♪ >> good morning from bloomberg's european headquarters in the city of london. these are the days top stories. ubs beats the bank second quarter profits, topping estimates. we speak to sergio ermotti. santander also surpasses forecasts. we speak to the cfo in the next hour. president trump announces a bipartisan agreement to suspend the u.s. debt ceiling. big caps weeks of frenzied talks, averting weeks of a payment default. now for the hard part. either boris johnson or jeremy hunt will be named the next prime minister. theresa may's successor will have his work cut out, navigating brexit in the crisis with iran. we are live in westminster. ♪

>> good morning, everyone. just gone 6:00 a.m., lots of earnings coming through from the european banks. let me recap ubs to start with. the key number is second quarter net at $1.4 billion. the estimate was my hundred 57 million. -- was $957 million. in terms of the second quarter profit pretax is up 3% year on year. ubs global wealth management posting to billion dollars of outflows in the second quarter. global wealth management nets new money, but overall the second quarter net beating. sergio ermotti really seeing a revival of the fortunes in the second quarter after what he called one of the worst starts to the year in recent history.

the bank posting its highest quarterly net profit in almost a decade, seeing a boost to the u.s. wealth profit. coming up, we will speak to the ubs ceo sergio ermotti and get all the details. don't miss that conversation with manus cranny later in the show. if you want to keep up-to-date, there is a fantastic tliv blog on the bloomberg. let's move on to santander. we are looking at a beat, second-quarter net income 1.3 billion euros. a clear beat on the second net income. in terms of what else we are looking at, santander is on course to meet the day goals happening today, and we will be looking for details on the net interest income for one of the european banks that is feeling the effects to a certain extent of the low rates in europe, even though exposure is in latin america. coming up, we will speak to jose antonio garcia, ceo of

santander. looking forward to that conversation. also looking to a different space. if i could just get the headlines -- we have some breaking news from north hydro, the numbers i'm looking at our second quarter underlying at 875 million norwegian krone, the estimate was 879.8, a little soft on second quarter. it is saying that the ramp-up is progressing and the second quarter adjusted eps comes in at 0.19, the estimate was 0.2. through,arnings coming but coming up on bloomberg we northpeak to the ceo of hydro, don't miss that intro at 9:00 a.m. london time. let's get straight to one of our top stories. by midday, u.k. will know the name of its next prime minister. boris johnson, the face of the

brexit campaign, is the heavy favorite to beat jeremy hunt in the polls. the new leader is set to take over tomorrow afternoon. we will get to work on brexit, the single issue that has dominated british politics for three years. let's get the latest from westminster and anna edwards. great to see you. a new prime minister, but does this change any of the brexit difficulties? >> well, it doesn't really, does it? good morning, we are live in westminster. we will learn later on this morning who was the new prime minister of the u.k. they faced some of the same difficulties -- member the backstop, the thorny way the relationship will be managed between northern ireland and the republic of ireland -- that will be back. that is something that boris johnson, the favorite to win, objects to. he wants brexit to take place by october 31. one thing that is making his life more difficult is that --

she only has a majority courtesy of the relationship with the dnp in northern ireland. his majority will be even smaller than theresa may's at the time she took office, because the majority keeps on falling for various reasons. he will be incredibly vulnerable from day one. just yesterday we saw one minister resign, whether he has the confidence of the house. we now understand the liberal democrat party is going to be taking legal action in the scottish courts to try to stop any attempt suspend parliament. all the difficulties that we saw theresa may face in trying to get parliament to come to a view on brexit -- if anything, it just got harder. >> i was speaking to our guest yesterday who said for investors, the new cabinet is not necessarily the biggest focus but rather the setup of parliament. run us through what we should look out for over the next few days on both those fronts. >> yes.

what we are looking at for the next few days -- today we will learn who was going to be prime minister, and then tomorrow is when we see, probably, if things go to plan, a changeover of power. theresa will make her last cry minister questions tomorrow and will then visit the queen. then the new prime minister will visit the queen. they make the speech as they go for the first time into 10 downing street. one of the big orders of the day, orders of the next couple days, will be to set up the top team in the cabinet, and we will be looking for who becomes chancellor in the u.k. how balanced is the cabinet going to be? there's talk about unifying the party but we have seen that many times before. is that even possible? boris johnson remains quite a divisive figure, even within his own party. we will see a number of resignations from top positions, we understand, in u.k. politics, both for we even see prime

minister boris johnson or jeremy hunt take office. >> anna edwards in westminster, thank you so much. we will catch up with you again shortly as you cover this story. let's get to the global markets. we are deep into corporate earnings season, in terms of how we are looking for the u.s. equity market open, futures are pretty much flat. we are seeing some signs that there could be progress in the trade negotiations in terms of president trump meeting with tech companies over huawei, and china talking about buying more soybeans. in terms of the debt deal in the u.s., it is up a basis point, which has given a lift to the dollar more than anything. the dollar is higher against most g10 peers. we have the update from anna in westminster. you are seeing all g10 currencies the board weaker, cable at 124.58, the euro dipping below 112.

