♪ manus: friction over the december decision. it isl officials -- december -- is december a done deal? make's day in court. arguments judges against the prime minister's claim that she can bypass parliament. and stop checkl -- steps down. the wells fargo ceo steps down in the wake of the scandal.

will the move restore confidence in what was one of the world's most valuable banks? let's get the first word news. sincena's exports drop february. pressure on the one. chairmango ceo and john stumpf has stepped down. public outcry over accounts. he helped build the firm into the world's most valuable bank --h rockets driven by profits driven by cross-selling. kim snow will become ceo. croatia's president says the departure -- britain's departure from the european union on affected trading block. the country will remain anchored to europe. it is for you to decide whether it will be a soft or

hard brexit that i would assume that the connections will remain very close area. u.k. housing market strengthened after the shock of brexit faded. that is according to the royal institution that says values also continue to decline in central london. incur --government prime minister cut short the provincial trip to return to bangkok saying he was prepared for an audience with the crown prince. concern over the monarch has coincided with the stock market. global news, 24 hours a day powered by 2600 journalists in over 120 countries. this is bloomberg. let's have a look at what is happening to markets today. the biggest fall since september 26. stocks falling for the sixth they.

1% decline today. the big news is that of china which is why we are seeing the dollar fall, the yen rise. most,exports dropping the global demand remaining tepid. 1.74% yesterday, it rose to the .ighest since june the fed last meeting revealed a close call during those discussions and nymex crude below 50. grew and differences emerge between opec over how members will share outlook cost. one chart i want to show you on the back of that china data. this is a breakdown of china exports i the region. this is the portion of the short -- chart. , exports to korea as well.

exports to the eu falling 9.8%. that is the purple heart. 10% downments sliding 8.1%. one commentator saying falling exports to the eu and u.k. suggest a downside risk to china economic recovery for brexit. something we will be talking about with our guest. a close call. the feds minutes have given severals insight into -- several voting to hold rates last month. indicated it would be appropriate to raise rates relatively soon. pricing at nearly 70% chance of a hike in december . is it a done deal? if not, what could stop them. let's introduce our guest for today. president of emerging markets at ubs. 70% rate hike in september, is

that what you are thinking? >> we think it is when they will go. as the a done last year, they have been given guidance in calendar terms. what is different from last year, the markets are not pricing in as much as it is to next year. last year it was a two and a half percent price hike. now it is less than half a percent hike for next year. continue, they will need to reprice as well. we think december is -- is december iss on the cards. the probably not is a consensus about where we go and what sort of path we take from there on in. we might want to leave it for several quarters. we do not need to. inflation is not screaming high. sales slightly coming

off, they don't need to fight. they want to go despite that as the minutes suggested. given that information, i think what may be priced in for next year may be too low. when the fed did in december, it was pricing at 2.5% hike. next year will be quite interesting. that presents interesting risks for the market. mark: can emerging markets withstand a rate hike? withstand it in terms of january mayhem, i do not think you are likely to see this in kind of mayhem or is no doubt that emerging markets this year have limited from several one offs. oil prices nearly doubling and china giving a credit impulse almost like 2012. when we speak about pressures, i don't think we can go back to january kind of levels. i don't see the floor dropping

off. we'll promised another january. i think that would have to be one of the issues that does it. 25 billion, 150 billion a month. i think we are some distance from that in a big collapsing commodity prices. >> this is the wonderful nature of the bloomberg terminal, i want to get this chart. talking about capital outflows. this is the chart. one which is the yellow line, dollar one, and capital outflow. when the dollar rise, capital outflows increase when the dollar doesn't perform so well you do not see such a large decline in capital outflows. these sorts of levels here were not as bad as those. can we go back to those

december-january levels? you saw athat time lot of chinese companies paying down external debt. china has a finite amount of dollar externals and it has been down -- pay down a considerable sum. to see continuing capital fight. that could intensify but i do not think the market will worry as much about the stability in the next three to month -- six months. that does not mean the market is pricing it correctly. the yellowis -- line, has been depreciating. what is priced into the forwards market is much too little. priced in today and going back to january is a see forwardu can driven being under pressure. chart, has continued to go forward in pricing much less than what they have in december and i think that is wrong. the other markets will take interest as well.

to take notice there from here to an absolute meltdown in emerging markets -- >> we will come back to china in a second. stay with bloomberg surveillance. china coming up including exports dropping 10%. we analyze what that means for the world second-biggest economy. we trade growth. and eightxit presidential race. our markets pricing with correctly? we will discuss and is the u.k. , weign secretary johnson will bring you that live. could brexit be delayed up to a year? they with us. this is bloomberg. ♪

♪ let's get the bloomberg business flash. government has you know --and from 401(k) plans. that could send a signal to other banks. rbs representative could not be reached for comment and the labor department did not immediately respond to requests. union credit will boost capital by selling 20% of its stake. it is the -- it is set to raise 550 million euros. the remaining 55% holding will be locked up for a year. products vanity from -- vanish from its online store. britain's biggest supermarket over risingilever

prices. and the brexit book. it aims to have results soon. growthr reported sales increased demand in its ranks in europe over the net -- summer. that is the bloomberg business flash. exports most extempore last month, shipments dropping 10% from the year-earlier according to a customs administration. how do we read this data? >> good morning. i think it is a soft reading on china's economy by all accounts and brings a sharp end to a few months of stabilization. we are seeing a big dip in shipments to keep markets like the u.s., like europe and of course that does not bode well going forward. on the import side, a concern

because china buys a lot of components to ship to the world. less, itis buying suggests exports will continue week. a pretty soft reading on the china trade story today. it is the world's biggest -- second-biggest economy. 60 low against the dollar. to what extent is it helping exports? economic theory would teach you that they would get a reasonable dividend from a weakening exchange rate. they are not getting much bang for the buck and when the yen as it did, itch did not put a rock under exports. what it does suggest going forward, the pressure of the

yuan will be downward. because china's economy continues to slow and face challenges as it makes the transition. change drivers. factors, a fed rate hike. hikes and the pro-dollar story, the one going downwards. a weakening currency might help exporters in china and, but also encourage money to leave the country and that is not what authorities want. cheers. thanks for joining us. >> this is the reason. weak exports is the reason china is levering up as quickly as it is. this is the reason they cannot take the foot off the pedal in terms of boosting the housing market because that is what they had in growth. this week trade data in china is

not just a china issue. this is for the whole world. it is because the relationship between trade and growth is fundamentally broken. you are seeing much weaker trade for the same level of growth. willmeans that china probably see weaker trade for some time. that means that the risks from trade move elsewhere in the economy. equilibrium in other parts. the decline is continued, how does it go? to 6.85 byit goes the end of the year. he will continue to see depreciation. when you are not likely to see is a messy end anytime soon. on the next three-year horizon, it is unlikely the chinese authorities let it go. withwill be in control -- the currency devaluation of

august 2, 2015. >> you will not see messy devaluation. you will not see 1997. the way it depreciates will be different than 2015. august 2015 was a step above. it has been depreciating at a slower pace and the pace can pick up, it will continue to depreciate that it will not fall , money markets won't choke up. mark: back to august 2015, another wonderful chart. not booted difficult. , the white line is the dollar-you one and the second panel, the purple line and the s&p 500. currently equity is bottom. the vertical channel is august 2015. the yuan devaluation for markets dies. january 2015, the yuan was strong but markets traded in a

sideway range. yuan now is near a six-year low. against the dollar. markets stabled. >> i like your charts. there is a great degree of complacency in some parts, especially emerging markets. they affect in asia, doesn't seem to be -- care about the way currency seems to go. they are not worried about competitive devaluation aspect. it is not pricing in mayhem. that is quite complacent and the , commodity prices are doing fine for now. u.s. treasuries are backing up at low levels. the u.s. is probably -- in all of these axes you are beginning to change. is when i think the other places in asia and elsewhere

will start paying attention. there is a degree of complacency. showing thated by chart with highlighted the decline of exports to the eu and u.k.. does that highlight that brexit is having an impact? >> i think it does highlight that political risk is having an impact on economic risk. during that time, most factory owners declined considerably so it is reflecting a weak time in europe along with political risk. make no mistake. what we are seeing in the world in terms of it having an impact on confidence in investment. the impact regulation has on how businesses are thinking investment and trade, would have an impact on the markets as well. mark: the glory for that chart goes to hillary clark. our chart guru. great chart.

