caroline: essential bank re-think. a shift in policy to deal with the new policy that the new low rate policy. we discussed with rupert harrison. banks plan a brexit. it went -- lenders won't wait around to see what deal u.k. can get from europe. we bring you the first data since the referendum. ♪

francine: welcome to the pulse. right here in london, i am francine lacqua. we have a great show lined up. joining us, rupert harrison, chief macro strategist at blackrock. let's check in on the markets. we will be joined battle mark gilbert just joined by mark gilbert -- joined by mark gilbert. dollar weakening against most major peers. all jumped -- gold jumped. equities decline in europe. asia also declining as oil retreating a touch on brent. where at 48.44. is get to the burkes first word news with nejra cehic. nejra: the minutes from the rba meeting where the central bank cut interest rates for the second time in four months were released today. the cuts would boost inflation.

big investment banks, the european headquarters in london will start the process of moving jobs of u.k. within weeks of the government triggering brexit. that is according to people briefed on the plan being drawn up by four of the biggest firms. they say executives are planning for the worst as they will lose the right to sell services freely around the eu. donald trump has laid out his plan to defeat i.s. on further terrorist attacks in a speech in ohio. he said he would hold -- halt immigration from countries with a history of exporting terrorism. overdue to is develop a new screening test for the threat we face today. vetting. extreme i call it extreme, extreme vetting. problems.y has enough

.e don't need more these are problems like we have never had before. francine: joe biden has called donald trump's rhetoric a threat to u.s. troops, campaigning with hillary clinton in pennsylvania, the u.s. vice president also sharply criticized trumps suggestion that russia launched cyber attacks on america. >> this guys shame has no limits. he has gone as far as asking putin and russia to conduct cyber attacks against the united states of america. even if he is joking, which he outrageous thing to say. francine: theresa may has totten to chinese president express her desire to -- the u.k. and china. that is according to the uk's

new asia-pacific minister. the government reviews a project in which china could be a partner at speaking in beijing china ay, he called global partner. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am nejra cehic. francine. francine: a new policy for a new normal. today's reality calls for a fresh approach to central banking. that is according to john williams. he -- that is an argument he has been making. in an essay released last night, williams writes while gdp targeting monetary authorities are optional, fiscal and other policies must also take on some of the burden to help sustain economic growth and stability. chief macroson --

strategist at blackrock. rupert will be staying with us for the whole show. a lot of news from downing street. every time we have you on, we have a lot of reading news. that's a lot of breaking news -- a lot of breaking news. if you take a look at what a lot of central bankers are doing, they have not achieved with a set out to do which is increasing inflation. need to abandon that mandate of targeting inflation? rupert: the speech by john williams is interesting. this idea of a higher inflation 2010, a comesnd when was talking about it for a while. central banks around the world would love a bit of inflation. if they were going to make an error, they want to have too much inflation. we have seen in the u.k. as well. usemonetary policy start to

-- in 2012, the u.k. government -- explicitly used a communication device to say they're willing to tolerate higher inflation for a longer -- possiblynger po markets were ahead of the central banks. central banks are going to tolerate our inflation. this is a part of the asymmetric risk that they face which is there's not much more they can do. if inflation is too high, they feel they have to do with that. peoplee: something about in certain circles talking about. what can they do? let's move your target from 2% to 3.5%, what can they do completely to try and spur that? rupert: they need to shift expectation. they need to change expectation

of the firms and workers who are setting prices. that is going to depend on having credible tools. in the u.s., public one of the -- it is one of the only economies where the economy is beginning to generate some domestic inflation. it is subdued. we are going to see more inflation numbers in the u.s. the challenge is more and other parts of the world, japan, the eurozone were such a banks are running out of ammunition. we are seeing increasing pressure on governments to step up with fiscal policy and other policies to try and generate inflation. francine: are you a believer in helicopter money? at it push back yesterday -- i had prospectus today -- i had push back yesterday.

