jonathan: a very warm welcome to bloomberg daybreak. i am jonaan 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 commitment

to joining the limiting of oil production. david: the top story is the brexit story and the pound. guy johnson, thank you so much for joining us. as well as a bloomberg bond and fx reporter. up us and my colleagues understand what is going on. this seems very intricate. is may going to parliament or not? is brexit on or off? guy: it is still on in the mind of the prime minister. she is allowing parliament to have a debate regarding what is happening. she has not gone as far as allowing a full vote for what is in the package for negotiation and maybe on the triggering of article 50, that will not happen . she wants to keep her cards close to her chest to gain a decent negotiating position. what we are having here is a

debate. the thing to remember about the referendum was that it is advisory, it is not binding. the view and parliament seems to be as a result of that being parliament should have the authority to step in and make the final decision. the prime minister believes that executive power exceeds that and yes, you can have a debate but it is us who are going to make the final decisions. on theour experience side of the atlantic is once you open up a debate you cannot control it that much. what happens if they come back and say, we decided we do not want to do it? guy: that will be interesting to find out. this is still something the prime minister believes she has the authority over and as a result she is going to take it as an advisory element. there is a court case about to take place that could allow a

vote on the triggering of i think thebut political situation becomes very murky at this stage. i think what the market is reacting to his two things. the market is very short of sterling so any shortness surrounding this, is going to generate some sort of a pop. less so aboutse whether brexit is going to happen at the form in which it is going to happen. what this may do is allow a softer brexit to take place and i think that is what the market is reacting to. expertise,ng to your you heard guy talking about how short the market is when it comes to sterling. do the shorts reload or do they pause? >> i think there is a slight pause today, but let's not forget that sterling is down 5% over the last four sessions so even if we get a bit of a relief the direction for

sterling is still very much lower. one expects the rally to be sustained and most are expecting the pound continue to weaken. they are looking at their forecasts and figuring out whether they need to revise them lower after friday's flash crash. thethan: looking at response of the government over the last 24 hours,'s prime minister may caving toward parliament or market forces? has this resonated a move with the government? may he what isat ultimately happening. it may be a gauge of how the market and the world is reacting. the conversation that came out of the conservative party conference and the idea that there is a focus on immigration, it is sterling. there may be a wake-up call that you need to temper the language, this needs to be a treaty that will resonate around the world.

i suspect that conference speech was delivered to domestic domestic, primarily audiences, but there is a realization that maybe the rest of the world is hearing that message and maybe the markets are teaching a message dust teaching a lesson to the new prime minister -- teaching a lesson to the new prime minister. jonathan: the focus very much on the house of commons in london where theresa may will shortly be addressing parliament and taking questions from parliament members. she will be taking questions now and we will bring you the headlights and highlights of that -- headlines and highlights of that. time foris is a fun these members of parliament and it is quite interesting to watch. onget a view of the pound the investor point of view, we are joined by steven friedman. he served at the new york fed

where he oversaw foreign exchange. welcome to the program. investors, what do you make of this? do you trade on this or not, what do you do? steven: you need to be aware of the fact that a week or so ago what we are seeing in britain looks more like a hard brexit and that is counter to the expectation that had developed over the summer. there is the concern we are moving full speed ahead and it is a drawnout process, but it looks like we could have less free movement of capital and goods. alix: is this a situation that it is the market teaching theresa may a lesson, it just took a while? .teven: i do have sympathy i think we are seeing a realization that she needs to be aware of market forces and there are constraints on this process. whether --e want to

whether the view. toughweeks of tests -- rhetoric the government may aim to stabilize markets however there is a fine line to walk as may's conservative party once a clean split from your. redline, the free movement of immigration and people. it is not going to reconcile any time soon. steven: this seems like a stopgap measure to me in my mind. i do not see how the markets do not come back eventually to see that we are looking at something that looks like a hard brexit. david: as an investor as you look at the u.k. and europe, does this create buying opportunities because the prices go down low or is the risk just too much and you say you are going to stay on the sidelines? steven: it can create buying opportunities, it is just too early to tell. jonathan: you are over at the

fed looking at fx markets and markets. . if you saw the moves -- move , how would you set the fed up to analyze what is happening? steven: if you see something like this happen in your foreign-exchange markets you are probably devoting more resources to analyzing what happened. you are reaching out more frequently to your market contact to try to understand how people are positioned, how sentiment is evolving. alix: we talked about the pound following over the past few days and i have a chart from kit juckes with a perspective of the pound's real effective interest rate. we are now at a record low when you take a look at that effective exchange rate. how influential can central bankers be to combat something when you look at the kind of

chart? happening with the power that puts the bank of england in an interesting situation, there are seeing pound weakness and volatility in the market and that is going to have inflationary consequences so it makes it harder for them to provide stimulus. jonathan: steven friedman of bnp paribas. let's get an update on what is making headlines outside the business world. emma: with less than a month ago for election day republicans are in a state of open warfare. gop nominee donald trump declared himself unshackled from so-called disloyal republicans like house speaker paul ryan and john mccain. he also said freedom is on the ballot next month. this election will determine whether we remain a free country in the truest sense of the world or whether we become a corrupt banana

republic, controlled by large earners and foreign governments. the election of hillary clinton would lead to the destruction of our country. emma: earlier yesterday, trump went on a twitter offense of lasting trump -- ryan as weak and ineffective. in syria, another day of bombing in aleppo. activist group says at least 25 people were killed including five children. another puts the death toll as high as 41. the only surviving suspect in , hisber's attack in paris lawyers have stopped representing him because he has chosen to remain silent in a protest against the 24 hour video surveillance of his cell. the attacks killed 130 people. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. chandra.

this is bloomberg. u.s. equity futures slightly lower today after the beating they took yesterday, and samsung -- erickson not helping in europe, down over 60%. this is the worst one-day fall for the stock since 2007. you see global customers cutting back on their network equipment orders. following samsung, take a look at a five-day chart. you can see the damage that has been done, down 5%. samsung cutting its recorder operating profit today. the total number of over 11 billion dollars in sales they will lose because of the note 7 and taking it off line. we do have a little bit of m&a, you have stanley black & decker buying new well to will division for about $2 billion. new well well pay down some

debt. jonathan: thank you very much. . big week ahead for the fed we preview the september minutes out today, and a line of fed speak. city, this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. the attention of global fx is right here in the house of commons as prime minister may takes on jeremy corbyn. just after prime minister may gives a little bit of ground to parliament accepting that they should be allowed to vote on her plan to take britain out of the eu, a headline is that theresa

may will allow and will speak maximum -- seek maximum possible access to the single market. when your emphasis seems to be getting rid of the agreement with the eu for the free movement of people, it seems difficult. david: that saves to be the mandate behind the referendum. alix: isn't this a different may then we saw last week? directingit is a may that addressing a very different audience. story, but theic fallout was international. it was in the fx market, gilt got battered. stanley you morgan wonder whether the market forces have resonated with this government and that is where you have seen this subtle have it in rhetoric. whether that leads to material action is another question.

david: it may be the prime minister had not fully anticipated the reaction of international markets. little bit of sterling strength, nothing to get excited about. up about 1.25% on the cable rate. the rest of this week to focus on the other side of the trade, fed minutes from september will be out at 2:00 p.m. possibly giving investors insight on what to expect to the rest of the year. we also hear several fed speakers on friday. still with us is steven friedman. it feels like we are on autopilot toward december. what we have learned is that things can change radically. your view on the fed? associatedview is with that autopilot and i see that a hike is possible in december. probability with most of

the mass in that december bucket. jonathan: the fed has been defined by dissent and it seems that governor brainerd is setting the agenda. do they capitulate? we get tothink if september and we are still seeing labor market slack being some signs of firming inflation, there is significant evidence and we could see the doves seeing in favor of a rate increase. we have to look at the minutes from september and there are three who are not in favor of raising this year. alix: the u.s. dollar continues to grind higher. this is jp morgan's real broad effective exchange rate and that has it moving a lot higher, at its highest level since really

back in the beginning of february. that tightens financial conditions regardless of a fed rate hike. steven: it has quite a bit of an influence. the fed targets a short-term rate they are interested in the whole suite. it leads to a tightening of financial conditions and the feds putting on the break. david: what will you be looking for, how strongly the dubs felt? what they have dissented if they had raised? there were three dissents at the september meeting. therere other evidence were other voting members who were in favor of raising rates but did not feel strong enough about it to dissent? maybe there is more pressure from the hawkish camp. there is a possibility that a dissentedight have

had they voted to raise rates in september. jonathan: how do we gather the politics and does it come up in the minutes? steven: young was quite adamant that the fed does not discuss politics. what is fair again is whether political in certainty is affecting the markets and the economy. placek if we are at a where the election outcome is looking a little more certain, political uncertainty is going down, they are less concerned about a surprising outcome that could lead to volatility in markets, it gives you more confidence toward a rate increase. alix: what kind of rhetoric will we hear on inflation? steven: this is one of the very interesting things. if you go back to how they talked normalization it was a noise the fact that we need to get up to a neutral policy rate before inflation hits 2%.

now we are seeing more of a willingness to be patient and wait. seeing clear evidence that inflation is moving higher before proceeding. alix: that is steven friedman joining us from bnp paribas investment. $50.taying above opec said to have firm commitments from russia on oil cuts. next we will hear from the secretary general on a potential deal. ♪

david: this is bloomberg, i'm david westin. big news out of the energy council meetings this week, including vladimir putin signaling that he may go along with the opec cuts. we spoke with the secretary-general. >> the decision in algiers was a holistic one.