it is holding that today advance. we still do have those heightened tensions in the persian gulf. let's check in on the markets in asia with juliette saly in singapore. good to see you. >> a lot brighter here in asia than it was yesterday, although very thin volumes. japanese stocks leading the gains, the nikkei up over 1% in late trade, chipmakers getting a boost after morgan stanley upgraded that, though hallway suppliers also doing very well despite that view. it is worthflat but noting that exuberance you saw yesterday, china's nasdaq has come off a little today after rallying yesterday, only four of the 25 stocks are moving higher today. it is leading declines in g10 currencies after they said they are going to revisit policy markety, which has the

suggesting rates could remain lower for longer. let's also have a look at my chart, showing the moves this year, despite all the implications you have seen the about 3%, rise by certainly underperforming the gains in the asia-pacific index. but amidst these trade headwinds, we have different calls. goldman seeing the worst behind korea, upgrading the market, but then over at ubs they have cut their 2019 cost target to 2100 points, which is where it is sitting now, down from 2200. they are remaining range bound do to the bank of korea and the implications on a lot of these supplies in the midst of the trade war. >> juliette saly in singapore, thank you. it is the busiest week for earnings, 145 names reporting, which represent more than $8 trillion of market value. in europe we have already heard

from bank heavyweights santander, looking for signs of an economic slowdown and any indication that trade conflicts are affecting profit. today we are asking the question, will second-quarter earnings for european banks mark a points for the sector, or will there be worse results to come? join the debate, reach out to us and the mliv team. joining us now is the investment advisor at the bank of singapore, joining us from dubai. great to have you on the show. thank you for joining us today. can i get a sense first of all of your view of the global earnings season so far? let's start with the u.s. do you think that earnings so far and what we've heard from ceos and cfos and the numbers we've had could give another lift to u.s. equities? >> so i think it will be too early to comment right now. we've only had about 16% of the companies reporting, but the

results that have come in have been pretty heartening. 78% of the companies have had a beat on earnings, which is a good sign. it's usually expected that earnings per share would be down about 2% quarter over quarter. ofdid not go in with a lot strong expectations, and so far they have been pretty mellow and in line with what people have been expecting. investors might be forgiving of companies that disappoints, particularly if they take into account that some of that disappointment could be to do with trade tensions rather than the underlying business of corporate's in the u.s.? >> i think the market is not really in a forgiving mood. we saw that with netflix, their stock was down about 11% when it missed the earnings.

investors have got in with high expectations. i don't expect them to be very forgiving. >> that's a great point. from ceos andgns cfos that they are concerned about the outlook, but they are rising payouts suggesting that's who may change. is the dividend policy telling us a different story than what we are hearing in the numbers? >> that's a very good question. the dividend story is very strong, the share buybacks story is very strong, and one of the places we are seeing it is with the banks, especially the u.s. banks out here. one of the main components that ,as driven earnings-per-share the major organization over the

last couple years. it has enhanced earnings-per-share and i do strongly feel that the dividend payout story will continue seeing stock buybacks. >> just a question on europe as well, we have had a couple banks reporting today in terms of ups and santander -- what's your take on the european earnings season, where the low rates picture is even more pronounced than what we are seeing in the u.s.? >> i was just listening in when santander,d ubs and ubs has been a little bit of a downbeat over the last few with a negative interest rate margin there's expectations that they might have a further rate cut and we are looking at a rate of -50

which wasts, specifically the case for santander, and also outflows for ubs and whenever you think about ubs one of the first thing that comes to mind is the billion dollars worth of outflows. >> investment advisor at the bank of singapore, he stays with us for the hour. great to have you with us. let's get the first word news with annabelle in hong kong. >> thanks. european governments are putting together an evil mission to provide safe passage to the persian gulf, this after iran seized a british tanker in the region last week. the u.k. foreign secretary jeremy hunt warns the escalation will mean more navels in the area >> under national law, iran has no right to obstruct the ships passage, let alone board her.

it was therefore inactive state piracy. >> iran's foreign minister the move, saying the british ship was violating international law. president trump has announced a bipartisan deal to suspend the u.s. debt ceiling. the agreement to boost spending caps weeks of frenzied talks to avert the risk of a payments default. congressional leaders have pledged to support the cross party measure, which leaves all sides unsatisfied. and president trump says china's optedent xi jinping irresponsibly over mass protests in hong kong. they could stop the demonstrations if they wanted but hoped that they would "do the right thing." this sunday saw a peaceful rally devolve into street battles between protesters and the police. sanchez goes into a first about to form a left-wing

government, but the party is still unable to rely on the support it needs to form a coalition. he requires an absolute majority to succeed. if he fails he gets a second shot on thursday. spain could be on track to hold new elections. 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. this is bloomberg. >> annabelle, thank you so much. coming up, we will speak to jose antonio garcia, tara, cfo of santander. don't miss that interview at 7:00 a.m. london time. this is bloomberg. ♪ mberg. ♪

