♪ ♪ 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. francine: i prefer to learn as we go. -- u.k.s ian mccafferty ten-year yields dropped to a record as the bank of england qe -- trump goes old-school. the republican nominee which is tax cuts and -- to return the u.s. economy to precrisis days. the rbis governor holds rates steady before september's departure and where live in mumbai to break down the latest. ♪ francine: welcome to "the pulse." live from the birds european headquarters right here in

london. and francine lacqua. here's a picture from the boards -- i am francine lacqua. his a picture from the boards. there you go, 130. we were touching below 130 just about a half hour ago. crude oil at 42. the european stocks practically unchanged. just a little bit higher. because it is august and we are not seeing much volatility i want to say that u.s. volatility index down. let's get to the bloomberg first word news with near change it nejra: donald trump has laid out his plans for growth in the u.s. borrowing from traditional republican ideas by proposing tax cuts and looser regulations. he told the detroit economic club that he wants to simple five excessive business regulations and lift restrictions on the energy sector. he also says he wants lower corporate taxes and the biggest overhaul to the income tax cote since ronald reagan. cooks you cannot ever start a

small business under the tremendous regulatory burden that you have today in our country. going to end it. i am going to cut regulations massively. francine: turkish president visits st. petersburg to rebuild relations with russia. he will meet vladimir putin and his first -- and subsequent crackdown and nine months ago, putin called turkey's downing of a russian jet a stab in the back and imposed a series of punitive sanctions that india's central bank has left rates unchanged. the benchmark repurchase rate will stay at a five-year low of 6.5% as predicted i-27 of 29 economists in a bluebird survey.

today's policy announcement is the last and rajan's time as a governor. his successor is yet to be named. barclays has agreed to pay $100 million to 44 u.s. states to resolve an investigation into interest rate manipulation. it is the first lender to settle state probes -- that inflated borrowing costs linked to the london and u.s. dollar -- u.s. dollar. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: thank you so much. learn as we go as the bank of england -- advice on monetary policy post-brexit. mccafferty suggests easing is likely but he prefers a wait and see approach on policy in the aftermath of the eu referendum. prefer to learn as we go. the pound continues to slump

since the brexit vote as the boa -- the boe began expanding its program. we are joined by richard jeffrey. thank you so much for joining us and help us understand what the mean.eers are we going to see more qe? is mark carney too quick and throwing tools out there? richard: i think he has been too quick. and i have been quite surprised. when they make policy changes, they did not improve the economy immediately. they improved the economy in six months to a year and longer. to be trying to make policy -- francine: if you look at the -- data dependent it means you adjust on a monthly basis. richard: i think that is a problem with policy at the moment.

a longer-term view of where they should think interest rates should be in one to two to three years time. it is quite interesting that we did have the policy and measures announced by the bank of england last week which were pretty meaningless. i cannot see how a quarter or additional -- quantitative easing, how is it onto feedthrough to the real economy. had we had interest rates slightly higher to begin with, had they been at 2%, then a cut would've been more meaningful. francine: is it a problem with the policymakers? or is it a problem with an economy that we don't understand how you make it work? it is crazy when you think about all of the qe we put out there, that inflation is where it is. richard: that is right. inflation is low because of external reasons. the u.s. and like

u.k. which are further into their recovery phase, domestic league regenerated inflation is picking up. it is more pressure than is evident in the headline numbers. the authorities should be looking at that and the labor market. ,hey should be saying growth easing is relatively slow rates when you compare with free recession. in theis not sustainable context of labor demand that is been -- francine: we don't know what will happen. we don't know how much investment will be cut by it we don't know this economy will be fast enough to adapt and exporting more to take the benefit of the weaker pound? richard: i think there are rules of don't knows here. when we have to be careful about is giving negative signals to operators in the economy.

