>> all eyes on and they. we have -- all eyes on abe. could this time be the charm? cut down under. the australian central bank cut interest rates to the lowest ever. route? --al the only is fiscal the only route? crude reaching $57. ♪

>> welcome to the pulse. live from bloomberg's european headquarters. i am francine lacqua. european sex declining for a second day there dollar weakening -- european stocks declining for second day. dollar weakening. contradicting reports and it is unclear what part of the fiscal plan is new. we will try and way into all of that and give you a breakdown. banks down 2%. we found out late last night that deutsche bank and credit suisse will be kicked out of the euro stoxx 50 because of the share price has fallen so much in the coming days. that's get to bloomberg -- let's get to bloomberg first word news. nejra: -- typhoon at last the city with wind and rain. it grounded flights. hundreds of people suck refuge. -- soft refuge.

ceohe berkshire hathaway tapped the presidential nominee at a slight he may does he made. -- he made. >> donald trump i have not sacrificed anything. can you stand up to a couple of parents who lost a son and talk about sacrificing? have you nold trump decency, sir? challenge trump return.se his tax >> i'll bring my return he will bring his return. send the word to him, if you will. francine: the centers for disease control have warmed this

have warned pregnant women not to travel to the zika transmission area in miami. it also said pregnant women live there should take steps to prevent the spread of the virus. >> there was evidence of the potential for ongoing spread of zika. we are taking a step to advise pregnant women not to travel. nejra: global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. i am nejra cehic, this is bloomberg. francine: the yen is getting as the 26th -- since the nations market crashed in 1990. according to a draft, just under half a total of the package will give total measures it lets dish measures. let's speak to andy sharp. we have reports of the plan.

exactly how much do we know the package? and how much of it is new? andy: the governor just approved the plan so we can give you the actual final numbers. ¥28.1 trillion. that is more than $20 billion. calls --t is what abe half of that, ¥1.5 trillion in new spending. that is what we have in total pictures. what we look at now is what is in the spending, some of it is for demographics. japan had issues with childcare. a lot of money going toward infrastructure, talking about speeding up the building of a ultra high-speed rail line between tokyo and osaka.

money going toward mitigating risks from the brexit. money for quick relief. obviously the 2011 mega disaster. guess how much are they going to put in this year? what is going to be the short-term impact? ¥4.6 trillion, that is about $45 billion in action spending this year. we should see some kind of short shot in the arm in the economy. francine: andy, thank you so much for the update. the big thing that people want to know is whether this has an impact on the economy or not. australian central bank has cut interest rates to a fresh record low as it moves to counter disinflation. together these stories with my next guest, joining us is sarah human -- sarah hewin. great to have you on the program

and when you look at japan, we are still getting the details. we are going to have more of a sense of what the boj is doing. does europe need the boj to work? sarah: japan's economy growth for the less fears, we're still looking at growth. even with the fiscal package, we think the economy will struggle to reach 1% growth next year could japan is a significant part of the global economy. it is important for asia. .- next year japan is a significant part of the global economy. it is important for asia next year. francine: could they have done more in the fiscal package? get a sense of how much their willing to do. kuroda said he will do whatever it takes. has it --?

goes, thefar as it news has been in the right direction. the argument is a little too little too late. there could've been more on the qe program. markets are clearly disappointed last week when there wasn't an expansion of bonn cuts. all eyes on the 21st of september -- expansion of bond cuts. all eyes on the 21st of september. expectations, but we could see some form of helicopter money which would kickstart inflation. on the other hand, we could be -- there could be structural changes. francine: which is not clear. sarah: it is not clear. no major change. although in perception will help spending on things like minimum

wage will help participation in the labor force will over time raise the potential growth for the economy. it is not going to happen in a hurry, that is the problem. francine: the australian central bank, can they do enough to spread inflation? the matter what central banks do at the moment, we have this inflationary pressure progress? -- this whatare makes central banks nervous. it is quite difficult to see the targets being met in the future. on australia, what is interesting is the economic commentary was not too bad. the economy by no means it down and out.

