presidency -- crowdedt xi have a agenda in washington and pope francis addresses a joint meeting of the congress of the united states of america. this is "bloomberg surveillance." i am tom keene and joining me is vonnie quinn and in london, jonathan ferro. rate cut the norwegian we saw, it really speaks nuances in the market this morning. jon: i am in london but my head is in oslo. it really speaks to the economic reality of the commodity rout. with us in london and we will address the markets through our four hours of bloomberg surveillance. isnie: china's president

promising to pump value into foreign investments. china will open up wider to the outside world. >> we will accelerate the legislation process and adopt the pre-establishment evidence list and put an end to government review of contract and restitution of an foreign investors in the process. the positive list will be longer and bigger. >> she leaves today for -- xi leaves today for washington to meet with president obama tomorrow. pope francis comes the first pope to address congress and there is likely to be something for everyone to dislike. liberals don't like his position on abortion and same-sex marriage and conservatives will clash with him on climate change and cuba.

russia's vladimir putin is prepared to launch airstrikes on the islamic state from inside syria. bloomberg news reports that putin would rather have the u.s. and their allies coordinate their actions against isis. the senate will vote today on stopgap funding that would keep the government open past next wednesday but is not expected to settle anything. democrats plan to filibuster. mitch mcconnell hints that he will offer a new plan that includes funds for the women's health organization. only threeas sessions next week before federal agencies run out of money. most poll shows that americans agree with the central theme of donald trump's campaign for president. surveyed think

their country is not as great as says americans are fed up with politics, suspect the wealthy have an unfair edge and think the country is going in the wrong direction. tom: that speaks volumes. think -- kitchen sink was thrown in that poll as well democrat party poll we saw yesterday. let me do a data check, we can do an hour data check today. the euro is all over the place, advancing off the norwegian shock of an hour ago. crude oil has been fragile this morning. churns and then there are commodities. copper -- that is not the right quote. it is about 2:30 on that. that 7.58 is eight misprint and with brazilian real, overt

intervention by the central bank of brazil to try to staunch the collapse of the brazilian real. let's look at something constructive which his new home sales coming back nicely but to put it in perspective, here is the trend, here is that exuberant boom at another time and place. of thethe measurements united states of america, vonnie, we are not back there yet. vonnie: and the question is how far do we get back to. we have new sales looking for a gain of 1.6%. tom: jon ferro is with us in london and let me cut to the chase of the incredible news flow that we have got in the markets that we see away from norway and the challenges of europe, what are you most focused on?

jon: i am looking at the reality of a $50 oil price. you see a market that has become unhinged and the central bank that needs to react to that. a rate cut today by 25 basis points. the thing they have got on their time -- side is that rates are at 0.5%. tom: i looked at chair yellen's speech. we don't know what she will speak about but we go right to this december debate and the idea that she is the central banker to the world. jon: china really got a seat on the fomc. samey they face the question. they asked themselves to make a judgment call. is it a slowdown or is it permanent? and what does that mean for the domestic economies. that draghi looking at

decided whether to do more and janet yellen deciding whether to do less. tom: at michael mayo will join us in the next hour with david goldman but we have a special guest as the president of china travels to washington. volkswagen to not make it to thursday and the pope will make it to capitol hill this morning and emerging markets implode and we begin with the markets with jon ferro. joining us this morning is stephen rhodes, senior lecturer. tothere any element or tinge norway, brazil, austria with negative interest rates in the ghosts of 1994, 1997, 1998? >> the 1994 comparison is one that always intrigues me. that was a time when we had a huge bond bubble and the fed began a process of normalization

with the basis point increase in february 1994 which unleashed the worst year in history. tom: could she do that leading to global instability? >> the fed was woefully behind the curve that we defined by inflationary expectations. there is no inflation right now so the risk of a bond market debacle on the scale of 1994 is less significant in my opinion. at: you and others looking the assets and liabilities of a complex global system. what is the fragility of the global balance sheet right now? >> the fragility is that we have come through a horrific crisis and we are still stuck to a large extent with the debt piled on before and after the crisis.

the world has to come to grips with this debt one way or another and central banks are finessing that problem by subsidizing debt service cost. tom: we saw that with governor carney here a number of weeks ago. , a question please for dr. roche. are all trying to figure out is whether we have a fundamental shift on our hands. whether the slowdown is temporary or whether we have a central shift. is this a new world? a new chapter for china and the e.m.'s of this world? >> it is a new world. if it wasn't i would not be doing what i am doing for a living. tom: are you coming off the yale?t quota of c's at there's no grade inflation? >> it is early in the semester.

currencyhat about a prices are commodity-led prices. >> let's get back to the point on the brave new world. china is not crash landing as many of the people on this show would want you to believe, but china is changing the structure away from an old manufacturing, resource-intensive model. are inource economies serious trouble and likely to continue to be so given the ongoing adjustments. this is the norwegian currency against the euro and you can see very clearly how extended a large, developed petrol state like norway is. outside three standard deviations beyond the blue circle. you go to steve roach and it shows that even the better economies are challenged with

new instability. >> they are in the biggest uncertainty of all of this is we look at the commodity situation and economists will come on my show and your show and say this is positive for the developed world but we have not seen that feed through. i would be very interested to get the view of the professor. when do i see that positive feedback into the developed economy because i haven't seen it in the u.s. or europe. we certainly don't see it and commodity producers of this world. >> that is a great point. consumers are supposed to benefit the most from falling oil and other resource prices are still dealing with the legacy effect of a horrific balance sheet in the recession. it is average less than 1.5% per year for seven .5 years. -- for 7.5 years. loyal -- lower oil prices are not changing the balance sheets

for consumers. tom: you see the philippine central bank keeping their key rate unchanged. >> everyone compensates to the global system. media says china, china, china. what do you look at through the roche prism? china is important because china accounted for more than double the share of global growth and all the advanced economies in the world it but the problem is that the recoveries in the advanced world are anemic. so that is why china gets a seat at the fomc meeting. if our recovery was a strong as we are being told, then china would be a blip. tom: 10 seconds. do you agree with bill gross that the fed should raise rates? >> absolutely. the emergency is over.

roach agreeing with bill gross. tonight at 5:00 p.m., janet yellen and her lecture at the university of massachusetts in amherst. live on bloomberg television and radio. surveillance.erg

tom: good morning everyone, a tom keene correction. i am an idiot. our new world headquarters is off to the right. i was wrong. i got off the map and i looked at the 1547 map of london which

gave me clarity that we are just to the left of beach street which is where john locke lived a few years ago. he used to watch surveillance. jon ferro knows the map of london and joins us this morning. morning, let's get straight to it. in japan, prime ministers shinzo abe has announced what he calls three new areas of abenomics. he said he wants to focus on strengthening the economy, boosting childcare and expanding social welfare. he also said that japan had almost beat inflation. european union countries are still divided over the refugee crisis. at a summit in brussels, leaders humanitarianease aid to the refugees but could not agree on how to police the borders. the eu has proposed the border patrol be turned over to a new agency and volkswagen meets

tomorrow to discuss the choice of a new ceo. winter corn resigned in the wake of that scandal. possible successors include the head of the porsche unit and the branch chief. those are your top headlines. for more on that story let's bring in hans nichols at the vw headquarters. the big corporate story this time around. bmw. do we just assume at this point that it could spread? boy i think -- hans: we have to make that assumption. they said there will be spot tests on non-vw diesels. that means for any cars with differences between road tests and what they actually test in the lab or get there in missions monitored the good problems. we saw bmw down almost 5% because this same group that

blew open this story. they said that they detected differences between what the x three in europe was doing on the road versus what it was doing on the lap. i suspect all car companies are now doing road tests. jonathan, you and i should do road tests to figure out which way the stocks are going to react because it seems like a simple test can send the stock reeling. jon: i would love to do those tests with you. but the big question this morning is who runs this company friday morning. when we run this company friday who do we wake up with. whose job will it be to deal with the financials and clean up this mess? hans: on the financial side, mattias gets strong marks from wall street on the finance side and internally with the porsche

family and in part because porsche has been a printing factory of money. they have 3 billion in euros in profit last year. that was on sales of about 170,000 the occult. outsideant the candidate you go with the recent arrival from bmw. i think the way that we should figure out this next story is will i be here in monday or will i be at another capital of auto manufacturers in germany. where is this story going to go? i suspect it does not end i meet the world's biggest auto factory. tom: i look at london and the desire for small cars it is a global story and another minor but nevertheless tangible shock system.lobal

jon: you cannot predict these kind of events. what system. is interesting about this particular story is here is a company that spends a huge amount on research and development. if they can't get it right without cheating, how does anybody else get it right. to people wake up in new york and across the night states and say that because of this they're not going to buy vw or an audi? thisi want to go to how spreads in the u.s.. vonnie: by accident these marks and makes happen to be -- the agency contracted by the european regulators just happened to pick up on the fact. tom: you wonder where this ends. on the show yesterday could he gets a thursday and he didn't. justfor those of you joining us, the bmw story

continues to ferment. jonathan ferro and vonnie quinn with me this morning. coming up later, pope francis in washington. something pageantry at the white house? there will be a joint meeting of congress. we'll have full coverage on bloomberg radio and bloomberg television at 10:00 a.m.

tom: this is not london, this is not new york. that is kowloon. hong kong. entirely too beautiful. just a spectacular view this evening.

we welcome all of you from asia. we are used to david writing about japan but today he talked about choosing to go to a place for you have these huge capitalist successes like jeff bezos. i what to read this section from the article. when mr. xi began to show his authoritarian tendencies one enter petition was he was tapping down politically to prepare the way for economic reforms. in practice his instincts to control have trumped those to let the market decide. little pressure has been put on state-owned enterprises to sharpen up. for every interest rate -- would you agree he says he is liberalizing but everything he

does something he comes down on them? >> i think that is an exaggeration. i have a lot of respect for david. moving verdict on china to more of a market-based consumer services driven private sector led economy is in. that's where china is going. they're not going to do with the former soviet union did witches let go and let it go up in smoke. that is a very important example they will avoid at all cost. they have a heavy hand in managing the transition but it is a transition whose train has left the station. the consumer sector is now to gdp growthore and the investment sector services are larger than manufacturing and construction combined. ande are dramatic changes

we are balancing that china is not being given credit right now. tom: let's come back and we will talk to stephen roach in the last hour. from seattle to washington. and the pope, to keep up with the schedule will move up to new york city. i need to tell you that markets are on the move including a much weaker mexican peso this morning. we will have this for you all through bloomberg surveillance. today if i the clock p.m., janet yellen worldwide on bloomberg. ♪

tom: we welcome all of you. jon ferro in london, i am in new york and with me is vonnie quinn. 's president is

pledging to open doors to u.s. businesses. withattle, xi jinping met top business leaders. he pledges to fix issues regarding foreign investments and intellectual property theft. techd a message for the ceos which included tim cook and jeff bezos. >> china has more than 600 million internet users and more than 1.2 billion mobile phone users. this has brought opportunities andamazon, cisco, apple other companies in this field. >> today, xi jinping pfister washington and will meet with president obama tomorrow. there has never been a day like this on capitol hill. pope francis is expected to address some of the issues. his mission on climate change, property and cuba will notpope e liberals happy.