it included the islamic republic of iran. >> so they would have to participate in a phrase or cut? >> they are already part of this decision and i think it is quite gnificant. you heard yourself from president vladimir putin, at the world energy congress, a firm commitment at the highest level of government. able minister has been with to hand,g hand side-by-side, shoulder to shoulder. we are confident. david: they are pretty confident, he is happy he has got iran in, he has got russia in. sounds romantic. will be the cynical, he is happy because crude is north of 50. alix: at what production do they actually produce a cut?

there is a half a million barrel dispute with oil members of the actual level. we spoke with jeff currie. jeff: you would not know until to queue of this -- next year. even the russian production hits a plateau in that january-february time next year. you would not really know into you get into the april-may time period whether anyone will adhere to these agreements. if they fail and prices do not cuttingey end up production drain their liquidity much faster. there is a lot of risk in pursuing this strategy. alix: i love that jeff took it to a broader picture. .t is about global liquidity the saudi arabia is selling their reserves that has dangerous consequences. jonathan: i go back to the

interest in all of this, if you want to get a bond issuer away from saudi arabia, what is the best way of getting investment appetite up? david: it is getting crude up and taking aramco public. alix: you can say you are going to cut and that will help the oil price, but what about the quota? the yellow line is the quota from 1988 and the output is the white line. 2007 we saw opec below that quota. the execution is a big risk. i wonder whether the real agreement did not happen in algiers but in doha. get production and then at the end of the year we will have an agreement with freezing output at all-time highs. david: talk up the price as much

as you can. alix: was ok, the end history .anager -- energy minister ok an agreement of an agreement and you have to wait for the implementation and according to jeff currie you have to wait potentially until next year. we take you from crude to post-brexit environments. what does it mean when the u.k. finalizes its exit from the eu? theresa may in the house of commons, a subtle shift from the prime minister in a subtle shift in the cable market. from new york, this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. here is the tone of the market, future slightly negative, down 11 on the dow, down not even a

single point on the fx market. sterling strength after the biggest four-day drop on the cable rate since june. yields grinding higher once again, up two basis points as we start to approach 180. stopping --a may is softening her stance as she gets some ground to parliament allowing a vote on her plan for taking written at of the eu. is the fed poised to make a move? rate hike that's for december have edged 70% -- bets for december have aged -- edged 70%. crude edge is back up to a 2016 high. david: our morning must-read today comes by way of the u.k. parliament where prime minister theresa may has been addressing parliament on the question of

brexit. >> what we are going to do is deliver on the vote of the british people. we are going to be ambitious in our negotiations to negotiate the best deal, and that will include the maximum possible access to the european market to trade with and in the european market. i am optimistic about the prospects of this vote. i am optimistic about the trade deals, that other countries are actively coming to us saying that they want to deal with the united kingdom. i am optimistic that we will be able to see our economy grow out .f the european union labor did not want a referendum on this issue, the conservatives gave them a referendum. labor did not like the results. we are listening to the british people and delivering on those results. the foreign secretary wants a second vote.

her, i would to have thought that labor mps would have learned this lesson. you can ask the same question again. you still get the answer you do not want. david: that is british prime minister theresa may addressing parliament as part of that part of dutch prime minister question time. she kept saying she is optimistic that there is somebody on the other side. jonathan: i think she was referring to the leader of the opposition party. politics isritish that you can throw shade of the person next to you and refer to them as the right, honorable gentleman. they want the maximum possible access to the eu single market but we know that the emphasis to not on the maximum assess the single market, it was on immigration. a fineay is walking

line, the conservative party once a clean split but she cannot go too far to the other side. eu does not have any incentive to let her off the hook. alix: a lot of it is invested in trade. jonathan: and -- elections next year, do you think this will go softly and smoothly? the french and german elections? i am pleased to say that antonio romeo, u.k. council to new york and director general for european affairs is still with us. let's start with what the banks are saying on wall street. what are they saying to you right now as the rhetoric has gotten a lot more serious? antonia: these are very sophisticated players and you would expect them to be looking

at their business bonds, and thinking about what they want to do with their businesses. i think the prime minister has been clear that we need to do two things. there is a mandate from the british people to get control over immigration but as you just heard her say, we want to see maximum possible access to the single market and that is good news for american banks. both? n: can you get .ntonia: this is a negotiation the government is saying they are not going to be doing commentary on the negotiations. not be thing is, we will in a position to know how that is going to be. alix: we were hearing rhetoric ramp up from the big banks. u.s., new york is going to be the big beneficiary of the brexit. wells fargo is doing much more than just talking, they are

looking at areas like frankfurt and paris to do business. antonia: london is a financial , andhat services the world provides a huge amount of liquidity in the european market . i think what they said is very important, which is this is not a zero-sum gain between the eu and u.k. there is a lot of systemic connections and actually from in point of view of the eu the negotiation you do not want to lose the business back to new york. is point of the negotiation let's keep london as a financial services, vibrant trading hub servicing europe and servicing the world. jonathan: help me understand something. currently there is a lot of uncertainty about the eu passport for london. clarence does not just happen outside the eurozone, it happens in london.

-- in new york. is this an issue for negotiation or for the cause? antonia: i think everything is an issue for negotiation. which pieces could be part of the negotiation to move, which for --will be bid possibly number one on the list of our counterparts of negotiation. i do not think there is any power as to the outcome. jonathan: my question would be whether the eu parliament can tell the united kingdom, you cannot have the passport without a going to the court. it went to the court last time and the ecb lost because they did not have the framework, the infrastructure in place to do it and take it away from london, so why would it be any different? antonia: the chancellor was on bloomberg last week saying the same thing.

i do not think there is any reason to think it would be different. job is to gather information from the side of the atlantic and relate it back to your government to input into their thinking process. they are trying to formulate their negotiating posture and while it is a u.k. issue, our people here are suggesting things that might work in the negotiation to keep them in london. antonia: you are quite right, that is my job to ensure that those in the u.k. during the negotiation understand the priority for businesses out here. we want to keep the huge amount of investment from the u.s. in the u.k. on all factors. these companies are very advanced in their own analysis, and i would say we are working very closely together to understand well what it is that

that point would be for negotiation and how they respond to different outcomes. i made the point earlier that theresa may is treading a fine line because the conservatives wanted a brexit, and she does not want to lose leverage to the eu. make the case for the best eu leverage that u.k. leverage. antonia: we can talk about a fine line but this is a negotiation. we do have clarity. alix: they would n necessarily suggest that. antonia: it is not a fine line? --x: it is not a large negotiation. antonia: we have the financial services trading hub of the eu in london. has, they u.k. has the talent, it has got the

universities, rule of law, contract law, a huge amount of innovation, and the infrastructure and communications to deliver. final question, have you noticed a shift in tone in the last week from the players on wall street after that speech at the conservative party challenge? have had a shift in the market and i wonder whether the people you have spoken to picked up the phone and said, we do not know -- like what we have been hearing. have you heard that? i would say the chancellor has been clear that we are expecting a period of some volatility. from the point of view of wall sectors,nks and other they i think are in a position where they are seeking certainty as soon as we can give it. my job is to limit uncertainty as much as possible. i would not say there has been a dramatic change in tone, and the

key idea is that we have to work together. e have to keep the u.k. as a highly attractive and competitive economy. alix: antonio romeo. up, ceos weigh in on the importance of this years election. tory burch on the importance of people going out to vote. ♪

emma: this is bloomberg daybreak, i am emma chandler. okada, highland founder and ceo.

david: with less than four weeks to go before the presidential election much of the attention has shifted to tension within the republican party. donald trump says he now feels unshackled from speakers in his own party. joining us is kevin cirilli from washington. what is going on within the gop itself? kevin: several top republicans have denounced donald trump's candidacy following the surfacing of that lewd video last week. i had to put this question to kellyanne conway and she told me that later and -- later on she would have a conference call with several republicans. the republican party is at a crossroads and now has different leaders.

