francine: don't rule out september. the dallas fed president said a rate hike is possible next month. u.s. job data on friday. the latest european stress tests. sizable hit.ered a uber takes a ride. i'm francine in london. tom keene is in new york. a most interesting start of the day to a most interesting week.

the earning news, but i thought the italian bank workout was really interesting over the weekend. quiet, as always, but that will be front and center. it reminds me of how complex the calculation of dilution is. that is what it is about -- equity shareholders getting crushed. at howe: also looking reliable the stress tests are. let's get to the bloomberg business flash. taylor: one police officer was killed in a suicide attack in baghdad. authorities say they killed two attackers in a gunbattle. committing to the triple lot guarantee.- lock the former minister responsible

for pensions called it to be scrapped. the backlash is growing over donald trump's comments over the parents of a dead muslim american soldier. trump questioned whether the soldier's mother was not allowed to speak at the democratic convention because she was muslim. the woman said she was too distraught. a number of republicans joined hillary clinton in condemning donald trump's comments. hillary will appear with another billionaire supporter. she will campaign in omaha with warren buffett. she was joined in pennsylvania over the weekend by billionaire mark cuban. riggs, this is bloomberg. tom: thanks so much. that is a big deal, warren buffett weighing in at this time. it will be quiet through august. i don't think we have an august

that is quiet through this presidential campaign. francine: it does not feel significant that hillary clinton is going to omaha. i'm not sure with the voting swings are. it feels a little bit different. it is unusual for warren buffett to way and -- in? tom: i think it is unusual at this time of year. for our global audience, nebraska is not a swing state or a battleground state, but mr. buffett carries a certain tone to a certain part of america that maybe is on the sidelines. we will have much more on this. a tumultuous weekend of presidential politics. equities, bonds, currencies, commodities. euro turning. oil is front and center. 41.18. on to the next screen. the big 12.25.

brent, 43.10. yen is stunning. ,ou use dollar-mexican peso pretty quiet. francine? francine: this is what i picked up. banks are under pressure. i thought this was significant. it opened higher on the back of the ecb stress tests. this is a picture for some of the european stocks. overall, they are flat. tom: i want to bring up deutsche bank. deutsche bank, german, london-based. down we go. the blue line, we are really getting right near there. there is a certain fragility to the banks. most of that is due to a

pre-workout dilution calculation. which is pretty ugly. francine: it is ugly. i'm a little bit jealous you picked some of the european banks. you are right on the money there. the concern is that they did not really test their weakness. this is what i chose. this is something to do with t-bills. the amount of t-bills outstanding is the blue chart. the percentage in the u.s. treasury market. the squeeze on the u.s. treasury bills which compromise 11% of the u.s. treasury debt market, is getting worse. tom. this for you, it is another way of looking at treasuries and what the impact on t-bills is. let's get more now from eric nielsen. great to have you on the program.

we spoke to a couple fed presidents over the weekend. i'm not sure with the market is latching onto. it is overall uneasiness of what comes next. the real momentum is the fed and central banks. >> i think that is right. for me, the stress test is not the big deal. with thento this year fed saying they would probably hike four times. communication from the fed has not been great. i think the market is really confused right now. francine: we actually caught up with robert kaplan. i think september is very much on the table. i think we will have to see how events unfold. it is too soon to jump to a conclusion on that.

one of the things i've learned as a central banker, you've got to be patient and we've got time to make a judgment between now and the september meeting. i want to take advantage of that time. we have two job reports between now and then. i want to get the benefit of that information before commenting. tom: why with a hike before a u.s. presidential election? would you not wait until that is over? erik: i think you would want to wait if you think trump is a real possibility. it is so hard to believe that he is a possibility sitting here, but it is too close for confidence. there would be such an uncertainty if he were to become president. . don't know kaplan he has not been around for very long in this job and does not have a background in monetary policy. with all respect, i don't think i is the greatest -- sorry, don't think he is the right

communicator to be listening right now -- listening to right now. erik.ood morning, it is august. in normal danish tradition, i'm sure you will be taking four or five weeks off during this month. but as the tension so strong that you will be working through august? do we go lazy, do we take time off, or is there a crisis tone during the month? tom. good point, i can back from vacation last night to work through august. already, my two weeks as we do in europe, and it has been very good. i should have more, i think. on a serious note, there is a lot going on -- it feels very uncertain. we talked about the banks. big as anstill very

uncertainty. the enormous uncertainty we are heading into. tom: remind us of the relationship of the bund is bank des bankecb -- bund thi and the ecb. remind us where they are in outrage over peripheral challenges? that my view on this is they are much closer to the ecb than most people appreciate. speak the top line. i sense is that the relationship is not bad and the bundesbank is what the bundesbank is. germany has clearly let up the

pressure on the peripheral. people were on the phones to help block the commission's plans to penalize spain and portugal. the bank test was one issue. think there is anything between the bundesbank and ecb. tom: if you are just joining us, italian bank bailouts seem to be the theme today. next hour, ira jersey. with oppenheimer fund. the dynamics of interest rates wrapped around sluggish economies, wrapped around two baseball teams in new york that needed better august. this is bloomberg. ♪

francine: i'm francine lacqua in london. tom keene is in new york. waror: uber has ended its in china. they will take a market share in didi. uber investors haven't pushing profit ine china sisony postede the latest quarter. ony got a lead in gaming consuls by launching a virtual reality headset.

