Surveillance. I am Francine Lacqua in london, tom keene in new york. The banks are the biggest industry losing ground in europe and you have Credit Suisse, ubs and commerzbank down between 7 and 8 . Tom i would note when i walked in the door american oil was below 40 a barrel. Francisco blanch is going to join us in a bit, but it is a deceptive tuesday. There is a lot going on. Francine lets get to the bloomberg first word news. Japans economic stimulus plan will increase spending by 45 billion this year according to a draft being discussed by the ruling party today. It includes lowcost loans and money for infrastructure and disaster relief. They have been hurt by a stronger yen and week consumer spending. Australias central bank has cut Interest Rates to a record low. They lower the cash rate by a quarter percent to 1. 5 . Inflation and wage growth are at record lows. Warren buffett is challenging donald trump to meet him anytime and anyplace to reveal their tax returns. While campaigning for Hillary Clinton, he ripped trump for failing to release his terms returns. Clintonrshly criticized and Bernie Sanders endorsement. Mr. Trump he was so angry when they were talking about him. If he had not done anything, he would have been a hero but he made a deal with the devil. She is the devil. Test outarlier trump on the legitimacy of the political process and is worried the november election maybe rigged. The International Olympic committee has second thoughts about staging games in developing countries. You can blame it on radio. Rio. We are frustrated with problems brazil has had. They appear to be backing away from their goal to open the games to a wider range of cities. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom equities, bonds, currencies, commodities, a fold into the idea of where we are. Futures are a little bit south. Euro stronger. Nymex crude, we had 39. 14. Vix to the next screen, the , 12. 95. The yen is a shock. Point 101. 62. Could you believe a 99 handle on yen . Dollar mexico is a emergingmarket proxy, new weakness in peso. Francine im looking forward to talking with Derek Halpenny about yen. I do not know if a 99 handle is possible but 100 certainly looks at the moment you pressure on european stocks, definitely on the lows. What i want to focus on more is the banks. I have two boards today. If you look at a lot of the stocks under pressure, credit squeeze, ubs down 6 . There is no real reason but as lionel put it, there is no positive news for anyone to buy. Down below came in expectations. Thrown out the banks of the stocks with the index that there is flatout erosion. Bring that data screen up again. I look at the 10 euro level on Deutsche Bank. We are now at 11. 40. A nine print on Deutsche Bank, i do not know how that changes. Francine the fact that they are getting kicked out is not significant per se but it is a milestone and a crowning moment of all of the discouraging news we have had from a lot of these banks. Tom how about over to the bloomberg and wall Economic Data we will see in the United States . I showed this chart to the team this morning. They were mostly awake. 60 years back, savings as compared to personal, disposable income. We used to save a lot of money. We were almost biblical. We tied the green line, 10 . Then the slow rollover in savings down to 5. 3 . All sorts of people have written about why this decline and where we go from here, i would suggest a lot of this is the aggregate taxes americans pay. Francine i picked up something for you and related to the u. S. I picked up something a little plane but it goes to treasuries. The treasury volatility has been vanishing. Merrill lynch option volatility estimate is at 63. It is a benchmark that sees what it has been doing and it tells us that the expected price has dropped since to the lowest since 2014. It is another way of looking at what markets are really pricing. Is the be clear, that volatility index across the entire curve going down, the Merrill Lynch move index. Francine that is right. Tom that is an important chart. Francine i think tom gave me a be plus or and a minus for that chart. Tom i think that was a quality a. Francine japans government announced extra spending as Prime Minister shinzo abe tries to bolster the economy. Lets get straight to Derek Halpenny. As always, you have great insight into what happens in japan and with stimulus. The market is clearly disappointed. You argue they are basically pumping 1. 6 of gdp into the economy and that is not a bad figure. Of fiscalterms stimulus programs, it is going to have an impact but it is more of the same in terms that this is a demandside focus stimulus. And therefore, yes, it will have an impact that then it will fade going forward. I think markets are disappointed partly because of that but primarily i think because of the Unrealistic Expectations that have been built up in the market in the last three to four weeks that we were going to get something much more substantial with coordination with the boj. Francine is the market to binary . Too binary . Derek at the moment, the focus is very much on japan. We had ben bernanke come over from the u. S. To tokyo and there was a lot of chatter about helicopter money around that. We have come to the point where the markets correctly realize that the whole abenomics optimism has unraveled completely. The fiveyear inflation went from slightly negative when he came to power, shot up to 2 and is down more now than ever. Tom i think that is a great insight. Lets go to the chart. We are talking some first and Second Derivative brutality. This is a zoom in of the corroded chart we have been doing