there are some who are some who were following donald trump and others maintaining loyalty to house speaker paul ryan, and others who are without a leader at all. this is a republican party clearly at a juncture. david: take us into that election, what is all of this likely to do to voter turnout? is this going to suppress voter turnout? candidacy has put a wrench and republican plans and there are some who feel that his candidacy is not popular in his distant dust in their district, and they need to distance -- in their district and they need to distance themselves from him. on, is really what is going but at the end of the day, donald trump continues to fund .aise for the republican party his loyalists maintain the joint victory fund is going to be something he will continue to do

and they feel he has raised more money for the party than paul ryan. this is all setting the backdrop for a fight over control of the republican party after election day and where it goes after the next cycle. david: kevin cirilli reporting from washington. voter turnout inevitably comes a big issue in every presidential election. sadly, the united states ranks near the bottom. one ceo has decided to do something about that. tory burch has built a label into a million-dollar retailer. she is a philanthropist and has turned her challenge to the idea of getting americans voting. tell us about this initiative, what it is and why you got started. tory: i started to look back at the last election and i was horrified when i saw that 53% of

americans turned out to vote. it does not make sense. david: what are the contributing factors that you look out -- look at? tory: i think people need to be inspired to do it. i hear all the time it is difficult to find time. we have done certain measures to make it easier, but if we can incentivize our employees to do it and be role models, that would be a great thing. david: it is inconvenient for me to figure out a time before or after work to make it to the polls. tory: many countries in europe do it on a sunday. i think tuesdays were picked because of the agriculture 200 years ago and how farmers went through their crops, and the best time to harvest them. i think we could easily make that change. david: what did you do specifically at tory burch? tory: it is not easy. we had to figure out how to do

it, so we gave our employees who are not in our retail stores four hours and those in our stores two hours to plan their schedule. david: do you stagger it? tory: yes, they do. when you have that time in advance i think it gives you timing to plan. we show them how to register also. david: what has been the response? tory: it has been overwhelmingly amazing. i announced it at our town hall last-minute and it was beyond even nation. el other companies -- beyond ation. it is interesting the other companies signing on. i am not taking credit for it but we have had fortune 500 company sign off, small corporations, startups, so i think we are seeing it across america. david: is this the beginning of

something larger for tory burch? tory: i think political participation is essential. it is something that really represent our country and i think if we do not all want a say in things and how the election turns out, we better get out and vote. david: it has become partisan for reasons that are not entirely clear to me. it tends to be seen as pro-democrat and anti-republican to get out and vote. have you had that backlash? tory: i have had a little but i do not really see that side of it. i think to have a voice in this country is what this country is about whether you are republican or democrat. david: we cannot have tory burch year without asking about your retail. give us your sense from where retail isabout how going overall today in the

united states. tory: retail is tough, the macro environment is tough, but so many things are affecting retail. traffic is down, customers are shopping online. there are so many different things like tourism affecting it. it is how do you shift your ,ompany to look at the future understand the macro and the changes and move forward, and make retail and incredible experience for the customer. thing we hear again and again is the online piece and let's be honest, amazon is the name that comes up. is that overstated, the effect that amazon is having or is it really shifting the entire business? a reasonhink there is for retail a i certainly believe in e-commerce and online. we are pivoting our company to be a technology company. retail is always going to be important for us, rick and

mortar, and a lot of our customers are finding inspiration online and going into the store and buying. david: we are going into christmas season. do you have expectations for tory burch or more broadly what retail will look like compared to last year? tory: i am hoping it is going to be more positive and i think we are doing everything we can to ensure that. you never know how it will turn out but i have high hopes. we have great customer experience, great product, then we can get people in the store. we still want that touch and feel. david: certainly my wife does. that is tory burch, founder of the retail company tory burch. emma chandra is here with bloomberg business flash. emma: stanley black & decker is buying a tool business of the company that owns elmers glue.

they say the sale includes erwin, lennix brands with the proceeds being used to pay down debt. samsung is cutting their profit guidance by a third in the wake of the galaxy note 7 crisis. they will cut it down from a previous forecast of 6.9 billion. the plugerday pulled on what was supposed to be its premier plot -- phone. saudi arabia is preparing to meet investors over its first international bond sales and they are disclosing little or no information about the economy. they were moving more than 266 butels -- million barrels they have not had that reviewed. crude sales account for 75% of oil export earnings. i am emma chandra, this is bloomberg. jonathan: fed speak, we have a

week full of it. we look ahead to today's fed minutes release. from new york, this is bloomberg. ♪

alix: this is bloomberg daybreak, i am alix steel. we are six hours away from the fomc minutes and what may be more important is the expectation -- inflation expectations. that blue line is the number of people on the fomc who see the risk of inflation forecast to the downside. the white line is put options. you make money if inflation falls below 2%. that premium has been rising as inflation expectations have ticked higher as well. will we see the blue line move

higher in the minutes? higherd members see inflation or less downside risk as we go forward? this is the bear case. it takes a look at inflation expectations for the u.s. over the next three years. with a bachelor degree and annual income over $100,000 feel inflation will not be picking up over the next three years so that is on the downside . on the bull side you have inflation expectations of break even over the next 10 years moving higher. charts oil versus the 10 year break even, the white line is break even and the blue line is oil prices. it has dragged the break evens up even higher. with this higher market expectation of inflation about , because on the household

side we are seeing lower expectation for inflation. this is key today when you get those minutes. the inflation debate will be front and center as the fed takes that on more than the employment conversation. jonathan: certainly taking hold in the u.k. with u.k. break evens really blowing out. we will keep the conversation on fixed income, the risk of the credit market with an investor who manages $17 billion of investments. in the markets, we are about one hour, 33 minutes and 40 seconds away from the cash open and --ures are negative -- futures are negative. ♪

jonathan: good morning and

welcome to bloomberg daybreak. it was the tone of the markets as we come -- county down to the open. market, after the biggest four-day drop for the cable rate since june, some sterling strength. again, up twoce basis points. alix: here is what you need to know. theresa may softening her stance , the plant -- the pound plunging. the prime minister give some ground to parliament, allowing a vote on her plan for taking britain out of the eu. for decembert's have raised to 70%. hailed through his pledge as crude edges back up to the 2016 high.

the cartel's talk of russia's commitment to limiting oil production. david: we want to go deeper into that top story of hours. we turn to the bloomberg london bureau chief. we want to talk brexit. it is all going on in parliament. what is going on, right now? emma: the first thing i would like to note is that theresa may has not conceded to a vote on article 15 or conceded to a vote on whether britain should indeed leave the eu. what it is about is giving option to the scrutinize and criticize her plan. this reminds us that may does not have ample majority in , thereent and definitely is a majority in favor of a hard brexit. this is not about blocking the

exit. david: from the prime minister's questions, is parliament trying to push her toward a softer brexit stance or is it all over the place? nah: there is definitely not a majority in parliament or a hard brexit. her rhetoric has indicated she is going towards a hard brexit. she repeated now that immigration is her clear take away from the referendum. the message she got from the result was that she had to control britain's borders. she read bill is -- that is always coupled with the caveat that she won't give any ground on freedom of movement. listenn: we can take a

to that sound coming right now. >> weed to be ambitious in our negotiations to get the best deal for the british people, and that would -- that will include maximum possible access to the european market to operate within the european markets. jonathan: i'm in the fx market and i have to listen to that get an idea ofo a hard brexit, soft brexit, how do i keep up to speed? had a big flash crash on friday, now we have a 1% rebound. the pound has fallen almost 5% over the last four sessions. all the elements we are talking about right now seem to think the direction for the pound seem to be lower. deutsche bank said it is not nearly cheap enough. all the analysts in the immediate forecast are still fairly high and need to scale back their expectations.

if you are the politicians looking at that kind of move, what does that mean? >> market participants are getting worried. this is the fourth largest traded currency in the world. it is not a frontier currency, and it is swinging around like crazy. david: thank you so much. now, let's get investor reactions and its -- on the brexit plan and its impact on the pound. our guest oversees a mere $17 billion in assets. how do you react to all of this? >> it is not a positive as we look at the outlook of earnings or what is really happening in the u.s. economy. one of the things that is important about the brexit move is that it is fueled by populism

that is not going anywhere and that slows globalization, but when that hound moves as much as it is, it is a big negative on the economy. it is hard to see how the u.k. does not avoid a recession. is a big negative as far as global growth and s&p earnings. jonathan: a clinton advisor quote -- seems to be the most powerful market on the planet, but do you think that has had some kind of impact on the government, these rapid moves in starling? mark: -- in sterling? the currency markets are not the largest and the most transparent, although the flash graphs were something to worry about. david: to conjecture a little bit, how do you feel if you are mark carney?

are you off the playing field? -- i have ak different view on what all of monetary stimulus has done or not done. we are at the point where monetary policy is not helping. you are decimating your bank stocks and your banks in general. the banking system in europe and japan, that is not a positive or the economy, going forward. we have to have a different playbook, going forward and we will see what happens with that. alix: the rhetoric was if you have central banks buying corporate debt, you will see yields trend lower. that is not actually happening. a big look at this chart, decline following boe stimulus. now we are rebounding up to

where we were before the stimulus happened. mark: it is more about risk. is higher if you have a lower economic projection, going forward. fan of thebig government buying corporate debt. that is a line that should never be crossed. jonathan: you take a company like apple and the sterling debt rolls over, last week. when you look at u.k. corporate debt, to the moves in sterling scare you away from investing? mark: we are a big domestic shop. we do not do much u.k. sterling debt. bottom line, i think what you have to roll this into is your outlook for the u.s. economy. your outlook for earnings, and i

think we have some headwinds going forward. if we look at s&p earnings of thinkart of the year, i that continues to get hit like it has every year and we have been flat for earnings of the s&p, for three years. it is hard to see were stocks go up from here, from a fundamental basis, from really, any basis. i don't think we will see a whole lot from that standpoint. jonathan: we will continue that conversation. mark is sticking with us. let's turn to, and see what is making headlines. emma: hillary clinton on the campaign trail in miami alongside the democratic for the july money from 2000, al gore. climate change on the agenda. the former vice president offered assurance that clinton will advance the cause of renewable energy sources. planwill tell you that her

on solar panels and expanding renewable energy 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. emma: both white house hopefuls will be pitching again, today. down trouble be in florida and clinton will appear in colorado. the white house says president -- a is citing aork times white house press secretary -- whatever the president does me never be a knowledge or disclosed if it is carried out. in north korea, more bad behavior. in newspaper reports the isolated regime has purged a deputy foreign minister of punisher -- punishment to a group of high-ranking diplomats.

