francine: china's new measures. beijing's efforts to support its economy pushes the you want to its weakest levels in more than a year. investors have shown concerns over the revelatory block but -- shakedown of google. the headline figures beat the chiefbut executive says he's confident about the rest of the year. >> i'm positive about our development. that the confident rest of the year will go well.

francine: welcome to bloomberg surveillance. i'm fancy like why in london. stoxx 600e the 0.3%.g to 0.3% area -- there's some optimism. n tumbling to its lowest point against the dollar in more than a year. we are seeing a shift by china towards monetary expansion. i also want to show you euros/dollar. it's a little bit better than forecast. we also had a little bit of it'sn data and you can see 1.1691. we will hear from the chief executive. now gaining 9.5%.

more to calm, the interview of the day, the chief executive of ubs. the bank will try to get down to what it means for outflows and if he's positive weekend list entry doors. taylor: china has unveiled a package of policies to boost the neck -- domestic demand. the measure was announced following a meeting of the state council in beijing and includes a tax-cut aimed at fostering research spending and special bonds for infrastructure investment. the moves are intended to create a more flexible response to, quote, external issues. heald trump has warned that may act over u.s. imports of european cars. -- hee the comments that made the comments at the white house ahead of trade talks with the eu. the european union has been

very tough on the united states for their coming in to see me on wednesday. we will see if we can work something out. doerwise we will have to something with respect to the cars they send every year. the uk's expecting a 50 fold increase on interventions of takeovers of british companies and assets. ministers are introducing proposals that widen the scope over which they can intervene and deal over national security. they expect about 100 deals this year and want to undertake some kind of remedy in about half of those. wildfires have raged in greece near holiday resorts new the country's capital. people have been killed and injured in the nation's deadliest fire situation in more than a decade. they have called for international health of the european union. global news 24 hours a day

on-air and as tick-tock on twitter, powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. let's talk tech, google is still raking in marketing dollars from advertisers. propelling the online search giant to another strong merger. -- another strong position. it puts them on course for a record open. we welcome our guests. tech,rt us off, talking alex webb. thank you all for joining us. alex, if you look at alphabet, it seems like the revelatory burden was less than the dollars they got a never dicing. jumpedes, that revenue high about 25%, little more than

$5 billion. is howater concern regulation affects the down the line business. concerns, there's the general data protection regulation which gave more control over the data. that didn't seem to hurt google and might have helped them. the second is tracking -- traffic acquisition costs. that might be paying samsung to preinstall google search -- google search on a loan. they increased but less than revenue. francine: that's why they have pretty good margins. alex: absolutely. on the moonspending projects, that did increase. i think investors are happy to stomach that for now because they recognize down the line it might help alleviate some of the burden another part of the business. francine: whatsit mean for mobile? mobile is starting to mature.

regularly -- possiblyy impact is greater. the grip is little tighter than desktop. that means that the revelatory impact in europe, if that starts they attackown, and it more tightly in other markets, that would be a greater concern going forward. francine: is or anything from the regulation point of view that the you can do? alex: it's tough to say. the style was, my job is not to attack google. it's early to say where they broken the law. not to try to tell them how to run their business. it seems as though they've been left out about google's ad business. that's the third european commission decision that has yet to calm. that's yet to come. francine: do you like the tech

sector? valuations are quite high for the big four. the tech sector there's a wide dispersal valuations. well overtions earnings, you have to have conviction to go into one of the group isarea kind of lumps together. francine: do you worry about regulation? regulation is a worrying part of all industries that is some and will have to face in terms of challenge. there are different types of regulations around the world. some companies might have a better handle than others. it's really a case-by-case basis. if you want to stay away, you can go for apple? microsoft as well.

they have a cloud basis but they are not -- cloud business for the not dealing with consumer data in a huge way. they have next exposure but also less punchy evaluation. does this translate into how you view economics? it does show the trends on how we use mobile and interact with each other. one of the things that actually changes is how people like us do their research. there's a whole range and a new world out there. things you can look at. i've spoken to a lot of investors who tried to get a better handle on what's going on in the economy by looking at the data that can be glanced at these days compared -- francine: twitter and stuff like that? peter: that's the easy answer.

we could fill a show with this for there's a whole range of ways how we can look and compile data into new indexes that give you a better view of what's going on the economy than the traditional pmi's that came out today. that's probably a slight detour answer to the original question you asked me but it's interesting nevertheless. some of the asian tech companies to some of the ones in the u.s., can you say without doubt that alphabet is stronger and will continue to be stronger than the likes of facebook, twitter, and others? i think so, yes. you need google search to navigate the internet. all those other companies are arguably a luxury. you don't need snap. your portal to access the web is google. its essential nature.

he gives it an ad. -- it gives it an ad. francine: in the asian tech space is there something you like? you go after the chipmakers? >> the upstream seems better on a valuation based's. southeast asian countries have quite a bit of chip and conductor manufacturers. be 10, 20, 30 years down the line in terms of ai, driverless car's, ai, robotics. that's the kind of long-term play you want to look at. it will be part of the bigger story but if you can access that, that's the way forward. francine: thanks for joining us. peter.andini, and 20 coming up including ubs's wealth management unit. we are live in zurich next.

we will speak to the chief executive shortly. this is bloomberg.

♪ francine: economics, finance,. i'm francine blackwell in london. were ae volatile market boon for ubs's investment bank. they beat expectations but he contrasted with the key wealth management unit that slightly missed profit estimates. manus cranny spoke to the group's chief executive. look, we haveyou

a rating we believe we can match. we are not going into a victory lap. quarter, tax outflows in the u.s., we had one off outflows for a corporate transfer their. an employee stock option plan. effect onost no leverage or lending. clients are very cautious. we had a very good signal of a good momentum. making money was up threefold compared to last year. overall, i'm still positive about our developments. we don't look at new money on a quarter to orchard basis.

i'm confident the year will be ok. he said, if we go to a full trade war between the in china markets could be down by 10% to 15%. what do you think. we should look at the market a 10% correction is in the cards. can a trade war trigger the kind of correction? >> it doesn't need to be a war, just needs to be a constant escalation. a needs also potentially for the markets to correct. it will eventually be resolved. things can get worse before they get better. francine: let's talk to manus now.

good morning. just how good were these numbers? tom: he's probably sitting happily at his new quarters because his equities business is fairly stellar. his fx business is even better. volatility and flow the magic words. there's something for everybody in this set of numbers. and look at the wealth management, the real engine of the business, the profit number is $1.04 billion. they are taking costs out of the business. it's the shining star. i think there is that battle between the shining star, the wealth management and the other side of the business. , what a money outflow

way to call the market. you don't need a full war to get the markets to draw down. say?ine: what did he is he expected to pick up? the -- manus: he used the example of the american clients. they aren't running for cover, they are still pro risk. but what he has said is there's this slow drift toward cash from about 5% of their portfolio to about 20% in terms of asset allocation. the question is whether that evokes a substantial deleveraging. one other thing, there's a t live on your bloomberg.

he's announced the 25th of october as invest today. i think that's important because they gets a new targets earlier in the year that the market was a bit cap will about. it was a bit thin. the 25th of october 20 quite be atant, i think, will strategic reset my reset for the markets expectations of the team. francine: thank you so much. manus cranny there. that's keep the conversation on the banking sack her. peter, banks need volatility in the market. they also need higher interest rates. will europe be compared to the u.s. when normalizing interest rates? we are quite far behind.

there's numerous occasions when i've been on your show where my rule of thumb is to or three years. when we look at what the ecb has is to keep until the end of this year. summer ofhrough the next year, they will keep the interest rates steady. the earlier stuff i think we can ,et small, interest rate wise is next year. even then, our assumption is that this will be extremely shallow. i reckon before we get to anything that is not negative in terms of key interest rates in europe, two years past. francine: and that will put more pressure on european banks. demand for the growth prospects are perhaps slightly lower in europe. i think the key question is, can the european banks make money

and a time when interest rates are negative or when qe is still going from the ecb or there's just a lot more banking and bank activity in europe versus the u.s. in terms of her r per gdp basis. there's a lot more banks and institutions from small country and community-based to the large multinational branches. inhibits profitability. that's one of the reason why the profitability is quite low. this is a chart that hillary clark did for us this morning. the negative correlation between european bank stocks and credit risk. does it make sense, being on the credit side? nandini: the tricky thing with seen in the past few years is that parts of the credit market tend to spike up, whether it's the products or what have you.

i think there's ways to play the equity market versus the bond market. generally speaking, credit is not an area we are preferring across the board. we would prefer taking the equity risk rather than the investment grade reddit risk. you're good at folding so this corporate news into the economy. if you look at the different cycle you have mentioned between and the u.s., are you more reliant on what the fed does or what the snb does. peter: i'm not looking at single companies. you have to focus on where your businesses. , theompanies you mentioned multi-diversified businesses, they are obviously exposed to all of these areas.

