>> amazon delivers, the giant reports second quarter profits helping restore confidence. theresa may'se to operation. what are the prime minister's options now? and coming in hot. ,.s. gdp is likely to hit 4% but with growing risks from trade wars, will this big number of the repeated -- be repeated?

>> welcome to "surveillance. let's check in on the markets. green, up a0 in the few percent. in fact, we are on track for the best week we have seen since march. are seeing an upward trend on the back of telecom leading the chart. on the downside, seeing retailers down. keep a close eye on the japanese yen, currently seeing the dollar down. all about speculation of what the boj will do. will they start to change around, nuances in terms of their overall policy? that is what is driving yields higher. lastly, i want to show you what is happening to bitcoin. , again,y down by 2.8% it doesn't get through

regulators. they are concerned about the manipulation potential. of course, that etf being put forward by the winkle bostwick's. winklevoss twins. we bring you some key interviews just after 1130 london time for now, let's get bloomberg first word news. donald trump personal attorneys is prepared to tell investigators that the president knew in advance about a 2016 where russians were expected to offer damaging information about hillary clinton. this is according to cnn. such testimony would contradict of the president, his son, and other officials who have repeatedly claimed the president was not aware of the trump tower meeting until more than a year later. north korea has released the remains of some american warrior

s. they say a transport plane flew to the eastern north korean city earlier today and returned to an airbase in south korea with boxes containing what are believed to be the remains of 55 missing american personnel. it marks the first tangible outcome of donald trumps summit with kim jong-un and signals progress in broader nuclear talks. theresa may's of brexit options are narrowing after the eu rejects a key part for her proposal. theresa may thought her cousin proposal was the best hope of getting a deal she could also sell to a divided parliament. but in a blunt and public critique, michel barnier said he will never accept the plan. nothe eu cannot and will

denigrate the applications of its customs policy and rules. nonmember. not be subject to the eu governance structures. and french economic growth unexpectedly fails to celebrate in the second order when a series of national strikes acted as a drag. fell and tradeng also weighed on growth. and at 1:30 p.m. u.k. time, we will get gdp data with expectations that the world's biggest economy grew in the second quarter at the fastest pace since 2014. 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. i am taylor riggs, this is bloomberg. caroline: thank you very much.

amazons investors have shrugged off second-quarter sales, focusing instead on soaring profits. the online giant reported a record second-quarter profit. generated net income of $4.16 billion this year, more than the previous seven quarters combined. joining us now is alex webb. it is not often you see a focus on profitability. it has always been focus on revenue, and they have pushed one-sided profit. as you said, they missed analyst expectations for revenue , but the reason people investors for the growth, the expectation that the sky is the limit. the skype might be the limits, but there is also the promise that one day they can flip the switch and be profitable. and doing that is demonstrating their ability is pretty smart and demonstrates to investors

why is worth throwing money at the stock. theline: and trust in management to be able to maneuver this juggernaut. it is also interesting where this growth is coming from. we know web services are key, but what else is pushing forward? priam is always something dragging in more people. not as big as the rest by any stretch of the imagination, but their advertising business is profitable. something facebook and google are scared about. the reason why google and facebook have been so successful is because they own the interaction with the consumer. they have google search results, facebook.com. that is where they show the ad amazon takes it one step further, because they are owning the point-of-sale. that is what creates terror amongst advertising giants. caroline: what about their dominance in the u.s..

i think it is expected to be about half of all online transactions. but internationally, this is something they are focusing on. alex: absolutely. if you go to amazon.com and click on what country, it is interesting with countries they are not present in. they were only this year arriving in australia. their ability to expand his massive, but that does require capital. you need the delivery services in those countries to deliver profit. in recent months, they have slowed down the international expansion. moment, they see a slowdown in topline growth and there is the ability to attack new markets. caroline: always great to get your insight. and some concrete the investor base post netflix and facebook. thank you very much. let's get to our top corporate story here in europe, bp.

they have agreed to play billions for onshore assets. their biggest acquisition in almost two decades. it gives the energy giant a position in the prize basin, the world's fastest-growing oil region. annamarie, how does this benefit bp? >> the stock has been under pressure this morning. and some would say the market just does not understand the deal yet. what they are paying for is assets in the united states, which you say is the fastest-growing. it has produced about 3.4 million barrels a day. how it stacks at up against the biggest gulf producers, it would come forth in terms of ranking. so many are saying this gives them plenty of room in the future.

also part of the deal is they are getting eagle creek in texas and louisiana. they are quicker in terms of assets for return, but this is really a big play for the future of bp. caroline: biggest deal in two decades. that is potentially why we are seeing the share price under pressure. meanwhile, they are benefiting your--. they are saying they will be returning the bp deal, what they received. and another oil and gas for a they are exiting to investors. they have not come out, but likely, put a lot of pressure on bhp to ditch all of these oil and gas assets. but the best is analyst andy foster. they hold bhp and manage about three and a half billion u.s. dollars.

he said shale has been a problem child, so it is good to resolve that. it looks like investors are happy and will be able to get a peace of this. came into shale when it was not at this of boom. now we are seeing the boom, and they're saying they waste too much money. but the price is right. many are saying the price is right for bhp billiton. and they seem to be getting the better end of the deal. caroline: a problem child for one, maybe a love for another. thanks, annamarie, fantastic as always. stay with us, we bring you our interview with l'oreal's ceo. stay tuned, this is bloomberg. ♪

caroline: economics, finance, and politics. this is "bloomberg surveillance." let's get to the bloomberg business flash. ubs is laying off dozens of staff as it reinvents the leadership team. bloomberg has learned that stephen friedman, appointed last year as head of sustainable investment solutions, was amongst the cut. memo, a new a leader was named to lead the business and will continue to lead sustainable investment efforts. weakness in l'oreal's mass-market brand is weighing on because medical giant, despite buoyant chinese demand. the french beauty conglomerate reported revenue that fell just shy of analyst estimates. while growth was helped by , mainstream brands

such as maybelline fell short. you our interview with l'oreal's ceo at 11:30 a.m. u.k. time. that is your bloomberg business flash. caroline: thank you very much. the boj has offered to buy an unlimited number of the bonds this week, working to rein in the yields. leading to speculation they may reduce monetary policy joining us now to discuss is stephen gallo. a fascinating time, speculation abounds. and that is why we have seen a push up in the yen and yields. what do you expect the speculation to achieve? stephen: a realization that other banks are normalizing, which has been the case all along.

dollar bulls sold the idea to investors and themselves in the first half of the year that the world was coming to an end, that global growth was collapsing. certainly, we had a rough patch in q1, but what we are seeing now is that the u.s. outperforms, most likely. but the rest of the global economy has been just fine. and recent actions by both the ecb and boj confirmed that. that's there really has not been monetary policy divergence. these essential banks are moving in the same direction. caroline: just slowly. stephen: yes, but they are getting. is talk aboute fluctuation around the 0% yield they are. what do you expect in terms of nuances? stephen: i do not think it is worth getting into the specifics , from an fx perspective. the boj has signaled is

that markets need to be prepared for normalization. been, it has just been swept under the carpet for a wild by investors while they concentrate on things like trade tensions and so on. this has ramifications for the rest of asset classes and indeed, bonds across other governments. i'm curious how we have seen the yield just had higher. we are seeing knock on effects. --t about other ethics rates fx rates? where do we see the?? -- yen go? we think it will trend higher, partly off of the dollar. fx investors, wrongly in our view, traded markets as if the world were ending. that is clearly not the case, although there are risks on the horizon. moment, probably on

an alleged hedged -- unhedged basis, our investors are long dollar. so the risk is as growth decelerates a bit in the second half of the year, that's the dollar weakens off a little bit into year and. -- end. we don't expect anything major, so we think it will drift 1.15% lower. on the flipside, yesterday we had the ecb doing exactly what was expected. another central bank starting to normalize. where do you see the euroyen going? stephen: i think the environment is well-balanced between the two. because it is very much the case that these major central banks mirror one another.

certainly, unless economic data warrants, you are not going to see one of these major banks step out aggressively ahead of another. part of the reason is the currency. but it is a pretty well-balanced environment for euroyen. caroline: interesting times. we'll discuss much more with stephen gallo coming up, running out of time and options. theresa may under pressure again. how will she response? -- respond? that conversation is next. this is bloomberg. ♪

caroline: you are watching "bloomberg surveillance" the eu has rejected theresa may's proposal for a trade deal. ,n a blunt and public critique michel barnier said he would never accept the customs plan. the eu cannot, and the eu will not, delegate the acquisition of its customs to a non-member , who would not be subject to the eu governance structures. caroline: it means the prime minister has to go back to the drawing board, just 12 weeks before a private agreement is due. what does this mean for the british pound? still with us is a stephen gallo from bml -- bmo.

