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 political mischief. more on his comments ahead.

let's take a look at some of the market movements now. we are seeing a reversal from yesterday. 50 points at 18,000. moving. the biggest the nasdaq is up .4%. apple hired. google has an event later on today and we may's he a new phone. in terms of other movers today we are looking at currency. is dollar index strengthening once again.

stronger by about 17%. you can see the dollar index up today. the pound is that it's lowest in 30 years. as iss being impacted oil. mining is one of the major movers down almost 6%. that's about 30 minutes into the trading session. let's look at where european markets are. nejra: 19 minutes to the close of trading. one of the key things to note is we have had three stock engages

in the u.k. they all hit record highs. take a look at this chart. time this hasrst happened in almost 17 years. the last time these three equity gauges hit records at the same time was on the december 30, 1999. in some ways history has been made today. investors piling into u.k. equities as they all reach franchise. i have tracked sterling year to date. we have seen it fall below the post-brexit low. we are now at 12759 on sterling. 31 year low on this currency. the lowest since 1985. if you look at the ftse 100 in sterling versus in dollars you

are seeing a very different picture. it has actually declined in dollar terms. the biggest underperformance since the financial crisis. that is something to bear in mind for u.s. investors. on the stoxx 600 we are up more than 1%. we are seeing european stocks advance. gains in the u.k. and france and germany. german markets reopening after a holiday. european stocks heading for a sixth straight day without losses. in on thet's check bloomberg first word news this morning. >> the u.s. will keep trying to end fighting in syria even though it ended negotiations with russia.

that's according to john kerry. he spoke in brussels a day after the u.s. announced it was pulling out of peace talks. >> we will continue to pursue a meaningful sustainable enforceable cessation of hostilities throughout the country and that includes the russiang of syrian and combat aircraft in designated areas. and russian knows exactly what it needs to do. he accused russia of turning a blind eye to serious use of chlorine gas. hurricane matthew is in haiti with winds of up to 145 miles per hour. the southwestern part of the country was battered by high winds and torrential rain overnight. forecasters say haiti could get up to 40 inches of rain. another tirade from the philippine president.

he told president obama you can go to hell over u.s. criticism of his anti-drug campaign. his anti-drug fight has left more than estimated 3000 suspected drug dealers and pushers dead in just three months. a surprises has made visit to the site of the devastating august earthquake in central italy. he visited the hardest hit area of the town which remains largely closed due to security concerns. the way has been cleared for a global climate deal to take affect. it is likely to come into force a little more than a month from now. last year more than 190 nations agreed to work toward capping global temperature increases.

nejra: let's return to sterling's dramatic decline. the pound is falling for a second day reaching the lowest level since 1985. 12766. this on concerns over a potential hard brexit. with us is our global credit strategist. let me start with you and what's been happening with sterling. showing sterling three months risk reversals. what this says is that we are positioned for more declines. there is some talk in the markets that the short sterling position is a little bit crowded. similar priceery

action on both days starting out with sales of the pound. short shallow bounce in the pound and resumed selling. your respective of what might be crowded positioning it has some downward legs. hard brexity the you talked about is what is spooking investors. nejra: we got further comments. there were reports about theresa not being there would preferential treatment for financial companies. that is creating more of that concern over the so-called hard brexit. >> i think the prioritization of mattersion over the that would concern the financial institutions has led investors to think it will be harder than initially thought. is now becoming real. we are starting to get more of the details about the start of

the negotiating position for the u.k. that's what led to the selling of the pound. how is this bleeding over into the bond market? are they still being affected by stories like deutsche bank? >> deutsche bank is still very much in the background. aversion lastk week that has become secondary over the last 24 hours. what has been interesting has been the underperformance versus the euro corporate bond market and the steeper quality curve between those currency pairs over the last 24 hours. we are still in the lou yield. you have seen a widening of corporate sterling spread in ig and high guilt and a steeper curve relative to the euro denominated ig and high-yield.

chart of the one year deutsche bank cds. back.ld be scaled we are still waiting for confirmation ernie proof that is true. to one year cds continues show there is a decent amount of caution among the investor base as far as deutsche bank is concerned. vonnie: we just showed that. i want to ask you about volume. are we seeing investors hold off until they know more or his volume pretty healthy? >> i think it's pretty healthy. volume within the secondary market has been fairly limited. it has been a primary market affair in terms of that liquidity play. we saw a limited issuance but it has been picking up again. there is still consistent demand.

