Lets get a check in on the markets. European equities are pretty flat. The stoxx 600 struggling for direction. You heard and the headlines, three key things we heard. The dovish message from Jerome Powell reiterated and we got better than expected data in terms of retail sales and factory output, pushing the 10 year yield up. It also pushed the dollar higher and we hold on to those gains. The question as whether President Trump can have the weaker dollar at the same time as a strong economy. And can he have gains in stocks as the same time as a trade war continues . As you made those comments, the s p 500 took a hit, dropping for the first time in six sessions. Coming up, we speak to the oecd secretarygeneral. Dont miss that interview live. Lets get bloomberg first workers. Word news. The u. S. House voted to condemn comments from donald trump that are racist. Week, he tweeted for congresswoman should quote go back to where they came from. Trump says he is not racist and does not have a racist bone in his body. Of the lawmakers, he says it is quote my opinion they hate our country. President trump confirms turkey will not be able to buy a fighter after it began delivery of a Russian Missile defense system. Russia says they are working through a tough situation. The white house is weighing economic sanctions. Amazon faces a fullblown eu antitrust probe as the eu competition chief prepares a finale to her fiveyear crackdown on u. S. Tech giants. She plans a formal investigation into amazon. Amazon has this dual role. They are hosting businesses but also competing in the very trade they do. So now we are looking into their use of data to see if this is done in a fair way or if there will be a case for us. North korea is likely suffering its worst downturn since the 1990s when it battled floods and famine. That may have lost as much as 10 of its population. The bank of korea estimating if ,ontracted by 3. 5 in 2017 leaving the economy roughly the same size as the u. S. State of vermont. And bill gates, never ranking lower them number two in the sevenyear history of the bloomberg billionaires index, until now. He has been taken over by lvmh is bernard arnault, Company Shares rising to a record and pushing his net worth to 107. 6 billion, more than 200 million ahead of gates. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra . Nejra thank you so much. Lets kick it off with trade and the latest on the Worlds Largest economy. President trump has reiterated he could impose more tariffs, despite promising to hold off in a truce he reached last month. We have a long way to go, as far as tariffs are concerned. Billion wether 325 can put tariffs on. We are talking to china about a deal, but i wish they did not break the deal that we had. Nejra joining us is an economist at ubs Global WealthManagement Entity the chief economist for bloomberg economics. Welcome both, great to have you. Let me ask you first about these latest comments aired suppose he is stating the obvious. How much of a threat is it . Tom what we have think about on trade, and in particular the u. S. , is the looming president ial election. Away, but020 is a way the Campaign Drums are already beating. Tough on china is a votewinning message. So when we hear President Trump speaking, we have to keep in mind that he is speaking to that political base. Even if we dont get more tariffs between now and november 2020, we are going to have continued threats of more tariffs. That uncertainty is already going to be a significant drag on investment, and employment hiring decisions. Nejra it certainly provides a dragged yesterday. We saw the s p 500 fall from a record, futures pointing higher today. Can this rally go much further without a trump put . I would not much call it to the trump put. I would look at what is driving the rally, and that is the shift in stance from Central Banks globally. It is our expectation the fed does take an insurance cut at the next meeting. That comes against a backdrop where, for all intents and purposes, the u. S. Economy is growing. Other things being equal, that is relatively positive. Maintaining a moderate overweight, but when you see a reaction like yesterday, thousands of that talk to you about the fragility of this rally . I understand we need to talk about earnings, which will later , but how fragile is this equity rally . Dean i would not say its fragile on the basis of what is happening with trade. For some been with us time and there are a number of risks out there. The argument that is more likely to come into play could be the question of valuations. Clearly, what is happening with the trade vectra, and i agree with what was said earlier, going into the president ial election campaign, it is hard to see how the rhetoric around trade improves in the nearterm. Nejra lets stick with the conversation around the fed. Course, we have jay powell saying the central bank is threats,g threat, adding he will act appropriately. Uncertainties have increased, particularly regarding trade developments. Theddition, issues such as federal debt ceiling and brings it remain unresolved. Fomc participants have also raised concerns about a prolonged shortfall low the 2 target below the 2 target. Nejra meanwhile, Robert Kaplan adjustmentopen to an of calls and tactical rather than strategic. Your read on what we got yesterday from the u. S. Data . We had the message reiterated and that we get that better than expected retail sales and factory output showing a robust u. S. Consumer. Tom i think this underscores the fact that, very likely, the fed will cut, but cut in a cautious and an insurancedriven way. There has been some talk of a 50 basis point move in july. Our view, the jobs data is robust, retail sales is robust. But itde war is not over was better than expected, so some of the trade risk has come out. So our expectation is that the fed will not need to make an