>> facebook shares plunge as news breaks and revenue flows. it could be the biggest wipeout in stock market history. and the eurump avoided trade war, agreeing to defend new tariffs. for hints. mario draghi delivers the latest policy decision, six years since the whatever it takes speech. nejra: welcome to "surveillance"

are seeing some gains in european equities, after a third day of gains on the ms the -- msci. you are seeing carmakers outperform when it comes to the stoxx 600. presumably on those talks and the progress between president trump and juncker. though, who knows where it will go from here. we thought negotiations with china and saw where it went from there. we are also keeping a close eye on the euro, holding on to gains from yesterday. saw general of weakness following the progress between those talks between president trump and juncker. on crudeing an eye oil, holding on to gains from yesterday and of the fact that we are seeing concerns around tanks in saudi arabia. but facebook is what we want to talk about, and absolute facebook means we saw the stock dropped as much as 24%.

you can see where it is moving now. of course, we will see what happens at the open. one key thing to think about will be when we talk about the market values, $151 billion wiped off at one point. could it make history with the drop in its stock when we get the u.s. open? question, of course, is how much contagion there could be over this one stock. for now, let's get bloomberg first word news. taylor: donald and the eu commission president juncker have agreed to suspend new tariffs will negotiating trade. they agreed to imports more natural gas and soybeans, and both about to lower industrial tariffs. also agreed to re-examine steel and aluminum tariffs and retaliatory duties. the announcement pulls

washington and brussels back from the edge of a transatlantic trade war. donald trump will lay a second summit with vladimir putin until next year. specialton cited counsel robert mueller's investigation into russian interference in the 2016 presidential election. house, last week, said trump had invited him to washington for a meeting in the fall, a move criticized by both republicans and get democrats. another step to ease the pressure from its deleveraging campaign. the pboc has told some banks that a specific capital requirements will be eased to help support local institutions in meeting credit demand. the move comes as authorities try to mitigate increasing risks from the trade war. british officials are considering allowing the eu to impose market regulation on northern ireland, while the rest

of the u.k. breaks away. bloomberg understands the plan would come into force as a backstop if other options fail in order to guarantee there will not be a hard border with ireland. likely tol option is enrage the northern irish party, threatening theresa may's fragile conservative government. and in greece, the number of people killed by wildfires has to 81. 281 -- risen firefighters from italy, romania, and cyprus have joined while u.s. surveillance aircraft is trying to determine if the fire was started the -- deliberately. arsonists have deliver the targeted the area around the capital for land development. global news, 24 hours a day on air. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg.

nejra. nejra: thanks so much, taylor. let's kick off with facebook. shares tumbling as much as 24%. if it opens this love, it will be the biggest route for individual stocks. it comes after they reported earnings for the first time since 2015, and they missed analysts estimates on revenue. they have also missed in both monthly and daily active users. mark zuckerberg made mention of the decline and pointed to the laws.p are laws -- gdpr >> it was an important moment for our industry. we thought declines by about one million people as a result. at the same time, it was encouraging to see the majority of people affirm that they want us to use context, including from websites they visit, to make their ads more relevant and think -- improve their

experience. nejra: joining us now is our guest host. and joining us on the phone is oliver, u.s. research sales at atlantic. oliver, let me start with you. breaks to see you and thanks for joining us. is this a reality check? oliver: i think it is. it is an interesting reaction. the stop was initially down 8%, which looked fair. but after the core, which is i think where the damage was done, we eventually settled down. it looks that we are stabilized coast to 20%. and that looks fair in terms of the move today, which is also the way we have to frame this move. remember they were up 26% going in, and it actually recovered 43% from its march low.

so it had a huge run. maybe some complacency and in a flagging these potential concerns. which really have not gone away from the cambridge analytical scandal. i think this is where this all stems from, and is clearly still an issue. nejra: how much of a concern our costs? they are a knock on effect of engagement having waned. engagement get backup, they're having to spend more. to try and reassure the user base that security is paramount. they are having to invest in new infrastructure, new aspects of the business to keep people on core facebook. that is what people are grappling with. it is the core business. ever but he knows instagram is a great business, a lot of engagement there.

on the core facebook platform that i think you are seeing issues and they are having to invest aggressively to try and turn that around. at the same time, we have seen the spending come through in terms of media. the worldched any of cup games, you will see the facebook advertisements loud and clear. their comments, exactly same way and full-page newspaper ads as they try to reengage and convinced users the platform to save. briefly, do you get the sense this will be one that quarter or is it the start of a bad period. oliver: they have already told us things will get worse before they get better. they said the growth outlook is not as rosy as it was. there are at least two more quarters of slower growth. costs are going to grow faster than revenue for the next two years. the outlook does not look great.

on top of that, you have the sentiment. and more importantly, engagement. and that is what drives numbers. if they cannot get engagement right, the rest follow suit and revenue will be under pressure as advertising slows. nejra: thank you so much for joining us. alberto gallo is with me on set. is, yes, wetion have seen this drop in facebook. is this going to feed through to the rest of the sector or is it isolated? alberto: there are three things we're thinking. perspective, the tech sector has discounted low interest rates for a long amount of time. so that growth rate has been boosted by low interest rates to very high multiples. number two, it is a crowded trade. it is a popular position across a lot of funds, and also in

retail, there are notes or etf that focus on that, which make it a very crowded trade, reacting to that there's. perspective,tory imagine it half of the regulation would be applied to check with regards to personal data. even if you only had half, costs would go up a lot and levels of engagement from people are declining as people realize that their data is being used in ways they do not want it to. we think this is a crowded trade. that havecompanies diverse of business, like google. and others that have only one type of business, which is more of a risk, like facebook. so generally, we are pretty cautious in the sector. and how connected or disconnected is the sector from the rest of the u.s. equities

based. i want to know if we get a tech selloff, will that bleed through to the rest of the s&p 500? alberto: half of the market cap comes from very few names. less than 10 names. there is a lower impact from a selloff in the sector. faang's.angs -- nejra: but what cause more jitters in trade sentiment in the next few weeks? alberto: hard to say. but what we have seen is increased fragility across markets. we saw it with the volatility selloff. we saw several events in italian bonds. so we have seen an environment of lower liquidity, without making markets a more binary and volatile. july has been a quiet month,

seasonally, a good month. but i do not think volatility has disappeared. we still have low liquidity and a lot of crowded trade. we have seen these crowded trades pop in one by one. volatility, bitcoin, mediatech is the next one. has given you optimism at all? alberto: earnings have been good in the u.s.. reductions to the tax and the impact of protectionism. of impact iser positive for an economy, a large close economy like the u.s.. out a littlecoming less well in europe and emerging-market. it also reflects the redirection of growth back to the u.s. from the tariffs. nejra: alberto gallo stays with us. and stay with us, plenty coming up. president trump and juncker

agreed to suspend new tariffs. could this be the beginning of the end for a global trade war? and we hear from the ecb. mario draghi's executive paints a positive picture and we learn about the plan to hike rates. this is bloomberg. ♪

nejra: economics, finance, and politics. this is "bloomberg surveillance." let's get the bloomberg business flash. here is taylor riggs in new york. taylor: as we mentioned, facebook shares have slumped after the social network reported second-quarter sales and user growth that fell short of analysts production. the company also told wall street the numbers won't get any better this year. >> this is a critical year for

facebook. we may progress preventing abuse, forged ahead with new innovation, and are adapting our services to the new trends. they have finally given investors the share buybacks they had been demanding. the anglo dutch energy producers says they are starting a $25 billion share repurchase around, two billions in stock. but even there estimates fell short of even the lowest and -- analyst estimates. >> a commitment to divest $30 billion worth of assets. part of it was debt, but importantly, to upgrade our portfolio. we are essentially done, just putting the finishing touches on it. but we will deliver by the end of this year. daimler's profits

declined after failed momentum for its mercedes-benz luxury cars slowed. the world's biggest luxury carmaker reported earnings before interest and tax of 2.6 4 billion euros. the manufacturer, making the first prominent company to cut its profit outlook, blaming in part because leading trade tensions. anglo american is given the green light to a new copper mine in peru, while also rewarding shareholders as its first-half profits surged. this is as the company climbed billion, and will pay a dividend of $.49 a share. the product has been well prepared, probably the best i have seen. secondly, a much different cost structure to what we have seen in the past. we have syndicated the development of the project. i think that is an important step.

and we won't be required to put it out to fund our share until late 2019. so i think we are in a good place. the balance should be strong, and we should thunder from cash flow. taylor: that is your bloomberg business flash. nejra: thanks, taylor. the transatlantic trade war appears to have been averted. yesterday, donald trump and the eu commission president juncker agreed to suspend new tariffs while negotiating trade. >> we agreed to work together for zero tariffs, zero nontariff barriers, and zero subsidies. on non-auto industrial goods. if the united states puts a 20% tariff on car parts and , itr countries retaliate would cost the u.s. the economy $50 billion in lost gop that gdp