between name and price is probably more acute than it has been in recent months. nejra: talk about the impact on sovereign rate. just looking at the u.k. break even. we have seen that push higher. is that largely down to the weaker sterling and are we expecting inflation to rise? in terms of what it means for if inflationngland is higher through the currency that is probably something they will end up looking through because it's not exactly the right type of inflation they're looking for. they prefer inflation driven by demand and not a weaker currency. it is probably something the bank of england will end up looking through. simon richard jones and ballard. thank you for joining us on the program. remain political risks

heightened across the world according to the international monetary fund. we will hear from the chief economist on trade and more. this is bloomberg. ♪

nejra: you're watching bloomberg markets. i'm nejra cehic. vonnie: i'm vonnie quinn. time for the bloomberg business flash. cleared theongress way for families of 9/11 victims to sue saudi arabia. to theelegation has come united states to lower cash from investors. the saudi's will seek foreign investors to help plug a budget deficit.

bill gross says new financial technology such as bitcoin may be protection against central bank and negative interest rate policies. the federal reserve it and central-bank are destroying historical business models that foster economic growth. krispy kreme doughnuts is buying the u.k. business from its equity owner. the company didn't disclose the price but a person familiar with the matter said it was in the same range of the scrapped ipo. that is your bloomberg business flash. south africa's finance minister is in new york leading efforts to boost confidence in his country's economy.

the rent has been turbulent amend mentis concern he would use his position that over the government's purse strings. they can't make up their minds at the moment. the latest news in the media is that they believe they don't actually have a case. >> you don't feel weekend in any way. >> not at all. africa is at risk of losing its investment level credit status. coming up, political risks remain heightened across the world. we will hear from the chief economist at next. this is bloomberg. ♪

nejra: live from london and new york, i'm nejra cehic. vonnie: i'm vonnie quinn.

you're watching bloomberg markets. rising political discord are threatening to derail the global economy. that's the latest warning from the imf. tom keene is with me now. interview theto chief economist at the imf. what can he possibly say? tom: he can't. what's interesting is the ambiguity of the report. frankly it's a fairly positive report even though you read paragraph to paragraph and there's a lot of gloom. i'm going to ask him about the first sentence of his summary. strong sustainable balanced inclusive growth eludes us. the median forecast is being downgraded. longer-term we don't know what kind of tit-for-tat tariff

detection is an is going to be in place. tom: they do mention it early on. it dovetails a little bit into the election. clearly madame lagarde has said trade matters. that is one of the messages year as well. we do not have him yet. good to see you. this is also about the existential threat to the world economic order. it is an existential threat in terms of market dynamics. sterling breaking through is a smaller story for the imf that mixes in. let's remember it is a shift in

outlook with reduced u.s. growth lesser developed economy growth with some other areas actually doing better. canada coming down as well. it's a mixed jumble. it sort of gets to the market reaction. we will be back with that interview. to the central-bank policy here in the u.s.. loretto mester saying she saw a compelling case for moving the fed funds rate up gradually in such member and obviously not worried about the election in terms of moving it higher in november either. she spoke with kathleen hays in cleveland monday. i it's on overheating and don't think we are behind the curve yet. i thought there was a compelling case for taking another gradual step up on the past. -- the path.

it is gradual. we have made a lot of progress on both parts of our dual mandate goals in terms of labor markets. we have seen 180,000 jobs added for month this year on average. we are doing well on the labor front. inflation still below the 2% goal. pasts moved up over the year and monetary policy has to be forward-looking. a compelling case for moving the rate up gradually. taking another step on the gradual path. are some people who think you want to curtail expansion. not at all. the reason i think it was appropriate to move the rate up is we want to the sustainable expansion and moving rates up is consistent with that. the numbers on consumer spending or weak enough

that the atlanta fed cut its gdp tracker. the first half the gdp barely grew over 1%. does that make you think the weight could be a little bit longer? of hitting the economy with a rate hike when it is not all that strong yet. >> the first half of the year growth was 1%. i still think we will see a rebound in the second half. my view is we are going to be growing a little bit over trend over the next two years. tot will be strong enough put downward pressure on the unemployment rate. inflation can move gradually back. expectations are reasonably well anchored. economic conditions

are such that we are going to be going gradually back to the 2% goal. we have to preemptive in moving so we canst rate up keep the expansion sustained. >> you argued for hiking rates in september. if the data stays strong it seems the economy is on even better footing for a november rate hike. are you going to argue for a rate hike in november? i think all meetings are live. in september i thought the case was compelling to take another step on the gradual path. if the data come in as we anticipate consistent with my forecast over the median run i would expect the case would remain compelling. we are going to look at all of the data between now and november as we do all the time.

