♪ francine: anything is possible. even a hike in september, says the hike'sbadudley. will the minutes back him. the u.k. jobs market shows surprising strength. swings.ay it misses analyst estimates. we speak to its ceo. this is "bloomberg surveillance ." i am francine lacqua in london. tom keene is in new york. tom: the deadly news yesterday -- mike mckee were on radio live

when that news came out. moves tell you, he really the market. this is.how skittish but the number one story is the are thef cathay pacific challenges of asia and china. if you go through the headlines -- forget about hedging. it was a grim report. ceo,ine: and certainly the who has been in the job for about two years, is under pressure. we will speed to him in half an hour. let's get to the bloomberg first word news. taylor: donald trump is shaking up his struggling campaign again. bannon to behen the new ceo. kellyanne conway will become the campaign manager. all of this is seen as a motion for paul manafort and a sign that trump will stick with his

aggressive style. to -- for the people arrested during the coup attempt. some 38,000 people will be released, including those who showed good behavior and have less than two years to serve. 35,000 people had been the kind -- detained for questioning. angela merkel joins the campaign jet -- trail again. it is less than three weeks until the election in germany's eastern region. polls suggest that the alternative party in germany may win at least 1/5 of the vote. and under new proposals, companies who avoid taxes will be fine. the treasury says new sanctions would make would be enablers think twice.

medal forurth gold the american gymnast simone biles pay she won her latest with a showstopping or exercise set to brazilian-themed music. the u.s. is out in front with 84 medals. china has 51. great britain is right behind with 50. global news 24 hours a day, powered by our 2400 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom: let's get to it. jason trennert in the next hour. the euro near the 113 level. and oil. we are on a $50 watch on the crude. yields yesterday were something. brent crude, 48 69. the yen little weaker over the last 24 hours. sterling strong. crisis over. 1.30 on sterling. francine: and we are winning

medals in rio. all good in the u k -- all good in the u.k. certainly for the moment, sterling at 1.30. gold is down a touch paper emerging markets slipping. oil down. it is all on that speculation. tom: this is an old look at the sea -- cci. and goes back to eisenhower the idea of inflation-adjusted commodities. yesterday went down. massive commodity deflation. there is the china boom. we are about halfway back. there is no one back we looking for lower commodity prices. it puts in scale the little bit of lift we have added recently. onncine: sometimes we are the same page. i also did a correlation between the msci all country world index

and the response for the dollar. the white is the price of the dollar. you can see the sweet spot in around december. --t this tells us is that this is an oil play. i am showing the dollar, but what i was trying to get to was that it was an oil play. this tells us that the december interest rate rise boosted stock. turnill,ng in richard global chief investment strategist at black rock. first, welcome to the show. we need to talk about bonds, inflation, jobs, and the fed. underpinning everything is a sense of caution? richard: there's a sense that the dynamics have in driving markets drives reach for yield. where the environment is a scarcity of high quality yield

assets. what you see over time is that toforcing many investors look for alternatives. where can they get return? in an environment where global growth has been ok, the recent data out of the u.s. and europe, with the exception of the u.k., and asia has been reasonable and good enough. you are seeing gradual flows from the regular yielding assets into riskier assets, driving markets. francine: what will drive markets from now on? fede is concern that if the hikes andis the fed the markets are not ready, there is a temper tantrum. richard: if we look at the rest of the year, the macro will be critical. you need to see reasonable economic data translating itself into improving earnings, particularly in the third and fourth quarter. if we see that come through, we

think the market will hold onto its gains and potentially move higher. a lot of good news in the price. when we think about their risks to market, what can 30 off the course, then it is interesting how the tone has changed. we talk about the risk of a global recession, a u.s. recession. those risks are still out there, but they have declined. data has shown that the global economy has been remarkably resilient. u.s. data has been broadly surprising. that relatively benign market environment is increasing. that inflation picks up more rapidly than markets had been anticipating. and if the fed chooses to increase the rate, there should be some caution. that is what you're seeing and markets today.

tom: i understand the scenario. i do not see the catalyst. i was taken aback yesterday by the market reaction to mr. dudley. i get it is august and there are only six people at black rock working. but the basic idea of how far people liked president dudley are from the vigilantes of the market, they are just far apart. what will be the catalyst to bring them together? story ofi think the the summer, in terms of policy -- and there are two parts. the first looks increasingly likely that policy will remain easy for longer, notwithstanding bill dudle'y's comments. we willseen that, and get more clues from the fed minutes. but it looks increasingly likely that central bankers are willing

to let the economy run hotter, given the asymmetric risk to the market. i think the short-term message is they are prepared to let the economy run. tom: i understand that we look for an overshoot and i understand the scarcity of bonds, which sir john templeton called a shortage of bonds. why can't what we are doing now just keep grinding and going forward? richard: i think that is the base case. i think central banks can anchor interest rates at the short end of look or pay we know there is a huge structural demand for debt at the long end of the curve. from pension funds, from insurance companies, from individuals looking for yield. that is anchoring interest rates down. what will break you out is a shift of fiscal policy and increase in supply over time. distancefeels some

away. at the same time, that supply is essentially funded why the central banks, if that happens, it underpins the rates. though we are moving into a reflation mary -- three inflation environment, it will look longer. francine: how many bubbles will that create? richard: the next 12 months, interest rates will remain anchored by loose policy. at the moment -- i hesitate to use the word "bubble." i think you see a significant increase in valuation, which seems rational given what you're saying in monetary policy and low growth. the big question will be our central banks -- francine: you could argue this is what central banks want -- creating bubbles. by artificially inflating assets, this is the pure definition of a bubble. richard: they do not want to create bubbles but what asset

prices to support the economy. they are looking at broad finance conditions, particularly in the u.s. where asset prices play a role in supporting the economy. i ate look at central banks being relatively successful with achieving asset prices. we saw in the end of last year on the back of one rate hike that those are material risks. but given the fragility of the economy today, i think that is a scenario the fed will want to avoid. you for: richard, thank now. global chief investment shouted just at black rock. coming up, cathay pacific shares are down. chiefak to ivan chu, its executive. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene is in new york. let's get to taylor riggs. taylor: there is a report of massive job cuts at cisco. they will dismiss as many as 14,000 employees, including -- according to crn. they will reportedly announce the cuts in the next few weeks. analysts say that cisco will show a 2% decline in sales. barnes & noble's has gotten rid of its ceo. the bookseller says he was not a good fit. other executives will assume the duties for now. cathay pacific posted profits that plunged 82%.

