from that attack. Then, also, i wanted to look at swatch. There is concern over luxury sales slowing. That slowing being increased further after the deadly attack in nice. So, not a great day for swatch to say that firsthalf profit fell by half. The most in at least 15 years, as demand for his watches in hong kong, france and switzerland collapse. You can see this drop at the open. It stayed low. Down 10 . The shares have hit their lowest since 2009, falling 13 . One analyst says shrugging proper literally shrinking profitability looks like a disaster. I want to look at the safe haven assets, looking at dollaryen. The yen heading for its first week since 1999, trading near prebrexit levels. This is weakening on speculation about helicopter money. The yen was the bestperforming currency against the dollar in june. Its becoming julys worst. Speaking of other states haven assets, we are not seeing huge moves in the bond market today, but it is worth pointing out the treasuries are snapping a recordsetting rally. The 10year yield this week has alltime lowrom an set last week, meaning this weeks decline in treasuries is to be the biggest in the year. Fed officials have downplayed the impact of brexit, not just on u. S. Growth but on global growth. We get a lot of u. S. Data later. Mark thank you. Manuel valls, the french Prime Minister, just finished his briefing on that attack in nice. He says there will be a National Period of mourning from july 1618. Paris prosecutors have started an inquiry. He has finished his briefing about the attack. China come heto cut to boost the economy may be paying off, stabilizing and lending and Consumer Spending perking up in the second quarter. Tom, overall these numbers look pretty good. Talk us through the key points. Think there was a number of positive takeaways from todays data release. The first one, headline gdp growth, 6. 7 year on year. On target. Andi in line with the first quarter. Second, sides of acceleration at the end of the quarter. Gdp tracker accelerated to 7. 1 in june. So some momentum heading into the second half. Thirdly, it was a consumption story. The National Bureau of statistics has said around 3 4 of the growth came from the consumer sector. Some positive news on rebalancing as well. The negative, and this is a familiar story, is that much of this has been underpinned by acceleration in credit, more bank lending, more shadow lending. A lot of that credit has gone to the state sector. We are seeing substantial acceleration in investment by state own firms. Much weaker investment by private sector companies. Mark some momentum going into the second half, in the last month. What is the outlook from here . Tom so, i think there are some tailwinds for growth. We have had a lot of credit go into the economy in the first half of the year. That should help underpin continued robust investment, looking into the second half. We have actually had a lot of yuan depreciation based on the pbocs basket measure, the yuan is down some 10 on a trade weighted basis since last august. That should give some resilience, some competitiveness to exports. All of that makes us think we will see stability and growth heading into the second half of the year. Of course, that down great, the possibility of further stimulus measures that downgrade by the pboc. Further stimulus is not off the table. I think expectations are now shifting more towards maintaining the existing stimulus but not necessarily adding to it. Mark thanks a lot. Joining us in the wake of that chinese data. Lets get more analysis. The countrys economy is better the perceived. An research. Asi a National Bureau statistics Spokesman Says the economic environment remains complex. Is that a good summary . First positive thing to know is the shift towards the consumer. I think what is important to ane is weve seen improvement in industrial profitability over the first half. The first quarter, we saw a huge amount of credit pumped into the system. But in a context where we have seen steel produce the best quarterly profit they have since 2009, this is a positive indication. On the credit side of things, when you look at ppi, the purchasing price index in china, inflation for the industrial sector, we have seen the greatest improvement since 2009. Every marginal new piece of credit extended to the industrial sector is less costly in real terms that it has been for seven years. Mark prices have turned a corner after four years. Due to price deflation. Douglas that is a huge thing to look at. So, that ppi improvement and conversion of cpi tells you something about the utilization of capacity. That is important in the current environment where a lot of this improved profitability in steel has come through cost outs. Weve seen over the last two commit tocompany about 25 reduction in the capacity out to 2018. You are seeing reform happening in china over the last three weeks. Capacity utilization seems to be improving. Which is a hugely positive sign. Mark is the goal to double the economy from 2010 to 2020, maintain this 6. 5 growth level . Is it achievable . Difficult in the current environment, particularly globally. One of the things that we at Northern Trust are looking at is looking to invest in companies that have sustainable advantages over longer periods, an ability to generate high cash returns. Hopefully, these kinds of Companies Globally that can perform irrespective of the global environment. But when it comes to china specifically, i think they have ols ability, they have the to with which to buffer themselves for any potential shocks. It remains to be seen whether they continue on the reform. Mark i think we are bit confused. Against the dollar, we are at 6. 