10:00 a.m.begins at eastern time on bloomberg television. over 100 are dead after a stampede near mecca. officials say 115 were heard. more than 2 million pilgrims were taking part in the pilgrimage. similar disasters have occurred in the past including a stampede nine years ago. in a war thatnd lasted five decades. the government of colombia and marxist rebels have agreed to sign a peace treaty. willebels known as farc start to disarm. the fighting in colombia has led to 200,000 deaths. to cut oiloving prices. norway is western europe's

biggest oil producer and the slump has led to the highest unemployment rate in nine years. 20,000 people have been laid off. futures have deteriorated in the last 20 minutes. i'm watching the mexican peso but there is a lot to watch this morning. will be preaching this morning to a congregation split over abortion. a dispute threatening to shut down government. beyond these issues the pope's views on immigration and climate change will resonate. it was really something to speak to john goering before he went to the white house lawn. there, we observed a for kennedy sitting next to secretary kerry which brought me back to january 30, 1961 when a catholic

president spoke to this congress. and today the pope will speak. what will you listen for as the pope speaks this morning? >> i think the pope will come .ith an inspiring message i think he wants to lift us up and realizes we have a broken and divided government. i will listen to see how specific he gets. ourpect them to ground conversation about policy in a moral framework, but i think he will use an inspiring tone. tom: you are so good at our calculus of faith and policy. as a mentioned -- over the uproar from 60 years ago, how will this pope blend faith into a discussion with some politician sitting on their hands? >> i think he will try to remind us that politics doesn't have to be partisan.

the catholic tradition sees politics as a good thing. politics should be about human dignity and the common good. and as you mentioned one third of catholics are in congress. john boehner will be right behind him. many members of congress graduated from jesuit university. the pope is the first jesuit pope. there will be a lot of interesting spectators there today. vonnie: you mentioned the two members of congress that are catholic behind him, joe biden and john boehner. once capitalism presides over the city -- society and guides decisions it ruins society. although be this kind of conversation? >> that is a challenging message, particularly for the united states. we are the world's superpower

and at the heart of global capitalism. pope seesink that the it as a bad thing. he wants to put the human purpose at the center. so i think it depends, will be listen to the pope or just look to the pope to confirm our own political ideology. i think it will be an inspiring message but everywhere he goes he challenges people and i think he wants to get us out of our comfort zones. vonnie: there is a republican representative who will boycott the speech, will he hold any sway? >> i don't think so. i think the pope's moral message drowns out the petty, partisan politics. i think it is a sign of great disrespect particularly for a member of congress who graduated from a jesuit catholic university. speaker john boehner says we need to listen to the pope, reflect on what he says and be challenged by him. tom: what was it like on the

lawn of the white house yesterday? give us what actually happened. >> it was amazing. i was moved by it personally. the pope came by in a fiat. people screamed like the rolling stones were the beatles were coming by. there was both a sense of energy and a deep peace. pope brings a message that resonates deep in the human heart. him andd be lifted by should not drag him down to where we are with our ugly political conversation. it was quite a moment to see so many people from all walks of it was really remarkable. tom: we greatly appreciate your perspective. his book is the francis affect. stephen roche with us as well. we follow up with president xi

jinping, it is a state visit. that is different than a pope visit. two largestthe economies, the rising power and the dominant power. had an unprecedented outbreak of friction from cyber to territorial. tom: when you look at the south china sea and the west philippine sea, does the pentagon overweight that threat? >> i think we are concerned about territorial disputes from a nation that claims it has no territorial ambitions, but we cannot look at the military issues in isolation from the economic issues, the social issues or the geopolitical issues. they all come together when these two leaders meet.

and funny, i have to correct you, they meet tonight for a onnie, i have to correct you, they meet tonight for a working meeting. tom: stephen roche's most recent book on balance. our single best chart next on asia. ♪

vonnie: here is our morning brief. at 9:45 et, more data. the bloomberg consumer comfort index followed at 10:00 a.m. by u.s. new home sales. tom: we say good morning to all of you. it is time for a single-best chart. if china and america are unbalanced, they are unbalanced against a greater asia. stephen roche published his wonderful book, "the next asia." this chart is everywhere in the

in analysis now, takeaway japan, the dollar index has broken through key support back to the financial crisis of 1998. what does that signal? that the asian economy, china-centric as it has been for the last 15 years has lost its major engine. reflects a rebalancing that i wrote about in a book in 2009. it is finally coming into play. rebalancing ise not that china is crash landing but that it is shifting its structure and will become a source of demand rather than instruction. has asia as well as the broader global economy in a pickle.

they went china and many respects to continue with the old model as well as preaching the gospel. tom: jon ferro, we see that in the markets. malaysian currency, what is your observation to dr. roche about this seismic change in asia? jon: have to talk to him about that because it has become a divisive issue. a strong dollar welcome in the iny of london or the hgb hq frankfurt. my question to you, who is going to lose from fed policy >> who will be the most upset? will it be the ecb and the boj or that epm? mean, fed policy right now is frozen at the switch.

we will hear from janet later today but the fed continues to quick -- cling to an antiquated approach of inflation targeting in an inflation list world. always looking for excuses pay on the foil of low inflation to defer policy normalization. the really is no monetary policy in the united states right now other than to keep interest rates at zero and balance sheets large. other central banks are going along for the ride. vonnie: what about china's equity markets? now that we have seen this less than 2% range? >> i have combed for the time being. the bubble has burst and the market is probably back to the level that was prevailing before this shanghai hong kong direct was launched in november of last year. it is hard to catch a falling

knife. jon: just a very quick question if i may, you mention china and we talked about it getting a seat on the fomc, for anyone looking for guidance, do we stop looking at payrolls, do we just try to follow what is happening abroad globally? a balancing act between the domestic economy which is still performing very sub par and the international economy which it needs to provide a boost to exports to augment weakness in domestic economy. fors always a balancing act the fed. the china factor is so important because the domestic recovery isn't what the fed is trying to lead us to believe that it is. unemployment is low but the labor market is obviously not tight enough to generate any wage pressures. tom: mike mayo and david goldman

and the next hour. we had a fistfight this morning. elizabeth is tough. look at this woman. vonnie: she is a wonderful producer and thank you for all the photos. you have something beautiful to look at at the united nations general assembly building. you have some thing to look at but you might not get there because of the pope but you want you would see is flags honoring the 70th anniversary of the u.n.. tomorrow, 193 world leaders will commit to these goals. tom: i attended meetings with the philippine government six weeks ago. the building is a madman. it is amazing inside the 1960's feel. it is lovely and beat up. vonnie: there it is on the outside. pope francis may have spent

yesterday speaking among thousands and attending mass in d.c. but he still had time to meet some fans. the white house photographer captures the happy moment. he is hearing their possessions. tom: very good. you wonder, when does he sleep on this trip? >> sleep is overrated. tom: stephen roche, sleep is overrated. his most famous quote. commuters complain about traffic but nobody expects to ae this, i dash cam captured plane landing in the middle of a busy california street. they were not filming a new movie it was a routine exercise between a college student pilot and instructor. this forced students to make an emergency landing. we are laughing because no one

was hurt but it could have been really nasty. tom: this is like at heathrow, this happens routinely in london? jon: i am laughing because this is how tom keene arrives to work every single morning when the plane lands by lexington avenue. vonnie: then he takes off his cape. tom: we don't use the gulfstream like we used to. mckee picks me up. it drops down and central park. vonnie: in the winter you just come in and hockey gear. tom: we state in. -- skate in. an important conversation in the 8:00 hour. we will speak to the european union trade commissioner. sicilia will join us. we think her for tweeting it up last night. we will speak to the importance of pacific and atlantic trade. she has interesting thoughts on china to say the least. stay

president ofe china travels to washington it is bloomberg surveillance.

tom: a four x report -- forex report right now. from four point 05 to 4.18over a cup -- 4.05 to over a cup of coffee. it is right on the cusp of joining the other commodity and other carbon nations. euro-yen.re watching report. your four x -- forex report. vonnie: santander is giving still a vote of confidence. the president says they are making tough decisions but has reformed the economy now. in an exclusive interview with

bloomberg he predicted that brazil would return to growth next year. about where she sees the bank and three years. >> i wanted to be the best bank and many more markets. when i say the best it is the best for our people. in some of the smaller countries like portugal or chile, we want to be there. and took overoat -- botin took over at santander from her late father. the leaders of the 28 nations met in brussels. putting theuggested controls under a new agency and in the world of agriculture there is a growing buzz about stealing. theft is on the rise around the world. precious pollinators are being stolen in australia. bees haven't taken the

last two months. australians are trying to grow more allman's because the california drought is hurting production. that is stunning. tom: or stinging, whichever. vonnie: jeff bridges and jim carrey running around in their van. tom: the movie is in treatment right now at the sunset tower hotel. here is the side of stephen roach that you don't know. he is hard-nosed and tough but here is dr. roche far west of shanghai and west of chengdu in the heart of earthquake territory. visited the panda preserve right after the earthquake. >> i did and i saw the devastation in the village after that horrible earthquake and the juxtaposition between seeing these lovable pandas and this devastation that killed 80,000

people was striking. tom: there is a fabulous panda video which i have seen which shows the chinese urgency. we have a stereotype of a clumsy, centralized government. that's wrong, isn't it? when they have a mission, they do it. >> there is so much in china that we don't get and have not got from the western per spec if. are particularly as we distant from the ritz-carlton hotel. >> you look back at the china of the late 70's or early 80's and we are still a poor, rural, undeveloped country. they have moved their per capita income up 30 fold. there the second largest economy in the world and there are still a lot of issues that they need to grapple with and those issues are on the plate right now. tom: quickly within that how does this president and the next

president pivot to asia? >> i think the pivot is probably overblown. thatnping said one thing struck me as important, both nations need to do a better job of understanding their strategic contentions. what is our strategic contention toward china? what is china's strategic intention toward us? that is to be clarified in this meeting and in subsequent meetings. you we greatly appreciate coming in this morning with your perspective on china. our moment of silent sympathy to yield students. they're in this. -- there it is. so much more coming up. we will speak to david goldman, his caution on disinflation and outright deflation. markets on the move. futures deteriorate as stephen

roche speaks volumes. city, this is bloomberg surveillance. ♪

tom: commodities signal an

exceptionally fragile market this morning, markets are on the move as we speak and this morning, david goldman joins us. obama and xi jinping will have a crowded agenda. pope francis addresses a joint meeting of congress of the united states of america. good morning, this is bloomberg surveillance. live from our headquarters in new york. it is september 24. join me as bonnie. we will get to our top headlines, and extraordinary morning. vonnie: beginning with pope francis making history in washington being the first pontiff to address congress and the speech is not without controversy. liberals don't like his positions on abortion or same-sex marriage and conservatives disagree about climate change, immigration, poverty, and cuba. that begins at 10:00 eastern and

it will be live on bloomberg television. china's president is on his way to the capital and a meeting tonight with president obama. can being talks in bc more confrontational about his appearances in washington. he has talked to some of america's top business leaders. china has more than 600 million internet users and more than 1.2 billion mobile phone users. this has brought opportunities for amazon, cisco, apple, and other companies. administrationma has talked to china about cyber security, military actions, and human rights. this is the president's first official to the u.s. and he will attend a state dinner tonight at the white house. bottom your good and is ready to launch airstrikes against the islamic state in syria even if the u.s. doesn't join.

wouldssian president rather have u.s. and his allies coordinate actions against militants through russia. the senate will vote today on the funding that would keep the government next wednesday. it is not expected to settle anything, it includes things on planned parenthood and democratic filibusters. mitch mcconnell says he would offer a new plan that includes funding for the organization but the house is only three sessions next week before federal agencies run out of money. a new poll shows most americans agree with a central theme of donald trump's campaign. 72% of those surveyed think the u.s. isn't as great as it once was. the poll also says americans are fed up with politics and say the wealthy have an unfair edge and think the nation is going and the wrong direction. those are the top headlines. tom: we have a wonderful script but that story with our

republican poll was so important. markets on the move, we will keep you abreast. forget about that, they plunged over the last hour with real instabilities within the currency markets, much of which we saw yesterday. i'm looking at the mexican peso at 17.25 which is enough to make mike mayo fall off his chair. it is a nuanced september. we could go for three hours with michael mayo of cls a america. in a dressing management issues and governments issues. -- governance issues. bank ofo going after america for years, david goldman of reorient group joins us. i will rip up the script. we heard a vonnie talk about

american exceptionalism being over. the republican poll we have, you addressed the statement in your note this morning. onamerica losing its grip capitalistic excellence? >> america's economy is 10% below the 2001 trend line. every recovery, we have gotten back to trend. this economy is still 10% smaller than the trend would indicate. we have no capital investment, housing starts at half where they were before the crisis. industrial production barely recovered. roughly where it was before the crisis. this economy is dead in the water in terms of the physical. tom: in part of that poll survey which you followed, an unfair chance because of a gilded age, a plutocracy led by two big to fail banks. are the banks ever more powerful as new york city and washington are ever more powerful?

