to yellen and kuroda as the fed gives the latest decision. david: stocks rise around the world in the dollar weakens before central-bank policy meetings this week. alix: the bank for international settlements is once again sounding the alarm bell in china after a review shows the credit to gdp gap as well above financial risk levels. jonathan: a warm welcome to "bloomberg ." , live fromn ferro new york city. the overwhelming consensus is the boj is the bigger one, but no consensus as to what they are going to do. david: also, they have more options open. a lot of variables in this thing. they committed or interest in to see what's going to happen. alix: the super bowl of financial markets is wednesday. i don't watch football, but morgan stanley is out with a note today saying the yield curve in japan met stephen anymore. we've seen a 50% retracement from january levels. they don't want that much of a steeper euro. big question for

the fx trade is if they come to -20 basis points to you by resell the end -- the yen? alix: a great show, with richard clarida, coming up later in the program. jonathan: a positive turn to the market after negative and last week. futures are positive up about nine points, .4%. in europe a rally on a stronger footing, the ftse up by 1.4% in the dax up by a .8%. events onsk wednesday, if the decision in the boj decision, just hours apart. in today's session, a softer bloomberg dollar index, the dollar-yen just coming down a little bit. wti withonger footing,

a 43 handle. and merrillica lynch thing there's downside risk that the targets get back in the 60's by the end of the year and a supply pop could be around the corner. there's been a steeper yield curve, we debate that throughout the program. today, the long and rally and 30 year treasury around about basis bigt to 2.4 percent at of a week. alix: let's check in for in-depth coverage on all those top stories. and a current is looking ahead to that pivotal wednesday boj meeting. previewing therk withion and megan murphy terrorism become the focus. the market is focusing on the boj and enda curran joins us now. you have an advisor to prime minister abe saying he's

expecting more negative rates and more qe. this is a consensus in japan and asia? enda: there's no consensus on the boj will go this week. it's really wide open. all we know is that all options are on the table. the difference this time around is that this meeting includes an assessment of how policy has been going for the boj. there are two diverging views, one is that the doj -- the boj says monetary policy is maxed out. the second camp says they might just dip further into their toolbox and double down and took the negative rate further. they might even mix up their asset portions to try and stephen the yield curve to give something back to investors. we don't know which the way they are going to go. there's a feeling that he is leaving -- is not leaning toward shocking all this time around. he says he will expand stimulus if he feels is necessary. it's all in play from wednesday. alix: this sets up the stage

later. we have a lot of data out of , a lot of read on property sales and prices. what is the latest? enda: property sales going high again, seeing gains of prices, despite the policymakers stepping in to try and curb, with a worry about now is a bubble. we saw suspected intervention by the giant central bank in hong kong today to put a floor under the yuan. enda curran, chief asia economics correspondent. high board of never 15%. ofathan: it means a lot things to a lot of people. the federal reserve, let's bring in your lineup. could we basis rise around the corner? >> we should not expect

anything. the fed is eager to tighten policy, but things are not ready. the first half of the year saw a really weak growth. we are not going to see robust growth in the second half of the year. they don't need to do anything at this point. they are faced with a very delicate balance of explaining why they are not ready to act now. and still trying to strengthen the case for more tightening going forward. by loweringieve it the growth forecast for this year. probably keeping the forecast for growth unchanged for future years. you wonder how they remain on hold if they leave the forecast on hold. how can express doing nothing for the warning signs ahead?

yelena: they will probably leave the pace of dots going forward. jonathan: great to have you on the program. reserve startsl marking their own forecast, we wonder why we are pacing -- paying attention at all. david: we are choosing our tail, it's an automatic reflex loop. it was a big weekend for politics, we heard from both presidential candidates. it was all eclipsed by some explosives went up in new jersey and in new york city and again in new jersey. murphy, ourmegan washington bureau chief to tell us what this all means for the presidential campaign and how are the two campaigns reacting? megan: it shows the contrast between these campaigns and his starkest possible. from coming out early characterizing this as a bomb in

a terror attack in new york, even before we had officials coming out and saying anything about it or what it meant and what the motives were. other hand, we saw hillary clinton, while condemning the attacks of the weekend taking a more measured response and asking for people to find out the facts before coming to any judgments. it's been a consistent theme on this issue throughout as both of them seek to put themselves forward as the commander-in-chief that people can trust in very uncertain times, when people are increasingly concerned. much at allvery about these incidents in new york and new jersey. there's been very little information provided beyond the fact that we had an explosive device that went off. another was found. overnight, another set of what looks like improvised devices found near train station in new jersey. it's a city that was bracing for an influx of world leaders in the united nations summit this week. we've seen a huge increase in the security presence over the past 48 hours. david: there was another attack in minnesota in a mall, a

stabbing of the islamic state has claimed credit for now. happened, howl would the two candidates stack up in terms of national security issues? megan: it's fascinating when you look at the polling. so may people say they are concerned about donald trump's temperament to handle being commander-in-chief, they have expressed a preference in terms of being able to lead the nation in times of national security crisis. that's been consistent throughout this campaign, and surprised a lot of observers and surprised a lot of people who are political pollsters how much of an advantage she has had on that point. she will be seeking to draw contrast encz went to the american people of the kind of steps and resources they need to use. it's not all of our rush to judgment and promising a tough crackdown. to makel be trying their case and we see how it plays out in this crucial week ahead of the first debate next monday. david: megan murphy, our washington bureau chief. --update on business

headlines outside of the business world. amash andre ethier. -- emma chandra is here. inand other explosive device elizabeth, new jersey. the device exploded while was being examined by the robot. no one was injured. that happened a day after a bomb exploded in new york city. more than two dozen people were injured in the second device. five people are being questioned, as the u.n. nation general assembly opens today. the fbi is now investigating a stabbing at a mall in indianapolis is a possible terror attack. according to authorities, and man a private security uniform stabbed to nine people before an off-duty police officer shot him dead. islamic state has claimed responsibility. describes theport attacker as a somali who has lived in the u.s. for 15 years. in europe, another setback for

germany's john salonga merkel in regional elections. in germany's angela merkel regional elections. about a quarter. the anti-immigration alternative for germany siphoned up many of those modes. -- many of those votes. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. item a chandra, this is bloomberg. chandra, this is bloomberg. alix: will companies moving high alert -- moving higher. opec maybe moving closer to a potential deal next week in an unofficial meeting saying they are inching closer with opec and non-opec reducers. we have issues with libya and helping big oil in europe. do an upgrade for wells fargo here in the u.s., coming from

robert baird. wells fargo has had a really horrible five days in the stock market. it's interesting what robert baird said. $2.6 million in revenue lost does not equal $20 billion value loss for this company. the further risks for wells fargo are limited. a similar story in terms of upgrades when it comes to general motors. morgan stanley raising their to $37 a share. the true consensus is $37.50. right around with the street is talking about. missing general motors pop rosalie hiring free market. up, the marketg pricing to 20% chance for rate hike on wednesday. the fed is ready to move. the global head of fx energy speaks out, that's why. from new york city, this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg ." i'm jonathan ferro. the dollar slipping a touch ahead of the fed rate decision this week. a 20% chance of a rate hike this month. joining me is steven saywell, at bnp powerpeople don't see a 20% chance. stephen: -- steve: we think the market is underestimating the chance of a rate hike the 2016. i'm surprised now because as you said, it's not pressing at all. 20% and rates markets. but also equity markets and the foreign exchange market are clearly not expecting this.

