tv Bloomberg Surveillance Bloomberg July 8, 2019 4:00am-7:00am EDT
francine: letters say it will exit and cut 18,000 jobs. shares rise. whoworld is reminded t runs the show. the lira plunges. with a largebate cut, president trump -- ♪ the central bank does the opposite. that is to reaffirm their independence. thatld tell them not to do because they want the fed to cut rates. ♪
francine: welcome to "bloomberg surveillance." these are the markets. the stoxx 600 gaining a touch. the u.s. 10 year yields going to around 2%. deutsche bank after the massive overhaul gained one point 7%. we did have a little news out of the german industrial production data. bit of gaining a little temper on some of these markets. the market is going toward 2%. coming up, we heard from the associate general chairman, what he had to say about the fed, ecb, and more. let's get to the bloomberg first word news. the lira swamping after president erdogan's decision to replace the country's central
bank chief. the dismissal has fueling concerns over the regulator's independence. in a meeting, erdogan reportedly told policymakers to get behind his conviction that higher interest rates cause inflation. this morning, greece has a new prime minister from the right democracy party. the election handed him a mandate to tackle the nation's chronic woes. new democracy is set to get a perlman treat majority. the outgoing premier did not do as badly as some expected. >> i feel if i have a strong mandate to deliver on my agenda, which is un-agenda to grow the economy, to create more jobs, and to make sure people feel safe again. lagarde will be a great president for the ecb, according to the french finance minister. last week, european leaders
picked her to be the next central bank president. we asked the chairman about the nomination. >> i think she is a very good choice. it is not because you have a minister, she is not an elected politician. i think she has the experience of financial crises. she has the experience of managing a big institution. she has the experience of having discussed and dealt with politicians. >> hong kong police arresting five people while dispersing the latest protests against the controversial extradition ban. intesters were taking part what was called an unlawful assembly. protesters want the law withdrawn entirely. the u.s. soccer team won the women's world cup, beating the netherlands in the final. triumpha back-to-back
for team usa, and a record fourth title. the team now flies back for a tickertape parade here in new york city on wednesday. global news, 24 hours a day on air and tic-toc on twitter, and powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. francine: thank you so much. deutsche bank has unveiled a radical overhaul that will see business pose a loss and cut the workforce. the chief executive will shelf the dividends next and take restructuring charges of 7.4 billion euros through 2022 to pay for the enormous shakeup. the chief financial officer spoke to bloomberg in frankfurt, and began by outlining where he sees growth coming from now. will be thely greatest growth driver in the franchise as we see it going forward, especially in today's interest rate environment. that may change in the future as
interest rates change, but we see great opportunities that have existed for several years. we have not been able to participate as much as we should or could have. we also see growth in the private bank. bankingan consumer franchise we have, as well as in italy and spain. asset management has recovered after a difficult year and is back on a growth trajectory. we see underlying growth in our franchises. we are seeing the decision to retrench and step back from elements of the global markets franchise, in particular equity sales and trading, that is a step in reorienting the bank. toward am inclined global clients, my question is are you able to serve my needs? >> that is part of the core question for us. many of our questions, and it is the nature of the german economy that a significant portion of the revenues earned, for example by the dax 30, are international revenues.
30% of the revenues are earned outside of germany. 40% of german organizations, sme's, have organizations outside of germany. these clients expect us to be present around the world and be able to service their needs. those needs may be cash management, they may be risk management, they may be fx. those are areas in which we excel. it is around those strengths that we reorient the bank. >> how will the retrenchment and equity affect that? >> one of the concerns that we have about retrenching away from equity sales and trading is the franchise impact and the potential that it would have on impacts in our other businesses. in making the decision we have made. that, andd to grasp we needed to manage through that. we are retaining a targeted equity capital markets franchise, as well as research and learn -- limited distribution in order to continue to serve our clients
needs around equity financing. but the sales and trading decision has been difficult for us. that recognizes there are likely to be some knock on franchise implications. >> do you think you will lose clients? >> as we looked at the overlap between our equity sales in trading business and other businesses, we will keep a fair number of clients and continue to be able to serve their needs. we will reduce our client franchise as we attempt to focus on those core clients where we devote our resources. but the impact of clients that are uniquely served by us in equity sales and trading, they are surprisingly small. will be operating with a smaller cushion when it comes to capital. our regulators comfortable with that? you said they are for now, but it is a slim margin. >> i would not call it slim.
we feel that even at 12 point 5%, especially for the business mix we will be orienting toward, we will remain among the most highly capitalized of our global and european peers. francine: that was the deutsche bank chief financial officer speaking. let's cross over to frankfurt where guy is standing by. we are getting some comments from the chief executive, who is speaking on conference calls with the media. he is trying to say that the overhaul is similar to reinventing the bank. will shareholders be satisfied? are paid to bers a little satisfied this morning, but the shares this morning is not enormous. you have to see in the context of the last few days. there are a series of questions that need to be answered by management at deutsche bank. can i execute on this? significant most
one. they have to thread the needle when it comes to executing this plan. they are operating with a relatively small peer one here. i know they were talking about being comfortable with that, but from a regulatory part oy pointf view, the market is tiny. this probably will provide them a little bit of a cushion. you have to remember that they are retrenching to a germany whose economy is retrenching as well as this point. i think the margin is tiny. nothing like this has ever been tried before. the unintended consequences are going to be very hard to plot. execution is a critical thing that the market will now focus on. francine: deutsche bank is still talking as we are talking, and he said the bank has cap too many options often. -- too many options open. how much of an impact will that have on deutsche bank, and can
we rule out any capital raising? capital raising is something they have done thus far. this plan, they think, does not require further capital. as we already talked about, the margin for error is absolutely tiny. they have to deliver on this and almost perfect with every step they make. the german economy becomes more difficult as the ecb potentially looks to cut rates. that will be another factor in the mix in all this as well. that will be something they have to figure out. they will have to execute this plan, move back from the equity division, and do that seamlessly. as i say, that has never been tried before. very difficult to do, and any misstep will cost dutra bank dearly -- cost deutsche bank dearly. francine: guy johnson in frankfurt. let's get more with marcus ashworth. a greatson had
interview there with the chief financial officer. he said, this will work. of doing the cut, how much time a they giving deutsche bank? marcus: deutsche bank has to do this. think we need a lot more details on that, how many of these job cuts may be job shifts to somewhere else. the reality is for capital rates, that is not opinion yet whether they will be able to get away with not having one. i expect share price will rally substantially. you will see a capital rate. for the moment, as you put it perfectly, they had too many options open and none were working very well. they had to close down and get to job cuts that the german union's regulators would not allow them to do domestically and have them taken away from germany, which is the
consequence of trying to be the goldman sachs of europe for too long. francine: what happens to the u.s. unit? marcus: some of that may be sold off to one of the other big u.s. investment banks. i think that is quite likely. the juicy bits will go, but the bulk of it will go to the wallace estate. francine: marcus ashworth with us, staying with us. credit riskk's tumbles for the lowest since march. we have a chart for how the bonds have been performing compared to the equity. deutsche bank bonds rise, and the default swaps drop. coming up, the turkish lira plunges following president erdogan's decision to remove the central bank governor. we are live in ankara next. this is bloomberg. ♪
francine: this is "bloomberg surveillance." the turkish lira plummeted after president erdogan fired the country's central bank governor. erdogan told lawmakers to get behind the government policies, including his conviction that higher interest rates cause inflation. let's get more with our reporter who joins us from ankara. where does this decision actually leave the central bank and the new person in charge? >> that is a very difficult place, to say the least. one of the reasons president erdogan removed the previous governor was that he was refusing to lower interest rates, presumably as quickly and as big as everyone would like him to. but by removing the central bank
governor and appointing another one, erdogan may have unleashed a new period in turkey. if the lire continues to decline, like it did today, it might actually force the new delay orto possibly pause on the easing cycle. francine: are we now more likely to see a rate cut? >> that is the question. we are likely to see a rate cut later this month if there was no management change. but now there is a management change, they are bracing for a possibly bigger and quicker rate cut then what would be warranted by inflation. it might be more difficult for the new governor to cut rates, which is probably what president erdogan would want him to do. it is a tricky situation. francine: it has been tricky for some time, you could argue. what is the political context here? >> turkey was in a recession
