Live from bloombergs European Headquarters here in london. Coming up, we will speak gman twoo the pierre gramegna. First things first, lets check on markets, european stocks retreating. They were undecided what to do earlier but now they are down to 0. 4 . The retreating oil and gas shares japans yen surging to the strongest level in more than a week against the dollar. This is looking for signals about when we get stimulus or not. The british pound falling. Lets get to the latest bloomberg first word news with caroline hyde. Caroline good morning good at Bernie Sanders has told the Democratic Convention that Hillary Clinton must become the next u. S. President. This came after his plea to protesters. Michelle obama offered her endorsement of clinton. What i admire most about hillary is that she never vocals under pressure. Pressure. Uckles under she never takes the easy way out. Hillary clinton has never quit on anything in her life. Any objective observer will conclude that based on her ideas and her leadership, Hillary Clinton must become the next president of the united states. Aroline and man armed with knife has killed at least 19 people and injured several others near tokyo. That is according to the kuroda news agency the kyoto news agency. A motive for the attack has not been established but police told the man used to work at the facility. Britain needs a new financial watchdog to punish wrongdoing in order to win public confidence. A new body should operate separately from the Prudential Regulation Authority and the financial conduct operation to help inadequate response. Solar impulse to has become the first aircraft to fly around the world powered only by the sun. The plane touched down and out with dobby this morning dhabiown in dobby abu this morning. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. You can find more stores on bloomberg at top. I am caroline hyde, this is bloomberg. Francine. Francine bps Second Quarter results have missed expectations. Earnings fell 45 although increase prices continue to erode income. Ryan chilcote has more. It is quite tough. We are seeing more pressure on refining. Ryan that is right. That could be trouble for all big Oil Companies. We saw the share prices for shell fall on the back of bps Earnings Report which came in just 100 million shy of expectations with 720 million of adjusted profit. The issue is not just the falling price of oil, the issue is those refining margins. Bp saying they were the worst they have seen in years. As you know, refining is the heads for Oil Companies good when times are bad for the oil price, it is refining, making crude into finished products that helps. There is a glut of gasoline at their. Integrated Oil Companies made too much gasoline at the refinery and that is hitting them. What is worse than that is ep also said that they expect in the Third Quarter the pressure to remain on those margins. Francine. Francine ryan, very quickly, at least they stuck to dividends. There was concern that a lot of these oil majors had to scale back. Ryan it came in at . 10 a share. Bit. D see gear take up a about bps debt load at 30 billion. If that continues, you will see more concerns about that and you might hear people talking about a cut to the dividend in the future. Nobody wants to do that just yet. Francine ryan chilcote, thank you so much. Some of the big u. S. Oil majors a little bit later. The Bigger Picture of Global Growth. Lets introduce kit juckes. Always great to speak to you because you have unique insight into how the market and Global Growth play out. When you look at the story with oil, doesnt point to slower demand echo are you concerned about world growth . Or is the linkage its not there because we see disruptions in refining problems . Kit one of the things is we have had the oil price and just for the big fall, bounce a bit. They are probably not going back to 80, they are probably not going back to 80 70. It is happening. I do worry that someone who doesnt know much about it whether more and more Oil Producers have try to boost. Ncome by getting into refining that industry is going to feel the pinch of more people wanting to get more dollars out of each barrel of oil. More than anything else coming get the sense that all of the things that happened last year to the oil price, they are going to feed through. Care francine because of the volatility in the currencies and the big moves, i am thinking of yen, pound if youre going to be winning company, you have to be on the right bed of company right bed of currencies. David most Companies Like to have most of their currency exposure. I have no idea what is happening and that is a terrible thing to think when you get paid to understand it. You have to be playing lucky. Francine a lot of people said quietly but wont say upfront. Is it market psychology . There seems to be panic moves that we are not certain what is happening to equities. Kit in the phone exchange market, there