it's a sort of global bond rout. november is a dead meeting. bonds adjusted, chair yelling in a live december meeting. and soon, it will be all over. clinton in trump spar while governor pence spends anxious moments at laguardia. good morning, everyone. i'm tom keene; with me is guy johnson. the vice presidential candidate of the republican party landed at laguardia last night in heavy rain, and he slipped off the runway. that would never happen at heathrow, right? guy: absolutely not. apparently the whole front of the plane was covered in mud. quite an experience. the bond markets are experiencing something similar, i would argue, but things have turned around the last two minutes. tom: i like your observation. we'll give you color on that

today, away from the hysteria of a global bond rout. what is going on and what it means to various central banks. riggs.re is taylor lls are feeling the squeeze from inflation costs by the brexit vote, several reports showed that uk residents have less spending power. they all cite the following pound as a factor. stirling is down 18% against the dollar since the brexit vote. regional parliaments and bill jim are expected to lift the trade deal between the european union and canada. the rest of the eu already backs the deal. they couldn't have the green light until there was an approval, who couldn't approve until they received commitment on arbitration. parliament is said to confirm the prime minister tomorrow, the caretaker leader lost the confidence vote yesterday, but

tomorrow the socialist party rivals have agreed to abstain in the second vote, which should give him a simple majority. he has been acting prime minister for 10 months, because no party could gather enough votes to form a government. and there is a report that vice president joe biden is at the top of the list to be secretary of state if hillary clinton is elected. politico says clinton and her aides are figuring out how to approach him. since, he has campaigned for her across the country. and here in new york, the republican vice presidential candidate mike pence skidded off the runway while landing in heavy rain at laguardia. the plane came to rest in the grass. no one was hurt. the ntsb will investigate. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: a tense moment yesterday,

as we mentioned. everyone is fine, and we forget about the air safety. we take it for granted. there was that tense moments last night. and in foreign exchange, you can see the news come across bloomberg hd. what's important here is the commons. bgc, tfsi cap, a recurrence. pretty straightforward, with some global wall street legal news this morning. equities, bonds, currencies, commodities -- a little bit of a bond aight, futures backup 1.86%, big move through the week. vix elevated- the 15.5, nowhere near the average. two-year yield has not moved for a longer duration. the german 10

year gets my attention at 0.157. their sterling just can't get it together. guy: yeah. a similar vein to my board. gilt is unchanged. the market has really moved to this morning. decent selloff but that has backed off and equity is coming back as well. equities have popped over the last 20 minutes. we are still down heavily. but nevertheless, we have seen the story pick up a little bit. a fair bit of return to equity, the bond market more stable, but there are key stocks. we'll talk about the pharmaceutical sectors later on. nova nordics, a diabetes story in your neck of the woods, tom, down by 14.14%. tom: let's go to the bloomberg. this is the bloomberg/barclays aobal aggregate bonded next,

total return on the unfolding yield over 17,000 members. of you will know that this is the lehman index. we go back 25 years. what's interesting here is the bull market price up in 2009, some call that a once-in-a-lifetime bull market. we continue to see a nice of yos is the lehman index. bond movement tire. here is a recent leg up. this gives you a long-term view of the "bond rout" of the last few days. i don't mean to diminish it, and we will show some charts, but that puts the bond rout in perspective. guy: it certainly does. to give you a bit more perspective, this is a comparison buy/sell spain and italy. we have seen a significant shift in terms of performance, spain continuing to outperform italy. let me zoom in.

a spanish government looks like it will be full this weekend. we have seen strong headline inflation data coming out of spain, the core more stable. a little better the shift over the last few days but we have started to see a three assert itself. that's ahead of the italian referendum coming up. the markets are differentiating on the periphery. let's get some more perspective on what we are seeing around the world with bank of america merrill lynch director of fx strategies, joining us on set. we are trying to decide whether or not the bond market move is significant. what to the guys in fx think? >> honestly, there's a followthrough into the fx markets. yen higher, sweden higher, sterling higher. i think this is all just part of a broader trend in markets where they are pushing back on the idea that there will be further stimulus of central banks, trying to emphasize the need for fiscal change. we heard it from he--

guy: did the market simply to the price run, and the pendulum swung too far, or did they read the central banks wrong? >> i think it's the read on central-banks. we are starting to wake up to the fact that the ecb will not be the last resort forever. givinge has helped them, those bond rates above the death rate. but certainly i inc. the overall how much the market is wha more can they push against it. tom: i look at the dots, i guess we are going into the december meeting, unless you want to tell me there is something in between, and the idea here is that the dots coming. -- come in. the question is, are we going to have a tantrum? is this going to be a dots adjustment beginning in december? is it going to be a dots adjustment that can be managed and controlled, or do you just

assume there is a tantrum involved? perspective of the comments from yellen we have been hearing, she is very much mindful of the shape of the yield curve. she is prepared to see the economy run hot, inflation run above target. we expect november to be a placeholder. we expect action in december, followed by further, albeit moderate, rate hikes heading into 2017. a long will be contingent on the size and scale of fiscal stimulus that comes out of the u.s., but certainly this is about managing the structure of the yield curve. guy: what is the half-life going to be between rate hikes in the united states? it has been about 12 months -- does that come down? >> two price tag for next year, so probably a production. guy: and that is priced already? >> it is. i think they are grudgingly coming to that move. it's moving the market in that

direction for sure. tom: recalibrate your sterling call this morning. we migrated, and i get the extrapolation game, and i don't think ill of that. but you go in here on friday, you have to get to monday, you have to publish -- how do you recalibrate? >> we always emphasize that the risks are to the downside. we have nothing to change that particular view. i think what's important is that we have had three idiosyncratic prices in sterling in the last years. what's crucial here is that th e peak declines have been around 30%. if you project the monthly decline in sterling out toward the end of 2017, that would put cable at 105. that's a projection based on the current monthly pace, but certainly the risks are that it's more and more about the squeeze on consumers, consumer confidence.

