welcome to "on the move." 8:30 in berlin and we're accounting you down to the european open. i am guy johnson alongside airline hide this is what we are watching. theresa may prepares her first cabinet meeting. the case biggest banker says the deposit for equities comes with a big hangover. we speak to just be see reality check for u.k. stocks. midis reviews turkey point -- movies reviews turkey for downgrade. this is a bank meeting today.

go go nintendo. -- with price the sex could do we have a new and -- with price hikes. do we have a new and -- new and? this is how we think the stock story is going to open this morning. the fair value cap collation, .he euro stoxx down .5% london looks like it is going to outperform again. the dax also down by less than a half of a percent. caroline: a risk aversion could be the other assets. we have seen yields falling from the likes of german debt, down three basis points. meanwhile money flowing into the haven that is the japanese yen. dollar down a quarter of a percent compared to yen. the qe dollars appeared to be getting more speculation.

banks rate central cuts coming from both of those countries. he moves in assets and the bond markets. let's get togo -- bloomberg first word news with juliette saly. juliette: caroline, thank you. turkey's bank will slow the pace of interest rate cuts and it meets today. today. when it meets as selloff in the lira and sovereign debt. the expectation is for a quarter-point cut instead of the 50 basis points. in a rare public stage, donald says herife melania husband is tough when he has to be. appears to have taken inspiration from a surprising source, michelle obama. in response to claims that his speech strongly echoed the own latest -- the first lady's own words, the trump campaign has issued a statement. -- ays

reelecteds newly prime minister have been sworn in by the governor general. turnbull reshuffled his team after this month's narrow election when. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. bloomberg. guy. guy: juliette, thank you very much. theresa may will chair the first meeting of her cabinet. simple.ctive is don't let this administration be defined by brexit. in a statement, she said it will be the responsibility of everyone sitting around the cabinet table to make brexit work for britain. stephen king is the senior

economic adviser. he joins us as our guest. is that wishful thinking that the whole thing will not be defined by brexit? >> it will be a challenge over the next three years. in terms of divorce, it will be a certain. there is no precedent for us. you get three ministers who were brexit tears through the campaign whose a job it is to try and extract the u.k. from the eu. we do not know exactly what the eu will want from the u.k. there is no precedent. -- deficit that u.k. has which is going to be difficult to fund over the next two to three years. many foreign companies don't come to the u.k. to sell to the u.k. people, they come to the u.k. to sell into the single market. with the uncertainty as to what the relationship will be to the

signal market, maybe some of that foreign investment will not be coming through so easily. by: we saw yesterday stocks other companies making similar noses. the cheapness of sterling means there are opportunities. market's fear that the -- there will be too many -- to a few companies coming through. exactly what would sterling do to the u.k. economy? we think about the fall of the pound. 2008, when the pound fell genetically, it wasn't so much the exports that picked up, it was the headlines rose. up with a much weaker domestic demand story. that important to stress are significant costs and adjustment costs in the u.k. itself.

guy: how would you manage the situation if you are mark carney? stephen: it is important for the bank of england to stress the world has changed. therefore it is important to stress the pound doesn't need to be lower temporarily but permanently. the implication is there that they will have to do something over the course of the next few weeks. i think the rate cuts first of all. if rate cuts don't work, your into more unconventional stuff. -- you are into more unconventional stuff. there are things like qe, funding for lending. to try and encourage more activity to expand the u.k. itself. at this stage, it might be the bank -- the treasury to do something, not just in terms of

monetary policy but fiscal policy. the message from philip hammond has been different from george osborne. we should be thinking about quite carefully. there is a recognition that the government itself can do something alongside the central bank to provide support for the economy. anna: stephen, i want to take it from outside the u.k., looking at the other side of the story, tom keene spoke exclusively to christine lagarde. she said after brexit, the pressure is now on here in europe to deliver. -- ishope of the european that the european leaders will find the strength and determination to bring about some of those structural reforms, changes that will deliver value to the europeans. that will devastate it is worth together.