earlier this year, its first in a decade. and erdoganerosion, lost a few major cities in elections this year. in a rerun, he lost his biggest city by a huge margin. there is clearly a political backdrop that is forcing erdogan to create some stimulus for the economy. he may be thinking that lowering interest rates or asking the central bank to lower interest rates might be better than just trying to provide fiscal stimulus. francine: thank you so much, our turkey bureau chief. let's get more with marcus ashworth. this seems to be another kick in the teeth to investors. marcus: if you are still in turkey, you have more hope than intellect. there is no investor in turkey that knows exec they what they are doing that is still in there. there is very little credibility with the central bank. they had a guy who was a bit of stooge,, or a deputy
does not change the dynamics. we will probably get a rate hike. but if the lira does back away sharply, it may prevent them from doing what they want to do. they would be back in the same situation as earlier this year. but the reality is that erdogan wants interest rates down, and we will almost certainly get it this month, presupposing the lira does not fall out again. but the reaction of the lira is pretty mild. that tells you what you need to know. francine: why? marcus: they knew the rate cut was coming anyway. is what thew much fed does actually impact the lira? marcus: that is a very good point. one, you could argue the fed itself has problems with independence. it is easy to cause dispersions. but because the fed is talking rate cuts, that makes it easier for countries in emerging
markets, particularly ones like turkey, to change the winds. the turkish economy, if it is not to hurt -- technically in a recession, it is very close. the reflation has not fallen off. francine: will it -- dell will they need -- will they need fiscal spending? marcus: what has come down other good bits, but the economy has suffered. it they need to cut interest rates, but it will not be for another couple months. but under erdogan, it will come earlier. francine: marcus ashworth stays with us. theng up, we hear about fed, the ecb, and esteem lagarde's nomination. this is bloomberg. ♪
francine: this is "bloomberg surveillance." the white house may be laying the groundwork to replace the fed chair jay powell when his term ends in 2022, or sooner. we have been told the president maybe sizing up his picks to replace powell. let's get more with marcus ashworth. there is a lot going on. the fed independence, the fact that the president is jobhunting for the central bank. but how does the jobs report change the dynamics of what the markets think the fed will do? marcus: i hope it does change. we will have to see from powell whether he wants to roll back. i think we realize from the
comments last week we will not get 50 basis points, but i think it will be hard for the fed to not cut 25 beeps. i think that would be a mistake. the economy has hit a bit of an air pocket, but it is perfectly good, and i think we should be where the vice chair was six weeks ago, absolutely on hold. i don't know what happened in the following six weeks. i didn't see anything. francine: markets may have gotten ahead of themselves. marcus: definitely, but the fed has allowed them to. the fed rhetoric has changed. there are statistics, some are pointing sharply down. but these often are the case. we will get some indicators pointing one way or another. the reality is the hard stats, the boring stuff, is coming in fairly ok. we have slightly lower growth, but it is not a recession.
people want to have insurance cuts, but i think the fed is. far far too far ahead of itself. francine: do you worry about central bank independence? marcus: i do. francine: the president can't do anything. marcus: we don't know if he thinks he can. francine: the fed says otherwise. marcus: they would say that, and let's hope they are right. the pressure, you should argue, would make it less likely for them to cut rates if they want to be independent. it seems they are driven either by the market or trump. the fed is not seem to be ahead of the curve. their entire interest rate spectrum is below rates. francine: what does it mean for the dollar? marcus: the dollar does not seem to make much difference. it does not seem to be affected at all, and that is because inside the euro or other economies, they are weaker. sense, we expect the 25
basis cut. that probably stays the same. francine: marcus ashworth from bloomberg opinion stays with us. we are getting more breaking news from the point -- deutsche bank chief executive. the corporate bank could be worth more than the entire bank. he is also saying he will invest selectively in america. coming up, back to political normality. eece's new prime minister be able to live up to his promises? we will be live in athens shortly. this is bloomberg. ♪ hey! i'm bill slowsky jr.,
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cut 18,000 jobs as shares hot rise. the turkish president fires the central bank governor. the lira plunges, stocks slide, and as the debate at the fed shifts from a large caught to whether to cut at all. this is "bloomberg surveillance ." let's check in on what is moving in the markets. the topve to start with headline of deutsche bank after the restructuring. shares higher by about 1.6%. this is off the highs of the day, but it is still trading around an april high. biggertructuring was than markets expected, so that is why we are getting the temporary pop. analysts and others are saying this is temporary. on the risends also today, nearly 3% gains. they have abandoned their dividend policy of increasing at about 10% per year, but the
reason why shares are still gaining as along with that they have announced a 200 million pound ibach. that is allowing shares to keep up as the company struggles to keep up with their e-cigarette rivals. tgs is the biggest gainer on the stoxx 600. this is a material and mining data company. the shares are higher by about 8%. they are on track for recent acquisitions they have been rolling through. it will be completed by april, the company says. shares trading at a february high. francine: thank you so much, dani burger. let's get straight to the bloomberg first word news. here is viviana hurtado. >> a sweeping turnaround plan for deutsche bank. germany's biggest bank will radically shrink its global operations. among the most dramatic changes, the plan exit from equity sales and trading business. their plan will also see about 18,000 job cuts. the restructuring is set to cost 7.5 billion euros
through 2022. theorporate banking will be greatest growth driver in the franchise as we see it going forward, especially in today's interest-rate environment. that may change as interest rates change, but for now we see great growth opportunities that have existed for several years and we have not been able to participate as much as we should or could have. we also see growth in the private bank. >> oil edging higher as the european powers urge iran to to increasedecision enrichment uranium levels. iran says it is open to talks with europe after the 2015 nuclear deal. one year ago, president donald trump pulled the u.s. out of the agreement. the white house may be laying the groundwork to replace fed chairman jerome powell. the president has two current picks for the central bank
board. bloomberg has learned he may be sizing them up to succeed powell in the top job. thehe race to become next prime minister, boris johnson looks for a landslide victory. according to a poll, he will get around 74% of the vote. ge -- hunt will only will get less. he is expected to take office the week of july 22. global news, 24 hours a day on air and tic-toc on twitter, and powered by more than 2700 journalists and analysts in 120 countries. i'm viviana hurtado. this is bloomberg. francine: thank you so much. we are getting pictures of mr. erdogan speaking in turkey. hours -- this is after he fired the federal bank governor. he expects the rest of the establishment to tow the government line on monetary policy. governorion to can the
was announced in the early hours of saturday following a pause in interest rates that lasted for nine months. we will keep an ion what the president is saying in istanbul. as soon as we get the translation and if he does anything newsworthy for the markets, we will bring it to you. greece's new democracy leader is he has a mandate to take over the troubles. party didng premier's not do as bad as some expected. >> i feel if i have a strong mandate to deliver on my agenda, which is an agenda to grow the economy, to create more jobs, and to make sure that people feel safe again. francine: joining us from athens is head of equity research at
euro bank equities investment firm. thank you for joining us. first of all, how quickly does the new prime minister have to act to tackle some of these economic troubles we are seeing in greece:? >> pretty quickly. i think parliament will not close this summer. our understanding is he has a measures that he will be enacting as soon as he is sworn in. it is high on the agenda that he needs to get going, given the fact that a lot has been almost and the market has priced a lot of the expectation that this is a progrowth, pro-reform government. francine: what does that mean in terms of concrete measures? you write in your morning note that we need more progrowth orientation. how much time does the market give the new prime minister to come up with something big? is it six months, three months,
september? think it is not as clear-cut as that. at the end of the day, it is the signaling. that is something we will be seeing this afternoon. two is how quickly he can push with the landmark project. it is something that was talked about widely over the past month or so. i think if he gets in and signals that he means business, that will be a credit to him and will buy him more time in regards to the deeper reforms that have to do with cutting through the red tape and making the greek environment more conducive for investment, which is something the country lacks and has lacked for the last 10 years. francine: we are looking at some of the market movements. the yield on the 10 year bonds hit a new record low on monday. what does it mean for some of the banks, for example?
