Present anytime soon. Shares in the photo app maker plunge as user growth stalls. Can any filter save it from the instagram threat . This is bloomberg surveillance. We are getting some breaking news out of the iea. Dip as we are seeing a across global stocks because of the threat from the Korean Peninsula. This is what im looking at. They are cutting estimates for the crude needed. I imagine they mean the crude pumped from opec for 20172018. They also go through some of the compliance issues opec was discussing. I dont know whether this is having an impact on the price of crude. You can see brent down some 0. 8 . They say that Global Oil Demand is rising to more than 100 Million Barrels a day for the Fourth Quarter of 2018. This is what im looking at for the rest of your data check. It is a risk off kind of mood. This is what were seeing in equity. Havens are gaining because of the korean tension. We had ray dalio publishing a note, a game of chicken between the u. S. And north korean leaders. He advised investors to buy gold. We will get plenty more. First lets get to the bloomberg first word news. Heres taylor riggs. Taylor tensions are rising in kenya, where the Opposition Alliance is demanding it be declared the winner of tuesdays election. Former Prime Minister won more than 8 million ballots in the vote, compared with 7. 7 5 million for the president. The claim further escalates a potentially violent political crisis. Venezuelan leader Nicolas Maduro says he wants a meeting with donald trump. It comes less than two weeks after he verbally attacked the president. Maderos address to the Constitutional Assembly comes as america lays sanctions on his socialist administration. Initiate negotiations so that i have a personal conversation with donald trump. Initiate negotiations to have a telephone conversation with donald trump. If i travel to new york in three or four weeks for the United Nations to have a meeting with donald trump, here i am. Heres the chief of your interest. Nicolas maduro, constitutional president of venezuela. Taylor google has canceled a meeting to address gender issues. They are citing concerns over staff safety. In a note to employees yesterday, the google ceo said he called the meeting off after questions to be asked were posted online, raising concerns that employees would be harassed. Shares in snap have plunged in extended trading after growth fell short of estimates. 173y active users reached million in the second quarter. Analysts had been expecting 175 million. It feeds fears that aggressive competition is punting the companys potential. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Francine . Francine thank you so much. Y wasnt tough enough, that is the message from donald trump, saying the regime in pyongyang should be very nervous. Anythingth korea does in terms of even thinking about lovek, of anybody that we or we represent, or our allies, or us, they can be very nervous. They should be very nervous. Things will happen to them like they never thought possible. Francine markets have been jolted by the drama. Volatility spiked to the highest level since the u. S. Election. 1. 5 ,p 500 fell almost the biggest drop in three months. Billionaire investor ray dalio, who leads Bridgewater Associates, said people should consider placing 5 to 10 of their hedged assets in gold. Kamal sharma is director of g10 fx strategy at merrill lynch. Great to have you on the program. Do you believe this will deepen or will we see a leg up . Kamal in the near term, we see little reason to change the view that the yen and the swiss franc should remain the fx currency of choice. Tensione underlying between north korea and the u. S. Fact exacerbated by the that we are in summer months. Liquidity is at a premium. The bulk of our recommendations are to remain constructive on the yen. Longain a structurally bond buying into the summer. Francine are we going to see a lot more volatility . That weve always thought heading into the september period that there would be a pickup in volatility more generally. Given the approach of the potential government shutdown, tax reform measures, and a focus on u. S. Monetary policy. This is just an added layer of complexity. We are constructive on the dollar. We are becoming increasingly selective in our view. Longer dollar versus canadian, versus kiwi. Much i have a chart showing the swiss technicals compared to moving averages. We are charting swissieyen. What do you make of that . Kamal the swissieyen chart is interesting. Ishink what is interesting that we are not at levels where we would deem the s p to be interested in terms of intervention. The fact that weve had a large buildup of short swiss positions in a few weeks given the sharp rally towards 115 is probably seeing some of those positions being taken. Francine the other big issue is u. S. Inflation. We get the latest reading in a few hours. Analysts say Consumer Prices excluding energy and food probably rose 2 . That would snap four straight months of subpar readings. That has been causing the Federal Reserve a lot of stress lately. Yesterday the new york fed president said reaching 2 is not going to happen anytime soon. Until some of these very low readings drop out of the statistics, we can take some time. Francine first of all, why is measuring inflation such tricky business . Kamal the world has changed since the financial crisis. Theres demographics, technological changes. This is not just a problem specific to the fed. They have been talking about alternatives to inflation targeting. This is a problem that is impacting the broad g10 and developed economies. The market remains very sensitive to inflation numbers. Pbi was softer than expected. That left