-- it is worth being together. anna: a call for more europe. is europe going to be pulling together? would you feel the responses been for merkel and the remaining 27 countries of the eu? >> some of the mood music we have heard has been more encouraging than people might a feared a week ago. europeans recognize that u.k. is an important trading partner but the recognize if you give u.k. too hard a time, they also encourage more of europe. will -- all and ollande toerkel and h talk about how europe should be. france and the netherlands, you have a left-wing parties coming through. there are a lot of political uncertainties in the eurozone. it is important to stress that europeans recognize that are

still some difficulties out there. with a single currency, ideally you need to have a single fiscal policy, making union. these things are proving difficult to build. more integration to create further economic outcome. policies are moving in the opposite direction. each is not just a challenge for u.k. itself it also a challenge for europe. anna: have you been concerned about issues? some of the unintended consequences is shining a light on the italian banking crisis. do you think it is something that we worked out to prevent it from becoming a systemic issue? stephen: the last things european want is a systemic issue. when push came to show, the ecb would do anything it could do to

prevent sovereign bond markets from being turned into wayside currency markets. anything they can do to convince a systemic crisis can be done. the problem is it's time there has to be a policy initiative, it is coming in a kind of belated sense. there is no clear leadership at the moment. -- anythingening happens and then there is a response to events. let's just hope things won't happen. if they do, we have to response. -- will have to respond. manus: that is been the story for the last two years. stephen, stay with us. up next, turkish central bank has a difficult decision to make today. hold up on the rate cuts cycle. or act like it is business as usual. -- or act like it is business as usual.

up next. ♪

juliette: -- pokemon go field a rally lasting more than a week. the rally jumped $39 billion extending a run that extended

share prices more than doubled as the app became a viral phenomenon. the company set a record for the most shares in a trading daily in japan. novartis has seen its second-quarter earnings decline 3% as profit fell, excluding some items. grapples with tumbling sales of its medicine. .hey invest in new products erickson has said it will double its cost-cutting plan after posting second-quarter sales that missed analyst estimates. sales fell 11%. reducepany said it will research and development spending as carriers curb investment -- investments in wireless gear. volvo second quarter profit rose

by 7% as production cuts saved costs. -- which truck market owns the mac truck brand in america announced production cuts in north america and brazil in february. that is your bloomberg business flash. guy. trucknteresting when company's cutting back on production and what that means. we will talk about that later. turkey equity market opening up a few minutes ago. let's check in. that is yesterday's close, down 6.71% this morning. we have the market down about 1%. that is the 100 down over the last two days. significant drops coming through once again. the equity market continues to soften up as a result of what happened friday. caroline: we got to be looking at the policy response.

turkey's central bank maybe thrown off course after the -- in the aftermath of the attempted coup. economists expect the pace of interest rate cuts to be slowed slowed.s can cut -- in the meantime, movies can cut turkey's credit rating to junk. -- how exactly has the coup attempt and the crackdown affected the growth outlook for the economy in turkey? at least it has raised some questions. the main question mark is over the issue of foreign investment into turkey which has done well in the first five months of the year. the next inflow in the first five months last year, there was a net outflow. the danger is if investors decide the political risks are , then there might be

this inflow and the investment that might start in -- might start reversing. made worse by the fact that moody's is looking at its ratings. junk.dy cuts, it will be barclays issued a report that says outflows, if there is a cut, could be more than $3 billion. caroline: just on the cusp already we will see how that pans out. give us a sense of anyone's promises -- everyone's thomas is -- erdogan's promises. riad: the wave -- the figures we saw last night was 7500 arrests. 13,000 tohat number

14,000 people being suspended or fired from their positions. government officials, military, judicially, interior, police, finance ministry. yes, there is a massive purge going on. whatuestion really is, so form of government will be seen next? erdogan has wanted a more presidential system where he would hold the greater power than he has now. traditionally it is a ceremonial post. he is very much trying to reshape the way the turkish political system works. guy: riad hamade, great stuff. thank you very much. stephen king still with us and we talked about the fact that the u.k. has a deficit problem. he has a massive one. we got political instability and