if the data comes in as consistent with what we have been seeing then i would think it will still remain as compelling. >> you would vote for a rate hike. >> we will see when we get to the meeting. the case will be compelling. vonnie: that was loretto mr. with bloomberg's kathleen hays. it looks like she would be perfectly fine with voting for a rate increase in november. i'm going to call it an outlier call. view,ke loretto mester's very different from boston, the people in the middle. the 10 year yield calls of various houses where barclays completely disagrees with steve

major at hsbc. it's amazing the jumble that everybody is faced with. it speaks to the jumble we are going to see in washington at the imf meetings today. the moment the 10 year yield is at 164. tom: by definition you would have to have further weakness. much more from the imf. tom will be interviewing the fund's chief economist next. this is bloomberg. ♪

vonnie: live from bloomberg world headquarters new york, this is bloomberg.

we turned the latest warning from the international monetary fund citing political this court threatening to detail the week of global recovery. tom: with us now is maurice osfeld of berkeley. he is the chief of economic research for the economic monetary fund. congratulations on your world economic out -- outlook. i loved the first sentence of your summary -- in search of strong, sustainable balance and inclusive growth. it's not out there, is it? >> not yet, tom but we are hopeful that with more concerted policy action we can do better. tom: the policy package you look forward to is what everyone is talking about which is fiscal policy to come to the rescue of an exhausted monetary theory and monetary policy. what do you need from , particularly, what

do you and christine lagarde need from the next president of the united states? one element we have emphasized a lot is the trade picture. trade has fallen. it has grown very slowly in the last few years relative to gdp, certainly. we certainly view that as a drag. an end toike to see the creeping protectionism we see in the world and more progress on moving ahead with free trade agreements and other trade creating measures. beyond that, there is a standard macro issues, structural are very which important and should not be ignored in this mix. they need support from fiscal policy, as you say.

we think fiscal policy can be more aggressive where fiscal space allows it and we think it can be smarter, better designed. fiscal could come to the aid of haveary if policymakers the political will. tom: one of our legacies is a lack of fiscal policy over a number of years. a cocktail of interacting legacy -- and that's your phrase. discuss the cocktail of what we got wrong that we have not fixed. we came out of a global of anial crisis unprecedented magnitude in the postwar era and that had scarring effects. in the labor markets, you see it and you see it in nonperforming loans in many countries and in bank balance sheets and high debt. you see it and low productivity. after that, the demographic

trend is not positive for investment and growth. we moved into a challenging after the very strong policy response to the global financial crisis. problem with that is that slow growth can feed on itself and perpetuate. we really need a policy punch to get us moving again. tom: news was made this morning -- hsbc with an outlier call of further low interest rates and interest rates lower for longer into 2021. how can institutions like central banks and the international monetary fund rather us away from the -- that rather grim view? view may be an outlier call but if you look at recent economic research trying to

andmate the equilibrium real interest rates for the global economy, they seem to be lower for longer and have recovered less quickly after the crisis than previous crises. we need more growth to get us out of this interest rate trap. monetary wallace he probably cannot do it alone. bc sitesn major at hs carmen reinhart. he is adamant we have not the leveraged. your worlddepth of economic outlook, give us a scorecard and how we deleverage? are we getting there? we are about to release the fiscal monitor which is our sister flagship publication. help me with that. how are we doing? >> it's all about debt.

it has proceeded at different rates in different countries. the united states appears to have deleverage quite a bit but a lot of that is foreclosures and short sales of home so that's not necessarily a favorable picture. with deflationary pressures, it's much harder to deal ever and that makes it more important to hit the price level targets. 0 tom: when i go to the world economic outlook, i look at the boxes out there which are subsets. three, you look into deflation. for someone like the united states, do we have a risk of japanese deflation and other disinflation's folding over and affecting our economy and affecting janet yellen's options? >> i think the risks for the u.s. are quite moderate. they are worse in europe and forwards in japan. expectations appear to be pretty

