francine: oil hits the levels last seen 15 months ago as the u.s. and saudi's pledge a joint effort. samsung has stopped the sale of ,ts galaxy note 7 smartphone leading to a shareware out. republican house speaker paul ryan says he cannot defend or campaign donald trump as follow-up from a compromising tape continues. i am francine lacqua in london. breaking news out of the iea. oil one of our top stories.

the oil market rebounding faster as opec implements the deal that -- i do not know if it has had an impact. it seems pretty self-fulfilling, right? we knew they were looking for some kind of agreement to freeze production. if that is implement it, it will help the oil markets. the iea coming out with its monthly report, saying they see the oil market rebalancing faster if the opec deal is important in. it seems a given, but who am i to say? you see brent at 33.01. we will have plenty more on the iea and go live to a stumble for the petroleum conference. first, here is sebastian selleck. seb: the republican party a conferencecalled on donald trump's embattled campaign after paul ryan said he will not defend or campaign for

the candidate after the comments about women. stick to illegal immigration and stop running him. a new poll shows hillary clinton enjoying a 14 point lead, the largest gap so far in that survey. since i has suffered its biggest intraday fall in a month after asking all retailer partners to stop sales of its galaxy note 7 smartphone. there may be a new defect in the phone and they advise users not to use it. since i'm has lost more than $13 billion in market cap today. goldman sachs says china's currency outflows maybe worse than they look. of increased outflows could stem the recent column in china's foreign exchange market. more than 2600 analysts and journalists in more than 106 countries. i'm sebastian selleck. -- salek. the dollarncine:

climbing on the bed on. the european stocks are pretty much unchanged. touchutures declining a after a retreat in asia. we saw stocks fall, led by technology shares, after samsung told retail partners to stop sales and exchanges of the galaxy note 7 smartphones. i want to focus on the ftse 100, and the pound. we will speak to the ceo of saints very a little later on on the count full and whether it is helping or curbing retail sales. i decided to go for oil because will kennedy is here to talk about oil. this is the kennedy graphic, an homage. the latest is the blue graphic on russia.

saudi arabia, you can see, is the white line. it is at a high compared the last two years for them, down a touch. the wti price -- you see it is really russia that has been producing and let more in the past, which is why this agreement may be in place sooner than later. is training. our guest is diane, founder of ncods economics. also to join us is bloomberg's managing editor for energy and commodities, will kennedy. you are an expert in oil, right? we have the iea saying markets will rebound if the opec agreement goes through. that is a given, isn't it russian mark -- isn't it? you have seen acknowledgment that some kind of

meaningful action is going to happen. saudi arabia came to this big meeting of energy ministers goingday and said, we are to change the market than mi. things need to change. putin said he is willing to take part. goldman sachs said, we think something meaningful is going to happen here. it is important to remember, since the opec meeting in algiers, price is up 15%. it has had a material impact. that has taken place in the face of a rising dollar, which shows the markets really responded. francine: how significant was putin's intervention yesterday? will: people are skeptical about whether russia will ever engage in real demand management. run byn oil industry private companies. they have very difficult weather conditions to contend with. but the fact he was there and send it i think means they are willing perhaps to freeze production, at least. that said, your chart shows very

clearly the record level. they pumped 11.3 million barrels a day in the first of this month. francine: how much do you look at oil? diana: oil is really important. in the u.s., the oil dividend was not as much as people thought, because we now produce oil. between 40 and 50, the shale fields are productive. investment has begun to pick up. it is the element that is not really being taken into account in terms of how much oil will come on. we have to go through the balancing act of next year. by mid-2017, i think you will see a pic of continuous production which could put a lid on these prices. the oil dividend is something most people do not understand. not only was it the oil dividend for consumers, but it was a dividend to be able to accept jobs at low wage rate. people literally could not accept minimum wage jobs. not only has minimum wage gone up at the state and local level,

but we have seen commute costs -- we do not have much mass transit. we do in chicago, but not the u.s. in general. that has had a major impact on people's willingness and ability to get jobs. francine: i grew up thinking lower oil prices means good things for the economy. on oil fresher producers. but what we are struggling to understand in the last five years -- we cannot get inflation. this is partly due to the fact that oil is a stop. but it does not give the lift we thought it would to the economy. diana: it has more complex reaction functions than it once did. everybody initially, when they saw oil prices plummet, said this is great for u.s. consumers, consumers in europe, consumers in the uk. at the end of the day, it is not the same equation it once was. we want to be in a sweet spot of oil. --hink $40-50 five dollars

$40-$55 is a sweet spot. you are not causing too much displacement for businesses that, when oil businesses are high, cannot luncheon in the economy. francine: the saudi oil minister said $60 by the end of the year is achievable. is that achievable? will: it seems prices could be heading to test that level. but the reaction of producers of shale -- the iea director this morning said $60, most shale production is going to come back. what the market is going to be looking for is the shale cap. where does the u.s. shale industry cap prices? it is probably going to be very hard for prices to get much beyond $60 per share. they can produce oil more efficiently and reduce the cost. what opec is really doing is taking the short out of the market. it once oil prices, but also

wants to guarantee we do not see the slump like last january, down to $30 a barrel. at the very least, reactions from algiers mean that is not going to happen again. diana: one other point. the saudis were attacking not be shale fields in the u.s., and they are going to freeze production at record levels as well. there are a lot of things at play. i think the ceiling is there. you are right. that is a floor. francine: will kennedy, bloomberg plus managing editor, of ds economics. the ftse 100 ticking higher, gaining 0.3%. points,ill down 118 almost at an all-time record level. that has to do with the weakness in the pound on the back of brexit. stay with "surveillance." coming up, fed watchers -- could these minutes provide clues and 'sasons behind last month

dissent? we discussed brexit and why sterling keeps sliding. as paul ryan backs away from his party candidate or president, we talk about political risk in the world's largest economy. this is bloomberg. ♪

francine: in london, this is "bloomberg surveillance." let's get to the bloomberg business flash with sebastian salek. seb: shockers in asia and the u.s. -- shoppers in the u.s. and asia snapped up lb hm handbags

and perfume. gains from the fashion and leather goods division. fell 11%t -- takata after it was said to be considering bankruptcy protection in the u.s. the airbag maker says no decision has been made. the commitment is providing a stable supply of products, and talks with related parties are ongoing. a decision to pull a ukip oh due -- to pull its uk ipo due to uncertain market conditions. francine: a busy week for the fed. tomorrow, we get minute on the fomc decision. three dissenters came out in favor of a hike. on friday, jelly yellen -- janet yellen gives a speech. in the meantime, a bold call from pimco.

for more on the rate debate, onk is the ceo of ds economics. it is a real pleasure to see you on this side of the pond. it may a sense of where you see the fed going. diana: i think we will get a december rate hike. remember, the federal reserve does not do policy analysis related to the election in any of their modeling. whatever the election outcomes are, there are things they might have to take into account once we get there. with that said, yes, yellen is there. francine: which would be what? can we expect the kind of brexit -- let us say donald trump wins. the markets are not pricing in for it. is that a brexit scenario? diana: they are also not pricing in a route with clinton, where you have the senate and the house godin -- the democrat. i do not think that is likely. the senate could, but i do not think the house is likely to go. if something happened like that,

you could see a reaction the market has not priced in. financial stability is a fed mandate. we do not like to see the tail wagging the dog. but it does put them in a precarious position in december. that said, i do expect a move in december. the interesting part is that even small moves -- it is only a quarter point. jamie dimon -- i used to work with jamie. he says it is a small move. it is a doubling of the fed funds rate. in the context we are in, even small moves can have outsized market impact. that is what the fed is trying to be cautious about, is make it as orderly as possible. and they are starting to ask -- ofaccept larry summers' view the world, secular stagnation, or the new normal. francine: let us say they do a small hike in december. what are the chances of them having to reverse it because we see a recession or something, inflation going nowhere in 2017? diana: i think the chances are pretty small in 2017. we overestimate how fast policy

works. thator good policy -- policy, it is sort of like that leaky faucet you did not fix. it continues to leak, or maybe you have a pipe and you put a bucket underneath, and all of the sudden, you have a flood. you do not connect it to the fact he did not fix it for years. i think that is how policy is. the same thing with brexit. it is a huge move in the pound right now. before the average person on the street, it does not seem cataclysmic. it discredits the forecasts themselves. the same thing is true of trump. there are issues he could move quickly on, with large market implications in the u.s. economy. but the chances of it happening in 2017 in general are still pretty low in terms of disruptions the fed will have to stimulate. the real issue for the fed is, is fiscal policy going to be more stimulated? i do think we have bipartisan support. francine: it is difficult to see