you stay with us. up next, emerging markets. we will discuss a rocky week in south africa and political risks 4:00 p.m. investors. this is bloomberg. ♪

♪ >> i want to tell you it is

vital that we do not raise -- >> boris johnson is testifying before the foreign affairs committee. , about brexit. the showdown between south africa's president and the come , to appearminister on fraud charges. tuesday it is down a further 1%. em cross strategy. many say this is a pretext to appoint a more pliant head of the treasury. how bad is that for south africa? south africa has plenty of project -- problems even before

you have political issues. markets pricing in south africa as junk. not booted much downside risk in credit. some of the structural problems will consist. for the bond markets, we will continue to see pressure. mark: this is a great chart. this shows even before he was charged. overseas investors were selling the nations bonds at the fastest rate. record flows in the first nine months but that turned a corner in october. are we seeing a change here? >> i think you may see a bigger thege going forward if south african rand continues to decline. after five years of significant depreciation which actually hasn't meant to much for south africa's exports. structurally you have an economy that remains high. some downside but it remains high. where growth is extremely weak and unemployment is extremely high. investors can lose some of their

confidence in the economy. the currency can come under pressure -- pressure and the if thist does, political risk begins to increase in south africa, all of the money that has come in this year is at risk. you. we will come back to head across strategy at ubs. underpriced risk. fears of a hard brexit. a close presidential race. globalizationst could rule the markets. this is bloomberg. ♪

♪ the reminder that foreign minister boris johnson is testifying before the foreign affair committee in the u.k.. he said that the loss of ufj --

u.k. influence in the world is being reversed. we will continue to bring that headline as they occur. let's get the first word news. air is sebastian. sincena's exports drop february. the yuan has hit a six year low. reports below expectations in september. wells fargo ceo john stumpf stepped down after public outcry of think it counts -- bank accounts opened by employees. selling strategy at the center of the scandal. tim stone will become the ceo. president said the you k's departure from the european union will not destroy the -- countries ties with the blocks. it will remain anchored in europe. >> i suppose it is for you to

decide whether it will be a hard brexit. i would assume the connections will remain close. global news 24 hours a day powered by 2600 journalists in more than 120 countries. this is bloomberg. mark: we trade, fears of a hard brexit. analysts from the imf to wall street warning against a backlash against globalization. they say if you get one, we could rule the financial markets. our investors pricing in the risk. what is ahead -- we have the head of cross strategy. we said -- he says we are not seeing the destruction very what is happening on the globalization from? >> i think this is one of the biggest risks for the global economy. go fed cycle can come and but over the last 20 years, financial markets have benefited and economies have benefited

massively from the global world. if you take a long-term picture from the industrial revolution, which you could say was the beginning of the modern trading era. you see three phases of trading. -- you seetening out a flattening out. rain shadow of that recent success. more recently, the last couple of years tell us that it is not just a slowdown, there is a modest reversal. that needs to be stopped because if that does not happen, that fundamentally compromises many economies. weak growth is leading to an increase in leverages, the housing market, and that will mean financial stability in three years. mark: why the reversal, the flatlining? >> slightly more than half of that is demand.

investment is week. let's not think cyclical. this has been an issue for 15 years. one of larry summers points on stagnation. the other issues are structural. china. globalizing shrinking. declining in a cyclical fashion. investment declining to a slower level but the texture of investment is changing. you are moving from manufacturing and construction investment to services investment which are much less trade in tents. china is one of the reasons. global value is one of the reasons and at the margins -- an increase in protectionism. -- institutions were extremely friendly to trade in the past 20 years. that has begun to change. mark: what does that mean for our folios in this new reality? >> most models are going to be wrong because they assume as a parameter that global trade in

relation to global gdp is the same. you were speaking with hong kong and he said japan has depreciated. which hasn't had an impact on exports. that is why it hasn't had an impact. because globalization is slowing down. the pace you will be able to sell it other countries, is not currency, but how much they are importing. if they are importing less than output, your currency needs to go further. rand is cheap, it is giving you the wrong signal. the medium-term earnings risk is a huge risk. said,come statement, as i you lever out the balance sheet and that becomes a balance sheet problem in the next three years. massive credit explosion because of globalization plateauing now but this is the template. this is where we are heading in emerging markets.

you will have a balance sheet problem. most are on the balance sheet, i.e. debt. favor is not as much in or haven't been in favor as one big bet on the m debt. if globalization does not pick up, if you see global trade being weak for a long time, those will affect the balance sheet. , which could do all sorts of miracles but this is the one we chose. dollar emerging markets. all 24 major ones in 20 -- 2016. look at the top four or five. it tells a very clear story. >> they are all not a beacon for -- producers.

i think importantly, from a big credit impulse from china. the housing market doing extremely well. --40% and china continuing one of the things we saw in china today was still strong commodity. that is still going on. can you expect metal prices to continue to go up -- should oil prices stream high? in both cases, not much more output room here. commodity prices will go up for a long time, especially metal prices will begin to be tested and with that some of these currencies will come in to pressure. the rand already is and others might. mark: the so down 9%. being deemed a trump proxy hasn't it? >> it is more than that. mexico has been under pressure for a long time. over alook at the chart

25 year. , it is a 45 degrees line. it has had structural weakness for a long time. it has been exacerbated by the recent political -- you have not seen volatility rise anywhere as much as the mexicans. i worry that mexico's pricing and political risk in the rest of the u.s. and asia, will be challenged if -- >> wire depressing it in? >> i think complacently -- complacency. --ry time they are placed christ in political risk it has not paid off. the peso from here, have we seen the lows against the dollar or the lows to come? trump aside, the long-term trends? you can see further depreciation of the mexican peso. we spoke about outflows in china. china sees huge outflows to the

u.s.. these are persistent capital outflows. the u.s. economy improves, mexico will also improve but unless it can stem those capital outflows, it will be difficult for the mexican peso two rebounds sustainably. if you get the right candidate, you will see a slight rebound. sure it will necessarily reverse the trend. is medium-term trend -- this one of the more competitive currencies out there. probability of a trump when? -- when? would that much further from that. in my mind, it is even lower. mark: up next, boris johnson is quiz by parliament. could brexit the delayed here? this is bloomberg. ♪

she said the u.k. would be leaving and their fight -- thereby you would be leaving the the number of court justices would no longer be subject to european community. that is the key point. you will get the best possible deal for britain. moving on from that.

♪ surveillance, 9:41. boris johnson being quizzed by lawmakers on parliament foreign affairs committee. the u.k. influence in the world is being reduced, he also says

the court in the u.k. sends out a signal of openness, the u.k. would be hostile to people of talent and the eu had huge interest in agreeing to the best deal. voters predicted brexit doom will be proved wrong. we will continue to monitor headlines out of that testimony. exit could be delayed by a year if the -- prime minister theresa will argue the government has the right to begin grexit without parliament. let's get more from our editor simon kennedy. high simon. today what happened? >> judicial review. the judge will try to make a decision by the end of the year. the challenge is to theresa thes ability, which sets two years for written to

withdraw from the european union. favor, itge rules in will go to the house of commons, the house of lords. it.ill perhaps not derail meanwhile, parliamentary reflection or marshals workday? -- flexing their muscles? theresa may has a small majority and trying to ignore conservative rushers in her own party. most were programming. they were speaking up yesterday. the labour party, previously quite insular focus on who is going to lead. emerge in a neustar the brexit spokesman labour party.

