guy: welcome to "on the move." we are counting you down to the european open. i'm guy johnson. caroline hyde is in berlin. here is what we are watching. the yen jumps as south korean stocks sink as the north detonates a nuclear device. is draghi done? are central banks looking increasingly like they are out of bullets? why is the bond markets focused on the speech monday? and, viola, the ousted ceo of monte paschi and what can be

done to rescue the world's oldest bank. caroline: caution ahead of the market open. futures signaling a down day. caution about the north korean missile, caution about monetary policy. is the party over? we are down 0.2% on the euro stoxx 50. guy: let's figure out what is happening. daybreak is pretty good. this is what we are looking at around the world. the dollar is down. there's a bunch of things going on. we need to figure out what it means. are central banks outside the fed beginning to run out of bullets? there's a really interesting fed note that has been highlighted. then you've got the speech monday, plus draghi, plus the japanese as well. it really feels as if we could be at an inflection point. the euro is trading at 1.1277. the japanese yen reacting to

what happened in north korea overnight. let's get the bloomberg first word news. here's christine harvey. christine: thank you, guys. be a lotte gasquet ceo has agreed to step down. he leads the bank in the midst of a plan to bolster the balance sheet and attract new investors. he will stay in the position until the company can find a successor. china's factory gauge deflation erased eight straight months in august. consumer prices rose the least in almost a year, climbing just 1.3%, trailing estimates for a 1.7% increase. jeffrey gundlach says it is time for fixed income investors to prepare for rising interest rates and higher inflation. recommend they reduce the duration of their positions, move money into cash, and

protect money from volatility. gundlach says that while rates may not rise in the near term, he thinks now is the beginning of something and people are supposed to be defensive. north korea has confirmed that it conducted its fifth nuclear test. 68thxplosion comes on the anniversary of the nation's founding. south korea's president has strongly condemned the latest provocation from kim jong-un's regime and warns its action will lead to its self-destruction. global news 24 hours a day i would more than 2600 journalists in more than 120 countries. guy: thanks very much indeed. let's stay in asia. let's talk about the reaction to that north korea detonation. shery ahn standing by. definitely risk off sentiment across the board. the nikkei just closed, losing all earlier gains. the yen stronger now.

on top of that, north korea news, the fifth nuclear test, the kospi down 1.3%. risk off sentiment across the board. although north korea's nuclear test does make headlines every time, we are seeing that investors have factored in largely the north korea risk. what we're seeing now is that the rate decision, when they , weally left the key rate saw some change in the kospi there at around 9:00. then we saw the headlines coming out of north korea. not a lot of movement. 12:30, north korea just confirming they carried out that nuclear test. the south korean finance minister saying that if there is bigger move on the markets, south korea would act. markets rightity now are relatively stable.

analysts agreeing that the negative impact from north korea will not last that long. is big story out of asia chinese stocks. we're seeing the hang seng index soaring. mainland cash is flooding the hong kong exchange. we are hearing from authorities that they are allowing chinese insurers to buy into hong kong stocks through the shanghai link. we're seeing that buying through that shanghai connect at more than 700 and dollars every day. -- $700 million every day. we are seeing hong kong gain overall. i'll pick up from here. thank you very much indeed. that is the risk sentiment at the moment. let's check in on the big action yesterday. mario draghi says officials will study options to ensure the quantitative easing program doesn't run out of hans to buy as he played down the need to

commit to new stimulus for now. taskedgoverning council the relevant committees to to ensure a options smooth implementation of our purchase program. the risk to the euro area growth outlook remains still to the downside. this assessment is probably reflected in the september 2016 ecb staff macroeconomic projections for the euro area which foresee annual real gdp 1.6%asing my 1.7% in 2016, in 2017, and 1.6% in 2018. we discussed the assessments of the economy. we didn't discuss anything else. changestime being, the are not substantial as to

to act.a decision the committees have full mandate. they will look at all the options that might be used to redesign the program. guy: joining us now to talk about what mario draghi said yesterday is hsbc's head of asset allocation. good morning. nice to see you. i'm going to quote a note that a couple economist put out. it is a note that came out from karen ward, talking about the fact -- that sequence really encapsulated it -- the ecb is not going to hit its mandate as far as the eye can see, yet it is failing to act. is thaty say

