delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. meeting. manus: the u.s. president is said to urge world leaders to confront north korea and iran in his first beach. for: the caribbean races the strike in two weeks. manus: escalating the row with the prime minister. aston martin's ceo tells ceo britain and europe have the power to mess up exit.

tot both have the potential get exit wrong. or we can be grown-ups and find a way of making it right. anna: very warm welcome. i am anna edwards. manus: markets have a lot to digest. the beginning of the federal reserve meeting. it is the bottom market we turn to. this is how the fund managers are selling themselves in england to this meeting. you have the wipe out the way down to 2.01 back up to 2.2%. this is the net long positioning in the bond market. fund physicians have dropped, they have cut their life

positions, the at least bullish top year and just go to life. the bloomberg economic surprises sincee lowest levels 2016. bond market yields were at 2%. there is a lot of whipsaw in the market. anna: not all that far, 2.21%. lots to talk about with the fed. and verycks diverting explicable when you look at what is going on with japan. the close catching up today, hong kong and south korea a little bit weaker. the overall picture is up be. it not tell us all that much about where we go next. in terms of where we are on the , he was holding its gains slipping a little bit. the fed is meeting, balance

sheet the focus, shrinking the foreign to have to in dollar giant. houston lee, how deliberately or cautiously will that be done? treasury yields pretty steady. that is what has been going on. mass: we hit a 15 month high and gain some of it back. the question for the market is this. be slow andl gradual. , the analystshind are left behind. i am grateful to the analysts. this seems to make my life easier. we are playing catch-up. a number of others raising the forecast.

and 140 is where he calls the position but there is a little bit of risk in that call. about mna inalk the market. just pressing the number. for 1.6 billion dollars. this transaction has an enterprise value of $1.6 billion. keep an eye on that one. let's get a bloomberg first word news update with juliette saly. juliette: in the u.s. president donald trump made an address to the human general assembly. calling on north -- leaders to confront north korea and iran. they will need to build a bodily it against the country -- countries. i said bureaucracy and

mismanagement had prevented the organization from achieving its potential. recent years has not reached its full potential. because of bureaucracy and mismanagement. increased by. has 140% and its staff has more than doubled since 2000. we are not seeing the results in line with this investment. gary cohn has emphasized to foreign climate and energy officials the u.s. plans to withdraw from the paris climate accord. his comments come after the climate chief said the u.s. had signaled it wants to seek new terms from within the agreement rather than withdraw out right and then renegotiate. caribbean island nations recovering from irma are bracing in twohird storm strike

weeks as maria strengthens to a potentially catastrophic category five hurricane. the storm is the strongest classification on the five-step scale and has top winds of 100 60 miles power. china has increased its holdings in u.s. treasuries in an indication that government policies helped. 1.17oldings rose to trillion dollars in july. the u.k. premised are's attempt to silence foreign secretary boris johnson in a brexit debate has backfired. had not been authorized and insisted she was in charge of the government that .ad agreed to the policy johnson gave an interview in which he discussed brexit options and appears to leave open the possibility he might

quit in protest. and handling of the issue. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top go. it is a little bit of a waiting game for the fed. you have japanese stocks which missed and on the rally rebounding after the public holiday. the nikkei up by 1.7% and the topix trading at a two-year high. we had minutes coming from the rba, flat on the asx 200. also seeing the taiex come under pressure. inre was a recent run-up those apple supplies. we are watching nintendo jumping the most since october 2008. todit suisse upgrading outperform from neutral. leading the gains

among shipbuilders. this is on expectations a good win orders for large iron ore carriers and lg slumping and soulless the south korean government according to some reports has urged companies to reconsider their investment plans in china. anna and manus. manus: thank you, juliette saly in singapore. governor mark carney said the central bank may need to increase rates in the coming months going the surprise statement issued by the u.k. policymakers. said brexit is undermining the u.k. supply capacity making it harder for the economy to grow without generating inflationary pressure. nationals on set, the cio of fixed income energy the morgan asset management. you seem to be ahead of the curve. the bank of england needs to make -- think about raising rates.

