live from new york, here is the tone of the markets this tuesday. futures positive. equities pushing higher. much higher in london, up over 100 points for the first time in 16 months. -- story in the fx market the cable night -- cable rate drops to a three decade low. 1.2763. at alix: we will get the first and only vice presidential debate tonight, in virginia. tim kaine is up against donald trump's choice for the number to two spot, mike pence. the federal reserve bank president of cleveland says the economy is right for an interest rate increase and repeated that the november meeting should be viewed as live for policy decisions, despite its proximity

to the presidential election. the pound is falling through a three decade low against the dollar, mounting investor concerns that the uk is headed for a so-called hard brexit. this follows theresa may's weekend announcement that britain would trigger its exit from the european union in the first quarter of 2017. david: our top story is the slide in the pound and the path toward a hard brexit. joining us from london, guy , and inand jon ferro france we have caroline hyde. what is going on with the pound? bring us up to speed on the markets. is this all because of theresa may? uy: basically, we are a lot warmer over here now in the united kingdom. that is probably the message around the world. the town has been bubbled -- tumbling. we are back to levels we last saw in 1985. we were pretty poor them. it is not summoned to write home about.

financial markets believe we are going to be seeing a harder exit than had been previously priced in. the market has been pushing down toward a 125 level. you see the data. the market is very short sterling. it is happy to see it going down. but it seems to be the politics that have moved it. there may be an element of the fact that the chancellor yesterday indicated he would not be pushing as hard on the fiscal policy story as we maybe thought. thetary policy might push pound lower as well. theresa may said uk financial services companies will not get special favors during brexit. the city of london versus the rest of the uk. talk us about the dynamic in the market. >> this is a very different government we are seeing. what theresa may's closest advisers say is the city felt like it had a cozy relationship with the previous conservative government, with david cameron and his circle.

they really need to rethink that. what theresa may is tapping into a little bit is the populist sentiment of western electorates. people have had enough with bankers. it is good politics, certainly, to be hitting bankers over the head. you are seem to be very tough. the big question is this is a big gamble to take. she and her people seem to be gambling that no matter what brexit looks like, the city and the big banks will stay in london. it may be true, but it is a risk. jonathan: theresa may setting the stage for the united kingdom . how is the eu reacting to that? the president of the european council said this is against its interests. what are we hearing from europe? caroline: they can see the hard brexit ball coming their way, and they are willing to throw it right back. you heard from the deputy chairman of the cdu, angela in germany,ty

saying, you want hard brexit, you have hard brexit. no passporting rights for your banks. you also heard from the dutch prime minister, saying they hear from theresa may that this is a harsh line she is spinning. i'm not only in terms of new passporting. they are also saying you cannot have pre-negotiation. it is all about once you trigger that article 50. then you can negotiate. piecemealual, discussions before that march 27 deadline you speak of. we heard from lithuania, denmark, poland, sweden, the eu, all saying you cannot speak to us individually, because they are worried you will see cracks start to move within the eu 27 that are left. david: the negotiation between london and brussels, where does the power lie? yesterday, a prominent bank percent, do not be sure the ball lies on the european side.

europe may have more to lose than the uk? therene: there -- john: is that view. you can argue that once they start the clock ticking in march of next year, you have two hours to negotiate the deal. -- two years to negotiate the deal. once that happens, the power will be with the eu. they can wait. they know the uk has to do a deal. eu could go slow on the negotiations. the closer you get to the end of the two-year deal, the argument goes, the closer theresa may will, to do a deal. the argument on the other side, the brexit side, is it is not in the eu interest to negotiate a punitive deal with the uk. interests at stake. german carmakers, french industrial companies -- they want to do this. they do not want big tariffs imposed on the united kingdom. asis not quite as clear cut all the power has to lie with brussels. thethan: for investors,

brexit concern reignited. sterling weaker. straight out of the gate, the bank of england, the only institution with conviction. what does this mean for them? the consensus was another cut. are we still there? guy: probably not. we will get services data tomorrow, which is probably the most important component of the uk economy. for the moment, the economy seems to be doing very well. the reason could be a significantly cheaper pound and single market as -- access. in some ways, the british economy has the best of both worlds right now. this is what the bank is trying to do. it is trying to assess whether it should deliver more monetary policy early in the process or save it for later. at the moment, the data are coming through fairly well. that has surprised many people, including the government of the bank of england. david: thank you so much. let's get an update on headlines outside of the business world. we turn to emma chandra with first world news. taxes theld trump

focus. hillary clinton ripped into him over a report he may have paid no federal taxes for years. she said he represents the same rate system he claims he is trying to change. trump boasted about the way he is the tax code. businessman and real estate developer, i have used the tax laws to my benefit and to the benefit of my company, my investors, and my employees. brilliantly --e i have brilliantly used those laws. trump also said people who make the mistake of underestimating him are in for the biggest surprise. no one is expecting fireworks in this debate. the vice presidential nominees, tim kaine and mike pence, square off tonight. the debate is being held at the longwood university in virginia.

kaine and hence are considered two of america's most mild-mannered political figures. you can watch the debate live on bloomberg tv. hurricane matthew may be catastrophic for haiti. the storm skirted jamaica but has started to hit southwestern haiti with life-threatening wind and torrential rain. haiti is the poorest nation in the western hemisphere and is still recovering from its deadly earthquake that hit in 2010. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this does bloomberg. relatively flat in the u.s., but in the uk you have a monster rally on the ftse, sitting around record highs. uk bank stocks also moving significantly higher. hsbc up 2% as well as royal bank of scotland. part of this is because they get a lot of revenue from outside the uk. the weaker pound actually helping uk bank stocks, as by

the fact that prime minister says banks will get no special they undergo brexit. moving to health care providers in the u.s. -- cvs pharmacies will be removed from the tri-care network, which services u.s. military and families. getting a downgrade this morning by credit suisse, saying other health care providers like walgreens will lose business now that cbs is out of that tri-care system. pandora getting added to violence over at goldman sachs. significant upside to subscriptions for premium radio plans. pandora up over 4% in the premarket. but it is brexit in the pound really moving the markets. jonathan: the ftse 100 just points away from an all-time high, with the cable rate down to a three decade low. the dollar -- an exclusive interview.

cleveland past president said the case is probably strong for a november hike. we are joined by the fidelity investments director of global macro. ♪

jonathan: from new york city, i'm jonathan ferro. attention on financial markets in the city of london, with the cable rate at 1.2764. you can take it all the way back to 1985. we dropped through the post-brexit low. we have not been here since three decades ago. equity the story in the markets. futures in the united states marginally positive. the ftse much higher, up 121 points, and almost at an all-time high as we blast through 7100 for the first time

in 16 months. alix: the other big story is, forget the summer. how about a november rate hike? member who dissented last month said the november hike should not be off the table. investors spoke to kathleen hays in an exclusive interview. kathleen: i thought the case was compelling to take another step on the path. if the day to come in consistent with my forecasts over the medium run, i would expect the case would remain compelling. of course, we are going to look at all the data that comes in between now and november. alix: we are joined by jurrien timmer, fidelity investments director on global macro. is november on the table? the fed mayhink have missed an opportunity in september to wrestle away control from the market. it is like the fed has a dance partner with the market, and they both want to lead. and the fed wants to lead, but

the market is leading because the fed is concerned about financial conditions, so they to the cede control markets. that is the dance we have been in. alix: today, we have a dollar index over the 200 day moving average. dollar-yen continuing to rise. we have five-year breaking inflation expectations starting to move higher. the underlying data seems to point to a stronger economic condition. jurrien: and the december probability is about 60% for a hike, the highest it has been in a while. a year ago, in december, when the fed did go, it was about 70%. the fed, in all likelihood, is going to go. whether it is november or december remains to be seen. going into the september meeting, the burden of proof is on the data to be strong enough for them to go. it was not, because we had the payrolls and the isn. for december, the burden of proof is for the data to be weak enough for them not to go.

