francine: think of england cap tone. two hours away from the bank of england rate decision. cut interest rates for the first time in seven years? volatility spikes ahead of the decision. and theest since brexit pound is weaker. and oils come back after dipping into a bear market earlier this week. surveillancemberg ."

we are getting a headline from it is a of japan and significant number because it is double yesterday's amount. we are seeing -- bank of england and bank of japan. are we seeing the limit of what they can do? tom: i am kind of amazed. francine, it is the most interesting day and then we go into the jobs report tomorrow. everybody will recalibrate. theve one item that shows central bank dysfunction that you talk about. francine: if we compare, which i know we will do. mark carney on the speech june 30 was very careful. let's get to the bloomberg first word news. taylor: sticking with central banks, economists predict the bank of england over deuce the benchmark rate to a record low.

mark carney surprised investors by keeping rates unchanged and they signaled they would cut this month. the central bank will publish the first full assessment of what the brexit vote means for the economy. in london, one person was killed and others injured in a knife attack. police are looking into whether terrorism was involved. there are indications that mental health was a factor. more details coming out about an emirates to crash landing in dubai. butplane burst into flames all 300 people on board were able to escape. senior justice department officials raise objections to before hundred million dollar payment the u.s. made to iran. flyingre concerned that over at the same time the u.s.

released four american soldiers would send the wrong message. it was not a ransom, it was too sinced a fails arm deal 1979. top clinton advisers are reaching out to republicans who are maybe ready to defect because of donald trump repeated missteps. some republicans who have made the switch say they had been contacted on how to make it effective. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. equities, look at bonds, currencies. francine is running the show today because the bank of .ngland oil was up a little bit over the last 24 hours. on to the next screen, please. euro-yen is maybe an interesting item?

stronger, stronger, stronger against the euro. that is something we don't normally watch. simply hasn'tield moved. that signals that the fed will wait. chimera saw 30 year closer to zero. i don't want to misquote them. my picture for european stocks, climbing a touch but nothing great. the ftse is expected. even if mark carney does cut today, it will not spur anything. market --lity of the how about the bloomberg? the american economy can take out the consumer? dwightes back to

eisenhower. and down we go. that is the consumer. the four presidential moving average. and what is absolutely killer about this chart is that little support toowing the the american economy through the recent crisis investment. it hasn't been there. inventory hasn't been there, government hasn't been there, it is all about the consumer importing the economy. data point is the lows circle, down below. ap deal as the fed considers the jobs today. francine: it is one of the themes today. if you think about the weeks that we are having, it is earnings week but central banks are the biggest unknown. and they could put the market one way or the other. sterling volatility.

this shows you that we are seeing quite a lot of increase in all a trilogy. people don't know really what they will do. weeks ago and this is now. today but it is also about his guidance. tom: and the shift in volatility , and chris verrone show, butter on the that chose the currency markets. manusne: let's bring in cranny is outside the bank of england. is there even a chance that we get negative rates today? i think it is very unlikely that you see negative rates. you may see a cut of 25 basis

points which is priced into the market. the split.down to if it is a 9-0 vote today, more could be on the way. what with the vote be on quantitative easing? the market says it is a shoo-in for a rate hike -- a rate cut but what more can they do? it qe?e: is will they do it this time or do they wait to see more data? manus: this is where it will be interesting. what is a menu in terms of the governor and his cohorts can do. the inflatione target and do corporate bond buying. there is plenty to think about. the contrary ends out there say that the dollar-sterling is lower this morning but if you cut it is priced

into the market. we haven'tels that seen since 1992 and this market is short and we best not disappoint. in the united states of america, one person will dissent, two is a huge deal. you guys are way more fractious. how fractious will be bank of england be today? manus: i think it has to be a 9-0, if there is a rate cut. i don't think, in the u.k., they want to go to negative rates. there is a sense of warning -- look what happened in japan. fractious, they are. but will they be united? tom: we will see in the next

hour. nil. like a zero.is i didn't even know it was lost in translation. cranny, thank you. in simon wells and simon kennedy. if you look at the nil-bound, is there a chance that mark carney would have to go into negative territory? it is very unlikely in the current circumstances that we go negative. the question is, today, will they go more than negative 25 points. but lessons from

the ecb tell us that you stay at the minimum bound and then six months later you find out it didn't do what it wanted to do and you go lower. can make a more than 25 basis points today? a will that put them in position where they have no ammunition? simon wells: i think they could go lower. it is possible. i think it is a very strong, central case but they were going they will go lower. tom: with your coverage over the keeps, you know the phrase " your powder dry." can't act in front of the data. don't they have to keep their option lt available? simon kennedy: they kept their

powder dry last month. the central bank will never say they are out of ammunition. but they will try to be innovative where they can. is not favorable of negative rates. they will look for other pieces maybe moreon, quantitative easing. maybe a push into corporate bonds could be something they are willing to consider. but we will have to see how aggressive they want to be. and they still do not have the hard data. not enough to turn into a more dovish position. totally agree. the distinction between the hard data.

