guy: welcome to "on the move." we are counting you down to the european open. . am guy johnson i am alongside caroline hyde. she is in berlin. john williams of san francisco says the u.s. economy is in good shape. is september dead? did carney save the day or act too soon? he faces a critic in parliament today. and apple unplugged. the world's most medical companies expected to unveil the iphone 7 tonight in california.

will it or won't it come with a headphone jack? fascinating buildup to the open. gold surged, the dollar plunge, and futures market in the green for a moment. the probability of a rate hike now pushed back as low as 24%. rookie forward to see how the session develops. big moves in japan. the back end of the curve we have seen the yield dropping. the curve is flattening out again in japan. the yen is also getting stronger . this largely depends on what is happening, but the move is significant. yesterday, we saw a really solid auction. if the market is still interested in long-duration japan. let's get everyone caught up with what we need to know. --er: german industrial

production fell the most in two years in july as manufacturing suffers him subdued mobile trade. that missed analyst estimates of a .1% rise. it is the latest data released since the u.k. vote has weakened . the u.k. chancellor when the senior bankers in london later to set up the government plans to support the economy and sound out their views for a post-brexit britain. theresa may coming under pressure from some of the world's biggest banks to strike an interim agreement with the european union or financial companies before formal exit talks start. that is a process that will get underway before early next year. move as many as 1500 jobs from london to elsewhere in the region in the wake of the brexit vote.

that is according to ceo sergio ermotti. --told a japanese new paper newspaper that while london will continue to be a key financial center, it will not be as important as it is today. meanwhile, inc. of england governor mark carney will testify before u.k. mp's later. be on thexpected to attack after accusing the central bank of unleashing august the manus, including a rate cut, without significant evidence of a slowdown. will leave itsan stimulus program unchanged at its meeting next month, given little deterioration in economic fundamentals and caution about the risk of expansion. we get a decision from the central bank on september 21, the same day as the fed policy announcement. apple will hold a keynote event tonight where the world's most viable company is expected to

present a of products. all evidence points to a modest hardware upgrade paired with meaningful enhancements to ios 10. there is a concern that the handset will not do enough to stem declining topline growth. this is bloomberg. guy: thank you very much indeed. ism manufacturing and nonmanufacturing pmi data have slashed the odds of a rate hike in september. 24% chance of the fed raising interest rates. despite the recent underwhelming data, the head of the san francisco fed remains upbeat on the u.s. economy, speaking overnight in nevada. september's meeting is still live in he still sees an

increase sooner rather than later. markets really unconvinced about that. he is a nonvoting member. let's get the tape of where bonds go and where the fed goes. joining us, european equities fund manager kevin lily. ,he data in the united states how is the fed expected or should the fed raised in these -- in this environment? kevin: they are likely to raise in december assuming the data turns around. clearly, the data at the moment is not supporting a rate rise. and the data in europe is similar. caroline: give us a sense of the repercussions from the united states.

you are saying we are unlikely to see a rate rise. i think we will get a december rate rise. as far as the risk environment is concerned, it is tough at the moment. i am almost sitting on the fence in my portfolios last year. on the one hand, you have a softening of data coming through in the u.s. and the rest of europe. you have an improvement of data in the u.k. at the moment. i am almost sitting on the fence. for me, as far as managing the risk, it is about balance. it is the more risky part of the market, which is super cheap at the moment and i do want to buy. i have to balance it out because of the extreme political timetable and events we will likely see coming through in the next few months, whether it be

the italian referendum for the elections. guy: why the you think things will be good enough in december? a big chunk of the u.s. economy tends to follow the manufacturing number. the blue line is the nonmanufacturing. the yellow line is the gdp number. ,f you look at the survey data it is pointing south. why do we think we are going to be in a strong in a position to deliver the data. they are not improving, they are declining. kevin: it has been oscillating in recent months, particularly on the manufacturing side. a slight dip in the last few months is influenced by what is going on with policies. caroline: you said that your overall direction is formulated

from where bond yields go. where do u.s. bond yields go in terms of the look? we have 30-year bonds. blackrock is saying it is time to get out. it is a tough one of the moment. it is difficult to see where bond yields are going. have some hand, you improvement in the latter part of the year. you have the fed talking about raising rates. on the other hand, you have central banks in the world doing qe. you have europe bringing down bond yields. it is a relative valuation trade. the more the ecb continues with its iie program, that holds down u.s. treasury yields as well. guy: we will talk more about the equity story in a moment. kevin lily stays with us. caroline?