what policies donald trump will put in place. diana: the uncertainty factor is an issue for markets. one thing people do not realize is, what could he do right away? you cannot renegotiate nafta. but he could use legislation clinton signed into effect where he says, you are being hostile, mexico, so we put tariffs on you. that would shut down manufacturers in the united states. that would shut down major retailers, doing the same to china, and raise prices rapidly. there could be massive economic things. but what would people let him do? how fast could he do it? we do not know. francine: this is insiders telling us that he does not really have a transition play, which is a little bit like the brexit for the uk. if you have a political vacuum for one or two months, what does that mean? usually, presidents on either side of politics have people in place to keep it smooth. diana: even during 2008, it is

one thing hank paulson commented about. it was horrible to go through the transition. things were happening so quickly, you could not coordinate policy between two administrations. in the uk, you had a plan b, with mark carney saying, we did nothing brexit was going to happen, but we had planned a stopgap. we do not have that in the u.s. fed. we do not have an ability to deal with that at the fed. nor do we have that in the political process. that is the larger arch you -- larger issue. brexit as a look at symptom of an illness we are experiencing in the western world. it is not just the uk. it is in the u.s., in the eu. isolationism, nationalism we have seen come out, and hate is a very popular thing and politics these days. francine: and that has longer-term implications for everything we do. thank you so much.

the founder and ceo of ds economics. we will be talking a little bit more about some of the models we can use in this day and age, and we will talk brexit with diane a little bit later. up next, why the nobel economic prize is a win for micro over macroeconomics. we are also getting breaking news out of south africa. this is the south african falling on reports the finance minister, on the show just a arrested.will be the south african rand is falling 3%. i will get the chart up and we will follow the breaking news closely. ♪

francine: i am francine lack what here in london. over the last six minutes, there has been a sharp movement in ram, weakening as much as -- movement in rand, weakening as much as 3% against the dollar. south a report that the african finance minister, who was on the show last tuesday, will be charged with fraud. we understand that in johannesburg, there is now a briefing with the police, and as soon as we have news one way or the other, we will bring it to you. last week when he was on the program, he was asked repeatedly whether the probe means that his job and the stability of the south african rand will be at risk. that heme three times

did not believe in it and had not been kept up-to-date by the police whether they were still investigating him or not. this was only last tuesday. we heard from a couple of leaders in the country, saying whatever happens, the probe must not destabilize south africa. you can see the huge move as we listen to the police giving an update on this probe, with huge moves in the/rand. still with us, i ad -- with us, diane swonk. the first reaction is it is a mess because we have not been kept up-to-date. as an investor, you would shy away. thisto: this is -- diana: is an issue in emerging markets. thisl prices fell, it corruption emerged. brazil is in a depression. there at least is an actual action to deal with the corruption. .e have yet to see

this is the beginning of a tip of an iceberg. titanic, but this is a tim of an iceberg in emerging markets like south africa, where you really have corruption that is broad-based, and they have yet to deal with it. many people thought it would happen more rapidly. it is not. francine: the other concern is that this was a finance minister that at least by the markets was well regarded. which is why you are seeing these huge swings. storyhave a big profile today about bob diamond, the x ceo of barclays. betade a massive personal on africa, and it is not going well because of the corruption. this is not just money. this is people's lives. i was in south africa in the early 90's. i met nelson mandela. the optimism was incredible. the potential of the whole continent. that all seems to be disappearing. it is terrible. i would be careful about too broad of a brush.

ofre is still our pockets optimism. i think africa is an interesting place to be. but you have to be more careful how you tread, because nigeria is down at 180, not only because of terrorism, but falling oil prices. we have seen with these companies it has really been revealed, unfortunately across many emerging markets, how much they did not deal with by using the paper of those profits on oil. francine: thank you so much. this is the picture. 14.22 four rand. -- for rand. if you look at the six members ranks index, it is falling 3.2% on the backs of a report. we still do not have confirmation. ♪

francine: i am francine lacqua in london with the first hour of bloomberg "surveillance." breaking news out of south african, the rand falling 3%

after a report the finance minister is to be arrested. this is according to a local news station. we have two reporters on the ground in johannesburg listening to a news conference given right now by the south african police. the market reaction has been quite significant and quite violent. the9 for the rand against dollar. let's show you the banks. this for the moment is just on ordhan will ber. g arrested because of the probe that we knew was going on. about speak to him just -- exactly seven days ago on this program. he was talking to us from new york. we repeatedly asked him whether he was concerned about the probe. .his was seven days ago

he told us he had not been kept in the loop on whether he was still being investigated or night. -- or not. when i asked him whether it would put his job and therefore a little bit of the stability of south africa at risk, here is what he answered. >> as far as the so-called investigation, that is no more than a political mischief. you have the elections in the u.s., you have seen the brexit in the u.k., and the police do not get involved in those situations but i am sure we in south africa will resolve these difficulties. francine: the story seems to have moved on from last tuesday. the deputy president of south the deputy president of south africa saying the probe would not steve -- destabilize south africa it also reminded that no one is above the law. let's get to the bloomberg first word news.

sebastian: the republican party chairman has held a hastily held conference. that is after paul ryan says he will not defend or campaign for the billionaire. said that brian should focus on illegal immigration and stop attacking him. poll showing hillary clinton and join a 14 point lead. suffered its biggest intraday fall in a month after all retail partners have been asked to stop selling its smartphone. they are advising owners not to use it. they have lost more than $13 billion in market cap today alone. charles evans arguing in favor of keeping the interest rates low. who is slatednker to become a voting member of the fed next year says prematurely

tightening policy could carry costs. >> repairing damages incurred from the great recession continues to be critical for improving labor force quality for stronger, longer-lasting growth. overestimating the national rate inferring the u.s. is at full employment, and prematurely tightening policy would carry high social costs. sebastian: global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i'm sebastian solly. this is bloomberg. are just getting some more on that breaking news out of south africa. the south africa prosecuting head saying taxes work in a strange way. a special police unit is basically probing the finance minister over and allegedly illicit surveillance unit that he set up when he led the tax

agency. they say that he was offered the chance to respond. no official word on whether he will be arrested or not, but we have had quite a bit market movement. we also have does reporters on the ground in johannesburg attending a news conference and if there is anything on that we will get back to it. the uk's brexit secretary broke with government convention yesterday to say he could see advantages to the british pound's 30 year low. david davis argued the decline would help exporters. let's discuss more. mark and diane, thank you both. from a truly economic point of view, there was a feeling amongst a lot of people in this country that as the pound slide it means it is good for exports,

it means the economy will gain traction and tourists will come to the shores. but if it is too protracted or to violent it hints at a weak economy. diane: one of the interesting issues, i have a lot of clients who are global manufacturers. the production facilities in the u.k. are running full out. they want to take full advantage of the low value of the pound and they have put all investment on hold. they are depleting these factories, doing everything they can. it gives you a distorted initial serve in activity from these bacteria -- from these factories, and there is no future. that is the way you have to look at this particular reaction to the weaker pound because we do not know what the trade relationships will be, what kind .f tariffs will be out there no investment, it shriveled up overnight.

to run their production for loud but nothing going forward. investment has already been a problem, particularly in the u.s. those plants can deteriorate fairly rapidly. francine: what have we actually learned in the last 10 days? they keep going backwards and forwards on a list, no we are not. it does not seem there is a cohesive policy to deal with brexit. mark: a currency is like a share price for a country which is why we are seeing the rand paul now. what we have learned is that -- seeing the rand fall now. there is not much faith in the management of bricklin -- britain plc. fact that the flash crash dropped all the way to 1.18, it has not come all the way back. it is not a flash crash, it is

just achieving and new low. francine: a lot of people are saying this is helpful for the u.k. economy. is there a sweet spot are able to export more whilst at the same time not sending a panic alarm to the rest of the world? mark: we are pretty close to looking at this as a sterling crisis rather than a weakening basis on the fundamentals. diane: that is the real issue. isk: the last thing you need rising, accelerating inflation because then you end up with stagflation. diane: that is a real concern. a depreciating currency in a country that is an emerging market country, that is one thing, but they also have to do with inflation. this is even harder in a country where so many policy uncertainties are out there. francine: we are following what is happening in south africa. we have managed to speak to the

finance minister and he is telling us that his lawyers will issue a statement shortly. i do not know exactly what that means. it is quite unusual to speak to someone who was in the middle of an investigation. he says, my lawyers will tell you shortly what happened. n said the police will come to issue a summons. not clear whether that is an arrest. we do have reporters on the ground in south africa chasing that news story. this is a picture for the rand. a story that started breaking about 15 to 20 minutes ago on the back of a report by a local news station saying that the finance minister was going to be arrested. this is after the hawks, the local special police unit is probing the finance minister over the surveillance unit that

