>> pulling the brexit trigger. he prime minister said she'll invoke article 50 by the end of march next year. >> deutsche bank drama. lender looks to cut 1,000 jobs as it faces fresh charges in italy. for trump.imes he won release any new tax information in response to avoided his ve federal income tax year for almost two decades. welcome to bloomberg. starting to form brexit.the >> these people are believing at the moment. market reaction. in terms of volatility, pound haven't seen it pick up one, three, even six months out. you have to wonder is there complacency leading to a hard

brexit. >> that came up to a 15, 16 month high. coming to brexit, i just don't know if she has a plan. >> i think that is the confusion today. emphasis appears to be on immigration. represented in the market. >> coming up we have several guest. charles peabody managing director of compass.. is here to talk about systemic increase. deutsche bank's chief economist joins us to help make sense of store for a europian union minus one. time, the market. >> let's get the global score card up. relatively flat in the united states. percentage point. today in losed frankfurt. 128.78 down. two opposing forces. throughout the uk

is positive. he politics that's what's weighing on sterling. >> the pound sliding after the pledged rime minister to start pulling the uk out of the europian union by march. >> there's no such thing as a ifference between soft brexit and hard brexit. hard brexit is a conscious reject trade is a false dichotomy. whether people like it or not, the country voted to leave the and that means we are going to leave the e.u. let's more analysis, bring in our bloomberg team. the take art with you

away, analysis from teresa may's speech over the weekend. what was it? >> that she is doing clarification to the date so know when she starts that two year process, article 50 will be to vote by the end of march. so we know that which we didn't know before. we know she'll put e.u. laws into british laws and we didn't know that before though we would be the case.

>> i want to talk about the financial markets. weaker pound. we do have politics on one side. the manufacturing data and

the economic data on the other side. walk me through that. >> it's nice that you have manufacturing data on the day have their s chancellor. yes the data are reasonably buoyant at this stage. you've seen what the market has said this morning. seen what's happened to the pound. down to 1985 levels. hey may talk about the fact they don't feel very calm when ou have those kinds of headlines breaking. you talk about the positive 100.y within the ftse bloomberg allows currency to adjust what the ftse 100 is doing. it may be up year to date in sterling. on a year to date basis in it's down by 2.23%. you're a british person for ting in pounds but everybody else not so good. >> anna, you're at the conference party

there. today the chancellor there will be talking. what do we expect to hear from mr. hammond? >> yeah. speaking to your point about manufacturing. times eard that a few from the business secretary over the last couple of days. no doubt many people here are the most of that positive data that we have seen. phillip hammond, the chancellor, very aware of the complications protest.is brexit he just said the brexit protest will be complicated. looks to set out more detail in the autumn statement. 23rd.omes in november, we could get more detail. right now what we've got is a timing and l on protest but not much clarity about where this goes. relationship be? cdi has been critical of that aying there's a great urgency now that we get more detail around it.

i spoke to david today. no clarity from him either on the detail will look like. >> we're looking at live shots speaking at mmond the conference. if you look at what the proposals might be. phror, spend more, forget about balancing the deficit. ab those kinds of proposals? >> he's talking about targeted infrastructure, spending. he himself recognized there have anecdotal evidences, businesses cutting back on spending. get ahead of that. can tell you every time anybody talks about building new roads that gets big cheers. comingd see some of that through. he's pledged to seek the best market access. they say it's a false dichotomy. that might be what the treasury thinks but the 27 other members

e.u., they make noises to uggest that they want to put both of those into the same party. government saying they understand the by concerns about brexit. businesses do have to take that on face value at the moment. we're y just says listening to the bank. very aware of the forces of the market. >> just to wrap things up with you in london, heart of markets, short from sterling just stay on. as far as businesses are oncerned, is it business as usual until then? you saw the deal that went morning.his this doesn't look like the ma stopped. easy to make the case to the fact that uk stocks are cheap. city of ook at the london and see marriages that block. on the it's easier to an asset anagement business post hard brexit than it is to some other aspects of the financial out nity you can run funds

to dublin and make it work. that's a very straight forward do.ng to in terms of where the shorts are n sterling, the markets probably still believe there may be further downside to come if continues to emphasize it. that probably makes life more difficult for sterling. bloomberg team on the brexit story. thank you very much. up to speed on the world.nes now in the by >> donald trump supporters are firing back at that report about he presidential presidential nominee and his taxes. "the new york times" says trump $960 million loss on his 1995 income tax return. trump y have let eliminate his federal taxes for almost two decades. rudy new york mayor giuliani said that shows trump for is an absolute genius making use of legal tax breaks to help his company survive. defeat for the peace

plan in colombia. voters rejected it surprising would passho said it easily. the government backed plan called for them to give up their weapons. return they would be guaranteed seats in congress and penalties for crimes. colombia's president said a cease fire will stay in effect. the ryder cup.n american team defeated the europians. hours a day 4 powered by more than 2600 ournalists and analysts in 120 countries. this is bloomberg. alex? >> thank you very much, emma. taking a look at some movers in the market. capital and henderson coming together. henderson is up. bill gross saying he is

of that deal. they would have cost synergies $110 million a year. money moving into passive anagement out of active management forcing consolidation between the active managers. deal that we al might see, cabela. potentially a bass pro shop winning bidder for this company beating out a pe sycamore. trying to get it to sell. pressuring the company. it looks like bloomberg is reporting bass pro shops could be winning that. cabela up 18% so far this year. get auto sale numbers throughout the morning. saying q 3 sterday shipments topping ef mates 24500 cars. company reiterating goals automobiles. no comments on if there was discounting used to get those a key.for numbers,

car manufacturers when they're at that peak auto fear. john, all in all, it is a touch today.elief rally bit of relief for now as deutsche bank isn't trading. what we will be watching is the amount of deposits still in trade. story coming up next, we'll catch up on the news over the wbg. story for deutsche bank. new york this is bloomberg.

>> deutsche bank continues in the news whether investors rying to figure out whether problems were as bad as they sounded last week.

argen, take us up to date on exactly what happened over the eekend, both respect to italy and respect to possible layoffs. >> right. we've really had two bits of news that have been received positively by investors regarding deutsche. first and most importantly on riday we got some news regarding speculation that the final assessment with the doj region up being in the of $5.4 billion. a now that would imply capital hit much lower than analysts thought by after the initial $14 billion opening gamble from the doj. that's been positively received by investors. from ly, we've had news this morning that deutsche bank are close to reaching agreement labour representatives over job.ing 1,000 that's part of previously announced cost plans. nevertheless it's positive that

head way in g some reducing costs. >> that's something they already right?d to do, isn't that this is just about getting approval to do it. deutsche bank doing anything to confidence of their customers? >> well, clearly they haven't market yet with anything concrete in terms of new strategic plan. that's something they need to do to win the confidence of investors. i think first and foremost they just want to try and resolve first.egal issues before they come to market in terms of raising capital, they neeto convey to investors a credible restructuring plan. cuts, cost cuts. something that they've been lagging their u.s. peers in of cutting costs. >> argen, thank you very much. jonathan? much, david. very so the ceo john klein set to dc this week potentially to meet with the department of

justice. ig question is how big a fine will they face and will it have enough capital? according to research from j.p. these are the various scenarios for deutsche bank. anything between 3 and 4 billion that would result in no capital increase. north of 4, a capital increase. is if you get me a revenue loss that forces a increase. big question goes to charles peabody. great to have you with us on the program. the third outcome, the idea that losses from ue clients because of what has been happening over the last month or likely is that? >> the operating environment is very difficult. one of the main risks at is their ank derivatives portfolio which is about 50 billion value. a significant piece of that is very illiquid, type three, level assets. when you're leveraged 25:1, any to that portfolio can have a big hit on your capital

or earning. that's what we are seeing at deutsche bank. concerns shifting from earnings funning to political. >> you talk about the level three asset. over the he talk weekend. what kind of discount do you apply to that because it is so illiquid. an you take us through the me tann canics. for 35ve been doing this years. there's one portfolio i still can get my arms around and derivatives portfolio. improved.es have i ask any analyst to tell me what that portfolio is worth particularly when you is 18 of euro in level three asset. no e are assets that have observable market price. ou can tell what those are valued at. >> the question like this is incredibly difficult to answer, priced. it's if you're trading a quarter of book value at the moment, surely

that price to some extent. >> i mean, the stock prices the uncertainty of what level of capital's going to be the balance estore sheet to health. he funding issues are asking questions about which level of creditor will have to take a hit capital.e that i don't know if you can bring up financial s senior europian cds spread, but what i that, it's made up of europian financial companies all weighted. starting to 're accelerate towards the spread widening trade in all of those european financial indexes. it's similar to the setup we had ahead of the january february in stocks this year.

