>> eyeing the hawks. it's super thursday at the bank of england where they decide on rates. we're live. >> earnings and admissions. . mfment w. reports hot on the heels of anreemt ade more than five million diesel cars. >> diesel will for sure pay a role over the next several years as a transition technology and that's an important one because we can see the goals toward co-2 emissions for 200 and beyond can't be ea cheed without diesel. shuffles the

cabinet. anna: welcome to "bloomberg day break europe." the frempling bank giving us better than expected numbers in he second quarter. they're setting a high bar for trading between the banks. we saw credits in their unit rising in the second quarter, this is france's second largest bank. the c.e.o. of the business has simplified the structure, he'd been reviewing some of the

assets. they own the consumer banking unit, they have part of the savings business mundi, better than expected numbers this number. manus: it's an extension to his contract but the big news from kaiser, they are i.p.o.ing the health care unit. it's something the market had been expecting. the c.e.o. of there, kaiser, moving to this conglomerate structure. moving from being an aircraft carrier to a nimble fleet of ships. the. p.o., first half of 2018. $2.25 billion, a slight miss on he estimate of $.33. third quarter sales come in at 21.4, a snip below the 1.8. this is something they were concerned about, low organ exgrowth going into 2018. it could be that the back log

slows up a little bit. >> let's start with the wrerman corporate reporting season. deutch telecom gives us the numbers. they have $400 million euros on their stake. remember shareholders, deutch telecom on the outside raiding their target to about $22.3 billion. the story here very much a u.s. story at the moment as well as what's going on in their home market. the united states very much a focus, t-mobile business. they've been wanting to tie up with sprint and sprint said they've had good talks with t-mobile u.s., but sprint is also talking to charter. back home at thierman market, the carrier wants to put fresh growth momentum in its market. the challenge is to have business estimates from the likes of telefon ex. manus: when it comes to the reformation of banks in italy, messier is delivering second

uarter net income. 945 million euros. the estimate was 547 million. we're talking balance sheet cleanup. 13 billion euros in capital being raised, they have a target of 14. billion. the net income is comfortable. 945 million, the number was 947 billion. loan loss provisions come in at 564 million that's down considerably from last year this time last year was 865 million. the overall revenue just a hair, 4.68 billion. they've sold the business, reduced the risk. they've raised 13 billion euros n capital.

>> back to the jer -- anna: merck giving us numbers. that's in line or maybe a shade below the 1.1 billion expected gi bianalysts. the e.p.s. number a shade below s well, 1.4 million injures as opposed to expected 1.56. the focus was whether they'd stick to their outlet whether sales in asia of the liquid crystals for flat tv's, how they were going to do how new dicines such as cancer treatment. is this going to be the same story at merck? that's their key drug in that particular space. watching for any updates on that. also fx effect because of the weak dollar. manus: we'll have a conversation

with one c.f.o. this is merck c.f.o., he joins the team at 7:30 a.m. anna and i have a busy 7:00 a.m., we'll tell you who is coming up. let's get numbers in. first half numbers, .27 billion. that could be big but when it comes to looking at solvency rashee, this is what's standing out for me. the sol venn injury rasheyow looks like it's just slipped below the line. you've got a big on the first half net. 201%. my apologies. it's a better number thope sovereignty rating. versus 197%. that's your ability to take klosses tissue losses on extraordinary events that happen maybe once every 200 years. property and casualty revenue rises. life and savings revenues fall 1%. overall first half revenue rises billion.

first half net profit beat the solvency ratio. the company set pretty strong targets. we'll ask the man himself about those targets. the c.e.o. joins anna and i for an exclusive conversation just after 7:00 a.m. do i have any breath let? do you have any breath left? anna: i don't know, let's see. lots of talk about in the 7:00 hour. let's put up the risk rate and show everybody where we were on the asia sector, and the cost pee. this is taking the edge off th asian trading day. stoc in asia down after being at 10-year highs. cost pee down by 1.7%. was down as much as 2.2% earlier. president moon decided to increase taxes on high earnings. we're at 11850. we saw a decent move iger in the euro. managed to hold on to most of those gain this is morning. it's the best performing fx to

date. >> euro rally enters a round of relentlessness. we've surveyed 100 firms at the start of the year. everybody thought the currency, they expected surnky -- currency to trade at 118. nobody expected that. eight of them are up there. estimates up to 120. just that little bit lower, you see some of the data come through. the drawdown wasn't as much as everybody expected. you see the -- they come back in and hedge on 2018 contracts. get in there they got in there and hedged. anna: one extra line on merck, the focus was on the outlook. they're cutting their full year net sales forecast to 15.3 billion to 15. billion. let's get the first look now. >> thank you, take a breath. in the u.s. donald trump may be on the verge of ramping up his threats against china on trade. according to a government official who spoke on condition

of anonymity, the squad mrgs is gearing up to investigate china over what it says is violations of intellectual property. if the talk turns to action there could be trouble for the global economy. white house chief of staff john kelly reportedly called attorney general jeff sessions to assure him his job is safe. two familiar -- two people familiar with the call, kelly told sessions that the white house was supportive of his work and wanted him to continue his job. brazil's embattled president has survived a massive corruption scandal with a victory in the lower half that allow hims to cling. they defeated the motion that would have put him on trial and forced him to step aside along with 263 against 227 votes. the -- this paves the way for him to ride out his term and at

