nejra: good morning from bloomberg european headquarters in london. manus: this is bloomberg daybreak: europe. these are today's top stories. nejra: em equities had a 14 month low. goldman sachs warns there remain more pain to come. games, russia and china demonstrate the unity with a joint military exercise. we are live at the eastern economic forum. a dose of realism. the pound jumps as a deal is achievable but michel barnier warns there are three major areas of disagreement. ♪

nejra: good morning, everybody, from hong kong to dubai, from lagos to london. we are seeing a little bit of quarters optimism in asian equities. the index mapping eight days of losses which was the longest losing streak since december 2017. tensions,e of trade perhaps an opportunity to buy these markets. 111.41.en trades at we are up 3/10 of 1%. the bloomberg dollar index overall pretty much unchanged. the yen is one of the g10 currencies at the moment weakening against the dollar. barnier from michel

that a brexit deal is possible in the next eight weeks. cable holding on to the 130 handle. the two-year yield -- i know we look at the 10 year, but the two-year yield at its highest since 2008. 2.71%. keeping an eye on emerging markets as well, he very much in focus today. the e.m. currencies going through the 200 week moving average since 2017. manus: the question an emerging markets -- goldman sachs says there is more pain to come with currencies that are overvalued and undervalued. they say the indian rupee is overvalued. who has been defending this onslaught? this is indonesia. this is what they have done. they have been the most aggressive bank in asia this year in terms of raising rates, but they drain fx liquidity,

10%. followed up by the philippines in the white. india, just under 2%. this moment of irony is that malaysia and south korea have managed to build their fx reserves. these are when we begin to worry about current account imbalances. goldman sachs and the indian rupee are overvalued according to their model. the bottom line is deficit countries, beware. i wonder what that means for the usa or for the pound. those are some of the subjects we will cover with our guest. to what it was in 1997. current account deficit, beware. nejra: beware indeed. let's take a look at how u.s. futures are trading. we saw u.s. stocks closing higher yesterday, snapping four days of gains on the s&p 500.

the nasdaq gaining. it looks like we get have another reasonably strong session when the u.s. markets open later. 10 years on from the collapse of lehman brothers, we look at the lessons learned from the big names at the time. bob diamond joins us at 9:30 a.m. we will speak with the former ecb president. in the afternoon, former fed governor dan to relevant. let's get the first word news with debra mao. hey. debra: in the u.s., the white house has delivered a message to north korea as it said it is ready to start planning a second meeting with kim jong-un. the announcement by sarah huckabee sanders came hours and johnnald trump t bolton said nuclear talks with john bolton stalled. >> it was a very warm and positive letter. we will not release the full

letter unless the north korean leader agrees we should. the primary purpose of the letter was to request and look to schedule another meeting with the president, which we are open to. debra: russian president vladimir putin is toasting his counterparts from china and japan today at the eastern economic forum. it gets underway. at the same time, russia will hold joint military exercises with china in what is being called the biggest were games for decades. in the u.k., the pound is holding gains after jumping yesterday. above one dollar 30 as a deal on the uk's orderly withdrawal is hospital within eight weeks. if we areseen that being realistic, we are about to reach an agreement on the first stage of this negotiation which is a brexit treaty within six or

eight weeks. debra: in the u.s., more than one million people are fleeing as hurricane florence goes towards the east coast. it is expected to be the strongest hurricane in 30 years to get the carolinas. they are under emergency evacuation orders and four states have declared emergencies. initial estimates say it could cost as much as $27 billion in damage. global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thanks so much. let's check in on the markets in asia with sophie. huntersoks like bargain may be looking at asian valuations trading at lows. chinese market is helping lift the regional benchmark. the hang seng, we are seeing it

under pressure, up by 2/10 of 1% as tencent is set for a second day of losses after it shuts down the popular "texas hold 'em" game. also under pressure, led by samsung. when it comes to stock movers of note, i want to highlight macau casinos which are sinking. mgm china down by nearly 7% after deutsche bank cut its rating. chinese steel players are sliding after moody's forecasting declining demand. on the back of that $6.7 billion deal to buy idt. some analysts reckon the price hasis too hefty and s&p placed it on negative watch on the back of that. manus: thank you very much, sophie in hong kong. emerging markets stock market

has slumped to a 14 month low and there seems to be no recovery in sight. goldman sachs is signaling developing nation currencies have further, including citing unprecedented levels we have not seen and the global financial market crash. joins usr economist now. a great deal of research is being produced. goldman says there is more pain to come in the fx market. a bump in the markets this morning. market,s develop deficient to impact developed markets. i spoke to a jpmorgan asset manager and they are saying no, we are making great gain and it will not cause contagion. agree or disagree? >> i agree does not have the potential for contagion but it could add to uncertainty.

