will it focus on e-commerce lead to 28 straight quarter of profit. an eight straight quarter of profit? a warm welcome to "bloomberg ." with federal confusion reigning consensus, the zero -- david: they are communicating perfectly, they are confused. they cannot agree amongst themselves on what to do. alix: perhaps charlie evans' idea, you have to see the whites of inflation's eyes. in addition to that, the consensus in the fed, they are

not afraid of a sharp pickup in inflation. incredibly relaxed about the prospect of that happening. rates are going nowhere fast. david: it reflects the asymmetry in the way they reflect market data. they're not that worried about hyperinflation. alix: you have a softer dollar, bonds. in global what does this mean for bonds? where is that turning point? was an tuesday, it conversation about a dovish fed, fed,esday, hawkish thursday, dovish fed. earningsmart reporting , coming in at $1.07, higher than estimates. also boosting its full-year earnings forecast due to

improvement in u.s. stores, a stable consumer on that end. revenue was also of 4% quarter on quarter. -- up 4% quarter on quarter. con sales 1.6%. comp sales 1.6%. e-commerce sales up over 11%. a very different story than what we heard from target. walmart is trying to move into that world to compete with amazon, of course. walmart beating on earnings come also raising its full-year 2017 earnings guidance. later, we will be joined by the man in charge at cisco, ceo chuck robbins will be here discussing his incoming -- upcoming earnings results. a firmer market across the

board. jon: firmer market, soft dollar. no consensus at the fed, that no action. in the fx market, here is the story. the softer dollar, down by .3%. strong pound on the other side. weak dollar giving crew just a bit of the lift. -- crude just a bit of a lift. the front end of the old curve on treasury to your notes very sensitive to write expectations. we trade at 0.2%. notes very sensitive to rate expectations. whether mr. dudley once again throws a wrench into any conviction anyone has.

now represents the forward-looking view of the fed versus those minutes which were backward looking. let's check in with our bloomberg team. shannon pettypiece breaking down walmart earnings. matt boesler on what appears to be a split fed. and simon kennedy on those surprise retail numbers and u.k. -- in the u.k. david: shannon pettypiece is here with us now to talk about the numbers in detail. same-store sales up. what jumped out at you? shannon: a pretty solid quarter for walmart. expectations have been really low for the company for over a year now. i good increase in traffic to the u.s. stores them a good increase in online sales.

looks good online, looks good in the u.s. there are only two markets outside of the u.s. that did not do well. the u.k., a lot of issues with the pound and competition there and china was also relatively weak. you've been reporting on the transition walmart is making, particularly into the e-commerce area. what do these numbers tell us about how that transition is going? shannon: what is walmart and what is the u.s. consumer? walmart really lowering more people to their stores or does the u.s. consumer just feel better, going into the stores and spending more? compare them to target, the last recession we had, there was a sense that customers were trading down and going to walmart incident target. -- instead of target.

maybe consumers are trading down or maybe walmart has just approved their stores and doesn't take a good job -- and does such a good job on pricing and advertising. the second half looks good. they raised their guidance for the year. in contrast to target which said the second half of the year is not looking any better. thank you for being with us, shannon pettypiece. alix: pivotal to supporting gdp growth in the u.s. lower for longer is the theme. james bullard spoke on the future of fed policy. year we only move once per

, it would take 12-14 years to get to the full normalization. that seems like kind of a disconnect. we try to put together a new approach. alix: matt boesler joins us now. that new approach come also hearing it from williams. is the fed taking on a new approach to monetary policy? matt: it certainly does seem that way. a lot of interesting ideas have been introduced by various members of the committee. broaders to this zeitgeist of everybody rethinking the old relationship these to be able to count on. -- they used to be able to count on. it does seem like there are a lot of things at play right now. like a divided fed, but you had dudley coming out earlier in the week talking more on the line of a rate

increase earlier than the market expects. does that they represent what the fomc thinks right now -- does dudley represent what the fomc thinks right now? matt: i think he does. that doesn't mean over the next month or so or even the next three months. it could be that he has in mind something else beyond that. it is not clear that is necessarily a signal that people need to be preparing for an imminent rate increase. we will hear more from him today. maybe we will get more clarity on that. much, matt you very boesler. alan ruskin said yesterday they will be hawkish short-term. jon: a weaker dollar story, but much stronger pound as well. to take a look, simon kennedy

joins us from london. retail sales, it is going to be ugly. brexit, consumers will be scared. it doesn't show in the numbers. simon: coming in much stronger than expected. way above what the median forecast was. we saw brexit in late june come sales inon was way on july -- the sun come outcome of people hit the shops, they bought more clothes. out -- thesun comes sun comes out, people hit the shops, they bought more clothes. sales will slow as unemployment picks up. numbers,he underlying a big pop in sales of watches and jewelry. you wonder how people came from

elsewhere to take advantage of that weaker pound. we have a bit of a squeeze on sterling. that could be short covering. other people who believe it won't be as bad as others thought it would be? simon: it is certainly out there. they still fear stagnancy, they still see more from the bank of england. it will be a while before the big banks turnaround and say brexit is not having the effect that we thought. we will see more discussion about what the u.k. once in this new deal. deal.ts in this new emma: later this month come of the verbal crack a milestone no

other car or tech company has achieved. uberer this month, will crack a milestone no other car or tech company has achieved. upf driving cars will pick passengers in pittsburgh. according to the wall street journal, the u.s. would not let the iranians take control of the money until a swift plane carrying americans took off from iran. stories oft in the four american swimmers who say they were robbed at gunpoint in rio. were released after promising to speak with investigators today. brazilian police are growing skeptical about that claim. is back in the u.s.

changed someew, he of the details in his story. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. if you are struggling to make sense of that story, coming up, we will try to make sense of what's happening to the dollar. coming up next, talking to the global head of fx energy at bnp strategy at bnp paribas. ♪

alix: this is "bloomberg ." of 3.5%, raising its full-year earnings guidance in part -- you have to see the

strong comps else out of the sales at of the u.s. athave to highlight samsung a record high, this stock closed at a record high the last time apple was at a record high was june of 2015. and the more impressive because we keep talking about the sluggish demand for smartphones and more competition, but they had cost cuts and their galaxy phone continues to be killing it. this lowest first-half sales growth since 2009, had a hard time raising prices, in the atdle of a new ceo shift nestle. cisco, you have to look at the earnings there. a little better in terms of

revenue growth, but it was the guidance that was a bit softer. -- you see that negative one -- -1%e one percentage sales. chuck robbins joins us in the 9:00 hour. jon: looking forward to that conversation. a weaker dollar hitting a two-month low. down from prospects for a rate hike. is steven saywell . for the guys on the trading floor at bnp paribas, three different mornings, three different narratives. what on earth is going on? en: we think the market is being way too complacent about prospects for a fed rate hike.

clearly, this has been a response to the minutes we saw isterday, but we think there a strong chance that the fed does move in september. we think the markets are not pricing and enough of that probability. the market is only 20% price for a hike. if they doom of -- if they do move, and will rally quite substantially on that surprise. in the past year, they only made the move if the market is primed for it. how do they prime the market for a move? will janet yellen make that kind of communication towards the market? steven: we think she will. traditionally, that speech has been very important. the clear platform where the fed can really signal what it is going to do. when it comes to data, we know

the fed is very focused on payrolls. when we had that fed meeting at the end of july, we still had a bit of an overhang from the uncertainty here about the may payroll numbers. there is a fear of further downside to the employment report. since then, we've had a nice return to the july to. -- july data. importantraise that three-month moving average for payrolls. we think that will allow the fed to go ahead and hike rates in september. the fed clearly responds to markets, they say they taken into account. what this janet yellen as a practical matter need to get -- what does janet yellen as a practical matter need to get that up to? steven: a key point to focus on.

the fed does not like surprises. a lot of this will come from the signaling. you are right to focus on what the market is saying. dudley's comments today, this may be a good opportunity for him to continue signal that to the market. think they would like a 50% chance of a rate hike priced into the market. currency -- doesnd that hold until the rate hike? steven: our answer is probably yes.