least temporarily shift his attention to economic reform needed to fix brazil's public finances. says he know house to fix goldman sachs. weighty d to be overly to a client base, which we'd never abandon, but we're disproportionately involved in trading kind of clients, who trade a lot, hedge funds and others. the more corporate banks tend to have much more business with corporates than others. that's something we should fix. we shouldn't have let it get that disproportionate. but we did. we'll fix it. >> global news 4 hours a day, 120 d by more than analysts. that rally has come to a built

of a falter here in asia. we were holding yesterday at 2007 highs. you have the tech rally holding along with president moon's tax reforms. the nikkei is down by around a third of one percent. hong kong stocks dropping from june 2015 highs, signs of the stocks being overbroad. it's off by about .2%. when we look at stocks in detail, it's fallen significantly. watch out for moves in the london shares. this is the c.e.o., sounded a growth warning for the bank. a bank in australia also falling after its cash profit was amiss but it did see it maintained a dividend payout ratio of 60% to 80% of past earnings as a sustainable return on equity. this is the reason you're seeing such a big fall coming through, samsung off by 2.4%, taking its

yore tow date gains to 3 %, trailing apple which is 36%. manus: it is super thursday. while the bank of england is expected to hold their interest rate at a record low, economists think it would probably down groid its -- downgrade its forecast for 2017. ann namplet the m.p.c. surprised the market with the 5- vote in june. since then there's been personnel change. could we see something similar, though? >> the consensus, good morning, they're expecting a 6-2 vote in favor of keeping rates unchanged today with mccafferity and saunders voting for a rate hike again. tpwhack june it was forbes that was the third dissenter. she left the bang of england. her replacement, her views on policy specifically aren't known but it would be a little surprising for or the go against the consensus on her first

meeting. another surprise that happened since june was a bit of a hawkish term from the usual dove, andy halladay in a separate peach. r began stanley thinks he could be another dissent today. we could see 5-3. goldman sachs thinks we could see 5-3. nomura said the bank of england could surprise and vote for a rate hike. but the consensus is 6-. why would a rate hike today be such a surprise? we had growth in the second quarter coming in at .03%. inflation slowing to 2.6%. still above target but the thing is that wages are still failing to keep pace with inflation. real incomes are squeezed. we know the bank of england is focusing a lot of wage growth. manus: they are indeed. what cowl we get in terms of growth and inflation estimates today? will they show their hand? will they falter, i suppose is the question? >> again, the consensus is expecting here is no change to

the inflation forecast for this year and next, but the bank of england is forecasting above target inflation for this year an next. they could cut their growth forecast for this year and next. that's what we could see there. also another thing that bloomberg intelligence and some others are expecting is that the term funding scheme will not be extended beyond february, 2018. the point of that was to pass on low rates to consumers and businesses so the fact that that gets stopped in february, 2018 if it does that could have a tightening effect and also increase the argument for not raising rates. and of course in the meantime, the -- they are facing its own wage growth concerns because we've got protesters for a third day, they're going to be protesting outside the bank of england. security and maintenance staff at the b.o.e. who have a 1% pay rise. it is very early in the morning for most people. anna: it is. 6:14 here in london, let's remind ourselves.

a lot happened in the last 14 minutes. joining us here in the studio, also up early, head of rates at u.b.s. listening to all of that, putting in context, the vote pattern we've seen of late which caught the market off guard. in i amongst all of that a focus on where the u.k. economy go, how weak it gets. we've got charts i know you've been focused around. what do you see that illustrate yours concern? >> when we talk about which way the members are going to move, we need to look at these. both andrew hal diand mcgovern when they talked about their reservations about whether the time is right to raise rates, referred to anemic wages, the lack of wage inflation, signs that wages are not picking up even as unemployment falls. and also downside risk of confidence.

that was one of andy's reasons specifically for to the voting for a hike in june. when you look at consumer confidence now it's slowed to the same level it fell to in the immediate aftermath of the referendum. anna: the confidence numbers. >> exactly. if you're looking for confidence to pick up before you act on rates, then this is quite a clear deterrent that tells you you shouldn't be doing that at this point. manus: we've got a new member of the m.p.c. we've got the doves versus the hawks. she joins the spectrum. saunders and mccafferity are expected to stand pat and vote for a rate hike. how far away are we from a rate hike? nomura says it's possible but when do you think they could raise rates? we saw reports that they should raise rates before brexit takes place from neisr. >> i think one thing bank of england is keen to avoid is that

they won't raise rates because of brexit until 2019. i think that's why we'ved that hawkish shift. they're trying to keep the market more alert, borrowers aware that rate mace go up. when you look at the data, in reality, the case for a hike is moving further away, not closer. you've alluded to weak growth, significantly weaker growth we saw in the first half of this year compared to the bk's own expectations. inflation, yes, that's still a story. if you look at the drivers of inflation, there's good reasons to think we're not far from the peak now and market expectations anyway are very much under control. there isn't a case to be raising rates. anna: you think they can look at that peek in inflation. let's go back to 2003. this is c.p.i. in the blue and base rate in the white, outlining how high c.p.i. got and how much the bank of england

