San francisco fed president John Williams says Monetary Policy needs to be reimagined to deal with a new normal. Shirt of the tubing Percent Inflation target be scrapped . Caroline should we look at the record highs we closed out in the United States, because we are seeing a little bit of risk aversion, money coming off the table when you look at european futures. Russia seems to be at a record high. Today, money coming out of the riskier equities, but there is m a action happening in germany. It looks like we could be following oil lower. Guy we are going to keep an eye with oil having a fairly bouncy time. Lets take you to the gmm function, a good headsup to what is going on around the world. I want to focus on what is happening with the yen, the yen really under pressure. You can see its really welded. The yen moving up 1 this morning. We are flirting with the 100 line, the boj paying attention. The nikkei has responded by going down 1. 22 . Youve seen some fairly interesting moves in steel. There could be a bit of a chinese bid returning. Its interesting to see how that works on what exactly the chinese are doing in terms of moving money offshore. Heres the bloomberg first word news with juliette sally. Juliette the minutes from the rba meeting where Australias Central Bank cut Interest Rates for the second time in four months were released. The rba said the cut would boost inflation and gdp as house price concerns cool. Russian equities closed at their highest level on a record monday. That is as rebounded oil prices occured. Lukoil and rosneft were among the biggest gainers on the benchmark 50s stock index. Big investment banks with European Headquarters in london start the process of moving jobs from the u. K. Within weeks of the government triggering brexit, much faster than assumed. That is according to people briefed on the plans being drawn up by four of the biggest firms. They say executives are planning for the worst. They will lose the right to Sell Services freely around the eu from the city. Joe biden has called Donald Trumps rhetoric a threat to u. S. Troops. Campaigning with president ial nominee hillary clinton, the u. S. Vice president also sharply criticized a trumps suggestion launch Cyber Attacks on america. This guy has no limits. He even got so far as to ask putin and russia to conduct Cyber Attacks against the United States of america. [booing] even if he is joking, which hes not, even if hes joking, what an outrageous thing to say global news 20 for hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Guy thank you very much. Lets get into the mining stocks. Bhp billiton has reported an 81 drop in fullyear profit. Joining us is bloomberg metals and mining reporter jesses nice borough. Lets start with you. Is this rockbottom . Is this as bad as it gets . Jesse that is the consensus view, that the numbers we are getting this earnings season could represent the trough. Weve seen Commodity Prices for iron ore plummet over the last 12 months, which bhp is reporting, but this year, we have seen a big rebound in the share price. I think investors are taking the approach that perhaps weve seen the bottom. Prices have been strangely higher than people expected, 60 per ton. Weve been hearing forecasts of 35, 40 earlier this year. Overall, its been quite a dark 23 years for these companies. Caroline certainly, they say Global Growth is going to remain modest. What do they say about the outlook for the Commodity Prices . Weve seen Capital Expenditure really be reined back. Exactly. They have been raining and spending across the board. Commentary was fairly limited. I think we will hear more from the scene now Andrew Mckenzie very shortly. Was, Commodity Prices are expected to remain low and volatile in the short to medium term. Guy jesse references the call that is coming up. You can follow the plib function surrounding what is happening with php. Lets bring in wayne bowers. Are you invested . We have a reasonable but nine view on reasonably benign view on global resources. Youve got this dynamic where demand is weak and poor globally, and with supply, you are seeing adequate supply across a number of different commodity and Natural Resource markets. You could argue the demand function is the one to watch, not the supply function. Anything related to the extraction of Natural Resources is opening yourself up to Global Demand dynamics. The economic statistics, the pmis are important to watch to try to assess the future prospects, and as we know, for most of the Global Economic prospects, we are not expecting a significant rebound or acceleration of growth. Guy do you think markets are in balance . I think its still under pressure. Based from those sectors or companies that supply core commodities, we are seeing that with a good example from the macro perspective. The australian economy is primarily based on this extraction, and weve been heavily exposed to the chinese downturn. Weve seen some rebound in china. Its a good example where you can see theres enough supply of core commodities. Where does the demand come from . If you see that come as we heard lack of bhp release, appetite in terms of risktaking or Capital Expenditure, it will slow down. A very cautious approach for commodityrelated sectors. Caroline we have heard the word cautious being reiterated by the likes of antofagasta, also coming out with a drop in sales, down 18 . What are we hearing from the rest of the sector . That has been a real theme across the sector. We have heard rio tinto earlier