♪ francine: boris johnson becomes prime minister. on the agenda: forming a cabinet and negotiating exit -- brexit. china and the u.s. restart in person talks. and deutsche bank posts a bigger than expected net loss for the quarter and a slump in trading revenue. we are aware the outlook has deteriorated during june. frankly, it represents revenue pressure for us and all of the banks if rates from here go down further.

francine: good morning, everyone. welcome to "bloomberg: surveillance." good morning if you are watching from europe and the u.s., good afternoon if you are watching from asia. francine lacqua here from westminster, what a day! this is the day boris johnson becomes prime minister. there is a lot of pageantry today. has her last prime minister questions our in parliament and that she goes to see the queen. she comes back, and then it is boris johnson started to see the queen. in the meantime, we have market movement. euro area july manufacturing pmi is below forecasts at 46.4. services pmi is pretty much in line with expectations that it is a fall from the month before. we also had ugly german data which will impact euro-dollar. this is what is coming up on "bloomberg: surveillance." , forve plenty of guests

example, the ac malan chairman and deputy chairman at rothschild. he will be with us to talk the latest on oil. we also have robin from chatham house. let's get straight to bloomberg first word news in new york city. is facing an antitrust probe from the u.s. justice department. it is investigating whether dominant companies are thwarting competition. at concerns look that consumers and businesses have expressed about search and online retail. president donald trump is tosidering how to respond turkey's decision to buy a russian missile defense system. last week, trump said he was not looking at economic sanctions quote right now. but the u.s. suspended the country's ability to buy and build f-35 fighter jets.

china has accused the u.s. of undermining global stability. the country is releasing its first defense white paper since president trump -- present xi jinping launched an overhaul of the military. it will a departure from the previous report and signaled improving efforts to cornet with the u.s.. -- coordinate with the u.s.. suing to keepp is his personal financial information out of public view. this is coming three weeks after the house ways and means committee sued to keep -- to get his tax records. operating profits and free cash flow will significantly improve. that is after cutting outlooks earlier this month. the mercedes maker scenes annual revenue slightly higher than a year ago. vehicle sales will be the same as in 2018. global news, 24 hours a day and on tictoc and on twitter. powered by 2700 journalists and

analysts in over 120 countries. francine? francine: thank you. let's kick off with the latest from westminster. this afternoon, boris johnson will formally take office. thirds ofth two conservative members, the former foreign secretary faces the job of bringing his party together. he has restated his pledge to 31 european union on october and said there won't be an early general election. we will go live to downing street, but first, let's see boris johnson in action bringing -- beginning with his forest -- foreign secretary resignation speech. >> it is not that we have failed to make the case for a free trade agreement. we have not even tried. with the junk forth backstop. do not rule out no deal.

after three years and two missed deadlines, we must leave the eu on october the 31st. i am of the right man to unleash on that project. it is vital as a country that we get ready to come out without an agreement, if we must. >> any further is simply going to end up eroding trust in politics. we have a very good opportunity to come up with a better deal. >> we need to get brexit done by october 31. >> we know the mantra of the campaign that has just gone by. in case you have forgotten it, it is delivered brexit -- , and fight jeremy corbyn. the campaign is over and the fight begins. francine: joining us is anna edwards outside number 10.

what do we know about the team boris johnson is building? anna: good morning to you. boris johnson will need a team around him. of course, he is the man who has led the brexit campaign that has always worked best with a strong team around him. the focus is who will be in the cabinet. names being thrown around this morning. talent is one being -- patel is one to watch. scandal ind over a israel, but boris johnson always spoken favorably of her. some in the media are suggesting she will go to the home office, but we have no news. in terms of chancellor, we have not moved on the conversation. stress has been loyal to boris johnson and has been at the treasury up until now. so look for today to be a day helping boris johnson to be that dude.

dude being the mantra of the campaign. he will need help delivering brexit died october 31. -- by october 31. francine: to be expected to say how he will negotiate or deal with the brexit? exactly,id not hear but we do expect a speech today and we will be looking for clues. all the way through the most recent part of the campaign, he has been hammering home the line that it is do or die. previously, he has said there was a one in a million chance there would be a no deal of brexit.- no deal certainly, the emphasis has been on the need to deliver by october 31. so we will be looking for clues as to what his latest thinking is. this is something many have been alarmed by.

many will tell you that business wants certainty and that is why it they're saying we have got to go out by october 31. not are saying that is certainty because it takes you into the great unknown of no deal. build some trying to bridges with businesses, for example appointing the sky ceo. earlier those rude words he had lot long ago -- not long ago? clearly he sees he has some bridges to build. francine: anna edwards outside of 10 downing street. robin fromews from chatham house and a guest. thank you for joining us here in the heat. when you look at the composition that boris johnson will likely can we read from het the type of negotiation

will bring to the eu or the type of brexit he will deliver? >> he has got to work on so many different levels. he has got to make sure he doesn't have his own awkward squad of people who want a close relationship with the eu in parliament undercutting his negotiating process. so what we are seeing, as importantly as anything, is the collection of trying to keep some of those on site, inside the tent and not heading to the back benches. he has to show that the cabinet he puts together is the centrist , conservative party that will make it difficult for those left out of the job suite to oppose him on what will be a tough negotiation. toncine: the market wants know one thing, what are the chances of a no deal?

gregory: i think they remain low because i'm afraid will have to define no deal. francine: crashing out. gregory: highly unlikely. boris himself does not want to go to a general election with a person who was not able to conclude a deal. that is the reason he was selected. you could have an agreement that the deal is done and it is impossible to deliver and that a no deal is the beginning of a negotiation. you start taking that off from the 31st onwards. keep air traffic going, we will have tariffs straightaway. so it becomes an extended negotiation with no particular deal. you could say i've left with no deal and the eu will say it is not a p or no deal. -- peter no deal. -- pure no deal. francine: the sterling did not fall by that much, but it has to

do with the boe. i was not surprised, but the reality is not much has changed if you look at the factors we are changing -- paying attention to, boris johnson has commented he is pro-business. so what we are looking to is for him to deliver on that. , we a portfolio perspective are in a similar cap to many portfolio members. .veryone is neutral francine: you could argue that pro-business would be leaving without a deal. gregory: in terms of that scenario, what we will be looking for are clues as to what he could potentially do in the meantime to open up a little bit. means in our terminology would be some sort of fiscal impulse. i realize he needs some sort of approval, but if he wants to keep the economy on track, that

could be a mechanism to exercise. francine: because of his style and renewed energy, can he actually get anything from the eu? robin: you do not want to be seen as the end of the process as being the one to push the u.k. out. all the words we heard are there. you have had an incredibly bruising parliamentary election with the major parties taking a hit. the greens and the more centrist pro-eu parties coming up. is last thing you want to do turn around and be seen not just as a populist but an opportunist populist, the worst type of populist. he has only got a three seat majority with an election coming up. how much do you give to a person who may not survive until the 31st.

so i think the eu will be very cautious to see what he puts forward. boris johnson's cabinet will be running around negotiating. i think they will just hold their fire, keep the mantra come and see what he does. francine: the sterling move on who gets picked as chancellor? does sterling move on who gets picked as chancellor? gregory: sterling moves when we get evidence of what is happening. the security market is one of the best indicators of the expectations of markets. maybe even a better indicator that the equity markets. and so far, the fx markets are telling us no position. so we need to see hard evidence in terms of policy and then the fx market will react. francine: thank you for joining us. gregory from arbuthnot latham, robin from chatham house. later, deutsche bank's

slump deepens after the loss comes in a worse than expected. we hear from the chief financial officer up next. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg: surveillance." , we are expecting boris johnson to become prime minister later this afternoon. senior u.s. trade officials are reportedly set to fly to china on monday. it marks the first high-level talks since negotiations broke down in may. robert lighthizer will be in shanghai though the meeting is not expected to yield a major breakthrough. meanwhile, the eu has almost doubled the amount of u.s. goods

it would hit with retaliatory tariffs. that is if president trump imposes duties on european cars. the bloc could now hit 35 billion worth of goods from the earlier figure of 20 billion. still with us is robin from chatham house and gregory from arbuthnot latham. deal,ou look at the trade is it going to hold or are we going to find a step forward? what does president trump need? ors he need to be fighting does he need to say i fixed that, i will move on. robin: it is so hard to read. when you look at where he is most comfortable, it is fighting. i don't think he wants things to , he can say i have imposed some pain, but you cannot have an additional set of tariffs playing through into jobs and economic sentiment,