the european banks in particular, and a good part of their funding markers are in europe. that's a key component. you have to look at how much exposure they have in other parts of the world. there are some european banks that are more exposed to troubled emerging markets currently and some that have significant on the next voter. the key difference here between the asset liability. we know is currently not the easiest fit to be in. francine: how much to you worry about emerging markets and the asian emerging markets where we see these banks trying to focus on private individuals. they've been hit by a possible double whammy. dollar hurting their debts plus trade. trade tariffs would hurt the emerging markets. peter: there's a whole range of issues that need to be looked

at. it's quite complicated to answer them in one fell swoop. i think some element has to do with the traditional political corruption in these type of things. and others have come from bad policymaking, turkey for instance as a clear example. you look at emerging markets in aggregate, what you have seen is a significant increase in dollar-denominated debt. on one hand, the dollar is strengthening where the emerging market currencies falling. and where dollar interest rates are rising, that's a difficult environment. you have an aggregation of these things, a large amount of debt plus some political troubles plus some bad policymaking, that's a bad recipe. francine: do you like emerging markets? nandini: we do on a broad basis that if you rank them based on the rise and external debt, the

ones are the worst external vulnerability are the ones that have had the worst currency performance. argentina, turkey, russia but that's also geopolitical. is starting to see the negative performers in emerging markets are the ones that have these geopolitical or vulnerabilities in terms of current account balances. the ones that haven't been battered by markets, china, malaysia, thailand, we prefer those and then within that countries like china that can keep their industries going. francine: some breaking news. agricole is planning to buy up to 10% in italy's creval. we did hear from the european

central bank just yesterday or maybe two days ago that something would be done. a lot of the smaller italian banks need to find a solution adequate to our sources, they are willing to take a 10% stake in creva. l. they've gone through new share issues and we understand that's one of the reasons it wasn't pretty good state. bigerge or have some of the stake.ve a big you can see it's up 7.82%. we will have more on the morgandation from jason and peter schappert. the german carmaker turns a profit for the first time in 20 years. parent company searches by as much as saw percent. we will bring you our exclusive

interview. that's coming up next. this is what your markets are doing. we are seeing a little bit of stocks rising. higher asures edging we have some pretty positive earnings. that boosted sentiment. we also had china's efforts to support its economy which are spurring a little bit of risk buying across the asian markets. losses ong earlier some of the data from germany. did have pmi's across the europe area. plenty more next, this is bloomberg. ♪ two, down and back up.

our phones are more than just phones. they are pocket sized personal trainers... last minute gift finders... siri: destination ahead. and discoverers of new places. it's the internet in your hand. that's why xfinity mobile can be included with xfinity internet. which could save you hunreds of dollars a year.

plus get $150 when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. am francine lacqua in london. let's check in with what trending on tech talk.

smartphones are moving slower than competing devices. a speed techfrom company. the euro is treading water ahead of the meeting on thursday. the shared currency is trading where it was a year ago against the dollar, caught in a cross trend. over the past few hours, the wealth management division sees outflows of the investment bank. machine powers on. this is the highest exposure to china. you can find out more on the bloomberg terminal. here's taylor riggs. taylor: china has availed a boost the policies to economic slowdown. this was after the state council in beijing. aimed ata tax cut

spending and special bonds for infrastructure investment. there will be a more flexible response to external uncertainty. donald trump has warned he may -- he made the talks at the white house. >> the european union has been very tough on the united states, but they are coming in to see me on wednesday. we will see of we can work something out. otherwise, we will have to do something with the millions of cars they send in. taylor: there could be intervention on a takeover of british companies. ministers are outlining proposals to widen the scope in which they can intervene in deals over national security. to examine 100 deals this year

and that would take half of those. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. i have taylor riggs. francine: thank you so much. they are trading higher after earnings and more positive picture of the outlook. that's despite the second quarter that missed lowest analyst estimates. billion,n at 2.7 one shy of the forecast. they also said it's improving programs and expect to reach targets for the year. joining us now on the phone is the chief executive. thank you so much for joining us. somengs missed estimates, segments were stronger and the outlook is positive. you forecast the

economy and what impact that will have. say leading up to the was impacted by several factors. was in brazil and with 50% capacity. if you look at the underlying situation in the market, it looks quite positive with good demand. more positive a situation. they are expecting the deficit this year. given the rise in your shares today, they are up a lot more than was expected when we had the earnings out, argue relieved that the market, even

though we had a lot of headwinds, they are relieved about the future looks like? >> that could be one explanation. i would say there are several areas that are positive. development in solutions that was the acquisition we did last year. we have good volume development and margin developments. we have good market developments, we see as i mentioned the market is quite tight. the global equities are going down. we have some support balance in the deficit. it was expected for there to be eight deficit for the year. there are several factors that might have an impact on that. francine: how much do you worry about the trade dispute?

about tariffs in the automobile sector? we look to that carefully. several -- we are buying at a much higher price due to the duties. the price for the product, we see that we have very similar margins as we had before. like it's paying for this. we are concerned about the long-term effect and what this is going to mean with global trade going forward. the policy will be an eye for an i going forward. blind, ifke the world underlyingues, the

sentiment in the market is quite positive. for cars, it's an important market segment. arecine: at this moment, you expecting the trade dispute to deepen? if trade does not bring global economic development, that could be an issue going forward. francine: thank you so much. he is the chief executive join us on the phone. let's keep it on earnings. they have jumped this morning to their highest in seven years. that's after the unit that the french company bought from general motors turned a profit. the chief executive spoke

exclusively to us. >> the changes in the world, this chaotic situation is making us very humble. what was true a few years ago might not be true today. for the time being, we want to be recognizing that we are performing well in europe and europe is a place where we understand our customers and can make great products. value, that's the reason we are such a big player in the market. that does not change our strategic plan. if we want to become a global carmaker. that means we will continue to develop ourselves in other parts of the world. this is exactly what we are doing now. for the time being, it's great to be a european carmaker.

>> is it good in the long term? >> in the long-term, our interest is fragmented. our interest is to make sure we are profitable and rewarding business everywhere in the world. this is why we have announced that we will come back to north america, which is one of the places where we are not so present. >> the u.s. president will european% tariffs on car imports and car part imports . is at jeopardizing your plan and your timeframe coming back to the u.s.? >> i don't think so. we change the way we proceed. of course, i think globally if we step back from this short amount of time, if we look at this from a broader perspective, we keep open trade in the world. that will create more wealth for

humanity and more win-win situations. stepping back, i think it's better for u.s. citizens and the u.s. country for open trade. that is long-term. now we recognize the current situation and we will adapt accordingly. francine: that was the chief executive. let's keep this conversation on global trade. argue long, short on carmakers? do you just want to weighted cianci have the trade situation plays out? >> this is fallen it quite a bit this year. be a value opportunity, but the more prudent way to go forward is to wait and see. the eu andtings with the u.s. administration on this topic.

hopefully if they can come to case, this is so important. metals and tariffs of already been put into place, small numbers. they may affect specific industries, not enough to this rail things. we are talking about something more challenging and could be detrimental to broader european growth. francine: it could be detrimental for u.s. growth. if these come into force with what we are reporting on, what does that mean to the world's gdp? will this de-escalate? : we don't have an estimate of what it means for global growth. i refer back to win the imf released theirs. cost estimate is it would

4.5% of gdp growth. i would like to make another point. one of the things it needs to be considered is currently going wari think the global trade is a little bit misplaced. eat dogrs in a dog world where everyone fights everyone, that's not the case. seems to be imposing tariffs and other kinds of on everyone else. and everyone else's retaliating against the u.s. the case can be made that the impact on the u.s. is going to be a larger than everyone else imposing on the u.s.. the case against that is the as drive gdp in the u.s. is larger than other parts of the world. how those two playoff could be

crucial, important going forward. it's very difficult to assess that. it escalates as people find allies. germany would suffer hugely if tariffs were imposed. peter: the estimates i've seen is it would cost carmakers in germany $20 billion. that's a big number. it's not going to be the end of the world. one of the things that has not been taken into account is what the reaction of the carmakers is. it, from thend german carmakers they are being sold in north america. then we have to take a look at how would they react to that. with a shift production around. there is a cost.

