tv Bloomberg Surveillance Bloomberg July 8, 2015 6:00am-8:01am EDT
has stopped spinning. stocks cannot find a bid, and beijing goes in search of a healthy, sustained stock market. in moments, jenkins is out mcfarland is in. john farrow speaks to the new barclays cost cutter. we are live from our world headquarters in new york. i am tom keene, with vonnie quinn and brendan greeley. it is a double barrel morning of china and greece. brendan: which is the bigger story? it rides on one question. are the stock markets in china still a casino like the last 20 years, or are they indicative of bigger trends in china? tom: the main idea is that china -centric things so far -- japan is down 6% or 7%. cost me and korea --
brendan: the chinese government seems to be in full panic trying to throw things at this to see what they can fix. tom: we mentioned barclays news. jenkins is out at barclays. here is vonnie quinn. vonnie: another round of government support measures the benchmark shanghai composite index is down more than 30% since june 12 through investors have suffered more than $3 trillion loss on paper. the chinese government has taken steps to prop up more cap stocks. at one point participants were locked out of 71% of the market. foreign investors continue to sell holdings at a record pace. european leaders have given greece a new deadline. expect a rescue plan by sunday or face being kicked out of the euro.
the greek government is told to come up with new proposals. angela merkel says she is not optimistic. this morning at the european parliament, the greek prime minister promised to deliver. prime minister singh tsipras: i am confident in the few days we are able to meet the obligations of the crucial time in the investment of greece and the eurozone. vonnie: jean-claude juncker said there is a scenario ready if greece has to leave the euro. the chairman of barclays, john mcfarland, is taking up the bank after just three months on the job. in three years as ceo, jenkins has cost thousands of jobs and sold off assets. chairman mcfarlane will take over as executive chairman while barclays looks for a permanent ceo.
he is promising more cost cuts. john farrow will talk to barclays chairman john mcfarland a few minutes from now -- john mcfarlane a few minutes from now. "the new york times" says microsoft's hardware group is being affected by layoffs. these layoffs will be in addition to the 18,000 jobs cuts the company announced last year. we are likely to see a lot more of this. thousands gathered in los angeles for the u.s. women's soccer team for his world cup victory. on friday, new york city will honor the team for the tickertape parade, the first parade honoring a team that does not have "new york" in its name. tom: it is a first, right? the crowds are not going to be, like, men. brendan: what do you mean? it was the most-watched soccer
team in america. it happens, it is over. soccer has arrived. vonnie: brendan is going to be on the front row. tom: maybe a little back holding on to the kids. i am on my way. the pageantry on the week. much going on in greece and china and some corporate news as well. futures are simply ugly, -22. one thing not moving is the currency market. bonds are a big deal. currencies at 1.1036. oil flat. onto the next screen, if you would, please. 58.5 on the two-year greek yield. that was 50 32 days ago, and it continues to elevate -- that was 53 two days ago, and it continues to elevate.
gold is stable right now. going into the bloomberg terminal -- when you have the kind of to multiply have you go to gold. the big rollover -- i have never seen this through these are spikes up. we are going higher, no we are not. five of these in a row. i have never seen this in a billion years of technical analysis. never seen that. this is a trend going south. brendan: in all these things we look at, two out of three of the charts we look at in some way are looking at long-term disinflation, long-term lack of growth. there is nothing on the horizon. tom: i think you can full this away from greece and fold it into china away from the roulette wheel feel of china. there's something going on there that is you this rollover in gold. brendan: but again, i would like to spend the next several days trying to figure out, has the government figured out a way to
move the economy -- or move investment into equities? does this have any sort of meaningful, long-term effect? tom: can you do that within a non--capitalistic society? right now we need to go to brussels and watch what they do no. not the diplomats. they are diplomating in brussels this morning. watch what markets participants do. they are confirming the immense tension in brussels and in athens. there is a real economy in athens, and the real blather in brussels. hans nichols, what will you look for on this wednesday? forget about this sunday. what is on the hans nichols agenda for today? hans: traffic in athens. if you have heavy traffic, there is some confidence you may be doing something in athens. right now no one has enough money.
we have had three negatives. they do not have the banks open. they were supposed to be open but they will not be we do not have an actual proposal. that is due on friday. everyone expected on monday. we had a headline across -- they do not have food shortages in athens. it has gotten to that point where the economy minister in greece is denying that they have food shortages. that shows how close to the edge they are. tom: i am an amateur, you are the pro. i noticed a change in angela merkel's demeanor yesterday. did you notice a different angela merkel yesterday? hans: yes, she was smiling. when all the prime minister's came out of the meeting, a colleague of mine said everyone was wearing frowns except for 1 -- angela merkel. she almost seemed as piece -- at
peace with herself. brendan: am trying to understand the mechanics of being kicked out of the euro. how does that even work? hans: no one knows. it is significant that john jean-claude juncker is talking about a plan being place. no one knows how it works. you are always told in an airplane crash to clear head down and put your hands forward. the most likely scenario is that greece as a modern functioning state could no longer operate. then they would have to have some kind of parallel currency to go along. if they are frozen out of markets, out of the ecb, they will have to have some kind of entirely new makeshift organic structure that allows the civil servants to get paid, that allows hospitals to import medicine.
