francine: the tale of the tape. politics get personal. the trunk clinton rematch in the second presidential debate. no deal for deutsche yet. the bank continues negotiations with the u.s. department of justice. of target. governor hirohito kuroda signals that japan may not hit its goal until 2018. good morning, everyone. i am francine lacqua here in london.

we have a great show lined up for you today. in a half hour, we re-bring you an interview. later, we speak to franklin temperatures mark mobius. here is sebastian salek. sebastian: the second presidential debate lived up to expectations. hisld trump dismissed rivals comments and try to deflect comments. meanwhile the democratic nominee said sean's remarks shows he is unfit to serve as president. >> i did not say that at all. this was locker room talk. i'm not proud of it, i apologize to my family and to the american people. i am not proud of it. but this is locker room talk. >> what we all saw and heard on

friday was donald talking about women. what he thinks about women. what he does to women. he has said that the video does not represent who he is, but i think it is clear to anyone who heard it, it represents exactly who he is. haltedan: samsung has production of its note 7 phone. it comes after several reports phones alsooans -- catching fire. the yuan tumbled the most in four months. china's markets reopened after a week on break. the currency fell to six .771. china's central banks have speculated to keeping the currencies stronger as it saw to

limit capital outflows. the french national bank president says it can cut interest rates further into the negative territory. he noted that the bank has already pushed rates quite far. >> it makes sense. you have to distinguish between the exchange rate channel for negative rates. we have a lot of evidence that the exchange rate is working. >> are you couple going further into the negative territory? >> there still some road to go further if necessary. sebastian: global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. salek and this is bloomberg. much,ne: thank you so sebastian salek. this is what we are seeing on the markets. i think it is appropriate to debateu that after any

tween hillary clinton and donald trump. the peso trading the highest. when you look at european stocks, they are swinging and expending some of the losses. vixx you can see it 14.24. one thing i wanted to show you .as deutsche bank our biggest corporate story over the past three weeks here in europe. we understand there is still no deal with the boj -- with the doj. i wonder if that is why investors are nervous. this is also a chart going back to the mexican peso, the one we wanted to show you. the terminal chart charts the popularity and read, donald trump -- popularity in red, donald trump. you can see it is quite correlated since he has started being hit to head in the polls that's being head-to-head in the polls. you can see the correlation.

no plans to exit easing. that was the message from governor kuroda. i spoke to him in an interview in washington, dc. >> traditionally, central bankers argue that interest rates can be controlled while long-term are not. in reality, after the lehman major central banks have been directly intervening in the long-term asset market to and friends longtime interest rates and i'm sure they're been successful in reducing long-term interest rates. from our experience with the negative interest rates, we are quite sure that this combination

able to control the curve -- control yield curve. don't say that we can completely troll desk completely controlled ten-year interest rates. friends -- we can and and -- and for its and manage around 0%. francine: is it a range? have introduced .ome other majors if necessary, we can make a new long-termap the interest rate to go beyond our

target. sure we canite but we have to, introduce the new majors which could avoid an interest rate go beyond the very -- anna: that was governor kuroda speaking to me earlier on this weekend for an exclusive interview. we also talked about inflation expectation. yearan see this is the 10 zero coupon inflation swap. the first circle is on abe unleashed his fiscal stimulus. that is when the on buying program had been -- the bond buying program had been extended. they go on to qqq a. let's welcome daniel lawson. he joins us for the first half of this show. thank you so much for coming in.

there are so many concerns because we don't know where our growth is going to come, our shop is going to come from. we may be nearing zero. >> potentially. the problem is -- talking over the weekend, the imf last week, -- japan has is yet to enter that problem. there tried numerous ways to get around the problem around debt deflation dragging the japanese economy. he has talked about his for state plan. -- for his -- about his for stage plan. -- liability problem . francine: are worried are you that we are reaching the end of monetary policy? you that weed are are reaching the end of monetary policy? you should not look at japan and

say there thinking outside the box. daniel: third of their aging cognition -- about the fourth stage, negative interest rates. we are now in the final stage, a andof financial policy fiscal policy. japan has entered that face. kuroda is very concerned. happy about gdp growth and closing the output gap. francine: everyone is. the market is. he is still undershooting when he has promised we will reach that 2% target. daniel: the ecb and the bank of japan have the same problem. this is the kind of final game. it could take quite some time. francine: will it work? when i was speaking to governor