-- gdp. but there are two we made a deal. we agreed that no other tariffs asld be introduced as long we are in negotiations. nejra: so what does this mean for markets? alberto gallo is still with us. i do not want to be pessimistic, but we have not heard definitely that there will not be car tariffs. at the moment, this is just a negotiation. what is your view? alberto: it is not a done deal. i would not read across a softer stance from china. we know this is the bigger negotiation happening, and china's stance is a lot more antagonistic. and europe, we have seen some concessions, but this is the start of a longer negotiation. almost like an agreement to come

to a agreement. the administration can say they have scored a win by having more revenues for farmers and energy companies, which are part of trumps of voting base. but this is a long planned, and the real objective is to have more jobs in the u.s., to have european car companies build more factories and more production. and that is far from happening. also, the approach to getting concessions has been successful, why would they continue to be tough? nejra: i'm glad you brought up china. my question is that is it possible that they want to seem a little bit closer with some of , in order like the eu to ramp up negotiations with china. alberto: we think the china

negotiation is a lot bigger in size in terms of the trade surplus. it could continue to be tough. far,ink that china has, so insulated its economy was central bank stimulus. 10% depreciation in the yuan. but eventually, we have some slowdown in the chinese data. and that could hurt the other emerging markets. argentina, but we have some of the larger asian including australia, indonesia, vietnam, thailand, they are all linked to chinese growth. and they all trade very close to leopard low premiums. -- record low premiums. nejra: are you changing your investment as a result, or would you need to wait for more tariffs to the implement? this year, we have been

shifting our approach from a goldilocks environment where everything is going, last year, to a divergent the grand -- environment. we think this is still the case. europe and em growth has been stabilizing, but the fed will continue to be dovish. we also think u.s. assets should be for better. having said that, there are some things that underperformed too much. italy, spain, they have been price for an end of the world scenario. on the em side, we are more worried that things could get worse. ,verall, positive on the u.s. and a bit less on the rest of the world. within that, europe has been , so more badly positive on europe than the em. nejra: all right. let's talk about the ecb. mario draghi is likely to

confirm that the eurozone is back to relatively strong economic health. today's policy meeting predicts will endning council their purchasing in december and clarify when they will next hike. what are you expecting to hear in terms of rate hikes? the question will be asked, i'm sure. alberto: the question is what "through the summer" means. nejra: exactly. alberto: it is the first time they will start normalizing the negative. economic data has been weak in europe. there is stabilization and an uptick in economic surprises, but the situation remains uncertain. at what will happen in september, italy will go into the national budget. a lot of disagreement on how much to spend. and some periphery spreads

remain wide. so i think the ecb will remain dovish overall. they have not had the fiscal stimulus that the fed has when the fed started qe. the u.s. was spending at a deficit of -10%. they have kept their markets tight. biggerket is now much than the fed percentage of gdp, but they have a tougher job. they do not have any support from the fiscal policy of the european companies -- countries. i want to show you this chart of the euro. the spots has come under pressure, and with that, so have the forecasts. from 1.2621.18ed 1.18.6 to will support come from a ramping up of trade tensions?

even in yesterday's session, we saw it strengthen. alberto: i think the dollar should strengthen in general. there is a bit of optimism in trade, but in the end, the u.s. will continue to be tough. the u.s. is the only central bank which can convincingly hike rates and do another this year. other central banks like the ecb, boj, they can talk hawkish but the reality is there situation is far behind the u.s.. so what needs to give is the dollar. the u.s. has been able to talk tough on trade, have growth, and keep the dollar low. but something has to grow and the dollar gets stronger. nejra: why have we seen such a big moves? and -- were they warranted? alberto: they have lower

liquidity, and even a news like we have seen on facebook or the boj 10 create a very large moves. i think they want to lift share prices to increase lending to the economy, something they have done two years ago. nejra: yes. alberto gallo, pleasure to have you with us and look forward to speaking to you again soon. up next, global luxury goods sales are on course to top sales. we talk about the trends driving the industry. this is bloomberg. ♪

nejra: economics, finance, and politics. this is "bloomberg surveillance." i'm nejra cehic in london. let's check in on what is trending across bloomberg. it might have noticed, we are having a heat wave.

on tictoc, and underground lake has been found on mars, italian researchers have found this discovery, it could be an answer to the mystery about whether liquid water exists on the planet. saying lot about twitter give us some of that water. mario draghi is likely to confirm the euro area's economic health, six years to the day since his start pledge to do whatever it takes to keep the euro together. and our most read stories. in third place, qualcomm is scrapping its bid. and second, the u.s. and eu declare a trade cease-fire. and top, facebook tanks in after-hours trading. let's get the bloomberg first word news. taylor: as you mentioned, facebook shares have slumped after the social network

reported second-quarter sales and user growth that fell short of analyst rejections -- projections. they also told wall street the numbers will not get better this year. >> this is a critical year for facebook. we'll make progress preventing abuse, forged ahead with innovation, and are adapting our services to new trends. taylor: donald trump and eu commission president juncker have agreed to suspend new tariffs while negotiating trade. the leaders pledged to expand european imports of u.s. nickel five natural gas and oil been, and both about to lower industrial tariffs. also agreed to re-examine u.s. steel and aluminum tariffs and retaliatory duties in due course. it polls washington and brussels back from the edge of a transatlantic trade war. delay a second summit with lender whose in until next year.

john bolton cited special counsel robert mueller's investigation into the russian interference in the 2016 presidential election in a statement announcing the left. -- delay. trump invited putin to washington for the fall, a move that was criticized by republicans and democrats in congress. british officials are considering allowing the eu to impose market regulations on northern ireland, while the rest of the u.k. breaks away. understands the planet come into force as a backstop if other options fail to guarantee there will not be a hard border with ireland. the radical option for breaking the deadlock is likely to enrage the northern irish party propping up theresa may's fragile government. global news, 24 hours a day on air. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much,

taylor. global luxury goods are on call to top $400 billion in 2018. growth is also set to outpace last year's game as asia's recovery and rising demand for high-end discretionary goods drive customers. joining us now is an industry veteran. he has been appointed vice-chairman of another italian fashion house which sold a 41% stake to this italian private equity group. great to have you with us on set, lovely to meet you. let me start by asking about luxury. what is driving this growth, even now? i think it is a general trend of improvement of quality of life. age,ustomers of any

thinking millennials, but also the older customers, are looking for a more pleasant and sophisticated way of living. so they select, more cautiously than in the past. they know a lot because of the internet, but they like more and more to have exclusive items, special things. to build their own style, in a certain way. the components are very different. travelers are extremely important. people, when they travel to europe, they tend to spend more. and travel is increasing 6.5% every year. so this is a big driver of growth. on the other side, looking at domestic consumption, and this is quite surprising, but very evident last month. while the united states and , europeve solid markets

is basically highly influenced. way, chinesein growth in terms of economy, population, the fusion in terms of possibility to buy, is definitely helping a lot. the increase of the asian population is important. it will be challenging to build growth in europe, depending on the traveling regions. nejra: and i want to ask about china in a second, but in terms of the challenges of building growth in europe, how much is that to do with the consumer and their taste, and how much to do with a slow economy? at the end, the economy trend is not so directly correlated. consumption and larger. -- luxury.

the stock exchange is extremely related. you have seen in china, a couple weeks ago when the stock exchange was week, immediately every brand saw a relative decrease in a growth. europe, i think we had, as an industry, to find new motivation. thehe dated drivers for next 5-10 years will be the chinese population, because they buy everywhere. and the second thing will be online. online, it is not so big it appears luxury. very often, we're confusing luxury. but in terms of communication, it is extremely important. a news will build approach to the market where the retail is a main point.

nejra: when we talk about trade wars, we talk about a lot of sectors that could be hit. most recently, carmakers. i know before you set the luxury sector is a little more protective, that i am wondering at what point might in effect the chinese consumer, if consumer sentiment is hit because of a ramp-up of tensions . morele: luxury is protected because it is elastic to the price. price want a specific that's a specific watch, it is a few hundred dollars more, you will not change of mind. you're looking for a specific product. days, we see how the chinese yuan has depreciated. this looks to be the strategy of ping, andg -- xi jin

at that point, you start to have competition in different countries. a big price gap in china. if the yuan goes down, the gap reason to buyless from your. -- europe. for the industry, it is not bad. the concern, as you were mentioning, is for any kind of industry, something unexpected. when i think ahead to the funds and look at investment, you always figure out. talking duties, talking water, cosmetics, packaging, all of have 20-25%ries market in the u.s..

this can be impactful in terms of competition. i know at the moment we are still seeing that robust spending from china. startsbut if that ever to tail off, whether fed of trade wars were something else, what will luxury makers fall back on? who will have something to offer globally, even if chinese consumption tails off. most large groups have reached a large geography. there are very few countries which are out of the perimeter. grants, they have big opportunities to grow. 50% of the grants are not fully exposed to the asian market because it takes size and experience. there are still two or three geographies with big potential. take southeast asia, which is faster than india.

thailand, all of a sudden, is becoming a second destination for chinese. so a complete change. indonesia is growing rapidly. all of the peninsula is a big markets. india.u have it will keep being slow. everybody, myself included, we were expecting a big change. but india is a new force. then, probably a comeback from eastern countries in europe. so there are two or three potentials. for small groups, big potential in terms of expansion. for the large groups, it will be a matter of building and diversified. nejra: could we see consolidation? michele: i would say yes.

a certain way, the present economy is increasing the challenges. there is a lot of liquidity. in a certain way, there is a lot of a bias for luxury. and everybody is paying a big amount, but very rarely, people have not been able to resell at a higher price to develop business. success and acquisition in luxury, quite a high percent. nejra: lovely to chat, which we had more time. do come back. [laughter] michele: thank you. nejra: great to have you with us on surveillance. up next, maze of brexit plan b. may is set to consider a radical backup. a solution that will flows with both u.k. lawmakers and brussels. and take a look at westminster on what could be the hottest july day on record. it can't possibly get hotter, can it?

some have predicted it would hit 37 degrees celsius, 90 degrees in fahrenheit very make sure you put the sunscreen on. this is bloomberg. ♪

nejra: welcome to our weekly brexit show first, let's get your brexit bulletin. jeremy hunt was in berlin to warn that the eu needs to do its part to avoid a cap scenario of brexit leaving without a divorce deal. after the chief brexit negotiator said the government must step up planning to the possibility that talks collapse. on tuesday, theresa may took control of negotiations in a move that reinforces her drive to keep close to the eu.

