mark go the extent of the dissent, federal reserve rate hike that for december edges toward 70%. investors await -- to solidify sentiment. mixed messages. oil holds above $50 a barrel amid uncertainty over russia's uncertainty over and output cut. made backs down, the pound the plunge pauses. this is bloomberg surveillance. i am mark barton. ♪

mark: let's get the bloomberg first word news. here is sebastian salek. sebastian: theresa may says parliament should be allowed to -- taking britain out of the european union. seemed to come after they dumped the pound of a concern the pm was taking a gung ho approach. -- by a third following the note 7 crisis. the company said profits will come in at 5.2 trillion one, won, down.llion donald trump has gone on a twitter offensive, blasting paul reid -- paul ryan as weak and ineffective. the shackles have now been taken off of him after ryan condemned

his comments about women. the nominee continued his campaign speaking in panama city. >> this election will determine whether we remain a free country , or we become a corrupt, banana --ublic controlled by large and foreign governments. the election of hillary clinton would lead to the destruction of our country. againstn: fraud charges -- to a junk rating according to investors. the possibility of an increase in borrowing costs back on the table. he was summoned yesterday to make a appearance in court tests make an appearance in court in december. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am sebastian salek. mark: let's check in with what's happening with markets.

stocks are falling in europe, albeit by the smallest of margins. 0.1% as investors look toward december as a possibility -- as the problem -- as a probability for a fed rate hike. looks at -- look at ericsson share, down 80% the most since 2007. the phone manufacturer reporting sales, earnings that significantly missed its segments -- missed its predictions. companies rein in spending. the pound after four days of the kleins, look at the rebound. .f a by 1.3% biggest gain since july after falling 5% in the previous four days. theresa may accepting parliament should be allowed to vote on her brexit plan. oil a little bit higher today, the one dollars, nearly 15 month

high. russia sending mixed messages. i want to show you this chart as we approach the minutes of the last fed rate meeting. this is a gauge of inflation expectation. this is a gauge of inflation expectation. expectation. notice the five-year five-year fall away -- five-year forward. from 2021imb to 1.5% to 2026. it is the closest since may. that is the middle of june. inflation expectations are rising in the u.s. even the fed's referred measure -- if you strip out food and energy. inflation expectations are rising. it plays into tonight's minutes. how deep is the hawkish camp in the fomc? chair janet yellen is under

eric rosengren who has supported ultralow rates. will the minutes provide the clues? the likelihood of a 2016 hike. --'s welcome gilles moes moec. to what extent is the dissent in the fed? gilles: the minutes are likely to reveal a hike in december is on a natural slope. that is a change in what we had at the beginning of the year. things are much more hawkish. your craft here,

-- your graph here, getting closer and closer to their definition of stability. if you look at the labor markets, it makes not a lot of sense to continue to do that. this is the message we will get. there are indications the need between. sales later this week. it is the natural slope. mark: there seems to be a view that some in the fed will want to see the eyes of inflation. is that the eyes of inflation? 1.7%? preferred measure or does it have to be 2%? gilles: there would be a case for excepting inflation overshooting in the u.s. physically the view would not just be we need to be closer to the old -- we would like to see inflation overshooting the target for a while before we can

get into debates over normalization. at the same time, given what is going on in the real economy, that position is the right one, but harder and harder to sell, especially when you have a fed which is under increasing criticism from the markets, from politicians in the u.s., anyway for failing -- four in a way failing. not the most elegant -- it is hike.ly -- 40 december --k: how troublesome is janet yellen is trying to hold the consensus, especially around keeping interest rates low. do we view it as a positive thing that there is dissent? healthy debate? thereproblematic that were three dissents?

gilles: there was a sign that impatience was growing it within -- growing within the fomc. you are of the hawkish persuasion and you felt the consensus were finally moving in your -- consensus was finally moving in your way, every two of three months something goes on that stops you in your tracks, you want to make a stand which is probably what happened. what it reflects is a level of impatience, possibly on both sides. it is getting tougher. the decisions that central banks have to do at the often historic decisions. back in the days, when it turned 15 years ago, the old debate was whether or not we would hike or in march rather

than april? the world would not spending if a decision or to go in one direction or the other. now it is incredibly crucial. it has a much bigger bearing, not just on the market but on the economy, because policies at this stage -- you get dissent but you get a tougher discussion. giveaway, -- gilles moec. you can watch it on the bloomberg. stay with surveillance. plenty coming up today including the vote on brexit. sterling rallying. theresa may accepts there should be a debate in parliament on eu negotiations. plus, is the world closer to a deal to stabilize the oil market? will bring you our interview with the secretary-general of opec. higher oil prices could lead to lower rates in russia. that is the view of the

country's central bank governor. we'll bring you the interview. this is bloomberg. ♪

mark: i am mark barton in london. let's get the bloomberg business flash with sebastian salek. sebastian: -- missed its expectations and is waiting demand for wireless network apartment. revenue dropped 14% and the gross margin narrows to 28%. bmw ceo says he expects sales of electric vehicles to surge in the next decade, possibly reaching a quarter of production. he said improvement in range and charging stations will win over more customers.

>> difficult to guess how many products we will offer and how future.will see in the it might happen we see a range of 15%, 20%, 25% in the next 10 years. in terms ofe cars combustion engine. sebastian: basf have beat analyst estimates. it seeks to alleviate conglomerate this is models running out of steam. it is focused on trimming the firm's portfolio and cutting costs choosing to sit on the sidelines of a merger which is ripped the campaign this year. it still expects "considerable decline in sales." againsterling climbing all 31 of its major peers after theresa may accepted the parliament should be allowed to

vote on her brexit plan. the move easing investor concern be keepingent would a gung ho approach to brexit negotiations. simon kennedy joining us. us, gilles moec. how much of a stand down, you turn is this? >> it is a, you turn is this? >> it is a slight one. this doesn't map out a path to a reversal in brexit. some people might've thought that. it does mark a small shift from theresa may last week, very gung ho, implying the hard brexit. regain control of the laws of immigration and this week, excepting parliament should have .ome vote -- immigration this week, excepting parliament should have some vote.

much pressure does this put on the prime minister, -- has a slim majority? simon: what she wants to do is put the plan through and have the voters turned against her. if she whips the government into backing the plan, as she is likely to do, then she might be able to have greater credibility and getting parliament to back this. -- in getting parliament to back this. mark: it doesn't mean that parliament has to approve -- article 50. a london court will start ruling on that tomorrow. how will that play out? simon: this is pretty much what we are dealing with. the courts start meeting tomorrow. they will be looking at this case which again perhaps will not derail the brexit process

but will throw grit into the wheels. mark: let's bring in our guest. is this relief? look at sterling up 1.5%. is this relief for u.k. , tostors who would worry use our phrase in the introduction, theresa may was taking a gung ho approach to brexit? jean-marc: i don't know if it is so much relief. -- we had the flash crash last week and there is a high degree of uncertainty about exactly guess what a triggering of article 50 will constitute -- what a triggering of article 50 will constitute. mark: gilles, you're still expecting hard brexit. isn't that correct?

-- is that correct? hard brexit is still the probability here. go -- go on the -- gilles gilles: the old budget will be paramount. there would be lawmaking in the u.k. that would not be dependent on whatever the court of justice says. that is normally not consistent with access to the sick of market. there are wanted to things on the news desk asked -- access to the single market. there are one or two things on the news desk. it is not the vote, it is externally vague. the second thing which i think is important is what kind of majority you would find in steer awayto try and from the hard brexit? it is not obvious to me. including the position, this

idea that immigration needs to central.d is very the fight within the labour party was on the idea that even labor has to be tough on immigration which doesn't help to move into a soft brexit and help bring in the u.k. closer to single market membership. i would be very prudent on the news that we have. simon, of big notion, cherry picking? we heard eu ministers in luxembourg. it seems to be such a prospect. simon: if you look at the consensus in the house, there is also consensus in europe. i have hardly ever seen europe united on such an issue. they have always been she's a great -- been shades of gray. picking, freedom of

movement. every day a new one comes out. is it a negotiating position? yesterday telling us it was not. mark: simon, great to see you. moec, thank you for joining us. stay with us could ecb taper talk causing brief market turmoil last week. we'll next week's meeting by clarity on the timeline for winding down stimulus. this is bloomberg. ♪

mark: i am mark barton in london. the ecb meets next week as pressure mounts and details on the winding down of stimulus. gilles moec, chief economist at the bank of america. merrill lynch, to taper or not to taper? that is the question. is the ecb even close to tapering? gilles: i don't think it is for now. march will continue to be the current date. you would have to find some good reasons. is it that the outlook has suddenly turned much more positive? both expected and realized inflation remains low.