where does it go? stephen: the opportunity exists for sterling to fall. subjectively, the probability of a cliff edge of brexit is about 30%. to,it could easily rise possibly even above 50%. this is a reason i have been cautious regarding our dollar call. certainly a fall in cable would inhibit dollar weakness. cliff edge of brexit would also be, on balance, negative for the euro. but the sterling would underperform if the market price and click at brexit -- cliff edge of brexit. i would not do anything with cable, you have these big risks on the one hand, the boe next week. the dollar has lost some upward momentum.

boeonce we get through the and what the august round of discussions look like, and then get into the fall one, this is when the downside risk will crystallize. caroline: what about the euro pound? it could be a weakening force if we see a cliff edge. the waying at it all since 1975, but it has been slowly tracking higher. i would not completely rule it out, that is a benefit of the u.k., which eurozone economies do not share. it has that release valve, it can devalue if it needs to. and there are costs with the devaluation. spain cannot do that, italy cannot do that, and the u.k. is a democracy. and therefore, the exchange rate fits with that. but at the moment, the eurosterling is buy on dips.

we broke through trendline resistance. so anything down to about .89 is , andd buying opportunity the view we are caring is that you will see .91 and .924 you see 87 again. caroline: what about in terms of a no deal? my subjective probability is around a third, but the risk is it rises to even -- 50%.rcent caroline: what they see happening over the course of the next few weeks? the pound could have followed a lot more on the back of some harsh headlines. yes, but at the moment, the sterling still has the benefit of time on its side. the window is closing, of course.

if this rhetoric were coming out of the press conferences from the eu side a month before the deadline of article 50, it would be a very different story. it is kind of like with trump. the markets have learned to expect that trumps rhetoric is different than what the end result or actions are. and like any difficult negotiation process we have seen in europe before, whether it is negotiations,er they are difficult. long and drawn out. caroline: getting numb to those headline risks. stephen gallo, telling it like it is. terrific, president trump talks up the u.s. economy gdp. ♪

caroline: economics, finance, and politics. this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe.

mark zuckerberg lost $15.9 billion yesterday. that is more than a market cap of 175 companies. this as facebook shares plunged 19%. president trump threatens to impose a large sanctions on turkey. the nation's economy is already hit by a run on the currency and a surge in inflation. in our most read stories, third place, the boj is seeking to rein in yields. in second, ubs is dismissing dozens of staff. and top, is amazon. they delivered soaring profits at more than double analyst expectations. find out more now at bloomberg.com. let's get the first word news, here is taylor riggs. personalonald trump's attorney is reportedly prepared

to tell federal investigators that the president knew in advance about a meeting where russians were expected to offer damaging information about hillary clinton. that is according to cnn, citing unnamed sources. such testimony would confident in the president, his sons, and other campaign officials who repeatedly claimed trump was not aware of the meeting. has released the remains of some american war dead. the white house said a u.s. air to antransport plane flew eastern north korean city early today and returned to an airbase in south korea with boxes containing what are believed to be the remains of 55 missing american personnel. this marks the first tangible outcome of president donald trump's outcome with -- summit with kim jong-un and signals progress. may's brexit options are

narrowing after the eu rejected a key part of her trade proposal. offer custom proposal was the best hope of getting a deal she could sell to a divided parliament. but in a blunt and public critique, michelle barnier says he will never accept the plan. -- cannot and will not delegate the applications of its customs policy and rules and duty whoection to a nonmember would not be subject to the eu governance structures. french economic growth unexpectedly failed to accelerate when a series of national strikes acted as a drag. in threeded 2/10 of 1% months, while consumer spending fell and trade weighed on growth. at 1:30 p.m. u.k. time, we get

gdp data out of the u.s., with expectations the economy grew at the fastest pace since 2014. you mentioned earlier, mark zuckerberg lost more wealth in a single day that the entire market value of coal, course, nasdaq, or ralph lauren. the than 170 companies in the500 are worth less than amount of money that vanished from facebook shares, plunging 19%. zuckerberg is now the world's six richest person, down three runs on the bloomberg billionaires index. 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. caroline. caroline: thanks so much. u.s. tvearing about

while french national growth failed to accelerate. the gdp rose just point to %.rcent -- .2 president trump is optimistic about the data. here is what he said. >> gdp will be announced tomorrow. i do not know what they are, but i think they will be terrific. was reallyk over, it low and heading lower and was going to be there fast. caroline: terrific. still with us is stephen gallo. terrific? we are expecting around four percentage points. can they hold on? stephen: already, there are signs that would be deceleration. you brought me here to talk about fx, and so i will do that. the issue they have is the nature of the fiscal stimulus

and the growth momentum that was already in trade is that it is coinciding with deterioration. so, what you need to sustain dollar strength is steady portfolio inflows. but as long as global growth does not fall off a cliff, of course, not our base case. our base case is that it will remain steady, despite the risks. there is a possibility the u.k. could end up with a deficit, and when it does, the dollar will fall. caroline: how far could fall in your perspective? i know we were talking earlier about how it could -- the u.k. could upset that. but when we are looking at a growth of more than four percentage points, how much could the dollar weaken? stephen: i was cautious, and told you slippage of about one-one .5%, he literally the

end of 2018 -- cumulatively by the end of the year. despite that, our view is that there will be one more day higher -- leg higher. so that is an inhibiting factor. but note, i said cumulatively. caroline: and let's look at the flip side. what is driving the rim and be nminbi lower? stephen: it is china's own actions. if you look at the competitiveness again they have from the rhesus -- recent evaluation, it roughly equals or even offsets the size of the tariffs. the impact of the loss of competitiveness through the tariffs. so it is a very engineered move. caroline: manipulation?

stephen: of course it is, but that is what china does. some central banks wish they could do that. in fact, when they can't do it with physical tools, they do it verbally, with rhetoric. have their cake and eat it. but it is no secret china controls the currency, and that is how you have to approach china. you always have to use that perspective. it is a managed currency. they have made mistakes in the past. 2015 was an episode with policy errors. they had a dramatic slowing, the stock market collapsing. they were trying to hold the currency steady, but realize they had to succumb to private sector forces, and when they did , they created a vicious spiral of outflows they had to arrest. this time around, they have got that in the rearview mirror.

and also, the fiscal backup is supported for growth. i would not say a further buildup of debt is good, and certainly not a further buildup , but theyent to gdp have the tools in terms of augmented fiscal policy to backstop growth. and that is what they are doing. is not coinciding with indiscriminate capital outflows, it is a managed to climb --decline. that does not mean it could not become more chaotic, but that depends on the trade war. of currency terms weakness offsetting the knock on effects for china, what about dollar weakness? do we see that being a supporter for growth going forward? stephen: yes, possibly, a little bit.

i would think that officials within the treasury, economists, are now looking at the dollar as wrote moderately overvalued, relative to the long run. in fact, that is what the imf , thatassessments conclude the dollar is moderately to even significantly overvalued. phase getting into a where prolonged strength in the dollar, rather than a little bit of weakness boosting growth, prolonged strength to be a big drag on the economy. seeill be interesting to what next exports have contributed to the gdp figure. caroline: we dig into those numbers and a bit. it has been wonderful to have your expertise. joining us is stephen gallo from bmo. up next, we dive into european earnings season. this is bloomberg. ♪

caroline: you are watching bloomberg. let's check in on one of the biggest leaders in the stoxx , the worsttly down day for caring stock since june 2016. . this is on the fact that ug did not live up to expectations. still boasting significant growth. in particular, ug coming in for 40% growth, but overall, it seems it has not lived up to expectations. really sinking. sticking with earnings, we are about done with the first week of eu reporting season.

some strong numbers from banks have been paired with mrs. by energy and tech. energy and tech. here is a quick recap. >> the profit of 700 million for the first half of the year is a solid number. but most importantly, matt, we have executed on all of the targets we have set. >> if you look at asset management, they all contribute to a strong quarter. and the fact that for the first six months, we generated almost 3 million off capital, a record. continue to see strong volume growth in latin america, despite the elections in mexico and uncertainty and brazil. we have seen, you know, particularly in europe, probably the best quarter we have seen in

a few years. >> the last few years, everybody was doing well. prices were quite high. then when the markets got more difficult, and that is my expectation, we will see more opportunity. because maybe some competitors will realize it is quite tough at their. -- out there. caroline: joining us now is bloomberg's fx strategist. give us your preliminary read. >> it has been fascinating. if you take a step back, the setup was pretty constructive. we had the cause, the sell in may. estimates have flatlined. , andere we are, a week in about a third of the companies have reported and they are better than expected. if you look at sweden as the typical canary in the coal mine, because they reported early, we

had expectations of flat revenue coming in at 2%. we had expectations of six-ish earnings growth, they came in at about 11%. so better than expected. ,weden is also interesting because they have implications for europe. down frombreaking it a geographic point of view, what about a second tour of port of you -- sectoral view? early, butstill banks and insurance are two categories where we are seeing beat. versusials at around 16% nine percent, in terms of beating versus mrs. -- misses. interestingly, while the setup overall was constructive, energy, high bar. luxury goods, high bar. they have both done well, revenue is better than expected,

up until now. and now we have slips across the board in energy. still huge growth, but not quite what we needed, given the momentous nature of that sector. and that does create a's challenge -- a challenge. caroline: you wonder what more they have to achieve. what you think about currency headwinds? we were just talking about where we see the pound and euro going. interesting. currency is super important for europe. is obvious, but there is a of international exposure across the continent. in particular, because a child is the u.k.. 60%, on average, of the ftse comes from abroad. that creates the intrigue and importance.