increasingly, the credibility of the ecb is going to be called into question. >> i couldn't agree more. he's also suggesting that modern transmission mechanism has never worked better. i can see his point of view in that, but i can't agree with him. then we would both be wrong. this is an environment in which not just the ecb, but pretty much all the central banks are facing a massive credibility issue. tweak inat they can , at least theal minimum amount of time to do a qe program, because at the end of the day, when we are looking at this and keep underperforming on inflation, and if that is their target, i would suggest they have to act. but we're also in a point in time that they don't have enough room to do that or political capital to do that. it is from your point

of view the fact that they don't have the ammunition rather than keeping powder dry for later in the year? to some extent, i would also try to maintain a little bit of dry powder as it were. but i think this is a longer-term credibility issue. i think the credibility of not just the ecb, but also the fed, being severely questioned now even amongst members of the fomc. day, i no end of the longer believe that we have the ability to offset any significant statistical weakness or market volatility through the use of monetary policy by itself. this will have to get into fiscal policy. drivenket is still being by monetary policy, which i would suggest simply hasn't really worked.

if low interest rates and qe are so growth generative, where is all the growth? guy: that is a point made in the telegraph, we should have an economy that is roaring. policy,prices, monetary we should be off the races, but we are not. he's talking about fiscal policy. they wrote a piece about the fed, talking about a note from the fed that was written, talking about the fact that the fed is going to be out of ammunition. that down cycle could be coming sooner than we think. we also got jeffrey gundlach pointing to the fact that inflation is beginning to pick up. this chart here, inflation back on the radar. this is beginning to take up. we've seen that coming through. then you've got this speech on monday which everybody seems to be excited about. she's a massive dove. she's scheduled a speech

just before the dark period and there's a hand that maybe she's going to point us toward september. other central banks have run out of policy ammunition in this cycle. where is it now? fredrik: our official view is they are not going to act until mid part of next year. there is still not sufficient amount of impulses, positive impulse in the u.s. economy, to warrant a rate hike now. odd tothink it would beod do that so close to the u.s. election. on top of that, i would suggest that our leading indicators, they've been arguing that for a while now the cyclical outlook is pretty weak globally. continuing to hike into an

environment which looks weaker, i would suggest would be a policy error. all that being said, i think there's a market risk that you get the perception that the fed is behind the curve, especially if the inflation number starts to pick up, then you see rate hike expectations coming through. guy: ok. nerbrand,fredrik stick with us. we will be digging into all your asset allocation calls. we got another great conversation coming up. is the british pound going to be helping or hindering those splashing the cash at the pub? j.d. weatherspoon's talking prices versus your and my desire to get drinking. this is bloomberg. ♪

guy: welcome back. you are watching "on the move." earnings for j.d. weatherspoon beat estimates with full-year 0.6 millionit at 8 pounds. founder tim martin joins us now. congratulations on the numbers. what changed to make you more positive? a very good question. i'm worried about what is going

right. it is always difficult to say. pubs have their own rhythms. to like sales have been generally positive. it has been a nice summer. it has been good weather. britain did very well in the olympics and most people are happy with the referendum results. the football team got knocked out by iceland, but we knew that was going to happen in advance. , theis my reading feel-good factor. caroline: explained to me this. your readings, slightly improved trading to come. reduction in consumer confidence. they are worried about the tougher trading environment to come. why so different a picture? tim: it is always difficult to say. i'm tempted to say we are a better company than greinke. but i know that wouldn't go down very well.