>> underlying rates of growth are strong. and when you look at wage inflation it is a tale of two stories create on the one hand the public sector wages are growing nicely. the new dynamic is the autumn statement. we are likely to see a fair bit of fiscal easing in the u.k. anna: dialing back the austerity. the income england will also be forced to react to that. manus: you are ahead of the posse in terms of what they did. this is morgan stanley, months to the first hike and the hawkish rhetoric takes ground zero. when do you think we get the first hike and is it one and done, that is the more important part for the market. guest: no. the first time is november and

the next is likely to be from very next year. manus: they are not undoing the panic button easing. guest: no. to get that in november and there is the autumn statement. from the bank of england's perspective you cannot react to government policy until it is made. we'll get the autumn statement and the reasonable fiscal easing , so you are in play for more rate hikes in 2018, the first thing february. anna: the close as closer we got to european trade the pound turned around. up by .3 of 1%. this commentary around the economy's potential. this is the way that mark carney is talking about this, he is saying because of our reduced potential we get to the inflation story quicker.

guest: that is right. it is a tricky dynamic. long-term growth may be lower when you look at the u.k. so the way to think about it is the terminal rate of interest rate arguably should be lower than it ever was. if you think where the terminal rate was in previous cycles you are getting to 4% or 5%. this cycle is much less. where could a terminal rate me? why not in line with inflation? if you look at inflation your north of 10%. manus: your closer to 3% which point full percentage ahead of where the market thought it was. the other he mentioned was he added that the case for tightening may be reinforced by the possibility that global equilibrium and interest rates may be rising meeting monetary policy has to move to stand still and this is what he is talking about. the reflation trade across the spectrum, u.s., eurozone, u.k., and china. it is amazing how the tide for

interest rates have shifted. maybe the boj is a separate case. guest: inflation is starting to spike. the key to that will be the degree to which wage inflation starts to become embedded. we have low rates of unemployment and it has not been backed up by a rise in wage inflation. anna: although you do point to the picture of what is going on in the public and private sector. we're talking about private sector wages. what about the policy, does all the -- this take into account bumps in the road and the brexit -- in the brexit negotiation or do you focus on what we know the data. guest: it will not sound long but it is pretty long.

the reality is with all these events markets focus on them with the laserlike intensity as you get close to the end. nobody expects much resolution between -- before 2019. manus: gadfly made the point that markets a stencil they are underpricing the dangers and risks posed by boris johnson in terms of what kind of relationship we could have with the eu do go that -- do you go with that as a theory, he could cause an election or cause a areership challenge, we underpricing him. >> it has been important to focus on what theresa may said and think back to that lancaster .ouse speech she is the one that the prime minister and she is the one that set the tone.

anna: it will be interesting to see what she says in florence. 6:13 a.m. in london. thank you for joining us. manus: the u.k. rate debate continues throughout the day. we have an interview with the [inaudible] anna: and talking brexit with tony blair. we are with you all the way through the journey from the bathroom to the desk. later this hour we have marcus carson, speaking to andrea's -- vontobel assetom management. anna: we discussed this week's boj policy decision next. is preparing a call

for action against north korea and iran but what kind of action? we talk about the risks ahead in his speech to the u.n. this is bloomberg. ♪

anna: it is 118 p.m. in singapore, 6:18 a.m. in london. up i .6 asia-pacific is of 1% but there is confusing signals because japan is cap -- playing catch-up. much movement. this is what you need to be watching for today. ahead of sunday's election in -- [inaudible] makes hisald trump speech to the un's general assembly in new york.

anna: how quickly will the unwind the stimulus? here is juliette saly. juliette: toys "r" us has filed for bankruptcy as the retailer failed to keep consumers from abandoning its stores for the lower prices and convenience of online shopping. it secured $3 billion in financing while it restructures. this is the latest blow to a brick-and-mortar retail industry reeling from small traffic and the threat of amazon. bnp terabyte is one of the companies exploring of fund mesha -- a fund tie up. ofy studied the visibility combining the money management axa with accident many -- money managers. reached out to competitors including the texas -- natixis.

needstomaker said it guidance as it seeks to avoid trade tariffs and able to recruit skilled labor after britain leaves the eu -- the eu. >> i would not like that time of discussions to go more than six months without getting some inkling about where it is going to go, where the tariffs -- whether tariffs will exist and for everybody, how are we going to do -- do with skilled neighbor? juliette: that is your bloomberg business flash. manus: thank you. after spending a year trying to prevent the benchmark yields bankrising above, the faces the challenge of stopping them from falling too low. anna: it went from a one-year high to something below 0% this

month. our reporter is in tokyo. could the boj act on levels in thursday's policy update, are we expecting any change? >> at this point, not really. , we are noty shows expecting change. they do not have jacked right now. that is the consensus i think. atus: there are politics play. shinzo abe could be mulling a snap election. what impact might that have in terms of the bank of japan's policy? how he wins the

