>> nonfarm payrolls day. what will the data say about timing for a fed rate hike? rbs thinks one of the uk's biggest banks posted a bigger loss than estimated. we talked to the cfo. opening ceremonies take place in rio tonight. >> welcome to "the pulse."

i'm francine lacqua. let's quickly check on the markets. centralas to do with banks. after the boe surprise yesterday with qe, the focus turns to u.s. jobs data. this is the picture. european stocks, a touch higher. in terms of the amount of money passing hands, lower than it usually is around early august. the pound, yesterday we saw a huge move in pound. i wanted also to show you the euro-pound at 84.80. it's been quite a tough week for banks. i wanted to show you that index overall. plenty more on corporate stories, but first, let's get to the bloomberg first word news with nejra cehic. nejra: britain's biggest taxpayer-owned lender saw a net loss of 0.8 billion pounds compared with a 280 million pound profit a year earlier.

cfo ewing stevenson explained the details behind the figure. loss, andak out a establish the fact that the core business made another billion pounds of pretax operating is typical with us, while we are in the middle of a restructuring period, we saw some pretty substantive constraints. nejra: the number of people being hired for permanent positions in the uk's slumped to the seventh lowest position -- to the lowest position since july. it provides a fresh indication that the brexit decision will hold back economic growth a day after the bank of england said the outlook we can markedly. german factory orders unexpectedly declined in june.

demand for investment and goods within the euro area slumped in the run-up to britain's referendum on eu membership. a raft of national and battleground polls have found donald trump slipping well behind hillary clinton a week after the end of the democratic convention. and the klatch emeritus national poll showed the republican nominee trailing clinton by 15%. on nbc survey sees trump nine points behind his rival. new york's top banking regulator has asked goldman sachs to supply more information about its work for the malaysian state investment fund. that is amid investigations into whether any money laundering or other misconduct occurred. the head of the department of finaial services asked for meeting with bank officials by the end of the month. goldman said it had been in dialogue with the dfs for some time. news.s the first word i am nara che hatch. this is bloomberg. so much. thank you

the bank of england finally put its foot on the accelerator. governor carney cut interest rates for the first time in seven years yesterday and unveiled a host of measures to support the u.k. economy. in his news conference, he spoke about where he sees the path of you take -- u.k. monetary policy. >> all of the elements in this package have the scope to be increase. the mpc can lower bank rates, increase the size of the tfs, and expand the scale or variety of assets held in the asset purchase facility. clear that wey see the effect of lower bound as a positive number close to zero but a positive number. the bank of england continues to stand ready to take whatever action is needed to achieve its objectives for monetary and financial stability as the u.k. adjusts to new realities and moves forward to seize new opportunities outside the eu. francine: in the weighing of the

banks measures, the pound tumbled, while u.k. stocks rallied with the footsie gaining 1.6% yesterday. today's pretty much flat. let's get a lot more analysis from john writes. thank you for joining us. what was more significant? the surprisell had qe, which took everybody by surprise, but he was also adamant that negative rates just don't work. john: it's not the first time he has said that. he tends to speak for himself when he is saying that, but other members have said similar things. the u.k. has a particular problem with lower negative rates because to my stick borrowing -- domestic borrowing is put against floating rates. make banksn might less keen to lend. would be a very mixed impact were they to go negative, and he

doesn't want to try it? francine: were you surprised by the qe? does it feel to soon? the pm eyes in july were pretty terrible, that goes to the fact that there was a shock after brexit. the bank are happy to acknowledge that they don't have a full picture yet as to how the economy has been impacted by the referendum. we were forecasting that they would resume qe as soon as they have because it seemed likely that they would seemed -- they would like to be preemptive. some surveys had a pretty grim reading. that might be partly because the shock of the outcome. they might be overstating the weakness, but the bank of england have been making clear they didn't want to wait around forever. they thought there was a case for being preemptive. francine: does preemption mean you can avoid the recession.