bag.are a mixed i see the current problems more of a consequence rather than a cause of the problem. in 2017, the dollar was were on aas markets risk on mode. money was moving out of the u.s. into developing markets, into emerging markets. wars, weear of trade have been more risk off. into safe dollar assets. that is going to expose em market which is horrible and does not have -- vulnerable. nejra: does the developed world remain protected from contagion from emerging markets as long as china holds up? kallum: yes. you have to pick the good and the bad emerging markets. relatively small emerging markets which are export oriented, rely on commodities tend to be vulnerable. if you have big emerging markets

like china or india, they have the firepower. they have the policy tools to stabilize the economy if markets turn into a more risk off mode so i don't worry about china or india at the moment. i worry about argentina and turkeys of the world. manus: one of the things i noticed this morning, the drawdown in reserves. how do you defend yourself? indonesia really stacking up to the market in terms of drawdown and fx reserves, followed closely by the philippines. can we expect much more defensive play from some of these em central banks? kallum: yes, you would expect them to push of the currency against the dollar. you can't defend the indefensible. it is very important for markets to look at your economy and realize you are on a sustainable path. all the rate hikes in the world cannot push up a currency which is an underlying economy that is not on a fundamentally

sustainable path. my best guess would be at the margin we see in improvement in the trade risk, what will happen is later on this year we will become more risk on again which would encourage investors to take money out of safe assets into other assets in europe, asia, em's. that will alleviate some of the pressure on emerging markets because again, these are a mixed bag. we worry about them as an asset class, but are some good markets and some that markets. because the dollar is stronger, they are a coming under pressure. nejra: they specifically highlight there are seven countries that are at risk of exchange rate crisis. sri lanka, south africa, argentina, pakistan, ukraine, turkey. when you look at economic fundamentals in terms of what you should be worried about, what are you looking at? current account deficit or something else? kallum: i like to look at fiscal

policy. if markets decide they pick a winner among em's and you get lots of capital flowing in, countries should not be discouraged from using that. what that does on the private side, it creates a deficit. they should at least try to go to sustainable fiscal policy. on aide is looking sustainable path. what you have with turkey is that fiscal policy and lots of inflow of capital. the economy is not on a sustainable financing path.i think markets should look for countries with good fiscal harbors as the ones that will do well when they become more risk on. manus: the question is what happens with the dollar and that will drive maybe when we go to risk on. what i have for you is emerging markets. we are below 20 year average according to the em. the rsi, the relative strength

index, which is down. it's got more miles to go, according to the technicals. if that is the perspective, is it the dollar that has to ultimately faded's movement before you step into em? kallum: i think the dollar has the trackback a little bit, weaken, which would be the expression of markets worrying less about trade wars, among other things before emc relief. but look at the fundamentals. four emerging markets that mainly export oriented. em's should be having a pretty good time of it. the u.s. is doing well, europe is not doing badly. things can improve in the second half of the year. all else being equal, apart from this trade war nonce is we have to worry about, it should be a relatively good environment for em's. the dollar then starts to weaken and you start to see that

stronger demand playing out and emerging markets benefiting. nejra: kallum stays with us. next, we discussed the latest on brexit after the pound jumped. optimism about getting a deal. manus: 10 years on from the collapse of lehman brothers, we look at the lessons to be learned with a former ceo. bob dimon's exclusive interview at 9:30 a.m. eastern time. this is bloomberg.

♪ >> the committee gathers this morning in an extraordinary moment. >> i think this is a defining moment in our history. >> the landscape of the nation's economy has been radically reshaped by the united states government in a matter of a few days.

>> we are in and the finding moment in our history. our nation is involved in two wars and we are going through the worst financial crisis since the great depression. disappearingand practically overnight. >> unprecedented. >> we lost three of the five top investment banking firms in this country. >> giants like bear stearns and lehman brothers, others to their knees like freddie mae and freddie mac. d all of you about six weeks ago this was entirely possible and in many ways predictable. >> first came the bailout of bear stearns which we were told were unavoidable. then lehman brothers. last week, treasury organize the bailout. >> what is tragic and lamentable is the ensuing calamity was foreseeable and preventable. this is no active god.

it was combination of private greed and regulatory neglect. >> it is difficult to leave in limbo so i would hope there would be some kind of action. >> this is probably the most difficult environment in the financial market i have experienced in my 30 years. but, it is a cycle and we will get through it. it will get better. >> we must act now to protect our nation's economic from serious risk. there will be ample opportunity to debate the origins of this problem. now is the time to solve it. brings back some pretty tough memories. our conversations are wide ranging with the high-profile executives, policymakers who were there. barclays, the former governor of the bank of england. just some of the faces of the

crisis. let's get to debra mao with your business flash. : boeing has raised its forecast for aircraft demand in china as an escalating trade war between the world's two biggest economies cast a shadow over the plane maker's prospect in the asian country. 670,000 newneed planes at $1.2 trillion through 2037. a 6% increase over its production last september. acquiring integrated device technology's for $3.7 billion. the second biggest supplier of semiconductors expands beyond the automotive sector into data centers and communication devices. the japanese company will pay $49 a share, a 60% premium to the u.s. company closing price yesterday. 10 years since the collapse of lehman brothers, michael

seltzer says he fears barclays could have been the next bank to fail. >> i remember watching the barclays share price tumbled out to 50p and genuinely wondering at the time, is it possible that barclays won't survive this? debra: apple will kick off a blitz of new products, setting the giant up for a strong holiday quarter. the focus will be on new iphones. it is still the company's most important product, generating two thirds of revenue. through the rest of 2018, the world's most valuable public company will launch revamped ipad pros, apple watches with larger screens and a new entry-level laptop. that is your bloomberg business flash. nejra: a brexit deal may finally be coming into focus.