nick: obviously for the banks, it is more of a risk perception, because the greek banks are not really loaded on greek government bonds because they have a quota, given the fact that through this program, the programs we have, they wanted to disassociate the banking system with the sovereign and have it decoupled. compared to other peripheral systems, greek banks are underinvested to greek sovereign bonds. on the other hand, the signaling is such that you have a part of the market, the fixed income part of the market, and bond investors buying in to the sustainability of the greek finances, the sustainability of the debts, the fact that the country has more than a decade to grow its income into this gdp and that is some leeway that has gone unnoticed, especially from equity markets. we have a disconnect between what has been witnessed from the
fixed income market and the bond market, that only as of late have we seen signs of resurgence into the equity markets. the outcome was such that was broadly expected, and i think on the equity part of it we will be needing to see more action in order for those expectations to actually take form in actual numbers that are delivered. francine: thank you so much. the head of equity research at euro bank equities investment firm. let's get back to the central bank. we caught up with the former ecb policy maker lorenzo bini smaghi at the world economic forum. they spoke what the fed and the ecb's next move, and whether christine lagarde is a good fit for the central bank. >> it is a very good choice. it is not because you have a minister that is political for life. she is not an elected
politician. i think she has the experience of financial crises. she has the experience of having managed a big institution. having the experience of discussed and dealt with politicians in europe. that is important because europe is not completed yet. we have to continue construction of the banking union, even the monetary union. i think it is important to have someone who is pragmatic, who has the ability to discuss and have a dialogue with political authorities. not expect more ecb stimulus in july? the degree expected in september. are they being realistic? are we going to see more of this? >> i think it depends on the economic situation. it depends on the fed also, because if the fed starts loosening quickly, the risk of the euro appreciating is not
exactly what you want at this time of the cycle. seeink we have to wait and how these two factors will evolve come up in pretty -- evolve, particularly in july. >> let's see you see stimulus in october? >> not necessarily, but the fed is aggressive in july. why should the ecb wait for the new president? it could make its life easier if the stimulus was provided already in the fall without waiting. ministers one monday might actually nominate the next imf head. one name is mark carney. do you think he is european enough? >> that is a good question. somebody withd smarts, competence, and
certainly mark carney has police qualities. dimension, ian leave it to the finance ministers to decide if he is european enough. >> do you believe it would be a bit strange to have someone in charge of the bank of england after brexit? have be frank, we un-american at the world bank. -- we have an american at the world bank. i think it should be a european, and a competent one. we benefit part of europe. in brexit negotiations, maybe they should first discuss how to manage this before understanding what they have in europe. i would expect to have a continental european, but that is for the ministers. donald trump
reaffirmed that the fed will cut and thatthe u.s., bankers from the fed was doing a good job. what do you make of it? >> when politicians tell the central bank what they should do, the central banks do the opposite just to reaffirm their independence. i would advise trump not to do that if he really wants the fed to cut rates. in the end, it depends on the economy. i think the last job reports was pretty good, so it does not necessarily justify a cut in rates. it is probably right to cut rates when there is a real need to support the markets, because you have 200 basis points left, and you want to use it immediately. francine: that was lorenzo bini generaleociete chairman. deutsche bank reveals an a $2.8l that would see
francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash. 737 max 8 losing its first customer. saudi arabian budget airlines buy thersed a plan to jets. it will operate an entirely airbus fleet. this is a setback from boeing, who is under pressure to prove the max is safe again.
this after two crashes killed a combined 346 people. -- qualcomm secured financing for its purchasing of another company. that could value the firm as more than $22 billion. bloomberg is learning the chipmaker sees annual synergy potential of $1.5 billion. the wall street journal reports it is looking to raise as much to $4 billion in the next several years. that is an increase from $10 billion. that is your bloomberg business flash. francine: thank you, viviana. bank announcing a turnaround plan that will see the biggest bank shrink and recharge its global operations. how much of a surprise will this be? and how much of surprise is the
timing of this? >> it was leaked in the media in the run-up to this in the last few weeks, but there were some surprises yesterday. in particular, the prospect of the bank being able to return capital to shareholders once the plan is complete. they are investing, put a lot of money to restructure the bank. it would cost 7.4 billion euros to stabilize the firm. but once they reach that destination, it should be able to return capital to shareholders, who have been suffering a lot of pain over the last few years. francine: they keep saying they will not need to raise capital. how could they be so sure? elisa: this is one of the question marks that surround the plan. at the moment, they are signaling to funders internally they have more legroom from the regulator to ease into the buffers, and that is helping to fund that.
butbut the bank is also expectig their core business to grow revenue over the coming three or four years, and that is what has been so elusive. there is question as to whether they will be able to do that to sustain the model. francine: elisa martinuzzi. we will have more from her throughout the day. with the uncertainty of brexit, how are luxury brands doing? this is coming up next. this is bloomberg. ♪
francine: church's this and english brand, and the company still manufactures their footwear at the st. james factory in that town. tony blair famously wore a lucky pair to every question time for decades, and they were the shoes of choice for pierce brosnan's james bond. but how are they dealing with luxury demand in the trade wars and brexit? joining us is that chief executive of churches group. when you look at your band, you were in women's footwear, but a lot of people know you for your menswear. much will you grow and into what regions for the next five years?
>> the brand has been doing very well over the last few years. whichear, we grew at 9%, is a great achievement within the regular retail chain. arebig opportunities for us in china. the luxury market is that 206 he that 265 euro -- million euro mark. market,it is a single and we feel we can grow this enormously. the other challenge is china, which is a third of the luxury market in the world. 45% the nexto go four to five years. it is a big challenge in a big opportunity for church's to go to that market. francine: in china, do people want to buy online? do they want a physical store to try them? how much of that percentage
growth will be women's shoes as opposed to men's? the chinese are buying both online in retail, 100% of the information they get on the purchase of luxury is coming from digital challeng channels. the online presence must be perfect to get that market. francine: the website or instagram? instagram is first. that is a digital channel that must be perfect. church's has five stores. we have been an international brand since the 1890's. we are master craftsmen, we make shoes that. last a long time a. keep coming into the stores with their children.
they are graduating, first pair of shoes, new job. they know it will last a long time, and they will accompany them through their career. francine: how do you sell to women? 30% of our business is women's. more surprisingly, we have been making little shoes since the 1900s. we see that as a growth market for us. we feel that over for the next five years, we must make that ahievement, which will be prime growth driver. francine: we talked about brexit almost on a daily basis. how do you prepare for a no deal brexit if it were coming? >> it is a big question mark for our business. the luxury industry is really big to the u.k. economy. the luxury economy is 50 billion
euros. it has grown 50% over the last five or six years. and it does not just impact direct luxury, it impacts tourism, and how people see the u.k. around the world. francine: and you make those shoes in the u.k., right? how will you get them out of the country? >> this is the challenge of the tariffs. we have a warehouse in europe and here. we are building up to that period of uncertainty. there is intellectual property challenges as well. there will be extra costs, and somehow they have to be not passed on to the consumer, which is not a good thing. francine: is there anything you can do to mitigate it? >> having the warehouse in europe will help mitigate that factor. we have a lot of our dealings in europe, a lot in pounds. we have a natural buffer against that. other than that, retail stores,
ownof sales are in our retail stores, so we can manage that directly. francine: thank you for coming on. bloomberg surveillance continues in the next hour. tom keene joins me out of new york. we will talk to the cross asset strategist at morgan stanley. deutsche bank beginning at long recovery after the radical surgery, 18,000 jobs will go. the turkish lira plunging after president erdogan removed the central bank governor. we will have plenty more on these stories. this is bloomberg. ♪
radical overhaul. a second-quarter loss and cut 18,000 jobs. whogan reminds the world runs the show. fed shareste of the to a large cut to whether to cut yet again. i am francine lacqua in london. am, in your own words we have terrific news flow. we look at deutsche bank, what is going on with the fed, and quite a lot of news with brexit because conservatives start to vote today on the next prime minister. tom: everyone is focused on deutsche bank. alison wilson will join us for an important moment in the next hour. , mr. savings has spoken in the last 20 minutes. there is a real disappointment about the mix.
what i see that is so important is the usual job of owning. we are not leaving asia, new york, or london, yet they are making cuts. let me bring up the bloomberg. francine: i think that is fair, tom. let's go to your bloomberg, but overall deutsche bank has had restructuring on the table for years. this was meant to be the big one. we see a little bit of shyness and investors saying they want the details on how they will do this and this. that is why the share price is turning a little bit after being higher this morning. tom: the success of deutsche bank that some of us remember. francine is too young. the boom in the 2000 straight up . the peak of the financial crisis, and they couldn't get it done time after time. these declines are amazing. look how far off the trend deutsche bank is.
