best,ing up on bloomberg a store that shaped the weekend -- the week in business around the world. obviously, we are taking the decision to retrench and step back. this isng around all of something that is still a question mark. [inaudible] >> he leaves here with wall street believing they will get a rate cut. >> we have a lot of time left

.efore the meeting wil >> parliament saying clearly we will not take kindly if you try to buy [inaudible] >> one of the biggest tech deals ever. >> we will extend their reach into 175 countries. recession may be coming, but investors should not fear the worst. it is all straight ahead on bloomberg best. ♪ hello and welcome. this is bloomberg best. the most important business news from bloomberg television around the world. let's start with a day by day

look at the top headlines. deutsche bank a dramatic overhaul of its operations at a turnaround. bombshell.g deutsche bank planning to cut 20% of its workforce. shutting down its equity sales and trading business. >> the losses are already starting. comepect many of them will in london and many will come in the united states as well. the focus is about refocusing this business back on the german side of what is happening to become a corporate bank, less of an investment bank. >> is that enough? what is the reaction? >> it is quite dramatic, 18,000 jobs, the biggest restructuring

seen. the problem is there is a lot of risk and it is not only going to be a costly restructuring, finding enough revenue to offset that. they want to keep asset management and all of those areas are very competitive businesses. turning around all of this is something that is still a question mark. , tumbling inank 5.9% in the1%, primary market. celebratingrs are and parents 3% of the lender. >> what they are taking the bank back to is its history of being one of the world's best commercial banks. .t is consistent and stable

as an investor, that is exciting. >> the restructuring plan so far looking like a bust to the markets. execution risk higher given more headwinds to capital. there seems to be little room for error. >> i think the issue is capital continues to be capital. it is going to be 2020 before things start to turn and i think patience is required for investors involved and i think for new investors, perhaps a wait-and-see approach. day one of testimony before the house and financial services committee. he has been answering questions for about three hours. later on at that and of the month.

-- later on at the end of the month. [no audio] >> in addition, inflation continues to be muted and those things are still in place. >> he went into the hearing with the markets pricing at a rate although many times talked about how well the economy has been doing and talks about the cross current of the future including trade which he says is the responsibility of the administration and not the fed,, just that it would have an effect on the economy. he leaves with wall street believing he will get a rate cut , but did not give clues of the timing or the amount. >> it is priced for a 25 point basis cut. that is because the fed has. it is not that they are going to

pause at all. i think the big surprise at this point would be if they did nothing. the market is entirely driven with what is happening on policy. there is a lot of earnings confusion, no opponent to this recent mark, all about policy elevating valuation. how long it keeps that depends on recovery showing up. >> after two days of testimony to congress, jay powell message is clear. the old laws governing inflation appear to have been broken with big implications for policymakers as they consider a rate cut as soon as this month. an unexpected jump in consumer prices. what is your reading? that's interesting to see

30 year bond auction, you might have thought it went off without a hitch. in fact, the gap between what people thought the price would be at auction, the yield coming in much higher. the price much lower and it is no coincidence that it comes after this did come in stronger than expected and powell was fairly dovish in two days of testimony. they are looking for a second cut later in the year, but it is definitely getting investors a little bit of parts to wonder if it is appropriate and maybe inflation could get a little more wide. >> president trump renewing his beijingn china just as prepares to [inaudible] his complaining that china has enlisted purchases of american

farm products. >> we did not get a lot of details. at one of the few things trump told us is that china had moreently agreed to buy u.s. agricultural goods, but the data shows chinese agriculture purchases in that meeting and we have trump himself questioning whether china is committed to increasing those purchases. >> trade data overnight with imports and exports down year-over-year. ofexports fell in the month june and a member when mr. trump through the higher tariffs through chinese goods. perhaps a bigger takeaway was on 7.3%.port side with year, imports in the u.s. have fallen by double

digits going to china. sidenk the manufacturing continues to be under pressure and that is why there is so much focus and whether or not the trade talk can reach a resolution. fed speak,ead, more and issues of conversation. on why christine lagarde should succeed at the ecb and up next, more of the weeks top business headlines. it talks about 4% annual gdp -- he talks about 4% annual gdp growth. >> this is bloomberg. ♪

