♪ scarlet: from bloomberg world headquarters in new york, welcome to bloomberg markets. we are covering stories from san francisco to rio de janeiro and beijing. matt: global stocks climbing to a 13 month high. chances the feds will raise rates later this month fade following a slew of weak u.s. economic data. aarlet: mike mayo of cialis gives his forecast. what it would take to turn bearish on banks. fall product launch gets underway in an hour. we are expecting phone and possibly new gear for listening. will it be enough to impress analysts and consumers? scarlet: we are halfway through

the u.s. trading day. julie hyman has been tracking the moves. we touched a record high for the nasdaq today you are now lower. the nasdaq down about three points at the moment. you have seen of -- seen a move of less than 1%. market cut its forecast driving down some of the other grocers. some notable movers, western digital. raised its forecast. --says its product mix is it improving after its acquisition of sandisk. making news with a blockbuster discovery in the texas shale formation that holds

an of to supply every refinery on the u.s. gulf coast are a year. the company is reallocating resources to get that oil out of the ground. another one of those up movers. today we are looking at chipotle. pershing square capital is taking a 9.9% stake saying they are going to push for changes. unclear what those changes will be. some folks are skeptical about his chances of success. tracks not have a great record when it comes to consumer companies in particular. t.will see how it turns out matt: airlines are up today. of anis seeing signs important bottom and that is what is boosting them. conference ats a

which a lot of these airlines are presenting. delta said that its pretax income is going to be cut by that outage it had by $150 million. that's a higher estimate than it previously gave. it also said it's unit revenue has been improving since the summer. we also had southwest airlines coming out saying its capacity is going to expand at a smaller level next year. that's reassuring so we are seeing a broad rally in airline stocks today. you, julie hyman. let's check in on mark crumpton. russian hackers attacked u.s. computer systems "all the time." toer security will continue be a huge problem for the next president.

he didn't comment on whether the russian government is responsible for recent reaches against the democratic national committee and other organizations. president obama visited a rehabilitation center for those u.s.ed by old bombs the dropped during the vietnam war. the u.s. will help clear some of that unexploded ordnance. >> we will invest in $90 million over the next years. we hope it can mark a decisive step forward. some 20,000 people in laos have been killed or wounded by the bombs since the war ended. a state judge in south carolina is ordering 600 respect to jurors to report in january for the trial of the man accused in the charleston massacre. he killed nine black

parishioners after bible study. the state trial is set for january 30. the federal trial is set for november. a study finds doctors spend more time dealing with paperwork than face-to-face time with their patients. the study found doctors spend just 29% of their total work time talking with patients or other staff members. another 49% was spent on an electronic record keeping and desk work. date let's get back to our tech story. we are watching shares of apple ahead of the company's big product announcement in san francisco. less than one hour. it comes at a critical time for the tech giant as it battles declining iphones ale. -- iphone sales.

joining us from outside the .vent in san francisco is this going to continue to be a big event? or is it going to fade away? think one of the better things they have going on at this event going on is the expectations are more moderate than other apple products. to the extent you have any modest incremental upgrades on the battery life or processor or camera we would expect the refresh cycle a little bit. it should be an incremental positive. scarlet: tempered expectations. we know the iphones seven is not likely to be groundbreaking. . it will be similar to the iphone 6.

does that matter? i think it matters in the context that there is so much excitement for the next iphone. because if matters it's not a big enough upgrade then perhaps people will hold off on buying a new phone until sometime in 2017. it could end up pushing the replacement cycle a little more. not as bad as what people are apprehensive about right now. matt: what you think is the next time a truly exciting product will come from apple? for are they done with that kind of innovation? >> that has always been the black box of apple. you never know when these innovations come up. of r&dlook at the amount spending they have had you have to believe there is some bigger innovation out of apple beyond phones and watches. matt: is it a car? >> that is one that is talked

about a fair bit. the other one is the streaming tv service. those are probably the big things people will focus on as new products. some kind of apple tv cable service would be the next on that list. the apple watch has not really taken the market by storm. expectations would be more independent from the phone. matt: relative to apples success watch has product the not been a massive success. relative to any other new watch brand of course it has been unbelievable. ofyou expect any serious grades for the watch the cycle? >> one of the things they will launch or take is the gps

capability. it makes the watch a better independent device without the phone. can provee more they the watch can be untethered and be a useful device without a phone in your pocket the more useful than the more deployment of apple watches you will get overtime. gps integration would be a big positive. if any other company was selling the millions of units of apple --ches it would be can enter considered a home run. apple is a victim of its own success. it int: you have to put context. apple is trying to generate more revenue out of it software and rely less on hardware. how much does software currently contribute to revenue and how might that change in the coming years? >> it's a 12 in -- $20 billion

revenue stream. it's going pretty well. it is becoming more important. remain that the stock will always start and end with iphone units. that still drives 65% of the revenue. without iphone units there would be no services to be had. this is a very iphone heavy driven investment at this point. scarlet: thank you. not miss our one-hour special on apple's product event less than an hour from now. join us for all the news, analysis and market reaction. banking analyst mike mayo says he is becoming much more positive on the outlook for large banks. find out why next. this is bloomberg. ♪

scarlet: this is bloomberg markets. i'm scarlet fu. matt: i'm matt miller. time for a look at the biggest stories in the news right now. british prosecutors are on the verge of announcing whether there will be criminal process is in the tesco accounting scandal. market chainuture said it had overstated processed by over $350 million. at least nine senior managers were suspended. scarlet: dell has wrapped up its acquisition of emc today. it marks the largest technology deal in history.

the new company has 140,000 employees. the ceo did not deny there could be job cuts. matt: the world's largest brewers are lining up for a chance to buy a stake in vietnam's top rear maker. -- beer maker. it is worth at least $1.8 billion. also on the list, japan's asahi group holdings. lets your business flash of day. scarlet: this has not been a kind year for most bank stocks. you can see shares of wells fargo, goldman sachs, bank of america have all lost value. one bank analyst is optimistic.