how large that cost will be at the end of the day is very difficult to assess. francine: thank you both. you will stay with us. stay with surveillance. we have plenty coming up. , the government makes his biggest push to slow the -- improve the slowing economy. the central bank compares to hike rates for the second time in a decade. we will discuss china next. this is bloomberg. ♪

francine: this is bloomberg surveillance in london. china has made its biggest push to invigorate the slowing economy, unveiling policies to raise domestic demand. chinese stock supposed to their best three-day rally in almost two years. one tumbled to the weakest in more than a year against the dollar. is the market right to embrace these measures? is and whatconcern scenario is this? will china use that trade tool? peter: it's a bit of a funny question. it is still a currency. beenush for many years has to let it float. in an environment like the current one, there is economic

stress, if you allow it to float it will almost certainly devalue. it, it isn't devalue very clear to me that in this environment, it is justified to some degree. to where exactly is more of open question. i'm not worried about the evaluation for say. francine: are you worried about the fact that the trump administration or president trump will take a certain way. >> this is getting into territory about names being called and what people are talking about back and forth. from the chinese perspective, it is somewhat justified. markets have been battered by trade tensions around the world. there might be a next her push that is required to continue for that domestic demand, which is

coming in strong. there has been deleveraging. this is starting to turn off credit growth. there is slowing in some parts of the industry. aside from the devaluation, they are trying to boost some credit and assess moving around. francine: is your any doubt that regulators in china understand what's going on and can deal with it? peter: that's always an open question. certainly, it seems to me that the package illustrates very therey that they do see is some concern for the economy and they reacted accordingly. we will have to see. it's very clear that not only trade tensions and internal problems they have, some quality measures were forthcoming and way. francine: i'm looking at my chart.

this is the rate for the 25th day in a row. 2016. the longest since that show traders are pessimistic. there is room for it to depreciate further, that's according to some of the foreign exchange specialists we've been talking to. how to get into china if you are bullish on china? >> at the conversation we're having with clients. we are interested in china and 70 new opportunities in asia. -- some of the new opportunities in asia. it means there is a broader universe opening up. arein the market, there consumer stocks that are based on some of the chinese internal the mystic demand being open for global investors. it's quite exciting. we are excited about certain parts of the asian market. we have experiential companies

that will withstand whatever happens around the world. people still want to buy their alcohol for their groceries or get an education within china. demographics we would prefer. francine: thank you so much. they are both staying with us and we will talk about the boe and pound dynamics next. boe prepares for a hike, there is a fresh defensive bond buying. we will have that conversation. this is bloomberg. ♪

francine: economics, finance, politics, this is bloomberg surveillance. the only has lost the first offensive quantitative easing. several banks will hike rates for the second time in a decade. was not sure whether he supported an increase at the next meeting. in and therericing

is an 88% chance of such a move. it's summer turmoil. it is next month's meeting. to bee expecting them tight on august 2. peter: the bank has put the analysis out and they said before the main meeting why they are inclined to raise interest rates. they haven't in may, i thought that was a strange way of communicating to the market. if you look at the analysis the bank is put out, they have very little option. that is one thing. we are calling for a rate hike because we follow the bank and we forecast what they do. me, the economy is doing ok. it's not stellar. the wage gains that the rate has set -- said will be coming have

been elusive. it's not one that should make you concerned. the inflation we currently see, which is coming down, it is certainly going to drop further. i don't see why the bank is in a rush to hike. if i may add, one of the key premises the bank is built their analysis on is a smooth transition in terms of brexit. i certainly think we are in the opposite right now. maybe you shouldn't do it twice in a year? peter: don't get me wrong. i think the way they have been prepping the market, they should go. should have been guiding the market in the first place. >> generally speaking, the key issue is the common argument is from where do you cut if you

haven't raised interest rates? you can shove that aside for a moment. the fed is doing four hikes in the next few years. holding still is a loosening measure. it acknowledges some positive growth. retail spending might be boosted by the warm weather, the world steepy not justify the rate hiking cycle they may be trying to get off. francine: thank you both for joining us for a very packed show. next withis surveillance. ♪

francine: china's new measures, gains. to keep

after amazes investors and tribes up concerns of regulatory crackdown after a blockbuster quarter. ubs trading revenue surges. net new money misses. he says he is confident about the rest of the year. good morning. this is bloomberg surveillance. tom keene is in the art. there are two global stories, one is chinese stimulus. you can see stocks up in china, something we haven't seen. euro area growth is slowing with more fears of trade tensions amounting into trade wars. tom: we have seen day after day of this. it really stands out in the data check. when you look at eu growth, you can look what we've learned over the last 24 hours from fiat.

hownd this fascinating italian fiat adjusts to the new global fiat. that will be fascinating the coming months. francine: there's not much italian left in it. it is growth in the region that has been softening on the back of a lot of concern about deteriorating confidence in europe as a whole. we will get back to that. let's get straight to the first word news in new york city. taylor: president trump would agree to an interview with robert mueller's investigators, there's a catch. rudy giuliani says the president would only take questions on whether his campaign colluded with russia. issaid the president concerned about a perjury charge of prosecutors believe other

witnesses. the new wealth management business at ubs is delivering on its targets. profits were better than expected in the latest quarter. that offsets $9 billion in outflows. overall, i am positive about our development. i am quite confident that the rest of the year is going to be ok. their investment bank had a better-than-expected second-quarter. the psa has managed to do something with the car brand at general motors. they made money. bought from gm year ago. it is now showing a profit. that has shares rising the most in six years. we had an interview with the ceo.

more than 900 million euros flow, that is a very positive signs of a turnaround. i would like to praise the ceo has beenhe doing a great job. we can say that each employee is contributing and i am happy to see the results with the stakeholders. greece the death toll in has risen to 49. more than 100 have been injured in the fires are being spread by winds raging 50 miles per hour. people went to the beach so they could be evacuated by boat. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom: equities, bonds,

commodities. we've got the summer field. futures are up six. let's go on to the next screen. that's yesterday. the yen.'s go over to let's put up the complex, that that isr yen and then something we rarely look at. rim, that is a level people pay attention to. francine: this is what i'm looking at, let's go through the markets quickly. i want to get to that in a second. stimulus,the china measures we saw go through. the euro caught in earlier decline because of german manufacturing data.

we had this headline crossing says thenal, barclays sfo is looking to reinstate charges over raising. if we remember what this is about, it's basically the front office in the u k looking at the barclays capital raising case. there are questions about whether they could face criminal charges from the sfo because they got him to avoid a bailout. this is what they have done. we will get to that in just a second. i don't know if this is having an impact on the share price. back to one of our top stories, china introduces a package to boost domestic demand. trade tensions threaten a

slowing economy. onshore line is the lowest since june 2017. what do our guests make of the move? thank you both for joining us. mean, does this intervention mean about trump? >> what we see as the chinese are very mindful of the activity level and the trade tensions which are threatening exports. they are doing their best to just mitigate some of that by gentle course easing to allow them to generate solid growth. we are talking about domestic demand. we forget how the economy is reorienting toward the domestic sector. they are looking to make sure that process continues.

francine: let me bring it over to my chart. argue long or short china overall? >> we are long some specific areas. we are very mindful of what spin happening as you just highlighted. you have to put those measures into context of what has been unfolding. this is around the reduction of available credit and the implications on the chinese economy. trickyvery mindful is a handle and the world is waiting for the reaction of the government and how that will manage this. tom: it's wonderful to have you with us. asset?h the new there's a whole new world out there from 10 years ago were all of a sudden cash matters and matter is thatrs

changed your strategy? sonja: i think you're right to point matter is that changed your strategy? sonja: i think you're right to point out there is a focus on what is a safe exit where you can find diversification benefits area whether cash is the right option depends on where you were based. in europe, cash is not necessarily an effective asset. u.s.,tralia or the two-year treasuries have ,ncreased the level they exceed that's a very different proposition. you have to look at what your options are depending on where you were based. francine: where do you find value? jeremy: there is a case to be made at growth stocks. china, we view a lot of the negative news is already priced in. we have looked at putting on some physicians, looking at cnh and buying that against the current dollar levels. there is some susceptibility.

regard this as providing value and we would look for a fall back toward the 650 level. tom: explain onshore offshore to our audience. it's very confusing that there is an onshore quote and an offshore quote. was a difference? it's the investor landscape, there is a differentiation between those marketplaces. they want to buy and sell the chinese currency. there is an offshore market that gives an indication or inability to trade without needing to be in domestic operations. it's an internationalization process of the chinese currency. in terms of the opening up of china as a financial asset and asset class. francine: for our regular

listeners, my chart shows the traders overseas are more pessimistic about the currency than those on the mainland. we understand by this chart that they could -- there could be room to depreciate further. for that.to jeremy it's a huge week for earnings. and thetalk to the cfo chief executive officer of anglo american. we will talk to itv. shell,ef executive of that is all coming up this week on bloomberg. ♪

francine:, let's go to earnings and more volatile markets as the investment bank be expectations that contrasted with his wealth management unit which posted he outflows and slightly mixed profit estimates. said he hasecutive a positive outlook. hadn the second quarter, we more normalized environment, but we had the effect of gaining market share because of our rolling out of our electronic engines. i'm very pleased with the businesses.of our goodso had a very momentum, the same financial advisor was a threefold compared to last year. almost the u.s., we have

