Transcripts For BLOOMBERG Bloomberg Go 20160727

David and how is he going to pay for it . The United States is a little bit behind the u. K. They are on their second female Prime Minister. Alix glaxosmithkline ceo andrew witty and tom fanning will join us to break down all their earnings. I turn to you and say it is all about fx. Jonathan what captures risk sentiment that are then dollaryen in the fx market . Tn back with a 105 handle. Firmer, apple helping do that in the United States, and equities firmer in europe as well. Fifth straight a day of losses for crude, down 244. 37. Down to 44. 37. You might forget that today is fed day. A lot to discuss. Alix what matters more, the boj or fed . Lets check in with our Bloomberg Team for indepth coverage of all of our stories. Carl riccadonna on the fed as it wraps up its policy meeting as well as Matthew Cantor men on in europe aschael Deutsche Bank signals deeper cuts, and megan murphy in philadelphia. Jonathan lets begin with coverage of global Central Banks. We will have a more indepth Global Coverage report. Is and dougive current. Nondecision im told. I wake up to news from japan and im struggling to figure out what is happening. Enda what we had today was an unexpected announcement of an unexpectedly large fiscal stimulus package. They were showing footage of a High School Baseball game and that will give you an inkling of how nobody was expecting this announcement. What we do not know are the details. We do not know the net new money that will come out of this package, when it will be rolled out. What we do know is that it put pressure on governor kuroda and the boj to respond when their policy meeting ends on friday with more fiscal stimulus of their own. It puts kuroda in a position where he does not want to be. The question is, can he pull another surprise out of a hat or will he disappoint . Jonathan janet yellen, will she disappoint later . Carl riccadonna joining us. Everyone thinks they will do nothing. How do you communicate best doing nothing . To take afed is going different strategy from the japanese and not employ shock and all. They are moving with a tremendous deliberation and what that means is they will very subtly acknowledge the changes in Economic Performance since the june meeting. , express ally means bit more confidence in the outlook for Economic Growth and a sigh of a bit of relief that the labor market is not rolling out of bed. Riccadonna, and enda curran. We will have full coverage of the fed Rate Decision this afternoon at 2 00 p. M. Two big stock stories moving in opposite directions. And Deutsche Bank. It seems like the question for apple is are we going to see a move higher, is the worst over . Matthew it looks like apples business is stabilizing. Expectations were low this quarter and they exceeded, so it seems that stabilization is the way to describe this business. Alix what is the key metric to look at for next quarter . Their fiscal firstquarter is the december quarter and that will give us a iphone what they expect seven to do. Alix to look at the Services Side of the business matthew i think tim cook has not set a whole lot you and it is getting worrisome that he is sticking to the status quo whether rather than trying to find things driving us higher. He has been throwing out the same metrics for a long time. Alix Michael Moore is joining us on Deutsche Bank. It was a different story, particularly when you look at the u. S. Bank. Michael Deutsche Bank was down 20 in the debt trading whereas all the u. S. Banks were up. You are starting to see the restructuring have an impact on the business, whether it is getting out of certain areas of trading and they also talked about clients being unsettled by the negative news around Deutsche Banks Capital Position. Alix Going Forward, what are we going to see what are we going to have to see out of Deutsche Bank . Has been all about costcutting and boosting the Capital Position, and that has been the theme for this year. They talked about more cost cuts, more job cuts, 3000 in germany after they finished negotiations with the labor unions. They will continue to try to boost the Capital Position by selling their bank unit and a stake in the chinese lender. Alix thank you, Michael Moore joining us in london. There are a lot of other movers we want to be watching. The first is twitter. It is really getting hit hard in premarket, thirdquarter sales much lower than estimate. Add revenue from video has not really kick in. Can twitter get more money once they do . Glaxosmithkline reporting the stock is slightly down. Revenue is pretty much in line. The company does see 2016 core earnings per share growing by 11 to 12 . Nintendo did not do well. 5 , still down over dealing with issues about weaker demand for its console as the stronger yen. Rounding it out with tanks in europe, unicredit taking a bit of a hit. Point 5king at a five billion stock sale and is looking to sell its entire stake in a polish bank. These banks need cash and they are trying to raise it. The stress tests will be released on friday after the european close. David we are going to go now to philadelphia. At the dnc bill clinton took center stage to introduce us to his wife. Married in we were that little house on october 11, 1975. I married my best friend. E after morein aw than four years of eating around her at how smart and strong and loving and caring she was. And i really helped that her choosing me hoped that her choosing me and rejecting my careerto pursue her own was a decision she would never regret. David megan murphy reporting from philadelphia, you just heard president clinton giving the softer side of Hillary Clinton. Did he accomplish his goals last night . There to humanize Hillary Clinton. She has struggled throughout this campaign with low favorability issues and trust. He spent a lot of time in the speech going back through things she has done that people might not know about. Challenges she confronted when she was younger, and as a wife and a mother. His second challenge is casting her as a nonestablishment figure , which is pretty difficult when you have been a secretary of state and senator from new york. He said she is the true change maker, the true nonstatus quo candidate. She is the real one between her and donald trump. That is a theme they will be echoing, the real change is with the person you have known for decades. David this was history being nominatedfirst woman by a Major Political party. Does this put the Bernie Sanders schism behind us . Megan i think they have been moving on. Establishing a unity candidate Going Forward, they are going to do that more tonight with president obama and joe biden. Mistake, there are a lot of people in that hall and in that arena that will not vote for Hillary Clinton because they are such active Bernie Sanders supporters. Her challenge is not only going to be to convert those voters but take their message to those crucial independent voters that are on the fence in the swing states, and make the case that she is the agent for change this country needs, she is the one who can carry us forward into these tumultuous times. The polls are very tight. David that is megan murphy, reporting from philadelphia. Jonathan moore cuts from john cryan. Overall chartists hit the bottom line. Japanese Prime Minister shinzo oblique announces plans for 265 million in stimulus. This is bloomberg. Alix this is bloomberg. One stock we are tracking in premarket is apple, jumping over 6 after stelling selling more than 40 million iphones. The Company Still being able to bank on the iphone sales that they get two thirds of their revenue from. Sales in the next quarter or going to fall but less than expected and that is also helping apple stock at premarket. It looks like there are signs of stabilization in its revenue and product stream. Are going to turn back to the big story overnight from japan, the japanese Prime Minister talked about a Fiscal Stimulus Program to get the struggling economy going again. Joining us is kit juckes. We will go up this morning to this news that i am some trouble parsing through. There was a speech given and i am not sure we have a transcript , in a city outside of tokyo. We are not sure of the specifics. What do we do with this information . Kit we wait until we get more details. We have seen lots of packages around the world announced by governments and then you say, how much is actually new . Are we taking existing plans and packaging them together to make them look egg . Big . How many bonds will they have to issue to finance this . I would like to see something that involves additional borrowing to put demand into the economy and try to get things going. Then i would like to hear pretty much at the same time that the boj is going to increase the pace of bonds they buy so they will buy more, and we can have a long and meaningful discussion about whether a Central Bank Buying more and more of a bond market whereyearolds are negative, whether helicopter money is a nonsense concept. Until we get all of that, us is a big looking number. David i wonder how much of this is a minuet between mr. Kuroda and mr. Abbe. There was talk of possible fiftyyear bonds being issued. Might this be a way of funding fiscal stimulus . Kit i think they are looking forward, and it will be much easier for the japanese to fund the debt if what they are getting is increased bond her kisses from the bank of japan. If they can term out on the issue even more longer dated bonds for the bank of devonte where youpan, that is have Monetary Policy and fiscal policy working more in harmony. Im going to find it much easier to be optimistic that that will weaken the yen than i going to be optimistic about what it will do in the long run for the economy. Certainly you need monetary and fiscal policy to Work Together for any chance of getting the japanese economy on a better track. Jonathan the boj as part of the g3. Fed we was the ecb or would have jim bullard on a program like this talking about what the fed may or may not do. The guidance from the boj is confusing and i wonder if they actually care. Againave shown again and that they are not really borrowed by what is expected, they will deliver when they want. Do you get a sense they do not feel the outside pressure coming from market . Kit if we look back at the last month in the u k were we were led on a merry dance by the governor of england. Central banks that communicate a lot have a problem if they are running policy and Monetary Policy committees with 2000 members. We will pass over everything we get from the fomc statement tonight but without a press conference to help them, and we will hang on every word of every governor that we hear from in the next two weeks. I am never sure whether one is that much better than the other. When i