election. and if abe wins by a big margin he has power in his party and that means whatever he wants there. that is a core measure. abe's economic policies are in the right direction. [inaudible] let the boj continue its easing. anus: gdp has expanded to sixth straight quarter through to the second quarter. the nikkei is above 20,000. this would be a good time to go to the polls but the other dynamic is the end. the yen is the haven of choice

and this is a challenge for manufacturers, isn't it? >> that is true. you saw yen strength at its highest level since november. something boj has to closely watch. that means the consideration of sentiment among the companies. tot is something boj wants appoint. [inaudible] afford to take risks in strengthening the end. anna: thank you very much. let's turn our attention to the

boj. the boj is part of that story. little expectation of change even though there could eat excuse for movement or another date given what we have seen in the yields of late. guest: there could. acting in a stealthy way. they said clear parameters of quantitative easing but they dial that amount of been down. you can think about it on a monthly basis. when you're thinking about targeting that 0%, they can buy less. anna: it takes the focus off how much they are spending. >> the key when you look at that, you can't -- could interpose the yen. the reality is it is about controlling the yen and controlling inflation.

manus: here's the control. this is what corrode his oda'senge was -- kur challenge was. from what you have seen and talked to people in the market, is there a liquidity issue? functioningare quite well. japan are targeting in distorting to the function of the market it does not distort the liquidity story in the way ,hat qe and then the markets you still had very liquid markets. arguably it distorts the level. that is a deliberate policy. is the currency. if you think of japan they have an inflation rate of zero. what you do not want is dramatic currency spread. they have a weak dollar to

contend with. just: that is the challenge. it gets harder to generate that inflation. anna: what about the politics, this feeds in to what boj is doing. guest: very much so. markets get desensitized to a lot of that political risk. ultimately it will come back to the economics. manus: let's see if it does. anna: the u.s. president will call on world leaders to confront north korea and iran, two countries his administration considers to be the world's gravest threat. just what will he ask for? what tone really he ask for it in? of the u.n.critical

in the past. we will see if he continues with that. this is bloomberg. ♪

manus: it has gone 2:30 p.m. in the afternoon. you're saying the dollar rise, the yen falls days in a row. by 1.5%. been a shift let's put that into context. we have the topics on the move. move. topix on the there is a potential for an election call. haslinda: the weaker yen for the third day not doing that topix any harm. you mentioned the snap election.

higher, poisedix to renew its two-year high. the gains we are seeing on the msci asia-pacific index seem to be driven by japan because we are seeing a bit of softness in china, in south korea, in hong kong but we are seeing these gains in japan. moving on to the fx market, we are seeing some yuan weakness. weakestading near the level of this month. that weakness, some reports are saying it could be to do with estate owned dividend. traders are saying there is a lot of volatility in the yuan and what help to the weakness is stopping restrictions. 659 is where we are. we broke and went to 648.

quite a difference in terms of the weakening. that is not weakening. we're back at 135. this is following mark carney's speech in new york. if we look at the trading beenioning, sterling has rallying. the chart showing pound dollar 25 day to 10 day risk spread reversals. this is what is happening in the options trading below the surface. anna: a new edition of daybreak is available. tops have a look at the stories that have made it into today's edition. we start with geopolitics around trump. that is the cover story, the decision on iran's nuclear deal which he said will be made very soon. he discussed terrans malign

with benjamin netanyahu on the sidelines. manus: strategists are revising estimates after currencies' best week since 2009. a gain of 3%. governor carney is fueling expectations. it will seek to reduce stimulus in the coming months. the revisions are coming through saying about 40 but there are risks with that. all coming in, the fourth quarter consensus estimate at 129. made back most of those losses on the pound. this is against the dollar.

theresa may called the special cabinet meeting for thursday. to finde minister hopes boris johnson to her brexit vision before a key speech and italy on friday. she discussed his future in a tv interview in europe. -- in new york. turn our attention back to donald trump and his u.n. address. he will call on the world leaders to confront north korea and iran which is administration considers to be the most dangerous threat in the world. consequential method. we are looking ahead to what he has to say. the broaderbout u.s. story. the geopolitics is to the for.

but away from that this week a very big week for the fed. help me to understand something. the traditional logic when we are told what qe was supposed to and with the unwind will do is as the fed unwanted don't she we should see yields go higher. not necessarily apparently. if you look at what happened when they were doing qe you might be led to that conclusion. guest: we live in a topsy-turvy world. what that did was instead of pressing bond yields it pushed them higher. the reverse of that it sounds odd but it could push bond yields lower. anna: how does that make sense when we talk about being in a multiyear low rate environment. that contribute it to the low interest rates. how can we say it pushed yields higher?