risk are here onk are the real economy. do you taper, because it is getting hard to change -- you can reduce buying just because you cannot agree on whether moving? i think it will be a negative signal from the central bank that would tell you, well, we are going to alter our stance. we are going to deliver a tightening of monetary conditions, because we cannot agree on the technicalities. we send a signal -- third solution, you do this, because you think you would be more comfortable with inflation remaining low much longer which is something we have heard from the governor. it will be a change from european central banks. i understand -- the political

cost on draghi to deliver every single -- so 2017 is going to be -- for the current conversation which is what we do after march, a decision which would have to be taken in december. if they taper, it would be a problem. tapering you are bond, what is one to change. jon: when the exit qe, they will have to taper which is not the same is -- same as the saying they are going to taper. the challenges facing central banks globally, the actions from the boj recently, i think they are starting to be -- there is starting to be an acceptance that qe is not going to be done the job. if you look at how much andrvention has occurred

the growth outlook globally, that is suboptimal for central banks. particularly the impact of the financial systems, particularly the banking industry and insurance companies. i think there will be a gradual move to looking at other ways they can manipulate the economy. the bank of japan's solution was yield curve controlled -- yield curve controlled. i don't see tapering. i think that would be a policy era at this point. -- policy error at this point. mark: gentlemen, stay there. this is surveillance. of course, this is bloomberg. ♪

mark: i am looking at what is happening in thailand. fascinating those in the markets.

stocks slumping today. look at the dollar against all the major emerging markets. there are 24 listed here. you can see the worst performer today is the thai baht. this is on concern over the health of the nation's king and the prospect of a u.s. rate hike this year. we have seen the benchmark equity gauge falling every day after the royal palace said sunday the kings condition was unstable. he is revered by many. he is a unified presence during his seven decade rain. you see the south african rand not falling as much as yesterday. still down by 0.3%. yesterday. big movement in emerging-market currencies. here is sebastian salek. seb: uk prime minister theresa may has accepted that parliament should be allowed to vote on her plan to take britain out of the european union. however, she has asked to do it in a way that gives her space to

negotiate. the decision seems to calm investors after they dumped the pound on concern the p.m. is taking a gung ho approach to negotiation. this is the worst performing major currency against the greenback. samsung has cut third-quarter operating profit guidance by a third following the note 7 crisis. the south korean company says it will come in at 5.2 trillion won. abruptly, the firm pulled the plug on what was supposed to be it from your phone, designed to compete against apple. donald trump has gone on a twitter offensive, blasting house speaker paul ryan as "weak and ineffective." the billionaire declared the shackles have been taken off him after party leaders condemned his comments about women. republican nominee continued to campaign, speaking in florida. mr. trump: this election will determine whether we remain a free country in the true sense of the word, or we become a corrupt banana republics, controlled by large earners and

foreign governments. the election of hillary clinton would lead to the destruction of our country. seb: and fraud charges against the south african finance minister have moved the country a step closer to a junk rating, according to investors, who could see an increase in borrowing costs back on the table. gordhan was scheduled to make a court appearance in november on fraud charges, months before the s.e.c. will release a rating of south african credit. powered by journalists in more than 120 countries, this is bloomberg. mark: while holding about $50 a barrel. saudi's energy ministry leaving talks with an agreement that russia would limit on production. that leaves opec disagreements about how to share the burden of the cuts as the last obstacle to the deal.

until we are able to bring the market to some form of balance by stimulating stock drawdown that will bring it to acceptable levels, we will not be able to achieve the fair price that will be fair to both producers and consumers. yousef joins us now from the congress in istanbul. some interesting comments there. : absolutely, mark. you cannot envy the secretary-general of opec in terms of the amount of work he has in front of him, in terms of getting everybody around the table. they will be having meetings today in not just istanbul, but with non-opec russia. i asked him specifically, because we have heard russia talk before and make pledges. are they going to live up to it? he said he got a firm commitment

from russia that they are on board once opec gets everything together. of course, in all of this, within opec, we are still waiting for details about the exemptions, in particular with iran. again, there have been different reports as to what that exception would look like. he said, we have not made a decision on that yet. it is still being hashed out. at the end of the day, every partner in opec needs to participate to support the market. so, he is leaving the door open in terms of perhaps a more qualified exception. also, he was not worried about making progress on the iraqi front. were raisinghey doubts about secondary sources for their barrel count. not worried about that. i can tell you dealing which was positive. there was a sense of optimism that this needs to be done now and is in the best interest of all stakeholders involved. they are biased, but at the end of the day, they feel this is a crisis. there are lower oil prices they

have not seen before, and they need to take action now. mark: and you also spoke to the uae oil minister. >> i think -- i think i am optimistic that we are talking, and we have progressed a lot since the doha meeting. all members ofat opec have agreed today to consider talking about a range of production -- this is all encouraging. we were not there when we met in delhomme -- in doha. yousef: that is the uae oil minister. $40 a barrel, not sustainable. ultimately, what most experts have been saying, the ones i have been speaking to on the ground, is that most of the cuts are likely to come not from saudi arabia, but from the hole.

-- the whole. are makingg they progress ahead of the all-important meeting later in vienna, when we expect the final details. it will happen. they will have something to be able to show to the public in november. mark: great job. thanks for joining us. let's get more on my guest, a portfolio manager. and the chief european economist at bank of america merrill lynch. i have been furiously bringing up charts. i have to do it. this is a fantastic chart, essentially showing us how oil is driving inflation expectations. this is the oil price, the blue line, versus the u.s. break even , the difference between the 10 year and inflation. inflation bonds. see, oil is leading inflation expectations. does that tell us the outlook for the u.s. bond market?

it is fairly bleak. those due in 10 years, up by 5.8%, biggest loss of every major bond index in the world tracked by bloomberg. >> absolutely, you have issues when you have rises or dramatic changes in oil prices. we have had a lot of volatility in the oil complex in the last few years. as you can see from your chart, that has affected inflation expectations. inflation, however, is still running at very low levels from a historical standard. and i think particularly around opec and the sort of deal with russia, it is still -- it remains to be seen whether they can put rhetoric behind them and start to actually implement some of the -- the factors that have been discussed. moment, oil has been driven very much by rhetoric and not by action. if you think about russia,

russia's oil revenues are running about 60% of the point they were this time in 2014. that in itself will continue to weigh on any definitive action that could be taken. at thearlier, we look five-year, five-year forward breakeven rate. we saw it slide to 1.5% on an annual basis, the highest level since may. i found another chart. this is expected inflation three years ahead, according to the new york fed consumer survey. we know the fed looks closely at consumer inflation expectations. it is cominglear down. how does that play into the earlier chart, which showed us how inflation expectations from the fed is actually increasing? what does that mean? gilles: i think we have seen in europe as well where the entire economic consensus 10 to 12

expectations about people would be able to maximize the entirety of inflation information, and their predictions would be the best possible. funny five years ago, we talked about expectations that people would project the future as a function of the past. this is what is happening. you see that in europe as well. inflation has been low for a long while. people have increasingly gotten used to this. way has a bearing on the that you view inflation, looking ahead. that makes the job of central banks incredible. the minute this low inflation regime stops being embedded in the consumer psyche, it is very hard to move. when you see a disconnect between what the markets expect, based on what is going on in oil and so forth, and what is felt by consumers, it is, i would say, somewhat normal.

one thing as well -- there is always something that troubles me as an economist looking at these sort of charts, the other one. how can oil, which is something that is going to move and affect prices over maybe 24 months, have such a strong bearing on long-term inflation, five to 10 years? the market as well tends to behave in this adaptive fashion. the latest information tends to be completely overstated in the projection for the future. on inflation in general, i completely agree with you. where we are remains extraordinarily low by historical standard. it is starting to normalize, especially in the u.s. it is very, very far from normalizing in regions like europe. and if we count solely on this source of external factors to normalize inflation, we are going to have a problem, because i know the equity market loves high oil prices, but consumers prices,hate high oil

because it is negative for their purchasing power. so i would not be so, how do you say, one-sided on this. i think it is a bigger piece of news. mark: u.s. inflation data has done well, the biggest annual gain since 2012. that reflects the slight shift in expectation. has the run in inflation-linked its peak or not? how do you view inflation-linked debt right now? jon: we may have a little bit further to go. i think on the whole, where we are globally in terms of global growth, the export and of deflation from particularly china, and the ongoing currency wars -- i think that would make it incredibly difficult for the run to extend much further. mark: good stuff. stay there. jon mawby, portfolio manager. gilles moes, chief european economist at bank of america

merrill lynch. 20 coming up today, including russia calling. we are live in moscow. we will bring you an exclusive interview with the central bank governor. and we talk with morgan her sheets.d we talk with the former head of the european parliament committee on economic and monetary affairs. ♪

mark: this is "surveillance." high oil prices could lead to lower rates in russia, according to the bank's central governor, speaking to nejra.

