ejra: i'm in for mark barton. welcome to bloomberg markets. funny: we going to -- bonnie: we're 20 take you from new york to london. breaking economic data in the u.s.. let's go to the markets desk where julie hyman has the latest. julie: another reading on consumer confidence. the last one we got came in better than estimate. this one in that trend -- the university of michigan sentiment for september -- the final .eading coming in at 91.2 90 is what analysts were anticipating pick current conditions rising to 104.2. the relatively high level therefore sentiment. this is the first entries in this particular meeting of consumer sentiment in four months. it looks like americans are more of the about the prospects for their incomes, and the

persistent low inflation we have seen. again, the number, 91.2 -- better than had been estimated. so, what are we seeing of the stock market -- in the meantime, we had been seen a rally already. nothing in the number to dissuade us from the rally, bouncing back from yesterday's deutsche-bank induced declines. we will get more on deutsche you in a few moments. all three major averages are trading higher. if you look at the recovery we have seen, you can see it in the futures overnight. yesterday we had a slump in stocks. that slump continued until the early morning hours here, and then we have seen this turnaround in the u.s. futures. also, it is a relatively broad rally. most of the groups in the s&p 500 are higher with the exception of real estate. energy leading the gains. consumer staples, financials, telecoms -- a mixed bag of the types of groups higher. financials bouncing back, but that we have defensive groups,

cyclical groups -- a mix leaving the game. energy shares are higher. oil prices -- they could be keen off of oil prices, which have also reversed higher. not much higher, about one quarter of a percent, but nonetheless, a reversal from earlier declines. finally, more detail on the banks here. goldman sachs is still down marginally, however jpmorgan, citigroup, morgan stanley, are all bouncing back. there was a ripple effect yesterday from the headlines that deutsche bank, according to bloomberg news -- some of the hedge funds were pulling some of fund collateral -- hedge clients were pulling collateral from the bank, and that caused concerns about u.s. banks as well, and their exposure. what do you see in europe? nejra: we see the impact of those concerns about banks here in europe as well. we are about 90 minutes till the close of trading here. let's look at where equities are. this is the stoxx 600 -- most industry groups are heading

lower, weighing on the benchmark a little. telecom stocks are leading the losses here, down 1.3%. health-care stocks down .8%. financials down .8% as well. it is very much ready -- not quite across the board, but if we do a gip on the stoxx 600, we are down almost 4/10 of a percent on the equity benchmark. it is a little bit of a bed day on the last day of the quarter, but that said, the stoxx 600 is headed for a quarterly gain -- in fact, the first quarterly gain this year. that is worth bearing in mind even though it is a sour end to the third quarter, and a lot of the concern has been driven by this stock -- deutsche bank. it is worth noting the shares have reversed an earlier drop. they dropped as much as 9%, hitting a fresh record low today, but rising as much as .7% at the moment. this is a myth traders

speculation the bank might reach a lower settlement with the doj. we will bring you more on that as we get it. what we are seeing over five days at the moment, deutsche bank down about 4%. it is down on the week, and that is weighing on the stoxx 600 bank index as well. also down on the week. this is impacting the government bond markets in europe. what we have been seen as money moving into safe haven government bonds. the german 10-year yield at intraday is actually heading for its lowest since july. vonnie: for more on deutsche bank and what is next, let's analyst atris, bank atlantic equities in london. he has and keeping a close watch on deutsche bank. i'm looking at the chart. in the u.s., we are at 12.28. in europe, deutsche bank is up almost 6%. nine 89oint today,

euros -- investors are reacting to something positive. chris: they are. the story about hedge funds taking money out that people have put that into perspective. they have to process -- about 33 billion is in their brokering business. i think we have to say the vast majority of deposits are from, you know, normal, run-of-the-mill customers in germany, spain, italy, etc., and the fears about the liquidity situation were certainly overdone. the big focus is on the capital situation and what might've her if the department of justice goes to the top end of its settlement. vonnie: it was the past of some of the names pulling out -- millennium -- that perhaps spooked investors, or perhaps they saw an opportunity if shares or debt were to get cheaper. mr. wheeler: far be it for me to understand why they did that,