managed to look through that. slightly different reasons. there was a pound weakness story but also an oil price story in here. but there's a history of looking through these spikes in inflation. >> moat of -- most of that, this time as well, about the weakness of sterling. if you put a chart of real wages up there, when inflation has government gone up it's come from external factors, squeezed consumers and led to weaker growth. that's what we're seeing now as well. what's important for the bank they can't affect where inflation will be this month, next month, the month after. what they can affect is expectations about their own credibility and where it will be in the median term. if you look at market expectations for median term, they have come off. there's no need for the bank to move. it would be risky for them to d so when consumers are under such pressure. i don't think there's any prospect of them doing something today. >> they do nothing. the prospects for inflation are

steady enough. if we look at expectations for the marketplace, this puts together everybody's forecast a huge number of markets forecast, you're in there, john. won't embarrass you for looking at the u.b.s. number. i want to go for the bloomberg weighted average which is 1.31 by the end of the fourth quarter. getting up to 1.51 by the second quarter of next year that trajectory for, giving everything you've said is that a fair representation? >> i won't disown our own forecast, we're slightly lower than that, but the direction of travel is correct. yields have clearly been rising. they're likely to rise further. this is more a global story. other central banks we know are either in the process of addressing balance sheet reductions or getting close to doing that in the case of d.c.b. and therefore there's less central bank buying around. there's a stronger global economy. but if you look at this in the context of that global economy,

certainly in our view, it will rise less. than equivalent cross market yield. they'll outperform because the u.k. economy is demonstrably underperforming. that does all come back to brexit. manus: where is that bess, against treasury or against boons? >> we've seen a significant rise in treasury, we think e.c.b. has to slow down its pace of purchases and that the growth environment justifies that. it's been strong and we think it rries on being strong. anna: we'll talk more about that and how it affects the united states soon. manus: we'll bring you the bank of england rate decision. you've got minutes of the meeting and inflation rereport that will come at u.k. mid day. anna: half an hour later, governor karney gives his news conference, including inflation

reports. loomberg users can follow that at bloomberg live and here on bloomberg tv. what's next? manus: president trump signed a russian sanctions bill forced upon him by congress. with the addition of a statement he has reservations. anna: the administration may be on he verge of ramping up china. they're gearing up to investigate china for intellectual property violations. manus: what are the possible threats against chi sna >> the sust looking at having the u.s. trade representative office investigate, start a probe, into what the u.s. views could be intellectual property violations. of international trade law. by doing this, this obviously could antagonize china and there

really might be retaliation in terms of, especially if the u.s. goes outside world trade organization rules, china could do the same thing in materials of this retaliation. it could spark a trade war. there's concern among trade officials that, how far to go in this. but there is, as you said at the top, there is real thinking that they are going to look at doing this very soon. his is under a 1974 law. anna: so going outside the w.t.o. regime sets a precedent. that's what -- would affect how china responds. one of president trump's concerns about the russia sanctions bill. he's been forced into signing this amidst the investigations ongoing about the role of russia in the electoral campaign and during the votes. >> yes, he really was, his hand

was forced. congress had what we call a veto-proof majority. in both chambers they would have had enough votes to override a veto and given the investigations and everything else going on it's not the kind of thing that would have looked good to veto as one of your first vetoes. the president had to sign it. but in a statement along with the bill that he signed he said he had concerns particularly about retaliation as we've mentioned with china. that would be an issue here. this bill also has sanctioned against north korea and against iran. so there's some concerns there about allies and what they would think of these kind of sanctions. then there's the issue that the president brought up executive authority. that he should be the one making the decisions about sanctions rather than having his hand forced by congress. so he will have to enforce it. but there is latitude. we'll see what happens with that. but again, trade wars are always a corn with these kinds of things. it's a very delicate balance.

>> jody, thank you very much. jody schneider with the late thoennes u.s. administration. john raitt is still with anna and myself. aye written down here, trade wars, balance sheet reduction. there's only one fact, balance sheet. what preoccupies most. trade or balance sheet reduction? >> from a market sense, balance sheet reduction is the key. the fed has been a huge enflunes on what's going on in the treasury market ever since it began 10 years ago. as it starts to reverse that process it will be a beg influence as well. the speed at which it moves is going to have a bigger influence at least in the short-term on u.s. treasury yields and other issues. anna: and the july meeting, in terms of sequences and what we see when from the fed, what's your latest thinking? >> we thought initially they would continue edging rates

higher before they started balance sheet reduction but the july meeting made it here they're focusing on that process of tiptoing away from full bore q.e. that's not what we anticipate first in september. we think about rate hike is probable this year. manus: one thing i saw is the market is paying more for treasury bills that expire after the 19th of october than before. have ave this division, you begun to ruminate about that? >> that's a perennial issue, the debt ceiling, seems to come around with regularity. every time so far it's been swerved at the last minute. and what -- basically what we see is as you get closer to any of the debt which is potentially going to be defalled on, at least in technical term, as the debt ceiling debate gets ever closer, begins to trade more

riskily, essentially. that's what we're starting to see. the longer we go unresolved, the morethings will get caught up inthat. but the market assumes it will be successfully negotiated as it has been in the past. anna: some weem were watching for the treasure and whether they'd make comment about the long bonds. they've been quiet. 50-year bonds, treasuries, allowing the u.s. government to lock in low interest rates, does it make sense to you conceptually? >> does when you look at yield levels. they have been notable by their -- by the lack of willingness they've had to go for down the yield curve compared to other sovereign borrowers. you do have to tread carefully. you have to know your demand conditions and if you try and issue very long bonds when demand isn't there you have a problem. manus: maybe me knew chen has a strong lock on the mark anna: up

next, the diesel dilemma. the plan to curb emissions. will the plan work? and we see through b.m. wmple's result, next. that the bloomberg. ♪. who knew that phones would start doing everything?

