for stimulus. but the yen heads for the biggest gain since brexit. alix: i'm with her. bernie sanders calls for solidarity within a splintered party. how politics affects policy for the fed. jonathan: a very warm welcome to "bloomberg ." i'm jonathan ferro along with david westin and alix steel. david: a lot to cover today. we have oil at a three-month low, the yen heading for the biggest gain in a month as traders scale back expectation about the japanese stimulus. in a treasury auction of two-year notes sound the weakest demand since 2008. thend kicking off -- alix:

fed kicking off. the world's most valuable company set to give earnings after the close. we will set up everything you need to know. when it comes to the markets, and ethics story all the way. low rates river is where the smart rates has been for the last couple of years. in the fx market, weaker pound, stronger yen. stronger by 1.36% against the dollar. as the helicopter money fades ahead of the doj decision on the friday. the weaker pound story means a stronger dollar story as well as we carry the last couple of weeks over in the fx market. that stronger market means the brand is down another .7%, the wti down.

yields coming in to touch, and by two basis points on the 30 year yield. your yield is 2.264% on the u.s. 30 year. alix: breaking news. verizon now with earnings right now. it looks like a beat on the top line -- bottom line coming in at $.94 a share. operating revenue coming in light at $30.5 billion. the company buying yahoo!. that $4.8 billion. one number that was really interesting to me in terms of internet subscribers for files, down.- four fios, that was interesting headline that crossed. yahoo! is a cigna to of revenue growth great you would think after yesterday. let's check in with michael mckee on the fed beginning its two-day meeting. matthew kanterman previews apple

4s and ryan chilcote is breaking down the vp. megan murphy with the latest from the democratic national convention. michael mckee, no chance the fed is going to hike tomorrow. what is the most important part of the statement we're going to get? michael: you are asking if i can take the day off. you are not going to miss much, it's all about the statements. the reason going to be any action from the fed tomorrow. they've seen the economy get better, but it's only been two months since we saw a big drop-off in job creation. it's only been a month since the brexit vote. we don't know long-term how the economy is going to develop. they won't know second quarter gdp until friday. they are missing out on that data. the new york fed and atlanta fed are estimating that we're going to see growth double from the first quarter. look what happened a year ago. in july, they revised the numbers. in two dozen 15, they revised

growth lower for each quarter. meanshat means, that lower growth and inflation, less reason for the fed to move. fed, like everybody else, doesn't raise rates when they have a non-press coverage month. alix: fair point. telegraph tohe december rate increase. could we expect them to telegraph a september rate increase? michael: they are not to be that specific. we are looking at december, 49% right now according to fed funds. if they get that it is september, they will be happy. they are not going to mention a month in particular. alix: thank you, michael mckee. apple, over and the the next 24 hours. david: we are joined by matthew kanterman of bloomberg intelligence to talk about this. what are we expecting? it had a pretty rough go.

the real focus is on what they're going to say on the fourth quarter and beyond. iphone sales are expected to million, and we've iphone success cycle. se.iphone as the -- it still drives their business. david: how much on the spotlight is on tim cook? analysts are saying the jury is out, how much pressure is he feeling? michael: he came up in apple as an operations guy. he helped create the machine that is apple. some people argue that at this point, they need a new innovation leader, like another steve jobs to come in and change the company. i don't know if that is the

case. the smartphone growth market is only growing lows bidders at this point. -- low single digits at this point. the premium segment is growing even slower. unless they can come up with another $200 billion product, i don't know what else they can do. alix: thank you to matthew kanterman. that doesn't sound too promising. jonathan: brutal. to bp, where things are brutal as well. drop in profit, and the second quarter was meant to be better than the first quarter. walk us through. , on anf you look at it adjusted profit basis, the last quarter wasn't that bad compared to the preceding two quarters. if it missed estimates by a good $100 million, you had not a falling oil price, but declining refining margins. price have a little oil

year on year, it's definitely down. what has saved the bacon of all the big oil companies in the past is there downstream business. the refining business. they have all been pumping out gasoline, refining the crude product like there's no tomorrow. it created a real glut, in the united states. but not only. if you dig down to the earnings statements, you see bp say they're concerned that that same pressure on refining margins will continue into the next quarter. jonathan: upstream oil prices too low, downstream, we can margins too small. , and margins are too small. are they come from doing that? ryan: the ceo says he is comfortable where that is. when i spoke with him in february, he indicated he was happy for gearing to go all the way up to 30%. they still have some little room on that front. the problem comes if we don't have an oil price above $50 a

barrel by the beginning of next year. bp is set to run -- to make the money it needs to earn to pay dividends and its costs -- it needs a $50 will price. if we go into next year, they have to cut costs. we have to look at how viable is the dividend in the future? jonathan: ryan chilcote, thank you. bp stocks trading lower, oil soft. david: another big story in philadelphia, the democrats got the convention started in philadelphia last night. bernie sanders was the center of attention, as he tried to bring his followers over to support hillary clinton. bernie sanders: any objective observer will conclude that based on her ideas and her leadership, hillary clinton must become the next president of united states. our job now is to see that strong democratic platform implemented via democratic-controlled senate, by and acratic house,

hillary clinton presidency. david: we welcome now megan murphy, from philadelphia. as the day started, it looks like bernie sanders had a long way to go to get anything close to party unity. did he get there in the end? i don't think they can ask for anything more than what bernie sanders said last night, which was a full throated endorsement of hillary clinton and the principles she stands for. the problem is over the next few days, has bernie lost his movement? we saw supporters of his brewing throughout the day. mentioned,ey were even scattered boos for elizabeth warren. what we face as a still divided convention. we will have the rollcall vote, where they have the last chance to make their stand as delegates , to say who they supported. bernie went a very long way last night, it was a speech that the

hillary clinton people will have appreciated. has he healed those fractions? not quite sure. david: critically important is specifically the voter group that bernie sanders really appealed to -- college-educated younger people, typically white. whether they can bring them over. do we have any sense of whether they are coming around to hillary? they say they will never vote for hillary clinton, but it's a small portion of the democratic party, this is not the majority of the democratic party. the optics may have been bad at sometimes yesterday, although michelle obama really brought the house down, this does not make up the majority of the democratic party. they will be pushing together demographics out, and hillary clinton still thinks she has the advantage. let's go to michelle obama. she did appear last night, it was quite an appearance. let's listen to what she had to say.

michelle obama: i want someone with a proven strength to persevere. someone who knows this job and takes it seriously. someone who understands the issues the president faces are not black and white, and cannot be boiled down to 140 characters. megan, it is clear that michelle obama did very well for michelle obama last night. she was very effective and well received. did she help hillary? megan: she did in so many ways. this was a deeply personal speech, in some ways, a deeply risky speech. she really put everything on the line last night for hillary clinton. the clinton people will be replaying that speech over and over, using it in ad, to show the very poor they want to get across. this is a unified democratic party. if you want the same principles in the same thing to continue under president obama, you will vote for me. megan murphy, reporting live from philadelphia. alix: it's a really busy day for companies.

we kick off with a potential merger, anheuser-busch and sab miller. anheuser-busch raising its bid to $103 billion, saying the brexit is not affecting the steel. however, aberdeen asset management, the six largest holder it sab miller, said no dice, still undervalues the company. we do have some earnings that came out earlier this morning we want to focus on for you. the first is verizon. he did have an earnings beat, the revenue came in light. at $3.5g revenue billion. fohould point out, files -- ios beat estimates. in terms of dupont, this company raising the lower end of the ,ull-year profit forecast moving higher in premarket. eli lilly had a second quarter revenue beat and reaffirming its forecast. we want a look at what's coming up later on. caterpillar and mcdonald's,

apple and twitter after the closing bell. seven numbers of the doubt reporting, loss of earnings coming out. jonathan: a busy day. coming up, the currency headed for its biggest gain in a month. scale back their as mutations for physical to illustrate we talked the bank of japan and preview the upcoming decision on friday. michael purvis will join us. and viewers worldwide, this is bloomberg. ♪

jonathan: this is "bloomberg ," i'm jonathan ferro. japanese yen heading for the biggest gain a month, as the minister asian not decide on the size of a sinless package. this ahead of the bank of japan's decision later this week, with 41 economists

surveyed by bloomberg expecting using this month. joining now is michael purves. michael, with helicopter hopes fade, i still really know what we're debating in terms of helicopter money. walk us through this. the concept of helicopter money is one of the most controversial of all of the aggressive experiments that central banks have done. this is probably the single most controversial. as you are pointing out off-camera, it's not just barely even legal they can i this overtly. the question is, do you get a fiscal package combined with the monetary stimulus together, where there is some effective channel for keeping it all together? if we do it helicopter money in japan, it's not a crisp process, it's sort of a slow morphing into something like that. alix: they say they are already