asia's largest international airline was battered by losses from jet fuel hedges. and passenger yields fell because of competition with chinese airlines. that is your bloomberg business flash. you are sticking with cathay pacific. francine: we are pay we are pleased to be joined from hong kong by the chief executive, ivan chu. great to speak with you. yields are declining. jet fuel hedges are mounting. how do you reverse this massive slide? the big issues we are chinese are structuring. every year, we are seeing -- everywhere, we are seeing the strong dollar. so the market is a it -- a bit challenging. demand is related to

gdp growth. i think we are seeing short growth here. have an rather improvement story, but the situation is that we are seeing less demand for front and travel, business class travel. astomers are going to short-haul hike. and we are seeing security , whichs with terrorism is impacting travel elements. so the demand of travel is slowing. we hope it is a short-term issue. supply, on the other hand -- we are seeing supply on the long haul routes on the pacific and australian routes. francine: if you want to sit and start airline from scratch, what would you do differently? i understand there is pressure from all sides, but some of your competitors are doing better. i think the economic

environment -- there's not a lot we can do about it. what we are doing now is to invest in new routes. fleet incoming. what we will see in europe and in london is that we will be operating more flights to england. at the moment, we are going five times a day to heathrow. we are going to open a new t-5, which will be very good for our customers. we continue to make ourselves competitive. we are going to have very competitive fares, and service will continue to be good. we will also work on the cost. we will keep it the same, if not better. we are investing not just in aircraft but in loungers.

the customer experience is something we will continue investing in. francine: every time used be to us, you say you will speak to your hedging strategy. will you ever abandon it? it does not work because the prices are so volatile. you look at the first half because ofl was lost the low price of the fuel. but if you look at the volatility of the field from $30 early in the first quarter to close to $50, you can see the brent crude u.s. dollars fluctuate a lot. so managing fuel costs is a very important part of our program. 30% of our costs, we will continue to hash that. even though we are seeing more of a hedging loss, then next few costs are taking out the hedging a netnd have seen us make

cost-saving up 20%. that is a big number. has cost saving on fuel been helpful toward our first half's performance. even though the big issue for soft demand.f is corporate travel slowing. is slowing.avel we hope that will be temporary. but the probability for the second half will still be challenging. francine: are you still enjoying your job? it seems like a tough one, and your pre-disasters, after three years, step down. will you be staying on? [laughter] airline is a an particular job or we have a lot of uncontrolled factors. fuel pricing cannot control.

but there are a lot of good things. tofar as cathay, we continue invest in our product and our new fleet to we have 66 new aircraft, which will make our fleet one of the youngest in the world. we currently have 99 long-haul aircraft, with average years of five. so our product and services is something we are proud of. this year will be the 70th anniversary of the airline, so we will continue to invest in the product and services. francine: it is a tough job. thank you ivan chu, cathay pacific chief executive officer. in the next hour, we speak of jason trennert of strategas region best research. we speak to -- jason trennert of strategas research. ♪

francine: "bloomberg ."rveillance tom is in new york. i am in london. u.k. get a look at the jobs data. britishg's head of coverage simon kennedy is here. so is richard turnill of blackrock. >> this is good news. there is a glimmer of hope, as one economist told bloomberg, that the razor is not having an

immediate effect on the u.k. labor market. whether it lasts is a question, but would it have been hard if it was bad news? tom: do you have an angle on unemployment dynamics? politics is about jobs. we have confidence of this, confidence that. when do we get data that tells prime minister made by the people employed? >> we get a taste of it today, but the unemployment rate stayed at 4.9% in the second quarter. like the u.s., you will get it over the next month or so. slowly orange -- slowly but surely, you will see unemployment -- you will see employment pick up. optimists out there will say there is not a big hit, and the economy will fare better. francine: will we find out more with the retail tomorrow? is that a better benchmark? simon: i think that is a good

example. that will at least frame the debate over one of birds are having inflation data. the influenceed from the weaker pound. francine: thank you so much. simon kennedy from bloomberg paid and richard turnill from black rock pay we go to gilts next. next, we will talk to carlsberg's ceo cees 't hart. this is bloomberg. ♪

tom: good morning. francine lacqua in london. i am tom keene in new york. brent crude on the 50 watch.