an official and his family have been banished to a farming area. south korea says they are looking into the claim. inbal news 24 hours a day more than 20 countries. u.s. equity futures slightly lower after being pummeled, yesterday. butch is up by about half a percent. raising $1.5 billion in a private bond sale. they raised about $3 billion yesterday. on the downside, you have to look at samsung over the last three days. today that reporting it will write down its earnings by about two point $3 billion due to the fact that it is stopping production of its note 7 phones. we have a different story in the cyber market.

upside, raising its few -- full-year earnings guidance. the earnings was lower than consensus. jonathan: coming up on this program, attractive credit after the real -- rally we have seen. where investors find some opportunity? this is bloomberg. ♪

jonathan: this is bloomberg daybreak. let's get a check of the markets. we are about one hour away from the open.

this is how we are poised in the world of futures. if you switch up the board, the fx market looks like this. yields now 180 on the u.s. 10 year, up three basis points. there are no concerns over the impact of reflation on bond markets. yesterday we spoke with goldman sachs asset management. we asked what we could possibly see from deflation trade into credit. >> so much money has come into credit because the u.s. credit market was positive yielding and the next best thing to negative rates outside the u.s. you start to see some level of reflation, that will scare investors that are just owning yield because they are positive. ofathan: this story

reflation used to be good for credit. has that changed? mark: he mentioned the term reflation and for the i.t. markets, he is referencing -- it is fairly cheap compared to a lot of things you can buy, globally, but it is very interest rate sensitive. you have rates moving up that will hurt you and as portfolios, but when you turn to the world we live in, which is a lot of high-yield and floating rate, there is a lot of opportunity now. it is time to be rotating up in quality within this market. our global outlook is not incredibly positive, but there are still a lot of things to do. this rotational aspect of upping quality within credit out of fixed rate into floating rate, those are the things that make sense to us and there is a lot of attractive opportunity. jonathan: so you push back

aggressively? mark: i do. when you look at any sort of sentiment survey. amount ofis uncertainty across investors and when investors get uncertain, they sit on cash and cash levels across the investor base has never been higher. trading is about what is an investing is about what will be. we think about what will happen when the election is over and that cash needs to get spent. that is what i am focused on. i want to put our investor capital into places where it's going and higher-quality credit should be a beneficiary of that. alix: take a look at the bloomberg and this shows your point. 1%.st 1% or 8/10 of that is a huge move. does this move and your love of the fixed floating rate declined after friday? mark: it is a permanent change in the way that market funds

itself, going from fixed to floating. capital has shifted because of that, and that is what you are seeing. it could come off a little bit, but if you look at this move, and we have a lot of floating bank debt. up, and it is benefiting from this move. we are seeing that, already in our portfolio. --t continues to be a nice 5% in a floating rate environment is pretty good yield. if it goes back down to four and a half percent -- 4.5%, that is still pretty good. david: you referred to the unsent -- uncertainty of the election. is the market over anticipating? are they overpricing in the uncertainty? mark: that is a good point, and

i do think they are. aremarkets and the economy bigger than some of these other trends. politics is one of them. what will happen postelection, and what will happen with the new president. these two candidates are very different. that will come off the table as far as uncertainty. what do you do next? where you put that capital to work? that is a dynamic we will see in 17, and there are parts of the u.s. economy that are fairly constructive. we are not growing at 3%, what are we growing at 2%? probably. that might be a good supportive backdrop for credit. alix: you had that floating fixed rate investment. do you barbell that? barbell i have is higher quality credit on one de and then get ready for distress on the other. what is amazing about this

reflation we have talked about and the amount of credit that has been issued. if you look at the last peak we had in the credit markets in 2007, we have added trillions of dollars worth of debt into the system. we have a situation where we have over a trillion dollars of outstanding debt in the high-yield part -- bond market and the i.t. corporate market and that is almost $3 trillion more than we had in post seven. andcan have a small amount have a big nominal amount of opportunity. that is my barbell when i think about the opportunity, going forward. david: there is so much more debt on balance sheets right now. that is going to have to get turned over at some point. realhappens if there is a difference in the interest rate when that happens? the could be a substantial shakeout.

-- there could be a substantial shakeout. mark: i go back to the global growth dynamic, and how fast are we growing, and how much can inflation -- inflation pressure can you have? the long-term interest rate outlook for us would be lower for longer, and in that environment, i think that is not the issue. for me, it is a bit more basic. it is just the nature of low investment rate lending. you have to get ready for that. that will be a fantastic opportunity. that is the barbell. we could have interest rate problems. we could have interest coverage problems in different parts of the marketplace. i think it is a good old-fashioned credit cycle. alix: good to see you.

marco, -- mark okata. this is bloomberg. ♪

alix: this is bloomberg daybreak. earnings season kicking off, this week. delta reporting as well. at the end of the week, we get big banks, jpmorgan, citigroup and wells fargo. mark okata, back with us. how bad are they going to be when earnings come out?

mark: is going to be lower. all i see is headwinds when i look forward to earnings. if it continues to go up, based on the weakness of these other currencies, that is a problem for earnings. we have wage pressure. thinga pretty common companies are seeing now, across the board. that is another detractor to earnings. , where do you get growth in this environment? the punchline moment think about earnings is winners and losers. the overallbout number and it is about picking winners and losers. if you do that well, that will be an interesting opportunity. jonathan: a big list of earnings coming up, we had a conversation

about business models, yesterday. wells fargo used to be this flagship brand for american banking and then you have guys in the big markets businesses and it was day and night. now, a bit of a private. the markets business becoming a bit more constructive. hit -- pivot. the markets business becoming a bit more constructive. i think it is unfortunate. it does create opportunities for private markets to step in and do that. we built our firm in thailand and my career on displacing banks within the bankroll markets. banks andwith all today, there are a lot of investors in that space, and that will continue, but to your

point around the profitability and business models, you have a lot of people in markets businesses that really don't want to work in a utility. that adjustment is something that is going to continue to happen and to your point around well, there are a great banks, but there is a lot of pressure to do a lot of things and a lot of unintended consequences in this move. we will see what happens. banks have a lot of cheap lending. they have a lot of free monday -- free money. jonathan: great to have you with us. we appreciate your time. coming up, we speak to george, the great financial -- the former greek finance minister. ♪

alix: it is a: 30 in new york. theresa may a softening her stance, the pound plunging --

the pound plunge causing to catch it break -- breath. is the fed finally poised to make a move. fomc rate hike that for december have increased to 70%. putin's pledge as crude edges back up to the 2016 high. cartel senior officials talk about russia's commitment to lowering oil production. jonathan: looking at future support -- approaching the open. future is negative throughout much of the session. down 50 points on the dow and six points on the s&p 500. we bounced back with sterling strength and optimism the prime minister might be softening her stance. breaking news coming from saudi arabia. to weigh easing

restrictions on foreign banks. we wi bring yore details on that when we get it. they are set to explore giving more foreign bank licenses. alix: now to the morning meeting marie here where he banks are looking -- what he banks are looking at and they are looking at volatility in the pound. this is the one-month volatility of the pound dollar. that green line is one standard deviation up and the red line is one standard deviation down. volatility has really picked up. joining us now from london is the head of fixed income and every strategy in eastern europe, the middle east and africa. is the pound and emerging-market currency, now? it is becoming an emerging

market currency. one of uncertainty. the ec you put together the , the picture in the u.k. fiscal situation, the fiscal position tells me that can be very much compared to -- economies. drovew the capital flows the sterling appreciation up in the past. it could be challenged now in the coming quarters. it is an interesting point in terms of sterling risk in the fx market. the short could could do -- could continue, especially when it comes from the leveraged positioning. you are leveraging they have

enough reasons to accumulate sterling, now. jonathan: we are talking about the central bank with a potential to hike interest rates. the market keeps the bank of england from cutting rates in the near term. >> you should look into the developments in the breakeven's and link up markets. we had a huge movement in breakeven's and this is pretty much -- a similar move on the nominal bonds as well. the markets are already pricing and a lot of the deflation risk, coming in. that has been supported by the move we had on sterling. it will not be difficult for the bank of england to be ultra dovish. they will wait a lot more to unravel more dovishness. --must be careful in terms to not write the market into further deflation.

alix: the other big move has been the dollar, continuing to rise higher. let's look at what that does in emerging markets. is the impact of that stronger dollar? it is absolutely key. we had a very low cycle of soft dynamics in the dollar. it is interesting because this is not actually coming from a more hawkish fad. the most boring topic in global investment is now the fed stance. andfed hiking in december possibly in q1 of next year and that is pretty much it. given that the ecb is now finally discussing a potential exit. like a nuance, but it is strong enough to change the directionality within the

markets. we are perceiving that already anderms of eu price actions i do think potentially, that negative for many of the curves out there. this is the biggest red light we highlighted, very recently. alix: thank you very much. today, we may be talking about brexit all the time, but it was not all that long ago we were focused on what -- on whether greece could stay in the european union. our colleague is here for a special interview with the man who served as priest's minister of finance. he served as the finance minister from 2009 to 2011.