if you're explicit about the fact that we are printing money to spend it. somewhere like japan, you have to factor that they have helicopter money anyway because the government is spending money and the central bank is buying all the debt. what are the expectations of consumers and firms about the future inflation? demand ine source of the economy they're going to dish that are going to generate that? -- that are going to generate that? incrementally, i don't think we should give up our expectations about fiscal policy too far because it takes a long time, not easy to spend money. francine: it has to be the right one. chief macro strategist at blackrock. he stays with us. we're getting started. we have plenty more coming your way, including an 81% drop in profits for the world's biggest mining company.

ahead of the bloombergs interview, we focus on the was commodities producer. our banks planning a exit. could -- we bring you that bloomberg exclusive story. as the bank of england sets up its bond buying program, is it now time for governments to step in? will discuss global growth. this is bloomberg. ♪

frank i am francine lacqua here in london. let's get to the burke business flash with nejra cehic. nejra: -- has removed its ceo sing the role has become so complex that it traditional management profile was no longer adequate. bynk manion will be placed -- with immediate effects. shares have fallen 22% since he took over as ceo in march of last year. talks.ere has held the combination of the two companies will create the world's largest supplier of industrial assets. warren buffets pressure hathaway posted boosted its investment in apple during the second quarter when the stock slipped according to a regulatory finding. 55% to 15.2 million shares. copper miner antofagasta has

seen its revenue slump 18.5% on lower prices. speaking to bloomberg, the ceo says he sees profits rising in the medium-term. >> copper has traded sideways this year and we have seen a summer demand in the first half in china which represent around 50% of copper demand. the outlook for copper is favorable in the medium-term. in the short-term term, there is more production coming to the market. it is going to be similar to what we have seen recently. we see that the market will get tighter. markets will start to increase. >> that is the bloomberg business flash. francine: shares are up a little after the world's biggest mining company reported in 81% drop in profit. classic monster prices is behind in plunge -- a 25 year low

january. what these numbers can tell us about global growth, we are -- our guest host, rupert harrison. stewart, first of all, thank you for coming on. we don't have an hour so let's quickly go down the list. -- slightly below expectations. you have to think in this environment, negative yields just about everywhere. has to bef dividend some sort of prize asset. maybe that is a reason why shares are a little higher. by and large, the company is still managing to pay dividends. that is the take away. francine: how much can they tell us about the strengths or weaknesses in the world economy and how much is it about these huge companies that see the downside and cut costs.

down 60% which is phenomenal for a company to do that in a year. -- if you lookis at their forecast for 2017, issue that number going up. the first time for a while. certainly showing not as much pessimism. if you look at what they're putting the money into, it is going to go into copper. francine: does it tell us about china echo -- about china? we caner the best lens look at china? stuart: i don't know if it is the best. it is one. there is such a glut. what is interesting about bhp, they are quite bullish in china. they're expecting the government to keep gdp between 7%. relative to the economic community, that is quite a

bullish outlook. francine: what is your take? rupert: it comes down to china for most of these commodities. they are significantly more cautious and we had a bit of a bounce. and -- that looks unsustainable, the housing market. we are still seeing over the medium-term this steady downward trend in china. in that environment, it is going to be difficult for these -- for the chief executive sounds bullish about the medium-term. it is hard to see that story personally. one, the we had glencore chief executive sounding bearish. are we going to see more consolidation? radio is probably the most consolidated industry group.

