London. Barton in we are one hour into the tuesday session and docs arising for the second day. They were rising and now it is dipping with the second day of gains. This is the first time this has happened since midjune, but we are down by 1 5 of 1 . The german 10 year yield is rising, it fell by three basis points yesterday because of a more hawkish president draghi. Down for the third and itinst the dollar, is the best performing g10 currency against the dollar so far in 2017. Big stockpile data expected from the eia tomorrow. We should continue to see a drawdown. 1 5xcrude, lower, down by of 1 . Lets get the bloomberg first word news. Reporter President Donald Trump has nominated quarles to be the federal reserves top banking regulator. He was a senior official in the george w. Bush ministration. Quarles, who will be the first person to solve than the to serve and the role of the vicechairman, will be a pivotal part in easing after the financial crisis. Donald trump juniors lawyer has ignored his client did receive an email last year offering a meeting with someone who would potentially damaging information on hillary clinton. This is after a report that the under trump had been told it was part of a russian effort to help his fathers election campaign. The meeting could draw trump junior into special counsel Robert Muellers russian probe. U. S. Secretary of state Rex Tillerson is in the gulf, trying to resolve the saudi led crisis in qatar, which is put washington in a difficult position. Saudi arabia is the top buyer of american weapons. State Department Officials are skeptical that this will be sorted immediately, but are looking for ways to ease tensions between the countries. The confederation of british industrys says u. K. Banks and life insurers are getting less optimistic because of uncertainty over brexit. Sentiment fell in the three months after june for the fifth time in the last three quarters. Meanwhile, theresa may has been forced to suspend one of her own lawmakers from the conservative party after she used racist language to use the possibility to describe the possibility of leaving the European Union without a trade deal. This reduces theresa mays numbers that she struggles to win votes in the house of commons, when she lost her majority after last months election. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Mark thank you very much, indeed. Investors are looking ahead to two potential Market Movers this week. The start of the earnings season, Janet Yellens semiannual Monetary Policy report to congress tomorrow. Testimony coming after a stronger than expected jobs report on friday gives the central bank on track to raise rates one more time this year and begin unwinding that 4. 5 trillion Balance Sheet. Overnight, San Francisco fed president spoke about inflation and the rate path ahead. I would argue is inflation 1. 5 ,tuck at roughly which i dont expect, but if it did come i would argue gradually raising Interest Rates, are holding off on doing that for a while. Aboutt overly concerned that because in the u. S. I do see a lot of signs, both in the earlier question of wages, but also in the economy that is doing really well. The economy is strong and continuing to move ahead with good momentum. U. Rk joining us now, geoff y are you inflation hawk or dove . I am leaning more towards conservatives and dovish at this point. If you look at forecasts, another hike this year, another two next year, not really wanting to push the boundaries at this point. Even with the labor market tightening, you really have not seen that spending pick up. I do really see things changing in the future. Mark still, comments from various Central Banks giving a lift to the yield curve. Is this the end . We have to keep asking until it does end. Is this the end of the great bond rally, or not . I we really going to go back to negative rates across the board . No, probably not, right . To put it this way, even if we get the downturn and some degree of moderation, i dont think the cuts will be as aggressive as we have seen in a post crisis environment. Is there a figure. Did somebody put a fingegure on it that signals the end of the 30 year bull run in bond . I think the numbers matter much more market. 3 , wecan get to thre are at 1. 6 , right . About 100 basis points. Anit is sudden, prompted by unforeseen inflation surge, then we could have a problem. Mark favorite story on the bloomberg today, geoff, super mario is getting markets respect. We have this chart, whicih sho ,s, treasuries, europ bonds australia, and canada. The blue line is what matters because the yield curve has been steepening. Is draghi leading the day when it comes to making the yield curve steeper . Draghi is letting it happen, which is a step in the right direction for the bond market there. The next question is, how far is he prepared to let this go . Mark and what is the answer to that . Steeper curves, higher yield, and a stronger currency. He will allow two out of the three to happen. ,he euro, once a gets past 1. 15 i think he will talk things down a bit. He has got to watch the divergence. Mark lets look at the eurodollar. I think 1. 17 was roughly in october of 2015. We have come through the post trump election levels. There was the brexit level as well. Those were the three key levels to look out for. You are saying 1. 17 is too high . Again, it is about pace. If we get to 1. 17 barely three months after his self projections showed a softer projection, i think he will have to tame expectations somewhat. But if you allow businesses to hedge and use the weakness in the euro to pass on the wage gains, then you will be able to tolerate things. Mark equities . Global equities are very comfortable in that position, but on the overweight eurozone, on an absolute basis, we are not really overly in any particular market. Stays with us. Lets get the Bloomberg Business flash. Reporter a fresh drop in quarterly clothing revenue and missed estimates for food sales. This deals a blow to the chief executive officer as he seeks to revive the u. K. Bellwether. This adds to evidence that consumers are tightening their purse strings. Pearson has agreed to sell a 22 stake in random house for about 1 billion to strengthen its Balance Sheet. Pearson is selling the state to its publishing unit partner. This gives penguin, random house and enterprise a value of 3. 