leaders are publicly using those terms and talking about consequences and what they will have to do. vonnie: any word from mario draghi? everyone wants to hear from the current ecb president. hans: mario draghi has been quiet going into the meetings and going out. we have very little sense of where he is on this. he is looking to the politicians for some sort of cover direction, some sort of tip-off on what he should do. so far we are in limbo. i wish i could say we have clarity. we do not. we have closer toward a bad outcome but no certainty that bad outcome will happen. tsipras could take the 60-plus percent from the public and still have a deal. tom: u.s. yields come in six basis points. the greek spread widens out
showing that tension, while the other peripherals do better this morning. let's go around the world. the collapse of chinese equities continues. it is a discrete china event. the japanese stock market down 6%, the korean stock market down only 7% from recent highs. we have seen all this before. so has timothy craighead. he has been on china watch through many a collapse. i go back to your goldman sachs days. what is different this time? you and i have seen this before. what is the new new in 2015? timothy: it is a great question. there is what is new and there is what is not new. the new is that there is substantive policy reform and that is still the white knight that may come to support and create some recovery of this marketplace. there is corporate reform pension reform soe reform
through there is active policy approach that are trying to transform the economy and rebalance it. we talked about that a little bit. what is not new is the equity market in that we have seen this one unfortunately before. the equity market continues to be a retail dominated market that is very momentum oriented, and that was levied even further this time around with a significant rise in margin debt. what we need to see is policy continuing to evolve, to pass the baton toward a more sustainable institutional base that has a core foundation to it. we have not seen that yet. brendan: when we look at stock markets in the u.s. and europe they are connected to some underlying trend in economic growth. is that true in china, or will
should we still look at stock markets there as a casino? tim: i would like to say there is more of it, but in this rally, if you go back to november when it started getting momentum, it was driven by hyped up policy initiatives, hopes that global investment would come through the shanghai/hong kong connect, and it took off. that happened at a time when we were seeing earning reductions and slowing economic growth. policy stimulus will be driving future expectations, and that is a big part of what got this moving, but then it got a life of its own. long answer to your short question -- if you look over a 15-year period, we continue to see spikes and retreats as opposed to a typical more developed market relationship to underlying economics.
tom: i am sure we will speak to you again soon. jim craighead with bloomberg intelligence, in hong kong. dow futures, -1.75. thanks for the huge response yesterday to our twitter question. we go to china today. what scares you more -- china's stock market, or greece's debt crisis? stay with us. "bloomberg surveillance." ♪
private plane and a fighter jet is raising new questions about airspace limits near military bases. the f-15 and the cessna crash in midair over china. the jet pilot ejected safely but both people in the small plane were killed. the collision happened near an air force base north of charleston. the ntsb is investigating. jpmorgan is preparing to settle state and invest -- state and federal investigations into credit card abuses. jpmorgan has been accused of trying to collect debt from consumers that they may not have owed. also providing inaccurate information to debt buyers. people are backing away from donald trump after his controversial comments. the pta has decided not to play at his course. nascar has canceled a banquet
set for another trump facility. trump says -- john farrow will talk to john mcfarlane a few minutes from now. tom: john macfarlane call it a typical career, the user diversity -- not a typical career -- the university of edinburgh. he is the guy that turned around amc bank. brendan: we are watching the ongoing story of, what is a bank? barclays is deciding it is a small investment bank. deutsche bank is going through the same transition. vonnie: there is a parallel with deutsche bank. suddenly they are out. tom: and speed of change. we have much coming up. ian bremmer will come up joining us from eurasia group.
here he looks at the pessimists and he says he is not one of them. this is one part of a terrific essay -- tom: brennan, this is one of the great essays of the moment. brendan: but we are still waiting for the productivity enhancement. you have capital, increases in the population. we know what those things look like. we all thought the internet was that magic thing, and there is increasing evidence that the internet has not increased productivity. vonnie: suddenly it just fell off, and we are not getting back there. tom: one of the things that is so important about this debate -- look, there was the housing
leverage boom, and before that there was the technology boom. what is the next next? it is not stupid stuff like big data, cloud data, nanotechnology, and all that. brendan: when the pie is growing, you do not have to talk about distribution within the pie. when the pie is not growing, that is when we start talking about inequality. this growth that we are having is linked to inequality. tom: robertson should for decades has been one of the great students of linking together. we begged him to come in this morning. he came in by covered wagon from connecticut this morning. we are going to talk the dollar later. but right now on what every viewer is saying -- what is new about america? where is the productivity next that gary shilling is talking
about? robert: when you have an economy that is driven by manufacturing driven by the production of goods, it is a lot easier to measure and develop. services productivity is difficult to grow. tom: i noticed yesterday netflix has all of 2000 to 3000 employees. that is an example of the service economy. brendan: are we prepared for a long run of low growth? presidents get measured on their gdp growth. robert: absolutely not. and it is a global phenomenon not just a u.s. phenomenon. part of these demographic. we have slowing population growth, an aging population. they use different things. we use a lot more services, a lot more medical care, as opposed to consuming things. that makes it a more difficult environment globally. again, that is competition for a
pie that is not growing as rapidly as we are accustomed to. vonnie: are you saying it is a measurement problem, or we are not going to see it in a services economy? robert: it is going to be difficult to see it in a services economy. we will not see the kind of growth rate we have historically seen. if you have a growth rate of 1.5% with the labor force growing 0% 2.5% we are not politically accustomed to seeing that little gdp growth. tom: you know personally what it is like for a bank to cost cut. how entrenched are the cost cuts at deutsche bank, barclays, and the american banks? robert: we have had a lot of authority taking place. it is becoming more specific rather than big, general layoffs. in addition what we are seeing
is a lot more specialization. certain banks are focusing on fixed income, equities, certain banks on wealth management. you are seeing the competition beginning to window out -- to winnow out certain parts of the competition. tom: if you are just waking up jenkins is out at barclays. john macfarlane will provide leadership in the coming months. stay with us. "bloomberg surveillance." ♪
executive chairman at barclays. john farrow sought down with mr. macfarlane. john: john, great to have you with us on bloomberg tv. a big headline saying that anthony jenkins is departing. we already stated that you needed a new skill set. the first question is, what are the skills you are looking for and how did you come about making that decision so quickly echo john mcfarland: -- john macfarlane: of course, we had the management crisis about three years ago when bob left, so anthony was given this terrible role, and he has come through that well. the company has stabilized. going forward, we have a very different agenda. if you look at the stock price
where it is now, it is the same as it was six years ago. it has a 2 in front of the number instead of a bigger number. when we reinforced the strategy at the off-site meeting and considering the execution of that, we realized we needed someone who could turn it around. we need more revenue growth more productivity. we need a more agile beast. the company is very democratic. john: you mentioned a share price. since anthony came on board, the share price was up around 46%. he was fired. that is not a secret. what was his reaction to that? john macfarlane: of course it is disappointing, but he is very affectional, the way he did it. anybody in this position would find it difficult.