48.75. and a weakerut, yen right away. we will talk sterling and brexit. have to look at the u.k. labor market showing strength. their bank of england inflation forecast at the same time. plenty more brexit next. tom: let's go to the bloomberg first word news. taylor: donald trump is overhauling his campaign, sending a signal he will not change his style. stephen bannon, who runs breitbart news. conway willlyanne be the campaign manager. the moves are seen as a demotion for paul manafort. nobel prize-winning economist paul krugman says american

should discount trump's business background. >> we have this delusion that business experience has a lot to do with running economic policy. they are very different domains. generally -- genuinely great businessman generally have no clue about macroeconomics. a particular, the trump style, to borrow a lot of money and then walk away and have some entity go bankrupt -- that will not work for the next states government. tolor: krugman spoke bloomberg tv. in los angeles, a wildfire has forced more than 80,000 people to flee. the fire forced a shutdown of part of interstate 15, leaving drivers stranded four hours. and a leaked document could make relations worth between germany and turkey. according to an internal

estimate, germany views turkey as a central platform for terrorist groups. no response yet from turkey. president suspended dilma rousseff has appealed to senators less than two weeks before her impeachment trial. she is accused of using accounting tricks to hide a budget deficit. global news 24 hours a day, powered by our 2600 journalists and analysts countries.n 120 i am taylor riggs. this is bloomberg. francine: thank you. we want to focus more on brexit, with the u.k. labor market claimant counts showing more strength than we thought. we also have a great report by bloomberg saying that the bank of england inflation forecast, out 10 days ago, it is are you looking stale.

let's get back to richard turnill, chief investment strategist at blackrock. is this more important than the jobless numbers? richard: the bank of england is prepared to tolerate higher inflation, one of the shifts we have seen the last few weeks. one of the shifts we have seen is that the bank of england is being what more willing to run looser monetary policy. so any pickup in inflation, which is associated in a pickup in inflation expectations, will be seen as tolerable. we are unlikely to see the bank react to the short-term numbers. i want to bring it to my bloomberg terminal -- toncine: i want to bring you my bloomberg terminal. this is the difference between wage growth in the u.k., which is blue and around 2.5%, and inflation, 0.6%. what is going on? richard: you have the gradual pickup and wage growth over time. francine: which is a good thing. people should spend more. richard: it is encouraging.

what we will see over time is whether we had momentum building around that and what impact brexit has had in terms of the wage growth numbers over time. we expect the headline to pick up materially in the u k for two reasons. sterling has fallen, so import prices will pick up. secondly, oil price has rise significantly, which plays a role in pushing down on the headline inflation rate. real wages are likely to, under pressure. tom: let's continue with richard. i want to talk about the ninth anniversary of the crisis. right now in copenhagen, cees 't hart with carlsberg. he is one of the few ceos i know that does not speak off a powerpoint script. wonderful to speak to you. i want to cut to the chase. one will you move to london? sterling will be weaker. will carlsberg migrate to

london? cees 't: good morning. you're painting a picture that is attractive for us, as well as the u.k. is starting to do more. tom: within that is the idea of a global platform. you worked for years with you know ever -- unilever. what will multi national food and beverage do? can you think about building revenue and products? over the years, if you look at the fast-moving companies the last 20 to 40 years, there have always been unexpected dynamics in the markets. and the good thing is that people are eating, dining, and drinking. that is a solid is is.

as a result, you see price generators. it is good to review our portfolio and look to other areas, like nonalcoholic beers. our beers and other countries is more affordable. so we have many lovers -- lev ers. francine: talk to me about russia, which is the main concern for carlsberg because of inflation in russia. will you have to close or raised because demand will wane in breweriesclose because demand will wane in russia? cees 't: well, we think they now have a network that is good for us. they have a big market.

we need to transport our beers further. that will cut cost. decline is now -2%. we expect in the second half maybe around -5%. that is different from the past. -- do you see in russia in terms of improvement or worsening of the trend in 2017? that it is inink the second area that we need to watch. the production of a bottle that we are not allowed to sell above one half. the other is what they call a guy or system, a control system

for shops that need a register to sell all call. it is not clear what the impact could the -- could be. these factors are in the market. we are waiting to see the consequences. tom: cees 't hart, chief executive officer of carlsberg from copenhagen. in the next hour, we begin the 10th year of a financial crisis. jason trennert will be on. this is bloomberg. ♪

"om: "bloomberg surveillance from london and new york.

george can call this from nomura with us. richard turnill with us in london. george, nine years on. i marked the beginning of the went inton t-bills standard deviation. the 10th year of their financial crisis. there is august. it dropped in the three-month t-bill. down we go. lehman those associated with march of 2009. there was shock and awe, but it was a shock that we are still at it. george: there is not a week that goes by that we are not over analyzing central bank activity. we have been so focused on all sorts of measures. rememberst of 2007 i

getting calls from clients -- "what's going on?" it is ironic that here we are, and nine years later, and they are in the news again. tom: the metaphor i use is "the oil in the engine." within that, is the oil any better now? george: there is a lot of it. a lot of liquidity. the problem is it is hard to monetize that. .t is sitting as excess tom: reserve in the banking systemtom: what we knew that four years ago? george: and it has not changed. that is why we have some soul-searching from fed members. tom: we have to clear the markets. what is your catalyst to allow us to move on from what reinhardt described?

george: the amount of liquidity put in place and all of the qe -- it has been called a liquidity trap. it is hard to get out of it until you get people feeling confident on the outlook. until those things happen, it is hard to get growth multiples up. francine: i know we focus on the psychology. it is almost like we just need to get consumers to start spending again. while thank you, i do not want to start spending until i am sure of my future. how do we get real growth? george: i think what we have lookingring is they are from it cannot just calm the monetary policy side, especially seven, 8, 9 years on. it requires a mix of measures. if fiscal comes to mind, structural reform as well. it is an encouragement for

public-private partnership to get things moving. thatd partnerships revolutionized infrastructure in the u.s. but the fact that we do not have it lined up is what gets people nervous. and the other side is the negative rate story, which is sometimes a counterproductive measure and people save more because they do not have as much interest. this is all coming to a head. reminded froms comments of one of your former colleagues. infrastructure sometimes takes 20 years to build, so you do not know what you are investing in. have learned is we are reaching the limits of monetary policy. it was never designed to deal with a structural issue. we learn that post financial