especially amongst his midwest, farming backers. show that it is not broken down, show he is still in negotiator. but he cannot give away a compromise deal that would undercut his fighting message. donald trump has moved into campaign mode and campaign mode needs enemies. china top on the list makes sense. you have got other sons -- other stuff going on. taiwan, hong kong, and at the moment, the chinese don't want to give a lot either. xi jinping is in a tough position. he has got his own hard-liners. i think this is theater. that is enough to go into the election. francine: i have heard that these trade wars could come down and escalate, come down, escalate, could be something we have to get used to. what does that mean for the markets? gregory: we are positioned that

donald trump's position is to be reelected. to be reelected, he needs jobs, the housing market, accessible petrol at the pump and an all-time stock market. but he also has to appear as if he has won the trade wars. our position is what we have , that president xi jinping and donald trump need a deal. a lot of posturing and theatrics, but the reality is they will deal. to makell find a way himself look good regardless of the terms ahead of 2020. francine: thank you both. robin from chatham house and gregory from arbuthnot latham. they stay with us and we will be talking about the fed next. up next, we focus on monetary policy and the ecb ahead of a pivotal risk of the month. and the fed is cutting risks for the first time in a decade. and the ecb as mario draghi is on the way out. this is bloomberg. ♪

francine: this is "bloomberg: surveillance." let's talk about monetary policy. ecb policymakers have plenty of reason to wait until september before committing to more stimulus. decisionn, the rate and a slowing european economy. as we saw the top of the show, european pmi has fallen. manufacturing has slumped to its worst performance in more than six years. now let's get back to our guest.

still with us is robin from chatham house and gregory from arbuthnot latham. when you look at monetary policy , which could surprise the markets more? ecb or the fed? robin: we are surprised by the general tone to begin with. there is nothing wrong with the u.s. economy. francine: there is this little thing called the trade war. robin: yeah but if you look at the numbers, the manufacturing numbers are not hitting the economy as much as expected. and service numbers are quite good. and looking at the recent economic data -- francine: what about yield curve inversion? gregory: we don't look at three-month tenure. -- ten-year. and even the fed argues that if you add back qe come it should be higher. -- qe, it should be higher. francine: are you suggesting this is a policy make -- mistake

or are they concerned about trump? gregory: it is good politics, but a mistake. there will probably be an advance of the trade war ahead of his election. the fed will have already made the downward move and then have to backtrack. once the trade war starts to get resolved, then all the exporter start to do well in global growth will start to perk up. francine: what does that mean for ecb policy and madame lagarde? gregory: if christine lagarde called me and said gregor about what is your advice, i would say to play hardball. take a page out of trumps a book. book. -- trump's do not lower rates. francine: what would the markets do in that case? gregory: if the markets new there was a fiscal impulse coming in europe, the markets would love it. between it was expected aboutthere has only been

one trillion euros of fiscal impulse. they should go to brussels and make the case. francine: i wish we had more time. you will have to come back. gregory, chief investment officer of arbuthnot latham. robin of chatham house stays with us. coming up, we will to debbie chairman at rothschild. we will talk to him about italian politics and the latest on oil. for over a decade, he was the ne chief executive so he has something to say about the middle east. areext, deutsche bank ones more deterioration after reporting a bigger loss than expected. we get more from our cfo interview. this is bloomberg. ♪

♪ francine: at number 10, boris johnson becomes prime minister. on the agenda, forming a cabinet

and tackling brexit by the halloween deadline. the u.s. and china restart talks on monday. it is the first in person talk since the truce at the g20. deutsche bank posts a bigger than expected net loss for the quarter and a slump and trading revenue. , warns, james von moltke that low rates mean more pressure to come. good morning, everyone. this is "bloomberg surveillance." boris johnson do to be premised or later on today. andnderstand from the bbc its chief political correspondent that dominic cummings is expected to be a senior advisor to the new premier, boris johnson. he is a british political advisor and strategist. he was campaign director of vote and special advisor to michael gove. we will look at the implications , whether that means boris johnson is preparing for a general election and may be taking away some of the wind in the sales of nigel frosh.

we will discuss that with chatham house. let's get more on deutsche bank, germany's biggest lender. they lost 3.2 billion euros in the second quarter, a bigger net loss than expected. trading revenue at deutsche bank dropped 12% in the second quarter as it again underperformed its biggest rivals. james von moltke spoke to matt miller. executee are working to on the restructuring just as quickly as we can. with the execution comes the accounting recognition of the steps we have taken. this quarter, we are recognizing about 3.4 billion of costs associated with the transformation. those are by and large non-cash charges, dta impairments, goodwill impairments, and software intangibles that we are also impairing. we get a good portion of the accounting impact behind us in the second quarter. in the balance of the year, we are working to take severance and restructuring charges in the second half as we execute on the restructuring.

there will be some real estate charges and incremental dta charges in the year. where expecting probably another 2 billion these related charges over the coming several quarters, or two quarters in particular. tom: what percentage -- matt: what percentage of the job cuts do you think you can get done this year? how many can you get out of the way? james: it is a steady, gradual process affecting all areas and geographies of the firm. we are working as quickly as possible but also trying to execute on this as sensitively as possible given that it is affecting the lives of our colleagues and friends. we have notified about 900 staff already, associated principally with the equity sales and trading business that are either leaving or are leaving in near term the platform. the capital release unit is well underway in terms of execution on the deleveraging steps, organizing itself under a new management team and moving to

reduce the headcount associated with the business is that we are either exiting or significantly reducing. we are well advanced for 2.5 weeks and. it is a protest in. in.s a part -- it is a process we need to continue on steadily for the coming years. matt: do you have a headcount target? james: we have some internal targets. what we said externally is below 90,000. that is something we attend -- intended to achieve and go as deep into the heidi's as possible. we don't want to -- high 80's as possible. we don't want to give a specific target at this point. one thing we have talked about overtime is internalization. we are continuing to earn allies -- internalize, particularly technology jobs. that type of activity will continue. ow,is a bit of an ebb and fl hence the reluctance to pin down a specific target number. matt: you mentioned the equity,

sales, and trading business down 32%. the fixed income business was down only 4%. those numbers, as big as they are, compare not so unfavorably to your peers on the street. why did you do better than expected? james: i agree. in the environment and relative to peers, that 4% is reported. it is about down 11% if you exclude the trade web game, which a number of our peers have. within that, frankly, rates performed reasonably solidly. our credit franchise was up year on year. we were quite encouraged with the performance in many of our rates businesses, of our fixed and currencies businesses. obviously big cities -- equities is down significantly. that affects the restructuring we executed last year and as you would expect, some of the uncertainty that played out

during the quarter as the market, clients, and employees were anticipating some element of restructuring to come. francine: that was the deutsche speakings von moltke to matt miller. nissan saying that the report of a 90% for quarter operating profit plunge is broadly accurate. we will have to look at price reactions from tokyo. at the moment, the share price in asia is closed and whether there is any reaction from any of their sister companies. for the moment, nissan saying the report of a 90% first quarter operating profit plunge is broadly accurate. i italians are holding their breath as they try to decipher intention.ini's will he pull the plug on the five-star movement or stick with the government where he is the defector leader? minister, giuseppe conte, is expected to

defend him in parliament today. for more on u.k. politics, here formero scaroni, and the eni chief executive. i have a couple things to ask you about advisors, boris johnson. welcome to bloomberg. welcome to westminster. when you let get italian politics -- look at italian vini win biguld sal if he went for an election no w? >> the elections would be in october. from now until october, many things could happen. i am not sure they will go for an election. module depend from what happens today -- much will depend on what happens today. onte will try to defend s

alvini on the russian affair. there are people in the business community that look at this as a positive thing. in the end, no radical decision can be taken. francine: i guess the concern is trade --have to if you look at the numbers in italy, they are not bad apart from jobs. this, in order to fix probably the business community thinks we need to have a new election, new government, different perspective. with the five-star movement holding 33% of the seats in the to takent, is not easy any economic real action to create jobs in the country. francine: we talked about the european elections. at the time, we said we have avoided the kind of more extreme

