francine: limited stimulus. the bank of japan focuses on buying etf's. the yen drops. very little visibility. ubs's ceo site a challenging environment of profit as ubs slumps. and, stronger together. hillary clinton accept the democratic nomination as she blasts trumps vision for america. ms. clinton: so let's be stronger together, my fellow americans. let's look to the future with courage and confidence. francine: can hillary transform

her policy experience into a clear vision? welcome to "the pulse" live from london. i'm francine lacqua. we have a great show lineup for you this morning. we speak to the ceo of the .orld's biggest reinsurer as we wrap up a week of european bank earnings and look to stress test results this evening, we speak to the ceo of the british bankers association. that is at 9:30 a.m. let's check on the markets. a lot of market swings. 103.65 is where we are. the boj opting for limited expansion. it did say it will plan to reassess the policy. it has already been three years.

stocks, iuropean don't know if i would call it unchanged or slightly higher, but we had a lot of earnings news to digest. the banks have been under pressure. we are expecting stress test results this afternoon. watch out for ubs and barclays in particular. let's get to the bloomberg first word news with caroline hyde. caroline: hillary clinton says america is at a moment of reckoning and has belittled donald trump's claim that he alone can solve the nation's problems. clinton said the u.s. can advance only when each segment in society and members of every group work together. ms. clinton: i will be a president for democrats, republicans, independents, the struggling, the striving, the successful, for all those who vote for me, and for those who don't. for all americans together.

barclays second-quarter profit fell by more than half and the bank posted a 1.9 million pound pretax loss from the unit that houses the businesses and assets is trying to sell or wind down. ceo jes staley spoke to bloomberg earlier. >> at a bank like barclays, rather than being part of the crisis in 2008, we are seen as a place of stability. we are open for business. we are extending credit to small businesses. cooperationork in with the bank of england to minimize the impact of brexit and be on the side of our customers and clients. has beatenlphabet sales and earnings estimates. it is thanks to the ad businesses bringing more money from a swelling mobile user base and better cost controls. the firm is investing in new areas as it looks for the next

big thing to replace its aging yet highly profitable business. global news 24 hours a day. you can find more stories on the bloomberg at top . i'm caroline hyde. this is bloomberg. francine: thank you so much. the bank of japan has expanded its purchases and donald the size of a u.s. dollar lending program, but chose not to boost the price of bond purchases. the yen surged on the news. i want to show you my chart of the hour. totells a different story what we are seeing in the rest of the world. what we decided to show you is that japanese unemployment has been going down. we brought it back from september 2011. 3.1%, one of the lowest in the world, and yet boj, because of the dynamics of the economy,

those asset purchases have been increasing, $4.1 trillion. for more on this, boj, and the yen, we are joined by the executive director at mitsubishi securities international. did governor kuroda disappoint knowing that yen could go up or was this a mistake? >> this is the most radical monetary easing policy of all. francine: overall in the last three years. >> and continuing. we have ¥80 trillion purchases continuing, which amounts to about 50% of gdp. we've had a doubling of equity purchases. there's no mention at all of any tapering in the future or exit. when people talk about helicopter money in japan, we

already have helicopter money. francine: are you suggesting that market psychology was wrong? brendan: i think we have very short-term trading perspective around the news announcement and there have been expectations that they would do more. i think the most significant reactions have been in the bond market, where you have a 10-basis point rise in yields. the other surprise has been equity markets. markets couldnd very easily go a lot weaker from here as people digest the fact that there is no more negative interest rate coming, that we've probably had all we are going to get. francine: do you have any doubts they will be able to weaken yen? it was one of the first times we heard the finance minister coming out with a statement supporting boj. does that mean it is coordinated? brendan: in some ways, the

inflation rate is going up. unemployment down at its record low point is translating into service sector inflation with some wages going up. bank of japan's core measure of inflation is up to about 0.8%. my central scenario would be that inflation is gradually rising in japan, but if one looks several years into the future, there's some scenarios where you may get very high inflation and the bond market should be looking at those scenarios. francine: interesting that you have a read across with inflation, but this also tells us about demographics. do we realize how bad this is? demographics is the key factor. it is going to affect the savings rate in japan. we are going to see continued moves down in savings.