guest: the way to think about it is we are in a rate tightening cycle. in rate hiking cycle's what typically happens is 10 year yields will settle will determine where the rate gets too. let's say it is roughly in line with inflation at 2%. areear yields around 2% radically wrong. manus: that would we a differential between a u.k. terminal rate. it would give you that lower dollar. backdrop,k at the everyone presumes no change. will he go for another rate hike and this is the backdrop to which they are tightening. sachsse the goldman

financial conditions index and it is the lowest since 2014. this is the backdrop to which they are tightening. crack on, you have the capacity to do this. >> when you look at market pricing it is hugely complacent and so indeed are the central banks. we are likely to get a lot of detail on the balance sheet. when you look at what is priced into the fed and other central banks it is way too pessimistic. ratesd should be raising and a couple times next year. of people have come in and said the risk is this over the next way for hours is that the fed moves the dot plot lower. you would take the contra side of that. guest: absolutely. think of the journey of this year. the fed has dragged it higher. back to the march rate hike. the fed said we are hiking

rates. when you look at underlying expectations of growth, underlying inflationary pressure it would not move the dots materially. the markets will be forced to get in line with the fed dots. when you look at the impact on bond yields it is flat. two-year yields are going up quite a bit more. 10 year yields we will see. they probably go to the high of the range this year around 250. -- thehen will the adjust? we have the impact of the hurricane and the strong hurricane season we're seeing in the u.s. so getting to the underlying data picture might be tricky between now and december. how i went is the fed going to adjust, will the scent the hawkish or dovish members? guest: data will be volatile. when you look at the economic

impact of hurricanes they can be fairly additive. the way the fed will communicate, they used speeches to repress the market. manus: a lovely line talked about bond traders. here we go. this is how we started the day. this is the positions, we have dropped the short positions. so the market is spooked. you think the market is under shorted for this move, how quickly can we get to the 2.5% the euro for it to? >> we could be there in a matter of weeks. the market has repriced very quickly. but the way we

started the year, we're talking about a 30 basis point move. the market looks the long way around. manus: that could have a dramatic impact on the equity story. 30 basis points can shutter a market. >> maybe that is a healthy consolidation. it will be in terms of bond markets. exceptionallyre easy so it will be a minimal hike. anna: thank you very much. our guests stays with us on the program. manus: if you are a bloomberg customer you can watch the show on tv go. this is what i call assistance from afar. tv . you have the charts and everything streaming. everything you do and you can influence the conversation. you can chide nicholas from the

bottom of the screen. anna: you are allowed to send nice messages. that's talk about brexit. brexit from the government. >> the inevitable point is you will get a permanent depreciation of the pound. i agree. it is possible to see have seening as we recently if the tariff barriers do not come in. each time we are trading to see the same reduction in the pound. for me net-net, this is something that does not give me a week what keeps me awake and night is the nontariff barrier. that is where we are more likely to see tricky situation with cars being held at ports in germany and france.

there is nothing you can do about that. there is no offset. you are at the mercy of customs and that works in the other direction as well. my biggest concern is nontariff barrier. juliette: you said you think japan does well and theresa may can learn from that and support more of one of britain's best exports. guest: japan is an example to learn from. it is an island. it trades with its neighbors but not part of a block. it has tariff barriers in and out. it has a remarkably powerful manufacturing industry. the government generation on generation has said industrial's asia and is important and theresa may if she follows her stated purpose of having an industrial strategy and she puts that at the heart of her government and in line with that favors a slightly weaker pound, the trading nation, the

industrial nation can do very well. juliette: if europe is less promising? guest: and terms of consumer confidence it is pretty much the same between the u.k. in europe. we both have the potential to get brexit wrong or we can be grown-ups and find a way of making it right. for desk callsls for a grown-up conversation. usa: even if you are missing there is no need to miss out on bloomberg entirely. you can listen on your mobile device. and next, talking about what the balance sheet unwind could mean. manus: what could the outcome

mean for investors of the election? his: donald trump makes first address to the un's general assembly. what is the u.s. president likely to say at the u.n.?