extreme move to support growth. We are expecting 25 basis points in july and another at the end of the year. Nejra i just want to ask whether you think the u. S. Consumer can offset the Global Manufacturing slowdown . Tom that is a great question. The economy has got three drivers. You got consumption, investment, and exports. When you think about the u. S. , investment has lost momentum. The strong dollar and weaker Global Demand is heading exports. Hitting exports. The consumer is the only show in town. But even with that engine firing, the economy can sell clock a comfortable 2 annual growth. That is roughly on trend, so certainly there are reasons for concerns. The trade war could escalate, the yield curve might be telling us something. But even with the just the consumption engine, we are not incredibly worried. Nejra all right. And just to pick up on what tom , atsaying about 25 bits ubs, you think we will get 50 in one go. The fed think that if will move, is more effective to do a one off insurance move. We are not expecting a prolonged cutting cycle. Last time i checked, the markets are pricing in close to what hundred basis points. That is overdone 100 basis points. That is overdone. We have a short bonds as one of the insurance calls within our folios portfolios. But in terms of the longerterm outlook how the trade situation unfolds. Consumer, we should not overlook that when we are looking at the data, unemployment, wage growth against a backdrop where whereion is up at levels the fed would like to see it, but is not running away, that tells us that real Household Income growth is a positive story. That should be enough to keep the economy moving along. Nejra just briefly, will the fed be able to on invert the invert thee un yield curve and sustain steepening . Dean that is a deeper challenge because we have to start discussing the fed balance sheet. Byy will start to move again the time we get into next year, if they wish to maintain a size relative to the u. S. Economy. I think that will be a more difficult one to engineer. We maintain a fair degree of skepticism around this question. There are multiple factors that can explain why we are seeing the yield curve the shape it is. It is not necessarily a sharp turn in growth. Nejra both stay with us, and stay with surveillance. The newament confirms president of the commission. We discussed the political and economic problems on her to do list. Plus, trouble in tech land. U. S. Tech giants face of biggest showdown with congress in 20 years. That story later this hour. This is bloomberg. Nejra this is bloomberg surveillance. Im nejra cehic in london. The next president of the European Commission has been the first she becomes woman to hold europes most powerful policymaking position. Meanwhile, finance ministers and Central Bank Governors are gathering in france that it in france today. , greenagenda is libra coins, and global tax. What can we expect from todays g7 gathering . Good morning. There is a lot happening today, but the big talker is libra, the facebook cryptocurrency. Wednesday to central bankers and ministers, they tell you they want to know exactly what is the purpose. They will tell you very clearly that this is just a payment system, we can work with us, but if this is the First Step Towards creating a currency that can compete with the dollar or the euro, that is simply not going to happen. They also worry about the size of facebook. Millions of people use this on a daily basis. In europe, they also worry about data privacy and the scandals we have seen play out. So there is a lot of focus and attention on libre, but you have but you also have to keep in mind the trade tensions and the digital taxes. Of course, those comments by the administration on the weak dollar could also be a big subject today. We also spoke with the president elect, what does she have to say . A very timely interview, i have to say. She managed to get that nomination approved, but it was just 383 votes, very tight. Senior members of parliament that anything below 400 votes is actually a very weak mandate and not a good start, not a good look. But she has a lot of challenges ahead. Shes got trade and the relationship with donald trump, and of course, brexit. We talk to her and she said that ultimately, what we need to keep in mind is that our relationship will have to be close. Lets take a look. It is not the end of something, it determines that beginning of the future relationship between the United Kingdom and the european union. We want to be partners. They are our neighbor. And ie common interests will put a lot of emphasis that we will have, if necessary, a brexit in a good way, knowing we have a common future. Was ursula von der leyen, president elect of the european union. Bloombergs maria tadeo, great to have you with us. Still with us is dean turner from ubs and the chief economist for bloomberg economics. Dean, you prefer u. S. Stocks to europe. Is that because you think the bad news is not priced in or you do not find them compelling enough . What is your thinking . My thinking is more the outlook and the potential for just see moree upside potential in the u. S. Right now. Thats not to say there are not pockets of value, it is clear there are. But we just see better opportunities for returns within the u. S. Nejra if you talk about corporate earnings as well, that is a challenge in europe, in terms of the negative rate environment. Makeeurope ever be able to its way out of this negative e environment the Smart Environment . Tom is not clear. The challenge is to balance a europe were growth is not disastrous. Is driving unemployment against the ecbs very limited policy space. How is he going to square that circle . Our expectation is that we will see a little bit of action on policy rates. We will see support from the banks to offset the impact of negative rates on their earnings and