guy: welcome to "on the move." .t is 8:30 in the frankfurt i'm guy johnson alongside caroline hyde in frankfurt watching deutsche bank. what else are we watching? bad news for the banks. seeing figures in theresa may thatnment tells bloomberg they will not prioritize financial services in their brexit negotiations. ready for a hike? fed's loretta the chance for a

rate hike is to live. r.b.i..or at the it's governor patel first decision remembers well that every member of the reserved banks has a vote as well. we're going to take you live to mumbai could were less than half an hour away from the european open. the fair value tech elation on my bloomberg told a fairly flat open here in europe, up less than .1% across the pc. deutsche, i'm looking at the trade day trade versus the close on friday. on trade gate, deutsche is going to open up around 1%. let's take you around the world and show you what is happening. the yen versus the dollar. the dollar is up. a bit of a ketchup move for the australian bond market -- a bit of a catch up move for the australian bond market.

we will talk about the rba later . you are seeing a dyson move -- a decent move in the end. let's get everybody caught up. here is the bloomberg first word news with juliette saly. juliette: thank you. the cleveland fed president loretta mester says there is a case for the u.s. to raise rates . she is one of three fomc officials who wanted a hike last month. mr. repeated her views that the fed's november meeting should be considered live even though it is days away from the u.s. presidential election. >> the fed should be looking ahead and not just waiting. i want to be consisting -- consistent with our committee case in. -- with our communication. if we wait until you see the inflation get back to your goal, then there is a higher potential that we are going to have to raise interest rate on a steeper

path. when fed and other policy makers have done that, it doesn't turn out to be a good outcome. juliette: us chile's central bank has kept its cash rate unchanged at 1.5% -- australia's central bank has kept its cash rate unchanged at 1.5%. the economy is going in and above the average pace. -- they announced an ipo that raised $2 billion. it plans to sell 11 million new millionnd another 5.5 to be sold by samsung electronics. the company will engage the demand on october 26 with an ipo price to be announced the following day. donald trump claims he billion the use -- he brilliantly used the tax codes that only he can understand and reform.

he reported a $916 million loss in 1995. a figure so large he may not of legally been required to pay income taxes for two decades. hillary clinton referenced this in a speech yesterday saying what kind of genius loses $1 billion in a single year? >> as a businessman and though state developer, i have legally used the tax laws to my benefit. and to the benefit of my company, my investors and my employers. brilliantlyhave used those laws. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. saly.uliette this is bloomberg. guy: juliette, nice to see you. the british government will not financial fixing

services companies in its brexit negotiations. they say the prime minister has dismissed a key business demand for a deal with the eu to help ease the transition out of the block. the pound holding near three decade lows. after theresa may says she will begin the process of leaving the eu by the end of march. let's welcome our guest, neil dwane. good morning. talking about frexit real estate? -- about frankfurt real estate? so good in't think think you can buy frankfurt real estate for different reasons. i don't think you should do it because all the goldman sachs people are going to be moving out of their -- moving out there. caroline: what happens? are you convinced the financial services hub will be in existence? neil: our analysis of what is

going down would suggest we are going to be equivalent by the time we have left, in which case it is hard argument for europe to say despite the fact we are opening their laws, we cannot have the passporting and other rights that that equivalents would give us as a trading partner with the european union. guy: that sounds really rational. 1 -- really rational. [laughter] that you haveief to make the u.k. suffer and one of the easiest ways is by denying passporting. neil: i can see that. at the moment, we do have that irrational motive politics, but we will see how the italians get on with their referendum. we have three big elections next year.