models is called bnp paribas steer. dollar yen is justified below 100. it is coming in at around 98.5. the impetus of a higher rate expectation or rising front in yields in the u.s., the dollar is pretty well valued at the current level. if we get that catalyst of the market changing its view, that will be the signal that the dollar will start to appreciate. much, stevenou so saywell. we will have much more on the currency market, including the yen surging to 100 per dollar and the pound moves higher after surprising retail sales data. this is bloomberg. ♪

alix: this is "bloomberg ." 131ling dollar surging to -- steven saywell is still with us. at what point do we see the short start roll up when it comes to sterling? steven: this is the key point to focus on. our metrics telling us the market is very short sterling. -50.kill goes as low as it is a big vulnerability there. -- expect suchpt a rebound here. retail sales are accelerating in the u.k. i think the bank of england will rethink this from a retail perspective. the production site is terrible. the real numbers scaring the

bank of england, the main factoring industry, this is looking very poor. a bit more far-reaching than one months retail sales numbers. we think the bank of england will take notice of that. there will need to be more easing coming from the bank of england. jon: there's two interpretations of the move today on the cable rate, one is there is a short two, maybe we are starting to build another narrative, maybe the data won't be so bad after all. interpretation that is too early to make? steven: it probably is at the moment. we do see cable around where we are by year end.

we would not be surprised to see it go lower in the short-term. yes, we are focusing on the bank of england having to ease more, but also the fed. the market is very mispriced on the fed. big picture, sterling has already adjusted dramatically. we can lean back on our evaluation models here. we've had a 20 beat figure move and sterling. cable going to parity, cable going to 110, they are bit extreme. we think 135 is a pretty good level for cable to settle at. the risk on rally, oil moving higher.

how much juice is left? steven: not a lot. what we are seeing at the moment is the risk on in the equity market driving this. if the market gets nervous about a rate hike, that is likely to hit the s&p 500, you are likely to hit risk and emerging-market currencies and commodities currencies like the australian dollar. jon: coming up, we discuss the u.s. economy and the next rate hike. from new york city, this is bloomberg. ♪ [ clock ticking ]

time. you only have so much. that's why we want to make sure you won't have to wait on hold. and you won't have to guess when we'll turn up. because after all

we should fit into your life. not the other way around. ♪ everything is cool when you're watching a screen ♪ ♪ everything is awesome, ♪ when you're sharing a meme ♪ ♪ a voice remote, "show me angry kings" ♪ ♪ you know what's awesome? everything! ♪ ♪ apps that please, more selfies, ♪ ♪ endless hours of the best tvs ♪ ♪ brand new apps, shows to go, ♪ ♪ awesome internet that's super whoa... ♪ ♪ everything is awesome xfinity. the future of awesome. ."ix: this is "bloomberg walmart shares rising up to the world's largest retailer reported earnings above analyst estimates.

it also raised its full-year forecast. nestle reported the slowest first half of sales growth -- first half sales growth since 2009. the css he expects pricing to start rebounding in coming months. he expectssays pricing to start rebounding in coming months. a surprise all around, unicredit saying this might not last, uncertainty will come into play in the future. the dominant story in the fx market, if you are a dollar bear and you will up this morning, you are thinking one word, perfection. the dollar index down by about .3%. the dollar weaker against every single queue 10 currency.

strong spending for u.k. retail sales. , wti upmmodities a lift .5%. we had a 50 handle on brent for the first time since july 5. the front end of the curve very much and focus. -- in focus. 30 year yields coming in 3.5 basis points. the fed very much in focus. david: our morning must-read is , giving us a different take on the concerns over brexit. what about leading economists -- one of our leading economists

says a fundamental restructuring of the eurozone may be what is needed. began, we've done a better job in recovering. stagnant,asically broke the last couple quarters .3%, .4%, that is not a good performance. the prussians in spain and depressions in spain and greece. a divorce is not going to be easy, but it can be done in a way that is better than the current system. stiglitzat was joseph on "bloomberg surveillance." he is not a big fan of the way the eurozone has been going. on: he has a lot of company

the other side of the political ideology. he is the liberal economist from gary, indiana. he is coming to the european analysis from the prism of working-class america, of manufacturing america and america that puts people to work. the overall failure is not some bowtie description of the euro, but 20% unemployment rates. david: how do you address that? closer integration across all of europe. the other, break it back up again. tom: i don't have a certain answer about which way to go. i have great respect for the

number of good thinkers saying you have to break it up and come up with a set of euros. , harvard, professor stiglitz, the real distinction here is if you break them up, how do you affect the policy? david: once you break that up, it is hard to put it back together. it was quite a process to get this together -- tom: as i mentioned on radio -- the guy who is adamante ecb stiglitz is wrong. this is a political debate that goes back to the scope -- goes world war ii.

this will be decided at the ballot box. will not see the euro decided at the imf or brussels. it will be decided at the ballot box. tune in every day from 7:00 to 10:00 a.m. eastern time for "bloomberg surveillance." reserve the federal releasing the minutes from last month's meeting yesterday. bullard spoke on the fed rate hike path. >> the implication is the policy rate is going to remain essentially flat over the forecast horizon to remain consistent with the current regime. jon: joining us now is ellen zentner. jim bullard closer to the market

than anybody else. your interpretation is to throw in the towel and admit defeat? they are focusing on creating a new fundamental framework for monetary policy in a post-financial crisis world. manytunately, it takes years to get to that point, but it's taken many years for protesters to get to that point whening more realistic forming expectations for interest rates. we will see more discussion and jackson hole this year. do we need to rethink monetary policy entirely? ellen: rather than so bald-faced adopting that's bald-faced --

bold-faced adopting bullard's view -- they don't know when rates will rise, persistent headwinds have not faded. near zeroe in a interest rate policy environment for a very long time. would other ways can we conduct monetary policy in order to battle downturns? -- what other ways can we conduct monetary policy in order to battle down turns? it is likely that she expects interest rates to remain low for a longer time than they thought. it will be interesting to see how her speech characterizes these issues. the minutes gave us some insight there.

they devoted 2.5 pages to discussing a new framework and how that might look. alix: slightly above zero versus the overall committee, which is about 3%. they don't have that much room to hike if you go with william'' scenario. ellen: the september fomc meeting after janet yellen has prepped everybody at jackson hole for this, you will see those expectations come way down. i think they will be more realistic about the economy plus potential growth. y's potential growth. happen five or six

years ago, we might be at higher interest rates today. that would naturally set the expectation that rates would rise very slowly. the purple line you see is the williams projection, and blue line is where the effect of funds rate is now. jon: the terminal rate at 3%. you are looking at the ultimate destination. 3%, maybe comes down towards 3%. the market is obsessed with the journey. does the journey change in your mind? do they have to move quicker? ellen: absolutely not. this is something a growing number of policymakers feel. has said we can be patient.

they are not being pressured by inflation, the economy still has a ways to go before we meet enough slack. it has been a great, huge adjustment since the financial crisis. i think the terminal or equilibrium rate can be lower and they still get their very slowly. alix: morgan stanley talking about firing -- talking about buying five-year notes. what do you think will change in the next few weeks that gets them to their 30% expectation? ellen: inflation matters the most. inflation expectations are extremely low. they are starting to get embedded lower, which terrifies policymakers. coreed a string of inflation data that surprises to the upside. the next print encore pce prices

will fall to a 1.5% year-over-year pace. get expectations off the table even further for a rate hike this year. ellen center sticking with us. -- ellen zentner sticking with us. will be talking about how you can measure productivity and what you can do to actually boost it. we will be right back. this is bloomberg. ♪

jon: this is "bloomberg ." chuck robbins joins us to discuss cisco's quarterly

results. is "bloomberg ." productivity is not growing the way it used to come everyone complains about it, but nobody seems to be able to do any thing about it. joseph stiglitz spoke out earlier on "bloomberg surveillance." >> the changes are very fast mother is a sectoral -- very fast, there is a sectorial move. i think there is more going on. whenever you have these huge structural transformations which we are going through, there are difficulties of adjustment. some of those difficulties get reflected in lower productivity. david: still with us is ellen center from dust ellen zentner -- ellen zentner from morgan stanley.

you agree that is what is going on with productivity? ellen: i agree that is one part of it and it is a very complicated issue that everyone is laser focused on. productivity, productivity from technological , what we see over time is all this r&d going on is really about old the economy r&d versus new economy r&d. lead to capital deepening and led to productivity enhancements. to economy r&d leading advance the technology is not a productivity enhancer. that will probably stay with us.