this comes after russia's central bank made an unprecedented commitment to keep borrowing costs unchanged this year. yes.: one analyst referred to that as hawkish easing. vera herself called it a moderately tight start. the challenge facing russia is, on the one hand, easing would perhaps lifted after its longest recession in two decades. the other is trying to meet this inflation target of 4% by the end of 2017. inflation is at 6.4% at the moment. by saying the rates will stay on hold until the end of the year, any people say this is about the central bank trying to preserve its credibility over boosting economic growth. impact higherat oil prices might have on monetary policy, and here is what she said. if there is a higher oil price, it can lead to a stronger ruble. and through the foreign exchange

channel, that in turn can cause a more rapid decline in inflation expectations, slowing inflation. then, we can ease monetary policy much faster. the relatively high real rate in russia is one of the reasons russia is one of the hottest trades in emerging markets. at what point does this influence of capital become a risk for the economy. we are assessing the trend in capital inflows, but it must be said that at this moment, we do not see large, significant risk, cause the russian economy is working with limited access to international financial markets. therefore, there is a capital inflow, but it is not so large in scale that it concerns us. first, we are adhering to our floating rate, and in no way do we want to influence the exchange rate. second, we understand that in this time of disinflation policy

, reducing inflation, when we have to keep interest rates high, there could be such an effect. it is temporary. reached oure inflation target, we can cut the interest rate and ease our monetary policy. nejra: you recently criticized the cheap money policy of global central banks. what is the one thing that central banks like the fed, like the bank of japan, even the ecb should do to avoid unintended consequences on russia and other emerging markets? i think that the central banks of these countries face, of course, a very difficult task inonsidering the deflation these countries and the suffer limited impacts of loose monetary policy. they have to resort to art to achieve their goals. asked nabiullina

about exit risks of brexit in particular. she was fairly sanguine about the risks of brexit, and were concerned about the impact on the rest of the eu. she told me sterling does still remain attractive as a reserve currency for russia, despite its precipitous fall in recent days. andreyou also spoke to costin. what did he have to say about brexit? i asked him about the reports that vpb might be moving part of its business from the uk to europe in the event of grexit -- of brexit, and here is what he had to say. andrey: we are not pulling business from london. we will have to see what brexit means. we are planning to consolidate the functions in london.

the anti-money-laundering functions, or the client functions. custody brexit, i do not think we will be able to do it. we will have to keep it separately in london and europe. that is a problem. otherwise, at the moment, no plans to leave london. but they plan to continue definitely to cut down there for business reasons, not for any political reason. nejra: i did also get mr. kostin's reaction to the latest central bank move. that thet is positive central bank is working so actively to cut inflation, even if he said the key rate might fall to 7% or 8% next year from 10% now. mark: great job. thanks a lot. mawby,houghts, jon gilles moec. this is a wonderful chart we were showing a lot yesterday, the value of the negative

yielding bonds, last week falling by 10% to 10.7 trillion. this is a chart that goes back years. a long cry from a couple of years ago. where is the clamor for yields taking you? jon: i think that as we get deeper into the central bank the monetary policy experiment, it does encourage a huge misapplication of capital in some respects, either moving further down the high yield, risk spectrum, or further down the maturity spectrum, to try to generate the same sort of yield you can do with a much less risky allocation a few years ago. avoid -- i try to avoid in my portfolio construction chasing yields and chasing asymmetric risk-reward profiles. mark: what do we have to learn

in this new day about fixed income management? fixed income fund management in today's environment is a different beast than it was 10, 15 years ago. it is driven much more by intervention and rhetoric, and much less by traditional economic cycles and traditional credit cycles. and that is why we are sort of so deep into this cycle. and as we move out, as we come to the end of the cycle, i think personally the exit is going to be very different from previous cycles. mark: what is the exit going to be like, the exit from this cycle? elvira: the exit needs to be 'spropriate to each region stance in the cycle. -- thet of big moves market globally chooses one direction. deal withe hard to for a region like the eurozone, which is dealing with inflationary pressure. why theas i understand

fed wants to normalize, why it is probably a good thing that quite seenize, i am on seeing the ecb stand in the way of any contagion from the u.s. to other markets. some of the issues we had two or three years ago were put in the freezer by qe, that stability in those countries. it is probably good that rates stopped being negative at the long end of the curve. probably helps everyone. but it needs to be a very, very controlled movement. otherwise, we will find ourselves with the kind of issues we were trying to deal with two or three years ago. mark: great to see you. jon and gilles. up next, sterling advances. we will bring you the market stories and moves today. ♪

mark: check out what is happening to markets today. the stoxx 600 is falling as investors look ahead to the december meeting of the fed. the expectations are roughly 68%

probability there will be a hike. erickson shares getting higher today. sales, -- save -- sales earnings, missing predictions. it's is the weakness will not end soon. sterling rebounds today, of as much as 1.7%. in five. increase fell 5% in the last four days. theresa may stating parliament should be able to vote on a brexit plan. russia is sending mixed messages on the output. oil at 15 month highs. "bloomberg surveillance" continues, streaming on your tablet, your phone, bloomberg.com. this is bloomberg. ♪

keene in new york and guy johnson in london. we say good morning. prime minister may -- extraordinary moment for sterling in the last 48 hours. let's move on. on oil, in this hour, phil garlic or will join us. he is against consensus. oil prices. lower finally, we need to look at the basic idea of your financial repression, the challenges on this -- on wall street of lower for longer. a most interesting day. guy johnson in london. in for francine lacqua. i am tom keene in new york. sterling yesterday was extraordinary. what was the mood in the city as we dipped to a 1.20 handle? guy: quite incredible, really. we bounced back. what is fascinating is the british press has made very that theresas idea may appears to have caved into parliament. it is not on any of the front pages this morning.

yet the financial markets have latched onto that as an idea that it may be something to save us from the hard brexit, we end up with soft exit. a mismatch of the political narrative and the financial narrative right now. tom: absolutely extraordinary. we will have some great charts to give you the brutal moves we have seen in sterling. brutal first a word news. i am kidding. here is taylor riggs. taylor: with less than a month to election day, republicans are in a state of open warfare. yesterday at a rally in florida, the gop nominee declared himself unshackled from so called republicans like house speaker paul ryan, a 2008 by's presidential nominee. he said freedom is on the ballot next month. election willthis determine whether we remain a free country in the truest sense of the world, or become a corrupt banana republic controlled by large [unintelligible] and foreign governments.

the election of hillary clinton would lead to the destruction of our country. national polls released yesterday offered good news for hillary clinton. a survey from nbc and the wall street journal gives her a nine point lead over donald trump in a four-way race of unlikely voters. it was conducted over three days , before and after sunday's debate. innton leads by 11 points the pri atlantic call. that was taken after the release of a tape in which trump is heard making lewd comments about women, but before sunday's debate. chunk and clinton were tied in the same poll two weeks ago. lawyers for the only surviving suspect in last november's attack in paris say they will no longer defend him. the attorneys report they stopped representing him because he has chosen to remain silent in a protest against the 24-hour video surveillance of his prison cell.

authorities are hoping he could provide information about strategies and networks, and identify others who might have connection to that november 13 attack, which killed 130 people. day,l news 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. tom: let's look at the data right now. currencies, currencies, currencies. yields pretty much in stasis. the euro weaker. the euro weaker while sterling is weaker. american oil elevated. us.l is joining the idea of the vix backing up. you wonder if some of that is a political reaction to america. sterling, with a brief visit under 121. guy johnson, what are you looking at this morning? guy: i have an eclectic board.

stocks flat. icsson, stockr battle this morning. king of thailand is 88 years old, and markets have been reacting to his health. we do not often talk about the tie -- the thai baht. tom: the jolt survey is out today. ofshows the spirit employment in america, and it is pretty good. this is the other view. this is employed 25-54 years. that is a half-century regression. the red line is 50 years of linear growth of employed in america, and it just stopped in 2000, and the extrapolation of that -- we are missing 30

million employed in that group. it is a stunning chart over 60 years. guy: that is a big spread, as you say. it should have carried on going up. we went sideways. it is kind of a currency story. let me show it to you. giltsis the long kilts -- in the uk, long treasuries. this factors in the pound and the drop we have seen. concern is beginning to creep into the gilt market about whether foreigners will continue to support it. you see this is down to 100. you have seen a big drop down. effectively, you have lost money investing in gilts. you have not lost money if you invest in treasuries. i think that is going to be something the market will continue to focus on in the uk. let us bring in our guest for the hour, andrew sheets, chief asset strategist at morgan stanley. we will talk about brexit in a moment. the market is pricing it in,

that the fed raises rates in december. we will get the fed minutes later on. we will talk about dissent today. is the number in the high 60's still too low in your mind? andrew: we think it might be a little high. our economists think the fed will ultimately pass on a december hike. we think the data will soften a bit as we move between now and the next meeting. i would also emphasize i think the market has moved beyond this issue of the importance of whether or not they actually hike in december or not. the important thing is the pace they go out. whether or not they hike is probably not the debate that will drive markets between now and year-end. we are watching the single engine of growth that seems to exist in the moment, the u.s. consumer. we watched as tom talked us through the oil price. the hike is a tax on the u.s. consumer. rents are going up. there is a problem for the u.s. consumer coming down the pike in terms of inflation in different forms. is that something the fed is