>> i thought we were going to clean that up. how could deutsche bank be in today?sition >> german leaders have questioned how a bank who blamed for lators, you know, what's happening to their stock price is in the business of peculating with their derivatives portfolio. european system was slow in dealing with their systems. political problems are now, you know, that it's hard to aid, particularly in germany, when you argued against providing state aid in or portugal or greece. >> charles peabody, you're sticking with us. go, charles peabody will be with us. e'll be talking about the outlook for bank earnings as we start the fourth quarter.

this is bloomberg.

>> this is bloomberg go. only he bank isn't the news.r in the patrick flinn spoke with bloomberg television about how negative rates are impacting business. we see that the negative rate environment. we've seen it for a year now. think it will continue. don't see the likelihood or prospect of it changing in the term. therefore, we have to react. we are reacting. one of the primary questions me is how will you navigate a low rate environment you make rate means less money in terms of your deposit margins. this is the response. will by investing 800 million in a digital strategy be able to earnings per share in a lower rate environment. still back eabody

with us. so, yes, we were talking deutsche bank more specifically. rate likes a profitability, you don't want to lend. that's a risk in the economy. absolutely. if i can join your battle the challenge, alex, i'd like you to bring up w -- did i say comment? his will show you what you're talking about. indexyou put in the sx 70 which is the european financial index and rank them by dividend see,, what you're going to there are a number of european banks yielding over 4% which is the average yield. market place is still questioning the capital capacity banks.t of european sue.not a deutsche bank >> and if italian banks, if we that are theyield, higher paths. >> that's why it's so hard to to the german

banks. it raises the question, who's next. its aly wanted to bail out banks. germany said no you didn't. circular problem. >> do they call an insurance company? o they call a warren buffet of germany and say you have to help us out? quoted last was friday. warren buffet usually comes in when he's the last capital piece. we're not sure this is the last capital piece. the price know what tag is until we figure out what are.legal responsibilities >> it's not just this mortgage backed settlement issue. money for example and lawnering. >> structurally for european banks, if we didn't have rates what kind of problems would that solve versus remains.that still if we didn't have negative rates in europe what problems would solving?d up >> the capital infusion from the third party? > their ability to raise

capital and ability to lend. >> it probably would bring some stability to the funding side of equation. as a fiduciary, i would be limit my exposure to european markets. elections in eral spain. state elections in germany. refdum in december and presidential elections. there's huge political risk where anything can go wrong. i have got plenty of risk in the banking systems. fatigue withnetary the central banks. >> charles, great to see you. peabody research and trading managing director. politics.up next, taxes?nald trump pay does it matter? we'll talk about that next. this is go.

>> it is 7:30 on wall street. here is what you need to know at hour. a gauge of the pound against even major peers sell below

brexit levels after teresa may pledged to start pulling the uk out of the european union by march. people with knowledge of the matter say deutsche bank is poised to reach an agreement with labour representatives this week that will pave the way for german lender to eliminate 1,000 jobs as part of the cost year.announced last and henderson group agreed to capital group creating a money manager as both companies seek to revise asset profit.nd henner son shares surged the most in seven years. combined firm will have a market value of at least $6 billion. know at at you need to this hour. john, that merger speaks to a maker issue of how you can money this this environment. >> let's get on the board. futures flat. dow futures positive 1%.

nowhere.es going ftse climbing to a 15, 16 month high. here is your why. switch up the board. comes from the fx market. pound.er cable rate drops towards the low we have not seen since the mid 80s down by 3/4 of 1%. just two opposing forces colliding. economic data is okay. the manufacturing data strongest since 2014. politics is what dominates this trade as prime minister may said trigger article 50 by the end of the first quarter next year. bond market yield creeping a higher up one basis point. trading 48 handle up by .06 opinion. > the new york times has obtained a copy of donald trump's 1995 tax returns new light on trump's financial situation. ccording to the document the $916 million loss could have led

mr. trump to reduce his tax as 18 years.many megan murphy joins us now with more. story in u.s. politics over the weekend. from the we heard trump campaign? >> we haven't heard much other they aren't told us planning to release any more tax records that would shed any more tax situation. we have some people like rudy saying this shows mr. trump's economic genius in being able to manage his business's tax efficiently. there's no question this is a big deal. the records are not complete to allow us to see what trump could have does with that and what he would have sed the loss to off set future years of income. something voters in swing states pennsylvania, places where people are struggling to get that economic foot hold in he recovery will be looking at today. >> this is the last in a very

very challenging week for donald trump. debate with the performance, ended with a threat revelation from "the new york times." out in support. many other trump supporters have been out pressuring the it, do better.x >> we had this campaign with the play book approach. yes, we have people saying this in he worst week presidential campaign politics they can remember. look, we've also been here before. got a debate between mike pence and tim kaine where pence will be under tremendous pressure to not on issue with donald trump's tax returns but his continued wall comments about women. his attacking of a former miss universe contestant. nd that is really weighing on him. we've seen since the debate in terms of women, the polls have clinton's illary favor which was a group that he

was doing relatively well within recent months. there's no question many republicans, not just on the wing, but his wing as well, are asking what can we this ship around? >> if you're hillary clinton, do over ou tell her to the next one or two weeks? >> don't say anything. on his do the damage own. we have another debate in st. louis. saw that the approach they take.d to show's in ohio today. that state may be closing again. pick up na want to those voters. pretty funny s a thing. david? >> thank you very much, alex. e're gonna stay on the subject of the presidential election as we turn to our morning must read. chief writes about how surprisingly little the

markets have reacted to the election so far. in his words, quote, the fact is that the stan ard&poor's 500 climbed irregularly without any correlation with the and of trump's peaks valleys in polls. sometimes market gains and co-euincided with his political forces. sometimes they didn't. reasons for e two this, matt. one is the markets really don't care much who the president is. the other is the markets don't really believe donald trump might get elected. it?ch is >> try finding somebody who believes the latter. a parade of eard trump. from that are stunning. nd you have to put them in the context of what would be policy. so it's hard to find anybody who donald trump will be a seamless transition from the barack obama presidency. being the case, the markets have been saying almost from the

year that they don't expect, investors don't to ct any change from obama clinton. >> you went back in your piece through history. does this compare to prior elections and how markets have reacted? of hat's the stunning piece data. when you look at volatility, which is daily price fluctuation treasuries and for equity, this is the lowest of any election year, going back to 1992 when we data for the first time. >> is it possible that's because bank? central it is a different world this time. ecb, that might be overwhelming any other reaction. partly true.at's but if you go back to when bernanke was the federal banker, low interest rates when he was the chair of the fed.

that volatility was stunning. forced the fed to come back into the market and walk everybody back. that did find one market has reflected pretty much how trump is faring in the polls. peso. the what's going on there? obvious. it's quite when you have a candidate -- >> we have a chart to show this. > when you have a candidate who's saying the extraordinary things that he's declaring about to build a, he wants wall, he wants to rip up the north american free trade agreement. at this point one of the most important trading partners of the united states. try to ld trump to nullify everything mexico has been doing for the past decade, that's stunning. hat's why there would be a correlation with the currency. >> every time the trump poll numbers go up that white line, peso goes down.