let's look at the chart on sterling. is sterling. consensus is the yellow circle. this harkens back to the 1980's. if mark carney needs help from the merely minty chancellor and prime minister, is he going to get it, verbally, today -- after the meeting? simon kennedy probably not. although the bank of england has been talked about being the front line it has raised some eyebrows. what he said is that fiscal policy will be reset but he will wait for the hard data towards the end of the year. it will all climb just how much fiscal policy will be eased up. theresa may has said the aim of to deliver ae is

budget surplus by 2020. so there will be some room. but there are reasons not to describe a fiscal bazooka. they will focus on things like infrastructure and corporate taxes, trying to spur business investment. philip hammond will be trying to come up with a plan. simon kennedy and simon wells -- we will be back with both of our guests. talking about the u.s. jobs data tomorrow. coverage ofg you the bank of england does release data. mark carney'syou news conference minutes after that. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom, let's get straight to the bloomberg business flash. has cut theta fiscal profit forecast. income sales in the latest a strong yen has cut vehicle sales overseas. europe's largest engineering company has raised its profit forecast for the year. they posted higher than expected earnings in the latest quarter and the german company says there is a large order for powergenerating equipment. of the world's largest maker sporting goods will give up on gulf. clubs andgive up by equipment.

they fell 8% in the latest fiscal year. francine? back to: let's bring it central banks. less than two hours away from the bank of england decision. where does that leave other central bankers? are back with simon wells and simon kennedy. thank you both. simon wells, when you look at the news conference, what kind of language are you expecting from him and how much can you learn from that? will getls: what you is, whether or not they underwhelmed with the action today, is a load of promises and teasing the market with what they might do in the future. some form of helicopter money if the government he sides a big fiscal stimulus is required, the bank of england may be there to support them and supply the funds or by the debt. that would be a big step. likes athat mark carney

big move. not afraid to be a leader here. bazookawill be the still being in reserves. in terms of today, the big question on qe may underwhelmed. lap.hsbc needs a victory brilliant on gold and way out in front of major houses on lower interest rates. majorarney now faces a reality. what is the persistency of lower rates now? simon wells: steve major thinks that tilt yields and treasuries could rise in the short term but coming back, we are in the perm alone environment. that gives a big dilemma for today. does not have a problem of high yields or lack of credit supply. the u.k. economy has a problem

of uncertainty. a problem, the demand for assets will stay high. guilt will stay low. tom: we have the banner out there right now on wales. i get the idea that the city is riveted to the bank of england but is wales riveted? what is the larger english beer? simon kennedy: british view. i'm going to wales next week and i can research and maybe bloomberg can extend my books holiday? it is important for the rest of the country and there are some parts of the economy that needed more than london. we look at guilt yields and the currency and the bank of england is clear that they support the entire country.

there are certain parts more than london that need a reflation. is the of the criticisms demand for money. easing today, the demand is there. patches of the united kingdom, those who voted for brexit, you might think there isn't the demand. tom: it is fascinating what the reach is and what the bank of england will do for great britain. the united kingdom. timeout. we will continue this discussion coming up. a conversation with brian moynahan of his bank of america. look for that at the 7:00 hour. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom, this is what we picked out for the morning must read. is an advisor to jeremy corbyn and has been on the program many times and she writes concerns at approaches to industrial strategy can lead to incumbent companies and sectors winning unwanted favors from governments through persistent lobbying. the bottom line is that the argument should be the best way to help drive growth. let's get to our guests here in

london. simon wells and simon kennedy. simon kennedy, how much of the debate in the u.k. has switched todemanding -- switched abandoning austerity? simon kennedy: i think the debate has changed but whether that is followed by realities is a different thing. neededonomies argue we but now it is delayed. perhaps, austerity is on the shelf for a while but that is the debate. philip hammond has that job. do we know, do we understand fully what the main difference between philip hammond and george osborne will be? simon wells: it is a very different economic environment. when your economy is crippled by there is a much stronger public policy role and

potential for the public-sector investment to pick up the flak. so we have already had theresa may and philip hammond saying balancing the books by 2020 is no longer a priority. it will be a priority over a longer amount of time. when we think of the u.k., we think of the 1970's and the made theew where they worst cars on the face of the earth. and that is why we clam up when we hear industrial strategy. francine: saying it as it is. simon wells and simon kennedy. this is a picture of your asset class. 1.5 hour away from the bank of england decision. this is bloomberg. ♪ [hip hop beat]

♪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. francine in london. london is the focus. the bank of england as we go to

the job stage. international relations. right now, here is taylor. it is not enough for the bank of england to cut interest rates. in less than two hours the boe are expected to cut the benchmark rate to a record low. -- british government british prime minister will try to reassure small and medium-sized companies in the wake of the brexit votes. she will meet with companies today. on the agenda, views on the brexit negotiations and how the government can help them drum up business in a new market. abe'san, a new member of cabinet is pushing to improve the economy. they are bringing in the idea of a wage target. that nation enrages has held back efforts.

entered belize earlier today, bringing heavy rain with winds of 80 miles per hour. in mexico, and has already been flooding. some people living in low-lying areas of guatemala have been evacuated. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you. it is the most highly anticipated bank of england decision this decade. decade.anything post brexit is highly anticipated . they are expected to cut rates in 90 minutes. talked through what brian is. -- is thinking. last month, it was highly anticipated. boe tried tove the

help us figure it out. brian: absolutely. this is an important meeting, but i think we can expect anything they at this one. the radical rules like talking about going to negative interest rates or sharply ripping up the ifprograms, i don't know these are appropriate at this stage. sterling has already weakened a lot. the bank of england cannot ignore the impact of that. morenk it will be much neutral than that. there will be more interest in what the bank of england things is happening to the economy -- thinks is happening to the economy. francine: we have some terrible figures. when he take into effect the shop of brexit -- shock of brexit.