at the same time, we have this colossal budget deficit. the sales tax hike may well be up to 8% of gdp. we're likely to get credit rating downgrades. all this adds to the potential downside on the market. francine: what does this all have to do and what does it mean for yen? brendan: i think what happens on the yen is going to be much more determined in the short-term by the u.s. perspectives. we're seeing distinct growth disappointment. we've had some fairly nasty capital spending data in the u.s. this week. if we get more doubts about the strength of the u.s. economy, that could push the yen higher. francine: we're expecting the fed to possibly move in september. brendan: i think that has gone out. what we're likely to see is some combination of continued

japanese government bond selloff, which means bond yields are rising. that could feed into rising yield in the u.s. the gap between the two may narrow for some time. francine: thank you so much for all the inside. brendan brown, executive director at mitsubishi, stays with us. we will talk about the fed and the transition to a negative rates. let's get to our other story, bank earnings. afterares relatively flat switzerland's biggest bank beat estimates. manus cranny spoke to the ceo, sergio ermotti. with thery pleased strong quarter, not only in absolute terms, but if i compare it to the second quarter of 2015, we are up. both in absolute and relative

terms, very strong results across all businesses. quarter, therst phrase was paralyzing volatility. that016 going to be a year we've got to get used to subdued activity? >> it looks like. there is very little visibility about the near future on all fronts. macroeconomic, geopolitical, and clearly, this is translated by client risk aversion. we can measure it in terms of cash holdings. our average cash holdings of our clients outside the u.s. is 28%. in the u.s., declared cash holdings is up to 22%, the highest level we have been seeing for a while. it is a challenging environment. francine: that was ubs ceo sergio ermotti. cranny. live to manus sergio ermotti staked his reputation on the wealth management business.

is that paying off? manus: the strategy is proving harder. everybody thought they were moderately insulated. you sat down with thiam yesterday. we've got john cryan, jes staley. brexit, dividends, negative rates, low rates, for him isn't about -- it is about getting clients to shift. there are warning flags in the numbers. net new money missed on the target. investment bank profitability down 48%. margins dropped ever so slightly. i think the challenges and the headwinds are the same for everybody. the others have to develop a plan. eye of thein the storm. aboutne: what did he say brexit? this is one of the concerns. it is difficult for ceo's to talk about because we haven't

trigger article 50, but it is one thing that will really suffer in london. manus: absolutely. the critical issue is two-sided. one is for the business and one is for the client. passporting writes are critical. were there any opportunities? take a listen. >> there's always opportunity, but we need more clarity about what kind of form this brexit vote will take, and then people will be able to evaluate where there are opportunities. there are also challenges. foronly for the u.k., but the entire european system. manus: francine, they are all going to hold the reins in terms of what they are going to do with staff. the french and germans are knocking at the door.

he seemed relieved with a subdued quarter rather than paralyzing volatility. they did make money on revenue, on brexit, but they are abandoning some of their near-term profits. francine: thank you so much. stay with "the pulse." plenty coming up. the world's biggest reinsurer sees profits drop off. we will be speaking to the cfo. plus, as several of europe's biggest banks report falling profits, we will analyze why and bring you our interviews with the ceo's. with corporate earnings season in full swing, what has been the impact of brexit? we will bring you what they've been saying. this is bloomberg. ♪

swiss re service re -- has reported a drop in second-quarter profits. i'm very pleased to welcome the cole whoiss re david joined us on the phone from zurich. thank you for joining us. how does your industry grow? grows our industry basically as the world economy grows, and also as the world's appreciation of the value of insurance increases. insurance plays an important role in allowing long-term

investment to take place. it allows businesses to take risks. it allows people to protect their families. it is a very long business model. there's areas where insurance can increase penetration. francine: overall, there's so much concern about growth. where do you see potential to grow if the world economy is staying where it is now? not outlinee driven. we believe in maintaining good discipline in our underwriting decision-making. we see that we can still provide innovative solutions to our clients. we can help markets develop. it is one we have to be quite disciplined. i think we've seen opportunities to grow with our close life business in the u.k. very high degree of