this month. Costs have been arraigned in dramatically. Reigned in dramatically. Costs downtting towards the 15 to 20 per ton mark. Its an extremely profitable business, and you can understand why the ceos continue to expand market, which squeezes out higher cost producers. Guy two kind of rapid up, jesse, to waynes point about demand, what are these guys saying about where they see demand going . Back up, and we will talk about supply and demand. They are not investing in new kit. They arent investing in new mines. That side of things has been in focus for long time, but what about demand . What is the expectation of where demand goes . The fed is not raising rates anytime soon. China is chugging along. That is the multibilliondollar question. Year, they said, no one can rechina come in that is the big x factor. Demand has been a weaker, but it has not fallen off the cliff. Strangely, it has held up. Theres a huge question mark about the sustainability of current demand levels. Caroline are you trying to read china at all . Where do you see that particular area of significant demand going . Is it just a cooling story . It is cooling, but ive there is a transformational aspect. China has not sat on its hands doing nothing. If you visit or talk to some of the state owned enterprises, they are at a transformational stage, moving away from heavy industry, moving away from pure extraction of commodities, moving up the supply chain. More high tech, more engineering. You can see there are transformational programs going on in state owned enterprises, especially in the steel sector where they are moving more into Consumer Product amanda cycles. That will take many years. You cant turn a refinery into a steel manufacturer in a twoyear timeframe. From a state owned perspective, its being sponsored by the government. That transformation is occurring. It has an effect on the immediate demand of massive amounts of core commodities, quite rightly. You are seeing that anyway. Going forward, i think the story of china is one of positivity, but we should remember it is moving affectively from a developing nation to a developed economy. With a developed economy, we should have an expectation of developed growth, lower growth, not high emerging market growth. I am positive on china that its very much a longterm, long play story, and there are some in balances that need to be worked through imbalances that need to be worked through. Isoline wayne bowers staying with us. Thank you, jesse, amid your very busy morning. I will let you get back to the analysts call with bhp billiton. Guy up next, the new normal. Sayseds John WilliamsMonetary Policy needs a reality check to deal with todays issues. Then its the market open. Were watching bhp. Also, the brexit story by the numbers. We will get the first data from july out of the u. K. Today as the bank of england heads back to the bond market. Plus, the pound continuing to slump. This is bloomberg. Caroline welcome back. Big moves going on in the eurosterling trade. The europound is advertised level since we saw in august 2013. This is a weakening story on the pound side. This is the euro rising higher. We are currently tracking it up at 0. 87. Big moves in the past three days. How much higher will we go . Weve got that auction, the bank of england trying to buy the longer end of the debt curve. We will see how that manages to go, but of course, lets get you up to date with your Bloomberg Business flash. Here is juliette sally. Juliette bhp billiton has reported an 81 slump in fullyear underlining profit. However, that beat forecasts. Even if the Company Posted its first loss since 2001. We will be talking to and are mckenzie, the ceo of the worlds biggest mining company, on bloomberg. A statement from the banks chairman says Frank Van Jensen will be replaced by andres proven in immediate effect. Shares in the swedish lender have fallen 22 since he took over as ceo in march of last year. Frack sir has held merger talks with germanys lender. That is according to people familiar with the matter. The combination of the companies would create the Worlds Largest supplier of Industrial Gases. Berkshire hathaway boosted its thestment in apple when stock flipped. A berkshire raised its stake in maker by 55 to 15. 2 million shares. That is your Bloomberg Business flash. Guy thank you very much, indeed. New policy for a new normal. Environment calls for a new approach to banking, says fed president John Williams. Its an argument he has been making more forcefully as of late as Global Policy fails to boost growth. In an essay released around 5 00 you to care time, williams istes, while gdp targeting an option, fiscal and Monetary Policy must take on some of the burden to sustain Economic Growth and stability. Still with us, wayne bowers. Do you the inflation target should go . I think it should be challenged and questioned. I dont think anyone can remember who made up the 2 or where it comes from. Lots of banks have that is the as the mantra. Those comments are so similar to trichet. There is only so much the central bank can do. Need to move on the government side to help to stimulate demand. I do think Central Banks are being challenged, being seen as saver the last savior to the world economy, but also, those comments strike home some of the economic theory around central rate forecasting based on inflation forecasts. Its a whole plethora of other activities. If you think how economies are transitioning from old to new, which is more digitalization, more technology