5 billion. Snap shares have fallen below the ip prize for the first time. Fallen below the ipo price for the first time. Analysts say snap needs to prove the advertisements are a must buy, and they need to keep innovating their product. Mark a new study shows that question surrounding brexit are hurting britains business optimism. U. K. Banks and life insurers are less optimistic because of uncertainty over the eu divorce. One year after theresa may became the conservative leader, she will use a major speech to appeal for cross Party Support theelp peel britain out of eu. But she was forced to suspend one of her lawmakers over racist language yesterday, reducing her numbers as he struggles to win votes in the house of commons. Lets get more. Geoff, to you. Lets start with this chart, geoff. We are in negative territory, levels we have not seen since the brexit vote one year ago. We are minus 34. Is that everything you need to know right now . Shouldature, we start to see a flat line somewhat. Yes, Consumer Spending is slowing and that is why we push back heavily. We should not be in a position to hike anytime soon. That the same time, one thing eating into Consumer Spending power is higher inflation. Mark if you are a hawk on the an argument to be raising rates up from emergency levels of 25 basis points. That is true, but you have to make a determination on whether this inflation will be transitory or not. The slack has been reduced in the u. K. That is a more permanent inflation impulse, the holy grail for policymakers. How can yo uu say, we have zero slack right now, but with all the uncertainty and brexit looming, you say that slack will tighten . Mark we have got a chart, can i bring it up really quickly . I think it is roughly 47 to 50 in december cant see it there, but ill find it. Is that looking too hawkish . I think so. People look at inflation and prices are very high. They are noting that we already see a pullback in spending, putting pricing pressure on them. Mark what about politics . Theresa may makes a big speech today, one year on from becoming the leader of the conservative party. She said over the weekend, i will still be leader in 2018. Is your money on that . All options are on the table as far as the house of commons is concerned. Being this speech pitched towards . We have seen she wants cross party consensus. Shell try to win some of the p roremain votes on the labour side. Everything is on the table right now. Right now she wants to be as excessive all right now. Conservative Party Politics is something you have to consider as well. Mark so, an election within the fiveyear fixed parliaments period you would say is more likely . Client, ince again, a know these are early days. The conversations lean more toward expecting an earlier move. Mark sterling, outlook . Its not going to fall much at this point. Cable is heading higher. Eurosterling, slightly harder. Softer against the euro, but stronger against the dollar. Mark 1. 35, so it is creeping higher. It is. They want to keep inflation in check, and the fed does not have additional hawkishness. But we have come a long way from 1. 20. Say, we get a sudden tumble based on brexit rhetoric or something along those lines, something close to the denver side of 1. 25, i think close to the dovish side of 1. 25 think that is a possibility. Mark is it vulnerable . It is honorable to very adverse headlines. Mark thanks, geoff yu. Rex tillerson, touring the gulf. Turkey speaks out over the treatment of qatar. We bring you the best of our interview with the deputy Prime Minister. This is bloomberg. Guy you are watching bloomberg surveillance. Lets focus on the middle east now. In an interview with bloomberg, primeuntrys deputy minister Mehmet Simsek says the country is a force of good in the region. He also weighed in on the situation in qatar. That we agree the situation has been unfair, we advocate dialogue. We continue to call on all of our partners, our brotherly countries, to peaceful dialogue. Outwe hope this works sooner rather than later. We also of course, try to prevent such political differences from having big impacts on economic relations, on investments and trade. I think turkey has been successful in that sense. Let me give you two examples. We had a big spat with russia. There was a big backlash on turkey haside, but been cool and avoided a big fallout. Finally, were back on track, back to precrisis levels. We had a big fallout with israel. There was a big crisis with israel. What happened is that we avoided a big fallout for investments, and trade. To gccis applies currencies. Yes, we have strong ties with all these countries. Yes, we think qatar should be treated in a more fair fashion and constructive fashion, but we dont want any fallout when it comes to trade and investment. Im sure we can manage that. Reporter are you at all concerned that your relationship with qatar will one day have implications on you and sanctions on turkey . I doubt it because first of all, turkeys not alone in thinking qatar should be treated more fairly. Secondly, there is absolutely no grounds, no justification ,for why turkey should be treated in any i think turkey is a respectable player. Peace, stability and prosperity. Thkey is by far, doing e biggest combat against isis. Countrys the only ground,ts on the effectively combating extremism. We have, in a way, liberated 2000 square kilometers of syria from dash. We work with our international allies, the night and with our Coalition Partners in containing