4i-16,nt to lock one in it is still later than they thought at the beginning of the year. i think it kind of set the market up for that inevitability. jonathan: the ftse 100 going through a record close on a closing basis. we bless through a record high. the intraday high is another level to account for. the federal reserve and the they seemight now -- to be running the show, saying there is an asymmetric risk. if you want to cut off upside risk, we cannot respond. the downside risk if they do becomes real. is that going to be the argument for the next six months? i think in september, the reason they did not go -- i think they could have gone if they wanted to -- was this asymmetric risk management approach, we like you said it is much easier to fight inflation

than deflation. i do not think the fed wants to go through the negative interest rate conversation. they are in "do no harm" mode and we do not have enough growth. at 1.4 is growing percent. earnings growth in the s&p is negative. it is very hard for interest rates to move higher in the absence of both. we have a disproportionate impact on market valuations. ,f rates go up without growth the market becomes overvalued. the market goes down. you get back into financial conditions, the unspoken third mandate the fed is stuck with your. david: does that mean the fed is caught in a squeeze? a president from cleveland sees potential inflation, and we have to keep ahead of that. on the other hand, gdp keeps getting revised downwards in terms of growth. we do not see underlying growth. isn't that a squeeze? if we someday -- i am not saying we will. if we get into a stagflation environment -- if you look at

brexit and the localization movement, we might go there. then, the fed will be caught between a rock and a hard place, cause its dual mandate is low inflation and price stability. if they get higher inflation without the corresponding growth, they have to choose. they are sort of in that mode now. they look at phillips curve models and say, we have to normalize policy. the market does not seem ready for that happen. alix: there is the big risk that if you see a pickup in inflation, what does that do to asset classes? the u.s. 10 year yield and world equities are moving together for the first time since june. the risk of course is that if you do get inflation, you do get growth, the market is not expecting it, you could get a washout of both equities and bonds, a temper tantrum. is that the beginning of things to come? jonathan: with traders long everything and volatility low,

the worry is that people have bought up leverage to a level that it is going to bite in a big way. do you subscribe to that argument? -- i do nothink think the market is overly leverage. theour point, alix, interplay of growth and rates is important. i want to discount -- i am on a discount cash flow model. if you say the 10 year goes up 100 basis points in yield without earnings growth, the market will be 20% overvalued. but if the 10 year goes up 100 basis points at 6% earnings growth, the market would still be 10% undervalued. to your point about growth getting hotter and inflation starting to run with break evens going up, as long as there is growth to correspond to rising inflation, i think we will be fine. the fed normally does not have any problem raising rates, because usually when they are, the economy is overheating. and nobody really cares about rates going up when there is enough growth to offset it.

there is the absence of growth and the pressure to push rates up that is giving the market these taper tantrums we have been seeing. david: is there too much complacency? volatility has been low, equities, debt, foreign exchange. if there were a turn up or down, what is the exposure? jurrien: if the term is up, if we finally get escape velocity, which is a term we do not really sure about anymore [laughter] -- [laughter] like i said, i think it will be fine as long as the growth is there. we look at earnings growth, to q3, there are green shoots there. it is still negative, but less than it was last quarter, which is less than the previous quarter. if we get a return to nominal growth, i think the fed will have much more of a green light to go. i think the markets will be fine if that happens. jurrien timmer, fidelity investments director of global macro. thank's for being with us.

the one andt is only vice presidential debate, down in farmville, virginia. what should we expect, and how much will it matter? that is next. ♪

david: this is "bloomberg ." you are looking at washington, d.c. the vice presidential debate will be in virginia, but they are going to be trying to move to washington, d.c. in january. mike pence and tim kaine debate in virginia. they are facing very different challenges. megan murphy joins us to tell us what we should expect. we have to say this is against the backdrop of a fairly extraordinary week for mr. trump, leading up to the tax

debacle, or what he thinks is a genius play. how will this affect things? megan: it will be interesting to see how governor pence handles this. we expect this to be a focus tonight. at least on the questions that come through from the moderator. tim kaine is going to try to get them as hard as they can. world, this is an xml of what a brilliant strategist he is, being able to reduce his federal income tax. loss in -- andn whether voters care about this issue has been hard to pick up in the polling. this will be one of the first times we will have to check that out. david: who has the more difficult task, mike pence or tim kaine? pence will be faced with the challenge of putting donald trump into -- he has always been the influence that moderates -- that influences the campaign. a speaker who comes

across as folksy. he has a charm. he is across as a christian, a conservative. gets family values across as well as a conservative economic agenda that was a hallmark of his time in indiana and congress. the challenge is putting the yin to donald trump's less-focused message. kaine, can he breakthrough? he does not want to make a mistake that damages the campaign. they are looking for him to not blow it tonight. david: how close is the race? bloomberg politics had a poll showing north carolina, a critical swing state, is not and that. -- is neck and neck. win statet is a must for donald trump. there are few paths to the white house for him without north carolina. he has kept his margin in ohio, another critical swing state,

where it looks like he is still up 3-5 points. since the national debate, where donald trump was considered to have a dismal performance, national polls have widened. that is a big difference between the neck and the national polling we saw going into that fracas last weekend, to what we see today. the signs for his campaign are that he really needs to close that gap. been able to close that margin before. we do not have much time left until november. card, johnson, could he make a difference in a close race? megan: we have a fantastic piece this morning that looks at that. what are the swing states that could make a difference? we are looking at colorado, new jersey, and even new mexico, where voters not attached to either candidate may go for a third-party candidate. david: megan murphy is our washington bureau chief.

she knows everything about politics. senator tim kaine and indiana governor mike pence will face off in the first and only vice presidential debate. special coverage begins at 8:30 p.m. eastern. jonathan: looking forward to that. lower for longer could mean a hold no longer, adding to hsbc steven major. also coming up, the real state of financials. we catch up with the ever core executive chairman. in new york, the attention on london with the cable rate. and ftse 100 breaking through a record high close. is where we trade. futures positive in the united states.

it is 7:30 a.m. on wall street and here's what you need to know -- the ftse 100 is at a record closing high and the pound is at a three decade low

against the dollar. the prime minister theresa may of written said it would trigger it's your -- its exit from the european union in the first quarter of 2017. the federal reserve bank of clean when -- of cleveland president said the feds november is live for a policy decision. we will get the first and only vice presidential debate tonight in virginia -- 10 kane will be up against donald trump's choice , mike pence. that's what you need to know. the 16 month high on forftse becomes a record the first time in 16 months. this is the fx market grinding

decade lowto a three as we trade at one dollar 27 $.50. at $1.50. -- at $1.27. this takes it to our morning must-read. this note comes from hsbc had of global. tom keene of surveillance caught up with steve major on this five-year forecast phil's --. tom: i'm so dazzled that i let i glasses on radio today. the essence of this is he agrees with reinhardt and rogue guard -- and rogue off. he says deleveraging is not over

and there is a lot to go. jonathan: is this a nouriel roubini call coming? tom: it's not doom. jonathan: but it's grim. tom: it goes back to the populism in europe and politics in america. he says financial repression continues. there is no way a large body of yieldy canada to a 1.35% -- got $1.35 a year and on treasuries but the five your call is the yield will not be higher than they are right now. whose problem is this? is it the savers or the policymakers? tom: i think of the vote and now roger altman will talk about this. i would suggest that this outlier call is pushed back on.

we will get rate stability and we will get a better feel. i would also say that jpmorgan went to with third quarter 3% gdp statistics so it shows how -- how alonejors steve majors is. about a record high in the ftse, if you are dollar based in the ftse, you are down 23% from 18 months ago. it's americo you can do this. -- it's a miracle you can do this. these linkages are important right now against the shock of the hsbc research. it's the outlier call and the market seems to gravitate towards it. david: and away from the fed. the financial markets

have been able to price the potential for growth and inflation in a more in -- efficient way them the -- than the fed can forecast it. tom: i would suggest that the markets are always more efficient than people sitting around the table. janet yellen and the central bankers, that's the question. the linkages are front and center. jonathan: from tom keene, thank you. 7-10 eastern time, watch bloomberg surveillance week days. thank you very much. i got through that without mentioning the boston red sox. david: almost. roger altman is here from ever core to talk about this. welcome back to the program.

let's talk about this call from hsbc. what is your initial reaction? >> my reaction is it possible. every time we have seen -- we have expected rates to begin to move up, they have not and every time we thought rates could not get lower, often may have. bet would not be my debt -- and that's the mainstream view but it's possible. because iot be my bet don't personally think rates will go lower than they are now. i think over five years, you will see some easing back from the central banks. it is more possible today that was six months ago or a year ago

or so. david: it would say something sobering about global long-term economic growth. dateu look at the latest on world trade and it's discouraging. it has been slowing. i saw a forecast a couple of days ago, less than 3% year-over-year growth. that is so far below what we saw in recent years that it ties together with a lower, longer scenario. alix: you worry about where the systemic risk and the imf says it points to deutsche bank are you this chart looks at the potential contagion. this is the credit default swap index. it looks at companies equally rated and nowhere near where we were back in june of this year but we have seen a steepening of the credit default swap which would imply there is some contagion risk from deutsche bank. do you see that? >> not particularly.

