i love that question. if they get a be key getting into friday. ofathan: for me, the bank england leaves forecasts unchanged. the overwhelming majority expecting rate cuts this thursday. that's going to be fascinating. alix: fascinating communications coming out of the boe. that trickle down into european stocks. rally into the recent coming off the biggest monthly gains this october. the hsbc global equity strategist ben laidler. lots of red on monday. thethan: lots of green in last five months. the s&p 500 has been win, win, win. to kick off this monday's trading is softer in europe, the ftse down about .1%. the dax marginally in negative territory. alrightx market, it's on this one throughout the week. the cable rate with a weaker pound off the back of some pretty weak manufacturing data coming out of the united kingdom ahead of that bank of england rates decision. is coming thursday. the commodity market is just wow, wow, wow. the biggest monthly drawing some down as weith wti kick off august. in the bond market, yields coming up across the curve on treasuries. five years up three basis points, just over one full percent. alix: high 30's will be the bottom for the oil prices. let's check in with a bloomberg team for in-depth coverage of all the top stories. tom mackenzie is in beijing on the latest with robert kaplan. in hong kong, nicholas comfort in london for the latest on the european bank stress tests. tom, you're and interview with dallas fed president robert kaplan, what was your number one takeaway? tom: he said it is too early to tell. he can make a call of september ending is needs to look at more data, particularly any revisions. he said don't take center off the table. take a listen. -- september off the table. robert kaplan: september is on the table. we have to see how invents unfold. -- events unfold. it's too soon to jump to conclusions. i think i have learned is a central banker, you have to be patient. we have time to make a judgment between now and the september meeting. i want to take advantage of that time. now andreports between then, i want to get the benefit of that information before commenting. the president also said that the dallas fed forecast for 2016, growth would likely remain just below 2%. he also said the brexit effect on the u.s. economic growth picture was just marginal. alix: also we heard from the new york fed president, bill dudley. he seemed a little more optimistic, but also pessimistic over the longer term it comes to those hikes. tom: that's right. he was speaking in indonesia, he said it was premature to rule in any finding from the fed 2016. he also said that the market view of just one rate hike 32017 was overly complacent. he said the fed wants to avoid the taper tantrum of 2013. that theid as well november elections will not factor in to u.s. fed policy decisions. alix: thank you, tom mackenzie joining us from beijing. breaking news this morning, tesla and solar city officially going to combine in an all stock deal valued at $2.6 billion. atvalues solar city shares $25.37 apiece. more -- a few10 dollars less from where shares were trading at the end of friday. i should point out that solar city does have a 45 day go shot period, where he can look for competing bids. to combineolar city at a deal at $2.6 billion. david: you unless gets his way. this was in thinking wanted to do. -- elon musk gets his way. they are not sure it's good for tesla. alix: fair enough. he does have a termination fee of about $78 million. to your point, a lot of shareholders wondering why tesla -- that has a lot of debt, is going to go spend a lot of money to buy solar city. david: shareholders want you on musk to stick to his knitting. -- elon musk to stick to his knitting. new data out of china points to strengthen the service sector and weaker manufacturing. we turn to robin ganguly, we want to talk about what those numbers show. it's been a confusing day for us in this part of the world, as can sometimes happen. i think the important take away from all of this is manufacturing hasn't inclined substantially. -- hasn't declined substantially. china is seen as a barometer of the world economy, so chinese manufacturing is still more or less where they are, it's a free positive sign, especially after data that we saw a couple of weeks ago with gdp beating estimates in the second quarter. i think if we don't look at the small bits of the numbers, that ntractn't co substantially. david: if you look at the divergence, should we be focused all?e caixin at shares traded in hong kong rose substantially, 1.92%. the brenda gauge showed a jump in manufacturing. yuan declined substantially today, about 0.2%. the most in more than two or three weeks. they focused on the official manufacturing. there is some confusion, but at the end of the day, the takeaway is that there hasn't been a substantial deterioration in manufacturing. david: thanks, robin ganguly, reporting from hong kong. jonathan: for bank analysts and journalists, the weekend was ruined because the stress test in europe came out after the close on friday. one of the people that had to dig through it was nicholas comfort. start with the stress test and the result of what you saw coming across europe. nicholas: the debate was going to be with a tough enough or not? saying, we had voices things were a lot tougher in 2014 the last time we had them. now, the gdp scenario is up pretty tough. there is also a whole array of challenges the bank has to take account up. the litigation front for investment banks, they took their toll in this test. whether it is tough enough or not, that is still to be discussed. what equity markets are telling us today, after initial rallies, they haven't falling. we are seeing investors analysts saying you came through the tests,what equity markets are tg us today, by and large, but wh's the growth? it is a pretty mixed picture for investors today. jonathan: i wonder for the chief executives of some of these banks, whether there are decent results? we expected monte paschi to be the underperformer. maybe the standout was deutsche bank. run through deutsche bank numbers for us. nicholas: deutsche bank was in ratiosworst in terms of in that adverse stress scenario. if you look at the delta, the change between the capital ratio they started out in where they ended up, it fared a lot better than the average banks. the concerns over capital for deutsche bank have been so intense, this may be a positive signal for many people at the bank, and for investors. they didn't do worse than expected. comfort inicholas frankfurt, thank you. call forking into that goldman sachs, they are downgrading equities to underweight over the next two months. overweight cash, going to add the sellout. saying you have macro fundamentals, more stimulus is needed to keep stocks higher. but a lot of that is already based into the market. this is s&p year to date. what's go over those levels. --5 is the record clothing closing level. we are still right around his record highs for the s&p. moving over and talking about the european bank stress test, monte paschi, the potential no bailout,ctually, but a rescue funds. they will issue 5 billion euros in equity if they can sell off their nearly 28 billion euros worth of nonperforming loans for about 9.2 billion euros. at the 33% of the growth value of the loans. a little bit of a relief rally today, but who will be there to buy some of those assets? out withen ing baidu, this is one of the stocks we are watching on that uber didi deal, rising a touch in the premarket. baidu and other shareholders of uber in the china market will get about 2.3% in that company. we were technologies will hold about a 6% stake. as much have evaluation as $35 billion. we are following all those headlines for you through the next three hours. now for what you need to know outside the world of business, shery ahn is here with first word news. shery: backlash is growing over donald trump's comments about the parents of dead muslim american soldier. it has to do with remarks made by the soldier father of the democratic convention. thep questioned if soldier's mother was in a lot to speak at the democratic convention because she was muslim. the woman said she was too distraught. a number of republicans joined hillary clinton in condemning trumps comments. theresa may's government says it is committed to the so-called triple loss pension guarantee. the policy ensures retirement payments rise by inflation, average earnings, or 2.5%, whichever is higher. former pension minister has called for it to be scrapped. will be of triple loss enormous by the end of the decade. supporters of turkey's president demonstrated in cologne, germany. 20,000 people took part in a rally that had the slogan yes to democracy, no to the two. --anizers wanted air to one the president to address them by conference, but authorities turned down the request. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm shery ahn, this is bloomberg. jonathan: coming up on the crisis in three separate events. japan, the u.k., and the united states. all with data and policy announcements that are sure to move markets. we have your preview, this is bloomberg. ♪ jonathan: from new york, this is bloomberg. i'm jonathan ferro. on tuesday, japan's cabinet is expected to decide on the stimulus package. the bank of england is a spectacle rates on thursday for the first time in over seven years. in the u.s. on friday, it's jobs day. joining us is michael mckee. where should we work, friday backwards? would do friday backwards. the fed is going to affect markets all over the world, the others are more specifically located. fed speakers suggesting the markets are not paying enough possibility -- attention to the possibility of a september hike. the data coming in strongly say september is a real possibility, and friday we get the jobs data, it's supposed to be good. 170 5000 jobs created, a drop in the unemployment rate, and an increase in hourly earnings. if we get that, it will change some perspectives about where the fed is going and when. right now come the markets are saying nothing until next year. david: we have disappointing gdp numbers last year. the job numbers on the one hand and the gdp on the other. michael: the fed will pay more attention to the jobs numbers. they feel it is more contemporaneous. the gdp numbers -- that was a very good explanation. inventory levels were way down. in theory, that should be boosting growth in the second half of the year. if they get strong jobs numbers and there is no indication the economy is rolling over, they will be more inclined to go. they will ignore the gdp numbers more. jonathan: the debate for bank of england is a lot easier. on thursday there was an overwhelming consensus they have to do something. bad news today, the pmi for the united kingdom fall significant way below contractionary level. it got worse, according to the marketplace, as the month went on. brexitcket impact -- impact is starting to be felt. you go back to what they said at the july meeting. they all but promised saying most of the members of the committee expect monetary policy to be loosened in august. the data support a cut, there's