>> in terms of the large-cap companies, they have had varying degrees of success. lots of people want to sell assets. very few people are willing to pay the price. we have a complete disconnect it between valuations. nothing substantial. francine: group, what is your take on china overall? are we seeing the type of regulatory policy was on january? >> we are going to see this stop go cycle. they are serious about some aspects of the reform story. whenever growth slows, you see these spurts of credit creation. they are finding it harder to make that credit count. i think we'll see a slow term declining growth. dependent on some of that growth .oming back sustained at 7% in the medium-term, i don't see how that is going to happen unless you've got a real

willingness to take on some of these very difficult issues. we just have not seen that. francine: rupert, think it's a much. -- thank you so much. we'll be back. stay with us, we will be talking to the ceo of bhp billiton. up next, our banks running a brexit? could investment banks move jobs out of london? could be sooner? will bring you that story next. this is bloomberg. ♪

francine: welcome back. big investment banks with you european headquarters in london could start the process of moving jobs. that is according to people briefed on the plan being drawn up by four of the biggest firms. let's speak to michael moore. he is in charge of u.k. banking team. rupert harrison from across is still with us good michael, there seems to be frustration -- with us. michael, there seems to be frustration. frustration with top bankers and ceos that the u.k. negotiators are still staying they can have access to single markets without giving in to a free movement of people.

michael: the u.k. government needs to take this time to convince banks they had a plan to keep passporting and a very reasonable one. the banks don't feel like that is happened. there seems to be this feeling from the government that they can get everything without giving up much of anything. the banks are concerned i that. -- concerned by that. the process of moving people is going to take 18 months to two years between getting revelatory approval, getting office space them all of the logistics, they need to act quickly. if they want to have people in place when the two-year negotiating period is up. francine: is it linked to brexit? cuses?"t more like "brex michael: i think this is tied to brexit. between'sa lot of in

between full passporting and not about all -- none at all. banks held up the hope there could be some arrangement where they can keep full passporting. that is looking less likely than it was immediately after. you are talking probably thousands of jobs across the sector. francine: rupert, you are one of the rare insider's. how surprised are you that we don't have a plan yet? rupert: i am not very surprised. it is difficult to draw up a plan. if banks are moving some of these jobs, i think that is a rational thing to do. it is very hard to see the shape of the deal with the rest of the european union that preserved single market rules and access and financial services. if you want anything real on

free movement people, that is the first thing to do -- thing to go. the struggle will be maintaining single market and other places. the other thing is if you want to test even if you're not a member of the single market, can you maintain access? that is difficult for a big financial center like the u.k. to run large operations under someone else's rules. it is extreme the difficult. you will find the u.k. regulators will be concerned about that. it is hard to see a way to run through this to maintain these single market access roles. francine: it was the day that theresa may moved over. have you learned anything in the five to six weeks? >> we have learned how difficult this is going to be. we got not just one negotiation, but at least three negotiations.

new relationship is and what is your relationship with the rest of the world. they are still in the process of putting together the department of people, the negotiators, the strategy. we have seen some stories that the timetable could slip. we may not trigger until later here. you really need to have your ducks in a row before you start the countdown. you've got some very significant elections in europe next year. you won't really know who you are negotiating with until it is done. it is going to be long, slow process. francine: michael is so happy he moved from wall street to cover u.k. banks. michael, if we do trigger article 50 in 2019, what does that mean for job losses? will some of the u.k. banks wait? or will they move jobs out of london and she replaces like earning him?

manchester? michael: the triggering when it happens will matter. a there is any negotiation on longer negotiating time. he'll -- a time longer time he oh -- a longer -- if there's going to be a two-year window, there is a clock ticking on banks to make a decision on whether to move people in the u k -- in the u.k. or start cutting jobs. francine: guys, think you so much. coming up next, we have the first hard to data after the referendum. we get that. will we see a inflation acceleration? will they do like they suggested in the past. we will break down the numbers. , not is quite a lot of

even in strength or relative strength, it is a story of dollar weakness. we will going to that. this is bloomberg. ♪ [ clock ticking ]

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♪ brand new apps, shows to go, ♪ ♪ awesome internet that's super whoa... ♪ ♪ everything is awesome xfinity. the future of awesome. francine: welcome to the pulse. right here in london, i am francine lacqua. all expected inflation report for the month of july. this is after brexit. 20.6%, a rate rising touch higher than the commons had predicted. july import prices surging at the most since 2011. we are getting quite a lot of news so we are trying to break it up to see the most important one.