but we can draw our own conclusions why it became public knowledge they were taking their money out, and the stock tumbled. the most accord thing is to look at the overall balance sheet of deutsche bank. 215 billion in liquidity. there are questions about capital, but the ability to service itself at the moment is very sound. i think the ceo made that clear to his staff this morning. nejra: i have a chart talking about liquidity risk. bank of america, merrill lynch -- you can see this jumped to something like a four-year high earlier this week. it has come down slightly. the question -- i know you said you are not as concerned about deutsche bank risks on this front, but what about the risk of contagion, and any possible counterparty risk? mr. wheeler: that has rallied the market a leap in there were fears -- if there was a problem with deutsche bank -- and we saw that trading sharply in the

second half of the day, a lot of big names would be exposed. this is not lehman brothers. this is be a bigger issue if we landed to image major problem with deutsche bank. as i said, the balance sheet is a different animal than lehman brothers or bear stearns which were institutional brokers. costs the banking system with a big, strong deposit is, and the liquidity it has been forced to raise since the crisis. in terms of its capital, how can they improve the ratio to an acceptable level? 10.8 is an: acceptable level. the question is is that enough if they have a much bigger settlement if they have a settlement with the department of justice. certain newspapers are saying that settlement might come soon. i do not think so. has the chance to build that over time, assuming, as i said, the hit does not come until two or three years down

the line. if it does, he has to assess, and maybe he has to raise more equity. vonnie: has anyone done the reverse math -- what kind of fine would be acceptable to keep deutsche bank in a stable position? are we talking double digits or less? mr. wheeler: depends on a bunch of factors, including tax and liability, but they have reserves against litigation. not all of that will be against the mortgage-backed situation. i do not know how far they would feel going down. it could mean they could take a fine of $7 billion, $8 billion. once you get past that, people would feel they have to access capital, but why would john cryan issue new capital and give the department of target -- just as a bigger target to aim at. it would the game, but seem ridiculous. nejra: that is one of the things you have been pointing out, a balance of raising the capital, and that impacting the front.

how can they manage that balance, then? they'll get a better idea of how far they are on the negotiation -- and when they get further down the line, how do they fund the resources, or do they have to do something else? major, talking about major dilution to existing shareholders, and i think john would try to avoid that if he can. obviously, lobbyists have been involved, but how far can it go? talk to the department of justice? ken angela merkel? mr. wheeler: i do not know about angela merkel. i think she would like to avoid doing that. i think john would like to avoid doing that. there are plenty of high-paid lawyers. a nephew works for the firm. i'm sure they're looking to see

what they can do to mitigate the impact. end, the management will be involved to ratify that, and the department of justice will probably want to see the whites of their eyes. selloff insaid the reaction to this was overdone -- but was it just overdone today -- do you see any risk down the line that could cause real concerns over the banking sector, not just in europe, but globally as well -- these are the questions everyone is asking can we have spoken to people that are sanguine about it. are you? mr. wheeler: there are plenty of risks out there. i was talking to investors about equity capital markets, why they are so weak, given there is a lot of demand to raise capital. they say so many macro concerns that cover not just the banks, but the whole market. i think the european banking market still hasn't got away from the crisis fully. every time it takes a step forward, it has been hit with one or two issues that have taken it back a step. they really have to get clear that were hitting them in 2008

and start to look as strong as their u.s. counterparts, who obviously look a lot healthier. nejra: thank you so much, chris wheeler. great to have you on the program for the second time today, actually, on bloomberg tv. vonnie: let's get to first word news. courtney collins is in the new york newsroom. courtney: the two top republicans in august are having second thoughts about the bill allowing the families of 9/11 victims sue saudi arabia. house speaker paul ryan and senate majority leader mitch mcconnell says the bill could open u.s. soldiers overseas to retaliation by foreign governments, and willing to rewrite the measure. dozens of world leaders are in jerusalem for the funeral of shimon peres. prizewon the nobel peace for helping to negotiate an historic peace agreed with the palestinian. bill clinton was president during the time. lifelinton: he started off

