The earning news, but i thought the italian bank workout was really interesting over the weekend. Quiet, as always, but that will be front and center. It reminds me of how complex the calculation of dilution is. That is what it is about equity shareholders getting crushed. At howe also looking reliable the stress tests are. Lets get to the Bloomberg Business flash. Taylor one Police Officer was killed in a Suicide Attack in baghdad. Authorities say they killed two attackers in a gunbattle. Committing to the triple lot guarantee. Lock the former minister responsible for pensions called it to be scrapped. The backlash is growing over Donald Trumps comments over the parents of a dead Muslim American soldier. Trump questioned whether the soldiers mother was not allowed to speak at the Democratic Convention because she was muslim. The woman said she was too distraught. A number of republicans joined Hillary Clinton in condemning Donald Trumps comments. Hillary will appear with another billionaire supporter. She will campaign in omaha with Warren Buffett. She was joined in pennsylvania over the weekend by billionaire mark cuban. Riggs, this is bloomberg. Tom thanks so much. That is a big deal, Warren Buffett weighing in at this time. It will be quiet through august. I dont think we have an august that is quiet through this president ial campaign. Francine it does not feel significant that Hillary Clinton is going to omaha. Im not sure with the voting swings are. It feels a little bit different. It is unusual for Warren Buffett to way and in . Tom i think it is unusual at this time of year. For our global audience, nebraska is not a swing state or a battleground state, but mr. Buffett carries a certain tone to a certain part of america that maybe is on the sidelines. We will have much more on this. A tumultuous weekend of president ial politics. Equities, bonds, currencies, commodities. Euro turning. Oil is front and center. 41. 18. On to the next screen. The big 12. 25. Brent, 43. 10. Yen is stunning. ,ou use dollarmexican peso pretty quiet. Francine . Francine this is what i picked up. Banks are under pressure. I thought this was significant. It opened higher on the back of the ecb stress tests. This is a picture for some of the european stocks. Overall, they are flat. Tom i want to bring up Deutsche Bank. Deutsche bank, german, londonbased. Down we go. The blue line, we are really getting right near there. There is a certain fragility to the banks. Most of that is due to a preworkout dilution calculation. Which is pretty ugly. Francine it is ugly. Im a little bit jealous you picked some of the European Banks. You are right on the money there. The concern is that they did not really test their weakness. This is what i chose. This is something to do with tbills. The amount of tbills outstanding is the blue chart. The percentage in the u. S. Treasury market. The squeeze on the u. S. Treasury bills which compromise 11 of the u. S. Treasury debt market, is getting worse. Tom. This for you, it is another way of looking at treasuries and what the impact on tbills is. Lets get more now from eric nielsen. Great to have you on the program. We spoke to a couple fed president s over the weekend. Im not sure with the market is latching onto. It is overall uneasiness of what comes next. The real momentum is the fed and central banks. I think that is right. For me, the stress test is not the big deal. With thento this year fed saying they would probably hike four times. Communication from the fed has not been great. I think the market is really confused right now. Francine we actually caught up with robert kaplan. I think september is very much on the table. I think we will have to see how events unfold. It is too soon to jump to a conclusion on that. One of the things ive learned as a central banker, youve got to be patient and weve got time to make a judgment between now and the september meeting. I want to take advantage of that time. We have two job reports between now and then. I want to get the benefit of that information before commenting. Tom why with a hike before a u. S. President ial election . Would you not wait until that is over . Erik i think you would want to wait if you think trump is a real possibility. It is so hard to believe that he is a possibility sitting here, but it is too close for confidence. There would be such an uncertainty if he were to become president. Dont know kaplan he has not been around for very long in this job and does not have a background in Monetary Policy. With all respect, i dont think i is the greatest sorry, dont think he is the right communicator to be listening right now listening to right now. Erik. Ood morning, it is august. In normal danish tradition, im sure you will be taking four or five weeks off during this month. But as the tension so strong that you will be working through august . Do we go lazy, do we take time off, or is there a crisis tone during the month . Tom. Good point, i can back from vacation last night to work through august. Already, my two weeks as we do in europe, and it has been very good. I should have more, i think. On a serious note, there is a lot going on it feels very uncertain. We talked about the banks. Big as anstill very uncertainty. The enormous uncertainty we are heading into. Tom remind us of the relationship of the bund is bank des bankecb bund thi and the ecb. Remind us where they are in outrage over peripheral challenges . That my view on this is they are much closer to the ecb than most people appreciate. Speak the top line. I sense is that the relationship is not bad and the bundesbank is what the bundesbank is. Germany has clearly let up the pressure on the peripheral. People were on the phones to help block the commissions plans to penalize spain and portugal. The bank test was one issue. Think there is anything between the bundesbank and ecb. Tom if