u 'doe t eth dvery. oding uc pwiwiro fi hthatpsroui francine: anything is possible even a rate hike in september says fed dudley. will economy coming up in 30 minutes. wti -- we talked to former opec president chakib khelil. ♪ francine: welcome to "the pulse." live from bloomberg's european headquarters. i'm francine lacqua. we have a great deal of conversations coming up.
we have a lot lined up for you including one conversation with the former opec president and algerian oil minister, chakib khelil. the good thing is he will be up to put every thing into context and say why opec costs are different now. we are having breaking news from the middle east sovereign wealth fund. we speak to the ceo on a fairly regular basis. it has returned to profits. this is because it's trading division made some money. this is a huge sovereign wealth fund. biggesttually the sovereign wealth fund in the world. there were concerns about the impact that oil has had and on the sovereign wealth fund saying it has returned to gains in the second quarter even as it warns low interest rates will put pressure on returns and this as we have seen more withdrawals
from the government. it is on some of the gains are due to the way they positioned on the bond. let's get straight to your markets. this is a picture overall, -- dollartocks are actually being under quite a lot of pressure yesterday. today, it seems it is the reverse side. we did have two hawkish comments from fed officials. south korea's one actually tumbling by the most since brexit. golden declining. we are in a risk-off move. let's get to bloomberg first word news with nejra cehic. nejra: the bank of england has found enough bonds to buy to meet its weekly target. the boe purchased 1.7 one billion -- that comes after an attempt last week. of the target. cisco systems is reportedly
cutting 14,000 jobs worldwide, 20% of its workforce. the networking a permit giant announced layoffs -- will announce layoffs in the next few weeks. -- requires workers with different skill sets. a spokeswoman declined for comments. japanese shares climbed on volume this morning. exporters are getting as the yen halted its advanced after surpassing 100 per dollar. it is the second time that the currency has risen above the level. will the roth says the republican presidential cut toinee -- he also spoke bloomberg about how trump would balance the books. >> the way that the trump plans to ellis the book, i am not sure -- the books will be exactly balanced.
it calls for a stimulating the economy in generating more revenues for government. nejra: global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. francine: a september hike is possible says fed dudley. he says he would not rule out one. investors are not betting on it. will today's minutes convince investors where the deadly -- whether dudley could not. economist.h senior we have two fed presidents hawkish and dudley saying a september hike is possible. your of lockhart saying we will definitely get one rate hike this year. >> this reminds me of a fairytale comment.
the boy who cried wolf. we have a series of fed presidents trying to ensure the markets believe them in terms of meetings for the rest of the year. traders simply believe the key points on average earnings, the ones we know our closest to the heart of the fed chair yellen, just sibley not those data points that have outperformed in the last few weeks that have driven some commentators. she is waiting for wage growth. you want to see earnings tipping up. also, you've got to look at the commodity markets and whether that is going to start to cost push inflation. given that none of those signals coming through, i think you need to look at risks are very
asymmetric. it doesn't generate as many headlines or talking points but it is perfectly rational situation given where the full basket of data is. francine: what are you expecting from the fed minutes today? that jelly -- that janet yellen speech, that should give more been insight. simon: there are two point. as well, it is whether they continue to believe that the international macroeconomic environment is becoming more start of the tightening over the next couple of maintenance. -- couple of meetings. in reference to brexit, there's going to be a fallout and it will spill over into non-european countries. the fed will want to reference it that. the second part of it is do they still believe that those
inflation matches are the key once to be concerned about? are they starting to look at a broader basket of metrics around industrial activity numbers? the softening of the dollar? inflation -- later on in the year. francine: we caught up with paul. remember, thisn is what he had to say about the currency policy makes for the central banks. -- monetarymination policy is pretty ineffective for a while we came in thinking monetary policy at zero rates was ineffective. then a cult -- the long can qe and negative rates. i didn't think it was possible.