inflation has a disappointed expectations. we think this is probably the last cut, so we see overtime inflation will return to target. what would be interesting is what happens to oil prices if oil prices turn around again, if they start to pick up? we could see a recovery in inflation expectation. francine: we are getting breaking news from minister also saysing deflation -- he they explained to kuroda about the extent of this package. -- this is probably the first economy, because the end is also haven. it seems that last week when they came out with the stimulus it was almost a clear

message to governor kuroda, right? sarah: they need to work in tandem. that was where the market disappointment came through. this big fiscal package led to expectations there would be in tandem a monetary package as well. that may still come. we'll wait and see what happens next month. so far we have seen a big selloff in japanese bonds. that is a warning sign that markets are not happy. francine: sara, thanks so much. she stays with us. we'll talk about the eurozone and brexit. stay with "the pulse." crude oil slides to bear market. we will analyze what is behind the big drop. couldesk could be desk the federal reserve -- could the federal reserve's next move be downward? today's days until the next

bank of england meeting, we will bring you the latest pmi numbers as mark carney excesses the economy six weeks after the exit vote. this is bloomberg. ♪

francine: oil trading near $40 a barrel ahead of the u.s. weekly government stockpile data later. crude fell into a bear market yesterday on the concerns that the glut will could -- the glut will persist.

here. blas sarah hewin is still with us. how the year, great to see you. the bear market will continue because the seal producers can turn the caps on quite quickly, it will go back up. --ier: none of the oil trade we are going to see the prices we saw at the beginning of the year. we went down to $30. centrally very people -- very few people -- i can add it is most likely where the to be $40k in this -- only around to $45 a barrel for the next couple of months until we see a bit more killer the -- in bit more clarity. september and october going to be difficult for oil. the demand for oil goes down. andnd and increase later that is again held. the narrow band will be with us.

francine: you like this? i made it for you. 45 in footie five. i think you are saying this has gone down a bit and you can see the u.s. rig count is in white. w ti in blue. you see the recovery here. you talk about refineries, what do we know about demand? javier: demand has been strong. places like india, united states and it is been quite good in europe and china. it is beginning to fall to just a bit and that is worrying the market because we need the atand side to -- if you look your screen, you see clearly that one oil prices peak around may or june, that is when we saw the beginning of the recovery of the oil rigs on the white line. now that the market is trying to find out, it will go down to

$40, we see that white line come down again and rigs being reduced. the main problem is the market independentn -- the use the opportunity of high orces goes to $55 in may june to hedge production for next year. what happens now with the oil price, we are protected. they are going to be of to produce even if prices come down. francine: sara, what are you expecting? much -- are soo matched. think the rig count chart is very interesting. we'd expect that in the aftermath of brexit, this concern over global growth, that u.s. thered in the

would be a squeeze on energy prices. we think later in the year prices will pick up again. demand hasn't totally disappeared. supply will be constrained. production will be capped. that suggests upward pressure on prices later in the year. francine: how much the probability is that oil shoots back up? here are the majors recovered last week. how much the lack of investment is there that would mean this $80e could go back to $70, or $90 in a couple of years? javier: that is one of the bigger concerns. we thinking more closer to 2020 and we see a big investment not coming down. every company is continuing to reduce. mcdonald, a product for bp.

a couple of years ago when bp did the first blueprints, it costs around $22 billion and now bp thinks they can build it for around $10 billion. part of the drop in expenditures is related to cost savings. one thing to look at for the next six months is what is going to be the reaction? this is not working for them. francine: thank you javier blas. sarah, we getting pretty news from japan. moment, saros -- sarah was suggesting the market was disappointing. this were hoping for more. heavy as thete as market -- market would've wanted. could the federal reserve's next move be downward?