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2:30 p.m. in the afterno in tokyo. that is a shot of the emperor's palace. a little bit of dollar strength coming back into the market. will it last is the question when we see a reshuffle from the administration. waiting for some numbers from ebitda.g with a is a soft fix rather than hard fix. it will cost half a billion euros. a not great

forecast early on, they told us they would increase their revenue profit forecast. still waiting for these numbers to come through from bmw. we will keep an eye on that. bmw, volkswagen, and daimler have agreed to upgrade 5 million new or diesel cars and offer trade-in rebates on older models in a it to salvage diesel technology. cost half all billion euros, agreed to edit an emergency summit. matt miller spoke to the bmw ceo about the fuels future. diesel will for sure play a role over the next years as a transition technology and that is an important one. we can see the goals toward co2 emissions cannot be achieved

without diesel and clean diesel. the euro six diesel has all the requirements to make a positive contribution to our environment. a significant emissions cutting impact, that is why diesel will play an important role in the coming years. for more on the sector, joining us more onset. good morning to you. we will talk about the sector. ebit, 9.3ond quarter million. 9.1.arket had penciled in that is just below the numbers that we had expected. 25.8 billion, the market penciled in 25.85 mother earnings, gross earnings at 2.93 ahead of the overall and the concern is how strong the auto

industry can be. second quarter bmw sales slumping in the u.s., u.k., germany and squeezing the auto margin. we will get to that in just a moment. the stocks have been squashed this year. daimler down and vw down 1.3%. it is a red-hot headline. in terms of the auto industry, 8% to 10%.ween that is the guidance and it is the guidance in terms of the operating profit and they are on track for 100,000 electrified vehicles. anna: thank you for waiting there. let's look at what we learned yesterday, the numbers better than estimates. their bute that for what did we learn from the diesel summit? michael: apart from added

incentives on scrapping or trading in older diesels, what was announced yesterday was preannounced a few weeks ago that they will recall euro five and euros six diesels for a software fix which will hopefully reduce the nitrogen 30%. by 25% to manus: do you think that what you saw and what you heard yesterday, was it theater for the politicians to -- and industry to appease, do you think the consumer will be happier? they are doing a software fix. michael: in terms of reassuring the consumer have not gone far enough in this is taking into account that sales have fallen significantly over the past couple of months, most pronounced in germany and the u.k. for diesels. anna: yen to be a said they are on track for toy 5000 electric vehicles, this story any momentum. in the meantime they are

clinging to the diesel sales, they need to bridge that gap, is that the reason? guests: at the moment consumers are switching to lower margin gasoline cars and making electric vehicles and it is important for them in terms of profitability. manus: there were things agreed yesterday, software fix rather than a hardware fix and 5 million cars and the agreed that -- to build infrastructure. this is a realization they will have to step up to the plate in the transition, is net? onst: that is reliant subsidies but we need a massive investment in infrastructure. you look around london coming it will be hard to find a recharging point and that has not hanged not only here but throughout europe. you, michael dean

from bloomberg intelligence. thanks for your thoughts this morning. that talk about europe, john wraith sitting patiently through that discussion. let's talk about what we see comesh -- from the fed it to the ecb, how dovish can they be is the question as they start to taper? john: we think the alternative meeting is in september for hard decision on potential tapering but we think they will start to andce the pace of sovereign other qe purchases from january of next year partly because they are going to run out of room if they keep going at this pace ad infinitum and partly because the conditions in the eurozone economy merit a bit of the cooling of the pace. the -- aboutbout running out. you have a concern around the

program or buying process. what does that do to you, we have this massive run-up in yield, last time you are here we chatted about it. how much impact will that have on german yields in the periphery? depends on how much they slow the pace of purchases, they go from $60 billion a month to $40 billion a month in 2018 and down to know new net her juices after six or nine months. if they do that there is room for them to continue going the way they have done and that is what the market is reflecting as the most likely outcome. if they need or decide to go at a faster pace, then they start to run out of room on german bonds with regards to the psp limits the have been let -- it's set, the 33issuance limits and the more they go on a hard and fast pace the more they will have to do divert purchases toward france and italy. manus: in terms of the shape of

the curve, this is japan and germany. does the german curve continue to- two -- stephen steepen? think those are -- and those short rates can come down a little bit whereas as we were discussing earlier as they start to set back from maximum pace of purchases and longer bonds, as we have seen, some of those moves in long yields will continue so we think that for now that is the dynamic that is likely to persist. anna: where does this leave the periphery, how do you see the picture changing? john: by and large the growth story in the eurozone has been reasonably widely spread. there are some issues around the

