>> welcome to "on the move." we are counting you down to the european open. i am guy johnson, alongside caroline hyde. this is what we are watching. the morning after. deutsche wakes from a rough night of trading in the u.s. as anxiety mounts. hedge funds reduce exposure. contagion concern. short interest in commerzbank hits the highest level since 2013. we speak to the chief financial officer.

brent and fed dissent. we look ahead to the last quarter of 2016. what will the winter bring? caroline, let's take you to the adr action overnight. you can see the trade overnight coming into europe this morning. this is the deutsche adr. this is european trade. this is after european trade. you can see the story surrounding the fact that some hedge funds are withdrawing some to deutscheosure bank. the stock took it very, very hard. you have to wonder whether liquidity is really the issue here. commerzbank clearly in focus for you as well. caroline: it is. speaking to the cfo. we will be first in there with the interview. have they done enough? 1800 jobs to go, that they are still potentially not cutting costs as much as analysts

wanted. in the eye of the storm, dragged lower by deutsche bank today. about 3% lower. time to consider whether germany and when thed department of justice can make transparency clear for deutsche bank, barclays, and some of the other players who have yet to hear what they will have in terms of fines. guy: the political temperature certainly rising. risk running through global markets this morning. the uk's ftse 100 up by 100%. unlikely to repeat that. we are up to 0.2% in the end. the bond market is reasonably well bid. half an hour away from the european open. where do we think these markets are going to go? this is the fair value calculation. the ftse down 1%.

in paris, down 1.4%. the dax down nearly 1.5%. let's take you to the full update of everything you need to know. here is the news with rosalind chin. rosalind: thanks. -- japanesetock household spending plummeting. however, a rise in industrial production led to modest growth. it points to the challenge kuroda faces as he tries to get inflation up to his target. u.s. treasury secretary jack lew has visited mexico to visit a pro-trade message and a call for deeper cross-border relations. key technology acknowledged the stress for workers in both countries and said trade is the growth. to boost mexico's relationship with the largest trading partner has

contributed to the peso falling against the dollar in the past six months. a private gauge of chinese factory output indicates expansion in december and the first sign of stability. it came in at 50.1, in line with estimates, up from 50 in august. with it stable for now and home some cities,g in some analysts suspect policymakers will switch from easing to a tightening mode. -- yuan isthe u.n. falling against the dollar. it becomes one of five global reserve currency's tomorrow alongside the dollar, the euro, the pound, and the yen. they hope for a boost in international usage and prestige, with its share of global payments hovering near a two-year low. analysts in more than 120 countries -- this is bloomberg. guy: thank you very much.

deutsche bank is being felt around the world as banking stocks tumble. he was traded deutsche bank shares, the adr closed at a record low yesterday. some hedge funds have moved to reduce their exposure to the german lender. that is the one week chart. the adr smashed overnight. we are expecting a similar story in europe. stocks are sharply lower. let's get to our guest in the studio, a chief investment officer. it is now the time for authority to step in and provide clarity to the market? just: it feels early. yet. not panic mode the story around deutsche is gripping the markets. we have seen calm for the last few weeks and months, so it does not take much to shake sentiment. it feels a little too early, but if this carries on, they will have to step in. caroline: if we're talking about

the ecb or germany -- is it time for the u.s. department of justice to make clear just how big the fight -- the fine will be? that would let us know the capital issues at stake for deutsche. is ammed: in essence, this global problem, even though it is a german bank. if it does go down or suffer severe losses, this will shake the banking sector globally. so the authorities in europe or the u.s. need to look at this matter very closely. ay: if deutsche does have capital concern -- we need to be very clear separating liquidity and a capital position. the bank is making clear it has no real issue on either. market is certainly speculating about both. who do you turn to? angela merkel saying, do not look at us. the political applications in italy and elsewhere. who do you turn to if you are john cryan and you have to make this happen? you have a 0.2 something price-to-book. what are you going to do? mouhammed: you have three

parties you can go to. the first is the european central bank, making sure you yourthe liquidity to keep bank afloat. the second is obviously the government. you've your strong voices saying, we will not bail you out, but you can call the bluff. if the german economy goes down, so does the eurozone. the third is look at private investors. there are other institutions that could cut risk to the bank, as we saw in 2008. draw aing you to dissension between what we invest in at deutsche, credit versus equities? littledit looks a vulnerable right now. if authorities are going to step up, it will be to the benefit of the credit holders. you wonder if that is true of the italian banks. if deutsche needs help, the expectation is italian authorities will be banging on the door, saying, we want to do

that as well. mouhammed: there would be a long would wantnks that something. obviously, equity is suffering in the eye of the storm, but their credit is suffering quite specifically. we have seen their credit default swaps widening quite aggressively. leveragedget, it is a bank. it has a lot of debt. give us a sense of the systemic issue. , chief investment officer. we see all banks being dragged down. its assets are more than half of the german gdp. the imf points out in june that it may be the biggest globalutor to risk among systemic banks. is it time to get out of all your banking exposure? mouhammed: we have been telling clients to stay calm during this period. deutsche is the eye of the storm and other banks will trade in a similar fashion.