caroline: up next, will the unreliable boyfriend make a credible witness? you know who it is. mark carney facing the ire of critics over brexit. .e preview that event and then the big short. not just u.s. hedge funds expecting lower volatility. europe's stocks at its lowest level before and ecb meeting. s, crude realities. a key meeting in algiers is ever closer. is an agreement on output as far away as it has ever been? we talk oil. this is bloomberg. ♪

caroline: a cleaning of the brandenburg gate. this beautiful morning in berlin, people atop the gate, giving it a bit of a polish. let's kick it on to the bloomberg business flash. shery: thank you. the chinese owner of new york's waldorf astoria is pressing pause on its multibillion-dollar spending spree. they are switching strategy from chasing yields to incorporating

the company bonds. they have picked up assets in asia.s. and according to people with right knowledge of the matter, some banks have concerns about whether they would provide enough details on its ownership structure. has promoted the chief executive of its operations unit. he was previously cohead of credit and will join the bank executive board. their former ceo, who is leaving the company. chipotle shares rose after pershing square bought a stake in the company. bill ackman hedge fund said shares are undervalued and plans to discuss ways to improve the company operations and cost structure. the fast food chain has been struggling to recover from a scandals.food

shares have fallen 14% this year. apple will hold a keynote event tonight where the world's most viable company is expected to present a new line of products, including the iphone 7. evidence points to a modest hardware operation paired with meaningful enhancements to ios 10. this after concerns that the new handset will not do enough to stem declining topline growth. caroline: thank you very much. meet.k. chancellor will senior bankers in london to set .ut the government plans that comes after sergio ermotti said yesterday that he may have to move as many as 1500 jobs from london to elsewhere in the region in the wake of the brexit vote. bank of england governor mark carney will testify before u.k. mp's later.

they are expected to be on the attack after accusing the central bank of unleashing all the stimulus without sufficient evidence of a slowdown. is kevin lily. . wanted to bring in a chart economic surprise is ramping up higher in the united kingdom. we do have an overestimation -- it seems as if brexit concerns were not there. do you agree? kevin: i don't agree. i think it is the calm before the storm. when you look at the leading indicator data, which has driven a lot of this, the number for the u.k. in the previous month was very weak. a huge rebound in august. unsurprisingly, when the previous reading was taken, we had just had the brexit vote. we did not have the u.k.

government in place. the politicians were coming up to try to support markets. companies were risk-averse at the time with low forecasts. where ithe reading reads that things improved or got worse in the previous month. now we have had the august 1 and it is the reverse of that. things have improved since the end of july, certainly. you aggravate the two together, they do point to a slowdown. you have to take the data in combination. when carney appears today, he will be given a hard time. they will say that he should not have cut rates like he did. carney's response should be what? kevin: i think he has to stick to his guns and say that he made decisions and at the time that he made those decisions, there was not a proper government in place and a lot of potential risk.

he did what was necessary to calm the markets down. guy: should he follow up with another rate cut? kevin: not at the moment. you would have to wait into you get further into the brexit negotiations. guy: do we need to wait to get an idea of the fiscal story? kevin: i think we do. the likelihood is that they come up with some other forms of stimulus. some ways of helping housing market. infrastructure spending, the way the market is thinking at the moment. caroline: where are you thinking on the pound, kevin? kevin: i think we have had the big move. we are now wait and see for a number of months. we have not even started brexit negotiations yet. it will be dependent on what happens elsewhere. the u.s. elections may influence the pound versus the dollar.

we have a political timetable in europe coming up. you have the italian referendum and elections coming up. i think we have had the big move. guy: how big a discounted you think u.k. should have now? not just stocks or bonds, but all assets. do you think the uk's going to accept that it will be discounted? how do you price that improperly? kevin: you look at the valuations of the u.k. stock market compared with the european stock market. it is a preview. p.e. of thee american markets are run 17 times. i think the u.k. markets are around 15 times. it does not look that cheap at the moment. there is a huge rally on the back of the currency depreciation. we have had that big boost already.