outlook for italy because of the political situation. generally speaking we are up eight about growth for some of those larger periphery economies as well as the eurozone as a whole but much depends on how the ecb extricate itself. the ecb not only has to avoid that for general purposes but as of the risk to the periphery. manus: can they deliver the smooth taper which is the title of your note. you do not get off the set without talking about the euro. the realms entering of relentless. this is the estimate in the forecast, the euro-dollar forecast and this is the pot -- the spot price. this is when it becomes an issue, the speed and velocity of the euro versus the actual movers. the analysts were not thinking we could get here by half of the year. john: what is going on here when

you look at these forecast is market to market, the euro has gone up so much that people have to play catch-up to a degree. we have moved our were cast of 116 for year-end, lower than where we are now. was 130.orecast so we had that mark to market process. where it has got to now, if you look at interest rate differential, the expectations are around with the central banks will do, one of the key drivers of currency. this rally has overextended itself. that is not to say we have seen an overshoot into the [inaudible] 125 is where you're heading but the pace has been going up is not merited. much,thank you very staying with us here on daybreak. if you are a customer you can watch the show using the tv function, like regular tv but lots of extras, you get the charts and functions and the scroll up the side of the screen and you can click the button to

ask against a question. japan's promised her reshuffles his cabinet. the latest live from tokyo. this is the prime minister on the move to change the direction of his cabinet. this is bloomberg. ♪

anna: welcome back. 644 in a.m. in new york it is 1:44 a.m. s&p futures look a little bit weaker for the start of the trading day. the asian equity session down by .6 of 1% on the msci pacific them a lot has to do with the kospi and samsung. let's get bloomberg business flash. here's juliette saly. juliette: credit agricole has become the latest french bank to while other prowess

firms stumbled. revenue in its capital markets unit rose 10% in the second quarter following a performance from b.n.p. paribas and natixis. square -- in an interview the ceo said rather than competing with banks his company is focused on offering traditional banking services to people who might not have easy access to them. >> we realized recently that we are not competing with financial institutions and banks and traditional lenders. in our average loan -- our average loan is $6,000. we are competing with people going to friends and family and asking for a loan and that is a massive market.

tesla jumped an extended trade is the ceo said he never felt better about the company's prospects despite burning through $1.6 billion in .ash and boosting battery output. investors focused instead on , hundreds ofd thousands of installations of solar roofs and trucks to line -- adto the lineup. clicks i am confident we will be able to reach production rate of 10,000 vehicles per week toward the end of next year. track to we believe on achieve a 5000 unit week by the end of this year. qatar airways has dropped a plan to invest in american airlines following a chilly reception from the u.s. carrier.

buying it no longer meets their objectives, they said. the mostcan ceo called -- the purchase puzzling at best and concerning at worst. comes qatar -- the moves as the country focuses on a boycott. quite an unprecedented move, isn't it? yousef: yeah, it is unprecedented, some of these major policies are very closely aligned to the fact you have this kind of departure could mean that they are in for the long haul. who does this apply to? a applies to children of qatari women married to foreign men, special talents that the state deems necessary, and those who have extended notable services to the nation, those are the

three categories and what comes with it? a lot of perks. the same kind of access to educational facilities, health care, and a portly it gives the opportunity to own property and to run commercial activities without a local partner. in terms of what this means, some of the risk metrics, i want to show you what is enin with the qatari 12 months forward. at the beginning of the crisis, -- moved ind lockstep. over the last couple of weeks, we have seen a bit of a spike in the qatari forwards. anxiety a bit of risk coming back into this market. fascinating, the thing to watch is whether the authorities are going to move quickly to implement this new law and show whether they are serious about this, what are they -- they are

trying to gain international support against the saudi lit lock. anna: thank you. on thatle east anchor story. unprecedented in the gulf and cooperating countries. we have seen the interesting politics unfolding in japan. shinzo abe is reshuffling his ministers after a slump in popularity and humiliating local election defeat. isabelet the latest from reynolds. what are they hoping to achieve from the reshuffle? isabel: the reshuffle which has just and announced, the list of ministers has been read out by the chief cabinet secretary. it has to be a delicate balance between enough novelty to keep voter interest and to provide a bit of a bolster of the polls but also not bringing in too many experienced little have skeletons in the closet or who might be prone to making big mistakes. shinzo abe's clarity had fallen

to the lowest level in the time he has been in office since 2012. he is anxious to repeat any of those -- not anxious to rupee any of thosemistakeshat happened recently. he has kept some of his closest aides, the financeminister staying in his job and his chief cabinet secretary. we have also seen that his foreign minister is out of the cabinet and has gone into a role in the party which places him in a good position to stand full leadership in the future. manus: this is a concern that shinzo abe has made a couple of stumbles and bad moves but what ,appens if he fails to restore do you think the moves you're saying are far-reaching enough to affect that reestablishment of support? is, thei think it analyst i have spoken to think they are skeptical about whether

this will provide much of a bolster in the polls. people start to look to head from now and we will see up party presidential election and we could see a number of rivals emerging. a monk them the foreign -- former foreign minister. cast doubt over the japanese economy. shinzo abe has had some success with his economic policies, he does have very low unemployment, but he has failed to reach his inflation targets. this could signal change in direction for japan's government in terms of economic policy. anna: thank you very much, isabel reynolds joining us from tokyo. john wraith is still with us. we will see how the reshuffle but one of the key tenets enomics, the --