this is, i think, a slow burn rather than a flash crash. tom: i love that description. help me remove, or help guy johnson living the dream, what 1.10 sterling mean? >> it depends on inflation. our major concern from an economic standpoint is very much what it means -- we think that the consumer will be squeezed next year. we are looking for a slowdown in growth.we aren't projecting a recession . but we are already starting to see petrol prices decline. guy: let me ask you a question related to the headlines. if you think theresa may -- we have a problem with tariffs, don't worry, because the decline in sterling is going to outweigh any tariff concerns. do you worry that the british government will say one way of

managing the terror story will be to let the sterling sink? >> i think the natural adjustment over the last few years, it has not been overly concerned by the currency. that's the major concern. if a current account can rebalance, if export markets can benefit from a weaker sterling, i think the government will be pleased. tom: ok, well we will continue. the bond rout, we don't want to overplay it, but will report on global bond prices, lower. that means you must have the perfect guest at 6:00, and we do. robert dold, the bond house. we will talk to him about bonds and equities. johnson send the, his fabulous new book. this is bloomberg. ♪

guy: i'm guy johnson in london. tom keene is in new york. let's get the bloomberg business flash with taylor riggs. taylor: general electric's is in talks about a partnership with one of the oil industry's largest service providers, baker hughes. the company is one of the options during the oil slump, where they have been looking for partners as a way of cutting costs. earlier this year, baker hughes terminated plans to be acquired by halliburton because of antitrust concerns. anheuser-busch inbev reported a drop in third-quarter profit. it was the first time they published results since the record takeover of sab miller. ab inbev says they no longer expects sales growth this year. and that is your bloomberg business flash. guy: thank you very much. let's turn back to the banks. a big subject this week, stocks

continue to outperform in the sector that has been interesting the past few days. ubs, rbs, bnp paribas, all coming in above. some more than others. sergio ermotti spoke to manus cranny earlier about the numbers. >> with a very strong result, we have been able to move on our capital position, on the legislation side. we got very close to our target that we need to achieve. good money inflows, good progress on cost on our targets. i am very pleased because of the diversification of our business, which has proven to be a winning seem. guy: sergio ermotti, speaking about the figures. michael moore is still with us, as he has been throughout the week. we also bank of america merrill lynch.

michael, ubs is interesting. it has changed its business model away from invest in banking, which is great, except for when you have a call for fixed income doing well. >> yeah. it certainly benefited them over the past few years. it is trading at a premium ou don't see at many banks, or at least not over the past year. this quarter was one where you wanted to be in the fixed income trading business. certainly they missed out on that, but equities didn't do quite as well as the big arrivals like morgan stanley are goldman, so you didn't quite get the boost that a lot of the banks did. guy: when you look ahead to what happens next, give me a sense of how the business -- what is going on in fixed income right now, and in foreign exchange, what turns into a good q4? >> markets look for trends.

there has been a tendency for markets to look between meetings, rather than looking at multiyear, multi-month trends, which is historically been a key drag. once we get some clarity about positive divergence, how fiscal policy fits into it, that's where markets and investors get interested. tom: let me bring this up. i am bringing this chart up, because michael moore was dazzling me with his friday conversation. michael, it's a german 10 year yield. down we go to a negative interest rate. than over here is this leg up we have seen. from our bank desk in london, is this a bond rout? >> i don't know that i would call it a bond rout. i think it hasn't been quite long enough. there is a lot of debate about whether this third quarter bond trading performance can continue, and part of that is around the volatility.

you saw volatility come down a in october, so -- you know, the question is, are we going to get a brexit-like an event every six months to boost the activity in october, so -- levels? that seems less likely. tom: to bring up the chart again. here is what we do mathematically. we do this on "surveillance" because we like to do math. here's two standard deviations, this blue mesh across the german yield. you touches here, go out of it here, out of it here in september. and here's the recent leg up in the so-called bond rout. healthy here. -- help me here. it's not that big a deal, is it? >> remember, the market has a big position in the bond market more generally.

what we are seeing here is exacerbated moves. as much as we have been talking in the fx market, we're coming up to month end. i suspect part of that move is driven by liquidity constraints. let's quickly talk about what's happening in the banking sector. this is -- but they quickly show you a chart -- this is the health care sector over the last month. this is the european banking sector. this is a defensive sector. michael, does the q3 reporting season justify the bounds, the big bounce, we have seen? >> i think they have come through with beating estimates, improving profitability. whether that continues i think is the main question, but certainly it is a step up, but still a lot of them are mid- single digits r.o.e., which is nowhere near where they need to be

. you are still seeing some banks push other targets for r.o.e.. you saw it with ros today. it continues to be a four to five-year story and the recovery of profitability. tom: michael moore thanks so much,. his work this week with the european banking desk. on apple, on amazon. what an interesting week and technology. twitter, out goes vine. we will speak to gene munster on apple -- excuse me, on amazon investment. this is bloomberg. ♪

guy: i'm guy johnson in london, tom keene in new york. earlier on, we had the great privilege of being at the peterson institute. this is what he had to say about what's happening with the u.s. election. >> it's fair to say that reasonable people could argue for a rate hike, while most people would argue against one. i think that is a fair debate, and their arguments on both sides. but the trump view of the economy is based on falsehoods and mistaken ideas. tom: adam pozen. let's look at the chart -- the mexican peso is a proxy for the election. debate one, two, three. here is at leg up

