Tom, we had a little bit of eurozone data out. Continue watching a lot of the banks. We are waiting for Standard Chartered. Hsbc all about costcutting. I do not see how that could be a good strategy. Costcutting is front and center but all the focus is away from Standard Chartered on those European Banks. Bid thisbit of a morning. Francine they do a little bit. Certainly some of the stronger banks. Standard chartered coming up, we have to look at pretax, worse than expected. It is the Capital Buffers that investors are watching out before out for. Ct1all, that first half capital ratio 13 13. 1 . Pretax a little bit below. Capitalirst half ct1 ratio 13. 1 . Tom Standard Chartered is an emerging market proxy. Youve got the mexican peso out to to 19. That is all you need to know about emerging markets. Ian markets more than Central America but you make a very good point that this is not really a u. K. Bank. They are headquartered here but it is an asian bank. Lets get to first word news. Taylor for the first time, north korea has fired a missile that landed while japan considers its economic zone. The missile launched fell into waters 160 miles of japans coastline. Shinzo abe called it a serious threat to japan security. Japans Prime Minister may be about to raise tensions with china. Hawkish l. A. He is about to appoint a hawkish ally. A reporter,g to he is about to appoint a hawkish allly. Trump is ignoring advisers and Party Leaders who want them to move on. He is told a tv station he has no regrets. Trump is refusing to endorse the highestranking elected republican paul ryan. Ryan has a primary election next week in wisconsin. Ryan spent several weeks before deciding to endorse him. Trump also withheld his endorsement from two republicans facing primaries, senators john mccain and kelly ayotte of new hampshire. Global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. This is bloomberg. Tom really front and center. Of last 24 hours president ial politics in america has been unique. We will talk to a trump supporter in her next hour. Ands a most nuanced interesting moment. Yields assuring 1. Churn 1. 54 . American oil making real news yesterday. 39. 78. 13. 78 a little bit of equity angsty. Yen, yen, yen nowhere near 99 but im going to call it a strong yen. Mexican peso up to 19. That really show some of the more global tensions were seeing as we focus on yen. Francine i love that you look at the mexican peso. You know what i reminded of, the brazilian games start friday. We need to look at what is happening in brazil. We do not even know if they started. The currency has been under a lot of pressure there. European stocks are fluttering. What i really want to show you is banks. Rebounded because a lot of the stocks or earnings were not as bad as expected, but maybe it is also a different crop of banks. Hsbc was ok. Socgen was ok. Standard chartered just coming out. The capital ratio is not bad at all. A beatinghey took yesterday. I will give you a green in the bounce but what an ugly day yesterday. I want to look at history. This is a chart i made 14 years ago. I updated it. I did it for facebook live. Manufacturing in america. Population adjusted. Its set in todays number which is 13 Million People in manufacturing. Thell know the yellow line, slow markdown in manufacturing overtime. Absolute francine, the implosion in the last 15 years in manufacturing is something. We can talk all day about this. Withs a little bit to do currency, and it mostly has to do with Technological Progress and the idea of the new manufacturing, which is a less peopled manufacturing. What do you have . Francine i like that chart, because the more we drill into some of the issues, and underpins the earnings. Tom and cutting costs. Francine it is not a vanilla bank chart. It just goes back to showing that European Banks that have be en under pressure are also cheap at the moment. When you look at the pricetobook ratio which is in the white line. Tom very cool. Francine not all banks are created equal. You cannot compare china to the u. K. Banks. Is basically a comparison towards the stoxx 600. Lets get back to the markets. Heads of europe g10 affect strategy richard joins us. Great to have you because everything is linked and nothing has ever been so linked in terms of currency markets. Currency market stability or fx currency stability makes it how theyr ceos to see will make money. Are we going to see less volatility . Richard when we look at most of the series across Foreign Exchange, a lot of those are near the lows. Its not just currencies. Youre seeing in and fixed income and equities as well. We had a bit of a backup yesterday but in the much broader picture, the vol is low. Its looking to remain that way. From a policy perspective or centralbank perspective, a lot of them are happy with that. Francine i would argue that one of the biggest stories this weeks treasuries. Its really change. What is underpinning that . Richard underlying this flattening trade that was out receiving trade of rates that ultimately when people are looking a fixedincome they are expecting curvehis is just the should continue to flatten out Going Forward with an expectation of liquidity. A lot of this has been postponed in terms of how the Central Banks are going to look at their policies till september. The bond market is getting nervous. What is going to go on with the bank of england tomorrow . And perhaps is there going to be any tub of a backup, or steepening over the shortterm . Tom look at yen. Bring up the chart of japanese yen now. I want to back up away from the mumbojumbo we talk about, massively strong yen. Richard, is the yen a domestic story, or is it being buffeted by for an activity . Forein activity . Richard over the mediumterm, without a doubt it is the trade surplus japan has. That will set the mediumterm exposure. J, thereinto the bo were some expectations that perhaps we would see more Monetary Policy, rate cuts or in that did not, and get delivered. Investors are unwinding some of those positions and waiting to see what actually happens in september. If policy is not adjusted, that animately the eyyen is in environment where it should appreciate. Tom ultimately it is out of whack. Adam pozen writing and the financial times. Thepozen talks about received wisdom. What is the received wisdom on intervention . Do you have an idea of the when intervention . Are they going to be so bold as to do a unilateral intervention . Give us an update on that. i think the ministry of finance has been somewhat clear. They see currency movements, the five big figures are more, they see that as extreme. We have had them on the tapes a few times talking about this type of pressure on the yen seems onesided. I think investors need to be cautious. Ultimately, it is going to be difficult to consistently intervened to weaken yen. I think that is where the market approach is that the market will continue to apply pressure. At times, there will be some intervention if this does push up dollaryen it is hard to see that as being stable. Tom i agree. Richard any of those types of strength in dollaryen, more than likely that will get offer into. Tom i would agree, checkered history to say the least about unilateral intervention. Coordinatedy rare intervention as well. In our next hour, someone for some excellent guests. We will talk about the Glass Ceiling. I want to talk about miss paratt at google. And a president ial candidate that just knocked up against the Glass Ceiling. York, gorgeous, new metsyankees, what could be better . This is bloomberg. Inncine im Francine Lacqua london. Lets get straight to the Bloomberg Business flash. Says the new report bank of england probably will cut Interest Rates close to 0 to ward off a recession. The report comes from the National Institute for economic and social research. The tightening of financial and Credit Conditions will slow down investment and Consumer Spending. Economists will predict the boe will cut rates t omorrow. Socgen had lowered professions for been provisions for bad loans. Hsbc has announced a 2. 