john: not necessarily, but it means you have more chance of limiting the damage to the economy. i think the governor was clear in saying that while their forecasts have been pared back, they may be on the optimistic side. they've done what they think early, and we will have to see whether they need to do more or whether the government needs to step in on the fiscal side. francine: he has the tools to do more? john: conventional policy is running out of room. francine: that is worldwide. john: it's been the worry the past few years, that central banks have not been able to get rates up for the next downturn. limited.k., we have ammunition to fight it. he's right about unconventional policy. they can buy more assets. they can keep yields push down. in itself, as in the eurozone, monetary policy is not going to be the panacea. we need solutions from the fiscal side. francine: are we right to look through inflation? john: they made the point before

that they would be looking at above target inflation but week growth. you have to prioritize one over the other. as in the financial crisis, they are prioritizing we growth. francine: john race is head of u.k. rates at ubs. we will be talking about the banks. pulse."h "the plenty more coming up, including back to 2008. britain's largest taxpayer-old lenders swings to a loss. we will bring you our interview with the chief financial officer of rbs. as investors bet that the fed will freeze u.s. rates until september of 2017, we will preview jobs data and what it means for the markets. the world's largest sporting event starts tonight amid brazil's deepest recession in a century. this is bloomberg. ♪

francine: rbs, the bank majority-owned by british taxpayers, has reported its largest expected loss in a second quarter. they set over more money to cover its lawsuit over a 2008 share sale. manus cranny sat down with the cfo of rbs to stalk about the numbers. -- to talk about the numbers and brexit. bank.are a very liquid

our loan to deposit ratio is 92%. we've put on more volume growth -- manus: it is going to squeeze your numbers. the netll squeeze interest margin, but will it help us lend more? no. we have already been lending at a decent rate. manus: if the demand problem, not a supply problem. manus: i think every bank is different. for us, it's probably more of a demand problem, certainly not a supply problem. , theome of the other banks lending facility will be helpful. manus: will you pass through the cut? >> we will look across our asset and liability products and do what we think is fair. manus: the governor had a clear message. you have no excuse. you will pass it on. >> i'm not going to sit here and commit we are going to pass it on, but we will be looking at it. manus: the one thing that came

out yesterday, we are heading to a zero interest rate world in the u.k. how are you going to deal with that. how are you modeling to deal with that? how are you preparing to deal with 0%? manus: as you shop a couple weeks ago, -- saw a couple weeks ago, we are putting ourselves in a position that if we needed to, and it would help if we didn't need to, to be able to look at how we get to a fairer balance between liability customers and asset customers. we have 85 billion pounds of non-interest-bearing on demand deposits. in as a tough place to be zero interest rate environment. i think we are heading into an environment that is structurally lower terms of profitability for large u.k. banks and going to make it harder for subsequent banks. manus: let's talk about brexit. can you tell me what is going on

in u.k. plc? is demand dropping off? what is it telling you? manus: we are the biggest bank in the country. for some time a slow down amongst our corporate customer base, stalling .ecisions to invest in people that has continued after the referendum vote. on the retail side, we've seen a drop off in mortgage application volumes since the referendum. there's definitely a slow down. manus: would you call it a recession? >> i wouldn't call it a recession. when you look at the numbers from mark carney, we were pleased. we were broadly in line with our own estimates. 18 was more positive. markine: boe governor carney urged u.k. banks to start lending again, but if they don't, whose fault would it be?