typically lower. it is playing out on those lines. and cutting interest rates has a minimal effect in changing that path. companies concerned in that, and the u.s. economy is investing in that -- they will not invest more simple because interest rates come down another 25 basis points. we believe the shift towards this goal policy, we need the right type of it and the right type of structural oreform. at: nine years ago, you were merrill lynch, taking into black rock. i will ask you the same question i asked you nine years ago. when the weekly or the balance sheet damage that has caused all do we fix the balance sheet damage that has caused all of this? are some way away

from clearing those issues. the u.s. has made more progress than the rest of the world, but we still have huge challenges ahead of us. takesting the economy time. getting the inflation rate up takes time. but there are encouraging signs that we have inflation moving in the right direction. that is a solution that takes many years to play out, rather than a quick resolution and a rebound in investment opportunity, which is why the government needs to take a role. moved the market yesterday, hoping and praying for some form of reflation. george can dollars, most of our george can savers -- call this, most of our viewers are savers that have been crushed. do you see any glimmer of hope for savers? george: unfortunately, no.

just because you can prove a null hypothesis does not mean you will change your policies. they will not change their approach yet. i think they will try to raise in a gradual pace. he has been more than eight months since they had the rate. and we are still debating it. tom: and i want to give the highest marks to governor carney , who has been the clearest in his language. francine: that is fair. he is also -- he has also steered this economy in a direction investors seem to be more at ease with. george, are we seeing a crisis in the next 12 months? george: let's get through -- francine: december? george: december. let's see.

a lot of people think the fed will hike in december post elections. i think there are a lot of moving parts. we need to see how this impacts financial conditions. i think markets are getting frothy. what we are hearing from the fed is they want to take away some of the complacency in the marketplace but they are scared to move. maybe that is what w was doing yesterday. tom: did you really get your first gray hair and the august of 2007? did this click and you went home? george: it was downhill from there for sure. tom: george goncalves from nomura, he will join us on the radio. he is more handsome there. i am as well. coming up, we continue our discussion with richard turnill. hsbc will joinom

us about the degree of freedom the japanese yen has. ♪

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i think a lot of people in london would argue it is a hedge fund capital world. it is a beautiful morning in new york city. redemption is in the wind. let's get to our bloomberg business flash. here is taylor riggs. taylor: billionaire paul tudor jones has fired around 15% of the workers at his hedge fund. according to people familiar has beenmatter, tudor hit by more than $2 billion of investor withdrawal. 35% because ofll legal costs. it is controlled by the dutch government and just returned to the market last november. the bank says it has identified the cost savings it will make next year. ford is taking the driver out of the driver's seat. the carmaker says it plans to

have a fully self driving vehicle by 2021. it is designed for use by right hailing services. ford says the car will have no steering wheel, gas, or break pedals -- brake pedals. francine: let's talk now about emerging-market stocks and whether they have further to fall. they are following today. will a u.s. rate hike upset the party? we stay with richard turnill. tracksa chart here that relative strength index. this is the relative strength index of the msci emerging markets index. it is the highest since 2010. what shows us is that the steepest rallies in 2009 could be under threat as shares reach the threshold. this is a threshold that has spurred losses every time it was crossed.

thatrd: what it shows is investors have come back into class after concern about china and the dollar and oil and the fed. a long list of concerns. as those concerns have diminished, emerging markets have been the winner. what the chart shows riley's that has done well in a short thatd -- shows rightly is it has done well in a short period of time. the question is can they rise further? what this indicates is that in the very short term, perhaps because of caution -- we saw something similar in march. the lesson then and the lesson now is that in weakness, you want to be buying pay what is are twoemerging markets

points. the first is monetary policy globally, particularly in the fed. in an environment where u.s. interest rates are low for longer, it is favorable for emerging markets. second is oil. oil appears to have stabilized in the $40 to $50 range. favorablees a more environment for em. do you buy companies, nations, or the whole kit and could little? -- kit and caboodle? richard: in the short run, the whole kit and caboodle. you have seen $40 billion go into emerging markets debt and equity since the beginning of the year. the majority of that money buy ing etp's. passive instruments. as we go forward, you have to be more proactive on what you own.

the areas we would focus on is where you have structural form going on in emerging markets, which will lead to self-sustaining growth. areas like brazil, india, and china. those are the areas we think most sustainable. tom: richard turnill from black rock, thank you. look atext hour, as we the ninth anniversary of when i would suggest the crisis began, jason trennert with a view back and, particularly, looking forward to adding value. daragh maher will join us from hsbc as well. this is bloomberg. ♪

tom: it is nine years on from the beginning of the financial crisis.

will year 10 bring release from the great distortion relief from financial repression? the crisis has given a stock prices price for perfection. in this hour, jason trennert on the bull market. and the changing of the guard -- campaign trump. good morning, everyone. this is "bloomberg surveillance." tom keene. with me, francine lacqua and london. ise years on, it extraordinary how little has changed. francine: you are absolutely right. the balance sheets of central banks, it is amazing how they have grown so much. that is the amazing part. uc see european banking. i believe august 9 was bnp paribas challenged in europe, and we still talk about european banks, don't we? francine: bnp is still talking saw thee fact that they

beginning of the mortgage crisis. realizee the first to the impact of the crisis. .om: remarkable it is not that time has flown, it is that we keep going on this thing. right now at theme is to get to "bloomberg first word news." is shakingald trump up his troubling champagne again. stephen vanden. senior adviser kelly and card way will become the campaign manager. all of this is seen as a demotion for paul manafort. american investors have lost considerable confidence in donald trump. according to a new bloomberg politics poll, registered voters narrowly picked trump over democrat hillary clinton.