you are just joining us, italian Bank Bailouts seem to be the theme today. Next hour, ira jersey. With oppenheimer fund. The dynamics of Interest Rates wrapped around sluggish economies, wrapped around two baseball teams in new york that needed better august. This is bloomberg. Francine im Francine Lacqua in london. Tom keene is in new york. Waror uber has ended its in china. They will take a market share in didi. Uber investors havent pushing profit ine china sisony postede the latest quarter. Ony got a lead in gaming consuls by launching a Virtual Reality headset. A plan involving private investors to bolster finances for an italian bank. Unicredit was the second worst performer in the stress test. Francine thank you so much, taylor. Lets get more on the European Bank stress test. Nick, great to have you on the program. You have been looking at Deutsche Bank and barclays. Were they tested in the right way with sufficient stress . Nick well, it is a question of who you ask. There are a lot of banks complaining how tough they were before hand. We have a lot of criticism of banks saying they could have been tougher. Scenarios which are a lot tougher than they were the first time around. On top of that, if you are a big investment bank, this time, you have to take account of your potential legal risks. That hurt a lot of the big banks , especially Deutsche Bank. 220 pointse bank of capital decline was from legal risk. It is a tougher set of tests, one cant deny it. Francine unicredit, Deutsche Bank, barclays, what did it mean in terms of capital rate earnings . Nick among those names, i dont think we are going to see any determined by this test. All three of those banks you named are assuming their plans to shrink their way to capital strength. That is something that the market environment has been pushing for anyway. I dont think there is going to be any bank that comes out with a capital increase, a share sale on the back of this increase come with the increase, with of the catalyst pushing toward recognizing their deficits at monte paschi. Tom europe seems to be playing by a different playbook than the United States. I think we have an understanding of who gets diluted in the United States. Is it the same group in europe . There a difference in the cramdown of dilution . It is pretty similar to the u. S. In terms of their equity structure. Sometimes, they have a charitable wing in there as well. There are a bunch of cooperative banks who are in a tougher position, where they have to convince the clients, who are their shareholders, to really stumped on more capital. Where it gets really complicated is on the bond side. You have a lot of small Retail Investors who bought the bank. Onds from many different banks wanting to believe these were ,aving products and not risky but now the discussion is if a bank goes bust, the bondholders have to front the cost. While you dont necessarily have a bank going bust on the horizon , that does make things a lot more complicated. Francine thank you so much. Nick comfort. K, does the economy needs strong banks or do strong banks need the european economy . What can we do to get the banks back in better shape . Erik you need both of them. Lets start with the issue raised is the stress test tough enough . I think it is a bit of a silly thing. If you want to be negative, you can say, you could have made it tougher. The stress test was an enormous shock. What hurts a bank is a recession , it is not the smaller details. Yes, you could always find something that could have been tougher, but this was one heck of a tough stress test to put the banks through. Look at it is not so much where the capital ratios are now, it is the change from that with this shock. The shockers were some of the german banks and the irish banks. Paschiready knew monte was a tougher one. I think it is a bit picky to say you could have tested it harder. Francine fair. Tom is there a discussion of helicopter money in europe . Is helicopter money even core of 17ven a nations . Erik yes, it is feasible. Lets call a spade a spade. We havent already. Helicopter money is when you run a bunch of deficit and there is qe at the same time. If you want to finesse it and be promisenomic, it is a a credible promise up front that the increase of base money will stay with us forever. We dont know that, we dont know that in the u. S. , we dont know that in japan. The chances are that it probably will. I think the overwhelming possibility is that we havent already. Francine thank you so much. Erik nielsen stays with us for the hour. But seven look at something. Banks under pressure. Came at a times of growing pessimism. This is a picture of monte pasch i gaining. And Deutsche Bank are under pressure. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Tom keene in new york. Tom, this is my morning mustread. There was a time when the u. S. Consumer was still king. Mind that the consumer is the same person most consumers are prone to moments rage nowadays. Whether that translates into a vote for donald trump depends. Tom it is an important insight. It reminds me of stephen roach, who has been heated for years over the true weakness of the American Consumer. That . Ielsen, do you see that there is some gross or aggregate American Consumer numbers that are frankly pretty good, but that the actual disposable income of a have not america is lower and lower and lower and flat . Two things, tom. On the one hand, you are actually right. For the big middle class of america, you have not seen an income increase for a generation. That has to be addressed. It is a fundamental problem. The increase we have seen in real income in the last year or so is all due to the low oil prices and low inflation. You have this unusual situation that real income has gone up because inflation has come down. People feel differently about that. It does not feel as