there are differences. green tea have just bought a very big company. they are taking over other companies. i think the inflammation coming out of the trade generally in the last couple months is that people have been going out for a pint, going out for a meal, so it has not been dan. i think greene king are doing ,lightly worse than average which they will recover from. how far forward do you buy wine and when do you expect to see the effect of the cheaper pound impacting that cost? how far forward do you buy by forwardk that we a few years, although there are certain clauses that allow suppliers in some cases to increase prices if the currency moves the wrong way. i'm very optimistic about line in particular. we by most of our wine from the new world, south america, south

africa, australia, new zealand. we sell more of this than any other company in the u.k. when we leave the eu, the tariffs that we pay on non-eu wine will be eliminated, we hope. so the price of wine will go down. a bit of a plus from the referendum result for wine drinkers. caroline: we've got to remind our viewers, you are a great proponent of brexit. i urge our viewers to read your statement. it is fascinating. one of the ones that made me laugh, boris johnson, david davis, will achieve far more for the u.k. by copying france and playing bowls in plymouth rather than hankering after any you agreement. you want to say goodbye to some of the taxes online. how can you get that without an agreement with the eu? in order to strike

a deal with someone, every businessperson knows, every house buyer knows, there has to be a willing person on the other side, a willing counterparty. if you go into negotiations desperate to do a deal and think your economic future depends on those negotiations, you've got a very weak negotiating position. we haven't got a trade deal with the united states. we haven't got one with china, with india. states,arly the united an enormous trading partner. rules.trade under wto if the eu wants to do a deal, we are all years. if they don't, it is up to them. guy: a lot has been made of the data over the last few weeks, certainly pointing to the absence of armageddon when it comes to the economy.

early,ou say it is too even in your optimistic view, too early to say what the effect is going to be? prognosis frome the imf, the oecd and so on, was around the immediate impact of a brexit vote. that has been proven to be untrue. looking further into the future, it is difficult to be precise. what we do know is that the key element which economists generally just don't get is that democracy is what creates economic success. look at japan after 50 years ago. it rose from the ashes. south korea versus north. west germany versus east. north america versus south. if we get more democracy, which we will get if we or when we

leave the eu, it will improve our economic performance. being more dissect of than that is being more difficult. generally, already we've seen the gloomy prognosis has been wrong and i think we will continue to do well. this is a point that you made in your statement, saying those economists should go and stick it in their pipe and smoke it. great to speak to you. thank you very much indeed for joining us. guy, we are minutes away from the open. up next, looking at potential corporate movers. j.d. weatherspoon's called up about 0.2%. the focus is on the world's oldest bank as well. more next. ♪

caroline: a beautiful 8:54 here in berlin. another scorcher lined up, but not so scorching on the futures. futures across-the-board a little lackluster. the ecb restrained from adding more stimulus. let's look at the banking sector. in italy, keep your eye on monte dei paschi. the oldest bank in the world looks as though they are getting a new ceo. farewell to the eula. he's going to be helping steady the ship onto a new leader is found.

the treasury officials are saying, situation is under control. that stock could rise about 2%. unicredit could fall about 1%. reports that unicredit is potentially eyeing up may be a capital increase to the tune of 10 billion euros. weatherspoon's, we've been talking to the boss of that business. hsbc's head of asset allocation is with us. overweight or underweight stocks at the moment? fredrik: underweight. earnings story, we are still sitting with earnings estimates from 10. i would argue that is significantly lower. all the arguments that lower interest rates drive the net present value of stocks higher i would suggest is faulty or very simplistic. we are looking at environment which looks much more of a little. -- much more volatile.

we have greater independence on emerging markets, all of which leads to higher economic volatility, which drives risk premiums higher. guy: stay with us. the market open is next. this is bloomberg. ♪

guy: good morning and welcome. you are watching "on the move." i'm guy johnson and i am alongside caroline hyde, who is in berlin. caroline has your morning brief. caroline: the yen jumps as south korean stocks sink. north korea detonated a nuclear device, sending tremors across the region. is draghi done? central banks look like they are out of bullets. ousted ceo of the monte dei paschi doomed from the

start? what can be done to rescue the world's oldest bank? guy: we are likely to see a negative start to the session, but there is a lot going on in terms of the central banking session. yesterday, with old off by a little bit. let's show you how we think these european markets are going to be opening. here we go. the ftse is probably where we get the first action, just really flatlining. perhaps a little bit of a negative tendency coming through. but we are absolutely flat. we might go up a little bit here. the cac also, looks like it is opening a little bit softer as well. we are waiting for the dax to come through. what are we seeing in terms of the other assets? this is the stoxx 600 broken down by nations. portugal and norway, just flirting with the flatline.

