francine: tweaking targets. the bank of japan cuts its inflation or cast and says it will allow movement in jgb for the yen and 10-year gilts. credit squeeze shines. they posted their best profit in three years. me theef executive tells group is almost done with the restructuring plan. the selloff continues in the tech sector. down nearly 300 billion cents earnings last week. what are investors looking for today? this is bloomberg surveillance

and i'm francine lacqua. i'm in europe because i interviewed the credit suisse executive after he reported earnings. investors seem to like it. a couple questions on global markets but we'll get to that in us tech in. nejra: let's take a look at the broader markets. it looks like european equities have an cost that -- haven't caught that fanng flu. the nasdaq whopping below its 50 day moving average. the stoxx 600 doing nothing much at all. some big movement in fx and the bond market. more tweaking around the margins with its lessee. quite a dovish news conference from kuroda. we see those jgb yields move lower, dragging global bond yields with them. we traded 2.95%.

dollar-yen did not react much. since corona has spoken, we definitely seeing more downside in the end. now all 3/10 of a percent. a lot going on in the corporate space. let's start with pretty sweet. the swiss unit compensating for trading weakness. the best adjusted pretax profit in three years. most units beating estimates. storyof a different looking at standard charter stock. first half profits were up 34% but perhaps it's decline in cost is unnerving investors. it's one of the worst performers on the stocks it's hundred so far. we will speak exclusively to the cfo. we can dig into the numbers more. bp up 1.4%. happening boost

reassuring investors somewhat about the financial stress after it announced the bhp shale deal last week. let's get the first word news. taylor: the bank of japan leaves its targets unchanged. the central bank said it will reduce the amount of bank reserves and negative interest rates. it intends to maintain the current fixed relay low levels of short and long-term interest for an extended. of time. u.s. president donald trump said he is willing to meet his quote, counterpart with, no precondition. that comes amid tensions climbing after trump left the nuclear deal.

some hours later the white house walk act some of those comments saying the officials do not expect tehran to seek a meeting. >> they want to meet, i will meet. it's good for the country, good for them, good for us, and good for the world. no preconditions. i will meet. hasor: north korea reportedly continued to build missiles sense kim jong-un agreed to commit to denuclearization. says photoson post and other evidence indicates efforts were underway to assemble at least one and possibly two liquid fueled intercontinental ballistic missiles. the rockets were being built on facility -- at the facility on the outskirts of pyongyang. government borrowing in the second half will jump the mosys 2008 financial crisis. despite a strengthening

economy. they expect to issue $329 billion in debt. that's the fourth-largest total on record. global news 24 hours a day and a tictoc on twitter. in more than 120 countries. i'm taylor riggs, this is bloomberg. francine: thank you so much. we have those credit suisse earnings little bit earlier on. they beat expectations and gave investors reasons to stay with the bank or the end of its three-year restructuring. we are 10 quarters into the 12 to restructuring. if you look at bank earnings, they made gains in key areas to offset some continued weakness in trading. i asked the executive whether a downturn in global markets or and markets overall mentee would

worry about new asset is his what he's. >> -- what he said. >> this was a very good order. you so positive net assets which is important for us area if you had asset management, we are at 40 billion. that's the size of a medium-sized bank. very much focused on ultrahigh net worth. more than 60% comes from that. that's the heart of the strategy. we need to ring institutional advice and services. ibcm and global markets provide services for our clients. we printed this platform. platform.ted this it's a really bright spot for

us. francine: if there's a strong market downturn, what happens? >> you can have outflows. what happens, more importantly, is where you fit between lines. you going to see us make much more money from derivatives and structured products. which is what you see today. it's a little bit in global market. a lot of it is structured products. it's a big swing. it's the nature of what we do. we may earn a little less. but more recurring fees, recurring income. francine: how much to worry about the markets? give a possible government shutdown. strategy bey of the adopted, when we started three years ago, market trading was

59% for profits. b was from a to absolutely key because today, we look at markets and trading as an upside. the core of our performance is driven by wealth management which is much more stable and principled and we can solve the global markets. we tell our markets team in new york and elsewhere that it's good to be a credit suisse because here we can grow. it's from 17%. that's good for trading activity to grow 70%. important point, was are restructuring unit. hit are in the 18 targets. he said it would close it down when we had it big enough. we are now at 10 out of 11 and

49 out of or two. we are done with our restructuring. no skepticism. we have hit the point where it's going to stop weighing on our results. what about global markets? the structure we need to explain better. strategy isarket not to maximize the standalone global market revenue. it's to use global markets to power the other division. revenue is down 8% and that's because keep them under strict cap. revenue and poor on much more capital in that activity and then you would see

results more similar to those of our peers. we have decided to use global markets to serve our clients. i feel it is working very well. francine: the chief executive of credit suisse. join us are our guests. thank you for giving us a little bit of -- of your time. what willake of it? make the difference between the banks? you look at the financial sectors, obviously, the performance has been pretty bad in the first six months of the year. it's a little bit lopsided from there but terms of earnings, the earnings are pretty good. but it's from moist of other sectors -- sectors. it's mainly a call from europe. cb is finally getting the rates.

it, will probably not be sustained. francine: how difficult is it to choose the bank or the banks of the country were the banks are strongest in case of a severe market downturn? luca: we think there is more growth in the u.s. you look at long growth. it's up 5% in europe and only 2%. it's a much more solid position in terms of balance sheet. dependent on what is going on in terms of economic growth. if you have a next celebration, even the japanese banks, it's mainly a factor more than a

regional issue. francine: if financials are so dependent on economic growth, what is your outlook here? luca: i think we are reading too much into this softness we have. let's not forget that european growth is roughly 2.2 and 2.3%. the rates are close to a record low in germany. we see an improvement in confidence in rants and italy. still very solid. we are actually still predicting and expecting solid growth in europe. maybe an acceleration from the first quarter. it still positive. were not particularly worried about the state of the european economy. putting trade tensions aside, how much more upside is there? luca: i think we talk about five

or potentially 10%. we think there is not much upside in this i goal but we have good earnings and i think we may enter the face of the year, especially in september, when the market since the little bit stronger. there's not much upside in the u.s.. thank you so much. he stays with us. up, we have plenty kuroda tweaks.oj and we look at how investors are reacting. how third --the halford joinsrew us. this is bloomberg.

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francine: economics, finance, politics, this is bloomberg. we are covering the credit suisse earnings. let's get to the business flash from taylor riggs. bp has posted more profit than expected in the second quarter. offering reassurance to investors of financial strength after notes's biggest deal in almost two decades. after spending much of the last several years after that oil spill, and a deep industry downturn, the ceo said he would build upon all that hard work acquisition billion

of u.s. shale assets. >> venezuela is a human tragedy unfolding an unfortunate that's going to affect oil markets. we look at libya and nigeria from time to time. tensions coming of the gulf recently. demand is keeping up and production is keeping up. u.s. production will rise. there are offsetting factors here. taylor: standard chartered ceo is getting closer to meeting his target for the bank. the london-based lender beat estimates. profits jumped 34% to $2.35 billion. 6.7%n on equity decline to and the bank said it is close to meet -- to meeting it's a percent target. the ceo joins us for an interview at 9:30 a.m. u.k. time.

cbs says les moonves will remain us to yell for the time while outside counsel investigates allegations of sexual-harassment. a new yorker article claimed several women were at is a glance m&a to and that the career suffered when they were use advanced is from the 23 look year-long company veteran. he admitted there were times decades ago that he may have made some women uncomfortable but said he never used his position to harm anyone's career area that is your bloomberg -- career. that is your bloomberg is no splash. -- bloomberg business flash. nejra: the bank of japan has rates- has left interest unchanged. they will be more flexible in bond operation. this was the longest wait for a statement since september 2016.

how important is this policy tweak and what should we be expecting? still with us is luca paolini. the boj matters because we have seen this downward pull in global bond you. yields.en -- bonded the decisions of the bank of japan is important but it doesn't change the reality. inflation in japan is very weak and the central bank is forced to provide more's amulet. they are not in a position to change dramatically the position they have been using the last two years. risk, i think any kind of change in this environment can affect the clients.