parties really coming in big, although they had a big stronghold. if you look at boris johnson, salvini, others across europe, are we moving towards that direction? it seems like that direction of anti-populist -- populist, anti-immigrant. james: the populace -- taylor: the populace -- gregory: the populist impulse took a number of years to build up. france is a very interesting place to look at. i think it is a confirmation. --h time you think it is a very solid 25%. sweden, this is not a north-south divide. it is across europe you can say to a certain extent. the brexit parties great

showing is a reflection. populist politics hold a good 20% of the elections from now on. every centrist right party has to worry about it just as every centrist left party has to worry about being outflanked. francine: what does it mean for chief executives? does it change their business decision? does it change their investment decisions? does it change the economy? >> in total, companies are doing at reason we well. share price, stock market is very high. the business community is leaving -- people are not really worried. i have to say that as far as italy is concerned, the country is divided in two. if you go around italy, everyone is happy, increasing the revenues. they say that is not a real issue, while in the south,

problems which always existed are aggregating. francine: in the north, unemployment is quite high, too. you just rely on all family monday -- all family money and a lot of cases -- hold family money -- old family money and a lot of cases, right? even for the use? youth -- youth. on them -- youth unemployment is higher in the north. james: maybe you are talking about some regions -- paolo: maybe you are talking about some regions. the region of venice is quite hefty in terms of an implement. francine: what is the prescriptions and reform that you would tell the government right now to put in place? paolo: i would cancel both of votes the government has made. we have the best pension system

in europe -- had the best pension system in europe. we have changed that. the --,at is called which has not served the people to look for jobs. francine: on dominic cummings, his campaign director, the bbc reporting he will be a special advisor to prime minister boris johnson. what does that tell you about the new prime minister's thinking? robin: tells me he is thinking very seriously about what general. election would be he might not -- election would be. he has to be thinking already, how do we tackle the brexit party? dominic cummings was the big thorn in the side of nigel farage. the risk is that dominic cummings was one of those people using a lot of that data and some linkages alleged and

certainly put in the on war about his use of the cambridge analytica data. dominic cummings is a polarizing figure. as i said earlier, boris has to show he is playing both sides simultaneously. he has to keep the base happy on the centrists onside. dominic cummings would be a good counterweight to some of the softer appointments he will have to make this afternoon. francine: thank you both for joining us. paolo scaroni and robin about stay with. we have plenty more from westminster throughout the day. we will also have plenty more on oil. iran is reported to be planning to secure the strait of hormuz. more trouble for tech companies, as tech giants face an antitrust probe from the u.s. justice department. we will discuss the sector's troubles. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i am francine lacqua at westminster. we have plenty going on. it is day one for boris johnson as prime minister. let's get straight to the bloomberg business flash. >> texas instruments reporting stronger than predicted sales and profit forecast. it says third-quarter revenue will be 3.65-$3.95 million. this signals the slump in demand for chips may soon be at an end. it helps counter concerns a u.s.-china trade dispute will hurt the overall economy. we work is reportedly looking to

go public in september. it is expected to be the second-biggest ipo of the year. the company is targeting a share sale of about $3.5 billion. largest is we work's backer and values the business at $47 billion. the number of snapchat users topping estimates. this after the company rolls out an updated version of its android mobile app. in the second quarter, an average of 203 million users logged in daily. that is well ahead of analyst estimates of just under 192 million. that is the. bloomberg business flash francine? francine: thank you so much. iran reportedly claiming it will secure the strait of hormuz to prevent what it cause disturbances to oil shipping, according to reuters. iran is has claimed behind a pair of attacks on vessels near the strait. this has been -- errata

fluctuation in the price of oil -- a lot of fluctuation in the price of oil. there is a lot going on and it is unclear exactly what will happen next. it is unclear how the u.k. will react to this. still with us is robin niblett from chatham house and paolo scaroni, a real expert when it comes to the region. first of all, when you look at the strait of hormuz and being at the forefront of all these trade tensions, is there any real way to be able to secure this? if you are boris johnson, you come in and try to keep president trump onside. one of your takers was actually attacked just last week. how do you deal with it? paolo: it is three kilometers wide. it is fairly narrow. you can certainly try to stop ships over there, even if to stop a supertanker is not very

easy for anybody. 20% of the oil of the world through the strait passing and 25% of the liquid gas. it is very important. i always remember that even during the iran-iraq war, the strait of hormuz has always been open. it is in the interest of everybody. all of the exports of iran passed through the strait of hormuz. frankly, i doubt that would be a of the strait. the impact on the price of oil, but overall, how worried should we be about these tensions flaring up? >> you have to be worried about them because they are real and we are not quite sure where they may isolate to. the most important thing is that

iran desperately needs to require -- reacquired negotiating leverage. it knows it is in a long-term battle with the u.s. and may cut over to the next pregnancy. what they had -- presidency. the big nuclear deal that was done, they gave up their leverage. iran knows it is going into negotiations. it is alone. it knows it cannot trust the europeans to help without in any meaningful way. they needed to build a negotiating leverage -- they need to build up negotiating leverage. each step of the moment is to make them more relevant in future negotiations? francine: the retentive forget how boris johnson -- do we tend to forget how boris johnson will go with foreign policy? is that something we should be more mindful with? in the past, he has been quite clumsy. >> after the drum of the appointments, his in trail on --

drama of the importance -- appointments, his entrails on -- he has to make a decision on iran. does he play the trump maximum pressure or the other way? each of the topics with foreign policy, russia. each of those decisions will send a signal, is he working with europe or not? francine: are you expecting oil prices to remain volatile? paolo: the market is not very worried. it's in their interest that oil continues to flow through the strait of hormuz. imagine a scenario of war, which frankly i don't see. i don't see much volatility on the oil price. francine: thank you both for joining us. , deputy director at rothchild and robin niblett. the u.s. justice department steps up antitrust scrutiny against the likes of facebook and google. details next. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua in westminster. let's talk about tech.

big tech is facing an antitrust probe from the u.s. justice department. is investigating whether dominant technology companies are forcing competition in their markets. what does it mean for the stoxx andthe sector -- the stock the sector? .et's get more on this alex, great to have you on the program. how significant is this probe? biggest -- one of the biggest things we will have seen from the u.s. on this. we have seen big matters in europe, not least from the european commission. tackling them on these antitrust questions and not about content is the major blow to these companies right now. what they have been desperate to focus the conflict around is on

regulation come on ensuring that the content that appears in their platform is appropriate and acceptable. as long as people are talking about that, they are not talking about antitrust. antitrust really focuses on a change of their underlying business. that could be the ultimate and for thef this, tech companies at least, their worst case scenario. francine: is this politically motivated? alex: i don't know. i think ultimately, even if it is, that does not mean it is not warranted. this is a question which regulators and antitrust authorities have sat on the sidelines on for a very long time and see these companies become vast and in many ways, hard to understand. that thing that i think is interesting here is by looking at the online advertising space, that really will give them an opportunity to unpick some of that ecosystem's workings.

the way that online advertising is set up, programmatic advertising, you have someone bidding for online space, someone selling on myspace, and in the middle, you have an ad-exchange where the bidding takes place in real time. facebook and google control all three of those processes. they are selling on myspace, but also -- selling online space, but also bidding for against other people. that is what some people are suggesting matt beat anti-competitive -- might be anti-competitive. francine: "bloomberg surveillance." continues in the next half-hour -- next hour. this is bloomberg. ♪

♪ francine: at number 10, boris johnson becomes prime minister.