the key reason we would say here is firstly, the spillover effect from brexit. there was a big issue last time. we would also highlight at the last fomc meeting, there was a real fear over payrolls. we had that rogue very low release voting in the yield. that's been pushed aside. we could be surprised. jonathan: we have economists calling for rate hike tomorrow and the effects team saying play for the stronger dollar. steven: that's a theme for us. for exchanges concerned, is less reliant on with that actually does, it's more the language and sticking to the market for the rest of the year. the boj, we've seen the fed, and the yield curve stephen. the u.s. u.s. and japanese yield

dollar-yen,ook at they got nowhere fast. i would argue has been an impact on the fx market, but not those major currencies you mentioned. if you look at something like the australian dollar, this is actually come off and the new zealand dollar as well. the reason i would say is because those two currencies, australia and new zealand are much more linked to risk in the global community, and particularly, equity markets. if we see less risk-taking in the markets, equities coming off, we think the best way to play that would be sure the australian dollar and new zealand dollar, rather than the euro will again -- or the yen. outlier, it's an not with the market itself is. if the fed were to do what you said, and go up 25 basis points in september, it would cause

real disruption in the marketplace. should the fed be taking into account as it decides what to do this week? steven: really good point. i would argue no. we heard from several fed commentators, said officials themselves, that they've given more than enough guidance to the markets that they could be hiking. we saw the particularly even after janet yellen made her jackson hole's big. we heard the comment from fisher with a said the market really should be ready for rate hike's this year. jonathan: understanding fits biggest tough enough. the head of fx energy of french banks include the japanese as well. happens onbout what the other side of wednesday, risk on, risk off. if you go to -20 basis points in japan, whether that's positive for risk or not. the example we got earlier this year makes things very interesting. steven: it's confusing, and i

try to make it clearer. i would come back to the sense that i would argue for the euro-dollar and dollar-yen in particular that the fed is more important in the kind of environment that either the ecb or the bank of japan. i think that's where the bank of japan was struggling in january. the ease policy at the same time that the fed was disappointing the markets. was very hard for them to get traction. what they really need is for the fed to hike and then the impact of policy in japan in the eurozone is much stronger. then you get the policy diversions. that's why would argue that the fed is so important here. list -- the asymmetric risk if you look at easing or action, or doesn't matter until 2:00 p.m. that day? steven: the point i would make is because the decision in japan comes before the fed, the market may not respond so aggressively until we get the fed news a couple of hours later.

if we get both of them moving in opposite directions, that would be the big move in foreign exchange markets. that would see the dollar-yen a lot higher. jonathan: we could see some dissent one way or the other. at the boj, the last two times they made a big move, the other to cut rates in negative territory this year. we saw the vote of the boj. did they find an agreement to do anything? steven: not think so. the best case scenario is they do nothing. we think there's a greater chance of a change of strategy, and they stop targeting the monetary base and move towards yields or something like that. i think that is the key thing. the final point would make on this one, with the fed, i don't think it's black and white to the high court of a hike -- do they hike or don't they hike? is relatively hawkish and what they say, they are signaling to the market any to price more in. the foreign exchange market a short dollars.

the general say theme here is the market is underpricing fed risk. will the fx market respond to hawkish talk? i wonder if it's having a law dimension returns is a goes on? steven: i would ask this question by coming back to petitioning in the market. if you look at where we are positioned, our survey still as we are short. surveys tell us we are short. for 18 months now, there's been a big disappointment in the market. to your point, i would say the market -- we come to the part where it is so short, there's very little downside. there's a very strong asymmetric risk for the dollar to respond to hawkishness from the fed than the other way around. jonathan: steven saywell and sticking with us. the dollar-yen is a little softer.

alix: risk rally, i love that can call on a monday. emerging-market issuers exposing themselves to greater volatility. we explain later. and what to the latest political headlines mean for the upcoming election and the market? if the cannot to the memory come election -- it is the countdown to november 8, the election approaches. this is bloomberg. ♪

alix: this is "bloomberg ," i'm alix steel. yields backing up across the globe, as we see a 2013 paperlike tantrum. tantrum.like 2013, that spike did lead to a selloff. that is relatively similar in 2015, 210 years spread is that white line of the fx has not

really budged this time around. steven saywell, global head of affect strategy. we waiting for en to selloff? where is this different? steven: it's an interesting point. our view is the market needs to adjust and we expect the dollar to rally. but we wouldn't expect a aggressive selloff in the end, like we saw you mentioned the taper tantrum. the reason for that is twofold. the first point i would highlight is this is much more flagged as an event. the fed has hiked once, we are no longer in qe. boj have come to the party and are providing huge amount of liquidity. what they are trying to do is to get domestic investors in their regions to go abroad. some of that money will come in gm. while the dollar is less of the funding currency, this is the driver, we had outflows from the

eurozone in japan, that could cushion any fallen em currencies. off: if we see a risk shakeout, where do we see that? what is the currency pair that will be at the most? steven: our internal market -- our internal models point to a very clear trend here. it is sure the australian dollar and the new zealand dollar against the resurgent u.s.. dollars,t is short u.s. dollars, but it's long australian dollars and new zealand dollars. if that scenario happens, it's pretty much a perfect storm to short australia and new zealand. msx, aussieting dollars, watch out. steven saywell, good happy. jonathan: coming up, calling for

calm. london's mayor urges the government to take a measured view on brexit. monetarydown to decisions from the fed and boj. the market are positive footing today with equities up across the board. features positive and in the fx market, dollar-yen trading with a one-to-one handle. yields just coming in a touchdown by one basis point to 1.69% on the u.s. 10 year. from new york, this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg ." time jonathan ferro. isfrom new york city, this

"bloomberg ." i'm jonathan ferro. in the fx market, this is how we set up. softerre dollar -- dollar. it is the commodities story all over again. market, the story of the last few weeks has been a curve that has been steepening. the story today is the rally of the long gain. anticipationt and has been building. the week is finally here. >> it finally is here. here is what else you need to know at this hour. bomb sniffing dogs, a team of dignitaries will visit chelsea

today. exploded in a new jersey seaside community. the federal reserve and the bank of japan hold policy meetings this week. jpmorganackrock, and asked for a december increase more likely. the claim that employees created more than 2 million unauthorized customer accounts to meet sales goals at wells fargo. int will be discussed testimony. a trip to promote relations and reassure investors following the referendum in june. with the brexit was that a perception may be created overseas that somehow

london is going to stop being open-minded and outward looking. we've got a simple campaign. london is open. tom: where is the next london? where is the alternative? >> there is no alternative. my message to our friends in america, business people creating jobs and growth, in london, you have access to talent, the finest banks, the regulators, why would you want to go elsewhere? "hamilton" is also coming next year. [laughter] tom: when prime minister mae europe,o the rest of who is she speaking to? of the things we have been impressing upon the prime minister is that it is crucial that when it comes to negotiating with the european union, that london has a seat

around the table. tom: how do you do that? >> the government is he agreeable -- is agreeable to it. when the governor -- government gets ready to negotiate, they need to realize it is crucial to london. london is a powerhouse for the u.k.. the government recognizes that even if you were in favor of brexit, if you want to be on the right side of history, it is in your interest to get the right deal with the eu. if we don't, it could lead to jobs leaving london, prosperity leaving london. tom: into next week, the idea of , the idea ofet london and the united kingdom, do they need the eu single market or do they not? can you go it alone? >> we will survive.

issue is an increase in prosperity, being a beacon for the rest of the world, showing the world london is open. that means talking to european neighbors. my point is very simple. we've got to use brexit as an opportunity. jonathan: for more on the interview, did you sit across a that was making the distinction? tom: it was very clear he wanted a distinction at the table. i watched an episode of "wolf hall." i don't see with the difference is between tudor england and the

england of khan right now. the continent matters and it is going to take unique english calculus with europe, as it always has been. jonathan: it is a critical part of global financial markets. we are still talking north of a third of global fx trading still going through london. on the euro, buying, selling. how critical is that? tom: you go back to do they move stuff to dublin, amsterdam, any of the other cities to be blunt? i think that mystery is how to get his positive message out with london and not making a talking point where he really connects with the rest of the united kingdom. you did not show it, but i thought his little bit on the collapse of the labour party was really interesting.

this is something for american viewers that is different. he is identified with soft liberality. do you go back to a tony blair labour party or does he speak to a new labour party that we have not even identified yet? jonathan: he's got to speak to several different factors within his own party. just to go more globally and moreat financial markets generally, is there a sense that, i don't care about the city of london because i don't the global about ,arkets, not with these viewers but more generally? come on, aykroyd, write something short. london is london and you can -- whatever your

politics, it is stunning that he is the mayor and his sides of victory is stunning. jonathan: "hamilton" enough to get you to london? to: yes, anytime i can go parents and the manolo block .tore at the top why is manolo blahnik way up? jonathan: tom keene. there is the plug for harrods. david: mayor de blasio has said they are looking for a specific individual in connection with the bombings in new york city. they are looking for a specific individual.

we will keep you updated. we are not going to turn back to the rate situation. on wednesday, the bank of japan will tell us where it is looking for monetary policy? is the head of rates research, how much of a steepening is the result of fundamentals and how much is because of what people are anticipating? >> good morning. the last two thirds of the move are a market preparing, anticipating what the boj may deliver this week. we think it is time to expectations, rather than fundamentals. david: what do you expect? >> at a minimum, we think they will take away some restrictions on the average maturity of the portfolio.