>> that's correct. there was a record low peso against the dollar around 26 or so. really sort of the high point of trump's poll poll y if you look at a that had shown he had drawn neck and neck with clinton in ohio. talk ab foreign ruble?ge, what about the >> zero. zero correlation. know, for all of his phrase leader, for all disclosures tunate about leaks and everything else, the attempt by the russians democratic party, there's zero correlation in the with trump and putin. >> so as we get closer to the still a, because we are month away, do you expect there

would be fluctuation as what has past elections? >> one would have thought that trump was gaining and he was a serious o be possibility as president of united states, yes, you would markets to reflect that. if you look at, you know, if you ook at betting markets, the betting markets have been mostly consistent all the way through the year, from the beginning to the present. hen you average out the polls, donald trump has never really gotten above significantly that needs to win. he >> thanks very much. fascinating piece today in bloomberg view you'll want to read. matt winkler. jonathan? >> thank you very muchcoming up, u.s. job support. preview of what to expect deutsche bank's chief economist joins us next. from new york this is bloomberg.

>> coming up on bloomberg does nielsen chief global strategist. >> here's your bloomberg flash.ss there's a big takeover in the money management business. london based henderson group buy janus capital, creating a company worth $320 management.r the combined firm will have a market value of at least $6 billion. two years ago janus hire bill manage its imco to bond fund. september auto sales figures in

out today.e rolling the japanese automaker said its 4.9%. last month were up analysts had predicted nissan sales would fall. dutch bank ing plans to cut bout 5800 jobs in the netherlands and belgium over five years. that will save about a billion dollars a year. ng has been cutting costs to invest in financial stability. alex? >> thank you very much, emma. friday will be a key data point for the fed as they make a call whether to hike in december. layer below the job number will be wages that's key. three charts that show wages could continue to bubble up and lead to higher inflation. comes to us as deutsche bank chief international economist. this is the first chart. those that make under $15,000 a year and their confidence. do you know what? it is pretty high.

actually the highest level that years. seen in 15 so the lower, the less you make, the better you're feeling right now. one reason is because your wages are going up. this next chart tells the story 25th percent he aisle of earning versus 75th aisle.t we've seen that huge jump just of he last year in terms year. now up 4% year on 75th percent aisle also has show a jump. you have minimum wages trickling in helping those wages. side, the jobs being created are in the lower wage rowth and the medium wage growth areas of the economy. this orange line here shows how added since e been january of 2010 in the the medium wage occupations, and are the low wage occupations. these are the two key numbers i to focus on. medium wage job gains have come

up by about 14 million. lower income has come up by about 10 million. lot of job growth and lot of this area ofeen in the economy, we're at the high have been plateauing adding 6 million jobs added over last six years. at these charts. what does that tell you what we can expect on friday? then from the feds? >> i think what's very important to remember is the fed has a mandate. despite markets talk about risks, from china to brexit to the key to remember is the dual mandate says that we need full employment in the u.s. see inflation at 2%. jobs that are being created have been more and more now middle in the low and income groups.

not only for those with skills and education. tells you that for friday the abor market continues to do well. >> wages and minimum wage job, job growth and minimum wage jobs, does the quality of jobs matter? >> it matters a lot. that is also discussion you should know about productivity. productivity growth has been weakening. robably because some of the jobs created are no longer high skill and high wage jobs. bad news? say is that probably good in the sense that e want to create jobs that benefit everyone, but also that its those that have a higher market for business. in that sense the recovery is broadening out. looks like we are still on the right trajectory. fed will probably be hiking december. >> exactly. the fomc must be looking at the numbers you're looking at here. a few right now. probability of a hike in december is still 59%. underestimating the risk of a hike in december? going on a battle

between the economics profession and the finance profession. looks like it's meeting the dual mandate of full employment and inflation is grinding closer to 2%. should i believe that we are about to see inflation at 2%. why don't we wait longer. all these assets, the hunt continue. should >> the profession has been right, the finance profession the economics profession has been wrong. why will that change? >> the fed is trying to market, do to the you know what? we are closer to hitting a dual mandate. been at that point quite yet. i think the issue then becomes, well, now that the economies been crying wolf for several years, is the wolf coming now? to hike rates in december? suggesting.e wit is

>> the other narrative is if the sees higher inflation but they look for an overshoot they ave to move faster down the road with their pace of hike. do you buy into that? >> that's a very popular argument. say, well, they can overheat and just roll their thumbs and wait longer. bit the key issue is what about long rates? okay maybe this should be 2, 2.5. we don't worry too much. hey, the fed is behind the curve. move ten year rates will even if the fed holds. the hundred with for yield. lot of people have been chasing ield and reaching yield on the whole premise that short rates were aying low. two an rates and now five year rates start to move higher because of the feds doing omething or inflation coming around, then the hundred could be at risk. reconcile your

growth? with the gdp if that's the case there should be more money in consumers' pockets. >> for the last three quarters growth has only been around 1 been weak.ch has employment growth has been hanging in the rank of 175 to 200,000 for quite some time. we'll see on friday what we get. bottom line still continues to labor market the is getting better and the fed has a dual mandate of full mployment and inflation, you can't really blame them. i don't think they're doing anything wrong. we look at ng if these indicators, it still looks hraoeub things are okay. we understand the risks. generally speaking their job is to meet the dual mandate. getting e they're closer to that. >> if the fed has a long term see rate hikes how do those numbers sync up? long distance still today between where the market is and where the fed is. that's why the question is, will the market finally moving

up to the fed. fed been a long time the had to adjust down to where the market is. has been e profession winning this arm wrestle up to point. >> friday, jobs day in the u.s. we have an all-star lineup of gross, including bill janus capital fund manager, economics professor and black rock global, cio of fixed income. go, looking more like we are heading toward a hard brexit. how hard could it be? that's next. this is bloomberg.

>> from new york city this is bloomberg go. phillip ancellor hammond spoke in pweurbirmingha hour.er this >> the markets have calmed since the referendum votes, and many recent data have been better than expected. that is the clearest demonstration of the undering economy.of our but there is no room for complacency. is the deutsche ank chief international manager. economic resiliency, strong foundation? what we see at the moment? >> the weaker pound is playing a very important role here. people predicted we would have one that was much more severe than what we have seen. falling has been helpful. we may not get a recession in he uk growth next year in our view could be around 1%. that's a slowdown. we all recession that

fear once brexit hit. > we'll wake up to the headlines hard brexit, soft brexit. what is everyone talking about? you tell them? >> i tell them we are also very confused. parity andl hope for hope it will be clearer what's going to happen, but it still messy.s incredibly even now we on have some weak trade en will the deadline be. it becomes a debate about the political discussions, who will the interest are of the european countries? what are the interest of the u.k.? timing on that, on when something will happen, makes it very difficult. it is too early to say this was nonevent. up to now markets would conclude as dramatic as we could have seen. be on the radar screen forever is an exaggeration. to what the method prime minister is doing there. if she were clearer the markets

might sort this out. as a practical matter, she's weakening the pound, helping the mudling nd maybe through as the british are sometimes known to do. the right might be approach. > it is brilliant policy pushing it on to others. ut at the same time, a weak pound involves a lot of issues politically, economically. be a risk to an feed into the political process. at the end of the day, the weak is playing an important role why they are not getting their recession. this narrative over the wbg fueled by the comments that somehow we will head towards a hard brexit. how much of that is a starting of europe the rest that, we're fine, we're going to do our own thing. negotiations happening? >> we say we want to see the

of inflation, es what does that mean? sometimes the devil is in the detail. it becomes critical thinking what does it mean? does it mean we are going for a brexit or does it mean doors are opening and begin tions now have to in terms of what does it mean for immigration, freedoms, verything involved and how do they want to keep a marriage with the european union going. the eat to have you on program. detail on the timing but no detail on what it will mean to us. confused as we are. coming up, two more hours of loomberg go including an interview with henderson on his company's news that they are buying janus capital. want to miss that interview. this is bloomberg.