the beginning of a new round of qe your qb. Qe. Nejra when i asked a guest if it needs to be creative, he said it has already been creative. It is a question of when to use them. You saymberg economics, the qe expansion just needs a deeper get into the bond market. So what should they turn to buy next . We think there is sufficient space for the ecb to expand purchases. What is constraining the ecb is the selfimposed rules they have. Expansions to be an of the ecbs own rules to allow them to go a bit further. Billion is roughly where they come out. Nejra you dont expect to last into laps into recession, but what action do you expect on this front . We are expecting they will actually go towards rate cuts initially . Initially. For a qe program to be credible, especially at the state of the cycle stage of the cycle, it will have to be a big program. And the point made about limits, they would need to review to make this. Our consensus is that there is not full support on this yet. 20 basis points of cuts before the years and is likely. Nejra tom from bloomberg economics, thank you for joining us. Dean turner from ubs stays with us for the rest of the hour. Up next to them at swedens oldest bank slashes payouts and we rank banking earnings from the u. S. Thats next, this is bloomberg. Nejra this is bloomberg surveillance. Lets focus on banking. Swedens oldest bank says it will no longer be able to pay out one of the highest dividend ratios. That is as a swedbank deals with the fallout of a Money Lending scandal. Fine, when is a there is a fine, we will pay that fine. How that will pan out, it is too early to say. It is important to build a safety buffer in the environment we are in. Nejra lets round up what we have learned. Only two major u. S. Lenders are left to report, and for those that have, or revenue is starting to bite. Citigroup set the pace of but cost cuts helped lift shares. Surprised investors thanks to a jump in Equities Trading. Meanwhile, wells fargo posted its smallest lending income since 2016. Jpmorgan snap a streak. Still to report is bank of america and Morgan Stanley. For now, the question remains, how will lenders boost revenue . Up next, a throwback to 2017, we talk the pound and brexit. This is bloomberg. President trump warns he could impose further tariffs on chinese imports if the trade fed chairman jay powell sticks to the script as he says the central bank is monitoring downside risk. ,nd a busy day in trade clinching the European Unions top job. We should never forget that we are allies and friends. We sit on the same side of the table. This is bloomberg surveillance. Lets get to data out of the u. K. We are looking at cpi year on year coming in at 2 . The core number comes in at 1. 8 , in line with estimates. The june inflation rate staying at 2 as forecast and core inflation rising to 1. 8 as forecast. The pound unchanged, recouping some losses from yesterday. Lets check what is moving under the surface in terms of the big stock movers today. One of the big gainers up 4. 5 . The operating profit Beat Estimates and saw strong sales. Before the market even opened, they hope they get a positive reaction due to the fact that they have seen it as a low valuation. Foras really dealt a blow the first time reporting earnings that missed analyst estimates. Even though net income because highest analyst estimate. They cut 50 instead of 75 . You feel like they have been moneyg with this laundering scandal. It is the worst performing financial stock in europe. Bloomberg get to first word news with Viviana Hurtado from new york. Viviana the new president of the European Commission is ursula vonda ally and von der leyen. Shes the first german in over 50 years. He told lawmakers that most pressing issue is climate change. She seeks to bolster relations with the United States. We do have issues, but we should never forget that we are allies and friends. We stood on the same side of the table if i may put it that way. Therefore, we have to negotiate. He different topics but in the end, we know it is a better way to trade with each other. President donald trump said he might impose more tariffs on china after promising to hold off on more duties in a truce he reached with president xi. Ae deal is for china to buy large amount of u. S. Farm goods. Beijing says no agreement like that was made and there have been no largescale purchases. Falling in may by 2. 8 billion to just over 1. 1 trillion. That is the lowest in two years and marks the Third Straight month of decline. Says theJerome Powell u. S. Federal reserve is carefully monitoring downside. Isk he spoke at a paris event to commemorate the language similar to the congress that cemented expectations for Interest Rate cut later this month. And unveiling the first all electric supercar. It will cost 2. 1 million. The doors are operated by a key fob. It is the first new model in 11 years. It will be 130 units and will begin next year. Cars, it isese doing more than just selling 130 cars. It is actually a technology capability. We are investing a longterm plan. Global news 24 hours a day onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Nejra sterling is trading at the lowest levels since 2017. For is as contenders britains next Prime Minister tough and the rhetoric around a no deal brexit. Boris johnson would hold an early election while were Jeremy Corbyn is still in office. Pound hit a twoyear , particularly around comments from jeremy hunt and Boris Johnson around the backstop being dead. If you look at the chart, some have called to watch the april 17 low for the march 17 low. What is the level for you on sterling . We think sterling is interesting around these levels, quite frankly. The way we think about it, if we , given theal outcome downside from here, it has been a possibility. But it is not the base case. If we continue to see sterling around these levels, it is