a plan involving private investors to bolster finances for an italian bank. unicredit was the second worst performer in the stress test. francine: thank you so much, taylor. let's get more on the european bank stress test. nick, great to have you on the program. you have been looking at deutsche bank and barclays. were they tested in the right way with sufficient stress? nick: well, it is a question of who you ask. there are a lot of banks complaining how tough they were before hand. we have a lot of criticism of banks saying they could have been tougher. scenarios which are a lot tougher than they were the first time around.

on top of that, if you are a big investment bank, this time, you have to take account of your potential legal risks. that hurt a lot of the big banks , especially deutsche bank. 220 pointse bank -- of capital decline was from legal risk. it is a tougher set of tests, one can't deny it. francine: unicredit, deutsche bank, barclays, what did it mean in terms of capital rate earnings? nick: among those names, i don't think we are going to see any determined by this test. all three of those banks you named are assuming their plans to shrink their way to capital strength. that is something that the market environment has been pushing for anyway. i don't think there is going to be any bank that comes out with a capital increase, a share sale

on the back of this increase come with the -- increase, with of the catalyst pushing toward recognizing their deficits at monte paschi. tom: europe seems to be playing by a different playbook than the united states. i think we have an understanding of who gets diluted in the united states. is it the same group in europe? there a difference in the cramdown of dilution? it is pretty similar to the u.s. in terms of their equity structure. sometimes, they have a charitable wing in there as well. there are a bunch of cooperative banks who are in a tougher position, where they have to

convince the clients, who are their shareholders, to really stumped on more capital. where it gets really complicated is on the bond side. you have a lot of small retail investors who bought the bank .onds from many different banks wanting to believe these were ,aving products and not risky but now the discussion is if a bank goes bust, the bondholders have to front the cost. while you don't necessarily have a bank going bust on the horizon , that does make things a lot more complicated. francine: thank you so much. nick comfort. k, does the economy needs strong banks or do strong banks need the european economy? what can we do to get the banks back in better shape? erik: you need both of them.

let's start with the issue raised -- is the stress test tough enough? i think it is a bit of a silly thing. if you want to be negative, you can say, you could have made it tougher. the stress test was an enormous shock. what hurts a bank is a recession , it is not the smaller details. yes, you could always find something that could have been tougher, but this was one heck of a tough stress test to put the banks through. look at it is not so much where the capital ratios are now, it is the change from that with this shock. the shockers were some of the german banks and the irish banks. paschiready knew monte was a tougher one.

i think it is a bit picky to say you could have tested it harder. francine: fair. tom: is there a discussion of helicopter money in europe? is helicopter money even core of 17ven a nation's? erik: yes, it is feasible. let's call a spade a spade. we haven't already. helicopter money is when you run a bunch of deficit and there is qe at the same time. if you want to finesse it and be promisenomic, it is a -- a credible promise up front that the increase of base money will stay with us forever. we don't know that, we don't know that in the u.s., we don't know that in japan. the chances are that it probably will. i think the overwhelming possibility is that we haven't already. francine: thank you so much. erik nielsen stays with us for

the hour. but seven look at something. banks under pressure. came at a times of growing pessimism. this is a picture of monte pasch i gaining. and deutsche bank are under pressure. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

i'm francine lacqua in london. tom keene in new york. tom, this is my morning must-read. "there was a time when the u.s. consumer was still king." mind that the consumer is the same person -- most consumers are prone to moments rage nowadays. whether that translates into a vote for donald trump depends. tom: it is an important insight. it reminds me of stephen roach, who has been heated for years over the true weakness of the american consumer. that?ielsen, do you see that there is some gross or aggregate american consumer numbers that are frankly pretty good, but that the actual

disposable income of a have not america is lower and lower and lower and flat? two things, tom. on the one hand, you are actually right. for the big middle class of america, you have not seen an income increase for a generation. that has to be addressed. it is a fundamental problem. the increase we have seen in real income in the last year or so is all due to the low oil prices and low inflation. you have this unusual situation that real income has gone up because inflation has come down. people feel differently about that. it does not feel as good. but it is still an increase and you don't see the effect on consumption in quite the same way. in all of the oil importing

countries, this could be true. you see it in europe very much also. it is exactly the same picture. it is a consumer-led recovery. francine: is that what we have brexit? erik: i think brexit is a bigger story. immigration, confusion, little englanders, lots of issues. tom: let's come back. we will speak on the greater european economy. what a weekend for american politics. i don't know where to start. they do. ren thisn and help he afternoon. this is bloomberg. ♪

tom: bloomberg surveillance. glad you're with us on a monday. we look at economics, finance investment in a moment must watch on inequality.