manus: it has gone 1:47 a.m. in the city of new york. we made fresh records, the dollar halted its slide. you're looking at a fairly flat opening in the u.s. at this moment. that's it close up with juliette solly. juliette: toys are us has filed for bankruptcy, it failed to keep consumers from abandoning its stores for the lower prices and convenience of online shopping. it said it secured $3 billion in financing to stay open while it restructures. the filing is the latest low to

a brick-and-mortar retail industry reeling from sluggish mall traffic and the threat from amazon. goldman sachs has named can hit new president. he is a 25 year veteran. aston martin has become the latest british company to call for clarity on the u.k. government exit negotiations. -- automaker says it needs the guidance within the next six months as it seeks to avoid trade tariffs and wants to labor. >> i would not like that time of discussions to go more than six months without starting to get some inkling about where it is going to go, where the tariffs are going to exist, how are we avoiding non-tariffs and importantly, how are we going to

deal with skilled labor? juliette: that is your bloomberg business flash. takesthe german election place this weekend. led bloc isn union likely to win. block stands at the% followed a 21% for social democrats. hers: the continuation of rule could be good for investors. matt miller has been crunching the numbers and what it might mean for markets. there is a great story in terms of the stock investors guide to the german election. show we start with the bullish case, what is the base case, what is the most likely scenario? it is not likely the most

bullish scenario for the market. matt: that is right. with angelaely is merkel winning, at 36% she does not have enough to form a majority government. she would have to find a coalition partner and the only partner that would bring her alone to a majority government so far is the spd. even though the spd is pulling -- pulling at the lowest levels it has since the second world at 57%,would put her 58% and that would give her what she needs. is that with the market wants? when we surveyed economists and talked to investors, that is not their first choice. any continuation of what has gotten us this far would not be the worst choice either. ina: that is the context line of who is likely to do best placesot depends on who

third. with the coalition will end up looking like and how long it takes to get there. how close the third finisher -- place finisher gets. theplaces first that is not french -- the right wing parties. places thirdis who that is not in those two parties and how much do they get? stp, the liberal party has a good showing, they are polling at less than 10% but if they have that much or more and merkel gets closer to 40% the market could get its wishes which would be a cdu-stp coalition, that is what economists said would be best for the market and that would be good for tech stocks, good for

investment in general if they want to reduce regulation. that could take months to work out. we talked to members of the stp and the green party, both possible coalition partners and they said after talks start in october it could take until right before christmas. manus: let's see how the coalition shapes up for angela merkel. a lot of people write that the german election is boring. others say do not be misled. it could be anyone of these combinations. it could be at an extreme the jamaican coalition which is not necessarily best for markets. election? is the

guest: reasonably boring. when you look at german government you get these grand coalitions. the precise makeup can vary but grand coalitions are good because you get a fixed ability in terms of holocene making. markets are looking forward arguably to that next phase of eurozone policymaking. mean by that,you what are they looking for? the frenchill have and german election out of the way and when you think of the european union there is this impetus to do more in terms of the eurozone. merkel doesela better that could be interpreted as a positive eurozone trade. key when yous the look at the german election, you

have opened a window to accelerate and develop policies. bank: the european central -- the markets have shifted dramatically. portugal has had an great. two very different stories. and the s&pow rerate of them yesterday. do you want to be long portuguese, they have moved aggressively. portugal,ng about greece, and spain. this has been quite a move. guest: it is horribly the start of a move. it is the international economic success story. when you look at what were the other countries, whether it is

portugal. that is the start of the move. could thatmuch more compress in terms of the benchmark? 75 basis points as you look out over the next year. a meaningful compression in terms of yields. storythis is the growth coming from the eurozone so much so that the austrian government managed to the money for 100 years at .112%. the u.s. 10r than year yields. it?u planning to hold onto guest: there is a case to be made that is good value. you can compare it to a u.s. 10 year but you have a different reference rate. in terms of the u.s.. the other thing is it might be a

100 year maturity. the duration is only 40 years. manus: when the ecb against to going to be the most aggressive manifestation of that, it is -- is it going to be bunds or on the periphery? guest: it will be bunds. ecb qe beneficiary of has been germany. that is the market with the highest yield. anna: thank you very much. on thegreat to have you program. thank you for joining us. talking about germany. coming up on sunday we have lived programming as the results commend and we bring you the election outcome and what it means for markets with commentary from high-profile guests in politics and finance. carney reiterates the case for the u.k. rate hike

during his speech in washington. how soon could a rate hike, or is carney bluffing? this is bloomberg. ♪

manus: carney clarifies. the bank of england governor dials back hawkish rhetoric as the fed begins its two-day meeting. anna: the u.s. president is set to urge world leaders to confront north korea and iran in his first speech to the un's general assembly. manus: and storm warning. maria marches toward puerto rico as a category 4, as the caribbean braces for its third strike in two weeks. anna: and boris johnson hints at resignation, escalating his role with the prime minister. meanwhile, the aston martin ceo says britain and europe have the power to leverage brexit. >> we both have the potential to