the reform is what his opponents point out is missing. abe: it matters how mr. fares as he goes forward. we were talking about growth being strong, about the on implement rate being low, we are expecting that as wages pickup to come through on inflation. the economy is in a good place and politics is in a difficult lace. anna: we could get to inflation targets. or is that too much to wish for? john: we are heading slowly in that direction so there is a lot to a positive about in terms of and maybe this reshuffle will help that. manus: this is the balance sheet, everyone is talking about this, everything is moving, the bruins are moving -- bunds are moving. there is still a huge amount of,

the balance sheet is rising in japan. and do you think we hit a pause button on this hawkish rhetoric? the: to a degree that central banks are determined to try and get these balance sheet expansions to plateau and start to move back to more normal settings in due course. they have to do so incredibly carefully. if they are too aggressive and what they do, they are going to store up the next problem. manus: is the inflation targeting, far be it from me to question inflation targeting, but ime things where many people are saying that is a policy error in itself, that is a redundant target to have. john: you cannot just take -- change targets arbitrarily for potentially the wrong reasons. if you look at wage inflation in the u.s. and the u.k., for

example, low unemployment but wages and not taking up. some of those dynamics are changing. we will put that down to changes in collective bargaining, technology, demographics and areas like this. if it is concluded that there is a permanent structural change, in the relationship between and implement an wages, there may be a consequent need to revisit inflation targets. these things cannot be done in a hurry. is youre u.k. specialty. we started talking about what the bank of england is expected to do and talking about inflation and getting that under control. back to that aim at the boe and what we will hear today, what is your sense of why the hawks have voted the way they have given the concerns about how the u.k. economy will withstand exit? aboutwe were suspicious coordinated shifting with the rhetoric we were getting from the ecb and the fed is well. it does not seem to fit the data and if you look, kristin forbes

who has left the mpc had a set of long consistent views as to why the removal was justified. if you look at michael saunders who started voting for a hike in june and we assume will again today, it is less clear why he has done that. he made a speech in april where he made himself, it was apparent he was one of the more hawkish members and he justified that by saying he thought growth this year would be above the bank of england's expectations. expecting 2% for gdp in 2017, they're probably going to say they have excited 1.6. growth has been hard for what they have anticipated which is significantly below. this view that growth is going to overshoot what is an old and much higher forecast seems tenuous. manus: he could shift the other way but that might be showing a little bit of shakiness. let's talk about the brexit from e.m., we have a cracking piece

and they are looking at the metrics and saying brexit premeeting -- premium is dissipating. they looked at stocks and implied volatility. ,hey are back at 2015 levels credit default swaps. the euro is more volatile. there is the rise there but is there still a brexit premium in gilts and sterling in the markets or is it saying? john: it is changing in nature. this is a slowed emotion -- slow-motion showdown. that is what we see in the first half of this year, every recent to think it continues. this is a story about a chronic relative weakness in the u.k.. it is not the catastrophic collapse that some feared after the referendum immediately after. brexit is a significant headwind, it is a persistent one n acute one.a

anna: thank you for your time. ands: a host of earnings the below ceo joins us for the first interview of the day. this is bloomberg. ♪ ♪

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manus: eyeing the hawks. it is super thursday. we are live to threadneedle street. anna: bmw reports profit that beat estimates hot on the heels of an agreement by germany's biggest automakers to upgrade more than 5 million diesel cars. >> diesel will for sure play a role over the next years as a transition technology and that is an important one because we can see that the goals toward co2 emissions were 2020 and beyond cannot be achieved without diesel. manus: fighting for survival. shinzo abe reshuffles the cabinet.

brazil's tomorrow escaped the corruption trial and clings to power. welcome to daybreak europe, our flagship morning show. i am manus cranny. and edwards. let's get to the mining sector because this is going to be topical as we go through this half-hour, randgold saying it's on post is positive -- its outlook is positive. fever -- aviva. we have the first heads -- half net income. the first half combined operating ratio of 94 point 5%.

first-half operating profit 1.4 7 billion pounds. , 1.4 7rating profit billion pounds for them. interim dividend at fourpence. mark wilson joins us, the aviva ceo. great to see you this morning. welcome back to the show. talk us through the first half in terms of the numbers. mark: good morning, it has been a pretty good six months. what we have seen is operating profit that is up 11%. eps is up 50%. that is driven by topline results coming down and dropping down. it is -- the product is brought based. lots -- life insurance, that is up 27%, that is helpful. german insurance is up 17%. france and poland and turkey is

up. if you look at asia they are up, china factors doubled in sales and we have plenty of cash flow, plenty of capital but also put the dividend up 13%. hopefully investors will like it. anna: a lot of positives to point out. looking at what you have done for the first half of this year, you have done a lot of transformation in the first half, it has been that transformation and getting out the assets you do not want. give us the big picture thinking here, is all of that does -- that done, do you leave the transmission story alone in the second half of the year? the: we certainly are in fixed phase of the business and we have moved to transforming the business models. we want to invent -- reinvent the insurance market. we have sold off a lot of our lower quality franchises and i am happy with what we have left.