labor quality, believe it or not commit there's been a change happening over decades and women's labor force participation rate has risen and the wage gap has persisted. that means more and more people depresses labor quality. deepening to capital investments. david: is it labor quality going or really stagnant while the orands go up -- going down remaining stagnant while the demands go up? ellen: it takes fiscal policy makers do not tend to have a because beyondon their time in office -- i worked for the state of texas come i've worked for government come i

know it's difficult to get policymakers to think beyond their term in office. that's why changes and enhancements have to come from capital deepening. the next president, do we get a lot of infrastructure spending? to sound like too much of a dismal scientist, but i am not one that wants to hang my hat on this divided congress doing something. it fair to blame congress or blame the president -- a lot of these companies are sitting on a lot of money. they are not investing it the ways they used to. ellen: i'm not really blaming the president or congress, but there is a piece of this they can do.

business is absolutely have had no incentives to invest more. they are not hiring the types of workers that need investment in equipment. they're getting a greater shareholder return by doing other things with their money. we have not seen that natural impetus for businesses to invest more. buybacks, dividend increases. jon: if we had higher rates, whether be incentive for them not to do that? ellen: that is one argument that is out there. low interest rate itself has been depressing activity. it businesses see interest rates rising, they need to get in there and fun this investment now rather than later. -- fund this investment now

rather than later. they don't need you suddenly get more activity going before interest rates rise. deutsche bank says there was a huge decline in private equity before the recession -- productivity before the recession. that is the new normal and it is ok. ellen: when productivity picks pick up to what has been a falling trend over time. it is going to get better, but that better is much lower. that plays into how you view the economy's potential growth and what the appropriate equilibrium rate is for that.

david: to draw all this conversation together, is it possible that the fed is part of the problem? when we see minutes like we did yesterday that show disagreement -- you're not sure the demand will be there to support your investment. ellen: it is uncertainty, but i don't think it is caused by the fed. it's not something the fed is doing. the fed is trying to figure out ways to boost the economy and help businesses gain confidence. by not raising interest rates, i don't think that is the problem. znetner,en great conversation -- ellen

zentner, great conversation. david: three charts outlining core business growth that is next. this is bloomberg. ♪

, it is a new york city weaker dollar story when the dollar index down by .3% to a two-month low. a bit of a rally in europe, but only marginally. income commodity story. a stronger pound, up .9%. an upside surprise --

we had a 50 handle on brent. that wraps up some of the market moves. talk about firming, you have to look at walmart, up 3% in premarket. this was october of 2014, a huge decline after you had walmart coming out saying they would pay then thes more, but stock rallied 30% since that level. is the same store sales versus traffic. the orange line is traffic come the white line is same store sales. the eight straight quarter of gains, traffic still up, but

lower than it was in the first quarter by 1.2%. as traffic goes, so does sales. huge strains in the u.s. sales market. very different story than target when their same-store sales fell over 1%. the other big piece for walmart is their online sales. online sales had been declining, but they were able to rise by over 11%. they are investing heavily into this area, buying jet.com. last year, they had about $14 billion in online sales, but only 14% of amazon's $99 billion in sales. the have a lot of room to catch up. that is a big part of why they

are buying jet.com to do that. huge and different walmart than we saw in october of 2014. sales growing, prices lowering. online sales continuing to grow. today.great charts investment officer will join us to discuss financing in this low rate world. this is "bloomberg ." ♪

david: walmart's big beat, the

world's largest retailer surging after top estimates raised in guidance. same-store sales gained for an eighth straight quarter. jonathan: that officials split in july over the urgency to raise, reinforcing lower longer. alix: u.k. retail sales unexpectedly surging following brexit and hot weather and a weaker pound bolstered spending. david: welcome to a second hour of bloomberg go. we were not sure we would learn much from these minutes, but we sort of did. the lesson from zero consensus is if there is no conviction at the fomc, what are they going to do? nothing, and that is the consensus. another speech by mr. dudley, and you wonder if that changes the debate. alix: also the question being, when will -- what will they pay more attention to, going forth -- going forward?

is it about inflation and how to get it at 2%? david: they seem to agree they are not worried about inflation anytime soon. alix: m&a thursday. united shares only buying cardinal -- will be buying cardinal. million.2 we reported about this a few days ago, rumors this was happening. this is the story of two reasonable banks -- two regional banks teaming up. companies joining by cisco ceo will be here to talk earnings, big job cuts as well as their transition to software. we have the firmware markets after yesterday. jonathan: equities are stable,

futures largely negative. i would not set as much price action in london with the ftse doing nothing. if you want the price action, it is in the fx dollar -- fx market. the big upside right now, the price action i'm talking about is on the cable rate at 131.52. that weak dollar is feeding into the commodity market. upper up by 1.2%, wti extends -- 6/10. market,onds outperforming on the long end of the guilt curve -- of the gilt curve. points, but i have to say it has changed about three times this week. it is getting a little bit

stupid. alix: and it is only thursday. let's go around the world and check in with our bloomberg team with index coverage. we are breaking down the estimated walmart numbers. simon kennedy on a retail sales surprise in the u.k.. david: we do turn by -- turned back to those walmart earnings surprise the upside. we are joined by bloomberg's u.s. consumer reporter. walmart seems to be doing alright. >> a very different picture about the u.s. consumer. walmart saw same-store sales increase more than expected. they saw traffic increase, they saw online increase. a really strong quarter for walmart. i talked to the cfo and he said the consumer is not doing great, but they are doing ok and he sees a lot of stability and part

of that is walmart has a very stable business model. groceries that drives regular traffic. gloom asch doom and what we heard yesterday from the target ceo. david: what about the online piece? this has been a priority for the ceo at walmart. they made the big jet purchase. millionspent 3.3 dollars last quarter, which surprised a lot of people considering jets is a one-year-old online startup. this quarter, online sales were up about 12%. a sign that maybe things are improving. have driver is that they doubled the number of products they are selling online, so kind of basic math, you have more product, you can make more sales, but you still have to have customers going there.

not doom and gloom online, either. david: that was bloomberg's u.s. consumer reporter. what does the fed think? alix: consumer spending healthy -- helping to support gdp. the affair -- fomc releasing minutes from their last meeting. lower for longer continues to be the theme. at the same time, the president spoke on the future of fed policy at a conference. it would takear, on the order of 12 to 14 years to get to the full normalization, so that seems like a disconnect, and what we have done is try to put together a new approach. alix: chief u.s. economist from bloomberg intelligence joins us now. how much of this new approach taking on the fed? >> i see no reason why the fed oflocked into a -- a pace

once a year. it means nothing about the future. lowerl have a unemployment rate, stronger consumer spending and more inflation, so there is little reason to believe the fed would go for once per year in 2017. fullerton williams recently -- bullard and williams recently -- that is not the consensus at the fed. they are merely looking at sluggish economic activity delaying the onset of more aggressive policy normalization. i think that those regional presidents in no way reflect the view of the committee. alix:'s view of we may have to prepare the market for a hike sooner, is that the prevailing view in the fed, going forward? >> i think dudley has an

excellent read on what the main line of thinking is. i think his remarks earlier this week were a push back against these regional fed presidents. he does not want to create the sense that that the fed is going back to the drawing board, rather that they are just tinkering with the policy prescription in light of evolving economic data. he said september could be in play, it was evident in the minutes that most policymakers, there is a consensus that we are moving to full employment. if we are not there now, we will be there soon, and tightening will be warranted at some point in the future and that is still a separate meeting. it does really strike a chord with what will be the priority? it was the labor market and now it will be inflation. jonathan: a big question for the u.k. as well. another big question is what -- the consumer,

a political sharp or the for july, it was certainly the weather. sales in july coming in much stronger than expected, up 1.4%. the forecast of doom for the brexit economy is overplayed, certainly in the short-term. the weather forcing people into shops to buy shorts and t-shirts and the brexit affecting the weaker pound, driving up tourism. jonathan: we are trying to get a read coming -- in the months to come. a look back at the jobless claims and they were actually fine, but the vacancy in the jobs numbers were low, and you wonder whether that is an indication of uncertainty for businesses. whether there is any guidance or uncertainty, the bank of england will be watching. >> it is fair to say the data

came in stronger than expected, better than expected. jobless claims numbers did not fall, retail went up. economists isst it is the pause before the storm and as soon as companies come back from summer break and reassess the brexit outlook, one that is uncertain given that we don't know what the u.k. will seek in its new relationship with the eu, when you get those jobless claims start to pick up, unemployment maybe follows and that is when you will see the sales start to deteriorate, at least that is the forecast. news and anat upside to a rise on u.k. retail sales with the cable rate up to 131.53. let's get you up to speed on the markets. was it really only

sunshine for five days. jonathan: it was a hot week in july. that is the story. i want to take a focus on airbus because we have a downgrade over a bank of america. a really interesting call, saying that the valuation is midcycle valuation and we are at the end of the cycle for the industry, looking at slowing orders and a slowing cycle as we go forward. estimates below consensus. the real contrarian call at bank of america in terms of valuation and how it is going to grow, going forward. a totally different story when it comes to samsung as it closes at a record high, in stark contrast with apple, whose record was june of 2015. galaxy phones are killing it, but this is impressive because of the competition and the global worries of the sluggish smartphone industry.