-- how it works, it is very procyclical measure. he says that by allowing inflation to overshoot, it will change. this only changes the mindset. it doesn't have an impact on real inflation. daniel: agree to an extent but it is only a mechanism. they can expand their balance sheet and china, the funding into the economy more direct. one of the big problems that the bank of japan and politicians have had is this income distribution issue about to be. -- about qe. they see this mechanism that channeling money will help inflation expectation. through your interview with that showed me, i think comes a clearly, -- the second round of impacts on the person on the

street inflation expectation. francine: daniel, thank you so much. he stays with us. tay with "surveillance." hard brexit, soft brexit, does it really matter? will discuss the options. cheap oil, cheap gas. what does it mean for the energy industry? which of these biggest industries -- the presidential debate gets even more personal. we go live to the u.s. to get the latest reaction to around two of clinton versus trump. this is bloomberg. ♪

francine: this is bloomberg surveillance." let's get to the bloomberg business flash with sebastian salek. sebastian: samsung has halted reduction of its note 7 phone. it comes after reports emerged of replacement phones that were issued also catching fire. the shares fell almost as much as 6%. stake andeasing its 20%. the billionaire -- over the media conglomerate. the group will hold 20% of the voting rights. taking into account the double voting right. global group shares have jumped after it agreed to sell its u.s. in the unit. -- tompany says the deal

raise $2 billion. mounting losses and liquidity. that is bloomberg business flash. francine: deutsche bank executives have failed to reach an agreement. that is according to build. a person familiar says negotiations with negotiations are ensuing. is daniel lawh us for me. michael, why isn't this settlement with deutsche bank taking so long? michael: they would like to get a figure out there. there is a lot of detail to be ironed out, even if you get to a figure. how much of that is cash? consumer relief? for other penalties, what is the bank agreeing to in terms of saying what it did? details tolot of

iron out even if you can get to a number. they are very far apart on those figures, versus the 14 million -- versus the $14 billion. there is a lot of ground to make up. if that original number has not come out and you do not have so much pressure on the stock, it would not be surprising that this settlement was taking so long. it is just increasing the density increased attention on deutsche bank -- the increased attention on the to bank is making it so long. francine: down by 2.8%. i was down in the and john kline was there. i saw him briefly on thursday night. they have not said much. are you surprised that they have not been more communicative with markets? michael: the main communication, they cannot really talk about the doj. the main committee case has been about the derivatives book and trying to reassure the market that some of these concerns

about the book are overblown. clearly if you look the numbers, that is not the proper way to look at it. i think there has been some uncertainty about the level of level three assets that it+++ he saw the chief risk officer in the german press over the weekend trying to assure the market this balance sheet has never been cleaner and we are a lot simpler. francine: one last question. we understand they may want 25% of the bank.

have a confirmed? michael: they have not said anything publicly. the reporting is they have an interest in increasing their stake if there's an opportunity to do so. certainly, that would be one more option for deutsche bank if they needed to raise money based on a larger than expected settlement. that gives them an anchor investor. francine: daniel, i know you don't want to talk about banks. one of the things that imf was very clear, the concerns about this is models. we talked about deutsche. we need a strong banking system in europe to make sure that growth is there. the two are so link that sometimes there is a feeling that the regulators forgot them. daniel: the way that policy is shifting. it is not a confidence that the doj is playing hard. at the same time the u.s. is looking at the ecb and the european economy and saying we need some fiscal and monetary expansion. treasuries secretary lew is putting some rush on germany. -- some pressure on germany. the ability for them to expand and germany clearly ahead of the election not wanting to do so. a bit of a negotiation going on

between deutsche bank and systematically the most important bank in the world. imf, all theom world leaders to get stimulus into europe. francine: daniel, thank you so much. up next, should the u.k. go for soft brexit? or a hard brexit? or perhaps it doesn't matter? we will discuss those options. this is bloomberg surveillance. this is bloomberg. ♪

francine: this is a bloomberg surveillance. i am francine lacqua in london. time for our morning must-read. something to do with brexit. and the a bright column rights if you leave the european union, well, you leave the european union. that is neither hard or soft. it does not dictate whether brexit will be harder soft in those other crucial respects. he goes on to say that the relationship between the eu and the u.k. will be as closely as possible. britain's new prime minister is wise. she will want economic relationships to be as close as possible. if the you is wise, they will want the same -- if the eu is

wise, they will want the same. daniel, the problem with brexit, and i know there's been a lot of kerfuffle. it depends on how attached the prime minister and governor is to having access to europe. they don't seem very attached. they seem to focus a lot on immigration. daniel: i don't think so. i think -- this is hit headlines again -- this has hit headlines again. remember the speech that theresa may made is kind of clumsy. speaking to their own constituency, it has the -- francine: they know everyone was looking at them. i have people coming on and saying it was the tory party conference. it was the first time we hear from the prime minister on bikes it. they need to know the rest of the world is watching. daniel: i think she will learn from that. i think it was a mistake.