ofhave gone from a period distinct headwind from the standpoint of currency translations with a strong pound and a strong euro. this is the inflection point. as we go into q3 and q4, both of the currencies are essentially flat. went frome dollar, we 10-12% positive to neutral. so that allows underlying growth to show. looking at the index, say msci europe or the stoxx 600, you will see the celebration versus the first half, mostly because of energy. but currency now clears away. and what we expect to see is a really celebration in growth. caroline: a bit more transparency without the headwind very thank you very much. up next, foxhunting.

we talk media and the battle for fox's entertainment assets. this is bloomberg. ♪

caroline: economics, finance, and politics. this is "bloomberg surveillance."

let's get the bloomberg business flash. amazon investors have shrugged off the second quarter , focusing on soaring profits that came in at more than double projections. the giant reported second-quarter profits of $2.53 billion in sales. generated a net income of $4.16 billion in the first half of the year, more than the previous seven quarters combined. we think it is driven by, again, prime. and thee program engagement of prime customers, as well as increased selection. particularly, third-party selection. kering shares have fallen by the most in two years, as gucci became the victim of

its own success. the wildly popular growth came in slightly below expectations in the second quarter at 40%. and we close in l'oreal mass-market brands are weighing on the cosmetic giants sales growth, despite buoyant chinese demand. the beauty conglomerate reported revenue just shy of estimates. growth in the luxury division ,as helped by strong sales mainstream brands such as maybelline fell short of expectations. you ourill bring interview with l'oreal's ceo at 11:30 a.m. u.k. time. that is your bloomberg business flash. caroline. caroline: let's focus on media. the 21st century fox and disney shareholders are voting on fox entertainment assets. disney has already won the approval from the doj, after comcast dropped its bid to focus on buying the british tv

provider sky. later today, and agency is inspected to hold a hearing on the price sky bidders should have today -- to pay. what are we expecting out of the new york meeting. is it a done deal? joe: mostly, yes. toare expecting them overwhelmingly approved the merger. the question is, what happens to sky? caroline: why is it still in play? we just had numbers and it shows of why it is the crown jewel. rising profits, rising sales, a growing customer base. play because we have comcast, still wanting to acquire the asset. they have got a 26 billion pound bid on the table. the question is, does disney come back with a competing bid?

we do not know what the intentions are. so we have to see how that bidding scenario plays out. caroline: fascinating to see how it unfolds. and of course, your reporting will be all over. let's get to one of our top stories as well. factsays it has no relating to the health of its former chief executive in the period leading up to his shoulder surgery and sudden death. for more, we are joined by our senior writer. you knew him well, it is an emotional topic, but what have we learned about his health? tomaso: yesterday, there was the shocking revelation who said that he had been sick for over a year with a serious illness

before being treated with surgery. later, fiat chrysler it self said the company was not aware of his condition until the end of last week when his family was told he was unable to return to work. statement where they essentially confirmed that the company was not aware that they did not tell the company about his illness. that is where we stand now. caroline: i mean, of course, medical data is a private matter. very difficult to decide at what point it should be entitled to the investor base. but how shocked is the company, is italy, the investor base? mean, the company was already shocked by this sad news.

he was fiat chrysler, he created fiat chrysler. he represented the group. this sudden death is a shock for the company. this is adding more shock to the ,hop, the fact that the company the chairman who had been working with him for 14 years, was not aware of the illness. what he should have said to the board of investors, there are many asking what is going on. caroline: fantastic as ever, our senior writer joining us from milan. we continue in the next hour. this is bloomberg. ♪

tom: this morning, in the midst

of earnings season, resilient equity markets and chinese yuan ships to new weakness. high yield with the bank of japan and the feds. they will meet next week. a first look at unthinkable numbers. it is a make america great economy. the president takes a prerelease victory lap. sees shrinking profit margins and amazon sees expanding margins. this is "bloomberg surveillance turco -- this is bloomberg -- this is "bloomberg surveillance." francine lacqua is in a beach in london. i know 98.6 degrees. that i believe is hot. we are well into the 30 degrees celsius.

i am surviving without a fan at home. that is hard-core i think you will agree. tom: thunderstorms scheduled for the united kingdom to maybe give them a break and a lot of global heat worldwide including japan. it is not facebook today, we're not doing facebook today. let's go to taylor riggs. taylor: the first 10 to outcome from last month's summit with president trump and kim jong-un. north korea has released the remains of some of the americans killed in the korean war. that comes on the 60's bit anniversary of the armistice that ended the fighting. president trump is enthusiastic about the latest data on the economy coming out today. the president spoke at a steel mill in illinois yesterday. numbers will be announced tomorrow sometime. i do not know what they are but i think they will be terrific.

we took over and it was heading lower, a lot lower and it was going to be there fast. a bloomberg survey says the economy rose 4.2% in the quarter. the options on brexit are shrinking for theresa may. rejectedean union has a key part of her proposal for a trade deal. now she has just 12 weeks to go before the divorce deal is supposed to be signed. the uk's chief negotiator they stay inside the eu's customs union that would enrage may supporters. the central bank has again offered to buy an unlimited amount of bonds. the offer came after japan's benchmark yield reached .01% for the first time in a year. it is official. a former cricket stars party has

won the most seats in the pakistani election but the party did not win and out light majority so he will have to win a coalition. once he takes office, he will be confronted by a growing economic crisis. reserves arerrency dwindling and he may need a bailout from the imf. 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 am taylor riggs. this is bloomberg. tom: equities, bonds, currencies, commodities. down 25,500. i cannot remember what i did. 11.94. i make the screens up and i cannot remember what i did because i have not had my 14th cup of coffee.

6.83 rounded up, that is a weaker yuan. facebook yesterday was historic. i thought jonathan ferro was great and what a lack of communication by the company. nejra: big questions over where the growth comes from next. we talk about that with alex webb and make comparisons to amazon as well. it feels like a friday. the stoxx 600 on a headline level. not doing a lot. we are seeing gains in emerging markets. the euro weakened after draghi yesterday. we did not get a lot. he left early to go on his summer break. we did drop below 117. the lira hit a fresh record low. it is studying today but where do we go from here? tom: we have to pull out our chart on pakistan with that historic election of mr. khan.

we have to go to a tech chart. it sets us up for good discussions. mark lehmann was brilliant on bloomberg radio on this. orange, amazon, facebook and blue, google in white. facebook has normalized back to the advent of facebook and it puts in scale what is happening with these wonderful three stories. there are a lot of nuances. joplin spare,he everyone is having fun with that drop. maybe a normalized drop gives you a better perspective. nejra: i'm so glad you did the tech chart. i'm focusing on something more macro because of the guests we have coming up later. hans redeker and antonio pascual. the yield has more than tripled since last friday. we have hit 0.1% for the first time in the year.