ppi input, that 3.3% much more than expected. this is the first piece of real data that we are getting, cpi month on month, it was a little bit better than expected. we are not seeing any revisions. the pound at 1.2966. the actual number came in at 0.1%. pound extending gains after the cpi and ppi data. this inflation data as an official measure as the ua has made its official vote to leave the eu eight weeks ago. joining me now is mark gilbert, and rupert harrison former chief of staff and macro strategist at black rock. thanks for sticking around. the inflation data is stronger

than expected, 0.6%. is this to be expected? it is something mark carney warned us about. >> it is a little bit harder than expected but a sickly in-line. the bank of england has laid the ground for this. they have signaled explicitly they are willing to let inflation overshoot for three years or longer. they are trying to signal that this is a temporary shock that has to be absorbed. chart thato go to a you sent me yesterday. the inflation figure and in blue, which growth. -- wage growth. does it make a difference if we are importing stuff? >> if you look at the chart, there is that long. 2010-2013 where you are

underperforming. if you look at where we are since the start of 2015, the picture is a bit better. weight growth is getting better. you want that gap to be there for longer. have more money in their pockets, otherwise the company can't recover. >> brexit means inflation could shoot up and go to 2%. saying particularly petrol food prices are not being it is not going to accelerate inflation. if we are already going in, we need to see wage growth even faster. , that is not bad but it is still not great.

member has been very vocal that you are going to have a massive drag on the economy. backine: if we take a step , u.k. inflation accelerating is also assigned there is further price pressure with weak pound. >> it is a very interesting chart. you are going to see those lines cross again. you are going to see inflation moving well above 2% over the next 12 months. we had seen in the last 18 months or so, gradual signs of wage inflation starting to come back. that may start to peter out. 2010-2011, your first question talked about two different kinds of inflation. you might see the wrong kind where people get hit by rising prices but a weak labor market is going to restrict the extent

wages can respond. is this an impact from brexit or is it obvious because of the weaker pound? >> it is the weaker pound. , wemore significant data are actually going to get it tomorrow. we're going to get the claimant will be thend that first real indicator of whether this has impacted the labor market. francine: what kind of grate would you give to mark carney at the moment? stable.ipped the >> he is employee of the month as andy fantastic but said earlier this week, you cannot rely on the central banks to do everything. economying to reset the . all the risks we are talking going to need the

government to seven -- step in. is this a mistake? u.k. economy, from 2010 two thousand 10 to before the brexit referendum actually grew at the same pace of the u.s. .abor market i think this really is a brexit issue now. one of the things people have not picked up on is the impact of lower gilt yields because of it is going to deliver a big fiscal win towards the government. particularly because we have issued a lot of debt in the last few years. you might see deteriorating public finances but you will see an offset in impact from low interest payments. that might give them more room at the edges to spend more money

on infrastructure and cut a few taxes. i won't expect a big package because he will feel constrained by how far he can go but he might have a little more room. do you think the example of places like canada, where they are doing deficit spending are in a fortunate position because they can be more relaxed? it seems theresa may is willing to let them do that. >> that was an explicit program. so far, that is often the case with fiscal policy. in the last six years, the austerity rhetoric was worse than the reality. there was a steady consolidation plan. it is actually hard to spend that money quickly. there was definitely a shift in mood. we will feel a little bit deficit,ed by a chunky

a big banking sector vulnerable to external capital flow. i don't think he is going to spend several percent of gdp. this is also difficult to do quickly as you are going to literally throw money at people and that is not necessarily the best way for the economy. francine: for the two-year-three-year yield spread , you could say they failed but it is kind of what happened cause there is just so much appetite. what happens if the same happens today? >> i think they will be pretty pleased. francine: right. >> they succeeded massively beyond their expectations. the point was to drive down yields, force money into other assets. managing to do that at the end of that chart, it was much