theresa may said at the end of march she will invoke -- try to maintain -- they return to power for parliament. plc. beginning to feel the brexit chill? >> absolutely. a wave of stories overnight. one that has captured social media attention was marmite. hellmann's mayonnaise, ben & jerry's no longer on the shelves. the reason according to reports is a spat with unilever's stockist. .n issue in the pound the cost of product. sports direct among those complaining about fx losses. hedge losses. is the cost -- as the cost

of hedging increases, are you taking a profit? >> absolutely. mark: theresa may has been busy lately. >> nearly her 10th foreign city she has visited since becoming prime minister. the message people will be spain, europehere stand on freedom of movement and the right of citizens in each country. theresa may has said she expects to be able to protect the rights of citizens. the sames looking for assurances -- a lot of ex looking at meetings today as a sign they are ok. mark: it is a trend that is interesting. ing is moving jobs to london. that is a first. >> it is against the recent trend and against the rhetoric

but i believe moving them -- moving to london. looking to move staff elsewhere but -- >> hopefully barna will be moving abroad. trading like an emerging market currency. yes or no? --if you look involuntarily volatility, it is trading like an emerging market currency. on a more serious note. ,hen emerging market currencies you see money markets choking up. several banks rushing to hike increase. we are not there as of yet. i do think this idea that it is all going to be ok. we are making a decision that is going to impact generations. i don't think we should be sidetracked about recent data being strong. inflation is picking up as a result of the week sterling. tot year, growth is going

trot as a result of the idea that a week sterling will provide foreign buyers to come in and prop up the economy. it doesn't hold much water. growth next year because of financial market falls. this has ramifications for generations. if there is a hard brexit. if you go that route. the narrative is that you can get back into the eu negotiating tariff treaties but it is not about tariffs at all. it is about relations. the real protectionism is not because tariffs are rising but regulations are changing. to go through that maze of regulations with europe, that will cloud business confidence -- several years and risk is i like the idea of the pound being seen as the official opposition here in the u.k.. pound,loom followed the

you can trace the political debate. ,ountdown whenever hard brexit losing a membership of the civil market comes forward, the pound picking up this week as you saw the signs theresa may gung ho that the approach was reined in by parliament. friends, the republican party debated. sarkozy, provision for brexit. nicolas sarkozy, the former theresat presiding with may on the issue of immigration and talked about day one of a sarkozy presidency would see him go to brussels and introducing new treaty. hoping it would be impressive enough for brits to rethink brexit. mark: final thoughts.

some of everything about emerging markets. what is the bottom line right now? >> it has been a special year. straightot be drawing markets -- lines for markets to continue. rates will continue to be ok for some time. three years time, the big risk is credit gets infected. mark: thanks for joining us today. head of crossed strategy at ubs. wells fargo rises today. quits incutive stop the wake of the scandal. is it good enough to restore investor confidence? this is bloomberg. ♪

♪ mark: are watching surveillance. to givehnson continuing testimony to the foreign affairs committee. punishing the u.k. makes no sense for europe, he says.

we bring you any headlines out of that as they break worried the u.k. will get a brexit deal of huge fountain he says. the newsflash. barredgovernment has scotland from matching 401(k) plans and other retirement funds. that could send the signal to other banks with hedge funds with criminal records. the labor department didn't immediately respond. boost capital by selling an additional 20% of its stake in an online bank. rates set for 550 million euros. 35% holding will be locked up for a year. productsnge of vanished from online store. a standoff between britain's greatest supermarket chain. in the wake of the brexit boat. it is currently experiencing

availability issues. that is the bloomberg business flash. down wells fargo shares slightly in premarket trading today. the chief executive john stumpf quaking in the wake -- quitting in the wake of the scandal. he made it the world's most valuable bank. -- you got a sense watching his appearance before the senate a few weeks ago. especially when elizabeth warren laid into him. you got a sense, how can he survive this? was it only a matter of time? took -- he gave a lot of is paid back. he went to congress to try and make up for the first appearance and get ahead of things. but certainly, the pressure was unrelenting. that was easyndal to understand and get outraged hot -- copy imagination

of congress. tim sloan, ceo, long viewed as the most likely successor. they are closely linked are they? does that lay some of the blame? is he tarnished by this fall? to actively get out there and talk about a fresh start because he was chief financial officer a number of years. he has been in the bank a long time. he has been part of this management team that pushed the cross-selling initiated. questions still be over whether this is a fresh start. 12% sincek has fallen the misdeeds became public. chart. a great legal liabilities analysts will be keeping their eye on. liabilitiessts, the

you can see what the trend is. does this draw a line in the stand? does this fall under the scandal of stump leaving? >> there continued to be concerns over whether they will ife to boost legal reserves, there will be other fallout from this on the legal front. then on the customer front, what will customers do? will they continue to interact with the bank? some of them pullback aced on a lack of trust? it starts on the revenue line, it could be an issue, wells fargo is starting from high profitability. thank you. he will be joining tom keene from new york. you are watching bloomberg.

tom: this morning.

both the euro and sterling weekend. china's stones with a trade report. we go to beijing. the nextca staggers to debate. this is "bloomberg surveillance." london.guy johnson in the euro is weaker. and sterling as well. guy: it is all bound to what is happening -- we happen waiting for the euro to break the low. the euro was in a tight range but is now breaking below level. and that is due to the expectation that the fed goes in december. tom: let's get to the first word news. taylor: a breaking poll on hillary clinton. a nine point lead in a critical

state of pennsylvania. that is according to a new politics poll which gives clinton the lead in a two-way race statewide. at least four women are accusing donald trump of sexual assaults, adding to the damaging revelations and controversial comments about women. the new york times is citing the claims of two women. they contend he touched or kissed them inappropriately. trump is demanding an apology. the u.s. military has launched -- yemen rebels. that occurs to the white house who says strikes against a navy ship failed this week. recent missile launches that threatened the u.s. and other ships operating in international water.

wells fargobuilt into the most viable bank but ceohe is stepping down as over the accounts opened by employees from customers who didn't request them. the bank says john stumpf is retiring, affective immediately. he will be replaced by the coo. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. tom: let's get through the data. we want to get to george magnus quickly. now, yields come in and risk off today. there is the euro. oil pulls back a little bit.

expanded,eally nowhere near the 20 average. there is the big print. the dollar, 98 point 05, halfway back from the hundred level. sterling, 1.2168. guy: let's run you through the other numbers. -- stoxx 600 in europe stocks are softer. you see softer. we have also seen moves in the emerging markets. we see fresh records for the turkish lira. and i bring you unilever. big retailer and unilever is the big supplier. brexit just got real. it is a big deal over

there. for crisp us is doing well the blue jays and there comes guy johnson for the cocoa puffs. this is lost in translation across the atlantic. let's go to the bloomberg and the sea consumer confidence. there is the boom in the 1990's. down we go. thought we can bring in the political confidence we have seen. we have the obama administration. and the real philosophical idea with edmund phelps joining us in box,ext hour is the green a one-off of optimism in the 1990's -- or was that a true moment of excellence we can get back to? you really wonder, looking at the consumer confidence index. one thing knocking the

mining stocks is the disbanding data from china overnight. but this was provided to me earlier on from daybreak. this is essentially a gauge of lending electricity consumption out of china. and what it shows is that china is booming. it is a narrow part of the economy but nevertheless, it is pointing to 9% gdp growth coming out. now, it does overestimate what is happening here. but it does take the doom and gloom scenario out a little bit. let's talk about what is happening in the united kingdom. ubs joins us.from great to see him. he is a marmite fan. i don't of his desire when it comes to cocoa puffs, we will get to that later. for the u.k. consumer, there is

a beginning of the understanding that brexit will have consequences. george: it is early days. a lot have been going abroad this summer as a lot of us do. and getting money changed at the airport. we heard he seen a bit of a shock. i went to italy a few weeks ago and i got parity with the commission charges. and a lot of people will obviously know that the declining sterling is making holidays more expensive. row between tesco and don't think there is a lot of import content in marmite but it is indicative of the fact that the 50%-60% depreciation of the pound since the 15%-16% depreciation

of the pound since june is a shock. so this is the beginning of greater awareness. it remains to be seen but this certainly is the beginning of an awareness. brexit costs money. guy: that is what rights it means. it costs money. -- it doesn't need to consult parliament. we haven't really gotten into the constitutional mess that surrounds what the referendum was and there is an advisory and how parliament will play the role with that. again, markets hate uncertainty. it is really complicated. even as complicated as

the whole array of separate negotiations with the government will have to do with the eu over any number of different things over the next few years. but the constitutional position is complicated. and if the government were to lose this case -- and it will be appealed, either way. whatever the decision. this case will be appealed to the supreme court and the supreme court -- it is expected they will rule on this before christmas. if the government loses the case in the supreme court then it ,ill delay the triggering adding to further uncertainty. i'm not a legal expert enough to know whether the government would be supporting it enough or not but it does highlight the complexity of the whole thing. and of course, about parliamentary supremacy and sovereignty. people in the

conservative party, or especially in the conservative party, as of yesterday, are becoming more vocal about it matters. tom: george magnus, good morning. --hony, bring up this chart here is the advent of the euro back in 1999. essentially an inverted deutsche mark. this part gets my attention. down we go. do you resume weaker euro with weaker sterling? george: that is the zero-dollar? yeah. i think, both. beginning, at the the pattern that the euro is forming seems to reflect a much , whichronger u.s. dollar