♪ >> deutsche bank drama, the

lender looks to cut 1000 jobs. >> pulling the breadstick trigger, the prime minister. candidatesidential will not release any tax information and claims that he may have avoided paying taxes for two decades. david: i am david westin here with alix steel and jonathan weston. called maybeng instead of theresa may. trigger said she would -- to apply you are not worried about the single market. alix: the pound saints and you have a u.k. pi in the underlying fundamentals in the market reaction.

there is not that much volatility in the pound, so there is that sense of complacency. toid: the banks have gone her and said if you don't make decision soon, we will have to make decisions that will not help london. forward of this brings the thirst for real detail. alix: coming up, an interview that theyrson's ceo are buying janus capital. global rates joins us about the amount of debt investors are purchasing. jon: here is your scorecard, futures are flat. the ftse up by 1.36%. switch up the board, it is a weaker pound. -- a nearee-day kid three decade low and weaker

against every currency. bonds and yield up. crude up. alix: the british pound is sliding after theresa may pledge to start pulling the u.k. out of the european union by march. >> there is no such thing as a choice between soft exit and hard brexit. -- hard brexit is a conscious decision, it is a forced dichotomy. the country voted to leave the eu. and that means we are going to leave the eu. alix: let's bring in our bloomberg team in england. simon, let's start with the analysis of theresa may's speech. -- she didhat she

not really mention passporting writes. we don't have many details about it. wants, shea may kind of relies on a dribble of news. 50 that invoke article will set the parameters of how we get out. question is what exactly are you going to aim for? yesterday is that even if she would not invoke official talks, she held out a hope that there would be informal talks beforehand? no notification means no negotiation.

jon: if you are looking at the market reaction, the trade seems to be ignore economic data and focus on the politics. is that the story in london? what they certainly are focusing on. the focus is on immigration. one of the prime minister talks about there is a difference between a hard brexit and a soft brexit, they're pricing it in. data is not a good. it pmi manufacturing data is interesting. 55.4, very nice.

you have a really cheap spurling -- sterling and you have single market access. anna, you are right in the middle. tell us how that is going to play at home in england politically? heard -- he tells the ballots budget plans -- he tells us of the balanced budget plans and carefully targeting investments. he is aware that some businesses have put some of their plans on it is a risk that that lies out there. we did not get much details. to booston pounds

technological information in the u.k. coming on the 23rd of november, but we will get details up to the u.k. government to set. we are not going to get any details with the relationship of the eu. we know now that that won't be triggered into the end of march. quite frustrating for sinesses. says the government is -- gned is we arean say listening to businesses, the banking sector, and that is being factored in. that is what we are hearing. philip hammond trying to do his

part. one's article 50 is triggered, talk about the next two years and trade deals that companies will have to manage? thosey cannot strike trade deals. as long as you are not and a member, you have to rely on brussels. the british trade secretary is redundant, talking yesterday -- t alix: if you are a big bank with , whatr presence in london do you make of what you have heard over the weekend? >> it will be extremely nervous. i was talking to jpmorgan a few days ago at our even in london. he would like to see an interim

agreement. it will be difficult to achieve. they're looking for stability and an understanding. one thing that will be good news is for the u.k. to translate existing eu legislation into u.k. legislation so you won't outside and no smoke transition. that may be a small part of what the banks are looking for. they would like to see much more longer transition period. that may not be what you're lookinfor. alix: thank you for the roundup. .et's get an update emma chandra is here with first word news. trump is resisting pressure to release new tax information following

blockbuster revelations about his finances. the new york times says the republican residential nominee posted a 960 million dollar loss on his 1995 income tax return. not toy have let trump pay taxes in two decades. trump won't make any tax information public. clinton takeslary a medical spark of today. on will call for limits contracts and make it tough for workers and consumers to sue companies. spago has in vote those causes when customers try to seize damages. -- theyn colombia rejected a plan to end the five decade civil war. lenientaders would get

sentences for crimes. negotiations.new global news 24 hours a day, powered by 2400 journalists, in more than 150 news bureaus across the world. this is bloomberg. alix: thank you. we have some relief happening overseas and european markets. we want to happen -- you want to see what is happening with deutsche bank. premarket, down by 1/10 of 1%. the company is close on a grain with labor representatives to cut jobs part of a previous plan outlined by john cryan. the number that was trickling down was $5.4 billion. that filled a huge? ego for investors -- and that was a huge? ego of the day.

bill gross and janice very close. they are going to have 16% of combined earnings. leading to mergers and consolidations and those active management spaces. twitter, who will buy it? that is the rumor mill. learnedday night, we google will explore a possible bid. salesforce reportedly approached the company. jon: we will be covering this later. coming up, we will discuss the systemic risk of banks with deutsche bank. bloombergity, this is -- from new york city, this is

bloomberg. ♪

alix: it is m&a monday. by. pro shops will be it will be the two largest outdoor sports retailers. the idea is that elliott management owns a part of kababella there was a bidding war going on. jon: a big move on friday for deutsche bank stock. the question is how much lower can you get that down at the doj?

pointing out a range of outcomes, three to $4 billion. north of four would lead to a capital increase, but the worst outcome is if there is a client revenue loss that forces a capital increase. is the professor international financial systems. i want to begin with you. client revenue losses. how much do you think the bottom line, the top line would have been damaged with the story over the last month with deutsche bank? >> it is hard to judge. it is a big range. my fear is more about the reaction of the market to the whole deutsche bank situation rather than the actual facts of deutsche bank. the problem is, this concerned about deutsche bank set off a

lehman moment. jon: do you think that will happen, professor? >> i think of operability is very low. small probabilities have a way of occurring. do, we areis if they much less able to deal with them today than we were in 2008. alix: in some ways, this is the burst -- this is the first big test for regulators to prevent contagion as a systemic risk. oft you think the reaction the markets is telling you about regulator's plan to help banks? >> i think the market is very nervous about the possibility that a bank or a non-bank could fail. the spread of deutsche bank indicate that. we concentrated on the last six years on not preventing

contagion. we concentrated on a counterparty risk, not on the behavioral phenomenon of panic, which we look at it 2008. david: i wonder if it is as easy today for the fed to step in to help these banks and they get into trouble? >> that is what has to be done first. ecb is very strong. with emergency funding in europe, it is a matter of the national central banks and not for the ecb. to the united states, our powers have an highly restricted by the dod frank act. i want to talk about the fragility in the market. what explains the nervousness around deutsche bank's stocks

that could cause a swing from positiveiday to territory by the end of the session? >> what the professor was talking about before, the memories of 2008. last week, thursday move coming around lunchtime and at a quiet maybe a little bit was overstated. in onally when you come monday and futures are flat. if there were fears of contagion, you did not see monday morning during the financial rice is where you would come in and futures were flat. i don't think there is much of a real concern on the part of investors as far as a contagion effect. the two biggest headlines are deutsche bank and brexit. of the stability

of the u.s. market even with the political circus. versus thety here uncertainty over in europe helps to justify premium on u.s. denominated assets. take a look at investors buying deutsche bank bonds, they had to take losses. is that where will we'll see contagion -- is that where we both the contagion? >> you could see losses there. withthursday's move deutsche bank's stock was brought it to the forefront and the issue needs to be resolved. so we have to have some finality on the fines. will deutsche bank raise capital, or will the be some bail in? ways is a whole host of

this can play out, but right now, it is an uncertain outcome. right now, the markets don't seem especially overly worried on monday morning. alld: the solution for these problems is for the banks to make money so they can build up their capital. as we have been concerned about regulation, is it possible that it is preventing the banks for making the money that will get them out of a hole? >> that is a little strong to say that it is preventing them, but it is not helping them. we raise their capital requirements to a very high level compared to come 2008 and requirements.dity all of this is depressing bank earnings. on top of that, the large fines we are talking about. jon: thank you very much.

up, it is merger monday. anderson does a deal to buy janus capital and google is working on a bid for twitter. details next. this is bloomberg. ♪

♪ david: this is "bloomberg ." i'm david westin. withal management merging anderson group -- anderson group. bass pro shops is buying cabela. jeff mccracken from global m&a joins us. let's start with that bass pro and what is driving that deal? there was an activist in the stock pushing a deal, and they got a deal. $5.5 billion.