doing it, effectively monetizing the debt and pushing out the maturities as they go. 90% of all the issuing. they kind of already doing it. states,: in the united the federal reserve is treasury matures and rolls off, then again, they make a material gain and the treasury. you had about $500 billion in profit since 2008. these governments have been funding deficits for quite a while. michael: the markets and probably the mainstream political discussion hasn't .eally focused on this so far, it's been no harm, no foul. the bank of japan is very important in many respects. their balance sheet relative to gdp is about 70%. it's enormous. ecb is less%, the than that still. crackedugh we really this long duration qe concept a few years ago, the boj has taken

it to the next level. what can happen later this week with the boj is ask for nearly relevant on several fronts. and markets included. david: what is going to happen later this week? what is the range of possibilities, realistically? yen, a: you look at the key defining feature for the nikkei performs. and that a step back and look at the pmi in japan, both of them are sub 50. you look at inflation, which has been extra ordinarily lackluster. 10 year inflation are 35 basis points are so right now. inflation worst vectors. but they've done more aggressive monetary stimulus than anyone. it's going to be very interesting. the real question in the near yen,is can the end, -- the

which has been strengthening, can they break that strengthening trend? alix: the bloomberg and compasses the problem that japan is in. it's consumer prices, -.3%. problem, despite the stimulus and despite the boj and what happened. cpi, the we look at problem is you can't print people. it's a demographics problem. you're going to get stainless from the boj potentially, you might get a new budget package from the ministry, the same forces with an old method. when are they going to do something about demographics? briefly inlived japan's are all years ago, of all the major western european isntries, it is the one that the most ethnically how much us. i read someplace recently that the only immigration they really have is from young japanese to have gone overseas, coming back. place tothe easiest

adapt to, the language is difficult, it's a very unique and specific culture. it is an island nation. very different from the u.k. i don't think it's anything you can really count on happening overnight. there is such a strong cultural dynamic that occurs in japan, with respect immigration. jonathan: yesterday they said the best time to plant a tree was 20 years ago, the second-best time is now. they should've done sending 20 years ago, but they should do something about it now. michael: you are fighting years of history. david: they've tried to things just rates,e and and it didn't do anything. i'm not sure they know what to do. i'm not sure they know what the consequent is will be of any action. alix: they are doing it. michael: they're are being very aggressive. performs is a little bit more obvious intangible than cultural -- changing their immigration. alix: michael, great stuff.

we are looking at oil, the latest slump falling to a three-month low. i.70 on wt the man injoined by charge, eli lilly's the ceo, to dissect the quarter and see what is in the pipeline. this is bloomberg. ♪

alix: this is bloomberg, but alix steel. dragging, oil falling to a three-week low. still with us. my favorite chart of the week, take a look at the bloomberg. this is daily oil price swings that we have seen. we are starting to pick up a little bit of steam, these are standard deviations, and we had some calm back in may, but we are ramping up. target?he

saying: i put on a note $40. romancing the bottom is falling out of the oil market, but there are a few factors that are happening. the post brings it, you've seen sort of bid for the dollar that going on. it -- brexit, you've seen this bid for the dollar going on. desolateine and inventories have been climbing. because the summer drive wasn't quite as robust as a lot of people expected. not just here, but in europe and the u.k.. in have gasoline production china coming online in a stronger way as well. the inventory picture is not radically different. it's one thing to think that oil -- i am of the view that oil is going to be ranging in the 45

dollars to $55 cap in some time. alix: three months ago, we would have seen any dollar slide in oil michael: and stocks would have been selling off. expect to see higher quality energy equities being bought on this. very different than january, february, where the glass was half empty all the time. jonathan: we were talking about a refining business was good margins. that's another changes well in the last couple of months. david: i'm just about more broadly in the equity markets, we saw a direct coalition for an oil prices and equity prices. that seems to a broken down. what it -- what accounts for that? would correlate with the energy market, what

would have been good for energy is bad for the rest of the market and so forth, and vice versa. over the last 18 months, you have this dramatic fall in oil prices, that correlation when positive and stayed strong. until the spring. these correlations tend to fade. the dollars i was mentioning earlier is still very relevant here. spx/cruder correlation, that is something you have to watch. alix: i love that correlation. michael, thank you joining us. michael purves. jonathan: coming up next on "bloomberg ," fallout from brexit. from new york, this is bloomberg. ♪ [hip hop beat]

♪olympics 2016, let me get you on my level. ♪ so you never miss a moment, ♪ ♪miss a minute, miss a medal. ♪ ♪ why settle when you can have it all? ♪ ♪soccer to wrestling. track and field to basketball. ♪ fencing to cycling. diving to balance beam. ♪ ♪all you have to sa♪ ♪ is, "show me," and boom it's on the screen♪ ♪ from the bottom of the mat, ♪ ♪ to the couch where you at? ♪ ♪ show me the latest medal count♪ ♪xfinity's where it's at. ♪ welcome to it all. comcast nbcuniversal is proud to bring you coverage of the rio olympic games. alix: this is "bloomberg ," i'm alix steel. european banks are getting hammered today.

they had a drop in tier one downn ratios, unicredit instantly. all the italian banks getting span -- getting slammed. to becausely had they had the limit in milan of 4.9%. another mover we want to talk about is ever bank. it's in talks to be bought by an unnamed financial services company not yet trading. as the year today, the potential offer price is $19.50 a share. also, casual restaurant stock getting taken out to the woodshed. totty much all of them moved sell from hold. they are all getting really beat up in premarket trading. caterpillar earnings coming out, it looks ofe a beat in terms earnings, coming at $1.09 a share, revenue coming in at a little over $10 billion. , estimates were

for two dollars six ends. in terms of caterpillar premarket trading, that's up over 1.5%. closer to the bottom end, it's good look at caterpillar as indicative of global growth, industrials, etc. we will keep our eye on earnings as a trickle out. jonathan: very busy morning for earnings and the effects market. the first thing you saw was the red hot dollar yen move we are seeing in effects. down by 1.37%, a substantially stronger japanese yen ahead of the boj decision on friday. the hopes for helicopter money waning just a little bit. it means a stronger japanese yen. the market across europe is largely stable if you're looking at the footsie in the dax. the sentiment at the moment with a stronger japanese yen seems to be holding up with the exception of this one. the commodity market where brent and wti trade near in april low.

brent, $41.41. as the a form see today meeting begins, this is how the players in the treasury market the long end of the curve, 30 year yield coming in about 2.5 basis points. the trade 2.261%. i'm sure yield on the u.s. 30 year. that wraps up some of the market moves. let's get the headlines as of business world. here is shery ahn. reportersnie sanders ignore pleas not a protest on the opening day of the democratic convention in philadelphia. many were angry over relevant relations of party officials favoring hillary clinton in the primaries. in the primetime speech, sanders did not directly call for his supporters to vote for clinton, he made it clear where he stands. bernie sanders: any objective observer will conclude that based on her ideas and her leadership, hillary clinton must

become the next president of the united states. meanwhile, senator elizabeth warren urged reluctant liberal to vote for clinton. she told the convention when democrats turn on each other, they cannot unite to fight against a rigged system. police in northern france have stormed the church and killed two attackers who were holding hostages. the hostage takers killed a priest and wounded another person before police and the standoff. authorities don't know the identities of the attackers or their motives. the french antiterrorism investigators have now been called in. concerned tourists about terrorism are staying away from france and turkey the summer. they are flocking to spain and portugal. both are forecasting a record number of tourists this year. through may, rivals and spain were up almost 8%, over nine states in portugal jumped 13%.

francis on 9% drop in foreign visitors in the fourth quarter. global news, 24 hours a day, powered by more than 2600 journalists and analysts in 120 countries. i'm shery ahn, this is bloomberg. david: thank you. the morning must-read comes from london, we have an important indicator of what the bank of england will do when it meets next month. one of the uk's top monetary policymakers has indicated he has changed his mind, after a series of negative business surveys, and now favors immediate stimulus for the u.k. economy. it all the guarantees the central bank will announce a package of stimulus measures. tom keene is here from surveillance radio. this is an interesting and important development. at this point, 95% believe there's going to be stimulus. interesting in this article, he also went on to say there has been a real change in the bank of england toward paying more attention to financial markets. he is not entirely satisfied. beastt's a more fractious

than the fed. let's begin with that. , governorlot of votes carney has the pleasure -- the pressure of inflation. , and whenit economist he comes out and says this, and as you say, the tone of the carney boeards the being different than the mervyn king boe, it's not a small deal. economist, mervyn king is an economist, and mr. carney is a different beast. tom: there's nuance, i'm sure the governor carney would defend his monetary ability and the responsibility of the bank of england to do monetary policy. shery ahn's defense, a lot of what we're seeing right now is the bank stocks. defense is aen's lot of we are seeing right now is bank stocks.