sideline the troublesome administration created two years ago to lead the british withdrawal. it also follows months of tensions between david davis, who left the department, and europe advisor. time, the u.k. has published fresh plans to keep financial firms operating in the event of a no deal brexit. the government released a draft proposal that would give firms area, the eu plus iceland, liechtenstein, and norway, as well as counterparties the recognition they require to continue operation. they said they would back any request by the u.k. to stay in the eu after march of 2019. ministerhe foreign became the first senior eu

official to publicly raise the prospect of brexit being delayed. a move to extend would have to andequested by britain, agrees to unanimously by the 27 remaining eu governments. global news, 24 hours a day on air. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thanks so much, taylor. areish officials considering allowing the eu to impose market regulations on northern ireland but not the rest of the u.k.. the plan could come into force as a backstop if other options fail, to guarantee there will not be hard border. the move could be politically explosive for theresa may, as it is likely to enrage the northern irish democratic union party, propping her up in her fragile government. joining us now is the editorial editor at the institute of economic affairs, a conservative

phrasing -- think take. great to see you both. let me start with you. we have talked about this backstop before, but if this were to go ahead, surely this is risky. >> i suppose the question is what are the alternatives. both sides have committed to there being no hard border. that may setosal is unacceptable, it supposedly annexes northern ireland and leaves them entirely within the eu. theresa may says that is unacceptable. has come up with its own alternative proposal, which so far has been partial. it proposes that the whole of the u.k. should remain in the customs area as a backstop. a guaranty, last resort option. but there is something missing. to have avery well

customs alignment, but that is not the only problem. the other is regulators environment. animals, disease, consumer checks. food safety. the he's of the puzzle, u.k. still has not made a proposal. and what we understand is that the idea of having regulatory alignment, thereby having northern ireland under a separate regime to mainland great britain, that is the proposal. as you say, potentially explosive, but what is the proposal? theresa may has set the eu proposal is unacceptable. this one, the real issue of tariffs and customs, the whole u.k. with northern ireland would be together. and it would just be a question of checks or things. it is worth remembering that certain goods moving from northern ireland to britain are subject to checks. there are already quite a long

ist of checks, most of it certain kinds of stuff. you can sell this as a technical thing, that it is not the same as a customs border area--. and you will notice officials recently talk about no customs border. nejra: given what and has just said, would this watch -- wash? it would be extremely a close it with the eu. and likely unpopular with her own party. as we saw, support for the conservative party has crystallized around the league vote. they estimate that something like 70% of supporters are levers -- leavers. anything that undermines a hard brexit is likely to be unpopular. and regulatory alignment, this is a concern to many. think saying to closely

tethered to the eu will make striking feature trade deals potentiallyfficult, complicated things like the transpacific partnership. this policy is unlikely to watch -- wash. nejra: what are you expecting in october? madeline: the big explosive news from parliament was theresa may saying she is taking back control of negotiations. she has created a situation where the eu's main response ability is contingency planning for a no deal. what we are likely to see is a series of announcements outlining what the government is doing to prepare for the no deal scenario. making sure flights, deliveries, that something -- sort of thing. nejra: is a no deal more likely where we stand now? or are we heading for a harder or softer brexit? madeline: it is hard to know.

the position on the ireland border, particularly some of the more hyperbolic things that have been coming out, for example, the idea that the u.k. flights would not be able to klaas -- cross into aerospace, it doesn't stack up. au would have to look at flight back to see how that would be hard to do. deal moreade a no likely, because it has essentially tied the government hands. anything that seems to commit them to a customs partnership is likely to be unpopular. it may not get through parliament with the combination of the leave the rebels, i'm sorry, labor rebels, and the overwhelming majority. as i said, becoming increasingly euro spent -- skeptic. in?a: do you want to jump

emma: i was saying, for every hartline brexiteer, theresa may have to find somebody potentially in the labor ventures who is not terribly keen on jeremy corbyn becoming -- prime minister, and there are those, and who wants a works.networks -- that people with industrial manufacturing who just might decide they are better off voting for this deal. the real story over the next few months is theresa may's strategy to make parliament work. end up with potentially no deal, potentially an extension. the irish foreign minister yesterday was the first official to speak publicly about the possibility of an extension. it has been kicking around in

brussels. the first time summary said it publicly. see can imagine a scenario where there is a deadlock, an extension, and then hearing into the abyss, if you like. lawmakers have their minds focused and then end up approving a deal. nejra: you brought up brussels. madeline, you have been talking about the changes. what has changed know the may is leading negotiations? it has created a great deal of anger from the brexiteers. it seems to shift power away. and there have been somebody reservations -- resignations taking place. i do not think it can be stressed enough that conservative success is now tied to brexit. amongst, there will be a huge sense of betrayal. ,hey have already seen a surge

nobody knows who the leader is. and yet they had the surge of six points. they will be extremely worried about the consequences of this kind of arrangement and of having theresa may and robbins leading negotiations. nejra: thanks so much to madeline grant and emaar ross thomas. let's get the bloomberg business flash. here's taylor riggs. facebook shares have slumped in extended trading after the social network reported second-quarter sales that fell short of analyst rejection -- projections. >> this is a critical year for facebook. we have made progress preventing abuse, forged ahead with new innovation, and are adapting our services to the new trends, messaging, stories, and groups. taylor: shall has finally given

investors the share buybacks they have been demanding. the energy producers says they are starting their share purchase program, buying up to $2 billion of stock in three months. it was not all good news, as their net income fell short of even the lowest analyst estimates. commitment to divest a $30 billion worth of assets. to pay down debt, but importantly, to upgrade our asset portfolio. we are essentially done. putting the finishing touches on it, but we will deliver by the end of this year. taylor: that is your bloomberg business flash. nejra: thank you so much, taylor. let's check in on the market. seen some gains on european equities, following the gains in asia. carmakers have been leading on the stoxx 600 on the idea of some progress in talks and an aversion of the trade war between the u.s. and eu.

meanwhile, nasdaq futures take a turn lower on the drop in facebook shares as much as 24%. looking at fx, the euro a little low. we jumped above the 1.17 handle. dollar-yen is weaker, moving higher with speculation around the boj. the yuan continues to weaken, and a quick check on fixed income. the boj field jumping to its highest in more than a year. in the session, the 10 year bond yield moves higher. surveillance continues in the next hour. tom keene joins me out of new york. look at westminster in the heat. this is bloomberg. ♪

♪ tom: this morning, trees do not grow to the sky. facebook comes back to earth.

zuckerberg loses 24%. there is more there. agreement, there is there was little agreement to be had. outdove thedraghi doves? ehra, mario draghi with a meeting today and it is drifting away in the news flow. what he says is always important. nejra: absolutely. come,hat rate hike might there were different interpretations and languages. that is what i found interesting. through the summer of 2019, the end of summer? will that give support to the euro. that has been trending lower, 1.17 and all right now because that has changed the handle.

tom: the august 1 fed meeting as well. the biggest sign yet that major trading partners can convince the u.s. to back away from a trade war. president trump and president juncker have agreed to suspend new tariffs. europe will buy more soybeans and liquefied natural gas. president trump will lift tariffs on steel and aluminum. facebook takes a dive. after reporting second-quarter sales, value dropping. they warned revenue growth will keep slowing. the company has been hurt by the failure to safeguard data. draghimentioning, mario

is likely to confirm today the eurozone is back to solid economic health. analysts predict he and colleagues will and purchases in december. interest rates could rise after next summer. a radical option for breaking brexit deadlock in play. british officials are considering whether to let the european union imposed market conditions on northern ireland while the rest of the u.k. breaks away after brexit. the problem is that the plan would enrage the northern irish party that is cropping up theresa may's fragile government. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. thanks. equities, bonds, currencies, commodities. real quiet. within this, strange things. kirby steepening. down -- the curve steepening.

crude oil, elevated. what do you have? save me. nejra: i have a euro. very much in ferguson -- in 7, above dollar1 weakness following the talks between president trump and juncker. the headline in the stoxx 600 does not show you what is under the surface in terms of carmakers outperforming, that benchmark up 1%. dollar-yen, tweaks to policy. brent high. tom: let's look at facebook. it is interesting. slope does not matter but i will do some slow nevertheless. thebook, disappointment off

ipo, the trend here is less the man the trend here. here is the bad earnings. down 24%. notice how that is the extrapolation of the earlier trend. deceleration, simply, we have gone back to the original trend. nejra: fascinating. we will talk so much about facebook. they questions over whether this will be isolated. tom: exactly. throughf this will seep to the tech sector and the s&p 500. yen. talking about trade. i hope you will love this. i have taken this back to 1980 two look at the great yen appreciation and the reagan era tariffs. what can we take from that? one thing -- how the yen has not somegthened as much as

would expect even with the ramping up of trade tensions. let's get back to tech. tom showed a great chart. facebook losing friends. shares tumbling, 24%. after the company reported earnings, for the first time since 2015, missing analyst estimates, missing monthly and daily active users. now the asia tech reporter joins us from hong kong. shelley, thank you for joining us. was this a reality check for investors? reporter: it was. it was a jolt of reality for them, especially for the upcoming quarter. the misses were not super bad. facebook is showing growth. what scared investors was this downbeat guidance the company gave to analysts. news ishin the facebook

the fear that revenue growth, hope and prayer, and then the disappointment of revenue growth bowls over into other tech companies. within your experience, how discrete is the facebook revenue miss? everyone is going to be dealing with similar things. gdpr,e, privacy issues -- privacy issues, fake data, they , will go-- fake ads across the tech sector but we don't know if this'll be confined to facebook. theret is fascinating, are distractions and in our reporting, government stuff in the regulation and the scandal. come on. it is just about business as well. where the executives on the conference call -- how do they handle this? where they stunned? did they manage the message?

do they sound my cap big multinational company? what was the tone? bigid they sound like a multinational company? reporter: the tone was positive but every time he went to the numbers they would say -- by the way, expect revenue growth to slow down, by the way, expect drop it to go down -- they still seem confident especially with big revenue generators like instagram, whatsapp, facebook messenger, they are counting on these. facebook has had this reckoning coming. it was inevitable that they would have to deal with things like privacy issues. the less people share with facebook, the less they can target ads to those people and the viewer they can sell. -- the fewer they can sell. nejra: how does facebook come back from this? reporter: they are making good steps. they are costly. investors don't necessarily like

to see those kinds of things. numbers coming down. facebook has said we will continue to invest in the business, it is not just these cost drivers like dealing with privacy issues. they are also investing in other things like instagram and whatsapp and trying to make them more able to monetize through more advertising. tora: thank you so much shelley in hong kong. hussein, great to have you on surveillance on the phone. we have just been going through the numbers. is your first take that in context this is not such a big move for facebook? or is it something that causes worry? reporter: -- >> these are specific to facebook. the company is still trading at a higher number then it are ago.

