scarlet: most u.s. stocks closing higher this afternoon with the s&p 500 reaching an all-time high. joe: the question is! "what'd you miss?" scarlet: we break out the market action by asset class. joe: plus, european bank stress tests results in moments. amanda: and u.s. gdp disappoints . we have the three charts you can't miss from today's economic report. scarlet: we begin with our market minute. the s&p 500 making another intraday high. the dow jones industrial average couldn't quite get there, falling just marginally, off-white .1%, or 26 points. in terms of the monthly superlatives, fifth straight month of gains for u.s. stocks. this comes after data for the second quarter showed less than expected growth. joe: the story, though, for

today, extraordinarily low volatility. basically, a market that means nowhere and seems to be unchanged every day. amanda: it is inching higher. the s&p 500 hit that intraday record. scarlet: maybe "hitting" is not the right word. inching up. amanda: playing around with. huge tech week. amazon, apple that. which had a rather good week, was a weight on the market. basically flat to slightly sold off. a little profit taking. there is hewlett-packard, though. report today, report only, that kkr and carlisle are considering a run at hp and that has the stock shooting higher. speculative move up. we have no confirmation of that but the market is interested in

the rumor. joe: let's take a quick look at u.s. government bonds. lower across the curve today. one of those days were equities rise and bonds and treasuries rise as well. kind of the story for a while that we see equities and treasuries doing the same thing on the same day. scarlet: in terms of currency, we are focusing on the dollar this week. want to stand on monday and tuesday. the gdp -- modest gains on monday and tuesday. the gdp report pushing out expectations of the fed rate increase. rallyd rallying -- yen after japan under one the market by keeping bond purchases and negative interest rate stands unchanged. fairly tumultuous month for the almost 7% on hopes of the stimulus. now and in month little changed. -- now ending the month little change.

firmer by 1%. joe: let's take a quick look at oil because that really has been the story, how weak oil has been . oil hasn't quite fallen below that but if it were to, that would get a lot of the technical people interested in how much lower it has to go. you mentioned before about supply building up, rig counts arising. lots of focus on that line i suspect we will be talking about next week. scarlet: as promised, the headlines from the european bank stress test results, and amanda and i were looking at the man to be focused on. ratiosly loaded cet1 shows the one that everyone is focused on because there is no past sales in this particular set of stress tests. ratio fore, the cet1

monte paschi dropped to -2.44% in the stress test. you have a negative number here, definitely not what investors want to see, although perhaps not so surprising either. amanda: a couple of closely watched names. deutsche bank, questions of how it would fare in the stress test. allied irish, it looks like it may well fail. depending on what kind of measurement we are going to use, that is probably not going to satisfy the regulars. scarlet: and of course, from this, the supervisors use the information to set capital requirements bank by bank. it is not like no one can issue dividends or buyback stocks. they are going to take this information and put it through their models and come back with guidance specific to each bank. amanda: there are also questions that have been raised about the

stability of the stress tests. some academics have issued studies saying that the stress test isn't robust enough, because it doesn't include negative rates or the brexit. joe: jim reed of deutsche bank pointing out that one of the problems of the stress test is exactly that, the lack of test for negative rates. these negative rates might stick around for a while and might be something that needs to be included. scarlet: another 2 names here. 7.1%er time bank drops to in the stress test. nothing like the negative number that monte paschi hackett and society --that monte paschi had. and societe generale fully loaded. amanda: and this afternoon, in an e-mailed comment, it says it showed the improved resilience of the bank. clearly they are satisfied with what they are saying. from the investor point of view, some of the banks are going to have to shore up capital but nothing disastrous year. on the italian bank, monte

paschi, the fact that they got a deal really last night in order to shore up their capital, not involving any form of state bailout, means that their bondholders will not have to take a massive haircut, which is very good news for that market. scarlet: just a quick note on the u.k. banks. the bank of england saying that the bank authority showed that the u.k. banks have resilience. we will monitor the headlines and discuss this further later on in the hour. let's take a deep dive into bloomberg. you can find the charts using the function at the bottom of the screen. i'm looking at the s&p 500 ford pe ratio. stocks are at record highs for the s&p 500. still in recession. valuation clearly stretch. the 20-year average, by the way, is 17 times. which is probably waste -- richest evaluation since 2012.