no reason they are not going to cut. they may increase the amount of their qe burgesses and the funding for lending schemes. funding for and the lending schemes. this will be the first rate he has made in the four years he has been there and we will come in with a bank. jonathan: never able to do a thing. alix: he's known for getting ahead of the curve. he didn't do it at the last meeting. now it's all steam ahead. i'm looking at japan, and advisor saying the government and the boj should recognize the fact that the combination of fiscal and monetary policies is already happening. it is not helicopter money, it's already working. they should tell that to investors in that will help sentiment. what can we expect tomorrow? michael: this will be the fiscal side. they are going to adjust the idea of helicopter money, there is good reasons you don't want to necessarily do that. he's going to announce additional spending, the real key is how much of this is going to be new spending. the japanese announces new plans. , ¥28id $287 billion worth trillion. most of that will be stuff they have already announced, and they add more on top. they had 26 consecutive supplementary budgets, fiscal stimulus budgets. it hasn't got them out of the hole yet. david: it's not just how much, but when? , andig does it need to be how quickly does it need to be spent, and your opinion, to affect markets? michael: it doesn't take that much, as long as there's a fair amount -- if they did ¥10 trillion, that would really get the market attention, in terms of new spending. they do it over the next year or two. what we have seen is you get an immediate pop in the markets after one month. -- what't look like they are talking about is going to be enough to move the needle. be's point, just say we are doing it. we are monetizing it without calling of helicopter money. jonathan: it walks like a duck and sounds like a docket, but we are not calling it one? michael: how do you do it? their technical resources on the japanese central bank for doing this. they can restructure their portfolio. this perpetual bond idea. here's the problem with the perpetual bond. you know own all of the debt in one instrument. what happens when you want to tighten rates? -- if you want to tighten rates? you have this giant bond that no one can buy. jonathan: wednesday going to happen? -- when is that going to happen? michael mckee, great to have you with us. economics editor here at bloomberg. alix: coming up, the costly batter -- a battle over over. a bruising battle between these two startups. we reveal all the details, next. this is bloomberg. ♪ david: this is "bloomberg ," i am david westin. chinese rights sharing company china's uberg subsidiary. we go to lulu chen, joining us from hong kong. welcome. it's a big deal, is accommodated deal. tell us how this is going to work. lulu: they will form a new entity that is valued at $35 billion, according to our sources. both companies will become minority shareholders in each other, and the founders and ceos will become -- will sit on the boards as well. essentially, this is a combination -- the culmination of a battle that's been lasting for more than a year. in terms of capital in the amount of subsidies, it's become humongous. that's why investors have pushed with a steel. -- pushed for this deal. david: they invested a lot of money to fight specifically against uber. what made them throw in the towel? lulu: it's been quite a turn events. werea year ago, they saying this was their most important battle overseas. essentially what we saw is in the past year, uber has been burning more than $2 billion in china alone, and investors on both side had become more anxious. hoping the companies can put an end to this battle, where they have been heavily subsidizing passengers to win the market shares. jonathan: the masses on both sides, global investors are going to be anxious looking at this as well. re were doesn't have it -- ube doesn't have a revocation for capitulating. but it capitulated in china. what does this say? lulu: analysts and investors still think that it over -- uber has a good chance for competing in companies -- in countries that are similar to the u.s. they are competing with local players in these local markets. these companies are not giving up easy. companyay, another issued a statement saying they are ready to roll up their sleeves and continue the battle with uber. jonathan: what does this mean for the regulators? companies, ign wonder if regulators hasn't that the say about this? andd: uber is so strong didi is so strong. it makes this hard. when is it supposed to close? our understanding is both companies have been in touch with regulators in trying to open the dialogue of communication. it depends on how you define the market. in china, if you look at the public transportation market, probably they do not qualify as a monopoly. if you narrow it down to the private hailing car apps industry, with of these companies combined would become a dominant player. david: thank you, lulu chen reporting from bloomberg. jonathan: coming up, european banks matching the biggest monthly gain in 17 months. the bank of england's first rate cut of seven years did throw cold water on a rally for new york. this is bloomberg. ♪ hohes w'oiithongestc ?estc .thlais hotas hca hyson' at' ey seg ca hke cwistomin biness rnte, p cthu e.juais hotas hca hyson' at' ey stus azetomid ag y wiourofias 'r eie esr a adylr -onheesev .or upde 'its restn i, w c u 'doe t eth dveryay oding uc pwiwiro fi hthatelroui a different story when it comes to harley davidson. that stock was upgraded to $66 30% higherid it is than the consensus price which is rare to find a real bull on harley davidson. those are the individual names we are watching but overall, a little weakness in the market. want init's action you august, this month might deliver if history is any guidance. it has been beautiful for some of the bears out there. futures are stable and equities of 1%.k 1/3 month ofilding a fresh the same speculation around italian banks. the cable rate is at $1.31. the bank of england rates remain unchanged. where is the rebound in the crude market? the biggest rebound in 12 months almostnth but we are at $44. where up about three basis curve.on the gilt but yields are rising up three basis points. monthig immense of this -- big events this month. a bank of england rate decision and payroll friday. let's get your headlines. hillary clinton appears to have gotten a postconvention bounce. a poll out today shows that the democratic presidential 46-46 -- 46-42% lead over donald trump. of her haveviews dropped six points. investigators say a hot air high tension power lines in texas before crashing. all sitting people on board were in the worst accident in u.s. history. the national transportation safety board says it will look at a number of factors including reports of foggy weather. china is paying soldiers to leave the world's largest army. military personnel have been getting general's buyouts to retire early. in some cases, soldiers will receive as much as 80% of their be retirement wages. the chinese president wants to cut 300,000 troops from the 2.3 million on duty. a day,news, 24 hours powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. david: for a morning must-read come we turn to u.s. politics and what this presidential election is likely to mean for u.s. stocks. according to an analysis, it's pretty much good news for investors whenever we elect a president. joining us now is the author of this piece, matt and winkler before we talk about why that might be, it's talk about the facts. analysis shows us that overwhelmingly, when americans go to the polls, there is a corresponding correlation in the stock market which is favorable. there are only two exceptions. when you go all the way back to 1964, it's 50 years in the two exceptions stand out. one is 2000 when we had the dot in theble burst early year and the disputed presidential election which went to the supreme court in december. that was the first debacle in we werend was 2008 when in the worst recession since the great depression. chart from your piece that illustrates this point showing the presidential election years. two that go down but the rest go up and that's true for republicans and democrats. makes sense, americans get a chance every four years to think about where they are and -- whaty want freedom they want. what they decide for them is very hopeful. it's very positive so the candidates whether it's republican or democrat who expressed the most confidence in the future is the candidate that wins, of course, and that has been the pattern. the stock market tends to agree with that. start,it's like a fresh new ideas and new people coming in. let's give you an alternative hypothesis. they say thears, government does not do much. washington shuts down every four years and maybe the stock market likes that the government doesn't do much. >> each candidate has an agenda whether you like it or not and the agenda is for change, some kind of change. after two terms of ronald reagan being president and people look back and say that was a favorable time but at the end, he was not that favorable in the polls. -- the first president bush won with an agenda of a thousand points of light, kinder and gentler nation. that was a turning point from the reagan era. he prevailed on the stock market like to that. david: another thing you cover is there are some differences between republicans and democrats that may be surprising. >> historically, democrats have believed in government as an instrument of positive change. that has meant spending on programs. the rescuely it was of the automobile industry and the aftermath of the financial crisis and recession by president obama. he again did it with the affordable care act. you can think about it being a boon for the health-care care industry. those are two good examples. -- haveans like generally been against spending programs. ronald reagan said government is the problem. you had an opposition by the stimulate the economy whereas the democrats historically have been much more predisposed to do that. amp upyou still had a but it doesn't last as long for the republicans? >> in the presidential election year, the democrats get a bigger bounce but in the ensuing three years after a democrat is elected, the performance in the stock market has fewer price fluctuations and much more of a gain. david: what about the bond market? >> the bond market has liked it election since we started compile this -- compiling this in 1978. every election since then has been positive or treasury bonds. it should be said that the republicans, when they fail, do better in the bond market than the democrats. by the way, that's probably defensive. if you think there may be weaker growth, if you think the republicans are going to cut same and spending at the time, maybe the economy will not do as well. the bond market accordingly is the defensive instrument of choice and that's where people go. david: republicans overall slightly better for bonds and democrats slightly better for stocks but overall? >> in an election year, you have to like the market. david: thank you so much. you readto be sure this piece in bloomberg news. alix: here is a call for you -- in u.s.t overweight emerging markets, underweight in europe and japan. a strategist at hsbc securities is with us. you are betting against central banks, you are betting against more stimulus and rate cuts. why? >> we think we are getting to the end of the line. we have had disappointment over the last month or so in the central bank in japan and the ecb and i don't think we will see very much out of the u.k. this thursday. the general messages we are getting close to running out of ammunition and we need to seek more on the fiscal side and the backdrop is valuations are high and earnings are pretty lackluster. we need to be focused on a relative safe haven which of the u.s. and maybe em which may be cheap enough and potentially about to rebound. alix: underweight europe, you're not necessarily alone in that. we have a chart that shows ftse outflows and they have been picking up. we have seen 55 billion dollars coming out of europe in the last 21 weeks. how much more underweight can we have? imagine buticult to i think you are sitting on significant inflows to europe over the last three or four years. with this level of economic policy uncertainty in europe, it may be difficult to see positive earnings surprises. without that, we don't think european equities are cheap. will kickhink reality in at some point? yes, you had a 10% rally over the last month or so and we 10%k the market is about above fair value. we are looking for a pullback and we think people are putting too much weight on expectations. we don't think that will happen. earnings season has been pretty lackluster with no earnings growth globally. valuation is about a 20% premium globally. volatility is close to all-time lows so something will give. want to pick up on central-bank policy, the idea they can no longer stimulate asset prices. why is that? i think we have seen this for a while. every intervention has become less effective. or four last three years, the reactions have become less and less. look at what happened in japan when they moved to negative rates, many on intended consequences. -- unintended consequences. that's one big example of how central-bank policy is becoming less effective. about safe talk havens, when you have valuations a 14 year high, one standard deviation or two in terms of the normal, you're talking about expensive. someone will come on this program and say the opposite view and say the u.s. market is completely undervalued versus the rest of the world. what do you make of that point of view? that's what makes markets. i don't agree with that. given the level of uncertainty in the level of overvaluation globally, we should be prepared to pay for the safe haven status. we should be prepared to pay for that today but longer term, we are probably toward the end of the earnings cycle. it's the story for next year. alix: is the story for next year em a stronger dollar? it's ok now but later not so much? >> you've got the lowest margins in the world. you are 35% off your high of theem which is the same in europe. i can see it in emerging markets. but not in europe. alix: where? >> it's pretty early but you have to be very cyclical. brazil, russia. alix: what about turkey? >> yes. alix: how do you manage the geopolitical risks? >> this is where you make your money, at the beginning of the cycle, the most depressed markets, the ones with the most depressed earnings. demand a stabilizing now relative to developed markets. i think you want to go for the markets that are most out of favor which is counterintuitive. alix: the safer and the riskier ones -- great to see you and thank you so much. up, stocks pose their biggest monthly advancements of march. fiscal policies are threatening growth in the economies. this is bloomberg. ♪ david: this is "bloomberg . ceong up the merrill lynch will have a big announcement thursday. jonathan: chinese factories outperformed in july. the tale of 2 p.m. i's. the official readings are showing things are not ok but the private readings show things are ok. follow the private one. what is your view? >> i think the official one is probably biased toward the soe weakness. maybe we are looking at the smaller private companies where we see more growth. neither of these give you a convincing story of strength and neither give you a convincing story of recovery. -- the view of our chief economist says we are going in for a protracted time of weakness. probably declining growth in the mid-6% range. aboutan: we will talk politics and china but regionally, china is so fragmented at the moment particularly in the northeastern province where these companies are issuing debt and 300 basis points more than the national average. much of a concern is that for central policy planners looking at regions across the world that increasingly tells different stories question mark >> it's the same concern you see in europe. you look at some of the depressed economies in north your they, last declined. economic growth declined about 3%. if you look at the provinces that are growing, it still the coastal ones. it creates a difficult policy problem. you have to know how to absorb a huge amount of potential unemployment from these depressed provinces and that's a big policy headache. alix: part of the issue has either been not enough liquidity in china. i look at the m1 and m2 ratios. rising whichs been sit -- should suggest that liquidity is better and we are not in that crisis zone we were a few months ago. >> m1 has been growing faster than m2. we are seeing is an increasing liquidity preference from companies. coming outing money of the private sector happening to her property sales and asset sales going back to the corporate sector but they are holding these liquid assets and are not investing. the lack of investment feeds through to a lack of clarity and policy. people are not confident about the external environment and not comfortable about the policy environment so they are not confident in general. their plan to revise growth in china is not going ahead. if you look at the investment numbers, they have gone below 10%. that's a very big change. if you look at the private number, it's even worse. there is a lack of confidence and i think the lack of consensus you are seeing and government policy about how to develop the chinese economy and solve these problems is feeding through to that -- to those numbers. have that 6% growth, that is supported by a lot of fiscal and monetary stimulus. when the premier came in, it was all about reform. to that reform agenda which could support more long-term sustainable growth? >> the reform agenda is still there. this is going ahead of industries. seeare starting to industries close down. there was a story yesterday about potential consolidation of two big steel companies in the north and the south. i don't think that is good news for the rest of the world because that will just mean more steel exports coming overseas. it is happening but not happening at the pace the rest of the world wants. china has never really marched to the tune of the rest of the world. it follows its own agenda. this is a big political headache and you cannot reform these companies without mass or withoutt upsetting local interests and it's a difficult job and it will not happen quickly. they are close to 400 zombiesoe's that need dealing with. jonathan: great to have you with us. we talked about the differences between the president and premier. year has been sidelined over decision making the government at the moment. -- the premier has been sidelined over decision-making in the government at the moment. david: it has historically been a rough month for stocks and we will look at what might be in store for global equity markets this month. this is bloomberg. ♪ alix:alix: it is august 1 and we wanted to revisit the turmoil that happened last august and look ahead to what we can expect over the next four weeks. -- turmoill mile started with the yuan devaluation on august 10. this was dollar yuan. itseekend and the pboc cut rate by 1.9 percent. they said it was a one-off and the yuan had the biggest one-day drop since 1984 but the next day, they did it again and it raised questions as to how healthy china really was. the dolly rallied and emerging-market currencies sold off and we saw somewhere thing happen in january. the other big event deck in august was the destruction of the media stocks led by disney. this is a normalized basis. disney is the blue line. disney came out august 4 and said they were looking at a subscriber loss at espn which fell the most in four years for it it cut its cable forecast for tb profit and a boiled down to espn. it disney cannot keep espn subscribers, what is that mean for the ecosystem as a whole in media? it raised questions as to where media was in cord cutting. it continued throughout august. nonetheless, disney is rolling over a little bit again. that is echoing in the global stock index. huge drop, one that was echoed again in january but we are far off those levels now. we might be trading a little flat but it feels from those two perspectives, different kind of august. but -- david: how much of it is the way it's communicated as opposed to the underlying message. china was having a hard time signaling where they were going. they seem to have gotten better but i'm not sure disney would have communicated that the same way today. jonathan: that's a very good point. the average decline the last seven years in a bull market was 1.7% in august. it has been ruble for the bulls and beautiful for the bears. -- it has been beautiful for the bulls and beautiful for the bears. alix: you have lighter volume because some of the traders go on vacation. these are key themes we are watching. coming up, oil prices took a beating in july. core willfrom ever discuss oil next. from new york city, this is bloomberg. ♪ david: investors are bracing for a big week with three days circled on the calendar -- the abe stimulus plan, a bank of england decision and the fed. not countthey say do out a rate hike this year. will have ahina deal worth 35 billion dollars and they have fierce rivalry between two startups. david: welcome to the second hour of "bloomberg ." before we came to the air, we learned about this uber deal. it's surprising. jonathan: we are not used to uber to capitulate on anything. they have spent a ton of money to compete in china. it tells a big story for investments into china. alix: didi owns a portion of lyft in the u.s.? this -- one of these issues is what will mean for ridesharing around the world. does this pave a cleaner way for an ipo for uber? , and we will right preview the bank of england big policy decision with the chief u.k. economist from route -- merrill lynch. we will first take a look at the markets. jonathan: some big events this week. stimulus plan is coming tomorrow and thursday, bank of england decision and the important payroll report friday. not a big month of gains. dax is marginally in positive territory. it's a softer pound story, down about 1/3 of 1%. manufacturing was south of an already ugly reading. in a commodity market, july