francine: gone in 10 days. anthony scaramucci is ousted. meanwhile, the administration focuses on tax reform. the oil major beats expectations. shares are up, but has bob dudley delivered? the u.s. greases the venezuelan president's assets. the message from former fed chair.

investors should be worried about bomb prices. this is "bloomberg surveillance" and i'm francine lacqua in london. we have a lot to get through, especially on the+++ data check. first of all, markets are a little bit unchanged. this is the msci world index. earlier they were gaining some 1%. stocks reclining in asia after data reinforced confidence in global growth. what i'm also watching out for is the euro. it was following a little earlier on. oil, up above $50 a barrel. we are getting breaking news out of the eurozone. let's show you what that is. manufacturing pmi is pretty

much in line with expectations. reporter: hunting for access in the stock market. you might be better off looking at stock prices. bloomberg,view with we were told, the real problem is monday market bubble collapses. long-term interest rates will rise. council of the exchequer says despite disagreements over the transition period, philip hammond, it was in brazil to promote trade says the debate among cabinet ministers is adjusting to a new relationship with the european union, not the question of staying longer in the 20th member bloc. the u.s. says it will combat the distortions to the world economy created by china's economic system. in a report to congress, the u.s. trade representative office says the primary goal is to defend the government's goal to impose. duties on china the report comes days after the

trade talks in washington. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine? francine: thank you. anthony scaramucci was are moved days his new job just 10 after he joined donald trump's team. the political turmoil spurred the delegate further declines, completing its fifth straight monthly drop. white house officials outlined an aggressive timetable for getting a tax overhaul in place by the end of the year. we are joined by iain stealey, jane foley, and of course, kathleen hunter. she's bloomberg congressional reporter and frankly, has been extremely busy over the last couple of months. thank you all for joining us,

but i will start with kathleen. what's going on inside the white house? you have john kelly saying, i'm in charge and anthony scaramucci gets ousted. >> that's right. barely one week ago anthony scaramucci was talking to "the new yorker," talking about how he was going to fire everybody and a couple days later, he is out. it raises the bar for interesting even with this administration, with its unprecedented levels of shake up. with john kelly coming in, unlike reince priebus, his predecessor, everyone, including anthony scaramucci, was going to have to report up through kelly. that was a mutually disagreeable situation. so, yeah, it is an interesting development. francine: what does it mean for how john kelly wants to govern?

he did talk about tax reform and the timetable for that. there are questions as to whether he is a micro manager or has the political acumen to getting through congress. >> he certainly has experiencing managing people and situations. the key question for any new trump staffer, and i've said it before, the degree to which he is able to manage trump himself. nobody so far has been able to rein in trump's erratic tweets. no staffer is going to be able to necessarily fix the white house's problems unless they are able to address that. it seems to be an outstanding question, whether kelly will be able to do that. francine: jane, what does that mean for dollar dynamics? when you look at this political upheaval, it seems the dollar does not take notice at the moment. is that a good or bad thing?

>> i think it is a bad thing. messnk the words chaos and certainly are not good things. theeconomic particulars, market is looking at the big divisions between the republican party and the inability of that party to push through the health care reform, their inability to pursue the tax reform. that is unwinding the market. there are other dynamics in addition to that which are affecting the dollar and you could argue about the fed and the lack of inflation, but also, many of us are putting our money in riskier currencies. we have seen this massive rotation back into the euro, based on a pick up in eurozone growth. from that perspective, this rotation back into the euro has

been accelerated by the move out of the dollar. francine: does that mean the dollar continues to decline here? is it happening quite quickly? >> it is happening quite quickly. if we look at the dollar index from the start of the year, we are looking at a 10% decline. we see a very accelerated movement in the euro-dollar in particular. that is very uncomfortable for central bankers. it is up to case with central bank assesses thkers, it is the movement around the currency that is important. central bankers don't generally like that movement. this is more of an issue for the ecb, rather than the fed. so, from that perspective, i would argue that it is a natural, the euro-dollar moving at this velocity. we would like to see some

consolidation before deciding what the next move is. francine: what is your take on how markets should view these dollar machinations, and all these rumors and leaks and job changes? >> if you look at the dollar index, everything has been reversed in the run up to the trump victory, whether it is the yields breakevens, or going anywhere. let's look at the broader picture for the growth dynamics for the u.s. it is weakening. we expect the fed to continue moving in its trajectory of unwinding some of this accommodative policy, starting with the balance sheet on the assumption that inflation does stabilize and come back up again. maybe that does give a bit of support for the dollar. we have had this view over the

last couple months where the rest of the world has done really well from a growth standpoint and the u.s. has been the laggard, which is when the difference compared to the last few years. francine: first of all, is john kelly on the paul ryan side of things? do need to start worrying about tax reform? >> i think the second part of your question, we'll find out in the coming days, whether the president listens to him. there are indications that he would, he sang his praises yesterday. we have seen how quickly donald trump's opinion can shift. when it comes to the focus, it does seem like the white house, you know, after donald trump's's tweets over the weekend when he was focused on the health care defeat, it seems like now with john kelly at the helm, they are moving on to tax reform. what was interesting about what was said yesterday by the white house about tax reform is they seemed focused on the timeframe and not so much on the substance. there is a lot of difference,

substance and it is tricky to be locking yourself into these end of the year timetables, september to october timetables, when you have not made progress on bringing the fed together on the topic. francine: we are having histor a story crossing the bloomberg terminal. the rewrite is set to start as trump regulators grabbed the reins. i'm not sure what is in this renewed focul rule, but we understand regulators at this point have agreed to rewrite it during a closed s.o.c. meeting. we will get back with kathleen hunter and iaian and jane shortly. stay with "bloomberg up,eillance," and coming second-quarter earnings send shares higher. later, watch of for the bond market. we talk to the former fed chair alan greenspan, and is warning

for investors. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" an let's get straight year bloomberg business flash. reporter: banks might need to find $30 billion to $50 billion to support european businesses in the aftermath of a hard brexit. this is equivalent to 15% to 30% of the capitol wholesale banks currently commit to the region. operating costs could rise to $1 billion as functions previously operated in london are duplicated on the content. a plunge of more than 21% after scrapping plans to renew some of its debt.

if they could not meet all the conditions to redeem the 2019 notes. the company representative did not immediately return a message seeking comments. one fo two nuclear power projects in the u.s. has been scrapped. the decision to stop the expansion of the plant comes four months after westinghouse filed for bankruptcy, setting the financial challenges facing u.s. nuclear power. that is the bloomberg business flash. francine: the trump administration has sanctioned nicolas maduro, accusing him and his government of undermining democracy. the u.s. stop short of a more significant penalty that had been under consideration, banning imports of menace women oil. ofv-- banning imports venezuelan oil. >> we very much believe that

sanctions do work. and we will continue to monitor the situation and consider additional sanctions. .p. shares with oil, b also rose this morning as debt rose to a most $40 billion, the highest level ever. lower payments for the rest of the year and funds from asset sales will eases burden. continuing the conversation on venezuela and b.p. we are joined in studio by jane foley and iain stealey. are investors pretty happy with what we have seen for b.p.? the debt is going up. buthey beat expectations, they guided those expectations down considerably in the weeks before the earnings. people expected earnings over $1 billion for the quarter. $500pulled that down to

million. they beat that. in the first half, payments for the spill direct definitely on earnings. they frontloaded those earnings to the start of the year, so we expect less drag in the second half. also, they expected to dispose of a lot of assets. we may see that ease off in the second half of the year. francine: what role does venezuela play in all of this. it is a huge part in the oil. there are no sanctions on oil, but that could change very quickly. >> most people consider ban ning venezuelan oil to the u.s. would be drastic. the u.s. is less dependent on venezuelan oil than it used to be, but it is still a big part of the picture. it was the more likely they might ban fuel imports from the

u.s. into venezuela. they have not decided to do that either because they feel it would disrupt the venezuelan economy and add to the chaotic situation. francine: there is an opec meeting next week. thank god for that. they have not met for a while! 10 days. >> it is at an official level, but they are very keen, the saudi's, they are very keen to put pressure on other countries to put a lid on compliance. we have seen prices rise almost 10% since the start of last week. francine: how do you look at the price of oil and correlation? does it only have a correlation in the commodity rich currencies, four also on the dollar, for example? -- or also on the dollar, for example? into feeds more broadly

the g10 and other countries, too. yes, we have had these interesting dynamics. story,ly, the venezuelan too. global growth is pretty strong. but it also seems there is a skepticism amonst amongst oil analysts for the longer-term of oil. does this mean we are at the peak oil demand period? for that, there are obviously significant implications for the oil exporting countries. what we did have in the last few years in norway, for example, other industries were being pushed out. these other industries.