-- than a quarter ago. investors are counting on this growth. this is a shock. that is how it felt on the earnings call. they were basically guiding, hitting market saturation. populationu.s. adult is on facebook. 90% of the adult population in europe is on facebook. at some point these things let go. -- these things plateau. then you have these bigger issues around the company like gdpr. it feels like the company has grown, where it could potentially grow and it will be a harder message at this point going forward. nejra: where is the growth going to come from? ones, instagram and whatsapp, phenomenal acquisitions. they are harder to monetize and they are younger businesses. the company will have to play

catch-up to make up for the fact that growth has stalled. the product is used by everybody and has not changed very much in the last couple years. they will have to go back to the drawing board. tom: thank you so much. greatly appreciate it. news, this has been expected. -- $2 billion gift and compensation. james with us. did you own facebook? you are not a facebook guy. did you have a bad night? shares,ve facebook underweight position because of the risk associated with a model. i have three takeaways. first. revenues were disappointing. second. cost is up. i was struck by the lack of

control by management in the call. it was not orderly, the ducks were not in a row. this is where they gradually unpacked more bad news in a manner i think analysts find concerning. tom: do they need within traditional buy side global wall street -- do they need an adult? do they need a ceo who is an operational guy? >> that is a very astute observation about the lack of what goes on there. they need someone to calm the markets, the company, to demonstrate that things that have to be done flawlessly and that execution will be critical. they are ramping up cost. they will generate challenges ahead. revenue is not as important as cost. tom: i was with you and everyone was looking at revenue vectors

and i was looking at expense vectors -- extraordinary. they can taper expenses. what is their constraint to limiting expense growth? >> the real challenge is they 's in order to remain an approved business to operate in europe and other jurisdictions. european to roll out regulations across the global marketplace but this is expensive. the avoidance of upset will have eyes on the screen. more people. nejra: judging by the share price reaction alone, this was a wake-up call for facebook investors and watchers. visit a wake-up call for the tech sector? james: prices cannot rise vertically without increasing risk. all investors know this all too well.

we have been a significant investor in amazon. we have been shopping the position. like a garden out of control, we get the clippers out and down comes the position. then we do more cutting. some people have an running these positions -- they are the one who will be feeling the pain. nejra: staying with us, james. salomon., marcus this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance," let's get the bloomberg business flash.

breaking. nst semiconductors says qualcomm has ended the bid, failing to approve the takeover before the deadline. $2 billion in compensation will be got and qualcomm lance to buy back $30 billion of stock. second quarter profit doubled at airbus, delivering best-selling single aisle jets. there was a hold up in customer payments. visa, saysays -- spending on the products rose 11% in the fiscal third quarter. bloomberg record, spoke to the cfo and an expose of interview and it sounded upbeat. >> it is intact and attractive.

there is an inflection point and it has never been easier or faster to discharge cash as it is today. i would not say this is as good as it gets. if anything we are at a point where it cannot only continue but could bit better -- but could get better. taylor: you can see more of that interview later on "bloomberg markets," at 9:30 a.m. new york time. tom: thanks. this is what we do at "bloomberg surveillance," we try to line up two very smart experienced people. whatever the theme is, we go added on the interesting tensions in their worlds. james has never seen a coupon he wanted to clip. he will only go to dividend growth. we have a guy on equities and a guy on fixed growth. are we in a bond bear market?

>> without question. that is what you're seeing from the central banks. they're throwing everything in reverse. they are scrambling to get to something that looks normal and take distortions out of the market. tom: james, is dividend growth in alternative to a coupon? james: i certainly think so. the real deal from equities, across a range of markets, not just dividends but underlying free cash flow yield. investors need to be careful when they buy dividends, they do not buy traps, when companies are dispensing cash versus long-term growth. isra: one of your key calls the 10 year treasury yield from 3.5% to 4% over the next 12 months. what will drive that? bob:.

a couple things. the fed is on this thing on the fed funds rate, then you have the other central banks that should begin their processing. that is what we want to hear out of the ecb, out of the bank of japan next week. it is not only going to be the fed on its own. it will be the other central banks. the second thing that is important -- in the fourth quarter we go from qe to quantitative tightening. we have to get used to that. we have not been used to that for over 10 years. the liquidity in the bond market and other asset prices is going to disappear. finally, the global economy looks pretty good. it is time to figure out what a normal yield looks like in the bond markets again. it is not below 3% on the 10 year treasury. nejra: how does this figure into your view on equities? your targeting 3100 on the s&p 500 year end.

what about the risks? james: the market will be a noisier place than last year. what has been on for equity investors is that it has been so quiet, apparently risk-free. global volatility will average 19% this year, twice of what we saw last year. the past points will be daunting. the when i look at frontier, it is a mixture of 6030 10. is that out the window? with consultative easing and quantitative tightening? does the mix work? james: i think it has been out of the window for an extendedperiod. what are the implications of quantitative easing and tightening? cash, able to achieve a reasonable real rate of

return, the textbook that describes the base play describes the premise in a capital system that people need to be rewarded for taking risks at all. we get back to cash, a positive real rate of return of 1.5%. a return to lending, long, extra 1.5%. what is the correct yield? textbooks would have told us over the long run, 10 year yield should approximate nominal economic growth. we are a long way from that. i do not think we will be back anytime soon. i completely agree with the rising slope of yields. tom: i don't want to go all sharpe ratio on a hot summer day but let's do it. we have not seen a real risk condition, which is why we own bonds. they dampen the risk model of the equity world of james. are we complacent in bonds?

we will get a new love for persistent cash flows in the net shock? your 60 40 10. there is some complacency of the bond market. what everyone is forgetting is how distorted the markets are. we have negative deposit rates in europe. negative deposit rates in japan. central banks telling you they are thinking about a path to changing those. there is complacency in the bond market. yields will go higher from here. i don't think we get enough credit for what is happening in the equity market. it is because of the low yields that equities were able to inflate themselves and discount themselves at a lower rate. what happens when the rise? what happens when the cost of funding for companies goes up? what happens when dividend discount rates go up as well?

there is a lot more here than just the bond market, as the central banks struggle to get to something normal. nejra: the 10 year yield higher. what does the curve do? bob: the curve is doing what it should have done in periods when the fed is raising rates. that flattens as they try to estimate what the terminal fed funds rate will be. we think from here it starts to re-steepen. 1998 more into 1994 than and then after that where you will see a pickup in growth and moving to two and three quarters to 3%. it will be a place to pause. there are still growth going on globally. as central banks exit holdings of treasuries, that will un anchor the long end of the market. 3%, the front end, 3.5% to 4% on the tenure.

-- on the 10 year. nejra: with that make you positive on banks? curve the long end of the has been substantially supported by u.s. investors who look at the yields available in japan and europe. oh my gosh. that is terrible. let me go to the states. i can get a sensible return. that is one of the reasons yields are where they are. another question. this whole issue of what the bond market has done to buyback activity. a lot of companies look at yields and say let's issue debt. do you think that we will see fewer buybacks and that is less natural support for equity pricing so companies won't be buying their own shares? bob: i think that is true. the debt issuance, by backstory was last year. this year, in the u.s., companies have embarrassment of

riches in cash flow because of a step down in tax rates, profitability has gone up. they are struggling deciding what to do with cash. there is the repatriation of cash from tech and pharma companies. the first thing is to share that with shareholders, raise dividends and buy back shares. they have cash accessible and they do not need to go to the bond market anymore. the other thing that helps stabilize long and u.s. path u.s. bond market, companies have the ability to contribute to pension funds till the end of september and enjoy the 35% rate. it dropstember 30, back to 21% so the incentive is not quite there. nejra: what a great conversation.

we love it when our guests talk to each other. forget to stay with bloomberg for the best coverage of the ecb policy decision. you heard that. the best coverage. mario draghi at 7:45 a.m. in new york, 12:45 p.m. in london. lots more to discuss with james and bob. this is bloomberg. ♪

nejra: i am nejra cehic in london with tom keene in new york. let's take a look at what is trending. an underground lake has been found on mars.

researchers using ground penetrating radar may the discovery and it could be the solution to a mystery about whether liquid water might exist on the red planet. give us some of that water in london, it is boiling. and mario draghi today is likely to confirm the economic health of the euro area, six years to the day from his historic pledge to keep the euro together. and in third place on the terminal, qualcomm tracking their bid to acquire a rival chipmaker. the eu and the u.s. declare a cease-fire. and facebook tanks as revenue and user growth missed estimates. tom, we really focused on this in terms of the job in facebook and extended trade, but also what implications it has for the rest of the tech sector. tom: speaking with you david kirkpatrick yesterday, truly a facebook poll, -- bull, he

mentioned the fallout they are going to. the expense side is just as interesting as the revenue shortfall. now our first word news in new york with taylor riggs. taylor: it will not be a trade were between u.s. and european union, at least for now. the president and jean-claude juncker have decided to put off the proposed auto tariffs. they will re-examine the steel and aluminum tariffs, as well as eu retaliation. the president says it will work toward zero tariffs. meanwhile, the eu will buy american soybeans. house conservatives have stepped up their threat to impeach rod rosenstein. they say he has ignored their demands for documents on hillary clinton investigations. 11 lawmakers have introduced an impeachment resolution. and over in pakistan, their national election, and on con

hardy has won the most seats. he would havend, to strike deals with independent lawmakers to form a coalition government. his main political rivals charge that the vote was rigged. and china is taking another step to ease the pressure from its deleveraging campaign. bloomberg has learned that the bank of china has -- a capital requirement will be eased to support lending. that changes one of several moves heading often economic slowdown -- off an economic slowdown. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. ♪ nejra: thank you. european earnings climbed a plastics maker beat forecasts for a test quarter in a row, prompting the ceo to raise targets and signal a boost in investment. the company is expected to generate 2 billion euros in cash

flow this year alone. i am delighted to say that markus steilemann joins us now in germany. great to speak with you and thank you for joining us. some investors have shown a little bit of skepticism around covestro's model, does the show price -- share price reaction show that you are winning them over? us: good morning and thank you for having me. our strategy is going to continue to be to pay off. we did achieve all figures. income,ou look at net 25% up and earnings-per-share 20% up. we are very happy about the current quarter and more to come. i think we are having leading positions in our markets, number one physicians globally, and -- number one physicians globally, and this will continue mid-to long-term to grow up of gdp.

