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tv   Bloomberg Surveillance  Bloomberg  July 30, 2020 5:00am-6:01am EDT

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longer according to chairman powell. he says the best chance to return to a job -- he is candid about the urgency for fiscal stimulus. speaking of which, it is thursday and "hope springs eternal." so says a leader. negotiations are not going well. how about compromise? jobless claims at 8:30 this morning. jes staley is not impressed with wf h. barclays says hi ho, hi ho, it is off to the office you will go. good morning, everyone. "bloomberg surveillance." guy johnson es const on the acreage in london. is const on the acreage in london. google says you don't have to come back for a lear that a year, five years, a decade.
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jes staley says let's get back to the office. morei think the banks are of a pressing concern, absolute critical. if you think about the advantage that sector needs to make, the changes in diversity, in terms of gender and race, corporate culture really important in a bank as well when dealing with risk. all of these things, i can understand why he wants to bring people back into the office. i suspect it is going to be a little more flexible bringing everybody back to the 9-to-5. tom: credit suisse flexible as well. francine lacqua in zurich. we will get her in the hour. with our first word news in new york city, here is ritika gupta. ritika: negotiations resumed saturday on a compromise coronavirus relief plan. areblicans and democrats nowhere close to an agreement,
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under pressure because of people losing unemployment insurance this week. a stopgap measure would extend those benefits. federal reserve chairman jerome powell calls it the most severe economic downturn in our lifetime. powell says policymakers promised to use all their tools to support the recovery. interest rates were left near zero by the fed. powell says plan for the worst and hope for the best. the number of americans killed overe coronavirus has gone 150,000. california, florida, and texas waves appear to have leveled off. and a record slump in the second quarter, output falling 10.1%, the most since germany went to quarterly gdp report in 1970. coronavirus restrictions, exports continued spending, and investment indicated signals
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that growth has returned, but unemployment remains high. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i am ritikantries, gupta. this is bloomberg. guy? tom? tom: thanks so much, richie go. equities, bonds, currencies, commodities. we are going to get to kit juckes here. it is about equities, about bonds, bonds, bonds. all you need to know is that yields come in with a vengeance and continue to grind down after the powell press conference. you see in the 10-year, .55. five-year yield out to record low as well. you really see it in the inflation-adjusted space, however you want to measure that. guy, to me the yield story is front and center. guy: absolutely. it was interesting to see that powell did not stand in the way of the weaker dollar.
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we have a stronger dollar, and you can certainly see that in euro-dollar. trading at 1.1739. a huge earnings day in europe. we had german cd -- german gdp to contend with. unemployment better than anticipated, but the banking sector we are focusing on, yesterday you talked about jes staley. our clays painting a grim picture -- barclays painting a grim picture for the u.k. economy. airbus out with better news this morning. the company is trying to manage its cash flow position very, very carefully, and it is talking about a pickup in deliveries in the second half of the year, which will help that cash flow. -- the fed is absolutely front and center. the federal reserve bank used all of its tools to support the
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recovery from that economic downturn. jerome powell. speaking about the road ahead in that virtual news conference. tom: absolutely, it has been a huge exchange. >> we are told to do what we can and as long as it takes to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. the path of the economy is going to depend to a very high extent on the course of the virus, on the measures that we take to keep it in check. the data are pointing to a slowing in the pace of the recovery. but i want to stress, it is too early to say both how large that is and how sustained it will be. the rising joblessness has been especially severe for lower wage workers, for women, and for african-americans and hispanics. the fiscal policy actions taken thus far have made a critical difference to families, businesses, and communities across the country, and it will take continued support from monetary and fiscal policy to
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achieve that. the federal reserve has been taking broad fiscal actions to support the slowing in the economy, for households, for businesses large and small, and for state and local governments. these are lending powers, not spending powers. there is great uncertainty about the development of therapeutics and vaccines. all of us want it to happen as soon as possible, but we cannot plan on that. we have to hope for the best and plan for the worst, i guess it goes. lots to unpack in there. kits dig in and get -- juckes joining us now to help us with that. let's kind of work our way through it and see what the dollar, first of all -- did jerome powell further dollar weakness last night? nothing to -- what
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did we expect him to say other than what he did say? there is a lot in the price. my concern is about the dollar and the amount it has gone down recently, probably sent around the fact that august is illiquid and dangerous for markets and has been for a long time, and that is not bad for the dollar, and the market has now got a pretty solid bearish consensus sitting here. inthe dollar is still here september, i will be selling it again with enthusiasm. right now, i want to sit back and be where of volatility. tom: kit juckes, we usually talk with you about foreign exchange. i want to shift to the fixed-income space. it is real simple. the bond market is speaking and speaking in volumes. there is an assumption that the united kingdom can avoid negative rates.