told tom keene on bloomberg surveillance this morning the banking industry is healthier than it has in in years. >> on the one hand the banking industry is healthier than it has been in decades based on the strength of the balance sheet. no one is sweating about any big failure of a u.s. bank. on the other hand used till have the worst revenue growth in decades. the worst revenue growth in 80 years. the only way to make it on the bottom line is to better control expense is. that means reduction in compensation. >> you've done the math. bring up the sets of charts of banks. wells fargo in yellow. jpmorgan in white. narrow orer going to does this just go on and on? this difference in performance? >> we are much more positive on

the large banks. once again the u.s. banks are more resilient than they have been in decades. they have more utility like outcomes. >> but the revenues aren't there and they have to cut costs. >> they are making headway piece by piece. you see anything else with annuity like outcomes whether it is consumer staples or the treasury bond those consumer staples have gone way up but the banks are not getting credit for the improved risk. there is less revenue but the other side is dramatic risk reduction that should give banks higher valuation. >> shareholders don't like that. they want to grow. they want a healthy market environment which doesn't entail negative rate. otherwise banks worldwide will be under pressure. >> you have seen that the last few years.

absorbed some major body blows as it relates to their own restructuring revenues and raids. a lot of those has been absorbed so we think the outlook is better for the banks the next three to five years. >> what banks are the best? is there a group that will benefit from a fed hike? >> absolutely. higher interest rates would need a spark that would have investors recognize the improved risk profiles of the bank. assuming one interest rate hike by the end of 2017. as long as that the case we are fine recommending the bank stocks. we have seen this as the opposite of 2000 six. investors were wildly off the mystic and just one year later you saw the financial crisis. now investors are very pessimistic about the banks. we think in the next year we will see a takeoff. scarlet: that was mike mayo on

bloomberg surveillance this morning. saying it is time to be more bullish. to show you a chart that illustrates the kind of pressure the banking industry has an under. the white line is the financials group overall within the s&p 500. the blue line is the real estate sector. jones indices is going to separate these. they are going to break out real estate stocks because the blue upe has done much better about 10% since the start of the year. financials as a whole are pretty much unchanged. matt: mike mayo would probably say this is another reason you want to buy financials that are undervalued. they haven't been under enough pressure according to a lot of populist in washington.

they are going to be under more pressure today. there are a number of people testifying in front of congress today including esther george. sidesss is on both populist conservatives and populist progressives angry about the fact that commercial choose the federal reserve's regional governors and the regional feds aren't really overseeing at least this is the charge the big banks enough. scarlet: it feels too cozy. matt: there's going to be an outcry on capitol hill today. watch for that. a lot of people are talking about glass-steagall. this analyst writes watch out for what happens after this election year. risk to the biggest

banks is not necessarily low interest rates but populist anger. still ahead. is speaking trump in philadelphia. he is discussing military spending. when we come back we will discuss how trump and hillary clinton are preparing to answer questions on national security. this is bloomberg. ♪

matt: you're watching bloomberg markets. i'm matt miller. fu.let: i'm scarlet hillary clinton and donald trump will appear at a forum on national purity tonight. and nbc news poll shows trump among the to 66% military. bring inon this let's a reporter in washington. good to see you.

what is a candidate forum as opposed to a live debate? donald trump and hillary clinton will be on the same stage but not at the same time. they will be taking questions from matt lauer about national security. they won't have an opportunity to ask each other questions or engage with one another as a traditional debate. we will see that later this month when they have a debate in new york. this is going to be specifically about national security. answering all kinds of questions about everything from veterans issues to the middle east to what their vision is for war and the military going forward in their potential administrations. matt: do you expect them to be attacking each other as well in this forum and which one will come after the other? >> most definitely hillary

clinton will go first by coin toss. donald trump is going to follow her. we will see a lot of attacks from both of them. hillary clinton has called donald trump unfit for the presidency. can competean you with a tweet should not have the nuclear codes. expect to hear from donald trump that hillary clinton was not in charge of foreign policy and the world is more chaotic. we will hear attacks from both as we watch this for later tonight. scarlet: what can you tell us about donald trump's plan to eliminate mandatory defense spending cuts? how is he approaching military spending? >> his plan is to get rid of the sequester which are mandatory caps on military spending. he wants to create a much larger foot print for the military and

increase the size of the army and navy. is heing he is saying wants the military to provide a plan to defeat isis within the first 30 days of his administration. he wants a stronger military and he wants to spend a lot more money to create that. matt: who is ahead in the polls right now? >> the polls are tightening on a national level. some have donald trump slightly up. we have seenpart hillary leading the race throughout the summer. the battleground states are key for determining who is going to win the ultimate presidency. hillary clinton has a slightly. donald trump is within striking distance. hillary clinton continues to have a strong lead in the battleground states. if she does well enough in those states she will be the next president. scarlet: hillary clinton is trailing donald trump when it

comes to military voters. military support is behind donald trump? >> that's what we are seeing in this specific toll. donald trump from the beginning of his campaign has meant a lot of time talking about the veterans and how they are treated after they come in. he said in some cases he believes undocumented immigrants are treated better than veterans. he has tried to show himself as and someone who will definitely increase militaries pending which has led to higher numbers in the polls. matt: thank you for joining us in washington. this is bloomberg. ♪

♪ scarlet: live from bloomberg world headquarters in new york, i am scarlet fu. matt: and i am matt miller.

mark crumpton has more from the newsroom. mark: the dallas morning endorsed a democrat for president. editors told readers in one of the most nation's reliably red states to vote for hillary clinton over donald trump. "there is only one serious candidate on the presidential ballot in november." 's mr. trump campaign will end selected news outlets from covering their events. has banned a number of media outlets from covering rallies or news conferences. the campaign official said that .an will end on thursday a british lawmakers kept questioning theresa may about whether the u.k. will remain part of the single trading block when it leaves the european union. prime minister may: i will not be getting -- be living a

running commentary and there is a good reason for doing that. we want to get the best deal. we want to get the right deal for the united kingdom and if we were to give a constant running commentary i would give away our negotiating hand and that would not be what we would achieve. secretary said it is improbable the u.k. can remain part of the single market if they wish to regain control of the borders. the last hospitalized survivor of the orlando nightclub massacre has been released. june co-days after the shooting, they remained in critical condition. all of the patients have survived. 49 people were killed in the attack and more than 50 others were injured. ♪ global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. matt: oil prices swing between