and mx is confident on how ou r investors understand the story. that is also reflected in the top performance. risk toow much of a your business model is a potential escalation in a trade war, is perhaps not to you, then -- if perhaps not to you, then further down the line to those automakers you supply? markus: i hope yesterday was a great day for free and fair trade. so, to explain it a little bit more, i think that the chemical industry relies in total on free and fair trade, and so do our major customer industries kumutha i'm looking for the both parties finding a solution and avoid going into a conflict. i have yesterday was a great starting point for that. our exposure is limited in terms of the trade war, because we have already very low tariffs.

we have key production side across the world in our key markets. and we are well-positioned in our key industries, in the electrical, auto and also the medical industry, so that means it will not come to a significant meltdown in gdp. we are well positioned. tom: wonderful to have a with us. you are the walking and talking example of what every mba class is talking about in the world, that is ticking the - and making the-a company more supple. give us anu doing -- example of how you are taking the old stodgy nest of an old, stuffy company into what is now covestro. markus: it is important not to forget our history. we were part of bayer and we are

part of that history. we also have to say that in terms of a business model we are playing in an industry of high-tech materials, which is different from an industry in pharmaceutical or the agribusiness. that is why we are continuing with these structures, and culture, that we need. we are very customer centric and we are running the business to make sure that there is not in any corner of the corporation any hidden value. tom: how are you delegating authority given the new regime? markus: i think it is important to live by example and at that is what i try to live up to every day and i hope i am doing better and better on that, and i hope that my team, our 17,000 employees can feel it, see it, and if they feel i am not living that they role model, provide me with feedback. that is what i try to do each and every day. nejra: you are one month into

the role and you have talked about increasing investments. that may include a new world scale plan. can you give us more details on the business, what part of the business, the location? markus: it is very important to see that our core products in all groups, polycarbonates, high engineering plastics, but also raw materials,- those are growing above gdp. we expect 4% growth rate in all of our products. that is why we also putting money where our mouth is. we are continuing to increase investments, we continue to increase capital expenditure, and that means not excluding any of the products, any of the regions, so we are really focusing on our global positions in all three products. that is why we have increased

capital expenditure this year to 700 million. and we will minute three years ago to 1.2 billion euros of capital expenditure in the total business. nejra: give us details on what the acquisitions might look like from here. to see it is important that we do not have a track record in acquisitions, so that is why this is important for us to also make sure it is understood in the market that we take really clear value approach. we are not currently in a rush to do m&a. we have between 300-400 ideas we are looking for to see whether sense,isition would make but also making sure that as to our portfolio. as we have stated, it is important that some of those acquisitions might be more in specialty areas, because it

would also help us to make your portfolio more resilient. the technicality of the business. that is why you will find most targets we haven't on -- have on our radar screen around this area. tom: thank you very much, the chief executive of covestro. just before the conversation on economics. we are thrilled to bring you richard haass with a note on transparency and summits. haass from the council on foreign relations. this is bloomberg. ♪

tom: means up and down --

earnings up and down. a lot going on. nothing bigger than facebook. nokia tried to take the turmoil, but facebook outdid them on the negative, down 24% earlier, 17% right now. and as we have been talking with the james bevan about, they still have huge revenue growth, but less than what the street was looking for. but also a real expense adjustment higher, where the profitability test really clicks in and facebook is down 17%. looking at a busy week of earnings. why don't we glean information on european earnings. here it is. >> it is the growth dividend in line with the underlying earnings. it also said, as you stated, that the scope for share buybacks is emerging based on a strong environment and of the

development of port polio -- of portfolio. >> after working capital, it is a strong quarter. 2014, whennce q1, oil price was above $100. this was a $12.4 billion operations quarter, so that is a very important component in our confidence to start the buyback program. >> we have announced the dividend policy. and we always look at the options that we have available to us. we are continuing to get debt down and we expect will continue to drop over the next 18 months, so that is where the main focus is. and making sure we have growth in the portfolio. >> we have had a good year and what is behind the top -- is behind that, top growth was up, we increased dividends, and we had stock buybacks, but what is really pleasing is the consistency of sustainable performance. from earnings to the ecb,

mario draghi is likely to come from the eurozone is back a strong economic health. the meeting in frankfurt and analysts predict that bond purchases will end in december. they may also use the decision to keller five -- to clarify one at one next hike rates. james, let me ask you first, is needsro -- does what it to catch a bid? >> i think the analysts are saying the interest rate policy is bad news for growth, not good news. we have that the european banks like deutsche losing money, because they are having to be punished for providing money to their core central banks, and i see lots of data that says german households are looking at interest rates and raising

savings rate in order to ensure that they have enough at the end of the day. that is the negative behavior that they need to move earlier in the paint is rates up on. nejra: when we talking about the 10 year treasury yield earlier, are european rates keeping the 10 year yield anchored where it is now and will a 3%? >> i think so. money is being exported into the u.s. bond market. what i want to see from the ecb is a peek into 2019, and are they generally going to wait until the end of next summer before they begin to normalize rates, or will they start earlier? we think they should start a lot earlier. nejra: they should, but will they? >> i think they may. i think the bank of japan has opened up the door and james is right, when you have a negative interest rate environment, the pressure on the banks is serious, they are not earning anything from the interest margins. if you look at the change in profitability of the u.s. banks,

it -- with rates at zero from the fed. tom: i am going to show this chart. companyt michael's jpmorgan, this is back 40 years. up we go. this is before bob michael joined the company. michael joined the company right down here, james, and up we go with the experiment of jpmorgan. james, what is the best practice of jpmorgan? not michael, he cannot talk about this. james bevan, what is the best practice of jpmorgan that the eu banks need to figure out? james: that they are cautious about the advance of capital. they have developed a sense of a way to allocate. they have strong risk control, but a very refined progrowth culture. i think that is what the european central bank lacks, does not really understand the

dynamics of what is required to achieve strong, long-term growth. the central banks need to get with it. tom: we had the derby yesterday with deutsche bank and mr. savings speaking with matthew miller. i found a search for revenue. can deutsche bank compete in the future with the american too big to fails? james: i think it is miles behind and it will take a generation of change in order for them to get to that position. nejra: i want to ask a final question on credit. what is what you are seeing in the credit market telling you about where we are in the cycle right now in the u.s. and in europe? bob: nothing. there has been a correction. we are using it as an opportunity to get in. we like the european high-yield market. it is one of those rare instances where the credit spread in european high-yield is above that of the u.s. high-yield. there are a couple factors of that. concerns over italy, and

concerns of her brexit, so both seem to be fading in the background. the previous to this how well the european companies are doing and we want to participate in that. nejra: ok, james bevan and bob michele, stay with us. have james -- joining us. this is bloomberg. ♪

nejra: this is "bloomberg surveillance" taylor: bloomberg business flash. shares of facebook have taken a billion ing $151 market value at one point after reporting second earning sales and user growth had missed estimates. facebook also warned revenue growth will keep slowing. the company has been hurt by failure to safeguard data, content policies, and changing rules for advertisers. royal dutch shell will start a buyback plan. the announcement came after the dutch energy company posted

second-quarter earnings that were a billion dollars less than analyst estimates. they also reported it -- the operating expense rose and trading was lower. we spoke with the ceo. >> i think that this is a sought a result. -- solid result. if you look integrated gas, up, compared to the same quarter last year, our upstream business is up compared to last year, and down, business is 30% linked to a difficult refining environment and a very difficult trading environment. taylor: and in goal america given the green light to a $5 billion coppermine in peru. american'sth anglo ceo who says that investors are being rewarded. >> we've announced a dividend policy. and we always look at the

options we have available to us and we are continuing to get our debt down and we expect it will continue to drop over the next 18 months, said that is where the main focus is and making sure we have growth in the portfolio, but we'll keep ourselves open. it is about a balanced approach. taylor: that is your bloomberg business flash. tom: thank you so much. the national security advisor will meet with the pentagon, the wall street journal reporting that mr. bolton will have a meeting today with pentagon officials. to be a fly on the wall. us richard haass will join from the council of foreign relations and we will definitely speak about john bolton and the admirals and generals of the pentagon. hearing from the financial times, i visited with -- in london who is with blackrock. she has a very nice summary of the nuances of checkers and onto the future of brexit.

it is essential to fight the right battles. the european parliament elections next year likely to pit globalists against highly coordinated populists. sh goes on toe say it would be wise for the european union to accept the basic premise of the u.k.'s proposals. bob and james with us. yous, this is a very centric essay on how the eu has to respond. is the eu responding in a responsible way? james: you are never dubbed enough. -- dove enough. the eu is asking things that were irreconcilable, that the bush people do not want the free flow of people, but happy to have the free flow of goods and services. they do not want to be tied to european regulation, nor did they want to make contributions. this is never a cocktail that would be popular, or indeed available, within the framework

of negotiating with europe. the sooner we get used to the idea that there is going to have to be compromise on behalf of the brits, as well as europeans, the quicker we can get a deal done. nejra: we talked about the 10 year treasury call earlier, but risksg into this, tail coming from brexit, also trade when i look at the equity market, maybe it is all's w thate -- all is well that ends well. what is it pricing? bob i think it is aware of the risks:, otherwise you would see higher yields. it will be interesting to see what comes at of brexit now that there has been some sort of compromise between donald trump and juncker. they like the de-escalation, the markets like the compromise james alluded to. if you can get that between the

u.k. and europe, i think you will see the yields move higher in credit spreads come in and it will be in accurate reflection of the real bond market. tom: bob, thank you so much for agreeing to be here with the james. james, thank you for agreeing to be with bob. thank you to both of you. really, really outstanding. we will be on facebook in the next hour. and paul sweeney with his wisdom on facebook, but we will stay on plan with richard haass from the council on foreign relations. ambassador richard haass is the national security advisor for the pentagon. 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. tom: this morning to my trees do not go to the sky, facebook comes back to earth.