sarah human will talk u.s. economy next. this is bloomberg. ♪

francine: this is "the pulse." i'm francine lacqua. let's get to the ebf with nejra cehic. -- let's get to the bloomberg business flash with nejra cehic. nejra: the germany-based .etailer saw sales fall at the same time, earnings before interest dropped more

than 50 million euros to 154 million euros. at bmws second quarter profits rose 7.9% as it boosted sales and kept a tight grip on costs. the luxury carmaker's earnings before interest and tax client to 2.7 3 billion euros. that is above the 2.67 billion euro average. bmw shares are trading lower this morning. commerzbank is lower after earnings -- catering to small and medium-sized companies slid in the second quarter as record low interest rates eroded revenues. isis the second-largest this thatcord profits -- treated to a 30% decline in the second quarter. that is the bloomberg business flash. francine: thank you so much now change. this is what we are getting from governor kuroda.

we are from the finance minister saying the package -- it's core --'s coordinator telling the market that the governor japan's goal is upcoming inflation. -- overcoming inflation. it doesn't mean easing a setback. he is also saying the boj policy last week was in that same vein of ending deflation and the hopes to defend his track record even if markets thought he disappointed or he could've done more last week. this is the picture for yen, 1.08 point -- 101.52. this friday will get a key update on the state of the world's largest economy. u.s. nonfarm payrolls expanded by 180,000 in july.

according to the w rp function, investors do not expect a rate cut for the next unit -- rate cut for next year could this is the picture -- at the moment i'm fiddling around could return of the dove. hike expectation of a rate hike from the fed in 2016 hewin iselow -- sarah here this morning. i really enjoyed your note. your push back about the possibility of them doing a rate hike. he took but a rate cut. sarah: we've been expecting the next move from the fed would be cutting. let dish we and have seen immature cycle in the u.s. -- we have seen a mature cycle in the u.s.

we have seen some strength on the consumer side, but the underpinning to that is credit expansion which we don't think is sustainable. if you look at what we have had in the first half of this year, it was very weak gdp growth numbers. francine: the jobs numbers are pretty good. sarah: that is absolutely right. last month we had a huge jobs and other printed this friday we think we'll see when it's 50,000 which is less than consensus. this is a backward looking indicator. we have seen the peak of monthly payrolls going back a year and a half now since which the peak on the monthly basis -- we see over the coming months and into next year that the payrolls are probably going to slow. francine: if there is a cut, the markets have not priced yet. is there a concern that they

lose credibility becae they keep saying they are hiking this year. what happens if they take the markets on a long trip? sarah: markets for a long time have not paid much attention. the fedsm about what zone forecast is saying and how they are likely to act. fed has always said they will be -- they made a slightly more hawkish statement last time around. they flagged well in advance if they start to get worried. we are not seeing inflation pressures come through anywhere at the moment. we think that is going to be concern on friday. hewin, thinkah it's a much. -- thank you so much. economist atchief standard chartered stays with us . we'll be talking about seal we and brexit next. the countdown to bank of england super thursday. we'll bring you data out of the

u.k.. -- out of the u.k. we'll have a look at that and pound and brexit. this is bloomberg. ♪ [hip hop beat]

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.eesev 'it'restn i, w c u'e e dry.yoding uc pwiwiro fii francine: welcome to "the pulse." live from bloomberg's european headquarters, i am fre month of july but it is better than expected. 45.9 so that to indicates a contraction. we were forecasting a figure of 44 so 45.9, better than expected. you are starting to feel the first signs of brexit. construction in general probably one of the sectors that has been

hit the most since the vote on june 23 for the u.k. to leave the eu, as a lot of projects have been held back. the pound, 1.3210. the yen, we have been covering it quite extensively. we have also had a little bit of detail on the fiscal plan. we heard from the japanese finance minister and we are hearing from governor kuroda. he was off about this policy announcement. they said there would be a policy review. governor kuroda saying he does not think the boj will shrink its policy after that review. i think we saw on the back of that a little bit of movement on yen. it is currently, if you look at yen, i think it was 102, 101.57. you can see the impact on the latest news.