discipline in terms of taking decisions to invest in growth. francine: are you still interested in the life? david: we don't respond to market rumors. we are interested in continuing to see our close life business grow in the u.k. francine: will you talk about some of the units you have? what are the plans for the life capital unit? david: i think it would be premature to talk about any ipo. we have said in the past that we would contemplate having third-party investors with us. the life capital business is a very important opportunity for us. if i look at the level of penetration of life insurance in developed markets and developing markets, there's a very ample opportunity over multiple years, perhaps even decades, for us to

continue to provide new solutions, introduce insurance to new policyholders. timeine: difficult, last you were on the program, i remember having a conversation about negative rates and the pressure it caps on swiss re. things may be getting worse. david: it hasn't gotten any better. the recent decision in the u.k. has probably exacerbated the decision. the lower rates may last for longer. saver, anyure on any long-term investor. it certainly has an impact on the insurance industry. francine: do you think that we underestimated or overestimated the effects of brexit? the markets are. we haven't trigger article 50 yet. david: it is probably still early days. there was some volatility around the vote, both down as well as

up. i think it will take quite some time to learn what is going to happen, and how it will happen. we have to be diligent, watch the discussions, and underline that the u.k. remains a very important market for us. david cole, thank you for your time. the chief financial officer of swiss re joining us from zurich. let's get back to our guest host, brendan brown. when you look at the reinsurance business, we don't often inc. it is as penalized as the banks, and it is not, but are we mispricing risk overall? brendan: i think the bond market bubble if one wants to call it that is a dominant influence on all global asset markets at the moment. or upset to that level

bursting would have profound effects. i mentioned the possibility that we may be entering a dangerous period in the japanese market. theseenerally, i think level of bond yields clearly makes very little sense from the longer-term perspective. the big question is, when do insurance companies decide to take profit? francine: thank you so much for that. we will talk about japanese banks. brendan brown stays with us. coming up next, barclays profit plunges. how big a blow was the brexit vote to jeff staley's turnaround effort? this is bloomberg. ♪

francine: barclays second banker profit fell as the posted a pretax loss. ceo jes staley spoke to bloomberg earlier about brexit. >> at a bank like barclays, rather than the part of the crisis in 2008, now we are seen as a place of stability, liquidity. we are open for business. we are extending credit to small businesses and consumers. we want to work in cooperation with the bank of england to minimize the economic impact of

brexit and be on the side of our customers and clients. francine: for more, let's bring in bloomberg's finance editor, michael moore. also with us is brendan brown. when you look at barclays, the turnaround is tough. will it get better anytime soon? >> the stock is up today and i think that is in part due to staley saying it will get better next year. non-core costs are supposed to drop off by one billion pounds. this quarter still had some tough elements to it. francine: what are we expecting from the next couple quarters? they are impacted by brexit more than the other banks. >> staley talked about being practiced at having to set up new units, and if they had to, they could move to that. i think the bigger impact will be on the economic side. if you look at it

regionally, brandon, are japanese banks worse? they contend with negative rates. brendan: i think japanese banks are a big opportunity. the question over the longer term is the amount of business and profitability they are going to get from the shift away to other assets. francine: what did we learn from ubs? not as bad, but the road will be long? >> across the board, equities trading was tough in the quarter. that has been one more headwind against all the banks. francine: michael, thank you so much. michael moore and our guest host , brendan brown from mitsubishi securities, thank you so much as well. up next, falling profits at several of europe's biggest banks. we will bring you interviews with the ceo's. plus we speak live to the chief executive of the bankers association.

markets are a little volatile. the story of the day is yen. boj opting for limited stimulus expansion. this is bloomberg. ♪

francine: welcome to "the pulse" live from london. i'm francine lacqua. let's get the bloomberg first word news with caroline hyde. caroline: francine, thank you. hillary clinton says america is at a moment of reckoning and belittles donald trump's claim that he alone can solve the nation's problems, accepting the democratic nomination for president. clinton says the u.s. can advance only when each segment of society and members from every group work together. ms. clinton: i will be a

president for democrats, republicans, independents, the struggling, the striving, the successful, all those who vote for me, and all those who don't, for all americans together. caroline: googles parent company has beaten a sales and earnings estimate thanks to the ad business bringing more money from a swelling mobile user base and cost control. the firm is investing in new areas from cars to health care as it looks for the next big thing to replace its aging but i recoverable -- but highly profitable business. amazon beat analyst estimates. shares rose in extended trading as the firm forecast third-quarter sales that may also beat estimates. global news 24 hours a day out by 2600 journalists, and you can find more stories on the bloomberg at top .

