>> holiday homework. as ecb policymakers look forward to their summer break, the central bank prepares a plan for a plan. a breakthrough in brussels. signs of progress emerge as brexit negotiations continue, but could the divorce bill be the stumbling block? the german carmaker who recalled 3 million mercedes to fix emissions. i'm francine lacqua in london. on today's show, i am joined by the executive chairman of 10x

banking, antony jenkins. i'm looking forward to that. later on, we will be speaking ceo, paolormer scaroni. if you have questions for either of them, please let us know. .n follow them on tv first things first, do you ever miss, antony, being in the markets, being the head of barclays? >> not at all. i get to work on fascinating problems now and it is totally consuming. francine: this is consuming the markets right now. stocks and equity futures are advancing a little bit. the euro, coming off of a 13 month high. the dollar, edging higher as the u.s. health care reform bill imploded, meaning investors now are having to weigh whether this

casts doubt on donald trump's policy agenda. the pound, steadily declining. now, let's get straight to the bloomberg first word news with taylor riggs. taylor: the white house has confirmed that president trump met putin for the second time at the g-20 meeting, something that was not disclosed at the time. last night, trump lashed out on twitter, saying the fake news is becoming more and more dishonest. even a dinner is made to look sinister. there are signs of progress in the brexit negotiations. both sides have delved into the details of the main issues they want to make headway on, including how to keep a soft irish supporter. the meetings are scheduled to last until thursday. a third round of negotiations is planned for the final week of august. living standards in the u.k. will not get any better for a

while, according to the institute for fiscal studies. they say the world household income is set to remain depressed due to less potential for stronger employment growth and cuts to working benefits. greece's much-anticipated return to the bond market this week has been held off, partly due to a feelinceiling set on the amountf debt the country can hold. the debt ceiling is included. the imf is expected to discuss a new credit line for grief tomorrow. -- for greece tomorrow. the messaging service has been partially blocked in china. users have reported experiencing intermittent outages, as well as audio clips not being delivered. according to a person familiar, whatsapp is not responsible for the outage. the company declined to comment.

global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. francine? francine: thank you. we also get policy decisions from two of the world's most crucial central banks tomorrow, but they are heading in opposite directions. the bank of japan is battling weak inflation. that will eventually forced policymakers to acknowledge that the program will be needed for several more years. in europe, tapering is on everybody's minds. the ecb is said to be working on policy. policymakers have not yet held formal discussions on the end of bond purchases. ,et's bring in kamal sharma joining us from the london office. thanks for coming on. there is a lot of focus on the ecb, but what would be the upside for mario draghi to give us a plan on how they start tapering? >> i think it is the break of

1.15 in the euro-dollar. obviously, there has not been a significant move sense the central comments. we are of the view that there will be a tapering of using purchases -- of easing purchases over 2018, but that discussion will be left until september. we have the jackson hole symposium coming up in late august as well. for the moment, the ecb governing council, and draghi in particular, will want to play this flatback to the debates on how easing and tapering will comence. francine: do you worry that actual inflation will pick up? there is a strong argument that inflation will pick up because of structural concerns with the labor market, meaning we are not trading quality jobs in europe. will that reverse? >> the 2018 forecasts for

inflation have been recently revised down, which is why, if you look at the spectrum of views on the ecb and the path to normalization, we are on the dovish side of expectations. within that lens of softening over the course of 2018, core inflation pressures remain muted. e ishink that end of q unlikely to be until the end of 2018, followed by a deposit rate hike. francine: was there, some kind of concerted action of hawkishness? if there is, what does it mean for other currencies? andexample, the euro-dollar the euro-yen. >> i think it is a convenient narrative that we had correlated hawkishness. the government was and already hawkish before centra.

carney led the market to that view. but then the week following that we had the riksbank decision. though central banks were not of a mind to support the evidence that there was coordinated intervention. what is clear though, is there is a growing amount of frustration among central banks over the recent years that inflation pressures are picking up, given where we are in this business cycle. but there is in balance growing in various economies. so, they all have imbalances w ithin their economies. as far as the dollar, we do see a typical response to the fed tightening through the cycle. the dollar tends to underperform, and we have seen that with the aussi and kiwi. we see that from the bank of canada, and to a lesser extent, the bank of england.

as far as the boj, we think they will remain the nominal anchor for the rest of the year, which is why we remain bearish on the yen. francine: talk to me little bit about the pound. you mentioned what mark carney did to redress the hawkish pressures. yesterday we had inflation data, which was well below expectations. >> yes, and then we have the carney comments coming out late in the afternoon, which downplayed the near term miss. we did have a move lower in sterling. the point we have been making is sterling's responsiveness is limited between correlations between sterling and data surprises. they have fallen quite significantly. we still think sterling is a player on brexit, on the domestic political situation. our trading recommendations are structured around volatility. francine: kamal sharma, thank

you so much. 1.1519., this will depend on whether the end's bull run will abruptly, whether draghi avoids the hawkish tone of his recent speech. the district the bloomberg business flash. taylor: they have agreed to purchase the food business for $4.2 billion in a deal that would add frank's red hot sauce to the spice line up. this is expected to be completed in the fourth quarter, pending regulatory approval. mccormick says it has obtained financing. mobile's ceo has been replaced. the move comes just weeks after they rebuffed a $29 billion

takeover from u.s. rival ppg. and daimler, seeking to head off a growing crisis by voluntarily recalling more than 3 million mercedes-benz diesel vehicles in europe. cost about 220 million euros. if accepted, it could help fdaimler avoid the massive penalties. francine: financial services are ripe for transformation, driven by new technologies. that is the view of my next guest, antony jenkins the executive general at 10x. he thinks banks are facing their own uber moment of the structure and and could go the way of codec and become obsolete. as always, this is amazing. a lot of theb banks don't

realize, but you believe we will the a transformation in like the taxis saw with uber. where are we with that? >> maybe in a period of five to 15 years. i worked in the industry. i always asked this question, why does the technology make life easier for customers, for banks, and so on? all it seems to do is add complexity and cost. now what we are seeing, as the power of computing increases, it can begin to solve complex problems. we're beginning to see a wave of transformation going through the industry, rather like what uber did. this is the moment i describe. it is where technology can create a different technology experience in the best example of that is mobile banking. in this country, it is affecting

bank trafficking. we also see technologies producing cash out at atm's, which is down. the kodak movement is dif ferent. that is when customers realize there is a different and better way of doing what they want to do. kodak invented digital photography, but we can now take thousands of pictures on our mobile phones. the kodak movement will come in the five to 15 year period. francine: could the two movements come together? >> you are always going to be wondering. the big trends are that we have this enormous growth. as with any kind of burst of activity in the thickets of technology, a lot of it does not work and some of it does. theyou can see companies in

foreign currency space, in the payment space really starting to scale. what those companies have done is they proved there is a different way to do banking by focusing on a narrow view, making the customer experience better. the mainstream banks are doing what all incumbents do, innovating. francine: and buying companies, right? >> to some extent, buying and investing. that is what i would regard as innovation. all big companies are capable of innovation. it is very expensive for them. mobile banking is an example of a good innovation, and i think a successful one. just as kodak innovated the digital photography. the difference between a disruption and business as usual

you need to transform to respond to a disruption. and that is very difficult for large organizations to do. don't have the right culture, mindset, or way of reframing. this is how the kind of startup technology is forming. francine: can you change that, if you are a big bank, and change the composition of you r board, for example? >> it is absolutely a leadership and cultural challenge. something interesting has happened. if we were having this conversation 15 months ago, i would say most big banks believe innovation would be sufficient and their scale would protect them. now there are banks i'm talking to around the world that realize that is not working, and now are working on alternate models.

that is really where we take a small amount of resources, put it really outside the existing environment, and we let it go, and work as if it were a startup, and be protect and nurture that. this model is not uncommon in other industries. if you think about pharma compa nies, they have exactly the same issue. in this case, they actually buy companies. this is a slightly different model. i think it is more appropriate for financial services. now i have bank ceo's saying to me, can i try the innovation stuff for three to five years? i can't get my people to move fast enough. i can't move my legacy platforms fast enough. can you help us with that? francine: do you see a joint venture between apple, facebook, and the big banks? where are the big banks thinking -- or are the big banks thinking about this? >> this is another very

interesting aspect. which york, we have psd2, will require opening up all the financial records and transaction capabilities of banks to anybody who has got the authority and capability to handle that information. in that world, you can imagine a separation between the management of the client relationship and the provision of banking services. get left with the heavily regulated and not very profitable activities, where a technology company that has got a huge digitally engaged customer base and immobile off ay can' cream lot of the profits. and we see that in other industries. you look at content, for example, what goes through the apple store online. you look at what amazon is doing. when you have that massive purchasing power, because you have got all the relationships with the customers, you can

control what happens in the industry. that is the other real threat. francine: so, who will i bank with in 15 years? our relationship is a little bit obsolete, but it is one of tru st. >> i think trust is always the card pulled out in this discussion. but you will bank with the person that makes your life easier. if you are like most people, dealing with your money is a bit of a chore. but dealing with your money is important to you for saving for your children's future, buying a house, those things are really important to you. your finances are a mechanism to achieve that. so, somebody that can do that for you, make you feel like you have made smart choices without you having to do any work at all, that is who you will bank with. and you get your mortgage from, who provides your credit card is the relevant at that point. -- is irrelevant at that point. francine: is it on my mobile?