aware of right now? andrew: that would be one reason among several that we think would argue for waiting. another would be that even with this rise in oil prices, inflation is still well below their target, and has been below their target for years. on the idea that the inflation target should be something that , that theyymmetric should balance missing high and missing low, that would be another reason, we think, to wait. tom: i am glad you bring up inflation. we have bone so fixated on sterling and the renminbi. help me with a morgan stanley global view on inflation and wage inflation. guy johnson, i take this back to one headline in bloomberg, months and months ago, governor carney saying there is no inflation. help us with an update on whether we will see inflation. we will seeink headline inflation. to me, that is one of the

biggest challenges the market is going to have to deal with, even if it seems like a very simple challenge. just you to calendar effects, just due to where we were this time last year, it is almost certain that headline inflation, both the u.s. and the eurozone, is going to pick up, and pick up pretty steeply over the next four to five months. that will have to be balanced in investors' minds, the visible rise, with the fact that core inflation, especially the inflation heavily dominated by what has been going on in china and the currency there has been far weaker. that is a tension that i think this certainly going to play out in the bond market as you see that diversions. tom: let's look at american inflation right now. whipping this chart of a couple weeks ago, i have been remiss in not using it. this is inflation in the u.s., but you can take it as a global proxy.

the basic idea, when everything is said and done, is the idea of this curve up that we see in core inflation. rather, headline inflation. the yellow line is the core inflation. we are nowhere near an overshoot, andrew sheets, are we? andrew: i do not think we are. some of our thinking about why the fed will not hike comes back to this idea of asymmetric target, that after missing very low and below that target for a while, it would be ok to miss high for a little while. looking up -- that is important. markets to focus on inflection points. markets care about inflection points. the idea that the worst might be behind us is psychologically important, especially as people the loan only yields they see in fixed income markets. tom: the fed -- give us an

update in the last 48 hours. is she looking for a december hike? andrew: we are not. weaving the fed ultimately stays on hold. we think that is because we are thinking the data in the fourth quarter softens somewhat, especially consumption data. third quarter was running a little hot, and we think that slows down. tom: andrew sheets with us through the hour. you get lucky with the news. important news of parliament stepping in with the prime minister and brexit. what an important time to speak to sharon bowles, an important voice from the united kingdom, in brussels. a former european parliament member. really looking forward to speaking to her. ♪

guy: guy johnson in london, sitting in for francine lacqua. let us get you a bloomberg business flash. taylor: saudi arabia is preparing to meet investors over an international bond sale and the perspective of disclosing little-known information about the economy. it revealed the kingdom sees its 260 sixrve at more than barrels, lasting more than 70 years. it has not had that estimate independently of you. 75% ofles account for export earnings. there is some uncertainty in the global oil markets over russia's willingness to join opec efforts to stabilize the market. the group said it will not cut output despite president vladimir putin saying russia boostsupport efforts to prices. a key task is to bring down the global glut while demand remains suppressed.

it is a record-setting bond deal for australia. the government has sold $520 billion worth of 30 year debt. to 3.47%. are priced lower commodity prices and reduce mining investment have stanched revenue. that is your bloomberg business flash. guy: thank you. the pound is strengthening after the uk prime minister theresa may accepted parliament should be allowed to postpone her brexit plan. do not be overexcited. the move eased investor concerns that the government would be taking a gung ho approach to the eu negotiations. interesting language. economists -- we are still with andrew sheets of morgan stanley. none of the british papers have picked this story up, yet the financial markets are all over it. time of theout the brexit referendum, this bubble.

willing this idea that maybe we do not get this hard brexit? andrew: i think so. what is so interesting about the movement in the pound since the 23rd is it has all been politically driven. there is a raft of really strong data in the uk and the pound has not been sensitive to that at all. our feeling is that we are still heading for a hard brexit. theresa may is giving parliament a chance to debate it. you have this migration issue. that is the reason the vast majority of people voted to leave the eu, and the eu have said you cannot have migration and then take all the other freedoms. you cannot leave that to one side but have the other freedoms. for our mind, hard brexit is still on the cards. theresa may is doing the right thing in debating through parliament. -- mark: theoretically, the referendum was advisory and parliament should be able to bake this.

nevertheless, we are seeing pressure on the pound. that.: we have seen you look at the data on what the net short -- net shorts look like, and we are very, very short with the expectation this is just a temporary blip. >> i think the bounce we have seen is a temporary blip. there are two things happening here. you have a large current account deficit in the uk. investors are looking for compensation from the pound for investing in the uk. we need to finance that 6% deficit we are running at the moment. the other thing is, if we go for a hard brexit, long-term growth prospects are far worse. that,en investors realize that is when you see these large moves in the pound and the currency. tom: that we go to the pound chart. you have been living this. you know it quite well. in the middle of the chart is the flash crash. then we go with a plunge, and -- weo red circles are are really not sure.

well under 1.20 a share. then, we have stability for literally a day and a half at most. and there is the rollover. that blue circle is briefly we went to a 1.20 handle. i cannot remember exactly. conversation here, but there is the rebound this morning off of the 1.21 level. guy: i think levels are important. i think the market is very short of what -- british currency has been held upon by the markets. you look at the rebound and think about coach -- how short the market really is -- if the market really believed we were heading to a soft brexit, i expect the bounceback would be significantly bigger. i think you need to take this little bounceback with a pinch of salt. positioning is absolutely important here. andrew sheets, let's bring you into the conversation, kicking and screaming. you look at the cftc

positioning. you know how short the market is. what is your reaction to a blip higher? there is- andrew: certainly a capacity for some relief rally given how short the market is. i think stirling still faces big numbers.with two the first is, as we were just discussing, the uk has the largest armed account deficit of any major country we do -- we follow, developed or emerging market. it has the lowest real interest rates of any market we follow. those are both very big impediments to the currency and the arguments holding the currency or holding gilts. those provide a big long-term problem for wanting to buy the pound. tom: excuse me. andrew, i am staring at the recovery. andrew, help me here away from the short-term gyrations.

where you guys are on lower for longer. we are all focused on brexit, hard and soft. i look at morgan stanley's work with hsbc of the shock of going out in time. longer out on how much the united kingdom will have to deal with it. andrew: that is a major struggle. are still expecting -- our chief uk economist is still expecting the bank of england to ease policy rates modestly further between now and year end, another 10 basis point cut. you are going to have this tension between, in our view, a central bank that is going to want to buy some insurance against the economic uncertainty that might be coming down the pipe, with the fact that recent data has been quite strong, and the fact that markets are also now pricing uk inflation to pick up rather substantially, as the currency has fallen so much. so i think you are going to

potentially see a real tension between the central bank that wants to say, there are potential economic consequences we want to insure against -- this rise in inflation might be temporary. the markets see inflation picking up rather substantially over the next 12 months. a greats is a great -- breathing. futures negative also in the united states. see where we are in a few hours. thank you so much, dan hanson, for the quick tour on the dynamics of sterling. coming up later, stephen stanley has been done on about subpar u.s. economic growth. he is extremely thoughtful. we are thrilled to bring you stephen stanley in our 6:00 hour. an update on clinton and trump's american economy. ♪

tom: good morning. guy johnson in for francine lacqua. he is not as gorgeous, but we are glad the guy is here. i'm tom keene in new york. there is currency, brexit, the election in the united states. and then there is the biggest products grew up of all time, samsung. our tokyo news bureau has followed this forever. i am surprised there has not been a bitter reaction in samsung stock. why? we did have a 10% drop in the last three trading days. it took about 20 billion dollars off its market cap. it could have been bigger. this is one of the biggest

debacles to hit samsung. context, it isn a much bigger company. it sells displays, semiconductors. this does represent a rather small fraction of its total revenue. tom: what have you learned about the knock on effect to their other cellular phones? reed, i cannot convey what it is like to sit on a given domestic american airline and be told, if you have a samsung, you cannot use it. that has to knock over to their other products, right? reed: exactly. there is going to be two impacts. one will be on its other product lines. still no clear signs of that, but we are watching it closely. that will show up probably in figures for the last three months of the year. of course, this will also change how consumers look at rival products, namely those from apple and google. guy: how does apple take advantage of this? you know, the timing

could not have been worse. we are right at the cusp of the u.s. holiday shopping season. apple just came out with its iphone 7. of can probably expect a lot marketing campaigns built around the fact that the phones do not catch on fire. for google, it gets interesting. up until now, samsung has been the face of android phones. google just came out with its new pixel smartphone last week. they are going to want to put a positive spin on this as well. , thank youtevenson so on bloomberg, on the sell side, there is the reality. the money hit the road. ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. great, that's what i said. so your business can get back to business.

sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. economics,ide on finance, international relations, and brexit. guy johnson is in for francine lacqua. you need a news update.