the dollar vulnerable. The market will be focused on changes on that inflation for currency markets. Francine you were mentioning you were constructive on the dollar. I have a chart which basically shows the u. S. 10year. Are you constructive on the dollar because of inflation figures or is it more to do with the Korean Peninsula . Kamal constructive on momentum. If you look at the broadbase moves in the dollar, we are technically very oversold. The levels are consistent with moves in the yield. I think from that perspective, the recent improvement in u. S. Economic data has largely been ignored. Also, the flipside of this equation is that some currencies versus the dollar have gone a long way. Optimism in the likes of the canadian dollar, some verbal rhetoric against the kiwi, make those the ideal candidates to be short against the dollar. Francine do you still look at the phillips curve . Kamal it is flattening. The phillips curve has been a key focus for Central Banks for many years. We continue to focus on that. It is flattening. We are not getting any kind of inflation. It is still the benchmark that most Central Banks use. Francine i have a question from a viewer. The viewer says, what is the logic of safe haven flows heading into yen with japan being at risk from the worsening north korea situation . Kamal one of the things we focused on this week was, if there is an extreme uptick in these geopolitical tensions, one thing we are concerned with is the viability of the again. Earlier,eport said gold and the swiss franc make better safe haven prospects, given the geographical proximity. It is an argument you can make that the yen may be vulnerable in the longer term if the tensions intensify over the coming months. Francine what are you expecting today from that u. S. Inflation 0. 2 on theal on the basis, 1. 8, 1. 7 underlying basis. I think the market is a little bit defensive, because of the pbi number. I think the risks are in line with expectations. Francine thank you so much. Kamal sharma stays with us. We will get his thoughts on euro. First lets get to the Bloomberg Business flash. Taylor google u. K. Has won a proposal to build a campus alongside the offices in london. The project will accommodate as many as 5000 workers. The building will be longer and construction is due to start next year. Chinas online watchdog has launched an investigation into reports of violations at new services. The Cyberspace Administration of china says it will look into reports of some of the Largest Online services carrying User Generated Content laden with violence and rumors disruptive to social order. No immediate comment on the notice. Ryans grave, the first employee at uber, is stepping down from his management role. Graves service as Senior Vice President of operations and is tasked with running the business in absence of the ceo. He will remain on the board to help the Company Search for a boss to replace travis kalanick. That is your Bloomberg Business flash. Francine six weeks from the german election, Angela Merkel has returned from her vacation with a commanding lead. According to a new poll, the cdu csu has a 16 lead over Martin Schulzs spd. Bloombergs German Government reporter is in berlin. Patrick, is there a danger that Angela Merkel and her team are now complacent, so the polls change . She is so far ahead in the polls, even after a vacation, that Party Officials have said, if anything, complacency could plan tossue, and they go in strong with the election campaign. Francine i guess people in germany like the status quo because the German Economy is powering ahead and theres nothing huge in the manifesto. It is pretty stable. The economy is very strong. Unemployment is low. Certainly helps. She is the force of stability in germany. Her strength has also to do with the weakness of other parties. The social democrats have struggled to reverse the momentum. There could be a contest back as far as february, march, but now merkel and her christian democrats have pulled way ahead. Francine is there a contentious issue that Martin Schulz could turn into the main event, or is it really a done deal . Nobody is saying it is a done deal. All of them will tell you that german voters tend to Pay Attention only in the last days and weeks of the election. We could see some tightening. Nobody is willing to call it yet. Unless theres some outside event, merkel is in a very strong position. Francine patrick, thank you so much. Bloombergs German Government reporter. We are back on the Trading Floor with kamal sharma. Im looking at a very simple chart, charting euro, and it shows that euro is definitely back in favor. You can see bullish wagers on the euro. Is there a danger that the euro will be overbought . Kamal we think there are some risks that the euro does come under some pressure. We have been surprised by the resilience of the single currency. Something weve been focusing on is asking the question, are Central Banks buying euros again . 19 ve fallen from 28 to as of q1 2017. That is a combination of a number of things. 