he has just written his memoir of those years. it is described as the best history of the greek crisis so far. history sounds like it is over but it is not over. just this morning, more headlines about the greek government arguing about -- arguing over terms of the latest bailout. you signed a deal designed to bring it out of here in two years. it has been seven years. why is it still going? years, three bailouts. four prime minister's, nine finance ministers and we are still there. should there have been debt restructuring earlier on? also, to take a step back and

see why we are still in. whoportugal and ireland came in to the bailouts after we did, came out earlier. mike: what is the difference between them and greece? george: greece started from a much worse point. competitiveness problem. credibility deficit because the previous government had lied. there were also mistakes in design of the program, mistakes in the fact that debt structuring to too long to happen. a lot of it is also in -- internal. there was no political consensus over what needed to be done. a lot of infighting. the initial governments were alone in trying to do a difficult job. all of this played a role in the recession has much more deep that should been that should have been. we lost a quarter of gdp.

and than 25% unemployment 50% for the youth. we are still there, we are crawling. mike: are you going to get out? the economy is still contracting. what is left? george: it depends how you look at it. ways, greece is like a broken country. on the other hand, a lot of what was wrong has been fixed. after many years, we are running a primary surplus which means we are spending less and -- then we are earning in taxes. that is a very important step. a lot of the structure reforms that were necessary, opening product markets, it is out of the way. not enough, and our institutions have not adapted. to start ad basis

more viable growth, or what is necessary now, is some political stability that will bring investors back. what greece needs in the next 10 euros in0 billion fresh investment. my worry is the current government is sending mixed signals -- mixed negative signals to the investment community and we need the international investment community to come in because there are in -- interesting sectors in the greek economy where we have some stability. mike: can greece survive if its debts are not reduced? george: we do need debt relief. it will not happen in terms of a fresh debt haircut given that it has now held majority by the official sector. you have capping interest rates, extending maturity. even though debt relief has been

put out there as the holy grail, it is not enough. it is necessary, but not sufficient. what is goingg, to bring confidence back is building institutions. the kind of stability and the tax system and the environment for businesses that any investor will look that -- look at, that will take time. mike: the book is sort of a love-hate relationship you have with the markets. you need them, and yet you say as he tried to get greece out of the hole, people trading credit default swaps made things worse. 2009, the markets have fallen asleep at the wheel, just like european policy makers have since the creation of the euro. they were lending to greece at the same interest rates they were lending to german -- germany. they woke up after the contagion from the crisis in europe, after

the recession in 2008, and they overcompensated for the fact top they were giving us marks and we werereated as if we were basically germany or the netherlands. lots ofdeal, there were market participants that were speculating on the next moves, and they were making it much harder. we were fighting against constant downgrades and this made it much harder to get out from where we are in. mike: thank you very much for joining us, out -- author of game over. jonathan: coming up on this program, we look at the impact of differences in regulation globally on the pipeline for drugs. ♪

alix: -- emma: this is bloomberg daybreak. members., oppenheimer david: pharmaceutical and biotech companies have been some of the big drivers of growth all around the world. one of the challenges they all face is different regulatory systems they need to deal with, country by country. in june, we spoke with the ceo of regeneron. he said it might be good for his business when it comes to the fda. >> if you are innovative like we like to think we are, you want to hide bar because you want the fda to let things that are really safe and effective and have been well established and

proven so that when you get over there, that is your protection because you don't have that big marketing muscle. david: president of global r&d at -- which works closely with regeneron says there is an urgent need to harmonize regulations. they are the french-based multinational company that is the fifth largest provider of prescription drugs, worldwide. you heard your partner from regeneron say sometimes it is good to have regulation. where is the line between constructive innovation -- constructive regulation and when it spills over? >> that is a great question. i agree with him on this. we need a high bar. the problem is the bars are not at the same level in every country, so there is a divergence which means you have to meet multiple regulatory standards around the world. is adea of harmonizing central idea to make sure that we don't end up with multiple

regulatory burdens on top of each other. i agree with the fact that regulation is necessary to ensure safety for the public. david: take us into your operation. you are responsible for r&d for a very large pharmaceutical company. it is not an impossible impediment. we are tackling it. the thing is that you have to multiply the number of regulatory teams that you have to have. have the same conversations at the same time, with all the regulatory agencies. they deferred and their appreciation of the safety and efficacy for the same disease, for the same drug that goes around the world. the timing is different, the discussion is different, and that imposes cost. i don't know the exact amount it imposes on the innovation 15%ne, but it is between

and 20% of our cost, dedicated to set up -- satisfying regulatory regimes across the world, rather than covering new -- discovering new drugs. david: are there any efforts to harmonize these systems? >> i think so. i think it the fda and the european medical agency, everyone is sort of caught between a rock and a hard place. they have to satisfy their stakeholders in the political system. and each one of the countries at the same time, they realize that harmonization would help them because the fda for example, 80% of our products are imported. the fda has to inspect the rest of the world. ema does the same thing and the japanese agencies do the same thing. innovators like us have to be ready for a multiplicity of inspections and requirements, rather than having one harmonious one to satisfy all of the agencies. the agencies are working together.

i wrote a editorial with our previous head of the fda, and we do see progress, but it is slow. the requirements are higher than they used to be. david: is one way to get around some of the difficulties through purchases and i positions? there has been a lot of consolidation. processee holes in your -- progress for you would be interested in making acquisitions? >> mergers and acquisitions have different reasons to happen. some of them are purely financial to synergize different portfolios between different companies. some of them are market-driven. when you have consolidation with the market on the bear side, you realize you are better off bringing a portfolio that appeals to the medical world rather than separated products that don't have synergy. from my point of view, what is

also important to understand is the model of innovation has exploded in the world. it is no longer what it used to be where if a forest -- a pharmaceutical company had everything inside of itself to do all the innovation it needed. today, we have 5000 biotech companies in the u.s. 80% of innovation is not coming from larger companies, it is coming from academia. you have to be nimble and willing to acquire, to partner, this is what we did with regeneron. a very successful partnership because at the end of the day, you have to be humble. diseases are complex. we do not understand everything there is to understand about biology. network innovation where you are able to associate, to partner and acquire is the key to success. it is the same thing in the technology fields and computers. innovation is distributed around

the world. it is not in any one big laboratory. david: thank you so much for being with us. president of global research and development at -- but a look at headlines around the world. emma: cathay pacific airways is scrapping its profit outlook and doing what it's calling april -- critical review of its business. asia's biggest international carrier says cell phones a no longer to exceed those of the first half. the airline reported 80 -- 82% slump and warned of a slump in premium travel. sprint, the unprofitable wireless carrier is looking to use airwaves as collateral for funding its business. the company says the arrangement involves airways licenses that represents about 14% of its total spectrum. raise $5ny aims to

million. kieran holdings has agreed to acquire a minority stake in brooklyn brewery. a rare investment by an aging company in a $22 billion u.s. craft beer industry. plans to expand to brazil. the company will give the japanese company -- japanese company is stake of about 25%. the value of the deal will not be disclosed. this is bloomberg. jonathan: up next, it is battle of the charts with the bond market. a lot of supply coming into treasuries, today. kicking in,n trade and a big way. yields up seven basis points. we bottomed on yield to 50 basis points on an interdict move on august 15. we have doubled since then. we trade north of one full presented -- percentage point.

from new york, this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. key events for the day ahead. trading less than an hour from now. -- annual payment symposium this afternoon, we will have minutes from the september meeting and also after the bell, railroad company boasts report earnings. let's get over to david for battle of the charts. the charts andf mark barton is coming to us all the way from london to battle alix steel. mark: let's look at the u.k. and u.s. bond markets. let's look at it in dollar terms. ands look at treasuries

guilt that is maturing -- guilt that is maturing. the blue line long treasuries, the white line, long gilts. treasuries have outperformed for the entire period. we read based on 100, last year. since april, we saw a positive move in u.k. gilt. september was a high for this index. anduse of sterling's plunge the rise expectations and the lessing probabilities -- lessening probability -- profitability, we have seen a plus of 13 to minus four. the winner is u.s. treasuries, up by 10%. long bond, down by 10%. david: you figure out what happens with inflation. alix: i'm taking a look at the

currency markets. this top panel is the two year yield spread between u.s. and the u.k. bottom line is pound dollar. as you wind up having to u.k. yields rise, you have a stronger pound. that has not been happening, lately. in u.s. yields, but you also see a rally in the pound. that does not seem to make sense, but now we have reverted back to the norm. u.s. yields rising and the pound falling. david: love you both, alix steel wins, more bloomberg coming up. ♪

to: a very warm welcome bloomberg daybreak. county of down to the opening bell in new york. futures flatly negative, down 35 on the dow. negative on the s&p. the story the fx market has followed -- a stronger pound after four days of weakness. yields rise on the 10 year by three basis points. we have pledged $44 billion worth of debt auctions in the usa. alix: the fed finally poised to make a move? bets have edged to 70%. buoyed by that sentiment. pledge.l's putin's membertel's most senior pledges to limit oil production. galaxy note 7 troubles are costing samsung, south korea's largest company, cutting its

forecast. david: we are going to turn to the important story about the fed minutes coming out later today. septemberthe fomc meeting. we will hear from a few speakers weighing in on the central bank's decisions. >> we take the world as it is. we do not adjust monetary policy with any eye on political outcome. green joining us is megan , an economist. this is my question. should we be paying attention at all to what they are saying, as opposed to the numbers that come in between now and december? megan: i do think it matters given the degree of dissent at the last meeting. usually, the minutes to not move markets. might.me, they you are right to highlight the numbers. i think janet yellen and the fomc have set the bar low for a rate hike. they have a naturally hawkish bias.