>> it is probably an app that runs in the background and only comes to you when you need a decision, might be able to anticipate things you might want to do. so, in the case of a small family, for example. another child in the house, you could predict in 12 to 24 months, that family might want to move to a larger accommodation. you might be thinking about moving house. here's five great offers we can get you. here are three locals. those types of things, that just take out the strain of managing your finances. and actually, the pure peevish and of the balance sheet just becomes a commodity. francine: uber, facebook, google, they are all american. will this app be from the states, or could it come from the u.k.? >> absolutely, it could come from the u.k. i am really excited about what

we are doing the technologies in this space. i would argue london is the leading hub of artificial intelligence. there is no reason it could not come from the u.k., and there is no reason why it could not become a global capability. francine: what is the biggest challenge, when you left barclays and started 10x, what surprised you the most? do you like being an entrepreneur? >> it is tough. there is nothing easy about trans forming industries. but the one thing that you have in this world, you have the freedom to think, and most importantly, the freedom to act. you are not constrained by having to run a large organization day to day. you can basically build the future in the way uoyou want to build it. you for joining us today, antony jenkins, the founder of 10x banking. up next, daimler's recall of 3

million mercedes for an ermiss missions fix. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua in london. the german carmaker daimler is recalling 3 million mercedes benz diesel vehicles to head off a crisis. if the movie is accepted by

officials, the company could avoid massive penalties. after the vw scandal, is diesel dead? let's ask chris ranger, who joins us from berlin. what led to this recall? chris: well, i mean, as you said, it's been bubbling along since the volkswagen crisis broke two years ago. daimler has been accused basically of not necessarily cheating per se ,b, they have been adamant they did not cheat. they may have push the boundaries of what regulations allow, in terms of thing able to cut off emissions controls to protect the engine. the boundaries for those criteria are pretty loose. they are being accused of taking liberties with that. francine: chris, what is daimler trying to accomplish here? chris: well, they are trying to get out in front of this.

basically, they have been pretty adamant, fighting these allegations that they have cheated, that there is anything wrong with their vehicles. what they are trying to do is to become good with the german government and say, we are going to get out ahead of this thing. we're going to recall every single modern mercedes diesel on the road in europe. to wipe this thing under the rug. it is a relatively cheap fix. it is like 70 euros per car, 20 million eurs. if this fixes the problem, they get away pretty cheaply. francine: will they? is it too soon to say they do get away with it? are there wider concerns about diesel cars in general? >> there is still wider concerns about diesel. diesel is under pressure, regardless of this recall. this underscores the issues with

diesel in general. the fact that it is efficient technology in terms of fuel burn, but it creates these gases that cause smog, and could cause cancer. these issues persist with diesel. daimler is not out of the woods. the investigation is going on the u.s. prosecutors are still looking at the company. where they come out of this at the end of the day remains to be seen, but it does get them on the good side of the german government. francine: thank you, our european auto reporter in berlin. up next, the hurdles brexit negotiators need to clear. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg first word news. here's taylor riggs. taylor: the white house has confirmed that president trump

met vladimir putin at the g20 meeting in hamburg, something that was not disclosed at the time. last night, trump lashed out on twitter, saying the fake news is becoming more and more dishonest. even a dinner arranged in germany is made to look sinister. ecb staff are said to be working on stimulus plans for consideration. according to officials familiar with the matter, no definite proposals have been devised and policymakers have not yet held formal discussions on the end of bond purchases. an ecb spokesperson declined to comment. living standards in the u.k. won't get better for a while according to the institute for fiscal studies. it says real household income has grown slowly since the financial crisis and is set to remain depressed due to cuts to working age benefits. greece's much-anticipated return to bond markets this week has been held off, partly due to a

ceiling set by the international monetary fund on the amount of debt the country can hold. according to officials, the debt ceiling is included in a series of documents agreed on by greek authorities and the washington-based fund. facebook's whatsapp messaging service has been partially blocked in china following a censorship crackdown by the government. users reported intermittent outages, saying photos as well as audio clips are not being delivered. according to a person familiar with the matter, whatsapp is not responsible for the blockage. the company has declined to comment. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you so much. brexit negotiators have admitted to frustrations on both sides, but say they are making some progress.

in talks yesterday, several hours were spent discussing how to keep a soft irish border as well as european nationals in the u.k. negotiators say one of the main sticking points remains the size of the divorce payment the u.k. should make to leave the bloc. here with us is paolo scaroni. foras a former cielo at eni many years. for manyead of eni years, had to negotiate deals, speak to politicians. how do you make a deal? i don't know whether we have to talk about game theory. dealid you go into a big talk with a politician? paolo: in any negotiation, you have two ingredients which are absolutely needed. you have to have a clear view of where you want to go. you have an idea about the direction, the limit the

negotiation should give you. the second, you need leadership. you need to be empowered. you need to be sure that what you propose, people backing you will agree. this is needed for the u.k. in particular because continental europeans think that since the u.k. pulled the trigger, it is up to them to make proposals. francine: it seems emotional. can you get a good outcome when it becomes so emotional? it feels like a divorce. paolo: it feels like a divorce. i believe that like a divorce, in a real divorce, at the end of the day, emotions fade away and you start to be rational. we still have time to be rational. i'm convinced that there will be a good agreement. francine: do you believe that there's real capital in europe that can take the place of london? i speak to him of ceo's who tell

me nothing can replace london. it may slow down a little bit, but you seem to believe that paris or frankfurt can spearhead the financial capital of europe. paolo: i frankly am surprised of the fact that the u.k. chose to give up on something that they've achieved in the last 30 years, to have london as the capital of europe. not only a financial capital, but the real capital. all the continental europeans come to london maybe once a week, every two weeks. with brexit, this will not happen anymore. the continental europeans will find other capitals, maybe frankfurt, but also paris, maybe other places, dublin, but certainly london will lose this role of being the european capital. it might become the capital of other worlds, so nothing wrong with it, but certainly the role that london played in europe

will be different. francine: do you speak to ceo's that really care about brexit? i hear more and more, looking at charts, looking at pound, so investors care, but if you speak to ceo's, they think it is a very british problem. paolo: it is a british problem that the people in continental europe are, on one side, they find it incredible, this choice of the u.k. but there are people who are happy about it, because the true europeans, the people who want to go ahead in building a political europe, think that with the u.k. inside, this would have been impossible. maybe without the u.k., europe can move ahead in political unity. francine: r.o.e. too optimistic about europe? you come on regularly. you were on maybe 12 months ago, saying, what about reforms?

you were concerned about europe. politicians say we are going faster than the u.s. maybe, but unemployment is still 25% in many countries. paolo: unemployment is decreasing as well. the european economy is performing well, and performing better every time we take the measure of the european economy. this is good news. at the end of the day, unemployment will start to decrease as well. what was important was to get out from stagnation. this is particularly true for countries like italy, not to speak about spain, which has been a phenomenal success story, but italy, france, are now progressing in a+++

francine: this is "bloomberg surveillance." let's get straight to your markets and check on your asset classes. here's nejra cehic. nejra: i was going to say we were seeing a rebound in european stocks, but that wasn't long-lived. we are pretty much flat on the stoxx 600. we saw the nasdaq and the s&p 500 in the u.s. touch all-time highs again. global stocks retesting those all-time highs. european stocks not looking too

strong. tech stocks leading the gains. they were the laggards yesterday. on the downside, industrials and financials underperformed. financials were underperforming in yesterday's session as well. yields,year treasury something i've been keeping a close eye on. we saw it drop six basis points yesterday, below the 200-day moving average, almost touched the 50-day moving average. we are rebounding today, up about one basis point on that 10-year treasury yield. with the politics in the u.s. and those expectations coming down for that fed rate hike, the bulls seem to be very much out in force when it comes to treasuries. that brings me to the treasury bund spread. this tightened down to 1.7% yesterday. we are coming up a bit today.

