mark: some of europe's biggest lender's report. we hear from the bosses of ubs, credit suisse, barclays, and more. european tech stocks follow asia and america lower after amazon result raise concerns about earnings in the sector. and the senate says no. the so-called skinny repeal

collapses as mccain rebels. trump tweets, let obamacare implode. this is "bloomberg surveillance." checkout european equities. looks like we are down for the third day in five. on track for the second straight weekly drop. earnings once again front and center. euro of against the dollar. 01.7 u.s. 10-year little changed. 2.7% annualized rate. that is what we are projecting, or the economists we've surveyed. 1.4% was the prior quarter. the rest of the economy giving less of a lift to gdp. crude oil lower today, headed for the biggest weekly gain in the month. sliding u.s. inventory, stronger

demand, raising speculation. oil, $49 and change. let's get the bloomberg first word news. here's taylor riggs. taylor: the u.s. senate has rejected a move to repeal parts of the obamacare health law. it came after john mccain joined with two of his colleagues to block the so-called skinny repeal bill. this is a disappointment. house, wes in the thank them as well. i regret that our efforts were simply not enough. switzerland's second-largest lender reported an increase in second-quarter profits boosted by earnings at its private banking units. that is better than analyst estimates and comes halfway through the restructuring plan. >> long-term, i'm always quite

optimistic. the short to medium term is difficult. ,here's so much uncertainty geopolitical events, that are extremely hard to forecast. that wealth creation in emerging markets is here to stay. taylor: barclays has posted a net loss, driven by efforts to sell down its africa unit and a charge for the payment protection insurance scandal. the bank aims to return tangible equity as it moves past issues that have weighed on profitability. >> we still are not happy with where we are. we were down in the second quarter. we've made some recent important hires. we will get that corrected.

overall, the investment bank had a pretty good quarter. taylor: pakistan's pro-minister, nawaz sharif, has been barred from holding office after a probe into his family's finances. today's ruling followed a probe that found a disparity between his family and his known sources of income. in the u.k., police investigating the deadly grin fell tower fire survey have reasonable grounds to suspect corporate manslaughter offenses may have been committed. senior executives from the council and the organization that ran the block could be interviewed. organizations guilty of corporate manslaughter are liable to an unlimited fine. 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. mark: european equities

following asia and the u.s. lower today, dragged down by technology shares, a selloff coming after disappointing results from amazon, heightened concern about corporate earnings. the dollar still languishing as we only u.s. gdp figures. tranquility, some volatility has returned. vix spiking yesterday, closing above 10 for the first time in as many sessions. adam cole, head of global ethics strategy at rbc europe joins us. thanks for joining us today. u.s. gdp, is it going to be enough to lift the dollar out of its doldrums? adam: we think probably not. stronger u.s. growth is probably a necessary condition for a stronger dollar. meetingtember fomc probably being off the table for higher rates, if the fed uses

that as the opportunity to signal its shifting policy, then the hurdle is pretty high for better growth or higher inflation pushing the dollar higher. for the moment, i think going with a softer dollar is probably the right way. mark: as the obamacare repeal collapses, how much is u.s. politics playing into the dollar right now? adam: this matters also. the markets treat that as a barometer for the likelihood of broader reforms, broader tax reform, and easier fiscal policy. easier fiscal policy means tighter monetary policy. the more the risk diminishes, the more the downward pressure increases. this matters also. mark: the flipside is the euro's gain. the euro near about those levels januaryt seen since

2015. are there barriers to further upside from here? is 1.20 and beyond pie in the sky meantime? adam: we think it probably is. clearly what the market is looking for, is where the next opportunity is. the market is beginning to price in policy normalization in the eurozone. if we look at the obstacles, the inflation, we see better candidates elsewhere for policy normalization than we do in the eurozone. while we would like to run with the picture of a softer dollar near-term, we might look at canada or australia as better ways to play that. mark: and on the topic of policy normalization, some might have thought a week or two ago that the august boe meeting next week was live. does the gdp figure from earlier

this week put to bed any thoughts that the boe could hike rates next week? thinknot only that, but i probably as important or more , the softness in recent earnings data. the fact that wage inflation isn't following argues for that to be very much transitory. we don't think the bank will change its medium-term outlook for inflation and i think that probably rules out higher rates, not just at next week's meeting, but for the foreseeable future. we think the market is premature in the u.k. mark: how do we play sterling? it is up to those levels since september 2016 against the dollar. the euro is in the ascendant when it comes to the euro-pound exchange rate.

how does one play sterling given all the different factors, u.s., u.k., europe, economics, so on and so forth? ill see sterling as independently week. we don't have particularly constructive views on either of those currencies. we would look for sort of sustained sterling losses against a broad basket of currencies. if i were positioning for it, that is how i would play it. we see sterling as independently basis as thetained market replaces that prospect of higher rates. mark: have a good weekend, adam cole. let's get the bloomberg business flash. here's taylor riggs. taylor: shares in ubs have fallen the most in six months after the bank reported a decline in its ability to absorb losses. 13.5%.io came in at

meanwhile, ceo sergio ermotti has told bloomberg he's in no rush to make brexit related choices about the future of the business. >> we will make a decision later, q3, early q4. we have a lot of flexibility and we don't see that we need to put pressure on the timing and find ourselves having done some kind of regrettable moves. profit b.n.p. paribas came in at 2.4 billion euros, surpassing analyst estimates. equity and services revenue jumped 26% amid surging demand while provisions for bad debt fell. >> if you look at today, we see there is a positive momentum. that environment, we should probably let it cater a little

longer and not step in with further regulation. taylor: adidas shares are soaring after the german sneaker maker increased its revenue and profit forecast, helped by strong sales and brand streamlining. the company now expects net income to rise for the full year. the outgoing ceo of ge, jeff immelt, he's on a narrowing list of candidates to take over as head of uber. that is according to people familiar with the matter. hewlett-packard enterprise ceo meg whitman has squashed talks of her taking the job by tweeting, normally i do not comment on rumors, but speculation has become a distraction. that is your bloomberg business flash. mark: credit suisse has reported an increase in second-quarter profit after restructuring the business to focus on wealth management. francine lacqua spoke to chief

executive tidjane thiam. francine, good morning. halfway through the overall, is the ceo pleased with what has been achieved? francine: he seemed pretty pleased. he said they've been cutting costs, increasing wealth management. he's confident about capital ratios and he's confident about the swiss bank. however, these trends need to continue. they are juggling a couple things to make sure they do reach that huge overall in about 18 months from now. he was pleased but also cautious. he said it is still too soon to cry victory. we need to keep at it. this is what he said about his longer-term strategy. >> long-term, i'm always quite optimistic. the short to medium term is quite difficult to predict because there's so much uncertainty, geopolitical

events, central banks, that are extremely hard to forecast. the rate of increasing wealth, wealth creation in emerging markets, is there to stay, and is driving the numbers you see. it from: if you look at a holistic point of view, you still have global markets that did pretty well, but there's still a sizable chunk of the industry. tidjane thiam is saying that as they continue reading some of their rivals in wealth management, then it will rebalance and deliver the vision he's hoping for the bank, which is focused on wealth management. mark: elaborate on global markets. how did that unit do? francine: global markets, he said, could have been stronger. they are in line with expectations. he did say there was a lack of

volatility, which we saw for all asset managers. the lack of volatility is because we've seen delay from the fed and other central banks to normalize their central bank policies. there's a lot less volatility in the markets. clients haven't been as active. i asked also about whether he saw signs of a pickup in volatility and this is what he said. >> where we have been challenged is by volatility. volatility hit 8.3 yesterday. unimaginable, unprecedented. it has an impact on the levels of clients. you have a decision in q3 which we are seeing in july. it is a little bit of a funny day because it is the first time as long as i can remember that both ubs and credit suisse are reporting.

investors are focusing on different things. mark: we will see you later. thanks a lot. francine lacqua in zurich covering those ubs credit suisse earnings. manager biggest asset declining in the second quarter. it was weighed down by the cost of buying pioneer investments. net income falling to 145 million euros. the paris-based company seeing its first net fund outflow since it was listed. the chief executive, yves perrier, is here. good morning. the shares are lower today, but only 45 european companies are rising. is that a reflection of your earnings, or is it more about the market? yves: i think that is more a question of broader market. the firsts for semester has been very good. advanceme was up 11% in

of our objective of 5% and it was driven by revenues which increased by 9%. as a consequence, the cost to again bytio improved two points at 50%. for theng the activity first semester, nearly 30 billion euros of net inflows, but it was the result of the first quarter and negative of -- mark: do we worry about the net fund outflows in this quarter? something which is very technical and linked to the seasonality. it was the outflows of monetary funds at the end of june which came back in july.