60 in new money. i am positive about our developments. confident the rest of the year is going to be ok. that was the ubs chief executive speaking to bloomberg daybreak earlier on. our editor joining us. like ubs delivered a beat. >> i think investors have given it a thumbs up here it i think you pointed to the wealth management business. i think once they beat the charges, investors are putting aside the money outflows and putting it down to a one time manifestation here. it's encapsulated in the u.s..

we are looking at increasing focuses on cost. francine: ubs like credit suisse , if you see a trade tension escalating or if you see the fed move, is that going to be the front line for banks? >> absolutely. i think geopolitical uncertainty leaves a lot of investors to stay put and how invest assets actively, which is what the banks don't need. this is about the economy and the outlooks. tom: jpmorgan in the last five years has returned 16% per year. ubs is one of the better european banks, they've returned 1% per year. why is this acceptable to shareholders?

are they sleepwalking through this in europe? >> i think you're being a little bit harsh. ubs has been ahead of the pack in terms of tilting toward wealth management. you're getting returns for investors who are higher than other european banks. there is more to come. we have seen the build a capital buffer, much more so than expectations. that should transfer -- transfer to more. tom: how do they do in return and equity? >> i don't have the numbers at hand. francine: i'm looking for it. tom: they are almost overcapitalize. argument, thisr has been quite in demand and banks have been stronger

capitalized since the bailout. you see consolidation in the financial sector? does that make you like the sector? this is a theme that we try to get to the bottom of, are regulators ready for consolidation? sonja: it's a topic we have entertained for quite some time. --europe, is it creating worth creating a european champion? there are various opportunities already to see this happen. i would be surprised if we were to see broad-based consolidation. it would be take over time and nothing has happened. i think we highlighted some of the italian opportunities. i think rate -- regulators would look at it favorably.

it's more of a business rationale. it's difficult to justify a merger. tom: very good. we will continue this discussion. in our next hour, we talk to fidelity on the equity markets. the s&p 500 is in double digits. goldman is up 14%. next hour. ♪

francine: this is bloomberg surveillance. this is francine in london and tom in new york. google is making marketing dollars from advertisers. quarter another strong in the face of regulatory trouble in europe. economist now is our covers. when you look at what we google, thebout find did not make much of a difference. google ads are doing well. alex: it continues to grow. some of the changes may have helped it. the growth of their total revenue was just over $5 billion.

that's the same size as the fine. billion of cash in reserve. what we are looking at with how regulatory changes affect their business, it's not very much. they're mobile business continues to grow. it's not -- they are losing a little bit of market share. it is still a place where google and facebook dominate. it's the new platform where they are the windows of mobile. they have a new approach. alex, i really give them high credit for breaking out there other bets as well. they are a distraction, aren't they? this is the same business was eight years ago. there cap star 37% with a

massive growth rate. alex: it could be a description for now. the new cfo came in, she had a retrenchment. she sent where do we have a chance of making money? that is a moonshot in the truest sense. they have shed some of those businesses. for the future of google, they are essential. we have seen with happens with other incumbents when they rely on one business. i want you to dig deeper into this. give us an example of and other bet under her discipline that may actually pay off. give me another bet. alex: if we are talking about regulation, we talk about the way it's going to play out in africa and india. for google to make a play in

africa, they have hot air balloons that distribute mobile signal in areas where it's hard to get a tower. that is an opportunity for google to deliver services to new markets that otherwise wouldn't exist. they actually launched one of the first projects in kenya last month. francine: that's a fascinating story that i read about. space,u look at the tech is there anyone you like? is it may be the chipmakers? is it the balloons? have: i think overall we to put the tech sector into the context of the broader market. we are concentrating on the top five the dominate the media headlines. there is a chain that goes into that.

i think without going into too much detail, i am a bit worried that we have an unhealthy market development because it's just the one sector that dominates. if you look at the growth rates and the delivery of earnings so far, it is justified. from a more fundamental point of view, it's the only thing that doesn't have the same issues we are worried about elsewhere. we are looking at the supply chain across asia. francine: coming up, an interview with the cfo. that is coming up in an hour from now. it is 6:30 a.m. in bloomberg. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. streaming must see tv has never been easier. paying for things is a breeze. and getting into new places is even simpler. with xfinity mobile, saving money is effortless too. it's the only network that combines america's largest, most reliable 4g lte with the most wi-fi hotspots. and it can be included with your internet. which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. ♪ morning, this is "surveillance." i'm francine from london, home from new york. i know you want to talk about u.s. politics.

en, the former attorney of president trump. tom: we have a huge tweet from the president. we are joined by our bloomberg managing editor. up, and can't make it it's all caps. an've got to be kidding me, all caps message gets that much play. were you taken up back? capsu know, the all shocked me. caps, get texts in all the first reaction, the first follow-up is usually an apology. it is certainly shocking . we have seen this movie before, the heat he is getting from the mueller investigation is getting closer and closer to the white house. there is a distraction

happening, and that is probably what we just saw. are, iatever the threats have this tweet memorized, some form of military response. newspapers in the u.s. advance that story this morning. is there any sense of a nato response to iran? i don't see it. what i mostly see is disorganization. >> sure. again, taken seriously but not literally, maybe that's the best advice. obviously he is stressed about ally, for theest saudis that his enemy number one. francine: what does it all mean, for what we see next from president trump? it's impossible to say, but do we see a pattern? the president picking a fight with someone, someone showing up i don't knowhouse,

if it's retaliation or to distract -- >> muddying the waters is always a good strategy for a prosecutorial target. knowf the things that we it can probably insert is wherever this mueller investigation ends up, it's not going to be a clean break. you've got an enormous percentage of the american electorate who see it as a legitimate investigation by now. that's probably where things are going. it's going to be a mess, it's going to be the american political system eating itself up. vladimir putin is probably smiling about it. francine: thank you so much, james hertling. we need to get to one of our top stories that we broke about 32

minutes ago. said that the uk's serious fraud office wants to reinstate fraud charges against the bank in relation with its capital raising with qatar. this had previously been dismissed in may. for more on this breaking news, let's get straight to our reporter in london. when you look at why they would reopen the case, is it new evidence? do we know why they would again look at it? or is it just the way the jurisdiction happened in the u.k.? no, essentially all this is taking it to a higher court. what happened in may was that one court dismissed the case, and now the serious fraud office is taking it to the high court. they think they have a case. we can't actually discuss the details of it because there are very strict rules in the u.k.

about what you can say about live cases. -- about wh cases. the bank was able to say it was a difficult case for the serious fraud office to make, and now they are saying we can make the case, we think a higher judge should make the ruling. -- isn'tin this barclays free and clear because the court found them not guilty on a simplistic basis? are they being tried twice? >> no, no. they weren't found not guilty. the reason the charges were dismissed was not on an evidential basis. they were only dismissed because the judge said the legal argument doesn't stand up to scrutiny. it revolves around what a corporate entity can or cannot be tried for.

that is quite a complicated thing. basically, you need to prove that the whole board was aware and complicit in the action, and the judge never said barclays didn't do anything wrong. i'll say said was that the serious fraud office was unable to show that the whole board was party to all of this. the serious fraud office is now saying, it's not so clear. we think we can make the case. we'd like a more senior judge to rule. this is what barclays said two months ago when charges were dismissed. we haven't gone into the evidence at all, so we can't say anything about that. we will just have to see what the higher judges now say. francine: thanks so much. the very latest on barclays. let's get straight to the bloomberg first word news with taylor riggs. >> president trump may revoke

the security clearances of a number of obama era officials who criticized him, among them james comey and john brennan. brennan called the president treasonous last week. a white house spokeswoman says the formal officials have "monetize their public service in security clearances." u.s. congressional negotiators want to hold back the transfer to turkey. house and senate aides say it is part of a compromise defense spending bill. lawmakers at the pentagon need to submit a report for what it would mean. in the u.k., the government wants to make it easier to intervene on national security grounds. authorities expect there will be an increase in intervention on takeovers. the regulations would apply to both foreign and british purchases of u.k. companies.

and verizon wants to partner with google or apple when it rolls out the first superfast 5g service in california this year. bloomberg has learned that verizon wants one of them to provide television when the service is offered at los angeles and sacramento. came up giant short try to develop its own tv service. i'm taylor riggs. this is bloomberg. tom, francine? francine: thank you. now to trade. the european commissioner met with -- will meet with donald trump tomorrow, hoping to de-escalate tensions. joining us now, the associate professor of the london school of economics political science. still with us, fidelity international.