really get brexit wrong. or we can be grown-ups and find a way to make it right. manus: welcome to "daybreak europe," our flagship morning show right here in london. anna: a warm welcome to the program. it is just gone 7:00 here in london. the asian session is a little confused in terms of guidance for europe. the japanese markets are playing catch-up, and we see strength coming through in japan. the return of the european futures makes it go further into the u.s. story, which looks flat. manus: it does, indeed. we have that one deal across the billion..6 a meaty story, toys "r" us has gone bust. they have filed for bankruptcy.

i think that does personify some of the big things we want to deal with. you talked about the asian equity trade, anna. up 21%, tracking the u.s. equity story. we also have the possibility, will shinzo abe go for an election? the nikkei has gained almost 4% in the five days before the election. anna: and the asian story is the handover. the dollar index is under pressure. we focus very much on the fed this week, the balance sheet conversation, the timing of that $4.5 trillion giant in the room. how slow, how steady, how deliberate will that be? treasury yields are watching that closely. trump at the united nations, suggesting to the general assembly, how diplomatic will be language be? that has the potential to nudge markets.

manus: keep an eye on cable. we are up .3%. you just heard the aston martin ceo tells bloomberg that they have the power to mess it up. what you have here is a median forecast for 1.29 by the end of the year. analysts are playing catch-up with the market. the question is, when you assess what mark carney said last night, did he step back from the perhaps more hawkish tone that came out from the bank of india? he also talked about the global equilibrium in rates, rising in monetary policy, moving to stand still. an upgrade, 1.33 by the end of the year. there arehester, risks to the bullish view. anna: the currency team at nomura. paulound did fall again mark carney was speaking, more dovish interpretation than thursday. but having said that, in the

european session, the pound has gained momentum. let's have a quick look at the bond markets. bundis the price on the future. we talked a little bit about the bond market and what could be in it for them. manus: nick says when it comes to tapering, obviously what they want to avoid is a taper tantrum, but you could break through that .06% and it could happen quite quickly. anna: let's get an update on the first word news. here's juliette saly. juliette: thank you. in the u.s., president trump will use his address to the united nations general assembly to call on world leaders to confront north korea and iran. trump, who has been critical of the u.n. in the past, will need to build a broad alliance against the countries his administration considers the world's greatest threat. speaking yesterday to a committee on human reform, he said red tape and mismanagement has held the organization back.

former trump campaign chairman paul manafort was reportedly wiretapped by u.s. investigators under secret court orders before and after the presidential election. according to cnn, the taps continued into early this year, including a period when he was known to have spoken to president trump. meanwhile, "the new york times" says that robert mueller's prosecutors told matt forte in july that they plan to indict him. hurricane maria has reached a category 4 storm as it bears down on caribbean island nations still recovering from the. it is the third major weather system to rock the region in two weeks. separately the northeast is expected to take a blasting shot from hurricane jose. china has increased its holdings -- rose to 1.17 chilly dollars in

july. japan owned $1.1 trillion after the biggest gain in almost four years. the u.k. prime minister's intended to fire boris johnson has backfired. theresa may told journalists that johnson's intervention over the weekend hadn't been authorized, insisting that she was in charge of the government. the johnson -- johnson responded by saying he openly discussed brexit options and appears to leave open the possibility that he may quit in protest. slash global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . it's certainly a fed waiting game here, but we have seen japanese markets play catch-up to the rally across asia. the nikkei and the topix both at two-year highs. it's the biggest jump since may. you have seen on and offshore yuan fall, stocks under

pressure. the asx 200 a little flat on the close, and it's worth noting that emerging markets stock volatility is at a record low ahead of the fed meeting. looking at stocks we have been watching in the region, nintendo jumped the most since october, 2008 on an upgrade from credit suisse. hyundai leading among shipbuilders on reports that it could win orders for very long carriers, and lg going the other way in seoul, on a government report that the company has been urged to reconsider investment plans. next in terms of asian market actions as we await the fed. manus: thank you very much. the bank of england governor, mark carney, says the central bank may need to increase interest rates in the coming months. this is a price statement issued last week. anna: carney said brexit is undermining the u.k.'s supply