this is about central banks. we are looking ahead to what the fed might do. we've got the ecb meeting and the decision coming tomorrow as well. the treasury bund spread, something to keep an eye on. that does feed into the euro. we saw the euro hit its highest since may 2017 yesterday. we are at 1.1524, a little weaker on the euro in today's session. that moving up towards 200-week moving average. is it going to get there? draghi in the driving seat tomorrow. is he going to try to manage those expectations of signaling of tightening of a pullback in stimulus? european equities got to be taken into account. we've been seeing that relationship come back where it is having a negative impact on the dax and eurozone stocks. francine: thank you so much. oil has slipped after the

american petroleum institute was sent to report an increase in u.s. stockpiles. people familiar with the data say inventory rose by 1.6 million barrels last week. that contrasts with a bloomberg survey. oil has been lingering below $50 a barrel despite agreements by opec and its allies to curb output. scaroni,h us is paolo vice chairman at rothchild and sons. thank you so much for sticking around. when you look at the price of oil, opec and russia will meet to review their production cuts in st. petersburg next week. what do you think will come out of it? paolo: i think they will strike another agreement to curb production in the next few weeks. they have no alternative. they might even decide to curb more production in order to try to push prices have a level in

excess of $50, which is a kind of minimum they would accept. that inventories will willase only if production decrease. otherwise, investors are going to stay fairly high. francine: the market has changed since you were kind of following opec, and i don't know how closely you were following opec, but it seems there's a will to keep control of things, but it is all about the oil rigs in the states. they've effectively lost control of the market. paolo: the good news for them is that russia and opec are now linked. that is the good news. the bad news is the marginal price of oil is the shale oil production in the u.s. if we had met two years ago, i

would have told you the margin of price of shale oil in america is $65. now i'm telling you it is $50. maybe if we meet two years from now, i would tell you $40. this is the game changer for everybody, which has been the reason of unity between opec and russia. francine: will they succeed? paolo: i think they will succeed, but i believe for the next 12 months or 24 months, i would be surprised to see oil in excess of $55. francine: you think they will have to cut production further. is there anything else they can do? paolo: they have to cut production in order to leave room to the american shale oil on one side, and to decrease production of the countries which were out of the market. libya just to start with. iran is increasing production slightly. there is the venezuela case,

which is a big question mark. venezuela is producing very little but could double production easily. francine: it is difficult, because unless you are the oil minister from saudi arabia, it is difficult to see what they will do. will it have to come from saudi? paolo: the saudi have more flexibility than anybody else. russia also has flexibility. russia cut production by 300,000 barrels. they can double this without major disruption to the russian economy. for the time being, they have no alternative. they have to leave room to the u.s. shale oil. francine: how would you handle the situation? there are reports that oil majors will spin off like lines. do you need to diversify? paolo: the only majors are

integrated oil companies and they make good money refining. low, theprice is sectors are performing well. in terms of the result, they are not that bad. , oil price decreased by one dollar is not one dollar less in the pocket of an oil company. who is really suffering is the country. francine: of course. good to remind people. paolo scaroni stays with us. up next, the meeting with vladimir putin adding to president trump's troubles. this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." let's get straight to the bloomberg business flash. here's taylor riggs. hasor: mccormick and co. agreed to buy reckitt benckiser's food business. the transaction is expected to be completed by the fourth

quarter of mccormick's fiscal 2017 pending regulatory approval. mccormick plans to fund the deal with equity and debt and says it has obtained committed bridge financing. exxon mobil's ceo has stepped down. he's been replaced by the company's head of specialty chemicals. the move comes just weeks after akzo rebuffed its takeover from pbg. the is seeking to head off a growing crisis over emissions cheating by voluntarily recalling mercedes-benz diesel vehicles in europe. the company will extend an ongoing upgrade of compact cars and vans to nearly every modern mercedes diesel on the road. the plan will cost it about 220 million euros. it helps time ller avoid the massive penalties that beset volkswagen. francine: thank you so much.

donald trump and vladimir putin met for a second time in a previously undisclosed meeting at the g20. a white house official said they spoke during a dinner after spending two hours in a formal bilateral meeting. the meeting adds further pressure on the president after the collapse of his party's effort to repeal and replace obamacare. let's get more from kathleen hunter. paolo scaroni is also still with us. thank you for sticking around. another day, another controversy. how big is this one? kathleen: i think it adds to the drip that we are seeing about these revelations between contact between trump during the campaign and in his time in the white house. i think it builds on a narrative about trump and his close associates not being as forthcoming as they might be about these meetings they are

having. i don't think anyone really thinks anything of much significance happened in this. it sounds like it was a dinner conversation that happened sort of informally and wasn't particularly substantive. the fact that something like this would be typical in past administrations -- typically the white house will give a readout to reporters afterwards and note significant things that happened. it is surprising this wasn't part of the readout. there should be a heightened sensitivity in the white house to, any time something happens with russia, the reflexive thing would be to disclose it. that builds that narrative that they are trying to keep something secret. francine: i want to ask you about whether it hurts his base or not. paolo, how should ceo's deal with this administration? we have a piece saying this health care collapse could leave trump winless in his first year.

should ceo's care? paolo: my impression, the ceo's do not care very much. on top of that, i have to say that if mr. obama would have done the same thing with mr. putin, like sitting next to him at a dinner and talk for an hour or so, nobody would have made any comment on it. i have an impression that people are kind of overstating what is happening on the trump administration. isimpression is the economy doing reasonably well in the u.s. i don't see major worries from the ceo's of u.s. companies. francine: if we are overstating, and at times it does feel like everyone is focusing on something which may or may not be benign, but is there a way the president can get on top of that? is it full transparency, full disclosure so that we stop with leaks, rumors, and speculation?

kathleen: now there is a different standard but i think that is because of trump and his associates' behavior. there is this reflexive kind of focus on the media on anything to do with russia. in some ways i think that is warranted. if there is a way for the trump administration to get on top of this, it begins with disclosing everything possible. that way we don't keep having these stories every day. i think that is kind of the problem. what happens with health care? mitch mcconnell may put a new proposal together? kathleen: it looks like we are moving on to tax reform. yesterday we found out this newest mcconnell proposal, the straight repeal, doesn't have the votes it is going to need to pass. i think the significant thing is

that tax reform is going to be even more difficult than health care was supposed to be. the white house isn't even looking to put out its proposal until september. the last time they did a broad-based tax overall, it took more than a year. it is going to be a heavier lift than health care was an health care didn't get off the ground. francine: should ceo's care about this? is politics more treacherous at the moment? are ceo's just getting used to it? paolo: take the example of health care. i just remembered that for mr. obama, to make his health care reform took three years. for years, we had been talking about it. the fact that this is a very sensitive issue, no doubt about it. i would not overplay the fact that there is a stop and maybe another go. i believe most of the chief executives are thinking my way. it is a big issue.

find yet aidn't solution, but everything goes on. francine: thank you so much, paolo scaroni. he is the vice-chairman at nm rothchild and sons. kathleen hunter, our u.s. congress reporter. "bloomberg surveillance" continues in the next hour. tom keene joins me. we will be talking to the volvo president. we will also be going through diesel scandals. it is big central-bank week with the boj and the ecb tomorrow. look out for any kind of currency movement. a little pressure on treasuries. this is bloomberg. ♪

francine: holiday homework as ecb policymakers will go to their centra summer break, centl

bankers will return. will he get the taper timeline for september? lower for longer, treasury yields are pushed down over new concerns for president trump's policy agenda. morgan stanley becomes the latest u.s. bank to report earnings. this is "bloomberg surveillance" and i'm francine lacqua in london. tom keene is in new york. i know we are looking at currencies and movements. we are looking another diesel emissions scandal. tom: it is back-and-forth today. we had wonderful guests to talk about the quiet in the market, sand some of the politics. you tell me. this ecb is not a small issue, is it? francine: no, and it is the underlying of all currency moves. today it is the ecb and boj. yeah, we will focus on ecb a lot. but first, let's get straight

to the bloomberg first word news. reporter: it turns up the president trump had his second meeting with putin at last week's g-20. the white house says they had previously undisclosed conversation during a dinner of global leaders. the eurasia group says the meeting lasted one hour and the only other person present was putin's translator. mitch mcconnell's new plan to appearsobamacare to be dead. three republican senators have come out against a repeal without a replacement. they cannot afford to lose more than two republican votes. and greece's plan to return to the international bond market this week has been put on hold. that is partly due to a ci eiling set by the imf, meanign greece will have to it until thursday, when it will make a $4.6 billion debt payment. theresa may will try to build bridges the financial and trade

organizations during the brexit talks. tomorrow she will launch a new business advisory group, which will focus on the u.k.'s withdrawal from the eu and wider economic issues, such as industrial strategy. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: thank you. equities, bonds, currencies, and commodity. they cannot even invent a second screen. futures advance awfully pause yesterday. -- futures advance off of the pause yesterday. futures: u.s. equitiy advancing, the euro coming off a little bit of that 14 month high . we also have the boj meeting tomorrow. inflation.ng u.k. i wanted to put the dollar in there compared oto the euro.