the growth is still there, but there is less. at one point, losing 24% of its value. there is more in the trump juncker summit. there was little agreement to be had. and can mario draghi out dove the doves? an important conference today. and we say good morning from new york. nejra in fore, francine lacqua. are we in the summer lull in the heat wave of brexit, or is there for the momentum into the end of july? nejra: we are in the summer lull . there is a story talking about the plan and discussions for having some sort of deal -- b etween the northern island in the rest of the u.k. that would be troublesome for the -- that theresa may relies on.

so whether there is any sort of solution is the question and to the irish border question remains a big one in how we go forward. tom: we will touch on that through all of surveillance today. this is your first word news. taylor: shares of european carmakers surging after president trump backed off of his threat to impose tariffs on imported cars. shares of bmw, daimler and bolt wagon -- and vw among those arising. jean-claude uecker agreed to put -- jean-paul uecker agreed to put off the trade war. president trump says they will work toward having zero trade barriers. and shares of facebook have taken a dive. the social network lost $151 billion in market value at one point after recording second earning sales and user growth that missed estimates. facebook warned revenue growth will keep slowing. the company has been hurt by its failure to safeguard data, its policies, and changing rules for advertisers. and european central bank

president mario draghi is likely to confirm today that the eurozone is back in relative of -- relatively solid health. he and his colleagues are likely to confirm that -- will end in december in interest rates could start rising next summer. and as you mentioned, a radical option for breaking brexit deadlock in play. -- imposing market conditions a northern island, while the rest of the u.k. break so after brexit. the problem is the plan would probably embrace the northern irish party. y that isister -- part breaking up prime minister may's government. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. equities, bonds, currencies and commodities. we have paul sweeney, and then we have ambassador haass.

euro a little bit of a lift. what do you have? nejra: european equities. nasdaq futures turning lower, following this facebook earnings and share price dropping. european equities are big, it does not show what is under the surface, that european carmakers are outperforming after the talks. and the euro trading on a 1.17 handle, not sure what that is 1.1713 on the dollar. dollar-yen on the back foot. crude gaining after the stockpile data. tom: thank you so much. we have a headline out right now, the ramifications on the south side if you screw up. jpmorgan announces a price facebook, a big deal. this down from 217. now down 16%. they simply adjust the price

target. let's go to a chart, then paul sweeney of bloomberg intelligence on the matter. facebook off, when david kirkpatrick was a genius -- he said, go along. is the non-log, here slope, but it does not matter. we come back and here is the down 24%, a very nice extrapolation of the previous look. what do you have? nejra: i am so glad you brought up the chart, because the drop we saw in extended trading with facebook could make history in terms of the amount of market cap it wiped out. i have a chart on the euro. moving on dollar weakness yesterday following the talks. down since the start of the year, treading water since the end of may. fromuro forecast has gone

1.26 two months ago to 1.18. so the question is, will they get lift from mario draghi? it all hinges on the dollar. tom: let's look at facebook. facebook with a revenue shortfall and maybe an expensive lift. paul sweeney has seen this across many different industries before. i want to get to the day two and three question, is this a sign of things to come for the other faang stocks? the revenue growth is still there, but the path has changed. will we see that with company a, b, c? paul: i think the underlying digital advertising environment remains strong. tom: we saw that with google. paul: that is where consumers are spending more time and that is where the advertisers will follow bid there are the -- follow.

there are specific things with facebook, revenue slowing it expenses are rising. we are looking for a big margin hit over the next couple years. they were looking from it 40's, now talking about margins declining into the mid to high 30's range, so that is a significant reset and profitability. tom: 700 basis point decline in the margins. paul: now the question is, you cannot call it a short-term blip, so where do you position? tom: those of us with gray hair remember this going back to jobs. will we see zuckerberg go back to himself seven or eight years from now? paul: he is in a strong position. tom: does he know the paul sweeney ratios? paul: he has a strong team behind him. sheryl sandberg on the operation side, she is the revenue person,

then a strong finance team. i think with the team is saying is we will make a corporate decision, even though the revenue growth may be slowing in certain parts of the world, we will continue to spend and invest in products, some of which should grow the business, but some of the spending is simply to deal with the data issues that have been thrust upon us, that they now have to deal with. they have been telegraphing higher expenses, but growth is higher than what they were looking for, revenue growth is more than what they were looking for, ergo the hit to the profits, which is way more than they expected. tom: we are ergo-ing. nejra: it harks back to my days of my degree, but that is another story. i was talking to a guest earlier that was saying that facebook is reaching market saturation when it comes to user growth. i understand costs are a concern. we can talk about the fact that it can always find ways to cut

costs, but where does the growth come from? paul: in terms of user perspective in the mature markets, whether it is north america or western europe, the user growth is maturing. there, but the top line for several is they have platforms in which they can monetize. facebook.com, instagram, they also have messenger and whatsap p, each north of one billion users. and there are monetization app andnities for whats messenger to fuel growth going forward. so they are still looking for substantial revenue growth going forward, but not as fast as the street had been looking for. nejra: you said earlier you do not see a rate across to other tech companies here, but does that mean investors from other companies might actually benefit, particularly within the space, as investors

redistribute capital within that tech sector? paul: i think we will see some of those trade off in the next couple days in sympathy with the facebook news, but i think the underlying advertising story, as it relates the digital advertising, remains strong on a longer-term secular basis. with this, -- what this calls into question is valuation and are they priced to perfection. google put up a very good quarter. investors will certainly take a look at some of the positions and valuations. tom: bring it up, this is the famous fundamentals screen on the bloomberg terminal. i want to go down to free cash billion,billion, $8 $17 billion, and what is so --ortant here is cap x capex is a solution for every troubled company. they have degrees of freedom, massive ability to adjust, don't they?

paul: they do, and they are ramping up spending. that is part of it. they are still spending. tom: but they are not amazon. paul: they are not. they are free cash flow positive, so they are in a tremendous position, for the question is given where the stock was priced, where do you think the profitability will be for the next couple years? we know it will not be where the street was discounting. tom: thank you, superb. coming up, mr. bolton will go to the pentagon. whoa, that will be quite a meeting. richard haass will join us. we will rip up the script with ambassador haass. cme groupy, the chairman. stay with us. this is bloomberg. ♪

nejra: this is "bloomberg surveillance" taylor: let's get to bloomberg business flash. a semiconductor says qualcomm has ended its bid. china's regular is filled to improve the largest ever take over before its final deadline. and xp will get to billion dollars in compensation. meanwhile, qualcomm plans to buy back $30 billion of stock. and the world's largest plan for bio back -- for a buy back, earnings at -- have shifted into higher gear thanks to strong sales in berman and gin. sales beat estimates. we spoke with their ceo. >> we have had a good year. and what is behind it, earnings

per share were up 9.6%, we increased the dividends, and you can see the stock buyback. but what is really pleasing is the consistency of sustainable performance. all of our regions around the world were in growth. taylor: second quarter profit doubled at airbus. the playmaker accelerate deliveries of its best-selling jets. those had been delayed by problems with the engine provider, and it led to a hold up in customer payments. and visa says that america's love for credit card debt has boosted profits. spending on the products rose 11% in the fiscal third quarter. that is when credit card debt reached a record. but the cfo says there is a bigger opportunity for the company. he spoke to bloomberg. >> the bigger driver of our growth is our ability to convert cash, about $17 trillion in cash. on the consumer side around the world, that remains to be

digitized, which is a large number. and about $20 trillion in what we call the b to b world, using the solutions we already have. and there is a larger opportunity there all the time. taylor: you can see more of the interview later on "bloomberg markets." and that is your bloomberg business flash. tom? tom: always an important conversation with richard haass from the council on foreign relations. he just published a product syndicate. we will take a look at this, the sound summits and the transparency of summits. "a summit that ends without a written accord might seem successful, but through the passage of time will prove to be anything but. interpreters are not diplomats who knows when an exchange calls for clarification." wonderful to have you with us. mr. bolton will go to the

pentagon. and he will walk in the room on iran. how will he be greeted by the secretary of defense? ambassador haass: i am not sure the red carpet will be out. we will see a lack of anything remotely looking like consensus on iran policy. is the goal a regime change? is it a policy change? is the focus on the nuclear, or the domestic, or on the regional push for influence? you will have an administration all over the place. willmaybe an interpreter be necessary and there will be people in the room. this is critical to the nation's confidence. to have a pentagon on the same page as the executive office on pennsylvania avenue, are they? ambassador haass: the short answer is no. in my experience, those in uniform are the most wary about using military force, they have to bear the burden of it. the secretary of defense,

general mattis is not looking for war. he has to think about north korea, china and russia. he has things he does not want to put on the side, so the idea of a discretionary war that we would initiate against iran is not on his to-do list. tom: -- nejra: good morning, richard. meanwhile, we've also heard that the second summit with the russian leader vladimir putin will be delayed until next year, the has been announced by the white house. at what point do we need to not react to every single thing that we hear from president trump, because when he did announce the summit last time, i asked the question to a guest as to whether it would pass exactly as it was outlined? ambassador haass: i take these tweets somewhat seriously. this is the equivalent of a white house statement committee's tweets. at times, there will be gaps between the tweets and what happens. it is not the first a ministration that has a gap

between words and action. this is the way he has chosen to communicate with the world and he ought to be held accountable for what he says. nejra: we also, of course, had the meeting between president trump and juncker. are you hopeful that we will see some sort of agreement on trade, or is this a hiatus before the midterms? ambassador haass: i do not know, but there is a pattern. the president pushes things until it has negative repercussions with its base. we saw it on immigration, and on north korea, where we seemed to go to the brink of war and suddenly we are living with nuclear weapons in an open ended way. it is possible he got pushed back from the base, because of the tariffs, and the escalation with europe over trading issues. none of us can ever predict when it comes to donald trump, but it is good to see a truce.