a big question ahead of the boj meeting in terms of what this means for yield curve control. tom: it really sets us up. nejra: let's focus in on tech because amazon investors have shrugged off second-quarter sales that missed estimates, focusing instead on soaring profits that came in on more than double analyst expectations. joining us is bloomberg opinions alex webb who covers tax -- who covers tech. it is the profitability investors are looking out for judging by the reaction. alex: historically everyone is investing in amazon because of -- very little expectation in the long-term it would deliver profits. revenue still grew which is fell short of expectations. amazon was able to demonstrate they can flip a switch and ramp-up that profitability. it is an incentive for investors. difficult they become at the growth level, then they

can readily move to a profit spinning business. nejra: what is interesting if you look below the surface is where that growth in revenue was coming from. it was not so much from e-commerce, it was from clout and also advertising. alex: cloud remains the huge profit driver at amazon. the great debate new pillar of growth for amazon is there at business. business.d the reason facebook and google have been so successful is they have -- you can bid on advertising. facebook and google own the interaction with the consumer, but amazon goes one step further because they of the point-of-sale. that is a huge threat, particularly for facebook. that weake criticisms

bundle these tech stocks together. you've been wonderful about their distinction in their nuances. bring up the bloomberg. this is hard to see on tv but it is instructive. amazon is a retail giant and considered a grocery store equivalent. down in the lower right, with amazon of 4%, it is the most stunning number. amazon, one year out is going to be a five cents on the dollar business. there is no retail shop in the world that approaches that. i understand it is web service and the such. how persistent is five cents on the dollar down to the bottom line? alex: to what level can they sustain that level of profitability? i think it will only go up. the discounts amazon does right now in order to win customers, the moment they shave that down there able to generate even more profitability. are hugeng businesses

margin businesses and they have a colossal network and are based on the digital platforms that amazon runs, not on brick-and-mortar warehouse locations. tom: over to the screen again. down at the very bottom of the bloomberg, the most important point, free cash flow. billion, $9 billion, a year off. free taxxplosion in flow is unprecedented. to generate $24 billion in free cash flow 24 months out. how can you have a hold rating on amazon? alex: it is a rare person who does. -- the reason they are battling apple for that trillion dollar market cap is because

people are buying into the growth story but they recognize it is spinning up huge chunks of change. amazon does not just give out money in the way apple does, they invest a lot of it into the businesses to find these new growth pillars. when they announced they were getting into the health care market, the health care market shuttered because they recognized its power. tom: alex, thank you so much for the briefing. really appreciate the nuances. here's what you need to know on chinese yuan. they extend their decline. this is a weaker yuan over three days -- i do not have the john madden telestrater up. this is weaker yuan into their saturday morning. coming up, hans redeker will

join us from morgan stanley. eisen will join us. looking forward to that in the 6:00 hour. we will to him about factor analysis as well. is a beautiful moon over a cool new york, that compared to nejra cehic's london. stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to bloomberg business flash. a french luxury company is a victim of its own success. shares are falling after a gucci

brand grew only 2% in the second quarter. gucci has grown 49% in a previous period. private equity firms are tomidering whether to buy china. they offer kfc and pizza hut restaurants on the mainland and has a market value of almost $14 million. there is some concern about growth that intel. the second-largest semiconductor maker posted second-quarter results that beat estimates and they beat their revenue target for the year but some investors decided there could be yes robust growth in the fourth quarter. that is your bloomberg business flash. nejra: thank you so much, taylor. now to central banks. the boj has offered to buy an unlimited amount of bonds for

the second time. this is as it seeks to rein in yields. japan's central bank meets tuesday to start will be a busy week for policy makers. on wednesday the federal reserve one ounce its rate decision and the bank of england will release its quarterly inflation report. we have the ecb decisions yesterday. redeker andre hans antonio pascual. great to see you gentlemen. i showed you a chart at the top of the show. , let me ask you what this means for dollar-yen. we think what happened in the year of 16 but a year when there was significant yen strength.

the central bank was going into negative interest rates. theyhey were doing that -- had to see financials in their equity market were declining significantly. the equity market was week. when you have a lower bank stocks you have to think about the ability of banks to create credit. see was when you had interest rates near the zero , and you still have an inflation or depletion area and balance possible. in those circumstances you can get what we called a deflationary rise in real rates. nejra: sorry to jump in, but will the boj be able to do anything to stop the yen strengthening? hans: i do not think they are focusing on the yield curve. is much moreve

difficult to contract in an environment where the s-curve is getting set to inversion. you are in the best of two worlds where international rates putting the back end of japan under upward pressure and you were allowed to lead against them to increase the monetary base. what japan has to decide is to concentrate on the monetary base or do they want to dampen the steepening of the curve? thinks the position and i they are going to lean toward the banking sector and's abiding -- and providing support for that. that means the yen is going to strengthen. you have au saying yen strong call? are you against consensus? hans: i think so. two weeks ago when the yen was

weakening it was on an unsustainable path. the boj shows signs of nervousness if you believe local newspaper reports. we will see what the central bank is going to make out of this. i think they have several and they can think about how you can be supportive of your financial sector without having an impact on foreign exchange. i believe the focus is clearly and thetock market focus is on the banking sector because of the effect the banking sector is going to have on japanese credit. amazing is find so the control and the messaging of the central banks. they are on message and with confidence about the future. i do not buy it for a minute. how original is the central banking in july of 2018?

i think they are forced to be original. 10 years ago and today, we would not recognize it. i used to teach macro and -- negative rates were things you would not even mention. now they have become standard tools. now the boj is struggling with this issue. when you're moving out of so much accommodation, i think you have to provide guidance. boj -- be strange if the some form of tightening by changing the yield curve control or widening the corridor. i have sympathy for the comments, trying to support the bank from a macro perspective. nejra: i want to ask you more about ecb curve control.

thank you so much, hans redeker of morgan stanley and antonio pascual of our cleat will be staying with us. coming up, a chairman and ceo. that is in the next hour in new york. look forward to that conversation in the height of earnings season. this is bloomberg. ♪

nejra, to be a fly on

the wall at prudential asset management. and richards is out. she is a good friend of "bloomberg surveillance." she will take a new senior leadership in finance. richards is resigning from prudential. that is the latest being spun. nejra: cannot wait to hear where she goes next. let stick-back with central banks. still with us are hans redeker from morgan stanley and antonio pascual from barclays. the euro weakened after a press conference yesterday. any supportgive from here? there are other factors, some of which are outside the -- antonio: i think there are other factors, some of which are outside the control of the ecb. inflation is below 1% and is not where they want it to be.

there are other factors. trade.tional factors, if they were to establish a trade war which they seem to raise the white flag, the first impact would be bigger for the euro and the macro negative could have another negative impact on the euro good to me that is the biggest international issue. that is now for hold. maybe now you see a bit of a wrench in trading for the euro. will the ecb attempt any kind of yield curve control? for the investments? antonio: there are two issues. just because there is no eurobond there is no clarity. already investments, i think there was too much speculation. draghi dismissed the issue of

investment discussion. they need to manage an average duration of that portfolio which is roughly the same duration of what is outstanding. as the portfolio matures, it makes sense the investment is slightly longer to keep the average duration constant. the market got a little bit carried away with that discussion and for now i do not think we'll see much from the ecb. tom: thank you so much. as we just mentioned, anne richards exiting prudential. she is the new chief executive officer. this is bloomberg. ♪

nejra: i'm nejra cehic in london with tom keene in new york. francine lacqua as the day off. let's take a look at what is trending. mark zuckerberg lost $15.9

billion in personal wealth yesterday. that is more than the market cap of 175 companies on the s&p 500 as facebook shares plunged 19%. president trump has threatened to impose large sanctions on turkey over the detention of an american pastor as the nation is already hit by a surge in inflation. our most read stories -- the bank of japan is seeking to rein in yields with an offer to buy an unlimited amount of bonds. ubs is said to be dismissing dozens of stars at its wealth and amazonunit delivers soaring profits that came in at more than double analysts expectations. it is interesting. i know we do not want to compare between different business models, but so did interesting to see the different reaction to amazon and facebook. tom: two different companies. maybe the comparison is more

from google to amazon. i remember yesterday a guest said we go from the faang stocks to the -- it is an interesting mix in the technology season. right now, in new york, here is taylor riggs. taylor: there was a solemn ceremony at an airbase in south korea today. an honor guard carried the remains of americans killed in the korean war off a plane that had just brought them from north korea. it was the first tangible outcome of president summit with north korea's kim jong-il and lastmonth -- kim jong-un month and it signals progress in the talks between the countries. more revelations from president's former lawyer michael cohen. cohening to cnn, michael is prepared to tell prosecutors the president knew in advance about a meeting where the russians were expected to offer damaging information about hillary clinton.

that would contradict the testimony of the president, his son, and other campaign officials. trump administration is raising hopes for a renegotiation north american free trade agreement. the trade representative says it is possible the nafta partners will reach a deal next month. he said canada has not yet compromised in the same way that the u.s. and canada have. there's a new risk to turkey's economy. the country is dealing with a surge in inflation and a run on the currency. president trump has warned of large sanctions. -- if the president does not release a detained american pastor. the pastors accused of taking part in that failed coup two years ago. 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 am taylor riggs. this is bloomberg. taylor.hanks so much,

another sign oil has rebounded from the 2014 to 20 price crash, bp made its biggest deal in two decades. the deal gives the london-based energy giant a position in the permian basin, a swath of west texas and mexico that is the world's fastest-growing oil region. joining us is bloomberg's energy reporter. great to have you on the show. is why bp hasery done this and more whether this was the right price. kelly: it is an awful lot of money and analysts were looking at a $9 billion value. it has gone down on the bp side and up on the bhp side. some are wondering whether they have overpaid for this deal. nejra: how is bp planning to swing the decision for investors? kelly: they raised the dividend

today. that was something people have planned for them to do, but they moved up the announcement to be concurrent with this big purchase. tom: i want to talk about broken yield properties. they have divested $18 billion over the six years. it was truly a broken company not young ago -- not long ago. what i find fascinating on the bloomberg oil watch is the industry is out of ideas. toy will return all of this shareholders. industry is the oil simply out of ideas? kelly: i do not know if they are out of ideas. you are seeing more deals in spaces that are outside of what they would normally do in their core competencies. green energy deals that bp recently bought.