little bit of oomph that mr. trump has into the weekend. the polls are a mix right now. here is a strong clinton scene within the mexican peso. you just assume that the mexico peso not be linked. >> it's the idea of proxy trading. all the conversation is very much focused on what happens. there's a little bit of stabilization. i get the sense that we are in -- it's veryso much a similar fashion to the eu referendum, where the market will trade political news up until the referendum, where it up until the u.s. election, shall i say, and then focus on fundamentals. guy: that's exactly what i am hearing as well. you get the election results, let's see what hillary clinton wants, then you get into a picture where they are like, ok,

so let's recalibrate and think about what she would need. >> absolutely. the appointment of her treasury secretary would be very important. yellen will be important. look beyond the pricing of the risk premium. the day after the eu referendum, the u.n. chose to leave the eu. tom: we will continue. two weekends to go until the first tuesday of november. our special coverage throughout all november 7 and into november 8, the morning of november 9. from london, from new york, this is bloomberg. ♪

tom: thank you to all at laguardia, out in the pouring rain, assisting governor pence of indiana. the plane slipped off the runway. all are ok, all are fine.

a huge effort, with the plane hindered in new york. thank you to all at laguardia for their work. i'm tom keene in new york; guy johnson in london. right now, to our first word news with taylor riggs. taylor: u.s. government investigators are looking into middlemen in the $5 trillion per day foreign-exchange market. they want to know whether the dealer posted a fake bid, rigged auctions, and gave confidential information to others, according to people familiar with the matter. among those being cold, no one is commenting. hillary clinton interest the final days of the campaign with the cash advantage. $153 millionher at as of october 19. has repeatedly pledged to spend $100 million or more of his own fortune on the election;

so far he has put in a little more than half. in the north dakota, police used pepper spray to evict protesters demonstrating against the controversial to kodak says oil pipeline. more than 100 people were arrested. there were no serious injuries. opponents are concerned about its impact on drinking water into native american land. in japan, new data underscores the problems the government has in trying to revive the world's's third-largest economy. japanese consumer prices fell for the seventh month in a row. excluding fresh food, prices were down .5% in september; household spending dropped as well, down 2.1% from a year ago. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. guy: thanks. let's jump back to the banks, topping expectations as lenders continue to outperform in the third quarter.

sergio ermotti spoke to manus cranny earlier and gave his take on what the future holds for the banking sector. >> there is overcapacity in the european banking landscape, in order to allow for consolidation you need a regulatory framework that allows you to go through from a practical standpoint. i know people would argue that in theory it is possible, but in practice it's more difficult. i thinkaid that, yes, that in 2017 we may start to see some movement in that direction, do believe that there are other ways to extract the synergies in are industry, not necessarily through direct consolidation. combining part of our value chain so that the industry can become more efficient in responding to the

high regulatory demand we are facing. guy: sergio ermotti, the boss of ubs, speaking to manus cranny early on. the next guest says the european banking model may be broken. bank of america merrill lynch, still with us. great to see you. you say it may be broken. maybe or is? >> well, sergio ermotti highlighted all the points. the capacity that exists in the banking system in a slow growth economy is too much. so how do we rationalize it? any other industry, you would have lots of m&a, consolidation, eliminating fixed costs. we don't allow banks to consolidate. sergio ermotti was talking about banks cross-border, but this is something banks could do in country. guy: isn't the fault of people that run banks, or the people that regulate banks, or the government? >> as everyone's interest,

rather than anyone's fault. the issue for regulatory standpoint is that consolidating banks concentrates risk. we're very concerned about two must risk concentration; we saw what happened. so right now, we are looking at how we consolidate without necessarily doing a traditional way. guytom: professor, good morning. you straddle the economic and academic world, and the real world of banking. bring up the chart here. we're going to ask peter -- here's the bond rally we are in right now, on the german 10 year bond. because show you how miniscule it is, within perspective. peter, that we have here is the reality of negative rates, and marvin goodfriend at carnegie mellon says the efficient point for negative rates is something in the vicinity of -3%. can negative rates work for

or could they even possibly work under emergency at the -3% level? >> i'm not a real fan of negative rates at all. think it's a policy that is a big question right now, whether it works. it is something that is new. it would be an experiment. i think central banks really need to rethink the whole policy. tom: next question i want to get to, and i will throw up a chart from friday. we're doing this just for you. the idea of new, longer duration. we have an austrian piece -- there it is. this piece came two days ago. it came up here near 100. it's enjoying a 6% moves down. it's amazing to me to see long-duration paper go down in

price. are we falling into a trap of issuing too longer duration paper? >> oh, the risk is incredible. one of the things we have to think about today -- if you have cash, remember that only a small amount for an institutional investor is guaranteed at any so,vant amount -- institutional investors, what do they do with cash? cash is a drag, banks don't want it. they are looking at securities to buy. which securities do they buy? if i were advising any asset manager looking at interest-rate risks today, wanting a cash equivalent, to be certain to have very, very short duration securities, which have a negative yield on them. but one of the things investors may have forgotten or haven't paid enough attention to is that at very low rates, buy in bulk.