brian: the measures we have had so far, they were pretty bad. had numbers out of factories. we will have a clear opinion there. the level of uncertainty is so elevated about what is the uk's going to be? i want to congratulate you on the clarity of your note from fitch. this elephant in the room is inflation in 2017. you have a nominal gdp, and animal spirit for the united kingdom that tells me it cannot cut rates. real gdp plus big inflation next year, does that limit mark carney's option hourly? optionality?

brian: i think it does. with think it will push up prices in the u.k. we have inflation slightly above 3%. i don't think they can be too gung ho about wishing rates negative. it is a difficult situation they find themselves here post runs brexit. growth potential will be impacted by low immigration. there ina supply shop the currency as well. more inflation, the trade-off is going to be worth. that makes it more complicated for central banks to engage. tom: what we just heard was a and hishat mark carney experts have. it is not just a raise it bad -- just saying brexit, bad, lower

interest rates. francine: right. when you look at central banks, i don't think anything is easy. it is the nuances of who gets hit how. this would be my big question to brian. in pound, but p who does it hurt? do you see an increase in services demand or not really? it is not like you are selling engines. brian: sure. when we talk about how does the sterling benefit, we talk about the things like number of foreign students. those are not things that change very quickly. francine: exactly. think there is necessarily a huge vote for that. that is one of the things that happened after the financial crisis. we thought we were going to have

a big boost from the trade. it did not come through. we don't so much exchange rate. francine: when tom is talking about nuances, you need to see what happens to inflation. the good that the u.k. will be importing can shoot up inflation at a time where we see recession in the environment. brian: you have to remember this is a global issue. that trend through globalization, mortgage rate has been negative for prices -- more trade has been negative for prices. and have less disinflation, that is something we will have to take into account definitely. tom: let's revisit the chart from the last week. bring it up, if you would. the purple line is goods and services. it is remarkably level as

chairman greenspan would say, that the white line the money flooding into the united kingdom. the red circle is that break where we see a horrific current-account deficit. what is the dynamic here? is this chart going to force mark carney 's hand? spending have been more than our income, and that .as been financed what we have to bear in mind is if the inflows were to dry up divorced toould close the more rapidly. you need a bigger decline in u.s. domestic demand as the foreign funding dries up.

depreciation in sterling itself has helped on that front. it has made assets cheaper. we hear of lots of european investors getting interested in the u.k. assets because sterling is weaker. whenis one way it helps, if we get into an ongoing weakening of sterling, that can be counterproductive. they need to think about that and what they do today. tom: i really appreciate the idea of how big inflation is going to be for the united kingdom. what this comes down to is a basic idea. can a bank get out in front of the debate? we call that in america the expost anti-debate. richard timberlake and others have looked at this. where is mark carney today? is he going to really trying to be -- as the city want them to be? brian: i think he will be more

exposed to be honest. arguments to the u.k. economy is going to weaken, but the level of certainty we have about that is very low. i just don't think you can really expect the bank of england to offset the slowdown. the nature of the shop we are worried about here is that companies are not going to be making the big-ticket spending items. the large part to reverse spending items. they are not going to be doing that. kennedy at 25 basis points is not going to make a big difference. it 25 basis points is not going to make a big difference. this investment and uncertainty shot they want to see a transform into something that leads to a rise in interest rates. that is where it can help. francine: thank you so much for now.

coming up later today, the boe set to release its rate decision at 7:00 a.m. in new york, 12:00 p.m. in london as well as mark carney's news conference have an hour later. found trading waiting for the rate cut. they are waiting for some kind of knee-jerk reaction. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom king is in new york. let's talk about oil. time for morning movers. trading at $41 a barrel

after u.s. gasoline supplies fell in april. is retreating to the highest is the level. we have seen quite a lot of volatility. brent crude making a little bit of a comeback. we are joined by james harrison, who covers oil for us. both.you thank you for joining us. but theeady today, white line is the world index. this is stocks overall. i am interested in what has been happening in the last these are quite strong to dollar moves. -- two dollar moves. why so much volatility? james: i think of like trying to find the right supply and demand level. what is driving's sentiment --

driving sentiment into the market, you have a high level of of gasoline when consumption should be high, particularly in the u.s., and i surprised people -- and that surprised people. really, that is what has been driving the volatility. the price drops into a bear market this week. francine: have they found a floor? james: possibly. the options indicate it is to bring out to buy protections for further drops than increases which suggests perhaps the floor has been found. that have been suggesting the market is set for a correction now. tom: we talked of america steven of-- talked to america yesterday, and he made a strong case for the decline of oil. and seen any literature out

there this is the microeconomics of oil has it raked down, or is it truly a consensus believe we will stay at this level? james: i think that the consensus is we are not going to revisit the lows in the 20's and the lows we saw last year. fundamentally, the big surplus of production is disappearing. the question now is how quickly do these surplus stockpiles dissipate, and that is what is driving it right now. probably not down to the 20's. that is not expected by a wide range of people. tom: have you ever seen it like this? you have been following this for years. have you seen the absolute mystery of the guessing of supply and demand that we have right now? james: no. that has been the realities of the oil market. there is a lot of data out there, but it is prone to revision. it is very hard to assess.

tom: i agree. james: even harder to assess actual demands. it is not common to look at the data and the demand from two years ago seeing revisions. it is a bit of a mystery. francine: overall, what does it tell us about world wrote. i-- world growth. it was correlated to the stock market earlier. it has stabilized around the mid 40's and will probably gradually had out over the medium-term to the mid-60's. i think the fact that it seems to have found something of a floor is positive for emerging markets. what we were seeing in the world economy is the commodity producers were slashing their spending. the reaction to that was to slash spending.