if you accept this, we had net inflows of 8 billion euros. mark: so the trend remains positive. yves: and especially in the retail side. mark: 40 billion is the target for the year. you raised that target. yves: we have been above last year, 65 billion euros. with 30bove this year billion euros for the first half. we prefer at this stage -- mark: clients, where are they putting money right now? have -- we do all kind of investment, active, passive, and also real assets and so on. what we see, especially during

the first half, we had 7 billion euros of net inflows in etf. we are number three in europe for this. i think the passive asset management is very favorable for the clients presently. mark: and real estate also. are you worried that retail investor demand for property fund products in your home nation in france is pushing prices towards a model? -- a bubble? yves: in the context of very low interest rate, all the asset class are high, but i don't consider that in france concerning real estate we have a bubble. as long as interest rates remain low. mark: we will talk more about interest rates. the deal.out can you elaborate on that?

is that going ahead? does that mean you've hit your capital allocation target for paris? yves: we are on the deal, but the deal is not completely signed, so i don't want to elaborate too much about this. inflows of about 4 billion euros in our real estate funds. in this kind of assets , mainly in france, but also in some other countries mark:. mark: where else are you deploying capital into real estate? in the international sector, we invest was a exclusively the commercial sector, and concerning the countries, mainly france, but also germany and italy.

it depends on the quality of the assets. mark: yves perrier, the chief executive officer of amundi. he will be staying with us. this is bloomberg. ♪

mark: you are watching "bloomberg surveillance." still with us, yves perrier. pioneer, how is the integration process going? what is the setup process looking like? yves: this first half of the

year was good for us because of the results, but also good for us because we closed the pioneer transaction in the timetable anticipated. it was at the beginning of july. defined the action plan for the new company, defined the organization, appointing the key people, and all the key people of pioneer except the ceo are on plus, and so amundi pioneer is completely prepared to implement the action plan. mark: what is the role of your main trading hubs? organize willwe be the following. hub forll be the main european fixed income.

for monetary funds, structured products, real assets. dublin will be for european equities. london, the main hub for global fixed income, global equities, and emerging markets. u.s.ston, of course, for expertise, is fixed income and equity. and we have in addition, investment platform in japan, for japanese equities. milan fore multi-asset. we have done this after the assessment of the best investment platforms of pioneer or amundi, defined by the performances during the past period.

so the choices that we have made were linked to the performance. mark: post-brexit, is paris the new london? yves: london is a main financial center because london has developed a clear strategy. london will remain the main financial center. of course it will depend the way brexit will be implemented. at the same time, probably paris, which has many assets, can reinforce. mark: thanks for joining us. yves perrier, the chief executive officer of amundi. this is bloomberg. ♪

mark: you are watching "bloomberg surveillance." let's get the bloomberg first word news. taylor: the u.s. senate has rejected a move to repeal parts

of the obamacare health law, dealing a setback to donald trump. it came after republican senator john mccain joined with two of his colleagues to block the so-called skinny repeal bill. >> this is a disappointment. a disappointment indeed. our friends over in the house, we thank them as well. i regret that our efforts were simply not enough. gave hisonald trump reaction on twitter, saying three republicans and 48 democrats led the american people down. let obamacare implode, then deal, watch. >> long-term, i'm always quite optimistic. the short to medium term is difficult to predict. there's so much uncertainty. we think that the rate of

increasing wealth, wealth creation in emerging markets, is here to stay and is driving the numbers that you see. taylor: japan's defense minister has quit over claims she helped cover up records that exposed the danger faced in south sudan. the move comes as prime minister shinzo abe prepares to shuffle his cabinet amid a slump in popularity. in the u.k., police investigating the deadly fire say they have reasonable grounds to suspect that corporate manslaughter offenses may have been committed. senior counsel could now be interviewed under caution. organizations guilty of corporate manslaughter are butle to an unlimited fine individuals can't be charged. 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. mark: just getting this breaking

news from pakistan. no less sharif, the prime minister, has resigned. we got a statement that has been confirmed. his office says the court order will be implemented, but the office is confirmed he has reservations on the court ruling. the supreme court of pakistan earlier ordering the disqualification of sharif after a corruption investigation into his family sick of financing, plunging pakistan into political turmoil. the bench of the supreme court giving its unanimous verdict today after a graft probe found disparity between his family's wealth and is known sources of income. this is a developing story. sharif is the second world leader to be felt by the panama papers leak following the resignation of iceland's prime minister last year. the leaks also led to the exit

of spain's industry manager, to executives in iceland, and senior european bankers. it also prompted increased scrutiny of offshore accounts. we will continue to bring you developments on this story. the sharif office says justice wasn't done and sharif says he's to consider all legal options versus the supreme court verdict. lossays has posted a net driven by efforts to sell down its africa unit. excluding the one time cost, the bank posted adjusted pretax profits of 1.4 billion pounds. lossesng charges, it had attributable to shareholders of 1.4 billion pounds. we spoke to jes staley earlier and asked how he feels the investment bank is performing. >> we are quite pleased.

in our advisory business and debt underwriting and equity underwriting, we had a great quarter. the first half of this year was one of the best we've felt the bank has. in credit-rating, we did quite well. in rates and currency, we are not happy with where we are. hiresmade some recent there. we will get that corrected. overall, think the investment bank had a pretty good quarter. anna: you are happy with the extent to which you backed the investment bank business and you think you've taken enough action to turn that around? >> we still have room for improvement. we are clearly very pleased with the strategy we set out in terms of the transatlantic consumer corporate and investment bank. we have a strong position in new

york. we were the number one investment bank in the u.k. with a market share of over 10% in the second quarter. we like the business. invest inntinue to our investment bank. anna: can you give us an update on the status of various investigations, looking into matters to do with barclays, the u.s. doj? what are investors telling you about all these legal issues? are they proving to be a distraction when you are talking to investors? >> we definitely want to put both the rmbs and the qatari issues behind us. beyond that, i really don't want to discuss those issues as they are open investigations. anna: you've talked about another $700 million in charges

for ppi. the deadline has been extended. is this all you are going to take on ppi or could there be more? >> our hope is that this ends the reserves for ppi. the bank has taken close to 9 billion pounds of reserves related to the ppi issues. the government has put an end date to the ppi claims and so we hope this recent 700 million pound reserve will bring this issue to a close. anna: sticking with the consumer credit story in the united kingdom, the bank of england has said that u.k. lenders are dicing with complacency. has that forced you to change any of your policies? >> we are definitely focused on it. we've been in discussions with

the bank of england. what we've seen is a pretty sharp increase in consumer spending ends the brexit vote. that has been matched by an increase in consumer credit. per capita consumer credit is at a level roughly equal to where it was in 2008. unemployment stays very low. we are watching it. we are adjusting our underwriting standards accordingly. we want to remain a bank with one of the highest quality portfolios. on unemployment, which continues to be quite low. i think everyone should be mindful of the levels of consumer credit, both in the u.k., and the u.s. as well. mark: next, the credit suisse chief executive is optimistic after a 78% profit increase. we're going to hear from tidjane thiam.

that is next. this is bloomberg. ♪

mark: you are watching "bloomberg surveillance." credit suisse reporting net income for the second quarter that beat estimates. reporting a 70% rise in second-quarter profit, $312 million, boosted by earnings at its private banking units. the results come halfway through tidjane thiam's three-year restructuring plan that has seen thousands of job cuts, the selling down of bad assets, to focus on more stable businesses. francine lacqua asked him about how he felt the restructuring was going. >> feeling good. we think the restructuring is working.

it is 18 months out of 36 and we we are delivering. we said that we had a challenge in growth. billionated almost 23 in the first half. that is our best performance since 2011. it is very good. years forvery good wealth management. growth is back. it is profitable. profit is up year on year. we said that we would resolve a capital issue. we are now at 13.3%. we said we would cut cost. we've cut 1.9 billion in 2016. we are well ahead of our target for this year. we said that we would reduce risk. risk is 47% down. we have dealt with doj. we've been busy, growing,

cutting costs, raising capital, cutting risk. so far, we think the teams have worked very hard. francine: what are you most proud of? is there one thing that you found more difficult than the others? >> you don't do any of that alone. it has been a joint effort. they are all difficult. very difficult for any company to grow. there's a lot of competition. very difficult to cut cost at the same time. interesting is that we have really driven in parallel at the same time. revenue is up 9%. the operating leverage is what is driving profitability. francine: revenue is beating expectations, but flat somewhat.

