francine: a year after the last rate cut, bank of england hawks site a height -- sight a hike. reaches anuity index all-time high. a bumper earnings season. the ceo says he is cautiously optimistic. this is bloomberg. good morning, everyone. this is bloomberg "surveillance," and i am francine lacqua. later on, we will be joined by

the ceo after they came out with earnings yesterday. we continue the conversation on what we will see with the global economy. this is your data check. it is all about the bank of england, but we are getting your area pmi. that is pretty much in change. we were expecting 55.4. werel stocks overall trading from their recent unprecedented highs. we are seeing declines in asia. we are seeing a jump in crude weighing on european shares.

+++ traders await labor market data tomorrow. look at yen because of the cabinet reshuffle. let us get straight to the bloomberg first word news. here is sebastian salek. sebastian: the trump administration declared a full-fledged economic war on his country. that is after the u.s. president signed a russia sanctions bill congress forced on him. trump expressed reservations, saying it encroaches on presidential authority and may hurt his ability to work with our guy allies. before an had left the cabinet after shinzo abe reshuffle his talk team. allegations of cronyism have undermined public trust in the japanese leader while a series of scandals have found criticism on his -- voters no longer see him as the most appropriate to lead the government. brazil's president survived a massive corruption scandal with a victory in the lower house. michelle to matters allies defeated it -- michel temer's allies defeated it. it allows him to shift his attention to economic reforms. tesla shares jumped in extended trade as elon musk said he had never felt better about the company's prospects.

he justified burning through cash during the second quarter by spending on capacity for his cheapest model yet and boosting battery output. investors focused instead on deliveries. installations for solar roof and more. pay for bosses. boards reacted to political inssure to reign compensation. they earned an average of four point 5 million pounds in 2016, down from 5.4 million pounds the previous year. more than their employees. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek. this is bloomberg. francine: thank you so much. this time last year, in the wake

of the brexit vote, the bank of england cut the interest rate by 25 basis points. the of a rate hike is in air, but hawks are still expected to be in the minority when the latest decision is really set midday u.k. time. economists think policymakers will downgraded the forecast. bloomberg's nejra cehic joins us now from the boe. 5-3 vote in june. could we see that again today? morning, francine. first of all, what a difference of your makes because as you say, this time last year, we got that rate cut followed brexit, and this time, a year on, we are talking more about whether there could be a rate increase. the consensus view is that it vote in favor of keeping rates unchanged. we did get that surprise 5-3 vote in june. nocourse, kristin forbes

longer at the bank of england. her replacement is unlikely to go against the consensus on her first time voting. some people are questioning andyher and holiday -- could become hawkish again at this meeting. you have morgan stanley saying vote.ld get that 5-3 goldman sachs saying the same. it could be 5-3. nomura saying the bank of england could surprise today and hike rates. the consensus is for it to be 6-2, rates unchanged. why? we had that slowdown in inflation for june to 2.6%, still above target, but a slowdown nonetheless. then there is the growth coming in at a meager 0.3% and crucially, wages still underperforming inflation. much, nejraanks so cehic, at the bank of england

throughout the day. we will bring you that bank of england rate decision, the minutes of the meeting, and inflation report at midday u.k. time. and we will have governor mark carney's conference. bloomberg users can follow all of that on top live . our guests. in thank you both for joining us. you were governor right now, how would you look at it? there was a decision from the governor to sound a lot more hawkish in portugal. is it because he has raised the hike or just because he wants to market to believe it? simon: yeah, it is clearly going to be an interesting meeting. what the bank is worried about is that the natural rate of unemployment is estimated to be 4.5%. they have been revising this down. they revised it in the last

inflation report. if they continue to think the labor market will be strong, at some point, weight pressures may deliver. e pressures may deliver. on the downside, you have brexit risk, growth slowing, consumer income squeeze. if i was them, i would be playing it very cautiously. i think that is the way -- why the consensus is as it is. the vote will be very interesting. francine: but why? everyone, almost everyone in the studio says i would be cautious. why did the governor very clearly put the market on track for thinking that they could hike this year? simon: what happened was the labor market's strength has sort of worse that trade-off between letting employment go above its potential and letting inflation overshoot. in my opinion, all of the inflation overshoot we are seeing is due to sterling. there are limits to what the bank can or should do about that.

that is why everyone is saying to be cautious. it does not seem like the right time to make the first rate rise in a decade. francine: does it feel like the right time to get into the u.k. market? max: you probably from a longer-term perspective should stay away until you have more clarity. boe perspective, and what it means for asset markets, i am completely with simon here. today is probably not the right time yet. maybe in november, the crucial point is that they are going to basically reverse the stuff. the crucial point is to actually decide and look through it. even if they are raising this year at the start of next year, is that really on the versatile of last year's step or is that the beginning of a rate hike cycle? that is the crucial point for asset markets. be it for gilts, that is the crucial point.

that one step. francine: let us say they were to hike by 25 basis points today, because let me bring you to my bloomberg chart so you can see the boe's history of looking at inflation. governor says we should look through lower inflation because at some point, de into wage growth. if they were to hike 25 basis points today, what would it actually due to the economy? simon: 25 basis points on its own, in a modeling sense, not a huge amount. it only removes the emergency measures introduced a year ago. this will be the first time in a decade. the economy is fragile because there is this income squeeze going on. you might argue quite a lot of people are on fixed rate mortgages right now. it will not hit them immediately. a move now is going to be a massive deal and much more than 25 basis points in the middle of the cycle. theother thing is, is

market really going to believe even if they try and message it as one and done that the curve will steepen and the currency will depreciate in the near-term? it will be a massive moves are you should they really care -- it will be a massive move. francine: should they really care about what the market is about?ed that can be a good thing because you do not see surprises, but sometimes, if you like they are dictated to you by the market. simon: of course they should, because the way the gilt market currency reacts dictates financial conditions. the top-level answer is of course, yes. behind that, there is financial stability concerns. higher valuation. they do have to take consideration of that. these over the rest of the year and surely, those outweigh the more slowburn financials stability concerns right now.

max: i am more on the first argument there. look at financing conditions, that is more of a global picture. when we look at financing conditions in this year, you look at the two rate hikes in the u.s.. there you see financing conditions loosen. when you look at the ecb's comp is it financial stress -- stresstion financial indicators, that is still on the euro. a central banks make a mistake and there is a massive reaction, there could be an adverse reaction. they should be caring at the moment. francine: thank you. both stay with us. they would "surveillance." plenty coming up. we reflect on bumper earnings season. bmw sees record second-quarter deliveries. we look at the latest deliveries from the embattled german carmakers. this is bloomberg.

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francine: this is "bloomberg surveillance." here is sebastian salek. ceo hasn: unicredit's defied expectations that the bank could not keep up with earnings growth. that as opposed -- as it posts it surprise earnings. .et income climbed earnings were boosted by one-time gains. credit agricole has become the latest french bank to show trading prowess while security firms elsewhere tumbled. france's second-largest think rose 10% in the second quarter. that follows outperformance from bnp paribas and the texas -- and

nitixis. siemens plans to spin off its health care division through an initial public offering in the first half of next year. the company says it will give them the resources they need to make acquisitions. the ceo takes a further step into dismantling the conglomerate. the bloomberg business flash. francine. francine: apple sales forecast helped be down. it closed. chairs in the most viable company jumped 5%. it has been a strong earnings season with 82% of s&p 500 firms reporting positive sales growth. it has been a rosy picture in europe with 77% of companies seeing sales increase. still with us, the chief economist at hsbc securities and

max kettner. from a u.s. and european perspective, and you just brought it up, the numbers for sales, gross-wise, it is fine. surprises-wise, it is different. the differential is much more. when you look at the price factors and the amount of companies on the upside in terms of earnings in the u.s. and in europe, it is much stronger in the u.s. than in europe. at the moment, it is not only the european -- the euro basically dragging down european equities and having an effect for the european equity underperformance, but really that the underlying earnings are not as strong as in the u.s.. in the u.s., it is much stronger. francine: fundamentals or cost cuts? max: based on fundamentals and of course as you mentioned in

central banks, of course, when you look at financing traditions overall, we just talked about how we should be focused more on the market reaction with regards to finding conditions. that is very important for corporate of course in the u.s. and europe because we have done a study earlier this year, we have seen over the next couple of quarters, you still have in europe -- particularly in europe -- do have a lot of companies that benefit from refinancing. is partly to- that do with financing conditions, partly with fundamentals, of course. thatine: is there a danger it completely messes it up? this could be coming from the ecb or the fed. what does that mean for wider growth? simon: presumably, the profit and earnings is back on a global economy to the upside. you have across the western , atd in the u k and u.s. least very little slack in labor market. the way the central banks could

mess this up is perhaps this wage, and implement relationship is about to kick off in a big way. the phillips curve is highly nonlinear. they are well beyond the curve. in reality, they are -- there are so many reasons. these are keeping wage pressures low. they are understandably taking a very cautious approach and we might see ecb tapering next year. the fed is moving gradually and probably not today, but eventually, their gradually, the bank of england may be heading there. francine: you were very diplomatic when talking about the phillips curve. is it broken? should we forget about it? are there cases we should still be looking at it? simon: fundamentally, it exists. it is often swamped by oil price shocks. we have seen that with exchange rate movement. fundamentally, the laws of supply and demand must apply. if you need to hire people and there is no one available, you will have to poach someone and pay them more. the thing is, no one knows how