he allegedly set up when he led the national tax agency. we understand that the police will come to the house and issue a summons. this is the rand. the reaction has been quite significant against the dollar, weakening around 3%. as soon as the news hit the bloomberg terminal. if we look at the banks, the banks are down by 2% to 3%. we will have plenty more on that throughout the day. there is the banks. they are under significant pressure. we are trying to figure out exactly what is going on. 3.5%.rd bank group down latest on thisy probe. we will have plenty more on that after the break. we are hoping to go to one of our reporters on the ground. the rand drops on reports that

the finance minister is to be arrested. this is bloomberg. ♪

francine: this is bloomberg "surveillance," francine lacqua in london. the rand has weakened more than 3% after reports that the finance minister will be charged with fraud. our reporter in johannesburg has this report. you have been listening in to the press conference by the national prosecuting authority and it is confirming the initial reports that he was arrested. >> it has confirmed the initial ports -- reports that he will be served with a summons to appear in court. the head of the prosecuting

authority says the supposedly rogue unit at the tax collecting revenue service in south africa, while the finance minister was in charge of the tax collecting agencies was formed illegally and run in a bizarre manner. we do know that at this moment, the finance minister as well as others with that tax collecting agency have been summoned to appear in court. francine: has mr. gordon respect -- mr. gordhan responded? >> we have just seen headlines coming through from the finance minister at an event. he is just outside johannesburg. he said he received a call from his family that a police officer presented himself at his home to present the summons to him. he has also said that he has been summoned to go before the court on the second of november this year. he has also sent the public must

ask themselves why these events are taking place just weeks before he is due to tell the budget, on thee 26th of october. francine: thank you so much. let's switch gears. , let's turn to the u.s. and widening risk on the republican party. paul ryan backed against donald trump yesterday saying he will not defend or campaign for him. for more on the u.s. presidential race, diane swock is still with us. we were talking a little bit about the u.s. presidential race earlier and paul ryan is a hugely respected figure within the republican party. how does that shift the debate? the vote for trump has been a vote against the establishment and paul ryan represents the establishment. one of the things republicans are worried about is how bad

will their losses be on november 8, will they lose the senate and the house? i do not think that is likely. paul game -- paul ryan has a long game for 2020, he would like to run for president himself. we will see chuck schumer move up in terms of leadership. ryan and chuck schumer are willing to cut deals with each other, and there is bipartisan support to move forward on some very important policies in the u.s. depending on who gets elected and how everything falls out between the senate and house, how far and how rapidly we get some of those changes like corporate tax reform. infrastructure spending, we do desperately need that. the one thing that is completely absent is deficit talk and long-term fiscal sustainability. no talk about entitlement reforms.

the bottom line is that there are problem going forward. verye really talking about large deficits in the united states at a time when i do not think the fed will be able to raise rates. fiscal policy would hand the baton from the fed to fiscal authorities. francine: you do not want to raise the rates too much because that brings about a dollar rally. diane: that is the last thing we need, it would be dis-inflationary. we have a catch 22 situation. i think we will get some much-needed fiscal policy no matter who gets elected. there will also be some negatives depending on who gets elected. the biggest indicator has been the peso-dollar relationship. francine: of course, the true proxy for a trump presidency. diane: anytime we see anything where he gets closer in the

--ls we see the peso pressure on the peso is substantial. , wecine: we do not know have contradictory messages from hillary clinton on how to deal with the banks. how do we know whether she becomes much more centrist? diane: this is from all of my friends that are political handicappers, the poll she is going to have to face is on the left wing of her party. the republican party, the left the democratic party is also very influential. we have seen the rise of bernie sanders and elizabeth warren gained traction. they are not into playing with kids gloves on the banks. these are also very anti-free-trade kind of people. they want some similar things that the trump and the right wings want as well. nationalism and closing down of

borders, that is being underestimated. i think there is going to be a lot of tensions within the democratic party. one political handicapper who is very well respected, he is now expecting by 2020 two c four parties in the united states -- to see four parties in the united states. our system is not built for that. francine: you are becoming so much more european. diane: that would be a very good thing i think in many ways, but without a context or legal framework. if trump had dropped out there was a framework to put into office and have the election. i have already voted. we vote early and often in illinois. we do not have the ability to just recall an election and call a new election. francine: up next, the rand

drops as south african banks plummet amid reports that the finance minister is arrested. we will bring you the markets and breaking news. ♪

francine: this is bloomberg "surveillance." we have spoken to south africa's finance minister, saying police came to his house to miss -- serve a summons. let's get to the bloomberg for an overall market check. mark: lawyers will issue a statement shortly after this of eyewitnesses that say province or dan will be charged with fraud. every single major currency is rising against the rand. the united states dollar is up 3%. this year the rams has risen by 8% against the dollar, including today's decline on this big surge for yield. the rand is plunging. stockson to other moving , lvmh is the big gainer.

the world's biggest luxury goods maker reported third-quarter estimates that eat estimates -- .- third quarter estimates the ftse 100 is that a new closing record, 7103 is the record high in april last year. we are at 7107. this is six -- since brexit. the small-cap index is at a record as well. 250 was at a record also. look at gilt when they hit a record in august as the pound boosted inflation expectations. does that mean the bank of england will do less? --s shows the market valley value of the world's negative yielding bonds. the total value, 12.12 trillion

in june, the highest month end total since it began its unprecedented climate in august 2014. stats, some interesting japan accounts for almost half the world's total of negative yields. 44% comes from western europe. -- u.k. accounts for point .5%. francine: thank you so much. final thoughts from diane swonk. we were meant to talk about macro economics and negative rates and it is really news that has taken over. we received news that the finance minister received a call from his family to say the police brigadier arrived at his house to deliver a summons. as soon as that news was randered, the price of the has shut down significantly, currently at 14.23.

diane, he were on set with us when this broke. whether it is true or not, this is not helpful for an economy that needs to be stable. diane: that is right and in a broader sense i think it is a cautionary tale. we see politicians in all parts of the world starting to infringe upon the independence of finance ministers, central bankers. is here someone that is credible, that they are attacking, it was going to deliver a budget that would show bad things. this is where markets come in and give discipline too bad politicians that make up things. they say there are no consequences, this is a lie. thee are consequences and problem is when do they fall out to the person on the street. unfortunately they take time and accumulate over time, and it

really sets back a country like south africa even further at a time when this was considered a beacon of hope. you have to think of it in a global context of a cautionary tale when you go after legitimate people who are dealing with financial markets like central bankers, along with finance ministers that are respected in the global marketplace, there are consequences when you go after them domestically. francine: diane, such a pleasure to have you with us. bloomberg "surveillance" continues. i will be joined by tom keene live from new york. we have an extra two hours of surveillance and we will be going through the rand and found. -- pound. ♪

francine: under pressure the saudis agree toter a and

decrease production. samsung electronics asks retailers to stop selling its galaxy note phone. this is bloomberg "surveillance ," i am francine lacqua in london, tom keene in new york. it seems like it is far away but it is a lot of linkage to what we are seeing in emerging markets. what did you take away from our conversation with the minister a few days ago? francine: we had the minister here and we saw him at the imf. we repeatedly asked him whether it hurt the stability of his country as to whether he were to be investigated.

he said at the time that this was political mischief and he had not heard at the time from he did not so that even know whether he was investigated or not. let's get to the bloomberg first word news. we are sticking with south africa, the rand is weakening against the dollar after a report that the south african finance minister will be charged with fraud. he discussed it with bloomberg earlier this month. >> as far as the so-called investigation, that is no more than a bit of political mischief which every country will have. you have the u.s. election, you have the brexit in the u.k. get sure the police do not into those matters but we will resolve it. taylor: we will have more details on the story as they become available. war in theil

republican party over the presidential bid. the chairman held a conference the chairman held a conference call to rally behind trump. this came hours after paul ryan said he will no longer defend or campaign for the nominee after a vulgar video was released. pollc/wall street journal finds hillary clinton with a 14 point lead over trump in a head-to-head matchup. regulators in singapore and switzerland are slamming for and time under -- money laundering thehis is associated with troubled malaysian fund one mdb. the local branch manager has been arrested. british prime minister theresa may says brexit ins brexit but a london court will decide whether

it is up to her to decide when the u.k. leaves the eu. they will try to convince the --ge that she can target global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: let's get to equities, bonds, currencies, commodities, a nuanced data check. futures go the other way from yesterday, the bond market opened today. higher yield risk on, maybe december rate hike. euro weaker, oil elevated. the vix showing the equities from 14 into 13.94. sterling getting to way 1.20

level rather quickly. euro weakness and dollar strength as well. francine: i think that is absolutely the crucial bit and we need to look at pounds. euro weakness, we have a survey out of germany. they survey the current expectations, current situation. much weaker than expected for the month of october, two months after brexit. we were expecting 59.5 and we got 55.5. expectations for the future, much better than expected because we were expecting a four 6.2.e and we got a this is the picture for euro -pound and dollar strength. that is my acid check. the rand, 14.25, it fell 3%

after the probe of the finance minister. , a: two standard deviations jump in weakness. i got the wrong screen up. i am going to get up the right screen this morning. is. is -- there it i wanted to get an update on one of our acclaimed charts. this is important. notice the leg up in the two year yield. important is we are heading directly towards the extrapolation of what was. if you take the optimism of a year ago, we are going right for that extrapolation. we triangulate on tuesday, it is triangulate tuesday and we are coming back to 1% to year yield.