will that change? >> it is up 9% over prior year. it is very good growth. there are bright spots. revenue has grown in switzerland. that is the first time. we grew 5%, our revenue. we are gaining market share in switzerland. francine: does it validate your strategy? >> we've always said we could grow profit in switzerland. profit is up 14% over two years. think -- we can actually grow. bank is auniversal very good model.

it is a good story. cost is going down. revenue is going up. that pattern you see across businesses. cost is going down. revenue is going up strongly. cost is going up less. in asia, same thing in wealth management. revenues coming up strongly, cost going up less. and finally, global market. it is a huge turnaround. we said that we would hit 6 billion of revenue. ofdid 3.2 in the first half 2017. there was a lot of skepticism that global market could be turned around. all these are bright spots. so the trend we are seeing can continue? >> we are working hard for it to continue. if you take international wealth management, we have priority solutions, which is a team of advisers who design customized

solutions for our clients. this is where you see the transaction income going up so strongly. we've been able to increase the number of mandates. the asset base is higher. in asia, same thing. we have this integrated approach. we have the chinese billionaire building in london. our wealth management team in london, our real estate properties in europe, where number one. that integrated approach allows us to sell, and the other point is -- [inaudible] the reason why we are confident is that a lot of it comes from working better with our existing

clients. people think that we are recruiting new clients. all this growth comes from working on the clients we already have. next, two of the u.k.'s biggest agents report a profit plunge. how is the top and of the market faring? that is next. this is bloomberg. ♪

mark: you are watching "bloomberg surveillance." let's get the bloomberg business flash. taylor: shares of ubs have fallen the most in six months after the bank reported a decline in its ability to absorb losses. its tier one ratio came in at 13.5%, down from 14.1%. sergio ermotti has told bloomberg he's in no rush to make brexit related choices about the future of the business. laterwill make a decision , q3, early q4. we have a lot of flexibility and we don't feel that we need to put pressure on the timing, and

find ourselves having some kind of regrettable moves. taylor: b.n.p. paribas has outshone deutsche bank. profit surpassing analyst estimates. equity and prime services revenue jumped 26% amid surging demand while provisions for bad debt fell. , thereou look at today is a positive momentum which is continuing. that environment, you should probably let it cater a little bit longer, and not step in with further regulation. taylor: amazon tumbled in extended trading after reporting a big jump in quarterly costs and offering a disappointing outlook. expenses rose. earnings per share came in at $.40, much lower than the $1.42 expected by analysts. that is your bloomberg business

flash. mark: shares into of the u.k.'s biggest estate agents falling after reporting a plunge in profit. they continue to be dogged by a sluggish property market. foxtons reported a drop of 33%. both companies expect conditions to remain challenging amid political and economic uncertainty. what about the high-end of the market? barattieri joins us now. how is the london market? i think we've entered a binary market, where quality homes are still selling pretty well, where developers that are delivering homes and understanding the buyer are still having the pricing powers that they used to have. i think there's a lot of stock on the market that is not up to par. mark: prime london prices and the first quarter on quarter gains since the third quarter of 2014.

with your line calculations? dropped, tell us we've we're on the ascendant again? niccolo: i think we are seeing volumes that are starting to pick up. i go back to the point that we should not look at an overall index, but the innerworkings of the market. where you are seeing the good developments versus the ones that are not as good, the ones that are doing well -- mark: what has changed since brexit and what has changed since the election? niccolo: a couple of things. what brexit and general election have shown is uncertainty. we're operating in a very tight labor market. i think that is probably going to be exasperated by brexit in the short to medium term. on the positive, the pound has

become substantially weaker. they see it as a buying opportunity, if they believe that london is the place to be in the long run. mark: does london maintain its preeminence? niccolo: i think that is the fundamental question. mark: some bankers are moving their staff out of london already. niccolo: they are, but you are seeing the rise of other industries as well. it is a cycle. we've seen that the finance industries are not really our buyers. mark: who are your buyers? niccolo: the wealthy international clientele that love to be in london and want to make it a home. those are our main buyers. mark: couple of big developments. one is alice street. one is called the broadway. how is alice street going? niccolo: we've sold 52 out of

72. in this challenging market, it is a pretty good result. i think that people have recognized that is the only residential overlooking the grounds of looking and palace. the choice of site was the right one. mark: when will the rest be filled? when you've actually finished it? niccolo: most likely. mark: give us an idea of the price of the units. niccolo: up to $30 million. mark: and the broadway, how is that going? niccolo: we haven't started sales yet. we are starting in september. we believe that mixed-use is actually the future of residential high-end development, delivering a vibrant quarter, in the middle of westminster, pretty unique. mark: talk to me about donald trump. some say because of the middle

east travel ban, maybe some middle eastern investors may be casting a closer eye on london. has that dynamic changed things at all? niccolo: not hugely. trump's policies have affected many other things much more. middle eastern buyers have always favored london over new york. rhetoriconald trump's probably will increase that going forward. other majorhose capitals benefited from the political uncertainty that we've seen in the last year or so? niccolo: i think it is very early days. i think that what has happened is the people are slightly more cautious in general and they are taking time to find a development they love. when they do find it, they buy it. frankfurt to take over paris or london is going to take a long time. mark: we've had an election.

do you think there might be any change to stamp duty? is it more likely or less likely than before the election? niccolo: i think it is politically very difficult. actual receipts are substantially down. i think it is going to take some time before that happens. mark: are you bracing for another election? niccolo: there have been so many surprises that i'm braced in general. mark: good to see you. chief executive officer of north acre. "surveillance" continues in the next hour. tom keene joins nejra cehic out of new york. this is bloomberg. "bloomberg surveillanc♪

,> this morning the european

they continue to play catch-up with their american brethren. cuts,g good about cost wealth management in america struggling. barclays, will they get a radically simplified bank. trumpcare is very dead amid the drama of a late-night vote. an important moment for switzerland finally after nearly three years of swiss banking weakening. good morning everyone. this is friday. i'm tom keene in new york red --. nejra, earnings news. i have to go to the swiss franc. weaker, interesting things going on in foreign exchange. weakening against the swiss euro for the fourth day. the smb brought the frank cap in. we have a great column on the

bloomberg from bloomberg profits talking about this movement. pinpoint exactly what happened. looking forward to talking about that. tom: we will touch on that. i have a great chart on that. right now, after what we witnessed in washington last night, our first news, here is taylor riggs. for seven years republicans a promise to repeal obamacare and their latest attempt has fallen apart. john joined two other republicans and all 40 democrats to defeat the plan to overcall the affordable care act. it was a big defeat for republican leaders. >> this is a disappointment. a disappointment indeed. our friends over in the house, we thank them as well. efforts were our simply not enough. emma: mcconnell has pulled the

bill from the floor and said it is time to move on. the public feud from top white house officials has turned toxic. anthony scaramucci attacked rivals, steve bannon and reince priebus. he called it reince priebus a paranoid schizophrenic. moving over to london, local authorities could be charged with corporate manslaughter in a deadly high-rise fire. that is according to a letter that police sent. there's been no decision whether to charge any person or organization. at least 80 people died in the fire. in japan the inflation rate has stalled. consumer prices were unchanged in may. otherwise they rose at an annual rate of 4/10 of 1%. japan's labor market is tightening and may push inflation closer to the central bank's 2% target. global news 24 hours a day, powered by more than 2600 journalists and analysts in more

than 120 countries. i'm taylor riggs. this is bloomberg. so much.ks i'm glad you ended with japan. one of the themes as we go to august onto the various central bank meetings of september. data checks, securities, commodities, we need to race through. 24 .64 onary to see the futures. next screen where it gets more top,esting, euro swiss up i did a skit when i looked at the bloomberg terminal this morning. that is able to move to say the least. a nine handle up to 10.66 with yields -- that should be green on the screen at the bottom. one basis point higher. feelally shows the risk on that we see in equity markets. nejra: absolutely.

that segue is good to european equity markets. stoxx 600 is down so the risk off his feeding through the the sameequity session as we saw in asia where tech stocks were leading those losses. that came through from the u.s. equity session. handle, spain very much in focus. seeing yields are moving higher in europe to the 10 year bond yield at 57 basis points -- keep an eye on copper. still on course for a weekly gain. especially after five months. tom: nejra, i did this chart for you. jonathan ferro is in a way cap but here is swiss franc back in 1975. mark, synthetic euro, this is a stronger -- swiss franc.

