We have a packed and great show for you today. We speak exquisitely to the ceo of italys biggest bank. Jeanpierre mustier. In 10 minutes from now. And in our brexit show at 9 30 a time, and another exclusive and that comes from terra firmas justin king. Breaking news out of china, on a day where we are seeing nervousness on the market spirit and this is what we are seeing on these China Foreign exchanges. For the end of june, coming in 5 trillion, below what economists were expecting. Lets check on the markets. Overall, its the selloff we were talking about yesterday that seems to be continuing. So, were seeing a little bit of a repricing on some bonds. Bund,year german yesterday at this time we were at 0. 49 , then we touched 0. 5 , 0. 57 . That means there is a little bit of a repricing, for example in the italian. You can see this index at 12. 52. Lets get the first word news. Is being seen as suspect behind the hacking of a dozen power plant. A Nuclear Facility in kansas was among the five targeted. The warning spark concerns the attackers were searching for all abilities in the electrical gird. Rid. A u. S. Led effort to condemn north koreas latest missile test has broken down. And u. K. Werece unable to overcome objections from russia and china. Its a setback for the Trump Administrations top foreign ies. Icy priority dohars refusal to accept their demand is proof of links to terrorist groups, citing a statement from the alliance. Saudi arabia, the United Arab Emirates and egypt have pledged fresh measures against qatar. Talking of the global bonds selloff, the bank of japan has 1 3 of control over the nations bond yields, sending yields lower. No bids were tendered after the central bank offered to buy 10year notes. The yen hit an 8 week low. British Business Leaders are heading to a 17thcentury Country Estate for talks for the u. K. Brexit secretary. The hsbcboss and among those attending. On the agenda is what more the government can be doing to ensure it and flex a minimal a minimal costs on business. This is bloomberg. Francine thank you so much. Thousands of protesters have clashed with authorities in hamburg ahead of the g20 summit. [sirens] now, police fired water cannon and pepper spray as crowds set off fireworks. Organizers of the welcome to hell demonstration are announcing the g20 summit as a vehicle of global capitalism. This is one of the most turbulent meetings of g20 leaders in years. Matt miller is also there. The big meeting today is donald trump and Vladimir Putin. If you look at the three main topics, Climate Change, trade and you have how to handle north koreas provocation. What will the two leaders be talking about . Know well, we dont yet exactly when they are going to meet or what they will discuss, but there are a lot of questions as to whether or not the u. S. President will bring out the hacking allegations when he talks to Vladimir Putin, whether he will bring up north korea, the provocations there and it tends to deescalate that situation. That would be interesting as well. Ent gotten an official schedule or it is not officially on the schedule as far as the time they will meet. The questions a lot of people in this hall are asking is whether or not donald trump is going to play into any of those topics that Angela Merkel wants to highlight, especially the Climate Change topic. They are going to try to leave out the term requirement change that talk about factors that affect the environment instead. But there is going to be a working session on climate at 3 30. Everyone is going to be watching to see whether or not donald trump goes to that session. And see whether he participates as well. Francine a lot of tensions overall. Do you think this is the most explosive g20, we have president xi, donald trump and a meeting between Angela Merkel and the president of turkey erdogan, which should be interesting. Matt yeah, it definitely has the potential to be one of the most explosive, well, i dont termto use the explosive, one of the most highly charged g20 meetings in recent years. Those two issues are far more important for the shortterm Political Landscape than the trumpputin meeting. Which longterm historically may prove to be a huge one but for right now, erdogan has said germany is committing suicide, his words, by not letting him speak at demonstrations on the sidelines of this g20, for his own political situation in turkey. That is a real problem when you have leaders using language like that. And then you have got the china situation. President trump yesterday met with shinzo abe and moon of south korea to talk about how they are going to try to pressure china to deescalate the north korean situation. Of course, china has not done very much at all on that level, zero result because north korea has launched another missile. So, the china situation and the turkish situation are at least for the short term or the immediate term going to be much more hot button issues than any allegations of hacking with the russians. Francine i used to cover g20 s. You have covered hundreds of these meetings. Is this one of the first one where it is geopolitics that will be at the forefront. So, there is a danger that trade in the economy can take the back. Mean, tradei is one of the first issues they are going to talk about after Angela Merkel gives her opening remarks and 20 minutes. Most of the world is on the same page as far as trade is concerned. Only protectionist worries really are with the u. S. , obviously. We have not seen a lot of actual legislation in that direction. There has been a lot of protectionist talk out of donald trump, but you have not seen Congress Move on that with a border tax. It is interesting to see how the e. U. Will develop in this regard and what they will talk to the president of china about because the e. U. Under the leadership in one sense of french president macron has started to worry about jobs being taken from important sectors and started to worry