francine: european banks are out with earnings today. can the reverse the slump? we speak it is a way to ceo carlo messina this hour on italian banks. rio tint reports its worst profit sinceo 2004. the future of the company sits on a new ceo's shoulders. trump says dump. he tells investors to pull their money out of the stock market. while president obama tells gop leaders to pull their support. this is bloomberg "surveillance

." tom, we had a little bit of eurozone data out. continue watching a lot of the banks. we are waiting for standard chartered. hsbc all about cost-cutting. i do not see how that could be a good strategy. cost-cutting is front and center but all the focus is away from standard chartered on those european banks. bid thisbit of a morning. francine: they do a little bit. certainly some of the stronger banks. standard chartered coming up, we have to look at pretax, worse than expected. it is the capital buffers that investors are watching out before -- out for. ct1all, that first half capital ratio 13 13.1%. pretax a little bit below. capitalirst half ct1 ratio 13.1%.

tom: standard chartered is an emerging market proxy. you've got the mexican peso out to to 19. that is all you need to know about emerging markets. ian markets more than central america but you make a very good point that this is not really a u.k. bank. they are headquartered here but it is an asian bank. let's get to first word news. taylor: for the first time, north korea has fired a missile that landed while japan considers its economic zone. the missile launched fell into waters 160 miles of japan's coastline. shinzo abe called it a serious threat to japan security. japan's prime minister may be about to raise tensions with china. hawkish l.a. he is about to appoint a hawkish ally. a reporter,g to

he is about to appoint a hawkish allly. trump is ignoring advisers and party leaders who want them to move on. he is told a tv station he has no regrets. trump is refusing to endorse the highest-ranking elected republican paul ryan. ryan has a primary election next week in wisconsin. ryan spent several weeks before deciding to endorse him. trump also withheld his endorsement from two republicans facing primaries, senators john mccain and kelly ayotte of new hampshire. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. this is bloomberg. tom: really front and center. of last 24 hours presidential politics in america has been unique. we will talk to a trump supporter in her next hour.

ands a most nuanced interesting moment. yields assuring 1. -- churn 1.54%. american oil making real news yesterday. 39.78. 13.78 a little bit of equity angsty. . yen, yen, yen nowhere near 99 but i'm going to call it a strong yen. mexican peso up to 19. that really show some of the more global tensions we're seeing as we focus on yen. francine: i love that you look at the mexican peso. you know what i reminded of, the brazilian games start friday. we need to look at what is happening in brazil. we do not even know if they started. the currency has been under a lot of pressure there.

european stocks are fluttering. what i really want to show you is banks. rebounded because a lot of the stocks or earnings were not as bad as expected, but maybe it is also a different crop of banks. hsbc was ok. socgen was ok. standard chartered just coming out. the capital ratio is not bad at all. a beatinghey took yesterday. i will give you a green in the bounce but what an ugly day yesterday. i want to look at history. this is a chart i made 14 years ago. i updated it. i did it for facebook live. manufacturing in america. population adjusted. it's set in today's number which is 13 million people in manufacturing. thell know the yellow line, slow markdown in manufacturing overtime. absolute francine, the

implosion in the last 15 years in manufacturing is something. we can talk all day about this. withs a little bit to do currency, and it mostly has to do with technological progress and the idea of the new manufacturing, which is a less peopled manufacturing. what do you have? francine: i like that chart, because the more we drill into some of the issues, and underpins the earnings. tom: and cutting costs. francine: it is not a vanilla bank chart. it just goes back to showing that european banks that have be en under pressure are also cheap at the moment. when you look at the price-to-book ratio which is in the white line. tom: very cool. francine: not all banks are created equal. you cannot compare china to the u.k. banks. is basically a

comparison towards the stoxx 600. let's get back to the markets. heads of europe g-10 affect strategy richard -- joins us. great to have you because everything is linked and nothing has ever been so linked in terms of currency markets. currency market stability or fx currency stability makes it how theyr ceo's to see will make money. are we going to see less volatility? richard: when we look at most of the series across foreign exchange, a lot of those are near the lows. it's not just currencies. you're seeing in and fixed income and equities as well. we had a bit of a backup yesterday but in the much broader picture, the vol is low. it's looking to remain that way. from a policy perspective or central-bank perspective, a lot of them are happy with that. francine: i would argue that one of the biggest stories this week's treasuries. it's really change. what is underpinning that?

richard: underlying this flattening trade that was out receiving trade of rates that ultimately when people are looking a fixed-income they are expecting curvehis is just the should continue to flatten out going forward with an expectation of liquidity. a lot of this has been postponed in terms of how the central banks are going to look at their policies till september. the bond market is getting nervous. what is going to go on with the bank of england tomorrow? and perhaps is there going to be any tub of a backup, or steepening over the short-term? tom: look at yen. bring up the chart of japanese yen now. i want to back up away from the mumbo-jumbo we talk about, massively strong yen. richard, is the yen a domestic story, or is it being buffeted by for an activity? forein activity?

richard: over the medium-term, without a doubt it is the trade surplus japan has. that will set the medium-term exposure. j, thereinto the bo were some expectations that perhaps we would see more monetary policy, rate cuts or in that did not, and get delivered. investors are unwinding some of those positions and waiting to see what actually happens in september. if policy is not adjusted, that animately the eyyen is in environment where it should appreciate. tom: ultimately it is out of whack. adam pozen writing and "the financial times." thepozen talks about received wisdom. what is the received wisdom on intervention? do you have an idea of the when intervention? are they going to be so bold as

to do a unilateral intervention? give us an update on that. : i think the ministry of finance has been somewhat clear. they see currency movements, the five big figures are more, they see that as extreme. we have had them on the tapes a few times talking about this type of pressure on the yen seems one-sided. i think investors need to be cautious. ultimately, it is going to be difficult to consistently intervened to weaken yen. i think that is where the market approach is that the market will continue to apply pressure. at times, there will be some intervention if this does push up dollar-yen it is hard to see that as being stable. tom: i agree. richard: any of those types of strength in dollar-yen, more than likely that will get offer into. tom: i would agree, checkered history to say the least about unilateral intervention. coordinatedy rare

intervention as well. in our next hour, someone for some excellent guests. we will talk about the glass ceiling. i want to talk about miss paratt at google. and a presidential candidate that just knocked up against the glass ceiling. york, gorgeous, new mets-yankees, what could be better? this is bloomberg. ♪

inncine: i'm francine lacqua london. let's get straight to the bloomberg business flash. says the new report bank of england probably will cut interest rates close to 0 to ward off a recession.