there has been some sort of goodness. the canadian economy is doing better than people had anticipated for this year. really, as a look over the next 20 to 40 years, there is a lot of skepticism about whether oil prices can recover? francine: can it? does that have any impact on your forecast? >> the interesting thing is oil has bounced quite nicely, having had quite a deep fall earlier in the year. people were quite concerned about the relation to inflation and its ties to monetary policy. now that we have had a bit more stability, inflation might not be falling as drastically. so, that should be good for thele, the bond bearers of world who thought yields would be pushing higher this year. outside of europe yields have

moved a little bit higher. in the rest of the world we have had fairly muted moves in yield. you, bloomberg managing editor for energy, and iain stealey and jane foley stay with us. up next, the latest market getsion as the you areuro support from bullish reactions. this is bloomberg. ♪ francine: you are watching

"bloomberg surveillance" and you are looking at live pictures of london, were actually the sun is out. it looks like it could be summer. i don't think it will be hot in london, but it looks a lot better than it has. let's check in on the market action with mark barton. mark: whatever you want to call it, the middle of the earnings season, time to show off our wonderful ea functions earnings analysis. this is for the stoxx 600. surprising byles 1.25% on the upside. click on growth while we're at i t. this shows sales growth, 7.8%. earnings growth, 19.5%. 256 at of the 406 companies have reported earnings, francine.

if you have a bloomberg, explore the terminal. this is b.p. over the last year. let's look at the one-day share prices to show you how the shares are fairing. moving to calmer investor concerns, saying lower oil spill payments and funds from asset sales will ease the burden. net borrowings totaling almost $40 billion at the end of june, up almost $9 billion. b.p. did manage to cover the dividend commitments with cash flow during the first half, but it will need oil prices to rise or stay put to avoid further debt increases. down 10%,b.p. stock, the worst performer among the world's big five non state oil company. this is a good chart but of the eurzone. we have gdp data in 20 minutes.

ammog the ecb hawks more in their quest to start policy normalization. the white line is the u.s. index. the blue line is the eurozone economic surprise index. and the wonderful chart below,f francine, that is the difference between the two, 50.6. francine: thank you, makr. -- thank you, mark. the bond bubble that is ready to pop. we have a currency specialist and a yield specialist. this is bloomberg. ♪ is this a phone?

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so all you pay for is data. see how much you can save. choose by the gig or unlimited. call or go to xfinitymobile.com introducing xfinity mobile. a new kind of network designed to save you money. francine: you are watching "bloomberg surveillance" and i'm francine lacqua in london. reporter: in the u.s. anthony scaramucci has been in the from

his new job as white house communications director and it is john kelly's first day as chief of staff. press secretary terry saunders said he left by mutual agreement and will not return to the export import bank. the u.s. said it will combat the distortion into the world economy graded by china's economic systems. in a report to congress, the u.s. trade representative's office said the primary goal is to defend the government's ability to stop china from dumping goods or unfairly subsidizing chinese firms. this comes just days after tense trade talks in washington. donald trump reportedly dictated a statement later shown to be misleading in which his son said a meeting with a russian lawyer was not related to his father's presidential campaign. according to the "washington itt," advisers agreed that could not be repeated later if

the full details emerged. the paper said the president changed the plan and dictated the letter, and said the discussion focused on the adoption of russian children. the traffic ministration sanctioned nicolas maduro, accusing him of undermining democracy. in an unusual move, the treasury department acted after a vote on sunday to rewrite the constitution. >> generally, we very much believe that sanctions do work. and w e will continue to monitor the situation and consider additional sanctions. reporter: global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm sebastian salek and this is bloomberg. francine: we are just getting some u.k. pmi figures.

manufacturing growth accelerated for the first time in three months. that is because it is being both . by the jump in exportation data. we will look at the implications for brexit. in the meantime, the profound not moving at 1.3215. equityeenspan said investors might be better off looking at the bond market. this is where the actual bubble is, and when it pops, it will be staff everyone. in an interview with bloomberg, he said the real problem is that when the bubble pops, long-term interest rates will rise. back with us is iain stealey and jane foley. iaian -- thank you both first of all, for sticking around. do you worry about what greenspan says?

or is it something the market is aware of? >> i think it has to be something to be concerned about. when you think about what happened over the last decade, the central bank balance is approaching $20 trillion. that money has gone into the bond market and boosted bond prices. when you look around the world, yields,bonds, negative central bank buying negative yields and bonds. it is the definition fof a bubble. how does that reverse? by our calculations, that balance sheet expansion will change to a contraction probably within the next year, fed quarter 2018. how does the market deal with that for the first time in a decade? francine: that is the $3 trillion question. >> the problem you have is between now and then, you are giving up your yield. you still have the central banks, and the ecb, and boj

buying bonds. at some point, the market is going to flip and start looking at the impact of high yields. francine: but me bring in jane. this seems to be fairly well telegraphed. it seems to depend on how the market interprets it. >> we need to look at the position in japan. for decades, people have been saying this same story. there is a bubble there and it could be very painful and at some point, jgb yields will go through the roof. the fact that it has not complacency with the investors. central banks are kicking the can down the road. but i think it is out there. it is something investors are going to have to pay more attention to. it is coming now in the

u.s. francine: this is the 10 year treasury yields. this is the 50 day moving average in green. here's the 200 day moving average. we have heard yields will be at 3%. to 2.5%, or even how difficult is it to fix the price on it? >> our view is, when you look at yields for the rest of this year, they will move higher. we are calling between 2.5% and 3% by the end of this year. we don't think the markets are pricing enough into the fed. we have just gone to grips with what happens when the fed starts to unwind its balance sheet. when that occurs, those you will move higher. francine: that when this happens, is this muscle memory? because most people have never move through this? >> at the moment, you'll there being cap lower by the -- at the moment, yields are being kept

lower by the foreign buyers. but i suppose the central bank has also started to take away the free cash to buy those wants. that will have an impact. francine: jane? >> the big question is, when will the plug be removed? the linchpin has been the inflation rate. they comes back to the fact that inflation has been particularly low, given the low rate of unemployment. not just in the u.s. released throughout the whole -- really throughout the whole of the g10. we have low wage inflation throughout the eurozone, in the low, despite a very unemployment rate, and very low wage inflation in the u.s. we can look at japan as a good example of this. i think we have that something

jon b.49 jobs for every seeker. are we going to get the inflation that allows the punchbowl to be removed, or will that be delayed? -- this: on that note is the chart that looks at eurozone surprises economically versus the u.s.. what does this tell us? the blue line that is the eurozone. the u.s. is on a reversal. what if it is not that we are measuring things wrong, but the trend is on the lower side? >> that chart describes why the euro-dollar has gone up so rapidly recently. of course, it's on related to what was in the price, what the market was expecting. this year the eurozone growth story has been one of the exec stories relative to the price at the end of last year. in the opposite can be said with

respect to the u.s. in the macroeconomic sector and france we have had a window of opportunity. we have seen this rotation back into the euro. but a large part of that story is the yield story in treasuries. u.s. treasury yields are low, keeping the dollar low, too. if we were to see u.s. yields rise in the u.s., that could effect the dynamics of the euro-dollar. francine: up next, we focus, of course on what the boe will do on thursday, and finding $50 billion. we bring you details on new reports that says banks will refresh funds after brexit. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm i francine lacqua in london. philip hammond said despite cabinet disagreements over a transition period, he laid out an agreement for free movement for european nationals. the deputy secretary argued that would not be kept safe with the brexit vote. -- meanwhile, report says banks need to find up to $50 million of capital to support the european union in the aftermath of the hard brexit. still with us, iain stealey and jane foley. iaian, i don't know how you actually try and go through what brexit will look like with all the noise surrounding and political infighting, we don't know what it will look like or what the government wants it to look like. >> island for us, looking at it from the bond side -- i think

for us, looking at it from the bond side and the gilt perspective, you are right. the bank of england will probably not rock the boat, and keep rates what they are. they also don't know what brexit will look like. they don't want to disrupt things. for us companies gilt yield stay pretty stable. francine: francine: what does it mean for the bank of england? do they just focus on inflation figures and consumer credit? perhaps closers to the line last year during the referendum. i think they want to step back into the shadows as much as they possibly can. we were given this chart in the june fomc meeting where we saw three members vote for the immediate rate rise and the market was not expecting this.