>> the financial crisis remains in place today as shown by actions by bank of america's board. it is not the america of the 50's and 60's were banks could be relied on as trustworthy. a lot of the banking industry has come a long way, bank of america has none. tom: have we gone tohenry confidence -- the banks removed from having skin in the game? >> it still seems like evidence by bank of america this week that the actions were taken to favor those at the top such as at the board level. tom: this is the bank you knew? >> it is the bank i quit and of which i sold every share i owned. knowing the management, i expect them to destroy it. i would say the banks are like when a text locked in a room. -- lunatics locked in a room.

lunatic, puten a them in a straitjacket. they can't put themselves in the public showing as much harm as they used to. >> the hardware changes have made the industry much stronger, more resilient to unforeseen shocks. it is tough to change behavior beyond that and i want to go into behavior i saw. changed? is it the culture of the country? the management as reflected in congress and the white house? how did we get into this situation you are describing? scam,er the 2008 regulators came down with a ton of bricks and said don't do anything. if you look at bank is atability, interest an all-time low. banks are buying more treasuries and mortgage backed securities than making commercial and industrial loans. they are acting conservatively

because their hands are thankfully tied. which means i like bank preferred stock but i hate the equity. >> they are not making loans because they want to buy treasuries or because they are not -- they are not making loans because nobody wants to borrow money? before the news is financial crisis, capital is double where it was. the balance sheets are more resilient. there is a stress test every year so banks are pillars. but if they want the industry to the level, the consequence will be less. tom: david goldman used to live this at bank of america. will i have a job in february? will i get to bonus season? what do you predict over the next five months for bankers in new york and across the country? >> banks will do fine. there is a stress test. it assumes 10% unemployment.

-6% gdp growth in one corner -- quarter., thanks will be fine. tom: do they jettison hundreds of thousands of jobs? >> this is the worst growth for the banking industry and eight decades. the only way to control the bottom line is expenses. vonnie: we saw a terrible quarter at jefferies as well. where do we look to for checks and balances in investors for bank of america? >> i just returned from charlotte. we look to the board for checks and balances. we had the vote on tuesday that promoted the ceo to the position of chairman. they looked for the vote after the fact and promoted him already. then they decided to have a vote last tuesday. i was one of the four people that asked questions. miles.veled 3000 this was a representative of the largest pension plan and the country. the largest teacher retirement

plan. this person asked -- made his comment. before he was done, he says in closing, they pulled the plug on him. the representative of half $1 trillion in assets was not allowed to finish. will redoel mckee that quote. as you asserting to me that the representative spoke, they pulled the plug? >> this person, bank of america's board, the lead independent director, there were not many people there. they said we are going to treat shareholders better and right after that, they pulled the plug on one of the most important investors in the country. >> here's what they had to say. this board needs to regain the trust of their shareholders by continuing to engage with their investors to rebuild that trust and holding brian moynihan

accountable for company performance. that is the response to the vote. do they then have to offload their shares for bank of america? >> banks are zombies. there is no reason to expect them to sprint that they are not going to fall over either. you owed him for steady income on the preferred site. if you own them for economic growth, you're in the wrong movie. tom: we are thrilled to have you with us today. we will continue this discussion with mr. mayo on the strength of america's banking system and of course david goldman on the challenges of emerging markets. at 5:00 p.m. tonight, we hear from janet yellen on radio and television.

♪ tom: good morning. how much copper is there on the net -- london metal exchange? commodities on the move. willie moving this morning. the riel,ng for mexican peso is not helping me at 17.25. watching.all janet yellen whether she will say anything to clarify the reaction function for investors tonight. this morning, he

is writing that maybe janet yellen doesn't know because the fed has abandoned the old milton friedman everywhere monetary phenomenon definition of inflation. he says friedman's assumption of accelerating inflation and it irrationally rational expectations that lead to single-minded targeting of instability are embedded in economic models like some biblical creation myth. but the fed, along with almost all other central banks appears to have lost faith in that story. in other words, we are not seeing inflation and are pumping money into the global economy and it's not working. has suchmodel confusion of theoretical foundations to what any central bank is doing. mike one model has been a catastrophic failure. :all we have done with

quantitative easing is turn the world into a lever trade. threaten toeven take the money away, the people picking up pennies and the and run andter there is a nearly perfect correlation between expectations of the future fed funds rate and commodity rises. the fed itself is the source of deflation. what?d itself needs to do to say our models are broken, monetary policy has done what it can. but that keeps trade going. >> absolutely because at this point if you have a drug addict who will die if you take the drug away, you don't take it away and say there is something else you have to do. fiscal and regulatory policy is what has to happen. in that case, the best case is nothing. do no harm, hippocratic oath.

anything the fed does that attempts to take the terry away will exacerbate the situation. tom: do you agree that they should have raised rates last week? >> they should have done absolutely nothing and now they have themselves in the worst of both worlds. they said they would raise rates and the market believe them but they lost credibility. treat for you worldwide. coming up, we speak with the eu trade commissioner.

tom: good morning. we welcome all of you worldwide. david goldman and michael mayo, let's get to our top headlines. says its cars have no cheap function like those used by book wagon -- volkswagen. they say that the bmw suv european standards. shares are down more than 7% now.

the suv was tested by the same group that tipped off u.s. regulators about volkswagen. calls back -- he shinzo abe says he wants to improve childcare and expand social welfare. he said japan is close to beating this. they will continue policy for investment. still divided over the refugee crisis, at a summit in brussels, they agreed to increase humanitarian aid but they disagree about how to police europe's borders. the eu has proposed that border patrols turned over to a new european agency. ask if the global economy is hostage to german cars? bw accounts for one and a quarter percent of the german economy which accounts for the largest percentage of the european economy. now bmw is being dragged into it.

we have an auto analyst for bloomberg intelligence, he joins us from our princeton new jersey bureau. the real question everyone needs to ask when we are over here is not only what the future is of wouldd vw but how much this it affect the global economy? kevin: good morning, i think there is over capacity and this global industry and auto industry in general. im sure the demand is there and there will be automakers ready to fill in and grab those shares. probably an is issue with that technology specifically. we see here diesel engines are not as popular or necessary on the cost side as they are in europe. and we have seen other automakers go to other technologies. i think this all gets worked out.

it may mean a change in the strategy for a company like hasswagen who cannot do or proven that they cannot do diesel clean, high-performance, and cost-effectively. and maybe adopt another strategy. we are seeing investors sell first and ask questions later when it comes to bmw and vw has been hit hard. your suggesting this is a company specific problem that won't affect the auto industry in general. again, there can be a greater impact in europe where half the market is diesel. here we are 1%. i think that is one of the things that is interesting about the vw case. when they are eventually done with realigning and paying fines and fixing vehicles, the question is what the strategy is from their. does that continue to be diesel?

congestionink about and pollution i'm not sure going forward that is the answer. you have seen other automakers. toyota leads and hybrids and tesla with electrics. there is other technology along this spectrum that makes me question whether diesel is viable. who gets to take over from winterkorn and how long will it take before somebody settles? kevin: they may have that by ,omorrow and i would say that besides coming from porsche is probably the front runner from the family's perspective but i think he might be a bit too close to martin winterkorn and say it start fresh with somebody on the outside who come up or lack of a better term, hands are not dirty with this scandal. when you say realigning the sea suite, vw has been

criticized for being a top-down hierarchy. does that have to change? in: i think now is the time to look at all those things. not only the corporate structure and the management structure and the management mindset but the strategy on the diesel side of that. what we will do going forward or is there another engine technology or another way to go where that company can go from 3.5% market share in of u.s. to their goal something higher, maybe 10%. wonder why vw struggle so much in the united states and if this will affect them and if they cannot get traction anyway so it doesn't matter. >> that clean diesel was there. every automaker through its stake in the ground and says this is what we represent. their state was clean diesel.

and because of gasoline prices, because of our perception of diesel going into the 80's, we are not a diesel market. they never got that traction to where this is the new technology and will be the future of fuel efficiency. you guys want diesel and the u.s. market has basically said no. >> from bloomberg intelligence, thank you very much. we are in the whole. tom: what is the vw of the banking industry? a week ago nobody knew about this. what is the diesel engine of banking? mike: everyone is looking for the next crisis and i think we are on a crisis hot. the banking industry is strong. if you are looking for bad behavior at the top of a firm, it is bank of america. i keep harping on this. but they said we will treat shareholders better and in the

next 13 minute meeting they treated them poorly. a.m: michael mayo with cls coming up, pope francis speaks to congress and we have coverage at 10. ♪

♪ tom: here is what you need to know. vonni will not be able to go home tonight. e mike mckee will take surveillance so you can go home. we get ready for the pope in new york. there is a big buzz this morning. e: you can't walk across

fifth avenue. vonnie: i tried -- i'm not saying i tried but if i had, i would say they are unscalable. tom: we will have that for you at 10:00 a.m. this morning on radio and television worldwide. here are headlines this morning. vonnie: less than three hours time, history will be made. pope francis will become the first pontiff to address congress and the speech may cause controversy. liberals don't like his position on abortion or same-sex marriage. conservatives disagree about climate change and immigration and poverty. that speech begins at 10:00 eastern and you can see it live on bloomberg television. and you can hear it live on bloomberg radio. china's president is on his way to the capital at a meeting tonight with president obama. xi jinping talks nbc could be -- in d.c. could be more

confrontational than in washington state. he spoke to some of america's top business leaders and told them onto partners can bring the united states and china better together. >> it is to promote development and onto partnership is a -- entrepreneurship is an important source of strength. and spirit and more success stories of business cooperation will make contribution to the growth of the united states and china's relationship between the two peoples and two countries. vonnie: the obama administration is at odds with them over human rights and sever security. this is is first visit to the u.s. and will attend dinner tonight at the white house. the death toll is 310 after a stampede in saudi arabia today near mecca during the annual muslim pilgrimage. at least 450 worshipers were hurt, more than 2 million pilgrims are taking part.

similar disasters have occurred in past rituals including a stampede nine years ago that killed 362. peace is at hand in a war that has lasted five decades. the government of colombia and marxist rebels have agreed to sign a treaty within six months. disarmels say they will 60 days after that. the fighting has killed 200,000 people. the president was in our offices a few months ago discussing how he was dealing with them. now, we need to go to the bloomberg terminal and we will completely rip up what we had planned and look at markets with michael mayo and david golden. you have the dow rallying, the dow declining and declining. david goldman, the mexican peso spiking ever weaker.