denmark, ireland, and spain, the losers. how is the gilt market doing? caroline: we were between 75 and 76 basis points on the 10 year yield. we are up one basis point at the open. yesterday, we saw yields across the sector in europe head higher after mario draghi somewhat disappointed the markets, not by the fact that he did not do anything, but because he did not even discuss expanding qe. let's take a look at how the stoxx 600 is doing on the imap. we can dig a little bit deeper on these industry groups. pretty much red across the board. you have health care stocks leading the losses, down .5%. materials are following closely behind, down almost .4%. on the upside, utilities are the greenne edging into the

with most of the other industry groups heading lower. i want to start with a couple of u.k. stocks in the beer and pub sector. we got numbers from weatherspoon earlier and basically, four year revenue came in at 1.6 billion pounds. the estimate was them to 2.7 million pounds. -- the estimate was 72.7 million pounds. comments on brexit that i could find, though we were looking out for those. the final dividend is coming in

he bank is moving quite quickly to assemble their capital raising scheme. they have made a couple of disposals already. it is no secret. it is well-known that he is

moving quite quickly. whether or not they will get to 10 billion remains to be seen. pioneer, you know, they came with to wrapping of a deal santander, then they decided to end that at the end of the summer. what interesting now is whether or not they do move ahead with a full blown sale, rather than doing some type of joint venture with another partner. guy: thank you, always a pleasure. dan liefgreen, joining us. view that the banks need a steep curve? over the last feet days, we have seen little instances where stocks have just gone straight up. >> in terms of looking at what

corporate management would like -- guy: when i say hsbc, i mean from an investment point of view. >> from an investment point of view, yes, a steeper yield curve would help. but having said that, i cannot put together a macro case why that is going to be the case, really. be: could bit engineered? >> it could be engineered, in the way the fed is always talking about the fact that we need a higher level of inflation coming through for nominal growth rates to recover. that is the only way. fiscalwith th packages coming through, perhaps helicopter routes, in those circumstances, yes. the other argument for a much steeper yield curve would be an

area of protectionism, which would drive down competitiveness and drive up inflation rates. given some of the political stories we are seeing, that becomes an increasing risk, as far as i am concerned. that ultimately, is a risk. caroline: we could be getting there, in terms of these deepening of the yield curve. we saw it in the german reaction yesterday. we can see that spread between 10and 30 year debt. bull reversal of the flattening trend could help banks. talk to us about the debt market. you are liking u.s. high yield. why are you sticking with that bet? >> we look at our allocation th rough two investment processes.

we just published friday on our strategic allocation. in that, we looked at an environment where we have six different economics and arias. across the board -- where we have six different economic scenarios. aress the board, equities strategists have a negative view on all equity scenarios. for the first time since we started our allocation project, we have raised cash. a virtualsh is guarantee. guy: how big is your cash position? >> 17% on a strategic basis. i cannot tell you house suppressed i am to have to go down that route. -- i cannot tell you how surprised i am to have to go down that route. i don't think the return

opportunities on a risk weighted basis are great in developed markets. have 18% int, you terms of developed market equities, slightly more than your cash position. you are still thinking, to some degree, of exposure. >> if i have to look at, this process looks over a three-year period, equities look like they could recover on a strategic basis. on our tactical basis though, if i looked at our six month view, we are still highly conservative. we have very long data treasury positions. we have 15% in cash. we have taken up our gold position again. this is an environment i did not want to sit here and talk about

because this drive down the view that this is an asset deflationary situation. for all of us, that becomes a hugely problematic approach. what that means for pension funds and insurance companies, and ultimately, what that then does to consumer confidence, is a significant problem. guy: we will see what you can do versus the monetary team. fredrik nerbrand is going to stay with us. here euro finance ministers look for answers. two of the 15 measures have been completed. is a funding crunch inevitable? congress getsends tough on wall street. u.s. legislature

capable of delivering anything? plus, we have maniacal recklessness. south korea's president denounces another nuclear test from thm pyongyang. that is next. ♪

caroline: welcome back to "on the move." we got 15 minutes into your trading day. the stoxx 600 is currently

trading a little bit lower, down by .3%. risk aversion, ecb is not pumping that stimulus as some a economists have been hoping. consolidating growth over the year. on the downside, we are off by more than 3%, almost 4%. far company is seemingly more concerned about the environment post brexit. they are worried about our ability to splash tehe cash and start drinking our beer. on the flip side, there is a feel-good factor in the u.k. but now, let's get out for the bloomberg first word news. reporter: thank you. gauges factory deflation has these, -- has eased, falling to 8%.