long the structural changes are going to weigh on growth. francine: if you are active in the market, there is so much passive investment. the players that therefore are active in the markets are reduced, and that is i imagine, mainly hedge funds. they can actually cause huge distortions. max: yes, particularly with regard to yen. there is a lot of worry with debts. you have a huge inflow into emerging markets. across the fixed income space and it could this sort -- distort the markets. terms ofe think the financing, in terms of liquidity conditions on markets? is that going to be a huge deal when we have some structural changes in the market? in terms of when central banks can get it wrong, particularly with regard to what is behind the curve, those passive

investors -- they can have a huge impact. then, combined with passive investors from an asset allocation perspective with the risk parity, who basically level it off their fixed income exposure and are forced to withdraw their exposure, then combined with the passive investors, that is a danger for a market perspective. francine: thank you so much. we will talk about thing to watch about for the bank of japan. up next, good earnings news from the m w after german carmakers agreed to recall diesel cars. this is bloomberg. ♪

francine: this is bloomberg "surveillance." i am francine lacqua in london. encouraging news from bmw this morning as it eat estimates of slight increases in 2017 pretax profit. the result come one day after an unprecedented summit in berlin, where government and auto industry officials agreed to recall millions of diesel cars. the bureau chief joins us now. i know you are updating us on the summit yesterday. what came out of the summit? if you look at the earnings from bmw, is diesel in a better place than it was two days ago or not? the automakers did dodge a bullet yesterday because there was a lot of discussion that they would have to do much more expensive hardware fixes.

they did not in the end have to do that, however, what we do not know is whether they dodged a bullet yesterday or really the longer term. we have been hearing from sources in the environment industry that barbara hendricks is very unhappy with that agreement from yesterday and she is still going to continue pushing behind the scenes for hardware fixes. we also have the ongoing discussions of diesel bans here and those are being implemented by courts. if the courts are not happy with the fixes that were agreed yesterday, then all bets are off as to where things are going in the future, so they dodged the bullet for the moment, but it remains to be seen where we are going to be -- what we are going to be looking at a couple of months from now. francine: what did we hear from bmw today, chad? chad: bmw of course had positive earnings results, but they did talk about a much more cautious outlook, and that more cautious outlook has to do with the fact that they are going to be spending billions, like all of the automakers, on producing

electric cars. they have 40 new vehicles coming up through 2020 as they make the shift toward electric. that obviously is going to be a very expensive proposition, so they had a good quarter certainly and they are happy about that. a cautious outlook for the second half. francine: chad, thank you so much. talking to usere about bmw and diesel. next, russia accuses amerco of declaring a full-fledged economic war. donald trump signed the sanctions bill. we will have the latest. this is bloomberg. ♪

francine: this is bloomberg "surveillance." japan's long serving foreign

minister has left the cabinet as shinzo abe reshuffles his cabinet after a local election defeat. a series of scandals focus criticism on his ministers. ll indicated that voters no mostr see abe as the appropriate person to lead the government. allies defeated a motion that would have put him to step to force doucetthim aside. it will shift his attention towards economic performance. at u.k. listed company declined to 17% last year. a new report from cipd found endedat ftse 100 firms average of 4.5 million pounds in 2015, down from the previous

year but that was still 129 times the average earnings of their employees. global news 24 hours a day powered by 2700 journalists in 120 countries. this is bloomberg. just gettingre some breaking news and this is pmi for t united kingdom. we have pmi. this is broken into two components. services better than expected. 1.3228.can see pound what is important about today and why the pound is moving on the back of expectations from the bank of england, we are expecting the boe to downgrade its forecast for growth but announced that interest rates will stay at a record low. base consensus, so pound is moving up expectations of the boe.

the russian prime minister says the trump administration has declared a full-fledged economic war on his country. that is after the president signed a russia sanctions bill congress forced on him despite expressing reservations about it. he says the legislation and crushes presidential authorities and may hurt the u.s. ability to work with allies and could have unintended consequences for american companies. kathleen hunter joins us. is still wasr us. we are hearing from russia that there may be some kind of economic war between the u.s. and russia but we are hearing the same with china. kathleen: definitely an interesting time, you know, t rump as a candidate was a tough talker during the campaign and, you know, i think he is trying to, the administration is trying to in a measured way put some oomph behind some of those campaign promises.

it was interesting to see on the sanchez measure, the needle the administration is trying to thread in terms of looking as though they are not rejecting a congressional effort to put more oversight on them when it comes to russia, because we need to keep in mind the trump administration is in the midst of these russia probes were they are looking at the potential for collusion between russia and the trump campaign. time, this russia sanctions legislation will put some limits on trump and his ability to lift sanctions on russia. the administration was under a lot of pressure to kind of accept that. the president cannot really veto signinghe did a statement where he signed legislation but then he kind of uses the signing statement to express concerns about it. and sort of say that he may not, enforce may not elements of it if it becomes necessary. are three main

topics. tax reform, health care and the debt ceiling. are we going to find more about any of these the week? industry there was an development yesterday. there was concern and markets about the deadline coming up at the, sometime in the fall. it looks as though it will be the end of september which dovetails with the deadline for funding the government. and so, it puts a lot of pressure on congress to get something together when it comes to the debt ceiling and funding the government starting, you know, when they come back from their summer recess. what happened yesterday is, was a reassuring development in terms of the process of getting this done as that one of the leading house conservatives actually backed off of his demand that an increase and the debt limit be coupled with spending cuts. that could be an early sign this as somebe as difficult people had thought but is certainly going to be a thorny issue for them to work through. francine: are these market

forces, if you talk me through the consequences that make you decide where to put money, is the fed or central banks first and then you have earnings and fundamentals and then you have politics, or is politics number two? you described it would be the ideal solution. at the moment, it is in the opposite. we look at the dollar, it is very much political. it is almost entirely political at the moment. if we look at what is happened till two months ago there was still a reaction to the dollar, there was still reaction in the treasury market on fed talks. whenever you had hawks and doves coming out and saying i'm going to switch my turn, there were some reaction going on there. in the last couple weeks you have not had that at all. you basically see investors looking through that and only really focusing on the trump administration on what they can do or what they cannot do and cannot push through the moment. it is literally only driven by politics at the moment which, in a way for us, is a bit frustration and hard to

forecast. francine: there is a clear trend. of thelalling it the end cycle. and this is basically the dollar. we brought it way back to 1973. is it just on the way down? how much is this about politics and how much is it about the fed and economic data? max: part of this is driven by a fshift in euro. we have more domestic strength in europe. that's part of it as well. it may also be partly driven by expectations have been in too high from november to february this year, protectionism is coming. there will be maybe higher growth . everyone was leading towards 2.5% growth. becoming about potential growth again or little bit higher. it is not as spectacular as people thought it to be. i think most of the moves we

have seen now is a bit of a down sign. hard to tell because it is giovan by politics. i guess at one certain stage markets are getting so incredibly pessimistic about the nly focus on politics that they forget about monetary policy. think about, for example, we look at what is priced until the end of next year. we only have 1.5 hikes price. that is way too little. still working. we could end up in a situation where we are a bit behind the current. not at the moment. it is something where investors are not looking too much through at the moment. francine: thank you so much. ceoext, we'll speak to the of italy's biggest insurer after his company's first-half profit beat estimates. this is bloomberg. ♪

francine: this is bloomberg "surveillance." first-half profits beat estimates, net income at italy's biggest insurer rose to 1.2 billion euros up 4%. the company is cutting costs to counter low interest rates and e.u. economic growth. the ceo philippe donnet is here in the studio. welcome. congratulations on strong results. what is the biggest risk, or you are going through a reorganization. is it execution or do you need to do more? mr. donnet: i think our plan is

working well. it is the right plan for our company at the moment. thise are executing well industrial plan. i would say that everything which is in our control is under control, which is a very positive. cost reduction is on track. the disposal program is on track. improvement of our operating machine and of our technical -- is on track. everything is on track. and this is why we have very solid results of the end of this half. of thee: in terms disposal plan, i remember talking about it with you the day you announced the disposal plan, you say this on track. how many countries have you exited? is it going better than expected because fundamentals worldwide seem to be stronger. mr. donnet: it's going i would say, yes, better than expected in terms of price offering.