bigger than most people expected. it speaks to the fact that it effectthat qe has more than it did in the early round. the early rounds people were happy to sell them, but now the residual holders are the people who need those gilts. if you are buying off people who want to hang onto them you have to pay higher prices. other people are forced to buy similar assets. francine: thank you so much. mark gilbert stays with us from bloomberg who -- bloomberg view. in the last couple minutes we had a headline from china. they have approved a stock and it. when i read the headline it wasn't immediately obvious what link isnt but the representing an important step in capital market reforms so this, i believe, is china

getting their house in order. i will big a little deeper and we will bring you any more e fromng news we hav china. but get the first word news. u.k. inflation accelerated in july 2 0.6%. signs of further pressures with the weak pound fleeting to the biggest jump in import costs and four years. theinflation numbers marked first hard numbers on the economy in the wake of the brexit vote in june. presidentncisco's fed is calling for a new approach to central banking. john williams argues that interest rates have fallen. he says in the new low natural it will nonment, longer make sense. big investment banks in london will start the process of moving jobs from the u.k. within weeks of the government triggering brexit.

that is according to people briefed on the plans being drawn up by the biggest firms. executives are planning for the worst, that they will lose the right to sell service freely. theresa may has written to chinese president to express her desire to enhance trade and strategic ties between the u.k. and china. that is according to the uk's new asian-pacific minister. government reviews a major nuclear power plant project in which china could be a partner. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic, this is bloomberg. plenty coming up, including is fiscal policy back in fashion? as john williams calls for a

data andthen the euro trade balance at 10:00 london time and later today, we bring you an interview with andrew .ckenzie after that loss that is coming up at 2:30 p.m.. u.k. time.

francine: is fiscal stimulus back in fashion?

central bankers, including most recently fed's john williams has been leading the call for action from governments. janet yellen says the fiscal policy has not been supportive. peter crist says monetary policy can't be the only remedy. is it really time for governments to act? joining us now is mark gilbert and rupert harrison. staff to theof former chancellor george osborne. i want to get back to the debate on monetary policy in a second in the last 10 minutes china's eight council approved the shenzhen hong kong stock connect. this is opening china's equity market to international investors. is this something that opens it up or is it just a facade? >> it is real but it is very well flagged.

we had this rumor over the last year that this is coming soon and local markets get a pop. it is a positive sentiment but the timing is a surprise, not the announcement. francine: we were actually expecting it last year. let's get back to central bank policies. , withe talking before rupert about what central banks should do, what they can't do, what rupert will be happy with, that placed in -- that inflation target being much higher. they need to be much more radical. there is an old argument that says textbooks are wrong when you cut interest rates this low. when you are down, you get quantum physics effect and things don't happen the way the textbooks say they should be.

pretty announce proper interest rate increase and that would motivate consumers to spend and companies to borrow before costs go up. you would have to be really brave but the current situation is not tenable. current monetary policy don't seem to be -- francine: could it backfire like negative rates? could it bring the world to recession? what about credibility? no cushion. there is no room to go much lower and that is one reason why the fed raised rates in december. it wants to have the capacity to bring them down. you tell us take that off the table. it gets much harder. do they have any clue

what they are doing? -- it are assuming they'd wouldn't work. --re is a nonmedical little non-negligible chance. they are not going to meet their 2% inflation budget anytime soon. you've already got a massive seems likeit madness. that is where we have been trapped for a while. >> there is a lot of truth in the analysis. problems with these flat yield curves are that banks find it difficult to make money so you start to impair your financial system and your basic interest rates, low interest rates work it people expect them to rise in the future. if consumers start to think this is just a new permanent environment you could get reverse effects.

the question is, how do you shop expectations? how do you get steeper curves? we are probably raising rates and that is not going to be as brave. thatould be brave to make kind of commitment so i would expect you see a more part, to talk up inflation expectations. i think those will be the first to steep in these yield curves and shock expectations. francine: would you be concerned about defaults? interest there are rates going higher, and if we don't have any growth at all, i don't know if it is quantity traders but a lot of these companies that have been fictitiously kept alive? >> you need economic darwinism.

