three-year low, fueling concerns about their future growth. alix: veronica trump -- melania trump tells the world about her husband but did she use her own words? jonathan: for our viewers worldwide, from new york city, i am jonathan ferro alongside david westin and alix steel. the action happens after markets closed. alix: a little bit before. quite a night in cleveland at the republican national convention. we do have earnings from netflix, ibm, and yahoo!. david: johnson & johnson just came out with their quarterly results, topping estimates and they are trading higher now.

we will have their ceo with us just before he goes on a conference call. happened withat the failed coup on friday we want to see what the central bank ones are doing. they left their benchmark rate unchanged at seven and a half percent and cut their overnight lending rate about 25 basis points. we do have the lira depreciating slightly against the dollar. the turkish central bank said it took measured steps for simplification -- simplification. the lira on the move to the downside. let's get a check in on the rest of the market. record highe fifth on the s&p 500 in just under a week -- over a week. future softer. the dax down by one full percentage point.

all 19 industry groups on the stoxx 600 have been in the red so far. the ftse 500 down one third of 1%. germany investor confidence absolutely plunging. the fx market, the aussie dollar getting absolutely whack. we have some minutes from the australia central-bank, very dovish minutes potentially setting us up for a rate cut. the dollar is up about a third of 1%. the action in the bond market, five-year yields coming in three basis point down 1.1%. hours, a huge call for morgan stanley that we will discuss, 1% on a u.s. 10 year has got tongues wagging in the city of london and beyond in the commodity market, two days of losses, brent crude down.

$46.26. alix: let's go around the world and check in with our bloomberg team for in-depth coverage of all of our top stories. keller, andm.r.i. , and michael mckee, as well as megan murphy. accusations of plagiarism at the republican convention. the big mover in the free market is netflix. what happened to subscriber growth domestically? tech, just a day for to give you the big picture. it has been a tough start to the year for tech companies. fleeinghad investors toward utilities and safer assets. people are looking to netflix saying, can you guarantee me

solid growth in the slow growth environment we for -- we find ourselves in? comforteddid not feel so netflix has been changing at subscriber model. they have been upping the price for new customers and slowly doing it for existing, and that has irked a lot of people and slowed down there estimates. they have had a hard time getting subscribers overseas and that is a pretty significant chunk of their business. a lot of analysts are saying that programming is not robust enough overseas so there is a lot to worry about. 2011minds people a lot of when they broke out there dvd portion from their streaming portion. that concerned a lot of people and so investors are seeing echoes of that, and sold off the shares to a significant amount, down about 12.5%. alix: is this a second and third quarter blip or a loyalty issue

with netflix customers? thank you. take a look at this, this is what netflix does the day after earnings. these green lines are standard deviation lines to the upside. what this shows you is we have a lot of big moves in netflix. these are the three biggest. we had another big downside surprise but we had the stock go down. nonetheless, expect a lot of volatility and movement in the stock. this is five or six standard deviations to the upside so keep your eye on this. banks,from tech to goldman sachs is going to be bringing out their earnings and about 30 minutes from now. laura keller is with us. of two a tale situations. their q1 numbers were not good but we have banks reporting

above investment analysts. laura: they are looking for a lot of good things out of goldman. they are the only bank that is expected to have profit rise this quarter. unfortunately only because they had a lot of legal issues last year at this time. if you look quarter over quarter, last quarter we had this terrible time for trading. this quarter we are actually --ecting to see a lot better on the back of those fixed income trading results. that the key question, is fixed income trading? jpmorgan was way up. laura: goldman historically has relied a lot on debt trading specifically. talking a little bit about how they pulled back on some of their market share

but it is still a very important part of their business. investment banking is a large area for goldman and we may see cost come down as well. david: that is laura keller. jonathan: let's bring in michael mckee, bloomberg economics editor. comes forne call morgan stanley, a forecast of 1% on a u.s. 10 year by q1 2017. where do we begin? michael: nobody's model is working today so a wide dispersion of use, and morgan stanley really contributing to that. the u.s. economy is going to slow going forward and they have taken off all of their rate calls through 2018, and see a 40% chance of recession. their bond strategist have now cut their forecast for the 10 year note yield to this year to one and a quarter percent and

next year to 1%. the yield on the 10 year is the sum of all the yields along the yield curve. they are basically saying we are going to see a rate cut from the fed. yield,n: u.s. 10 year 1.5526%. we surveyed the analysts. 2.78%.ian forecast, the events of the last month or so, i wonder how much of an outlier a 1% yield is on the 10 year. michael: they are always bullish, they are always going to go up. it is not out of the realm of possibility but the data around the world has been coming in better than expected but what has not has been inflation. the bond market telling the central bank, forget about it. bond yields are trading below their average for the year and

at this point it is possible we are hanging in the range around one and a half percent. jonathan: we will continue to talk about this throughout the program. david: very important potentially. beginning ofs the the republican convention in cleveland and the headliner was donald trump's wife. rememberh made people some things for michelle obama speech years ago. >> we are raised with so many of the same values. >> my parents impressed on me the values. >> you work hard for what you want in life. >> you work hard for what you want in life. >> your word is your bond. >> your word is your bond. >> that you do what you are going to say. >> that you do what you're going to say. >> that you treat people with dignity and respect. >> that you treat people with

respect. >> we want our children and all children in this nation. >> we want our children in this nation to know. >> the only limit to your height of your achievement. >> is the strength of your dreams. >> and your willingness to work hard for them. >> and your willingness to work for them. david: joining us is megan murphy. you've predicted that she would be the headline coming up but i am not sure you anticipated why. megan: i do not think anyone would have predicted that she would have been the headline because of a plagiarism scandal which is what we are waking up to in cleveland. he has begun his convention with a fight on the floor we have not seen in decades and now his wife accused of ripping off chunks of paragraphs for michelle obama's 2008 convention speech.

it was noticed on social media first last night after her speech was concluded within about an hour. there is no question when you hear it there that they are almost verbatim in large sections and sentences. the campaign has come out and denied it and said that she composed the speech almost on her own. there is no real explanation for only that ipened, am sure there is a speech writer in some very hot water. david: it is a fun story and the media will play with it, but i wonder if there is an underlying theme which is the discipline and organization of the campaign. are they disciplined and organized? what does it mean when you are running the country if you cannot be? megan: if you cannot even get this kind of thing right on your head by night, a night that she had to have a breakthrough moment, that he had to have a breakthrough moment.

if they cannot even do this right, how are they going to get the rest of this campaign right? those are the questions people are asking. we turned toward much more establishment speakers this evening, chris christie, mitch mcconnell, some forces that were resistant to trump. can they turned the corner? i am not so sure. last night was a spectacle. , he isoing for spectacle going for glitz and glamour, but if you cannot deliver on the goods and content you will never make it out of cleveland with the kind of bump he needs to close the gap on hillary clinton. david: megan murphy reporting from cleveland. jonathan: do we get to play that again? it is convenient that we are talking about that. coming up, the health of jackson and jet -- johnson & johnson,

shares moving higher. we will break the numbers down and here what is in the pipeline with the ceo dominic caruso. ♪

jonathan: -- david: this is bloomberg , i'm david westin. in free& johnson is up trading after reporting earnings that the estimates. the quarterly sales were up 3.9%. caruso, ceoominic and vice president. we see the reactions of the stock. why don't you give us your headlines? dominic: we are very pleased with strong second-quarter

results that have been driven by the improvements we continue to see across all three of our businesses. business withical the successful launch of new products as well as robust pipelines being built for the future. our consumer goods division is making important strategic choices. the medical device business is gaining momentum. we are undergoing a restructuring but are improving growth and are going to market in a new way which is important. we are confident about the future. we raised our sales guidance and adjusted earnings per share guidance as well. david: let's start with pharmaceuticals and the pipeline. what do you have coming down the pipeline. i know you cannot give us specific numbers, but what are you most hopeful about? dominic: we have a very strong

pipeline of pharmaceuticals. we have 10 new products we are going to file between now and 2019. the first was filed and improved -- approved, and is off to a great start. a robust pipeline across 10 new entities plus 25 line extensions of successful products that are in the market today. that business is doing well and has the momentum for continued strength going forward. david: what is the competitive situation? how much of a threat is that? dominic: there is a little bit is ampetition because it complex disease but we believe be medication will probably back bone therapy across multiple therapeutic options for people. the important thing to note is

there is improvement for a very devastating disease and we think we will be back bone therapy in the future. david: where are you with respect to possible bio similars? how long can your position in remicade continue? dominic: remicade is our number one product and we believe in the strength of our patent which we intend to defend rigorously through september 2018. bias simulators are a potential entry into the market. even when bio simulators do enter the market we believe they are not generics, they are a different class of medicine. we think the market will behave differently. 70% of patients on remicade are adequately treated today so we do not believe physicians will readily change patients on remicade to a bio similar. david: you are just closing on

folk. explain why vogue was important. is a veryogue successful company in the hair care space and beauty in particular is an area of focus for us. we have multiple products that consumers know very well like neutrogena. vogue is a fast-growing business, a natural's of hair care product and it moves us from number eight in hair care to number four. as partroud to have it of the johnson & johnson family of consumer products. david: johnson & johnson has a fairly substantial portion of its revenue coming from europe. what does brexit due to you? dominic: it provides some uncertainty across markets in general but to put things in perspective, our sales in the u.k. represent about 3% of our sales.