this is all about the health care reform bill. tom: what we try to do every day, folks, is get you out front of the academic discussion. ia few weeks ago, an incredibly important speech on where europe is and where the united states is. here is the key chart from his 25 page powerpoint. this is killer, fracine. the white is the u.s. the blue is the euro. here's the rollover from the financial crisis. and they really have not come back. what is cool about the sitting your chart is here is the united states gap, and here is the massive eu gap. europe is catching up. europe is doing better, but they have a long way to go to get back to anywhere near the extrapolation of what should have been. that's a great chart from blanchard. francine: that is a really great chart. i have a simpler chart, tom, but

i think simple is best ahead of the ecb, showing the rally ahead of the euro. it is currently at 1.15. the premise of this is that the euro's bull run could end abruptly if draghi avoids the hawkish tone. look out for that. tomorrow there could be, on the back of the ecb a little bit of euro movement. 10 year u.s. treasury yields dropping to the lowest level since june. i have a chart coming up for that. traders in the futures market are becoming convinced that yields we lower for longer, no matter what the federal reserve says. turning us for the hour is david stubbs. david, thank you for joining us, as always. we have quite a lot of earnings. they seem ok. then we have the central-bank action comedy ecb, the fed coming up. what will give impetus for the market to rally further, or for a correction? >> i think the focus of the

equity market will be trying to work out what happens after this energy bounce ends. energy has been this big swing. fewurbed earnings the last quarters. what is left behind it? tech earnings are looking good. financials are ok, though there are some parts of the industry struggling a little bit. that will be the key focus on equity market. in the bond market, we are at the mercy of the tone of voice, not to mention the actual content from the central-bank tomorrow. i suspect draghi will not want to be overly dovish, given how his speech was received. the big question of course, the bank of japan, when are they going to acknowledge that their stimulus is not raising inflation? yellen could be out early next year. he wants to start a balance sheet unwind there. kuroda's term ends next april. francine: i will bet you five

ound pounds. before we get to the coordinated action, i want to ask you about the 10 treasury yields. this is a great chart i was sent by hillary. it shows the 10 year treasury yields are testing the long-term plan. will a breakthrough? -- will it breakthrough? >> i think they will be obsolete focused on the outlook for core inflation in the u.s. already i think the september meeting is pretty much off the table, in terms of a rate rise. i think we look at the balance sheet reduction there. and even the december meeting is doubtful. the last time i checked your wonderful work function on the terminal, i think it was a little bit below 50%, though i have not checked in a couple days. this is absolutely a function of whether there is genuine inflation impulse coming in the economy, or whether the deflationary impulses will hold inflation down. francine: tom is asking a

question. tom: you have a phd of the university of the non-orthodox, the new school for social research. >> proudly non-orthodox. draghie we dealing with here -- are they dealing with unorthodox economics? are we just making it up as we go? >> i think there was a point after the crisis when central banks had to make it up as they go. cutey did, they up several of the negative boundaries in their world, for example, negative boundary rate. people would look strangely at the notion of negative policy rates before the crisis. the aftermath of this period is going to be the unconventional measures are now conventional. the next time there is a downturn, of course they will balance sheets

again. people will not think much of it. tit will lack the controversy of the initial quantitative easing programs. balance sheets again. people will not think much of it. i think the unconventional is now conventional. the things we could not have imagined are now mainstream theory. tom: how do you take mainstream theory into what blanchard was talking about in naples, the whole labor model, versus the blather we talk about everyday? i don't see wage growth and the mystery of which growth really attached to the debate. -- the, it certainly facts of the moment are that the prevailing inflation theory of relationship between unemployment and inflation and wage growth is uncertain. the phillips curve, i don't think it is dead. it has shifted left and is a

significantly flatter than it was in the past, thanks to fear over another great recession, thanks to technology, thanks to globalization and competitive forces and almost no presence of unions in western labor markets. i think the additional theories are in play for inflation dynamics, but they have to be adjusted. and we can't just wait for inflation to pick up. without the understanding the key deflationary forces are holding this down around the world. francine: a great, great read from bloomberg intelligence. the phillips curve, alive or dead? coming up, we speak with the volvo ab ceo. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua with tom keene. let's get on to volvo ab's shares, trading lower after second-quarter earnings jump 39%. the swedish drugmaker delivered more demand for construction. we are joined now and please to be joined by the ceo, martin lundstedt. he is on the phone from sweden. thank you for speaking to "surveillance." the truck division profitability fell during the quarter. shares were down. how do you see profitability going on trucks? what's the outlook for earnings in general? speaking, i think we are looking at a good quarter for the group.

it felttruck division, to 9.6%. on the back of supply restrictions during the end of the quarter. the model for the group is continuing with underlying profitability improvements. francine: give me a sense of the infrastructure plan? are you starting to see the fruit of it? he you raised your forecast on the whole. >> what we have seen when it comes to the truck side, is our forecast is the market has opened up. we see levels on new trucks and used trucks considerably better. and also, economic activity in the u.s. is strong. 225,000oving up to units. i think that is a fine

recovery in our truck market. the construction site has a slight improvement from flat to a small improvement. tom: i am thrilled that the volvo truck had 70 inches of head room and a telescopic ladder. do you see global gdp getting better, even while the developed companies lag behind? >> well, generally speaking, we solid economic activity around the globe. our forecast is gdp will be slightly better. i mean, we see it in china, in europe, where there is solid market demand, and in u.s. demandly speaking, the

for our type of product and services is picking up. tom: what you need from mr. draghi? [laughter] >> generally speaking, we don't talk about the specific needs from either mr. draghi or someone else, but we are following that very closely. when it comes to europe, i think we have good economic activity in general and that is translated into transport flows, and that is translated into infrastructure activities. that is coming into our businesses. for the time being, i think europe is an interesting place to operate within. francine: that was a good question, tom. if mr. draghi could put small notes in an envelope and send them to "surveillance," we would be grateful. what is your outlook for europe in general? where do you see the market actually increasing, and will it get easier from here for the truck business? >> for the truck business, we are guiding for continuous,

strong market on the level, as we saw already in 2016. that is around 300,000 units for the year. cycle,take a general that is 10% to 15% above. we see that also from the macroeconomic activity, in terms of the transport flows, etc. we see the models moving forward. , thank you lundstedt so much. later on bloomberg radio, we drive forward the conversation with washington. jared bernstein, out with an op-ed today. jared bernstein, former economic adviser to vice president biden. the republicans picking up on the pieces of health care. this is bloomberg. ♪ reporter: this is "bloomberg

surveillance" and i'm taylor riggs. the ceo of akzonobel is stepping down because of ill health. resignation comes months after the unsolicited takeover bid from ppg industries. in response, akzo said it would split up the company. the new ceo will be the special chemicals head. mccormick has agreed to purchase

the food business for $4.2 billion, given the giant spice company products such as frank's red hot sauce, which has surpassed tabasco is the best-selling hot sauce in america. a strategic move involving some of its pipelines. the british energy company could form a partnership and holding company for an ipo. pipelines offer a more steady source of revenue. that is your bloomberg business flash. tom, francine? tom: francine, i have to interrupt. have you ever had french's mustard? francine: i have, of course i have. i love a good condiment. tom: first of all, we don't call them condiments. it's mustard from one mustard street, rochester, new york. congratulations to mccormick for bringing american mustard home to america.