they have to make it back to 12 euros per share just to get on the bear market trend. francine: let's remind everyone. the chief executive saying they're returning to their roots to focus on germany. germany is not doing great. concernwhy there is about what deutsche bank will be. deutsche bank down to 1.2% in today's trading. leaders are urging iran to reverse its latest ofision to breach levels uranium enrichment. no one is ready to impose sanctions. iran said it will resume purifying uranium beyond the voles allowed in the 2015 nuclear agreement. that takes tehran one step closer to being able to build an atomic bomb. today, former bankers -- after ahave a mandate
decade of problems. outgoing premier alexis tsipras falling to 32% of the vote. the turkish lira falling after president erdogan privately fired the country central bank governor. there is concern the banks will lower interest rates by more than expected. bloomberg learned erdogan told lawmakers they need to get behind his beliefs. higher rates because inflation. president trump joining a national celebration of the u.s. women's soccer team winning the world cup. the americans have won their second title and forth overall. the president tweeted, "america is proud of you all. " a little more than a week ago he got into a social media clash with megan rapinoe. a parade is set for wednesday here new york. global news, 24 hours a day
on-air and on tic toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you for that nice summary on the ladies moving the ball around the field. you wonder where this will be in two years, for years, six years, 20 years. it seems to be a key moment as women's sports gets new momentum. let's get to the data. we did the bloomberg on deutsche bank. those headlines still coming out . the curve flattening, a little bit of a rebound. i am watching the spread, the oil doesn't do much on the next screen. the equity markets, morgan stanley with their global sell. 2 francine ische bank, knew you would want me to. francine: i'm looking at
european equities. they are now actually down in touch. i think that's mainly in part -- i'm not sure if we would call it disappointment. we knew about deutsche bank, the share price rose 3%. something that's making investors uneasy. i think it is some of the lack of specificity about how much they are cutting and the radical move that has been on the table for years. people are questioning what is happening in asia or the u.s. financial officers spoke to guy johnson in frankfurt and began outlining where he sees growth coming from. greatestly will be the growth driver in the franchise going forward, especially in today's interest-rate environment. that may change as interest rates change. we see great ruth opportunities that have existed for several years and we have perhaps not been able to participate as much as we should have or could have.
we see growth in the private bank. the german consumer banking franchise we have, as well as italy and spain. asset management has recovered after a difficult year in 2018 and is on a growth trajectory. we see underlying growth in our franchises. we are taking the decision to step back from elements of our global markets franchise, and particular equity shares and trading. that is a significant step to reorienting the bank. >> the question i might ask is are you going to be able to serve my needs? >> that is part of the core question. that is the nature of the german economy that a significant portion of the revenues earned are international revenues. something like 80% of the docs revenues are earned outside of germany. 40% of smes have activities
outside of germany. these clients expect us to be present around the world and service their needs. the needs might be cash management, risk management, and excel.re areas we it is around those strengths we are reorienting the bank. >> how will that affect equity? >> one of the concerns we have always had about retrenching away from equity sales and training is the sales impact and the potential it would have knock on impacts and our other businesses. obviously, making the decision we've made we have had to grasp that and will have to manage through that. we are retaining a targeted equity markets franchise, as well as research and limited distribution in order to continue to serve our clients needs around equity financing. the sales and trading decision has been a difficult one for us, of course. recognizing, as you say, there
are likely to be some knock on franchise implications of that decision. >> do you think you will lose clients as a result? >> as we look at the overlap between her equity, sales, and trading business and other businesses, we will keep a fair number of our clients, we think, and continue to serve their needs is that we will reduce our client franchise as we focus on the core clients where we resources. our clients that are uniquely served by us in equity, sales, and trading is quite small. a you will be operating with smaller cushion when it comes to capital. our regulators comfortable with that? you said they are for now, but it is a very slim margin. >> i would not call it slim. we feel even 12.5%, and especially for the business makes we will be orienting towards, we will remain among the most highly
capitalized among our global and european peers. tom: deutsche bank is a new deutsche bank. a stream of headlines coming out of the market. adjusting lower off of the headlines. the asset managing firm is core to the business. it wasn't months ago, but i guess now it is. they mentioned the job cut process has started. i johnson has seen this before. johnson has seen this before. the job cuts begin. i don't buy the 18,000 number. is that a first approximation? probably, it is. francine was talking about this, some of the jobs might be moved to other institutions. there might be a job swap. i think it is a work in
progress. it is interesting, he was speaking in london willing to detail where the job cuts will fall. i think a lot of things are approximate at this point. departure forcal deutsche bank. the unintended consequences are hard to fathom at this point. tom: let's go beyond the numbers. when i read the press release i was thunderstruck at the statement there will be no cash call. what is the conviction of no cash call out to 2022? at this point, the conviction is high. tom, there are so many variables. there are so many moving parts that it is hard for the investment community to buy into
that at this stage. the bank is saying, i would suspect the bank would like a higher share price to go back to the market. the operating room for maneuver is absolutely tiny. they have to execute this plan perfectly. they have to hope the german economy stabilizes. the data is not great. they hope the interest-rate environment gets a little easier. the ecb rate cuts eventually coming down the pipeline towards this. there are so many variables here. yes, the bank says no cash call at this point in time, but it will be a difficult needle to thread to make that happen. i suspect that is why we are seeing the share price reaction we are seeing this morning. francine: does the bank have another chance at this? is this the last chance that shareholders are giving it? we have been waiting for this for some time and have had half
overhauls until now. guy: this is the most radical surgery conducted on the bank. 19 99, they buy bankers trust. they briefly became the biggest bank in the world. since then it is about managing decline. this is a big bang approach being taken here. i suspect this relates back to the question tom just asked, investors are hoping this will be the final slice that happens. the final surgery. if we are having a conversation about a capital raise, potentially you have to ask the question, will the investment community give deutsche bank a little more? over the last few years they have raised 30 billion. the market cap is half of that. on deutsche bank and the final headlines from deutsche bank. there cfo speaking now, growth
stanley aggressively reaffirmed their cell call on equities? we are pleased to bring you the morgan stanley chief asset strategist who was knee-deep in the story over the weekend. you have been cautious. how do you get from cautious to a cell on global equities? -- sell on global equities? to put it is time for us our money where our mouth is. really across global equity markets. if i look at how much morgan stanley is expecting equity markets to make over the next 12 months, it is one of the lowest levels of the last five years. it seems more reasonable for us to lower our equity weight to the lowest level in the last five years. that's what we did over the weekend. francine: what is your take on what we are seeing? >> i think equities, the fed remains ahead or behind the
curve. when rates are high there are downside risks to equities. a lot of normalization is priced. the underlying structure of what is priced in, how low cyclicals are, are basically very much adjusted to the level of rates. a lot will depend on where the fed delivers. you to a let me bring fed chart that looks at the fedging probability of a cut. why is the market so certain the fed would cut? themos: a couple of ways of interpreting the market. ae market is extrapolating gradual slowdown in growth. as the unemployment rate has a natural floor. on a slower growth rate you might need a lower level of long-term interest-rate. more importantly, perhaps, if you look ahead, you can make the case that there are some risks,
such as my colleagues are describing. there are a lot more downside risks to raise than downside risks to raise. if you look at the distribution of events, there is more insurance on the downside than the upside going forward. the low inflation environment allows that flexibility. this is how the market is set up. continue through the show on this important call by morgan stanley. we want to bring up a part on deutsche bank, intraday showing the friday and the optimism off that call. down a further gap up. this is the disappointment of the headlines happening a moment ago. this is bloomberg. ♪
francine: this is "bloomberg surveillance." from london and new york. deutsche bank revealing a dramatic overhaul. cutting and's work for the fifth. joining us now is the dsw vice president, representative for shareholders. talk to us about why you think there has been a reversal in the share price. this is five restructurings in four years. how much do we know about
whether this is the one time the bank will change course? it is, first of all, the first step in the right direction of the bank. the question will be whether it is the right time, or whether they have lost years, four years , and now it is too late for this big step. what i find impressive is that is cutting the investment business. this is the first manager of deutsche bank that is doing this. -- who is doing this. i find the new strategy very well to concentrate on financing business, financing companies. this is what deutsche bank always could do. this is what deutsche bank is good in. ridiculous,u say
you mean that this is a good thing? are you happy with the plan that he proposed, and what are you waiting for to see if they need to do more? do you worry about the fact that the german economy is going down and they will be tied even more to the german economy? >> i think the strategy is right and good. the question is whether it is the right time or if they have already lost too much time. the second question is whether they have an additional shot. i don't think so. this is the last big step they have. if this fails, the deutsche bank has serious problems. tom: the union rules with the power of labor in germany, can withoutng succeed sacrificing job eliminations within germany? >> other unions have said they will go with mr. sewing and they agree with his plan.