the report comes from the national institute for economic and social research. the tightening of financial and credit conditions will slow down investment and consumer spending. economists will predict the boe will cut rates t omorrow. socgen had lowered professions for been -- provisions for bad loans. hsbc has announced a $2.5 billion share back to reverses stocks slump. the bank is backing away from annual dividend increases and hsbc removed its target of surpassing a 10% return on equities by the end of next year. quarterly profit fell 45% from a year ago. the prospect of a recession in the u.k. you are sticking with banks. francine: thank you so much. yes, i am sticking with banks.

the most interesting earnings story of the week. let's get to our banks reporter. when you look at the banks, you cover a lot of the e.u. banks very in depth. hsbc was pretty much as expected but it is all on cost cuts. richard: the surprise was the buybacks they announced. this is an institution where they pledged a progression of a progressive dividend. there is concern about whether they are able to grow those. however, the disposal of the brazil unit they sold earlier this year, that was a fantastic boost for the business that ofbles them to do2. 2.5 additional return to shareholders. francine: what we know about standard chartered, this is a different bank skewed towards

asia. there is so much focus about capital ratio. this is kind of the one thing that shareholders want to make sure they have. richard: this is the good news from standard chartered breaking in the last few minutes that they have managed to maintain her capital ratio as a measure of financial strength above their target of 13%. that is really good news. there was also concerned about their capitalization given they have rising loan and parents. however, that is another thing we see from standard chartered, they are not as bad as we had previously feared they could be. institution which is experiencing a slowdown in those asian economies that could hurt its balance sheet but not as bad as we feared. tom: have you seen a good study dilution expected when the european banks go on to do what they need to do which is re-cash? ution.ys had an 81% dil

i know that bank's a total mess. have you seen a good study of what the dluti -- dilution would be at deutsche bank? richard: if they did have to raise new capital, that would be a negative thing for the shareholders. we've seen deutsche bank is down 50% year-to-date. a tough ask if you are shareholder to take up a new capital -- on these institutions but hopefully we are not going to require that. the stress test confirms that their relative stability to these institutions apart from the likes of monte di paschi. tom: is this in august story or do we go on holiday and we come back in september and readdress it? what is the urgency right now after what francine and i witnessed yesterday? richard: there is a great deal of urgency to solve the situations in the south of

europe. however, in the u.k. here we have fears of the brexit which are not being realized at this moment in time. hsbc this morning was saying they have not seen a particular slowdown, and that they do not expect to see any issues with rising impairments of credit quality. this is something that will play out over the next couple years. they also see that we will get more loan growth picking up through september, with taking a pause as a consequence of the referendum. as we go into the fall, hssbc seeing things picking up. francine: tom is obsessed with european holidays. take my days. tom: i think it is really important. what we witnessed yesterday was not good for anyone. i mean, those declines in deutsche bank were shocking. francine: right. we focus a lot on these banking stocks that have to go through

restructuring. it's new ceo's. at the end of the day, it's to do with central banks. they have anemic growth, huge regulatory fits which means they need to curb risk. and there is nowhere to make money. richard: it comes down to what is the sovereign curbs? curves continue to flatten out due to monetary policy or just investors' demand for yield. that is a tough environment for banks to make capital. are reflectinges that, and europe is reflecting that as well because, as one of the more extreme policies ou there-- out there. francine: thank you so much. the two richards. we will talk about some of the more secure but important currency move straight coming up later, the conversation on banking continues. we speak exclusively to carlo messina, the ceo of intesa sao paulo.

that's coming up right here on bloomberg "surveillance." ♪

francine: this is bloomberg "surveillance." dom, this is what i picke out for the morning must read. i read it twice. donald trump speaking to the press, interest rates artificially low. the only reason the stock market

is where it is because you get free money. almost.ving stock pixcks bizarrehas been a couple of days. i think it is a terrific quote. again.hng the quote up it is econ 101. interest rates are artificially low but the only reason speaks to the servitude of most statement we get from mr. trump. he love to speak and certitudes but i can't conveying a enough how much it is front center for america. for our global audience, "the journal" a republican paper. trump's missteps and goopp unease. "the new york times" trump swipes at republican. there's the basic idea of where

we are. it is original and america at this moment. francine: original. the only other head of state whoever spoke to me was silvio berlusconi back, i believe, 2008. richard, how do you model donald trump? dollar positive or negative? the more pressure that donald trump is under or them issues that arise, the more that is less going to be dollar next rade. -- trade. investors, when they look at the dollar, there is not a fear of the fed. that remains the base

case, it is going to be in a private where the dollar weakens. francine: i'm a european to it i keep being told, even if he is elected president, there are checks and balances and he talked about removing janet yellen. how should an investor look at that? richard: yellen is the guiding force on the fed. it creates uncertainty of volatility. to a large extent, until it is done, it is difficult to position for it. this far ahead of the actual election, it is one of those tail risks in markets, but something moving currencies now, still out there. francine: rebound is banks is what we are seeing. european stocks are little changed. this is bloomberg. ♪