wrapping it out with twitter, getting a sell rating at evercore. is issue is that twitter basically trading at or above what microsoft paid for linkedin back in june, but recurring revenue is considerably lower. the risk reward is definitely to the town -- to the downside and lots of volatility for this stock. now when he to know outside the world of business -- we need to know outside the world of business. --- and the: >> customers will be able to hail self driving cars from their smartphones. it will be supervised by humans in the driver seat. vehicles are specially modified although suv's outfitted with sensors, lasers and radar. you details about the north korean diplomat who defected to south korea.

officials say the number two official at north korea's embassy in london has arrived in seoul with his family. he says he defected because of his disillusionment with the regime. does go americans who say they were robbed at gunpoint in rio will be questioned by brazilian police. they were pulled off their flight to the u.s. by brilliant -- five brazilian authorities. they were released after promising to speak with authorities. police are going skeptical about their claims. another of the slim -- swimmers is back in the u.s. global news 24 hours a day, powered by more than 2600 journalists in more than 20 countries. jonathan: coming up, out to deliver set returns in a negative world. aig's cio says he would rather take a lower return on equity, but invest safely.

we break down his portfolio, next. ♪

alix: lower for longer, hawkish short-term, that is where the fed stands and even in a negative yielding world, insurers need to make money. joining us now is aig's chief investment officer. to -- you would take a lower r.o.c. then submit to more risk, tell us why. doug: taking a lower r.o.c., ramy expected return perspective, part of it is the risk for your rate, plus a risk premium. at the end of the day, once it goes down, it is not like you

can change that risk medium. all you can do is take more risk and hopefully get more compensation. the problem i have is there is lot -- there is lots of risk without a lot of reward. youdid you take risks when were not getting appropriate compensation? our view is it is much better to get compensated by managing the risk profile of the company and stay in lower risk investment and get appropriate returns. jonathan: the conversations we have here is it simple, you go down the yield curve or down the capital structure on debt. it is different for insurers. doug: we have to manage regulatory capital, we have promises and obligations. policyholders,e we have to try to provide an appropriate return of the capital because that is baked into the premiums that we charge. it is based on the investment return. at the same time, we have to

satisfy obligations and be able to deliver those claims. we have to balance the risk profile to the return profile which is a constant tug-of-war. if i start taking low risk, i have to raise my premiums and i won't be competitive. if i start taking incredible amounts of risk, the credit quality of my ability to deliver on my long-term promises will do to rearrange. it is an ever-changing challenge to balance that appropriately. david: it looks like you are going more into things like ceos. -- cdos. doug: you have to look at the balance sheets. the first process in thinking about how to manage the assets is to look at the analysis. to think of the maturity profile of the liabilities. you have to think about the liquidity profiles. one of the things that is unique to aig is we have long maturity

liabilities which gives us a very attractive look to the profile because the demand to satisfy those claims won't be for many years in the future. as a result, we want to be able to monetize and pick up extra yield for buying less liquid assets because we don't need to sell those assets for a long time. we are constantly looking at assets that may enjoy extra yield compensate -- compensation associated with their lack of liquidity. you can go beyond cdo's and write to the loans. given that we might have liabilities that are due in 15 years, there are opportunities for us to buy loans themselves. we don't need to liquidate assets for those years, so we can take advantage of liquidity. alix: if you want to have higher yields, you are willing to take less liquidity. how much sovereign debt are you willing to take? doug: very little.

the best sovereign debt is the 30 year inflation protected security. there is so much uncertainty about is there going to be in ration or disinflation. if you have a high degree of uncertainty, inflation expectations are relatively low. if you would try to take a position in sovereign debt, the best position you would take if someone put a gun to my head and said i could only by a sovereign the 30 would go and buy year inflation protected security. another interesting point is because you have been covering stories about commercial real estate and another was some commentary on the -- that it is .ublishes -- bubblicious if you look at commercial real estate from my perspective, it is very similar to what inflation -- to a inflation

protected bond. i get streams of rent that are indexed to the level of inflation. it is comparable to owning a stream of inflation cash flow. -- whatexactly what it a inflation protected security is. on's compare the yield buying commercial mortgage property which gives you an inflation protected stream of cash flow versus doing it in the riskless asset class. happens that the yield on treasury inflation protected securities in 10 years is zero. the yield on 30 year is 50 or 60 basis points. the capitalization rate in commercial real estate is 6%, roughly. you get an extra 600 basis points over the risk-free yield over making investments in real estate. david: we will not put a gun to

your head. [laughter] aig's cio will be staying with us. alix: coming up, he thought he was getting an equity position but what he got was risky debt. the real problem with hedge funds. ♪

david: this is bloomberg go. we are back with aig's chief investment officer, overseeing more than 300 deep in dollars in assets. in this environment, hedge fund investment is so much more important, why do they remain important to aig? despite the fact that we have $350 billion in asset, there will be a number of asset classes where it does not make sense for me to hire the best people in the world to do that for me.

i have to outsource the money management because if i cannot but together the team of experts and be able to confidently respond -- provide them with a supply of capital, we will not have a big position. we use the outside managers in a whole number of forums, some in the form of hedge funds, some in separate accounts. i use a variety of outside managers to manage those classes that will be sold -- small in scale. a longn: you went to short equity fund and help -- ended up holding puerto rican debt. how does that happen and how do you keep on top? doug: that is the main issue we have with the hedge funds. it is very hard to have the full transparency as to what is going on. what is important to me is i want to make sure there is no correlation between what those managers are doing. i want them to stay true to the asset classes i want them to do and major there is no overlap with what is on my balance sheet.

because of the form, when you invest in the hedge fund, it is difficult to know what is going on inside. in the case of that example, i did a very unusual thing. what normally happens when you get your materials, most likely, you get them and put them in an envelope and send them to your accountant. i took a peek at all the k-1's and interviewing them, you begin to see there was tax-exempt income on one of my k-1's. long chore fun -- long short fund have equity on the k-1 and then you go through the act of the k-1 and it reveals when you own tax-exempt bonds, they had to tell you what the source of the states are so you can file your state income taxes correctly and you see the variety and it's like we manage a very large tax-exempt bond portfolio. there is no reason i want to have a person who i have given money to manage for me actually

buying asset classes i manage. it,d: there you have teaching us that it is not the two and 20 that is the problem. great to have you with us. jonathan: coming up, an initial jobless claims just moments away. of oure will air part interview with columbia's professor of economics. a weaker dollar and a stronger commodity session. futures are largely negative. ♪

jonathan: this is bloomberg. let's check in on the markets. we are awaiting u.s. economic data. initial jobless claims coming shortly.

ver in europe. the fx market is a weaker 36,ar, dollar yen, 100 spot maybe the exception of the moment, the cable rate decidedly stronger. economic data in the u.k. initial jobless claims coming in at 262,000 jobs, less than estimated. the number of people filing for initial jobless claims continues to fall lower. the idea is that we have a labor market that is better versus the inflation picture. data like this tends to make the job of the fed a bit more difficult in terms of market off of the&p futures lows for the session, the dollar climbing up a little bit, but still negative on the day. jonathan: it is a high frequency data point that traditionally does not move the markets, but

it is into the market is doing ok. a tighter labor market -- if they are not worried about the inflation, if they remain -- inflation will shoot higher and they will have to do something on interest rates. a very relaxed attitude to that is the take away from yesterday. did has really been quite strong, but wages are coming up, but not as fast as we would have expected. jonathan: let's carry on the conversation and get to today's morning meeting. michael fredericks, the portfolio manager, which has .ver $13 million in assets let's talk about the bond market . the conversation we keep having. you go further down the curve, further down the capital structure, which one is it? michael: we have been emphasizing a few things.