u.s. federal reserve has urged congress to prohibit merchant banking. of severale recommendations issued by u.s. banking regulators. another was for a call on wall street to limit commodities, after goldman sachs were confused of seizing unfair advantages in oil and energy markets. north korea has conducted is fifth energy test on the 68th anniversary of the nation's founding. been condemned and it has been warned that the actions will lead to north korea's own self-destruction. global news 24 hours a day,

powered by 2600 journalists in more than 120 countries around the world. this is bloomberg. guy: so, the pboc might be under less pressure to add more stimulus. factory guage inflation eased to the least in eight years. we are now joined out of hong kong. we are getting into the weeds in the chinese data very easily. is there a big take away from this particular number? >> definitely. i would say the big take away is, look at what is happening to factory prices. they are edging closer to positive territory. remember, they have had a record streak over the last four years. the has been a constraint on profits and on margins. of course, it has made borrowing more expensive for this companies. what i would say though, guy, one issue about it is, it is a positive development, but it

also reflects commodity prices and in particular, what is happening with oil prices. sure, china has promised to tackle excess capacity, but i think they are not progressing as fast as people would like. driven by this is internal chinese data. it is quiteerefore, a lot for the central bank to fit into their overall thought process. what does this mean for the pboc? >> i think when you have a situation like that, the headline is, when you see cpi doing well, it takes pressure off to cut rates. they don't need to try and stall demand as much as they would have to otherwise have to. hina's economy is taking up thanks to government sponsored credit.

investors are not investing or spending. so, the pboc perhaps, remaining in neutral mode. but they will continue to channel credit in. and of course, the government will keep pumping money in. so, more stimulus is still to come. caroline: we will be back with you, i'm sure. now, let's get back to hscb's head of asset allocations, fredrik nerbrand. what interests me about your asset allocations, emerging-market debt from 21% on the way down to 4%. do you think the rally is over? >> at the end of the day, what you are looking at is our three year view. on that basis, the valuations have tightened. we are looking at an environment where none of these scenarios we

have looked at, the emerging-market debt side comes up. it becomes a mechanical argument why that is. on a tactical basis, we are slightly more optimistic. we are still looking at an environment where many of these currencies are going to strengthen. we have a relatively positive view on india and indonesia. we are looking for carry for the more than anything else in this environment. having said that, back in the beginning of this year more than 50% of our asset allocation was high-yield credit or emerging-market debt. we are starting to take down both of those because valuations are tightening to current levels. guy: give us a sense of your timeline. what does tactical mean? >> tactical means about six months.

guy: you can chase this one for a little bit more, but we are getting to the end of this one, folks. >> for now, because the three year view would be driven on the valuation basis. on that basis, you have to look at valuations more than anything else. and on a six month tactical view, you have to think of the underlying dynamics, and then emerging markets do make sense. i think you have to become is an of what you are doing -- i think you have to be cognizant of what you are doing. it is still an environment where i can drive out some of the andde flows chinese ppi. guy: thank you for stopping by. i think we are going to be having an hsbc day today. dig in more to

the bond market. next, data independence. jeff gundlach warns the fed is determined to show its freedom to act. are we in for a september surprise? this is bloomberg. ♪

guy: welcome back. you are watching "on the move."