was that too much geography -- geometry? francine: the geometry is fine, it is the busyness of the graphic. it is very baroque. what i want to show you is what brand has been doing the last three days. -- what rand has been doing the last three days. a news report has confirmed that the finance minister will be arrested. secondbout it for one because we understand that he has been arrested because a special police unit is probing him because of a surveillance unit that he set up when he led the national tax agency. , put this in the context of the nation. -- does heto resign? have to resign? diane: we do not know yet -- francine: we do not know yet and

we care about this because he is well respected by the market. he was delivered -- slated to deliver a budget that would have been pleasing to the market. o, you have been listening to the press conference confirming the reports on the minister. >> we have been listening very closely. the national prosecuting authority saying they want to hold an impromptu briefing and this of course clearly caught the finance minister by surprise. he stated he received a phone call from his family stating that he lives -- a police thiser was at his house was definitely not something he anticipated. francine: we asked him over and over again seven days ago whether he had heard from authorities. he had said no.

whether he was concerned about it, he said this is just political mischief. davis a sense of how he has responded and what it means for the country. is he arrested, do we not know yet? amogelang: having been caught quite off guard he has been quick to say that his lawyers will issue a statement later on today. there have also been reports that he will hold a briefing to bring clarification, but the finance minister has also said that people must ask themselves why these allegations are coming up a few weeks before he has to budget.the country's we may not know exactly what will happen but he is sure to update us. tom: is the risk here to the minister personally, or is the risk to the standing government? amogelang: the risk is to the country's economy, to him

personally, as well as the standing government. we know south africa is set to grow at the slowest days since the recession in 2009 and this man has steered the economy through the recession. last yearappointed when the former finance minister was fired. he has tried to stave off a credit rating downgrade. seems to bething he taking quite personally, and definitely a risk to the economy. weekse spoke to her a few ago, we go further on global trade with catherine mann of the oecd and brandeis university. trade,slowdown in world must watch our next hour. ♪

francine: this is bloomberg "surveillance." tom keene is in new york, i am francine lacqua in london. taylor: lvmh is reporting revenue that beat estimates. shoppers snapped up celine handbags and new louis vuitton perfume. to $10.2es rise billion led by stronger than expected gains. china's currency outflows may be bigger than they look with goldman sachs morning a rising amount of capital exiting the country in yuan rather than dollars. 27 point $7 billion in yuan this year.ft oldman says such large cross border moves can be explained by

-- china's largest electric car manufacture has secured a loan commitment to fund the development of its monorail system according to people familiar with the matter, who say they are scheduled to sign the cooperation deal today. they believe a monorail will represent the next growth area for the electric carmaker. francine: thank you so much. this is a picture for the rand as we speak. we saw a pretty big move because it was down some 3%. it has plunged the most in more than three months. this is after the finance minister said he had been summoned to appear in court. prosecutors said he would be charged. this is on the back of the probe that came to light in august. then we kind of forgot about it but this is after there is a

probe into his time as head of the tax authority. this is just the latest development in a battle that has pitted the finance minister again some of the state owned companies. let's bring it back to the markets. great to have you on the program. there is a lot going on in the markets. we have this layer of politics. if you are an investor in the market, it seems the direct correlation between central banks has been washed out. >> what does not kill you makes you stronger. i think what we have is clearly a lot of pent-up volatility markets. until that volatility creates an event that is massively unexpected, seems to be continuing with the liquidity. the key three things are going

, u.s. ratesointment , and brexit. oil of course is another theme that might be ramping up depending on how the november opec meeting turns out. i think those are really the key four things. francine: these are things that we talk about day in and day out. is there concern that there is a shock that we are not saying? goldman says the outflows out of china are larger than we think. virginie: i think it is all about what the market expects. people had talked about brexit but when the results came they were so complacent about it that that had an impact clearly on the currency. on china in particular, i think aboutcent announcement the debt for equity swap is quite interesting. this is something, if you

remember, that china had put together were put forward in the 1990's to try to take some of the debt out of the system. corporate debt is quite high. in terms of the flows, we need to see more data for the other areas of surprise that can be anticipated by the market is irrational russia, what is going on there. prices, under more and more pressure. back to, or there may joe -- major potential disconnects between the three or four components besides with the market expects. tom: synthesize it across markets. the brutal fact is into october we are beginning to see dollar strength. bring up the chart, the dollar index.

sterling.% euro, 12% pepper, -- some salt, and parsley as well. we are in a range. what does that mean for equities worldwide? virginie: i think it depends on what sector so if you thought you have that rate increase in december, clearly a rate increase and a stronger dollar will have an impact on commodities, will have an impact on certain emerging markets, and clearly have an impact indirectly on europe and the pound. i think the strongest impact would be on commodities and e.m.. factey question is the that over 50% of people expect rates to go up in december, so the real surprise would be if they do not go up in december and therefore a weakness of the dollar. tom: do we get out of the range

right here? overnight offrapy the red sox being swept by cleveland. do we go through this range? stabilizeris the d for the emerging markets system that you are expert in. virginie: i think if you have not only one rate increase but the guidance for a second rate increase in 2017, not too far after the beginning of the year, i think that would bring you to the level that you are talking about. if you only have one rate increase in december and the message is, we are just holding stable, that might not be that dramatic. tom: in these ranges you have things moving, stir line under a one point -- sterling under a 1.23. on radio this morning, the nobel prize winner from the

massachusetts institute of technology, if you do one thing today read the bloomberg view column on hallstrom and heart. it is brilliant. ♪

francine: we are getting some more breaking news, out of -- samsung, saying saying it is ending production of the galaxy note 7.

samsung dropping quite from 8%antly, down after telling earlier partners to halt sales. stormas taken samsung by and given a clear advantage to its competitors. tom: i know you faced it on your trip back to london. how unitedrgasted airlines did not mince any words saying if you have one of these phones you cannot use it on their airline. extraordinary. why don't you bring in our guest from seoul, korea. this has -- francine: this has been going on for several weeks where they say they fixed it and they did not. is fact that samsung says it production of the note 7, it is taking a huge step back. peter: it is a combination of one debacle after another.

basically they are scrapping note seven which means they are going to restart, maybe come out with another version hopefully in time for the holidays but i doubt that. i do not think most analysts believe that could happen, so this is a huge blow for samsung. we saw that in the market when it plunged 8%. ,he biggest drop in eight years they lost about $17 billion in market value. huge events today. francine: the problem, and we have some great bloomberg stories. one is quite tongue-in-cheek saying the phone you might explode -- the phone you bought might explode. this is a dream for their competitors because samsung i imagine would take such a beating he would hesitate to buy what comes next. peter: the competitors are doing really well right now. clearly people will hesitate to

buy a samsung phone. arequestion is how loyal the current users of the samsung phones. so far, the folks we talked to in korea seem to be loyal. they are taking it in stride and saying, i will take the exchange so it will be ok. globally, i think this is a public relations nightmare. tom: help me with the family. throw up the chart of the pullback. it is one thing to see the vice-chairman of bloomberg, the son of the richest man in korea. what does it mean for the management and who gets fired this morning? peter: that is a big question. j lee is the heir apparent. his father is bedridden, had a heart attack does go years ago and has not been seen since. lee has been running the

company and there is questions about whether he should actually succeed -- secede. there will be i presume an executive shuffle going on. tom: thank you so much, from seoul, korea this morning. i think this extraordinary story of technology, i believe the failure of lithium technology, you have really got to wonder how this carries over to other users of lithium batteries like the boeing issue. because they are ending production, at least it is a clear-cut. tom: coming, catherine mann of the oecd. this is bloomberg. ♪

tom: from london and new york, bloomberg "surveillance." catherine mann coming up in the next hour.

