deutsche's bonus question. the bank is looking at alternatives. apple store supports its first annual sales decline in 15 years. and the prime minister is said to want the bank of england's governor to stay. this is bloomberg " surveillance." good morning to you all. european stocks on this

wednesday session. we are one hour is today. there is the stoxx 600 down by 1/3 of 1%. the third continuous decline. a while.ain in the highest in 15 years. loafers, handbags contribute into it. 2%.october, it's up by as we approach the december fed meeting, many expecting, there .s 70% probability ofa a hike u.s. crude stockpiles expanded it prefersays freezing output at current levels rather than cutting production. let's get to my first wonderful chart of the day. it's all about volatility expectations.

uge.ss asset gagu as you can see, it has fallen to the lowest level since 2014. are investors getting too comfortable? making some nervous -- threats from washington to beijing. the uncertainty about the u.s. presidential vote has diminished. investors are coming to terms with the potential rate hike and december. it's possible investors are too nervous to make any big bets. what a wonderful chart. let's get to bloomberg first word news. >> thank you so much. in extended fell trading after a reported its first annual sales declined since 2001. and forecast sales for the last three-month of 2016 that were barely higher than analysts estimates. investors expected the iphone maker to take advantage of the galaxy note 7 problems.

beleaguered deutsche bank is said to be considering not paying bonuses in cash in a bid to boost n investor -- and r confidence. the supervisory board meets later today. although no final decision is expected. a spokesman for deutsche bank declined to comment. bad times lie ahead for bond holders and rising inflation and deficits conspired to drive down interest rates. at a conference yesterday, the double line capital ceo says we are in the eye of a hurricane for the next 3-4 years. out.2018, 2019, 2020, look he recommended investors reduce exposure to securities and said

sabres -- savers emerging markets debt. is bloomberg. sterling recovering from its lowest level since the flash r bank of england governor mark carney said it were limits to officials willingness to look beyond it overshoot of inflation targets. >> that judgment is a judgment about the optimal trade-off, a judgment we have to make on the basis of the agreement letter. shere are limits to the mpc' willingness to look through an overshoot of inflation. mark: the morgan stanley chief executive says his bank will be forced to move some employees out of london as a result of the brexit vote. >> there's nothing good about

brexit. inloved the rule of law england, we love our folks working in london. you have all the eate ecosystem, it is all there.rtered we will have to have a headquarters in europe in addition. we will probably have to have more capital and liquidity trapped in those legal entities. none of this is good. mark: carney suggesting there are limits to the boe's willingness to look beyond the overshoot of inflation targets which brings me to the breakeven rate, the difference between the 10-year and the inflation which has been rising substantially on the back of sterlin'decline does that tell us that investors are expecting too much from the boe when it comes to stimulus? certainly goty

put out a state by guidance by mark carney and other mpc members that next week's report would trigger a further stimulus, possibly an extension of the quantitative easing pro gram. me ist that at a ti unlikely. it is much more likely if they are going to have another go at monetary stimulus, and bear in mind, there is significant diminishing marginal returns of doing it now, that is more likely to be in the february inflation report because that will be the time ahead of triggering article 50. ist symbolic gesture which what the monetary stimulus will be as much more likely than right now when it is not needed based on the factors we have seen -- mark: what we are going to see in tomorrow and the gdp report, which should see growth of what? not as weak as many were anticipating. >> a lot of businesses have

looked at the rather confusing picture from the political, political -- in the u.k. a lot of our plans will remain on adjusted until we get clarity. that comes across strongly. they are as uncertain as the rest of the investor community. not materially to push the u.k. economy into contraction. mark: the other question carney faced what she dos was about his future and -- he dodged. he's due to make a decision by the end of the year.l may is keen for him to stay. is it too early to make a guess, whether he will stay beyond 2018 or not? if he doesn't what sort of knock to markets with every? >> my view is that he will stay but my view has been weekend, as we see a series of politicians

michael govepress, will, the x education secretary and attack the distributional impacts of quantitative easing and low and negative interest rates. in terms of what carney said, he made it a personal decision, rather than talking about him being influenced by the noise in the political sphere or brexit. in terms of the succession plan there are a lot of unknown quantities on the mpc that could take mark carney's place. .ndrew bailey ben broadbent. he's going back to the lsc. there are unknown quantities for markets. expect sterling, there was a surprise announcement he was going to leave, would be skewed to the downside. mark: i started with this wonderful merrill lynch chart

which shows muted volatility across all asset classes. lowest since 2014. what does it tell us? >> it has been quite a long run since the referendum vote in the u.k. in terms of, we know what terms of december is a key month in terms of the follow from the u.s. presidential election, but then the question over whether the ecb will extend his quantitative easing program that has been uncertainty over that. most investors have positioned themselves ahead of that, a lot of the cross asset swings that we saw during the summer have actually left the marketplace and people sitting on their hands waiting for further signals of what the trajectory looks like from central banks and governments. mark: summit french, the chief economist. stay with us on "surveillance." plenty coming up. draghi's suspense. cb hits back at critics

that the negative rate policy once again asking governments to pick up the slack. deutsche bank consider striking the cash bonuses. the chief executive of banca monte paschi gives us more details and an exclusive interview. we will bring you the morning spanking is and why apple can't wait for christmas -- the morning banking news. the first sales decline since 2011 and hopes for a return to revenue growth over the holiday period. this is bloomberg. ♪

i'm mark barton in london. let's get to the bloomberg business flash.

>> lloyd's has pointed a fifth -- has poised to the 15% decline. pretax profit fell to 811 million pounds as the largest mortgage lender took a 1 billion charge to compensate customers who were wrongly sold loan insurance. the bank has taken more than 17 billion pounds and chargers for payment protection insurance over the past five years. more than any other major british lender. santander says that profit was little changed, beating estimates for the three months through september. net income rose 0.9%. third quarter profit has tumbled 21% at airbus, earnings before interest and tax excluding one-time items went to 171 million euros. as it addressed production delays on its latest wide

body models. sweden's wallenberg dynasty has tightened his grip over erickson by moving a trusted executive to lead the embattled network equipment maker. the former ceo, the wallenberg publicly traded investment company, will take the numeral on gender 16. january 16. ericsson's shares are trading higher this morning. that is the bloomberg business flash. me negative rates for slow growth. mario draghi hitting back at the central bank critics once again calling on governments to do their part if interest rates are to move higher. ghi: long-term interest rates have been on a downward trend across the global economy for the better part of the last 30 years. so, the second letter of actions

we need if we want interest rates at higher levels are those that can raise the national rate. policiesires -- some that can address the root causes of access saving overinvestment. in other words, fiscal and structural policies. mark: what does europe need? summit french as here. -- simon french is here. is europe listening? draghi keeps banging the same drama again and again -- the same drum. outn: he put a lot of data the support of the stuff that he goes on time and time again at the press conference -- particularly the impact on financial institutions, but also the offsetting impact that that has had in terms of household forbtedness and the costs non financial institution. it was in tune with what mark carney was saying. whether the eurozone is actually

listening, it is a moot point. the fiscal trajectory goes neutral next year but there's no opening of the floodgates regarding particular the one major economy they could do it, germany. critically going to into election year. politics is overwriting economics. structural reforms, a mixed scorecard. there are countries doing a better than others but all of them mindful of the difficult political backdrop to doing labor market reforms, the kind of nitty-gritty that is behind that big statement. the elephant in the room for mario draghi is the euro, the european single currency, should be broken up into a tighter knit northern core. he can't say that. that is the problem that every single public -- has. it is a solution he cannot speak about. mark: investors expecting more stimulus and december, whether it is extended or he pumps it it, but probably an extension. they didn't talk about extending. they didn't talk about tapering.