you can say it is overvalued versus historicals. amanda: by some measures, and in fact you could say that because the situation today is so unlike any previous time in history, making historical comparisons doesn't really add up. never had a situation where we had zero rates and are awash in liquidity. joe: we will find out eventually if this is a disaster. scarlet: time will tell. joe: i want to look at data from the university of michigan consumer sentiment index. specifically, the gap between the index of how people say things are going right now versus expectations in the future. expectations of the future are starting to tail off. you have this widening gap. ominously, this gets ready wide before some recessions. not a perfect indicator, but the red bars signal recession. in the late 1970's

before recession, wide in the early 1990's. one, i guess00 people were optimistic about their future. it is not necessarily a foolproof recession indicator but it is interesting that we are getting to extreme ranges here on how people feel about right now versus the future. possibly there is anxiety about the election creeping into that, where things are ok but they don't like where they see -- amanda: the reason i think the 2005 thousand is at is the economy -- 2005 comparison is apt is the economy was ok but there were asset bubbles that made people nervous. joe: housing did start to rollover not long after. i agree. amanda: we have the gdp number and i want to look inside my terminal at the picture of business investment, once you strip out energy good the energy

sector -- talking about exxon mobil and the other majors, the effect of the prolonged weak commodity price, they are not investing. overall investment is the white line. strip out energy and you get the blue line. they are investing and not a bad rate. by another measure, it increased 4.5% year-over-year. joe: everything is fine, then. what are people complaining about? amanda: wait a minute, i'm from canada, we can't do that. joe: canada had one of the worst gdp reports in a long time. amanda: the good news is other businesses are investing. joe: let's get more insight into the month that was for the markets. all around it, bloomberg -- oliver renick, bloomberg stock reporter, joins us now. what is your number one takeaway? oliver: up and up. you have the dovish fed outlook, despite the tilt, hawkishness this week.

overall we saw the expectation for interest rates fall yet again. if you're trying to find a reason for looking at wide the stocks could keep moving, history for the past seven years is a pretty good precedents that when the interest rates are low and there's not a whole lot else to put your money into, stocks are pretty solid. that is part of the reason why we floated to a new high today it also with the help of earnings. it was nice to see a little bit of company-specific idiosyncratic binding happen this week. amanda: give us some phenomenal to be in the markets on because --is interesting -- tw give us some fundamentals to pin the markets on because it is interesting -- that means the economy is weak and stocks should not go to new highs. thank goodness we had pennies like -- properties like the tech sector reporting.

give me something to hang onto. oliver: i have a chart that hopefully we have that looks at the economic surprise index. it took a little bit of a take down today. basically, this is looking at the idea that gdp threw things for a little bit of a loop today but overall you have a significant move up in the interest rate futures, looking at fed funds futures, with better economic numbers. today was not totally bad. joe has talked about that there were good numbers in their. ultimately there was a macro play on top of what we did see in tech as well. a few things happened this week but overall there will be a lot of outlook into how the lower rates around the world will keep affecting things. the hike, the possibility of like, 40% likelihood. you can see the economic surprise index is doing pretty well and how much of that is because expectations were

lowered pre-brexit is important. but that is hawkish in the sense not like to goes where there is a lot of volatility and if it keeps doing well that will factor into their decision. back to thats go idea about tax because we have seen a lot of tech companies reported earnings and as amanda said, fundamentals, you can hang your hat on. oliver: it is a stark shift because this is a group that has not been doing well. when you look at what has been happening this week, a few things going on. one is the fundamentals, the earnings a very nuanced point because they are down year-over-year average so the profits are not good by any means. but they are beating by quite a bit. you are looking at the ratio, infotech sector to the s&p. as that is going up this week, tech outperforming. at the same time you have this there we case -- boom,

go. staples versus cap. -- tech. we are going to look at the stables been a popular area for we are showing that the gap is widening. some sectors have done very well. if you like apple store, whatever, you get a little boost on top of it because of valuations right now. scarlet: thanks, oliver. oliver rented, bloomberg news. coming up, we will have analysis and take away from the doj's decision. this is bloomberg. ♪

mark: i'm mark crumpton. let's get to " first word" news. hours after hillary clinton

