Manus welcome to the pulse. Where life from bloombergs european headquarters. Good morning. I am manus cranny did lets get into these markets. We are seeing a pauls overall on the equity side. A little bit of a complexion of what is going on. What is moving the market . Ericsson has more than 4000 job cuts in the Second Quarter. The ceo doubling down, setting the tone in terms of cost cutting. Running 5 at the open. We have seen it up in april. We have brent in there for you and the pound. Brent crude, oil trades right around 45 in the states. We are waiting for stockpiles in the u. S. Crude is really jesting lower. Also Global Growth concern story and a lack of real growth coming through. The worlds worst major currency over the past five days. New macro potential real Zen Investment down 40 . The pound is down it we are waiting for cpi. Annual cpi has not hit target in this country since december 2013. Traders are saying 83 ability of a rate cut in august. Me. Man is joining he is the ceo of ericsson. 4000 jobs gone. Ozzfest berg are you prepared to does hans best berg are you prepared to cut more . Stay with me for all of those stories. Nejra cehic is here. Good day, nejra. Nejra in a rare public speech, melania says she says he is tough when he is to be. Inspiration from a surprising source, Michelle Obama. Her speech strongly echoed the first ladys own words at the 2008 Democratic National convention. The Trump Campaign issued a statement. Reelecteds newly Prime Minister and his cabinet have been sworn in and camera. He reshuffled his team after the the ftseection when 100 bull run is heading for a reality check. Uks benchmark will end the year down 7 according to the bank itch is the most bearish says the promise of Central Bank Stimulus will give way to harsher economic realities after voters decided to leave the eu. A teenager armed with an ax and a knife injured four people on a train in southern germany for. Eing shot by Police Authorities say the assailant was a 17yearold afghan but the motive has not been established. Global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. Cehic. Jra this is bloomberg. Manus days after an attempted coup in turkey, it sent the lira reeling. Movies e just the central bank, the Financial Authority has taken immediate and concerted measures to avoid an economic and financial massive destruction that we couldve had. All of us were on alert, monitoring the situation and wondering whether they would take the right measures it the turkish authorities, central bank, financial ministers have all reacted very strongly, in a concerted way to make sure there would be liquidity available, that the banks could function in the Market Reaction was relatively moderate. Manus the decision comes as the australian and new zealand dollars dropped the most in more than a month, speculation that further rate cuts are the cards next month. They are under stimulus as a Global Economic outlook darkens. To help us make sense of this uncertainty, it is jonathan bell. Amazing how Christine Lagarde , thes to the response market response, to the attempted coup and the policy response. It was all sort of cordial response. Lets not all blow it out of proportion. What do you make of it . Jonathan i watched it from start to finish. It was quite interesting what started off looking as if this is going to be a big event and it hit markets very hard, ended looking like this is just he will take more power. The concern now is a longerterm concern. The shortterm as you say, markets have not reacted very much. Anus stocks were down 7 the lira lost 5 . I am almost waiting to catch up with my market wrap on that. It couldve been a lot worse. Lets talk about Global Policy response. The central bank of turkey is expected to do the five basis points. There is this to do what you five basis points. Theres this feeling that the omission could come to this. Jonathan it is the world where we have been for the last few years. There is not much else of a response anywhere else. Yes, turkey is dont the right thing. Weve had comments out from australia and new zealand looking at what they can do in monetary terms to support the economy. But then when you look at the culprit, companies are doing the exact opposite to what you want for the economy could Companies Reporting weaker revenues. If everyone caught everyone cuts costs, that hits gdp growth. The whole time, there are two elements to the market. Manus that slowdown, that gdp growth, is something we are all worried about. Whether it is Recession Risk in the u. K. , slowdown in the United States of america. K and anued eu underwhelming europe. Jonathan the two drivers of Global Growth, china and the u. S. Both of them appear to be doing alright. That is fine. Once you get away from those, europe has got its problems. U. K. Trying to work out what will happen for the next two quarters. Manus whatever that here is treasury yields. This is typical, isnt it . Turnaround inthis. Ur rates, in treasuries are you a part of the camp that says manus, i am worried about growth and i think we have to go through 1 in the United States on the 10 year . Jonathan if you have 1. 5 yields, that is unattractive. It got yields negative going out 30 to 40 years, switzerland, and where are government bonds, it is unattractive. We make the yields fall further in the u. S. I am not going to buy bonds to benefit from that. Manus hold that thought. We want to find out where you will allocate the money. Jonathan bell, stays with us. Stay with the pulse we got a lot coming up. The ftse 100 bull run is headed for a reality check. That is the word of hsbc. Harrison doubles down on costcutting after missing estimates. Ericsson doubles down on costcutting after missing estimates. Customers at the convention. Melania trump echoes Michelle Obama. This is bloomberg. London. 