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there is certainly an assumption that the united states can avoid negative rates. the market is testing that right now, isn't it? kit: for sure. the trouble with negative rates is that they are in nobody's plan. plan until they are punched in the face, and this pandemic is punching policymakers firmly in the face. you cannot rule it out. wisenk the u.k. would be to do everything they can to avoid negative rates, given the size of the current account deficit, the position of the currency at the moment here. would avoid from different reasons from the united states, but we may have to find something that we can do. it becomes a question of diminishing choices. no one is going to take negative rates completely off the table. tom: what i find interesting here is the idea of a europe that instituted negative rates before the market caught up.
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that is one theory, one idea, versus the market directing central bankers toward policy. is the market going to tell them that you have to avoid negative rates? are we days or weeks away from negative rates in the united states? really testing the central bank as an institution. kit: we are not quite there yet, but when nothing else works, the people who get negative rates first are ones with big current account deficits, who were doing it in part to force money out of the currency and weaken it in japan and europe. that was one of the means of easing monetary policy further. it needs to attract foreign capital. in the united states, you could easily have negative rates from the perspective of it could weaken the dollar. i'm not sure policymakers could complain. the problem in the states is a more mundane one that they want to resist because the money
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market funds are so important, and it would damage the plumbing of the financial system. we have already seen since march how vital it is that we keep the plumbing of the u.s. financial system, or the dollar system, working properly. i come back to it. if god for bid we get a nasty second wave globally that really sort of started impacting economic growth in september or october, central banks are going to be looking and fiddling around with what is left in their toolbox and seeing what they can do. guy: if the signal that i should be taken from negative real rates in the united states, the market doesn't believe that the current stimulus plan is going to be enough. kit: i think we could start off with the fact that there is a chronic shortage or in excess of demand of safe assets and the -- has aa monopoly of
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large part of the world's safe assets. if you have got people who need safe yield, they get pushed involuntarily into driving these levels. i don't think it says something about expectations, it says something about the state of the world that we find ourselves in today. that does not mean it does not add implications. it has implications for gold and implications for what nominal yields do. i think it tells you that we still have a problem, when we all look for cover and when central banks are buying safe bonds, we want to buy the safe bonds. tom: kit juckes with us, and we will continue. it is an extraordinary bloomberg data screen right now, particularly in the rate space. , .1230.year we have a terrific lineup today of wonderful conversation. kenneth rogoff of harvard will
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join us in the 6:00 hour. please stay with us, from new york and london, this is bloomberg. ♪
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tom: bloomberg surveillance. guy johnson in london, tom new york. public service announcement, maybe more than any other time in my time at bloomberg, do we need to explain the absolute craziness that europe calculates gdp than the united states?
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this is going to be everywhere today all the time. europeans will say they created -- create it correctly, americans will say greenspan was right, we do it this way. u.s.,ualized gdp in the apple is in what, q. week -- apples and what, kiwi? apples and potatoes? >> you cannot compare the two. it is done on an annualized basis. you're scaling one up to the other. -36, according to a round 10% drop in the u.s. economy on an annualized asis, which is kind of comparable to what we are seeing out of germany. am: i am going to guess about see in thewhat we united states today.
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after that math exercise can but kit juckes is about ready to walk away from the camera. he joins us from socgen. i hope we did not embarrass ourselves. i want to talk about turkey. i brought it up for the last couple of days. we just had a seven print on the u.s.-dollar-there a. close is turkey to unraveling? kit: pretty close, i would say. the problem that turkey has is twofold. one is they have much less foreign reserve protection available than many other countries, so they don't have much ammunition left to help currency. the second is, with the credit stimulus that they have been giving the economy recently, the danger is that there balance of payment is deteriorating, and you don't see it so much with the economic downturn. those two things together make it vulnerable. the guys at the iif have done a really good job on plumbing some of the flows.