the data is coming in, and as the data comes in, it does appear more and more likely to the bank of england is going to have to do some serious stimulus. tom: that can be true, but a lot of economists are saying all central banks are out of ammunition. i like the phrase the toolbox. i associate that with the bank of cyprus. in his research with the fed years ago, talking about a given bank having a toolbox, where they have options to go with. things isox for all getting pretty bare after eight years of crisis management. weid: i wonder whether recovered from brings it to quickly, the underlying economics are starting to come in. tom: we are nowhere near an analysis of what brexit means. i happen to be a london optimist, and the u.k. optimist. but i could be wrong. we won't know for quarters really, with the impact of

brexit is on the u.k. domestic economy. david: the impact of a significant stimulus could be exactly the pounds diminishing in value and raising prices for the average britt. tom: there's a lot of moving parts with a presumed stimulus by boe. i agree that the place to go is the land of jon ferro, you will currency and you look at currency as a proxy. sterling right now is rolling over again. david: and how much people are paying on the high street. tom: i would watch currency market is a proxy for all these movements. keene fromks to tom surveillance radio, tune in from 7:00 to 10:00 a.m. eastern for bloomberg surveillance radio with tom keene and mike mckee. now we go to jonathan ferro, who has someone who really knows about these things. jonathan: he's going to be a busy man, the united states is one of the uk's most important trading partners, the number one at four market, number two for imports. since the referendum in june,

the u.k. minister of state for trade and investment has been traveling to spread the word, britain is open for business. he joins us now. great to have you with us. audience, we will have a u.k. team meeting everyone across the planet trying to secure trade deals. differentiate between the roles within the moment in the brexit teams getting straight deals done. >> i came into government in march of this year, david cameron asked me to be the minister of state for trade and investments. at that time, smith about 10% of my time on trade deals, mainly because they negotiated through the year. with brexit, we need to focus fully on trade deals and set them up across the world. we are splitting he has overalls, responsibility for export come inward investment, and trade deals. looking after the trade

deals, that's how my specific response ability. i have colleagues who are looking after export earning with investments. there's a huge amount of pessimism from the government about how bad this could be. now there's a sense of optimism, you called the second elizabethan golden age, this hope. it's our nature as a nation, we've always been traders. --traveled the rules traveled the world and ruled the waves, we're using the internet now. i think our geographic position, time zones, english language, the fact that we do have a huge amounts of investment in the greatrom outside, and goodwill across the world, all of those things we need to leverage to make sure that we are the freest, most safe, most heavily traded nation in the world. ,e are open for business there's lots of really positive reasons why the u.k. should be a global hub for trade. ease of doing business

is one thing, ease of securing trade deals is another. ,he quote i associate with you you spent 30 years in the john lewis partnership, for the brits in the united states, they ask when to and we get the waitrose? you run a supermarket chain in the u.k., if you want to strike a deal with supplier and makes business sense, you both do it. politics can be very different. talk to me about how different than actually is, trying to secure a deal with another country, with a huge amount of political uncertainty in these individual areas around the world. very similar.s around the supermarket for 10 years. when you find is if you deal internally within the business as the boss, you can get things done pretty easily, it if you don't to take the authoritarian approach. however, if you want something to supply you, if you want to buy a site that three other people are after, if you want to do a deal internationally for your products and we differ

market, you've got to do it because it's in the best interest of the buyer, and the best interest of you as the seller. you can't control, you can't make people buy things from you. when you look at international trade deals now, it's about finding the reason why people would want to trade with the u.k., and why the u.k. would want to trade internationally. wethe heart of that is that are free marketeers. we believe in free trade, we do gets good for the economy and good for the globe. i think that this time, the united states and the u.k. should be standing up for free trade, and we should be trend -- standing up for free markets. it's the equivalent of going to supplier and saying we would like to supply your food, but the stored as an open for a few more years and i can't ask lee you when the store is going to open or what the rules around the store are going to be and who is going to be in charge. what can you do? article 50 has not been triggered. none of this has been resolved. what can you do between now and then? mr. price: we can start talking

about the wta about the rules. we have begun conversations with the team in geneva. we need to talk to your about the terms in which we will trade with them going forward. and all of the countries that currently trade with the eu and places like america and china, we can start talking to about what might the shape of a deal look like going forward. we are great supporters of and as long as we are members of the eu, we will support that. i hope that we can adopt that at some point in the future. but there is lawfully can do in terms of sending out strategy, started to talk people. we can't find a deal while we are members of the eu. but we can do lots of preparatory work. jonathan: you just got back from china, positive, we are seeing a few deals on the back of bribes and is largely opted back of a weaker pound. a model eu, do you see realistically where the u.k. can

get terror free access to the supermarket without a deal being done over the free movement of people? mr. price: i think people are jumping to it must be norway or this or that. with the fifth. largest economy in the world, we have a trade deficit with europe, 62 billion pounds. it is simply not in the interest of the germans for us to impose taxes on cars coming over or tariffs on french wines. there's only one country in europe that we run a trade surplus with. the u.k. is a really powerful forne, number one in europe foreign direct investment. for all of those reasons, it would be very difficult not to do a deal with in the best interest of everybody. i will give you one example very quickly. the wings are made in bristol in england, the bodies are made in france, and other wing is made in spain and avionics in germany. you got to have a free-trade agreement for aerospace. you have to have the same for

defense and automotive's. when you break it down category by category, what i think will come to this something is common sense in the best interest of all the people of europe. right now, a lot has been said, think it's time for everyone to go on holiday, have an ice cream, enjoy the beach, and come back and think in a very logical way about what's best for everybody. will be amark price very busy man, uk's mr. trade foreign investment for the minister of state. thank you. i wanted to bring waitrose to new york. i want to lobby america to bring waitrose to the united states. alix: you do that, i will go on a vacation. i'm into it. is the health of eli lilly, shares edging higher after earnings match estimates. the ceo joins us next to break that quarter down when we return. this is bloomberg. ♪

alix: this is "bloomberg ," i'm alix steel in the green room. coming up on "," ellen zentner will be joining us to talk fed economy and more. david: this is "bloomberg ," i am david weston. pharmaceutical giant eli lilly posted second portal estimates , removing grease around 9% for the quarter. the stock is up in premarket. joining us with more is john lechleiter, chairman, president, and ceo. welcome back to "bloomberg ." you take a look at the top, and you either met or beat all the estimates your up nicely over last year's second quarter.

those of the topline numbers. take us behind those numbers and tell us what we should be looking at. we grew revenue 9%. i think the important piece of that is that 8% of the revenue growth was volume. growth,a percent volume six percentage points with a new product we launched since 2014. price and rate had a negligible impact on the topline. in addition, we got good growth from several existing product, including a rapid acting -- david: let's talk about this product. with an important pharmaceutical for you. there is a pending issue before the fda about whether it can be used for heart treatment. where does that stand, and how big could that be for eli lilly? in price: -- mr. lechleiter: the quarter, we had an advisory committee that voted 12 to 11

to update the label based on the results we got from this long-term cardiovascular outcomes study. we are still awaiting word from the fda on the specifics of that label change. but obviously, this is a big deal, in terms of diabetes medicine. i think it's the first diabetes medicine, medicine made to help people with diabetes lower their blood sugar that shows a cardiovascular benefit. -- actuallyus awaiting action from the fda and the european japanese regulars as well. if you did- david: that approval, how material could that be for revenue and bottom-line? it's a product that we share under a big alliance that we formed in 2011. we take it going to be an important contributor to the future. this is a class of drugs, these

inhibitors that this is part of that is relatively new in the diabetes space. the class has been growing, and we are pleased that we are the only one in that class that has this data so far. david: let's talk about the other drugs coming down the pipeline. this is the first quarter where you have a psoriasis drug that was on the market. how is that doing? mr. lechleiter: we are doing well. it's hard to make predictions right after you launch. we recorded $19 million in sales this quarter, all that came from the u.s. we are in the process of launching in europe. we just got approval for psoriasis and another condition in japan. i think so far, so good. we'll know a lot more in quarters ahead, in terms of how it's doing. we are very pleased so far. david: you also have waiting in the wings, a new arthritis drug. when you expect have that to

market? mr. lechleiter: that's under regulatory review in the u.s., and japan. we're looking for derogatory action in the u.s. in the first quarter of the next year. this is an oral drug for the treatment of rheumatoid arthritis, we had some very positive findings in the phase three trials, we ranges to launch this product. david: let's talk about is the holy which grail. a big problem, a lot of people affected. where are you on the development of an all-stars drug -- and alzheimer's drug? late 2000 15,: in we laid out the whole portfolio of diabetes medicines. we have a number of different approaches to health timers -- to alzheimer's. the one in the lead is an antibody, we have a study underway now that's enrolled more than 2000 patients. the last patient visit, the

treatment is 18 months, and the last patient visit will be october. we are hopeful to be able to give topline results from the study late in the year. let's go over to the cost side. one of the goals you set is to make sure you have only 50% of sales reps and by orangey -- r nd. mr. lechleiter: we are making good progress towards that goal. in the quarter, we have a special payments astrazeneca, a one-time milestone payment of $100 million based on progress of another else timers -- alzheimer's drug. the total growth for the quarter was only 3%, compared to 9% in sales. as long as we are getting we aree like that, covered it we will get to the 50% goal in 2018 as we promised. david: you are on track. mr. lechleiter: absolutely.

