♪ >> coming up on bloomberg best, the stories that shaped the week in business around the world. any mail trail raises questions for the white house. janet yellen takes questions on capitol hill. reports. with earnings >> it is almost an embarrassment listening to the stupid --we have to deal with in this country. >> exclusive insight into monetary policy. >> at that low level you would have seen more inflation pressures. flex we will implement -- >> big names in finance tell

us where they see markets moving. >> we want to see interest rates continue to rise. >> we remain comfortable. >> the valuation between the u.s. and europe is actually growing. >> we are in more of a political crisis when americans feel. >> the brightest minds in business drive the conversation in sun valley. >> we should get over the notion of the politics of repeal, and onto the notion of fixing the aca. >> it is all straight ahead on bloomberg best. hello, and welcome. this is bloomberg best. your weekly review of the most important business news, analysis, and interviews.

let's start with a look at the top headlines. on monday, economic data from china. >> supplies gains holding up in june. the demand in the economy there could remain robust in the face of relative -- regulatory curves. >> it is a positive headline. factory profits are heading in the right direction. as long as ppi stays positive, that is not a bad thing. but at the same time, we are a long way from the peak in february when we were 7.8%. tepid.r prices remain may be a one-off restocking of inventories by companies, which is what skewed that number. it is probably headed downwards

for the rest of the year. to aid theanted trump campaign. it is official. donald trump jr. was told in an that he would receive damaging information about hillary clinton at a meeting with the kremlin connected lawyer from russia. the russian government was trying to help his father's election bid. is it obvious in the crime has been committed here? >> not yet. i am sure everybody, including us in the news bureau are trying to figure out what the legal definition of collusion is. there are election law issues. you're not allowed to take anything of value from a foreign government. regardless, it is not good for mr. trump's son. >> they wanted to get this information out as quickly as possible, all in one swipe so to

speak. they feel they did not do anything legally wrong. the attorney statement suggests as much. this is bad. politics really could cloud any progress on policy issues republicans want to move forward ahead on like health care. >> mitch mcconnell has announced that the senate will delay the start of the august recess by two weeks. he said after the senate finishes it's worth -- work on health care they can turn to the national defense authorization act, and a series of nominations from president trump that mcconnell said democrats have been obstructing. it is a significant response to the pressure he was feeling from members of his own party, saying we have not gotten nearly enough done to go home to our constituents. janet yellen before congress,

saying the u.s. economy should continue to expand over the next two years. she stressed the fed continues to monitor inflation closely. >> we are very focused on trying to achieve our 2% inflation targets. it is not a subject of discussion. >> you have a lot of members eager to see the multitrillion dollar balance sheet, be wound down, to be investing in treasury bonds. from that standpoint, a lot of good news. he said it is an evolution, not a revolution. the market didn't care. he seemed to be optimistic. >> i think so. , weall there is a tendency are more comfortable with higher rates than we have been.

it is more of an evolution. >> the senate republicans have released an updated draft of the health care bill. for the most part we knew what was going to be in here. what are the compromise that were not on the original plan? >> $70 billion to stabilize the insurance markets. the is in addition to the $112 billion that was already in the original version. in placekeep the taxes from the affordable care act. there is increased opioid addiction spending. in terms of more broadly speaking, we were talking whether the majority leader would try to peel off support from democrats. at this bill can no democrats are going to support this. flex rand paul has, against the -- susan susan: collins will not vote for it. do you expect a vote next week?

lost 2, we can't lose any others. we will wait and see. >> jpmorgan and wells fargo foring off second quarter banks. investigators are getting a sense of how wall street fared. each bank did better in some units than the bank had forecast, which was an interesting turn. >> the big thing people focus on is trading. we had the bank significantly lower expectations. in in linean coming with those lowered expectations. equities trading worse, but fixed income much more important. dimon has somee

things on his mind, doesn't he? >> we have become one of the most bureaucratic, litigious society's on the planet. it is almost an impressed -- an embarrassment listening to the stupid -- we have to deal with in this country. we all have to get our act together. >> jamie dimon is consistent calling for a tax reform, and how he thinks that can benefit the economy. thisve been hearing from consistently. his impassioned plea for actions to be done. still to come, as we review the week, the leader of france essential bank offers insight into the ecb. his viewslan shares

on what is ahead for the fed. and u.s. health care reform and other hot topics. and more of the weeks top business headlines. his views on what is ahead for the fed. many gulf economies and energy companies are trying to reconsider their strategies. >> this is bloomberg. ♪