--ns and losses as digesters investors digest comments from opec and russia and figure out whether oil producers will agree to bolster the market. a cap could affect a company like energy recovery which manufactures equipment used in hydraulic fracking. joining us is the ceo of energy recovery, joel gay. thank you for joining us. you have developed a new technology for fracking that is supposedly more durable and better able to handle the frack then-current technology. you have a contract with schlumberger as well. is it tougher -- is it tough to sell that technology? joel: it is easier for us because our product plays on efficiency and we drive down the cost per barrel to frack as well . you can argue that in a bearish

market that our value proposition is even more compelling and hence the success we have been able to enjoy. scarlet: this licensing deal with chambre j gives exclusive use of this technology? does come over the next 15 years in on short global manufacturing fracking operations. matt: your stock has been incredibly successful. you are up 60% year to date over the last year, 410%. you have done better than anyone isected as far as ups concerned. can this continue? joel: we like to think our performance is sustainable. matt: you are only trading at 17 times, it is not like you are massively overvalued. joel: i would say that the market has yet to value our economy, but we are appreciative of where we are right now. our messages simple, we are only

getting started. we have disrupted technology in a number of applications with oil and gas. virtually anywhere where you have high spending on pumps and high content on energy. scarlet: matt is pulling up the des page on the bloomberg, the taker is eaii. you are based in california, southeast of oakland across from silicon valley. tell us about the influence of the disruption of the innovation of silicon valley on what you do. part it is an infectious of the country and i mean that in a positive way. we are a broader silicon valley company and disrupting innovations through highly engineered technology is something we are proud to participating in -- participate in. i cannot envision the company being based anywhere but in the broader silicon valley. matt: how do you pull in other

technology? you use water in your pumps and to perform a lot of the processes that they do, water is in short supply in california. are you finding ways to deal with that? joel: our core market prior to fraction -- fracking technology was the process by which you render seawater possible -- pliable. our company has been at the forefront of enabling clean water for water starved economies. california is no different. california is quite difficult in that there is an entrenched environmental lobby that has made the production of desalination facilities difficult. if and when, we will be there to dissipate. scarlet: there is fracking in oklahoma, how much is there a need for water recycling in oklahoma where there was just an

earthquake and people raise concerns about fracking and earthquakes? matt: can you take advantage of that with your technology? .oel: i would say indirectly we would take advantage in as much as looking at the fundamentals of supply and demand. if you look at where preserves are. there have been a number of interruptions, whether it be nigerian uprisings, algerian .ipeline bombings and the like north american hydraulic fracturing or north american hydrocarbon production is a stopgap until the global supply returns to a healthier form. indirectly, yes we will benefit from some of these microcosmic disruptions in supply in the production of oil and we are well-positioned to do that. scarlet: i am glad you ended on a general note because i want to get your thoughts on what opec does next. production what

specific opportunity does that create for u.s. and canadian emp companies? joel: i think the broader theme is the market is set for a sharp return to form. it can be over the next 60-90 days, but there will be a negative surprise shock. other way if you look at how undercapitalized the oil patch has become as emp's cut spending by up to 70% and demand has remained relatively constant. the demand for oil and oil the relatives. with constant demand and reduced supply you will have a shock and i think that will impact prices favorably and the prices that have partnered with companies like schlumberger will do very well on the upswing. , joelt: thank you so much gay, ceo of energy recovery.

matt: we are less than 30 minutes away from the special on apple's latest product event and we are live from san francisco at 10:00 a.m. pacific time and 1:00 p.m. in new york and 6:00 p.m. in london. this is bloomberg. ♪

♪ matt: you are watching bloomberg. i am matt miller. scarlet: and i am scarlet fu. the ecb is ready to update his outlook for the euro area. some policymakers suggested projections may be revised up. what he forecast's now is anyone's guess. matt: london is in danger as

losing the status of the world's biggest hub. we will to you what asian nation will look to take that status over. scarlet: how the rise in global travel has increased the threat for the mosquito borne disease. matt: european central bank president mario draghi is expected to lay out fresh growth and inflation projections for the euro area this week and there will likely be little change from three month ago. most economists predict the downside risk will force the ecb to extend quantitative easing before the end of the year. mohamed el erian says central bankers are in a tough spot. >> you look at this and you ask how much systemic risk is building in the system and it is quite a bit. central bankers keep one eye on this and one eye on the economic variables and this high is telling them, maybe we should be a little bit less accommodating when it comes to policy.

the other one is the economy and that is why they are in this situation. scarlet: the european commission has given google until september 20 to answer antitrust objections over the android software. he has been -- google has been accused of wielding power over the smartphone to crush competition for apps. designedid android is in a way that is good for competition and consumers. volkswagen will study whether they should build electric cars with another company. this company is a top seller of electric vehicles in china and vw sells more electric cars in china than any other market. if london loses its status as a trading hub, singapore is next in line based on a study by singer house cooper . place.k comes in at six

singapore gets credit for superior technology, low taxes, and efficient infrastructure. matt: time for the bloomberg quick take your we provide context and background on issues of interest. the zika virus has spread rapidly through the americas. it has caused a jump in the number of babies born with alarming birth defects and it is strongly suspected in an cases of a rare narrow logical disorder. in august officials confirmed the first cases of the mosquito borne transmission within the continental u.s. had emerged within a neighborhood in miami. the disease has for two countries and territories taking up most of the two american continents. there are no specific drugs to treat zika and no vaccine to prevent it. drug makers in the u.s. government arm -- and the u.s. government are working on both. symptoms include rash, fever,