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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. ♪olympics 2016, let me get you on my level. ♪ so you never miss a moment, ♪ ♪miss a minute, miss a medal. ♪ ♪ why settle when you can have it all? ♪ ♪soccer to wrestling. track and field to basketball. ♪ fencing to cycling. diving to balance beam. ♪ ♪all you have to sa♪ ♪ is, "show me," and boom it's on the screen♪ ♪ from the bottom of the mat, ♪ ♪ to the couch where you at? ♪ ♪ show me the latest medal count♪ ♪xfinity's where it's at. ♪ welcome to it all. comcast nbcuniversal is proud to bring you coverage of the rio olympic games. tom: good morning. bloomberg "surveillance." a lot going on, important interview coming up with the leadership of intestate, -- of

intesa. are they a troubled italian bank? better than the others. sort of like the boston red sox. francine: good analogy. tom: let's get to first word news. report the obama administration secretly airlifted $400 million to iran. iran'sncided with r release of four prisoners. meg whitman has endorsed hillary clinton. once ran for governor of california as a republican. she urged all members of the party to reject trump. experience maker the far better choice, she says. and don trump is urging individual investors to get out of the stock market like he did. the republican presidential

candidate told foxbusiness that interest rates are artificially low and inflating markets. trump says the only reason stocks are the way they are is because investors are getting free money. in japan, prime minister shinzo abe has added an economic policy radical to his cabinet. advocated firm political oversight of the bank of japan. his appointment comes amid signs that investors are losing confidence in abenomics. news 24 hours a day powered by 26 hundred journalists and more than 120 countries, i am taylor riggs. tom: thanks so much. d, we goand me -- pumpe beneath the headline data on jobs day. we're the usual suspects. mike: the weird thing about the economic data lately, it's been relatively good. strangeet these

outliers with big numbers. . everybody really nervous. they are looking at adp as a canary in the coal line for what is coming with that. you look at the chart, and it is extremely unreliable. you can see that white line, adp much more stable, then payrolls. it's narrowed it margin of errors. big misses. june.w by 93,000 in most useful for trends, whether we are going up or down and it does show the labor economy has downshifted an average of 204,000 jobs in 2015. now we are running at 173,000. that is about what th forecast shows for the mud. etom: but the headline number. struggled with

this, whatever anybody's view in economics, everybody agrees the jobs, we allin go yay. mike: now it has come down. you had yesterday, rob kaplan from the dallas fed suggesting we only need 120,000 to make and happy and most fed officials think it is somewhere around 100,000 that you need to fill the job openings that come due. 180,000 would be a very good number. tom: to be clear, jason furman at the white house is happy with 130,000. mike: as an economist, yes, as a politician, no. people -- tend to think the number has to be higher or it's not good. it's really much better than we need to keep bringing the on a planet rate down. -- bring the unemployment rate

down. francine: we have the beo countdown but we find out what their future expectations for inflation is. which is the most important? richard: from an fx side, it is the bank of england. adp today but nonfarm payrolls on friday is not seen by the markets and shifting the fed reaction too far one way or the other. francine: what, the presidential elections? richard: no. the idea that the strength in the labor market has been with the u.s. for a long time. that is not going to shift too far one direction or the other and is not going to change our fed expectations for september or december unless it is a blowout number to the top site. francine: boe? richard: bank of england does matter because what you're looking at basically you have had three of your main central banks, and there is this idea and fixed-income there is going to be additional liquidity, rate cuts and q.e. and expectations have been built

up again for the bank of england going into it. you can see this in euro- sterling and cable. the market believes rate cuts and q.e. a disappointment causes a big problem for fixed-income. tom: deutsche bank yesterday taking nominal gdp ex- consumption. and with the inventory adjustment we saw it is a crater of gdp. outnevertheless, x-ing consumption. a your experience, is that proper approach a looking at the annual spirit of the country? mike: 70% of the country is consumer spending. yes, you take that out and you have nothing left because business spending isn't there, a nd inventory and trade is not there with the dollar, although that is leveling out. tom: help me with what you and i have heard for years we have had

such good support from the national federation of independent business, does small business really matter or is that an artifact from a different time and place? mike: it does matter.it gets a little bit to the animal spirit. companies that have everything to gain and everything to lose hiring. it is the small businesses that create the most jobs. you want to see that continue. we should get a number later this week on their payroll numbers. we'll see how that is going. francine: overall, you look at look at these granular analysis of what we're seeing for the job stated's dat. a suissey curve. anything below 40 years is negative. richard: most extreme curve. part of that is by design. we have seen an awful lot of swiss appreciation toset up an

environment with deterrence. and part of that policy is keeping that curve there is strong relative to the rest of the g-1o curves. absolutely. when we look at the medium-term expectations for the swiss it does not trade as much as a defensive as it did, either under brexit or the recent stress we had an european banks, you are not seeing the swiss appreciation we have always got in periodic market episodes. it does show you a does have an impact on currency. francine: where do you make money in currencies? richard: currently right now it is short-term horizon till we get to september. then we can talk more about where the central banks are going to go. i really do like dollar -- upside. again, you are seeing pressure in energy markets. you are seeing basically brought economic weakness which is beginning to work its way into canada as well. so, that is one where we're beginning to see sentiment shift. i think that is when you can definitely do.

broadly in the lowball environment, without central banks pushing the envelope too far, it is going to come back to some broad dollar weakness against e.m. francine: thank you so much from citigroup. michael mckee, our economic editors in the u.s. we speak exclusively to carlo messina. we will be asking about the figures yesterday. we will be asking about nonperforming loans and possible consolidation in the e.u. banking system. this is bloomberg. ♪

francine: i'm francine lacqua in london. tom is looking at charts.

reporting aaulo smaller than expected decline. of italy'sy lender's are internal. joins. carlo messina with ust to have you on the program. your share price is doing better than others. how much do you need the italian banking -- laoans to be fixed? it's mainly related to specific cases. there were two banks -- under t threshold of capitalhe. . they've been solved through the usage -- still remaining monte pasche, the big problem of the italian banking system.

through the disposal of nonperforming loans, in my opinion it has solved monte pasche. we have to wait for the recovery of the real estate market in italy. prices increasing. so, this only a problem waiting for the price to recover. so, i do not see significant problem from a fundamental point of the. -- point of view. francine: every time i speak to you and every three-month i ask, are you going to buy monte pasche. you have always told me no. would you beest, interested in buying it if you got rid of the bad loans? mr. messina: there is no rationale to buy monte pasche. i'm committed to deliver a plan in a clear trend of creating value for shareholders. also, do not forget that 60% is in international investors.