this is bloomberg best. our global tour of the week's top business stories. in turkey, the president shocked global financial markets by suddenly ousting the head of the central bank. leader -- the turkish lira weekend -- weakened. he demands that policymakers support his view. >> this removal out of the blue, where does it leave the person in charge? >> it leaves the central bank in a tough position. the previous was probably on the cusp of starting and that

starting in easing cycle -- starting an easing cycle. to be honest, it is a bit more muted than what one would expect, but there is still some volatile in the lira. it is possible it might reach a level where it is more difficult for the new governor. the democracy leader has taken over as prime minister. that is after yesterday's election and was handed a mandate to tackle the nation's chronic [indiscernible] is an agenda to grow the economy and create more jobs, but also to make sure people feel safe again. >> he will tell you i want to

grow this economy aggressively. he talks about 4% growth. he wants to attract foreign money, but most crucially he wants corporations -- two/taxes for corporations -- he wants lashaxes for corporate -- s taxes for corporations and the only way he can do that is convince them that they need to lower the surplus target currently down. hoping he will get the leeway, but it is not clear by any means. it is interesting that the market likes the story and how long can this go on for it? >> u.k. mp's have voted in favor of preventing the next prime minister from forcing through a no deal brexit. the amendment passed by just one

vote. >> whoever comes after will have just as rough a time. parliament saying it will not take kindly to bypass us. boris johnson, who is the frontrunner, saying he is keeping that option on the table that he would suspend parliament if need be. torting by saying i want talk to parliament to get a deal done. he is saying this is what i want and i'm going to get it done. >> the only way to do that is to get brexit done. has noturopean union changed the position. it remains exactly the same, so the challenge for the new prime minister is to try to work with the same carts that the previous prime minister had, but to play them in a different way. commissionpean issued its most recent projections early this morning

and the news was not good. >> we have downgrades across the board, they expect the european economy to grow in 2020. that is a downgrade and the prior expectation was 1.5. we have talked on the show many times about weakness and the commission really set the strength of the recovery and it is being put to the test by jim politics, trade and brexit and the timing is interesting because we are expecting to hear from mario draghi in two weeks in the market has priced in a rate cut to stimulate the economy. dss has become the latest chemical maker to sound the alarm on economic weakness. themy interesting to see and mainly due to trade complex -- complex. conflicts.

[inaudible] >> bsf was fairly optimistic about it and this year a slight increase in sales. expected to be slightly better. now, saying it will be down as much as 30%. that is a much bigger downgrade expectation with analysts expecting a weakness in industrial production and of course, difficulties in the american agriculture sector. european powers are urging iran to reverse its decision to breach the levels of uranium enrichment under the 2015 nuclear court. still, the u.k. anti-e.u. are stopping short of threatening sanctions. sanctions seem to be off the

table for now to what action can brussels take? >> there are two ways to go the diplomatic front. they are trying to lower the tensions. obviously, things have become more tense with the u.s. saying let'sk. are take a breather and get diplomatic talks. of course, that is somewhat difficult given the u.s. position, but france and iran this past weekend said they want to try to schedule some talks by the end of july which could open ita diplomatic front, so really is let's try to talk rather than going with further sanctions. >> hong kong police have arrested five people while dispersing protesters in one of the cities busy tourist districts. nightclashed late sunday after tens of thousands marched

against the government extradition bill. >> this is different than what we have seen in weeks past. the protesters wanted to march through one of the busiest shopping areas in hong kong over the side and tens of thousands of them came out. it was a bit bigger than we expected and it shows the nature of the momentum they have and how it has gone on much longer than people originally thought. legislationersial that prompted millions of people to take the street and protest -- in protest. stoppedm short of saying she would formally withdraw the bill and at least one lawmaker saying it is too little too late. what would be enough been? -- then? toprotesters what the bill be withdrawn because that is the

anothereguard to carry from reintroducing that bill and that is why the protesters are digging in saying we want to see that bill withdrawn. bit of semantics to explain her position to the public, one that the public finds unattainable. >> china's car industry showing signs of recovery with the latest sales advancing for the first time in a year. dealers have been offering steep discounts to offer -- clear and that has caused concern that it will be able to sustain. >> i don't think it is the end of the slump, but i see some growth [inaudible]

probably better sales the second half. consequence is the 2017. tax cut in 2015 to i think the second half is getting back to normal. theill see 5% growth in second half. the ecb juneof meeting was mark with a broad consensus that policymakers were not prepared. that follows a recent toughening ,f language by mario draghi saying that if the outlook does not approve, that would be enough towards an actual summit. that christine lagarde changes anything? is she going to push for fiscal spending and if she does, will

government actually hear her out? >> she does not change anything from our perception, however if you are starting to price a more hawkish ecb because of [inaudible] being selected, then clearly it is against that. ♪