68. Obvious the happy to let it drift lower against the dollar. As tom was saying, it has drifted lower against the basket, too. How much lower . How worrying is that . Might we see another run and outflows . Douglas we dont actually think the yuan is being used as a policy tool. The yuan does not have a huge impact to the chinese economic impact. In an environment where seeing rebounds. Over the longer term, a stronger renminbi is better for domestic consumption. By renminbi has been driven outflows rather than policy. It is important to note as well with those outflows the Chinese Government are failing to stabilize those outflows. They are happy with the weaker renminbi. I do not think we are going to get capital outflows all of a sudden even if the lending numbers have just been released, we have had trade finance within china. That that kind of outflow that has been driven by excessive trade outside china is not there at the moment. We dont think there is a onetime devaluation coming. There is more weakness to come. As people get more comfortable with the chinese outlook, and stability in the renminbi may follow. Mark what other Investment Opportunities are there . What else are you looking at within china . What can our viewers look at . Douglas reform is beginning to ramp up significantly. And as that comes through. Joint companies merging over the last three weeks. We have got a large government summit coming up midaugust which we think further reforms will come from. Chinese banks are the classic thing, but given the current 7 ,ls and they are on , an attractive thing. I think it has been missed. More globally, the issue at the moment is, and we have seen a huge rotation into high risk stocks. There are various reasons for that but we are of the belief it is important globally to look at real competitive advantage of stocks, companies that generate high cash returns. And that kind of environment, the macro should not matter. Douglas morton, head of Asian Research at Northern Trust capital. Prime minister valls proclaiming ourning,al period of m following the terrorist attack that killed 84 people. Valls heads to nice with president hollande. We bring you the latest headlines at a france. This is bloomberg. Least 84 people have been killed in france after a terror attack involving a truck which drove into crowds of people celebrating bastille day. Prime minister valls confirmed french prosecutors have started an inquiry and three days of national mourning. The driver has been identified. Has more. s caroline what do we know about the driver . This identityin is confirmed, we know that he is 31 years old, born in 1985. And hes of french Tunisian National that, at least according to the i. D. Card, the driving license found in the truck, he drove through the cr owds last night on bastille day in nice, we also know he was known by the police for petty crimes, but he was not on the terrorist watch list. Theas not part of where authorities put some radical, potential terrorists. So, he was not on these watchlist of the intelligence services. Mark how is the french government responding to this attack . Caroline the Prime Minister valls just spoke after a defense cabinet meeting. He declared three days of mourning. He also said the state of emergency that we have known here in france since the november 13 attacks will be extended for another three months. That should come for vote at the National Assembly from tuesday, should be adopted by the end of next week. The state of emergency was actually supposed to be lifted according to what president hollande said earlier yesterday on bastille day during his National Television address, his traditional one on bastille day. Is this allows the authorities to put some people under house arrest and arrest people as part investigation. The investigation is focusing on whoever this man, who was driving the truck, who has been identified, who has been shot by police last night. Paris, thank you for now. Lets get more on this with a french lawmaker. Hes a member of the French Senate representing she joins us on the phone. Thank you very much for joining us today. What has been your reaction . What are your thoughts following this latest tragic terrorist incident in france . Afteroks like charlie, brussel attack, it looks like it will never finish. It is a nightmare. And, you know, i was just listening. Whatever is the state of emergency, what ever are the watchlists, whatever is the work of our intelligence services, we are unable to prevent this kind of drama. That is a fact. Mark as you say, it is like a nightmare that never finishes, but the facts are this is the seventh terrorist attacks, three major ones, four minor ones s 2014. Anuary when it comes to lone wolf incidents, how can france protect itself . I dont believe it all in lone wolf. You know, they are acting by themselves but does not mean they are not connected with other people. So, you know, i led an Investigation Committee two years ago and we had a lot of but our conclusion was that we cannot establish any lonely wolf strategy in fact. Even acting by themselves they are connected. And probably we will find some connection with those people, the guy from today or from yesterday with other people. But he was not on a watchlist. Even if he would have been on the watchlist, that does not mean we could stop it. We have a lot of people on the watchlist. Charlie were on the watchlist and we were unable to stop them. Mark what can be done, when the french population today is in mourning for the third major time since january last year. They are looking for answers. What are you going to say . Im afraid we do not have any answer. I do not think more criminalization well help. We are under a state of emergency, and see what happened. Nice is a very, its a city where the mayor and the local power are very involved in security. Municipal police. They have facial recognition with cameras in the streets. They have very firm policy. Despite all those things, this crazy truck and run on the killedde des anglais and 84 people. I think we have to review all the things but i think the people have to get used to live with this terrorism feeling and acting. I think we have to have a citizen mark i think we have lost nathalie goulet. Can you still hear me . I think we have lost the french senator. Thank you to the member of the French Senate, the union of democratics and independents, speaking in the wake of the terrible terrorist attack incident in nice overnight. Ive pictures some l from the belgian Prime Minister. Lets listen in. [inaudible] [speaking french] mark headlines from the belgian Prime MinisterCharles Michel as they cross the bloomberg terminal. 9 53 in london. We will continue to monitor his News Conference taking place. At the time in london, 953. Stocks are falling across europe. Only falling for the second day in seven. This is bloomberg. Mark belgiums Prime Minister is speaking to reporters in brussels. He says the government is weighing asked a security for the holiday on july the 21st. He says his nation is to take measures. Terror the French Foreign minister has cut short the trip to mongolia to return back to france. In brusselsmichel says there is no alert state rise to four from three. Threert rise four from is justified. We will continue to bring events from france in the wake of the terrorist attack. Stay with bloomberg surveillance. This is bloomberg. A tom again, terror in france as the french confront and live with a continued and ever new reality. Speaks of the horror. Mr. Trump asks, when will we learn . Minister may forms a government as markets place a bid to her sterling. The italian banks, they will fail