john: you have not been in the role longer self, making quite an impression after a couple of months on the job. for the people looking at barclays now, wondering if this job is for me, are you going to find it hard to recruit someone to barclays? bob diamond -- the bank has decided to move on from anthony jenkins. who are you looking for now? john mcfarlane: we have good business between the investment banking business, regional commercial banks, the credit card company, and our african business. that is where we make our money. there is some touch point with that. we are going to look internally, externally. this is well trolled territory.
a lot of banks are looking for ceo's. we have get the right guy. i have been around barclays for an awful long time because i used to be in the u.k. barclays was one of the preeminent organizations. it has a fantastic brand, a tremendous draw card. john: when you look about the situation's direction, when we were looking at this being a change of strategy, the word "accelerate" stuck out. does it mean more aggressive job cuts? john mcfarlane: it means a number of things. to achieve what we are trying to achieve with the value, you need earnings growth. the celebrating -- accelerating those two things is required.
cost is important, but it is actually about revenue and increasing revenue growth way over the cost of capital growth. we missed allocating capital at the moment. of course, cost will play into this, but everybody is facing this, the cost ratios in the 60's. john: what are the unproductive areas specifically? do people have anything to worry about looking over the last quarter? john mcfarlane: it is not just about investment banking. it is everywhere. within each business, we have unproductive little cells, and we need to do with them. john: a successful bank in europe -- i can think of a few examples -- deutsche bank struggling with change. what does a successful bank in
europe look like now? john mcfarlane: if you look at the geographies of where we make our money, in europe, north america, and south africa -- we are very focused going forward. these are different businesses. in germany, north america -- we are really good at it. we are being much more focused. john: when you look at the regulatory environment in the u.k., and a lot of people have discussed considering their presence in the united kingdom -- going forward, is it in any interest at any bank, and for your specifically, to become bigger? is the direction the other way, to come -- to become smaller and leaner? john mcfarlane: smaller does
not pay a big -- smaller does not play a big role in that. i think we can deal with the regulatory changes. we do not agree with refinancing. john co this is the final question for you. you come in, you are aggressive and you make moves very quickly. is that a fair reputation, do you think? john mcfarlane: i am not going to talk about myself, but what i have done elsewhere might give you a clue. tom: john mcfarlane is the newly minted executive at barclays. i think of the grill, the picnic in connecticut on an afternoon in july. it used to be that somebody
would say go into plastics. now would you tell some young kid out of college to try to apply at barclays? is there a future in american banking? robert: i think there is a future. like a lot of industries, we get over expansion. during the 2005 2006, 2007 time period, we got over expansion. maybe we had people who did not have a passion for the business. i think there is still the future, but it is going to be narrower and for people who really want to be in that business, as opposed to this is the place to go. brendan: when i arrived in new york in 1997, the conservative thing to do was to go to an investment bank. the exciting thing to do was to go to a startup area that may have flipped. tom: do you see more consolidation? my experience is, when we get a time like this, things start combining. robert: when you have an
industry that is not growing or shrinking, they generally do not tend to get in front of the curve. they tend to be behind the curve. organizations usually are adjusting to a lower growth rate more slowly so i would guess there is more consolidation to come going forward. tom: i think i heard him say we are a credit card company. vonnie: i was just going to say, he made a big point that revenue growth is where he wants the bank to be at and revenue growth was down 9% last year. where is it going to come from? robert: you go back to your animal spirit nominal gdp. if gdp growth is running along at 3.5% to 4%, it is tough to get revenue growth in that environment. tom: when i am fascinated by -- you have had real world of experience -- the bank of america office is right outside st. paul's cathedral. do you need people in every city, or will the new technology
help the john macfarlanes do with technology? robert: if you are in the wholesale distribution business you do not need as many people. they are going back to their retail roots -- credit cards wealth management -- because that is where the growth is. there you do need people on the ground in the local areas and you heard him talking about geographically about where they concentrate their business. it is not global. i did not hear asia. tom: do they still do premier league soccer gekk brendan:? ? brendan: we are going to talk about the dollar in this hour. in the meantime, companies are keeping cash on deposit in the bank. that is the subject of today possible best chart and tom and
tom: good morning, everyone. "bloomberg surveillance." let's get to the single best chart with brendan greeley. brendan: mattress stuffing is the subject of today possible best chart. what we are looking at is deposits as a percentage of gdp. it is at 5.7% right now. that is its highest level since 1963. that is amazing. we have bob sinche with us here. what does that say to you? bob: it is not keeping it on deposit for the high interest rates. again, i think this gets back to the fact that global growth is not robust. the investment opportunities are not there particularly in the
manufacturing sectors where you would build up large amounts of capital to build facilities. as you guys have been mentioning, a lot of these technology companies, very few employees -- you do not need big facilities to produce information and technology. this is an adjustment process, and it is not the kind of economy we have been used to for the last 50 years. vonnie: has this buildup and consumers a fear that things will not get better anytime soon, or is it that they do not know what to do with this cash? robert: i think individuals are feeling the same way, that they do not know what to do with the cash. at least have the insurance. brendan: could we see these savings bleed at any point into waging creases? robert: the average earnings numbers that we got this week,
that is probably the least reliable wage series we have gotten because it is a mix of who was working and salary. we have had a lot of anecdotal evidence to that effect. we are starting to see that the labor market is tightening up. that it's back to your potential growth discussion from earlier. this economy has been growing to 2.3% 2.4%. that is the clearest evidence we have that potential growth is less than 2%. tom: i have been writing about that with john herman and michael feroli among others. do you buy the idea that the fed is behind and that the entire terminal rate that we are heading toward is a lower yields, lower interest rate economy? robert: the fed has been very slow to adjust to this expectation that growth has been less than 2%. they are talking about 3% next year.