first, let's get to first word news with taylor. in remarks in a speech prepared for each of, investors are underestimating the number of great hikes for this year. hit high balloon tension power lines in texas. the national transportation safety board says it will look at a number of factors including reports of foggy weather. the government of hong kong has from nextdidates month's elections. two candidates have been disqualified after refusing to sign a pledge. in poland, pope francis told young people that they need to

believe in the new humanity stronger than evil. it was the final event of the pope's five-day visit. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am taylor breaks. this is bloomberg. tom: thank you so much. what we know for certain is this time around it is inequality stupid. indiana notom gary, surprisingly has lined up behind secretary clinton. i spoke to him a few days ago. he was in philadelphia. our country faces three big issues. the problem of slow growth, and the twouality, together have meant that the

fast majority of our citizens have had a stagnant income for a third of the century. finally, weeks. in 2008, a really serious financial crisis. i do not think we immunized ourselves adequately against another financial crisis. tom: here is a dirty low secret. bloomberg keyboard our stock of these -- are a stack of these. these are authoritative articles on what matters. what you need to know, what secretary clinton is to know, what mr. trump needs to know is the work has been done on inequality. .ichard dobbs is with us this is your new report on inequality. what was the biggest surprise about american inequality? the biggest surprise is, in america, 80% of people now earn less than people like

them previously. people do not mind classic inequality. if i am earning 10% more -- people do not get upset about that. what people get upset about is if they stop earning more and stop -- stop earning more and start earning less. of: let me turn the emotion around. are we going to be richer than our children -- a whole different emotion? track to be better off than our children. not everyone, but between 30% and 50% of the people. if we carry on on the current trajectory, we will be better off than our children's generation. we all want our children to be better off than we are. francine: this seems a little bit crazy. we're still growing. it must be a distribution

problem. redistribute things in a different way. has that changed? are the rich just getting richer because of monetary policy. >> we are growing glass. when you grow more, everyone rices. that is one element. the second element is we're getting more returns into the owners of growth capital than the owners of labor. we are finding that there is a segment not benefiting from growth. they are growing less than the earnings.the average the reason is these are people whose jobs are being disruptive, specifically by technology, immigration, trade. there is this tool course of people no longer benefiting from the whole system that has been wonderful for the last 30 years. francine: what do you mean we are growing less? gdp is rising, modestly, but still rising. >> but in a world that is

, everyone ise i going up. at sweden, here which permeated the report as countries that are different. is sweden istlier a union labor economy. is all we are talking about the atomization of the workforce? first of all, the skills. are we building the skills of people whose jobs are being displaced chocolate there is also questioned about whether we make sure that people get their share. we may not like it, but the fact ensure -- system does tom: interesting. k.t's bring in eric nelso

grows -- he economy isn't the issue really that the two small share of the population, particularly in the states, it's gaining too much of the increasing pie and there's nothing left for the rest of them? richard: absolutely. more growth would be better. if we did things like infrastructure spending, all of these things, that would help bring people out. we should not walk away from policies that get more growth. that is the first element. second, how should we think about getting the skills of these people that have been displaced to come up? people whose jobs are being displaced at the age of 50, they can step up. is are thereught

ways that we can ensure there is a segment that still is benefiting? francine: i guess the problem is if you have and it prints it -- is thisenticeship -- enough to explain the double jump phenomena? richard: you have a big part of the proposition that feels this .lace, in many ways and, the issues of immigration, it is all part of the economy. it is up to policymakers to redistribute and that has been done very poorly in the united states and several european countries, not all of them. the result of that issue is you get an enormous degree of people unhappy in the middle. in europe, the state has always been much more

president, just because it has been accepted. in the states, there has been huge backlash even to obamacare. for europeans, it is very hard to understand the health care is not a human right. if you go back to the second world war, it is difficult to make clear distinctions between the european model and the american model. capital growth has been the same in these countries. what we have seen over the last 10 years is many of them have fallen behind. what richardack to said. education is a big, big issue. i don't share your view on helicopter money, that that would lift people up. what we need to do is lift people up of value interest. that's about investment and education. tom: it dovetails back into

productivity. within your report, i don't see .linton or trump is this being considered by her politicians? i do not observe it? richard: there is a lot of interest in this amongst the political class in europe. there is a realization that when people stop advancing -- tom: is it just investment? richard: i do not think it is just investment. long-term, productivity. it is about education and those subsidies too. there is a sense that the political class recognizes this is driving inequality. there are groups that will never get to majority, but they will swing it. we saw with brexit, this will get -- they swung it. with he't tell this

report and the poor in india. richard: really interesting. the poor in india are better off than the poor in india before. there is fancy, getting better off. the poor in america are better off, but no longer better than the past. tom: congratulations. a newthan their parents," report. you cannot say enough about the executive summary in the 70 page or so report. carefully.l west texas intermediate trying to get back once again. york, this and new is bloomberg. ♪

tom: good morning, everyone. france in the quality in london. i am tom keene in new york. michael mccain is here. what are you looking at? nightl: stay up all listening to fed officials. once again, we have the market and the fed disagreeing after that lousy gdp report on friday. the bloomberg dollar index is now back at its lowest after the may payroll report when everyone was depressed about what was going on. the fed is pushing back again. you mentioned robert kaplan. he sat down for an interview in