concern going forward it how do you manage that story at the central bank? the pressure is on politically to cut rates. u.k. has astephen: deficit of 7% gdp. deficit is turkey much smaller than it was two or three years ago. manus: -- guy: that number is going to get larger. stephen: the current account deficit is not quite as big as it might've been. nevertheless, this is a thorny issue for the central bank. we'll see what happens today and --t people were thinking that is likely to see that now. we think so. we will see what happens. it is the usual thing which is you want to make sure there is an important domestic economy. that would suggest doing something for loosening monetary

policy. at the same time, you need to make sure the foreign investors are kept happy and not are going to -- and are not going to walk away suddenly. guy: is the weapon of choice still currency? is that the best way of handling this situation? the u.k. needs a cheaper currency. turkey needs a cheaper currency. isphen: the big difference inflation rate is still relatively high, a percent plus. -- 8% plus. nevertheless, you look at the history, the last three or four years, the so bank has been tried to kickstart their economies. cuts some interest rates. you're going to get a temporary game, it is going to come through via the currency. is already underway without the central bank doing nothing at all. they are doing an adjustment in

terms of the lira. events happen, currencies and just. just currencies at just. -- currencies adjust. technique to try and help them out. has --e: and a one erdogan has held his grip over the central bank. we are minutes away from the open. up next, we'll look at the movers in today's trade. we are going to be looking ahead to goldman sachs results. ♪

caroline: 8:54 here in berlin. let's have a look at some of the stocks we are keeping our eye out ahead of the open. missing. estimates we saw them reporting an 11% drop in sales. the company is saying it'll double its cost-cutting plan. the problem is where the costs are being cut. research and development -- that stock could fall 1% to 2%. novartis could slump to the same tune. profits may follow this year they worn as it faces declining sales. that being me back. -- increasing it spending on its heart medicine treatment and

presto. it has a number of new drugs is trying to push through the pipeline, trying to increase their investment on. guy: it certainly is. go to sex another stock you want to watch for. where -- goldman sachs another stock you want to watch for. doneof its peers have fairly well in fixed income. you have seen that over the last few sessions should bank of america doing ok in that space. it is going to be interesting to see what happens with goldman's. how solid is that franchise back of king from hsbc still with us. majors, 15 onen the u.s. treasuries. to we stay low for long when it comes to the u.s. treasury market? stephen: the key thing here is globally we have tremendous this inflation pressures. very weak nominal gdp growth. -- n, you get

guy: coming up, the market open. futures are pointing to a mixed start here in europe. that is the story next. this is bloomberg. ♪

guy: good morning. welcome. we are here in the city of london. i am alongside caroline hyde. she is in berlin. we are moments away from european open. caroline: a fragile ftse as theresa may prepares to chair her first cabinet meeting. the uk's biggest bank says there will be a hangover. we speak to hsbc about a reality check. outlook negative. mindy's review of turkey leads to a downgrade. the central bank needs today. can you deliver the cuts -- can they deliver the cuts the

president wants. pokemon go. has areaming service price hike. we have a new end. guy: the market is now opening. let us see what the european open looks like. the white line is the ftse 100. looks like it is softening up a little bit. you can see it looks like we are getting a negative start to the day. is somethingf that that has been priced in to the comment. -- it is also -- the dax isthe also opening up softer. as you can see from where we finished yesterday, the markets

are pricing in the negative story here in europe this morning. let us go below the headline level to see what stocks are on the move. let us get the details from manus cranny. manus: is it a lack of stimulus? or is it a cause for breath? sachs is going to set the tender. thisll drop by about 18% year. perhaps there is a bump in fixed income trading at the end of the quarter it is not enough to pull the whole system higher. all securities are down by .2 part -- .25%. oil is back at $45. turkish stocks at the bottom of your screen. istanbul stocks down 7% yesterday. declining down by 1% today. i love what one of our editors

wrote today. turkey should not be confused with penny stocks. for me, it is about the fx story. new zealand dollar, aussie dollar -- down 40%. macro potential comes into play. the aussies are worried about growth. they may cut rates. the turkish lira should be at the bottom of your screen. moody's potentially cutting to junk. that will come through and hit the lira. lira, 2.98 at the bottom of your screen. a couple of trends. -- $45.17. take a look at some of the stocks on the move. erickson, sales down. krona -- more cost cuts to come.

