>> from bloomberg world headquarters in new york, i'm scarlet fu. >> i am amanda lang. we are covering stories from washington to frankfurt. below 40 threeng dollars a barrel ahead of major central bank meetings. the latest wave of corporate earnings in the u.s.. after a united front in philadelphia, speakers at the democratic national convention will try to address one of hillary clinton's vulnerabilities, that voters have not warmed to her. quarterwood third results with iphones still the biggest factor to the bottom line. will they be able to reduce falling growth? u.s.e halfway through the trading day. we need to go to the markets where julie hyman is keeping an eye on stocks.

today, they are holding at the bubble. julie: we have seen some acceleration of decline. people are focusing on earnings. we will not hear from the fed it -- fed until tomorrow. actually, things are bouncing around. scarlet is right. we have all of the corporate earnings to shift through, it is the busiest day in the terms of the number of earnings reports. donald' numbers were disappointing compared to estimates. 3.1% will believe. analysts are looking for 3.6% gain. if the united states we saw a slowdown of 1.8%. it was 5.4% the prior quarter. analysts are saying there is an interest-free wide slowdown that calling for a

restaurant recession. a slowdown from a number of different factors from u.s. politics, terrorism, social unrest, global geopolitics, and economic uncertainty. that this is the canary that lays the recessionary egg. leadingld the a indicator. downgrading a number of stocks. 11 restaurant stocks. chipotle going to a cell. darden is down. cheesecake is down. this is bloomberg intelligence. this looks at the comparable sales. same-store sales for the broader restaurant industry. that is the white are. so-called quick service restaurants like fast food restaurants. this is a two-year chart. you can see the downturn. in the past two months the numbers have gone flat to down. this is what the restaurant industry is coping with. ,lso, consumer companies

tobacco companies, reynolds american missing estimates. hurt by lower cigarette sales, volume, and acquisition expenses. it and other cigarette makers are falling today. it is not all about learning. we have mobile life falling. they say that the contract with tesla will not extend e.on to the current product they have been working on. the cto saying that they continue to support the current tesla auto pilot product line, but it is not continue. mobile life comparing some of the earlier decline. they say that it is a buying opportunity. also speculating this is mobilize decision to terminate this, not tesla's decision. >> thank you. >> let's check in on bloomberg first word news with mark crumpton. mark: thank you.

islamic state claiming responsibility for a killing at a church in northwestern france. two attackers took hostages during morning mass. they stabbed to death an elderly priest before they were shot and killed by police. another hostage was seriously injured. president francois hollande says all means must used in the fight against the islamic state. relations are warming up between turkey and russia. the turkish president will travel to russia next month for talks with flat amir putin. turkey praised russia for its support since the attempted coup on july 15. the united states and other nato allies have criticized president aired on -- president erdogan for his post-coup crackdown. burned more than 50 square miles north of los angeles. at least 18 homes have been destroyed. it is day 2 of the democratic

national convention in philadelphia. one of the party's most enduring presidents will be at the center. former president bill clinton will address delegates, and they hope you will help the hall move on from a temperature was open a win bernie sanders' supporters were energized by the departure of debbie wasserman schultz and a speech by their candidate. they made it clear they would not go quietly. his delegates will be able to show support during a bull call vote. tim kainekers include and nancy palazzi -- nancy pelosi. joining us from the side of the dnc, from what we've seen and aboutso far -- let's talk how the democratic party seems to be folding. >> right. this is a very important invention. steady,what has been a

but remarkable, shift to the left. a more progressive direction. that is after moved to the center in the 1990's. you have hillary clinton moving left of president obama on immigration, financial reform, health care, workers rights, and so on. what you are seeing are they shifts being propelled by the country becoming younger, more ethnically and racially diverse, less religious, and more progressive. you had the campaign of bernie sanders that propelled this through the last year and put a capstone on the scene of the isocratic platform that probably the most liberal in its history. this is the democratic party involving as the country revolves.

mark: i actually used the words "they won't go quietly" speaking of bernie sanders' supporters. you saw some of them with tape over their mouth that said "silence." they aren't set up for it saw as favoritism toward mrs. clinton. that seemed to be borne out in the e-mails released by wikileaks. a lot of them toll networks that it doesn't matter that senator sanders is imploring them to back mrs. clinton. that they will not do so. does she need their support? senator sanders' supporters saying we will push you over the top in november? >> if you points. yes. she absolutely does. this election is closer than people thought. recent polls after the republican convention, factoring umps, trump is leading in a number of holes. it is happening already. from around the primary when things reached the peak of bitterness, only half of bernie supportersnie

said they would support her. now it is 80% or 90%. you are seeing a lot of raw anger being brought to the surface among the e-mails that indicated favoritism toward hillary clinton. these are not the median brady center supporter. the more ideological than usual, berniee hard-core sanders supporters. they do not reflect the median voter that supported him in the primary. hillary clinton needs them and will be consolidating them. we will see how many she gets. mark: there is the one factor that keeps coming up. a lot of people do not trust mrs. clinton. how do she convince them, or her husband in his address, how does she convince the folks on the fence that she is trustworthy? >> this is her single biggest

vulnerability. what the clinton campaign has tried to do, and what bill clinton will try to do, is serve as a character witness. the themes will be hillary clinton before she was a politician fighting for justice as a lawyer. we will hear a lot of anecdotes and personal terms about what she has done, the kind of person she is behind the scenes. things that do not appear before the camera because she is a private person. he covers bloomberg politics and is at the democratic national convention. philadelphia. thank you. 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. scarlet: thank you. next on bloomberg markets, eli lilly getting a dose of investor love showcasing investor earnings that pump up the bottom

line. we will speak to the ceo. this is bloomberg. ♪

amanda: you're watching "bloomberg markets." i am amanda lang. scarlet: i'm scarlet fu. the biggest business stories in the news. greenlight capital is taking a stake in the and titanium maker spun off from dupont. they also denounced a short recommendation. citroen research was cited saying that it is designed to fail. greenlight says they used a decline in shares from the decline in june to add to its base. posting gains that missed estimates. putting added pressure on

verizon to outline how the $4.8 billion deal or yahoo! augments its own business. estimates of 780 5000. $.94 per share, numeral two cents better than estimates. amanda: second quarter earnings matched estimates. thanks to growing u.s. sales of the top drugs, including the erectile dysfunction pill, cialis. $.86 per share. it rose 8.5% to 5.4 billion dollars, beating expectations. that is your business flash update. staying with eli lilly, the ceo talked in depth about the drug pipeline. specifically the alzheimer's ambitions with david west on bloomberg earlier. different a number of approaches to alzheimer's. the one in the lead is an anti-body.

