A big move on yen and we are watching the fed. Tom i am most focused on Deutsche Bank. Dropping. Ank was job it is just not happening. Francine that was pretty much expected and when you talk about not happening, you have to look thehe stress tests for European Companies and unicredit may be about to make some big announcements. It is now official, the democrats made history at their convention in philadelphia. Hillary clinton is the first woman nominated for president in a u. S. Party. Sanders madam chair, i move that the convention suspend the procedural rules. I move that all votes cast by delegates be reflected in the official record, and i move that Hillary Clinton be selected as the nominee of the Democratic Party for president of the United States. Taylor a few hours later, bill clinton told the convention that his wife has never been satisfied with the status quo and always wanted to move the ball forward. A 265 billions stimulus to prop up the economy. It is unclear how much of the package will be new spending. Big victory in upper house elections this month and after that he ordered his government to come up with a stimulus plan. In france, one of the Islamic State supporters who stormed a church was on a watchlist. He was wearing an electronic tag that allowed police to track his movements. He was shot and killed. Another challenger to jeremy corbyn. Oh and smith is looking to pledge smith will what he calls a National Mission for britain and promises to improve workers rights, pay, and conditions. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. At equities,ok bonds, currencies, commodities. Fed day, i think it is a dead meeting. Futures are alive at five, a little bit of a risk on feel. Oil going nowhere. Of where ite a clue is going to be at the close of market, 42. 71. Brent crude under 45. In the yen, i will let francine talk about the yen. Sterling, 1. 3108. Francine we need to start on the yen because there is a lot of anticipation, tension, volatility, and it is currently at 105. 53. It is unclear what the stimulus announcement means, whether it is a message at the boj so i think that is the story today along with banks. 0. 6 . An banks gaining tom out it tokyo it was great on the confusion engendered. Lets look at the fed. I will use this chart this afternoon with scarlet fu and joe weisenthal. Is there enough going on in that chart . That is the lollipop chart. Francine it is a rainbow chart. Tom those circles are the fed meetings. The answer is, we have moved along and rolled over four standard deviations with that gray line extended off the red line center trend. We come back, it is not as dire as it was post brexit but nevertheless it is really something and says a lot about the challenges that janet yellen has. Francine these are the challenges for government corona. Governor kuroda. I did my own lollipop chart. What wethe picture for are seeing in terms of implied volatility on yen. The white line is basically a oneweek historical yen volatility. The orange line is a oneweek implied yen volatility. A sickly what it tells us is that trader attention ahead of meeting, but it tells us is uncertainty is probably what we will see as we try and wade through the news of what is going on in japan. Host, ubsto our guest. Sset strategist geoffrey yu we got lucky by booking you today because of this announcement. What is the Prime Minister of japan trying to do . Orit a warning for the boj are we going to expect more fiscal stimulus . Geoffrey he is signaling to everyone, i have a mandate so he is going to use this mandate. Expect something, and that is a message to the populace at large and the boj as well. The Central Banks can only do so much if the people do not believe in what the government is trying to achieve. At the same time, he is going to need money. Lack of bias, perhaps. Francine the problem at the moment with shinzo abes announcement as there are unspecified parts as to what is new, what is old. Is it so complicated to show that he needs that means business but it could fall flat and we could see the yen surging . Geoffrey i wonder whether Global Politics have played into this. We are hot off the heels of the g 20 and corroded did not want to make too much of a statement kuroda did not want to make too much of a statement. Tom i think all of this is linked together whether it is mr. Kuroda, mr. Draghi, mr. Carney, it is linked together for a lack of degrees of freedom. We are running out of a good choice set of things to do. Do you get the feeling they have just run out of ideas . Geoffrey a central bank will never admit they have run out of ideas, but from japans point of view i think it is very acute egos they are several decades into this experiment and still because they are several decades into this experiment and still struggling. They need to push back against this notion that they have run out of ideas. Tom how do they do that . Is it in speeches as we go through the summer . Again, like the fed is that a different part of the cycle so i think they can afford to be with their rhetoric. On japans side, i think it is much more important so that is why the governor has called away his previous comments about helicopter money. Caseine what is the best scenario for janet yellen . Geoffrey i think the stress, data is doing well, a goldilocks environment. Do not cast any doubt about ,trength in the u. S. Department but the stress in the international conditions, they need to be cautious about where the dollar is going, and after the brexit. Tom do you have a yen call . Geoffrey your risk is certainly to the upside in dollaryen and at 100 i think the boj will defend it. How they will defend it will be interesting. If they do a big package, then dollaryen will go to the upside. It is what happens after that which will be much more important. Tom looking at the fed and Deutsche Bank. Eoffrey yu with us with ubs this afternoon, Michael Mckee in washington, joseph wiesenthal and scarlet fu with our special fed coverage. 