a nice little advertisement. it is not the one i would pick, but we don't want to do brands. we don't know what the ecb brand would be, but investors are waiting to hear from draghi on tapering during tomorrow's policy decision. this is what is moving a lot of the currency markets. the current expectations are for announcement september or october, despite the ecb evaluating options. to limitedeaid appetite in policy change for now. i can tell you for free, tom. i' i'm sure mario draghi has never had that mustard. david, on a serious note, how much do we care about the ecb? the ecb is imported, but it's all about the fed. >> i actually think in the coming months, the ecb is the central bank with the greatest

influence over markets. for a long time we have seen europe really struggle to gain markson with question over the existence of the currency, let alone its prosperity. now, europe's feature does look fantastic and you have the added issue of the potential constraint in the number of bunds they cabn buy because they will bounce up againstcurrency,s prosperity. now, europe's their limit. really, the global focus during the next couple months will be very much on what mr. draghi says. i think we lean on the side of being dovish this meeting. there is a many questions on their policy. are they going to do a smooth, preannounced taper? with a step down from 80 to 60, which is not a taper at all. and then what about the interest rates? when do we get rid of negative interest rates? does this happen in 1

increments of 10? going back to the previous sector, we are in a new world. when we went into negative rates, central banks tiptoed down by 10 basis point increments. they were worried about issues to do witht he r the run on band cash and the impact on the banking sector. traditionally, you unwind things the way you build them up. you would expect them to tiptoe out of this by calling commence. o-- by small increments. then, there is the view they might want to take it out when they start tapering policy. tom: does jpmorgan change asset allocation because of these unorthodox strategies of bankers, of central bankers? >> i think we were encouraged

throughout the post crisis period, that central banks were throwing the kitchen sink at getting markets stable, getting financial systems recovered in getting growth and appointment towards some semblance of normality. we have been investing hand in hand with central banks in equities. i think it was a key part of why we have been risk on for almost the entire process period, and why we remain overweight on equities. what happens now, tom, is the issue. tom: my question, very quickly, how do you know when to get risk off? wait for a bellwether signal from mr. draghi? >> i don't buy it. i think markets are much more focused on good old-fashioned economic fundamentals and just like most cycles, when i see fundamentals weakening, i'm going to want to take some chips off the table.

right now i don't see that at all. i see a robust, synchronized global expansion. we are advising clients to be overweight for risk assets at the moment and underweight on the savfe havens. francine: coming up tomorrow, the ecb will announce its decision, followed by a news conference by the ecb president mario draghi. we will bring you live coverage when that happens at 7:45 in new york, 12:45 in london. he will go to the currencies. this is bloomberg. ♪

♪ >> surveillance in washington. kevin cirilli will join us in the next hour. -- trump whom reading

pitting -- putin meeting. right now, taylor riggs. >> we are starting with politics. secretary wilbur ross is at the hearings. administerntries talks today. -- trump administration toprding to people, several advisers are involved. is -- theouse european central bank is -- wants to move

careful. the concern is investors may jump on any schedule. downloadsobal ranking -- downgrades the u.s. when it comes to retiring. norway's number one followed by switzerland and iceland. i'm taylor riggs, this is bloomberg. greatis one of the themes. i don't think the audience understands the failure of the system. retirement >> we need to do it globally on

retirement and education. a lot of times it goes hand-in-hand. -- resulted in and about 19 minutes. >> ulbrich companies are able of innovation. the difference between a disruption in business as usual is you need to transform to respond to a disruption and that is difficult for large organization. if you look at other industries,

it is unusual for large company -- chris, thank you so much for joining us. the earnings season not too bad. it is not great, but where the via trend? >> i think it was a bad quarter. i think the numbers were decent. -- normally defense to did as people go on holiday and then we will see what happens back on

labor day. far,rms of the numbers so jpmorgan had some concerns. that, citibank did well. i think they are doing a purposely to give himself a .pringboard consultants come in come what kind of cost cuts are they going to be? are they going to+++

businesses? to be fair, banks are bad at cutting costs. i think the thing that will surprises is a digital bank -- digital banking things will have an impact. cracks that is going to surprise us for the next five years. banken do i see the retail implosion. when do we see the branch banking model come in with a vengeance. >> i think jpmorgan where the first one with that idea in the first on is despite people that

it iso go to digital, quite important. people are going to have to work out how you will ensure small businesses. >> is a coming soon? is it something you think of in terms of investment or evaluations? what about the future of

regulation. back to -- g to get are they here to say and are they going to cap the candidate equity we see. -- we'ree's no doubt -- moreg to see , not as much capital. >> does that mean the banks are not that cheap? of course, we are in a new world. play ai think the banks .ot of catch-up

>> this is a chart that shows global von -- global bond value market. the bank plays an interest rate play on what the fed does next. obviously, any kind of inflation will see the banks sought to push out and provide more liquidity to the market. give us an update on deutsche

bank. obviously they have the flotation of the management and --ent arms coming up i hope people in the bloomberg terminals stay. we value your presence. bloomberg businessweek. what a success last week with our eu cover in brussels.

bloomberg businessweek tomorrow. tomorrow, they will be a new issue. this is bloomberg.

>> this is bloomberg surveillance. fell afterly american patrol rise. the u.s. department of energy releases its -- let's get

straight to neil atkinson. he joins us now from paris. week, opec will meet with russia. they going to achieve more cuts. we are sure about the moment hasough the opec agreement been operating so far, the month reliablee've got numbers. after wait and see what they decide. opec is responsible for its own decisions just like everyone else. when you look at the oil rigs

, are they powerless? isthe u.s. situation interesting because the first part of the show and the extent with production increase. and now, a resurgence to some extent. --is not question of the libya and nigeria are seeing on production increase dramatically. the opec producers are seeing

their own cup diluted by two of their own members. the fewou are one of people who have tangible experience working in venezuela. where do they stand right now? >> the states -- is very poor. workersdeal of time is not able to do their job, interim family. however, production today remains at about 2 million barrels per day. venezuela's problem is it is not .ble to refine as much

>> the entire industry has had to adjust. there's a lot you discuss about bringing cost down. has all the easy work been done? think most of the easy for lending food has been achieved. the oil industry is all about men and women and making things more efficient. i would anticipate most of the significant cost have probably been achieved in this cycle in inmate be an issue of cost beginning to rise.

are we still in range bound? doesn't publish forecasted prices. expect stocks to start falling during this second half. you can expect the price to the supported and you can expect the price to rise, but not very much. does few dollars the price extent, >>se -- some where is your biggest mystery for neil atkinson? us is seeing me

outlet can remain in the second thing we're trying to understand is how resilient the u.s. show industry is. is how and final point resilient will demand growth is going to be. compliance some of you are sure come in those are the things we are looking at. you so much. stay with us. we will ask a more about what we are seeing and what central banks are doing. to ask ask, not

videos we havehe to read this is the literature for the videos we have. this is bloomberg.

drop and --a bank nailed it. i love what you did here francine. not labor dynamics, but total factored productivity. you for the compliment. it is always welcome. a former chairman wrote this, saying as i get richer, measure -- is there becomes any truth in that? ofare looking at data points

central bank. >> the crucial word here is measured productivity. it is much easier to work at a .actory it was becoming difficult to quantify some of the activities. it is the chimney difficult and i think it is not just measuring overall productivity, right now , still lots of evidence being overestimated if you take into account things like computers. it is a nightmare measurement. i know the bank of england said this is the toughest time to measure economic output they've

seen. easier to count income from a difficult to count productivity. >> as we get richer, we cannot use the same models now that we used 20 years ago. .t is a different world >> absolutely. i think we are shattering thedigms between relationship of working hours and output. you see this happening all over the place. thanks to the fall in cell phone prices. to a change in

methodology on how they quantify the phone services in the united states. the next one may be the price of education. when it comes to data, it will changey inflationary and the balance between the deflator in the real -- to discuss. francine, it is amazing how quite it is. we have wonderful guest coming since will join us as well. it will be good to talk about fix is called here in the

-- vix. that is a while statistic. not the drama we saw monday. york, andn and new our next hour, hoping you stay with us. overnighteed to know from washington. stay with us. this is bloomberg.

tom: it is the key question for washington. does the president have the will

to connect with congress? republican health care down in flames and next year, could the gop commit tax reform legislation? china and u.s. leaders, the greatest of great divergences. america struggles towards 3% growth. team trump will talk tough on steel tariffs. team xi, they will listen. volatility. good morning, everyone. this is bloomberg surveillance live from our world headquarters in new york and our world headquarters in london. francine lacqua joins us this morning. it really is quiet. we make a joke about it and we talk about it in a moment that low volume, low volatility. how sleepy is the city? francine: first of all, in europe, a lot of people are on holiday. what a shock. but you said we are very live.