we have very good offers. i'm able to confirm that we'll billion,achieve the 1 the proceeds of the disposal. we will probably exceed this billion. arecine: and the cost cuts 100% going to plan, do you need to accelerate those? mr. donnet: no, we already accelerated last year with a 70 million cost reduction. forre fully on track delivering the target by the end of 2018, which is already in acceleration compared to the initial plan. francine: what about growth? are you looking to buy anything? there was a little bit of a couple of weeks where there was speculation about intessa and that got dropped off. was it a hard moment or no k moment to live through? mr. donnet: no, it was a moment. this moment is over. it is over since a few months now because it was january,

february. it is fully over. as you know, we sold our state in intessa. no, we are focused on growth as well. we are growing, as a matter of fact. we have at the end of the first half of this year, net inflow in life insurance of almost 6 billion, which is almost the thehest het inflow in industry. so we are a growing company. and when you look at this organic growth, it is a very profitable growth. as you have probably seen, we completely shifted the business unique products. this is the reason why the value of our business margin has been increasing so significantly. francine: you do not want to buy anyone? you are not targeting anyone? or if the opportunity arises, would you be willing to consider a bigger competitor? mr. donnet: as i always said,

our current plan is an industrial plan and it is not based on acquisitions. nevertheless, we are opportunistic people. opportunitiesood to accelerate the implementation of our plan, thanks to good acquisitions perfectly in line with our strategy we would look at them very serious. francine: what would that be? what if be a region you want to be in, a company that is cheap? mr. donnet: it is difficult to find a cheap company at the moment. so what matters is really the strategy -- fit. definitely, as you know, we are a very european company. we believe in europe. we think there will be a very positive momentum in europe. very strong we are and central and eastern europe and we want to further strengthen our market position in most of the european countries. talked about things in your control. what about things outside your control? there seems to be in appreciating euro.

things are feeling better. are you seeing it in your company? mr. donnet: our starting seeing enough.t it is not i think there is not enough growth in most of the european countries, especially the western europe countries. because, you know, the politicians have to push forward the reforms. i think that we need in europe to unleash the potential for growth. there is potential for growth, but we knew to create the commission to unleash this potential. francine: it is also about investment. being an insurance company, people forget you are vulnerable or you can take advantage of putral banks and where they interest rates. is this something you are looking forward to, normalization? finally, we talked about it for so long but interest rates overall in the world could go up a touch. mr. donnet: yes, but no one can credit what is going -- predict

what is going to happen. i have been living in japan for low years in a very interest rate environment and everybody was sinking it was the end of it. it is still not the end of it. so, nobody knows how you get out of a low interest rates i scenario. we basic scenario is that are going to live in this environment for many years. we are very focused in preparing the company to face this challenging environment for many, many years. francine: is there something you need from italian politicians? in one of the first interviews i had with you we were talking about possible italian discounts, because -- mr. donnet: i think, we said the italian discount is disappearing, which is normal in which is fair in which is good, because actually, the politics is quite stable in italy now. still pushing is

the necessary reforms. there is not instability in italy. maybe there are some changes or there will be some changes in the government but the policies are still implement it, which is good. i'm quite confident for the future in italy. francine: you are. despite elections? be a littlemay less than a year away but overall it feels better than when we spoke six months ago. positivet: definitely for italy, positive for european we should not fear elections. if we think that in democracy elections are problem, it's a problem. so, i think that elections are part of a normal democratic process. they will not stop the implementation of the reforms. look at what happened in france. what happened in france, did not stop anything. theink we have now, since

presidential election, in acceleration of the reforms in france. we have now an acceleration of the constriction of europe thanks to the french election. it has been positive in france. it will be positive in italy. francine: wonderful. what a treat to have you in the studio and to speak to you. that was the ginerali chief executive officer vw daimler. the dow jones might've hit a record yesterday but lower this morning. let's check in on markets. mark: the bank of england's rate decision and roughly two hours, 12 minutes time. super thursday, the rate decision. the core inflation report. function, i think of it deeper. this is the page for august 3. % probability the bank is going to raise rates. months ago that was at 23.7 percent following some hawkish comments from mark carney.

at the last meeting, the split was 5-3. anstin forbes has left and analyst i spoke with yesterday said it will probably be 6-2 today. this is cpi inflation, the white 2.6%,hich, as we know, is well above the bank of england's 2% target. basic wage growth is the blue line. look at the difference between inflation and basic wages. that is the gap that matters. this is a wonderful chart as well. this is real wages, the blue line, -.4%. inflation higher than wages. if you're thinking that consumers can dip into their isings, francine, the hope not great because savings are at their lowest level since the 1960's. a quick peek at the dollar index, down 9%, near the lowest

level since january 2015. once a bear market starts in the dollar it tends to last a decade. dollar's trade weighted gauge against major currencies fell at least 40% during the previous two cycles. . that is a chart to watch. got some wonderful stats sa ying the dollar index is down more than 9% this year. byit stays at this level december 31, it would be the biggest annual decline since 2003, when the fed was in the midst of an easing cycle. leastllar depreciated at 3% against all 16 major currencies this year. it's only the second time since at least 1992 it fell across the board. the other time was in 2004. one last stat. the dollar typically starts a bear market with a bang.

the dollar index fell 18% in 1995. it has lost 13% in 2002. market slide. everything you need to know about the markets. wonderful function. francine: thank you so much. the payments company led by jack dorsey posted strong growth and earnings in the second quarter. emily chang sat down with jack dorsey at his company's headquarters in san francisco where she asked him what the biggest driver for growth is for foursquare? that isr core business, what we are most proud of, continuing to grow the business that scales. we're reaching's more small -- more small businesses. like i said on the call, we realized recently that we're not really competing with financial institutions and banks and traditional lender's. our average loan size is

$6,000. we are competing with people going to their friends and family to ask for a loan. that is a mess of. we continue to innovate within that space, but it has got great fundamentals to it. and it's something that continues to be attractive to all of our square sellers. emily: you are rolling out product lines and diversify revenue and offer this all-in-one solution for businesses. where do you see the most promising new growth in the future? i still see a lot in the core. we have a lot of small merchants to reach. we have a lot of room to grow market. we recently introduced square point-of-sale for retail. so, we're getting more specialized and really paying attention to what retailers need in particular. this is something that we have always been more of a horizontal service. and we have been able to really specialize and go vertical and by doing so i get to open the

final on who we get to reach. emily: let's talk about the decision behind the physical card you're offering. do you want to offer more bank services? years, we have 8 taken on a partnership mindset with the banks. we are not out to compete with replacel markets or banks. what we have been really good at is making what they offer today accessible to more people. and we started with sellers and industryyou know, an that would only enable 40% of people to get through to start accepting credit cards, we took that number 299%. -- to 99%. were think that is a lot of room to do that in seller spaces like square capital and loans but on individual site as well. when you consider us, i would consider us as a simple, easy way for anyone to be able to start immediately and bridges a bit in the economy, whether that

be on the seller side or an individual site. what we're seeing with square cash, we are reaching and under banked, it is a very young audience as well. so, that makes us really proud, but it's consistent with what we have always been. emily: you are attracting larger sellers. how do you handle the additional competition as you move upmarket? mr. dorsey: it goes back to our core differentiators. self-service a big want are building software that is intuitive and easy no matter the scale is important. and then i think one of our greatest differentiators is really around being cohesive. we aren't just a point-of-sale. we are payments and we are square capital and we are crm. and we're instant deposit. it's all built into the same package. you download one app and you have everything you need to scale you need to scale. can start at one location and scale to 40 without having to

think about anything without having to talk with anyone, even. that is where we come in. emily: you did report a net income loss. i'm curious how you think about profitability and how that impacts how far out you plan the product roadmap. rsey: something i'm proud of is we are a company that is moving money. so, we put a lot of controls over everything that we do and we have a lot of discipline. and getting to profitability means that we have achieved a discipline milestone, and that we get to choose them how we invest or how we drive profits. we'll get to that milestone and we will continue to invest in building better and better services and products. emily: loop capital recently suggested that paypal should buy square saying that they are millennial, their customers come from and yours. what your thoughts on that? mr. dorsey: there is a lot of value in the fact that we are a platform that brings

institutions together and bring that works together and bring platforms and hardware together as well. so, there's ar real value in our independence and that's what we're building against. francine: that was jack dorsey. bloomberg "surveillance" continues when tom keene joins me out of new york. we will talk to pimco and goes what we're hearing from the boe. we have super thursday. we have that rate decision followed by the news conference of mark carney. then we look at earnings. we have quite a lot of earnings brady european banks and the french banks are doing quite well on trade. and especially the european banks are doing quite well. this is bloomberg. ♪ who knew that phones would start doing everything?