is idiosyncratic events. We are waiting for a meeting from the fed where they are not. Oing to do anything with rates we are waiting for a bank of japan meeting where everybody is expected to do something sometime. A lot of positions come off. We have been waiting for the reserve bank of australia meeting next week and we thinking what it tomorrows inflation date are a bit higher than expected. Everyday we get a different member of the sec getting an opinion desk giving an opinion. Giving an opinion. It is hard to get right all the time. Francine i know we talked about. Ou about how we price risks is it only being priced in currency markets . Sometimes it feels like binary like that. Kit you look at the u. K. , the referendum risks of what happened seems really clearly in the currency market. The equity story is more difficult because it helps a lot profits for a lot of exporters. The gilt market, the Credit Rating in danger or the Interest Rate is going to be really low. You see it in currency markets more clearly and with Central Banks are buying government bonds. How do you price . How do i price italian uncertainty . I have no idea. Francine you dont go through euro. You take the position that it is going to be where the you increase volatility. Kit one of the winning currency strategies over the last few months has been sell volatility. I think well get a pickup in volatility through august. Francine kit, think you so much for now. He stays with us. We will be talking about janet yellen and pound. Stay with the pulse. Plenty coming up including a busy week for the worlds central bank. The boj gets ready to make announcements it will take a look at the state of the global economy. Immediate monetary stimulus. Well talk brexit and the u. K. Talk with the finance minister of luxembourg. This is bloomberg. Francine lets get to bloomberg first word news with caroline hyde. Caroline francine, thank you. Germanys secondlargest bank says a key measure of financial strength fell in the Second Quarter. That as it made the adjustments to reflect up occupational risks. The firm says net income in the Second Quarter fell 32 . It didnt specify help divisions performed. Ab inbev raised its bids for a. B. Miller acb miller after the pounds slumped. Receive one pound more per share than the previous offer. Has sharplyjudge criticized statements and actions by former executives of bear stearns in the final days of the investment bank. He says Important Information was held from the public. He is now allowing to move forward. Francine. Francine Federal Reserve policymakers begin their twoday meeting in washington today. They are expected to hold the line on Interest Rates. The fed funds futures indicate the odds of a rate hike this december almost back at the level on the day of the referendum. That policy decision will be followed on friday by one for the bank of japan. Economists surveyed by bloomberg see the be a just sees the boj see the boj easing. It juckes, global strategist theres been a Huge Movement in yen today and yesterday that the markets are all over the place. The finance minister, governor kuroda saying there is no helicopter money. They expect in out its stimulus but not as aggressive as they thought. Kit the termination of monetary and fiscal stimulus. If you get Monetary Policy working in unison with fiscal policy, whether you end up calling that helicopter money is an exaggeration, drone money where central bank owns a 30 of the bond market of which everything after 17 years has negative yields. I could get myself quite confused about when it becomes a helicopter on that path. When they are working in unison, you can deliver the commendation of a higher currency market. Francine why wont they . Kit i think they will get a fiscal stimulus. It wont be called helicopter money yet. Well get easing on friday from the bank of japan. Including more asset purchases, perhaps a rate cut. I hope that delivers a weaker currency. Francine will it . I know this is where you get paid the big bucks. Governor kuroda says he surprised the markets in the january in january, and then he thinkhe january policy, i was mismanaged in the sense that it was a complete surprise. It was a split vote, it was a friday and it was on a time when they were trying to move to negative rates to encourage japanese investors to move money overseas. In assets they were buying january, they were getting annihilated. The timing was dreadful. The time now is much better. I can feel their nervousness because you are in uncharted territory and you find the timing and the way you execute policy changes is difficult. As with hiv last summer, the chinese made a huge error as with the chinese last summer, the chinese made a huge error. At 1. 