spreads are up but from a low base. sector -- let's focus on the u.s. headquartered banks -- it's in such a profoundly different place than it was eight years ago at the time of the crisis. capital buffers, liquidity buffers, supervision and regulation, streamlined business models -- it's just a much sounder and sabr system. certain european banks are than most of their international counterparts and we see the pressures on deutsche bank but keep in mind, it is small. share of deutsche bank's $18 billion. one of the things going on is deutsche bank is under pressure for a number of reasons but one is it is so small. is it not the size of

the market cap but what's on the balance sheet? don't seem to understand what is there? but if therue justice department sought to levy a 13 -- a $13 billion fine against the big four in the u.s., it would have been done differently. it's not much different than the the market share of deutsche bank. they cannot take $14 billion and that would not be the reaction against one of the big cap u.s. bank. david: you have the big u.s. banks on one hand and the european banks. bank specificsche situation or doesn't spread more broadly within europe to the financial system? specific tot's deutsche bank.

they are the ones facing this fine which triggered these concerns. all, when you study the institutions, they are quite different. ubs is primarily a wealth management business rather than a banking business and barclays it had -- has a strong new direction. i think there a more differences among them than similarities and i don't expect this to result in european banking contagion. where does the liquidity come from? i don't know the answer to that. there is speculation about an equity raise which deutsche bank is denying. theink it depends on what final likely settlement amount is. as we get closer, it will

determine what capital they need to raise. this did not just start with the $14 billion fine. deutsche bank was struggling to make money so what do they become? ubs has roots in wealth management. barclays becomes a transatlantic bank. what does deutsche bank become? how long does it take to become whatever it is? >> we have seen a big shakeout among investment banking participants. that business has become harder for traditional platforms which are lending center. they are not the only ones experiencing some of the effects of that. the ceonot want to be of deutsche bank because i think

it is a dilemma. that's one of the hardest jobs right now on the planet. it's a tough question and i don't see any obvious answers. alix: thank you for sticking with us. we will talk about politics and what to do and what the markets are telling us about the presidential rates and how they would react to a different president. this is bloomberg. ♪

herroan: coming up, david d, portfolio manager.

emma: job cuts are on the way at a swedish networking company, ericsson which plans to eliminate 3000 jobs and cut production and tom country. it is facing increasing competition from nokia and waning demand. vuitton is of louis toing a controlling stake the tune of 78 billion dollars -- $78 million. rimowa made the first aluminum suitcase. the deal between southeast airlines and its pilot may be in jeopardy because delta airlines has a pending deal that would pay its pilot more. southwest pilots union wants to renegotiate some sections of an agreement reached at the end of august. that is your bloomberg business flash. david: roger altman is still served in thes

clinton administration and is a supporter of hillary clinton and the current residential raise. are the markets pricing and the possibility of a donald trump presidency question mark >> no. at least not in my judgment. they are not doing so because of where the race stands. if you look at clear politics now and the betting odds, 75-25 probability of a clinton victory and you look at the tossup states, the only one donald trump is leading and is ohio. hillary clinton is leading in every other state in the market has been expecting a clinton victory for some time and especially now. if they were to price in the possibility of a donald trump presidency, how would they reflect that and why? >> i think there would be an expect tatian of an economic slowdown. -- i think there'd be an

expectation of an economic slowdown. be economic contraction and i am not here to disparage donald trump that interns of what the expectation would be, especially the idea of this 35% andrt duty on chinese goods a similar tax on exports into the united states from mexico -- those are steps that would deal a blow to trade and growth. if the market expected there would to win, be a separate question as to whether he would do the things he is talking about. if you thought he would do some of them, you would see an adverse market reaction. david: obviously traders the driver but should be -- should we be concerned about mrs. clinton because she has not been as harsh on china and mexico.

says let's renegotiate nafta to protect their workers. she is more protectionist. >> keep in mind the difference between trade agreements and trade itself. i don't think we have seen the end of trade liberalization agreements. had, over the medium and longer-term, global trade will continue to grow. ons not entirely dependent the agreements because the lay of the land right now is still more conducive to trade then not so. favor of a redo or scrapping of the transpacific partnership agreement and amending nafta but that does not mean that -- that trade around the world will topple. altman, stay with

us and don't forget tonight, senator tim kaine and indiana governor mike pence will face off in farmville, virginia in the only vice presidential debate and coverage begins at 8:30 p.m. eastern time in new york. jonathan: it's that time of the month where bill gross puts out his monthly outlook are you he becomeat coin may attractive to investors as a protection against a central bank low. isording to him, protectionism. the ftse 100 is on our record high on a closing basis. weaker pound, level we have not seen for three decades. from new york, this is bloomberg. ♪

jonathan: this is bloomberg. last year was a red letter year for m&a. could we break last year's record? charted m&a deals are the last 12 years. it is lower this quarter than we were at the end of 2015. we are now over $1 trillion but back in 2004, it's a different story. roger altman is still with us. this is your read and butter. when we say and a is down, what is wrong? a is down, what& does that mean? record was an all-time

and 2016 will come in strong write any objective standard but not as strong as last year. the basic conditions which translate into strong m&a with ultra present low interest rates and credit availability and high equity prices which breeds confidence in the sense that we can do it in the sense of deals. relatively good in the united states levels of business confidence, not great but not that. andadd those together historically, they have meant high volumes, high m&a volumes in those conditions are still there. is not news about m&a that is down this year but it still ticking along very nicely. jonathan: for any business that gets together with another one, it's so strategic.

talk to me about how much credit and low rates greece the wheel? how much does it matter? any cash deal is accretive. cash is negligible so anything you buy for cash and their -- and broadly speaking, anything you buy for cash is accretive. if you happen to be a strong balance sheet cash rich higher, this environment is i deal from your point of view. not every deal is cash. there was a deal yesterday with bass pro shops and cabello. you are seeing an awful lot of level ofs and the interest rates or absence of interest rates and the availability of credit is pushing that because you almost can't do it cash deal that is not accretive are you david:

cheap credit is one thing and also a search for earnings growth. should we be disturbed about that? knows we are in a form of earnings recession. i think we had five or six consecutive quarters with weaker earnings. yes, revenue lines or top lines are weak and there is a drive for synergies based growth arian most strategic combinations involve cost rid duction for synergies and that is one way you can get earnings growth and cash flow growth if your topline is weak. there is no doubt that is partially driving m&a volumes. we can bemoan that but it's the art of the practical. alix: we have seen deals in the tech space and biotech and health care. where are the deals in the next

6-9 months? >> the tech space is really active. i have never seen dealmaking intech is active as it is. our firm has been a beneficiary of that. i think that will continue. health care is weak year-over-year but it still hyperactive see you have tech, health care, energy, lots and lots of activity in -- in energy. i think those will be the three eggs sectors for the next 3-6 months. general industrial and consumer are always active but they are catchall categories. alix: great to get your perspective and thank you for joining us. coming up, the pound is tumbling to its lowest level since 1985. the global head of fx strategy

on the sterling decline next. this is bloomberg. ♪

jonathan: a warm welcome to the

second hour of "bloomberg ." on this tuesday, october four, futures are marginally positive in equities are up in europe with the ftse at a record high close. fx, a three decade low on the cable rate as the pound drops to $1.27. closing --tse 100 is at a record closing high in the pound of the three decade low against the dollar as greg's it takes hold. we will get the first of vice presidential debate tonight in virginia as tim kaine goes against mike pence. november is still alive meaning an exclusive interview with the federal reserve bank of says the president who economy is ripe for interest rate increases at the next meeting despite its proximity to the presidential election. >> i thought the case was compelling to take another step

on a gradual path. if the data comes in as anticipated, consistent with my forecast over the medium run, i would expect the case would remain compelling but we will look at all the data that comes in between now and november. world let's go around the and check in with our bloomberg team for more on analysis. how divided is the fed? is there real division? >> we had three dissents on that suggested a badly divided fed but it's more nuanced. i talked to fed officials and as economic data improves, inflation is rising. for raisingargument rates to get ahead of that area if you polled most members of the fomc, they would agree with that but whether you do that in