there has been a drag on global demand growth the last years. no surprise, recessions in russia and brazil seem to be getting a little less intense. the stabilization is the marginal positive for world growth. tom: you have an optimistic tone. what does the imf get wrong? why are they gloomier than you? >> when we were looking at the old markets last year, we were seeing the collapse u.s. oil rigs count and smith 2014. since mid 2014. what we have seen this year is a much cleaner correlation. the latest figure shows a slight increase in production, but overall, the presen pattern has been in u.s. oil production.

the u.s. increase in shell production was a swing factor in massive global supply. that has come down sharply now. i think it is a stabilizing actor in the market. it took longer than expected. we should have been anticipating a two-year lag there. it is happening. that is stabilizing this year. francine: i am quite surprised. we were focused on the oil rigs, and it was a point where goldman sachs says we will take a lot more for the supply and demand equation to come to balance and we saw that the first half of this year. we see its offkilter again because of price disruptions. is that fair? james: yes. there are a lot of moving parts to this, but brian is right. fundamentally, we have seen a major downward shift in production. point does it stabilized, and how much can the

u.s. producers cut costs? counte seen the rig rising again but no evidence of a sustained increase. tom: fascinating. it will be amazing to see where we are into september and the end of the year. i am sure we will see you again. i have a fabulous chart of the animal spirits of the united kingdom and the immense challenge that mark carney has as he goes to this morning's important decision. your decision is to watch bloomberg television and radio later worldwide. brian of then with bank of america. brian moynihan on governance in new york city. this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance." francine in london. i want to throw up hr quickly. i will call it the most important chart. worst, let's go -- first, let's go to bloomberg business flash. taylor: i will take it from

here. the german athletic shoemaker says sales in the u.s. and canada rose 26% in the second quarter. adidas has been grabbing shares from nike in nike's home market. china was the company's fastest-growing region. second quarter gold production fell because of problems at two african mines. >> everyone's focused on the u.k. particularly in the u.k., but there is a bigger challenge for this part of the world, and how do you fix it so that we can unlock business and start growing and delivering value for business, and that will take some time. taylor: randall is one of the

best-performing gold mines in the past decade. that is your bloomberg business flash. tom: i had a chart in front of taylor rigs. bring out this chart. i want to get to francine in london. this is the chart of the morning. brian with us. yellow circle is where you think nominal gdp or the animal spirit of the united kingdom will be. that really limits mark carney's ability to cut interest rates, doesn't it? lower they can move near-term. the impact of brexit on demand will outweigh the impact of brexit on potential supply in the short-term, but i think in the medium-term i would say this. the inflation trade up will be worse post brexit. it will be more volatile than before. we have race going down, but as immigration slows down, as

inward fdi slows down, potentially u.k. productivity, it will not be a one-way trip in terms of trying to boost demand. they have to take into effect the supply will not be a strong either. francine: i give tom king and a plus -- an a plus. this is the problem with our central banks. it is whether they follow the markets to closely. .e saw that guidance brian: i think forward guidance at this point is not particularly sensible because they don't know what the economy is going to do. is probably not going to work that well for them. mark carney cannot avoid the post brexit slowdown in the u.k.. francine: can he avoid a recession? brian: just about partly because you get an export boost from a

weaker sterling but also expenditures. investment is the most important component of demand. investment weakens, imports we ken. -- weaken. in little more will be spent on u.k. goods, so that is probably what gets us out of a recession. domestic demand will go down in 2017 in the u.k. tom: the assessment fabulous. thanks for a terrific brief. coming up, lots going on. christopher will talk to us about the pulse of the market. with more on the bank of england. good morning. ♪

tom: should or even can a central bank get out front of

economic decline? this morning mark carney must choose, will the bank of england acts to support a post brexit britain? the two year yield suggests an ultra accommodative america. gop, mr. trumpe rips up the campaign script. this is bloomberg "surveillance," live from our headquarters in new york. i am tom keene on the bank of england watch, francine lacqua in london. this is a big deal. francine: especially if you are a pound trader. every time post brexit we have mark carney at the boe meeting is a big deal because you try to figure out how they see guidance , inflation, and whether they will go into negative rates. tom: brian coulton was phenomenal and i love how we are

going to folded into the broader market. francine: we certainly well. tom: let's get to the first word news. taylor: economists predict in under one hour the bank of england will reduce the new low. rate to a mark carney survived -- surprised investors by keeping the rate unchanged but they signaled they would cut this month. london, one person was killed and five others wounded in a knife attack near the british museum and police have arrested a suspect. they are looking into whether terrorism was involved and whether mental health was a factor. details coming out about the crash landing of an emirates dubai. plane in it burst into flames but all 300 people on board were able to escape. they say the pilot may have tried to avoid the aboard -- abort the landing to avoid when

shares. hillary clinton is ramping up -- after topinst republicans. some republicans have already made the switch have been contacted on how to make the outreach effective. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: let's get right to the data. we have a killer set of charts from francine and myself this morning. turn, nymex has a bid back above 40. the vix up 12.67. euro-yen showing strong yen as well. ,rancine: the pound retreating it is the most significant thing today. the bank of england decision may

