Manus im manus cranny, and you are . Francine im francine lacqua. Breaking news. It is a little better than expected. A lot of people were expecting this july number to be changed maybe a little pressure from greece or from the ongoing concerns about china. Not so. Better than expected at 108. Manus this comes in with five straight months of declines. People are saying it is beginning to look like the purchasing Managers Index for the whole of europe which just slipped a little bit but is still showing overall growth. This is three years off from when mario draghi said he would do whatever it takes to save the euro. Good numbers there. Francine Current Assessment better than expected. Expectations also better than expected. Chinas stocks have tumbled with the shanghai composite index falling the most since february 2007. There is a concern that a rally sparked by Government Intervention is unsustainable. Manus caroline has all the details. Down over 8 on the shanghai market. Caroline this is phenomenal. This equates to 500 billion knocked off the valuation of the shanghai composite. 500 billion. Equivalent to three children 3 trillion yuan. Lets check on who the biggest fallers were. It was about the iron companies, the infrastructure companies. The worst performers off by more than 10 . We saw across the board miners sinking. Those related to infrastructure sinking. It is a concern that the government cannot crop this particular composite up. Steps have been taken. The imf already criticizing these moves, we understand according to people familiar. It is putting it back in focus. We were talking just a few weeks ago about a 4 trillion route that had happened across chinese equities. This sense of calm that prevailed over the last week has been shattered. A little bit of bad economic news. Their earnings, Industrial Company earnings, were down in the month of june. When you are facing these economic woes the government cant prop it up. Analysts and investors weve been talking to have said they think the biggest fallers today have been those companies that have been most propped up over the last few weeks by the government. Think of what the government has done. 1400 companies with folded trading. They restricted shortselling. They suspended initial share sales. The imf urged china to eventually unwind the support. Have they started to do that . Is this why we are seeing the selloff . Of course this is feeding into the commodity route as well. The second biggest economy in the world and the biggest demand or of copper. Copper is currently trading lower. Oil trading lower as well. Supply glut, one issue. Demand side of the equation another. Will china not be demanding quite so much fuel . This is playing into europe. Lets check the stoxx 600. Every single Industry Group is lower. In particular, it is tech at the moment trading lower, and financials. Youve got to be keeping an eye on how this is affecting miners. Manus thanks very much. Lets get into the conversation. Harold joins us. He is had of asia equity strategy at hsbc in hong kong. Lets try and make some sense of this. We have a market which had recovered with Government Intervention. We have an equity market. Here we are, the sting in the tail. Down over 8 . How concerned should we be that these efforts by the government are running out of steam . Clearly, if you talk about the feeling, this must be in. It shows that the confidence is still extremely fragile with regards to domestic sentiment toward equities. You can see actually that the markets are reasonably ok this morning. It was after one or 2 00 local time that we saw the selloff shock. Maybe it is because of the week Economic Data, but that came out last week. Sometimes, you just have data where it is not clear but it is just an accumulation of factors which can drive the market down. Before you know it, you have some self fulfilling prophecies and sentiment playing a role in this as well. Francine how concerned are you . I guess we should be more nervous because theres nothing in particular that points towards a route. It is general sentiment. Is it likely that we will reach that level . Herald 2500, i think, is a bit too low. A couple of things. A lot of things have been pointed towards. It is not a very elegant way of trying to stabilize the market. If we look at europe and the u. S. And we look at the financial crisis, shortselling market intervention, it is not something which is unique to china. We have seen this in other markets as well. Some of the fingers being pointed at china, it is not that they are unique in this regard. We do of course see that quite a number of stocks have been suspended. They have to roll that back. The sentiment is still extremely fragile with regard to that. If we talk about china, for me there are three chinas. You have the shenzhen index Something Like 80 times earnings. That clearly needs to come down. You have the shanghai index which is still expensive. We thought some value started to emerge. Then you have the hang seng market in hong kong where valuations are much more reasonable, but it is being dragged down as well as the shanghai market needs to correct. There are three chinas. There are pockets of china where valuations look reasonable. It is more outside china and in hong kong than in china. Manus you mentioned the three distinct parts of china. The shares in hong kong are the ones that sound as if they are interesting to you. A lot of people are saying this drop has given them an excuse to not be long china. Do you see this as an opportunity to buy into those hong kong shares . Which areas would you think offer value if that is the word one can use . Herald it could well be in the near term. Sometimes in these situations you have to keep calm and take a step back. There are certain theories in china, where growth will continue irrespective of the moves in the market irrespective of the general macro environment. Think about for example, new energy. Particular, the wind sector. We see growth