the politics and politicians could change. maybe it will not be irrational behaviors in a years time. one has to hope that in the end, economic sense and wisdom will prevail. caroline: o'neill, what about the sense of the -- neil, what about the british pound? neil: there was surprised that the brexit decision which your short josh which rush josh -- which are chart shows. think -- i expected the day we triggered to see the type of move we had yesterday and the type of headlines we had overnight. i would've said that sterling in our opinion looks fairly valued, so that doesn't mean it cannot get cheaper. fundamentally, it doesn't need to get a lot weaker. the argument about overseas

exporters and our competition is overstated. many of the big exporters have big this is his overseas to meet closer to their clients. the translation of earnings will be better because of sterling. our export competitiveness is going to be automatically uplifted by the weakness in sterling. -- to be dramatically uplifted by the weakness in sterling. guy: we have an incredibly -- to where it has been. neil: watching you guys last week, i think we are seeing that manufacturing is doing better than we all feared after the holidays. there is an element of momentum inside the global economy which many of us thought with the elections -- it seems to be ok. they could be because china is ok. guy: you sound optimistic. neil: i think i am positive. there are a lot of difficult things going on.

most of the audience has to put money to work. there are opportunities. guy: stay with us. plenty of discussions with neil. his november live? loretta mester thanks so. a case -- thanks so. a case for a hike. should rising populism -- rising populism is a threat. we are going to speak to the chief economist and it back on the markets, deutsche bank is trading after yesterday's holiday in germany. it close higher at this point. this is bloomberg. ♪

caroline: welcome back to "on the move." a slightly jury frankfurt as we have all eyes in anticipation of how the two bank will open today. -- of how deutsche bank will open today. you.tte: caroline, thank pimco says too many fund managers are getting their hedges wrong and undermining pension returns. the firm says many managers are using uniform currency protection for each asset class while ignoring opportunities to benefit from the way some exchange rates correlate with riskier assets. pimcoays it is using -- says it is using a currency by currency approach. abb says it will keep its division inc. continue the transfer mission.

it has been calling for the firm to offset business. abb announced it will buy back $3 billion of shares over the next two years. ericsson could announce it is setting between 3000 to 4000 jobs as soon as today. the struggling maker of wireless networking equipment is trying to cut costs. ericsson has informed this wish -- the swedish government about his plan. netflix rose to its highest since may under speculation it could be a takeover target. rumors have linked netflix the disney, although analysts say little chance of a deal. netflix declined to comment. that is your bloomberg business flash. guy: cleveland fed president, loretta mester says the us economy is right for a rate hike. -- the u.s. economy is right for a rate hike.

there is a compelling case for moving the rate up gradually, taking another step in that path. you want tothink curtail the expansion, not at all. the first half of the year, growth was around 1%. i think we are going to see a rebound in the second half. around 3% in the second half which is about 2% for the year. we are going to be growing over the next two years. inflation expectations are anchored. the economic conditions are such we are going to be going back to our 2% goal. as i said in september, the case was compelling to take another step on the gradual path. if the data comes in as we anticipate, consistent with our thatast, i would expect the case would remain

compelling. we are going to look at all of the data that comes in between now and november, as we do all the time. we like to look at all of the incoming information. you are right, if the data comes in as consistent with what we have been seeing, then yes, i would think it would still remain compelling. we will see when we get to the meeting. we are an apolitical institution. politics do not come into our decision. we look at the economy. we set policy based on the economic outlook. guy: independent central banking. bill dudley is advising caution over a hike noting concerns that the risk for recession is increasing. bloomberge you to my and show you what is happening

in terms of the probabilities that are implied as a result of where the market is. 60.9%, the probability of a hike in december. do you agree with that? >> probably not. i don't think there is a chance. the top cios were 50-50. we reflect pretty much as a company the bipolar relationship. the fed speeches, everyone who says we think we should be raising rates is another one saying it is too early. rings are too uncertain. you have -- things are too uncertain. you have been talking about this for three years and they have not done anything yet. they give volatility to the marketplace which makes us more uncertain. dollar.: talking of the is it the dollar that feeds into this viewpoint? is it the global growth story?

i generally think when you stand back and look at global growth at around 3%, pre-the finance of crisis, that would've been called a recession. we have to accept the fact that we are trying to rebalance. the world is a world -- the world is a low growth place. the dollar is somewhere where it will continue to take the strain. the japanese juncker control will lead 10 year -- the yield curve control --l lead -- leave 10 year any long-term bond money will find the u.s. treasury market positive. guy: is a japanese money going to the u.s. or to europe? this is being skewed by the money market changes.

