Gulf. Earnings reports first since the u. S. Blacklist. Warnings of difficulties ahead. We speak to the companys chairman. Im matt miller, in for Francine Lacqua in berlin. Lets check on markets. Gains in london, drops across europe. Stoxx 600 down a half a percent. Bp holding it back from bigger losses. To pound continues to weaken see thes, and you japanese yen strengthening. By 108. Dollar can only. 6 of yen. The fed is expected to cut rates tomorrow. Yield and coming up we speak to the ceo of cap gemini, 9 30 a. M. London time. A lot to catch up on today as we have a slew of exclusive interviews. Lets get the first word news from new york. Ratesa mexicos interest are too high for the slowing economy according to the president. The central bank has cap the key high,t 8. 25 , a decade and this makes it one of the strongest currencies this year. The mexican economy may be in mild recession. [speaking foreign language] they are more cautious about inflation. ,his is not a bad thing, no, no this is not the wrong thing to do. I am not saying that. Important to lower the rate to encourage growth. Mexicos president was speaking exclusively to our editorinchief. Ultimatum to Boris Johnson. Talks withocart far, brussels have refused. Morning commuters in hong kong facing delays as protesters disrupted services on the subway, the second time in less than a week they have disrupted the railway, after beijing warned violence would not be tolerated, following clashes with police over the weekend. Seeing over the fed decision. Says 2 inflation remains out of sight, trimming projection to 1 for this fiscal year. Donald winning his fight to veto a block of arms sales to saudi arabia. The senate failed to override the move. Critics say saudi arabia must be punished for yemen and the murder of jamal khashoggi. Global news 24 hours a day on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado, this is bloomberg. Matt lets kick off with the fed. The rate cut expected on wednesday would be the first in more than a decade. Scott minard, the ceo of Guggenheim Partners, doesnt think they should. He says they need to raise rates in order to keep the economy from overheating, a view that the president does not share. Trump tweeted that a small rate cut was not enough and that the fed had made all the wrong moves. The president has been a critic of jay powell. Take a listen. We have a gentleman that likes raising Interest Rates in the fed. A fed that would lower rates, would be like a rocketship. We have a gentleman that loves quantitative tightening. They really float us down. There is no inflation. We are paying interest and it is unnecessary. The fed has not been a help to us. We have a gentleman that likes a strong dollar in the fed. We are not playing on a fair field. We do not have a fed that knows what they are doing. Eventually he will do what is right, perhaps. Lets see what he does. Matt joining us now in london, jose, cio. Jones, berlin, Richard Bloomberg strategist. Jose, let me get your take on the president s comments especially the strong dollar comment. Isnt it a good thing for an economy to have a strong currency . Jose it depends. You can manage Interest Rates. You have to keep them how they are. Richard . Richard in one way a strong dollar is vote of confidence for u. S. Economy. For exporters, it becomes challenging. Exports become more responsive. There is tradeoff. The president has decided the latter is more important, in a world where there is competitive devaluation, he wants a piece. Matt jose, it looks like he will get what he wants. Scott minard does not win this time. What does that mean for asset prices . Are you concerned we could see bubbles inflated . Jose it is possible. I would not say we have a bubble now. Rates inut on interest u. S. , will have equity rise more, bonds, in terms of price will rise as well, probably we will be living in a more dangerous world. Probably, we need some margins for economic policy. We dont have margins on the fiscal side. Having margins on Monetary Policy, it would be key looking forward, in case we have any recession, what do we do then . That is the question. Than richard, we see more 1 trillion leveraged loans in the u. S. , we have private credit of almost 1 trillion, basically bonds to companies that cannot take out debts like that, zombie firms. The proportion of smallcap u. S. Firms without earnings stood at 32 at the end of may, the highest levels since the crisis. [no audio] richard the end of the cycle is coming. They want to smooth any recession so we have a recession that is more like the early 21st century, rather than the Great Recession in 200809. Matt the question of the day from the blog, for which richard writes, they are asking, can the fed sustain the everything rally . Now,he fed dovish pivot sustain the rally we have seen in which everything from equity pricesto sovereign debt continue to rise . Richard i would say yes. Jose especially in the short run. The question is not short run. Maybe it is longrun. If you use all the weapons you have at hand, in case something goes wrong, you have nothing to do. That is where we see a key risk. Tensions, theal political noise starts to reduce, we have a lot of things around which make us feel not comfortable. We have trade wars, the gulf, manyn the issues in britain, with brexit, and italy, we have elections. Living in awe are dangerous time, so we need to be prudent. Matt what do you think, richard . Great point that jose makes. One of the concerns scott minard brought up was that if the fed does not raise rates but instead lowers rates, the next downturn would be much more dangerous. Richard the fed realizes it does not have as much ammunition as it has previously had. The bet they are making is to get in front of this thing so they can smooth a slowdown so it is not really