for the last two years, share shares were going down -- cabela shares were going down. 15%.were up one retailer buying another retailer, you see that a lot. strategy?s is an exit >> the only other funded that was around was sycamore. seen this before when a strategic is competing with a private equity fund, they went through in these deals. sports authority went goodbye. what can we learn about the industry from this kind of merger? >> retailers come and go. best buy has come back from the brink.

circuit city, prominent huge name 10 years ago, they don't exist. it is not just sporting goods, it is retailers in general. it shows the amazon world. they have made like really tough for anyone selling anything in a retail out led with all of the costs going into real estate. david: twitter is back in the news as well with news that google make a deal. one was on google. they handled -- they hired lazard. it seems like twitter is going to sell, whether it is in a couple of weeks or a month or so. there are big three prominent names vying for twitter. david: it is a big deal. we also had news overnight of

henderson merging with janus capital driven by cost savings? >> yes. if you look at how henderson shares have reacted, investors love it. shares are up 20% or more. david: thanks, jeff. he is our manager for global m&a. .e will have andrew formica this is bloomberg. ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. great, that's what i said.

so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. ♪ jon: from new york city, this is "bloomberg ." futures that flat in the u.s. -18 points on the dow.

ftse up by 14 percentage points. it is a weaker pound story. falling to a three decade low. yields higher. crude trading lower at well. alix: we have m&a. that comes from cabela. bass pro shop is buying the company for $5.5 billion. a 19% premium. pushing forgement potential sale. investors getting their way today. nxp were hiring catalysts.

nxp once a larger partner because energy costs are rising. want to take a look at taser. off by 8%, picking up a downside cuts to neutral. this comes as new york city announced buying body cameras for police. jon: janus capital and henderson group coming together. they will be known as janice henderson with $320 billion under management. joining us is andrew formica from london. question, as an asset manager, these companies were coming together and they would run this company, what would you say to me? likew: in an industry this, it is appropriate to make sure the businesses can retain

the alignment of strategy. every transaction has to be judged on its merits. given the highly important nature of the investment talent and the distribution reach, it is absolutely appropriately look to get a merger of equals so the strength of both firms are preserved in the new business. jon: it is very hard to identify a true merge really force. why with this one be any different? andrew: the starting point when we discussed the transaction, we share a very similar, strategic ambition. when you look at the challenges, we are aligned on what those challenges are an aligned on the solutions we are adopting for the firms. that is a fundamental bedrock. we both come from a

over if you of teams build collaborative approaches. it is making sure we do everything we can on behalf of our clients. with the strategy alignment in the cultural alignment, it give you the best chance for this murder being successful. jon: a note -- you said a new breed of portfolio managers need to be created. what does that mean? andrew: we know there are far more significant intrusion into our industry. that is requiring a greater scale. our clients have moved on a more global basis in the are looking , and to make sure the service they received is across the board. trust is a big area in financial

services. a new breed of asset managers, one that could service managers equally across many geographies. jon: can you explain how you go forward? do star manager still have a role to play in this combined company? andrew: every firm is still going to have names and individuals who are well regarded. even today, everyone of those star managers have a team behind them supporting them whether you are looking at a sporting event, it is not just what they do, but the team that is supporting them. there is no such thing as a star manager or a lone wolf. ideasre a combination of that are being generated by lots geteople and being able to that in a collaborative approach.

jon: when people think of janice, they think of bill gross. how supportive is he about what you are doing? andrew: bell is very supportive of where the business direction is going. he is a great investor and has a phenomenal track record and he can see very clearly the strategic driver of what we are achieving. he is very supportive of what you're doing here. jon: earlier, you called brexit a drop in the ocean. why is that? andrew: people look at brexit as a situation that is so defining that you should change everything you are doing. out i was trying to point in that comment is at the end of the day, whatever form brexit takes, the u.k. financial services industry will persevere.

europe, they will be a supporting client for us. we are a global business. the u.k. and europe will be an important market for us as the u.s. and australia. he cannot look at brexit as a defining moment -- we cannot look at brexit as a defining moment. jon: the analysts getting together putting out a research about who is next to come together in this industry? my question is bigger better? do you spend more consolidation? was it a big call for you to get out first and come together before others followed suit? andrew: it is interesting if you look back through m&a in our industry. there are not many examples of m&a across borders and transatlantic. the reason is it is hard. when you have the shared vision answered culture.

janus-henderson, that will make it easier. they will have to make sure they have an aligned culture to achieve it. is there a first mover advantage? it is the most important move for our clients, employees, and shareholders. that is why it made it a compelling decision. up, asst to wrap things a asset manager, do you think you would ever come on tv and talk about the upside of a merger of equals? i never set myself up on what i might do in the future. always said my vision to be larger in the u.s. and with janus, we created that. for both of us to have the privilege to support us in this endeavor, we are excited by this. it probably was not an ambition.

together, we were able -- we all be able to turn this into reality of being one of the leading asset managers out there. it'll take us a few years to make sure we have relied the full benefits. jon: great to have you with us. andrew formica, henderson group. later, we will be joined by janus capital ceo at 6:30 eastern time. david: it is always good to from the proverbial horses mouth. we are looking at what key banks are looking at. strength. regained negative yield bonds jump. david wu joins us.

the idea behind all of this negative interest rate was to get the double economy going again. is it working? >> that is an excellent question. last week, i was in switzerland. investors quite as present as they were last week. they have had negative interest rates. these guys are now living through the backlash of negative interest rates and talking about how pension funds are struggling. retail investors are in the newspaper about cutting benefits. people are bundling up. this is where monetary policy easing is becoming counterproductive. david: what are the number showing as?

david: if you are looking at u.s. data for august, it is been a long time since we have seen a poor series of data out of the u.s.. the stock market is trading at an all-time high. this is why september numbers will be really, really weak. you're looking at the negative impact of negative rates in europe and seeing recessionary signals. --are seeing companies and companies in europe to borrow. like?s at high-yield look david wu: no one is making any money. losing assetse under management.

carry -- ose not to jon: who wins out? when you get a price-sensitive buy. what wins out, fundamentals? david woo: we are closely getting to and inflation point -- an inflation point. rates are likely to go much further lower. if growth momentum turns the other way around, that combination that rates cannot go lower, that will undo this market of goldilocks. woo, happy to say you'll be staying with us. if alix: it was a big weekend for u.s. politics.

trumped taxes? did he pay any? this is bloomberg. ♪

♪ david: this is "bloomberg ." i'm david westin. coming up, an interview with cleveland fed president loretto mester. up.et's get you caught it is a first monday in october and that means a supreme court meet in public since june. one seed remains in the after the death of antonin scalia a.

. it is the first time that the court has been less at full strength. donald trump resisting pressure to release a tax information about his finances. says theork times republican nominee posted a $960 million loss on his 1995 income tax return. that may have led trump eliminate his federal tax bill for almost two decades. global news 24 hours a day powered by more than 26 journalists in more than 120 countries. this is bloomberg. alix: thank you so much. markets are underpricing risk of a trump victory that could have many market implications as we go forward according to david woo and bank of america. that blue line is the

clinton-trump spread. line, they own bonds, funds,. it is not a perfect correlation. in the last two weeks, the red line, when trump was gaining, risk purity funds sold off. david, is this a risk in the market? david woo: absolutely. when you think of the biggest consensus in the market, we will end up with an easy victory for clinton and end up with a split congress in washington. i would say the market is pricing in a gridlock and a high probability of gridlock. the fed is going to be on hold because there will be no fiscal stimulus. gridlock means low interest rates. risk parity trends tend to do well in a low risk environment. probably know about u.s.

elections is that we got into -- uncertaintylieve in premium is over 5 -- an uncertainty premium is overpriced. thus far in this election, we have seen volatility very low no matter what was going on with the spread. that contradict your thesis? david woo: when you look at the clinton neverket, went below 67%. last week, before the first debate when trump was surging in the poll, the market never gave her less than 57%. i don't think the market ever thought it was possible that trump would represent any represented challenge for her.