much.not doing very francine: do we need to rethink how central banks operate? do we need to give them a different mandate, because they have done a lot. it is difficult to go back and say what would the world look like have they not done it. it is difficult to argue it that it has worked. >> what you see is where getting into this stage where central banks focus on me knowing their mandates. you need to -- there's been a real intellectual blind spot on behalf of government on what the legacy of historically low nominal rates are is going to be across the board. the kind of economic structures that we are allowed to build up in the 1970's, 1980's and 1990's, you can hang your hair gets hang your hat on inflation
-- hang your hat on bond yields, interest rates evening out at 5%. that is a world of the past. the problem is the economic structures that were booked up, welfare systems, labor markets, automatic stabilizers are closing. would not necessarily say that you have to load the fiscal -- start stimulus spending. but what you need is to have governments that recognize the legacy of bond yields is not solely making their borrowing cheaper over each fiscal round. there are fundamental questions being asked, the kind of economic structures but will they be sustainable over the next 20 years? francine: simon french, thank you so much. stay with "the pulse." we hear from steep when -- we hear from steve when.
nejra: abn amro has said second quarter profits dropped by 35% on provisions for legal costs. the state-controlled dutch lender who returned to the market says net income fell to 291 million euros. it was one of the world's largest banks. it was transformed under state ownership and it focused on the netherlands. -- reported first-quarter profits that missed analyst estimates. earningsh brewer says to $522 -- fell million. the company's ceo will be on surveillance this morning at 10:30 u.k. time. and the giant, praxair a tie up between the two companies would create the world largest supplier of industrial gases. any potential merger is going to
face scrutiny. shares of slumped and cathay pacific after reported first half profits that would -- that missed. income fell to 45.5 million u.s. dollars. losses from hedging fuel market the gauge from caring more passengers. -- 10:15 u.k. time. that is bloomberg business flash. francine: within the last few minutes we heard that the ways sovereign wealth fund -- that norway's sovereign wealth fund has returned to profit. aton french, when you look what the norwegians put out -- i you said it is difficult not to make money when you look at bonds. this is the division that outperformed. 1.3%, bonds
outperforming. really q2 in contrast to q1 where the fund made a loss. it was a much more favorable trading environment for which the sovereign wealth fund to make money. there are two points before we going -- before we go on. there was an interesting report. adding ahead of fiscal events that may change the investment last cake -- investment landscape. london reflecting the backs of vote. the norwegians had a respectable history of the ethical stance they take in terms of terms ofts in .hareholder activism they lined themselves up in -- as we go through the reports for
indications for based change in stance and that. francine: are the operating like some of our pension funds and should? is it much more risky? simon: the questions for the norwegians is their revenues are heavily exposed to oil and gas. you want to attack at the head. the scale of the sovereign wealth funds, along with many of the sovereign wealth funds around the world, is that to some extent they cannot really bust the market too far given their scale. you tend to see a very strong correlation between the broader asset classes performance and the wealth funds, the clever if we get ation -- sub $50 oil price for a system pill of time. -- system period of time.
francine: we could have a correction of an asset classes. i have never seen a market where anything is rising at the same time. simon: it is quite impressive. i think i would go with the equities. standpoint, --ve foreign equity standpoint, i , the the kind of valuation kind of pressure earnings metrics you could swallow for equities at the moment, how much higher have they been historically due to the rates? run.y good francine: when a we going to see growth? does it come a couple of years after the fed starts hiking? is it for years down the line? simon: i take issue with the idea that we have not had
growth. if you look at a global level, where on a very persistent, albeit, slightly boring trend growth path around 3.5%. the question is will he get a break out to the top and? i have to confess to being a little bit; on a lot of the growth figures reflecting on the speed in which the new economy is generating wealth, generating economic activity. the ability to measure a lot of the destruction that is going on , particularly in the digital sphere. i suspect there is more growth but we have not -- we have to get used to lower nominal numbers and also our growth figures. francine: simon, think you so much for the growth numbers. and aillion of boundless forge a $50 facial. 50 dollaroreign to
attractions squarely at adults. ♪ >> when people say family-friendly, casinos are not for children. resort, thedult city of macau. its offerings in food and beverage, gaming, all of this conventions, meeting space, entertainment are pitched for the 21-year-old and above. there are better places for kids than macau or las vegas. 5% of theess than visitors to las vegas are under 21. >> you're trying to attract a mass-market? >> i'm trying to appeal to everybody in the world and make them say you got to go to macau to stay in this hotel. it is the greatest experience you can imagine. that is the definition of everest occasion.
it is just -- the definition of diversification. -- in the sense of the hospitality industry you spend more money on the rooms, on the food, on the restaurants and on the meeting facilities. that is diversification. it doesn't mean adding a roller coaster or ferris wheel. >> you applied for 2080 gaming tables and you ended up getting wanted to 50 altogether. what was your reaction? >> we thought 100 was the minimum and we planned accordingly. we hired accordingly. if you ask a fellow that has a hotel that includes a gaming room, they will say it is much better to be under spread and games than overspread. no one likes to see it bunch of idle tables.