accepted the democratic presidential nomination, she and running mate tim kaine hit the campaign trail. they spoke at temple university in philadelphia before a bus trip to europe two battleground states, pennsylvania and ohio. mrs. clinton continue to take shots at her challenger, republican donald trump. ms. clinton: i find it highly amusing that donald trump talks about "make america great again." he does not make a thing in america except bankruptcies. mark: mr. trump, on the campaign trail in colorado, wasted little time responding to mrs. clinton's speech at the democratic convention last night. in a series of tweets, he attacked her for being soft on terror and refusing to say the words "radical islam." u.s. attorney general loretta lynch thanked a group of police officers in baton rouge, louisiana today for their work in what she called challenging times. three officers in the city were killed in an ambush this month.

lynch met with officers and first responders, telling them, "we feel with you and support you." and vice president biden spoke at a visual for the officers on thursday. expanded the government crackdown in the wake of the attempted coup. president e rdogan's government has canceled 50,000 passports soldiers,ed bureaucrats, and academics. pope francis paid a somber visit to the nazi death camp auschwitz-birkenau today, becoming the second pontiff to make the pilgrimage to where hitler'sler -- adolf forces killed millions of people, most of them jews. global news 24 hours a day in more than 120 countries. i am a mark crumpton. this is bloomberg. joe, back to you.

joe: let's return to the european banking authority stress test results just reported and how the markets might interpret the news. i want to bring in alan ruskin, global head of g10 fx strategy at deutsche bank. allen, something like this, which is designed to give people confidence, ultimately, in european banks, we had the easy be coming out saying that the banks are stronger. what does this mean short or medium term for the markets? alan: for exchange markets i don't think it will have much impact. we have to go back to 2014 when we had sensitivities about these tests. a lot of time in the last three or four years and a significant buildup in capital asset ratios. i think banks are seen as more secure but right now we are focusing on a few particular banks and maybe there is some sensitivity but i think that is more of an equity story than a currency story. scarlet: right, and we are focused on the italian banks with monte paschi being the

worst performer in the stress tests and essentially seeing its capital wiped out. how much of the trouble in italian banks is priced into the euro? we see worse than expected results for italian banks over the next 12-18 month, what would that do for the right?-- rate? alan: a range of different conduits in which it would impact the currency markets. one is political. does it impact the way the referendum goes, fourth quarter, which would have huge ramifications for the euro. another would be through the whole credit impulse. there are signs that credit is slowing. the acceleration is turning to the celebration in europe and that could -- deceleration in europe and that would be significant as well. amanda: there is a case to be made that the conditions in the u.s. economy, the u.s. fed should have hiked rates this week. would you agree? are they too slow to normalize? alan: laid out conditions in

terms of tightening, at least the end of last year, you saw financial conditions in a certain place, the kind of indicators he would look at in terms of equities, financials, etc. they have all performed remarkably well. you could say that there is a pretty strong argument they should be tightening and seizing the window, i think, because the international backup doesn't always a line like this. china is in a good place right now. europe is quieter as well. japan was leaning towards easing. the international backdrop is great. joe: you mentioned japan, and people called it a disappointment in terms of directly what they did. we did see some yen strength but we also saw the nikkei rally and the banks rally perhaps on the fact that boj did not go further into negative rights and instead created avenues for the banks to exit dollar funding. is the bank of japan showing how central banks can ease further without cutting?

is this the way central banks are moving? alan: i think there's something to that, absolutely. it will not be terribly upset with the response where the equity markets and financials are hanging in even if the yen actually strengthens. i was the, don't want -- obviously, don't want the yen district into much. all of a sudden the nikkei starts to tank. i think it is reasonable from a central bank standpoint. scarlet: and of course you came equipped with a chart, which we love you forget global quantitative -- which we love you for. global quantitative easing still moving. see us through what you going forward with the change in the central bank assets chart. alan: what we might sees that the chinese central bank was going to be losing reserves. its balance sheet was going to shrink. the u.s. was no longer adding to global liquidity. bank of japan and