we have seen the dollar be relatively strong. nejra: we saw some outsize ahead of this decision so the fact that were going to get a bit more flexibility around that target, are you expecting more volatility because of that? luca: the bank of japan from one side compelled to do more but on the other side they are aware of the wrist too much stimulus. they need this flexibility. we have seen this in the past. --y are not in a position i think there will be more volatility going forward driven by the central bank policy. francine: you will get back to the boe and brexit shortly but

on the boj, this is that 2% inflation target. can we be sure that governor target?ill achieve that new line -- target? luca: they are struggling to explain why inflation is so low. there are some structural factors. banksk almost all central are struggling to understand this and i think the bank of japan is not in a better position to do that. they will be forced to continue the stimulus. as long as inflation remains near zero it will be difficult for the bank of japan to stop this policy. how long can they keep them in place? it impacts banks profitability

in the country. luca: it's a difficult decision. it would be the wrong decision to hike rates for the sake of the banks. there are different ways to support the banks but hiking rates is the wrong policy and would affect the credibility of the central bank. hike ratesult to when they expect inflation to remain at a zero level. policy not the only way to support the banking act or. -- banking sector. nejra: does it provide a downward gravitational pull on the 10 year yield? don't buy too much this policy divergence story. even the bank of japan is in a

doing less stimulus many year ago. i don't believe the virgins will be a critical element but i still believe we pay too much attention to the ecb and the bank of japan. are in a globalized economy. they have an impact but it's more short-term. the big story is about u.s. and u.s. inflation. the trend will be for bond yields go globally higher. global growth is a bit weaker than it was at the end of last year. inflation seems to be going up. if you look at the six months, the dollar stronger. -- keepingectation

inflation expectations lower. because of this, it's a natural overreaction. now there's a correction on the way down. difficult to believe there will be much more upside in bond yields. francine: where do you expect equities go from here? morgan stanley is expecting a correction in the equity market that would be far bigger than the one we had in february. how ugly with this the luca:hood of it happening -- happening? luca: global policy tightening will have an effect. "correctionct new -- i don't expect a significant

correction. of profitpotential margin. there are indications that we are close to the end of the ipo but this is not imminent. for the next six and 12 months i think we are's know ok. years, three years is where the problems are. are you expecting boe to hike rates and that -- and would that be a mistake on their place? the bank of england is in a very difficult position. inflation has. the economy is ill struggling and the housing market is in not a great situation. i think the most logical decision would be to rate -- wait.

but i think they are forced to hike rates. strong,al economy is the bank of england can hike rates but i think the big decision they have to make it or almost forced to do it. nejra: thank you very much. great to have you here. up next, standard charter's ceo joins us for an interview. the conversation next. this is bloomberg. ♪

francine: this is bloomberg surveillance. it there here to talk about critics lease. we are looking at financials and the markets.

let's get straight to the first word news. it taylor: bank of japan has left its interest rates unchanged while announcing tweaks and policy. central bank said it would reduce the amount of bank reserve subject with negative interest rates. the intend to maintain a current low levels of short and long-term interest rates for an extended amount of time. it donald trump said he is willing to meet with his iranian counterpart with no preconditions. that comes as tensions between the countries climb after trump withdrew from the nuclear deal. white house appeared to walk back those comments. meet, i willto

meet. any time they want. it's good for the country. it's good for them, it's good for us. no preconditions. taylor: north korea has continued to build missiles after they said they would work for complete denuclearization. thellite photos indicate efforts were underway to assemble at least one or two liquid fueled international -- intercontinental ballistic missiles. they were being built on the outskirts of pyongyang. borrowing in the second half will jump to the most since the financial crisis. the treasury expects to issue $329 million in debt by

september. that's the fourth largest total on record. credit suisse is given investors reasons to stay with the bank through the end of its three-year restructuring. estimates.st it is doing better than expected on revenue and adjusted profit. international wealth management profited 360 million francs above expectations. >> this was a very good quarter for credit suisse. us.s very important for management,he asset that is good for the bank every six months. taylor: global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg.

francine: i will pick it up here. selloff, they are rushing to exit u.s. tech stocks and nasdaq dropped low the 50 day moving average. facebook had the biggest market cap in history. will investors get a break when apple reports today? join us is alex webb. what we going to hear from apple? alex: we are going to be looking at the revenue numbers. they are going to grow. revenue thanore that. it will see if the brand is still strong, is the strength the phone or the strength of the brand. they are mainly -- selling

things on the strength of its brand. nejra: what will analysts discern? alex: we will see how they to go in theles next quarter. what happened last year was the top line iphone did not arrive in the third calendar quarter. they were delayed. if there are going to be similar delays, we will be able to gauge when that new iphone is going to come out, what week. good morning from zurich. what is the strongest company you have seen so far? if you buy apple, it's different than facebook. where do you see potential? been one of the

better ones so far. amazon surprised most with the upside. we know with amazon it is getting revenue from a lot of different sources. 87% from mobile ads. google gets the lion's share from ads. it is also getting a lot of profit from web services. it is more diversely spread than some of the other stocks. them, if you talk about they are different. apple sells hardware. facebook is a platform. they are all a little bit different. there is a more sophisticated approach developing in the investor front. i remember the day when we would talk about this

being the biggest competition to apple. of the have not been able to pierce the western market. do you worry about the supply chain given the trade war? alex: that is going to be what investors are going to be asking about. to what extent does he fear the impact of the trade war? ward howivot point to much money they are spending on facilities in north america. billionthat is $3 annually compared to what they spend internationally. somewill probably expect insight into that. nejra: let me show you this chart. they are 6% away from that trillion dollar cap market. is that going to be enough to it?

alex: when you look at the way they have an impact on the market, not only because it is buting within the index, also the cause of the supply chain, that trickles down to the chip industry. it, i don'ttops know. across tech it has a huge amount of impact. nejra: thank you for joining us on set. we will have an exclusive interview. costs are outgrowing growth. they are trying to have an increase in top profits. that conversation is next. this is bloomberg. ♪

francine: this is bloomberg surveillance. we are looking at once trending on the bloomberg. check in on what stranded across the bloomberg universe. harley davidson is planning to spruce up its global lineup. will introduce its first electric motorcycle in 2019. some morgan stanley analysts say a correction could be on the horizon. it may have a bigger impact on tech centric portfolios. is a smartad story phone slowdown hitting them. theyill stay the course is struggle to stoke inflation. a taxis said to look at

cut for the rich. here is taylor riggs in new york. taylor: it's starting to take a: samsung. a toll on samsung. as chinese rivals step up competition. there is trouble in joint the mobile business beside demand for its memory chips. they will sell up to half of the universal music group. it wants to cash in on a surgeon music streaming that is given new life into the industry. the french music conglomerate will sell to strategic partners. it has ruled out an ipo. cbs said it les moonves will

stay for the time being while they investigate allegations. a new yorker article claimed that several women were intimidated and their careers suffered when they refuse advances from the 23 year company veteran. he acknowledged there were times that he may have made women uncomfortable. he said he never uses position to harm anyone's career. credit suisse is given investors a reason to stay with the bank through the end of its restructuring. second-quarter net revenue is up. estimates.st they are doing better than expected on pretax profits. wealth management had a profit of 461 million francs. it was a very good quarter for credit suisse. it's a positive asset, which is very important to us.

if you add in the asset , that is the size of a good-sized bank. taylor: that is your bloomberg business flash. let's get to one of our other top stories. bp reported results that the estimates. the numbers come after the oil giant announced it would buy shale assets. speaking to bloomberg this results they said the were a positive signal for investors. are coming down, we have raised dividends for the first time in 15 quarters. people are pleased. we keep advancing. i think initially people were concerned that we were off to the races and we were going to break our framework. we are going to stay within the

$15 billion capital framework. we will divest assets to offset the deal. we will continue to increase distribution for shareholders. discipline is the main word. we will come in the 65 range. needed, youoney you .re guiding investors it are spending will be at the bottom of the range. it's like you are setting the theme for that. bob: it depends on the oil price. it feels firmer rather than softer. there is a lot of uncertainty in the market. this will be effective as of the first of july. the first part of this deal will likely be higher prices. the company is working well. we brought in three new projects, we have three to do by

the end of the year. i think things are on track. chiefne: that was the executive of bp. a 34% increase in profits for the first half of the year. that the estimates. they are downplaying the trade war threat. they are close to the rest of the trade tensions and it's limited. shares are falling as a result. joining us now for an exclusive interview, we are welcoming the cfo. thank you. i'm sorry i can't be with you today. this is what investors are worried about, where would you spend money in the future? the key thing today was topline growing 6% and the bottom line 34%. i think cost is the second order

issue. we are improving the profitability of the business. it's up 7%, which is much more where we want to be. up year on year. in large part, that was deliberate. we brought forth some to improve the business. we would expect to be at similar levels than where we are in the second half. francine: you are right. it's crucial. a lot of that was technology spending. you can argue this is part of the restructuring. will you continue to spend this much on technology? the overall cost we would see being similar in the second half to what we spent in the first half. that's what we said this morning. the technology part is important.