taylor: south africa's rand is falling the most in more than three months after prosecutors say the finance minister will be charged with fraud. here he is discussing the probe just a week ago. >> as far as the so-called investigation is concerned that is no more than a bit of political mischief which every country will have. you have elections in the u.s., you have seen brexit and its consequences in the u.k. the police do not get involved in those situations that i'm sure we in south africa will resolve these difficulties. earlier he confirmed police delivered a summons to his home and said his lawyers will make a statement. fed president charles evans says the u.s. economy is probably not he arguesployment and to hold interest rates low until core inflation is higher. repairing damage from

the great recession continues to be important for stronger, long-lasting growth. relief supplies trickling into parts of southwest haiti affected by hurricane matthew, but not quickly enough for those in dire straits. doctors have run out of antibiotics and pain killers, and water and food are scarce. the humanitarian aid agency has made an appeal, saying about 750,000 people will need "life-saving assistance protection" in the next few months. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. at gains oil holding near a 15 month high as saudi arabia and russia, the largest oil producers say they are ready

to cooperate to limit output. we had an exclusive interview with the russian central bank governor. thank you both for being on set with us. i wanted to talk about the economy and oil, but the bigger concern now, it is unclear whether russia is a friend or foe to u.s.. you look at russian tv it seems there is more and more war talk. christopher: you have to put this into the context of the u.s. election. there has been a great deal of rhetoric on both sides, heightened concerns against the dangerous situation in syria. it is difficult to get an accurate reading as to what this actually means longer-term. everybody is hoping is that this is kind of part of the election

dialogue and that it will ease once the election is over. we did see this to some extent in 2014 when the same people on russian tv were demanding that u.s. companies be kicked out of russia, demanding that russia invade ukraine. this is almost tired of the dialogue. -- part of the dialogue. francine: doesn't this seem like a seven escalation? christopher: it is a dangerous situation because it involves an ongoing war in syria. it will ultimately come down to president putin. he is the person who makes the decision, as to what he wants. for the moment he is allowing these pundits or nationalist politicians in moscow to make these inflammatory statements, but ultimately we have to see what he wants, what he says. the next opportunity i suppose

when hopefully he will go to paris and we will hear what he says. tom: if you had to brief resident clinton or president trump, what would you say after you saw the debate on sunday evening? what do they need to know about mr. putin and in particular what syria christopher: they need to understand is the economy matters a great deal thento president putin geopolitics or global power. this is something that is this --missed to a large extent in the west. read in moscow is that the greater priority is getting the economy back because that is important for sustaining support. not going to say you are an expert on commercial banking, but give us a take on

the integrity of the russian banking system. does mr. putin have the banks at his back? christopher: the situation is a lot more stable. russian -- russia has shown a great deal more policy flexibility and fiscal risk -- fiscal restraint than was expected. it is fair to say that right now the financial system is stable. that is not to say it is heading toward recovery or any sort of robust recovery, and that cannot happen until we start to see some action on sanctions and increase in investment. but it is more stable. chairwoman hask been pivotal and they have shown themselves to be the best, most competent of all the russian agencies and they have been a big part of why we can say the situation is stable rather than on the brink. francine: you could say that for a number of companies -- countries in the world.

investors, for because the politics are very difficult to decide, i'm not sure how you look at the risk which could involve an escalating tension between the u.s. and russia. virginie: i think that is a very real risk. i think cost of war for russia in a very low oil price explains this turnaround and wanting to work with saudi. we have seen the news about the pipeline with turkey, which again just a few months ago, turkey was one of the biggest enemies of russia. there is definitely desperation in my view. how do you take that into account? i think it is partially through oil. clearly it does not look like anybody around the table wants to do a production cut but probably freezes.

in terms of how you play that, you have to put that along with whichventory situation will change in 2017. that might be one way to hurt yourself. in my view, the russian factor is going to continue to remain negative in 2017. tom: bring up the dollar-ruble. collapse off of $100 oil, and the question is the importance of this migration of ruble strength. that really is a signal to mr. putin that he has integrity .gain with the system how urgent is it for him to have a strong ruble? christopher: quite the opposite. president putin made fairly clear in an interview that he does not want to see the ruble increase much further than the current level.

what russia's problem right now is, it needs to develop a supplementary driver of economic growth. 12 yearsof the last has been oil trickling down creating a consumer boom. it needs to attract more investment into manufacturing and create a more diverse economy. the question that is repeatedly asked, tell us what the ruble will be if oil goes back to $80. russia is a competitive manufacturing base because the ruble is about 63 or 64 against the dollar, but that would not be the case if the ruble depreciates. putin said he sees the ruble as strong as he wants it to be and has indicated his preference for the ruble staying at this level rather than appreciating, because that is key for investment flows. tom: thrilled to have you back on again. we are always thrilled to have dennis gartman with us.

he has been like everyone else trading, whip sought within this range bound market. we go on the range with dennis gartman. this is bloomberg. ♪

francine: this is bloomberg "surveillance." tom keene is in new york, i am francine lacqua in london. and wti. on both brent we are joined by tracy alloway in abu dhabi. all, good morning. this me investors are bullish or short covering? francine.d morning,

i think that is the question that everyone is asking at this time. in time it is difficult to overstate how dramatic the swing in executive positioning was. you can see the contract for the three most popular brent and wti options increased by 142 million barrels in the week ending october 4, the highest on record. you could argue the oil market collectively woke up, decided the opec deal was going to happen, and changed their positioning, or you could say that quite a few people were caught out by the surprise deal. there was quite a bit of uncovered shorts in the market around october 4, so it could be that investors have been buying the long positions to cover the short positions. the answer is we just do not know. francine: i am looking at a chart. in blue is the russian production for oil. in white is saudi arabia.

this is the price in purple of wti. we got news about an hour and a half ago that oil supply and demand could come into balance earlier than expected if the opec agreement goes through. this is expected, is this significant in any way? tracy: is it expected? i think if you look at the positioning data, that tells you what is at stake for the market. we now have record long positions. they need to see this opec deal come to fruition, see something more than just the words, the iea saying something different -- similar. we need opec to do something about it. the actualities that we have seen over the past couple of days do not suggest there is anything on the immediate horizon. we have seen russia say it is

interested in freezing production on the same day that new data came out showing its production was at a post-soviet union record. we heard opec say it is looking to wrap up oil production and it nearly -- iraq say it is looking to wrap up oil production and it made no reference to the opec deal. traders will get angry if they do not follow through on their promise. tom: how does abu dhabi and the rest of oil middle east respond? two schools of thought, we are ranged around and we are going ,o migrate to a terminal value and the other is we are going to be soggy, migrate lower. jeff currie at goldman sachs with a $50 terminal value, they cannot like that. tracy: right. i think as you might imagine there is quite a lot of optimism in the region that oil prices

will recover somewhat. bad, $50rel is not too a barrel might be more problematic. people here seem to be preparing no matter what happens. we saw saudi arabia begin to meet with investors for its first international bond sale. that is going to be something like $10 billion to $15 billion. they are trying to diversify their funding because of the budget holes caused by lower oil prices, so steps are being made no matter what the price of oil ends up being. just the talk of the opec production deal has created a very beneficial environment for saudi arabia's debt issuance. tom: what is the level of construction in abu dhabi? i never can remember, is it south or north of dubai? if i go down to dubai, i have always got cranes in the air whether they are doing something are not.

fervor, the infrastructure development in abu dhabi right now? tracy: it is an interesting question. we have seen some project put on hold but there is debate going on saying in times of an economic slowdown you have to ramp up infrastructure spending. those arguments are going on at a high level. the question is how the authorities and that balancing fiscal prudence at a time when the deficit is growing, or whether they ought to spend their way through a potential recession. aside is that i had gold knobs in the hotel in abu dhabi. so much for fiscal prudence. francine: which they are now selling off. the problem is that the gold knobs are done and they need to try to contain social upheaval. virginie: and diversify sources

of economy growth, same as russia. those are models that are very much concentrated on one industry. to me what is really interesting is that we are talking about production freeze or production cuts. then we have demand and technology. demand will probably not be much stronger in 2017. of course you still have saudi and iran who were not in the perfect relationship, and arguing about who should do what. could we have a bit of support to the oil price? yes. is it sustainable? in my view it is not. francine: because of shale gas? virginie: because of shale gas, weak demand. if you look what is happened to iranian production is -- after the sanctions were lifted, it was absorbed in exchange for 130

billion worth of investment that iran the. you will have things like this. this is it. is russia ready to cut production? not sure it is. francine: thank you so much. mike cop, we speak to upe about the pound, his new agreement with habitat, and brexit. this is bloomberg. ♪

us, thrilled you are with bloomberg "surveillance." london and new york. we are looking at south africa as the police show up on the door of the finance minister. england, francine is getting poorer and poorer as sterling guys down. a bloomberg business flash. samsung electronics is ending production of its galaxy note 7 smartphone after the company halted sales and asked consumers to stop using them.