the capital trapped in there can rates- and zero interest to companies alive that still don't deserve to be breathing. that is terrible for the companies involved what on a broader sense, one of the unintended consequences is the zombie companies. would i stop spending more if i saw companies around me going bust? >> it is a high risk strategy. either it works and you change expectations or it doesn't work and you make things worse. policy makers -- it is a brave policymaker that brings forward defaults or take a big gamble like that. that doesn't mean that is correct but that is what you will see. the other idea is nominal gdp targeting so if you are not meeting your inflation target and it is politically impossible

to say we are going to have a 4% inflation target, to say instead in this environment, for now, let's target gdp. target growth directly, change the game and the language and what you are looking at. >> in 2012, we had a new central bank come in and we did a lot of work with mark carney in the treasury on nominal gdp and higher inflation targets. i think there are some very attractive properties. what we kept coming back to was communication challenges. inflation't have an anchor in you are trying to communicate to consumers and firms, which is not really something they can relate to in the way they can relate to inflation, as they say, there may be some economic merit that it is a tough political cell -- political sell to say we want

higher inflation. francine: let's say you are in charge and can do whatever you want without any medical pressure, how would you get us out? >> the question. -- good question. i would shock expectations by changing the monetary policy regime, whether that is a higher inflation target or nominal gdp. world, that is probably the right thing to do with more fiscal policy on a medium-term horizon rather than a short-term. francine: why only a little bit more fiscal? is you canevidence build up infrastructure spending over time but the big constraint in the u.k. for infrastructure spending is not cash. it is having the projects ready to go, the planning, permissions, the capacity to take the rail or the road industry.

there aren't new roads or rail lines to be built. we need to be building those pipelines for the next decade so we should see fiscal policy in structural reforms rather than short-term demand management because it is not realistic to expect it to achieve that. except markyone carney and janet yellen and replace them with business people. people who know the impact of monetary policy. have some real economy people in charge of monetary policy. aancine: then, there is danger, even more than what rupert was suggesting where you go to extreme parties after that. if you come back, wouldn't it hurt a lot of people who voted for brexit? >> think what we've got at the moment.

whoave academic economists all go to the same conferences, already same textbooks, and that is not working. you have a massive problem with groupthink. not seeing radical ideas come forward and if you put business people at the helm and give them more control -- francine:-- they are still constrained by what are you actually going to do and that is why you have lsu makers roping around her new tools around communication and expectation. that is the problem. you put a bunch of business people in charge, they are not going to have new levers to pull. >> they are going to know what the government needs to do. central bank independence is

separate from being able to criticize the government. it doesn't mean you have any say in fiscal matters. had -- european governments paying more the burden. sticky, its is very takes a long time and it is very difficult. >> francine said i could ignore the politics. francine: then i went back on it because we have to come back to reality afterwards. thanks for the conversation. mark gilbert and rupert ief micro ch strategist at black rock. let's check on the markets. a bullave seen the dax market. the ftse 100 in overbought territory. if we look at europe's equity benchmark, the stoxx 600 is down 6/10 of a percent.

we are looking at a pretty broad-based selloff. mostlook at gr are, industry groups down. the one really gaining is a commodity producer. moving higher after first-half earnings. its worst results in 2001 with underlying profit down. yennt to look at dollar because we have been seeing a weaker dollar over the past two weeks because of those expectations of a fed rate rise. approaching 100. 28. gold up for a second straight day, it has jumped the most in two weeks and emerging markets, ninth day of gains for emerging-market stocks. the you come too late to

rally if you come in now and how much further does it have to go? francine: stay with bloomberg surveillance. tom keene will be joining me. it is really a day of dollar slumping on fed rates, european equity for treating. ♪

francine: a central-bank re-think. john williams calls for a shift in policy. yen rallies. why lenders won't be waiting view -- deal what london can get from europe. zew gives an the