5 billion share back to reverses stocks slump. The bank is backing away from annual dividend increases and hsbc removed its target of surpassing a 10 return on equities by the end of next year. Quarterly profit fell 45 from a year ago. The prospect of a recession in the u. K. You are sticking with banks. Francine thank you so much. Yes, i am sticking with banks. The most interesting earnings story of the week. Lets get to our banks reporter. When you look at the banks, you cover a lot of the e. U. Banks very in depth. Hsbc was pretty much as expected but it is all on cost cuts. Richard the surprise was the buybacks they announced. This is an institution where they pledged a progression of a progressive dividend. There is concern about whether they are able to grow those. However, the disposal of the brazil unit they sold earlier this year, that was a fantastic boost for the business that ofbles them to do2. 2. 5 Additional Return to shareholders. Francine what we know about Standard Chartered, this is a Different Bank skewed towards asia. There is so much focus about capital ratio. This is kind of the one thing that shareholders want to make sure they have. Richard this is the good news from Standard Chartered breaking in the last few minutes that they have managed to maintain her capital ratio as a measure of financial strength above their target of 13 . That is really good news. There was also concerned about their capitalization given they have rising loan and parents. However, that is another thing we see from Standard Chartered, they are not as bad as we had previously feared they could be. Institution which is experiencing a slowdown in those asian economies that could hurt its Balance Sheet but not as bad as we feared. Tom have you seen a good study dilution expected when the European Banks go on to do what they need to do which is recash . Ution. Ys had an 81 dil i know that banks a total mess. Have you seen a good study of what the dluti dilution would be at Deutsche Bank . Richard if they did have to raise new capital, that would be a negative thing for the shareholders. Weve seen Deutsche Bank is down 50 yeartodate. A tough ask if you are shareholder to take up a new capital on these institutions but hopefully we are not going to require that. The stress test confirms that their relative stability to these institutions apart from the likes of monte di paschi. Tom is this in august story or do we go on holiday and we come back in september and readdress it . What is the urgency right now after what francine and i witnessed yesterday . Richard there is a great deal of urgency to solve the situations in the south of europe. However, in the u. K. Here we have fears of the brexit which are not being realized at this moment in time. Hsbc this morning was saying they have not seen a particular slowdown, and that they do not expect to see any issues with rising impairments of credit quality. This is something that will play out over the next couple years. They also see that we will get more loan growth picking up through september, with taking a pause as a consequence of the referendum. As we go into the fall, hssbc seeing things picking up. Francine tom is obsessed with european holidays. Take my days. Tom i think it is really important. What we witnessed yesterday was not good for anyone. I mean, those declines in Deutsche Bank were shocking. Francine right. We focus a lot on these banking stocks that have to go through restructuring. Its new ceos. At the end of the day, its to do with Central Banks. They have anemic growth, huge regulatory fits which means they need to curb risk. And there is nowhere to make money. Richard it comes down to what is the sovereign curbs . Curves continue to flatten out due to Monetary Policy or just investors demand for yield. That is a tough environment for banks to make capital. Are reflectinges that, and europe is reflecting that as well because, as one of the more extreme policies ou there out there. Francine thank you so much. The two richards. We will talk about some of the more secure but important currency move straight coming up later, the conversation on banking continues. We speak exclusively to carlo messina, the ceo of intesa sao paulo. Thats coming up right here on bloomberg surveillance. Francine this is bloomberg surveillance. Dom, this is what i picke out for the morning must read. I read it twice. Donald trump speaking to the press, Interest Rates artificially low. The only reason the stock market is where it is because you get free money. Almost. Ving stock pixcks bizarrehas been a couple of days. I think it is a terrific quote. Again. Hng the quote up it is econ 101. Interest rates are artificially low but the only reason speaks to the servitude of most statement we get from mr. Trump. He love to speak and certitudes but i cant conveying a enough how much it is front center for america. For our global audience, the journal a republican paper. Trumps missteps and goopp unease. The New York Times trump swipes at republican. Theres the basic idea of where we are. It is original and america at this moment. Francine original. The only other head of state whoever spoke to me was Silvio Berlusconi back, i believe, 2008. Richard, how do you model donald trump . Dollar positive or negative . The more pressure that donald trump is under or them issues that arise, the more that is less going to be dollar next rade. Trade. Investors, when they look at the dollar, there is not a fear of the fed. That remains the base case, it is going to be in a private where the dollar weakens. Francine im a european to it i keep being told, even if he is elected president , there are checks and balances and he talked about removing janet yellen. How should an investor look at that . Richard yellen is the Guiding Force on the fed. It creates uncertainty of volatility. To a large extent, until it is done, it is difficult to position for it. This far ahead of the actual election, it is one of those tail risks in markets, but something moving currencies now, still out there. Francine rebound is banks is what we are seeing. European stocks are little changed. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Olympics 2016, let me get you on my level. So you never miss a moment, miss a minute, miss a medal. Why settle when you can have it all . Soccer to wrestling. Track and field to basketball. Fencing to cycling. Diving to balance beam. All you have to sa is, show me, and boom its on the screen from the bottom of the mat, to the couch where you at . Show me the latest medal count xfinitys where its at. Welcome to it all. Comcast nbcuniversal is proud to bring you coverage of the rio olympic games. Tom good morning. Bloomberg surveillance. A lot going on, important interview coming up with the leadership of intestate, of intesa. Are they a troubled italian bank . Better than the others. Sort of like the boston red sox. Francine good analogy. Tom lets get to first word news. Report the Obama Administration secretly airlifted 400 million to iran. Iransncided with r release of four prisoners. Meg whitman has endorsed Hillary Clinton. Once ran for governor of california as a republican. She urged all members of the party to reject trump. Experience maker the far better choice, she says. And don trump is urging individual investors to get out of the stock market like he did. The republican president ial candidate told foxbusiness that Interest Rates are artificially low and inflating markets. Trump says the only reason stocks are the way they are is because investors are getting free money. In