this baker really shows the power than stability and then not. charts massive -- this really shows the power then the stability and then not. this was a historic moment in 2015 where swiss franc came back. he see that again. down we go. the leg up here is a really big deal. the first abrupt weakening of swiss franc since that january of 2015. nejra: fascinating. why we have seen such a big move. we have the comments from thomas jordan saying the swiss franc could be overvalued but some strategist questioning why we have had such steep moves in the past four days. after earnings showing the capital ratio declining despite improvement in the wealth management activity. different reaction for credit suisse -- trading higher after reporting a 78% increase in

second-quarter profits. we spoke with the ceo. here is the take on wealth management. strongly,s going up in asia same thing. going up very strongly. finally global markets, because of the turnaround, we said that we would take 6 billion of revenue in 2018. we did 3.2 in the first half of 2017. there was a lot of skepticism that global markets could turn around. the most profitable second-quarter. optimistic,am quite short-term is very difficult to predict because there is so much events,nty, political, central bank's activity, that is

extremely hard to forecast. -- wealth wealth ,reation and emerging markets driving the numbers up. and would say that clients family offices have been catching up in the second quarter compared to the first quarter but across the board if you look at our american, aipac business, also in europe, transactional volumes picking up , and in general, and all kind of activities in relation to deploying cash. in more constructive ways. discuss ising us to james. >> good morning. it is increasingly attractive

to be a wealth manager because you get fairly decent fees as well. it is fairly easy to collect wealth assets and to grow that part of the business. that gives you a nice stable core in the middle of your banking business to offset the much more volatile income from things like trading. ok so if we are talking about trading, we continue to see the drop in equity trading for credit suisse in particular. still halfway through that turnaround plan. how much are investors to focusing on that lagging equities trading? know it isinvestors volatile and they don't read too much into it but the background trend in equity trading is that it is changing much more to an out the rhythm i.t. -- two algorithmic i.t. functions.

the guys in the trading rooms taking a punt. the b.i. s in particular but all national regulators are starting to change the rules in terms of how much capital banks have to put up against certain activities. some activities become less attractive to banks and become a cost-cutting exercise. other activities don't. wealth management against equity trading is much more costly for banks to put up the capital to back equity trading. much more wealth management. so you see that seesaw shifting. tom: to me it is a pr exercise. these interviews are trying to manage the story. bring up the chart on credit suisse. this is almost a proxy for how far behind the eu banks are. maybe citibank is enjoying this agony as well. here is credit suisse from 2007, down we go, we have really gone nowhere. my question is when do we see

m&a come in here? everyone is going slow motion and the stocks are reacting, why can we see combinations to drive these cost cuts forward? >> i think the other thing i would emphasize is we tend to talk naturally because they come out each quarter and they are , about earnings. the secret about banks is to look at the balance sheet. or theand the solution resolution is going to be related to the balance sheet. it was very interesting to see the responses respectively of ubs and credit suisse -- their share prices -- because you are seeing they're not moving as much as the earnings potentially with the balance sheet. twice trading at almost it's common equity tier one valuation. credit suisse is trading below that. it is a much cheaper bank compared to ubs from a balance

sheet point of view. tom: a financial data -- the politics, less so maybe from london and maybe so from washington. this is an extraordinary headline from russia. it is cryptic. we want to make that clear. mr. putin in russia order the united states to reduce diplomatic staff in russia. this plays right back to washington with the legislature of the house and the senate, boldly saying, no we want more sanctions. then you have the president much more in the corner with russia saying no, we want to see less sanctions. we will speak your with kevin cirilli. stay with us. this is bloomberg. ♪

bloomberg surveillance. i'm taylor riggs. this is the bloomberg business flash. toyota third place in global auto sales up for six months of the year. the japanese carmaker trails nissan and volkswagen. it is now counting sales from its newest member, mitsubishi. posting 37% increase in net incomes, profits in brazil, biggest contributor to earnings,. banco popular are was took over in june after shares were wiped out. ceo is on theic short list of candidates set to run uber. enterprises,rd they say there is a lot of work

to do at hp. that is your bloomberg business flash. i'm usually not big on the ceo gossip train. how do you run mega sized companies like mrs. whitman does and bring it down to the entrepreneurial level of uber. fascinating. i will suggest that we will see more names. mrs. whitman stepped out last night. she will not move to uber. she made that clear. nejra: especially fascinating because a lot of controversy with uber about the culture of the company and how much that was down to the previous ceo. and how much a new ceo would make a shift in the culture. u.s. futures lower meanwhile after disappointing results. we have just been talking about heightened concern about corporate earnings and amazon.

it says it is boosting spending on new warehouses to meet growing e-commerce demand. jpmorgans now is , let'smarket strategist get this started. i want to show this chart at the top. european and u.s. valuations close to a five-year relative low -- what we are looking at is 12 month forward pe. this has dropped off a bit in today's session. given a lot of earnings that we've had up today. when you look at the future of performance is it valuations or earnings that will be more important? >> i think it is both. technicals that support european equities and the fact that so much money has left the asset class because of political fears since 2016.

euros flew out of equities and some has come back in but there is still 40 billion left on the sidelines watching for the earnings to come in. for the first time, five-year expectations are rising throughout the year, not be notched downwards which is a big sign as well which is making is positive on the u.s. equity face. you have investors coming to you that worry that they are missing out on the european next. ? >> the best time to about european equities for a non-euro-based investor would have been before the french election when all the real worries were coming to a head. after the results of emmanuel macron, we've seen the inflows coming in. that $40 billion remains on the sideline, awaiting technical reasons to be interested as well. the broaderested in space, the eurozone, growing so well, the ecb being more

hawkish, the euro could strengthen, that helps with non-euro-based investors and allocation. tom: at the end of june i did not think i would be talking about pricing power at the end of july. fedrt kaplan of the dallas really providing leadership here. do you, at jpmorgan, see a threat to corporate pricing power because of disinflation and because of outright competition? >> certainly. i think that is more exacerbated in certain sectors whether inail, some of the companies the u.k. that have to price down while inflation and costs are higher -- but there are ways people are innovating. component of these companies has been upgraded while pricing has remained similar. generally speaking competition and getting the consumer, that is where the market is. ae engagement with them is

big focus in the u.s. and and european companies. leverage in the double all-cash fund. thiseople that have missed market, what is the actual to do to get in this market? >> it is not buying the index. valuations on the whole, even in europe could be considered fair or average values. in the u.s. the p/e ratios are some of the higher levels in the past two years. finding those pockets of equity sectors and spaces and style factors within the index that have more to give. values in financials, partly in europe and the u.s., not buying very volatile sectors that we be -- that we see being sensitive even within the past few days with the earnings results. nejra: what looks most attractive to you james? >> the concept of rotation. i don't think anyone saw the last six months happening.

much of it was reversing what had happened in the prior six months or nine months to that. a lot of bets are being placed that europe's economic recovery is on track. they have managed to say stain supply growth -- to sustain supply growth. that is great. if you look at bank lending that is not exist in. -- nonexistent. that there was going to be tapping of the brakes by the ecb the main driver behind the nominal visibility of any recovery in europe would disappear quickly. meantime you have the recovery in the euro which will start in pinching as we go further down the track. i think the scope for rotation into cheap, domestic plays in some markets are boring stocks. gettingwill continue courage on this friday. moving forward through the hour

with these two. this may be the interview of the day. fuss, a critical moment in fixed income markets. wisdom from dan fuss later. ♪

>> time now for the morning must-read.

burgess,es from robert he asks if jpmorgan just compared stocks now to 1987, referencing a report, here is what he says. strategies that boost leverage when volatility declines such as option heading and commodity trading, share similar features with dynamic portfolio insurance of 1987." let's get back to our guests. us, james and nandini. inwe get a bear market equities will it come from the economy? >> i think it is a combination of both. we need to see some slowdown in the u.s. -- or a bear market.