as we all know it will take some time for this to work out so we certainly do not see any immediate impact. david: medical devices is the third area. there has been a lot of restructuring in the industry. where is that business going and how can you keep the markets -- margins up? aminic: we underwent restructuring last year and we are seeing improved momentum. the restructuring is allowing us to accelerate our growth and pace of innovation in that business, and change to market go models. this is all about a new go to market model in medical devices which we think is important, and we are leaders in that field. you have a fair amount of cash on your balance sheet and a stock buyback but what about your m&a approach? what are you in the market for? dominic: we are always in the market looking and we are

actively looking for businesses that have a strategic fit but also where the valuation allows us to acquire the company and create value for our shareholders. we are very active, always evaluating activities, but we will execute at the right time with the right party at the right valuation. david: how sensitive are your variationsng out to in the strength of the u.s. dollar? what kind of foreign exchange exposure do you have as a company? dominic: the primary exposure is with respect to the euro so as it weakens, the results would be a challenge. we did not see a significant weakening of the euro due to the brexit vote but overall, we did have about a 1% change in sales due to currency changes, overall 3.9% growth.

when you cut through acquisitions and divestitures, the underlying growth of the business is about 8%. caruso, the cfo of johnson & johnson. alix: coming up, aussie dollar's getting hammered. the reserve bank of australia keeping its options open for a possible august rate cut. we will have the details next. this is bloomberg. ♪

alix: this is bloomberg . i am alix steel. we have some big currency moves. the bank of australia's meeting shows that cap their options open for a rate cut and it is reverberating on the market. jonathan: if you woke up this morning and you are in the fx market you would have seen two significant underperformers, the kiwi and the aussie dollar.

they are performing right over a 1% drop. on the aussie side, the rba minutes are very dovish. concern about jobs growth are easing, potentially setting us up for a rate cut. the reserve bank of new zealand has been a pioneer. at a time when rates are at a record low globally, how contain does how to contain the effects. something they are said to do now is tell property investors in new zealand if you want to buy property you will need to deposit 40%, up from 30%. what this is going to allow governor graham wheeler to do, he can cut rates again and cut them and not worry about a property market bubble because it has been a big concern. as soon as we learned this today, straightaway, fx market adjustment.

what is interesting, while people experiment with low rates others are seeing what they can do with macro policy to contain the risks of the housing market and get the inflation back toward target. david: where do they have the political support? jonathan: exactly the same as the bank of england. on the other side on the mpc they can do things with monetary policy they would not otherwise be able to do. alix: breaking news with lockheed martin, boosting their full-year outlook. net sales for the second quarter also beating. the stock is up 2% in premarket trading. ♪

alix: this is rumor go. i am alix steel. --this is "bloomberg ." steel.lix we want to get to premarket

movers during first is lucky that lockheed martin. operating profits, sales forecast, this coming at $12.9 billion for the second quarter. the big name is going to be netflix, down bay in the markets. it was worse a little earlier. a huge missed on subscribers across the board, domestic and international only added 1.7 million subscribers this quarter. how does netlist continue to grow and deliver good operating profit margin is? that is the question going for it. a price hike of one dollar to two dollars in the last quarter. look at ibm. reallyhnology doing well, transforming into a cloud-based business. it's all business is still a drag on sales.

posted business actually revenues up for the first time ever. overall for the company. we want to wrap up with yahoo!, that is lower slightly in the premarket. it is less bad.is still lost hundred $80 million in the second quarter. it still puts the heat on marissa mayer to deliver some kind of sale for the company. downal ad revenue was 1.5%, it was just over 2% last year. google 31%. putting that into perspective for you. jonathan: it is the least ugly contest on wall street as we await those earnings. absolutely beautiful. those numbers coming imminently. a wider market, futures are softer. five record highs.

if europe is any guideline as well. the main performers in mainland .2%.e, the ftse. about we moved south by over 100 points on the session. some very ugly german investor confidence. the expectations component is a lot worse than some people were anticipating. in the fx market, commodity currencies are underperforming. we talked about the kiwi and the aussie dollar. a potential rate cut coming in the coming weeks from the reserve bank of australia. rates already at an all-time low. a big discussion in the bond market. london, wall street, asia, 1% is the call on the u.s. 10-year from morgan stanley.

an outlier call that everyone is discussing. german bond yields trading negative on a 10-year at -0.039%. for treasuries so far in 2016. yields coming in on the back of 10-year still. very low. we traded at around 1.55%. here is the commodity market. crude is lower for a second straight day. .1%, south up about of $47 per barrel. alix: we are moments away from reporting goldman sachs second quarter earnings. there are so many numbers to parse through. it seems the one that stands out to me is, it isn't so good at

j.p. morgan and stanley group, it sets the bar high for morgan stanley. >> don't forget bank of america. i just went and checked the numbers before and. what is really interesting is equity trading is in mind for the last year or so. this that wet should be looking at. equity might be a little bit. it could be higher, it is not going to be the bustout. unlike bank of america, equity is just as important to versus goldman -- bank of america. at thisnt to look because that is where they draw a lot of revenue from. everything we have seen so far, that number has been down. maybe it has been a little better than analysts expected, because if you remember analysts pullback expectations after

brexit. analysts had pulled down estimates to much, and we might see this for goldman. david: when you look at the expense side -- >> it will be interesting because we had a couple rounds of cuts, about 400 people cut from goldman's or. that includes in the trading operation. , we are at one report seeing 16% year-over-year confidence down. alix: we have a earnings coming out right now. is -- bottom line, it never revenue at 7.9 3 billion, that is above estimates. in terms of earnings, goldman made three dollars and $.72 a share. made four goldman 49.lars .40 nine cents -- $4.

coming inme sales better than estimates. it looks like that would be a 50% share. they had a 14% market share, but that seems to be rising. --you said this was 1.9 3 david: yes. was 1.8.alyst estimate rising, probably even if that was way down a little bit. david: shares look at $3.72. we should keep pointing out, year-over-year, it is still down. whether it is revenues or earnings per share. it is all down. >> last quarter we had a high legal expense. that might be dragging down the

overall numbers. alix: that is a good point. that fic number of stands out. the big story i found going into this is that goldman sachs had a 14% market share before this quarter, so the idea is that goldman could increase it and they did. they increased it to 50% or more. or more. they seemed to be to deliver. in terms of equity trading, i am now getting that number now. that is coming in life versus estimates. $1.75 billion.t i know you are looking very closely at that at $1.79 billion. equity is lighter. >> just looking at my tally, that is what we were looking

for, 1.475. >> this includes just one week post-brexit. we don't know exactly what happened. >> no one has talked about it. david: maybe it had no effect. alix: we are too early to tell. nonetheless, equity stands out to me. 1.78, now theyas are at 1.75. that is interesting as well. david: there combination -- compensation expense was over what was estimated. this looks like it may have gone the other way. alix: that is interesting. we have been talking all about that morgan stanley you'll call on the cap-year. if these guys do not put costs and that he'll comes into play, we are looking at 11% earnings decline next year. that cost cutting is becoming more relevant as we continue to

see that younger black and. -- yield curve flatten. >> maybe that will just me that we have deeper cuts in september, for example. jonathan: you can follow all this on top live at the blog. we speak about things being better or worse than expected, but ultimately this has been a disappointing year over year for banks. now,e live blog right coming in at 1.9 3 billion. a 33% increase from a year ago. this is the part of investment banks people are concerned about, particularly deutsche bank and europe. continue -- can discontinue? >> i don't know about that. a lot of people i talk to the market saieh traded ahead of brexit. maybe we are seeing that.

we will not see that coming into this slow summer. aybe we will see a pickup in q4. there was nothing catalyst life that told me we will continue to see growth. i think it is a that quarter. moving upwards in premarket, it was off 1%, now is up .75%. david: a fascinating story we will continue talking about. thank you for being here. we'll have more on goldman sachs earnings later. coming up, we are talking more about the fallout on the failed coup in turkey. will the president of turkey reconsider his authoritative past? we will be live from cleveland as the rnc kicked off last night. this is bloomberg. ♪

alix: this is "bloomberg ." i am alix steele. coming up later, top rated apple analyst gene munster will be talking to him on apple. this is "bloomberg ." i am david weston. emerging market shares have dropped from their highest levels since november. china's is murat koprulu -- joining us is murat koprulu. welcome. good to have you here. had a few days to digest what happened. give us a sense of where you think the turkish investment

immunity is? mr. koprulu: this was quite a punch, so to speak, it is a very rare event in world history and economic history. people who not go through attempted coups. half of the attempted coups in the world are usually successful, according to the statistics, and half are not. trying time. the fact it happened over the weekend made things each year -- easier to digest. by outcome became bought markets. things seem to be calm this morning. there was a central bank rate cut. it was measured. global banks were expecting more aggressive rate cuts. a calleems to be returning to the markets right

now. for a lot of investors for a lot of investors not familiar with turkey, there was an oberlin -- overnight lending rate, and we all know about the lending corridor, i spoke to the former governor a few months ago trying to understand policy. i think there is confusion about what the turkish central bank is trying to achieve. mr. koprulu: there are a lot of professional investors in my world that are asking the same questions. corridor structure, these are methods put in place in order to try to be more dovish than not, so to speak. the result is a little bit of confusion, but nonetheless, some measure of stability comes out of the confusion. final moves,not

other than yesterday, in the market, it is an interesting effort to be more dovish without being a cure rate cut her, so to speak. alix: the theme yesterday seemed to be that banks around the world would accept the geopolitical risk in turkey, but central bank cannot erase geopolitical risk in any sense of the word. mr. koprulu: like i said, this is a six sigma event. you have to take time to digest it. this event does not happen in a vacuum. in the last six months, there has been acceleration of geopolitical events in europe. this happened the day after nice, france. these two are connected. people have not thought about

that. this is all about the refugee crisis and different is, and the going to beople are concerned about their safety. happeninghis is internally in turkey. theseare all of conspiracy theories. there is this external and internal damage to the country. david: do you see opportunities in this for investors? if markets overreacted, this would be a time for investors. mr. koprulu: again, with a large event like this, you always have to take stock. there are developments internally occurring right now that have to settle themselves out. the whole system is under some bit of turmoil, let's put it

this way. david: particularly some of the companies that are seen as not entirely loyal to president or erdogan. is there substantial risk of nationalization? mr. koprulu: some of this has been happening for a while. there has been this theory about certain corporations that are antigovernment for some reason or another. thing, this is not a new but it was exacerbated, obviously, by the failed coup and the ramifications afterwards. that needs time to settle out. i am worried, not just for turkey, but also for europe. turkey is very connected to your veryeurope is making -- connected to europe.