about takeovers of these important sectors trying to level. Hem at an e. U. Of course, the chinese are still buying companies around the world, majority stakes but not allowing other countries to buy majority stakes into their important industries. That will definitely be a discussion, and one that affects the Global Economy immediately. Francine thank you so much. Matt miller covering the g20 in hamburg with some great insight. Up next, we have the spotlight firmly on italian banks. We speak exclusively to the ceo of the nations largest lender, the unicredit boss jeanpierre mustier. This is bloomberg. Francine this is bloomberg surveillance. Lets quickly check on your markets because there is quite a lot going on, little bit of a selloff. Mark showing signs this week of spilling over into stocks as well as other assets such as gold and silver. Time simultaneous declines occurred between stocks and bonds was during the taper tantrum in2013 when the fed hinted at reducing stimulus. It is a bit different. The stoxx 600 has returned 10 a year to date, every year since the taper tantrum. Global equities are on course for a second weekly loss. Gold and silver declining. Higher bond yields pressure. That is a wonderful chart. As is this chart, the u. S. 30 year lead. The 10year moving average, the recent selloff is a sign of more pain to come for u. S. Bond bu lls, according to a legendary fixed income investor. And a Hedge Fund Investor ofling time on the era Central Bank Buys stimulus saying the Global Economy is heading to a new stage where markets will not that the same level of support from monetary policymakers. Thats the chart to watch today. Key moving averages. The boj was in the market today. Asserting control over the nations bond yields, sending borrowing costs lower with its first big straight purchase operation since february after the global debt selloff this week. No bids were tendered after the central bank offered to buy benchmark 10year notes of. 11 . Yields dropped to 0. 85 from 0. 11 . That is what is happening in japan. Wonderful chart. Sterling had for its smallest weekly reign in more than three years, versus the euro. Investors are waiting for more certainty on the bank of englands policy and how brexit negotiations proceed. The wonders of the bloomberg terminal. Francine mark, thank you so much. Mark barton there with the terminal. We also had overnight a little bit of breaking news for jeffrey gundlach, a couple of interesting thoughts which may have sparked a little bit of these market movers. Now, as european politicians digest the lessons from italys belo, 17 billion euro two schools of emerge. What is at the rescue all less than idea, brought greater Financial Stability to the country. And then there is the german tow where politicians appear be competing with one another over who can sound the most outrage. Lets get the thoughts from a major player. Joining us for an excuse of conversation is jeanpierre mustier, the head of italys largest lender unicredit. Always great to catch up with you. Good morning. Francine last night you won the prize of banker of the year. Mr. Mustier unicredit won the prize. We have a wonderful bank. 25 million clients. We have an Extraordinary Team and they won the prize. Francine you are leading them and you have not been at the head for that long. It is quite amazing you got the prize right now. Does it feel good . Do you think there are more challenges than you were expecting . Or are in general on track of not exceeding expectations . Mr. Mustier we have a plan. Keep working and working hard. That is what the team is doing. Francine jeanpierre mustier, talk to me about the italian banks. Do you feel that with the resolution, the system as a whole has actually gotten better . Mr. Mustier i think what happened in the past two weeks is a complete turning point for the Banking Industry in italy. Our we raced raised capital in january we told the phoenician banks will be say. The risk premium for an tying banks should go down. And this is what is happening now. There is no more risk premium as far as italian banking is concerned. In addition to that, we are seeing that the nonperforming loans are going down as well. The outlook for the Banking Center in italy is very good. And should not be a reason to be worried but more important more opportunity for investors to be positioned. Francine do think investors will buy more of the italian banks . Mr. Mustier they already came on for our Capital Increase and benefit from that. Italian banks today with the risk premium and more systemic issues, are a very good buy. Francine you are talking about loans, and they are coming down but they are still huge. A lot of banks are sitting on a huge nonperforming loan. What does it mean for the investors . Mr. Mustier i think for the npl, we have to put things in perspective. If you want to bring on the npl ratio, a common ratio to the european average, it might be 150 billion euros. Iss a large amount but it not a systemic amount. With the transaction 17 billion euro to investors we have raised a lot of appetite for npls. I think the market is there. This, issueo will be solved as well i have no doubt about that. Francine is there another bank that needs state aid . Mr. Mustier i dont think no. We have an image issue in italy. The Biggest Issue and the rest will be easily digested. We look for what is very positive. Not only thepl, stock is being dealt with an increasing, but the the Italian Economy is excellent performing quite well. Francine jeanpierre mustier, analysts and investors see your main rival intessa as the biggest winner out of the two phoenician banks. Ventiaetian banks. Mr. Mustier the solution for the Venetian Banks was a major turning point for the country. It is good the solution was found. I just want to note that, since the veneittian bank rescues was announced ourdoes not change i trie strategy. Our plan is based on consumption and that is what we