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the index hits a high. a year after the last rate cut, bank of england halts a high. will the new economic forecast give any clues? president trump signs off on russia sanctions and his administration is set to wrap up trade threats against china. tom keene is in new york. i'm francine lacqua. today's boe, we have the politics, quite a lot of earnings, as well. tom: the earnings driving the market up, as well. the president taking full credit for it. it is a swirl day. i thought it would be a quiet week and it is decidedly not a quiet week in washington. francine: we have not had a quiet week in a decade or so. here's taylor. taylor: china is trying to stabilize the deteriorating trade relationship with the u.s.

says it paid high attention to intellectual property and wants a good relationship. u.s. tariffs could lead to chinese retaliation. u.s. attorney general jeff sessions can keep his job for now. not kelly has said he does -- president trump does not plan to fire him. trump publicly attacked him last week for being weak. canrazil, president temer focus on the economy again. he has survived a massive corruption scandal. brazil's lower house has defeated a measure that would have forced him to step aside. qatar has taken an unprecedented step to rely on a patriot labor. it will grant permanent residency to some foreigners.

it is one of the steps they are taking to luer investments in the wake of the saudi-led boycott. day.l news 24 hours per i'm taylor riggs. this is bloomberg. tom: thanks so much. let's get right to it. , 22,000. -- 2500.ng up to 2200 first time in ages hr turn to the equity markets. oil turning. sort of a turning morning off wall street. francine: it is turning. i'm looking at stocks in europe and they are retreating from highs they had yesterday. i think this is mainly because of asia. shares are being pulled down on the european index. we had some better-than-expected trading unit figures from a lot of the french banks and then

japan because of cabinet shuffles. tom: put this chart together yesterday with 22,000. i've should've been shocked by the 22,000. i show this on twitter and facebook live. here is eisenhower in the 1950's. here is a double in the stock market when the dow is 200. here is another double, here is another double, here is a long malaise, a carter malaise. good morning, president carter. here is another modest malaise. the is the drop in financial crisis. it is a whole set of double your money's. francine: i like that. ahead of the boe, i had to do a boe chart. tom: sure. francine: we are looking at pound. hillary clark said to look at inflation. my usual inflation versus wage growth. this is history.

we brought it way back. this is a history of the boe ignoring hike inflation. if you argue that they are , higher high inflation inflation will feed into wage growth, so you could argue for a 25-basis point hike. maybe it is time to stop ignoring high inflation. 22,000 jones goes best for the first time ever. there are some potentially ominous signs for the markets, one notable being the recent weakness in the transportation average. this comes as 75% of s&p 500 companies that have reported have seen positive earnings growth. hour, the now for the bank of america merrill lynch director of g10 fx strategy. mike, i don't know what is more

significant, if it is the u.s., if it is earnings, or if it is the boe today. from a market perspective, what do you look at for the real trend? mike: i think the bank of england is probably the most important one for the week -- for the day. i think the u.s. data will be the most important for the week. england is interesting because you have only seen one success all -- bank successfully get away from the zero lower bound. there is talk of the bank of england as part of the discussion. when you look at the bank of england and that they appear to be the next in line, the reason they are interesting at a global level is because it gives you a sense as to whether the global central banking community can get away from the zero lower bound, instead of just the fed. almost like as

benchmark about how markets react if they do surprise. >> yes. ultimately, the central bank reaction function looks beyond reflation targeting. we saw that with the bank of canada. we are looking at the dollar, as well. ultimately, central banks are waking up to the fact that we have seen inflation consistently undershoot. at a time when you are seeing growing imbalances, you have the markets across europe, as well, starting to continue to remain robust. for the bank of england, we don't think they will hike today. we think they will remain on hold for another long period. the risks are that they will not be as comfortable with continued above target inflation as we saw here. tom: mike, the idea here that the markets are doing the more rate hiking for the central banks then they can do themselves, we see currency

adjustment, we see bond adjustment. are the markets doing heavy lifting for governor carney and chair yellen? michael: i'm not sure they are. i think governor carney would rather see long rates higher. i think one of the reasons why the bank of england is talking relatively hawkishly, while the activity data has been showing a slowdown is that they would rather see a high of turn premiums. they want to see a bigger yield difference between intermediate rates and cash rates. i think chair yellen has got a similar challenge. it looks like they are going to move away from a focus on rates to reducing the balance sheets. they hope that will do some of the heavy lifting for them. i think central banks in general would quite like to see a higher return premium. tom: what they bring up this chart if i can here. this is the merrill lynch move index. the volatility, the yield curve, this is back 30 years.

we have never seen this. show the vix, the equity market. this is quiet personified. quiet on the move index. kamal: absolutely. if you look at the fed reaction function, the terminal rate of the fed funds rate remains low. we are going to start looking at normalizing policy, but there are dual mandates out there. there is balance sheet normalization and there are rate hikes. what the move index is telling us is that the market is with they comfortable fact that we are going to be in a sustained period of policy. am: on a. spaces kumal -- on dots basis, would you predict that they will catch up with the market and bring those dots

down? kamal: if you look at the comments from the fed in the last 24 hours, there is no give on inflation. it is all very contingent. , itink tomorrow's numbers is not going to be whether employment continues -- we know that, it is about average earnings. the bank of england, it is very similar. if average earnings continue to remain weak, those second-round impacts are likely to limit the extent to which central banks can continue to normalize policy. tom: we will continue this discussion. lots going on with washington, as well. andill continue with kamal mike. coming up later today, a conversation with charles cantor. he has been very involved in the transaction of amazon and whole foods. we will get an update on that. also, the valuations of

technology. from london, from new york, this is bloomberg. ♪

francine: this is "bloomberg surveillance." you are looking at live pictures of the japanese prime minister shinzo abe addressing his cabinet. he did have a cabinet reshuffle. he is not as popular as he used to be. what we know in terms of the cabinet reshuffle is that the foreign minister lost out in the party reshuffle. .here is a lot of speculation he is one of the longest-serving

foreign ministers. there is a lot of speculation for partyuld run leadership. now talking about the place of japan in the world and he said he will prioritize the economy. .eep an eye on yen the ceo of siemens is taking another step to dismantling the german engineering company. let's get straight to tailor. islor: the ceo of siemens taking another step toward dismantling the german engineering conglomerate. he plans to spin off the company's health care division through an ipo next year. that will give the unit the resources it needs to make acquisitions. bmw says it is cautiously optimistic. the german automaker's warning that spending on new technology and electric mobility and self driving cars will rise this year. they are also coming up with 40

new or overhauled models between now and 2020. the largest insurance company in italy is cutting costs and getting out of less profitable businesses. they are trying to counter lower interest rates and weak growth in the eu. >> we are growing as a company. when you look at this organic growth, it is very profitable growth. we completely shifted the business mix toward protection products and so this is the reason why the value for our business margin has been decreasing so significantly. taylor: generali's quarter profit rose numeral 4%. that is your business flash. francine: on to the boe. this time last year, in the wake of the brexit vote, the bank of england cut rates.

talk of a rate hike is in the air, but the hawks are expected to be in the minority again when their latest decision is released at midday london time. policymakers will probably downgrade forecasts for 2017 growth. us.a joins what exactly are we expecting? it seems the market is expecting no change in terms of race, but a change in forecasting inflation and growth. francine.t's right, the consensus is we are going to get a vote in favor of keeping rates unchanged. in june, the boe surprised the markets with a 5-3 vote. dissenter,orbes, a is left the bank of england. her replacement's policies are not known to well, but she is not expected to go against the trend in first time voting. morgan stanley, goldman sachs thinking we could see 5-3

because of one of the votes that could turn into a surprise hot. -- hawk. then you have the outlier calls predicting a surprise rate hike. the consensus calls are predicting a 6-2 vote against a rate hike. crucially, wage growth is still trailing inflation. economists expecting there to be a cut in the bank of england's growth forecast for this year and next, but no change to inflation forecasts. tom: what is the zeitgeist right now? now?is the mood right do they want to be aggressive or are they scared stiff about no wage growth? nejra: i would say that mark carney certainly probably is scared stiff about no wage growth and it is something that

he will have to address in the press conference. he also might be a little bit concerned about flip-flopping too much in front of the markets, given that he was dovish and then flipped to a hawkish tone in june, when he's at the time might be coming to remove stimulus. he is going to have to approach this press conference very carefully. when you talk about the zeitgeist, another iron he today that will not be lost on mark carney is the fact that they are battling wage growth on their very doorstep. we will have a thursday of protest from security and maintenance staff happening today at 1:00 p.m. tom: this is wonderful. i want to show you this. this is what we are looking at in the united states. not the bank of england. the new york times on their cover today with all of the news in washington shows prince philip at 96 in his last public visit. i thought this was quite something, as well. francine? francine: a day late for this

one, "the new york times." we did cover it quite significantly yesterday here. and anythingg fx to do with gilt, anything like that. what does it mean for pound? if we have no change today, is it an end for the pound bulls? correlations the between the pound and the u.k. data, the correlations have fallen off a cliff. the narrative on sterling is very much about the brexit negotiations him of the top of transition. does today's meeting really matter for the overall trajectory of sterling? i don't think so. given the slowdown in growth momentum we have seen into today's meeting, the market is probably looking for a dovish vote. why not hike today,

mike? mike: realreasons -- income growth is negative and the savings rate is that a 50-year low. you are piling pressure on to an already constrained consumer at a point in time where there is no clear sign of underlying inflationary pressures. if you strip out the prospects, it is very hard to argue there is a significant upward drift in domestic inflation. they can afford to wait. i think realistically they will see her the brexit negotiations go. to hike ahead of the brexit negotiations would be quite aggressive, i think. tom: alan greenspan with comments over the last number of days on stagflation. he is getting pushed back in the united states. is he read about the united equation --kingdom? are we seeing stagflation in britain? guess you can argue on the basis that it is a great contributor to gdp that we are

in the kind of zone. in the medium-term, it is tough to argue that. there is a challenge globally to get inflation up. ultimately, we have bought some of that inflation from the rest of the developed world by the sterling depreciation. we have the u.s. where inflation has been undershooting. in europe, you have very little signs of upward pressure. the u.k. has some of the import price effect. i don't think you have stagflation at the moment. francine: thank you so much. stay with us. kamal.d stay with bloomberg for the latest from the boe. that rate decision due out at 7:00 a.m. in new york, 12:00 p.m. in london, followed by a press conference with the boe governor mark carney. we will see what he does with

these growth forecasts. this is bloomberg. ♪

francine: francine and tom from london and new york. we need to talk about the boe and the impact on the markets. we are back with mike and kamal. when it comes to gilt, how will they react? mike: i think the most important thing today is the tone of the news conference and how hawkish carney is. inflation is forecast to be above target throughout the

forecast horizon. if he is hawkish, the market will take it badly, i think. i think the u.k. rates have a big brexit premium in them, as well. the worry about the bank of england hiking soon and a transition on brexit. francine: i also want to get to where morning must-read. writer, one of my favorites. an agreement? kamal: yes. absolutely. it has been a long time coming. the s&p will be gripping their hands somewhat. i think the most significant development in this space where the comments from the s&p president last week, even when the swiss franc was breaking through.