is up a few percentage points over the last week or two. so, yeah. in this context, sterling just goes down against the u.s. dollar. and down against the euro as well. tom: many publications yesterday of trade weighted euro -- we will show that later in the hour -- but what is the scale for the elites of england when they see sterling? and scale back to the revolution of 1848, how big of a wealth of destruction is this? thate: my personal view is i think it will be significant. that we havey reached the bottom of sterling yet, at all. it's very difficult to establish. it is a competitive issue. it is really about the risk premiums that markets want to as a in the currency

consequence of expectations about what will happen to the economy and the economy's capacity to form over the medium-term. moment, you still hear a lot of -- how do i call it -- nonsense, from government ministers, who say this is a wonderful thing. we export our way to success and and sterling depreciation is a significant way of rebalancing the economy. only last part of that has any credence. it should have some impact in rebalancing the economy but only on the margin. morenk we need to see much in terms of government structure and the structure of government policy and how we nurture that. come back with george magnus in the hour. phelpsnext hour, edmund

on this mystery of america's productivity. this is bloomberg. ♪

guy: i am guy johnson in london. tom keene ever present in new york. inlor: samsung electronics the u.s. consumer safety commission are agreeing to the terms of the expanded recall for note 7 smartphones. it increases the number of devices that can be returned to 1.9 million. samsung says all owners will be able to return their devices for another's ma'am song smartphone

or a refund. the u.s. government has barred the royal bank of scotland for .anaging 401(k) plans it could send another signal to banks with criminal records. the rbf representative could not immediately be reached for comment. that is the bloomberg business flash. guy: thank you. exports dropped the most since february of last month. overseas shipments drop 10% from earlier in the year. more details on all of this from enda curran. he joins us from hong kong. why such a standout disappointment? what happened here? is there something more meaningful going on economically? enda: sure. the general view is that there

is something more meaningful going on -- the global trade story continues to be weak and global demand for chinese made goods continues to soften. the big issue shows there is no returning point for chinese manufacturing either. as long as global growth remains sluggish, it is hard to see when the demand will come along to lift chinese exporters. tom: we will bring up a chart here right now. this chart is chinese exports. and this is what everyone was talking about at imf. of a rollover in year-over-year exports. with a negative temper sent blue zeroalone the line and the yellow line is what's more normal. we are miles from the normal export growth of china. enda curran, what is the currency prescription proposed by beijing? good point.re, a

the only 10 tatian for china would be to let the currency weakened further. even with the currency weakening, they are not getting much bank for the book. unless they were letting it depreciate quite sharply. will china start letting it lower? lower beforeit they get concerned about capital outflow? and occurring, thank you for the brief visit. this china data was really something. us.ge magnus is with george, this is extraordinary. you have written about this in a series of books. 25%-30% yearle is over year chinese growth. gone, isn't it? i mean, that is not coming back. right? george: it was the peak of

china's 25 year expansion, if you want to put it that way, which ended in 2011. and ever since then, the story has turned for different reasons , which am sure we have examined at great length. and yeah. 2011, we haveince seen times when the government different forms of physical and monetary stimulus and credit stimulus to try to arrest the downtrend in chinese growth. one of those seem to be going on now. guy johnson'sy charge before on the index looks so dramatic. because it basically speaks to the stability in the chinese economy. the narrative for china has gone stale this year.

ratherind that is a youmy story, which is about want an increase in a credit expansion and the deterioration in the funding structure of china's debt. this is something that we shouldn't dismiss as temporary. the export story is important it actually it is peripheral in my opinion. when does that actually happen? we've waited for the chinese death story for a while. george: if you only look at the asset side of the talent sheet which is what the regulatory commission and chinese government does, actually, then, rollover and pushing the story into the future -- it can go on for some time. what can't is the quality and stability of funding which is

rising quickly. i think that has a timeline of up to 2-3 years. you never know what will happen in the interim. tom: in the next hour we turn it back to the u.s. economy with chair janet yellen and linking that into the first tuesday of november. alessio de longis joins us. this is bloomberg. ♪

tom: how to convey to a global

audience american politics right now? it is original, day to day. it is original to try to get from the morning to the afternoon to the three :00 a.m. tweet. here is somebody clearly against mr. trump and writing with care and balance. nicholas kristof, from the new york times. about.". trump is right at the end of the essay -- " let's try to pivot from outrage at gross words to condemnation of unconscious in the savior and policies. on the sole point that actions matter more than words, trump is exactly, frighteningly right." i really cannot convey the bizarreness. we have never seen this. i would take this well back to the 19th century. guy: it has been a turning point

to global politics. it has affected exit. our candidates differ in their behavior to what is happening with donald trump but what he represents in the world is something that has captured the imagination. i remember studying u.s. university and i've always watched it and i've never seen anything like this. it is so important to see what this means for the political debate going forward. it does feel like a shift. tom: i think it is important within the bloomberg poll, the narrowness outside philadelphia audience,lobal pennsylvania is a key state. , may be likehat georgia or illinois, there are two or three pennsylvania's. there is an east coast pennsylvania and a west coast

pennsylvania, a whole different world. ,ittsburgh and the mining another part of the world. and the important thing are the suburbs. it will slice the dice in the coming days. mrs. clinton is doing better in the suburbs after what we have observed over the last couple of days. what you need to observe is "with all due respect." they're look at the most unique times from washington. and america. this is bloomberg. ♪

tom: good morning. deutsche bank will introduce a hiring freeze. this is a hiring freeze.

and the key phrase is -- "it is across the board." i will suggest that this is not a surprise. the global gdp away from deutsche bank theater, you wonder how many of these will see. i expect the next trade on will be the next idea that they will try to significantly cut. they're trying to have the available credit situation into the right area and it will be a real challenge. the question i've thought is yes, a hiring freeze, but what about the people who really make money? what does their future hold? tom: they have to retain key personnel but there is another story here. controldes some

functions, such as defiance -- such as compliance. you had to keep the compliance people on board as you wait for the settlement. right now, after this deutsche bank freeze, we get to the first word news. taylor: donald trump is planning to intensify his attacks on hillary clinton over her husband's past sex scandals. but this is just an act of desperation -- hillary clinton: his campaign "ad today said they will use scorched earth" strategy for the remaining four weeks of this race. that just shows how desperate they are. that's all they have left. negativity. pessimism. and we are not going to let donald trump get away with it. are we? campaign -- left

hillary clinton shaking and help unify republican voters in the embattled campaign. todayals want answers after a syrian man expected of planning and islamic bombing attack took his own life in the jail cell. germany's top officials say his investigation into whether he had accomplices far more difficult. wide selection of unity lover products from man is to into tescond marmite stores -- it is a standoff over rising prices on consumer staples in the wake of the tags it vote -- wake of the brexit vote. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries.

guy: thank you. let's get back to the deutsche bank story. deutsche bank has implemented a hiring freeze. the only function left out of that is the regulatory compliance team. michael moore joins us on set in heren and we are still with george magnus. no surprise, i guess. no.ael: we saw barclays do a hiring freeze earlier this year. it is the way, when you are trying to cut jobs, it is the way of managing down the headcount number without having to do larger firings. not many people are moving at this point in time so i don't know if it will move the numbers that much. guy: is the next step -- think thatu have to is on the table. for analysts have called

wiping out the bonus pool. but you risk losing top performers if you do that. magnus, weigh in here. isn't it always true in a hiring they keep 30-40 key personnel? freezee not in a hiring or a bonus freeze if you don't pay up for the key talent -- you lose them. don't you? yes.e: i am detached from that nowadays. but in principle, that is correct. the situation of the bank is said in thes you package before, it is inevitable that this was going to happen and i'm sure they will lose people. for all the traditional reasons. is deutsche bank specific,

whether you can say that, i think you can say it isn't. the finances,of the story to me, the big stories about the bank itself but the bigger story to me is really about shrinkage. we: michael moore, what are going to see up to december 31? how many banks in europe are going to do a deutsche bank that doesn't make headlines on the bloomberg? this will be copycat it, isn't it? michael: some banks are already in this position. across the industry, it is very tight. you are not seeing a time of movement. it may tend to pick up early on in the year but i think this is certainly something other banks will look at. and you seen the banking industry where they have cut more than 300,000 jobs in the last five years.