>> this is bloomberg best. let's continue with news from washington dc. tosident trump made plans fill a key regulatory post at the federal reserve. >> donald trump is going to be whonating randall quarrels, served in the george w. bush administration. quarrels would play a pivotal

role carrying out president trump's pledge to ease regulatory restraints put on banks after the ago trey crisis. , whatupervisory position will this do to banks? >> it should mean less regulation for banks, and more profit. doneuch can quarrels get on his own? a lot of dodd-frank is written into the legislation. what changes he makes has to get through the fed board of governors and the comptroller of the currency to try to standardize regulations across the industry. it would do things like have the volcker rule lined up. he doesn't want to see banks broken up, doesn't like the resolution authority they have put in place to wind down banks if they are failing. he thinks capital standards are too high. he does think there are some

good things about dodd-frank. he is not going to take a meet asked everything -- meet acts -- meat axe to everything. >> they are considering selling seeking international partners as the producer of the most crude and the united arab emirates tries to expand operations. >> this is hot on the heels of planned flotation. it does not intend to sell a slice of the entire company at the holding level. it is going to sell minority stakes. this is still a big deal for a company that was basically synonymous with the abu dhabi government. economiess many gulf are trying to reconsider their strategies.

saudi arabia isn't the only one. we have seen oman. lady is speculation of a energy -- kuwaiti energy companies as well. >> abercrombie & fitch, dashing hopes. doesn't have many stores left. >> it is a brand that is tarnished at this point. part of the reason, if you take a look at the revenue and the company, itf this is a pretty stark downturn. estimates are even worse on both ends. abercrombieright, need new strategy. that was part of the idea. let's try to talk to american eagle.

abercrombie went through the process and found from the buyer perspective there wasn't anyone there. they need to offer a certain price. want tonese authorities stop the use of vpns. plan to get through the loopholes. >> they are a form of private technology people, businesses, they tunnel through the great firewall and access sites blocked outside of china. on the new york times, to google, facebook, instagram. in wide range of sites unblocked. the government has taken an ad hoc approach to targeting individual vpns for set down -- for shutdown. the new move would take a more comprehensive and aggressive approach by asking china's major

state owned telecoms to block traffic that appears to be vpns. theyone in china gets on to internet through one of these telecoms. >> saudi arabia says the anti-terror pact signed between guitar and the u.s. is not enough to in the medic isolation. isolation.iplomatic the agreement was kept secret until it was leaked to the media on tuesday. barredd written document terror groups. accusations that it is violating the agreement are false. >> they are going to go to kuwait, get some ideas, they signed a deal, and this memorandum of understanding would possibly unlock some doors when they go and sit down.

to aesponses we got speak picture that is insufficient from the qatari side. understanding more needs to be .one, >> getting some jobs data out of the u.k.. consumers seeing their spending power eroded. despite unemployment falling to low.tier well behind the rate of inflation last month. you have to say these figures underscore the dilemma that split the bank of england over whether to raise interest rates. the bank of england governor is not ready to call for higher rates, though he sees the pressures to do so.

he says there is reason to see it moving in the direction -- but the decision ise tricky at the moment. >> the bank of england should be forward-looking. the rise in inflation is squeezing real wages. as long as wage inflation doesn't pick up the bank of england will be hitting their target going forward. >> they recognize the mystic inflation remains high and the global inflation story is not within its control. is your turn, it is fiscal policy, it is the direction of travel that now needs to be the real focus. >> another successful prime day. amazon isn't revealing exact numbers, but it generated about

$1 billion in revenue. >> the biggest day in sales they have ever had. they did a billion dollars in revenue in $2.5 billion gross merchandise volume. which was a pretty fast growth for them, for the small businesses selling on prime day. they added the most prime members in a single day in the history of the company. prime is the biggest driver of the retail businesses growth over the long-term. >> the brazilian president had the support to defeat congressional motions that would put him on trial for alleged corruption. the case comes as the former president sentenced to nine and a half years for money laundering. the market reacted positively to this news. is that because they don't expect him to run in 2018?

>> that is exactly it. we are talking about someone with a very, very strong political influence in brazil. any indication he may not be able to run for president next year is a good indication for the market. all ofnown as someone, the reforms are being implemented now in brazil including the pension system reform just voted this week. the markets have given a clear message here. any bad news for lula is good news for investors. >> theresa may's government unveiled a landmark law that will remove written from the european union, the repeal bill is aimed at transferring eu laws onto the british statute book when the frexit takes place in .arch of -- brexit takes place they would have two years through a fast-track process.