is not good for the crude bulls. the bank of england is very much in focus. the front and of the gilt curve basis points. it's a very big week ahead. alix: the merger monday theme does not disappoint. verizon is buying fleet maddox in a deal worth $2.4 billion which turns out to be $60 per share, above the $42 closing price of a fleet maddox. it is a software company. the premium is about 40%. fleet maddox will bring over about37,000 customers and 737,000 subscribers. much more coming up on that deal. stock is halted in premarket. let's go around the world and check in with coverage of our top stories. about when the fed mate raise interest rates and we will talk about whether the bank of england will cut rates this week and we go to find what -- frankfurt as well with the latest on the european bank stress tests. we heard earlier from the dallas fed president. he were is what he had to say. i think september is very much on the table but i think we will have to see how events unfold. it's too soon to jump to conclusion on that. things i have learned as a central banker is you have to be patient and we've got time to make a judgment between now and the september meeting and i want to take advantage of that time. there are two job reports between now and then and they want to get the benefit of that information before commenting. alix: not only did we have dudleykaplan but robert said the market is underestimating the potential for a fed rate hike. fed out of the picture on to the middle of 2017. i think that's too dovish. thingthe data, the other that president kaplan said last friday q2 gdp report makes him want to wait for more information. we have to remember that the at an extremeown we soft pace over the past three quarters. not even 1%ing growth. when you grow that slowly, that does not justify even moderate policy from the fed. focused on thee core of growth. the sole engine is consumer spending. for that reason, we have be focused on the jobs report. we joke that this is the most important jobs report coming up at this one truly is critical because it will provide critical information about whether households have the income to continue propelling the economy forward. alix: what jobs number will investors reassess their outlook for risk? the chance for september is slim to none. to see december in place, we need to see 150,000 jobs are better on a sustained basis on the second have of this year. alix: thank you so much. it's all about thursday. jonathan: the most important payroll report since the last one. 2009 was when the bank of england did something with interest rates. let's bring that bring in side -- simon kennedy. great to have it with us. what can we expect thursday? governor ofpect the the bank of england and his collies to act and they did not do so in july. investors are pricing in a 100% chance that mark carney cussed -- cuts interest rates from 0.5%. what more can they do? can they booze desk in my boost the cost of easing? do they make it even easier for banks to lend? there is a whole range of tools that the bank of england can use. people will look for them to deploy rate cuts this week. have not had a terrific amount of economic data out of the u.k. since brexit. will they get out the sledgehammer and do as much as they can? or do they take a gradual approach? there are different views in the bank of england. they talk about having hard data and we don't have much. there are confidence gauges. the report on market economics and manufacturers are coming in much lower than was first expected. anotheriment indicated member of the policy committee is pushing for rate cuts. thank you. the sledgehammer story. the central banks have to take into account is what happens to the local thanks. we got a reading friday of what's doing in europe area we got the stress test. we will go to frankfurt, germany. what did these european bank stress test's tell us about the state of the european financial community? they told us where the problems are localized and there are many weak banks in italy which we knew already and there are weak banks elsewhere. germany as well did not look too great. while there is no immediate requirement for these banks to raise capital with the exception of one in italy and one in ireland, it tells us the banks are still weak. they need to deliver on the downside of their balance sheet. it was partly a reassuring story but they are asking themselves today where the growth will come from. ratesve to low interest and the brexit discussion and how that affects growth, it's not up pretty picture for bank investors. david: the italian situation is not a big surprise. where are the surprises on the upside? with deutsche bank, many people said they would fear it could be a bad result. i don't think that's what we saw. their capital ratio is one of the weaker ones but the of their capital ratio in the stress test was not so severe as some had feared. this of the first time we saw a litigation risk being factored into the stress test. bigsche bank is a investment bank with legacy issues to resolve. that factored in but not so heavily that it took them down to low of it -- to too low of a level. david: thank you so much. verizon buying: fleet maddox. it's a software company for $2.5 billion. verizon is slightly up in premarket and fleet maddox stock is halted but relatively unchanged. add over 700,000 subscribers and 37,000 customers from this acquisition. this is the eighth acquisition not counting the joint venture that verizon have done so far this year. that leads us to our next m&a and that is tesla and solar city. the solar city board approved the merger with tesla. the deal comes in at about $25.37 per share and that's why solar city stock is down. it was up friday but it's about a $2.5 billion deal. for other can look bids within 45 days and there would be a termination fee if that winds up happening. tesla is relatively flat. ,he call from goldman sachs they downgraded equities to overweight over two months saying you have to have fundamentals or stimulus will be needed to prop up stocks. all of that is relatively eighth in the stocks. 500 year to date intraday high, 21 77. it closed at 2175 so we are around record highs. here's what you need to know outside of the world of business. hillary clinton appears to have gotten a post-can did gotten a- post-convention bounce. the twopoll had candidates tied after the republican convention but hillary clinton will be introduced at a rally in omaha by warren buffett. over the weekend, she appeared with billionaire mark cuban. helicopterransport has been shut down killing all five people on board. it was the deadliest single incident involving russian military personnel and the syrian civil war. the helicopter was shot down during a humanitarian mission. prime minister theresa may posco government is committed to the triple loss pension guaranty. ensuresty -- the policy rise of inflation. responsibleinister for pensions has called for it to be scrapped. the cost of triple loss will be in norm us end of the decade. day,l news, 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. very much.hank you coming up, the s&p 500 since their record highs after recording its longest winning streak since 2014. is this five-day losing streak pointing at had to another rough august? futures in the united states are positive. rum new york city, this is bloomberg. ♪ alix: "bloomberg this is." it is the goldman sachs called downgrading equities over the next two months and overweight cash. is this the right call? the chief market strategy -- strategist from america prize joins us. without fundamentals and stimulus, they say it will be hard to drive markets forward and a lot of this is already priced in. the call. with we have been underway globally in equities a few months and slightly overweight the u.s. relative to other -- to other places. we have pulled forward some of these positive earnings expectations for the second half of the year and now we come to find out on friday that the u.s. economy had little momentum coming out of the second quarter into the third. when you add the fact that oil is now in a bear market, that was going to be a big swing factor to turn aggregate earnings positive. i think equities will struggle in the next month. alix: we talk about people being he underweight you us equities but valuations are still high. this chart shows the price to earnings forward ratio is now at 2002,ghest level since nearing one standard deviation. is that fundamentals or because the alternatives are worse? three or four months ago, we had a number of people say that they expected earnings to go up theuse of energy and dollar. what happened to those two factors? front, thenergy rebalancing of the market is taking longer than people expected. we have an inventory overhang that does not want to seem to go away and now we have a recount so that's not helping. number two, you have had a economyf things -- the is slowing down and not gaining real traction and you have had the fed struggling to try to convince the markets that they are still relevant for the remainder of this year and i don't think that's the case. when you have bond investors, how much of the fundamentals matter when the bond guide wants to pay up for consumer staples which is safer than the 1.4% you make on the 10 year? >> i understand that argument but i find it less than satisfying. it does not make a lot of sense to plow into something like an asset category that is overvalued because the rest of the marketplace is not that attractive. preserve myer principal and move to cash or moved to alternative investments that hopefully can smooth out the volatile ride we expect in the next four weeks. marketn: we are in a where treasuries in many people's eyes are overvalued. classic defensive moves like utilities and bond proxies are considered to be overvalued. what does it mean for the market when the safe haven are the ones that look the riskiest? >> it tells you those traits are crowded. it means there is not a lot of value no matter where you look. to turn to where you think there is going to be some cash flow and the ability to sustain those dividends. i understand the rationale behind it but it does not mean you're not buying into an overvalued asset class. the real burden of proof now is .tothe economy show some improvement in the second quarter we think we will still probably get better than 2% growth in the second half. we think maybe you get one fed right -- fed rate hike in december but with no no mentum -- no momentum starting the corner, those fundamentals have to be re-examined. alix: thank you very much. it's interesting, a different call but the same idea. the debate continues because at 9:30 a.m. eastern, someone will say the opposite again. coming up, sterling weakness and the pension for -- penchant for central-bank action. will the bank of england exacerbate a decline this coming thursday? we hope to bring you the answer from the city of lou done than -- from the city of london. ♪ this is: from new york, bloomberg. we focus on the fx market with the pounds sinking again and the dollar following. we are down by about two/10 of two/10 of 1% -- 