>> good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. this is "bloomberg daybreak: are today's these top stories. goldman shuffled to the path. goldman sullivan -- john waldron becomes the firm's next president and coo. asian stocks compound gains. the russian central bank is expected to follow the ecb and boe in holding rates steady after turkey's hike. carney's warning. he is said to tell ministers that and no deal brexit could lead to a 35% plunge in home prices and would force the central bank to drive up rates.

welcome to "daybreak europe." 6:00 a.m. in london. thean get you up on markets. the msci asia-pacific index ending the week on a high. a second day of gains. emerging markets as well performing pretty well. we have the rate hike from the turkish central bank. a hike, a surprise upside of 625 basis points on that one week repo rate. we saw the turkish lira rally as much as 5%. we are seeing weakening in this section. 6.14 is where we trade. weaker by .9%. if we look at what the dollar is doing, it is heading for a weekly loss. biggest weekly loss since a february, i believe. we got the u.s. inflation print coming in software, something we are keeping an eye on in the u.s. mixed picture with

the chinese data, so lots to look ahead to in the show in terms of talking through central banks and the emerging markets base, but as we mark 10 years since the collapse of lehman brothers, we will be joined by the former ceo of deutsche bank after 4:30 p.m. u.k. time. juliette saly in singapore. in the u.s.,l, hurricane florence has hit the north carolina coast, but the storm is centered 85 miles from store. from short. torrential rain has crashed into waterfront towns as florence is set to make landfall later today. more than 1000 flights have been canceled. duke energy says 3 million people could lose power. it is estimated the total bill for them which could reach $20 billion. for damage could reach $20 billion. storm alert in the northern province.

as many as 824,000 people may have to be evacuated as schools and businesses have closed. the storm is forecast to pack maximum winds of 173 miles per hour with dust as strong as 207 miles per hour -- gusts as strong as 207 miles per hour. chinese state media want the nation it should not expect a the tradelution with dispute with the u.s. as there is no signs donald trump has changed his thinking. an editorial in the new york times says china should be aware there may not be a deal anytime soon. washington issaid taking a tough attitude. mark carney has told senior government ministers that a no deal brexit would probably seeing just rates rise rather than fall. bloomberg learned that carney said crushing out without an agreement would lead to a fall in the pound and higher tariffs. they said he suggested it would

make it harder to cut borrowing costs to support the economy as the be away -- boe did in the aftermath of 2016. a new claim that former goldman sachs president gary cohn backed scandal --th a billion dollar -- supported the "potentially lucrative line of business that some of it top asia-based bankers were developing in malaysia." he did not immediately respond to a request for comments. top senate judiciary democrat dianne feinstein has notified the fbi about unspecified information she received about u.s. supreme court nominee brett kavanaugh. the fbi said it received the information and included it as part of judge kavanaugh's background filed under standard

procedures. a spokesperson said he has been vetted repeatedly during his 25 years of public service and contended feinstein's move was sent to undermine a confirmation. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. let's get a check on the markets in asia with sophie kamaruddin in hong kong. sophie. we are seeing a nice column of green when it comes to equities in the region. is being led higher by tech stocks. samsung rising 3.8% in seoul. the nikkei teaching five to rise.above 23 -- 2252 rising to its best

rally since may 2016. we are seeing chinese shares looking fairly subdued after a mixed data set. retail sales coming in solid. investment did disappoint. we do have a bright spot on chinese shares. let's check in on one of those numbers. best toet to see its jump since november 2017. chinese electric car stocks are gaining ground as investor interest is rekindled as we saw the shanghai carmaker surge in new york trading overnight. i want to highlight kawa electric after draghi expressed confidence on economic growth and inflation that europe accounts for 14% of sales for it. pegatron jumping. and mentum will continue into the -- momentum will continue thanks to new futures. kamaruddin in hong