i don't know whether the ecb meeting will be very live but it will be the hawkish tone or not of mario draghi that will be encouraging to europe. tom: getting ready for a three-week vacation without our first word news. here is taylor riggs. >> it turns up president trump had a second meeting with russian president vladimir putin at last weeks to tony summit. -- g20 summit. they briefly conversed during a dinner for global leaders. the meeting lasted an hour and the only other person present was putin's translator. revealcconnell plans to obamacare but that appears to be dead. three republican senators have come out against the repeal without a replacement. mcconnell can't afford to lose more than two republican votes. thece's plan to return to international bond market this week has been put on hold. according to people familiar with the matter, it is partly due to a ceiling set by the imf about how much debt the country can have which means it may have

to wait until thursday when it can make a payment to ecb. in the u.k. prime minister theresa may will try to build bridges with financial and trade organizations during the brexit talks. she will launch a new business advisory group. the group will focus on the and's withdraw from the eu other economic issues such as industrial strategy. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine? tom? tom: let's run through the data. equities, bonds, currencies, commodities, and the euro is at 1.1 530 and every thing else is turning. francine: this is what we have been looking at. a little bit of a turn but i like it. retreating as the ecb's meeting, we are seeing a boost in stocks because of earnings but they are not bad. oil fluctuating and gold falls down. tom: we regroup right now and we

do that with robert sinche of amherst pierpont. robert sinche has been nothing short of brilliant on pound-sterling over the last year and joins us to synthesize where we are. how afraid are you of low volume and low volatility? >> i think part of it is the summer and part of it is some complacency about central banks. we have that flurry of activity a few weeks ago in portugal where the second -- the central bankers seemed to get together to dampen some of the enthusiasm in financial markets but unless they follow that up with policy shifts, we won't get much volatility out of it. tom: but the quiet essence, what is the outcome of slumbering through down to a vix well under 10 and a move under that. what is the ramifications of that to global wall street? you saw that on trading revenue that didn't happen yesterday.

robert sinche: i think you are seeing that in the financial markets in general, there is a big supply of assets in the marketplace, whether it be the baby boomer retirement savings, whether it be central banks, and when you get this much liquidity, supplies to market, you are just not going to get a lot of volatility unless you get abrupt changes in expectations. i think the central banks tried to hint at that a little bit a few weeks ago but so far, the bank of canada is the only central bank that has followed up with anything on the policy side. i don't think the ecb brings anything this week, i don't think the bank of japan brings us anything new and it looks like the fed activity may get pushed back a little bit. you also don't have any catalysts to change expectations and certainly no catalysts coming out of the policy front in washington. so you look around the world, you see a lot of liquidity, a lot of supply, and you are getting markets. at the same time, you don't see

expectations changes from any policy initiatives. francine: what is the policy mistake? what if there is a policy mistake? what are the chances of a policy mistake and if there is one, could that the catalyst? concerns on the policy side have to be on the monetary side in the u.s. you could have a policy mistake in the u.s. on the fiscal side by just not doing anything but it looks like we are headed down that route and the markets have come to digest that. doi think the real issue is, we get anything shocking out of the fed anytime soon? we don't think so. it will probably be a september announcement on tapering and the winding down of the balance sheet and then we get the december rate hike but that is pretty far into the future to start discounting any changes now. know if youdon't want to talk about asset bubbles or bubbles or bowls in general or repricing for correction but

what asset class could be repriced quickly? robert sinche: i think we saw a few weeks ago that the fixed income markets are really where the asset prices could change most abruptly. we saw that in european bond markets. we have digested a bit of that. i don't think we are going to get anything out of the ecb meeting this week or out of draghi. there is a bit of hype going on on that one and they are trying to get away from jackson hole being a policy meeting and being part of an academic meeting. so i think you go to september before you really have an ecb action and a real fed action so it could be a long summer. tom: in july, we are 10 years on in the crisis. i'm sure in dubai it seems like two workers three crises ago. here is our chart. with a blanchard fabulous speech in naples of where we are.

the white line is u.s. economics and the blue line is eu economics with their extrapolations forward. this is where we have never caught up. we have never caught up in the u.s. and even more so, that bigger blue arc on the right, we have never caught up in the european as well. have we just given up hope on getting back to the trend? robert sinche: i think that part of what we have to deal with is the reality of demographics. we are an aging society in the u.s. and more of an aging society and slower labor force growth in europe and on top of that you have less dynamism in europe in terms of investment and productivity growth. i think this is a concern going forward because it doesn't look kind ofhave the political economic leadership that we need to kind of jump start this process. ofdon't have the dynamism the 1950's and 1960's and the initiatives we had back then to really create the kind of

capital investment that we need to make up for slower labor force growth. quickly, howy would you review emerging markets? we don't talk about the rest of china anymore or the risk of repricing. is that a mistake? complacency on the part of the markets? robert sinche: i don't think it is complacency in the short run and i think if we had some better, higher inflation numbers in the u.s. over the summer, that probably could have been a greater concern for emerging markets but again, if anything, the expectation is about policy changes and a potential policy era on the monetary side. they have been diminished. we are seeing the headline inflation numbers coming down around the world. it doesn't look like that is going to change anytime soon so i think we are in an environment where it is not going to get major policy changes in the short run. francine: thank you so much, he of amherst

pierpont. the ecb is set to announce their policy decision and we will bring you live coverage of that when it happens at 7:45 a.m. in new york and 12:45 in london. this is bloomberg. ♪

tom: good morning, everyone. bloomberg surveillance from london, francine lacqua and tom keene in new york. it has been an eventful 48 hours in washington and it was made more eventful on charlie rose last night as ian bremmer talked about another meeting between .r. putin and mr. trump kevin cirilli, our chief washington correspondent was not at that meeting. let's be sure we've got that right. dr. bremmer says the meeting

his sources. does the white house confirmed that a long chat occurred over dessert? kevin: well, long chat is the questionable part. for former president barack obama, he had a similar a counter -- encounter with vladimir putin when he was being received but the difference is they disclosed it at the time. it is common during the dinner settings that world leaders would ask these conversations. the president was actually seated next to japan prime minister shinzo abe and took with him a japanese translator but the difference is it wasn't disclosed and as a result of that, the president's tweets you are looking at now criticizing these stories, the fact that it wasn't disclosed caused another headache, a political pickup for the white house. tom: where are the adults in the room? they are doing push-ups with senator grassley, like you went viral on yesterday. let me ask the request and's

desk the questions -- the questions the republicans and democrats want to know. where is the adults to assist the president with what washington has everyday? kevin: there was no readout of this. it also comes from the backdrop of the previously undisclosed people -- we're up to eight people -- who were in that room in trump tower with the russian attorneys so all of this again, narrativenuing this that the white house is unable to shake out of. francine: so what needs to happen? just more transparency? i was speaking to a major oil co and he felt sorry for president trump with no matter what he does, there is a controversy. the best way would be to fully disclose and start speaking to the press more. kevin: i would love that. i think journalists would love that. thathis is the white house

is increasingly looking for some type of win and i think yesterday's defeat on health care, coming on the backdrop of stories like this with the undisclosed meeting or even the appearance of a nondisclosure -- ure, i wassclose just reading out the hunt's , ifmn on the bloomberg and health care was so hard to do, wait until he gets a tax reform. francine: any update on the health care? they are now going for a third attempt at putting something together? kevin: no real new developments. there is nothing likely for any type of full repeal bill to pass despite the majority leader's efforts. i spoke with several former governors who are now led by senator joe manchin, a centrist democrat from west virginia,

they want to put together a fix-it bill which would involve subsidies with the obamacare exchanges but it is tough for them to do that, a narrow path forward. kevin: let's look at a good mmr from noah feldman. tom: this is the bloomberg view. professor feldman from harvard law. in one emblematic frustrating day, trump saw the failure of a senate bill to repeal and replace and was forced by an advisory to certify that iran is in compliance with its nuclear obligations. requiring majority in both houses of congress the american system pushes the president to negotiate a compromise. thank you for the civics lesson. is there any indication he will get this for tax reform? something operating a now is that they can move on to tax reform without doing health care despite whatever but he wanted to say. tom: great, but can they move on to tax reform without a president who didn't take civics 101?