>> you are watching bloomberg

best. tuned intoinvestors jerome powell's testimony on capitol hill. in his first since joining the bank, they spoke exclusively with michael mckee. watching very carefully what is happening and we are looking very much on upside risk and downside risk through it this point, there a little more tilted to the downside. -- the market has priced in a one is percent chance of a rate cut. can you go against the markets? >> we will have a lot of data and we will get retail sales, consumer spending and markets are smart, so if the data is up with a different outcome, the markets will adjust. >> markets are basically priced

to reaction of a recession almost? >> i feel pretty good about the economy. on the consumer side, spending is great to read on the labor side, markets are still quite tight and those are very healthy signs. >what the chairman mentioned yesterday is is is confidence and investment. andfirst quarter was fine the indicators are less strong, so i have been out with my contacts in my district asking questions about how you feel for business investment and i would say that i see people link folks off, cutting back existing plans, but they are also not leading in the way the numbers have shown. >> you have a different background. you are a business consultant at mckinsey forgive years. you are the guy that talks to the ceos. what is the general feeling

about the economy and where it is going? today think we are heading down or unsure? >> most everyone i talked to said this is the longest upturn in my memory and it has been in history.u.s. economic it has to change at some point. there's concern that things are close to changing. said, their own businesses are doing quite well and so today's good, but they are nervous about tomorrow. >> much more to come on bloomberg best, including sir richard branson on galactic's upcoming public listing and the to revivexplains how profit growth. also, the right leader at the right time for the ecb. >> it is important in europe

does europe is not completed yet. >> this is bloomberg. ♪

♪ >> in general, the economy in brazil i think is poised to start growing faster than what it has grown in the past, so we are very optimistic going forward. >> i think the aca, we have grown over the year, we have had 80% of the people continue. i hope the politicians start to think about moving from politics to policy. >> the only thing which is not changing, which is where we can make a difference in quantitative ideas. >> those are some highlights from bloomberg's coverage of the annual allen and company conference in sun valley, idaho.

visit bloomberg.com to find more conversations from sun valley. the atmosphere was much more somber at deutsche bank headquarters in frankfurt this week, as the bank unveiled a radical overhaul. guy johnson spoke with the chief financial officer, who explained how deutsche while implementing deep cuts. ♪ probably be the greatest growth driver in the franchise as we see it going forward, especially in today's interest rate environment. that may change in the future as interest rates change, but for now we have seen great growth opportunities that have existed for several years, and we have not been able to participate as much as we should or could have. we also see growth in the the germank, consumer banking franchise we have, as well as italy and spain. as that management has recovered after a difficult 2018, and in

fact on a growth trajectory. we see underlying growth in our franchises. obviously we are taking the decision to retrench and step back from elements of our global market franchise, in particular equity sales and trading, and that's a significant step. >> if i am a german client, or global client, the question i might ask is are you still going to be able to serve my needs? >> that's part of the core question, right? many of our clients -- and it is the nature of the german economy that a significant portion of the revenues earned, for example by the dutch 30, are international lobbyists, something like 30% are earned outside of germany. of german organizations have activities outside of germany. these clients expect us to be present around the world and to be able to service their needs. those needs may be cash management, they may be risk management, they may be fx, and those are all areas in which we absolutely excel, and it is

around those strengths we are reorienting the bank. >> how will the reoccurrence affects that? >> one of the concerns we have always had about retrenching away from equity sales and trading was the franchise impact and the potential that it would have knock on impact in our other businesses. obviously in making the decision we've made, we have had to grasp that metal and will need to manage through that. we are attaining a very targeted equity capital markets franchise, as well as research and limited distribution, in order to continue to serve our clients needs around equity financing. but the sales and trading decision has been a difficult one for us, of course, recognizing, as you say, that there are likely to be some knock on franchise applications of that decision. ♪ >> in brussels this week, e.u. finance ministers approved to steal a nomination to replace mario draghi is president of the