trump gets elected? what happened after that? stimulus is so intense, the likes we have not seen in decades. time tradethe last was talking about was the early 90's. the difference between today and the 1990's, gm sells more cars in china then in the u.s. the politics of trade were started -- july walmart, target, if they are raising prices because of a 25% terra on imported goods? the markets are overplaying the trade war for trump.

where are the cars manufactured? isn't the issue not whether the cars are sold, but where they are made? david woo: a lot of them are made in china. but it is true that the prophet the gm makes in china gets brought home. my point has to do with the lobbyists. who is going to be lobbying for trade wars with china? this is why trump is talking about let's reform corporate tax law to prevent more companies from taking their business offshore. if donald were to get elected, it would be based on a platform that we would take it to the chinese. if he wants to do that, nobody in congress will stand up to him. i don't care what the lobbyists. are doing.

don't you need to worry about trade wars? david woo: you need to worry about a more subtle war --a more subtle way of trade wars. if trump were to become the fedt, you would -- would be forced to normalize risk. under trump's presidency, we would do a lot better. the last thing trump wants to see is a stronger dollar. the chinese would be under pressure. that is where trump will have a direct say. under trump, the dollar will be stronger, but the general market will be more volatile. alix: your best guess over the next three months? david woo: i am talking about the next six weeks. as the race tightens, volatility will go up.

emerging markets, people want to get out of the door. alix: great to see you. up, whenming contingent convertible debt instruments knees, good high-yield debt catch a cold? this is bloomberg. ♪

♪ david: this is "bloomberg ." i'm david weston.

time for battle of the charts. oliver, go first. oliver: i apologize in advance. i may be raising more questions. i will give you a little set up with stocks. there is a lot of tension in the market. you are looking at the s&p 500 and two lines. this is interesting because if you look at the moving average, we are out of this range we were in. david: quite a few point that out because it is hard to see. oliver: the green line is our 50 day moving average. we have been trading above the 100 day moving average. we are in and white envelope where markets -- we are in an envelope for markets have not jumped either way. shows companies

that are on and white oversold technical basis -- on an oversold technical basis. a lot of people say there is quilt up technical tension in the market. nothing terribly groundbreaking. to seeyou won't be here it because you will be on vacation. far, far away. [laughter] question i have been having is the relationship between high-yield and deutsche bank cocoa bonds. they move in opposition. become lesstion has negative. if you take a look at where it was in august, it was in negative points. points fora negative five correlation. if you are a high-yield investor and you own deutsche bank's cocoa bonds, they convert from the bond into equity.

what do you do to cover the losses? you have to sell the other high-yield investment assets. that is where i think the contagion could be for the deutsche bank cocoa. jon: i am went to go with aslix as well -- alix as well. oliver, enjoy your vacation. andng up, eric nilsson david kelly. we count you down for the open in new york city. futures are likely flat. from new york, this is "bloomberg." ♪

♪ david: we are just a little over

30 minutes away from the opening bell. this is bloomberg . i'm david westin with alix steel and jonathan ferro. eric nielsen and david kelly will be here discussing the latest on breakexit. jonathan: 30 minutes away from the open. futures largely unchanged through the morning. -61 points on the dow. the ftse up by almost a full percentage point. yields unchanged on the 10 year. crude largely positive. action -- it is a chart of the cable rate. the pound week on all the crosses in the jeter.

david: we want to turn out to eric nielsen. global chief economist at unicredit. we have been talking about deutsche bank a lot. the european banking system has lots of problems. it's a very specific thing about that $14 billion fine. going forward -- that will be resolved. i'm completely sure one way or the other. the thing people are not .ocusing enough on jonathan: what is the potential actually happening? >> hard brexit means mays's

insistence on controlling immigration specifically having the so-called passport for banks. if it increasingly looks like it doesn't because mays doesn't care enough about london and cares more about the immigration story than the u.k. will go into a almost certainly wto thing. you get tariffs on all your trade. this is big stuff. alix: why haven't we seen that reflected in the data and long-term markets? >> with a surprise outcome of the referendum we saw big moves in sterling.

the pound is cheaper for tourists who come in. my point is that it's the fifth investment that's going to be heard. last week the head of nissan said we are not doing any investment now, the biggest car producer in britain because we don't know what the tariff system will be. they will be facing something like 10% to 15% tariffs on this. david: is it possible the markets are sophisticated enough if she theresa may's -- were to come out and say the most important thing is that passport she gives up negotiating power against those countries. maybe this is a negotiation the markets have to wait out. >> that's a fair possibility. it's a wrong one. she's probably trying to do exactly this. immigration in britain is not the same issue as immigration on the continent.

in britain it's all about polish and bulgarian and romanian workers. continent isn the all about refugees and the middle east. i can't see how you make that compromise. alix: james gordon of morgan stanley said he still feels like the u.k. will still be that financial center. of one of the biggest banks in the u.s. saying, i'm ok. there is a kind of comfort with this idea of mutually assured destruction. are you sing there is not much leverage on the u.k. side? >> that's basically what i'm saying. they overestimate the negotiating power of britain. whatever deal they strike up has to be a greed unanimously by the european parliament. tell the bulgarians that you can no longer let their people go to britain to work, they will not agree. how do you get anything through the parliament they gets britain

a better deal than norway or switzerland? i think people are too optimistic. david: let's assume the markets wake up and say this may be really ugly. how does that get reflected? in our book we have u.k. growth going down. it's a very difficult forecasting exercise. something close to a recession. that is our main scenario. it comes into next year. investment in the u.k. slows to medically. the pound will drop. that will help the exports a little bit. it's difficult to pinpoint exactly how every step of the way. -- usuallymuch more

there is a compromise. this is so different from anything we have seen in europe before. jonathan: one thing you have done well is read the politics. help me understand. the former chancellor came on this program last week and said it would make sense to wait until after the german election to trigger article 50. into thethis factor election campaigns in france and germany that will happen after article 50 is triggered? germany is not the big problem here. germany would like to do a trade deal. britain anditically germany have always been allies. the french election is important. they will not do anything for britain to be honest. llande has a big problem.

alix: what does that mean for centl-bank action? how much more can they throw at this situation? at the ecb we think they are going to extend qe after march. they will have to tweak some of the technicalities. maybe they retake the bottom of the yield. you can basically keep this program until the end of next you which just means maintain the present stance. jonathan: you have been highly critical of negative interest rates. many banks were turning away that policy. do you expect to see that? >> i would be shocked if it goes deeper into a new -- negative

territory. they thought they couldn't get away with it. it didn't work. then they did the qe. now you can't produce a narrative that takes negative rates back to zero. it's a terrible policy. that brings us full circle to deutsche bank. if there is going to be slower growth the only way for these banks to make it out is to make money. it's going to be that much more difficult to make money and it puts pressure on marginal institutions. >> absolutely. the banking system in a nutshell in my opinion none of the european banks have caught up very well with the i.t. revolution. we have branches all over the place that are not profitable and need to be closed down.

maybe it has not been done properly. that is the conversation we should have about the banks. we have to live with this policy with the flat curve which is painful for a long time. eric nielsen, you will be staying with us. we will be getting auto sales numbers in. toyota is up 1.5%. the estimate was for 2%. nissan did better than estimates. we will continue to bring you auto sales numbers as they come in. now aroundes right the lows of the morning. we are moving lower on the day. banks are relatively stable. they had a turnaround on friday. the first day of the fourth quarter. we have a lot of deals to get through. is cabela's being

bought by bass pro shop. about 2.7 billion dollars in sales. another $1.3 billion online. beinganus capital group bought by henderson. total value will be about $6 billion. a lot of funds move into the passive world and leave the active manager struggling to keep their business. bill gross saying he is very supportive of the deal. the ceo of henderson's tanning behind active managers. both of those moving today. donald trump supporters are firing back at that report on the presidential nominee and his taxes.