we have increased the spend on improving the infrastructure. over the last three years or so, we have doubled to spend. that is something that is coming through on her costs. it's given us the capability is much improved on what would take 40 days and now that's down to eight days. we are going to continue to invest in that level to we can grow the business long-term. how will you ensure investors that this will be ok? will you be able to keep those costs under control? andy: we have said that we are mindful of the cost. as long as we can see the top line growth is coming off the returns,t is improving that is the case of the moment, we will be very focused on investing. costs we will control, but

investing is important. theant to get the return of capital. we have progressively moved our way up. we are on the right track. 8% target ond an equity. how much will you need to boost revenues? term.it's in the median the first half of the year was slightly flatter because we don't have bank levy charges. we will get to that 8% level. we won't stop there either. we will get above that at a point in time. some ofking at the progress are making in tamping down that at risk. our shareholders giving you too much of a rough time?

andy: it would be nice to think that we will see the share price taking up a little bit more. investors will form their own views. the quality of the balance sheet and the cost we are taking on bad loans is much improved. , wemillion in six months took many charges in single year. we are in a much better space. up individual components are improving. those are the things we are focused on. what will you do with your capital? when you give it back to shareholders? andy: it's nice to have people talk about capital access. our capital member now is much stronger at just over 14%. that's a much better position to be in. we reintroduced dividends at the end of last year.

forward and the profits increase, we will be focused on what we can do to return the value to shareholders. nejra: you said this morning that the trade war impact is limited. are you making any preparations in case? andy: we have got a big business in china. i think sometimes when you look at our share price, people would think it's the only business we have. it,nding on how you look at 3% of our business is trade between the u.s. and china or hong kong. it's a small part of the business. it's important that it's only a small part of the business. weakness,ee signs of but we are keeping a very close eye on it. what happens there. a lot of activity is happening

in china at the moment. we are positioned if that trade does thunderbird itself more into asia or other parts of the world. have a watchful eye. what worries you the most about china? is there a concern that some of the extra stimulus the chinese policymakers of put in place will fuel bad debt? are they trying to put something in place? andy: i'm not sure. they are wanting the economy to be more integrated into the world economy. ofwant to provide a degree connectivity. incoming got 24%. people are concerned about china, the underlying activity is really strong.

it continues to be there and be focused. we think we have something unique. we will play to that as strongly as we can. anything can you hedge to counter a trade war? is impossible? on how thepends trade war manifests itself. if it is specific to certain sectors, it's not so much an issue of hedging but one of looking at where the supply chain flows compared with where it is today. it's really early days. i'm not seeing any noticeable change. that is something we are alert to. nejra: can you give us an update on the latest splitting the asian hubs into two stand-alone units? andy: we looked at the business and we have a lot of activity in northern asia. structure is somewhat

different to that. we made the decision we would make moves to align our legal structure with how we manage the business. we have made the first steps in singapore where we ran it to businesses and now it's just one. that is working its way through our system. thatine: the benefits of are tangible? andy: it gets managerial structure more in line, which makes the business easier to run. we generate big amounts of credit with some of the businesses that are trying to buy back liquidity. that takes away some of the friction costs we currently have. what is your outlook for impairment?

andy: an interesting question. they are difficult to predict. they are idiosyncratic and depend on individual situations. the third part has been very low. you have to go back many years before we would have a numbers flow like that. theould be nice to think full your number will be about a billion. that would be fantastic. that would'veo, been a great outcome. we've done a lot of work to clean up the balance sheets. nejra: are you going to sort out the sanctions issue? andy: the sanctions issue is complex. run in many markets around the world, getting systems in place. it's a serious endeavor.

we have made improvement. there is still some more to do. we will absolutely have got everything right with what is required by regulators. we will have something very unique. we will operate in 60 countries around the world to a globally consistent standard. we are very nearly there and we need to give a final shot to get across the line. we have said we have got ongoing discussions with the u.s. and u.k. authorities. when we know more about the outcome, we will talk about them. nejra: thank you so much for joining us today. thank you for joining us. we saw a beat on the first half, rising 34%. and he has to come

more often in the studio. bloomberg surveillance continues. i will be joined by tom keene in new york. we will be talking to paul donovan. today, wein stories heard from standard chartered in london. i am in zurich because i spoke to the credit suisse chief executive. we will talk about what that means in the market. we look at the bank of japan and when they will achieve that 2% inflation target. this is bloomberg. ♪ this isn't just any moving day.

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it will allow movement in jgb. the bankisse shines, had a wealth management music as a standout. flu. what are investors looking for from apple today. morning, everyone. this is bloomberg surveillance. i'm in zurich today. tom keene is in new york. we have to look at banks. there is a possible downturn in the market. the morgan stanley call is really something. they really are cautious. elenaovetails into what has set about making america great again. gdp is 4%.

that's coming back down into the 2 paths. i've got important tournament coming up. francine: i'm looking forward to that. let's get straight to the bloomberg first word news. she's back from san francisco. taylor: north korea reportedly is building new missiles. this is just weeks after the summit with president trump. that's according to the washington's post. the missiles are being built at a factory that made the first rockets capable of reaching the u.s. the trump administration they bypassed congress and give them $100 billion tax cut to the rich. the treasury department is studying whether or not it can use regulatory powers to account for inflation when they are doing capital gains taxes.

the bank of japan is staying the course. are increasing the easing program. negative apply interest rates and a lot more movement in the 10 year bond yield. they are preparing for a long struggle to stoke inflation. investors are betting that the bank of england will raise interest rates this week for only the second time since the financial crisis. the market is pricing in a hike on thursday. behindnomy is lagging its peers. that could of the central bank an excuse to hold off. credit suisse is giving investors reasons to stay with the banks are as restructuring. they had a profit higher than expected. gains in the wealth management is this offset the continuing weakness in trading.

and spoke with the ceo. >> this was a very good quarter for credit suisse. assets, whichve is very important for us. if you add in the asset we are adding to the bank every six months. more ofwe will have that interview coming up. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom: thank you so much. let me get to the data please economic growth is a little bit light. at gets my attention, but what really gets my inflation is the inflation statistic is up. that's the fastest in six years.

that's an interesting mix. it shows the challenge we see in central banks as witnessed by the bank of japan. i will try to get the bank of japan story out. it's extremely well done. we will try to get that out on twitter. the good market, i stand corrected. that is not as good as expected. maybe that is the carnage. the turkish lira is unraveling among the central bank independence. let's talk central

banks. it was a busy week for announcements. that leftus news interest rates unchanged while tweaking monetary policy. the governor said they will maintain the 10 year bond yield target set 0%, that will be more flexible labonte operations. professor, we have a million questions on bond targets. will this work, even if it takes longer? how will this work? >> so far, so good. the market has stood its ground. they came to the forecast two years ahead. of forwarding a lot guidance, which is popular in the states. they are indicating the strategy going forward being a lot more

open about things. this is one of the reasons why it worked out nicely today. there is a problem we are likely to have, a step back from the demandant kicked in for the olympics. it's ok. worry about the side effects? how thisvery aware of works. will they be able to do that fine line? >> one of the indications of them being so flexible is man stands the prolonged problem of excessive easing. it is shown very negative issues because people are not going to invest, even in for your rates. there is a negative implication to the japanese banks. this is from an ultralow

interest rate. there is a negative side effect that is starting to creep in. there are external factors like trade wars occurring. of anxiety is prolonging. they wanted to make the move while he can at this moment. tom: i'm glad you mentioned the bank. it's almost anti-bernanke what they are doing. are they taking a different tack from what ben bernanke's courage was in 2008? asked actually, if you look at the comment from the vice minister, he made it clear the strategy is not to kill the patient while they try to remedy it. they do understand that growth is something they have to look at first before they look at the conservatism of excessive methodology. i'm not worried about that to be honest. tom: tell me about the equity

investment. i can't say enough about the article. flabbergasted by the reaffirmation of the ownership of equity shares by the central bank. how is that going? define basic principles of capitalism. the fact of the matter is the bank of japan will continue to etf andn things like change the policy into diverging into topics. believe these are methodologies to sooth market anxiety. they will continue to support these issues rather than anything else. as we know, it's greater. i think it's part of their forward guidance that they introduce the market that they

will continue to support the levels of the corporate activity. francine: thank you so much. london is paul donovan, the ubs wealth management manager. yard trying to do everything they can. the inflation target keeps getting postponed. dilemma, ifs a real you talk to a japanese person, inflation is nowhere near 2%. its way above it. the consumer thinks it's higher than it actually is. they are cautious about spending. we might not be able to afford education next year, we might not be able to afford health-care next year. the reality is inflation is low.