when you look at the implications of the meeting that president trump will have with jean-claude juncker, how can the president tried to de-escalate? >> he has a really hard task in front of him. trump has made it very clear that he is interested in this protectionism. it's not obvious that he will be able to deescalate the situation. in fact, they are already drawing up a list of goods they would retaliate on if trump goes ahead. massive, it isre already having negative implications on the u.s. market. francine: what does this mean for your worldview of carmakers? do you not buy them at all, because you could see something turning ugly, especially for german carmakers? or do you buy on the dip? >> is a part of this already reflected in share prices, one of the weakest in the european

market as everyone tries to figure out what the implication would be. none of the car manufacturers would take it, so the whole -- yet it would be a real impact on the european economy, and i think it's one of the topmost measures. we know that tariffs are most effective if they hit the goods rather than the raw materials. this is why europe was clear they would retaliate if that were to happen. tom: stephanie, we are throwing around a lot of multisyllable bilateral,ilateral, unilateral -- what is the game theory of all this? how big a level of the game of chicken are we playing? >> we are in a really dangerous game of chicken, and i think the challenge for the eu will be what to do next. they have adopted the traditional tactic of retaliation, which is what game

theory suggests is the right strategy. they have retaliated on politically salient issues. that works once. what do you do in the third round of retaliation? traditional retaliation doesn't work that well in these modern economies with global supply chains. the eu says he will impose tariffs on u.s. made ketchup in attempt to hurt this iconic u.s. product, and heinz says it is made in europe. it is difficult for the eu. they want to retaliate, they have retaliated once, they get less useful overtime. tom: stephanie, where i would go further is in the early spat, game theories are more narrow. then you broaden it out. stephanie, do you or anyone else think through what it means for the small truck industry in europe? there are huge barriers of entry to get into the

united states. what does it mean when they go broader the second or third round? >> it's a good question. we know there are 25% tariffs going into the u.s., that's a huge barrier. but the european union, if they have to retaliate again, will go broader. they will put tariffs on other products that will hurt eu consumers more. with the european union has done is tried to impose maximum political pain on the united states by targeting harley davidson, made in paul ryan's district, bourbon made in mitch mcconnell district, well minimizing the pain for european consumers. when you go broader you are increasing the pain for european consumers, because you are imposing tariffs on goods that consumers are trying to purchase. francine: if we go a step further, with the fed be unable to hike rates if the trade war escalates? >> i guess, eventually in the long run, when we see the real economic impact, for the time

being we are estimating what the impact will be. but eventually, yes, you would expect trade war's do not know any winners, and the economic impact will be negative. it will have an impact on the forecast of the fed, and eventually they will have to lower their forecast. but that might take some time to feed through. francine: thank you very much. fidelity international, lsc. a huge week for earnings.we will speak exclusively to the cfo and ceo of anglo american. plus, the chief executive of itv in her first interview of the day, tomorrow. also, we have all industries covered to give you a very nice picture of where trade goes. this is bloomberg. ♪

♪

francine: this is "bloomberg surveillance." tom, the first round of meetings between president trump and jean-claude juncker are tomorrow in washington. the u.s. is deciding whether to impose tariffs as high as 25% on car imports as part of president trump's bid to reduce the u.s. trade deficit. caroline connan sat down with the chief executive in paris earlier. >> i think it will change the way we proceed in the way we do it, but of course i think globally if we step back from this very short period of time, if we look at it from a broader perspective, at is better we keep open trade in the world. i think it will create more wealth for humanity, more win-win situations. so stepping back, i think it is

better, including for the u.s. citizens and the u.s. country, to have open trade. now, we recognize the current situation, and we will adapt. >> will you move to canada instead? >> or south america. >> so it is possible you will put more energy, more investment, into canada rather than the u.s., because of these new tariffs? >> so far, we look at it as a whole. we consider both markets as important, and we will implement a strategy that gives the possibility to come to those two markets. but again, let's be pragmatic. let's see how things are going to unfurl. willll see, based on what be decided beyond the announcements and all the things that we can learn in the medium. francine: that was the groupe chief executive with caroline

connan in paris. joining us now, the global automotive research analyst. still with us, fidelity international. you were talking a little bit about the automotive sector and the concern when it comes to trade wars. even if you do have a 25% tariff, is not necessarily the carmakers that take the brunt, it's the supply chain. what country or what piece of the supply chain will be hit most? >> it's important to recognize will on the whole, supply locate the larger components, factories are exposed to assembly to reduce logistic costs. for us at the moment we are more focused on the impact of the supply chain, but that is more regional. a breakup of nafta would have big invocations on the supply chain in terms of the u.s. and

europe. francine: but what does it mean for the german carmakers? >> the german carmakers, if you look at the number of vehicles they imported from the u.s. to europe and vice versa, you are looking at around 800,000 vehicles going from europe to the u.s. and 300,000 coming back. ironically, most of these vehicles are german. german suvs in th the u.s. coming into your, german sedans going into the u.s. we think the potential implications for daimler would the around $1.5 billion to $2 billion, but it remains to be seen if they still choose to shift those models to the u.s. clearly, there are economic choices that need to be made. they could be about redistributing the projects. china is one obvious example, particularly in light of the fact that the reese only dropped

their vehicles. tom: i want to switch to fiat. your work on fiat is extraordinary. you have a free cash flow yield of 18%, which is off the chart. did they get put out of their misery? who was going to buy fiat? >> well, that's a question we get from a large number of investors, and i think for the sad and unfortunate circumstances over the weekend, many people saw him as the person to make one final deal before his retirement at the end of the year. theerms of who might potential, the names that come up are usually fairly consistent. been cited. that cited theer

potential alliance of fiat chrysler and justin they might be open to do that alliance. historically it has always been volkswagen group but the weight of looks like its own restructuring it is focused on. tom: that's a very nice walk-through. we were toldas, yesterday by any number of guests, that is essentially a private company masquerading as a public company. what does the family want to do, given the generational shift they will go through with the illness? >> well, i think the family has been very focused on d concentrating their exposure to european mass-market auto production, and that has really been achieved if you look at it. 2010,dustrial business in this thing out of ferrari that has been a huge success, this been out that is presently being discussed either later this year

or in the first half of 2019. that objective has been achieved. now, iare the family think you were looking at a company which is undervalued but also that has huge potential. on june 1 fiat chrysler laid out their business plan then they are looking to double earnings to around $14 billion extreme billion dollars. if the family believes that can be achieved, i think having exposure to that asset is not a bad place to be. ittainly within our sector, is difficult to find another company with that kind of earnings essential. francine: thanks so much. our guest stays with us. on that point, can we talk a little bit about how you play the automotive sector? we know jean-claude juncker is meeting with president trump

tomorrow. these are fiery personalities. how do you price the markets and possibilities of it going wrong? do you ignore these runoff events? >> you have to make sure you do not over interpret the noise. it is not only tariffs weighing on auto share prices. we have seen a slow down in the global growth, and as such unit sales have closed down. you have to impacting measures .hat will weigh on them there will be individual stories but overall there are two opposing forces. francine: are we in the currency war? or is it all made up? investor,to me as an there are so many noisy headlines right now that trying to figure out what really drives the markets, i always revert back to fundamentals and try to add on top what the noise might imply in terms of the fundamentals. at the end of the day, it will

be long-term. tom: i want to talk -- we will do this in the next hour. forever,n the dow, up and then there's a great article from yesterday. do you use factor modeling? it has to come over to more traditional, non-hedge fund investment, where you are worried about value it momentum and trying to partition them out within your investment process. >> you can't really ignore them. if we stick with the momentum factor, it has been such a dominant driver. if you try to ignore it, you bite will underperform for an extended period. we cannot ignore the market competition in terms of participants has changed quite dramatically. it is always very good and helpful to understand what

individual stocks, how they classified, what's driving them, to a knowledge how unusual the last period has been in terms of the dominance of an individual factor. tom: do those processes help you in what you do, or do they help you buy helping you not do something, helping you avoid making a mistake? which is it? i know the answer but i'm asking you, it's a trick question. [laughter] >> to my mind, it is both. the understanding of market dynamics and how systems react to trends and changes, and obviously making sure that the fundamental investment process can at least acknowledge what is driving the market to make sure the market is not overly exposed at any given point. it really is using it to your advantage, even in a fundamental investment process. sentiment going

forward, so far we have had at good number. >> to my mind, the most that the part is markets have outperformed the economy for such a long period of time, and it seems to be in the final stage of the cycle where it looks like the economy is outperforming the market. expansion has been a large part of it, and earnings will be the dominant driver of share prices, because they have to deliver to see the market advancing from here. francine: are there clear winners in terms of industry groups and clear losers? >> we talked about earlier how it is a very one-sided market. the only sector that really works is tech, the rest is not working. we have the oil exception, but from a sector trend and with links to the debate, the momentum factor is predominately found within the tech sector. it is a very one-sided market, and it worries me, because it's

not a reflection of a healthy market environment. they are crowding the only segment last. yet they have delivered so far. putting timing on this is difficult. but getting back to the fundamental picture, 2019 seems to be the first year of a slowdown in growth, and you have to make sure which parts of the market you want to stay engaged with. tom: wonderful conversation. thank you for being here. we will try forward this conversation. in our next hour, for the entire hour, abby joseph cohen of goldman sachs. ♪