i do not know -- they are positioning themselves for a long-term future and as you can see still focused on this traditional oil and gas growth. tom: kelly, thank you so much. it has become a letter thing. i liked it better when it was broken hill properties and british petroleum. they had a romance. hans reddick of barclays and antonio pascual -- hans redeker of morgan stanley and antonio pascual. i like that you have real names. the heart and soul of this matter was the end of the china boom in the commodity boom. your commodity analysis and morgan stanley with your foreign exchange analysis, is there any sense of a new commodity boom or a super commodity cycle? i would like to make two

remarks. when you look at m&a activities at the state cycle, when you look at the performance of oil, oil tends to prove -- tends to outperform in late cycle. gloomy andas pretty promoted long positions -- at around.e -- people came is that assignment everything is rosy? those type of activities, it tends to be a late cycle and then you have to think about where does the first doom drop? it is always where the first credit risk was. ,his time is emerging markets at that time it was in u.s. corporate bond yields. the spreads went wider. -- you translate at

translate that into currency analysis. commodity markets are not good for the long-term. we are suggesting that when china is progressing, it is going to be the old china or the new china that is going to progress, i think it is going be the new china, the less intensive on the commodity side. block hashe commodity seen significant leverage in the past. combination of huge leverage and wheat asset quality. look into the arena state market. you have the same in norway, australia, new zealand, canada. all that translates that those currencies are likely to depreciate. nejra: i want to pick up on your late cycle comment. oil has rallied, metals have not. hans: the outperformance of oil

was the same in 2008. --ra: what does it mean which currencies will outperform in which will underperform? hans: when you think about that, and you would continue to be long on oil related currency. we have trade but it is running out of juice. we are late cycle. i want to make it perfectly clear we think that the asset markets are close to dropping out. ofthink the outperformance the capital market or the asset is topping out, the outperformance relative to the rest of the world. we have seen the u.s. dollar has been supported by those type of loans. what you have now is the long u.s. dollar. look at how much european asset holders are holding in the u.s. corporate bond market. it is fragile. when it comes to liquidation on that side, europe repatriation

back into the euro. a lot of people are trading back into the u.s. dollar. i believe that is an error. nejra: you think dollar weakness, euro strength from here? hans: that is absolutely right. and we have to do it right now. nejra: hans redeker and antonio pascual will be staying with us. and coming up the bp ceo will be on bloomberg. interesting given what we have just discussed with the bp deal. this is bloomberg. ♪

nejra: i'm nejra cehic with column keen -- with tom keene. me in london and tom in new york

. it is boiling in london and i think it is for theresa may as well. the eu has rejected theresa may's proposal for a trade deal. the eu chief negotiator said he would never accept her customs plan. this means the british prime minister has to go back to the drawing board just 12 weeks before agreement is to be signed. joining us is our brussels bureau chief. what does michelle take issue with in this customs plan? proposed that brussels outsources its status collection to her majesty's revenue and customs and there is no precedent of a cost -- of a country outsourcing its collection. impracticalthis is and will create bureaucracy and there is no precedent so it cannot accept it. similarly on banks, london reposes a joint rulebook between

the eu and britain on banking regulation. says the eu has regulatory economy. alive u.k. wants to stay with this rulebook post-brexit, then the eu will allow a limited access to its banks to the single market. if not, they will not allow access to a single market. that is it. of theresaoposals may were rejected outright yesterday. nejra: given we have the summer recess in the u.k. and no doubt some sort of break in europe, what progress can be made before the october summit? nikos: it is hard. we are still where we have always been and this is square one. the eu says the u.k. must make a

choice. we either have unhindered trade in good and services post-brexit and that means the u.k. would have to stay in the customs union and the single market, or we do have regulatory barriers so the u.k. can maintain its sovereignty and the regulatory economy. -- the regulatory autonomy. decision london has to make an brussels said it has not made it yet. time is running out. we have a few weeks to decide. we will see how that goes. it does not look good. tom: thank you so much. hans redeker with us of morgan stanley and antonio pascual with barclays. i want to talk about the underlying vibrancy of the european economy. i saw france gdp a little light,

i read a couple reports, it is all rationalized. is there a spirited eu economy? i think it is quite strong when you look at consumption. it is true france was weak but i think there are factors related to the strikes. domestic moneys are strong. look at the labor market -- healthy in the euro area. look at investment and corporate margins. look at the fiscal stimulus coming up in germany, not at the same order of money in the u.s. but relevant and a bit more easing in countries like italy and spain. i think overall when you look at each and every component, it is in pretty good shape. we are worriedts about, and about trade wars and the slow down in china and what

trump could do to the euro area which is a lot if it were to -- looking at the euro area growth a bit over 2%. if there is no acceleration in --de wars would be supported by demand, i think. meeting gotmp minimal play in the u.s. versus all of the other washington stuff going on. what was your perception on the trump uecker meeting for brussels? antonio: there was not a lot of detail. the fact that it did not putlate, the fact that they on hold and discuss the potential to a further trade agreement i would say it is a

net positive. caveating comes with a of the midterm elections in the u.s., whether this is just to keep things as they are on positives with the inclusion of purchases of soy from the uropean union to the u.s. maybe he wants to keep things on hold in the u.s. until the midterm elections. maybe afterwards he could reoptimize and change course. nejra: what about the u.k. economy. you have the boe decision next week. you see the u.k. economy has firmed somewhat. will this give any support to sterling? true that the second quarter firm up -- we are tracking growth around 0.4% and above trend.

trent is around .325%. all of this is true and gives a view to hike next week. as far as sterling goes, we just discussed brexit. i'm afraid that is the overarching theme that is driving the currency. nejra: hans, i am wondering if you agree with that. i know you said you are bullish on the euro against the dollar. for the time being it is leaning to the upside. which isis a currency hugely undervalued but is becoming weaker because of political considerations. when you take politics out of the equation, when you think you're getting into calmer waters considering the relationship with the euro, then the sterling is going to offer significant opportunity.

the question is from which level are we going to start. i'm afraid at the moment we have little visibility on that side. i think for the time being euro-sterling is catching a bit and it is going up but i would say later in the year sterling is going to offer a fantastic opportunity. nejra: where? would trade it much more against the u.s. dollar. andknow i am a dollar bear that would mean a move back up to 100 -- 1.50 is a possibility. tom: very good. hans redeker with us and antonio pascual, thanks so much for joining us today. one of the most important people in the senate. tim scott of south carolina. an exceptionally important conservative voice. tim scott in the 10:00 hour this morning. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs.

starbucks is taking big steps to correct course. the chain will start nationwide delivery in china by the end of the year. it is also considering a u.s. television ad campaign. in haroldre mixed schulz's final quarter as chairman. locally, they beat estimates. erickson is open to options for its $1.2 billion u.s. billing unit. bloomberg has learned the swedish company is looking for potential buyers for its tell korea technologies -- for its telcordia technologies. taylor, thank you. let me bring up a chart. this is a good way to get ready for the weekend and the trilemma china faces. i know the president has talked about currency manipulation. off we go, ever strong from 2004 to a leveling in a recent rollover.

hans read with us from morgan stanley. what is the outcome the chinese government desires? what does president xi want with renminbi levels? china -- labor market stability. when you have a certain level of productivity and demographics you mix them and come up with economic growth requirements between 6.5 and seven and steer the economy accordingly. each time you're coming up closer to seven you can focus on the second target. each time you get to the lower end you focus on the labor market. when you look at the chart from 2004, i guess from 2004, at least the first few years it is misleading. that means you are capturing dollar weakness. it is much more important that when the u.s. dollars started to strengthen from february onwards renminbi was

leaning against that. there was renminbi appreciation up to the 14th of june and then we did see a significant change in the renminbi and i guess that was triggered by chinese monetary policy. that is when they were adding liquidity to the market, that is when they were cutting into their reserves, into the reserve requirements. and 2016.t like 2015 at that time you had much more open capital and financial. and themuch more sealed funds may be coming in from investors. otherwise, you will not see it a lot. i think this is not about the exchange rate. this is about keeping chinese growth going in an environment where there is a trade threat

out of the united states. tom: it'll be interesting to see how that unfolds. we have had some reports of 6% out of 4% or even 3% gdp. that is an outlier call but nevertheless there is a dynamic. hans run it for, thank you so much. it has been an extraordinary week in equities. team, we will ande forward to amazon success and also what it takes to not lose money. that is a good and beautiful thing to do. eisman will join us without cannot lose money. we'll do that, next. ♪ phones have made our lives effortless.