a small moving interest rates can really affect the price. tom: this is critical. i put the banner up on the chart. the austrian seven-year peak gave up three years of coupon in wo days. -- in t in tw dayso. guy: this is what people don't understand when rates are as low as they are. ratesou have interest like this, the capital losses are not as great. very, very quickly on relatively small movements in bond yields. we are looking at where we were 10, 15 years ago -- that is something that is still waiting to be fully priced in two investor mindset as we continue to deal of these incredibly low rates. at the banking story is something we are still conjuring

in europe. it is still an absolutely colossal problem for mario draghi. you can almost relate to what we are talking about with the banking sector. if europe can fix its banking sector, where would european rates the in terms of what druggie has to do to deal with the ongoing drag that the banking sector creates? >> the banking sector is central improving they, transmission mechanism of monetary policy, improving lending. that obviously puts open bias on interest rates. it makes the ecb's job much easier, to take away this negative interest rate environment. guy: and that would change the euro-dollar right. you talk about the banking rate in isolation, but it is such a critical part -- >> it is, but we can't forget that the ecb is keen to emphasize the structural reforms of the european economy as well,

labor market reforms. this is one part of the overall model that draghi wants to see. tom: professor, where when you lecture right now that real rates would go within the united kingdom and within the continent in the next one to five years? i do want to pin you down on this, but if i assume weak sterling higher yields, what part of that is a decline in real rates? getell, i don't want to excessively academic -- tom: no, stop, it's academic friday. let have it. >> historically, we have this view that real rates were stable, and it was inflation that change things. and that is -- if you look at historical chart, you can see

that isn't true. real rates have moved substantially. i almost think that concept is somewhat discredited. certainly, you would expect for a tradey that has deficit that's going to suffer inflation, that rates are going to have to go up, because otherwise foreign investors who we a trade need will no longer fund the deficit, no longer fund government bonds. rates are going to increase. in a world where everyone else's rates are close to zero, that doesn't have to be too high. but if u.s. rates in a year or two are going to be 2% or 3%, then sterling rates might have to be significantly higher. guy: let's talk about what the pound is doing right now. under a little bit of pressure as we speak.

this as we have a court case and belfast. out in this is a challenge to the article 50 triggering that theresa may believes does not need to happen without parliamentary approval. this case has been brought because it relates back to the good friday agreement. we're going to wait and see what this judge rules. we will bring you this is shortly, but this is what's happening to the pound right now. this is bloomberg. ♪

tom: i'm going to let guy johnson talk about this. here's sterling, we're thrilled to have our guest of us today -- there is brexit, a rollover, my

extrapolation to 120, middle of november. guy johnson down to the 105 if you do the math. what do you see intraday? guy: what we are watching at the moment is a cold case rolling through, which the market got a little bit -- the judge finished reading the ruling in northern ireland, is belfast. this was a case brought by a bunch of politicians relating to the good friday agreement of 1998. this courted was, case was brought suggesting that the good friday agreement contained language which would allow parliament to have a role in triggering of article 50. the judge has ruled that it is not the case. thebelfast court says executive privilege was not in the good friday turns. sterling has continued to stay down. i wonder if this is a reminder for many out there that there

are other court cases currently under review which relate to whether or not the executive privilege applies, and we will hear from those over the next few days. how big a shift would we see to the upside if parliament had a rolling trigger? >> i think the question is would parliament vote against article 50? 7 out of 10emember, labor constituencies voted to leave. are they going to vote against their own constituents? even if it goes to parliament, article 50 would be voted down. most politicians have accepted the democratic mandate of the public. net-net, it looks virtually inevitable that article 50 be triggered. guy: but then it comes down to an the fact that parliament may have -- this is where i think parliament and the number 10 are more of one mind, that parliament would then be transitioned to the new deal.

that is where the new story starts to emerge, and that is where we have a difficulty in pricing. post-triggering of article 50 and three deal, that will be difficult. >> it's a problem for fx, pricing or modeling. at the moment, the market is short. we know the market is short. it's expecting the worst. but the crystallization of the triggering of article 50 will really focus minds for the market. in terms of article 50 itself, we have the judicial review coming up. this will be a politically driven market for the next three months. the have the supreme court appeal, so a lot of political landmines that they have to navigate. tom: professor, help me with the linkage to the politics and the elites of london. are they aware of the fragility of the financial system, the idea of trust, liquidity, and

solvency, given the political moves that are being made? >> i wouldn't say that, no. i think the politicians are always interested in the next election. i think that is what they will always refocused on. they're dealing with a situation that they probably hadn't expected. if you remember, the vote wasn't to go this way. i think they are looking at a population and trying to figure out what the population wants. the population hasn't suffered, as was predicted. i think this is a critical thing that is difficult to understand, that the pound, as you highlighted, is taking a real hit. the quickest hits should have been food in the u.k. we have a grocery battle going on, where we will see things like smaller packages and other things, but it hasn't been

transmitted yet. the average person doesn't see it. we haven't had any major job effect yet. so we have seen share prices of domestic companies suffer, but that's an indirect effect. tom: let's get up to bat if we could. this is obd, a three-dimensional courtesy surface of the one-way bet on sterling. you have this tattooed on your brain. what is the faith that you have in this one way back on shorter sterling? we see it one year out on the lower axis. what was the confidence he would have in weaker sterling? --it's not completely 100% we have to ignore knowledge that the data has been stronger for q3 gdp numbers but what if those numbers continue to remain strong heading into 2017? we think it will be a slow burn,

a jerk drop of negative information. the numbers do not begin to show significant deterioration, the market will question what kind of impact we are seeing on the u.k. economy. from our indicators the market bearish, sentiment is there are metric risks building. but we are still fundamentally concerned with the current account deficit. through the qe phase of 2009-2012, portfolio investment outflows from u.k. bond markets with a significant driver of the deterioration of the basic balance, which is the current account deficit. guy: stay with us, both of you. you will both stick around. let's recap and tell everyone what has been going on. morning,ase this brought by a group of politicians, has been thrown out

by a belfast court. it was effectively a case that pointed at the idea that article 50 could not be triggered without parliamentary approval the cousin the good friday agreement. the court did not agree. more on this next. this is bloomberg. ♪