european central bank. caroline connan sat down with the society general chairman in southern france. he says despite a lack of a banking background, it is a fine choice to leave the ecb. ♪ >> i think she has the experience of financial crises. she has the experience of having managed a big institution. she has the experience of also discussed with politicians, and in europe it is important because europe is not completed yet. we need to continue in the construction of the banking union, the market union. i think it is very important to have someone who is pragmatic, but who is committed to discuss with political authorities. >> most economists do not expect most ecb stimulus in july. they really expect it in september. are they being realistic

regarding the charge from november? are we going to see more of the stimulus? >> i think it depends on the economic situation. it depends on the fed also. if the fed starts loosening very strongly, there is a risk of the euro appreciating with the dollar, and that's not exactly what you want at this time. i think we have to wait and see how these two factors will evolve, or the fed will decide in july. ♪ >> the world's largest supplier of consumer goods became the latest to sound the alarm on the damage the trade war is doing to global supply chains. logsansports goods for the of walmart i and nike. yvonne man spoke exclusively with the ceo, who said trade uncertainty is affecting how its customers do business. ♪ >> all of our customers now are

u.s.-based customers, trying to diversify outside of china. not leaving china, but diversifying outside of china. less eggs in one basket, spreading out the risk. this has become a big opportunity for us, because when you have to diversify out of china, you go, let's say, into different countries, and we have the biggest network in the world. we have deep knowledge in history and relationships with local vendors and local governments. we can help customers move very quickly. it is actually a big opportunity for us now that things are -- the world is changing more and more. >> so you are getting much more pressure from clients now to shift production out of china? is it more through u.s. customers? what about european customers? >> i'd say it's mostly european customers because of the tariffs. noweuropean customers see it as a buying opportunity inside china, because in china,

many factories are not operating at full capacity. when they are more eager for business, there's a supply chain opportunity. it's an opportunity for any non-us retailer. european,, japanese southeast asian, domestic. >> meanwhile, wall street keeps its eye on washington, in particular watching the federal reserve for widely expected rate cuts. an exclusive conversation this week with erik schatzker, the head of global, macro, and asset allocations says markets may have let expectations get the better of him. ♪ >> i think the market got to dovish on the fed. the idea that they would do 50 basis points in terms of easing in july is too optimistic. ultimately, the fed sees low-inflation, and i think they see slowing growth. the prudent thing to do is 25 basis points. when we were talking ahead of the jobs report, that was where

we stood, and markets had that come around. there are very few times -- three or four times in history -- where the fed funds is more than 50 basis points above the two-year. every time that happens the fed eases. 2000,pened in 1989, 1998, 2006. all those times you had very slow growth over 12 months, and the fed was trying to get ahead of the curve. in 1998 the market went to the upside. our view is we will not have a nasty recession but we also don't buy off on the case we will have a big 1998-2000 runoff. >> that's the big question though, right? does this look like 1989? does it look like 1998? doesn't look like 2006? or does it look like 2000, instead of when markets were

substantially higher 12 months hence -- >> let's walk through those. to be the case that it is 2007, companies are over earning, i don't see that. in 2000 you had a valuation issue. in 1989, it wouldn't be a bad test case, you bubble through and make it through the central banks, but you had some corporate profitability issues. if i was going to quote sa shakespeare, it is full of sound and fury, signifying nothing. havee downside, you do what i would say a protective fed and its peers in the global central banks. ♪

♪ welcome back to "bloomberg

best," i'm rosalind chin. let's resume a roundup of the week's top stories in business and finance. trade tensions in asia escalated as japan and south korea sparred over curbs on tech exports. ♪ >> another trade war might be coming to the foil, citing long-standing and unresolved tensions, japan restricting exports to korea from three types of critical components which are used to produce semiconductor's and smartphone screens. this dispute has its roots dating back to before world war ii. how difficult is it going to be to come to some sort of resolution? >> i think the real issue for both sides is they need to ask themselves what they will get out of it. there is certainly a lot of pride and patriotism involved, and old wounds are being opened up again, but at the end of the day, they have bigger things to worry about, global trade and of macroeconomic environment that we've been talking about for the

last few months, and the fact that both sides -- the south koreans and the japanese -- have companies that are under threat from china, because they are in areas that the chinese companies want to get into. if these two are going to squabble between each other, that opens up the opportunity for companies in china to get in there, and get the hardware supply chain. ♪ >> germany's biggest bank is facing more trouble. deutsche bank is likely to face an investigation from the u.s. justice department as part of a probe of asia's 1mdb investment funds. they are looking into a former goldman sachs executive who later worked at deutsche's. they have not made any acquisitions of wrongdoing yet. >> from what we understand, deutsche bank may have been the ind in what it handed out 2014 and called some of that back when it realized this collateral couldn't be seized, which was slightly different from wit goldman sachs found itself in.