taylor: hillary clinton was on the campaign trail yesterday in miami, alongside 2000 democratic presidential nominee al gore. on the agenda, her sickness -- al gore's signature issue, climate change and energy. that clinton will advance the cause of renewable sources. mr. gore: her plan on expanding renewable energy -- it is right at the limit of what we can do, and that is exactly the kind of ambitious goal that we need from the next president of the united states of america. both white house hopefuls will be pitching voters again today. donald trump will be in florida. clinton will appear in colorado and las vegas. 's top official says their military will join a planned operation against islamic state fighters in the northern iraqi city of mosul.

he dismissed protests from baghdad, offering a string of insults on national television, directed at the iraqi prime minister. the u.s. state department says iraqi neighbors should respect iraqi sovereignty and territorial integrity, and differences should be worked out through dialogue. in south africa, fraud charges against the finance minister have moved the country a step closer to a junk rating, according to investors, including the possibility of an increase in borrowing costs. towas summoned yesterday make a court appearance in november on fraud charges. that is a month before s&p release reviews of south african credit. not left london in more than a year after his arrest for allegedly spooking markets, but that could change as soon as friday. if the 37-year-old loses his final appeal, he could be headed to the u.s. within four weeks. he allegedly made as much as $40 million in profit.

he is facing 22 counts of fraud and market manipulation. 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. guy: thank you very much indeed. higher oil prices may lead to lower rates in russia, according to the central bank governor of russia, l vera napoli now. elvira nabiullina. elvira: higher oil can lead to a stronger ruble. that can cause a more rapid decline in inflation expectations, slowing inflation. then, we can ease monetary policy much more quickly. andrew sheets from morgan stanley is still with us. good morning. thank you for taking the time to see us. opec says they have an accord

that they are going to cut production. russia wants in. the believe any of them when they say they have the common ground to find a deal? i am not certain. what they have been doing -- i told bloomberg surveillance two months ago they are managing expectations very well, particularly this. this is adopting from a monetary economists do. there is a surplus. the people that follow oil markets over the decades have always said, we want a balance. we do not want people holding inventories. now, there is roughly a billion barrels of oil in inventory. double staying inventories and prices will go up if they manage expectations properly. thing beginning to affect the market is venezuela is coming -- a $3.7 billion debt payment is due november 2. they are trying to reschedule. they have been unsuccessful.

or is a question whether they will default and take the buoyancy out of the oil market. interesting to see. the question surrounding this of expectations is, who is the swing producer question mark if you want to manage expectations, you have to be the swing producer. is the shale story the swing? philip: demand cannot swing. if you say inventories can be built or reduced, you also have a swing buyer. if they manage the expectations and keep the price curve sufficient, firms will put oil on ships and hold it on ships because they are holding a risk-free rate of return, 5% or 6%. you could earn good profits. you could talk about a swing producer or the swing buyer. if you manage the expectations

so more people come in and buy futures, we have roughly 4.5 billion barrels of oil. that would just stay there. let us bring up brent crude. i want to frame or the market is. here is brent crude. per liter is looking -- verliger is looking for $40 a barrel into next year. jeff curry at goldman sachs, lower terminal value than consensus. blob, 60,hat yellow $70 a barrel. rleger, where is your terminal value? philip: probably around $45 a barrel. tom: you are killing me. philip: there is additional supply coming from shale. if you go back to the peace you aboutth al gore, talking

conservation -- the oil industry is fighting a rearguard action, and they are losing. demand could fall well short of expectations by 2020, as more electric cars come in, as more consumers reduce, and given lower economic growth if you look at the recent imf forecasts. we keep marking things down. maybe 50. there is a big standard deviation, and there will be spikes. that is sort of the best they can do. tom: this is the debate which affects all of us. the market is up here in the yellow. jeff curry of goldman sachs is in the red, and verleger is even below him. is that supply or demand dynamics? philip: both. the supply dynamics are accelerating. the shale firms are getting better and better at developing fields faster for last -- for

less. dynamics, we are seeing a rapid move of this petroleum.ay from you look at the paris auto show, and almost all the cars were electric cars. that is an important element in this whole thing. what chevrolet did when they came out with the new electric cars. it surprised everybody. but it is a move. this is the way the automakers are going to meet their u.s. fuel economy standards. this is the way they will meet their eu fuel economy standards. guy: let's talk about the demand story. this is the contracts table, the ccrv. this is where we were six months ago. this is where we are now. the whole curve has come down. my sense seems to be that that is because the market got demand wrong. and i right or wrong about that? philip: partially, they got

demand wrong. that is on the left-hand side. on the right-hand side of the corner, the forward price is a battle between those willing to sell oil forward and those who are willing to put oil in storage. this is a game i have been playing for 100 years in commodities. it is steeper if people do not want to buy storage. if they have cheap storage -- you can have eight tanker four $.30 a barrel per month. have a tanker for 30 cents a barrel per month. demand was growing at 4%. they revise their number two 2% -- to 2% overnight. imagine if the bea had done that for gdp. the whole thing has to come down. guy: we can be very excited about price. we spoke to the opec

secretary-general. less excited about price. >> at the moment, we are not targeting a particular price. we are targeting high inventories. we are cautiously optimistic that with these drawdowns, which we are seeing in the u.s., that thise weeks now, is probably the new trend. was the opec secretary-general speaking a little bit earlier on in istanbul. they are targeting inventories, not the price. they do not understand how this market has changed, the swing demand for inventories which can total 12 million barrels a day, more if they manage expectations right. this is the same thing central bankers do. governments try to do it. and as far as that goes, businesses try to do it. you manage expectations on earnings. if you have people believing in lower earnings growth, higher earnings growth, stock prices go

up. opec and almost all of the oil industry totally missed this point that there is something like 4.5 billion barrels hedged, open interest in the future. a lot of that is hedged. tom: your thoughts on america and trade. nafta -- was not a failure? what do clinton and trump need to do to protect american trade relations? philip: thank you. nafta should not have been a failure. we worked on it in the 1980's at the peterson institute. markets, andopen where mark -- and where markets -- where workers lost jobs and retraining. we did a great job on opening new markets and a poor job on retraining. now, we have to catch up and go back and take care of those people, evil in north carolina and other areas, auto workers who have seen jobs go away. the retraining part of the thing

was never funded properly. , but i we can recover think it is going to take a while, especially given what has happened in this election. you -- torful have ondonyou in our l studios. sterling and an ascending u.s. dollar. axel merk, always controversial, on the future of the greenback. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." what your glasses back on. you can wear your glasses. it does not -- >> i am getting old.

i need them for reading. tom: i need than just to wake up in the morning. i need them when i am asleep. what a joy to talk to a nobel laureate from the massachusetts institute of technology. it is great to talk about stuff that is a little obtuse. you have written a brilliant essay with your team on carry. what is that? it is ait -- andrew: it is a term applied to a lot of things in financial markets and we wanted to be precise and how we do find it, because we wanted to look at a lot of different things -- foreign-exchange, equities. what we are really focused on is, what is your return if nothing happens, if nothing changes, effectively, and current market pricing? how much are you paid for that? what is interesting is, that premium exists in different forms across different markets. it behaves in different ways

across different markets. but when taken together reducesvely over time, a pretty attractive risk-adjusted return, something we think looks better than equities at the moment. tom: here is the mother of all carry, oil. swing up to that chart, if you would. you get the basic idea of $100 for ever. that was the ultimate carry in oil. how do you affect these traits to make a 16% a year profit? how do you make the trade and not get killed by the big move in the market? andrew: i think there are a couple things. to the point phil was making earlier, when you have this upward-sloping futures curve, that effectively means that if you buy the forward and nothing asnges, that falls in price it moves forward and rolls down the curve. from the perspective of the investor, that is a negative carry position.