we have a study under way that has enrolled more than 2000 patients. the treatment is 18 months, the last patient division will be in october. we hope to get topline results from that study late in the year. >> let's go to the cost side. one of the goals is to make sure that you have only 15% of your sales represented by s gna. where are you in the process of receiving that goal of 50%? >> we're making progress. we had a special payments to ask present a coat, a one-time payment of $100 million based on progress of another alzheimer's drug that we are partnered with them on in phase three. if you took out that milestone payment, the total growth for the quarter was 3% compared to sales. as long as we are getting leverage, we are confident we will get to the 50% goal in 2018 as promised. >> you are on track?

>> absolutely. we can gav -- we give additional guidance to firm up projections. we expected a minimum through riod.pe we expect 5% growth in revenue. we also believe that we are going to expand our gross margins between 15% and 20%. resume would dividend increases. we have increased after not increasing the dividend during the time when we had patents expire. we said we would get back to a regular pattern in greece and our dividends on a regular basis. .> there was brexit you have a fair amount of operations and revenue from europe. you expect brexit to affect eli lilly? >> we expect that to have very little impact, especially in the short-term, virtually none.

in a long-term, how the u.k. drug approval process will work. we have intellectual property matters that we will have to sort out between the u.k. and europe. i'm confident we can deal with that. we have a research center in the u.k.. we will continue to invest there. it has been a good place to do business. >> if several drugs in the pipeline. are you looking at acquisitions? that would make sense for eli lilly? are always looking for opportunities. you saw us purchase in 2015. we have the third largest animal health company in the world. we are always looking in the ma space's -- the phar for places in diabetes, oncology, alzheimer's, and other areas. we will continue to be opportunistic. i think that these will be smaller deals. you are not interested in large scale combinations.

scarlet: that was the eli lilly ceo. still ahead, commerzbank resuming dividend payments despite reducing levels. next. this is bloomberg. ♪

♪ this is bloomberg markets i'm scarlet fu. some of the biggest banks have been shrinking their footprint and scaling down operations to focus on greater returns from their richest customers. citigroup, they had a global retail empire stretching from chile to china with branches in 50 countries. after the losses suffered from the financial crisis, they have sold or intend to sell retail operations from half of the countries. it cost citigroup 69 million customers worldwide and solid workforce decline.

it is not only citigroup. it has taken place and other global things like hsbc. in 2008 hsbc had retail operations in 60 countries. that has been cut by half. ranks realized by offering all surfaces to as many customers as possible is not as profitable as focusing on hybrid individuals, which make up larger percentages of their profits. businessman inc 2006. 53% came from and corporate investment banking. that segment grew to 75% while profits from retail banking shrank. consolidation in the u.s. as well. citigroup had 2100 branches before shutting one third to concentrate on cities getting out of businesses where they do not see a pathway to getting the returns they think are appropriate. amanda? amanda: the second-largest bank has a muddled message for the market.

commerzbank losing money thanks to factors beyond its control. it is setting aside a pot of cash for global investors. why is it committed to this business as usual dividend and what does it imply for the rest of the lending sector? what it meansth that we are seeing an erosion of that core capital base, 11.5% to 12%, factors beyond the commerzbank control. >> it is a real shock. it from thexpect analyst community. it is down to factors, according to the bank, beyond their control, but speak to the factors that banks are facing. more pressure from operational risks. that is the way that the bank measures risk potential from things like fraud or litigation. you also have the pain of pension liability, the easy

pressure from low interest rates . banks and the return tickets. you're looking at environmental issues that hurt the banks profit. it's own ability to make money for operations. it does not seem to have taken that big of a hit relative to expect haitians. -- expectations. amanda: has there been a change in methodology? lionel: regulators are really pushing banks to stop using their own internal methodology. whatever you standardize is calculation, there is pain on both sides. for many banks it means setting aside more capital. the case for commerzbank and a lot of other banks, it means you are balance sheet looks weaker. question is whether commerzbank will stay committed

to the dividend payout ratio. it would stand a stark message if it pulls back after reintroducing the dividend. is there concern that might happen? lionel: anything is possible. as you say. i think in terms of the message, felt it had leeway to carry on as normal. later, depending on how bad it gets, either from the european stress test or the macro environment, it can change if necessary. i think for all banks the path toknow morality -- the path normality, building capital, being able to say the tough years are over and shareholders will get something in return, that path looks more long and winding. amanda: everyone is desperate to resume to what they had before, but the conditions are different. squeeze on their

italian government holdings. we presume the other european banks are similarly exposed as commerzbank? lionel: it is tough tell. the actual overall numbers. there are plenty of banks in terms of absolute value of italian debt, more exposure. in terms of the maturity, whether the holdings are mainly in shorter-term debt, five to 10 years, that apparently plays a bit of a part. need to be clear of other banks will face that same pressure. basically, the overall environment, low interest rates, they sickly, that would mean that banks are having trouble making money from their basic lending. that is not good for their business or their holdings. probably, bad news for the sector. amanda: part of that is the regulatory environment.

thinkoes the regulator about 11 point 5% versus 12%, and what is considered required at a european bank? lionel: that is a good question. we'll get stress tests this week that would give us more information on banks' ability to resist, even if we do not get the clear path to levels that will tell us exactly what is the golden number. in terms of regulatory minimum, commerce bank looks fine. a lot of banks have raised capital. we are in a different world than 2008. obviously, there are more regulation measures coming in. that ratio, to stand still for banks, it is getting harder to achieve. things are getting harder, and there is the hope that the macro environment gets worse, there is a potential to take a softer approach. scarlet: thank you, very much.

lionel laurent is the columnist from bloomberg. for more fast commentary go to gadf on your bloomberg terminal. quarterly earnings. investors are calmer than they were before previous reports. this is bloomberg. ♪