12 in lets get to bloomberg near Bloomberg Business flash with nejra cehic. Nejra nintendos lasting more than a week. Nintendos values have jumped above 39 billion expended in extending a run. The app became a global phenomenon. The company said a record set a record. Mcdonalds japan has seen its shares jumped after it started eating away figurines based on pokemon characters with sales of happy meals. Nintendos pokemon go which is sparked a frenzy still is available in the car 10 in japan for the cartoon series. Novartis shares are dropping this morning. It increased its spending on heart medicine and faces declining sales and its bestselling cancer treatment. In the low singledigits and the Constant Exchange rate. Sales will be unchanged. Ericsson said it will double its costcutting plan after posting Second Quarter sales that missed analyst estimates. Sales fell 11 , more than the 9 forecast by analysts. It will reduce research and develop and spending. Manus, will be speaking to hans 9 45erg on the pulse at a. M. Manus. Manus theresa may will share her first meeting of her first cabinet today. The director the directive is simple, dont deny this dont allow this administration to be defined by brexit. She said it will be the responsibility of everyone sitting around the cabinet table to make brexit work for britain. Those are the words did lets see what the actions actually mean those are the words. Lets see what the actions actually mean. The ftse bull run is heading for a reality check. Yearenchmark will end the down. It is the most bearish i have seen. I have jonathan bell. He joins me now. That is a heck of a call. The headline is hsbc barricades on u. K. Stocks, carney cannot stop the hangover. They say we are going to drop 7 . Would you agree with that . Jonathan when youre talking but u. K. Stocks, youre talking about ftse, the international stocks. ,he International Economy rather than what carney is doing in the u. K. In the u. K. Look it the midsize companies, then you have more of an issue. We are try to understand what happened to growth in the second half of the year. Manus are you calling a recession . Jonathan we may have a marginal recession. I think things are better than most economists or casts. Economist forecasts. How much is a sentiment going to be hit by brexit . If sentiment is head, consumers stop investing. Then you have the deal with europe. Where does that go . Those do not need to be as negative as people are concerned about. Softbank is a good example. Britain is still open for business. Manus i know everybody is talking about arm, and what will happen next. Softbank getting demolished yesterday. What does that signify to you . Will there be a rush of everyday a rush of m a . Are you expecting people to build biotech decisions . Swiss investors looking to Biotech Companies off equity market investments. Jonathan sterling weakness, 10 off the value of arm. It is a heck of a premium. That wasnt the real issue. They thought they could get it marginally cheaper. That wasnt the issue. It was banks looking at the growth and companies that will continue growing. If britain has companies that are able to grow, that is the main thing we should be looking for good manus the other chart it is the s p 500 versus the msci on the global. This is the s p 500. Msci all world index. We have this dramatic new record , the fifth time in six days a new record, the dow closed at a record for six straight sessions. Profits of clot profits have. Eclined by 6 the longest losing streak since 2009. Would you buy the u. S. Equity market on that kind of trade . Jonathan i have been underweight u. S. For some time. That is certainly when you look at the charge, the msci world, you need to strip out the u. S. To see how s p is doing against other markets in terms of performance is being huge, despite corporate earnings declining in the u. S. Earnings in europe which we had anticipated would recover have not recovered. They are still in depressed in europe, wheres the u. S. Manus i want to interrupt you would get breaking news. This is from moodys. , the u. K. Real growth of 1. 5 for this year, 1 for next year. Jonathan saying he reckons we will avoid a recession here in the United Kingdom. The u. K. Economy will slow significantly in the near term. That is going to be one of the issues. They also say the u. K. Retains some important strength. You got uncertainty in a post brexit world. 1. 5 growth for this year. Down to 1 for next year. The uks credit, is under pressure following the issues with the eu. These are the very latest coming from the credit worthiness remaining under pressure, following the decision to go for brexit. Trimming the growth forecast. So we will, of course, delve a little deeper as we get into that. Jonathan bell is my guest host. He stays with me during the rest of this hour. Saudi arabia, what are they doing with their bonds, u. S. Treasuries . In may. On where alive. Take a look at the kingdoms finances in a world of cheap oil. This is bloomberg. Matt saudi arabia u. S. Treasuries, over 9 billion. Joining us with the details with the chart of the era chart of the hour. When we do the significance of the latest figures this is about disclosure and we are beginning to understand the quantum the saudis own within the u. S. Treasury market. Manus, these are remarkable figures it it has only been since may that we have been getting the detailed breakdown from the u. S. Treasury department about those Saudi Holdings. They only came after a freedom of information act request from bloomberg news. We put it up on the chart, easily accessible for you on the bloomberg. You can pull it out with a separate function in terms of those wanting to create your own charts to put it in perspective and what were looking at here is the holdings. Those a down 2. 