on the agenda, forming a cabinet to tackle brexit by the halloween deadline. back to the negotiating table. the u.s. and china restart talks on monday, the first talks since the truce at the g20. deutsche bank posts a bigger than expected net loss for the quarter and a slump and trading revenue -- in trading revenue. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua at westminster. boris johnson as a new prime minister later this afternoon. tom keene in new york. we are waiting for theresa may to do her prime minister questions in the house of parliament around midday london time, then she resigns by seeing the queen. the queen because an audience with boris johnson and we have a new promised her at number 10. tom: getting substantial play in the united states. i've taken back to columns in the new york times -- two columns in the new york times. one of them is about president

meeting with the prime minister. i believe they've talked three up threethey've talked times by september, which i think is extraordinary. francine: that is a fabulous angle. we are spending so much time looking at the cabinet, we forget to talk about foreign policy what the relationship between president trump prime minister johnson will look like. in the last 15 minutes, there was a report from the bbc that dominic cummings, who was the basicallyigner, so the brains behind brexit, could become the senior advisor to pm johnson. isnew york city, here viviana hurtado. >> today, boris johnson formally becoming prime minister. he will try to build a government that will bring his conservative party together and deliver brexit. johnson has told conservative

members of congress what most wanted to hear, the u.k. will leave the eu on october 31 and i will not be an early election -- there will not be an early election. the former special counsel in the russia trump investigation will face questions from the u.s. congress for the first time. robert mueller will testify before a house committee. democrats are hoping he will offer more details about president trump and possible obstruction of justice. he has stated he will not go beyond what is in his. 448 page report. u.s. trade officials had to china next week for the first talks since may. a senior administration official says the meeting is not expected to lead to major breakthroughs. last month, president trump and president xi declared a tentative truce in the year-long trade war. the long-standing -- long trading slump at deutsche bank got worse in the run-up up to a massive overhaul. in the second quarter, revenue from buying and selling

securities fell 20%. the equities trading business the company is trying to get out of it -- vegas trying to get out of fell by almost a third -- bank is trying to get out of fell but most a third -- by almost a third. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. the pomp and circumstance in london is great but there is substantial news flow this morning. the data moves this morning off of grim economic news in europe. futures in the u.s. negative nine. not the new weakness, but getting there rapidly. next screen shows the bond picture within the vix. here is the lineup of europe litmus paper. german to your down to a -0.78. 10 year craters down to -0.37

off of a -0.3 handle. euro swiss really breaks down strong swiss franc, one away handle is a huge deal -- 108 handle is a huge deal if we get there. we are not there yet. francine: we are not there yet. shrugging off views that u.s.-china trade talks will resume next week. the market is a little bit down. i would suggest it is the bleak pmi's, especially in germany, that people are focusing on. that is heightening the focus on the ecb time. we have that german factory slump that was pretty bad. that raises the risk of recession. that is playing out in the markets. atm looking at pound-cable 1.2 462. tom: let me show you this massive transatlantic disparity. it is really clicking in with a vengeance. the two year yield in germany, the two year yield in the united

states and they break apart. in 2012 here is a recovering united states, a little bit of a recent rollover, may be that having to do with the fed. the g of germany -- the leth argy of germany down to a new low. the divide of this manufacturing recession is really tangible. tom, i love your chart. we will get back to that shortly. boris johnson is becoming prime minister today and plans to announce his cabinet minister. -- expected to be included, while three members of the current cabinet have said they will resign before johnson takes office. joining us now live from -- is anna edwards. in the last 20 minutes or so, we heard from the bbc that the brexit brains, dominic

cummings, could become chief advisor to boris johnson. bbc and other media reporting that he will be a senior advisor to boris johnson. other media reporting that upping the number of a vote lead masterminds we have advising boris johnson right now. he is a bit of a controversial fickle. he was found to be -- figure. he was found to be in contempt of court. although this ups the brexit credentials of the boris johnson team, it does perhaps strain relations with some in the erg. that is an interesting dynamic to watch. today is all about the handover of power from theresa may to boris johnson and the top names that he is going to pick, the people he will pick to surround himself. is it going to be very brexit balanced? is it going to be balanced towards the brexiteers?

will there be room for those one nation tories? thatine: how much will give us an indication of what kind of brexit strategy boris johnson plans to pursue? anna: this could be crucial. he got more than 60% of the members of the conservative party voting for him. he clearly feels he has something of a stronger mandate to shake this cabinet how he sees fit. he needs somebody to help him be that dude. he talked about wanting to be the dude that delivers brexit, unites the party, defeated jeremy corbyn. he wants to be that person. any of the critics of boris johnson .2 somebody that's may a toster of the detail -- point somebody that's a master of detail. -- itvb just announcing just announcing that david frost will become an eu negotiator.

we are beginning to see this stream of announcements. do you see -- expect that like mr. frost, it will be barely have you -- very heavily weighted towards leave? what will be the mix that you would expect? we were talking about the mandate he got from his party membership yesterday. i suppose he probably feels he has got quite a stronger mandate to shake the cabinet how he wants. our colleagues in westminster were running around finding quotes on all parts of the conservative party who found something positive about him to say. we will be looking to say just how brexit biased his cabinet and his team around him will be. that certainly will give us some clue as to how much he is really going to be minded to this do or die that makes some people in

the business community quite nervous. 31st of october, that's when we brexit, that's what he said, by the halloween deadline. francine: thank you so much. anna edwards in front of number 10 downing street. joining us is rupert harrison, blackrock multi-asset strategist and manager. thank you so much for being here. you kind of a straddle the markets with the politics. thank you for making the time. when you are prime minister and assemble a team like boris johnson is, what does he need to think of? he could potentially need to be prepared for a general election. he has to reward those that supported him but also trying unify the party. if feels like a nightmare. rupert: he has got a big challenge. we are already seeing. from these early announcements the outlines of his strategy. the first thing is dominic cummings i think is a very significant appointment. he ran the leave campaign.

he is first and foremost a campaigner. a big part of that is boris getting ready for the possibility of elections. he will do anything he can to avoid elections this side of brexit. by the spring, we will be almost certainly into an election. francine: he is noncontroversial, right? because of the data crunching. rupert: indeed. that hints at the second aspect, that boris johnson needs to face a choice of whether to create a big ten oracle all in on brexit -- big ten or go all in on brexit? he has to get all of the brexiteers inside his tent to give him the best chance of the final point, preparing for no deal, preparing for an election. what he really wants is to get a deal through. francine: i know tom has some questions. i will jump in quickly to ask about nigel farage. he seems to be the biggest threat to boris johnson.

how does he deal with him? rupert: i think the conservative party would find it very difficult to do any kind of farage.h nigel that makes an election very dangerous for boris johnson this side of brexit. when you have a four-way split between the labour party, the borough democrats, conservative ,arty, and the democratic party that leads to a huge range of outcomes. i think boris johnson does not want to be the shortest serving promised are history. tom: wonderful to speak to you. this morning. . i want to speak to you on a broader issue that came up in conversation yesterday. you are what boris johnson wanted to become. you had top academics at eton , a sterling academic career. would you please explain to our global audience the fact that everybody in british government seems like they came from one dorm at eton or oxford or

cambridge. would you explain the concentration of the conservative party, the focus of it around eaton. how did this happen? rupert: i think there is a little bit too much focus on this. i think it is a mainly -- mainly a coincidence that we had david cameron, and now after theresa may we obviously have boris johnson. i think that is disproportionate to the relevance of this issue. i think boris johnson is going to be trying very hard as he puts his cabinet together to demonstrate that the conservative party, which is the reality, is actually a much broader party. i think we will see a very diverse cabinet. i think we will see people from a huge range of backgrounds, ethnicities. i think he will take a big step towards making the conservative party look much more like the country it is trying to represent. tom: we see that already. as a foreigner, i see the diversity talked about within the cabinet.

rupert, the idea is that boris will delegate authority, that he will delegate decision-making? do you buy the idea? that he will let other people do the work? rupert: yes. i think that is true. that is not just a speculation. that is how he ran london when he was mayor of london. he had a series of deputy mayors and powerful officials who really did the details for him. he is not a details for him. he would argue that that meets the challenge that he is facing. what he is really facing is a political challenge of trying to create a coalition that can get a brexit deal done. it is a communication challenge, a leadership challenge. what we see today is he is bringing in indeed some of the people who helped him run london when he was mayor. has chief was the key person who helped him run london in second term -- his second term.

will every person in the cabinet get behind a no deal brexit? rupert: yes, absolutely. afford afford -- can't the resignation power of having someone on the eva brexit in a big position resign. francine: you probably know boris johnson more than most people. is he willing to go for no deal? either fight parliament or -- rupert: yes, i think he would be willing to go for no deal rather than have an election. the issue for no deal is really about parliament. we have seen these cabinet ministers resign, adding to the numbers on the back benches who are willing to vote against no deal. there is a majority in parliament willing to prevent no deal. the question is, can they find a mechanism to make that binding? ofncine: rupert harrison blackrock stays with its. we will -- stays with us.

in the next hour, we are joined by the vice chairman kissinger associates. we will also be talking to him about iran and the strait of hormuz. this is bloomberg. ♪

♪ tom: "bloomberg surveillance." our special coverage today, this special day in the history of the united kingdom. it is going to be 90 something today. it actually published in new york that london will be 100. let's begin with the heatwave. tom: celsius -- francine: celsius!