japan, Prime Minister shinzo abe has added an Economic Policy radical to his cabinet. Advocated Firm Political oversight of the bank of japan. His appointment comes amid signs that investors are losing confidence in abenomics. News 24 hours a day powered by 26 hundred journalists and more than 120 countries, i am taylor riggs. Tom thanks so much. D, we goand me pumpe beneath the headline data on jobs day. Were the usual suspects. Mike the weird thing about the Economic Data lately, its been relatively good. Strangeet these outliers with big numbers. Everybody really nervous. They are looking at adp as a canary in the coal line for what is coming with that. You look at the chart, and it is extremely unreliable. You can see that white line, adp much more stable, then payrolls. Its narrowed it margin of errors. Big misses. June. W by 93,000 in most useful for trends, whether we are going up or down and it does show the labor economy has downshifted an average of 204,000 jobs in 2015. Now we are running at 173,000. That is about what th forecast shows for the mud. Etom but the headline number. Struggled with this, whatever anybodys view in economics, everybody agrees the jobs, we allin go yay. Mike now it has come down. You had yesterday, rob kaplan from the dallas fed suggesting we only need 120,000 to make and happy and most fed officials think it is somewhere around 100,000 that you need to fill the job openings that come due. 180,000 would be a very good number. Tom to be clear, jason furman at the white house is happy with 130,000. Mike as an economist, yes, as a politician, no. People tend to think the number has to be higher or its not good. Its really much better than we need to keep bringing the on a planet rate down. Bring the Unemployment Rate down. Francine we have the beo countdown but we find out what their future expectations for inflation is. Which is the most important . Richard from an fx side, it is the bank of england. Adp today but nonfarm payrolls on friday is not seen by the markets and shifting the fed reaction too far one way or the other. Francine what, the president ial elections . Richard no. The idea that the strength in the labor market has been with the u. S. For a long time. That is not going to shift too far one direction or the other and is not going to change our fed expectations for september or december unless it is a blowout number to the top site. Francine boe . Richard bank of england does matter because what youre looking at basically you have had three of your main Central Banks, and there is this idea and fixedincome there is going to be additional liquidity, rate cuts and q. E. And expectations have been built up again for the bank of england going into it. You can see this in euro sterling and cable. The market believes rate cuts and q. E. A disappointment causes a big problem for fixedincome. Tom Deutsche Bank yesterday taking nominal gdp ex consumption. And with the inventory adjustment we saw it is a crater of gdp. Outnevertheless, xing consumption. A your experience, is that proper approach a looking at the annual spirit of the country . Mike 70 of the country is Consumer Spending. Yes, you take that out and you have nothing left because business spending isnt there, a nd inventory and trade is not there with the dollar, although that is leveling out. Tom help me with what you and i have heard for years we have had such good support from the National Federation of independent business, does Small Business really matter or is that an artifact from a different time and place . Mike it does matter. It gets a little bit to the animal spirit. Companies that have everything to gain and everything to lose hiring. It is the Small Businesses that create the most jobs. You want to see that continue. We should get a number later this week on their payroll numbers. Well see how that is going. Francine overall, you look at look at these granular analysis of what were seeing for the job stateds dat. A suissey curve. Anything below 40 years is negative. Richard most extreme curve. Part of that is by design. We have seen an awful lot of swiss appreciation toset up an environment with deterrence. And part of that policy is keeping that curve there is strong relative to the rest of the g1o curves. Absolutely. When we look at the mediumterm expectations for the swiss it does not trade as much as a defensive as it did, either under brexit or the recent stress we had an European Banks, you are not seeing the swiss appreciation we have always got in periodic market episodes. It does show you a does have an impact on currency. Francine where do you make money in currencies . Richard currently right now it is shortterm horizon till we get to september. Then we can talk more about where the Central Banks are going to go. I really do like dollar upside. Again, you are seeing pressure in energy markets. You are seeing basically brought economic weakness which is beginning to work its way into canada as well. So, that is one where were beginning to see sentiment shift. I think that is when you can definitely do. Broadly in the lowball environment, without Central Banks pushing the envelope too far, it is going to come back to some broad dollar weakness against e. M. Francine thank you so much from citigroup. Michael mckee, our economic editors in the u. S. We speak exclusively to carlo messina. We will be asking about the figures yesterday. We will be asking about nonperforming loans and possible consolidation in the e. U. Banking system. This is bloomberg. Francine im Francine Lacqua in london. Tom is looking at charts. Reporting aaulo smaller than expected decline. Of italysy lenders are internal. Joins. Carlo messina with ust to have you on the program. Your share price is doing better than others. How much do you need the italian banking laoans to be fixed . Its mainly related to specific cases. There were two banks under t threshold of capitalhe. Theyve been solved through the usage still remaining monte pasche, the big problem of the italian Banking System. Through the disposal of nonperforming loans, in my opinion it has solved monte pasche. We have to wait for the recovery of the Real Estate Market in italy. Prices increasing. So, this only a problem waiting for the price to recover. So, i do not see significant problem from a fundamental point of the. Point of view. Francine every time i speak to you and every threemonth i ask, are you going to buy monte pasche. You have always told me no. Would you beest, interested in buying it if you got rid of the bad loans . Mr. Messina there is no rationale to buy monte pasche. Im committed to deliver a plan in a clear trend of creating value for shareholders. Also, do not forget that 60 is in international investors. We have such an amount of pasche,with monte we have no possibility to create value. Francine yesterday you were ahead of target. Would you consider increasing the dividend . Mr. Messina not this year, no. We have a target of 3 billion euros. Probably we would be the best dividend yield in the European Banking sector, but this year, we want to use the extra net income related to these figures compared in order to improve profitability for 2017. Have better cost of risk and 2017 and to deliver, over deliver in 2017. Tom we saw in urgency yesterday across all of European Banks. I think most people in American Finance are baffled by the lack of synergy and mergers of italian and other National Banks in europe. When do we begin to see a modern mergers discussion among European Banks . Mr. Messina so, it is clear that to work on synergies between European Banks you have to talk about the possibility to reduce costs between Different Banks that are in Different Countries. In my view, it is difficult to between banks and Different Countries. Otherwise, we have to serve the story of increasing revenues