a bit like the chicago cubs. we are at a point now where we are realizing that the potential growth is lower. they are taking that into their set of expectations. low potential growth probably means that the equilibrium rate is lower. brendan: that chart came from pavilion global markets. we have a great quote from the people who have pulled it together -- it seems like companies have no idea what to do with their cash. tom: let's get photos in right now. vonnie: number three top photo, an extremely rare white humpback whale, a famous one appeared beside a black humpback new australia. it would be his first sighting outside australian waters. tom: how do you do a biopsy sample? brendan: what is it like to be
so rare that when you show up people take little samples of your flesh to prove that it is you? that has to be so annoying. tom: next? vonnie: number two -- in melbourne, australia, sticking with a plan for a skyscraper. the building is inspired by -- guess what, tom -- beyonce's curves. can you see them there? tom: anything we say will be used against us. vonnie: that is her, by the way. brendan: the first rule in avoiding hr violations, is not to say "hr violations." vonnie: 20,000 gallons of water
and 200 tons of topsoil -- that is how you make a big mud -- brendan: i love it. vonnie: there is a mud king and a mud queens. brendan: i was going to say this is something that we in the brendan greeley household called "saturday." tom: let's get back to economics, finance, and investment. we will dovetail into greece and china. our twitter question -- already a huge response -- what scares you more, china's stock market or greece's debt crisis? stay with us. it is "bloomberg surveillance." good morning. ♪
on a wednesday as we try to get clarity. forget about sunday. brendan: we keep talking about the game of chicken and the cliff keeps receding into the distance. hans nichols set angela merkel was smiling after the meeting. sunday is a cliff. tom: we have some top headlines from around the world. here is vonnie quinn. vonnie: let's start in latin america. pope francis heads for bolivia after taking ecuador by storm. in a major speech, the pope calls for a new world order tease ease the plight of the poor. bolivia will be the second stop of his trip. bloomberg news is reporting you were china has been discussing -- uber china has been discussing plans with bankers.
the launch of apple music appears to have been good news for one of its competitors. spotify just had its best week ever in the u.s. apple store. the streaming music service just spent five days as the most popular iphone app in the u.s. those are tebow headlines -- those are top headlines. tom: it is good, but confusing at the same time. it is a little clunky, is how i would put it. let's get some perspective right now on the dollar. it is a movable feast with china, with greece. the collapse of gold that we showed earlier, oil cannot find a real bit. but at every moment, everyone in the industry keeps one eye on dollar dynamics. robert sinche joins us this morning.
do we have a possibility of an ever-stronger dollar that becomes a 1995 to 2000 strong dollar? bob: i do not think we will go back to the levels that we saw either in the reagan years or in the 1990's, but i think we are looking at an environment where the dollar continues to get stronger particularly versus european currencies. we are seeing production doing better in europe while industrial production is sagging in the u.s. now. tom: is it about a strong dollar or about other currencies being mediocre or weaker? bob: certainly in the case of the dollar we have the prospect of the fed normalizing policy. that is a big driver. abe is talking about the third part of abenomics.
this is really a default and we are seeing the movement going to the dollar, the end, and the swiss franc. tom: we have a headline that deserves bob sinche's comments. mohamed el-erian would suggest they cannot get to july 9. they have to do it today. what is your urgency about greece having to act? bob: the urgency is there is no time left. july 20 is coming very quickly. if they do not make that payment to the ecb, the ecb will be required to cut back in emergency lending assistance and the banking system fails. brendan: that headline is directed at the ecb directly. they have a meeting at 4:00 this afternoon frankfurt time, to decide whether to extend ela. tom: can mario draghi act independently? can he be a janet yellen, or is he tied at the hip to the
politics of the movement? bob: they do not want to take over for the politics. they will continue to move on on a slightly restrictive path. i doubt they cut the emergency lending assistance. i do not think they increase it either. i think they tried to keep it status quo, moving along until the politics gets decided. tom: the euro weakens off of this headline. vonnie: we may be in a precarious situation with emerging markets. are we? the fact that we have potential further slowdown in china now, that is the big news here in china. that creates some slowdown, in one of the few areas of the world that is growing. that spills over in terms of global growth, commodity demand and that is a big part of emerging markets. tom: bob sinche, thank you for being with us on a many storied morning.
ultimatum as they prepare for black scenarios. the chinese roulette will as stopped spinning. beijing goes in search of a healthy sustained stock market and global economic turmoil was made for what amir putin. -- vladimir putin. good morning everyone i am tom keene with the vonnie quinn and brendan greeley. in bremner will join us -- ian bremner will join us in a bit. vonnie: trillions of dollars of market value go down the drain in china. the shanghai composite index fell 60% today hitting a three month low. it has lost more than 30% in less than a month. much of the investor money is borrowed. chinese governments trying to drop up small cap sox -- cap stocks.