we are waiting to see what kind of effect we are going to see. the cost of dollar has gone up. buy be teepees? tp's? i buy b this reflectsl: the fact that there is a normal leverage inside the mobile financial system. the eurozone -- the global financial system. -- i thinke crisis that reflects a technical issue inside the financial markets that anything you are i looking at in terms of the attractiveness of u.s. assets. guy: we're talking to the brexit lows. we have a 127 handle on what is the cable rate. i will show you what is happening with the euro sterling. is this conservative party politics?

is there anything more meaningful going on? the market is testing whether you see the next big line the sand. that's big line in the sand. -- big line in the sand. remember, you to interviewed former people than i do, that the markets are all about omentum. -- all abouthort momentum. everyone is short. in september, i found sterling pound, the economic situation was much better than we had hoped for. yet the bank of england deciding to cut rates. of turbulenceriod that mr. hammond was talking about. the u.k. economy is doing just fine. caroline: what about euro pound. -- euro pound?

give us a sense of where the weakness is going to come in? the eurozone doesn't look too pretty. risk caroline, there is a that the euro weakens in the next 12 months because of the political behavior and the fact that it is highly likely that we do get more extensions of quantitative easing from the ecb. at the eurook against the dollar, because i think that is the currency that is of most interest. we think at 105, it is clear that the federal reserve is quite angry if the euro is that week. we tend to think around 110, 112. all of the big export machines in germany are functioning well at the level. caroline: export machines functioning well, neil. staying with us. we are looking ahead to the stocks to watch. one behind me, deutsche bank. we will see how that opens up.

german trading looks 20 bounce on the open. we'll have it -- looks to bounce on the open. we will have it ahead. this is bloomberg. ♪

guy: welcome back. we are approaching the market open here in europe. .:53 in frankfurt let's talk about what is happening with sterling. we have been popping lower

again. we are taking another leg up. asia, another calm session for the british pound. we are taking out those lows. we are down to the 127 level. a bit of a background on what we are saying, the function on your bloomberg. we are on an intraday. -- intraday period. caroline. caroline: it seems historical what is happening with the british pound. theresa may taking to the radio -- taken to the radio. germany,cular stock in behind me, deutsche bank. will we see the stock rebound after we saw it in the trade on friday on the higher side in germany? it was a holiday yesterday in germany. so much momentum building into

the doj. will we see a deal done as executive test executives of deutsche bank head over to a few meetings with the department of justice. we will see if any sort of deal is struck. job losses coming from ericsson as well. guy: thank you, caroline. me. dwane next to what the think of stocks right now? else, thereanything is no alternative. equities, --opean neil: for european stocks, your connect these are not quite that punchy. yields,e looking for which i think a lot of investors are, otherwise we tended feel asia and europe -- and emerging markets are offering earnings growth.

guy: the market open is coming up next. this is bloomberg. ♪

guy: good morning and welcome. you are watching on the move. imed am here in london. caroline hyde is over in franklin. caroline has your morning brief. caroline: it is bad news for banks again. senior figures in theresa may's government says the prime minister will not prioritize financial services in the brexit negotiation's. the pound dropped to a 31 year low. loretta mester says the fmoc meeting is still live despite being so close to the election. how high will the word be by the end of the week?

at the r.b.i.. every member of the tank now gets a vote. we are live in mumbai. value on the bloomberg pointing to a recently positive opening except for the dax which is playing catch-up. white languages the ftse 100. there is the blue line which is the cac. thedax is opening and so is tax. cac. what is mooney -- what is moving? manus: it is the pound that is moving. i have the bloomberg card the sterling index. this is the brexit vote. where do we go next? we are the weakest since 2004.

have a look at cable. we are trading at levels not seen since 1995. 90 on sterling and 122 is the next level for the pound. sterling rose in terms of reserve currency status trumping the yen. will that continue? our guest said no. if you are a sterling investor, the cap is good news. if you are a dollar investor, you really want to own sterling. there is no doubt about it, there is more of a risk on proclivity this morning. i am talking about deutsche bank. we are opening -- we are waiting for the opening flash. energy is up. this is what is moving all of

the break evens around the world. the break evens in the u.s. with the fed -- that is moving higher. could that be part of the justification for loretta mester? european markets are opening. we are keeping an eye on abb. they are under duress from one of their active investors. they are keeping the power grid. a $3 billion buyback is what they are talking about. could there be 3000 or about -- 4000 jobs to go? ericsson's a look at stock price. there you go. 1.18. have a look at reiner. they carry 10.8 million passengers. a year ago they carried 9.5. take a look at the reiner stock price.