london is a little bit cloudy today, but it is a little bit warm. it is after all, friday. .3%.arket is down by now, let's talk about one of the big subjects on the day, the fed. y is is it isach sa investors face inflation. cashshould move money into and protect against volatility. he also added the fed would tighten when the wirp, and we will talk about what that is if you don't know what it is in a moment, is still below 50. >> my guess is the next time the fed titans is when the wirp -- the fed will tighten is when the wirp is below 50. caroline: he is talking about

our wirp function, guy. i have another chart i want to be focusing on, because this is what he is saying to prepare yourself for, volatility. this shows you have the volatility is on the rise in the stock market. we are seeing that spread, the three-month volatility futures, versus the vstoxx. it is the highest since 2013, in fact. this starts to beef up his argument. was it calm before the storm before the central banks start to say, "we can't do much else." guy: i think we need to take a moment to enjoy the fact that wirp has become part of the vocabulary. this is a really good case and point. screen, that wirp on my interest-rate

volatility. i want to show you the brent two day. that is the u.s. data, the effect it has had. we are going to talk about the eurogroup next. this is bloomberg. ♪

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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. caroline: will come back to "on the move," 30 minutes into your trading day. risk aversion out there after that ecb decided to hold back on adding to quantitive easing past march. real estate, retail, health care is easing us lower. on the flipside, the banks are in the green. the cac 40 is down by .3%. let's dig into the individual stock stories. nejra: you are right, of course, the banks are in focus today. it i'm highlighting two of the biggest movers on the stoxx 600.

actually getting this stock, 1998 high. rubis is up. with aalf, e-bit clear beat coming in at 160 million euros versus an estimate of 144 million euros. the revenue was a little bit of a mixed, though. -- bit of a mix, though. on the downside, we have been focusing on pub companies. greene king is down 3.8%. although it is confident of delivering another year of financial progress, it says potentially, a tougher trading environment ahead and it sees softer confidence since breixit. guy: of talk about what is

happening. the eurogroup will be holding a meeting today, talking about greece and italian banks. the first review of the nation's last bailout. we'l all used to know this stock really well. thwe will see a dispersal of 2.8 billion euros in funding. greek bonds are currently excluded from the asset purchasing program. joining us now credit agricole's head of management. we are not done with greence, are we? >> now, i don't think so. that we a potential will see reduction. given the overall climate in europe at the moment, it is

still fairly week with growth. there could be some support. that is concerning to the germans, in particular. guy: let's talk about draghi yesterday and central banks. central bank has been quite dull for a while, but it is becoming quite interesting. how do you engineer a steeper yield curve and is that what central banks are thinking about? >> it seems like that is the latest, if you look at the kuroda speech earlier in the week, but also what draghi alluded to in the press conference. it is a big worry to them, the fact that bond yield curves have a flattened so much. as a result, banks are struggling to create profits. guy: are you saying they did not want that to happen? >> in kuroda's words, they were surprised. i would say they were not truly expecting that. if anything, we do think the boj in september and that boj

in december will take steps to re-steepen the curve. to do that, we think they will reallocate some of the purchases they are doing at the moment from the long end of the curve to the short end of the curve. important? -- why is that important? it will help the banks. in terms of currency, however, it is somewhat nuanced. if indeed, we do see the short end of the curve coming under renewed pressure in japan and the eurozone, we could see cuts. both the euro and yen should we can on the end of that. in the current environment, we have the fed moving closer to hiking rates, which is negative

for bonds. we have central banks, like the boj, saying, we're going to leave the long end for the time being on its own. that could mean long-term yields across the board could start creeping back up, resulting in a tightening of global financial conditions. in terms of impact on the euro and yen, the immediate impact the short enive on d of the curve. yields might not be looking as attractive as before. i think it will be for commodity currencies, high-yielding currencies, benefiting from the latest risk rally. caroline: it looks as though it is already happening, though. already we have hints in japan

that maybe they are rethinking whether they will be buying at the 30 year curve. we did see a risk steepening in the curve. the 10 year and 30 year reversing that bull flattening trend. we rose up, just on words from draghi. meanwhile, he says he does not care about the hit on banking profitability. >> i think that is, draghi's comments to be interpreted to mean the ecb is not ready yet to consider additional options. but i think those changes in teh he qe at aldi are coming. aren tehe qe modality coming. verbal indications, if they do work from draghi and kuroda, well, talk is cheap. wastingld the ecb be