coming through Earnings Growth as well. Valuations for the h share stocks are not very high. You could look at macau, where valuations have continued to decline. We see a little better news coming out. There are pockets of growth in china where im actually quite confident. It is just for the moment, the market is extremely volatile and these stocks are maybe being ignored. I believe there are opportunities for those people. Francine looking at some of the charts this morning, it seems that the capital outflows are accelerating to a point that some would call alarming. Do you expect the government to intervene after the shanghai was down 8 . Herald difficult to say. I suspect with what happened the last couple weeks, since midjune, that they might well intervene and get some state funds to do a little bit of buying. Before we saw this h share market turn, march, april, may early june, the government tried to intervene. They called down the market. It came with a couple regulations that made it more difficult for people to trade on margins and things like that. It is likely that they will do the reverse at the moment. Francine thank you so much. Manus heres a look at what else is on our radar. Ubs has smashed its secondquarter earnings with a profit rise of 53 . Income from managing funds for the wealthy more than doubled on the lower costs. The Bank Published its results a day earlier than scheduled after an incorrect report in a swiss newspaper yesterday. Net income came in at 1. 2 billion swiss francs up 53 on a year earlier, and beating analyst estimates. Francine Fiat Chrysler has been hit with a record penalty of 500 million by the u. S. Department of transportation. It follows an investigation into whether the company delayed acting on safety defects on trucks and cars. Fiat chrysler has agreed to buy back more than half a million the alkyls. Effective suspension parts could cause a loss of control. Manus phillips the Company Spinning off a unit to focus on Consumer Health care, as reported earnings that beat analyst estimates. Adjusted secondquarter earnings before interest taxes rose 27 . The company says it was helped by rising demand in north america, europe, and india. It is a different picture in china. We are quite cautious about china. We have seen a significant slowdown in our health care business. The Consumer Spending is still ok. Slower than what it was before. Francine Teva Pharmaceuticals is nearing an agreement to buy a generic drug business. That is according to people familiar with the matter. The deal could be announced as early as today. The acquisition would extend a wave of mergers that has swept over the Health Care Industry this year. Manus the greek government is set to begin talks with creditors on a new bailout agreement. Officials are due to start negotiations with their greek counterparts by tomorrow. They will discuss many policies the country needs to implement in return for emergency loans of up to 86 billion euros. It comes as capital controls and the shutdown of greeces Financial Markets enters its fifth week. Francine earnings season is in full swing and peaks on thursday in europe when 76 report. Tex, the spotlight this week. Manus lets start with those banks. On wednesday, it is barclays. What happens to that institution . Thursday, we see deutsche bank. On friday, bnp paribas. Francine a lot of people at the top leaving. As wti trades in a bear market we get updates from the oil majors. Bp reports on wednesday, total on wednesday, and shell on thursday. Manus finally, rounds two from the titans of tech. We get earnings from twitter and facebook on tuesday and wednesday. Will they continue to run disappointing news that we saw from apple, microsoft, and yahoo last week . Stay tuned to bloomberg. We have all those reports, the earnings, the analysis, and we will break it all down right here. Francine welcome back to the pulse. We are live on bloomberg tv and radio. Manus switzerlands largest bank, ubs, eclipsed estimates. Francine net income climbed to 1. 2 billion swiss francs, up from 792 million the Previous Year. The result was published day earlier after the wrong figure was leaked in a newspaper over the weekend. Manus the chief executive told bloomberg that despite working in challenging environments hes optimistic about the future. We have been in asia for 50 years. Our strategy in asia is longterm. The prospects in asia and china are very important. You should look at the opening of onshore markets in the near future. I think it is really an engine for growth. Francine lets get more with chris wheeler, banking analyst at atlantic equities. Great to have you on the program. Thank you for hustling in. It is rising to the upside. Chris yes, there are some important positive points in numbers. If you strip out some of the actions, good net inflows of cash. Equities in line with the u. S. Market. M a, not bad, also pushing back on costs. I think they will be pretty happy. Manus part of the reason why anybody owns the stock is, the payout. He has a capital buffer. Are we anywhere near peak capital building, and could they review the dividend even more generously to shareholders, or am i being too optimistic . Chris look at the model of the u. S. Banks. We saw pretty decent results. The fed has doubled the globally systematic important buffer they had. These guys are already paying out in the case of goldman sachs, 81 of earnings. In the other banks, 80 , 60 in some cases. You can get there. The problem for swiss banks is there is some uncertainty around where they have to be on leverage. Theyve done a great job even on capital. I think they are being cautious, and rightly so. Francine we understand that it will be by the end of this year that we may have new targets. Chris that is probably the case. They must feel they are almost there. They are doing so much at the bank, driving down deposits trying to get the leverage as strong as possible, but it does seem that in europe, we have still not quite got to