in my estimation, europe is in a very difficult situation regarding the refugee crisis. turkey holds some of the cards there. not to mention, the european economy, in my estimation, is substantially weak. david: murat koprulu, american turkish society chairman, had of emerging markets and investment. isx: coming up, goldman showing again after estimates were topped. we will dig into the numbers and discuss the health of the financial system. this is bloomberg. ♪

jonathan: from new york city,

this is bloomberg. goldman sachs is in premarket trading after reported earnings beat estimates. frome cassidy joins us portland, maine. great to have you with us on the program. let's start with the first question, this is the big bang on wall street most reliant on trading. fixed income trading did remarkably well. cannot continue for the year ahead? goldman sachs, similar to the other players in the capital markets business, all benefited from the brexit vote. the volumes are very strong after that vote, even though it was only the last week of june, and also volatility. all of the capital market players are going to be talk to replicate because of what we saw in the second quarter. from what you have

seen from the numbers, the performance in trading is one thing, the cost of headcount is another. does that tell you more about the direction of travel for this bank? mr. cassidy: that is a good point. i would suggest that all the companies led by goldman sachs are reducing expenses in personnel as well as other defenses to face the new reality -- expenses to face the new reality. longer-term, these companies are shrinking in size because the activity for their businesses have declined relative to where they were pre-financial crisis. alix: the highlight that he pointed out was that fic trading. $126 million,ust is that something that can be replicated going forward? or is that just a one-off?

what we are seeing with legal costs and other large players is they are elevated in certain quarters as they settle their problems with the u.s. government. goldman was one of the last ones to settle. jpmorgan settle two or three years ago. the lower legal costs for goldman and others will remain lower. those were aberrations. measure of how is the return on capital. us an indication that they are on a path back to where they were? the use of the at 11%, now they are at under 9%. mr. cassidy: it is a combination of both. you put your thumb on the issue for all of the big banks in the united states. their capital levels, because of new regulations, are so high

today that in order to earn roe's above their cost of capital is very challenging. as you pointed out, goldman is below their cost of capital. only jpmorgan is above their cost of capital. the combination of improved business, focusing on expenses that will leave goldman to a higher cap. this is pick up the second quarter. if you do not see that, that path will take longer to reach. to revise youred estimates up or goldman sach after this? mr. cassidy: we will review them very carefully. we are going through the numbers as we speak. if we think this is sustainable, we will have to look at it. jonathan: jerry cassidy, thank you very much -- gerard cassidy, thank you very much were drawing us. out to us thats

the only u.s. banking ceo to address brexit had on an initial statement. see managing business efficiently despite uncertainty created by brexit. it might be because. havehis might at all, they to do more business. alix: this probably hurt their equity trading revenue. coming up, we will go live to cleveland where the republican national conference kicked off last night with a big bang. this is bloomberg. ♪

of toppingman sachs estimates on the top and bottom line, posting a 74% increase in second-quarter profits. jonathan: shares of netflix plunging after a three-year low

exacerbates concerns about the company and the future growth. nia trump tells the republican convention about her husband, but did she user own words are the words of the woman she wants to replace? david: welcome to the second hour of "bloomberg ." jonathand westin with ferro and alix steel. earnings extravaganza. three big reports in tech cannot last night and results of this morning. jonathan: goldman sachs dominating and wall street reports that tech has been mixed. plungingnot pretty, after subscriptions fell short of estimates. still decent numbers. if you look at absolute terms, but in terms of expectation, very soft.

a push and pull between all tech and new text. who knew that ibm was doing so well? we will break down those numbers at the top analyst and we will talk yahoo! later and look ahead to apple's much anticipated report, but first, i check on the markets. if you take a look at s&p 500 futures, pretty soft. jonathan: we came off the lows after that goldman sachs report and that will lift sentiment a little bit. in europe, a lot of softness. one full percentage point in germany. expectations, very soft and way below expectations. that got sentiment. you see the ftse 100 down about point to a 1%. in the fx market, commodity not doing so well. about it earlier and we

1.37%.n by 1.3% -- that is the fx market. let's get to the bond market. massive for morgan stanley, 1% 10 year yield. that is where the debate is right there in the bond market, but today, yields come in at minus two basis points and my mystery. alix: breaking news, buyer pay out, we want even more money. the company saying that the firm buys to proposal of 54 point seven billion dollars is financially inadequate and it is still open to conversations with buyer, but not $54.7 billion deal. this is now the second time in has been rejected and they continue to say, pay me more and it will cost you, but show me the money. david: it seems to the goal in public, but i think there is some concern about how much that bayer would have to take on to

make the price go up. sato isand mon thinking of merging with petrochemical and what are we going to do if it does not come true and it the business will think about it. and do they need a buyer bid at the end of the day? but they are -- david: but they are in play. alix: definitely. let's look at the in-depth coverage of all our top stories. on goldman sachs, and then the plunge and netflix shares and then megan murphy covering cleveland on the first lady controversy at the republican convention. let's start with raking earnings, laura keller, are thanking them wall street reporter joins us now, 47% or 74% increase in second-quarter profit. big eps, so wey are driving through some of the earnings and trying to figure out what goldman did really

well. trading has been excellent. to bring your perspective, and is not as good for overall trading, for example, bank of america. we are still trying to drive through some of those. another note, we find the dividends and increase their did not happen. 70 centsecasting per share and it was 65, so one thing to note for investors going forward in the morning. legalwe also sought the -- we also saw the legal cost coming down in that boosted profit. on radio recently, they said the magnitude was notable. will we see a lot of upward revisions now in a full year earnings because of this or is say?o early to laura: some analysts have said, i will be revising for goldman, so we will have to see how big that magnitude actually is going to be. i'm sure he will get more details and maybe they will talk about expenditure, which will

help us get to those 2016 second half and 2017 numbers. alix: what was the biggest downside? laura: investment banking remains an area we are concerned about. i also notes some of the activities, trading, quite a bit lower than some analysts expected, and we also have equity underwriting low, although, not as bad as expectations, so equities for goldman are very important. not just fixed income trading that is important, so i think that is something that will need more detail for management and why exactly that was and if there was something related to brexit of what happened that we just do not know right now. alix: thank you, laura keller, joining us from bloomberg news. that stock has been all over the map in premarket and slightly higher. to netflix, ugly, ugly. let's bring in danny berger. we saw the crash and trading so, walk us through it. this is generally

followed tile around earnings. this will move about 13% either way when they release onions. already heading into the earnings, option prices were pricing and about at a 9% move. the magnitude has been far greater than that. dig in.ly have to something that surprised investors here was this three-year low subscribers numbers. there is to waste a look at this. one is the current members. they had to hire what is called a churn rates, chance they are ditching the product. and as far as new subscribers, that was also lower than expected. the company is saying that they have been raising prices. they are doing is solely for existing companies and about one dollar to two dollars for new customers. people are upset with that. they are giving up the service. another thing they pointed to as the olympics. they say they will have competition with olympics, therefore, with suspected subscribers, they will not be as many because of the competition. lastly, overseas.