kevin: they are going to have to continue to move on to tax reform. the white house is likely now going to release its plan on tax reform sometime in august and the working principle -- i thought megan murphy put it best -- when she said the president and the white house are learning it is hard to take a way things once these programs already exist. tom: that would be true. whether predicted as well. kevin cirilli, our washington correspondent. robert sinche has seen all of this. he is just old enough to remember tip o'neill and tax reform as well. what do you do at amherst pierpont given all you have just heard from mr. cirelli? do you just ramp down your expectations on the vector of gdp? robert sinche: we have taken down growth projections over the next four quarters a little bit has we didn't expect to see more progress than we were getting. what you are finding interesting in the discussion in the last couple of weeks is that

everything is the discussion in the senate and how the senate might reach a compromise on health care legislation and on tax reform. nobody is talking about the house. comes to taxhen it reform it might be more difficult to get that through the house than it will be through the senate. so we are just trying to find a compromise in the senate. we haven't even addressed the dynamics of the senate having to deal with the house that could be in more ways more unruly. kevin: they are also all of for reelection, tomorrow as well. we will continue with robert sinche as well. on bloomberg radio, we will drive this conversation forward. chair bernstein -- jared bernstein joins us on the likelihood of a 1986 redux. good luck with that. this is bloomberg. ♪

tom: bloomberg surveillance, francine lacqua in london, tom keene in new york. good wednesday morning to you. he is our senior executive director of summit reporting. michael mckee is in washington for a summit today. place what we are going to see in washington today. it is like henry paulson redux that it is not. michael: it is more than that and it might be all standing between the u.s. and a trade war. donald trump came into office to lacking -- promising china was tariffs but at the

mar-a-lago meeting they decided they would put together a 100 day action plan to improve trade relations between the countries. they made some progress. the chinese are buying american beef and we are buying chinese chicken. things have stalled but now they are getting together to get everything back on track. ,f you show tom this chart here this is what the u.s. is worried about. the chinese trade deficit with the united states going ever wider. it stalled in 2016 and started to go off a little bit but so far this year, headed back down. wilbur ross said yesterday we have work to do. francine: so has the u.s. administration -- how does the u.s. ministrations be to china to get more balanced trade? michael: that is an interesting question because the chinese like the way things are, it is going their direction. they have a chinese congress at the end of the year and they would like to keep the status quo. the u.s. wants to work on the trade deficit. areas they have agreed to work on like credit cards,

allowing u.s. credit card companies and rating agencies into china, but we are not going to see the u.s. do what the chinese want which is relax restrictions on high technology and military equipment sales to the chinese. so there are some sticking points out there and overhanging everything, north korea and whether china can use its influence to help them back off their nuclear program. tom: michael mckee, thank you so much, our economics correspondent in washington. with us is robert sinche of amherst pierpont and joining us now, donald stress time of ever core isi. definitive on china. the answer is china is not only waiting out this meeting, they wait out the trump administration. what has changed from jonathan spence 101? >> i think there is going to be more sizzle, a little bit of eak at and even less st this meeting. china has their own priorities

and we have ours. china is sort of ok with that. washington is not. they are not going to be in agreement that breaks new ground. tom: so the in hundred pages on the history of china, somewhere about page 200 it clicks in that they just wait. the chinese are professionals at waiting. within your storied career, is the waiting now different from the waiting was five years ago or 20 years ago? don straszheim: no. everything you think about in china, in terms of policy, ought to be gradual and not abrupt. that has always been the case. that's going to continue to be the case. so we will maybe get some marginal agreements on more beef exports, more lng, we are happy to do that, and they are a were with us that they can't buy our high-tech products. we don't want to sell the high-tech products because we

think they have technologies that are of military significance. these are not going to end today. francine: what will they decide on steel imports? how does the trump administration way these economic imbalances with the need to get china to deal with north korea? don straszheim: well, steel and aluminum, we very well may, at some point -- i don't think potentiallyld introduce new actions to restrict both steel and aluminum. provocative, i think, to china and to other countries around the world because it would indicate some potential protectionist slant. beyond that, you are not going to see a lot of new action, i don't think. francine: thank you so much, donald stress time of evercore

and robert sinche of amherst pierpont. coming up on bloomberg markets, u.s. tradeth former representative michael foreman and ask him about these china blamingports and china's overcapacity for creating global glut. that conversation with michael froman is at 6:30 p.m. in london , 12:30 p.m. in new york. stocks are actually gaining a touch. there is good news when it comes to earnings but watch out for boj. this is bloomberg. ♪ these days families want to be connected 24/7.

that's why at comcast we're continuing to make our services more reliable than ever. like technology that can update itself. an advanced fiber-network infrustructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. francine: bloomberg surveillance from london and new york with tom and francine. at brexit,ou look the negotiators are still

ongoing. we know our brexit minister will travel back to brussels tomorrow. they seem to be acknowledging frustration on both sides over the divorce from the eu. this is because of entrenched early positions. if you look at the details there also seems to be a bit of progress emerging. that will have a huge impact on the city of london. let's get straight to the first word news with taylor riggs. out president trump had a second meeting with russia's president vladimir putin last week. at the g20 summit, the white house says they had previously undisclosed conversations during the dinner for global leaders. groups ian bremmer says it only lasted an hour and the only other person present was prudence translator. >> never in my life have i seen two major countries with a constellation of a national interests which are different while the leaders seem to be doing every thing possible to make nice and be close to each

other. that is what people don't understand. >> president trump lashed out at media reports of the second meeting saying he once again was the victim of a commands. -- of big news. the trump administration posting on the venezuelan officials for human rights violations. top advisers are involved and the white house has warned it would take action if maduro goes with his plan to rewrite the country's constitution. the european central bank is studying its next steps on economic stimulus. they are examining scenarios for the future of quantitative easing. the ecb's governing council wants to move carefully. their concern is that investors may jump on any signal that bond purchases are about to be tapered. a new global ranking downgrade to the u.s. when it comes to retirement security. america fell to number 17 in the fifth annual survey. norway is number one followed by switzerland and iceland. global news, 24 hours a day, powered by more than 2700

journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine? tom? tom: we will do more on retirement including bringing in alicia monell of boston college. amherstinche with us of with us and thrilled to have with us today don straszheim. on his tie.ere this is a game of thrones tie. he has the dragons on the time. that is gorgeous and spectacular loaded with the symbolism of your power, the auspicious and potent powers. what is the power of president xi? how is he lined up with the dragons? don straszheim: he is now the number one guy. core. it means he is the leader of the party and he will continue to be the leader of the party.

this transition in november, president xi hands power to president xi for the next five years. eliminated all of the doubters and adversaries. tom: is this debate between him and the poa cleared up? don straszheim: he controls the military. he is the head of state of the government and he is the general secretary of the party. he is in charge and we are going to get what policies he wants. tom: what is the policy he wants if you were to advise the president of the united states? don straszheim: he wants to stay in power and the most important difference, i think, is that washington seems to want china to strangle north korea, which they could, economically, in a month. but china sees north korea as an important offer between china and between south korea, a client states of america, and the last ring china wants -- the

last thing china wants is for north korea to collapse in some way and then they have syria on their doorstep. this is not helpful. tom: interesting. francine? francine: is there anything the trump administration can actually do to deal with this steel production? we have a great chart, measuring it in metric tons, and it is very clear that china's steel production outpaces the world and the u.s. but you could argue xiat because president wants to stay in power the policies could change after the people's congress? don straszheim: the analogy i would use is an eight-year presidency by a u.s. president, two terms, four and four. how many times can you cite in the past where the u.s. president has made a 179 degree turn in year five? that would be repudiating the record that you just ran on and

got elected four. the same is true for china. they will go the same direction they have the last few years in the next five. full his politics into something as basic as monitoring n.ina's yua for those of you on radio, all you've got to do is our recent and the star you want. that is by the government. it is not a float, is it? don straszheim: it is not a float at all. there are signs they are monitoring their exchange rate versus a basket rather than the dollar. as we see this decline in the dollar versus major currencies over the last two months you are seeing the chinese currency beginning to catch up with that. robert sinche: so on a trade weighted basis, the chinese currency, if anything, is weakening a little bit although it is going up against a weaker dollar. don straszheim: i would just

describe what is happening now as not yuan strength but dollar weakness. tom: but when do we get the capital flows -- i have read you, don straszheim -- we have been waiting for some form of capital flows with china. are they there or imminent? you are shaking your head. robert sinche: they are not. they just started this new bond connect program to attract capital. don straszheim: they had the stock connect program now for one year in san jan and three years in shanghai. chinae outbound out of into hong kong, not northbound from hong kong into china, this is investors voting with their money. as long as china does not make the real reforms in these markets, it will continue to not flow north but flow south. tom: we have a high real interest rate in china. does that matter or is it just

so about flows and the unique teachers of the chinese government? don straszheim: the money markets and the policies are increasing in china. robert sinche: what is interesting is they actually just told the banking system to bring down the rates of returns on of the savers. i don't think they are freeing up markets. i think capital continues to flow out of china. so what do you do? slowdown reform of capital controls because of this very issue of wanting to maintain control. if you open up capital flows, we see what direction they are going to go and that is going to create all sorts of instability within the economy and that is clearly what the president doesn't want. we have a situation where, if anything, they are slowing down the reform process and they are not going to become a world reserve currency. they have domestic stability as their focus. if anything, the weakness we are seeing in the political environment, in the u.s. just makes it easier for china to delay reforms because they

really don't feel threatened by what is going on in terms of growth and of element in the u.s. don straszheim: china is a big boy. they are highly vulnerable now, more than in the past, to external events. that poses potential external risks. china doesn't want that. that is why they are not interested in freely floating the currency. that is why they have capital controls on. tom: thank you so much, don straszheim with us. .is tie, it is like dragonstone i'm waiting for emilio clark to come in. don straszheim with us today. backt sinche will come with francine and maybe look at town-sterling as well. he has been on fire in terms of getting the vectors right on sterling. businessweek, they keep me incomplete secret. everybody knows what the new

issue of the bloomberg is except me. megan will tell me. ande is the great eu issue the conversation on lloyd blankfein as well. stay with us. this is bloomberg. ♪