when the bank of england was doing last week was giving negative signals. announcing more quantitative easing, what does that come from? about makingnking an investment decision industry and you look the bank of england taking these decisions -- and say we will put that on hold. you get the opposite response from the one you want. this is not going to do anything to help consumer demand. francine: let's take a step back and what if you tell people i asthing is fine and then a consumer spend too much and get into debt and it is not ok because the recession is at a standstill. we see a recession. richard: i as a consumer spend too much and get into debt. they are not discouraging from doing that -- discouraging you from doing that. the rate of increasing consumer debt is too fast at the moment. -- francine: the

problem is we only have sentiment for now. it is difficult to pin down. richard: we have figures from retailers which show no brexit response. we have figures that's we had figures published today. francine: it is difficult at this moment to take a view either way of how bad or how ok it'll be. is difficultink it to take an overall view of the economy. there is no evidence to date that there has been an adverse

reaction to the referendum results. reaction within industry, some companies are saying we're going to put investment on hold. that is not unexpected. other businesses are announcing investment plans. were belowmi numbers 50. i know it is pmi. so mayber weeks after there's a bit of a pullback. richard: the pmi is a concern. -- youk low the surface. have to look below the surface. i would expect to see those recover over the next few months as people within the industry. -- francine: richard jeffrey,

chief investment officer. we have plenty coming up including stabilization in china. factor great deflation easing good are we seeing steady in the world's second-largest economy. the reserve bank of india's governor holds rates before his september departure. we break down his legacy. the pound sinks for a fifth day as the u.k. continues yields. you can catch my exclusive interview with tidjane thiam in this month addition of bloomberg markets and on bloomberg.com. this is bloomberg. ♪

francine: i am francine lacqua, london. let's get straight to the idiot with nejra cehic. -- straight to that bloomberg business flash with nejra cehic. nejra: the walls second-largest itnsurer -- that is even as got claims of natural disasters and restructuring charges. munich re shares are trading higher. legal in general shares are lower after reported first-half that missed analyst estimates --

[no audio] approaching 1000. the carrier expects more than 100 -- having canceled 870 on monday. it is wanting that delays will continue even as systems come back online. that is the bloomberg business flash. francine: the world's second-largest economy shows signs that stabilizing. china's factory gate deflation eased for the seventh month in a row. malcolm scott joins us from hong kong. malcolm, can we trust the ppi? does that mean positive news for the economy echo malcolm: -- for the economy?

malcolm: we can trust that there is a recovery. inhave been mining deflation factories in china. last year rises were dropping from over 5%. they are driving test their dropping 1.7% -- they are dropping 1.7%. looking like such dramatic falls anymore. recovering commodity prices, one factor. whether we can say this -- whether we can say there is improvement in demand, maybe it is too early to say to do some economists are predicting that we may see by the end of the year these factory gate prices turn positive again. that could spread globally could china has been a big source of global disinflation with this cheap goods shipped around the world and if those prices start to turn positive, that could

have global repercussions. positive newsad from china. what is the significance of that? malcolm: this quest for stability, every government has a quest for stability -- there is no conspiracy. in china, there has been is overarching -- multiyear growth , the equityst year markets were blowing up the yuan which was weakening. there has been this return to stability. it comes ahead of next year, this very important change in the top leadership. the 19th national people's congress is expected around october of next year. few analysts are putting out that has been one of the reasons why we may not see big of evils and reform -- big up evils of

reform. a lot of people have to retire. many -- as many as four -- as many as 40% of leaders may change it -- may change. francine: thank you so much, malcolm scott there. let's bring back richard jeffrey , chief investment officer. she would not worry about china anymore? -- should we not worry about china anymore? richard: it is interesting to see how china seems to be back on the back burner. clearly china has a strong influence on commodities markets and through commodities markets can have a strong influence on the west. it is not a strong market for the west.

peripherally important to economies like germany. for companies like the u.s. and u.k., much less so it it is not a big market for us. when you look at china, to an extent, it is reassuring. growth seems to be stabilizing. they're still a spirit of transition. it is trying to transition from some of the manufacturing some ofinto services the manufacturing sectors are showing strong recessionary characteristics. francine: you are concerned that actually central banks -- i am extrapolating and i imagine you feel the same that we should be at higher rates at the moment. are you concerned they will never start raising rates because , something will happen with china -- because it next time something will start happening with china?