,echnicals are very important while we have seen low volatility in the past few quarters there has been movement under the surface of dispersions and correlations, beneath stocks and sectors in u.s. and global markets. that could set up a domino effect in subsectors of the market. back with bothbe of you. talking more about this and 1987 coming up. the euro power higher. this is bloomberg. ♪

tom: a busy morning on bloomberg surveillance. is in for francine in london. i'm tom keene in new york. we go to moscow and washington.

market movement with the swiss franc this morning. new york city with a late-night, here is taylor riggs. the republican attempt to scrap obamacare has collapsed. john mccain joined democrats to block the bill. mitch mcconnell pulled the measure from the floor and said it is time to move on. this would've ended the requirement that individuals buy health insurance and that companies provided it for their workers. the senate approved new , then theon russia country ordered the u.s. to remove its diplomatic staff from there. 455 people by september 1. it is not clear how big that cutback means. the u.s. was ousted from cottages and warehouses in moscow.

jeff sessions says he is staying on the job. hetells the associated press wants to fight for the president's agenda. trump has criticized jeff sessions for being ineffective. in jerusalem is really police amid recentalert tensions. two weeks ago muslim gunmen killed two police officers at a mosque. metal detectors and other security devices. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. nejra: thanks so much taylor. let's get back to european banking results. barclays, an from end to the restructuring. . hit by the one-off costs of the

disposal of the african unit. earlier we spoke to the ceo on the numbers. >> with the investment bank overall, in the advisory business and debt underwriting, we had a great quarter. the first half of this year was one of the best results the bank has had. in that part of our business. credit-rating we have done quite well. in rates and currency we are still not happy with where we are. we were down in the second quarter. veryve made recent important hires there. we will get that corrected but overall, investment banking had a good quarter. still happy with the extent to which you back the investment banking business at barclays and you think your taken enough action to turn that performance around? >> we still have room for

improvement. there very pleased with strategy that we set out in terms of the transatlantic consumer, corporate, an investment banker we have a strong position in new york. we're the number one bank and the u.k. with a market share of over 10% in the second quarter. we like the business. we think it is important to the overall strategy of a transatlantic bank and we will continue to invest in our investment bank. >> can you give us an update on investigations, looking into rmbs issues, what are investors telling you about all of these legal issues? are they proving to be a distraction when you are talking to investors about the company? >> we definitely want to put both the rmbs and the qatari issues behind us. in discussions with the sfo and the doj, but beyond that, i

don't want to discuss those two issues as they are open investigations. ongoing very looking at your statement you talked about another $700 million in charges for ppi and the deadline for ppi has been extended. is that all you will take on that or could there be more? this endse is that the reserves for ppi. the bank is taking close to 9 related tonds, oh ppi issues. the government has put an end eight to the ppi claims and so we hope this recent 700 million pound reserve will bring this issue to a close. nejra: with us is james ferguson, founding partner at macro strategy partners and nandini. james, let me turn to you first. i am wondering this quarter that

today, isd reporting this the last quarter of structuring related charges for barclays and a clean earnings view ahead from here. james: i think it is hard to say. in a big multiyear, we are talking a decade now, banking crises, you get hit in years wanted to buy the uncontrollable losses on securities and then you have three to five years of taking loan-loss provisions and by the time you've got through that process and at the same time rebuilt your capital which is quite an achievement for the banks over nine years, you come into a badge of honor. the final years. when the regulators say let's get some money back you are strong enough. tom: what we heard about those two interviews, it sounds like a parody of american baseball interviews. they are spinning their lines. at theo they want to be

end of 2018 and are they only going to do it to mergers and combinations -- through mergers and combinations? >> i think the time for mergers is past. , that is earlier in the crisis. tom: you're an expert on this. how is barclays and deutsche bank set in the international banking? what is their unique skill set versus the american banks or select other banks that are way ahead of where they are? can they catch up? james: when i first started back in the 1980's, a shame to say, it was a big thing about bulbs brackets, big banks trying to get bigger and cover everything. and all nationalities and jurisdictions and time zones. that is always a danger sign for banking. each time they get a massive

slap on the risk, the great financial crisis was a huge one. they tend to pull back and concentrate on local areas of competitive strength. that is what we're seeing now they are you will see a more boring, better, safer banking system that probably deserves to be re-rated overtime a bit higher and later, they will start getting more ambitious again. they will start expanding too fast and you will get the funding gap and that is the warning sign. that is down the track. >> i've been talking to a certain analysts saying that onio draghi is embarking yield curve control and that has been beneficial for european banks. what is the sweet spot where yields in europe are high enough to be beneficial for banks but not so high that we start to see a rotation out of equities because of risk rhenium -- risk premium? james: i think it is a red herring. it makes sense to think that but

if you actually look at net interest margins of banks over time compared to the yield, there is virtually no relationship. or a bank, it is the risk of balance. and if theyre risks want less they have more risk free. that movement is more important for them. interview, wehat talked of the reality in the future of banking. they said they have to rebuild foreign exchange and this and that. yesterday deutsche bank cut back the bonuses of a lot of management. do we have a new bonus compensation model or is it a fraud and we are still right where we are that i meet -- that i need that guy in foreign-exchange to make this thing go? banks is wehing for need people there that have proven competency -- there

mainly trading off the bank's aaa rating -- the really important thing is that the change in the rules that have slowly come down the pipe, in terms of risk and the amount of capital the banks have to commit to each operation, that changes the profitability and the risk reward metric and that means that the old bonus structure will not make economic sense. the new one will have to be based elsewhere. tom: this story of global loss rate, how people will get compensated in london and new york and other places where you make the revenue and operating income. james ferguson, brilliant. thank you so much. mandy, we will continue -- nandini, we will continue with you later. this is another good interview. timothy adams. ♪

tom: it seems now each evening in washington is extraordinary. to our global audience, has a huge set of political exhaustion that is no less. joining us in washington, this historic moment is punctuated by mr. putin. .e have russia responding are we committing foreign policy out of the legislative branch? question that the legislative branch wanted to bring back some of the foreign policy credentials to congress and wake in the executive branch. it is interesting that mr. putin

acted before the bill became law. we have been getting mixed signals from the white house whether president trump will sign this bill. our team in moscow are quite good at reading the tea leaves. they have a cottage outside washington. we have a cottage outside moscow. sunbathing, drinks, and cocktails, what is the cottage outside moscow, or outside alexandria? days of theosing obama administration they expelled 35 diplomats in the u.s. and took two cottages as you describe them, which are used for intelligence services. we do the same thing in moscow. it is tit-for-tat, they held off and now they decided to do it. moving on to health care, so much news out of washington overnight. the rep has failed. why and what happens now?

--john mccain was not part not convinced by paul ryan that they would go to a conference and work out a comprehensive health care solution. so he voted no. it is unclear where they go now. to a certain extent president trump has a lot to say about it. if he comes out this morning and blasts the gop recalcitrance, it will not be helpful in terms of trying to revive repeal and replace. that is still a possibility. it is not totally dead. tom: i want to dovetail together the legislation we have seen. a collapse of the import tax, the border adjustment tax, also the collapse of health care. both of these events directly follow on to the new debate on tax reform. are we going to have blown out deficits because we can't find the balance between revenues and money going out?

>> that is the key question. if you want to do the kind of tax relief that donald trump and the gop has been promising you have to figure out how to raise the revenue. without a border adjustment tax it is hard to figure out how they will do it. let alone the political difficulties of passing any kind of tax reform. health care was supposed to be easy and they can't do that. nejra: thank you so much to bloomberg's senior editor for government. .et's get back to nandini the news from overnight, we are not seeing a huge reaction in the markets, are we getting a little fatigued in the markets from this? >> fatigue is the right word. watching washington get onto the topics that markets would be more sensitive and i ais predominantly that corporate tax issue. the current issues are not being sorted out and you won't get

more market moving reduction of the corporate tax rate from that 35% headline rate which could have more implications for stock trading on the market. the general sense is the symbolism here is that we are not getting as further through those points as the administration wanted to get to given these recent events. nejra: as, pointed out, the talking aboutt, tax reform, when you look at the u.s., how much are you playing off political developments and potential upsides to u.s. growth versus the fed and how does that affect how you position? >> the biggest thing we look at his earnings expectations. pre-trump not changed election for 2018 and post trump election for that as well. on valuation measures, the upside for corporate tax reduction is not priced and yet. if that does happen that could

boost earnings and give us a more positive view on u.s. equities on a global basis if it happens but as we discussed, that remains to be seen if it does. looking at the fed, that is a bit more certain. the fed raising interest rates on past normalization, we expect them to do one more raise this year in december and start the balance sheet unwind in october. interest rates priced in for next year, gets them back on track for higher interest rates. tom: is there exuberance out there? are we rationally or irrationally exuberant with this new leg up in equities? >> there is a bit of exuberance that is not necessarily having justification in the market. those november and then this marketallies in the based on the trump administration agenda, not much of that has been delivered. we are taking a step back, thinking, what are the actual policies that will come into play or could come into play that could affect various sectors?