that sacrifice this. this shows you how serious the problems of deutsche bank must if even the labor unions are agreeing with management. tom: should deutsche bank be in london, in new york? >> yes. deutsche bank is trying to be the number one financing institute, financing bank, for even in theires offshore business activities. therefore they need the london and new york-based business. they need to concentrate on the german market, re-concentrate on the german market again. the time is over when deutsche bank had the aim to be the number one investment bank in the world. tom: thank you, so much. sw representing retail
investors in deutsche bank. you have with the headlines, the recovery of deutsche bank, up we go. jump condition, then down with a little bit of recovery in the last number of minutes. francine: i have to say, the must-read story of the day, with these cuts we should have less volatile earnings. we will have a little bit more of a sense of where they can actually make money. the share price of deutsche bank, up today. ♪
what has held up the markets. the global use of cash. you have an important global sell on equities. doesn't that push against sustained dividend growth, in particular share buyback, for good or ill? and sharevidends buybacks have been supporting global equity markets, but there are short-term and longer-term issues on counting on too much support from that. buyback activity dissipates. in the near term, markets will lose some of that support. the other element is companies respond to market and economic conditions like investors do. as long as there's confidence in central banks and global growth will be okayed companies will buyback stocks. when you see growth fears pick up and our economists have been downgrading the growth outlook, companies retrench and pause. sharpe had a number of
selloffs. november and december this year, the in theory there was heavy buyback activity going on. if there is something that helps the equity market, we don't think that equities are a hold or abide. tom: the arching issue of your weakl sell on equities, nominal gdp. just a more tepid global gdp? andrew: partly that. partly that markets are already expecting a pretty aggressive central-bank response, which probably minimizes and reduces the effectiveness of that in boosting markets. from a micro standpoint we are below consensus on earnings for the next 18 months, partially to do with the weak nominal gdp outlook, but also on the
pressure in the u.s. and asia. francine: what is your take on this? themos: i think we are landing at a lower rate of global nominal growth. to me, that is less relevant as long as the discount rate declines more, or proportionately, nation should be sustained. if not, become richer. the main questions are two. first, are we going to have a recession? if that risk declines, the equity market might be supported. on the others, my other big question is what my colleague from morgan stanley said, will the central bank deliver in light of what is expected? banks havetral talked the talk. let's see if they walk the walk as well. staying withh are us. let's get to the bloomberg first
word news. today, fund manager jeffrey epstein appears in court in new york on federal sex trafficking charges. he was arrested saturday after years of accusations of child molestation. into thousand eight, epstein pleaded guilty to state sex charge while avoiding tougher federal offenses. and the u.k., conservative party lawmakers opposed to a no deal brexit are plotting another attack. they want to stop the next prime minister from forcing a chaotic week from the eu without parliament's consent. force john chen is the overall favorite to defeat jeremy hunt. the new prime minister is expected to be announced the week of july 20 second. in hong kong, police arrested five people while dispersing the latest protests over the controversial extradition law. thousands marching through a district popular with tourists. policere taking --
mourned protesters they were taking part in an unlawful assembly. global news, 24 hours a day on-air and on tic toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. francine, tom? francine: the turkish lira kened.d after -- wea the higher interest rates cause inflation. rather removal out of the blue, where does it leave the central bank, and where does it leave the new person in charge? >> it leaves the central bank in a tough position, francine. the previous governor was probably on the cusp of starting a rapid easing cycle as early as this month. with the decision by president erdogan to suddenly remove management at the central bank,
a drop in the lire, though it is muted. it is possible that the lire might weaken to a level where it would be more difficult for the rates, asor to cut president erdogan would probably like him to do. francine: is it more likely we would see a cut by the bank? toit is very difficult answer for two reasons. on the one hand, president erdogan probably didn't want the new governor to start cutting rates as quickly as possible. with a potential decrease over the weekend, he may have put into motion a dynamic that would make it more difficult for the central bank to deliver those cuts this month. sense of thee us a political context around this.
we have been following this closely. what is it mean for president erdogan and his stance on power? erdogan, since he was sworn with new powers last some erosion in his base. we saw that in the elections this year where he lost all of the big cities in turkey, including istanbul, a city that has been under his or his allies' grip. this is down to high inflation, currency, and run-up in unemployment rates. clearly president erdogan did want some stimulus to the economy. he seems to have thought that the stimulus rather than relying of his policy only may have toedited what he considers be the solution to turkey's economy. whether it is going to be the case, we will see.
tom: thank you so much. sheets.andrew turkey has its own idiosyncratic moments. given the central-bank challenges we have seen of literally the last 15 days, if we assume that powell, lagarde, and the others, how does e.m. react to the new realities of further quantitative easing? 2019 is not 2018 for emerging markets. x u.s.ar we had growth declining. that is important to the profitability of emerging market portfolios. at the same time the dollar borrowing cost for emerging
markets was rising. not just because of hikes, but because people were expecting more fed hikes ahead. that outlook has radically transformed, and rightly so in our view. into a place that when people look at ten-year rates in the u.s., they see more downside risk than upside risk. that means the market is going to be a lot more forgiving. it doesn't mean unconditionally forgiving, but a lot more forgiving for a number of emerging-market missteps. it has been a theme not just for emerging markets, but across markets which may extend to the point that central bankers reach the limits of what they can deliver. u.s.,e all focus on germany, and japan. what about e.m.? is it an opportunity or do they go down further? andrew: the risk for em equities
remainsive because it effected from an earning standpoint spy trade. in taking down the overall equity rate from neutral to underweight, the question is what do you do with the money? i think e.m. fixed income looks relatively good. we like the local rate markets and the hard currency markets. we think valuations in any fixed income generally look average where other asset classes look expensive. growth the backdrop is more supportive for em this year than last year. that is one place we like on a relative basis pushing more funds. tom: i really can't say enough about july 8, supposed to be on monday, lazy summer morning. yeah, right. , right nowtsche bank all of the news flow of the last 48-hours.
great.ink she is she has a lot of experience at the highs level. she has been a great director for imf, and i am deeply convinced she would be a great president for the ecb. >> i'm convinced certain changes need to be made, and christine lagarde, along with the board -- she doesn't decide this alone -- would set us on the right track. perfecttine lagarde is ecbontinue in the role the
had in previous year with mario draghi, especially in the task of easing our economies. is with the collegial body. together with the boards i think she can do an amazing job to take the monetary policy of the euro zone to the next level. .> europe should get more christine lagarde sends a very good signal. francine: world leaders and chief executives we spoke with at the summit on the imf head christine lagarde's nomination to lead the ecb. , pictures,ing news out of athens where the new prime minister was, i think, just being appointed by the president. we will get back to that shortly. in greece, it is interesting
shamedrope seems to have the populist leader and he seems to have lost to the central right person. it is an interesting turn of events for greece. tom: it is a huge turn of events for greece and we have come full circle. , ofnew democracy party course, really harkening back to another time and place with mr. mensa talk is being the son of a previous prime minister with all of the conservative party mentions years ago. it is imperative to understand that the new prime minister was basically exiled from greece with his father and mother in his early childhood. i don't think he returned to greece until his teenage years, 1974.
it is a statement on the past of greece, as well as the way forward. francine: the 51-year-old mitsotakis proved his business friendly reputation. he is harvard-educated. we will have more of greece's central right leader set to take over. yesterday'sr legislation handed a mandate to tackle the nation's chronic troubles. i have a strong mandate to which isn my agenda, to grow the economy, to create more jobs, and to make sure the greek people feel safe again. by aine: we are joined bloomberg reporter in athens. how much time will investors give the new prime minister to
have these pro-business reforms in place? good morning. there is a sense in greece today the politics have gone full circle. that not only have the greek people said no to alexis tsipras , but they have said yes to mitsotakis. newspapers today, this is the right change. investors are buying into that. you see that in the rally of greek stocks, the compression and greek bonds. i spoke to him yesterday night and he is well aware that in order to get the tax cuts he has promised and to grow the economy as he wants to grow the economy for percent on an annual basis, he needs the european union to play along. he said my big priority is to go to brussels, present a credible plan, and perhaps get some concessions. tom: maria, is greece celebrating? back to another
conservative voice, is it celebratory within athens, or not? >> i think for many greeks, rather than a celebration this is almost a return to political normality. people here very much remember the election when alexis tsipras was voted into office, a shock to the system. the fact that they had to queue for hours to get 60 euros out of a cash machine is something that stuck with the psyche in greece. many just want to move forward. they want to get a job. they want to make a better life for themselves and their kids, and they see this as a return to normality, not a celebration. when you talk to people you see the scars of the crisis. this is a country still hurting from the deep crisis. they want to move forward. rather than a celebration, they hope to get to a new normal that is more stable. francine: thank you.