tom: i know, i'm sorry. how bad is the heat in london? francine: it's pretty hot, tom, i have to say. this is very unusual. there was some kind of analogy about dungeons and brexit yesterday. tomorrow is meant to be the hottest day on record in london, some 40 degrees celsius. tom: 40 degrees celsius there. the only one in the room knows celsius and fahrenheit is rupert harrison of blackrock, and of course his public service to united kingdom. how will it play today? we are so london centric at bloomberg. i am the worst victim of that as well. how does boris johnson play from sea to shining sea? rupert: he is divisive. that is not just in london. we have seen evidence already that compared to theresa may when she first became prime minister, she was a relatively

unknown quality. the vast majority of the country were willing to give her the benefit of the doubt. boris johnson comes to power as someone who is pretty clearly defined and almost everyone's mind. he's been a figure in public life for a. long time. . he has a high proportion of either unfavorable ratings, but he also excites fierce loyalty amongst particularly leave voters and brexit party supporters. that is the reason why the conservative party has turned to boris johnson at this point. he was not just the leader of the leave campaign and the kind of flag bearer for brexit, he is really terrified of the brexit party. as thee boris johnson figure who can neutralize that threat. rupert, explain to us the ceremony today of the queen of england. this is her 14th prime minister, from church hill to johnson.

with great respect, maybe it will be her final prime minister. welained the ceremony that will see today and what it means for prime minister johnson? -- johnson. rupert: i think he will enjoy the ceremony and theater of this. it is all about imbuing that person with the authority of prime minister. he is not prime minister until the queen asks him to form a government. that theater will be theresa may giving her last appearance at midday today. that will be a farewell piece of theater. after that, she will drive to buckingham palace, or i'm sure have the helicopters following her every move. she will resign. the queen will accept her resignation, then boris johnson will take her place. he will be asked to form a government. he will give the first substantial intervention, that speech on the steps of downing

street, where i think he will lay out his agenda. we will hear about his determinations to deliver brexit. i think we will also hear quite a lot about his aspirations for a domestic agenda. although he is seen as a very extreme figure on brexit, his politics are quite centrist on other issues. cue, rupertght on was talking about the helicopters following theresa may's every move. when it comes to pound, how does the market view boris johnson? when are they going to find out what is exact policies? -- his exact policy is? rupert: i have had a lot of questions asking if boris johnson would attack the center once he is elected. i don't think we will see that. he has got to elevate the possibility of no deal. i think that is partly because he genuinely sees as a realistic outcome that he continually needs to prepare for. his team also sees this as

unimportant part of u.k. bargaining -- an important part of u.k. bargaining. one criticism of theresa may is that she never made no deal a credible threat. i think we will hear from boris johnson, from his chancellor a big step up in preparations for no deal, together with a very brexit heavy cabinet. the market will take that negatively. i think there is still downside, certainly in the short term. in the long-term, volatility is underpriced. francine: coming up, we speak -- and avesta cobb on

♪ tom: studying market moves in europe. very difficult economic data across all of europe. deutsche bank earnings a little light as well. we will talk to mathew miller about that in a bit. the economic data today was really something, including the german pmi, which came in south. there is a manufacturing recession in europe. we will address this with andrew pimco coming up. stay with us. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what?

i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. ♪ this is bloomberg "surveillance." i am francine lacqua at westminster green, tom keene in new york. recenttral banks'

reading out of -- the pmi dropped in more than -- to the lowest level in more than six years. this will account for more stimulus from the central banks but investors are saying they might wait. us is andrew and rupert. what are you expecting from the ecb tomorrow? draghiamic that mario may our main not want to -- may or may not want to lock in christine lagarde and whether they may want more stimulus. andrew: i think the sequencing is the ecb july meeting will be one of signals and the september meeting will be one of action. raised president draghi a lot of expectations in the

market and among his federal governing council colleagues as well, through his june press conference that the ecb should do something. wait untily will they get the new macro forecast in september and we will see the action. we could see tomorrow a slight change on the forward guidance. that would not surprise me if we withthe word "or lower" regard to the policy rate at current levels or lower in the future. francine: do you agree? can we expect anything different from madame lagarde then from mr. draghi? rupert: i think she will continue the continuity. they are close personally and her view of the world is

similar. we will probably get changes of guidance tomorrow and they will be teeing up the big decision around rates and qe. the pmi help that case, but it is not that that is driving it. mario draghi's speech was an important summary of the way the central banks see their job as defending inflation. there's a good chance we will see significant action. increase how to -- chart thatse had a the slowdown is not just a trade war. the fault of donald trump or is there more going on? andrew: certainly, the uncertainty about trade is a

driving force and the slowdown germany and the netherlands, which are huge exporters. other pockets of uncertainty are specific to europe, negotiations on brexit and whether there is a deal or no deal. we have a pretty mature cycle underneath it. tom: what are you doing at pimco to adjust to a european slowdown? question.od there is a lot priced into markets already, 20 basis point rate cuts for the ecb. there is strong momentum on yields and spread and central banks have turned. that is an environment in which one is not short duration, but given what is praised in, there is not a lot to -- christ in,

there is -- priced in, there is not a lot to do. it is already there. tom: we will continue. right now in new york city, your first word news. viviana: donald trump is deciding how to respond to turkey's purchase of a russian missile defense system. it has led to outrage and u.s. congress. senators say he is frustrated by a lack of options. trump says he is not looking at sanctions now. the governor of puerto rico is set to step down after two weeks of massive protest, according to two of the largest newspapers. the governor vowing to stay in his departure --

would be more uncertainty. boris johnson is the new prime minister of the u.k. and will announce the cabinet ministers. he has said the u.k. will leave the e.u. as scheduled with or without a deal. 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 viviana hurtado. thank you so much. joining us live from london is the u.k. minister for children and families. still with us is rupert harrison. thank you for joining us. as boris johnson is about to announce his team, what advice would you give the new prime minister? what does he need to look for in a team that unites the country

and works for brexit? >> i don't think he needs my advice. wellhe has done remarkably is bring together parliamentarians from what i would describe as both sides of the party. , theave robert buckland general he would have described and the leader of the house who you would describe as an arch brexiteer, all of those badges have gone away and they are united behind boris johnson. they came together, we need to deal in october 31 they the best way to do that is to set a target with the country to do that. the composition of his cabinet will be people from all sides of the party. i heard last night he even talked to rory stewart.

he is happy to talk to colleagues, put his arm around colleagues. francine: will boris johnson deliver the brexit you want? nadhim: i think he will. interlocutorsour believe the nation is prepared to leave without a deal, not that he wants to leave without a deal, he will try to get a deal. if they believe the prime minister with a disciplined cabinet would leave october 31 without a deal, i think they will give some way to allow him to get a deal through parliament and deliver brexit october 31. francine: how much damage does that do to the economy? businesses have been stop piling. -- stockpiling. retailers are sitting on stock

they cannot reuse next time. rupert: the uncertainty that has been holding back the economy since the referendum is turning from chronic to acute. there has been a drag on business investment but the economy has carried on growing, jobs have been created. in the last two to three months we had a dramatic drop off. could see some significant slowdowns in the months ahead. there is nothing fundamentally wrong with the british economy -- if we get a resolution tom: wonderful to speak to you from new york. i steal from you every chance i get. you are a chemical engineer. let's talk about the historic chemistry of a cabinet to be

made. andould have a pakistani, iraqi curd, and indian living in uganda. there is no equivalent in the united states, i can assure you of that. how excited are you about the makeup of this cabinet? nadhim: i am excited. has theboris extraordinary ability to attract talent. his chief of staff edward lister, i worked with him when he was the leader of wadsworth counsel many decades ago. he ran london for boris and ran it incredibly well to the extent he returned a second time as mayor. you look at the people in the aame whether it is the son of pakistani bus driver who came to this country and has done remarkably well as home

we'llary, and i'm sure have a big role to play. , thecolleagues conservative party is truly now much more representative of what the nation looks like. as the camera panned out across the thousands of faces in this great big arena in the excel x london-- excel center in , you saw a reflection of londoners. i was proud to see that. it is a testament to theresa may, to david cameron previously , for attracting talent from different backgrounds and cultures to join the party and get involved. francine: with all due respect, tori members, if you profile them they are a certain vintage

and background. is diversity enough to unite a party that has never been this divisive? nadhim: clearly, brexit has divided the nation. we know that. when i speak to not just members of the party or conservative voters at stratford-upon-avon, i have lots of small businesses in stratford who say we may have voted remain but you -- we want you to deliver this now because the uncertainty is the most debilitating thing. a lot of big investors say to me, there is a wall of money ready to come into the u.k., as long as the threat of jeremy corbyn is taken away. the fear is that we have some sort of collapse that allows jeremy corbyn to step through into number 10.