the new york times says trump his 1995 taxss on returns. that may have let him eliminate his federal tax bill for almost two decades. mayor giuliani says that shows he is an absolute genius from making use of legal tax breaks to make his company survive. voters in columbia have raised the prospect that the country could fall back into conflict with the farc. thatbalked at the idea rebel leaders would get leniency for crimes such as murder and kidnapping. colombia's president plans new negotiations and says the cease-fire will stay in effect. hurricane matthew is posing a threat to hatiti and jamaica. it is expected to pass through the east of jamaica and may hit

the southwestern tip of haiti later today. , teslan: still ahead investor concerns. the company delivered vehicles topping analyst estimates. and it reassure investors that it can finally be profitable? we will bring you the details as we count you down to the open. futures moving into negative territory. this is bloomberg. ♪

alix: gold is off slightly this morning. this chart tells me a very interesting story. this is gold dollar volatility. this white line is one month. the blue line is three months. wanted to track whatever risks we might see into the election. one month volatility we have seen a little bit of an increase. not that much. why have we not seen gold volatility pickup when we have the uncertainty of an election and a potential dollar rally with a trump victory? >> the dollar is going to wear as well. on the dollar below 95 would be a positive for gold. a lot of times trading is about

patients. we just going completely sideways. what's the catalyst to get the breakout to 1400? >> i'm not sure. the path of least resistance is up. the markets taking a break. crude is also very dollar dependent. it is approaching month highs. i don't know what the fundamental driver is going to be. the upside could get everybody bullish again. alix: is it gold or is it going to be silver? >> silver has a better risk reward. silver could have a quick move up to 22. there is more upside potential. all of this is dependent on the dollar. you will see the metals market

come back like you've seen the energies. 1450 is the target in gold. that's also the halfway point of the all-time highs to those recent multiyear lows. it's just how the followthrough is going to happen. alix: i'm waiting on the volatility to pick up. david: we have some breaking news. we will have auto sales numbers throughout the morning. ford is down 8.1%. off the that far numbers. still disappointing i'm sure. tesla has only, one profitable quarter. can elon musk proof you can make his company turn a profit? this is bloomberg. ♪

alix: this is bloomberg . i'm alix steel. futures heading lower this morning. all ahead of some iso manufacturing numbers. new orders will be the key. let's head over to abigail doolittle at the nasdaq. coming off itst best quarter since 2013. >> quite a performance for the nasdaq in the third quarter. we have a few movers. when resort shares are higher in the premarket after it was reported that revenue grew in the month of september by 7.4%. some investors may see this as a potential turnaround. this is something investors are really looking forward to. trading lower in the premarket,

sistrunk systems. it was downgraded to sell ubs. modest downside potential for the shares. jonathan: in the bond market italian yields at a two-year high versus spain on a referendum poll coming up toward the end of the year. eric nielsen is with us. the divergence in the bond market we are seeing. not beings are complacent here. what do you think it is? >> if the referendum in italy for sure. there has long been a funny comparison between them. you compare all the statistics on the national accounts and the recovery. spain had a very traditional crisis of real estate. we know from history they look like this. italy did not have that crisis.

they had 20 years of berlusconi. they didn't do the reforms they had to do. analytically you have to think of it very differently. right now it's all about the referendum. if he's able to back away from it does it remove political risk from the system? >> i think it's too late. it's a little bit like cameron saying i stay whatever. thing is whattant passed the last two days in parliament. he has promised to increase the minimum pensions. he has given tax cuts. he has lost the left of the parliament in this vote and now he is trying to get the middle to come on board. he's doing middle-of-the-road policies which is kind of good. he's very active on the policy front right now.

to look back going to automobiles. shares of tesla are up in the premarket. this after the ceo urged employees to boost sales ahead of a plan to raise capital. joining us now from outside detroit is bloomberg auto reporter. how good were the numbers? >> they were a decent beat. most analysts were in a range of 20,000 to 22,000. it bodes well for elon meeting his goals. david: they said they will make the 50,000 number. there is a big difference between 50,000 and the number they are talking about making with their new automobile. are they on track to meet those goals? >> those are very ambitious goals.

model three the $35,000 electric car they have coming at the end of next year they are shooting to be building half a million cars a year. that will be a quantum jump for them. the jury is still out on that. they tend to be a little behind on their projections. david: they are doing better on manufacturing. how are they doing on financing? are they making money yet? >> that's the big push for the third quarter. they are about to go out and raise more funds. they would like to show a profitable quarter. they don't have a strong history of profitability so far. david: what about the merger that his upcoming? is that going to help them on their finances? is to be determined. it has been a very controversial merger given elon's connections to both companies. that is something investors are very eager to see how it will turn out. bounced instock has

the premarket. how will investors react if they make their 50,000 number? our investors going to be looking more closely at the dollars and cents? >> the more they can sell the more likely they are to make money. that's why the stock is up so much. they shot past expectations on third-quarter sales. investors believe they will finally make some money. investor been a lot of support for this company throughout a period of money-losing. if they start making money they will get even more support. we have cars with very rich profit margins. they are selling their suv now as well as the model s to dan.

the more they can sell the better they will do at making money. david: thank you, keith. jonathan: the opening bell coming up next. we're just over four minutes away. futures negative. dow futures down 57. frankfurt germany trading its close today. weaker pound story on every single cross. down by almost one full percentage point. yields unchanged. crude at 48. the cache open is next. this is bloomberg. ♪

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the cable rate. on the cross pound as you hear the opening bell in new york. yields unchanged. about 15 seconds into the open. deutsche bank closed in frankfurt. alix: a new quarter as well. seeing a little bit of weakness across the board. remember where we came from. the s&p and the dow just finished four straight quarters of gains. you have the nasdaq seeing its best quarter since the fourth quarter of 2003rd team. it was a huge move for the major indices. the banks not doing any harm

today. deeper in terms of the auto stocks. general motors slightly flat. actually fell by 8.1%. fiat chrysler also expecting to be lowered as well. sales? hit peak auto what does it mean for consumers spending and gdp? rounding it out with the story of the week. is deutsche bank trading in the u.s. over the last two days. theot reports that perhaps settlement was going to be a little bit lower than we closed on friday.

it was a big move for the stock after it got so hammered. how much more capital will they need to raise? jonathan: let's bring in eric nielsen and david kelly. there are two camps here. one is that this will turn into something very bad. let's get it straight to 14. where do you see it? >> i think it will come down. do individual stock analysis at my team. it looks so out of proportion compared to the offense. that some equalization will come about. surprised the you market feared a spread beyond deutsche bank securities? >> i'm not.

i think everybody is still haunted by what happened when lehman brothers fell and the huge fines that have been imposed on u.s. banks. thing is the arbitrariness of this negotiation. either you did something for which you should pay a fine or you didn't. this has real consequences for the european economy. you need banks to lend. hammered by these fines and all the regulations stopping them. and the european central bank keeping rates so low. you are supposed to lend at higher rates to make a profit on your net interest margin. the message should really be back to european regulations. they need to make the banking

industry in europe healthy. the cocoas were there to help the taxpayers. in essence they are creating because wrist -- risk it is spreading to other areas of the bank. >> it's not just protecting the taxpayers. the real problem is that risk has become the four letter word of the teens and banks are being told don't take any risk. there are given no incentive to take risks. having the harmful effect in europe of suppressing confidence and lending. you need to see earnings rise. it's just bad policy. if there hadn't been

substantial capital reserve requirements wouldn't the outce have an much worse? hasn't the efforts of the central banks made the markets more comfortable? >> to me the real issue is arbitrariness. if banks have to find hurdles , that's fine.eet because of the arbitrariness of stress tests and these fines is enforcing or encouraging a conservative policy on the part of lenders which is just slowing things down. down .6%.ar sales are by .2%.ck is up the question of higher capital being raised for banks. what about banks being able to actually attract capital?