would like to see the end of the day or the policy moves that say we want to move this forward. David that is kit juckes coming to us from london. Alix to our big stock story of the day, Deutsche Banks ceo signaling more belt tightening. Apples lowercost iphone eases some growth concerns but does the lower average lower than average selling price affect profitability . Jonathan from new york city, this is bloomberg. Shares of Deutsche Bank trading lower in frankfurt after reporting the Second Quarter profit was nearly wiped out over a drop in trading revenue. Joining us now is chris wheeler. Im going to begin the chart, it is Deutsche Bank price to book ratio going back to the financial crisis. This company is trading at financial crisis levels. It is beyond that. What does that chart tell you and the message that investors are currently sending to john cryer at Deutsche Bank . Chris i think it tells you he has an enormous job to reconstruct the bank or focus the platform and get the bank into the like kind of shape to take advantage of the fact that it does remain a very large bank in the world banking markets. This also tells you this is a long haul as john has alluded to, although he is trying to accelerate the pace. Jonathan numbers coming out of wall street, their trading revenue was terrific for the big investment banks around the corner. For Deutsche Bank it was down 19 . What is the story . Chris the u. S. Banks were up 21 in aggregate over that period. John actually said in a letter to staff that the u. S. Had in a much more robust market during this period. I think we also have to face the its that deutsche and european peers have been losing market share because of the changes going on, and that is a concern because what john wants to do when he comes out of the restructuring is still have a leading player. Alix comparing it to other aspects of u. S. Banks, return on tangible equity was an eyeopener of a number at 1 10 of 1 versus 6 , 8 that we would see for u. S. Banks. Chris i sent that to my equity salesman and i think they were taken aback. The bank is breaking even and the cost basis is too high. Revenues fell 20 year on year and i think revenues costs fell by about 5 or 6 . That does not work and it is part of this process to restructure the bank, it changes, and hopefully step back. The problem is the 20 decline in revenues tells you there is a bad bank round that deutsche is having to cope with. David i wonder if they are trying to ride the horse in two different directions. We want to cut people but maintain our growth, for example fixed income trading. Isnt that hurting them in their core franchise . Chris absolutely. Investment banking fees in particular were weak and the quarter. Certain clients are stepping back and saying, maybe this is not the time to work with them on an m a deal when they are really so distracted. Side,ms of the trading generally speaking lions tuesday very loyal clients do stay it is absolutely essential john holds on to as much as his revenue base as possible. Jonathan i want to pick up on something you just said, clients pulling back from dealing with Deutsche Bank. Do you see that expanding across businesses given that when they are in the news always seems to be negative . Chris certainly in the retail space they have got that. Business,titutional people do have to step back occasionally and say, should we be giving so much business to a bank of this nature that is going through so many problems . I am convinced it will come out the other side but it is just a longhaul. Sitting there saying, we will keep business as normal for the clients is probably unlikely, and they will have to step it back until they see a calm her situation at deutsche. Jonathan down by over 4 . Alix next we are talking oil, jeff currie will join us. Wti at 42. This is bloomberg. . C sv jonathan from new york city, this is bloomberg. Maybe you are thinking about taking an early holiday. Do not, stay with me. Markets are on the move. On the backfirmer of decent apple earnings, up about 110. In europe ace a Third Straight day of gains. Switch out the board on this fed decision day, overshadowed by dollaryen in japan. , a weakerf 1 japanese yen. A fifthtentially straight day of losses at 42. 71. Lets get to some of the stock movers. Alix we are getting some earnings breaking right now. Boeing revenue coming in slightly better than estimates. They are seeing a core loss of about . 44 a share. I am not sure how that meshes up with certain estimates. Bullying is reaffirming its fullyear cash and revenue isdance, boeing reaffirming its fullyear cash and revenue guidance. Adjusted earnings coming in at . 74 a share. That stock pretty much unchanged in premarket. Headingown a little bit into premarket. Psa Group Earnings were up 52 in the first half of the year and it is dragging up all of the other carmakers in europe as well. Peugeot anding that brexit. Can survive airbus, Second Quarter profit did beast Beat Estimates by about 12 however they are taking a 4. 4 billion right off for two of their jet series. Wrapping up in the u. S. , you have got to look at cocacola. Did see a decline in foreign sales and it was not helped by an upward move in u. S. Sales. Lets get an update on what is moving outside of the world of business. Shery ahn is here. It was a historic night in philadelphia with Hillary Clinton the first woman ever to be nominated by a major party for president. Bernie sanders took the microphone and asked that she be nominated by acclamation. Clinton there are clear, achievable, affordable responses to our challenges but we will not get to them if america makes the wrong choice in this election. Her is why you should elect and you should elect her because she will never quit when the going gets tough. She will never quit on you. Sanders supporters continued to demonstrate outside the convention and inside, several dozen sanders delegates paraded off the floor. In france, one of the Islamic State supporters who stormed a church and killed a priest was on the terror watch list, wearing an electronic tag to let police track his movements. In the u. K. There is another challenger to jeremy corbyn. Owend smith is speaking pledge today he will what he calls a National Message for britain. Promise to protect workers rights, pay, and conditions. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am shery ahn. This is bloomberg. David now to the morning mustread about apple. The question, is apple stabilizing . Some analysts are saying so. To be ane sc proved bright spot in the Earnings Reports on tuesday. The Company Forecast sales would the 45. 5 billion to 47. 5 billion range for the current period was better than most Analysts Expected estimated. People were not very enthusiastic when it was announced an apple seems to be doing a lot better. Cory they are selling a lot of phones. By all estimates we know these numbers are high the concern was that this lowerpriced phone would not only bring lower butnues for each phone, that also lower margins. There were so many sales of this phone, they talked about cannibalization, which was overwhelmed with the success of the phone. David but there is margin pressure. The margins are declining. Phone andsc is a good has a lot of the stuff that the highend phones have in terms of the equipment in that phone. When apple ships a new product, the worst day is the first day of margins. We would expect the margins to get a little bit better but the phone with such a big success and new to the market it had a gross effect. Jonathan you get an upside surprise. The stock gets repriced. We have a pop and you see that in the premarket. Are you going to rerate the company and valuation higher knowing that it is going to see decline in the future . Why would that change anytime soon . Cory by any measure this is a cheap stock. The question of declining revenues, you have asked two questions what is the future and how can you development that is happening with this company is interesting. One of the encouraging signs of the earnings is the growth and services. We saw a substantial increase in Service Services revenues last quarter and that is a suggestion that there is a future for apple regardless of product cycle. David a substantial increase off of a relatively low base. The majority of their profits are coming off the iphone still. What are the hopes for the iphone seven . Cory i am already reading analysts notes about the iphone eight. I think there was great concern among the estimates. They are concerned the iphone seven may not be as thrilling and shocking as prior major upgrades, and might not lead to that sales bump. That puts more pressure on the services business. Iphones people with have had those funds for a long time and are really ready for an upgrade. David cory johnson, thank you. Alix a potential stimulus at a japan and a fed meeting. What does that mean for commodities . But theatively flat dollar index about 5 since the end of june. Sheing us is jeff currie did such a pleasure to chat with you. When you get all the movement the Central Banks, what is for commodities . Jeff the passion of bulls and bears have coalesced around a relatively benign fundamental outlook on commodities with lee which leaves the macro in the drivers seat. Whether it is the boj or the , doesthe issue is that this open the door to more fiscal stimulus . Your Industrial Metals rallied. When we think about the potential implications, it means stronger dollar, lower crude price. When we think about the base metals such as iron ore and fairest complex as well as rrous complex as well as copper, it is a little bit of a different story. Rising metal prices but declining energy prices, do you get deflation on the backend that puts upward pressure on the complex . Thatthe fomc, our view is we put a probability of a rate hike this year somewhere around 65 . 55 which is pricing means we are a bit on the hawkish side and a benign outlook is what people are focused on what it does point to potential Downside Risk in oil and gold. Focusing on gold, look at gold as a strategic hedge against problems in the world. Being long on gold is the same thing as being short on politicians. Alix Morgan Stanley had a call of 1 on the 10 year yield in the First Quarter of 2017. The correlation of gold and the 10 year yield, the negative correlation is by about. 