there is a risk of them cutting rates a little further to take away the pressure that has been flattening the curve over the last couple months. we do think there are tweaks coming along the way. a lot of it has been well televised. david: does that mean you do expect much market reaction or you don't expect markets to react much at all? >> we think the markets will be volatile around that time. it depends how much information they diebold after the meeting. then we run right into the fed meeting, which is all well -- also going to be critical. we do think a lot of it is priced in. alyx: morgan stanley out with a

note that said the curve will not continue to steep in. the implication is that you need to buy that. is that the trade, george? we do think it is going to remain volatile. the implementation of money market return has taken away some of the yield pickup available for overseas investors. david: come back to the fed. but may talk pretty tough, what expectation do you have ?bout the market reaction >> there is concern around financial conditions being flushed with liquidity and

chasing yields in all sorts of sectors. i think it does behoove them to come off with a more hawkish tilt. going to be looking at the forecast and what they envision as the path for rates. the challenge they have is they want to keep the hike on december in play and probability high, so it gives them an option to actually hike. it will also have to manage the view around where rates will ultimately go. i think that is the challenge. much more hawkish. --athan: thanks so much david: thanks so much, george. yieldor does the 10 year depend on the clinton-trump spread? coming up, the u.s. presidential election and the markets are speaking up. how will markets respond to a trump versus clinton white house? election days rapidly approaching. ♪

alix: this is bloomberg . i'm alix steel. daming up later, rich clari joins us to talk the fed in the boj. >> here is your bloomberg business flash. back taxes in the european union. major u.s. companies may be investigated.

japanese airbag supplier takata is moving ahead with the option of the company. according to people familiar with the matter, possible buyers include carlyle group, kkr, and a japanese auto-parts maker. bidders have been asked to submit proposals by early this week. more job cuts are on the way and rolls-royce. cutting 200 positions from its management team. the ceo wants to cut $260 million by the end of this year. rolls-royce has been cut by falling demand for turbine engines. this is bloomberg. david: it is now 49 days until the election. a new poll shows donald trump pulling even with hillary clinton. the two candidates present very different views of the country.

a lot of it has to do with economics. with us now is barclays head of public policy research. onhas done extensive work what lies behind the topline polling numbers. let's start with a chart you created. back to 1992, we are essentially graph -- flat in household growth. >> the new numbers show a bubble of 5.2% in median household income, but you have seen a household income. you have seen the rise of the far right and talk on the far left. some people feel they are being left behind and it manifests itself in globalization and trade. >> absolutely.

folks often side with those who support trump or sanders on the left who don't feel better off today. you have a terrific chart on the country just question -- question. the bright green is worse off than 50 years ago. clinton supporters think we are much better off. the populism does spread. this is a great chart where you can see it. it goes back to the reason why they want to see a revolution or change in u.s. policy. david: how do they operationali ze these numbers. how do you appeal to your voters? >> for clinton's campaign is going to be talking about how the country is not in as bad of

shape. from the trump side, it is about hitting home the idea that we are in a low growth environment, whether it is japan, europe, the u.s., economic output has gone down. with stagnant incomes, they can continue to hit that home. david: we have 49 days left until november 8. at this point come are the numbers baked in and it is a question of how they characterize them or could numbers coming out in the next 49 days affect this materially? >> absolutely could affected. i think clinton has a slight advantage given all the forecasts. she was 405 point ahead nationally, it is only 1-2 points now. now. are client concerns i think the first debate will be very important for investors.

we will see what kind of a candidate trump would be as president and how hillary clinton will defend herself in a debate. david: you have a chart that shows how it will affect the various quintiles throughout the population and it shows dramatically that in the lower quintile, hillary clinton does not affected at all, hillary clinton -- donald trump does not -- fx it a little bit. 1% and thethe top far right, the top 1%. that is how many fewer taxes donald trump would impose on the rich people. the yellow is how much more hillary would tax them. >> this is the percent change on the different quintiles. it is targeting the top 1% on the clinton side. everyone below that level -- this is what presidential candidates say. this is independent analysis, not barclays numbers.

congress needs to act on this. then need congress to implement the taxes. david: lastly, it is not just how voters feel, but how strongly they feel. things that is interesting is the passion of the donald trump voters. the commitment to vote is big and different. what can hillary do to drive the number higher? >> the enthusiasm gap is important. i don't always believe there is such an enthusiasm gap for hillary clinton. she did get 17.5 million primary .oters in 2008 she got 15 million this year. i just think her supporters are not nearly as vocal as others. david: thank you so much. it is great to have shone with us. jonathan: coming up, flagging credit risks to china. we break this down coming up

next. this is bloomberg. ♪

alix: this is "bloomberg ." the big news over the weekend. the bank of international settlements warning china's debt again. the credit to gdp gap was over 30%, the highest since 1995. what is the solution? a solution could be the rotation into how home debt versus .ulprit that -- corporate debt this is household loans outstanding, the white line. blue line is corporate loans outstanding. the corporate debt is just about 10% versus household debt at about 21%.

i should point out that this is april. it has been household debt that has the majority of new bank lending. where is all that money going into? homes and cars. that shows thert percentage of gdp of auto sales, property sales, and the combination of the two. the white line is the combination of the two coming in at 16% of gdp. property sales coming in over 10%. yes, there is a downside risk. you have more money from households moving into the property sector. that is going to push up home prices. we saw this reflected in chinese home data. home prices increased the most in the last six years this past month. let's put it into perspective for the bigger picture of debt. this is debt as a percentage of gdp broken up by sector. the blue line is household debt. the purple line is corporate

debt at over 150%. the growth has been in household. corporate debt is still woefully low. the white line here is credit of gdp. that is the overall worry with china. if you see china continuing to rotate in household debt instead of corporate, that is a good thing. that is debt. at some point, it comes due. some point, it is going to have to stop. when does the music stop and what does that do to chinese growth. coming up in the next hour, the hsbc head joins us. from new york, this is bloomberg. ♪

david: terror takes center stage

with donald trump and hillary clinton. the campaign takes on a wave of terror threats after multiple incidents over the weekend. jonathan: investors cap down to janet yellen and kuroda. alix: it is the money market rally. the dollar weakens before central-bank policy meetings this week. david: welcome to the second hour of "bloomberg ." live from new york city, jonathan, there is a lot of news going on. consensus is to look to the boj and not the fed. non-decision on wednesday from the fed, i'm told. alix: what is behind the meeting for bond yields? they say there are a lot of longs in the market. there is still potential for the correction. david: we're back once again to talk about hawkish tones. alix: 48 hours, guys.

we are almost there. we will talk central-bank policy a later inrd clarid the program. we are looking at 18 bit of risk on in the market overall -- a teeny bit of risk on in the market overall. jonathan: it is a broad-based rally in europe. almost every single group gaining on the session. it is a softer dollar today on the fx market. if you are looking at the commodity market, stronger dollar, stronger commodity session. the story on this trade, it is the long game that has been selling. the curve has been steepening, the spread has been widening. atlds coming in about

2.433%. meganan: let's -- alix: murphy has developments on the weekend explosions in new york city. we look ahead toward the fed decision. and caroline hyde on another blow for angela merkel. david: it is politics. we have had an active political season. the bombing attacks, even as we have been on the air, there are reports that new york police are looking for a 28-year-old naturalized afghan citizen. he may be armed and dangerous. this is affecting the political campaign in profound ways. we turn to megan murphy. how is this playing out in the presidential race? >> new yorkers having alerts on their phones about this suspect. he may be armed.

they put this out as an extreme alert. is rolling into the campaign quite quickly. donald trump talked about the need to step up racial profiling , talking about how political correctness has dampened our ability to clamp down on terror attacks, saying this will be stopped and we need to get a handle on it. he called current leaders stupid in their approach to terrorism. we had hillary clinton out condemning the attacks, but advocating for a more measured response, that the facts be known before we jump to conclusions about the facts or the motives. david: it is relatively easy to come out and be belligerent. it is a harder position to say we are going to be measured. how can she handle this? >> this is the real contrast of the two campaigns. it has played to donald trump's advantage to be on the front foot. the first to say this was

a bomb in new york and we would eradicate this. it has been the kind of threat he has taken to a national security threats. it puts hillary clinton in a difficult position. to is the one who is going take the more measured approach, get the facts before going forward. at the same time, he has been able to trade that -- for that is a weak response. she is going to have to show that she has a handle on it, has a handle going forward dealing with national security issues, that she will be tough, but fair and measured and the one you .ant in the hot seat david: this happens against the backdrop of the polls that has shown a real tightening of the race. is there a shift of momentum going on? >> there is no question the polls have tightened on a national level and in key swing states. it does seem that there is

momentum that has moved behind donald trump. he has really solidified his gain under white working-class voters. in her favor our demographics, particularly minority populations. democrats are very concerned about the enthusiasm gap for her -- in votersvoters who are less committed. she needs to get her turnout up. onid: we are still focused the fed even as these developments are focusing. alix: political uncertainty and fed uncertainty, as well. ok, so we basically are looking at nothing going to happen on wednesday. is it going to be about the risk"?nt "the balance of is that what we will be looking into? >> obviously, there will be a lot for economists and analysts to digest.