kong. thank you so much. turning to the emerging markets russia's central bank may defy government pressure to stay a neutral one. it increased the likelihood of a serious breach of the 4% target. joining us is blackrock's deputy cio of fixed income. great to have you with us and good morning. despite what we have said in the intro, i do not think anyone is seriously expecting a rate hike from the bank of russia today. i mean, what i find interesting about russia is a lot of people say to me have got a budget surplus, growth is good. inflation is really actually nowhere near the 4% target, yet it seems to have been swept up in the broader em selloff. blackrock takes a fairly selective approach to em. how do you balance that with the fact that you see certain countries swept up? >> we have seen a spread move from that investment. know, likelike you

argentina or other countries where the risk category is very high. the spread between high-yield and investment-grade em has moved out quite a lot because investors have been concerned about turkey, about argentina, about venezuela, and this presents an interesting opportunity if you understand the individual countries themselves. when theye russia, cheapen as a result of other pressure across emerging markets, the sanctions are important relative to russia. that provides a really interesting opportunity. nejra: i have a chart of russian bonds, if i can bring it up while you are speaking. we have seen actually the 10 year yields rise on concern about the possible sanctions. the worst-case scenario. ruble bonds for you would present an opportunity, for example? scott: we focus on the hard currency bonds, the

dollar-denominated debt. they have come back quite a bit. action by the turkish central bank, and thentina, has subdued volatility. russia is an interesting example because it sits between the high-yielding countries and some of the lower yielding countries. nejra: let me take you to a chart i do have of turkey which we have got in the library. the bonds for 2 p.m. narrowing with the central bank's rate move. it has come back a bit today which tells you something in itself. what about turkey? scott: turkey is very interesting. because the premium is so high and the currency has had such a huge amount of depreciation, we have seen a substantial appreciation over the last month or so. you look at the dollar denominated bonds, and those have rallied to nine point 5% yield over the last couple of months. in turkey, the situation really relates to investments. thatrday's rate hike shows

the central bank does have some independence and the upside surprise in terms of the rate hike delivery. what's important is in a number of countries where there has been high tension, we have seen policy reactions that have been relatively substantial. argentina is a good example. turkey is another example. as investors become more focused on what the central banks are doing within the countries, that may bring confidence back to the complex, which is a loss of some of this risk premium in turkey. nejra: how long does that last?ence tend to with of the lira rallying as much as 5% yesterday, we are seeing a pullback from that today, so you might have the short-lived confidence. do you jump in and take the opportunity or do you just wait? scott: it's a very interesting question. buying a rallying market is hard to do sometimes. again, looking at a chart, we have a tremendous amount of premium built into the country. that may be justified because of

the government's stance on different issues. this is an important step for turkey moving in the right direction. the fundamentals are relatively challenging in turkey, but , they emerging markets have been caught up in the recent cheapening of the asset class. nejra: countries like? obviously isuntry brazil and argentina. brazil obviously has the issue around the political situation, the upcoming elections, but as you look at the fundamentals, they are relatively solid. nejra: if you're looking to make income, how good is a time to invest in emerging markets, particularly if you look at the relative to the 10 year treasury yield? scott: it's very interesting, stepping back across the spectrum. yields are much higher than they have been. we had a 60 basis point increase over the course of the year and an increase in short rates as we know the fed continues to increase short rates. if you look at five-year treasuries, which are approaching 3% -- if you take a

conservative view, you could have that. a more aggressive you, we can have 4%. -- view, we can have 4%. suddenly, we are looking at 5% or higher which is much more in keeping with traditional thoughts around asked in come -- income investment return expectations. we have had easing rate cuts which repressed yields available fixed income investors, but with the increase in the underlying treasury market and some of the spreads widening in the more really aet classes, is very interesting opportunity for investors just to lock in high yield, which is an important part of the fixed income environment. nejra: we have talked about the potential impact of a country like turkey on the em space, but we have got to talk about china because some people argue that, you know, as long as china holds up, any kind of contagion or so often emerging markets can remain fairly contained.