8 . Billion. 3 9. 3 youre looking at here and accelerated selling of Saudi Holdings in u. S. Treasuries. Mind, those do not include custodial accounts that come in at about 1 5 of Saudi Foreign reserves. There is substantial pressure on the saudi budget and underscoring that paradigm shift is a part of the Economic Vision that the country had, as it tries to grapple with oil prices at the levels they are at right now. Manus there are many ackermans saying there could be derivative products. A great charge. Ellman use of gondola use of normal eldin. Jonathan bell is still with me. Yousef when you look at the debts we look at that, does that cause you concern . Cause me it doesnt great concern for the treasure markets overall. There is something in saudi, where because of low oil prices they are having to see how to balance the budget. One way is to sell u. S. Treasuries. Manus Goldman Sachs is going to report their numbers today. Banks are under pressure. Goldman sachs, Second Quarter revenues expected to fall by 17 . That is going to be one of the Critical Issues here. Put goldmans in context relative to europe for me. Jonathan there is a big difference between u. S. Banks in european banks and u. S. Banks made the right offs that they need to make. They capitalized. Initiate in europe, there is hidden nonperforming loans. Clearly in italy it is a big issue, how to bake we capitalized to go forward how do they we capitalize Going Forward recapitalize Going Forward. You have a problem of how do they grow profits . Revenues continually suffering. It is always been about how do they cut costs . Manus this is what you would say about goldmans, what you want to see from goldmans in terms of cost cuts . A lot of people are saying the issue is the goldman client book is different from the bank of america. They need to rebalance the client portfolio rather than costs. Jonathan theyve got the issue that they had. Areas that have suffered, it is the banks that have the corporate ties that have been able to take market share from goldman. The costcutting, it is just a continual look at where you cost cut and we cost cut that costs. Cut costs. D move do you move more to india . It is a brexit issue but nothing to do with the u. K. Manus jonathan, thank you very much. Jonathan bell from standup capital. Brexit and the sweet spot the european corporate. Up next, the pound. What happens to cpi . This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Ands this is the pulse. The city of london with manus cranny. Cpi in the United Kingdom came line plus 2 , very much in with market expectations. That is a little bit ahead on the year on year. Petrol prices have been rising ever so slightly in the United Kingdom so what you have is pretty much in line on the cpi. On the retail price index, that is slightly higher. It is the cpi month on month on. The markets focus in the june inflation rises by one half of 1 . It is the very first indication at the end of the Second Quarter. A lot of this data is for june so it does not give us a real indication in the eye of the brexit storm. 1. 3219 is the run up on the pound but analysts are saying you should sell into rallies on cable and it is only a matter of time before the trade to the dime side asserts itself. Cpi for the month of june comes in at plus. 2 month on month. That is your data. Lets get up to date with your first word news. Nejra australias newly elected Prime Minister and his cabinet have been sworn in. He reshuffled his team after the narrow election win this month, declaring budget repair the top priority. The ftse 100 is heading for a reality check according to hbs see just hsbc. Hsbc it says the promise of Central Bank Stimulus will give way to harsher economic realities. With an ax andd a knife injured four people in a train in southern germany before being shot dead by police. Butas a 17yearold afghan a motive has not been established. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Manus thank you very much. Lets just check out what is going on with some of the main market moves that we have here on bloomberg this morning. A little bit more detail . Nejra starting with the stoxx 600, it is falling today down almost 8 10 of a percent. Risk aversion coming into these markets. In terms of the detail and where that is coming from, looking at r on the bloomberg, all Industry Groups are heading lower. A modded a carmakers are leading the losses, commodity producers down. 6 . Access to bell as one of the worst performers today, down 5. 6 . Secondquarter revenue was a mess and it is had a slowdown in sales in the u. K. In the runup to the brexit vote, and a wider malletts has befallen parts of the region and spending on home iserovements a wider mala has befallen parts of the region and spending on home improvements. We are at one dollar 32 but we have retraced some of those losses after the better than expected inflation data. It is still the worst performing t10 currency in the last month and weakening against most of its 16 major peers. Treasuries, Morgan Stanley says the year of the bull will push the u. S. 10 year yield to 1 in the First Quarter 2017. E are at about 1. 55 now Morgan Stanleys is the most bullish call and basically they said on march 15 that the global backdrop of fixed income was so supportive that it was shaping up as the year of the bowl. Since then the bloomberg , that hasond index actually climbed 3 since march. It has gained 5 this year. The 10 year yields set an alltime low earlier this month but right now we are at about 1. 