as israel's brightest student, became its best teacher, and ended up its biggest dreamer. he lived 93 years in a state of over thewonder unbelievable potential of all the rest of us. courtney: president obama also es showed thatper hope and love were at the heart of the zionist idea. recorder are hoping a will tell them how fast the new jersey commuter train was going when it slammed into the terminal. one person who was standing on the platform in the station was killed. more than 100 others were injured. and a new poll shows hillary clinton has increased her lead in the battleground state of florida. the mason-dixon survey has clinton with a 46% 42% lead over

donald trump. it is a two-point increase over the last poll published in august. the poll also says 4% of florida voters are undecided. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am corny collins. this is bloomberg. vonnie: thank you. coming up, a look at the stocks moving early in the u.s. session, including notable gainers in the semi conductors. this is bloomberg. ♪

vonnie: live from -- nejra: live from london and new

york -- vonnie: you are watching bloomberg markets. a time for a look at the bloomberg business flash. each of the five bidders for troubled airbag maker, is offering investments of at least $1 billion. a person familiar with the matter says they may be leaning toward three days -- one by buyout firm kkr, another by -- and another by bain capital. the defective airbags have led to the biggest auto recall in history. in the euro area has risen to its highest since 2014. consumer prices in the region rose at an annual rate of .4 percent, matching analysts investments. it is still below the financial banks goal of 2%. apple and ireland are. to argue the eu unfairly kept during tax dark

negotiations. the eu ended up with a record tax bill. apple contends the eu never told him about a shift in the investigation. that is your latest bloomberg/. business flash. julie: i am looking at chipmakers after reports that a semiconductor might be getting interest from qualcomm. they are the world's largest maker of chips for the automotive industry, but it has been diversifying away from the business to some extent as it has seen a slowdown. you see the two-day chart on the stock of 25%. it got a leg up yesterday on the report, and it continues to rise today. analysts are trying to handicap what the price could be. at suntrust, they put it at 124. jeffries says as high as 136.

you see the shares are at 103. qualcomm shares also have been rising over the last couple of days as analysts say this deal makes sense for qualcomm -- would add value. those shares are up 9% over the past few days. there is a cool function to look at the relative value of the companies to their peers. look at the bloomberg -- the relative value calculator. what you see down here on the x access is estimated earnings per share growth. on the y axis, we have estimated price to earnings ratio. the various bubbles are the various companies in the philadelphia semiconductor index. the size of the bubble depends on the market cap of the covenant. -- it's bubble is estimated earnings growth, 24%. it trains at 24 times estimated earnings. the p group is in the purple. it looks like -- you or group is in the purple. is cheaperke nxpi

than peers and estimated to have a higher growth rate. when you're looking at why this company is attractive, that could be a couple of the reasons. we see other chip makers rally -- particularly those exposed to the automotive industry. we do not see as big of a live for some of these copies, obvious the club but you have peers logix, skywards, and semiconductor also seen a lift today. nejra: thanks so much. coming up on the program -- the rally in emerging markets stocks hits the ball. we will track the ups and downs with an investment strategy from blackrock. that is next. this is bloomberg. ♪

you are watching bloomberg markets. i am vonnie quinn. nejra: from london, i am nejra cehic. shares are paring losses as shares in the u.s. rise, easing concerns the turmoil in the banking industry could spread,

but could longer-term concerns about the health of european banks cause outflows from etf's, which tracks some of the continent's biggest lenders question joining us to discuss -- strategyhead of at blackrock. a lot of concern around the banking sector. i know if we look at etf's, what you have seen is inflows in the u.s.. europe is an area that has seen continued -- continues to see outflows. now, as we continue to see concerns over the banking sector, how do you think that is going to affect the etf flows in europe? >> we have seen investors taking investments out of the european equities, putting them to work in exposures like emerging equities and income. what drives the significant outflow -- what is notable,