>> it seems as if now times have changed. the message has come coming -- has changed coming from the regulators. they want to clamp down more. down.- >> the clinton -- the clamping down, the demand went away, the customers went away. i don't think the government took aim at the operators. that is not my opinion. the policies of central had anent in beijing effect of reducing consumer spending at the high-end, louis vuitton, chanel. gaming fell into that category. aggressivewere more spenders seemed to have been
constrained by the atmosphere. that is certainly impacted the these junketivity operators brought to the table. they have shrunk and disappeared. >> are we in the recovery? >> the question. i don't know -- good question. i don't know. it is hard to answer that. i think everybody's waiting to see what impact this has. that opened places the not cause the market to grow, did they? no. good question. we might get finance to that in september or october. >> what a character. that was steep when -- steve wynn. and the chinese would
like to make it more family-friendly. have you ever went to macau? what do we understand about the chinese authorities? they are doing something with account to try and attract a different tourism. simon: one of the big challenges at the start of the year was capital outflows from china through the unregulated roots -- routes. the chinese are concerned and have a handle on unregulated routes. it is through the commodities trading route, through their links into hong kong. we saw a data point that -- aints -- imports suggestion that invoices were being created to move capital offshore. that is the real chinese -- the real challenge for chinese ringleaders. francine: simon french, chief economist stays with us could
-- it is a surprise, this jobless claims counts. we do have two pieces of of how the u.k. is faring post brexit. if you look at the claimant's count, it is the most of july. 353.pound at 1 back to simon french. a quick reaction first. u.k. employment figures in line, apart from the jobless claims changing. do you read a lot into that? simon: the jobless claims is definitely something to focus on which is related to july in the post brexit period. that is consistent from what we have seen from the recruiting surveys. rather than delaying or putting decisions, employers are generally taking a more cautious stance. in theerlying momentum
u.k. labor market, which has been a strong story, thanks in part to the chart behind you, which shows that real wage growth was negative for most of the for five years following the financial crisis, it allowed labor in the u.k. to become more competitive. and employers continue to want out labor, because it remains fairly cheap. that is why we continue to see a fairly decent performance and why sterling is reacting, because you did not see a rapid movement in the claimant count. francine: is it seasonal? it seems a little counterintuitive. is that fair? simon: i do not think it is fair to describe -- a scribe seasonal factors to this. when we get to employment in the u.k. and the u.s., you will get a lot of volatility around what is becoming a static nature --
picture. therefore, reading too much into one month of data would be a mistake at this point. francine: and you are helping the government push some of the things through with rationalization. how does the government look at this data, because they have so little data post ranks, yet the after statement -- probably get a few more prints on the labor market side. that oversees the key concern for government. perhaps not from a mechanical point of view as much as the concern would that they still had the fiscal rules in place that dominated the last parliament. the advantage of the last notcellor is that they do have the same restraints. so if we start to see a reversal in the labor market picture and the response in terms of income probably doese
not have too much of a bind in the autumn statement. but in the data thus far, it is a slow burn in terms of brexit. francine: what about mark carney, does he look through inflation? simon: he does. but this is not a mark carney thing. this is a bank of england thing. persistently prepared to look through periods of inflation as a result of temporary factors, such as the massive depreciation in the sterling. since lasttion november. that will push inflation, in my model, up towards 3% 12 months out from today. i expect the bank of england to look through that. they are in stimulus mode. francine: and the options yesterday did not go badly. they found enough stuff to buy. simon: they did. was a hiccup.rst
$50 million short pier 1 you saw was the market was quite a in terms of volume for parts of the summer. and it was not used to qe. been outof england has of the market for four years. it was just trading desks. a lot of the work done by the bank of england to warm up trade ahead of yesterday's auction was successful in terms of coverage. francine: what are you thinking for retail sales? , we areetail sales looking at around 4% growth. indicator ofged the return of real wage growth, the return of decent summer weather following a difficult start to the summer trading period. problems come later in the year. francine: simon, thank you for now. chief economist at panmure gordon.