novartis, profitability falls again. spending on one of their new drugs for your heart is where the money is being spent. up .25%. erickson down by 3.49%. zalando unchanged from yesterday. second quarter profit tops estimates. sales popped up by 26%. that is what the germans were doing while we were prevaricating whether we should running part of the european union. let us talk about what is happening in the u.k. manus just mentioning brexit. the brexit hangover maybe one of those things that mark carney cannot cure.

that is the view from hsbc which predicts that the uk's benchmark index will and the year down the year down end at around 70%. stephen king joins us. let us talk about what is actually happening here. allows you to put in the currency adjusted column. coming year to date up by 7%. in euro terms, down by 5%. slightly outperforming. the ftse is not a particularly good gauge of the british economy. haven't we are the scene the kind of reality of how markets price things and in some ways correctly coming through? the ftse is a largely dollar-denominated index. about 60%-70% of the ftse

earnings come from abroad. it is an international stock market. not a local market. it has a greater focus on what is happening in the u.k. we are seeing a kind of financial market reaction but we have not been a great deal in terms of an economic reaction. what does the foreign sterling do to the u.k. economy? u.k. aprofitability of contest u.k. companies over the next year -- or u.k. companies over the next year? --. consumers or companies hoping things will get better. that is increasingly unlikely. the output will be pretty poor in the next year or so. guy: you just said the ftse is foreign earnings taste and sterling needs to fall even

further. thet is easy to make calculation that as sterling immediately comes down, there will be an uplift. what is less clear is the extra u.k.,ich is although the or the ftse makes earnings abroad but it also makes a big chunk a tone. the chunk at home is what is uncertain. giving some context here -- before the brexit vote, hsbc forecasted our growth over 2%. after the vote, it is plus .7. there is a range of forecast from the negative to the positive. but they are all weaker than they were the asleep. if the data confirms in the next month, it will be a constraint on the 250 and to a lesser extent on the ftse also. the bad news still to come in terms of the economy. hsbc is talking about

paris and the hangover about to come. what about the hangover in germany and the rest of the eurozone and the eu? we have w numbers coming out later today. hit wide brexit. what about the longer-term rather than just the jew number? -- to be fair, there are small pieces of good news. hsbc's actions to drive down 10 year yields all over europe has relieved pressure with regard to debt service cost for the government. fiscal expansion this year. the extra bit of fiscal toansion has helped stabilize the euro zone economy even as the situation in other parts of the world is less encouraging. are a few nuggets of good

news out there associated with the fiscal side this year. longer-term, the eurozone still has significant difficulties. productivity growth is generally pretty poor. there are big questions about the institutions of government in the eurozone going back to my earlier comments. there are a lot of big issues out there. and big issues of political uncertainty. you have the italian constitutional referendum coming up later this year and all of the elections coming up next year. all of these are constraints on economic growth. thefor the time being, lower debt service costs and the expansion in the fiscal policy are good bits of news. 1% -- we up next, the talked a bold treasury call from

morgan stanley. will the u.s. reached new lows? this is bloomberg. ♪

caroline: welcome back. we are a 11 minutes into your trading day. let us look how the markets are forming. futures rick nolan it would be a futuresures signaled -- signaled it would be a down day.

dax down by 0.4%. what about the online retailers? a macro move on this company. the top 16.93%. .assive outperformance in terms of the stock stories -- k+s down 3%. let us get you caught up on what you need to know. here is juliette saly. turkey central bank will slow the pace of interest rate cuts when it meets today. according to economist surveyed by bloomberg. after a failed coup, triggered a selloff in the lira, they are

expecting a .25% cut. exclusive interview, the imf chief christine lagarde said a quick response by turkey's policy makers helped to calm investors. >> the lira went down but not by much. in the main, there was an orderly functioning of the market. after something that was massively disruptive. juliette: welcome turnbull his cabinet have been sworn in by the government -- governor general in canada. he reshuffled his team after this month narrow election win. nintendo's market value has pushed past sony after a pokemon go rally lasting more than a week. nintendo's value has jumped 30 might -- $39 million. the act became a viral phenomenon.