the boj needs to manage expectations in the market. in other words, bring the consumer more into line with reality. we see every pricing of global on yields. i don't know if this is a divergence or if there is something deeper in it. is a i think what we see split. the boj is keeping accommodations in place as far as the eye can see. if we look at the ecb or the federal reserve or the boj -- boe, they are not adding accommodations. fed or the ecb is not taking away liquidity when the demand is dropping. that's an academic debate. they are not trying to accelerate.

the bank of japan is committing long-term to buy bonds in a way other central banks are not. you get a degree of divergence coming through. tom: do we have proof yet that you can unwind from quantitative easing? has anybody been unwinding? paul: absolutely. we see central banks change policy and move away from the access accommodation. if you look at the central bank balance sheets, that's been declining percent years. that seems perfectly acceptable. is how far down we go. i think we are in an environment where liquidity preference is higher. americans are not quite as addicted to credit cards as you used to be. i heard you buy -- pay cash when

you buy coffee. we are not sure with the right balance is not great --. tom: i don't think we paid cash for this coffee. i am looking at the beverage of choice. as you mentioned, the real challenge here is understanding the terminal value of each of these cultures, each of these nations is very different. how far apart is the american terminal value from the japanese terminal value? paul: there is quite a big gap. is terminal rate of policy largely dictated by the trend rates of growth. the trend rate of growth depends on population and productivity. japan has got a declining

population. productivity is ok. the u.s. does not have a declining population. you would expect there to be a sizable gap. the uncertainty is what things like trade protectionism and declining mobility might do to the productivity of the united states. what is the trend rate of growth in the united states going to be. that may come closer to the rate of growth over time. francine: the figures we had in the u.s. economy, i am thinking of last friday's numbers, are you concerned the fed will have to fight many more times? stay onthink they will a slow and steady pace. they are not going to react to

last week's numbers. it will be revised many times. the fed knows this. it's complete fiction, these numbers. it's operating above trend growth. it has a degree of fiscal tightening coming. they are going to slow the economy down as we come into the fourth quarter of this year. i think there is a little bit of a rest. president trump has been critical of the fed policy. i think if the economics is in the balance, maybe we shouldn't raise rates? the fed'stack on independence. there is a tightening because of the perceived threat of independence overtime. tom: we are really thrilled that

paul donovan is with us. we are looking at the central bank actions in japan. i want to shout out to stephanie. she had a wonderful interview with governor carney. common up, we will continue the discussion on economics. we are looking forward to that. please, stay with us. this is bloomberg. ♪

taylor: let's get the business flash. cbs will keep les moonves on the

job. they are looking for an outside counsel to investigate sexual harassment allegations. several women say their careers suffered when they refused his advances. he said he never uses position to harm anyone's career. they have increased the market forecast. they are helping offset the biggest medicine. we spoke with their executive vice president and cfo. >> this is going to drive growth and allow us to get to 5%. this is versus where we are today. we will grow means faster in the second half. taylor: samsung is getting hit by the slowdown in the smartphone market.

they missed estimates. shipments of smartphones are declining. rivals arese grabbing market share. that is your bloomberg business flash. taylor, thanks so much. let's talk financials. credit suisse beat expectations. they gave investors a reason to stay with the bank through its restructuring. i spoke to the ceo. this was a very good quarter for credit suisse. we made profit. assets,up positive which is very important to us. if you add in the asset management, that is 40 billion. more than 60% comes from it.

that is the heart of the strategy. we need to bring institutional light and services. increasinglys will provide wealth management for services for our clients. we created this platform. it is up 17%. that is a really bright spot for us. francine: if there is a market downturn, what happens? us.t can help the most important thing is our revenue. we will make more money from structured products. that is what you see today. see the markets have had an amazing recovery.

it's a big swing. it's a natural, what we do. we may have a little less income, but we can see recurring income. francine: how much do you worry about the markets? you have equity valuations. strategye adopted a and we see the bright spots today. , 59% of our products. a to be, we look at this as an upside. this is much more stable and much more predictable and doing very nicely. goodets team said it's

to be a credit squeeze. they can grow. for them to be able to grow 17%. they can grow this much with support. aother important point is restructuring unit. we have 18 targets. we had 11 to begin. we had 40 billion in leverage. me, that's the most pleasing thing and the results. that was done with the restructuring. we are going for that. that is not going to stop weighing on our results. , it's a really part of what we need to do

better. people compare us to others. we don't think that's right. our strategy is not to maximize the standalone global market. its to use global market to power the difference. what you see this quarter, revenue is down 8%. the cap.hem under we can transfer revenue and put more capital into that. you will see results more similar. we have taken a different path, to use the global market to serve our clients. we feel that's working very well. francine: joining us now from london is the finance managing editor. this is basically on the ubs. they have a different strategy

in play. you can argue that both banks are going at it in a different way. both are working. isi think the main point they are looking from different starting points. went much later than ubs. you are starting to see that in the money figures. the trading side, what we see inthere has been a rebound their asian equities, which had been struggling. we don't see that rebound elsewhere in the business. the fixed income business remains flat. people will be asking more as he points out. what is the global market strategy? the elephant in the room is peak 2000 revenue and operating

income that is coming back. there is still a shadow of the credit suisse we knew years ago. strategically, where do they fit into european banking? are they actually a bank that can find scale and continue forward? >> absolutely. the scale will be in wealth management. we see that the delivered now. the shifts in the coming months will be what happens after this restructuring plan. the bank will be highlighting its coming targets toward the end of the year. whate moment, it's unclear remains to be done. there will be more coming in on cost. thank you so much. francine is in zurich. we will continue with that coming up on the markets.

we will continue to look at european banking and united kingdom banking through the work. we have the chief executive officer of barclays on thursday. cool and calm in london. that's good news as they break a heatwave. in new york, we are on the edge of a beautiful late july morning. stay with us. this is bloomberg. good morning. ♪ 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. francine: this is "bloomberg surveillance." i am francine lacqua in zurich. tom is in new york. we have to look at the market moves. there has been mark meadows in

the bond market -- market moves in the bond market. we look to standard chartered and your u.s. president to talk about a shutdown and paul manafort testifying later on. let's get straight to bloomberg first word news in new york city. warned the pentagon afghan forces continue to lose ground. the report says that targeted terrorist attacks are rising even as the afghan government -- mikeace talks with pompeo says the u.s. strategy in afghanistan is working. the president said he would be willing to meet with the iranian president rouhani with no preconditions. irandministration now says first needs to change its

behavior. tensions between the countries have risen since president trump withdrew from the 2015 nuclear deal. join high-level nafta talks with the u.s. and mexico this week. the country's attempt to join the negotiations were ignored or spread by u.s. trade representative's office. trump has suggested he may look for a bilateral trade deal with mexico before working with canada. a governmentid shutdown before the midterm elections. the president has threatened to shut down the government if congress does not provide money for a border wall. 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, francine. francine: thank you so much. bank of england rate increase looks almost certain, even as doubt over the economy lingers. investors are betting there is a 90% chance of a quarter-point hike on thursday, which would only be the second increase since the financial crisis. ons is despite brexit rang -- weighing on british growth. paul, when you look at some of the concerns, there seems to be a consensus that because the boe did not hike in may, they will hike thursday. are they right to do so, or should they just worry about the power level? >> i think they are right to raise rates. the british economy is not lagging behind its peers. it is ahead of europe in the economic cycle. the recovery began earlier.

the labor markets improved earlier. you now have the normal process possibly exaggerated by brexit of coming back down to normal levels of growth. the bank of england is saying we have a normal cycle going on, normal levels of employment and the economy, seeing wage growth pick up, which we are, and yet we are running an aggressively negative real interest rate policy. i think that is where the bank is looking to slowly moved towards normalization on rates. francine: you are right. i probably should have rephrased it. it is about the fact that you have no idea what the economy looks like in 18 months. that is fair because you don't know whether the u.k. could crash out of the eu. how difficult is it to increase rates at this point in time?