♪ tom: this morning, client markets are the single exception. beijing nudges the renminbi ever weaker.

the s&p 500 is up 14% these past 12 months, why are you in cash? abby joseph cohen from goldman sachs joins us. date to consequences the likes of which you have ever suffered. iran, nomore orioles, word from the pentagon. we call"surveillance," it google. alphabet just killed it. good morning, this is "surveillance,". live from new york i'm tom keene in london, francine lacqua. they were innocent, and now i guess they aren't innocent. do you have any tone on this at all? i was a little confused by the barclays news. francine: i don't think they were ever called innocent. what they said was they couldn't take the investigation any further. what we found out today is that

the u.k. serious fraud office is now looking to reinstate the front charges against the bank, stemming from the 12 billion pound fundraising with qatar during the 2008 financial crisis. tom: let's get our first word news in new york city with taylor riggs. would agree trump to an interview with special counsel robert mueller's investigators, but there's a catch. lawyer rudy giuliani says he would only take questions on whether his campaign colluded with russia. giuliani says the president does not want to be asked about the obstruction of justice in the russia probe, because he is concerned about a possible perjury charge if prosecutors believe other witnesses. and as you were mentioning, barclays have said british prosecutors will try to reinstate front charges against the bank. they have to do with the 2008 capital raising in qatar. london dismissed the case in may. if barclays had been convicted,

it could have affected their ability to do business globally. the newly combined $2 trillion wealth management business at ubs is delivering on its target. profit was slightly better than expected in the latest quarter, and that helps offset a surprise $9 billion related to tax withdrawal in the u.s. we spoke with the ubs ceo, sergio ermotti. >> overall, i'm still positive about it. we don't look at it on a quarter to quarter basis, and i'm quite confident the rest of the year will be ok. >> meanwhile, ubs investment bank has also had better than expected second-quarter. and doing something with the opel car brand that general motors can do. make money. they bought opel from gm year ago. they say they are now showing a profit and that has psa shares rising the most in six years, and bloomberg had an exclusive

interview with the ceo. the operating margin, more than 900 million euros of positive, free cash flow. we can say that it is now visible, and we like to praise the leadership of the ceo, who has been doing a great job in implementing. we can say that each employee's contribution, and i'm happy to see the results. greece, the death toll from wildfires near athens has risen to 49. more than 100 people have been injured. the fires are being spread by winds reaching 50 miles per hour. hundreds of people fled to nearby beaches so they could be evacuated by boat. i'm taylor riggs. this is bloomberg. francine, tom?

tom: a quick data check, equities, bonds, currencies, commodities. s&p at 28, a little lift in futures, oil still advancing with a nice not job after the president tweeting. the renminbi conflict, dollar-yen, dollar-or maybe, yen-renminbi. this is what really matters within this morning exchange. francine: i was also looking at renminbi. european stocks are up, u.s. equity futures climbing. i guess we had some pretty good, positive earnings that boosted investor sentiment. we also saw china trying to support the economy through stimulus. that is with some higher risk assets across asia, including one lower. what else i'm looking at is euro dollar. tom: one of the best things, as you know, is you stumble upon things in the bloomberg terminal. these charts are extraordinary.

the iranian rio is quoted by the bank of italy. this is not usd irr. it's what the bank of italy works on. 1978, and this is an amazing log linear trend of iranian weakness. it's extraordinary, over 25 years. it's not venezuela, it's not zimbabwe, it is uniquely iran. francine: i like your chart. i haven't actually seen it before. this is my chart and it is very simple. there's a difference between offshore and onshore, which i will try to explain to the best of my ability. basically if you look at the traderst shows that overseas are more pessimistic about the currency than those on mainland china, and there is room for it to depreciate.

further, you can see the offshore won is weaker for the 20th day in a row. tom: very good. we are thrilled to have with us for the entire hour, most generous of her, abby joseph cohen, with goldman sachs, advisory director and senior investment strategist, which barely describes her contribution to finance. we will get to the factor investment later in the hour. right now, we need to stop the show and go on the celebration. she has not been with us because she has in on a four-month bender.ff -- wins.n see -- he finally what does this mean to the capitals, and can they do it again? >> this is fabulous for the capitals. lovef the things that i about that championship was how

multinational it was. you take a look at the players on the team, their fans and supporters, we are talking about so many different countries represented, and the wonderful sportsmanship that we saw displayed. tom: it was a unique celebration. for those of you worldwide, the capitals have an won for a million years, and she was the last fan standing. and you say it's an international investment. can you acquire shares the stock market is morning? once again, you come back, double-digit return. can you buy shares here this morning? >> very selectively and very carefully. evaluation of the s&p 500 is ok, not great. it is basically trading at fair value for the overall market

when you take a look at earnings inflation. you have to believe that 2019 will be another year of economic expansion and profit gains. but here's the key message -- overall, we are approaching the point of inflection. the really robust growth in gdp and the really robust gains and profits, these are happening right now, and we do expect them to decelerate. it will be increasingly clear in 2019. that is something that does spook the overall market. i'm also concerned about those on phenomenal factors that are whetherto quantify, it's the possibility of a trade war or something else untoward on the international front. these are things that could unsettle markets. i am more concerned, by the way, about fixed income the mayan equities. -- then i am equities. francine: do you expect there

will be a correction in fixed income? andquickly could that come, how disruptive within the for the rest of the market? >> if we take a look at what has already happened, there has already been a notable rise in interest rates at the intermediate and long it has not been good for portfolio investors unless they have an careful, looking for opportunities. i think it will be increasingly difficult for fixed income investors to do well. we are looking at global bond markets, government bond yields are negative for more than half the developed economy. that is not sustainable. in the united states, we have already seen a rise in the 10 year treasury yield to 3%. can it go higher, we think it will. we would be cautious in fixed income.

it's not a large enough increase in interest rates to really damage the economy substantially, but it can hurt fixed income portfolios. francine: what are the challenges of a trade war escalating? you talk about a cyclical downturn, which would slow down a little bit. but if you compound -- what's the possibility of something ugly coming out of geopolitics? >> it is very hard for me as a financial analyst to express those probabilities. what we can try to do is determine what the damage would be if that were to occur, and it's obviously not a pretty picture. at one level, demand for u.s. product would be slightly affected. keep in mind that the unit is dave has enjoyed -- the united states has enjoyed enormous growth, but is still a small percentage of our gdp. what we are concerned about and what is so hard to quantify is what's the impact not just of

demand but on cost and on supply chain disruption. we are only beginning to see that. what we have now are anecdotes and we think this is what we need to be watching. if there were an all-out trade war, it would be very difficult for investors to focus very directly just on the fundamentals. the geopolitical environment would be uncomfortable. and one more thing, flows funds internationally. the united states benefits tremendously from non-us investor demand in u.s. securities. not just the treasuries, but equities. over the last year or two or three, a significant demand in u.s. equities has come from the country where the president is now talking about slapping significant tariffs. that can't make those investors particularly friendly toward the united states. francine: thank you so much, abby joseph cohen.

it's a huge week for earnings. we will speak tomorrow, i think, to the chief financial officer of santander. we will also talk to the chief executive of anglo american. if you look at the leadership of the industry groups we are talking to, we have the media, the chief executive of itv, and then we have oil majors. all of that and much more, coming up this week on bloomberg. this is bloomberg. ♪

♪ tom: we welcome all of you worldwide. francine lacqua in london, tom keene here. podcast,get our apple abby joseph cohen will be featuring heavily on this

she is in charge of china panic. you have a wonderful skyscraper in hong kong, there's a fair amount of china panic whether it is 1600 pennsylvania avenue or other places. >> we have to look at it in two different time periods. right now what we are seeing is that the chinese economy has been slowing, the chinese monetary authorities are trying to provide stimulus. why is this important? globally the chinese economy is the world's second-largest, it's also a major trade partner. we are focused on the u.s. trade on the bilateral basis but china is an enormous trade partner for so many other countries and weakness in china would be problematic. ,hey are huge importer

particularly for many emerging market. i think the real china concern should be longer-term, where the chinese government has been toused on long-term policies enhance chinese growth, chinese competitiveness, and the chinese role in the world. it is the biggest risk to united states dominance. francine: today we saw this thing government push from china to invigorate the economy and financial markets, not only in mainland china but worldwide, taking this as they want to put risk back on the table. what are the pitfalls for chinese leadership and regulators? otherarly, investors and policymakers are commenting because the chinese are taking these actions.