let's get straight to the bloomberg first word news. nejra: australia's central bank has cut interest rates to a record low. glenn stevens and his board lowered the cash rate by 25 basis points to 1.5% as predicted by 2025 economists. this is to counter disinflation and the market hampered by underemployment. warren buffett has ripped into donald trump. the berkshire hathaway ceo attacked the republican presidential nominee over a swipe he made at the heartbroken parents of a muslim american war hero killed in iraq. >> our families have not sacrificed anything and donald trump is not sacrificed anything. how in the world can you stand up to a couple of parents who lost a son and talk about sacrificing. i ask donald trump, have you no

sense of decency? nejra: buffett also challenged trump to release his tax returns. lago.ill meet him at mara i will bring my return, he brings his return. we are both under audit and nobody is going to stop us about talking about what is on those research is returns. nejra: the cdc has warned pregnant women to not travel to the so-called zika transmission area in miami, florida and pregnant women should take steps to prevent mosquito bites and the sexual spread. >> this investigation showed there is evidence of the potential for ongoing spread of zika. we are taking this step of advising pregnant women not to travel to this area. nejra: global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am nejra cehic.

this is bloomberg. francine: for more on the u.k. construction pmi, chief european economist sarah hewin and as with us. we are starting to see the downfall from brexit or at least in certain gauges. is it going to get a lot worse? we are unclear whether we will be hit by a recession or whether it will be slow growth. sarah: it is a good question because we are seeing surveys that clearly come in over the past few weeks, would be signaling recession. do we see a rebound in august? sentiments in the immediate aftermath of the referendum was very negative. we had a lot of uncertainty, we had no government, no clarity on what the next steps were. since then we have a new prime minister. there have been some tentative steps toward brexit, and it may well be that the confidence

certainly in the markets, we are seeing more stability. my own view is that the thoughts of surveys we are seeing are suggesting longer-term impact of the brexit result. the survey suggesting the investment house has been put on hold. projects are being scrapped. these are the sorts of impacts that have an effect on the economy, not just of days, weeks, months, but years. francine: how bad can it get? it is almost an impossible question because we do not know when the article 50 will be triggered. there is hope on the market it will not be triggered, so how do you see it processing from now on? how do we know -- how much do we know about theresa may's appetite to trigger it? sarah: i think it will be triggered. theresa may has been very clear and she's being held to account

by skeptics within the party. with a narrow majority in government she cannot afford to delay the process for too long. triggered, it0 is is a one-way process to brexit and we have very little leverage over our partners in the eu so the government will want to make sure they have determined as far as possible before triggering article 50, what the state of the negotiations will be, what the end outcome is that they want to achieve. francine: what does it mean for the pound? sarah: we think it will mean continued pressure. poundnk that we will see having down to 1.20 in the autumn and below by the end of the year. francine: below to 1.10 or parity? theh: we see it around 1.17, 1.18 level against the dollar.

pretty weak and certainly quite a lot weaker than we see it currently. francine: sarah hewin, two feet economist at standard carter -- standard chartered. let's head to the bloomberg with mark barton for your asset checked. mark: it is a broad-based decline today, investors digesting a whole host of earnings, looking at the price of oil which is in a bear market, and thinking about the fiscal stimulus plan that has been announced in japan. all 19 industry groups on the stoxx 600 are declining. the gauge is 1.2% lower. further afield as the currency markets. i'm keeping an eye on the australian dollar. these currencies are rising against the aussie, these are falling. australian central bank cut its lending rate to a record low.