come enoughwe have in expectation in those measures in the u.s. equity market. nejra: speaking of exuberance, i heard something great from ubs yesterday, fear of missing out versus fear of joining in, the millennial version of that fear versus greed. , nandinitv stays with us but take a look at tv on bloomberg. you can take a look at what is happening, see the headlines live, and any great charts we bring up during the show as well. all tom's charts on tv . this is bloomberg. ♪

>> this is bloomberg surveillance, i'm taylor riggs. let's look at the business flash. amazon has reminded investors that dominating e-commerce has a price. they forecasted a potential quarterly loss for the first time in two years. their second quarter expenses increased more than revenue. they have boosted spending on warehouses and data centers for its web services units. british airways posted a

better-than-expected 45% increase in quarterly profits. the full-year figure will show gain. strongerfited from asian and latin american influence. the german sneaker maker is booming demand from retro sport shoes. the of shoes has made the brand a hot commodity in the u.s. they are capitalizing on growing sales in china. that is the bloomberg business flash. they ran tom. nejra and tom. tom: the iconic hockey franchise was bought. ccm tossed out as well at some point. the swiss franc, this is an extraordinary and inside baseball story. to give us wisdom, christina

joins us from bloomberg news. andini still with us from jpmorgan. i was thunderstruck christina when i saw this. this morning. is this summer weirdness in zurich or is this a tangible weakening in swiss franc? >> you might be onto something there with the latter. the swiss franc has not been much in demand for most of the last few weeks because europe is doing a little bit better. maybe investors are feeling safer and less in need of the frank these days. leveln this there was a you had to get to to get back to suppose it normal for swiss national bank. this is from earlier, the basic idea is that strong swiss franc, the history of january of three years ago and then the battle that the swiss national bank has

had and it finally gives way here. what level do they need to get to from your reporting to say that all is clear for swiss franc strength? would, as the s&p probably say they are not focusing on levels specifically but the move in the price action. they're primarily overpriced, they are concerned about the lack thereof. movesg as they don't get on that, they will be pretty relaxed about it. apart, -- swiss side >> there was always compared to the euro. ,he euro now strengthening plans for mario draghi to taper from the program he is doing now reducing over the course of 2018. that has for us already built in

a strength of the euro. to top traded currencies against the euro, the swiss franc, you see that weakness that could be a nice thing to get the economy more boosted. the greenest on our screen. maybe a slight change in the .ast few years we have been talking about appetite for risk this how do you protect your portfolio? youinding the places where thought traditionally would not be as risky but now we are flagging is higher risk, government bonds, because andction of qe normalization, thinking about being unconstrained in the fixed inome side and taking risks equities that look like they have good valuations. valuequity markets on the

side of things is more our strategy now. tom: ladies, thank you so much. there is a lot to talk about. we have the history made in washington last night. senator mccain with a decisive vote to defeat trumpcare, no other way to put it. in europe, the pr and message building for european banks who andtrying to get their shot their houses in order. on this friday, stay with us. this is bloomberg surveillance. ♪ tom: this morning, this bin is

over for republicans. trump care is very dead.

the too big to fail banks in europe play catch-up with credit suisse. wealth management barclays spin a radically simplified tank reared in switzerland, an important moment after three years. breaks andranc weakens decisively. good morning, everyone. this is "bloomberg surveillance ." americans waking up today see a completely different washington the what we knew what he eight hours ago. absolutely. just sitting here, how money people are going to think so much time has been wasted with nothing achieved? andou look at treasuries the dollar, is this just markets getting fatigued from the chaos in washington? tom: to your point, this is all

about the midterm elections and real threats to republicans aired we will look at that today. right now, for your morning briefing. taylor: starting ndc d.c., the republican attempt to scrap obamacare has collapsed in an early morning vote. and mccain -- joined all defeat the repeal bill. the bill would have ended the requirement that individuals by insurance and companies provided to their workers. the public feud between the white house officials has turned toxic. anthony scaramucci attacked reince priebus and steve bannon in a foulmouthed tirade. moving over to london, local authorities could be charged inh corporate manslaughter

the high-rise fire. police essay there has been no decision whether to charge any person or organization. at least 80 people died in the fire. moving to japan, the inflation rate has stalled. otherwise, they rose at an annual rate at .4 percent. 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. tom: thank you so much. how about a friday data check, we will get to that in a moment. features off of the historic highs south this morning. that is with american crude over $50 a barrel.

euro swiss up top, that is a huge number. 111 -- we jumped to 113. it is a hock a stick, if you will, i dramatically weaker swiss franc. nejra: when you talk about the risk on fuel in the markets, that certainly looks like when .17.ook at the dollar 117 i would argue that that is down to some of the data we have had from europe. yet, it is risk off when you look at europe. we had the tech stock that off. we know it was at a two-year high. tom: i like to put the german tenure of their as well. .hat is a higher yield that read should be a green color. we wonder if we will see the

negative interest rates get back from their below zero bound as well. let's begin on washington. last night, history was a maid. tim adams will join us from kentucky -- history was made. sen. mcconnell: this was a disappointment, a disappointment indeed. our friends at the house, we thank them as well. i regret that our efforts were simply not enough. tom: very good. the senate majority leader late last night. kevin cirilli is from russell this morning, the russell building goes back to 1909 and i don't think we have seen history one, two, three times like we saw last night. will be the response of the white house? kevin: the president tweeting after this about failed saying

that democrats and republicans let america down. he was talking about lisa makowski, susan collins, and john mccain. they voted against the health care bill. senate majority leader said on the floor it is time to move on. folks, this is the beginning of the end of a major policy defeat for this white house. tom: already the pundit stepping in. thes is a writer at " they all hadost," " the power to stop a bill, and conceded in do great damage, nevertheless, all hoped someone else would do the dirty work of

derailing it. after seven years of protest and seven months of legislative paralysis, republicans have not figure it out what to do about obamacare." what will they do about tax reform? kevin: steve mnuchin as well as congressional leadership and that it wast said dead, but it was very policy specific. i have spoken to people at the treasury department saying they have been working to correct the mistakes of what they see on health care, whether or not they can do it we will find out. tom: is what i'm going to read over the weekend, the border tax is dead, they couldn't do health care, so they can't owns the books on tax reform? morningerstand this that i'm that have much larger deficits as republicans spend? kevin: i think if the house

leaders fight, because they are at odds with the congressional leadership and administration, you have the potential for political fireworks come fall. i can also tell you that this is a white house that does not want political drama surrounding the debt limit raise, nor do they want any theater that surrounds the potential for government shutdown. nejra: when you talk to people in the markets they say tax reform, tax reform, that's what matters were earnings and markets. health care issue has dragged on for months, and yet, still here we are. that was meant to be the easy bit, why don't we let it go? kevin: that is a great point. i think now they have to let it go. i think they have to move on to tax reform if they want to, because now that this has failed, they have to pass another type of budget bill.

there ise of a bipartisanship, there is a bipartisanship for lowing the corporate tax rates beard there would be enough to get that across the finish line. is aalth care there bipartisanship to fix some of the exchanges or at least 80 and support worthy exchanges have failed. that said, they haven't been able to find a narrow path forward. i can't stress how much of a defeat this is for senate majority leader which mcconnell. i have spoken with aids all night on the republican side who are scratching their heads, very disappointed this morning. also, we have to talk about russia, we already have retaliation for u.s. sanctions. where do we go on that? kevin: crossing the terminal as we speak, but russians have essentially shut down facilities in moscow. they have also shut down a

cottage that was a u.s. site in moscow. a statement coming saying that russia-phobia has launched in the united states. this is a clear campaign -- tom: one more question, i put ron zigler onof twitter last night, they beleaguered ron zigler. what we saw from mr. scaramucci is an outrage. there is no other job in corporate or government america that could keep his job. why does he have a job this morning? ask ofyou would have to the president, but i think you put it all into perspective. tom: i think that is the way to leave it. kevin: there is nothing to say. tom: i think were going to step on this garbage lightly. kevin cirilli, thank you.

kevin: thank you. tom: thank you very much from the russell building and correct with your silence this morning. he is a never silent with his fixed income market. wellsould be the -- of fargo. what is the bond market communicating to us right now, higher yields, 30 year bonds? >> yes. tom: are we near escape velocity? not near escape velocity, but i think the bond market is telling you the economic backdrop is ok. yellen and team delivered a clear message this week that tighter policy is coming, but the tighter policy is going to pivot away from the traditional form of rate hikes towards balance sheet management here to i think the bond market is starting to sniff, as you pointed out in europe, we are probably going to see less easy conditions as well.