this is something that has been ongoing. tom: i want to bring up this chart. the foure chart of major u.s. banks and i took out the laggards. the yellow line is wells fargo and the green circle is john stumpf excellence. he outperformed james dimon on a stock basis, going back. and then there is the rollover into wells fargo but they are equivalent now. michael moore, with all your years off theur bank desks, is he a fall guy or was he involved in this? well, he set up the cross-selling strategy that led to these incentives being pushed , the hard targets being pushed on the employees. so it was his strategy. and in some ways, he is the fall guy in that they needed to quell

some of this here over the bank and he took it upon himself to do that and be that person. but certainly, there were two sides to this. guy johnson, one story on this. i was on stage with john stumpf a few years ago and i have a great respect for the gentleman. he started out with nothing in minnesota. was talkingmpf about stores. stop thet nuts and discussion. i said they are not stores. you don't collate branch a store. psychologically, that doesn't fit with the american idea of inking. and there it was. he said they are a store or consumer -- and you wonder if that alludes to the decisions that were made over 5-6 years. whatif you think about happened in banking, we , otherely solid here

started to get into banking. so you saw a tesco crush shelling into insurance and banking and other things. and maybe that is where it came from? pressure from the retail environment? , is this enough to satisfy regulators and politicians? because they have gone inside for a replacement. when tesco had a problem, they went outside the business. is this enough to keep everyone off their back? michael: if they had gone outside, perhaps that would do more to relieve the pressure. on the other side, you have someone who knows this bank, inside and out. i don't think this is the end of the story. there are questions from analysts about legal reserves and whether they will have to boost those for the fallout. but the big question will be whether it has impact on revenue. whether customers will respond.

michael moore, thank you so much. michael moore, cross-country acc champion. he sprinted across their today and we thank him. up, we speak to the laureate from columbia in the 11:00 hour today. this is bloomberg. ♪

guy: this is "bloomberg surveillance." i am guy johnson in the british capital. let's get back to brexit. we will ignore the marmite

scandal. brexit could be delayed by as much as a year if the government loses a court case which begins today. may's senior political adviser argues that the government has the right to process without the approval of parliament. let's get more from sony kapoor. joining us from muscles. how worried you think the government should be? sony: i think it should be very worried for two reasons. the actual legal merit of the case, where, based on the conversation that i have had with some of the leading lawyers isolved, it seems that there a significantly strong case against the government. or very possible that the government might lose the case. the second is that at issue in the british referendum is the idea of taking back control of

serenity. and serenity means serenity of the parliament. and a government that has been set to ignore parliamentary order will set a dangerous precedent that one can hark back to some of the decisions that were taken in going to war, where the parliament had ambitions than prime minister cameron. i think this pits the parliament against the executive and it is an important precedent. interesting article is that it potentially pits the parliament against the people. the constitutional impact of that would be massive. if parliament were to block list, where does that leave the constitutional story going forward? is -- thequestion

people voted for something. "something" is what we pay our parliamentarians to define. people voted for a brexit and it is completely undefined. the difference between a hard and soft brexit, single market access, passports, there are a whole bunch of options. which is where the parliamentary democracy needs to come into action. kapoor, at what point do the markets take over? my experience with political -- all of a sudden this becomes a market dialogue. a chart went viral yesterday. the telegraph had it and we had it. 1848.ook it back to a few years back. this is back to 1990. and this is trade weighted

sterling. down we go from the blue circle, brexit, and we blow through the lows. markets tell parliament what to do? based on conversations i had yesterday, i think there is a significant amount of alarm within the british government these exact on developments. so in that sense, one can say the market has not exactly taken over but it has sent a firm signal. and that, combined with decisions for the tesco where he bank has decided to relocate out of london -- this will start to add up. and the economic pressure is going to become irresistible. and the costs are going to add up the for any supporters benefit.

sense, markets will concentrate before any of the process can be finalized. tom: george magnus, give us some history. what would george may do? 1990's, united kingdom enjoyed a challenging time. what did the prime minister major do at that time and what does prime minister may need to do now? george: i don't think there is much that is similar today, comparably. evictede british were or left the exchange rate, we competitivehuge boost because the currency was overvalued before. and the 1990's were not exactly the kind of stagnation with

world trade days that we have today. so we should reject that as a benchmark for what is going on today. far, thes that so decline in sterling has been remarkable but not chaotic. are fromkapoor and i the same table, really. but i think the decline in sterling may have gotten some people in the treasury concerned, particularly as this is taking place in the context of a pickup in gilt yields, which is important. but actually, watch this space. because if sterling's decline becomes chaotic, and it might, then the rise in gilt yields will send a strong message that -- you guys are in trouble. but i don't think we are there yet. what am i going to say? of political pigheadedness

breaks the tears -- of brexiteers generally believe they are doing the right thing. and i don't think they will be alarmed by what they have seen in the currency market. sony: to the point about guilt. yields are george: beginning to feel the pain. expect this to continue. so far it has been incremental that there has been a pattern of how this has happened. george, get out front. can george magnus go to parity? with the u.s. dollar? george: could it go to parity? yes. is it likely in the immediate

future? i don't think so. but are we on a path towards a hard brexit -- and a hard brexit , despite the fact that david davis says there is no such , itg, a hard brexit would would leave us completely exposed in 2019. i think that if people started to discount that properly then i think we could see a big drop in the pound towards parity which would overshoot and it would be very uncomfortable. guy: many people would argue it is pretty chaotic now, but that is only one view. is theresa may playing politics or poker right now? you know what,d, i can't lay out my negotiating strategy because i am playing poker.

she is having to do a little bit of politics, but which one is it? sony: theresa may, if you look at her history as a parochial politician, one of the most anti-immigrant home secretary's is playingr had, she poker by rules that the rest of the eu does not recognize. this is her big mistake. she think she's playing poker but she's playing very dangerous politics. one which she is certain to lose. many people are starting to think of the u.k. in terms of political development and as currency volatility with asset ince issues and volatility similar terms to emerging markets. political risk in the u.k. today not actually significantly

higher than emerging markets for less return. tom: sony kapoor, thank you so much. coming up later today on "bloomberg markets" it is a good time to talk to sheila bair. always interesting and always controversial. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." george magnus is with us. steve major at hsbc has been right on yields, he goes lower for longer to 2021. do you agree that we are drowning in such debt that interest rates stay lower for longer? george: no, i don't, really. and i think, in fact, we may look back on what is going on inflectionrt of point. when we reached rock bottom in terms of interest rates and negative interest rate, from which the past may not be a steep rise but a turning point.

a lot of water will still have to flow under this bridge before we can deem that inflection point to have arrived, but the genesis of the report that i aboutabout or commented in the imf eu about global debt situation are in a where we have to have solutions and answers on how to deal with the debt. a lot of people are starting to talk about greater fiscal acts. and if you mix the fiscal activism with changes -- guy: how do not have more debt? george: what you are trying to do is take on the government balance sheet. and arguably, it is easier to deal with over time. -- the imfdevise says that if you have fiscal

space, use it. does, doesn't but britain the united states does, germany does. japan, arguably, has. so they should use it to create higher nominal worlds of growth. and that will help a lot. tom: what is it called? marmite? marmalade? george magnus, wonderful to have him on. turning to america, we do that in the next hour. on american productivity, we are honored to bring you edmund phelps. this is bloomberg. ♪

tom: this morning, both the euro and sterling weekend. the dollar ascendant. janet yellen's december plans --

are they changed? on america's dearth of productivity, where is our next dynamism? mrs. clinton's prospects sharply outside philadelphia. the nation staggers to the final debate. we are live from world headquarters in new york thursday, october 13. i am tom keene in new york. in london for francine, guy johnson joins us today. give us an update on the judges -- the events today of brexit in london. moving fast. we see the attorney general going to court to defend theresa may's position that it is the to trigger authority article 50 and start the process of taking the u.k. out of the european union, and that parliament should not have a vote on it. we have a parliament in this country. people voted in this country for

sovereignty. someone argue that taking parliament out of the picture may not be the way forward. this is a critical constitutional moment for the u.k. tom: let's get to our first word news. here is taylor riggs. taylor:

over control of the nation's finances pierced free reaching its end. this is after prosecutors summoned gordhan to appear in court on fraud charges. zuma reaffirmed his support this week, but analysts are speculating the finance chief's firing is imminent. john stumpf led wells fargo through the financial crisis and build it into the world's most valuable bank. he is stepping down with his tenure unraveled by public forry over accounts opened customers who did not request them. the bank says the 63-year-old is retiring from both posts, effective immediately. he will be replaced by coo tim sloan. global news 24 hours a day, powered by more than 2600 journalists and analysts who work in 120 countries. i am taylor riggs. this is bloomberg. storyurrencies tell the

today -- equities, bonds, commodities. futures sagging. even -18 earlier. doing better. yields come in risk off. euro was under 110. oil under 49 gets a bit of a bid in the last hour. the vix was at 17, 16 .91, showing 24-hour angst. dollar was at 98. a strong dollar giving up in the last hour. 1.22 sterling. guy: let's talk about european equities midrange. we are lower, down by around 0.9% on the stoxx 600. it is the miners that are really doing the damage around europe. some of the financials in the mix as well. let's talk about your-dollar, 1.10. we saw that pick back up. emerging market currencies suffering against the dollar. you are seeing the south african story and the turkey story front and center. unilever, a big fight with tesco.