there is indiscriminate selling in times like this. that is not to say all banks are unhealthy. a lot of banks have recapitalized. a lot of banks have reformed their business models. we are still encouraging clients to look for that value and invest in it. guy: you have to be selective. you look at the books around weope, and you realize that are probably not fully through the process we need to get through in terms of providing increasing tranches of capital, which is going to get sucked up and spat out in terms of the way the npl process works. not there yet. the u.s. had an accelerated process it went through. europe is dragging it out bit by bit. mouhammed: your point about the collapse of the share price -- actually, it is one of the most distressed and undervalued sectors in the world. you have to be selective. you have to look at high-quality institutions, which is important in times like this. but there is a lot of value which could harvest strong

returns. you have to be selective. guy: pick your moments as well. he is here for an hour. coming up, inflation as the boj scratches its head. what is left to do in the world's biggest economy? german banks -- we look at deutsche shares and u.s. trade. we will talk about commerzbank as well. cover oil, indecision, and the last quarter of 2016. all of that is coming up. ♪

guy: 8:42 in frankfurt. let's see your bloomberg is fast -- business flash. sebastian: thousands of job cuts , according to a dutch newspaper , quoting unidentified people with knowledge of the matter. this may generate billions of euros in savings. the largest lender in the netherlands employees about 52,000 people. deal withnearing a another airline. the companies are in talks for at least 30 wide-body jets. it would be valued at $6.7 billion, catalog price, although

usually airlines negotiate discounts. hass fargo ceo john stumpf endured a second day of accusations from lawmakers over the bank scandal. argued the bank is holding leaders accountable after finding about 2 million accounts were created without customer authorization. the wells fargo board says it will oversee an internal review into what happened. brexit related losses and the condition to making new investments. bloomberg, a ceo said further investment decisions will depend on clarifying the u.k. relationship with the eu. they were responsible for one in three cars built in the u.k. this year. that is your bloomberg business flash. guy: i want to take you to what is happening ahead of the open. we are now 15 minutes away. what we have got is a very soft picture. it is being driven out of the

states. it is being driven, really, out of europe. at the moment, the stoxx 50 down 1.6 percent. germany is down 1.6% as well. where are waiting on numbers for french cpi. i will just wait for that number to hit. we should be getting a number any second now. as negatively not as we may be postulated it would be. the survey was for month on month of -0.3. we are a little better when it comes to the month on month number for french cpi. however, the same is not true in japan. the bad news he's coming for the boj. consumer prices fell for the sake straight month and households cut spending in september. that was before the new easing measures were announced. which are being

released -- let us get our north asia economy editor possibly on all this. the data, the minutes -- everything is highlighting the challenge the boj faces. >> that is right. the bank of japan is trying to inflationeople that is going away. they have been trying to convince them of that for a while. it is obviously hard to do that when prices are falling every month. that is the point that governor himself,s made probably unhappily, a number of times in recent weeks. there is not look like going to be any relief for them anytime soon. economists are pointing toward more of the same. what do we get from the accounts?

in the opinions released this morning from the most recent monetary policy meeting, there were not a lot of surprises. wasas clear the boj concerned about the impact of the policies on financial institutions and their profitability, and how that might impact lending. in addition, they also made the point that they need help from the government, that they need structural reforms to the raise japan's potential growth rate, if they are going to turn around and get sustainable growth. guy: great stuff. thank you very much. joining us on what is happening with the boj. faith in the boj possibility to deliver a higher level of inflation to protect the economy? mouhammed: to some degree, the numbers speak for themselves. they have not been able to

deliver the necessary inflation that they have been seeking for the past few years. from that perspective, there is a loss of credibility even as they swing more and more at this problem. caroline: how much to relay the blame on the boj for imposing negative rates, dragging down the profitability of the banks? i am with you keep on with banks, because i have deutsche bank behind me. is it the central bank policy that hurts them the most, or as the ecb president said, is it something else? mouhammed: the policymakers, to some degree, do not have any choice. they have to rescue their economy. they are carrying the ball of the sack in terms of the economic challenges. from that perspective, perhaps negative rates put some challenges on the banking system. the banks need to reform. reform, to cut jobs, maybe reconsider their business models so you can see a