paul: i think you have to go with the probabilities. the probability is we will get some kind of negotiated exit, and the u.k. economy will not fall off the edge of a cliff. function.ill there will still be food in the shops and people spending money. that is essentially what has happened over the course of the last 12 to 18 months. if that is your base case, you have to have contingency planning for stockpiling food and medicine and cutting rates and supporting the financial system if it all goes horribly wrong after march next year. that is contingency planning. you cannot try to do both at the same time. you have your base case that it is going to be negotiated, in which case a rate hike is prudent at this stage. hike rates, they are injecting accommodation into the economy because with rising wage and rising inflation, however you discount it, real

interest rates are coming down. the bank of england doesn't want real interest rates coming down at this junction. tom: stanley fischer of the federal reserve stopped traffic with the phrase altra accommodative. fischebank of england rian? are they altra accommodative? paul: i don't think they are ultra. they have a different structure from the u.s., in which a lot of mortgages in the u.s. are variable-rate. they have been transferring wealth from savers to borrowers and helping to resolve the debt problem without the necessity of taccone and fiscal easing or tax cuts. i think it has been dealing with the debt burden in a peculiar british way. the bank of england's balance

sheet like the fence has been -- fed's has been declining as a share of gdp. there has been a reduction of relative liquidity. peculiarlyere be a canadian way for governor carney? what is the carney have forward? paul: fortunately, the bank of england is not run by governor carney. it is run by the monetary policy committee. they have no problem putting the canadian in his place. this is a collective decision. the collective view of the bank of england, i think, is running a way of doing policy which is sensitive to the interest rate reactions that the u.k. consumer has, which are different from other markets, which is sensitive to the need to transfer money from savers to borrowers in order to deal with

the debt problem, which is sensitive as well to the fact that the u.k. is a relatively open economy and that sterling has an impact not on gdp necessarily but on the profitability of exporters. paul, talk to me about our start. what would that look like? i guess the danger is that it cannot be seen as the target. what do they do it as? a range? is that a useful tool for you? paul: personally, i am quite skeptical about this sort of thing. we are in the midst of dramatic change in the global economy. there is uncertainty about where a lot of economic variables are doing. there is an arm uncertainty about whether the data is accurate, whether we know in real time what is going on. the bank of england itself has been very critical of some of the data. coming up with a theoretical

construct like this in a time of upheaval where you are not sure what is going on, i am not terribly sure that is constructive. the bank of england has always been an academic institution. a lot of discussions there are relative to an oxford commons room. it is quite in keeping an character of the bank of england. i'm not sure it is been to make a difference to me on a day-to-day business. tom: that is the difference between bailey and america. we will continue. this is so good. on thursday, i have demanded the surveillance staff take the rest of july off. there is no doubt about it. blanchflower,vid they will be with us. thrilled to get boe perspective.

take the rest of july off, team. ♪

tom: good morning, everyone. "bloomberg surveillance." francine lacqua in zero. i am tom keene in new york. it is a special time. we are going to get perspective on washington. we do that with stephanie baker of bloomberg news in london. she of course owns the cottage industry of paul manafort's finances. i am really quite taken by this trial we are going to see. how much information has come out before the trial. is that unusual? stephanie: a lot has come out.

we have seen hundreds of pages thatails and memos manafort sent to the former ukrainian president and his colleagues and other consultants that were hired for ukraine. we know a lot. we know the extensive list of witnesses that mueller's team is expected to call to testify against manafort, including rick gates, manafort's partner who has turned against him. even though it is unlikely we will get much discussion of russia or manafort's time on the campaign, it is really focused on the tax and bank fraud charges. tom: within that is mr. manafort, and i believe you are innocent until ruling guilty, and with a vengeance -- proven guilty, and with a vengeance he

is moving towards a constructive and to this trial for himself. how does he claim innocence given all we have seen from mr. mueller? stephanie: he is claiming that this isre loans, that not income, that he did not have control over these foreign bank accounts. i think he is going to raise an uphill battle with that. they have extensive records, detailed lists of transactions. muellerclear is that if wins this case and gets a successful action of manafort, -- conviction of manafort, that puts wind in his sales and makes it hard for the trump to shut down the mueller investigation. if this does not go to plan, that is a major setback for mueller. either way, i think manafort may be banking on getting a pardon from trump in the end if it does

not go his way. francine: talk to me about a possible tax cut for the wealthy. will that happen? when will that happen? how will it be taken? stephanie: this is something that larry coker love, the national economic council advisor, has wanted to do for a while, which is the indexing of capital gains. when you pay capital gains, you look at what your original investment was. he wants to index that to inflation, which would amount to a tax cut. that would reduce the amount of taxes you pay. that would result in a tax gift to the ultra wealthy. there is some debate about whether or not the administration and treasury can do that unilaterally or congress would need to do that through legislation. that would encounter major pushback in congress. bush had looked at doing this

before and decided they could not do it unilaterally, that it was in the power of congress. politically, i think it would be somewhat daring to try to do right before the midterms. it would give the democrats a platform to again say the trump administration is all about tax cuts for the super wealthy and big corporations. politically, i don't think it would play well. francine: we also still talk about a shutdown. what do we know so far? could the president actually say yes to a shutdown? it is not really in his power, right? stephanie: he doubled down on his threats to shut down the government if he does not get his $25 billion for his border wall yesterday during a press visitinge with the italian prime minister. however, he has gotten pushback

from republicans in congress saying we don't think this will happen, we are trying to push this back until after the midterms. we are prepared to send him appropriations bills between now and the end of september when funding will run out. they think they have time on their side, that trump understands shutting down the government before the midterm is not helpful to anyone. much,ne: thank you so stephanie baker. paul donovan of ubs is still with us. i don't know exactly what will influence the markets if anything. measure,at strong gdp don't look too much into it. what does the government shutdown mean for the u.s. economy? paul: it is sort of something you look through. what we find is that when you get the threat of shutdown or a shutdown, you get a temporary

problem. you are putting growth out of the quarter with the shutdown into the following quarter because you are delaying payments. you are pushing into the future government spending. the other problem you get is that whatever the all the debate, you tend to not get any data during a government shutdown because the shutdown includes the statistical agencies. on are left relying completely unreliable statistics which are privately produced. there is a variety of issues. generally speaking, if we are talking about what is the trend of the economy, a one-month or two months shutdown does not make a great deal of difference in the direct sense. indirectly, it could have an implication politically. you might have to worry about are we going to get new policies? is this going to change the composition of congress?

are you going to see politicians scrambling to buy support in the future? the direct economic implication is very short-lived and is something you should generally look through. fed constrained because they have the silliness of a dead meeting that a live meeting, then a dead meeting, then another live meeting? it is the silliest and i have ever heard. paul: i think what the fed is trying to do is to create a degree of certainty in the financial markets, this regular rhythm of tightening so nobody is to upset. that might make for less dramatic journalism. i appreciate that is something that journalists are not too excited about. investors like a little bit of stability every now and then. goodness knows we have enough stability elsewhere. having a central bank that is

giving you a sense of certainty is a little bit of a welcome relief. tom: paul donovan with us from ubs. smart coverage. the bank of japan, the fed, and the bank of england on thursday. this is a really strong gtb go. apple, central-bank balance sheets, boj, download those charts and be smarter. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. shares of credit suisse are rising today as the bank posted higher-than-expected profits in the latest quarter offsetting weakness in trading. we asked the credit suisse ceo about his global markets business. >> our global markets strategy is not to maximize the standalone global markets revenue. it is to use global markets to power revenue and for much more capital in that activity, and then you will see results

similar to this. we are using global markets to serve our clients, and we think that is working well. profits beat estimates at standard chartered. standard chartered indicated costs were unlikely to decline over the rest of the year. shares of standard chartered fell the most in about six months. second quarter profit rose fourfold at bp as they cashed in on surging oil prices. that reassured investors after they announced their biggest deal in almost two decades. they have agreed to buy bhp's shale assets in the u.s. >> think it shows more confidence than we have had in a long time. it is the sixth quarter in a role that we have delivered results or exceeded it. that give us the confidence to raise the dividend for the first time in 15 orders. people are pleased.