♪ scarlet: live from bloomberg world headquarters in new york, i am amanda lang. scarlet: i'm scarlet fu. that's begin with the first word

headlines. amanda: scarlet and amanda, bernie sanders says he is hopeful his supporters will accept the reality. he spoke earlier at a bloomberg politics breakfast. a little bit messy sometimes, especially for young people who work their hearts out and supported a campaign. we lost. they worked against hillary clinton. and now i'm asking to support hillary clinton. , people have emotions and feelings. senatorshe vermont said an overwhelming majority of his supporters will back mrs. clinton. donald trump received an enthusiastic response from veterans as he criticized democrats and promised to reform the department of veterans affairs. he told a gathering at the annual convention of foreign wars in charlotte, north carolina "our politicians have you."y failed

he criticized hillary clinton and the democrats for failing to mention the islamic state during the convention's first day. hostage takers that killed a priest in normandy, france allegiance to the islamic state according to president francois hollande. the priest that was murdered was 84 years old. another hostage was seriously injured. the world's first around the world solar flight ended in abu dhabi where it first took off on a 25,000 mile per hour journey. the solar impulse 2 did not use any fuel as it made 16 stops. it powered by 17,000 solar cells. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. back to you. attack: moving on to

after yahoo! announced it was selling its operating business to verizon. a big point of contention was what would happen to the yahoo! ceo marissa mayer's. the senior research operator joined the bloomberg surveillance team. tom keene asked if myers' compensation was deserved given yahoo!'s stock price during her tenure. >> $213 million for basically a business that declined 10% every year? see had several years to right the ship. that is a job anyone would want. you pulled it off. that does not justify a million dollars, let alone 200. pew research yesterday have great charts showing how verizon and yahoo! together with aol is so small versus facebook and google. do you assume that verizon has to get much, much, much more scale fast to make this pipe

dream work? >> that is exactly right. what they are doing with aol, adding yahoo!, they want content, users, the mobile side. that is what they are putting together. it is part of a bigger picture strategy that is coming together. >> i want to move to apple. when i was looking at the analysts this morning, i've never seen them more at odds. do think that it is over for apple, or at least the peak? -- can they can they continue getting market share? >> what is he make about owning apple going into the next quarters is that you get 2 shots on goal. typically, you get one shot, the opportunity to own in anticipation of numbers going higher end to a product, iphone, cycle. you get low expectations for the seven and the anniversary loan

in 2017. that is an added safety level in terms of owning shares that has nothing to do with the report tonight. it is all about september and 2017. >> we hear about the google-backed chinese smart watch. they can on the asian market, putting apple in trouble. theirmall part of business, 6% come is the watch. they suggested will be 1 million and a half units. what is most important about the watch is the wearable category should have an inflection point higher when the watch is decoupled from the iphone. that you will be able to use the watch as a standalone to do text messages and phone calls. now, you have to have your phone. the outlook looks gloomy for the watch, but ultimately, when they add the bigger features, the trajectory will change.

amanda: i do not see anyone ever using their apple watch. i have cash build over the last four years, $146 billion, 155, 2 06, and 130 3 billion. what a surprise us with the use of cash? >> we probably will not get much of an update until the march quarter of 2017. they give it annually. you might see a slight shift to more of a dividend first is by back. before that, the big focus is can they use the balance sheet to acquire and invest in things that can get investors excited? >> what would they buy? speculatet comment or about m&a. i can tell you what investors think -- netflix and potentially tesla. i think that those two are areas. the netflix peace, investors think that makes sense because it beefs up the services

segment. that is an area that apple has been growing that benefits from piece hasd the tesla the future of cars. and apple's play there. thehat is it mean for after iphone seven? you think they do acquisition on content and software that it helps with software, bringing out an iphone 8, talk us through the math of the 2. >> that is on the side as far as going the services business. what investors will look at is how the iphone seven will do. how the 10th anniversary one next year -- that will be a slightly different form factor. it will look more futuristic. there's still room for the smartphone market to have innovation. what is being talked about now is the ability to use your phone. your phone will essentially flip open to be a tablet. it will be at two in one type of device. hard to say when that is coming.

if that is one of the trends, apple will be there. >> speaking with tom keene and francine laqua. >> now, to have doolittle with a check on apple. optimisticlish and on apple. as for the markets overall, a little bit more. apple was down sharply. today, fluctuating between small gains and losses. much of the reason the nasdaq is flipping up and down. important to remember about the june quarter, the fact that it follows the first revenue decline in more than a decade reported for the march quarter in april. investors looking for more of the same, a 15% year-over-year decline in revenue, a 25% year-over-year decline in earnings. the bar might be said below, or it might be what we will see. calling that down

chair to neutral and 85 dollars per share suggesting the stock could fall by 13%. that is a strong bearish call ahead of the quarterly report. jpmorgan says he remains cautious and to his estimates for the iphone are too high for the second half on macro headwinds. we will know in a few hours how it turns out. uncertain at this time. >> after the last report, stocks fell 6%. what do we see about volatility heading into this one? abigail: we are seeing expectations for less volatility of according to options on volatility. we look at this chart put together by a bloomberg reporter in london. chart."a "apple vix she's making the point going into the june quarter report, fiscal third quarter report, fiscal third-quarter for apple, expectations are

at the second lowest level over two years, suggesting that the biggest move either way will be 4.4% up or down. and you mayknows, know as well, i love charts. i would make the weight when we have had the apple vix at lower levels that proceed a spike higher. whether that happens tomorrow or in weeks to come is unclear, but it appears it could return to much higher levels. .carlet: good point thank you. for her charts, you can check her out at the chartress on twitter. apple's not the only name to watch. twitter will report its second-quarter results. we will get clarity on the user base as a push for live streaming content helps to monetize that. this is bloomberg. ♪

vonnie: you are watching bloomberg. i am vonnie quinn. mark: here's what we are watching today. ready to follow in the footsteps of the imf and lower its forecast. what is it saying that makes it less optimistic. vonnie: miller about to cost ibm best more money. why they have to sweeten their offer. mark: the quick take, the concept of social helicopter money is being debated by economists. with throwing money at consumers

fix the country's economy? imf is not the only organization down on the global economy. cutting the global forecast, saying that despite improvements too many economies remain fragile. they are not making enough progress to stand on their own. catherine mann tells bloomberg there is little reason to be optimistic that the next year. .> we are doing revisions the imf came out with their revised outlook. that was down. when you look at the picture for 16 and 17, it looks like it will be a downgrade. very unfortunate. we would like to come with better news, but there does not seem to be enough on the horizon. mark: a busy earnings calendar. among the winners is the first half profits that beat estimates with the biggest tire maker cutting costs to become more competitive.