richard: they will start to raise rates. the risk is that they start raising them a little later than they should even though -- therefore they end up chasing their tails slightly. in that situation, they have to raise them faster than they should. they will probably have to go higher and they do more economic damage. central banks, particularly the federal reserve and the bank of england did have opportunities to start the normalization process two years ago when growth picked up and they could've just started their process of raising rates higher. getting consumers to invent that idea. it would've been very beneficial. francine: i don't know if you believe that the fed will raise rates in september. if you believe that possibility and you were in charge of the pboc in china, what would you talk through with janet yellen?

still evident that janet yellen is looking over her shoulder for excuses not to raise interest rates. she is back in that mode. it is by no means a certain unless she can find an excuse not to raise them, she will take that. as to the relationship between the chinese central bank and the federal reserve, between those two is the currency. the relationship will be damaged if the chinese authorities allow the value of the currency to slip. that is one of the things that help the pricing in china at the moment. francine: richard jeffrey stays with us. we will be talking about spanish bond yields and eurozone next. up next, this is a picture for spanish bond yields good we saw and -- bond yields good -- bond yields. richard, what do you think of all this? buying opportunity or stay away from it? that is coming up next. this is bloomberg. ♪

francine: welcome back to "the pulse." a sneak peek before winter break. this a picture of spanish bond yields. but to quebec to 2012. that was the christ -- we took it back to 2012. look at that, it is below 1% for the first time ever, 0.972. are we pricing risk?

richard jeffrey, are we in this present risk? or is it because of qe, we can live with it? richard: are we miss pricing risk? .es, both things are correct there's enormous amounts of liquidity in the world economy. it is looking for safety. it is not looking for real safety, it is looking for nominal safety. the people who are putting their money into these bonds, super nationals and institutions like that are not so bothered about the real value, they want nominal safety. when you look at the spanish chart, you have the interaction of that. people believing that the spanish economy is becoming more secure. it is shown better growth trends it it is recovering -- growth trends it is becoming recovering -- growth trends. it is recovering. supportinggermany the markets.

is this realistic. is this a good option? absolutely not, because you're looking for the next person to buy from you if you're going to sell them, who is going to take a bigger bet on yields then you have. francine: would you be buying any of those? .ichard: know i wouldn't francine: i put the white chart in japan. in germany, is blue. -- in germany, it is blue. i haven't put up the ftse. in the swiss payment that is below 40, is a negative territory. we kind of accepted. it is bonkers -- we kind of except it's -- we kind of accept it. richard: if you put up u.k. yields, what is the treasuries inflation target? it is 2%. this is telling you the government is planning for you

to make a negative real return. is that a good option for investors? clearly not. anybody -- francine: wise anybody buying it? because they have to. -- why is anybody buying it? because they have to. richard: there's an enormous amount of desk quantitative easing programs around the world. it is still coming through. that liquidity is looking for nominal safety, not worried about the real return. it is being part in the bond markets. it is not being part by private investors and institutions also avoiding conventional bond markets as well. is the super nationals -- it is the super nationals driving this trend. francine: richard jeffrey's, chief investment officer at kaz know. the pound is back below 130 to the u.s. dollar come ahead of u.k. trading data.

we'll bring you those numbers coming up next. here's a picture out of st. paul's. a beautiful day. it almost looks like watercolor. this is bloomberg. ♪ [ hip hop beat throughout ] [ fans cheering ]

♪ 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 say 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. hohey s w'oiit ghong, estcak ?hoestcak .th lais p hceotas hke hyso wn' aret't ey llkelica hotkes? cwithstomcain business rnan fid e.ju ddst aus a czetomimeey e y towiour rofi pas splgeh pa an u'd yo 'll yeachstr somer eie esr a adylr -ju ddst aus a czetomimeey e y diresevicfi pas splgeh pa .or upder