we have such an amount of pasche,with monte we have no possibility to create value. francine: yesterday you were ahead of target. would you consider increasing the dividend? mr. messina: not this year, no.we have a target of 3 billion euros. probably we would be the best dividend yield in the european banking sector, but this year, we want to use the extra net income related to these figures compared -- in order to improve profitability for 2017. have better cost of risk and 2017 and to deliver, over deliver in 2017. tom: we saw in urgency yesterday across all of european banks. i think most people in american finance are baffled by the

lack of synergy and mergers of italian and other national banks in europe. when do we begin to see a modern mergers discussion among european banks? mr. messina: so, it is clear that to work on synergies between european banks you have to talk about the possibility to reduce costs between different banks that are in different countries. in my view, it is difficult to between banks and different countries. otherwise, we have to serve the story of increasing revenues but it is difficult to say you can increase revenues, italian, french or spanish or german banks. view, consolidation between european banks can happen only in line of business, asset management, but not between big players. tom: are there too many banks in europe?

are there too many banks in italian? mr. messina: yes, absolutely. there can be consolidation within the countries. and you can explore synergies. a merger,t ot mato make you have to create value for shareholders and the only way is through synergies but the synergies are cost synergies. within countries, it is possible to exploit synergies. a lot ofe will see consolidations within country, and italy, but also in other countries. tom: with great respect, sir, i look at european banking when i looked on park avenue at the old pan am building above grand central station. there was a time when our airlines were a lot -- when our airlines looks like european banking. it was a national interest. you going to have to work through these challenges? are you going to have to work

through the nationalism of your industry to get to a successful outcome? mr. messina: no, i think that at the end reality is that we are a company like all the other devoted to create value for our shareholders. so, the only point is to make in a good way the job of being a good banker, reliable for clients, having liquidity leverage and profitability like intesa sao paola. o. withlso being in a country a problematic situation, it is possible to delivered -- to deliver good performance. tom: let me show the chart. don't break into italian on me come on! i need to meet a supermodel. don't break into italian. the redline is unicredit. the white line is a good bank.

this shows attention within major italian and european banking right now. -- this shows the tension. intesa is the second-biggest bank when you look at actual value, and has a -- intesa is consider the bitter bank -- the better bank. given your shaping your strength, how much will you buy abroad? are you looking for acquisitions? mr. messina: so, it is clear ist probably intesa sanpaolo the only bank that can make acquisition outside his country. so, because we are in a clear excess of capital, also certified by the stress test, and because, do not forget, we center areerse exceeding our requirements. the real point is the possibility to create value for

shareholders. i'm really committed to deliver a business plan that can create value for shareholders. i want to improve conditions for 2017. for this plan, i do not see any possibility to create -- if conditions change within the week and consider other opportunities. for the time being, i am really committed to deliver my business plan. francine: right. shareholders, how would you describe investor sentiment? yesterday, your figures were good. analysts were saying there were good. share price fell. mr. messina: yes. the point of intestate san -- paolo wet of intesa san are attractive of the italian banking, perceived. in reality, italy has strong fundamentals.

wealth management business model is delivering in a very good way much better than also its competitors. in reality, in some months, investors will consider again paolo as the real opportunity for having increased value. francine: interesting. carlo messina there. we were talking about the italian disco. we --- discount. we are sending road set u -- to tom keene. we will talk about the macro economy. tom, if you look at european stocks, they are higher. banks? tom: it is the messina effect. francine: storccks are a little bit subdued. this is bloomberg. ♪

francine: welcome back to bloomberg "surveillance." tom, we have some breaking news on samsung. this is significant because it is a bloomberg scoop. well done for the people on the

ground. samsung said to be in talks to buy some of the assets of the unit owned by fiat. this is for the auto parts. it is part of the operations of the auto-parts maker. this would be one of the first asset sales we have seen from fiat chrysler in the last couple quarters. i do not have a number of how much it would be worth of fiat, gaining 4.2%. let's get back to the banking industry and back to a little bit of m&a and negative rates. it is tough being a banker nowadays. that means you had to take less risk. this is the enjoyment that the biggest bank. to usyou for speaking exclusively. we are talking about the challenges for italian banks and the challenges for intesa. overall, negative rates are

terrible for banks because it is very difficult for you to make money in this kind of environment. mr. messina: it's difficult if you look at net interest margin. on the other side, there could be some opportunities in commissions because when clients have no opportunity to invest underthan assets management, they can be moved into asset class that can create value from commissions points of view. that's the reason why we are working on the wealth management business, and we are delivering 60% above are pretax income from wealth management. s environment can create also opportunities in terms of growth of gdp. if there could be some announcement in the growth of gdp, you can have better quality in your asset quality. retailear that from a banking point of view, this is something that is negative. arecine: the two interlink. european banks need european

growth and european growth needs strong banks. are you seeing the green shoots of recovery? mr. messina: i think at the end, rate environment can increase the attitude of corporate clients to invest. so, investing, they can create energy for growth in different countries because you have demand coming from customers. so, companies are no look at rate cant and zero increase investment. if you have the right business model, you can have the possibility to create value also in these environments. tom: if there is a right business model, where do you envision being in five years? obviously, there has got to be henrybanks, but as koffman says, if banking is the new utility business, where is your bank in five years? a goodsina: that is question. i think that from a strategic point of view, this is the

question that ceo's have to consider. and the answer for intesa sanpaolo is we want to be one of the best wealth management companies outside of italy. and i think we have the potential to tap this target. i do not see any significant value in being a significant corporate investment banking bank because there is a lot of capital absorption, a lot of negatives deriving from corporate investment banking activity for a bank like us. and wealth management is really the story that we have to tap in the next years. francine: carlo messina, the ceo of intesa. coming up, we talk eyn. -- talk yen. ♪