michelin benefits in an increase in car sales in china that offset a slump in brazil and russia. major oilfirst company to report second-quarter results that were disappointing. -- fell 45%.45% the brent 25% increase during the quarter provided some prospect for relief. anheuser-busch and inbev sweeten .he offer for sabmiller that means sabmiller investors would get an extra $1.30 per share. ab inbev was proof -- was responding to the drop in the wake of the brexit vote. porsche will add 1400 jobs to take on tesla in the battle of the electric cars. most will be at the factory in germany. the automaker will spend more than $1 billion to develop its

first battery sports car in 2019. vonnie: time now for our bloomberg quick take to provide background on interest. helicopter money is being debated. helicopter money handed directly to consumers would send us scurrying to the shops do spend our windfalls, boosting confidence in the economy. renewed interest in this idea is renewed interest that ideas thought of as daring are being seen as commonplace and ineffective. mario draghi calls helicopter money a very interesting concept. the japanese minister in july denied a newspaper report that the government was considering helicopter money. the head of the bank of japan said it would be illegal and

unnecessary. it has been fueled by worries over low inflation in europe and japan. milton friedman came up with the concept of helicopter money in 1969. it was made famous by ben bernanke in 2002. he referred to it while arguing that the central bank can also have inflation when needed. the nickname helicopter ben stuck. during the recession that crisis, they stopped short of printing money and handing it out to consumers. helicopter money argues that it is the financial equivalent of injecting adrenaline into the heart of the patient in cardiac arrest and may be less risky than quantitative easing, which has been blamed for fueling what some see as a bubble in global stock and bond markets. they point out helicopter money is not free. it devalues the money of what savers have in their accounts. quick onread more at ni

the bloomberg. go to bloomberg.com for more stories. ♪

amanda: this is "bloomberg markets." i'm amanda lang. scarlet: i'm scarlet fu. when you want to compare currencies, one option is that they can mac index. there is one way to look at it introduced by a economists in 1986. it is a purchasing power parity index due to the purchasing power of the big mac. this was frank is overvalued 36%. the norwegian and swedish krona are also overvalued. the most undervalued is the south african rand by 65%. theher way is to type into bloomberg. this has the original big mac index is from the economists. this is what it looks like.

the price of a big mac is overvalued in the u.s. compared to the eurozone, japan, china, and the u.k. so sincearticularly 2014, around the time that the dollar started to string than on the eye -- started to get stronger on the idea the fed would raise interest rates. amanda: economists have introduced other levels of dollar parity and overvaluation. the iphone is the new measure. the iphone index. we have a chart that will show you relative measures. the argument is that people will go a long way to get an iphone. iphones are priced the same in terms of the base cost price. on that basis, you can see relative to the big mac, a different picture of overvaluation and undervaluation. the big mac index points to deflationary pressures in big markets and a strong u.s. dollar. the iphone index shows a different story.

the iphone index is something for people would go to a different country to buy it. we saw that with chinese tourists buying iphones before apple made it available-for-sale in mainland china. amanda: one weakness is that the big mac index is so heterogeneous globally. it is the same product. they sourced locally. you get deflationary pressures in food and labor that tend to be similar in terms of the overhead. an apple store might look different in one country versus another. i feel like a big mac is the way to go. not just because i like big macs more than iphones. scarlet: i like the big mac index because i am a child of the 80's. it leaves us wondering if you need to update the measures. the serious underpinning is that overvaluedknow how or undervalued a currency is. it has been a reliable measure. do we need to update it? maybe.

reminder thatk apple will be reporting third-quarter earnings after the bell today. we will be all over that around 4:30 p.m. eastern time. scarlet: it is time for walk the talk looking at the pressure points of social change and herbert is outpacing america's ability to adapt. the power base has never been stronger. the lgbt community is using its clout to elect lawmakers that will defend protections at home and in the workplace. we saw it with peter thiel just several days ago. >> every american has a unique identity. i'm proud to be gay. i'm proud to be a republican. most of all, i am proud to be an american. bureau chief jeff green joins us. in terms of what it says about where we are, both parties are fully aware that this is a group

that they need allegiance from. that they need to protect. how important is that? jeff: if you look at the political landscape, this is the most elected openly gay politician we have ever had. at the same time, we are approaching one trillion dollars in buying power. you have political clout and cash that helps people pay attention to lgbt people. dig into the cash. will get the political landscape in a bit. how does that compare with other groups, other minorities for instance? jeff: it is more than asians as a group have as purchasing power and approaching that of african-american-hispanic, 1.3 trillion. all people are part of three groups. lgbt people are adults. they do not include children, which do not have disposable income. that brings the number down.

on a punch for the dollar basis, lgbt is about the same as any other minority group in the country. >> to get in trouble anytime you make generalizations about how a group thinks, behaves, or will act, but one may assume this group gravitated more to the left than the right. has that changed? jeff: what is happening is it is gravitating more firmly to the left. the democrats have become so closely aligned with lgbt interests it is hard to distinguish them. peter thiel is an exception. most aligned with the democratic party, because if you want equal rights and other things done on the agenda, they recognize that candidate they need is hillary clinton. you will not get a supreme court justice favorable to lgbt people with a republican president, more than likely. >> is there risk of political association? jeff: as gay marriage became

legal in the visibility has grown -- that is one reason there is more spending power, people are more comfortable saying they are lgbt people making them easier to count. everything is more visible. at the same time it is easier to become a target. as you saw in 30 states with 200 laws designed to scale back this power. a target ofde themselves to some degree by being so successful. they are aware of that. they recognize they need to fight harder to maintain the power they have had so far. >> is there fear in the community of some sort of strains of very far right that are surfacing in the republican party? >>. so much fear. the reality in the states, they saw what could happen. even in congress there has been discussion that talking to the lgbt politicians is concerning. it shows there are hundreds of gop lawmakers willing to pass laws that would hinder their

ability to have rights in the work toys. >> great to have you with us. >> breaking news from volkswagen. settlementillion gets the go-ahead from a u.s. judge. this is a preliminary go-ahead. not the final approval. volkswagen getting the preliminary go-ahead from a u.s. judge for the 14 foot $7 billion u.s. settlement for the diesel emissions cheating scandal opening the door to objectors to speak up and set the stage for final approval this year. we will monitor this. volkswagen shares closed higher in german trading today. this is number. -- is bloomberg. ♪

it's on 1 p.m. in new york, 6 p.m. in london and 1:00 a.m. in hong kong. scarlet: welcome to bloomberg markets.