4. That is relatively high two 2014. What does that gold price equal if we get 1 . Jeff it would definitely be th of 1400 which is white which is why we like it as a strategic hedge. Our base case is for gold to trade back down at 1300 which is modestly lower from where we are now. In terms of thinking about the upside risk, not only about the u. S. Yields trading lower but lets say china is put in this situation, capital controls are put in place and you get real demand for gold. The worldcertainty in and gold makes a good hedge. A good job of assessing supply and demand and not so much on geopolitics. Does that inherently mean more volatility Going Forward as it becomes more dependent on outcomes . Jeff commodities are what we call a spot asset. While you look at financial are called an anticipatory asset and they price the future. You get a lot more volatility in Financial Assets than in commodities which is why we like commodities as a hedge. We would expect that the fundamentals today will show less volatility relative to the uncertainty that drives the financial market. Alix great stuff. Jeff currie is sticking with us, Goldman Sachs global head of research. Jonathan jeff currie will be talking refinery margins and their effect on the oil sector. The commodity market, potentially a fifth straight day of losses for crude. From new york city, this is bloomberg. David this is bloomberg. Wittymithkline ceo andrew will be back will be with us to talk about earnings. Alix it is my favorite oil chart of the week, is global refining margins. They are continuing to have lower as we are seeing an inventory glut turn into a product glut. Jeff currie still with me. That chart i feel is freaking out the majors, the oil market, and weighing on time spread. Jeff you have got to think about the context of the global bout. We look at the context to the global market, you have got to in the context of draws canada, nigeria, saudi arabia. In the Second Quarter we had of crudef 35 billion oil being drawn down so when we look at the global balance, it is a shift in the surplus from crude to products but a shift to the surplus to a deficit around the world. Alix when you take a look at yes, there is a product glut. I am already hearing about run cuts in asia. Then the inventory builds backup. What is the risk profile . Jeff your risk of having containment issues is the greatest in the october time period. We have lost a lot of supply out of nigeria. We had a supply disruption out of canada and we have lost supply out of venezuela so you have to put that in the context. The net position is really not that much so you were going to have to question, what caused the decline in prices to 42 a barrel . We would argue because the fundamentals are not distinct the market is trading off the dollar. Goingllar and Oil Prices Back to june 1 have been trading lockstep. To insomething i pointed the last couple of days has been the time spread of dubai from one to two months, and prices are much lower than that for two month prices, due in part to the oversupply. That has particular reference in terms of asian demand. Are you worried about asian demand as referenced in that spread . India,hether you look at the numbers that came out in india recently surprised to the downside. They were printing 600,000 barrel a day growth. China is slowing sequentially given the fact that the stimulus is beginning to back off so yes, we see weakness in demand in asia that offsetting that, the situation in nigeria is worse than it any point. Alix and it is getting no tread in the crude market. Jeff the oil price is trading off of the dollar right now lockstep. What do we focus on . All of the bearish news and do not focus on the bullish news. I can turn around and make a bullish case as well as i can make a bearish case which if you look at positioning has kind of neutralized. The passionate theres have thatd away which tells you the market and the fundamentals are really not going into any significant direction. Alix you saw the 45 to 50 range for oil but we will get more stimulus from the boj. If that winds up boosting the dollar higher, are you going to revise that downside range . Jeff then you look at the fomc. Do they come out with a more dovish or hawkish stance . Theres concern about the modestly accommodative language in the second paragraph. You could push yourself back to the 45 to 50. We look at all of the risks and they are relatively balanced. Tot is why i do not want take a real strong view on what is going on in the Refinery Market because it is a shuffling around as opposed to a distinct alix does that mean the correlation that we have seen between oil stocks as well as oil kind of breaks down . Oil stocks have held up the past few days. Jeff i would put highyield into that category as well. I would argue that the highyield market is the last shoe to drop relative to this back in oil prices. I think the view on the stocks and the highyield is a question about sustainability for the future of shale. Our base case is that u. S. Production continues to come up such that you create a deficit in 2017 where you need to turn the u. S. Shale machine on. It has really revolved around that need to turn on the u. S. Shale. What if libya comes back . What if nigeria comes back . Then we push back that day further and further, and the longer it takes to turn on the u. S. Shale machine the greater the risk for the downside. Rebalancing, when is that going to happen . Is the supply glut going to delay that . Jeff whether it is product or crude does not really matter. It is happening in the u. S. If you look at inventories in the oecd and china, a have been building. Even the balanced Table Numbers that came out of the iea data shows that there has been a big draw. The port stocks have declined. We saw a drop in saudi arabias inventory. When we look at the global balance which is more important than looking at the u. S. East when youlance, look at the highfrequency data it should a 6 million barrel build during the first few weeks in july. You need to go back to what is going on with the fomc. Alix the dollar. Jeff currie, Goldman Sachs, global head of commodities research. David coming up, is the fed too reserved . We will take a look at why the fed should hike rates sooner rather than later. Alix this is bloomberg , i am alix steel. Three charts that show that now is the best time for the fed to be hiking rates. Here are theaid reasons why the Federal Reserve should be doing it and have all their ducks in a row. We talked about yesterday on the Bloomberg Financial conditions index, here is where the conditions were when the fed hiked in december. Financial conducive conditions are much looser than they were. Yields are much lower and you have the dollar a little bit higher but not by a large amount. Then turning to the ecodata, if you look at the isn index, it is the same kind of idea. Look at how much it has risen since the december hike, right around 54. In terms of ecodata, rings are better. Better consumer confidence. Retail sales pretty good. Backdrop,f the global one of the themes we saw in august and december of last year was the effect of a potential u. N. Devaluation. Heres what happened in august, the huge spike in the dollar and you had it again while the fed raised rates in december. You have the yen falling and the dollar rising. Here, not much is happening. Maybe a little bit of depreciation in the yuan but orderly and the fomc seems to be managing the fixing quite well. It is hard to make the argument the fed should not be raising rates if you look at the data context. Take what it does not into account is the geopolitical uncertainty. That has got to be in the back of the feds mind. Out, alan ruskin pointed if they do not do it now, will they missed their opportunity . Jonathan fascinating note and one we will debate. Ceong up, Glaxosmithkline Andrew witty and tom fanning discuss their companys earnings. Futures are firm. This is bloomberg. E global stockseads higher as the lowercost iphones gain traction and Deutsche Bank tumbles because of restructuring costs. Jonathan Prime Minister abe announces more money in stimulus. It overshadows janet yellen today. Alix Hillary Clinton becomes the first female nominee for a Major Political party. David welcome to the second hour of bloomberg. The bank of japan is the story of the week right now. They had a decision on friday. Jonathan i think its the confusion of the past month. We dont know how much of this is new money and how much will be issued through bonds and what the boj can do off the back of that. Citigroup came out with a note that said any kind of stimulus will probably set the boj back a little bit because they want want to see what kind of stimulus there will be. Many years will the stimulus move out, 250 billion . David there will be more bonds. Alix they needed. They are buying 90 of total issuance. Made lasttory was night when Hillary Clinton got nominated. Alix we have a earnings coming out this morning and will speak with two ceos whose stocks have performed well will discussne ceo what is ahead in the pipeline. We have to take a look at the market first. Think dollaryen captures risk sentiment in general. To 1. 05. Ng down we have been everywhere on that currency pair. Have markets a farmer in the u. S. And rallying in europe as well. The commodity market remains the same. Its a fiveday losing streak for crude oil. Low as 42 on as wti crude. Year yield is coming up at other basis point. The twoyear note is now yielding 76 basis points. Lets go around the world and check in with our Bloomberg Team of all of our top stories. Alix apple and Michael Moore is Deutsche Bank. 40. 