we also give additional guidance to firm up the medium-term projections. we said we expected a minimum through this time, even though we have additional patent expirations, we expect at least 5% average annual growth in revenue. we said we also believe are going to expand our gross margin between 15 and 20, and we said we would resume regular dividend increases. we increase the dividend the past couple of years, after not increasing the dividend during this time we had pads expire, but today, we said we're going to get back to regular pattern of increasing dividends on annual basis. in the second quarter, that was brexit. you will fairmount revenue coming out of europe. how do you expect brexit to affect eli lilly? mr. lechleiter: we expect that to have very little impact, certainly in the short-term, virtually none. in the long term, we want to see how is the u.k. drug approval process going to work, if it separates out from the european process.

we also have some electoral property matters that we're going to have to sort out when the u.k. and europe. i'm confident we can deal with that. have a big research center in the u.k., we will continue to invest. it's been a good place rest of your business. david: you have done a lot of r&d, are you looking at acquisitions at this point and what sort of things might make sense for eli lilly. mr. lechleiter: we are always looking for opportunities. you saw's purchase novartis animal health in 2015, we now have the third largest animal health company in the world. we are always looking in the pharmacy's, mainly to supplement or augment our present in areas like diabetes, oncology, alzheimer's, and other areas. we will continue to be opportunistic, but i think these will be smaller kinds of deals. we are managed in large-scale combinations. david: john, thank you for coming on and talking in such detail about your business. as the eli lilly chairman,

president, and ceo. thank you, david. we are looking at a fed that probably won't leave -- be hiking tomorrow. we wanted to show you two things that talk to that. this is the market implied policy curve, and this is what was the day after brexit. we didn't see 50 basis points for fed fund hike until 1.5 years out. ever since then, the market has slowly re-rated higher, now we are looking about 50 basis points in just about six months. the market is slowly repricing. you can really see that central-bank divergence starting to occur between the u.s. and the u.k., and the two year yield spread. if you take a look at u.s. treasury bond yields, that spread is now about 59 basis points, and the difference between the two is the highest level in 16 years. to prove that point, yesterday we had a pretty bad treasury

auction for two year yields, the weakest demand since 2008. why own to your yields if you're going to see a rate hike sooner rather than later? seen some kind of tightening here, but we are way looser than we were back when the fed hiked in december. three signs point to the fact that the market is slowly repricing a fed hike. the market may be repricing, but the economists, that's a question. we preview the today fed policy meeting and get a look at the u.s. economy with morgan stanley's chief economist, ellen zentner, we didn't see any rate hike for a long, long time .from new york, this is bloomberg. ♪

crude reality. oil plunges to a three-month low and bp reports the biggest decline in four months after posting a 45% slump in earnings. jonathan: central bank in focus,

the fed kicks off the today policy meeting and a bank of england policy maker calls for stimulus. the yen heads for the biggest gain since brexit. alix: i'm with her. bernie sanders calling for solidarity and medicinal injured party. the question facing investors, how politics affect policy for the fed. ♪ david: welcome to the second hour of "bloomberg ." i am david westin with jonathan ferro and alix steel. we are breaking news from seattle. alix: mcdonald's earnings coming out, it looks complicated. in terms of earnings, it looks like they had $1.45 a share, that's above estimates. but you have to back out $.20 of charges for that, so estimates coming in at 1.25 for earnings.

revenue in line with estimates, a little over $6 billion. the real story to me here is what happened to its sales growth. u.s. sales here were up 1.8%, missed estimates. high-growth market, sales, 1.6%, missing estimates. overall, sales, 3.1%, missing estimates. the stock reflecting that, down almost 2% in premarket. we continue to monitor these headlines as they rollout. it looks like it is the comps they'll miss in the u.s., and overall, dragging down the stock. jonathan: not fitting into the wider market, futures flat after yesterday's decline. we are coming off all-time highs the united states. in the fx market with a big action is, the dollar yen is potentially the biggest one-day drop since brexit, a stronger ,apanese ran -- japanese yen number 1.4% on the session. stronger yen, weaker pound, as the bank of england policymaker, a hawk turns a little bit dovish and calls for stimulus,

potentially as soon as next month's meeting. in the commodity markets come the theme of crude lower continues, for a fourth straight day with brent down almost one full percentage point. wti down. core government bonds rallying, treasury yields at the long end of the curve, 30 year yield coming in at about three basis points as the fed begins its two-day meeting. alix: we will be looking at that. let's check in with the bloomberg team for all our in-depth coverage of this top stories. carl riccadonna on the fed, tom giles previewing earnings after the bell, and megan murphy in philadelphia the latest on the democratic national convention. carl, no rate hike expected tomorrow, but as a just outlined a few minutes ago, the market seems the steadily be pricing a rate hike sooner than later. conditions have removed remarkably close to brexit, as you highlighted the

figure at the top. i don't know that we can say sooner rather than later. i think september is still going to be too much for stretch here. there's lingering uncertainty both for the domestic economy as well as the international economy. i think the fed is going to be after to be on hold until the election in november, which then puts the first rate hike coming in december. what's happening here is the fed is making a little bit of a trade-off. they always indicated they want to keep moving gradually towards tighter monetary policy, so they have to do less work later on. but they are making a trade-off, holding up now, i think they will move faster next year as a result. alix: the real issue seems to be it's hard for the market to judge what criteria the fed are looking out, versus back in october, when it seemed very clear. inflation and employment. carl: the fed needs to see growth that is above trend. we should get some indication of that when q2 gdp is report on friday.

we've growth above trend, above 2%. they need to see the unemployment rate holding in and a sub 5% level. and they need to see evidence that a little bit of consumer wage inflation is providing a tailwind to consumer spending. i don't think there is tremendous mystery as to what will push the fed into action, we just need to see evidence of more vigorous growth. alix: fair enough, carl riccadonna joining us in new york. a big day for earnings. jonathan: if had to choose one company you would want the earnings were original quarter, it would be apple. tom giles joins us now as we preview apple earnings. where are we in the apple story right now? tom: it's not a good place. this is the second quarter in a row and we expect declining revenue. that will be the first time that happens in about 14 years. the problem for right now for apple is china. what's happening in china is you are seeing that competitors are coming in, competitors like

xiaomi. we will call up a chart on the screen will show some of these ,ompetitors, xiaomi, the vote all of these have been gaining share against apple in this crucial region accounts for 25%, roughly one quarter of their overall revenue. jonathan: conversation we have had in the last several quarters is this is a company that has become a value proposition, as opposed to a growth proposition. does anything change at apple to make it a growth company again? as opposed to just being a very, very profitable company? tom: i could tell you they need another ipod or another iphone. have thisey do breakaway product, they have gotten so big that it's really difficult to make a big difference. the introduced the watch, and it's doing well. not great, but it's doing fairly well. it's really hard to really move the needle at a company as large as apple. we hear a lot of talk about a tv

product, but they have a lot of problems getting all of the different content providers behind that product. we hear a lot about the car product, that's not going to come along for a long time. and when it does, how game changing can it really be? you have apple coming in and doing things that returning cash to shareholders and issuing dividends, acting like an older company that is not high-growth, as you pointed out. tom giles, in new york, great to have you on the program. interesting day. david: hillary clinton wants to grow stock, ted cruz may not be endorsing donald trump, but last night in philadelphia, bernie sanders did not leave much doubt about who he is supporting for president. here's what he had to say at the democratic convention. bernie sanders: any objective observer will conclude that based on her ideas and her leadership, hillary clinton must become the next president of the united states. see thatow is to

strong democratic platform implemented by a democratic-controlled senate, by democratic house, and a hillary clinton presidency. we welcome megan murphy, coming to us from philadelphia. the contrast between ted cruz and what he did for or to donald trump on the one hand, and what bernie sanders did last night for hillary clinton couldn't be more stark. our hillary clinton people just ecstatic about what bernie sanders did for them? i think they're happy. ecstatic. used they were nervous, they weren't sure what he would say, even senior members of the white house works pressing concern about how full throated he would be in his endorsement. he did as much as he could in his speech last night to bring his supporters on board with the hillary clinton campaign. what has been a rocky and

divisive start to the convention. the question is has bernie lost control of his own supporters? we saw extraordinary scenes with people being booed on the floor, anytime hillary clinton's name was mentioned. sarah silverman, the comedian, in speaking with al franken call them ridiculous at one point in the evening and said they were acting ridiculous. we are watching for has bernie done enough to get his people over the line for hillary clinton. david: it's not just what he said from the podium, but also what he did in terms of the platform. he did get things put into the platform that should appeal to his supporters. are they recognizing that and reacting to that? megan: great point. the platform fight has been instrumental in this battle. we we really saw the two sides come together and try to work out a vision that would be a compromise -- we saw things like minimum wage. we talked about free college, especially on wall street and financial legislation. we did see the platform drift

left, no question. hillary clinton knows that going into general election, she has got to stay somewhat in the moderate lane. the platform is one place he was allowed to exert pretty big leverage. i do think people recognize that, and they saw what he did there. david: besides bernie sanders, wheels over for michelle obama leslie, who was pre-compelling and certainly got quite a response from the audience. let's take a brief lesson. michelle obama: i want someone with the proven strength to persevere. someone who knows this job and takes it seriously. someone who understands that the issues and president faces are not black and white, and cannot be boiled down to 140 characters. david: it strikes me that we heard from the first lady last night, and today we hear from someone who wants to be the first gentleman, if that's what we call him. warmer president william jefferson clinton. , william president jefferson clinton. megan: he's going to try and give hillary clinton a human

face and a personal base to some people who don't feel they don't really know her. a striking about michelle obama's speech, there was a point where she actually choked up and found it difficult to continue, knows when she talked about her girls. as when she talked about two young black women who are grown up in the white house, and looking that will clinton has made it possible to have the first woman hold the oval office. the first woman in the white house. it was an incredibly powerful moment and an incredible personal moment. you want to seize on the same feelings. megan murphy, our washington bureau chief, reporting from philadelphia. we go to a look at the stocks that are moving. a lot happening. we have together it off with mcdonald's, down over 3% after the earnings report. it really was the cop sales numbers that are weighing on the stock. in terms of u.s. cop sales, 1.8%, that was amiss. overall cocktails, 3.1%.