final production surge in the economy. in the meantime, it is going to continue to be challenging. keep getting into bond proxies, illiquid assets. this is going to continue for a long time. the idea of transforming fiscal policy sounds great, but the central banks keep doing the heavy lifting. we are going to continue to see rates being pushed lower, or whatever it is. the trade is, i need to find some yield somewhere. mouhammed: the central banks are clearly continuing to expand their programs. know,nk of japan, as you recently went to the 10 year yield, trying to keep that as close to zero as possible to create stimulus in the economy. in terms of what investors have invested, there is a continued hunt for yield, but it does come with risks. try to keep the balance between risk and reward, in the fragile environment we are in now. we have often seen the

boj being the first to go and others copying. we do see the ecb tackling yields directly or exchange traded funds waiting into stock purchases as well? mouhammed: they may need to go down that path, but they have a slightly different environment right now. they are actually seeing a pickup in inflation. we looked at the french data just now. the german inflation data came in stronger than expected. actually, they may not need to do that. what they have in place may be sufficient. in inflation continues, they may not need to do more than they are already doing. guy: we are minutes away now from the opening. we are going to look at some of the corporate movers in today's trading. we are going to be talking at deutsche bank. the lender slumped in u.s. trading after some hedge funds reduced their exposure. that was what we saw on the adi.

you can see the same on the trading listing. we will come back. we will talk much, much more about what is happening surrounding deutsche. in the meantime, i want to take you to jerusalem, where the funeral of president and prime minister shimon peres is underway. it is a very eclectic list of attendees. let's put it that way. really showing the breadth of this man influence on global diplomacy. president obama in the front row. range reflecting the impact this man had as president of israel, senior statesman, some would argue, of global diplomacy. his funeral underway in israel. >> [speaking hebrew] ♪

caroline: welcome back to "on the move." a few minutes before trade opens. i am in a gloomy frankfurt. maybe it is a pathetic fallacy, spurred by the bank behind me, deutsche bank. a slump as the rest of the banking industry tells lower. reports that some hedge funds have started to cut their exposure on this particular bank within the prime brokerage area. what does that mean about some of the less sophisticated retail investors? deutsche bank trying to say their liquidity does fine. we will be speaking with the ceo

of commerzbank as they lay off hundreds of jobs, trying to cut costs. guy: looking forward to that conversation. i would like to point out to everybody that deutsche bank is really behind caroline. deutsche bank has not disappeared at all. it is still there. you can see the reflection of the office. i promise you it is still behind her. inging about job markets, is going to be a stock to keep an eye on. reports out of the netherlands suggesting we are going to see significant job cuts being announced as well when it comes to this sector. insurance, the banks, everybody caught up in what is happening here. that is the latest reporting surrounding ing. how much of a change in the business models does the financial sector need to go through? mouhammed: there are two aspects. one is the requirement for capital. having a heavy investment banking division requires a lot

of capital. a lot of banks have been be risking away from that -- de-risking away from that. with changes in regulation, they need to look at how they manage that. ♪

guy: good morning. you're watching "on the move." we are here in the city of london. i am alongside caroline hyde. we are moments away from the start of european trading. it is going to be quite a morning. caroline: it is a gloomy morning here in frankfurt. it is the morning after the deutsche bank. they wake up from a rough night of trading in the u.s. exposure.s reduced contagion concerns, short interest -- highest level since 2013 pit we speak to the banks chief financial officer. , banks bashed and fed dissent

. we wrap up all the action and look ahead to the last quarter of 2016. what will the winter bring? guy: that is the big question. what will happen? let's talk about this market open. how is deutsche going to open? as you can see, we did see a little bit of a pop in london. where unwinding that quickly -- we are unwinding that quickly. we have got a market that is going to open down around 1% for london. once everything is opened, stocks get going. as you can see, a sharp gap lower for european markets. the ftse is down, 1.1% now and continues to fall as we watch and we wait and see what is going to happen. deutsche bank -- we will see what gets going there. some numbers being posted.