resources to engineer something that is already taking place? i do believe however, that in the current environment, central banks might want to call the central bank's bluff. that renewed steepening might not be sustained. so, the ecb will have to take some action in december. the bigger picture here however, if anything, they might have reached a limit, in terms of how much further the long-term yields could fall from here. from that point of here, the risk, three to six months out, longer-termher yield and tighter global conditions. caroline: therefore, can you cut through some of the mist that is building at the moment? are you on the side that draghi did not go because he did not need to and he is waiting for more volatility coming later? or, is there just nothing more

he can do? is there too much turmoil within the ecb that they cannot agree which way to pull? >> the ecb is still able to deliver and indeed, the measures we expect in december could have an impact and prolonged the asset purchases program, allowing them to continue expanding their balance sheet smoothly. that said, the overriding message clearly is, as you highlighted, both the ecb and boj are moving close to the limit of their ability to stimulate growth. so, monetary stimulus might have to be supplemented by additional fiscal stimulus in the case of the eurozone to get us where we want, but we are not there yet. i think that is a topic for next year when investors will be openly questioning the ecb. that for the next three to six months, the ecb is not out of

options yet. guy: is september alive or dead? if you wanted to communicate that september was a live meeting, she is the perfect person. she put that speech in very late, just before the blackout period. in my reading to -- am i reading too much into this? >> that is the interpretation. that the fed wants to communicate and that potentially, investors are wrong for dismissing september. the u.s. that was not necessarily supporting the case for a rate hike. yet, the fed speaker certainly highlighted that they are dismissive of the latticed data and they want to -- dismissive data andtest they do want to normalize rates. the investors might be a little bit complacent going into the fed meeting.

our call is for the fed to stay put for now, no hike in september. we expect the next time to come in september. the chances are, the statement, the press conference, the message that will be communicated could be more hawkish than the markets are expecting. , thave this big risk. th e u.s. presidential elections. we could be on course to normalized rates -- to normalize rates. again, given that all of that is happening, an environment where the likes of the boj and ecb are clearly reaching the limit of their ability, that could translate into tighter global conditions. i think the dollar could do well, but it could be tighter

on the yen, the risk correlated currencies. guy: thank you, valentin marinov . up next, the fed recommends a plan on lending. can regulators take on on more lending? is next on bloomberg. ♪

caroline: welcome back to "on the move."

43 minutes into your trading day, we remain lower. rescue caught up on your bloomberg business flash with christine harvey. reporter: bayer is exploring the sale of the dermatology business as it explores a takeover of monsanto. they say the german drugmaker is working with jpmorgan on tehe sale. spokespeople refused to comment. well, apple announced the iphone 7 with much fanfare but says it won't be doing the same with opening weekend sales numbers. the company insists that supply, not demand, will govern the stocks, and they know the orders will sell out. they are not releasing the numbers, holding back a key metric used by some investors to gauge the success of an iphone want. ceo, fabriziohi's

viola, has agreed to step down, leaving the bank in the midst of a plan to attract new investors to avoid a bailout. he will stay in the position until the company can find a successor. that is your bloomberg business flash. caroline: thank you. now, aviva ceo, mark wilson, says britain's government needs to offer more clarity on the brexit process. there has been increased profit and raise dividends in august. francine lacqua asked mark wilson if the firm has an overall contingency plan. >> i think what we need from the government is a certainty of timeframe. i think it is entirely appropriate they have not invoked article 50 yet. we need to take some time, take a deep breath, sort out what the plan is.

we don't have to sort out all the answers, but the answers will be different for different industries. i am impressed by the fact we have got a new prime minister, we have got new people in place. markets crave certainty, don't they? i hoping and we will get that over the coming months. francine: are you worried london will stop being one of the financial capitals of the world? >> know, the reality is london is the home of areas like insurance. london has got great labor laws, it is a great place to live, it has got all the systems. trying to unwind all of that, i think, is a pretty tall order. caroline: a tall order you want to be digging into more. the full interview is in the latest edition of "leaders with lacqua," one you don't want to

miss. guy: you certainly do not. but we are going to focus on the banking sector. the federal reserve has urged congress 2 -- caroline, pick up that.and read i lost my mic. caroline: the agency push for limits on wall street's ownership of physical commodities. for more, we are joined by michael moore from the bloomberg news financial theme. take us through what exactly is being proposed here because it looks like they are saying the goldman sachs business model, they don't like it. >> certainly, a large chunk of what goldman sachs does, and some of the other banks as well, the federal reserve can't remove this merchant banking exemption in the u.s. by itself. so, that is why it is recommending to congress it would like to see it do it.