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there are good reasons to be nervous about what happens next for the lira. tom talks about turkey unraveling. tois getting pretty close being very, very sort of difficult for turkey to manage its way through this. almost impossible. int did the crisis look like turkey, and what does it mean for the rest of the international system? kit: the problem for turkey is that it is dependent on foreign capital. the problem of a pandemic is that it makes capital stay home, so we say -- we see already the market economies that depend on foreign capital -- south africa, brazil, turkey -- are three good examples of it. they have had strains at various points this year. the turkish lira has been holding up pretty well, and it is coming up under new pressure. the danger is that you cannot get foreign capital -- if you
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cannot get foreign capital to protect your economy, it limits voluntary pot -- it limits monetary policy and you are forced to have restrictive fiscal policy to get payments in the right place, and that deepens your economic downturn. that is the world of difference between them and the countries that can engage in quantitative easing, negative rates, all the stuff that we are exploring at the moment to offset the pandemic. -- the impact of the pandemic. it is a very clear example of the vulnerability of countries that rely on foreign capital at a time when the world is not working properly. we couldess maybe think about the systemic effect may be working through the diplomatic channel or the geopolitical channel. obviously this is a company that sits at a key nexus in a region that is highly unstable. it will be interesting to see how president erdogan reacts to the financial crisis.
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kit juice, thank you very much indeed. kiting us to give -- juckes, thank you very much indeed. coming up in the next hour, we will continue the conversation on the dollar. jeff currie of goldman sachs is the global head of economics research. concern about the dollar dominance that we have all of our lives. that conversation coming up at 6:30 a.m. in new york, 11:30 am in london. i'm looking forward to it. this is bloomberg. ♪
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guy: i'm guy johnson in london with tom keene in new york. let's talk about what is happening in the aviation sector. yesterday boeing, today airbus, paring back wide-body jet production. out as it basically wakes the collapse in demand for new aircraft, the world's biggest plane maker seeing delivery slump in the second quarter. i spoke to the company's chief executive. >> in the second quarter, we have completely adapted our production system to what we think is the new environment, and we have reduced comer for ac 20 familythe from 60 per month down to 40. we are adapted to the new situation and we will react to it he with our customers, with
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airlines around the world, to understand what is the right calibration moving forward. isthink this 40 a month appropriate for us for 2020 for probably the vast majority of 2021, and we are awaiting signals from the alliance -- from the airlines and from -- to understand when things will recover. we think there will be recovery. it is very likely. but it is logical to assess at the moment when. that is where we are today. we are navigating for a situation with a lot of uncertain date and changes, and we have put our foot on again by adapting the company, by resizing, adjusting production rates, by adapting the supply chain as well to this new difficult environment. guy: you said today that you are looking to get the business to a position where it is neutral on cash in terms of the burden as
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we look at the second half of the year. deliveries are a key part of that. itn you -- how realistic is to get to a neutral cash flow position, given the operating environment that you just described? have ahe end of h1, we large number of planes already to deliver but not delivered actually because of the situation with the airline and the customer. we have 100 45 planes produced, not delivered. it is very high. we think we will manage to produce it significantly in the second half of the year. this will contribute to the balance in cash flow that we are contemplating. it is an objective because there are a lot of uncertainties. we are making good progress on the new delivery schedules, the amendment to the contract we have with our customers, and we are gaining visibility when it comes to the second half of 2020 and 2021. that our- we can share
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objective is to be cash flow neutral before customer financing on the second half of -- tonka guy johnson with -- tom: guy johnson with great skill. there are differences between boeing and airbus, to say the least. one of the things we have been doing on surveillance is a lot of good conversations with virologists, with epidemiologists, on this horrific pandemic. part of it is the apparatus that will be used forward given a recovery finally out of this terrible disaster. stephan sturm with fully sandia's -- with fresenius. we do that next. ♪ businesses are starting to bounce back.
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earnings beat estimates, helped by the performance of the , still this german health care company has decided it will cut its guidance outlook, the ongoing pandemic a factor behind that. stephan joins us now with insight. thank you for your time. let's talk about what is happening in the business. i am curious you felt the need to reduce guidance this morning. you are a company with great insight into what is happening in hospitals. i am wondering what you are seeing in medical institutions you serve. stephan: good morning.