♪ this is "bloomberg daybreak: europe." let's check in on the markets. this is a huge week for earnings in the u.s. and europe.

in asia we are seeing some green on the screen and optimism around signs of potential progress and potential face-to-face meeting between the u.s. and china. dollar strength across the g10 is partly to do with the debt ceiling deal but in new zealand we are seeing weakness with key losses among g10 currencies after the reserve bank of new zealand says it is revisiting its strategy for unconventional monetary policy. futures flirting with a flat line in the u.s., oil steady after two days of gains, so tensions do remain in the persian gulf. let's get the bloomberg business flash in hong kong. >> thanks. you saw a revival of its fortunes in the second quarter after what the chief executive sergio ermotti called one of the worst starts to the year in recent history. it posted its highest net income in almost a decade held by record profits and wealth management business in the americas,

negotiatingortedly to struggling sell a modem unit which would give apple key engineering talent to develop new devices to connect to the internet. assets could be valued at $1 billion in the deal. continental has cut its earnings outlook for the year as the car parts giant lowered its forecast in vehicle production in key markets, including china. the company now expects global car production to fall about 5% in 2019. continental says this means the profit target will no longer be achievable. in the u.k. is intervening in the $3.4 billion sale on national security grounds. the decision follows the recommendation by the competition of markets authority to review the deal. a legallydy made binding pledge to keep strategic decisions of the u.k. that's your bloomberg business flash. >> thank you so much.

could trade tensions be on the fall? seven tech ceos met with president trump to discuss the blacklisting of huawei. they praise the meeting as a sign of progress. beijing also met with companies last friday about upping u.s. soybean purchases. it could pave the way for new face-to-face trade talks between the two sides, the first since negotiations broke down in may. still with us as the investment advisor at the bank of singapore. what odds do you put on some sort of a trade deal by the end of the year? well, i think we are optimistic that toward the end of the year or the middle of next year, especially before elections in 2020, we will see some sort of improvement between the two countries. china is already feeling the pinch when it comes to gdp numbers that have come out.

saw it slower we down. the month over month numbers that recently came out, retail sales and industrial production, they are showing signs of recovery, because china has a lot of tools in its toolkit. we do see progress toward a trade truths and the second half of the next year. >> what does that mean on how you would invest in chinese assets, either linked to the discussion we are having on trade and the potential for policy easing but perhaps also in tech with china star board? so, we are actually neutral on chinese equities. we do like three sectors, we like the infrastructure play, we like the property sector for high-yield bonds, and we also like the consumption sector, we like the names like china

mobile, some of the names that have come down quite a bit like baidu which is close to about 50%. in the fixed income space we are predominately focusing on chinese property names. whenever you mention chinese property it tends to get people a little bit scared or they tend to start thinking about ghost towns and that kind of thing, but we are looking at these very big chinese developers and the ones that are issuing dollar-denominated bonds. we are not going to the local currency bonds, some of the top chinese property developers like country garden or kgb properties. >> translate all of this now to your view on the u.s. and global fixed income markets based on treasuries. because if you expect good odds of a partial trade deal before the 2020 u.s. elections, this

that mean you are expecting a short easing cycle from the fed? that, it's get into why weteresting to know still prefer chinese property developers in chinese high-yield stop two reasons come to mind. number one, they are actually cheaper when it comes to valuation the rv the u.s. counterparts. secondly, the corporate balance sheets have improved, default rates are low. cycle, peoplecut are looking for higher-yielding names and you won't get too many of those. those are two reasons we still prefer -- the question about the the 25 basiscle, a 25s, we are calling for basis points but when i walked into the interview i was looking and8 across the board,

there is still a 22% expectation. we are calling for one. we are calling for another one in september and we might see one in september because whenever you see this insurance rate cut cycle, you see it follow-up with 75 basis points of easing. >> all right, make sense. it also explains why you see grounds to be overweight risk in your risk allocation strategy. thank you. he is staying with us. lots more to discuss. we just got some numbers from ams. it seesarter revenue, third-quarter revenue at $640 million, the estimate was 525.5, so that's a clear beat. the second quarter growth margin a 25%. million, the estimate was 404.7, $50 million. it sees the third-quarter adjusted margin above 25%.

i guess another positive sign here on the semiconductor space after we heard from ps mc. coming up, we will talk about brexit and speak to the treasury and business spokesman. this is bloomberg. ♪ mberg. ♪

♪ this is "bloomberg daybreak: europe." today, we will finally get the results of a conservative party leadership contest with gordon johnson, the heavy favorite, for who will take over as u.k. prime minister tomorrow afternoon. a member of the biggest political parties also have a new leader -- the scottish mp is taking the helm at the anti-brexit liberal democrats. let's go live to westminster, where anna edwards is with the guest. great to see you again. >> good morning. very pleased to say that i am joined by the treasury and business spokesperson for the liberal democrats, great to see you. did i speak to you last year? >> i can't remember.