but it is difficult to say you can increase revenues, italian, french or spanish or german banks. View, consolidation between European Banks can happen only in line of business, asset management, but not between big players. Tom are there too many banks in europe . Are there too many banks in italian . Mr. Messina yes, absolutely. There can be consolidation within the countries. And you can explore synergies. A merger,t ot mato make you have to create value for shareholders and the only way is through synergies but the synergies are cost synergies. Within countries, it is possible to exploit synergies. A lot ofe will see consolidations within country, and italy, but also in other countries. Tom with great respect, sir, i look at European Banking when i looked on park avenue at the old pan am building above Grand Central station. There was a time when our airlines were a lot when our airlines looks like European Banking. It was a national interest. You going to have to work through these challenges . Are you going to have to work through the nationalism of your industry to get to a successful outcome . Mr. Messina no, i think that at the end reality is that we are a company like all the other devoted to create value for our shareholders. So, the only point is to make in a good way the job of being a good banker, reliable for clients, having liquidity leverage and profitability like intesa sao paola. O. Withlso being in a country a problematic situation, it is possible to delivered to deliver good performance. Tom let me show the chart. Dont break into italian on me come on i need to meet a supermodel. Dont break into italian. The redline is unicredit. The white line is a good bank. This shows attention within major italian and European Banking right now. This shows the tension. Intesa is the secondbiggest bank when you look at actual value, and has a intesa is consider the bitter bank the better bank. Given your shaping your strength, how much will you buy abroad . Are you looking for acquisitions . Mr. Messina so, it is clear ist probably Intesa Sanpaolo the only bank that can make acquisition outside his country. So, because we are in a clear excess of capital, also certified by the stress test, and because, do not forget, we center areerse exceeding our requirements. The real point is the possibility to create value for shareholders. Im really committed to deliver a Business Plan that can create value for shareholders. I want to improve conditions for 2017. For this plan, i do not see any possibility to create if conditions change within the week and consider other opportunities. For the time being, i am really committed to deliver my Business Plan. Francine right. Shareholders, how would you describe Investor Sentiment . Yesterday, your figures were good. Analysts were saying there were good. Share price fell. Mr. Messina yes. The point of intestate san paolo wet of intesa san are attractive of the italian banking, perceived. In reality, italy has strong fundamentals. Wealth management Business Model is delivering in a very good way much better than also its competitors. In reality, in some months, investors will consider again paolo as the real opportunity for having increased value. Francine interesting. Carlo messina there. We were talking about the italian disco. We discount. We are sending road set u to tom keene. We will talk about the macro economy. Tom, if you look at european stocks, they are higher. Banks . Tom it is the messina effect. Francine storccks are a little bit subdued. This is bloomberg. Francine welcome back to bloomberg surveillance. Tom, we have some breaking news on samsung. This is significant because it is a bloomberg scoop. Well done for the people on the ground. Samsung said to be in talks to buy some of the assets of the unit owned by fiat. This is for the auto parts. It is part of the operations of the autoparts maker. This would be one of the first asset sales we have seen from Fiat Chrysler in the last couple quarters. I do not have a number of how much it would be worth of fiat, gaining 4. 2 . Lets get back to the Banking Industry and back to a little bit of m a and negative rates. It is tough being a banker nowadays. That means you had to take less risk. This is the enjoyment that the biggest bank. To usyou for speaking exclusively. We are talking about the challenges for italian banks and the challenges for intesa. Overall, negative rates are terrible for banks because it is very difficult for you to make money in this kind of environment. Mr. Messina its difficult if you look at net interest margin. On the other side, there could be some opportunities in commissions because when clients have no opportunity to invest underthan assets management, they can be moved into asset class that can create value from commissions points of view. Thats the reason why we are working on the Wealth Management business, and we are delivering 60 above are pretax income from Wealth Management. S environment can create also opportunities in terms of growth of gdp. If there could be some announcement in the growth of gdp, you can have better quality in your asset quality. Retailear that from a banking point of view, this is something that is negative. Arecine the two interlink. European banks need European Growth and European Growth needs strong banks. Are you seeing the green shoots of recovery . Mr. Messina i think at the end, rate environment can increase the attitude of corporate clients to invest. So, investing, they can create energy for growth in Different Countries because you have demand coming from customers. So, companies are no look at rate cant and zero increase investment. If you have the right Business Model, you can have the possibility to create value also in these environments. Tom if there is a right Business Model, where do you envision being in five years . Obviously, there has got to be henrybanks, but as koffman says, if banking is the new utility business, where is your bank in five years . A goodsina that is question. I think that from a Strategic Point of view, this is the question that ceos have to consider. And the answer for Intesa Sanpaolo is we want to be one of the best Wealth Management companies outside of italy. And i think we have the potential to tap this target. I do not see any significant value in being a significant Corporate Investment banking bank because there is a lot of capital absorption, a lot of negatives deriving from Corporate Investment banking activity for a bank like us. And Wealth Management is really the story that we have to tap in the next years. Francine carlo messina, the ceo of intesa. Coming up, we talk eyn. Talk yen. Hohey s woiit ghong, estcak . Hoestcak. Th lais p hceotas hkeca hyso wn arett ey llsekeg lica hotkes . Cwithstomcain business tean fid wi, pro cthey bould e. Ju ddst aus a czetomid ey age yltowiour rofi pas splgeh pa an ud yo ll yeastr cusomerer wheie thesr ey a aredylrea ju ddst aus a czetomid ey age on dheiresevic pas splgeh pa. Or upder. ithare tstn jui, wif c itelan howp grr younebusiss. U ydone t se ethat dveryay odintrg ucin pwifiwiro, fi hthatelyorow usur bs. Ines ascomct. Ness t builbufor sssine morning, a fragile stability in markets. American oil below 30 a barrel. 