-- the fed cannot be too dovish. they are eager to tighten policy going forward and they are facing a very delicate balance here. they are not going to move now. they are ready to tighten policy going forward. they can lead the forecast for growth going forward unchanged. alix: i'm also looking at the fact that we're looking at the dots we will see for 2017. >> absolutely. we will be closely looking at ot clot. we don't expect much change in future years. the fed is ready to tighten. they keep talking about it. you mentioned on the program, there were a couple of very hawkish speeches.

they are still in that state. we don't expect that many changes in the dot lot going forward. alix: thank you so much. we have uncertainty in the political section, uncertainty with the fed, uncertainty with germany. jonathan: let's wrap things up in germany and head to berlin to caroline hyde. chancellor merkel's party facing another setback in berlin. talk us through the results. getting: the cdu really the protest vote front and center. this is the worst performance we have seen for the ceu, angela merkel's party, since the end of world war ii. clearly a wake-up call for anglo merkel. they are once again seeing an erosion of voters going to the right wing, extreme anti-immigration party, the alternative for dortch land.

-- deutschland. this is not a complete seachange. the democrats are still in control of berlin for a 15th year, but they will have to team up with the greens, the left party. they do not have an overall majority and it does seem to be the immigration policy that is putting people off. jonathan: is this a regional story that won't be reflected in the national election? she was voicing concerns today. she was just up in front of the news organization moments ago saying my fault. she does take her share of responsibility today, saying that they waited too long to tackle the refugee crisis. she is trying to hit this now because she is worried about the election next year. the alternative for deutschland has seats in 10 of the 16 overall council elections, the local boats.

to transpire into the national elections, that is where the worry starts to creep in. she is not worried enough to bow to some of the demands of the sister party, that is the likes of the csu, the bavarian leader has been asking that she puts a cap on immigration, 200,000, leave it at that. she is saying no explicit cap. we don't want to see the unbridled welcoming of immigrants that we saw last year. one million were welcomed. she is having to step back from that policy to keep control for next year's election. she does not say whether she is running for it yet. jonathan: i suspect we will not get an answer for a while. coming up, expectations for fed hike. what the boj will do has been a source of interest for some traders.

the answers might not be that obvious. from new york city, this is bloomberg. ♪

alix: this is "bloomberg ." let's get the latest developments in the attacks in new york and new jersey. emma: police in new york want to question a person of interest in relation to the bomb explosion that wounded more than a dozen people. he was born in afghanistan and became a new york city -- resident. a bomb exploded in chelsea on saturday night. meanwhile, a device found at the

train station in elizabeth, new jersey blew up overnight well being examined by a robot. noone was hurt and there is word on whether the incidents are connected. on capitol hill, lawmakers will try to reach an agreement on a stopgap spending bill. the senate majority leader mitch mcconnell has set the first of a series of votes for tonight. the biggest outstanding issue is how to pay for the effort to fight the zika virus. chandra, this is bloomberg. jonathan: thank you so much. the bank of japan will kick off its highly anticipated policy meeting tomorrow. the u.s. federal reserve interest rate decision is expected to be unchanged and that comes out on wednesday. joining us to discuss is the hsbc head of fx strategy in new york. i'm going to ask you a question

around the fx circuit. boj ofet a cut at the negatively 20 -- -20 basis points, you would have thought that the experience has shown us that yen can be stronger off the back of that. is the yen a buy or a cell on -20 basis points? we are going to be underwhelmed yet again by the bank of japan. that move into negative rates last time, it is just a mark smacking of desperation. it does not feel like they are going to do anything very different. it little bit more negative and , thisome lending scheme yield curve story doing the rounds, i think the market will be disappointed ultimately. jonathan: are we in monetary policy exhaustion? >> definitely in terms of impact.

economic impact of monetary policy has become smaller and smaller overtime. i think we get a little bit exhausted talking about it, as well. [laughter] >> policymakers are looking for other options. that is why fiscal policy has drifted much more into the narrative over the last 3-6 months. david: we want only here from the bank of japan about monetary policy, they are doing a thoroughgoing review. is there a chance there will be a fundamental rethink of the entire approach or is this just window dressing? >> it could be both. what makes the boj complicated is that there are a number of moving pieces and then you have this review. when people talk about policy confusion and the boj not being able to agree, this really is a movable feast. it is entirely possible, not

possible that the review there and let it i just and then they come back later in the year -- digest and then they come back later in the year. the risk is that they would be unlikely to want to give their critics ammunition that they are raising the white flag or that they are throwing in the towel. this is not a straightforward thing by any stretch. alix: what does it mean for the yield curve and affects? -- fx? this deepening of the yield curve not reflected in the currency pairs. where is the action going to be if we see a selloff in the curve? where is the action going to be? >> i don't think it is going to be in fx. it is very much a relative shift. steepening of the japanese curve

seems to have dna curd european yields -- de-anchored european yields. where the impact has been more fx. in fx was in e.m. we have seen that kind of pattern. effect fromg that the trump story of the political uncertainty and the fed uncertainty, it is hard to know how much of that selloff has been japanese oriented. david: what does hsbc want -- jonathan: what does hsbc want to see? >> i'm struggling. [laughter] >> i'm hesitating. the ultimate thing is helicopter money, but they are so far away from that the moment. i think that is improbable. if they expanded the etf program. they did it in a piecemeal way

the last timeout. honestly, i don't see it. you are either selling dollar-yen or you are selling the rally. jonathan: in your years of covering central banks, i can't think of a single news conference i've been in where the overall consensus has been this is a big one to watch, but there is zero consent this on what is to come. couldld be an easing, it be a hold, what does that save a communication coming from the boj? >> part of it is the review. corona has placed a premium on kuroda has-- placed a premium on surprised. the boj were the first ones to , they have this aging society. onus --esn't put the

does it put the onus on the prime minister? is it coordination? >> they have already done some fiscal stimulus. have we had enough time to see whether that is having an effect? have done fiscal stimulus, but they also did fiscal stimulus last year. in terms of year on year growth is going to be relatively modest. japan did not deliver on the fiscal side. really where we are moving to now, talking about japan, is mics ever's -- abeno going to work? it is drifting back to square one. that is a gravitational pull and that currency now. jonathan: let's wrap this up by asking the question. very short-term, you are going into wednesday, are you buying the yen, are you selling

dollar-yen? are you sitting on the decision? how do you play wednesday in a short-term manner? >> there is going to be hesitancy to trade the boj. i think that will be constrained. i think the fed is going to be dovish. i don't think they will throw anything weird out. there might be a delayed reaction to an underwhelming fed -- i'm sorry, and underwhelming boj. on top of that, the fed. jonathan: sticking with us to unveil the strategy. thank you very much. alix: we just talked about the boj, but is that the fed moving markets on wednesday? we will turn our focus to janet yellen and the fed. will inflation and declines in corporate profit keep a rate hike on hold until 2017? this is bloomberg. ♪

alix: this is "bloomberg ." we turn from the boj to the fed. is it really the fed that is actually going to move something on wednesday? >> it should be. it is chronology that draws us to the boj first. less uncertainty had we had this conversation three weeks ago. it feels we have drifted away from the rhetoric. that is where the surprise factor can come in. alix: fair. we look at the bloomberg index is a stone's throw away. where is the potential upside? >> the dollar has already rallied. anything from the

press conference to justify against the average. the asymmetry is that it peels back from that level. janet yellen is going to say it is all data dependent, it is going to be the same kind of carbon copy, the dots are going to move lower. it is going to make it harder for the hawkish elements of the dollar to gravitate higher. jonathan: there is this narrative that the fed marks the market and they do not control of what is expected of them. to come out and disciplined the market a little bit and regain some authority, do you think that is possible? >> i think the fed has painted themselves into a corner, they have made it clear that market decisions are interest-rate decisions. the markets get unnerved and they cannot raise interest rates. it is the same circularity happening with the dollar. i think that is where they need to reeducate.

they don't want to be seen always reacting to the market. they should be driving the market narrative. that is not the way it feels at the moment. david: what are the fundamentals the fed should be looking for to justify a rate hike? >> the obvious one would be the labor market. it has been half or near full employment. they anticipated pickup and wage and inflation. a number of inflation measures in the u.s. are at or above 2%. you could point to that. the counterargument is that we , investment is not quite where we would wanted to be. of fed's preferred measure inflation is still well below target. jonathan: head of fx strategy at hsbc, fantastic to have you with us. we will have more on the boj on wednesday. up, the bank of

japan and the bond market. speculation that the boj will try to steep in the yield curve to help the lenders and the economy. what will it mean for bondholders? how would they go about steepening that curve? we will break it all down. ♪ . .