also bear in mind that just 10 days ago, they passed a stress test, deutsche bank did, getting a vote of confidence after a myriad of misconduct allegations uneasy.e regulators a few things to balance out. ♪ >> houston, we have a listing. richard branson's virgin galactic will become the first-ever space tourism venture to hit the public market after receiving a grant from social capital. can you walk us through the logistics of how this ipo is happening? >> that's right. they are taking the route of reversing into an already listed company, investment vehicle, which means they can bypassed the traditional ipo route. virgin galactic has only done a

couple test spaceflights, so it hasn't really started on the business of sending space tourists into the sky. >> the operating model around which we are building the business shows that we are going to be in commercial operations within a year, and the first half of next year is when we will start to see the ramping of customer flights and revenue-generating flights. we expect profitability in mid-2021. >> we've had very successful flights into space recently, we've made five astronauts, the first five astronauts to be made in america since 2009. work 14 years of hard getting this far, we feel we are on the verge of something very special. ♪ closed its purchase of red hat, finalizing the world's second-largest technology deal ever, in setting the company up for a path to compete with top software suppliers and cloud. >> what red hat has done is built that ecosystem, in open

source with its unique conditions. on one hand, when we say preserve it, that is what we are preserving, but we will help them extend their reach into 175 countries. >> we are working to build the best hybrid cloud platform, but no one does it to look at it. you buy it to build applications or move applications. coming together, it allows us to dramatically accelerate our business, and i think dramatically accelerate our clients businesses, which of course creates value throughout that chain. ♪ sales andff a bullish profit forecast for the sales, cisco isn't standing still. cisco, whose equipment makes up the backbone of the internet and corporate networks, announced it will buy a casein, valued at $2.6 billion, which makes products for cloud infrastructure operators and communication service providers. cisco, you don't

want to be selling the same box everyone else has. they are going out in getting the fundamental technology, the chips, the optical translation technology, to put it in their boxes, and saying it will hopefully make the looks of google come back to them, saying we need cisco technology. ♪ >> two of the world's largest automakers are teaming up on self-driving car's. the car partner has a valuation of about $7 billion, in vw will sell it saudi division self-driving unit into argo. that positions argo as a challenger to general motors crew and alphabet. this to be very competitive in europe, having scale that will make us more competitive, if you accelerate into cars, which will have those companies. ♪ >> m&a heating up so much that

even ones usually advising on those deals are starting to merge. boutique investment banks are bundling up with piper jaffray, price tag of $485 million. >> i think the price is low, and i think that they got a very good deal, and i'm going to do everything in my power to make sure they did, and everything we do to be helpful with them should help the stock, and over time we will make a real contribution, and we will be large shareholders. there's a lot of ways to get paid in this deal. ♪ >> the grinding of the 737 max is starting to hit home at boeing. we are beginning to have blast quarter overall shipments fell 54% from a year earlier after its best-selling plane was barred from flying following two fatal crashes. how do you think -- they are still building these things. >> we have seen bad numbers for

the first half so far. i think the second half will be worse as well. then that we have just seen first airline to cancel the 737 max 8 commitment, we could end up seeing a lot more in the second half as this unravels further. the other factor that is causing a bit of concern is the trade war, not just between china and the u.s., but other trade disputes going on right now with the eu and u.s. that thererobably will be more challenge going forward for boeing in the second half. ♪ >> federal prosecutors are charging fund manager jeffrey epstein with sex trafficking, as well as conspiracy, and are pushing for him to remain behind bars pending trial. the indictment was unsealed earlier today in manhattan federal court after the well-connected financier was arrested on saturday. he pleaded not guilty during an initial court appearance.