if we look at expectations for global gdp, what we are seeing is this inflection that i mentioned earlier. the expectation is that growth in 2019 will be slower, notably around the world. not just the united states this down to5%, 4%, slowing something just a bit over 2%. we see that in almost every other country and the one exception is brazil, which has been emerging from recession. and thea slower year, united states and china are moving more slowly and that is reason for concern. we believe that investors are feeling more comfortable over the last couple days, and the chinese are stepping up through their monetary policy capabilities. one of the things we really should be focusing on is this long-term strategy that china has been in terms of their

version of the asian development bank. think of it as the marshall plan for asia in which china is the if you financier and think about the advantages of the marshall plan for the united states in the 1950's and 60's it is one of the reasons they became such a dominant economy. the chinese are also employing other aspect, just a few years ago all trade done within asia was done in the form of u.s. dollars. it was the single reserve currency. we now see that many of these trade contract are being done in chinese renminbi and this is something that enhances the importance of the chinese within global commerce. this is something that we should not be ignoring, it is something that is quite important. francine: is there a vicious there,- china puts out

the more the yuan begins, the more they risk urging of president trump because he believes that's manipulation. >> there's obviously concern on the part of many that this is manipulation. if you look at the performance of the renminbi since the financial crisis, however, you see that it is one of the few currencies that has been strong. that doesn't mean it is valued appropriately or inappropriately, it just means the momentum has been quite robust. the declines we have seen most recently are of very small amount of give back. tom: what a pleasure it is to have abby joseph cohen. someone with decades of experience in securities research, in media and in technology. sweeney and abby joseph cohen on what alphabet and the rest of

them brought. whatt to open this up with we are observing. 30%, and the bottom line is scale has disappeared. technologists are really with this. google, amazon, facebook -- when they destroy our normal scale, what have they rot? >> incredible market share across their businesses. we look at the internet business which is dwarfing television at over $70 billion in the u.s. it is down to two players -- facebook and google. you take a look at e-commerce, who was the dominant player? amazon, because they can reinvest money. jeff bezos reinvested his business like no one else, a scale that no one else can build. you see the market share is that

amazon has and how they can go with ther businesses drop of a hat. it's the scale we are seeing from some technology companies, and the next frontier will be the cloud. this, it'sou hear almost a generational shift from the return to scale that we all studied. does the government need to intervene? the concentration here of cash flows alone, does it demand government interference? >> clearly that's the conclusion from the europeans. i think that if europeans are european it also protects us to some extent, and i do think there's a need for government to at least look at whether there are some elements to be regulated. -- you may have to talk about something that you

can feel more directly, which is privacy concerns and also some of the other issues that europeans have been active on, whether personal data is being well protected. what we discover is that when they implemented their last round of regulatory increases, many of us were affected by us as well. we begin to see some of that benefit. most importantly, many people here are raising alarm bells. i'm not coming to a conclusion about exactly what sort of government regulation would be appropriate, but it is something that we have been ignoring up till this point. ifncine: two abby's point, you are an investor and you want to remain outside the data privacy issues swirling around these big companies, is there anyone else apart from apple

that can give you that safety? >> amazon, their core e-commerce business is outside of that, but we raise the issue that amazon is becoming a significant advertisement play, trying to break up that duopoly between facebook and google. we are looking for amazon to have $3 billion of advertising which is a huge growth rate. spaceok at the technology starting with microsoft in their operating system, the europeans have taken the lead on regulating the u.s. technology sector. the u.s. played a light hand. we noticed a change when the u.s. congress brought mark zuckerberg in front of them, that marked a change and raised the question among investors -- is this the point where the u.s. congress and the regulatory environment will step up?

>> one quick observation -- when mark zuckerberg appeared before congress, it became very clear that the members of congress were informed with regard to the technology business, and it is difficult to see that cast of characters making good decisions. it would be important for us to build expertise someplace, in terms of people who really do understand how technology works. hour, wein the last were talking about the idea that it's aer that's -- corner and business. why should they stop? what is the motivation for for competingon with amazon? they are not going to stop. there is no indication. >> no.

that's one of the issues they continue to spend significant amounts of money, double-digit growth -- i think they are spending it smartly, on people and technology. the r&d remains very high at these companies. we are seeing a lot of spending in the cloud, they added another 4000 people, high-end engineers. the companies continue to reinvest in their business which creates a moat. me, breaking news -- pulse abby joseph cohen -- here's the breaking news on eli lilly. what's fascinating, these are the people -- i was saying the other day, i was saying, guess what? dogs die. 1954, they were the

first people to do antibiotics on animals. this will be an interesting transaction. revenue and earnings are out on eli lilly. ins is an acclaimed company the biology and microbiology industry. we will come back -- everybody in the industry talking about this great article on factor investing. i demand we speak to abby joseph cohen about factor investing, the pluses and minuses. ♪

♪ we like to look out at st. paul's. this is the other way from queen victoria station. the acclaimed mansion house as

well and also saint stephen's church. there is a roman ruin there. francine: it is under a headquarters in london. the office issuing a warning telling the brits to stay inside because it is too hot here. you are probably in your car so you know it is very hot outside. haven't seen whether since 96 u one or 62 since that heatwave. with us is abby joseph cohen. what a lot of people don't know is you really care about the distance and their veracity and you are questioning the gloom on productivity and gdp. our: we are not measuring economy properly anymore. we don't go out and measure everything. the commerce department is not in a position to do that so we

use a sampling technique and the samples are based upon the way the economy used to look. are not properly picking up a good deal of what happens to the service economy or picking up a lot of cool new stuff happening in manufacturing grade in the 19th -- in manufacturing economy. moree 50's, about 50% or were in manufacturing. now it's about 10%. if we take a look at manufacturing as a percentage about death of dollar output -- of dollar output, it is about the same. financial services, other services, we don't know how to measure productivity. very often the statistical data reverts to zero. tom: chairman greenspan talked about the spread the difference between chairman powell and martin across 50 or 60 years, is because he is tethered to phillips curve to phillips wedded

curve certitude? abby: he is fortunate to have an outstanding staff and they are well aware of it. the people at the fed like the rest of us need to understand oh we are all trying to use are in many cases -- data we are all trying to use is flawed. what i'm concerned about is not taking into account some of the things paul sweeny addressed and that is the impact not just on productivity but also one gdp growth on newer technologies. francine: is that what economists are getting wrong? or is there something else to worry about? whether it's economic models or actual economists misjudge? abby: i am concerned we are not giving proper attention to technology not for a lack of trying, we just don't have the data and the commerce department is not collecting it as we need.

i'm concerned we aren't collecting data properly in the service sector and the other big area is multinational trade. it's about the only place we have good -- the only place we have good data is u.s. canada where we collect excellent data in both directions. for many other countries and many companies, we do not know from a macro standpoint what those supply chains look like. tom: we have another headline on the bloomberg. a $3 billion transaction. are we seeing a pickup in m&a because rates are going up and cfos are getting out? is there an urgency to get transactions done because rates are going up? abby: we are seeing the cash many companies have being used for a number of things. m&a is clearly one. we have also seen an enormous increase in share repurchases as a function of the corporate tax-cut where many are repatriating funds, using it for share repurchase.

it is boosting return on equity because of your buying in shares , r.o.e. looks better. what we are seeing right now is close to the maximum impact that we will see with corporate results as a consequence of the tax change. tom: let's continue our discussion. , yournow in new york city first word news coming here is taylor riggs. >> president trump may revoke the security clearances of a number of obama era officials who criticized him. among them former fbi director and the former cia director. a white house spokeswoman says the former officials have "monetize their public service --wered your declarant is." and security clearances." house and senate aides say -- as part of a agreed bill yesterday.

lawmakers what the pentagon to submit a report on what it would mean for u.s. turkish relations. barclays says british prosecutors will try to reinstate fraud charges against the bank. those out to do with the 2008 capital raising with the nation of qatar. a judge in london dismissed the case in may and barclays -- a judge in london dismissed the case in may. if barclays was convicted it would've faced issues over the world. changes are being outlined today. a 50 folds expect increase in interventions on takeovers. will apply to foreign and british purchases of u.k. companies. the imf predicted the inflation rate of venezuela will soar from .,000,000% the government of nicholas maduro continues to print money. the imf says venezuela's economy

will shrink 18% in 2018. verizon wants to partner with google or apple when it rolls out sir -- the first superfast 5g service in california. verizon wants one of those companies to provide television when the services offered in homes in los angeles and sacramento. the wireless giant came up short in trying to develop its own tv service. global news 24 hours a day on air and on tik tok on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. thanks so much. let's get back to earnings. results all the returns to sale growth in brazil. the company said it could emerge in a stronger financial position if one of china's largest oil companies takes control. that is according to the cfo who joins us now on the phone from switzerland.