recent guidance, they expect on 10% or 12% inl of 2017. six months sterling takes another beating. stocks have a little bit of a reprieve in the opening flashes this morning. caroline: tune in if you want to catch manus cranny talking to us throughout the market moves. i am talking about deutsche bank which is down about 0.5% after we saw it all slightly on the adr in american trading. can a deal be done with the department of justice? what does that mean? has deutsche bank got further to drop? is already a cheap share

trading on less than three times a book value. the -- many equity investors have shown that they think the prospects for the bank look uncertain and murky. what i would say given the initial concerns focused around this department of justice find is we still have to think about the four or five other european banks that are vulnerable. it shows you how long the recovery from the global economic crisis will take. much is som -- there is so outstanding litigation. they also need to make sure they have a business model that investors will find attractive. --europe, they'll in roles the bail in rules have changed. at the moment, all three of deutsche bank's businesses or the it is the bank

investment bank, they are failing to do that. i would say as an investor that you can find other investments that are covering their cost and delivering returns in this uncertain world. say that we watch with interest what deutsche bank has to say and for our clients we are very careful about the counterparty risks. this is symptomatic of the difficulties we have seen in your zone banking in general and we still have those four italian banks that are still unresolved and in a far worse position than deutsche bank. guy: we need to note this for everyone. the 40 -- the ftse 100 has just broken through 7000. which is great but i want to carry this out a little bit. andme take you to my wei i have a currency adjusted ftse. we are north of 7000 that if you

look at the last column in euros we are down by 5.23% which is dax. than the cac and the great trade if a you are a u.k. investor but for everyone else, not so much. >> what we are even seeing bigin the ftse is the dollar owners like glasgow and you have the domestics which are threatened by the brexit and the fear of rising inflection -- rising inflation and a throwing the -- the economy in 2017. guy: does the fact that it is not working for foreign investors -- there is an argument that foreign investors will not be piling in. how does that change your

calculations? >> if we get the stocks right, the currencies will not be hurt. her many bond investors you have to look at their return adjusted for the currency. as we know from brazil last year, you could earn a 50% return -- 15% return. caroline: give us a sense of the asset classes. up -- key team i picked the key theme i picked up is that investors are worried about investor -- currency markets. you have to be able to navigate some of the political and policy risk if you are discussing india. we think for european investors stuck in a negative interest rate environment for the

foreseeable future, we think there is a lot of -- there are a lot of interesting european companies. we are quite constructive on oil from here to we think the oil majors look a bit of a no-brainer for people looking to hedge political risk and getting a good return while they wait. -- itere is a new chart is a low be terror. the bond proxy trade is incredibly expensive. 50 or 60?not 50 ofng back to the nifty the 1950's and 1960's that suggest a lot of these bond proxies could get more expensive. timeframe lasts another

20 years, then this stuff is where you are going to get some return. even now, nestle has a 3% dividend yield. it will soon be the only travel related -- triple rated bond in the world. guy: stay with us. we will talk about global growth and threats. the biggestk to risks to the global economy and the political twist. we will also talk about the new era in india. economists are split on what will happen. we are live in mumbai. and's hurling falls to 830 year low due to the brexit backlash. is a hard brexit looking inevitable. this is bloomberg. ♪

caroline: or breaking news on job cuts this time coming from ericsson. 3000 jobs to go. this is all about telecom equipment. a say they will be cutting jobs across the board including production and sales as well as administration. it had been well flagged. it is 3000 is the number. job cuts across the board.