they are saying that they did not add as much as they want. analysts think they do not have enough program offerings for those people overseas, so subscribers numbers from a couple different angles taken some hits. urger, thank you very much. stock down in premarket over 13%. david: we will go to cleveland and now, where megan murphy is covering the republican national convention, you said yesterday that melania trump's speech and make news but i'm not sure it is for the reason you thought. take a look at how similar what she said is what michelle obama said eight years a. michelle obama: we were raised with so many of the same values. my parents impress upon me the value. michelle obama: you work hard for what you work in life. melania: you work hard for what you want to life. the show: -- michelle: that you do what you say you are going to do. melania: that you do what you

say you will do. michelle: that you two people at the respect. melania: that you treat people with respect. on to the pass those many generations to follow. michelle: we want our children and all children in this nation. melania: we want our children in this nation to know. michelle: the only limit to your achievement. : the only limit to your achievement is a strip of your dreams. michelle: and your willingness to work hard for them. melania: and your willingness to work for them. david: [laughter] fun forhis is good those of us in the media and we will play it until the cows come home, no doubt, but is there a larger issue here. -- larger issue here? yes, this is a media story that will dominate the news cycle for the entire day. it is important and here is why. this isn't just one misstep, this is the latest in a series

of what has been an incredible rocky week for the campaign. there was the botched road of vice presidential nominee, in terms of that making now, not been able to get ahead of the story, and we were told melania worked on that speech for five weeks to six week's with a rider, and if they did but these from michelle obama and the similarities cannot be denied. the campaign is scrambling to get out the defense, saying that she chose a common words and chris christie said only 7% of the speech where the same. i am not sure where that gets them, but we will be watching the follow-up today and to see if anyone's heads will roll. david: put yourself in the center of the donald trump campaign. what is the message they would like us to pay attention to into the second date as opposed to this? this ishey want to say a different kind of candidate with a different message. we will have these the magic nights, last night was, make america safe again. tonight will be make america

work again. there are trying to roll out the differences that have brought donald trump this far, the fact he is unspoken, willing to stand up to things that are not traditionally republican values and things they had done in the past in terms of platform and principles. he is pushing for that, whether it is trade, the glass-steagall, banking regulation, and the problem is he just cannot keep -- he just keeps making serious mistakes, mistakes that are common with the first-time candidate, which is what he is in this situation and what they are trying to do is distract from the noise and have a focus on the man and record and they have been unable to do that. david: thank you, megan murphy. we will come back to her in the program for updates on what is going on in cleveland. alix: moore update on the breaking news at the top of the hour, monsanto is and they areyer's

saying that they are open for business and either doing a deal with bayer or other parties but they are rejecting the current deal. monsanto stock is lower by about 1.5% and bayer stock in germany just off by over 1%. monsanto had been looking to maybe by bass aggro can be in it as, -- aggro-chem unit to grow. jonathan: bayer is trying to pull out the biggest ever and it looks more expensive. nto iscond point is monsa trying to be them to the punch and you get that sense, opens a conversation with others, it is bayer, but that they would like to buy other people, as well. i wonder how they talk to the investment base and how to buy someone else at a time when someone offers a big deal to buy been? that did make it difficult. sort: also, it makes some

of joke because everyone else is joining them. jonathan: the conversation we continue to have. coming up, the s&p 500 closed at another record high for the fifth time in six sessions with 20% of the index reporting this week. will the game be short-lived? we will debate the strength of u.s. markets and the treasury market, not. from new york city worldwide, this is bloomberg. ♪

this is bloomberg. i am alix steel. goldman sachs reporting a 74% jump and what does it mean for big banks? us, citigroup,ns

bank of america all day better than a lot of analysts. trait is the issue of bank profitability behind us or still to come? it is relative. we saw expectations come down the upper big banks and they have been much better. a lot of that has been based on cost cutting. he liked financials and they continue to see a headwind in a very flat yield curve and expectation for fed rate hikes gets pushed out, and that is typically not a great environment for the traditional business of banking. alix: you describe morgan stanley's recent yield mark and the call for the u.s. economy, no rate hikes through 2017, 10 year yield in the first quarter of 2017 at 1%. what do you think of these kind of calls? katie: we lean more toward that point of view than what seems to be the consensus point of view. our view is that the 10 year will be closer to 1% into 2% in a years time.

it is predicated on this perspective that the fed should be in no hurry to raise rates, and i know we will hear some rhetoric next week and you are starting to hear some strategists talk about the fact that the fed may hike rates in september. that is not going to happen. we are looking when you're out for the first rate hike, if then. the situation is much too fragile. there is much too much at stake for this next fed rate hike to think it will happen in 2016. you,han: that line from you think there is a ton of money to be made from this bull market in the bond market, even where yields are right now. katie: bonds in the portfolio conservatively to important purposes. first and foremost, insurance policy. this is the asset class and as discussed for 2016, that zigs while it zags for everything else. alix: recently, volatility as well. katie: right.

and providing good returns, i mean it was interesting to see outperform stocks in the first half of 2016, said there were good returns, but that is the second purpose in your portfolio, to earn money at fixed income, especially give perspective is different from the markets. this call on morgan stanley and are called which has been the consensus, has allowed our lives to make good money and fixed-income because we think the former curve has it wrong and the fed will not be on a rate hike cycle for the next couple of years. if you have that perspective and your rights, you can make some good money in fixed income, even at low rates. david: the overall message i take from your approach because you make adjustments and investments, is to get a bit more conservative. not more radically, but a bit, come out of high yield, non-us equities, go into investment grade because you're concerned about the future. not a positive future month the economy is going. we areit is less so that concerned about the future and

more that we want to take some money off the table and some of the bets that have worked out well, high-yield specifically, with data for four years and high-yield. it has done very well for us and for our clients. double-digit return for high-yield bonds and a good liquidity environment that allows us to take some of that money safely at the table. at the same time, we went to we haver bets where the highest confidence and we lost some in non-us equities right now. brexit clearly has a big impact on european growth. the uncertainty surrounding brexit for the next few years will impact confidence in europe, so we will demand higher risk premiums to be invested in european stocks and valuations are high right now. if your viewd is, works out for the fed and 10 year yield, that is your view on the market. what if it does not? what if we are in a 2013 playbook scenario with so often equities and the bond market has so much money in it, if it

bursts, it will be severe on the downside. katie: of course that is the case. i think the fed has that top of mind and that is one of the reasons why they would be very low to surprise the market. they have been in the past. you have seen many times in the fed has linked at the last minute, recognizing their ability to unfortunately surprise the market and it could have negative consequences and create the conditions that they are trying to avoid, to radically tightening of financial conditions, lots of volatility in financial markets, and they will not want to do that. another reason we do not think the fed will be on a jonathan: rate hike cycle. it appears a lot of professionals that the monetary policy has been outsourced to financial markets and that when the data is good, they will tighten and when it is bad, financial conditions will loosen trade my expectation is the fed will do something, but essentially nothing anyone outsourced monetary policy to the market. is that what has happened? katie: it appears that way and

the fed appears to be behind the curve in the bond market got it right this time. visually, it looks like the fed is following the market but i do not think that is really the case. datathink the fed is dependent and data has been shifting dramatically. i think it has been a tough call. they made the right decision to back up their hike expectations. it looks that way, but i don't think it really is that way. alix: so they are not bond traders yet? jonathan: no. [laughter] data dependent fed is controversial in the u.s. 10 year at the moment. alix: fair. katie next to, thanks for joining us -- katie nixon, thanks for joining us. jonathan: coming up, the netflix call her show. innges after a big mess international and domestic subscribers break what they need to do to get back on track, next. from new york city and our viewers worldwide, this is bloomberg. ♪

david: this is "bloomberg ." i am david westin. shares of netflix tumbling after they set the price increase cut subscriber growth to a three-year low. joining from arlington, virginia, capital market research analyst, thank you for being with us. i went to start with the missing expectations because it strikes me that they had 1.5 8 million overseas subscribers and in april, they said it would be 2 million, but that million -- but that number was revised. the same thing happened with u.s. subscribers. is this a failure of management to god expectations? guide: i think they must -- they misguided clearly and for a lot of companies, that would be an annoyance. for netflix, their ability to understand what the demand is going to be, the number of subscribers, how much they can charge, it is crucial they understand that because they are

making long-term commitments to ramp up their spending for content, and if they misunderstand how much demand there is, there is a risk that could be misfires versus expectations that these guys could grow their margins that healthy pace over the next several years, and that to support the stock, so guidance is unusually important for these guys because their business depends on it. david: where did they go wrong? do they underestimate the churn, the number of people coming in and going out and the difficulty of maintaining the number? if so, does that say something more fundamental about the business? with what theygo said and what they told this is precisely that, that they misunderstood churn and they said in particular, people who had heard about in the pending , where it is one dollar or two dollar lower rate that had been grandfathered in and that people heard about that and turned off by the level they did not expect. they're blaming it on this pricing action during a guest

implication from their assigned is once they factor do this over the next several months, the push ease and maybe subscriber growth will look better. our concern is that the idea that people would cancel netflix at the level of hundreds and thousands of reports of a rate hike suggest to me that the loyalty is dinner then out -- thinner than i would like to see because you have to see a lot of subscriber growth for it to work and pricing leverage. they are already very sensitive and that worries me. david: quickly, are we being unfair to them because their earnings were up because they did raise the prices? sometimes you have fewer people but you make more money. barton: i do not think we are being unfair. the earning is deep but on a low basis. these guys were doing operating profit in the $60 million to $70 million range on the base of revenue on $1.5 billion, salon that kind of small margin, they percent variance is possible,

but the multiple assumes that these guys will be making a multiple in earnings. no, i do not think we are unfair. i think it is very sensitive at , canpoint and the company they get the growth they need? david: they are still pretty aggressive. barton: i am more nervous about it. a $90 price target, so i'm not as comfortable as a like to be. david: barton crockett, thank you. alix: nervous, interesting. coming up, christine lagarde has advice for the u.k. and their plans for brexit. our interview, next. this is bloomberg. ♪

is bloomberg. i am jonathan ferro and let's get to the financial forecast, an update on where markets are. futures of the united states a

touch off. doubt futures up by three points, s&p 500, negative around 5, 5 record highs in number one week, remarkable session. a churn to the session, as tom keene would say. we will check out the other asset classes. dollar yen on the session trade. yields coming in as a get breaking data in the u.s. alix: we have housing month on month coming up at 4.8%. that is a big read from estimates, that was 4.2 of 1%. huge for june. may was revised quite lower, down 1.7%, and was previously at -.3 of 1%. you have a revised lower but june of the revised upwards. building permits month on month beating a touch, 1.5%, taking a good read on the housing market. similar for permits. you had may revised lower but june beating estimates. futures, not&p 500

seeing that much of the movement. pointsill by about 4.5 and on the two-year yields, not particularly the movement. high yields still negative but klein back to their neutral line. -- but clawing back to the neutral line. checked on the yen as a put my computer, a safety increase and the u.s. dollar moving slightly higher versus the yen, one of six, but not a lot of movement as housing data comes in much better than estimates. jonathan: let's get to the morning must rates. christine lagarde spoke with bloomberg television's tom keene in an exclusive interview yesterday. take a listen. christine: there has been in thecant progress macroeconomic situation of great britain over the last five years. we have seen it clearly move from a 10% fiscal deficit to more than half that now.