well, good to see you. what is the liberal democrat strategy? what is the strategy going to be for the new prime minister being held to account? >> we are very clear, unlike the other main opposition party in the u.k., which is the labour ofty, which has a position wanting to stay in the european union, or leave it depending on what type of the country you are in, the liberal democrats are clear that we want to have another referendum, a people's vote, on whatever brexit deal there is, and we want to stay in the european union and stop brexit. no form of brexit is acceptable to us, only staying in the european union, and that is a very clear position. but we have a bigger problem in the u.k., which, is that this -- it is illustrative of

how our politics is broken and the two main parties at the heart of our political system are divided. lot about talking a the road -- the conservative party. they are in constant their own civil war. >> the problem liberal democrats as they only have 12 mps in the how do youd me -- into a biggerss presence? >> if we have a general election which most commentators think is quite likely over the next 12 months, we will be in a very good position to do what a third party has not done in the u.k. for generation. obviously there are good examples abroad where this can happen, justin trudeau where the

canadian liberals were in canada -- i think that's absolutely possible for the liberal democrats to do. of course in canada they also have a proposed system, but we are seeing levels of discontent which are quite unprecedented, people want change and they would be wasting their vote if they vote for the two main parties that are overseeing the brexit mess. the new leader we elected yesterday who got the landslide majority, a 39-year-old mother of two, very modern politician who has gone through the ups and downs of everyday people in our country, providing a very attractive alternative to boris johnson, who is highly likely to be announced as the incoming prime minister. 1950's, andk to the the main opposition leader, jeremy corbyn, who harkens to

the 1970's, when what we need is someone who is looking at the here and now. in the future. that is what we have been arguing for much of this time. there is some legal action to totaken, to stop any attempt suspend parliament. what are your expectations? the extraordinary situation of boris johnson the next prime minister, having led a campaign to leave the european union under the guise of protecting parliamentary and ensuring the democracy is in westminster and not some other place. at the same time he's about to take up the prime minister and is looking at suspending parliament in the lead into the scheduled data in october 31. he can force it through so that parliament can't, in the interest and instigation of the

people, stop us from leaving the european union without a deal. while there was a vote three years ago to leave the european union, it was never presented by boris johnson or others as something which would result in us leaving without a deal. the catastrophe that would pose, not only economically but so many other areas -- >> there was talk about how the tories would take no deal over a bad deal but that didn't win. let me ask you about defections. theyou expecting others in conservative party who might be unhappy with boris johnson's leadership, if indeed he is named as leader, are you expecting defections toward liberal democrat? >> i think there are a lot of people on that train, but as to when they get off the train and arrive at the destination, only they in their hearts no. leaving a party is a massive thing, it's not just a political decision, it can often have implications for your family -- some people were born into their parties. it's a huge decision.

but we have been speaking to a number of conservative members of parliament who are deeply, deeply dissatisfied with what's happening. >> could you give me a vague number? [laughter] >> a good few. i don't want to put a specific number on it because i don't want to spend heads. but there is absolutely no doubt that if you look at the main parties in british politics, they have very much gone to their extremes. the conservative party has been hijacked by donald trump's politics and the populace rise, and jeremy corbyn, the main opposition party -- there are lots of members of parliament who were not elected on that basis and didn't join that party wanting to be part of a fringe concern -- they wanted to be mainstream political people doing work for the country. >> they were talking about that yesterday. finally, if we are to brace

ourselves for some unexpected event or a to boris johnson's --dership in the early days even to jeremy hunt's premiership. could we see something surprising this week? >> i'm not sure there will be anything majorly surprising this week other than the appointment of a new cabinet. >> no vote of no-confidence? >> i don't think there's an appetite to do that right now. in order for the government to succeed, it would require a number of conservative mps to withdraw confidence for the prime minister who was only an office for one day. the new prime minister will be taking office tomorrow after rounda may does her final of the prime minister's questions in the house of commons. around 4:00 tomorrow afternoon, 4:00 to 5:00 p.m., boris johnson will become the prime minister.

then they will go on the summer recess. it is highly unlikely that they will take a vote of no-confidence. however, in order to have a general election before the scheduled date of departure, and when parliament returns, it will toe two days within which withdraw confidence in the government which could have a general election before the scheduled date of departure. if it happens any later than that it will need a general election, but only after we have left the european union. we are working to stop brexit. >> thank you very much for joining us. good to see you. bloomberg's and edwards in westminster, thank you so much. let's get the first word news in hong kong. >> thanks.