colleague wrote a fictional letter in which he imagined what the banks might say to carney at the end of the year. it's a fun read. he says, the problem is our customers. after brexit, they weren't interested. our lending growth is going nowhere. he's now with us. it is funny, because you say merry christmas. it's a little bit like bloomberg. the banks actually put charts in it. also with us, john wraith from ubs. thank you for sticking around. it's a fun piece, but it goes down into the heart of the problem, which is, this country needs the banks to lend to make sure that there is not a supply chain disruption in money supply. and the governor yesterday said banks have no excuse, but we heard the rbs cfo's excuse. there's a demand issue. this is a bank that is owned by the government saying, we have been lending. the supply is there. we need to admit the u.k. is not

the eurozone. lending growth has been healthy because of subsidies on the government helping lending. i am not sure exactly what problem we are trying to address and whether it's going to work in terms of demand. francine: you finish the piece by saying, maybe you should think of fiscal stimulus. he aiming atis banks, or was it facetious? banks, don't mess this up. is he expecting them to increase lending significantly? >> there's a part of that. this is about confidence. it's about whether you can create the environment where people feel confident enough to start borrowing again. even with all of these measures, the mood after brexit is not going to be confident enough in the short term. francine: this goes back to creating a mood, you have to be optimistic about the future. how can you be optimistic when .2 recession,mi

and in general, you don't know what will be in six months. john: the worries that came out of the referendum result, they continue to be more defensive. in some defense of the monetary policy, they do have a limited ability to influence things, and at least by increasing the supply of credit and lowering the cost of it, making it more available, at the margins, that has to help a little bit. the bank has to be seen to be doing something. this isn't a solution. the bank is doing what it can. francine: i like your words at the margin. and zero point5% 25%. does it make much of a difference to banks and people who ask for credit? >> on the bank side, it does. it does hurt margins. it's only an offset.

it's only a cushion. look at the price of the assets people are being asked to buy. house prices were at a record before brexit. where is the marginal buyer of the u.k. property right now? francine: are u.k. banks worried ab? governor carney was reassuring the public at large that he will not go in negative territory. maybe it's on a personal level. >> that's a good point. remember there was talk of getting near to zero. zero is scary enough already today. banks are worried that this is just the beginning, that if we don't help or fix or change anything, we are going to be hitting zero soon. francine: what is something that banks in the u.k. could do better to help with the economy? is there anything else? before, we were saying the focus has to move to the fiscal side, the government side. that is where things can be changed much more materially. this doesn't just apply to the u.k., whether it be the central

bank, regulations on commercial banks. it seems to me that sector of the economy is doing everything it realistically can to help the situation without getting into riskier territory in terms of lending in ways it shouldn't. therefore, policy decisions need to move to the fiscal side. that is what we are expecting next. the bank of england has called for the government to make decisions on how it will change fiscal policy. francine: which is how he finishes his fictitious letter. ps, have you called treasury? are we going to see consolidation in the u.k.? there are still a lot of banks. i know it's because of past legacies that they need to put money to one side, but if we talked to years ago, we thought we would be a different place for rbs. >> i don't think competition is such an issue. i think rbs is trying to sell one of its brands, and santander

might be the bank to buy it. if that can be called consolidation. we have plenty of new challenger banks. there a lot of competition for mortgages. francine: thank you so much. john wraith, head of u.k. rate strategy at rbs, stays with us. we will be talking about the banks in japan. the boj says it will carry out a false go review of its policies, but is tapering kiwi off the table? this is bloomberg. ♪

francine: this is "the pulse." i am francine lacqua. let's get to the bloomberg business flash. ali on said its second order profit almost halved. europe's biggest insurer sought net income fall to 1.1 billion euro. that missed analyst estimates, and for the same time, operating fell 1.4%. the phage folsom has reported amidd-quarter earnings growth in india and improved pricing. adjusted operating ebit town rose $1.76 billion. the company remains under pressure to deliver on target a year after it was created through the merger of the phage and tops and. samsung is hoping the olympics will help generate content and

interest for its virtual reality headset. it is teaming up with nbc universal and the olympic broadcasting services to distribute the first vr presentation of selected events. they include the opening and closing ceremonies, diving, basketball, gymnastics, and track and field. francine: thank you so much. turning to another central bank, the bank of japan. governor kuroda ordered his staff to order -- to complete a comprehensive review of policies by september. the goal is to see what is needed for the country to reach its growth target. john wraith is still with us. when you look at the boj and you look into what governor kuroda oh said, does it automatically mean he's regretting some of the policies he put in? john: i don't think necessarily regretting them but questioning whether they are having the desired impact. this is something you can apply to all central banks. it is right that they are keeping a close eye on what they