south korea's largest companies struggled with the crisis over exploding batteries. samsung has recalled this galaxy no one and -- there is the possibility of a second recall. the bank of shanghai is looking to boost capital. it says it will shell sayers -- shares at 200 -- $2.65. this is one of a wave of smaller banks trying to increase lending. bp will not proceed with oil fiveration in australia years after it began looking for resources in the area and before it was allowed to drill. they say the decision to step away follows a review of the company's upstream strategy and was influenced by regulators. that is your bloomberg business

flash. francine: tom was saying that most people in the u.k., including me, are that much for since brexit happened -- poorer since brexit happened. time for my morning must-read. saying,he editors is caught between inpatients at home and desire for deliberation abroad.member states mrs. may has put yourself at a huge negotiating disadvantage. it is a familiar position for british politicians who have repeatedly failed to grasp that continental europe is a foreign place and they do things differently there. i do not know if this is because business is done differently in -- eu or if this is just difficult to discover what the endgame of brexit is. virginie: i think the current

situation is a difficult negotiation not only with the eu but with the public in the u.k. this lack of detail, of precision as part of the negotiation tech week. the fear of a heart brexit -- hard brexit might help get a softer brexit. i think theresa may is well , and i think her strategy is clearly intended. i am not sure it will be successful but it is intended. francine: if you look at the pound falling, the brexit minister saying this is good news because it will help with our exports. if it weakens too much or if the move is too violent and clearly points to a weak economy. virginie: you have positive and negative, 5.9% account deficit, and the weaker pound. it will help in terms of making imports more expensive and

inflation could be a slight positive. there is no time to adapt to do this. the u.k. and the pound has been the safe haven of europe for many years. the question is, is this about to change? is that safe haven status about to be lost, given the lack of visibility? i think on one hand those negotiations must the tough and if they lost too long you will have some fear and people will move away. tom: let's bring up euro-sterling right now, coming off of brexit. it is the blue circle down at the bottom. the basic idea coming off the blue circle is what path would a weaker sterling take? we are taking the white path and the original idea from a number of houses was the red path.

are we anywhere near a brutal move in sterling? virginie: my view is we are going to 1.20. clearly we are much closer from here today than we were. the question is, it happens after that? if in fact you have a bit of inflation coming back in the economy does not collapse, which is my expectation. we know that 2017 will probably be a much slower year. will there be room for an increase in rates? that is down the line. tom: there is lots going on. ♪

morning, dollar

strength as international market adapt and adjust to a december rate hike. sterling continues its dissent. scent. de ofthis hour, catherine mann the oecd on lousy trade for china, lousy trade for america. we moved to october 19. when in doubt, go after this be grow the house. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. a surreal dayas yesterday in american politics. how did the debate playing in london? francine: it is what everyone is talking about. people are looking in disbelief, and yet we also have political scandals in europe. the one thing people want to know is, are they going to be more videos, and not necessarily only a donald trump.

it has taken a twist and turn that is unexpected to most. tom: bloomberg politics with open -- bloomberg politics, "with all due respect," tonight at 5:00. african -- h oncuss the probe surveillance earlier this month. >> as far as the investigation is concerned, that is no more than political mischief, which every country will have. there are consequences in the sure we willm resolve these difficulties. taylor: the national prosecuting authority is holding a press conference at this hour. we will have more details as they become available. it is a civil war in the republican party over the

presidential bit of donald trump. yesterday the party chairman held a conference call to rally members behind trump's and battle campaign. he came hours after paul ryan told lawmakers he will no longer defend or campaign for the nominee in the aftermath of that 2005 video in which is heard discussing women in lewd and grading terms. a poll released yesterday finds hillary clinton with a 14 point lead over donald trump in a head-to-head matchup. regulators in singapore and switzerland -- the allegations are tied to belkin's role into funds associated with the troubled malaysian fun. the firm's local branch manager had been arrested. prime minister theresa may says brexit means brexit, but a london court this week will decide whether it is up to her

to decide when the u.k. leaves the european union. her attorney general try to article the judge about 50. failure would force the issue into the house of commons and the house of lords, both of which were largely pro-eu. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: taylor, thank you so much. what is our data check? equities, bonds, currencies, commodities. futures at negative five. the euro -- this is a huge deal. the euro weaker. sterling is a bigger story. but i have watched the linkage of sterling and euro. onto the next screen, if you would. to 14.83.wn francine: this is my data board.

i am looking at rand, pound, overall the stoxx 600 flat. looking at any kind of agreement oil.en saudi and russian the rand is what we are watching, at 14.17. the finance minister was summoned and link to the probe taylor was talking about. tom: let's go to the bloomberg and forget about the distraction of american politics -- or for that matter, south african politics. here is the two-year yield. with all the fed meeting's spring of the cross the december and -- sprinkled across the december fed meeting -- we are migrating back to a triangulation of the gorgeous two-year yield. noticed a leg up off the last meeting. francine: i like that.

in terms ofopy charts, in terms of color use. i wanted to talk about some things that were in the past. in blue is the ftse 100. my white line is the 10-year, two-year bond yeield spread. this is also what we heard from brokerage city index, saying that the ftse could be rife with guilt. 2016 is different. correlation one that chart. r somebody who knows about -- somebody you knows about r -- somebody who knows about r

squared is our guest, jerry webman. wonderful to have you here. count me within your beautiful note of the single digit world. we used to say single-digit was up 7% to 8%. you say we are getting used to 2% or 3%. that takes some getting used to, i think thaterry: is right. it is certainly right for pension funds, governments think that something is going to bail them out. you do not have to get into that story to think that most of human history did not see the kind of growth we have had in the last century and a half or so. i am not trying to be pessimistic, i am just trying to tell people, do not count on the market to bail you out with growth that we thought was normal 20 years ago. is the ideathis that a corporation -- this is the financial part of economics -- can take subpar nominal gdp and expense reduce it into per

the good earnings growth. from your purview of economics, can they do that? jerry: well, they did that for the first couple of years of the economic expansion. when we are seeing now is that revenues are not growing, and expenses are. most of us consider this to be good news about slightly better wages, slightly better wages meaning that we are increasing cases in themany aggregate faster than we are increasing revenues. that is not long-term sustainable. so companies are going the opposite direction. is the one thing that you think markets are mispricing? we look at bonds, we look at correlations, the price of oil -- when is the next shock coming from? jerry: it is like what is the next black swan? if i look at markets, markets have been in a range for the last couple of years. we are probably waiting, as we

did with oil, for a surprise out of major producers to tell us normal0 is now the new for oil prices. i do not think central-bank policy will be the shock. whatever that shock is going to be, it is going to be like the corporate news we heard this morning that you and i probably cannot forecast. the point is that markets are more vulnerable to these kinds of shots at a time when growth is already fairly feeble. francine: i am trying to understand the correlation between politics and equities. rising. keep on if you look at the turmoil or the soon to be terminal that the soon to be turmoil in politics -- there is all this cheap money. there is mispricing risk, not for bonds, but also for equities. wery: maybe we are, maybe are not. i am sorry i do not know the u.k. or european statistics. gdp is in82% of u.s.