painson also feeling the as they see competition slowing from china and exertion on the prices. guy: let us come back to what is happening in the u.k. we are seeing u.k. assets moving around quite a bit this morning. the pound has been pummeled back to 1985 lows. you can see the moves today. that is where we are trading, 127 .70. the ftse 100 has cleared back through the 7000 mark. we are up 0.7%. take a look at your currency adjusted. happening with the bonds as well. that is the yields. let us get to up to speed. here is juliette saly. us central bank has

kept the catch rate unchanged at a record low 1.5% as an unexpectedly strong rebound boosted an economy already growing above the average pace. the british government will not prioritize protecting financial servicesyes -- the companies in its brexit negotiation. they say the prime minister's resisted london's demand for an interim agreement as the u.k. leaves the zone. samsung biologics has announced an ipo it hopes will raise $2 billion as it seeks to ramp up its growing presence in the market. it plans to sell a 11 million new shares.

gauge investorl demand with an ipo price to be announced the following day. donald trump claims he brilliantly used his tax code. it comes after a new york times a nearlyd he recorded $1 billion loss. i figure it so large that he may have not been required legally to pay taxes for two decades. hillary clinton said -- what kind of genius loses a billion dollars in a single year? businessman and real estate developer, i have legally used the tax laws to my benefit and to the benefit of my company, my investors, and my employees. honestly, i have brilliantly used those laws. global news 24 hours a

day powered by our 2600 journalists and analysts in more than 120 countries. i am juliette saly and this is bloomberg. guy: it is italy's turn to worry the bond markets. mostountry now pays the compared to spain. polls, the last one was too close to call. neil duane joins us. >> i think it will be a cause for concern. the interesting dynamic for me is one that the prime minister has made this a referendum on his management of the country. as i understand the rules, if this referendum is not passed and the reform will not happen and even if he had lost his credibility, we do not immediately get to a new starnment under the five party that could radically change the direction of italian politics.

we would get more of the status quote which would worry me less. if we got the referendum through and that there is a change in the government then a new government could change inks dramatically. caroline: there is political risk and bank risk. is it systemic like deutsche bank? >> i think that the fact that unicredit has been clear that they want to sell some disposals and have a right to share. does the balance sheet get cleared up on the back of that? or eight years after the crisis, it is a tragedy that for many banks their management has not come clean cleared -- has not come clean. back at the success in is u.s. at the top program

-- that is why the u.s. bank industry is in much greater health than the european system. briefly take you back to the spain and italy conversation. spain does not have a government and we are worried about italy having a change of administration and yet spain gets to borrow at a better rate. there is the spanish versus an italian. spain does not have a government. it could be a new business model. >> holland did not have a new government for some time. the fundamentals are different. spain is growing strongly. the banks are recognizing their losses and merging inside them to try to get stronger. spain has changed its labor laws so you are seeing investment into their manufacturing

sectors. spain could always do more but it has taken some medicine. italy has not taken any medicine at all yet. guy: thank you, neil duane. up next, what is the most significant risk to global growth in 2016? fitch'soined by chief economist brian colton. this is bloomberg. ♪

guy: welcome back. what is on the move? u.k. assets. it is all really about the pound. it is back down to the 1985 level. 127.67. asia was recently quiet but then the volume kicked in in london and we saw another like lower. nexteems to be the markets target. in a sterling terms, the ftse 100 is higher. we have cleared 7000. you saw some headlines on how amazing this is. weio your terminal, currency adjusted in euro terms. down 5%. let us talk about a related subject. the rise in populist politics poses a significant threat to

global economics. we are now joined exclusively by brian coulton. he is the chief economist at fitch. are we headed towards a protectionist world driving global growth lower? certainly see that as a risk. a rise in populism. if you look at the details, the increase in protectionist measures have been creeping up. china is becoming more self-sufficient. but there is a danger that a goes into reverse. if some of the policies come to pass. caroline: what sort of dent to economic growth could donald trump as president give? >> i think the issue is uncertainty. inn we look at weakness investment since the crisis, corporate finances have improved quite a bit. areorate balance sheet

generally looking ok in most developed countries. what has been a surprising is that there has not been a read across to profits. we think what are the reasons for that is uncertainty. wewe get a scenario where are seriously looking at the u.s. membership of nafta, the terrorists on mexico and china -- the impact of that on business uncertainty will have a negative influence on investment in the u.s. and it is already weak. we think that could be a big problem. guy: do central banks think about this? >> they are in defensive mode. prevent then do is shocks. having a further look at -- amplification of the shocks in terms of credit conditions. we were worried before august that we might see a post-brexit shock.