within my portfolios, i have the u.k. as underweight. the rest of the outlook is relatively value. caroline: when we look at the u.k. sector basis, is there any sector that is a screening buy or still offers value? kevin: i think the real value lies in financials, within banks. but we have to get bond yields rising. they are not going to outperform significantly until bond yields rise. we have had an oversold bounce over the last few weeks. i would expect that to continue until we see bond yields in a rising situation. guy: how long before the u.k. curve starts to stiffen? over the last few days, the japanese curve has steep and -- steepened. is there a dawning realization that what we need is change to

the curve to allow banks to deliver what we need for the real economy? kevin: this is the case. when you are getting economic data that we have had over the , leadingdays indicators in the u.s. and eurozone have been weak. leading indicators in the u.k. have been stronger. guy: stay with us. plenty more still to come from you. we are minutes away now from the european open. up next, we look at some of the potential corporate movers. details of that next. the market open is nine minutes away. this is bloomberg. ♪

summer returns to london. it will be hot today. how is the market going to perform? we talk about the stocks that we are watching right now. barratts in focus. a series of its peers have been announced over the last few days. barclays a little concerned about london. some quite positive. numbers positive as

well. the u.k. market for homes remains healthy. you can see a significant drop from the brexit and it has got back about half of that. stockne: interesting u.k. to keep an eye on, sports direct. down as much as 12%. annual general meeting, we knew that their ceo was going to be coming under stress. the numbers they are turning their attention to was disappointed market. 2017 adjusted earnings before pounds or0 million near about. that is undershooting where the market had hoped. overall, no intention to take this company private. notably, the chairman has

offered to stand down. it seems as though they managed to persuade him to stay on as they look at the ongoing changes. i want to get kevin's perspective about corporate governance and the way in which it helps you dictate investment in the united kingdom. we put more emphasis on corporate governance in our portfolio than we do in our company. it plays a very important role. volkswagen, we have avoided that. isplays a bigger role and it clear that the new leader of the government is putting a greater emphasis on that as well. we will see how the stock opens very shortly. kevin is going to stay with us. the president of the united

states is in laos, addressing a number of issues. the first visit by a u.s. president post the bombing that was conducted. he is talking about that issue as well.

guy: good morning. you are watching "on the move." i'm guy johnson, alongside caroline hyde, who is over in berlin. we are moments away from the start of morning trading and caroline has your morning brief. caroline: fed, is up. insistss the u.s. economy is in good shape. is september debt? -- dead? did mark carney save the day, or did the act too soon? and apple unplugged. the world's post bible company is expected to unveil the iphone 7 tonight in california, but

will it or wanted come with a headphone -- but will it or wont it come with a headphone jack? guy: the markets are going to the -- pay attention to the market's. able story. let's take you to the main markets. remember, white london. blue paris. purple germany. the london market is oscillating. we are waiting and watching to see what will happen throughout the session. we will wait to see what mark carney has to say later on. central banks, once again, dominating the story. let's talk about what is happening around europe. portugal, the performer. solid performances coming through from spain. this is the stoxx 600 broken down by nation. the u.k. and ireland are certainly the laggards.

nejra: here is how the u.k. 10 year yield is opening up. this drop six basis points yesterday. we were at 66, and we are still at 66. so, i a lot of change there -- so, not a lot of change at the moment, but we did the a drop yesterday. of course, looking more deeply into the equity market open on the stoxx 600, digging into the imap. you can be largely green here, which fitsof course, looking moy into the equity market with hows going. energy stocks are leading begin, up .5%. not a surprise, i suppose given that wti is heading higher today. behind.s are closely commodity prices are heading higher as well, as well as oil, of course. guy: thank you.

kevin is still with us from old mutual. we talked about the banks a little bit already. i believe those to one side for a moment. let's talk about utilities, beverages, foods, the stuff we all need. yet, different views from different sectors. that after theed brexit vote. we are very underweight in food and beverages. these are in the low to mid 20's, or even higher. nestle at ahase 2.5% yield. negative rates were issued yesterday. >> what i have done is i have bought into utilities of late and the pharma sector as well.