utilization, price discovery is so fast and so quick. That is being missed in a traditional central Bank Forecast model where you are looking at growth expectations come Inflation Expectations to predict the current level of rates. Its just missing so much. Caroline its fascinating being potentially tying and fiscal powers with this. We heard from mr. Williams that you should be locking in tax rates and link it to unemployment or Social Security benefits. Is that something you could see the government signing up for . I can, but on one side of it, i think weve got some issues we can see around the world when it comes to tax rates. That is being focused on an sorted out through g20 or oecd levels around trying to get a fair tax paid with activity that a company has in a country. Thats an issue. Then you move down into the competitive side of where a country actually has a low Corporation Tax rate for the purpose of obtaining Economic Activity. Centers, hongian kong, singapore, very low personal tax rates. Youve got that competitive nature, which should promote Economic Activity and employment fulfillment. I think the u. S. Has a challenge here. Again, it seems to be the outlier in terms of Corporation Tax policy and how it treats multinationals. They are at risk of falling behind what is available around the world. Going back to my comments were the use of technology doesnt mean that you need hundreds of thousands of people in one country or one city they can be located in many parts of the world. Guy people buying in the u. S. Equity market we saw a fresh eye for all average indices are they buying into this already . Jen williams saying, Monetary Policy, we live in a new world, we live with low inflation rates, so therefore, we need to look at other metrics. The market is already there, isnt it . There is nothing else to buy up. The market has already made this assumption. It has. I also think some of the larger multinationals predominately based in the u. S. , historically coming up through the tech side, are very good, very quick, very fast at taking advantage of the Technology Enablement and Corporate Tax rules that sit around. That flows into better profit and higher revenue and higher dividends being taken through inequity perspective. Perspective. The dollar gieves them security. Largecap equities also give them that, especially dollarbased. You cant miss that security aspect, which is the much better predict provision of liquidity, as well as a little bit more dynamic, visionary entrepreneurialism. Guy stay with us, wayne bowers joining us from Northern Trust. We will have a look at some of the potential corporate movers. Linda, keep an eye on that. Plenty of stocks to look out for. The opening seven minutes away. This is bloomberg. Guy five minutes to the market open. A leveraged bid on the euro versus sterling, one of the big stories. It looks like we have stocks at. 8710. , one ofve this morning the stories to watch. One of the others to watch is bhp. It looks like it has hit rock bottom. Caroline a bit of merger action in germany. Could we see linda, the Industrial Gas company, rise 4 on the open . That is what we saw the u. S. Rival praxair rise in the open. There are talks of a merger. Ofk out for volkswagen, course always in the eye of the press. We understand the department of justice has found evidence of criminal issues with the diesel probe, and they are negotiating a settlement. Plenty to be digesting. Coming up is the market open, futures pointing for a start. The open is up next. This is bloomberg. Guy welcome. You are watching on the move. Im alongside Caroline Hyde in berlin. We are moments away from the start of european trading. Caroline has your morning brief. Caroline the mining meltdown. Bhps fullyear profit tumbles more than 80 . Have we hit rock bottom . Brexit by the numbers. We get the first hard data for july out of the u. K. As the bank of england heads back to the long end of the bond market. Will carney find enough sellers . California dreaming. San francisco fed president John Williams says Monetary Policy needs to be reimagined. Should the 2 inflation target be scrapped . Guy that is a big question a lot of people are asking. I also want to show you as well that the markets are opening. Let us see how the equities open. S ftse 100 moving lower. That will be correlating with the continental markets as well. Ftse down by 0. 2 . It is certainly being driven lower by the Market Makers this morning. Let us deal with the details of what is going on. Elliott that circle says it all. Every sector down so far. Into thely one minute market open but everything is down so far this morning. A lot of people are away. We hit u. S. Records yesterday. Oil declined a little bit. Some gains in things such as gold. Markets are lower across europe. This is the picture on the u. K. Guilt mark gilt market. Yields are down this morning. The bank of england has week two of its quantitative easing program, its bond buying program. Market forin the bonds today. More difficult to buy these as Pension Funds are holding onto these. We will see if the bank of england gets the bonds it wants. Will be in a Holding Steady pattern suggesting Interest Rates are likely to rise sooner than what people were expecting. In terms of specific stocks we are looking at, quite a lot happening in corporate news. We can see the swedish bank is down 1 . They have ousted their chief executive. Saying that the position is too complicated. Best we do not have a price yet on linda. We un