now the market is anticipating for this week's meeting on thursday that some of those hawkish votes will go back into the shadows, that we have two or three voting for an interest rate hike, but it still could be sometime before the actual hike. erosion that inflation is having on the incomes and the likelihood that will slow consumption i ithe year ahead. from that perspective, the market sees the backdrop of the world economy doing fairly well. and the bank of england, keeping rates on hold in that environment. francine: on this chart in white you have the boe's consumer credit data and the blue is the finance data. the blue, this is lobby group formally known as the bba. these numbers show the other large lenders had about 90 billion pounds of consumer

credit outstanding, which means an increase of less than 7% over two years. the bank of england think years are much more optimistic, saying the gain is up to 15% of what people want to borrow. >> the bank of england has been in the headlines over the last three months. they warned one month ago about the pace of gains in consumer credit and unsecured lending in particular. the bank of england is not the only central bank concerned about this. we can look at canada, switzerland, australia, new zealand, you name it. these countries are worried about the level of household debt. the reason for this is that interest rates have been very low and property prices have been fueled higher. people have to take on more debt. there is a concern that people on the margin, those most likely not able to afford those payments, they will get burned. the banks are concerned.

they are likely to announce more macro potential measures to curtail lending. if we look at some data, we see consumer borrowing at the highest levels since the 1960's. there is a concern that consumers throughout the u.k. will see real wages eroded and will not be able to borrow more to support consumption. and we already have record high debt as well. it's not a very good outlook for consumers at all in the u.k. francine: what does this mean for gilts? >> the gilts will not move far from where they are at the moment because there is a lot of uncertainty for the bank of england. they are concerned with the amounts of people who have inflating mortgages. if they do raise rates, they will see more money coming out of their pocket every month. when in real terms, wages are down. if you think bank, also to

2011 to 2012, when we had these high levels of inflation, which the bank of england is concerned about, they look through those during those periods. we expanded quantitative easing programs. there was different leadership, but they have had a history of saying, we will look at the underlying growth dynamics and the concerns about brexit probably keep them on hold. they will probably go from the 5-3 vote to 6-2. francine: why go through the pain of talking the market into believing a boe rate hike is on the table if you are not going to do it? >> we got to a stage where it was 5-3. ink carney, the big voices the bank of england, they were voting to keep rates on hold. i think actually the market was surprised. but really the core, those that direct policy, they are saying we will hold. they want to see what brexit

means before we move forward. francine: thank you. up next, the euro has gained 10% against the dollar this year, but is it still undervalued? this is bloomberg. ♪ francine: this is "bloomberg

surveillance and i'm francine lacqua in london. here is sebastian salek. reporter: bp failed to reduce debt in the second quarter, lagging behind competitors. net debt rose at the end of ju ne. malaysia's one end dp investment fund failed to make a since hundred $3 million payment to abu dhabi's sovereign wealth fund. national petroleum investment will make an announcement today. imdb did not immediately respond to any mail seeking comment. -- to an email seeking comment. the car renter said it could not

meet all the conditions to redeem the 20 19th notes. -- redeem the 2019 notes. two nuclear power projects under construction in the u.s. has been scrapped after it was said that halting the work could save customers $107 million. there were scores of financial challenges facing u.s. nuclear power. that is the bloomberg business flash. francine: remember six-month after president donald trump's trade advisers said the euro is grossly undervalued. the euro is the cheapest among the g10 peers, despite a gain of 10% against the dollar this year. still with us is iain stealey and jane foley. around.u for sticking

jane, you like euro everything. what would it take for the euro to stop rising? >> i think it has got to be draghi. if draghi indicated it is not an to indicate was the movement of the currency was doing a lot of work for the central bank in terms of tightening monetary conditions, the market might reevaluate. the pace of the gains in the euro-dollar have been extravagant. it is possible it could push the timing of the normalization back a month. francine: i have a good chart looking at the euro-swiss, which we were talking about over the break. >> is quite amazing. i think the movement we had last isek does underline th notation back into the euro.

for a long time, we have had this perception that the swiss franc is this safe haven currency. negative interest rates, threatening to use intervention, they use anything they can to stop funds flowing into the swiss currency. what they needed really, was an improvement in european fundamentals, a rotation back into the euro. and of course, that started at the start of this year. it was always going to be difficult to predict the timing, the trigger. that we had acceleration of that move, which created the move we saw last week. francine: this is a credit agricole chart, which goes back to what we were talking about the u.s. in white you have the two year treasury bund spread and in blue, the euro-dollar. >> the main thing here is the

balance sheet adnd the fact the ecb is likely to withdraw that balance sheet. that has been supportive for the euro in a time, as they showed earlier, economic data looks fantastic. u.s., a little bit lackluster. as we said, the euro is still undervalued on a long-term basis. people need to buy euros every day. there has been flow out of the euro. there is a lot of good things going on for the euro. francine: what is your take on japanese bonds? >> the bank of japan will control yields and keep them between zero and 10 basis points and they have the ammunition to do it because they have not been spending that much money. they have actually got ammo to move up. they can go into the market and

keep them at these levels. francine: we have been talking about the euro. we charted the japanese yen but the daily moving averages, the gpy, and is the euro then we have the other things we are watching out for. >> the bank of japan has made no indication they want to normalize policy. arewhile, the markets anticipating we will have normalization in the ecb. policy hence, you have this carry trade policy. francine: thank you both. that was a fun hour. now, we are getting breaking news on ferrari. this is a nice little scoop for our senior automakers reporter. arrari is said to plan utility vehicle -- i don't

know if that has a good ring to it. they say they will double profit by 2022. i'm sure reporters are hitting the streets to get us the possible plans for this larry. -- for this ferrari. "bloomberg surveillance" continues in the next hour. we will talk venezuela, oil, and of course, anthony scaramucci and what exactly is going on in the white house. tom keene has been doing some digging around. this is bloomberg. ♪

♪ francine: gone in 10 days. anthony scaramucci is ousted

chiefjohn kelly becomes of staff. meanwhile, the administration tries to move on to achieving tax reform. the u.s. freezes the venezuelan president's assets but stops short of tanning oil imports. bubble pop.t for a should be worried about bond pricing. good morning. this is "bloomberg surveillance ." i am francine lacqua in london with tom keene in london. what alan greenspan talked about, we need to get back to that. tom: and particular the yen strength, down to 1.09. francine: we are getting gdp figures. in euro area growing 0.6% the second quarter. that is matching estimates. you are looking at inflation figure out your next move.

here is taylor riggs. taylor: the u.s. has taken an unusual move. trump sanctioned the venezuelan president, accusing him and his government of undermining democracy after a vote to rewrite the country's constitution. meanwhile, the wife of a venezuelan opposition leader says he has been taken from his home. the white house is looking for a new communications director. anthony scaramucci was ousted 10 days after he joined the staff. it is said to be an agreement between him and new chief of staff john kelly. street regulators have begun to rewrite the volcker rule, according to people familiar with the matter. five agencies are looking to loosen restrictions. changes would probably give big banks more flexibility.

moving over to the u.k., the chancellor of exchequer says brexit will not be postponed or delayed. in brazil, philip hammond said the u.k. will leave the du -- will leave the e.u. says debate is about adjusting, not staying longer in the bloc. 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. tom: let's reset on the data. with currencies, big move yesterday afternoon in new york. equities. futures up eight. lift.rnings driven the euro on a tear. and westech said -- west texas

intermediate up. there is the dow. chris chris auntie -- chris chisanti later on in the hour. in of the yen, we did not get to 109 handle. francine: we had some pretty good bp earnings. it did stoke a lot of energy shares. overall, global stocks are advancing. there were strong corporate results. the msci world index they're paid you can see the euro-pound .8929.29. -- and you have strong euro at the same time as strong sterling against the dollar. it has been sporting.