it costs you money to hold that forward. one thing we like at the moment is owning the russian ruble, which has high real interest rates, against something like oil, which is related but has a very different profile over time to hold it. trying to understand how we trade this through options -- what this through into the equity landscape. in the equity market, we want to look not just at the dividend yield, but how that compares to local interest rates and what you could earn by just keeping your money in cash in that market. that is a pretty important distinction. a market we have turned cautious on recently is brazil. our latin american equities strategist believes that upside is quite limited. there are a couple of reasons for that. one is that the brazilian equity market has a dividend yield of less than 3%, where local interest rates are 10%. if you think about your

opportunity cost of converting are money into reals, you collecting 83% dividend by giving up the opportunity to make 10% parking it in cash. that is a negative carry trade that we think looks unattractive. that would be something our framework would disfavor. levelreak that down to a below that, and the story of what is happening -- we have seen utilities and the moves. i have been told a great deal by strategists. i want to focus on the rotation for my returns over the next 12 months. andrew: that is a major challenge in certain equity markets of how dispersed the market has become between pricing the quality parts of the market, the parts of the market which secure dividends, and the lower parts which are cheaper with more cyclicality. that is specially a problem in europe. because ofrweight

that the virgins, what you have to pay for those higher-quality stocks. it is quite extreme when a historical basis, compared to lower quality things that are cheap. that investors have to make such a stark decision makes the overall market less attractive. tom: bring me over to adam parker's equity market. hold a carry strategy, carrying forward dividend growth forever and ever? i think yes. something we like about the u.s. equity market is, the u.s. often gets painted as a low yielding market because the headline dividend yield is low, that ignores the fact that u.s. companies tend to do more in buybacks than their european or emerging market peers. thetotal combined yield of u.s. market is over 4%. that is higher than where the combined yield is for europe, for example. i think that is a point and and

has made and he has recently raised his target. tom: this has been fabulous. andrew sheets, thank you so much. i love linking quantitative finance to pretty sophisticated stuff, and the basic idea, what do i do with equities? andrew sheets is with morgan stanley. we are going to move on to deutsche bank. equities, bonds, currencies, commodities -- the basic idea of the vix. dollar strength out near 98. this is bloomberg. ♪

everybody.orning, guy johnson in london. tom keene in new york. in the next hour, a tough american economy. bloomberg business flash. taylor: ¢ is cutting third-quarter operating profit guidance by 1/3 in the aftermath of the galaxy note 7 crisis. to comefor the period in at $1.46 billion, down from a previous forecast of $6 billion. the firm pull the plug on what was supposed to be a premier phone designed to compete against apple's iphone.

ericsson facing waning demand for wireless equipment, struggled to reduce costs as it tries to keep up with rising competition and slowing demand. that is your bloomberg business flash. i am taylor riggs. -- deutsche bank is set to increase its private debt sale according to a person with knowledge of the matter. this comes a week after the bank raised 3 billion. a reporter is sitting next to me on set. deutsche bank -- that is a big deal. is a good sign for them that there was demand out there. they got this last piece in, even at a tighter spread than the previous slice of it. demand outthere is there for their debt. it is a little more expensive than the were paying a year ago. 290 300 over, and then

over. versus 130 a year ago. a little more interest expense. this environment, borrowing costs are so low it is not a huge difference. guy: anything we should read into the fact that they went private? michael: it is probably easier to get done at this point. they have more debt maturing later this year. they wanted to perhaps get out in front of that. allows them some flexibility. tom: michael moore, let us take a bigger scale. we have been looking at deutsche bank, up and down a little bit. a euro here, a euro there. a little bit. a euro here, a euro there. the basic idea is, this is a trend, michael moore. is the management of deutsche bank aware of this in the sense they have to speed things up and act now? or are they comfortable bouncing

off of doom and gloom, sitting at 12 euros a share? michael: i would say they are definitely not comfortable bouncing around these levels and constantly being the headline story, and having politicians talk about the future of the bank. i think they want to get out of that cycle. there has been discussion of doing something more dramatic on the strategy. we have not heard anything from them on that front. heart of this is getting through the strategy and the cost cuts. the biggest part is the doj settlement. watching banku, after bank -- deutsche bank has to deal with year-end. i know your vacation starts december 15. when does john karen's -- c urran's vacation start? ael: i do not think john vacation.getting much they will have a lot of

questions. there has been talk about the doj would like to get a deal done before the election, given some of the pressures on their side of things. certainly, georgia would like to get this done sooner rather than later. tom: thank you so much. michael moore following all of the european banks, including deutsche bank. when an interesting hour, particularly thanks to andrew sheets, for that work on the duration and length of carry. in our next hour, what a timely moment. theave shared goals for european parliament and the -- we have we have sharon of the european parliament joining us, and we will talk to stephen stanley about a tepid america. ♪

this morning, sterling rebounds after the prime

minister caves in. parliament will have a voice in the brexit debate. a tepid american economic growth. on your two americas, stephen stanley. he the republican candidate takes on, the republicans. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tim tom keene. guy johnson, the u.s. political hours, a the last 24 ballet as donald trump went this big river house. guy: a ballet, yes. it is between the republicans. tom: don't forget, mark halperin and john heilemann will give you the political formula. now, "first word news."

taylor: with less than a month to go before election day, republicans are in a state of open warfare. yesterday, the gop nominee declared himself unshackled from so-called disloyal republicans. and house speaker paul ryan 2008 presidential nominee john mccain. he said freedom is on the ballot next month. willrump: this election determine whether we will remain a free country in the truest sense of the world, or if we become a corrupt banana republic controlled by foreign governments. clintontion of hillary would lead to the destruction of our country. taylor: earlier yesterday trump n offensive, saying that paul ryan is weak.

two national polls released yesterday offered good news for hillary clinton. a survey from nbc and "the wall street journal" gives her a nine ,oint lead over donald trump 46% to 37%. it was conducted over three days before and after sunday's debate. 49%ton leads by 11 points, to 38% in a pri atlantic bowl. that poll was taken after the trump and clinton were tied at 43% each two weeks ago. lawyers were the only surviving suspect -- lawyers of the only surviving suspect say they will no longer defend him. because he has chosen to remain silent in a protest in his prison cell. and identify others who might

have had connection to the november 13 attacks, which killed 130 people. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom: let's get through the equity markets right now. equities, bonds, currencies, commodities, and get right to a discussion of american growth. futures in stasis. a weaker euro along with sterling, and oil elevated. you heard in the last hour, lower verleger called for oil prices. dollar stronger. we will talk with steve stanley about that in a moment. guy johnson? guy: let's talk about what is going on in the world. the position of the stoxx 600, we are flat. erickson getting pummeled, the network equipment maker. that is a punishment by the market that you have not seen

area often. it seems to be confined to the technology sector, particularly with what happened to samsung overnight as well. the foot to one you know, they work inversely at the moment. if the town goes up, the ftse goes down. it is a fairly straightforward combination. things are working pretty well right now. tom: we are going back to this chart. let's show it now. the survey out today will probably be optimistic. here is another view, less so. let's go through this now. this gap is a huge deal. this is the extrapolation of 50 years of employment growth, of 25 to 54-year-olds in america, and something changed right here in 2000. we got flat employment growth, and the gap is a stunning 28 million people, called it $30 million, the core employment

growth. -- the core employment gap. guy: let's talk about what is happening in the u.k. we have referenced what is happening with the town and the rebound we are seeing. this chart is long yields versus -- these are bloomberg indices, and total returns. the total return on the gilts have turned negative. this is something to really pay attention to. the gilt market is a critical component of what happens next in the u.k. is there -- if there is any with a fear, things will change dramatically and quickly. tom: stephen stanley is someone to pay attention to. he has been dead on with a tepid, moderate american economic growth. he joins us today. the call?hanged are you more optimistic on american economic growth? >> i think growth will be better

in the second half of the year than in the first half, but the potential growth rate in the economy is much lower than we thought it was even just a few years ago. u.s.how critical is the dollar to the dynamic, the churning of the american economy each day? steve: we saw a huge appreciation of the dollar in late 2014 and early 2015, and that had important implications. it held inflation down for a while. it had a big impact in terms of trade flow. when the dollar moves, the economy reacts. .om: let's bring up the dxy this is a blended index, 57% euro, 12% or so sterling with the other major trading partners, not china. steve stanley, here is the leg up. does this have legs, if you would? does this have the ability to be a dollar breakup?

steve: it is unlikely we will see the move that we saw a few years ago. but with monetary policy doing what it is doing, the fed will likely raise rates over time. of our central banks are still using or at least not tightening yet. we are ahead of the curve there. guy: do i need to be concerned about the u.s. consumer? consumer seems to be the only engine to global growth in any way right now. steve: they seem to be rock solid right now. wage gains have been improving. consumers have ample firepower, at least for the moment, to continue to give us decent growth. guy: if we were to see oil prices going up more, rents climbing faster than wages for a little bit more, how does that change the dynamic? steve: that certainly takes some of the zip out of the income piece.

what we have seen with the last couple of years with oil prices falling, it gave consumers ask for money in their discretionary spending budgets. we are starting to see that go the other way a little bit. obviously moving from 40 to 50 on oil is different then moving from 40 to 100, which we have seen over the last few years a couple times. tom: give us an economics update. kathy man -- catherine man was on yesterday, it incredibly grim on world trade. steve: the trade flows globally are definitely lower, and i think surprisingly so. people are worried about that. our trade balance, our trade flows, have picked up a little theon the export side as lagged impact of the dollar in appreciation that we have talked about. tom: is it simply a china dynamic? steve: i think that is a big

part of it. slow growth is also an important piece. tom: steve stanley is with us. we will link this and with the politics of the nation coming up. we are thrilled to bring you sharon bowles on the actual mechanics of parliament as they take on prime minister may over brexit. this is fun. this is bloomberg. ♪

guy: i am guy johnson in london. tom keene is in new york. this is "bloomberg surveillance ," and this is a "bloomberg business flash." taylor: the australian government has sold $5.8 billion

of 30-year debt. -- new march securities australia's borrowing needs have boomed as lower commodity prices and reduced mining investments have stemmed revenue. there is uncertainty in the oil market over rushing willingness -- russia willingness to join the opec oil market. let 'er rip confirmed russia would agree to efforts to boost prices. that is your bloomberg business flash. guy: the pound is rebounding after a brutal few days for the currency, this after the pragmatist or, theresa may, accepted that parliament should be allowed to vote on her brexit plan. we are with sharon bowles now, the former head of the european