what are we going to do? we are going to -- we have a fair chunk of capital and cash sitting there. we will have some old on acquisitions and pay down debt and shareholders have seen this year we will also look at giving more back to shareholders and we have done all of them the last 12 months. we are developing a bit of a rhythm here and i wanted it to be consistent. to keep on delivering and we will do just fine. focus in on the two things you want to do, one is dividends and one is debt. you said i will switch out and paydown more expensive debt that between is it a balance the debt and the dividend, where is the priority? mark: it is a good question and the answer is it all depends. it is a matter of economics. we believe we have enough access capital -- excess capital. this is somewhere in the range of 150% or 180% of our solvency

targets. we can do a little bit of everything. we will pay down some expenses -- expensive debt and give some back to shareholders. the dividend comes out of the operating earnings growth, that is why i am putting the dividend up because there has been a pretty strong first half. anna: you have been outspoken about the ogden rate, this is certainount rate for injury claims, you have spoken about the way that is done. do think the u.k. government needs to review this and over what time scale, what are your expectations? mark: i have been outspoken because it has been a random piece of policymaking and the other person who gets hurt is the consumer. young drivers could pay 1000 pounds more for insurance 72 500 and older drivers

-- 70 two 500 pounds. breath.ith bated manus: for that to be delivered. we could be waiting for some time in terms of delivery from this government. our last guest called the economy of slow-motion slow down. a cataclysmic moment. you have written an op-ed on brexit, how would you describe where we are in the brexit negotiations if you look at the political flow and how that is impacting your business if at all? isk: brexit does not impact too much and we are very much a self-help story and people tend to gravitate to some of the good brands. we do not think is going to go into a session but it will be subdued for some time. as for how long depends on what

the government does, the government is starting to engage thelly, they're asking right questions. whether they have the right answers depends on what policy they come up with and we have not seen any policy. i believe we do need a transition and we need that transition for two years. anna: i was going to ask you about the transition, will two years the long enough, is a brexit does not impact the business but from a part -- a market perspective you would be avoidingd in not -- in too much volatility. what does the market need to look like? dark: they're in lies the big question. i think two years, anything shorter is not meaningful enough. anything longer and people will not make the chain -- choices they need to make. the transition will be different in different sectors and government should be looking

sector by sector and saying what that means. they need to put a stake in the ground and say this is their policy, then we can get down to something concrete. it would have a long term referendum, so far nothing has happened. the voice of business needs today front and center. that is business that can help the economy and the economy that can help consumers. i think it is that simple. manus: thank you for joining us this morning. a good set of numbers and a message to the government. the ceo at aviva. anna: europe's second-largest insurer has reported first-half profit up 2% helped by higher earnings and -- in its life and health insurance unit. they are preparing an ipo. joining us now for an exclusive interview, thomas bubel.

numbers for the first half beating estimates. what went right for you in the first half of this year? thomas: we saw a very strong performance, 5% underlying earnings-per-share growth and this is distributed across all segments, you see a strong andating movement on life dnc and asset management. on top of this we have managed to grow in the second -- a sectors where we want to grow which is the health business and the commercialized pmp business and all this based on a very strong balance sheet with a of 200%.ratio good results, we are fully on track with our ambition 2020 and confident looking forward. ceo indeed.ou are you set some pretty tough targets. you're saying you cannot hit that return on equity of 12% 14% along with the targets for your asian expansion. confident in terms of a glad --

a grab for plans in asia? thomas: asia is a he growth area for us, we are very well positioned in asia in almost all the main countries with very strong progress and our focus is to grow with these partners and take advantage of this demographic growth and the new middle class that is coming up in asia. axa isou have said that listing a minority stake in u.s. business, where does that take you medium term in the u.s., do you plan to exit the u.s. business entirely, do you plan to hold onto a minority stake, what is your thinking? thomas: it is early days. we have announced this intention to list a minority stake for two reasons, we want to take more

than edge of the local growth condition and secondly, we want to have more capital to redeploy into the segments where we want to grow. there in the moment in quiet time and as it is a cannot talk a lot about it. and the s-1 procedure. however, if you look at the numbers that we have published at half year, the u.s. is a very strong contributor, new businesses up by 13%. we have to see going forward how the sector will play out but i am confident we have a very good operation there, it is very much focused on a growing market and i am happy with what i have seen. you're going to have procedure and that ipo, you have this process of changing access -- changing axa. ?here is the priority for you o

heavy hand inhe japan. where is the priority in terms of spending money, would it be china? thomas: we do not look at it from a geographic perspective, businesst it from a perspective. in her -- health and commercial pnc. these lines of business have an inherent customer content that is that's contact that is frequent and we need to get closer to her and customer. if you look geographically, we have today, the critical global size, we're looking across the globe in those two segments to really grow but to grow with opportunistic approaches and not with large acquisitions. anna: when you look at things -- and bank might

have to sell, is there anything they could put up for sale that you would be interested in? thomas: i do not know yet. i have not seen the file yet. i'm looking at great interest and great care at every file that passes on my desk but also with the filter is it a business in the health arena, is it in the commercial line pmp and where i get closer to the end customer. inus: you're not interested working assets, generating income like the waldorf the story a, no? thomas: no. we are strong globally, we need to shift our portfolio towards a more client focused approach and therefore, those two areas are my focus. anna: you're speaking to us from paris. when you look at the change in

the political landscape in france, how do you view the early months that macron has delivered to france and what do you want him to prioritize in the months ahead? thomas: first of all i am very happy that the french president is called emmanuel macron. it has really given a very positive spin to france. he is very dedicated to make the necessary changes. i believe there is two areas that need to be a focus in the short-term, the one is the question around how to reduce the deficit and the second one is my how to really make a move on the labor market reform, these discussions are ongoing and i am very confident that he and his team are very dedicated to make the necessary changes thebring france back into global arena of competitiveness where it has to be. if you look at most of the businesses of the large