on the ground in athens. the crisis.lived you have lived it closer than most. what does this mean? you look at the share price, a lot of the banking staff has recovered. how much more on stable footing is greece now? cannot overestimate how important of an event this is in many different aspects. hands down, this probably extends the rally for a number of reasons. the initial conditions we are entering into this situation in a favorable spot. after many rounds of restructuring, the dynamics are to different number than before. probably fiscally as good for the short-term as more of their high-risk peers in the european monetary union. evendly, five years ago gdp has shown -- bottoming.
this is a long process of improvement, which a more business-friendly set up would help accelerate provided there is no global recession. , in terms of the termsmentary majority, in of the fact the more extreme parties are out of the parliament and the statements of mr. tsipras who said that he would move to the center, i think there is a lot of symbolism in the normalization of the political set up. tom: this is important. barelyyears mitsotakis spoke to poppa darius. is there different nuance? themos: i think the important isnce is that mr. mitsotakis a person who is very far from
the political divisions of the past, despite his heritage. agenda is very much center of the road. this is one of the things that has appeal to many greeks. he came out promising simple normalityke policing, and education, health care, and so forth. his agenda is center of the road. much.hank you, so the images from greece are simple. what we will see over the coming days, particularly with the european central bank, president lagarde will no doubt be able to get along with the new prime minister of greece. stay with us. this is bloomberg. ♪
the european five-year forwards, one of the reason that andrew sheets went to the cautious view on equities. the rollover is still a rollover looking at the five-year forward and the eu. francine: what does that mean? forew, what does that mean madame lagarde? andrew: it creates a challenge. it means the markets are still doubting whether renewed central-bank easing will permanently lift the inflation both backdrop and europe. one of the most fascinating things about the european market from an equity perspective is it has been trading as a low beta market. it is near 20 year lows. ofope has a reputation being a very high beta and cyclical market. we think it could be lower beta. we think equities will be weaker. francine: what you think the prescription is for the european economy is right now? themos: while the
arguments about policymaking, there is one important difference in the european economy now relative to a few years ago. the weakest growth impulse in europe is coming out of germany, not spain, greece, or the peripheral. this changes the policy set up. they're leaning more towards more progrowth measures potentially, and the risk-reward s what the central bank i i think is driving some of the market expectations. whether that inflation expectation chart will reverse going forward will largely depend not just on your -- on europe, but on what china does. tom: not to comment on deutsche bank directly, but have you figured out how a bank makes money on a negative rate world?
andrew: it is a challenge. you see this in japan where the banking sector continues to lag. where banks traded at significant discounts. talking abouten and exploring tiering. they are aware of the issue, not ignorant of it, but it is a challenge. we see that playing out in japan, as one more challenge to the banking sector. tom: thank you, so much. , allison williams will join us. her analysis for bloomberg intelligence on the historic restructuring of deutsche bank. this is bloomberg. ♪ xfinity mobile is a wireless network
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, 18,000 this moment deutsche bank employees will be shown the door. there will be no cash call in this hour. out on a failed global bank. , will they sell equities in this bull market? and chairman powell must recalibrate to the 31st of july. this is bloomberg surveillance live from world headquarters in new york in our global universal headquarters of london. francine, slow summer monday, huh? francine: slow monday in july with five stories and markets all moving. we have deutsche bank and news on brexit. we are getting pictures of the newly elected greek prime minister being sworn in today, flanked by his family. the primeand that
minister must act quickly to tackle some of the latent economic troubles. yield hitting new record lows on the 10 year bond. tom: this is extraordinary. the son of a former prime a historict is childhood, part of the greek revolution before democracy where he and his parent -- parents were thrown out of the country. wassymbolism here absolutely extraordinary. this moment for greece, francine, just important. look at aand if you lot of the equity markets in greece, they could accelerate on the back of what the new prime minister has promised. tom: let's get to first word news this morning. did the honor: leaders are urging iran -- viviana: leaders
are urging iran to reverse uranium enrichment but no one is threatening to impose sanctions. continue to enrich beyond the levels allowed in the 2015 nuclear agreement, taking tehran another step closer to being able to build an atomic bomb. and in greece, voters dumped the populace government in favor of a center-right new democracy party. minister we saw just moments ago of the swearing-in ceremony, he will have a mandate after a decade of problems. the outgoing premier alexis falling to 32% of the vote. the turkish lira falling after president erdogan fired the country's central bank governor. there is concern the bank will lower interest rates by more than expected. berg learning erdogan told lawmakers that they need to get
behind his rates. and president trump joining the celebration of the u.s. women's soccer team winning the world cup. they won their fourth overall, beating the netherlands 2-0 in france. the president tweeting that america is proud of you all. you may remember he got into a social media clash with star player megan rick tino -- rapinoe. news 24 hours a day on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado, this is bloomberg. tom: as we go into the data check, let's look at a chart right now with deutsche bank. it really frames the emotion coming off of saturday. the close on friday, up we go on big news. then we roll over with a vengeance.
check withhe data equities, bonds, currencies, commodities. oil, watching that carefully. this morning, the dow had a big bull market. a global and equities by morgan stanley. deutsche bank 7.14 right now. it's not good, is it? good.ne: not i guess it is a little bit volatile as people figure out what it means. they have the fifth restructuring program in four years. how much time are investors giving deutsche bank? stocks in europe are edging a little bit lower. i think they are tracking what deutsche bank is doing. euro steadythe after some german industrial production ended up missing expectations and greek bonds rising over a new government elected over the weekend proving
to be more market friendly. the bank has unveiled a radical overhaul that will see lender exit and posting a second-quarter loss. to bloomberg in frankfurt and began outlining where he sees growth coming from. towe are making a decision retrench and step back from elements of the global markets franchise, in particular equity sales and trading. that is a significant step in reorienting the bank. probably banking will be the greatest growth driver in going forward. it may change as interest rates change. for now, we see great growth opportunities that have existed for several years. pessimistic view about the german economy and we
are seeing some signs of stability in the european economy. about the credit portfolios and the credit quality we have demonstrated not seeingy, we are or calling for a significant change in the credit environment. tom: we have some technical issues, but an important interview over the weekend. us.johnson joins how has the story changed in the last 24 hours from your important conversation where they talked about growth opportunities? to be kidding me. they are managing the message. what is the message on a monday afternoon in frankfurt. guy: the share price has gone down and the optics are not particularly good. you can make excuses for this and say the share prices have gone up and have a decent
bounce. they have heralded the move on the equities front. saying all the right things. but the optics are that the share price has gone down. , iton a monday morning really doesn't look good. martin has been following the story for years and years. no one at bloomberg has seen more redos then she has. she summarizes it with a lot of emotion. the destruction of shareholder value is so great that they are likely -- unlikely to give the reboot a second chance. jettisoning what deutsche bank was never good at. this is a for any large bank, isn't it? guy: they have been forced
into it, tom. the effort to become a global bank and compete with deutsche bank, they briefly became the world's biggest bank. ever since then, it has been about managing decline which has been far too timid. the surgery had to be radical. he is withdrawing from the equity business. that has never been done before. this is something that will be very difficult to achieve. it will be difficult to do without unintended consequences. execution will be pivotal. this is a bank that's going from serving financial clients to serving corporate clients. they have gone from global to german. this is a huge shift. the share price is down because i suspect this is a very long road to recovery that deutsche bank is on. every journey starts with a single step. today's step feels like a little bit of a misstep. deutsche bank should hope for a
little bit more from the market. francine: how much of a concern is it that the german economy is also turning? on germanycusing when we are questioning the strength of germany. guy: and we saw more week data today. maybe the german data isn't that bad. i think he is putting a little bit of a gloss on that because most of the numbers are looking pretty poor. they are retreating to a german market that is looking very good right now and they are retreating back to a germany where the ecb. that comes with clearing, we will wait and see. but they are retreating to a market that looks very difficult. i think that is another factor. that will make the execution of this plan a little bit or a lot more difficult. james, chief financial officer of deutsche bank.