where were you yesterday when you found out mr. scaramucci was exiting stage right at the white house? bringing in james hertling of bloomberg. he has a lot of experience. do now ist to explained to our global audience who this most interesting general is. this is a tough middle-class kids from -- kid from massachusetts, outside boston. he did not start on third base, he started trying to get into the batter's box. james: he is a classic american success story. now, he is in uncharted territory. , to be general, you have to be politically skilled as well as talented. but the snake pit that seems to be today's truck white house and

congress andgle his own people in the white house will test anybody's skill. tom: i agree totally. as a just general kelly will test the waters quickly to find out where he fits in. who is jim hertling watching in the white house? scaramucci was an easy call, but who is the next person that general kelly has to create order around? ifes: what i will watch is the sean spicer comes back to the white house. that will be interesting. whatever happens with bannon, one of the things, for me, what drove scaramucci away was not necessarily kelly trying to restore order but scaramucci outshining trump, taking the spotlight away. the spin now -- in is kelly reimpose in order, but

if history tells us anything, it tells us the commander in chief does not like to be outshined by anybody. that is what got bannon in the doghouse in the first place. francine: will john kelly actually have the president's ear? will trump listen to kelly? james: i do not know, but history suggests trump does not listen to anybody. francine: so what does he need to do? james: what trump needs to do? francine: no, john kelly. it is said that he needs to be a micromanager, but the counterpart is he is no political beast. how will he speak to congress? james: that will be interesting. there are -- marine generals typically do not have much use for politicians and congress people, who they regard generally as obstacles to be worked around. obviously in washington, congress controls the purse.

he will be tested on many fronts. tom: you mentioned congress. before we get the tax reform, right in our lap is the idea of the budget. from where you sit, do you see any indication mr. trump is sensitive to the importance of this budget debate? james: no. i do not. ceiling, the budget -- all of these dollars and cents issues will test the white house and test congress in ways they have not been tested before, because health care reform, while it was a political issue, keep lyrical issue for this white house and this congress, it certainly -- key political issue for this white house and -- congress, it was not let's go to mark

dowding. do you ignore these political machinations or do you worry? >> what is happening in the white house and around the white house is a lot of fun at the moment. it is a circus, looking on as an outsider. investor, what matters to my perspective is less what is happening in the white house and more what is happening on capitol hill at this particular juncture. the issues will be tax reform and whether we end up with a fiscal ease hating the economy next year -- hitting the economy next year. reform, this is one of the first things we heard from john kelly. that we have tax reform that they will try to push through. mark: as an investor, timing is everything. so when these things become apparent will be pertinent in

terms of market tragic day, but it -- trajectory, but what i would think of is if we end up with a material fiscal ease into prettyomy that is mature, it will be the first time since the 1980's we have seen something like that. something like that delivered. this will be the big area of analysis for many of us as we move into the second half of the year. tom: you have enjoyed various bear markets. are we headed for a bond bear market? greenspan is making the headlines today for bloomberg news but are we headed for a bear market in bonds? mark: i think i lost all of the hair on my head the last time we had a bear market, it has been that long. i think everyone would reflect on the fact that with bond yields as low as they are, it is

difficult to see yields going much lower. the big question is we have seen the end of the circular bond market, are we transitioning into a cyclical bear market? that is hard to argue. i think yields will go higher than they currently are. it is difficult to see yields going back to 3%, 4%, 5% in the u.s. unless we get a real change in the underlying landscape. if we saw fiscal ease happening in the u.s., that is one of the things that could change the landscape that we could look on as a defining moment. in the here and now, it is pretty much steady as she goes. tom: we will come back to mark dowding. policy,ext hour on charles gabriel will join us from l for partners. stay with us.

this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." bp is trying to calm investor concerns after debt rose to a record. funds from asset sales will ease the burden. bp has almost $40 billion in debt. its second-quarter profits beat estimates. hashe u.k., the frog office launched an investigation into british american tobacco over reports it arrived -- bribed

african governments. companies withs a woman in charge perform better in the market. it comes from scandinavia's largest bank pay the bank looked at almost 11,000 companies and found those run by women had a 25% return from 2009. that is your bloomberg business flash. francine: thank you. the bank of england is due to announce its rate decision thursday. in may, bluebay asset decided to go short sterling. let's get back to mark dowding, bluebay. at also with us is elsa lignos from rbc capital. so brexit -- there is political

infighting, the boss is away, philip hammond is saying may be brexit is so soft he will not even realize but saying it will happen. who do you believe? mess.brexit is a it looks like an ugly outcome. i am struck around westminster, at the misperceptions about what will be achievable. there is almost this sense that we are some sort of super powers still, that europe needs us more than we need europe. i am concerned by the attitude i'd attacked -- i detect. when i look at this, it looks like a complete mess. this idea that we can have our cake and eat it in the u.k. seems like a load of nonsense. francine: are you still short

the pound? mark: i am still short. we are also short against the euro and the dollar. over the next couple of years, we will see weak growth, lack of investment, lack of jobs, and bad politics. we need to build in political risk into the pound as well. the parity could be achievable against the euro and ultimately against the dollar. tom: elsa, good morning. good to have you with us. let's bring up the bloomberg dollar index. it is little more sophisticated than the typical index. this is a beyond elegant trend of weaker dollar. to be honest with you, i have never seen such a contained weak dollar. can you extrapolate that out to

further dollar weakness? elsa: it is interesting, because there are lots of good things that could happen to the dollar in 2018. but it is difficult to see them in the short term. in fact, in the short-term, it is more possible we have had news, whether from debt ceiling negotiations or the fed getting cold feet. definitely from a technical side, the momentum of favors further dollar weakness. of dollar closing at the month end. longer-term, i think dollar weakness might a dud. tom: it is a jumble right now. do you have a market to play in? are there people who have over-bet a certain strategy? elsa: we are seeing interesting

trades emerge. there is a lot of interest picking up in the swiss franc. that started last week and has extended this week. it may have been m&a flow originally, but now we are seeing increased interest from other investors. outside of that, we like the aussie dollar. tois perhaps wiser to stick your of piling into a dollar trade at this point. francine: let me bring you back to the pound and sterling, which we started the conversation with. good consumer credit figures. let me talk you through my chart . it shows the boe's consumer credit is more optimistic than how much consumer credit there is for a lot of the high street banks. how much of this is a concern to the boe? what does it mean for interest rate decisions and what does it mean for the pound? elsa: there is a broad market

narrative that central banks are concerned about financial conditions, so they will deliver tighter policy. in the case of the bank of england, the market is pricing around a 30% chance of a hike. i think that is overdone. if you look at the fundamentals of the u.k. economy, it is hard to argue we need tighter policy. we saw slightly stronger pmi data this morning, but data into the end of q2 is showing weakness. i would not run with this trend for sterling. francine: we will be back with mark dowding and elsa lignos. coming up thursday, stay with bloomberg for the latest from the boe. the rate decision due out at 7:00 a.m. in new york, followed by the news conference from mark carney. this is bloomberg. ♪

♪ francine: "bloomberg surveillance" with tom and francine from london and new york. a great story on the bloomberg terminal. this is why we picked our must-read. it comes from the former fed chairman, alan greenspan. valuation,out market he says "the real problem is when the bond market bubble collapses, long-term interest rates will rise. we are moving into a different phase of the economy -- to a s since the not seen

1970's. that is not good for asset prices." this?is there a truth in fear and bond of markets the crash, if you saw slot -- that sort of correction, it would lead to a sharp person in stock prices as well. there is his argument that during qe, you see bond prices and equity prices moving together. so it stands to logic. emphasize in terms outcome,flation frankly, there is hardly any inflation to be seen globally. this may be something which is a threat further into the future. i do -- i am not sure if it is a threat for here and today. francine: and there seems to be a consensus that there will be lower rates for longer that will

persist. of people, including greenspan, say they will break higher quickly as normalization starts. where do you see the 10 year yield? looking at 250 moving day averages? mark: icv 10 year over the course of the next few months drifting towards two and a half. for rates to go above three, which long-term would be an area where you would start to think you should be worried as an equity investor about what is going on in fixed income, to see that, we need materially high inflation. to me, the risk is political. if we get fiscal ease towards the back end of the year in a mature economy, that is the sort of thing that could ignite inflation. but at the moment, it seems we are in a world of steady as she goes. we are looking at lots of things that could cause the equity market to crash -- at the moment, i cannot see it. elsa: it is interesting, because

there are a few central bankers who have said perhaps we could see the phillips curve steepening materially as we get the full employment. but we have not seen it yet. it could happen further down the line. central bankers do look two years ahead come about it is not happening at the moment. you, elsa lignos and mark dowding. both stay with us. coming up tomorrow on bloomberg the goldmanricas, sachs ceo joins us. asked about will be bonuses and also incentives that goldman sachs has been doing to get people back to work. this is bloomberg. ♪ who knew that phones would start doing everything?