ecb to add liquidity and offset the drain in the emerging market side. you have not seen quite the drain on the chinese side. the bank of japan has done a wonderful job, adding a huge amount of liquidity. so has the ecb. the bank of japan has done it to the tune of about 16% of gdp per annum. that is huge. when the market pays for more qe, you have got to ask -- come on, 18% from 20%, doesn't make any difference. amanda: you think the bank gets creative with its balance sheet next week? alan: not yet, but they deliver on the 25 basis points fully priced in. deutschelan ruskin bank. scarlet: coming up, harvard with a case of the iv blues. this is bloomberg. ♪

scarlet: i'm scarlet fu. "what'd you miss?" a shakeup at harvard management corporation, the investment arm of the school. the ceo who was named to the position a year and half ago resigned for personal reasons and harvard management has to look for a new replacement. it has been pretty rough. if you look at the returns, you see it there. harvard trails all the other ivies except my cornell university. come inside the bloomberg terminal and you can see, harvard has the biggest endowment of all the schools. $36.4 billion. more -- $10 billion more than

the next biggest endowment, yale university. from the other school cambridge, massachusetts, that is doing better, with the return of 10.5%. on a one-year basis, harvard -- you don't even see it until number 32. joe: oof, awkward. scarlet: you can click on harvard for more information on the endowment. amanda: some of the returns suggest a risk profile you would not expect to see in an endowment. scarlet: everyone is getting pushed out. joe: everyone is talking about how oil is falling and candy 2 continue to divert? i want to look at a long-term chart of the ratio between the s&p 500 to oil. what it shows is that this ratio moves in broad long-term, slow-moving trends. you see this big, long upward cycle in the ratio, the s&p 500. andoil, the bubble eras,

then we went into a long decline where oil started to rise and stocks didn't go anywhere. really since the crisis or not long after the crisis, has been going back in the other direction. this year come over the last several years, stocks have picked up relative to oil. we can assume in -- zoom in. we are part of an uptrend. amanda: i want to jump inside the terminal. a couple of things to watch for goo. above, if it breaks out upward587, two resistance points. scarlet: i think that is the first time we have done the fibonacci. joe: we need more fibonacci. scarlet: coming up up, a deeper dive on the european bank stress tests.

this is bloomberg. ♪

hillary and tim kaine hit the road today hours after mrs. clinton formally accepted the nomination for president, she began a bus trip for pennsylvania and ohio. donald trump is in colorado springs, colorado. you'll will hold a rally in denver tonight. the obama foundation made it official that the presidential library will be located in jackson park on chicago's southside. the president plans to raise as much as $1 billion to finance the complex. -- federaleel

theals court found that voting log required photo id to cast in ballots. this reverses a lower court ruling that had upheld the law. the united nations special envoy to syria is urging russia to leave the creation of humanity and -- humanitarian core doors and -- toppo to you the u.n. they would offer a way out for fighters who wanted to surrender. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: let's get a recap of today's market action.

the s&p 500 made an intraday record high, but as for the close, it got within two points of its record. it rounds off a fifth straight month of gains. the dow jones finishes down 24 points. it is the tech earnings that drove a lot of the movement higher this week, amazon in particular. joe: european bank stress test results are out. let's head to milan where we have the details. thank you very much for joining us. what is your big take away from the results? what cut you by surprise, if anything? thatite caught off guard half the was going to fair poorly. throughfor that it came a negative capital buffer. it is forcing the bank to raise money.

is seeking to raise 5 billion euros. this will be the third time in two years it has stripped capital buffers. that was the highlight. irish banks also flagged in less than perfect conditions for overall, should the headline s areis be europe's bank ok? elisa: some of the simulations have been wrong on banks based on the previous rounds of stress tests. have such as deutsche bank come through slightly below average. numbers at the moment look slightly above expectation. amanda: walk us through how the results of the stress test will

be used. the european banking authority will apply them and look into what each bank should do on a case-by-case basis, but none of these recommendations are binding, are they? elisa: not quite. there is no pass or fail mark. no one has been shown to have a particular shortfall of capital. the ecb will use these findings to determine just how much capital each individual bank is going to need for next year. it will be a process that is tailored to each bank and there is no visible fail mark. joe: what do the stress test results mean for deutsche bank? that is a stock that has done horribly and people keep watching and grinding lower all year. where are they? to -- we have been able not been able to get many reactions yet, but i believe the