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thanks for having me. technically, this has not been a guidance cut. i need to point out when we were provided original guidance, end of february, we made a clear this was without covid effect at that time. covid was a more regional phenomenon out in china. this morning, we have updated guidance to include all covid effects we estimate for the remainder of the year. i would point out covid impact for us as a group is relatively benign. difficult to accurately quantify covid effects. according to estimates at the half year mark, we would have been excluding covid more toward the top end of our per
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guidance. provided it is obviously a dichotomy between dialysis treatments, you very clearly have no choice to have dialysis or you die. on the other hand, elective treatments, the bread and butter business in our hospitals in germany and spain, there, primarily because of government instigated shutdowns, when we exclusivelyorced to focus on covid patients, we are looking at a footfall and admissions relative to expectations. that is the key driver of an earnings decline in a second quarter, however more toward the we are seeing a
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healthy pickup in elected cases already. guy: do you anticipate that pickup will continue? are you getting pushback from medical institutions suggesting they are refocusing attention on what some are describing as a second wave in europe? stephan: the basis for our assumption and guidance is the assumption we are not going to waveroadly based second but rather local/regional outbreaks that will not lead to nationwide set downs -- shutdowns like we saw in late q1 and early q2. we are seeing interest from elective patients to do procedures they were originally hence, what do and we are seeing is a backup in
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admission numbers over the course of q2. expect tory much continue to see reversal of original principal. originally, the thought was we must not treat elective patients in order to reserve capacity for covid patients. the new principal now is we are meant to perform elective procedures, as long as we can demonstrate we have capacity in case another covid wave comes our way. tom: your company is an extraordinary story out of world war ii. your company has underperformed since 2017. the share price is really not very good. are you under terrific pressure
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from the foundation to turn around share performance? how does that work with your more public shareholders? acknowledge our share price has been underperforming. the interests of company management and foundation, there are specific reasons that have led to this underperformance. you will know we had to go to get outugly fight of the originally intended acquisition and we have issues in our german hospital business that led to a profit morning in 2018. we are in the aftermath of this. management and shareholders are aligned to show continuity. i believe q2 results presenting this morning are yet another quarter where we are meeting or
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slightly exceeding expectations. if we can continue that, the share prices will correct itself. thatthank you so much for candid response to a delicate question. the chief executive officer of fresenius. more to come this morning. administrationmp and congressional democrats no closer on compromise. the pressure is building, as millions of americans are running out of employment this week. mark meadows sees little chance of a stopgap deal that would cover only jobless benefits. agreement for federal agents to leave portland, oregon, over a disagreement about when the governor says the agents believe. the homeland security chief says there will be no pullout until
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it is clear local law enforcement can prevent violence at the local courthouse. hong kong, the government has barred 12 pro-democracy activists from running in the upcoming election. they said they did not meet requirements. this, after student activists were arrested for making online comments, that allegedly violated the law. global news, 24 hours a day, on air and on @quicktake from bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much. coming up, thunderstruck by response of wonderful effort by our team in hong kong to help stephen engle with the edge. we are doing it again. on the crisis on the hong kong. >> i feel at the end of the day,
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we are on an airplane with turbulence. everyone is holding on, waiting for the plane to land. in most cases, the plane lands safely. >> for it to crash. >> i honestly feel this is not going to crash. china needs hong kong. they need an open hong kong. they just want to keep it safe. they want to make it stronger. does not wanting a stronger pro-democracy camp. before the national security law, lawmakers were accused of using filibustering tactics. cards have circulated, singling out the faces of democracy advocates, including the human rights lawyer, the ace of hearts, albert ho. >> many people are being scared away. they want to defeat you without
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war. force or waging that is the way the chinese lay the game. >> if i sit here and say, no, i will never be arrested -- were you born yesterday? you live under communist rule. how dare you say anything? i have never said that. even in 1997. neither did i predict, i will be arrested tomorrow. no! we live under chinese rule. everything that happens would not surprise us. that is the way they behave to their own people! we will stay and fight! >> i don't think i could leave, even though i know i could be put in jail. because, you know, if i become scared, all the other people will all the more become very
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scared, then the whole community will be stifled. we need to fight until the last minute. >> before the national security law, this is legal. after the law implemented, it is illegal. speech is limited by this new law. the freedom to advocate hong kong independence or overthrowing the chinese communist already. there is limitation of freedom of speech. >>'s freedom of the press under threat? >> no. >> no? subversionhey are in or secession. reporter: do people have to be worried about what they post on facebook?
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or their employees? >> yes, i don't think there is an obligation for what criminal offense your staff meets but the point is, if you are not involved, if you have no intention to carry on secession, subversion, terrorist acts, what have you to fear about? fascinating. just a taste. you have to watch the whole thing. tune into the hong kong special, hong kong on edge, 7 p.m. friday, in new york, bearing through the weekend. don't miss it. this is bloomberg. ♪
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>> our services is about connection and our business model is about advertising. we face competition. >> we have fierce competition on the developer and customer sides. it is so competitive i would describe it as a street fight for market share in the smartphone business. >> we see bigger competition. we travel, we real estate. >> we don't have a dominant share in any market or product category where we do business. >> history shows if we do not keep innovating, someone will replace every company here today. tom: everyone has a tie on. it is like a wedding! you are going to a wedding! it is amazing, everyone is styling the technology look. then they go to washington, they have to put a tie on. alex: they realize they need to
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show some respect. as much as they can around the edges. s jeffow invisible wa bezos? alex: he really started to take the heat, they could not get his connection going. lawmakers had good grasp of the issues. how this operates and how it seems to disadvantage others. they may have had a good grasp of issues and asked 20 questions, nevertheless, doing that does not get us to a position of how i can get a clear idea of how the rules are likely to change.