. odintrg ucin pwifiwiro, fi hthatpsyow usur bs.ines u 'doe t eth dvery.nebusiss. ascomcbu.ss t builbufor sssine francine: welcome to "the i am francine lacqua. breaking news at of u.k., we have construction data and it is important to take a look at what that means because we are pretty thin on the ground in hard data. we had the brexit vote on june 23 but u.k. june industrial output rising 0.1%. the manufacturing and -- output

falling point 3%. it gives us a good sense of what the u.k. economy is doing pretty brexit vote, and then we have to look at july. the only thing we have is some pmi figures so that goes more toward sentiment instead of hard data. we heard some mpc members saying they want to wait and see. pressure from pound after the boe announced qe. 1.30 against the u.s. dollar. nejra: donald trump have laid out his plan for growth in the u.s., borrowing from perdition all republican ideas. he told the detroit economic club he wants to simplify business regulations and lift restrictions on the energy sector as well as low corporate taxes and it overhaul to the income tax code. startump: you cannot ever

a small business under the tremendous regulatory burden that you have today in our country. going to and it. cut regulations massively. nejra: turkish president 31 visited st. petersburg to try to rebuild relations with russia, and his first overseas trip since last month's failed coup. called the downing of a indian plane by turkey -- central bank has left food prices unchanged. they will stay at a five-year low of six and a half percent as predicted by 27 of 29 economists.

his successor is yet to be named. to pay $100 agreed million to 44 u.s. states to resolve an investigation into interest rate manipulation. they are the first lender to settle. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: indian bonds rallied after the outgoing governor said the central bank will conduct or open market purchases of debt. interest rates were left unchanged. let's bring in our next guest, he is gareth leather. , let's us from mumbai start with you.

what does russia leave behind? leave behind?ajan >> remember the context that he took in. three years ago india was facing a current account deficit. measures to build the watches -- put in place new ideas like the inflation targeting regime. the monetary policy committee that is going to be deciding on rates from here on, and he also went off bank loan problems -- after bank loan problems. he wants to clean up most of the bank bad loan problems. there has been extremely positive results in that regard. remains,of the matter why is he not getting another

term? there are critics of his policymaking and many believed he was more hawkish than expected in holding onto rates when they should've been lower. the other big challenge of criticism was that he often spoke on areas outside the ambit of monetary policy that did not go well with the powers that be. of whoe: give us an idea is likely to succeed as governor of the r.b.i.. he is leaving in september. should we not know by now? harsha: you are right, september 4 is when he leaves office and we are hoping the government will be announcing another name any time. there have been no official communications as to who will be succeeding him. the former deputy governor has been mentioned. the chief economic advisor as

well. we have to watch and wait for who is going to take over. francine: thank you so much for all of your insight. leather,ng in gareth senior asian -- when you join us -- when you look at india, he was hailed as the best governor in 2013 or 2014. he was thinking about problems. why did he step down? does this spell bad mood for control of inflation overall? gareth: i think the problem is that he did a good job of stabilizing the economy, the currency stabilized. the problem was that he ruffled too many feathers while he was there. trying to clamp down on bank lending which upset some people. he introduced an inflation target that upset some others as well.

there are several reasons i think he was forced to step down. he kept monastery policy higher than many wanted. francine: they are less mature economies than the west so you will need someone to do structural reforms were taken tough decision. you are intimating that maybe the person who comes next will be less tough. gareth: that is the big risk. certainly we do not know who it is going to be. if you get the deputy governor , you wouldral bank not expect to see any big changes. i think the big concern is that you get an appointment from the finance ministry who was put under pressure to cut interest rates so would would not be a properly independent central bank. francine: what is the big mistake the next central banker could do? gareth: you cut interest rates to quickly with inflation above target for next year.