he was still at pains to emphasize that the swiss franc was significantly overvalued. the path of least resistance still remains for the swiss franc. is that if you look at signs of political , yous within the eurozone look at the political agenda over the next six months, there is nothing thatme really concerns us. -- that really concerns us. merkel probably will win. tom: tomorrow, job stay in new york. bill gross. ♪

♪ tom: to those keeping score, the detroit tigers could not have left new york fast enough. flameskees down in

yesterday to the struggling detroit tigers. a gloomy new york city this morning may be because a baseball and maybe not. i am tom keene here with francine lacqua in london. a boisterous day. here is taylor riggs. taylor: china wants to maintain a good relationship with the u.s. when it comes to intellectual property. the prospect of an investigation has raised the risk of a tit-for-tat retaliation. u.s. officials are gearing up for a probe into whether china violates intellectual property laws. starts his second term of president in iran this week. the trump administration has added sanctions on iran and next may take aim at compliance with the landmark nuclear agreement. officials expect inflation to snap back. john williams at the san francisco fed says inflation surge close in on the 2% goal in

the next year. the cleveland fed's loretta mester says it is -- global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. we are very fortunate at inomberg view to have people the trenches of discourse and dialogue on whatever the topic may be. commenting yesterday on the cacophony of washington but it's wonderful to go to berlin. been absolutely must read on the oddities and dialogue and the discourse of moscow and washington. have you ever seen it like this? have you ever seen the delicacies back-and-forth between trump and putin? >> actually, there is nothing we have not seen before here. this is certainly not the first

round of u.s. sanctions on russia. the mostrobably domestically important one for the u.s., but certainly not the most painful one for russia. tom cole and the fear is the russians and mr. putin will react. react putin -- will the day by day or is there a more strategic putin to what mr. trump speaking of when he speaks of sanctions? certainly -- is certain that is certainly, right now, when it comes to western sanctions his actions are strategic because he know that sanctions are here to stay. specific little moves are not as sharp and

momentous as one might expect. warning -- isia's think someone in the cabinet including the russian prime minister said this is a declaration of fully fledged economic war on russia. i think they are making these noises also for the domestic russian audience, which russiao be reminded that d byn circled -- encircle .ts enemies they are making these noises not because the sanctions are more or dire thanful the previous ones, they are just doing this to fire up the domestic audience. i am a russian living in moscow or st.

petersburg, do i want my president or my prime minister to actually get along with donald trump and get something out of him? or do i prefer this kind of talk? leonid: that depends on what kind of russian you are. there is the minority of pro-western russians who generally want russia to get along better with the west, the u.s. and the european union. if your the majority of russians who support the annexation of crimea and generally support world then you enjoy the -- war of words. much.ne: thank you so we are back with mike amey and -- toyou look at trump tweets see what the fed will do next or do you ignore it? mike: i think the most interesting aspect of trump foreign policy is the fact that

the market don't seem to look at it at all. i think we should all keep an eye on this kind of stuff because these are classic events where most places in the world everything looks fine and then these situations deteriorate quickly and they can have a material market impact. kamal: at the beginning of his presidency, there was a lot of reaction to trump tweets. i think expectations around trump have been recalibrated particularly on issues of fiscal stimulus and tax reform. present some focal points, but they are not the be-all and end all at the moment. we on austerity? without the bank of england meeting today and coming up on a massive debate on the u.s. budget, give me an austerity

update. let's start with europe. is it an austere fiscal moment for europe? michael: i think we are at that eat andy -- at the end of the period of fiscal stimulus in europe. we have moved to the point where by europe is a marginal positive on fiscal for the economy. u.k. is pretty much flatlining in the u.s. if you look at where we are now, the border adjustment tax is officially dead and you've got this talk of tax reform and that tends to indicate that, if anything, fiscal will be a positive for most developed economies having been a relentless negative for years. if you are looking for upside surprises, i would say fiscal policy is one of the key ones to look at. francine: this is a chart, i brought the dollar back to 1973 and we are calling it the end of the cycle. we are a bit more

constructive. given at expectations -- where any surpriseare, could be stimulative for the dollar. the key is how the macro of economic outlook moves into the end of the year. we look for another rate hike. if inflation starts to pick up, that should help the dollar, but it is key to note that we have other central banks with their views on policy normalization and the dollar tends to underperform through tightening cycles because the central banks are playing catch-up. francine: are you buying any treasuries at this point in the cycle? leonid: if you look at -- michael: if you look at where interest rates are, relative to they look markets relatively attractive. of the kerry is not radically different to the ford curve or the u.k., certainly japan or europe and if you think about

what -- why du own duration? you own it to protect your risk assets in the environment in ase something goes wrong and treasury yield of easily could fall a lot more than a 50-basis point bund yield. as a risk management toward, treasuries do not look bad at all. tom: what are you doing with duration right now? michael: we are pretty agnostic at global duration. we've seen a big backup in european yields because of mario draghi and this kind of 50-60 basis point on the 10-year, bund seems to have good support and the ford curve is pretty steep. u.k. and japan still look skewed to risk being moderately higher and in the u.s., it gives you that protection that duration can give you. we are in a tightening cycle. we have seen a bit of a rally in

rates, so we have taken ourselves back to neutral stance, but we have relative value views -- tom: duration folks, this is almost a blended maturity of a given portfolio. that's a little bit of jargon from mr. amey of pimco. we continue with kamal as well. this is for that you've set, nobody in these magazines like week.4 years old this two covers, they are really wonderful. these two young kids, you give them money every day. i think they could be my grandchildren and they are worth more money than god. must read on technology as well and if you know mr. scaramucci, you know these people. hna of china. michael campbell with an important article on the mystery of hna. much more than just on mr. scaramucci. ♪

♪ francine: this is "bloomberg surveillance," with tom and francine from london and new york. let's get to the middle east and -- qatar -- grant presidency permanent residency to some foreigners. those eligible for the law include children of qatar women married to foreigners, those that have special talents needed by the state, and those with extended notable service to the country. for more, the editor for bloomberg markets joins us now from abu dhabi. i am quite intrigued by the list of things that you need to be to apply, but this goes back -- what can you read into this as kind of a piece on what happens

next? tracy: it's an interesting move. you and i have spoken about this more than once. in many gulf countries, there is sort of a social contract agreed between locals sort of the actual native warned people here in the gulf region and the isernment and the exchange often one of political stability in exchange for things like generous tax allowances, education paid for, housing allowances, that sort of thing. foreigners are really restricted from those same benefits. you have to become -- you can't become a resident no longer how long you have been here so this is a big change. it's unclear whether or not these will be implemented. at the moment it is a draft law that has been approved. it says that qatar is trying to strengthen its links with the outside world. me about talk to football. this is something we don't talk about often. it is significant because there

is a transfer probably the most expensive in history linked with psg and qatar. tracy: you could read it in a similar way as the residency news we were just discussing. i like the way simon cooper but this. he says it is sort of like a rich person buying a picasso, it is a cyclical effect. qatar buys the world's most expensive football player and it says something to the international community and their desire to play on the world stage and their ability to do so. it has massive amounts of wealth that it can use to participate in the world's sport. tom: you and i have one great common, research as a fabulous time to look up at what analysts are doing. what are you seeing in research right now? tracy: today it has to be david wu at bank of america at merrick