guy: i'm guy johnson in london, tom keene in new york. let's focus on pharma. job the nordic -- novo nordisk, the biggest maker of insulin, slashing long-term profit forecasts. the director of european research, bank of america merrill lynch, the london institute of banking and finance. i thought that we'd already heard, and they had already told us. they repeated it again today, yet the stock got a massive re-rating. explained. >> if you talked to me you would have realized that we didn't think so. we thought there was still pressure going on, and they missed on their key insulin number. the pressure on diabetes is immense. easier, going to get because you have generics coming

next year. areaa slightly different but also there is longer acting insulin. they are seeing the same thing and they have to keep winning contracts, and the only way to do that is by offering bigger discounts. is to getneed to do all these fantastic trials they have done and convinced the regulators to put down their label. guy: a more broad question. what loose the pharma stocks in their entirety? the pharma stocks and the banking stocks in blue. over the last months we have seen banks go up and pharma go down. you could argue it's because they are worried about hillary clinton, and you were talking about that relentless pricing power. or is it because they are bond proxies? explain -- which is the more important thing for the market right now? >> for the moment, what's driving these stocks is a worry that is perhaps warranted, that pricing pressure is real for the

payers, and there's nonstop political rhetoric. when you put those things together, it's a combination people don't like. tom: help me here with novo. life is so talk for this -- so tough for this from cynical maker. anybody in the world would die for the margins of novo. don't they have a lot of margin where they can deploy cash and redistribute cash within their new pricing world? only place you can go with a margin that high, tom, is unfortunately down, which is what i think people are worrying about going forward. when you have gone from a. period of significant top and bottom line growth and giving your margin to this place, i think what you have to worry about is when the management turns around and says, look, we are just at the beginning of this. i think you have to worry about that. that sets them up for a fall.

tom: guy, in your interview today, that was the beginning of the storm from your cfo. this was a great hour. thank you so much, gentlemen, greatly appreciate it. coming up, we continue the discussion. the linkage of the equity markets into bonds. robert dold will join us. we are thrilled to bring you the celebration of wonderful a new book. no, it's not paris -- you will have to go with it, it's new york. ♪

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tom: let the quiet end. lower.higher, price

it is a global bond rout. november, bonds and just to janet yellen in a live meeting. soon, it will be over. clinton and trump. , tense moments on and off the runway. good morning. this is "bloomberg surveillance." guy johnson in london. last 20terling in the minutes. what happened in ireland? guy: throughout the case brought by politicians that effectively suggested the break that having an impact on the good friday agreement. the courts ruled that was not the case. of course, it had not gone that way, it would've meant there were problems reading article 50. what is interesting has not come

up subsequent to the ruling. you could argue you could understand. sterling goes down. softened the sterling before it happened. tom: we will go through the data in a moment. our first word news. taylor riggs. taylor: a judge in order ireland has rejected 2 challenges to the brexit process that removes -- at leastbstacle one obstacle by theresa may. the judge said it was beyond the power of the court to interfere in the process. parliament in belgium is expected to left the roadblock to the deal. the rest of the eu already backed the deal. belgium could not give the green light until the region approved until the received commitments on public service. caretaker lost the

confidence vote yesterday but party rivalslists have agreed to abstain -- again from a simple majority. has been acting as prime minister for the last 10 months. there is reported that vice president joe biden is at the top the list to be secretary of state if hillary clinton is elected president. clinton and her aides are for you without how to approach biden. againstt decided to run clinton in the primaries, but since then, he is campaigned for her. an airplane carrying republican vice presidential candidate mike pence -- the airplane tour up concrete. no one was hurt. the national transportation safety board will investigate. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom: thank you.

a little bit anxious here. heavy rains in new york, a plane upond before the governor plane. all well done by laguardia team of people. significant damage off the end of the runway. let's go to the data chart. one of these things guy and i agree on, the bond rout. yield moved the other way from the rout. dynamics, if you would. sterling 1.21. it was 1.34. what do you have? guy: european bonds are back. hour, hour about an and a half ago. what we have seen is a backing of any yields. equities are a little bit

better. we are still down on the session. the stoxx 600 still down by 0.5%. individual performers very important. novo is one you need to look at. taking a big hit. marginsointed out, good and sales is elliott pointed out, maybe the reason things lill get worse -- sam fazel pointed out, maybe the reason things will get worse. doll, global aggregate index, the ginormous market of 2009. the latest move up. this is all central banks. lower, lower yields. higher processes. , a giant rout.ut the aggregate index.

let's bring in robert doll, asset management, chief strategist for he knows row number one, watch bonds. -- strategist. he knows rule number one, watch bonds. robert: it tells you a little something. i think the market is waking the that nominal -- waking up the nominal growth is better. , 137 at the low 10 year treasury, not consistent. tom: we member rise duration -- memorized duration, a single word "brutal." do you consider it is brutal that of sexier equities world or can you manage this so bob doll to live with this? seen the latter. we were at 175 before we went to

137. not going to end as a result. brutal is a very strong word. i like the fact interest rates are moving up. the overall environment is killing, deflation risk is going down. that could allow earnings to get a little better. guy: good morning. a bit of cold war. -- cold water. sometimes the pendulum swings too far, did it swing too far? to 137.it was down it was a surprise to me. i think we are where we could have been and belong. tom: i do not want to interrupt, but look at this banner. brutal moves in the bond market. three-weekm a vacation.