19 to then peso dollar. The Glass Ceiling in many ways is broken. Sallie krawcheck in this hour. On secretary clinton and Sallie Krawchecks wall street. All eyes are on troubled europe. Good morning, everyone. This is bloomberg surveillance , live from our World Headquarters in new york on this wednesday. I am tom keene in new york, Francine Lacqua in london. When did we learn from the intesa ceo moments ago . Francine first of all, the italian banks are under pressure, but they are a little stronger than Market Sentiment given credit for. It is emerging markets that are hurting the most today, so banks are not that. European stocks are down as well. Tom they are down overall. Overwhelmed at the great mystery of all this. There is no mystery, she has our first word news coming here is taylor riggs. Emirates Airline Passenger jet was involved in some sort of incident while landing in dubai today. The boeing 777 was arriving from india when it made an emergency landing. All passengers were evacuated safely. Tv footage shows clouds of black smoke and all planes are now delayed. For the first time, north korea has fired a missile that landed in what japan considers its exclusive economic zone. It fell into waters about 160 miles from japans coastline. Prime minister shinzo abe called it a serious threat to japans security. There is support the Obama Administration sent 400 million to iran. It coincided with the release of four Americans Last january. U. S. Officials deny any link between the payment and the release of prisoners. Critics eight amounts to ransom. Onald trump is doubling down the parents of the muslim soldier killed in action. According to the new york ises, trump an ignoring advisers who wanted to move on. Meanwhile, trump is refusing to endorse the highestranking elected republican, House Speaker paul ryan. Paul ryan has a primary election next week. Ryan spent several weeks before deciding to endorse trump. Senators john mccain of arizona and kelly ayotte of new hampshire. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom . Tom taylor, i will not comment. Taylor riggsthe timeout chair. Lets get right to the data check. Equities, bonds, currencies, commodities. Few days. Teresting thrilled to have Michael Purves with us. Euro gives it up a little bit. Crude persistently under 40 now. Onto the next screen. The vicks showing equity angst. Strong yen, 101. 25. All, nearso says it 19. Francine, what do you have . Francine weve seen a little bit of volatility. U. S. Stoxx 600 fluctuating is fallingit for a third day. We see a rebound us banks trigger a broader recovery, and oil below 40. I want to show you quickly the pound. We have some not so great figures in the u. K. It feels like a different day than yesterday. Tom crisis over. Francine it is not doing much for global sentiment. Tom very cool. We will get to the markets in a victory how about this in a minute. How about this in the bloomberg . Jobs adjusted for population, the great decline in manufacturing jobs, and then the suddenness of a decline over the last 15 years. It is just amazing to see the atomization, as i mentioned earlier, francine, mckenzie has done a killer analysis of inequality. They really center on union exposure nation to nation, and the summary is, we do not have unions, and sweden does, and it makes for very different makeup of a nation. I will not opine on it anymore, francine. Francine i was looking for valuations on European Banks. The market cap has been slumping quite significantly. The white line from the stoxx blue line ise stoxx 600 banks versus the more general index, and what the shows you very broadly speaking is there so much a cheaper when you look at price to book compared to not only u. S. Banks with the broad market in general. Tom very cool. Our guest this hour is someone who looks at volatility. Is sleeping at his desk and joins us right now. What is the distinction of the quiet in the markets right now . Everyone is talking about a tepid move index. What is the distinction of this august . Michael you step back a little bit, and you tnk about what and how thatbrexit impacted the volatility environment, you know, it really was what i call goldilocks 3. 0, dollar gothat the bit but not that aggressively, and what was aggressive for treasuries and its equivalents in germany, japan, and so forth. Agree with bill gross that it is a bubble, that you cannot participate in fixedincome . Michael depending on what kind of investor your, i was a guest. Its hard to make a value case for treasuries. That is without question. The problem is that a bubble that could pop, that is the bigger question, and given a lot of other trends, it is hard to see that bubble popping anytime soon. Tom lets do that right now i go to the bloomberg. Francine with a move index chart. The entire yield curve is dynamic thank you, Merrill Lynch. Slope matters, and it Shows Percent change in the ugliness, Michael Purves, is 2007, 2009, that abrupt redline upward. Now we have a pound of lethargy bond structures. Is that a mirror of the greatest portion that is out there . Michael it is a reflection of what Central Banks are doing, dominating the market. You know, the volatility story has shifted from equities to treasuries and then on to currencies, and even those are starting to get some stability in them as well as we go through the various adjustments. There is one thing, getting back to your bill gross question, there is an interesting question, which is if investors are really you look at treasuries versus equities right now, and there is arguably more people buying treasuries more for their price movement, so the volatilities,tive treasuries having much lower volatility than equities, that story may change in the nottoodistant future. Francine what is going on with treasuries . The shift in the last six days. Michael the big question here is whether we are, you know, when i look at treasuries, to me, the key factor is really what is happening overseas. If japanese seals are going to start backing up that is almost more material than what we will get on friday from our job numbers. Are in myand the jgb mind is so key to what we are going to be looking at whether 10yearooking at the treasury yield and how that spills forwarded to other asset classes. Tom francine, im working on a jgb chart right now. I do not have it ready for tv with the bright colors, but it is amazing price lower, yields higher in japan. Francine i actually have it. Overall, we talk about volatility. 10 months, 12 months, a lot of volatility, but above and beyond, are we going to see more volatility coming from china . Michael that is a great question. If you look at the vix overlaid with things like the 80 x y, that paradigm really broke down in the late q1 of this year. Whether china it is hard to right now see the china tell risk coming out of being that dominant. Badooks like a bunch of news out of china. If you look at the chinese data, first of all, it is always a little bit opaque, but it is not good, and it is not that tragically bad right now. It has had a lot of time to beat pricing by the market. I do not see drawin china driving the bus right now. Tom great to have you with us, Michael Purves, weeden and company. I have a volatility chart to dazzle Michael Purves. Coming up, she will dazzle us. On the state of her global wall street. This is bloomberg. Tom bloomberg surveillance. I am tom keene and london, london. Loo like what Francine Lacqua and london i am tom keene in new york, Francine Lacqua in london. Roberts has been on the show a lot. I will be honest, his book is my book of the summer, 64 shots. , his retirement in may. It is a killer book on leadership. Francine, he has been under the pc bust. Francine i do not know if it is this is aoblem, but victory for the debate on gender diversity, so whether you are for or against it, this was a clear debate on gender diversity that he thought was over, and many people, especially women, think that it is not. Tom we will talk about this with Sallie Krawcheck again. Kevin roberts out. Here is our Bloomberg Business flash with taylor riggs. Taylor samsung is in talks to buy all or some of Fiat Chryslers auto parts unit. Samsung is interested in incar entertainment. A deal could be worth more than 3 billion. And first cap earnings fell at Standard Chartered. Revenue. Set following ceo bill winters defended the dividend and laid out plans to cut 15,000 