10 atwill be the end of this year. I have hopes that will have dollar yen much higher. Francine how do you look at the selection . If your janet yellen, do you not just stay put to see a clear picture . Im being so diplomatic. The janet yellen goes for stability by instinct. Kit janet yellen goes for stability by instinct. They wont do anything today. Their problem is they would want to see really strong Economic Data in the next couple of months and wished they have done something they had done something. Theyve got another meeting in september. They are still looking at the which feels healthier than it did last time they met. They have some better domestic data. The risk sentiment is much less than some people have feared. Francine why is that . Cheering wers think that it may never happen. But it may never happen or article 50 may never be triggered. Kit this is not the worlds biggest economy though it is the home to a lot of us. It is mostly a u. K. Economic hit that will come through slowly, steadily and be very big. It is a european head because we are already a trading partner for europe. After that, it tails off. Money has, using trumped everything so far. Francine will talk inflation. Kit juckes, global strategist stays with us. Slowing growth and rising inflation as the bank of england switches sides. This is bloomberg. Francine this is bloombergs pulse. This is as bank of england officials gathered to decipher the latest postbrexit data but hasnt considered slowing growth and fostered inflation. Could see inflation rise to 2. 2 by Second Quarter next year. Still with us on set, to talk about pound and the fact that it , it is kit juckes, global strategist at socgen. When you look at pound, how much do you look at the boe would look at inflation . What they can do immediately . Kit i look at what they can do immediately and thereafter. I assume until i learn otherwise that the policy since after the 1992 the parts are from the are in is you look through the effects of the inflation. Cutting rates of sterling fell through that period. So did the sees of economic recovery through the 1990s was very strong. Seeds of economic recovery through the 1990s was very strong. What benefits you can from the economy for exporters and you ignore the inflation, unless francine what does the u. K. Export that it owns . Kit financial services. And currency terms, we have a big surplus and services and an even bigger deficit in goods. Most of the goods where we have been successful have been goods of things that are relatively formulative this one cars, high engineering is where we have been as a country most successful. We have had a lot of medical attention. The our exports in the u. K. And they can grow them. They have mostly been in a part of the market boost margins and profits. Francine where he surprised about his comments . Kit it is clear that from the moment mark carney set out to the referendum that he would be quickly ease money that left rates on hold. Becoming out and marking their position. The survey data and the pmi data on friday were awful. That is before we saw the cbi data yesterday which is also awful. We have had some awful data. There is no doubt the economy is going to slow. Francine slow to a recession . Look at of access to we have to the eu . What kind of access we have to the eu echo eu . That july soe everybody by summer close and barbecue because the sun came out. The economy will take ahead. Take a hit. He had 73 and pc meetings. 73 73 and pc meetings. You dont have a month, martin. I think i wouldve done. Francine what happens to the pound . Kit the market is bearish. I think we will take it against 1. 20 andr between 1. 25. Once we start getting a clearer picture of the Economic Data, because there is a lot of data out there. After that, we will have negotiations start and the governments response. If we came in with a big fiscals policy response fiscal policy response we need Infrastructure Spending to sort out some issues. Francine is it too soon . Can we look at the characters in place and cabinets and try and actually secondguess what they will do . Or do we need to wait . Kit this is the way politically which seems the obvious solution. I sort of think they will get there in the end. The Austerity Movement within the conservative party is pretty big. It will push back. I think i will get the pound significantly lower before i come back and say there is a brighter, longterm story for the currency on the back of that. We might come back to that next year. Francine it, thank you so much. Take you for coming up. Thank you for coming on. Coming up on the pulse, we will speak to luxembourg finance minister. He is pierre gramegna. This is a quick market check. European stocks overall having a higher start to the day, retreated with pound. Yen soaring to a oneweek high. Where looking at a couple of the movers. We are looking at a couple of movers. Aret of oil and gas shares feeling the losses. This is bloomberg. Francine welcome to the pulse. In london, i am francine lacqua. Lets get to caroline hyde. Caroline Bernie Sanders has told the Democratic Convention that Hillary Clinton must he come