are desperate to hike by the end of the year. as long as the numbers do not deteriorate, i think they will hike. we do not need improvement anymore. i myself have just changed my thing called to december. david: that is based on what they have been saying rather than a change in the numbers? megan: both, actually. we have had decent data in terms of the isn manufacturing data, also the jobs data. not spectacular by any stretch of the imagination, but did not reflect deterioration. q3 -- if that is a big disappointment, i think a rate hike before the end of the year is off the table. both the atlanta fed and the new york fed are forecasting gdp growth of around 2.1 percent, which is not spectacular and might disappoint markets. alix: what is the rhetoric on inflation? you heard from bill daley dudley today, saying i think long-term inflation expectations are well anchored. my favorite chart is the -- the blue line is fomc members who see risk of inflation forecast

to the downside. at the same time, you can put options on inflation targets. they pay out if inflation falls. that has been rising. you see this change at the fomc minutes today? megan: i do not think we see that change at all. inflation should start to look better. by the end of the year, headline inflation may be above the fed target, but that is for statistical, not structural reasons. with oil prices rising, inflation will look better, and the hawks will probably use that to argue for a hike. i think that should be looked straight through. i do not think anything structurally is changing. jon: politics, new york fed president dudley says the fed does not conduct policy with an i on politics. we expect them to say these things, but you wonder how things will develop. monetary policy, you need an idea of fiscal policy. you will not find that out until you know who the next president is. how can they have the conviction to say they are not looking at the politics? i think they are.

the people at the fed are incredibly frustrated by the pressure they are getting not just from other people in governments, other policy numbers, but from the media and the public as well. even if they are not discussing it out right in the fomc meeting , so the elections may not show up in the minutes, and probably will not, as yellen has already asserted. david: there is politics and there is fact, who the president is going to be. wargame in a little bit. assume hillary clinton is elected, or donald trump. what is the likely effect? megan: if donald trump is elected, i do not think the fed can hike rates. i think if he implements the trade policies he has suggested he would like to, the u.s. would be tipped into recession. elected,y clinton is there will be a lot of policy uncertainty. it is still possible for the fed to hike rates based on the data. it is possible for them to hold

off, given that we do not know what clinton will be able to pass through, particularly given the house will go to the republicans, the senate is still up for grabs. if you have a clinton win, there could be gridlock. pay forike tax hikes to the fiscal stimulus that everyone is looking forward to -- she will have a hard time passing that. november -- if the fed wanted to prove it was totally apolitical, is there a case to be made for a november hike? what are they really going to learn three or four weeks down the road? megan: there is still a lot alix: of data we will get. -- there is still a lot of data we will get. alix: but if the bar is low -- megan: like i said, i do think they have an eye on politics. jon: can we talk about governance of the federal reserve? it is not just fiscal policy that could change under trump. he has been vocal about janet yellen. voice this a couple of times.

i will give this to you as well. if donald trump is elected president of this country, given what she knows coming from the president already, if he is indeed the president? we know what he thinks of her. what does she do the following day? megan: i think she is more galvanized to stick it out in the event of a trump presidency. i think she will stick through the end of her term in 2018. she is one of the biggest proponents of fed independence, so i think she will stick around to ensure they have as much independence as they can. david: you work for one of the largest insurance companies in the world. what do you say when the people who are investing the money that you have to pay the insurance recipients when they are due, what do you say to them, given what is going on with the fed? tough in an really environment of low rates for insurance companies and everyone running a pension fund. asset and liability matching is nearly impossible, given how low

rates are and how low we expect them to be in the future. challenge.ose a huge in terms of four to invest, given that every other major central bank is going to be exceptfurther, i think, for the fed, i do think that is more supportive of equities for fixed income. jon: thank you for being with us. life as ae -- manu management chief economist. says vladimir putin whoever is responsible for hacking the rest of credit party is not important. he says it is a distraction from the main issues. but the russian president says he is concerned u.s. presidential candidates are campaigning using anti-russian rhetoric. putin spoke today at the investment forum organized by vpb n in moscow. he says he wants moscow and washington to be on good terms and is concerned about escalating tensions. in south africa, charges against the former finance minister have

moved the country a step closer to a junk rating, according to investors. that has a possibility of increasing borrowing costs. gordhan was summoned yesterday to make a court appearance in november on four charges, before s&p and fitch reviews -- review south africa's credit. the hurricane came with a high cost. the storm impaired or destroyed more than a million structures, forced businesses to close, and put thousands temporarily out of work. according to goldman sachs, matthew probably caused $10 billion in damages. insurance companies could be liable for about $4 billion to $6 billion of that total. journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: we do have u.s. futures slightly lower today, adding on to some downside after yesterday's washer, where the

dow was down by triple digits. you also have the 10 year yield continuing to grind higher. we have a huge issuance coming to market. what will that do to the yield turn -- yield curve and equity markets? oil was up earlier during the day. now turning slightly negative. we will see what that will do .ith shell it feels like the rhetoric out of the opec and russia meetings uncertainty.s more what will the quotas look like? who will cut first, opec or russia? the industry -- the energy minister of russia says russia has been invited to the next opec meeting and looks forward to those discussions. now, it is about the implementation causing some uncertainty in the oil market. coming up, the world continues that conversation on oil. we speak with them energy strategist on the opec deal and what it means for oil stocks. ♪

david: i am david westin. big news out of the stumble this week as world energy council meetings. vladimir putin signaled russia might go along with opec production. we caught up with the secretary general of opec to get his views. a the decision in algiers was decision risks by all 14, including the islamic republic of iran. >> they would have to participate in a freeze or a cut. they are already part of the decision, instead of previous failed attempts. i think that is significant.

you heard yourself from president vladimir putin. energy the world congress, a very firm commitment at the highest level of government. his minister has been with us, walking hand in hand, side-by-side, shoulder to shoulder. so we are confident. david: that was mohammed --kindo, secretary of secretary-general of opec, speaking from istanbul. alix: the russian industry minister -- russian energy minister saying they are invited to participate in the next meeting to work on joint plans. typical opec, that will be a technical exchange to set up a roadmap. aniers was an agreement for agreement. now, we have an agreement for a technical roadmap. then, we will have a technical meeting to get to a roadmap. that is where we are. david: is this real, or is this

just spin? muchwe do not have evidence that when they agree on anything that they actually implement it. alix: we have the chart to prove it. look at the opec quota and where they actually produced. also, they wind up saying things like, no level of oil output was discussed today. they are hopeful. there is a question of who cuts first. does opec cut first? it becomes a job running game. more uncertainty. david: you have libya coming online. you have iran ramping up as fast as they can. alix: that orange line is the quota, and the actual output is the white line. it does not really matter. let us turn to the trade. we are joined from the cmb by a senior vice president at rosie no brothers. -- rosino brothers. back a it50, rolling today. how much more upside is left? >> we are still trading on the anticipation of cuts.

the september fomc, if you look at the dollar relative to oil, they were trading parallel to each other, and were on a straight shooter higher. that only exaggerated once we got the announced opec cuts, which have not taken place yet. i think right now, the market is very much waiting to get to the november meeting to actually get the cuts. i think oil volatility, while it is creeping higher, has a way to go. i think higher prices are limited until we get to the next opec meeting. alix: fair enough. on the flipside, if we do not get the specifics the market needs, what is the potential fallout, considering the market is quite long right now? todd: the market is long. if you are going back to the mid-40's, it is a big drop. i think it will probably come. we saw a big rise with the announcement. we will probably just take that back. 45 is a good support level. some of the option potioning, that is where we are seeing a lot of support. in the u.s., the federal reserve

and the temptation to raise rates, but unable to, it will be interesting to see how oil moves. supply and demand issues -- obviously, there is a ton of supply. with the demand kick in that will keep oil prices from drifting below $45? alix: for more on the opec potential deal, the oppenheimer senior energy strategist is joining us. there is another meeting october 29. that meeting will be a technical exchange to set up a roadmap. what does that even mean? to realize that so far, nothing has happened. it is all talk, but no action. the market needs to see concrete steps to rebound. the market will balance. the question is not if. it is when. supply willeing, continue to decline. we have been starving the

project of capital spending over the last two years. acceleratear will that. it is going to delay, postpone, or cancel any future projects, because we just do not have enough money to put any investment in these funds. the question is not if. it is when. production, forget about this rebalancing the problem. they need to cut production. if they need to cut production mattingly -- i am talking at least 2% -- you will see oil prices going higher. while prices would have to reach a sustainable level, which i believe is going to be about $60 to allow production to continue to increase. opec is maxed out. opec cannot produce any more oil. global supply is flat or declining. therefore, it would be bad. the question is going to be

when. in the past, when opec has been effective, saudi arabia have driven it. they have a lot of incentives, fiscal incentives, to try to get the price up. they are facing a lot of challenges. do they still have the power and influence to drive it? it is only because of the law of numbers. they produce more than anybody else. the export more oil than anybody else. having said that, higher oil prices also respond from show producers. production is going to be very profitable with $55 oil. this is the price opec is targeting to be at least the bottom of the range. if oil prices go to $85 and stay there, we will see a lot of drilling activity coming in. a lot of the wells that are drilled but incomplete will come into play. we can add half a million barrels within 3-6 months. that will negate any production drop that opec might reduce.