capacity, making it harder for the economy to grow without generating inflation pressure. they saw the pound move while he was speaking, it dropped as he was more dovish than last week, and has been making up some of that this morning. joining us to talk about the u.k. economy and much more beyond, the ceo of aviva investors. good morning. let's start with the u.k. and then go to global markets. will mark carney approve to be unreliable at this point, do you think? do you think he is telling us rates will go up or do you just want -- or does he just want action? >> what are the tools to manage the currency is obviously interest rates, so quite clearly, we have an unsustainable situation in the u.k., where inflation is rising faster than wages, and either the bank of england addresses that or you start to see new wage pressure coming through, and the situation becomes

uncontrollable. i think they are indicating it, but i think the further the pound moves, the more it strengthens, the less they feel the need to do. there is a game on between the markets and policymakers at the moment. manus: where are we? i started the show, $1.40. this is cable versus the forecast. the forecast is $1.29 by the end of the year. carney has recharged the debate, and that has a direct impact in terms of inflation. if he can hold of the ground here and hold the rally, it plays into his inflation call. >> it does any sense, but i think there is more to predicting the pound than the level of interest rate. if it was a normal economy in normal times, you would be looking at the relative rate available in the u.k. compared to the u.s., and so on. we are not in normal times. we are negotiating a major trade agreement, the brexit situation.

it's under discussion and it is not going so well. i think that is going to play on the fortunes of sterling as well. uncertainty about the level of the pound, simply because of that brexit. anna: and this week also, the fed meeting, very crucial for markets. we talked a lot in the last hour about the dot plot, and the fed expectations. what are you expecting to hear? how quickly, how slowly do you think that balance sheet unwind needs to take place? >> i suppose i have been something of a broken record on this. i don't think there is colossal damage to be done in the u.s. by pushing up interest rates. i think if we can move up in line with the fed dots, obviously the market hasn't agreed, but i think if we can't move up, the u.s. economy will

be able to sustain. you remember back in 2013, there was the taper tantrum. essentially policymakers were perceived to be moving ahead of the markets. that has been branded on the brain of central bankers. they don't want to see that happen. what's interesting is the first half of september, we have seen interest rates move up materially, but we have also seen risk assets do quite well. underlying, the global economy is not doing too badly. the imf raised global growth expectations for the first time since 2011. the real economy does ok. you can see risk assets able to sustain a rise in interest rates. portfolio constructors need to think about how their portfolio copes with a taper tight, a secular, long-term, increase in interest rates, and are they will set up for that. not necessarily attention, not

necessarily a sudden thing, but a gradual, every couple quarters, 25 basis points on interest rates. we do have global reflation happening. is central bankers don't do this by the time we get to the next downturn, they won't have the tools to respond. manus: put together some of the longest rallies we have seen in the u.s. let's have a look at the chart. the longest rally was 1991 through to 2001, 300% rally. now, 172%.910 giving what you have just said, you don't think this rally is tired. >> i think the rally -- u.s. equities, the rally is getting quite mature. and i think there are some sectors that do look quite expensive. but i think it is sustainable. i think it can sustain in a world where interest rates are slightly higher. the risk is that the market

doesn't agree, and we have a downturn as we adjust to more normalized interest rates. -- this goesaid back to your own words, that we get a flat end of the yield drop innd you get this the long. do you think the curve begins to flatten out as we go into the reduction of the balance sheet? >> as the central banks continue to drag their feet, we will see the curve steepen. the market will force the action from the central bank. one of the things that is quite interesting to me is that there isn't the same creation of demand for a long duration government. the demand came historically from benefit pensions and insurance products. nobody really needs to buy 100 year austrian paper anymore. manus: don't get her started. [laughter] >> the thing is, we may have bought some of it for portfolio management, but 2% bond yield,

if that moves 1%, you lose 40% of the capital that you invested in that bond. i didn't think people realize how dangerous bonds are. manus: stay with us. we will put that in perspective, how dangerous bonds can be. coming up -- anna: trump's debut. the u.s. president will call for action on north korea and iran in his first address of the human general assembly. manus: later, "surveillance" will speak to adam pozen. this is bloomberg. ♪

anna: it's 8:17 in berlin. 7:17 here in london. the euro against the dollar,

seeing some quite big movement this morning. strengthen the euro, pushing up against that 1.20 level. we also saw the pound moving against the dollar. the dollar index is down by as we head today, into the results of that story tomorrow. manus: let's ask juliette saly. has file toys "r" us for bankruptcy, as they failed to keep consumers from abandoning stores for lower prices in online shopping. they secured $3 billion to stay open while they restructure. the bankruptcy filing is the latest blow to the brick-and-mortar industry, still reeling from the threat of amazon. b.n.p. paribas is among financial companies exploring a fund manager. france's largest bank is waiting the feasibility of combining the