-- is she suddenly going to allow her mp's to be able to have an influence on her negotiating position? sharon: i'm always a little bit skeptical. i think the weakening on that makes political sense for her because she is in more danger were the vote to end -- with a vote at the end. with a vote at the beginning, she did say the objectives and broadbrush terms can obviously change during the course of negotiations. voting for something is better than we will actually get. guy: the interpretation of the financial markets is that this will lead to a softer brexit, and is that what you are kind of telling the? that we will end up with a more managed process, maybe even

possibly including single market access? sharon: access to the single market is there for third countries. just have to get it. it is a question of whether you can have something that is better than the united states that everybody else gets, which is what we really want because we have been closer and we have had unquestioned access and the right to trade cross-border without necessarily having to get permission from regulators, the so-called passports. what can replace that? .e are not in the eu there is no passport. an important question will be around the customs union or it can we be in the customs union for good? is that something where we can be in that and still do free trade agreements? point, notegotiating something we can dictate. tom: minister, help me here with your british parliament. most of the knowledge americans have about parliament was

defined by judy dench in three movies of the united kingdom that we watch and we think we have an image of parliament. how will labour and the conservatives go at it as they try to get the power or the debate or the discussion away from the prime minister? well, they will have a debate, and then they will say what the advantages and disadvantages are of trying to stay in the single market or in the customs union and push the negotiating position. it is already expected to be toward a softer run, putting a resolution forward. they will take a vote on it. it is not yet clear to me because i have not actually got into parliament today. whether this is something that would go to the house in the normal way or whether it will just be the commons -- the argument that is being used, in the areas where the royal prerogative has been exercised

in the past, whether we go to war, has always gone to a vote in the house of commons in recent times. so this, brexit, being the biggest thing that faces the united kingdom in many years -- and although different from war, it's effect could be comparable in economic terms -- why should that not go to the floor of the house of commons to get approval? tom: maybe all royal prerogative is something we need in our politics today in america. this is the sterling chart since brexit. our politicians blind to the evaluation -- are the politicians blind to the evaluation of your currency? what an abrupt move down. are people like you blind to sterling movement? sharon: no, i think that politicians are dependent on which side of the argument you come from.

use it to say it shows a hard brexit is not a good thing, and we need to do something that is having more immigrants, gentler in terms of -- or softer in terms of our relationship with the eu. but those who want to take the hardline say, well, the devaluation helps our exports. at the moment i think you will find that the bank of england is not easily rattled by where it has got to so far. whether it will continue and continue, it reaches a point where everybody starts to be worried. but at the moment it is some on one side and some on the other side, and we are at the kind of levels that we plunged down to at the time of the financial crisis. evaluation at the the time of the financial crisis did not provide as much of the boost exports as would have been the case if we sold off

manufacturing goods. high-tech and services -- the currency is of less significance than what we are selling. guy: you have your ear to the ground. what are you hearing from your colleagues in the european parliament? line of theink the european parliament is much the same that it has always been. there is no such thing as being half in the single market, which is precisely where we would like to be. if you took what boris johnson promised that we would have, we would have our cake and eat it. there is no such thing. there are lots of concerns about , they do not want to sort of highlight the way out the way other countries might follow suit. tom: let's leave it there. sharon bowles will continue with

us, and of course stephen stanley is with us in new york. coming up, television and radio -- a conversation with torch public and sent to new -- with george poppa consented to -- michael mckee on greece. we will get to that later. this is bloomberg. ♪

tom: good morning, everyone. guy johnson in london. i am tom keene in new york. let's squeeze in a discussion with baroness bowles here. what is the difference between

janet yellen's shop and carney's shop. he is dealing with a discrete shock. nowe: i think the question is what is the longer run outlook for the british economy. tom: guy johnson, the british love that idea of the medium-term as well. help us out with the baroness on the bank of england. >> one of the big questions is that governor carney will be sticking around. do you think he should stick around and continue to do the job he is doing at the moment. do you think he has the support of the treasury, and what do you think monetary policy needs to deliver for the british economy? think: first of all, i mark is intending to hang around. when he originally had a shorter , as hisht year term

request for governor. i am hearing that he wouldn't mind if it was a years or another term, because it was rumored what he would like to do when not be available to him. think changing the governor of the bank of england right now would be terribly helpful, so i think to have some continuity -- theresa may has said that she is keen on the level of qe that is going on because as many no, those with assets get richer and those without do not. there is an inequality to it. you are going for deeper examination, what was the alternative? what might be the alternative, other than more qe? , now isshe is saying

the time for fiscal policy, and the bank of england. same as the european central bank. they are saying it's have the fiscal policy doing something, why should we do all the heavy lifting in the central banks? guy: to put on a different hat, let's talk about what is happening in europe. is the ecb worried about deutsche bank? are you worried about deutsche bank? sharon: i have always had this suspicious concern about deutsche bank, and it is being voiced in the european parliament over time i think one of the big problems, we do not know -- there seems to be some lack of transparency and references to special resources that you do not know what they are. , one you do not know becomes suspicious. that has been held in train in the past. but now i think the cat is out of the bag a little bit on it. tom: baroness, thank you so much. we appreciate it.

baroness bowles on the important shift that we saw with a shock and the plunge and sterling we saw yesterday. and we catch a bit as parliament, we will have a voice on brexit. most interesting to see. a person to speak to on this , yourow is george magnus bf senior economic adviser. a terrific perspective, george magnus, so look for that tomorrow in our 5:00 hour. the data right now, sort of a lot going on here, but it is mostly in the currency space, the rebound of sterling. euro weakness this morning. against dollar strength. with stephen stanley of amherst pierpont, we are in new york, and a little bit in london as well.

tom: good morning, everyone. guy johnson in london. i am tom keene in new york. this is government officials in

germany, guy, with the basic idea that the german public officers are sparing deutsche bank to move ahead with their bank overhaul. this is a very delicate release by bloomberg news. these are people speaking with the condition of anonymity, as they say. so there is a discussion forward on deutsche bank are let's get to our first word news with taylor riggs. taylor: british prime minister theresa may has accepted that parliament should be allowed to vote on her plan for taking the u.k. out of the european union, but she is asking lawmakers to do it in a way that gives her space to negotiate. a motion today will call for proper scrutiny of her plan before formal eu negotiations begin. that motion is supported by some lawmakers in may's own conservative party. in south africa, brought charges against finance minister pravin gordhan include the possibility

of increasing borrowing costs back on the table. he was summoned yesterday to make a court appearance in november on fraud charges, a month before s&p and fitch are due to review's -- due to release a report. on the agenda, outdoor plus signature issue, climate change al gore'sa's -- signature issue, climate change and america's signature issue three al gore: i will tell you, her plan on solar panels and expanding energy, it is right at the limit of what we can do. that is exactly the kind of ambitious goal that we need from the next president of the united states of america. taylor: donald trump will be in a collar and lakeland in

florida. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. tom: stephen stanley, i want to bring up this chart. this is the heart of our employed 25bate, it to 54-year-olds, both sexes. simply, there is no other way to put it. right here, things change. what happened in 2000? steve: from a cyclical perspective, the labor market was tighter in the late 1990's than it has been in my lifetime, so what we are coming off of is a strong --

demographics are another thing. most of the period that you have drawn there is when women were entering the labor force. some of that trend is probably unsustainable. tom: mr. trump and senator sanders were playing to the tension of the 28 million people in this gap. the fact is, there is a labor split in this nation. your outlook on growth cannot fix that split, can it? it is not a cyclical problem, it is a structural one. the answers do not lie with the fed, they lie with much more difficult problems to solve. education, the way we promote growth with government policy, be it taxes and regulation. those will be very sticky problems, and it is hard to muster the optimism to get think your environment to believe that those things will be fixed. guy: do we need more government to solve this problem or less? steve: i think we need a lighter

touch on the regulatory side. we have made a lot of decisions on the regulatory side over the last 10 years or so that are pursuing goals that may very well be good goals but that are coming at the expense of growth. one decision or two decisions is probably not so bad, but a lot of decisions piled one on top of the other means that in the hole, the regulatory policy that we have, it is certainly holding that growth to some degree. i would love to see tax reform. smarter, ie things do not know if the answer is necessarily bigger or smaller per se, but certainly smarter. we need to repatriate the huge amounts of money that u.s. corporate hold abroad? one of the things we have not seen is the willingness by cfo's, ceo's to invest in people and to invest in -- how do we spur that? steve: tax policy and regulatory

policy would make a huge difference. the repatriation issue, you're looking at the symptom rather than the root problem. companies arehy moving their operations overseas. corporate tax reform would go a long way if we were to have a more growth-friendly and business-friendly environment. tom: let's link into politics. charty, wander in that again. the idea here of president bush, president obama, two eight-year terms -- this is just absolutely stunning, stephen stanley, from a presidential moving average, 4% real gdp. we come down here to the absolutely miserable 1.9% gdp. essentially we are doing a campaign in an economic decline we have not seen post-world war ii. steve: that is why it is such an interesting campaign.