september or november and december is less important than the majority would save and how far or how first -- how far or how fast you go after that. bill dudley warned yesterday that with rates so low, you don't want to be too quick to raise rates because if you tip the economy into recession, the fed has less ammunition so there is caution about the timing but most people feel rates will go up and we see that reflected in the fed future trading in november. president lacher is speaking and says a preemptive rate hike is critical for stable inflation. he says the fed is doing too much on growth. yet another speak thrown into the mix. notthan: the market does listen to the fed. >> i think the markets are just ignoring this and i think they are making a big mistake. the probability for a rate hike in november is low and i think

it's woefully low. i think the fed wants to raise this year. have said they have been apolitical but they have to take into account the possibility the donald trump could win the election. if donald trump when's the election, the markets will go chaotic. go this year,o taking everything off the table like the politics or whatever, november is more compelling than december. alix: more headlines from jeffrey lacher. he says a preemptive hike will help avoid tightening too fast. the ideas to do it now and we don't have to play catch-up in the future. he says fed policy rates should be 1.5 percent by now and employment and inflation are running near or close to their goals. david: he says let's get going and president mester says november. is it to expect

the fed to hike before the election? >> probably not realistic. in many ways, november would be in ideal month for the hike. they have been telling us that they can hike at the conference meeting and telling us that they can hike despite the presidential election. in a way it would ring all of those promises to fruition. at the same time, the reality is there is too much risk of market turmoil and no press conference to explain the decision so it's unlikely it will happen. jonathan: the hawks are finessing their message and saying if you want this recovery be durableger and and sustainable, you need to make a move now. will that resonate with the dogs on the fomc? you are seeing more and more people who say this is not working and perhaps it's time to look the other way. more people in the market are saying that as well so it's gaining currency. as it isation is low

even though it's rising and the economy not going gang dusters, the feeling is we probably need to start rates moving higher but we don't have to be in a big hurry. if we are going to have market turmoil, the market is not pricing it correctly so they say why step into that. they will probably stay sidelined because they figure they can wait until december or early next year. alix: i look at the dollar index above the 200 a moving dollar and against the yen for the sixth straight day -- what are those market reactions telling you about the fed speak and when they might hike? >> the markets are starting to get on board. the fx market is liking this a little better. which pushes us out of the contraction mode and into expansion. we have had rosengren who is a

dove is more on the hawkish side but he would not call himself that. more and more fed's big leads us to believe it is coming sooner rather than later. fx markets are the preemptive market and will not wait until after the hike. they will get on board straight away and i think that's what you are seeing now. david: thanks to our bloomberg team. let's get an update of what's making headlines outside the business world. : donald trump is not disputing the report of his taxes but he seems to be embracing it. he addressed speculation that he may have avoided federal taxes for more than a decade. he told a crowd in colorado that he brilliantly used the tax laws. clinton said that donald trump represents the same rigged system he claims he will change. she said he has taken corporate excess and made a business model out of it. the two vice presidential nominees square off tonight in

their only debate and is being held at longwood university in virginia. fireworks are not expected and they are both considered two of america's most mild-mannered the lyrical figures. you can watch the vice president at 8:30 p.m. eastern time. the groupange says will publish a wide range of material over the next 10 weeks. among the topics is the u.s. election, more oil, and google. he said the election files are not meant to harm hillary clinton as his been reported. he made -- he has lived in the ecuadorian consulate in great britain where he has lived for the last four years. this is bloomberg. alix: thank you so much. the story in the market is the pound at a three decade low and the ftse is breaking through a

record close earlier today and part of that has to do with some of the banks as well as oil companies and tobacco helping push the ftse higher. i find the bank reaction interesting. you would think a hard right it would be negative but a just the ec and barclays get the revenue outside the u.k.. the weaker pound is benefiting some of the larger banks. taking a look at the movers in the u.s., look at darden restaurants, earning $.88 in the first quarter all stop --. olive garden beat estimates and announcing a new buyback program and raising its all year theings outlook area and las vegas sands got an upgrade coming from bank of america to a buy saying its new casino in macau is outperforming its rivals and they expect las vegas sands to raise estimates because of that. market, the the fx cable rate is dropping to a three decade low. we discuss brexit and what means

for financial markets. in today's session, it means a weaker pound. from new york, this is bloomberg. ♪

the cable rate in higher and there a sterling weakness. there are reignited concerns itut a hard brexit and what means first ruling and financial assets in the u.k.. let's bring in the bloomberg team. weekend of a band of

the conservative party conference, narrative started to build up with the idea heading toward a hard brexit. is that the story? >> that seems to be the case and that's what the markets are pricing in but it will be more difficult for the u.k. to we got noall stop precondition so the european union could simply run the clock down and it's becoming clear that immigration is front and center and the city of london will have to play second fiddle. has enjoyed a cozy relationship with number 10 downing street but it will not be at the front of the line when it comes to priorities in negotiating as they trickle article 50 and that seems to be the case that is priced in here. the hard brexit line seems to be pushing the pound down right now. jonathan: you look at the trade and the dynamics on sterling and

may be only bullish factor is that everyone seems to be bearish. can you talk to me about how overwhelmingly bearish the trade is question mark >> it feels like many people have this position on. the interesting thing about the price action the past two days is a almost got a carbon copy with the pound selling on till 9:30 a.m. and then stronger data and a short and shallow bounce and then a resumption of selling that happened yesterday and today. notwithstanding the crowd of positioning that many people are talking about a market, the pound really trades heavily and i think it's down to the hard brexit scenario that is spooking investors. what do the short positions tell us about the pound and the future? retrenchmentect and then a step down and a step down? >> i think it will be a bumpy ride where we see sharp retracement as that short positioning perhaps gets shaken

out of near-term. realistically, think people are betting that we have not seen the low for the pound and as a result, that positioning is getting quite heavy. alix: what winds up happening to inflation if we have not seen the lows? >> there will be an inflation feedback. that has been priced in. the curve isof pricing and the possibility of more inflation down the road that it will be interesting to see whether the bank looks through this. the growth concern is probably front and center now and it will look through inflation in the same way it has done the past area inflation may be coming but is the wrong kind of inflation that is making is poor and not richer. david: the other adjustment is

with the current accounts and might that give some early to the u.k. economy? that this ise hope the pressure gauge, the mechanism by which the u.k. economy adjusts to the fact that exit is coming. it seems as if that is the scenario we are in. we know the pound will take the pressure and it should help out u.k. assets becoming cheaper. it's going to have consequences and the consequences are that the u.k. consumer is ultimately going to be poor as a result of this on the global stage. alix: i am seeing reports of euro-pound .90 going to parity. what is the consensus view for how low the exchange rate can get? >> there is a wide variety of views and i think .90 is

eminently attainable. i think parity will betray keep because you have to look at the two component parts. the euro dollar and the cable rate and it's hard to foresee where those two will reallye unless the pound starts to fall sharply. is attainable and we have outside use of people saying we could go as high in euros sterling at parity. alix: you know the ucb will react to a parity call. thank you all very much. coming up, the risk of a hard brexit and the potential rate hike in the u.s. which are a few of the events threatening the market. for more on those events, peter borscht joins us next. this is bloomberg. ♪

jonathan: this is "bloomberg ." positivere marginally with the dow up 15 points in the s&p 500 just up a touch. 15 ande 100 is up over a through a record high on a closing basis. in the fx market, the cable rate is at a three decade low. a superlongmarket, auction is coming out of italy. alix: you have the referendum that will come up and you don't know if you will have a government anymore. this is 50 years out.

how do you search for yield? >> 50 years out seems to be different in italy. financial repression is happening because it yields down the long and will be low and the demand will be low. david: it's overwhelming. high you can buy a yielding bond and europe and its that david: has it all. david:and the markets are stillcalm. there is little volatility in the markets. that david: has it all. david:what events might turn the markets one way or another? levelund is at its lowest to the dollar in over 30 years. borish us now is peter from the quad group. you said things have not happened much since last june but sooner or later things will happen so how do you position your self? >> it's a little tricky.