the bank of england found enough bonds to buy to meet its weekly target. they purchased 1.17 billion pounds of gilt. cisco systems is reportedly to cut off to 20% of its workforce. according to crn, the layoffs will be announced in the next few weeks. cisco has been shifting its business to network-based software products, which requires different skill sets. on thin shares climbed volume. exporters are gaining as the yen halted its advanced after briefly costing 100 per dollar. it was the second time this year wentjapanese currency has over that level. global news 24 hours a day, powered by our 2400 journalists and analysts in more than 120 countries.
i am they which a hitch. this is bloomberg. francine: thank you. coming up, oil halts its advanced. we speak to the former orbotech khelil.minister chakib skittish?s the fed so that is coming up on "bloomberg surveillance." as we head to break, meet one man who is bullish on the worst performing currency in europe. this is bloomberg. >> on a personal basis, i bought some sterling. we do not speculate in currency in the fund. always hedges back to dollars. our investors gave us dollars. we want to give them dollars back. on a personal basis, i think sterling may be getting overdone. so i do not quite agree with george soros. ♪
francine: european stocks lower. let's head to the bloomberg with nejra cehic. nejra: european stocks down 3/10 of 1% if we look at the stoxx 600. they are heading for their longest run without gains in two months. investors reevaluating the recent rally, where the dax moved into a bull market. and we got the hawkish comments from dudley and lockhart of the fed. i want to dig into grr on the
bloomberg. most industry groups lower, with technology and chemical stocks leading the losses. tech stocks down almost 1%. the worst performer on the benchmark today is admiral group. you can see a down 7.9% at the moment. it has fallen the most since june 24. this is after it had an update that showed its solvency ratio to 480 percent versus two hundred 60%. insurance companies in general have been coming under pressure with the low rate environment we are in. i wanted to take a check on the dollar-juncker the yen briefly broke 100 for only the second time this year. we are at 183. the dollar rebounding from a more than three months low after
the hawkish comments from the fed. this is the dollar-yen. the dollar up five times of 1% against the yen. looking at emerging markets, the emerging markets index broke and a day rally yesterday. what i have shown is the relative strength index. we have seen the steepest rally since 2009 in emerging markets. but this looks like it is coming under threat, with the relative strength index going above seven-day. every time this has happened in the past four years, it has spurred losses. so is the rally about two and? well certainly, the msci emerging markets index is down. francine: now let's talk oil. sincetrading a lower april. traders speculating that opec result in a freeze.
chakib to welcome khelil, former opec president. he is in ec -- d.c. it brings me back, because i used to chase you around the corridors for comment years ago. it looks like opec and other oil producers will meet in algiers next month. how likely is it we get an output freeze? chakib: i think it is more likely this time, because the markets are rebalancing. we will probably reach complete equilibrium in 2017. it has some ups and downs because of pregnant -- because of brexit and the strong dollar. because a lot of these activities now. but probably, this is the time because most of the big countries, like russia and iraq and iran and saudi arabia are level, --p reduction
production level. so because they have also gained on the market share, any more gains means more pains for all of these countries. that means the valuation and budget problems and so forth. devaluation and budget problems and so forth. someis time, there may be agreement on a freeze, not limiting production. the meetings they have had between saudi arabia and russia thesome of the talks of influence ministers point in that direction. it is an action needed by all. francine: is getting a deal now better or worse than if they had managed something in april? chakib: if they had managed
something in april, there would have been probably -- that would have been better psychologically for the market. even this time, it will be more psychological, because they would retain the surplus in the market. the surplus is around 8000 pounds per day. that will decrease next year. it would have been better before. what it is never too late. they will probably do it this time. it will be good, psychologically, for the market. i think all of the conditions are set for an agreement on that freeze. francine: what happens if we do not get a deal? there is so much criticism that we never had 10 years ago that opec is now irrelevant. if there is no agreement, it is that going to be a lot more fuel for people to say "we don't care