want to do. clearly, a lot of it isn't working. inflation isn't picking up in these economies. it's incumbent on them to keep reviewing the policies and try new things. francine: do you have a problem with negative rates? john: less so in japan than the u.k., for different reasons. i have some sense that negative rates is not a reasonable policy in medium to longer term. comfortable with negative yields in japanese currency. desperate circumstances call for desperate measures in some circumstances. francine: this is the 10-year for japan, the u.k. and purple, and you can see around here is when governor kuroda surprised markets and goes into negative rates. i think it was february 2 or february 3. he keeps on saying or justifying them by saying, longer-term, they will have the desired impact. there a huge difference between the result that the market wants

and how quickly they want it and these policies taking effect. john: when you consider the issue of 2% inflation, to have that as a sustainable rate in the medium-term, you have to have markets believing you are going to be able to do it. credible, has to be and before you put in new policies that don't have the desired result, they swiftly lose their credibility. you can apply this to the u.k., as well. if this new wave of qe doesn't support the economy sufficiently, the bank of england are going to have to consider what else they can do or what they can do more. it's an point for them to keep communicating, but the markets have to believe they are able to control inflation. in japan and not only japan, we are not there. francine: we are not. it's amazing when you think about qe and what they've been doing, inflation hasn't gone anywhere. jon is staying with us.

we'll also talk about jobs and the fed. up next, the correlation between the boj and fed. what would a decline in job growth due to rate hike expectations? we look ahead to the u.s. jobs data next. this is bloomberg. ♪

francine: welcome to "the pulse ." i am francine lacqua. let's get straight to the bloomberg first word news with narrative a hedge. royal bank of scotland has posted a larger loss than estimated in the second quarter. britain's biggest taxpayer owned lender saw net loss of 1.0 8 billion pounds. that compared with a 280 million-pound profit earlier. speaking a bloomberg, the cfo explained the details behind the figure. down the lasteak

report, as is typical with us at the moment, while we are in the middle of an intensive restructuring, we saw some pretty substantial if provisions. nejra: the number of people being hired for permanent positions in the u.k. slumped the most in seven years in july. that is according to report by the market and recruitment and implement federation who described the drop as a dramatic freefall. it provides a fresh indication that the brexit decision will hold back economic growth. german factory orders unexpectedly declined in june. orders adjusted for seasonal swings and inflation fell 0.4% from may. that as as demand slumped.

i raft of new national and battleground polls have found donald trump slipping well behind hillary clinton week after the end of the democratic convention. a poll showed the republican nominee trailing clinton by 15 points among registered voters. an nbc national survey sees trump nine points behind his democratic rival. global news 20 for hours at a powered by more than 2600 journalists and analysts. this is bloomberg. francine: all eyes on the u.s. jobs report. nonfarm payrolls probably increased by 180,000 in july following a surge of 287,000 in june. that is according to median estimates. john, when you look at the coalition between the fed and jobs, are we going to be listening to what janet yellen says as more of a testament to whether she will raise rates in september or the latest u.s.