deliver the first rate move in seven years. stocks rising in europe and up a little bit in europe -- in asia. oil clinging to gains after the rally yesterday. inflation, what will it do to the united kingdom economy? , there is thedp precrisis trend in red. brian coulton is looking for 3% plus inflation next year. that wanders out to an animal spirit, that yellow circle. and you wonder how that limits governor carney's options today and through 2016. francine: also, historically the bank of england has looked through inflation. if you were to tell me, what is the one thing that you really want to hear from mark carney, it is really how he views

inflation and how he will deal with inflation. , picked a more vanilla chart pound volatility. it is not a pound chart but it shows the volatility, the overnight volatility in the pound and the price jumps. this is brexit, the day after brexit. this is the last boe meeting, and this is now. if you are a pound trader you are quite jittery and trying to figure out his every word. tom: nice color coordination on your chart. christopher around with us. -- chrisopher baroni perrone with us. set,gilbert joins us on writing up a storm and bloomberg view. it truly is a historic day. give us a sense of the legacy

that mark carney has to deal with if he goes to this decision in an hour. mark: you may need unreliable boyfriend who has been promising and promising to raise interest rates and we had brexit, and now he is promising to cut interest rates. the biggest risk today is that they do nothing again because remember, all nine have to be come to a you could 5-4 leave rates unchanged. if carney is one of the ones that votes against moving, is that the government is planning fiscal action? -- spoke at length about monetary policy and what it can do for the economy. if there is no move today i think that is an example that philip hammond is going to reset fiscal policy. tom: will we see that on the same day, a few days out? what is the timing of that so they keep their independence?

mark: a big delay because we will not get it until the october statement. that is what philip hammond has told us. if you are the bank of england and believe there is a proper package of fiscal policy coming along, if you can corn a policy between the monetary side and fiscal side they be you increase the firepower to resuscitate the economy. tom: let's bring up pound-sterling. you will see it on live bloomberg hd color. an absolute consensus of weaker sterling. deutsche bank down at that red mark. what do you see in the sterling chart and what do you think when you see consensus is one-sided? catherine: i think we have to get ready to short. positioning has never been the short before -- christopher: i think we have to get ready to short. positioning has never been this short before.

no matter the outcome there is rallies.isk that it the other story is that the european banks have been so weak i am not sure there is my from thefrom a cut bank of england at this time. on june 30e has said that he does not want to go into negative territory for interest rates because of the pressure he put on banks. when you look at inflation, how should mark carney see it? in its to balance out higher inflation and he could say that 2017 we will see inflation above the 2% target. mark: you would look through that. a period ofneeds proper growth and that might mean higher prices, high consumer prices which in turn, let's not forget the real bear for the economy's wage growth,

which has been missing in action completely. if you are of the opinion to allow inflation to remain at the book target which in turn would lead to wage growth, that may be a price worth paying. francine: what is the one prescription to look through and where does inflation have to come from? if it is because you are this isg more goods, maybe something they should not look through. mark: there are a lot of reports recently saying the alleged impact on and sports and exports of a weaker currency does not pertain the way it used to in the past. i think the bank of england would look hard at that and say sterling was 1.60 on brexit even and it is now 1.30 so it must have an impact on trade. they may be coming to the conclusion that economists are the effect on

inflation may not be as high as we thought in the past. francine: there is so much stock about -- so much talk about the yields and pound, that the ftse will stay away from this. when you look at how u.k. stocks have performed, they have outperformed germany and the u.s. even. i far as a utility of a cut, think the equity market is suggesting perhaps the outcome is not as bad as was forecasted into the june 23 vote. tom: we have dazzle mark gilbert in london, he is so jaded after his years of central-bank coverage. this is your pound sterling. what is great about this is the massive volatility, all of that red in the even bet of what

sterling will do higher or later . as you go out in time it plummets. there is where you get that sterling weakness out always. i brought you to tears, right, mark? mark: as chris said, if all the aney that is betting on weaker pound but there are several surveys that say if you look out beyond a rate cut, if you look at the last five straight rate cuts we have seen around the world, every single currency involved was higher two months later and this is what we want. tom: this is so much about a certitude, a bet, a belief in the market. chris: wendy trends exhaust themselves? when people get too far on one side. no matter the outcome in 15 minutes, i think we get sterling higher over the next several months. tom: higher? chris: stronger. francine: how. chris: this is about

positioning. if we have learned anything about currency markets, consensus thinking has been punished. we have seen it in yen and euro and i think sterling follows that path. francine: i saw so much research saying that even if we did not get brexit, the pound would fall. mark: but we did have brexit and now we are going to have a move. francine: we will be back in just a couple of minutes. we will look at the fed, some more beer we moves, more of what -- some more boe moves, more of what mark carney's position might be. is this conference morning. ♪

francine: this is bloomberg "surveillance." i am francine lacqua in london, tom keene in new york. taylor: u.s. regulators examining warren buffett berkshire hathaway over one of its biggest holdings, a stake in wells fargo. the issue, whether berkshires investment violates the rules as to how much credit banks can extend to finance these -- financers. cohen's dealseve with the sec -- according to a person familiar with the matter, his new firm stanford harvard is meeting with clients. he was temporarily banned from dealing with others money after

his former firm pleaded guilty to securities fraud. wellser-busch inbev dominate the management team. the 17 person executive board will include just one sab manager. -- ceo will leave the combined company. verrone with us and mark gilbert with us as well. dazzle mark gilbert one more times. we third -- we show this on our fed chart. we are going to wander through 2012. watch the red line drop down. this is the distance that the market is from the elites at the fed. it is stunning now to see where that redline is bottom -- is down at the bottom versus consensus.