taylor: that is your business flash. tom: thank you so much. paul donovan from ubs. i want to go back to the heritage of ubs in asia and the brilliant research you guys did and still do in asia. bring up the chart. this is real gdp in china. paul, i don't buy it for a minute. back in the past, the normal variance of gdp. clearly the financial courses. clearly the rebound. this has gone down to flatness. you have got to be kidding me. do you trust the statistics provided for the smoothness of gdp at the 6.7% range? as anmy guiding principle economist is to trust no statistics at all. with is normally a problem the data, u.s., european, or chinese. that is a dubious statistic. i think it is fair to say that

the amplitude of economic cycles has been reduced by the application of technology over the last 15 to 20 years. the inventory cycle since 2008 has become less volatile, and that will reduce economic volatility, but not to that extent. i think what you can say is that when you look at a gdp number in china, the ballpark is probably right. the chinese economy is we 6.75%g between 6.25% and give or take. chinane: we saw delivering extra stimulus to the economy. do you worry this will lead to too much debt? paul: with china's debt, it is primarily domestically owned. that means it is essentially intergenerational.

wealth transferred, domestically owned, not a huge problem. if you look at the u.k., the u.k. has done to income ratios that are extremely high. that is because everybody has mortgages. i have debt. my father has assets. this is not a problem. you end up with intergenerational wealth transfer. i don't think it is such a big problem in china. tom: thank you. in the next hour, we need to drive forward conversation on central banks. kim schoenholtz. stay with us. this is bloomberg. ♪ this is bloomberg. ♪ phones have made our lives effortless.

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which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. tom: this morning, quiet markets. and turkishthe yuan

lira. facebookflix will buy or vice versa. the bank of japan reaffirms a fight against inflation and dislocation. no word on whether that includes facebook and netflix shares. the president calls for a government shutdown. it is assumed that would include some postponement of a trial for mr. manafort. this is "bloomberg surveillance." i am tom keene. live from our swiss headquarters in zurich, francine lacqua. there with a different bank, a smaller credit suisse than what we saw 12 years ago. added to go with their leader? francine: yeah. it is a smaller bank here in it is in -- bank. it is in better shape than it was three years ago. they basically go through the

trials and tribulations of credit suisse. they were at pains to explain is that one of the that thes they get is global markets lag peers because it is a different business model than others are trying to do. they are using it as a unit of wealth management and not on its own. tom: we go to italian gdp, a smaller number. european gdp coming in a little light. topline inflation is the worst since 2012. core inflation contained in europe. here is taylor riggs. taylor: north korea reportedly 's justding new icbm weeks after the summit with president trump according to the washington post, which sites u.s. spy agencies.

the trump administration reportedly may bypass congress to give a $100 billion tax cut mainly to the rich. according to the new york times, the treasury department is studying whether it can use regulatory powers to let americans count inflation when it comes to capital gains taxes. the bank of japan is staying the course. boj governor kuroda pushed through changes to the radical easing program to push for sustainability. japan's central bank is preparing for a longer struggle to stifle inflation. the bank are betting of england will raise interest rates this week for the second time since the financial crisis. the market is pricing in a 90% chance of a 0.25 point hike thursday.

the economy is lagging behind its peers. that could give the central bank an excuse to hold off. credit suisse is giving investors reasons to stay with the bank through the end of its three-year restructuring. quarterly profits were higher than expected. gains in the wealth management business and swiss banks offset the continued weakness in trading. we spoke with their ceo. >> this was a very good quarter for credit suisse. assets,positive net new which is very important. management,he asset 17 billion, we are at 40 billion, the size of a medium-sized bank into or three months. taylor: we will have more from that interview coming up. 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.

francine, tom. tom: thank you so much. let's do a data check. bank of japan done. they are interesting actually. we will talk about that in a moment. tomorrow, i think it is the fed, then bank of england. aboutve down futures up three. euro rebound. the vix close-out to 14 and down to 13. lira, ibe and turkish wanted show those signposts. up at the end of the year. think about it cooling down. all of a sudden the fiscal deficit front and center. here is back when it was ugly. 4% of gdp. the deficit was terrible.

the clinton surplus. republicans hate when i say that. down we go. doom and gloom. we are rolling over. we are almost back to where we had, to steal a phrase from the economist art simpson, a cow. 2019. we have lots to talk about. andhursday, adam posen toid glass on will be here discuss the bank of england. withe discussing the same kim schoenholtz of leonard stern school of business. professor, thrilled to have you with us. imf and why you with all my stern, theym at nyu are the first to advertise me a

million years ago. i think you guys. i look at the bank of japan, that is not textbook. it is on the frontier. central banks have been given the mandate to maintain price stability. the bank of japan is doing its best to achieve the stated numerical goal of 2% inflation. i have not gotten there yet. they cannot or they have accomplished the mission, and for that reason they are maintaining an aggressive, accommodative posture. tom: near mortals like me in my audience go back to basic economics, which is like a piggy bank in the kitchen. what is the piggyback for the bank of japan? i guess china has reserves, and the u.s. is the u.s. what is the piggy bank for the bank of japan? kim: if you mean can they create

money, the answer is yes. tom: why can they not create their way out of this problem? kim: it is remarkably difficult because of their own past behavior. 20 years ago, the bank of japan allowed japan to fall into deflation. it has stayed that way for almost 20 years. people in the japanese economy expect prices to be stable or falling. raising those inflation expectations is difficult to do. they are trying very hard to get there. overall, you live better. as the economyn no one wants to look like. over and over in europe, we cannot end up like japan. even if there is an aging population, people live well. kim: the japanese economy is growing again. bank of japan has brought about an and to deflation.

it is a really good,. they just have not reached the goal -- a really good accomplishment. they have not reached the goal they set, namely 2% growth in the price level every year. they have not got there. they will probably not get there in the next year or two. they have said today that they are committed to achieving this goal and will continue to implement aggressive, expansionary policies to make that goal realizable. if you ask me -- [crosstalk] want to: they don't have these side effects for the bank. they still need extra stimulus. how do they find that balance? is very difficult because they are at the frontier. their assets are approaching 100% gdp. the federal reserve is in the

range of 20% gdp. it is a challenge. it makes markets function less efficiently when they are very aggressive. their principal goal is to achieve price stability for the economy as a whole, not to make the bond market a liquid one. francine: thank you so much. kim schoenholtz will be staying with us. coming up on "bloomberg surveillance," earnings season will be in full flow. we will speak to jeff bailey, the barclays chief executive. i know he will have something to say about markets around the world. this is bloomberg. ♪ orld. this is bloomberg. ♪

taylor: this is "bloomberg

surveillance." cbs has decided to keep embattled ceo les moonves on the job. they have hired an outside investigate to allegations of sexual harassment. les moonves said he never used his position to harm anyone's career. the french drugmakers new products are helping to offset declines for new medicines. we spoke with their executive vice president and cfo. now to getl allow us guidance on a four-year basis. that means we will grow flatter in the second half. taylor: samsung is starting to

be hit by the slowdown in the global smartphone market. quarterly earnings missed estimates. smartphones are declining after years of rapid growth. samsung's rivals are grabbing market share. tom: thank you so much. kim schoenholtz with us from new york university. now we dragged in an owner of the faang stocks, gina martin adams. do you? gina: inherently i do. tom: everybody does. carefully chosen morsels of technology. i have thrown in the kleinman moving average. we have not even rolled over the quarterly moving average as we did in march and april. the uproar over this is overwrought. gina: when you look at the broader tech sector, this is really specific to facebook,

twitter, and netflix. tom: exactly. i looked at like eight charge this morning. i am done with the hysteria. gina: it is very specific to those companies. it is not industrywide miss. most companies are beating expectations and moving higher. it is certainly driving overall sentiment for the sector, which frankly was a little extreme. flip on thes is a radar screen. tom: where is the opportunity? you are not going to tell me, i know you can tell kim schoenholtz what to buy today, but what do you do given this opportunity? gina: our model has suggested that you rotate outside of the internet and software services companies all year. you go back to january, and the

model suggested you moved to hardware and software companies. that will be the apples and microsoft's of the world. you do that for one reason, the growth rates are shifting. growth rates for the software companies and the broader hardware companies are accelerating this year and maintaining a relatively rapid pace whereas the internet software companies showed slower growth. the relative price action started to turn back in february and march to support this case. the model has not shifted. there are opportunities in technology. they may not be in these companies everyone has become enamored with. francine: just to be clear, this is not a meltdown. this has nothing to do actually with the data issues, regulation. gina: i think so. it is very company specific. could i say it is a facebook

specific meltdown? certainly there market valuation has dropped precipitously. sector-level meltdown? i don't think so. the earnings for the sector in march continue to come in strong. when you have such robust sentiment for specific names in the sector, the removal of that excessively optimistic sentiment can impact the sector at large, but it is not impacting the earnings whatsoever. francine: what are we looking for in apple today? it seems that google was the outstanding performer. can apple beat it? are 15%ple expectations sales growth year over year. that is quite a bit when the expectingis

revenue growth of about 8%. this is stock that has not gathered nearly the sentiment access that the rest of the faang stocks have. there seems to be an opportunity. we are in the midst of a correction in prices. it is relatively unpredictable. schoenholtz, link this into the work of carl riccadonna, who works in the other side of the death star of economics. alexander called for low 2% gdp. i don't mean do you agree with morgan stanley, what do you think equity enthusiasm back to gdp? gina: you can. you do that through macro model earnings growth and macro model valuations.