thanks for joining us this morning. on possible take trade wars? and willmpact syngenta it impact the shaky recovery to the agricultural? mark: i think the trade wars is something that continues to rumble around between china and the united states and certainly we are seeing closely. we have seen a substantial impact on soft commodity prices. a medium-term impact if it remains on from around the world. in terms of the short-term, we are seeing traders looking for -- looking in latin america. ultimately free trade is something syngenta supports and

we hope the governments resolve these disputes to the benefit of something -- but it is something we watch closely. francine: are we seeing any impact amongst farmers? are they actually decreasing the amount of acreage they are farming? in the united states the dispute really escalated after those farmers made their planting decisions so soybean and corn growers both plant about 89 billion acres, that is slightly down from the prior year but we don't see material impact from the potential dispute. what we are seeing in latin uprica is acres likely to be of both corn and soybean which will be favorable for us in the coming season. beyond that it's difficult to say if farmers will decide when it gets closer to their suspected planting windows. francine: sinochem has taken

a.er leadership of chemchin what will be the impact on syngenta? the: president -- presently chairman has replaced the previous chairman as chairman of sinochem and chemchina. he made it clear he understands the strategy we are on and supports everything we are trying to achieve and we are working in the background to facilitate the execution of those strategies globally and in china itself. as to whether chemchina and sinochem merge down the road, that's a decision the chinese government will make. we feel comfortable working with both parties. we have a strong strategic relationship with sinochem. we have worked for the last all months with chemchina, we see little impact from a day-to-day

operation perspective if there was a merger. if it comes to pass we will look for further opportunities given their strength in a number of sectors as well. tom: as you know there are amber waves of grain across america and that has led to an arrogance in agriculture in america. how are american farmers doing and what are they and -- and what do they most get wrong about other nations to export to china? farmersthink american have been the most productive in the world for many years and they have been the first two. technology to improve the quality and yield of the grain they grow. i think they are reflecting on the recent drop in commodity prices and recognizing that their exports into key markets whether that's europe or china specifically, may be hampered if

they can't remain at the level they are. aspirations ofr the chinese government is to drive more self-sufficiency, to drive modernization and agriculture in china. the current disputes will only escalate this desire to do that. that undoubtedly will potentially impact on the u.s. farmer. tom: thanks so much. we are going to continue with abby joseph cohen at gold dust -- of goldman sachs. your morning briefing, look for that bloomberg daybreak coast-to-coast. this is bloomberg. ♪ ♪

tom: bloomberg surveillance. update.t a daily as we do we will get back to cohen.seph , the president got the world's attention. at one time it appeared the president would be able to theorynt nixon's "madmen " and scare other states into acquiescence more successfully than nixon had. maybe next year trump will be claiming credit for hurting war and praising president rouhani as a talented, funny, intelligent and a strong leader who loves his people. mr. cirelli is bouncing off the walls. onin: the large developments

whether or not the iranians will respond in any way, i think yesterday we saw the white house briefing with sarah huckabee sanders was essentially trying to argue that the entire administration is on the same page and very much if you look at the rhetoric from president trump to stay -- secretary of john bolton, all of them speaking from the same playbook. tom: within the helsinki hopes there was a region east of israel that was the center point of attention. how do those different players playoff what we saw from the president late sunday evening? yesterday i was speaking with sources who suggested the saudi's are happy with how president trump is tweaking with regards to iran and the saudi's are happy to see the direction the administration has moved in with regards to the removal from

the iran nuclear disarmament deal. whether or not the u.s. is able to negotiate some type of other deal, we will have to wait and see. we will have to see what nikki haley does. she is in lockstep with president trump and the two other administration officials i named. this is now increasingly coming to the forefront and i would thatnote, we have to note russia is still selling missile-defense systems to noronto and that it -- to tehra and that is not something the u.s. likes at all. francine: what do we need to know about nafta? kevin: there is a lot of talk there could be some hope in terms of negotiating some type of deal or a one-off deal by the end of the year. the administration has been tightlipped. presidentew elected in mexico, there appears to be

some type of goodwill in this sense they want to get to some type of deal. i'm not sure we have any concrete evidence of that in the short term. francine: thank you so much. our chief washington correspondent, kevin cirilli. let's get back to abby joseph cohen. u.s. despiteto the the possibility of tariffs. i think he truly change the way we proceed and the way we do it. i think globally if we step back from this very short period of time and look at it from a broader perspective, i think it is better we keep open trade in the world. i think it will create more wealth for humanity and more win-win situations. stepping back i think it's better including for the u.s.

citizens and the u.s. country to have open trade. i think that's on the long term. we will adapt our plans accordingly. >> will you go to canada instead? >> it is part of america. >> so it's possible you will put more investment into canada rather than the u.s. because of raising tariffs? >> so far we look at it as a whole. we will implement a strategy tot gives the possibility come to those. let's see how things are going to unfold and we will see based on what will actually be said beyond the announcements and things in the media. we are thrilled to bring you abby joseph cohen of goldman sachs.

yes it is about equity investment, far more it is about intellectual rigor. her work with the institute of which am a member as well, her publications in many academic journals including a high level of -- as well. -- including a high level of mathematics as well. this idea of factor investing. let's partition out what we all learned into momentum, into value, small-cap, large-cap and a few other things and we do better. is it by what he does with factor investing or is it something that helps him avoid doing things? abby: i believe it is the combination. factor analysis is something many people are familiar with. when cliff was a young person in

the industry at goldman sachs and we discussed factor analysis , i don't need to do my foreign, but i was one of the few people in the research department who was familiar with it because factor analysis has been around for a long time. for things like economic development and economic growth. done has been to apply the mathematics of factor analysis to financial markets. it is a question of finding opportunity. also to find risk. tom: this is a discipline because it's not like the bell curve of your high school class, it is asymmetric where you lose more on the downside than gain on the outside. is an issue in losing less and that has been

the charm of aqr. abby: it also helps explain what's going on. it helps explain why certain securities and sectors are not doing well. those with low correlation to other factors and this is really important and it is intellectually and peel -- appealing because it explains things. it actually is a box that helps explain what's happening in the economy and in the financial market, not just in the united states. francine: how should investors prepare and where should they invest to be more prepared for the economy of the future? does it move from the sharing to artificial intelligence and does that include driverless cars? abby: there are so many issues and i'm so glad you mentioned a handful of them. i would start with valuation.

the valuation of the s&p 500 is just about where it should be. we need to look for miss pricing. either -- mis[ we need to identify longer-term opportunities because they may very well be mispriced. one concern i have is there such enthusiasm for some technologies. the cheapot priced in matter in the bright death in the marketplace. -- in the marketplace. if there is some unfortunate news, even if it is a quarter or two, there is not much margarine or cause -- margin or cushion for error. that becomes a concern. taking a look at the impact on our economy, but we have to recognize technologies, to use the parlance, they don't

have to be just cool, they have to actually produce a product and one with a sustained business model. playere: does the bigger take hold. how much bigger can amazon become? can it dominate everything we do day-to-day? abby: i'm going to go back to one of the first meetings i did for the cfa program and it was a case study of the international business machine company. 60's,in the 1950's and many investors at that point you that it's growth was going to -- viewed that its growth was going to be unlimited. 10 years later it would account of u.s. gdp. 50% obviously things do not grow to the sky. things of happen and i happen to not be commenting on the company you asked about just to say

let's take a look at sustainable models. but also what's happened in terms of exogenous factors. here is a chart, i use the dow instead of the s&p 500 but they look remarkably the same. the dow going back to the beginning of the 20th century. the huge depression move and then a long move up at higher. i know you are not going to comment on amazon. momentum is such a dangerous thing. it goes back to weinberg of trees going to the sky. are we anywhere near a trees going to the sky factor analysis? abby: i will tell you what it is showing and that is momentum stocks have underperformed the -- 100 by about 10% percentage points year to date.

we have also seen under of about that magnitude for stocks with international exposure. what we are basically seeing is that investors with a market that is roughly a fair value are becoming more careful in this process and that's what they should be doing. cash is an asset for us in something that investors should not be thinking about either in , but rather is equities rise in evaluations do not improve because they will have prices rise more than the earnings underneath them are growing. levels,me to raise cash we have been recommending to raise cash as we mentioned before because so many fixed income that we will be seeing offering at this point. tom: we will continue this discussion.

abby joseph cohen, senior investment strategist at goldman sachs. there is so much more, we are utx.g you tx, out -- q2saw one guess of 5.3% for in a boom gdp. we will continue this discussion across all of bloomberg today on earnings and of course on the economics and the focus on china and politics of washington. please stay with us. this is bloomberg. ♪ two, down and back up.

our phones are more than just phones. they are pocket sized personal trainers... last minute gift finders... siri: destination ahead. and discoverers of new places. it's the internet in your hand. that's why xfinity mobile can be included with xfinity internet. which could save you hunreds of dollars a year.

plus get $150 when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. alix: alphabet amazes. google beating estimates with

the fastest pace of revenue growth in four years or it -- four years. the bank leading a solid quarter. thank you china. stimulus gone as the country looks to taxstimulus cuts and sl bonds to support its economy to offset trade and global growth fears. david: you have more than paid your dues. welcome to "bloomberg daybreak." i'm david westin and i'm glad to be back. alix: him taking a day is a big deal. david: it is a long way from croatia. alix: how was it? david: it was spectacular. teamwere so proud of their , we were w