the selloff by foreign investors is accelerating. european leaders tell greece -- take us or leave us. they could be kicked out of the euro if they don't accept new bailout terms by sunday. greece is been told to come up with new economic reforms but the prime minister told the european polar and -- parliament that he will deliver. >> in the next two to three days we want to provide proposals in detail and i am confident we will be able to meet the obligations of this crucial time in the best interest of greece. vonnie: in greek cities lines at atms group longer. the banks shut four days are supposed to reopen tomorrow. antony jenkins is out as chief executive and jenkins cut
thousands of jobs and sold assets. barkley says new leadership is needed. >> we discussed strategy at the offset meeting and considered how we might bring forward the execution of that and realized we needed a different approach. we need more revenue growth and product stability. the company is very bureaucratic. >> he will take over as executive chairman will they look for ceo and he is promising to make more cost cuts. a new wave of layoffs coming at microsoft perhaps as soon as today. it will affect the hardware group including the smug -- struggling smartphone group. it will be over and above the 18,000 job cuts the company
announced last year. the u.s. women's soccer team will be welcomed in the canyon of heroes. thousands cheered them yesterday in los angeles and they are getting a tickertape parade friday in new york. those are the top headlines. tom:? for this? brendan: likely not. i get up at 3:00 in the morning am a i don't do everything but this. i would like to lobby fee for to pay them as much as they do the -- fifa to pay them as much as the male players. tom: the collapse of chinese equities continues. to an extent it is a discrete chinese event and we will speak to ian bremner about this in a moment. we will go to nick wadhams in beijing. do you link the hang seng index
into what is going on in shanghai and beijing. are they separate and discrete or is it all one collapse >> it is a little bit of both. the whole china market collapse has been a share driven and that is still very much a closed market with some exceptions. the hang seng index has been much more muted on the way up and just faltered a bit on the way down in comparison. there are a number of dynamics we can explore with that but so far it is discrete and separate. brendan boy -- brendan: the chinese government has been intervening but are they having a crisis of legitimacy? >> if you look at some of these moves it does seem to be mostly
a sentiment. we had a move today with a government told companies not to sell off shares of their listed units. that is the kind of situation you cannot imagine a saint -- state owned company selling shares of its listed units anyhow and the government has promised to give the market a more decisive role. at the same time other governments, the united states has intervened in times of financial crisis so i think it is a bit too early to say the government is undermining its legitimacy but there is still quite a ways to go for this to play out. vonnie: so many operations have been undertaken, is there more to come >> the question is how low does the market go and are they really going to bring out the big guns. they could cut interest rates
again and lower the reserve ratio requirement. some of these measures so far appear to be sort of aimed at sentiment. the market is still up a little bit so far this year. i think the government has to look at how much is this going to leech into the rest of the economy. even the price of bigs and soybeans are down and there is some indication that people are buying fewer cars. once we get a better sense of how this is expanding into the rest of the economy you could see heavier measures by the government. tom: mr. tsipras is speaking at the eu parliament advancing the story forward. hans nichols will be with us in a bit as mr. tsipras begins to explain. he is just back from china. yet bremner -- ian bremner -- i
want to go to a chart because i think you and i are on the same page that the panic in the moment. there is a huge china rally and this is a very contained fall. you have seen this before what is different this time about the contained and measured chinese pullback? >> two things i heard and that was before most of this recent selloff but first it was the notion that the runoff in chinese stocks was completely disconnected with general sentiment in the chinese economy which has been very stable, decreasing growth but nothing that people are overtly concerned about. there is actually an enormous amount of confidence about the leadership and the structural developments.
i saw that across the board. people in the chinese market are not there for years are evened months. they are therefore weeks. tom: m.i.t., the classic panics and crashes. this is no different of kindleberger of a u.s. market when it was not as mature as it is now. >> in a sense it is even worse because it is still very much concerned and closed by the chinese government. the problem is that for the chinese government one of their key reforms is trying to engage in financial reform but that means allowing investors to take pain. the answer is that you can do it a little but the willingness of the chinese government to allow it to happen significantly -- if you watch the chinese state owned media they are doing what
they can to talk the market up. you actually see chinese state funds thing they are putting more money into stocks. this is not a communist system or a capitalist system. having said that, i don't see these problems as saying that suddenly the chinese economy are any less strong than we thought last week. brendan: the chinese government is in the middle of a conscious attempt to take the shadow banking double and turn them into equity investment but the question of the morning is, is the stock market in china the casino or an indicator? >> i am saying it is still the casino but the willingness to move in that direction will be tentative and i heard that from every single angle and i think you heard that play through this week. it is very different from the second-largest economy in the world and saying there are different problems. tom: will greece have a new
currency one year from now? >> i don't think they will. it had become more likely that it was that on balance -- tom: you would push against the idea that they will move away and stay within the euro? >> i think they desperately want to but it still takes two to tango. i still don't see grexit at this point. tom: coming up, not only ian bremmer but we will bring you deutsche bank about the great distortion, the many great distortions that we see in the interest rate market. ♪
tom: good morning everyone bloomberg "surveillance." tsipras is in strasburg. hans nichols is in brussels this morning. hans, tsipras goes to strasburg. who will he speak to? hans: right now it looks like he is speaking to eu creditors but he may have made a blunder by saying he would have had a deal if he had just done this with the eu. that will not go down well in
brussels or berlin are places like amsterdam. tom: within all of your good study, is this a changed tsipras in the last three days? hans: three minutes ago i would have said yes. they submitted this esm document that had three important concessions. they were asking for three years not two and they talked about prior actions as early as next week. that is doing things in parliament to say they are serious and they were pretty fuzzy on the debt write-down. that is a formal request for a three-year loan as a positive sign. it is not definitive because we still need to know what the details are but listening to tsipras now especially saying we would've had a deal had it just been with the eu, it's like he wants to go out of his way to antagonize merkel, schaeuble and the imf. brendan: it sounds like if they
are fuzzy on the idea of a debt write-down that looks like a concession? hans: yes. the way it was phrased and i just glanced at the document was we welcome the opportunity to discuss some sort of measures to make their debt more sustainable. that is a long way from saying we demand a debt write-down before we talk about prior action or any of the things we need to do to structurally reform our economy let alone how they raise taxes, collect taxes and distribute pensions. tom: the euro 1.1016. brendan: not demanding debt write-down upfront is the key concession. >> where you can see agreement is after the greeks say they are
prepared to take these measures and then it comes. the imf has given them legitimacy to make that argument but their debt will be sustainable for a short period of time but they will need eventual write-downs and everybody understands this. for me this is a different tsipras because he has political credibility. tom: he didn't have that until the no referendum. dominique constant with us next. ♪
tom: good morning, everyone. bloomberg "surveillance." vonnie: a midair crash is raising new questions about airspace limits their military bases. an f-16 fighter and a private cessna collided over south carolina. both in the small plane were killed. it happened near an air force base north of charleston.