-- merrill lynch. he is telling investors to seek the japanese yen as a safe haven coming up ahead of a risk off september and this is the big question weighing on investors' minds. one of the upcoming flashpoints for the global market? david will and his colleagues figured trump and his -- could be set for a showdown on two confrontation -- with north korea -- that would be a risk off event. we have david will saying -- david wu saying you should buy yen to prep for that. francine: still with us in sharma -- kamal sh arma. when you look at the middle east, is it a pure kind of oil

mobile growth story or does it go to inflation bank? >> i think it is about the amount of supply at the moment. through which i look at oil is the impact on currency. in my world it is the canadian dollar and also the norwegian krone and we start to see signs of weakness in the canadian dollar given the move in oil prices and the data. oil is very much for us the ability of opec to continue to abide by the production cuts. francine: is opec even relevant anymore and how does that play into your portfolio management? michael: we would argue that the daysnal price of oil these is much -- is as much the share producers as opec. the marginal cost of output for the share producers -- shale

producers goes, the lower the floor gets. $50seem to be about stable plus or -$5 and that is for the l wasnt commodities kama talking about. we would argue shale producers are as important as opec. tom: one of the great themes we are having is the idea of u.s. versus european equities. is a general statement pimco overweight europe. michael: we have been. cautious now.ore you have seen a very good earnings growth at of u.s. and you cannot ignore that and the euro is very, very important. a lot of the major companies in the euro stoxx are the -- euro stocks are the exporters. we have generally been refocusing out of europe having been more enthusiastic about that one towards some of the markets. tom: kamal, where does the euro

push against this enthusiasm in europe? it used to be 140, i don't buy that. it has got to be a lower level. are we getting up to a level where stronger euro comes up the european machine? kamal: i think the key here is the fair value measure we have at bank of america and we think it is about 120-125. as you have been discussing with mike, the interesting part about the inflows we have seen into europe is they have been on an unhinged basis and this continues through the french election. if growth continues to maintain a strong handle and we see macron continue with his reformist policies, that sets a firmer basis for these flows. on the swiss side, we have been seeing investors buying out of

the swiss market presumably into the european equity market. as a general trend where europe is the preferred market given less fiscal austerity and political risk premium and therefore, a higher eurodollar. francine: thank you so much. amey stayma and mike with us. this is what you do if you want to ask a question to mike or .amal, go on to tv we can steal some data checks from tom keene or even a chart. this is bloomberg. ♪

♪ .aylor: "bloomberg surveillance this is" i am taylor riggs -- this is "bloomberg surveillance." shoemaker reported sales grew 26% in the second quarter and sales in china up 28%. adidas has become the hot brand in the u.s. thanks to demand for retro shoes and a steady stream of new models. we will talk to adidas ceo at 6:30 eastern time on "bloomberg surveillance." somemusk has gained

financial leeway to cool off his mission of bringing electric -- tesla just rolled out its most affordable car yet, the model 3 starts at $35,000. the lending business at square is booming, but the ceo says banks will have anything to worry about. he spoke with bloomberg tv. >> we realized recently that we were not really competing with financial institutions and banks and traditional lenders. our average loan size is $6,000 so we are competing with people going to friends and family and us for a loan and that's a massive market. taylor: there lending business rose 68% in the second quarter. that is your bloomberg business flash. tom: thank you so much. abe speaking right now in japan. you look at yen and this is the

long-term chart and the structural strength of yen going ack 30 years, down we go with cyclical, yet persistent yen strength and here is abenomics and we are back -- not back to where we were even in the nirvana of the -- of a few moments in 1997 and 2007. francine: i would really like your chart your yen, it is a must like we find kamal sharma best take for the euro. this is on the back of what? kamal: divergence. we have been on the view the bank of japan would remain the nominal policy anchor within g10 and i will be used at the funding currency. direction losing the of travel toward policy normalization -- nomination. -- normalization. francine: i guess the question

is whether he stays on after his term in 2018 and what happens to the prime minister? michael: as you had in your commentary, i think the party as a whole is still committed to trying to get the economy going. even if you get a leadership challenge, our sense is you would not get a fundamental shift in the policy of the government. he may well come under pressure, but we would not expect a serious shift in the policy. tom: what is your target on euroyen? kamal: 132 seems like a logical place to move to. it has been quite a significant move and i would say this is against the backdrop of broader based euro strength because dollar-yen is lingering around this 110 level.

there is event risk around tax reform shut down and geopolitics -- a little bit of a floor underneath the yen at the moment. ultimately we think kuroda and the bank of japan remains steadfast to their commitment and buy that end of the year we see the dollar-yen headed back to 117 or 118 level. tom: thank you so much gentlemen. mr. sharma is with merrill lynch with pimco. what do you do with amazon? what do you do with the mergers and acquisitions and all that cash of technology? charles kan of newberger berger got -- next.

♪ amid negative brexit adjusted wage growth, what is the bank of england to do this morning?

onernor carney opine sterling. 22,000,000 is up -- dow is upon us. cost cutting and growth of the cash flow have nothing to do with it. give me a cosmo with carrie can you work at double-shift on sunday and i need a filipino nurse for the shift on tuesday? isigration reality, this bloomberg surveillance live from our world headquarters in new york. i am tom keene. with the -- with me not babbling immigration wars is francine lacqua. yesterday afternoon indies united states of america -- in these united states of america was extraordinary. use aim not babbling immigration wars, not yet. we are just about to go through brexit. tom: this is a serious issue. you are sweating bullets whether

you are not -- you are about to get thrown out on your ear. francine: i am keeping cool, but it is significant for growth. away from the emotions, there's a lot of research giving us a glimpse of immigration on the economy and if you curb it too much, growth may take a hit. tom: there we go. seems to talk about today -- themes to talk about today. trying to -- is the trump administration may investigate china for violation of international intellectual property law. to. tariffs could lead chinese retaliation. u.s. attorney general jeff sessions can cheap -- can keep his job for now. not intendrump does to fire him according to persons familiar with the matter.

trump publicly attacked sessions last month for being weak. the president is unhappy sessions recused himself from the russia investigation. in brazil, the president can now focus on the economy again. survived a corruption scandal. that decision may clear the way for him to push through his pension plan overhaul. qatar has taken an unprecedented monarchies.ulf era they approved a draft law that will grant permanent residency to some foreigners. it is one of the steps qatar is taking to lure investment in the wake of the saudi-led boycott. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. on politics in washington, you see an early drag down to corporate earnings. aetna buried in their press

release. they do mention the affordable care act and the ramifications on health care. that shows the tangible linkage of what goes on in washington at corporate america. let me do a quick data check. cantor -- get to mr. kantor on where we are in the market. oil is back a little bit over the last 48 hours. francine: global stocks seem to be retreating. euro lower and look at pound because we have boe and a possible new growth forecast. tom: this ties into our guest this morning. we will do a couple bloomberg's and move on. here is the dow and the doubles of the dow back to eisenhower. 200, 400, 800, and there is some malays and some it isaa of quiet, --

regular how we see a doubling of the dow. these are approximations of the dow 22,000. double your money, to markets in one or something like that. -- your: i dove year double your money chart. i want to show you the history of the boe it during high inflation. we know inflation is higher. tom: very good. we have a wonderful guest this morning. i want to bring up this chart to get us set up and going. this is a chart of amazon and whole foods and charles kantor and others made whole foods, amazon performance going back a good two years. the yellow line is amazon and the white line is the two jump conditions in whole foods starting with the circle. amazon an update on -whole foods.

are you happy with where these companies are in the mating process? itrles: ultimately i think will end up being good for the customers, the employees of , customers and employees of amazon. i think amazon will bring a tremendous amount of technology to whole foods and whole foods hopefully will solve the challenges amazon has faced in grocery. net-net, it should be a winner and we look forward to the future of whole foods inside amazon. tom: back to the chart. in the beginning of the spring of last year, look at this -- look this up radio folks, another big jump condition in june. this is what guys like you do. other still more opportunities like this or are you taking the next two years off? charles: we are at it every day. there is no resting. we are off to find more value in other places. i think there are lots of opportunities and what has been interesting about the market this year, despite what use it

just is low volatile conditions in the aggregate, it is still tremendous value and bifurcation companies ofcross sectors and subsectors. they take consumer discretionary retail and the distribution companies. one of the influences is the impact of technology companies, maybe amazon specifically on their competitors and lots of folks out there get very nervous thatthere is a hint companies like amazon maybe going after their market share and their customers and that in itself, we debate the cyclical of that versus the secular nature. the goods and services they provide their companies and the brands they provide and where they sit in that conversation will determine whether it is cyclical or secular. francine: what does this actually mean?

if you are a competitor and scared that amazon is coming after your pie, do you sellout, do you downside, d become more nimble -- do you become more nimble? charles: it is idiosyncratic to what people believe that the threat is. the whole foods instance, amazon had not implemented a grocery strategy as well as they would have liked and whole foods was behind the curve as well as investing and technology and data and understanding their customers so there was lots of synergy at both companies -- and both companies can bring a lot to the -- to each other. i would say the traditional company, and that is a very broad term, has been behind the curve in investing in technology, investing in data and understanding their customers and their brands. maybe that is because of -- because -- have been shorter than companies like amazon that tends to play in very large total, addressable markets with

a very long time horizon. what is happening in this environment is that everything is changing at rates of speed that is very uncomfortable and so, if you missed something, it takes you much longer to catch up. francine: you are telling me that retailers will go bust? is that fair? potentiallythink one of the great opportunities is really understanding that not every single company or consumer andany will get amazoned that is because of where they fit in their customers' lives. whole foods is a very good example of that. there are other categories like in the pet industry for example. not every category has amazon penetrated and i think a ton of consumer companies have invested in technology and stand strongly with their customers and won't get eviscerated by the

influences of amazon on the market. tom: i want to check about monfils --terday -- mondelez yesterday. that shened yesterday did not cut cost fast enough. when you look at the large packaged goods companies and the grocery store companies, the big business of it, is that what you see, that whether it is rosenthal or the others just get exhausted by cost-cutting and they don't go fast enough? charles: i don't know that they don't go fast enough, i think the other side of that debate is if you are not investing for future growth, if you are not building at new platforms and not investing in innovation, at the end of the day, no amount of cost-cutting will save you and some of those subsectors you mentioned, maybe they just had a bit of bad luck. they have seen almost no pricing power and there has been fight