my recommendation would be to really reduce the level of uncertainty, identify clearly what the goals are, identify the said,ne, and as philipp understand that it will take time, but it will require understanding on both sides in order to eliminate the trade uncertainty, the regulatory uncertainty, the passport uncertainty. there is a whole range of issues, which need to be addressed, which have brought the european countries together and for much clearly the united kingdom, as indicated in intentions, to withdraw, so clarity of intent, execution, identification of the goal and the timelines would be very helpful. jonathan: it is my privilege and pleasure to say that not christine lagarde, but tom keene

joins me now, i would from "surveillance" radio. the forecast coming up at the top of the hour and we stand at the u.k. with a forecast of 2.4% for next year and 1.9% for this year. that is set to be revised to lower, what most people think will happen. talk to me about what christine lagarde is recommending to be ok -- to the u.k. it sounds like negotiation. tom: the first comes out with economic indicators and the real question is, how do you put brexit into the global fear? europen a continuing or continuum or is it going to rejigger everything because brexit will seal that when it comes out? i thought it was fascinating yesterday and how she twisted brexit around to the bit about how europe should act and what the actors in europe should do, but i will give you one point right now, which i think is front and center. we were at 33 liberty street

downtown yesterday and the news this morning is 33 central in london. new london bridge. wells fargo is taking real estate at 33 central in london. to me, that is the first whisper of what people do, not what they say, and you are much better at this than i am because you are living in london, but the bottom line is i really wonder what people will do and not what they will say, which is christine lagarde's advice. it will keep -- in line jonathan: it will keep them play base their. tom: i said this to someone the other day and david westin is curious it -- is furious. the first thing prime minister may should have done was expand the highway. jonathan: so they could get in. tom: but i am serious.

and the and gloom defeatist attitude about england, watch what they do and that is the major message. jonathan: a lot of money. my friends in london are a critical bunch and the criticism of the imf over austerity and they said it would be damaging to growth. way too pessimistic about how the u.k. economy would turn out and it turned out pretty well. tom: i will agree with one asterisk and that is the massive and unique immigration into and england. england has always been a different model to forecast because of the people dynamics. of course, maybe that was [indiscernible] jonathan: he had to get the gold string in there. tom: we need more runways. jonathan: tom keene on radio.

david: thanks. we'll head over for a look at the individual movers. how: drugs, cars and banks, to sum up the morning movers very drugs, johnson & johnson, moving higher in premarket. earning specter, led by the farmer division and raised guidance on sales and profit, basically because we heard a confidence in the pipeline of pharmaceuticals. david westin spoke with the cfo johnson & johnson and they seem pharma name.ay the a look at chrysler, italian parent down on a percent in trading. they are investigating the monthly sales figures and if they were inflated. we learned yesterday that two dealers said in january, the company pressured them to inflate the sales and that waiting on sentiments today. with thanks,p goldman sachs second quarter

profits rising 74% and trading around the neutral line, a little up, little down, and it was led, the prophet led by better fixed income and commodity trading and lower legal costs, but the r.o.c. is also below 9%. equity trading revenue was a touch light. jonathan: let's get to the top trending stories on bloomberg. look at the top stories and reading on the bloomberg service. let's begin with david westin. david: i like to bring everything back to pokemon. ofturns out this is a summer pokemon, everything connected to pokemon. my favorite, and one of the most read stories on bloomberg, pokemon go offers glimpse into $32 billion softbank deal. earlier this week, we learned about softbank buying and the stock went down because investors did not like it. it turns out the technology that has, specifically helps

people with their smart phones have more battery power to play pokemon go for a longer amount of time. this is the fun point. by the way, an incredible fat around northeastern united states. i do know about the rest of the world, but the broader point is that claims softbank is making is this is the internet of things and what arm is doing will be found in just every single gadget around the world. jonathan: the other story is the market value is nintendo. david: yes, sony. jonathan: the other story in new york city, central park, find these videos online. people found a rare pokemon in central park and they all crowded around and this is the next generation and airplane pokemon go and running into central park. david: my son plays every evening to collect pokemons. isathan: the other story that they call in the bond market, that 1% on a u.s. 10 year yield and the story is how bad expectation could be in the bond market.

the conversation i had with someone earlier is why is it always so bullish? the bond market is always so bearish. they say yield is higher, but at the beginning of this year, i forget where we were and there are calling for the 10 year yield to hit 2.78% by the end of 2016, a medium estimate in a bloomberg survey when we were at 2.27%, but this is the last 20 years story. it is just like that for the last 20 years or so and i wonder why they keep getting it wrong that in terms of forecast. alix: it is true. i remember the poor bond bears got totally run doubt. i am going to italy. david: good idea. alix: a great piece that you should pick up on on bloomberg. basically, we have had three other instances in italy of securitizing nonperforming loans , and they all kind of went bad.

the reason this is important is because it will he still has 360 billion euros worth of nonperforming loans and what do you do it them and had to get them off the bank balance sheet? the biggest one has to do with this week. it was called island refinancing. you have the securitization of these and investors only get paid if you get your money back from the sovereign loans through the courts are no offense, but in italy they are slowing it takes a lot of time to get money back and that has been part of the issue. david: i think it is a years. alix: 7.8 years and an average of just two. jonathan: here lies the problem with italian npl's. it is not about setting aside money and cleaning it up, it is about changing the rules, so you can really address the npl's in italy. they are desperately trying to sort it out. david: for example from draghi, we think about labor laws, but these are the reforms that need to be done in order to make

targets work letter. alix: not only do have to wait to get your money back, but there are loans holding off altogether that happened in these securitized products, so a huge problem going forward. i like my italian banks. trump's newonald valuation. updated assessment of his wealth that has been subject of debate. we will reveal interesting findings, next. heading to break, highlighting that the dollar index is at the highest level since early march as a got that better than expected housing data, seeing they pop in the dollar. this is bloomberg. ♪

alix: this is "bloomberg ." in theix steel

hewlett-packard greenroom. coming up, top rated apple analyst gene munster will join us. do not miss it. here is your bloomberg business flash. taylor: mansanto projected bayer's takeover offer. they call it financially inadequate. they say they are so open to talks with bayer and then the other deal. a dealo they consider with another german company. second-quarter earnings beat estimates at lockheed martin. they increased deliveries of the past 35 fighter plane and there was growing demand for the fire missile to fight insurgents in syria and iraq. the european commission has find some of europe's best-known truck makers a record $3.2 billion in a price-fixing case. they paid one third of that and they said the company's coordinated timing and the

passing on a mission technology. that is your bloomberg business flash. this is bloomberg. david: thanks. donald trump has not been shy in saying why he should be our next president. one of the reasons is the business he has built and the way he accumulated wealth. bloomberg takes a close look at how wealthy mr. trump really is and we are joined by caleb, he just wrote a piece on bloomberg, so tell us what you found. caleb: we looked at the 12 months later and mr. trump's network has gone up to $3 billion. to $3 it has gone up billion. caleb: less than the $10 billion in claims for that is what we can account for. david: how confident are you in these numbers? will never know what the building will go for until it sells, so for some of trump's assets, whether it is these trophy resort properties, you could expect someone to

take out the premium above the revenue that they generate, just for the sake of owning, but on a number base and financial basis, we feel pretty confident about the range. david: you went through property by property and how did you get your numbers? caleb: for a lot of his properties, figures are disclosed, like for the gulf properties, he discloses topline revenue in his federal election disclosures to run for president. there are other things like street, nikewall town, for which there is mortgage agreements out that include a lot of the building finances that allow us to hone in pretty exactly to what they are aware of. david: at the same time that his property is worth more, he has also borrowed a fair amount. $170 million loan not against any hotel he is building and washington, d.c.