utilities because one, it is a very underwhelmed sector. particularly, the german and french utilities are linked. we are getting a push from that. we are also getting help from the lower bond yield. we are in a lower for longer bond yield environment. these are highly indebted. the german companies, in particular, are splitting their business into two parts, into the commodity utility bar and the regulatory utility part. i think that is going to boost those companies. caroline: this morning, italy is outperforming. how do you break down regionally speaking? >> we look at regions. we tended to look at it from a sectoral position. italy has been underway for some

time. the only stock we have in italy is leonardo. so, we do have a stock in italy. this depends on the votes from the referendum. will be very it good for italy. if it does not get passed, it is quite bad for the italian market on the short to medium term. that is what i have some presence there, and am looking to increase, depending on the right result. guy: thinking about bond relationships with equities, can i ask you a quick question? treasuries and their relationship to bond yields. this is a chart we have picked up a number of times. a sickly, the relationship is not working in the way you would normally expect tit to. why do you think that is? when you break the numbers down,

it makes you a little bit nervous. >> the u.k. is ok. the u.s. is less ok. it has broken down because of the central bank policy we have had over the last few years. so, we have a situation where bond investors are purchasing bonds for capital gains and equity investors are purchasing equities for yield. equities do not look particularly cheap. bonds, they do look cheap. it is a strange die lemma we are in. -- it is strange dilemma we are in. >> just to give you the context behind this, without the nasdaq hit a fresh record high yesterday. the s&p 500 is in its tightest trading range in 38 years. but what this chart shows is hedge funds have been adding to their positions in s&p 500.

it is not a surprise that they would be along the equity market and short volatility, but what is interesting is hedge fund positioning is its most bullish in three years. but this is even with the average strategist forecast at 1.5% below the market's closing level. they are betting against volatility while that is at a historic low. the question is, what is driving this optimism in the equity market? and there is optimism we will not see much volatility coming. is this all about them just betting on a continuously dovish fed? guy: possibly, or it is a bet basically, that they don't believe that bond yields are offering good value right now. let's get kevin's take on that. with extremed

evaluations in the bond market, you probably don't want to own equities. but with bonds where they are, there is nothing left to buy. is that what we are seeing? >> i think that is right. the evaluation of equities looks attractive. the fed has become data dependent. the weakest data is leading to lower bond yield, which means equities look attractive. caroline: how do you position when it comes to volatility? do you use it as a hedge in any way? >> now, i don't. -- i do look at the volatility, and a look at relative strength indicators to manipulate my cash positions up and down a little bit, but that is all i do. caroline: in terms of

technical indicators, we saw the ftse 100 and ftse 250 hit overbought levels. i know you are no longer looking at the united kingdom as a particularly attractive buy. one.: that is a tough i think the market looks a little bit overbought. i think markets in general are due for a pause. they have had a decent summer. we are going into a period of enhanced potential volatility because of political events. view, it is time not to increase the risk of the moment. guy: kevin, thank you. up next, on the house. u.k. economic data is on a roll.

we are going to discuss sterling. years of expense followed by steep a cutbacks and a new eara for the chinese banking system. plus, the iphone 7 is about to be launched. we will talk apple. this is bloomberg. ♪

guy: welcome back.

you are watching "on the move." the dollar is picking up a little bit and is affecting the oil market. this is how the european equity story looks at the moment, waiting and watching, i expect. mark carney is on deck. so, maybe a little bit of a pause until the get into that story. what are some of the movers this morning, caroline? caroline: i am looking at the mrr function. some of the big movers are indicated by analyst recommendations this morning. this shows the lack of commitment to the stock market this morning. the biggest gainer is up six percentage points morgan stanley. on the downside, you can see the likes of deutsche the fan. this is a downgraded stop this morning. notably, this is the dividend volumes we can see for the german airline, 4.8 times the previous month's average.

on the downside, world pay group. shares are being sold into the market. you can see interesting news at the top of the lord by the gold market. fed willected that the up those rates. keep an eye on those miners. let's get to the bloomberg first word news now. reporter: thank you. german industrial production fell by the most in almost two years in july. production, adjusted for seasonal swings, dropped 1.5% from the previous month. that missed analyst estimates from a 0.1% rise. this is the lattice data from the u.k.'s decision to leave the eu. philip hammond will meet senior bankers in london later to set out the government's plans to

support the economy. prime minister theresa may is coming under pressure from some of the world's biggest banks to strike an interim agreement with the european union's financial companies. that process will not get underway until early next year. ubs might have to move as many as 1500 jobs from london to elsewhere in the region in the wake of the brexit vote. that is according to sergio ermotti. he said that while london will continue to be a key financial sector, it might not be as important as it is today. apple will hold a keynote event tonight, where the world's most valuable company is expected to unveil new products, including the iphone 7. the building meaningful mostcements to ios10, the recent addition to the operating system. this might not be enough.