given that matthew was coming up the east coast, i like the fact that the good thing about weather forecasters is they make economists look good. here we are trying to forecast things. 1980 five, i'm at the fed and the pound is at a certain level and then the largest intervention in the foreign exchange market, president reagan, of take free marketer but what's missing in the discussion about the weakness of the pound is that the ftse has gone up. if you are a domestic person in the u.k. and you are saving for retirement, you're not concerned about short run in order prices going up and this is a benefit. it's competitive devaluation so markets tend to exaggerate their moves. fact thatesting the there is no indication of invest

in -- of inflation. david: if you are a domestic person in the u.k. and investing from the outside like a u.s. citizen, you're not doing so well with the ftse. when you adjust for the exchange rate, i think the return is negative. yes, but most people who own equities are domestic holders of equities. if you are a non-u.k. person, that's what you've got, a tremendous sale on real estate prices and other real asset prices. when i was here previously, we talked about this competitive devaluation going on around the world. is theu ask where instability coming from. that's where it is. when you throw crumbs on the water, the pigeons start eating the crumbs.

that's the notion of the competitive devaluation. it's lack of international economic cooperation. we should be issuing 100 year bonds in the u.s. if italy can do 50 years. alix: you mention the lack of inflation but we have seen five-year break even start to rise. are these kind of inflation signals from wages for the cleveland fed president outlook? is that what markets are starting to mess? atyou have had a real floor par against the yen in the dollar which is critical and then we came back off of that and we are at $1.02 which is a 2% move you. prices asdeflationary

the motion that we cannot grow our way out of the debt we have had. historically, it's like saying how do you create more growth by issuing more debt? the marginal debt rate has grown but our growth rate has not. wages is in terms of not such a bad thing. we think of that as a bad thing but why are asset prices going up a good thing? i think wages going up will lead to further growth and that's a benefit. how do you position yourself in that world? you're not a weather forecaster and you don't know what will happen but how do you position yourself? >> if you're going to forecast, forecast often. i will change my forecast tomorrow from today. that's what we do. think thef this, we gold and silver is an area where you could probably take some short positions in benefit.

i think the dollar is a little run out. have happened from oversold conditions and we see that time and time again in the equity market and we like to buy the first hip and sell the second. the first one was in said timber in now it's no man's land -- september and now it's no man's land. the nasdaq is outperform the s&p 500 and the dousing evidently. -- and the dow significantly. alix: pimco is selling long-term treasuries and buying tips, that's a call you do not see? would you reverse that? inflation really picking up. that's not such a great use of money. if you look at the bond market -- it's been around a trip to know where. we don't think that's a particularly good place if you

are looking for an opportunity to trade and make money. there are far more opportunities in the commodity markets and the equity markets relative to the fixed income market. gold is dropping below $1300 an ounce as you speak. jonathan: great to have you with us. next, shares of deutsche bank are back up after closing yesterday in frankfurt, germany with investor concerns. next, we will debate what's happening in global financial markets and the financial themselves. it's a weaker pound today and the ftse close to a record high. this is bloomberg. ♪

jonathan: this is "bloomberg ." futures are marginally higher and dow futures are up 13 and the s&p futures are about half

of one point. the big move is the ftse 100 close to an all-time high. it's a three decade low on the cable rate. the yield is creeping a little bit lower. looking at u.s. futures, these are the individual movers -- says a merger with cbs makes sense. the deal is already priced in but viacom is not getting a price. walgreens, cvst is losing a tri-care deal which is the health system for u.s. military and families and it will be replaced by walgreens in stores. that contract could be worth as

much as $2.5 billion for the company. pandora is getting upgraded to a premiumon buy list with subscription increases. i continue to look at deutsche bank to determine if the deutsche bank risk is systemic or contained. this index looks at 30 financials that had weight in the index print the credit default swaps have been moving a little bit higher but we are not near the levels we saw back in june. someheless, you have seen contagion spread, some risk in those credit default swaps. how systemic is this? joins us on the phone now. how worried are you about credit

suisse getting sucked into the deutsche bank problem since they have their own settlement? issue whole settlement has gotten overblown based on a trial balloon. it's unlikely they will pay a $15 billion fine at deutsche bank. you are right, it has had an impact on share prices of financials around europe. it should not and this is an example of shooting first and asking questions later. to 2009.e comparing it the banking system in europe is significantly stronger in capital positions than they did. you have probably seen the data -- 250 billion euros has been rate in capital so it's much stronger. the deutsche bank problem should not really lead to this confident contagion given the

strength of their remaining financial institutions. to your point, deutsche bank has raised in 19 billion euros but five of that is on buybacks. the ideas they will have to go back into the market. -- they will issue equity and that will hit all the banks. >> they won't have to know back to the market based on perception. they will have to go back of their is an outsized fine or some other laws not uncovered -- not covered. it remains to be seen whether they have to are not. we are not investors in deutsche bank even before this. it remains to be seen and 8ecause of 2007-200 investors are jumpy anyway. i think it's an incorrect reaction based on fear and not

what the actual situation is on the ground. jonathan: you have a significant position on credit suisse. can you give me an update on your position? we price the business. if the market price of the stock market is significantly below that what we believe is the fundamental but -- valuation, we buy more. if the market price approaches our view, we trim a little bit. our view of intrinsic value of cs is not change that much in the last few months. it changes a little here and there depending what's happening. near asot been anywhere reactive as the change in the share price. shares are down more than 50% from a year ago and the intrinsic value of the business has not dropped in our view by anywhere near that.

it's been an opportunity. we probably own closer to 10% as a result of adding over the last year or so. alix: credit suisse is up against its own settlement in the u.s.. they set aside 1.6 billion dollars do you feel this is enough? . if it's too high, they should not settle. this is gotten out of control. i think the punishment has to fit the crime if there was a crime or a law broken. we have to look at economic damages and nephew look at past settlements, what they have reserved should be somewhere in the ballpark. fining big banks has gotten out of control. there is $200 billion of fines that have been asked -- that have been assigned. it's probably at been at this

stage where you are hitting them with an unrealistic fine it's counterproductive to the global economy. david: there is uncertainty that hangs over a bank. you have to balance this. $15 billion is a lot of money. it's like a hong kong carnival. i don't think anyone assumes that anywhere near this amount should be settled. the boards and management of these businesses have to, at some point, decide. some of these cases have been won and you cannot just let the doj swing at anything. there has to be realism.

these government officials including the justice department have to look at economic consequences. alix: you on about 10% in credit suisse but what other banks would you buy? >> we have a stake in tango national -- in bnp paribas. they were getting fined for doing business with iran. which is very big but still did not trigger a capital call. they have a strong capital 6% dividend yield, they probably trade at 60% of book value and eight times earnings. it's a solid financial institution that's making money. cost cuts and fee income, they are doing all the right things. andsector has been tarred it's a chance to try to take

advantage of some of these weak prices. jonathan: it's great to have you with us. next time you're in town, we look forward to having you come in. the fx market, it's the pound dropping to its lowest level since 1985 with concerns over a so-called hard brexit. it was not what the prime ministers said but it was what she did not say about the fx market. it's the idea we are heading toward a hard brexit, does that resonate with you? if you look at her list of priorities, it's clear that control on immigration is number one. euing not to submit to any rulings was probably number two or three so access to the single

market has fallen below 10 turkey -- below 10 or 20. thatis not the main issue the current strategy will try to achieve. i think the chances for a hard is different to the market. is the cable rate the thing you focus on or rather upside potential in euro-sterling? from a medium term, if we are era shone the dollar, euro-sterling still has a lot of juice left for the upside.

let me be clear as to how we see things panning out. saw an initial knee-jerk reaction in the referendum results. imply that the whole event was priced into it. we had an acceleration of short positioning. extreme that so they started acting as a headwind for further selling weakness. .ow we are getting more clarity unfortunately, we seem to be getting more clarity that seems to be holding toward a hard rex it. -- a hard brexit. underneath that is potentially some deep reversal in the the u.k. has been experiencing for so many years. david: what do you see in the

fundamentals to justify that today? move up in need to the rates faster than we thought first up -- faster than we thought. . i look at real rate differentials, the u.s. versus major trading partners, i see significant decoupling the beginning of -- that started the beginning of 2015. the second half of 2014, it was largely a pandemic story in the rally in the dollar was justified. real rate differentials went nowhere but the dollar kept going higher partially because other major central banks wanted to keep their currencies weak because they had to fight their own wars. we have reached the point where that divergence has become quite significant and it can no longer be maintained. i think the market has figured that out this year. that's why the trade index is down four or 5% this year.