he is renovating the old post office at the blocks from the white house and it is expected to open in time for the election in november. david: he is also selling things. caleb: just by tracking all of the stocks and bonds he has, he has also disclosed filings in the government and we can see that he sold about $50 million worth of stocks and bonds over the course of the last year. david: do you get a sense of how much liquidity he has at looking?in the balance sheet insofar that he needs to help fund his own campaign, how much cash can be reached quickly? he probably has using the high-end of the disclosed ranges in the disclosures to the government about $170 million of assets to liquidate immediately. he also could take out further loans or mortgages against the young leopard parts of his properties that he has also. david: how much do other people estimate? we have you at 3 million, donald

trump it over 10. two also is estimated and where do they come out and had to compare the range? caleb: we have "fortune" rising at 4.5. and "forbes" all of those numbers are much closer to each other than any one of them is to $10 billion. david: this is the wealthy individual by any measurement. $3 billion. caleb: a lot of money. david: why does it matter whether it is $3 billion or $10 billion? at the bloomberg billionaires index, we assess a lot of their fortunes, and donald trump is almost singular in his claims of wealth that are greater than the ones that are estimated, and it is because it is part of his story asked the candidate and businessman that i am wealthy and it is proof of my success, and so the numbers are very important to him. , can: from your reporting

you get any sense about whether the wealth has gone up because of his candidacy, particularly the value of some properties, because he is more prominent than he was before? caleb: in almost all cases, no. we are talking about mortgage ships, so luxury, residential real estate in new york, office real estate in new york and san francisco, they are down. whereas, revenue at golf courses is up and perhaps that is driven by people wanting to play a trump golf courses come a but in most cases, this is about the underlying fundamentals of the businesses. david: one of the big challenges everyone has covering the campaign in the media is what is the signal and what is the noise? what is important and what is noise? [laughter] saying orf the rnc defending the trump campaign because of melania's remarks last night. we have a sound from ryan's us and let'sprieb

take a look. >> melania did a great job. if you what to do a poll on the subject, you would see an overwhelming support and people have been impressed with the job that she did last night, so i think in that case it was a successful nights. david: this was the chairman of the republican national committee talking at a bloomberg breakfast just today. coming back to the wealth question and tying it in with would behow much she paying attention to these issues rather than what he wants to do with the country? caleb: i am very happy that that is totally above my pay grade. hope peopleth and i pay attention to our numbers and pay attention to how much effort we put into getting them right, and what they want to take out of it is what they want to take out of it. david: that is caleb melby. thanks for being here. up, the global hunt for

yield taking investors to unexpected places. ofshow you where in battle the charts, next. this is blumberg. ♪

."vid: this is "bloomberg i am david westin and time for battle of the charts, alix steel against julie hyman. alix, you go first. alix: i am looking at how much money is flowing into high-yielding assets. indonesia tells compelling story. this blue line, foreign holdings of sovereign bonds, and the white line at 10 year yield in indonesia. foreign holdings of the bonds are now at a record high as he have the yield around 7%. high,is off from its own 1.5% that we saw back in october 2015, but nonetheless, 7% to see when you look at the u.s. at 1.5%. when you look at

the u.s. at 1.5%, and there are other things going on besides the search for yield, but indonesia has an attractive six points explain dollar inflow just this year -- attractive $6.6 billion inflow just this that theyou show geopolitical risk doesn't matter. we talked a lot about that yield when it came to turkey yesterday. david: a search for yield, julie. julie: it is, but i am coming home and looking at economic data in the united states. indonesia, that is far away. let's talk about what happens in the united states. unemployment rate during each presidential term since it is political season and we have been talking about what goes on in cleveland and this is color coded by political parties of the president, so what we have -- obviously, you want unemployment rate to go down, the desire to directory -- so except under reagan, we have the unemployment rate going down during democratic presidencies and those the trending higher

during republican presidencies. something interesting to keep in mind as we -- thed: for the end of republicans is when it tends to go up it looks like. julie: there has been choppiness. aix: i like that chart quite bit because many economists have written on that and the idea that some democrats get more stimulus in the economy, so then you wind up having it had that might have to hike rates and then read to some kind of hike in unemployment rates into their term, so that it is a cycle that happens. jonathon? jonathan: for me it is easy. it is going to be such a thing for 2016 and i just wonder how many people will go into these insecurities and understand some domestic issues in these places, turkey, fantastic example. knowledgeable people in that country he would completely -- you were completely caught off guard and i wonder how men people are caught off guard also looking at emerging assets --

emerging markets as an asset class went countries making it up are so different? david: they go so many places for yield and they may not really know that destination. excellent. i'm going to go with julie as i think it is timely because of the republican national convention, but i am saying alix is the winner. alix: by default. [laughter] david: we don't call the control room default. that is not right. open over 30. minutes away. coming up in the next hour, gene munster from new york city, this is bloomberg. ♪

?c+sv ♪ we are 30 minutes from the

opening bell in new york. this is "bloomberg ." at marketsking overall that are a little softer today but really, it was the morgan stanley 1% yield for the 10 year. jonathan: that is what everyone is talking about. david: breaking news. the imf is out with the global forecast. ,hey took it down for the world from 3.2% down to 3.1%. 2.2%esting, kept u.s. at and kept europe where it had been, they did not take it down. they also told us that before brexit, they would have taken the global. downgrade, wasn't a so much as an upgrade. i am looking at is the

idea that nigeria's economy will contract 1.8%. it has been hit by oil but there is so much terrorism that it has spread throughout the economy. david: they are definitely struggling. let's get caught up with the markets. jonathan: so the cut for the forecast for 2016. this is how we are ahead of the target open. in europe, and ugly session emerging. the ftse 100 up i .1%. in the fx market, up. we see a potential rate cut potentially in august in australia. that is down by 1.5%. in withere coming treasuries. the morgan stanley call, a 1% on the u.s. 10 year yield.

we will talk about that later in the program. let's bring in the global team. julie hyman is here in new york. abigail doolittle is at the nasdaq. julie: let's start with earnings. we are talking about the pace of earning season accelerating. aftern & johnson up 2% they beat estimates and raise the full-year forecast. that is largely on the strength of the pharmaceutical business. but the sales fell arthritis drug was the source of a want of strength. shares are up 2%. we also have the latest on the dance between monsanto and b eyer. this morning back and said the offer was financially inadequate that expressing -- inadequate but expressing willingness to work with the two companies. trading in germany, we have seen

a little bit of a declined by more than 1%. goldman sachs up with numbers this morning. that companies numbers beating estimates. bond trading beating estimates, just as it had with other banks. has fallen.ng and that may be the source of the decline. at 9:30 for that begins so we will get more details at that point. abigail: yahoo! may have just reported the last quarter as a publicly traded company. it was a disappointing second-quarter. revenue fell 19% year over year. earnings missed estimates by 6%. who will they sell to, for how much? well put by brian at capital research -- another day closer to the end. room --ure of resident measure of revenue in the

airline industry missed its forecast but this is one airline higher up on the year. we will wait to see how the dust settles. and netflix shares are plunging in the premarket after the online streaming company growth figures for the second quarter on the domestic and international front missed estimates. the third quarter guide is pointing as to whether these are near-term issues around the olympics and the price hike or if something longer-term is at play. david? david: we will stay with netflix. we will be joined now by mike olson. he rates netflix as overweight with a $122 rice target. are you having second thoughts about the $122 price target? mike: no. if you look at the grand scheme

of things. is less thanbjects 1% of the overall. we still feel good about the long-term numbers. we did not change anything for the long-term. when the toect million subscribers by the end of the year. we still feel very confident with the long-term numbers. david: there is no question that they have a wonderful position with the subscribers. at the growth rate is it? . thisonathan ferro made point. are you concerned with their forecasting? they have been off for two quarters in a row. ake: they have, and they have poor track record with price increases. the last price increase they had also. they have had difficulty around forecasting with the price increases but the primary issues here are short-term in nature. if we look at the

un-grandfathering of the price increasing, it will be wrapped up by q4. and the olympics are the other things that are affecting the subscriber numbers. will be-term issues alleviated and will be back on track as we get into the second half of the year. david: perhaps a longer issue is churn. itinesses that have a lot of have a lot of trouble. does that change your business model for them? mike: as i just mentioned, the then issue is tied to un-grandfathering of the price issue. and i think that will be alleviated as we get past this .nitial problem time so we don't have a concern around churn. the company mentioned that gross subscriber numbers are flat, year-over-year, which is a positive signal. david: thank you so much.

it was mike olson, senior research analyst. jonathan: let's get back to the imf report. dan skelly. let's begin about the difficulty with forecasting -- the imf has cut for a fourth time privacy global gdp coming in at 3.1%. discussion that gets me. this is the forecast for the coming year. 2017. given the fact that they reach some kind of trade deal that avoids an increase in economic barriers, how on earth do you model this kind of stuff and come out with this stuff? dan: this has been difficult for everyone. the imf, the federal reserve -- overone has been cutting the last few years. it is a slow growth recovery and

we are later cycle. but just because we are later cycle doesn't mean that stocks can to do well. historically, in the late cycles of recovery, stocks have actually done fine. we think that just because it has been a long recovery, doesn't mean it will die of old age. recoveries tend to die when excess has been built up. and when you look at the u.s. and corporate and consumer behavior, you have not seen a ton of excess being built up in this cycle. let me make a couple of quick points. but it wasn excess limited to the energy sector. when the bubble burst in energy, it had a positive outcome for the consumer -- low gas prices. so unlike the other bubbles that had a horrible paramount on the balance sheet, the energy market bursting led to low gas prices and better consumer behavior.