tom: good morning, everyone. though news flow is absolutely extraordinary. a great images out of greece moments ago. the new prime minister and ceremonies as he takes over. stories from turkey as well and deutsche bank. allison williams with an extended discussion in about 20 minutes. right now, to get back to first principles, close a roscoe -- jose rosco.
made an outstanding call looking for double-digit equity growth. morgan stanley with the global cell on equities. -- sell on equities. ago. did that two months we caught our chinese positions two months ago. we caught our u.s. positions a month ago. we are looking for a adjustment to the fed reality. the hsbc optimism of six months ago, is it is single-digit world, a flat world, or is this as good as it gets in equities? to retrench on the trade agreement that everyone thought was done. to retrench on the trade agreement that everyone thought was done. the other is the fed reality. we feel they cut twice in the next six months. after that, with an improved trade picture, we think the economy improves and the
earnings picture improves. francine: what happened with the fed expectations? -- it was pretty clear six weeks ago and then the markets got ahead of themselves? >> i think that is exactly right, the market got ahead of itself. help theants to try to economy, but if you look at the jobs report, unemployment rate ticked up. we are in pretty good shape with wage gains in the consumer looks relatively healthy. it is hard to envision a scenario where the economy is that weekend the fed needs to move that quickly in such a short time. that is not our view. francine: when do you expect inflation to pick up? >> that is an eight-year question. have global expansion, technology, and 5g beginning this year.
it is a secular issue and we think this begins the highly deflationary time for the economy. tom: i don't think in the years i've known you we've ever talked gold. everyone else is lifting up gold and you go the other way. is that steve majors faulty? -- fault? >> i think mr. majors did a good job on his call. tom: wait a minute. steal is the best fundamental gold guy on wall street. ,> and the best set of hair tom. the jim's view is that gold does well. but jim's view is that gold as well. we don't have a situation where we have a weak dollar. your friend from london loves to talk about the dollar. tom: are david and i on speaking terms? francine: you are.
just about. is the dollar overvalued right now? >> we think it trades sort of sideways. it is hard to envision a scenario where we see weakness in the dollar. the gold rally is quickly behind us. it is hard to paint a great picture for gold but it has done fairly well. tom: important that he will be with us to the hour. -- through the hour. in turkey, the central banker is out. 30 hours ago, the path forward for mr. erdogan and the litmus paper is the turkish lira. condition and lira weakness with a little bit of stability in the middle of two standard deviations of movement. plunge, but nevertheless, lira weakens as well. coming up, important analysis on
depreciation, it is a regression chart. you go back to 2012 and it kind of tells you the whole story. our investors out of the country? >> i think there is that. at the announcement came on sunday that there was time to digest emerging-market sentiment. liquidity is still coming. for the time being, the damage has been limited. the monetary policy committee will meet and the cut will be more substantial. bring that chart up again. never in my life did i think francine lacqua would throw up two standard deviations of turkish lira. i'm going to tear up. this is a serious chart that shows an institutional depreciation or devaluation of a currency. long can they keep that
going on in international relations basis? >> i think it is much more than the currency, the institutional degradation across the board. the central bank being the victim this weekend. but that is the process here. how long can they push it? as long as the markets let them do it. that is the answer. we know the foreign reserves make between $24 billion and $25 billion a year. ,here is not much for a mover but they made the choice. he put himself in charge of monetary policy and with a slow growth outlook, he was to push the economy further, no matter what the cost. tom: do they have the gunpowder to spur the economy? or have they exhausted their tools to move from austerity to jumping the economy? >> i don't think they have the firepower.
i think there is a complete lack of confidence at this point. they are in uniting the economy under the old economic model. it will be difficult because the construction sector which was one of the key pillars, is facing significant difficulties will notlower rates help. reforms are needed and they are not going to come. even if they were coming, it will take a long time to pay off. so he decided to make a false choice. francine: so what does turkey need to do? >> turkey first of all meets to regain credibility. -- needs to regain credibility. so the institutions, the central banks, the finance ministry. ofn offer a realistic plan reform. but the political choice for erdogan is to affect the global growth rate to allow the economy to rebalance.
that will be the political choice going in a positive direction. we don't have the political will or the right people to pull turkey out of this crisis. onlyine: president erdogan has so much power, but at some point, he will want to do something to set it straight. am i wrong? >> i think he is -- >> i think he is sitting it straight. this morning, we had rules on twitter and before coming this morning, i think that it looks like plagiarism. turkey is not such a big deal, but the market is commenting on the credibility of the central bank. let's look at it first of all here. iran, it isift to sort of off the radar right now. but it is never off of your radar. but give us an idea of the response that iran can make to president trump.
the response that they are already making, enriching twofold.and it is first, the most important one is to get something more from the europeans. iran knows the europeans want to keep his deal alive. but theylife-support, want to extract a bigger credit line from the europeans to be able to continue exporting iranian oil. secondly, upping the ante to see if trump becomes more amenable to talks. but i think that they are playing for time, hoping that trump will not be reelected next year. on,here is posturing going which is obviously a fairly risky kind of posturing to do. i look at iran, i look at the relationship with saudi arabia over the weekend. the tension there is
extraordinary. has that tension increased recently? doubts of seen tension going up and down over time. we have seen an increase, -- we have seen an increase recently. they are facing economic hardship to find a scapegoat. so tensions with the saudi's will play well back home. we have the risk story, but we don't see confrontation materializing. .rancine: thank you so much it in the meantime, we're looking at deutsche bank shares pretty much flat. have 18,000 jobs that will go. ♪ ♪
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greece. someone on the left and the right with a heritage of the center-right of the nation. the two prime ministers in athens this morning. we say good morning to all of you. francine lacqua and tom keene in new york. and again, on the equity markets, i have to go back to the weekend. what do we do? it?unloved is do we need to sustain or retire? >> we have these two issues to get through. the trade war, finishing up the u.s. and china. second, adjustments with the fed. tom: how does that change with the jobs day? the calculus changed to july 31. >> the calculus begins wednesday when he begins his testimony. tom: what is he looking for? >> what is he going to ease, and
how much? will tell you 25 basis point. but he's not going to do that. >> he will not do that. they will look at the direction and the steepness of the cuts. we think it began on friday with a good jobs report. what does this mean for treasuries? treasuries, look at we have a very decent rally at the beginning of the year. we are down 2%. if you look at where we are in terms of treasuries, a steady economy we think is staying pretty much where we are around the 2% range. bidhink treasuries are well in this environment, especially at the long end. end, whatat the long kind of level are you targeting between now and the end of the year? jose: 1.8 is the official forecast from london. so we are saying that is
arranged through year-end. even though the economy looks --d -- not great, but good we have a series of issues out there. ,eopolitical and otherwise issues that keep the balance through the end of the year. tom: with our morning news in new york city, here is viviana hurtado. trump may beident grooming a successor for jerome powell, criticizing the central bank and saying that if they knew what they were doing, they would cut interest rates. the president could get rid of jerome powell and replace him with one of his nominees to the board of governors. jeffrey epstein appears in court on federal sex trafficking charges. he was arrested after years of accusations of child molestation. guilty. he pleaded that reached that
plea deal is alex acosta, the u.s. secretary of labor. conservative party lawmakers opposed to a no deal brexit are plotting another attack. they want to stop the next prime minister from forcing a chaotic break without parliament consent. boris johnson is the overwhelming favorite to defeat jeremy hunt. the next prime minister is expected to be announced. police arrested five people while dispersing the latest protest against a controversial extradition law. thousands marching with tourists. police saying that they were taking part in an unlawful assembly. global news 24 hours a day on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado, this is bloomberg. looked at 19,000
bloomberg employees and had to find the two most sleep deprived . we succeeded. allison worked for years at morgan stanley and has covered international global banking. our other guest did reporting over the weekend, story after story. what have we learned this morning? that we won't is get details on what the job cuts are coming -- where the job cuts are coming from. are onlyy's desks thousands. your work in the last 48 hours has been extraordinary. ist i love about your work that you are always doing it dynamically. the other banks will respond to deutsche bank's challenges.