jpmorgan is reportedly ready to settle allegations of credit card and debt collection abuses. the wall street journal says the bank will pay at least $125 million to resolve the claims. gave false data to debt buyers. more firings for donald trump. espn and the professional golfers association are dropping tournaments near los angeles. the latest reactions to trump's insults the mexican immigrants when he launched his presidential campaign. tom: every day a business walks away. we have tsipras making headlines and juncker speaking. brendan: the other headline that
jumps for me is the irish prime minister says greek's aid application wasn't the right thing to do. tom: the small countries are key here. let me get your attention right now. the 10 year yield is nearing the negative rate. maybe china and maybe greece. dominic is the expert at synthesizing rates, economics and politics. he is with ian bremmer this morning. uni could go for two hours on four different topics. that is a long day. let's focus on the great distortion that we all see in your rate space. what should we take away from lower negative rates in germany, sweden switzerland and a 30 year bond under 3% in the u.s.?
guest: i guess you can say that it signals a lot of complacency over the fact that the premiums are zero negatives in some market. it is a hangover from kiwi in terms of what the feds are doing and what the ecb has done. tom: does it adjust how janet yellen and -- act in september or december? guest: i don't think so. obviously they want to normalize rates but just because normal rates are lower than they might otherwise be doesn't mean they should be more aggressive on the front rates. especially not now. in the end markets will correct themselves but you have to be very careful. lots of metrics going into what we had a few years ago. vonnie: these lower term premiums, what is it signaling? that we will see deflation?
we are seeing a in china and many countries around the world. will it be extended? guest: not necessarily. the whole point is that it is different from issues of inflation expectation and things like that. what it means is that investors are desperate for yields and they push things down because structurally interest rates are lower. tom: you use the word desperate you are stars in two different worlds. is your world paying attention to the financial signals from dominic's world? guest: not particularly. you see a greece that is economic and political and in china is see a problem that is in some ways fundamentally political and in puerto rico an
issue that is fundamentally economic -- there are two tracks on all of these fronts. tom: within this is the idea of what central banks can do. does draghi stay removed? is he independent? tom: it is not like the fed. guest: it is difficult because they hold the fate of the greek banking system in their hands. some of those decisions are political in terms of how far you can continue. >> the decision today will be fundamentally political and i also think this sunday deadline, if there are constructive negotiations doesn't mean it's really sunday? brendan: one point of evidence that the ecb is necessarily political is that when a german leaves the board it is said we
need to find another german to go back on the board. you cannot just grab somebody at random. tom: polder gallardo makes a decision -- paul to gallardo makes a decision between solvency. where are we? guest: the greek bank is more or less considered solvent or the ecb would pull the plug. liquidity is a big issue. solvency and liquidity will converge. tom: this is a sensitive question, can there challenges affect european banking or are they removed? guest: more than ever before they are seeing some removal. there have been big strides. but i think the issue on the direct impact will be how people perceive the eurozone if people or to leave and you are one economic cycle away. tom: we will stay.
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lost more than 30% in less than a month. the investor on paper topped $3 trillion. foreign investors are dumping shares at an increasing pace. at one point, market limits stop trading on more than two thirds of all stock. facing a take it or leave it deadline on sunday greece is making a new bailout did. bloomberg news is learning the country is changing its request from two to three years and is looking to start pension reforms as early as next week. european leaders told greece it could be kicked from the eurozone if it doesn't accept new bailout terms but this morning the greek prime minister promised action. >> in the next two or three days we will be taking concrete proposals in detail and i am confident that in the next few days we will be able to meet the obligations of this crucial time
in the interest of greece and the eurozone. vonnie: lines of atms grew longer today and the banks shut four days are supposed to reopen tomorrow. some say they are closer than ever to a deal on iran's nuclear program. iran once the u.s. arms embargo limited. negotiators are giving themselves until friday to finalize terms. the chief of spacex says his company doesn't know why the rocket disintegrated last month after lunch. elon musk told bloomberg engineers are getting the program back on track. >> it's definitely a setback but i think it is something -- we're coming from any to make sure that there are no issues and we address future flights. we still get a lot of support from nasa and commercial
companies doing commercial satellite launches. >> is the seventh spacex mission to resupply the space station. serena williams is stocking the title at wimbledon. she reached the semifinals and plays maria sharapova next. he finally beat kevin anderson and the natural's -- match was suspended the night before because of darkness. tom but you never stop when it gets start. hockey wise. tom: let's go to a mac monitor and i will save the entire desk from that one. let's have some common sense into the china debate. up we go. what is so important here is that this is a normal decline. we are within the huge volatility of china.