data thisd housing morning. let me make another key point about excess. we saw excess buildup outside of the u.s. in em debt. so with the dollar from december, that means borrowing costs are lower. the fed was talking about raising rates four times this year, talking about another forecasting error. now we are potentially looking at no rate hikes this year and maybe not next year. that is positive for the e.m.. a ton of moving parts here. it seems to me that everyone has been too optimistic and to bullish on global growth. that also plays into exit strategies being to bullish on the idea that we get economic growth. reengagewe going to

and actually look at that and say -- that has been the wrong path for several years now. dan: interest rate forecasts have been very troubled. there are a key points as it relates to brexit. one of the reasons the recovery has been so weak is because monetary policy has been the only game in town. we have seen zero fiscal stimulus. not a lot of forecasts are talking about that now policymakers in europe and the u.s. and other parts of the world may actually feel more fire under their feet and feel more pressure to enact a much-needed fiscal stimulus at a time when interest rates are so low -- when is a better time to invest in project infrastructure to increase fiscal spending? so i bring that back to brexit because i think the markets with the positive rebound since the brexit and the footsie leading, is positive. david: kelly look at the macro

for a minute? world, not going in a good direction and even in china. productivity, have not seen the growth coming through. global trade flows. when you take those factors together, doesn't it limit global economic growth? dan: particularly as it relates to the demographic question, it does. when you look at the employment situation in the u.s., the employment market is tighter. a lot of people who want jobs have gotten jobs. so we are starting to see a wage growth increased because of that. that the overall profile of the u.s. economy is different than it was in the past. we are not saying that there is huge, absolute return potential. frankly, valuations are elevated. this context of low

interest rates we think there are positive opportunities still. alix: on a micro level in terms of growth, you like allergan and google but you have to pay up for them. make the case for how long you are willing to pay up for growth versus looking for value? dan: i look at everything from a relative perspective. this year, another area that people have gotten on is the huge -- equity market leadership. on one hand you have the old market leading energy and materials coming out of the energy downturn. but on the other hand you have yield stocks working. a look at the long-term fundamentals for those different sectors, there is concern. has long-termy structural issues two to china and some of the yield stocks are very expensive. so some of the stocks that you mentioned that we are positive on, we think that versus the

yield stocks that are trading at 30 times earnings that have limited growth, we still like google that has great secular growth. alix: there is a great case to be made for that. that was very insightful. dan skelly, good to see you. for more on the imf forecast, catch bloomberg's interview with the imf chief economist at 10:30 eastern. measures, cost cutting at goldman sachs seem to be paying off. we will take deep into the banks milani aand later, trump stole the show in cleveland but not for the reasons the campaign may have wanted. this is bloomberg. ♪

alix: time now for futures in focus. this is "bloomberg ." this is the charge that you need to know when it comes to oil. i trading close to average. dubai is a good reflection of middle eastern oil prices. when it gets higher, it means that prices are more expensive than in the future. when it gets lower, it means there is price weakness and that is what we are seeing now. doyle --ontango in the in the dubai oil prices. that means we are seeing weakness in asia. that is weighing on oil prices. focusing so much on supply but it is demand that is coming in front and center in the third quarter and some of the signs is not -- signs are not so great.

you heard me make the case for weaker demand in asia -- what do you think of that? >> if you look at oil, i think it is a range. chinese imports have grown if you look from january to june. up 14%. i think oil prices will continue to hold. askede the global glut in the lean that you guys were just talking about. slowdown inemand, a futures, you have to look the other direction. look at the bullish case of things right now. shale production decreased for 10 straight months. you continue to see that trend take place here. week over week, we have seen in been terry drawn out so i wouldn't be surprised if you see oil prices start to threaten the $60 range again.

and ultimately, at the end of the year, i wouldn't be surprised if the oversupply decreases. do have bullish factors will link over but it has not been a biggish bullish factor in recent weeks. morgan stanley seeing the rebalancing happening in 2016 because of the demand weakness. phillip: i saw goldman sachs come out with the same type of thing. once we get back over $50, you start to see the shale production -- they start to come back online and all of a sudden, we see it going up and up, running at capacity again and we get inventory. something has got to happen. ultimately, global growth will have to be there. i think the bullish case could be made down the road. said, as we rise we

see producer hedging as well. locking in those gains ways on the future. so it really has to be demand that has a surprise on the upside to help balance the market. willip: yes, demand definitely have to take a factor into that. we never saw a pickup on the drive in demand through the summer so far. gasoline, you have a major glut their itself. if oil supply comes down a bit, we may start bringing that down but if you are going to play it, make sure the french markets work with the further out contracts. alix: thank you so much. that was philip streible. good to see you. up, goldman sachs is following a trend, seeing a rise

in fixed income activity. however, they did miss on equity trading. this is bloomberg. ♪

david: welcome to "bloomberg ." goldman sachs reported earnings this morning that beat analyst estimates but the stock is down in premarket after equity trading revenue missed estimates. for more on the second quarter numbers we are joined by laura keller. laura, let's get right to it. why is the stock down when they beat estimates? laura: there are a couple of places where we had disappointment. expenses being worse than expected and a lower dividend than what bloomberg cap thought, as well as lower equity trading. bettern actually had than expectations on equity trading, inc. america and

citigroup matched the estimates. david: let's take each one of those. getting costs down -- we hear a lot of stories about laying people off. is there an explanation from the company about why expenses are not down? on theno, but hopefully call, which starts at 9:30, we hear more about that. there are at least 400 people in new york who lost their job. i know that goldman sachs had hired people -- i don't know if that is part of it. we would like to get more because with overall expenses, they have been up hiring then what we thought. whether they are fair or unfair, we have to compare to other banks. how does it compare to wells fargo and citibank? laura: wells fargo, they reported on friday, bigger than

expected. fromof america, the talk management was about cutting expenses and they gave us an through 2018, $53 billion and they will bring cuts -- they will bring costs down. if you have goldman sachs out there saying, actually, expenses have risen, we need to understand why. david: and we need to talk about the equity trade. the variance we have seen with other banks. and we aretly, understanding that it is not looking as good as we had originally thought. the estimates we saw there were a lot better. and even bank of america and but that were trading isn't as important. they match the estimate that we had wanted. overall, still down but goldman sachs hasn't provided a reason. and mentioned cash products

derivatives -- wraps we will get more color on the call. inid: so two-putted perspective, all banks are down, year after year. but the question is, where they better than last year or worse than last year. laura: and they all are worse than last year. we already knew that they would be performing poorly at how poorly? blankfeinwill lloyd be on the call? laura: it is not, it will be his cfo. i understand that is not the case. david: they have to be watching the stock price right now at goldman sachs. laura: maybe they are revising those talking points, we will see. i know when i talk to people at

the credit desk, we want to hear more. david: so we will be looking for the reporting on that call. that was laura keller, thank you so much. jonathan: for the opening bell, just over four minutes away with --ecord that stood 13 months and we have five new records in the space of a week. futures are a little bit negative ahead of the cash open. s&p 500 futures are negative. the market open is next on "bloomberg ." this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide, this is "bloomberg ." let's get the global financial scorecard for you.

futures mostly stable. a record high close in yesterday's session, set to retrace some of that as stocks open in 10 seconds time. as you hear the bell, i will walk you through your asset classes. the dollar-yen, it is up. of about .3%. a weaker japanese yen and a weaker pound, even with the upside surprise in inflation in the u.k. the inflation numbers in the near term do not matter and the bank of england is going to make a move in the short term. yields coming in at two basis points. 1.56% on the u.s. market. a big call it -- call coming from morgan stanley. 35 seconds into the open. let's get across to julie hyman. the record close

yesterday, stocks have pulled back out of the gate today. the s&p 500 is down .25%. he nasdaq is down .75%. mix earnings reports are coming out. ibm, an interesting story. are fallingings year-over-year but not as much as estimated. what is key is that the unit that includes watson, the supercomputer ai, the cognitive solutions unit -- that is seeing an increase in revenue for the first time. this is being seen as investors as a turning point for ibm. have been looking into areas of future growth and this is one of them. netflix is not, doing as well. sales and profits rose but people are focusing on subscriber numbers. 1.68 million subscribers with the addition, that missed

quarters. netflix is blaming it on the increase in prices. onflix has had the steps that front before. shares are plunging by 13%. johnson & johnson boosting its full gear profit forecast. as we talked about earlier, the arthritis treatment is helping matters there. shares of by 1.5%. lockheed martin shares are moving higher by .6%. jonathan: let's get to another company story. the future of yahoo! remains in question. shares down slightly after the open. investors remain focused on the sale of yahoo! for more, i am pleased to say i am assisted by gene munster.

great to have you with us. the headline across the at&t --g -- verizon and set to submit yahoo! bid. what do you think will be the best fit? verizon makes a lot of sense given what they have done with aol, and at&t fits in the same camp. the typical buyers that you may have thought years ago are different. connect has been more active in the space as well. something is going to happen, probably before the election, even the real key to figuring out the value will be the tax treatment on how the m&a will go down. alix: how might the m&a look like? patents? what is the best kind of framework for that? gene: the best framework is to just sell the core and that leaves alibaba and yahoo! japan.