4 million iphones sold. To ght investors have rewrite their expectations on apple . After several quarters of turbulence and issues with supply and demand, we are starting to see the iphone supply and demand can into balance. Up well for the next iphone cycle which will start late in the next quarter. Alix what does that do to the margins . The average selling prices come down so how much more does apple have to sell to make up for the loss in margins . Nation continued they to sell moreue product. New products are always lower margins but over time, that gives you a Broader Market opportunity. On whatymore it hints they will do with the huge or test of cap warchest of cash . Most of it is stuck offshore. They will buy back stock and pay off dividends. They will keep making small deals and focus on internal development and return cash to shareholders. Michael moore is joining us on Deutsche Bank. They said they would restructure last year, is that still true after this last quarter . I think its more true than ever. Cut have continued to costs. How quickly can they do that . Will inhabit impact on the business . In this quarter, you saw them route. E to go down that some analysts wanted faster but they are continuing to cut jobs. You are seeing a little bit of impact on the business. Not aserformance was good as their u. S. Competitors and part of it was getting out of some of the areas they have been in. Weakness and fixed trading and equity trading continuing in the next couple of quarters . They talked about some of it being due to clients being unsettled by all of the capital questions around the bank. Down toit will come to how they can reach reassure clients and part of that will be in the stress tests later this week. Alix thank you so much to both of our guests. The stock stories are really hot. Jonathan very much so , aboj decision friday in a fed decision later today. Michael mckee is joining us from idc. D. C. What have we learned today . Another role of the fiscal dice with an unexpected announcement from Prime Minister billion. We dont know how much of this is new money and we dont know how it will be financed we dont know how many years it will be rolled out over. Some of the details are scant and the bank of japan is flying blind. On the bankpressure of japan to respond with stimulus on their own side. Respects, the bank is being pressured. They are cautious about adding stimulus so we will have to wait and see whether he can pull another surprise out of their hat and whether he pulls the stimulus levers. Jonathan i imagine the boj but whatto do nothing will we get from the fed today . Michael you dont eat oysters in a month that does not have an does notnd the fed raise rates. We know the economy has gotten better and the data coming in is as strong as the last two years. Does that stimulate the acceleration of inflation . It part of the fed thinks will come quickly and they should move now and another says we have more time. Look to any kind of change in the inflation forecast today. It will be get that, more about the minutes in three weeks and we will see how many people were on the side of moving more quickly because they think inflation pressures are building. We have Global Coverage with both of those bank decisions. Thank you both. We will have full coverage of the fed decision this afternoon on television and radio. That coverage begins in about four hours. We will havet, another night of the Democratic Convention in philadelphia. Last night, former president bill clinton spoke in length and at personal terms. About his wife. , we weree married married in that little house on october 11, 1975. I married my best friend. Awe afterl in being around before years about how strong and caring and loving she was and i really hoped that and rejecting my advice to pursue her own career was a decision she would never regret. Turn to our Washington Bureau chief megan murphy. I dont remember a time when someone had to try to reintroduce someone who is so well known throughout the country and the world. Is this a achievable for bill clinton to reintroduce her and change our views of her at this point . It will be incredibly difficult for him to get anyone to change their views. Most people in this country feel like they have their minds made up on Hillary Clinton. Issue for her campaign because the unfavorables remain high and her trust issues remaining problem. This is a new attempt to dig deep back into her history and going for her biography to bring up parts of her life that people may not be as familiar with. Its to humanize her with voters and make them realize she is similar to them and has had the same struggles as a wife and mother and her career. Is fair to say the speech was quite long and slow at times and it played very well in the arena. Amongincredibly popular the base. Outside, we will have to see it how it plays with independents and republicans. David another challenge Hillary Clinton has is the right track wrong track numbers across the country. 3 of the country think we are in the wrong track and its hard being a democrat behind a democratic president , how can she turn that around . She will be looking to barack obama tonight to make that case that he has put the country on the right track and she will follow in his wake. He will talk about securing his legacy. Everything he has done in terms of where he is on social and economic reforms, she is the one to double down on that and take it forward with her on vision for Economic Justice and social reform in the country. David thank you so much. Jonathan coming up next, abe moves and the yen drops on a 265 billion ins stimulus package. Shares of apple are surging in the premarket. Are there unparalleled Profit Margins now at risk . From new york, this is bloomberg. David this is bloomberg. Japanese Prime Minister abe announces a 265 billion stimulus but will that be enough to prop up their nations economy. We are joined by the global r with 600e billion in assets. Welcome to bloomberg. Pick up on what was reported about what the Prime Minister said overnight. Assets and you hear that news so how do you process that information and what does it cause you to do or not to do. Its whether its priced into the market and then you dissected to see whats new and what is not new. Dont know for sure but it could be a multiyear stimulus. You have to make a decision them about how much of a change it could have with potentially further boj easing. You can contextualize that against the demographic and macro factors affecting japan. It leads you to quick conclusions like any genuinely aggressive fiscal package would put at least modest or marginal pressure on japanese yields most of which are negative. In that sense, it could reduce at the margin. Pressured reduce some of buying of u. S. Treasuries. Bite it would be a negative for u. S. Treasury yields. The issues facing japan are so large that its not clear what it will do. Just what might happen in japan. We have had two or three auctions for u. S. Treasuries which were disappointing. Does that tell us something about where u. S. Treasuries are headed . Not necessarily. We have seen that before i head of a couple of other fed releases. Ultimately, what we should look for with the fed is any change in Risk Assessment, if its more balanced and the dialogue between fed members. Wishes tohair yellen see the whites of the eyes of genuine sustained growth. That would seem to be several months off so we are calling for december at the earliest. Fascinates me when we use the auctions as an indicator. There was a week fiveyear bund auction in the last week. Had a big that we global bond market rally and people are just pausing for a little bit . Is that what we are seeing . I think so. There is news coming out and markets can get tired and a certain sense after rallying so much. Assessment from chair yellen and the fed over the direction of wage growth. Its hard for the fed to know or for anyone to know what will happen to the Participation Rate , wage growth, sustainability and the like. The fed is data dependent and i dont think this will be a critical meeting. Alix we see global bond yields continuing to decline. You look at pension funds, how do they keep up with their commitment without going down that risk scale and incurring risk down the road . Thats the operative question. Certain risks. Re a lot of the Risk Assessment especially following the rallies postbrexit are priced to perfection. Ccc high yield bonds, its time to reduce those heavier risks and you can add risk but keep it in quality. It can be abb high yield bond. If rates do rise, a lot of these risky assets could reprice quite a lot if we hit a global recession which is not our view. Can come from diversification which we advocate. A mix of shorter structured ,ssets and higherquality bonds enough diversification so no matter what your diversification, youll get a reasonable amount of yield and make sure the tail risk is contained. David thank you for being with us today. We will have special coverage of the fed Rate Decision this afternoon. Alix it is the big mover in europe, Deutsche Bank shares are plunging. Quarterly profits all but wiped out by the cost of restructuring that has yet to bear fruit. We will discuss whats next when we return. Some of the big movers to watch in the open this is bloomberg. Jonathan this is bloomberg. The scorecard with futures firmer and equities rally in europe. Futures in the u. S. Are up about and apple is making up about 7 of the nasdaq. Its lifting futures across the board. Is stable. Llar the weaker yen is a big move. It was a stronger yen store yesterday and confusion on Monetary Policy and fiscal policy in japan. I head the fed nondecision as the yield on the 10 year is 1. 56 . Deutsche bank is under pressure with shares tumbling after the Bank Reported secondquarter profit was on the wiped out by a slump in trading revenue. Joining us with the details is the Bloomberg European finance and investing reporter. Lets begin with the numbers. Debt trading revenues at every single major bank was terrific. Why was it so bad at Deutsche Bank . We are seeing it right across the board. We see revenue numbers taking a severe hit in the Second Quarter. Even business areas where they want to grow. Areas that have performed strongly are lagging now. Not just a story of the whole bank but the bank losing market share. Alix something we also heard were comments on brexit. The rhetoric is we dont know enough yet and are not seeing a lot of affect but that was different with Deutsche Bank . The date it was far from determined. There was a note of last week that said Deutsche Bank may be for losing and we did not get a confirmation and there was not many specifics that investors can get their tv into their teeth into. Deutsche bank as large so itions in frankfurt may be a bigger hit for Deutsche Bank been u. S. Bank. The legal contingencies have hung over their head. Have we gotten more information on working their way through those . Yes, we did. The bank highlighted the settlement negotiations with the doj on the residential mortgages. They reiterated they hope to have the big legal issues behind them by the end of this year and that is what they are facing. Jonathan 2 thanks very much in the focus have been Deutsche Bank in germany and then all of the banks in italy. Speculations and reports around a potential 5. 5 billion stock sale, what is that story . The company has been under forsure to bolster itself quite some time and led to a management change. What we are seeing is the bank is weighing its options. Its considering exiting from businesses which have been considered core on till now and limiting the need to tap shareholders. What we have picked up is that wouldf shareholders money raise further funds that would create a real difference in the banks of buffers which comes toward the end of the industry. This tell us what we should expect out of the other european banks . Yes, i would think so. There was a view by analysts that there would be a read across to european banks. It would point to a hit to market share and we may see that tomorrow with credit suisse. Jonathan thank you very much. Coming up, we will have with both of those Companies Earning beating earnings estimates. This is bloomberg. Jonathan this is bloomberg and lets get a check on the market. Firm, up about 51 points on the dow. Some decent numbers out of apple yesterday giving the indexes a lift given that apple is about 7 of the nasdaq. The fifth straight day of gains in europe. The market is pausing for the Federal Reserve Rate Decision today and the dollar weaker a stronger dollar and a weaker yen. Alix durable goods are coming up for june and it looks like a disappointment by 4 . One pointte was for 4 . May was revised down as well to 2. 