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of earnings season, brazilian equity markets and the chinese yuan ships to new weakness. the bank of japan says they meet next week. bank of england as well. unthinkable numbers. it is a make america great again economy. the president takes a prerelease victory lap. profit margins matter. amazon sees expanding margins and steve eisman showed up with a little short. that will be a good and beautiful thing. good morning, it's the summer friday. nejra cehic in for francine lacqua it was on a beach. frame for us the record heat of the united kingdom. heat has gone from bad to worse. nejra: can you see the steam coming off me? onset.a fan i'm holding it up and i don't know if you can see it. it's from tom keene being in london.

this is the gift he left for me. theresa may even -- under even more heat because the eu has rejected her customs plan. right now, let's go to cool, kong, and collect it first world news. taylor: in the first tangible outcome of the korean summit, north korea has released some of the remains of americans killed in the korean war. it does signal progress in broader talks on nuclear weapons. as you were mentioning, the options on brexit are shrinking her british prime minister theresa may. the european union has rejected a key part of her proposal for a trade deal. she has just 12 weeks to go before the divorce bill is supposed to be signed. negotiatorief suggest they stay inside the customs union but that would

enrage part of mays conservative party. for the second time this week, the bank of japan is trying to tame an increase. the central bank has again offered an unlimited amount of bonds. the offer came after japan's benchmark yields reached 1/10 of 1% for the first time in more than a year. bp has agreed to make its biggest acquisition and almost two decades area the british energy company will pay $10.5 billion for onshore oil and national gas assets. that includes the world's fastest-growing major oil region. a former cricket stars party has won the most seats in pakistan's election so they will -- but they will have to form coalition. you we confronted by a growing economic crisis.

he may need a bailout from the imf. global news 24 hours a day, on air and at tictoc on twitter, powered by more than three 700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. not much going on except for the turkish lira, little bit of action. it is also little bit of curse deepening. the vix 11.9. sharply weaker today. nejra? a fairly quiet friday. were up just 4/10 of or percent. below the surface is where gets interesting. steve eisman knows all about that. a bit of several days in a row. the euro dropped below 117 yesterday. cannot catch aa bid. extending losses from yesterday.

when and will we go? tom: love to play with big moves in big prices. the chart the distorts a little bit, let's go to the bloomberg and put in scale. google and amazon top the famous orange. facebook in the middle as you can see the reset yesterday. giving a little real scope and scale. there is the scale of facebook's reset. versus amazon and google. nejra: amazing moves in tech this week. let me bring it to the broader s&p 500 index. or within 1% of a record high. we saw a little softer yesterday but not only do we keep looking at higher highs, we also keep looking at higher lows. wells fargo calling it independently positive technical set. now, we need to look

at president trump out front on the jobs report. it was a number of weeks ago. out front president on this morning's gdp first look. >> gdp numbers will be announced tomorrow sometime. i don't know what they are but i think they're going to be terrific. and it was really low and it was heading lower, a lot lower. the president of united states on gdp. part of this is the backdrop for investment and finance. join us is steve eisman. he's looking at the larger picture along with the opportunities. were going to get to an opportunity here in a moment. the economy like in 2004 or 2005? was it the same effervescence is now? steve: it have the same appearance in the sense that things look at it positive.

it was great growth but under the surface there were tremendous issues. i don't see those issues today. tom: you don't see the underlined leverage. it's more control today? a different character joran rich a new shadows? -- a different character to the leverage and shadows? see at least at this point, barring a trade war which is something i can't handicap, any serious problems of the economy. i really don't. does anything that's happening in the credit market concern you? it -- you? this has been inverted. it's to show that riskier debt is out before. it's a different picture from overseeing and equity markets.

this is say anything about where we are in the cycle? see any of my usual metrics that are flashing red or yellow. credit quality, which is what i isus on a norm is the, probably the best in anyone's lifetime. there is no sign of any deterioration anywhere. not even in subprime auto. it's nothing i'm particularly concerned about. if i saw the next disaster i would be happy to call it for you but i don't see a. don't i understand you see any big risks in the same way as 2007 but there must still be some pockets of risk where you see opportunity. what are they? steve: turkey which everybody knows about. this is not a systemic problem but there are two banks in europe that have fairly large exposures to turkey.

bva and unicredit. i'm sure those two. -- i am short those two. you have a new short you're looking at. i want to be clear, it's not a big short. it's a little short. it's a company short. it's an old-fashioned company short and it's not facebook. i own facebook and i own amazon. what did you do yesterday when zuckerberg was losing a little bit? how miserable were you yesterday? i was in that miserable. this happens. you own a stock like facebook you have to expect every now and again you're going to lose money. it's not the end of the world. the short is a company called

zillow. the real estate company. the big best scenes in the last couple of years have been internet platforms but not all platforms are created equal. this is a company whose structure has deeply upset most of their retail brokerage industry and those people are looking for alternatives. the company's business has slowed dramatically over the last year. as a result, they've entered a new business which is going out investing their own money to buy houses and it's an. i think that is a terrible business. it's a cyclical business, it's a low-margin business. the irony is when they announced it months ago they said what was capital-intensive, they wouldn't be capital. and last month, what did they do, they raise capital. how do you respond to

shorts to go out and aggressively tout their short? you say you are short zillow. , you do it a classy way. we see people coming out and touting their short in the media. i don't have anything its zillow. i think the stocks overvalued and they have issues. speak to what other people do. asan only try and be mild-mannered about as possible. away from long short come away from trades, is the market just over bailey and right now? -- is it over variance right now? i don't think it's that

intellectually important question. we could've made the same argument during the internet bubble but that didn't break because the stocks got too expensive. it broke because we went into recession. it's more important to call the cycle than the. everybody is trying to work out how to take any opportunity or d risk in the event that we get a trade war. are there any places are companies were you would particularly be short or long in the event of a trade war? steve: it's very difficult to handicap. it's only the obvious answer which is, any companies with heavily reliance on international trade. they would suffer. my best guess is that with respect to the trade war, it will go to the edge because these things always like to go to the edge and at midnight on sunday night, they will reach an

agreement. what about in europe? we might see carmakers software but are there any other parts of europe that you are targeting specifically in the event of a trade war? i'm not targeting anything in europe because of a trade war. i'm short of the institutions in europe that are very specific. i mentioned unicredit ndb v.a.'s is of their exposure to turkey. there are a few other banks i think are undercapitalized. it's not a massive end of the world call. we had a cup of coffee and time warner center this weekend and somebody comes up to you about deutsche bank new york area should i apply for the job? tell me about them. i have no idea what deutsche bank is going to do. it's got new management that is trying very hard to fix it.

my best guess is that over time, deutsche bank will be a smaller institution. how much smaller is too early to say. nejra: he stays with us. so great to have you. interesting conversation to have on bloomberg. you do not want to miss out the news and the move into shale. ♪

nejra: -- taylor: let's get to the bloomberg business flash. the french luxury company is a victim of its own success. shares are falling after the

group she -- gucci brand grew only 40%. in theabels can only that rate but they had grown 49% in the previous. . there are considerations to buy yum china. they are talking the banks about financing. they operate kfc and pizza hut on the mainland. concerns are some about growth at intel. the world's second-largest semiconductor maker beat itsmates and boosted revenue targets for the year but some investors said there could be less robust growth the fourth quarter. that's your bloomberg business flash. on a friday in the summer it's a good and beautiful thing to talk to paul sweeney. to ask a security

analyst about why you own amazon. what is the brilliance of the eiseman ownership? steve: i have a brilliant thesis on amazon. it should be in the investor manual which is every day i come home and there are 10 boxes at my house. a minimum. i bought it because this is ridiculous. paul sweeney, peter lynch said just look at the hallway and thus we saw yesterday. paul: we saw a big earnings quarter and it's something amazon its investors are typically used to. company can this dial up the expenses whenever to.need i think the takeaways of investors are, the amazon web services, the cloud business is really a profit driver for this company.