scarlet: from bloomberg world headquarters in new york, good afternoon. we are in this hour, covering stories from san francisco, toronto, new york and beyond. oil goese falling as below $40 a barrel and the fed starts its meeting. one hedge fund manager is topping the game and no one knows how he is doing it. has created an iphone index and you may be surprised by what it says about the u.s. dollar. let's go over to the markets desk and julie hyman. right now stocks are fluctuating? we are awaiting the results of apple which may set the tone for the market but the

big earnings have not set the tone for the entire market. it has been a stock buy stock in trade we have seen over the past week or so with earnings season that has accelerated. the dow is the laggard pulled down by mcdonald's. the s&p is not doing much at all. if you look at the s&p over the course of the session, you will see the range we were in with a drop off just before 11:00 a.m. and stocks were covered in have been trading sideways. volume on the s&p is roughly in average. the 20 day let's get to individual stories. at 12:00, we talked about losers and now we will talk about the winners in today's sessions. an unexpectedted second-quarter profit and analysts predicted a loss. sales fell year-over-year for the company saw a better product mix and operating improvements and has been focusing on cost-cutting. allegheny technologies came in with sales that beat estimates.

they saw demand from aerospace and defense companies and they are pulling up u.s. steel as a result. those are a couple of the winners. the more under the radar stocks that we have not talked about, avery dennison camming out with earnings that beat estimates and raising its forecast for the year. xm beat estimates and raised its projections. second-quarter subscribers are 580 7000, rising by 8%. jetblueed around but came in with earnings that beat estimates. these are not a result of earnings but other news. is boosting and nordstrom is benefiting from a piper jaffray upgrade because of its anniversary sale. good stuff, one hundred

72 companies in the s&p 500 reporting today. julie: it's a peak day. amanda: let's check in on first word news. it's day two of the democratic national convention in philadelphia. one of the party's most enduring presence is will again be center stage. former president bill clinton will address delegates. the party is hoping he will hope the hall move on from a tumultuous day one when supporters of bernie sanders and energized by the departure of dnc chair debbie wasserman schultz and a speech by their candidate made it clear they will not go quietly. as for sanders, his delegates will get to show their support during a rollcall vote. other notable speakers include virginia governor terry mcauliffe and houston aquatic later nancy pelosi. campaign is on the trail today. the likely democratic vice presidential nominee stopped by the city diner in richmond,

virginia. he used to be the mayor there before he went to -- he met with the mayor there before he went to philadelphia. mike pence was campaigning in roanoke. i texas judge has dismissed the last minute charge against to california antiabortion activists who made undercover video of themselves into by fetal tissue from planned parenthood. the 27-year-old and a felony-old have faced a charge of tampering with government records. each could have been sentenced up to 20 years in prison. the tourist concern about keeps them away from turkey and they are headed toward spain and portugal. ofre is a record number tourists of this year. arrivals in spain were up almost 8%. overnight stays in portugal jumped 13%. france, the world's most visited country, saw a 9% drop in foreign tourists in the fourth quarter. global news, 24 hours a day,

thand -- powered by more 2600 journalists and analysts in more than 120 countries. thank you so much. let's return to the financial markets with a rally in u.s. stocks that have stalled after a week. raking run last on friday, the s&p 500 reached a seventh all-time high. where is the next level of resistance? let's give it lead -- let's bring in kt stockton. were stuck in this range for it seemed like two years before breaking out decisively in mid-july. ended for now? where >> is the next level of resistance? for the s&p 500, there is no resistance left on the chart. that does not mean it cannot go higher but it releases the chart of some headwinds. the s&p 500 does not tell the

whole story of the market. we have other major indices that face resistance. look at the channel that had bound the s&p 500 for so long, you can take the width of that channel to arrive at a price projection of about 2400 over several00 months and that is fairly well aligned with where there is resistance for other indices like the russell 2000 and indices overseas. with no upward resistance, where do you see secondary lines coming in? >> because we have broken out above resistance, sometimes resistance becomes support going forward based on behavioral finance. 2100-esistance was around 2135. it was a well tested level and that makes the breakout that much more significant. initialld be the support level for the s&p 500 once up back unfolds.

secondary support, we can consult the 200 day moving average. scarlet: one of the charts you look at in your work is the relative rotation of different sectors. see -- it looks like health care is- in the leading sector in the upper right-hand quadrant. technology is improving as well. the otherk at sectors, eight out of the 10 sectors are either weakening or lagging. does that matter if the most influential sector is improving? >> technology and health care have big weightings in the s&p 500. they tend to exhibit leadership in a strong tape especially technology. we have seen a lot of breakouts based on technology and relative strength has picked up in the last couple of weeks. in health care, we are seeing biotechnology stocks pick up interest.

i think that's a promising development. it shows tendency toward risk on positioning and we are seeing that outside of the u.s. and the emerging markets. amanda: we've got that chart as well. feels as though there is momentum. i think the technical bear that out. >> i think so, too. a longer-term perspective, you see what we call an inverse head and shoulders formation or eem representing the whole space. there are a lot of different country indices with this might reversal pattern in place. the recent breakout showed some which market breadth means participation and we see breakout in regions like china. inverse headhat and shoulders, what happens once you break out of that? how much higher can it go? next depends where the resistance level is. it does not give you a great sense of the ultimate target or

the end of the move but we can use resistance to gauge upside. i believe is at least 6% of current levels. amanda: let's talk about oil because that has broken some levels. where does it go from here and where does it find support? strongcrude had very short-term support at $40 per barrel. it was not acting well. that exhibited a loss of momentum. it targeted the next support which is not too far from current levels. that's where i would look for a more important low to be established with the 200 day taken average already out. i am looking for signs of downside exhaustion. once we get that, we can feel comfortable, revisiting crude oil but the related stocks. scarlet: when it comes to treasuries, we had an incredible rally that brought them to record lows.