one, be really diversified, and our preferences for kerry assets over equities, we have been taking down our equity rates, but here question, we don't think it is a time to be going up the curve or chasing yield. it is a time to be more conservative. there will be a time when there are more attractive entry points, but we are running about half of our risk budget and i think that is prudent, given where rates and spreads are, at the moment. jonathan: talk to me about how you rebalanced interest rate positioning and what you have done in the last month. michael: we had some hedges on the front end. we were concerned that the front end was more vulnerable to shock. we see continued flow in the backend. european and japanese, mainly

institutions, mainly into treasuries and markets like clo's and securitized assets. we think that will really keep the backend of the yield curve pretty well contained, so that gives you a sense. we have a look those hedges where we think at the moment, the fed may well raise in december, but we don't see strong enough growth to be worried about a big back up in the front and. jonathan: i want to pivot toward investment-grade. is spread over treasuries the highest in about a year and i wonder how you reconcile the two things. at what point do we stop looking at things like the fed and start looking at absolute yield? give me some thoughts. michael: we are talking about that very actively, what level the you just back away? look at european high-yield, at under 3%. would you want to buy and hold

that on a 10 year view and we say no. i think a similar story in pockets of aig which is why it is so tight. it is this technical bid from overseas buyers that they are so , even buying at low levels of absolute yield was pretty good compared to if you are sitting in japan or germany. at the same time, it is part of the reason you are seeing more money move into things like aa and aaa clo's were you can earn two and a quarter with virtually no duration risk compared to ig. you are managing a big multi-asset income, you wake up every morning seemingly to a different story. we are having three different conversations over what the fitted -- over what the fed will or won't do.

how do you feel right now? michael: we take a long view. a lot of mixed messages, and it is difficult to gauge where that is going. predator than getting caught up fedarsing word changes and text, we are stepping back and looking at the economy and is it strong enough to see a big move higher in short-term rates and we think the answer is no. given how weak the rest of the world is, if they try to aggressively raise rates, the translation affect on the dollar defeats the purpose and takes the wind out of the u.s. economic sails. we'll don't see a big shift in interest policy. yields are going to be low for a long time, and it is a huge challenge to our clients who need the income and consistency and cannot accept big drawdowns and that is why we have been battling down the hatches with low levels of risk. jonathan: great to have you with

us, thank you. europe, aing over to crisis in europe with some wondering if the euro will be able to hold up and if a divorce from the currency may be the solution. a bloomberg talk with joseph stiglitz, here is what he had to say. joseph: if you look at what has happened as a result of the euro, it took away the interest rate and exchange rate mechanism for adjusting, did not put anything in its place. europeput, the gdp of has been well below even below the united states. we were the country from whence crisis began, we had done a better job in recovering. they are basically stagnant. wrote the last couple of

quarters, .3%, that is not a good performance. ist you have to contrast continuing that outcome, depressions in spain and greece, and an alternative. a divorce is not going to be easy -- >> how difficult -- joseph: but it could be done in a way that is better than the current system. it would still be better if they put in place -- the question is, will they do that? >> if the euro breaks apart, into the set up with austerity, they vote in a party that once out of the euro and france does the same, how many years do -- how many years of pain do we see before we get into this world you are talking about? joseph: the crisis began in 2008 and 2010.

the market with the euro is not adjusting well. i think the example of countries that have a flux in exchange rate, a response to the countries with the deepest crises, they responded very quickly. we are not talking about six years, we are talking about a couple of years. argentina, once it broke the pact with the dollar, began an innymous growth, beginning 2002 and had a growth rate of 8% , putting it right next to china as the fastest-growing company -- country in the world. that continued until the global financial crisis. >> you would argue for a breakup of the euro and stronger banking unions. how do the two marry each other? joseph: i would argue for a stronger banking union and doing the other things that would keep euro together -- europe together.

the question is, is there is -- is there enough political solidarity and will to do those limited number of things that work, makethe euro the eurozone returned to the kind of growth had before the euro? joiningseph stiglitz bloomberg television. michael mccain joins us and you have also interviewed him. what did he mean by divorce. -- by divorce? >> he is saying that the euro should be fixed, because the european project is worthwhile. you can make the policy changes for the predicate for the euro, the things it was told on like fiscal authority that is missing. he also suggested you reform the groupings,ifferent maybe have a northern euro and southern euro or as he suggests,

perhaps you have a flexible euro where it is one currency, but with different exchange rates, maybe a greek euro is worth less than a german euro. there are practical problems, but these are some of the ideas. david: people from the beginning when the euro was founded said that fiscal should be together with monetary and they could not get there. is there any prospect of these individual companies -- countries would give up their fiscal authority? michael: the best that the europeans seem to be up to come up with is the idea of muddling along and they are proud of that because they say they are able to create compromises. what joe says is you cannot be proud of that because even muddling along leaves people like those increase with deep depression and the human cost of muddling along is tremendous. there does not seem to be any prospect of people will move beyond that. alix: did he specify what kind

of catalyst could bring this around? city is out saying italy and the elections there are truly one of the biggest risks to europe that nobody is talking about. needel: you would something like that, in italy is a major concern, going into the fall. once we know the date, we will have a better idea of what will happen. you will have this drift and he says you will get a couple of more years out of it, and then something else will happen that pushes you over the break. alix: thank you very much. up, walmartming jumping on earnings. topping estimates and raising guidance. we discussed what drove the big beat. -- discuss what drove the big beat. ♪

alix: this is bloomberg go. coming up, chief investment officer -- unveils his investment strategy for commodities and fixed income. here is -- bloomberg business flash. the biggest maker of the equipment that power the internet is cutting 7% of its workforce. that means about 5500 positions will be limited. recastpany is trying to itself as a provider of software and services. with thethey will talk ceo that bloomberg will talk with the ceo. unit -- united bancshares has agreed to buy one of its rivals in the washington, d.c. area,

cardinal financial. regional bank mergers have will comed as lenders to counter challenges stemming from the financial crisis. the shaky global demand for south -- for smartphones is not slowing down spam -- samsung. samsung reported better-than-expected second-quarter profits. -- that is your bloomberg business flash. david: shares of walmart are rising. the world biggest retailer boosted its annual earnings forecast after second order earnings topped estimates. joining us for more is dan binder, he has a buy on walmart of $85. a price target we cannot talk about price

target at this point. we go to our previously published target of $82. upward earnings or revisions was part of our thesis, so we are happy to see those shares move higher in the free market. david: what did you take away from this earnings announcement? is the strategy working? dan: we upgraded this, early june and the genesis of the upgrade was our store visits in the u.s. as we to word the u.s. stores -- the u.s. stores, we saw better execution which meant cleaner stores, better stock shelves, faster checkout. enter the little more time than they initially expected, but when you have 4600 stores, sometimes scale is not your friend. i think they have done well against the plan. david: tell us about this field research you have been doing. i read that you also noted target and they did not look as

good as walmart did. our research encompasses a lot of different things, but a lot of it is what we are hearing and seeing in stores. has had lesso-day incremental stores versus walmart. walmart stores were frankly in decayat of a period of for this management to go for and i think doug mcmillon as ceo had a fundamentally different view on how the future would look for walmart, and i think he took some big hits in october as he lowered earnings, reinvested in stores. they are looking a lot better, and now he is reinvesting in price to try and drive more traffic and get more volume. david: they are also upgrading their e-commerce with a big acquisition of jet.com. which is driving this more at this point? dan: brick is a much larger

piece of the total. e-commerce was right around 3% of sales, last year. from a headline perspective, it is important that they are showing a wee acceleration of e-commerce growth because that is where retail is going, but the bigger needle mover is the u.s. stores and you have to clean those up and give the customer a reason to come in, change their impression and i think you stand a better chance to get their business online as well. jonathan: cleaning them up is one thing, closing them is another. -- do youin the u.k. think from a field research you have done, one of the stores you looked at and solve this probably would be better than just shutting down? do you think that is a position or strategy that will develop? dan: if you look at retail across the u.s., -- you feel that pain because retailers have

had this shift online. when you look at walmart, specifically, though stores are very profitable. trimming,be room for but i am expect massive closures the way you have seen in say, the office product space. david: let's spend some time on jet.com. what about the integration? a lot of these deals go wrong on integration. it is tricky, especially when it comes to systems and supply chain. jet.com only has three distribution centers. perspective,s walmart will have to do a lot of work on the backend and integrate that. they have experience in some cases, painfully in areas like brazil where the just completed the systems integration after several years. i think they will take this slowly and be smart about it. what i like about jet.com is not