well anchored in the u.s. performance is below the longer-term expectations of that's where the fed's conundrum is at the moment, picking the right timing for the second increase in rates. academic your tom: worth with rudy dornbusch. of currency risk overshoot? do we have a risk 12 months or 24 months out of the stronger it dollar and sharply weaker pound-sterling and a euro that sags? >> a stronger dollar is one of the downside risks to the u.s. economy. indeed, it has been a drag on growth. part of what we have seen in the past year with the disappointing performance in the first half of 2016 is reflecting dollar strength. we are not forecasting renewed appreciation even if the fed should do an interest rate hike. we are forecasting stronger

growth for next year for the u.s., somewhere north of 2%. for the u.k., the situation is quite uncertain. currente a very large account deficit and it's unlikely they can sustain the flows of inward investment that have allowed them to run the deficit. there needs to be an adjustment to the exchange rate and we have seen that starting to happen. of rex it sinks -- of brexit sinks in, the currency is depreciate further and it could go further still. tom: thank you so much. the idea of the former governor of the bank of england saying a foroff currency adjustment pound-sterling can solve

problems for the prime minister of england. vonnie: thank you so much. francine will interview christine lagarde at 9:30 a.m. tomorrow. let's check in with first word news. : no one is expecting fireworks in this debate -- the two vice presidential candidates , tim kaine and mike pence square off tonight. the debate is being held at longwood university in virginia. they are both considered two of america's most mild-mannered political figures. you can watch the vice presidential debates on bloomberg television beginning at 8:30 p.m. eastern time. the colombian president is scrambling to make a deal that was damaged by a surprise referendum result. he has sent his negotiating team back to cuba to restart talks. he plans to meet with political opponents. the rejection of the peace plan

was marked as rebels led to a selloff in colombian ons and the peso. more fallout from the failed coup in turkey in july. almost 13,000 police officers have been suspended as part of an investigation into those suspected of backing of the muslim cleric. turkey blames him for inciting the coup. the european union is appealing to greece to meet requirements next week. be released tod help their economy. finance ministers meet and luxembourg monday to talk about the milestone. the nobel prize for physics goes to three british-born scientist who are now at american universities and received the prize for reviewing exotic matter like superconductors which conduct electricity with no loss to resistance.

global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ahead, how was ireland attracting business and jobs as the u.k. prepares for brexit and we will hear from owen murphy. this is bloomberg. ♪

vonnie: you are watching bloomberg. ra: this is your global business report. the south african finance minister addressed a recent

police probe and gives his outlook on the nation's economy. lvmh is adding a german suit maker to its galaxy of brands. there is a huge drop in real estate prices -- plate that real estate prices in manhattan. the south african finance minister says the police investigation is nothing but political mischief and will be resolved soon. he also discussed where he sees growth in the nation's economy . >> there are other sectors of the economy that have been growing and will grow into the future. in many american companies are invested is from a -- investment is from a chinese company. the parent of louis

vuitton is buying a majority share in german suitcases. ra: the seller is the grandson of the founder. a tentative deal between southwest airlines its pilots may be in jeopardy because delta alliance has a pending deal that would pay its pilots more. southwest pilots union wants to renegotiate some sections of an agreement reached at the end of august. it is a buyers market in manhattan. apartment sales plunged 20% in the third quarter according to an appraiser. the number of resale apartments on the market at the end of september was 53% higher than in late 2013, the lowest point. vonnie: it's time for our quick take we get background on issues

of interest. people of united kingdom shock the world in june by voting to leave the european union which they joined in 1973. thought the eu was expensive come out of touch and a source of uncontrolled image -- immigration. voters supported the split by 52%--- 42%. there were anxieties about globalization. the prime minister david cameron who had pushed for the u.k. to remain resigned and was replaced by fellow conservative teresa may. the u.k. currency tumbled on the prospect of years of uncertainty no matter how brexit will work. she willay says trickle the start of negotiations at the start of 2017. years to join16 the european union after it reformed in 1957. some people argue that it should

pull out. prime minister john major's government almost fell in 1993 when some of his party lawmakers voted against him over the signing of the treaty which deepened cooperation and created the european union. that same skepticism cap britain from adopting a single currency when it was adopted in 1999. brexit campaigners worried about immigration to create a popular backlash overcoming concerns about the fallout on jobs, trade, and the broader economy. the question is whether the u.k. can strike a brexit deal with europe that gives them control over immigration but retains access to the tariff free markets of 500 million people. about brexitmore on the bloomberg and that is your global business report. go to bloomberg.com for more stories. ayra: much more ahead as we