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it is an interesting washington. i have no clue where we will be at 6:00 p.m. tonight. i am tom keene in new york, francine lacqua in london. let's get to our first word news. here is taylor riggs. taylor: one of the biggest moves yet in-flight and put in -- in putin's military buildup. troops will move closer to european territory. increased be used to military presence in belarus. meanwhile, mike pence is in the soviet -- the eurasion country of georgia. and a report by the u.s. trade steelentative points out and aluminum. --

in pakistan, the battered stock market is showing signs of recovery in the wake of political turmoil. the benchmark is up again today after its biggest intraday gain in two months. investors are taking comfort from the peaceful resignation of the prime minister following a corruption probe. the government has endorsed sharif's brother to be new prime minister. los angeles reached an agreement to post the olympics. that clears the way for paris to host the 2024 summer games. 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. tom: thank you. "vanity fair" has a new article post" and thegton "new york times."

the "times" with a story weeks ago about trump jr.. had aight, the "post" story with the president dictating some sort of note from trump jr. to authorities. marty schenker runs all of our government and economic coverage. nk, andk -- you bli things happen. how will general kennedy -- how will general kelly change the dialogue of the president? marty: that is the key story this morning. firing or pushing out scaramucci is an easy thing. controlling donald trump is another. he is not going to stop donald trump from tweeting. that is not the point. the point is in those tweets, if he is setting policy, is kelly fully aware of it and prepared for it? that is the question. tom: i assume a general with this experience will be the guy from here to sergeant to general

to leader. that kelly will test the process quickly. how will he test the white house process in the next 48 hours? is keeping on message. tax reform is now the number one priority for this white house. there seems to be movement or consensus on what that could include. problems theyads have to solve with congress, and kelly has no experience in dealing with congressional negotiations. that will be his test. francine: that is what i was going to ask. how important is it for the chief of staff to have that political background, where they can negotiate with congress. how much would you ask of this chief of staff to get the white house in order, to be in charge, be the person people speak to to ask to speak to the president? chief the key thing for of staff is recognition on the hill that he is the guy in

charge and he sets the message. and it comes to a budget the debt ceiling, they have to be able to go to kelly and know which way the president is leaning. you cannot get tax reform before you take care of those issues. so it is critically important you get that done. francine: yesterday, we seem to have an aggressive timeline when it comes to passing a tax bill from the white house. there is a feeling that -- is there a feeling that things might get back on track quickly? if they can stay within the framework of a calm, methodical white house, they can try to push through tax reform quicker then might be expected. but before they can even do tax reform, they have to get a budget deal done. because they will not know how much money they can spend on tax reform until they do. that promises to be extraordinarily contentious.

kelly will have to navigate through that. tom: one of the great moments for general county -- general kelly was reading leon panetta -- was meeting leon panetta. what did you learn? he demandedarned complete control over access to the president. that everyone in the white house have to go through him to get the donald trump. if donald trump giving him that authority, and he sought it, that is what he learned from those gentlemen. it is a good lesson, if he wants to be successful. francine: thank you, marty schenker. joining us from washington, d.c. let's get back to elsa lignos, rbc europe fx energy -- strategist, and mark dowding, from bluebay asset management. what is your take on these white house removals?

will they have an impact on growth longer-term and therefore on the dollar? elsa: the initial reaction overnight was somewhat negative. the firing of scaramucci 10 days into the job sparked this belief. but john kelly has been received relatively well. he is a demand that if anyone could bring order to the white house, he should be able to do it. there is still skepticism over if you will be able to do it, but we are less concerned about what is going on in the white house and more concerned about what is going on in congress. francine: are you worried about the debt ceiling? mark: no. andad a republican congress president -- it should not be an issue. of course, there is going to be noise around this, but i do not think that is going to be the driver of markets in the next couple of months. up thewant to rip script. john tucker on bloomberg radio

talking about the swiss franc. the swiss franc has been weaker and weaker. is this a point were sm busy -- smbc has to get control of the markets? that they would step in to calm the upper out swiss franc move brupt swiss franc move? axa, i think they are perfectly happy with what is going on at the moment. it is hard not to argue the swiss franc is somewhat overvalued. the swiss franc is always overvalued. if you compare the dollars swiss, has been overvalued 35 years. but they believe it is friendly -- overvalued, and they will be nothing but happy the swiss franc is weakening. tom: does this come down to central-bank action? is any of that political

mumbo-jumbo mean anything to pros like you? elsa: i think there are a lot of people talking about currency, whether it is central banks or policymakers on the fiscal side, but none of it matters much unless there is an actual tool they can use to enforce their views. of rba overnight, they said they do not like the currency strengthening, that it would be better if it was weaker, but there's not much they're willing to do to reinforce that threat. so it really does not have much of an impact on my thinking. that would change if we were talking about the smb doing explicit intervention, but none of that is on the agenda. you, markthank dowding of bluebay asset and elsa lignos of rbc. we will see more in depth analysis on business week coming includingamsung --

samsung. log on to a businesswe ek.com. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's get the business flash. asan's softbank has as much 65 billion dollars in financing lined up if it decides to buy charter communications. once thes chairman marriage -- already merged with sprint. rose -- , -- average hedge fund and s&p

500. another hedge fund news, europe is on a hot streak. money pools investing across europe attracted additional capital for the second straight month in june. that follows a track where nearly $16 million was pulled out. that is your bloomberg business flash. francine: thank you. the trump administration has sanctioned venezuela's president , accusing him and his government of undermining democracy in the south american country. came in response to sunday's vote, that was seen as a step towards rewriting the country's constitution. steve mnuchin described maduro as a dictator. barden.us is andrew still with us, elsa lignos and mark dowding. have you heree to

in london, but talk us through what we learned yesterday. maduro has been sanctioned by the u.s., so this touches him but nothing to do with oil? andrew: right. it is obviously a significant escalation. it puts them in the company of assad and mcgarvey -- mugabe as heads of state who are personally targeted. the u.s. is concerned about the events paid we have breaking news of the leader of the opposition being detained right now. so this is the u.s. increasing pressure. they talk about hitting oil directly. we have heard there are concerns if they do that, venezuelans, who are already suffering from food and medicine shortages, would suffer even more. right now, they are limiting themselves to going after maduro. but it is a very clear signal. francine: the president has said

he would not be intimidated by this -- will it change the way he interacts with the rest of the -- andrew: will it change? hours after the u.s. does this, keyre seeing videos of opposition leaders being rounded up in the middle of the night at gunpoint. it certainly has not made maduro richard reid. it might -- retreat. it might make him more defined. this could be part of a broader crackdown on the opposition. we will see. but there are worrying signs in caracas. the the headline is opposition leader taken from his house. there are memories for some of a certain vintage of lbj wandering

down into the caribbean to save the day. is there any indication the united states will save the day? andrew: there is the hope of venezuelan opposition that the u.s. becomes much more involved in this. a very slow slide. people are now openly talking about a slow slide to dictatorship, which is something we had not heard. it was always concerns about venezuela, but this language is new. aboute not seen anything potential military involvement. that has never been put on the table. we may see increasing pressure beingms of screws tightened. regionally, no one is recognizing the results of the

vote sunday. we may see more steps in that regard. tom: can we report that the as aary supports maduro pre- or post-dictator? andrew: i cannot say anything now, but if you look at the past years, that has happened. the concern is you were nearing a point where you may get to civil war, with two sides completely deadlocked, not talking to each other. the reason signs we are seeing is further drifting and more escalation. chance --a very quick transition. tom talks about lbj -- that is lyndon b. johnson. tom: that is true. i have been summarily corrected from london. excuse me. [laughter]

we need to move -- francine: we need to move onto the markets. bond yields -- is this a buying opportunity, or could this get worse? mark: i will begin by saying i do not have a strong view on the outlook for venezuela. it is a humanitarian crisis. the only observation i would make is a five-year bond trading at $.44 to the dollar is telling you that investors do not expect to get paid back in full. one would assume that payment is coming at some point. do you look? we do say corporate who may have exposure to the country and need to get their money out. from a markets perspective, probably the biggest impact is by the oil market. as you mentioned earlier, the

decision not to impose sanctions on the oil sector means market ramifications are somewhat limited for now. francine: thank you. big thanks to andrew barden. he manages emerging markets global coverage and also elsa lignos and mark dowding. if you are a bloomberg customer, you can watch us using tv , and you can ask tom and i'd ask questions. just click underneath the video screen. this is bloomberg. ♪