michelle barnier said a divorce agreement in the next eight weeks so he argues issues including the irish border needs to be resolved. the pound gaining a tense of 1% in yesterday's session and holding on to its gain. kallum is still with us. a deal with an eight weeks is realistic but that is supposed to be the easy part. the hard part is after that. we are hearing u.s. brexiteers for a new fight over eu lost. is it concerning? kallum: i think it is interesting it seems to be moving into what they europeans are saying as opposed to what u.k. politicians are saying. the u.k. in eu will agree to some trade deal that will keep the irish border open. a semi-soft brexit. my hard brexit risk is about 20%. we have to watch the brexiteers within the u.k. they could scuttle a deal that might pass parliament if we don't get help from democrats,

s&p and maybe some pragmatic labour will help it get it over the line. kallum: you have a wonderful analogy in terms of the hard brexit years. suggest that a group of brexiteers, hard brexit are's might be up for deal making over -- kallum: do the analysts trick. from the beginning of brexit negotiations until today, you hasthe conservative party decided they would rather negotiate within themselves and compromise in order to avoid the risk of snap elections and have the risk of a socialist. which means that for the brexiteers, the so-called red lines are not really red lines. they have crossed them at each and every stage when necessary. it is more like a kidney stone. they will pass them, it is painful but after, over all the

party is healthier. the majority of moderates will bring the brexiteers and the conservatives around the table and say let's figure all this out. let's get a deal. let's avoid the risk of fresh elections. come 2022, probably jeremy corbyn will look like such a weirdo if the economy is still in decent shape. we could easily win that election. nejra: speaking of the economy, you put the probability of a hard brexit at 20%. what happens to the bank of england? we are awaiting a decision this week. a hike not expected but beyond march. kallum: the economy is already improving in the second half largely because consumer fundamentals are getting better. in 2020, strong job gains, wage growth should push consumer demand stronger. that would mean stronger economic growth, say 1.8% next year, 1.7% in 2020.

on the back of that, he could accelerate the pace of normalization. two hikes in 2019 at two hikes in 2020. it would make sense until after march of 2019. i think we will go through a quiet period and immediately after brexit in march 2019, we will see more hawkish signals from the bank. manus: yesterday, we got a nice reading in terms of the gdp. it shows that highs has picked up. today, we get wages. i didn't think we would be having this conversation about the growth of momentum. this defies the doomsayers of brexit, the economy is doing fine. what about the wage and constriction in the u.k. employment market? what do you expect? kallum: i don't see much of a tick up. suggests the labor

market is -- we have record level of job openings. well below the estimate of full employment. the near fact that employment gains remain strong suggest there is still supply growth. when we start to see employment up,s slow and wages pick only then can we conclude the labor market is close to full employment. kallum, the analogies are simply stunning.kidney stones to hard brexiteers. he stays with us. if you are traveling to work, you could always tune on to the radio live on your mobile device or digital radio. we're with you every step of the way. nejra: we absolutely on. back on radio at 8 a.m. we are live where vladimir putin will host chinese president cg xi jinping.

later, we will bring you our interview with the russian energy minister. this is bloomberg. ♪

has a milano finance or wonderful line. consolidation in the credit may consider bbva and avm as a possible m&a. for the make sense exposure or abn in the north. that is the latest newspaper reported. on the possibility of cross-border mortgages -- mer gers. the governor of the swedish bank meets privately with investors and bankers in london. can he soothe their nerves?

nejra: we were taking a look at the swedish election with inconclusive results. the debate on possible sanctions against hungary. manus: and lawmakers will hear from the greek prime minister. let's see what he is going to say. markets are in focus along with a big function issue really in the sideline. hurricane florence on the way to the ease coast of america. the markets and more. >> let's start with the mixed picture in markets. the real standout this morning is japan up 1.2%. with have a weaker yen. cheap valuations helping. elsewhere, china giving up gains earlier today. absolutely in focus weighing on the market. 1%, onng down 3/10 of the brink of a bears market. there is no sign the em crisis has abated.

i want to jump into my terminal to show you specifically what em currencies has been up to. this is the msci gauge. it is fluctuating but not trading at a 17 month low. we do have some bank meetings from turkey, argentina and russia later this week so we might have more pressure. manus, you mentioned the hurricane so i want to show you hurr go. this is a good way to track the path of hurricane florence. you can see the time of making landfall later next week -- this week. forecastfineries are to hit. it is likely to hit my home state of virginia but the thing to keep your eye on is this big yellow streak. this is a major transport line for the east coast of the u.s. already, we are starting to see oil prices reverse some of their decline, trending a tad bit higher today because of the likely impact this hurricane will have. nejra: i do not know your home

state was virginia. we have to talk about that later. i spent one year there. thank you, dani. let's get the first word news with debra mao in hong kong. debra: in the u.s., the white house has delivered a windfall message to north korea as it said it is ready to start planning a second meeting with kim jong-un. the announcement came hours after donald trump's top national security adviser john bolton said nuclear talks with pyongyang had stalled. >> it was a very warm, very positive letter. we won't release the full letter unless the north korean leader agrees that we should. the primary purpose of the letter was to request and look to schedule another meeting with the president, which we are open to. debraa: the announced says it will use a combination of trade deals and domestic reforms to survive a fallout from a