for now months of the kuroda chart we have been doing for now months. Yen does a 100 print on mean for the japanese economy . It has got to have an effect really across all of their gdp calculation. A valuation perspective, i would argue that we are actually just around fair value. I do not think the level itself has a hugely such damaging impact on real gdp growth. But of course you are right in saying that part of the story with the devaluation up to one tourism has surged in japan and there will be an impact on that going forward. From a valuation perspective, i think we would have to see fairly sharp moves below 100 act toward 90 before we start to get the japanese authorities more explicitly signaling their dissatisfaction with the move. Tom i look at this, it is extraordinary to try to imagine the move through 100 down to 90. If it completely refused abenomics, can he stay today that abenomics is done . Derek certainly explaining the dynamic i just mentioned about inflation expectations, it has had its impact and that is now over. Therefore, another injection of action is needed to try and restore some of that optimism. I feel it has to be more down on the government side and in particular, the structural reform we have talking about talked about before. This type of policy is required to lift the potential growth rate in japan. Abe is looking at a 20 in nominal gdp in 2020 and it is not going to happen. Muscine Derek Halpenny of with some unique insight into what happens in japan. Coming up, we speak with Francisco Blanch of bank of america. We talk oil. Hits 38 orether it 39. If it hits 38, what it means for a lot of these Oil Rig Counts . Live pictures from new york, it is a miserable day here. I hope it is warmer in new york. Francine this is bloomberg surveillance. Francine lacqua in london, tom keene in new york. Taylor Second Quarter profit rose almost 8 at bmw. They kept a tight grip on cost and their reliance on cheaper feels vehicles. Intercontinental hotels posted firstquarter earnings that Beat Estimates. They said they are confident in the outlook for the full year despite an uncertain environment in some markets. Has raised almost 20 billion in its biggest bond sale ever and will use the proceeds to finance their acquisition of linked in. That is your Bloomberg Business flash. Francine thank you so much, taylor riggs. Oil trading their 40 a barrel today. Thatfell amid the concern the oil glut will persist. With us is Francisco Blanch for some unique perspective. Meant tot was stabilize and supply and demand was meant to be a little more stable by the end of the year. We are back in oversupply. Francisco i think what is going on right now is quite seasonal. If you look at what happened last year between the settlement of the july contract in june, in late june and the settlement of the september contract in late august, we lost 18 and a half dollars a barrel. This year we have lost nine. Settle, i going to think, 38, 39, 40, in that range. It is all extremely seasonal. In the u. S. We lose one and a half to 2 Million Barrels from demand. , this isins being weak putting a Downside Pressure on the price. Francine i have an oil chart which basically is an oil rig counting. This and theith problem with demand is there is a linkage between oil and global growth, which is very strong because we do not know what kind of growth we are seeing. You are confident this is all seasonal, it is not something ugly and demand coming from asia . Francisco we are pretty confident this is a seasonal pattern and in our view, we are still looking for oil to be back in the 50 plus range at yearend. We view this dip as a buying opportunity. Obviously the market has moved to a steeper contango so the market rate has dropped. If you look at december 2016 prices, we do think those probably end up settling over 50. We are in a refinery maintenance season because the market is always creating roughly two months ahead, we see a pickup in refinery consumption for crude oil. The to your question, amount was very strong last year at 1. 8 Million Barrels a day. Certainly brexit puts a bit of a question mark on global growth, but lower Interest Rates are helping emerging markets. I do not see a drastic change at this point. Tom i look at where we are now in general, is a rationalization of microeconomics of oil which is a great mystery to everyone. Brent crude log, slope matters, down we go back to the 200 day moving average. 29 a barrel was the outcome of 80 and theng at rationalizing at 60 a barrel. Arent we doing the same thing now, trying to rationalize the mysteries . What is the percent of likelihood you could be wrong . Francisco that is an interesting question. Francine good question. Francisco i am pretty confident we will see a rebound in oil prices at years and unless there is a global recession. Supplies are looking pretty dire heading into year end. We are predicting a contraction in Global Supply year on year throughout the rest of the year. We are already on a year on year decline rate and that is going to turn into half a Million Barrels a day and possibly 700,000 barrels a day. Supply is already contracting on a year on year basis. It is rolling over and demand is still ok. I think as long as demand holds up prices will move into year and. Going to look back and it will feel like a seasonal downturn. It could be steeper than we expected. I have not changed my forecast since january, since the first week of january. Im probably the only analyst who has not done that. We are still calling for a pullback into the Third Quarter because of seasonal factors. Saudis kept a stable process profile