the high-growth market, 1.6%. all those numbers just mean the dolls has missed on their, sales in regions that are very supportive for their company. also, their average move on , we are day is 1.7% almost double that now in premarket trading. if the stock opens here, it will open a load the 50 and 100 day moving average. quarters,our mcdonald's all beat on earnings. it's a sort of a big drag on the stock. you can back out some expenses and whatnot, but $1.45 is what mcdonald's made in the last quarter. i would highlight the big industrial mover of the morning is also caterpillar. slightly, it was a earlier on the initial release, but the company did cut its full-year forecast, saying it is cautious entering the second half of the year. he does have a lot of exposure to commodities, which leads me to bp. the stock is down the most since mid february. that company basically lower

production, weaker profits, weaker refining margins, more debt. that sums it all up for what's trading the stock now down over 2%. jonathan: yet still up over 21% so far this year. alix: good perspective. jonathan: an incredible rally for energy companies. coming up, the fed kicks off a two-day policy meeting today. any janet yellen provide insight into the next steps? ellen zentner joins us next. from new york city, for viewers worldwide, this is bloomberg. ♪

alix: this is "bloomberg ," i am alix steel. the two-day fed policy meeting today, the first since the

brexit vote. if you think the fed will provide clarity on the timing of the next hike. , there isner joins us some indication that point to the market repricing rate hike sooner rather than later. inflatione a look at and jobs, the fed should be hiking right now. why do you disagree? ween: we disagree because like to look at financial conditions in the context of your underlying growth and inflation in the economy. we feel it's best reflected by the adjusted national financial conditions index, that the chicago fed puts out. if you look at that index, financial conditions are about right to support growth and inflation in the economy. getting that all towards the fed's goal. the important take away there is that for the fed to maintain the proper amount of support that would give it confidence it will hit its outlook, it's got to remain on the sidelines and keep

those financial conditions favorable. alix: the big question that we were talking about earlier is a divergence between central banks. without we will be able to do it, then we weren't going to be able to do it, and now it seems like we can't anymore. you take a look at the u.k. versus u.s. two-year it's bad -- two year yield spread, do stuff like that prevent the fed from hiking? ellen: it paints a picture of a globally interconnected economy. financial conditions are a broad matter for financial conditions here in the u.s., and vice versa. what the fed does matters. this is a fed that has increasingly taken that on board in their deliberations. we saw that when international conditions was inserted as the statement in january of last year for the first time ever. a work in progress, and evolution of the fed, if you will. the recognition that what they do matter, and with the rest of u.s..rld matters for the

jonathan: do you need to see a deterioration in the u.s. economy to reconcile the economics with the bond market view that the euro could catch 1% on the u.s. 10 year? our growth forecasts have been well below consensus for a very long time, and what we have seen over time is that we maintained our growth forecasts, for the economy to grow around 1.5%, while consensus in the fed has consistently come down. the biggest change rest in this latest outlook that we released thehat we took the fed off table, further rate hikes off the table and move the fed to the sidelines. but we see as growth is tracking in line with our expectation for around 1.5% this year. that's below the fed's expectations. if the fed wants to get anywhere

close to their 2% next vacation for growth and be confident that inflation will return back to their 2% goal, they've got to remain on the sidelines. the only way to do that is to provide an even greater degree of support through financial conditions. and that means no further rate hikes. where are we in the business cycle and credit cycle, and to what extent should the fed be taking that into account? ellen: very good question. we have been focused on this late cycle theme, that the business expansion has moved into the late phase of its cycle. that is an important phase of the business cycle, generally marked by slowing growth, credit cycles its turn, slowing job growth. importantly, monetary policy that was tightening, the fed takes into account, because if you've got growth that is slowing, why do you need to slow it further? growth is coming in below where they think the economy's potential is, do i need to raise rates to slow and overheating economy back to potential?

absolutely not. in terms of the credit cycle, i would for the corporate credit cycle at a different spot than where the consumer credit cycle is. that should give us comfort that the business expansion, even though it moved into the late phase, that late phase can last white some time. consumer credit cycles, we are seeing small chunks in the armor , particularly in rising delicacies. overall, i would but the consumer more midcycle, where's the corporate credit cycle looks more late cycle. allen, always cheery in the morning. ellen zentner speaking with us. coming up, will donald trump or hillary clinton be better for the economy? we break down fiscal policy, next. this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg ."

i'm jonathan ferro. it stayed to immigrant national convention in philadelphia. it was better for the -- it is day to of the democratic national convention in philadelphia. who is better for the economy, donald trump or hillary clinton? libby cantrill joins us now. simple question, the bond market seems to want more treasuries and yields are very low. it was going to give the bond market what it wants with more debt? libby: early days in terms of the policy agenda. we don't know much on donald side.s hillary clinton wants to simply the economy through a big infrastructure bill, up to $500 billion. donald trump has sent some similar things, that he also wants to spend money on them for structure. at this point, we don't know many more details. in terms of donald trump's plan. think the big question is you can't do this unilaterally as

president great enough to have congress's approval. the big question is, even though hillary clinton may want a simile the economy and may want in order toe debt invest in the economy, would she be able to? with the republicans in the house cooperate with her. donald trump has said he's going to get $10 trillion in tax cuts over 10 years, he hasn't has said how is going to pay for that. you clinton has been open about saying she's been to raise income taxes for the upper brackets. which one is more fiscally responsible? issued thisd trump corporate individual tax plan that would cost $10 trillion, that he walked away from and said added recognition that would add to the debt, he was saying he wanted to exhaust $19 trillion of public debt. he is revamping that. his advisers have said his new plan would cost around $3 trillion. in terms of hillary clinton, she has been pretty consistent that she would raise the individual side.

corporate tax reform, there may be more wiggle room. at this point, these are just policy platforms, and as i said, it's really going to be predicated on if congress cooperates with those candidates. alix: which equals more uncertainty. you took a look at the consumer sentiment, and what the impact was during the bush gore election cycle. the blue circle, you have the recession and the uncertainty. why hasn't the market priced this election cycle uncertainty? i think with that example shows is that while leading up to the election, we can see election uncertainty impacts in the soft data, the survey data. we have seen consumer sentiment surveys show that households are noting a surge in the number of negative reports they hear about the election, the small business optimism survey shows that tax policy is floated back to the top of businesses list of concerns, which is normal in

election year. it typically doesn't bleed through to affect the real data in the economy, the hard data. example in 2000 is a prime example of just following the election, how it can have an impact on the real economy, where sentiment tanked and nominal consumer spending tanked during the five weeks that it took lawyers to argue in front of the supreme court and figure out who was going to be the next president. to me, that is what i most focused on. some kind of event like that occurring again between donald trump and hillary clinton. -- we are where there in limbo and the economy comes to a standstill. the: -- david: one of things that struck me in your work is the number of times a sense roosevelt we've had fiscal still is, and it's just been once without recession. to underscore

that we are focusing on what might happen, regardless of who the next president is. foribby pointed out, and structure spending is low hanging fruit, sending that both candidates have said they want to do. we focused on what those impacts would be, and have drawn a line of difference between increased federal spending and fiscal stimulus on order of these past big large structural changes in the economy, which were a game changer. i don't think there is appetite for that. alix: much more coming up with ellen zentner and libby cantrill. apple is gearing up for earnings. will the results give shares a much-needed boost? is next, this is bloomberg. ♪

e ali we hadx some big movers in lower.market: mcdonald's

also taking a look at the casino stocks. wynn, las vegas sands. las vegas sands had earnings. you had a mike trout turnaround led by recreational gamblers and tourist. macau turnaround. this stock seeing a huge pop. first sales growth for this company in a year. revenue with 3% better than estimated. still moving after the post-market numbers came out yesterday. are seeing a lot of competition and therefore pricing pressure ports hepatitis its hepatitis c drug. quite a few misses in terms