what is the correlation of the markets right now? pros like you are going across the correlation. david: the big correlation is between the expected fund rate and everything else. emerging-market currencies, commodity prices. think that thele volcano might corrupt, everyone -- interrupt the biggest trade in the world has been emerging-market debt which has doubled since mid-2000s. tom: he keeps talking about mexico, did you think you should be careful about picking up the pennies? david: they have bought emerging-market debt to try and enhance the returns and they are getting killed. there is no where they can sell it because they own it all. the good news is the banks don't on it anymore. tom: let's go to jpmorgan, you

call them the lebron james of the system. dimon, mr. goldman says they don't on this garbage anymore. call them the lebron james of banking because they have offense and defense. it is much stronger and more resilient and they can withstand this. if the fed had raised rates what will be different? david: if we go to three and a half percent, janet yellen says we are going to -- the market doesn't know. dropu say once you will and living downstairs from a centipede there might be 100 choose to drop. people will run out of levered trades. world trade volume in nominal terms is down 7% year on year as of june. this is a world trade recession

which is why china is having problems. tom: i hate to interrupt but we will go for hours on this. 14omberg surveillance for hours. we will check futures. this is bloomberg surveillance. tom, you are watching markets like a hawk. it's like one big rip up the script day. here is a fact. currency adjustment, and inflationary impulse, our strong dollar and imported inflation, there is little doom and gloom in the united states with all the pageantry in washington. involve david goldman and cause them to reconsider the dynamics of many parts of asia and the dynamics that falls over to the american banking system. michael mayo with us from clsa. let's continue this discussion of where we were of these

incredible dynamics. when does the dollar get to that ribbonlike dollar -- rubin-like dollar, to frankly dam and -- dampened the american spirit? goods producing sector of the economy is underperforming. our gdp is driven by consumption and the consumer balance sheet but the goods producing export side of the economy has been terrible. token, china, retail sales up over 10% year on year, exports down more than 5%. it is hard to argue it is an internal problem in china which is creating problems globally. the chinese internal sector is growing rapidly. it is the external sector that is shrinking their industrial picture. that is why you had such a bad print on the pmi. walmartrs reported that

has gone to the chinese, to their suppliers in china and had your currency has depreciated so you need to give that to us and get price cuts. how do you deal with that in the world? how can anybody deal with it? it seems like deflation is embedded in the culture now. had a 50% real effect of appreciation and currency since 2009. they took back to-3% of that and people like donald trump who doesn't know anything about it says they have been devaluing forever. walmarts negotiations are not my concern. as you say, it is a hallmark of the deflationary environment. tom: how internationally exposed our big banks? jamie dimon goes to washington and says we need global banks and jpmorgan wants to be one of those.

are they the same international exposure of other crises? >> the largest banks are more diversified than when you go back to the third world problems of the 1980's. the banking industry's mantra is do no harm and protect the fork. the balance sheet are fine and there can still be hiccups and this this inflationary world, banks have to become more efficient meaning cutting more jobs. >> the net interest margin of the banks is at an all-time low. tom: do you agree with that? that interest margin is the lowest it has ever been, the opposite of what is supposed to happen. that means the banks are being conservative. consolidation or he become more canadian -- where we become more canadian? the regionals, come on. >> you seen some consolidation

pickup with bb&t making acquisitions. they said one reason is to create restructuring opportunities in an environment that is more difficult. less, partlyding because of regulation. they will also lend less due to demand in the past economic recovery. tom: this is the animal spirit everyone is talking about. >> when you say a little bit, is it significant? not only do people want to borrow but do they have cash on the balance sheets? >> growth in this economic expansion is 1/5 the pace of past economic expansion over the last century. vonnie: our banks becoming more interesting to you than the old banks? >> the way we look at this and david goldman talked about this in this world of tough revenue growth we like tough self-help stories. suntrust is one.

tom: we will come back with mike mayo and david goldman. we will speak to mr. male about the illness of lloyd blankfein. we will speak with the eu trade commissioner, good morning.

♪

welcome back. pope francis is in washington, d.c. in a couple of hours he will be tong from the apostolic -- capitol hill to address a joint meeting of congress. across georgian house the street from the vice president's residence near the naval observatory. it functions as the vatican's embassy in washington. tom: interesting. >> you can see the crowds lining the route all the way to the capital. it is probably a 15 minute drive, people crowding into the d.c. toet a glimpse -- get a glimpse. tom: it was really something yesterday. people were really taken. vonnie: and you can imagine watching the mass from central park in your windows.

midtown, and i saw in as well out in force as they began. it is at 4:00 p.m. today? >> fair warning, do not be in a car. vonnie: let's look at movers this morning. percent, the of a dow down. folks like him could have a bit of a better day, it is up more than 3%. there might be some resolution to the leadership. bmw down 6%. -- effec tfect their there. the reason that we are talking about platinum today is platinum is in diesel engines and terms of the catalytic converters when it comes to petrol you are talking about palladium.

moving today. tom: him over as well was ofdman sachs on the emotion blankfein's illness. people are allowed to become ill nd years ofl a management with mr. blankfein, your thoughts please on the path of goldman sachs through this illness and after. >> floyd blankfein is one of the industry's most successful taking ceos who has navigated goldman sachs through exceptional performance. especially during the financial crisis. lloyd blankfein has been a leader on social issues which you don't usually see or expect from a banking ceo. as you mentioned, gary: seemed

willing to step into the role as needed. having said that, lloyd blankfein has said he will continue through his cancer treatment which he described as highly treatable. >> jamie dimon did. tom: he worked through it as well. michael mayo, thank you so much. tonight at 5:00 p.m., michael mckee, will be listening to every word of janet yellen's comments. you as well on bloomberg radio.

♪ tom: we are now -14, dow futures. let's get to our headlines, here's vonnie. vonnie: brazil is getting a vote of confidence, santander says brazil is making tough decisions about reforming its economy. in an exclusive interview with bloomberg, she said brazil would return to growth over the next year. the best bank be in many markets and when i say the best, i mean for our people and customers and communities. i think in smaller countries like portugal or to a -- chile

we're are either. eu countries are budgeting and extra billion on refugees but they are split on how to pull the sport is. puttingas suggested border control under a new agency. and and earnings slump at h&m. they recorded their weakest quarterly profit growth in two years. being hurt by this brother dollar, most of its clothing a.mes from asio it is actually remarkable what we are seeing in all the markets right now. h&m. i don't know where to go with it, are they booming because they have a lot of competition. vonnie: the currency conversions are killing them. tom: let's look at banking and

we do that with michael mayo. and bank ofan america will move on but where is open to question. it is sort of kind of working out. mike mayo has been a respected vocal critic. he is the managing director at clsa america and s david goldman is also with us. we touched on some of these themes and the hour but let's step back and say with all the upper of the banks, where are , and theodd-frank ability to do a new american banking. do you have a picture of that? mike: the new of america's banking is the old. it is a banking of the 1950's were banks were pillars of strength and stability and trust of the community. the good news is the balance sheet are stronger than they have been in half the century.

the bad news is is revenues are sluggish. regulation is complex, there is over 13,000 pages relating to and-frank regulation interpretation. that is tough to navigate. tom: is there an overcapacity? mike: based on revenue growth you would say yes and that means banks need to cut expenses. >> your criticism of brian moynihan, where is he failing by these regulations? as he burdened by the legacies at bank of america, the bad purchases i'm looking at. the returns under the chief executive officers his return is 1.3%. kendall is is was -2.8%. by those standards, he seems to be doing a good job. mike: tough comparisons. the bad job is with the tone at the top of bank of america. to aholders sent a message 37% no vote. >> is he failing the

shareholders? the economy? the lenders and customers of the bank? the shareholders, the stock price return for the last five years is the worst among the largest banks. he also failed the 2 million people represented at the meeting when after two minutes, the representative, the plug was pulled. he's should have said i'm paying for this microphone. >> it doesn't matter what management does because there is too much money in this carry trade facing too little profit. the fixed income of bank of america, there is no way to get target. mike is right, they should cut expenses but it doesn't matter much. it doesn't matter who management is because their hands are tied. tom: mike mayo follows the banks. david goldman limited the banks

for decades. lowest excuse the by the banks. i'm sorry you have low returns, there's that you can do. citigroup doesn't rely on higher interest rates. bank of america only has targets were they rely on them. selling off unprofitable businesses, reallocate capital, doing what they can. this is not new news. tom: i don't want to go into personal experiences that you had as you look to be a very -- boa. is this a bank that never successfully merged? david: bank of america had one idea which is to hire and acquire and fire. between the mid to thousands that trade was over and there was nothing for them to do but consolidate and sit there. it is not an interesting equity proposition. it is a great pervert option --

great preferred option. there is no way for them to make returns in common equity better than real interest but the preferred stock has bigger yield and it is mispriced. it is too cheap. tom: do you agree on the yield take or do you want to get an equity pop down the road? mike: bank of america, poorly run bank. i think if you are capable and good you can get a return. they are two banks with very different business models. should they be a consumer and business loan driven model like wells fargo or should they be supermarket conglomerate bank like jpmorgan? david: we would say it is management over model and return of the top of the firm, there is no timeframe for any key financial target. there is not a clear scorecard

on how managers get paid. what bank of america needs to do . the board needs to hold the ceo and his management team accountable. vonnie: why is he insisting on having those? mike: if you read the proxy for the meeting, they say it helps them do their job better. but they haven't done their job well so wired -- why are you promoting the ceo? tom: let's talk about the pageantry we will see in ishington, david goldman, think of dr. kissinger, the new ferguson book that is out. he is real politics. what is the real politics you suggest the united states needs with president xi in the coming years? david: we have a common interest with china and russia in crushing terrorist organizations. i think there's room for collaboration with resident

couldn't on -- president with on dealing isis. i think there is room. in the case of xi. china is involved in a serious military buildup but it is largely defensive. china has been paranoid toward the u.s. and feels itself encircled as a former colonial country. i believe there are ways to do conflict avoidance with china but we will never quite lent tensions -- blunt tensions. on the saw putin speak unilateral effort against isis and syria. reports that russian marines are fighting next to hezbollah which are unconfirmed. that would be bad.

i think if the u.s. took a , weng role which it hasn't would force putin to collaborate in a way that is beneficial because he has an interest in stopping them from spreading to russia. tom: only come back to mike here. what will you be focusing on in the next two hours of surveillance? >> we will watch what happens with german car companies. fed it becomes about the when janet geller speaks later today. the pope is not going to move markets. tom: i was going to open on the opening of the brazilian trading. this has been fabulous. david goldman, formerly of bank of america and mike mayo of clsa moyniharp comments on han.

we will continue. really focused on the 5:00 p.m. speech of janet yellen. this is bloomberg surveillance.

>> this is a bloomberg's "surveillance." good morning,

everybody. 8:00 on wall street. auto investors shift into panic this morning. perhaps the pope can offer absolution. investors convinced today. i am michael mckee tom keene. let's get you caught up on the markets at this hour as to get closer to the opening. we will start in asia with the shanghai composite did not move a whole lot and finished up a little stability. fromesident xi has washington, leaving seattle for not soton, d.c. today, much stability in japan. investors unimpressed by the three newster abbe's areas of economics, we will talk about that today. the yen has strengthened considerably -- has fallen considerably over the last few minutes. the stocks, six hundred in europe, lowered by 1.6%.