jobs numbers? john: they're always important, but compared to the way they have been over previous years, they have been reasonably stable of late. other issuesarly the fed is keeping in mind when it decides on rates. i think you need to look at it in the context of other data. francine: i would like to bring you to the wirp function on bloomberg. it seems every two weeks there is probability that the fed doesn't hike this year. is september off the table? john: it's not off the table. we are predicting they will go in december. this is part of a pattern. it seems to be slipping ever further away. this time last year, we were expecting them to raise rates in september with high conviction. they didn't. road, they have managed to get rates up once from almost nothing. that tells you there are ongoing serious concerns about the recovery. every time we get another bit of

negative news or concern, the prospect slips further. francine: 60% domestic concern and 40% external, china? now brexit has happened. it hasn't had that much of an impact. john: not directly, but if you consider that the u.s. federal reserve is the major central bank remotely contemplating raising rates in the foreseeable future, even though the domestic economy is such a big part of the picture, they have to consider differentials. if central banks were moving in the same direction, they would have less concern but external factors. francine: dollar strength has helped of the fed tighten a touch. john: absolutely. they are still confident about the recovery in the u.s., and they still believe -- they want to communicate that they intend to keep rates moving.

for all of these central banks, in the grand scheme of things, rates are too low. they desperately want to get them higher to give themselves ammunition. francine: what does it mean for treasuries? we saw a big move in treasuries over the last 10-12 days. that was on the back of, what? john: it's partly going on with global yields. we saw that selloff in japan. these markets, because of the ability to buy in one market and hedge into domestic currencies. they all tend to move in tandem in terms of directionality. if the fed can stay on course, can raise rates, and in doing so the u.s. recovery doesn't stall, yields a should move higher, but we have seen how difficult that is. francine: i have a chart. this is a rate chart. it's basically the amount of treasuries held by foreign central banks. you can see it is declining.

it's declining almost to a level of 2014. there is a clear decline. does it mean central banks are burning reserves, or are they switching? john: it is partly that, but they are switching into other things. investors will look at the range of assets relative to each other as well as looking at out right yields. you can see there is a andctionality between this out right moves in yields and the spreads between different markets. it is pretty volatile. i don't think this tells you anything to be too concerned about. in september, why would they do anything before the u.s. election? it seems so big, i wouldn't take a chance. john: i think it's a live meeting. there's an argument to raise rates, but we don't think they go in september. francine: because of the election? john: it's one of a range of issues. rightly, they won't intimate that is a big deal because they

want to keep their independence intact. as with other central banks, when they have any sorts of concerns, they are airing on the side of caution. if in doubt, they become much more dovish. they are worried about moving in the run direction and discovering they have gone too early. francine: you don't want the economy to collapse. john wraith, u.k. rates strategy had at ubs. markets, little bit flat. let's head to the bloomberg for your asset check. nejra: of course, markets are still digesting fresh stimulus measures from the bank of england and looking had to the payroll data in the u.s.. we are seeing european stocks little higher. the stoxx 600, up 4/10 of 1%. let's look at the gr are function on the bloomberg and see how various industry groups are performing. you've got commodity producers leading the gains, followed by carmakers.

health care stocks, dan 1%. most industry groups are gaining. healthook deeper into care stocks, i want to bring up nova notice. we are seeing this drop of 8.7%, the biggest in six weeks. this is after the world's largest maker of insulin trimmed its sales and profit forecast for the year. what it is signaling is it intensifying pricing pressure from customers in the u.s. it also said growth in 2016 will be weighed down by the loss of a key contract for its top selling insulin. that is one of the worst performers on the stoxx 600. sterling, we are seeing a bit of resilience after a drop yesterday. what this chart shows you is sterling is very much within a post-brexit range. it did manage to hold 2.4% higher than the 31-year low reached in the aftermath of brexit. analysts are saying, sterling

will fall further before the end of this year, but it will rise next year and in 2018 hit $1.39. that does carry with movement in the derivatives markets. we are looking at one-year risk reversal. r 12-monthm fro options is close to an eight-month low. options traders are becoming less bearish on the longer-term prospects for sterling, and six months of volatility has been coming down. it's dropped to its lowest since february. francine: up next, the world's largest sporting event starting amid brazil's deepest recession in a century. we will look at the olympic task facing the leaders of brazil. this is bloomberg. ♪