8 . If you strip out transportation, it was still a disappointment and you strip out capital goods shipments that are nondefense, down 4 10 of 1 . Numbers aree goods disappointing. The s p futures are Holding Steady and relatively flat but durable goods are down 4 for june. David we will turn to earnings. Southern Company Announced secondquarter earnings about an hour ago. The earnings exceeded analyst estimates on earnings per share. Tom fanning is the ceo of Southern Company which is the fourth Largest Utility Company in the country. Welcome to bloomberg. Great to be with you. We have the overall numbers but you are the ceo, what is the story behind the numbers . I think our data would show that its right on the money. Sales, weret basically flat yearoveryear. Is ane are seeing increase in growth in customers but probably a small decrease in consumption in the residential class. Same with commercial class, increasing customers, decent decreasing conceptions. Between those two, where reasonably flat. You just went through a durable goods report. What we see in Industrial Sales is probably a reaction to global uncertainty whether its an ornomic malaise in europe event risk or terrorism or lack of transparency in china or perhaps even some caution with respect to our own president ial election. What we are seeing is while industrial activity remains reasonably company, we are not seeing the investment of capital from the industrial sector that we expected. Isid one thing that changing is the way you are supplying your electricity. You have made major acquisitions of natural gas facilities. Where are you on those . Southern company, when president obama says all of the above, we are the only company in america that is. Building new nuclear in america, 21st century Coal Technology, cleaner the natural gas, we make major advances in renewables particularly solar and we are pivoting to more wind with energy efficiency. In the middle of all that, dominant solution to the Energy Future of america will be natural gas and we have made sizable thats recently unnatural gas infrastructure. We like the hard asset side of that rather than the commodity. We just completed the acquisition of Agl Resources and we just got through negotiating a deal with candor morgan. David where will that show up in your Earnings Report . In your income statement . If you look at comparable earnings at . 70 per share, its really good. When you go forward, we will a full year of Southern Company gas which includes Agl Resources plus the investment in solar. David finally, bring us up to speed on your socalled clean coal. Are some cost overruns but where does it stand . Its terrific, we are in the middle of startup. We had a major breakthrough recently where we produce the first sin gas out of the plant. We did the first fluid as a nation, the technology that we use. We finally got it going. The button to create gas out of this coal, we did at right away for 22 straight hours. Thats just remarkable. We are now in the process for the next two weeks or so of going through major tests in which we will take the gas and move it through our middle systems that will capture Carbon Dioxide and ammonia and sulfuric acid. Ultimately, the idea is to deliver the synthetic gas to the turbines that have been running for two years. And produce electricity. I think it will be a landmark breakthrough in Coal Technology around the world, the first of its kind. David will you be on track to have it up and running . We have said that these next two weeks a really critical. All of the technical issues and moving the gas through this cleanup system into the turbines and that is for unit b. Is to produce a electricity and we will prove the technology and hopefully have it all done by the end of the corridor. David thank you so much for joining us today. To another ceo, glaxosmithkline was out with earnings driven by new drug sales. The stock is currently trading higher on the news. Joining us now is the glaxosmithkline ceo from london. Lets begin with the brexit effect. Lets begin with the impact of a weaker pound. Is around 133, adding 9 positive impact on fullyear sterling revenue. Looking at your guidance for the dividend, you expected to remain the same but what will you use the money for . Great question. As strong tailwind affect from currency and its not just dollar, its euro and yen and all of our business. 91 of our sales are outside inside so we see the benefit at the top and we get the benefit through the as well. Of the p l its driving sales and margins and its driving cover for the company in terms of dividend cover. Through the next couple of years, our Restructuring Program will come to an and which has been significant. Will move into a phase i think of hopefully sustainable sales growth. There is no doubt at all this will put the company into a strong position to think about how to deploy cash in 2018 and beyond. We have a commitment for an expectation to pay 18 per share. It will be up to the board to decide what to do in 2019 and beyond. Jonathan would you like to see more money go back to shareholders or would you like to bolster the pipeline of drugs and go buy some companies . Overall, i have generally been less keen on m a. Believer ing organic growth. I have done a number of deals like the big deal last year with novartus but i think the classic acquisitions into the biotech space can be exciting on the day you do them but over time, im not convinced they have delivered the value anticipated. My personal preference is to continue to invest significantly into r d. Weve got an extraordinary pipeline coming through. We have 40 more drugs and vaccines and advanced development. I think that is where we can generate the most extraordinary value for shareholders over the next 5, 10, 15 years. What we have been working on heart is to reshape this company not for the next couple of quarters but the next decades. I think we are in good shape for that. I hope we will have a lot of opportunity to invest in the news we saw during this quarter on the pipeline was encouraging and we saw some excellent and oncologyin hiv and that will be where we want to invest. Some have said we have not seen much late day news out of drug companies. Talking about earlystage products, what specifically are you most excited about . Im going to remind everyone that we Just Launched six great products which are bringing in 4 billion pounds per year and are doubling every year. That is an important first wave. You will see later this year ckat we will file the shinri vaccine to prevent shingles. Its very exciting and we will file the worlds triple respiratory medicine in the u. S. And europe. Excitingxtremely opportunity so those a very late stage, about to go into submission. Quicklyow moving very hiv regimen which could be a complete game changer. We are in advanced development for a long action hiv treatment which mean people only need to take their treatment once every month or couple of months instead of every day. In phase oneojects or two development for oncology including some extremely exciting first in class treatments and we just had approved in europe, the worlds first of these gene therapy drugs where we take children who were born with a rare disease and reengineering that sell and seeing fundamental transformation of their disease which is close to a cure. From an Innovation Point of view, weve got absolutely wide spectrum of products which are launchable through 2025. Anathan we were in davos couple of months ago and we talked about brexit. You did not paint a doomsday scenario. Preference for the u. K. To remain in the eu because of the ease of doing business. You put your money on what you really think. You invested 275 Million Pounds in facilities to bolster production. What do you like about the u. K. In a postbrexit world . Think you characterize my prevote correctly. On the margin, we thought the uncertainty of a vote and the potential lack of clarity about the future jug Regulatory Environment is something we would avoid. Weve got uncertainty and we have to wait and see what the regulation and environment is but the fundamental view before and today is that the u. K. Remains a good place to do business. We have a long heritage here and do a lot of research here. To build factories here makes sense. Its a very competitive fiscal environment especially when you look at Corporation Tax in the patent box situation and ready access to good talent. The university of england kris is great creates great talent. We are voted by students as the secondbest recruiter of students in britain and the only one who beat us is google. From where we sit, the fundamentals are the same. There is more uncertainty and we are not sure what the future Regulatory Environment is. The vote happened and its a democracy and we will make the most of it and i am delighted we are able to announce these Capital Investments today. Not because of our view about it Shows Confidence in our new products. These investments are to back up the supply chain. Bloomberg needs google, remember that. Great to have you with us. Coming up, iphone rose 15 fell 15 while profits went down. Shares of apple are spiking ahead of the open we will big did we will dig into their big quarter next. This is bloomberg. David this is bloomberg. Up later, our special coverage of the fed decides at 2 00 p. M. The story is apple today with the shares surging in premarket after they Beat Estimates indicating the company could be stabilizing. Joining us now is stephen milunovich. Increased your estimate for this year and next year for the first time in a while. What was so great about the quarter you heard yesterday. Expectations were really low an apple did well so revenue was down 50 yearoveryear so we should not get overly excited. Some of the recent data from verizon and at t, its starting to feel like this could yet pretty ugly. The company said they exceeded their expectations with the iphone really everywhere except china. People feel like they are getting an that have better handle on the upgrade cycle. From a talk a stock perspective, we are at 115. It was the worst quarter yearoveryear and thing should get better from here. Alix is this going to be a new normal for apple with slower 4 revenuee point growth versus the gang busters they saw a few years ago . Is this a pause before they get back to the killer growth rate . Company the size of the and the maturity of the iphone, it appears people are holding onto phones longer. We need to see that reversed to get substantial growth. The Company Needs to diversify over time. Is there another killer hit coming . Number of probably a years away. Until we see Something Like that, we have to assume we are in a single digit growth world. Alix is thealix 115 stock price for a growth stock . Fits around our estimate and thats where a lot of the legacy Computer Companies are. That is not a growth multiple. All of the take on cash that apple has. Apple is in value hands and its possible if there is a re acceleration, that could provide a good upside. Alix does the market have to bererated . Got a dividend which he did not have a few years ago shares are coming down about 5 per year. I think expectations on growth have come down pretty demonically. The bold story as we completed the shift from shift to growth. I think we largely have re rated. Alix thank you so much. Up, could prime stimulus mean lower yields in the United States . This is bloomberg. David this is bloomberg. Its a battle of the charts today. This could be a tie because we are talking about the same thing in the market. They stop potential stimulus out of japan, i wanted to look at the foreign purchases of overseas debt. They have climbed a high in july. Maybe anticipating some kind of or stimulus. You have seen yields in the u. S. Hit a record low around the same time. There is money coming out of japan and flowing into areas like the u. S. Which has lowered the yield. Its not a perfect correlation. You have seen this in july. We see all lot of capital flowing out so will we see a lower yield . This matters more for the treasury market than the fed does. David lisa . I want to look at whats behind this trend. We will take a look of the Balance Sheets of the Federal Reserve and the bank of japan. The fed Balance Sheet really climbed in 2013 as the fed ramped up its quantitative easing purchases. It has plateaued in the meantime. Japan Balance Sheet, many Analysts Expect 13 billion to go higher as the bank of japan bills on the stimulus. Dead builds on that stimulus. Builds on that stimulus. Investors out of the assets in japan into the u. S. David you have a larger u. S. Economy. Lisa bank of japan owns the market right now. Alix is it 90 of all the issuance . Right. David they may do more. Jonathan that is the expectation. The Japanese Academy is 1 3 of the size of the United States other Balance Sheet will not be the same. When people talk about jet about debt to gdp ratio. There is talk about a 50 year bond coming out of japan. Its a perpetual bond. Alix they might forgive the debt and let it go. Its very tight because they are connected but i will go with the catalyst rather than the sentiment i will go with lisa. David im sorry. Lisa won, congratulations. Alix it was a tie. Jonathan it was not a tie. Up, Tobias Lefkovich will give us his outlook for stocks and more. Equities in london are up 7 10 and the dax is up. The yields are a little bit lower on this fed decision day. The bank of japan is the event of the week. The dollaryen is at 1. 05. It is a weaker japanese yen and crude oil is lower. City, we are counting you down to the market opened in new york. This is bloomberg. Jonathan from new york city, we are counting you down to the u. S. Open. In europe, rally for the last five days. Futures are from her in the United States capturing sentiment and the potential by thetion from a move boj friday. Dollaryen, the yen is weaker. Crude oil is down for a fifth straight day. We are about 30 minutes away from the cash open and we are counting you down. David this is bloomberg. We have been talking about Central Banks throughout the morning. We want to focus on equities. Earningshad a lot of overnight as well as more reporting today. Apple was a bead so lets look at whats moving ahead area Abigail Doolittle is monitoring everything at the nasdaq. It feels like a earnings are the story despite the fact that durable goods orders were not that great for june. Julie that is been the case over the last couple of days. Economic data has not been overshadowed by earnings. I will let abigail talk about apple but i want to get to cocacola. The company came out with numbers that missed estimates. Sales in north america rose 2. 2 . That is the only region globally where coke saw an increase in sales. It has been coping with a general slowdown in soda sales across the industry. It has been taking different measures to combat that. It was not entirely successful this quarter so the shares are down 1. 8 . Had a smaller loss than estimated by analysts. It also had a better cash flow. The company is keeping its operating cash flow prediction for the full year unchanged which is reassuring to investors. We are watching twitter as the shares are falling 11 as the Company Pushes Back again on any expectation that the sale will more. Se by much the Sales Forecast is lower than predictions as the company says its video ad revenue is not going to materialize. Good morning, today is likely to be all about apple but lets look at acamai which is plunging in the free market. Guided Third Quarter well below street estimates. It looks like its coming from increasing competition in the media segment. One analyst sees about a 20 down rise downsize from yesterdays close. Turning to apple, and a bit of a apple wasrom acamai, down yesterday but on the premarkets surge, it should open slightly higher. It should at about 37 billion dollars market cap after their june quarter was strong. Quarter estimates are better than what the street was looking for. It represents yearoveryear declines. Investors are a bit relieved its not worse than it could have been. David we want to stay on apple and bring in cory johnson. Is this a story about apple being in better shape than we thought or is this a story about apple talking down expectations . Its down 15 . Cory its about the analysts being wrong. They are emphasizing the gloom and doom. Numbers have been coming down. The analysts have in bringing these numbers down. Its exceeding its expectations as a result. The company is going through a big transition. Weve got a developed market which is 35 of the iphone sales. Means a lack of technological innovation, the biggest step up, is the first smartphone and the next one is only integral incrementally different. The folks are stretching out the sales cycle longer. David its at least two or three transgressions transformations. There is a transformation to services and possibly other products like augmented reality. Which of those is the most promising . I think what will matter the most is the search business. They want to serve users. Maybe people want to replace their iphone so it keeps them locked into the apple ecosystem. Morey mean selling products in the next quarter. David thank you so much. Jonathan the apple numbers are giving futures a lift. Lets get over to mark barton for an update. Mark plenty of games for the stoxx 600. We have had betterthanexpected santanderrom psa, air. Few investors are waiting the decision of the two day fed meeting. Thats big in the u. K. Gdp rose better than expected. The good performance came in april. Analysts say we will see a recession the next quarter and the First Quarter. Deutsche bank today signaling that germanys biggest lender may have to take further cost cuts after profit was almost entirely wiped out. Analysts were estimating a 22 million euro loss. The secondbiggest lender is down by 41 and Deutsche Bank is lower than 36 . Its the worst performance in the last 12 months. Jonathan thank you. Deutsche bank stock has been hammered. For more, were joined by our german business reporter. Over the last couple of weeks, we talked about the big investment thanks and the highlight is the debt trading revenue. What is the story between the outperformance from the banks of wall street and exactly the same decisions and underperformance in the Plane Division at Deutsche Bank . The u. S. Banks have a great economy behind them. They have people who are confident of bout how the u. S. Is going. Europe, there is a lot of lack of confidence in the european economy. People are worried and rates are rockbottom. Its not as much volume out there. If youre in the middle of a overhaul, you will lose revenue. Saying theys are are upset how far revenue is coming back and this may be a bit more than they had planned. Pricetobook, its of book value. 3 the ceo did not say 2016 would be great. He said it would be tough to make money. He is talking about accelerating costs and restructuring and restructuring and moving what was already planned. What is the story here . That may be pushing the investment down today. To see more granularity by accelerating or extending cost cuts. We dont know what it means. Hireuld be that they will additional staff but there is not that level of detail on that. The investors are worried the Deutsche Bank will have to sell shares today and dilute their shells. It could come through a situation where the litigation costs are so high, they have to do it. I guess you need to settle the investigation cost and pull of the through this overhaul and hope the markets will recover or not deteriorate further. Jonathan thank you very much. This story has changed. Has not changed. Downny shareholders sit and say they want dividends. David when do we hit the bottom and start coming back up . Credit says they want to make money. David there is more news form out from outside the business world. Bill clinton says his wife is a change maker and ready to lead. Nominatedatic Party Clinton and that former president spoke of him spoke of her as her commitment before coming to washington. Fight asked her to come down i asked her to come down to the art museum. We have been talking a laughing together ever since. She opened my eyes to a whole new world of Public Service by a private citizen. October 11, 1975. I married my best friend. The featured speaker tonight will be president obama. One of the Islamic State supporters who killed a priest in france was on a terror watch list. Wear anorced to electronic tag that let police track his movements. Police commandos a shot and killed the two attackers. Investors will develop solar powers near the ruins of Nuclear Activities so rumors from the 86 meltdown. Alix coming up, oil is down over 70 in the last month so could it fall further . I have two numbers that will determine its direction. Tune into that special coverage of the fed decision later today at 2 00 p. M. Eastern. This is bloomberg. Alix its time for futures in focus. Everyone will be looking at gasoline inventories today and i will look at u. S. Production. Is the biggere hughes oil rig index. Its a huge dropoff in oil rigs but so far, oil rigs