earnings growth is relatively robust. you have seen expectations for revenue and earnings growth continuously rise. that is powering the stock market. holding back sentiment is the valuation, which is related to central banking policy. as the u.s. gets tighter, the fed continues to tighten policy. as the ecb inches towards tighter policy, that is holding back valuation expansion. the market is sensitive to earnings growth. that means it is sensitive to economic growth. gdp is meaningless when it comes to equity markets. what matters is capital goods orders. unemployment, are we going to continue to see unemployment line? you have to be specific in the economic indicators you follow. tom: alan greenspan would say this is important. chairman powell needs a resilient equity market to provide confidence, and he is getting it in spades. that allows for him to move

towards neutrality and even restrictive stance? kim: i don't think it is the equity market that is driving policy. tom: i agree. it helps. kim: it doesn't hurt. raiselan to gradually interest rates and normalize at a level that is consistent with history as opposed to the accommodative stance they had today. -- have today. francine: what do you worry about in the markets and the economy right now? we have morgan stanley saying we will see a big drop in equities. we have geopolitics, trade tensions, the shutdown. is the market good at seeing these pressure points? are they cool or too anxious about it? kim: the purpose the fed has in raising rates is to sustain the recovery. to ensure the economy can

continue to grow for a longer time. if markets discount that healthy future, it should not be very bad news. if they are looking only at the next quarter or two, they are going to have to accept that the fed will continue to raise rates in order to normalize conditions and remove the accommodations they put in place a decade ago. withprofessor schoenholtz us from new york university, and gina martin adams from bloomberg running our equity shop with enthusiasm. she has certainly not been saying go to cash and has been right over the last 12 months. the me tell you about bloomberg radio. we have bob moon and karen moskow. they do it on bloomberg daybreak. even in new york, the gorgeousity of new york. bloomberg daybreak. ♪

francine: this is "bloomberg surveillance." tom and francine from new york and zurich. we traduced the leadership -- introduced the leadership of credit suisse. they are suggesting some reason to stick with the bank through the end of its three-year restructuring. i spoke with the company's president and asked about global markets. >> markets are trading at to the

upside. and muchh more stable more critical and growing nicely. the globalrb markets. when i go to new york and elsewhere, i say it is good that we can grow. 17%, that is good for trading activity to grow 17%. we can grow with support. is our important result restructuring unit. of 2018hit our end targets. we said we would close it down when we had 40 billion leverage. we are at 39 billion of leverage. the results were done with the restructuring. there is no question we could get to that point at the end of the year early.

it will stop laying on our results. francine: what about global markets? >> global markets, it is a really part of a strategy we need to explain better. us to others. we don't think that is right. our global market strategy is not to maximize the standalone global market revenue. it is to use the global market to power. you see revenues down 8% because we keep them under a strict cap in terms of leverage. we could trace revenue and pour much more capital in that activity, and you would see results similar to those of our peers. we have taken a different path to use global markets to serve our clients. we feel that is working very well. francine: joining us from london to talk about your pain

financials is bloomberg's finance managing editor. when you look at credit suisse. is it the same story, but chris we started to turn around -- credit suisse started to turn around earlier? >> fast forward a few years, and this is what you have with ubs with credit suisse. he is reminding investors he is done with the restructuring, the three-year turnaround. initially, some of the results were not what investors were expecting. he has shown he has delivered that plan well. the trading business has become somewhat irrelevant in terms of the overall group. i think he is saying is going to try to communicate more about over the coming months. francine: what comes after the restructuring? how does the chief executive now

grow credit suisse? >> he is obviously pivoting towards greater growth in asia and china. we are seeing growth in wealth management assets persist. some investors, some clients are less confident. they have cut back on borrowing, and he is still able to grow that asset base, which points to more growth ahead. is $5 billionisse of operating income. maybe. barclays is at least double that. does credit suisse have the scale to continue his model of being wealth management, or must they go out and combine? >> i don't think so. i think that trajectory towards becoming a larger wealth manager is established. barclays model is very different. don't forget that he has come in

and pivoted the bank towards greater growth in investment banking, a move that is coming under scrutiny. he has an activist shareholder on board who is scrutinizing the shift, and there will be a lot of focus on that in the second quarter with focus on the trading business and how well that is preparing to peers. miniis credit suisse a ubs? >> i would guess they are being seen as similar. i'm not sure mini is the right term. ubs is obviously a lead in terms of wealth management focus. credit suisse is growing rapidly given it is already pretty significant in size. francine: thank you so much. elisa martinuzzi, bloomberg's finance managing editor joining us from london. on thursday, earnings season is

in full flow, and we will be speaking to jes staley, barclays chief executive. he will be asked about banking and brexit i am sure. tom: let's continue taylor: the pentagon warns that afghan forces keep losing ground's in the country's civil war. seeksistan's government peace talks with the taliban. a comment from secretary of state mike pompeo, he says the u.s. strategy in taliban is working. the trump administration reportedly rejected candidates to join high-level nafta talks with mexico and canada this week. attempts to join the conversation were ignored or spurned by the administration.

the white house appears to be walking back comments president trump made on a ron -- on iran. he said he would be willing to presidentiran's without prior conditions. there have been tensions since president trump withdrew from the 2013 nuclear deal. president has reportedly privately agreed to delay a possible government shutdown until after the midterm election. according to "the wall street journal," he sees there being a fight over his controversial immigration plans in november or december. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom, francine?

francine: second quarter profit bp, cashing inat on surging oil prices that reinjured investors on its financial strength. the company has agreed to buy shale assets in the u.s. for just over $10 billion. we talked to the bp chief executive bob dudley. >> we delivered results or exceeded. we raise the dividend for the first time in 15 quarters, so we've got momentum and people are pleased. reporter: what are you hearing from investors about the deal? >> people were concerned we were off to the races and we were going to break our financial framework. there going to stay within $15 billion to $70 billion capital framework. we are -- to 17 billion capital framework. we are going to continue to increase dividends for

shareholders. we are still planning in a $50 to $60 price range. you are also guiding investors to expect spending to be at the bottom of the range. it seems you are setting the for consideration. >> it depends on the oil price. it feels firmer rather than softer. this deal will be effective as of the first of july. when it closes in october, we will have the economic benefit of that. the first part of this deal is likely to be higher prices. the company is operationally working well. we have three more projects before the end of the year. i think things are on track. tom: bob dudley of british petroleum with a really interesting american transaction

from broken hill properties, using the names from another time and place. a cover article from "the new york times," a hyper detailed long analysis 90 days on. inocrats have succeeded recruiting candidates and a lot of the battlegrounds which have the advantageen of incumbency even in districts where republicans are running for reelection. upside foran republicans, it's that the fight for control will often be fought in republican for late districts where the president won in 2016." that is a good thing to jump into with our kevin cirilli in washington. i read the article. how much in the way is president

trump for congressional gop politicians? kevin: for the centrists, i think it is an issue for them. you seen the likes of some republicans trying to move a bit away from the president on issues like trade, as well of the mueller investigation. for the most part, the polling suggests republicans are very much approving of the president trump's administration. does touch upon what you touched upon yesterday, which is the turnout by democrats. what do you get an indication of how democrats will turn out in the midterms? kevin: candidly, i think we seen indicators already, whether in cut her lamb's -- in connerly connor lamb's district, and the special election in alabama. on the other side of that, you