joint pain, and pinkeye in about one in five people who are spread, brazil recorded a 20 fold increase in the incidence of microcephaly, infants with the condition have abnormally small heads and usually brain defects. the connection to zika was confirmed by researchers back in april. here is the background. zika, related to other mosquito-borne virus is including dengue fever, was first identified in rhesus monkeys in the zika forest in 1947 and in humans in 1952 in .ganda and tanzania one theory for why it spread so rapidly in the americas recently is that people here have encountered it for the first time and have no natural immunity. here is the argument. in the absence of a vaccine which could take years to develop, the best way to control

zika is to control the mosquitoes that spread it. a brazilian city expanded a pilot program to release a male skewed is that have been genetically modified so that there offspring die early, but there are unknown copper -- consequences of putting unknown mosquitoes, which are food for other animals come into the wild. you can learn more at ni quick on the bloomberg. had to bloomberg.com for more stories. scarlet: apple is getting ready to roll a series of product upgrades and we go live to san francisco as we await tim cook's big reveal. this is bloomberg. ♪

♪ matt: this is bloomberg marketsmatt:. i am matt miller. .carlet: and i am scarlet fu the s&p 500 approached an all-time high.

all of the indexes have turned south and we have the nasdaq retreating by seven points. abigail doolittle is live at the nasdaq. abigail: we had the nasdaq in a new record high yesterday on the close and putting a fresh intraday record high earlier, now down ever so slightly. perhaps the apple event is going to determine the fate. beneath the surface, lots of big movers including western digital. shares are up 12%, on pace for their best day in about a year after they revised fiscal first-quarter guidance up i as much as 22% of the bottom line. this reflects the sandisk acquisition. we had a great conversation with mark miller at benchmark company , a former physicist and he understands the science. he has been recommending to buy the shares of western digital for some time for two reasons, -- first for the

demand slashing prices and difficulties around the new 3-d chip. mark mike or has a street high price of $100 per share. he said this is a turnaround. when we take a look at a chart of western digital, it is bullish. buyers are very interested and there is a potential bullish reversal pattern here. not confirmed now, but if the stock can climb higher it may suggest that western digital could climb toward mark miller at benchmark company's price of $100 per share. matt: the apple event is minutes away. let's bring in john butler who covers apple for bloomberg intelligence and out at the apple event in san francisco as corey johnson. the most important thing you will watch for when tim cook takes the stage? on.he headphone jack, come

i do not care about the headphone jack. i think this is an interest in phenomenon as it relates to how many phones they will sell. what is the expectations around this? it will be about price, how many localities they will sell it into within the first days and weeks and when the first days are. they lost the iphone 6 and six plus. going to jack the price for current these undervalued in china and europe? they may tell us a lot of information about that and that is stuff i will be listening for. scarlet: cory is not worried about the headphone jack, but i am. i like the way i use my iphone now and i think a lot of people do.

do you think that means people will take up older versions of the iphone and not spend on the iphone 7 or whatever they call it? john: i think that is the risk in the near term and i say that because they have a history of removing ports. they took out the ethernet, people will get used to that -- people got used to that just as i think they will get used to the headphone jack. initially i think people will trade down and go with the the iphone 6s plus. obsolet you are not ing all of those headphones you have in a drawer? pretty soon this event will be like buying a microwave up and -- of an.

it is a big event, but not something where you think, when will they come out with the next microwave oven? do you think it'll lose some of the excitement it had. has. i think it already put people inill the stores to create the illusion of artificial lines. thethey going to obsolete iphone 6 and go with the iphone se at the bottom and the brand-new 7 and 7 plus at the top end? this will make a big difference in terms of gross margins and operating margins and inventory management. one thing we talked about earlier on bloomberg radio, discussing with hillary clark is the conversion cycle. they manage their inventory so well and they generate cash almost instantly as they are selling phones, unlike any of their competitors and one of the

ways they do this is by having a limited number of sku's. if they go out there with multiple models, that adds competition to the supply chain line. let's see how they manage that and what it means for inventory. matt: that is a strong point. john, what do you think? will they cut it down? they do not normally have all -- have model proliferation. samsung does that an apple plays in the premium segment and if they leave that option on the table, the iphone 6 and the 6s and the plus version, there is a trade down risk and you are impacting revenue. if you narrow the choices and the field is all concentrated on higher price devices, it plays to your advantage. matt: i think the risk is you could lose a few people on the

margin, perhaps -- but maybe a risk worth taking. scarlet: as you stand outside the venue, in the past we have event -- aeen a big fan boy event, people lining up in a lot of excitement and people are blogging and tweeting about it. is it generating that same type of buzz? the invitations to the event are tightly managed by apple. it is a combination of fan boys, bloggers, professional journalists, the analysts from the street, industry analysts, a lot of apple employees. apple chose to have it at this venue that fits a lot of people. they have had a smaller events in other places. it is certainly a big production effort. they have risers for the tv media and they have to clear the park of all of the people that would normally congregate in the park. the homeless are pushed off to the side.

it is an and norma's that apple is trying to manage their image because it is so important. it is one of the ways they get such huge gross margins and operating margins that their competitors can only dream of. matt: suppliers are pretty happy . bloomberg. on the i have it organized by three-month price chains -- change and you can see how much green is on the screen. companies like lg have done them -- incredibly well. this must bode well for future sales because surely apple is ordering enough stuff that they can make money. john: one thing i would add is that they are coming up against this super cycle two years ago where people came rushing in to buy the iphone 6 when they suddenly had a choice to buy the first large screen iphone.

those devices are now two years old and batteries begin to fail over that timeframe and screens get scratched up. processors get slow. app developers always develop to the latest processor. i think that is part of it. matt: thank you so much for joining us from bloomberg intelligent. corey johnson on the west coast as well. cory will be joined by emily chang with more on apple as we begin special coverage of the big product announcement. scarlet: a spokesman of chipotle, chris, they held introductory talks with bill ackman -- buying a 120 and dollar stake in the company. this is bloomberg. ♪