a record-setting afte astronaut is back on earth after a six month stay at the international space station. it earlier undocked from the iss. jeff williams returns as the u.s. recordholder for time in orbit, logging 544 days in space over four missions. they circled the globe more than 2700 times. global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. this is bloomberg. guy: thank you very much. back to earth with a bang, i think that probably applies to mario draghi as well. it is very silent, but when it comes to his press conference tomorrow, i expect we will see a lot of blame being placed on the brexit. fresh growthut

and inflation figures. analysts expect downside risks will force draghi to keep his forecast unchanged, even possibly, slightly more negative. take you tot to this chart here, the chart we alluded to earlier on. it is basically, the japanese curve. then, we have but the banks picking up. draghi is in a difficult element at the moment -- dilemma at the moment. he needs monetary policy to work. when you the banking sector to be solid. there are a number of ways to do that. how on earth will he do that? >> it will be interesting to see how he does it, to be honest. at the moment, all he can do is pass the buck to other government and get them to push through fiscal measures .

that will get economy is going again without extra pressure from the ecb, which could lead to a steeping of the curve. -- lead to a steepening of the curve. caroline: tomorrow will we see any change in the ability to buy bonds and quantitive easing? >> i doubt we will be any change in the length of the period. eventsre many political coming up in the next few months. he could tweak some of the limit he has on particular bonds. many commentators say he is running out of particular bonds so he can buy in particular areas. i can't see him doing much more than that at the moment. guy: kevin, thank you for joining us this moment. we will have full coverage of the ecb press conference

tomorrow here on bloomberg. up next, a slick move, but so far, no sign of a rescue. we will look at how the saudi-russia agreement is working, but not delivering. is it affecting the oil prices? up in oileing ia pick now. ryan chilcote will join us next. this is bloomberg. ♪

guy: welcome back. you are watching "on the move." let's talk about the markets and what is happening around the world. the best way to start is looking at the gmm function. you can see a little bit of the dollar strength creeping in. the yen has a strengthened. we are at 101.54. the japanese bond market is re-flattening again after some significant steepening. so, just keep an eye on that. oil is an interesting story. we are going to discuss that in a little more detail, but the dollar is up, and we can see little bit of strength in oil,

which is a little counterintuitive. crude, obviously, a factor in terms of what happens next withthe global economy. what happens as we work our way towards algiers, an important conversation. but what is happening with the fed is just as important as well. ryan chilcote is here with the details. ryan: the dollar is up and crude is up. generally, they have an inverse relationship. the weaker the dollar, the stronger the brand because emerging-market economies can purchase more of the stuff. that is generally speaking, what we have seen, let's say, over the last few months. the price of oil is rising, while on the back of that fed jobs number, we have seen the dollar fall as people scale back the expectations for a rate hike in the united states. that has been pushing the price of brent up over the last 24

hours. you have sort of got this situation where you have got oil step between the dollar pushing it up and the glut, which is forming a bit of a ceiling, if you will. u.s. inventories remain stuck well above their historic averages. caroline: brian, talk to us -- lipn, talk to us about the theice being paid to potential agreement to freeze. is it in any way likely? ryan: the market is not think we will get a freeze. everybody got excited when we thought they would be an announcement out of saudi arabia, but as you know, the optimism was dashed pretty quickly once we heard the russian oil minister and saudi spoke and minister

said they would not agree on a freeze. let me show you what is going on with the oil market. the oil price is falling and russian output at the same time, is rising. opec output is rising. everybody is pumping like there is no tomorrow. iran and iraq are pumping. i spoke with one of the biggest oil trading outfits and they say, while agreement is more likely, it would be easier now, but they still don't see it happening. though they say, the fact they are getting better on september 27in algiers is useful because it is helping th talk up the pre of oil. coming outa lot more of singapore with the asian-pacific patrol in conference. the-- asian-pacific trolling thpetroleum