>> i think that's right. it's frustrating to see academics keep calling for higher capital ratio is. you need to tell the pension funds and insurance companies that they have to put the money in. buy sideho is on the of things would choose to buy these shares if he thinks it's a good deal. banks in europe have had a higher cost of funding. that's not sustainable. they have to adjust. we have a very difficult environment to do it in. call for higher capital, i miss the point of it. the reason the american taxpayer didn't pay anything for it was the american government moved fast and europe didn't. you can't protect people from

every conceivable risk. nothing good has ever come from a safe loan. if a loan is completely safe it didn't grow anything. jonathan: the political irony of the italian banks and politicians saying we want to do something. now the italians telling the germans, you want to do something you follow procedures. >> it's a very good point. the truth of the matter is the germans were not after the italians because i suspect they didn't know what was going to happen with deutsche bank. the germans were actually amazingly quiet when all of the business came about. academics saying, we have this now. this is politics. risk.business has to take

it has to be managed properly. about dealings with a changing environment and making decisions. it's not to hammer everything out in preset order. it's not realistic. david: because it's going to be so difficult to convince people it's ok for banks to take risk, the easiest thing to do is for the ecb to move away from a negative interest rate policy, try to allow long-term interest rates to move up. it isn't a free market to the that central banks are fixing long-term interest rates. the antithesis to a free market is price-fixing. that's what banks have been engaged in. that's at the heart of the problems of the european banking system. david: thank you, eric nielsen and david kelly.

both will be staying with us. looking at event risks investors should keep an eye on. this is bloomberg. ♪

alix: this is bloomberg . i'm alix steel. coming up, and interview with cleveland fed president loretto mester. ♪ from new york, this is bloomberg.

a little bit negative across the board. let's head over there now. abigail doolittle is standing by. >> lots of stocks moving. one big loser this morning. on pace for its worst day since november of 2015. taser was downgraded from neutral to buy. the company lost a contract for the new york city police department to a competitor. this could signal some price competition. stocks up more than 50% this year. also tradinon the open, tesla. up 3% after the company reported third-quarter vehicle deliveries topped estimates by as much as 19.5%. tesla has promised to deliver 50,000 vehicles.

it seems these numbers could help the company raise much-needed capital by the end of the year. investors have to find where to put their money and there are a lot of event risks coming up. you have the u.s. election. you have brexit uncertainty. andfed meetings in november december. the election in spain. that's a lot in 12 weeks. david kelly of jpmorgan and eric nelson of unicredit are here. at the moment i think it might be perceived to be the u.s. election. it's unclear what sort of political scenario we will be dealing with after that. uncertainty goes down after election day. i would put it one other way. aboutan investors have $12.2 trillion sitting in cash.

the risk to me is that money is earning -2% in real terms. inflation is not zero. people don't put money to work in a long-term way. in normal times before the financial crisis you got paid to wait. now the interest rate is strongly negative. you are paying for the privilege of waiting and worrying. people need to think about that also. city center institutional investors are more in cash than they have been in a while. what's the biggest? >> trump. this is an earthquake. alix: trump winning you mean? >> yes. there's all the uncertainty. that ofto think american institutions are strong enough to contain the craziest part of it. he could do a lot. environment, it's

hugely damaging in my opinion. i don't want to guess which party will do. this is by far. i think the story to watch is when some of that money starts to get released into earning asset. people are focused more on emerging markets. a number of emerging markets have started to do better. there are nice yields to be picked up. it feels cheap to buy here. >> i agree. away frome shied international in general over the last few years and particularly emerging markets. whoever wins in november and the u.s. is going to grow more slowly in the long run. on the election i think people need to realize the one certainty is the house of representatives will not switch. it's either going to be hillary clinton or donald trump and paul

ryan. this is one case where american gridlock may be somewhat good. people need to recognize that it really does matter who is president. it still has to be a compromise between the white house and the house of representatives that is not particularly friendly to either of these candidates. >> your point is well taken. if the senate swings to the democrats and hillary wins, there is a mandate. even if it swings it's not going to be enough to break cloture. whoever wins the presidency will probably take the senate. the big block is the house of representatives where you can't

get bills to do financial regulation through that without the approval of paul ryan. i think there's going to be less change than people hope or fear. jonathan: financial market participants are watching this right now scratching their head. fund managers say what will happen to the dollar and another set of fund managers level say exactly the that. you have any clarity on what happens when they win? >> if clinton wins you will get things settling down. she's a free trader. it's a known entity. with trump i assume that he didn't mean it when he talked about defaulting on the sovereign debt. but these are the things that i worry a lot about people looking. in europe also.

and itician said this don't think he means it. how do we know? it makes me very nervous. >> i'm going to try not to get drawn into this too much. >> you get to go back to europe. >> i think whoever gets to be in the campaign trail is one thing. what will actually get through the political system is another. that's going to happen right away is a bigger budget deficit. what we have seen this year is the retreat of the establishment and the ascendancy of populists. seem to care much about budget balancing or limiting infrastructure. we just ended the fiscal year on friday. the debt will be 3% of gdp. it could be significantly higher.

up and inflation moving economic growth moving up. we have the deficit moving up. it is all pointing in the same kind of direction for the u.s. economy. i think investors should pay attention. does the house of representatives being republican give you some assurance? you have a lot of deficit hawks in the house. >> some. they may be under threat from tea party people who aren't as hawkish on the deficit but really want to cut taxes and don't worry much about balancing the budget. i'm just wondering are these really fiscal conservatives or cultural conservatives which are quite different things? it's very hard for politicians to be firm on the budget when nobody has succeeded with that line. david: it's about getting reelected after all. david kelly and eric nielsen,

thank you for being here today. some breaking news on auto sales numbers. downchrysler numbers are .9%. estimates were to be down 5.1%. it is significantly better than what was estimated. a somewhat disappointing quarter given the numbers from last year. jonathan: coming up next, bloomberg markets with vonnie quinn and mark barton. what's coming up? vonnie: nejra cehic is joining us today. we will be getting breaking isn data. and j.p. morgan chase's reaction to that. we have a lot of data before the next fomc meeting. foley what michael he makes. and we will talk brexit. head of ferber is the

the biggest business lobby to confederation of british industry and she's not too pleased about the talk of brexit right now. we don't have many other details. she will have a lot to say starting at 10:00. the markets 21 minutes into the session. equities down. , a key number in business and policy makers will be watching. we will be getting the september u.s. jobs report this friday. next.l discuss ♪

go.d: this is bloomberg i'm david westin. this friday we will be getting septembers u.s. job numbers. . mike mckee joins us now.

it's interesting because we are expecting a pullback from where we have been. better than the last month. the latest estimate has gone up a few. a lot of people are saying that maybe understating it. some of the other numbers have been coming in better like consumer confidence. the numbers suggest there is more hiring out there. it could be a stronger month. that would change market thinking. david: some revisions to last month as well. >> that's the big key. august is systematically underreported. have seen august revised up by as much as 100,000. really going to change people's thinking about what the fed is going to do. david: we have some tmi numbers.

>> we are expecting a rebound. it sunk below 50. you have to go down to 43 to get a correlation. asht now it doesn't look good. we had a slow month in august and the beginning of september. that seems to be turning around now. the chicago numbers came in much better than forecast last week. alix: the markets don't believe them. does that mean the actual data has to be that much more awesome for the markets to start believing the fed? >> probably not. if they think the fed likes the numbers -- it's not whether we like the numbers. if we see a drop in the unemployment rate because that has been static for the last it could signal a slow down. that would be seen as particularly good news.

we are also forecast to get a big rise in earnings. that would be seen as good news as well. alix: good to see you, michael mckee. we will have an all-star lineup on jobs friday. is data dependency still a thing? david: it is for the public. we have three months to go. jonathan: this is how things are shaping up as we kick off a new quarter. equities down. positive on the ftse in london. a weak pound the dominant story in the fx market. the coverage continues next with bloomberg markets. ♪

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vonnie: we will take you from washington to new york and australia, the u.k., and the middle east in the next hour. first, we have breaking economic data. manufacturing moved into a stationary territory in the month of september after coming in at 49.4 back in august. expecting aere lower reading than that. still 53. exactly the same as the previous months. in at 55.1, song that's a good sign.