it was to support the labor market hampered by underemployment. glenn stevens lowering the cash rate by 1.5%. inflation remains quite low, given very subdued growth and labor costs and low growth elsewhere. this is expected to remain the case for some time. this is the price of crude oil over the last 12 months. crude is in a bear market. it has fallen from its one-year highs on june 8 through yesterday by 20%. 11k at the rally february when it fell to a 13 year low. through the highs of june 8 it almost doubled the crew is falling, hovering around $40 a barrel, concern about a supply glut. look at the big decliners on the dax. deutsche bank has been even did

from the euro stock 60. francine: thank you so much, mark barton with your asset check. as investors weigh the significance of japan's new stimulus package, we will talk yen, bonds, and the world third-largest economy. in "surveillance" we will talk oil and the correction that we , and we talkti politics with richard haass, the president of the council of foreign relations. this is bloomberg. ♪

francine: this is "the pulse." nejra: shares in metro are lower this morning after a reported third-quarter sales and profits that missed estimates due to currency swings. sales ofits -- saw 13.6 billion euros. earnings before interest, taxes, and special items dropped to 154 million euros. bmws second quarter profit rose as it boosted sales of its new compact suv and kept a tight grip on costs. their earnings climbed 2.7 3 billion euros, above the 2.6 7 billion euro average of 10 analyst estimates compiled by

bloomberg. afterzbank is lower catering to small and medium-sized companies slid in the quarter. second-largest business reported operating profit of 2.3 million euros. that is the bloomberg business flash. francine: thank you so much. japanese bonds falling for a fourth day, driving benchmark to the highest and foreign to half refrainedn the boj from bond purchases. investors are focused on the deal -- the details of the fiscal stimulus which provides a goose -- boost to government spending. is derek halpenny. we are talking last week.

what do we know, they are working together the boj and government. going through the numbers you think it is quite significant. derek: i can understand why the markets are disappointed because there was this obsession with helicopter money, and more working together with fiscal policy and monetary policy. taking the ¥4 trillion that is going to be implemented for this fiscal year over a six-month period, so you annualized that and get something like 1.6% of gdp. it is going to lift growth but like all previous fiscal stimulus packages, it is not going to be sustainable and there will be a supported factor for real gdp but it will be brief. francine: i have a board, the halpenny board. japan is the one where watching the most because we have had some quite big moves over the last couple of days. derek: the problem is that the

whole of abenomics is unraveling. that is impacting inflation expectations so there is a greater urgency in japan to try and reinvigorate abenomics. this is the efforts that have been taken so far. judging from the way the markets are responding, it is obviously not enough but you've got to take into context perhaps the unrealistic expectations -- francine: of the market. derek: and the ben bernanke trip to tokyo fueled talk of something bigger. francine: i want to talk to you about the review but i do not know if it is from a theological point of view, is there merit in governor kuroda not giving the market what it wants? there has been a lot of speculation that what janet yellen's getting wrong issue follows the market too much. degree but is to a

would ultimately have to come down on the side of, there is very little left for the boj to do and therefore they need to work with as much as possible. this reassessment of the monetary stance. i think it could drag on much beyond september. i am not convinced we are going to get something in september. there could be another message from kuroda and perhaps october when they get the updated projections on the economy. the question i have asked them is what are they going to do? they could eat out another chunk ,n terms of qe on jgb purchases going to deeper on negative rates, but in the world we are in today and will not have any dramatic impact. francine: what is this policy review? governor kuroda keeps getting asked about this policy review and whether the you -- whether they will shrink their policy.

why is he asking for a policy review? is he uncertain about what he is pulling in just putting into place or is it a cultural transparency exercise? inah: -- derek: certainly terms of negative rates there is still a debate on what the impact is, given that banks on the announcement of that policy. we orou compare qqq negative rates, i think the assessment is perhaps more on the rate side than the quantitative easing side. francine: derek halpenny, stays with us. we will be talking a little bit about japanese banks and a little bit more on yen and jgb. up next, commerzbank flies as negative rates earnings at its second-largest business. we will also look at credit suisse and joyce eubank. -- deutsche bank. ♪