the private sector. so it is great to pay attention to politics and we should be paying attention to politics, but the individual decisions of corporations and consumers makes more difference. 1999 price-to-earnings whats of what -- close to they were over 30 times, i might be worried. do i think junk bonds are expensive, that equities are expensive? yeah, but -- tom: bring up the grass. our team at bloomberg lp is doing a great job of giving us the picture of the yield curve of different nations. in white, the united states. in yellow, the brexited united kingdom. the red is the joy of switzerland's down below. the first thing i notice is that you do not get a positive return 26thitzerland until the

year of joy. what an extraordinary statement. how does chair yellen maintain the optimism in america? jerry: i think it may help if we get a rate increase at the end of the year that says we are no longer on life support, no longer on -- we are getting away from the most extraordinary policy. that is a beautiful picture. to negative yield curve -- clearly that is a negative for the economy. the other thing is that the yield curve is positive, but it is not terribly steep. if the central bank were really wrong, you cannot see the yield curve tom. the -- would be clear to jerry: we do not see the kind of acceptance that leads to that. book webman?e

we are going to combine jerry webman's work with catherine mann of the oecd, an important time again to speak to her after the oecd growth report, after the imf meetings. worldwide, this is bloomberg. ♪

live pictures from capitol hill in washington, d.c., where the annual imf and world bank meeting is scheduled for november 8. an important day. what is happening that day? tom: what is happening in

washington is i left three bowties in my hotel room. if anybody sees them, let me know. francine: you were so upset about that. let's get straight to the "bloomberg business flash." lvmh, the world's biggest luxury member, saw sales rise to $10.2 billion, led by stronger than expected gains from its fashion and goods division. china has currency -- goldman stock's are warning that a rising amount of capital is exiting the country in yuan rather than in dollars. compared with the monthly average of $4.5 billion in the five years since 2014. goldman says the large move can be explained by market-driven

factors. china's largest electric car manufacturer has security need $.9 million commitment from -- to fund the development from its monorail business. and lender are sega ghetto to sign a cooperation deal today. byd believes that monorail will revenue tom:argest -- tom:this did not get lost in translation yesterday could whatever you think of billionaires, they sometimes speak with clarity. mr. buffett spoke with immense clarity yesterday. i cannot commit a -- i cannot convey the impact of his press release. this is the "morning must-read." warren buffett --

tom: francine, this was an extraordinary response. an extraordinary statement by mr. buffett. francine: you are absolutely right. -- the split continues. certainly when you look at what paul ryan is doing, and at the same time we had a great story saying donald trump wants to run america like a business. if the ceo of a ftse 100 company on wall street came out with that video. imagine how he would be treated. tom: jerry, you have grown up on the right side of the tracks, paying alternative minimum tax. it is a big day, that first year

at alternative amt. howorget about the top 10%, much the top 15% of america pony up. all of the attention is on a guy like trump. jerry: i pay taxes, you pay taxes. the tax system is -- one of the things i would love to hear in this debate that we are not hearing, which probably ought to be coming from paul ryan, is let's clean up this tax code so that we get rid of all of this -- tom: and get some trust back. jerry: nobody can claim that i am not paying my fair share. tom: this goes back to reagan and tip o'neill, im am going to guess 1986, but i may be off by 10 years. as a primal scream for tax reform. as you saw on sunday, they are nowhere close. nowhere close. but going back to the policies, right, of the twoidates -- we know the

candidates are flawed for different reasons. do we know what kind of policies they will put in place? donald trump is flip-flopping on austerity and spending. then hillary clinton says one thing to bankers and then tells the people another thing. is an interesting story because we set out to simplify the tax code in 1986. remember bill bradley, that we should be able to pay it on the back of a postcard? we actually expanded it and made it more complicated in 1986. we did some good things, but we need to do that again. we will not do it perfectly, as we did not do it perfectly then. tom: i will retweet it out again. the warren buffett letter was really quite extraordinary. coming up, we will continue this discussion with steven ratner of will it advisers. we will talk with him about

advising and also about the politics of washington. this is bloomberg. and there is a beautiful washington, d.c.. ♪

francine: tom 1, francine 0. the sliding. reduced theirhave forecast on the british currency.

consortium istail warning that a failure could push prices up. i guess joins us now from one of in london.es first of all, congratulations on the opening of this new flagship store. are you concerned about the timing? you are opening this just when the pound is falling. i wonder when we will have to raise costs because of brexit. at this moment in time, we just do not know. clearly currency has an impact on our operating costs. the commodity markets do as well. if you take fuel, for example, although there has been a currency effect on the price of fuel, there has also been a reduction in the commodity price. those costs have not been passed on to customers. the important thing is to it on and trade our business and do what we need to do for our

customers. that is why we have opened the store, which is the first coming together of the brands. it provides both food, but also clothing and general merchandise and home wares in the same space. francine: that seems to be more of what people want, the one-stop shop. but overall, mike, is the town becoming a problem? i know it is difficult to foresee the next six months, but you're feeling at the moment? mike: it is just impossible to predict. there are effects both ways. currency clearly has an impact on our business. we would not deny that. the commodity market and the effective commodity markets quite often have an imposing -- have an opposing effect.

cost changes can be mitigated through a supply-chain, so we will continue to make sure that we do anything, as we always do, to mitigate any cost changes in our business. tom: i know that you are in your quiet toe with interim -- in eriod.uiet pon on your website, you have 101 products so that i can have a products, -- indian 101, so that i can have a curry week. what do you need from prime minister may to assist your company to reach out to all of the united kingdom that needs a diversity of food? mike: i think the british retail theortium, on behalf of entire retail industry -- for us, it is important to retain free trade, and we will continue to employ people who have a

right to work in the u.k. up to the government to decide where those lines are drawn. we benefit from the multicultural society that we operate in. it is important to us to continue to be able to do that into the future. tom: mike gupta, thank you so -- mike coupe, thank you so much. coming up for a scum we had a conversation with jeff currie right after the algiers meeting. we need an update later today. seven-hour "bloomberg daybreak." catherine manus coming up. this is "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." a really interesting day. right now to our "first word

news." p.m. at outh deep finance minister, pravin gordhan, will be charged with fraud. here he is just a week ago. >> as far as the investigation is concerned, that is no more than political mischief, which every country will have. you have it in the u.s., there ,re consequences in the u.k. and the police do not get involved in those situations. i am sure we will resolve these difficulties. he earlier confirmed that police delivered a summons to his home, and that his lawyers will release a statement shortly. we will be live in johannesburg for that. chicago fed president charles --ns says the u.s. economy he argues for keeping interest

rates low until core inflation moves higher. speaking in sydney, he says repairing damage from the great recession continues to be critical for improving labor force quality for stronger, long-lasting growth. relief supplies are trickling into isolated parts of the areas affected by hurricane matthew. doctors say they have run out of everything including antibiotics and painkillers. there is no power in haiti and water and food are scarce. people in haiti alone will need "life-saving assistance and protection," over the next three months. warren buffett says that he has never used the kind of tax reduction methods that donald trump did. he sent out a statement monday in response to trump's comments in sunday's debate when he admitted to using the loss in

1995 to avoid paying federal income taxes. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. "bloomberg surveillance." francine: let's get back to south africa. the currency falling the most in three months. prosecutors say that pravin gordhan will be charged. a report from south africa joins us from johannesburg. --s was the finance minister he is still the finance minister, so we need to make that clear. what does it mean for investors? are we looking at more political turmoil? >> he's still the finance minister, but that is the big question, will he remain the finance minister? that is what is driving the , and the politics in

south africa is particularly targeted at the treasury. minister wasnance fired abruptly. that's an markets into a tailspin. he attempted to slow the economy and restore confidence. he laid in investment delegation in new york this week. there is a question over whether he will keep his job or not. francine: we are hearing from the clinical party -- that the party will cooperate. he is saying that he thinks this is article mischief per you can clearly see all of the , aatility that we are seeing similar situation for the banks. when do you think this will be resolved? economists have come out strongly saying that clarification is something that is essential and needed urgently. economists said that the

president needs to make a statement, and the charges of alleged fraud pose a threat to him keep his job. deliveringwill be the budget in two weeks or not because that is essentially what has been at stake in terms of restoring confidence in the a man who is set to steer through its weakest anticipated growth this year. francine: is there a natural successor to pravin gordhan if he cannot deliver it himself? is there clear political mischief, or is there wrong doing? o: pravin gordhan's interview was quoted from last week, saying that it is not political mischief, that the law has to take its course.

the ruling african national congress has said that ever since the presumption of innocence before proven guilty -- what is clear is that there are various voices coming out to speak. the treasury is set to release a statement, and pravin gordhan has said that he will respond. we have yet to see how the story will play out. so much.k you jerry webman is with us, from international economics, and his work over the years with merrill lynch and oppenheimer funds. i want to bring up two charts. bring me up the long-term currency war chart of south africa. this is the way it is done in every emerging market -- and every emerging market is different, but currency depreciation is a weapon. is that the right phrase? jerry: i wonder if currency wars are not the folly of this

economic cycle. i think central banks did a lot of very -- did a lot good work in the aftermath of the financial crisis, but this is now beyond what it makes sense to do. tom: bring this up. the advanced "bloomberg surveillance." i have never seen a smirk like this. i am going to go over here and get the whizbang here. this is like john madden football. into -- how does currency run with the skimming the surface that looks like that? jerry: it looks challenging, but if the u.k. is dependent on exports, if inflation is not a problem, maybe we are looking at a weak currency, and maybe we will win the currency wars. it is a troubling picture.