so, you're starting to see this very mild -- but somewhat of an uplift in bond yields. we are moving out of this very low volume, slow grind environment. the question is, is there enough momentum behind it to carry it meaningfully higher. i don't think we get the answers to that until the september timeframe. i think we are kind of stuck in what i would call low and slow type of environment for the next couple of weeks, at least. nejra: what does it mean for the curve george, we will get more detail in a moment, but in a broad-based sense. >> if you think about the shape of the yield curve, it has been flattening. we saw a little bit of a steepener pick up a little bit, but our base view is the flattening should continue. over the course of this year as

we creep toward tighter policy, you should see an expect the yield curve continue to flatten. there are ways to play against that, you could look into the credit markets, the spread again, to offset that but i think that uplift at the long end should be ready fairly byched, it's not exceeded high yields as well. you.: thank stay with us. i know you have some great micro trades on the curve. coming up, we also hear more from credit suisse and barclays. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." joey votto fell in the first six month of the year, the japanese carmaker trails nissan alliance and both widen. volkswagen. thes counting members -- leader of general electric is on the short list to run uber. ceo haspackard taken herself out of the running, she says there is a lot to do at hpe. nejra: a rash of earnings from european banks this morning with what it swiss -- with credit suisse and ubs numbers lower despite an improvement in wealth

management activity. a different margaret reaction for credit suisse after reporting an increase in market profits. we asked europe rocky top banking ceos for their take. >> we see it working, as you say, it is 18 months out of 46 yard we believe out of the things we identified as key, we are delivering. you have seen we have a change in growth, we have generated 23 billion dollars in the first half. >> and rates and currency we are not happy with where we are, we were down in the second quarter. we have made some important hires there, we will get that corrected, but overall i think we had a good quarter. >> we are confident that we can reach our target.

it is not an easy journey. we are talking about a net cost savings. we are at absorbing a huge amount of headwinds due to regulatory changes, investments we need to do to keep up with competition. >> we see that there is a momentum continuing. that environment, you should probably let it cater a little bit longer and not step in with regulation for the changes. nejra: joining us is alisa martinuzzi and still with us is the head of credit strategy. are there any themes we can pick out from european banking earnings? it is kind of a mixed bag. what management is doing well, you've got investment banking doing different quite broadly

across the investment banks. barclays conversely struggling and on currencies. overall, i think the at credit suisse is beginning to yield the results they were after. i think that is the main takeaway today, but you also have some headwinds that are going to hit all of the banks. a step back taking in anticipation of regulation coming later that will affect all banks. nejra: i think back to the u.s. earnings seasons where we saw goldman and bank of america underperform in core areas and we look at credit suisse and ubs, the question is, are they becoming wealth managers rather than investment banks? our bank three crafting their identity? alisa: yes. certainly in europe, they have

had little choice. i think credit suisse pulling away and all units, that does seem to be on good track. we are seeing ubs much further ahead in its turnaround that started years ago, now being at the point to look at dividends and taking a breather. tom: to me, it is a big pr stunt. i don't know what they are restructuring for. where will they fit in, and five years in international banking? do they want to compete with u.s. banks or are we looking at was a regional banks? nejra: you've got to -- alisa: you've got to roll out that these will be competing globally and all scales, but they will be competing in some indexes. you have credit suisse and west management and deutsche bank onh -- but very much focused

key products and key business areas. tom: i could talk to you for an hour today. thank you so much, alisa martinuzzi leading our bank coverage, huge initiative as well on the italian tanks. this is without question, the most important interview of the day. dan fuss on bonds later today.

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."m: "bloomberg surveillance that at theint out o's it leads in history after in inflection point at the white house, due to scaramucci's action, people might actually leave. i wanted to let our global audience know that. right now, wells fargo and their credit strategy. you wormed my heart, george. taiwan for most of bonds, what do they have to do you with a price down, yield up in my bond portfolio? for a u.s. investor, it is a technical in the market. tom: totally and inside baseball thing. george: it is. it is issued for taiwanese insurance companies. the main message for us is it

pulls supply, bond supply, away itm u.s. investors and plops into taiwan. that is the main issue. the critical thing is in a exact in a exogenous shock and all of the sudden you are in a bear market. we are not there yet. not at all.we are the corporate bond market is wider spread, neither will happen this summer. tom: will they happen in 2018? george: i think september is the key inflection point. if we see convergence in the front and and central banks are regime,oward a tighter i think that is the catalyst. tom: if i have to get rich by monday, what is the yield hauled risk for pros in retail? yields toot a lot of find out there.

it is an aggressive term. if you look at investment raid on average, yielding about 3%. high yield is about in the four, fours.hi tom: and this is what "bloomberg surveillance" is about it and why you have your tv on all day. you have dan fuss later in the day. and also jonathan ferro, coming up later in the day, timothy adams of kentucky. ♪

♪ nejra: this is "bloomberg surveillance." pitch -- tom keene in new york. let's get the bloomberg first

the news here at taylor: republican attempt to scrap obamacare has collapsed in an early morning boat. john mccain and other republicans joined democrats to defeat a stripped-down repeal ill. the bill would have ended the requirements of that individuals buy health insurance and companies provided for their workers. attorney general, jeff sessions, says he is staying on the job. he tells the "associated press" he wants to fight for the president's agenda. the president has criticized sessions for being weak and ineffective. it russia is striking back at the u.s. hours after the senate approved new sanctions on russia, moscow ordered the u.s. reduce its diplomatic staff there. the total staffing

should be 455 people by september 1. it is not clear how big the cutback is. says it is monitoring the situation closely. 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. you so much. this is the interview of the day for tom keene, may be the interview of the summer. we have timothy adams with us with the institute of international finance. george what this also from wells fargo. tim adams working with a secretary snow and secretary o'neill with a george bush the younger in the trenches of doing policy and doing it with grace. he joins us this morning. let's do business first, audienceg to our level

what the -- is. timothy: we are members of an organization, the full gamut of mediation. we do research. for the are the voice big banks and you are now holding a dodd-frank into our budget battle. we will get to last night's rest of it is in a moment. why is a lessening of dodd-frank by the president not going to help the budget process? there is a gimmick being employed to raise revenues here it that is how they treat the liquidation authority. and because the way assumptions are made in budgeting, the budget assumptions says you will have a bank failure in your nine, there will be in a flow of financing for liquidity, but you don't get the returns until your 11, 12, and 13. it looks like an outflow, but it

is actually a net neutral. tom: there was a deeply emotional photo out on twitter of mr. boehner having a dinner with mr. mccain, the old guard of the republican party. you are from kentucky, how does senator mcconnell go back to kentucky after this defeat last night? timothy: it is tough. most of kentucky voted for donald trump. they were anti-east coast, anti-leap. tom: they spoke to -- to an extent. timothy: i hear that from my relatives, sure. they want somebody producing. they say washington is paralyzed, not producing results of them. they want capital reform and job creation, it is simply not happening. how can the government square the circle between

cutting corporate tax while raising revenues? timothy: the math doesn't work. i think we will end up with increasing deficits. if you want to cut the corporate rate to 25% or less, want to do something with individual rate, something with it reap a to ration, -- repatriation, then you will run a deficit even with dynamic scoring. nejra: what sort of reform would you want to see? timothy: anything that supports capital reform asian -- reform ation. full expensing of equipment, for example. tom: when do guys like you start resigning? mike allen is talking about in iraq the o's this morning, senator mccain did the heavy lifting last night for guys like you. when you guys like you say enough to the experiment that is

donald trump? guys like usfully never give up, because there are so many things that the country needs to do. gary is a symbol of a team at the nac, secretary mnuchin is trying to put together a team of treasuries, coming along slowly. i hope they stay there. the country needs them, the president needs them. we just have to move the agenda forward. tom: this is so important right now. in shock over what we observed last night. this is not appropriate behavior, at the minimum it is indicative of a set of dysfunctions. if they don't make a course correction quickly, then indeed, i think we will see very serious repercussions and midterm elections here in this is not jim bakker's white house, but it is not too late.