on friday, the company set a record on shares sold in japan. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . this is bloomberg. guy: it certainly is. thisn stanley called year's treasury rally and now they are getting more bullish. 10 year u.s. yields will fall to 1% in the first quarter of next year. that is the call. let us talk about this. showing you a few charts. this is the 10 year and these are predictions on where we will go. the green. is the morgan stanley call. at 1%. that is where the u.s. 10 year has been moving. this is the q1, 2017 average yield or cast. it has been coming down and down. the current number is 1.89%.

the direction of travel is very lower andds this ever morgan stanley says 1% level. hsbc's senior economic adviser joins us. -- it turns out he was right. is a reverse.ley it is a strange thing, isn't it? talk a bit about what is happening more globally. what is driving this number ever lower? we have seen the direction of travel. it has been going on for quite some time. it continues to confound. this lower and lower number. what is forcing us down to these levels? >> it has been going on for 15 years. qe andy, it predates

negative nominal interest rates and these experimental policies from the last few years. if you think about the conditions we have seen globally in recent years, they are more and more like the japanese. prices on growth, inflation, short-term interest rates. the inability of central banks to return to normalcy. all of these things are unique -- uniquely japanese. we have had similar conditions coming through in other parts of the world. the gap in what people forecast, nominal gdp would be in the actual nominal gdp. the gap amounts to about 25% after five years. shortfalls in growth and inflation. in the western world, the u.s. 18%,out 15%, france is

italy is 24% and spain is 30%. these are dramatically lower levels of nominal activity. means the lower the interest rates are likely to be. as populations get lower -- older, they are less focused on generating income. they like things like bonds. you drive yields down lower for that reason. guy: we have seen that clearly. a transformation of the entire global capital market into something that is much more like a traditional bond market and less like a capital risking equity market system. theline: we are looking at yield on the treasury. 1.56. morgan stanley think it will lose 0.5%. we can see just how much the u.s. is at odds with the rest of the world. you were speaking about japan.

still negative territory. that is the blue line. the purple line showing us where germany is currently trading. we have seen a slight pickup in those yields. u.s. have more then japan and germany? do you see the negative yields remaining for the rest of japan and germany unlike? >> both the central banks in europe and in japan are offering themselves negative short-term interest rates. that has had an impact further up the yield curve. we used to think traditionally that the u.s. was the kind of determineplace to yields and the rest of the world. aredevelopments elsewhere driving down yields. in the u.s. think about it. one of the consequences of

having negative rates elsewhere, the u.s. is importing deflationary pressures from the rest of the world. it cannot raise rates as much as it would like to. because it cannot, it also triggers downward pressure on 10 year yields. guy: very briefly, where would you expect the u.s. 10 year yield to be in 10 years? lower than where we are now? >> yes. we have buried though japan's diarrheal structural -- incredible story of yields. next, the pokemon go frenzy pushes nintendo to a higher value then sony and netflix. we will discuss the milestone and the technology,. this is bloomberg. next. the technology, this is bloomberg.

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>> with new members, we have not had any changes to our prices. we have had a couple of quarters of great growth. this is around change resistance. whatever the price is for something, people do not like it to go up. in terms of new members which is what drives growth, the new pricing is working great. caroline: change resistance. that is reed hastings, defending the raising of netflix prices.

netflix stumbled so much less night after the company said the price increase cut subscriber growth. a 14% slump. it was a phenomenal fall. check out my screen. it sent shivers down investors spines. point six 8 million subscribers being added, lower than what they expected. they wanted to see more than 2 million added overseas. look at the slump we saw. down from 13%. putting it into perspective. when hundredr, 60,000 added in terms of the united states. a much lower than previous number. this is the slowest growth seen in three years. people do not like change. perspective,to check out where we saw in

netflix shares come from in the last five years. 12% fall may not be road that much. that much.erode end.another nintendo. post pokemon rise go. absolutely sensational. we built this chart this morning, we were talking about pokemon lifting nintendo past sony. let us role netflix into this. valuations.rket netflix valuation is around 42 billion. now, nintendo has done that as well. let us zoom in. , bluerple line is netflix line sony, and the white line is nintendo. they have all crossed. nintendo has gone north of what is happening with netflix.