david: thank you very much for joining us. next, google is holding its autumn event today is -- and is expected to announce new google gadgets including the first google branded phone. that's next. this is bloomberg. ♪

alix: this is "bloomberg ." hour, the jeffries chief market strategist will be joining us. emma: here is first word news -- the two vice presidential nominees square off tonight in

their only debate. is being held at longwood university in virginia. fireworks are not expected as tim kaine and mike pence are considered the most mild-mannered political figures but you can watch the debate here on bloomberg television at 8:30 p.m. eastern time. voted aboutcongress suing saudi arabia for 9/11. saudi officials are attending a two day event to new york posted by jpmorgan. saudi arabia will sell debt and seek foreign investment to help plug a budget deficit. the president of columbia scrambling to save a peace process. it was damaged by a surprise referendum vote. the president has sent us negotiating team back to cuba to restart talks and plans to me with his political opponents. the rejection of the these plan with farc led to a selloff in

colombian bonds. this is bloomberg. david: later today, google is holding its annual autumn event where it will unveil several new devices. joining us for free the -- for a preview is gene munster. let's start off with the phone. i understand it will be the first time they have branded themselves. what do we expect? >> this is a rebranding of the nexus phone so if you remember, it's a pixel phone. mostpect this will be the pure implementation of android. typically, google does a hero phone which is an inspiration for the other android hardware manufacturers to build a better phone. resolutione that a

and better graphics which will help enable vr and that will be the platform they are calling daydream. the headline will read that the pixel phone is the first andream-enabled phone eventually, most if not all android phones will have this daydream standard which will make it easier for us to do vr with their phones. i assume this will be something that will be like the cardboard thing where you put it up to your face? >> yes, cardboard is what you need in order to use the phone for vr. samsung has one and there many other word parties who build the things that go on your head where you can pop your phone into it. google is trying to say we want to create a standard and it's called daydream, that will allow people, manufacturers to tilden

to that. the vr experience will get a little bit better. david: strategically how important is this to google? how much money coming make off of vr? nottrategically, it's critical but it's the natural progression of technology and having more immersive experiences. eventually, google will want to monetize the vr . there is also the content that google plays into. they have a platform called jump which is youtube but for vr. they can sell ads in front of that so probably the way they make money longer-term is to toture offline tv budgets some of these the our experiences. about let me ask you their rival called home, what is that? echo.s their version of

it's a digital assistant and actively listens to use you don't have to cue it. of theeption of echo amazon echo has been overwhelmingly positive. people who use it love them. google can add a surge piece to this. one thing that echo struggles with is doing search terms. they can do basic terms really well but if you ask a more complex search related question, that's where amazon echo has a problem and that's where google home can fill that gap. because google has all these products around you like calendar and mail, you can use some of those to create an e-mail from it. david: twitter has been in the news. salesforce has been tied to disney and there were reports that help about be interested in

picking up twitter. what do you think of that? >> i don't cover twitter. civic we to that but i can talk about what google would be interested in. price, there are properties that are for sale and maybe twitter is there. what google really wants i think -- i struggle with why they would want to do this. they get the benefit right now. google indexes tweets now so when you do google search, the tweets come up. i'm struggling with the rationale behind this. i know it's a rumor now but i think they get a lot of the benefit of twitter without having the headache of owning it. david: that tells me something in and of itself but thank you very much for being with us. up, we will talk with dani burger in the battle of the charts. this is bloomberg. ♪

jonathan: this is "bloomberg ." it's time for battle of the charts and danny baker is taking on alix steele. >> we have talked about the peso has been moving. the white line on these charts are the real clear politics polling average. they kind of move adversely to each other but i'm tired of the peso. at the top, this blue line, i have the u.s. etf for the mexican equity market. iss short interest average two weeks so it looks smooth. look over here. the donald trump odds have lifted since he won the primary. this has skyrocketed and it's right here, this is almost 50% of the etf being short. it's highs so around here, we

had the debate. this will actually start to drop off shortly once the two-week average starts to update. if you want to know how donald trump's odds are, you can look at market data. instead of political polls. david: that's pretty cool. it gets us away from the pay so. that's a good move. at inflationking because the dollar is moving above the 200 day moving average and inflation is starting to come in higher in the chart still -- tells the story. line's consumer prices year on year and both of them have started to move relatively higher. panel is the move index, the volatility index for u.s. treasuries and that is going nowhere fast. this is to say if inflation is starting to get priced into the market, it's not the fed

presidents, it's the actual inflation data that's potentially moving the dollar higher. what would happen to volatility in a treasury market? will we see a run out of the long and bond? -- long and bond? -- long end bond? tantrumsee a taper again? david: when the top one peaks, the bottom one peaks. alix: i did not even see that. david: that's terrific. i know my vote. thank you for enhancing the chart. i'm afraid i'm going with because she took us away from the peso. jonathan: don't worry about it. hour, up at the next

jeffrey's chief strategist will break down the imf headlines. we will bring you that live on bloomberg. here is the market story -- 25 minutes away from the cash open in new york. in london, the ftse is close to an all-time high. it is a weaker pound story and the cable rate is taking it to 1985. down to theing your market open from new york. this is bloomberg. ♪

alix: we are 30 minutes away

from the opening bell in new york city. this is "bloomberg ." take a look at futures. they are relatively flat. jon: let's get to the scorecard. futures marginally higher. very close to an all-time high on the ftse. the cable rate dropping to a three decade low. david: we have breaking news. i headlines coming out here. -- imf headlines coming up here. estimated growth numbers down significantly. the eurozone raising the forecast. we are at incredibly low levels. the global recovery subdued amidst one week of trade data

and low inflation. david: these will move markets. alix: the imf is lifting its forecast for the uk economy in 2016 despite the brexit vote. .1%.growth, up by not all doom and gloom when it comes to the imf. jon: political tensions raising uncertainty brexit, the u.s. raisingction -- uncertainty. brexit, the u.s. election. david: we turn to mike mckee for more. give us the headlines from your point of view. re are a few economies that are doing better. world growth stays at 3.1% this year, picks up a bit next year. which is the good news.

they expect the u.s. to grow faster than it is this year. in 2017, will slow down. the opposite in japan. have a graph that shows the changes in the imf forecast for the u.s. the numbers have come down with have comenumbers -- green numbers.ment numbe they're expecting u.s. growth to pick up, just not as much. it is a question of the populist fever sparking protests around the world. the donald trump movement, the brexit vote. growth has been too low for too long and in many countries come its benefits have reached to few.

political repercussions that are likely to depress global growth further. i want to talk about the forecast very quickly. moreeconomists still bullish than the federal reserve. the imf is somewhat still optimistic on the margin. mike: comparing it to other countries. thisrange forecasting like is not very accurate. when you are talking about a .2% difference between the u.s. fed and the imf, it will not be statistically significant. once we go through the weather problems in the political season, no one really knows. in david want to bring zervos. who pays attention to these numbers? will the fed pay attention to

these numbers, the market? david: a lot of economists that work at the fed, the cbo and the bloomberg, a number of other problems are watched -- number --other places i watch these all watch these. at the market level, there's a who are nottors keen on a couple tenths of gdp i was noting the atlanta fed yesterday, their gdp forecast felt pretty dramatically. -- fell pretty dramatically. there is a team of revising down u.s. growth pretty substantially. alix: whereas emerging markets are relatively stable, not counting china.

david: that has been such a big theme of hours since q2 of last year. we big fans of the e.m. trade. cheapot very underperformed for many years. it was here in april that we ,aid -- you guys wrote a story david zervos turns bullish on the markets. the real point is the underperformance has happened, the overshoot happened, it got really cheap. they have all lagged. you have the storyline developing my transfer of the baton to e.m. from dm, the benefit of the stimulus --

theme thatbeen a official forecasts for growth had to be revised down. at some point, that turns. how far are the markets from being able to handle a turn like that? how concerned are you about a surprise? david: could happen, certainly not averse to it. we have run a long course in a bull market, particularly with financial assets and the recovery in the u.s. that seem to us that had seven years behind it at the same time left e.m. in the dust. e.m. was at its worst sentiment levels coming out of the china august and january the buckles with the currency -- a debacle with the currency.

jon: for me personally, for the , i looks from the imf away from that and look at where they are in the conversation. it's very much the center of the political story that's emerging. some of major economies turning inwards. you wonder what that does to the trade story in the years to come. we see that in the uk and across europe and really fundamentally in u.s. it morehis makes difficult for hillary clinton to say we are growing, we are doing fine and maybe gives donald trump a bit of -- we better pull in the drawbridge. mike: if the numbers prove out, yes, that's the question. as we watched the data, do we see this happen? right now, we are not.