putting governments are together a mission to provide safe passage to the persian gulf, this after iran seized a british tanker in the region next -- last week. jeremy hunt wants more royal navy ships in the area. >> let us be absolutely clear. under international law, iran has no right to obstruct the ship's passage, let alone board her. it was therefore inactive state piracy. minister haseign defended the move, saying the british ship was violating international law. is the best candidate to lead the international monetary fund, according to mervyn king, former governor of the bank of england. the canadian succeeded king as the chief of the central bank in 2013 and holds british and irish passports. >> the most qualified candidate is almost certainly mark carney, but he is not seen as someone integral to the european union. >> you like to see him get the

job? >> i'm not saying who should or should not get the job, but he is clearly a qualified candidate. i'm not sure many of the other european names that have been mentioned so far are qualified to hold such an important economic leadership role. >> president trump says china's president xi jinping acted responsibly over ongoing mass protests in hong kong. he said that beijing could stop the demonstrations if they wanted but hoped his candidate -- his counterpart would do "the right thing." this sunday saw a peaceful rally devolving to street battles between protesters and the police. a firstnchez goes into vote to form a left-wing government, but the party is unable to rely on the support it needs to form a coalition. he requires an absolute majority for the 350 seat chamber. if it fails, he gets a second shot on thursday. if it fails again, spain could be on track to hold new elections. 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. this is bloomberg. much.nk you so we speak to the ubs ceo sergio ermotti, do not miss that conversation, after second quarter net beat. are we seeing a revival fortunes? this is bloomberg. ♪

♪ this is "bloomberg daybreak: europe." i'm nejra cehic in london. >> and i manus cranny in zurich for the ubs results. good morning. the numberseen cross from ubs, and the bottom line is it's the best profit in nearly a decade. americaed states of management group delivered some pretty good numbers.

the challenges are cutting interest rates in the united states, the pressure on net interest margins is one of the big headwinds. combined with that, you are dealing with negative rates here in europe and switzerland. we caught up with sergio ermotti, the ceo. >> if you look at the first quarter, we had a very weak first two months and then things normalized. we saw some normalization coming into the first half and a little in more volatile environment terms of the risk appetite in the quarter. >> if we look forward, we have pressure on net interest income, volatility is pressed and there a lot of competition. are those headwinds mounting for you and the business? q1, as a trend we saw in trend where we saw the u.s. reporting, highlighting the same

issues which will come under pressure, not only because rates had a complete u-turn in terms of expectations, but what happened between the end of may and early june in respect of the five year u.s. treasury which lost almost 40 basis points, and has a huge move, already had a big impact on some expectations. hadddition to that, we also headwinds from europe and the swiss franc rates and at the end a hugeday this is change. having said that, you saw transactions hold up very well and reoccurrences are also stable. overall we have doings but on the other hand we have seen these positive developments.

>> negative rates is a headwind for the superrich along with low deposits. -- are theystion going to cash in and if so who is running cash the most? >> it is quite interesting to see investor sentiment surveyed like we do every quarter, the clear cash balances topping 1% despite the fact that investment assets across the board went up. >> the markets rallied. cash events do -- ,re not really in the markets and we saw that across the board, not only on the dollar side but also on the swiss franc and euro, which seems to indicate that investor sentiment is muted. people are happy about their

asset allocations, which is good, because our clients are happy about their investments. it's not very constructive for activities. >> with that new money in the last quarter confirmation -- came from asia, give me a sense -- >> the typical seasonality factor is affecting our u.s. business and outflows for tax payments in the u.s. if you look outside the u.s., we have billions of income with some havet clearly less leverage, less demand for trading and blending, usually supporting around the third and any other developments. >> the headwinds we just talked about, do you still feel confident you can hit the target of 15% returns? think that it is premature

to talk about the for your outlook because the visibility we have month-to-month and werter to quarter -- are finishing close to 15% and it makes me comfortable that we in line withlevel last year's performance, which was around 13%. hard, and we prove that when market conditions are generation, our business, and our diversification is able to deliver very strong results. >> do you think from a banking side, if i look at what's to come from the fed, ecb, euro swiss at a two-year high, we are moving further and further away from normal to much lower for much longer? your take on that perspective? >> as i mentioned before, the

u-turn on interest rate expectations is not only dramatic in respect to what happened for the last six to nine months, but also the last quarter. assume that the rates will stay lower for longer period than expected, and that's the reason why we are very focused on mitigating actions in respect to what we do on our cost space, finding ways to growth and other initiatives to offset headwinds. >> the last time we sat down you said you want to continue cutting costs as normal, you have not reached the tipping point where you might need to do something more dramatic. are you still in that mode? what could trigger a more substantial review of the business? >> if you look at the performance we had in the second

quarter, it is a strong one, but that doesn't make us complacent about the environment. if i look at for example of the ,nvestment banking activities the revenue pressure is there to stay. had ae the fact that we record m&a and advisory results, we are not sitting there and waiting for a better time, we are thinking constantly about ways to redeploy our sources and optimize our portfolios. >> we are acting from a position of strength and a position in which we constantly look at how to improve our business, and it's not one-off initiatives that will make a difference. we need to stay close to clients and take advantage of our position in the market. >> that was ubs ceo sergio ermotti, speaking to bloomberg's manus cranny, my coanchor from dubai. still with us, the investment advisor at the bank of singapore.