theit is becoming real for british people as they begin to contemplate the future of their breakfast. tom keene part -- tom keene, back to you. tom: american politics of the last couple of days has been extraordinary. what is the confidence of the nation? this is the favorite statistic, because it is a weekly statistic, the bloomberg comfort nation'sthe confidence. the green rectangle is the glory of the late 1990's. down we go. , thee obama administration red line, improvement in confidence. one-off,green box a guy johnson, or are we back to normal right now? guy: let's talk a little bit about china. we have seen data, overnight. it paints a bleak picture. tom: really ugly. guy: it talks about a global story as well. export story to the rest of the world -- down and down pretty hard. an index we should be paying attention to -- are we being

over gloomy about the prospects within china at the moment? mark producing this on "daybreak" a little bit earlier. is an alternative gauge, i guess you could say, for chinese growth. energy consumption measures. it points to a more positive measure for the chinese economy. wanting toward 9% growth. but there is a lot of credit in these numbers. so much.k you let us frame where we are in the markets and do it with a theme that has done quite well on the international landscape. maded -- oppenheimer fund a decision to focus on international markets. actually putting money to work, are you under the table? >> we are -- we are taking a decent amount of risk. and the general theme we are expressing is an overweight emerging markets versus developed markets, nearly across all asset classes. the overall lateral risk we are taking is not, in terms of total

risk in the portfolio, is not excessive. it is more of a relative value bet. it is a relative disconnect between the cycles into emerging and developed markets. economics, their theory is emerging markets will recover, that their gdp will stay at a subdued level now that lots of one-off good events have occurred over years. do you see a recovery in e.m. you agree it could be set in the new lower terminal value? alessio: we see a more modest bounce in emerging markets, from a growth perspective. my financial asset standpoint, we still see a constructive -- tom: because of the money flowing in. alessio: not only that. the downside risks at the moment are very limited. for emerging markets, the story is first and foremost about valuations -- collecting your

carry, your yield, your risk premium. the limited bounce in gdp growth, particularly nominal gdp growth, tells you something about the upside in earnings momentum, and therefore equities. overall, against developed iskets, where the earnings negative and the business cycle is rolling over, that is where you can capture your relative value story. emerging markets to us is about the relative value versus developed, rather than the attractiveness of emerging markets are right. guy: is there another way of looking at your strategy as simply being short the dollar? you do not like the u.s. dollar? many people have in their portfolios the idea that if you are long the dollar, you need a counter on that, which is emerging markets. dollar goes down, emerging markets go back, and vice versa. alessio: on the dollar, we are expressing that in two ways. overall, we are dollar neutral. but to your point, we are expressing neutrality versus the dollar with an emerging markets overweight versus a developed markets underweight.

we are underweight the euro, the pound, the swiss franc. currencies. an overweight the emerging market currencies, particularly the commodity-sensitive, high-yielding currencies. we are in it for the carry. we are in it for the high beta and low valuations, emerging market. we are also staying away from china, taiwan,- korea. there, we feel you are not paid to collect much of a yield. and the valuations are not compelling either. guy: do you have to push out the duration? alessio: duration, we are -- we are not pushing out. we are actually neutral at the moment. but we prefer expressing, again, through emerging-market local debt. hedging some of that through cheap and rates. tom: i want to go back to that because i think it is important. we have heard this before, a tale of two dollars.

the x y is resurgent. the you see the broad dollar index breaking out with your optimism on emerging markets? alessio: being the dollar index, mostly euro, the 1971 trading partners, you could break out, absolutely. sterling is clearly trading downside momentum on the euro. the euro has not gone anywhere in two years. can we break 1.10? yes, we can. the key question for dxy -- probably the yen. we have seen renewed negative momentum on the yen. it was the big outlier. we could see dxy breaking down. tom: that shows the stations pro with dollar dynamics of old trading partners and with new and em economies. alessio de longis with us for the hour. coming up soon, that phelps of columbia university. i cannot think of a single

person i would rather talk to about productivity and about what we hear from trump, what we hear from clinton. where is american dynamism? ♪

in london,uy johnson in for francine lacqua. tom keene in new york. let's get your bloomberg business flash with taylor riggs. market the u.k. housing are stronger in september after the shock inflicted by brexit ofed and a shortage available properties persisted, according to the royal institution of chartered surveyors, which also says values continue to decline in central london. shares of cathay pacific airways are tumbling more than 5% in

hong kong, to the lowest level aftere than seven years, asia's biggest international carrier scrapped its profit outlook and said it is conducting a critical review of its business. yesterday, it said its second half is no longer expected to be better. snapchat is said to have chosen its bankers as it pushes ahead with the biggest social media ipo since twitter. morgan stanley and goldman sachs will leave the listing, which could happen as soon as march. lenders from j.p. morgan to credit suisse will act as joint book writers. snap inc. can file its documents confidentially since its revenue is below $1 billion. that is your business flash. tom: let's look at the bloomberg poll right now. i noticed the philadelphia will get there with megan in a moment. there is pennsylvania, and there is a big gap in an important state. many saying this is the key state. our perspective on this, megan murphy joins us this morning.

megan, i look at the pole and i look at the distance. i spent more time on hold in the last week than i have all year. is it over? megan: i mean, look. if you look at these numbers we see in philadelphia suburbs, across pennsylvania, the numbers out of ohio, florida -- some states we do not even expect to be in contest that hillary clinton is moving into -- arizona, nevada, in georgia even from her campaign thinks they have a shot. st looks like this thing' wrapped up. anybody who covered brexit knows -- is there a possibility we are dramatically undercounting the trump vote? that is the thing on pollster's minds. a nine point gap in pennsylvania, a 6, 7 point gap in ohio -- that is difficult to close. either we are dramatically undercounting who is going to come out for him and vote, or it does not look close right now. tom: that gives a prescription for pollsters and everybody else. can you gauge who will turn out?

is there any history of that? megan: here is what is so fascinating about this race right now, when you have donald trump actively going out and laying, i am running such a vicious, brutal, personal campaign because i am trying to suppress her turnout. i do not think you have seen someone come out and say that is exactly what they are doing. they are trying to make people turned off, less motivated, by going back through allegations that have swirled around the clintons for more than a decade now. it is hard to model, even if you try to model the obama turnout against what we think clinton is going to get. it is hard to gauge a candidate like donald trump and what kind of turnout we are going to the, just because we have not had someone similar to the kind of candidacy, the kind of populist, aggressive, forward -- the message he is sending -- in such a long time. the existing turnout models do not work as well as we would hope to really see where we are going to get on november 8. guy: to extend that point,

megan, is this the undecided of deciding, undecideds or people crossing the aisle? megan: a bit of both. no question the release last friday of the video showing those incredibly aggressive comments that made about women has dramatically shifted the narrative. you have seen literally the bottom dropout not just among women, but among college-educated voters. that is important. while donald trump has always pulled well with less educated voters, he was doing well with white college-educated voters as well. the polls have consistently showed a big shift since friday on that. he is doubling down on this strategy. no question his camp thinks we are just not seeing the numbers the way we should see them. by appealing to his face as a strategy, by green of things on the far right fringe is on the -- byfor a long time, appealing to his face as a onategy, and bring up things the far right fringe of the party for a long time, he thinks

he can do it. guy: how is this affecting the other races -- the senate, the house, etc.? megan: this is what we are trying to measure, what people are calling the trump drag or the trump effect. you see many republicans in close races trying to run the other way from his comments, his message. again, the republican party remains in tremendous turmoil about his candidacy. throughout this campaign, we saw an interesting shift. even though people were supporting trump, they also were able to support establishment republicans who did not adhere to his message closely. now that we see this real shock split in the republican party -- internal warfare that we have not seen since the 1970's. it is really testing people as to where they are going to a line, and whether we see a trump track or trump boost. that is what we are trying to model. tom: i am glad you are sitting down. we just learned "the washington post" has endorsed mrs. clinton. i know this is a shock to you. megan: shock. tom: i will see you in the food court there.