a lot of people coming away thinking, oh brexit. i fully agree that the tory party in reality want somewhere between soft and hard. they want to negotiate and get a better deal. it is in europe's best interest to negotiate. francine: isn't? i don't see it. the u.k. could argue for the eu than the eu needs from the u.k.. daniel: you could argue that on a per capita basis, what we taken through from europe is greater than what europe takes imports from the u.k. a nice relationship. i don't think that will change. i think they will negotiate and ensure that -- german cars and u.k. they get a better deal. u.k.ce and europe from the will get a fair deal. it is logical that they go through this negotiation. on how hard the u.k. will be.

francine: win is that going to be corrected? all of the newsmakers that are not u.k. based tank we are going for a -- think we are going for a hard brexit. daniel: we are leaving. you have to negotiate. when you do negotiate, sometimes you have to take a hard line. communication from the conference and converted was too hard. francine: thank you so much. exit from easing. we bring you more from my interview from haruhiko kuroda. we spoke to him in washington dc. that interview coming up. this is bloomberg. ♪

francine: i am francine lacqua here in london. let's get straight up to the first review. the secondrst --

presidential debate quickly lived up to expectations. disavowed comments captured in a 2005 video and attacked hillary clinton over e-mail use and past accusations of misconduct against her husband. the democratic nominee said mr. trump's remarks show he is unfit to serve as president. mr. trump: this is locker room talk. i am not proud of it. i apologized to my family and the american people. certainly, i am not proud of it, but this is locker room talk. mrs. clinton: what we all saw and heard on friday was donald talking about women -- what he thinks about women, what he does to women. and he has said that the video does not represent who he is, but i think it is clear to anyone who heard it that it represents exactly who he is.

: samsung has halted honeuction of its note 7 p after several reports of replacement phones initialed -- released after the initial recall also caught fire. shares fell 6% on the news before paring some of those losses. after amarkets reopened weeklong break. ,he currency fell in shanghai to the weakest since september 2010. china's central bank was speculated to be keeping the currency stronger than the 6.7 level. the swiss national bank governor says the central bank can cut rates further, into negative territory if needed. jordan said the bank has already pushed rates quite far. sense fors switzerland. you have to distinguish between exchange rates, negative rates,

and the credit channel. there is a lot of evidence that the exchange rate channel is working. >> are you comfortable going further into negative territory? mr. jordan: we still have a to go further if necessary. seb: new study four hours a day powered by more than 2600 journalists and analysts in more than 120 countries. francine: the bank of japan targets inflation, not the exchange rate. that was the message governor kuroda was keen to emphasize this weekend at the imf meeting in washington. he told me that clearly several times, although i did try to push him on inflation rates. i spoke to him exclusively in the scene -- in d.c. kuroda: a good effect on the economy, extending rates. but the process is not targeting the exchange rate. we are targeted at the inflation

rate. we have a target of 2%. having said that, because exchange rate could effect the economy -- so we carefully monitored exchange rate movements. upon among the 27 countries, the g-20 countries, is that the exchange rate should reflect fundamentals. and excessive movement of the exchange rate, erratic movement of exchange rate, would be the economy,o economic stability. agreement. that would again -- francine: i understand a

full-year commitment. i look at you and sometimes 10 times a day -- i look at yen sometimes 10 times a day. there must be a point at which you are uncomfortable. is it 95? is it 98? kuroda: i will say there is a , yes.f appropriate at this moment, we have been carefully monitoring, assessing the movement. it is just a little. but the speed of change, and so on and so forth. as far as monetary policy is we must target the exchange rate. exchange rate, the issue is -- francine: governor, you are talking about erratic. i understand you do not want to race. kind of

how did you feel when you saw that flash crash in the pound on thursday? kuroda: it is a bit difficult to understand, because after the eu june, the british pound depreciated. and then it became fairly stable. and other financial markets, including the stock market, other asset markets, or performing relatively well, so i was a bit surprised. -- a bit surprised when the british pound depreciated. mis-trading -- francine: a fat finger? kuroda: i don't know. after the shock, the british

pound recovered somewhat. stayhope exchange rates relatively stable, not erratic. [laughter] francine: do you ever -- are you concerned, ever? kuroda: known, not really. -- no, not really. yes, japanese companies have invested heavily in the u.k.. i understand japan is the second-largest investor in the many japanese banks operate. hand, tradether between japan and the u.k. is not so erratic. british pound, the yen exchange

rate, may not have so large an impact on japan's economy. unlikeshort run, dollar/yen rate for euros/yen rate. both of them are quite important for the japanese economy. francine: so you do not see a lack of liquidity, a bigger problem on lack of wood quiddity? you prefer tok if market equity in terms of , andcing by non-us banks so forth. i think liquidity is quite enough. know, interest rate on

falling banks have been rising. maybe some big changes in the forthand so on, so regarding government bonds, this is an issue we discussed very much among government bond leaders back at home. japan has carried jgb'sofof gdp fueling the market. i do not think so. francine: that was governor kuroda speaking to me exquisitely in washington, d.c.