they're growing advertising business is a profit driver for this company. like --investors are recognizing is a lot of levers here to pull. tom: jeff bezos is looking very patagonia. the financial controls of this beast have to be extraordinary. int is the pixel dust seattle that allows for these returns? paul: this is a company that has conditioned wall street and its investor base to ever-increasing investments in its business at the expense of near-term the stock still performs extraordinarily well over a long. of time. -- over a long amount of time. the long-term returns are there. while they would outback expenses for whatever profitand put up a huge

beat. it's a company that whenever wants to can throw off commencements of earnings and free cash flow. nejra: the fact that a canned outback expenses gives investors conference about profit in the future. one of the things that the profitability can improve going forward is the cloud business. it's a big business or them and they are the leaders. it is a profitable business as opposed to the core e-commerce business of amazon which is historically been a low margin business. amazon isbusiness for a very profitable business and that something that is growing will drop fund line. the advertising business that we pay could be an $8 billion revenue business this year up from 3 billion last year. it's also very possible that profitable. those two, not the

core e-commerce, the did so well. the cloud space is competitive. how long can they live there? there are big players there. it's a business that sees a lot of price-cutting almost every month. you these players cut the price with the demand is so strong. so the business continues to grow at high rates. to 20 fastest growing intact and amazon is a leader. zillow thentioned last block and some real questions about their performance. you look at twitter the same way and that it is narrow and focused and scope and can't compete? don't have a strong

view on twitter. i am facebook and i think facebook is a dominant player. tom: let's look at facebook with the reset. paul: the issue for twitters are finally starting to show some would suggestowth that some of the product and cream they made is working. the bigger issue is advertisers starting out giving a little budget to flitter. they made the advertising toducts much more relevant come off the mat were people thought is richly as a year and a havoc of the company have no .uture in the advertising space the stock may be real little bit had of itself in terms of growth.

its focus on user growth and advertiser growth. what would make you lose state in facebook and turn that long into a short? steve: i don't think your going .o see anything for months it reminds me a little bit of when facebook went public in their all these questions about how they're going to do on mobile in the stock collapsed right after the ipo. what you saw yesterday was a reset of the business model area when facebook went down, old media stocks went up. i think that was a mistake. facebook said there went to cut their margins and half to fix the business. if i was an old media company i wouldn't take any solace in that. nejra: one of the challenges is

how the do they get that growth? you must have faith in other parts of their business such as artificial intelligence. steve: artificial intelligence a little beyond my intellectual capacity. company thinks the story aspect of instagram be the next big wave and will know whether that's true. let's go back to twitter and fold into instagram. it's got to come up on the call. are you say that the company for acquisition? twitter is the ultimate bolt on for some of these giants. once the new story? paul: twitter feels like they don't need to be acquired. they have the model and the younger demos.

tom: is someone stomach to go out and buy the oil, some will be don't enough to buy twitter. one of the things google lacks is the social media platform. this probably a better play for alphabet than 80% ago. want too go -- tom: i go back to first principles. whatever happened to normal ratios? these guys are all of them play by separate playbook. what tech investors particularly on the internet side of the equation look at is the total addressable market on the longer. of time -- over the longer moment of time. that's e-commerce.

will it be 50% or 20%? if so, you buy amazon. steve: it doesn't matter whether i believe it, it's whether the market believes it. the market will believe it until it doesn't. i go back to the internet bubble, the market stop leaving it when there was a recession when it turned out all the companies were not immune. the debate about whether these internet companies are overvalued is i think at this point academic until the economy curves. results today.p is that the catalyst to come if all the copy blair coming out and calling that's insane to point something percent? -- are coming out and saying to

point something percent? if that were the case, yes, but i don't see that happening. tom: thank you to the two of you. it's been great. nejra: fantastic. paul sweeney and steve eisman. they stay with us. coming up, the l'oreal chairman and ceo. coming up just shortly next. 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: good morning, everyone. we have been talking about twitter and will talk about

twitter. we should note that bloomberg lp operates a global breaking news network on twitter called tictoc. we look for earnings out of a 7:00 hour. here's taylor riggs. taylor: there was a solemn ceremony at an airbase in south korea today. and on a guard carried remains of the americans killed in the korean war off a plane that brought them from north korea. it was the first hands while, president trump's summit with kim jong-un last month. it's a none of this denotes progress in the broader nuclear talks. more elevations from michael:. cohen is prepared to tell prosecutors have the president knew in advance about a meeting where russians were expected to offer damaging information about hillary clinton. that would contradict the testimony and public denials of the president, his son, and other officials. trump administration is

raising hopes for renegotiated north american free trade agreement. u.s. trade representative's said it's possible that nafta partners will reach a tentative deal next month but he says canada hasn't yet compromise in the same way that the u.s. and mexico have. there's a new risk to turkey's economy. the country is already dealing with a surge of inflation and a run on the currency. now president trump has warned of large sanctions. that's if they don't release of detained american pastor. he is accused of taking part in a failed coup two weeks past two years ago. onbal news 24 hours a day air and on tictoc on twitter. this is bloomberg. tom, nejra? nejra: thank you so much. l'oreal shares fell as weakness of the mass-market brand weighed

on the cosmetics giant sales growth this despite demand from china. jean-paul: mass market is we have improving and been gaining market share. some retailers are doing a pretty good job. walmart is improving nicely. i'm pretty confident. 13% growth partly due to china. these strongwe see double-digit growth numbers in china? jean-paul: we don't know exactly but it could be pretty sustainable because there is a large population in china. we know that the upper class and upper middle class will double the next 10 or 15 years. let's very interesting is that all the new consumers, millennials are very often going

directly to luxury brands. they don't hesitate today to buy their first makeup were first lipstick with giorgio armani. this could last. are you concerned about the impact of the trade were between the u.s. and china on your luxury division in china? we have very few brands coming directly from the u.s. to china and we have not many brands coming from china to the u.s.. we will not be very impacted. >> are you seeing consumers shift away from some of your brands and moving towards french france and china because of the deteriorating image of the u.s. products? jean-paul: not at all.

consumers are still very far away from this dispute. see what happens but i'm not really concerned. do you think some of your french brands could gain market share? jean-paul: consumers are clever. they can see the dimons between political disputes and conception of good products. if they trust the brand, if they like the brand. i don't think there will be an impact. generally do you think these trade war concerns could impact global confidence for the global economy? yes, i think it's really absurd. the last thing the world needs right now is a trade war. we know that it's

counterproductive to economic draws. to peace. it's really the last thing we should do. we are pleased to have with us steve eisman. there was a big/earlier this week on a thing called factor analysis which is a theory that has come out of france and the idea of partitioning out value in momentum. it doesn't sound like a successful movie from a few years ago. steve eisman on the theories of investment. and the belief that you could factor out value. you can factor out momentum. is it legitimate or suggest a lot of academic mumbo-jumbo? steve: you caught me unprepared on that one. tom: he studied this.

look: it's not something i at it all. i don't try to parse some momentum versus something else. i just try to look at stocks and figure out fundamentals and figure out how things will work. that's what i try and do to make it more complicated, i'm not smart enough for that. let me ask you about luxury. this an area that seems to be insulated in a matter what's going on in the global economy as well as you have a demand from china is humorous? steve: nothing -- demand from china from consumers? steve: nothing is ever insulated. as long as the is strong things will be fine. if the global economy starts to slow or go into recession, all bets are off. question in on the

the esoteric question evaluation. you always place positions looking for a measure, modest return in your pleasant was surprised by the one in 10 or the 15 big successes? steve: if you look in my portfolio, there are things in there that are singles and doubles. there are things that are potential home runs. portfolioock in my that hasn't worked yet it has potential for a big home run this general motors. tom: in what way? one alongside. stocks are down because of the trade war issues. but general motors and google are the leaders and autonomous driving. off,tonomous driving takes it's possible that the

autonomous driving division will be worth more the entire company. tom: let's talk about profitability. amazon four cents on the dollar. gm not comparable to amazon. i can't get it down to the net income line. seven cents on the dollar. huge capital commitments. by an auto manufacturer. let's have a little history here. general motors is a fairly well-run company. that's a shocking statement to those of us who are followed for a very long time is precrisis coming was a horribly run company. it'smuch better ron and much more efficient and it throws off cash. it's a better company and it has --hot and autonomous driving has a shot at doing something fantastic in autonomous drawing -- driving.

nejra: in the others? steve: google. better than talking about value or momentum to look at the economy. our guest was saying one of the things he was talking about was what actually led to the sub prime crisis was the savings imbalance in the world and that is still present. does that cause you concern? probably referring to is commonly called the debt super cycle which has fueled the global economy for quite a long time. macro call to the maid and eventually the debt super cycle and. call thathuge macro who knows when it will happen. tom: i want to go back to general motors.