the next u. S. President. It came after his plea for protesters to avoid the floor. What i admire most about hillary is that she never buckles under pressure. She never takes the easy way out. And Hillary Clinton has never quit on anything in her life. Observer willve conclude that based on her ideas and her leadership, Hillary Clinton must become the next president of the united states. Armed with aan knife who killed at least 19 people in their sleep and injured others at a facility for disabled people in tokyo according to the new agency. Nhk says the 26yearold man is under arrest but a motive has not been established. Police told the nhk that the man used to work at the facility. Britain needs a new financial inchdog to punish wrongdoing order to gain confidence according to the u. K. Treasury committee. Separately toate prevent a repeat of the inadequate response to the collapse in 2008. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. I am caroline hyde. At overfrancine and luxembourg wants to grow even more. The country wants a bigger slice of the financial pie in the wake of brexit, or do they . Financial services make up 36 percent of the economy and luxembourg. Welcome theto finance minister of luxembourg. Thank you for joining us. Pierre a pleasure to be here. How you seelk about brexit. We thought it would be the end of the world but negotiations have not started so nothing has changed. Pierre one dates to be realistic and, in this matter. The brexit result was a shock but it is not a crisis. Lets get over that shock and lets negotiate, that is our message. As you rightly said, people thought it would be the end of the world and now a new wind of optimism is growing. Neither thing is the good attitude. One has to realize that the u. K. Andbeen in the eu 43 years to unwind all of this will be a long process, and we have to be rational and,. We do not know what the end game is an at the end of the day it seems like there is a sense of calm because of Monetary Policy. Pierre it is clear the shock of brexit has had a negative impact on confidence and on the perspective of growth, but still, on the euro zone it has been calculated that it would be a reduction of gdp of 0. 5 . Up 10oil price would go in a week, you would have the same prediction so one has to be reasonable and put all this in perspective. Francine do you think banks will leave london as a Financial Center and can luxembourg attract them . Pierre i have come here for many reasons, to visit level 39. We would like to develop fin tech in luxembourg and we would like to incorporate with level 39. But for banks and financial players, we do not come here to lord business away but to rentinue to do business lu business away but to continue to do business with london. Where the Investment Fund managers are in london, we do the administration and luxembourg and this has worked fine. We want to make sure this will continue in the future and whatever the results of the negotiation of brexit, there will be life after that and business after that. Francine what would be the best model for the u. K. And eu . There is concern that if the u. K. Does not have access to the Single Market than the business moves outside of europe. Pierre i would like to do a comparison with what is happening with switzerland. Switzerland does not have the passport and the major swiss players, major swiss banks are distributing their funds all over europe. They have a substantial place in luxembourg. Meaningful Risk Management is done there, so there is always a way to find a solution. Having the passport is what would everybody like to keep if if itperfect world was a perfect world, but there are other ways and means of doing business. My other message is a reassuring message, whenever the end result there will be ways and means to , andficient from london luxembourg is wellpositioned for that. Francine do you think the euro zone leaders and eu leaders want to do it that way . A lot of people have been talking and looking at switzerland as a blueprint for the future but it has taken 40 to 50 years to come to that place. Starting point with the u. K. Will be exactly the opposite dan switzerland because switzerland is not part of the eu and the u. K. Is part of the eu. So the long process that we will face is that we will have to unwind the 43 years of common history. Done in ading can be very constructive way but it will take time. Inncine what was it like the eu council, the first counsel after brexit . Were people bewildered or was there animosity . Pierre there was no animosity at all. There was quite a lot of deception because we all wished the answer would have been different. We were respecting the democratic result that happened. We had done a british settlement in february march where the eu have been very constructive in facing the problems that the u. K. Government was putting on the table. I think we even had found some Construction SolutionsConstructive Solutions