amongst market share and inflation -- tom: can you own shares of amazon? charles: i can. the revenue own growth or do you have to see it down the income statement? charles: i think you've got to make a judgment around what the future returns on capital look like when the investing -- if it ever stops so you have to make an adjustment -- a judgment around other things they are buying today and will they produce productive returns 10 and 15 years down the road and termu don't have those horizons with amazon i think it is hard to make the investment case on current revenue and profit. francine: thank you so much, charles kantor stays with us. stay with bloomberg firm -- for the latest from the boe, that rate decision will be out at 12:00 p.m. in london and that is followed by a press conference

by the boe governor mark carney, look at pound and any comments regarding inflation and growth. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. the ceo of siemens has taken another step toward dismantling the german engineering conglomerate. the ipo will give them the resources they need to make acquisitions. they reported quarterly profits that missed estimates. bmw says it is cautiously optimistic. the german automaker is warning ending on new technology in electric mobility and help driving cars will drive -- will

rise this year. they are coming out with 40 new or overhauled models between now and 2020. they posted second-quarter earnings that beat estimates. elon musk has some financial leeway to bring western cars -- cars to the western masses. tesla rolled out its most affordable car yet, the model 3 starts at $35,000. that is your bloomberg business flash. tom: thank you so much. for our global audience yesterday, washington came to a complete standstill in the afternoon. the cast of characters is -- of cnn and the other guy was stephen miller, mr. bannon's protege at the white house and this got heated. mr. acosta nudged forward the debate on immigration by asking about some of the niceties, the details of new immigration proposals. >> you are trying to engineer

the ethnic flow of people into this country. >> that is one of the most outrageous, insulting, ignorant, and foolish things you have ever said. tom: that was just part of the drama yesterday. kevin cirilli missed this because he was having a cosmopolitan at the trump tower bar and he joins us -- the trump hotel bar. kevin, you cannot make out what is going on -- make up what is going on. how will general mattis and the adjustadopt -- adapt and to comments from mr. miller and others in their white house? kevin: i think that snapshot you is a perfect illustration of where washington is right now, particularly with the relationship between the white house and the white house press corps. tom: mike allen and the team eliminated the afghanistan of

weeks and weeks ago and now general mattis is extremely upset with the president's comments on what to do in afghanistan. in the last 24 hours, what have you learned about the cadence and the pace of the kelly white house? kevin: i think they are headed into a vacation reset mode. the president really after this rally tonight in west virginia, when you look ahead of schedule, he will be headed to bedminster to try and reset and beyond that , a lot of folks in the west wing are going to be resetting in the month of august. congress is out of session and we heard from senate majority leader mitch mcconnell that they will not have another health care vote before the august recess. the house is already in recess. this is a month where things are resetting because if you look at december, it will all come to a head. francine: good morning. we heard from the russian prime

minister and wrote that what trump did of the signing of the sanctions first of all shows that he is incomplete weakness and he says it is a declaration of fully fledged economic war on russia. how will the administration take that? signed it.an, they the russians responded after the republican-controlled congress passed the sanctions bill, which is unique in the sense that it does handicap the president possibility to weaken any russian sanctions. fascinating because it is a republican-controlled congress. the russians from the standpoint of north korea are not even admitting that north korea is using an internet -- intercontinental the listed missile. they cut the u.s. diplomats that are allied to be in the united states. if you look at the investment in russia, clearly these sanctions are having an effect. maybe that is why we hear such strong words out of moscow. tom: thank you for the delicate comments on the in delicacies of

yesterday. we will have a cosmopolitan the next time i see him. charles kantor, rumor is he has never had a cosmopolitan in his life. you cannot make this stuff up. how important is immigration in the labor supply to corporations? i would say it is a first-order condition. charles: it's very important and when you speak to ceos and folks that make the hiring decisions across both public and private inpanies, the unequivocal the idea that they do not have enough talented, skilled labor to do important things that need to get done to make products and create services that businesses do. it is fundamentally important and fundamentally important to the idea that when you come to america, great things can happen. labor, like capital, is mobile and it will seek out the best

risk-adjusted rewards and america wants to compete in that labor force. tom: we are all advantage. we have the privilege of doing what we do, i do, what francine does. the guy moving avocados in whole foods, how does mr. bezos and the new management and the new directives of amazon whole foods, how do they retain those good people and the answer is incentives work? absolutelycentives work. you do that through qualitative and quantitative things. tom: and stock. stocks: you do that with if it is appropriate. not everybody can do it with stock. whole foods did it by not having a unionized labor force and they paid folks over $20 an hour and through the -- creating an environment that allows you to attract the best talent you can for the roles that you want filled? tom: my analysis was the man

chowder at whole foods was killer this week. on bloomberg radio today, an important conversation. statesmer united secretary for homeland security, a perfect time to speak to him. stay with us. in washington, this is bloomberg. ♪

♪ francine: this is "bloomberg

surveillance," with a picture of the millennium bridge and onto st. paul's cathedral. on the right you can see bloomberg crane building our building and next to that is the bank of england. that's where the action will be today. certainly a europe pound watcher. you can see the clouds darkening as we speak. the bank of england last year at the same time almost to the day cut interest rates by 25 basis points. there is now talk of a rate hike . the hawks are expected to be in the minority on the latest decision when it is released midday london time. economists and policymakers probably will downgrade the forecast for 2017 growth. -- joins us with the latest. a people wantnejr to know if mark carney is a hawk or a dove.

much: often he is very down the middle and that is certainly where he sits in terms spectrometer of doves versus hawks. the consensus view is we get a 6-2 vote in favor of keeping rates unchanged. the two expected to vote for a rate hike, ian and michael and the question is whether anthony might become the third menu to to vote ford member a rate hike. some think yes because his hawkish turn from being a dove, the turn in june moved markets and the hawkish comments from governor mark carney moved markets in june and the question is whether he will pull back on that in his press conference today because what we have had since then is inflation slowed to 2.6%, still above target, but a slowdown. growth coming in at 0.3% to the second quarter and the crucial issue of wage growth still lagging inflation.

francine: what is the view on inflation at the moment? in terms of what the npc and the bank of england is likely to say, economists are expecting them to downgrade -- downgraded their forecast, but keep them the same on inflation and this is interesting because you can probably see behind me protesters gathering outside the bank of england from the security and maintenance staff at the bank protesting a 1% pay rise, far below the 2.6% inflation that we have that i have been talking about. francine: thank you so much. we are looking at pound and we are hearing mark carney. this is bloomberg. ♪

. is this a phone?

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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. ♪ tom: good morning, everyone. coming up in the bank of england meeting. we will see the news.

right now, in new york city, let's get to the first word news. >> china says it wants to maintain a good relationship with the u.s. when it comes to intellectual property. the prospect of an investigation by the trump administration has raised the risk of a retaliation by beijing. u.s. officials gearing up or a probe into whether china violates intellectual -- intellectual property law. a second term as the iranian president this week, the optimism of his landslide victory has been eclipsed by a standoff with the u.s. government. the trump administration has added sections on iran and it may take aim at their compliance with the landmark nuclear agreement. in brazil, their president is focusing on the economy, he survived the massive corruption scandal. the lower house defeated a motion that would have put him on trial and force tend to step aside. the decision may make it ok for him to push his pension

overhaul. regional fed officials expect inflation to snap back from a recent slowdown, john williams of the san francisco fed says inflation should close in on the 2% ago in the next year and the cleveland fed president says it is approaching that level and they will vote on interest rates next year. u.s. attorney general jeff sessions can keep his job for now, the white house chief of staff has told him that president trump does not intend to fire him according to a person familiar with the matter. all caps publicly attacked jeff sessions for being weak and the president is unhappy he recused himself from the russian investigation. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. much more coming up, including a conversation with the leadership of adidas. london,r us, usually in