vweurope, it is all about and out bmws diesel cars may commit more pollution on the road then the lab and german stock taking, even though business confidence higher this survey comes up. also in france, the survey unchanged but the cac 40 down 1.6%. here in the united states, the knockout effect spreads were investors are on edge and we are waiting for janet yellen to importantght on an address. ahead of that, markets in freefall with s&p 500 index down 15 points, .75 of 1%. the dow jones down 130 points, point eight of 1% and nasdaq off by 42 points. that is a full percentage point. topping the list of things we are watching. i mentioned german cars. asis searching for new ceo

legal authorities announced draggedations and bmw into it. bmw falling as much as 9% in frankfurt after a german magazine reported that x3x drive sport-utility vehicle emitted as the europeanses limit for air pollution in a road test. nobody accusing bmw of cheating and they specifically say they did not, but it is a ask questions later morning. getting ever closer to a government shutdown parried texas senator ted cruz may try to give his presidential campaign a boost that filibustering a government funding bill. no indication that the measure would make it to the house but conservatives are talking about oust house speaker john boehner. the deadline is one week from today. gets puticking vote aside briefing today as pope francis appears on capitol hill to address a joint meeting of

congress, perhaps, we can bring peace to the warring nations. afternoon, he had to manhattan and should be here about 4:00, 5:00 and do not be in the car in the new york city area at that time. a lot of crosscurrents underway. targets, as tom keene would say, in a churn today. ryan leavitt, senior investment strategist at oppenheimer funds, joins us. you probably just want to crawl into the desk and hide and is overll wait until it because i don't know which way the markets are going because i don't know which way the economy is going, the fed is going, german cars are going, it has to be tucked in the environment to have any kind of visibility. think the irony is that investors have been waiting for correction for a long time where we have had a long prolonged bull market and investors are saying as soon as the correction comes, i will get into the markets and here we are and

sentiment continues to turn increasingly bearish. where we aret seeing in volatility coming up, investors being more bearish, that is usually a sign the markets are trying to find some sort of a bottom. it does not mean that this volatility does not persist, but over the long term what investors need to focus on is the global economy, despite the war, expense at a modest clip and immigration remains benign around the world and equity valuations compared to most other asset classes as a attractive, not about environment long-term investors. mike: you don't see a global central bank driven bubble that will burst and we don't suffer for a long time? see typicalould not bubbles, you look at spreads and credit, usually the first thing, reasonable to long-term values and equities are quite cheap and bronze globally and equities are

usually not cheap devonte's because they are a better asset class than bonds. i do not worry about bubbles forming in parts of the world. i think the bigger worry i had coming into the month was that the federal reserve could be setting us up for policy mistake. irony is that investors seem worried the federal investment -- reserve did nothing. mike: was the mistake moving up or not moving? brian: i think it would be moving up. the first role in central banking is to do no harm. like: we just heard that -- heard that.t everybody is looking for hippocrates to be the fed chairman. brian: united states is importing inflation into the country, down by 10% year over year u.s. dollar has surged 30% and you can look at bloomberg credit conditions index and shows a significant amount of tiny and since then the quantitative easing. you've also have in the united states not a significant amount of weight will. can argue labor markets getting

tired, is that going to happen? a good thing, but we know how to fend off inflationary pressures should they get out of hand and i think that is the, oh, please moment. god, give us inflationary pressures. policy mistake, raising rates in a world where you have excess supply, could be damaging. mike: -- tom: i wanted to say good morning to all of you on bloomberg television and radio. brazilian real is a jump closedon opening, 4.05, yesterday with intervention by the bank at 417 and we weakened further to 4.22 brazilian real per dollar. that is mimicked by the mexican other turning moments in the market futures, -15. bloomberg's "surveillance" right accounting text advisory.

regulatory changes can impact your business. see how the experts can help you navigate the complexities. find more online. where is the opportunity in all of this tumult? am i supposed to buy australian mining stock? 1 [laughter] lies: i think opportunity in emerging markets and people look at that as one area. it is a lot of individual countries of the big parts, and for all the talk about the weakness in china and the multiyear decline in industrial production and the property market bubble that existed there, there are a lot of parts of china that continue to work and that is a service economy, the retail sector. you are seeing it dynamic growth in commerce, education, tourism, so there are parts of the world where there is dynamic growth. it does not mean they are not being dragged down by the recent concern some investors, but china will continue to be one of

the most dynamic growth countries on earth. as we talk about volkswagen and bmw come a bit of a shame when you look at europe, you see credit creation for the first time in a number of years in europe and you see earnings pick up for the first time in a number of years in europe. there are opportunities globally. when you get into these types of markets, different indices and names correlate together, but for long-term investors, opportunities exist. mike: is there an opportunity to and take or mercedes advantage of the german automaker or avoid the sector? brian: we have been owners of bmw for a long time, they provide products that investors want. near-term volatility today in the markets and let's see where it goes, but for bmw, fantastic company that for a long time provided the cars that customers wanted. tom: kelly have a moment of silence for a good competitor of oppenheimer funds, and full

disclosure, oppenheimer funds has in a terrific supporter of bloomberg. another supporter's david herold, two companies that resiliently say you need to be international. you are at them, their track records speak for themselves. the 95th percentile, and i know you have a number of that funds in excellence, too, and should we buy apple or forward? that is tough. mike: you buy apple and you could get both the car company and apple. a break, minute before but is this a hangover or is this some sort of serious illness that the markets are experiencing? i would consider this a hangover. we knew about the slowdown in chinese growth and markets were disrupted with concerns about china's modest move on the currency, concerns about policy

mistakes as he entered into the september 17 fed concerns about policy mistakes. i'm not sure if the fed would raise rates and have a dovish call and a british sure the markets would've responded similarly. you end up getting bouts of volatility around changes in policy conditions and the fed extended the uncertainty. tom: we will continue with brian lovett of oppenheimer funds. growth to have them with us. 17.25.ican peso, good morning to those of you watching and listening. 4.214 the brazilian real. not as weak as the opening, but nevertheless, emerging market currencies in turmoil and teachers, -15 and down features -132. ♪

lots going on. bloomberg's "surveillance" this morning. we sake of with markets in turmoil. -- we say good morning with markets in turmoil. vonnie: the country's fed up and good news for donald trump. bloomberg calls out today with national polling and it is one of frustration. phil joins me from washington. the electorate is pretty displeased and tends to be that way in polls.

phil: people are never really super happy with how things are going, but right now i think there is a definite you can see it in the numbers and who benefits? knowing us for donald trump. it is not just donald trump with outsiders. it is a theme we have seen over the last couple of weeks or you see donald trump in the bloomberg's politics national poll by 21% and following him closely is ben carson. ben carson's rise has been the most impressive because he has come from single digits into a legitimate number two candidate. the other one i was interested to look at was carly fiorina up 10 points since her august poll to 11%. had a great debate performance and try to parlay that into the fundraising in the last days. you will see more of her but there will be more pressure on her. vonnie: the poll was taken after the scene and they, right? phil: yes, it was taken after

the cnn debate. these are the newest numbers. one of the interesting things out of the numbers is the ability ratings. people don't understand why ben carson has risen, a retired retiredon with no -- neurosurgeon and his favorability is at 68%, 10% have an unfavorable view. that is an absurd number and marco rubio with the favorability number that is pretty hybrid everybody else in the 50's and 40's. then carson is rising -- vonnie: i want to know but also trump has a 48 per -- 58% favorability. is that a good thing that there is a reaction as opposed to ben carson's 10% unfavorable which means people are apathetic? phil: i think what is interesting about unfavorables is usually a candidate when he is in you will have high favorables and the unfavorables because people like it when he burst out of the scene and we see a drop-down. we see with hillary clinton who was dropped over 10 point.

how ben carson's favorability drops now that he is jumped on the national scene, that is what i am interested to watch. washington isine filled for the pope's visit. phil: no question. today, the joint meeting of congress will be interesting to watch. how he tries to delicately balance. vonnie: we'll keep you in the studio because the pope in washington will address congress and we will bring you the coverage live on bloomberg tv at 10:00 a.m. eastern. ♪

tom: good morning. bloomberg's "surveillance" on television and radio. markets on the move. more emerging market carnage and the risk off. japanese yen moves strongly, 1.19. way down from the 120 level. the two year yield .6837 in the the riskates and shows off field.

brian levitt with us with oppenheimer funds. markets --merging there is commodity emerging markets and there is not commodity, but can there be further filtering, if you will, of 47 or four deep emerging markets whatever the number is? brian: of course. so much of what the aggregate are dealing with right now is a slow down in chinese growth. what we have all been waiting for is a transition in chinese growth of export-based and more investment-based economy to a more consumer-oriented economy and that takes time. if you look at the numbers, the service sector and retail sector in the chinese economy, they have held up well to all of this. a lot of the big turmoil in emerging markets has been standard on the commodity producing countries, the premodern -- commodity producing companies and they declined and and they have been within those sectors. a careful -- they have held up

better than energy mining. is: remember, folks, this true, commercial markets 20 years or 30 years ago, here is what it was. by the phone company -- you remember this? singapore? i do in by the phone company? what should i do invoke area? by the phone company. mike: if you look at the number of million dollar cap companies, you only have to go back to 1992 to see when the united states had more billion-dollar cap market companies and the rest of the world. there is about 7500 of them and only one third are in the united states and the rest are outside and split evenly between em and dm. call an emerging market, germany, mike, say it. has downgraded some of folks loggins ratings -- walks loggins -- faults loggins

ratings and is don't think that's a anybody given the loss of capital. we also have a couple of people, according to them, suggesting upper managers at volkswagen that will be leaving soon. that story continues. tom: veteran. from yale university, the labor arbitrage, which bob brought up, brian, that labor arbitrage of currencies forces vw to make more factories in mexico, doesn't it? brian: absolutely. the wages get cheaper and that is what in essence starts to happen. you see big declining currencies, money going to the united states and everybody thinking the u.s. is the best house in the neighborhood or the best house on the road and currency depreciate

significantly and you see currency start to fall in other parts of the world and they start to restore competitiveness. we cannot see this in europe because of the currency but this is how markets play o and this is how this works. go 90e will it you seconds early because you have to drive to the pope storm in manhattan. brian: i have to get to the giants game tonight. into it ton get watch the game, i'm sure. levitt with oppenheimer funds, thank you. we have extended bill maloney and he has worked on his currencies and bonds. from the breaking news desk, what a day. phil: good morning. it has been an amazing morning between the real, bmw, taiwan lowering rates and janet yellen at 5:00. to type it off, european markets are sinking, led by losses in germany.

and helped by% autobuild on bmw emissions. bmw has pared losses after they said they do not manipulate their vehicles, but that weakness of spilling into the u.s. with dr. you just down as much as 174 points. ash with the dow jones down as much 74 points. on the economic front front, chicago issued jobless claims and bloomberg consumer comfort. at 10:00, new home sales and 10:30, natural gas storage chain and janet yellen's speech begins at 5:00. in a deal news, sale of a dark lergenlio amid the alergg deal. fores fell as much as 25% verizon yesterday. such people are caps on remedy views below estimates. regarding earnings this morning, kb home around a: 30. wall street upgrades and

downgrades -- mutual at ubs, storage rates and nimble storage to buy with the price target of 32 and monster beverage raised by goldman sachs to a price target of 165. from the first and breaking news desk, i am don't maloney. tom: thank you so much. hear the terminal to more. christopher india, i just put this out on radio, here's brazilian real and the train wreck with a further spike up this morning. we have depreciated 5% since reaching through 4.21 right now. say,, as mr. shelley would remarkable. futures at -15, dow jones futures are -137 and the euro at 1.1240. something's not moving and just as big and is moving but clearly brisk off this morning. .68 on the two year yield on the 10 year yield comes in a solid

or basis points to 2.11%. mexican peso, morning. 17.24 mexican peso. stay with us. bloomberg's "surveillance." ♪

vonnie: this is a bloomberg's ."surveillance pope francis will make history on capitol hill. he will become the first pope to address congress and there is likely to be something for everybody to dislike. april 2 not like his position on

abortion and same-sex marriage and conservatives argue over climate change, immigration, poverty and cuba. it is set to begin at 10:00 a.m. eastern. bloomberg radio and television will carry the speech live. china's president will arrive in the capital. he is on his first official visit to the u.s. meterday in seattle, he with warren buffett and jeff bezos and other top american and chinese business leaders. he said china would open up wider to the outside world. >> we will accelerate the legislation process on foreign investment laws. and adopt the pre-establishment national list and put an end to government review of contract and constitutional point investing in the process so that the positive on this will be longer, will be bigger. vonnie: tonight, xi has a

private dinner with president obama and be welcomed to the white house formally tomorrow. the death toll rises from the stampede near saudi arabia. at least 450 three people are dead. more than 700 were injured. it is the worst tragedy in 25 years at the annual muslim pilgrimage. those are your top headlines. back to mike and tom. mike: i am michael mckee along with tom keene. of the day of data and economic indicators are two by commonwealth financial, the and make highest in independent advisers satisfaction among financial investment firms four times in a row. commonwealth.com. as i mentioned, a lot of data. we are wrapping it up from the desk. >> it is trickling in with jobless claims up by 3200 than forecast

jobless claims. it is below the critical 300,000 level since the beginning of large, pointing to a strong labor market. the government canceled the press lockups for the release and it is putting out the of the web, so it is trickling in and we are waiting for data on durable goods orders. tom: excuse me, are you blame this on pope francis? the slow economic it is the pope's fault this morning? : i will abstain from answering such questions. while we wait for durable goods, the federal reserve bank of chicago is in negative, so jobless claims, as we know, up by 3002 and 67,000 and durable goods orders, we are waiting and maybe the pope got an advance copy. i don't know. not quite as sharp as forecasted and that followed a 1.9 increase in july, a bit less. tom: greatly appreciated.