china. he said basically that september is a live meeting. i think september is very much on the table. we will have to see how events unfold. it is too soon to jump to conclusions on that. one of the things i have learned, as the central banker, you have to be patient. we have time to make a judgment between now and the september meeting. i want to take advantage of that. two jobs report between now and then. perhaps more important, the president of the new york itd speaking in bali saying t is too soon to jump to conclusions. the outlook is pretty positive. you can see, it is premature to rule out further policy tightening this year. the most important thing to know is that, by tradition, the new

york president never defense. if you know where he is, you know pretty well where janet yellen is. tom: some of the data is pretty good. what is holding them up? given what appears to be pretty good economic data. michael: that is the question. you get some good reports and then something like the gdp report. francine: how do you deal with china? how should the said deal with china? : they should deal with the as an external factor that influences trade to some extent. i think the fed's biggest problem is they cannot figure out whether the u.s. central bank or the world's bank. you look to individual numbers,

you should. if you do that, you see the interest rates have no business being where they are now. they have been held back by brexit, by china, markets, what have you. back to: i want to go hiring being better, inflation -- to have the feeling that if they have good data from now until september, they don't really want to hike, but they will be forced to? michael: not that they will be forced to high, but they get into a credibility issue. you look now with the market is in terms of pricing in the future course of interest rates, and you have basically a wide divergence between what the markets are saying and what the fed is saying. the net longs for the treasury are way, way up.

now, you look at a big drop in terms of the fed outlook. tom: see what you can do about this chart. this is the blended index from way back. we see a strong dollar there. export changing turn. we are right into this difficult turn. does janet yellen care about the red line? that -- he cares and: in that she cares it states in the vicinity. strongerot seen a dollar. what we did see in terms of net exports is that will wash out of the data and it will not subtract as much from gdp going forward. tom: it is august. get a secret raven fly?

michael: the question is if janet yellen wants to use as done in the past. tom: we begin our discussion of jackson hole. we will move this dialogue forward. nextwilson with us in the hour. oppenheimer funds. the 10 year yield. a wild statistic. worldwide, from london, from new york, this is bloomberg. ♪

august beckons. have you started your summer reading? francine lacqua has, i have as well. summer reading is always important and always more important on august 1. washington has a summer reading list trying to get to the issue of policy. maybe we will get to that on the second, third, or fourth week of

august. right now the policy is to get the bloomberg business flash. taylor: one of china's most inquisitive conglomerates is looking to sell off debts. they plan to sell off up to billion in assets. the flagship unit tells bloomberg tv that the company plans to disclose cells between now and the end of next year. the pokemon go craze may be tapering off in japan. analysts and investors have had difficulty calculating the impact on the bottom line. uber will sell its chinese this this to didi. plus, they are making an uber.tment into they have been pushing to sell

the chinese business after big losses. uber deal is not out yet. i want to make that clear here. basically the chinese giving $1 billion to global uber, and in the distance, they walk away .rom china and clear right now. i want to make clear that $35 and the number those are not transaction prices. i want to make that clear. i really take issue with that modern extrapolation of transaction. was that enough of a lecture?

francine: i will push back a bit. it is an idea of size and scope. a kid in idea of the size of china and the potential for uber. tom: baloney. we ate that last week. eric nielsen knows that extrapolation will kill you. is on my eric nelson side. he is forced to take sides. this is like the battle of the bankers. erik: that is true. francine: let's get onto the u.k. economy. when you look at what governor carney can do, we expect him to do something. we had some week pmi numbers. how much more can he do? is it a done deal? do qenot sure you

yet. he could do a little more for the dates. they are clearly getting nervous , but i think they're waiting for the report and the forecast to do anything now. francine: this is the one thing we really talking about. if you know that inflation will probably go up because you have to export goods which may be import goods that are a lot more expensive, to go through it or do you need to deal with it now? ,rik: he will look through it as he should do. it will be an interesting communication exercise. he talked about potentially high to attracttes foreigners. now, we have the possibility of recession on the horizon, and he is doing the right thing, i

think. tom: thank you so much. getting is going on this week. in our next hour, we talk royal. ira jersey will join us with oppenheimer funds. not a bad way to get the week started. oil nudging towards $40 per barrel. from london and from a beautiful august 1, kind of rainy and , new york. another hour of bloomberg surveillance. this is bloomberg. ♪

tom: it is a bailout of sortsshe

vicinity of 80% shared aleutian. hour. this it is a weekend of political outrage. mr. trump and political leaders are he can distracted by things said, and maybe things left better unsaid. good morning, everyone. this is bloomberg surveillance. the first day of august, back to school is upon us. lists inve reading your household? francine: but the kids are so young, it is more like painting lists. tom: les minecraft, more reading. and please to say that i went down in flames.