that raises the whole question about how independent the central bank will be and it lets inflation off the hook. heavy seen outflows in terms of investment in india or do you see the appetite waning? gareth: i think markets are pretty much at the moment in wait and see mode. we did not see a big forward in the rupee. i think markets are probably waiting to see who takes power and then go from there. it does not seem to be massive unease in the market. francine: it has more to do with what the fed does, right? there is a huge linkage between india inflation, rupee, and dollar fed. gareth: it is probably less of the concern now than in 2013 when india was running a big currency deficit and was dependent on foreign inflows from abroad. since then, you have seen the current account deficit fall

quite sharply so india is not quite as dependent on foreign policy --. have a leagueou table of your favorite emerging markets? gareth: india is doing quite well. the growth figures exaggerate the strength of the economy. encouraging is that modi after a quiet start is making some progress on necessary reforms. we have this inflation targeting regime in place and measures to open up the foreign investment. a goods and services tax is crucial to india's long-term development. statelaces a patchwork of taxes and unifies it across the board so hopefully it will create a unified, domestic

market to make trade a lot easier. much,ne: thank you so gareth leather of capital economics stays with us. stay with bloomberg. the pound thrives for a fifth day after the boe boosts bond purchases post brexit. the yield of the 10 year spanish bond falls below 1% for the first time. trump goes for old-fashioned tax cuts. this is bloomberg.

francine: stocks higher this morning. let's head to the bloomberg forayed asset check. nejra: if we look at the stoxx 600, it is pretty much unchanged, up ever so slightly. i am showing the gr our function so you can see the different breakdown of the industry groups. carmakers, oil, and gas companies leading the game. we are seeing oil prices fall but oil and gas prices up almost 6/10 of 1%. commodities producers are the laggards. one of the worst performers on the stoxx 600 is legal and general. we are down 5.9% on the stock at the moment after a reported first half profit that missed estimates. they are the largest manager of

pension assets. selloff did lead a among insurers after brexit. shares are down some 7.7% since the referendum. sticking with the u.k., let's take a look at sterling. it is down for a fifth day. we are looking at 1.3012 on sterling and this is the longest losing streak for the pound since may. not a surprise we are seeing this weakness given the bank of england has started its new qe this week. we are seeing some dollar strength after that. better than expected jobs data out of the u.s.. datauan, we did have that showing a little bit of stabilization in china's economy but also the yuan has stabilized somewhat. we are seeing it pretty much unchanged today and generally,

while the yuan has continued to decline there are other signs of the currencies stability. they are the least bearish in almost two years. what this chart showing is that three-month implied volatility has dropped to its lowest level since november. not only that but even as the yuan has been falling, we have seen money moving into global risk assets. that suggests perhaps global investors are not concerned about china and the yuan like they were. francine: it has been a busy week for data out of china. this morning's numbers show that's that -- factory gate deflation is narrowing. we are joined by gareth leather. thank you so much for sticking around. we are seeing signs of stabilization in china but the huge turnaround they are trying to do will take five or 10 years and we will see volatility back in the stock market. gareth: what china is trying to

do, they accept the days of 8% less growth are over. they are trying to slow the economy and wean its dependence moving it toward private consumption and that is going to take a long time. there are going to be here. periods are going to be of volatility. the economy has stabilized since last year so those fears at least for the time being have gone away, at the big structural issues are still there. francine: we should worry about that and it is owned by local government. we should also worry about outflows, capital outflows of money trying to get out of china. gareth: a few things are going on. the first one is debt. the government has relaxed monetary and fiscal policy which

has led to a stabilization of economic activity and created a further surge in loans. guide, someis any will have to be taken over by the government or the state banks. that is the issue and whether you get that internally hard landing or whether it leads to a -- francine: we still have questions on whether it could lead to a financial crisis. gareth: certainly that is the big concern. there is reasons to think it will not happen so spectacularly, that a lot of the debt is in domestic currency rather than foreign currency. the state banks are closed off from foreign competition so there are reasons to think you will not see a big messy unwinding of china's debt. francine: what about the outflows? there was concern three or four months ago that they were symptomatic of something uglier, it was not showing up in gdp

figures but if people wanted to put money out could have been a canary in the coal mine. gareth: there was also worry that china's leadership was set on devaluing the renminbi, especially after what we saw last year. what the have done is read this -- reassure the markets that it 20%ot ready for a 10% or devaluation of the renminbi. you have got to remember the government is still sitting on 2 trillion or so foreign exchanges , so it has the resources it needs to support the currency. francine: let's move it away from china, you talk about asian markets and yesterday. we talked about the stock prices. price and i was looking at some of the asian markets. it is by far the one that outperformed the asian peers since the beginning of the year.