to 40%. in june, he led 50% to 33%. one investor who is a big trump back or is carl icahn. he said there is a way trump can win. carl icahn: i do believe that donald has a great shot if he sticks to the positives, not so much to the negatives. if he just talks about the economy -- taylor: he spoke to bloomberg tv. some 38,000 prisoners in turkey will be released, including displayed goode behavior and have less than two years to serve. since the coup attempt, 35,000 people have been retained for questioning. angela merkel returns to the campaign trail today, after her reputation is battered through immigration concerns. she will address a rally at her christian democratic union.

polls suggest the anti-immigration party alternative for germany may win as much as 1/5 of the vote. the british government plans to get tougher on accountants and advisers who help their clients avoid taxes. under new proposals, they would be fined as much as 100% of the taxes their clients underpaid. the treasury says new sanctions would make would-be enablers think twice. and finishing off here at the summer olympics, it is the fourth gold medal for american gymnast simone biles. latest with a showstopping floor exercise to brazilian themed music. the u.s. is out front on metals with 84. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom, you have breaking news on lows. tom: lowes out with home depot

yesterday. coming in south of 6%. a foreign exchange hedge really did not work out. that surprises me when you think about lowes being a domestic company. it is a little soggy on lowes this morning. it is a churning data check, and august data check, with futures flat. , am going to call that euro 1.13-is. let's move on. what do you have, francine? francine: i am so thrilled that you have a great data board. mine is a bit soggy. oil is falling for the first time this week. i thought i would put it out there. basically we are all waiting for minutes from the fed.

the one in south korea. in south korea. and here is the technology the effect on commodities since eisenhower. down we go, the real commodity impact -- the real commodity index, rio crb. down we go further with the china boom. we have given up a remarkable amount of that. nobody is speculating on lower commodity prices. some people calling for a bottom. up theenzie, talking value of commodities. francine? francine: talking about going lower, i am looking at italy. what i decided to do was look at the worst performing stock index in europe. three monthse, versus one month implied volatility spread can what does that tell you? it basically bets that traders are putting -- especially the

heads they are putting against stock links. rising.el, you see it it means they are expecting further falls. tom: is that how you say that, the ftse mib? francine: yes. i do not know how they say it in italian. tom: i don't have to go through the ftse mib as well. to givemckee with us, us perspective on this ninth anniversary per jason trennert 17,ed nine cigars on august 2007. our 10-year anniversary is coming up, as you know. tom: i have my invite. jason: with the forward to seeing you. tom: there was a total lather about how the fed had to come in and "use the discount window." what do they mean? michael:

august 9, 2007, bnp paribas froze two funds. that was the beginning of the financial crisis and we saw financial markets react from there. 2007, we saw the u.s. financial markets react in the room but he has to do something because we are seeing markets freeze up. we make liquidity available to the markets. tom: jason? jason: what is funny when we started our company, people were not sure what the discount window was anymore. clients, people were particularly macro. the world has become so macro in the last 10 years. michael: a lot of people still do not know. banks can go to the fed and borrow. they do not like to do it because there is a stigma. is there something wrong with you? but it is a way to get liquidity into the bank.

there is a bear stearns low and then the lehman low, out to 2009. jason, the move -- to move this discussion forward, nothing has really changed other than elites have had their stock market priced to perfection. my own opinion is that monetary policy has been ineffectual to being actually harmful. the fed balance sheet is going to $800 billion before bear failed, to $4.5 trillion now. the irony is that you could argue that it is largely helping the wrong -- it is helping people, ordinary people. tom: mike, you have a chart that perfectly describes this. michael: i mentioned the idea of balance sheets, central banks. the white line is the fed's balance sheet.

this is nominal gdp growth. it put a floor under the crisis in 2009 when we were at our worst, but since then nominal gdp has gone nowhere. now it is even getting lower. they cannot create growth, they cannot create inflation. that is the beginning with williams and the re-think of our policy. tom: francine, should we steal that chart from mike? francine: right, but we will pay royalties. the problem is that if you look at the last 10 years, we can sit here and say nothing has changed, it has gotten money to the elite, but fundamentally we are much more systemically we were weak? before the financial crisis, and with the clear-out of the banks, you cannot really see another 2008 type crisis coming back. would you? jason: i agree. monetary policy, in my opinion -- and this is a very conservative, supply-side view of the world -- monetary policy

can only bring economic activity forward or delay it, but it is not designed to create economic activity. it is much more of a rethink of regulatory policy, fiscal policy, trade, all of those other things that would be more of a fundamental change. we are expecting central banks to do too much. central banks are being somewhat arrogant in believing that they can actually create growth over a long period. francine: are they arrogant, or is there just no one else to pick up the baton? mario draghi said i give you a window, i stick around with qe while you guys, the private government, sort this mess out. and private sector and government have not. jason: you could go back and say you are creating more hazard by the central bank by doing that, by continuing to kind of be an enabler, of doing nothing.

zero is a pretty -- zero used to we do not know. negative interest rates, in my opinion -- i feel very strongly -- are a policy error. that is largely because it damages the very transmission mechanism, the banks, which you are depending upon to get the policy to work. i am very sympathetic to your view, but i also think that central bankers -- my own opinion, they have unlimited bullets, the blood -- they have unlimited bullets, the bullets are they are using are very ineffective. francine: if you are a central banker and people say he is boring, not thinking outside the box, and then they do and they make mistakes. it is a catch-22, to say the least. on, all i know is the elites seem to benefit and everybody else is saying, let's go, let's go.