we need to look at first word news. taylor: interval, afghanistan, the taliban has claimed responsibility for an attack on foreigners. authorities say they killed two attackers in a gunbattle. saysritish prime minister they are committed to the triple loss pension policy. 2.5%, orarnings are whichever is higher. cost ofman says the triple lock will be enormous by the end of the decade. china is paying soldiers to largeste world's army. willme cases, soldiers receive as much as 80% of pre-retirement wages. the chinese government wants to 3.2 millionrom the

on duty. backlash is growing after donald -- hes comments questioned whether a soldier's mother was not allowed to spe ak because she was muslim. clinton willllary appear with another billionaire supporter. with she will campaign warren buffett. over the weekend, she was joined in pennsylvania with mark cuban. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. this is bloomberg. tom: it will be interesting to see how august proceeds and who mrs. clinton or mr. trump will this iswith endorsements. the biggest deal here is the separation of wall street from both candidates. it is one of the common

features. francine: from a global audience perspective, it feels like warren buffett is the bit different. he is not a wall street billionaire. he seems one touch with the common person in terms of how he lives and also how he invests. tom: it resonates with the walmart audience which is one of the audiences that mrs. clinton needs to go after two capture undecided voters and to republicans as well. i want to make clear, mr. buffett has stayed out of the political mill you -- wil milleu. let's go to the data now. we were up earlier on futures with oil. we will talk about west texas intermediate. .ust cannot flat out get a bid stunning.ill

francine? this is what i picked out. basically it shows the consequence. i wanted to throw it to the banks. overall, i would argue this week is central bank week. yen at 1.2.the not in the time being. this is torture bank -- door deutsche.nk -- george that is a pretty ugly chart. certainly it is moving in the direction of where things have to be sped up. francine: i also have an ugly

chart. have the you percentage of tea built -- t-bill. what it means is a potential consequence is favors falling. greate need to become a on the bond market. ira jersey has been on many times over the past several years to talk about dynamics of what we take to be a static idea . made headlines. you said we were going south. no one believed you. now we are aware ira jersey always said we would go. why are we at 1.84%? now, becauseankly,

of extremely low end historically low interest rates in countries like germany and france and even japan. still high-yield in relation to the -12 basis point. tom: the trend is your friend. the difference is a flatter yield curve. is it because of fear out there or is it said dynamics? ira: it is both. the fed, the next move, at least they're saying, is a two-year hike. you have some saying we may hike in september, so the yield will go up and it will be more trayvon by economics.

we talk about the three-year, the 10 year, the 12 year. italian: you are almost in the use of hands. how many moves are priced in at the moment? i don't think that many. ira: the market is not really believing the idea that the fed will hike anytime soon. you wind up with the chart that you had before. , i would like to comment on that. the reason it has not kept up think with the fed potentially hiking in september is because of money market reform. there is this big change over were a lot of prime funds are changing over into government only funds. meanwhile, the treasury

department is not issuing more t-bills. thank you. it is a great addition. i took a lot of time trying to figure it out. very quickly, what needs to happen for the market to price in a hike by the end of the year? ira: you need to see conditions globally improve. there is this big fear that disinflation will remain the case for an extended amount of time. that is one of the reasons why you have such low interest rates globally. tom: one question here. i want to leave forward to where we will be later in the hour. i have never seen governors and presidents and the chairs so far how far apart are the

markets from where the fed is? the federal reserve acts the way it is talking, the market will not believe them. the market has been burned several times. .ou have had false starts ultimately, they have not hiked at all. until they start to live up to the expectations they put into some of the language, it is very likely the market will keep discounting what they say. tom: i jersey with open higher funds -- oppenheimer funds. york and woods mckenzie. skip york on oil migrating sitting on the two day moving

average. this is bloomberg. ♪

francine: welcome back. i'm francine loquat in london. tom keene isn't london. here is taylor. allegations in a whistleblower lawsuit says celgene donated to patients helping to abort cancer drugs. celgene says the accusations are baseless. a company is--

teaming up with google, $700 billion over the next seven years. uber has ended its war in china with the deal with didi. according to people familiar willthe matter, uber s .ell to didi they have been pushing to sell the business due to big losses. you have more on the uber deal. let's head to beijing. when you look at uber, how does across through your world when it comes to the economy? to keene does not like extrapolate on the numbers. it shows the strength and potential demand for china.

absolutely. at the corporate level, there is a lot of logic to this. hemorrhaging. i think the biggest story here -- i think their art to potential ingles is the first discontinued excitement from the chinese consumer, already the biggest contributor to gdp growth. tom: that is right where i wanted to go. the dreaded phrase of joint venture. i have seen enough joint ventures collapse, not workout, or disappoint. give us the state of the phrase joint venture in your china.

>> it is an evolving situation. china has an aggressive industrial policy. they are not contended to give to players. markets if domestic players can do it, to doant domestic players it. if they cannot do it, they want foreign players to come in into something valuable. what do you make of the data? the china pmi data we had this morning. e private figures are giving us one number and what the chinese government is coming out with paints a different picture. >> right. theories argue

that they paid -- that the government paints a rosy picture. if you stand back a bit, yes, we saw the pmi down a bit, but the reality is both stayed close to .he 50 degree mark chinese economy is still in a holding position, not getting any better either. tom: thank you so much. us.jersey also with ira: a used to be about 25-30 basis points, according to our models. a lot of that was from japan. china has not been a net buyer for the last three years.