conference. caroline: now, let's turn our attention to one of the big players. saudi arabia is intensifying efforts to shrink its budget deficit. yousef joins us now. you have been covering the saudi arabia market. what is the government said to be doing in terms of slashing that budget? reporter: i just got back from riiad. i just got a sense of how much in a rush the authorities are to open up the economy and we get themselves off of oil. they are looking at $69 billion worth of projects. as much as 1/3 of that might be canceled. currently, saudi arabia has a budget deficit as of 2015, you are looking at 16% of gdp. the national transportation

plan, which is spearheaded by the crown prince, looks to balance the budget by 2020 and reduce their reliance on oil. the bloomberg estimate for this year is that budget gap is going to decrease to 13.6%, but the reality is, in the short-term, the kingdom will have to task some debt instruments. the expectation is there will be a $1 billion obond bonanza to plug that hole partially. they can also cap their foreign currency reserves. there is definitely a lot at stake here. guy: yousef, thank you. up next, moments away from a rate decision from the riksbank. we will get you a read on what is happening with the u.k. housing market. we will speak to the head of

housing at lloyds. that data and analysis is coming up next. .his is bloomberg we are 26 minutes into the session here in europe. ♪

caroline: welcome back to "on the move." live from berlin, we have breaking data from the riksbank. we are expecting sweden to keep rates on hold. awe are keeping once again, for this year, since february, the riksbank maintaining it at -1.5%. we can look at overall, where they it swedish -- where the swedish krona is performing. this is how it is reacting. 23 out of 24 economists we spoke to expected this. only one saw a rate cut down to -.75%.

we can see the swedish krona now cheap, now a funding currency for carry trades. it is the worst performer in the g-10, other than the british pound. do not miss the riksbank governor, coming up a little bit later, as we continue to see t lower. trading guy: the halifax numbers are dropping. the numbers are slightly softer than the market was anticipating. the month on month number has moved of quite considerably. the actual number this time around has come through at -.2. so, not quite as good as what wasn' it dissipated, but it is better from the last data that we had. but it was just post brexit. it not surprising we have

seen that come through. in a few minutes time, we will speak with martin ellis to see what those numbers mean. .n the meantime, nejra nejra: i am starting with a couple u.k. companies. these two have been fighting for the top position as the biggest gainers on the stoxx 600 today. mostgroup rose 6.6%, the since june 29, reaching its highest level in more than a month. it is an engineering solutions provider focused on the minerals, oil, and gas and power market. the reason for its gains seems to be because it was braised to overweight -- raised to overweight at morgan stanley. ashtead's shares have hit a record high today, up 5.4% at the moment.

it has risen the most since may of this year. it posted a gain in first-quarter revenue and expects full year results to be ahead of forecasts. on the downside, i'm looking at 5.3%.and kaba, down this company provides mechanical and electronic also security systems. its shares have dropped the most since february and hit the month,levels in a largely perhaps because it proposed a dividend of 12 swiss francs per share, which missed estimates. guy? guy: thank you very much. so, china's four biggest banks reported that numbers fell by the most in at least six years. chinese banks are under pressure from the economic slowdown and a

rising quantity of bad loans. china posed the biggest risk to hong kong banks. good morning to you. we have now that china had something of a debt problem. of the a sense magnitude of how big a problem we face, and how it is affecting the hong kong banks. >> now, the hong kong banks themselves perceived china as the biggest risk. the four, it was the property market. -- before, it was the property market. it is 27% of the total assets. but we do not see a lot of deterioration in the exposures yet. slowly, going through the cycle, and we can see a small increase in the npl ratio. at the same time, the exposures are coming down. it is difficult to say how well

it can be managed in the future. banksne: many of these are backed by the government in some way. there are many nonperforming loans that also happen to be backed by the government. can the chinese government really come in and save the day? >> if you look at it from the hong kong angle, some of the exposure is from state owned banks. it might not be such a big risk. but when you look at the other exposures, and some lending has gone with other companies. banks.o local, onshore that is probably the bit we are more concerned about, a little bit of credit card lending as well. guy: this is a systemic problem