maybe the story of last year which made so many investors so much money may need a new end and that could be nintendo. let us bring in stephen king to talk about innovation. we talked about stagnation and the economic story going forward from here using incredibly low rates. what are you we this reading --misreading? no one saw this coming. what could change this stagnation, this economic demographic problem we now face? >> we found one of those little pokemon rings in my garden the in my-- pokemon things garden the other day. slightly disturbing. the winner take all process in the global economy. people have become rich at this. in they are relatively few

number. in the u.s., new technologies are driving out white-collar clerical workers who are going into occupations which are lower skilled, probably below their own level, and creating a downfall in wages. one reason why donald trump has become popular with many people. important in terms of income redistrict -- redistribution. technology is transforming our lives in terms of a non-market sense. it changes our habits. there are positives but also significant negatives. gdp is not reflecting the technology story partly because of the redistributive effects. guy: we have had the negative. have we had the positive? >> they are get to come. we asked -- we compare growth

time frames from before. guy: it has been a great pleasure seeing you this morning. up next, more on the brexit. this is bloomberg. ♪ [hip hop beat]

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♪ from the bottom of the mat, ♪ ♪ to the couch where you at? ♪ ♪ show me the latest medal count♪ ♪xfinity's where it's at. ♪ welcome to it all. comcast nbcuniversal is proud to bring you coverage of the rio olympic games. guy: welcome back. 30 minutes into the market trading day. let us see how things are shaping up. overall, we have a risk off kind of a day. the dax back below the 10,000 level. a significant milestone. down by 0.7% in germany. the average of the 600 down by zero point sex percent. -- 0.6%. theus deal with some of stock stories. caroline has all of the details. caroline: i do indeed. i want to lead with the charge. zolando outperforming here in germany.

fretting over the brexit. the germans were busy purchasing all of their clothing online. the numbers smashing expectations. raising their margin goal. second quarter, very strong. 24%-20 6% second-quarter growth. novartis. the pacemaker. second-quarter revenue missing an assessment. a slump of 6%. uncertainty and challenges remain. -- second-quarter earnings rise. earnings beat an that people are devouring today. some of the three key movers today. guy: let us talk about the u.k. in more detail. since been nearly a month

the brexit vote and there are many unanswered questions. as christine lagarde noted in an interview yesterday. understandinguire on both sides in order to eliminate the trade uncertainty, the regulatory uncertainty, the passport uncertainty. there is a whole range of issues that need to be addressed. guy: uncertainty. that will be the word we are hearing a lot more about. what is the outlook for the country's economy and sterling? sam houston is the head of corporate fx sales. guest also -- our other guest also joins us. where are the numbers in terms of the economy? --in terms of the u.k. gdp gotten to 1.6% for

this year. a significant slowdown but not a recession. guy: a storm in a teacup or not? >> the market has been relatively well behaved considering it was not priced in. relativelyn has been large by a currency perspective. and 11% move is not something we have seen in over 30 years. the rest of the markets have been well behaved. market dothe currency the heavy lifting in terms of keeping the economy on track? how much of that will be delivered by the currency as asset values and everything come down? >> it will have some benefits. people tend to boost exports and

hold import substitutes. that will not offset the hit to investment the cousin that is the key thing that shapes uncertainty. net -- in termse are we now of what investors are telling you? theresa may is trying to create economic stability. she is trying to remove ambiguity from her conversation. maybe she is playing a political game rather than an economic one but what are investors telling you about the process and the implications? >> you said uncertainty earlier. clients arewhat my conscious of interns a of medium and long-term perspective. what does it mean for their cash

flows on an ongoing basis. guy: are they convinced it will happen? >> theresa may has been very clear in her dialogue in terms of that there is no choice and we are going to brexit. to quantifye trying what that means to them in terms of a risk perspective. caroline: looking here in germany, we are seeing any investors diving into the german real estate market. there is a great story out on the terminal today talking about investment. a singapore-based hedge fund saying they are really moving into german real estate. hit wetalking about the are going to see in housing prices and consumer spending. what will affect consumer spending the most? is it the lack of certainty regarding jobs or the housing situation? a combination.