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stability in markets. american oil below $30 a barrel. 19 to then peso dollar. the glass ceiling in many ways is broken. sallie krawcheck in this hour. on secretary clinton and sallie krawcheck's wall street. all eyes are on troubled europe. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york on this wednesday. i am tom keene in new york, francine lacqua in london. when did we learn from the intesa ceo moments ago? francine: first of all, the italian banks are under pressure, but they are a little stronger than market sentiment given credit for. it is emerging markets that are hurting the most today, so banks are not that. european stocks are down as

well. tom: they are down overall. overwhelmed at the great mystery of all this. there is no mystery, she has our first word news coming here is taylor riggs. emirates airline passenger jet was involved in some sort of incident while landing in dubai today. the boeing 777 was arriving from india when it made an emergency landing. all passengers were evacuated safely. tv footage shows clouds of black smoke and all planes are now delayed. for the first time, north korea has fired a missile that landed in what japan considers its exclusive economic zone. it fell into waters about 160 miles from japan's coastline. prime minister shinzo abe called it a serious threat to japan's security. there is support the obama administration sent $400 million to iran. it coincided with the release of

four americans last january. u.s. officials deny any link between the payment and the release of prisoners. critics eight amounts to ransom. onald trump is doubling down the parents of the muslim soldier killed in action. according to the "new york ises," trump an ignoring advisers who wanted to move on. meanwhile, trump is refusing to endorse the highest-ranking elected republican, house speaker paul ryan. paul ryan has a primary election next week. ryan spent several weeks before deciding to endorse trump. senators john mccain of arizona and kelly ayotte of new hampshire. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom? tom: taylor, i will not comment. taylor riggsthe

timeout chair. let's get right to the data check. equities, bonds, currencies, commodities. few days.teresting thrilled to have michael purves with us. euro gives it up a little bit. crude persistently under $40 now. onto the next screen. the vicks showing equity angst. strong yen, , $101.25. all, nearso says it $19. francine, what do you have? francine: we've seen a little bit of volatility. u.s. stoxx 600 fluctuating is fallingit for a third day. we see a rebound us banks trigger a broader recovery, and oil below $40. i want to show you quickly the

pound. we have some not so great figures in the u.k. it feels like a different day than yesterday. tom: crisis over. francine: it is not doing much for global sentiment. tom: very cool. we will get to the markets in a victory how about this -- in a minute. how about this in the bloomberg? jobs adjusted for population, the great decline in manufacturing jobs, and then the suddenness of a decline over the last 15 years. it is just amazing to see the atomization, as i mentioned earlier, francine, mckenzie has done a killer analysis of inequality. they really center on union exposure nation to nation, and the summary is, "we do not have unions, and sweden does," and it makes for very different makeup of a nation. i will not opine on it anymore, francine. francine: i was looking for

valuations on european banks. the market cap has been slumping quite significantly. the white line from the stoxx blue line ise stoxx 600 banks versus the more general index, and what the shows you -- very broadly speaking -- is there so much a cheaper when you look at price to book compared to not only u.s. banks with the broad market in general. tom: very cool. our guest this hour is someone who looks at volatility. is sleeping at his desk and joins us right now. what is the distinction of the quiet in the markets right now? everyone is talking about a tepid move index. what is the distinction of this august? michael: you step back a little bit, and you tnk about what and how thatbrexit impacted the volatility environment, you know, it really was what i call goldilocks 3.0,

dollar gothat the bit but not that aggressively, and what was aggressive for treasuries and its equivalents in germany, japan, and so forth. agree with bill gross that it is a bubble, that you cannot participate in fixed-income? michael: depending on what kind of investor your, i was a guest. it's hard to make a value case for treasuries. that is without question. the problem is that a bubble that could pop, that is the bigger question, and given a lot of other trends, it is hard to see that bubble popping anytime soon. tom: let's do that right now i go to the bloomberg. francine with a move index chart. the entire yield curve is dynamic -- thank you, merrill lynch. slope matters, and it shows percent change in the ugliness, michael purves, is 2007, 2009,

that abrupt redline upward. now we have a pound of lethargy bond structures. is that a mirror of the greatest portion that is out there? michael: it is a reflection of what central banks are doing, dominating the market. you know, the volatility story has shifted from equities to treasuries and then on to currencies, and even those are starting to get some stability in them as well as we go through the various adjustments. there is one thing, getting back to your bill gross question, there is an interesting question, which is if investors are really -- you look at treasuries versus equities right now, and there is arguably more people buying treasuries more for their price movement, so the volatilities,tive treasuries having much lower volatility than equities, that

story may change in the not-too-distant future. francine: what is going on with treasuries? the shift in the last six days. michael: the big question here is whether we are, you know, when i look at treasuries, to me, the key factor is really what is happening overseas. if japanese seals are going to start backing up -- that is almost more material than what we will get on friday from our job numbers. are in myand the jgb mind is so key to what we are going to be looking at whether 10-yearooking at the treasury yield and how that spills forwarded to other asset classes. tom: francine, i'm working on a jgb chart right now. i do not have it ready for tv with the bright colors, but it is amazing -- price lower, yields higher in japan. francine: i actually have it. overall, we talk about volatility. 10 months, 12 months, a lot of

volatility, but above and beyond, are we going to see more volatility coming from china? michael: that is a great question. if you look at the vix overlaid with things like the 80 x y, that paradigm really broke down in the late q1 of this year. whether china -- it is hard to right now see the china tell risk coming out of being that dominant. badooks like a bunch of news out of china. if you look at the chinese data, first of all, it is always a little bit opaque, but it is not good, and it is not that tragically bad right now. it has had a lot of time to beat pricing by the market. i do not see drawin china driving the bus right now. tom: great to have you with us, michael purves, weeden and company. i have a volatility chart to

dazzle michael purves. coming up, she will dazzle us. on the state of her global wall street. this is bloomberg. ♪

tom: "bloomberg surveillance." i am tom keene and london, london. loo like what -- francine lacqua and london -- i am tom keene in new york, francine lacqua in london. roberts has been on the show a lot. i will be honest, his book is my book of the summer, "64 shots."