>> is this amend that could turn into a vote of confidence on brexit? >> absolutely. it could turn into a vote of confidence on the government. both conservatives and the labour party, they actively want brexit. they voted for it. they want different forms of brexit. certainly if you are jeremy corbyn, you think this is a way you can get into government, by drawing tory rebels over for the amendments you are planning to add to this bill. it is a litmus test for theresa may's ability to push legislation through. ♪

>> welcome back to bloomberg best.

a pickup in the economy has investors wondering when and how the ecb will change its stimulus settings. in member of the blacks governing council discussed i with bloomberg television. >> our target is midterm inflation. around 2%. implement the recommended policy. what we have to do, what we started to do is to adapt the the progress towards our inflation target, towards recovery in europe. what we did last march, when we 60, we qe from 80 to

announced one month ago that clearly we wouldn't reduce interest rates. in the future, this will be our decision, we will go one adapting monetary policy. >> do you think the discussion should move quicker though? do you think the markets are expecting them to be more quickly? >> i think we have been extremely clear about the predictability of our monetary strategy. december, till december 17, we will see what happens after that. no impatience please. i don't say it especially for the financial markets.

we are independent. being independent from political pressures, and from such market impatience. >> are you also waiting for the political risk? you mentioned that protectionist policies are a threat to global growth. are you waiting to see how the political risks involved for the rest of this year? >> this is an important characteristic. remember, what was said one year ago after brexit, 2017 would be a dangerous year for the eurozone. we have seen exactly the contrary. our recovery is solid. it is domestic driven.

they are more the global level outside of the eurozone. what we have to do, this is a very important stake of the g20 summit, just happening now as we speak, to go on with monetary policy with international rules. these are the best solutions for global growth, and the best solution for any qualities. -- any qualities. >> coming up, we will get a read on the fed and an exclusive conversation with robert kaplan. advocate tomrgy steyer sees red. he sat down with bloomberg. around the market, a heavy hitter sees no signs credit is contracting.

>> take a look at the levels of activity, it does not show its sliding anytime soon. >> this is bloomberg.

♪ talks in switzerland on reuniting the country did not produce an outcome, but will offer the beginning of the process. the you think about moving economy forward, have few built-in expectation we would see reunification? .> it is regrettable it was a major effort. it failed to deliver results. it takes two to tango. we still have to see tangible steps which will match the words. finance minister

of cyprus speaking with bloomberg's guy johnson. investor and clean energy advocate tom steyer has criticized the trump administration's decision to pull out of the paris climate speculationing to he might be prepared to run for political office. >> the polling says americans of every stripe across the country, including republicans, no we have to deal with climate change and are up for it. the studies that we have done together with hank paulson, a bloomberg, and mike an independent, have shown that if we moved to clean energy, our economy will grow faster, costs will be lower, and americans will be better paid. republican lie that moving to

clean energy is bad for our economy is just that. it doesn't happen to be true. >> you are clearly frustrated with this administration. >> you think? >> a little bit. everything i have read says you have a choice, continue to be an environmental activist, but clearly you feel passionately not just about the environment, something far bigger about washington and what is going on there, is a time to run for governor of california? >> let me say this, i think we are in more of a political crisis than americans feel, and we don't feel it because the economy is pretty good, but in the political sphere, we are seeing true crisis. we need to be at the grassroots. change theng hard to way americans see issues.

we feel as if between going door to door, enabling americans to learn the facts and talk to each other, that is how we can reframe the issue. aboutt does it to you where we are in the credit cycle? >> everybody would say we are in the later innings, and yet, when you look at our backlogs and the levels of activity, it does not show it subsiding anytime soon. >> really? you do not see a turn in the credit cycle? >> it doesn't feel like it. >> how is this possible? >> i say that every day. you have to remember that we had with 2009,rrection and if you look back through history, it takes a longer time to recover through that.

it is something we think about a lot all the time, absolutely. it feels like it is getting very late. you look atthat, if data and client behavior, it does not. >> is something will precipitate a credit contraction, what will it be? >> most likely a geopolitical shock of some kind. that feels the most likely. >> when that comes, would you expect to see it in the terms to private commitments or public bond spreads? >> public bond spreads. the public markets react very quickly. in arivate markets react more measured fashion historically. >> treasury yields just backed up by 25 basis points in 10 days. went you look at that and say it is a healthy repricing, or does it represent something else?