francine? francine: thank you, caroline. markets slightly higher this morning. let's head to the bloomberg with mark barton. mark: stocks rising for the fourth day in five. the best winning run in two months. we are on track for a gain in october, best month since october. this month of courses july. this month has been marked by outflows. global managers turning underweight. that is the daily chart for the stoxx 600. big news for the day, boj. there will be unexpected economic assessment of monetary policy in september. the monetary base is unchanged. the lending rate, the negative interest rate, is unchanged. this is the yen. all major currencies are falling against the yen. worst performer, malaysian ringgit. have a look at banks, a number

of them rising. lender todaynish says second-quarter profit fell. that was a beat. you can see barclays up by 6% today. profit fell in the second quarter. that was a miss. it posted a pretax loss from the unit that houses the businesses and assets it is trying to wind down. ubs rising as well by 3%. different story to yesterday. second-quarter profit falling 14%. that was a beat. wealth investment and banking generating less revenue. for markets, second-biggest mover, the french utility rising as much as 11% earlier, 8% now. it reported a 17% drop in

first-half profit as the government cast doubt on the future of its nuclear power project in the u.k. profit excluding items climbed. that is why shares are higher. the government said on thursday it plans to review the construction of two nuclear reactors in southwest england. that was just hours after the board gave the go-ahead. the french government does see this project as essential to the future of france's nuclear industry. edf plans to sell 10 million euros of assets to fund it. francine: thank you so much. ubs scrapped its near-term target as second order profit plunged. ceo sergio ermotti said clients are conservative. he spoke to bloomberg about the headwinds facing his company. >> of course there's always opportunities, but we need more

clarity about what kind of form this brexit vote will take, and then people will be able to evaluate where there are opportunities. there are also a lot of challenges. foronly for the u.k., but the entire european system. manus: the key thing for the bankers is the passporting. is that the only key risk you focus on? far a risk in terms of having to find other options on how to operate. strong high flexibility, local presences in europe, frankfurt, luxembourg, and other cities in europe. we would be able to adapt. the outcome could well be that the u.k. retains access to europe. manus: you are headmanned and

the investment bank and the germans and french are knocking at the door. if the bank needed to redeploy, would switzerland feature on that redeployment? it all depends what is going to be the future of switzerland. switzerland has the same issue of passporting. switzerland at this stage is not an option. there may be opportunity in the future. manus: the latest news from monte dei paschi is the confirmation from lenders. what are your intentions? what do you want to get involved with, what do you want to do for them? >> the bank has issued a press release. we do not really comment on client activities or specific transactions. i have to stop the statement at this level. manus: would you consider

participating in capital raising? >> this is our bread-and-butter business to help clients do financial transactions. in general terms, not only for the bank, but in general, this is our business. ubs was not the only bank reporting this morning. also looking forward to speaking bbva.e barclays posted a loss. we spoke to jes staley about the effort. this is what he said. >> our investment banking franchise is very important to us and is part of our core vision and strategy and we will continue to prosecute that vision and strategy. following the brexit vote, we did one of the first euro bond issuers for a railroad company from germany.

we did the first big ipo coming out of europe for a privatization in italy. i think barclays presence in europe is important for barclays, but also for europe. add, as recently as last month, we had to completely reengineer the legal constitution of our business in the united states. we had to create a new holding company. we are currently in the process of reengineering our banking presence in the united kingdom. we have to create an entirely new bank called barclays u.k. adjusting our legal construct to execute our business strategy is something that we are getting pretty practiced at. brexit will be another issue that will acquire us to adjust. i'm very confident, because of the value we bring to europe,

that we will find a way together with the british government so that barclays can remain a presence across europe. francine: for more, we're joined by the ceo of the british bankers association, anthony brown. great to speak to you. we don't know what brexit will look like for banks. anthony: we don't. it has caused huge amounts of uncertainty. reaction, therket turmoil, the banks weathered that better than some expected. that was a tribute to the way banks have built up their capital. then there's the macroeconomic uncertainty. is there going to be a big slowdown, a recession? that plays heavily on profitability. the really big question for a lot of the banks is, what is our future relationship with europe?