-- will be reporting right up to doug. the risk is that you get innovators and entrepreneurs to bog down in corporate bureaucracy -- bogged down in corporate bureaucracy. david: that is a great point. thank you so much, dan binder. alix: don't short the ftse 100 according to one technical analyst and we will show you why. ♪

david: this is bloomberg go. time for battle of the charts. we have an intercontinental challenge. we will start here in new york. alix: i'm going to japan. banks are running out

of bonds to sell, they are hitting levels were if they sell anymore, they will be selling the bonds they need as collateral and this chart helps tell the story. index asmpasses -- the them together and gives you a proxy of jgb. trillion, the.1 lowest back to 2004. since the bond buying program picked up in 2013, it has: by 72%. the idea is that you have less liquidity and no one wants to sell. we saw something similar in the u.k. with an uncovered operation. we are unable to get the bond you need in order to buy. that poses a big problem for the boj. david: hardly anything left to buy. over in london, what the you have? >> i'm looking at the ftse 100, one of the best performers.

earlier this week, it went up to 73 on the relative strength index, which some say is overboard territory. does it have further to go or will we see declines from here? predict thegists ftse 100 is going to fall from current levels. ais chart shows the view of guy who runs a typical out -- analysis site and he says this chart pattern which is the inverted head and shoulders, this indicates the ftse 100 is going to surpass last year's peak and may reach 7300 in the second quarter of 2017. this blue line here is the resistance level, it has gone above that and this analyst said it should keep climbing, but perhaps not in a straight line. he says think of the ftse 100 level as the speed and rsi as

the acceleration. just because we are not accelerating as quickly does not mean speed is not incrementally going higher. david: you know the ftse well, jonathan. jonathan: we have the risk off tone after the vote and it all kicked in, some of the big exports in the majority of the companies listed on the ftse are big international names, so a lot of it is sterling. that chart is critical. alix's chart,- they are buy and hold. that is why you see volume drop off so much. we have seen days like that, once a day. that is how like the volume has been. alix: banks will now have to buy and hold because they needed for collateral. it is sort of a boat by an old by the end of the day. david: banks cannot sell anymore

because they have to have a certain amount. i will vote with alix. jonathan: i will split the vote. london wins. up, cisco's ceo will be here, discussing earnings as well as the transition to software. the market open is 34 minutes away. futures marginally negative. fx market decidedly weaker. a federal reserve the continues to confuse. ♪

we are 30 minutes from the

opening bell in new york. this is bloomberg go. i am alix steel with jonathan ferro and david westin. you are seeing a 50% probability of a federal type -- fed rate hike. david: we are really divided on rates. jon: i'm going to call it federal exhaustion. it is going to continue today feduse the new york president will be speaking in several hours time and he threw a wrench in the debate earlier this week. alix: what does it wind up inflation? inflation is nowhere near the target, so what does that mean for the rest of the market? do we continue? david: they seem to be prepared to run a high. later this hour, cisco has big plans for its future but

it is going to have to have a smaller workforce so it will lay off up to 7% of its employees. ceo chuck robbins will be joining us. we want to check that almost robbins -- those markets with jonathan. jon: futures lower marginally. in europe, a marginal positive sign of the ftse 100. on the dax, up by about a third. in the fx market, the sanction is pretty clear. earlier in the section, a weaker dollar story. not as aggressive as earlier, down by about 2/10 of 1%. the date movies on the cable rate. precise.o be a big surprise on u.k. retail sales really driving sterling stronger. market, crudety

had a 50 handled very briefly. well. firm as to wrap things up in the bond market, coming in a three basis points. the focus in new york and the global markets, the front end of the treasury curve which get the touch off the federal reserve. the debate, that continues. alix: we've got a lot of m&a and some earnings. cardinal financial and united bancshares stock is relatively unchanged but they are buying -- $912 million, $2011 $27.69 per share. you have regulation and low rates, thence -- you have more mergers. walmart, same-store

sales will grow by one to one .nd a half percent the u.s. strategy is working. the e-commerce department also up by 11.8%. it had been slowing but it is increasing. and by $.15. turning to twitter, downgrading the stock to sell. a look at traffic patterns and management commentary, evaluations are an issue trading at or above the level where microsoft was bubbling. revenue is much less of that of linkedin. abigail doolittle is at the nasdaq and in europe, nejra cehic is in london. abigail, talk about earnings. >> the big story for the nasdaq, cisco systems reporting after the bell yesterday but really to

be used to come out of the report is that they are laying off 7% of their workforce. this is far less than a report saying they could lay off up to 14,000 jobs, all of this does reflect a transition towards software from hardware and many think this is a good thing. , they mainlyorner offered a in-line pass for the future. neutrals are bullish. piper is saying this transition towards software could help profitability. net-net is a storage company that put out a blowout fiscal first by 28%. guide on aa strong few upgrades including j.p. morgan's robert hall, saying he is more positive on this story. susquehanna has a buy rating.

the stock was 90% on the year. also joining us, nejra cehic in london, european stocks rising for the first time in five days? previous to this, we had four days without gain which was the longest such stretch june. stocks up 5/10 of a percent, rebounding from a two week low. some of it is being driven by the market interpreting the fed and we also got the account from the ecb's. the last meeting where they were reasonably positive about the economic outlooks. you have seen stocks moving higher. in terms of individual movers, the biggest gainer on the stoxx 600, up almost 10%. it jumped to its highest in almost eight years. allocated 400 million euros

to a stock buyback. second-quarter shipments and revenue beat full cost. biggest dutchnd insurer and it has risen the most in two years. we are talking about solvency here, the key thing for insurers. show you sterling. we are up 8/10 of a percent. the pound up 2% against the dollar. this for july, the month of the brexit, it comes after some better-than-expected data that we had. this is also a two week trade, so the dollar we displays in as well. jon: for global markets, the debate continues. for the federal reserve, inflation seems to be the one thing officials agree on. say that aesidents september rate hike is very much

a possibility but our next guest does not agree saying rates won't rise until it reaches 117. joinsll family holdings us. what is the federal reserve guide? some say september is on the table and others say it is up in the air. >> we did have one dissenter on the committee. who didn't like the current or on holddoveish stance. a few others are sympathetic to that position but the board itself is still on hold. when they say they are data dependent, that does not mean they are waiting for one month of data. they really want a change in the pattern of data. that brings you to the fall which, during the election

season, i can't remember a single time that the fed acted during the election season. once every four years when the election comes up. regardless of the short-term dynamics of the economic statistics that get printed, i think the fed is on hold until january. david: putting aside politics for a moment, what sorts of data would you have to see before you changed your mind about their raising sooner. we have pretty strong employment data coming out. there is inflation. what would you need to see? >> i see rising inflation. who was onin, yesterday, is a brilliant inflation technician and he points out that health care inflation is rising, rents are , there is underlying core inflation in the sticky

components and inflation is being held out a little bit in terms of energy crisis -- energy prices. before brexit we had fair market prices for gasoline, and the prices figured down to 0.8% which is relatively a basement level for inflation. going toink that is trend up towards core and core is rising. -- inflation dynamics will to suggest that the fed has challenges ahead. mindther thing to keep in is the fed balance sheet is huge, over $4 trillion. it is five times bigger than it was over the past 20 and 30 and 40 years. in 2011, they expanded that the 4 trillion so now you are dealing with a supertanker that is really delegate in terms of

its -- the fed doesn't want to create that volatility in the fall. probably have to wait till january. alix: i know you have some strong calls on commodities, but where do you stand on the search for yield? do you want to go down the risk quality curve or do you go out the duration scale? people typically invested in the equity market obviously have the luxury of watching markets rally 10 or 20% and obviously fall 10 or 20%. in the past 20 years, we have seen equities fall by 50%. to the equity investors, certainly timing is not as important. for fixed income investors there comes a time where you have to say a zero total return is doing well.

and if you start out with yields at one and a half percent for it lowers for the shorter maturities, negative in some cases. reserving best off cash, keeping gun powder dry and buying back when yields are ofher and any likelihood retaining those yield in terms of offsetting capital losses is much better. riskyhe dynamics are very david:.investors john brynjolfsson, please stay with us. we are going to talk about commodities coming up. now we go to emma chandra with first word news. >> robotic cars hit the streets of pittsburgh later this month. it is a big first for cougar. .- uber for now, it will be supervised

by humans in the drivers seat. suv's.lly modified volvo how broad the crackdown was after last month's attempted to in turkey. more than 40,000 people were detained and there were 5000 still in custody. 80,000 government employees were removed from duty. sayamerican swimmers who they were robbed at gunpoint in rio will be questioned by brazilian fleece today -- police today. they were pulled off their flight by brazilian authorities. they were released. police are growing skeptical about their claims. ryan lochte is back in the u.s. and he changed some of the details of his original story about the robbery. global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. this is bloomberg. jon: coming up, entering a bull

market. the big question, is the rally sustainable? later, cisco's plan to transform itself. us in 20 robbins joins minutes time. from new york, 17 minutes away from the opening. this is bloomberg. ♪

alix: oil on the brink of a bull market. this is bloomberg go. brett crossing $50 a barrel. predicted theson crude will go to $15 a barrel now. he says it will drop to below

