. the ecb as mario draghi tweets the guidance. boris on the brexiteers. the new prime minister taxes cabinet with loyalists as the chancellor as home secretary. shareholders plan to return more shareholders. we will speak to the chief executive shortly. good morning, everyone. i am francine lacqua in london. this is "bloomberg surveillance." these are your markets. we are seeing news out of pmi yesterday. what the ecb will or won't do.

germany's business conference figures that is a test below figures. figures.h low a lot of numbers out there. the ecb is what people really want to know about. the treasuries edging higher. a surprise in ecb policy that will play out on euro-dollar. currently at 1.1126. and the weakness of that economy. this ahead of later mario draghi. we will be seeing that press conference. let's get to bloomberg first word news with viviana hurtado. viviana: boris johnson clearing out more than half of theresa may's top team. a stream ofidating brexit enthusiasts into his cabinet. becomes --l

counselpecial u.s. robert mueller largely disappointed democrats with his testimony yesterday. some wanted him to read aloud potentially damaging parts that he declined. trump.resident donald mueller didn't offer any clues. bernie made off asking trump to shorten his 150 year prison sentence. the 81-year-old is hoping to finish his fight and freedom. made off was jailed for running the biggest ponzi scheme in history. it cost investors $20 billion. turkey's central bank looks set to cut rates. president erdogan has been a believer in higher rates because inflation. the central bank looks ready to put that theory into practice. this month the president ousted the former governor.

europe's latest summer heat wave is breaking records. paris and london have seen temperatures sells is above averages. the hottest day yesterday ever. the forecasters say today could be the uk's warmest day on record. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. back to you. francine: it is decision day for the ecb. policymakers are set to see a rate cut. tosident mario draghi is set link the fuse on fresh monetary stimulus setting the stage for the final act of the central bank. simon wells, great to have you on the program. a lot of people are saying he is back in the corner of ecb because of bad pmi.

we had disappointing eco-figures. they could cut as early as today. simon: it seems a little early. this could be the quickest turnaround and central-bank history. right, yesterday's pmi, a big disappointment. auto related aspect. manufacturing, 17% of the eurozone economy. services still doing pretty well. no need to panic. clearly, they are going to signal something. they cut rates? i think so. and -- francine: do you expect they will cut in september? simon: i don't think draghi has cut off their options. we can respond with all of our appropriate instruments. question for lagarde is is she going to throw the kitchen sink and throw everything at once? or is it going to be one rate cut in september?

market tryill the and test the ecb to see if they have the tool kit to deal with the next downturn? produce aecb can credible qe program, they don't need to deviate on the cattle keel and go down the contentious avenue. qe will be effective. they are running out of tools. they are likely to say it. the market is already leading them. you ask me the good reasons to do qe from an economic perspective, i would say the only one is the markets expect it. i can give you many good reasons not to do qe. the main reason, you've got to let the market down gently. francine: is there a problem where markets are ahead of themselves? it was a 9% probability or ecb.

is there danger of big central banks being led by markets? simon: i think that is what is happening. francine: how do they get it back? simon: they need to cap it up. services have not been affected are the manufacturing turned down -- turned down in europe. it should start moving back toward target slowly. the political reasons are not there. think about the politics of qe, germany hates it, the netherlands hates it. you've got potential that on the budget in italy later this year. are you dragging the ecb into that political battle? francine: let me bring you over to my chart. you see some of the global bond market rally driving zero yielding bonds. what does this mean for ecb? european banks are struggling because of this.

will they be mindful of this? simon: of course they will. if you've got 1.8 trillion of excess reserve around, that is a 7 billion tax on the banking system. i suspect they will go down the tearing root and relieve some of that pressure -- route and relieve some of that pressure. that is not where the greatest concerns really are. this meanwhat does for euro-dollar? simon: structurally, hsbc was pretty bullish on the dollar. i think clearly if i am right, qe is a little further away than markets are currently expecting, then we might see a little bit of upward pressure on the euro in the near-term. euro-dollar is going to move sideways from where we are. francine: would the ecb hold off for now so you can change the outlook because they want to see

with the fed does? simon: i think that is another reason not to go. between now and september you see gdp print. you might get a sense of where the manufacturing is going to go further down are not. with the resilience, what is the urgency? worried are you about the german economy? simon: the german economy still has some problems. some of them troxel in the car industry. if you look at the -- some of them structural in the car industry. -- on thek at the back end of the year we saw chinese and u.s. demand start away. with the potential for slightly loose central policy in germany, i am still very strong late market even if wages turn a little bit. francine: simon, thank you so much. let's stay with the euro area.

this is confidence in germany. that has signs of economic malaise with the economics increasingly hard to ignore. profit warnings from the countries carmakers. joining us by skype is limits used -- clements fused. when you look at the latest e phone number, how worried are you about the german economy compared to when we spoke six weeks ago? clemens: it is not getting better. what is worrying is the weakness in manufacturing continues but it is now spreading. worsening in the services sector and it is not just industrials, it is really broadening out. the only sector that is holding up really is construction. francine: we also see -- we also have seen data reports suggesting it is starting to affect hiring trends in germany.

it is that -- is that what you are seeing? clemens: that is what we are seeing in manufacturing. employment is declining. in services we see hiring but they are also going down. this is starting to affect the labor market. francine: how much is that going to impact domestic demand? clemens: i think this will very likely have an impact. we don't see that yet but there as consumershat are maybe just worried about their jobs, even if they do not lose them, they will cut back spending. weakercar consumptions than just a few months ago, so this is already having an impact . francine: what prospects are there for the industrial slowdown to bottom out? think a lot depends on what happens to brexit and what happens to trade wars. in our forecast, the scenario is

these things will calm down. there will not be a hard brexit but now we see the new government in the u.k. increasing the likelihood of a hard brexit. we see that the trade war is continuing. if the trade wars get worse and if there is a hard brexit, we will not expect this to bottom out. if this comes down -- columns down and we get a deal, we expect things to stabilize. francine: are you telling me the appointment of johnson gather with the composition of his oninet having an impact investors and how chief executives may spend in germany and the next couple of months? clemens: i think it might. uncertainty grows. nobody knows if this increases the likelihood of a hard brexit or what could happen is goes to china.

meaning boris johnson would be the person able to come up with a deal with the eu and convince brexiteers that this was the best possible deal. that is the optimistic scenario. uncertainty is growing and that does have an impact on many companies. many will wait with the suspended investments and see what this government does. fuest joiningens us. and simon wells stays with us coming up, we speak to all of shells. -- olaf schultz. we ask him a thing or two about brexit. don't miss the interview. stay with surveillance. plenty coming up including diageo returns the cash. the company behind guinness, smirnov and johnny walker says will return $4.5 billion -- 4.5

billion pounds to investors. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." diageo shares low this morning despite the world's largest distillers saying it will return as much is 4.5 billion pounds to shareholders. for more on that in the earnings we had today, we are joined by ivan menezes. always a great pleasure to speak with you. first of all, on what you return to shareholders, is it buybacks or dividends?

ivan: what results we announced today have very strong broad-based growth in sales and profits and cash flow. but we have guided to for the next three years is the company will perform sales growth in the mid single digits. profit growth ahead of that. we are returning capital to shareholders of 4.5 billion pounds over the next three years. that is in addition to our dividends which grow nicely every year. francine: growth was a little bit short of expectations but increased investment seems to be paying off. what are you feeling the most upbeat about for the incoming year? ivan: we are very happy with the growth we delivered this year at 6.1% sales growth and profit growth at 9%.

if you look across the world, all of our growth, i'm really happy with north america growing 5%. the europe reason -- region grew at four point -- 4%. .ohnny walker grew 7% our reserve brands which are higher grew 11%. janet tequila -- gin and tequila growing. we have good momentum and it is consistency i am looking for. had a banner year with new product innovation that has done very well. francine: which categories are you interested in? have a very well balanced portfolio today, both in terms of categories and brands and geographic footprints. our interest would be in

acquiring brands at the premium end of the market that has good growth potential. we acquired custom eagles tequila and that brand is doing extremely well and really happy with that acquisition we are also backing young entrepreneurs . we've got 25 investments in a number of brands in various categories in whiskey, nonalcoholic. diageo wants to be active in acquiring brands and brands that have good long-term growth potential. we don't really have significant category gaps. i feel good about the portfolio today. francine: how are you approaching the cannabis market? ivan: it is very early stage of development. we are studying it. we would also -- we did not see an impact in the states where it

is legalized in north america. the key thing we want to show is the strong regulatory framework around the categories, much like we have an alcohol. we are just watching it and studying it right now. francine: how worried are you that the chance of a no deal brexit have increased with boris johnson as prime minister? you cannot move a lot of your supply chains between scotch. ivan: yes, whatever happens, we are committed to scotland's. we will be making scotch whiskey there. for diageo, we can handle the various scenarios of brexit. we can take an out strike. with this is for a few reasons. one is our supply chain is simpler and more indigenous. we have barley, wheat, women,

men in time, most of which is indigenous to the country. the second thing is we can trade within the eu under to pto wto conditions, tariff free. agreements eu fta with markets with such benefits, we feel confident we will be able to get the same conditions for the u.k.. we clearly want a deal to happen. to company has the ability work through the various scenarios perhaps better than some of the other manufacturing sectors. francine: ivan menezes, thank you for giving us a little bit of your time. boris's big clear around with less than 100 days for a deal for brexit, we will

discuss that next. this is bloomberg. ♪

francine: boris johnson has wasted no time in shaking things up. appointing brexit hardliners to several key positions. promotions,r of big patella goes to the home office. westminsterive from is anna edwards. where does this leave brexit and

how will negotiate -- how will boris johnson negotiate it? anna: it is a very good question. essentially, this is boris doubling down on his brexit can -- exit commitment. recommitting to the 31st of october is the brexit deadline. we saw him shaping a cabinet that is going to help him deliver exit. brexit.er he put in place a number of exit tears. he rewarded those who have been very loyal to him. let's not underestimate the scale of the reshuffle we saw yesterday. the night of the blondes night, this in reference to orson johnson's hair. -- boris johnson's hair. we saw a reshuffle that took out a third of the cabinet. francine: anna edwards there in

westminster. simon wells system with us. simon: you saw yesterday the pound didn't really move that much. it had come down and the previous days and weeks. from where we are now, we've got to wait and see. parliament is breaking today. they have a little bit of a cessation in news wild boars gets to work. -- while boris gets to work. francine: simon wells stays with us. at louis vuitton and christened your. ♪

♪ decision day, after mario draghi to the guidance, or will he go

for it and cut rates? the uk's new prime minister loyalists,et appointing priti patel as home secretary and sajid javid as chancellor. this is "bloomberg surveillance, good morning. good afternoon if you are watching from asia, i am renting lacqua here in london. let's get a look at markets with annmarie hordern. >> good morning. nokia is up 5%. they had an earnings beat. but the story is there 5g plan, a big question that analysts were wondering. we are seeing the stock the highest it has been in more than 17 months. lvmh also today on the upside up 1%, but don't let the tiny gainful you, it is at a record today -- don't let the tiny gain fool you, it is a record today. the market was looking for 14%, they saw 20% growth continuing

in china and also in their home turf, especially france. but clarinet ag. is to the downside. also because they are suspending talks with saudi's seven fund that is the best sabic fund.udi's francine: thank you so much, annmarie hordern. let's get straight to the bloomberg first word news in new york city with viviana hurtado. resumed kim jong-un has missile testing. south korea says two short ranged missiles were fired into the korean peninsula, stepping up pressure on the u.s. over talks. disarmament it happened hours after u.s. national security advisor john bolton left south korea. over to puerto rico. , where governor ricardo rossello gave in to the hundreds of thousands who demanded his

resignation. he said next week he will step down. . . that means more uncertainty for the u.s. commonwealth you may remember, puerto rico is still recovering from a deadly hurricane and a record bankruptcy. the european central bank is. that to signal that it is once again ready to support the euro area economy. today policymakers will decide how to confront an economic slowdown. both on a -- both -- most analysts expect a rate cut in september. tesla had a worse than expected loss for the quarter, $1.12 a share, despite a record number deliveries. yet another major management change is casting doubt on the electric carmakers future. the cofounder is stepping down as chief technology officer and he will become an advisor. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am viviana hurtado. this is bloomberg. francine? francine: thank you.

let's get more on the uk's new leadership. boris johnson has just chaired the first meeting of his new team. he will head to the house of commons to make a statement, setting up priorities for his premiership. first on his priority list will be delivering brexit. for more, we have bloomberg's european news director, as well as someone wells from hsbc still with us -- assignment wells. -- simon wells. what is the strategy he is preparing for? >> that is a real fascinating thing in this much-unprecedented clear out for a sitting government that we saw last night. the solemn night massacre, they are calling it. and stoning very much from the right wing side of his party -- installing them, very hard-core brexiteers on his team.

we were talking before about a liberale conservative like he built himself when he was mayor in london. but with the home secretary who has talked about her preference for the death penalty, the --eral conservativism liberal conservatism seems to have been shelved. clearly, he is gearing up perhaps for an earlier election then he said. when will that be? parliament breaks today for summer and there will be back at the beginning of september. his majority may vanish completely over the summer. thes down to only 2 at moment and therefore, the election might be forced on him there is. francine: peculation, that he -- there is speculation that he is surrounding himself with ,oyalists and pro brexiteers because he hopes he gets something from the e.u. that he can sell to the team and get

through parliament. >> maybe that is one of the here.gies he is bringing on side of those people who were rebelling against mrs. may's deal. banking that he is he will be of to bring across all those really hard-core people who were not willing to compromise at all, but remember, he has to have everyone of them and some labor people as well in order to get the idea across. so it will still be challenging for him to do that. . >> simon: you were telling me that you expect the pound to move sideways from here on. if we go back to the brink of a no-deal brexit, it means a lot of companies will have to stock file, prepare for that, which looks more unlikely than it was a couple of weeks ago. how does that impact the economy? yacov: you can expect a repeat of what happened in march the subsequent rundown of stocks.

the difference now is that in the past, he had this big global tailwind supporting the e.u best supporting the u.k. since the referendum. that has now gone. . you have u.k. pmi at best signaling little contraction, manufacturing very weak, so you have an economy that is featuring under this weight of uncertainty -- teetering under this weight of uncertainty. francine: how much do we understand about what the new chancellor will do when it comes to the budget. david: you have this 26 billion dollars warchest, and deficit that has been brought down and from 10% of gdp the.st under 1.5% of question is, what is the big number, and how do the markets react? in the current environment, you could see a fairly big number of

announced. francine: boris johnson of course has to still deal with iran. how much will he focus only on brexit? if he wants to be prime minister, he needs to deliver form. of some is there a danger that he focuses too much on brexit and lose everything else to one side? david: with tensions in iran , they were accused during the campaign of taking their eye off the ball. the foreign secretary himself said that, when trying to win the contest. we could see a flare up with iran in the summer, complications with north korea, something out of the blue could happen. how prepared is boris johnson to do that? and is an experienced cabinet. table.ew people on the he has taken the broom to his government to such an extent that there is uncertainty about how they would handle any such issues. there have been questions raised about how johnson will perform under intense pressure. we may be about to find out. francine: thank you both so

much. david merritt, bloomberg european news director, and simon wells, chief economist at hsbc coming up. , we talked to the german finance minister. don't miss the interview today at 1:00 p.m. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. i am francine lacqua in london. turkey's central bank is also deciding today. it will show how sharply bit about the central bank is prepared to make. president are the one that. is best president arterburn installed a new -- president erdogan installed a new governor

after firing the previous one. joining us now to discuss this is yacov arnopolin from pimco. great to have you here, especially on a big day like today here for turkey. what do we expect from the new central bank had? yacov: it will be interesting. i thinkat bloomberg, the median is 250 basis points 21.5.s, from 24 to it is difficult to gauge from turkey. let's us say 350 basis points priced in, what people are looking for is exactly what this means for the future path of policy and how much this will be a break with the previous governor. francine: will it spark a fresh eurocrisis? yacov: -- a fresh lira prices? yacov: it depends. people anticipate that this will

.e a really dovish central bank i think the reality is that the market will be much more dismissed of these moves as long with thise a backdrop gauntlet of central bank things meetings with all central bank chief sounding dovish. on the back of that, there is room for a lot of mischief to take race because you have this super dovish backdrop. francine: how much can the market actually move? we have a very managed economy, very managed financial markets. at the same time, a lot of investors out of the country. are we going to see immediate reaction because people already expecting the worst? yacov: i think there is an element of tearing. it is north of 300 or 400, could be negative for the

lira. if it is less than 200, could be positive for the lira. so this is a signal. it is important. after that, comes the ecb. givein and of itself may some cover for dovish has from emerging-market central banks. saw again, as long as the background remains supportive there is probably room for extra dovishness that the market will allow turkey to get away with, that in other circumstances it would not. francine: what are you looking for exactly? when do we get to know the central bank are a little better? yacov: we will see what the statement said. , not just today, but also signaling next moves. will it be just one big one of today that will need people to reprice the curve further. locals of a truly been positioning on the front end

cut. we have seen a lot of interest in the 2020 local paper, people betting on significant cuts in the curve. francine: are you buying anything in turkey? yacov: we have been cautious because at the end, recognizing that the kerry is very high in ra, it is how much they can get away with in context of other central banks cutting. so we are cautious. we will see what the signal is today and where we'll go from there. but we are reluctant to get carried away before we understand exactly what the path of policy is. the concern is always the -- the we saw the previous governor, he was willing to come out with significant high grades to defend the euro. the question becomes, will there similar reaction from this current governor as well? the anticipation is that he will be dovish, but what will be his reaction during a crisis.

francine: what do you think? yacov: too early to say. but i think net-net, the fact that the previous governor was let go raises concerns. francine: if you are not looking and you are conscious cautious of turkey now, as many investors are, where d.c. value elsewhere? yacov: indonesia. we have been getting involved in the currency. places like egypt. ukraine, for example, has become an interesting off benchmark bet of local currency. currency.local so it is definitely going to move me away from some of these traditional stories that have some here on them, like turkey, to off benchmark bets where we see for dovish policy from the central banks. francine: we will get back to ukraine and indonesia. yacov arnopolin from pimco stays with us.

up next, european sovereign bond onlds hit record lows anticipation that today's ecb meeting will set the stage for september rate cuts. are they right? we discuss that next. this is bloomberg. ♪

francine: economics, finance, politics. this is ""bloomberg surveillance." the heat wave we saw yesterday, westminster is experiencing it today, it is the hottest day on record in london. try to stay cool out there. now to the central banks on the market. another central bank expected to cut is the fed, which decides next week. investors are expecting a quarter-point rate cut. what does that mean for emerging markets? that isus to discuss yacov arnopolin from pimco. we were talking about turkey. you said you like markets like ukraine and indonesia. is that through currencies or through something else? yacov: ukraine credit as well. some exposure, local market exposure. indonesia, it is on fx side.

we talked about how central banks, no central banker wants to be left hind in this wave of cuts. we saw this in south korea and on.ussia, ukraine, on and any country can come -- you can come up with our cutting ratesp the ecb will be important and that fed will also be important. francine: the fed actually seems ok. is their worries about trade concerns between the u.s. and china get put to rest, that the fed is set of cutting could actually hike? yacov: i think we are far away from that. the fed would be reluctant to go from hiking to cutting to hiking again. we think the fed has been forward-looking, recognizing that inefficient is falling short of there is additions. on top of that, -- falling short expectations.

on the back of that, the anticipation is that even though the fed does 25 next week, they will stay relatively dovish and have no further change in policy direction anytime soon. for em, as long as the fed is dovish or relatively stable, the kerry party is going on, it continues. francine: what would make a change that? yacov: i think somebody irish and's -- valuations could get to frothy. we are moving in that direction but we are not quite there. theave seen already in that market perceives that -- the fed cutsprice is the even more. the concern loosens financial conditions and offsets any worries about trade. you have this balancing act. . on the back of that, maybe less worried.

it is curious in that thinking ecb,ed versus the obviously, the fed is much more important in terms of overall relative value. francine: because of the dollar. yacov: emerging markets, there is a difference on the valuation press active. but when you think of where money is coming from and we talk about em, that is a huge base of em investors in europe, certainly in terms of new interest coming from europe. so the ecb may be more influential in terms of the direction of flows or more flows coming to em from europe. francine: this is because of negative yields? i have a great chart looking at the global bond rally driving these negative yielding bonds to record highs. that is money that is going to em because they are looking for yield? yacov: inevitably, some is. some are staying at negative yields. there is definitely a push and pull.

the full of em higher yields and decent fundamentals, and a push out of negative yields in europe. it is a mixed bag. trend.nd is a slow i don't think there are people still jumping in wholeheartedly. there is a lot more interest around em on the back of what is going on. francine: how should and we china? yacov: check -- francine: how should i read china? yacov: china is in a long protracted trade war. back tomorrow, is there a looming crisis, no? is there a cyclical decline in chinese growth, yes. em markets, we have seen that before, we have seen worse. as always, china is a rocky ride. people move from euphoria to panic, actor euphoria.

we are somewhere in between right now. . our sense is that we are preparing for us lower, chinese growth on a cyclical and circular horizon, and kind of figuring out who will be the winners and losers in the region and within em on the back of it. thank you so much for coming on bloomberg surveillance. he is, of course, yacov arnopolin from pimco. policymakers at the ecb are set to signal a rate cut. but could mario draghi actually deliver a surprise today? our reporter maria tadeo is life for us in frankfurt. maria, what is the market expecting and what could the surprise be if he cuts today? morning.od the market is expecting a very dovish mario draghi. it is pretty clear that the economical one way and that is lower,. the only question is whether we get the rate cut today or we get it in september. until yesterday, the market had

taken the view that we would have to wait until september. but we had the bad pmi's yesterday that showed the european economy on a week note in q3, in particular, manufacturing data from germany that was really bad. that has prompted speculation that mario draghi will want to get ahead of the market and cut today. we are also waiting to hear from the market results for q2. francine: thank you so much, maria tadeo in frankfurt for us at the european central bank. "bloomberg surveillance continues. in the next hour, tom keene joins me from new york. we will also talk to olaf scholz, germany's finance minister at 1:00 p.m. london time. we had the disappointing figures . spoke to an analyst with doesn't he is also word that with the appointment of boris

johnson as prime minister, it means there is a higher chance we get an no-deal brexit, and that may have an impact on germany as well. i am looking at stocks climbing. i am also looking at germany's onyear bond yield falling deteriorating is this confidence in the country. oil also recovering some of the previous sessions' losses. 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. francine: decision day at the ecb. which will mario draghi tweak.

boris and the brexiteer. the new prime minister packs his cabinet with loyalists. up, the news across europe for a high temperatures. terraces is hotter than cairo. good morning and afternoon. this is bloomberg surveillance. , in londonne lacqua with air conditioning. a lot of focus on the ecb. front and center in the world. theshock that we see of cabinet redo is front and center. richard will join us in the next hour to deal with the irish question. francine: we will have a lot more on that, but first let us get to the first word news in new york city. minister,tish prime

north johnson, is purging his -- boris johnson is purging theresa may's cabinet. johnson is bringing in brexit hardliners as he prepares u.k. to leave the european union. today he will lay out his priorities. kim jong-un's regime has resumed missing -- missile testing as talks remained stalled. the north fired two short range missiles. happens hours after u.s. national security advisor left south korea. is european central bank expected to signal that it is ready to cut interest rates. policymakers are deciding how to confront an economic slowdown. most analysts predict that they will change policy language. we end in puerto rico where the governor is giving into the

hundreds of thousands who demanded his resignation. stepys next week he will down, which means more uncertainty for the commonwealth. virgil rico is still -- puerto rico is still recovering from a hurricane and bankruptcy. 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. tom: thank you. data, 97 degrees in cairo. 106 in paris. enjoying 100 degrees in london. other than that, the euro is weaker. it is interesting to see what that does off of the ecb meeting. massive bond moves with the vix really coming in. 2.02.-year yeild was there were plunges and yields in switzerland. 8.18 down torom

negative zero. that qualifies as a plunge. that is a good way of looking at it. i am also looking at german business, and that was tumbling. clements a little bit early on, and he was worried about the fact that we have boris johnson with a loyalist cabinet, but that -- and that could percent potato a no deal brexit. i am looking at european government bonds gaining alongside treasuries. some ofally recovering the previous losses. i also put the pound at 1.2467. tom: extraordinary. i wanted to pause and look at the single greatest chart in capitalism, it is in luxury goods.

mh, amazon and apple do not look like this. long-termine is a moving average. extraordinary success from 1989. yearutely unheard, 23% per in the last 10 years for the makers of high fashion that francine wears every day. francine: i am not sure about that. when you look at the big rival, they have been doing so well. there has been a shift with gucci losing a little bit of ground. i feel like i am doing a boarding chart because i am looking at negative rates. it is bigger than the luxury market, but years is more exciting. a global bond's rally is dragging yield bonds. it is nice to look at it.

now is the chief economist to talk about what draghi may do. thank you for joining us. when you look at the ecb, mario draghi seems to be cornered. just a cut today, also surprise the markets, or does he lower guidance? >> we think the latter. there is a danger of stating the weakness in the economic center. continued -- the larger part of the euro economy has continued unaffected. this will signal a rate reduction. somelso, provide commentary on how they see the for the weakness in

the manufacturing sector, because that will guide expectations. >> i am in complete agreement. francine: this is boring. >> we had agreed before we came on. of course mr. brought -- mr. draghi could you shock and awe and say that he gave the market a bit of a warning with his speech. i think it is more likely that the ecb would look at a range of issues rather than looking at a pure just posit -- deposit rate cut. to look it is important at the expectations. while those were taking a month or so ago, they are off the floor in terms of context of the backdrop. i think that provides mr. draghi with a little bit of cover in order to wait until september. francine: what does this mean for euro. have seen a lot of

euro positions being built up, so we have not yet seen those lows tested despite the weakness this morning. when you look at that expectations, we have not seen them since 2009. it may well be a rumor, not by the fact, but we see a short rally unless mr. draghi does create that surprise this afternoon. mario draghi a currency manipulator? jeremy: he would always say that the ecb does not have an explicit exchange rate policy, but we know and pleasantly when he has previously -- implicitly ton he has previously tried raise inflation rates, it is by changing the euro. it is potentially a charge that can stick. one of the things i will be

doing as i am listening, will be looking and listening to the language that mr. draghi uses and keeping my eye on president trump's twitter account. we look at when europe we look at clearly manufacturing slowdown. how close is your up to a recession? simon: i think it is some way off. the manufacturing picture is weak, but the service is in the low 50's, but steady. ofre is sufficient easing financial conditions over the course to start to feed through into increase lending -- increased lending later in the year. i do not think there is an imminent recession risk, but we have to look at the other side of policy, and fiscal policy. with the advent of christine

joining the ecb, the kind of work putting pressure on governments to give the ecb a break. it has been the only show in town for too many years. stayine: simon and jeremy with us. stay with us as we cover the ecb rate decision at 7:45 a.m. in new york. this is bloomberg. ♪

tom: they are changing the ortains at downing street,

just deciding where to sit. the chancellor and prime minister decided that. the cat checking out in the heat. right above the word prepares. that pelt you see on the doorstep is completely frazzled in the heat. is doing the 100 degrees fahrenheit duty as well today. i guess we are in a honeymoon mode. when does it end for johnson? anna: things are moving quickly, so developments could happen any moment. you always get that sense. if we are in a honeymoon, let us check out how the papers have received boris johnson. we will see what kind of greeting he has received. in reference to the extent of the cabinet reshuffle, "the night of the blonde knife" and

this refers back to the 1960's when harold mcmillan dismissed one third of his cabinet. half of the cabinet going yesterday. a little bit more convinced, " the daily mail" talking to the converted. they clearly liked what they called barnstorming boris. a little word from the other your --he daily mail the daily mirror" i do not know why anyone would want the job. apparently those were the words of the queen when she met bourns -- boris johnson. this is apparently a gas. he has shaped a cabinet full of brexiteer, which means that he put the remaining advocates on the back benches which would come back to haunt them. tom: one of the things we have

seen is that the chancellor of the exchequer will liquefy the balance sheet to support the no deal shock. how much wiggle room does the new chancellor of the exchequer have to accommodate a no deal? simon: it is -- anna: it is interesting, because we heard from boris johnson that willere is no deal there be no 39 billion pounds handed over from the u.k. to brussels, and the conservative party seems to think that they have a bit of wiggle room. they had the secretary of the treasury say it is -- if the money is not going to brussels it can be spent in the u.k.. we have heard from boris johnson the way he would like to support the economy in the event of no deal. even the outgoing chancellor did leave a message in his resignation to his successor suggesting that the chancellor

will have choices in the event of a deal. and, suggesting they would be more choices available if there is a deal versus if there is not. francine: thank you so much. we are back with simon and jeremy. when you look at the composition --the cabinet, pro brexiters think you, do you will have a fight? first i think the situation of this act is you thata party -- a cabinet has to be credible as a negotiating tool with the european union. it was not possible for boris johnson to the to brussel and say look at this cabinet which is a mixed view he will have to pursue a no deal. if he loses the battle in terms of reopening the withdrawal

deal, he goes back to parliament where parliament will support him. it seems like parliament will block him and then you are in the realm of a general election where boris pitches parliament against the people, and that is potentially where we are heading. most people think that is near impossible, with the withdrawal deal. francine: what is your take? jeremy: we have seen a lot of sterling negativity building up. it has doubled since theresa may's resignation. the market has been reemphasizing the risks of a no deal. there is some downside risk to come in sterling. does the market believe in a no deal being a high probability outcome? the market is not saying that, because sterling will be low and eurosterling would be higher. i think we are heading to a degree of constitutional

questions. while the election risks have amplified in the context of the last few days, i think an interesting dynamic, dominic tomings may be advocating think about another referendum as a way of solving this issue. i do not think we are hell-bent hasn election, but there been a lot of political uncertainty and investors would say i would much prefer to be sitting on the sidelines. tom: let us go back to first principles, what is the run rate of the u.s. k -- of the u.k. economy and what would it be under no deal? simon: 1.5%. what would it be in the case of a no deal? this comes back the question you asked anna. a no deal introduces supply-side frictions into the

u.k.. this is cumulative of 7% to 9% gdp. but, and this is where fiscal beicy comes in, it can offset by demand stimulus and having a looser fiscal policy. 5%ning gdp rates of 4% and that we see in america. if that comes the u.k., it will minimize some of that impact, that it will not be able to do all of it. lower becauseoes you get additional frictions that reduce the efficiency of the economy. tom: simon french with us and we are going to continue. richard will join us in the next hour, without question or expert on the irish question. -- our expert on the irish

question, as well as the german finance minister. that will be with mr. sholes. stay with us. this is bloomberg. ♪

>> this is bloomberg surveillance. let us get to the business flash. nissan is doubling its job losses and unveiled job -- production cuts. it will cut about 12,000 jobs

around the world. its first quarter profit plunged 99%. it has been hurt by an aging product lineup and a sales slump. despite a slow down, volkswagen is sticking to its outlook. profit fell more than 8%. offeringnefited by suvs. we spoke to the ceo. >> we have been able to grow offer rating -- operating profits by 2%. we have been successful with pricing. forecasting we are into a potentially difficult second half, but this gives us the -- this gives us the comfort to stick to our guidance. brand public has been a priority. shares of tesla are plunging. they posted a worse than majored loss, and another

management change is casting doubts. the cofounder is leaving the chief technology job. he has been with the company joined the musk board. francine: thank you. let us get back to some of what the ecb could or could not do and let us look at negative rates around the world. this is my chart of the day, negative debt. the global bond rally driving bonds. let us get back to simon and jeremy. what does that tell us about where to find yield in general? simon: what it tells you attempty, despite every to stimulate the global economy over the last decade, inflation is nowhere outside currency led inflation.

in terms of where things head view ise viewed -- our that the market has gotten overly bearish. we have an over expectation from the fed, and the sustained level of a balance shaped -- balance sheet combinations in the ecb. you do not follow that trend, you see written -- retrenchment. francine: do you agree with that? it seems like the central market is leading banks to cut? jeremy: that has been the story for the bulk of 20. if we go back to the beginning of the year and the bubble starts for the fed. it has been a market lead move and that has undermined some of the pressure points. in the context of a market aggressively forcing the issue and testing the resolve of mr. powell who is not a trained economist.

so, there is this pressure from the markets. is it going to be the case that the central banks will acquiesce? there will be some stimulus. it is a question of how much is aggressive.nd it is that seems to be an issue if you take a negative trait -- a negative view of the trade. it is an assumption that we will see resting of trade tensions, and then the ecb will be much more aggressive. speakne: coming up, we with mike pompeo. this is bloomberg. ♪

♪ is a clear -- it is a clear and beautiful day in the united kingdom, and it is not. that is a deceptive picture.

know whats, i don't that is centigrade, but there is the heat. francine: we are expecting extraordinary temperatures that could break records. commuters are told not to get on train. just a couple of hours ago as i got into the office -- it is hot. tom: what does it do to the tourist industry? you see the pictures of venice and paris. it has got to kill tourism. francine: for a lot of people that were here, i don't think he would cancel the holiday. i imagine people stay more indoors. , i economics of a heat wave

will look into for you. tom: extraordinary. calm, cool, comb, and -- and collect did -- collected. here is viviana hurtado. u.k., wetoday in the will get a new idea of the new prime minister's agenda. boris johnson will set out his priorities, the top of the less likely to be brexit. he has purged his predecessor's cabinet. 18 of 29 cabinet members are out of their job. vetoingt trump resolutions blocking sales to the saudi rate -- saudi arabia. there are likely to be enough votes to override a presidential

veto. democrats did not get what they want from the robert mueller former prosecutor testifying for five hours. dammingequired to read portions of the report and did not offer extra details. bernie made out -- bernie made askinging -- madoff president trump to shorten his 150 year prison sentence. the prosecutor said it is hard -- 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 francine: thank you so much. tech earnings, facebook is proving its business can weather

all kinds of scrutiny. and asettling the case doj has announced a looming probe, but it has not stopped the social network from getting more users and advertisers. great to speak to you on the phone. facebookyesterday that is seeing more regulatory scrutiny. how big will it be this time? david: they are facing an onslaught of scrutiny, and not just in the united states by any means. it is global scrutiny and it is pretty much very comprehensive and probing and goes well beyond privacy, which was the subject of yesterday's settlement. this company will remain under the microscope for the foreseeable future and that will not be comfortable. francine: it seems that has not dented the number of users and

they are doing well on instagram. will it the hitting on how much more they can grow? david: it is kind of a contradiction. no question that facebook has a great business that is in my opinion, one of the reason that they require some of scrutiny is the they have been so self convinced -- that they have been so self convinced that they did not feel much was wrong if they were rolling in so much joanne doughy have, -- so much look athave, and you the settlement from the ftc, it did not require facebook to admit anything fundamental. they said, we will do this differently and it is appropriate, but did not apologize.

they do not have an attitude that they messed up. they still see somewhat that the world is being very unfair to them. tom: i want to talk about a seachange in the zeitgeist in america today. if you wrote the alphabet effect right now, we're at a seachange for google. will they be more transparent in their business plan, in the statement of their revenue, earnings, and business segments? david: in there earnings release, no. probably not. google has a similar set of issues but not quite as bad as facebook in my opinion. in terms of where they are getting their money from, how much comes from youtube, they will not be more transparent. there is an attitude in silicon valley that they know better,

they will do things the way they torpedoes.damn the tom: kurt detrick -- kirkpatrick codified this. when did the attitude change? david: good question. i think facebook is deeply insulated by economic success, , truerue introspection psychological and legal introspection, because it is not just privacy they screwed up. they are screwing up their regulation of political speech. there is all kinds of other problems. we hear probably two or three times a week new mistakes that are serious emerge from facebook that are kind of digested and passed by because we cannot even remember all the things that have been discovered about the mistakes facebook has made. tom: get out of the trout stream

and start writing the google effect. "theirkpatrick, author of facebook effect." usht, jeremy stretch with and simon french as well. we look at technology and the certitude of the moment in the markets. one of the certitudes is dollar weakness. it ain't happening. when do we finally break to dollar weakness? jeremy: it has been a remarkably resilient dollar story throughout 2019 when we have seen? -- where we have seen? questions about some degree of intervention to pull or push back but dollar valuation.

there are some factors to keep in mind. fiscals the emerging accounts in the u.s. and that may come a for international investors. there is the blatant politicalization of the fed and that is a potential trigger point. that would lead political risks into the residential election. that provide some degree of uncertainty from the dollar perspective, but you have to see the fundamentals elsewhere improving. that proves dollar -- birds.atic for dollard birds.ar tom: we will continue. press conference with mr. draghi this morning. in the next hour, my conversation with richard haass from the council on foreign

relations, america's expert on ireland. this is bloomberg. ♪

♪ mueller,ise after mr. yesterday was extraordinary on capitol hill, all sorts of opinion and analysis of the performance of mr. mueller and the republicans and the democrats. we will leave that to the pundits. francine: this is a performance in the house of commons. leader of the house of commons appointed.

he is just addressing the house of commons. i think we are expecting boris johnson to address the house of commons and we will see if we have any idea on what clarity he will take to deliver brexit. tom: interesting to see these images of truly that changing the guard. mcmillan, to see such abrupt changes in the united kingdom. ,eremy stretch and simon french let's begin with the linkages of the ecb meeting to the fed on july 31. does chairman powell need to pay attention to the minutia we hear from draghi? simon: he probably did inevitably regardless of the action from the president -- the

-- and heof the u.s. has started talking about mario draghi. the independency is not lost in the white house. yourre a question -- question about the ecb leading through its policy actions to the euro zone being labeled a currency manipulator, that is important going into a reelection year. the president like to see the fed enter into a competitive rates policy with the rest of the world, certainly with the, and start to -- europe, and start to weaponize the currency enjoying the battle the bank of japan and ecb have had with a weaker currency. tom: what are flows with a superior united states and superior greek rates? is money moving with a vengeance

to the united states with high yields? jeremy: there has been interest in the sense that that is a world where we are seeing ultralow rates with more easing potentially to come. i guess then you are left with the question of which will be the short end of the trade, europe or japan, and the obvious definitions terms of g3. we have seen those flows being maintained. there may be some degree of circumspection from japanese investors going forward if there are going to be attempts by the white house to pressure the federal reserve to trim rates and be more aggressive in terms of its policy stance. that may encourage those flows to diminish. francine: how many cuts are you expecting from the fed?

jeremy: we are expecting two this year, one of 25 basis points and one in the autumn. we have seen the market paring back the assumptions of the 50 basis point cut next week but we have the gdp which is another variable to keep in the mix. francine: this depends on the trade concerns and whether they escalate or deescalate. how quickly can it change? simon: it can change quickly, but one thing that leads us to noble the efforts of four rate cuts to one to two, additional trade and tears to the supplies -- tariffs and the supplies -- we don'tng up know how far unemployment can go before we see wage pick up. if you start that on the demand

side a pickup, the fed does not want to stake out a path they will have to stick into rivers gear quickly -- reverse gear quickly. francine: thank you. talking for the first time, the new u.k. leader of the house of commons, appointed by boris johnson yesterday as the arch brexiteer. presidentsented lord of the capital -- cabinet. sharing his first cabinet meeting about 20 minutes ago and then we are expecting him to talk in the house of commons. this is bloomberg. ♪

♪ this is bloomberg quote surveillance." -- "surveillance." reportingusch stronger than expected earnings growth in the second quarter, profits rising 9%. volume grew at the fastest pace in five years.

a wet spring in europe and north america held back demand for ice cream, slowing sales at unilever. they reported second-quarter growth that missed estimates. we spoke with the ceo. sales were lower than expected because of cooler weather. the hottest day ever recorded in britain, we are a little bit weather dependent, but we are a big geographic product category and diversified business. viviana: unilever is seeing sluggish develop -- sluggish growth in many developed markets. projected earnings were less than expected. the automaker missed estimates. chinas to compete in

where deliveries fell 32%. francine: thank you so much. two emerging markets and turkey central bank will expect to cut rates. the bank's new governor looks to put the unconventional theory into practice. stretchench and jeremy are still with us. london, have you in thank you for coming in. can we say that central banks are dependent anymore? >> certainly was a shock and turkey on the previous governor was ousted in a somewhat unexpected fashion. forill be a matter of tests the new central bank governor to prove his independence. he needs to answer the calls for lower rates and yet he needs to deliver a cut that will not

spook the market. francine: we think if there's going to be a specter of -- the lira would need to cut? any biggeront of than expected rate cut, if it is the case later today. markets seem to be pricing in a significant cut that would not necessarily roil the markets, three -- 300 basis points. we will have to wait to find out. francine: i don't know if we have a lira regression chart. the lira has been coping well with what we have seen. is this because of capital controls and market participants are pricing in the worst? onur: that is part of the uncertainty -- answer and part of the answer is rates are still

high, which mitigate the impact on the lira which would be considered adverse conditions. the lira going to wear was before the firing took place, and turkey owing not to the fact that the fed and ecb seem to be industry. tom: stephen cook at the council on foreign relations is expert on the dynamics and history of turkey, and he mentioned in a recent xa -- essay about erd ogan and turkey being a reliable partner. are they a reliable partner with the united states? onur: it is something that a lot of people are observing, turkey's foreign relations seem to be coping with the purchase of advanced military equipment test for, did so as a

the turkish-western relationship. turkish policymakers seem to have handled what could be a crisis situation better than we expected come in turkey and investors in the financial community. tom: you look at it and part of it is within the geography of turkey, is russia. turmoil, what is the relationship with russia? onur: the purchase of an anti-air missile from russia certainly improved ties with an important neighboring country. turkey and russia have a lot they disagree on in terms of what is going to happen in syria. turkish officials are talking with their american counterparts as to what can happen in northeast syria where americans have quite a bit of stuff they

disagree about. most of the time, we tend to assume that turkey and russia eye i to i when it -- eye to when it comes to kurdish militants, but that is not the case and it remains to be seen what can happen between turkey and russia, and one appearance to be -- appears to be a smooth collaboration. francine: the central banks with geopolitics, how do you read the lira? simon: it comes back to this question of central banks and today's decision will be pivotal. decision which caused the chink in the armor and caused the lira to move substantially. i think it is relevant and was relevant in terms of the real rates that are evidenced in turkey that is one of the fascinating things in the chart

of the day today that you had. supports provide some but it is the question of markets feeling comfortable with the degree of monetary easing and feeling at will not be a disproportionate degree of easing purely at the behest of the president. francine: that was bloomberg's turkey correspondent and jeremy stretch. we will have plenty more from turkey throughout the day, and from europe as the ecb meets. , 7:45 a.m. newn york. this is bloomberg. ♪

♪ tom: this morning, draghi and the ecb will decide, can they get out in front of trump's

trade war and manufacturing recession in the e.u.? plunge.anc bids it is lakes or harold mick ellen in 19's -- it is like sir harold macmillan in 1962. thisis hour bang, -- in hour, richard haass. paris, noooling in doubt wearing javon she -- givenchy. good morning, this is bloomberg "surveillance." braving it in london, francine the call and anna edwards -- francine lacqua and anna edwards. hot is hot. francine: i think we are going to reach a record high. we are fine in the studio, but anna edwards being in

westminster. unilever saying this has a direct impact on the sales for ice cream so it could see it having an impact this quarter for the big retailers. tom: no doubt cooling it inside downing street with the new chancellor of the exchequer. viviana: new british prime minister boris johnson is purging his predecessor's cabinet. 18 of the 29 ministers are out. johnson is bringing in brexit hardliners while preparing the u.k. to leave the european union. he will lay out his priorities today. kim jong-un's regime has resumed missile testing as talks with the u.s. remains stalled. fireduth says the north two missiles into the sea east of the korean peninsula just hours after john bolton left south korea.

the ecb is expected to signal it is ready to cut interest rates again. policymakers are deciding how to confront an economic slowdown. changeedict they will policy language to prepare for a rate cut. the puerto rican governor gave into the hundreds of thousands demanding his resignation and said next week he will step down , which means more uncertainty for the u.s. commonwealth. puerto rico still recovering from a record herculean and banker -- hurricane and bankruptcy. 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. in viviana hurtado. -- i am viviana hurtado. tom: equities, bonds, currencies, commodities, yields are the real story. u.s. curve flattening ever so slightly. the vix 11 handle earlier.

2.02 on the 10 year. swiss plunge, greater negative yields in switzerland with swiss strength off the euro. francine: we are looking at jacob rees-mogg appointed yesterday, speaking in the house of commons. the pound kind of moving sideways. all eyes on the ecb. euro-dollar 1.31. back to the house of commons where the prime minister was saying they will leave on october 31. the p.m. has been clear -- p.m. has been clear there will not be a hard irish border. if you look at the composition of boris johnson's cabinet, especially his advisor, what does it tell us about where he wants to take brexit?

anna: doubling down on brexit in the shaping of his cabinet. he surrounded himself by brexiteers which means he is pushing those who do not want a no deal brexit to the back bench and they have come opposition -- become opposition. this reshuffle struck a chord with "the daily mail," clearly impressed by what they called a barnstorming boris. n" with thee "the su es -- of the blonde kni blonde knives. tom: the honeymoon is already over. they are looking for a response from labour and the new energy

of the liberal democrats. how will they respond to the last 24 hours? anna: there is only one day left westminster, -- in which is today. the new leader of the liberal democrats coming with a quick saying, why aren't you launching a no-confidence vote? the response of labour in the past is we will bring a no-confidence vote when we think we will win one. that is some of the maneuvering behind the scene. you are listening to jacob day asgg as his first leader of the house of commons and clearly enjoying himself. tom: anna edwards, thank you for joining us. we are thrilled to bring you the

president of the council on foreign relations. stints ofts -- representing the united states and ireland. his prime minister johnson even somewhat aware -- is prime minister johnson even somewhat aware of what will come down the pike? richard: my own view is if he goes ahead with a no deal brexit, he could lusby -- he could be the last prime minister. we are on the way to the disc united kingdom. ted kingdom. then there will be talk of a border in ireland and the republic of ireland. what is at stake is not simply the economy of the united kingdom but the future of the

country. tom: we talked to the president of ireland about the border. is that at risk? richard: there has to be something there. if you leave europe, there will be some kind of border. --sn't have to dust does it does it have to look like the berlin wall? no. what kind of impediments doesn't phase? -- does it face? the border is open. it is a political statement about ireland, so whatever you do, it is not sand in the gears of trade and physical movement, it is political and psychological. francine: boris johnson is well aware of the fact that no deal will usher in referendums and split the u.k.

since he is making europe believe he is willing to go to a no deal to get a better deal? richard: it is possible. problem the existential of transitioning from opposition to government, to actually being responsible. we will see whether he can make the transition. we will see if he can get a better deal and at most, it would be cosmetic. europe does not want to set the precedent that if you are a squeaky wheel you get a better deal. he will not get a substantively better deal and he has to decide what is he going to do. if he goes ahead, the issue is not simply the irish border. it is a constitutional crisis. the previous parliament is on record saying, we do not support

a no deal brexit, so boris johnson will have to decide. the other thing going on, if you had a normal opposition, this would become a factor in british politics and he would have a vote of no-confidence. the problem is you have a flawed labour party led by a flawed jeremy corbyn. the populist support for labour is plummeting. this is a constitutional crisis, and irish crisis, and also a political crisis for this country. thecine: can you link populism we are expecting the seer from -- see from premier johnson to president trump? there and inee it many democracies in europe. the brexit vote was an anti-status quo vote and it is

the reason why you don't put big important questions up for popular referendum. what we see on the right is frustration over cultural and immigration issues, and we see that in the united states. theee on the left democratic party and the labour with, really unhappy inequality, the lack of overwork -- upward mobility. as a certain poet said a century ago, the center is not wanting and we -- holding and we are seeing new parties emerge, or what used to be french parties becoming powerful. in the united states, we are seeing parties hijacked. we have the republican party of donald trump and in britain you have the brexit takeovers of the

tories and mr. firm roche and and his.rage tom: in america, i think we have an understanding of ireland and scotland. we think we know wales because they always lose at soccer. what does it mean? is, there hase got to be a best practice reaction. brussels is a mystery. how does brussels support against scotland, wales this prime minister? richard: clearly brussels will support ireland on the backstop issue, and they will not give the brits and boris johnson this big deal. they will side with ireland. i think also they would with scotland.

if scotland were to declare its independence, it would be europeted on entry into so i believe europe would make it clear scotland would be welcome as well as a united ireland if people vote in favor that. francine: richard haass from the council on foreign relations, he is the president and he stays with us. plenty more on brexit and boris johnson throughout the day. stay with bloomberg as we cover the ecb rate decision and what all mario draghi do? conference, 7:45 a.m. in new york. this is bloomberg. ♪

♪

bloomberg "surveillance," francine lacqua in london, tom keene in new york. we take pride in ripping up the script. 92 years old, the leader of tunisia has died. a surprise, no, but nevertheless a changing. all of this linked in to the arab spring and how tunisia rota wroteab spring -- tunisia up the arab spring. libya.od it is not bad exampleya is a of about intervention. it is where the west intervened and now libya is one of the most

failed, destroyed places. tom: one of the most historic days was one ambassador haass wandered out the door with mr. qaddafi. tunisia with desperate -- was desperate as a middle-class bastion for this middle eastern region. can they sustain that? because theis shaky president has died. zero political consensus about the future. you have the so-called centrist islamic parties. i do not see a working majority in tunisia so the idea that you have this peaceful revolution toward moderation and tolerance, that is optimistic. you have libya at the other end of the spectrum.

tom: richard haass, thank you so much for these comments. we will continue our coverage. much more to talk about. the ecb meeting and the foreign affairs of washington. coming up later, the secretary of state of the united states. this is bloomberg. ♪

♪ we are expecting the

u.k. prime minister boris johnson give his first speech since appointment in the house of commons. he gave his first speech yesterday on downing street. we were listening to the response of the newly appointed arch-- leader of commons, brexiteer. story, decision day for ecb policy makers. fed to signal a rate cut. president mario draghi sent to light the fuse on fresh monetary stimulus, setting the stage for his final act as ecb president. joining us is simon kennedy. an interest cut for legacy or is he just driven by markets? simon: he would be driven by the market. the economy of germany, the

biggest one in the euro area, we saw squeezed by serious data. there is lots of economic arguments to justify lower interest rate and the question until you act now or wait september? mario, whatever it takes, there is reason to act sooner. the markets think he will stimulate in september but you cannot rule it out. francine: what it a in his favor towould it be in his favor cut today? simon: we look to the data and we know what it says, so let's go for it. the reasons to wait for september, it would be a surprise for the market. what does mario draghi know that

we don't? reason perhaps to stay and delay until said number is if you cut -- september is if you cut the deposit rate, that will have affect on the banks. if you wait until the summer is over, that will offset the effect on banks. if you could cut rates today, but why not wait until september? tom: you have covered 13 different central banks and 13 different mandates. how constrained is mr. draghi by forecb mandate and the tone germany for not spending? simon: you saw a great story that angela merkel is recently sticking with a balanced budget

and not wanting to borrow to spend. mario draghi has used speeches to express discomfort that it is always monetary policy carrying in the nextand downturn it will have to be the government. it is increasingly hard for angela merkel to argue against it, but she maintains fiscal austerity has cap the country in balanced -- kept the country in balance the books. deeper.t go much it cannot buy more bonds. does, the moreb ammunition runs out, the more pressure will be on germany to spend more. that will be the kind of analysis the u.s. uses to beat up germany. talk about the firepower

the chancellor the exchequer has to look fine or fun a new deal effect in the united kingdom. this has percolated in the last 12 hours. is it effortless task for the chancellor to provide comfort for a new deal united kingdom? simon: the u.k. is one government that has imposed austerity. there is room, but you saw in the resignation letter from philip hammond but there were choices to make. do you maintain that effect to more down the u.k. debt, as you saw in the campaign, you saw boris johnson making a lot of pledges calculated to be about 20 billion pounds worth, and that would boost the economy about 0.3 percentage points.

borisis lots of reasons johnson wants to spend without brexit. ande has brexit and no deal there has to be an emergency budget, they have room. want to spend it on would be the question. up, we speak to the german finance minister coming up at 1:00 p.m. london time. boris johnson sharing his first cabinet meeting with his cabinet. we expect to hear from the new u.k. leader at the house of commons shortly. this is bloomberg. ♪

♪ it is extraordinary images from the house commons, -- house of commons, truly new faces on the front bench.

there is a familiar face, so familiar in brexit. so important as everybody jockeys to pay ohmic to a new prime minister -- homage to a new prime minister. francine: we are expecting boris johnson to speak at the house of commons and he will address a new deal split from the e.u. i think the prime minister is about to start in a few minutes. that is the leader of the house. we will see whether they can give any certainty on whether the u.k. government and prepare for it. tom: we welcome you worldwide. the chancellor of the exchequer as well. flow.ews derek wallbank is in

asia. what this post moller washington look like -- mueller washington look like? derek: i don't think anything has changed. he did not agree with trump about no collusion but does not seem to have moved nancy pelosi any closer to going for impeachment. there is no indication republicans have moved at all. party was republican on display yesterday? richard: the new republican party, not a conservative party but the party of a person, donald trump. tom: i think for a lot of americans at was a republican even far removed from 2012, let alone 1980. richard: this is a fundamentally

changed party based on a person rather than principles. yesterday did not change much. post mueller washington is where p -- pretty mueller washington 1 eller washington was. francine: give me an update on joe biden. is he the best option the democrats have? paul., -- hold that. boris johnson is just talking. johnson: i'm sure we will pay -- to our maidenhead. she has a great legacy on which we should all be proud. brexitsion is to deliver

on the 31st of october for the purpose of uniting and reenergizing our great united kingdom and making this country the greatest place on earth. when i say "the greatest place on earth," i am conscious i am making some hyperbole. trajectory on the which we could now embarq. it is possible the united kingdom will be the greatest and most prosperous economy in europe, at the center of a new network of trade deals which we have pioneered with investments we are making and propose to make. the investment in broadband and will boast the most conductivity on the planet by unleashing the productive power of the whole united butdom, not just london

every corner of england, scotland, wales, and northern ireland. we will have closed forever the productivity gap and see to it that no town is left hind african, no can -- behind ever again, no community forgotten. 2050, thanks to the previous prime minister, will no longer make any contribution to the destruction of the environment by carbon emission. we are with the world in delivering that zero net target. tom: we see the prime minister and sitting behind him, his chancellor of the exchequer. is diversity of the cabinet extraordinary and there is no

american equivalent. richard haass, here is a guy upt grew up -- boris grew advantaged and the chancellor of is exchequer as the pack -- the pakistani son of a bus driver. it is extraordinary. theard: not just him, women, people of various backgrounds. tom: why can't we do this or do we not desire to? richard: you are right in the sense that we are the most open country in the world to emigration. we have over a million immigrants come in to this country. the leadership is not quite there. in the political leadership, you see more in the democratic party and if a democratic wins in 2020 you will see a more diverse cabinet. poundrade-weighted

sterling back to the time of john major, down to lehman lows and back to new weakness. is he addressing a weakened britain or can he have enthusiasm? richard: he is presenting a dream. i would say in 30 years, things will work out, we will give up what we had, and i think that is a pipe dream. a lot of young people without europe and their future will decide to leave the u.k. there is a chance the country will unravel, so i cannot say the prime minister is 100% wrong , but that is a selective and optimistic portrayal of the future as imagine that imaginable. francine: we have a diverse cabinet but they all think

certain things. they are all loyalists to boris johnson and on the faction of the right hand in the conservative party of the u.k. there is a little bit of a groupthink. if the u.k. is preparing for a no deal brexit, or listening to boris saying they will prepare more, is this to focus the mind of the e.u. or will he go through with it? or will we not know until the 11th hour? is wed: the honest answer won't know until halloween. he is hoping the e.u. blanks in and myiction -- blinks prediction is it does not. this is a game of three sided chicken and we will see how it lays out. that thet is important

softer compromise brexit which was the hallmark of his predecessor, that was defeated. nobody wants that. if you have a choice between a second referendum and remain, or no deal brexit, it is tipped toward a no deal brexit. tom: let's get to the prime minister as he addresses the challenges of the united kingdom. johnson: the evidence is that arrangements are possible witherfectly compatible the belfast or good friday agreement to which we have force -- we of course are steadfastly committed. and my secretary of state are ready to meet and talk on this basis to the commission

or e.u. colleagues whenever, wherever they are ready to do so. former part, we will throw ourselves into these negotiations with the greatest energy and determination and spirit of friendship. i hope the e.u. will be equally ready, and that they will refusal toir current make any changes to the withdrawal agreement. ♪

♪ p.m. johnson: and lengthen this country's lead -- francine: boris johnson setting out his priorities for the government. he called theresa may's

ministers -- committed to delivering brexit by october 31, saying the u.k. is better prepared for no deal than people think and hopes the e.u. will change its mind. in honorart of the day of the new prime minister, the image of the prime minister meeting with the queen, we mentioned this chart earlier. crisisjor in 1992, the oft thatcher, the ascendancy -- the lehman rollover, and what a collapse in trade-weighted. it is critical they hold it here. richard: why does one think it -- think they well? this is taking place not in a vacuum of slowing economic growth, slowing trade volume.

there is more headwinds than you can imagine. tom: your book on the fabric of america is we have to get our fiscal house in order to have an expensive fiscal policy. bill.a tough richard: to connect what you are saying to today's headlines, his first crisis besides brexit will be erode. how does he deal with -- iran. how does he deal with the straits of hormuz? francine: how will he deal with the? he needs -- with that? he needs to keep president trump on side. they had an oil tanker seized but the u.k. has allied themselves with the u.k. -- e.u.

and wants the nuclear agreement to go through. richard: he has to protect british shipping. the iranians expressed some readiness for a swap. that is possible, and he will continue to support a negotiated outcome based on the 2015 deal. the question is whether the iranians will go along with the. francine: how close well premier boris johnson be with president trump? richard: one area they will not be close is climate change, but the entire chemistry of the new prime minister and the president is they will be close. they are both mavericks, outsiders, disruptors. even though they will not agree on every issue, i think the chemistry will be strong. trump has been pro brexit and pro johnson long before it was

appropriate to be so. i think there will be some visits and they will be brothers against the establishment, against the status quo. tom: ambassador, thank you so much, richard haass on the irish question. monitor theinue to new prime minister of britain. cirilli with the secretary of state of the united states. the ecb in a bit. this is bloomberg. ♪

♪ coming up shortly, stay with bloomberg as we cover the latest on the ecb rate decision and a news conference, will he cut or change the forward guidance and cut in september? that is in less than a minute from now, 7:45 a.m. new york time. let's get straight to the bloomberg/-- business flash viviana:. -- holding back

demand for ice cream, slowing sales for unilever. second-quarter growth missed estimates. we spoke with the ceo. >> in q2, ice cream sales were lower because of cooler weather than last year and we are making that point on what should be the hottest day of the year, the hottest day ever reported in britain. we are a little bit weather dependent but fortunately we are diversified product. viviana: nissan doubling planned job losses and unveiling production cuts. they will cut about 12,500 jobs around the world. profits plunged 99%. nissan has been hurt by an aging

product lineup and sales slump. volkswagen sticking to its full-year outlook. thanting profits fell more 8% in the second quarter. vw has benefited from offering more lucrative suvs. >> we have been able to grow operating profit by 2%. the main reason is our mix is improving and we have success with pricing. we are forecasting into a potentially difficult second half, but this strong foundation gives us confidence to stick guidance. porsche he said taking public is not a priority. shares of tesla are plunging. in the second quarter, they posted a less than expected launch. the co-founder is leaving the chief technology job.

companyeen with the since billionaire elon musk joined the board 15 years ago. tom: on tech knology -- technology, no one better to speak to than paul sweeney, following media and the dynamics of revenue growth. the whole thing is based on revenue growth, every company, every story. paul: if you are a technology investor, you are paying for topline revenue growth. facebook had an exceptional growth, other than the street have been forecasting. despite the regulatory issues, advertisers flock to facebook. tom: do they change and adapt to washington and europe and the regulation, or do they have that arrogance? paul: they will have to adapt

because washington, for the first time in history, is focusing on tech companies from a regulatory perspective. in silicon valley, you have to work with washington going forward but the agreement they have at the federal trade commission does not change how they go about their day-to-day business. francine: do we really understand how these massive companies will change and how hard the regulation can be? paul: we are very much in the early innings. u.s. regulators have taken a light touch to big technology out of silicon valley. the european union has been the regulatory overhang for many of these companies. what is changing as we are seeing u.s. regulators and politicians saying big tech

needs to be reined in. how will that be affected? no one really believes big tech companies will be broken up, but what is clear is going forward they and they have to be aware of that and manage that. francine: who will have it toughest? paul: i think the social media companies like facebook will get the initial brunt of it because you are talking about user data and privacy. those are some issues that will resonate with politicians and regulators, so you will see this with public meeting -- social media companies. tom: the goal is that these guys diversify and they are supposed to diversify in content were tech or media -- or tech or media. do they have the skill set of

that? paul: they have done a good job so far because they have a huge tech book and can get the best programming. we have not seen a big technology company dive in and make a huge acquisition. i have been predicting that for a while. every time we see time warner, everyone expects google or facebook to jump in but we have not seen it. are we actually doing with our media and tech time? paul: we are spending way more time with video content than ever before. video consumption has gone way up the last 20 years. people are cutting the cord but that does not mean they are watching less tv. they are spending more time with world andes of the

online video products, spending less time with abc, cbs, and fox. tom: paul sweeney will address this at 9:00 out of new york. there is much more to talk about. front and center, can i say this, record temperatures in paris and london? francine: we have never seen a london temperature that has been so hot. i have been looking at some of the things the media are saying. london is focusing on the best beer gardens to beat the heat wave and what to wear to work in pairs. in paris.to 40 or 41 that is more than 100

fahrenheit. tom: the newly elected prime minister making a speech in the house of commons. looking forward to bringing the ecb decision to you and an exceptionally interesting news conference. please stay with us through the day. hurne data, there is a c to the market and ever more negative interest rates in europe. in switzerland, a plunge in greater negative rates as well. this is bloomberg. ♪

we're the slowskys. we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands! check it out! now you can schedule a callback

or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not. ♪ alix: facebook delivers for now. fines and privacy changes

didn't slow down facebook, but they still warned of a slowdown ahead. tesla makes less on each car sales as profitability falls. daimler forecast crumbles. volkswagen tries to buck the trend, but warns of trouble ahead. and draghi's dovish limbo. just how low can he go? the market sees an 80% probability of a cut in september. david: welcome to "bloomberg daybreak" on this thursday, july 25. a lot of earnings coming out. raytheon coming out, beating on earnings-per-share. they took up their forecast for the rest of the year, moving up now any premarket, basically on missiles. alix: defense, exactly. david: dow also out. dow had a beat on earnings-per-share. they took their forecast down