,eslie is with chatham house the esteemed international relations platform in london. charles cantor with us as well. you come over to the united states and provide stability to washington? it is harder to keep up, even in new york that it is in london. tom: how is mr. trump translating in london? there would be protests if you travel in london. we saw a ballet in france. how would he be greeted in the united kingdom? >> this is what people are try doassess, some say we should what france did and welcomed donald trump but the predominant feeling is that it could go very badly. theresa may has been weakened by the u.k. elections and not in a strong position. they are at a difficult point in time with the brexit negotiations. throwing donald trump into the

mix when there are domestic discontent over what is going on in the united states and donald trump in general, and the likelihood of protests and not going well quick theresa may wants to say that donald trump will be negotiating a major trade deal with the u.k., then the payoff on the street would not play well. a third railion is everywhere, different interpretation by culture, what can the united states learn about its immigration battle when we look through the prism of the immigration debate in the united kingdom? >> in some ways, a similar lesson, making sure that the message, there is some the data and fact, some contours different to the debate about immigration. in the run-up to the referendum in june of 2016, most of the numbers were wildly off, most of the portrayal about what was going on with respect to immigration, eu immigration was not accurate. the risk is potentially the

same. francine: let me get you back on track with this approval poll average on the president which shows this is the white line and this is the disapproval rate, around 56.9% for president trump . what does he need to do to get this back on track, have you create jobs in america today, do tax reform and focus on things she can get through congress? >> the approval ratings are coming down. what is interesting is that the republican -- the approval among republican and conservatives remains quite strong, although there has been a dip. much of what is going on is not necessarily about the real economy in terms of the recent numbers, probably more about the perception of chaos in the white house and the inability to enact legislation, we saw the defeat replace.peal and

what donald trump is doing is returning to many of his campaign promises, going back to pushing back on affirmative action, pushing hard on immigration, pushing hard on china. a number of things he talked about on the campaign trail, with the backdrop of losing with respect to having more leniency to leverage his relationship with russia. where the numbers are coming from, the perception of the tremendous dysfunction in washington and in the white house. whether it is about real jobs is not clear. we are looking to see if he can do anything in terms of tax return -- tax reform, infrastructure. not clear there will be any movement. francine: will the chief of staff to the president back on track? hopefulit is a more appointment, john kelly, there is a concern as to whether or not the president will stay with the people he chooses that are

more professional and on task, or will the undercut them with a tweet? a lot of it will come down to the leadership, will they give john kelly the latitude to do what he needs to do in the white house. ? tom: you came out of columbia and your parents were probably appalled that you became a bureaucrat. hates, what mr. trump you were a foreign policy bureaucrat in washington. explain to our audience the value of grinding out state department like service beneath the cabinet. those people are demoralized. leslie: if you saw the recent reporting, secretary of state tillerson is not accepting the money being offered to the state department to implement some key programs. of -- peopleck being appointed across the

executive branch, donald trump can sign as many executive orders as he would like. this is the great irony, he is not legislating or working with congress, he is trying to legislate largely through executive orders. but you need the bureaucracy to implement those. in key positions across the executive branch and we have more than 400 who are not there, have not been named and will not be confirmed soon. difficult to make the machinery move. tom: thank you very much. we will come back with charles on the markets. business week out with new covers, one is on anthony scaramucci's chinese connection to his wall street firm. bucks that make more money than us combined. you will love the article on two kids who get it done. and china, the idea of hna

the mystery of a chinese -- they have the link to anthony scaramucci's wall street firm. ♪

♪ this is "bloomberg surveillance." a week after raising forecasts, adidas forecast that sales in north america grew 26% in the second quarter and sales in china up 28%. during us is their ceo. he joins us from germany.

congratulations on the figures. with youried are you progress in the first half? figures, we grew almost 20%, we doubled the income forecast of growth for in ther, more than 30% u.s. and china almost 30% and e-commerce, 60%. we are happy with the progress with reebok. overall, we are happy and satisfied with the progress we are making as a company in a market not so easy anymore. francine: there is more and more price competitive out there but given the strong cash and recent disposal, can you add anything to your portfolio? if yes, what would you like to add? indicated, we sold our

canada ands out of not looking for investments, we have so many opportunities for the adidas and reebok that we need to continue to invest in these and go above market growth. we announced the extension of contract in the u.s. which shows our willingness to build a larger position. particularly in the u.s. market. tom: the u.s. market numbers are extraordinary. is so important, psychologically a fashion forward company dealing with the idea that someday it will end. what are you doing at the board level and the senior management level to structure id does -- adidas where every mother has to have three kids only dressed in adidas. someday that will end and how do

you structure for that? >> i do not know whether some day that will end. strong position in football, basketball, hockey, soccer, that is what we are working diligently on ball and i believe we have a long runway in the u.s. and are not where we need to be despite strong growth rates. the montréal canadiens jersey looks great. let me bring in one of the best investors in america, charles cantor with a question? how do you think about the role of companies like amazon as it relates to your product, the differences between using those platforms versus engaging with a company directly? clearly, we will build an

online business that will be for billion dollars by 2020. withn either-or, happy relationships with traditional partners, sporting good stores and in america we have a relationship with amazon. you have to be where the consumer is and not rely too much on one entity. but youo be a mixture have to be where the consumer is an right now, they are coming to us in the u.s. with growth online at 80%. we are seeing the consumer coming to id this.com -- adidas.com. francine: a year with no cup, is whatorld you are focusing on away from the mega sporting events onto something more sustainable, more balanced. this is where you build a

foundation for what you are doing. if you look at the extension of the mls contract, it gives us the opportunity to work with youth teams in the u.s. and use our products to gain the experience with us and we see this as an opportunity for building a long-term, sustainable position in the u.s. thegrowth rates we saw in first half in the u.s., we expect the same the second half. we see strong demand of our products in north america. and in china. china was a pretty increasedh, competition from rivals. build a strong brand and a desirable product. the reason we have been able to rise the profitability in the second quarter and the outlook

for the year is because consumers are willing to buy our products at full price. there will always be competition. that is not right now our core issue on pricing. avoid too much promotion. tom: thank you very much, the chief executive of adidas. not like question -- polite question, he comes to the defense of a $4 billion business, are you saying, right? theaking sure you maintain integrity of your brand and what type of products and who gets them when you do not control the direct to consumer experience, that is a delicate balancing act , very well to go with the consumers -- where the consumers go to the question is -- how do

you get there at a margin level that is attractive for all you have invested in the brand? adidas has done a spectacular job in resonating their fashion elements with the consumers, as evidenced by the results today. tom: do you want to climb on their success or go after other dogs that are not performing? >> you have to balance that, easy to go with momentum and always think about the glasses either half-empty or half-full. the balance is the reality and if you get comfortable how ceos allocate capital for the future and what those return prospects look like, that is the underpinning of sound, long-term investing. francine: can a ceo afford not to be on amazon? keephey say, i want to control of my brand and i do not want to do any kind of partnership with amazon, or will it become too big?

fashion,lar brand, lululemon, they control all of their customer experience directly. the only place you can get them is for their online store or in their physical footprint. just chasing the volume does not end well always and there are different companies making those decisions. if you control the brand, the customer experience, you control your margin profile and get customers without everyday low pricing. tom: let me tell you about tv . it is on the trading desk, it just the day started with the usual live feed. side,round, on the right click on any given blog and bring up a chart. this is the dow chart. you can steal that chart.

take it over. to your bloomberg. stay with us, this is bloomberg. ♪

♪ francine: this is "bloomberg

surveillance." in 10 minutes, the expected bank of england rate decision. up, bloomberg daybreak america. >> who better to break this ,ecision done with steve major he is thing mildly bullish because the boe is in no hurry to hike. he has one of the lowest targets for the 10 year yield at the end of the year, one point &. -- 1.9%. we will dig into that. tom: he is an important and timely guest. you had a conversation with mr. blankfein yesterday. a guy named bloomberg showed up, how does he rationalize a trump trade? >> we did not have time to get

to that, that was literally my next question. the issue is, the value at risk has been decreasing on morgan stanley's is increasing and when you combine with that. handling their markets well, are they too defensive versus the rest of the street? tom: thank you so much. let me bring up a chart of the general market. we are thrilled to do this with charles karton. the upward trend. review by some of these long shorts and a market always moving higher, what is the benefit of long shorts given the perpetual bull market? in the increasing environment we are in, there is tremendous opportunity on the short side. we are running approximately long 40%, 45% range. we are trying to keep people wealthy.

try to participate along the way but it would not be reasonable to expect to participate in line with the market averages, given the fact we are running with less net exposure. try to make attractive risk adjusted returns. tom: where is the most attractive short? where do you find short value? >> we have had a really good time of it this year on the short side. t, wete the calm marke spent a lot of time talking about consumer discretionary sector and the impact of amazon and companies like that. we have had a neat set of experiences in the consumer discretionary sector. francine: charles, what is the biggest distortion? you talk about bifurcate and, does that mean the market could go either way?

>> not a big distortion today. no doubt that there will be a debate around that. as i look at the data two years remarkable --day, two years ago versus today, remarkable how much change, the story is the same, earnings, it is effectively, earnings have prompted rhetoric, that is the story of long times in the market, do not bet against the ingenuity of corporate america and the ability to reinvest cash flows around the world to reach attractive risk-adjusted returns . the volatility levels similar to two years ago. earnings up a good amount. credit rates about the same. just as -- just because it is point to say more of the same, does not mean it is wrong. to say more the same,

does not mean it is wrong. do notho do it passively necessarily understand what they own. we think it is incumbent when you construct portfolios to understand exactly the risk you are taking. time, given over the massive amounts on the margin that are flowing into passive versus active, that creates a big opportunity to take advantage of the distortions. .om: thank you so much coming up, coverage worldwide in the decision of the bank of england and the mark carney comments. stay with us. this is bloomberg. ♪ who knew that phones would start doing everything?

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high ahead of the meeting. germany economic growth lags european peers for the first time in 12 years and tesla stock surges, demand is solid. elon musk says he never felt better. good morning to our viewers worldwide, and we begin with the bank of england decision with no change at the bank of england, --e unchanged at 0.24% 0.25%. the corporate bond target remains at 10. on rates.- vote 6-2 the minutes come out with the forecast. let's get to guy johnson. the cable rate down, a 31% on the session, what are you seeing in the minutes? saunderserty and likely sticking the next out