you were listening in with that interview. sense, with the backdrop of the negative rate in europe and also subdued client activity, perhaps the prospect of trading drying up, will banks in europe be able to do enough in terms of mitigating cost-cutting to make you positive on european banks, or is the outlook for revenue to thin to contemplate buying european banks? >> so we have been big proponents of the u.s. bank outperformance vis-a-vis european counterparts. last year we had a preference and we have likes jp morgan for high-quality stakes for stocks that are relatively beaten-down. peers, is to european agree they will be in a challenging environment, not talking about banks that will go

through major structural issues like deutsche bank, even robust names like ubs the earnings report today was areomenal, but the stocks pretty much negative. i think the environment for european banks will be challenging -- it's not an area we like and we prefer u.s. peers for sure. >> we will see how the ubs stocks in just over an hour when european markets get going. we actually have an update from blackrock in terms of them saying that they see the ecb shifting decisively dovish in the coming months, so what they've done is close to their underweight recommendation on european equities and credit and they have upgraded government bonds to overweight. with your outlook for the ecb, would you be taking that similar >> we have blackrock actually been neutral on

, andies for a while now our focus has really been overweight on u.s. equities with china being neutral. i wouldn't say our views are in line with blackrock but we will be neutral on european equities. and thank you for the correction, ubs was the pretreating price -- i was cognizant of the fact -- i was actually looking at the pre-price. >> no worries. we would never correct you, you are one of our favorite guests. but i also want to talk about another copy which is important -- european governments agreeing to assemble enable mission to provide safe passage for ships through the persian gulf -- that's after iran seized a british oil tanker last week. the act has been condemned by the u.k. foreign secretary, jeremy hunt. we are seeing oil markets not doing a whole lot, but we've

seen a spike over the past couple days -- our markets underpricing the risk the persian gulf? fairlyuld say they are pricing it, and the reason i say are -- first of all, you right, we did see it go from $60 to $55, and now we are talking about crude oil futures. there's a couple reasons behind that. the main proponent for crude oil prices in my mind is growth, and a lot of people are not expecting a recession anytime soon. central banks and governments are pushing for fiscal and monetary policies -- we see the fed lining up to do rate cuts, the ecb with the rate cuts, the bank of japan has also been signaling that. china still has the monetary tools and they are already spending fiscal and infrastructure. we don't actually see the global

growth going into recession for 12 months. as long as we maintain stable growth we do see that oil balance. secondly and more importantly, president trump is not listening to the hawk on his team, which is understandable because going into election year he would be better off avoiding that situation. not listening to them. while it isn risk, significant, way bigger than disruptions in libya or venezuela, we think it will be on balance for $60 a barrel for crude oil. >> great our. thank you so much. investment advisor at the bank of singapore, thank you for joining us on the show. coming up, ran stat reports earnings. how was the economic slowdown in europe impacting the recruitment firms growth? the cfo joins us. we will also be talking to the santander cfo.

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nejra: i am nejra cehic. these are today's top stories. ubs the -- bouncing back to what the ceo called one of the worst starts to the year in recent history. >> if you look at the first theter, we are very weak first two months and into march, --ngs are motorized area normalized. ceases profiter hit by job cutting expenses. is next u.k. prime minister said to be announced later

whether it is boris johnson or jeremy hunt. theresa may's successor will have his work cut out for him navigating brexit. good morning, it has gone 7:00 a.m. in london. we are one hour from the target cash equity trading. we bring it all from banks to luxury. let's take a look at the numbers. second-quarter sales rise 12 when 2% beating the estimates. its first half of current operating margin is below 34.5%. also confirming its goal for revenue growth in the medium term. a little bit of a detailed second-quarter, rising 12.2%. x fx estimate about two feet there second-quarter and second-quarter revenue coming in at 1.6 7 billion euros. the estimate 1.65.

a beat there as well. holding up for them. let's take a look at the forecast margin. it is near a record high. take a look at futures, we did gains in some green on the screen in terms of u.s. equities. huge earnings season this week in the u.s. and europe. we are set up firmly for today's open in terms of ftse 100 futures, dax futures up i .51%. and cac futures up i .1%. -- by 1%. -- by .1%. that will be something to watch and a big central bank week as pertains to the bond market. great to see you and great interview. manus: thank you. we spent time talking about the bond market and the risks that central bankers should think about. have a look at your bond board,

this is how we are shaping up. a cracking story on the bloomberg this morning. the swaps market is pricing in a combined total of 320 basis points of interest rate cuts. trading new zealand, all set to ease. that conversation if you look at your u.s. treasuries, it is interesting. the from him. a warning shot to europe. u.s. fromshot to the the axis -- practice that has been done here and from switzerland on negative rates. more on that very shortly. let's get into the markets in asia. juliette saly is in zynga or. somette: we are seeing good gains coming through across asia today. led byecap by 1% chipmakers. we had morgan stanley upgrading the outlook for that sector. some good moves coming in from huawei suppliers after we had