♪ tom: it has been most interesting -- dollar canada. maybe it is a sideshow, that maybe it is not. here is a long-term chart. trudeauhigh -- my tru chart, back to the elder trudea u. 1.40 level.e, key then down with massive canadian shrinks. it here, right now is some

interesting tension. conversation started on a candidate that has moved, but strong canada is still a range bound. francine: that is a great chart. probably that chart of the hour. when you look at canadian dollars, in terms of notes you sent out, i imagine this has more to do with central bank policy then the price of oil. elsa: i was actually in canada around the bank of canada's decision. it was striking about before the decision, everyone was looking at the bank removing emergency commendation. but what i had was really the start of an independent titling cycle. restored inas recent days, but the canadian surer, we are looking at a

-- a short euro cap, sterling cap. francine: do you look at canadian dollar or any assets in canada, or it do you -- or do you just look at the price of oil? what is i mean for investments? mark: in terms of the canadian dollar, it is consistent with what we are seeing across the commodities space. we are not just seeing oil move higher in recent days, we are ore and surge in iron copper prices. in china, which is sick google, commodity -- drive in china, which is cyclical, it is helping drive commodity. it is it difficult question to ask. partly what we are seeing is less to do with canadian dollar strength, it is more a story about dollar weakness.

for what it is worth, we could be reaching a point where sentiment on the dollar is getting so low that we are due for a correction in the other direction, particularly if we get stronger data later this week. tom: i want to go back to a broader view. this goes back to your work at cambridge a thousand years ago. i want to talk about the idea of a model that we can work in now. can we work within the dynamics and mechanics of our financial system, given where interest rates are? do we have a proper model or are we look making it up as we go every day? elsa: the interesting thing with how we look at the canadian dollar is over the last 30 or so years, you have seen the importance of the dollar in trade weighted cad fall. markets is youor

can actually see the canadian dollar strength without having as large an impact on it trade weighted cad. the other thing we have seen is the sensitivity of exports to currency fall. that does give an economy more capacity to operate, even with a stronger currency, without impacting its external sector as much. strength, where does mr. draghi say the euro is too strong? elsa: they are already looking at it. it is definitely something the ecb governing council will pay close attention to. we have seen euro materially strengthen the last two or three months, pretty much since the first round of the french election. it will be a combination of level and rate of appreciation. if we continue to see the euro

take out new levels day after day, it maybe, a much bigger talking point for the ecb. tom: elsa lignos with rbc capital markets, thank you. mark dowding, thank you, with bluebay asset management. coming up, we are on the dow 22,000 watch. markets grinding higher. some of that off of good earnings. that is a perfect time to catch up with christopher grisanti. he is a value guy with concentrated positions. he has an acute look at the markets. we will do that next. this is bloomberg. ♪

♪ tom: weak dollar policy.

the yen and the euro advance. let the export wars advance. what is a general to do? -- be aeral kelly ba c c.o.s. to the staff? and we consider the growth trends. this is "bloomberg surveillance ." we are live from new york. i am tom keene. in london, francine lacqua. we have not been together in eight months, it feels like. i saw euro gdp the last hour. a pretty good number. francine: pretty good. it is probably my terminal of the day, because you can clearly see, when you look at projections for economic growth, euro had stood be pairing ahead. the u.s. is more shy. we saw elsa lignos talk up strong euro as well. i think that means weak dollar.

with a strong first word news now, here is taylor riggs. taylor: the u.s. has taken an unusual move aimed at a head of state. the trump administration sanctioned of venezuela's president, accusing him and his government of undermining democracy a day after a vote that was a step towards rewriting the country's constitution. critics call it a power grab. the white house looking for a new communications director. anthony scaramucci was ousted 10 days after he joined the staff pay the white house says scaramucci left a mutual agreement with the new chief of staff, john kelly. his foul mouth tirade put him on thin ice. and the u.k.'s chancellor of exchequer says brace it will not be postponed or delayed. he says the u.k. will lead you by march of 2019. hammond says debate is over adjusting to our new

relationship with the you and not about staying longer in the bloc. former federal reserve chairman alan greenspan says do not worry about a stock market bubble. he warns the actual bubble is in the bond market, and when it pops, watch out. inflationloomberg will not stay at historically low levels, which will doom bond prices. 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. tom: a data check before we get to mr. surly -- mr. cirilli. dow futures up 110. 92.t takes it to 215 110.036. stronger yen. i am talking about the euro -- this is definitely what people are looking for.

overall euro seeing strength. we see that continuing. i like james foley and -- jane said it pay because the euros on a tear, it is like the euro everything, including the euro and dollar. crude oil above $50. tom: thank you. do not know that when i am clueless, kevin cirilli dictates answers to me. the "washington post" moving forward a story on the president in control of his children. can the president be in control of a chief of staff? kevin: last night, the "washington post" reporting that the president got the final say about the statement by donald forward. when they came about that meeting with the

russian attorney. the said, we also saw that legal team for donald trump jr. and the administration are refuting the portrayal of those events. but this latest story is making his way through washington. tom: an open question -- it is tuesday. what will you try to observe through friday about how this white house runs? forget about scaramucci -- old news. what do you focus on the next three days of white house dynamics? kevin: tax reform -- tom:, on. the people. who will go next? [laughter] kevin: with general kelly as chief of staff, yesterday, within hours of their first staff meeting, you have anthony scaramucci fired. inah huckabee sanders saying the brady briefing room that there is no -- that he would not be in the administration. anthonyridge capital's

scaramucci, it speaks about the direction that general kelly wants to take the admission asian in. the question is whether donald trump wants to allow him to do it -- that is the direction general kelly wants to take the administration in. the question is whether donald trump wants to allow him to do it. francine: talk to me about tax reform. do we have a timetable and how aggressive is the white house about it? kevin: i spoke with a senior administration official, said that the economic council will meet today on this. at thatgrich will be meeting. he is someone who has seen someone who can go between congress and the administration. goingministration is against house speaker paul ryan. a lot of interesting political dynamics paid yesterday, i interviewed senator jeff flake.

he is somewhat who is not always on the side of the administration, and he says he is optimistic about tax reform or at least a tax cut, by the end of the year. francine: any news about a debt ceiling or health care? kevin: in terms of health care, it appears lawmakers are saying they are optimistic, but there is really no concrete meaning or legislative path forward on that front. in terms of the debt ceiling yesterday, i spoke with the assistant undersecretary at the treasury department. he said they are confident there will not be any political theater around that debt limit, despite some of the differences in agreement between altra conservatives and moderates -- between ultra-conservatives and

moderates. tom: kevin cirilli, in charge of dictating things out bloomberg from washington. we want to move on -- there is no one better to move on with then christopher grisanti. can we get away from politics and talk about the most unloved bull market since time began? is there exuberant's? christopher: sure. but i think we are more on the base camp of climbing a double mountain. we have clearly come away, but for those of us remembering 1997, we can go further. tom: everyone is focused on value and the value trap. no one talks about the growth trap, where you do not believe in growthiness or thruthiness. christopher: so you see the

bubble starting to form in stocks like netflix. but there is a bunch of tech stops that still have strong growth behind them. that, i think value managers would be foolish not to be there. francine: i like that -- as long as we do not go into recession. what is the likelihood of the u.s. going into recession the next five years? christopher: the next five years, probably more than 50-50. the market does not care about that as much as the cares about the next half months. see companies growing 25%, 10%, or even 20%, we would stay invested and continued to ride in the escalator upwards. francine: isn't a crazy that i do not care about five years on. what will happen in the next 12 months -- we do not know what is priced in in terms of the fed pricing. christopher: what we care about

his actual return over the five years. we do the five year projections, but they are not worth much. we can bank on one year projections more. francine: where d.c. distortion? distortion?you see christopher: if you look at s&p versus the rest of the market, you would see a huge gap, and it would continue to widen. sell the be foolish to ones that are just a little expensive. bring up this chart -- this is oracle. i made this chart up quick. i do not make get -- i do not get points for brightness, but this is a typical chart. help me about how a conservative

guy like you measures operating income earnings versus the of revenue dynamics. how do you fall growth and revenue into the stuff below on the income state? christopher: well, what you are seeing this -- and plaudits for using the log -- tom: you can stay another block here. christopher: what you are not seeing is a traditional company going to the cloud. microsoft three or four years 130%, 140%.gone up what we see with oracle is a company about to make that transition. they are about to see revenue and earnings gains. you are not seeing that up there. tom: are they your single

best by? uy? christopher: in technology. tom: it is about policy, budget, and tax reform. we will look at policy, with charles gabriel of capital outflow partners. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's give the bloomberg business flash. investoring to calm concerns after debt rose to a record. lower oil you payments for the rest of the year will ease the burden. bp has almost $40 billion in debt. the company posted second-quarter profits that he estimates.