hear from owen murphy. we are looking forward to that interview. this is bloomberg. ♪

nayra: live from london and new york, this is bloomberg markets. vonnie: the european markets are getting rattled on the timing of brexit and what it means for jobs. owen murphy joins me now to talk brexit and what's being done to spur growth in ireland. thank you for joining us. ireland is looking to gain some opportunity. has 38,000 people employed in international services so what is the target? part of the strategy which i

am here to promote is to increase the number by 30%. questionses difficult given our close relationship with the u.k.. borders a physical land and we have close trade relationships and a common travel area. when the referendum was put in place, we wanted the u.k. to not leave the eu. they have made the decision so we have a contingency plan in place. what we would like to see is a strong relationship between the u.k. and the eu. you look at financial services, there may be context ofes in the the negotiations when there is an actual exit and i am exploring that. at one cable is trading dollar 27 $.50. 50.1.27

how do you attract is nice in that environment when you're trying to hold up anglo-irish relationships? >> this is something we look at every day because we trade so much. but there is natural hedging going on by company so we keep an eye on the currency. i think there will be a lot of noise. it should continue to the negotiations. financial services is one of the last issues that will probably need to be discussed and agreed upon we will do our best to make sure that if people are making decisions, we need to take advantage of those opportunities. vonnie: there are other countries vying for the business and is not necessarily for sure that britain will leave the you -- the eu.

a big placends is for investing on the prospect of some financial services companies. warsaw is another one that has been mentioned as well as paris. how do you get in ahead of those? >> there is a lot of competition. after the u.k. leaves, we will be only english-speaking country left in the european union. population which is highly educated and we have transparent corporate tax rates in all of those factors make us an attractive location for any financial services locating out of the u.k.. we have a competitive and innovative economy? . if britain leaves, it's free to have any kind of corporate tax it wants. can you hold on to the 12.5% tax rate? >> we believe they made a

mistake. our 12.5% is rocksolid. there is uncertainty in europe but that's one thing people can be certain of. there is a lot of support politically or that rate. the importance is that we have used it to get real jobs created in our economy, 187,000 jobs and that's important. as far as the u.k. claiming it might change its corporate tax rate, we pride ourselves on our consistency. if you can lower your tax rate one day, you can raise at the next day. we have had 12.5% for a number of years and will commit to that that. how are you coordinating the regulations will be abided

by and attract business? >> we are not interested in brass plates but we want to create substantial growth in the irish economy. a committee that involves central bank and industry to look at how we best prepare ourselves for this new environment after brexit. the message is out there as to our opportunities for international financial services. vonnie: where do you feel this is all coming from? >> contacts have been made directly but also with the department and the government of those potentially interested in relocating to ireland. we saw this before brexit. individual companies were already coming to ireland to see our capacity. since the decision, that has just accelerated. vonnie: can you accommodate that kind of in flex? >> we believe we can.

we put in place contingency planning across every section of the economy. been working those plans so if you work at office space, we have millions of square feet coming online in construction and more in planning. topic, thea broader irish budget is due out next week. is it brexit-proof? we announced a summer economic statement which looks at the impact on our growth. came out minister recently to say that this budget will be brexit-proof but we have to make sure we are in tend to what might be happening in the u.k. next year and the coming years and have our fiscal policy planned appropriately. vonnie: oh murphy, thanks for joining us. ising up, the british pound at its weakest level since 1985. : stocks in europe are

rallying and we are looking at a broad-based gain of european stocks for their longest stretch without losses in almost a year. and thex 600 is up 1% ftse is up 1.8% and we have seen above 7000 for the first time in six months and hitting a record high. the dax is higher as well. we will bring you the close in just a few minutes. time this is bloomberg. ♪

>> it is 11:00 a.m. in new york. 4:00 p.m. in london and 11:00 p.m. in hong kong. i am nejra cehic. i am vonnie quinn.

you are watching the bloomberg clothes -- close on the bloomberg markets. we are going to take you from washington to london and cover stories out of germany, wall street and south africa. here is what is worth watching. itsbritish pound extending slump, falling to levels not seen since 1985. we will talk to a global economist on the mounting concerns of the heart brexit. -- hard brexit. vonnie: as we await news on the department of justice, we will hear from a german lawmaker. and google's latest hardware event takes place today and could mark the arrival of two new flagship smartphones