managing monitoring -- bloomberg reported last week that axa has reached out to competitors. goldman sachs has named can hitch in her as ceo. he has been the bank's president for the region since 2013, and is a 25 year goldman veteran. that is your bloomberg business flash. manus: thank you. today, donald trump will call on world leaders to defend north against north korea and iran. it is the u.s. president's first address to the general assembly of the united nations, and is most consequenc tial moment on the world stage. 30 schneider joins us with what

we can expect today from hong kong. good to see you. sum it up for us. what do we expect from president trump? >> well, we expect that he will come out very critical of north korea and iran, the particularly north korea, saying that other nations need to stand up as well, this just can't be the u.s. going after north korea. it's unclear exactly what he will ask other countries to do, and also whether he will go out -- it is unclear whether he will single out russia or china as an enabler of north korea. in the past he has been critical of china in particular for failing to stop the flow of oil to north korea, something that china has made clear they are not going to do in the short run. it will be interesting to see the details of what he wants others to agree to, but we know that will be the substance of the speech.

it is interesting because in the past president trump has not been a fan of the u.n. and now he will be spending a lot of time and energy there for the next few days, asking other countries to support the u.s. manus: let's see what today brings. jodi schneider, thank you. the ceo of and even investors is still -- of aviva investors is still here. this is something that all managers have to deal with. preparedness takes up a great deal of time but i suppose the question that we have you is -- to what extent does this deliver extended transparency and is in a good thing? i am certainly embracing transparency, i certainly inc. that as an industry we have been to opaque. there are some assumptions that to be embedded, perhaps how

closely and how much investment managers supposedly allow investment bankers and how much we will do in response to being bought or how much we would do. i think that is not accurate. nonetheless it is some people's reality. thatve made the decision we will pay out of our own so clientsearch, don't need to worry about that. historically, that came out of investment performance. attractive management is critical. butid always care about it never got the sense it was properly managed on the balance sheet. o the what does in thti decision to do it? to you all have to do the same? >> the other thing is if we are

going to go down a route to retire the funds we have to do some mental gymnastics as to how do you value a piece of research and how do you ascribe it to one fund versus another? obviously, investment ideas -- it's not as if we read a piece of broker research and immediately execute it. ideas come from all around. they come from sparking ideas of colleagues. they come from operating in the real world, shopping in toys "r" us and realizing that nobody is there by give you a clue. from how tome distill that down. that is difficult. but we are spending a lot to deal with it. half of our change spent is dealing with additional regulatory -- manus: the market is trying to

grapple isn't it? there is the extreme upper and fromng with a value packed j.p. morgan, how much are you going to spend? depend on how much we feel we need -- it will be a and that will be where we end up, writing checks. i think it is a reasonably significant element but not massive. i think that is going to drive potentially further consolidation, maybe not on its own but the fact that smaller investment houses might find it either harder to pay for quality recess or to have their own research teams.

i think we will see further consolidation is a result. anna: will you need to have your own research in-house? >> we do and always have had and instead of handing money over to investment bankers a lot of it will be spent in house. having said that, the figure i gave you is what we asked deked to spend. manus: you mentioned consolidation but if we look at the marketplace, you have henderson, janice -- i'm sure you have talked about this. are you big enough? will there be an opportunity for you to do the deed? >> i think we feel we are big enough and we have a very organic growth stories. typically this is between fund managers losing asked stash when a fund manager starts to lose assets consolidation becomes much more interesting.

we do have a positive, organic story -- that's not to say we like every other asset management business that might have some commercial logic or us. but i do expect generally the industry to see further consolidation. anna: and you are feeling good about the battle? >> yes. i think fundamentally i am hoping that this clears somewhat as people see the difference between market access problem, you don't need a big team to decide what is a good investment. it's a different business and i am hoping people realize that. anna: thank you so much. good to see you. manus: back this from anna and i, this morning's edition of "your daybreak." later in the day, tony blair

joining francine and tom keene. bloomberg radio -- you can always listen to bloomberg radio on your mobile device in the london area. this is bloomberg. ♪

guy: good morning. you are watching "bloomberg markets." in around half an hour, we will bring you the first rate of the day. i'm guy johnson in london. matt miller is in berlin. what are we watching? the nikkei surging past 20,000. japan's prime minister shinzo abe is said to be preparing a snap election. what will an extension of abenomics mean for the election? and revising the pound forecast.