if you assume that happens and it goes off as tax-free -- which is the goal -- that adds $16 to our $40 price target. so i think that really is the hope here, to essentially sell the core and you are left with these two valuable pieces -- alibaba and yahoo! japan. alix: what we learned yesterday is that it is less bad. much less than some estimates. how is the core doing? well, the display is down 3%. is down 15%usiness so not very well. ultimately, i think it doesn't matter. they made their numbers and maintained the numbers, the first time they have done that in a long time. so i think we have to give yahoo! credit that they are

meeting numbers. if you look at the stock, it looks like it was somewhat anticipated, given the recent move in the stock. jonathan: to wrap up the yahoo! story, it might be likely to 500 millions than dollars. how much of a disappointment is that and how much is it a consequence of how long it has dragged on? gene: don't think that number is a disappointment but the election piece is a huge part to how this plays out. whether it is clinton or trump, they will want to try to rally in some of the tax opportunity with the sale. on, ile it has dragged think there is a clear catalyst for yahoo! to try to get this done before november. alix: turning to your other number of expertise -- everyone loves to talk to you about apple. earnings coming out next tuesday. 153.price target is

analysts can't even seem to understand the metric anymore. gene: for apple? alix: yes, excuse a. that apple hass been in decline but it will return to growth. inn 8% in 2016 but up 10% 2017, in terms of revenue, that will be the key metric. as investors continue to look at the iphone seven and seem to be disappointed with it, i think it misses the point. even with a disappointing iphone seven, apple can return to growth. so there is a lot about performance between now and the end of the year with apple. hadthan: a conversation we earlier on this program was about netflix. over what to expect from some of the numbers. tim cook has come under criticism as well in the last

couple of quarters about the way he has handled communication and guidance, speaking to the markets, particularly with the issues that have emerged in china. with that,our views the communication with executives? i think tim cook has done a great job. he has been in a tough position because china has been a big win for them. or have been headwinds and he communicated that and probably over communicated that when they inorted the december quarter january. he said nine times about the difficulties they had in china and typically they don't mention it at all. i think he has done the right thing about communicating. inhink you will see a change their tone over the next few quarters about some optimism. i give him credit for being up front and i think he will be upfront about the change in the businesses that will be coming. i look at analyst

reports, analysts cannot get a grip on what matters for apple. brexit, currency volatility, others look at the replacement cycle, elongated to 28 months as opposed to 24 months. what do you say to the bearish factors? gene: i think that people are dependent on their iphones. the work that we have done is continue touy rates be better than 93%. it's true that people hold onto their phones for a little bit longer but they do need to upgrade and they will come back to the iphone. standpoint,nvestor this is a unique opportunity. you have low expectations and a shot by owning the iphone seven. and if i'm wrong and the iphone seven is a disappointment, there is a 10th anniversary phone that will come out in 2017 and i think investors will get behind that soon. and what i would say is that it has been rough but there are

good things coming and you need to own that. jonathan: all analysts say own it. you are the third biggest price target on wall street right now. if they called you and said, what is the one thing that wall street is underestimating, considering that this is probably one of the most well researched companies on the planet, what is the one thing that people are underestimating? gene: the biggest thing that they are underestimating is that people can't survive with phones that are three years old. and i think there is a belief that the up rate cycle is going to extend three years and beyond but that is not going to happen. mathou start to run the behind that, it shows apple returning to growth and it will be a positive. gene munster, fantastic to have you on the show. thank you very much. alix: i need the upgrade. my phone is barely alive. i want to highlight a mover in the market -- the dollar index

at the highest level since early march, breaking through the 200 day moving average. you can see that right there. typically when we see an asset class move above the average, there tends to be momentum to the upside. we have the expected housing data today. the dollar, moving higher. up, the imf cut the global growth forecast again. just how much lower can it go? this is bloomberg. ♪

david: this is "bloomberg ." i am in the hewlett-packard enterprise green room. coming up later today, fred

tomczyk. td ameritrade ceo. ♪ jonathan: from new york city to our viewers worldwide, this is bloomberg. withan sachs came out numbers earlier. cost cutting efforts fell short. trading lower at the open in new york city. i want to go to julie hyman who is listening in on the earnings call. julie: thus far we are in the opening presentation by the cfo of the company. we have not heard the questioning over the expenses and details but he has talked about total staff falling 5% from the first quarter. he also said that average daily trading volume was $62 million down from $72 million in the first quarter. so a decline on that basis.

total didy's earning come in above point analysts had been expecting. on the flipside, indeed see a decrease in equities trading, which is not necessarily in line with what we have heard from other banks. some analysts have said that the bar was raised by other banks that we heard from thus far. in addition to that, we did not get a dividend increase from goldman sachs, something that analysts were anticipating. so we see shares under pressure in today's session and we will keep monitoring the call -- it is just now open for questions and we will see what comes up out of the questions. thank you julie hyman. the stock is down by 0.66%. pulling back a touch. let's head over to abigail doolittle for an update from nasdaq. abigail: he have a lot of movers on the open -- netflix shares are down. company missedhe

growth estimates on the domestic and international front for the second quarter in a big way. the question is of course, whether these are near-term issues around the price hike at the olympics or whether there is something longer at play. down 35% which is amazing considering they were the top stock in the nasdaq last year. plunging even more is supermicro after the company preannounced a "ugly preannouncement." it could come in under 74% under point analysts had expected. it has cut its guidance dramatically for 2017. perhaps another sign that the global i.t. environment is easing? down after yahoo!

reported shares after probably their last quarter as a publicly traded company. recently breaking news that verizon, at&t, vector, -- they have submitted bids and the likely winners, the three top bidders are verizon, vector and quicken. sam sweeney says he feels the market thinks that verizon is the likely winner. thethan: let's get back to big story, the imf cutting the forecast for global growth this by theter the vote british to leave the european union. tohas been cut from 3.2% 3.1%. setser., brad great to have you on the program. imf is ant on the

assumption for the rest of the world, how difficult, not even a month after the vote, is that gauge? brad: extremely difficult and i think the imf handled the intrinsic difficulty of a airing on the side of caution. it didn't work down british growth as much as it might have and the expected fallout on the euro area is on the moderate side. only down by 20 basis points. jonathan: some say it is relatively optimistic for what the u.k. is anticipated for this year. the worst great -- the worst since 2012he u.k. but they are looking for growth .6% and theyound are at the high end. brad: absolutely. and that is because the imf will into the baseline optimistic

assumptions about a fairly constructive process of negotiation. and i think the report is quite clear that it is weighted to the downside. alix: so four cuts now? jonathan: four cuts. alix: when we know that we are hearing and imf forecast, we know they are cutting. brad: and that highlights a bigger problem. they consistently overestimated -- we were at four and we are now close to three. expertise isyour capital flows and i wanted to get your input on turkey. based on your study of capital flow, at what point do we see a current account crisis coming from a country like turkey? brad: it is always difficult to forecast a crisis.

it is much easier to understand for mobility. turkey's current account, while big, has come down. it is an oil importer and that has helped. push the current account back up. what i can safely say is that turkey is in the danger zone. 4.5 is big and if it gets above five, very big. and turkey, more than most emerging economies, has relied on short-term financing and bank financing. and it's level of reserves isn't that high. tanks couldt point, be under stress from corporations in turkey. quite a lot of nonperforming loans and corporations have a large liability with fx. what is the downside to that with short-term funding? it may be goes a little bit of other way around. if there is difficulty financing

the current account deficit, there would be further pressure on the turkish lira. further pressure on the euro means the burden of the corporate lending goes up which leads to more nonperforming loans, which makes the market even less willing to provide financing to turkey's banks. so in an adverse scenario, those dynamics could lead to a withdrawal of some of the funding that turkey needs, and some kind of difficult adjustment. jonathan: i wonder if they make a pivot back towards russia? alix: no, seriously, a good point. jonathan: brad setser, thank you. alix: coming up, day two of the rnc. we will discuss this in bloomberg. ♪

david: this is "bloomberg ." there has been a lot of talk about donald trump's wife since her speech at the convention last night, that there is a fair amount of policy being talked about. things, the call for the glass-steagall act to be brought back to break up banks. i understand that this is actually in the platform, should we be taking this seriously? megan: it is in the platform. also the rollback of dodd-frank when they talk about how much they would like to strip that regulation for businesses. these documents are hardly ever enacted but they do signal the moves that donald trump will make should he win the presidency. his sights presidential candidate, mike pence, has been an outspoken advocate of limiting big banks. he was against tort. this is the direction they are traveling. is the situation

republican platform this year calls for something that bernie sanders and elizabeth warren have made a core focus of their push -- pretty extraordinary. david: and the position seems to be between the big guys and the little guys, rather than the right and the left. i will put up a quote from the trunk campaign chairman saying that they are supporting be small banks mainstream. some of the stakes made in repealing glass-steagall -- it don't likethey little banks. they don't like the big banks. megan: they are being very smart about this in terms of wall street. we should make the point that hillary clinton herself has not called for a reinstatement of glass-steagall. she says that is unnecessary. we clamp downsure

on shadow banking where she feels the risk is migrating. for donald trump this is main street versus wall street regulation. communities with small banks on the trail talking about this issue. it is in the platform. david: and finally, for this time, tell us about the overall convention and unity? large demonstration yesterday with people wanting to vote as to whether they had to pledge to donald trump were not. do you get the sense that this is a unified party coming together? oh, absolutely not. the scenes we saw on the floor yesterday were extraordinary. people calling for a vote on whether donald trump should be the nominee. it did collapse and was overruled by the chairman on the floor. so what we are is that i expect some of this is a court to continue. there are people here who left the convention yesterday in the wake of that failed attempt to

get a vote on that. what we are seeing is people trying to find an avenue to make their anti-trump voice known. there are senior figures in the party -- chris christie and ben carson -- whether they can get there on a unified vision is far away right now. megan murphy reporting from cleveland all week long. alix: i am watching microsoft reporting earnings after the bell. what are they going to do with linkedin? it could be very interesting. jonathan: wrapping up "bloomberg ." we are trading from an all-time high with dollar strength. from new york city. this is bloomberg. ♪

vonnie: it is 10:00 a.m. in new york. i'm vonnie quinn. >> this is bloomberg markets on bloomberg television. ♪

vonnie: we will take you from san francisco to cleveland to washington as well. here is what we are watching. goldman sachs topping estimates on the top and bottom line, posting is evident 4% increase on second-quarter profit. >> mann sent over jack's the , calling the $55 billion proposal financially inadequate. also saying it remains open to constructive conversation. and melania trout's speech draws charges of plagiarism of michelle obama.