bank easing can offset the second round but cannot do much about uncertainty. caroline: what you illustrate so well in your report is the sluggishness in global growth. we have a great chart that shows how much deterioration there has been in terms of the trajectory. >> i think that is where the policy debate is going and we are already seeing it in the numbers. this idea that central bank easing is getting so complicated now. all of these special measures to try to protect bank profits. the fact that negative interest rates are kind of weird needs the impact of these easing announcements from central banks is ambiguous. people see negative interest rates as a problem. that is not what central banks want to hear.

they are supposed to tell you to go out and spend money and everything is great. that is why we are moving towards fiscal --. you expect it to be enough but not sufficient? >> i think it will just be enough. there is not an appetite where there is a major crisis of a really deep recession i have the best -- ahead of us and we had to avoid it. scenario.ddle through does the emerging markets outperform level? >> the last two years, the to globalwnside risk growth had come from the emerging markets. what we are seeing now is a slightly better picture there with stabilization in russia, in

q3 we will get something close to zero are positive growth by the end of the year. also in brazil, we have new leadership. oil prices as well. brian.anks e.m. is next.

caroline: welcome back to on the move. i am live here in frankfurt. the dax was closed yesterday for the unity day celebrations. it is trading up at about 1%. little more risk appetite in the market today that big moves in the british pound. guy: the pound is certainly one of the biggest stories out there. i want to show you some things before i get to the broader market. this is the ftse 100. and thishe cable rate is a ftse 100. last time we were up at these levels, this is where those two

were very you can see where the pound was up and the ftse was higher. this time around, look at that. and thed is coming down ftse 100 is going up. to generate this line, you had to happen what was going on down here. this is a great chart to show of fact.x the ftse 100 is launching itself north of 7000. and here is the stoxx 600. rolls-royce is trading higher. load of u.k. stocks in the mix at the top and. on the downside, lufthansa and deutsche bank. let us turn our attention outside of europe to the emerging markets. -- india andndia stocks advance and ahead of that announcement. let us find out what is happening.

let us go to the bloomberg executive producer from mumbai. good morning. what are economists saying will happen? down the middle. more than half of the economist believe there could be a cut in interest-rate by 25 basis points while the other half think there could be no change. in august. rates one group of economists believe this is a good change to cut rates. on the other hand, the other thep believes that perhaps r.b.i. should be waiting for more data points. the governor's first policy decision. markets are keenly watching

what the governor is going to be saying. what will his monetary policy stance be and how aggressive will he be on bond biting? -- bond buying? caroline: how does collective decision-making change things potentially in india? completely new ballgame. we have not seen this kind of environment before. the decision has always been done by the governor. now there is a committee. there are six guys on the panel. three from the bank of india and three are academics. if there is a tie, the governor gets the final vote. the minutes will be available to the public two weeks from now. known would be the

inflation pressures. india isnment of inclined towards low rates. we will have to see how the governor manages these various pressures and how he anchors expectations. and the tone of monetary policy today will perhaps set the ball rolling. guy: always a pleasure. we are looking forward toward your coverage. let us stay with the emerging market and on india. we are joined by the senior asia and -- analyst. >> we're pretty certain at the moment that there will be a hold but there is a lot of speculation because of the falling inflation last month and that the central bank would take the opportunity to cut rates. we are not so sure.