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alix: this is "bloomberg " i am alix steel. but the latest on the attacks in new york and new jersey. >> police want to question a native of afghanistan in

connection with the weekend bomb explosion in new york. the man is identified as a rahami.han he could be armed and dangerous. the explosion in the chelsea neighborhood wounded more than two dozen people. meanwhile, a device blew up at a train station in the elizabeth, new jersey, overnight while a robot was trying to disarm it. no one was hurt. clear if there was a connection to the new york explosion. they are investigating a stabbing attack in minneapolis as a possible terrorist attack. men in uniform stabbed nine people before an off-duty officer shot him dead. islamic state has claimed responsibility. they described the man as a somali who had lived in the u.s.

for 15 years. .lobal news 24 hours a day this is bloomberg. ramy: let's get you up to speed on global markets with big risk on the table. features positive -- futures positive. we have a rebound today with the ftse up by 1.36 and the dax up by .8%. the decision will be captured by dollar-yen this wednesday. weaker dollar.d the commodity market, a weaker dollar and stronger commodity session. market, you know what the story has been. it is selling on the long en d.

alix: that leads me to my chart of the last three weeks, that is the japanese yield curve. steepening has been the story. the white line is where the curve is now. the red is where it was june 24 right after brexit. you can see the huge difference in the long end of the curve. joining us now is the credit squeeze head of interest rate strategy and ahead of global economics from merrill lynch. this is one of the key parts investors are watching. how much steeper can occur go? >> it depends on what the boj does. they have a technical review coming up. if they mention something to the effect of being unable to purchase bonds at the pace they are currently purchasing at, you could see markets interpret that

as taper light. even though japan is a smaller economy than the u.s., it is lying about as much in dollar terms as the fed was at its peak. that could cause a significant selloff. it could be taper light. we don't think that is likely but it is a possibility. the: the narrative is steeper yield curve and scarcity of bonds down the road. why doesn't the boj take care of it? what is your take on the ground in japan? are doing a comprehensive review. i think there is confusion in 100 because there are different ideas of what the boj is likely to do. steepening the curve in the short run will not help japanese insurance companies and banks in the long run.

they need inflation. inflation will steep in the yield curve. has to holdhe boj the course and keep stimulus in the system. i think some of the concern that to steep in the curve is overdone. the focus is on the short-term question around the yield curve. but that is not solve japan's problems in the long run. the boj needs to keep its foot on the accelerator. ramy: there is a lot of confusion as to what is happening with the curve. inflation,xpected the expected path of interest rates, and the premium that is difficult to observe. how much of what we have seen globally is a return of the term premium? >> that is a great question. the last two weeks has been an

increase in term premium. what is this term premium and why are we seeing that increase? i think there are two things going on. they want some sort of post-brexit negative outcome being priced in. that has gone away as you have seen data being fairly good in the u.k. in europe. the second is a change in the supply/demand equation. we have had record corporate supply. billionunning at 987 high corporate issuance this year. that is 4.4% ahead of last year which was already a record-setting pace. you have more supply. there is concern banks are throwing in the towel. if demand is pulled back, you should see term premium repriced. alix: look at this chart on my terminal looking at breakevens in japan, europe, and the u.s. as well.

breakeven is nothing. anyone excitedis about the rate kicking in, will they be disappointed? i think things are a little overdone in the markets. i don't think the boj or e.c.b. are done. i think they have taken a respite. the boj to do the comprehensive review. the e.c.b. does not have to act until march next year. we will continue to see aggressive buying by both central banks. i think the story about central banks being out of ammunition, while there is some truth to it, i don't think they are literally out of ammunition. david: you say they should keep their foot on the gas, they still have ammunition. when it comes to the bank of japan, art they running -- art they running our bonds to buy?

what should they do to get inflation going? >> the fact they are running out of bonds is not a problem. they need to keep the yields down. what matters is keeping the yields down. they have to keep an aggressive buying program that holds the yield curve around zero. there is not much more they can do. t.e ball is now in abi's cour they've got deliver real fiscal stimulus. this is an historic moment for japan. low unemployment, high job openings. the central bank and government working together to stimulate growth. continue aggressive stimulus and create inflation in japan. confident about them delivering because we had sony disappointments in the past. but this is an opportunity for japan. alix: you are an investor.

do? do you we have seen investor demand come in. is this a private debt on wednesday at 5:00 a.m.? diphethis a by the on wednesday at 5:00 a.m.? will not be done on the day of the announcement. the prudent thing to do is to wait. the best case is the boj will underwhelm. i agree with what ethan was saying. you could see a potential opportunity to buy but that is based on the assumption the boj won't do anything drastic in either direction. alix: you're saying i am on hold and ethan is saying they cannot do anything.

confusion as we go into wednesday and 40 hours. ramy: i'm not sure anyone wants to give a call on the boj. in europe, also a big one. analysts during angela merkel's position will be eroded by mounting legal costs. this is bloomberg. ♪

alix: this is "bloomberg " i am alix steel.

pimco's the next hour, strategic advisor to his us to break down fat and boj -- joins us to break down the fed and boj. >> mcdonald's could face a $500 million tax bill from the european union according to the "financial times" which says it paid an average of 1.5% tax in luxembourg. the e.u. is saying the investigation is continuing. sales of legal marijuana may triple to $23 billion by 2020 according to market research firms. sales growth is being driven by states where marijuana has been decriminalized and by new state legislation. house prices in london rebounded this month after four statements of decline. the average asking price in the british capital was up almost 2% from august to $825,000

according to the real estate website. prices in london's most expensive districts are down 4% in the last year. i'm emma chandra. this is bloomberg. situation in the futures. we open the session on wall street in about 40 minutes. futures up 81 points on the dow. in europe, two weeks of losses. every group aiming in today's -- gaining in today's session. a decent session for commodities. a softer dollar story. yields coming in by about a basis point on the u.s. 10-year. the big decision is wednesday as withoj and federal reserve a stronger yen at of that.

crude bouncing back after a drop last week of 6%. we come back by about 1.4%. alix: you highlighted the rally in commodities helping the european stocks. you have the weaker dollar. you have property prices rising in china. you will build more houses potentially. that is good for base and industrial metals, especially copper. we are seeing that optimism reflected in europe. getting initiated by morgan stanley with a $37 a share price target. to auto 2.0 move does allow time to generate cash. they say g.m. will remain profitable longer than the market expects. they said they may see flat earnings in 2017 and 2018. morgan stanley said that should encompass a positive surprise. also taking a look at a potential m&a monday.

at $1.6l deal valued billion. shares selling slightly below the offer price. they have been the number three holder with a 6.8% share. out.er bid did not work vista equity is making a play. up, we will show you a key u.s. inflation gauge in the battle of the charts next from new york. this is bloomberg. ♪

jon: from new york city. this is bloomberg. i am jonathan ferro. a big week ahead for markets. wednesday, boj decision, fed decision. futures positive up 78 points on the dow. s&p futures positive around nine points. the dax up by 82 points. the dax and focus last week because deutsche bank got hammered. banks coming back a little bit in today's session. every industry group is gaining on the session. of gainsroad-based day in europe after two weeks of losses. let's see what the action is the other asset classes. in the fx market, a softer dollar index. down .5%. trading

david: you know what time it is? it is time for battle of the charts. today we have alix steel against caroline hyde. caroline in berlin i believe. you go first. thanks for being with us. >> a pleasure, david. i go first with a show of what is three risks currently in the market this week affecting volatility in the yen. go to this on your bloomberg terminal. you not only have the fed. you've also got japan's two holidays which are going to be affecting volatility. in the white line, you see the one-week implied volatility up 17%. this is the highest since july when the boj is appointed the

disappointed the market with the level of stimulus. in the purple, you are seeing the spread widening. they are respecting the agent aged today, a nice thing to do on a monday. on wednesday is adding to risks and liquidity in the market. volatility spiking higher. two holidays as well as two right decisions. david: that is exciting. thank you. is a spreadhart between the 30-year yield and cpi. it incorporates a lot of service sector inflation. as you see it rise, it means the yield is rising higher, inflation is falling.