>> this is bloomberg surveillance. i am taylor riggs. let's get the bloomberg business flash. discovery and viacom have held talks to acquire the owner of hdtv and the food network. that is according to persons familiar with the matter. traditional companies are under pressure to grow by acquisition after losing viewers to online video services. is inos turnaround plan

its fifth year without to get in progress. this is the 21st consecutive quarter. unit, cloud the key platforms, were down more than 5% from a year ago. in china, they have altered the country's biggest property deal. toe days ago, they agreed buy one is hotel and theme parks for $9.3 billion. now, are enough properties have been brought in. for will buy the project $2.9 billion. that is your bloomberg business flash. francine: thank you so much, taylor. investors are waiting for hints from the ecb president mario draghi on tapering after tomorrow's policy meeting. the expectations are for an announcement in either september or october. the phillips curve seems to be link that the strengthens is the european central bank. joining us now is j murray, and robert sinche

from amherst pierpont. thank you jay for joining us. isi think what we are seeing we know for a start that it is broken. we have estimated three different types of phillips curves at different states in the pipeline and they all break down at 2015 when the recovery starts to get going. we know that it is not functioning. mario draghi has made his own comments, remarking about if it is due to supply potential being larger. wage expectations are affecting it. case, the conclusion you have to draw is that the ecb will be willing to stall the potential of the euro economy. a will eat until they see the whites in the eyes before they withdraw stimulus from the euro

area. now if you look at the uk's experience than the eurozone is going to be waiting a long time for the phillips curve relation to reemerge. rates are interest likely to stay low and not be lifted probably until 2019. francine: what are you expecting from the ecb tomorrow? the euro will move depending on the hawkishness or not of mario draghi. >> imf and they are all very much looking forward to their summer holiday. i'm not expecting they are going to announce anything of any significance, particularly in the speech that mario draghi associates a market reaction, we probably don't get that volatility this summer. hem: i want to go to bob sinc in a minute, but what is the link between sterling and the policy of the united kingdom? are they linked or directly

linked to brexit from last year? view on that is there is a strong link between the politics and the exchange rate over the past year or so. theicularly as we run into election. but more people are realizing now, whether theresa may had a strong hand or not, it didn't matter much. nottical situation is actually that important a more -- anymore and it is difficult to get any sort of meaning in the gyrations of the politics in the u.k. >> nicely said. let's bring up the chart. sterling, bob you have been brilliant down at the bottom on sterling, calling sterling strength -- it literally went up six hours after -- there we go. we have lloyd blankfein up there is we want you to look at that

article. but up we go here with the tendency you talked about. everybody was down here in consensus but you weren't. where are you now on sterling? >> i think, we think the u.k. economy is going to underperform. if you talk about we wages, you have them in the u.k. the difference in the u.k. is because of the weak sterling they are seeing some inflation pressures. around 2.5% headline inflation. real wages are declining in the u.k. and that is going to weigh on consumption. we've been looking for sterling to weaken up a little bit. it has been stable against the dollar but if you look at sterling versus the euro it has come down very substantially. that is the u.k. economy underperforming. the euro zone economy, outperforming expectations a little bit. we had a big move in euro sterling and i think in general, we are seeing a weaker pound on

every currency except against the dollar. tom: francine, he is making me work overtime. bring up the chart. there is euro sterling. it is a little bit of lira. it is a chart i did a while back up, francine, as you well know, is stronger euro, weaker sterling. we are near the breakout at 90. it i do ok? francine: you did great. full marks with tom keene. when you look at that chart, when you see the inflation we had yesterday, what does it mean for boe? >> the inflation under shots expectations quite significantly . does it tell you anything about underlying inflation and pressure? does it really change the policy challenge. we will be waiting until 2019 to lift interest rates. the u.k. may underperform of it

>>. jamie, thank you so much. we will continue with bob since. >> morgan stanley, we mentioned lloyd blankfein and that wonderful cover. we should do something on james gorman. he is killing it at morgan stanley as well so we are looking at morgan stanley earnings to come up and sometimes come up early. james gorman is very unpredictable. that is how i would put it. tv , we are bringing it up for you. isyou have a bloomberg this how you watch tv live but way more important than watching my ugly face live, you can come over here and you can click up francine lacqua is killer chart on chinese steel production bonus round. you can steal francine lacqua's brilliant chart. i say you could steal them. this is bloomberg. ♪

tom: bloomberg surveillance. banks derby. here is the bank chart. we have shown this for 10 years, the collapse of for banks down to the same place. what a difference in recovery. this is something bloomberg has followed for years. the late great mark bittman giving us guidance on the

mortgage debacle. jpmorgan of here in white, wells fargo stagecoach in yellow, citigroup can barely get it going with no lift and i will give brian moynahan some credit with the lift up here. christine harper joins us now, executive editor and someone who has given us great guidance to the way we do financial coverage here. what is the nuance? >> you mentioned this earlier. it is the unpredictable james gorman who has really managed against many people's expectations to turn around that trading business in a way that it actually outperforms goldman sachs. that is astonishing, even in fixed income which is the area that all of the goldman sachs leadership is from. by the way, james gorman has put a bunch of equities people in charge of fixed income. i tom: usually don't do this but i can get away with this with christine harper. what is the difference between mac trading and gorman trading? there has been a generational

shift. what is the difference? >> when john mack came in, it was the era of take more risks in subprime mortgages, get more leverage lending, it was all about leveraging up and taking more risks, doing more complex trading. they went big into that and it didn't work out very well. and as you know, that happened during the crisis. after that, they had a really come to jesus moment and they became more clients and trick and got out of businesses, the commodities businesses. tom: bob, you have been in four come to jesus meetings in the last 10 years alone. how do you manage risks? whether it is morgan stanley, bank of america, or goldman sachs. how do you manage risks in the room when your head is on the line? robert sinche: i think what you need to do is have a more systematic review of risks, less

individualistic trading, and that is part of what we are seeing in the financial community in general. so much more pricing is going to electronic platforms. there is much less latitude for individual traders. what that means is that you have probably less volatile activity in trading. but combine that with the volcker rule and it really constrains what you are doing in terms of use of financial institutions own capital. therefore the rates of return that they can generate. >> it is also about the types of clients you are working with. goldman has historically had a strong franchise with hedge funds. also morgan stanley but we see what is happening over the last couple of years and goldman's business seem to pick up opportunity. francine: i want to talk about equities trading because if you look at the goldman numbers, equities are really strong. >> that is true and it was a surprise that a few other banks

-- what is expected now is for morgan stanley, which has been the leading franchise in equities, something like 23% of their revenue comes from equities trading according to alison williams so they are expected to have even better equities trading than goldman. we will see if they can deliver on that. in these earnings, i think a lot of focus is going to be on how the trading business performs compared to goldman sachs. francine: we are just getting morgan stanley, that second-quarter net revenue $9.5 billion. the estimate was at my .13, a little better than expected. i'm not getting anything wrong. trading revenue in line with estimates -- with estimates. >> i want to go to christine well we got her. the 25% margin in wealth management is an act of god. that, to me, is the ultimate james gorman statement.

never in my life did i think we would get out over 17 or 18%. how do we do that? >> he is defying a lot of the skeptics. tom: like me. >> i think one of the big challenges for them going forward is seeing if they can deliver on a lot of those goals, like cost-cutting, the r.o.e. target, 10% over the year. it will be interesting to see the numbers. tom: since the bonus was so big, they were down to 12%. thank you for joining us with and christinent harper as always, thank you from bloomberg news. more on morgan stanley. we will do that next. this is bloomberg. ♪

jonathan: wrapping up earnings on wall street, for the second

quarter in a row, morgan stanley fixed income trading outpaces goldman sachs. the european central bank is examining options to wind down qb. the plan to be unveiled in september and a gridlocked leaves president trump poised to to end his first year without a major accomplishment. his team works on trade policy. from new york city, good morning and warm welcome to bloomberg daybreak. i am jonathan ferro alongside david westin and alex deal. here is how we are set. futures go nowhere. the euro retraces the big move to the upside. we retreat from a high at 1.1525. treasuries, yields higher by two basis points at 2.28. this morning, morgan stanley has alix steel. alix: stock up by 1/10 -- 8/10 of 1%. thick number with a but his attention. bang in line with estimates