sharp like 10 years ago. There are different views on that. That is a big bet. That is the bet they are making. Matt richard. Heading back to the blog. Check that out on the bloomberg terminal. Jose, staying with us for the hour. You should stay with surveillance, as well. Still growing but slower huawei reports earnings for the First Time Since the u. S. Ban. Plus, we speak to the ceo of Technology Consulting firm, cap gemini at 9 30 a. M. U. K. Time. This is bloomberg. Matt economics, finance, politics, this is bloomberg surveillance, and im matt miller in berlin. Lets get the Bloomberg Business flash. Viviana citigroup preparing to ax hundreds of drops in the slumping trading division, including 100 positions in the equities unit, amounting to 10 of the division, as wall street banks faced the lowest trading revenue in the decade. Ning abraaj, citing serious wrongdoing, including unauthorized activities and misusing money. This is the largest, the imposed by their financial regulator. Bp bucking the trend of disappointing earnings. Flow in q2,ed cash offsetting the effect of lower energy prices. The ceo says it is too soon to determine the cost of tensions in the strait of hormuz. Extremely careful. Out,ve had ships in and some concerning incidents, right now we are not sending british troops, ships into the persian gulf. Viviana that is the Bloomberg Business flash. Matt thanks. Tech. , 23 rise in firsthalf 400 billionst over yuan. Attempted togiant withstand u. S. Efforts to curb the business but difficulties ahead could affect the pace of growth. Banjo, how has huawei managed to hold onto so much, 80 of the mobile phone market . Shelley two things. The first is they were able to stockpile american components before the ban went into effect. That helps the company now. In terms of smartphone shipments, they have increased sales quite a bit in china where they are taking market share makersom apple and other as sales and the rest of the world go down a little. Matt why are they so confident despite the u. S. Ban . Just bravado . Are they getting support outside . Shelly the company goes back and forth between saying they are really getting hit and this is ridiculous to this bravado, like you mentioned. We dont need the u. S. , we can do this just fine. Today they said, we can make our own operating system for the phone but we would prefer to use android and the u. S. Blacklist is going to hurt us on that sense. The truth probably lies in between. Huawei said it best themselves. Survival mode is their most important issue now. They want to survive and keep the Company Going for the future and continue investing and growing for the future. Matt thanks. Jose, still with us and i wonder, this brings us clearly to trade talks in shanghai kicking off today. Do you expect any positive results . Jose we hope so. Global trade is extremely important for the Global Economy. I dont think we can have a strong recovery if the talks fail. We have a lot of risk. We hope authorities reach agreement. Is, what is the downside . What are you concerned about . Could these talks fall apart and result in more and higher tariffs . As we haveownside, this situation on the markets and the pressure goes to the Central Banks to reduce Interest Rates, global trade is key. You cannot expect a strong economic recovery without global trade. Globalization is so important in our days that if it deteriorates, emerging markets in developed markets can suffer a lot. This will be the beginning of recession in Global Economy and this is something we should avoid at all costs. Matt how are you positioned . You have over 65 billion euros in assets around the world. You are in 51 countries. How are you positioned ahead of the talks . Stancee have a defensive on fixed income and equities. Fixed income, we are reducing duration. We are trying to go to the safest sectors. Side, we see opportunities. We have a value approach. Alternatives has grown much in the last year. We see opportunities on real estate. There is a few opportunities on private equity and private debt. Private debt is an issue. There are a lot of lows. We have to be careful. We have a better second half of the year, we hope the markets can continue giving support, unless something happens on global trade or with brexit or Something Else from the political arena. Jose, we will keep you with us. We speak exclusively with the chairman of huawei. Definitely want to get his take on the Earnings Report on the outlook. Up next, u. K. To spend the next few weeks pressing eu to negotiate a better brexit deal. Sterling drops to the lowest level against the dollar and more than two years. We focus on the pound, next. This is bloomberg. Matt economics, finance, politics, this is bloomberg surveillance, and im matt miller in the german capital. Update on sterling. The pound has dropped two year low in dollar terms as traders bet Boris Johnson will opt for no deal brexit. 1. 21, the first time they have slipped below that since march of 2017. We will be watching that closely. Pose a from mapfre is still with mapfre is still with us. Would you be adding levels of sterling . We would like to see more clarity on brexit. It is not the best way to start a divorce by asking an ultimatum so we see more pain shortterm. Looking forward, we are considering the possibility of new elections in u. K. And everything is open, so probably, i would not say we will have had probably the u. K. Could remain. Brexit 531pect hard of october. By 31 of october. Matt we have a lot to talk about other than brexit. It is important to watch. The pound is interesting. The uncertainty you are expressing is something we hear from almost everyone and it gets seemingly more and more uncertain. To the ceowe speak of capgemeni and we will ask him about brexit as well. This is bloomberg. Harder brexit, softer sterling with the power sinking as the chance of a no deal under johnson grows. Beats expectations and their ceo says he is cautious around the strait of hormuz. Extremely careful, we have had ships in and out and concerning incidents, we are not sending british ships into the persian gulf. Matt huawei reports its first earnings since the u. S. Blacklist, warning of difficulties ahead, we will speak to their chairman. You are watching bloomberg surveillance. I am matt miller in berlin. The biggest stock movers, lets go to london. Bp, want to start with higher production for oil and gas which offset lower prices and their cash flow was up 17 from a year earlier, 8. 