the yield have come back and are holding at 1.6%. the rally over based on what you have seen and the charts or is this positive for the next leg up that would drive yields to record lows? >> i think it's a positive refresh from the existing trend. there is long-term momentum indicators. when you look at treasuries, they have a short-term oversold condition within a broader uptrend. that tends to be a buying opportunity. i look at the ten-year treasury yield and it's supported at 138. you can imagine if that is taken out, people start to focus on 1% being the next psychologically significant level. scarlet: what do you think would have to happen in terms of other signals for that 1% to happen? >> the consecutive weekly closes below 138 would target that level and you would expect to see european yields following in

tandem with the 10 year treasury yield. amanda: thank you so much. scarlet: coming up, the chief says freeof the odc shopping vouchers might lose value. we will have more on the case for helicopter coupons next. this is bloomberg. ♪

amanda: you are watching bloomberg markets. the oecd is cutting its global growth park us saying that despite improvements, too many economies remain fragile and i not making enough progress to stand on their own. their chief economies tells bloomberg there is little reason to be optimistic for the next

year. she spoke earlier on surveillance. >> we were projecting at the 08 for 3% this year and that was before the most recent economic and the referendum and the terrorist incidents which have potentially undermined what looked to be a better climate for growth in europe. when we put that together, we are in the process of doing revisions. out with its revised outlook and that was down. when you look at the picture for 2016 and 2017, it looks like it will be a downgrade. it's very unfortunate because we would like to have better news. there does not seem to be enough on the horizon. joseph stiglitz talks about our discontent with globalization. is there a new globalization to be discontented with? the globalization that people

are discontented with is a fired globalization. it has been with us for a while. if we had managed to have faster growth along with technological advancements and globalization, i don't think we would be sitting where we are now trying to fight for tpp or ttip. because of a range of issues including too much attention to fiscal consolidation and not enough attention to growth, we're in a situation where growth benefits, small as they have been, have been absolutely not widely shared. the backlash we have observed in many countries, really around the world, has left us where we are now. we have to come up with a new policy set as well as a new narrative about how globalization and technological change can be beneficial and needs to be made beneficial for

a broader swath of the populations, not just in the united states that here in europe and other countries like japan. francine: you saw a rise with donald trump and the brexit vote. do we need to get used to the low nominal gdp growth? what we have said over and over at the oecd is that we just stick with this low nominal gdp growth. and politicians, we have to recognize we have the tools, fiscal, monetary, and full range of structural -- we have that full range. we can deploy them and we can

get to a faster growth rate and it's our responsibility as policymakers to do that. scarlet: that was catherine man. n. amanda: it's time to look at some of the biggest business stories. of volkswagen settlement 480,002 liter diesel cars off u.s. roads has been given the preliminary green light by a u.s. judge which would open the door to objectors. finals the stage for approval this year. the plan for buybacks and a possible fix covers car owners of 44 states and have a million vehicles. americans or buying new homes in june at the fastest pace in eight years. sales rose 3.5%. the median price of a new home was -- rose 6% in the last year. amanda: mcdonald's says sales growth missed estimates.

they said same-store sales grew 3.1% globally. their rivals are piling on discounts and promotions putting pressure on mcdonald's to keep prices low and that undercut the benefit of the all-day breakfast they added last year. that is your business flash update. still i had, we will introduce you to a man who is little known but making a big impact in the hedge fund industry. he is giving clients annual return as high as 91%. how does he do it? that is next. this is bloomberg. ♪

scarlet: this is bloomberg markets. the returns produced by one hedge fund out of atlanta are the envy of the business. argent has delivered annual returns as high as 91% since 2013. joseph mayer is behind this little-known fun and guarantees clients will not lose money. how does he do it? we should start by saying he little-known unless you look at lists of top performers. what's going on? providerhan one data has listed him. these numbers have been out there and that's part of what

drew our attention to this guy and what is behind scarlet: his returns? scarlet:these returns are astronomical. environment,t rate what kind of red flags did you find? >> it sounded too good to be true. it was either extraordinary returns and when he tries to explain his investment strategy, i cover hedge funds for a living. it's some sort of strategy across the financial classes. he has calculations and spreadsheets code that he gotrs to code and that was a red flag for me. it was hard to imagine that someone with little experience could do all this. which isnto his office a part-time office. it does not seem to have full-time employees. he says most of the money is

invested at treasuries. there is a 10 year lockup. there is other weird stuff like cycling through auditing firms? >> georgia regulators are looking into his firm. they are trying to see what is going on. they are looking at possible fraud. it's their place to put a name on this. we can just kind of report on what we see and questions we have. scarlet: when you spoke with what was his demeanor like? was he accustomed to this kind of scrutiny? >> i don't think he was accustomed to reporters being there. he is very charismatic. what i understood from speaking to investors is they like that they were able to talk to him.

they felt left behind by other asset management firms and not getting the attention they need. scarlet: who are the investors? of them are smalltime mom-and-pop investors who invested their retirements and liquid assets. these are not people with enormous amounts of money. amanda: one thing that jumped out at me was one former colleague who has several hundred thousand dollars in his fund was sold when he was picked in his pickup truck with a sixpack in the front seat. he's got this folksy touch that people are investing into. what was most troubling for me is that these are not sophisticated investors. the definition of an accredited investor has barely changed since the 1980's. $200,000have to earn

as an individual for two consecutive years or have a net worth excluding your primary residence of more than $1 million. are you surprised that retail investors can still believe things your mother told you when you're six, if it's too good to be true, it probably isn't? >> i could say i was surprised but there is this idea of hedge all and endthis be all and when you can invest in one you have arrived. i would caution mom and pop and higher net worth people who have more money. thethey don't have resources to go to someone who does this for a living to maybe stay away and stepped back from an asset class that is difficult. he may be a genius at work so we don't know. have any timeframe on the regulatory investigation? >> we have a soft>> timeframe.

probably over the next few months. we will keep you guys posted. thank you so much. on can find a story bloomberg.com. tomorrow, tone into bloomberg television and radio at 2:00 p.m. eastern, the fed decides. we will break down the july fomc rate decision. we will have jeff rosenberg of and others. that begins at 2:00 p.m. eastern on bloomberg television and radio. this is bloomberg. ♪

scarlet: let's begin with the headlines.