you can see the full half hour later this week. us.el lafitte is still with we spoke a little bit about japan and the troubles with japan. overall, who is the central bank or who has the most difficult job? daniel: a tough question. francine: all of them, right? daniel: i would say the ecb. they have a high debt burden and a is functional banking system, as we heard from deutsche bank earlier. it has got big problems with inflation. for europeang brain stevens, despite significant stimulus. breakeven's have come down to historic lows. francine: how much is energy? if you think central bankers are saying, we are trying our best -- i do not know if it is a productivity problem. it is a growth problem. but it is not as easy as that. you see growth pick up a little bit. you see growth maybe not picking up. daniel: is it demand with

inflation? at this juncture, the ecb and the central blanks -- central banks think it is a cost-plus issue. either the consumer of the person in the street has inflation expectations, and in less they can feel confident, they will not deliver on that. there is a conversation about bernanke from where the ecb has gone. policy -- does not have a structure in place in europe to do that. merkel has an election coming up . she has her own issues to deal with. she is not going to help the ecb out. i think they are at a dilemma in this juncture. has the ecb will remain in place for quite some time to come. francine: up next, the imf wrapup. tom keene joins us in new york, and we wrap up the best interviews. this is "bloomberg

surveillance." keene waking up in his apartment block and flying into the studio. ♪

francine: i am francine lacqua here in london. this is "bloomberg surveillance." shortly, we will be joined by tom keene as we kick off this new hour. first, markets lower this morning. let's head to mark barton at your terminal for an asset check. ,ark: this is the stoxx 600 0.4% lower, the longest losing run since september 14. banks are down, led by deutsche bank. negotiations with the department of justice to resolve handling

of mortgage-backed securities are continuing, according to people familiar with the matter. in light of the second debate last month, the red line is donald trump's average poll according to real clear politics. a white line is the peso against the dollar. the peso is seen as a proxy for trader views on trump's prospects. as the polling rate comes down, the red line, the peso has been rising against the dollar, up by as much as 2% earlier, now up as much as 1.4%. cnn conducted a poll after the debate. 57% of registered voters who watched said clinton won. this is a great chart. this shows startling -- shows versus gold -- this is gold in dollars, gold in pounds, excuse me. old in dollars fell the most since september.

concerns the fed might raise rates. some investors favor gold in pounds as a store of value as currencies weakened. his is evidence of sterling weakness against the dollar since last monday. what a big fall on friday, falling to the lowest level since may 10, 1985. 4.1% over the week. that was a massive fall, the biggest since the referendum. francine: mark barton with your asset check. greece's debt returned to the spotlight as finance ministers meet in luxembourg. the greek finance minister spoke to me at the imf meeting ahead of the gathering, and criticize the position of his german counterpart, mr. shovel, on debt relief. >> i explained that i do not understand how he has this triangle where he believes the program will work, the imf will be on board, and there will not be debt relief. someone has to give. i think the down in his heart, he understands that. francine: for more on the views out of the imf, i am joined by

tom keene out of new york city, who is still trying to recuperate from the intensity of the imf coverage here with us in london. tom, we had some great conversations. ceo's,e to the ubs francine lagarde, and hildebrand. it was clear that no one is feeling good about the next 12 months. tom: what is interesting is a clear message that no one in europe is in charge. interview after interview, what i noticed was, we really do not know who we are talking to. that was the theme from lagarde and mr. hildebrandt from blackrock. for me, it was less about brexit and the united kingdom, or for that matter greece, and much more about who is the adult in the room for europe. francine: i think a lot of the chat was actually looking forward to your presidential debate. a lot of people were asking questions, even certain governors that shall remain unnamed, who were asking what a

donald trump presidency would mean for stocks across the world. we also had to of course talk about deutsche bank. tom: i note mexican peso this morning over the weekend -- not just the debate, but the news flow and outrage over the weekend -- clearly, a stronger peso signals a better monday for secretary clinton than mr. trump. with that said, we will see how the poll's out in a second debate. we go to a third debate october 19, i believe. on deutsche bank, a pullback well within the range this morning. on "surveillance" on morning the news flow out of deutsche bank. it is up in the air. francine: and certainly the stock is not liking it at all. we had a conversation on saturday afternoon with the president of the swiss national bank, mr. thomas jordan. we talked about the trouble in the world, and i asked whether he could go further into negative territory.