2 billion. With weakertrend than expected results from rivals. Lufthansa to the downside with gloom in the airline industry, down more than 5 after missing estimates, negative impact of rising fares particularly in germany and austria. Ckitt cut their growth target of a slowdown in inventory in china. At the same time, stronger growth in china. Matt very interesting. Looking at some of the big stock movers this morning. Lets get to the first word news with Viviana Hurtado. Cuts, theabout right the rate cuts, the fed should be hiking according to Guggenheim Partners who warns of a potential overheating, saying preemptive rate cuts will lead to unsustainable he high asset prices and that can only mean the next downturn worse. A 23 rise inng firsthalf revenue to the equivalent of 68 billion. An indication the Chinese Telecom giant is withstanding u. S. Efforts to curb its business. Shipments for six months jumped 24 to 118 Million Units while huawei has worked difficult could hurt the pace of growth. Beyond me plummeting, selling more than 3 million shares, a three month after it went public , the offering intended to help them Fund Increase production and marketing as they battle it out in an increasingly crowded the good marketplace. N marketplace. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt lets get to the exclusive interview, Technology ConsultingCompany Capgemini reported first the first profit, earning cents the parisbased firm says it will acquire all trans technologies in a 3. 6 billion euro deal. Joining us is their ceo, paul hermelin. What would you say in terms of growth was the biggest driver for the reporting period . Donie we exceptionally well in the u. K. And in france. We had steady growth in the , 6 ter, 5 organically including acquisition. Noticed is the progression of all operating our margin by 50 basis points which allowed us to increase by 22 . Matt what are the expectations you have as far as brexit . We are going into talks or refusal to talk, the uncertainty is high as Jose Luis Jimenez has told us. How has the outlook for you in terms of brexit or u. K. Business . Doas a company we do not u. K. Versus eu and trade, so the production of software in the so we willed locally not be directly impacted by the brexit deal. There will be indirect consequences. For a few quarters we have three focused our business in the u. K. , from the public sector, including a big account with matches to revenue and customs, and a good progression in the world of energy. The consumered good segment is somewhat soft, a pretension about consumer behavior. Analyst hear from an who writes that your Infrastructure Services was a hereart of the growth because of the end of the transformation process. How does that look Going Forward . The cloud disruption has impacted massively what we used to call managed service. Now we have completed the migration to the new cloud environment and we have more clients and drive their Cost Reduction and flexibility. For us, good news. Now you want to start growing. You have made an acquisition. Do you have any companies in your site other than that . That will be a significant move. We have been doing year after year, liquidating half of all Free Cash Flow generation too small acquisitions. This is something different. , a midget the equity value move more than 5 billion euro. We will have to develop that. We are focused on what we call the conversion between i. T. And operation technology. In a couple of years we will look beyond that. The lowat i asked how Interest Rate environment is impacting your business or the business of those who are your clients . We have noticed this quarter with the first time the group has moved to what we call digital and cloud, it exceeds 50 of the group revenue. This fuels further growth because there are Mission Technology products. Environment economy , it is final four companies to invest in digital. We are optimistic for the remainder of the year. Matt let me ask you, as lighthizer and his u. S. Counterparts go to shanghai for talks with the chinese, everyone is hopeful for a positive outcome but how has the trade war affected your business thus far . As we all see the biggest segment, the one impacted is the automotive segment. , thelowdown in china threat of the digital taxation over u. S. Imports. We have noticed a slowdown in automotive in the first half. We have seen good prospect of investment in automotive but that was the segment on which we are the most vigilant. Matt thank you very much for your time. Paul hermelin, ceo of capgemini. Thank you very much for joining us. Another earnings interview, we spoke with the bp ceo after they posted secondquarter results that buck to be trimmed seven by other a trend set by others , cash flowimates from operations reaching 8. 2 billion in the Second Quarter, the highest since late 2017. Had a good quarter, strong operating results, 93 night 5 of our facilities are running and good cash flow generation and we paid off the dhp acquisition and the gulf of mexico settlement. A big milestone for us. Business is working well. The view, you read a rated you is there risk to that number . 8 through 20