2 00 p. M. This afternoon. From london and from a beautiful, coal or new york, this is bloomberg. Francine welcome back to bloomberg surveillance. I am Francine Lacqua in london, tom keene in new york. Second Deutsche Banks quarter profit was almost wiped out. Revenue plunged and Deutsche Bank set aside money to cut jobs. The ceo has been cutting risky assets and eliminating about 9000 jobs. Largest oil producer has reported its first loss because of the plunge in oil prices. They have reduced cost so they can the norwegian government owns 2 . The cheaper apple iphone is catching on more with consumers, one of the bright spots in apples earnings reports. Salesalso forecasted would fall for a third consecutive quarter but the range was better than most analysts predicted. Francine thank you so much. Lets get back to one of our biggest stories of the day, japans Prime Minister announced lands for more than 265 billion in economic stimulus. The announcement comes ahead of the boj Rate Decision on friday. Lets get to our Bloomberg News economy at her desk editor, jodie snyder. Cautiousa little bit because a lot of this fiscal stimulus may be things that he has announced in the past. Jodie that is right. Package,he size of the the equivalent of 265 billion but it is unclear as to how much is new spending, and how it will be financed. One will presume that bond issuance will be needed to finance it, but we do not know the details and we do not really know what it is going to be spent on. They mentioned infrastructure, highspeed rail, but no specifics. Francine when you talk about Central Banks, one day mark carney was called the unreliable boyfriend and now some say governor kuroda is the unreliable boyfriend. Is that a fair description . Jodi i think so. We have seen surprises where they did not ease and surprises where they did ease that the market did not expect it, and negative rates was a surprise as well. Some folks are saying that todays action by the Prime Minister going ahead and announcing the stimulus today when the central bank starts meeting tomorrow and announces their policy on friday, was intended, and this is something that will put pressure on the bank to ease further. Tom thank you, Jodi Schneider in tokyo. Geoffrey yu with us. The one thing i get is a clumsiness of planning of stimulus. It is so different from the tarp struggle the u. S. Had years ago. Why is japan having so much trouble coming to another arrow in the quiver of abenomics . Overall it is an reluctance to engage in topdown structural reform and the decisive. We talk about labor market reform, that has to happen so these are things that are structural, not isolated. Tom they really do not believe it, so where are they in five years . If they have the challenge of china and adjacency of other asian countries, where is japan in five years . Geoffrey i think we see some interesting developments in china. The sands are shifting. You have north korea becoming a bit more belligerent. Given what donald trump has been the Nato Alliance and defending japan and south korea is going to be a catalyst for japan to say, we need to act to defend ourselves, and that could prompt and awakening movement which is what abenomics was designed to be. At least they have a reason to act. Francine what would be the best Case Scenario for the fed . Would a dollar rally actually make their life easier . Dollaryen rally should not impact the fed too much because if you look at the overall impact on import prices, it is not as important as dollarcanada and dollarrenminbi. If japan moves, dollaryen will go high and dollartaiwan will go high. Francine how difficult is this for governor kuroda to read . Geoffrey very difficult. He has to maintain credibility for the boj and people are saying, has the g20 been holding him back . When forced to make a decision between g20 and the domestic situation, he will have to go domestic. Tom we will continue with geoffrey yu. In our next hour, the u. S. Equity markets have been resilient. It is amazing the conflicting reports and analysis of apple. Brian belski joins us in the next hour. This is bloomberg. Francine welcome back to bloomberg surveillance. I picked out a morning mustread to talk about china. This is from Stephanie Flanders who comes regularly on the program. She wrote in the Financial Times that the chinese currency has been falling again recently by 3 against the dollar in the last three months. It would be nice to believe that this was because the world is in a stronger position to cope with a deflationary china, that she fears it is because investors have not been paying attention. The problem with china, if you think about the last 13 months, this huge volatility and markets being scared last summer. Then we had january and now we do not talk about china. Geoffrey investors have not been ignoring china. I know a couple of meetings and calls in the past few weeks. As concentrated as last year and the beginning of this year when that couldve been a big call position in your portfolio. Currency,ct to the the chinese will say last year they made a mistake and proactively moved and poorly communicated it. This time around, the big fix around the brexit was to reflect dollar strength. China is still stuck in terms of overcapacity and in a deflation mindset, and that needs to change. Is it going to be a big source of volatility right now . I do not think so. Francine because they are going to do less policy mistakes . Geoffrey bee the margin for error is nonexistent. Is that good for reform in the longerterm . That is doubtful. Tom look at renminbi. It is sort of the litmus paper of all of this discussion, the mystery of what they are doing in china. It is a