manus cranny, walk us through what you are seeing. manus: risk has been reignited in the financials. it is about counterparty risks. eight institutions have with john some of their funds. -- have withdrawn some of their funds. is that a seismic shift? no. a complexion of read all the way around. where waiting for the opening sweep in germany. -- we are waiting for the opening sweep in germany. energy is down. europe has had a good quarter, 3.8% rally. we see the open price in just a minute. it is about what kind of systemic risk are they to the market? they have the one trillion dollars -- they have $51 trillion in exposure of derivatives. 27% is in currency. 12% is an equity derivatives. the have more exposure in the derivative market and jpmorgan

-- in jpmorgan. how does the quarter play out? this is the gilt market. ownership of british government bonds in august has risen. .oreign ownership has risen they dropped in july for the first time since january. -- since february. the bloomberg barclays aggregate bond market -- bonds were unchanged. a record low yields of 1.1%. what next for the gilt market? i take you to the pound which is an important correlation to whether gilts go and where you can assets go. we are down, the worst run of losses for the pound since the 1980's. let's get into some of the individual stocks. we've got deutsche bank. -- third renault

quarter, that number is mixed, 3.6 billion credit with a net profit of 6.37. margins missed estimates, 54%. the dollar was somewhat negative. the weather was a challenge. oil markets, equity markets are lower. profit is growing faster and renault -- at renault. renault continues to spite the chances. we have an opening trade. failure was once unthinkable. failure of deutsche bank was once unthinkable. now that 0% probability is off the table, down 7.4%. challenged financially. a great chart that you brought to count down about the options that are out there on deutsche bank. my question is is this a knee-jerk reaction?

in terms of hedge funds, withdrawing their funds. you don't want your money stuck in institution that may be going through a challenging time. is it stiff them it -- is it systemic? 6.4%.he down one thing that deutsche bank was saying, they said those measures of risks do not reflect our position. liquidity from the people i am talking to, it is not about liquidity with deutsche bank. it is about the propensity of the market to i finance -- to refinance which banks that over the next nine to 18 months. .uy: it is rippling around manus is going to carry on the conversation. let me show you what is happening with deutsche bank. you can see the gas lower, a very sharp move to the downside. let me take you to the member

concerns on the ethics 17. deutsche is down at the bottom. the whole sway of the european banking being smashed this morning. these are big moves for big, important systemically institutions. europe in the eye of the storm. what do you do with this? do you hunker down? get defensive? i don't say we go back to 2007, but this is a neck oh, and aftershock -- this is an echo, and aftershock. next this is investing in the financial sector. -- >> this is investing in the financial sector. our advice to clients against the backdrop is to be optimistic. we think there is an opportunity to harvest a good resurgent in the market -- a good resurgent

in the market. this is clearly an area to keep an eye on, but sometimes we got to step back. investors are not looking at capital gains, they're looking for yields. the banks are not delivering it. plenty of institutions have an inability to pay out money. they need to reserve cash, poured it. -- reserve cash, courted. with the book of investors looking at this and saying that does not fit into my income screen, how big a discount do i attached to a sector that cannot deliver that? banking has so many problems, but it is not delivering what investors want. mouhammed: your point about income has changed in the last few years. two years ago, the expedition was if you invest, you want to generate some income, that comes with risk.

today there is a next dictation that you are not going to did that income he used to get. that expectation management has taken place. people are more concerned about the preservation of the capital and purchasing power. sense of --ve me a my apologies, guy. ofanted to get a feeling what you are seeing in terms of commerce banks. -- commerzbank. they have made dramatic changes to their business model. the air streaking down the corporate and getting away from investment banking -- germany is over bank. it is enough that commerzbank has done? mouhammed: it is a little bit late. they should've been doing this many years ago. it is a welcome move to see the banks making these changes. it is quite aggressive. expectation will lead to job cut. there is a dichotomy guys you

got a very strong german economy and a very weak banking sector. this reform is long overdue and it needs to carry on. caroline: long overdue. what do you want him to say to you and the investor base? would you want to hear from chief executives like john cryan as well? what will it do to turn these red stocks into green? mouhammed: the question to ask is what is your long-term vision for the financial institution? a lot of banks are patching on to old problems. they are try to fix the issues that existed in the institutions did what we need in times like this are long-term visions and plans to get to those. that is what i would be looking for. guy: stay with us. up next, 99 problems post-brexit with 100 days since they vote.