u.s.-china trade war. his country will remain resilient in the face of global challenges. vietnam's economy is sensitive to disruptions in global to pry ts gdp.s trade is twice i >> we are seeking new ways to grow. we already have 12 free trade agreements and in four other trade deals, including the eu. we want to maintain good relations with both the u.s. and china. ra: in the u.s., more than one million people are fleeing as hurricane lawrence continues to move towards the east coast. it is forecast to become the strongest hurricane in nearly 40 years to get the carolinas. the outer banks under mandatory evacuation orders and four states have declared emergencies. could cause as much as $27 billion of damage. global news 24 hours a day on

air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much. breaking news across the bloomberg. img's cfo will step down. this just crossing the bloomberg in the past couple of minutes. img group saying the cfo will step down as member. the group citing a supplement of shortcomings on due diligence. the dutch fairly taking a break from being angry at their bankers. heads incurred their wrath once again just to get more context. manus: this was a big issue last week. the bank agreed last week to pay $900 million to settle a dutch investigation into issues around money laundering.

if you go on to the management board of ing, you can begin to see and understand that timmermans was there for over 11 years -- 11.4 years, delivering -4.96% overrn of his entire tenure. a man who was there throughout the crisis of banking and issues that happened in europe. so, you have the labor and the green, neither which in government calling for ing to be stripped of its role to provide banking services. this is an embattled ceo ed embattled bank. let's get to one part of the world i have never been to, but she has been there twice. where the eastern economic forum is taking place. president trump's tariff is there. a string of deals already on the table. who chases them?

great to see you this morning. xi meeting with putin in less than an hour. what is the significance of this coalescing of two huge power figures? >> good morning. inping just landed in the port city of vladivostok. it is a symbol he is coming up. the first time xi is coming to this economic forum. we have a list of trade war tariffs, as well as moscow possibly facing more sanctions from the west. beijing and moscow look like they are pivoting towards each other, not just economically. they have already signed more than $100 billion worth of deals. on top of that, it is the kickoff of russian joint chinese military drill today. this is the biggest we have seen since the cold war.

many are saying they are not just looking at each other more economically -- we have a great function on the terminal where you can see china is russia's 11th biggest trading partner. can this possibly be changed? can russia become higher on the export list? china is russia's biggest. not just economic relationship, but possibly one of military as well. nejra: annmarie, leaders from japan, south korea, china on site. do we expect north korea to dominate the talks? : --arie manus: it seems as if -- ok, it looks like we have actually lost annmarie in vladivostok. nejra, i will leave it to you to take us through the next. nejra: let's give it to the u.s.

and president trump's agenda could face a hardship if the democrats win the majority in november. any scenario for democrats winning the house could mean the death of his legislative agenda and increased scrutiny on his inner circle. joining us is partner at m ercury reed. let's start with the midterms, morris, and the possibility of the democrats gaining control of the house. how far could they take that scrutiny on president trump? >> it looks likely they will take the house, but not the senate which is checks and balances. that is what the market should be anticipated. more checks and balances. you don't have a situation where trump can rough ride. that is good news and bad news depending where you are looking at. if you are looking at more checks, more privacy, you are excited about that. if you are a small business owner and some of the numbers --

typically, elections are about pocketbook issues. midterm elections are usually a referendum on the president, but the members of congress suffer. i would expect that would be a significant loss. i don't think it is going to be as large as most people think. i think the democrats will get the house back, but the senate will stay with republicans. manus: good to have you with us this morning. the one thing that strikes me. from a very far distance, to be fair sitting in dubai, are the democrats on the wrong road screaming for impeachment when really what the country is looking at is more dollars in the pocket? i can get a job easier. does america really want an impeachment and do the democrats really got it right? morris: i think this is a situation where we need to take a step back. bill clinton was impeached, but not removed. if you cannot get the senate, you cannot remove the president. it makes no sense to take the

american people and the world down that road. i think you will see the democrats start to pivot to a more checks and balance, more overturning some of the things you will not see -- the tax cut you saw in the past. i think they will pivot away from the notion of impeachment and more focused on checks and balance, oversight. you will see lots and lots of investigations because it will be more effective to have a wounded donald trump than an inspired and reenergized base if they go after the impeachment. nejra: we were talking earlier and kallum had a question on whether the trade war rhetoric is likely to die down following the midterms? morris: i don't think so. the trade war rhetoric works for donald trump. it may not be working economically. donald trump is a guy who always looks at headlines. when he does the tariffs, he is looking for the headlines. he does unnecessary care if it is implemented.