as you see it go lower, inflation is picking up and the yield is not. 2.7%, the cpi at highest level since february 2009. michael says this does not make sense. we have not seen a spread negative since 2009. 2009, we did see a huge fall in inflation, a bigger pick up in 30-year yields. he said that will be different this time around. long-term treasury yields are well below the expected level given the fact we have seen inflation in the non-commodity space, particularly medical and shelter, also picking up. after the zika data on friday, i thought this was interesting because the higher -- after the cpi data on friday, i thought this was interesting because it is not priced in the market. jon: i will turn to caroline because she pointed out today is

ged day.the a 32,000 people turned 100 in japan this year. david: a profound statistic. it does illustrate a lot of problems japan has. caroline, you win. congratulations. friday, we received word the department was seeking $14 billion in fines from deutsche bank to settle the case around mortgage-backed securities. it was enough to send the equity and debt tumbling. today, the stock is down again. speculation is rising he may have to do what he has said he does not want to do. that is raise new capital. let's start with you. this is an opening bid. is there a sense of where this settlement might end up? >> deutsche bank management did

confirm the 14 going on asked by the d.o.j. there was a "wall street journal" article indicating the bank wanted to pay more like two or three. that seems similar to the comments that they don't intend to settle anywhere near $14 billion. if you split the difference, you come to about $8 billion. that is a little more than the legal analyst had been saying. that is based on where we have seen previous settlements. $8 billion is less than $14 billion. the other key factor to consider is the fact that department of justice might have more of a negotiating hand because deutsche wants to get this behind them. david: it is larger than the total reserve they have for litigation in the neighborhood of $6 billion. michael, there was a piece on bloomberg saying they will have to raise more capital almost no matter what happens. explain the capital situation

for deutsche bank. >> to have this explain dollars in legal reserves. they have a number of things in addition to that case. they have the libor and ethics matters. in russia -- they have the libor and fx matters. in russia, they have matters with the d.o.j. there are a number of legal issues deutsche bank is facing. they have said they want to knock them out as soon as possible. it is not just this rmbs matter. david: when you said they want to settle as fast as possible, that is not a great negotiating position. what ramification does this have for dividends? he was he took over, adamant he did not want to raise capital and thought it was not in the best interest of shareholders and pointed out that is not solve some of the

profitability and growth questions for the bank. for 2015cut dividends and 2016 hoping to reinstate that in 2017. but that has not been enough to they are taking on restructuring charges and legal provisions have inhibited the build of capital. on one hand, you have him not wanting to raise capital. it on the other hand wanting to get these issues behind them. they have said there are a variety of issues. management has said they want to get the biggest ones pass them in 2016. that has been helpful for banks to start with a cleaner slate. we have seen that with u.s. banks. you can get the biggest issues behind you, that can be helpful. at the end of the day, it will matter what the cost is. for deutsche, there is a capital issue. with talked about reserves. only part of that is due to

enforcement matters. cost will be key. david: thanks to you both. . jon: next, we head into the u.s. market open. tune into our special decision show on wednesday. city, about 34 minutes away from the open. futures positive and equities rallying in europe. this is bloomberg. ♪

jon: we are 30 minutes away from the opening bell in new york city. this is "bloomberg " i'm told that are a couple of central bank decisions this week. alix: 48 hours until that pivotal day. looking at relative risk, european equities around the highs of the session when it comes to the ftse and euro stocks. jon: the big story in the bond market the last couple of weeks has been the steepening of the yield curve. coming in about a basis point in the u.s. the story in the fx market ahead of wednesday is a stronger yen and softer dollar. alix: that is bleeding through to commodities. the commodity index up. crude benefiting the most. venezuelan president saying we could get a deal with opec. jon: a little bit of risk added ahead of wednesday. alix: we are seeing something similar when you look at futures markets. s&p futures up .4%.

the s&p around the highs of the session. it is still the m&a flavor of monday continuing. buying them for about $200 million in stocks. they say this will be the first year. it should close in the first half of 2017. tech m&a has been on fire this year. block, vista will buy the company. the activist investor is the number three holder at 6.8%. for more on what is happening in other parts of the market is abigail doolittle at the nasdaq and mark barton in london. abigail, you are checking out go-pro. >> shares have been beaten down, a highly shorted stock, up shortly -- sharply on the news

they will be hosting an analyst q&a later today along with a product unveiling around noon eastern time. we do have a few analysts bullish into the event. it has a street high price target of $19. soaring in the premarket, the gaming company up on the news eldorado is buying island capri for $23 per share. it is expected to double revenue. both companies are up sharply. alix: love it. thank you, abigail doolittle. mark barton in london. euro stocks around the highs of the session. >> everything is rising today. what a rebound from last week. the gauge fell for the second week, the longest losing stretch

since july 8. oil and gas are leading the advanced today. the shares are up by 5%. target to 20 versus 210. it rising coal price gives greater confidence and cash flow into 2017. prices in england and wales rising 4% year on year. the market showed a broadly positive picture overall as it continues to shake off the post-brexit vote uncertainty. funding, this is the hedge and money managers trimming. missing out is the currency that fell by 2% against the dollar last week. it is rebounding today. the big news last week was the ratesying we could cut

if the economy continues to pan out in august. this week is not about the boe. it is all about the fed and boj. jon: we want to continue that conversation. what is capturing the uncertainty is what is happening in terms of volatility. here is a chart of dollar/yen. events,ade around risk a big pop on implied volatility. you see it in july when we had the key boj decision. we are starting to see it pick up last week capturing the uncertainty around this wednesday. what is remarkable to me is not the move and volatility but the amount of uncertainty around the bank of japan. there's overwhelming consensus that is the key decision out of the two. but no consensus at all as to what they will do. david: so true. what are they going to do?

experts.re two great and the director of ethics -- fx strategy. rich, what do you expect out of the bank of japan on wednesday? >> they are reassessing their framework. the question is, do they take action? i think they do. the options are to go more negative on rates, change the dimensions of the qe programs, or pivot the program to stephen the japanese yield curve -- epen the-- stev japanese yield curve. david: what are the pluses and minuses from the bank of japan's view about steepening the yield curve further? >> they don't have easy choices. cost of borrowing.

there's also the other issue of how they pull that off. there will be if limitation issues as well. david: what is it due to getting the inflation and growth rate up in japan if they stephen the curve? >> it is clear they are not reaching their inflation target by 2018. it remains to be seen whether they become more flexible around the target because it is not realistic. in terms of the foreign exchange markets, it is key to look at what this does to the nikkei. this is where we are cautious and skeptical. they have had a hard time to impress the equity markets for a while. we are afraid this time may not be different. david: as i understand it, that nikkei average is driven by the yen-dollar. they cut and the yen strengthened which hurt the nikkei. what could the boj due to get the attention of investors?

>> your caught between two forces. the reserve rate would hurt the yen. if they met negatively, that would help the yen. i don't think they can do much to push the dollar/yen higher. if the package is successful, maybe they can put a floor around 100. when it comes to pushing dollar/yen higher, it will be more about the fed. u.s. interest rates need to go up to widen the different shows -- differentials and push the dollar higher. david: he's saying they need the fed to make the move in the marketplace. what are we expecting out of the fed? a we are and --we are not expecting a rate hike out of the meeting. be to seel eyes will what signal they give about a december hike. they could say we expect a hike at the next meeting or later this year.

on the other hand, they could equal the kate -- equivocate. all eyes will be on the dots. we expect them to shift down for 2017-18. some chance the longer ones shift down indicating a new neutral. of the movingh around is a matter of fundamentals of the global economy as opposed to a game swing shift issue? technical? >> we agree with your forecast about the dots. the market has this idea that the near-term rate hike does not matter much. what matters is the longer-term trajectory. if they lower the dots, that will be good for risk. we are cautious on that. the front end of the u.s. yield curve is flat. the two-year rate will probably go up if the fed is hawkish. look at the global momentum in terms of long-term yields. they are rising irrespective of the fed.

maybe inflation risks have been underpriced. we don't think the fed reverses the trend of tightening and global conditions. david: he makes a good point. how much of this is long-term inflation expectations as opposed to technical factors? >> i think some of it is rising inflation expectation. it is my view inflation risk is underpriced. the markets are betting against the fed for the next 10 years. they say breakeven inflation is 1.7%. i think that is too low. i would not bet against the fed the next 10 years. i agree the u.s. front end is mispriced. david: if you look into recent history when the bank of japan and fed have come out with a decision on the same day, the dollar has gone down. is that going to happen this time? >> we don't think so. the dollar weakened after every for decision this year.