the is a greater fear for business community than brexit. francine: we have to talk about labour next. thank you joining us. we will have plenty more from westminster. this is bloomberg. ♪

♪ tom: bloombergtechtv "surveillance," welcome, everyone. francine lacqua with our esteemed guests including rupert harrison. the festivities begin later today in london. a process here, prime minister to a newferring power

prime minister boris johnson. there are many things going on in the world. with us, andrew bonds and worth worth of -- andrew bosom pimco. urgencyo draghi's change with the grim manufacturing data out of europe? andrew: i think president draghi's urgency does not change today, that there is useful data to the extent there is any doubt within members of the governing lightl, particularly in of the expectations the president generated at the bank should be operating. today's data has confirmed his more downbeat view he expressed. tom: the vector there is

something -- this chart is extraordinary. this is generally fracturing, manufacturing,an obviously recession. as grim as anything in 20 years. a new lower year-over-year manufacturing decline. in germany and the netherlands and europe, can the service sector come to the right skew -- rescue? andrew: the domestic economy is holding up fairly well, so if we are going to see a recession that will be driven by the external sector. so long as that doesn't lead to a large wave of layoffs, there should be underlying resilience from domestic demand. we are seeing that in other pockets of the economy. what is more of a concern is the

ecb will be spending their remaining ammunition this year, what will they do when we really have a recession, which will follow as day follows night? we will have it at some stage. that the do you worry lack of tools in dealing with the next crisis if they stimulate too much now? rupert: i would agree the resilience of the labor market and service sector gives me some reassurance in the short-term, and the manufacturing data should represent a trough equities are and significantly overpriced. we could see a cyclic tilt. the ecb has always been behind the curve relative to other central banks because of political constraints and i fear that will happen again, wedding

-- when we get into a significant downturn we will have to see them upon us. francine: are you buying european bonds? wanting to be not short duration in europe, given this economic ground and given the signals coming from the -- economic background and given the signals coming from the ecb and around the world. francine: if you look at italian bond yields, there is a good return if you don't think anything too ugly will happen. andrew: yields have gone down a lot already. the future returns are priced ano markets, so this is environment where the forward-looking expectations for returns are coming down. expectingng to be

lower returns and more volatility in the future. -- thank youout very much. we will continue on the green with rupert harrison of blackrock. exceptionally important conversation given the plan in thesion united states, jacob lew. this is bloomberg. ♪

♪ is a sweltering day in london, extraordinary hot weather, perhaps record hot temperatures, all but put aside the changingtry of of the guard. the pageantry will begin. this automobile will take the prime minister to her questioning. at the parliament, she will face her final, what is it called,

pmmq's or something? what will be that moment? she will tryuess and reflect, i imagine, on her legacy, unless she tries to put herself in the camp of philip hammond against boris johnson. , whot harrison is with us was chief of staff of george osborne. while theresa may use this to try to guide the tory mps to not game his stake, or will she use this to reflect on her legacy? rupert: both things. the house of commons will give her this last chance to licked on her legacy and we may hear a appeal for compromise and unity because she sees the brexit wing

of the party are the ones that have not compromised. the left will have failed to go -- deliver the brexit she negotiated. i think it will be a forgiving atmosphere. thes the prime minister -- opportunity for the prime minister to have their say and leave with dignity. francine: what is boris johnson need to do to make sure he retains the top job? rupert: he has got to deliver brexit. he wants to try and deliver a deal through the house of commons. to do that, he has to get brexit wing on board. we will see a brexit heavy cabinet and this continued commitment to know deal as a possibility. he will do everything he can to avoid an election.

he has only got a majority of one or two in the house of commons and if he cannot get his deal through, he will face a difficult decision. francine: then theresa may goes to see the queen when she resigns and the queen calls on boris johnson to form a government. those intimate moments before the about to be appointed prime minister, does the queen offer advice? meetings are private and prime minister's do not avail the content. i have consistently heard the queen is very engaged. ceremonial purely a process where you get a shake of the hand or a bow and a curtsy and you are off. she knows what is going on and normally has questions up her sleeve. i think boris johnson will enjoy the pageantry but is

well-informed about the challenges he faces. francine: that is rupert harrison joining us for the hour. we are looking at live pictures, theresa may about to arrive in the house of commons behind me to face her last prime minister questions. as rupert was saying, the ambience is quite jovial to let the prime minister have her last moment. tom: much more coming up, robert hormats will join us. this is bloomberg. ♪

♪ tom: this morning, from the queento johnson,

of england postpones her vacation to great the 14th prime minister. there is a leave cabinet to form. anna edwards is at 10 downing street. in germany, negative yields become evermore negative. in washington, it is mueller time. an important conversation on capitol hill and mr. moeller -- mr. mueller. keene,york, i am tom francine lacqua on the green and london. we are awaiting prime minister may's final move to parliament. francine: there are live pictures overlooking 10 downing street, a little bit of a wind trap. it is about a 10 minute walk from the houses of parliament

and anna edwards will brief us on all that is happening. we expect theresa may to get into the car, no siding just yet. housell be driven to the of commons where she will face prime minister questions. the atmosphere will be quite collegial and jovial to send her off, and a time for her to reflect and offer words of advice. strickenst, she has words of being conciliatory and trying to compromise. we are expecting her to say that kind of thing. tom: what is boris johnson doing? is he literally on the phone forming a cabinet as we speak? francine: i imagine he is on the phone with many people trying to

figure that out. the way things work today is theresa may will go to the house of parliament and will go see the queen. she will resign and it is up to the queen to call for the new prime minister to form a cabinet. interesting, the composition of the advisors. the rumors we are hearing from the press, he needs to find people who are very close to him happy while preparing for an election. there is theresa may getting into the car to go to the houses of common. final move to parliament for prime minister may. there is terrific news flow, particularly grim economic data out of new york -- out of europe. viviana: we begin in washington.

the former special counsel and the trump investigation will face questions from congress. testifyueller will before a house committee and democrats hope he will offer more details about trump and possible obstruction of justice. u.s. trade officials heading to china next week for the first face-to-face talks since may. an official says the meetings are not expected to lead to major breakthroughs. president trump and president xi declared a tentative truce. the trading slump deutsche bank got worse leading up to the massive overhaul. revenue fell 12%. the equities trading business fell by almost one third. deutsche's blinked -- booked more restructuring charges,

leading to a bigger loss than originally indicated. 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. hurtado.ana tom: thank you so much. follow primeo minister may on her final trip to parliament and then at some point, she will attend the queen buckingham palace. the queen postponing her trip to scotland always taken this time of year, to greet her new prime minister. that is presumed. it is up to the queen to choose her government. here is a shot of prime minister may arising -- arriving. continuedgative nine, euro weakness. the next screen is important off of difficult european data.