of estimates and delivery on earnings. largely stable. , the dax upfirmer by .4%. the reader across from equities with aon is the story weaker pound, potentially more stimulus coming from the bank of england in the coming weeks. for the bank of japan, it is a much stronger japanese yen. the japanese yen substantially stronger. potential the biggest one-day drop since brexit. maybe the helicopter money will not be delivered in a big way. stronger dollar story of the -- $42.58e of weeks for crude. in the bond market, yields coming in on the long end of the

curve, 1.5 basis points. let's get to the headlines outside the business world. : supporters of bernie sanders undermined the image of unity the democrats hoped to project at their convention in philadelphia. many were still angry over revelations that party officials backed hillary clinton over sanders in the primaries. balancedt, sanders and -- sanders announced he would back hillary clinton but acknowledged there were still hard feelings. in thispeople here convention hall and around the country are disappointed about the final result of the nominating process. i think it is fair to say that no one is more disappointed that i am. senator elizabeth warren

trashed donald trump, calling him a man who cares only for himself every minute of every day. islamic state is claiming response ability for the murder of an 84-year-old french priest. they killed the priest and wounded another person before police stormed in. both attackers were killed. president francois lond -- ollande without to vowed toamic state -- fight islamic state through whatever means possible. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.

i'm shery ahn. this is bloomberg. david: let's return to the race for the white house and in what investors are watching right now. presidentecutive vice still with us. one of the questions is apart from who is going to be , how important is it to investors that there be a divided government? as libby pointed out, you get a divided congress and no one is ive the next president a blank check. the realization for investors is they have to let go of this assumption that we are going to get some great big sweeping fiscal stimulus like the past policies we looked at.

something that is a game changer for the outlook. investor still have to come to that realization and stop hanging all hopes on their being this big package. we all want fiscal policy to play a bigger role. monetary policy has just about run its course and this is necessary, but i don't hold out a lot of hope. i think everyone would like a bigger package. some investors would like a divided government. it removes a lot of uncertainty. is that what a portfolio manager at pimco is looking for. we are just trying to analyze what will likely happen versus what should happen. we are a bit more optimistic that something could get done. electorate is saying they want

washington to work again and fiscal stimulus, infrastructure could sway the electorate that the president is working in their favor. david: one thing the congress has to get involved in is trade. we have some stark differences right now between the candidates were donald trump wants to pull back on trade agreements. how important is that to investors? this is something that rubs investors the wrong way. you talk about protectionism, there is no and two studies showing that is bad for the u.s. and the global economy. jobsf our manufacturing tied to exports. it is something we and investors rhetoricg it is strong

on the campaign trail and a sexy topic, but it will not have any bite after we elect our new president. jon: that is what is winning the the worldss right now. >> both of them have walked away from being more supportive of trade. the most practical implication of this rhetoric is the transpacific partnership. there was some hope that might be brought up in the lame-duck section -- session of congress. that looks very unlikely at this point because of this rhetoric. hope the rhetoric on the campaign trail is nonsense year, but it has been consistent. he has been against free trade

since the 1980's. there is not much to show his rhetoric will not be the reality if he is elected president. the level of specificity about their economic plans -- we have a fair amount of specificity from the clinton camp. >> it is very difficult for us to put our finger on exactly what expected economic impacts would be an leaves us guessing. we don't get the first presidential debate until late september. after labor day is when the polling becomes more robust. it may not be until then that we are able to get more concrete sons out of the trunk camp

we can do more apples to apples comparisons. thank you both very much for being here. mcdonald's shares down in the premarket after reporting salesthat same-store growth missed estimates. an overweight rating on mcdonald's coming your price target is 135. this is weakness in the u.s., their high-growth market. what happened? >> there was some broad-based weakness. they did point that out that although all-day breakfast to , therer them in the u.s. was a softness across the industry that hurt them as the quarter when along.

alix: what happened to all-day breakfast? we thought this would be the killer thing for mcdonald's. >> it was a big boom. it was very impressive, they are still getting a modest benefit from that. this is roughly half the breakfast menu being offered all-day now. later in the year, they will offer a full all-day breakfast menu. that could be something to help them pick back up toward the back end of the year. at 123,e stock is now below the 100 day come almost below the 50 day. i think it bounces back fairly quickly. withis type of market

choppy fundamentals, there's a s looking foror that quality, that safety. storyve every franchising -- a re-franchising story. they still did beat earnings. i don't think the weakness lasts long. an analyst calling a casual restaurant recession right now. you agree with that call? >> the data has not been great, but we did see one of the biggest booms in all of restaurants led by the quick service restaurant sector. there is definitely political .ncertainty also, the gas price benefit come a lot of things that have come

together. the economic fundamentals are pretty good. to us, yes, we are seeing a lull now. that is after a big boom. we can come back. alix: is this a first quarter story of 2017? >> it becomes a story in the fourth quarter and into next year as well. that's why you will see investor appetite after today. you have this multiyear turnaround story with free cash becomeproving as they that asset light model. mcdonald's stock down over 3% in premarket trading. jon: the world's most valuable company reports after the close.

will sales in china way on results once again or will the iphone 7 come to the rescue? we are trading at 150 basis points. does --t end repricing we have come down on the 30 year. what that means for growth and inflation. we will debate throughout "bloomberg ." ♪

alix: this is "bloomberg ."

--ing up in the next hour is "bloomberg ." apple shares on pace for their biggest yearly loss since the financial crisis. the company releases earnings after the bell today. for more, we are joined by brian white. he has a buy rating on apple. $189.e target of tell us i you justify that price target. franklin we've used a 17 multiple. 16 market is trading at times. -- brian: we've used a 17 multiple. the market is trading at 16 times. david: it has been a growth stock.

is it still a growth stock or turning into a value stock? brian: if you look at iphone and fiscal 15, it grew 37%. downyear, we are modeling 11. what we are experiencing is difficult cost after the bigger iphone 6. 7 will return the company to growth in 2017. enormousere must be pressure on tim cook and apple. what are they going to do to create something we must have? >> that is a great question and that is why apple has the capabilities to do this. they have a digital matrix of hardware and software but one

building connected devices, 2 million apps on the app store and they can enter your areas -- new areas. they have an ecosystem no one else has. alix: that would require them to make some big acquisition. brian: an automotive, they are clearly investing. in wearables, they are the number one smart watch the world. i believe they're working on robotics. you saw a personal robot unveiled -- an area apple could be involved in in the future. you've got tim cook, he really drove that iphone sales, gave us the apple watch. do we need somebody else to drive apple into a new kind of

business? >> over time, leadership changes. i think tim cook is fine for right now. getting a bad rap in the near term similar to what he did in the summer of 2013. around apple doom is very similar to what we saw in 2013. iphone bottoming in the june quarter, sales cycle bottoming. this is the time when people are getting gloomiest around the story. david: they went into china and were fairly successful. they have some real competition .ow are they limited in how far they can expand internationally? >> i don't think so.

in china, they will enter the tier three through five cities. that -- they up can generate revenue in the next five years. alix: the iphone still represents two thirds of all apple sales. time tohad a lot of diversify that and help themselves and they have not done it. what is your confidence apple can grow in the next 10 to 15 years? >> very confident. their competitors will fall by the wayside. the iphone has been so super successful -- ipad has been successful. it is a huge business. , if that was a stand-alone company, you would say that is a home run.

the competitors are not making the profit to invest back into the business to go into new areas. thank you for being here. up, we will show you which indicator tends to direct the price of oil. this is bloomberg. ♪

jon: time now for battle of the chartsjon:. joe weisenthal with alix steel. the big things going on in the financial system right now has been the steady increase upwards over the last several weeks in short-term bank funding libor grinding higher

all the time. when bank funding costs rise, people get nervous. , it iswer in this case not something about the banks regulations are causing funds to move into safer securities. these regulations were put in place during the crisis. goldman sachs pointed out as evidence the fact that people are not too worried about the banks and financial services. you would expect credit default swaps to rise. that is not going on here. you can see spreads have continually been going down over the last month when even as libor rose.

alix: i'm looking at oil prices, what's been happening over the last two weeks. this blue line is the dubai 1-2 month spread. dubai is a good indicator of what asian demand is doing. those spreads have fallen. is due to oversupply or weak demand in the front month. the white line is the oil price. oil prices eventually rolled over. here, you have the dubai spread starting to sell off. arertheless, oil prices rolling over. david: forget me, alix.

i'm going with joe. normally when libor goes up, you get really nervous. i really like this chart a lot. the my vote goes to joe for same reason. i read the same story and it took me 20 minutes. your chart tells the story. it only took five seconds. coming up in the next hour of "bloomberg ." ♪

david: wedavid: are just 30 minutes away from the opening bell in new york. this is "bloomberg ." we've had a lot of earnings. we have the doj coming up. we have a lot to cover. yen ree dollar rating lower. alix: yes and he case schiller composite index looking at home case schillers&p composite index looking at home slightlyming in slo lower than estimates. in terms of those home price index you're on your coming in over just 5%. not seeing much of a market reaction yet. we did see a backup and yields housingwo-year continues to be a stronger point.