daesh. Sm and mark lets get the latest on qatar and Rex Tillersons tour of the region. Yousef, is the qatar stand up something the u. S. Can help resolve . Yousef yeah, they did not have much luck at the very beginning and they are not making a secret out of managing expectations. The state Department Spokesman said they did not advance the ball, but they look try to do things differently this time around. Rex tillerson has relationships with a lot of the key figures in this part of the world from his days at exxon mobil. His tour takes in through kuwait, qatar, and saudi arabia. Having said that, the two sides are getting more and more entrenched, makr, and this is fundamental. On the one hand, we have qatar looking at possible damages and litigation, and then you have the saudis porting to reports saying, look, that list of demands ins legitimate. As far as w resolutions, americans are pointing to this and saying, we do not expect any quick reconciliation. What is the money telling us in terms of capital flows . Looking at qatari stocks that are rebounding as we speak. The interesting part here is the gulf investors have been sellers in terms of institutions and that has been made up by patriotic buyers out of qatar who have stepped in on some valley opportunities, but some of the other gauges are important in this chat, the 12 month forward on the qatar riad. This gives us an idea of how the traders expect the currency to trade 12 months from now. The record we saw earlier in june was around 700, so very close to this level, but as it given, fairly calm waters the tension. We will have to see what kind of progress Rex Tillerson can actually make. Mark thank you, yousef gamal eldin. Geoff, you are still with us. Is this still a regional crisis within the gcc, geoff . Do you see spillover if it is not resolved sooner rather than later . People are keeping a close eye on the energy markets, of course. 40, ratherng at than 65. Comprehensively, there are two strands, the Foreign Policy, something clients are always interested in. Secondly, as you mentioned, it does point to some wider contagion. It does not seem to be causing this. Mark how effective is u. S. Polleicy, given the fact that we have just come back from a g20 summit . Divisions are main on many of the key issues. And they will remain. People are accustomed to that. One tweet can push the dollar or the mexican peso up. Those days are of the past. I think there is an area within the steel situation and that is linked to the geopolitics of north korea as well. This is a very transactional presidency, but it does not mean that other countries are entities cannot be transactional either. Mark the dollar unlocked in the first half. Traditionally the second half has been better in recent years. Would history repeat itself . That will rely on the fed, if they push the boundaries. Mark we are not there yet. Geoff yu, head of u. K. Investment at ubs wealth management. Up next, markets might be focused on the fed and yellens congressional testimony. Is draghi the most central of central bankers . We discussed that next. 4 26 in newon and york. Stocks are trading mixed on this tuesday. This is bloomberg. Tom lets get to the first word news. He was a senior treasury advisory under the george w. Bush ministration and works at a Salt Lake City private equity fund. He is expected to play a pivotal role in carrying out comes much to ease regulation constraints imposed on banks after the financial crisis. Donald trump juniors lawyer says he received email last year with a meeting or someone who had damaging information on hillary clinton. That news came after reports that the younger trump had been told it was part of a russian effort to help his fathers election campaign. Facing complaints from watchdog groups of violations of election laws. Rex tillerson is in the gulf trying to resolve the saudi led crisis. This has put washington in a difficult situation. It they host the Regional Headquarters of central command. This can beptical sorted out immediately, but are looking ways to ease tensions between the countries. The confederation of british industry says they are getting less optimistic in their outlook over brexit are in a brexit. Profitability, you to death retail sales rebounded in the Second Quarter. 2. 1 . Ent up the question over whether amounts to expenditures is squeezed by rising inflation and slowing wage growth. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Tom u. S. Inflation is going to be at 1. 7 this year and 1. 9 next year. To more ratete hikes between now and next june accompanied by a gradual Balance Sheet reduction starting in the fourth order this year. The ecb is scaling back its qe from january. Lets get more from Deutsche Bank. Thanks for joining us. Once the message from janet yellen when she testifies tomorrow and thursday . Hawkish given the developments . I dont think that will change course. Of i think that is in line with Central Banks over the last week, to be more hawkish unless accommodative. Mark have we seen the pace of the move upwards . Its the pace that matters and the speed upwards has been quite swept area swift. We have seen that movie before. We realize the fundamentals, we would expect the same. We have seen some stabilization of this, which is important to the market. If its moving a bit higher from here. Mark thats the root. It could be overshooting a little bit. I think its important. We dont expect the speed to be continuing like this area mark the speed of rate hikes this year, one more this year and one of the first half next year. Are you just below that western mark that . I think that is important to be discussed. If they reduce the Balance Sheet , in taking this into account, dontnough because we expect inflation to be through the roof in the u. S. Mark this is a great chart on the bloomberg showing you the entirety. , does0year breakevens that tell us what the expectation is for inflation . I