investors have been putting them into european investment grade. the gap between the inflows between european investment grade and outflows is the widest ever recorded based on etp flow flow, -- etp historically, but the gap is the widest this year. driving this is both a possibility of the -- profitability of the banking sector, and a broader question around how effective the monetary policy can be without a step up on the fiscal front. nejra: in that sense, does it look like credit investors in banks are far less concerned than equity investors they may well be concerned, but they have, in a way, a straightforward train to go where the central banks are buying. if you think about the slow

movement in european credit, it picks up around march the when -- and theounced the same can be observed right now in the u.k. credit market. while insurance is at the gap, demand has been picking up because of this largely buying of corporate bonds. vonnie: -- nejra: has central-bank action or inaction than the biggest driver? has beenow that driving etp flow -- the trend is more clear last year. we saw a huge amount of inflows going to european equities, japanese equities, and the momentum stalling in u.s. equity markets. that is a very clear reflection of the divergent trends we have seen last year with a u.s. heading toward a rate hike, and the ecb and be og -- boj going lower for longer. this year, it is a lot less

clear-cut in the sense that increasingly, despite the ecb and boj wrapping up at easing, flows have not really been following, and if you look at market performance, it has not been responding either. i think it goes to show that has a good closer to the limits of monetary policy, investors need to see more. nejra: what about the boj attempting to control the yield curve? what impact is that likely to have? ms. li: what we have seen so far -- the fact they started targeting yield curve, rather than ramping up, or cutting rates, it goes to show there is a -- there is not a lot more they can do, and they have to tweak around it, rather than increasing things. what we have seen is in response to the easing, more domestic investors started buying more japanese equities, and if you think about back in july, the previous boj meeting, they

discuss the etp purchase program. it goes to show that while boj is doing what they say they're going to do, domestic investors are starting to do more as well. what is interesting is international investors have not really been responding. while foreigners have been selling japanese equities, domestic investors have been buying. nejra: wei li of blackrock, thank you for that fascinating chat of what is happening in the world of etp's. still ahead -- vonnie: deutsche bank is not the only european financial company under knee. commerzbank is pushing ahead with a massive overhaul, including job cuts. we will hear from the company's cfo. this is bloomberg. ♪

♪ vonnie: live from bloomberg world headquarters in new york and london, i am vonnie quinn. >> you are watching bloomberg market. vonnie: courtney collins is in

the newsroom in new york. courtney: another endorsement for gary johnson. this time it's in the chicago tribune. is not fit to be president of united's dates. -- united states. it says they cannot endorse hillary clinton did a serious questions about honesty and trust. johnson was endorsed by the detroit news yesterday. hillary clinton has a lead over donald trump in michigan. the latest poll from the detroit news has secretary clinton ahead 42% to 35% in a four-way race. it was conducted after monday's first presidential debate. the european union has cleared the way for ratification of the paris climate agreement. eu nations agree to a fast-track vote on the tree.

the most recent accord to fight global warming could come into force next month. the eu has come under pressure to ratify after the u.s. and china agreed earlier this month. italian police have found two van gogh paintings ever stolen from the amsterdam museum and 2002. they were hidden in a farmhouse near an organized crime syndicate's stronghold enables. they are in relatively good condition. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney collins, this is bloomberg. nejra: thank you so much. global stocks and deutsche bank shares having losses on speculation. they may reach a low settlement with the u.s. department of justice. those reports are unsubstantiated. bancshares,ommerce down around 3%.