that positive sign coming through from the white house in terms of discussions on the wall way been. kospiaiex is flat and the is up. they think it will be at 2100 points by the years and which is where it is today. the kiwi the worst performing g10 currency are we had the rbs coming through saying it is revisiting its policy strategy. evil thinking that means that rates are remaining lower for longer. let's have a look at how the star board is firing -- fearing. debutsdaq had a solid with all toy five stocks surging, some as much as 500%. you see only four of those stocks in the black create we have to put it into context. a lot of analyst did expect it would pull back a little today. when you look at the two-day gain, most of those still more than 60% gains over the course

of today's reedit has been a solid debut for this star board index. nejra: juliette saly in singapore, thank you. we had second-quarter numbers from rundstedt. 5.9 reported revenue of billion euros. we are joined by the ceo. great to have you on the show. tank you for joining. one thing that analyst and investors are focusing on are your margins. do you see the third-quarter growth margin slightly lower, sequentially area and i want to ask about margin management in a slow growth world. you have the latitude to keep lowering costs and protecting margins? henry: the -- thanks for having me. set of numbers and more challenging markets. we have been able to improve our

growth margin by 20 basis points year-over-year to 20%. that is mainly driven using our value-based pricing. we are using more data, more insight into labor markets to price the profile. manus: i want you to make the economic world, live for me, i look at your geography, north america, netherlands, france, germany. we are talking about slowdown in the netherlands, give me your take on the state of the global economy. henry: i am happy to do that. the slowing down of europe so we have a decline in there. we are enjoying the benefit of a good global portfolio. with america is stable excellent profitability. one on the board.

the rest of the world, double-digit growth, amazing indias, 28% growth from 19, japan 9%. , a good margint in there. 1.7% topline, that is automotive related. and that is a weakness we see in some of our bigger countries coming through like in the netherlands. germany and belgium. but overall, really happy with the global prot -- portfolio we are having to compensate some of that. nejra: when do you expect to see a rebound in germany? do you expect not to see a rebound before september?

just give us an update on germany. henry: we have seen germany with slightly deeper in q2 -- you might have picked that up. .lso overall manufacturing we do not see any relief soon in there. at least for the remain are of the year. to continue -- for a weakness to continue in there and we plan accordingly. that: how do you balance slowdown beginning -- beginnings of a slowdown, do you invest the technology proposition for you or do you look for merger and acquisition bolt on? henry: we do both and it is important in times like that that we make smart investment

decisions. we definitely invest more in the u.s. where there is good profitability and room for investment and growth opportunities in there. also in many other markets. latin americaand where we see good profitability in that. are tightening the belt in markets. [inaudible] overall it is important that we are, that we do smarter decisions to balance the drought. your smaller staff and page group had a profit warning based on slowing global growth. growth fall. will you be able to protect yourself from the difficulties of that magnitude faced by page group?

happy with what we have achieved in quarter to his far as profitability is concerned. you have seen growth margins improving and we have been able david it through to the dunn line. we had and we intend to achieve the same going forward. many thanks. smart investments, return on capital. the clock is ticking down to iran's mid-a. we will find out who it is is the next u.k. prime minister. the winner is set to take over at number 10 tomorrow. whoever wins this race, tough decision ahead, escalating, you have the rent crisis is top of that agenda.

covert meeting by the outgoing prime minister. our managing editor is joining us in london. it looks like it is orest johnson that is going to be the prime minister. resignations will follow, we understand. how intractable is boris is hard , do they listen -- i listened to the irish foreign minister in the rest. what boris seems to be missing sounds as if it is undeliverable at the moment from the european side. surface, he is a hard line brexit approach. markets'e has the hackles up if you look at sterling, trading around those two-year lows. weakening under pressure and protecting that kind of worry. we see -- have seen in these negotiations over brexit that

there is a reluctance among parliament and policymakers to push the u.k. for the cliff edge. that is the hope that investors are still retaining. there will be some kind of reprieve, some kind of extension. i want to turn your attention to the fact that we haven't ecb meeting this weekend big bank earnings, ubs and santander. banks in europe contending with this negative rate of this. what are you expecting out of inking earnings season with a backdrop of an ecb meeting this week? paul: that is the interesting thing that everyone is watching, how bad and severe is this impact. banks't environment on interest margins. ae retail proposition is concern. we expect there will be more complaints but the ecb has been

maintaining its position that the banks are doing better. policies -- they are suffering from the negative yields. that trade-off will come up again in the dress conference. maybe that will be a push for the idea of [inaudible] punish interest rates to drop lower. that is something to watch out for. grumbling about the situation. manus: i have come back from that interview. he was making the point it is numbers in terms of the u.s. that drop, that compression in the net interest margin. behad a warning shot, careful what you do wish for, look at the european model and here in switzerland. do you reckon you will have deeper rate cuts and/or intervention soon when the euro