two-way street. it is not clear-cut of how it is going to play out. there is no question in my mind, saudi arabia cannot survive $50 oil. all can produce oil at $10, $30, but they need five or six times the multiple of that in order for them to survive economically. up on awant to pick point you made that the market is tight. it is tightening up. weorget that. take a look at the bloomber chart. -- it is thatad white line versus the blue line, which is the brent price. the spread is prices today versus prices in 12 months. the higher it goes, the tighter supply gets. we have been tightening up here. strip out a cut or not. what is the picture like for supply or demand? fadel: 6%, normal decline.

itself -- we are talking about millions of barrels will have to be in place every single year in order for us to maintain production. let alone grow production. we are talking about spending hundreds to billions of dollars every year, just to keep production flat, not growing. demand is growing by 1.5 million barrels a day. eventually, the supply and demand line will cross. it is only a matter of time. and i do not believe that time is on opec's side. i think time and technology are on shale's side, not opec. alix: you have to cut faster, or the market will rebound without you. we are also heading into for oil season companies. what oil price are these earnings factoring in? is that correct? view, these are

something the price, like $55-60 five dollars oil. but i remind people that behavior of the stocks will reflect the oil price. if oil prices go from $55, that is a sign it will continue to go further -- to go higher. evaluationy, the will move it. if oil prices continue to rise -- rising tides will lift all ships. it could double or triple over the last 12 months. the reason being, they were down by 90% or 80%. , theould not be a surprise ferocity. alix: when you look at the big integrated versus u.s. expiration and production

companies, which is going to have more exposure and upside as we see oil prices continue to rally? permianompanies in the basin -- pioneer, concho, aog. all these companies that are focused on the permian. the permian has become now the goto place. this is the premier zip cord around the world. if you do not have permian access, you would not count. those companies that have higher exposure to permian asset acreage and position -- these are the guys that would benefit the most from rising oil price. david: thanks so much for being with us. that is fadel gheit, oppenheimer 's senior energy strategist. alix: this is the really big, interesting comment. it is not the big rigs that are going to benefit. they are not flexible. it is u.s. shell companies that do benefit.

that is the seachange in the market. david: it is the pure play that since the benefit. still ahead, thank earnings later this week. will wells fargo's troubles bring down the whole sector? ♪

jon: from new york city, i am jonathan ferro with alix steel and david weston. we are counting you down to the market open in a -- in five minutes. this is how things stand in global markets. -34 points on the dow, negative three on the s&p 500. in europe, the ftse down 0.25%. there is an interesting session developing in the bond market. on the u.s. 10 year so far, trade at 1.78, up two basis points. supply is key for the treasury. auctions coming in, and yields a little bit softer today.

if you look at the fx trade so far, it has been about sterling strength. we are way off session highs. we roll over toward 1.2185. up about 0.5%. the story has been sterling weakness. the biggest four-day drop on sterling since june. that sterling weakness has begun to bleed into the bond market. starting totrade develop. we bottomed out in the middle of august at about 50 basis points on the uk 10 year. we have doubled since then, up six basis points on the session, north of a full percentage point. we are just started to price a little bit of inflation into the uk bond market. up next, the u.s. cash open, coming up in new york. ♪

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sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. jay: from new york city this is "bloomberg: daybreak." we are 25 seconds away from the open in new york. futures negative around much of the morning.

s&p 500 futures down by about .1%. after four days of weakness, we trade with the 122 handle. $44 billion worth of debt auctions and federal reserve minutes as well. treasury fell off a little bit. 179. we bounced off 180. rolls over toward the session low. down by almost one full percentage point, $50.33. so about 10, 15 seconds in let's strip the market back a little bit. alix: we are going to see a little stability in markets. yesterday the dow was up 265 points. the s&p closed below. that can exacerbate any selling in the market. right now, we see relative stability. the question being, can that hold as you see, brent, rolling over here, you can see a steep nosedive lows of the session off by .07%. the next opec meeting where russia should be coming to is

october 29. they did not talk about any kind of oil output, freeze, or cuts today. and that meeting for october 29 will be a technical meeting to get to a road map. is an opec deal going to happen? in terms of equities, erickson taking brunt down 18%. citing slow equipment replacement sales. sake weakness actually accelerated as their last quarter progressed. the extent of that weakness is what surprised analysts. the worst quarterly sales drop in a decade. taking down the whole group. erickson's top customers are at&t and verizon. also number two over june perfect. weakness there as well. in terms of what we are looking at going forward, you got to pivot now to some earnings. and bank earnings front and center. you get citi. wells fargo, and j.p. morgan on friday. wells fargo front and center in terms of analysts downgrade.

these are estimates that had been cut over wells fargo down by about over 1% versus estimates that have been raised for the 2017 earnings season by half a%. and j.p. morgan up about half a%. wells fargo taking brunt of a as investors reweigh what will happen in light of the scandal. will you see retail deposits flea -- flee. confidence in the retail bank shaken? jay: thank you very much. bring in our team and lay out the weekend. wells fargo coming up. jp morgan and city coming up on friday. and banc of america, goldman sachs next week. what should we expect? we bring in holly and joel. holly, earlier this year it was about expectations manage. the c.e.o.'s would come out and bring the bar lower. how are we set? >> probably a little disappointment when you look at the longer term picture i think what's important to keep in mind for a very long time the

expectation was this would be the turn around quarter. we were going to go from quarter after quarter of earnings growth into positive territory. we are getting disappointing announcements. a market still prized near an all time high. you have valuations that kept rising. if you don't have earnings to back that up, there's going to be disappointment. especially on the banking side. you are looking at banks within the financial sector to expect a growth of negative 3%. the rest of the financial sector a little bit more positive but still some names you are talking about going to weigh us down. >> one thing i'm looking at, i have a chart here on my terminal. a simple spread, obviously the big story we have been talking about since the late summer has been the rise in yields internationally -- japan, germany, the u.s. not dramatic. but it feels like there's a break in the pattern and financials have done well given that it appears to be good for their net interest margins. we have seen something oliver's talked a lot about, the real

break in the love that people have for anything low volatility . there has been this shift towards cyclical oriented stock. we have seen the financials go from one of the big laggers to one of the better performing sectors in the s&p. alix: the question being are you seeing the yield curve. really it feels like the financial sector has he rerate for a lower and slonger environment. have stocks rerated enough to encompass despite the backup in the curve? >> goodp point. when you look to that point, i think when you look at the tick up in expectations for the feds who go into december, we are off about 70% when you look at warp screen on bloomberg. even though we have had that tick up, banks have mord towards the front of the pack. the pack has been stable. it hasn't gone anywhere in terms of the broader benchmark. things are doing better. year to date is flat. they haven't responded to those higher expectations for the rate moves. there is a lot more out of hand

here they have to work out in terms of their profitablity. in terms of what's weighing them down right now beyond just the rate. >> jay: the yield curve is critical for a bank business model, but also driven the trade at the loose couple quarters which has been the bond proxies. how are utilities priced in terms of earnings? we had a bit of correction but how much? >> i don't think it's enough to where you are getting back towards historical normal levels for evaluations, particularly in staples. utilities have come down. trading back towards the average. when you look at staples, closer now -- beyond a little bit more than the dividend play. utilities are the stronger dividend play. the sort of washout we had it was good in the sense that it didn't spread to the rest of the market. we have had a little bit of weakness t wasn't enough to take down the broader benchmark. but at the same time there are still elevated levels to where that could wash out a little more and just how extensive the

iment pact could be. alix: i highlight this. we look at the bloomberg here. this is the hs go function. this is the s&p versus the 10-year yield. it shows that yield price and s&p are moving together. at the end of the day. you have the yield and s&p moving in oppositions directions. it points out if stocks standard a prier yield -- >> it is the big question. we have had this extraordinary simultaneous bull market in bonds and stocks at the same time. that's been the story since the crisis. the big question is, can risk asset actually withstand a meaningful march? jay: the ridiculousness of all this is typically the yield curve steep yones on an economy. it's inflationings growth, uity market that is on the prospect of a good economy. we go back to the story once again that somehow good news is ultimately bad news? >> interesting point because i think a lot we have seen in the past six months is contingent where that economic data is.

right now you look at the u.s. surprise index on economic data. we have just ticked back into positive territory. i think that we have seen, there are instances when you look earlier this summer where the market was actually doing pretty well as the expect agentses for rates going up. it happened as the economic backdrop, that's a positive. the days we have seen the extreme negative market reaction to higher prospects for rates or when you have that bad economic backdrop. the economic data is there, there may not be the sort of recoil by investors we have seen in the past. david: ultimately you have to sell stuff if you're a company. doesn't matter what the fed does, d.o.e., you have to sell stuff. the real question in the u.s. economy is the consumer. >> that is true. that ultimately one of the big criticisms of companies is they are not investing enough. corporate investment hasn't been strong enough. if we are not seeing that top line growth and you want to look

at nominal g.d.p., add up everything that people buy in the economy, if that's not growing as robustly as people like, then ultimately everything else just sort of financial games. alix: good stuff. thanks so much. joe and oliver. good to see you. welcome back. coming up samsung galaxy note troubles are causing the company bigtime. how much? the company slashing its third quarter profit forecast. details next. as we head to break it is the mover in the market. you have crude down almost 1.5%. taking a nose dive now below $50 a barrel. wti sinking below $50 a barrel. yet no specifics on a russia opec cut. the market taking in more uncertainty. this is bloomberg.