you are an engineer and you can see that better than i can, but to me that says i am in a position to aggressively compete. riggs had the news there. it looks like the spending pattern for luxury goods. but the answer is, this is ugly. i have never seen -- in the back there, i have never seen that. adjust? the nation how do they adjust to this to she asian? jerry: i think they adjust to it by the lower standard of living. what happens if your currency ines value, you are enmeshed international markets. you have to buy a lot of stuff globally. you are selling cheaper stuff to your own customers. you have a lower standard of living. that is what a currency depreciation does. tom: francine, to me, each nation is different.

but this is what you and i heard in washington of brazil and other commodity nations. francine: something that is surprising me is that the markets' focus seems to be clear on currencies instead of credit, and you can say it is because of brexit, rant, brazil -- is there something to be said for the way the market is pricing these brutal moves? jerry: i think the market is what -- i think the market is looking at what central bank are trying to a college. banks than seeing central backing off from this, we should be looking at credit risk. we should be very careful on these credit issues. now, being an exporter, maybe i like this currency. it is a tough problem for investors.

if i could sell you something cheaper -- i do not like it for my standard of living, but i might like it it my ability to sell you stuff. tom: look at this. jerry: i have never seen anything like that. tom: jerry webman with us. knowsine mann international economics. catherine mann and jerry webman -- this is a huge deal for donald trump, for hillary clinton. world trade, as secretary clinton says, what is fair trade? we will do that next. ♪

francine: miami francine lacqua in london. tom keene is in new york. this is "bloomberg surveillance." let's get straight to the "bloomberg business flash." taylor: samsung is ending

production of its galaxy note 7 askedhones after it consumers to stop using the ones they purchase. it has struggled with the crisis over exploding batteries. samsung has recall the note 7 once, and the continuing woes continue over a second recall. bank of shanghai is playing to that planning to raise $1.6 $2.65n, sing shares fell each. it is a wave of smaller banks raising -- bp will not proceed with oil exploration in the offshore australian, after it began looking for resources in the area and before it was allowed to drill any wells. says they producer agreement to step away from the

project follows the upstream strategy and the influencing getting the plan approved by regulators. that is your "bloomberg business flash." tom: jerry webman is with us. now joining us, catherine mann from paris with the oecd. he was on a bit ago with her important and reduced growth prospects. we thought we should drag her on again to talk about world trade. is the trade deficit sustainable? that that isort, her report. when i look at world trade, it is something that donald trump talks about. it is something that hillary clinton talks about. it is certainly part of the brexit debate. how grim is it right now? well, in terms of actual trade growth, it is extremely grim. there has been almost a decline in trade growth over the last couple of months, over generally in the last quarter.

trade has been growing extremely slowly. some people would argue that is a good thing. finally this bugaboo that we have had, it has become less important. in fact, it is not true. the declining trade growth that we have observed in the data and that we are projecting with continued slow growth going forward is damaging to the economies. tom: dr. mann knows this chart really well. here it is, world trade up, the 10 year long moving average of some global trade. we are back to 1989. dr. mann, back to here is just extraordinary. what is the dr. mann prescription to jumpstart some exports and imports? low trade growth is a problem that we have with the overall economy. investment has been very weak for quite some time. investment is very intensive in trade.

products go cross borders investment around the world, we also have very weak trade. it is also the case that there are other factors that are structural and policy related that underlie the slow trade growth. ing of them is that onshor and think more of their reduction of what used to be intermediate onshore. that is a structural phenomenon it has big implications for countries that might have thought they were going to start on the low rungs of trade. and then the third element is trade protectionism. we have shown in our economic outlook in the last couple of weeks that there is a rising protectionism not of the standard variety of tariff versus nontariff barriers and rules of origin and other factors that are undermining trade growth. you put that altogether, and

those are reasons for why we observe the slow trade growth today. francine: how do you a dress? tom and i were at the imf world that?- how do you address tom and i were at the imf world bank in washington, d.c. know, i think there is an issue here. first we have to recognize what is trade good for and why do we even want to do it. ofcourse, it is because lower prices. if you are a consumer, it is bigger markets. if you are a producer, it is technological process -- it is technological progress. if you are a consumer, you get a better variety. that is all the good stuff. the issue is, back to david ricardo, we have known there are winners and losers but we have never addressed that problem in the context of trade. we always gave that over to

somebody else to deal with, so the issue is that trade policy has to be part of the overall fabric of domestic policy. that puts it integral to the other issues we have been talking about for a long time with regard to structural policies that enable competition and labor fluidity. me a concrete example. i keep hearing over and over that we are going to implement policies that address some of these concerns. give me one that will actually happen in the next six months. catherine: in the neck six months? -- in the next six months? technocrat, let's consider mass layoffs. this is a problem when a plant closes down. this is a large group of people at one time being affected by a plant closing down. in the past we have not addressed that problem, even though we can keep data on it in a number of different countries. one thing we found in our

research is that you can give people like that unemployment benefits, or you can instead spend the money on re-training active labor market policies. but itthat sounds trite, usually is the case that they get unemployment and not training and other aspects. if you have one dollar or one euro and one yen and you spend it on unemployment, that would not be very effective. you get four times the benefit of placing people in new jobs if you spend it on active labor market policies. this is something that is a policy designed. that is true for whether it is globalization or something else. tom: let's come back with catherine mann. i want to get to jerry webb three you observed the presidential debates. i do not believe there was a single discussion on trade. i would suggest we have never been more anti-trade as an executive branch discussion at how did we get here?

jerry: what is new in this discussion? we hear great society and reaganomics over again. the only thing that is new in ,conomic policy in this debate to agree about it, is protectionism. tom: a mercantile america. with president clinton or president trump, are we going to -- jerry: that is where the rhetoric is taking us. tom: jerry webman thank you so much. mann and catherine jerry webman. the massachusetts institute of technology, we are honored that professor holmstrom will join us on radio this morning. worldwide, this is bloomberg. ♪

tom: the litmus paper, the foreign exchange -- yen weaker this morning. euro is a big deal. euro, weaker sterling. we will show that any moment. and south africa is making headlines. the dollar ran 14.25. francine? francine: coming up shortly it

:s "bloomberg daybreak americas." oil is in the news after vladimir made his statements yesterday. steve rattner will be here to talk about politics with the election coming up in 30 days. pimco.k of on news out of pimco "bloomberg daybreak." with jonathan ferro and alix steel as well. wereine: document, we talking about trade and populism. i want to focus on brexit. mark carney is taking the bank of england on tour. end welloing to ia or badly? catherine: whenever we see

moving -- currencies moving quite this month -- whenever we see currencies moving quite this much, we're probably a little oversold at this thing, and it will come back some. but the issue is that brexit does represent a change in the competitive nature of the u.k. economy in the longer-term because of the way it has broken the trade relationships, or at least have to rebuild them. the only thing that you can balance that out with near-term is a big change in the sterling. tom: i am sorry we are going quadratic. that is a linear function of what was supposed to be to 120 -- to be 1.20, and this curve is ugly on the long chart. is it a brutal murde move yet, catherine mann? catherine: asset markets tend to overshoot, and that is probably

what we're looking at here. we ought to keep in mind that this does create some problems for the bank of england. if it stays systematically at 10% or 15% lower, that gets it to higher inflation. that of course is the place where central banks really do not like to be. tom: glad you are overshooting like a good m.i.t. product. catherine mann, thank you so much. do you have a growth rate for the u.s. economy? -- jpmorganstudying is studying -- jpmorgan is stunning. some macros are that say we may get to 2.5%. in the second half of the year, they are good on the u.s. economy, but they are ratcheting back expectations also. gotou consider that you less than 1% labor force growth

-- we are starting to get a little bit of labor force growth -- not much productivity. how much growth can you have in these developed markets? tom: thank you so much for coming by. dr. mann, jerry webman with us. and others. tomorrow on the program, a lot going on. on oil and on a lower price for oil. -- this willgree be really, really important. let me do a data check right now. currencies front and center, the idea of sterling, one point 2257. that is stunning. this is bloomberg. ♪

vonnie: --

jonathan: a very warm welcome. i am jonathan ferro. the story in the markets, future soccer, equities farmer. softer, equities firmer. what you need to know, samsung ending production of galaxy note 7's microns after failing to fix problems with its batteries. it was supposed to compete with apple iphone during the holiday shopping season. summoned to appear in court on friday charges, the random weekend as much as 3% on the dollar against the news. readgency said it may balance if opec meets the new production targets. galaxy seven, we will bring in our bloomberg team from around the world.