what a brexit will mean for their businesses. we will discuss the u.k. we've got the latest on the troubled german lender. shares are under pressure this morning. later, caroline is going to be andking to commerzbank cfo the stability of german banking. that is coming up at 12:10 london time. i wanted to check the banks. to give you some numbers, take a look at where deutsche is setting. we are teetering around 10. ♪

guy: we are 12 minutes into the session. we're talking about the banks. let me show you what is happening wobbly. this is the helicopter -- what is happening broadly. this is the helicopter view. let me take you into the returns of the a a sex -- the afx. it's a bank down at the bottom. you got commerzbank down 6%. you got credit suisse, rbs, barclays, unicredit all down. the car sector is down 2.8%. there is not a single bank that we've got in positive territory on the banking sector in europe.

not exactly the friday we were looking for. let's catch up. let's get a global view, first word news. >> japanese consumer prices fell for six straight months plenty more than 4.5%. a rise in industrial production made for a modest growth. a private gauge of chinese factory output indicates expansion in september. the pmi reading came in at 50.1. with the economy generally stable for now and prices in major city soaring, policymakers will switch. the yuan is trading slightly lower against the dollar. china's yuan becomes one of five global reserve currency's alongside the dollar, the euro, the pound and again.

hoping for a boost in the yuan -- with its chair of -- with its share of --global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. bloomberg. guy: gorgeous cocoas just fell -- some ofutsche's the more risky and's. quarter.d of the third it has been a busy one. it is not all of been about -- not all been about deutsche. let's ask our guest. let's bring back in mouhammed choukeir. mouhammed: q3 can only be described as pretty sanguine, or a calm quarter. q4 will present a number of risks. there are a number of geopolitical events, the u.s. election and an intensification

of a brexit negotiation. there is central banks and the federal reserve has a meeting in november. they are not expect to move but in december, a move could cause some changes in market sentiment. echo i want to show you -- guy: i want to say this chart. it is ounce back during the quarter -- it has bounced back during the quarter but continues to be crushed. do you expect volatility to rise in the next quarter echo mouhammed: -- next quarter? mouhammed: when you are low, the only way is up. whether it comes in the next month, it is difficult to say. there are a number of events that could cause this action. caroline: what in terms of volatility across asset classes moves the most? is it in the equity trade? where do we see the asset prices move the most in the next quarter if we see this continuing bank concern?

mouhammed: in the past few weeks, the big moves have been the government bonds. we have seen big moves and currency. the asset class that is not been as volatile as it should be is equities. equities have granted higher in the last few weeks. we could expect a surge. we were looking at the european volatility numbers but the u.s. equally low. equities is the place where you can see a pickup. guy: do i continue to chase? the bond proxy trade. i have a couple of charts. effectively,shares this is a basket of stocks with lower volatility. bond proxies and they have been continuously well bid. this goes back to 2013, 14. has been ever upward. do we continue to be forced into these kind of trades? this is the bloomberg barclays,

ig versus high yields. this goes back a very long por of time. -- a verys of -- the long the oh of time. time.ery long period of bank,ad of a very senior and yields on high yields that have never seen before. we are in a world that we never thought was going to happen. mouhammed: that is a source of risk premium. this goes against all of the academic work that says high risk, high return. low risk or low volatility. tenant ofearly a value investing which is one that we subscribe to and recommend to our clients. in terms of high yields, this is a manifestation of the risk amy him an ideal bonds. high-yield as a spread is an

attractive value. so -- guy: ig still looks good. mouhammed: we are not an environment where anything is dirt cheap. this is just there is value to be harvested in high-yield bonds . guy: when you talk to clients and speak about what they are doing, how important is liquidity? how important is it they get into liquid assets? what are they saying what they are going to be done with their money? an extension of the trade is i am going to be moving into less liquid trade. they are going to give me some yield pickup. they are lumpy assets. it mouhammed: liquidity is of high importance. that is important to our clients .nd to us -- lumpy assets mouhammed: liquidity is of high importance. that is important to our clients and to us. importance. of high

there is plenty of opportunity without going into liquid assets to harvest returns. you can see some of the stress valuations in the equity market, but you can see liquidity come into some of the corporate bond markets as well. if you got the time horizon for it, you do not need to go there and take excessive level of risk to generate the outcomes. .uy: a quick check on the banks this is a picture we find ourselves in. we have fallen more. deutsche is down 8% as you can see. there you go. deutsche is a single digit stock as we speak. flirting with that 10, sitting around. a single digit away from it being a single digit stock. commerzbank under pressure. did jim is having this to jim is having -- pgm is having a rough

day. the stoxx around europe are being hit hard. up next, a break fed. -- a brave fed. we are going to bring you interview with the philadelphia fed president. ♪