i think it surprises a lot of people. there's still a huge holder. tom: just because they have a high inflation adjusted rate? mainly because of the switch over where the u.s. balance is much lower than it used to be. it is japan that winds up being a larger buyer. with negative fields, the alternative is u.s. markets. francine: overall, we saw so much volatility. can you confidently say that is now over our we're just taking a positive? -- a pause? ira: i would say probably just a pause. liquidity is not what it used to be. because of that, when you get --

when basically you get a lot of people trying to exit something through a small door, you don't muchup with prices getting larger. ultimately, you will get some normalized level put it will take some big pricing's to get to that level. francine: what will you be buying right now? where do you see the best value? ira: in credit space, we like things like securities on automobiles, particularly prime quality. they offer a decent spread. . lot of them are short-term ironically, in europe, we still banks where they are raising equity capital. we think that credit spreads their offer reasonable opportunity. francine: thank you so much. iver jersey with open higher -- er funds stays with

us. overall, markets over little bit subdued. the pound weakening after some really not encouraging pmi data. this is a live picture from london. it is august 1. this is bloomberg. ♪

monday, i am tom keene in new york. usp york here to join

speaking about oil. the canadian embassy in front of our view. they had a toronto maple leafs sticker on the front door of the canadian embassy. they were so embarrassed, they took it off. how about a must read on politics. ira jersey is with us from oppenheimer funds. the lawyer from the new york times -- is there any reason to believe that a clinton victory would the two and a richer global disaster? that is the question you should be asking yourself after denouncing democrats and mrs. particular saying rank-and-file republicans have a

hard time admitting that someone else could be much, much worse. it is almost as if washington is removed from the presidential campaign. >> i think that is one of the things that has occurred in the presidential cycle. you have a non-mainstream republican candidate as the banner bearer. i think a lot of people are going to continue to run on their own campaign. , it is perspective interesting. i want to know who the treasury secretary will be. who will issue treasuries. fed chaire the next if donald trump winds up winning the election. tom: this has real consequences into policy making. ira: it does. .t is not inconsequential

generally speaking markets tend to look through who the president is. threel still have branches of government that will interact in ways that we cannot necessarily for c. we willnd of the day continue to have to watch this because it matters. francine: what will be the immediate impact if donald trump does when the presidency? dollarnegative or positive or is it too early to say? little took it is a early to say. you probably wind up with a volatile market, but things like economic growth and monetary policy will matter. that ae markets think donald trump presidency is better for growth th than hillary clinton presidency? i'm not convinced either way. investing based on politics tends to be a bad investment. when people are pessimistic that

is the risk market -- that is sometimes the wrist markets best years. mentioned before, we have not really focused on policy. do we really know what exact policies donald trump will expel ? tom: we will continue a bit of this discussion on international relations and politics. it full to into oil. .cif york is in town a different view of american supply and demand on oil. from london, from new york, this is bloomberg. ♪

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francine: i'm francine lacqua, this is "bloomberg surveillance."

>> the fed president won't rule out an interest rate increase this year, dudley said investigators are underestimating the time that they will raise integrates. the dallas fed president talked to bloomberg about the prospect of a rate hike. >> september is very much on the table. i think we will have to see how events unfold. it is too soon to jump to conclusions on that. i have learned as a central banker -- you have to be patient. time to make a judgment between now and the september meeting. i want to take advantage of that time. two job reports between now and then. i want the benefit of that information before commenting. said the brexit vote will have a marginal impact on the u.s. supporters of turkey's president demonstrated in cologne, germany.

20,000 people took part in a rally that had a slogan yes to democracy, no to the coup. organizers wanted him to address the organization by teleconference. kongovernment of hong struck pro-democracy candidates. the losses the former british colony is an inalienable part of china. in golf, jimmy walker when the finer major tournament of the year. -- the final major tournament of the year. rain over the weekend forced golfers to play 36 holes yesterday in new jersey. news, 24 hours a day, powered by more than 2600 journalists and analysts to more than 120 countries. i'm taylor riggs, this is bloomberg. tom: oil has been a backstory for july.

dr. york as a really twisted in unique perspective. it's about gas gets, screws, bolts, nuts, and the rest of it. what is the number one of thing -- number one thing that wall street gets done -- gets wrong on hydrocarbons? dr. york: the speed at which oil supply does not recover. it seems like a lot of the financials just think you can flip a light switch and crude comes back. tom: you have to move some valves around interns and wheels. dr. york: you have to move riggs into the field. tom: i watched giant this weekend, i'm an expert on oil. everyone is supply, supply, supply. we have a heated debate about the band -- about demand.