in the policy, you think about it and you implement the policy. he is out first and then tries to implement it. also, globally, the only way sanctions work if you coordinate purpose.ty of he is not doing much coordination because he is undermining allies and it is not clear why he is doing certain things. a lot of people he's going after is not a national security risk. him in onn they rein trade? morris: the executive pen is a fantastic thing. the only person who could undo that is the next president, which you have seen donald trump due to barack obama. manus: can i ask you -- if the deal with mexico blows through -- was it all worth it? taking apart nafta to shift a little bit on carpark

consumption, has it been worthwhile? were there be a nafta deal with canada and mexico in the united states? could he have done it a better way? morris: absolutely, if you look at the sanctions and the approach. if you look at steel, you look at rebar which mostly comes from turkey, this stuff still need to get to america. they will pay more. in the nafta situation, you are not going to have the kind of comprehensive approach of you don't have canada. if you look at the auto industry, they have cross-border deals, supply chains. it will ultimately hurt the consumer. nejra: we just went to annmarie and i know you have written a lot about the effectiveness of sanctions. one of the things the markets are focused on from russia is when we get the worst-case scenario in terms of sanctions that affects state banks. what is the likelihood of the

bill from hell getting through? morris: the problem russia has is not donald trump. the problem they have is a very aggressive congress who is going after russia because it appears the president does not want to punish russia for some of things they may or may not have done. russia's problem is fundamentally having a problem with congress where you have both sides, democrats and republicans, aggressively pushing sanctions because they don't believe donald trump will hold them accountable. manus: hold that thought. i want to bring kallum into the conversation. the checks and balance from a political discussion -- i put this in the library -- i am looking at political risk around the world in terms of china, the you get the u.k. ironically is stabilizing. the u.s. is beginning to fade its move a little bit. when you look at this kind of a chart, chinese political risk is fading, u.k. is stable, and the

u.s. political risk looks like it could be topping out at the moment. how do you look at that from an economic point of view? kallum: that is a good question. in the eight years since the labor crisis, we have been living in the age of caution. our appetite for risk. we have shifted from the age of caution to the politics of anger. when it comes to it this issue, it is less a risk that plays out in day to day economic behavior. it presents major tail risks. what i would expect is largely day-to-day economic activity not to be affected much, but anytime you have a major flare up, you will see currencies move, long-term bond yields move. on this issue, we cannot look to central banks to help us out to provide liquidity. we have to cross our fingers and hope leaders, diplomats can prevent these tail risks manifesting. morris: that is interesting

because of you look at the political instability, the craziness coming out of washington, the markets have still been strong. that means fundamentally that the american economy is in a great place. despite the political uncertainty, i believe that is priced in. congress has not done much, that has been priced in for year. now with donald trump, people have recognized he is a lot of rhetoric but not a lot of teeth. i think the economy is going to continue to do well, despite what donald trump is doing in the white house. nejra: thank you so much, morris reid. kallum stays with us. let's get the bloomberg business flash with debra mao in hong kong. plan to acquire integrated device technology's for about $6.7 billion. the second biggest supplier of semiconductors in cars expands beyond the automotive sector into data centers and communications devices. the japanese company will pay

$49 a share, about a 60% premium to the u.s. company's closing price yesterday. the chinese consortium is planning to drop its pursuit of a takeover of yum china. restaurants of kfc in the world's most populous nation. bloomberg has learned the investment group, which includes kkr, has decided not to continue pursuing a deal after its initial proposal was rejected. representatives of the investor group and yum china declined to comment. that is your bloomberg business flash. nejra: debra mao in hong kong, thank you. let's take a look back at a few key dates of the financial crisis. on september 15, 2008, lehman brothers filed for bankruptcy and merrill lynch was taken over by bank of america. manus: september 17, the u.s. government took control of aig , an $85 billion bailout to

prevent the bankruptcy of the nation's biggest insurer. nejra: on september 23, ben bernanke and henry olson testified before the senate banking committee about the bush administration's $700 billion plan to remove assets from the banking system. for a look back at what it was like of the height of the financial crisis, we spoke with michael spencer. guy johnson started by asking if he could remember where he was when he found out the news of lehman's collapse. michael: i was at the conference, 2008 conference in birmingham. cameron who was not prime minister then, mr. osborne who was not chancellor then. the news came out that morning and created, i would say drama everywhere. even if you went in the financial market, it was front page news.

i was due to make a speech that evening so i had to stay there. but i do remember saying to a friend at the end of the day -- although i was chief executive in those days, and all the financial stocks took a massive dive including our share price to the major hammering. although, we were exposed to lehman in the negative way particularly. i remember saying to a good on paper mine, puti'm 100 million quid today. guy: you remember it then. were you ready for it? did you see it coming? did people anticipate this was going to be a reality or did everybody think at some point some of you will step in? this can't be let go.