♪ emily: from bloomberg headquarters in san francisco, i am emily chang. this is live coverage of the apple event kicking off right

now at the civic auditorium in a san francisco. the company is expected to unveil a new iphone 7 or two, a faster iphone watch, headphones, and a few other surprises. we will bring all of the announcements. the event is getting underway and we should hear from apple ceo tim cook momentarily. i want to get to our editor at large, corey johnson, live in san francisco where apple fans are buzzing. i assume everyone is inside right now, set the stage for us. peoplehey had a crowd of out here before. a lot of them filed in a while back and we are getting ready to hear what apple has to say. have been to these events and we have all seen the way it goes . apple can get away with saying things and pretending like they are news and people will literally get up and cheer the most monday and of developments.

so much so that the existence of a headphone jack will be a lead today. i want to paint a context of what is going on with iphone sales and what has been at -- happening with apple. iphone sales in particular have been coming down in subsequent quarters. we saw a slowdown in sales in terms of revenue and a pronounced double-digit slowdown. we saw double-digit the client in the number of units, how many phones they are selling. coming into this throughout all of the calendar year thus far we may have expected those trends to continue into the quarter we are in right now. this,ms of the slowing is it comes this new iphone. their goal is to sell a lot of them for a lot of profit. we will look for things that

give us clues about what we expect for this. how many places will sell the phones, how quickly they will roll them out, how slowly they roll them out to new localities. those are indications of strength for apple. the will be lots of interesting stuff, maybe a watch, maybe mac. this is really about the iphone, their biggest source of profit and one of the biggest businesses in the entire world. emily: we are not expecting -- not expecting a big design change. however, this is the first time apple is unveiling new iphones as iphone sales are falling. does that make this event more important perhaps than others? cory: i think maybe the opposite . it is in the eyes of the beholder. to the comment that matt miller made, suggesting that the iterations of this existing device that has been in the market since june of two dozen

eight -- 2008 are less important than iterations of pre-smartphone to post smartphone. edges tooling around the that with so many smartphones in the market and the slowdown -- particularly in china where inrtphone sales of over 20% two dozen 14 1% in 2015. we do not know what they are in 2016. the existence of smartphones is important -- much more important than the alteration once they are in the market. for business of service, it is hugely important. emily: the event is off to not as serious start. tim cook is apparently in a video with james cordon doing karaoke, singing one republic. i am sure that is revving up the crowd. cory johnson, our editor at large. he will be back shortly.

we have three experts joining us for the hour and will bring headlines live from the event and tackling some of the most pressing questions basing apple right now. how can the company resurrect iphone sales? how does it stack up against the rising competition? joining us now is o'malley could venture partner and longtime apple watcher, chris gordon and julie ask, vice president of global research. how big a deal these think this particular event is? you can say maybe there is not a big design change. apple is at a turning point where they need to get iphone sales backup. >> i think this is an interesting time for the company. they need to get the iphone 7 sales up, but also the sales of their services. with this new operating system,

the new device they will add more integration with apple services which will boost revenue. the new iphone always boosts sales. they need it badly. especially to stop stock from sliding down. emily: apple music, we are expecting an overhaul. julie, how do you see the pieces of the pie shifting. om said agree with what . if we look three years ago, only about 8% of consumers own a laptop, a tablet, and a smartphone and today that is 37% . there is still a lot of upside in the market, but i agree that services will have to grow to be a bigger chunk in the revenue. twoy: a lot of people have

your contracts and a lot of people who could upgraded this , are, my question, chris the announcements we expect to hear today and off? bloomberg has done a lot of reporting and we expect the dual camera processing, maybe no headphone jack, lots of people upset about that but maybe apple is ushering us into the future. chris: i think iphone sales are generally cyclical. the iphone 6 was a huge hit. people are coming up on contracts and i think we are very excited about this and i am interesting to see what happens with the headphone jack. i think apple thinks about these things methodically and they knew what they are doing. they will not leave people behind with this. emily: you are a camera aficionado come are you excited about the new potential camera? om: i am very excited because i will carry one less camera around now.

i are take all of my pictures with it and this is actually bad news for people in the camera business because what this new phone will signify is the shift from a hardware camera to mostly software driven logarithmic cameras of the future which is where companies like apple will have an advantage. i am super excited with what we could do with all of the lens cameras in the future. i cannot wait to get my hands on a device, to be honest. emily: tim cook has opened the presentation talking about apple music and he says it now has 17 million subscribers. apple music got off to a rough start and there is a lot of competition with spotify, pandora. how hopeful are you about the future of a revamped apple music? julie: i would say optimistic.

apple needs to continue to grow revenue that comes from services . a media is one of the more important categories and in things like payments and other emerging categories will grow into significant revenue streams if they execute well. emily: as someone who worked on the mac operating system, can apple bring it in services? .hris: you hope they would it is clearly the direction the industry is going. services will be important to processing capability, storage capability. apple has said they will basically put all of the smarts on the phone. i am not sure how that matches up with building a better services experience. it remains to be seen whether this is the right direction. emily: quickly let's talk about no headphone jack. there are reports that there will be no headphone jack and they would likely have an adapter so you would not be out of luck right away.

obviously this is something not a lot of people are happy about. people have said they use it for other things. how big a deal these think this would be? om: apple does this all the time. i remember people and planing about no floppy drive, no cd-rom, no dvd drive, it is the same. they have to push the industry forward otherwise silicon valley does not like to move as fast as it likes to think. especially in hardware. emily: i remember when it happened with the charger and we all got used to it. the world did not end. we will continue this conversation. tim cook is now talking about apple downloads saying that they have had 140 billion app downloads from the app store and we are live at the apple event foamn francisco here with malik, julie ask, and chris bourdon. mark crumpton has more from our newsroom. is proposingtrump

an increase in military spending and personnel. he laid out his plan in philadelphia, asking congress to fully eliminate the defense sequester that has reduced the military budget and he criticized hurry clinton for her tenure as secretary of state. mr. trump: sometime it seemed like there was not a country in the middle east that hillary clinton did not want to invade, intervene in, or topple. she is trigger-happy and very unstable. an activep also wants army and a marine corps based on 36th battalion and a navy approaching 50 ships and at least 300 fighter planes. stein is accused of spray painting construction agreement during a protest against the dakota access pipeline. a judge is -- has temporary stop