dr. york: we think we're more on this. the u.s. is going to see growth this year. slower than last year, but the u.s. is still growing. china's growing, india is holding up well. we are seeing a decline in europe, but they have been getting off oil for decades. they are back on that trend. , demand will hold on to a point where it can support those -- i know those onlinen get quickly compared with they did 15 years ago. dr. york: that's the big unknown , as prices recover. we have never seen the tight oil phenomenon come out of a price decline. we are now wondering on the demand side -- demand is going to be strong enough that it will stop up the over bill that we've seen over the last two years. the question is once we correct those stock levels, can the

supply outside of tied oil come back fast enough in order to keep the market imbalance, as opposed to the market going from being long crude to being short crude near the end of the decade. francine: let me bring it to the bloomberg terminal. i'm looking at how much the u.s. has added. rigwhite line is the u.s. count. -- ii'm surprised about don't know if you can see it, but we thought there was a trade of a range of 45 and 55, as you see the u.s. oil rigs coming back online. maybe that has dropped and we are between 40 and 50, that's the new range. dr. york: we have a lot of oil, if you look at west texas in the t of oil we have a lo in the 30's to 40's. it's not enough to turn around

u.s. production. it slows down the rate of decline. if you switch on the rest of the u.s., there is not enough oil in the u.s. to switch over the decline on a global basis. tom: ira jersey, i like what you write in your notes for oppenheimer funds. do you like skip york's world? mr. jersey: do we like oil debt? we still think it has risk. ,here are producers particularly high-yield bond issuers, who can't live in this $40 per barrel world. they are burning through cash. there will be winners and losers. tom: are going to see more pain? mr. jersey: within we do. of the bankruptcies that happened, about one million barrels a day production, we think there's another one million barrels a day production that that that risk with potential other bankruptcies. off, wells don't switch they just move from one owner to another owner. tom: the key producing. with the new owner, you have to

show your stuff. do you say $40 is a level? or can we see a $39 handle on oil? short dips into the $30 as possible. we think low $40 is where the market bottoms. francine: at $40, oil rigs come back online? dr. york: we have so much of the dxpense of oil and the ol depleted oil out. once you get below $40, the oil just isn't there. activitythat we reduce as we go from $40 to $39. there isn't enough oil that is active in the $40 on the supply side to give the market imbalance. the market can't stay there. francine: that's including shale. dr. york: that's including shale. where you see the $40 to $45 range, you see the supply side

being active in west texas. maybe a little down in south texas, but $40 oil does work in the rest of the world. francine: skip, what does that mean for the likes of saudi arabia and these huge oil exporting countries? dr. york: it allows them more time to figure out what their market strategy is going to be over the longer term. as long as we stay in the low 40's and you don't get that non-opec supply growth, the world becomes increasingly dependent on more opec oil in general, and middle east oil in particular. we are missing 400,000 barrels a day of production in nigeria right now. tom: do you assume that will come back? dr. york: we don't think it comes back in 16. tom: this is a pretty elegant chart, ira, jump in here with wisdom. the world is coming to an end, higher low prices, it's an elegant chart.

mr. jersey: one big rollover. you are right on the line. crude, the the brent north the atlantic crude, which one matters more to you? dr. york: moore the world's is priced off of print -- off of i.ent that is wp or $20.uite $15 we don't have to choose anymore. the spread between it have climbed. in theat is going on middle sized oil companies? it is indeterminate to me. what does your world do when indeterminate brent crude? basement a long time positioning themselves to survive. the conversation we now have with those senior executives,

especially in the mid tier companies -- they know they now need to move to something of growth move, but they are not sure when they pull that trigger. it is the when. the longer we stay in the low $40, the longer they are not going to pull that trigger. tom: ira jersey and skip york. include check will brent crude, because we aim to freeze -- aim to please. ira jersey noting that the 98.ad is like one dollar to london, new york, this is bloomberg. ♪

francine: this is "bloomberg surveillance," i'm francine lacqua in london.

>> shares rose to sort -- despite being the worst performer. the bank is working on a plan for private investors to bolster finances. another unit saw 5%. unicredit was the second worst performer in the stress test. more on this after this. china is considering the sweeping overhaul of its deal industry. according to people familiar with the plan, steel would be consolidated into to join companies, one in the north, the other in the south. it would be part of the government effort to end overcapacity and state-run industries. moviegoers in north america flocked to see "jason bourne," over the weekend. the latest installment brought back matt damon, and took in $60 million at the box office. "star trek beyond," finished second with $24 million. that is your bloomberg business flash. you, taylor.nk

they say that sequels don't work, but sometimes they do. a lot of hollywood producers are not taking a chance and talking about people. we had more italian banks and european stress tests. sometimes they are fighting for tir lives. we analyze the stress test, thatially on italian banks are the weakest rate became out about as expected. test, ithole stress was always going to be the problem. this is the one bank that is singled out. it has a rescue plan on paper, and everyone is excited about today, but the huge risk. it will take months to raise equity. we are back where we started and share prices indicate that. francine: we are not seeing how frail some of these banks are. i want to show you the share price.

this is the third time we're trying to rescue this bank, it's a penny stock. unicredit, in yellow is são paulo. the biggest bank is not performing as well as the biggest -- the second biggest bank. does unicredit have a problem? we have concerns about capital raising? >> yes. with these tests don't take into account what the future will hold. you unicredit is working on a plan that will likely to raise capital and sell assets. unicredit needs to bolster its capital. it's working on it. he stress tests don't tell us also fiscal that will be. closeregulars will look the share price is back to where it started. tom: the stocks are south today. barclays has an 80% dilution

to shareholders of this beleaguered bank. can you extrapolate that over to every other bank? this is a monday where we finally confront the price of shared illusion in capital race -- share dilution in capital race? we can see with the dilution is going to be, they've had to give new details. of the banks, we don't have a past sale or a plan. the noise we are hearing is that we are swiss to be reassured that everything is going to be great. they're going to raise capital organically over the next few years and everything is gravy. when i really confronting anything. really summarize. is this solved by share price in bank fundamentals, or is this solved by the adult institution that finally says enough.