and it is negotiation was not in the forefront in the campaign. There was a lot of deception. I would like to underline the sentence that david go made in that meeting. The United Kingdom is not going to turn its back to europe, and i think he was right to point that out because it is in the best interest in the United Kingdom and europe that the relationship we have built up over the last 60 years over world war ii continues. Understand you are very polite in saying, i am not here to pitch is this away from the city of london, that if banks were to relocate, which you pitch for business compared to frankfurt or brussels or paris . Pierre obviously we are an important Financial Center here at london is number one in europe, a be number one in the world, and we are number one in the continent and in the eurozone. After london being the first obvious choice, we have many british players and our country. We are a aaa country and there is only one there is only 11 left in the world. There is a lot of stability and hence predictability, so that is what investors are looking for. ,rancine thank you so much luxembourgs finance minister stays with us for more exclusive conversation on bloomberg. We talk a little bit about the. Urozone, currency wars is it business as usual for the continent after brexit . Has sanders make the case for clinton . We are live at the Democratic National convention. The fed officials push up chances of a hike this week . This is bloomberg. Francine markets lower this morning. Lets head to the bloomberg with mark barton. Mark appetite for risk is diminishing as fed kicks up one of its dutch kicks off one of its days of negotiation. The boj is on friday. This is our function, equities, currencies, bonds, and commodities. It is very much a day where people are putting money into haven assets such as bonds. U. S. Twoyear yield and the u. K. Twoyear yield, the spread is that the widest since may 2007 as we approach this fed dating. Next week and is expected to cut Interest Rates, a 90 probability. The difference in yield is 62 basis points. Yen, new zealand dollar, australian dollar, against the pound. All are rising against early because there was an ft report that martin well who has been hawkish for most of his tenure at the boa now favors immediate stimulus for the economy following the release of the pmi data on friday which showed a. Lump to 2009 levels sterling has dropped 12 against the dollar since june 24. It has rebounded 1. 4 from the close on july 2, its lowest level since june 1985. The hawk of this wheel is giving boost to these currencies against the pound. Francine it is amazing how you see these quite brutal currency moves quickly. The european surveys for july, the preliminary mario draghi refrained from adding to monetary stimulus but is a time for europes governments to do more and should we be worried about global currency wars . With me is the finance minister of luxembourg. Thank you so much for sticking around. Overall, what is your biggest concern for the eurozone . We have the italian banks, currency wars, political uneasiness. What is the one thing we need to be fixing in the next 12 months . Pierre what we really need is to have more confidence in europe. For what we are doing together as europeans in the eu, for those in the eurozone on one side. Just be a realistic that in fact europe is doing economically much better than in the past three years. Growth in the eurozone should be around 2 this year. You can see the glass half empty or half full but i think we are on the right track. Structural reforms are still lacking and that is why we do not have higher growth rates. We in luxembourg have done is reforms so we have double growth compared to average, 4 , but i think we are on the right track. Debt is going down in most countries, deficits are going down so the situation is not that negative. We have some tailwinds and a to take advantage. Francine how do we resolve the italian banking crisis . It shows weakness in the European Union and uncertainty for less sophisticated market players. Pierre this is a very serious topic. Let me first say that we have a Banking Union which was difficult to achieve. Many commentators thought we would never achieve that in europe and we have become an umbrella to protect all european banks. We are in the initial phase oute the banking is playing and we are meeting the first practical obstacle. We need to go through these and treaties, rules, and we have to be pragmatic with the nonperforming loans in a country like italy. I think mario draghi has said so rightly last week by saying we have to be pragmatic with how to deal with that. We have rules and we will get through them. . Rancine what does that mean if you have a bail in and realize so much of the subordinated bonds of italian banks are held by households, is this something that could be systemic and should we abandon this . Pierre i think you are going to fast to abandon