the re-rating on the front end of the all caps is an interesting story today, as is what is happening in the fx .arket a much stronger japanese yen. potentially the biggest one-day drop since the brexit decision. computersity market have been stable and equities have been firm. -- futures have been stable. two-year yields up, 30 year yield coming down. market, soccery session for a fourth straight one with brent and of uti down. wti done. -- brent and wti down.

on this busiest day of this earnings season in terms of the number of boards coming out, we have apple and twitter after the bell, we've already had a lot, including mcdonald's out with numbers that were disappointing. same-store sales growing by a smaller amount than had been estimated. u.s., a slowdown in sales growth. increase. this is not just about mcdonald's, it is about a bigger slowdown in restaurant sales. recession restaurant in the works. that could be the canary in the coal mine for a broader recession in the bigger economy. of differentber

catalysts for this current slowdown come including u.s. politics, terrorism, social unrest, global geopolitics. a downgrade of a number of .ifferent restaurant stocks abigail: first, gilead sciences, shares plunging in the premarket. their worst drop in three months . analyst did speak to an who said he was bracing for a miss. that wins we've seen in the first quarter and second quarter are very likely to expand into the third quarter. look for this one to pressure the biotech sector.

starbucks shares popping higher in the premarket after goldman added starbucks to his conviction by list. the cons could accelerate into the fourth quarter. valuation is attractive -- the comps could accelerate into the fourth quarter. we are higher, up by .1%. ahead of the boj later this week. bp shares down 3% earlier. the first major to report earnings. the were crude prices continuing to erode income -- lower crude prices. the beer industry, a be in bad sweetening its bid -- a be in

inbev sweetening its bid for sab miller. the pmi did on friday showed a -- data onost brexit friday showed a big slump post brexit. meeting.s his last he's got the itch. let's turn back to the data. what this means for the u.s. economy.

efficiency, productivity, let's talk about the economy. has beenin the u.s. upside surprise. what do you make of what's happening? ? we will bounce back in the second quarter, be a bit above 2%. we will average out a little below 2% for the entire first half of the year and then average around 2.25% for all of 2016. it will not be a great year or more will your. -- or a horrible year. alix: the fed it should be tightening for the first time since 2007.

it looks at jobs come inflation, financial conditions. we finally tipped into the fed hike cycle. overlookcan the fed the rising inflation, better and general financial conditions not as tight as they once were? bob: they can overlook it for a long time. there doesn't seem to be a case for them to sit back and do nothing. if you go back to why they raised rates in december, everything they looked at in december is better now. financial conditions are much looser. the labor market is stronger. housing looks fine, consumer spending looks great. these are not times you need extra narrow policy tools.

i think they should be raising rates this week. david: if you take away the extraordinary measures, wherever -- where would 2% be? present t we will come in about 2%, it's been 2006 since the was economy had a three handle on it. it's been nine years since we've had a year with 2% inflation. they can afford to sit back and let things run hot for a while. conditions were tight a few months ago because the market was told you will get four rate hikes this year. market has taken a complete about turn and the fed has joined in.

that's why financial conditions have eased. >> that's the problem. in the market goes from one side to the other and the fed goes from one side to the other. the data is getting better, the inflation numbers have gotten better, we have gotten back on the financial market environment . and theyk they need to will start the clock going. david: if you went back before the great recession and said we would have this kind of monetary policy, you would have said inflation would be off the charts. yet, we don't. >> it is not secular stagnation,

it is excess supply. i don't think the fed should be doing it. unfortunately, they believe we are still in a world of excess demand. the markets don't think they should be raising rates in the fed keeps on jumping in the market swings from one side to the other. we will come back and talk about exactly that. , robert schiller will be here at the top of the hour. shery: bernie sanders supporters ignored the pleas not to protest on the opening day of the democratic convention. overwere still angry

revelations that party officials favored hillary clinton in the primaries. sanders made it clear where he stands. >> any objective observer will conclude that they thought her ideas and leadership, hillary clinton must become the next president of the united states. shery: senator elizabeth warren urged liberals to vote for hillary clinton. islamic state is claiming responsibility for the murder of an 84-year-old french priest. they killed the priest and wounded another person before police stormed in. president pledged to fight islamic state using all means possible.

relations appeared to be warming up between turkey and russia. will travel tont moscow to month to talk with latimer bruton. -- vladimir putin. -- u.s. and nato allies global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm shery ahn. this is bloomberg. alix: coming up, u.s. treasury market starting to show signs of slowdown. the weakest demand for two-year treasuries since 2008. this is bloomberg. ♪

alix: it is the chart to watch into the fed meeting tomorrow. the yield curve at its tightest since 2007, the tightest and almost 10 years. money coming out of the front end and going into the long and. what does that tell you? >> the market does believe the fed is still committed to normalization and the front end of the curve is relative to where the fed fund target is going to. the long and going down does not tell us there is an expectation of recession coming. it tells us there is a pool of ,oney that is being printed

half $1 trillion every three months searching for a home and searching for a yield. over 85% of the world's bond markets yield less than the 10 year treasury. alix: if the fed does decide to hike, how did they get along -- the long end up? >> they will have an even more flattening curve, which will be indicative of a policy mistake by the federal reserve. thoughtshould have about normalizing their portfolio before normalizing interest rates. we have no concept of what normal interest rates should be. ofdo have a better concept t how much liquidity should be in the system. jon: we spend a lot of time the curve is

so flat. -- ifter yield curve flatterield curve -- a yield curve, what are the consequences? model getsitability called into question. net interest margins shrink. rates -- thatng is one of the policy expectations for this week, that perhaps the boj will move to negative funding rates for banks so they can lend out. jon: why aren't they using balance sheet to address this? a problem that is quite clearly hurting banks and net interest margins. >> they have been very reluctant enngo back -- that has b

one of their big problems. in their mindset, they have no anticipation of ever selling anything out of their portfolio. most people think the big news all come out of japan, not washington. most people think the boj will lead towards more qe. they arebelieves likely to surprise, hold back the ammunition. he likes to surprise markets, it is too close coming on the back of the last major move and he has to set the stage up for an even bigger bank in terms of the currency. he needs to know how big

the fiscal stimulus plan is. until he knows that, he doesn't know how many bots he has to play with. way. backs out of the they will have more details next week. alix: look at monetary policy. they will do some stuff. >> the market is not set up for the boj to do nothing. steve, thank you for joining us. a very fascinating 48 hours. bob, you are sticking with us. shares of mcdonald's falling in premarket. the fast food chain missing estimates, concern the industry is headed for a recession. details coming next. ♪

david: this is "bloomberg ." a raft of earnings arrived today. with us, oliver renick.

mcdonald's came out today, disappointing. oliver: consumers trying to parse out what's happening from retailer data and what's there has been a bit of a slowdown investor transferred wendy's and other competitors putting discounts out there, trying to draw in less.ans to pay a little riding the coattails of all-day breakfast for a while. it and it's there. how much can we keep adding?

almost a year after implementing that come investor start to look at what they will be looking at in terms of their guidance. revenue as same-store sales missed as well. i forget what bad shape mcdonald's was in not too long ago. the new ceo brought in the all-day breakfast, really turned around quickly. fixthat just a short-term or does he have a longer term plan? mcdonald's is a fast food restaurant. they have their menu. when you overhaul the menu, that is a huge part of it. when you come in and miss sales expectations by .5%, that is a big deal one of the trans-we've trends we'vef the

seen, people reacting to earnings season, it takes on importance when you miss or beat. a restaurant recession. is that a real story right now? oliver: i think it is important. we have two pools of information you can draw from. economic numbers, retail sales my housing -- retail sales, housing. looking at clothing, looking at retailers, looking at fast food. well may be a thing. whether it is specific companies are broader trends -- or broader trends.

,lix: caterpillar and 3m industrial behemoths. read --lar with a good >> the bloomberg commodity index is up. strengthhave that combined with the guidance cut from caterpillar, that makes you question, well, you cannot take the tailwind of the commodity strength overall, what is the read drew on demand around the world? guidance,nies cut that yourls may be corporate board members talking about global concerns, what will they be doing as far as cap x?

alix: the strong dollar was supposed to be the q1 story, not the q2. oliver: that was the story as we went through this earnings recession. . jon: thank you very much. bp earnings dropping 45%. big numbers coming from the oil majors. in the bond market, the yield flattening. this is bloomberg. ♪

jon: this is "bloomberg ." moments away from the opening bell. features a stable, but marginally negative.

dow futures up by 20 points. in europe, a second straight day of gains. a fourth straight day of losses in the crude market with wti down, and 42 handle. the curve flat, flat, flat. yen as we japanese headed towards a boj decision.