but putting it in congress' hands makes it less likely than just the fed enacting some regulation. this could be a drawn out process, as you have seen by just the fact that this report itself that the regulators produced was supposed to come in 2011 and we are just now getting it in 2016. this is still coming from the dodd-frank act, and it has been a very long process. guy: dimension goldman. wh-- you mentioned goldman. who else could this affect? >> wells fargo has a portfolio. goldman is definitely the largest. this was seen as some thing that could get bigger for the banks. the rule does not let you invest a large amount through the funds structure, but you can still do it through the merchant banking exception. so, some thank fo -- so

comsome banks are looking to do fewer investments. guy: walk me through the risks. my is there concern surrounding this? -- why is there concern surrounding this? walk me through why this is a bad thing. >> i think that will be the big obstacle for getting a lot of support in congress behind taking some strong action here. it does not seem like there is a lot of -- none of the banks think it is a big safety and soundness issue. i think it comes down to, this is separate from the core function of thinking and if we are going to to provide the fed backstop and deposit insurance, this is not something we are interested in. we want the banks to do core banking. it also comes back to, part of

ands banks dealkings commodities. -- dealings and commodities. it has become a politically sensitive issue, whether banks had too much insight into the commodity industry. i think the commodity element is part of it, but that banks use the merchant banking exception for far more than just commodities. guy: thank you for joining us, michael moore. reaction fromext, the region as north korea confirms that carried out a nuclear test. this is bloomberg. ♪

guy: welcome back. you are watching "on the move." let me show you the brent screams. they are softening up a little bit. this is where he got the data on the u.s. stockpiles. we saw a big drop, generating this big bounce in the price. we have faded off of that a little bit. the rally is beginning to fade. the market believing, that was a one off piece of adata, as a result of which, the

rally is fading. caroline: we are shifting our attention from commodities to asia now. china says it firmly opposes north korea's nuclear test and is urging the the good of nation to stop action that could destabilize the nation. north korea says no radiation blast.ked in tehhe peter, how significant is north korea's claim that it was able to miniaturize nuclear weapon? >> very significant. again, have to preface it by saying nuclear confirmed in 2013 that they had a nuclear missile. but if the claim is true, it would be a significant leap forward. we are getting very close to actual workable weapons. basically, what they have claimed to have done is to have bomb,urized an at hiatom

fitting it on a nuclear warhead, which can travel quite a distance on a nuclear missile and hit a target, perhaps even in the u.s. territory. quite an competent, -- quite an accomplishment, if true. guy: how is this going to change the geopolitics in the region? >> well, i think it has already started. the reaction has been swift. condemnations obviously from the u.s., japan, and korea. china's reaction was slightly different than from the past. they are also alarmed. they have already talked about just 30 minutes ago, the chinese foreign ministry said they will be reaching out to the north korean embassy there. so, clearly, much more intense reaction than we have thing

seen before. caroline: will this be any sort of detriment to north korea's ongoing nuclear ambitions. do you think any sort of reason or spokespeople coming from the u.s. or japan will actually debt ent it? >> that is the $50,000 question that nobody seems to know. none of these condemnations or sanctions have curtailed north korea's nuclear ambitions. whether it will happen this time, nobody can tell you that. i will be honest. i heardto -- basically, north korea will continue, despite all the stepped up sanctions that have come from around the world. guy: great stuff, joining us out

of seoul. our weekly show, "brexit, what is next." that is the story we will be focusing on. this is bloomberg. ♪

francine: nuclear news. a south korean nuclear test since the kospi sliding. the beginning of something. time to get defensive. warnings rise on fed interest rates and higher inflation. draghi dials it down. the ecb holds fire on further stimulus. is the central bank experimenting with a laissez-faire approach? welcome to "the pulse" live from bloomberg's european headquarters in london.