are going to do in italy or in venice. Francine how to respond to critics that you say that say the bes rescue plan puts the Banking Union dead in the water . Mr. Mustier i do not think it does. It is very important to look at the letter and spirit of the law. Tian banks had an original systemic problem, which couldve been much worse. You have to look at the alternative. And the solution found by the government is a very good solution and a very good from time to time, you need to take pain and take it under two conditions. It does not mean that nothing happens but you have restructuring. And then competition is still going on. I think these two conditions are fully met. Francine we talked a little bit about your strategy, and you are saying there is a plan, a marathon, threeyear plan. You came in charge of body year ago. How, overall, is the execution going . Are you comfortable . Threeyear its a plan. But in fact it is a 20 year exercise. The Banking Sector is going to a very large transformation because of technology, of client changing. So, its an adjustment because it is a 20year. Known to a certain number of progress in terms of reduction of staff and balance sheets. And performance of the banks. And you have to wait francine i was going to ask about the second quarter. Expectations in the first. Is the trend similar to the first, or our markets a little bit better . Mr. Mustier good try, but i cannot comment about that. Francine talking about turkey, you have a Huge Investment in turkey. There have been issues but there has also the possibility of ingually, of stakes be increased. What is your thought on turkey . Mr. Mustier im a banker. So i do not comment about political issues. On the business side, our bank in turkey in doing quite well. They are the best quarter for the last quarter. Turkey is a country which is welleducated, a young population. We are very happy to be present in turkey. Francine would you actually consider to review your partnership with the family to increase your state . Stake. Mr. Mustier thats truly happy to work with the family. They have a deep understanding of turkey. Francine how do you feel about the World Economy . We were speaking to the South African finance minister and looking at g20. Does it feel a little bit better, or are you concerned that geopolitics make it much more concern . Mr. Mustier the continental european economy is doing quite well p review should look at the figures, the eurozone grew by 2 . All the countries in the eurozone contributed to it. Its not concentrated. When i am looking at the countries italy, germany, bank ind largest germany, austria, we own the first bank in austria, we can see very positive developments. Annualized growth in italy in the First Quarter was 1. 6 . I do spend a lot of time with italian entrepreneurs. What they have been telling me is the best quarters the last two quarters have been the best in 10 years. Exports will improve and then consumption and then we have investment. The signs are there for a good Economic Performance for italy and for germany and austria and we see good growth. The outlook is quite positive. It does not mean that we need to relax. We need to push our plan and implement it. Francine do investors understand that you are a global bank, or do they see you as an italian bank . Is that an advantage or disadvantage . Mr. Mustier we are a single pan european bank. It is understood by investors. Let me give you prove. After the first round of the president ial election in france likely. Macron was most to be elected, what was the bank which perform the best . Unicredit. We were up 13 . See usved that investor css as a paneuropean bank. Francine can i ask about the project . You are setting up the vehicle to securitize the loans. Mr. Mustier the project, which is failure is not an option. Is what it means. We are going to close the deal in the next few weeks. It is working very well. We have a deal on one side with fortress. We sold more than 50 . We will keep selling the other half of the portfolio in the coming weeks. Francine would you ask the state to guarantee it . Mr. Mustier in italy, the possibility for investors to get some kind of securitization, i ts not a guarantee, and we might use that francine i think you have 49 of the stake. You want to divest . Mr. Mustier we are going to keep selling the remaining part of the stake. Buyers interested. It is a matter of closing the transaction. Francine would we have resolution by the end of the year . Mr. Mustier we are willing to make sure that we can move and should raise even for the interest on italian nonperforming loans. Francine you are very careful in what you say, and rightly so. Talk a little bit about consolidation in your industry. There were rumors about softeng, unicredit. But do think there will be consolidation in general, because regulators may allow it. Mr. Mustier youre absolutely right, the european regulars are calling for more paneuropean consolidation which is proof that europe and a single regulator works well, which it does. Paneuropean consolidation is difficult because you need to find synergies and if you do not find it on that basis, you find it on a domestic races. Consolidation my feeling is it would be much more on the domestic side. Its based on organic assumptions. We work on an organized basis. Francine would there be a need for a crossborder banks or would that i guess the pros is that you caould take on a u. S. Bank. Mr. Mustier i think it is good for europe to have more paneuropean bank. It is important we can prove that we can take a deposit in one country and lend and another one. In another one. There are only two so far. I think, you know, there should be a trend towards that you mentioned the u. S. We are not worried about u. S. Because u. S. Banks to not compete with us. They do not lend. We lend more than 400 billion euros to clients. U. S. Banks do not lend money to europe or european retail. We compete w