-- andrew bosomworth informed us of this. strength, money moving to switzerland at the margin. francine: european stocks are down. we had some pretty bad economic .ata out of germany a lot of attention will be on the ecb that needs tomorrow as german manufacturing slows. not a lot of focus on the resumption of trade talks but on the prospects of -- for a central bank so it makes for an interesting dynamic. tom: right now, let's go to washington and kevin cirilli, an important moment is time will stand still.

everything will do he can to not answer questions. will he stay on his document previously published or will we get anything new? kevin: i think it will be the first time most americans are hearing directly from the special counsel in that format, so the democrats hope he will say something new. according to literature put out by nancy pelosi, what they are trying to do is suggest this is an administration in chaos, that robert mueller's report illustrates as much. the question is whether the calls within her caucus, which , for at about 90% impeachment, and whether or not that becomes something that is inescapable. frankly, trump quite

no senior administration official or campaign staffer is that concerned. they think this is another date overdrawnn a long and process. is robert mueller a member of the department of justice, private citizen, or something in between? kevin: this is a storied washingtonian who has led the fbi for more than a decade, princeton educated. this is someone who understands the way not just congress works but specifically the house judiciary committee works, and the house intelligence committee works. that is a different dynamic than the senate. he is a seasoned pro so he should have all the preparation. tom: mike allen just published seconds ago and called this one

of the most anticipated hearings in decades. that is an extraordinary statement. explain to our global audience why this is so anticipated. kevin: this was the individual tasked with leading the investigation into the assault on democracy during the 2016 presidential cycle. reached theation foreignon -- interference and hostile foreign powers and their assault on democracy, i think that is the message that will rally democrats and republicans. tom: thank you so much. we are thrilled to bring you a five member conversation with robert hormats, vice president at kissinger associates.

what a series of news flow we are seeing, just amazing. remarkable, this huge transition in the u.k., the which have been anticipated for domestic reasons and because of the russian interference in the russian dutch and the american election and said it was likely to continue as we move forward. joke, we could talk about five hours, which i lied. we could talk about six hours. frame the populist moment which brings in the challenges of germany, the boris johnson you knew years ago, and also with what we see in washington, this

populist summer is the summer of discontent. robert: it is a populist feeling that encompasses a lot of things, that leads have not dealt -- elites have not dealt with the issues the average citizen has to contend with. this is a feeling in europe, the united states, and elsewhere. it is a feeling about immigration which boris johnson underscored when he was mayor of london and running for prime minister over the past several years. you have these issues coming up and you have a budget deal in the united states. dou made the point about bun yields. you could not get away with that increase in the debt ceiling without load interest -- low interest rates in europe. money intout their

treasuries and that keeps the treasury low. it is showing how interrelated this world, the populism and the whole economic indications of weakening europe and a stronger outlook slightly here. francine: good morning from london. marv a expecting populist movement coming from europe -- more of a populist movement coming from europe? the more extreme parties were more tame than we thought, is that a wrong assumption? think the average citizen is probably not on the far right or left. the politics have tended to drift that way because the far right is trying to mobilize its base and the far left is trying to mobilize its base, which makes it hard for compromise.

there are rays of hope. the election of the prime minister in greece indicates someone who is a moderate, a rational person, basically pro europe, he was able to win. greece is now coming back slowly from its difficult time. i don't think moderates should be counted out, but they have got to pull together a stronger center to govern effectively. for boris johnson, he has to pull the tory party together because the bigger problem that led to this decision to have a referendum was a dispute within the tory party. he has got to bring it together one way or the other. francine: we will get more on brexit shortly. coming up, we will go straight to downing street where anna edwards joins us.

muellerday, robert testifies at 8:30 a.m. in new york, 1:30 p.m. in london. ♪

♪ this is bloomberg "surveillance," i am francine lacqua. behind me, theresa may is shortly arising, taking her final questions before parliament ahead of boris johnson. andave a couple of weeks

media speculating on appointments of people boris will surround himself with. it seems to be a more pro-brexit cabinet or advisors then maybe we were thinking about a couple of days ago. anna: we have heard a lot about the advisors this morning and on that front, it seems to be brexit rising. names comingkey through and we have confirmation, dominic cummings will be a senior advisor. --played in a recent film was played in a recent film, found to be in contempt of parliament. he brings an awkward relationship with the erg. , formally a u.k. ambassador who worked with boris johnson, and has written about

how he does not think business should dictate the angle of brexit. isthe advisor level, there an ascendancy to the brexit side of things. later today we will hear about the cabinet appointment, various mp's getting the top positions around the table. francine: how diverse do we think this cabinet will be? anna: this will be an interesting one. wings talking different of the campaign. there are many ways to look at diversity and that seems to be a guiding force. we have been guided towards more -- more women and ethnic minorities at the cabinet table. -- priti patel

had to resign from the government in 2016 and she might be back in the top 10. speculation us to whether she could get the home office. the son of a pakistan a bus driver, a story he has told many times, we will look for more women and ethnic minorities. tom: what is the chancellor of the exchequer doing now? anna: we heard over the weekend, he said he would resign if boris johnson became leader. in a sense, it is academic because when theresa may goes to resign, she resigns on behalf of the government. symbolic if you resign before you are replaced and that is what we would expect

hammond to do. yesterday, we heard from david gove and rory stewart on the one nation start -- part of the party. we have seen a couple of those resign and hammond still to do so. tom: in the shade of 10 downing street, clearly you are wiser and francine lacqua this morning. coming up as we have robert goodts with us, another voice of perspective, former united kingdom ambassador to the united states in the 8:00 hour. this is bloomberg. ♪

♪ it is so hot here. in new york, it is 72 fahrenheit, about 10 celsius. francine: i have the real deal. tom: we say good morning to caroline connan in france. it is supposed to be 107 tomorrow. a heat wave in europe, very serious. francine: it is series. a lot of the press is reporting on how to keep cool so you were the economyr, but

is probably affected as people do not spend enough -- as much. farmerbert hormats, ambassador -- former ambassador of economic affairs for president obama the videos are powerboatsry, pt109 circling a tanker in hormuz. this has escalated. robert: we talk about johnson and brexit. this is his first crisis. he will be presented with the serious problem of iranians seizing this british flagship. it is owned by a scandinavian company and the crew is not british. tom: are these actions against the united kingdom a surrogate for president trump? robert: in part, but they are in

part focused on getting the europeans to take action to be more supportive of iran, to distance themselves from the united states. tom: will they be successful? retaliation for the british taking an iranian ship bound for syria. the reason the british are putting together with european countries their fleet to protect ships to distance themselves from the united states. while they will protect their shipping interests, they are interested in a negotiated compromise and are not siding with the united states and asking for a military escalation. they want a separate fleet. francine: what are the chances of the strait of hormuz being closed? we have not seen that even at

the height of some of the wars in the middle east. transitof the world's goes through there. robert: i believe neither side wants to close it intentionally. either, ins do not part because their oil goes through it and in part because other countries they are trying to work out a closer relationship with like europe and china and india, would be adversely affected. tom: we have to leave it there. please stay with us from westminster and new york, this is bloomberg. ♪

♪ an important moment for the united kingdom, this is 10 downing street. the prime minister has left for parliament.

14thohnson will be the prime minister for queen elizabeth the second. we look for that throughout the day. stay with bloomberg for all the coverage. --ncine lacqua green francine lacqua at the green. the queen will escape to scotland. are you traveling with her after she meets with the prime minister? francine: just like the queen stayed behind to tell her new prime minister to form a behindent, i am staying on cabinet watch so i will not traveling. tom: here is viviana hurtado. viviana: in the u.k., boris johnson becoming prime minister.

one of his first jobs is to announce the cabinet. he has said the u.k. will leave the e.u. as scheduled with or without a deal. china is accusing the u.s. of undermining global stability after -- a sweeping military overhaul. they say the u.s. has provoked countriesn among many and dispute has grown for the toe -- donald trump trying figure out how to respond to a turkish purchase of a syrian missile system -- russian missile system. the president is frustrated by a lack of options and says he is not looking at sanctions right now. the governor of puerto rico is said to step down after two weeks of massive protests,

according to two largest newspapers. you may remember the governor vowing to stay in office. his departure would mean more and for the bankrupt island. uncertainty for the bankrupt island. 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 viviana hurtado. newsday,xtraordinary with us robert hormats. levine.now, alicia we are going to rip up the script and i'm going to talk about the stimulus of more debt. robert hormats wrote on making our foreign debt with national expansion. i want to link our debt into stimulus for the american economy. althought is tangible,

as we were discussing, the relationship between lower rates and easy money and stimulus to the economy is not clear. the transition mechanism is not clear, and germany and europe is a great example where you have easy policy, negative rates, a vast attempt at liquidity to stimulate the economy, and it is not working. whatyou are knee-deep into our viewers and investors are looking into, courage after a big move. as the jumble in debt and deficit give you a greater courage? robert: it seems -- alicia: it seems the national bank -- rate is lower than any central bank expected which means we can pay more. we can handle more debt because

the interest will be lower and this is the way we need to grow. statement, buts the entire globe will be mired in this liquidity issue that will be hard to get out of, and it is hard to be the one economy not doing it. the dollar soe stronger and the rest of the world is so weak. we are all linked even though the u.s. economy is essentially an island economy. francine: good morning from london. what would a policy mistake from the fed look like? or raising tooch soon? fed shouldally, the lower 50 basis points july 31. i think it needs to get ahead of the market. the market has been clear signaling to the fed the