today bloomberg's caroline hyde asked the cfo about market sentiment for the sector. >> i think we have seen in general over the whole week a very negative market sentiment on banking stocks, not only in germany but across europe. it has been not a very nice day for the german banking stocks, but i think that is a very short-term view and i think we look at forward after that next week. caroline: -- >> i'm not prepared to comment. . i relaxed caroline: why do you think you were able to get through this and long-term? bubble help deutsche bank to convince the market their capital position is strong enough? is onecapital position on average with the market,

especially if you take into account the lower risk profile of the overall bank. is it wrong for the whole banking sector to be tainted at the moment? >> there is a certain level of discussion of the banking sector coming from low interest rate environment which is a burden. and regulatory is a little bit difficult to understand. that puts heavy some question marks around it. behink regulation needs to especially predictable, and i think that is a part investors are currently seeing. caroline: our rates too low? does the ecb need to move from negative rates? >> they need to decide on their target. it is obviously true the low rates, especially negative interest rates, are not something that intuitively work together with the banking model. ceo was talking

about competitors being driven out of the german market. who will be driven out? we haver as we see it won a number of customers, almost one million over the last four years. that is been across the market, especially those closing down branches. we have full commitment to the branch network. caroline: you are partly held by the government, a legacy of the bailout that happened post-financial crisis. was the government involved in your change of strategy? >> the government as a shareholder and not directly involved as other shareholders were not involved. the government has representation and the full board has agreed to the new strategy yesterday on the board meeting. caroline: should the government be talking to deutsche bank right now? >> that is something you need to

talk to the government about. caroline: when you talk about regulatory costs and rates too low, what about consolidation within the german sector? is that something you expect to happen? >> i don't expect that to happen short-term. caroline: in the longer term? >> it is something hard to predict from today's point of view. caroline: would you put your money to work eventually to buy out smaller competitors? >> but we are currently focusing on is really on our strategy and that i think is the focus for the upcoming months and quarters. deutsche can you let bank and commerzbank whatever come together? >> ever? i think that's a very bad question right now. : caroline: to 2020? >>. i don't see that being a real part nejra: that was caroline hyde. vonnie: great interview.

new polls show hillary clinton has taken the lead in two key states as you may survey for the white house. we break down the numbers and numbers.ostdebate this is bloomberg. ♪

vonnie: you are watching bloomberg markets. luke kellis says hedge funds are most at risk of shutting down. i spoke with him this week in an exclusive interview in london as part of bloomberg market's influential summit. asked about the effect of central banks and potential economic shocks to the world

largest publicly traded hedge fund manager. >> we have been pumping all this money through central banks. it is increasing leverage. i don't really understand the long-term answer that says more leverages the answer to a leverage problem. now we will be fiscal spending. that will help in the short term, but it creates more and one in the economy day we will have to pay back a leverage. it will be messy and horrible. my own and citations are very -- a long way away. you have a short-term problem which is it is hard to make money. if you take the basic idea that it's about allocating the scarce resource of capital to opportunity. when government say capital is freely available at zero cost, there is not much opportunity to allocate. -- and take a lot

more skill. but the extra value of 200, 300 basis points of active alpha is incredibly high and a world where passive returns can only be 2% or 3%. nejra: kid is certainly a challenging time for your industry. would you say we are at some sort of tipping point for the hedge fund industry? what will it take to bring the industry back to his early days? >> i don't think it's a tipping point. i think there are pressures. because of the lower returns the number of negative returns of significant pressure which we haven't talked about, that is part of what we're seeing. the hedge fund industry is $3 trillion. how much more of a heyday can you have? we've seen a little bit of outflow and i'm sure we will see more. we have seen a few things shutting down. kerry shut down this week.

there will be other people like that who run funds for 20 years and they a lot of money. then they sit there thinking ok, hard work, the returns are not as sexy as they used to be, doesn't look as much fun. it is true. it is not as much fun as it used to be 20 years ago, but there is a value we can bring to clients. there is a service we can provide the client a need. and we can do that is valuable for terms --firms in the world. it just has to be something you can do that is valuable. nejra: you are saying we are likely to see more shut down. what are the most vulnerable? >> the current pressure is clearly on discretionary macro and on the big event funds. it tends to be the mega sized funds for the pressure is highest. the emotional thought about the fact that you've got a $20 billion fund and you were paying