we are in a normal decline here even though the numbers -- the reporting of your torture bank team on china, -- your deutsche bank team on china -- how do they link -- guest: the bottom line is that when credit from one part of the economy into another part of the economy the stock market. in a sort of typical developing economy, -- tom: where does ago next? guest: a lot of it is getting destroyed obviously and that is kind of the answer. i tried to leave the country which to some extent you see the reserve data creeping out what is in the process of getting destroyed. the chinese economy is clearly not doing very well. >> i would say 7.1% official
growth seems comfortable for most of them are -- them. you see anticorruption reforms moving ahead as planned. pretty much everything the government is doing has been. -- not according to grand plan but feels comfortable and decisive. it is not 11% growth but the chinese economy feels comfortable to me. tom: will continue and look at the fed here in a bit. and improving data check from where we were two hours ago. -22 on futures. -13 is still grim. the eurodollar is a little bit fragile. we're looking at every back and forth. american oil has been very stable this morning.
on to the next board, the greek bond -- i don't know what else to say, when you get to 60% that is a different market. brendan: this is "bloomberg surveillance." today the fed will release its minutes from the june meeting and will mattingly is stratus and is waiting to read those minutes highlighter in hand. it is been a really busy month you think these minutes are old news? >> really excited to read the tea leaves and willing to a knowledge they are probably a little bit dated at his point. obviously everybody will be paying close attention to all of the passages related to any kind of rate increase. the last time we got a good sense that it wasn't coming in july that people were going to split on whether it would be two increases or one and that is what everybody will be focused
on but everything happening in greece right now and now happening in china wasn't happening when this meeting occurred in mid-june. on some level that casts a shadow about what we will be looking for today. i think it is important to note where the fed comes down on the economy. we saw personal spending tick up to a level it hadn't 2009. some positives moving away from a dovish position and more toward a robust look but it all has to be viewed through the guys of what is happening today and what is happening in mid-june. it might be more important than when janet yellen speaks this week. brendan: taking a look at the minutes coming out later today. when you read those minutes you expect to find janet yellen looking abroad for guidance? >> the minutes will focus on what is going on domestically. i think the issue for the minutes is the change we saw the
hawks capitulated in terms of their expectations because they didn't get the hikes they wanted early on but it will be interesting to see how they capitulated in the us sense that it has a gun as far as they helped. tom: you would write legendary research pieces about measure. are we going to see such a desperation for control by the central bank or is there a new regime? >> i think we are a long way away from a rate hike. there is a window with a can raise rates. they will try to do it in december but i think it is unlikely. tom: you think they will wait until next year? >> they may. the window will close if they are not careful. tom: where does it stay in that scenario? >> if greece settles down and
commodities settle down then you can basically get back to some kind of risk premium wooden back into the long and but to be honest, in our model, the 10 year is trying to save the value. it is not badly priced. tom: the backdrop for this phenomenal gdp is lagarde's new mediocre. >> it is the new mediocre but it is also the increasing black swan risk environment. europe is very vulnerable to the next shoe dropping and the next big terrorist attack. russia/ukraine and what happens if they get more unnerved. there is way tootom: this is a fat tail environment, how big are the fat tails now? >> bigger than you want them to
the. you have to be very careful on monetary policy. brendan: your known risks are they political or financial? >> i think there are some economic risks. people take it for granted that they think the u.s. economy is doing really well and it dragging the rest of the world with it. it has been tracking it -- dragging the world a little bit but not as well as you want it to be doing. tom: we have a twitter question. which scares you more? china's stock market or the greek debt crisis? we are getting some great responses. futures were -22 and they have improved as we move toward the in :00 hour -- toward the 8:00
your attention. breaking news out of asia. iron ore falls a solid 10%. throw up the chart, this is the correlation of chinese equity markets. a white line with the iron ore price. there is a lot of moving parts but that is upward. brendan: the question we have been looking at all morning is the stockmarket a casino or an indicator of the underlying economy. iron ore is the real economy. the other risk we have been looking at is the risk of a euro exit for greece. eric chester just got back from greece and this morning you will turn your eyes to -- guest: he is the economic commissioner and he reports that jean-claude juncker who has one
of three important seats at the table. there is the imf and the ecb. he has been relentlessly optimistic about the prospect for a deal. i want to see if it is yet time now with this sunday deadline for the optimism to turn to realism. brendan: the optimism in brussels has been the biggest cheerleader for greece. we just heard alexis tsipras say if i only had to negotiate with the eu we would have done this deal months ago. guest: i'm not so sure about that. one thing that he can tell us is how much daylight there is between the french and the germans. >> if he only had to negotiate with the eu and not the left wing of his own party, that may be true. tom: i will go back to a guy named olli rehn.
endless smile and endless happy. do you see that diminishing? >> endless bureaucratic work. he was always jolly. americans are bored by that. as well they should be. but even if this falls apart and if u.s. me will we see a greek exit in a week, the answer is no because the greeks have all sorts of ways to play this out. tom: you were in athens. how can they play out a lack of fuel, i lack of insulin or whatever? >> it hasn't hit hard enough yet. this is the crazy thing about greece how life goes on almost as normal. the greeks are amazingly tolerant of the limits placed on their economic freedom. when it starts disappearing off of store shelves --?
tom: let's get to our top headlines. vonnie: the u.s. army's ranks would affect throughout the world. reporting to drop thousands of soldiers in the next two years. the announcement is expected this week. uber is trying to raise $1 billion for the chinese is this. over is proposing a valuation of $1 million, it is the first time they have told investors their operations in a specific country. apple music is striking a three quart for its competitor.