in the u.k., the fraud office has launched an investigation into british american tobacco over reports it bribed african governments. a bbc report said a lobbyist arranged bribes to influence tobacco legislation. with study says companies a woman in charge perform better in the market. this comes from scandinavia's largest bank. companiesd at 11,000 and found that those run by women had a 25% return since 2009. that is your bloomberg business flash. francine: thank you. i want to bring you over to my bloomberg terminal. this is simple. it looks at currency dynamics but through an economic perspective. i will push it out on bloomberg social media, but in white is a simple way of charging the

economic upside or downsides to u.s. economic data. this could be inflation, growth, wage growth -- anything you want under the sun. same for the eurozone. what this shows is whilst europe seems to be on a better trend, this is mainly thanks to unemployment. it is different in the u.s. they seem to be matching again, but it goes to the euro-dollar divergence. tom: very cool because it mimics inflation in the five-year. it shows the year-u.s. separation. my chart gets to mr. greenspan's comments. this is inflation data today. over year, core inflation. all you have to know out of it financial crisis 10 years ago is a disinflationary trend. nowhere near the 2% needed.

it is like my chart of the day. , here is this inflation rollover out of nowhere. as an equity guy, is this transitory? are you going to go like chair yellen, wireless phone bills are down for everyone except for tom keene and chris grisanti -- between us, we have nine children, which is scary. wireless phone inflation? that is inflation. christopher: it is definitely inflation and we think of this is transitory. by the end of the year, you will start seeing more wage pressures that we have already seen. you will also see things like oil and cell phone bills and other things start heading northward again. tom: are we going to see stagflation? bring up the quote from the last hour, if you can get it -- it may are ready be in the surveillance been. the problem is when the bond

market bubble collapses, long-term interests rates rise. the chairman goes on to say stagflation not seen since the 1970's. i do not hear that from you. christopher: it is a possibility, but we think we will muddle along with 2% growth but with a little more inflation. earnings are reported in nominal dollars, not real dollars. we would love to see a little inflation. so instead of going 5% you -- a year, it could grow eight or nine percent a year. tom: is it ok i stole that quote from you? francine: it was great. the problem is that you and the fed would like to see inflation, but when is it coming? christopher: it's like waiting for godot. we think little full employment, with average hourly earnings creeping up -- not by much, but we will keep an eye on that statistic pay up by the end of the year, you will see that being more inflationary, for

better or worse. francine: what exactly is priced into the markets? if whether the market is pricing in fed normalization starting or continuing this year. christopher: i think markets are climbing, but this whole health care stuff has been the preseason, and futures are up because we are finally turning to what the market regards as the real meat of the bank, which is tax early, especially corporate tax reform. to the extent that it takes over headlines the next couple of months, that will continue to be good for the market. tom: you talk about waiting for "go-do" -- i thought it was "go-dot." the producer had to straighten me out in pronunciation. side is theless depression. the trend is there. diversified or do

you need to be more diversified? to doopher: what you need -- it is getting harder and harder to find pockets of value. they are still there. we are a 97 -- 1997, not 1999. so does not diversification, it is avoiding the growth traps, the things that are so expensive that even good news cannot propel them higher. that is what we are working on now. grisanti, looking out bloomberg data futures. coming up tomorrow, goldman a start turnfter on "bloomberg businessweek, and update with alix steel. look for that at the 8:00 hour. this is bloomberg. ♪

♪ i am francine lacqua in london. tom keene is in new york. i do not know if you knew -- there were a couple of protests over wages at the bank of england. think is not the chaos i we were expecting. lothursday is the boe -- a of people expecting the bank's benchmark rating to stay low. boe also published fresh

forecasts on growth and inflation. to theet straight now u.k. economist at bloomberg intelligence and still with us is chris grisanti. as always, great to have your insight on what the boe can i cannot do -- can they actually hike this year? we think it is unlikely. we are holding our call that they will hold off until after the u.k. has left the european union in 2019. what you have seen, and in the run-up to this evening, have seen the softening of data. inflation coming up a little. but the underlying growth picture its soft. we think that is what is going to keep them on hold, certainly this year. and moving into 2018, we expect that weak growth picture to carry on. to chart u.k.ied

consumer credit. it just goes through the difference of the numbers that the boe is looking at. this is for consumer credit in the u.k. the boe seems more optimistic that what we are seeing on the high street -- is this a real problem? rates,boe is setting they look at this and say we do not want to squeeze these people. dan: i think so. as the bank of england, there are two policy committees. you have one that cares about growth and inflation, but there is also the financial policy committee. they are in charge of making sure there is not buildup of systemic risk in the financial sector. they have introduced at least one measure to curb consumer credit and increase the capital cyclical buffer. over thelook at this course of the next two days, but

it is not their main concern. it is only the extent to which people borrow, spend money. that affects the inflation outlook. it is more likely that the financial policy committee will take action, particularly -- potentially later this year to take care of the build up of this in the system. francine: thank's dan hanson. we will be back with chris grisanti of presented capital management -- of grisanti capital management. the rate decision due out thursday at 7:00 a.m. in new york. it will be followed by the usual use conference. this is bloomberg. ♪ ♪

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your voice is awesome. the x1 voice remote. xfinity. the future of awesome. tom: good morning. bloomberg surveillance from london and new york. all eyes on washington. not only the drama and the politics, but policy.

we'll get to that in a moment. a gorgeous shot of washington. right now if not all quiet on the eastern front. here's taylor riggs. >> it's one of the biggest news yet in vladimir putin's military buildup. 100 thousand russian troops will hold maneuvers close to the eastern edge of nato territory this summer. officers say it could be a pretext to increase russian military presence in belarus. u.s. backss the george's desire to join nato. a report by the u.s. trade representative singles out the markets for steel and aluminum. the primary goal is to defend the ability to impose duties on

china for selling goods at artificially low prices. in pakistan the better stock market is showing signs of recovery in the wake of political turmoil. it is up again today after its biggest intraday gain in months. peaceful resignation of the prime minister after a corruption probe. the government has endorsed his brother to be the new prime minister. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. tom: it has been his hallmark for over 20 years. charles gabriel is with capital alpha partners in washington and he writes brilliant and detailed notes on what's going on in washington. it is a must read of detail on policy. chris grisanti with grisanti capital management. right now.o policy

is diane black at a name a lot of our viewers and listeners don't know? tennessee, is she on the same page as the president on fiscal responsibility? >> she may be on the same page, but she's far ahead. the president is going to have to learn a few things about how the budget process works because republicans have decided a long they were going to have to use the budget process to try to move health care legislation and tax legislation through congress. she's going to be a very important player. already played a big role. she has moved a budget resolution through her committee. i go to her and kevin brady and the others because i believe these people believe in republican 101 which is suppose it's a school balance the budget responsibility. it fiscal balance

responsibility. i think the president is focusing on much bigger issues with health and tax reform. it's interesting that republicans weren't even able to pass a budget resolution in 2017 m&a made that -- and then that they made that curse into a blessing and passed a budget resolution for 2017 just to help move health reform. to try to use the budget process not once but twice in order to move health reform than tax reform really has been a bridge too much so to speak. chief oft to see a new staff come in. we will see if he can discipline this president and this white house staff. storyl be quite another to see if he can actually try to

begin dictating process and scheduled to the congress. that's very difficult to do. tom: i want to get back to mr. mulvaney who is a very responsible budget hawk. is there any debate about budget hawks in the next 60 days or have they just been pushed aside by trumpism? >> not really. it does try to reach balance within 10 years. it does allow for a revenue neutral base broadening tax reform within a 10 year window. one of the biggest debates was trying to satisfy the house freedom caucus which wanted as much as $400 billion of 10 year entitlement cuts. they ultimately settled for less than that. there's a great deal of that austerity driven move toward

fiscal responsibility that is bundled into the budget resolution and that's why it's very difficult to pass and will probably take until october to pass. francine: you think it will be passed by october which actually would be a fairly decent win. >> yes, if they get it done in october or november. just because it seems as though we have put aside health reform for at least a while and they want to pivot to tax reform they have three really big budget fiscal policy challenges they have to pivot to immediately and deal with by september. bye to fund the government september 30. they have to pass a budget resolution and that is supposed to set a 10 year baseline. it is supposed to try to reach balance. to setlso supposed

discretionary defense and nondefense spending levels and those are basically already locked in by the budget control act the former speaker boehner locked in with mr. obama years ago. the president has come in and he wants basically to advance a budget that is all guns and no butter and they cannot do that without breaking the budget control act camps and you can't do that without democrats. unfortunately they need a budget resolutions but they are not going to be able to pass one until they have a dustup with democrats, perhaps even a government shut down. some sort of murray ryan agreement on spending. they can lock in a full budget resolution or a shell budget resolution. they're going to start doing political price discovery in september. francine: is there any way the president needs to change

language or demeanor now that he has a new chief of staff to get congress on board? >> he certainly does. this is going to be one of the more interesting stories to watch to have a marine corps general who has had some exposure with the hill when he 13 or 14islative aide years ago. an honest broker and to be little to try to discipline the president and white house staff, to try to restrict access when the president is really demanded very open access for family. and to try to stay on message and work with the congress and be a reliable copartner with the congress it's going to be a very difficult challenge. very quickly whether the president can stay on message as they try to pivot quickly to tax reform.