there is no direct evidence that is in need is is -- of a boost. also, the fact that although inflation rate dropped last month it is set to rise again soon. and there is the impact of a lot kickingnment spending in in the form of rapid wage growth for civil service. in terms of probability, is 6.5% where we think they will cut? >> we are pretty sure at the moment that this is going to be a prolonged hold by the central bank. tolation, is still going rise quite sharply in the coming months. and the inflation target for next month is likely to come down again to 4% making it even

more difficult for the central bank to meet that target. what has happened to asset prices in india? theave a chart that shows indian equity market rally getting nicely. gold was a big story but it is not doing anything like this impressively. change and isa there a ripple effect? >> the key reason why the stock market has been doing ok is that there is evidence that the indian government is getting its act together on reform. use all this landmark which is key to india's medium-term growth story. i think markets are being who we by the realization

that the government is making progress on reform. caroline: every now and again we see turbulent being injected with political turmoil. the security situation in india has improved quite a bit. relations with pakistan will never be great but they are better than they have been. we don't see the political risk in india the huge at the moment especially compared to other emerging markets for example philippines. guy: stay with us. we need to talk about the impact the fed will have. next, one member of the fmo time -- thinks it is time to raise rates.

we will hear from loretta mester. this is bloomberg. ♪

guy: 8:40 a.m. in london. welcome back. a big morning for u.k. assets. let us work you through what we are seeing. we have a pound that has weakened quite a bit and a ftse 100 that has gone up quite a bit and i assure you they are absolutely correlated. the blue line is a ftse 100. stirling is having a great run

post-brexit. take a look at this in u.s. dollars. not quite so pretty. it depends on where you are investing from as to whether or not you are having a good morning. let us get a bloomberg this is flash. pimco says too many fund managers are getting their hedges wrong. the firm says many managers are choosing uniform currency protection while ignoring the opportunities and benefits from some exchange rate correlate in riskier assets. pimco is using a currency by currency approach. abb says it will keep its power great division -- it's power grid division. capital has been calling for the swiss firm to remove that business. it also plans to purchase back $3 million in shares over the next two years.

are trading higher. ericsson plans to shed 3000 jobs as heart of an ongoing cost to program. in cuts will be carried out production, rmb, sales and administration. the swedish firm says it's in union consultation is ongoing. high onrose to a speculation that there could be a trait -- it could be a trait over target. rumors have linked netflix to disney. netflix declined to comment. that is your bloomberg business flash. caroline: juliet, thank you. president loretta mester says the u.s. economy is ripe for a rate hike. she says the case is strong even despite the parks -- the proximity to the u.s. election. i said in september, i

thought the case was compelling to take another step on the gradual path. come in as we anticipate consistent with my forecast over the median run, i would expect that the case would remain compelling. we will look at all of the data that come in between now and november and between november and december as we always do. you are correct, if the data comes in consistent with what we have been seeing, i would think it would still remain compelling case. >> and you would vote for a rate hike? >> the case would be compelling. caroline: what is the worldwide affect especially on the emerging market? of which sense economies are most exposed to a rate hike in the u.s.? >> the point you need to get across is whether the hike will

be anticipate -- anticipated. rates -- lastses december, they took it in their stride. what if there is an unanticipated movement, it is usually countries with big deficits that will be head to the hardest. at the moment that would include south africa and turkey as well as colombia. guy: what are flows looking like into the e.m.? we would have thought we would be looking at yen in a bigger e.m. in ae -- at bigger way. do you -- how do you see that changing? >> if you take china out of the then inflows into

emerging markets have been positive. that makes sense from a valuations perspective. emerging are still quite attractive. is the risk they have surge in debt. not just in china but countries like brazil, malaysia, and thailand. that is the big concern for emerging markets and how that story will play out in the next few years. bloomberg is speaking to gordon from south africa. give us a sense of what you want to hear from the finance minister. is it about rate issues, his own political stability? >> south africa has a lot of things going wrong at the moment including its dependence on commodities so it is being hit hard by the collapsing commodity prices. there is also the big issue of structural reform. the unemployment rate especially

for the youth is shockingly high. none of that will change without meaningful reform. the question is can that reform happen within the current political setup up. we have our doubts. the anc has been in power for quite a long time. thank you for taking the time to come speak with us. joining us from capital economics. we continue our discussion with gordan. let us stay in the e.m. saudi arabia is facing a bear worst with when of the situations there. youssef: this has been nothing short of remarkable the route that saudi stocks are experiencing.