, his retirement in may. it is a killer book on leadership. francine, he has been under the pc bust. francine: i do not know if it is this is aoblem, but victory for the debate on gender diversity, so whether you are for or against it, this was a clear debate on gender diversity that he thought was over, and many people, especially women, think that it is not. tom: we will talk about this with sallie krawcheck again. kevin roberts out. here is our bloomberg business flash with taylor riggs. taylor: samsung is in talks to buy all or some of fiat chrysler's auto parts unit. samsung is interested in in-car entertainment. a deal could be worth more than

$3 billion. and first cap earnings fell at standard chartered. revenue.set following ceo bill winters defended the dividend and laid out plans to cut 15,000 jobs. winters is also restructuring and investing $100 billion of risky assets. that is the bloomberg business flash. francine, you are sticking with this. francine: we are, thanks, taylor. can they remove the slump? one of our columnists, lena laurent, islionel joining us now. they are gaining. is this because of encouraging news or market sentiment? lionel: i think that hsbc's big share buyback was a big confidence booster for the market. it shows banks are doing what investors want them to do when they have cash, which is give it

straight back to the market. skeptical because the underlying trends are not great -- revenues are down, officer bell -- profits are down. francine: what is the one company that is getting it worse than others? some say there seems to be a untiln the european bank we fix monte dei paschi. let's have a listen first of all to the ceo. carlos: the banking system is related to some specific cases. there were two banks under the threshold of capital, and these have been sold through the usage , and that is the big problem of the italian banking system. francine: why are they not seeking monte dei paschi? i know sentiment takes two years where markets wanted in a week. lionel: they are trying to -- it

is largely symbolic. yes, monte dei paschi is a single or issue, but the bigger issue is a value of the loans on these bank hooks. if you do not believe the valuation a monte dei paschi bad lines, should you believe the other banks? strongne of the banks that have been called to help monte dei paschi because what is that for one italian bank is that for all of them. and i look at us, lionel, guess this is crisis with a little bit of rebound in the stocks, but is the surprise of this year and into next year going to be mergers of these banks within countries? where five banks go to two banks, where three banks go to one bank? yes, that has already started come a baby steps in italy, in spain.

it is going to take, sadly, a lot more time, a couple of years, and then we should be seeing workers again one day. so yes, that is starting. tom: lionel, thank you so much. lionel laurent, must-read at bloomberg gadfly. let me do a data check here. equities, bonds, currencies, commodities. 10-year yield in a little bit. crude oil under $40 a barrel gets my attention. coming up, must watch with a trump supporter. this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance." francine lacqua in london. i am tom in new york. it has been an extraordinary washington over the last couple of days. the former lieutenant governor of new york state out of ofumbia and has done a lot support, thinking in support of mr. trump.i want to get to the economics of mr. trump right here in a bit. right now, the tension between mr. trump in the republican extract was met -- republican establishment is extorted very. how would you expect the republican establishment to respond to mr. trump? it is hard to bedecked with they will do, but the important thing for the american people to know is that they are at risk of an enormous recession, and

donald trump has an economic plan to turn the economy around and produce the kind of business investment that will ensure -- tom: our joe weisenthal put out a treat last night calling donald trump the arch king. this is a guy who is not at george will, he is a guy with a different economic land of massive stimulus. y: that is not true at all. the people working for him or laugher, larry kudlow, steve moore, all reagan supply fighters in the essence of plan is to lower corporate tax rate, to invite back some $3 trillion in earnings that should be repatriated at a bargain so that they will come back to the country, and to lower regulation, life the oppressive regulations that have deterred business investment because if you look at what has happened to our economy right now, 1.2% gdp growth this last quarter,

despite robust consumer spending -- tom: that is true. betsy: why is it so bad? three consecutive quarters of declining business investment. tom: i want to go to the debate of the moment. bring up the morning must-read. has written a clinic on richard nixon's taxes. this is 1969. all of a sudden, nixon was hit with a huge tax bill in 19 69 of nearly half $1 million -- in 1969 of nearly half $1 million. how can we talk about trumps economic policy when we are distracted by sideshows like his nontax reporting? betsy: first of all, i've not distracted -- tom: most of america is, though. that is a fact. betsy: you are doing a disservice if you encourage

that. tom: betsy, my job is not to encourage anyone. the reality here is republicans by democrats are distracted all of these distractions of mr. trump. betsy: i disagree to your will begin to listen between the distan difference between hillay clinton's fair growth plan -- which is hostile to business investment -- or trump's turnaround plan, which will encourage much more prosperity and opportunity. tom: we to get perspective from abroad the atlantic. francine lacqua in london. most of the world considers donald trump a joke. how do you attract investment in the u.s. if you have a president who is considered a joke by the rest of the world? 50: because business leaders are going to make their decisions based on tax rates, on the

burden of regulation, and on the prospects for growth, and right now, the obama administration has produced a recovery that is the worst since 1949, and why? tax increases and business regulation such as obama care that are real job killers. our average work week is down to 34 hours. you cannot support a family on 34 hours a week. francine: that the, when you look at the metric from donald trump, this is a man who wants to look inwards. again, it would cut trade-off from the rest of the world. there is no question about that unless he does a 180 reversal. let me point out that moody's analytics just produced a report that confirms un ambiguously that hillary clinton's economic plan would not encourage any increase in private sector investment. that is what is ailing this economy, the reluctance of business to invest. they are terrified. listen to hillary clinton's

growth proposal. more regulation on bonuses, on overtime, on hiring, on investment practices. uncle sam will be in every boardroom and looking over every manager's shoulder -- that should send fright into the heart of all business investors. mccaughey, thank you very much, the former president of the bank of new york state. "with all due respect" today, particularly for those of you global, i cannot say the value on this unique american moment. good morning. ♪

is "bloomberg surveillance." i am francine lacqua in london. tom keene is an new york.

overall, stocks slipping apart from a lot of these banking, atf's climbing the most since april on this huge stock buyback. good capital ratios there. bloomberg first word news. here is taylor >>. taylor: francine, and emirates jet -- here is taylor riggs. taylor: 275 people were evacuated off and emirates airline plane. a large plume of smoke was seen over the airplane. it is the largest issue for emirates, which is the world's largest carrier for international traffic. japan's prime minister shinzo an outspoken lawmaker to his cabinet. his appointment comes after sign that investors are looking -- losing confidence in of

an homage. meg whitman has endorsed hillary clinton for president. she once ran as republican governor of california. she wants to reject trump, saying he has an uninformed position on critical issues. whitman says clinton's temperament and experience make for the far better choice. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom? taylor, thanks so much for your you get lucky, we have sallie krawcheck with us. maybe we would even talk to her about security analysis, dupont ratios, and other exciting things. evan roberts has given us the entertainment this morning. he is a frequent "surveillance" guest. ". roberts in an uproar with business insider," days ago, with women in management. roberts has resigned.