folks, these are not brutal moves in the bond market. wake up. guy, pick it up. take on's get bob's this. whether you're looking at price moves, small yield moves like we do at the moment produce a big capital changes. that is something we are going to have to get used to. aboutheless, let's argue the brutal. is it a brutal price move? robert: it is not. look at the chart tom showed. squiggle.rdly see the you make a good point. when yields are this low, it does not take much of a yield change to affect investors. i think we will get more. we are in a long-term bottoming. do not forget, 10 year treasury was double digits after the start of this 30 year. tom: you just touched on something, as you can do with

your experience. distortions are about misallocation in capital across the standard and the nifty five stocks. do you see a missed allocation in capital? robert: i agree with that. that's to say stocks with the yields perceived safety, low vol, that is what everybody wants. bit of acreated a bubble. i steer clear of those source of things. tom: merger mania. qualcomm, dutch conductor. 47 mergers. robert: if i as a ceo can borrow money at essentially zero, why not? most of these transactions to myiately become anti-

earnings. we have not seen a rush like this, a bit surprising. perhaps the environment is getting better and ceo's and boards are willing to take a risk. low interest rates. guy: bob, a conservative .uropean view all the u.s. stocks are bond proxies because the way companies have their balance sheets, right or wrong? robert: i agree. higher rates mean a lower price for everything in risk land. the question is, as we get to the higher rates and the lower valuations, do we get better earnings? back to third-quarter earnings, better than most of us thought. tom: this banner is so critical. chart., bring up this this is amazon.

robert doll never talks about individual stocks. legal restrictions on that. i am sorry, the mother of all regressions. a company that is capturing top line market shares like you and i have never seen in business history. i do not want your selling amazon, both what does this -- but what does is signal to other companies? robber bank those -- robert: of free cash flow. a slow growth world. the ones who cannot are going to struggle. tom: robert doll with us. a bond rout. brutal moves. coming up -- though brutal jonathan fenby. in celebration -- forget about test.ok, it is like a i see an end. jonathan fenby on france.

his good work on the company he loves. france. that is bloomberg. ♪

guy: i am guy johnson. tom keene in new york. a business flash with taylor rates. is in: general electric talks with one of the oil industry's largest providers. ge's seven outright purchase is in one of the options. has been looking for partners in a way of cutting costs. baker hughes terminated plans to acquire halliburton. jaruser busch, a surprise

-- drop in third-quarter profits. ab inbev of said it no longer expects sales growth to be in place this year. that's your bloomberg flash. guy: thank you. back to the banks. ubs, rba, all above estimates. guest: a very strong result, we have been able to build up on our capitalization. 345, close to our target of 3.5% we need to inflows.o, good money pleased, diversification of our business has proven to be winning. guy: ubs is the second-best performing u.k. bank on the

stoxx 600 today. let's get a take on this. in new york, bob dole. dall. it is a bad call for ubs with great respect to sergio ermotti. he does not have that much power that reporter: it is not helped them as much as deutsche bank even. a rather tough quarter in equities. importantly, the business continues to come under pressure by the difficult market. guy: is that going to improve? i remember sergio said the markets are paralyzed with fear because they do not wear it will go. is it changing? not with is something

a radical change. more cautious markets going ahead. the focus on cost cutting. , pledging to are continue with. tom: help me with the culture of italy. you have been covering this story. if i were to have an espresso tomorrow morning in milan, are the people of italy affected by this banking crisis or is it just removed from people sipping espresso? economy isourse, the affecting the day today of italians and the board of public . -- fall off we saw was that it is very much front and center. tom: do you predict further mergers and the next year within

italian banking? the past ceo said it is going to be slower and slower then perhaps anticipated. the very difficult trading environment and the equity evaluations that have taken a big hit. thank you and congratulations on your diligence on this story. i cannot tell you how many years she is been up front on the italian banking. web a lot coming up. bloomberg surveillance on radio. -- we have a lot coming up. third-quarter gdp. will join us. she will not aware of boston red sox sneakers. this is bloomberg. ♪

tom: everyone in our view of washington with a modest hangover all out last night in celebration of our new headquarters in washington down new york avenue towards the capital. joining us, party monster. he gave the party of parties last night. marty, congratulations on the opening of our new washington office. president clinton or president rouhani will probably's -- trump will stop by. do we know who it will be?

guest: we do not. the days are dwindling down. that campaign is intensifying as we speak. the early voting numbers, which are going to be record. signal?t do they do you know what percent? marty: they are not miniscule. as many as 50 million people will have cast their votes already on a tuesday morning, which is up from 46 million in 2012. that is mel in and online -- mail in and online ballots. we may get results on tuesday earlier than any election. the majority of americans made no by dinnertime who the president is. tom: what is the agenda for secretary clinton and mr. trump?

president obama stumps in florida today after michelle. florida is the key. there is no path for donald does not win florida and hillary clinton knows that. they are going all out to take that sunshine state. guy: marti, what people are trying to do is figure out what they think the first 100 days would look like once we have a democratic victory. who feels the key roles and what roles elizabeth warren may play. can you give us any color on what you are hearing? to me, the key person is not elizabeth warren, it is all right and and the gop. int happens in this election terms of the configuration of the republican party?

does paul ryan have room to negotiate with hillary clinton? is it gridlock squared? ,re they able to get tax reform repatriation, immigration reform? things paul ryan has championed. it will be really interesting to see. if donald trump, all bets are off. one more question and we will let you go to pick up the party favors. the idea here of mr. biden as secretary of state, i do not know where that came from. is secretary clinton guilty of getting a little upfront of the path? marty: the transition teams on both sides are talking about all kinds of people. joe biden is extraordinarily popular figure. if you're thinking about getting a smooth confirmation process, biden is the name you talk about.