55 . Manus if there is a chart to be tracked, you will find it. Should just say that what we focused on a bloomberg for the inflation data is this, a redhot headline. It is the year on year forecast that were going with. We have not hit that target since 2013. Futures are indicating and 83 probability you will get a rate cut in the months in the next month. Lets get straight to our reporter in turkey. Good to see you. Lets talk about the federal bank. One thing the central bank wants to do is emulate what christine emulated, quell the worries of the market, business as usual. Does that mean a 25 basis point cut . We are going to find out in just over two hours. What happened over the weekend is that the Central Bank Governor and Prime Minister called investors in a Conference Call to make sure they are going to do everything in their power to mitigate the impact of the coup attack on the Financial Markets and they will make it look like business as usual. According to some analysts and economists, that means the central bank will go for a smaller rate cut than previously thought. Most of the economists we surveyed last week were expecting a half of a percentage point rate cut by the central bank today, but some of them revised their call to a smaller cut on monday, citing volatility in Financial Markets and uncertainty in the wake of this failed coup attempt. Manus as you said, we will find out in the next couple of hours what the decision is. Joining me now to talk about mukey and the volatility is rat toprak. Great to have you with me. This debate as to what the central bank will do one will be about signaling, but the second most important thing is about the risk of the flow of capital to turkey. It is not really about a rate cut, is it . I do not think it is about a rate cut. The kerry has been a very important driver of the market in the past few months. But what we are really looking at is two big elements. One is about the portfolio flows. Because of this very favorable drop bash backdrop we had globally backdrop we had globally we have seen increases of imports to turkey into bonds and equities. , but we have to put it in context and compare it to what happened last year. Been underturkey has pressure and we have seen large outflows from turkey, about 10 billion of outflows. It has been one of the most hit emerging markets last year. We are comparing 10 billion outflows last year compared to today. The overall positioning is quite low in turkey. Look at the conditions, it is about 22 . Manus to a certain extent it matters because it is a sizable proportion of, if i have some em exposure turkey is going to be a larger exposure of that in a relative sense to the geography. Moodys has put it on review for a potential dying grade and it is on the cusp with a number of rating agencies. Does that matter . It is already trading pretty much a junk status. It matters obviously for fixed income investors. But we tried to not give that much important to this element specifically because as i said, the following participation is already low and investors have to invest it somewhere. Turkey is part of several bond indices. Being already neutral or underweight even with a downgrade is difficult to reduce these positions but in the near term, it will matter. That will continue to weigh on the turkish, that is for sure. We do not want to be too pessimistic about the turkish lira. Manus the other story we have written this morning is that there is 169 billion worth of s. Rporate about 40 of the turkish corporate borrowing market is in foreign denominated currencies. This is where the story really ,atters in terms of the risk the economic risk from the currency feedback loop. Murat absolutely. For turkishg source assets in general and the turkish lira in particular. This is a story we are talking about for now years. This is not something new. We know the fx liability on the corporate sector is large, about 27 of the gdp. Householdsor turkish or corporates have been able to withstand the turkish lira depreciation and the past two years and the main reason, it is the money that we have globally. The access of turkish corporates and banks do this has been very easy. We did not have any disruption of this money coming into turkey. Manus have a look at debbie crs. W crs i have emerging markets against the dollar. This is month to date and this is the personification of easy money. The chilean peso had a rally. There is the lira, it is the lag art in the e. M. Trade. We know what that story is about, but that relief rally, does that continue in your opinion . You said despite the flow of money, where does it stack and rack with you . Murat we have been very constructive on e. M. The past few months because of this dovish backdrop we have. We have a fed on hold, the ecb expected to print more money, the boj, and all the concerns about china that have receded. Manus we do not talk much about china anymore, do we . Murat the market is no longer worried so this is creating a positive environment for e. M. And for e. M. Providing a high carry. We are in an environment where we are chasing a high carry. Last week we were also chasing this in turkey. The dollarrand is a good example, really a reflection of this positive global backdrop. Manus david bloom will be happy and hsbc. And you very much for coming and sharing your latest thoughts on the turkey situation. Senior fx strategist as hsbc. Brexit, is it the end of a sweet spot . That is the question for european equities. That is what s p is saying. We are going to speak to the ceo of eric spent for