caroline: welcome back. the bank behind me, deutsche

bank, now a single digit stock, flirting below the 10 euro mark. in subordinated credit and -- coco bond subordinated debt also trading subpar at 70 in terms of a price point. assets getting hit across the board when it comes to deutsche bank and it does the entire backing sector lower. red. single bank in the guy: i am looking around europe. the market is running into safety. the bond market really in focus. not a pretty picture out there. we continue to worry about what the long-term implications of the banking sector story is going to be. we are in a world where we have a high level of dissent among the fed. bank of england, you are going to get some disagreement. you have some dissent and this seems to be some three party grouping that seems to be

forming. you wonder what that story is going to be, a cousin there has been so many excuses -- there have been so many excuses not to do anything. janet yellen has taken a very cautious start. patrick harker telling bloomberg yesterday the central bank should begin to lift rates. cpi isink inflation, pc, moving toward the 2% target some of it, when it comes to headline inflation, energy prices and other commodity prices. the you see those firm -- if you see those firm, i'm convinced we are going to continue to achieve that sooner rather than later. i'm concerned about falling down the curve. intercessor at the phone of your fed, taking a very different view. he is saying that there could be another excuse coming down the

pipe that could prevent the fed from doing what it is doing, and that is this stock. at 9.92.is now trading that is down 9% on the story. being scratched what's more than we saw after u.s. trading on the adr last night. mohammed sugar joining us -- mouhammed choukeir joining us. mouhammed: what is happening in the banking sector is of high concern. the federal reserve was instrumental in saving the banking sector -- saving the banking sector in the financial crisis and it continues a significant role. if you look at their mandate which is about employment and inflation, they have achieved those goals. that is why you have got the fed representative saying it is time to hike. let's not fall behind the curve. they have to think about some systemic risk, geopolitical

risks. being a fed governor is very different. caroline: the irony is the bank chief executives want to see a rate rise. it would help the business model. what do you think would be preferable? a rate hike or not? mouhammed: it depends on which it in the executives u.s., they don't have the negative interest rates. they have a low borrowing environment. we need to see normalization of rates that will help some banks in this sector. it is a symptom, when you do get higher rates, something that the economy is on his jumper footing. that could be the bridges -- on a stronger footing. guy: thank you for taking the time for coming to see us. mouhammed choukeir.

we are going to be speaking to test you can watch it on the television or bloomberg radio. more on what is happening with deutsche. 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: welcome back to "on the move." a gloomy frankfurt. budget bank slumps into single digit territory, a record low in share price. the contingent convertible bonds continuing in terms of value. this is rocking the rest of the market. guy: risk-off. risk-off. risk-off. it is rippling into the banking sector in getting into the wider financial story. equity markets down. the dax is down 1.76%. the cac is down 2% trading 4355.

ftse 100 outperforming. the 600 down by -- it is the banks that are doing the damage. the sector is down by 3.4%. deutsche is down hard. commerzbank also down. unicredit down 5%. a series of banks that are being put under pressure for a number of reasons. it relates back to capital concerns, what is happening here? today,bank is talking looking for to the press conference. unicredit very much under pressure as well. let's continue to talk about what is happening. let's talk german banks, european banks. understand, we taking some of their exposure way. that is a cause for concern. we have a ongoing capital crunch. we have an ongoing problem. the market believes this is a bank that could trade its way out of it. does it have the right business

model to be able to deliver that? what have analysts been telling us? cooks the franchise in the -- >> the franchises under pressure. the business is shanking -- the franchise is under pressure. the business is shrinking. investors are very frightened, cautious about stepping up and taking a long position. >> it probably is an imminent. fall,rybody started to their deposits from deutsche bank, then becomes seriously quickly. it is an artificial crisis but it has the potential. >> it is a franchise destruction. they are losing customer business across services and hedge funds. they are not going to be getting -- that affects the

long-term profitability of the business. guy: joining us now, daniel regli. good morning to you. one of the analysts describing this is an artificial crisis for deutsche bank that could become a real crisis. where are we? what is your assessment of the business that is deutsche? market i think that the is a little scared of the 14 billion which was run through fine by the initial department of justice. the fine or settlement will not be that high. of course, deutsche bank is currently -- has not abundant capital but it will be able to meet their regulatory requirements by 2019.