degree, the market has made that decision for them over the last few years. especially in the prime brokerage business. the question we have is, how big is it? what is the effort you are keeping? this big headline is global equities exit. but you know, we are going to keep enough so that we can support other businesses. we want to support m&a. it we will keep equities research. tom: we will stay in asia. allison williams, let's try to look at this within evolving global landscape. , reformsst competitors and acceleration. this is how people talk in the industry. this includes morgan stanley and toorgan who are more likely
benefit from growing commissions while citigroup's considered effort to ascend and equity trading revenue ranks has paid off. the headline is that we will stay in asia. gloating. allison: i think it is a broad story. cash equities is a business where there have been changes. the reforms went into effect about 18 months ago. we have seen more concentration commissions at the top. city and deutsche bank saying that we had smaller businesses and we know you have to be at the very top to compete. , androup has made progress deutsche bank has made less progress. i think that is what led to the decision. way, having to do something big and important, there was a lot of talk about exiting the u.s. altogether.
and i think the product exit versus the regional exit was probably the right move year, right? the u.s. and asia are growing regions. so to step away from those altogether and focus on europe is a tough slog. francine: what is your take on whether we know this works or not? the share price was up and down. how much time will investors give deutsche bank to see if this is enough? >> deutsche bank has outlined for themselves 2022. but as far as the economy goes, it even their targets are ambitious. but not ambitious overall with an 8% return on common equity. that is less than barclays is now and less than half of what jpmorgan is. tom: this is critical. i was flabbergasted by 2022.
do they have that time? >> it is a long time to wait. cuts were clearly outlined. that there were cuts that we are not seeing yet. they said this extend come would have changes but we don't know the rate and where the changes will be, for example. francine: go ahead. allison: i was just going to point, we wants to know where the reduction is coming from. ,ecause it is such a big number we might be getting that from the retail unit. allison, if you look at the challenges of deutsche bank, apart from the timeline, when will earnings the more stable? to your point, it is about the timeline.
we will have more charges through 2022. and i think to some extent, it is about the environment. pulling back on the more volatile trade businesses, that should help things stabilize. tom: like everybody else that read the press release on saturday, i was flabbergasted by the line, "there will be no cash call." what is the determinant that could change that statement? allison: cutting the dividend. obviously, that provides capital. running capital at a lower buffer so that they are in excess of their target. lowering their target based on regulators. sonali has been reporting on that the last couple of weeks. we have sort of been here before. on the part of current management, perhaps, but after
years of saying that this is the planet we don't need capital, i think investors will need a year or so to vet that a little bit. emotion ifill be the they are shot down today? we all had the backs pressed against the wall with lehman brothers. sonali: it is not just wall street. this started in asia. if you look online, people are being pushed out the door pretty quickly before 11:00 a.m. the german media was grilling them about losing so many jobs. mystery? is the you all have reported on this over the weekend and i have been stealing from you like crazy. allison: we want to know how big is big enough. the businesses you want to be in, you need to compete against
others that have this capability. tom: thank you for joining us. jose, thank you for not participating. [laughter] story, continue our looking at deutsche bank and share price is right now. we can is, francine, on deutsche bank. 7.11 for the euro. coming up later, head of global macro asset allocations. it don't miss that interview at 10:30 a.m. in new york. that's 3:30 p.m. in london. this is bloomberg. ♪
francine lacqua in london and tom keene in new york. let's look at investment and then get to francine and europe .n the ramifications inflation and disinflation in europe and in the united states. is it extraordinary? mentioned this earlier. can you explain where the inflation is going to come from? i do not know how you manufacture it. jose: we don't have it in terms of labor markets or goods markets. thanks to the role of technology and the better software. the u.s. is now the swing producer. oil prices go up and it disappears. tom: francine, it really fuld's into the dynamics of europe. look at the dynamics of europe, as tom likes to say. what is the prescription the ecb president has to put in place?
is it monetary stimulus or just fiscal? >> the next ecb president can't really do much about fiscal. francine: but maybe they can convince leaders to do more. >> mario draghi is a convincing person and has been trying to seize 2012 and failed. i suspect the political situation in europe with good economies and bad economies, the politics there, it means the fiscal is not going to move. it is likely that we will do what has been done before. the same strategy, do not deliver the first time. cross fingers and deliver the second time. they will not get any help from the politicians. francine: what does that mean? could we be facing recession with no tools left or support from government? >> i think the inflation outlook remains day-to-day. we can see how inflation will pick up in any meaningful way.
the economy is slowing down. if needed, they will put more money into that. we are gaining time. that is what is happening here. but politically, there is no will to do structural reforms. and there is no will to spend more to support the ecb in their job. pause there was looking at the bloomberg headlines that are coming out fast and furious. let me read these. the candidate in france to take over as president of the ecb, he faces madame lagarde. he makes it clear he's not a candidate for the international monetary fund. accommodated -- accommodative policy more than ever. how do you perceive a non-economist ecb head using the
services of others outside the direct ecb line? >> i don't think lagarde will face difficulties in the new job. the late imf role is involved in the eurozone crisis. she is a good communicator, so i don't see a major challenge for anyone to succeed that job. the challenge more is about persuading in the point that i was making earlier, the politicians in europe to actually help the ecb. suspect that, i she will struggle as much as mario draghi did. francine: thank you so much. one guest stays with us. jose, thank you for being here. coming up, a new greek prime minister. it he shepherd the country out of the financial crisis -- can
flash. a saudi arabia and budget airline became the first carrier to officially drop in order for max.g's troubled 737 fly airbus only planes. in march, the 737 max 8 is grounded after fatal -- after two fatal crashes. the cybersecurity firm is valued at more than $22 billion. broadcom estimates that energy will allow the combined company to save about $1.5 billion. morgan stanley has turned bearish. the bank cutting the global equities allocation to the lowest in five years. it is the outlook for stocks looks particularly poor. in a new note, morgan stanley says the profit forecast remains too optimistic. and that is the bloomberg business flash. tom, francine? newcine: greece's
center-right democracy leader is set to take over as prime minister. we saw him being appointed moments ago in a ceremony that follows. handed him election a mandate to tackle the nation's chronic troubles. take a listen to the prime minister elect. >> i feel like i have a strong mandate to deliver on my agenda, which is an agenda to grow the economy and create more jobs. but also to make sure that people feel safe again. francine: our guest joins us. it wasu look at greece, a surprise just a couple of years ago and now the darling of the stock market. and will he do better things for the economy? >> the listen to be learned here is that politically, we have moved on after four years of tsipras.
politically, the new leader is well positioned. he became leader of the party and got a good majority yesterday. now he has four or five key balance -- challenges this year. balancing credit and ambitious tax cuts. second, he needs to balance -- it ists to attract not enough for greece to grow. he needs to bring meritocracy to the public administration and he needs to deal with the mpl issue. the most important one in my view is the question of seizing the moment. he needs to push very quickly. i think that he will do that. francine: alexis tsipras shot to power during the financial crisis in greece. what are other populous leaders in europe looking at tempers to
change the way that they are ?oing things >> the mover was limited at the very beginning. , at the endferendum uniqueday, tsipras is a figure. he was labeled as a leftist. he did not do anything leftist in the last four years of government. he was driven to stay in office no matter what. he was somebody that was supposed to deliver against corruption and fight the oligarchs. there was nothing done on corruption here. again, i don't think there is a great record there. i don't think it applies to other populists and other countries. tom: at this moment, can madame lagarde adjust the intransigence of the germans?
can she adjust the core europe feeling about greece and the other peripheries? here arek the germans actually more focused on the dutch. intransigence is coming from the dutch more than anybody else. i think the intransigence is somewhat gone. i think that greece has been given quite a bit of leeway over the last year or so. what is important here from the getting toective is the next stage of economic development. not much thinking has been done by the creditors on how to bring the economy back. they will lead support from creditors to make it happen. are talking about, eventually, further down the line, an increase in the
production target. and have to deliver the fed go ask for this. tom: wonderful perspective there on greece and turkey as well. chart.to show the this roll over here in the last this is the list up on friday with a little bit of pullback. and then the rollover. francine: the chief executive was very clear. the company into focus on areas where it is most competitive. the era of spectacular ambition is over. ♪
it's a massive revamp of the fifth bank, recalling a of its workforce and scrapping dividends. jay powell in the line of fire. president trump keeps up the pressure to cut rates as the market prices out further rate cuts this year. erdogan flexes his muscles. did turkish president fires the head of the central bank -- the turkish president fires the head of the central bank. the lira falls, equity sells off. david: welcome to "bloomberg this monday, july 8. a little something going on in france. it was a great game. aix: their second win in row? david: that's right.