Indication of where german investors are. We also have that inflation figure in the u. K. That has more to do with the pound slumped than any kind of real inflation. Tom absolutely. Then you focus back on japanese yen trying to get to the 99 level. S, isntantiabenomic it . Francine i would argue that it is that a lot of dollar weakness. Taylor british Prime Minister theresa may sent president fusion paying xi jinping a letter. China has told the u. K. To reach a decision as soon as possible. Repelledt troops have a government offensive near the city of aleppo. Minister saysse talks are closer to defuse fighting. Yemen killedthern 15 people. The Saudi Coalition has been striking civilian areas. The attorney general of pennsylvania has been convicted in a perjury and obstruction case. She was accused of leaking grand jury secrets to embarrass a rival prosecutor. The pennsylvania governor has urged her to resign. At the summer olympics, high drama on the track. A desperate bid to win the 400 meters resulted in a dive across the finish line. The u. S. Is still in first in medal count. Nt global news 24 hours per day, im taylor riggs, this is bloomberg. Tom lets look at equities, bonds, currencies, commodities. There we are with futures and negative three, the yield churning. Oil advances. Next screen if you would. Vix. Dowcine, im not on the 19,000 watch. We are not there yet. Yen wants to move weaker, weaker, weaker. That is a big move in japanese yen. Francine my favorite analyst saying thin august markets. That is kind of my data board. I need to do a correct. I thought the zew beat estimates, but i miss read the headline numbers. It is one of the first data pieces that we have post brexit. It is a quarter of what we were expecting. Tom well, there it is. That is all there is to it. Inflation. This is a great chart. The white line is Service Sector inflation. Then we have the approximation of goods producing inflation with the yellow line. The red dot is the combined core with Service Sector inflation elevated and climbing back to normal. Ofis two separate worlds price change. Rent gets in there, as well as a rock in the pond, if you will. Was that clear, francine . Francine yes, it was clearer. I was looking at your chart thinking, im going to do and inflation chart for the u. K. This is what i did because i was thinking about software. Betweenthe yield spread u. K. Gilt yields. Last week, they failed without bond buying option. Today, itil again would not be so easy to dismiss. It shows the flattening of the yield curve. Tom big move. Francine huge move. We have to look at inflation and weak dollar. Gentleman, thank you for joining us on surveillance. When you look at this new world when it comes to the markets, equities ever higher, they are grinding higher no matter what. Then you have depressed yields. What does it mean for currencies . Will it have a huge effect on dollar . Nick ultimately, it will. We are in a phase of dollar weakness. Due to the much lower terminal rate in the u. S. Other Central Banks have surprised a little and have not eased policy. The bank of japan really disappointed markets. As we look forward, we probably see a reversal of that. Aggressive see more action from the ecb and the bank of japan, which forces their currencies lower by the end of the year. Francine what does it mean for Something Like abenomics . How do they get inflation backup . Nicholas it is a challenge, lets be honest. The key is to get more in the way of wage growth coming forward. Ultimately, it means the bank of japan has to be way more aggressive, even than they have been. It probably means another deposit rate cut. Francine four equities, we have a lot of u. S. Indices at record high and then we have this failure of abenomics. Strengthen yen. Absolutely. I think you hit the nail on the head with structural reforms. Rally is driven by this yield play and yields going down. For a longerterm view of equities to be sustained, we need to see the fundamentals comes through. Tom one of the things im looking at is what is moving in the market. Forget the theory, look at the reality. Dollar yen grinding down. Yen extrapolates out by 20 years. I look at this and i go, when will they intervene . At some point, you get a coordinated or less coordinated intervention which is it . Tim we have had quite a lot of intervention already. Bernanke we saw visiting japan. That can only suggest they are going to do more in the way of intervention. Ofil we see more in the way trying to address the problems they have with demographics, more people coming into japan, we are not going to see any change in the outlook for the longterm picture. Tom i look, nicolas, at the dynamics. Are these markets coordinated right now or are stocks on their own . Nicholas they are very correlated. When you look at the japanese authorities, they are going to have to react if you see dollaryen through that hundred level. It means probably an aggressive approach, probably from the monetary side in terms of more qe, but also remember that now governments have that fiscal tool, as well. Maybe that is what we will see, as well. Aggressive fiscal stimulus from the government looking forward. Francine think so much for now. Plenty more coming up with our guests on bloomberg markets. I think we will be talking politics. We will ask about some of the spanish cajas. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Tom keene is in new york. Lets get straight to the Bloomberg Business flash. Sentr Raw Materials have profits plummeting. Fell 8 , bhpsgs 2001. Result since the company does see a brighter longterm outlook for copper and oil. There is talk of a merger that would create the Worlds Largest supplier of industrial gases. Negotiations. Ld the status of the talks is not clear. The deal could be valued at more than 30 billion. A new study says that leaving the European Union says it will hurt the earnings of lower wage earners in the u. K. Supporters argue that lowpaid workers would benefit if migration numbers were cut. Francine, you are sticking with brexit. Francine the u. K. Got the first vote. Umbers on the brexit banks withent headquarters in london will start moving jobs much earlier than expected. We are joined by Michael Moore and we are still with nick and tim. Michael, overall, is this expected . The banks are disappointed because the government does not really have a plan and brexit may be triggered not before 2019. ,ichael if you work backwards the banks want to have a plan in place for when the brexit actually occurs, two years after the trigger, when the negotiating period is finished. You have to have people in place that can interact with clients. To work backward from that, given all the Regulatory Approvals required, finding office space, moving the people, that is going to be an 18month to twoyear process. They have to start unless they have a sense that passporting is going to be kept or there was going to be an extension of the negotiating period. So far, they dont believe the government as a firm plan on anything really. Francine are we talking hundreds or thousands of jobs . Michael it could be thousands based on what the banks said before the brexit vote happened. The banks, you want a firm plan in place. From thethe sense government. Tom buried in the story is the horse before the cart. If you leave london, youve got to go someplace. They dont have a clue where they are going to, right . Michael i think it is still a little bit up in the air. Tom a little bit . Come on we are all moving to a alfi. Ama tom where is that . Isnt that a beer . I could not find that on a map. [laughter] michael frankfurt and paris have the most structure. Dublin has also made it play. Luxembourg, amsterdam. It may be spread out. Tom come on. There is no Business Plan you studied at duke were you spread out in an industry. It is just like everybody gets together where they are altogether. What i love in the story are the two facts, the idea that 87 of the work is getting done in london and 78 of Capital Markets are in london. That tells me there has got to be a mass migration to a city. I have yet to have a sell side analyst tell me what that city is. What is it . Michael we are trying to find out. I think frankfurt has some natural advantages. But trying to move a lot of people there from london may be tough. I think this is the challenge the banks have. There is no obvious candidate. Francine there is not. Anecdotally, tom, they may be looking at ireland, they may be looking at somewhere in the u. K. Where it is a lot cheaper than london because house prices, sure they are going down a touch , but it is an expensive city. If you are facing a downturn, it makes sense for them to try to put some plans. I like the way you are having coffee, where are we moving to . That is the only thing you want to know. [laughter] francine i will get you lemon cello for when we moved to amalfi. If the u. K. Continues saying we are not going to budge on immigration, there is no chance that we have access to this single market. Nicholas i think the reality here, to find brexit for me lets face it. Brexit is not yet defined. Until it is defined, you dont have a starting point. I think the other trend you refer to is that irrespective of exit, banks are moving to lower cost jurisdictions. That is a trend that probably continues going forward. Tom is that fair francine is that fair . Tim i think that is fair. I think there is an element of politics going on. There is the goal to get the best deal for the banks. That if youuggests could pick up, fire everyone, and move to another country, it kind of suggests it is quite a commoditized job we are doing. I dont think that is necessarily the case. I would take some of these comments with a bit of a pinch of salt until we see more flesh on the bone from both governments from a brexit point of view and from the banks. Sticking up for the banks. Tom, we had a great conversation earlier. The former chancellor, george osborne. Telling us that it is an exercise in costcutting, but you also need to make sure you retain talent and bankers can be fussy about where they want to live. Coming up, we speak with Ian Shepherdson. That is at 6 30 a. M. In new york. This is bloomberg. Francine im Francine Lacqua in london. Tom keene is in new york. We have ripped up the script and we want to focus on something that John Williams at the fed said. This is the first time ive done the ripping of the script. Im so proud. With our guests. Williams say we need to focus on inflation or put a much higher inflation target or forget that and focus on nominal gdp. We need a radical rethink of what Central Banks are looking at . Nicholas we do. When you think of Inflation Bank central targeting, it is developed by the reserve bank of new zealand. That was a policy developed from that historical experience in the 1980s a very high inflation. Lets mark that to markets today. I go back to the chart that showed goods deflation. In a radically different economy where you have goods deflation, you certainly have disinflation, and the current framework for Central Banks is becoming increasingly redundant. Say that we do target nominal gdp how much difference does it actually make on what the tools are the Central Banks have available . Ultimately, what you are doing then is you are keeping the real Interest Rate lower for much, much longer. It helps to deal with debt and then it probably should add something in the way of stimulus , but there is another big important piece. There is a limit to what Monetary Policy can do. Is increasingly going to be in the court of government to do more on the fiscal side. Tom lets bring up the chart nick is siding citing. Showing that goods deflation. What i notice, tim, what i notice here is that John Williams and jim