+++ earnings day come and seems to focuses on individual companies. all the earnings that have come out are equally not a lot of change overall in the markets. all three of the major averages not even moving .1% at this point. dupont is one of the companies reporting this morning. the company raising the lower end of the full-year profit forecast, second-quarter earnings beating estimates. the company's been cutting costs to boost profit. is on track to complete its merger with dow chemical later this year. we were are watching eli lilly this morning -- we are watching eli lilly this morning. shares up a little better than 1%. growing u.s. sales of cialis and a diabetes treatment. we have industrials out with numbers this morning. different commentaries from them. united technologies raising the lower end of its profit forecast. it had been cautious earlier in the year.

the ceo said it's going to be a good year. we have not raised the top and because it is still early. a lot of things going on from a macro standpoint. seeing sales on the lower end of its prior forecast. out the big industrial companies cutting its outlook for sales growth for the full-year. still seeing a negative impact from the stronger u.s. dollar. mcdonald's coming up with comparable sales that missed estimates. a slowing of growth here in the u.s. this is just a small sampling of all the companies up with earnings. like rapidfire this morning. the other big mover in the market is oil. $42.91, a round a three-month low -- around a

three-month low. global refining margins had moved higher but are now dropping. refiners are getting less for supply,uct they creating a crude glut in the market. when you take a look at the global refining margin chart, what are the bigger ramifications of that? : that is the big story for the second quarter, the release of earnings for big oil companies. ap warning in the second quarter -- bp warning in the second quarter -- think about the oil company as an airplane, they were flying for the single desk with a single engine for the last year.

now, that engine is also showing trouble. we will have a big problem with big oil reserves. we can see even lower prices in the second half of the year and then refining even lower and that is the indication of bp. that is trouble for the major oil companies. upstream in trouble because oil prices are too low and downstream no longer the hedge because the margin is too small. that means they will pile on more debt. we spoke to bob dudley about a quarter ago and he said he is comfortable with the debt. this.tioned historically, back to where it had been previously. , does that tell you

these executives are very comfortable with a lot more debt? >> the executives are certainly comfortable with more debt because low interest rates have sectorsitive for the oil . that is making some investors uncomfortable. thestors are happy to take deal and no one is having to pay , a big price for that increased leverage. dollarsnother billion -- the ratio at the highest since 2002. by the end of the are, if bp puts another billion dollars of

-- as much as the other companies are taking. with interest rates at ultralow levels, he's happy taking that. your expertise, --liburton and slumber j slumberge -- >> when you get upwards to $50 a barrel, we have seen rig counts increase. there are companies out there that can make money at $50 a barrel and they want the revenue. at $40 a barrel, it's not so clear what's happening. i don't think the story is not

so much the big integrated companies from an investor when you look at , of coursecompanies we will fund them because they have unlimited resource. companyy for energy debt still resides in the high-yield market. that is where the stress is come or the leverage is, where the restructuring will occur this year. alix: to have been opting to issue equity investors seem to be more than happy to give over money to those hield companies -- high-yield companies. and thirst for yields prolonging the rebalancing many have been calling for in the second quarter and third quarter of this year. >> it goes back to the old rolling loan

gathers no maoss. i think we are going to see a lot more restructuring in the energy patch into your end -- year end. jon: these guys plan over decades. >> we have seen bp continued to invest in a way that shell has in planning for growth. bp is investing very little in , but certainly exxon seems to be at the forefront of the investment cycle. they are not that fancy.

that makeprojects money on a steady basis. exxon this week has been talking about a potential partnership .ith saudi arabia buying bg.ave shell have that diversification happening for big oil, what will be the theme as exxon and chevron wer report? >> whether they have been unable to whether the slump in the refining market. lookingr thing we are at closely, how much cost control their bringing. bp has been quite good on that. the firstis one of

ones to talk about lower for longer oil prices and why cost control was necessary. we need to see that companies are able to reengineer projects to make those projects work at much lower oilprices. bob dudley said the big project in the gulf of mexico was initially thought to cost about $20 million. now, bp thinks they can build it for only $9 billion. copier bloss -- hobby air blas, thank you for joining us today. this is bloomberg. ♪

david: this is "bloomberg ." coming up later today, andrew left. founder of citroen research. coming up, it is "bloomberg markets." what's the biggest name of today's show? mark: the house price index that came out 40 minutes ago. house prices slowing in the united states. we will speak to mr. robert schiller. it will be fascinating what he's got to say about the housing market and today and tomorrow's

fed meeting. us onhamed el-erian joins his latest piece, what the fed will and won't do this week. rm's other bees -- rm's other sotherby's on their latest classic car auction. get your checkbook out. jon: never going to happen. mark barton with the itch. and he wants a car.

julie hyman has the stocks. julie: let's take a look at the potential deals and done deals we are talking about this morning. has gotten aancial bid from an undisclosed bitter for aundisclosed bidder well-respected financial .ervices company yesterday andped are jumping again today. we have seen an uptick in acquisitions for small and midsized banks. anheuser-busch has raised its cash bid for sab miller to account for the pound's plunge.

you see anheuser-busch trading a bit higher. .ab miller a bit lower jon: let's head to the nasdaq were abigail is standing by. abigail: the company's blockbuster blood cancer drug did not extend the life in patients who have a particular type of lymphoma. city has removed the drug out of its model and trimmed its price target sing the next a data point for the company is data due out in september. . a huge drag on the nasdaq, gilead sciences did miss second

quarter hepatitis c drug estimates pretty significantly come also lowered guidance. one silver lining here is the fact that the hiv business did offset some of the weakness. apple earnings out after the bell. the one thing you care about today -- tom giles is joining us now. iphone sales could be down 15% year on year. how can apple drive smartphone growth? >> they have to come out with a new game changing iphone. enough elves have and whistles to get people to come out and buy it?

they really have to make it special. they're going out of their way to say it's not that special. >> we have not heard a lot about the next one that is really making a super excited. , theytalked about earlier are facing a lot of competition in china where local manufacturers are developing their own phones, cheaper, and they have really cool features. they're going for it and buying the cheaper ones. jon: maybe they are struggling to innovate their way to growth. i wonder if they could spend their way to growth. one thing they are doing,

returning some of the cash to shareholders. company's high-growth is starting to act like an old dividend paying company. they cannot go out and make a really huge acquisition. we love to talk and speculate, the idea of apple going and buying a tesla, for example. that would take apple far from their knitting committees consumer-electronics. would tesla really help apple? david: another field would be content. we all get that content over our iphones.

wouldn't it make sense for vertical integration for them? >> you could go out and do that. they want to be content agnostic. they want to provide everybody's content through the iphone. twitter has been pushing more and more into video. that is the match that a lot of people would like to see the make. we have no evidence that is happening. jon: thank you very much. earnings coming after the bell. coming up come the latest in philadelphia. speech -- wasn't enough to help unify the democratic party -- was bernie sanders' speech enough to

help unify the democratic party? ♪

david: this is "bloomberg ." it is now day two of the dnc in philadelphia. if the afternoon, there was a lot of dissension -- there was a lot of dissension yesterday afternoon. willy objective observer -- is to see that strong democratic platform implemented by a democratic controlled senate, a democratic house and a hillary clinton presidency. thed: we are joined now by bloomberg washington bureau chief, megan murphy reporting from philadelphia. one test will come tonight with

the rollcall. what are we expecting in that rollcall vote? thatm almost whipping rollcall vote -- this is almost the moment everyone watches. we will see if his supporters try to make some last stand on the floor. what is the hillary clinton camp doing with respect to this right now? do they think they are passed it -- past it? the dead body in the form of debbie wasserman schultz is on the floor. that's stepped over it and move on. they're looking for bill clinton to reset the agenda tonight. they need to get around this message of positivity and optimism.

david: what do we expect from bill clinton and who else is set to appear? >> mothers of victims of gun violence. putting that issue at the center of their movement. from bill clinton, soaring rhetoric, making you feel like you are one and part of the same movement. he needs to personalize hillary clinton, personalize his wife, personalize the mother and grandmother. for those at home who are still not sure. sure on him, not so sure on her and he needs to convince them. alix: we will be watching the dnc later tonight. before that, we get earnings from apple and twitter. they are reporting after the bell.

it's all about iphone sales and revenue. for twitter, user growth. earningswait apple after the close. dollar yen the one to watch ahead of a bank of japan decision. ast over 24 hours away from decision, a flatter yield curve. ." thank"bloomberg you very much. this is bloomberg. ♪

>> it is 10:00 a.m. in new york. from new york, i am vonnie quinn. from london, i am

mark barton. this is "bloomberg markets" on bloomberg television. ♪ vonnie: we will take you from san francisco to detroit to philadelphia. london and paris in the next hour. first we get to u.s. economic data. julie hyman has the latest from our desk. ahead of estimates, consumer confidence index coming in at 97.3. 96 is what economists had predicted. a little bit of a decline from the prior month. home sales rising from an annual month overcrease month, 3.5% and the prior month, this was for the month of may. may, thismonth for follows on the heels of the