it only a matter of weeks? simon: i think he will offer more after the december meeting but he is trying to keep that open for as long as possible to keep the feet to the fire around structural reforms and fiscal stimulus. of echoes with the german members of the european governing council looking to encouraging ecb also to be less stimulative, to encourage the reforms and the sudden peripheries as they see it as necessary to convert and for moving the eurozone from an optimal currency area. gamesare a lot of playing going on. ultimately i think he will relent in december. mark: draghi says inflation will move towards the target before he thinks the time he leaves in 2019. economists are not so sure it will hit just below 2% before the. , there islections

only a small window before inflation starts moving up. simon: you have to take these inflation forecast with the pinch of salt. but there are powerful bass effects given we had such strong suppressants of inflation through commodities, through fluctuations and demographic changes. we will start -- clearly the ind quicker will unw than the demographics. these are all factors that will make the window close quickly. and every single time we provide monetary stimulus, it just buys more time but a diminishing amount of time. mark: this sis a chart i made a long time ago but it shows you where the euro was draghi first announced q.e. last year. more q.e. we're at 109. i am looking at our fx forecast function. the median forecast is for 110. and 109 in the first quarter of

next year. is parity out of the question? simon: everyone has parity six months ago. the end of that chart does show fall.rly precipitous there are factors globally from the yuan and closer to home with sterling, the downward pressure on the euro should not be as material going forward. but it is interesting -- this is a positive from draghi -- the principal impact in q.e. driving growth in the eurozone was from export led recovery in the early part of 2013-2014, 2015. the credit lending channel is starting to push corporate activity, the reduction in real interest rates starting to generate growth that is not dependent on a we currently. the to the french

economist at panmure gordon. all those quiet on the volatility front ahead of the u.s. elections. we have that chart next. this is boomer. -- bloomberg. ♪

mark: this is "surveillance." lockers. the metal to bonds slowing to a crawl, visiting glows and volatility that have not been seen since 24. the quiet just before the u.s. election has alarmed the cadre

of market watches. risks exist. coinciding with a reduction and uncertainty when it comes to u.s. politics, the odds of a hillary clinton victory are close to the highest on record at 86.5%, according to forecast 538. simon french is still with us. this is a chart which can lead into a nice chat about inflation and how inflation expectations are rising, and investors preparing for that, simon, because this is tips, treasury inflation protected securities which are outperforming securities and the s&p 500. this is been normalized at 100. the white line is the tips line up by 7%. are we finally gaining traction when it comes to inflation in the united states, or not? simon: cyclically yes. structurally no. drivers ofral i

lower inflation and lower neutral rate of interest continue. cyclical factors, the near full employment of the u.s. economy -- there is some underemployment in there -- but those base effects from a low oil prices which will peak in january and february of 2017 because you will have the one-year anniversary of $27 oil. that really is why people are looking at tips as just performing to the upside versus low balled expectations. mark: this is the spread between the u.s. two year and the u.k. two year. we'rea t the widest sense may 2000. does that reflects the policy diversions between the two countries? are we on in december? mark: i think we are now. simon: there has been enough

data/suggest there has been positive manufacturing not just in the u.s. but globally this week. we have the services pmi out earlier this afternoon. mark: consumer confidence underperformed. then: the only fly in ointment for the fed is the labor market indicators data which has been in negative territory three of the last four months. but i think they have guided markets to a likelihood of almost three quarters of a december increase and they will be reluctant, short of a strong reversal, -- makrk: up next, money in the bank. deutsche bank sets you weigh alternatives this bonus season. this is bloomberg. ♪

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mark: let's get the bloomberg first word news. >> apple shares fell in extended trade after the world's most valuable company reported its

first annual sales declined since 2001 and forecast sales for the last three months of 2016 that were barely higher than analyst estimates. investors had expected the iphone maker to take advantage of samsung galaxy note seven problems and issue a more robust holiday sales forecast. is keen prime minister for mark carney to stay at the bank of england's and has fought to smooth over misunderstanding according to officials. they say within hours she criticized his monetary policy in her conservative conference speech this month, her office limited the damage five reassuring him the words were expressed clumsy. role ins been an active her statements on the economy, a bank of england spokesperson declined to comment. bad times lie ahead for bondholders as rising inflation and researching deficits

conspired to drive up interest rates according to jeffrey -- speaking at a conference double linehe capital ceo said we are in the eye of a hurricane or the next company 18,r years 2019, 20 20, look out and recommended that investors reduce exposure to longer duration securities and favors emerging market debt. global news 24 hours a day powered by more than 2600 and analyst in more than 120 countries. this is bloomberg. mark: shares in europe sold -- -- most troubled baker, he spoke to her european daybreak team. -- our european daybreak team. furthernk there will be consolidation in the italian markets although it is a process

which would probably take slightly longer than expected. as far as european consolidation on the retail commercial banking environment, i think it will be more difficult. >> where do you see opportunities to consolidate in italy? the types of businesses that should belong together? >> within the financial services, more on the asset management side. retail coremercial business -- on the commercial retail core business, the headline. >> one of the light from mario draghi dutch lions from mario complainingo stop about negative interest rates, what would you say to him about that argument? >> my advice to him would be to make sure everything --

everything each of us is doing -- >> you could not take more negative rates? >> not good for the banking businesses but you need to look after the macro environment and therefore some of the decisions which have been taken towards this direction. >> you anticipate more easing from the european central banking? >> know, factoring conservative macro interest environment which is negative interest rates throughout the three year plan. mark: simon french still with us. and michael moore joining us. love this chart. paschi oversold, overbought come in one week. i wild ride.

why have we seen such volatility in the share price in recent days? optimismve seen some around the plan and capital raising but all about it seems to be the potential for the capital raise and the interest findat and the ability to some major stakeholders to serve as the anchor. mark: execution risk? >> basically. mark: we need to know who those investors are. >> the confidence -- the confidence and that is not what it was days ago but people are looking for them to wrap that up weekly. mark: if you needed to show -- wrap that up quickly. mark: this is their nonperforming loans soaring and italy. versus italy in general. thevo --deutsche bank

speculation is increasing as that of tomorrow come is a possible they are looking at alternatives to paying bonuses in cash? >> they are having those conversations according to our reporting. we have seen this in european banks in the past, credit squeeze did that after the crisis and they have done it cents, it worked well. you can boostg your capital position by making a move like this and analysts have called for this, reducing the bonus pool. mark: n/a back were more row might be low, can further desk in a bank were more row might be low -- that -- we will see what happens tomorrow but given the talk in the market by u.s. banks have taken some share in the trading business from deutsche bank in their

investment banking rankings are down a little bit this year. that is a concern that they would lose some revenue and high-performance. -- lloyd's ofay london today come in the takeaways from this lenders? >> bogeys on the continued pressure from the interest rate -- there is the increasing focus on the capital ratios, especially at lloyds you saw it with people wanting some capital return and you saw questions over the capital ratio and the potential for dividend increases. mark: good to see you. do you think the negativity toward the optimal negativity toward the banking industry, simon, you are an economist, do you think it has reached its

trough? >> i think it has, you are getting to a point where people can see through the regulatory headwinds, particularly in terms of the legacy, not for reorganization but as a sector as a whole and focusing back on the fundamentals. the point around the shareholder return and looking at how the interface between tier one capital and dividends and the voice guidance was explicit on this, -- the lloyds -- negative rates certainly not popular, is that message finally getting through to central bankers? >> it has but it will not change there by figure. -- it will not change their behavior. as of aggregate, taking into account debt, the benefits, the

upside, nothing as unequal as unemployment is the phrase mario draghi comes back to. stay with bloomberg. we will bring you next the world economic foreman's desk forums gender gap and apple is down over 3% in premarket trading after its first yearly sales declined since 2001. european stocks falling for a third day, investors looking at earnings, earnings disappointing today. we bring you all the market action. ♪

♪ barton in london

. the gender gap could take 170 years to close according to the world economic foreman desk forum. due to imbalances in salaries, labor force participation copy to view you let annual rigging of gender equality country saw the us-led 17 places, this year when the race for the white house includes the first ever female presidential nominee for thejor party, let's welcome head of gender initiatives at the world economic forum, 170 years. for economic parity between the sexes, how do you work it out? >> we have been doing this for 11 years and since the financial crisis, there has been slower growth in many economies but the on that we think there are two things affecting this. downumber slowing things

for major test economies, the start of the fourth industrial revolution and what it is doing to labor market and what used to be lower to mid scale white-collar jobs that tend to employ a lot of women's whether sales word ministry to functions, those are getting automated. women are not as well prepared for those roles that are growing which are a computer and mathematical functions. the second thing is scum and most advanced economies, there is not the care infrastructure that is needed for families, whether single income or dual income whether to combine work and unpaid work responsibilities. mark: what does this mean for inclusivity, economic growth? >> women are one half of the telik high skilled anywhere in the world and that has been the case for the entire decade we have been measuring this and if you're using only 60% of that talent globally as compared to men, you will be losing out on about half of the brainpower,

the innovation power available to the world which will be a drag on growth. mark: who are the best countries when it comes to gendreau -- gender equality? >> the nordic country are the 80% of the gap being closed but even they have not reached parity. mark: who are the worst? is there a list of shame? among developed economies? >> a very bottom, pakistan and yemen but even a month the advanced economies, some performs low, japan, korea, and the high income countries like saudi arabia or kuwait towards the bottom. mark: what are the nordic countries doing right? >> they have built equality into their growth strategies, that is something they are following across the board. part of have made care their public agenda trying to

provide the infrastructure, not just in terms of maternity leave but beyond that and putting in place maternity leave, a gender equal approach and providing a public infrastructure for child care and elder care that does not exist. mark: education is important, technology, engineering, and math, still not popular with women, why is that? >> it depends on where you are come in north america and western europe, a bigger gender gap than in the middle east and certain parts of africa and in certain parts of asia. these regions, western europe and north america, will have to put a lot of effort if women are going to keep up with where jobs are heading. mark: how does hillary clinton if she wins the president the, change all this? one ofu.s. would become the countries that currently has a female head of state or federal government and out of all of the countries that we

have been covering, only 65 in the last half-century have ever had it e-mail head of state. state.and female head of -- had a female head of state. mark: do you notice changes when theresa may came to power? there were more women chosen in the cabinet, more females chosen in key position, do you expect gender equality to be pushed up the agenda if hillary clinton wins? closed as ofas june 30 so we are not capturing that yet but whether men or women are in charge at the very top, they need to take more conscious decisions on who is representing one half of their population and there is a lot of

benefits for that. indio, the countries that have more women in politics are also less unequal societies economically speaking. distributiontter of wealth if there are more women in politics. mark: thank you for joining us, fascinating. the head of gender initiatives at the world economic forum. up next, apple reports its first revenue drop in 15 years, more on the numbers and the holiday season forecast next. ♪

>> we have normal business in rolls-roycember two is the most well-known british rolls-royce is the most well-known british brand that truly belongs to britain so there are no contingency plans. i am very much in the belief that we need excellent trade relations with all sorts of countries worldwide and that is my hope that when it comes to brexit, that these trade relations are in excellent shape. mark: the chief executive of rolls-royce telling bloomberg the carmaker has no contingency plans for brexit.

i am mark barton in london. let's get the business flash. lloyds banking group has posted a 15% decline in third-quarter profit, pretax profit fell to 811 million pounds is britain's largest mortgage lender took a one billion pounds charge to compensate customers who were wrongly sold loan insurance. it back as taken more than 17 billion pounds in charges for payment protection insurance over the past five years, more than any other major british lender. sent in their said profit was little changed in the third quarter. net income rose 0.9% to 1.7 billion euros. -- earnings word for airbus before interest --

as it spent money addressing production delays to his latest white model body fell behind on single aisle deliveries and severed a drop in helicopter sales. sweden's wallenberg dynasty has tightened its grip on ericsson by moving a trusted executive to leave the embattled network it meant maker. -- equipment maker. he will take the new role on january 16, taking over for the acting ceo since july. ericsson shares trading higher this morning. --bayer's third quarter profits unexpectedly grew, earnings before interest, taxes, amortization, excluding some costs rose 6% to 2.6 8 sciencesuros, crop

which will probably replace health care as their biggest billion after it's $66 monsanto takeover completed, shown little growth. third-quarter revenue at the french luxury goods maker has topped estimates as strengthening demand for gucci handbags and fashion led to the fastest growth in more than three years. 10.5%, surpassing estimates for a 7% gain. wall street biggest banks face increased scrutiny from regulators in a bid to avoid a repeat of the wells fargo scandal. formal request for information has been received with on-site sales practices about to be reviewed. that is the bloomberg business flash. mark: apple shares extending their decline in extended its first annual sales declined since 2011.

is apple failing to capitalize on samsung's woes? >> that is the worry because this is the perfect situation as they head toward the festive time. they have not one of their key competitors in the market, bs seven withdrawn from samsung -- the s7 withdrawn from shelves. they warn that profit margin may come back a little bit from the previous year. the shipments have already fallen in the past quarter or iphones, revenues have fallen an average selling price also fall into $619 per phone. market beted into the slightly cheaper market which has dampened the sailing price even though they say this will

recover, overall, there are key concerns as they head toward the festive time. , youhart on the bloomberg type in 4510, we are seeing a decline in the white is a decline in shipments of iphone and in the blue is a decline in revenue from iphone. the iphone is still there killer product. mark: what about china? to what extent is apple losing his luster in the world's second-biggest economy? significantly, down 17% in terms of sales for the full year and a 30% collapse in terms of revenue for the previous quarter. not all going well in china, they have cheaper competitors who make very high end, luxurious looking phones.

a competitor have had other they are having some problems when it comes to china is apple. tim could -- tim cook said he was bullish on china but let's look into their next killer product, a watch that has not done well, it meant to be the new type of product that apple was bringing to the table. it has not sold in the way they wish. the hardware produces in the car unit becoming a software, they talk about tv content in this previous earnings which they say is a great opportunity and they are investing heavily in machine learning and r&d and maybe m&a is on the agenda but at the moment, we want to see organic growth coming from the world's most viable company and it does not seem to be there -- valuable

company and it does not seem to be there. great stuff, thank you for joining us. look at our asset board, the stoxx 600 carrying bloomberg dollars spot index and crude oil down for a third consecutive day. kering highest in 15 years. bloomberg dollars spot index for a second day on track for its monthly gain of 2%, the biggest since may. bloomberg surveillance continues in the next hour. ♪

tom" the stability and instability of the global

system, can the natural markets withstand the best efforts, the new religion of the stock market, with little growth, can cost cutting, sustainable market, we look at apple. counting,til, who is mr. trump has good news. good morning. this is "bloomberg surveillance." i am tom keene. towards mr. trump. >> given the overall lead for clinton and belief she has had in many of the swing states, this perhaps throw some of that into question, he is trying to put obamacare front and center. we will see how that lays out. best plays out. -- plays out. theresa may want mark carney to stay on as governor of the

bank of england according to government officials. month, shes criticized loose monetary policy two-- they moved to mark -- say that the words were clumsily expressed. the ruling party in japan wants to change the rules to let the prime minister stay in office for a third three-year term, if the move is successful, he would be in power or after the 2020 olympics in tokyo. rivals in his parties have not gathered much support and the main opposition party has not offered a credible alternative. andgovernment of venezuela the opposition controlled congress are digging in for a protracted fight, nationwide protest against the president are set for today, both sides accuse the other a staging a coup. congress has approved a measure for him to testify next week and opinion polls show most venezuelans want him to leave.

, a new bloomberg politics poll has donald trump with a narrow edge in florida, a battleground state. 45% tohillary clinton 43% among likely voters, third-party candidates are included. i am taylor riggs. this is bloomberg. tom: let's get to the data and we will talk politics through the show, 13 days to go until the election and 13 ideas on data. it is a quiet day. the vix moving up. difficulties as we try to bring up the data, i could go to the bloomberg, there it is. futures negative, anthony is looking at the euro. he continues to look at oil, he was transfixed on oil's decline. let's go faster to the next

screen. the vix 14.10. sterling with a 121 handle them anthony noticed it when up to 122.08 and a brent. neverhony our director far away from the foreign exchange market. european equity markets down by seven tenths of 1% and apple not setting the right tone in terms of earnings, european stock step for a third day and stocks down, oil down, one of the big teams of this morning. , bouncingof 122 yesterday -- the pound at 122. -- the pound -- tom: anthony celebrating a cleveland indians 6-0. bloomberg, after an essay on project syndicate. the green arrow and the red

arrow is a decline in united kingdom manufacturing since the middle 70's, from 20% of the economy to 10% of the economy. the quite serious is manufacturing production -- white series is manufacturing production adjusted for inflation. what is done in is that the red circle says it all -- what is stunning, the red circle is the depreciation low of 1984, look how linear, how strait this series is on the long-term collapse of manufacturing in the united kingdom. that is an extraordinary statement about the dynamics of sterling versus the help sterling will give exports. >> because of the changing role of the u.k. geopolitically over the last hundred years, talked to experts and it is difficult to know how fast you cast your might to work out what is normal

for sterling it has declined so much over the years. chart, we talked about inflation yesterday, whether j.p. morgan these it in the u.s. and they do not. that leads them to think the treasury market and the dollar maybe do not have too much further to run. another chart today, this is in relation to jeffrey good black, he was talking about how he ares tips, now saying they for winners because he sees inflation for winners. not buying in the norma's amount but enough in a u-boat yield environment -- but enough in a low yield environment. let's get to our guests. great to have you both. inflation, the oil

prices down now but the general move has been for inflation to go higher. real isificant, how this fear of inflation we see in some markets, and some developed markets, even that lots of central bankers say that if it has to do with oil we will let it run hot for a while? will doentral bankers that, most people expecting a rate rise in december in the u.s. and we will probably get that but a quarter-point will not make a great difference to companies or individuals. appellation area expectations are what matters and they seem to be going up a little bit. you have forces playing out, still very big deflationary forces, globalization not going away but you have oil no longer providing a deflationary shock, maybe if the of inflation. in the service sector, wage rises, inflation in certain areas. we do not expect a big pickup in inflation but given expectations were so low, perhaps where they

moved up to is realistic him a bna 1%, 2% range. -- maybe a 1%, 2% range. >> the inflation story and what the fed does around the, how excited can you be about emerging markets assets? do you fear rates go up too fast? an adjustment, the base effect from oil, credit is growing in the u.s. but not strong anywhere else in the developed world and you have a shift in the mechanism of monetary policy away from quantity targets towards yield targets in the case of japan and from gemoved from tv -- -- qe. overld agree, we have hanks up excess savings around the world and excessive debt and capacity. if anything, the excess capacity

being added to in certain parts of the world including china. there is a speed limit or level limit to how far bond yields can go. for emerging markets, there will be an adjustment but not that severe. tom: thrilled to have both of you. iss is what "surveillance" all about, going with a theme and getting smart guys on it. given where we are in the financial system, is it a good time to be diversified or a good time to be more focused on what i do with my wealth and assets? >> from our perspective, we are just trying to find a good set of companies we can understand the underlying growth and then look at the evaluation we should pay for their growth. in a world where growth is hard to come by, the run not that many businesses that can growth sustainability. rather than covering the

waterfront, we are trying to thata number of businesses we really believe we understand and can see how that growth will play out over time. easier said than done but if you can find a business you understand that gives you a greater conviction to take a decent sized position in. if you want to get the market. tom: this goes back to invesco and the basic idea of high conviction, you have to have a believe within the mills from we are in. what do you need from janet yellen, mark carney, draghi, the rest of these people to give you success in focused high conviction? >> i think growth is the key. what i want out of the central bankers is stability so we understand the rules of the game and we can do some fundamental narrative. what we do not want is a lot of change, unpredictability. tom: your thoughts on that?

>> i would tend to agree. where in a delicate phase monetary policy in the u.s. is in a tightening mode but a dovish tightening mode and that is trying to manage the transition in a way that does not destabilize financial conditions too much and risk derailing the recovery. we will continue to get that from the fed i think, we think they will continue to be quite concerned about financial conditions and financial shocks because of the importance of balance sheet conditions in corporate, and governments, even in household and financials for the u.s. and other parts of the world. with the the same boat balance sheet issues weighing things down, generally. stability and continuity are the watchwords. tom: it feels like a look ahead to next year but way too early in october to do that, we will

look at financial instability and a lot of this came out of the work of deutsche bank. he was adamant about a next year of financial instability. he will be with us in our next hour. from london and new york, this is bloomberg. ♪

>> this is "bloomberg surveillance." >> investors disappointed in apple forecast for the holiday season, the revenue projects and just barely beat estimates, apple shares lower in after-hours and premarket trading. apple reported its first annual

sales declined since 2001, the revenue in china fell 17% in the fiscal year. lloyds banking group said third-quarter profit fell 50%, the largest mortgage lender in u.s. paid customers who were wrongly sold mortgage insurance. over the past five years, they have taken more than $20 billion in charges for the cayman protection insurance gamble. deutsche bank looking at alternatives to paying bonuses in cash. according to people from the your with the matter, executives may give hikers stock or -- there is concern -- bankers stock. the u.s. justice department asked that it pay $14 billion to settle a mortgage on investigation. -- bond investigation in a you are sticking with banks. >> >> shares in europe's oldest bank fell today, investors are looked for two back his capital

raising plan, i spoke with my colleague to marco marelli. >> investors proactive in approaching either the bank or investment banks working for us. could engage, we in former talks for obvious reasons. that is what we will do. >> let's talk to michael moore. he joins us in the studio. story, art with this big story, a lot of detail around yesterday, the markets came to hear, who are these anchor investors have to be, they do not have any information on who they are but they say the phones are ringing. >> at this point it is just interest and the market wants to see anchor investors in place to have more confidence on the

ability to make that capital raising happen. we have more details on how it might be laid out, some debt to equity but the market wants to see this get done because it is a tall hill to climb. timing with the italian referendum coming up later this year and the way he kept using the assumptions we have made having conservatives because people are asking question about whether the plan is deliverable. >> seeking that much and profit, they have only asked for that wants, the market looks at all the issues it is dealing with now and saying a couple of years from now that is quite -- >> a long history. tom: i was surprised at the deutsche bank announcement on bonuses and stock, they are kidding themselves. moore and his team

are on deutsche bank, i will call this the vanilla credit default swap, panic in 2011. up we go again and critical -- critically, as a stock, 11 euros to 13 euros, they are in no way all clear, are they? >> no. the capital questions are still there and ultimately it comes down to what the doj settlement looks like. theythe issue on bonuses, are facing challenges, one is the #on the capital front -- num ber side on the capital front and not wanting to lose people are damaged the revenue side of the business. tom: do you have any idea, the general business of german banking? is anything getting done, away from the fines, are they making

money? >> the german banking environment has been tough for a while given the low interest rates and the number of banks that are competing with each other. that is why deutsche bank many years ago moved outside of germany and has tried to be an international investment bank. you have seen them on a couple deals recently, so deutsche bank is active in the markets but u.s. banks have talked about taking share from them. we will hear more about that tomorrow. tom: you focus a lot >> -- you first -- focus a lot on mergers and acquisitions, where do you seek m&a taking place in european banks? >> you will see it across the board, money is cheap and growth is hard to come by, companies are looking to try and get growth and if they can borrow

cheaply, not hard to make an acquisition. the challenge the banks face, rightly said by michael, the banking business -- that is not enough to move the needle and the rules of the game with the banks keep changing which is why it is so hard to invest in them, you do not know what the capital requirements will be, they keep changing the rules, what you can use as capital changes and ownership structures come in europe you cannot go pan-european, these things make it very hard to grow for banks and hard to invest in. tom: we have a lot to talk about. spence,p, michael always a great pleasure to speak , any number ofor topics including the state of his italy. from london, new york, stay with us. this is bloomberg. ♪

morning musthe listen, this wednesday, michael bloomberg it are editor-in-chief spoke with the morgan stanley ceo during the bloomberg year ahead even in new york. here is their take on the u.s. election. >> it goes too long. if you dig most countries around the world, election's are in a short timeframe -- if you take

most countries around the world, elections are in a short timeframe. you go to bed every night listening to these voices telling us about the u.s. elections, get it over with. it goes on for too long is gorman's view, time for emerging market currencies to be equipped around. -- whipped around? >> the challenge for emerging markets reflected in both brexit is thatrump phenomenon globalization is speaking, let's hope it is plateauing rather than going downhill from here. em and the big risk for mexico but not just mexico. about the idea that the donald will say to mexico, you are fired. and we will do much more stuff on shore. bring jobs back and capital

back, make america great again, whatever that may mean. with the donald trump agenda, hard to get a clear handle because he says so many different things but if you try to parse everything, you get more restrictive trade policy, more restricted immigration policy and looser fiscal policy . >> he would move away from the peso. tom: a quiet last couple of days and a new bloomberg poll shakes that up to a fare the well in florida. i get the idea of mexico and the focus even within the debates but how much can a new president effect emerging market policy and economies? do they really have power to affect the direction of ian goodwill --em goodwill? >> indirectly the president has a lot of capacity to affect

policy to the rest of the world by changing u.s. policy, he has discretion, the executive branch has discretion over trade, immigration and over treaties. not mean he will slap these enormous tariffs on imports from china or mexico or build a wall. it does raise the prospect of significant changes in those arrangements which would affect everything. tom: let's come back. 5:00 p.m. tonight, as we go to the elections. mark halperin and john heilemann with all due respect to good morning. ♪

♪ thrilled you are with us. it is a gorgeous city, new york, finally getting a little bit chilly. all of new york and washington across the nation looking self

to florida and a most interesting poll. here is taylor riggs. >> breaking this morning, a new bloomberg politics poll shows donald trump has a narrow lead in a must win state of florida. the republican presidential candidate leads hillary clinton 45% to 43% and third-party candidates included, trop is getting support from independent voters, this poll stronger than another recent surveys in the state. if donald trump wins the state mitt romney one at florida, he would still need 35 electoral college votes. an advertisement invokes one of the most powerful political attacks in american history, showing a nuclear mushroom clouds and then being questioned about atomic weapons, it recalls against barry goldwater and is in ohio and

paid for by a bill bradley. pentagon is urging the to try to recover enlistment bonuses paid to thousands of national guard members in california. the los angeles times said that recruiters were under pressure to fill the ranks and the paper said some improperly offered bonuses to soldiers who reenlisted. many are having to pay back thousands of dollars. the philippine president wants all foreign troops out of this country in the next two years. he said the philippines will survive without assistance on the u.s. added knowledge that without u.s. help it will be a lesser quality of life. the london housing market will feel the impact of brexit next year according to the center for economics and business research home prices will fall 5% -- 5.6% in london in 2017, nervousness and uncertainty starting to show , curbs on migration could slow demand from international buyers.

global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. >> thank you. the china currency has tumbled this week but the speed of the yuan -- of the recent slide will slow and policymakers will step in if bearish bets increase, according to a bloomberg survey of foreign exchange traders and analysts. i have a chart that shows the scale of the mood in 2016, that is the you want and blue against the dollar and when you put it against currencies, it downplays the move. this kind of move against the dollar, at some point, seeing recent market history, were talking about january and august of last year,

those were times when china seems to be losing control and a markets were rightly afraid of shocked devaluation in china that one of exported a severe deflationary shock around the world but since then they have tightened up capital controls or the enforcement of the existing controls. theou show, they change focus of the domestic market away from bilateral dollar china across to the trade weight. as far as that goes, it is working, they have internalized the problem but there are still issues, capital is bleeding out of china rather than hemorrhaging out and credit has been growing much more strongly than before. >> do you go with it there is nothing to see here description of what is happening with the chinese currency? it has managed and it is not previouslyhas then dustbin previously? -- has been

previously? bechinese growth seems to stable and from that perspective the chinese are quite comfortable with the currency weakening on a slow and steady basis, happy to be more competitive in the global world and everyone else in the world seems to be a race to the bottom, the u.k. leading and some of the others happy to see their own currencies weaken. they are happy as long as it is not associated with growth slowing. kingdom -- united >> i wish it would be so lucky as to rise like a phoenix from the ashes. i think it will be a complicated time. there will be important changes in the trading arrangements, the investment environment, and all

because of this issue of immigration. thebig danger is that relationship between the u.k. and the european union is one of fragmentation across the channel and that is a risk that has spread in other parts of the world. what will happen is we will move from this posturing around the hard brexit or just brexit, nothing in between which is the european position to a time when cooler heads will prevail and something more rational can be negotiated. that has to be the central case but there is this tail risk of significant changes in the arrangements that could be quite disruptive. tom: within this dynamics, there is an idea of what do i do with multinationals, do i want to invest and expressed my emerging markets self through the u.s., u.k., g7 multinationals, or do i have to invest direct? >> there is a lot to be said for

fighting good quality businesses with asset -- access to emerging markets but if you like western principles in terms of governance and finances. the challenge is the environment was great when you had a stable domestic market and you were recycling capital into the emerging markets and where those markets were not as competitive as they are today. the easy money will -- from the early 1990's, much harder today, the big multinationals, when they are in china or philippines , there are high quality domestic players, not just competing at the low end but increasingly at the upper end so you need to be careful that you are not looking at something where the idea looks great but the underlying growth of demand is strong but competition is tough. ,om: we will look at apple next i got my e-mail last night that my iphone 7 is coming, so exciting, and e-mail finally.

i am getting it finally. the state of his democratic party, that will be interesting at the 11:00 hour this morning.

tom: we welcome your beautiful evening, in asia, crossed the pacific rim, good morning to all in hong kong. what a gorgeous shot. that is spectacular. a shot all day but we have to talk about apple. let's get away from the usual product malarkey and talk about basic ideas.

of the script, the the saleportant to site, why is it grilling mr. cook on the three-year and five-year vision? >> you need to manage to a vision, and apple is at a point where the core product line, the iphone maturing rapidly and index the question, what is next -- and index the question, what is next? a car, home assistant? there was a question on the call , to tim cook, and a caller said, you have not expressed any sort of idea about where your headed three years, five years down the road? tom: it looks like a steel stock in pittsburgh, 10.4, why do i need a vision if i'm the

cheapest blue-chip on the planet? >> because investors live does look ahead 12 months come 18 months, the iphone has legs through that time but beyond that you will get eurasian because the market is maturing rapidly on a global basis and competitors -- it is very topical because i have a chart that shows the declining percentage shows they are seeing in china. while china is the focus now, on the call, with analysts, he was trying to move things on to india but how much of an issue is china? >> a big issue and the competitive issue more than anything. they talked about very strong iphone sales last year and tough comps. the reality is you are seeing these smaller competitors doing a really good job of gaining

share in that market rapidly. they were saying yesterday that the company has no cap on how much it was then if the right acquisition present itself. we talked about at&t and time warner and whether we will see this business or other tech businesses weighing in on media content, did that get airtime with apple yesterday? were angling towards media because they see it as a natural fit for this company that has roots in music. they have been successful there and i think it is a very good marriage with the apple brand and frankly tim cook is not rule it out. tom: i rarely do this but it really works here, the famous screen of the bloomberg and i do not care if you cannot see it, just know that apple services are going from here to here in john butler, a $13 billion revenue slice up to 20 billion,

a 20% plus growing business, how is that prized by the market or is it just an add-on to the iphone frenzy? john: people are increasingly giving them credit, it is still small, less than 15% of revenue, people are hoping it will get to a size where it begins to move the needle but we are not quite there. tom: i want to see if i can bring up, let's bring up the gloom, a terrible chart. a horrific chart. what is your enthusiasm, you do not do buy, hold, sell but it has been an iphone vector, ipod sector from 24, is the factor done? john: they need a new product, express vision, if i selected the most critical weston on the call it was the one at tim cook about the three 25 your position, people are not seeing

beyond the iphone and they need to. >> go back to the chart, anthony, get out of the cleveland indians box score. a little bit flatter, that is the change, the vector change in apple. >> loving your artwork. in cars,look at apple, very creative stuff, are you looking for the new why buster -- looking for the new blockbuster, the next big thing which they have not set out? >> there are challenges, we are not getting a strong vision from tim cook but i do see opportunity, services, that will grow significantly and the company can see a number of alternatives it can do but if it will do services within its own ecosystem, it probably needs other things. i would think virtual-reality

could be an easy build on top of their existing handset business, high in business, high-quality business. if they can do that and they are the one group investing heavily in it but we have no idea of what they are doing. facebook,, netflix, we have seen what they are trying to do in that area. this one will come out of left field. >> tim cook says he has big opportunity in india, that is where he's going for his next big push, do you have good news for him? >> it will present opportunity for apples and other company -- apple and other companies, india is not china is the challenge. per capita income is much lower. it is growing but will not grow nearly as fast as it grew in china for a variety of reasons. farmnot sure betting the on shifting growth from china, if markets around the world are

too saturated, india will help but it will not be enough. cash, have $62 billion in they built up cash to a big number, was there talk about m&a or enthusiasm, not to buy time warner, but to do something else? >> people are looking at this name and saying they need a transformative acquisition, the services business is promising but i think you can buy your way into growth a lot more quickly than you can build your way into it and that is what people are looking for. tom: thank you john butler. we will drive this conversation forward, looking at time warner and telephone, we switch gears. we will discuss apple in the next hour. worldwide, this is bloomberg. ♪

>> tingle with 41 in london. have a look -- 10:49 in london.

let's get the bloomberg is no/. profit fell 21% in airbus, the french-based guppies been money ramping up production of its a350 wide-body plane to make up for delays. toes of helicopters declined airbus is expected to cut jobs as it scales back output of the a3 superjumbo. chipotle mexican grill had a bruising third quarter, sales felt worse than expected 22% and profit down 95% from a year ago. they are trying to come back from a series of foodborne illnesses. the chain forecasting growth in the high single digits next year. that is your bloomberg business flash. >> thank you. let's talk about the u.k., the town recovering from its lowest level since the flash crash, the bank of england governor mark carney says there are limits to officials willingness to look beyond an overshoot of their inflation target, that helped

the town to recover yesterday and morgan stanley ceo james gorman says his bank will be forced to move some employees out of london as a result of brexit. he spoke in new york. >> nothing good about brexit. we love the rule of law in london come our folks like working in london and you have the ecosystem, the infrastructures, the tight scum of the plumbing some of the accountants, legal firms, public relations, we will have a headquarters in europe. we will probably have to have more capital and liquidity trap in those legal entities. none of this is good, we will have to move employees and their families from london. >> the banking sector, with of -- to theot brexit conversation. you see much more opportunity in the m&a world?

is aom a cost perspective, foreign company looking at a u.k. business and seize opportunity, that got a lot cheaper, you will see more of that. the chinese companies looking at the u and japanese companies, softbank looking to buy contrast the new administrations approval of that deal with what you are seeing, clearly there are questions raised as to whether they will get through and the european approvals may not be forthcoming. >> an interesting line to explore, a graphic that showed the different countries that have invested in heathrow, big foreign funded investment project that was approved yesterday, we will see if it gets built but it was backed by the u.k. government. point, you contrast that

with a little bit of a rhetoric we have heard from the u.k. government, the conservative party conference, your thoughts on how much the rhetoric is out step with so far what we have seen? >> a political game that reflects the contradictions in the brexit campaign. the referendum campaign, the brexit tears campaigned on it more open and globalized visioner in free trade of the u.k. and latched on closing down the country to immigration. this is a central contradiction, how do you reconcile a more closed labor market with a more open economy? that is what was on display at the conservative party of thence and in some contradictory behaviors and the rhetoric versus what is being done and approved. that will go on and people have to separate those things and hopefully the u.k. will remain open. if we close the u.k. down,

everybody will be worse off in europe will be worse off. eventually we will find an equilibrium between the rhetoric and reality but it will be a challenge. reality for your london, they will build busy airport, it takes one million years to get it done, we will go through this and this, what is the field on london as a financial capital? >> london will continue to be a financial capital for white sometime. you will see the growth of certain areas of european financial services continuing to go faster in different parts. you do not see wholesale moves, weaker banks saying we will do this or that but the reality is that is hard to do. places like luxembourg, frankfurt, investing in a number of areas and people will be hiring their. and growing their rather than the city but not wholesale change overnight. with the view you

have on gdp as we close out the theme today, financial and instability. will we be near global recession ? >> i think we are heading to a slower growth path, we will not tip over until a general recession, before that happens, there will be more easing. wouldentral banks that ease -- there is the prospect of some fiscal stimulus, fiscal policy has become less tight and continental europe and probably about to become less fight in the u.k. -- tight in the u.k. trump and clinton seem to agree on fiscal stimulus, not that extreme but at the margin all these things will help. the downturn in emerging markets

from the time being, the significant slowdowns, deep recessions in brazil and russia, pressure in south africa probably coming to a finish. we are slowing down but probably not going over the edge. tom: this is been great, thank you for getting our day started. we will continue the dialogue, joseph quinlan will join us from bank of america, thrilled to have him on to pull this into the u.s. equity markets and we will speak to someone from georgia make on your many instabilities. another hour of "bloomberg surveillance." it is a beautiful morning in new york. ♪

this morning, the stability, the instabilities of the global system.

can the financial markets withstand central bankers and politicians? the new religion of the stock market. with little growth, can cross cutting sustain a bull market? we look at apple as well. it is 13 days until donald trump -- it is 13 days until -- who is counting? donald trump is counting on florida. i am tom keene for it with me, birthday girl anna edwards. anna: the secret is out of the bag. there.eave it fascinating news about florida. we will see of the markets managed to maintain their ambivalence toward the u.s. elections. if we start to see donald trump doing better in the swing states. tom: the last few days have been sort of a mess. maybe they get clarified by the new bloomberg poll. here are the details, taylor riggs. taylor: the new bloomberg donalds poll shows that

trump has a narrow lead in a must win state for him, florida. 45-43 in a race when third-party candidates are included. this poll isn stronger than in other recent surveys in the state. the statesns all mitt romney won in 2012 and florida, he still needs 35 electoral college votes more to win the election. carney toy wants mark stay on as governor of the bank of england, according to government officials. earlier this month, she ,riticized monetary policy moving to reassure carney that the words were expressed. the ruling party in japan wants to change the rules to let prime minister's stay in office for a third three-year term. if the move is successful, shinzo abe would be in power

until after the 2020 olympics in tokyo. the liberal democratic party has not gathered much support, and japan's opposition party has not offered a credible alternative. the government of venezuela and the opposition controlled congress are digging in for a protracted and controlled fight. both sides accuse the other of staging a coup. congress has -- opinion polls show that most venezuelans want maduro to leave. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom: i want to get to the bloomberg. futures at negative nine, euro at 109. two days over the last per the vix, 14.5.

here in europe, we are down on the stoxx 600. apple not setting a great tone for equity market -- nymex also leaving some companies. that is the story of the day. bounce in thef a pound. some of the things mark carney has to say, giving some support. tom: this is one of the coolest charts i have done in a while. syndicate, we have overlaid two ideas. the green arrow is, 28% of of theturing, 28% economy. it is now 10%, way down here. it is amazing. the series shows manufacturing, production. i have adjusted for inflation. off the weak sterling of the

1980's, it is shocking, this linear, straightforward decline in manufacturing, in the united kingdom. which is somewhat akin to the united states. it is amazing, the manufacturing decline in the united kingdom. anna, what do you have? anna: the industrial strategy has been much mention since theresa may took power in the u.k. i have a chart about inflation. inflation in the united states. he saysalking about how they are winners. he says this -- he sees this kind of inflation as a 10-year breakeven. how does that way in to the investment ideas at this hour? tom: as we did last hour with arnab das and mark phelps, across two different platforms,

we are thrilled to bring you dominic konstam of deutsche bank. coughs] tom: i have the plague. joe quinlan is with us as well. class have full? >> it is not dead, tom. we are still plodding along. global growth is rebounding. holding upr world the stock market, dominic konstam? and that equals acid buildup and equities? : if interest rates rise in a meaningful way, the risk asset stock market would be resolved to a correction. tom: you have to be kidding me, joe. his world of low interest rates is the oil in the engine that

makes m&a run, right? joe: absolutely. no doubt. the low cost of capital is driving huge triumphs in m&a. you reaffirm the instability of forward on this october day? everything isnk relatively stable, but there is this effort to add risk premium back to the bond market. u.s., haswith the continued perhaps with the boj and the ecb, and central bankers , we have a measure of risk premium that has been extremely low. it has gone up a bit, and i think the central bankers like this a little bit more. the reason is they maybe want to take some of the potential froth out of the risk asset markets. that means 10 year yields can go to 2%. if it goes much further than that, it might become a bigger deal. anna: you say low interest rates

can be the fuel behind some of the m&a we are seeing, also fuel so givemerging markets, us the numbers behind that. the emerging markets are terribly unloved in the last five years. you see rotation out of developed markets into south korea, turkey, brazil, russia. you will see the rivers flow with a search for yield. even if the fed does raise rates, it is minor relative to the copious amounts of liquidity still out there, coming from japan, ecb. there is a lot of fuel for the fire, for the emerging markets to continue to rise. anna: what is happening to the global markets within your title? see as opportunities in the emerging market that you cover? dominic: i think emerging markets in the energy space benefit tremendously from higher

inflation expectations. emerging market credit is more like investment-grade credit. i think right now, if the fed wants to run things and try and get inflation expectations high, there is great opportunity from the equity sense. tom: we will go to marty schencker on this in a bit. it is almost a separate world of brutal moves, and everything else is dampened and quiet. if i bring up sterling, which is a solid two-plus standard deviation -- then down we go, the deutsche bank call, hsbc even more. dominic, this is a brutal move. do we see more brutal moves, or is this singular to the united kingdom? dominic: there will always be a scope for brutal moves because i think there is not a great diversity of positioning in the investor base. -- i think positions

are relatively complacent for a long time, and that is why you get the brutal moves. is not there right now. is there a big bet in a bull market, joe quinlan? investors are still very reluctant. they are holding cash. they want to be in shorter durations, munis. that prolongs the bull market with some added fodder. anna: dominic, tom was talking about what is happening with the pound and u.k. assets. people are asking about when we get parity on the pound against the euro. is this all politics? is there anything the ecb does here that makes a difference? dominic: we do think the pound is going to continue to go down and people will try to sell it on any sort of meaningful uptick. yes, it will take place in the

next six months, by the first half of next year. the issue is how hard the brexit exit would be. it looks pretty hard at the moment. tom: we will talk with dominic konstam on the backside, particularly about dan -- particularly about stan .ischer's speech yesterday we hope you visit with us, 12:00 p.m. today. the laureate from and why you -- the laureate from nyu, michael spence, will join a spirit from new york and london, stay with us. this is bloomberg. ♪

tom: there is one person awake

in the nation's capital. marty schencker will be with us in a moment. there is a beautiful -- there is the beautiful washington canadian and the city. let's get to our "bloomberg business flash." taylor: investors are disappointed in apple's forecast for the holiday season. the revenue projection barely beat estimates. the world's most valuable company reported its first annual sales declined since 2001. revenue in china fell 17% in the fiscal year. lloyds banking group third-quarter profit fell 15%. tookargest mortgage lender the $1.2 billion charge -- over the past five years, lloyds has taken $20 billion in charges for the payment protection insurance scandal. such a bank is looking at

alternatives to paying bonuses in cash. according to people familiar with the matter, deutsche bank may just figure in to its non-core unit. the u.s. justice department has pay $14 billion to settle in mortgage bond investigation. that is your "bloomberg business flash." tom: there is a new poll, a where the, one state national polls are a little bit different. mr. trump campaigning yesterday. i believe mrs. clinton was there as well, a little bit of an edge for mr. trump. marty schencker joins us, arctic executiveour senior editor. thrilled to have you with us this morning. i guess it is a glimmer of hope for mr. trump. if we were to pull pennsylvania right now, would you suggest we see the same vectors for these two candidates? very well might, although i think pennsylvania is slightly stronger for hillary clinton than florida.

but still, it points up to a possibility of a real nailbiter on tuesday, november 8. tom: within that idea is that we came off the third debate, and i saw that your political industry sort of took not a two-day vacation, but there was sort of a letdown. how do the candidates rekindle the excitement in the next 13 days? marty: that is an interesting question. the question is, will external forces create the excitement, whether it is more wikileaks out on hillary clinton, or whether donald trump doubles down on some of his comments? they will be going into the battle down states -- -- the battleground states -- florida, pennsylvania, ohio -- and it may come down to that. even if donald trump takes florida, the map shows he has to pick up ground somewhere else.

is obamacare the kind of issue that could help them? marty: they think so. some of that increase in health costs was baked in and talked about quite a bit. the numbers finally came out, and they are jumping on them. they think it does resonate with voters. is,the question well-educated women -- will that sway them in any way? it is really a question of whether it will. breakdown how this works in a state like florida, with the type of subjects trump has been talking about during this campaign. how it works that he can have such a positive move, compared to a previous pulling, perhaps, in the state. marty: hillary clinton polls way ahead in miami, which is a democratic stronghold.

she does very well among latin voters, especially a number of puerto rican voters, who have reestablished themselves in florida. but in the panhandle, in the north of the state and rural areas, donald trump does extremely well among less educated white males, and that has been the case so far this campaign. tom: one final question, there is an immense tradition of campaigning for his candidate. what is the report we have on how secretary clinton will use president obama these final 13 days? marty: president obama is going to wind up in florida toward the end of this week. campaigning -- it is relatively unprecedented that a sitting president is doing as much campaigning as he has done, and there really is a question of whether it is helping. of the race,htness

you would certainly like to have him rather than not be out for hillary, but you will see him more than any other president in any election cycle ever. tom: marty schencker, thank you so much. we will let you get started your -- with your working day. here is the "morning must-read." i have the things memories of william miller and barry goldwater running against lbj in 1964. quinlan, tough essay from megan mcardle. they had to pick themselves up and move forward. do they do that within gridlock? joe: they can, and they have to get paul ryan. but i think there is more to

what trump has done than the essay may suggest. there is a grassroots groundswell of population that wants to get behind someone like him. trump may go away, but his policies will be with us. hooper, is it a 2% amid that you and peter youer, can we get back -- and peter hooper, can we get back to 2% america? dominic: we can get to 1%. can you get me a bloody mary, please? it is very challenging this morning. we will continue. dominic konstam on negative interest rates. "with all due respect" -- nothing negative there. from london, from new york, stay with us. this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance." anna edwards is in england. i am tom keene, in new york. dominic konstam from deutsche bank, and joseph quinlan, who put an optimistic spin on you need to have courage. it is time for the courage section. bring up the chart, if you would. the lehman low -- dominic konstam had a bad day with the blue circle. that was the lehman low. it was agony. there is the great bull market. joe quinlan, what you are so good at is, when we get those little red, tiny boxes,

everybody falls apart. the days of the bear market are over. we have 7% and we all fall apart. how do we sustain courage gekko joe: by letting our corporate sector to do what it does it we has to be innovative, be smart about immigration, be open about it trade and investment and capital flows. a big issue now in terms of cross-border flow. let companies do what they do best. tom: i would say that is even widened that american difference has widened within the last months. with that said is the idea that i need to be in the market. there is a lot of noise out there. do i just ignore it and look at what corporations are doing, nor do i have to look at the noise of dominic's world? joe: you have to get into the good companies that have good core competencies, growing their businesses through smart m&a,

and ignore the rest. historically, i think we are still in the sweet spot when it comes to more global prosperity, middle-class, globalization in general. you cannot ignore the anti-tide of globalization. anna: as we try to tie in competence in investment, and we see such a low level of volatility, the chart shows so many assets --equities, bonds, currencies, commodities -- does that surprise you? dominic: not really. that is a feature of what we are calling the financial repression. the only thing that would change that would be a fiscal upset, let's say. of -- thatt is kind has kind of got to go back down again. telephone and time

warner -- are there battles to come? joe: it will not only be the united states and china, but that is a big deal that will have a global impact. that will be interesting to see. tom: catherine mann at oecd is just adamant about this. no institutions pushing back against it. joe quinlan, thank you so much. we will continue with dr. dominic konstam. buried., he has been we demanded that walter piecyk talk to us about mr. cook and mr. cupertino. -- and cupertino. this is bloomberg. ♪

anna: this is "bloomberg surveillance." london,a edwards in with tom in new york. let's get to "numbered first word news" with taylor. taylor: a new bloomberg politics

poll shows donald trump and a narrow lead in florida. delete hillary clinton 45% to 43% in a race where third-party candidates are -- he leads hillary clinton 45% to 43 percent in a race where third-party candidates are included. 35 more still need electoral college votes to win the election. the european union is signaling a breakthrough is imminent in an internal dispute holding up a trade agreement with canada. jean-claude juncker says he expects belgium's french-speaking region to sign onto a deal later today. that would allow the belgian government to endorse the treaty. in baseball, game one of the world series went to the cleveland indians. recorduger set a series by striking out eight batters. hit a home perez

run. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom: taylor, thanks so much. i was talking with chuck todd of nbc yesterday and he had the best word about the cleveland indians -- grit. we will see where this goes. game two, and you get away with the thinness of the cleveland pitching staff versus the excellence of the cubs. it will be quite good. speaking of quite good, he has definitive notes in the streets symbolize quantitative finance and what our central bankers do. no one writes like dominic konstam of deutsche bank. he joins us today. here is the deal. phil about her, ken rogoff -- , ken rogoff, have

theories about driving negative rates to low levels, and that somehow for a short duration that will be good for the system to clear markets. do you buy it? dominic: i definitely think there is some equilibrium out there where you might require negative rates. what is important is that you need to tax cash as well if you want to keep a viable, private -- tom: that is the point, where you are working, deutsche bank is one example of a viable private sector. here is the chart i used with professor good friend of carnegie mellon. paper at jackson hole suggests there is a territory that you have to get down to. we are nowhere near that, our wait? we are nowhere near the impact that the theorists are talking about. dominic: no, and part of that is the huge reliance on

quantitative easing in terms of the purchases that they are making through the securities market. and also there is a sort of hope for some people of fiscal stimulus, which would perhaps obviate the need for deepening negative rates. tom: when you heard stan fischer's speech the other day, do you share the public service optimism of stan? say that isst great, you have to talk the talk, but the reality is lower for longer? dominic: the problem is you are not getting away from the zero bound -- you are not able to get away from the zero bound quickly or very far. you are one negative shock away again, and iing think there are a lot of issues centrale with the other bank policies such as quantitative easing. that is why it is very easy to have the market think about

negative rates. my guess is what will happen is, sure, the fed can raise rates one more time so they can be optimistic. if you have not got productivity up yet, you are not going to get it up very much in the near future. when you get a negative economic ,hot, we will be in recession and negative rates will come back to the forefront of the debate. my guess is that for the next 10 years we will be priced in for negative rates in the u.s. interesting to listen to mark carney talk about negative interest rates yesterday. he says there is something unnatural to it. a lot of people would say what is unnatural is having a cash -- is having cash in the system that cannot be taxed. whereas in the past it has been taxed. aboutis nothing unnatural the idea that inflation is pricesl, that you have

that can fall rather than rise. not necessarily in a bad way, but just through innovation over recent history, you can argue that falling prices and falling negative interest rates are as natural as anything else. it does not make sense that it is not natural. anna: negative interest rates might not be something that the u.k. has to worry about, but guilt investors -- but gilt investors have had their share of headaches. dominic: the u.k. is putting itself into a difficult position through the whole brexit thing. in a relatively small economy, -- leading ag to trade deal is a bit of a disaster in terms of how

sterling has to react. but that is not really the point. that is a separate issue. the point really is that if we are -- if we are not going to be able to do meaningful fiscal stimulus and raise the demand side, global economies need to think about -- tom: vice chairman fisher delicately alluded to that within his speech. ring up the productivity chart. i have not decided if this is the chart of the year. this is what we were talking about earlier, dominik -- the idea of lower productivity. is it the application of new technologies it has brought us? what is the why for you around the ratios of dynamics? dominic: we have been looking at this in a lot of detail. , it iseresting thing is kind of a bit of everything. productivity is very closely correlated to the capital labor ratio, and there is not very

much capital relative to labor. that is partly a problem of investment it also relatively over employment relative to that capital flow. companies are hired -- companies are having to hire people because they are cheap, but at the same time they are not doing much investment. that is relative to the stock market as well. there's something called children's cute, the ratio of -- much buyingoing too back stock. tom: but can you and peter hooper assume the old factory model of mr. tobin of yale university, or is it a new economy? that is to be decided, but at that moment the correlations seem to be working. this tailing off has been a concern. i am a great believer that

capitalism needs bubbles to survive because capitalism is not a natural order by any means. it can blow itself up, and it often does. alan greenspan would have been generating a much higher stock market than now. this is interesting to her and i am talking to dominic konstam the marxist this morning. anna: we could not have anticipated this this morning. thank you, dominic konstam, as he stays with us. equities are weaker. oil is down. that explains some of it. the pound getting a little bit of a bounce from mark carney. that is one of the stories from the banking sector. this is bloomberg. ♪

tom: "bloomberg surveillance." thrilled you are with us. it is the gorgeousity of a city in the first days of the fall season. taylor: third-quarter profits fell 21% in airbus. airbus ramped up its production anti-350 wide body plane to make up for delays. airbus is expected to touch off back output of the a-380 jumbo. profit was down 95% from a year chipotle. enough forwas not nintendo. the popularity of the blockbuster summer hit did not offset sliding sales of three ds and you gain.

runcompany's super mario debuts in december. anna: taylor, thank you. here is someone who does not waste their time on super mario. "daybreak," with david westin, jonathan ferro, and alix steel. jon: commodity remains resilient. something has got to break. that is not something we are used to. it is a theme we will look through for the rest of the program, guys. tom: jonathan ferro, thank you so much. he brought his telephone. he is watching bugs bunny and his mind has turned -- walter piecyk, thank you for your talk with rich greenfield the other day. let's talk about apple.

him as everybody knows an apple optimist. iron looking -- i am looking at reviews of the iphone 7, which is the greatest thing since sliced bread from an economic that from an economic and engineering standpoint. >> it was pretty much in line, a little bit better than expected. that actually did come up as far as the quality of the phone and what they expect next. and whether that can inspire more than low single-digit growth. tom: what was the distinctive feature of the report yesterday? walter: there was not one. the revenue beat was there. they are returning to growth in the december quarter. the call all al along. we are talking about a 50-basis point swing for a company that has massive margins relative to what nokia did in the old days. overall the quarter was good.

anna: what does it mean when they talk about being supply constrained on the iphone 7? is it just about expectation management, or does it say something deeper? walter: it is about expectation management as far as what to expect in the next quarter. the operators are talking about not being able to get phones third sprint talked about that yesterday, and some of the other operators as well. he gives -- it should be positive as far as the company is concerned, especially given the evaluation. market why did the responsive negatively to the report? if the iphone 7 is still the great hope for this company, from what you have said, that sounded like a bullish signal.

walter: there was a question about the margin outlook for the quarter again. if people were expecting a 39% number and the guidance came in , that caused8.5% some concern. but those are small numbers when the margin is so high. years ago, these things dropped thousands of basis points. tom: if you x out cash and services, what is worse? i am fascinated by these -- this cash and services. walter: there is an impact of bringing that money back. it might be lower now, if we go into the next administration. that would take evaluation down to a less than 11 times for a company that is growing. services is a 20% grower. the rest of the company's are not growing. -- the rest of the companies

are not growing. lower than that, the valuation is still attractive. tom: where is the technology curve to their newer products? on earlier,was worried about visions. a-11, a-15s the ship. walter: chips always improve. what we are getting in phones today versus what we had only couple of years ago -- tom: how many iphone product is dominic konstam's house going to buy in the next six months? you cannot count that high number right? dominic: we have enough as it is. tom: anna, i find it amazing. when you go down to the apple store, what do you observe? anna: i wanted to ask about the story we have been talking about the last few days around media.

what appetite there was an apple to get involved in buying content. it is something that was raised on the call yesterday. is this something that flies for you? they talked about doing m&a. walter: it was raised, and that created a flurry of questions and activity. i was directed to our twitter account, where i posted a video of how tim cook has used his conduct of having intense interest for many years. going back to the script that he has been talking about for years, going back to his intense interest in television. those comments are going to be interpreted as apple is going after media companies. i just think it was them answering the question like they normally do, about interest in buying content. tom: what have you learned about twxt over the last days? walter: the new thing is that at&t is going to be able to

avoid fcc review. if that is possible and they do not have the possibility of a review, it makes the deal more likely than people think. thrilled with your working with richard greenfield. computer -- gene munster in the 8:00 hour with piper jaffray. more with dominic konstam next. this is bloomberg. ♪

tom: good morning, everyone. a foreign exchange report. sterling with 1.21 earlier, a little bit stronger. call, andhurning out the yen weaker over the last number of days. dominic konstam is with us from deutsche bank. this was a quiet little thing you said 20 minutes ago, 30 minutes ago, gdp growth migrating 2%. bring up the chart. we have shown this many times. stan fischer alluded to this in his speech. 4% real gdp1990's,

growth, and the red arrow is down, down to 1.9 percent growth. you say we stay here and migrate lower. tell me about the american spirit if that occurs. dominic: what is behind that is the fact that we are reaching full employment. but as we reach productivity, things have slowed down as well. the other side to the gdp from this metric, that could literally stagnate or grow less than half a percent. so where it is, it will go lower. basically close to 1%. that is bad news for wages, and obviously is a challenge for profit as well. tom: it is a challenge for any institution trying to affect public policy. how much are they going to come in? will he go all the way to the red line that we show on bloomberg, or do they meet halfway? dominic: the market has long run

dots around 1.25, and the said 1.75.long run dots around the fed will have to come down to around 2%. that is where the equilibrium stops. , the listening to that commentary around productivity, what would be your best states,s for the united driving productivity up and the rest of the developed markets? dominic: that is hard because traditional you think of the animal spirits in technology. are issues around public sector infrastructure spending. that will not do anything any time soon, even if there were a commitment. the only hope is that something demand related to productivity being so low says something about the fact that the market has been disappointing and there are all these workers in place,

working hard to be more productive. but there is not that much to do. on that score, the housing market is an obvious one. housing was a massive contributor to growth before the a disasterasically now from the occupied side. i actually do think that is a big issue for the broader strength of the u.s., and the trouble is no one really likes the housing agencies. no one really likes the concept of reigniting housing in the way that it was a driver in the 1990's and the 2000's. there are policy initiatives that you can do to get away from the rental class we are developing. anna: do you anticipate any of those changes to possibly -- those changes to policy being forthcoming? encouraging maybe too much homeownership when it was affordable in the past? dominic: know, and that is why

we do not think negative interest rates will be in the future for the next five or 10 years. tom: this is critical. you just said negative interest rates -- how does the financial commercial banking survived that? dominic: they can survive as long as they are well capitalized. they can survive for a few years, particularly in europe. it brings things to a head, and then you have to make real choices. are, do youices have a changing approach and go to the demand side and say we are crazy about fiscal policy, and you should have been doing this much more aggressively, let's stop this discipline. or do you say, there are problems with fiscal policy, and we are going to make things liberal by taxing cash, handing out checks to people who have a mortgage on the home. it does create a lot of issues. tom: very generous of you to be

with us this morning. dominic konstam will continue with us on radio as well, with deutsche bank. coca-cola reaffirmed these headlines. certainly an interesting set of earnings statements over the last few days. caterpillar disappointing as well. coca-cola with a small beat as well. on "bloomberg daybreak" we will continue as well. tomorrow, a professor from .artmouth, david blanchflower looking forward to that. thanks for being with us this morning. we continue on bloomberg radio. this is "bloomberg surveillance." ♪

jonathan: good morning.

a warm welcome on this wednesday. i'm alongside david westin and alix steel. we are counting you down to the cash open. negativeutures are eight points. yields up on the tenure today. handle ons over a $49 wti. alix: sour apple. shares of the company fell after sliding smartphone prices. and a brand-new poll out of the sunshine state show donald trump with a two-point lead ahead of hillary clinton in florida. bonds,stocks, metals, all slowing to a crawl ahead of the u.s. election. deutsche bank is looking for alternatives.