have to look at the political organization of the labor unions, the various different activist groups that have really rallied support. you do get the sense, at least from those indicators, that there would be a strong enthusiasm on the left. --, and i say this because but there's also enthusiasm on the right who feel the president has been wronged by various institutions coming from the mueller investigation the media. francine: talk to me about tax cuts. are we going to see a tax cut for the wealthy? kevin: i don't see how there's cuttype of permanent tax that gets done between now and election day for the midterm. the sources i've talked to tell me this is a messaging bill trying to get democrats to vote against tax cuts. you look at the numbers from last week's gdp report, most of that 4.1% growth in the second quarter was fueled by consumer

confidence, sentiment, and spending, but polls on the politics of this suggest that the tax plan from last year is still largely unpopular because democrats have won the framing of it. if you look at the midterm, and we talked about the government shutdown, immigration, tax cuts, what will people vote on come the midterm? kevin: a couple of things. if you look at how polls suggested top issues for americans, it is the economy, national security. in the roosevelt room at the white house, president trump made the remarks. i was struck by what he said about meeting with the iranian president. those are the types of meetings i think grab the attention of the country, while also seemingly suggesting he's willing to work with the european union i host of issues,

doubling down yesterday with italy and the auto market. trade is something perhaps a bit wonky ahead of the midterm elections. definitely americans will feel the impact of the president's trade policies. look no further than those agricultural states. tom: kevin cirilli, thank you. , taking in then politics and the financial system of europe, is kim shaun huls -- -- the regulatory impacts on european banks are completely different than on u.s. banks right now. i think you are seeing it in the price divergence. when you take it all in, the

fact that u.s. financials have not performed more than european and japanese counterparts is quite striking. they have outperformed, but they are really quite stagnant relative to the rest of the u.s. market, and friendly with rates rising continuously with the regulatory environment becoming easier, you would expect the u.s. financials to perform a little bit better. we talked about bank of japan's negative interest rates. my take is negative interest rates as a theory is usually avoided in discussing banks. economists really don't want to talk about the effect of negative interest rates on credit suisse them at deutsche bank, or barclays, do they? guest: it does create some difficulties for back operations. there's no question about it. but the purpose of negative interest rates is to achieve the central bank's larger goal of stability. there are trade-offs.

havecb and bank of japan great difficulty because they've had to keep interest rates extremely low given that they haven't really -- they haven't reached their inflation targets. ,n the environment they are in the rest of the financial sector pays a price for that difficulty. it strikes me as that the federal reserve recently has been criticized for raising interest rates because they've achieved their goals far better than other banks. reason, ther that fed is in the business of normalizing interest rate policy. that sacred couples compliment for the u.s. central bank in the .s economy we should be proud -- the u.s. economy. we should be proud of that. francine: when you see the relative strength of the u.s. banks compared to european ones, we talked about european cross quarter consolidation --

cross-border consolidation. could you see u.s. banks slipping into by a european one? reporter: never say never. that may happen with potentially some greater european growth, if you get the ecb lifting interest thes up zero -- rates off zero. the biggest u.s. banks, though, are already rather large and butting up against maximums here in the u.s., so perhaps moving into a global perspective becomes a little more appealing. frankly, the opportunities globally are largely in the u.s. right now because of growth rates, particularly when it comes to develop markets. the growth rates in the u.s. are just much stronger, interest rates are higher on the the regulatory backdrop is becoming less and less obligated incrementally. of doing business in

europe is extremely high relative to the cost of doing business to the united states right now. tom: gina, thank you so much. gina martin adams with bloomberg. we will continue with professor schoenholtz. francine? francine: of course, will have plenty more throughout the day. coming up on thursday, we will discuss the very much decision.d boe policy we are also getting a little bit ,f breaking news from china now on the back of what they've been doing so far. we heard from the stimulus giving some a lift into china, deregulation the will continue at a measured pace. does it was corporate still leverage up? is that one of the main concerns for china? we will keep an eye on china,

and we will be right back. this is bloomberg.

♪ taylor: this is "bloomberg surveillance." shares of credit suisse are rising today. the bank posted higher-than-expected profit in the latest quarter. earnings were driven by what management and offset weakness in trading. we asked the ceo about his global market's business. >> global market strategy is not to maximize the strategy for global market revenue. we conform us more capital, and then you see --

we use the bull market to serve our clients. i feel it is working very well. taylor: first-half profit beat estimates at a british bank struggling to be caught that rose more than expected. standard chartered indicated those costs are unlikely to decline of the rest of the year. shares of standard chartered sold the most in about six months. we spoke to the ceo. up nearlyequity is 2.7%, much more near where wanted to be. year --e up seven on are up year by year. taylor: that's your bloomberg business flash. tom: thank you so much. right now we turn to something

that is going to -- and bring up the chart if you would come up quickly -- this of course is apple. wehining come up -- have bill on apple. if you take out cash, this manufacturer is trading at 12 times earnings. does that make it the cheapest stock in the world? >> good morning. thanks for having me. i don't know about cheapest in the world come up its early among the cheapest as you compare it to internet and technology names. that's been the case for some time. on top of the profitability, it is a company that throws off over $50 billion a year in tax

bonus. -- tom:hey buy twitter should they buy twitter? will that be the bombshell. we are not looking for anything.y twitter or one of the big focus is for us we still think getting into the content streaming business as an opportunity for them. that might be what we .2. i don't think there is anything big on the horizon. china?e: what about there's a potential tariffs impact. that probably remains the biggest risk is apple has components made in china. we will all be keeping an eye on china, and i'm sure the committee will have comments on that.

we all know cooler heads prevail when all is said and done, but it is kind of out of all of our hands at thewe all know cooler l china accounts for over 20% of revenue, so it is a major driver and a potential risk is something more rich developed on ariff and trade front. francine: when the numbers hit, what are you looking for? is it something like licensed apps where i club music -- or icloud music? guest: it is a combination of things. headed in this quarter into the next iphone cycle, the biggest focus will be on fiscal q4. timinges that imply for and magnitude for the next iphone cycle?

i think the second-biggest area of focus will be services, and never that grew 30% this past quarter, driven by things like using.re, itunes, icloud those are big focal points for investors. pro-cfa tips. will power is with baird. we will look for apple booming as well. kim schoeme back, nholz with us for some final thoughts on the economy. stay with us worldwide. this is bloomberg.

♪ tom: "bloomberg surveillance." ltz of newim schoenho york university. i have the single most important chart of the theory of monetary economics in the world. this is a chart i brought out years ago which shows when you're right, and then you're wrong. this is the bank of japan with

our massive fight against inflation. down they come to is you are in know, they had to revert. we can't be wrong with boj was. central banking is about strategy and commitment, and commitment is only useful when it is creditable, when people believe you. the bank of japan's biggest problem is for 20 years they allow the economy to sink into deflation, and they reinforced it. back in 2000 2001, they made people think it was ok prices

were falling. changing that commitment, ma king people think you are committed to a gradual rising prices come making people think that is a lot of work. tom: critically it is tough to do because you have a low rate presence. guest: it is tough to do in any case, but if you have an administration or a president or an executive branch in general that is criticizing you for raising interest rates, it makes it more difficult. it actually makes it more difficult to demonstrate that you are willing to commit. if people doubt you, it raises the cost to the economy. it makes people think there should be a larger inflation premium in the bond market. that would be a really unfortunate price to pay when it is showing a lot more depth than we used to. tom: thank you so much, kim schoenholtz of new york university. francine: to the point kim was

making, we spoke to paul donovan. he says if president trump or anyone in his administration continues downing the independence of the fed, head may force the fed to raise interest rates a little bit quicker to show their independence. something to watch out for definitely. tom: very good. francine, safe travels as well. scarlet fu leading our coverage on the fed show. then we move on to the bank of england as well, with mr. carding on thursday. stay with us on bloomberg radio.

♪ reporter: boj walks a tightrope.

bank of japan will allow more volatility in 10 year yields and commits to rates lower for longer. markets pare back from hawkish that's. names flirt toh stabilize the tech rout. -- european inflation hit its highest level in years. "bloomberg:me to daybreak." procter & gamble just came out with their earnings. alix: just a cap slider, coming at $16.5 billion. earnings coming in at $.94 a share, better than estimated. when you see a kind of consumer low growthhis in the they have, it is interesting to see what kind of organic revenue they are going to have going forward