what does it signal to you technically when you see a two-year yield that cannot move? chris: i think the biggest story the last couple days has been the move in japan. that was a big reversal in jgb's over the last few days. follow? rates i think they could. tom: this is critical. what if you get follow-through on lower prices, higher yields in japan? what is the ramification of that to tokyo, to the government and the bank of japan? chris: there is simply not enough japanese bonds for the bank of japan to buy anymore and i think you will see investors start to sell german bonds and u.s. bonds. u.s. yields have responded post gdp report last friday. they have retraced that entire move. i think we need to be careful. i cannot convey

enough how the back story is that japanese bond price move. francine: when i look at treasuries, it feels much different. yields have changed and been quite volatile but it feels different in the last 10 days. is that a fair comment? what underpins this change? this feeling that the bank of japan and european central bank are becoming less efficient and they are pushing on a string. in the u.s. futures market you have to go all the way up until june next year until you get more than a 50% chance of a fed rate increased. with thet is at odds rhetoric from the fed and that is being reflected in the treasury market. the snap back in jgb's is reference -- references what we saw in the bond market. francine: going back to this vulnerability and ways to call it two or three weeks ago on the

way we price risk. now it feels more like vulnerability out in the open. what is the one thing you should be buying? chris: the one thing you need to be careful of, positioning in the 10 year note has been as long as it has been since the taper tantrum in 2010 and i think it sets us up for a bounce in yields. at the very least i would be backing away from being too long in the bond market. can banks rally? we have seen jpmorgan divert a little bit from yields over the past few months and that is a stock to keep on your radar. london.k gilbert in bank of england, boring. no. his is a huge meeting. please stay with us across all of our platforms. after the bank of england, a conversation with brian moynihan of bank of america.

from new york and from london, this is bloomberg. ♪

tom: nobody slept last night in washington. they are bringing the scaffolding down on the dome. stay on that photo if you would. that is live and that is the capital after a gorgeous restoration. is going tof there be a restoration of the republican party with the news flow we have seen in the last 48

hours. thomas ansell is one of our most solder -- thoughtful writers for the washington post and writing in the new york times today a must read with some killer charts on the mood and temperament of this nation. the election baby moving and the secretary's direction but her currently it is not guaranteed to stand. both campaigns are highly vulnerable to events -- those that are intentionally orchestrated and those that appear out of nowhere. convey enough the feeling of exogenous shock. rrone and mark gilbert with us. clifton-- what does mr. think? chris: the similarities with brexit are staggering. when you look at the lead in the poll it is similar to the lead

they had ahead of the june 23 vote. i think when the curtain closes in the ballot box people may make decisions that they would not tell a pollster. as a trend follower, what do we care about? a populist election and ultimately the candidate who wins that game wins in november. beenmark gilbert, you have watching this from abroad and writing of the populism in europe. today link across the atlantic? mark: they do, and it is back to this very simple issue. no one has had a pay increase for two decades. if you do not start to get wage growth, populism will grow and grow unless people feel they are better off. the rewards are being split better between capital and labor. unless you see that, the populism movement has got momentum in many countries. there is no signs of it slowing.

francine: when you say that trump may win will resonate against the elite who think this is unthinkable. amongst the elite and the u.k., brexit was unthinkable and you rightly reminded me we are a month and a half into it and much more stable than we thought. that initial move in the pound was predicated in large part on concern about political stability. instead of having that vacuum, ,ew prime minister, new cabinet serious people involved in negotiating how brexit goes through. we have probably one of the most stable administrations in the world and that is just a few weeks after brexit. francine: chris, when you say trump may win are you thinking it is a 50/50 chance? chris: i think it is probably 60/40 when we look at the construction of the polls. , and dan clifton

talks about pennsylvania and florida and ohio. those are going to be the keys but ultimately, this is a trend toward populism and donald trump is the populist candidate. when the curtain closes, people may vote a different way. tom: thank you so much. really looking forward to your next 12ive over the hours over the festivities at the bank of england. halperin, heilemann, with all due respect, maybe that is what we need in our american politics. 5:00 p.m. tonight. ♪

tom: good morning, everyone. in 30 minutes, the bank of england. let's get right to our first word news. taylor: british business leaders

say it is not -- not enough for the bank of england to cut interest rates. they are expected to cut the benchmark rate to a record low. they say the british government should increase tax rates for the government and cut the corporation tax. japan, the newest member of the cabinet is pushing a proposal to boost the economy, floating the idea of a wage target. that would take on one of the key failings in on the nymex. -- theion and wages national institute of health will run out of money to fight the zika virus at the end of the month according to estimates by health and human services. the white house reallocated unspent funds that have been designated to fight ebola. hillary clinton's campaign is ramping up the chase for

prominent republicans, reaching out to republicans who may be ready to defect because of donald trump's missteps. some have been contacted on how to make the outreach defected -- effective. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. will stick with politics and the populism that comes from flat wages. mark gilbert just mentioned that . let's bring up my chart of the year from two to three years ago. nothing has changed. this is the leveling of american median incomes. was therations we had last time that chicago white sox and the up we go rollover is the dissent of the chicago white sox. median household income really speaks to the flatness of it all