caroline: daniel, you're not worried that this will fall over? the liquidity position is ok for you? it is an issue of transparency from the department of justice? daniel: i did not understand. could you please repeat? caroline: apologies, daniel. what is the key concern if any for you at deutsche bank? do you feel a liquidity position is correct? what can they do to a live yet your concern? is it all about the department of justice giving up the size of the fine? that you understand asked me what the opportunities of deutsche bank. already sold this chinese bank which has about 40 basis point -- which adds 40 basis point to the capital ratio. then the ipo is on the page next year which could add about 100

basis points. it is roughly where it should be at the 12.5% by 2018. guy: daniel, does john cryan has the right is his model? is he pointing this is is in the right direction? about the business, we heard in the hedge fund business , i am not able to assess this. and all around the capital is hindsight for deutsche bank. i think they should be able to reach the capital target by the end of 2018, even when profits are low in the next two years. guy: daniel, great stuff. daniel regli joining us. thank you for your time. we are going to be speaking first two steffen ingles, he

will be joining us. bankingility of german clearly a critical factor. that conversation, 12:10 p.m. london time. 7:10 a.m. in new york. we are going to study the tone for what that conversation will look like in the united states. the chinese currency achieves mobile reserve stasis tomorrow -- status tomorrow. this is bloomberg. ♪

caroline: welcome back to "on the move." there is one story in the town. it is deutsche bank. did share price and the single digit territory. still 10. starting to reduce its exposure, concern about its capital. when we are looking at department of justice figure. loweragging the assets good shares a dive. -- assets lower. shares dive. commerzbank, we're speaking to the cfo later. everything is trading lower in european trade today. trading andt asia

likely to spill into the united states as well. risk aversion trade as we see once again the european banks in the eye of the storm. guy: let's get your bloomberg business flash, sebastian salek. sebastian: ing announced thousands of job cuts. unidentifiedng people with knowledge of the matter. -- organization will resolve generate billions of euros in savings and ing has declined comments. -- a secondary of eye physicians by lawmakers. the dismissal of the entire board of -- the bank is holding leaders accountable after finding 2 million accounts might have been created without customer permission. -- the san -- speak to

bloomberg at the paris motor show, ceo says for the decisions will the planned on clarifying his relationship with the eu. -- analystsnissans the trip held a two-year downturn in the world's largest casino. lee is expected to attend the conference of ministers next month. that is your bloomberg business flash. bankshe chinese tanks -- becomes one of the five currencies. will further china's efforts to

-- robin ganguly joins us from hong kong. this is been something we have all been waiting for him anyways it may be better to travel than arrive. what is the significance? robin: lots of people are expecting a flood of capital. last year where it was first announced that the u.n. would -- the yuan would enter -- i don't think there is anything completely radical that is going to happen tomorrow when the yuan does enter the sdr. this is a major boost toward china's assets to increase international usage of its currency. at the moment compared to 20% for the dollar. it has a long with to go. it'll boost some inflows but nothing radical in the near term. guy: what is it doing in terms of the way the chinese has been managing it -- the chinese have

been managing it? we have been watching what is been happening with the currency. are all of these things related and do they changed slowly as a result of this being ticked? robin: what china does, china doesn't move -- the devaluation that we saw late last year. everything is really gradual. the gauge the effect. -- they gauge the effect. it is going to be managing the currency. they wanted to manage the currency before the g-20 meeting earlier this month and we have many analysts saying between the g-20 meeting and the sdr entry that china would allow a lot of depreciation of the currency. now we have some people saying after sdr, there will be depreciation on the currency. i think it is unlikely that -- lhasa face is a

terrible thing. i don't think there'll be a massive depreciation of the currency. wrongk people have got it that it will decline a fair bit after sdr entry. guy: we see the yen moving on the risk-on risk-off -- what do we get from kuroda earlier on? -- what did we get from kuroda earlier on? been turningn has later, symptoms higher, sometimes lower. at this point, we are going to see any massive changes. guy: robin ganguly joining us out of hong kong. thank you. opec came to an agreement in algiers as it tried to limit output. more, will kennedy joins us.

i tickets the price and this chart here. -- i take you to the price and this chart here. we are down on the quarter. will: i think that reflects skepticism about whether they can make these output cuts stick. i think it is a significant move because what we saw this week was a reversal from saudi arabia. the two years, they let this policy producing and will. they said we cannot take the economic pain anymore. how long it takes them to get there? it is going to be crucial. the opec negotiations is about who takes the cuts. guy: there are many different views in the market. we are in a situation where opec is losing credibility it opec has failed -- credibility. opec has failed.

opec has failed and therefore the credibility of the organization is fading into the distant memory. will: we saw prices rise 6% on wednesday on the back of opec action. they do so have some market power. saudi arabia does need to reassert its credibility. the saudi's having said they are going to do this will bring oil out of the market. that will make a difference. the big question is how -- guy: does that get filled in by somebody else? will: we are in a different world from two years ago. two years ago, everyone was investing on a $100 oil. investment has been flushed. projects have been counseled desk canceled. -- canceled.