2/10 of 1%. the bank of england rate decision and that means we may get a rate cut. what is the downside on the cable rate if everyone expects the same thing? the 25 basis point rate cut has been priced in by the market for the past few times. mightwnside them up pound indicate that. investors might want to see this thursday but it might be too soon for the bank of england to do that. given how well placed the race -- the rate cut is, we will struggle to see more downside in the pound. suppose they come in with substantial qe, what does that do to the exchange rate? >> if we get the rate cut and substantialqe4 from the bank of england, then we have downside. it could be that the bank wants to keep some powder dry for the coming months and they might leave market expectations this time. they've got the quarterly inflation report in the press conference of bacon flesh out their ideas. it's all in play. alix: then we switched what we were here tomorrow from mr. abe. japanesee former finance minister on the dollar-yen. >> it's already incorporated into the market. the announcement takes place, i don't think it will on any ofor impact the market. yen-dollar rate will probably to one dollarate -- ¥100. alix: what is priced into the market when it comes to net stimulus thursday morning? >> i think the actual numbers have already been bandied about. investors know what to expect. we are looking at headline number of about ¥28 trillion. the devil is in the details as always. he was saying is that this is already in the price and in order for the yen to weaken and the dollar to go up against the yen, we will probably need to see something different. if we don't see anything different, the view was that we get back down to 100 in dollar-yen rate. given where we were post-brexit it gives japanese policymakers about of a problem. jonathan: there's a question whether fiscal policy will be good for the yen. can make a compelling case on both sides as it should be good for the yen a not so good for the yen. what japanese policymakers are hoping for is a weaker yen and let's see if that happens. jonathan: thank you so much. we are not hoping for a weaker yen. coming up, it's a big week for markets across the globe and we will preview the boe monetary policy and the jobs report. this is bloomberg. ♪ a alix: this is "bloomberg ." it is merger monday and we have the deals for you. verizon is by fleet meta-group at $60 a share. matics is surging. the elon musk -- solar city, solar city approving 25. 307i share. in the paste said that the price is too low yet nevertheless, the board has approved and solar city has a 45 day go shop time. wrapping it up with apple, you didi and uber joining forces and apple owns a small stake in dd. idi. be as muchcould now as $35 billion with the stock moving slightly higher in the premarket. theuber will get 20% of merged company. lots of questions coming out of that deal that we will be exploring. jonathan: fascinating. a spontaneous investment out of 10 cook. $35 billion.t made jonathan: very good. we have had five months of gains. the big question is, can we make it another month? august, futures are positive and stable. the footsie is down i .4%. in italy, underperforming so the bank stocks there are on that index. i am looking at payroll friday and the yield is up more than the front end. the yield up about five basis points and 2.23%. the new york fed saying maybe there is complacency as to where rates are going. a call for morgan stanley on the bond market is very bullish. u.s. dollar,on the the dollar is up by .1% today. trading see 5% weakness by the dollar in the coming months. that is the fx market. monthlyed the biggest drop in a year last month. now down over one full percentage points. $41.10. let's rough up the headlines. shery ahn: donald trump is firing back at critics over his remarks to the parents of a dead muslim soldier. he questioned if the mother was allowed to speak because she was muslim. the woman said she was just too distraught. -- it isn't about the soldiers family, it is about radical terrorism. a demonstration in germany -- 20,000 people took part in a rally that had the slogan "yes to democracy, known to the coup." german authorities turned down the request. jimmy walker won the final major tournament of the year. pga by one shot over jason day. rain over the weekend forced oh-fers to play 36 holes yesterday in new jersey. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am shery ahn. this is bloomberg. jonathan: we turn to today's morning meeting. joining us now from london with a look to the bank of england ahead ofn thursday, the bank of england decision -- the top line says "bank of england leaves rates unchanged." thursday is a little bit different, isn't it? >> it is. for a long time, it you have been able to pre-write these things. the data flow is poor and the u.k.. morning on this manufacturing was one example. i think it means the bank of england needs to act. and here, it isn't that it does too much, it is that it doesn't work. so they should go aggressive and go early. jonathan: let's talk about size. chief economist over the bank of -- what is theh sledgehammer approach to monetary policy look like? rob: sorry, i didn't catch that? how big will the qb and rate cut be? rob: ultimately, i think they should do an open ended qe program. i don't think they will do that. there seems to be residual caution at the bank of england. i don't think they are quite with this program. in terms of assets, what can they actually buy? as far as the gilt market is concerned, they already own a third of the gilt market. well, they have plenty still to buy. they own a large portion of the market that there are a lot left to buy. this will extend into corporate bonds. the corporate bond market in the u.k. is not huge. i think they could add $2 billion in purchases a month. it is worth a try. but i think your point about the is important.rket we haven't really seen before a country go into recession or have a serious growth slowdown alreadyetary policy is at its limits. and the u.k. is kind of an experiment. that mucht really left that monetary policy can do. what we need is the government to step up in october and announce fiscal stimulus. i'm sure the federal reserve bill be watching keenly. of any kind ofss easing, the rate cuts in the post-financial crisis world is very different to the pre-financial crisis. i'm talking about the composition of the mortgage market. a lot of people went out there and took out six rate mortgages. the composition is very different to what it was six or seven years ago. when they cut rates, how much of a difference will that make to the consumers in the u.k.? rob: quite a bit. there are a lot of consumers on variable rate mortgages but that isn't necessarily linked to the bank of england rates. you raise an important point here, it and it is that monetary policy in this world shows that there isn't really room to cut rates and even if you do, it doesn't pass through as strongly to consumers as it would have done. and that applies to any of the policies. already close to zero out for years. muchere isn't really that purchasing left there. and the tools come with downsides. talking about profitability -- it damages qe and pension funds. really, the bank of england is in a bit of a bind and they are running out of room. jonathan: rob wood, thank you for joining us. i think that is the fascinating point. this is a huge case study. larry summers liked 300 basis points to play with. the u.k. has got 50. david: it is a little frightening. alix: unless they go negative? david: right, unless they go negative. let's turn to the u.s. -- it is day.bout friday, job last week we had disappointing gdp numbers but the dallas fed president stuck with the projections for the year. thisrtainly on balance at causes the gdp forecast for the year two probably still be a little less than 2%. so we still believe the consumer will be strong in 2016. david: joining us now is sam coffin. what is your projection? we have the numbers pouring in, does that affect your trajectory and for what we will do this year? sam: we actually raised the second half forecast slightly. all, the inventory corrections have come further along. when a few greater stories is the weakness that came in on fridays report. alix: so factories have start working to rebuild the inventory. that is right. and there have been signs of that coming up. manufacturing fell flat despite the decline in the dollar-shipment. ahead, we have seen exporters pick up a little bit for the factory sector. a very uncertain global economy -- why does that change in six months? sam: we have worked off inventories as far as we have and i don't think there is a huge change in the global picture overall. but if you look at the new data over the past year, it has included slightly better global profit numbers. slightly more inventory corrections. and that has all helped a little bit. investment has fallen flat. to continue consumer momentum there is less drag from the mentoring. the question for the fed as they look at what they should listen to -- should they listen to the consumer who is pretty bullish right now? or the companies who are making decisions about investments and they are conservative? sam: i think that is right. and i think the caution so far has proven to be justified. they gdp underlines that. they will continue to be cautious. and the key will be whether the unemployment rate keeps going. we have seen the tightening in the label market. and in addition, core prices are edging towards 2% year to date which is their target and what they're looking for. but i think the increase in inflation pressure pushes their hand a little bit harder. alix: the fed president said that they might be underestimating a rate hike in the near future but the longer term, relatively pessimistic on the trajectory. bestion is, can the fed patient and gradual at the same time? david: what are you projecting for the fed? sam: one hike this year and two hikes next year. the surprise was that they did mark down their expectation and i think that underlines caution there. they are being careful and they're telling us they are being careful. many thanks for being here today. that is sam coffin. priceso from the fed to to oil. they just reported the biggest monthly decline in a year. but it has been a weaker u.s. dollar -- that is next. this is bloomberg. ♪ david: this is "bloomberg ." enterprisehe hewlett-packard green room. alix: it is the worst month for oil since march. a really rough ride in a bear market. james west joins us now. now we have more talks about what is the bottom? what do you see? james: i think we will bottom out here around $40. this is not a fundamental move in oil. it is a seasonal issue. it will be worked off next quarter or so we see much higher oil prices by the end of the year. alix: if you take a look at the data, we do see risk here in the u.s. added back. declines have stopped. the blue line is production decline and it is no longer moving down. uncompleted well oil coming back online. does that delay the rebalancing? james: what is happening now is completed andng it is masking the market