swiss is at a two-year high? how big a risk? swiss drop belowro 110 yesterday, the first time in two years. the bank really gaining strength so the euro under pressure, people looking to relative safety, people looking to anyway certain extent. that puts the pressure back on the swiss economy. it is a problem we have seen, we had the currency cap. look like the you trend was weakening. right back up there with a stronger levels again. s&p has moved ahead of the ecb. definitely something that investors are talking about. if you look at volatility swiss francs not that

much priced in. people are still reasonably complacent. great to have you with us. paul dobson stays with us. we speak to the cfo of santander as the bank sees its profit hit i job cutting expenses. that is next to this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." manus: i am manus cranny ins eric. santander expecting -- hit by cost cuts along with a restructuring. the bank reached an agreement to , 10% of the workers spanish workforce. closing 140 branches in the u.k. and in poland. it is a big shakeup.

great to have you with us this morning. inhave some of the numbers terms of the scale of the restructuring. the question now 700 million euros but 3200 workers to go in spain, 1400 jobs to go in poland. is this the and and the sum total of the restructuring or can we expect more substantial moves? good morning. guest: santander has delivered its strongest quarterly performance reflecting the progress we have made in our emotional and digital information. our business continues to perform extremely well. the charges relating to restructuring have impacted profit as we anticipated. we are starting to see the value that these will create going improve revenue growth and efficiency. it is clear the relationship between customers and banks is

changing. more --s are leaning and we have to continue to that new way of these relationships. to speak to you this morning. you mentioned improved revenue growth. this is the challenge facing banks, the negative interest rate abyss. are you able to do enough to mitigate the low interest rate environment in europe which could get even deeper with the ecb meeting this week? it is clear that rates have a negative impact. against that what we are doing is improving the number of loyal customers. we are increasing the

relationship with our existing customer base. we have over 20 million loyal customers, these are customers that view santander as their first banking relationship and 35 million digital customers which means we are doing more through digital channels which helps us cost -- cut costs. through these two measures, we are showing actual profit growth. today is an agm and you're going for your third capital increase. understand it is a mexican subsidiary. this is one of those delicate lines to walk coming back for more capital. do you think investors could run out of patience? as you said this is not a capital increase.

by then exchange minorities we do not own in mexico. this will have a very small positive impact on capital ratios if we were able to get 100% of that minority stake. it would represent five basis points of capital. raising the ratio is not the main purpose. we are generating capital organically. we generated over 10 basis points of capital in the quarter and we are in a position to reach our capital targets announcing today. nejra: we look forward to hearing more as it continues. let me ask you about the u.k.. by the end of today we will know who the new prime minister is here in the u.k. certainty it will be maurice johnson. i wonder if your baseline position has shifted on the

prospect of no deal brexit? >> we are a local inc. in the u.k. so the main concern is to continue serving our customers. we have millions of customers in the u.k. we are very well prepared to serve our customers and any outcome. when you look at it from the european perspective we are cooperating in u.k., we do not face any passport issues. it may have to make some adjustments. is to be there for our customers and we are ready to serve them in any outcome. the story runs at the core of the newsline and that we understand, he is asking for double the bank what you are where prepared to pay. are you negotiating a settlement to make this issue go away?

e: this is a matter for our lawyers to resolve. our focus is on the future and delivering on the strategic plan we set out last month in london. we have said -- set various onget aiming to get a return tangible equity. our focus is on achieving the goals we have set out and that is what our shareholders expect us to do. how damaging has this episode been for the banks reputation? e: i don't get has. this is a matter for our lawyers to resolve. on bank is focused delivering on our targets. back to the we go u.k. in terms of the discussion? yesterday we set -- spent a great deal of time discussion --

discussing the slowdown. what can you tell us about the business in the u.k. in terms of performance and any crack's therein? seeing that in prices that we have never seen in the u.k. before. seeing pressures on income. starting to we are we have the lowest cost of risk in many quarters. there is pressure on the revenue side and that is likely to continue. the things that depend on us which is cost, operating costs is what we are focusing on.

grexit great to catch up. thewere catching up with ceo of ubs. line, theyng the top did have outflows from level wealth management. what we're takeaways? it is about putting this forward, the best quarter since 2010. money going out down to the u.s. citizens paying taxes. volatility is repaired. the are -- therein lies headlines. onre is a tliv [indiscernible] that is the key issue. nejra: the investment performance was mixed. a lot to look forward to end i look forward to hearing more from that interview throughout

the morning. manus: he gave me a gift. he turned up with that and he gave me a gift, it is together we can change the world below the line. this is bloomberg. ♪ it make

anna: i am anna edwards live in westminster alongside matt miller who is in berlin. matt: the markets say it is tough to be a bank. the latesttander are lenders to admit that low interest rates are knocking revenue. european futures point higher as those banks beat estimates on the bottom line. the cache trade is less than 30 minutes away. ♪