uncertainty about the jobs outlook, the housing price slowdown we are expecting and also a rise in sterling increases import prices. it is a combination of those three factors that leads us to say that consumer spending will slow markedly in the next 18 months. caroline: sam, give us a sense of where you see the eu and the euro trading? corporate doing in terms of their own fx analysis? stage, theyt this are still trying to take stock of whether they have the right hedges in place for going down the line. if you think about the precipitous move we had in sterling, that will have huge translation impacts from a u.k. perspective. there will be some winners, some losers. are trying to

determine what their risk looks like and whether they can do anything at all to reduce some of that cash flow volatility on an ongoing basis. guy: what are they pricing for the bank of england? >> 80% chance of a cut. at the next meeting. guy: is there an expectation that the bank will have to do more? as they build out their hedges, what are they basing that on? is it driven on what the bank will deliver? >> corporate will not be betting on whether the bank will deliver or not. they have to take the situation now. ascertain what the present environment means for them right now and then use the right tools and their policy tool gate to mitigate the risk going forward. a will not be betting. he will be using market information right now. guy: what do you think the bank will deliver? >> a cut.

an extension of a lending scheme. a mixture of measures. guy: before caroline johnson -- what will the treasury -- jumps in, what will the treasury deliver? they will be preparing for some increase in capital investment. as investment false, they will want to ramp up public investment. sam,ine: in your notes, you talk about the risk of a recession in the second half of 2016. john, you said there will not be a recession. can you elaborate on the difference of views? >> there is potential for a technical recession. willbeing said, i think we see growth improve coming into 2017 once you have the

feedthrough from the sterling weakness we a party scene. hugely negative. but we do potentially see the chances for a technical recession. we have three scenarios. the central one is close to a recession but narrowly avoiding it. athave one that shows growth less than 1%. that would compare to a minus six number after a global crisis. as ae not seeing it meltdown economy as we had in 2008 and 2009. guy: the market was very wrong coming into the vote. corporate sense from -- how from corporates do corporates move ahead?

has their level of conviction changed as a result of that? me -- corporates tend to be relatively systematic in their approach to hedging. while they may be wrong in terms of brexit or no brexit, they will have hedges in place. a level of cover. what we have seen post brexit is a ramp up in sterling buying from a corporate perspective. these are fantastic numbers if you are a u.k. based economy -- u.k. based company. an increase in hedges and sterling buying. to take advantage of this. caroline: thank you very much indeed. sam houston and john. great to get their expectations

for the united kingdom in terms of the economy going forward. we talked political sentiment in germany after last night's train attack in bavaria. this is bloomberg. ♪

guy: welcome. let us get a bloomberg business flash. here is juliette saly. juliette: nintendo's market value has pushed past sony after a pokemon go fueled rally lasting more than a week terry

it has jumped about $39 billion. the share price has more than doubled as the apple he a viral phenomenon. a friday, the company set record on shares traded daily in japan. novartis says profit may drop this year. itsng declining sales in best-selling cancer treatment gleevec. it will decline by a percentage in the low single digits. will be largely unchanged. erickson will double its cost-cutting plan. after posting second-quarter sales. lower than expected. the company said it will reduce research and development spending as carriers curb investors. we will be speaking to the erickson ceo on the pulse in about an hour's time.

profitquarter operating rose 5.7%, its production cuts to save cost helped offset a sales slowdown in the u.s. market. the swedish-based company announced production cuts in north america and brazil in february. it will also lower u.s. output lower. that is your bloomberg business flash. now, let us turn our attention to the news out of germany. a 17-year-old afghan refugee injured four people on a trainer -- on a commuter in germany last night. concernslk about the surrounding immigration and terrorist threats. we will not dig into the ins and outs of this particular event,

tragic as it may be, but how much is the rest of terrorism and these terrible events affecting theice economic sentiment in germany and europe. >> at the moment, many events have negative repercussions for the german economy and the european economy. nice,rrorist attacks in the turkish situation and the situation last night as to the uncertainty. the euro area economy is still deep in crisis. uncertainty means that companies are less willing to invest and consumers are less willing to spend. all of our projections show a slowdown in economic growth all over the euro area including germany. -- isgest worry is italy