have started to come back. The blue lines u. S. Production which started to roll over at the end of 2005 and is now below 9 Million Barrels per day. See oil continue if we rigs moving higher . The u. S. Production number within that dot report will be pivotal. Is toddus from the cme colden. I am watching u. S. Production figures, what are you watching at 10 30 a. M. We will be looking at the demand and supply for oil. Then you throw in the dollar waiting and the dollar has been a difficult trade for certain underlying commodities like gold and copper and the oil. It becomes almost two separate markets even though the dollars incorporate into all of them. The dollar rising will be will have an adverse effect on oil prices. With the increased production in the u. S. And increased output from iran, it will shake up high. Evel some of said the markets finance about the dollar driving it. Oil below the 100 moving day average, how more of a technical washup can we see before stabilization . If you take a step back and look at the year to date midpoint of oil pricing, its around 31 39. I am looking at that as a rest area. We will look of the overhang of supply which has been the story with oil for some time. Will china come back . Its unlikely. U. S. Economy has got to pick things up. If they will find out later from the fed if there is a positive outlook, it will be dollar positive and on the short term, that could hurt oil prices but in the longer term, he keeps his at her above the 40 mark. The fed decision today will be overshadowed by news that the bank of japan japan is planning another round of ¥28 billion. How much will that play on the fed Rate Decision Going Forward . This is bloomberg. David this is bloomberg. The fomc will announce its Rate Decision after its twoday meeting. Few expect the fed to raise rates but our next guest says they will not hike for almost a full year. U. S. Economist joins us now. We are looking forward to hearing what Janet Yellen Yellen will say this afternoon what do you think they will say . Anyone looking for a significant change will be disappointed. We think there labor of assessment last to go round, they responded to the mostly negative report a couple of months back. We think they will have to unwind that an sound more positive. They have tinkered with their inflation expectation. There was one component that had started to drift lower. Back so wence risen think they will adjust that, too but these are minor tweaks. We dont expect anything significant from this meeting . David are they right . We had a chart that showed bloomberg favorable Business Conditions that indicated that given what they have done the past, it would make sense to think about rising now. Why is that . The conditions are quite favorable but in another sense, they have raised the rates and resources. If this was a classic dual mandate driven fed, i would assume we would already have been in full hiking mode. Being driven by other factors beyond the dual mandate we know and we all know the as it did that which is global development. That has captured their attention postbrexit. We heard from a couple of key members. They have all said we dont have any clarity on how brexit will leave all. Will evolve. The samethat the thing when china devalued last year. Our approach the fed has been taking for at least the last year where Global Developments are waiting on their thinking. If the fed wants to hike and the dollar runs and ahead, the u. N. Can sell authentic turmoil, how do they get out of this catch22. . I dont think they necessarily do. There is enough going on around the globe where we expect additional dollar strength. The fed would say that as a potential disinflation or he force in the United States. As a result of all of those factors, it will be difficult for the fed to reengage this hiking cycle. Jonathan do they need to . Do they need to do anything for a long time . Its a reasonable way of thinking about it. Classic dual mandate fed, they need to do something but if they take their cues from other metrics, maybe they dont. I think that is a reasonable way of thinking about what will be driving the fed for the foreseeable future. I had a conversation with an equity account. Folks are focused on when the next height will come. My honest responses who cares . I would say instead that if you know there is only a few hikes left for this fed, does it matter when they start the process . People need to focus on terminal fed funds which are much lower than people appreciate. Left is only a few hikes so who cares if they go into september and december or next year. David maybe it matters more in the longer term. It may be that misallocation is going on because the rates are so low. Thats a different conversation. What people have to understand is the idea of why the fed needs to raise rates. Application is think about where we are from a neutral said funds perspective. If its true its around 2 , than anything below that, you are still very accommodated from a policy perspective. We are seven years into the economic recovery and have the same Monetary Policy thats been in place since the heart of the downturn. Our base case of the fed fund should be higher but the reality is we dont think the fed will get there. Will you be in jackson hole in august . Its pretty empty right now in terms of fed speakers. At the end of august, yellen will speak. Nothing else on the calendar between now and then. People will look for cues about september or december. David thank you so much. Make sure you catch live coverage of the fed decision here on Bloomberg Television and radio at 2 p. M. Eastern. The former fed president of the minneapolis fed is complaining about Janet Yellens speech. Coming up, the market open is next and we are counting you down. This is bloomberg. This is bloomberg. We are moments away from the opening bell. Lets get you up to speed. Of pharma up 56 points, the s p 500, s p rallying in europe for a third strike, ftse 100 up, the dax up by 0. 83. Switch very quickly, other asset classes, yields coming down, dollar yen capturing risk , speculation we will get some stimulus on the fiscal and monetary sides. And crude, a fourday losing streak. Just pushing up into positive territory on the day. 25 seconds into the session, lets get to julie hyman. Julie that is catchy. Write it down. [laughter] luckily, we averages here. We will see what happened this afternoon and also, Oil Inventory data at 10 30. The winner here, no surprise given that index in particular, not just apple but the Ripple Effect it creates. Apples revenue from the iphone is falling but it is not only as much as had an anticipated year. Forecast sales are going to fall for the third consecutive quarter. 47. 5 billion. That was higher than analysts had anticipated due in part to demand for the lowerpriced iphones. We hundred 99 handset which got a lot of criticism but has proved to be appealing to consumers. You see the shares trading higher at seven point i percent this morning. Definitely significant. We have a Revenue Breakdown and the overall revenue figure, the purple portion is the iphone, so crucial for apple. You see the declining revenue we have seen in recent quarters. We are watching, cocacola, Second Quarter sales missing estimates as the company saw sales gain in north america but basically nowhere else around the globe, declining demand taking its toll as shares fall. Have got a lot of Aerospace Companies out this morning. Boeings cash flow strength, we can its in its earnings, the law report was smaller than estimated. Attorneys, also out with a fullyear forecast ahead of what analysts had in anticipating, boosting its numbers there, and General Dynamics as well. Earnings beating estimates. It saw better i. T. Sales even though its all weaker demand on the flipside. In telecom, were watching comcast and tmobile, both stocks rising but not by much. Comcast secondquarter profit beating analyst estimates. Fewer video subscribers than expected, canceling service. In other words, a better number four video scribers. Tmobile profit beating estimates although here, sales a million new customers for the first time in almost two years, something that offset perhaps the profit by some extent. Thank you. The s p hovers around alltime highs. We want to bring in an equity strategist, we just opened at 2174. But at a lot of heat some point, do you need to look and say ok, rate higher now, things are better in the u. S. . I do not remember myself ever being called a bowl or hot. , our target was 2100, mystic by a point. Markets can fluctuate around here. I do think there will be more rotational issues in the market. We favor value over growth, even in areas with technology across the board. Recently picked up tech hardware as we saw a severe pullback in the Second Quarter in those hardwares docs. We are trying to be more opportunistic. Give us the risks on the downside to what things can keep you from it . A lot of things you can focus on. One thing fundamentally is exit and what that could potentially lead to in terms of economic activity. A have seen people giving you bond roxy stimulus and really getting them up to let we think are safe levels. The one we get a lot of questions about, what if donald trump wins in november, and what is the Market Reaction to that, you could get a sense that from as apeople, they view this bad event. I tried to shy away for from alexion discussions. Partisanship tends to come into people pop peoples personal opinions get in the way. Im canadian and i do not vote in the u. S. I pay taxes here so i care. Five reasons to be bullish and five races to be bearish and the one that struck me most on the bear side is where will the money come from . We have a short a chart looking at buybacks versus domestic mutual funds and etf. Buybacks in positive territory slows areow the negative. If they do not reverse and the buybacks are the only his left to drive it higher, what is the risk . That one is just so stark, that is why we presented it. Corporations are arbitrage ring the difference between the cost of borrowing money in stocks. As what they are supposed to do. Again. S get in the way they lost money twice, declines in 2000, 2002, and 2007. They are not that afraid of buying international equities, which is kind of funny. You can have Insurance Companies buying, which they have been, and you can find a third group, hedge funds can take advantage of leverage. They do not knew flows. If they are under leveraged, they can also drive stocks. Markets triple and you have almost no money coming in over over the lows. The factore by far in we think those can pick up in the second half. Jonathan a market haunted by what happened in 2008 still, peace have been characterized by the front of the newspaper that , and that iscoming usually associated with the top. It does not sound like it will come this time around. How do you characterize the top when the psychology has changed so much that people are not encouraged,ed but scared of them. Right. They view it as they missed it. Trying to capture how people feel, i have been accused of not caring enough about how people feel and there is probably some truth to it, but it is more about how people position. Territory one people were not necessarily, same thing in 2004 and 2005. 