a special guest for 14 reasons, we only have time for five, cecelia bostrom is from vocal swedehe is a when it comes to european politics. wonderful to have you here. you just met with our minister, michael, in washington on tuesday. where is the immediacy and urgency? where's the moment of getting the transatlantic agreement together? so iia: the moment is now, went to take stock in what we are with negotiations. we made good progress and they 2013, before i arrived, and we made good progress but now winning to speed up because we need to finish this during the obama administration. tom: what is the distinction that americans need to know in the european argument versus the u.s. argument where compromise

needs to be found? cecilia: i think we are both committed to get this and strength the economic but also the political process links between us. conversations are always difficult. you need to go through culture, public securement, and we are looking into regulatory appreciation to facilitate trade across the atlantic for small and medium-sized businesses. mike: where is europe in terms of its trade with china right now and with agreements with china? it is one of your biggest trading partners. everybody is concerned about the chinese economy. are you worried that china is going to drive down the world maybe through the ports of europe? cecelia: i think we are a little bit world about -- worried about what is happening in china too early to say whether this is a definite trend or not. we are negotiating an investment agreement with china in order to

create a level playing field between us and them. we are quite advanced in those negotiations but not there, so that is the formal release. does this suggest negotiating with them separately from the united states, does this suggest that idea of a global trade agreement in those days are past and that bilateral or multilateral agreements are the way we are going to go in the future? cecelia: the last years have shown that there is a spaghetti bowl of bilateral and regional agreements all across the world. we are negotiating plenty and you are as well. you have the transpacific ownership and many others, but we should not forget that the world is an important organization and from europe site, we will do everything we can to see it we can have an agreement to bring around because we need global relief as well, so ideally these bilateral agreements need to be come formative with them. tom: you are four of five people

acutely aware of the debate over should you be part of the euro. you are pro-euro in sweden years ago and that went down in flames. you still are, and how does your attitude change about the use of the euro within the european union? is aia: i still think it formidable idea. the problems we have had is not because of the euro, it is because of certain member states not applying the rules related to that. if you are going to keep a currency between so many countries, you need to follow the rules and some countries have not followed the rules. we are slightly getting out of the crisis and we are doing what we can to support greece. it is not over yet that we are working with them. and still a big advocate fought for my country to join. it is not on the agenda. tom: i want to come back at sick about this further, the refugees and economic migrants -- what have you learned as it changes

every day? cecelia: it changes every day and i was commissioner for home affairs for five years so i'm into the debate as well. we have seen so many things happening. a civil society grading them, welcoming people, putting pressure. by: are they advantage syrians in sweden? cecelia: sweden together with germany are the biggest countries with the most refugees. other countries as well, but we have also seen diversity between member states but they agreed on the way forward. tom: we will come back with cecelia malstrom, european commissioner for trade, and there have been a lot of e-mails from those in new york city simply asking if you can make them a just for the new york rangers. he is 33 and new york is in a

total panic that someday -- cecelia: we have a secret laboratory and real working on that. tom: we will come back with cecelia to speak more on global trade in the united states. futures are -18, dow jones futures -156. vonnie: i'm with julie hyman. listen. a morning must earlier, we spoke with stephen roach at yale university of morgan stanley's and currently on the executive chair for asia about the chinese economy. crash landing as many of the people on this show would want you to believe, but china is changing the structure going from an old manufacturing research intensive model to a new services-based consumption model, so the resource economy are in serious trouble and are likely to continue to be so given that on flowing

adjustments in the chinese manufacturing economy. vonnie: julie, we know china is roach hasd stephen been forever, but it does appear there are more >> appearing in the china economy now. the story say that economists in general are putting the 2016 -- julie: the narrative and transition he talks about from manufacturing to consumer-based economy, that is not the hidden idea or unknown idea. that has been talked about for several years. the problem is the consumer does not appear to be picking up the baton. the numbers we have seen do not really support that strength, so that is the problem. vonnie: there is an industrial revolution going on in china and for the most part, the consumer does not have the ability to do that yet. it is extraordinary and was how the story about walmart fromding extra concessions suppliers in china because of the devaluation. that will not help consumers

cured there. that is our stephen roach soundbite this morning. you can see all of that on bloomberg.com. at 5:00 p.m. tonight, do not miss janet yellen's lecture on bloomberg television and radio live. this is bloomberg's "surveillance." ♪

tom: good morning.

what a moment for news flow this morning on bloomberg radio and television. the continuing story on folks login. v -- onw. vonnie: down 2% in all of this. the scandal at folks flag and we have been speaking about it for the last two days. there is a $32 million pension before stepping down yesterday and may have millions more in severance depending on how the supervisory board classifies his exit. joint is from our executive team at bloomberg and there is 32 main dollar pension, is the any indication that he may receive it because of what happened or that it it is invested yet or did even get the pension? his, far as we know, it is so he loses his job at walks with a $32 million pension and he gets a company car while it pays out. vonnie: we want to make any obvious jokes about what is in

this, but tell us about the severance. how would that be decided and how is it generally decided? >> it is decided depending on how is termination is classified. if the board finds out that he or did they find out he was terminated without any fault, then he gets a severance of two years compensation which should be around 30 million euros depending and based on what he has been paid in the past. if they find out that he was actually at fault and he knew about these emission tests and manipulations, then he won't get any severance. saidow that the board has he has no knowledge of it and that they respect his decision to ask for termination, so from the face of it now, it looks like he will get the money. vonnie: will it be based on performance at all because you have to discount this or ignore this scandal and how has the performance been what kind of package to expect?

>> he could have implications because there is a certain part of the conversation based on long-term performance of four years and two years. it could be slightly lower but at you right now and based on the past conversation data, roughly round 30 million euros. vonnie: this scandal seems to be spreading. there is no other carmaker to be found at fault by regulators and gone above and beyond when it comes to emissions and we don't know whether that will be something that will turn out to be more widespread and whether french automakers will be involved. what are the kinds of packages that we are seeing with carmakers in general to ceos? they're pretty rich generally, right? martin winterkorn was of the second-highest paid ceo in germany, so certainly at the top of the league. these guys usually have fairly good cushions to fall back. vonnie: even in the u.s., it is

pretty well known that the carmaker ceo's do pretty well. >> they tend to do better than european colleagues. vonnie: thank you so much. paintingour executive that bloomberg news and i will treat out that story. follow me at vonnie quinn on twitter. up later this morning, the pope in washington will address congress in a joint meeting. you will be able to hear it and see it live on bloomberg television and radio at 10:00 a.m. eastern. ♪

and the capital congress of the united states of america awaiting for the pope's visit to our legislative body. but a jointsession meeting. we welcome all of you on bloomberg television and bloomberg radio. a special announcement live on bloomberg radio and television the morning at 10:00 a.m., true paget's rate we have received with a list of events and to mike mckee, this is state of the union-like i would suggest. there is a mystery to it. it will not be just another speech this morning to say the least. mike: no, it is a major event or nothington whether

folks say it. it is a major event for wall street remains to be seen, but the pope has had some things to say. that inbe he will say new york city. bloomberg's "surveillance" brought to you by invesco. have you considered your investment alternatives? classes andal asset strategies may help achieve your goals. find out more at invesco.com /alternatives. with all the news flow and the markets of the, the mexican peso working out to new weakness, we are with the european commissioner for trades cecelia of sweden. i know you don't comment on foreign exchange, that is the height of rudeness, but i would suggest that what we see with the famous swedish stock in relationship between new zealand and australia, we have a global system compensating to the shocks of the last seven or eight years.

world take the shocks we have seen? we are trying to achieve trade agreements with basically the whole world because the future growth or global growth would come from outside of europe, so we need to be conscious of whether growth is and the biggest pocket is the u.s., so our agreement is so important with the u.s. that there are others, japan, china, africa, latin america, asia. you are atr view, the university of paris for years and they have 14 meetings where they do a transaction and they are told by washington they can't have an export and import bank anymore. what is that like to the eu prison to see congress in washington do that? cecelia: i can't comment on that case because i'm not the play with the details. tom: you can't comment -- you can comment on henrik but you

can't comment on the bank? the pope is out, by the way. mike: the pope is now shaking hands with people who are gathered. tom: one more question. mike: you are going to announce some new trade policy strategies coming up in the next month and it is interesting because some of the strategies are going to be focused on the idea of trade posturing development and human rights. that has been a big issue in the united states. one reason it has been hard to get trade agreements through congress is will it make it more difficult to get trade agreements through individual legislatures in europe or the european parliament? since you do: i think it will make it easier because the trade is such an important tool for economic development and growth and jobs but also political tools. we see how trade can really contribute to development and away where we can initiate that log on human rights, labor rights, environmental rights,

and i think we pushed to do so by consumers. consumers want to know how are my close produced and under what conditions? they want to know and we have a responsibility to make sure that all the supply chains are as decent as possible and trustworthy. please comeioner, back. thank you for joining us. mike: i'm bringing henrik. cecelia: operating next time. ceceliaal -- cecelia with the european commissioner for trade. mike: there are two people speaking today, his holiness and up in massachusetts where we have janet yellen, the fed chair, giving a lecture at the university of massachusetts and a lot of people hoping the lecture will not be academic but practical economics. what is the fed going to do and what are they going to do it? with ihan economist

s, i don't know if the traffic in amherst is anything like in washington for the pope when janet yellen arrives, but this by abe widely followed very confused investment community these days. >> i agree. i think the operative word is confused. nobody is quite sure what signal the fed is following in terms of deciding whether or not to raise rates and when. i think that is the worry. the fed has been rather more opaque than usual. there was a time during bernanke's chairmanship where there is more transparency and now we are back to opaque this and confusion, so we will be reading the tv more carefully than we normally do. mike: you think janet yellen had a bad day last thursday, and eli manning kind of day, or has the fed itself moved the goalposts

and confused investors because they don't know what they are doing? man: to the car to the fed, they were to change the sports analogies, they were thrown a curve ball in terms of -- to be fair to the fed, they were thrown a curve ball in terms of the weakness in china and the problems in china, so in that sense, you can kind of understand that they are saying they want to raise rates this may not be the right time to raise rates. the confusion is that they never articulated the risks outside the u.s. and how that could affect their decision. i think that is where investors are confused. i: i got the football mad and you got baseball, can you bring hockey? tom: janet yellen will go up to amherst where hockey is religion in greater new england. is this about regional differences within the united states and some would say about two americas with america

prospering and in america less so, is the fed managing for one america or are they overly sensitive or in a good way sensitive about two discrete labor forces? ariman: i think they are sensitive to what is going on with the two-tiered economy you are referring to, i think we are trying to be respected, but if you listen to janet yellen, that is but she is saying and one of the concerns she has. in the end, they have to manage the economy as a whole and the good news is it is going well. i think at some level, they have to come to grips with that. what i would say is if the decision was purely uneconomic grounds, they should raise rates are given everything else, they waited. mike: are they going to be able to get out of this if they do not raise rates soon? it seems like the idea of zero rates is becoming more and more embedded in the markets. nariman: i think the fed is not