2012,cal crises through the political crisis potentially this year from the french election, and the ecb quantitative easing. Heading into the next year or so, with the ecb considering tapering and european bond yields rising, that makes the european project a more appealing proposition. You could argue that the resilience is being driven by the asian centralbank reserves starting to rise and europe could be the beneficiary of some recycling flows. Francine have we discounted all Political Risk in europe, and is that dangerous . Kamal if we were talking at the beginning of the year, we would be talking about geert wilders, marine le pen, all of those events that passed without any significant disturbances or adverse reactions. Pollscond person in the is a fairly centrist party. One of the parties look likely to win the elections. Are veryhe tail risks low, which is why i think markets are not focusing on this particular event yet. It would be prudent for markets to price in some vol, but this is not really an event for fx markets. Francine what is the one thing that worries you about the currencies . Swingsgoing to have huge . All the focus seems to be on currencies. Kamal i think the positioning argument is very important. Tradingicking up some in the g10 fx space. That suggests there are some risks. The concern i think will be that if this tension spreads into macroeconomic data and we start to see some declines in business confidence, then it becomes a more meaningful driver for currencies. At the moment, we are focusing on the geopolitics. Francine before i let you go, we have the brexit show. What is your call on pound . Kamal we still think it is probably vulnerable to the downside. We have a significant amount of brexit related events over the next six months. Weve got three more negotiation rounds. We got a conservative party conference. I think the pound will continue to trade on the politics rather than the data. Francine thank you so much. Kamal sharma, at merrill lynch. Up next, going to the dogs. Snap slumps as user growth stalls. We discuss that next. This is bloomberg. Francine this is bloomberg surveillance. Shares in snap have plunged in extended trading after growth fell short of estimates. 173y active users reached million for the second quarter. Analysts had been expecting 175 million. It feeds fears that aggressive combination from facebook is blunting the companys potential. Lets get more with giles turner. A lot of people know what snap is. A lot of people dont know. Basically you put your face and change everything. Why has it not taken as much traction as analysts thought it would . The massive problem is no one really knows what it is. First thing is says is snap is a Camera Company. They are not selling many cameras. Is it a social Media Network . Its followers make a big play about, you cant compare it to facebook, but all investors want to do is compare it to facebook and say, you are not good enough. You should be focusing on how innovative you are. But investors are more interested in how many users it is getting. Francine this is kind of, they said they do photos and videos. The real concern is that instagram has very similar functions. Really bad. I dont think investors are going to be sending each other snapchats of happy cartoon dogs anytime soon. It is going to be more vomiting rainbows. The average revenue per user is increasing, but not as much as people hoped. They overlook the net losses. There were 443 million. The one positive you can get is the under 25s, that key demographic, they are using it on average 40 minutes a day. Almost as much as financial journalist use twitter. Francine i need to get onto the vomiting rainbows. Ive never seen that. Basically this is a line chart looking at the equitie since the ipos in march. What does snap need to do . All investors really care about is growth. They see it as a network. Networks need to keep on growing. The more the founders keep arguing with investors and say growth isnt important, the more investors are going to be convinced they are not answering the questions that need to be answered. Francine thank you so much, giles turner, bloomberg tech reporter. With theresa mays cabinet split over how to deliver brexit, we speak to the head of the u. K. s biggest business lobby group. We will talk about what the boe can and cant do. We will talk about pound. We had a call from kamal sharma. Ive heard everything from no parity or we touch it in 16 months. This is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. Francine welcome to our weekly brexit show, live from bloombergs European Headquarters in london. Lets get a roundup of the big brexit news. Heres taylor riggs. Taylor a report says the u. K. Is offering to pay a brexit divorce bill of 36 billion pounds to push talks towards a future trade deal. The paper cited three unidentified government officials. Brexit secretary david davis told the sunday times the report was news to him. U. K. Consumers cut back on spending for a third month in july, putting them in the worst slump in more than four years, dealing another blow to the economy. A report said the 0. 8 drop in spending was broad ranging, with clothing, household goods, food, and transport among the worst hit. The recruitment and Employment Confederation said the u. K. Labor market is tightening and it is difficult for employers to find staff. Las the availability of workers fell sharply. The rec said that helped boost the measure of starting salaries. The organization said the results show the importance of the u. K. Having easy access to labor from e. U. Nations after brexit. Google u. K. Has won approval to build a campus alongside the existing offices in london. The project will accommodate as many as 5000 workers. Construction is due to start next year. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Francine thank you so much. This is the brexit show, but sometimes we have breaking news from abroad. Hong kong, secondquarter gdp expanding, a little better than expected. 0. 6 mists were expecting a increase. Now, back to the brexit show and the u. K. Prime minister theresa mays cabinet remains divided over a transition plan. That is according to research by the groups is a row. The government is split three ways, with those who want a harder brexit calling for the shortest transition possible. A poll by the