historic appreciation of the yuan from 2005 on the left and we break through. Clearly they have managed a depreciation, some would say a true devaluation. Where are they heading where their currency with their touring their currency as a tool or a weapon of policy . Geoffrey it needs to be a tool to get Inflation Expectations back up. China has been in ppi deflation and the currency is essential to assist in that process. They are worried about pushing too far and domestic households will be buying dollars and there is talk of gold buying. It is a delicate balancing act. They are walking a tight rope so we are still looking at 3 to 5 . Tom well explained between the business side and consumer side in a nonfree economy. With that said, should we assume a glide path of depreciation . Bring up the chart again if you would. Where are they going . I cannot get a handle on that. Is going to be a psychologically important level for household. If you ask a High Net Worth chinese household, tell them to look at how dina dollarchina is going but a property in london has just become 50 cheaper, so those with the means to get money out it is not going to look attractive. If they want to contemplate account liberalization, they will have to accept the currency must me must be much weaker. With ubs, we yu will continue the discussion. Again, a fed meeting this afternoon. Our special broadcast at 2 00 p. M. To get you briefed. Obs withs bank us in the next hour on the choices and lack of choices that janet yellen may have. This is bloomberg. A tom good morning, everyone. Saidberg surveillance. Day. Day. D i am waiting for the 2 00 p. M. Show. Lets get to our bloomberg first word news. Taylor it was a historic night in philadelphia. Democrats made Hillary Clinton the first woman ever to be nominated for president i a major party. Bernie sanders took the microphone and asked that she be nominated by acclamation and hours later, though clinton capped the day with his speech. There are clear, affordable responses to our challenges but we will not get to them if america makes the wrong choice in its election. That is why you should elect hillary because she will never quit when the going gets tough. Taylor there were cracks in the democrats unity. Sanders supporters continue to demonstrate outside the convention and inside, several delegates paraded off the floor. A report by the house of commons theittee reports that brexit vote could increase immigration. Is facing renewed criticism over her handling of the refugee crisis. Lawmakers argue that for attacks in germany over the last week shows that her policies are not working. None of the refugees in the attacks had arrived last year. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine Deutsche Banks secondquarter profit was almost wiped out. Deutsche bank set aside money to cut jobs. The ceo has been cutting risky assets, freezing dividend payments, and eliminate in about 9000 jobs. Still with us as geoffrey yu. Joining us is otto dichtl. Uglyche bank was always but it was always going to be ugly. Otto i think it has to be put into perspective. Course since of late last year has embarked on a pretty deep restructuring program. I would have said actually ahead , that results released people were really concerned about Deutsche Bank posting some fairly sizable losses potentially in 2016. We are only halfway through the year and there are still maybe a few things to come. I would say, so far, so good. Two quarters a very small but at least existing profits. Francine should we be more worried about Deutsche Bank . We have seen so much volatility that you do not know whether this is the biggest, we just system weakest systemic bank. Otto it is certainly one of the biggest. Is it one of the weakest, i would say it has some challenges clearly. If you look at the share price and i think that to some extent, of course reflects the currently weak profitability and lack of thedends and currently still weak capital ratio. That is one key issue because of course one way of solving a weaker capital ratio is to raise , whichand get dilution is not so good for the shareholder. Better for creditors. Tom lets look at Deutsche Bank versus jpmorgan, a transatlantic chart. What i saw in the report this morning was a massive conditional probability and the condition is a probability the economy will not recover. How much time does john cryan have is the european economy really does not recover . Otto i think Deutsche Bank wants to have, at least this year for the deepest sort of measures in its program i would say, but for sure it is an 18 to 24 Months Program for things to fall in place. Is an mentioned jpmorgan interesting comparison. There is a few issues. One that perhaps for the time being, the u. S. Banks have a slightly bear better geographic set up. The market and the u. S. Seems to have been a bit more active recently and that is helping. The that is precisely point, Deutsche Bank does not have that luxury. I have the south side telling me this is a measured plan. Baloney. Where is the stock right now, 12. 31 euros. If this goes below 10 euros, all bets are off. How much time does he have to affect change . Otto i think what youre saying comes back to that point that certainly there is a material risk or likelihood that Deutsche Bank might have to actually forl go for a very painful the shareholder, capital underpin to sort of its solidity and give people more confidence. I think a fair point that you make, and it is one of the key issues for Deutsche Bank. Francine i like the way tom gets so excited and he calls it baloney. There is quite a lot of emotion. When you look at european banks, can europe grow if the banks do not grow . The interlinkage is huge. Geoffrey and the banks will say if europe is not grow the ecb will not be able to lift rates and that will hurt margins as well.