i love his statement. this is classic kevin roberts, sell fast, fix fast, learn fast is what mr. roberts says. he says "i failed exceptionally fast, my miscommunication on a number of points as cause upset and offense, and for this, i am sorry." he is now the absolute textbook example of the fear people have about talking about gender in corporations to you have been courageous in driving this debate forward. when do we get to a measured debate where people can misspeak like we all do over the dining room table and not be pilloried for it? sallie: oh, tom. [laughter] tom: when do we get to a point where we can have a rational discussion? sallie: whether the discussion is rational or not, i'm really glad it is happening because what is clear as is we do not have gender diversity in

corporate america or the corporate world right now. we stopped making progress. tom: i agree. michael: you know, in the banking -- sallie: you know in the banking industry and on wall street, it went backwards. tom: brian williams had a tough couple of years at bank of america. mr. moynahan has 14 people around him saying, "shut up," right? because he will get in trouble. that is how he has to feel this morning. sallie: bakck up. there is discussion and then there is action. gender diversity has been shown in study after study to leavd to higher performance. we can debate whether it is causation, correlation, coincidence, but the research is overwhelming. so companies who do not take diversity of all kinds seriously are leaving performance on the table, besides being, frankly, unfair. francine: all right, sallie, let's back up.

kevin roberts, he says he does not see a gender issue in the advertising world. is he just saying out loud what a lot of people, and a lot of men are saying under there for us -- under their breath? sallie: it could be. i am not in the conversation with the men. i have probably interrupted more men in business talking been anybody, and i have never walked into a group of men who says, oh sallie, it is so interesting to see you, we were just talking about gender diversity and driving performance for business. it does not happen. and we have not reached parity yet even closely. so the idea that this is over and we should top talking about it, it is women making too much of a big deal -- it is just not right. francine: right. and if you look at the figures, the world economic forum, for example, is estimating that it years, almost a century from now, at the current

rate, for women to reach parity at leadership across the world. what we need to do to move that forward? almost a century. sallie: well, i think some of it is a ceo has to decide to do it. we can put in another diversity committee, we can have another's each made by 70, but until the boards and ceo -- we can have another speech made by somebody, but until the boards and ceo's make the decision, the one, that would make for your viewers who think, "i am a dude, it does not matter for me," is that this matters for everybody. closing gender gaps actually puts more money into the economy. tom: michael purves, you are more wired on this than anyone i know. i'm not kidding, sallie has been doing this for your. this is a totally unfair question, which i agree, how many roosts are out there? teame: i spoke to my

recently. we were talking about the downturn, and you will have talked about this for. how aaron callan was treated at the downturn. and i said to the team, some who -- she wasreet treated so badly. i said do me a favor, name one male cfo of wall street business, you can, i can, but this team could not. what you have is so few women that women can be -- when things go badly -- women can be held to that higher standard. tom: michael, jump in here. michael: let's say clinton wins in the fall, you have the united states in run by a woman, you have germany being run by a woman, you have the imf being run by a woman, and you have our a woman --un by arguably some of the most important women in the world -- certainly as it relates to markets -- being run by women. does that reinforce -- does that help a tipping point on the diversity issue? sallie: look, i think seeing a

woman in those offices for anyone, women or men, fathers of young girls, that is fantastic or you cannot be what you cannot see. to the extent that some of my clinton would come in and mandates parental leave -- --earch has beginning research has been beginning to show that it pays because women are more likely to come back after having babies. edit she does, she contributes to her 401(k), she contributes social security. so it trickles down while for the economy. it is not just a woman's issue. a glideove your idea of path out 80 years. that is the heart of the matter. francine: the children of our children of the children may get there. it goes back to michael's point here we also have a prime minister who is a woman here in the u k is it more important to have politician women or footsie or

fortune 500? -- ftse or fortune 500? matters.t all just because it makes progress is not mean we necessarily keep progress. i worked on extremely diverse teams when i was on wall street, and it has gone backwards. --: because of the crisis why have they gone backwards? sallie: because of the crisis. diverse individuals get kicked out. tom: you are so young, there was a time when you came out, and if you were financially inclined, he wanted to the training program, and everyone wore the same suit and tie and all of that. do we need that again so that women can advance through those programs and get that experience? sallie: it is not a pipeline issue appeared i have the "new york times" comment couple of years ago and said, sallie, good news, 1/3 of the banking class

is women -- tom: and then what happens? sallie: they pop out in their 30's and 40's. the last time i was on here, one of the gentlemen, i felt so bad for him because i went at him, and he said you know, we just find it so hard to keep women. and i said, "have you thought about promoting them?" so women are more likely to leave their jobs -- millennial women -- for pay increases than millennial men are. so this pay gap matters. tom: i agree with this. sallie: and we are starting to see much more pay transparency, firms like hire.com. everybody has their salaries out there when they're getting jobs. that can help close the gap. francine: we always look at from what country gets it right. is there an industry that gets it better? michael: health care. sallie: health care. francine: wife?

-- why? sallie: i do not know the reason for it. i know that across industries -- there is not one i can immediately look to and say those folks have it, but where i am more helpful is that in starting businesses. the cost of starting businesses has come down so much that while venture capital does not fund women to the same extent that men do, the cost has come down and that women are starting to leave and create businesses at two times the rate of men. tom: the idea of you and ruth porat and others is that you come from mathematical that grounds the icac change there. i see younger women, i met a mechanical engineer from rochester institute of technology, and that did not happen when i was there -- because i was not doing engineering. but i have seen a lot of women ., which helps

with francine's 80-year glide path. sallie: and that is when the pay gap closes, when women go into s.t.e.m. because the need for talent is so much. tom: thrilled to have you here. kevin roberts' resignation. we will continue with sallie krawcheck and michael project. how about a data check? oil under $40 a barrel, and yen at a $101 level. this is bloomberg. ♪

francine: it is "bloomberg surveillance." i am francine lacqua in london during tom keene is in new york or let's get straight to the bloomberg business flash with taylor riggs. taylor: a $2.5 billion share

buyback to try to reverse stocks. the british bank is backing away from annual dividend increases. hsbc removed its 10% on equity by the end of next year. another company profits. rio tinto has been hurt by depressed prices for iron ore, aluminum, and copper. samsung is in talks to purchase some or all of fiat chrysler's auto parts unit. samsung is interested in the in-car entertainment part of the unit. thanl could be worth more $3 billion. that is your bloomberg business flash. francine? francine: thank you so much, taylor. let's go straight to bloomberg news. we have been following fiat for years. talk to me about the rationale of the deal.