will this run further? gareth: it is interesting because thailand's economy is doing not very well. this kind of long-running political crisis we have seen which has dragged on for a decade is dragging the economy back. the growth, even though it is on a similar level as malaysia, it should really be doing a lot better. the fact that the stock market is rebounding does not tell us much about the economy. francine: i am looking at foreign investors pumping in some $12 billion to tie stocks. they could be saying fundamentals or value growth. does this not tell us we think things are going to get better in thailand? gareth: it is not the opinion we have taken. the constitution doesn't come any closer to healing thailand's fundamental differences between the rich elite in bangkok and the poor impoverished. francine: the military has a big

role. gareth: the military is still controlling a large part of the government. francine: how does malaysia compare? they have huge benefits in terms of cannot tax and they attract what a lot of capital from abroad. chairman move there because it is so advantageous. gareth: malaysia has got its own problems, this long-running scandal which is dried to snare the prime minister -- which has tried to snare the prime minister. you have also got the slumping commodity prices which has hit the economy hard through lower export revenues. malaysia is not in the best of shape either. it is holding up better than thailand but we are not overly optimistic. francine: thank you so much, gareth leather from capital economics joining us this morning to talk china. up next, the pound continues its

downward slide. u.k. industry posts a modest gain. this is bloomberg. ♪

>> since brexit we have invested and asked her 500 million pounds in the u k economy in july alone because we are long-term believers that the u.k. is a great place to invest in. if we do not invest, other

people will not. we still think that is true and whether that is a great city, the businesses, we are increasing looking at venture capital because there is some fantastic tech elegy being developed and they are all short of money. francine: that was nigel wilson who spoke to bloomberg tv on an exclusive interview earlier this morning. are lowery's shares after reporting profits that missed analyst estimates. of get to the bloomberg business flash. nejra: u.k. industrial production barely grew in june as the economy lost omentum before the eu referendum. output rose 0.1% following a 6% drop in may. manufacturing declined or a six-month. the boa cut interest rates -- boe cut interest rates for the first time since 2005 and pledged stimulus.

munich really has reported second-quarter profit that was more than double analyst estimates to -- estimates. they climbed 974 million euros as it looked higher claims from natural disasters and restructuring charges. shares are trading higher this morning. airlines says the number of flights disrupted by a computer failure is approaching 1000. they expect more than 100 services to be hit this morning. are warning that delays and cancellations will continue as systems come back online. hason's office in japan been searched by the fair trade commission over its dealings with merchants who sell goods on its online store. they say the agency is looking into whether amazon sought deals with sellers that gave it more

favorable conditions over other e-commerce companies. amazon declined to comment. barclays has agreed to pay $100 million to 44 u.s. states to settle interest rate manipulation. false rate submissions inflated borrowing costs. that is the bloomberg business flash. francine: thank you so much. this is a picture of the markets overall, the british pound one of the most significant stories falling for a fifth day. we have the new zealand dollar. it is retreating with commodities. you can see the price of oil at 42.98 and the volatility is down to 0.52%. watch out for currencies and overall stocks. "surveillance" is up next. we kick off the conversation

with david stubbs. this is bloomberg. you can catch my exclusive interview with the credit suisse ceo on bloomberg.com. ♪

francine: i prefer to learn as we go. the boe advocates a gradual brexit response. the pound sinks for a fifth day. to returnes tax cuts the u.s. economy to precrisis days. obstacles asces oil drops from the highest close in two weeks. this is bloomberg "surveillance." i a