you lined it out. since a financial crisis. take a look at this chart to get a sense of the scale of pressure this market has seen. since april it has lost 21%. since the announcement of the austerity measures. it has been the worst performer globally. ten-day volatility is the highest in the world. what is driving this? the announcement that they would cut back on bonuses and of allowances. government spending is a key driver of the saudi economy on the back of oil revenues in the past. the cutback in spending will affect consumer confidence and spending as well as the spending on large scale projects. what this has done is create a vortex of negative sentiment. a lot of the surrounding markets including abu dhabi and wait -- many of these have exposure to isdi markets and it

affecting how their stocks are performing. we'll also have the ongoing political spat in terms of what is happening in the u.s. congress, the rights of u.s. victims to sue saudi arabia. what implications does that have on the saudi-u.s. relationship? and there continues to be uncertainty regarding the opec deal. and that be sustainable will it make a difference in terms of saudi oil revenues? all happening while the country is trying to cover a budget deficit. tidying downs stocks for the moment. to theough it is trading upside, 0.8%, we will have to see if that reprieve is temporary. guy: thank you. bloomberg markets middle east anchor joining us with what is

happening in the saudi market. breaking the brexit. the pound hits the lowest level since 1985. is there more downside to come? that is up next. this is bloomberg. ♪

caroline: 15 minutes -- 50 minutes into your trading day. 2%tsche bank is up about this morning, up about 10% from the last two trading days.

looks with so much optimism, that maybe a deal to be struck with the department of justice this week while executives head to washington for the imf meeting. that tower behind you is standing taller this morning but nevertheless, it will be interesting to see what happens toward the end of the week. there is a lot of anticipation at the beginning of the week. if we don't get a deal, it will be an interesting backend to the session this week. let us talk what we have ahead. we have u.k. construction data. it is what matters the most for the bank of england. jeffrey lacher will speak in west virginia. in the evening, it will be michael pence against tim kaine

on the national debate stage. a 31ound has fallen to euros low as investors brace for a hard brexit. we see trade this morning at around the 127 level. how much lower could we go? us on set.es joins a bit of a pummeling. where is the market positioning? richard: it follows a palm link yesterday as well -- it follows a pummeling yesterday as well. i had a mullet in 1985. it will be a bumpy ride. investors are looking at this scenario and they are spooked. we have had some decent data recently. yesterday's manufacturing pmi was better than expected. investors are looking past that

at the brexit and as it becomes more of a reality. inoline: we have to factor on the back of the dollar play as well. the dollar is up for six straight days. what about the euro-pound trade? richard: not with state -- notwithstanding the dollar threat, euro sterling has pushed higher. it has been quite relentless. we don't have nearly the size years but wea 31 are seeing multiyear lows for the pound. that will be the important cross to watch in the next few months. guy: how much is the rate differential story at play? >> i think it is crowded positioning unwinding and long dollar positioning -- i big your

pardon, short dollar positioning. realistically, there has not been a lot of change in expectations for what the rate -- for what the fed will do. we have mr. dudley talking about asymmetric risks. there is still some caution there. the fact that the pound is week against both the pound -- against the dollar and the euro is interesting to note. talk about dollar liquidity. i know you want to be talking about the euro basis. but we are seeing signs of stress. ebbing having -- is that as deutsche bank comes out of the spotlight? >> we're still wider at levels than last year but we have pulled back from the worst levels on friday.

there is still some room to run in that story. we have to watch that metric closely that it is not as that is friday. guy: payroll data on friday. let us say we get a decent number, does it go significantly higher from here? >> i think it edges higher. i do not think we will get a massive jump but we will edge towards 70%. that is probably where the fed wants it to go on the eve of the meeting. guy: richard jones joining us from bloomberg first word. we are 50 points away from the ftse all-time high. it is being driven by what is happening with the sterling. don't miss our conversation with the south african finance minister, the embattled minister. coming up aton is 10:30 a.m. u.k. time. so much is happening in that

country. but up next, is the pulse with francine lacqua. this is bloomberg. ♪

minister the uk prime plans no favor from the city of london over brexit. the pound falls to its weakest 1985.since the cleveland fed president says the economy is right for a rate hike despite its proximity to the u.s. election. we will bring you our exclusive interview. deutsche bank futures it is trading in frankfurt after a long holiday weekend. we'll ask michael fuchs about the government's position on the banks. ♪