there's a huge focus on mr. musk and spaceflight and such and then you have this oddity of an auto manufacturing operation in a tent in california. what is the tesla value in stock value through the iceman perspective? steve: we are short tesla. i don't see the value in tesla. elon musk is a very smart man but not -- with a lot of smart people in this world and being smart is it enough, you have to execute. he has execution problems. we will see how this quarter goes but he is negative cash flow. he's building cars in a tent. is nowhere in autonomous driving as far as i can tell. in inmpetition is coming space next year. tom: describe for us how you take the cash flow analysis from revenue. a huge mystery about how he will deliver unit.

also price and you have to bring that down to cash flow. tesla, not one but both of those are somewhat of a mystery. steve: a lot of mysteries to tesla. the thing i think is interesting from the negative perspective is that the company has lost an enormous number of executives in the last two years. we will see, maybe pulls a rabbit out of a hat and gets the company going better. but so far, jury is out. the the way he's gone after media and analyst, has he spoken to you? has gone after steve eisman? steve: maybe after today. tom: we won't give out your you mail or phone number. we heard your views on amazon earlier. what about alibaba? steve: we own alibaba as well. chinaa is the amazon of

and the interesting thing about alibaba is that it's possible at some point in the future, 50% of retail sales in china will be online. and that's alibaba. alibaba retellhe story is even better than the amazon story in the united states. looking at chinese tech stocks more broadly, you have any other calls in terms of the tech story in china? story in the tech china seems to concern the u.s. president. i have no other stories in china other than alibaba. we're going to go to washington in a moment and get an update. forget about gdp. for your student of what going on in washington? steve: i focus on every single day as part of my job.

steve: people can talk about the good and the bad of president trump but the fact i focus on ee day as part of my job. tom: how does it affect investment? is, economic growth has accelerated. there's no indication that it's going to slow anytime soon. we could argue about the policies and argue about them all the time. but the market is very unidimensional in terms of the economy. tom: thank you so much. don't go away. we are going to go to washington right now. our chief washington correspondent will prepare you and that would be kevin. kevin, we saw the president front run the gdp report. it's maybe not as big a deal as the unemployment or or but's on a victory lap. is their belief within the trump administration that they can sustain this make america great

again economy? kevin: they are hoping. pointing to economic indicators as a main crux of their argument for the midterm elections. they feel the economic indicators are much more in line for the bosses they want argue for as opposed to russia. policies they want to argue for as opposed to russia. noah feldman from harvard law i was what kelvin solely -- with kevin is looking at. obstruction can involve statements that would otherwise be protected as free speech. obstruction must be motivated by corrupt intent. intent to persuade seminoles to hinder or delay governmental proceeding area it is an easy to prove corrupt intent. i know you look at your twitter feed last night to see if they would go after you for objection as well. this is serious stuff, isn't it? kevin: it's very serious and no

less last line is crucial. it's very tough to prove any kind of intent in terms of structure justice. the developments of last night in regards to michael cohen's attorney, cnn reporting that he is now saying he was at that meeting and the president trump new about the meeting with regards to the officials, is also saying that they don't have audio recordings of that but that's a very new development. ofshould notice that several the folks at that meeting have testified under. they are under a rose in terms of the chronology of that meeting. that's a crucial development that emerged last night. the white house pushing back and maintaining that they're going to be able to get through it. you can get through

the night. our chief washington correspondent. here is taylor riggs. taylor: starbucks is taking some big step to try to correct horse. the world's largest chain of coffee shops will start nationwide delivery in china by the end of the year. they are also considering a u.s. television ad campaign. results were mixed on howard schultz's final order as chairman. erickson is open to options. bloomberg has learned of the swedish company sees multiple potential hires for its technologies. erickson was the focus on its wireless network is this. u.k., and richards has quit after two years. she will be chief executive at fidelity international which see over these 4-iron $14 billion. -- $414 billion.

to see her gong to fidelity international. i want to do a chart. iceman's all crypto. he's knee-deep in crypto. there's the chart, it going. basis, it's soup. the price is just there. link your interest in crypto into this east, bitcoin. how are they connected? the me first say that i am not an expert on cryptocurrency. feeling thing i will say is i don't understand its social utility because it's not like you to go to a store they are not taking your dollars. the only thing i can figure out about is money laundering.

speculate about the value of cryptocurrency but i don't understand how anybody even values these cryptocurrencies. it's like asking how many angels dance on the head of a pen. everyone is to set up a wing, division, floor of crypto experts just to keep up with the vote. just to keep up with what's going on. if i were running a big bank, i wouldn't have a cryptocurrency trading operation but i'm not running a bank. far as i understand, a lot of big banks are looking at how to integrate blockchain. steve: that's a different question. nejra: two-seamer value their? steve: -- paul: do you see more of -- nejra: do you see more value there? steve: i've talked to some

people think it's going to transform the back office. the underlying technology will be very important for the banking system. if currency, i have my doubts. would it change anything if there was more regulation? see anyone,e yet to with even a theory on how to value the currency. how devalue currencies? how do you value the dollar? its relative to other countries. like i said, it's like asking how many angels dance on the head of a pen. nejra: when you value companies you are valuing against their competitors as well. steve: you are valuing bitcoin against the u.s. dollar-based --

u.s. dollar based on what? i need a metric. mr. iceman at newberger berman. i want to know how you process being wrong. i have been wrong, wrong, wrong a lot of investments and there are to being wrong mentally. their outcomes and how to get out of a wrong. all of the people that were long general electric and got hammered. how the steve eisman handle being wrong? you don't just have one stock, you have many. i'm right and wrong every day. the important thing is to keep an open mind and to realize that you're not god and you can be wrong and you have to have a thesis. what are the facts that will

support it or not support your thesis. yet to be when to say yourself, i'm wrong, and walk away. you stop losses in some form? i don't have a hard stop loss formula. i just re-examine my stocks every day. earnings coming out here. the pace never in tear. twitter, we hear from paul sweeney earlier. the first look we got is at one cent. is a beach with a lot more coming out. the idea of monthly users missing their estimate. i'm not saying they would do a facebook but that's not a good way to get the twitter ballet started. excuse me for looking down. i'm looking at the terminal flow coming out. that comes in a little light.

the sub headline, the average users missed estimate. they see this as an important headline. we see further him a you decline in the third order. for those of you on bloomberg radio, twitter down 11.2%. his is the idea of getting out. twitter has communicated their battles a lot better than facebook has. they were really talking up this idea negative indication. they were clear on that. there's the first headline. they were really talking up this twitter projects users to decline, profit short of estimates. nejra: interesting numbers coming through. certainly, when it comes to facebook, i want to go back to what we're talking about earlier. how do you deal with being wrong? are you actively looking for the big eight short -- the next

short or is that something that can happen once in a lifetime? i pray every day that he can only happen once a lifetime. it was an interesting time in my life and an emotionally wrenching time in my life. i lived it once and that's enough. it's a day to day grind, as you mentioned earlier. , the holdings do you have? how many holdings do you have? steve: about 75. tom: at what point does concentration begin to harm you? you have a right number there were you get the balance away from the hedge fund blowups we overseen versus the diversification of years ago? long is 4% andst

my largest short is 3%. under those parameters, you have size but not too much size and you get diversification. i don't believe in making bets on individual stocks. nejra: if you were to take someone under your wing and mentor them? looking for a job. continue. [laughter] nejra: what would be your best single piece of advice? person, would tell the the first thing you should do is specialize. become an expert in a particular industry. don't be a generalist. hopefully choose an industry

that you enjoy examining so you don't get bored everyday. tom: this is been hugely viable. thank you very much. we have so much to talk about here. bring up the chart here. i don't want to make too much about the move other than 44 down to 36. down 13% right now. we need to tell you that bloomberg lp operates a breaking network on twitter and we call it tictoc. you will have much more on this. steve eisman would join us on radio. you will see a lot from bloomberg intelligence and their esteemed guests. the success of amazon. immediate news on twitter, down 15%. i like the job angle. you finessed that.

steve just passed me a note. it said tell her to use the fan on the desk. nejra: i've got it right here. i won't waive it but it's buzzing away. tom: we are going to go out with collected new york doing better than good. worldwide, stay out of the harmful heat as best you can. through the day, technology on bloomberg. good morning. ♪ two, down and back up.

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xfinity internet. which could save you hunreds of dollars a year. plus get $150 when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. 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. a >> i do not know what they

are but i think they're going to be terrific. pressure, second-quarter gdp. president trump has high expectations. if it has a four in front of it, he will be happy. could drop by single-digit millions. bp's biggest deal since 1999 as they buy bhp getting a way out of a disaster and has resulted in $20 billion of write-downs. david: welcome. i'm david westin. is down 16%, 18%. typically, if falls 11%. that is the move. let's put this into perspective. david: we will see where it ends up. it is about how much money they can make. they