indication would have to be showing further difficulty over capital buffers, as you said. that is part of the reason that the shares have been falling as they have this year. i think the takeaway really is tonight that the spotlight was on passkey. it seems to have been able to put together a private plan so there is no bailout on the card. the treasury stated quite clearly that it does not cashhe need for a public stop. scarlet: we do see the stress test including costs associated with fines and other risks. there has been criticism that it does not include the effects of

negative rates or the brexit. were these enough to test the banks? elisa: i think so, the scenario at the moment was pretty severe. we are not sure how closely they are looking at in terms of deutsche bank. their level three assets, assets that are very complex and don't have a market value for that and how much of that complexity is being factored in. scarlet: thank you so much. amanda: you talk about some of the limitations in the stress test. it only tested 51 of europe's biggest banks. 70% of total eu bank assets. in 2014 it was 123. this is a much smaller sample. was tested but no

banks from portugal or greece were included. joe: this will be interesting to see if this is a turning point in bank equity. it is aterrible sector matched against american banks. european banks have done badly. we have been talking about libor. the paschi bailout, which is more of a financial package, but deal being financed by other banks. plus third-largest bank. it isn't difficult capital condition. scarlet: looking at how bankshares will do, i have a chart that shows a european bank being relative to the other market.

it is a spread, but you still see how it has gone down, down, down. this has become a value trough of a sector. joe: earlier this week we were talking about dying banks in general on dividends. between the low valuation and the dividend, perhaps there is an opportunity. scarlet: certainly, the commentary we are seeing from the ecb is the banks have done what they needed to do. they are patting themselves on the back for the regular type -- the regulatory environment they have greater. ♪

scarlet: it is time for the bloomberg business flash. the biggest deal ever involving beer makers is moving closer to completion. sab miller's board has recommended the takeover offer for $1.3 billion. that is a move being welcomed by ab inbev of. ropostaletel

sales onn liquidation august 3 and ask to override bankruptcy. in third place with $65.7 billion and ahead of warren buffett after getting some $2.2 billion in the last two days. jeff bezos has seen his net worth increase almost $6 billion so far this year. joe: we are one month into the post eu referendum and things in the great britain market seem fairly stable. earlier i spoke about the data we have gotten so far and what kind of response we might see from policymakers. >> we are trying to assess the data that has come in so far in an evenhanded way. i was someone who was on the remain side. i have found it disturbing that

some people on the remain side have been cheerleading the bad data coming through. looking through the data, there have been good bits and bad debts. most places i look, it is not terrific, but at the same time we don't have much hard data. we have a lot of surveys and not much hard data. joe: it has mostly been survey so far with the flash pmi, the index,sumer confidence which tumbled. expand on that point about how you were disturbed by people who were on the remain side that seemed to be cheering negative news. toby: i think there is a certain amount of i told you so when you see the pmi crash into the recession territory. there is very little good things out there.

price expectations would be consistent with falling house prices coming through. i live in the u.k. i want the economy to do well and it is a little disturbing to look at people look at this and say we told you this was going to happen. this is project reality. that said, the survey data is not particularly upbeat. i'm just trying to record what we have seen so far and put it in context. joe: what about the fact the likely not bell the last vote in the u.k. or elsewhere that is about globalization and free trade? pointing out the i told you so for the next time similar debates come up, even debates about the nature of the u.k.'s relationship with the eu. is there any validity from that angle? toby: it is a good question.

there are issues if another , well,n country does expresses itself at the ballot box and does self harm, should there be an example made of the downturn in the u.k.? it certainly has not been associated with the economic rebirth in the data we have seen so far the u.k. himlink between popular is ism votes to come -- popular and. come could be the u.s. presidential election. there is not very much hard data, just surveys. there is probably enough survey data to prompt policy action and enough market data to give some

certainty to policymakers that that will not be in vain or undo.he the bank of england kind of surprising at its last meeting by not doing. what is the opinion on easing? cut. i would expect a rate signal that not having a of rate cut would be misunderstood by people and probably make the bank of england an easy target. if you think about what they are trying to do, they have signaled that they are going to be sensitive to financial institutions. they have pointed out almost with horror what happened to mortgage lending rates when the swedish bank moved into negative territory.