whether that translates into a peace treaty, i do not know, but yesterday was a better day them most days when it comes to trade. tom: there is a scream from democrats, independents, to get back to what i will call normalcy. do you see secretary pompeo trying to steer the administration back to some daily cadence that could lead to a constructive outcome? or is he out trumping donald trump? ambassador haass: i think he is trying to thread a needle, he is trying to be more traditional in the context of the most radical administration we have had since world war ii. you have to balance it. we saw that yesterday when he testified in front of the senate foreign relations committee. he is in a difficult position, when the president does things like these two summits, which is a wild the parter from our tradition, and mike pompeo cannot get crosswise with the president. but at the same time he is

trying to run foreign policy. tom: do secretary of states speak to secretary of defenses often? is wonder if the banking talking to asset management often, so does state talk to defense? ambassador haass: it depends. i remember when george schultz and weinberger would not talk to each other directly. colin powell was the intermediary. that was the way that they did it. they would talk to colin powell. so we have had that kind of situation. . i think that they do talk to one another now these two guys represent traditionalism. the problem is much more john bolton. tom: go there, he is going over to the pentagon. so why is "john bolton the problem." ambassador haass: there have not been high-level meetings. there has been complaints about the absence of the meetings, the cabinet level, without the president's.

. an there isd always tension between the national security adviser who has two hats, he is supposed to get everybody talking, but at the same time he is a pipeline directly to the president. he is a counselor as well as an honest broker, and i think the feeling is john bolton has the balance wrong, too much of a counselor privately with donald trump and not enough making the interagency process work. in the run-up to helsinki, there was not a clear meeting amongst all the principles on what the president should try to accomplish in helsinki. nejra: i want to take the conversation back to trade for a moment gone because the truce we have gotten for now -- moment, because the truce we have gotten for now, what is the read across to china? i have heard it might mean negotiations with china will soften, or the other view is that actually this is the u.s. trying to get closer to some of

its more traditional allies to ramp up the tensions with china. ambassador haass: i think the second interpretation is probably closer to reality, in large part because the u.s.-chinese trade negotiations are far more complex. they deal much more fundamentally with questions of intellectual property, forced technology transfers, intellectual property theft, and dealing with all of that i think is more difficult than the questions of tariffs and market access. donald trump created a problem with the europeans. i think that could be unwound quickly if he decides not to go ahead with the automobile tariffs, if he decides to walk back what we did with a steel and aluminum. the structural problems with china are just that and any president would have encountered far more difficulty with china, because it goes beyond trade balances, which mr. trump is the occupied with, for whatever reason, but there are concerns about the u.s. and china and trade.

even if you do not agree with the donald trump remedies, i think the causes of the problem, the chinese behavior, subsidies, you name it, i think that those are real problems. real structural problems. nejra: do you see a strong likelihood china will blink first and back down? ambassador haass: i think the question is what is going on in china? we look at china in this inevitable role, but i think they face real problems. one of the principal arguments for why xi abolished term limits, is he understands how difficult the future is. he has the debt, he has political pushback, growth is slowing, export markets are a little bit weak, so i think the possibility that china blinks a bit is possible. tom: we will come back to the conversation. we have a have moving parts on facebook that i think the story, particularly for global wall street, his current this morning.

piper jaffray yesterday from 250 to 200, an adjustment we saw a jpmorgan, down to 205, and the susquehanna reaffirms along and they go back to 250 with the stock right now at 177. so there is the debate within the markets that was makes for a good constructive discussion. if you're just joining us, we haslinda -- haass with us. not about beirut, this is eurasia or anything of romance, it is diplomacy at the moment and the end focal point of every issue. how should the united states assist these different parties on protecting the peace from iran all the way to lebanon? ambassador haass: i think we need to understand what iran is. it is not a status quo power, it is an imperial power and seeks

to shape the region and its image and it is doing it in syria, it has done it in lebanon. i think it goes beyond. i think it has to do with the political balance within iran. it is not a traditional country. you have multiple power setters. the guard has an expensive foreign policy. they are strong. a country of real capacity, military capacity, the economy, it is a real country. tom: with president obama and secretary kerry, not overreaching, but where they naive in their discussions with iran? that is what president trump would say. ambassador haass: i think they settled on a generous agreement with the nuclear think. it does not justify us getting out of the deal, but i think we settled into we wanted the agreement too much. but yeah, i think the administration was wrong in thinking that inevitably it was set in motion changes by which

iran would liberalize. i think that was a hope, not a serious strategy. nejra: richard haass, so great to have you with us. you will stay. and for the best coverage of the is's policy decision, that at 7:45 a.m. in new york, 12:45 p.m. in london, investors looking at anything we might hear about rate hikes in 2019. and also on the ecb's reinvestment. this is bloomberg. ♪ .. .

tom: it is simply gorgeous. yes, it is hot, but nothing like we have seen around the world heard record temperatures in

japan. inra, you are living it london. how bad is bad right now in london with the heat? when i was there, all the parks were brown. what happened in the last two weeks? nejra: i remember the little fan you had when you were on set, tom. everyone is sweating it out here. i love the heat, so i am not complaining, but brits are never satisfied. when it rains, we complain. when it is sunny, we complain. what do you do? tom: right now to our first word news, taylor riggs. , there will nejra not be a trade war between the u.s. and the european union -- at least for now. president trump and president of the european union trade jean-claude juncker agreed no retaliation. president trump said both sides will work towards zero tariffs. meanwhile, the eu will buy more

american soybeans and liquefied natural gas. on capitol hill, house conservatives have stepped up their threat to impeach deputy attorney general robert rosenstein. they say he has ignored their demands for documents about the russia and hillary clinton investigations. 11 lawmakers have introduced impeachment legislation. over in pakistan, former cricket star's as won most seats. as grant results stand, he would have to meet with independent lawmakers to form a coalition. china is taking another step to ease the pressure from its deleveraging campaign. bloomberg has learned that the people's bank of china told some banks that specific capital requirements will be eased to support lending. that is aimed at cutting off an economic slowdown. fromng itself apart rivals.

it has given the green light for copper mining in peru.we spoke with anglo american 's ceo who said investors are still being rewarded. payoutnnounced a 40% ratio. we always look at options we have available to us. we are continuing to get it down. we expect it will continue over the next 18 months, so that is where the main focus is in making sure you have growth in the portfolio. it is really about a balanced approach. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. tom, nejra:? much.aylor, thank you so jonathan krinsky with us. we are diving into a complex facebook chart. also joining us a security analyst richard haass, ambassador haass of course.

cash floww a statement? as the counselor on foreign relations. richard haass is here, and he has to decide every day with what they are doing on the website and how to project out on social media. let's go to the chart. i will not go to the mass and the details it is, but john, we moved from here down to hear from a 50% on facebook, and you go back to april and this jump. why is that important? ofathan: it holds a lot value that common gaps like that do get field. tom: this is john maddie, 1942ish, right? jonathan: if you look at the after-hours action yesterday, they got down to about 164 . 161 area is where we

would move 30 tom: these -- m ove. tom: the stoxx, ibm, colgate, name a company. jonathan: we do. 10 tolatility, momentum be higher. you use -- tend to be higher. readerjonathan, the across from the rest of the markets, what we've seen from facebook,t is -- from that is what we are trying to figure out. jonathan: when you vote a high profile, the next is netflix. our sense is that it has a similar pattern and that it kind the morningut in and then tries to rally in the afternoon. i think facebook is more meaningful from a market cap perspective. if we look at the market construction right now, we have technology at 26% of the s&p.

netflix is actually consumer discretionary. sure, it is more meaningful. nejra: do we need more threats in the market for the bull market to continue? jonathan: that has been a common discussion. threats i think are better than people have made them out to be. weight,ook at the equal it is almost near where the s&p is on a percentage basis, up year to date. above the 200 moving average. could it be better, sure, but that is like rolling out over. tom: richard haass, am i wasting time on facebook, am i wasting time on twitter? learned about the use of facebook? amb. haass: we do not use it much, honestly, twitter is much more viable. two minutes on twitter several times a day, i come across stuff i did not know. it is a great way to get out

messages. people in the political universe pay much more attention to twitter. facebook is something softer and lighter. although obviously when it has done and has not done has had tremendous implications for the political world. tom: you talk about breadth in your research. does technology have breadth now? jonathan: it does. you talk about facebook and google, and you take the name, they are doing the heavy lifting, but small-cap tech and mid-cap tech are working too. you have technology and health care come 40% of the s&p right now. tom: i did not know that. the two together are 40%. jonathan: yes, threats could be better, but it is a cap -weighted index. that is what is driving the bus right now. jonathan, it also shows the financial sector, if we look at earnings seasons in europe,

we have heard from deutsche bank, ubs, to name a couple of names. i have a chart that i hope you will like. basically shows the s&p 500 make index. -- bank index. the purple above, line, but it also looks like it has broken out of that triangle. this is somewhat linked to the backing up of the 10-year treasury yields and perhaps to what we saw toward the end of last week. what kind of opportunity do you see in banks, maybe not just on the technicals but also on the fundamentals? jonathan: banks have been kind of a mixed bag. they have done enough to kind of be ok here. earningsion, posted has actually been pretty good, especially for some of the big u.s. banks. interest banks have played a part. we have seen a steepening in the race. i think the setup is there for banks to kind of move higher. we think it is probably two steps forward, one step back kind of move. it is not necessarily going to

be right back to the highs they saw in january, but they will make slow progress. tom: how do you respond to the concentration? there is a focus of tech performance in the s&p. jonathan: it is. again, i think the breadth argument has been a little bit overplayed. if you look at some of the smaller cap, mid-cap, some of the percentage, the 200 cumulative are actually hitting new highs headlines -- new high lines. the way the market is structured is something that it can hike rate threats as long as the big cap names are going up. with facebook, it is a big mega cap tech made. we have not seen a move down like this in a while. it moved to down six, and if it goes over to other large cap technics, we could be talking to something different. ofra: richard, how much president trump is confidence when he approaches various trade negotiations and other

negotiations, are based on how well the stock market is doing right now? amb. haass: i think he believes that gives them a bit of a cushion and allows us to take a bit of a hit. he also looks at trade balances. he basically says we run negative balances. others need access to us more than we need access to them, in his mindset, so he feels we have a preponderance leverage. tom: i look at where we are, johnny, just one final thought if we could on the chart today, and it is one you do not want to be. where do i not want to be right now? jonathan: what is interesting is if you look at some of the highly cyclical areas, you can make your case for why, but we have autos, homebuilders, and semiconductors. tom: what are the autos like? jonathan: they are like death. [laughter] amb. haass: tell us what you really think. tom: what do you mean "they look like death"?