40. what happened to that 15 call? springrly, back in the or late last year, we had a glut of supply. we had bankruptcies in the sale sector. be a hugenued to oversupply. with supply closer to its upper levels in terms of inventories, we still have more production than demand. we have a weak global economy, whether you are talking in brazil or venezuela or europe or japan. so global industrial production demand is not growing significantly. alix: but clearly, you see things getting better. we saw 15 at the beginning of the year and now you see just 40. clearly it has been coming more into balance. >> i don't know that the

fundamentals have changed. oil prices get priced in the futures markets and there are certainly big players on either side when you are talking about oil. there can be a divergence between fundamentals and prices. we are not seeing 100-100 five dollar prices that we had back when the fundamentals were tight. have an oversupply situation, tankers offshore full of oil, waiting to dock and they are in no hurry to dock because the inventories on shore are full. opec will try to price oil in the coming weeks. every large sovereign that is running huge deficits, we would like to see higher oil prices at the same time, in order to cure their deficits they are pumping

full board and have no interest in cutting themselves. they would like to see someone else cut production. alix: oil below 40, your other commodity call is gold at $2000. we see a correlation between gold and the 10 year yield right around the record levels. at 2000, what is your call for the 10 year. i am not sure about the correlation because one of the things that we have going on is that with money printing going toall over the world, we, some extent, have the king has no clothes situation. to the an alternative fiat money backed by fed liabilities or creating fed assets, $4 trillion balance sheets at the fed. $180 billion a month are being printed globally by central

banks, bank of england, bank of japan, creating more and more currency and more and more reserves. and if that does sound like a someinable situation, at point the king was no close gets called out, where do you want to be? you obviously want to be in something that is real with no liability backing it. gold is a fundamental hedge against that kind of tail risk. alix: thanks very much john brynjolfsson. $2000, that is able call. coming up, walmart says sales are actually good for them. this is bloomberg. ♪

alix: this is bloomberg go. increases inng annual earnings. let's dig into the numbers in today's numbers don't lie. a big part of it was the u.s. consumer. you had same-store sales rising 1.6%. is foot traffic which came in at 1.2%. at the seventh consecutive nonetheless still in positive territory. are of the reason why you seeing walmart did better is online sales are growing, coming in at 11.8%. a huge jump from the first quarter. there was a lot of concern that their online growth was slowing. remember, walmart also bought jet.com to help. they came in at 14 billion last year.

nonetheless, 12% is something. us for more on the traditional retail giant is joe feldman, assistant director of research and retail analysis. he has a perform call on walmart stock. welcome. to take a number two pencil and rethink what you're talking about? >> our price target is definitely under review. futureys update it with information. stock is pretty expensive, if you look at where it has traded historically. clearly, the company has momentum and it has been performing quite well. there is reason to be in this stock and probably to own it through the balance of the year. it is not just as simple as "got to buy today."

david: is it same-store sales? is it taking their projections up? what jumps out at you? >> clearly the same-store sales number is driven by the traffic. up 1.2% even though it did decelerate a little from sevenrst order, it is straight quarters of positive traffic. clearly the efforts they made in-store, they are helping to drive traffic and that is working. you've got aime, competitor out there, target, not doing quite as well so that makes an easy target. it puts pressure on the rest of the space. -- has been increasing price dispenses. david: what do you make of the jet.com purchase? we have already seen an uptick even before jett.com came up.

>> i don't think the benefits we are seeing in commerce right now have anything to do with that. it will be a more 2017 event. acquisitiontrategic from the standpoint it gives hasss to technology jet.com and it also has walmart access to the millennial customer and a slightly more affluent customer than they currently have. we can debate whether they paid too much and the value of it and will it be a success overtime, i do think there will be learnings that will be successful overtime , particularly those issues i mentioned. david: is walmart just doing it better or might this be an indicator of future growth more broadly? this past two weeks that we have seen earnings from everybody, the numbers genuinely have been a little bit that are

for most people. what is interesting here is walmart does cater to the more lower-middle income can rumor where there has been more strength. gas prices being low for a sustained. of time, it is finally starting to trickle in. also, their increase in minimum wages have definitely been helping this consumer and that helps at walmart. david: thanks for being with us. let's look at those markets? jon: we are four minutes away from the cash open. futures marginally negative, europe positive after four days of a losing streak. a cash open his next. ♪

jon: from new york city, this is bloomberg go. moments away from the opening bell in new york, here is the picture in global markets.

nothing in equities, marginally positive in europe. 3/10 on the dax after a four-day losing streak. the opening bell in new york, switch of the board. , with theollar story exception of dollar yen at 141. 1% after an upside surprise, it is a significant upside surprise on u.k. retail sales. the softer dollar story feeding commodity market, yields unchanged amidst the federal reserve debate. we go nowhere on the 10 year. with resident dudley speaking of the bill later on, before we get there, let's script this market back and get it open. >> there is no way for me to right nowsound sexy

because there is not a lot ahead of buildup the speaking. we have this mess field to equity markets. you get a 50% chance of a rate increase, however maybe this is a better thing for britain hans. -- corporate bonds. abovep is well extended its 200 day moving average. if we could bring that up, you can see how much momentum has propelled stocks forward. trend lines, look how far the s&p has come since july. a huge move, you have not seen this kind of move since 2014. digging deeper in the individual movers, walmart starting to have a good morning. earnings,wo your e-commerce sales were up and ceo doug macmillan saying u.s.

strategy is working come sales. have a weaker dollar, the ds why index down to a three-week low. that propelled most commodities higher. rent hit 50 for the first time since july. , marathonen transport oil chesapeake drilling down with natural gas. kindergarten an upgrade over at morgan stanley. cisco shares are down as it struggles to revitalize its growth. the company reported fourth-quarter sales that decline 2% from a year earlier. cut 5500 jobs,l which is about 7% of its workforce as it transitions its product focus from hardware to software. we are joined by ceo chuck robbins. thank you for being here. >> great to be here.

you're getting some reactions to stock but the big story is this transition from hardware to software. give us a sense of where you are on that transition and how his potential layoffs it's in? if yout of all, normalize the box business that we sold back about six or seven years ago -- six or seven months ago, our revenues were up 2% and our record earnings per share were up 9% so overall i was pleased with the quarter. we had a lot of places that performed well in a macro environment. as we look at the transition that we are going through, the first thing we have to remember is that almost 75% of the engineering resources at cisco our software engineers and have been for a long time. what we are working on is how we

evolved our offers to our customers, how we package our innovation in a way that they would like to procure it? as a service or subscription. the fourth quarter in the row, we provide this information and our deferred revenue balance from software and subscription was up 33%. we are making that transition and i am pleased with where we are. david: where are you in the transition at this point? at what point will the growth for the substitute diminished growth for the old? look at what we have done in our security portfolio, with double-digit growth and the -- grew revenue growth 29%, half of that is coming from software and subscription. our collaboration portfolio was up 16%. being percent of that is

sold through software and subscription and it is available as a cloud service and we are making that transition a good contribution of software and data center orchestration. we are working on that, the teams are working on how we take that same methodology and apply it to our or methodologies. leader in the security business that architected this transition and we asked him to take on both security and the networking because we needed to do the same thing and our core product. david: are you satisfied that the pace is fast enough? you mentioned it was up 16%. within that, i noticed an advanced threat was up 80%. are you looking for other acquisitions that could speed up this transition? at this look transition, what we fundamentally do is we asked our business leaders in the

to first andoups foremost understand that we are going to make this transition. secondly, they need to look at the implications on their business and how they look at their portfolio different and what that means relatives to innovation and acquisitions needed in the security examples. it was a combination of really strong acquisitions but incredible innovation. the combination of those two has gotten us to where we are today. beh of our teams will looking at internalization, acquisitions when necessary and we will use of letters -- letter -- levers. david: are you also looking at possible things that you would like to sell in the old line that would actually speed up this transition? i think all companies are theirsible for looking at business, looking at their portfolio, making trade-off