what are the significance of newspaper editorial opinions anymore in this game? megan: i do not want to say this in a negative way, but in terms of "the new york times," "the washington post," they are not going to move the needle. what is is newspapers that have supported republican candidates -- we have had newspapers who supported republicans for more than 100 years in states like ohio, who support hillary clinton in this election. i do think that matters. i do think when you look across the media universally supporting one candidate -- little hometown newspapers in states like ohio and pennsylvania, where it is going to matter to people, where they still look at their local newspaper for their barometer of a moral compass or some sort of outside influence -- that does matter to people. it still matters in little towns were people depend on their local newspaper. tom: megan murphy with us in washington. providing great value in the data they go through on news

flow on this election. friday at 5:00 p.m. tonight, "with all due respect," smart insight on the nuance as we go to the first tuesday of november. worldwide, this is bloomberg. ♪

guy: i am guy johnson in london. tom keene in new york. this morning, blustery. it comes from the prime minister of the french republic.

he says we cannot build a united states of europe. it country has its own history, language, and culture, but we can have a federation of nationstates. tom: there it is. the brexit boat pushing europe to redefine itself. the idea here of the united states of europe. i thought juncker was brutal a few days ago. he said this does not exist. does it exist for you as an investor? brexit and europe, they do exist. from this quote, what is really remarkable is the reminder of how we got through the last five years of crisis. the political momentum, the social momentum, is one where this generation just does not want the european project to fail. also, the mentioning of the youth and the young -- that is an interesting disconnect, right? we have unprecedented youth

unemployment in europe. however, as brexit showed, the demographics of the brexit vote showed the young are the ones still married to europe, without a doubt. that is an interesting disconnect between the intergenerational cap, the two-tier labor market within each european country. the young are not blaming europe for how youth unemployment. and that is something that i think the european elite has to capitalize on, but also address very quickly. and in terms of brexit, i think that brexit is a real risk. the political headwinds we are seeing -- tom: let me bring in guy johnson. guy: alessio, why talk about the fact that europe is in trouble, though the project is in trouble? if the user does not blame europe, who should they be blaming? alessio: europe -- in my opinion, while europe remains a aable project -- but it is

project that, under the current situation, is clearly not working. brexit is just one sign of many that will come. you need to create growth, lower the unemployment rate, to prevent the populist momentum of repeated election cycles from taking over. idea.t is the what is the alternative to europe is a worse alternative. thing thanonly worse the current european project is a european project where there is more disaggregation. who is to be blamed for this momentum? in my opinion, it is for reforms and low growth. strong growth and a dynamic economy solves a lot of these problems. guy: we can blame the politicians, i guess, in some shape or form. we look at what is going to happen next. we have the italian referendum, the dutch vote, the french votes, the german votes. one of those my point the way of populism? alessio: i think the italian

referendum is the biggest risk at the moment. however, as time is passing, i think we are reducing the risk attached to that event. renzi himself has been gradually distancing himself from the earlier position of, i will automatically resign if the referendum does not pass. i think that may still happen. it shows that neither the opposition nor the current government are really willing to go to early elections. tom: we will continue with alessio de longis of oppenheimer funds. that felt with us in a bit. ateph stiglitz's colleague columbia university. look for that in the 5:00 hour. ♪

tom: good morning. and event full morning from london and new york. net felts coming up in a moment. right now, bloomberg first word news. taylor: donald trump is planning

to intensify his attacks on hillary clinton over her husband's past sex scandals. yesterday at a rally in colorado, the democratic nominee said the scorched approach is an act of desperation. mrs. clinton: his campaign said today that they are going to use a "scorched earth strategy" for the remaining four weeks of this race. now, that just shows how desperate they are. that is all they have left -- .ure negativity, pessimism and we are not going to let donald trump get away with it, are we? taylor: trump's campaign believe women who bring three claimed they were assaulted by hillarynton shook clinton and rallied republicans. a 22-year-old syrian man suspected of planning on islam extremist roaming attack took his own life in a jail cell.

germany's top security official says the death would make the investigation into whether he had accomplices in the plot for more difficult. public defenders said officials were aware his client was a risk to kill himself. tom keene, this is for you. it took austin matthews -- a muston matthews 40 minutes to get into the hockey league record book. the arizona native scored four goals for the toronto maple leafs in a 5-4 overtime loss to the ottawa senators. his final goal came with three seconds left in the second period and brought his mother to tears. local news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: absolutely spectacular. thanks so much for getting that video. this is absolutely extraordinary, and a major shout out to gary bettman, who we

interviewed, the commissioner of hockey for canada, for the united states. he predicted this. he flat out told me this guy would change the game. it is not a big deal that he is 19 years old. there is a lot of young kids in hockey. but what this kid did last night -- i am sure there is an equivalent in english football. but two goals, ok. three goals, stunning. you have to go back to 1917 to see any kind of equivalent. just extraordinary. your speechless. guy: changing the game, it is fascinating. watch the skill set. tom: we will get more perspective from erik schatzker, toronto maple leafs failed, through -- fan through the morning. it was an honor to speak to the newly minted nobel laureate of m.i.t. yesterday. also, our inventor

thisbor dynamics and how works. professor phelps, i may have as my chart of the year this collapse in productivity. you talked through this for years, this mystery of why american productivity is down. but the chart. i am not sure this is my chart of the year, but we are getting real close to it. there it is common that. -- there it is, ned. what is the mystery for edmund phelps? ned: it was a mystery to me for a long time, but then i began to think that there have been a sharp decline in the rate of innovation towards the late 1960's, early 1970's. and a whole lot of research later -- i am very convinced of that. you agree with professor robert gordon of northwestern university that there was something special about the

mid-and later 20th century? well, for sure. right from 1815 onward, britain and america were on fire. first britain, and maybe a decade later, america. of course, we thought that was normal dynamic capitalism. but then, of course, something happened in the late 1960's, early 1970's. and we have seen this and norma slowdown of productivity. and i think there is no doubt that behind that lies a slowdown of innovation. but that is tricky. it is not so much that the input of innovation slackened. it is that the inputs were running into diminishing returns. a lot of the innovative input from silicon valley was directed to capital goods. that is fun for a while. once you start

piling on innovation after innovation in the capital goods sector, you drive down prices of capital goods. and so this innovation is contributing less and less to gdp. tom: net has heard me say this before. one of the seminal moments of this crisis was not felt -- was speech in europe. i cannot believe it -- eight years ago. this exceptional speech. when households revert to their habits of saving, the ensuing growth of wealth will be a drag -- my emphasis -- on the wage to wealth ratio. i mean, ned, the fact is, wages

cannot get going because we are saving too much, right? ned: i would say that wages cannot get going because the things that labor produces keep falling in price, keep falling in terms of market value. so that while innovation is effective,ers more what they are producing is less and less valuable, and that is where wages are falling. that is the revised story. guy: professor, army not being innovative enough in the way we measure productivity? well, i think we do a reasonable job at it. we have always had difficulties along that line, ever since people started collecting numbers on productivity. thatve always understood there is a lot of quality improvement that we are not capturing. but there is no reason to think

that what we are not capturing is bigger today than it was before. so no, i don't think that productivity growth is really holding up, if we could just measure it right. i do not think that is correct. absolutely not. guy: what we value the most is changing, though, as you just pointed out, and therefore how we produce what we value has got to change as well, and how we measure how we produce what we value has got to change. i am just kind of wondering, as we go through into a different era -- and more digital era -- whether or not we have a grasp on what is happening here and where it is going to ultimately take us. the next generation coming through value things very differently from the ones that preceded it, or am i wrong in that? ned: i do not think the measurement problem is any worse today than it was in, let's say, the second half of the 19th century. innovations were so profound that time that you cannot even begin to measure their impacts.

so while now we are getting kind of humdrum improvements in our cell phones and all the other gadgets -- but it is not revolutionary. us with our labor statistics. you invented a lot of our analysis of our american labor economy. the you believe the statistics that come out of washington? do you have faith in the work and dynamics and measurement of the two americas, those employees and those less than employed? ned: i guess short answer is, yes. i do. i accept those numbers. tom: wonderful to see you again. net phelps on productivity. we will continue with officer phelps on the radio and surveillance later this morning. we are watching sterling and euro.

along in the next hour, wilbur of mr. strong supporter trump. ♪

guy: guy johnson in london, tom keene in new york. here is a bloomberg business flash. areor: chinese exports dropping the most since february as global demand remained tepid. that is adding pressure to the yuan, hovering near a six year low. customs administration says exports fell 10% from a year earlier in september, with imports falling nearly 2%. tesla motors and solar city shareholders will vote next month on the proposed merger.

a regulatory filing says the vote will take place in special meetings on november 17. the elon musk companies agreed to merge last july, but face shareholder unrest and lawsuits. since i electronics and the u.s. consumer products safety mission are agreeing to terms for an expanded recall of original and replacement note 7 smartphones. this increases the number of devices that can be returned to 1.9 million. samsung says all owners will be able to exchange their devices for another samsung smartphone, or receive a refund. that is your bloomberg business flash. tom: really extraordinary, taylor, to see the engineering failure turn into what it has turned into. it goes back to the importance of distribution and logistics. for those of you worldwide, and has been remarkable in america, the number of travel entities like federal express and airlines that said, we are not going to move these troubled phones. guy johnson? guy: let's talk about deutsche

bank. a companywide hiring freeze, according to people with knowledge of the matter. michael moore leads the u.k. finance team for bloomberg news and joins us on set with more. michael, give me a sense of the importance of this hiring freeze and a process that is ongoing within deutsche bank as it tries to deal with this external position with the doj and internal position with its capital? michael: right, i think it is a move that will help on the margins. you know, they are already cutting thousands of jobs. this will help bring headcount down a little bit faster. but there is not a -- this is not going to move the needle dramatically. but it is one more step they can do to try to get that cost savings. is the next step? michael: some analysts want them to cut the bonus pool in a mortar connie and way than they have done so far. than a more draconian way they have done so far to bring

costs down. they are continuing to try to redo their technology side, reducing the number of systems they have, trying to get the costs down on the technology front. but that is going to take some time. tom: michael moore with us in london. alessio de longis oppenheimer funds in new york. the ultimate value house -- are you brave enough to acquire the shares? alessio: in our team, we do top-down. we do not choose sectors. however, i would say that i would not get involved. what concerns me is that between the regulation, the lack of profitability, and especially the political uncertainty around brexit and core europe -- it is very difficult to make a case for increased value there. tom: what is critical is currency called. do you hedge the currencies of the g7 countries you are in, or do you go right at it and forget about those dynamics question mark alessio: -- forget about

those dynamics? alessio: we actively manage. we make separate decisions between equities, credit rate effects. --buyn by equities equities and actively do the currency overlay. euro, out of the the british pound, and we do not have a very constructive to you on exchanging currencies. guy: alessio, do you believe -- i am curious to get your positioning on this. you are out of all those things. do you believe european governments will backstop their banks? if they are prepared to do that, the credit of some of these european banks could be quite interesting. alessio: i think in the end, that is what will have to happen, articulately with italy, the realization the problem is to be addressed. nothing will happen before the referendum, but overall, europe, the consciousness around this problem is increasing. to be honest, with deutsche bank being in the headlines, it basically increases the urgency

of the situation, particularly for germany, and may allow merkel and renzi to come to an agreement with respect to the whole issue. to your point, i think, there might be value from there. even then, remember, there is a problem with profitability not being the best. there is tight regulation and tighter capital requirements around europe. so it is not clear to me that backstopping the banks necessarily makes an attractive value proposition, from a long-term profitability standpoint. credit growth is still anemic. the current situation with the banks makes forward-looking projections on credit growth even more troubling. that at itsdence best is able to grow at 1%, 1.5%, it is very difficult to get that earnings momentum acceleration. valuations are attractive, but without an earnings momentum, it

is difficult to see major upside from here. we have been discussing this all morning. we are close to the u.s. election, days away. how many days away are we from the doj and deutsche bank finding a deal? that is what the market is waiting for. we can talk hiring freezes all day, but until we get that, nothing changes. michael: that helps address the cost question, that the capital question comes down to the doj number. there is momentum from both sides to get this done quickly. but there is no word of it yet. i think a lot of the details take a while to be ironed out. you know, i would think you would see something by the end of the year, but you never know. tom: michael, what is our reporting in europe, and frankly the united states as well, of whether wells fargo should have gone outside for a new ceo? what do you hear on that? michael: i think that that question has been raised by some investors and analysts about

whether that would have given them more of a clean slate, helped take some of the pressure off. has been in that role, in that era parent role -- heir apparent role, for years now. he knows the bank inside and out. maybe it is easier for him to turn this around. it will be hard to sell this as a fresh start, given he was cfo for a long time, and was at the top of the house when some of these things went down. tom: michael moore, thank you so onh for that perspective european and american banking. futures, and improvement in the tape. bloomberg markets -- it has been too long since we have spoken to her -- sheila bair on american banking. no doubt on mr. stump and wells fargo, sheila bair in the 1:00 hour. ♪

tom: sterling under at 122. a little better tape. we had a 109 on euro.

dxy was 98 when i walked in the door. market.is the emerging looking out on the emerging markets, i think it may be the later. coming up shortly, bloomberg daybreak americas. jon ferro on the show. mike: -- david, we have comments on what the fed is going to do in december and the next year, and with the bond markets. finally, one of our favorites from merrill lynch, talking about commodities, particularly the mining numbers. all the commodity numbers are down. tom: this was a huge deal. i would suggest most people do

not see commodity recovery. david: exactly right. the numbers overnight do not help. tom: alessio de longis, rip up the script. you see a commodity recovery? alessio: we do not see much recovery path these levels, but also do not see much downside, compared to -- we do not see a repeat of the beginning of the year. because that was an undershoot. and now we are converging back into stable equilibrium. the supply responses coming, right? the negotiations at the opec level are much more attractive than six months ago, when all bets were off. tom: it is interesting, the supply side, where francisco blanche is working -- david: you have to get demand going. tom: david westin, "daybreak," in a bit. how about a chart. boring, but we do not always do an exciting chart. this is a god's chart. i did this for michael mckee.

does the green line get done by that redline? everybody is waiting for numerous cycles to adjust. a lot of debates yesterday. different houses with this call, that call. you are not in the parlor game. when does it adjust? in our opinion, it should adjust rather quickly. we agree with the red line. we second that stance. if we look at fake communication, in my opinion, it is fairly consistent. the only part of fake communication does not add up is the dot plot. in my opinion, the dot plot makes sense at the zero lower bound for a prolonged time. the fed needed to provide some very long-term guidance of where policy would be down the road. but now that we have had liftoff -- now that we're back into more conventional monetary policy, so to speak, i think the dot plot is more confusing.

confusing than other things. how can we justify the dot plot and then the statement from the latest meeting, where we talked about monetary policy being somewhat accommodative? how is somewhat accommodative squared with a dot plot that implies more than 200 basis point of interest rate hikes? that is the part that does not make -- that i cannot square. -- alessio, do we need to see more dissent on the fed, in the fomc? alessio: interesting question. in the last minutes, some members talked about risk to bed critical of the encase a hike was not delivered. what made headlines in the last meetings was the three dissents. could be ae dissents double-edged sword where you actually end up having more communications problems rather than less.

i think probably we need the fed to be more aligned. dispersionreduce the in the fomc. tom: alessio, thank you for coming. alessio de longis, with oppenheimer funds, with us. much more to talk about through the morning. "daybreak" coming up on bloomberg television. tomorrow, i am really looking forward to this. this house has a pretty grim call. morgan stanley, adam parker, on your equity portfolio. we will do that tomorrow. this is bloomberg. stay with us. ♪ ♪

jonathan: a very warm welcome to

"bloomberg daybreak." alix steel is off today. and market check -- futures negative here in the united states, down 94 on the dow. concern over china. that reignites. mining stocks getting crushed this morning. switch on the board. turning to the fx market, a stronger dollar story, with the dollar index kissing a seven-month high. david: here is what you need to know. china's exports dropped the most since february, raising more questions about a possible slowdown in the world's second-largest economy as the u.s. federal reserve moves closer to raising interest rates. the challenge to brexit in the u.k. high court begins today. a judge is hearing arguments that prime minister theresa may does not have the authority to trigger article be on her own, without an act of parliament. john stumpf, who built wells fargo into the world's most valuable bank, stepped down as chairman and