2% management fee and you see that $400 million in management fees, that burns a hole in people's stomachs. those sort of people are under the most pressure. it's been a long time since macros made money. i wouldn't buy discretionary macro for the future. i think computers of taken that opportunity away. fundsare new hedge starting everyday. a record number launched this year. it's a very dynamic, very vibrant industry. when individual funds get too big or stale or they get lazy, the money will flow away from them. i think for businesses like it's about having a broad set of different funds that can provide value to clients. when i go around talking to large investors in the world, their need for value added

investment management services is greater than ever. they are not sitting there going i hate hedge funds. they say i hate the uber hedge fund that buys the biggest penthouse in new york. that one winds. people up nejra: that was luke alice speaking to me early -- luke ellis speaking to me this week. i asked him what would be the biggest shock to the market? he said the biggest shock will be there is no shock. even a fed rate hike is not going to make much difference. he said the u.s. election may create a bigger amount of volatility. vonnie: we are getting closer and closer. great interview. to get more on the u.s. presidential election which is 38 days away, new polls. they show democratic nominee hillary clinton has taken the lead in two key states.

they key states, new hampshire and florida. is this -- >> these of the first states in which we're seeing postdebate polls. it does show most people did watch the debate. it was an incredible turnout in terms of people watching. for the most part people thought hillary clinton won. that is held her in new hampshire and florida. he has a little bit of a bump in florida. she is up by about four points. in new hampshire she is up by about seven points, beating donald trump in that state which he won in the primary. she does have a bit of a lead. it remains to be seen if she can hold the lead through november. vonnie: they are very key swing states. particularly florida. the obama team has announced that clinton's team has announced the president will be traveling their next week. why would she be the president

to campaign there? is a very hispanic state. does donald trump have any hope in florida? the primaryump won there, beating out even marco rubio the home state senator. he has properties there and support among older voters. the role of the president will be to try to rally young voters, minority voters, people may be on the fence about hillary clinton. people who voted for obama in 2008 and 2012 are not as enthusiastic about hillary clinton. seeing from we are surrogates, from bernie sanders, elizabeth warren, michelle obama, and the vice president. paul on clinton's team. the enthusiasm levels are not quite as high for her as they were for president obama. remember in 2012 he only won florida by 1%, the closest state of the election. she will need all the help she can get. vonnie: what are the key polls you are watching now? >> we will definitely want to

see with the national numbers say to see there was a national, nationwide impact. we will look at very important swing states, from florida to ohio to pennsylvania. ohio is important because the last couple of polls have shown clinton down. our poll has her down by about five points. pennsylvania is incredibly important because it is clinton's firewall. if trump can't win their, it's hard for him to get a path to 27 0. it will be very important for clinton if she wants to win to block trump from winning in pennsylvania. we are looking for polls and those swing state and nationally to see if the impact of the first debate, which most people say clinton one, will hold -- clinton won, will hold beyond the debate. vonnie: just briefly because deutsche bank is driving the market today, we are externally focused on it, the ripple

national committee has reignited call for clinton to release details a running her paid private speeches to deutsche bank. shares sellfirm's for a record low. they have recouped some of those losses. what is your take on this? >> this is not good news for hillary clinton. hillary clinton and her husband earned almost $1 million for speeches to deutsche bank from 2012 the 2014. this is something republicans are bringing up. we saw this against bernie sanders. he brought up her paid speeches. it's been out of the limelight, but now it's happening with deutsche bank and it's getting the republicans more ammunition to go against hillary clinton. it is something bringing this issue back into the limelight. at the next debate we may hear more about her paid speeches the wall street. it is something she will have to answer to and is not a good time as she is seeing this post a baby bump. it's an issue -- post debate bump.

vonnie: does anybody care about with the potential vice presidents say? to get thet going numbers of the presidential debate got last week. earlier this week. it will not have as much of an effect on the polls, but it's important people see both candidates are up to the job. there is probably more downside outside of either make major gaffes or unable to defend the running mate on one of the things they have said. it will probably the more on the negative in terms of actually supporting and increasing votes. to main task is them for not -- for them not to make a big mistake. vonnie: thanks. brs is turning its's the attention of portugal's debt. this is bloomberg.