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any clues we are further forward to changing antitrust laws in the u.s. to solve some of the problems being discussed here today? alex: we saw the way the democrats think about this versus republicans. madehair of the committee a forthright statement at the end. he thinks the antitrust law needs changing. side, they didan not think that was the case. as long as there is a split between the house and the senate, that is unlikely to happen. the department of justice and federal trade commission, when you look at the business models of these companies, the point of these hearings, as much as it might be to lead to change in legislation is also to put the heat on those investigative toies, gives some daylight
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how these companies operate so the public, magnifying glasses on the companies and the investigative bodies actually do something. risk toch poses biggest shareholders in these companies, regulation or taxes going up? antitrust rather than regulation. regulation is about changing small behaviors around the edges. fundamentally changing business models, is the big threat. something the market is increasingly pricing and. performance of google and facebook over the past year compared to apple and microsoft, they have not done as well. they are under the most antitrust pressure. they are so dependent on advertising.
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they control the advertising market. it is taking attention in europe and the u.s. and is a threat to those companies going forward. tom: thank you so much. markets sporting. earnings, selective tech giants, look for that this afternoon. michael wolff with us from activate, quite good at a strategic view of the way forward for these near monopolies. michael wolff, 6:00, spectacular, coming up. futures -25. stay with us. this is bloomberg. ♪
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>> the merger this something we have been scouting for months. l the benefits. it is about having one equities business. there is always a danger regulators behave in an unexpected way but i don't think
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so. i will editorialize. this is a huge deal. all banking will be watching credit suisse as they blow up the failed model. this interview is so important. attended zurich and joins us from a pandemic free zurich. let's talk about your travel. how was it traveling on airplanes? francine: interesting. i see pictures on instagram of empty planes and empty heathrow. actually, i got the different experience. full, full, whole. wearing a mask. tom: are we going to see other banks initiate what credit suisse is doing? francine: the new chief
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executive is really trying to simplify the complicated structure which spans new york, london, hong kong. he suggested it was something he took from other banks, to align himself. it is interesting. anew cost savings program, new trading business. interview, in the there was talk about, this is partially rolling back initiatives of the predecessor but he said they were also on the same page. clear, at the time, five years ago, they split investment bank and trading business after losing revenue. they are merging them. it is interesting. the investment bank and
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many banks are providing the ballast that are supporting the institutions as other areas of the banks struggle. what does he see in the second half of the year? other ceos have pointed to trading becoming less of a factor. is that the situation? francine: he gave us a cautious outlook for future. there was the surgeons in global markets business, jumping 43% in near dollar terms. suisse said it was less than expected for loans, they saw increase in capital levels. a lot depends on the pandemic. he was not that convinced that the worst of it ends. confident, that this shows they have the right structure in place to deal with whatever is coming.
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it was interesting about dividends. we spent time looking at european banks and how the central bank was looking to postpone. for swiss bank, it is different. wereard from ubs they looking at issuing something to shareholders. he confirmed that to me this morning. tom: that usually goes on in october. francine from zurich this morning. coming up, we start strong. this will really be good. americaabout large-cap as being the place to be. an update from mr. ward, particularly on a day of tech earnings. possibly, we will talk about mr. cook. he was in washington yesterday. the data check is important. yields continue lower off the powell press conference with curve flattening, gold down
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seven dollars. stay with us through the morning. the dollar space, stronger dollar going against that yield discussion. johnson, just simply large right now with 1.30 pounds sterling. this is bloomberg. ♪
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tom: this morning, lower for
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longer. it will be longer. --says german powell chairman powell, who goes in search of a dollar. in thect and candid, search for fiscal stimulus. hope springs eternal on thursday. negotiations are not going well. jobless claims at 8:30 a.m. this morning. see you in october. fh. impressed with w ho, its says, hi ho, hi is off to the office you will go. guy johnson in london. francine lacqua in zurich. restructuring in credit suisse is the tip of the banking iceberg. you wonder how many banks will make the desperate moves. guy:

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