it may be different for the fed for the reasons we discussed. we think janet yellen sent a message at jackson hole. it would be hard to backtrack. we agreed markets are underpricing the risk of tightening. the market is short the dollar and long commodity-based currencies. we think that is where the dollar strength could be focused against those currencies. david: thanks so much. rich will be staying with us. we want to get the latest on the investigation into this weekend's explosion in new york. in the chandra is here with first word news. >> police want to question a native of afghanistan in connection with the explosion in new york. the man is a resident of new jersey and naturalized less citizen. the new york mayor says he could be armed and dangerous. saturday's explosion in the

chelsea neighborhood wounded more than two dozen people. foundxploded device was soun several blocks away. elizabeth --in the new jersey blew up. no one was hurt. turkey is deepening its involvement in one of the deadliest conflicts in the middle east. the president says turkey will create a safe zone in syria. he said turkish forces have cleared out terrorist groups from an area 1/5 that size. on capitol hill, lawmakers will try to reach a final agreement on a spending bill that would fund the government through the first 10 weeks of the fiscal year. mitch mcconnell has set the first of a series of votes for tonight. the biggest outstanding issue is how to pay for the effort to fight the zika virus. global news 24 hours a day. i am emma chandra. this is bloomberg. alix: thanks so much.

should motorists brace for higher pump prices this week? we will look at the leak on gas prices. this is bloomberg. ♪

alix: where putting gasoline in focus. slightly down today. i want to highlight what happened to the curve in the last week. this was the curve a week ago, the blue line. the orange line is the curve now. degradation.teep

the colonial pipeline had a leak. it moved petroleum products from a certain area to the east coast in the u.s. the area has a lot of gasoline inventory. if we don't get new supply, this could be an opportunity for gasoline stockpiles to be run down. the potential for the markets to get tighter. this is the current i am watching to see when the leak will be fixed, when colonial pipeline can start moving more products down the road. let's turn to another commodity in focus. that is copper. joe, last week, killer week for copper. you got credit data out of china, premiums rising. you had inventory drawing. does that last? >> i think it does. i look at this is a forward-looking indicator for what will be transpiring economically. it had a 5% move in september. this is a nice move.

i think it is wanted. right now, we will watch to see if the data continues to come out so positively especially with the fed this week. alix: it was not just copper. it was all the base industrial metals getting a bit last week. into wednesday based on the dollar, what will be the move of the dollar toward commodities that has nothing to do with fundamentals? >> i think right now, the dollar will stay weak into wednesday. we will watch that closely. if it does, it will benefit copper. copper could be the catalyst. we need a catalyst. the hawkish fed has been a catalyst. that could bring in the new net longs. the net shorts got taken out last week. there was about 25,000 short contracts on the 13th. if the dollar stays weak, copper could get some likes to the

upside. alix: what is the range on the upside you are watching? aroundgoing to watch 21680 as the upside target. joe, we will definitely watch copper and industrial metals into wednesday. is it time to get out of treasuries? pimco says we are seeing a mini taper tantrum. we will look at what investors should be buying instead. this is bloomberg. ♪

is: from new york city, this "bloomberg " i am jonathan ferro. the steepening of the curve is not a concern to investors. we spoke about how this is impacting his strategy. >> we are not adjusting our

exposures as a result of the steepening. the moves are not meaningful enough yet from our perspective given where the risks in the portfolio are. jon: pimco recently changed his position, a strategy some have been calling for all year. still with that these rich clarida. what is behind the strategy shift at pimco with his words in mind? >> re-think inflation risk is mispriced. markets are saying for the next 10 years, the fed will fall short of the 2% inflation target. we think that is wrong. it has been below 2%. technically, the market is attractive. recently, we have been getting better than expected inflation data. that makes sense to us in the portfolio. jon: the conversation on this program the last couple of hours is the steepening could be go down to the return of the term premium.

what are your thoughts? >> think there are technical factors as mentioned. i think the boj is a technical. i think inflation and investors have not heard the term premium for several years in the treasury market. treasury yields fell earlier this year because of flight to quality and concerns about china. that fadesat concern you would expect some upward adjustment in treasury yields. alix: he saw investor demand come in. why is that not right? >> we want to wait and see. the boj has a lot of options. but it also has a difficult challenge ahead. there is a technical factor behind this deepening. there is a more fundamental factor which is higher inflation risk and evaporation of concerns about a crash landing in china. jon: looking at a steeper yield curve and prospects for more

inflation, why do you think there has been an aggressive give it away from long yields being lower is a good thing and now we need to do something, particularly in japan? >> in japan, the boj has been getting a clear message from the banks and insurance companies that the flat yield curve is hurting us. we have amentally, real global flattening of the yield curve. it was trading off all of those factors. when you buy a bond at today's prices, you're not earning a term premium for taking on the duration risk. that should return and we think it will. alix: break evens have gone nowhere fast. curse statement -- you have seen the curves steep en. delayed or is the inflation growth call not part

of the steepening yield story? >> i think it is. if you look at the u.s. chart, break evens have rebounded from was. --from lows. it depends on how many hours a day you spend on your bloomberg screen. explain it to our clients as we are not betting against the fed to hit 2% inflation rate. that is the trade being offered in the markets. david: japanese banks and insurance companies are not by theby being hurt flattening curve. to what extent do they have to take this into account? what's there has been an issue for several years. monetary policy has been to lower rates. when you lower rates, you are flattening the curve. flatness.ignore the it does impact financial

intermediation, especially through banking. it is more of an issue in japan and europe. in the u.s., the corporate bond market is doing well with low rates. jon: you can have a steeper yield curve. is -50t if the front end basis points? we had no experience for 200 years of negative rates. now we are learning on the fly how they work. concerns about their impact on they profitability have been relevant in japan. even the e.c.b. has ignored there is a limit on how negative they can go. i think that is why you see the fed giving indications they are not eager to go down that path. what affects are we

seeing on personal savings? people thought they would spend more. that does not seem to be the case. >> we had a rebound in saving after the financial crisis. it has remained stable. savings in the u.s. is a function of the fact that most of the saving is done by the upper part of the income distribution. part of the concerns about income distribution are showing up in a higher savings rate. alix: what is based on fiscal stimulus? >> we expect a modest this goal stimulus in the u.s. next year -- modest fiscal stimulus in the u.s. next year. awol for aks are while. there is modest fiscal stimulus we expect in the u.s. we will get it in japan. in europe, we will probably get a relaxation of austerity. jon: great to have you with us.

be sure to catch our special coverage of the fed decision this wednesday live on bloomberg beginning at 1:00 eastern time. the opening bell minutes away on bloomberg television. futures positive up around 69 points on the dow. in europe after two weeks of losses, the ftse up. the dax up by almost 80 points. dollar/yen with a 101 handle. 10-yearnchanged on the at 1.69%. and a rebound on crude after a big week of losses. bloomberg. next from this is "bloomberg " ♪

moments a way of picking up the trading week in new york. futures up positive. up six points of the s&p 500.

the ftse still positive on the day. the dax up 76 points. as you hear the opening bell, here is the scene across the other asset classes. 1.69% and crude advancing. >> it doesn't look like this is the board yet. similar story for the dow as well as the nasdaq. like to watch is that 100 day moving average. with a right sandwich in between those two technical leaders --

two technical levels that many traders watch. speaking at individual names, getting a recommendation over at morgan stanley. it is right in line with most analyst estimates, but they will say that the automaker will be profitable for longer. moving higher. they were hit quite steeply in the last few weeks. their property prices higher, they're going to build more housing, a copper demand over in china. let's take a look at one potential area i'm watching

today as well. it has to do with earnings. this is the s&p 500 trading -- 500 trailing earnings. taking a look at what we can expect next week. for 133 dollars per share for next year in terms of earnings. would be a 13% increase in the profits. -- ahing would not something we have not seen since 2011. also you need that underlying earnings growth that we are just not seeing. third-quarter profit could fall by 1.4%, that we are going to see and norma's rebound. >> i don't like to be skeptical, but we call that a hockey stick. don't trust those charts that go way up out in the years. >> they would like to see higher rates and get their own earnings estimates up.

they discussed the impact of lower rates. on the one hand we see familiar shift into equities. the flight from zero on the other hand races can serious concern -- raises serious concerns. joining now to discuss is gina martin adams, wells fargo security strategist. banks, i just wonder if there was a bit of an inflection point where some of these institutions realize we have to help out the financials. as the pessimism is starting to bottom out, are we set a rebound like toways? >> i would say yes but i am skeptical. analysts are expecting a rebound. , wheng about a rebound you go 12 forward, financials are expected to show some strong growth. there is a leader into next year.