that is the danger word we get to when we are talking about banks. are there other individual institutions that have a problem and then we get a read across into the sector. how does the structure function? >> that is the key question, can it be systemic in the end, or not? hong kong is so closely linked to china. often anges arinkages are opportunity, but other times, not so much. they are managing loan growth into china. if you look at the hypothetical ratios, it is not that big of a hit for the hong kong banks, if one individual bank gets a bigger hit, it could spill into the other hong kong banks because of some

confidence. guy: what is the implicit, or otherwise, guarantee? >> i think it goes through the chinese banking system. in hong kong, we do not have that from the hong kong authorities because hong kong is moving to a recovery and solution type of mindset. guy: for bank credit. >> exactly. guy: this is a serious concern. >> well, the hong kong banks are standalone on a basis. the chinese bit has been increasing lately. the chinese banks now own 36% of the system, which i think will

continue to grow. caroline: what about the likes of hsbc's standard chartered? how exposed are they? >> they are exposed and more exposed than all of the other banks, but at the same time for hsbc, the exposure, depending on how you measure it, is still less than the total equities. and then, i think one thing you have to keep in mind is that for each bank, exposure is different. it depends on what business model they have and what customers they serve. for hsbc, we think the exposure is following the international customers into china, instead of servicing chinese customers going out of china. depending on how the exposure is structured, they could make the exposure easier to d digest in times of a very sharp

deterioration in china. guy: thank you for taking us through the numbers. this is a subject our audience pays a lot of attention to. thank you for your time. caroline, we are getting news from angela merkel. caroline: we are, indeed. theerday, we heard about budget. this time, the chancellor of germany is saying the government has acted to stem the refugee influx. they are aiding native germans, not only refugees. antiterrorism did not start with -- and terrorism did not start with germany's opened her policy. -- open door policy. there has been growing anxiety about that policy. party didwing

particularly well in the local elections over the course of the weekend. many are anticipating how they will perform in the berlin elections. chancellor germany, addressing berlin, saying the government is aiding native germans, not just refugees. berlin, saying the government is aidingshe is sayis is much less acute than it was one year ago. guy: the riksbank, the market got a rise, which is not always the case when it comes to the riksbank. we have seen some minor tweaks to thee repo operations. there is one of my favorite pairs. that is where we stand at the moment, a bit of a pick up, but not much. i think the market is pretty much on board with what riksbank is doing right now. there is a readiness to do more, but no real significant change in terms of where policy goes next. up next, halifax says the u.k. house prices dipped in august.

we will talk more about those numbers and what they mean. this is bloomberg. ♪

caroline: a beautiful morning here in berlin. 43 minutes into your trading day. missedindustrial reports estimates. the dax is trading down by just over three points. digging into some significant movers on your mrr function. we are digging into the stoxx 600. we are looking at ashtead group

leading the charge, up 6%. why is numbers were better than expected. -- why the numbers were better than expected. up but on the lufthansia issche up by three percentage points. there is a little bit of a breakdown on what has been going on. but guy, we are going to be digging into what is happening. guy: let's show you some records. we do not often get to do this, but here is an opportunity. the bank hit a record high in russia. i am going to pour a little bit of cold water on that and use my bloomberg to do just that. what happens when i change it into u.s. dollars? let's do that and show you what is going on.

not so much, but we have seen a decent rally as of late. but nevertheless, the record story does dissipate just a little. in fact, entirely, to be honest. here is the bloomberg business flash. reporter: thank you. u.s. prosecutors are considering a criminal charge against a unit of hsbc related to conduct on the foreign exchange desk. move move -- such a would impair an earlier deal. the boj have already charged two people on the bank's for exchange desk. -- foreign exchange desk. the chinese owner of new york's business is pressing pause on its spending spree. it is switching strategies to

incorporating the companies. anbang has picked up assets in the u.s., europe, and asia. according to people with direct knowledge of the matter, some banks have concerns about whether anbang would provide enough details on its ownership structure. credit suisse has voted brian -- has promoted brian chin, putting him in charge of the securities business. ofn was previously co-head credit. , whoplaces timothy o'hara is leaving the company. chipotle shares rose after pershing square purchased a 9.9% stake in the company. shares are undervalued and they plan to discuss ways to improve the company's operations. chain has been struggling to recover from a