where the u. S. Is. There is a line in the sand and we know at what basis they are operating. Manus the whole world is revising their business model. Barclays is in a state of change. Deutsche bank is in a state of change. We ran through these this morning. He wouldnt answer me when i spoke to him this morning when i said, is this your opportunity . How do you use this moment of a state of change to your advantage . Chris sorry to keep going back to u. S. Banks, but i do cover them. When you look at that, look at the market share theyve been taking ubs, Barclays Deutsche it is an opportunity. Your point is well made. There is still so much flux. Three new ceos. That must be an opportunity for ubs to step up and continue to take share in the areas they want to play in. Francine as manus was saying, everyone is kind of shifting and changing their modus operandi. We saw Credit Suisse saying they want to be more of a ubs model, ubs having the Largest Private Bank in asia. What can they do to be sure they remain on top when everyone is almost attacking it at every side . Chris that is absolutely right. If you are the wealth manager and you are not strong in asia you are not the wealth manager. Manus that is what he said this morning. Chris but the growth needs to be in asia. When you are the biggest, there isnt a big cadre of Wealth Managers in asia as there are around the world. You have to train them and you are in danger of losing them to people who will pay up. What he has to hope is that banks are more disciplined and not just hiring his financial advisors. These guys are the Number One Team and will pay up because it will be ok in the end. Im not sure it will be for the whole industry. Manus very quickly before we go, the china route and the federal reserve. There is a push and a pole. Which is going to be the dominant theme for ubs . Chris i think it is going to be china. It is such an important market. Lets just that away from investment banking, where theyve done pretty well. If you are not strong in asia and you see wealth flows start to go backward, you definitely have a challenge on your hands. Francine chris, thank you so much for joining us. Manus coming up, a 40 billion deal. The latest on tevas potential accord with allergan. Manus welcome back to the pulse. Francine trv pharmaceuticals Teva Pharmaceuticals is nearing a deal to buy the generic drug business of allergan. Manus the deal could be announced as early as today. The acquisition would extend a wave of mergers that has swept over the Health Care Industry this year. Francine ruth david joins us now. Ruth is one of the original reporters that broke the story on friday. Another nice bloomberg school. Well done. Why is the allergan deal now . Ruth you know the guy come brent saunders, is a very acquisitive ceo. He really needs to focus more on Branded Health care. He is more of a Branded Health care man. The generics business which is slightly less profitable Profit Margins are like 50 compared to 80 , if he gets rid of that, that helps them focus on the branded side of the business. One thing to keep in mind is, they only completed the allergan acquisition and renamed themselves in march. This kind of lets him take a step back and focus on what is going on with the Branded Health care business. For teva, it is pretty great news. Manus teva have been pursuing miler. Is this saving face, or is it stepping away from that focus to knuckle down on this allergan deal . Ruth i think it is a bit of both. The they are the largest Generics Company in the world. They are thinking, we need to acquire to grow. Here is mylan, where theyve had an almost ugly battle more risks involved. If you look at allergan, the man who is tevas head of generics now used to be at the company. The risk is much less. If you look at the fact that what allergans generic business does in revenue is like 8. 4 billion compared to my lan the price tag is almost the same. Francine thank you so much ruth david. Francine welcome back to the pulse. We are live from Bloomberg European headquarters in london. Manus ubs smashed secondquarter earnings. Income for managing funds for the wealthy war than doubled. That comes a day earlier than markets anticipated. We will break away from those top headlines and bring you some breaking news. Francine on friday, we came out with the scoop. Allergan it was going to sell its generic unit. We were talking about it with one of our m a reporters. This is great news for tama if they managed to buy it. We have confirmation. Manus part of the drive kind this is tax savings of about 1. 4 billion. We have been covering this story. We are getting a breakdown. Its a two thirds cash and one third shares approximately. Ryan we were expecting this. We got all kinds of news over the weekend. They were going to buy allergans generic drug business. This is quite the acquisition for them, making the giant on the market even bigger. This really frees up mile and. Mylan was originally the target. It was a very protracted and very unsolicited bid. Teva had launched for mylan. They are free to pursue what they want to do. A lot of analysts think this makes sense. Allegan this frees them up to be a branded drugs company. They make botox and they can continue to do that. The ceo shows more interest in branded drugs. The profit margin is much better in that area. It really makes teva a much larger generic drugs business. We were expecting an earlier this morning and it has finally come. We are anticipating 40. 5 billion. That is what they were willing to pay for mylan, that was not going to happen and it became increasingly clear at the end of last week. An independent fund block the deal. They are buying the generic drug business of allegan area that is the news this morning. Francine thank you so much with the latest on teva. We have china. We have teva. Lets talk commodities. Lets bring in how the air. Heavy air. Lets know straight to you. The whole question for the commodity complex is growth and supply.