sanders says he is hopeful his supporters. booing hillary clinton and accept the reality. speaking in philadelphia, the vermont senator also says the importance of defeating donald trump >> is most important. i think >> donald trump is a danger to this country. i think he is a demagogue. i think it's not just me who thinks that. talk to his conservative republican colleagues who will tell you that they perceive he does not understand the constitution of the united states. speaking and virginia, donald trump highlighted the discord to lure the bernie sanders voters drawing attention to the recently released hacked democratic national committee e-mails that showed evidence of favoritism toward mrs. clinton during the nominating contest. is a leading suspect in

the hacking of the dnc computers. that's according to a u.s. official. the eye is looking into the breach. it resulted in the theft of e-mails and internal reports. russia has denied any involvement. the islamic state is cleaning responsibility for the murder of an 86-year-old french-based. attackers took hostages at a church in northern france and killed a priest and wounded another person before police stormed in. both attackers were killed. the french president pledges to fight islamic state using all means possible. the islamic preacher that turkey blames for orchestrating the coup attempt is denying the allegation. in an opinion article in the new the times, he also accused turkish president of using the failed takeover to impose authoritarian rule. he is exile in the united states. news, 24 hours a day,

powered by more than 2600 journalists and analysts in more than 120 countries. the debate over interest rate increases is heating up at the fed meeting this week. economic adviser muhamed el-erian discussed the fed positive influence over markets and the disconnect between markets and fundamentals. >> look at what has been happening on the ground whether turkey, 30% of government debt in negative nominal interest rate territory. the list is getting longer and yet the markets are very calm. thisix is under 13 and disconnect. is explained by the role of central banks there is a limit to what you can decouple markets from fundamentals. short-term, markets will be governed by liquidity injections on the ecb, bank of japan, china and corporations.

longer-term, fundamentals will assert themselves. how do you invest under such a scenario? we have the central bank induced calmness but you say the long-term outlook is tepid. how should one invest with those two factors facing us? d a tactical component to your structural positions, tactical investment becomes more important in this world. inond, become more barbelled terms of your overall exposure with more cash and moves -- and move further out in terms of the spectrum where central banks do not influence as much and thirdly, prepare stakeholders for the possibility of greater volatility down the road. make sure they don't do the wrong thing at the wrong time. mark: a lot has been said if the

if we seeise rates loosening policy from other central banks. diversion's among the world's major central banks when it comes to monetary policy? yes but limited. i can see the fed hiking 25 basis points 4 while other i would add the people's bank of china, they will loosen policy more. that will play out on the short andif things go to the long -- end, that spread has been remarkably stable and it tells fed may be able to deal with divergence at the short end of the curve but at the longer end, investors will keep that spread relatively constant. where will we see the

jump positions? to see theming first and foremost in the fx market. c it has been relativelyalm. to one over 1%p move in the yen simply on a local media report that the stimulus may not be as big. don't underestimate the extent to which markets have been influenced by the role of central banks. the most likely area volatility will be the fx market and that will translate into other markets. that is where most of the volatility is expected. you anticipate a recession anywhere in the world like the u.k.? >> i worry about the u.k. and they worry about the uncertainty facing major elements of the u.k.'s trading relations with europe and the way policy will be conducted in the u.k. there is a threat in the u.k.

and by consequence, there is a smaller threat to europe. i think the u.s. is ok. the probability is 30% of recession in the u.s. but well over 50% in the u.k.. mark: have you been surprised to which financial markets overall brushed off the surprise brexit results? the markets have been conditioned to trust central banks to repress volatility. there is a very strong influence dips and we have seen that over and over again. the conditioning of markets has been so pronounced that the word surprised is not really reflected that. what i have been surprised that is how people have forgotten that the global economy as a whole is facing such headwinds.

remember, china is still soft landing its economy with major uncertainty in big emerging economies. i am not surprised of the market behavior but i'm surprised at the analysts who have downplayed the tech -- the challenges facing the global economy. that amanda: was by my el-erian. amanda:our mystery stock of the and everythingp is bigger in texas and that includes better-than-expected profits. this is bloomberg. ♪

scarlet: this is bloomberg markets. desk. let's go to our markets they say everything is bigger in texas and that includes our mystery stock pick. a boast in sales for mobile helped offset a slump in mobile sales. amanda: texas instruments? scarlet: ding, ding, ding. julie: it was sort of obvious. scarlet: i thought maybe there is a texas rib restaurant. it's a pretty good-looking charge. julie: it has done well and is doing well today. the whole thing about mobile, is that they have been selling -- chips for mobile phones. you can see the shares are up

about 30% buspar this year. session,ok at today's once again the shares are at the highest going back to 2000 with a 7% gain in that stock. the breakdown in revenue for texas instruments and the shift in revenue, industrial use is 31%. this is largely an industrial chipmaker. have a big automotive chunk, 15% of its sales, communication, pc is only 6%. it has been shifting its revenue mix to some extent. it is forecasting a profit and sales to beat estimates as well. we see a ripple effect among the other chipmakers. we have a chart of the profit

growth at texas instruments. this looks at the year-over-year growth in net income. obviously, it has been slowing growth but this quarter was the biggest growth we have seen in more than a year. at the quarter and ahead to the next is what is fueling that stock today. scarlet: thank you so much. let's go to the bloomberg business flash. united technologies is predicting the low end of its profit. it is gaining confidence is getting a handle on the volatile global economy. the company says adjusted earnings will be up to $6.50 per share. has ordered 30 its meanto expand

premium service. has a list price of 3.6 billion dollars but airlines will get discounts. jetblue will use the new planes to add cross-country flights. that is your business flash update. falling back on rail for shipping sounds like a contingency plan. will hear from canada but coming up next, talking about the fed. this is bloomberg. ♪

amanda: this is bloomberg markets. bige the amount of u.s. oil shift by rail has been shrinking because of regulations and increasing pipeline infrastructure, it is climbing sharply in canada. transfer by train is expected to hit record levels next year.