. bart chilton on regulation, commodities, and the staggering populism. bart: it is crazy. it is so similar with brexit that it is almost scary because you have to throw the playbook out as everybody says, but it keeps being proven every single day. twisted have a really -- and i say this with great perspective twisted on the midwest linking into washington. how far apart is the beltway from the rest of america? have you ever seen this divide? the: while a lot of politicians talk a good game, with what big divide people feel. i worked at a steel mill in high school after school and those people still have a lot of angst and anger and are going to go with whoever speaks to their bread and butter issues. francine: does the elite in the

u.s. need to learn something? bart: i think they should take a cue from what has been happening. the concern i have is that it is such a torched earth strategy. we saw it with mr. trump and the primary season and are seeing it in the general election, seeing these things that are so inflammatory. things yesterday about how the election would be illegitimate if he did not win. it seems to have an inordinate hit on washington and goes over the line as reckless. tom: whether it is australia or brazil with the olympics, commodities have been unsteady. simple.t is real this is the long-term commodity deflation. , the spine backdrop

if you will, of commodities is prices always drive lower. bart: we have been talking about it for the last two years and there have been bright spots. but if still above $1300 you look at all the commodities in the aggregate, a are all going down. -- they are all going down. tom: away from oil and gold, what do the commodities look like? chris: there are some churns. silver has been good, platinum just broke out. in the second bear markets you could still have a good year or two years. remember is gold, it was in a bear market from 1981 to 2001 and still doubled from 1981 to 1987. allcine: do you think that the extra regulation for oil and other commodities has made a difference? bart: i do not think the

regulation is impacting oil whatsoever. it is a pay and perhaps there is more than we need but i think the oil market is driven by and large by these fundamental, you to the upward mobility up $50 not long ago and back down to whatever it is now. i think it is balancing out over the long-term. forcine: i covered opec years and a lot of the oil ministers eight or six years ago would say oil speculators are adding $10 or $20. they were also suggesting that speculators were largely to blame. with that nonsense? it was 147.272008 the high intraday in june. i do think speculators were having the impact and i'm also talking about the long only, people who do not often come across the speculators, some of

the pension funds, folks i called massive passives. they were setting their money aside and betting oil would go longer in years. they were having an impact but unfortunately that rule has not been done in a thoughtful way yet. tom: it is a twisted view of commodities. help me with police officer see.on when he ran the flt does your world of technical officer help police chilton and others, help people not lose money or does technical analysis have a huge benefit? chris: absolutely, especially when we are talking about hard assets. is secured by a high price and a low price buy a low price. when we look at oil right now, oil went from 26 to 52 over about four months.

that is a 100 percent rally after a 70% decline and we are now down 25%. tom: you are the police officer on the watch at cftc. when someone has 300,000 in ira rollover and it gets wiped out, is this your friend or enemy? .art: it is always our friend regulators still have these meetings 11:00 every friday morning and they are called surveillance. we got the idea from you. we look at the technical analysis during those things and decide what is going on, and we look at the traders, but their positions were. those reports are public although the traders' names are kept classified. , can you with absolute certainty say that position limits and commodities have changed the markets in a positive way? bart: they have spot limit right

now, it is whether or not they can get a sensible limit. the exchanges already have some limits in place and they are doing a good job. position limits are not as scary as they were in 2008 and 2009. hopefully this year, this is my prognosis, the cftc will finally get a position limits rule and it will be sensible. end-users like folks in the oil or mining industry to have a physical use of the commodity. tom: you have a comment? chris: net position data that comes out every friday is the most useful data to judge where the consensus is and is not. it was instrumental to us getting the oil call over the several -- past several years. people were not short all along. tom: he cannot get you cubs take its. -- tickets. chris: they are going to start

giving away the white sox tickets. francine: we will be back with chris marone and bart chilton -- chris verrone and bart chilton. european stocks on the rise, futures rising. mark carney at 7:00 a.m. new york and the news conference half an hour later. ♪

francine: tom keene is in new york, i'm francine lacqua in london. but get to the bloomberg business flash. taylor: a truce between one of the world's largest brick-and-mortar retailers and its online rival. selling the device

is four years ago another chain thinks the amazon products could give its lackluster electronics business a boost. jpmorgan got off lightly into the investigation against rigging of interest rates. -- banking facilities jpmorgan paid $89 million to the european union as part of a settlement related to libor. other banks were fined about $9 million in the investigation. tom: terrific news flow this morning. we did want to speak with chris quiet, barthe chilton with us as well. the bond market, quiet. foreign-exchange market, not so. let's show the three-week agony of the s&p 500. such lethargying

in the market? chris: do not short a doll market. following what i thought was impressive breakout, the last three weeks have been the narrowest range and about 75 years and i think this is a consolidation of a good move. as we come out of the weaker seasonal. -- weaker seasonal period, this is a market that goes up. there has been no evidence of distribution during this pause. tom: i agree with you theoretically on that. what i see is almost uncontrolled go to cash in motion. i get the gloom crew and there are some going, though to cash. chris: we see it everywhere we go. we wrote a. aboutiece called angst all the anxiety among our clients. i think it reflects an environment where economic cycles have taken a backseat to

central-bank cycles and that is difficult for investors to cope with. tom: what is the emotion out there right now? bart: i think people are looking at values. i think they are looking right now, they think they may have missed oil on the uptick and now that it is back down some will get into it. when you say go to cash, a lot think precious metals. i spoke with a guy on the train coming up and he said, even though gold is high i want it and i want to hold it. i think that sentiment is pervasive in the country. tom: i keep thinking it is lethargy. ofte sox, red sox at the end september. bart chilton, thank you so much for being with us. we are going to continue looking at the bank of england decision. looking at the surveillance clock i would put it in 15 minutes. equities, bonds, currencies,

commodities, oil had a bid and is a little soggy right now. this is bloomberg. ♪

tom: good morning, everyone.