>> i'm not sure which of those two answers, options i would picket this point. anin, our view speaking from insurance company investing perspective is we want to see interest rates rise. our in-house forecast has been 2.75% on the 10 year by the end of the year. i was starting to doubt if we can get there, but the last few weeks, maybe it can get there. i look at a couple of things perhaps driving it. there are a number of factors cited by experts, but two things stand out. there was a lot of central-bank aboutive around that time rising rates, the prospect of rising rates, and removing accommodation from the markets. that got the market going. at the same time, we see reasonably strong growth statistics, particularly in

europe. you were talking about u.s. rates, but that is important because for the last 5-6 years, we have an talking about global ratesl flows, and we see increasing in europe, we might see flows move a little. we are cautiously optimistic in terms of the economic growth outlook globally. we are looking for decent growth in the u.s., europe, and china, but what makes us more cautious is valuations, the likelihood that global liquidity may tighten, and the inevitable political risks. areas of your investing has been nonbanking financial services. how will you go on with that? is that mean you will reduce exposure to chinese banks? >> we remain comfortable with our holdings, and china more generally, first, china has the

toe and the policy space bring about the rebalancing of its economy over time. so that we think will allow a move to to a slightly slower but safer growth in the medium-term. in terms of allocation within china, we remain comfortable with our bank holdings, but changed the focus towards some of the more innovative areas in china. when you look at the shift in consumption, you can see a shift towards some of the services area, and that offers opportunities for us. how is starting a new position in europe today different than 2016? the difference is that there is more stability in terms of the growth profile of

those companies. a few years ago, growth was anemic in those countries. today, we are seeing inflation and theth pick up, violation disconnect between europe and the u.s. is growing, so we see that as opportunity and continue to find europe a strong alternative. >> is it easy to find unloved companies in the early stages of flirtation like europe? or when we are nearing the peak like in the u.s.? the key with europe and to some degree the u.s. is small-cap companies which we follow our under followed and underresearched, so that creates a great opportunity. in today's market, everything is being traded on omentum, algorithms, and money flows. you are getting the undervalued stocks pushed ever lower,

momentum stocks pushed ever higher, so we see opportunity in the values, but there is a strategic initiative that needs to take place to get value out of those companies, so it is difficult to do. it takes governance and management changes, longer time frames. it is not a trade per se. valueis a lot of equity you can acquire. on the heels of janet yellen's testimony to the house financial services committee, robert kaplan spoke with tom keene in another exclusive conversation. unemployment and relatively labor slack -- low 6,bor slack, and i look at u and that is still not far away

from the pre-recession levels. at that low level of unemployment, you would historically see inflation pressures. we are not. march was weak, april and may stronger, and some of this is transitory. there are some one-time factors in the march numbers but some is not transitory. technology enabled disruption, workers replaced by technology, shoppers can use technology and , businesses power have far less pricing power than at any time in my lifetime. asause of that phenomenon well as to some extent globalization and that goods and services are being competed for need to, i think we accept that some of this muted inflation is the fact we are in a different economy den 5-10 years ago. >> that's brilliant. michael dell, you say he will

see wage growth. when will he see it? , i have to tell you in my conversation with business leaders throughout the 11th district and the country and in our surveys, we are seeing wage pressure for skilled workers, but now seeing wage pressure for unskilled workers. ,ompanies talk about churn unskilled workers are leaving for higher wages and realize they will have to pay more to keep those workers, so with a lag, you will start to see more wage pressure. i believe in the months ahead. >> ok. ♪

♪ you are watching "bloomberg

best." tightens of media and tech gathered for the conference of allen and company to lay the groundwork for megadeals. policyar, politics and worth the main topics of discussion. david gura caught up with a few of the big-name attendees. >> here we are with the aca that could fall apart. we have to fix it. changes, a host of some recommended already i the other side of the aisle, i partisan bills introduced. that and getsider over the notion of politics of repeal and fix aca and get to other agenda items more important for the country down this bill. >> how engaged with this process you want to be?

is eager to fly that. what is the quality of the conversation between you, the administration, congress about what needs to change? engaged and have proposals on the table to make it better. re-insurance mechanism as we build a bigger market. we need to continue medicaid expansion. we should expect in medicaid expansion that by 2024 that we ought to see costs go down. this happened with medicare advantage. 100%in 2008, and we are at because we agreed if we are investing in this population, the costs should come down. the way we are talking about it is politically oriented. 2024, if we have not

invested properly and costs don't go down, we have made a mistake, so we have to hold everybody accountable including insurance agencies and private industry to say what are we going to do to make all square down. >> you have pulled out of some exchanges. what would it take to get you back in? >> i think this re-insurance model, costs reductions, flattening the curve, very important so they don't drop off precipitously, which they do. could get that under way we can stabilize what we have, we are ready to enter when we have a stable market that is predictable. >> do you see this same problems with the health care system that the president does? is that rhetoric measured? does it reflect the way health