the u.s. attorney called him a significant flight risk. >> when you have two planes and you live much of the year abroad, we think that's a very real risk. >> this is the guy who moved in bipartisan circles politically, financially, socially, and he got away with over-the-top behavior for quite a long period of time. i think a lot of people who were probably sweating this one out or wondering what law enforcement will come up with once they start going through his files. they broke through his front door over the weekend and collected photos, but i think that is the least of it. >> labor secretary alex acosta is resigning, effective a week from today. this is one of the first fromete pieces of fallout the epstein scandal that doesn't have to do with epstein himself. >> yes, because it is a sex scandal, so much attention has been focused on him and his conduct, but this is the first real repercussion in government at a high level.

the secretary of labor is out as a direct result of this. depending on what comes out from the federal investigation here in manhattan, this could have repercussions elsewhere as well, well beyond epstein and into the world of wall street or business. ♪

♪ this is the gd function in the bloomberg graphic dashboard, great way to get a quick snapshot of what's going on. tesla is in rally mode, up 3.6% on the bloomberg scoop earlier today detailing an internal memo that suggested that the company may increase its production at a california plant. >> there are about 30,000 functions on the bloomberg, and we always enjoy showing you our favorites on bloomberg television. maybe they will become your favorites. here's another function you will find useful.

it will take you to our quick takes, where you can get important context and fast insight into timely topics. here's a quick take from this week. ♪ ♪ >> in a tweet threat exchange with jetblue on april 17, writer mckenzie fagan had a few questions about the new boarding procedure. no boarding pass, no i.d.. instead, a camera and screen verified her identity against the u.s. customs and border patrol database and then let her on the plane. some passengers might consider the increasing use of facial recognition convenient, some may think it is orwellian, but it is already everywhere. the question is how far will it go? turns out, even some of those developing the technology are scared of what the answer might be. this is your bloombergquint take on facial recognition. francisco became the first american city to block police and other agencies from using facial recognition software. >> the biggest concerns are all

around civil liberties, and whether you enable a totalitarian state with this technology, which seems to be the direction things are heading. >> so how did we get here? like other artificial intelligence applications, facial recognition initially developed slowly, beginning in the 1960's, with the help of newly available height of cameras, machine learning, and giant databases of photos to increase accuracy, it advanced in a hurry. >> facial recognition is a technology that takes images from video cameras and tries to identify people in those images. it does so by taking key points in the face, usually, in doing measurements of the distance between all those various points. >> in december, 2018, london police made their first arrest based on facial recognition after crosschecking photos of pedestrians and tourist hotspots. in new delhi, a police trial reportedly identified 3000 missing children in just four days.

if it involves catching criminals and finding missing children, why would anyone be against it? for that, one might look at the most developed system in the world in china. >> it is used to create this vast surveillance apparatus, which has been particularly applied against certain ethnic minority groups. but even in western democracies there's a concern about police departments using the technology to try to find suspects, or even people who might be involved in legitimate protests, so they can be tracked. >> and those are just concerns about the technology when it works as intended. a study from the m.i.t. media lab found that white men in a sample were correctly identified 99% of the time, while error rates of up to 35% were found when it came to darker skinned women. >> microsoft came out last year. it was the first major company to say that they feel uncomfortable with this technology until there is clear

regulation. they were then joined by amazon, which seconded those calls. it seems like some other companies are getting ahead without such columns. guidelines,out some the algorithmic justice center in georgetown university law center unveiled the face base pledge, which asked companies not to provide facial ai for autonomous weapons or sell it to law enforcement unless explicit laws are debated and passed to allow it. a few companies have signed on, but notably not microsoft or amazon, possibly loath to lose the opportunity to sell facial recognition to police departments and government world over. so what is preventing your image from saying a whole lot more about you than it used to? face it -- not much. ♪ >> that was just one of the many quick takes you can find on the bloomberg. you can also find them at bloomberg.com, along with all the latest business news and

analysis 24 hours a day. that's a wrap for "bluebird best" this week. thanks for watching. i'm rosalind chin. this is bloomberg. ♪

♪ emily: i'm emily chang, this is "bloomberg technology." the ftc approves a record privacy settlement against facebook, fining the company $5 billion in connection with the cambridge analytica data scandal. does it change facebook's future? act like a bank, be a bank, that's what president trump wants facebook to do if it launches its new digital currency. why th