you have the democratic side emphasizing the fact that the unemployment rate has come down to 5%, that things are so much better than they were at the depth of the crisis. but the trump campaign says, wait a minute, things still are not good. tom: can chair yellen and good intentioned politicians apply good fiscal stimulus? can they manage the two americas , or is that an impossibility? hase: easy monetary policy done what it can do. we do not need more fiscal stimulus right now in the short term. what we need are structural changes to policy that would enable us to grow faster on a persistent basis. tom: we are going to come back. stephen stanley with us. a lot of news flow right now. this is an old line american story. stanley, black & decker, in inactivation -- in an acquisition of new tools.

it is not like a big number, but there is a lot of emotion there about industrial america across the 20th century. black & decker to take out newel l tools. ♪

tom: bloomberg surveillance. guy johnson is in london. i am tom keene in new york. jon ferro is in new york. jon ferro, what are you going to look at? to theam looking forward minister may to speak at the top of the hour. my question is as follows -- did the prime minister cave to the parliament or to the market forces we have seen develop in the last week. i went off on hans redeker, and

he is saying at the moment that the recent sterling that the reason sterling left an impression with the government, we will go into that question. guy johnson, what is this, six hours straight on tv? completely demolishing the that tom keene pushes that europeans do not know what a day's work is. guy? they clearly can start even earlier. the you have really got to jon ferro question about how hard you can work. we do not do the productivity thing. tom: france is actually more -- a lot ofn times it.s are being put into our next guest joins us.

what is the shift in emerging markets? >> the big shift came in 2000. we had essentially p.m. growth of 2000, then we got a boom, and now it is going back to 4%. essentially the 2000 period was a one-off. the opening up of latin america -- it was a one-off and we have to get used to a period of much weaker growth. tom: it is a new globalization or is it discrete to almost culture and demographics in the history of the e.m. markets. neil: part of it is demographics. the demographic dividend is fading and that will not come back. a lot of it is one-off or you can open up an economy once. you can only integrated global supply chain once. you a tailwind once.

most of those things have now faded. culturally, why e.m.'s cannot catch up -- they will, but i think we will have a tow of much weaker growth -- we will have a period of much weaker growth. guy: what does this mean when there is a blow around when these big markets open up? neil: i do not think that is as big of an indication per the critical thing here is structural slowdown. it is not about weaker demand, it is about the supply-side of the economy growing at a slower pace. the boost to activity from opening up china, all of that is gone. i do not think it will create another wave of deflationary pressure in the global economy. what it will create is a much weaker economic growth. this has a big impact if you can pound things over several years. to 25, 2030, the global economy starts to look very different. does the enhance

protectionism go into this? neil: i think it probably does. it is the old story about when much weakers out, growth, we will see social tensions build, political pressures build. it will be quite difficult. tom: we will continue this discussion with neil shearing, and up piece on a different emerging market. it is a different russia. their economy has been buffeted over the last number of months by domestic, by oil, and by foreign or now joining us, nejra cehic at cv tv capital conference with russia passing economy minister. startede will get straight away. thank you for joining us on

bloomberg tv. the plenary session today, you said russia may double its prime -- may double its plans. which copies would be involved? that is one resource of increasing discord. -- of increasing globalization. we also have global growth in front of us. nejra: basically they are allowed to buy the government stake. majors the next stakeholder going into a possible share fail. could wozniacki bank it's --

could wozniacki bank its own shares? i want to ask about any investors in ross meac shares. because of something other -- other financial institutions. nejra co on the oil price, the budget is based on oil at $40 a barrel. where do you forecast oil? any higher than that? there is $20 conservative.

-- thea: do you agree with budget that contains swings in the ruble caused by oil fluctuation? when could that be implemented into the budget rule? >> we have to discuss it. we have to discuss the policy. nejra: do you expect any more sanctions on russia, and how are you preparing for that? i have seen a lot of influence in the economy. companiesat russian have to approve -- go the economy minister of the russian federation. thank you so much for speaking exclusively to bloomberg. guy? tom: thank you so much per let

me do a data check quickly. we will get right back to it with stephen stanley of amherst pierpont, and neil shearing from capital economics. sterling, 1.2263. weaker euro over the duration of this week. from london, from new york, stay with us. this is bloomberg. ♪

tom: how about a foreign exchange report? 1.1018.k about euro, really interesting to see how the euro unfolds to the end of the year. euro sterling -- you would think or 0.91.d be a 0.90 neil shearing is with us from capital economics, and stephen stanley is with us from amherst pierpont. i want to talk about janet yellen, to have a final conversation about her, the central banker to america, steve stanley. issue the central banker to your emerging market that's is she the central banker to your emerging market world? neil: it would certainly seem as

much. my sense is that the emerging markets essentially become less dependent on dollar debt in particular, and what happens in the fed. there are still some pockets where that is not the case, but you see it in places for china, india. curve, if youthis would, anthony. the white line right here is janet yellen's world. that is the american exceptionalism. forget about the doom and gloom. our yield curve is way elevated over the united kingdom in yellow, and here with negative rates in switzerland. if i go out 20 years, 25 years, you go to a positive rate. do you agree, stephen stanley, that it is an exceptional america, versus g7 countries? steve: for all the problems we have talked about today in the u.s., you could make the argument that it is worse in most other places.

say,chard fisher used to maybe the best horse in the glue factory. america -- ihing just think america is doing better, that is all there is to it. neil: it depends on which metric you take a look at. you aeil, can i give question about, is the emerging market -- is the e.m. capable of delivering the ability to change its view to the fed right now? neil: it is possible. when you talk about e.m. in that sense, the impact that it has on fed policy, we really think china. if the fed wants to tighten what goes up, the renminbi weakens against the dollar and the world markets get jittery about the chinese economy, then maybe the fed starts to hold off. but frankly, the fed will not be setting policy what is happening in south africa or turkey or parts of america.

so long as china remains stable, then frankly at this stage e.m. is a relatively small part of the equation in terms of what is happening with fed policy. guy: we are starting to see oil go up. we are starting to see stabilization in commodity prices. what are the implications of that for the emerging markets? how do i play that? how does that feed into my investment strategy? you: to start off with, have to look at why commodities are stabilizing. on the one hand we have some stabilization of demand conditions. china in particular hasn't collapsed in the way that some people have expected. this is most obviously in commodity currencies, you have seen big rallies off the bottom. ,he big falls and currencies most of the rebounds have probably happened. tom: we showed this yesterday.

with the coverage francine had out of the united kingdom. the beginning of the south african government, and to 94, persistent currency depreciation. when somebody in the media says to you there is a currency war, a phrase we love -- is there a currency war, steve stanley? steve: i think a lot of countries around the world are trying to achieve a weak currency as a way to boost their economies are it or has been that dynamic in the last five years or so. i do not think the fed is necessarily of the same mindset there. thefed does not want to be currency to be too strong, but they are not seeking an active weaker currency. dollar rates. trade went up 20%. it is difficult to see that happening again. if it does happen, the fed will just -- tom: the politics in the

is certainly brutal there, and for president obama it is brutal. what is the economic view? neil: it is pretty positive. it was one of the countries -- the balance sheet looks good, the economic reform program was good. now the policies have turned sour. mexico is similar. before an program looks good, the policy has turned sour. -- the foreign program looks good, but the policy has turned sour. a questionask you about central and eastern europe? much has been made of the fact that nations do not want a suspension of the free movement of people, and they talked about having a big impact on economics. what effect would a hard brexit be on central and eastern europe? question. is a good primarily we are talking about

poland. that is why you have one million poles looking in the you -- living in the u.k. the question is what happens to those poles? do they remain in the u.k.? and the question is, that's the big issue is, -- the question is, that the issue is, it is germany that really matters in all of this. tom: we drive this conversation forward. steve stanley and neil shearing with us, and we will do that on bloomberg radio in a moment. guy johnson, thank you so much for staying on. bit ill today. hopefully she will be back with us tomorrow. george magnus will be with us tomorrow on "bloomberg surveillance." ♪

jonathan: a very warm welcome to bloomberg daybreak. i am jonathan ferro alongside david westin and alix steel. we count you down to the open in new york city. the dow up by not even two points. the tone of the fx market is at follows. pounddrops a bit, the stronger on the session at 1.22. alix: theresa may softens her stance. the pound plunge pausing to catch its breath as she gives ground to parliament. is the fed finally poised to make a move? december have for edged 70%. putin as they edged back to the 2016 high. they talk of russia's