michael: it was a suspended reality environment. i remember sitting there watching the barclays share price tumble down to 50p and genuinely wonder at the time, is it possible that barclays doesn't survive this? is it possible? -- i wasproper, old not there in 1929, but i imagine that was a period where things were just collapsing and confidence was being undermined not necessarily by issues, but simply seeing the share price collapse. yes, i think most of us thought they probably would not let it go. saved.earns effectively other financial institutions got support. i think most of us thought, surely, a solution will be found. i think it is arguable that

with the benefit of hindsight, maybe lehman should have been saved. guy: the events of merely surrounding what happened -- the trade floor was a vocal and noisy place. i'm sure there was a lot of talk of what was going on. you are in birmingham -- michael: came back down pretty quickly. guy: what was it like on the floor? what were you guys talking about? the men and women working on the floor were saying at that point? michael: it was a bizarre although theecause system seemed to be troubling around us, there was a lot of business going on because rates were very volatile and people had risks to manage. what was going to happen to interest rates? interest rates came down and stayed down very firmly. there was a lot of movement in the markets. people were saying who can i trade with? credit limits good with the

barclays, the goldman's, whoever. pretty much a significant portion of the financial market looked potentially foldable -- vul nerable.only a handful of banks looked rocksolid at that time. the trading volumes we did in the subsequent weeks was surprisingly robust. the overall ecosystem was clearly carondelet slowly -- crumbling slowly and rapidly. that was michael spencer speaking to guy johnson about the financial crisis. tough time for many people in the business. let's turn our attention to the future and when the next prices may be working -- may be. kallum, a senior economist, and still with us. i took my mind back to the day that lehman went bust.

there was only one thing on my mind which was risk. who could i do business with from the brokerage i worked with? who can i place my funds with, my stock with and be sure i get it back? in terms of bank balance sheets and counterparty risk, are we in a much stronger position now in the market relative to the day lehman's went down? >> certainly relative to a decade ago. some of the leverage you see from the bank sectors across the u.k.d, u.s., europe and you are now in the range of four to six times. on that basis, you could argue banks are in a better position, balance sheets are more short up. the prices from the financial sector, nor even perhaps the consumer which caused some of the domino effects of 2008. part of it is the natural cycle

of rising corporate leverage across all sectors in the u.s. corporate space. not particularly financials but a rise of debt ratios which is looking tricky for companies to handle but not an issue until a few years down the line. nejra: if the next financial crisis might not come from the financial sector or from consumers, where is it going to come from? kallum: good question. economic opportunities do not just die of old age, they die because excesses have gotten to an extent that you need a cleansing recession. you could always find pockets of excess. i don't see the systematic threat we had 10 years ago which means some issue in some small part of the world may cause problems for the world. i don't see in credit, investment. correction is around the corner. the essential problem 10 years ago was one of information. the way we view the world was

not the way it looked ex-post. i don't see that conflict today. manus: and, if i could talk about risk on balance sheets again, isn't it true to both of you that risk has been taken off the balance sheets and moved into perhaps a different sector? the banking system may have risk itself but we have a shadow banking system that perhaps has grown exponentially. >> yeah, i think there is sort of the type a, classic style of end of the cycle risk which are broad corporate leverages to high and companies cannot handle those interest payments. there is also the sort of simmering risks that may come from parts of the emerging world where shadow banking is even larger or certain parts of the european area where debt and leverage has not been handled the way it has been in the rest of the world. that is one of our key risks, systemic banking issues that are

not in the main, when you look at the leverage issue i was mentioning earlier, those of the big corporate banks and corporate institutions across the world. there is the potential we could look somewhere else for some of those risks. nejra: thank you so much to kallum and nandini, global market strategist at jpmorgan asset management. she stays with us. keep watching all week to see our conversations with a wide range of high-profile executives and policymakers, including the former ceos of barclays and dojo bank, the former president of the ecb, the former governor of the bank of england as well. manus? manus: just to recap for anybody who is just tuning in, the ceo koos timmermans will step down at ing after money laundering probe. a fine of $900 million last week. we will talk later on through that particular story.

what are the other shortcomings within ing? many voices, systems looking at money laundering. we put it all in context shortly. this is bloomberg. ♪

>> good morning from dubai. live from bloomberg's european headquarters in the city of london. these are today's top stories. manus: asian stocks at a 14 day low. goldman sachs is there may be more pain for currencies. russia and china demonstrate their unity. militaryear -- a joint exercise in vladivostok. say a deal istors achievable.

in the next few weeks. michel barnier warns there are still three areas of disconnect. manus: -- nejra: it's just hit 7:00 a.m. in london. some news we got in the last hour on ing. the ceo will step down. this is following a money laundering settlement. in last agreed to settle dutch investigation involving otherlaundering and crimes by a dutch client. it underinvested in compliance. the search has started, that's

what we've learned. he has agreed to remain in his position until the completion of the succession process. taking a hit there. he's been with them over 11 years. he was throughout the lehman area -- era. said he is the ceo but he is the cfo. ing talking about this, saying as far as the u.k. is concerned, barnier can have 3% of the rally. nothing is done until the ink is dry. asia has had the longest losing streak in nearly four years on the equity market. the fx market has really been pummeled. we are getting u.k. labor data today.