construction on the $4 billion four state pipeline. they say it would violate sacred and culturally sensitive lands. syrian activists, families, and civilians were killed today in an airtight -- airstrike in aleppo. yesterday the same neighborhood was hit by a gas attack. dozens of people were sickened. some 28 million children around the world have been driven from their homes by violent conflict according to a new report -- report from unicef that says all children make up about a third of the world's population as of 2015, they account for nearly half of all refugees. global news 24 hours a day powered by more than 2600 journalists in analysts in over 150 -- 120 countries. emily: mark crumpton, thank you. we are getting more headlines

from the apple event. some of these coming in from twitter. a tweet from the apple account "new cameras, water resistant, stereo speakers, longer battle -- longer battery life. this is 7." not sure if they tweeted this early because of is what we are waiting to hear. no headphone jack would make the phone more water resistant. what is your reaction to new details we are getting? chris: i think apple has not been historically great at twitter. as far as the headphone jack, this is apple pushing the industry forward. they will give headphones in a box and for most people that is fine. if you have an external headlight -- headphones, you box.get a dongle in the it is a good opportunity for the headphone industry to move forward by getting good signal out of the lightning jack and make for good audio solutions. emily: unofficially or un-of --

or officially we see the iphone 7 with longer battery life, stereo speakers, water resistant . talk to us about the technology and how difficult it is to make a phone water resistant? julie: i think the typical consumer has a hard time appreciating how hard it is to get that much and such a small package and make it water resistant and not have it overheat and burst into flames. emily: it is ironic because our producer dropped her water in that phone in water in it was underwater for three minutes, 12 feet of water in it still worked . this is something apple has obviously been working toward and now they are saying it is water resistant. how big a deal is it? om: sony has had it for two years roughly and the android devices. this is -- they are catching up with the rest of the market except are the headphones and stereo sound.

you see it in the android devices, meh. emily: i am excited, as a clumsy person. bourdon, omhris malik, we continue with our apple coverage. officially or unofficially, tweeting out the apple 7. we will talk more about it and there is tim cook singing carpool karaoke. i love how he can sing like that. i know someone who knows a thing or two about fashion --

♪ emily: welcome back to our special live coverage of apple's product announcement.

i am emily chang in san francisco. apple announcing a new iphone, the iphone 7. water resistant with stereo speakers on twitter. we will get back to the event, but it want to get where the markets desk where julie hyman has been taking a look at how stocks are trading. i believe you will start with an tendo -- start with nintendo? julie: nintendo is going to bring some of the gains to the iphone. this is something that looks like a big win for apple. nintendo has been reluctant to do this. this means mario will come to a paid -- on a paid app to the iphone. it is up now 14% after apple getes themselves -- as we announcements from the event, they see a little bit of a bump up from the low of the session.

we will see -- continue to track them and i will have more perspective on what we tend to see the stock do on announcement days. looking at some of the other charts we watch with regard to apple, the context into this announcement. mentioned, going into this announcement the back room -- background is that revenue has been declining for some extent. quarterly, wee have seen the kleins europe -- declines year-over-year. that is why pressure is on apple each time you get a product announcement. the other reason is because how dependent apple has become on the iphone. this goes all the way back to 2006. the total bar is total revenue and the purple is iphone revenue as a percentage of it.

overall revenue has been going up year-over-year, but you see iphone revenue as a percentage of the total really accounting for more and more. this is expressed in this chart. if you are a bloomberg customer you can take a look at it at g #btb 2444. emily: julie hyman is keeping an eye on the stocks for us. cory johnson is our editor at large live at the civic center in san francisco where the father of mario has been on stage talking with tim cook about the announcement from nintendo. apple officially announcing a new iphone 7 water resistant with a better camera, stereo speakers. what do you think? great. think it is we would have expected all of this stuff. generally, improvements on the model out there.

i still want to know about pricing and where they will sell it. when we look at what has happened with iphone pricing over the course of the last six quarters we see a dramatic move down for the average selling price of iphone and that principally -- specifically in the last quarter -- was about sales of the iphone se. the choice they made to compress margins and prices so you can see a drop in the revenue her phone or it will they try to squeeze less profit into them, but sell a lot more phones? we will get a sense of that when we see what the pricing will be. it will be important with this business of apple that is massively profitable. their market share can be less than 30% of the business, the profits are likely 90% of the business. if you look at the place where smartphone growth has happened, if you look across the world, you can see the idc numbers show a huge slippage in terms of the

growth going on for smartphones worldwide. when you look at china, china's growth in smartphones have gone from spectacular to a comparative collapse and i think that is one of the biggest factors for apple in their slowdown in sales is the slowdown in china and add that to the shrinking average selling price of the iphone's and we will get clues to a lot of that around this announcement today. johnson, our editor at large live in the apple event in san francisco. apple shares slightly down and bump up.shares the tweet from apple has actually been deleted, so somebody messed up there. we will continue bloomberg -- clicknnouncement on bloomberg coverage on apple

product announcement. we will see how it stacks up against the competition. we leave you with this from tim cook. tim: there is something, or rather someone missing and i am so happy to announce today he is coming to the app store. [applause]

♪ emily: i am emily chang and this is a live edition of apple's product announcement in san francisco. tim cook just unveiled a new apple watch. we know the apple watch is tim cook's baby and this is a first product that was announced under his watch. , am here with chris bourdon julie ask, and oma malik. we believe it may have gps

capability, but you still have to tether it to the iphone. julie: i do not think it is a problem to tether it to my iphone. it would be more expensive if it had its own radio in it and it would drain more battery and it would be fatter. it is an engineering decision and i think they made a good decision. million watches we believe shift, should we expect the watch to do better than this? chris: apple does not get into markets they do not think is a enormous and offer giant potential for profitability. they are in early stages still try to figure out what this is an a lot of technology is not in mobile -- at that formfactor. emily: will the watch pickup that -- the slacker will it always be a niche product? om: i am excited to be -- to see

a new one. emily: you are wearing yours, what you think? julie: i think the watch is waiting on this killer app. until they adopt voice and payment and identity and consumers have skin in a game about managing their own health care cost, think we are waiting for the really killer app to take off. emily: julie ask, forrester research, chris bourdon, former apple employee and om malik. watch ateiling a new the event and we will have more of our live coverage after this quick break. this is bloomberg. ♪

emily: live from san francisco.