today. so i don't think the structure decline has stopped because we have added 50 breaks to the rate count. the rig is still collapsing almost drastically. but the overall is collapsing some of that. so we expect to see similar come out of the u.s. by the middle of the next year. jonathan: i am not seeing dollar strength. a flat dollar throughout july and anticipation of a soft dollar in the coming months. james: i hope so. jonathan: a divergence, in many ways. brexit we saw a strong dollar with good quality asset and that is what caused the initial selloff in crude. and now the market is looking for anything negative they can find. so we are getting to the bottom of this. everybody is a market expert and as we now figure out we are not product the running glut is going to be seasonal and it will come down. and it will drive oil prices. alix: the inventory is very different from the first quarter, we were oversupplied and now it has come down enough to have a tougher. james: absolutely. inventory and demand will be declining over the next four-seven quarters in a row. you actually cover the oil services. oileems like the big service guys came out and said they thought oil was bottoming out. that was my take away. what did you learn when they reported last week? james: what the service company said that the bottom is in for activity, oil and they are adding breaks to the recount. and pricing will go higher from here. that is huge. because u.s. exports have been costst on cheap drilling to offset the price in oil. so what happens if prices rise? james: our view is that a third of the rig productivity in the is structural in nature. not price driven. all the prices are now coming back. today look at the report and the completion today, the completions are 20%-40% larger within two years ago. so when the prices come back higher, it will be more expensive and prices have to go higher. another takeaway from last week's earnings is that they will have to cut costs. so why should service companies continue to do well off the back of that? when they have slim margins downstream and no margin at all upstream. james: my companies don't have a margin. higherricing is going and on the server-side, pricing is going higher in general. is not in the market anymore. so that will allow pricing to rise. alix: a key point, oil has to rise in order for this to go up. west, thank you so much. so good to see you. coming up, what does the gaining revenue tell us about global equity markets? this is bloomberg. ♪ david: this is "bloomberg ." time now for the battle of the charts. joe weisenthal is here to take on alix steel. the white line is the bloomberg surprise index, it doesn't include gdp, gdp is a past reading. it only looks at present readings. it actually is holding up relatively well. it has come off the highs but it is holding up well. the 10 yeare is yield. we had a big selloff and now we are back higher. the question is, if you wind up seeing surprise coming in better meanestimated, does that that the yield has to wind up rising? will we see a selloff in the treasury market? are we justified having a 1.4% 10 year yield? that is the question. outperforminge what was expected. right. and we do not count gdp because it is a past look. david: joe? joe: one of my favorite economic indicators in the world came out this morning which is the monthly percentage change in macau gambling revenue. i will tell you why i love this chart. that is the white line. it is kind of like this high beta measure of the asian-chinese emerging economy. during the financial crisis, macau gambling searched. in 2015, down by 50% year over year but now it has been rising steadily. i overlaid this chart with the and you canhe index see it roughly follows the path. gambling anywhere tends to be a reflection of the economy except in extremes. so to the extent said macau gambling is a measure of asia, china emerging markets as a whole, it is a nice indicator. it tells you something. david: what do you think? jonathan: i had this conversation -- alix: his first one was initial jobless claims. jonathan: my vote goes to joe. i remember when macau gambling revenue really began tumbling. i just want to know whether this is a sign of things stabilizing rather than rebounding? it might be. there are still down, year over year. david: alix steel, i am going with joe. this is so creative. [laughter] david: it makes me think long and hard about what it means. joe weisenthal is the winner. coming up, head of global credit research joins us. are 34 minutes away from the cash open here in new york. as we kick off another month of trading, dow futures are up 16 points. in europe, a day of losses is shaping up. the dax is down by 0.3%. switch up the board. dollar-yen capturing weaker action. payroll is out on friday. and the cable rate ahead of the bank of england decision on thursday. an actual decision. a weaker pound as we go into that. yields are higher across the chart. wti at $41 gets the headline. , what will drop off happen in august? this is bloomberg. ♪ e jonathan: for our viewers worldwide. this is "bloomberg ." we are counting you down to the market open in new york city. view cheers are marginally positive ahead of a big week for investors with a stimulus plan from a, a meeting from bank of england. ftses are down .4% on the and the dax as well. the dollar index is stronger on the session as we roach big events for the week. wti got hammered in july. $41, flat. in the bond market, yields up five basis points. the attention and momentum shifts to the equity market now as we count you down to the market open. this is "bloomberg ." ♪ david: we are under 30 minutes away from the opening bell. this is "bloomberg ." we have quite a week ahead of us. jonathan: what happened to summer? alix: it went away. no rest for the weary. for me, it is all about the jobs on friday. what numbers does the market have to see in order for investors to re-rate their rate forecast? jonathan: for me, the meeting at the bank of england. the rate cut, everyone is expecting it. the first move since march 2009. david: and tomorrow, prime -- the plan for fiscal stimulus. we will see how big it is tomorrow. right, let's go around the world to check in with our stock reporters. julie hyman here, abigail doolittle live at the nasdaq and mark barton in london. julie, m&a monday. deals but they are not -- julie: right. usually the biggest deals are not announced in this month that verizon announced it was buying donahoe and now it is making another acquisition. an irish company that provides gps tracking software for businesses and shares are up 30%. verizon agreeing to buy it with a 40% premium. the total value is $2.4 billion. verizon shares are pulling back just a bit. another important deal happening , the ride- didi will beservice acquiring uber. this is important because they have been battling it out. there has been chinese government involvement in the ride hailing business in that country. so not only are these two individual companies involved but you have apple and alibaba here because they are investors in didi. one of the other investors is 10 send china as well. so there are other companies involved in this. so both of those stocks are moving up to say that this morning. let's go to abigail doolittle at the nasdaq. abigail: sticking with the m&a monday, we have the agreement that -- is being bought by tesla for a little bit more than $25 per share. lower than friday's close. if it does go through it will be the largest solar powered deal ever. it does require the approval of elon musk.s minus he is the largest shareholder in both companies and he did say on the conference call that this combination links home energy with electric vehicles. haveng to biotech, we pharmaceutical soaring on the fact that the company will receive a $75 million licensing fee from biogen after -- after met the primary goal in the final stage study. this is unlikely to move the revenue needle for i/or biogeninc. let's head to london. the best winning run in two months but slightly lower today. the worst-performing industry group is the banks. we know which bank came out bottom of the pile. which bank is top? monte pesky. capital was entirely wiped out. raising 5 billion euros. they want to offload the bad loans today. most of the other lenders are falling. luna credit was the second worst bank in the examination. falling down. manufacturing.k. falling more than estimated in july. suffering the biggest fall in four years. having us that brexit is a bigger impact on the economy than many had initially estimated. negative territory for the second time in four years. that means we have the bank of england on thursday and jonathan ferro is keeping a close eye on that. never been this there are a shot leading up to a meeting. 80,500 contracts. they are so short that they are setting up the pound for a bit of disappointment. could the bank rise? jonathan: you are spot on. the market is bearish and the consensus is this big. you wonder how much downside this is. barton is coming up on bloomberg as we kick off another day -- another month of trading. over the past seven years, the month of august has featured an average 6.1%. here is oliver renick. -- send me an e-mail with another stat. 12 in terms of monthly price increases? that data goes back to world war ii. oliver: -- has the crystal ball. i don't want to take the credit or blame. things do pop up. in the past decade, since the market started, we have two big ones. 2011, credit11 -- coming into question and last year, chinese valuation. maybe it is something about the summer and slower trading? of jitteriness in terms of the size of moves? it is hard to put your finger on it. but when you look at stocks , people areer watching this carefully in terms -- let's playly cautious here. -- been bullish for quite some time. 2300 on the s&p. nervousness and there are a lot of things out there that people will have to watch. people will see how that affects things. we have companies here that are still trying to figure out what the deal will be from brexit. maybe it will go to emerging markets? a bottom line valuations are stretched. bank of america will look at valuations across all different types of metrics. overvalued and more expensive than it has been, historically. last this was specific to august. a lot of people go on vacation but if you did have the valuations, when was the big trigger. you saw stocks rolling over. you had china worries and fundamentals as well. david: and it is not just because it is august. there is still an event that has to trigger this. so what are the headwinds right now? overvalued and fully valued, what is the big trigger here in august? oliver: a lot of things that people are watching. meeting that will come along and it will be close to tight economic data. whether or not stocks will be looking at the potential rate hike, positively. market is the comfortable with the rate hike, that could be good. if not, there will be a headwind quickly. and last august we talked about again it might come up because the chinese currency continues to depreciate. you now have the tick down in oil. there is coupling in that trade. , stocksast two years have been corrected. whether or not that part of the market will be impacted will be important. and the issue as to whether or not investors and corporate investors will feel comfortable doing buybacks. some pretty good stuff on the m&a front this morning. isreat report about that out. so more structural support for the market. those will be in play. david: thank you so much for being with us. oliver renick, bloomberg stoxx reporter. newsor an update on outside the business world. shery ahn: hillary clinton appears to have a postconvention bounce. a new poll shows her leading donald trump 46% over 39%. meanwhile, a clinton campaigns with another billionaire, she will be introduced by warren buffett. over the weekend, she appeared with mark cuban. safety investigators say a hot air balloon touched high power lines before crashing. all 16 people on board were killed in the worst accident in u.s. history. the ntsb says it will look at a number of factors, it including reports of foggy weather. soldiers toing leave the world's largest army. the lee terry personnel have been getting generous buyouts to retire early. soldiers receive as much as 80% of their preretirement wages. they want to cut 300,000 troops from the 2.3 million. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am shery ahn. this is bloomberg. alix: thank you. coming up, oil can't catch a break. increasing stockpiles remain at seasonably high levels. later in the program we will talk about elon musk and the deal that will create a solar powered house. but investors are not so sure. this is bloomberg. ♪ alix: this is "bloomberg ." might help explain the weakness we are seeing today. this is the official selling price on saudi arabia in crude to asia. down by $1.10 below the benchmark rate. , the steepestp drop since november. demand isn't there. refinery cuts are happening in asia so companies are forced to fight for market shares. if they don't cut prices, the bottom will step in. tot this does is continue add to the oversupply of the market and the market has desperately been trying to compensate for it. joe cusick.ow is where are we in the rebalancing process? what does it look like now? think supply is very high. we have been watching those numbers. if you look at the five-year west texas is at levels that we haven't seen. over 500 million barrels in supply. so we have a lot of supply and cushion that we have to get through. and right now, the demand is not there. alix: we have drawn down inventories enough and the other thing is that we will have to use floating storage and oil prices will have to come down that much more. which school of thought do you join on? joe: i am on the side right now where -- i am on the latter. they have to figure out what they will do with the continuing glut of supply. if you look at the gasoline contract, they bought a lot of cheap oil and they continue to do so. we are not seeing the demand quotient increase. i'm anticipating that you will have to figure out where you will start putting this oil going into the fourth quarter which will put continued pressure on crude. alix: so what is the price target? it was 26 last time we were worried about floating storage. what do you see? if we break $40, you will start to see $37 quickly. so we will watch the pivot today at $41. if you break that, it could get there quickly. alix: you are in good company there. joe cusick, lead strategist at the q sick group. day for dealsig in silicon valley. you personally cap arrival and calling it quits in china. we dig deeper. this is bloomberg. ♪ jonathan: markets are 30 minutes away from the open. this is how the stage is set. i onep 500 futures are up point. in europe, a soft session is shaping up. abee begin a busy week with stimulus plan is likely to come tomorrow. payrolls on friday. yields are higher on treasuries. breaks when 32. a weaker pound to kick off the week with the bank of england rate decision in focus. counting you down to the market open in new york. this is bloomberg. ♪ david: this is "bloomberg ." there are a lot of big economic events coming up this week. for more, we turn to mike mckee. three things that i'm aware of. abe tomorrow in japan, bank of england on thursday and jobs numbers on friday. we will have some impact on sustained rates around the world. those three are the ones we will be looking at. and the fed could be the most important player of all. that will be what we are all watching. and it is supposed to be a strong report. the president of the dallas fed said they got a couple of strong job reports and september is on the table. david: let's also do him for a moment. >> september is very much on the table. we will have to see how events unfold. it is too soon to jump to a conclusion on that. one of the things a have learned as a central banker is that you have to be patient. and we have time to make a judgment between now and the september meeting at want to vantage of that time. two job reports between now and then, we get the benefit of that information before commenting. david: i feel like i have seen this before. table --ble, on the but markets do not believe it. market seemed to prevail. why would this be different ? they are anticipating nothing until the middle or later of 2017. but they want the low interest rates and they don't want the fed to raise interest rates. a 25 basis point move is not going to affect investments at this point. jonathan: stanley fischer, janet looking atdudley -- how the market is positioned with a rate hike in the future, do you think there is complacency? with thehe accuracy -- market -- what do you make about the comments? mike: the old line is going to be true. at some point they will begin raising interest rates. inflation will start to rise and they will jump in there and that is what they are concerned about. the fed has gone too far in pushing out rate increases. in the short run we are dealing with brexit and uncertainty. that we should see growth in pretty good shape. they are looking to try to raise rates as soon as data justifies it to them. alix: in some ways, the market did respond. assaw the 10 year yield that jonathan ferro said, those are the three voices you need to care about. of theet yellen is one more dovish members? -- thehe pheasant president of the new york fed -- if you know where they are, you know where the chairman will be. he is the vice chairman of the committee that actually votes. you can tell at this point that they are not ready to vote. friday.: payroll is friday. thursday, bank of england decision. there doesn't seem to be much of a debate about what the bank of england will do in terms of a rate move. what are we expecting? things that they have in the toolbox that they have talked about using. by 25g the base rate basis points or they could go to 50 or zero although mark carney has said he is not interested in going that far. increase the size of the qb purchases and they could give money to banks as long as aren't lending it on and that could be increased as well. in part, a lot of this will be psychological. the idea that the bank of england is getting into the game will drive markets. david: isn't very vicious circle here? the more they cut, the higher the prices are at that could affect or curtail activity? mike: well, it is a question but the gamble they are making is that the pound has given up close to what it is going to do. it is already repriced. they came out in july and said they would cut rates in august. so the markets have already anticipated that into their calculations. alix: and eight stimulus is all andt new bond issuances nets stimulus and what the effects will be? 17e: the japanese have done of these stimulus offense and not much has come out of it. alix: i love these statistics. mike: everyone will be watching. and whether they are spending or lending to try and parse out --t impact it will have a have on the economy -- probably not going do a whole lot. the question is, it do they have any kind of major move left? japan has ruled out helicopter money. so it is not clear what they can do to change the story. jonathan: it is never big enough. you can always do more. mckee, a busy week for him. muskg up, a deal that elon thinks will create a solar powered house but investors are not sure. we countyork city as you down to the market open at the beginning of a new trading month, futures are marginally positive. this is bloomberg. ♪ ♪ jon: from new york, this is "bloomberg ." i'm jonathan ferro. futures negative on the s&p 500. in europe, we kick off with a day of losses with the ftse up i-4 tents -- up by 4/10. switch of the board for the other asset isis. for fx market. --orrow, thank decision decision on european bank. yields are higher across the curve on treasuries. up five basis points on 18 year. of five basis points on a 10 year. 32 seconds into the august trading session. of the oil drop, seeing oil stocks under pressure. not much has changed this morning even though whad goldman sachs downgraded to a tactical underweight. it is not a long-term fundamental, strategic call. not seeing a lot of pressure on stocks out of the cave, or --out of the gate and not seeing much movement. season continues on pace, but focus is on deals. verizon buys fleet natixis. it is a vehicle tracking company. $60 a share. a 40% premium. trade in the united states. seeing a deal and the gaming industry. caesars entertainment is selling an interactive division for $4.4 billion to chinese investors led by shanghai giant network technology. even though gaming is illegal in china, except for the casinos in macau, this is a longer bet on the future of gaming in that country. it is an israeli company. when you gamble online, you cannot exchange what you went through for real money. it is just for fun. shares are up by 9%. the final deal we have been talking about is tesla reaching its agreement for a lower price. -- $2.2 billion. it was widely criticized as a bailout. elon musk had recused himself from the board. solar shares are falling on speculation of what it applies about the fundamentals of solar city. we want to stay on the --on the solar city/tesla deal. explain why this was so important to mr. musk. >> he is a large shareholder in both companies and has a notion of creating big businesses focused on green energy. wasink the criticism -- it -- they did a conference call within 24 hours. the deal was criticized for people who did not understand. elon musk issued a master plan for his universe that did not explain it. seemed to say, well, we make batteries that go into cars and meet electricity, therefore we should own the electrical generation from one company. it is a hard stretch. it is true that the cost of capital for solar city was increasing. that was a problem because the returns on the panels in terms of how you crunch the numbers, 6% to 10%. as a result, maybe they thought tesla's balance sheet could support solar city. sheet willbalance have a degradaon on tesla's ability to borrow. tesla needs a lot of money to build of the factories. david: putting aside the balance sheet, there is an operational consideration. mr. musk's main goals is to produce the new cars. how