if you remember that george bush had a 30% approval, and lost huge in 1994. a have time to correct it, they need to get policy done. they need to focus on tax reform, economic growth, and job creation. how does this translate into your world, is there any hope of trumpflation. >> i think the gridlock is not growth positive and that is a big concern for us. we also hope that we get to see some tax reform, because that would be that -- the infant is to help boost growth. i think policymakers are hoping for and investors are hoping for. the ongoing gridlike -- gridlock , it is ok for now, but you need a tangible improvement.

otherwise, the markets start to give up. the potential for deficits means higher funding needs on on top of already large funding needs probably pushes the bonds higher as we going to next year. nejra: what does this mean for corporate debt already at high levels, how do you trade around that? george: i think you have to be careful in the corporate bond world. generally speaking have been low and stable over the past couple of months, but if that changes, there could be more volatility. harper it bond investors are benefiting from a healthy corporate sector. companies are doing well today. we are in the midst of a good .arnings season the incremental yield is getting thinner and thinner. you only get about 100 extra basis points and that's not a lot. tom: let's spring your bond world back to your politics and

with mr. snow. i would suggest we almost have a rockefeller republican, just spend, spend, spend. do have any confidence that the deficit -- the conservatism of your kentucky will show up for the tax reform act? it is not clear. i think the deficit constraint is going to be the one that is relaxed most. i think time is of the essence. we need a whole new generation of entrepreneurs, job creation and business startups are at an all-time low. we need to create the kind of -- thatce that enjoy entices people to start businesses. fair. want to be there is a distinction between iisamerican banks of the and european banks here it we have heard from the european banks and their struggles, how far behind are they from the

excellence of james dimon? timothy: i'm a big fan of jamie dimon. i have a lot of world-class ceos of my board. tom: be careful. timothy: i think they all phases different challenges, they are doing it a variety of different ways and they are testing parts of the business model. he knows what the right is his went intoired some wealth management, others retreated to different geographies. i don't know what the answer is, but we will find out as they experiment. tom: this has been wonderful, particularly the comments on kentucky. we are going to continue. let's talk about business week as well, i have been looking for it. i have the tom keene copyright now. samsung -- it is a real simple, your weekend reading, brad stone, samsung, must read.

anything by brad stone, you have to read as well. matt campbell with a story getting a huge was on pirates. johnny depp is in business week.

♪ ," a "bloomberg surveillance busy friday. coming up shortly, >> bloomberg americas, jonathan ferro. you making history. jonathan: is as a poster child really a big fx and it speaks to a diminished risk.

euro-swissack toward 120 which used to be the floor, we are nowhere near that, but i think the real news is thomas jordan find a little bit of relief. theegin to feel what pressure is the banks have been under. tom: it shows the risk on today as the u.s. 30 year gets on again at 33%. i don't see a velocity yet, i don't see a range reg out. breakout?- range do you? jonathan: no, i don't be a i have to say, it down and d.c. now that health care has failed the idea we will get an upside and fiscal stimulus, i think that is a big hope as well. too much is

foreign-exchange talk. real yield, 12:00 noon today, this is a big shock. i thought it would be terrible, and it is outstanding. jonathan ferro on the fixed income market. ajra: markets awaiting balance sheet announcement as early as september after the fed says the unwind will happen soon. unchanged.icies tim adams, president and ceo of the loomis sayles finance. ad george of wells fargo, got chart showing the u.s.-credit spread softening. this shows that the three 2000.ts in spreads since my question is, are we in such an unprecedented time of quantitative tightening that there is not much we can learn from history in terms of where

spreads go from here? george: i think history is very instructive to where we are today. there is tighter monetary policy and tighter conditions are what the trigger the end of a credit cycle and economic cycle. central banks have been heavily involved in keeping credit conditions as loose as possible. is movingat the fed toward a tighter policy and they are slowly and steadily tightening rates. that will eventually tip the market here go back to the chart you put up, there were long periods of stable credit spreads that led up to that sudden spike wider. that came, usually, after hikes. significant rate the mid to thousands was after 17 rate hikes it took until we actually solve credit spreads -- saw credit spreads start to

react. linchpin, sort of, at what point will the market turnover. that is the same in every cycle. nejra: how do you play this on a micro level? --rge: automate right level on a micro level, you have to be respectful of the backdrop. central banks tightening policy have to take a certain degree of caution. we try to reduce data exposure, get closer to a neutral position . there are curve positioning's to do, single name strategies, and you can pick up more micro oriented strategies that have less sensitivity to the broad market move. that provides you with a little insulation if and when volatility picks that. tom: we are at the 10th anniversary of the financial crisis of 2007.

tim, i few broader questions before you start your day in new york. and mainof wall street street, republicans and democrats can make a theme of this. how does ryan moynahan, mr. dimon, and the rest, how do they heart and soul of america linked together with finance? timothy: we have to make a connection with retail sales, storefronts, entrepreneurship, jobs. we have to talk about and that our kitchen table, economics. and we have to get out and understand what is going on. election told us we weren't doing enough of that. tom: what is the distinction between the two big to fail, regional banks, and small tanks having to do with dodd-frank policy? where are the regional banks in five years? >> i think they get larger. -- thencer such that

spends are such that the -- tom: are we going to go canadian? timothy: i'll think so. we will have a spectrum. serve different segments, corporate sector, household sector, small businesses. tom: we also need banks with stagecoaches. tim adams, thank you so much. mr. adams will join us on radio this morning, of course with david gura as well. bring this up right now, tv , i usually have it up before i go to it. however, on this friday, cut me some slack. you can watch number tv. tv.ou can watch bloomberg you can go back to a previous section, anywhere. you can scroll and find a chart, bring it up.

bonus round, you can steal -- you can take home my synthetic euro swiss chart. don't leave home without it, tv . ♪

♪ taylor: this is "bloomberg surveillance." lens -- british airlines posted a better than expected -- aig had a -- there is a report that the nordstrom family is offering preferred attract a buyout partner for the chain. according to reuters, they are in talks. the nordstroms 12 raise as much .s $2 billion in equity that is your business flash. what stood out to me with nordstrom's is the shares are down from the mid december peak. we talked a lot about the retail turned down and that plays a part in wanting the chain to go private. tom: nordstrom's is

underperforming and the family has no patience for it appeared they are going to do a neiman marcus. ringing tayloren right over to amazon as well. i'm on the single best chart. paul sweeney with the bloomberg intelligence, the -- the chart. this goes back to 1900 and it is an amazon-like chart. nasdaq up trailing, composite -- you can't make money in stocks. how many people have missed your bull market? >> it seems like people are looking for growth here, they go look at the outperformance in nasdaq year to date, twice what the s&p has done. areook at it, four stocks they big move in nasdaq. tom: i was stunned at the media

coverage last night on amazon, doom and gloom. explain to our audience now why guys like you monitor sales growth, amazon 25% to 30% versus the income statement and operating income or the net income line? has done a great job conditioning wall street to say, this is a top line growth story. i am going for market share which is now about 8% of retail sales. he thinks it is going to 10% and 12%. if that is the case, he is going for market share today and plowing every dollar back into the business to grow the top 5, 10,o be a player in 15 years as the world continues to move from bricks and mortar to e-commerce. the street has jumped on

bandwagon. occasionally, we get a little bit spooked where expenses are higher. quarter they will be higher again, but long-term, jeff bezos has delivered here i. thea: you are talking about knee-jerk reaction with the top guys, was that largely to do with a concern about spending? >> it really was. the revenue came in strong as tom mentioned. iss and theig m outlook for the quarter was much higher than people were looking for. chanceople get a to digest this, it will come back to the top line story. tom: the guy to talk to about this, mr. eiger, they run big companies. can they run a company like uber . act of dartmouth

applied mathematics, can he go pool? >> i don't think so. travis kalanick is still there and still has his control stock and it doesn't look like he wants to go away or take a reduced role. it will be a tricky situation to attract anybody of caliber into that role even though it is a great story. ok. tom: ok. thank you. particular thanks to our washington bureau and kevin cirilli for their reporting. this is bloomberg. ♪ .

jonathan: repeal collapses, the republican bid to kill obamacare fails and mitch mcconnell says it is time to move on.

global technology stocks dropped after amazon earnings disappoint, the second quarter reports reminds us that dominance comes at a price and jes staley takes pains as he completes his turnaround plan, the credit suisse cheap says he feels good -- chief says he feels good. i warm welcome to bloomberg daybreak, i am jonathan ferro with david -- alix steel, david westin is off today. futures are softer, down a third of 1%, euro-dollar is still firmer, north of 1.17 and euro strength carrying through the week for a third straight week and treasuries choppy. between -- movers,ighting the amazon premarket, down 3%.