apple has just unveiled a new watch and new software features. also said that pokemon go will be coming to the apple watch. bitnt to talk a little about competition. the battle between apple and samsung is only eating up. iphone sales are falling as samsung had its most profitable quarter in two years. apple may have something else working in its favor. samsung just issued a massive havel of the galaxy notes been due to an issue of exploding batteries. it is stacking up against increasing competition. with that, the ceo of 15 year veteran. research.orrester

how devastating is this recall at this particular time when they had a head start at getting the new phone out there and now androidets are its

space. they are doing interesting things. phone.s a new high-end they are going squarely after the samsung market. the apple has still gone back to what apple used to be, a product for a very elite audience in a demographically high-end office spectrum, so they have a much higher room to make profit and sell devices. as far as samsung is concerned, battery issues, i think the responses terrible.

they should be recalling every single device. blaming a supplier? no. it is your device. apple did not run away. make -- wee will made a mistake and in the end they took all the heat for it. emily: there is still question of the origin of the battery problem. we were speaking about how apple cannot win a race to the bottom. can they pick up some of the lower end customers around the samsung, despite the recall, is rising along with some of these other players? >> maybe. i think make -- we made a mistake and in the end they took all the heat for it. is makingle's focus the best product they possibly can. this is the dna. >> the cheaper iphone has been doing better than a lot of folks expected. >> you get into a smaller price form factor.maller

they are not sacrificing any of their beliefs to do that or philosophy to do that. emily: talk about what is going on with the supply chain. as we understand, apple is volume. even as iphone sales are falling, they are tweaking suppliers as well. quick there is always a challenge because consumers have an expectation for what they expect to pay with a phone. apple is putting more and more functionality in the package while trying to maintain what they had two or three years ago. it is tough all the way around. i think it is a very typical business practice. emily: apple shares are still down slightly. nintendo popping. the ceo talking about pokemon go . saying it has now been downloaded 500 million times

around the world. i want to go straight to our correspondent, julie correspondent, julie hyman watching the stocks for us. >> nintendo has been extending its games. this is the u.s. shares of nintendo. we will see how they train in asia in the wake of this announcement. this is an announcement that got the most enthusiastic reception. as for apple shares themselves, we're not seeing a lot of shares of the moment. heading down a little bit lower than the unchanged level. now down about .4%. it is not unusual to see a delayed reaction. we took the past five years of the apple launches, ever since tim cook took over the company.

so the day of, there has been a mix reaction. 2013 there was a negative reaction. disappointment over that. in all of these cases, the reaction the following day has been larger in percentage terms. whether up or down, it has been a bigger reaction. it seems as though investors do it take a day to figure out what the new launch means for the company. look at this seasonality chart for a stock. it looks complicated, but basically the annual movement over the past five years. we have seen the stock rise 2.4% going into today's release. what you have tended to see is then tendo -- september is a pretty negative month. if you look at how the stock does from the launch date through the end of the year, it

rising four point 5%. in other words, apple gains intensity and apple had a five-year winning streak going into 2015 in which it fell. here is the five-year chart. they had a record high back in 2015. since then, they are down 19%. and mirrors the declines weakening we have been talking about in the company revenue and gross margins. since then, we at seen a decline. it has moved sideways over the past year or so. gaining just about 2% so far in 2016, which is not exactly stellar performance compared to historical averages. emily: julie hyman, thank you for the update. more coming out of the apple event just on the street must. we have been wondering if the apple watch would get any

--dware chart -- are hardware changes. announcing it is swim proof, waterproof down to below 50 meters below the surface. ceo at upk with the there who worked at apple for 15 years. you are wearing your apple watch, julie. what do you think? >> i am thrilled. i am a swimmer. i think this is something that has been missing from the smart watches. i think it is awesome. >> i would like to contrast this with the old-fashioned watch. i know you tried it and it was not for you. product perspective, how important is this for apple? >> again, i think it is about

getting this thing to be a standalone, independent device, and they have a long way to go to do that. the biggest news in my house is you can play pokemon go on it. >> they are saying this will be shipped before the end of the year. given the changes, do you think that we will see watch sales pick up? is this what a needed for a little tick? five have about one in consumers that have some sort of a wearable device. i think it all adds up. maybe pokemon go does become the killer app that gets 10 and 12-year-olds to want to buy the device. emily: the maker pokemon go has been on age. listen to what he had to say. this morning we're really excited to show you something new we have been working on. designed to seamlessly

design pokemon go play with your run while enabling you to focus on what is important, all of the cool stuff around you. pokemon go on apple watch. [applause] >> i think gaming is a big opportunity on the watch. we had investors in a company called everywhere in finland that is developing and doing pretty well on the app, on the watch. i think that people want to interact with a much smaller while enabling you to focus on what is important, all of the cool stuff around you. pokemon go on apple watch. [applause] >>screen. i am actually excited about what pokemon does to make people think about gaming opportunities, interaction opportunities on the watch. that will push the whole industry forward. emily: there is also the fitness opportunities that the new waterproof feature opens up. an analyst at said water proof

was one of the most top requested features for the watch. julie included. >> i think this is always a hard market. this is a new product, and it is hard to ask consumers what they want. i think it will be a category where apple needs to show consumers and samsung meets to show consumers what makes it responsive. emily: a new watch reengineered waterproof down to 50 meters below the surface. you can play pokemon go on it. apple also tweeting a photograph .f the new iphones that then stereo speakers, a better camera. cory johnson, we will be with cory johnson after this quick break. we will be right back. ♪

emily: live on bloomberg television and radio, i am emily chang. this is special live coverage of the apple unveiling in no. we have apple watch and we are waiting for them to release the iphone seven.