michael mckee, thank you so much. we have a lot more to talk about today. daragh maher of hsbc will join us. we will ask him about ¥99, after a strong ¥80. is that even imaginable? stay with us. this is bloomberg. ♪

francine: this is this is bloomberg. -- this is "bloomberg surveillance." let's get to the "bloomberg business flash" with taylor riggs. taylor:'s second-largest home-improvement chain in the u.s., lowes, missed estimates. rose 2%, half of what was expected.

posted profit that matched estimates there is a report that job cuts are on the way for cisco. cisco will dismiss as many as 14,000 employees. that is roughly 20% of the workforce. of networkingker equipment reportedly will announce cuts in the next few weeks. will post a cisco 2% decline in sales after the bell today. barnes & noble has gotten rid of its ceo after less than a year on the job. the bookseller says he was not a good fit for the organization. -- anotherble executive at barnes & noble will assume ceo duties for now. us: daragh maher is with from hsbc, looking at foreign exchange. what an odd day yesterday, to see yen go through 100, which is sort of like dow 10,000. help us here.

let's bring up the chart on yen. long-term, we had a couple of viewers, listeners yesterday say the yen was at 80. i took the trend pre-abenomics and you extrapolate out the yellow arrow. why can't we go back to ¥90. i don't know. i do. totallysensus is against you, right? how do they adapt? forget about toyota and the rest. how does kuroda adapts to ¥95. daragh: with difficulty. there was a story out yesterday saying japanese profit was down 21% in q2. it is a struggle, but the reality is the market is not a charity. the market says this is what we think it is worth. jason: can i ask a simple

question? trennecuse me, mr. rt is taking over the show. jason: i think the yen was, was aroundhe end 120, along those lines. it has done nothing but strengthen since then. that is precisely the opposite impact they wanted. daragh: you do not always get what you wanted. japan, the for reality is it was all built on expectations that somehow abenomics would work. abenomics is not working, inflation is not where they want it to be, and if it is not working, they are back to square one with the yen. do we get back to 80? i would say if abenomics does not work, why do we rule out the idea that we go back to where we began, which is at 80. why do they just not

target wage growth? be the clear fix. giving money to other companies, as if they would only increase wages. daragh: the bond purchase game is something they have done in the past, so it was inevitable that they would try it again. they did the shock and awe tactics where everything was delivered in excess of market expectations. the difficulty they have is they are delivering policy into a cynical market. the market does not believe monetary policy is effective anymore. the japanese are not too worried about being effective, they just want to be active. they deliver new steps, but in each and every iteration, they have been underwhelmed. that is why the narrative has moved on to the idea of helicopter money.

this is the difficulty for policymakers at the moment. francine: do you believe in helicopter money? daragh: i do not believe they will do it. i think they will fall short. do i believe it would work? it would certainly weaken the currency, and i think it would get growth moving. arethe side effects unknowable and unquantifiable at this juncture. tom: i want to show how big this call is. it is steve major-like. there is the kuroda chart we have gotten. jason, this is your why. you want to get to the green box. we did not. down we go. in the lower right corner is daragh maher's ¥95. it is a next ordinary move. what does japanese industry do? jason: as an we person, it is a shame. -- i would say as an equity person, it is a shame. they should focus a little bit

more on equity. they are starting to do some of the right things that, as an equity person, you want to see equities do. i would say culture is in the way as well. we will continue with jason trennert and a cynical daragh maher as well. coming up, from rbc capital markets, our guest is really good on wage growth. we are looking forward to that. on bloomberg television am a bloomberg radio, this is bloomberg. ♪

tom: good morning, everyone. worldwide, francine lacqua at heathrow, and i am tom keene at jfk. now the morning must-read. this is a brilliant essay from a north --pro, and a anna north. tom: i urge, whatever your politics is and wherever you are globally, read anna north. actual mechanics of testing at the border.

saysine: a research note trump's immigration plan would kill 4 million jobs. i will show an integration chart. this is about demographics. this is japan. unemployment is practically nonexistent, 3.2%. but look at the balance sheet. this is just because they do not have enough workers because they are against immigration. where are we? all over? jason: as far as the election is? it is very strongly that absolutely not over, and that trump could still win. we are talking about the elites before. i am not advocating donald trump's policies, but i think we are talking about, there are a lot of things, whether it is brexit or negative interest rates or open orders or free trade, or a lot of things that average, everyday people are questioning that the elites have told them for a long time -- you

have to appreciate that. whether you think donald trump will work or not is another story. republicans will maintain control of congress. we protect the copyright of all of our guests, even daragh maher. we are not going to stand -- to send you out dan clifton's billion washington notes. 5:00 p.m., we demand you watch mark halperin and john heilemann, "with all due respect." no doubt on the trump campaign do over. this is bloomberg. ♪

francine: this is "bloomberg surveillance." you are looking at live pictures grater -- the cheese

which is appropriate because it looks like a cheese grater. tom keene is in new york. i am francine lacqua, close to the cheese grater. let's have a look at what asset classes are doing today. they are taking their cue from the fed. we had two federal reserve officials who were a little more hawkish overall. european stocks down a touch, and gold down as well. yesterday there was some gyration on yen. brent back up. talking about a strong yen, to 95 in the coming quarters and months. we have targeted earnings. here's michael mckee. better. target comes in earnings per share at the high end of the range, $1.23. was for 16.17

billion dollars. they see a decline in same-store sales for the first time since 2015, goes down 1.1%. here is the question. where were the sales? target and walmart have been facing increasing competition from amazon and online businesses. they are spending to get back into that game, but here is the long-term question -- can they do that? target does not give us any good news on that score right now. tom: it is always sober to see a negative statistic on, sales. right now, here is taylor riggs. taylor: donald trump is overhauling his struggling campaign and sending the signal that he will not be changing his style. he has named a former banker who runs a conservative website, breitbart news, to be the campaign ceo. stephen bannon. , butmanafort will stay on the move is seen as a demotion for him.