bullard of st. Louis are basically looking at a new model. I go back to michael for rowley who was way out front on this. Do you just assume that there is a new terminal value that is radically lower . Tim certainly, there is. There are a few bits of that. The first bit is that when you look at the Global Economy to date, it is different. That chart effectively charts the rise of china and china exporting a lot more goods. It does mean potentially lower growth looking forward. Francine we are back in two minutes. A everyone. Morning, Francine Lacqua in london. I am in new york. First lets get to the news on the election. Taylor donald trump calling for a new ideology test for immigrants to guard against terrorism. The republican president ial candidate said serious measures must be taken right away. Mr. Trump that time is overdue to develop a new Screening Test for the threats we face today. I call it extreme vetting. I call it extreme, extreme vetting. Our country has enough problems. We dont need more, and these are problems like we have never had before. Taylor he also repeated he would halt immigration from patients with a history of exporting terrorism. Joe biden is describing donald trump as a clueless cynic who is already posing a threat to u. S. Security. In scranton, pennsylvania, joe biden made his first joint appearance with Hillary Clinton. Donald trump made a threat to troops in the middle east. Record flooding in louisiana. At least six people have been killed. Over 48 hours, up to two feet of rain fell in some places. Many rivers and creeks are above the flood stage. The African National congress is refusing to blame its president for the worst performance ever in an election. That can lead to further erosion of support before a vote in less than three years. Shunned him with scandals. Global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. I am taylor riggs. This is bloomberg. Francine thank you so much, taylor. Miner hass biggest seen profit declined 81 for the worst results since 2001, actually since the big merger. With stuartre wallace and tim. Is not really the end of the worst commodities slumped for quite some time. Are we expecting further price pressure . I think you will get some shortterm pressure, particularly thinking about oil and iron ore. These tend to be quite volatile. Optimistic be if not at least moving to neutral. We have probably seen the end of these freefall prices that we have seen the last couple of years, and it still needs to be pointed out that they are throwing a huge amounts of cash and paying a dividend, which is a rare thing for investors to get their hands on in an environment where a lot of the yields are going negative. All of that is speaking in his favor. Withcosts are down 16 , for a company of that size is quite remarkable. Francine they did not cut it as much as expected, right . Tim yes. Francine what is the attraction for someone like yourself to the industry. Tim if you want equities to dividends right now, you go elsewhere. I think it is a value play that hopefully is rebounding Commodity Prices. Today, it is all about cash costs going down. For the near term, the will continue to rally on low expectations for cash costs, which will drive the bottom line. Once those get priced in, you need the Commodity Prices to go up. Very probably without singling oneanyone commodity, any commodity, you have yet to see any huge cuts to supply without some big jump in demand of course. Tom i think that is brilliant. Lets bring up the chart. Supply and demand here. Down it goes. , as you know, it is broken. Does Andrew Mackenzie keep the eightyear optimism we have seen, actually almost 12 your optimism, or does he revert back to broken properties of another time . Stuart that is an extremely good question. It will start going up again for the next fiscal year. Tom exactly. Stuart here is the decision he has to make. He has this money pit sitting in the u. S. In the form of oil assets. He has iron ore, which is not keen on, but it is making money. You have copper somewhere in the middle and coal. Tom these guys have been the grownups in the room. You live this every day. Is this a new bhp balaton or a new company hoping to get back to really China Expansion . I dont think they are thinking about it in those terms. Think anyone has come up with an answer to what replaces china. They said today they cite gdp to be 6. 5 to 7 over the next year, which is quite bullish. Whether we see that or not, they are not expecting china to collapse. Francine do we need to replace china . It seems a little bit premature. There is still quite a few years to run in china for these mining companies. Stuart yes, look at where we are coming from, a long period of a huge commodity boom, and that has been rationalizing the last couple years. You need to see supply just to the new reality. Any country cannot continue to grow at high rates into infinity. Francine that is a fair point, and that is when we have to remember overall. Are investors expecting too much . Thesweet spots the has been last decade is gone, and lead to adjust to the new normal. Tim potentially. This is a moving target. The picture can change quickly if we see more supply rationalization. The other big variable, which is kind of unknown, is when we go in terms of u. S. Policy, which has an effect on Commodity Prices. Tom are they going to sell the oil business in the u. S. . This company is so big, it is an oil Company Inside a mining company. Are they going to jettison that puppy . Stuart no signs of it yet. Lots of people have been asking, what stage do you stop putting money into something not getting you money in return . If youre going to be in shell, that is a good place to be. They have deep pockets. Explains our global audience the importance of brokerdeal properties to the culture and the mindset of australia. Stuart that is an excellent question. I wo