will this affect his ability to do that? put this on cash flow issues. in order to build the factories and to build the cars, they are going to need a lot more money, and raise a lot more money. now they have this extra business that has a hard time borrowing money. attached to tesla. task wasult as tesla's on friday, it got harder today. alix: it also got solar city for a lower sale price. what did you make of that? i mean, i think they could do any kind of deal they wanted. there were board members that had been on both companies. they are true believers and all of this i am sure. it is hard to imagine. we will see when the details come out on how this deal was decided. this will happen at any price. there were not people clamoring to own solar city until the deal was announced. over --other story, with what does it mean for the tech industry? >> this is an amazing story. is at $35ion on dd billion. it is an amazing price for this country merging the uber operation. this puts together and i really interesting -- it puts together a really interesting group. alibaba anddu and apple. remember when apple did this deal 10 weeks ago? return in 10 weeks for this deal. at least on paper. both of these companies were hemorrhaging so badly, they were both willing to give up a lot. i give up 20% of their business. a lot of comparisons being made to the alibaba-yahoo! deal. a created value. think of the nightmare alibaba has put yahoo! through as a have tried --as yahoo! has tried to get rid of that? point,two jonathan's does it raise a question about a tech company going into china? it unless you basically invest and accompany there and do it to a chinese company. >> i do think there are a lot of partnerships that are necessary. linkedinous about how is doing their. has had great success in china, but great difficulty as well. the partnership with chinese companies makes things easier. uber going all in. jon: cory johnson, thank you. companies are always interconnected. -- d: uber : what about lyft? jon: so many angles to the story. we kickoff august. equities to research, global evaluation relative to u.s. stocks among the lowest levels in 45 years. paul is a managing director. he joins us now from london. talk to me about this valuation gap between u.s. stocks in global equities. what do you make of the spread at the moment? >> what we have seen his ongoing pens ends regarding brexit, regarding the stability of the eurozone. skepticism climbing into investor's mines. they're bringing their acetone with a -- they're bringing their assets home. that has led to the u.s. market higher than international markets. quite a few investors are on the same side of the boat. another way of looking at it is looking at the ratio of the s&p. we have the chart that shows u.s. stocks at the highest valuation since 2002. one standard deviation on how expensive stocks are. how do you bet against the u.s. market? -yieldyou look at the bond , across international markets, the dividend yield is a .7% relative --2.7%. when you put that into the concept of bond yields trading negatively, that is a strong cash flow generation capability at a time when markets are looking to move up --move sideways. that can make a big difference to your overall returns. investors should be looking closely to those areas. jon: we talk about u.s. equities being perceived as some kind of -- if i look at euros denominated assets, you apply a small risk premium to bonds than on the periphery. does the same not apply to global and these? -- global equities. >> there has been a different approaching.' -- approach. the idea you invest for equities and growth and invest in bonds for income. that has moved on with the advent of qe to a situation by yielding equities are more attractive. premium,een some yield discount and international markets. david: how do take into account the possible risk to missed allocations brought by the low interest rate margin. up company is leveraging because rates are so low. they may be keeping investments and another environment. how do you sort of companies who are being really prudent than the ones being riskier because of the low interest rates? >> the one thing we have been very wary of, is the clever engineering we have seen anthony's partaking -- we have seen companies partaking in. bond yields have been used to leverage balance sheets and share buybacks have flattened earnings-per-share. quite a few companies have not then growing their cash earnings for some time. buyback activity is at an all-time high on the s&p. we are cautious of management teams redirect themselves on the basis of earnings. we have seen other extenuating circumstances, such as apple using bonds and repurchasing to get around its tax. there are many ways were companies can be clever. we have to look at cash -- free cash flow yield. balance sheet engineering is a game which is impossible to play indefinitely. abbe stimulus plan. can you get a bullish: japanese equities without an increase in dollar yen? >> that is something that is a key. what we have seen in a less week with the preannouncement from abbe, more of a fiscal package early last week. doj the quite disappointing announcement on friday tells us that the ball has been thrown back to the government from the central bank in order to take the responsibility for trying to inflate and grow japan. it does seem the doj's announcement on friday was vague. a lot of the measures that are being planned aren't really fleshed out. we will see more details coming tonight. impress with the detail of that deal, we will see the yen trade back. it will be taking very negatively for japan. the important business conditions for the japanese corporate world to thrive, and for more tax to enter the coffers, need to get the exports and a situation whereby they are competitive. if the yen to strengthen, yes, it would be very negative for the japanese market. jon: good to have you on the program. coming up, the strength in the credit market. recent questions on deals weighing on supply. we are 50 minutes into the session. stocks opening marginally lower. this is bloomberg. ♪ ♪ david: this is bloomberg go. i'm david wesson. it next is barclays head of global strategy research. alix: next is bloomberg markets with mark barton. vonnie, what you have on your show? vonnie: we will be speaking with elizabeth corley, the ceo of ali arts -- alliance. we will be asking her about the boe. implications for brexit and the federal reserve, we have comments about international development and packing the fed. we will be talking to major deals, tesla and solar city and the unicorn $35 billion deal. didi and uberrn, getting together. and stocks and election year. alix: sounds like a unicorn on speed. thank you so much, vonnie quinn. jon: what does a unicorn on speed look like? i don't want to know? let's get over to abigail doolittle. abigail: we have the nasdaq flipping between small gains and losses. in the biotech sector, with we have a winner up 25%. jen will bet bio paying a licensing fee after their drug did not meet the primary end point in a study. this is a positive for both companies. it will give them a big bump in revenue. this is a largely unmet need. move,g to another biotech seattle genetics. it's lymphoma drug did need the primary gold and a study, improving the life of patients. it also met the secondary endpoint. biotech may be in a bear market. but seattle genetics is bucking the trend by 7%. alix: staying with tech, apple has become the biggest bond issuer in the world, raising $80 billion in just four years. joining us with more on the risk of investing in corporate is brad, barclays head of corporate strategy. rising nine times faster than cash. what is the risk for investors? >> right now in the credit markets, there is more demand for investors one in corporate bonds then there is a need to issue from corporate. we have seen it in the mac row numbers in gdp numbers. the reason issuance has been up so much is share buybacks and dividends and m&a over the last couple of years. when those things happen, leverage those up. leverage in the investment-grade universe is up 1.5%. alix: the risk is for apple, what happens if they don't tell the iphones the market is expecting them to? then makes a turn in the corporate market? what sectors do offer fundamental cover? >> i think that is the big risk. increases, -- it is not necessarily the issuance plan. you look across sectors right now, financials for example, you don't have anything there in terms of u.s. financials or issuance for m&a. you're not issuing to buy back shares. placeay, it is a safer where we are right now. credit market is not talking about a lot of appreciation. , likehe other story they find it much cheaper to raise money in the bond market. is that a story going away any time soon? >> i don't think so. companies, -- se it is really tough to not want to take advantage. you have to find some form of investment opportunity or reward your shareholders. if you have opportunities in europe, the average corporate yield is 1%. alix: there enough. to that point, we have seen bond issuance rise, but down on the year. we have a chart that shows that. what is your expectation for net issuance for the next year? >> net issuance has to come off a little bit because what we are seeing in the m&a environment, it is harder to get deals approved on a regulatory front. down issuance will wind up a little bit as you allude to it. that would put net down as well. jon: i want to wrap things up. the community -- the commodity market. crude down. the stress debt. ratesies issued very low when you had crude at $19 a barrel. does the stress come back and a big way? -- in a big way? 45 -- 25different and to be there. if we look at the markets right now, if you look at high-yield and you look in the past when oil traded at those levels, -- some companies have defaulted. now you have bigger companies. you are not to look at it apples to apples. it still looks like that portion of the high-yield market. if we drop below, you have downside. alix: thanks so much, brad. barclays global head of corporate strategy. this is bloomberg. ♪ ♪ david: this is "bloomberg ," alongside jonathan ferro and alix steel. we had big three offenses week. alix: i am watching oil right now down 2%. what is the downside potential? are we going to see a decoupling? oblique is front and center -- abbe is front and center. and payroll is ahead. almost 25 minutes into the session. "bloomberg markets" is up next. ♪ ?c+sv ♪ vonnie: it is 3:00 p.m. in london and 3:00 a.m. in hong kong. i'm vonnie quinn. mark: and i'm mark barton. this is "bloomberg markets" on bloomberg television. ♪ vonnie: we are going to take you from detroit to london and territories and china and washington d.c. in the next hour. a big move at elon musk at tesla pay $2.26ree to billion for solar city. it was criticized as a bailout. elon musk is the largest shareholder. mark: robert kaplan of to bloomberg about the prospect of a rate hike this year. he says september is still on will bee, but the 2017 watching a key report. uber is selling itself to chinese competitor didi.

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