jamie sturgeon joins us. this move to oil by rail in canada comes despite the fact that there was a 2013 explosion that killed 47 people that set back the rail by oil movement. why are canadian producers turning back to it? that set offght, the regulatory backlash. we started to see this big run-up in crude come under pressure. the inability in canada to increase pipeline infrastructure that is behind these fast-growing volumes. rejection of keystone has left oil producers in canada to look to rails. without the added pipeline infrastructure out of alberta, 860,000 barrels per day, keystone was to provide that and we see exports climbing again,

up 23% in april and expected to rise sharply. the jump in volume, the more bullish estimates expect output to double and reach twice that by 20 18. it's a substantial jump. scarlet: it sounds like this shift back to moving oil by railcar is a contingency plan for producers. how has the industry been hearing for this? some have foreseen this an oilsands producers were preparing in the event the keystone pipeline infrastructure would not be there. candor morgan and imperial energy built a new terminal in alberta. they are expanding rail terminals in those companies are convinced the spreads will be wide enough with wti to pay for the added cost of rail shipments. some analysts are not convinced it is profitable enough to

justify shipping larger volumes by rail. argument has been bolstered this week with wti prices. amanda: what does it mean for the real companies themselves? >>l it show up in their profits? analysts say it's a wait and see story, more in line with the bear case. the big drop in crude volumes over the last couple of years has forced and in -- an industry retrenchment. there was another quarter of week volume. eggs -- executives were not exactly optimistic there would be a big recovery. it's a wait and see story for the rail side. amanda: scarlet: thank you. in the u.s., the debate over increases will intensify during the meeting of the federal reserve and policymakers with better news on the economy. is the fomc closer to making their next move? we spoke with mark cabana

yesterday. a rate hike is back on the table? think they will necessarily signal anything this week. we think they will likely adjust some of the language to acknowledge some of the improvement certainly on the labor side and just the continued positive second-quarter growth. we think the fed will make note of this but what we think is more important is looking at one line later in the statement that talks about how the committee is closely monitoring inflation indications and other signals about global economic development and financial conditions. if they were to downplay that, maybe say they were not closely , we think that would be seen as a hawkish sign for the market. is not our baseline expectation but something to keep an eye on. the data has been positive

through a series of bolstering events. -- give me your impression on the fundamentals and whether the fed should move sooner than analysts expect. >> certainly not before what they expect. there is some chance that the fed might consider a september hike but we don't think that's likely. that seems generally fair. the recent dataflow i believe has kept the narrative our -- alive for the fed. the recent employment report and we had good retail sales data and some inflation data that i think he is the narrative going that it may be appropriate to move in a relatively robust manner. joe: two-year yields have picked up a they are still weak -- well below where they were last december. regardless of whether they hike

later this year, the expectation is for a lower pace of hike than anyone thought a while back. is there anything that could change that in your view? there is obviously potential that could happen but that's not likely in our view. we don't think the inflation outlook is going to materially pressure the fed to go four times per year or even once per meeting. while growth has been good, it has not been really stellar. should the data materially change, the fed would adjust accordingly. in our assessment, that's unlikely in the near term. >> we have seen kind of a risk on appetite around the world with emerging-market that becoming attractive to people. the u.s. will remain the safe haven, presumably. end, -- shorting treasuries has been the smartest bet for several years now. protect >> from what

the fed might do? >>it could potentially. we have seen global conditions ease remarkably since the brexit vote and equities are higher. the dollar is not really strengthened all that much. wellave had em do quite and as the fed watches this, they are encouraged by the easing of financial conditions and is probably an additional consideration for them that might make them more confident if they wanted to tighten. habana, that was mark the head of short-term u.s. rate strategies. joining us now is joe weisenthal. all eyes today are on apple. joe: we will have a huge apple-focused show. when apple comes out, the first one people look at is the ifo numbers. regardless of what happens with anything else, they are an

iphone company. analysts are looking for 39.9 million iphone sales and average selling price of $606. you can see the trajectory which is positive overall. even going back through 2012 for the iphone. they could have two consecutive quarters of down earnings. that will be the thing to watch. the majority of this company pa's revenue is still hardware and some analysts are pointing to needing to see signs of service growth which is a high-margin business that will drive the business going forward. there is concern that the iphone replacement cycle and not be strong. versus services shows that services have not budged. they are not being driven by iphone sales. if you want to drive services, apple has to look to brand new places. it's not like the ipod the drove itunes. there is a gap here.

joe: they want credit for the services revenue. it's substantial but it is still flat like that. scarlet: it's hard to make the case that apple is a service company when the mix of revenue is firmly tilted toward hardware. that's why investors value the company as a hardware company. i was looking at the earnings estimate for apple. appleshareine shows price in the red line is analyst estimates for this quarter. as we have been reporting, apple to post the first decline since 2006. you can see what happened the last two times they have reported. it came out with a forecast which was lowball guidance but analysts continue to take down there consensus estimates. this is not fourth quarter. that was third quarter. here is what you see --

droppingrs are still of that was not the case when things were good. apple would lowball the guidance and analysts had to play catch-up. amanda: it's unusual to see an analyst come up with a sell rating the day before. as tots are convinced what they are seeing out there. they might be underestimating the company, it's happened before. joe: the last two earnings, the stock tumbled over 6% each time. we have obviously some nervousness going into the earnings. foroptions implied move this quarter is just a little bit under 5%. swing.ing to be a decent in the old days, people love to the earnings. it's a little bit of a streak of disappointing moves lately. inrlet: apple has fallen

earnings for out of the last five quarters. and then recovered strongly. i wonder what will happen next. we will dig further into apple earnings which are out after the bell today. david kirkpatrick will be with us at 4:00 p.m. eastern. tomorrow, tune in at 2:00 p.m. eastern for a special edition of bloomberg markets, the fed decides. july fomceak down the rate decision. we've got a roundtable great guests. all that is coming up beginning at 2:00 p.m. eastern time tomorrow. this is bloomberg. ♪

david: it is 11:00 a.m. in san francisco, 2:00 p.m. in new york and 2:00 a.m. in hong kong. markets." "bloomberg

covering stories out of san francisco, philadelphia and london. central banks in focus as that that kicks off its two day policy meeting. the yen with its biggest gain since brexit. it is dnc they too -- day two. david: apple and twitter set to report results in a little over an hour. we've been bouncing around in a tight range today dow has been the underperformer because of mcdonald's, now down when 3%.