can they still sell services to france and germany out of the u.k.? can we have eu staff working in the banks here? we simply don't know what that relationship is going to be like. francine: are you hearing anything about what that final model could look like. we've got a government, which is a great start. we know who the british government are. we know who the ministers are. the reality is, the shape of the deal will depend very much on the relations and deals between the u.k., germany, france, and italy. the prime minister is having talks with everyone to scope out what is the relationship. she said it should be something unique to britain. the only thing i'm confident

about is that whatever the relationship is, it will be completely different. it won't be normally. it will be something unique. it is very early days. this is a marathon process before we leave the eu. the article 50 negotiations are two years. we saw stories yesterday. the government hasn't decided whether it will be inside the customs unit. it is a really fundamental question. things like that aren't sorted yet. francine: is michelle dornier u.k. bank friendly? rd that he is a tough negotiator. anthony: we had dealings with him was overseeing the eu legislation that came in since the financial crisis. he came with a reputation of being pretty hostile to the

u.k.. i have to say, at the end of his time as internal market commissioner, the general view is that he did a pretty fair and reasonable job. there were some things like bank structural reform, where he had effectively carved out a u.k. opt out from french interest. he was a defender of the single market rather than just the eurozone. city thought he did a fair job. he will be a formidable negotiator. he is incredibly experienced. he's got a very experienced team of people working for him from the european commission. at the moment, it does feel a bit david and goliath. francine: i have a million more questions. hang in there.

we're going to take a very short break. we will be back with anthony brown. with corporate earnings season in full swing, what has been the impact of brexit on european companies? plus, second quarter gdp. we will bring you that as it breaks. and on "surveillance," we were breakdown the boj decision with robert feldman. this is bloomberg. ♪

francine: welcome back. we are having a spirited discussion about brexit. anthony brown is with us. thank you for sticking around. we were talking about what it and for the bigger banks, the new advisor to the commission, and his tactics for negotiating. how difficult is it for you, giving you have many different members, that your members want different things out of the eu, to speak with one voice? anthony: if you are a u.k. bank only, you probably don't care much about the single market. you might be worried about some european legislation. if you are an international wholesale bank that operates across europe, then it is crystal. what the banks want is to maintain the current access we have to the single markets. they can carry on providing services to european customers. manus: y --

francine: why would the eu agree to that? either they seek to attract jobs to their countries or give a helping hand to the champion. anthony: it is part of a very big deal. theresa may is thinking about agriculture, manufacturing, freedom of movement of labor. at the end of the day, we're still going to be in europe, the biggest trading partner for the eu 27, and from a financial services punter view, a global financial sector. european companies want access to the services only london can provide. you might see some movement. anthony: and that won't change in 10 years? anthony: that is going to carry on almost certainly. that is part of the pool of

talents and labor skills we have here. banksan companies and want access to these capital markets. what is the worst-case scenario? is there some kind of deal that means you need to follow eu regulations without having a say in it? anthony: the very worst-case scenario is falling out of the eu without any agreement. we wind up with rules under which banks wouldn't be able to sell any services. francine: helmeted job losses if that were to happen? anthony: i don't know but it would clearly be big. that is worst-case scenario. one of the problems with that scenario would that we have to implement rules and regulations that we have no say over whatsoever. that could be really difficult for the banks. but also for the u.k. as a country, if we want to maintain

being a global financial center, we have to accept rules that we have no influence over. it becomes a major stability issue. francine: is it too early to say how many job losses the city will lose because of brexit? anthony: it is too early to say because we don't know what the final deal is going to be. uncertainty is clearly bad. the banks have developed contingency plans for different scenarios. if we maintain the current level of access to the single market, there's no reason why they would have to lose any jobs in particular. they want to try to keep jobs in london. there have been some job movements due to cost cutting. that will carry on. in terms of access to the single market, they want to maintain jobs here if they can. if there's a worst-case scenario, they will have to relocate. francine: are they starting to relocate because london is so

expensive anyway? anthony: london is the most expensive place pretty much in the world, certainly in the eu, to operate from. a lot of banks have been moving to belfast in birmingham, but also to other european locations, like poland, ireland. and thecore services services that room where skills -- that require skills you can't get anywhere else, that is maintaining in london. francine: you have a great insight into the big banks here, how much staff may have. is it the american banks with the swiss banks that would have the most to lose because they have huge operations in the u.k. and they don't have the domestic market to fall back on? anthony: absolutely. if you are a you a retail bank, that is staying. if you are an international wholesale bank, serving customers across the eu, then it