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vonnie: you are watching "bloomberg markets." nejra: the rating company's portugalompany matches is third in the nation's bond yield. what is going on behind the scenes at dbrs. great to have you. before we get to you, we want to highlight this chart that shows portugal's bond spread over german bunds. 3.5% at the moment. portugalee the 10 year yield versus the german 10 year yield here. take us what the -- through with the concerns are. >> dbrs, even though they are a small ratings company, why the ratings matter is they are the last one of those companies

dicky portugal under investment-grade. and why this matters for howugal is that it's portugal is into the ecb program. if they decided downgrade it will, straightaway make it really extensive for portugal to borrow. financing costs are going to go up. it will snowball into quite a big issue. is likely going to hold on to this rating for now, but there is a slight risk they might warn things are not as good as it was the last time in april. there is a chance they might say the outlook is negative. that is a possibility. doese: let's say that dbrs end up downgrading portugal. what is the worst that could

happen? we are not talking but euro crisis scenario, are we? >> even the scenario of downgrading portugal, no one we have spoken to says that will happen. dbrs did not hand at that at all. -- hint at that at all. we asked if it happens, what is it me? they say portuguese bonds will be in freefall. if dbrs downgrades, ecb will not buy portuguese bonds. no investor will stick his neck out and say i will buy portuguese arms. it is too dangerous -- portuguese bonds. it will be too dangerous. that is dangerous for a company facing slow growth. politics stabilizing a bit but that's a big deal. vonnie: let's put it into a little context. but it isis up 3.2% still much higher than the other

peripheral countries right now. what happened? the government and portugal is gaining favor with the populace more and more. in countries like spain we don't really have a stable government. >> you are absolutely right. that is what is confusing about portugal. why isn't this is one of the worst performing? not just one of the worst performing in the euro area, but one of the worst performing bonds in the economy. the big thing is the rating. portugal is just one notch above this investment great rating. then it will be in speculative territory and will basically be a junk-bond. the fact that portuguese debt burden is big and the government has said we will meet our target, it doesn't look quite likely. the third thing is growth numbers of portugal have been really bad.

all these things are just adding up. so in the banking crisis you really had a bond that investors don't want to touch. vonnie: the targets are free-form targets. i'm not sure which european target -- country has met those targets, but the increase in yield is actually making portuguese debt more attractive. it could be a virtual cycle, right? >> that is a question i asked someone. they say if you're talking about low yield and 90 going up, isn't that a good thing? even if you're ready to land, who is there to borrow portuguese bonds. it's a different story at this point. vonnie: i want to show this chart. the bloomberg barclays global aggregate return index.

basically little changed this quarter. what is the outlook for the next quarter? >> interesting to see. bonds effect quite a dramatic quarter. they're going all the way to record lows and then suddenly there was a selloff. with like the ecb might not actually go through qb. --qe. the fed will raise rates. next quarter is all about politics in europe. that will be the big driver and a big discussion about where bond markets are going to go from here. vonnie: they do so much. what a great conversation on european and global bonds. coming up, more on concerns about the health of deutsche bank. this is bloomberg. ♪

vonnie: it is 11:00 in new york. there are 30 minutes left in the trading day in europe. vonnie: in new york, i'm vonnie

quinn. you are watching the european close on "bloomberg markets." ♪ nejra: we are going to take you from washington to london and have stories out of saudi arabia and the next hour. concerns about deutsche bank. investors causing some to pull back business and send global banking shares lower. their isights back in no basis for speculation. tv he isbloomberg relaxed when it comes any risk from deutsche bank. he says dividend payments will return in 2018. and it's the final day of the third quarter.