francine: this is "the pulse." i'm francine lacqua. allianz says its second-quarter profit almost halved after claims on charges for the expected sale of it south korea unit. europe's largest insurer saw net income fall. told bloomberg how elian's has to compete with central banks. we don't like to have central banks as competitors in our core activities. i believe, as i said before, it

is distorting the distance the worst parts or the credit spread should be the risk management, not distorted by a large market player. nejra: second quarter earnings have been reported a mid-in india and improved pricing. ebit rose toating $1.76 billion. the company remains under pressure to deliver on targets a year after it was created in a merger. toyota shares have risen despite predicting a 37% plunge in earnings because of a stronger yen. that is as the currencies rise has wiped $5 billion off the operating income of japan's automakers in the first quarter. toyota alone has taken a $2.3 billion hit. the company has cut costs and asked the government for help.

francine: it's the world's largest sporting event, and it is opening in brazil. 9%, interestn your rates at more than 14% and gdp deep in negative territory. brazil's leaders will be hoping for an olympic boost. it's get some analysis. great to have you on the program. brazil has gone through a lot, and it's clear that the olympics can't screw it up. put theknow if it will light on brazil as an economy that is getting better, but they can't afford to give a bad image. >> it's kind of funny. if you think of when the olympics were announced for brazil, it was maybe a decade ago, and brazil was at the forefront of being the vanguard of the south american bloc. very good economic growth, per capita living standards

improving. here we are on the cusp of the own picks, very different. you seem years of consecutive recession. the longest recession in brazil since the great depression. stephanie difficult. francine: how do they move on? i was looking at the olympics, and it's amazing that they haven't tackled the corruption probe. de la rue saif is still in this mess where it makes it difficult for investors in the country. > i think there are two ways of looking at it. to be fair to the judiciary and the press, the fact that they uncovered the scandal, they are on the verge of prosecuting it, and although the process is taking some time come it is grinding on. it looks like de la rue saif will be in an impeachment trial. that is getting some progress. has been sent for a trial,

as well. there is some progress. it is happening far too slowly. francine: if you are an investor, what do you look at? the situation has been so bad that at some point that it will go back up, or do you wait it out? currency is, the more fairly valued than it was many years ago. on the fixed income side, bonds are looking ok. you've got very decent yields. the problem is basically with the equity component of any emerging market. normally, equities trade at a discount to developed market equities, for good reasons. is,he moment, the question everyone is looking at the fed, today's numbers are going to be important. francine: it seems the emerging markets are giving a little bit of a lifeline, because the fed

is taking its sweet time. >> that is the bigger issue for brazil. if you look at the rally in the brazilian rail since march of this year, it's a 30% rally, which is enormous. that is mainly because of the change in the fed. we started in 2016 expecting four hikes and a similar number next year, and if you look at market expectations, we have hardly had one, maybe one and a half. francine: we will talk more about the change in the fed, but how much do you look at the political system in brazil and realize that these president cannot actually muster support or enough support of the people to plow through? there's not the charisma. >> when of the problems you have in brazil with the president is they have talked about reforms quite a lot, talking about instituting constitutional changes about spending cuts, but they are not implemented. it's one thing to talk about reform. it's another thing to implement it. that is what is going to be interesting and what investors will be looking at.

francine: if the fed waits too much to hike rates, does it put emerging markets in a difficult position because it rolls over some of the debts? you have zombie companies that are still alive. >> that is definitely an issue. next year is going to be a reasonably big year for refinancing. if we look at where rates are now. i wouldn't be surprised to see companies refinancing debt sooner than later. this is dependent on the fed outlook. and itback to the fed, seems that is all we are doing in emerging markets at the moment -- a lot of the fed speakers, like bullard, which is a bullish, hawkish guy, he's completely changed his tune. he thinks inflation is very muted in the states. that gives them some space. francine: commodities is one thing that developed countries can take advantage of, but this is one thing hurting emerging markets. there are a lot of producers.