we get to see ew. we are waiting for the italian market to open. morgan stanley says by italian stocks ahead of the budget because they are looking to cheap. we also have headlines coming could behat unicredit looking at bbva and ing and the prospects for m&a. with those names really make sense? the dax is up 22 points. you see a little bit of relief around the european equity markets. manus: it could be a bit of a followthrough from what we saw in the asian session. the s&p 500 gaining after three days of losses. if you look at the asia-pacific index, it's up following eight days of declines. we have a distinct absence of tradenes to do with

tensions today and perhaps that is leading to a little bit of risk appetite. japaneses giving equities a bit of a left. dollar-yen higher by 0.3%. you've already talked about cable so i will leave that out the looking at the two year yield. the 10 year yield was at a steady level. the two year at its highest in a decade. 2.71%. manus: just looking at the mliv blog, it's a lease bond revival is at risk as the ecb repairs to finally taper. even though you have these noises coming out and we are going to behave ourselves in , and theo the budget italians are looking at 5 billion euros in terms of payments for the minimum wage, take in mind that the ecb is going to taper and is that a

bigger risk for the bond market? it still in this narrow bandwidth. 20 bits on the u.s. bond market. we still haven't broken out of our slumbers there. , you've gotenheim them saying the fed is seeing a more restrictive path and a formula for recession. optimistic, two more rate hikes in 2019 -- 2018 and a couple more in 2019. italian stocks are bid. wells goodman has his blog going on the mliv why you maybe want to see that the ecb overbought these italian government bonds during the turmoil. let's get to the first word news. in the u.s., the white house has delivered a whipsaw message isnorth korea as it says it

ready to start planning a second meeting with kim jong-un. the announcement came just hours after donald trump's top national security adviser, john bolton, said nuclear talks with pyongyang had stalled. >> it was a warm and positive letter. we won't release the full letter unless the north korean leader agrees we should. the primary purpose was to and look to schedule another meeting with the president which we are open to. vladimir putin is hosting his counterparts from china and japan today at the eastern economic forum in vladivostok. russia will hold joint military exercises with china and what is called the biggest wargames in decades. u.k., the pound is holding gains after jumping yesterday. they used chief brexit negotiators said a deal on the

quarterly withdraw from the block is possible within eight weeks. are reallythat if we sticking, we are able to reach an agreement on the first day of negotiation which is a brexit treaty. six or eight weeks. >> in the u.s., more than one million people are fleeing as hurricane florence moves towards these coast. it is poised to become the strongest hurricane in almost 30 years to get the carolinas. north carolina's outer banks are on military evacuation orders and four states have declared emergencies. official estimates say florence could cause as much as $27 billion of damage. global news, 24 hours a day and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much for

the roundup. david england is standing by. today to you. the lack of bad news allowing some investors, at least in some of these markets that are believed to be more safe and less exposed to the trade tensions, coming in and nipping at the buds. up 0.6% higher. weak yen helping things in japan. 1.3% to the upside. benchmark, we the are a little bit higher. if we close at these levels we managed to avoid the run of eight straight days which would take us back to 2014 if you want to compare losing streaks. we have a failed bond auction in the philippines and inflation seems to be the problem. deutsche bank essentially

cutting their forecast for gaming in cake -- intake in macau. when we leave you with this. if you are having your breakfast, turn the volume down. this is a restaurant operator in hong kong. they reports in china say found dead rats in one of the soups. 7.6% today onown the back of a drop yesterday. manus: thank you so much. -- nejra: thank you so much. emerging-market currencies slumped to a 17 week low. some developing nation fallncies have further to even after a slide unprecedented since the financial crisis. our guest is still with us. differentiation ndm is the key, you said to us -- that to us before. but what does it mean to you now

as this crisis rolls on? key issue is separating the countries that have external or abilities to those that have more stable positions than they did in the past. what are those external vulnerabilities? account deficits and external debt. it will be harder for these countries to pay their debts when the fed raises interest rates and their currencies are a bit weaker. if you separate in order out these countries, the turkey and argentina's rank highly on these vulnerabilities and these currencies have been bad as a representation of that where it is the opposite of southeast asia and china where they have stronger positions on these bases. 6:00 a.m. withd this chart about fx reserves. who has really stood up in this run? it is indonesia and the philippines that have seen these

biggest drawdowns. goldman's hit says there could be more pain to come in the indonesian and indian rupee. does there, moment when value appears in em? i am seeing equity markets fund into em. doing any of that at jpmorgan? is there value in any of these currencies are equity markets? it depends on your time horizon. in the next three to six months, we don't believe the pain is over. trade talks don't necessarily ease and there are further concerns about specific markets on the geopolitical -- geopolitical side. if you are 13 -- thinking about at therm view, these are top of the expected returns over 10 to 15 years. and about finding the time

deciding how much you will take the volatility in the near-term. neutral on em for the next two years as a person the u.s. which seems more robust. manus: the jobs and wages information we got on friday and the repricing around fed rate hikes, does that support the argument that too early to dip your tell back into em? nandini: not just one jobs report is going to ruin the path they have set. they're going to be hiking and we will see two more in the first half of next year. it isn't going to be genetically too high for u.s. companies and not even for all emerging-market companies but it is higher than we have seen in the past 10 years which means some countries and some specific em corporate's who have issued quite a lot in recent years are not going to be able to service that debt as well as they could have before. we are not predicting mass

defaults are huge selloff but there will be some pain to be reckoned with. we areone of the reasons a little bit less keen on em broadly than several months ago or a few years ago. manus: thanks for the roundup. she stays with the bloomberg team. little, we will get a bit more on brexit and why the eu's barnier is optimistic about getting a deal. years from the collapse of lehman brothers we will look at the lessons learned. an exclusive interview at 10:00 a.m. u.k. time. this is bloomberg. ♪