for five days the streaming music service was the ninth most popular app. do you use spotify? tom: i used it and i quit. apple music to me is very cool. i loved the wall street journal article today, it is a little clunky. i cannot imagine where it will be in a few years. vonnie: i'm amazed that they get everything else right. brendan: they are a hardware company but not a software company. we could talk about spotify forever. we will move to russia. the combined economic output of russia, brazil and china was half that of the u.s. and now it is almost even. brick leaders arrive in russia today for their annual meeting. vladimir putin just spoke and ian bremmer takes a strike and
waves it for political risk. will it ever be more important than the g7? >> no. it won't be more important but it will increasingly challenge. we are all very excited and we are all focusing our gaze directly at it but there is no question that the russians see their involvement in the bricks increasingly in a lot of chinese lead international institutions. the asian infrastructure investment act as the way that not only they avoid u.s. pressure but also the way they challenge u.s. global hegemony. it is effective. when i talked to russian officials they are talking how they want to create with the chinese a bunch of economic infrastructure that undermines american power. brendan: what is that economic
infrastructure? is this the new silk road or the transit to europe, what is the most important piece? >> right now is the fact that the chinese are spending over $1 trillion building infrastructure with conditionality links to capitalism as opposed to the market. this past week you have a new piece of legislation on national security from china that has included within it that all individuals in china must actually have identification tied to their real physical id. no more anonymity. i bet the russians do the same thing. if your apple with your security in the cloud, those markets will be fundamentally problematic for you. i think the russians can hurt that. tom: they put six to seven geographies together and then they crash. andrew kramer on islamic units
fighting with ukrainians in russia. that to me shows the shock that a surprise could come. what is in bremner's surprised through september? >> the one thing no one is looking at right now and the thing that worries me most about russia is if they lose the world cup. i would be watching the fee for -- fifa negotiations. tom: you are serious? >> we are talking what every oligarch that has tens of billions of dollars invested and if he loses this it is a huge hit to his support. tom: russia is separate from kotter -- qatar? brendan: they will re-examine that vote and i think they have to take it away from qatar. it is something that even sepp blatter conceded but i don't think our -- see how russia
loses it at this point. there is too much infrastructure built in russia is a plausible place to hold the world cup. >> i am not suggesting it is going to happen but it doesn't have to be 2018 they were moving the month for qatar and they could move the year for russia. manus: tom: the basic idea that angela merkel will go against her german people to get a solution for greece. will she abandon her people? >> she is still quite popular and schaeuble is more popular in greece which is shocking to think about. i think merkel does not want to see this go down on her watch. she is prepared to accept grexit if you can blame the greeks. what tsipras as done successfully is that she is shifted the narrative.
>> she is going to win again. brendan: i have read a lot of announcements recently that she sees her job right now in grand historical terms, she will not be the one who screwed it up. vonnie: time to answer our twitter question of the day. which country scares you more china's stock market or greek's debt crisis? china has some economic issues which are already affecting the world economy for example commodity prices. greek is just broke. second, the grexit is far more important. china has all the money in the world and could potentially fix itself and greece could potentially kill the euro. tom: it is a risk. vonnie: third answer. neither -- puerto rico. which we should say is playing in concord cap today. -- concacap today.
brendan: i'm surprised i haven't brought it up. tom: i will start with greece. aggressive it is an off day but it is not. hans nichols making very clear that headlined by headline we move forward and i guess we move forward between tomorrow and midnight. the pumpkin turns into a carriage or the carriage into a punk and. -- pumpkin. brendan: i'm so confused by that. tom: i don't know where cinderella is tomorrow but this is really serious. vonnie: you will be asking me in a moment on the radio -- asking nick in a moment on the radio. we get to our agendas and ian would let you have one today. the unofficial kickoff to q2 earnings. watching out for those. brendan: mine is in d.c.. the head of the fbi will be speaking to the senate today are doing in favor of relaxing
encryption. phil mattingly joins us from d.c. to help us understand what is going on. what are the constituencies in d.c.? >> law enforcement in the white house. this is a huge issue that has been bubbling since google and apple last fall changed their operating systems in a way that law enforcement can no longer get a warrant and ask those companies for decrypted data. those companies in the wake of edward snowden have made it clear they are not willing to negotiate with the government on this. there have been a lot of behind-the-scenes closed-door meetings at the white house to figure out and middleground solution and nothing has been discovered. this hearing will blowout everything into the open. everyone will need to pay attention in the months ahead and it is not just a minor squabble. david cameron has talked about
this. president obama has talked about this. they talked about it in terms of something with no solution on its face. brendan: phil mattingly will be watching james komi speak on the hill today. ian bremmer, really quick this issue requires that lawmakers understand technology which is never a good bet. >> the big problem with the regulation is that treasury and homeland security don't really talk to each other and we will see the same thing on cyber issues. brendan: "surveillance" will continue on radio. on "market makers" we will talk to her muska vinci -- pierre moscovici. we can talk about exotic this shocks. thank you for helping us take another look at vladimir putin this morning. he just got done speaking. we are here in new york.
i'm stephanie ruhle. erik: i'm erik schatzker pair you have not see me for a while in this chair. it is good to be back. what a morning we have paired there is new information on greece and its request for a european bailout. chinese stocks are in a full meltdown. barclays in the use k, it is out. , it's ceo, anthony jenkins. stephanie: we have got an extraordinary lineup. erik: the economic affairs commissioner coming up in just about an hour. so many questions on how this crisis in greece can be resolved . he has some answers. i am hoping some good ones.