it is a different oil market. guy: i want to get to contact table up for brent. this is down to 2023. that is really not enough to balance budgets. will: it is lot better. guy: it is a lot better than where we are now. better than $50. will: last january, we saw oil go down to $30. they have to ensure we don't have another slump. prices more want toward $50 and $60. most of the gcc countries can survive. also at $60, oil majors can keep paying their dividends. guy: there are not many out there paying dividends. take you for wrapping up the week in the quarter. -- thank you for wrapping up the week and the quarter.

the german lender is back in the spotlight. hedge funds falling. the shares are sinking today. where off the floor where were on earlier. this is a -- we are off the floor where we were earlier. this is a single digit stock. the banking sector in europe is under a great deal of pressure. at 10.13.ding john cryan watching every take. he is paying attention this morning. we are going to carry on with that story. we have the ceo of commerzbank coming up later. this is bloomberg. ♪

caroline: welcome back to "on the move." welcome back to a gloomy frankfurt. it seems to not only be the weather but the stock price of the bank that is behind me. deutsche bank coming into single digits at one point. the news broke yesterday, the fact that hedge funds have been withdrawing their exposure to this bank. 10 out of more than 800 clients, but still the signs of stress in a crisis of confidence. rally andaults -- rise to a record high. we see oil prices slump today. signs of stress. let's get over to michael moore.

we really want to see whether this crisis of confidence becomes a real crisis because if they are trying to reaffirm, goldman sachs missed today sing liquidity position is fine. what is the key concern? michael: there are two concerns. .ne is the liquidity clients if they were to pull some funds. the concern is a miner one. you saw a lot of analysts come out today deutsche bank has plenty of liquidity. the liquidity coverage ratio bakes in the fact that some clients in a deal of stress will pull some money. deutsche bank has more than enough to cover that. the concern is miner. the other concern is just the client business. well client take a step back from doing business with what you.

in the second quarter, deutsche mentioned that some clients had taken that step back and revenues were hurt by some clients not being as active. some analysts have concerned about that -- have concerns about that, if it will be a negative hit. guy: what this john cryan do right now? he has to be very clever. the german government says it will not back stocks. warren buffett, does he need to do what goldman sachs did? does he need to do that kind of transaction saying i have someone with a lot of money sitting behind me here? i have the german government but i've got worn or somebody else? are we getting to that stage in terms of the thinking? michael: have seen banks do that in periods of stress.

bank of america years ago got worn buffet on the line. because it would be so diluted with the current stock price, even if you were to structure it a clever way, that is not something -- that is not option a. i think the biggest thing for him is getting some sort of boj -- doj's settlement done. they would like to get things in order. the quicker they can come to an agreement with a number that doesn't shock the market, the more they can put some of these fears to rest. caroline: interesting piece coming out of financial times saying perhaps the the department of justice should release deutsche bank and barclays all of the same time. they are not vocal when it comes

to share price and what they do in terms of support. would he have to raise more capital if the department of justice fine is too high? michael: right. that is an option. if they were to do a capital raise, certainly to shareholders that are in their provide one avenue of doing that. it comes down to what that doj number is and what the outlook on some of the other legal cases , explicitly russia and the fx cases, what the outlook for those are, because they have a substantial amount of legal reserves currently. if the doj case or to wipe all of those out, then it is a matter of building those back up for the other cases. that is where some of the concern on the capital front comes in. hds, a little look this

morning. blackrock, 5.7%. very briefly, how do we trade now? we've got that press conference coming up. give us a sense of the shape of the end of this week and what we are going to be talking about through the weekend. what are we doing now? next week? it is a minute by minute story. michael: trading is based on the latest headline or whatever the news is. it will be interesting to see if the regulators and politicians in germany were to speak up at all and say anything on this front. so far, it has been fairly quiet on that front. it will be a continue -- it will continue to be driven by the news flow and this kind of greed and fear. that seems to play out throughout this week. us: michael moore joining from our banking team giving us

a sense of what is coming up. caroline will be spent to commerzbank cfo. that is a critical conversation. 12:10 london time. 1:10 in frankfurt. ♪

francine: deutsche bank drops again. announcing concerns the lender cannot withstand pending legal penalties. contagion fears. financial stocks drag equities down. 99 and counting. it has been almost 100 days since the brexit vote and britain's economy is still flying blind. we bring you are recent brexit show at 9:30.