a new gps feature. all of this is happening. apple shares slightly down right now. what do you make at this? >> the trading around the moment, i think the expectations around the watch are swelling. this is the short term trading in the company. you look at the way the company is run, it is so different than its peers. taking a look at the operating margins or apple. i think the expectations around the watch are swelling. this is the short term trading in the company. you look at the way the company is run, it is so different than its peers. taking a look at the operating margins or apple. we're talking about consumer electronics. we are looking at single-digit usually 1%gle digit, operating margins. this is the profit before taxes and stuff is 24%, down from where apple has been, but still massively profitable compared to any other business in this industry. an incredibled in amounts of cash. even as they buy back shares, aliens and research and development. that cash generation allows them to do a lot of things no other

company in the world can do. it is inventing new things. the company has been widely criticized for not coming up with new inventions that can rival the iphone. it has achieved such great big success. the iphone is so big, everything else pales in comparison. >> apple is also on the hook for $14.5 billion, which they are supposed to pay back to the irish government. >> apple is also on the hook for $14.5 billion, which they are supposed to pay back to the irish government. parliament has been called back to debate the issue. how big could that be to the bottom line? virtually nothing. 6% of the cash at the end of last quarter. 0%would have probably impact.

ireland would love to have the cash, but the concern is it will hurt the future cash flow down the line. i think there is a lot more to play out there. rules.iling the irish setting itself as more of a cash haven than other eu partners. that will is a battle go on. in terms of perfecting the balance sheet of apple, the cash flow generation, i do not think we can expect to see any input. johnson live outside the apple product event in san francisco. more headlines coming in. my key plus design for runners with gps capability. something that runners will be very happy about because they can run without the phone and .ot get lost

longtime former apple employee. our apple watch aficionado who is very excited about the new features. gps specifically, what do you think? >> i think it is awesome because it makes the tracking of the distance more accurate. i would be looking at what is happened. i can swim with it and go running and the this is calculations are more accurate. it gives it a lift for the health and fitness category. >> there is talk this will attract others. how could this affect those companies? , we aredisclosure stockholders and fitbit. i would say fitbit has approved time and time again that focused and dedicated product are in demand for the market right now. watch may be suffering from a personality disorder is what i would like to call it. until they figure out fitbit as

a clear lead and will maintain a clearly. i do believe on these wearable, well and focused product, are much better for a longer amount of time. emily: that said, everyone has a smart phone, not everyone has a mark watch. will we get to a place where everyone has a smart watch or smart band or is that not the future? >> i don't know. i don't wear one a lot because feature.s i would like to be able to go running and not bring my phone with me. that is a big deal for me. as wearables go and we computerize the clothing and , it could bee wear the rabbit out there for that part of the industry. emily: we have two more minutes, still waiting for the official announced that of the iphone seven. your takeaway so far? >> so far, everything as expected.

it is really great to see them come out with the next version of the watch. i think it is good for reviving sales and interest in the watch category. love to know more about the services they are about to introduce. i keep going back there because this is not as a chop hardware anymore, all about services. let's see what they come up with. so not very much unexpected far. the watch had not been we much beforehand. i think that is interesting. i am interested to see where apple is going with the services aspect of the business. they have said specifically we will do a live the computing and bring data down from the club and do all of the manipulations. i am not sure this is the right time for them. i think they will be limited in the long run.

so i am interested to see what the new phones have store for us. emily: your last thoughts? i would agree with what has been said so far. when you are selling products like this, you have to have a new release every year. we're always going to be on a journey. you could say these features are not big enough for pop enough, but once they have this in their hand, they will realize what a is an delete forward compared to the products that they had today. emily: ceo who worked at apple for 15 years. partner at true ventures, thank you all so much for joining us. in go.event continuing still waiting for the iphone seven announcement. we have gotten a lot of information about forthcoming

apple watches. take a listen to jeff williams on stage. >> apple watch series two, it is faster, it is righted, it is water resistant to you can swim with it, built in gps and all the power of watchos3. ♪ emily: welcome back to special,

live coverage of apples roddick announcement. i am emily chang in san francisco. tim cook is on the stage at this very moment, x acting him to introduce the new iphone any minute from now. tole has already unveiled apple watches. a price for the watch, $269. this watch is waterproof. it has gps. you can now play mario, pokemon go. a new partnership with nintendo and nike. nintendo shares spike in, apple

shares slightly down. i want to get to her editor at where this event is going down. corey, your reaction to all of this far?to go cory: we do not have much to react to right now. the price is important. it will be more that the iphone. very important details to listen to. i think the watch is dairy interesting. i think the specific use case. the watern think of as a standalone device, think about how many iphone users at the table have the iwatch? this looks a lot more interesting because i use it or swimming. i like to swimming. for running, the fitbit has been a much better device. i think it is interesting to see how they are looking at the competition and why they are

using competitive devices and making adjustments on the fly here. >> cory johnson live for us throughout the day. back with us later today. tim cook ons age talking about the iphone. the iphone is the industry gold standard. going through new versions of the mobile operating system. more on the changes throughout the day. the coverage of the keynote event continues right here. will be back with bloomberg west at 3:00 pacific time. full analysis with apple expert. bloomberg markets up next. ♪

cory: it is 2:00 in new york. i am david gura with vonnie

quinn in new york. welcome to bloomberg "markets." vonnie: we are moments away from the federal reserve beige book report. there could be some softening in some areas of the economy and households and think. we have the dow, s&p down .2%. >> welcome back. reports from the federal reserve beige book showed the economy grew at a modest pace on balance in july and august. overall consumer spending was changed in most district. the labor market remains tight. wage growth and overall price inflation was described as modest index acted to continue to be modest going forward. ected to continue to be modest going forward. vonnie: what can you tell us