francine: do you think the president wants to change? does the appointment of john kelly point to the fact that he understands he needs to change the way he's been communicating with congress? >> i think so. he clearly has somebody who has tremendous leadership quality. the president spent all of those years with celebrity apprentice. he knows talent. he knows how to fire people. we have been through six senior members of his staff. we now have somebody who can do a lot of that locking and tackling for him. onreally does need to rely to the kelly and submit advice of general kelly and perhaps particularly backing away from the use of social media in a way that really detracts from the message on a daily basis. tom: let's bring in chris grisanti.

talk about the budget resolution and funding the government. those are the ordinary household chores of congress and that's going to be a heavy lift. i want to know can they ever get for investorsail which is corporate tax relief. do you see a lowering of the corporate tax rate? absolutely. they will have to have a measure of personal tax reform. you can't lower the corporate rate without three quarters or so of small business and files of the regular form. i think you can't really deal with lowering corporate rates without also having something for the middle class. week on the same day that we were having the news on friday on health reforms failure sixhe senate you have big

in the congress, the tax committee chairman, the house and senate leaders. mr. mnuchin and gary cohn basically came out with a statement of principles on tax reform and they are talking about trying to lower corporate rates as much as they can. they gave away the big base broadening or. we are about essentially going and to the future essentially we are going to start september, the president is going to need to have all of the steam he can. they will have to take on a number of constituencies as they tried to broaden the base. will be ablek they to get rates much below 25%. to 25%ll be lucky to get and there will be some losers as part of the process and wall street won't like that.

tom: terrific briefing. some reality on how the sausage actually gets made. outnew edition coming thursday. this week's issue, samsung to get you to your apple world. apple coming out with earnings and all the rest as well. here's a good one off briefing on the cover of business week as well. i think alix steel is there. she is upgrading this morning. she is getting like the mother of all ipads to use on daybreak. coming up, more on apple. this is bloomberg. ♪

>> this is bloomberg surveillance. i'm taylor riggs. asan's softbank has as much $65 billion in financing lines up if it decides to buy charter communications. that's according to people familiar with the matter. by charter toay merge with the company's u.s. wireless provider sprint. the main hedge fund at green light capital trimmed its losses for the year last month. the fund rose 2.1% in july thanks to hire start prices. it down .2% for the year. europe is on a hot streak with hedge fund investors. money across europe attracted additional capital in june following a year-long stretch in which almost $16 billion was pulled out. faster economic growth and safe and political risk are helping restore confidence. that's your bloomberg business flash. apple will release

results later today and let's expect a somewhat cautious fourth-quarter outlook due to potential delays in the new iphone introduction. the iphone 8 is expected to be an especially important offering. it marks the 10th anniversary of the original iphones really very bloomberg'soined by global tech reporter. chris grisanti is still with us in new york. he's the man that can tell us when to upgrade or not. how exciting will be the new cycle of products? >> everything is still in a holding pattern to see what the new phone looks like and whether people like yourself are going to go out and spend to get a new one. they haven't really changed the design of the phone and a number of years and people have been holding onto them a bit longer. is a lot of anticipation around this one. francine: how different will it

be from previous versions? is prettym factors set in glass at this point. it's a rectangle and a touchscreen. what can change will be some of the components within. there will be new augmented reality elements that apple has hinted at. it will be thinner, better camera. the performance will be faster. things like that. want to take this on the product side and then go over to chris grisanti with the investment side. this is for adam and kris. the idea of we are going to die in 2000 -- things are terrible. we are going to die on apple. why is this time any different? from a product standpoint we have heard this song and dance

before. >> growth has been slowing down over the years. the company continues to be immensely profitable and to deliver. whether or not how many of these new phones can sell. it's not whether they can sell a lot of them. whether or not they can get out ahead of some of the expectations. the anticipation for this phone is huge. this is the 10th anniversary. there's been a lot of rumors about whether or not they are going to increase the price and have a premium type device and some other lower-priced models as well. this is a big moment for the company. there has been a stretch where there hasn't been much news from them that has grabbed a lot of headlines. tom: let's go to chris grisanti on the money.

i want to show you what the pros look at. . here's revenue. it's terrible. then you have the 260,000 hope and prayer. they go from 55, 56 gazillion to 70 gazillion. it is still a growth juggernaut. how do you sell this dog? was 12 times.and now it is 17. it is still also about the cheapest gold standard tech stock out there. i don't know who is buying a phone right now between now and the introduction of the iphone 8. we are all waiting. there is a difference. the seven was not that big of a difference from the six. you are seeing a flattening of revenue. this is basically an iphone

company sells about 65 percent of its revenue from the iphone. are looking for an iphone a that is radically different. the screen is going to go all the way to the edge. we think the market will be excited about that. the other thing is apple is also becoming a services company. besides the phone used on itunes. all of this other software and app revenue that is really starting to fall to the bottom line. that's going to be more exciting over the next two or three years. when will apple actually repatriate their taxes and how much of that will be a game changer? already up and tax reform. is there some compromise with the democrats for example to get them to bring it back at 10% tax rate or eight percent.

that's going to be a big deal not just for apple for pfizer. that's out there. a lower tax rate is out there. adam, thanks so much. right at tv now. you've got radio, you've got tv. you have your morning coffee, you are on your trading floor. come over here. bonus round for your 10:00 meeting. click on the story. it comes up and you can see all the long short of the reason apple is going to die. ♪

tom: all of the distractions. washington, the major distraction. maybe brexit. chris grisanti with grisanti capital management, one destruction across equities bonds. currencies commodities. that is a weak u.s. dollar.

showed this earlier. if i was to teach a course on moving average dynamics this is to die for. seen't think i have ever currency trend like dollars trending right now. absolutely textbook. what does a weak dollar mean for you? >> i think it's good. we've got multinationals like apple and pfizer that are just going to reap the benefits of this. they are saying it's not on purpose but clearly this helps the trade agenda of the trump administration. we are looking for this to continue into the fall. if you were to look for a canary in the coal mine what would that be? we talked about the financial crisis and whether we could have looked at it differently. what do you look for now to

indicate the first early signs of stress test? thee want to avoid fighting last war. we don't think it's going to be a financially led crisis with the banks. is the lateseeing stages of a business cycle. cyclical stocks like general motors having great earnings and the stock price doesn't go up. that means we are in the seventh or eighth inning of a business cycle, not the fourth or fifth. we will start looking at unemployment claims and things like that. those are what i would consider the canary. tom: how many stocks do you own? >> 18 stocks. tom: are people over diversified? >> that would be our marketing pitch. we own them for three to four years on average. what percentage of your portfolio is that? >> about 8%.

i saw an article in tampa bay -- fascinating this idea of diversification as mr. lynch called it. chris grisanti, thank you so much. today?it 22,000 coming up, but most interesting gentleman. he not only has an opinion but it is an informed opinion. can't say enough about his appearance. this is bloomberg. ♪ ♪

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bring some order to the white house. he removes communications director scaramucci. the euro closes with the biggest month and again. and former fed chair alan greenspan has a message for investors. bubble notriencing a in stocks but in the bond market. from new york city, good morning. welcome to bloomberg daybreak: europe i'm jonathan ferro alongside alix steel and we can welcome back david westin. theing you up to speed on market action. two hours and 30 minutes away from the cash futures are positive on the s&p 500. the euro removed some of those big gains from yesterday. still very close to 2017 highs. treasuries stable. coming up, personal income and personal spending for june. plus the pc inflation data report.