care looks to you from where you sit as the head of an insurer? we have been very successful. we just added four new states and expand those already. from 500,000 to one million and will increase that in 2018, so a very successful program. >> what is it about your approach that makes it a success for your company? >> the right net work. the network is structured to deal with them. the pricing is right. 90% is subsidize, so they can afford it. they are learning how to use insurance, and it is turning out well. those who move off medicaid are able to move into the exchange and continue with the same network. it has been very successful. >> let's talk about the policy deficits. 2-3ou were to list the top

things you think should change, what would they be? >> we are dealing with the most vulnerable population in the country. some are very- dependent on this. what we have been recommending his to take the expansion to 100% of the total poverty level, but clint in place the exchange 350%, anddies to there is some chance they will move in that direction. >> here we have the senate debating now the republican plan to repeal and replace the aca. what is the role you see yourself playing out here speaking out and how optimistic are you that it will make it through the senate? >> i am optimistic, but not blind. i realize the political pressure to switch and support a terrible idea, to roll back coverage on

23 million people primarily to provide a tax cut to the richest 1.2% of americans, most of whom don't want or need a tax cut. they are not asking for it. it is a political promise and political transaction that will leave, a harvard study said there several hundred thousand people would die, a lot of downside. i have been working with john kasich and getting some republicans like governor sandoval and governor ducey to work with democratic governors, you know it has to be improved. aboutt me ask you cybersecurity watch last month. i have to wait into these waters. >> collateral damage. >> what happened? software,a piece of

tax filing software in the ukraine, we have a number of subsidiaries in the ukraine, and it infiltrated into our system. could we have stopped it? there were lots of major companies, partners, ibm, microsoft, and many others -- could we have stopped it? no. lez, itompanies, mondo has caused a lot of issues for us but we are sorting through it. 50% to 60% ofted the company. we are two thirds of the way there to having caught our arms around all the problems, but it was unpleasant. could we have stopped it?

it is difficult to be 100% certain. you can't be 100% certain. this area is becoming more sophisticated, the hackers becoming more sophisticated, but there are simple things you can and do, which we have done, but other things will have to do in the future. we will have to invest more. >> there is focus on net neutrality, in particular regulatory change in washington. what does that landscape look like to you from your vantage point now? >> at a macro level from the industry, there is energy around making net neutrality work. we'll johnson put out a clear statement that said, look, veriz neutrality.net

congress should pass laws around it and cement it. of action day organized, and all of those things are really positive. companies,vernment, and consumers have a chance to cement the net neutrality situation of people like, and it will go from something that was crafted quickly years ago into something that will hopefully give the country and our industry a big advantage if it is done correctly. i feel good about our stance on it, and all of our brands have their own stances, which i think everyone is leaning towards net neutrality, which is good news, so it is now up to the government and congress to make sure it gets cemented. ♪

♪ the bloomberg has a model.

these are the inputs into the taylor rule model you have to fill in. how do you know which is the right one? these are different taylor rule models. you can see the blue line, how the interest rate would go up if you use that model. if you use the aggressive model, he goes up even more. >> there are 30,000 functions on the bloomberg, and we always enjoyed showing you our favorites here it may be they will become your favorites. would take you to quick takes for news and insight into timely topics. here is a quick take from this week. >> china's president has a dream, or a pet project. he wants to revive china's ancient silk road along a

2000-year-old route. the project is supposed to deepen economic ties across asia, but critics see it as a way for china to spread influence west. the original silk road began as a trade route from central china to europe. silk, spices, and porcelain were transported to the west. today, president xi jinping wants to use from over producing -- steal from over producing factories. highwaysnt of ports or . to help bankroll the dream, also known as the one belt, one road initiative, china created the $40 billion silk road fun. xi said 30 countries have signed agreements and 20 more were cooperating on rail and nuclear

power. it will bring economic been offense against an increasingly dominant superpowers the man's. a project in thailand fell through because according to time and, there were strings attached, mainly china demanding property rights. china says the silk road initiative is a way to boost globalization. economists agree it has the potential to stimulate asian and global economic growth, but there are risks, like funds not going where they are supposed to and developments turning into white elephants. there is concern about china's increasing the assertive military, particularly in asia's waters. ♪ of the manyjust one quick takes you can find on the bloomberg. you can find them at bloomberg.com along with the

latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. thank you for watching. i am nejra cehic. this is bloomberg. ♪

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