decisions, so we constantly do that as part of what we do. we are constantly evaluating the entire portfolio. david: are you satisfied that you are moving fast enough? if you ask people around cisco, they would probably tell you that i'm never satisfied that we are moving fast enough have been moving relatively fast over the last year. we have made a lot of changes. i think the markets we operate in require us to make the necessary changes and we live in a dynamic environment where every week and month and quarter there are variables we need to build into our business and that requires us not only to move fast but be decisive and sometimes we need to make top decisions to position the company for the future. alix: some are saying they came in a bit light. are you concerned with that or is there something else going on

for the next quarter? you look at q4, what we said is that we saw a shift in the demand from our service providers and emerging countries. the rest of our orders were up 5% which is a strong statement relative to the enterprise public-sector commercial businesses. when you combine that shift in demand with the fact that our teams aren't suggesting that we would see a fundamental shift in the first order then we are beginning to see some impact of the business model transition on how we recognize revenue. all those led us to our guidance and we are committed to putting withrd our financial model revenue and earnings per share and managing to that through different levers like operating expenses. alix: another business segment that i feel like is gaining a 55 g. traction is

you had a powerful bandwidth. where are we in terms of the new cycle with that? almost every service provider around the world is looking at how the combination of routing technology and optical technology play integral roles in the bandwidth required to accommodate this never-ending desire for bandwidth that is going on in the internet. the prominence of video and how prevalent it is in driving the capacity requirements, and as we bring high-speed technologies like five g, they fundamentally give us the ability to deliver higher bandwidth into areas we might not have been able to before, to deliver remote education, remote health care, the internet of things and conductivity issues, that will require robust infrastructure. as that builds out, we think that does represent a good opportunity.

david: i do want to come back to the potential layoffs. it is a difficult thing to do what you have to do it and as far as you can tell will this be the end of it? or will you be constantly reviewing this as you go forward ? >> i said yesterday i would like to see the speedy -- this be the exception. is not an easy decision to make but it is one that we feel like we had to make to get our investments aligned against the areas we believe will drive the growth of the company in the future. evaluate ourantly portfolio, constantly run the business and look at the investments and the investments that we need to make but these are people and we don't take david:.ely -- lightly david:are you going to have a buyout program? take care of our

employees and we ensure that they can bridge to another opportunity. location, job search services for them, and all the things that you expect a responsible company to do so we will take care of them as they go. david: it is the responsibility of a leader. thank you so much. it is good to have you on the program. alix: what is moving in the market is oil, up for six straight days, the longest winning streak in a year. you have wti jumping one half percent. it came moving more than brett. it really feels like the market is looking for the bullish take because they have production moving up higher in the u.s. and yet markets really took that stride. it is a powerful move off of the potential opec freeze and it

keeps going. will be all over the markets in the next segment. coming up, uber puts a date on the fleet of autonomous cars that will pick up passengers later this month in pittsburgh. details coming up. this is bloomberg. ♪

go.d: this is bloomberg i am david westin. coming up, just an hour, john ledger is t-mobile ceo. he is here.

jon: from new york city, this is bloomberg and here is the state of the markets. .arginally negative in europe we roll over on the .ootsie -- on the ftse on the global market, a stronger dollar. >> this is the morning of the big share for the nasdaq. with semiff conductor, not to be confused with sun edison inc., sores -- shares are soaring. 683 million dollars. these companies will have 13% market share being the second largest silicon wafer maker in the world. ceo dora sue says that market share is attainable.

plunging here, the company received an fda response letter on its front and back the -- andexa, which reverses blood thinning. the stock is having its worst day in six months. some investors do not agree. turning to another stocks soaring, we are looking at bullish soaring after a ambitious second quarter. the stock may be having its best day in three months but canadian solar are down 50%. david: talking about another technology, uber, taking a big step forward in the race for self driving cars. the company will allow customers in pittsburgh to hail a vehicles from their smartphones. more on this story, technology reporter max chapman joins us now. tell us what is going on.

>> big news in the world of driverless cars. uber has embarked on this crazy research project that everybody thought would take decades and they are trying to launch it right now which is very exciting and in some ways leads them i had. -- ahead even though google is still the leader in technology. most people don't know this. carnegie mellon university is the place to do autonomous drive ing. the ceo of uber hired a huge chunk of the robotics department to build up this team that has hundreds of people and they are going beyond pittsburgh to open offices in san francisco as well. alix: how did they get there so fast? isn't it years away? >> it still is.

these cars will involve safety drivers and copilots. there is someone taking notes while you are driving around. that said, it is ambitious. pedestrians, bikes, everything that you could think of. one thing they have done that is interesting and aggressive is they just want the company -- what -- bought the company. it may be the biggest deal that has happened. it was about $680 million and there still are incentives. david: how many cars are they going to be by the end of this month? >> by the end of this month, i am not sure. 90's.lvo xc uber also has a deal that they with volvo to

develop a driverless car so they will spend $300 million on that. they are just pouring resources in. alix: what kind of regulations would come out of pittsburgh? as far as regulars are concerned, these are just like regular cars because the safety driver is hitting there with his ,ands or her hands on the wheel ready to seize control at any time. i don't believe there are any specific regulations to driverless cars in pittsburgh but the dmv just treats the safety driver as the driver. that is going to be something that needs to be worked on and regulators will need to figure out. the technology isn't there yet. when i did my ride, the car would take out the driver and say "i don't know what to do here." the driver needs to take over and that is why the safety drivers are there. in the case of the tesla

accident a few months ago in basically, tesla tells you to keep your hands on the wheel and it seems like the driver didn't. in any case, the driver and computer both made replace -- mistakes. david: do insurance companies like this idea? >> it obviously creates questions that obviously, it is going to reduce the number of accident. in a verye it out long-term way, maybe there would be so many fewer accidents that it would drastically change the insurance business. i think there are a lot of questions there that we don't know the answers to. >> what about bloomberg competitors? -- uber competitors? >> uber has jumped ahead of everybody in the ridesharing business. google has indicated they want to do this but obviously it is

still in the early days. how much money is this going to cost? uber is still scrambling towards profitability. they just made a deal in china so they don't have to keep losing money there. the question is how can the driverless car thing happen quickly enough that it will really help the business? does uber see this as an urban phenomenon or is it brought? >>?road i think they see it broadly. ber will of taking an u be cheaper than owning a car. in the short-term it is going to be in cities and also in the u.s. where labor is a lot more expensive. in china, it is not clear that the numbers work quite as well. david: that is max chafkin,

bloomberg businessweek technology reporter. you can read his story on newsstands right now. alix: after the release yesterday, the market came close -- pay close attention to statements by fed presidents later today. today, ceo and president outspoken, this is bloomberg. ♪

alix: this is bloomberg go. coming today, 10:00 a.m. eastern, fed chair dudley giving -- you get the federal reserve president in san francisco, speaking in a great at 8:00 p.m. eastern. you get robert kaplan speaking at a moderated q&a in dallas. what would today be

without fed presidents talking past one another? doveish fed and became a hawkish fed. we have the minutes there from the end of july where they are little bit dated. david: i wonder whether they are reacting to the reaction? everybody is relating to everybody constantly. alix: the idea is dudley is the forward-looking voice versus the backward looking voice. if you have the ,udley-fisher-yellen trifecta you just admit that you are wrong and come forward. alix: we take a step backwards and we will talk to janet yellen next week and see what she has to say. the fascinating debate is getting a little confusing for a lot of people but it continues. we'll bring you the headlines right here on bloomberg.

thank you very much. , 26 minutes into the session. equities marginally lower with the dow down by 1/10 of 1%. after four days of losses, european equities could snap back today. it has been a weaker dollar in the last 24 hours. erasing some of that weakness as we look forward to another speech by another federal reserve president. bloomberg markets is up next from new york. this is bloomberg. ♪

is 10:00 a.m. in new york, 3:00 in hong kong. i'm vonnie quinn. >> this is "bloomberg markets."

vonnie: we are going to take you from los angeles to johannesburg and cover stories out of the u.k. and washington in the next hour. minutes of the federal reserve's last meeting dampening prospects for a rate hike, sending the dollar sinking. officials have pushed the odds of a rate increase this year back to below 50%. nejra: u.k. retail sales jumping more than expected after britain voted to the european union. sterling strengthening of the back of that data. self driving cars arrive in pittsburgh, pennsylvania this month, and uber is behind it. how the car service plans