jobs. Winters is also restructuring and investing 100 billion of risky assets. That is the Bloomberg Business flash. Francine, you are sticking with this. Francine we are, thanks, taylor. Can they remove the slump . One of our columnists, lena laurent, islionel joining us now. They are gaining. Is this because of encouraging news or Market Sentiment . Lionel i think that hsbcs big Share Buyback was a big confidence booster for the market. It shows banks are doing what investors want them to do when they have cash, which is give it straight back to the market. Skeptical because the underlying trends are not great revenues are down, officer bell profits are down. Francine what is the one company that is getting it worse than others . Some say there seems to be a untiln the European Bank we fix monte dei paschi. Lets have a listen first of all to the ceo. Carlos the Banking System is related to some specific cases. There were two banks under the threshold of capital, and these have been sold through the usage , and that is the big problem of the italian Banking System. Francine why are they not seeking monte dei paschi . I know sentiment takes two years where markets wanted in a week. Lionel they are trying to it is largely symbolic. Yes, monte dei paschi is a single or issue, but the bigger issue is a value of the loans on these bank hooks. If you do not believe the valuation a monte dei paschi bad lines, should you believe the other banks . Strongne of the banks that have been called to help monte dei paschi because what is that for one italian bank is that for all of them. And i look at us, lionel, guess this is crisis with a little bit of rebound in the stocks, but is the surprise of this year and into next year going to be mergers of these banks within countries . Where five banks go to two banks, where three banks go to one bank . Yes, that has already started come a baby steps in italy, in spain. It is going to take, sadly, a lot more time, a couple of years, and then we should be seeing workers again one day. So yes, that is starting. Tom lionel, thank you so much. Lionel laurent, mustread at bloomberg gadfly. Let me do a data check here. Equities, bonds, currencies, commodities. 10year yield in a little bit. Crude oil under 40 a barrel gets my attention. Coming up, must watch with a trump supporter. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. Francine lacqua in london. I am tom in new york. It has been an extraordinary washington over the last couple of days. The former Lieutenant Governor of new york state out of ofumbia and has done a lot support, thinking in support of mr. Trump. I want to get to the economics of mr. Trump right here in a bit. Right now, the tension between mr. Trump in the republican extract was met republican establishment is extorted very. How would you expect the republican establishment to respond to mr. Trump . It is hard to bedecked with they will do, but the important thing for the American People to know is that they are at risk of an enormous recession, and donald trump has an economic plan to turn the economy around and produce the kind of Business Investment that will ensure tom our Joe Weisenthal put out a treat last night calling donald trump the arch king. This is a guy who is not at george will, he is a guy with a different economic land of massive stimulus. Y that is not true at all. The people working for him or laugher, larry kudlow, steve moore, all reagan supply fighters in the essence of plan is to lower Corporate Tax rate, to invite back some 3 trillion in earnings that should be repatriated at a bargain so that they will come back to the country, and to lower regulation, life the oppressive regulations that have deterred Business Investment because if you look at what has happened to our economy right now, 1. 2 gdp growth this last quarter, despite robust Consumer Spending tom that is true. Betsy why is it so bad . Three consecutive quarters of declining Business Investment. Tom i want to go to the debate of the moment. Bring up the morning mustread. Has written a clinic on Richard Nixons taxes. This is 1969. All of a sudden, nixon was hit with a huge tax bill in 19 69 of nearly half 1 million in 1969 of nearly half 1 million. How can we talk about trumps Economic Policy when we are distracted by sideshows like his nontax reporting . Betsy first of all, ive not distracted tom most of america is, though. That is a fact. Betsy you are doing a disservice if you encourage that. Tom betsy, my job is not to encourage anyone. The reality here is republicans by democrats are distracted all of these distractions of mr. Trump. Betsy i disagree to your will begin to listen between the distan difference between hillay clintons fair growth plan which is hostile to Business Investment or trumps turnaround plan, which will encourage much more prosperity and opportunity. Tom we to get perspective from abroad the atlantic. Francine lacqua in london. Most of the world considers donald trump a joke. How do you attract investment in the u. S. If you have a president who is considered a joke by the rest of the world . 50 because Business Leaders are going to make their decisions based on tax rates, on the burden of regulation, and on the prospects for growth, and right now, the Obama Administration has produced a recovery that is the worst since 1949, and why . Tax increases and business regulation such as obama care that are real job killers. Our average work week is down to 34 hours. You cannot support a family on 34 hours a week. Francine that the, when you look at the metric from donald trump, this is a man who wants to look inwards. Again, it would cut tradeoff from the rest of the world. There is no question about that unless he does a 180 reversal. Let me point out that moodys analytics just produced a report that confirms un ambiguously that Hillary Clintons economic plan would not encourage any increase in private sector investment. That is what is ailing this economy, the reluctance of business to invest. They are terrified. Listen to Hillary Clintons growth proposal. More regulation on bonuses, on overtime, on hiring, on investment practices. Uncle sam will be in every boardroom and looking over every managers shoulder that should send fright into the heart of all business investors. Mccaughey, thank you very much, the former president of the bank of new york state. With all due respect today, particularly for those of you global, i cannot say the value on this unique american moment. Good morning. Is bloomberg surveillance. I am Francine Lacqua in london. Tom keene is an new york. Overall, stocks slipping apart from a lot of these banking, atfs climbing the most since april on this huge stock buyback. Good capital ratios there. Bloomberg first word news. Here is taylor. Taylor francine, and emirates jet here is taylor riggs. Taylor 275 people were evacuated off and Emirates Airline plane. A large plume of smoke was seen over the airplane. It is the largest issue for emirates, which is the Worlds Largest carrier for international traffic. Japans Prime Minister shinzo an outspoken lawmaker to his cabinet. His appointment comes after sign that investors are looking losing confidence in of an homage. Meg whitman has endorsed Hillary Clinton for president. She once ran as republican governor of california. She wants to reject trump, saying he has an uninformed position on critical issues. Whitman says clintons temperament and experience make for the far better choice. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom . Taylor, thanks so much for your you get lucky, we have Sallie Krawcheck with us. Maybe we would even talk to her about security analysis, dupont ratios, and other exciting things. Evan roberts has given us the entertainment this morning. He is a frequent surveillance guest. Roberts in an uproar with business insider, days ago, with women in management. Roberts has resigned. I love his statement. This is classic Kevin Roberts, sell fast, fix fast, learn fast is what mr. Roberts says. He says i failed exceptionally fast, my miscommunication on a number of points as cause upset and offense, and for this, i am sorry. He is now the absolute textbook example of the fear people have about talking about gender in corporations to you have been courageous in driving this debate forward. When do we get to a measured debate where people can misspeak like we all do over the dining room table and not be pilloried for it . Sallie oh, tom. [laughter] tom when do we get to a point where we can have a rational discussion . Sallie whether the discussion is rational or not, im really glad it is happening because what is clear as is we do not have gender diversity in Corporate America or the corporate world right now. We stopped making progress. Tom i agree. Michael you know, in the banking sallie you know in the Banking Industry and on wall street, it went backwards. Tom Brian Williams had a tough couple of years at bank of america. Mr. Moynahan has 14 people around him saying, shut up, right . Because he will get in trouble. That is how he has to feel this morning. Sallie bakck up. There is discussion and then there is action. Gender diversity has been shown in study after study to leavd to higher performance. We can debate whether it is causation, correlation, coincidence, but the research is overwhelming. So companies who do not take diversity of all kinds seriously are leaving performance on the table, besides being, frankly, unfair. Francine all right, sallie, lets back up. Kevin roberts, he says he does not see a gender issue in the advertising world. Is he just saying out loud what a lot of people, and a lot of men are saying under there for us under their breath . Sallie it could be. I am not in the conversation with the men. I have probably interrupted more men in business talking been anybody, and i have never walked into a group of men who says, oh sallie, it is so interesting to see you, we were just talking about gender diversity and driving performance for business. It does not happen. And we have not reached parity yet even closely. So the idea that this is over and we should top talking about it, it is women making too much of a big deal it is just not right. Francine right. And if you look at the figures, the World Economic forum, for example, is estimating that it years, almost a century from now, at the current rate, for women to reach parity at leadership across the world. What we need to do to move that forward . Almost a century. Sallie well, i think some of it is a ceo has to decide to do it. We can put in another diversity committee, we can have anothers each made by 70, but until the boards and ceo we can have another speech made by somebody, but until the boards and ceos make the decision, the one, that would make for your viewers who think, i am a dude, it does not matter for me, is that this matters for everybody. Closing gender gaps actually puts more money into the economy. Tom Michael Purves, you are more wired on this than anyone i know. Im not kidding, sallie has been doing this for your. This is a totally unfair question, which i agree, how many roosts are out there . Teame i spoke to my recently. We were talking about the downturn, and you will have talked about this for. How aaron callan was treated at the downturn. And i said to the team, some who she wasreet treated so badly. I said do me a favor, name one male cfo of wall street business, you can, i can, but this team could not. What you have is so few women that women can be when things go badly women can be held to that higher standard. Tom michael, jump in here. Michael lets say clinton wins in the fall, you have the United States in run by a woman, you have germany being run by a woman, you have the imf being run by a woman, and you have our a woman un by arguably some of the most important women in the world certainly as it relates to markets being run by women. Does that reinforce does that help a Tipping Point on the diversity issue . Sallie look, i think seeing a woman in those offices for anyone, women or men, fathers of young girls, that is fantastic or you cannot be what you cannot see. To the extent that some of my clinton would come in and mandates parental leave earch has beginning research has been beginning to show that it pays because women are more likely to come back after having babies. Edit she does, she contributes to her 401 k , she contributes social security. So it trickles down while for the economy. It is not just a womans issue. A glideove your idea of path out 80 years. That is the heart of the matter. Francine the children of our children of the children may get there. It goes back to michaels point here we also have a Prime Minister who is a woman here in the u k is it more important to have politician women or footsie or fortune 500 . Ftse or fortune 500 . Matters. T all just because it makes progress is not mean we necessarily keep progress. I worked on extremely diverse teams when i was on wall street, and it has gone backwards. because of the crisis why have they gone backwards . Sallie because of the crisis. Diverse individuals get kicked out. Tom you are so young, there was a time when you came out, and if you were financially inclined, he wanted to the training program, and everyone wore the same suit and tie and all of that. Do we need that again so that women can advance through those programs and get that experience . Sallie it is not a pipeline issue appeared i have the New York Times comment couple of years ago and said, sallie, good news, 1 3 of the banking class is women tom and then what happens . Sallie they pop out in their 30s and 40s. The last time i was on here, one of the gentlemen, i felt so bad for him because i went at him, and he said you know, we just find it so hard to keep women. And i said, have you thought about promoting them . So women are more likely to leave their jobs Millennial Women for pay increases than millennial men are. So this pay gap matters. Tom i agree with this. Sallie and we are starting to see much more pay transparency, firms like hire. Com. Everybody has their salaries out there when theyre getting jobs. That can help close the gap. Francine we always look at from what country gets it right. Is there an industry that gets it better . Michael health care. Sallie health care. Francine wife . Why . Sallie i do not know the reason for it. I know that across industries there is not one i can immediately look to and say those folks have it, but where i am more helpful is that in starting businesses. The cost of starting businesses has come down so much that while Venture Capital does not fund women to the same extent that men do, the cost has come down and that women are starting to leave and create businesses at two times the rate of men. Tom the idea of you and ruth porat and others is that you come from mathematical that grounds the icac change there. I see younger women, i met a mechanical engineer from Rochester Institute of technology, and that did not happen when i was there because i was not doing engineering. But i have seen a lot of women. , which helps with francines 80year glide path. Sallie and that is when the pay gap closes, when women go into s. T. E. M. Because the need for talent is so much. Tom thrilled to have you here. Kevin roberts resignation. We will continue with Sallie Krawcheck and michael project. How about a data check . Oil under 40 a barrel, and yen at a 101 level. This is bloomberg. Francine it is bloomberg surveillance. I am Francine Lacqua in london during tom keene is in new york or lets get straight to the Bloomberg Business flash with taylor riggs. Taylor a 2. 