>> this is bloomberg daybreak: americas. global investors enjoying back in america's blanch and j.p. morgan management bob michel. jay: this is bloomberg daybreak, i'm jonathan ferro. 11 minutes until the session equities lower down by a quarter of 1%. dow a tenth. if you switch out the board, the story near the asset classes sterling strength. then we roll over. treasury up two basis points. alix, the story of the last hour, is crude just rolling over. alix: really. down almost 1.5%. to me the headline is russian president putin saying russia is ready to join and oil freeze, but not interested yet in

production cuts. saying, look, there wouldn't be a point. they would consider it but there's no point. that detail to me is important. the rhetoric yesterday they would consider a freeze. now no point. david: just about everyone we talked to said a freeze doesn't get it done. jay: it has to be a cut. alix: russia is producing over $1million barrels a day. it's easy to say they'll freeze at the record. . david: they are freezing. everybody else is saying i'm not cutting. i'll freeze. y: all time high is not -- jon: note 7, south korea's largest company. the stalks slumped this week is why $21 billion from the company's market value. our tenor analyst joins us now.

john, in terms of the numbers and operating profit cap, $2.3 billion. largely in line with what the market expected? >> i think so. samsung derives half its revenue from mobile. the note 7. is arguably the highest margin product line. they don't release those numbers. but i would guess it's their highest profit margin -- highest profit phone. and therefore when you're pulling them all back from the market, it's going to really have an impact on those mobile profits. jon: this effectively erases all of the mobile business profits the analyst has been projecting, who picks up the slack? who takes the extra money that would have been spent? >> you know obviously apple tops the list in terms of what people are thinking right now. my feeling is there is a put of a reluctance on the part of users to move from android to i

west or vice versa. having said that, google is out with a new pixel phone. the pixel on the pixel excel as well as several chinese vendors doing a good job. david: john, coming back to samsung for a moment. this puts a big hole in their product rollout. the note 7 goes away, and this is a relatively new c.e.o. faced with a crisis right out of the box. do we have any sense what their plans are to get this company back on track? >> i think right now, david, they are just scrambling to figure out how to contain the problem. on the go forward basis, my sense is they'll probably pull forward some of the launch dates on those key flagship phones, ncluding the galaxy s 8 and -- the note 8 as well. those are typically march and september launches. we may see earlier launches there in order to stem some of the damage here.

jon: any questions coming up about leadership and management of this company throughout this debacle? have they come up now? >> it's all over the press, right. there's been a lot of questions about the current leadership or lack of leadership right now at samsung. i think a lot of that steps from the current crisis and from a p.r. standpoint how the company handled it. we'll see how they do going forward as they move past this. as you know, memories can be very short. the question is best asked i think six months from now once we lap this issue. david: last question, are we absolutely confident or samsung actually confident that it's limited to the note 7? >> i think so. it's a lithium battery issue. lithium batteries are inherently unstable as they get smaller and smaller in terms of form factor to fit into these smart phones.

you ultimately run into these kind of issues. i'm not sure it's going to be a recurring problem. they'll design around this. david: john, thanks so much for joining us from princeton today. at the top of the next hour, it's bloomberg markets, bonnie quinn, what are we looking forward to bonnie: david, everything that's going on they'll be scrutinized by the markets. there are not a sale set of minutes. we'll speak with michael hanson of banc of america get his opinion. and speaking brexit, the sterling move comments. we also have an interview with croatia's president. the most recent country to enter the european union. and the european single markets. and she'll have a lot to say about the brecksit -- brexit vote. david: we'll talk about those fed mids coming out shortly. this is bloomberg.

jon: from new york city i'm jonathan ferro. we are about 19 minutes into this session. here's how we stand here in the united states. equities are lower by about a fifth of one 1% on the dow. the story actually the other asset classes nfx, the stronger pound story that's developed. the commodities, softer session for crude. has started to accelerate, down to $50 a barrel. dropped south of that briefly. in the u.k., just a few hours ago, british prime minister theresa may, addressed parliament. >> what we are going to do is be ambitions is our negotiations to negotiate the best deal for the british people. and will include the maximum possible access to the european

market for firms to trade with and operate within the european market. jon: addressing the economists today during the foreign minister question's time. the headline they would seek the maximum possible access to the single market. a couple weeks ago, though, last week, a conservative party conference the emphasis was not access to the single market, was dealing with immigration off the back of it. that is why one of the reasons why we saw this real big douth of sterling weakness kick in. one of the market forces, a little bit, on the margin, for the government and the way to proceed. david: you also wonder where teresa may wants to take this. she had her remarks at the market conference. now we know. now it seems she's going in a different direction. alix: you look at the terminal here. this is pound-dollar volatility on the one-month basis. that green line across, deviation to the up side. the red one deviation to the

down side. look how much action we have seen in the last six weeks. ow does that bleed theresa may's decision? jon: softer yields higher. the conversation we had yesterday which you've got this big holdings, foreign investments, holdings, all-time high. when you see what's happening in the s.x. market. what offsets that. an underlying asset. with sterling sells off as well. we have this inflation. then worry the investors outside the u.k. begin to sell. it snowballs. david: the one thing markets hate is uncertainty. as i look at this negotiation, i can't imagine another negotiation this complicated. she doesn't know where her own people are. whether it's the people across england or partly. then she has to negotiate with 27 different stonries. she doesn't know where they are. so complicated. how do the markets price that? jon: capture that noise and decide what's happening in the conservative market conference and what's happening in the house of commons and what

happens when hammond comes over. everything is ok, we are open for business. you have the foreign minister calling everyone international elites and doing something about it. and telling the bank of england we don't like your low rates. you have to take that noise and capture it in a price. for the f.x. market is simple, you sell serling. alix: here in the u.s.a. a lot of uncertainty as well. in the days ahead this afternoon we are going to get the somc minutes from the feds' september meeting. after the bell c.f.x. reports earning trickle out. banks on friday. david: talk more about those fed minutes. we bring in our colleague, friend, and the economics and politics editor for bloomberg, mike mckee. the minutes come out 2:00 eastern time. what are you looking for? >> not a whole lot. i'll tell you why. 'll call alix goldlylocks. alix: safe man. >> too hot, too cold -- jon: where is this going?

>> too old and too new. too old in the sense we had three dissents and that made news at the time. cause add stir. since then we have heard from all of the dissenters about why they dissented. there is not going to be new news in there about what they were thinking. we might learn if other people were close to them which would lend some weight one way or the other. but we have even seen the doves on the committee like charlie evans of chicago say i expect a rate increase in december. that's ok with me. there's not a question about what the minutes will tell us about futurepolicy. yet at the same time they are too new in the sense they are today, we have a presidential election and we have two months' worth of data between now and the time the fed meets in december. when they would likely make a movement a lot could happen. it isn't going to change a lot of thinking about what the feds are going to be doing in the future. david: of all the data points does the presidential election dwarf others? >> yes.

if donald trump wins all bets are off. you don't know what's going to happen because you don't know how the markets will react. he has talked about a big fiscal stimulus program that might be good for the economy. but if he borrows a lot that's bad for the markets. we'll see how the fed reacts to that. their best course to sit tight and wait and see what develops. if hillary clinton wins, it's considered more of the same. they could probably go ahead with their december move and sit back and wait and see what she's introduces when she gets into off. alix: talk about the december move, we are putting odds on the warp function at 6% of a hike in december. what more do we have to see to pu rate expectations to 70%, 80%? how good does that have to be? >> that depends on fed speak between now and then. what they are trying to get across, we don't need huge improvements, just the status quo. which is what the jobs report gave us last week. it wasn't great, but it was enough. and if he we continue to see that, as we get closer, you'll see more and more people price it in based on what fed

officials say they'll probably reinforce the idea they are going to move. if we get a big jobs report or next week we get c.p.i. and then towards the end of the month the p.c.e. inflation numbers. if those move much higher towards 2%, then you could see -- start to price it more. jon: on the margin there were people talking about a rate hike that month. then everyone got excited about this speech that would be delivered by governor brainard. she butchered the hawks right before the quiet period began. she talked about the benefits of waiting. governor brainard, if you want to bough to fedpolicy. she's been the one to watch i wonder why that's changed and why it will change any time soon? >> she's not necessarily going to be always in the majority. she was the loudest voice right before the fed meeting. what happened was that speech had been scheduled for some time but not announced. when it was announced everyone took it they were trying to send us a signal.

which they weren't. it was her offering her opinion. you knew where she was coming from. when you see people like rosengrin, the dissent camp, and evans, start to say a rate increase is fine, then you're fairly safe in betting the majority has moved it up to the center it can easily tip over into the rate rise. jon: great to have you with us. make sure to tune in 2:00 p.m. eastern to bloomberg tv for special coverage of those fed minutes. the markets, 26 minutes to wrap things up, a little bit of a move to the downside. now we go nowhere on an intraday move. the negative five, that wraps up bloomberg daybreak. bloom berk markets next. -- bloomberg markets next.

vonnie: it is 10:00 a.m. in new york. i am vonnie quinn. barton live from london. welcome to "bloomberg markets."

♪ frome: we will take you new york to stockholm and cover stories out of washington, the u.k., and turkey in the next hour. uk prime minister theresa may easing the brexit angst. the pound plunged. plan to a vote on the take risk out of the eu. the fed passes open market committee. we will get it -- the latest on the thinking and minutes, 2:00 p.m. wall street time today, while investors give a 68% of hike. oil taking a dive in the past hour. a widecr