is absolutely critical that you have access to those customers. if a wall is put up across the channel, you won't be able to serve your customers. if that is the scenario, you would have to move jobs elsewhere. hopefully we get a deal where that isn't the case. francine: what is your relationship with the current government? will we have a better idea of negotiation tactics in the next six months? anthony: it is early days. theresa may has only been in place a couple weeks. the ministers are just setting up their private offices. very early days. the government is trying to scope out what the different opportunities are. we are talking to the government and the treasury. they are very keen to hear the views of the industry. what are the red line issues for us? what are things we are not concerned about? basically trying to make sure london can retain being the financial capital for europe.

francine: how much animosity are you expecting from the germans or the french? is it difficult to pinpoint who the most difficult negotiators are? anthony: the most difficult noises have been coming from the commission and france. there has been a view that the u.k. needs punishment. that has gone away. the merkel view is prevailing. this is a partnership. we are going to remain really important partners. as i said earlier, the main trading partner. they want something that works for both sides. both sides want something that works for both sides. francine: she would be afraid of losing that to an entity outside of the region? what does she gain from it? from a financial services point of view, the european corporate's, the big european, german, french, and

italian companies want access to the capital markets in london that don't exist elsewhere. that is not going to change. we are the financial capital of europe. from a bigger political point of view, the eu has had so many crises,it has all these it has brexit crisis, and what the european politicians want to do is get rid of the sins of crisis. if you have a conflictual negotiation with the u.k., then that will just enhance the real sense that the eu is in crisis and sends a terrible message around the world. what politicians want is a really workmanlike negotiation and partnership. that will certainly be what is best for the european economy. francine: you don't want the norway model. what about the swiss model? anthony: the trouble with the norway model is you have to accept regulation that you have

no say over. it is all down from what we had before. the swiss model is a very complex model. you have a series of bilateral agreements. what we end up with is a completely unique british model. it will be unique. switzerland didn't leave the eu. this is utterly unprecedented territory. it has never happened before globally. francine: it could take decades. anthony: i don't think it will take decades to leave, but after we trigger article 50, it is two years negotiations. then you've got another four years for parliaments to ratify the deal and the u.k. parliament, etc., so many years. francine: so come back very soon. thank you so much, anthony brown. let's talk u.s. politics. hillary clinton has accepted the

democratic nomination for u.s. president, becoming the first woman for any major party to do so. clinton struck an optimistic tone and called for unity. ms. clinton: so let's be stronger together, my fellow americans. [applause] ms. clinton: let's look to the future with coverage and confidence. let's build a better tomorrow for our beloved children and our beloved country, and when we do, america will be greater than ever. francine: bloomberg politics reporter kevin cirilli is in philadelphia for us. i know you've been running on two hours sleep in the last five days, but how was the speech received? kevin: hillary clinton had her cask filled for her and she sought to unify the democratic party, trying to win over the supporters of bernie sanders. there were some protesters in the stadium, but she largely did

strike an optimistic tone. she wanted to work not only for women and children, but also to get the economy moving again. she faces an electorate and an opponent who are extremely angry and disgruntled at the pace of the economic recovery. kevin, overall, will we see the kind of bump in the polls for hillary that trump got last week? kevin: she is going to be sticking around in pennsylvania, campaigning here. then she will head to ohio. these are battleground states. trump will also be in ohio. on fortom line is, game hillary clinton and donald trump as we enter the general election matchup mode. francine: bloomberg's politics reporter, kevin cirilli in philadelphia. stay with bloomberg. "surveillance" is next.

tom keene will be joining me from new york. we will go through massively and moves, central banks, and what it means for commodities. the main story is european banks. we will talk brexit, passporting, and eu stress tests. this is bloomberg. ♪

francine: the bank of japan keeps its monetary policy unchanged. kuroda calls for a review of the effectiveness of policy. the yen jumps. cites limited visibility. hillary clinton accepts the democratic nomination. can she transform her policy experience into a clear vision? this is "bloomberg