the only one facing this dilemma. other central banks are in the same bind and a number of central banks in the last years that raised rates only lowered them, so i think the fed does not want to do that. i think in the end, there is justification on economic grounds to raise rates and my guess is they will do it in december. tom: thank you very much. behravesh with ihs global. we get good feet on the pope's activities but this is a different pope. when he works the crowd, he really has substantial conversations with people. not like the typical american politician and he has his translator with him because his english is not up to the part of his number of other languages, but i was really struck with how he really sat on each child as he spoke to them

ready to leave for capitol hill. like: he is interesting because he is so humble and has practiced austerity in his own life. it must be an amazing thing for him to have all of these people so anxious to see him. he just -- speaking of austerity, he got into that small hut he is around and perhaps it is a symbol of something. tom: maybe it is a trend to see a fiat surrounded by suburbans. they look like basic and you order speaker john boehner vice president biden will be in small cars. mike: porsche chief is reporting to be the front runner for the vw ceo job. -- martin fink or corn martin winterkorn moved out of the job yesterday and there reporting that spain's biggest

oil company is exploring options, including a sales of gas natural. that is aonder if precursor for a busy october. some of our guest predicting this. what an amazing day. another hour of "surveillance." ♪

tom: good morning, everyone, tom keene and michael mckee from our radios to the headquarters in new york. -- from a radio studio headquarters in new york. we will be greeting pope francis and he is on his way to speak at greeting people outside his residence, the consulate of the vatican in new york city. i cannot convey the market movement this morning , part of ourforex brief. visit ibkr.com worldwide and we thank interactive brokers for their support on a morning like this. the mexican peso to new record weakness, 17.31 and the brazilian real is beginning to

test at the opening, 4.22. these are huge numbers signifying weakness in the emerging markets print the euro strengthens, confounding the parity crew. all, $1.19says it come a stronger yen is a risk off feel this morning fit with us right now is mickey leavy of baron berg bank. you've got a million fed questions. feels thisee really tonight at 5:00 p.m. tonight. economics.o geeky everybody blathers in the monetary space, everybody talks. this has real economy outcomes. we are seeing in

foreign exchange income oddities and some of the actions like the norwegian central-bank? at some point, the real economy overtakes. >> it's a very complex question. of the to think framework in the u.s. but also globally. think about the impact of weakness in china and emerging nations, you have to consider within the context of the stronger dollar and the sharp decline in oil and commodity prices. when i added all up, it suggests weaker u.s. exports but strength in domestic demand. lower oil prices in the stronger dollar increase consumer purchasing power. aggregate demand. mentioned earlier, the sharp capitulation depreciation in the brazilian real and the mexican peso.

brazil has to get its act together. terrible leadership, bad policies, lack of credibility. mexico is suffering from the weaker energy prices and everybody is reticent to invest in emerging economies here. the general framework is the u.s. economy is doing just fine. it's growing comfortably. we have moderate inflation which is slightly below where the fed would like it. levy as asia since we last saw him. does it have anything to do it have anything to do with 2:00 p.m., september 17? michael: brazil is its own

strange creature at this point with its own problems but mexico reflects what's going on in the u.s. economy added biggest trading partner is china so they have problems ahead for their economy. does that suggest that maybe the fed is justified to take a few weeks to wait and see what happens and see whether it has the kind of impact on the united ortes either directly indirectly that maybe it has in some other countries like mexico? not, the fed is always dealing with uncertainty. we have uncertainty now emanating from china and emerging nations. you have to look at the fundamentals. the economy is growing comfortably and inflation is within sight of 2% long run. certainly, these weak emerging nations will have a modest

negative impact on u.s. exports. thatwe've got a headline the rectory discusses this. michael: caterpillar is cutting .ts forecast they say 2016 sales revenue will be about 5% load 2015. they will cut 5000 jobs and save $1.5 billion. yesterday,hat, walmart is going to the chinese and saying that their suppliers need to cut. they have inflationary pressures that are there. tom: they are there from the export side and you say ignore that because there will be a domestic strength from lower commodity prices away from caterpillar. >> i'm not singing ignore that

but we should expect weaker exports. relies inthat exports, you can expected to have weak demand. will look what's happening in consumption. it is healthy. you will have another quarter in real consumption above 3%. you are seeing strength in housing, domestic demand is strong which is exactly would you would expect and the fed has to deal with this uncertainty. the decline in commodity prices which have been significant, not just oil but the industrial side. as much ants increase in supply as weak demand and is not forecasting week global demand. the key point is that yes, china, indonesia, south africa, russia, brazil -- they have

weakness now but the u.s. is growing fine. europe is actually improving. the u.k. is doing fine. japan is holding its own. 3 that's/4 of global output. things into perspective and i was suspect the federal reserve should be doing that. once again, the negative response of the market to the fed not hiking rates and sending out a negative message on global economies, i think that should be resounding around the board rooms. tom: there will be a speech today at 5:00 p.m.. tohael: what do you want hear from the forecast tonight? what will help your customers. >> i think it would be responsible for the fed to come and say wese rates

are raising rates because the u.s. economy is growing comfortably and we continue to forecast in our official forecast, continued moderate growth in the economy and inflation going to percent. if they say that and make a positive message about the economy, not overly positive but realistic, the markets will respond positively. the fed'sink about forward guidance, think about the last couple of years, it has been negative. we will keep rates really low for a long time in order to stimulate demand. you look at nominal gdp growth that has not accelerated and has not worked and now they should start taking that the economy is growing at a healthy pace. tom: we will have you back for one more question. >> they should look at the

fundamentals and look at long range strategy and hike rates and given honestly of the economy. levy with us. we will have bloomberg advantage prime time with an important set of guests led by gene munster of piper jaffray. this will be cory johnson grilling gene munster on the future of the dynamo of the american economy, not caterpillar, apple computers. join us and jim robinson will join us as well. this is the first day of october, 6:00 p.m., bloomberg advantage prime time and this will be at the world headquarters in midtown manhattan.

october 1, 6:00 p.m., carol massar and carol johnson. these are extraordinary markets with futures testing. look at the 10 year yield, it is in six risk off basis points. michael: the caterpillar news will not help. there has been a rising pessimism about the markets. says,ter what mickey levy this feeds into it. tom: the euro is advancing. the brazilian real has new weakness. a very weak peso in a very weak real this morning.

tom: good morning, everyone, "bloomberg surveillance." market ramifications we see in emerging markets, the new mediocre abroad filtering back to the american economy with a touch of caterpillar, here is vonnie quinn. vonnie: here is julie hyman. we just heard from caterpillar. julie: the stock is trading lower. i want to give the headlines because it's important --

the company says it is cutting costs. it is also cutting its revenue forecast for the year by $1 billion. they are now expecting 48 billion dollars in revenue for the year and says next year sales and revenue will fall by 5% versus this year. it is also cutting jobs, 4000-5000 people between now and the end of 2016. it says a total possible workforce reduction of more than the00 people including consolidation enclosures of manufacturing facilities occurring for 2018. this is indeed the trickle effect or ripple effect from what's going on in the resource economy. and the demand for equipment as a result. because it has been across all commodities, the company says it is mining and energy but it's

not as though agriculture has been immune from the commodity downturn either. vonnie: if the market did not have a tough enough, we had automakers having a tough day even in the u.s. julie: the european automakers continue to fall and volkswagen may have its credit rating cut and there has been a report in a jim cheatedine that on emissions test in the company is denying that. cheated on emissions test and the company is denying that print the u.s. automakers are falling. motors eveneral though there does not appear to be any evidence, the other automakers are engaging the same kind of deception that volkswagen did. they are putting the price on concern over what this means for the industry. julie hyman, thank you

for joining us. we have pope francis arriving on capitol hill and i want to that arrival. -- and we want to take you straight to that arrival. the pope on capitol hill and he will meet with the president and speak with congress and about 45 minutes and we will bring you that live right here on bloomberg television. will on, janet yellen speak live as well and you are watching "bloomberg surveillance." >> ♪

tom: good morning, everyone, " bloomberg surveillance." say in on teen years of doing bloomberg on the economy may bee news flow today other than certain moments within the financial crisis. it's been varied. michael: it's been quite a day.

news is caterpillar cutting jobs and bloomberg reporting that mathias mooner maybe be the front runner for the top job at vw. will be atnet yellen 5:00 p.m. the guy is in a car heading to the s speaker john boehner waits for him. we will give you a description on bloomberg radio. what is the spread between hawks and doves on the fed? is there a great clarity or is that overplayed? >> i don't think it's overplayed. i think there is a great clarity. -- there is a great clarity.

you see most of the governors in washington tend to support yellen. tom: let's go to capitol hill where pope francis is meeting with speaker john boehner. at the capital as we look for the joint meeting. we will take a look at this right now as they sit down on capitol hill. michael: for those on radio, we can tell you they are in the ceremonial reception room in the capital. john boehner is a catholic and his speaker of the house. and theeeting the pope pope's officially traveling party before the address to the joint meeting. tom: we will set -- we will see that address at 10:00 a.m. here on bloomberg television. we continue with mickey levy. there needs to be a grace and

the pope will speak about that at 10:00 a.m. we also need a central bank grace. the graces more quantitative easing. it's always been the solution the last two years and we see it further with japan right now. too many people like congress look to the fed for solving all of the problems. forwardplus qe and guidance keeps rates artificially low has extended monetary policy way beyond the scope of which is capable. i think the fed has come to realize that they have run the course and how much they can do. what you see is nominal gdp growth hovering lower than 4%

and is not responded to the artificially low rates and qe. we saw the markets respond last week negative to the fed not hiking rates. think the fed is always dealing with uncertainty and we have uncertainty now from china and emerging nations. it needs to think about its long-run objectives and it officially has a long-run strategy that it publishes every january. it has a mandate and it should say we have achieved the mandate on employment, inflation is below 2% but below it for reasons that are benefiting the economy. get outke the rates and a positive message on the economy. the economy is growing just fine. michael: what is the point to hiking rates? one is the fed is

beyond its scope and secondly, atis -- by keeping rates zero and long bonds artificially low, it is creating major distortions not just in the u.s. economy but global financial markets. the fed tends to understate these distortions. an older person that relies on interest income if there are distortions on their balance sheet. ask any insurance company, ask other global central banks. tom: the argument is it will dampen real economic growth. one episode in recent u.s. history for the fed has hiked rates in the economy has slowed down. every time the fed has hiked rates when the economy is strong particular from this low rate, it has no impact. lays publish that u.s.

gdp for this quarter is tracking it to put -- at 2.2%. michael: are we at potential growth right now? is this as good as it will get? >> i think it will get better and if you look at everybody's tracking for the third quarter, they are also tracking strong domestic final sales, slower inventory building, and weaker exports. expect weaker exports in response to the stronger dollar and the slowdown in china but we should also expect healthy domestic demand which is what we are seeing. much,hank you so mickeylevy. cincinnati, where john boehner went to high school, m,ueller high school manufactured athletes and football players that mostly

went to a college called notre dame. he should be excited about meeting pope francis. they are at the capitol in washington for the pope's speech at 10:00 a.m. ♪

vonnie: this is "bloomberg surveillance." gathered on capitol hill as pope francis just arrived at the n is due to address congress in 30 minutes time. john boehner welcomes him a capitol hill.