>> companies that have formed the foundation of our financial markets are shrinking overnight. >> we are really lost three out of five top investment firms in this country. giants like bear stearns and lehman brothers and brought others to their knees like merrill lynch, fannie mae come and freddie mac. >> we warned all of you just about six weeks ago that this was entirely possible and in many ways predictable. >> first gain the bailout of bear stearns. then came lehman brothers.

then just last week, the fed and treasury fell out of aig. >> the ensuing calamity was entirely foreseeable and preventable. this was no act of god, was greeted by combustible combination of private greed and public revelatory neglect. thing to difficult leave in limbo so i would hope there would be some action. >> it's probably the most difficult environment to enter markets that i have experienced in my 30 years in the business but it is a cycle and we will get through it. it will get better. must act now to protect our nation's economic health from serious. >> there will be ample opportunity to debate the origins of this problem. now is the time to solve it. keep watching all week to see our conversations with a wide range of executives and

policymakers including the former president of the ecb and the former governor of the bank of england. group chief finance officer will step down after a money laundering settlement at the dutch bank. they agreed to pay about $900 million to settle investigation into issues such as money laundering and corrupt practices by former client. our guest jeffrey joins us. does ing think this move will help in the probe? deflectll help to attention from the chief executive who came under particular pressure after the announcement yesterday. it is important for the bank to show that a senior executive was held to account and with today's announcement it seems it was the cfo chosen for that role.

it's an easy decision to understand. he was at the top of the division that might have been expected to be in control of this. specifically, from the banks perspective, it does will decide more money than expecting and that's also on him. has taken the fall. he was there for quite a long time. just over 11 years at the bank. he went through the lehman crisis, the global market crisis, and the debt crisis. where will they look for replacement? it's too early to say. they has said he will stay in

play -- in place while his replacement is searched for. no indication from the bank today as to their preference. we will have to wait and see, i'm afraid. thank you very much. jeffrey smith. the cfo taking the hit for all the ramifications at the bank recently. brexit, a deal could be coming? you heard it here. we shall barnier said a divorce agreement is deliverable potentially in the next eight weeks. realistic is the word used. he cautioned that issues including the irish border need to be resolved. in 90 -- inback nandini.

barnier is responsible for moving this. are we over enthusiastic because nothing is done until it's all done? have we had a little too much of a relief? the gets toon't much or too little. it could change tomorrow so i'm not really worried about the basic movement of the pound. people are becoming more thatrtable with the fact there could be a best case scenario. if there is a soft exit, it takes a little bit more pressure off u.k. corporate's and u.k. consumers. a will to make this work from both sides. the quote from barnier is supportive of that. it's perhaps good news for broader markets. nejra: we talked about that last time you are on that you were expecting a deal before the end of the year.

you are neutral on u.k. assets so even though you expect the deal, you're not going gung ho into the u.k.. you get this deal and we expect it to be, it will be based on a few work around to get as that are deal but might not be a huge boon to u.k. companies that they hadn't been receiving before. we have kept herself neutral. the more important note is within the u.k. stock market. are taking different positions on large cap as was mid and small-cap and the sectors like financial services. it's very dependent on a brexit deal. homebuilders are not so concerned about the global picture. manus: the other stories in regards to italy.

we are going to move on the spreads between spain and italy. the other one is the unicredit story the caught my eye. ory may be looking at bbva others as a target for a deal. how much europe you want to take on board and would banking beat -- banking be part of that story? nandini: it looks still to be a troubled sector so we wouldn't call them the most attractive. a general support for banks in europe hasn't been great over the past few years. several specific issues in italy, for example, about bad debts. and just a comparative picture for the u.s. versus european banks. though the u.s. is pending some political discussion in the midterms, the fact that there could be some deregulation in the u.s. that benefits the banks

and that is not on the table in europe, there is some other sectors that are more interesting. technology, companies doing things interesting away from the financial sector. we start to see investors turn positive again. we had a tipping point in terms of how europe is standing now. nandini: we do believe the next few months should be better for europe in the past few months -- then the past few months. a lot of the survey measures were bottoming out in the past few weeks and months and we think that will be on uptrend. on ae looking at 2% growth gdp trend in europe. it's good for the region and would be a reason why european equities retracting a bit more attention. nejra: thank you so much. will be continuing the

conversation on bloomberg radio if you turn into that -- tune into that. we saw some caution respond in the asian sector. weakeresponding to a yen. in europe we see perhaps indications of a muted positive open. has10 year treasury yield slid by basis point. -- two-year yield noting worth noting it's near 2.71 which is the highest since 2008. we see uf -- u.s. futures pointing higher as well. the s&p 500 higher for the first time in four days. michel barnier keeping the markets happy. 1%rally as much as 8/10 of -- 0.8%. that's it for us. the stocks to watch our

unicredit, the italian spanish bond yield and we are 10 years out from the lehman's collapse. the lessons we learned. that occlusive interview right here on bloomberg at 9:30. ♪ this isn't just any moving day.

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the european open. we are live from our european headquarters here in london. i am alongside matt miller in berlin. matt: we are looking at mix straight in asia but more mixed to the upside. yesterday we are more mixed to the downside. cached rate is less than 30 minutes away. trade is less than 30 minutes away. anna: