francine: the fed cuts rates for the first time since 2008. continue president attacks on the fed chair after saying the cut was not big enough but credits the fed for an early start? brexit loomsf hard faces a mark carney tough new conference. welcome to "bloomberg surveillance," good morning from europe and the u.s., good

afternoon if you are watching from asia. i'm francine lacqua in london. ato era july manufacturing 46.5, a touch above expectations. watch,llar is one to also the u.s. 10 year yield. the markets broiled from what we heard jay powell say. said they peace time rate cut has had an impact on the dollar extending. european stocks up. pound is the one we have been watching for. 2110, this depends on whether goes for a hard brexit.

oil, 57.8. we have an exclusive conversation with an exclusive executive and joining us later, the global head of research for blackrock. before we get to all that, let's get to the first word news in new york city. quarter-point cut from the benchmark rate by the fed. that says it will stop drinking the balance sheet in august -- shrinking the balance sheet in august. this move dashes hope for a move.er dovish >> it is intended to ensure

against downside risk from week global growth and policy uncertainty. to promote a faster return of inflation to symmetric 2% objective. viviana: shall reported profit miss after slumping natural gas prices, the last of europe's big oil companies to report, rounding out a weaker picture for the sector. 25%gas division was down but earnings were lower across all businesses including refining and chemicals. >> what we are seeing this year is the confluence of starting up sectors,ergy producing weak winter in north asia and short-term prices are over the summer season. investmentrclays

bankers outperforming rivals during the quarter. investment banking fees only slipped 1%, compared with 11% estimate. u.s. refining and chemical operation is facing a complex inter houston erected in flames, where 37 people work injured. 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'm viviana hurtado, this is bloomberg. francine: thanks. interview with better than expected trading revenue.

decline.had expected a executive with an exclusive interview. thank you for your time. despite the difficult markets, you posted a pretty good first net income. for that continue? -- will that continue? >> we are on track to deliver to 2019, exceeding 4 billion euros this year, 80% cash dividends, we remain a cash dividend machine, the best in europe. francine: talk to me about what you are expecting in terms of the ratio. we increased the stock at

zero cost for shareholders. ratio, comparable with best in class. for the risky profile of the group, we have the best europe. any other actions you are taking? deal. yes, we made a the second half the one we made with interim. we made a disposal of 3 billion euros gross, likely to pay. we are now concentrating on avoiding debt.

now isnt of our effort to put people in order not to re-create nonperforming loans. francine: your strategy has been clear. betting on private banking, asset management to increase income, at a time when it is difficult for banks in general. are you still stressing those three segments? grow: we are continuing to because there is momentum in italy now with the transactional spread. we're coming back on management. we are leader in cost efficiency because we are 49% ratio so reduction of cost is very important for us. now we are situation in the country to think about something to make assets under management fees. assets compared

to fundamental account. to deliverentrating and execute the business plan. it is possible to do something different when the situation comes back to normality. the real turning point would be the end of this year, after the budget low. the trend is for a clear reduction in interest rates, ecb-fed. in theg our spread country down and then politicians have to do their job and their part. year, we canf the be more or less that 150 basis points. --ncine: two investors still do investors still see you as an italian bank? carlo: we have a relationship with the country. just remember, we have a market

cap of 35 billion euros. francine: you are up there. carlo: we are considered by investors as a top class bank the cost of equity is related to the italian situation. with reduction of spread, we can have a -- francine: are you looking at job cuts? others --ank, and carlo: we already delivered in the last three years. agreement with a player in accounts specializing in payment. they are responsible for 40,000 outlets. we are responsible for another 10,000. country, 50,000 in the will allow us to reduce branches

in exceeding targets of the plan, another 1000 branches. boosts in terms of cost reduction. then we will reallocate people. expectation is we can continue not only to be a wealth management story but also a significant story of efficiency in terms of cost ratio. reduction ofed the nonperforming loans, we can have a boost of net income in the next years. francine: 1000 retail you are closing down and relocation, how many people eat are you expecting -- with the jobs? received from the people within the organization some voluntary exits for another 1000. this would be something we can deliver also do to agreement

with this new kind of solution. what do you think of 3? terms of tltro it,o: if we endorse all of we remain with excess of medium-term liquidity. for us it is pricing. being an italian bank with the italian cost of money, it is competitive. my expectation is we can also have something. francine: do you know how many funds? carlo: today we have 60 billion euros of tltro 2. and arrange. francine: how much do you worry about the italian banking

landscape? is there a plan b? worriede cannot be totally about the situation. the situation is under control now. today, it is much better to be worried about other banking systems. german or in the next year, some other players with a lot of 113, 112 aspects. francine: if something happens within the german system, would it impact sanpaolo? carlo: we are benefiting from quality. move from other international players to our deposit scheme.

we are probably considered by the international people, an opportunity in comparison. francine: what is your biggest challenge? i keep on hearing from executives, it is impossible to do business with rates at these levels. our central banks making your life difficult -- are central banks making your life difficult? people can move into what manifests. charge for the a negative interest rate, that is already baked into our figures. if spreads will go down --

>> president trump his attacks on the fed saying the cuts weren't good enough. we will discuss that next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance," and i'm francine lacqua in london. the first cut since 2008. delivers insurance

cuts but further easing shocks traders. powellnt trump says jay has let the country down, advocating for a bigger move. let me give you a market check. treasuries,on with that were retreating. dollar extending events after jay powell warned against expecting a lengthy u.s. monetary easing cycle. i'm looking at dollar hitting largely priced in by investors focusing on the hawkish tone. u.s. 10 year treasury yields, giving up wednesday gains. let's have a listen to what jay

powell actually said. today to lower target for federal funds rate by a quarter of a percentage point, intended to ensure against downside risk from policy uncertainty, with trade tensions which seem to be having a significant effect on the economy. they evolved in a different way. inflation is also running below target. we see those as threats to what is clearly a favorable outlook. we believe this is the right move for today. we think it will serve the three ends that i mentioned. francine: that was the fed chair, jay powell, commenting yesterday after the central bank cut rates for the first time in a decade. the head of blackrock investment institute joining us today. instead of asking about the markets, thank you for joining us.

if you were on the fomc right now, would it have been difficult to cut rates? >> it is a good narrative an explanation for cutting rates at this stage. we have been seeing global tensions increasing, growth worries have been increasing so i think there is a good reason to move in that direction. at the same time the fed has been ambivalent about what exactly the reason for justifying the cuts. the market has been struggling to understand what that means. francine: also dissenters? jean: that is part of it. the other part of the market worrying compared to what has been expected and priced in by markets, which was a more extended amount of easing. what we have heard is, more cautious on what is coming. there has been a repricing happening as a result. francine: the question we are asking everyone on the markets

blog that you can look at on the bloomberg terminal, has jay powell killed the everything rally? jean: i don't think he has. from our side, the bigger picture thing is we have seen a significant tip out of the central banks for the last three months. we have seen the cut being delivered. it is not as much as what markets have been expecting for the fed but that is secondary impact. repricing,e digested we are in a benign environment and supports risk assets for the next few months. francine: do you think it could be positive or is it a mistake if they cut from now? jean: they need to get the communication right around the actions. the actions themselves are justified by environment. there is more risk so getting insurance, which is the right framing, is justifiable.

there are remaining options about how much more or no more. i don't think we have mistakes. what is important is to give clarity through communication around it. we will look for even more going forward. francine: thanks so much. up next, we dive into the biggest movers today. european lenders reported today. details, next. this is bloomberg. ♪

francine: this is "bloomberg

surveillance," i'm francine lacqua in london. let's check in on moving markets. >> upside. 10%,ng this morning, up the german online retailer, sales accelerated for the quarter and sounding more upbeat on the operating profit as they face a lot of competition. 4.5%, natural gas prices keep hitting oil majors. the only one to withstand it was bp. shell far more than their peers really focused on natural gas. siemens also downside, down 5%. weaker than expected profits posted and sounding the alarm citing downturn in demand for energy and auto unit and what

that means for future financial results. francine: thank you. the from jean throughout hour, head of blackrock investment institute's. coming up next, a full brexit lowdown and we speak to a german chipmaker. ion,peak to the ceo of infin ben schneider. this is bloomberg. ♪ .

francine: the fed cut rates for

the first time since 2008 but jay powell messages about further easing roils the market. president trump continues his attacks on the fed chair after he says the cut is not big enough but -- the slumping pound and the specter of a hard exit looms large as mark carney faces a news conference. this is "bloomberg surveillance." u.k. manufacturing data, pmi for july is unchanged at 48, a cut above estimates. 47.6.cast of we will get back to brexit and the strength of the economy with the bank of england addressing it today after the fed first rate cut in more than a decade and attention moved to the bank of england as u.k. central bank is expected to keep rates unchanged at 0.75% but a new

prime minister and he sinking pound means the beckoning the forecast calling for gradual tightening based on smooth brexit could become redundant and the rate announcement, their latest economic projections and hear from mark carney at the boe news conference. let's get the latest from nejra cehic outside the bank of england appeared what -- england. what are we expecting mark carney to navigate? no deal brexit while not freaking out the markets i imagine. >> brexit will be front and center because the bank of england forecast so far in terms of gradually rising rates are predicated on this smooth brexit and increasing beverages between what the bank of england has been forecasting and what the markets are forecasting, pricing in rate cuts as soon as this year which is something mark carney will address any news conference. the question is whether we get a clear change from the bank of england governor.

we saw a shift in tone from some bank of england officials but how does he address this challenge? to 2016 whenck they took out market expectations from the forecast or do they prevent a separate set of forecast based on a no deal scenario. if you look at the falling pound and the fact you have wage thereres increasing, could be some justification for the bank of england to forecast hikes but the problem is the big outlier and uncertainty is the no deal brexit and in that scenario many people say no way the bank of england could hike. those are the diverging views that mark carney needs to address and he recently did say he has to address what he calls these markets and 70's. -- these market sensitivities. francine: jean boivin towards us from blackrock. press conference will dominate by the pound and

brexit. jean: he needs to have a cautious tone driven by brexit, clearly front and center, and we are in a bifurcated world, it happens with a no deal or a deal and the reaction will be different. the second part is the global environment has changed has beenly and he talking with a key speech about seachange a few weeks ago. navigate, on the case of a no deal brexit, we have weakening of the pound and the policy reaction may not be as trivial as we thought with cuts and he will have to navigate how much he wants to open the door and make that a given. on the other hand, if there was an extension or a more positive outcome, the global outlook has deteriorated and the hiking cycle or need for hiking may not be as strong as it used to be. francine: why don't we take it

scenario by scenario, let's say there is a no deal brexit and on november 1, what happens to the pound and what does the bank of england need to do? jean: sentiment would be dented and the pound would weaken further and it would be difficult for a central bank to sound hawkish in that environment and it would probably come with cuts initially. but then they would be thinking about the knock on effect of the weakening sterling on inflation and that, giving the weakening we have seen, that becomes a more real factor. easing but a contained easing initially. francine: how do you navigate finding out whether there is a no deal brexit? it is in the realm of politics 150%. jean: absolutely. you can do research but this is about how politics of all and human factors -- we've all and .uman factors

existing probabilities of existing scenarios at what has happened since the last two weeks is the probability of a no deal brexit is -- increased significantly and the possibility of a election or referendum is rising. we are trying to track and assessing those policies and they are increasing. francine: do you follow the markets or is there a danger the market is much more pro-remain so people do not think boris johnson will go for a no deal brexit? jean: it is the case that when we see that now we think the range is about graham has widened considerably with those risks i just mentioned. we think volatility is on the price as a result. it is also the case that we are talking about bifurcation and very difficult for market to price those bifurcations. francine: if there is weaker pound at some point to you by into u.k. assets? should that be something

investors should look at or is it too dangerous? jean: there will be opportunities that may arise and given the way the u.k. firms are global and can benefit from movement, we need to take it seriously. at this point it is mostly neutral position where big risk and cautious stance is our whenw bank of england governor, does that, depending on whether they are pre-brexit, does that move pound or something they will have the same concerns, same inflation figures come in markets will take it into stride? jean: i think the governor pick matters and the character and leaning the governor will have will affect things to some extent the market. it is about the institutions faced with the same big fax, i expect a material difference in terms of the near-term outlook. while there may be some information and news, i do not

think it will be a big driver of markets. francine: what would be your question to mark carney today? jean: how much of the global deterioration on the outlook, the seachange think talked about, how much of that is driver versus brexit domestic considerations? francine: we will ask that question on behalf of jean boivin of blackrock. extensivef hong kong, we have been covering the protests, the june retail sales year on year.6% after yesterday's big miss on second-quarter gdp which shows europe -- which shows contraction quarter on quarter. coming up, weathering a slowdown, infineon beats on profit but once on a sluggish economy. we speak to their chief financial officer next. how manufacturing get a, the

challenges facing mario draghi and his successor. that is coming up shortly. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. let's get to the first word news with viviana hurtado. lender's largest restructuring in years begins to take shape, stockton achieving is 24 a target for capital requirements and says it is on track to keep the metric at that level. 12%e are posting this midyear and beating our trajectory taking into account a 50% ratio in cash.

when you look at the figure, no reason to cut dividends. >> first half results that beat expectations this fight u.s.-china trade tensions, and asia in focus lender reported $7.7 billion of underlying revenue, the stock has been rising, helped by a $1 billion buyback program announced in april. costs were lower on reported basis than last year by 3% on constant currency they were flat with last year. the costs are well under control. >> the london stock exchange agreeing to snap up definitive in a blockbuster $27 billion deal, the transaction expected to complete in the second half of 2020. shareholders will get a stake of approximately 37%.

bloomberg lp is the current of bloomberg news and it competes with that do provide financial news data and information. joe biden facing an onslaught from the democratic debate stage last night. his opponents sought to cut down the front runner on issues such as health care, immigration, and women's rights and in response he appealed to his record as president barack obama's number two. beyond meet and insight shareholders have pulled discount shares, offered at a 19% discount to the closing wednesday, it was to hit early investors a slice of profits and ask -- and looks to expand. 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. this is bloomberg. shells quarterly

profit that missed estimates after a natural gas price slump, their lng sales wind slipped 3% year on year in the first half and despite weaker than expected earnings shell will continue a buyback program. we spoke to their chief executive. we had a lower quarter compared to the same quarter last year, $3.5 billion, 26% lower. a number of reasons for that. we have seen some very severe macroeconomic headwinds that was most pronounced in a downstream business where we so weaker refining margins. tradingl a much weaker for petrochemicals, and we have seen headwinds particularly in north america and gas and lower prices. that has have a significant bearing on the results. integrated gas results which are

also lower, there is a lag effect because the gas a price in the quarter are priced off the oil prices four months earlier. weakness of last year in rent, you see -- brent, you still see in the integrated gas business. we also had a bit of noise, counting noise this quarter, quite a bit, half $1 billion, a one-off issues to do with provisions and oil write-offs, about 20 of them working in the wrong direction this time around. that predominantly means our earnings have comes down. mattersash side, what most for a company like us, a good quarter. francine: that was the chief executive of shell speaking to us exclusively. let's get back to jean boivin of

blackrock. it has market correlation about global growth, the oil price is almost always either, because of oil, is it different this time? jean: i do not think it is different. that came out in the comments we just heard. a big driver of the oil narrative over 2019 has been around recession risks and the concerns around that. ofhave seen a reiteration global output, nothing close to recession. forhink recession risks 2019 in the near term, we are willing to put that off the table. if you believe there is a disconnect between what we have seen in the energy sector and oil and the believe that recession risk is not as high as markets are expecting, there is a contrast with the fed where basically they are confident that recession is not on the

horizon and we are buying insurance. i think it is been driven mostly by concerns about the outlook, the oil behavior we have seen. to the extent we do not see recession risks, that is not in line with the behavior of oil and gas. francine: jean boivin of blackrock stays with us. infineon gaining after a profit beat estimates, a sign they're weathering a slowdown in the automated market such as china and the repeated concerns about a sluggish global economy after previously warning the trade war between the u.s. and china made the market environment highly uncertainty. joining us is sven schneider, the chief financial officer of infineon. thank you for giving time to bloomberg. where do you see sluggish growth in the world? >> hello. i am very happy to do so. that me start with reiterating that this quarter three was in line with what we projected from

the revenue side, from the segment result margin, we were slightly ahead of guidance with a 15.7%. if you ask me about the different divisions we are working in, we have clearly , weunicated that we see call it bifurcated situation in the automotive division, our biggest division in terms of revenues. on the classical automotive applications, the car unit related applications, we are seeing a decline and a weaker market, which is consistent to what you have heard from the oems and the car suppliers. in contrast, we have always communicated that the bigger trends, the structural trends, electric vacation of the , wecles, assisted driving continue to see strong demand in all regions, and therefore this

is developing nicely. this is the automotive side. and to include on the pmmond-biggest division, the division, we had different trends with a slightly weaker side werom a server have which could be good growth coming from new applications, 5g applications or a new silicone microphone and mobile. francine: that a cap relates what you have done so far but when you talk about macroeconomic conditions, where are they? china or elsewhere? do you see a global recession? >> what we say is that we have probably, we are at the bottom of a semi-down cycle. we see stabilization at this level. we do not see a for the recession. , wereviously communicated

did not believe in a recovery in the second half of this year. 2020e that more to come in but not in the second half of 2019. francine: how is your credit rating looking at what are you doing to bolster confidence in your balance sheet? >> the credit rating you said? francine: and what you are doing to strengthen your balance sheet? >> this is the infineon standalone answer and the answer related to the already announced cypress semiconductor acquisition. the credit rating of infineon is ratinglid at a triple d with a good cash position and well-capitalized. in regard of the anticipated acquisition of cyprus which comes at a give or take a 9

million euro enterprise value, still subject to regulatory approval, we have communicated there is a clear goal of the company to remain solid investment grade rating in order to remain in solid investment grade rating we have to mitigated that -- communicated that 9 billion, 30% will be financed through new equity and 70% through debt and cash on hand. on the 30% we have already executed in the first weeks and accelerated book building of 1.5 5 billion in the first weeks of june in order to make our balance sheet strong and to remain strong. francine: thank you so much, sven schneider, chief financial technologiesfineon talking to us about world growth and macroeconomic conditions and how are relates to infineon. ,urope's manufacturers struggle we discussed the challenges facing mario draghi. that is coming up next.

this is bloomberg. ♪

thisthink likely one more year, whether september or

october, more academic than economic impact, one more cut to come and we will wait and see how things play out but there is a lot of uncertainty, slowdown across the globe, we will see how that plays out and trade tensions had been at times quite a cute and have come down. they will have to adjust to that and brexit is in the background. there is a lot of uncertainty to deal with. francine: that was andrew wilson , the goldman sachs chief executive. let's focus on central banks. jean boivin is with us from blackrock. boe,u are boj come ecb, you are looking at different macro indicators, you have political pressure and brexit. what is the hardest job out of the four? jean: it is quitting -- getting a clear message out with forces coming at play and all of them

have slightly different issues to deal with. the common thread, team indication is more difficult -- communication is more difficult in this environment, what kind of framework are they operating in. we have -- francine: you have to be clear but if you are two clear, the market prices it in and you do not have firepower. jean: clarity is not on what you intend to do but the framework, how you think about it. there is a difference for the fed about thinking about is it an insurance cut or because you're worried about the economy slowing, or you are seeing some confidence. this leads to different outlooks. you cannot keep maintaining all of these options open. whichs the framework in they are operating which is a bit more vague. rates in this

environment are moving and play an important role. it is the case of some policymakers paying attention to the exchange rate more than we have seen recently and there's an element of currency war. i do not think central banks are engaged in a currency war at this stage. even though we are losing a bit of the plot in some cases, it is driven by two or monetary policy consideration and so far it is only rhetorical, not an actual currency war. aancine: jean boivin blackrock. me out of news york and we will count you down to the bank of england decision. ♪

francine: a little cut, the fed

cuts rates for the first time since 2008 that jay powell's next messages about further easing roils the markets. hisu.s. president continues attacks on the fed chair after saying because was not big enough but credits them for an early stop -- bank of england, slumping pound and the threat of a heart exit loom large as mark carney faces a tough news conference. good afternoon if you are watching from asia. i am francine lacqua in london and tom keene is in new york. we will spend a lot of time trying to figure out what happened at the news conference, why the market is disappointed and what it means for the rally after what jay powell said and we will spend the time that is left in the next two hours talking about the bank of england and earnings. tom: earnings may be about your opening was dead on about the tensions with jay carney, fascinating to see. let's call it bloomberg: race to the bottom, we have great

currency charts to show where we are. the lead stories renewed dollar strength today. francine: you are not wrong on that. i was speaking to jean boivin about whether we were in a currency war. let's get to the first word news. >> president trump and investors and blasting what they believe is a muddled message from jerome powell. the central bank cut rates for the first time since 2008 and he left open the possibility of further moves but said he did not expect an extended easing cycle. donald is hoping for a larger rate cut and tweeted, as usual powell let us down. the bank of england is expected today to keep its benchmark rate at three quarters of a percentage point and mark carney has to confront new realities of brexit. dealrospect of a no

divorce has led to a falling pound and lower body is and that means giving the forecast based on the smooth brexit could be meaningless. democratic presidential candidates try to dig down joe biden last night, he took shots from nine other contenders on a wide variety of issues with julian castro getting into it with him about immigration. >> we need policies with guts on this issue. [applause] >> i have got enough to say his plan does not make sense. >> jill biden was trying to put to rest questions if he is prepared enough to face president trump next year. a pentagon watchdog says afghanistan military is seriously shorthanded with a new report finding the army, air force, and national police almost 80,000 people short of their target. the u.s. is trying to negotiate a peace between the government and the taliban. 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. this is bloomberg. currencieses, bonds, , commodities with big changes off of 2:00 p.m. yesterday with equities down and a little bit of a pullback now on spx futures. the curve way flatter and a little bit of a bounce today but is still a very flat curve with 16 basis points. weaker euro. 14.99 and dollar index, that is a full move over the last week, 98.82 on the blended major trade currency with the euro 110..46. chinese renminbi job outside of two standard deviations, the ramifications of this are not just about the major currency pairs. francine: you are right but it is important but central banks are doing and the question without a doubt is jay powell

killed the global equity and the question is will we see a currency war? the dollar extended after jay powell warned against expecting .engthy monetary easing policy stocks were rising in europe and now trading sideways. we need to look at pound because we're trying to figure out how mark carney will dance around the brexit and the weak pound questions at the press conference. tom: many different ways to look at the dollar, the bloomberg dollar index, it is quite good mathematics. this is the real brought index, including china and many emerging markets. dollar strength. massive dollar weakness taking the president happy. since march of 2018, here is the lift off with the new leg up and do we breakthrough here to dollar strength? confounding all sorts of strategies. francine: yes, probably the

chart of the day, not deterred of the month. probably president trump will tweak something about the dollar if he has not done so already. euro table, we have talked about this because it has not moved, now moving up a little bit but in the wake of what we have heard boris johnson say, which is the u.s. -- u.k. governments doubly spending on u.k. brexit preparation, serious about leaving the european union without a deal by october 31, watch out for movement when it comes to euro cable. to talk about dollar strength is peter dixon at commerzbank global equity economist. it is a great chart. is dollar strength here tuesday? -- here to stay? >> we have dollar strength at

the time the fed has started to cut interest rates. it says a lot about the weakness of other currencies in other parts of the world. we have talked about the weakness of the euro zone economy. the dollar is gaining against the euro. with regard to u.s. fundamentals , they look pretty solid to me. tot is a good enough reason assume the dollar can gain a little bit over the next few sessions and probably consolidate gains for a wild and we will revisit longer-term forecasts. francine: the press conference yesterday overall, i do not know whether back communication but it was bizarre when you listen to jay powell cutting rates but talking about raising rates. is there a communication problem at the fed? >> i am not sure there is, the problem is more what the markets are thinking. mud being thrown by the president. they are making communication

strategy much more difficult that the fed is communicating clearly it will stop the rate hiking cycle, it did so in march. there was a question as to how far the fed will go from here. they have been unclear about that. -- what does a rate cutting cycle mean? tom: thrilled to have you on today. let's quote the investment strategist francine lacqua, it was just rather bizarre. that perfectly captures what we saw yesterday. it was really strange. peter, with that said, what do we watch to see a tipping point into the race to the bottom? dollar?tch renminbi,

how do we figure out when it is a race to the bottom? >> i am looking at the euro because it is close to our heart and the euro is the currency we thought would gain a little bit of ground against the dollar over the course of the coming months. that seems to have been thrown to one side. you have to watch it because the chinese are actively engaged in preventing the renminbi from --ing too far in the market tom: critically, does this limit the degrees of freedom president lagarde will have? if governor cardi -- governor carney act how do those degrees of freedom shrink downs, undiluted the of the european central bank?

not just degrees of freedom from abroad the what kind of legacy will president draghi leave? september, policy in policy will be maxed out and they will have less to maneuver. it will be difficult for the incoming new president given the increasing constraints upon monetary policy. francine: peter dixon from commerzbank stays with us. announcesf england its rate decision today at 7:00 a.m. in new york, 12:00 p.m. in london, mark carney will hold a press conference a half an hour later and we will have full team coverage. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. facing pressure over brexit with u.k. government doubling the amount of spending for a no deal preparations under the new prime minister. the bank is expected to hold the benchmark rate at 0.75%. -- peter dixon from commerzbank is still with us. --expect mark carney to ask or field a lot of questions on brexit and the pound. do we understand what boris johnson is thinking? this is trying to goodness the eu he is willing to go for a no deal? >> trying to government everybody he is going for a no deal. we have had spending commitments from his new chancellor about

the extra money they will pump into the economy and they would be a marketing campaign, more than 100 million pounds spent on advertisements in european papers. says, don't forget that he has a majority of two in parliament and we have an election today in wales where he is expected to lose another seat and that means a working majority of one. and we have a whole summer to go. there is a possibility he has no majority in parliament. think, a verye good point, he wants to stay in power, he was elected by conservative members that probably one a no deal brexit. if there is a no deal brexit, can he hold onto power? the conservatives have is the brexit party, the

insurgent party is eating into their votes and he is betting that if we can get over the line and his government can't survive and deliver brexit, that shoots the fox of the brexit party. all those votes come flooding back and if there is a general election, the conservatives have the number to get a majority. you take 15%, 20% out of because of the vote he cannot form a majority and they will be back in a hung parliament. johnson getsnister the headlines whether gossip or social order actual policy, what is the desire of the republic of ireland and brussels now in terms of building infrastructure at the border? what is their best outcome? >> it is a difficult problem, not only for britain but a big problem for ireland in the event of a no deal brexit. visited northern ireland yesterday.

the european union is duty-bound to protect what they call the integrity of their eternal single market and if there is in no deal brexit and tariffs are imposed on the transactions between british and european union goods, there has to be in infrastructure or way of taking the tariffs of the border. both sides they will not put them up but the european union will be duty-bound to try to impose that in ireland. no one has been able to answer that question so far. it is a difficult problem. tom: a delicate question and in my amateur reading of this, there is the thing in chapter 42 of every book about the combination of northern ireland back into dublin and the republic of ireland. what is the percolation of the visit to northern ireland, is there a constituency where we would combine the two? yesterday from somebody

who said maybe the time is right for a border poll, a vote in northern ireland to ask that question, should ireland finally be reunited? this is a sensitive subject. question about a vote is enshrined in the good friday agreement and if the argument goes if there is chaos surrounding no deal brexit and chaos of the border, circumstances have changed. the prime minister has dismissed those claims, saying no majority in northern ireland for such a vote but it shows what is at stake with this problem at the border in ireland. we are talking about the fundamental breakup of the united kingdom. tom: we will come back and look at a sterling chart. emotional at got the break looking at this chart and he may stick around. pound sterling moving around come out front of the bank of england meeting. david merritt with us and either dixon as well. -- peter dixon as well.

much more on the historic fed meeting from yesterday. hour onen in our next jerome powell and original fed policy. this is bloomberg. ♪

market,in the capital we want to focus on the area where we have a strong it as anp, i see

opportunity in this market were some banks are withdrawing from activity, european banks alongside. midyear andng 12% updating our trajectory, taking into account a 50% payout ratio in cash. when you look at the figures, no reason to cut dividends. i was encouraged by the recent communication of the ecb saying they are considering something if they areerstand long, it can impact profitability and what does it mean the ability to invest in digital transformation. the ecb cannot just look at this very far and should look at something like this, other countries have done similar initiatives in these situations.

mark. is a question we are not making changes of strategy because of the brexit. francine: that was some of the conversation with the societe generale give executive. -- chief executive. the bank of england grappling with the no deal brexit prospect and we look at pound weakening. 121.15perspective of a pounds. peter dixon with us from commerzbank, the chart stunning, it takes away all the noise. it takes away all the news flow as well, nothing more than pound sterling on the low of the 84-85, and down we go, the pound weaker, a nice recovery in a decade. , the new48 years decline on a log basis. this is unsustainable.

it looks like the chart of a banana republic. what to do? the truth is that we could even go lower. breaking point. if we get a hard brexit in october, i think where going lower possibly up to 10%. under those circumstances, you are talking about revisiting the laws of 1984-1985, but if we stay off a hard brexit and somehow push the decision to the future, the pound goes back up. where we are now is a temporary equilibrium. there is no doubt that over the , the pound hass come under pressure and it says economicut the u.k.'s

standing. tom: bring the chart up again. , there a 48 year decay is a fancy thing we do not talk august, but there is a trend, what is the urgency for the nation, for the prime minister, and for the next governor of the bank of england to change this trend? peter: i think you hit it on the head. first of all, it is brexit. if we can somehow parks that problem, you give the pound of a lift and you break the trend. , the fact that interest rates in the u.k. remain relatively low, perhaps lower than fundamentally justified, suggest that when you look at the relative risk of the pound through other currencies you will hold other currencies.

higher inches rates may provide the pound with a little bit of support but that will not happen anytime soon. i am afraid we will have to live with this week pound for some time to come -- weak pound for some time to come. the movement in the pound matters for inflation and the sharpening over the course of this week, if sustained, it will put pressure on inflation over the course of the coming months. francine: how difficult will this news conference before mark carney? brexit is either a no deal or something else, he will navigate weaker pound, and needs to navigate a changing global economy. ,s this is bigger problem globally it is getting worse and they need to deal with that. peter: indeed and that was the one thing that back in may when the bank of england said rates , they wereto rise doing and because of that point the fed rate cycle had ended,

the hiking cycle had ended and the ecb was lucky to do something. to catchis beginning up with the global cycle but that just adds to the pressure. aroundernor will dance the brexit question today. that is all he can do. before the final meeting october 31 deadline. a lot of questions and i do not think there will be many answers. francine: peter dixon from commerzbank stays with us. , we will ask about oil prices and some of the oil rigs. this is bloomberg. ♪

♪ bloomberg "surveillance," really interesting show today. francine lacqua with bank of

england coming up, nejra cehic. currencies on the move. in new york city, here is viviana hurtado. viviana: joe biden was the target at the democratic presidential debate, nine rivals going after him on a variety of issues but biden counter punched and was sharply critical to kamala harris. in 10re is no talk about years the plan will caused $3 trillion and you will lose your employer-based insurance. to be very blunt and straightforward, you can't beat president trump with doubletalk. viviana: biden was trying to put to rest questions if he is prepared enough to face president donald trump. down,"al, powell let us

this quote coming from president trump after the fed voted to cut interest rates by a quarter of the point. powell does not see the move as the start of an easing cycle. one of the sons of osama bin killed.s been killed. he was viewed as an eventual heir to the terrorist organization. the u.s. played a role in the operation that killed him. president trump offering vladimir putin help in fighting wildfires in siberia. but russia thanks, is assembling a fleet of planes. signalsaid the call is a they will be able to -- putin said the call is a signal they will be able to restore relations. 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. francine: let's get back to our top story, the first reduction since 2008. the fed delivers an insurance cut but sends mixed messages about further easing. president trump's's jay powell has let the country down and is boe senior advisor to governor carney has a few things to do today, and peter dixon from commerzbank is with us. thank you for sticking around. when you look at central bank in play today, are we in a currency war? does it feel more easy now? >> i cannot talk about the bank at the moment. the volatility in currencies is challenging. starling correlates with brexit news flow and that is challenging for market participants.

what does this mean for the financial system of the future? and thereis painful is now a 100% expectation of cuts. in the medium-term, what does this low rate being for financials? francine: should the central bank set on a teary policy thinking about the banks or is there -- monetary policy thinking about the banks? huw: each central bank has their own mandate. some have rigid deflation mandates. i am with charles goodhart. on, thrilled to have you and i understand the constraints that you cannot talk about the parlor game of what the boe will do today, but you are expert on the linkage of the financial system into what bank policy is. do the phd's at the bank of england have any clue what the

effect is of chronic negative interest rates? is there a research piece where we can glean how we escaped this morass? huw: we don't have negative rates in the u.k. there is a great piece i would love to share with you, by professor charles goodhart. it is about two months old. he takes apart the key piece of research the ecb is using to defend its negative rate policy. the key point is there is friction in the financial system and the banking system becomes less profitable and more brittle. it cannot invest in more technology. at struggles to pass it on. the euro zone banking system last year made about 4% return and this year it is probably not much higher. this pernicious lee low rate environment -- pernicious lee --

perniciously low rate environment is difficult. tom: you have marvin goodfriend talking about we need to be braver and go deeper with negative rates. do you have a view of what we do when we come up into a positive rate regime? do we glide up to that or will it be brittle? huw: this is a tough one, because we look like we are going lower and for the cycle it is not likely to raise rates. the governor kuroda had an interesting speech, bread and butter banking business has declined. it has been offset by gains of the bonds in investment portfolios. , theu reverse that investment portfolio goes down in value so it is about the pace and trajectory.

we are heading in the other direction, but i am happy to get in touch with charles and do some work. tom: he is driving sterling lower. we are going to get a lower handle. huw: i don't believe so. francine: holiday in europe, no one goes to cornwall anymore. is everyone ready for a no deal brexit? huw: i think governor carney has said the banking system is prepared for any scenario. i would push back to the colleagues at the bank and they have been extraordinary clear. francine: do you think everyone will be prepared? the probability now of brexit is 40%. high, but not above 50%. the banks have been preparing for this for a couple of years.

it will not be a comfortable environment, but i'm pretty sure we will manage in a no deal environment but hoping it will not happen. francine: what does "manage" mean? peter: we hope business as usual. many of the clients will have difficulty and that will feedback onto the banking sector business, but in terms of the and the infrastructure piping for transactions to be conducted across the european borders, i am pretty confident will be ok. tom: i want to go back to your days of analyzing banks. we spoke with the leadership of societe generale. everybody is looking for scale. upt we have a big bank roll over five and 10 years? huw: there is an increasingly

haves and have-nots in the banking system, those can -- those who can afford to invest in technology, and the tech firms. payment is the battleground for tech firms against the banks, so the haves and have-nots will have to scale up themselves or borrow someone else's scale and use someone else's services. some u.s. firms are spending three times the tech budget of the european ones. maybe that is why the market -- london stock exchange has a higher market cap. you.thank commerzbankof providing wisdom. we are waiting for a 1.20 handle on sterling and we do not see that yet european banking, off

of the stunning press conference of chairman powell. -- william bauder and the 7:00 hour. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." investment bankers that barclays -- at barclays outperformed rivals in the quarter. that bolstered jes staley's hold on barclays. he has taken on the added responsibility of leading the securities.

shares of standard chartered are higher, posting results that beat estimates. lower by last year by 3%. they were flat with last year. costs are definitely under control. viviana: standard chartered signaled u.s.-china trade tensions are clouding the business outlook. -- for saying -- francine lacqua spoke with the ceo. >> the reduction of the interest rate is something positive because in the end, each new spread people can will dutch move into wealth management. viviana: and has a says that is on track to deliver the target. tom: let's discuss european banking.

a senior advisor to governor carney at the bank of england, really doing a lot of work into technology, -- in and peter dixon with us. commerzbank,with you represent a german bank, how bad is the profitability? how bad is the profit-making machine of european banking? huw: you nailed it on the head. low and -- peter: you nailed it on the head. low interest rates have consequences and you see it in the banking numbers. costshe bank had to slash to remain competitive so negative interest rates are hurting. my bank analyst colleagues will tell you it is not all about negative interest rates, but i say how are we generating

returns? tom: one of the greatest insights elbows was david rubenstein talking about intercountry mergers versus going across border. our reclose are two cross-border cup -- are we closer to klos -- cross border banking? huw: i think it is slow. i think banking union is halfway two thirds through so there is some rigidity for cross-border. almost all of the deal so far have been domestic. when you talk about building scale, it is challenging because in an environment where you are not making money you are thinking about, how do i invest in technology to keep ahead? francine: will the banks be disrupted by tech knology -- technology or smaller players if they have not kept up? huw: it is how much of their

budget is spent improving systems. european banks are spending about half the budget to u.s. banks investing in innovation. libra wants to look at remittances so maybe it will start in asia or africa first. you look at china. 90%payment firms have a market share in mobile payments. you need to be worried about it now. francine: but you also need to regulate it. who will regulate at first and what form will it take? huw: it depends whether we are talking libra or payment. francine: both. huw: i thought it was important to update regulations in the digital age. when you get large firms encroaching into financial services, they need to be treated in an equivalent way and

we could probably update rules. cryptocurrency, ed is not that facebook will be successful. india will be the largest on bank market after china, but to use cryptocurrencies, they are threatening you will go to jail for 10 years. francine: if you focus on libra, what other agencies as the bank of england when you were working on this, who are they consulting with? regulated in to be each jurisdiction you pick up money. there is a group looking at the overall structure of libra but if they will be active in india or indonesia, they will need licenses in those countries. it will be a complex rollout. tom: how do they develop trust? how do the techies develop trust

with fancy guys in suits like you? huw: there is an easy and difficult answer. trust an extraordinary amount of personal information to social media. day today, they do have trust. the other thing we learned areher it is from ali pay the others, it is about convenience. if you are transmitting small amounts of money instantaneously and it is convenient, that tells trust. you need a strong regulatory framework to make sure if things happen the system is well regulated. financial services regulators are catching up with the situation and this will have to be an enormous focus. tom: you mentioned a paper from professor goodhart. have you seen a paper on how we

find libra stability, how we find some sort of currency stability? huw: if there is, i have yet to find it. tom: thank you. huw: one of the things we did, being a little bit nerds, if you puzzle, there is about 78 pages on tech knology -- technology and almost a dozen on government but 04 regulation. regulation. tom: are you long bitcoin? huw: no. francine: i was going to ask on the subject of regulation whether you had done any work on open-ended funds like woodford and what kind of role could central banks take? huw: that is a topic i have spent a lot of time on when i was at morgan stanley. i have done -- not done work on this because i was trying to

look ahead. it is something for the sca. i think this looks like 3rd avenue, an individual fund that got into a very liquid position and hit the redemptions. this is an open topic to think --ut what open-ended francine: thank you, senior advisor to governor carney. coming up, the chief financial officer of general motors. we will ask her a thing or two about what they do next and about the trade environment, at 8:30 a.m. in new york. this is bloomberg. ♪

♪ bloombergtechtv "surveillance," francine lacqua in london. nejra cehic outside the bank of london, going to be an interesting press conference today, the politics of england and the global central bank story. peter dixon of commerzbank with us. the press conference yesterday

with the noted economist was bizarre. what was odd about the struggle chairman powell had yesterday? peter: i would say it was totally bizarre. he caught the markets by surprise, that is for sure. i think the markets were expected mr. powell to say there are more rate cuts in the pipeline. the chairman just said, we are going to take it easy. he said this is not going to be the first in a series of rate cuts, but what is a series? enoughthree rate cuts is of a series. i think there is more to come. i don't think the fed wants to -- ando many hostages attacks from the president. tom: we have a weakening in

pound-sterling. 1.20 brent on sterling, not a 1.19. it is a real decline. does the governor of the central bank need to defend the currency today? peter: my view, no. -- maybehe bank's view others can say different -- the markets will determine where to go. there is no sense the bank of england needs to step in and defend the currency because it is a market decision. if the inflation rate were to suddenly shoot up as a consequence of the course of the next few weeks and months, the pressure may be to react with an interest rate hike, but i don't see why to do anything at all. francine: this is tom's favorite

way of looking at pound, a trade-weighted basis, around 4% since the last round of forecasts in may. they do next? is communication the only tool they have? was no clear communication about their thinking. peter: obviously, a concern about -- the concern the markets want to be spoonfed, which is something that has concerned me for quite some time. when centralng ago banks use to surprise markets and we had to deal with it. it is a good thing central banks do not always give the markets the information they think they need because the banks need to surprise them. we are in environment -- we are areasironment where many

are looking out of whack. tom: if i look at the chart back 40 years, it looks like a wealth reduction for the people of the united kingdom and a reason for others to buy up the asset. we will drive through this conversation through the day and with our coverage of bank of england this morning. this is extraordinary, this currency erosion. peter dixon of commerzbank, thank you so much. steenin for huw von joining us. adam posen will join us. this is bloomberg. ♪

♪ this morning, chairman -- thesays michael is

performance of the economy has been reasonably good so let's cut interest rates. the president says powell led us down. the dollar finds you -- renewed strength. president obama knew exactly who i was. prime minister johnson considers weak sterling over three decades. it is extraordinary. this is bloomberg "surveillance." francine lacqua on queen victoria street, nejra cehic to join us in the our bang. it is -- in the hour. toncine: we briefly touched 1.21. i have an intraday chart. certainly that will be the most

difficult question for governor carney to navigate, in the case of a no deal brexit what happens to the pound, the forecast, and monetary policy? forecasters are cnet holding rates at 0.7 -- seen as holding rates at 0.75 sent today. of: this may be the chart the year, the intraday breaching 1.20. a yearly chart on sterling from 60,000 feet with reddish shares not on strike. -- british errors not on strike. pound, a new slope ever weaker. only adam posen can understand that chart. here is viviana hurtado. viviana: donald trump and investors blasting what they believe is a mottled message from the federal reserve.

chairman powell speaking after the central bank cut rates for the first time since 2008 and left open the possibility of further moves but did not expect an extended easing cycle. president trump tweeted "as usual, powell led us down." the bank of england expected to keep its benchmark at three quarters of a percentage point. discussney has to brexit. the forecast could be meaningless. presidential candidates trying to take down front runner joe biden in last night's debate. immigration.it on >> what we need our policies that have some guts on this issue. >> thank you, secretary. >> i have guts enough to say the

plan does not make sense. viviana: biden was trying to put to rest questions if he is prepared to face president trump. a watchdog says afghanistan's military remain seriously shorthanded. they are almost 80,000 people short of their target. the u.s. is trying to negotiate a peace treaty between the afghan government and the taliban. 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 this is bloomberg. tom: let's get to the data check very quickly, equities, bonds, currencies, currencies, equities with a little lift. curve flattening after the fed meeting. equity markets show a larger vix. 99,ar index rounded up to that is a big deal. no doubt president trump will speak on dollar today.

it is not just about euro and sterling, renminbi goes up two standard deviations, back to 71 per dollar. per dollar.n francine: the second story is what is happening to pound. the story of the day, quite a big move on pound over the last 10 minutes. mark carney will confront the new increased likelihood of a no deal departure from the e.u. when he decides on interest rates in 55 minutes. then we will have a news conference. tom: there are a lot of complexities, a lot of moving parts. the research heritage is jacob chicago and kenneth rogoff on foreign exchange in

the dynamics of the system. we are thrilled to bring you adam posen with the peterson institute. how does the president address a renewed strong dollar? adam: unfortunately, he is going to address it instead of shutting up. there is nothing he can do about it because he and congress have given us such large deficits but that will drive up the dollar, and other places like the u.k. and europe are not doing well. no job -- no jawboning of the fed will matter. tom: when the facts change, i change. with weaker sterling, have the facts changed? adam: instead of the facts changing, it is more a wake-up call to the markets. governor carney and the mpc could not say anything beyond

brexit is a bad idea. it is a matter of time on the fundamentals for sterling to weaken. until there is an election or departure own october 31, the bank cannot do anything. francine: how difficult is communication by central banks via the fed or bank of england? adam: people are making it difficult on themselves at the fed. sustainedd this long, and reasonable's -- reasonable insistence to be more data-driven, data-dependent as they say, and to raise rates -- cut rates when the recent data is going the other way is a hard message. you have a committee that has multiple reasons for wanting to cut rates, but not an agreed set of reasons from the outside. governor carney and the bank of england, communication is the

least of their problems. they have the 1970's style conflict the u.k. has, you want to cut rates for domestic reasons but you cannot because the pound is crashing. francine: if you look at the fed , was the press conference confusing or are markets expecting to be spoonfed? adam: that is both. the markets are what they are. i think powell and the team should spend less time worrying about that. there is ultimately a confusing message because nobody really thinks you are fine-tuning a 20 -- at 25 bps and that is the right number, so you have to explain why there is more to it. tom: i am thunderstruck that the issents came from a

conservative region in kansas city and a liberal region in boston. how much do we want alan gripspan back and a lock on what the fed does? adam: we don't, we just want something more disciplined. as you have tracked through the years, since mid bernanke, we have had a breakdown of the norms so that we have got federal bank reserve presidents on tv, running around and commenting more frequently. give credit to president george and rosengren because they are consistent and fact-based and their concerns are financial stability. they have made it clear they worry about the financial stability aspect of the rates in this environment. tom: there is a deterioration in manufacturing statistics and yet

as jerome powell said yesterday, things are reasonably good. it seems to be a fed desperately trying to get out front of the data. is there any history that works? adam: there is some. one piece of this that the chair and vice chair have said in recent months, and president williams from new york, financial factors are playing a bigger role. that is quite a shift. it used to be for long time the fed only paid attention to international factors like 1998 when you had south korea and russia tanking and threatening to take down the u.s. banking system. they are concerned about the impact of the low rate environment in europe and elsewhere dragging down the u.s., or the u.s. having an interest rate differential so much off of what everyone else

is doing is causing a problem. that is new. the fed conference in chicago two months ago, a great paper by my colleague surveying all the ways the international economy affects the u.s. economy. that is a big change, and interpretation change. it is historic, but it is a change. francine: plenty more with adam posen, peterson institute president. we will have to talk about the part -- central-bank challenges. we will have live coverage of the bank of england's rate decision. this is bloomberg. ♪

♪ this is bloomberg "surveillance." week, beyond meat faces its andest challenge yet -- possible burger faces its biggest challenge yet. menu at about 10,000 restaurants. some chains reported intermittent supply problems. bankers at barclays outperforming rivals this quarter, falling less than expect did, all stirring jes staley's hold on barclays. addedtaking on the responsibility of the securities business. may a morning must read for

conservative republican, george will, really reams the democratic party this morning off of two days of debates. aspirantsdemocratic is like watching a century ago the 1919 world series one spec traders thought -- spectators thought, the boston red sox are trying to lose -- white sox are trying to lose. the party of science, as democrats advertise themselves, it is not the party of arithmetic." we go to kevin cirilli, our chief washington correspondent. bowden wants to know one thing. will there be fewer people on stage in houston? kevin: yes. i don't see how there is an. i put that question to the

chairman of the democratic national committee yesterday, and he noted the threshold becomes increasingly more difficult for this 20 plus theidates to challenge -- divide among democrats on full display and we saw that last night as former vice president joe biden took it from all sides. the perception in the spin room behind me is that biden performed better than he did in miami, did not have a disastrous type of showing. is: some of the zeitgeist the vice president walked away from president obama last night. i don't buy it for a minute. kevin: i don't either. i think last night you saw someone more polished and ready for prime time. you saw that in terms of how he was reminding voters of his

personality by saying, has politics by noting he was someone saying who wait -- would defend obamacare. you saw him directly take on bernie sanders and there were some questions of whether he would allude to him. whoentioned bernie sanders was not on the stage. some other folks were able to have key moment. senator michael bennet dug in as a centrist candidate. -- theink the doubt nominee of the democratic party will not be in favor of medicare for all. kevin: medicare for all becoming a divisive issue. kamala harris calls her plan medicare for all but a lot would say, that is not to care for all.

you are not requiring folks to get rid of their health insurance. ofis one tick to the middle what warren and sanders are proposing. , thank you soilli much, our chief washington correspondent. on to houston. we have much more to talk about. coming up, we will do more work on this with a former member of secretary clinton's campaign and amanda renteria. this is bloomberg. ♪

♪ had a lower order compared to the same quarter last year, 26% lower. as you can imagine, we have seen some severe microeconomic headwinds that were most pronounced in our downstream muchess where we saw a weaker trading environment for petrochemicals. in our upstream, we have seen headwinds in north american gas , that has had a significant bearing on the results. if you look at our integrated gas results which are lower than the same quarter last year,

there is a lag effect because the gas prices are priced off lower prices four months earlier. some of the weakness in brent, you see coming through in integrated gas. that does not explain everything. we had a bed of accounting noise this quarter, quite a bit, about half a billion of one-off issues to do with provisions, write-offs, other accounting matters and unfortunately they work in the wrong direction. that means the earnings have come down. on the cash side, which is what matters most, it is a good quarter. francine: that was from bloomberg's exclusive interview with shows chief executive. u.s. and chinese trade negotiators will meet again in

early september according to the white house, after meetings left little signs of concrete progress. says trade policy uncertainty has been more elevated than we into supinated. let's go to adam posen who is still with us. want tosident trump fight with china and run for the election so he can cry vic erie him atory, and it gives higher rating in the polls? adam: unfortunately, that is the right way to look at it. i think he genuinely wants a trade conflict with china and he is pulling back because of this gaming aspect. we will be locked into this negotiation that goes nowhere. maybe the chinese will agree to buy some agricultural products.

maybe trump eases up on huawei, but you will not deal with the big issues. i think in the spring, he walks away from the negotiations and says, i am putting up tariffs because i am tough and tries to use that in the election. francine: do you believe we will enter currency wars? are we in one? adam: we are definitely not in a currency war because somebody will be shooting. the pboc is making sure that there is a good reason for the renminbi to be following and they are tapping on the brakes. they are not looking to drive it down. they were burned badly in 2015. trump keeps talking about the currency and cannot do much about it. if he decided with congressional support to intervene through treasury, he could have an

effect, not so much because that alone would do anything but it would break the currency peace we have. tom: are we near moving from idiosyncratic lesser third world currencies off of dollar strength? are we blind to the risks of 1998? adam: that is the right thing to be looking at and as we discussed, the fed is looking more at international factors. on the other hand, we are seeing much less breakage in the end. swingsrkey has seen huge in their currency and inflation rate and they are riding it out. stuff road out a lot of last year and yemen is more solid. tom: where are we on the race to

the bottom if china has to look at a race to the bottom, are we there? adam: if china feels like they can let the currency go, then very quickly the u.s. gets extremely angry with some that then the good reason, chinese medium-term outlook is not good because they do not want to do that. tom: adam posen with the peterson institute, there president. the rio tinto chief executive officer. where do commodities fit into the dollar rally? this is bloomberg. ♪

♪ this is bloomberg "surveillance." this is pound,

cable at 1.299. with 1.21.fly flirt give a newswill conference later on. the following pound will certain down -- certainly dominate, as he updates on inflation and growth prospects. tom: interesting to see if he addresses directly pound-sterling. in new york city with our first word news, here is viviana hurtado. viviana: joe biden was the target at the democratic presidential debate, nine rivals going after him. biden counter punched and he was sharp the critical of kamala harris' proposal. >> there is no talk about the fact that the plan in 10 years will cost $3 trillion and you

will lose your employer-based insurance. to be very blunt and straightforward, you cannot beat president trump with doubletalk. viviana: biden was trying to put to rest questions whether he is prepared to face donald trump. "as usual, powell let us down," trumpweet from president after chairman powell cut interest rates by a quarter-point. he does not see the move as the start of an extended easing cycle. osama bin sons of laden has been killed. to leadiewed as an heir the terrorist organization. american officials telling the new york times american forces played a role. telling vladimir putin the u.s. wilhite does help

-- u.s. will help fight wildfires. possible tot is restore full relations between two countries -- both countries. 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. tom: thank you so much. detroit is history and it is on to houston for what will remain of the democratic party candidates. let's look at the celebrations last night. >> go easy on me, kids. >> mr. vice president, you cannot have it both ways. >> to be very blunt and straightforward, you cannot beat president trump with doubletalk. >> your response? >> unfortunately, you are in accurate. >> what we need our policies that have some guts on this

issue. >> please respond. >> i have guts enough to say the plan does not make sense. >> you want to be president. you need to be able to answer the tough questions. did you say those deportations were a good idea or say, this is a mistake? >> i was vice president. i am not the president. tom: forget all the fancy stuff. let's talk basic. one of the great stories of the democratic party. economics with john taylor at stanford university, played basketball and softball and has done some in politics with secretary clinton. now,a renteria joins us talking about getting more women into politics. you are consulting to survivors.

what is your message to make these candidates engage with america? amanda: this is the second debate and more of being who they are, showing they have a fighting spirit and a vision is what they need to continue to do. this is a long process. tom: you know the long process, but you have been in the trenches of this since your childhood. are they being over consulted? amanda: i think people showed up with the different energy. you sawnd debate, people lean in a lot more from the very beginning, and there is no doubt this competition will be intense in the primary and the general. memorize.ave got to how do they not do a clinton and lose an election in those key counties? amanda: they are talking

directly to folks around the country. tom: medicare for all will play in wisconsin? --nda: they are leading leaning into tangible ways people are affected. you saw that with elizabeth warren and you saw that last night. they are going directly in these places to talk to them. tom: let's bring in francine. francine: how much are democratic voters looking for someone they think can be donald trump versus someone who matches their view of the world? amanda: that is an important question. you are seeing the folks leaning in and not doing an analysis. that passion and intensity will be important when you get into the ring in the next debate and going forward. this will be incredibly intense and you saw that last night. francine: who has a better chance of winning against donald

--mp, a moderate or a amanda: elizabeth warren on the first night connected with people. thehe second night, you saw senator biden do it, cory booker do it. the more that candidates get comfortable with this idea that you will be attacked and answer back, that is what makes it possible to win. francine: i keep hearing because the economy is strong then president trump will be reelected even if he does not widen his base. amanda: i could not disagree more. if you look at 2018, the economy was strong. trump was not on the ticket, but people were talking about health care and humanity and the things they think are important.

that will win again in 2020. you will see democrats say, who does it work for? that particular question did not get discussed last night. tom: we are not talking about the royalty of the clintons or the obamas. what is the risk that the democratic party slips into running through with a progressive that is dead on arrival with middle america? amanda: i think you will see the party come together. tom: give me a date and time? amanda: april. at the end of march, 70% of pledged delegates will be announced and you have from that point to come together. tom: where are you getting this from? wantrd democrats, do they a sanders-warren zeitgeist or do they want to win? amanda: they want to win, but

their role be a discussion where people are in the ideological timeline and in the past and present. francine: what is your dream ticket? is it too soon to choose? choose,way too soon to but we need someone who can address foreign policy issues. we need someone that will excite the base. tom: how cool was it to see mike messina enter the hall of fame? , and he ism stanford in the baseball hall of fame. is that wonderful? amanda: being able to span their talents, that is fantastic. tom: amanda renteria with us, a democrat, who looks forward to march and april one maybe things will change for the party. willem buiter will

join us. an important conversation with dollar stronger. this is bloomberg. ♪

♪ this is bloomberg "surveillance." that is a countdown clock. the bank of england will release their policy statement. we are expecting no change in rates. it is the news conference will mark will field questions about brexit and a weaker pound,

touching 1.21 minutes ago. tom: lets talk with adam posen about sterling. what isighted sterling, so important is to understand how different the united kingdom is from what we have seen. the lehman low is right here and we are at a lehman low on a trade-weighted basis. goingther charts, we are back to 1987 with sterling week this. -- weakness. the degrees of freedom any bank of england governor has, are they drifting away? adam: absolutely. the bank of england mpc and governor are in a more constrained position. it is the fundamental distinction that the u.k. has been mooring itself from its economic foundations, and many

years of current account ounces built up. you combine that with the insert a-- uncertainty and you have recipe for a weakening pound. tom: do we have an understanding for whether prime minister johnson will select a centrist economist or someone more politically attuned? adam: the issue as you are well aware, is that johnson's wasination similar to trump to look for a loyalist and someone who is vocally pro-brexit. there is very few good economists on that line. the other option if the pound comes under pressure is to look for a safe pair of hands, someone who has been a central banker and knows the job and could calm things down. as the pound moves, it might

change his bank of england governor choice. francine: who do you see becoming the next bank of england governor? if there is a no deal brexit, what do they do? adam: the names your colleagues have reported on are the ones that are out there. i don't have any surprise. in terms of what they will do, they will have to whipsaw. if there is a no deal brexit they will have to initially cut rates to stop a panic and provide liquidity, but most certainly will have to raise rates to stabilize the pound. that will make the bank of england look bad but it is trivial compared to the damage of the economy. for doinge much scope anything but that. francine: raising rates in an environment where everyone else

is cutting, what with that look like? adam: it would look like an emergency -- and emerging-market or the u.k. in the 1970's. if you make yourself less trade additive in a structural way -- trade competitive in a structural way, it is no longer about insert t. you need -- uncertainty. you need an adjustment. the bank of england is not to target the pound but to keep anything that happens with the pound on inflation from being passed through to a second round. to reiterate, the u.k. is moving back to semi-em 1970's monetary status. tom: interesting to see the history. as we move to a fed discussion, what does the history lesson

yesterday that we got from chairman powell? andle harken back to 1994 1995, but do we have to go back further? adam: you have got to look back even further how unusual it is to do a shift in direction on rates, and then say i may stop here. that is what i will concentrate on. arguably, that is the right decision but you need to have a coherent case to make for it and they have not made that case yet. tom: adam posen, thank you so much. adam posen of the peterson institute. nejra cehic is outside the bank of england, all of a sudden a more interesting meeting with sterling breaching 1.21. michael mckee mckee was absolutely right yesterday, according to chairman powell.

this is bloomberg. ♪

♪ this is bloomberg

"surveillance." all eyes on the bank of england. we are expecting a rate decision shortly and the inflation forecast and gross forecast -- growth forecast and a news conference where governor carney will probably address the pound. we have seen a shift and probably the last 15 and its or -- 15 minutes or so, the pound at 1.21. how will governor carney navigate these questions and what will that mean? nejra: it is a difficult navigating situation that mark carney will have to do. what the boe has been forecasting, slightly rising rates, and the markets showing a probability of cuts. what the bank of england forecast is not factoring in is

no deal brexit. that is something mark carney will have to address. tom: what is the backdrop of united kingdom economics and the consumption vector of the united kingdom? is it like america where it is pretty good? nejra: yes, it is. consumption has been folding -- holding up. growthe seen real wage and that with the following pound is a signal the bank of england should be on hold. in a no deal scenario, a lot of people out there including boe officials say this is where the bank of england will have to cut rates. in terms of the updated forecast , pretty much every economist expects the growth forecast to be cut for 2019 and the following two years. it is interesting what adam

posen just said, in a no deal scenario the bank of england will have to cut and then hike later. that puts his credibility into question. tom: nejra cehic outside the bank of england. ands back from reagan national airport after an important press conference. michael mckee, congratulations. chairman powell said you are right, the economy is good. michael: they have got a problem. all of the central banks that are considering easing have the same problem, currency levels. it is one thing the central banks do not want to talk about. they do not want to be involved in manipulating currencies. we have a strong dollar hurting

manufacturing, which is brought about by things like trade disputes that the fed cannot attack directly. they are cutting to indirectly bring down the dollar's value in the u.s. and perk up investment to guard against a falloff. tom: without talking about the balance sheet, we have been talking of the degrees of freedom these different banks have. how constrained is chairman powell and the choices he can make going to september? toldel: he has pretty much the markets we will get another cut. tom: you are assuming a september rate cut? michael: not necessarily because the fed wants to but because the market wants it. if you look at the chairman's words, he tried to leave himself some outs. -- that coulddata

change their mind. right now, they are looking at data and the fed will have to follow along. francine: could the fed chair have been clearer on the rate path? they are coming under increasing pressure from the president and follow.ant to what does he think? michael: probably, he did not get his message across. he stumbled a bit and did not have an easy time getting back. recession, they do not need to keep going and going, and he stumbled over that. in the end, the market knew what he was talking about but because it was so difficult for him to explain, that led to market disruptions and we see a stronger dollar and equity

troubles. francine: is there a communication problem at the fed? michael: there is and has been for a while, but this is a difficult situation. they have been too successful in reading inflation and now that it is low they want to raise it. how do you do that responsibly? it is difficult for him to explain what the fed is trying to do at this point. tom: how unique is it to have a dissent from liberal boston and conservative kansas city? michael: we might have seen a midwestern dissent of charlie evans voted because he wanted a bigger cut. tom: what does this mean for jackson hole? will you see fistfights? michael: there is just a lot of

disagreement over the proper policy path and rates are so low, there is not a lot of room for maneuver. talking about the insurance cuts 5.75,5 going from six to you have a lot of room to -- 2 to 2.25, to there is not a lot of room. tom: the bank of england is suddenly more interesting. francine: i wonder whether it will have to's -- have to soften its hawkish stance. it will be interesting to see how mark carney navigates these different cult -- difficult questions on no deal brexit and weaker pound. ♪

>> the fed cuts and confuses

about what comes next. the bank of england up now with carney's first pass and earnings continue with european banks and shell disappointing. welcome to "bloomberg daybreak." we are waiting for the bank of england's decision and surprise and surprise they held it at 75 basis points. that is the bank rate. >> this is largely what has been expected. however the key is how they are going to indicate their path going forward at a time when their inflation rate is picking p. david: the initial headline says they're not projecting for a postbrexit world. they're not trying to figure that out. et's go now to bloomberg's nejra. we're not very surprised about the rate. what relation we learning? reporter: you pointed to one

thing which is