we are seeing better numbers yesterday. we have a whole raft of numbers coming out this week. if they come out with strong jobs numbers on friday, that makes hillary clinton's argument that much easier. michael mckee joining us. david zervos is sticking with us; the vice presidential nominees -- emma: the vice presidential nominees square off at longwood university in virginia. you can watch the vice presidential debate here on bloomberg television. our coverage begins at 8:30 p.m. eastern time. hurricane matthew has moved a short with winds up to 135 miles per hour. people their live in

poorly pulte homes. there live in poorly built homes. santos has sent his negotiating team back to cuba to restart talks. -- juan man well santos. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. alix: in the u.s., we have futures modestly higher. at one point overnight committee s&p futures were up by six points. you do have a stronger dollar. the case for a rate hike sooner rather than later. do it now. hike less down the road. he sees the fed reaching inflation and employment

targets. darden with better earnings. a differentme story, downgraded over at a record. -- grubhub off by 4%. dr pepper, a different story, downgraded over at every court -- evercore. 20 minutes away from the cash open in new york. features largely flat. from new york, this is bloomberg. -- features largely flat. largely flat.

from new york, this is bloomberg. ♪

alix: this isalix: "bloomberg ." deutsche bank, how much capital do they need to raise? what about contingent in the markets? take a look at this chart. credit default swaps, tracks 30 plus financials on an equal rated basis. credit default swaps starting to pick up. not at the levels we saw back in june, but nevertheless, a pickup. roger altman spoke with us earlier. deutsche bank is small. market equity is about 18 billion. jpm is over 100 billion. one of the things going on here is that deutsche bank is under pressure. for a number of reasons. it is so small.

david: you have deutsche bank on the one hand and u.s. banks on the other. -- is this as deutsche bank specific situation? roger: it's more specific to deutsche bank than otherwise. they are the ones facing the spine, which triggered -- this fine which triggered all these concerns. these institutions are quite different. ubs is primarily a wealth management business rather than a banking business. barclays has a stronger direction. there's more differences among them than similarities. i don't expect this to resolve in european banking contagion. alix: let's get some investor reaction. david zervos is still with us. what camp are you one? lehmani'm not on the

camp. i don't see the collateral run, the forest selling, the liquidation of assets, uncertainty over prices. -- the forced selling. the story is the fine story roger altman put out there as something that two people by surprise. and the general malaise in european banking. -- took people by surprise. we pivoted away from it last year because we gave up on figuring out what the ecb was up to. the ecb was very late to start qe. they were very let this crisis metastasize. the politics came in by the end of 20 15, mario disappointed everybody again, did not step up to qe.

i think one of our best calls at jefferies over the last seven years was getting away from europe in december. jon: two rodgers point, if you look at the $14 billion fine -- point committee look at the $14 billion fine, u.s. banks will be able to absorb that. roger altman turned around and said that here's a guy who runs he struggledirm -- to answer the question of what model deutsche bank should adopt. what should it become? david: for me, europe is not making it easy for any of these a one-stopild financial market shop for all european merchant banking and

commercial baking. you take assets and sell them out and get smaller. you have little jewels that work. i don't see the benefit. none of these banks are doing very well. europe is a difficult place to engage in banking business. it will probably stay that way. the uncertainty with the elections in france, the referendum in italy, the brexit -- there's so many variables when you're dealing with a european bank. they looked cheap on a multiple bases, but not that interesting to me. what about the european economy overall? in a robust way without a banking system? david: part of what the ecb has tried to do is stop the reliance on bank lending.

start a corporate bond market. that's what these new policies are. these things take a decade to build. it took mike milken and drexel a market --build a bond maybe that will come around. the thing is structured is not conducive to a lot of growth in europe has already got systemic issues internally that make it not the most exciting place for growth in the world. given how developed it already is. david: david zervos will be staying with us. this friday, we will be getting the jobs numbers. what this could mean for the fed's next move. alix: we have bill gross, alan reader.and rick this is bloomberg. ♪

alix: forget december. how about a november rate hike? in november hike should not be off the table. i thought the case was compelling to take another step on a gradual path if the data come in as we anticipate. expect the case would remain compelling. of coarse, we will look at all the data that comes in between now and november. -- of course. alix: the case is building for a rate hike. there is better inflation in the economy. this is the dollar index, now above its 200 day moving average. said orabout what she

about something else? david: the dollar? messagethe fed hawkish is losing its appeal to the market. a news that anything -- thing? david: how many times will they tell us we are ready to go and then something comes up? even if they were to go -- i love loretta come i think she's fantastic, the idea they go in november seems and uncompelling an uncompelling thing to do just before an election. it will be a dovish hike. look at what they did with the sep at the last meeting. erik schatzker asked the best question -- gdp is going down for the next four years.

rates are going up. and you explain that -- can you explain that? it's hard to explain. they did 50 basis points in -- thef cuts anticipation of any rate hike is going to be a dovish presentation. it's not going to get the dollar worked up like it did in the beginning when they first lifted off. jon: the longer you stay here, the more they are concerned -- trying to bring a bit of two-way wrist into the market. -- risk into the market. david: equities are on the highest, they feel like they will get blamed for the next correction. maybe they should be blamed for it. the scent was a

really well written dissent but a dovish dissent. the only thing i can find to be worried about is everything is best premium's are really high. -- i'm not sure bringing a third mandate in when they are not even that good at getting their first two mandates right is the best idea in the world. david: you say you know the red andyou respecter -- loretta you respect her. what are they trying to do? saying we will go in november. i'm not sure anyone takes that seriously. 70% fora way to get to december? david: great question.

in a lot of ways, they are searching for what they're doing. they are flying sometimes as blind as we are. they want to be attentive, they want to be like that got their pulse on everything. they are as confused as the market and their models don't generally work. they don't understand what the markets are saying back to them. they sound like they are vigilant, if they sound like harder toocused, it's have any blame thrown at you when things get messy again. jon: are they truly beholden to impliedmberg probability? flattering, but a little frightening. david: that was much more true of an alan greenspan fed. even less true of a janet yellen on my experience with

the institution over the last 25 years. jon: coming up, more with david zervos. how will markets react to a move away from free trade? the conversation shifts towards the market open in new york city. futures stable. the dow up three. the real headline is in london, the ftse at an all-time high. a weaker pound story. down .6%. six cents. this is bloomberg. ♪

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the ftse near an all-time high. the opening bell ringing in new york city. the cable rate dropping to a 1985 low. crude with a 49 handle come up .5%. taking a look at where markets are opening here come a slightly higher, the nasdaq leading the way up .2%. the imf downgrading the u.s. growth forecast once again. markets not really paying attention, you still have the dollar index right around the highs of the session. the stronger dollar bleeding into commodities. belowetting hit, digging $1300 an ounce for the first time since brexit.

the biggest gold miners in the world also getting pummeled today. levels we have not seen since before brexit. the stronger dollar. .otentially a fed rate hike the chart of the month, what is the impact of a clinton or trump potential the great -- victory? here's the clinton-trump spread. as it goes down, trump is gaining in the polls. the white line is the risk parity -- you buy stocks and bonds. you sell bothh, that there is a tantrum because you are leveraged. you've trump gaining in the polls. a washout in the risk parity

fund. is that a risk to the market? you get a trump victory and you get stocks and bonds selling out . jon: let's get to david zervos of jeffries. brexit. london amidst the overwhelming sentiment was it would never happen. are we about to see something similar? you get out of d.c. and new york and the tone has been very different. david: it seems that risk is very real. it's been very real with pulling everywhere. what happened in colombia with the polls, what happened in britain. it's very much up in the air. i do not think the chances for the rise in populism were that

it has shaped a lot of our views. one of the biggest things about the weaker dollar, stronger e.m. innd we focused on starting april, we pushed on that even harder after jim because one of the things we see with a rise in populism is that it makes its way to the currency market -- even harder after june. it weakens the currency. bothet the selling of stocks and bonds come a liquidation of the dollar asset base, that is the risk. the vendor financing of the -- we put walls up, that stops, they don't like holding our pieces of paper anymore. david: it affects trade and commerce. the imf warned about political risk. the fight against globalization.