francine: welcome back to "the pulse." some highlights for your day ahead. open, u.s. markets personal income and spending numbers out of the u.s. at 1:30 p.m. u.k. time. if you look at the indices overtime, we are a leg lower in terms of the european picture. thanks or the industry hit the hardest -- banks are the

industry's hit the hardest. credit suisse down 6.3% and unicredit almost down 5%. commerzbank down. the german banks ought earnings in its second-largest business slide 35%, hit by negative rate. these are the first couple of earnings after friday's european bank stress test. banking stocks popped up yesterday but quickly fell. article,omberg gadfly perhaps a sign that having no ast mark ineffectively giving clean bill of health to all of the banks tested gave nothing new to tell. our earnings are a better indicator? with us is derek halpenny. we found out today that credit

squeeze, deutsche bank would be pushed out of the euro stocks 50. down 7%. monte paschi down seven. is there asked that is difficult to pinpoint but that the investors have? laurent: we look at what has changed since the outlook. you simply have the traditionally strong banks like ubs that are having real trouble defending their rich valuation given the economic clouds ahead, and you have the difficult turnaround cases that still haven't proven their business model. francine: what is the reason to make it fall by 7%? i know we do not know but i'm trying to figure out why we have these huge moves all in one day. laurent: i think there was a big run up into the stress test. were notnk results

good on the probability side and it reminded us when you are faced with negative rates, you can try to pull out all the stocks -- stops but the probability is very hard. francine: the more the share price fall, the more at some point they are going to have to consolidate or cut assets or do something a lot more drastic than what we have seen so far. predictable,s very but it is all ceos can do. list ofank has a whole things it will do to try to defend against rates. it is going to try and charge corporate clients for their deposits, but you are reaching for these levers. if you do not have enough market share and control, what can you do? francine: at some point it means they will hurt their growth. if you cut too much of the fat then you start cutting the muscle in the bank. what are you left with? laurent: that is why the revenue

environment is bad. revenues are having to defend their profits but what choice do you have? unless regulators agreed to have some truce or proper backtrack or unless the economy massively grows, what choice do they have? francine: i feel like i'm going around in circles because it feels like six months ago or a year ago we were talking about the problems with the banks. here we do not even see what the end game is. you are mentioning that lending is not that bad, right? what the banks are lending to the real economy in europe is not as bad as a year ago. derek: i think the policies the ecb has in place, they will argue they are helping and trying to create a more favorable macro environment. if you look at the bank lending survey, there was an improvement in terms of an easing of lending conditions. they did an ad hoc question

good amounts and a of respondents are going to use those for probability purposes. as ecb would look to that policies that are actually helping to lift lending. to make a comparison with the lending to the nonfinancial corporate sector is picking up in europe but we are talking about growth rates between 1% and 2%. if you compare the united states, of between 8% and 10% on an annual basis so what it does to the macro gdp picture, it is not hugely supportive for growth at these levels. there a danger that certain banks will have to go under in europe? laurent: mating? francine: go bankrupt, file chapter 10 because it is so ugly.

laurent: i do not think that is on the agenda yet. i do not think that is worrying investors. we have all this capital that is definitely there. the question is how far lower can the share prices go? francine: thank you so much. thank you both for joining us. andk stays with us, "surveillance" will look at u.s.-japan relations. tom keene will be joining me from new york and we will kick off the conversation on japan and we will continue to oil with francisco blanch. in our second hour we will talk politics with richer highs. when i want to ask him about his donald trump and vladimir putin. we will also go through hillary clinton. if you are a politics watcher at i thinknt, and

economists are going to have to look more carefully, if you are into politics watching i do not know what you make of the u.s. presidential election. look at banks, down some 3% for this index in europe. ♪

francine: all eyes on shinzo abe as investors weigh the details of the japanese stimulus package. could this time be the charm? the australian central bank cut interest rates to the lowest ever. all monetary policy really work or is fiscal the only route? concern the0 amid global glut is not going away but analysts are not abandoning help.