are other names being discussed. he is just one of them. tom: marty, congratulations on the new office. robert doll with his decades of experience. i ignored elections, do you? assuming the outcome is going to be hillary is president and we will have republican house of representatives, move on. tom: do you like gridlock? robert being i think -- robert: gridlock is going to be best for the market at least in the short term. tom: you look at the different rumors and the back-and-forth, including the interim it will have. how much cash do you have right now? how defensive are you in equity markets? or are you the usual? invested asre fully we always are, not knowing at

not being able to predict. i do not see a big down move in the market. therefore, while we may not see a bit of move, you have to pick the right stocks. tom: i want to talk about courage to stay in the market. courage to look at the process. mark halperin, john, tonight into the weekend before the second tuesday of november. in new york, a beautiful, frigid 70 degrees this weekend. beautiful. new york. this is bloomberg. ♪

tom: good morning. guy johnson in london. i am tom king in new york. here's taylor riggs. middlemanoking into

and they'll foreign-exchange market. they want to know if the brokers posted a rigged option. this is according to people familiar with the matter. among the firms being investigated are tfs-icap. hillary clinton enters the final days of the campaigns with a cash advantage. the democratic candidate had 19. million as of october donald trump had a six-day million dollars. trump has pledged to spend $100 million of his own fortune. he has put in a little bit more than half. in north dakota, paul leaves it used pepperce it spray on protesters. more than 100 people were arrested. there were no serious injuries. pipeline opponents are concerned

about the effect on drinking water. in japan, new data shows the government-run to revive the world's third-largest economy. 1.5 percent.own household spending dropped his wealth, down 1.1%. dropped,old spending down 1.1%. one also removed from theresa may's plan to cut ties with the u.k. by mark march. the judge said it was beyond the power of the court to interfere. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom: thank you. we will get to jonathan fenby in a moment on his book "4s." -- "france." she messing this up

or the confidence the united kingdom can move up? >> at the moment she is not messing got. she has the conservative party behind her. a very fractured party, the conservatives. tom: you have enjoyed a sequence, does it give you pause that it makes further declines? jonathan: i think there will be an upside after that. tom: jonathan fenby on france. a new book. this is a book of affection. fenbyy who knows john knows his affair with paris. would charles de gaulle no france? jonathan: no, he would not. on to yourg to come

one volume. what is distinctive about your study of france now? jonathan: what i do in the book is to put the current problems in historical context. this the combination of more than 2 centuries of the system of the french are not at home with themselves. if they think they are the children of the revolution. they are conservative area they are not happy. that?ow has -- changed jonathan: he is the epitome of the establishment of france which most of the people are rejecting. he is the leading candidate. guy: is he going to be a friend to the u.k.? is he more anglo friendly than his predecessor? jonathan: i think he will be german friendly. if he's elected president, which you have the german

elections at angela merkel will have a difficult election. i see them standing together. they are the real strength. guy: the french economy, i misspoke, the french economy as maybe in the data today, two steps back. why do we have the stop start economy and what can management do? jonathan: it is a lack of confidence. the fairly labor -- cap and labor reforms have led to huge uncertainty about the presidential elections. not the kind of context in which people are ready to invest. thatlet's look of a chart describes what is a mr. fenby's book. out of worldoom war ii. thank you, charles de gaulle. a different slope.

knellan, you absolutely see in the last decades. evil more so than world war i. jonathan: a revolution still. -- even more so than world war i. jonathan: they look internally. tom: what is the process to reengage france and continental europe? what is the process to help them of an anglo structure? how do they get more modern capitalistic? jonathan: they have to have a president, a leader, and a legislature that will undertake market reforms and open up the plays. the politicians have to stop where their civil war is more important than the wealth of the nation. guy: how many more incidents they are able to handle?

do not know how many further terrorist attacks there will be. who is winning is le pen. she does not have to do anything in a sense. she waits back and wait for the uncertainty. seems she is telling her people in the national front to be very quiet. keep very calm and let the they arecognize what saying is what a lot of main street candidates are saying. doll.ob robert: growth all over europe has been a struggle. the demographics are an issue, are they not? it is.n: spain is doing extremely well. spain is growing faster than germany. , you add in the periphery countries, swiss lend

$500itzerland, they have billion. robert: how to get your economy to grow? jonathan: that is the problem. that is part of the confidence that has been lacking in europe, especially in france. we are all arose. -- morose. i guess we will stick with the wine and cheese. --hing the wine and cheese guy: the wine and cheese cheer to them. how is the social security that exists? how much is an advantage? you have to have the right to balance. part of the social security does not allow the kind of reforms we need to happen.

some is necessary. how do you draw the line? jonathan: it is difficult. it is sacred. it is kind of a religion. more than the affair, it is employment. code is 3000t pages long. you have to get unemployment down. growthfore you can have and national confidence. tom: my favorite sentence on page 466 "too many of the best and brightest people choose to work abroad." is there any end in sight? can paris recapture business? jonathan: it is difficult. but, young people i speak to here in the states and in britain say life is much easier and business.

the waysphere and people work outside of france. it is quite an old country in terms of the mindset. are trying toh build more cars in the u.k.? jonathan: we will see where they want to go. it is basically the car industry is not doing too badly in france at the moment. most of the profits is by french companies outside of france. a dividend as a rule would you go by u.s. financials? robert: it is the latter. you get the benefit from the growth and currency. tom: this is fabulous. we will touch on china as well in celebration of france. there it is. charles de gaulle. jonathan fenby on france as well.

we will continue forward on technology through the winter. mr. monster on an interesting france. talking about amazon. munster in the 7:00 hour. this is bloomberg. ♪

guy: good morning. nice and warm. unseasonably warm for this time of year. around 61. i am guy johnson. tom keene in new york. a bloomberg flash with taylor.

taylor: third-quarter profit rose at ubs. the biggest manager of money for the wealthy. made wasergio ermotti a measurement -- made wealth management the focus. plunged by the most in 14 years. the biggest maker of insulin missed long-term target by half a cause of pricing pressure in the u.s. the cfo spoke with bloombergtv. 5% negativepected impact on our u.s. sales next year from lower pricing. you can see we only getting into the storm now. we cannot say the worst is behind us. inlor: novo said managers the u.s. have been negotiating aggressively for discounts. that is your bloomberg business flash.