my goodness, look what can happen if we cut rates. it can pose problems in the banking systems. they have talked about insurance companies, solvency concerns, and they have talked about being sensitive to pension funds. in the u.k., about every 60 basis points of yields fall is associated with about another 100 million of pension deficits that come through which have been associated with huge cash injections into pension funds. they are very sensitive's about these sorts of issues and the kind of basket of measures i am looking for some that supports bank lending in the real economy of creditf concern shortages, but not much qe.

that was toby nagle. scarlet: disappointing economic data that you cannot miss. ♪

scarlet: consumer sentiment dropped in july from the previous month and u.s. gdp came analysts', short of expectations. wage growth is one of the most important components. data point that

only comes out once a quarter. we don't see it often. it is supposed to home in on how wages are changing for a particular job. it is supposed to be one of the. measures of wage growth. wage growth is excel a rating. it is at the highest point of the cycle so far. you look at the previous cycle and we are well below where we were. we have a long way to go and that suggests the low productivity environment we are in. scarlet: how does this compare to other wage data? does it confirm what we see in average earnings? matt: it does. a lot of the measures are starting to move up and accelerate a bit. this was one of the last ones that we were waiting on. hourlyerage earnings are seeing a pickup. we are seeing these measures get on the same page. joe: another thing you are

looking at is consumer spending. this is one of the standout points from gdp. matt: gdp was really disappointing today. it only grew 1.2%, but personal consumption was up 4.2%. the u.s. consumer is holding things up. the orange line shows contribution to gdp from personal consumption and the white line is from business. joe: something amanda pointed out is that business investment was dragged down in part by oil and if you exclude oil, the number is not quite as bad. it has not been impressive for a long time. matt: we hope we are getting through this oil shock that we have been dealing with over a year. the question is is the rest of the landscape confident enough to invest? it does not seem like there is

momentum there. hopefully that picks up because i think you need both domestic components to sustain growth. if you look at the chart again, you see the consumer part of the economy do better. the two often to verge and it is not unusual to see the orange line above the white line. matt: if you look at this chart, there were periods in the. wherethe previous cycle business investment would bounce back up. it speaks to how unusual and economy we are in. amanda: it does feel like we are dependent on the consumer in this stage of the cycle. you have another chart that goes to optimism and resilience. matt: the university of michigan survey had interesting data. it was not that great and one of the reasons is because the boost from markets, the effect that

people get when markets are higher, really seems to be fading a lot. the fact that consumer spending is so strong, all this market volatility, speaks to either a more resilient consumer or they do not have a lot of assets so it does not affect them as much. it seems like a different dynamic from previous cycles where this was a warning sign. joe: i want to ask about one other thing, the boj decision last night. theumped out at you that boj did something with dollar funding and caused japanese bank spots to rally. -- stocks to rally. matt: japanese banks are some of the biggest extenders of dollar credit. they really need to get dollar funds. what the boj did is relax restraints on the availability of dollars to supply their banks instead of cutting rates. of a cutpeople thought

rates it could exacerbate the dollar strains. that is a real issue that they are concerned about right now. scarlet: do you think that contributes to libor moving higher, or is that simply the money market reforms expected in october? matt: money market reforms are definitely driving it higher, but the japanese banks are the most dependent on american money. rates,look at borrowing the japanese are paying more than their european or american counterparts. scarlet: when do we expect to see a drag effect from that? matt: that is a great question. the fed is going to have to be assessing in the run up to their next meeting in the next five or six weeks. how that plays out, no one knows at this point. fantastic overview of what is going on in the economy. thank you. scarlet: what you need to know to gear up for next week's trading. ♪

joe: macau gaming revenue comes out sunday at 4:00 eastern time. everyone is going to get up for that one. week, theater next bank of england has a rate decision, thursday, 7:00 a.m., 25 basis point cut. i look at the big u.s. jobs report friday at 8:30 a.m. of consensus is a gain 175,000 after an increase of

265,004 june. we are going to find out if made is an anomaly. thanks for watching. joe: have a great weekend.

" to: "with all due respect donald trump, not everyone voting for hillary clinton is little. welcome to gotham city. the political media industrial complex of session with the convention is now over and the general election is upon us. today is the eve of the 100 day mark of the election.