mr. jordan: it makes sense for switzerland. you have to distinct between exchange rate channels for negative rates and the credit channel. there is evidence the credit channel is working. francine: would you be comfortable going further into negative territory? after johnson, we have room to go further if necessary. it seems again, central bankers keep saying they can do more and have the tools. markets may come in certain cases, the testing that. like mr.t of people jordan were talking their book. it will be interesting to see what the exogenous shocks are, led by economic growth, lack thereof, and the distraction of the united kingdom, how it adjusts. i was suggest to mr. jordan's comments, the real observation at the imf was how disappointed people were in the strasburg and bronislaw meetings. you wonder, how do they get things done -- strasburg and bratislava meetings.

you wonder how they get things done by the end of the year before things clicked in. we will haveine: more on what tom is talking about and look at ethics moves. peso fx moves like the chart. we get back to the manager at bernstein. dan, we are talking about the federal reserve, brexit, and the debate over there. there is also the problem of populism. i am not sure if you are the , or the so-called elites -- if you are a newsmaker, policymaker -- how you address that so voters do not go too much to the right or the left. responding very belatedly. classically in the uk, we have seen through the conservative party conference, looking at means of stimulus they could target more closely. i think theresa may's policy advisor george friedman said earlier today, we want to find

mechanisms that we can channel the money more directly to who we want -- i.e. infrastructure spending in the north of england, the area most people voted for brexit. and the infrastructure spending and scotland as well, to try to win them over. francine: thanks so much for the insight. daniel lawfully -- loughney. misconduct of sexual fly around the stage of round two of the u.s. presidential debate. who one the latest bout? ♪

francine: i am francine lacqua here in london. the second presidential debate in the u.s. lived up to expectations as a bitter and personal face-off. mr. trump: i did not say that at all. i do not think you understood. this was locker room talk. i am not proud of it. i apologize to my family. i apologize to the american people. certainly, i am not proud of it,

but this is locker room talk. what we all saw and heard on friday was donald talking about women -- what he thinks about women, what he does to women. and he has said that the video does not represent who he is. but i think it is clear to anyone who heard it that it represents exactly who he is. politics reporter kevin joins us from st. louis on this story. how did donald trump respond to the comments caught on tape? kevin: it was the political showdown at the second of three presidential debates, and donald trump apologizing for his remarks on that 2005 sexist videotape. then he hit back, and he hit back hard against hillary bringing up the several women who have accused the clintons -- bill clinton in particular -- of lewd conduct during the clinton years.

donald trump had his back up against a political wall. he came back biting hard as he is a lot of criticism from not only democrats, but members of his own party. he is vowing to stay in this presidential race. francine: there is a lot of talk about donald trump's running mate, mike pence, being less than impressed by this controversy. will he remain well? kevin: i put the question to national republican spokesmen in the spin room after the debate, and he told me that trump and hence are 100% "unified." oath are scheduled to hit the campaign trail today as well as later this week. despite top republicans inside the republican party calling on him to drop out and to replace pense, the-- with trump campaign is soldiering on. hillary clinton maintained a

lead in national polls and program states. she said donald trump is unfit to be president. hard andump hit back said if you were president, he would put her in jail. this was clearly one of the most, if not the most, contentious political debates we have seen in american political history. this thing is going to continue to get nastier at the next debate, scheduled in las vegas for next week. so much. as you kevin is in the last 48 hours. "bloomberg surveillance" continues. we will have plenty more. tom keene will be joining me. we will talk about imf, governor kuroda, and mexican peso. ♪

francine: the tale of the tape

-- politics get personal as 30 rough minutes define the bank yet.ton rematch. for deute the bank continues negotiations with the u.s. department of justice after reports john cryan left d.c. without an agreement. governor kuroda signals the bank of japan may not change its inflation goal until 2018. tom keene is in the ark. we had an interesting weekend. we had an interesting debate. markets definitely seem to be on the move. tom: i love the "game of thrones" allusion on twitter. it was extraordinary. i have never seen anything like it. one woman said, you are watching the debate with the door closed and the volume down and your hand on the off of the remote control in case the kids walked in the room. unfortunately, at the moment, it was funny, but it was not funny last night. francine: it is funny until the markets get a hold of it.