5 billion Share Buyback to try to reverse stocks. The british bank is backing away from annual dividend increases. Hsbc removed its 10 on equity by the end of next year. Another company profits. Rio tinto has been hurt by depressed prices for iron ore, aluminum, and copper. Samsung is in talks to purchase some or all of Fiat Chryslers auto parts unit. Samsung is interested in the incar entertainment part of the unit. Thanl could be worth more 3 billion. That is your Bloomberg Business flash. Francine . Francine thank you so much, taylor. Lets go straight to bloomberg news. We have been following fiat for years. Talk to me about the rationale of the deal. Samsung buying an auto parts maker. Why do you care . It is very interesting. For fiat, the rationality is capitalize we can on selling the car parts business, and there is another means passing from 5 billion debt to at least 4 billion in cash. For samsung, it is a way to enter into the car business, you know, Tech Companies and the Auto Industry are getting closer, so it would be a very interesting deal. Francine this is kind of what i was try to get to, tommaso, is this the first test and saying in 10 years, we will not be talking about carmakers, but the real carmakers are going to be the Tech Companies . Tommaso this is unclear. Sergio was on a Conference Call the other day and says it is clearly uncertain, the future. We are at the moment when the car industry is changing, Tech Companies are getting into the business for the development of autonomous driving, electric cars. It is very unclear what will be the endgame. Fiat position is that it is better to partner with Tech Companies than imitate them. Francine we know google is pushing into auto companies. Ebhardt, from our Bloomberg Team in milan. 1. 5 after we have the bloomberg scoop of them selling off their assets. Overall, banks on the rise. U. S. Stocks unchanged. Tom bloomberg surveillance. You just heard Michael Purves analysis has switched over to Foreign Exchange could lead to our forex report. What a day yesterday, yen 101. 20. Euro swissie i put up there. That has been interesting. Strong swiss over the last few days. Not really a breakthrough, but of importance. Dollar mexico, has been weaker, weaker mexican peso, out near 19 right now. Francine coming up shortly, it is bloomberg with alix steel and jonathan ferro. Jon, im looking forward to your rio tinto interview because the profit is bad, and this guy has been charge in charge for not so long. Is the worst earnings since 2004, and it is a questionable strategy. I will be questioning their strategy with the man at the top coming up at 8 20 a. M. Eastern, so 12 24 us. Then of course, francine, we continue the countdown with the bank of england rate decision. Rates unchanged. All this time since march 2009, we get change. Tom very good. Sell Sallie Krawcheck with us. We need to get an update on the digital experience known as ellevest. Sallie it is a Digital Investment platform for women. Why do we need one, you might say, there are plenty of those. The reason we need it is because of the gender investment gap in this country. We have talked about the gender pay cap before. Women do not invest at the same extent that men do, it can cost women more. Women live longer, salaries peak sooner, more risk aware, things that wall street is not addressed. We were laughing earlier, we both heard merrill, even the brand of the industry is a bull. This is not an industry that women say talks to me. [laughter] tom Michael Purves here. Salliesusly, to points, it is a singledigit world. In your world, it is a singledigit world with a vengeance. Michael yes, and a lower singledigit world, unfortunately. 2 treasury euro. Tom men or women, what do we do besides suck more money aside . Lowerl you adjust to the real wage environment. I mean, there are a lot of benefits out of that as well, right . It is quite a distinction from the 1970s concerns. And hopefully at some point, we will get out of this 222 constructs, but it will take some time. Tom how do you look at the strategy how do you look at a 25 multiple bluechip multinational . Michael i think you have to look at it in the context of rates. How did the s p make new highs just a few days after we cleared , after the brexit . Mediocrery sort of earnings and nominal gdp story in the backdrop not just here but globally. It is really a function of what is the earnings deal doing with ,espect to the treasury yield and that is 1. 5 number t here. As we were sort of getting at earlier in the show, tom, people are really buying equities almost more and more. I call it a convertible bond where you have a dividend with a call option of the future. Treasuries are being more and more bid for their price and less for their interest payments. Tom Sallie Krawcheck is the only one of the room who knows the underlying mathematics of convertible bond dynamics. Francine the surveillance theme. When you look at equities and finance in general, the problem is the more Central Banks do, the more negative rates are there, the more people look at price risks. Sallie yes. [laughter] sallie yes, indeed. About environment and for the foreseeable future, we are in an environment that is not a high return environment, the individual investors have to adjust their outlook ereader it is slow because it is easy to say, i want a 9 return like we used to have, and we see it in the rearview mirror. The answer for particular investors is to invest steadily, do not sweat the ups and downs of the market, but invest over time and what we are seeing at ellevest, which is amazing, is that we are so early days, that 75 of our women are investing on an ongoing basis. So they are taking a bit out of every paycheck or every month and putting some aside. That is the right way to do it because we think it is a low return environment, but i remember back in the 1990s and 2000s when i was an analyst, sometimes what you think is a lowreturn environment can be a highreturn environment out of the blue. Michael yes. Francine i want to go back to my chart, if you look at the 40,e, anything below michael, again, how do you deal with that . It seems pretty obvious and fair that you would look at equities. Michael yeah, i think you have to do and i think the pain trade for so many investors benched at the s p 500 is reading nominal their earnings treasury, which is mediocre there is no question about that. If we can get 5 Earnings Growth this year, that will be an accomplishment. Trade is a pe investment. When you see that swiss curve that you just flashed there, it is assumed it will not radically cheering change. Tom how long can bank of america keep Merrill Lynch . Is it a jettison, a jewel that creates cash flow . Well, it is all anybody wants to know for years and years. Now is the time. They finally got to the point where all of these managers are creating some serious sallie here is what i do not know. What i do not know is how deeply it has been integrated, how important merrill now is to the earnings. When i was there, they were pushing for the cross sell. As that works, and is it integrated or not . I just do not know. Tom fair answer. Sallie krawcheck, thank you so much, particularly on Kevin Roberts and Michael Purves. Sallie krawcheck will continue with us on bloomberg radio. It is an interesting market day. Stay with bloomberg worldwide. This is bloomberg. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Isit ncicap. Org] om banks bounce back. Would the results keep on selling . The b. O. E. Will act tomorrow. Francine and oil looks to rebound in a bear market as the Global Supply glut weighs on prices. Tom welcome to bloomberg surveillance. Jonathan the call that gave me a little bit more color. David i want to point out hsbc because the finance director, c. F. O. , it will cost them 100. Alix that raises the question thats