one of his biggest concerns was the reduction in the growth internationally of trade. how big of a risk is that? david: if you look back to populist experiments historically -- i'm not saying we are going to become argentina or brazil or venezuela, but this is where populism ends. in a very bad place. people liquidate your liquid assets. towardend, that movement less free trade, less mobility of capital does lower real returns on capital and does lower the currency associated with that return on capital. that's why we are not interested in the u.s. dollar. we like the countries moving away from populism. brazil and argentina going to

other way. columbia still going to other way. jon: on the flip side, you have potential stimulus coming from trump. re-think -- walmart, target, can you imagine? a 25% tariff on chinese imported goods -- it would be political suicide for trump. markets are overplaying the trade war from trump. david: super important. he's right. the fiscal side is trump's star that is shining out there. he is talking about a very regressive tax cut. hillary clinton is talking about a progressive tax increase. they're very different tax policies. the regressive tax cut policy that trump is out there proposing, the odds that that

blows up the interest rates on our debt and changes things dramatically is not historically there. quite a bit ofe pop said stimulus to anything we get negatively from the trade. offset stimulus. , if youthe other side do think this kind of thing will spark a round of risk aversion, that means stronger dollar. are those against your call? david: a little bit. if we have the trade barriers going up at the same time we are getting the domestic fiscal stimulus come it's not clear to me that you are going to get the withall for the dollar people coming in wanting to invest in the u.s. markets. you could have localized growth in the u.s. stay relatively robust.

job creation stay relatively robust. some inflation risks picking up. i don't see higher inflation risks. chart ofbeating alex's stocks and bonds lower. you get lower growth, higher inflation. that's what destroys risk parity. that story line becomes a bigger storyline with the trade areas. temporary do get some fiscal stimulus from these lower taxes. david: that all fiscal stimulus is created equal. you have the regressive tax cut from donald trump. more money in the pockets of the most wealthy people. as opposed to infrastructure spending. couldof those really stimulate the economy? david: the fiscal side is really tricky in terms of wires. multipliers.f

you have the usual suspects in berkeley and harbor telling you they are huge -- berkeley and harbor telling you they are huge. it's hard to look at the history and say this is a great trade. japan has the biggest fiscal expansion from 1992 today, the roadst trains, the best -- there got no growth. o today.1990 two they've got no growth. it might create short-term jobs but does not create that incentive to invest over long horizons. corporate tax changes due to that. -- do do that. how do you make the call

them we have trade barriers? em? do you like >david: they are already barrier up. closed economies. although latin american ers are rejecting populism after a long time. coming up, google plays catch-up. the search giant is interested in twitter. would pinterest be a better match? ♪

david: this is "bloomberg ." , chris sacca. jon: from new york city, this is how things are shaping up. equities markets positive in u.s. come up about .25%. , the ftse up by 1.9%. inching toward a record high close potentially. a weaker the board, pound, the cable rate at 127.57. a big move lower, a three decade low. yields just a bit higher. let's get you up to speed on the stock movers now.

abigail: do we have some movers this morning, especially in small-cap biotech. more than a double on the open here on the news the company has entered into an exclusive worth --pact that is to research duchesne muscular dystrophy. less fortunate, trinity biotech. open, plunging on the back on pace for their worst drop ever in 24 years after the itsany withdrew submission for a cardio testing device. company is saying they will take 9-12 months to regroup and figure out what to do with this platform. reports of possible takeover bids in the media world. netflix shares up on investor

speculation they could be a takeover target ahead of the us. -- paul sweeney is with why is it that netflix would be a good target? paul: investors are concerned about the subscriber growth. netflix is a subscriber growth momentum stock. it's not an earnings momentum or revenue momentum. subscriber growth is starting to slow, certainly in the u.s., but even in some international markets. that has an by did a bit of speculation about what this --pany is with this company would this company be better off with a larger tech or media company? david: if they were to be a target, who is rumored to be

interested? paul: the name that came up would be walt disney company. david: of course. paul: that would be highly unlikely. it would be a huge deal for anybody, but certainly for disney. netflix has a market cap of $44 billion. you would have to pay a big premium on that. it's trading 90 times next year's earnings consensus. it would be a diluted deal. it is a low probability. the story is still a good growth story. anybody who would want to buy it would be a very expensive acquisition. bob iger's big deals have all been franchises. --ble, lucasfilm, pixar netflix is not a franchise. el.marv

the: the netflix brand in ott world is the brand to have, but they don't own a lot of their own content. they are not a content company per se yet. david: when you talk about that kind of valuation, such a large deal for anybody to digest, are there players out there it would make sense for? alphabet certainly has the money. time warner bought hbo. dilution earnings would be significant. they are still scarred by the aol time warner deal. to the extent if we ever see

netflix trade hanscom it will be -- trade hanscom it will likely be a tech giant. big holds on the google story is they don't have a social media that form. they tried to build up their google plus business. shouldrs have always had they go out and buy a social said should always they go out and buy a social play? twitter's growth has stalled. saidt out a note that certainly google would have an interest in a social play. maybe they should think about snapchat or pinterest, which are still growing. munstere just had gene

on. he said he could not figure out why this would be of value to google because they already get data from twitter. paul: the value is the date of they have on their customers, their users. google already gets a lot of their data. it would be an expensive by. -- expensive buy. paul: $17 billion. in line with a multiple of google. next acquisition for anybody. -- an expensive acquisition for anybody. it might be of interest to somebody. .avid: paul sweeney markets,is bloomberg

dow jones up by 50 points. the story in the uk, pound at a three decade low. we've got three uk equity gauges that have hit record highs at the same time. the first time that has happened since 1990, almost 17 years. the ftse 100 hitting that record high, the ftse two be an ftse small-cap index. 250 and ftse small-cap index. coulda may's comments mean we will get a hard brexit. we will discuss the uk economy and talk about that with neville hill from credit suisse. we will also discuss the euro zone economy. a lot of interesting things happening in european bond markets at the moment. the correlation we normally seen within the periphery really breaking down.

a lot of things to discuss with our economy guest. we have a fantastic interview happening at the top of the next hour. tom keene with the imf chief economist. that will be live from washington at the imf releasing their world economic outlook. much thenk you very nejra cehic. -- thank you very much, never change. -- thank you very much, nejra cehic. ♪

david: this is "bloomberg ." tim kainepence and

debate each other in virginia tonight, they will be facing very different challenges. megan murphy will be with us to tell us what to expect. how does governor pence shift the focus from his running mate's taxes on to something that is better ground for him? megan: we will have a format that is quite controlled, they plan to spend 10 minutes on each topic. the format will help him. they are trying to push policy. bit.will help him a governor pence is a disciplined performer. he's been very disciplined on the stump for trump. he will talk about domestic policy. he's been quite disciplined on the conservative message, the social policies they would advocate. the format will help him. it will be up to him to stay on message tonight. david: we have a candidate in

tim kaine who is on a homeground in virginia -- is his main goal just not to trip over his shoelaces? megan: that is the main thing. they don't want him saying anything that becomes a social media sensation. home fields advantage -- the contrast on the policy front. these are not the two most electric figures. one third of voters don't know who these people are. classr we will see this we saw between donald trump and hillary clinton is yet to be seen. betweenclash we saw donald trump and hillary clinton. it will be one to watch. david: what about the aftermath? will we see the tweets from mr. trump again? megan: i'm sure the trump campell be out -- camp will be

out in response. they go after the analysts and the media to say who won the debate. that is half the battle. given the news cycle we've seen over the past week, they will be looking to push any advantage they have. don't forget tonight, senator tim kaine and indiana governor mike pence will face off in farmville, virginia for the first and only vice presidential debate. time.p.m. eastern atlive coverage on bloomberg 8:30 p.m. eastern time. -- the falling knife dollar keeps grinding higher, dollar index above the 200 day moving average. from hsbc saying

2021, yields will be no higher than they are right now. day for the markets in london. equities in u.s. up by 53 points. .25%.p 500 up by the ftse higher by 1.9%. the big story, the cable rate grinds down to a low we have not seen since 1985. from new york, the "bloomberg " team, that does it for us. up next month it's -- up next, it's "bloomberg markets." ♪

vonnie: it's 10:00 in new york. i'm vonnie quinn. ejra: i'm nejra cehic in for mark barton.

welcome to bloomberg markets. ♪ vonnie: we will take you from washington to london and stories out of wall street and south africa. the british pound extending its slump. the u.k. is headed for a so-called hard breakxit. the imf warns that rising political tensions over globalization are threatening to derail a world recovery. chief economist joins us on the world economic outlook. south africa's finance minister says the police investigation into him is nothing but li