countries like italy who were still deep in crisis and not getting out. caroline: the brexit boat had some unforeseen consequences. are you more worried about italy and the dampening effect on the eu then the uk's exit? >> i am more worried about italy than i am about the u.k. italy has shrunk. the size of the italian market has shrunk by 9% since early 2008. the italian economy has been growing around 1%. that will slow down italian growth meaning the economy will need another few years to a stabilized. we have a huge banking problem in italy. very high nonperforming loans. weak demand. -- becoming toxic and pulling

down italy. italy will be the first domino to fall i am worried. and it is so big it will affect all of europe and the u.k. also. crisis isthe banking unraveling in italy. the eu wants to see if there is a recapitalization of the banks in italy, they have to fall within the rules that have been laid out and there has to be burden sharing. could this make it worse? givenhink germany will because at the moment it is very clear that italy is in deep trouble. would mean to really charge the positives. a small man or women on the street will hold some of those claims. for ais no political will

bail in. the european commission and the german government will give in. bailout. agree to a more taxpayers money and government money going into italy and the banking system. i think that is what we will ultimately see. italy has made huge mistakes in the past. they should have solved this problem many years ago. it is coming on top of a weak economy. the worst possible moment. guy: how solid is the german banking sector? >> the german banking sector is vulnerable. the advantage for the german banking sector is that the economy in germany is doing well. 1.6% growth this year. nonperforming loans are relatively small. the german banking sector will see a consolidation in the years ahead. the smaller savings banks, the local savings banks are not

being very profitable and do not have the right business model so there will be a strain in the business -- in the banking sector in the years two, which will have a negative impact on the economy. but i am optimistic germany will pull through without a negative impact on growth. guy: how do you see the conversation between angela merkel and theresa may will go? >> germany is very curious to the plans hear about from theresa may and what she wants to do about brexit and about the relationship between the u.k. and the european union. and see attitude here. berlin does not want to punish the u.k. for its decision. there is a rational approach. the u.k. is an important partner for the german government and has always been. there is a strong interest to keep a good relationship and to

keep great britain close to the european union as possible. there is also a strong view to not give out special favors to the u.k. government because germany is worried that other countries will say we want the same favorable deal that the u.k... is on thethese issues mind of most politicians in the establishment in berlin. caroline: thank you for leading us ahead to the meeting between angela merkel and theresa may tomorrow. up next, we are live in cleveland as the republican national convention kicked off last night. not with a bang. and with some controversy. this is bloomberg. ♪

>> my parents invested in me. the value that you work hard for what you want in life. that your word is your bond. and that you do what you say and keep your promise. and i were raised with so many of the same values. you work hard for what you want in life. that your word is your bond. that you do what you say you are going to do. caroline: that was donald trump's wife first speaking at the republican national convention last night and michelle obama speaking at the

dnc back in 2008. you may have noticed some similarities. margaret joins us now from cleveland, ohio. give us the details. what actually happened? the wording is so painfully similar. melania'sf buildup to emergence on the stage a few hours ago in part because we have seen relatively little of her in this campaign cycle so far. she is a mysterious a gear to many americans. she is an immigrant. 46 years old from slovenia. with an ability to soften her husband's image and show us a different side of him. the donald trump campaign put -- a statement saying

talking about the controversy. saying that they were attempting to capture many of the emotions she was feeling about what is important to her and her values in life. having done so, they did not address the question about howell's so many similarities -- about how so many similarities appeared. donald trump has spent so much time criticizing barack obama the comparison is being made how chose so many of michelle obama's words. guy: what will day to look like? like?t will day two look >> day one was about national security. two is about day

making america work again. chris christie. and his son. but a focus on work rather than security. guy: thank you. the pulse is up next. ♪

manus: negative beauty reviews tests negative movie reviews. the country banks lead istanbul lower. separate cuts. he pounded trips lower. traders await june inflation data. hsbc wants the ftse 100 has further to fall. -- ericsson -- on cost-cutting after missing estimates. we speak to the ceo. ♪