about opec because they do not have a handle on the situation?" controls 30% of the market. so everyone looks at them. aen with the u.s. becoming producer. everyone is looking at that. everyone is listening to the declaration of the influential members of opec. still relevant. as demand goes up, because demand will go up between one and 1.5 every year, there will definitely be a rebalancing by year, next year by the latest. it is an important organization. are of them, like i said, reaching their top level of production. also, we do not want saudi arabia to you use the reserve
they have, because in case of a big problem, geopolitical problem, the oil market would not be available with that reserved. so the conditions are set for a freeze. perhaps leader, there will be talks about how to stabilize the market -- perhaps later, there will be talks about how to stabilize the markets. francine: what is the difference between opec and non-opec now and from 1999? chakib: in 1999, non-opec where observers. they were not really active. they were following what opec is doing. now, russia is more active. they have had more meetings. there is also the geopolitical situation behind the whole story
and that was not existing then. geopoliticalre power in the region. seeks more likely to stabilization of the market, because they would like to see the geopolitical situation stabilize, as well as the oil market. francine: thank you, mr. jacob pebley of, former opec minister, joining us exclusively on "the pulse." still with me is simon french, chief economist at tenure gordon. we care about oil with correlation on stocks. it seems stronger than ever, and at the same time, the equities are ignored. what is going on? simon: i think it is because of the feed directly into central bank policy, because it feeds
into inflation expectations. what mario draghi and governor kuroda need is a significantly higher oil price. they should be buying oil. and i have said that on the show before. i think it is true. an problem -- and you have excellent chart on the bloomberg behind you -- is once we saw the seeecovery, you start to the producers in the u.s. starting to add rigs and production. francine: this is the u.s. rig count in white. in purple, brands, and in blue, wti. as soon as the price falls, it does not fall much longer, because rigs come back online. so the producers are not opec, it is the white line. simon: maybe they are heading
towards production capacity in the major opec producers. at the thing that stopped a deal in april was the lack of forement between access iran and saudi arabia. what has changed? iran has notk reached the kind of level of output. maybe it is capable of producing the short run, but certainly not its ambition. if you go back to the pre-sanction age in the 1980's, iran and saudi arabia producing almost identical qualities. strategic vision for iran. francine: simon, thank you. simon french with great insights. chief economist at panmure gordon. up next, why the fed was noncommittal about hiking and hike timing last meeting, and convincedcahn is
10:30 u.k. time. the other conversation about the recent economy is whether it is ready for a rate hike or not. 7:00ed minutes later on at p.m. u.k. time. so will generalize minutes provide clues. let's get to our economics editor in the nice states. i love waking up and actually finding out from you, because you have a unique expertise on what clues we should be watching for. mike: and this is really important, because of the impact of fred -- the fed rate hike has on the world. continues thement observation that near-term risks to the economic outlook had diminished. but there was no warning of any imminent rate increase until yesterday, when new york president bill dudley and atlanta president dennis lockhart suggested there was a
hike possible in december. which was different from san francisco fed resident john williams saying that may be the expectation should be adjusted downwards. so we will look at the minutes to see what the fed is thinking. maybe the deal williams that long-term prospects tempered the rate increase prospects at the time. so people looking at the minutes to provide clarity. maybe not move the markets, because it is the weeks old, but it will fill in the gaps. inspectinges, we are that. and i know you're going to jackson hole, where this is a big one. we expect the policy speech from janet yellen the 26th. that will have more weight than anticipated. mike: in the past, only ben bernanke has used jackson hole as a springboard to talk about future monetary policy. does janet yellen want to do that? we do not know. by tradition, she gives a keynote address, but will the
markets push her into doing it? a week from friday, everyone will be glued to their bloomberg terminals and television at 10:00 eastern time. .rancine: thank you michael mckee with insight into the minutes. it seems after their two hawkish statements, already the market repricing. with us. "bloomberg surveillance" is next. inwill talk to ivan chu about 15 minutes. this is what your markets are looking like. markets areseems followinges, with oil after the hawkish comments from the fed officials.
♪ francine: anything is possible. even a hike in september, says the hike'sbadudley. will the minutes back him. the u.k. jobs market shows surprising strength. swings.ay it misses analyst estimates. we speak to its ceo. this is "bloomberg surveillance ." i am francine lacqua in london. tom keene is in new york. tom: the de n