according to analyst expectations, that is going to to move rates higher to stimulate growth. we get some operating margin expansion out of the sector. i frankly think is going to be tougher than that. japan looks to me like they are more likely to ease more than move. get -- we like to get the fed moving faster. can concerned expectations are high. if they were to come lower, analyst expectations, than i would say maybe we have a chance. >> the question we have explored on this program is it is the shape of the yield curve. >> quite frankly what we have seen over the last several weeks

is long rates have gone higher, financials have improved. in the yield curve itself is spread between short and long-range and is the primary earnings driver. to usually overwhelm the short term. >> your estimate, the $128 per share. pretty significant. what is going to make you downgrade that? >> the biggest mover in our profit expectation is energy. we have 5% eps growth this year and 5% eps growth next year. because we have this bounce back in oil prices in the forecast, it is all about energy.

we are not assuming a massive increase in oil price. we are assuming somewhat flat oil prices. --ik strong relative to what relative to where we were a year ago. >> when you look at your overweight such as energy and tech, what sorts of values or stocks we looking at? >> we like late cycle stocks. that is quality of balance sheets. very important to us and we are leaning on stocks and some of the tech companies. some of the materials companies of the world to try to find is quality balance sheets. that's where i like opportunities. i want to avoid all the risks and interest rates, i want to avoid the risk that analysts are going to be expecting into the next year. to leverage the

ideas, where this washout occurs . the commodity space -- there are probably values in there. them a we are what we -- we are at 1.69%. over, does it change? >> at point that is the support level for the bond market because we have had this extreme long-term downtrend. it 2% means we have better growth around the corner. because bonds and investors aren't seeing something as we

have overvalued in the bond market. >> we just spoke to six minutes without talking about wednesday. we know what it means, we think we know what it means with the effects market. what does it mean for people in the equity market? what are you looking forward to from wednesday? that thepretty fear futures market is expecting no change in policy in september. we are at this point in the cycle very earnings dependent. it is really tough to get another push higher because the

fed policy is easy. instead we have to see that economic growth follow-through. presumably of economic growth is following through it is going to tighten the race. we need a little hawkish rhetoric. >> are you pricing in the election at all? >> i happen to believe the market will turn -- will determine the election. eight half market probably supports a trump president, a more stable market probably supports the clinton presidency. insertedhe market has sectors and definitely tried to price and change. health care is a perfect example of that. we have certainly seen some infrastructure play earlier this year. there are sector level inputs. >> she is wells fargo security equity strategist. central banks are discovering

how hard it is for investors to weave money. is the fed at the mercy of the markets? that's ahead and this is bloomberg.

>> coming up on bloomberg markets, gopro chair and ceo nicholas will have a demo of

their karma drone and --, drawn in lake tahoe. action's? -- here is the on the equity market. the s&p 500 up for 10 speed a similar move on the dow and the nasdaq. abigail doolittle is standing by >> we have some and then day movers. -- the goaloring here is to expand tech data's asian business and to pursue next generation products. also soaring, isle of capri. bought byy will be eldorado resorts for $20 per share.

ahead of this these two stocks were already up a big way on the year. investors were probably pretty pleased. gopro shares higher. a little bit about what that product will be. the question is whether this could prove to be a turnaround. >> thank you so much. wells fargo hit hard last week -- owing a scandal all of whom got fired. what he is going to do to six if you among those asking questions will be elizabeth warren, who talked of bloomberg tv on friday and give us a preview what he will face tomorrow. badly broken at that bank. it tells me that notwithstanding , everything we followed in the

crash of 2008 in this culture and this bank is still about profit and cheating people and breaking the law. >> joining us from washington is --omberg's commissionable bloomberg's committee. going to be tougher stocks on capitol hill. lawmakers on both sides of the aisle are expected to throw some tough questions. a bit ofhas been doing damage control ahead of the hearing. they add lobbyists and a number of executives, who's the bank's president to talk to lawmakers and their staff ahead of tomorrow. however a lot of questions are still unanswered. lawmakers are expected to demand what they think are better explanations about the culture and the bank. is why this aggressive cross-selling strategy has went on for so long.

executive pay has going to be -- is spending quite a bit of time excited -- executive pay is what we are asked -- what we are spending quite a bit of time discussing. they want to know what steps the bank has been taking to consider clawing back her pay. few weeks away from an election where populist and high bank rhetoric has been very popular on both sides of the aisle. lawmakers are going to be using this as an opportunity to touch upon something familiar themes. such as whether or not banks side with wells fargo and are too big to manage. and whether or not there are the right mechanisms in place to punish executives when misconduct occurs. great, noing is not question about it. going all the way to the watergate hearings, one of the favorite lines of inquiry is what did he know and when did he know it? do he have any indication when mr. stump learned there were problems on the line?

>> that is definitely something lawmakers are going to be asking and seeking to clarify. we do know the bank has said this is something they have been looking into and reprimanding employees for a five-year period >> you put your finger on it. there have been various inquiries and reports for some years now. it does raise issues about the clawback issue. >> the committee wants to see what steps the bank has taken. they have begun the process what it takes to clawback that pay. a number of senators and wrote a lettern to the bank specifically asking

for questions around that last week. they're supposed to hear back from the bank today. >> thank you so much. >> it is moving higher pick the first time in about seven days. haveof the reason why you them upgrading the stock, i love this perspective. $2.5 million in revenue lost due to these claims is totally different than market cap loss and $20 billion over the last week. to really put that into perspective -- >> the points are very much different. this is not a balance sheet issue. >> exactly great point. we are going to move on.

coming up at the top of the next hour is bloomberg markets with vonnie quinn. lonnie: -- vonnie: we are going to talk about what any of the central banks might do, what might surprise the market, and what we can expect from the fomc and the boj. on wednesday.mit todayeresting report out suggesting the banks of london will be able to keep their rights. what exactly does that mean and might it mean the banks will keep their headquarters in the city of london? we also have the oregon ceo to bring back. >> coming up, policymakers predicted rate hikes in the

markets. now predicting a 50-50 chance we make it one. markets.ext in the then about 20 minutes into the session, stocks up marginally.

wednesday boj and the fed -- chief u.s. economist is with us. how highwith the fed, is the bar with the hike? >> i think it is an insurmountable he high hurdle. it would be a huge mistake for policymakers with gdp growth at such a slow level.

the economy appears to be doing ok. inflation is edging higher. it is not the right time for a rate increase. the challenge is to pass in september without coming across as too dovish and holding onto economic decisions at the december meeting. >> do they wind up lowering the bar for a hike at the end of 2016? >> this is the challenge, they don't want that to happen. think hawks want a hike by the year end. there is an increasing view on the committee. they will feel compelled to take one small step toward policy normalization at the december meeting.

the november meeting coming days ahead of the presidential election. out ann't rule opportunity for them to move. >> in either they are behind the curve and they think the economy is going to soften. they haven't given much guidance at all. >> i think the fed is going to tell us they are behind the curve. that is why the data dependent fed has not taken further steps toward policy normalization when the data falls -- data falls in line they would be more inclined to move. >> there has been a lot of theter of fed speakers in last six weeks. what kind of sense are we going to be telling -- are we going to be looking at here? >> there is a lot of chatter from the fed in the markets may be have gone too far trying to

play up the story that there is this disparity of views. i think it is a chorus of fed --ak that is trying to spend trying to send the message that conditions are ripening for the next policy move. the fed is not competent to move on a forecast, they need to see hard data. at least not yet in this quarter and the consumer is going to be the dominant engine of the economic growth at the first half of this year that they are only halfheartedly growing in the third quarter than gdp growth is going to continue to underperform relative to expectations. has been a wild, thank you so much. bloomberg intelligence chief

economist. and this week on bloomberg , we have a stellar lineup. greenspan,n blackrock chairman and founder larry sink, u.s. commerce secretary -- former bank of japan assistant governor, and .ormer ge chairman >> big lineup. nearly 27 minutes into the session. the yen is stronger. wednesday federal reserve and bank of japan decisions. thank you. up is bloomberg markets from new york. this is bloomberg.

from new york i am vonnie quinn. i am markom london barton. welcome to bloomberg markets.

vonnie: we are going to take you to washington and london and cover stories from ireland and africa. after therebounding first crude shipment from a libyan export terminal. we will talk about the latest from the markets. it is a week for central banks and the bank of japan says the federal reserve -- we examine why policymakers and in a no-win may be situation. >> and a person of interest is named in connection with new york city. we bring you the latest updates and gain perspective from a policy advisor on the fed issues. about 30 minutes into the trading