are you expecting some kind of stabilization? you think of it in january or february, we got as low as $28 per barrel. we are now around 40 or thereabouts. there's a new trading range between $35 and $50 per barrel. that creates problems for emerging markets, certainly. and might be kind of a cloud with a silver lining. we have indicate that to look for alternative sources of growth. over the medium-term, it might not be the worst thing. francine: thank you so much. up next, the fed is on hold until september 2017. that is what investors suspect. we will work ahead to today's jobs data and what that means for emerging markets. we touched on the defaults. we touched on what james bullard has said, but will they hike before december? this is bloomberg. ♪

francine: this is "the pulse." i am francine lacqua. here are highlights for your day ahead. at 1:30 p.m., it's the week's most watched data release. that is nonfarm payrolls in the u.s.. movies is due to issue a rate update on turkey. admin night u.k. time, the opening ceremony for the summer olympics. economists surveyed by bloomberg expect nonfarm payrolls to have expanded by 180,000 in july,

slightly above the average. function to the wirp on the bloomberg, the slow pace of gdp growth in the u.s. has pushed the next fed rate hike for september of 2017. emerging market assets are headed for their highs close in a year as loose monetary policy boosts demand for higher-yielding assets. let's get more with peter can sell a. thank you for sticking around. we were talking about the impact that the fed has on emerging markets. you were saying, it has a bigger effect than political turmoil in brazil. you are expecting a fed hike in december. are expecting 25 basis points in december, and thereafter, a very muted pace. probably one more in 2017. the reasons for that are simplistic. gdpave seen sub-trend growth in the first quarter and second quarter. you are seeing muted deflationary pressures in the states. core inflation is reasonably

high. headline inflation isn't doing much at all. wage growth, 2.6%. the levels welow saw precrisis in 2006 and 2007. francine: you don't need to pay people more because they don't feel it. >> not just that, but we are not big productivity gains. all of that says to me there aren't an awful lot of needs for significantly higher rates at this point. it's not to say they won't come. at the moment, i don't see why. francine: the argument is you want to give yourself the best possible chance to fight the next possible downturn. if you wait too long, you get taken on the wrong foot. >> that's true. the risk that the fed have is an asymmetric type of risk. if they go too early, they can cause a lot of problems. -- wait, we see core inflation higher than expected. that would be a good problem to have. francine: remember the temper

tantrum for emerging markets when the fed hikes and everyone was ready for it. is there a concern that they may be getting close to the same mistake? the markets aren't pricing in anything. they are not pricing in anything until december or september of 2017. what happens if they do something this year? >> emerging markets at the margins might feela little bit of pain, and that could create some problems, but we are back to the same conundrum of low developed markets pushing investors towards higher returns in emerging markets. if you look at the fund flows, they've gone through the roof in the last month or two. we are back to the same conundrum where low yields are pushing people towards e.m.'s. givens reasonable enough, what is happening in the eurozone, with u.k. cutting rates again. it's an incredibly low yield profile.

investors will look to pick up anything in hard currency. francine: what is your favorite play in the emerging markets? i feel like russia, both in local currency terms. francine: and turkey? put an underweight position. it actually underperformed the rally compared to most pms since march. the real point for an underweight cycle on turkey is when the cycle turns. when people say -- francine: turkey is political. you don't know at the end game for mr. erdogan is. >> i think we do. he wants to be the sultan-like president of turkey. very centralized power structure. that is the end game. there is nothing wrong with that if he has appropriate checks and balances. francine: thank you so much. coming up, "surveillance" is up

next. we kick off the conversation with the head of fixed income at hsbc. this is the picture for the markets. we had quite a big week for banks. this is bloomberg. ♪

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♪ francine: it is jobs day. for july.gures what will they say about the timing for a fed rate hike. one of the u.k.'s biggest banks with a bigger loss than estimated. we talked to the cfo. brazil olympics, the opening ceremony tonight. will the games alleviate or put the spotlight on problems facing south america's biggest economy. im francine lacqua