good. But it is still an increase and you dont see the effect on consumption in quite the same way. In all of the Oil Importing countries, this could be true. You see it in europe very much also. It is exactly the same picture. It is a consumerled recovery. Francine is that what we have brexit . Erik i think brexit is a bigger story. Immigration, confusion, little englanders, lots of issues. Tom lets come back. We will speak on the greater european economy. What a weekend for american politics. I dont know where to start. They do. Ren thisn and help he afternoon. This is bloomberg. Tom bloomberg surveillance. Glad youre with us on a monday. We look at economics, finance investment in a moment must watch on inequality. First, lets get to first word news with taylor. In remarks in a speech prepared for each of, investors are underestimating the number of great hikes for this year. Hit high balloon tension power lines in texas. The National Transportation safety board says it will look at a number of factors including reports of foggy weather. The government of hong kong has from nextdidates months elections. Two candidates have been disqualified after refusing to sign a pledge. In poland, pope francis told young people that they need to believe in the new humanity stronger than evil. It was the final event of the popes fiveday visit. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am taylor breaks. This is bloomberg. Tom thank you so much. What we know for certain is this time around it is inequality stupid. Indiana notom gary, surprisingly has lined up behind secretary clinton. I spoke to him a few days ago. He was in philadelphia. Our country faces three big issues. The problem of slow growth, and the twouality, together have meant that the fast majority of our citizens have had a stagnant income for a third of the century. Finally, weeks. In 2008, a really serious financial crisis. I do not think we immunized ourselves adequately against another financial crisis. Tom here is a dirty low secret. Bloomberg keyboard our stock of these are a stack of these. These are authoritative articles on what matters. What you need to know, what secretary clinton is to know, what mr. Trump needs to know is the work has been done on inequality. Ichard dobbs is with us this is your new report on inequality. What was the Biggest Surprise about american inequality . The Biggest Surprise is, in america, 80 of people now earn less than people like them previously. People do not mind classic inequality. If i am earning 10 more people do not get upset about that. What people get upset about is if they stop earning more and stop stop earning more and start earning less. Of let me turn the emotion around. Are we going to be richer than our children a whole different emotion . Track to be better off than our children. Not everyone, but between 30 and 50 of the people. If we carry on on the current trajectory, we will be better off than our childrens generation. We all want our children to be better off than we are. Francine this seems a little bit crazy. Were still growing. It must be a distribution problem. Redistribute things in a different way. Has that changed . Are the rich just getting richer because of Monetary Policy. We are growing glass. When you grow more, everyone rices. That is one element. The second element is were getting more returns into the owners of Growth Capital than the owners of labor. We are finding that there is a segment not benefiting from growth. They are growing less than the earnings. The average the reason is these are people whose jobs are being disruptive, specifically by technology, immigration, trade. There is this tool course of people no longer benefiting from the whole system that has been wonderful for the last 30 years. Francine what do you mean we are growing less . Gdp is rising, modestly, but still rising. But in a world that is , everyone ise i going up. At sweden, here which permeated the report as countries that are different. Is sweden istlier a union labor economy. Is all we are talking about the atomization of the workforce . First of all, the skills. Are we building the skills of people whose jobs are being displaced chocolate there is also questioned about whether we make sure that people get their share. We may not like it, but the fact ensure system does tom interesting. K. Ts bring in eric nelso grows he economy isnt the issue really that the two small share of the population, particularly in the states, its gaining too much of the increasing pie and theres nothing left for the rest of them . Richard absolutely. More growth would be better. If we did things like infrastructure spending, all of these things, that would help bring people out. We should not walk away from policies that get more growth. That is the first element. Second, how should we think about getting the skills of these people that have been displaced to come up . People whose jobs are being displaced at the age of 50, they can step up. Is are thereught ways that we can ensure there is a segment that still is benefiting . Francine i guess the problem is if you have and it prints it is thisenticeship enough to explain the double jump phenomena . Richard you have a big part of the proposition that feels this. Lace, in many ways and, the issues of immigration, it is all part of the economy. It is up to policymakers to redistribute and that has been done very poorly in the United States and several european countries, not all of them. The result of that issue is you get an enormous degree of people unhappy in the middle. In europe, the state has always been much more president , just because it has been accepted. In the states, there has been huge backlash even to obamacare. For europeans, it is very hard to understand the health care is not a human right. If you go back to the second world war, it is difficult to make clear distinc