to continue with his aggressive style for the remainder of the race. i am hoping that our conversation in america in this campaign gets to be more substantive about the real issues facing us at the moment. that is a constantly increasing deficit in the government. spoke toteve wynn bloomberg tv. he was the pioneer of what has become a staple on tv, the shout fest that focused on washington. john mclaughlin has died. he was a catholic priest. he developed "the mclaughlin group." it began in 1982, and he did not miss a single show until last weekend. john mclaughlin was 89 years old. tom: john mclaughlin, bye-bye. but it was so much more. a shout fest and

maybe he did that, but it was smart, smart, smart. john mclaughlin -- you were forced to watch it because he was so damned smart. jason: he was. he was a very charming guy, very cantankerous in a good way. but it kind of started this whole style, which some people might say is kind of out of hand, but it certainly was must-watch tv. tom: but he was always respectful. he and elinor clift would go at it. let's continue on here. the next administration has to deal with an asia that is a little bit upset with america. asiaf our great reaches to is curtis chin, who has served a republican and democrat present -- a republican and president -- a republican and democrat

president. how much does asia hate donald trump? curtis: i think that is an exaggeration. but there are currently detractors. the reality is that asia is pragmatic and they will work with whoever is the next president. tom: we need to be pragmatic as well. need to next president show the flag in a new way in asia? absolutely. they need to build on what president obama has done. pivoting not only militarily but economically. they have turned their back on the trans-pacific partnership. clearly there are things that not everyone is going to like, but with these trays deal -- but with these trade deals and needs to be negotiation. tom: are we still pivoting? did you invent the word "pivoted "?

curtis: they are using the word "rebalanced" now. people don't remember that asia pacific includes the united states. tom: we will pivot right now to london and francine lacqua. francine? francine: that was a good pivot, tom. donald a sense of what trump's foreign policy will be in asia. oftis: like you, i am kind an outsider, not with either campaign. if you look at the rhetoric right now, clearly china is a target. but i would say china is a target for both secretary clinton and mr. trump. when we look at it from an asian perspective, the numbers are so intertwined with the united states. that is not going to change. there is hope that once we get beyond the campaign, it is going back to the business of doing business with asia. francine: if you look at china, and i have always been told this

about chinese politicians in general -- they want to be accepted. everything they are doing is to be seen as a powerful force, with or against the u.s., but someone who is respected. if donald trump becomes president and he inadvertently says something that upsets them, what kind of foreign policy will that become? too often, foreign policy is driven by the rhetoric. we need to look at substance. they will judge any president out what they will do about the trade deal. asia today is much more than china and india. we need to pay attention to a the association of southeast asians. 10 countries have come together this past january, and if you look at them, in many ways they are a bigger market for the united states than china and india. there is a huge problem, right? there is a huge hotbed in the south china sea.

it will also depend on where the next president lies on that issue. curtis: absolutely. here in the united states, milkeng for our next institute asia summit -- tom: excuse me, that was a shameless plug. curtis: absolutely. that is why i am here. i learned this from watching the show every morning. what we are going to focus on in singapore is the forces shaping asia. in many ways, china will shape that -- to theu were going fullerton hotel in old court, i get that. that there is a generational shift among the -- we are, i would suggest, ignorant on taiwan, relatively england -- relatively ignorant on singapore. what is the next institutional

change that the next president has to do with? curtis: we need to underscore to all of the people in america that there is no escaping the reality that china and the united states will continue to have to work together. tom: but what do we do with singapore and taiwan? curtis: if you look at the numbers, there is more u.s. investment in the 10 nations in southeast asia than there is in brazil, russia, india, and china combined. can you express investment in south asia or in asia in general through u.s. multinationals, or do you have to go abroad to do it? jason: as a matter of fact, you can. i would argue that for the average person, that is probably the way they should do it. what investing in equities in the region is really driven a lot by china and emerging markets, china, in my opinion, it will have its macroeconomicm a

point of view. it is probably better to take the long-term trend through a u.s. company that is investing for a relatively long period of time, as opposed to china -- pick your spots -- in individual markets, in my opinion. francine: what is your take on chinese currency declining today i go there are concerns that capital outflows from china are increasing once again. renminbi hashinese been on a decreasing trend for some time now. every so often, the narrative gets punctuated by one bank or another telling us it is on because of a seismic shift. we just do not get them. we have occasions last year, a year ago, and where we did have a misstep on the currency in china -- since then, the management of that currency has been very astute. to be honest, it has not been much of a talking point.

over the last three to six months, there are far fewer questions about china. there is much more of a focus on japan and japanese currency. ?rancine: is that not a concern we know that the pboc is stabilizing then, but if we see so much volatility like we saw back in january or august of last year, it will be much more -- is, it feelseality like the chinese economy is on a more stable footing. back in january we were more obsessed on talks about hard landings. it was amplifying the unease. now we are in this calm phase. get this capital outflow -- my goodness, that would be awful if it happens -- but the reality is, we have had a much more boring story out of china. tom: let's do a first on "bloomberg surveillance."

dollar.yen-singapore there is the lehman low way up top. strong yen flight to quality. there is abenomics. chin, i'm sorry, there is abenomics, the big red scoop. has abenomics failed for asia? curtis: i think it is failing so far for japan. tom: but for asia? diverse whenis so we think about the trade patterns between japan and china. we have to look at the individual company versus a country in general. i am always struck by -- we talk there is sobut little talk about japan. i travel with business leaders and government officials. it is all about china and india, and increasingly the individual markets of southeast asia. tom: ambassador chin, thank you so much.