bloomberg "surveillance," in new york. francine lacqua in london. foreign exchange, euro-yen is all you need to know, strong yen against a more fragile euro. through 21 12.79. all watching sterling, 1.3331. chrisverrone looking for stronger sterling against consensus. francine: coming up shortly as bloomberg and alix steel joins us now. you have a huge banking guest. alix: we have an unbelievable guest joining us, brian moynihan, ceo of bank of america. we will be breaking down the boe

decision and the broader state of u.s. banks when you compare them to the european counterparts, and what the situation will become when it comes to market share and profitability. later on in the show we will be speaking with mexico's foreign affairs minister, and front and center is going to be trump and clinton, both backing away a little bit, more of a protectionist feel. what does that mean for mexico who depends on u.s. trade? francine: thank you, alix steel. let's bring in manus cranny at the boe. people forget, this would not only be the first great cut in seven years but the first move for the bank of england in seven years. manus: absolutely, and rights have never been this low since 1694. the question comes down to the numbers, will it be eight to one or 90?

what action will they take? sterling has been on a one-way trip since 1971. we have fallen a long way. tom: when i look at this announcement, what is the positioning of the city right now? as short can be. moved to reward is to be a lower bound with a 1.25 bid. no qa, a wait until the autumn statement. that is your risk and that is your reward. francine: manus cranny in front of the bank of england. he will update us in about 10 minutes. policye on the boe's announcement, charles duhamel joins us. you wrote a scathing note on july 18 on mark carney and the

fact that he almost preempted a brexit would be so volatile that you question the more it -- the merit of having a foreign head of investment bank. i think getting the policy right is extremely has becauser bank the monetary conduct has run out of juice. we have seen it particularly in japan and the eurozone. you cannot just do it without politics and fiscal policy. francine: what do you think about politics? the bank of england is there to see if they want to look through inflation or not and try to avoid and and -- a recession. anrles: if you make announcement immediately after the brexit vote that it is going to be bad for the economy and you are the head of the central

bank, that is more likely to provoke a recession. for this is your call morning? is he going to shock people and not make the move? charles: i think they will probably make the move but the main point is it does not really matter in terms of a quarter off the interest rate because that is not going to cause anybody to borrow any money. if he does not make the move, sterling will go up a long way probably and that would be destructive for the economy. tom: what will this mean for the european central bank and mr. draghi? charles: i am not sure i can answer that. what we are seeing here is that we have got a recession coming on a very minor scale in the third and fourth quarters of this year. as a result, there should be perhaps some more quantitative easing by the bank of england and if they do some of that

today, which i would not be at all surprised, -- by that would take the pound down a bit but frankly i do not see that affecting the euro very much. francine: how should mark carney deal with higher inflation possibly above 2% and lower growth? payles: i think he should attention to the growth and not worry about the inflation. we will come out of the numbers once the devaluation effect is 12 months old. tom: charles, when we move on it has got to be a series of decisions. guest earlier this morning looking at higher inflation in the united kingdom. is that your call that whatever happens, we will see really an inordinate level of inflation relative to other nations? charles: i am not sure i would agree with inordinate.

it is just if you have an import ratio in a country of something gdp which we of have over here and you push out your imports in price by 10% then you are liable to get 2% inflation out of it and that is probably what is going to happen. the real question is, does it flow through into wages? my thought would be not that much. tom: thank you so much. news worldwide. he said you would look for sterling to go up. as a general statement, is there such a cacophony now of economics and investments that it is tough to play in the market? is it a moment to stand aside? chris: i think we need to approach this market as pragmatic as possible.

a lot of the relationships we have relied on over the years since i do not work. never seen industrials outperform when the yield has flattened but that is exactly what we are seeing. i think we need to approach this as pragmatically as possible. just because sterling goes up or down, i do not think we need to extrapolate what that means for the economy. francine: are the markets pragmatic or emotional? mark: i would argue they are fairly pragmatic and the cross asset stuff is not working too well for the moment. it is unusual to see gold and the dollar rally but that is exactly what happened over the last several weeks. i do not think we should read too much into that. if you like gold, own it. if you do not like the dollar, sell it. francine: we are seeing the correlation between stocks and bonds. i am not sure how you look at risk when everything is going in the same direction. chris: the correlation among

stocks is the lowest it has been in about 18 months so you are finding some opportunities to differentiate yourself for the first time in a while. i think that is welcome news for active managers and is reflected in the fact that the average stock is doing better than the index this year for the first time since 2013. that is more consistent with the u.s. equity market that wants to go up, not down. tom: chris, thank you so much. francine and i will be on radio worldwide with the bank of england decision, and of course we move on to brian moynihan at bank of america as well. mark carney, front and center right now. this is bloomberg. ♪

jonathan: making the cut, the boe projects its flash rate for the first time in seven years but what else might mark carney have up his sleeve? david: brian moynihan joins us in a bloomberg exclusive. alix: welcome to a special bloomberg . i am alix steel with jonathan ferro and david westin. breaking news from the voa. jonathan: the first rate cut since march 2009. points,down 25 basis 0.25%. they have expanded quantitative easing. that program stood at 375 billion pounds and has been increased to 425 billion pounds. 2.25%,ve cut rates expanded qa and have begun a corporate bond buying program. th