samsung buying an auto parts maker. why do you care? it is very interesting. for fiat, the rationality is capitalize -- we can on selling the car parts business, and there is another means passing from $5 billion debt to at least $4 billion in cash. for samsung, it is a way to enter into the car business, you know, tech companies and the auto industry are getting closer, so it would be a very interesting deal. francine: this is kind of what i was try to get to, tommaso, is this the first test and saying in 10 years, we will not be talking about carmakers, but the real carmakers are going to be the tech companies? tommaso: this is unclear. sergio was on a conference call

the other day and says it is clearly uncertain, the future. we are at the moment when the car industry is changing, tech companies are getting into the business for the development of autonomous driving, electric cars. it is very unclear what will be the endgame. fiat position is that it is better to partner with tech companies than imitate them. francine: we know google is pushing into auto companies. ebhardt, from our bloomberg team in milan. 1.5% after we have the bloomberg scoop of them selling off their assets. overall, banks on the rise. u.s. stocks unchanged. ♪

tom: "bloomberg surveillance." you just heard michael purves analysis has switched over to foreign exchange could lead to our forex report. what a day yesterday, yen $101.20. euro swissie i put up there. that has been interesting.

strong swiss over the last few days. not really a breakthrough, but of importance. dollar mexico, has been weaker, weaker mexican peso, out near $19 right now. francine: coming up shortly, it is "bloomberg " with alix steel and jonathan ferro. jon, i'm looking forward to your rio tinto interview because the profit is bad, and this guy has been charge -- in charge for not so long. is the worst earnings since 2004, and it is a questionable strategy. i will be questioning their strategy with the man at the top coming up at 8:20 a.m. eastern, so 12:24 us. then of course, francine, we continue the countdown with the bank of england rate decision. rates unchanged. all this time since march 2009, we get change. tom: very good. sell sallie krawcheck with us.

we need to get an update on the digital experience known as ellevest. sallie: it is a digital investment platform for women. why do we need one, you might say, there are plenty of those. the reason we need it is because of the gender investment gap in this country. we have talked about the gender pay cap before. women do not invest at the same extent that men do, it can cost women more. women live longer, salaries peak sooner, more risk aware, things that wall street is not addressed. we were laughing earlier, we both heard merrill, even the brand of the industry is a bull.this is not an industry that women say talks to me. [laughter] tom: michael purves here. sallie'susly, to

points, it is a single-digit world. in your world, it is a single-digit world with a vengeance. michael: yes, and a lower single-digit world, unfortunately. 2% treasury euro. tom: men or women, what do we do besides suck more money aside? lowerl: you adjust to the real wage environment. i mean, there are a lot of benefits out of that as well, right? it is quite a distinction from the 1970's concerns. and hopefully at some point, we will get out of this 222 constructs, but it will take some time. tom: how do you look at the strategy -- how do you look at a 25 multiple blue-chip multinational? michael: i think you have to look at it in the context of rates. how did the s&p make new highs just a few days after we cleared

, after the brexit? mediocrery sort of earnings and nominal gdp story in the backdrop not just here but globally. it is really a function of what is the earnings deal doing with ,espect to the treasury yield and that is 1.5% number t here. as we were sort of getting at earlier in the show, tom, people are really buying equities almost more and more. i call it a convertible bond where you have a dividend with a call option of the future. treasuries are being more and more bid for their price and less for their interest payments. tom: sallie krawcheck is the only one of the room who knows the underlying mathematics of convertible bond dynamics. francine: the "surveillance" theme. when you look at equities and finance in general, the problem is the more central banks do,

the more negative rates are there, the more people look at price risks. sallie: yes. [laughter] sallie: yes, indeed. about environment and for the foreseeable future, we are in an environment that is not a high return environment, the individual investors have to adjust their outlook e-reader it is slow because it is easy to say, "i want a 9% return like we used to have," and we see it in the rearview mirror. the answer for particular investors is to invest steadily, do not sweat the ups and downs of the market, but invest over time and what we are seeing at ellevest, which is amazing, is that we are so early days, that 75% of our women are investing on an ongoing basis. so they are taking a bit out of every paycheck or every month and putting some aside. that is the right way to do it because we think it is a low return environment, but i remember back in the 1990's and 2000's when i was an analyst,

sometimes what you think is a low-return environment can be a high-return environment out of the blue. michael: yes. francine: i want to go back to my chart, if you look at the 40,e, anything below michael, again, how do you deal with that? it seems pretty obvious and fair that you would look at equities. michael: yeah, i think you have to do and i think the pain trade for so many investors benched at the s&p 500 is reading nominal their earnings treasury, which is mediocre -- there is no question about that. if we can get 5% earnings growth this year, that will be an accomplishment. trade is a pe investment. when you see that swiss curve that you just flashed there, it is assumed it will not radically cheering change. tom: how long can bank of america keep merrill lynch? is it a jettison, a jewel that

creates cash flow? well, it is all anybody wants to know for years and years. now is the time. they finally got to the point where all of these managers are creating some serious -- sallie: here is what i do not know. what i do not know is how deeply it has been integrated, how important merrill now is to the earnings. when i was there, they were pushing for the cross sell. as that works, and is it integrated or not? i just do not know. tom: fair answer. sallie krawcheck, thank you so much, particularly on kevin roberts and michael purves. sallie krawcheck will continue with us on bloomberg radio. it is an interesting market day. stay with bloomberg worldwide. this is bloomberg. ♪

[captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. isit ncicap.org] om: banks bounce back.

would the results keep on selling? the b.o.e. will act tomorrow. francine: and oil looks to rebound in a bear market as the global supply glut weighs on prices. tom: welcome to "bloomberg surveillance." jonathan: the call that gave me a little bit more color. david: i want to point out hsbc because the finance director, c.f.o., it will cost them $100. alix: that raises the question that's