tomorrow on "bloomberg surveillance," we are really looking forward to this. , out with a new book on the euro, particularly professor joe stiglitz on whatever the new globalization may be. this is bloomberg. ♪

francine: it is "bloomberg surveillance." london.ncine lacqua in tom keene is in new york. let's get straight to the bloomberg business flash with taylor. taylor: billionaire paul jones the people onof his fun. it has been hit by more than $2

billion in investor withdrawals this year. and second quarter profit fell 35% for abn because of legal costs. abn just returned to the market last november. the bank has identified $225 million in cost savings it will make next year. that is your "bloomberg business flash." got surprising data on the pros brexit u.k. labor market today. jobless claims unexpectedly fell 8500.ht -- by thank you so much for joining us. when you look at the claimant count, how much of it is a surprise? we were expecting claimant counts to rise. -- it mean that because >> it might not be a surprise that it did not rise by month -- by much. the reason is that labor demand

has lagged real activity, so it takes a bit of time for firms to adjust their labor force. hiring and firing is costly. you want to be sure that there will be a downturn. so it is likely that on opponent will pick up in the second half of the year as activity continues to slow. and the fact that we did not see it today essentially reflects that lag. taylor: what -- francine: what are we reading into this overall? we had inflation yesterday, we have jobless claims today are tomorrow we have real retail. are we trying to figure out too much? >> the inflation figure was really interesting. there were signs of the inflation configuration feeding through. sensitivece is very to the exchange rate starting to move up. that is what you expect to see over the coming months, but also wage growth and domestically

generated pressures. thees -- atent moment, there are early signs that the shock is playing out. but it all remains to be seen how it feeds through in the coming months. francine: what is the one thing that the markets got wrong about brexit? the feedback loop of the markets because mark carney is here and it stays strong? dan: the key thing to take away from what has happened over the past eight weeks is that the bank of england has made it very clear that it will look through this exchange rate effect. and this high spike in inflation has come further down the line. the key point is they can look through that as long as inflation expectations in the u.k. remain broadly anchored.

there are significant impacts on returning inflation to target. will be next six weeks entertaining, to say the least. dan hanson, thank you so much, from bloomberg intelligence. the next six weeks of bloomberg data -- of u.k. data could have some real surprises to it. francine: and the prime minister also comes back on holiday. that about? think about the cat. she is on holiday. francine: i love the fact that she is the only other prime minister in switzerland since margaret thatcher. she is walking in the mountains. it is refreshing. she is thinking about the economy. tom: ♪ the hills are alive up, rbc capital markets. very good on which growth. tom porcelli. this is bloomberg. ♪

tom: not the fireworks of yesterday. in london and new york, the forex report -- the yen back

above 100, 100.79. sterling rounded out -- sterling rounds it out. francine? francine: coming up shortly, it davidoomberg ," with westin, jonathan ferro, and alix steel. she joins us now. index on the 100-day moving average. we will have alan ruskin of deutsche bank, the man you want on yen about not only moves, dollar moves, but also into the fed. he says what we have seen in dollar yen is not typical into a fed tightening cycle. you could see a yen rally, whether it is risk-on or risk-off. i am excited that we will have a commodities roundtable. we will talk with andrew mccanns -- we talked with andrew mckenzie yesterday.

the question,t have commodities bottoms, to our guests. tom: is it a commodity bottom? alix: that is what andrew mckenzie said. it is going to take time. tom: what do you think? alix: if i knew, i would put money on the table, right? 2020n terms of copper, four a bottom in copper. oil -- i don't know. if i had more stomach, i would definitely be betting on oil, but it is too scary. too much volatility in oil right now for me. tom: it is the ninth anniversary of what i target the crisis, the four standard deviation moves that we saw on august 17. there are ramifications. one of them is that jason

trennert has been given the mother of all bull markets. you have been hugely successful in sustaining through this bull market. street has troubles and we see it in deutsche bank today with the bonus round there it you and i know that it is a " yeah, but" press release. jason: it is probably a pretty wise move on their part if they were to forgo their bonuses. tom: can you retain the same personnel? jason: i think deutsche bank can. i do not think there are a lot of other places to go within europe itself, certainly not a lot of other banks that are doing particularly well these days. i think it would be a wise political move. francine: within europe or the u.s.? again, it is very difficult, but i think the onus season generally speaking will not be particularly good this year. what time was -- i think the generally speaking

will not be particularly good this year. people think that there is a change, and of course this is also being exacerbated by central banks. of: can you acquire shares 20 multiple pe stocks this inning as you acquired them 2011, 2012, 2013, 2014, 2015? can you keep doing that? jason: you probably have to. 7.5 percent is too high, but by the same token, again, there are not a lot of alternatives out there. advisors to strategic -- will there be a strong dollar to do with in the next 12 months? daragh: know, there will be a

weak market. the reaction yesterday, dollar-yen minis 100. -- -100. respect to thet oxygen in the air at hsbc. you guys are way out of consensus at morgan stanley. maher, this has been fabulous. and jason trennert with us. your 10th anniversary is coming up? jason: it is. some said they would never last. tom: 10th anniversary of strategas research. both of these guests will continue with me on radio. michael mckee and conversation. tomorrow, joe stiglitz -- all republicans, watch. ♪ avtk"0

jon: great expectations.

he rate hike tops 15 percent for the first times and brexit. david: the u.k. labor market shows signs of continued strength. sterling continues to rally. skin ins. voters with the game are loosing confidence the republican nominee is best for their portfolios. jon: warm welcome to "bloomberg ." we've been playing the fed rate hike game for nine months now. it has gotten more noise in the last 24 hours. david: the game is not over yet. we will get the minutes. alix: before those minutes come it feels like all quiet. you have the dollar reclaiming a bit of ground, sittiig