97 probability of market going higher. Target, investors you get dragged dan, probably need something to change on the bond side, but then start thinking about chasing equity opportunities. That is interesting. You think bond selloff could spark an equity rally . There is discussion about moving out of fixed income. People have been talking about it for years and thus far it has fared. It has failed. Stockof 2000, the tech peaks. Months later, you start to see significant outflows from that point on from Aggressive Growth funds. They took 17 months of looping to finallyoney conceded is not coming back. It will take a month or two, longer than that for people to change their behavior. Human beings are not that quick to react. If true, i would have been on a dialogue time ago. We will talk about that next. Areng up, twitter shares over 12 after the Company Wants that thirdquarter sales will be much lower than previously forecast. Not all that we will explain that next. This is bloomberg. This is bloomberg. Coming up later today, john duffy, Six Flags Entertainment chief executive officer. Coming up, it is bloomberg markets, vonnie quinn and bloomberg market. Top story. Deutsche bank top shareholders. He joins us what exactly he wants to see, how long are they prepared to wait for Deutsche Bank to execute all of the promises they are making. Extensively be covering the dnc, the gavel today, highpowered beakers including the president and also obviously, the big story of the day is the fomc. We will speak with michael of barclays on that. Thank you. Have the movers. Liquidators are down nearly 10 today after they came out with the ladings latest Earnings Report. Analysts were only looking for a 5. 4 drop. The company saw an increase in the average sale of 1 and a drop of the number of customers by 7. 9 . Centers, earnings per share matched estimates and net revenue is coming in below. A lot of turmoil within the health care industry, shares are down 7 . Finally, the biggest maker of aortic valves, raising its 2016 forecast for the Third Quarter in a row. ,ounger and healthier patients though shares higher by 7. 4 percent. Jonathan the mastec up half of index. Ing up 7 of the i can tell you about 25 of those points are coming from one stock alone, apple. Lets get to cory johnson. reacting, the notions of the end of apple being here. Another interesting catalyst here we should be looking for is india as a growth catalyst. Some commentary talking about that. They will get perhaps retail that will drive their growth to we saw that with china. Maybe the last big new market but an important one and a huge one. Technology and specific stocks. We see money rotating in the market. We have had a couple of deals recently appeared the stocks have done fairly well, better than most people thought. Tech hardware is more interesting to us. 700 companies in the u. S. And what their Spending Plans will like and tech was the place that was most on fire. Planned from the companies. That was fascinating to us. Part of it is the inability to not spend in areas, mobility and cloud. You have to be there. It has become nondiscretionary. A Dramatic Development and technology is the shift away from Company Spending from building a server or adding the capacity to support a business in the back of the office. That is all coming up in the amazon cloud. The Company Spending a lot on software and not on hardware. I agree. I think that is true. I more agree about how negative people are on the hardware side. S p,hardware sector in the it slipped about 800 basis points in terms of that is where we saw some opportunity. But look at the result from hewlettpackard, it is hurting. I agree. Everyone knows that. Question is what is new . Before, it isjust not that they did really well. It is that they did not do as badly. Tech, we arebout talking about two different forms of tech and that takes me back to twitter. It is something a company is investing a lot of money and. You are funny today. This is the lowest the stock has fallen since the last Earnings Statement on twitter. What is going on with twitter . Aside,any management what is interesting as we have seen the slowdown in user growth and we have seen it for some time. It little bit of growth in the u. S. , a bright spot in an otherwise gloomy report. She just really worth some, moving to video, a lot more clicks and adds an adversary advertisers do not seem to care. Twitter advertisement engagement is growing like crazy. Some engaged with when you scroll through your twitter advertisers are paying less and less and less for twitter, and the value of those , it is reallyown disconcerting. That is a different story than we will probably hear from facebook. Esp or we will Pay Attention to those numbers as well, but it is a different story in terms of adding users. Facebook is adding users. Look at this cost for engagement. It is a bad trend and it is getting worse every quarter. The question i have this with facebook. A different trend or is it picking up on volume. The coffin facebook have been under some pressure as well, but theyre adding so many more clicks. That is a story better illustrated with google. They made a conscious choice as they go from desktop to mobile. New discounted advertisements as well. The twitter story has always from mobile this quarter. Facebook, we will see what happens. Through, the rhetoric coming in, the dollar was not going to be depreciating. So far, 1. 3 for the s p. The you think this is the thesis for the second order . I think the negative trend holds water. It will be less than it was in the First Quarter. I think what people probably want to see is turning positive, not the rate of change being less negative, but when does it turn positive . In the First Quarter, those the first one we had in energy. All about energy. The first order, we had current the hammering you is well. You are seeing some of that updating a bit in the Second Quarter. Always asked months away. There is good reason to believe the earnings will be up in the second half. Drag from energy is diminished, Industrial Production is moving higher. The other thing we have seen is certain stocks are moving together. Will earnings be the differentiator to shake it up . It isn that happens, something the derivatives desk is looking at, inc. About the big energy Company Trading versus big equity, they should not trade similarly. When they all start trading as if they are etf, most people are really nervous, they are selling losers and winners at the same time. Seen, it hashave usually been a good time to buy the market and not to sell it. When everyone is trading independently and everyone feels confident that they are the greatest stock pickers around, that is when you worry. Lesson interesting distinction. Thank for coming in, that he chief u. S. Act at a strategist. Cory johnson in new york. Thank you. He does not like it here. He likes it here. We like having him. Coming up, bill clinton rallied democrats last night ahead of the speech by president obama. The latest from the the and for global markets, we wrap up the central bank look ahead. Big decision, the boj on friday. This is bloomberg. David last night, former president clinton spoke at length about his personal terms with his wife, Hillary Clinton. Clinton i asked them to take a walk down to the art museum. We have been walking and talking and laughing together ever since. Hillary opened my eyes to a whole new world. Of Public Service by private citizens. On october 11, 1925. I married my best friend. Are joined by megan murphy, joined this week in philadelphia. That was a walk down memory lane with former president bill clinton. What the debt due with a Television Audience who was undecided . The way the speech played will be very different in the hall than out of the hall. He did take viewers and people in the audience they walk down memory lane by telling them things they may not know about Hillary Clinton, in particular the early things she sought to do, social justice, registering he was trying to say this woman has always been Public Service and have fought to change the game from day one and that is what you should be thinking about in this election. What is unclear is whether that plays well in Democratic Base or whether that could swing the independent voters. This woman has been in the public eye for more than three decades and people still feel like they do not know who she is here to think he did a good job of whose humanizing her to some but it echoes their personal life together, which republicans will target. David we will hear from president obama, the headliner. We are also going to hear from tim kaine, who we have not heard much from. Who is he appealing to . Appealneeds tim kaine to to the voters who will really decide the election, the swing voters, ohio, pennsylvania, michigan, order, virginia, where he will play a big role. He gave a fiery talk this morning when he got white emotional about the role in the race and the stakes involved. People it out of the park tonight. All eyes are focused on barack obama here at week that the sleeping rhetoric he is known for, that he will be best remembered for in some respect. He will put his legacy and what he achieved over the past eight years. He will phrase it in terms of the economy and social justice but he will also say this is an important choice for everything stone the table Going Forward. He views donald trump is a dangerous man and he has been clear about that. He will want to draw the starkest contrast between them. Jonathan if the decision, we will have full did full coverage. Thank you very much and good day to you all. From new york, this is bloomberg. It is 10 00 in new york. I am vonnie quinn from new york. Mark in london, i am mark arden. This is numbered markets on Bloomberg Television. Vonnie we will take you from new york to london to washington and of course philadelphia here it is fed day in the u. S. A majority of investors expect theyll offense to do what it has done, nothing. Could this set the stage for a possible rate hike in november . Mark a strong july in stocks. Higher today inequities worldwide. Regain 3. 9 trillion over the month. Hillary clinton made history by being the first woman to be nominated by major party for president of the u. S. What to expect from tonights lineup