burden sharing. There are roles, they need to be rules,ed roles they need to be respected. One has to be pragmatic and face that the public would be the victim directly if we in a blind way applied a rule. So be pragmatic about it and be reassured by the fact that we have a european umbrella. Francine when do you think we will have a resolution either way . It feels like it is a timeline problem, that the European Union is slower than investors wanted to be. Pierre this is a problem we made very often. We had it for the greek crisis. In the end, europe voice finds a solution. Targets are important but the solution must be a right one, and bearable and defendable. Francine if the italian banks are dealt with in a way that is either sloppy or mismanaged, could it be a bigger crisis than brexit . Pierre i do not see a link to in the two things. The brexit issue is about finding a solution for the exit of a country in the European Union so it is more of a political diplomatic issue than a financial issue. The two things are of a different nature. Francine how much of damage to the reputation of luxembourg was lux leaks . Pierre that is very much in the past, we have solved that. Way that it in such a under the luxembourg presidency in december last year, the eu agree do have an Automatic Exchange of rulings at the eu level. 26 countries out of 28 have rulings so we are exchanging them now. Luxembourg is a part of the solution, not a part of the problem. Francine hasnt impacted companies . Companies . Pacted pierre i think it was a wakeup call for the International Community that there are rulings around the world and we have to deal with them at an international level. Europe has been pioneering in this direction, but the same is happening at the g20 will ecb level. The tax landscape is changing dramatically. I was present in lima when recommendations were presented to the press. I think it is a change that we are witnessing and i saw theresa may said today that she also wants to combat tax fraud even stronger, and work against tax havens. Luxembourg is totally on board. We are embracing tax transparency. That is good for our country, reputation, and the image of our Financial Center. Francine minister, what a pleasure to meet you. Pierre the pleasure was all mine. Francine the finance minister of luxembourg. Bernie sanders campaigns for Hillary Clinton as the dnc has its own supporters. Francine welcome back. Bernie sanders has backed Hillary Clintons candidacy at the Democratic National convention. Speaking on the first night of the event, sanders told them bided divided delegates that the choice between clinton and trump is clear. Bernie sanders, a headliner. Did Hillary Clinton the speech she needed from sanders . The day began with progressives still upset with the leaks from wikileaks coming from the dnc. Former dnc chairwoman Debbie Wasserman schultz resigned because of this scandal. Progressive and many of the Bernie Sanders supporters are still upset with Hillary Clinton for choosing tim kaine, a running mate say is not progressive enough. The tall order for First Lady Michelle Obama as well as Elizabeth Warren and Bernie Sanders was to unify the democratic party. Lets take a listen to what senator sanders had to say. Mr. Sanders i am happy to tell you that at the Democratic Platform Committee there was a significant coming together between the two campaigns, and we produced by far the most progressive platform in the history of the democratic party. Kevin so clearly, senator sanders trying to make the case to his supporters, several of which were booing Hillary Clinton chanting lock her up inside and outside the Convention Hall. A tall order tonight for former president bill clinton who will address the Convention Hall this evening. Francine in 20 seconds, was there a huge difference . It seems like the contrast between the republican and democrat conventions could not have been more different. The Donald Trump Campaign is trying to specifically go after disenfranchised and disgruntled workingclass voters. Clearly the message coming from democrats and philadelphia is they view his rhetoric as incredibly divisive. Francine kevin, thank you so much for joining us. We will have plenty more from kevin throughout the day. Stay with bloomberg, is up next and we will kick off the conversation with andrew sheets. At 10 30 we speak to catherine mann. Banks, the boj and said meetings are coming up this week so we have to look at currency moves. Then there are also 2 dragging a lot of the oil stocks lower after a disappointed. And the one we have to watch out for is also sad miller after inbev increase their share price. Francine big oil, small profits. 45 drop in earnings as low prices continued to erode income. Democrats descend on philadelphia as the fomc convenes in d. C. How will politics affect policy for the fed . The currency heads for its biggest gain in a month as the fed kicks off a twoday policy meeting today