december raise was a mistake and conditions tightened too much and they have to undo it, but the fed did not say they will on do it. they talked about trying to anchor inflation in a way we do not get into the chap -- trap japan has. they would get ahead of the market and straighten out the curve and we would have healthier market. that is the ideal situation. francine: what does dollar due until the end of the year? alicia: there is definitely a floor under the dollar because we are the best economy. the u.s. growth rate is increasing while the rest of the world is decreasing. even though the fed is going to ease, it will keep a floor under

the dollar. its rate only lowers by 10 basis points and the fed does 50, the dollar probably gets weekend but there is a floor. tom: you and edward dirksen never thought we would get here. pointe finally reached a as so many americans feel where it is truly out of control or do we go with lower rates forever? robert: i don't think americans feel it is out of control for the reasons you mentioned. the carrying cost is low so you can borrow more money without impact on interest rates, which you could not have done five or 10 years ago. tom: what are we doing to our grandchildren? robert: somebody will have to pay. unless you assume interest rates will be low forever, we will

have to pay for this. if the goal is to stimulate economy, you can do it without paying more money and it lowers the dollar. alicia: it is not the debt. there is no magic number in interest rates. growth gets you out of these problems and that was the promise of the administration, we will take on more debt with the promise of more stimulus. tom: has that been successful? part, ther the most administration has done what it said. the tax cut was important for business stimulus, and you have tax flow. in cash generating companies that will go on. robert: i think it will stimulate the economy but not eliminate the debt by growth. i do think it is stimulative. tom: this is wonderful, alicia

levine and robert hormats. we will drive forward this conversation. lew,e better than jacob really heated on these dynamics. the transmission mechanisms of our fiscal policy. stay with us. this is bloomberg. ♪

♪ >> we are working as quickly as possible, but trying to execute this as sensitively as possible given that that is affecting the lives of our colleagues as friends -- and friends. we notified about 900 staff associated with the equities

sales and trading business that are leaving or have left. we were encouraged with the performance and many of our income and our fixed currency businesses. equities is down significantly and that reflects the restructuring we executed last year, and the uncertainty that played out in the quarter as clients were anticipating a restructuring. the outlook deteriorated in german -- june. it represents a revenue pressure if the banks go down further. tom: it is not happening. an important interview with our matthew miller, the idea we need an improvement in rates. thisis not happening morning for deutsche bank and germany.

that's go to the single best chart with alicia levine and robert hormats. manufacturing year-over-year. i have never done this chart before, the great recession in the middle and down we go. you getxtrapolate pmi's to a true manufacturing recession. it is the heart and pride of germany. they are in a generational change. the urgency is tangible. robert: yes, it is, and you can see in the numbers what is happening with yields because they are anticipating a continued weakening. part of that is domestic and part of it is china. china is a big market for them so the exports are not picking up. tom: if you look at the terminal

value you were alluding to earlier, i believe i learned in corporate finance you flip the reciprocal and that gives you the pe. will we get use to hire pes because yields are so low? alicia: the short answer is yes. tom: exactly. alicia: multiples that investors are willing to pay will be higher, and the fed is helping this along which is why the market has been supported and will melt up higher through the end of the year. i will say this about germany and the manufacturing data, there is probably another stimulus coming out of china this year. the anniversary of the founding of the republic will be in the autumn and that should help europe.

the european economy is a levered play on china and emerging markets. robert: that is why the trade negotiations are being watched so closely. the china element is important. people want to decouple our living in a dream world. you cannot decouple from china because they are such an important part of demand. francine: you brought it right where i want it to go. do you expect the u.s.-china trade tensions to ease off or will we see the u.s. not wanting to find a deal with china because it is comfortable for president trump being on the attack during the campaign? alicia: we are in the peak mildness when there is talks of the meeting restarting. the issue was never soybeans and liquid natural gas, that always

ip. the last 10% of the deal they could not close still exists. does the administration do a skinny deal where there is some tech for tat in trade -- tit-for-tat in trade? the structural issues are difficult. the events are shaping up to be positive for the administration because of the fed cuts twice and there is a china deal, that is positive for the economy and equity markets in time for the election. this is playing out in a positive way. chinane: how much does need a deal? we underestimate the fact that president xi is strong but maybe not as strong as he was. robert: they need a deal. it will be good for the united states to have a deal for

political reasons. the chinese need to boost their growth and they will probably do more stimulus, more fiscal and monetary stimulus, lowering interest rates. a return to a normal trade relationship or nonthreatening trade relationship with the united states would be helpful in giving the investment environment a boost and reducing the tendency of countries to look elsewhere for sourcing their products, which hurts the chinese economy. they would like a deal. tom: alicia levine and robert hormats with us. caroline connan sends in a love note from peers. this -- paris. this shows the actual attempt -- temperature above normal in europe.

we are at 79 degrees mean temperature. anything near 80 degrees is a huge health risk. connan for ourne weather report. 107 degrees fahrenheit scheduled for tomorrow. parliament awaiting the prime minister of the united kingdom, this is bloomberg. ♪

♪ this is bloomberg "surveillance." a son's profit reportedly will profit90% -- nissans reportedly will plunge 90%. under pressure to turn the automaker around. andits are at a decade low nissan is struggling in the u.s. the stage has been set for the justice department to approve the merger of t-mobile and sprint. pay $5twork agreed to billion for wireless assets they

are divesting. t-mobile and sprint have been fighting for more than a year to get there merger approved. the biggest tech company in the u.s. facing a wide wayne ching antitrustde-ranging investigation. investigators will look at concerns about social media and online retail. that is the bloomberg business flash. francine: thank you so much. outgoing prime minister theresa may taking final questions before prime minister ahead of induction.hnson's been covering bloomberg politics for over a decade. how many governments have you seen being formed? fifth primell be my

minister i think. this one is different because nobody ever thought boris johnson would do it. i am not sure boris johnson thought he would do it. it looked like he was on the cameronsucceeding david as prime minister and he did not even run. it, youhought that was get one shot and he has had his shot and blown it. today, he is. francine: what does boris johnson need to do to make sure he stays prime minister for more than a couple of months? deliver what kind of brexit? rob: i think he needs to deliver brexit. i was talking to somebody from the european research group that are pro brexit and they are clear that britain has promised

the u.k. will be out of the european union november 1 and he has to keep that problem -- promise. that is the number one thing. they would like him to do it without a deal and he has -- it is not clear he can get no deal through parliament, so probably he needs to get something substantial from the e.u.. francine: if he has a cabinet is very diverse but still largely pro brexit, does he keep them enough on the side to vote through a compromise, withdrawal agreement that would be almost everything theresa may put forward but in name? rob: it is hard to know. this is what some tory mps call the lipstick on a pig option. they say they will not accept

when he comes back from the e.u. asks thething, and he brexiteers to pretend to believe it. they are aware this is a possibility and they say they will not fall for it. maybe they will go for it and say it is enough. he may turn around and say, this is the most brexit you were going to get. generaln do we get a election announcement? prime minister johnson would drop a quick bombshell and get it focused. one day we get the dury re-started question -- when do we get the derby started? rob: that is a good question. there is a question -- an article in the times that he should just opponent and go for an election. we are assured from tory mps

that he does not want a general election. boris johnson has a certain amount of record for doing things he said he would not do. applyly we do not need to too much of that. months of people think if you cannot get something through parliament, that is the moment. francine: what does he do with nigel farage? rob: they all think they need to stay away from nigel farage. this is being urged upon him by donald trump. the danger with embracing nigel farage as you end up taking responsibility for everything he and his supporters say and do. that is risky for the conservative party, so their preferred strategy is having brexit dealt with. francine: we are trying to figure out what kind of prime

minister questions we will get. will this be jovial, the legacy of theresa may? last sessions the are quite warm. not --corbyn style is jeremy corbyn's style is not warm and friendly so i suspect he will go on about stuff he does not agree with. francine: rob hutton, one of our experts in u.k. politics. the outgoing u.k. prime minister theresa may for her final pmq's. ♪

♪ -- alix: germany feels

the trade pain. manufacturing the weakest in seven years. bund yields hit a record low. one last hope, face-to-face trade talks between the u.s. and china. the have and have-nots of earnings. northrop grumman beats and raises its guidance. a busy day with earnings. ups on deck. welcome to "bloomberg daybreak." york, withne in new david westin in washington. david: i think it is sort of like jay powell. whatone wants to hear robert mueller has to say, and