which is it? good question. ultimately, who is really in control of these banks is not the ceos, it's the regulators who tell him how much capital they are allowed to allocate. and it's the economy to tell them how much growth or return they are going to get. rates are lower for longer, negative. you are basically waiting for regulators to tell you enough is enough. you don't have to keep bolstering capital. ultimately, all you can do as ceo of keep cutting costs and pray you don't have to raise capital in this environment. francine: canada european bank do well if we don't see growth? it depends if there's too much capacity in a market, you can always try and merge, which they failed to do. no.mately, if there's low growth, you have to find other sources of income and try and sell products that

may be a bit risky or racy. it's all about the market share. the more market share you control, the more you can do with it. are not area. sadly, no. laurent fromnel gadfly. i highly suggest you go look at ni gadfly. this is a picture for a lot of the european banks that are under pressure today. some of them arising. monti passkey had a big selloff because of the stress tests. unicredit down 8%. this is bloomberg. ♪

tom: with to the four x -- let's do the forex report. not a long one print, 10226 on yen. weaker sterling, i'm going to call it all in all one big churned. the strong yen versus the euro with the 114.17 euro. francine: coming up shortly on

alix, what do you have coming up? : first, goldman's call going underweight equities for the next two months. we also have the ddn uber merger in china with the potential of $35 billion valuation. and a very big week ahead, the boe meeting on thursday. we also have potential for more stimulus tomorrow. and jobs friday. we will be discussing all of this with ben laidler, a very busy monday. tom: alix steel, thank you. , bothork and ira jersey of them with the linkage into the american economy. ira, the jobs report is here. odd report, it doesn't go directly into a fed meeting. it's one time when you have two job reports before

the next fed meeting in september. i think the jobs report is going to be meaningful for markets. we need more confirmation. we had that very week may number -- weak may number. will this stay on trend or what we have another weak number with a lot of volatility and jobs market? asterisk is always an about the world economy. is that a general analysis? mr. jersey: i think it is a genuine analysis. when people work, they can you more. particularly in the u.s., they are driving more. we've seen that. we've seen this tight correlation between the strong job growth we've seen over the last 18 months or so and how vehicle miles traveled has been tracking up as well. francine: i wanted to bring you over to the terminal and show you the return of the dove.

betss a fed rate hike -- on a fed rate hike are up. if you have a great job summer, pressure will be priced in? it's the biggest number the fed will hang their hat on. between that an inflation. one of the things about the gdp report -- the number on the wea but real gdp was the price deflator was higher. that will probably increase the probability that market subscribe to a december flight -- december hike. by year-end, after the election, the market might price again. a once a year fed. when we talk about the fed going slow, that's a slow as they can go if they are going to keep on hiking. francine: we are about communication or miscommunication. is there a real concern out

there that markets are mispricing a fed move? mr. ,ersey: if there was a concern you'd see more pricing and markets. you would see option markets in particular starting to deep price things, where people will be buying more puts on rate instruments. we're just not seeing that. i think the market doesn't believe the fed speak. that ultimately is the reason why we are priced where we are. tom: i call this the robert gordon chart. professor gordon and northwestern mutual deal his visit and support of this important book on the recovery in labor participation. this is the amount of americans participating in the economy with a great ten-year rollover down, down, down we go. ira jersey, we had that leg up very and alley rolled over. -- now we rolled over. mr. jersey: if you look at labor participation adjusted for the people retiring versus the

number of kids in college, you see that this is actually relatively stable. have animately just aging population and you don't have enough people graduating from college to fill those jobs and join the labor force. see about ira jersey and skip york talk about aging populations, they look at me askance? francine: i don't believe that. tom: retirement is overrated. mr. jersey: absolutely. francine: when you look at demographics, there's a huge problem in japan. are we any closer to fixing that? how should a fed view of problem in japan? is it completely taken off or not systemic, worst of had listen for the rest of the world ? r. jersey: china has

similar demographic issues. there's no quick fix for any of that. it's one of the big reasons why in general, going forward, because of the demographic challenges. you've had nobel prizes given to economists lookingit's one of ts the impact of demographics on growth. sense that it makes it is very strong when you have a growing population, you're going to have a growing economy. when you have a declining population, you're not likely to have a strong economy. skip york and ira jersey with us as well from oppenheimer funds. tomorrow, more on commodities. ♪

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♪ withhan: investors break

data on the calendar of the stimulus plan. a bank of england decision and u.s. payrolls. david: don't rule out 2016. fed officials tell markets to not count out a rate hike this year, with one fit president even warning about september. takes a ride in china with dd. ending a fierce rivalry between two startups. jonathan: a warm welcome to "bloomberg ." i'm jonathan ferro with david westin and alix steel. know whatcircles, we it is for a big week ahead. they are supposed to announce fiscal stimulus. alix: i'm looking early jobs friday. what friday outcomes would materially change the risk perception in the market.