series of food safety scandals. toight, apple is expected present a of products, including the iphone 7. there also be updates to the ios 10, the latest update to the operating system. there are concerns that the new headset will not do enough to help with apple's declining growth. guy: thank you. we just had numbers out of the halifax, giving us an indication of the u.k. house prices. joining us now on the phone from london to discuss the halifax house prices is the head of housing economics at lloyds banking group. as the u.k. heading for soft landing? >> it is very difficult to call

that one with any precision, but we can see signs of a slowdown. that has been very much the trend since earlier in the year. we can see the annual rate, as you say, now down at 6.9%. in march, it reached a peak of 10%. also, the quarterly rate of growth has been slowing since february of this year. we do see this sort of gentle slowdown. which, i am quite happy to say, is in lign with the forecast we issued in 2015. caroline: where is the key laggard, in terms of region? >> well, we don't go into the regions in terms of the current monetary figures, but the overall picture is we do see softening in those regions of the country which have been performing most strongly over the last few years. that really is london, the southeast, the rest of southern england, which have been outperforming by quite some distance. they are showing some kind of

slow down, whereas the rest of the country, which broadly speaking, showing fairly modest growth, is still continuing to tick along. i think this is because of the affordability issue. it is so much more pressing in london and in the southeast. clearly, this is outstripping any earnings growth, making it harder and harder for people to come into the market on the bottom rung. people are feeling more and more strained by the high level of prices, causing some constraint and curbing house price growth. that is a key factor into what we can see this slowing at the moment. guy: the members of the treasury select committee will say that mark carney should not have cut rates the way he did following the referendum. if he had not done that, do you think the numbers you would have produced today would have been softer? >> no, i don't think it would

have any impact on the figures we issued today. it is too soon, if you like. a lot of the activity we are presenting today was pretty well already done. this is based on mortgage offers and that interest rate cut, it has come too late on to affect activity. we must also keep in mind that the latest reduction, all it has done is lower very low interest rates a little bit further. i don't think we should exaggerate the impact that will have, in terms of people's financing and the ability to pay their mortgage. yes, it will help a little bit, but the main thing is to boost confidence following the referendum vote, and any concerns the bank of england has as a result of that. caroline: anecdotally, where is it being hit in terms of fei oreign investors?

are they stepping back, or being lured in by a cheaper bou pound? >> it is a bit of a two edged sword. i find it difficult to see how this will have a longer-term effect, whether there will be marked portion because of uncertainty regarding where the u.k. economy is going. but there is this boost from the low value of the pound, which is actually making it cheaper. at the moment, what we have seen in recent months, is the decline at the top end of the market. but if anything, the decline in sterling over the last couple months, has actually helped to renew interest. about aclays is talking 20% drop in reservations. maybe not convinced we will see that coming through, but we will wait and watch the markets. thank you, martin ellis. coming up, apple's highly

anticipated product launch. what can we expect? we will preview that, next. this is bloomberg. ♪

guy: 54 minutes past the hour.

welcome back. you are looking at two live conversations taking place, one in laos, and the other in berlin. angela market is talking about the market and addressing the refugee story as well. talking abouta is his trip to laos. some events we have to focus on, expect 20 of talk on the brexit story -- expect plenty of talk on the brexit story. we will also have mark carney facing the treasury select mitty. and at 6:00 p.m., it is apple's big event with a new iphone. what do you want to see, caroline? caroline: well, i am not that excited. i am slightly miffed by the fact i can no longer use my own earphones. big push from apple, but this will likely not

change the revenue outlook for iphones and indeed, for the overall iphone numbers. four straight quarters is what we are expecting in terms of declining sales. we will not begin an uptick in to the second quarter of 2017. that is when we are expecting a whole new kind of product, an iphone with a slimmer screen. that is important when you are looking at this chart. 66% of the revenue comes from the iphone. guy: the biggest indicator for iphone to me is the fact that warren buffett owns it. he likes to own things in utilities. that is kind of where the company is right now. caroline: this is not a growth stock anymore. this is a long-term play. this is not meant to be the euphoric driver we have seen over the course of five years. we have seen it remain steady as we go, still the world's most

valuable company. we will see what they do in terms of trying to grab back the market shares. it is "the pulse," coming up, guy. ♪

francine: staying low. bank -- european stocks fluctuate near january hike. can carney defend the rate cuts? apple launches its newest product a week after being hit by $13 billion back taxes. could the iphone seven break the sale streak? ♪ francine: welcome to the pulse.