some amazing crowds are gathering. votes wagon cheating scandal may lead to a downgrade at standard & poor's. -- the volkswagen cheating scandal may lead to a downgrade at standard & poor's. rating software on cars. in saudi arabia, 700 worshipers died in a stampede near mecca during the annual muslim pilgrimage with more than 2 million pilgrims are taking part. it's the deadliest stampede s. openovernment would keep past next wednesday but it's not expected to settle anything and d funds planned parenthood and democrats plan to filibuster. the dow futures are down 1%. let's get back to tom and

michael. tom: good morning, everyone," bloomberg surveillance" at the opening bell. you wonder what will happen between the caterpillar news and the bmw news and what we see away from the equity markets may be as important as what we see in the equity markets. the opening bell is brought to you by sei. seic.com/imagine is where to go. there is a jumble of equity news. the news flow is just an ordinary. >> there is plenty happening. there was some clarity in terms

of where to start when caterpillar came out with its announcement. tom: that was less the layoffs and more the forward review? cut thistely, they years revenue projection and said next year sales will drop about 5%. that was after caterpillar capital accelerating and they expect the stock to 'smble 60% from yesterday close to $28. caterpillar is falling in early trading, down about 5.5%. automobile stocks are lower after european union urged 28 member countries to begin investigating whether car companies got around in missions standards. polls wagon has admitted to cheating in the u.s. and their ceo resigned yesterday. general motors and ford are down about 1% and chrysler is lower by 4%. stocksdeclines in energy as oil approaches a low in new york trading and exxon mobil is down about 0.5%. halliburton is down 1.2%.

they told employees that more jobs are being cut in north america. the president wrote in a memo that halliburton will eliminate multiple layers of management. accenture is down 1%. their fiscal first-quarter revenue trailed analyst estimates. it also indicated that full-year earnings may fail to meet projections. you've got monster beverage up 1.7%. froms raised to a buy neutral at goldman sachs and gold-mining stocks are higher as gold rises for the second day in a year. it would produce the first of back-to-back gain in almost five weeks for gold. david wilson, thank you and we bring in tracey holloway. all of a sudden, is there a

palpable sense of gloom about the u.s. economy descending upon the country? >> all of a sudden? it's been on the slow burner. we used to say when america coughs, the world catches a: now we can see that -- say that about china. talked about uncertainty over emerging markets feeding into that interest rate decision. it has been on the monitor and it seems to be intensifying. caliber -- caterpillar is a good example, it's a good way to take a temperature of the global economy. we are seeing those concerns start to manifest themselves in willumbers for it michael: interest rates keep from rising? the ceo of caterpillar but you have to wonder, it seems like all the news -- all the news is gloomy right now. >> it's not great and before we

came on air, we were chatting about emerging-market currencies and it is ugly out there. michael: when you look at the brazilian real, it is dropping at the fastest record in years. and ditto momentum chart selling momentum is at its highest in three years and it does not seem like it will stop anytime soon. just to add to the gloom because you don't have enough, it used ofbe that the shining hope all these weakening emerging-market currencies was that you would get a boost in exports. casemight not be the according to hsbc economists. they have a note out arguing that currency devaluation instead of a zero sum game is actually zero none game. tom: i put this out on bloomberg radio from the fed meeting , asia dxy including emerging

markets is down 1.2%. as you go to tracy, i guess that suggests that is dollar strength and that it into a system that janet yellin has to talk about tonight at 5:00 p.m. michael: do we have any indication she will say anything that will be any use to anybody? tradersve heard lots of and investors complaining about the fed communication strategy. expectations going into last great prime example. it was a coin toss going in. that is coming from experts whose daily job detract monetary policy. they should not have that degree of uncertainty and yellen will have to say something specific about what the fed is looking at in terms of the u.s. recovery. based on the 5% long-term unappointed rate, they have hit that. to say she needs

something about the wider world and how the fed is viewing global markets at the moment. michael: i am wondering what she could say that she did not try to say last week. it may be more how she says it. they seem to have a committee case and's problem. >> i don't and they heard that job. envy hert and the - job. every country that is raise rates the last couple of years has had to backtrack on the rate rise in the fed does not want to make that mistake. tom: i support the institutional memory going back 10 years to japan. you know these dates better than i do. there is nothing central bankers hate worse than making a mistake in raising rates. digitalchart for listening -- the plunge of the two year yield off the fed meeting. ton we go from .80% down

.68. and now we are down to new weakness. the short paper market is reacting to these big zogenix market news. >> much more than they used to. this kind of uncertainty is not good for investors. will possibly be dealing with that for the next couple of months. it they hike and move in a direction and you will have a certainty that you know which way the fed is going or they stay lower for longer and make that clear to markets and markets get that certainty. tom: copper is not through the august weakness. we are not quite there yet. have we seen the bottom in the economy as janet yellen suggested on the domestic side? maybe the stock market is not reflected yet. >> that's a good point but i

wish i knew if it was the bottom. i would be trading out i did. michael: we would all be rich. whichre is another aspect is that the markets are no longer moving the way they used to in response to the fed. they would keep rates on hold last week, we should have seen the post hold rally in stocks and other assets which we have seen for the past five years and we did not get that and that might be a change in the narrative. tom: thank you so much. joemberg markets with wiesenthal has a podcast. you will see more of that in the coming weeks. down, the s&p 500 is down as well. 2-year looks like this.

you think of a sub 2% yield and oil does not do much this morning but gold is up 14, $15. real is leading the way, 4.23. ♪

tom: good morning, everyone

"bloomberg surveillance or co." vonnie: matt miller is joining me and we spoke with chrysler chairman john elkin. he said what happened to vw does not affect the car industry as a whole get >> the industry was very clear in the release it made. has nohe fact that it relations with the industry. it's a company specific fact. the european union and the other countries have made it clear that they are working on different standards to be able to measure and we are confident that all of this will happen and will be positive for the consumers. sayse: in other words, he the industry as a whole is not responsible in this is a company specific thing.

matt: he says the same thing in a different part of that interview where the automakers union says it's not a company specific problem. i think the important thing is that each company will have its own issues with this. with bmw, they've got issues with this. has had issuesrd eachepa guidance and company will have to come out with a separate statement and that's exactly the same thing we heard a couple of days ago from nissan. it cannot say the entire industry is gaming the system but many companies probably are to some extent. where you draw the line? basically, i don't

understand why they would come out and say proactively this is not an industrywide problem when they don't know. >> there was a very clear which was the union of manufacturers in europe saying that what has happened to volkswagen is not related to the musttry and the industry not be concerned about repercussions. vonnie: that's pretty much the same thing. carmakers are down today and investors do not think this is a company specific problem. seize each, you will company coming out with its own issues. hard today, down nine or 10% in europe. you will have to wait for each company to say whether or not it has cheated. if you believe martin wink

will havech company to look at whether the engineers have made a defeat device. vonnie: matt miller, thank you. matt: i think what will be whether thiss leads to consolidation that sergio mark yanni is talking about. ♪

tom: good morning, everyone "bloomberg surveillance." brought you by ftn financial group. this is a bombshell announcement citibank.am lee at they have been adjusting their cautious view in the recent days. they have postponed their forecast and the interior view push theiris to projection out to spring of 2016 and push the bank of england moved to the end of 2016. ,ook at that china growth rate

well under 3%. the citibank people have been more downbeat about the global economy than most others. called for a global recession next year. it's on the back of additional confusion from the fed and they think they will not move this year. the fed fund futures are only trading up slightly. highlight allen zentner llen zentner at morgan stanley. along with out front citibank along with these significant shifts. this is not about the new york jets. michael: it is amazing.

they are playing as well as the new york jets at this point. you want a trade that will probably pay offer for you, that on harvard football. the man we are going to bring it will never do that and he will be the only one in america who will be worried going into the game. tim murphy is the coach of harvard football. you can hear harvard every week in boston on bloomberg. you went to rhode island and last to your undefeated and you are still undefeated. you did note rebuild your team, you reloaded and are ready to go. >> i think our coaches would look at it differently. replace six players and welace 2 nfl guys

had to rebuild in some positions but it's a solid start against rhode island with offense and defense and special teams. 10 is the final score and brown has not given you a contest in recent years. >> i would not say that. we have been fortunate to win a lot of games over the last decade over brown but i don't think any of them have ever seemed easier. we got out of their lesser with their life and we seem to be their biggest game so we will give it their best shot. they have a lot of talented athletes and play a defense similar to the new york jets defense. i was watching the pregame show. defense andg at the i said that's the brown defense. it's a blitzing defense. i thought i was looking at the brown film. tom: you sound like a proud football coach. snap and the the

quarterback steps back, what is the difference between the division one college game and they nfl? -- and the nfl. ? >> it's just the speed. if you have good athletes, you can get wide open guys at the college level but at the pro level, the window is small and amanda man coverage is tight. everything has to be done with perfect timing. youael: we love talking to and we have an amazing news flow today and we will wish you luck against brown at 645 p.m. for the pregame show in boston. we will give the coach more time next week. he is a very interesting person. it's always interesting worldwide, the guy has such experience working with academics that move the football

forward. michael: i'm sure harvard stadium will be full for that game as is the house of representatives chamber right now. of looking at the pictures members of the house and the senate gathered for a joint session. pope francis will address the members of congress and it looks dean,now like the acting the dean of the ambassadorial corp from the republic of palau has entered the chamber. they will bring in the the pope's cabinet and will address the chamber coming up at the top of the hour. is following this in washington. has all the pop and ceremony about a state of the union address. in this case, both sides of the aisle will stand up and applaud. >> at least you will not see the

same surly looks from half of the room. we got a little bit of a preview yesterday of some of the ideas that pope francis wants to talk about when we heard him at the white house. he talked about climate change in particular. there should be less of that today. this is historic in nature. probably wants this to go over so he can be welcomed back again. we heard him talk yesterday about martin luther king jr. he has american history on his mind as he approaches congress in terms of a way to reach a bipartisan audience. paints the catholic picture of our legislature come our congress and our senate. i don't mean the detailed statistics but paint the

catholic church within our capitol hill. than prior toent john f. kennedy. invited by the house speaker john is a republican and catholic. he will be flanked by the vice president joe biden who may be a presidential candidate who is also catholic. of the sitting congress is catholic. it's a completely different landscape then america had a century ago. that has made all of the difference in the world in terms of the idea of a pope not only being invited but welcome to. it has been a difficult time for the church the last couple of years. the pope is meant to represent a fresh start. he is being received with a norm even by people who disagree with some of the policy issues he is pushing. michael: what is the reason

congress would invite the pope? bute is a tourist value while he is a worldwide figure, he is not a world leader. why would they invite him? the supreme court is walking into the chamber. that should mention about1/3 of the court is also catholic. scenesf this behind the and in front has to do with john boehner. many speculated a couple of years ago that his deferring act would be immigration reform and he would go out with a bang. there is a second wave of speculation that of all he did was bring the pope for an historic address to congress, that would be his legacy. the pope's visit to the u.s. is a fairly historic event anyway. while he is here, the idea of

having him in front of congress is historic. tom: thank you so much. secretary of state john kerry enters the chamber and he sat next to ethel kennedy yesterday at the white house. we will give you full coverage in three minutes of the entrance. the sergeant at arms of the house paul irving will announce the pope's entrance to speaker -- john boehner and vice president joe biden. it's very state of the union like but not a session and not a state of the union, a joint meeting of congress and the senate as they greet pope francis in washington. he will go to new york city this afternoon. when need to say thank you to all of our team for an amazing day of wonderful guests and conversation.

we are produced by richards truman and rachel or span. this is "bloomberg surveillance." ♪

matt: it is 10:00 in new york, 11:00 p.m. in tokyo. welcome to the bloomberg "market day." pope francis prepares to address a joint meeting of congress. theill listen in on

historic speech. missouri may soon company. bmw is under scrutiny. we have the updates on the growing emissions scandal. it has only been one week since on fed decided to stand pat interest rates, so what will janet yellen say today? good morning. i am matt miller. it's get a check on the markets after a slow low-volume day yesterday. we had red arrows across the board and we are back at triple digit moves on the dow jones industrial average. 16,070 is thes, level. s&p 500 down 21, a little more than 1% at 1917. and the nasdaq down more than 1% as well that 4699 as investors weighed more gu