enterprise in france, the axa business, they are doing quite well. we are well-equipped for these changes and we want to benefit from these changes even more. much, thenk you ray sea -- very much. bringing france back into its global position. anna: a lot of hope there, a lot of expectation. next, golden games for mining company randgold. we will speak to the company ceo after the company posted second-quarter results. that is coming up. this is bloomberg. ♪

manus: it has gone 7:18 a.m. in the city of london, 18 a.m. in berlin. these markets are taking a breath. -- the rise of the euro

that can be an issue. this can a business flash with juliette saly. juliette: credit agricole has become the latest french bank to [inaudible] while security firms stumbled. revenue in its capital markets unit rose 10% in the second quarter. that followed art -- out performers that set a high bar for trading amid poor results from wall street and european investment banks. lehman plans to's been off its health care division through an initial public offering in the next half of next year. the company said it will give the unit the resources it needs to make acquisitions. the ceo takes a further step in dismantling the engineering conglomerate which reported quarterly profit had missed analyst estimates. squares lending division is booming as it [inaudible] milliontal of 300

dollars. the ceo told bloomberg that rather than competing with banks his company is focused on offering traditional banking services to more merchants and consumers you might not -- who might not have easy access to them. >> we realized recently that we are not competing with financial institutions and banks and traditional lenders. $6,000rage loan size is so we are competing with people going to their friends and family and asking for a loan. that is a massive market. hasette: randgold resources been second-quarter profit at 102 point $8 million and says the company is trending toward the top end of its 2017 productive and guidance range. that is your bloomberg business flash. and and manus. anna: thank you. let's bring in the ceo of --dgold, you have to note given us the topline story.

onnks for joining us here set in london, always great to see you. you are guiding toward the top end of the guidance range, where is that production coming from, what is new? mark: we had a very good first half, we forecast a good first half and i think you know when we -- last quarter we came out with a solid quarter and we are building on that. manus: you promised the market three big projects over the next five years, while else -- what else is in the pipeline? mark: the way to make money is we have one innd in theeline which is final feasibility study, we expect to finish it next year, around the middle of next year. more important, we have some very exciting project in the

ivory coast which we talked about today. we call it [indiscernible] 50 kilometers of mineralization, eight kilometers we highlighted as perspective, we have the first filling holes mine on the ivory coast, a big oak target, we have a million answers there. our criteria is 3 million answers and a 20% [indiscernible] $1000 long-term gold price. we can deliver those three in five years, it is better than any m&a. said this before, that is the story for randgold. the $1000 gold you were counting on, we are at 1262 where we trade on spot gold. when you look at the rest of the year into next and you evaluate,

what are you going to do with all these new prospects, what making, doese you that depend on a lot of factors? used 1000.ve always there are so many variables when you develop a gold mine particularly in africa. itgives a chunky margin and ensures that you can manage your business through the cycles. anna: we are talking about unwinding the balance sheet by isious central banks, there prospect for it to go higher on that kind of financial dislocation. mark: in the medium-term to long-term, the supply of gold is going to tighten because we as gold miners have not really spend money on replacing the gold that we mine and that is what we believe we are well positioned in the market to continue to create value for our various stakeholders.

manus: i do not know what you do every quarter and you leave here, we encourage you to grab hold of the head of mines. costsve managed to take down. down 8% the half-year, and 13%. the question is, is this is good as it gets in cost reduction? mark: pretty much. as fuel goes down further it is a big driver in our costs, it is all about efficiencies, and we have been growing our minds -- mines. as you grow production, a fixed base cost and you increase production you bring the costs down. one -- our minds are higher grade than most mines in the world. this we talk about

periodically, the amount of cash you are carrying and the prospect around dividends. mark: we have $572 million in the bank, no debt, we paid $94 2016 thisvidend for quarter. we paid cash tax. we are generating significant cash flow which you would expect as we are profitable and we have said we want to have half $1 billion of cash to be able to support our growth programs and the rest will pay out to dividends. debt in a gold company is not a good thing. you really want your shareholders to be fully exposed to the gold price. you want the upside. manus: just a quick one on regulation and practice and tax. resolving, howo

close are you? mark: there are procedures to do with disagreements in our commitment -- investment convention. exercised those legal processes yet because we are engaged with the discussion of the ministry and the tax administration. anna: thank you for your time. good to see you. the ceo of randgold resources. go to for the start of the trading day. some of the stocks where watching, siemens. manus: they have delivered their ipo-ing theirare business. anna: credit agricole carrying on the tradition of strong trading. we have seen the two telecom taking a hit on their bt spake

-- a stake. exchangen stock announcing numbers saying they want to maintain london's possession -- decision as a global financial hub. leave you with a view. this is bloomberg. ♪

♪ guy: good morning welcome. this is the european open. opening and 30 minutes time. we are going to be acting you down to that open. matt miller and die. i am guy johnson in london, matt is in berlin. what are we watching, the boe. widely expected to hold over brexit uncertainty. america is betting on a high. we speak to the banks chief economist. president trump signs a russian sanctions bill.