the majors, the trade autos? jonathan: ford and gm. ford has been weak for some time now, so it is difficult to say if there is in a new news. --eowners have started to homebuilders have started to roll over pure semiconductors, the nasdaq has been moving for a couple of months now, so that is something to watch as well. jonathan: -- nejra: john, give us the biggest technical think that other people in the market might have missed. jonathan: again, i think you need to look at the primary trends and take out some of the noise. we think for the broad market, it is two steps forward, one step back, so don't let facebook today necessarily think that tech is rolling over. you need to take a step back and look at the bigger news. tom: jonathan krinsky, thank you so much. please come back. nejra, that was great on the chart. that is really important stuff and a huge part of global wall

street. nejra: thank you so much. chief marketsky, technician at baycrest. richard haass stays with us. at 10:30 a.m. in new york, paypal cfo. i look forward to that discussion. this is bloomberg. ♪ n. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. let's get to bloomberg business flash. facebook is lower after the social network reported second order sales and user growth fell short of projections. the company also told wall street numbers will not get better this year. mark: it is a critical year for

facebook. we made progress preventing abuse, forged ahead with new innovation, and are adapting to new trends, messaging, stories, and videos. taylor: shell will start a $25 buyback plan after the company posted second-quarter earnings that were less than analysts' estimates. we spoke with shell's ceo. >> i think $4.7 billion, i consider it a solid result. if you look at buyback plan aftr the company posted second-quarter earnings that integrated cash, comprised in the same quarter compared top to the same quarter of last year. i do not see the business more than 30% down here that is very difficult to a very refining environment as well as a difficult trading environment

as well. taylor: activist investor dan paypal is off to a rough start. venmo'se said that the growth could continue to fall, and the stock of reach $125 in 18 months. that is your bloomberg business flash. tom, nejra. nejra: thank you so much, taylor, in new york. seen years to the day since mario draghi said he would do whatever it would take to keep the euro together. we will bring you live coverage of draghi's conference later today. bloomberg's ecb euro area reporter joins us in frankfurt. good morning, alessandro. i imagine clarification about the first rate hike, when

exactly it might come in summer 2019. alessandro: indeed. what he told us in june is that ecb would not touch rates through the summer of 2019. the question is -- what exactly now does he mean through the summer? it is possible this is a question that is the liberally vague because he wants to see how the economy will be doing in the next couple of months. what is clear is that he leaves the door open to a rate hike, october 2019. at least one rate hike under his belt. this could happen in september, october, and we have heard from policymakers he has been a bit uneasy with market pricing rolling out this month and only looking at december 2018. we may get some more clarity from mario draghi about this. nejra: it is so interesting, because if you look at the differences in the translations, the wording is slightly different in different

languages, so it will be interesting to see what he says there. the bond is very much in focus, alessandro. what are we likely to hear about that? maybe not: well, much, because this is a discussion that the ecb is still only discussing, so it may be a few more weeks or months before they get to the conclusion. what is at stake here is what is the ecb stops buying new assets in december of this year? very unevenis is a profile, because in one month, you may have a lot of maturing bonds, so you have a lot of money to invest. so this may create volatility in the market. what the ecb will decide is whether it will just follow it willally, whether take a sort of a bit more active approach in the way that they can smooth out the process, smooth out the differences. asset yieldome an

curve management, but of course the ecb for now is different from that. tom: alessandro, thank you so much. alessandro speciale with bloomberg news. we want to dip in with our chief washington correspondent kevin cirilli and come back to richard haass on the disarray. kevin, the ambassador has a book that is even more prescient now than at its release a year and a half or so ago, and that is a role in disarray. kevin, mr. bolton will attend north rotary drive today in the pentagon. how this rate is the conversation between the national security adviser and general mattis in the pentagon? have been rumblings that the president is disappointed in general mattis. escalates in this terms of russia, we should note that the president has backed off his claims that russian resident vladimir putin would be at the white house at the end of the year. now the white house is saying that will not happen until the

first week of next year. tom: i saw a tweet out that this happened on monday, this happened, and at the bottom, it said "it is only wednesday." is this a unique week to you? kevin: honestly? no. this is trump world. there is no question in terms of how quickly things moved yesterday, it was quite interesting to see the european commission president jean-claude uecker did not -- jean-claude juncker did not initially have a statement. president trump adding that,'s reporters scrambling to get to the garden. we did not have details on that, is interesting the president, it of going to iowa president try to get some leeway to agricultural states in the soybean market ahead of that speech tonight. nejra: yeah, kevin, the way it is being read in europe about talks between president trump

and jean-claude juncker is a pause or a rally on that. what i thought was interesting is the president tweeting that look, it is hard to negotiate with people constantly snapping at my heels. trump, youpresident have got this, we will back off. kevin: i think that is a good point. juncker's part, he said he wanted to come here and de-escalate some of the tension, and to some extent, the political theatrics yesterday speak to that. we just do not know that yet. merkel,hancellor angela -- makingltural inroads wit when it comes to soybean prices. when it comes to regulatory parallelism, so to speak, it is to be smoothed out.

the president saying "i do not know how congo war we do not have -- how," or we do not have specifics on how. tom: kevin cirilli, thank you. it was a book, what, 18 months ago, 16 months ago? it was really prescient, richard haass. a note was featured a couple of months ago. if you wrote your book now, what would be different? amb. haass: to i have been called man things in my life, but nevery -- tom, i have been called many things in my life, but never an optimist. what i really missed was the degree to which the united states, which for 70 years have been the great preserver of international order, now we are the great disruptor, and in many ways, we have abdicated our traditional national role, and there is no one really willing and able to take our place. tom: friendly, the work of the

council on foreign relations is bloomberg talk of our disarray. i know you will not give me black and white, but do you tend -- is it a one off with a one-term or a two-term trump, or is this permanent? amb. haass: it is a big question whether it is an aberration or it is a trend. it is a big difference, as he said, whether it is one or two terms, versus eight years. this trumpism, he capped into it. remember during the campaign, what hillary clinton, bernie sanders, and trump agree on? they were all in favor of getting out of the tpp, the transpacific partnership. there are things afoot in this world. there are things going on with the rise of china, the weakness of various international institutions, the move away from democracy, the move toward authoritarianism. what is going on in the united

states is not the only thing contribute to greater disarray in the world. pick:, richard, i want to up on a point you were making about esther national -- international institutions. we were talking about tech in this hour, the way that disarray in the world is heading, do you see a way in which institutions breakdown and we get the rise of things like bitcoin and blockchain actually taking more power? amb. haass: in some areas, we do not have rules or institutions. take digital, cyberspace -- that is the wild west. there are not enforcement rules, mechanisms. that is an area where we have chaos. there is a serious degree of energy out there. in other cases, like trade, we're seeing at the wto, the last trade round absolutely collapsed. can you put some regional agreements in its place? you go from area to area to area. we will see what happens with nuclear proliferation. but yeah, i think we are at a moment in history where there is

a large and growing gap between the capacity of institutions with support, among other things, the degree of international consensus or the lack of and the scope and scale of the challenges we all face. climate is yet another area where the gap is large between the challenge and the consensus, so you ought to be worried. given this global cap, it seems a shareat if there was of stock out there for the state of the world, there would be a serious correction9. nejra: right. you were talking earlier about the fact that the u.s. seems to be setting a way of leading the global order of the last several decades, and there is no one at the moment that can step in. does that matter, though? amb. haass: absolutely. the world is not on autopilot. if you think good things just happen, look at what happened in the middle east. looking at who fills the vacuum, whether it is a group like isis, or you still have bashar al-assad in power, using force

in his criminally. unless the united states does not organize itself, it did your latest -- it deteriorates. tom: do you assume general mattis serves up the minimum? amb. haass: i actually assume not. i think he has been put in something of a penalty. donald trump eight stories that suggests someone is restraining have your there was a story in the "new yorker" that said this international order is a good thing, and donald trump basically said no, it is not. i think mattis is a traditionalist in a radical administration. tom: richard haass with the council on foreign relations. i cannot say enough about the immediacy of his book in july of 2018. we will continue this discussion on radio. we will have richard haass with us. facebook,a focus on down 15%. down 24% earlier.

i think down 16% right now. let me go over to forex. this has been a quiet market, but we still have the forex report. dollar-yen, strong yen the last few weeks. facebook down. .he euroyen was $1.30 weak euro in the over thetrong renminbi last few days. don't forget, mario draghi this morning across bloomberg. please stay with us worldwide. this is "bloomberg surveillance ." ♪ . . retail.

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more clarity. limits to growth. the cfo at facebook warns of revenue growth declining for the rest of the year. $16erberg and at least billion in stock in freefall. as investors search for clues in rate hikes, the definition for summer, and qe investments. and president trump and john kline longer -- jean-claude juncker declare a cease-fire. to "bloomberg daybreak" on this thursday, july 26. got aneel, we have earnings day. and $.65 angs coming share, that seems to be a beat as well. revenues a little light, coming in 25.