his take on brexit erickson for his take on brexit. It willricsson says double its costcutting plan after secondquarter sales missed estimates. Joining me is hans vestberg, ceo of ericsson. Lets get straight to it. Looking at your stock price this morning, we rallied on the open, up 5 . We are up 2 at the moment. The market likes what it is hearing from you. How many more job cuts do you have to do to get to the new equilibrium at ericsson . We have one program that in 2014 that is bearing fruit on our operating expense levels and that was very important for the Second Quarter. Now we are adding in more cost reductions mainly because volumes are coming down but also to preserve our profitability levels. That means we are doubling or reducing our opecs and that should be measured and the second half of 2017. It will impact employees as we are doing this transformation but also contractors and other costs. We are putting in a new Corporate Structure that is designed for lower costs. We have all this and place and we are executing on a larger cost reduction, but that also means we can invest more in certain areas to continue to be competitive. Manus lets talk about the geography where you do business. Asia has been about 10 of your revenue, one of the bolsters of the business. Are you seeing any signs of slowdown in asia . What can we expect from the second half . Hans Southeast Asia has been good for us. We probably have gained market share and we see a transition from 3g to 4g. In china it is very stable. The place in asia where we see less activity is india. We see a lower pace on investment of infrastructure. The Service Peace manager keeps a pretty well in india, so that is what we are seeing on the asian footprint right now. Manus there is a mega deal at play, soft bank going after arent softbank going after art. Capex spaine big get get turned on s paid it get turned on . Is 5g the driver . Hans that is very much anticipated right now. We believe right now that we are going to have the first precommercial in 2018. We are delivering already. When its to remember that five is very different. 4g was only done for consumers but the 5g is a wider system change where it can cater from everything to a condiment autonomous cars. A much wider investment needs to be done in transformation so i think over the next couple of years we are going to see gradual but sizable revenues. Now we are defining the standard that is so different from any other technology we have ever done before. Manus a couple of other big subjects that come to mind. You have been running the Swedish Company for six years. You are a company that does business into europe. Advice for the businessmen lobbying the new administration as to the uks position as it goes to seek trade deals and potentially a new relationship with the eu . Hans first of all, we believe in free and open trade. We are in 180 companies. We are a big investor in the u. K. Working from everything to the broadcast from the broadcasters. It is an important market where we invest a lot and trade with the u. K. Will be allimportant. We would like the eu to be united but with the decision taking, it is more to see that that trade relation continues because the u. K. Is a large and very important market for us. Question cashal your shareholders raise many questions. You have been with the company 6. 6 years and have delivered a return of just under 4 . That lags your peers. The have been institutional shareholders that have questioned the strategy for you. Are you set to remain at ericsson . Are you fearful that institutional shareholders could harry you from your position . Hans i think we are doing a lot of transformation at the moment, changing the Corporate Structure, doubling the cost efforts. We are going into new areas say to see itu through. That my job is to continue and that is what im focused on. Manus hans vestberg, ceo of ericsson. To clevelandive where the rnc got underway last night. This is bloomberg. Wife spokeld trumps last night at the Republican National convention and some people are saying that it had a little bit of a reminiscence of what Michelle Obama had to say before her husband was elected. Lets get to the Republican National convention in cleveland. Walk me through this. Run me through the comparisons. It is very striking if you put the speeches sidebyside. There are a couple of passages talking about how they were both raised and the importance of, essentially morality and your hopes and dreams of your children, ethics, things that are almost verbatim in a lot of passages. The problem potentially is that donald trump has sought so much to draw distinctions between him and president obama. This is melania trumps introduction and the inevitable comparisons will be, she wants to be so much like Michelle Obama that she borrowed entire passages from her prious rerks. Her remarks were very well received at the time by many of the republican voters, but for newsext several hours the cycle has taken over in terms of comparing her to mrs. Obama. Manus there is no doubt about it, not a day will go by without a bit of controversy and hillary about donald as being a potentially dangerous president. Margaret, thank you so much. Pulse. Hansr the mytberg joined me saying, job is to continue to execute the transformation. Rival, see Donald TrumpsHillary Clinton later on charlie rose. We consider aing new subpart path to Economic Growth and disinflation. Madame lagarde says europe convicts the italian bank. A select few disagree. Day one is so done in cleveland. Mrs. Trump is the only one on script. This is bloomberg surveillance. I am tom keene in new york, guy johnson in london in for francine. Sort of an