price profile and the market has to keep that happened make that happen. We rationalize supply and demand and the saudis are no longer acting as a central bank so the market has to create meaningful price swings to adjust that balance. I think demand is actually quite good. If you look around the world, demand for air travel is quite strong. The demand for driving is quite strong because prices are cheap. More, liet to drive more, and that is what matters for oil. With thecisco blanch mystery of where we are in the 200 moving day average of oil. With us next hour, Richard Haass. There is a little bit to talk about. Russia, ms. Clinton, mr. Trump. We could talk to Richard Haass four hours. Bloomberg surveillance. Francine i am friends in the clot in london, tom keene in new york i am Francine Lacqua in london, tom keene in new york. The New York Times says, the voters deserve to know what mr. Trump is hiding, considering his , thery of bankruptcy government investigations of trump university, and other dodgy part of his branded universe. I thought this was significant because it is the kind of debate we had prebrexit. It goes back to inequality. There were concerns about Hillary Clinton being part of the establishment but a line of thought, if you picked what is happening in the u. S. Pit what is happening in the u. S. Against brexit. Tom it has heated up postconvention days and you cant imagine where the heat will be in september into october. I thought the most important article yesterday was in the washington post, on mr. Trumps tax history from many years ago. I understand that is ancient history but for most americans who really do not understand the conflation of Business Real Estate into someones personal tax return, that it was stunning. As tax profile of the 1970s and 1980s, that is what i would watch as the release of the tax returns debate. Francine i do not know whether in the u. S. There is more pressure than in certain european countries. There is a clear difference how the u. K. Treats their politicians in relation to tax returns and i would say that is probably one of the things that theresa may, has Andrea Leadsom wobbled about, i do not know why she has to release her tax return. Tom i would state for our global audiences, it has really heated up in the last 48 hours, some of the mysteries of mr. Trump and ms. Clinton. Paul bloxham joins us from hsbc. Tom good morning, everyone. Francine lacqua in london, tom keene in new york. A lot going on, japan action, weak european banks, and australian banks with a surprise cut. Taylor british Prime Minister theresa may will try to get the economy moving again with a new industrial program. She says if the u. K. Is to take it vantage of the opportunities provided by brexit, the whole economy must be firing. Singapore is word warning that u. S. s credibility is on the line and it is a litmus test of americans seriousness. Pentagon plans further airstrikes against Islamic State forces in libya. They struck a tank and two other Islamic State vehicles in the first group outside syria and iraq. They will coordinate continued strikes with the libyan government. Stepping up pressure for the release of the man they blame for last weeks cu. Has lived in exile in pennsylvania since the late 1990s. U. S. Officials have said they need to see more evidence. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. Riggs. Lor this is bloomberg. Centralbanktralia cut Interest Rates to a low. They have to counter disinflation and underemployment. We are here with paul bloxham. Francisco us is blanch. Great to have you join the program, paul. Did an idea of what Central Banks still have to do. The specter of disinflation is not going anywhere. Paul inflation has fallen below the bottom edge of the reserve banks target. It is sitting at one and a half year on year and they target 2 to 3 so they cut Interest Rates again today. They cut earlier in may. The have cut 50 basis points this year to try and stimulate a lift in inflation but we have a bit of honor employment so we need underemployment. We think this will be enough for the moment and the rbas rhetoric will shift to watching for the impact on the economy and how much effect it has on inflation. Looking further out, the key question is will they have to cut more . Francine when you say this will be enough, enough for australia because they cannot do anymore or they are waiting for other Central Banks to cut and hoping that bigger economies can dent disinflation bubble . Paul both factors are important. I think the low global inflation story is having an impact on australia there are also some domestic dynamics that are a little bit different. We are in a Mining Investment boom and it has been a big drag on the economy. Commodity prices have fallen along the way and that is one of the key disinflation or a forces but that will come to an end very soon. Commodity prices may already be pass their trough. Maybe the rba will not have to cut too much further. Tom lets get the chart up of australian inflation. What concerns me is the trend is right down to zero. It is without question talking a trend to deflation. I get the economy one off. Is it a japan like disinflation . Paul certainly not when you have a growth rate for gdp running at 3. 1 year on year in the First Quarter of this year. You have above trend growth and that is generating a fall in the Unemployment Rate at now 5. 7 . It is not quite got enough momentum to lift the mastic inflation and that is coming in our view lift the mystic inflation and that is coming in our view. Thing we are shifting for is growth being driven by services imports and that