tom: thank you. jonathan fenby with us in celebration of his book "france." robert dold with us. we have gone from bond rout to what we do in the equity market. my single best chart is the doll chart. you pull back and you come up and find kerch. -- courage. a pullback in this bull market. some of these are not corrections and the hysteria is comical. robert: the least believable market of art years. it has come a long way. sitting on the sidelines and waiting for the pullback with enormous cash and we get the pullback and people take more out and do not put more in. will do whatrmotti

everybody else does, cutting costs. is your perception of most companies have enough room to further cut costs? bob: i do not think there is a whole lot left. , tom, the quarter first quarter website positive earnings since 2014. the earnings recession in my mind is ending and we made it through. a few setbacks but basically flat. itwe get better earnings, will be good news. we need to offset that the rout. tom: guy, help us. guy: let's bring to what is happening in the credit markets. wasn't it, bob? bob: i lost it. tom: we had a technical difficulty -- a brutal one. a technical difficulty.

what mr. johnson asking, is is supported by the great re- leverage? yes, yes. that is what is going on in the market. ceo's our borrowing as the road to buy back my stock and as long as a basis close to zero, you will see that behavior. it is creating excesses. saw market gilbert joining the daybreak team. he talked about his concern about what is happening. you can see liquidity. liquidity drying up. what would be the ripple effect into equity markets if we see concern in march -- emerge in credit? bob: it is a problem.

liquidity is one that could get it up. with harry routes of liquidity -- we have had several rough of liquidity. i do not think the conditions are there. we have to keep it on a watch list. tom: you are listening to this. bob doll is uniquely american. do you perceive we can get more capitalism going and the rest of the world and the next 10 years or of segment? wish rather is a than reality. tom: there can only be so many dolls- bob it is going to affect the economy and markets. to that point, tom's question, european companies have not leverage their balance andt the way the u.s. has

turned it to share buyback. i hear a lot of investors comment from that side the pond to our side, why won't european companies gear up? what do you make of it? a mystery they lags. they may still do it. the confidence has held them back without question. i would argue that have not cut costs to the degree the u.s. has. that has been the mantra since the great recession. tom: bob doll with us. we have a special treat. we will come back with the jonathan fenby and discuss china. the change in the politics of china. over the last few days. will helpmegan greene us with the first look of american gdp. stay with us. this is bloomberg. ♪

tom: foreign exchange imports. sterling, sterling, sterling. ugly number. down for 121 an hour ago.

news out of belfast in favor of prime minister made. weaker sterling this morning. pretty much everything a churn. guy: daybreak america's is up next. i know jon ferro would like it to be bonds, bonds, is a alix steel? doing both. the worst month since 2013. we will talk to mr. keenan. my real point is we have not necessarily seen a bond rout moved to other asset classes is not what investors what necessarily expecting. we are hitting all things amazon with the gene munster. investors were printed -- pretty upset with the quarter for the fourth quarter. should they be? we will be asking that question of the next three hours. tom: thank you. in doll and jonathan fenby

celebration of his new book on france. with your expertise on china, it is critical we look at the people's daily, which is the voice of the government. there is for me a seismic change going on. we going to a second term of the leadership. a leadership that wants to harken back 20, 30 years of what i call communist rigor. jonathan: we have had xi jinping , the most powerful leader in my book. tom: you would go that far? in terms of the jobs he got. always behind the scenes operator through other people. xi is up there, center stage. 12 jobs at the moment, which is too much for anybody. even more concentrated on him. , the idea here of beijing controlling the region

or major cities, what is that dynamic? jonathan: that is the old dynamic of china. it has gone back hundreds of years. that is what you are getting. it is even more cop located now because you are becoming -- complicated now because you have economy. largely operate to themselves. xi is trying to centralize power of all of that. he has centralized economic decision-making in the coming's party, which i do not think is a good inc.. it is too much. -- a good thing. being hurt bysks this centralization. guy: is it the trend was around the world? is it another demagogue? is not a demagogue. he is a super extreme ceo /cfo/coo and every other c you

can sync up. he is trying to run china inc. the glory days were in the 1980's when -- he sat back and let people get on with it on a local level. this centralization which comes out of politics risks reversing that and leads to an uncertain future. guy: he is entire c-suite. does he have any toleration for the market? not think he has any toleration for the market. the talk is about market mechanisms are you they do not mean the markets by that. -- market mechanisms. they do not mean the markets by that. still only putting partially into a bank. the bottom line is to increase the dominance of the republican party. tom: you walked out with a wonderful new edition of "foreign affairs" magazine.

the international relations of china, are they still insular or do you look for them to push out? pushing gout. are they are trying to establish relations over the world. 14 state visits abroad each year. poweras an imperial almost. not territorial imperialism in the way britain. it is a respect. beijing the emperor. doll.ob jonathan fenby, congratulations on your new book. we will continue with mr. doll . an update on the american economy. ♪

♪ jonathan: good morning.

happy friday. a warm welcome to "bloomberg daybreak." i'm jonathan ferro alongside david westin and alix steel. futures positive. up 20 points on a dow. positive three points on the s&p 00 as we count you down to a u.s. g.d.p. print. and treasury fields just coming off the highest since may at 185 on a 10 year. alix: after this hour, u.b.s., c.e.o. sergio armanti alleging to cut cost after the swiss bank reported a drop in management. .b.s. saw 68% plunge in profit before tax. and shares of amazon down in the premarket after forecasting holiday sales that may miss estimates. they began offering prime free service in china. and global bonds are set for their worst month since 2013 as investors see central banks moving closer to reining in stimulus.