i have a chart showing record holding. foreigners boosting investment in china's onshore deck. his brought -- onshore debt. is blackrock one? scott: it's obviously very big. as the accesss grows and we are involved in the market, trying to push forward as it becomes more open. your point about china is correct. if we look at the major drivers of emerging markets, it's obviously economic growth globally. economic growth means growth in the u.s., which looks very strong, but it also means growth in china, so to the extent you have a view around chinese economic growth -- our view is the government targets economic growth, not inflation -- we believe the government can meet its growth targets in china, and therefore, with a positive view around the u.s., that makes a very good combination for emerging markets, for example. obviously, the fundamentals are important, but then we have technical as i'm about

individual country politics, it nejra: thank you so much -- etc. nejra: thank you so much to scott thiel. we continue our coverage to mark a decade since the collapse of lehman brothers. our guests will talk about where we still need to improve, and this weekend, you can re-watched the documentary, five years from tells the where hank complete story of how he persuaded banks, congress, and presidential candidates to sign off on nearly $1 trillion of bailout. this is bloomberg. right in the middle, i was gripped with fear. ♪ >> i did not really have privacy.

i took myself on, stepped out, and i called windy. -- wendy. ini could hear the defeat his voice. he just did not see a way out. , i feel theendy burden of the world is on me. and i failed. and it's going to be very bad. and i do not know what to do, and i do not know what to say. please pray for me. ♪

nejra: this week marks the 10th anniversary of the collapse of lehman brothers. we have been speaking with key figures to look back on this historic event. risks thatdiscussed remain in the financial system and what we need to do to mitigate the next financial crisis. >> the banking system is safer than it was then, but it is not safe. there are still things we ought to be doing in my judgment in order to make a run on the

banking system much less likely. i think it is debatable whether the banks have issued enough capital. >> what is the biggest risk now? if you look at the financial landscape -- >> the big lesson from what happened was people could see that what was happening in the world economy was unsustainable, but you cannot forecast exactly upre the problems would blow , and i do not think it makes sense to say where will the next crisis be? the right question to ask is when the next crisis occurs and we face a problem, what are going to want to do? we will need to lend money to the banking system to keep it afloat. have we put in place a system of regulation which ensures the banking system is sufficiently resilient? i am not sure we have done enough to make a sufficiently resilient. it is a question of judgment, but i would like to see much more done in terms of making banks preposition collateral so they are in a position to borrow from the central bank, an

insurance policy. the key thing is to explain this to people in advance, so that when the government takes action to lend money to commercial banks, people understand, yes, this is simply the playing out -- the accident happened. tos is the insurance policy which they are entitled because they paid for it in the past. that is the key thing i think we need to do. nejra: that was former bank of england governor mervyn king speaking with guy johnson. let's get the bloomberg business flash. for that we go to juliette saly in singapore. hey, juliette. juliette: goldman sachs group investment banker is completing a takeover of their own firm. three of the most important roles will now be held by overhaulingho are the company that has been on wall street powerhouse for years. among them, john walter will be the firm's next president and chief operating officer. the second most powerful position in the bank. and his wife have

launched a $2 billion fund to help homeless families and create a network of nonprofit preschools in low income communities. says the fund will use the same principles that hundred and amazon. in an exclusive interview for bloomberg's david rubenstein, he warned it is dangerous for politicians to attack the media. >> i will say this. it is a mistake for any elected official, in my opinion --i do not think this is a very out there opinion -- to attack media and journalists. [applause] >> i believe it is an essential component of our democracy. isiette: hong kong tycoon -- considering listing some assets through a london initial public offering. bloomberg learned the company, which owns energy and water utilities globally, is speaking

with banks about the listing of certain british welding's through a representative did not --pond -- certain so much.ank you the european central bank confirmed it is sticking with its bond buying phaseout. a downgrade.ite the bank will cut bond buying in half and potentially end the program by the end of the year. scott thiel is still with us. it's got, so we did see a bit of a rally in the euro following the decision. i want to take you to a chart to do with the output gap, because this is one of the key things that came out in the news conference. it is something notoriously hard to measure for the ecb. has the output gap closed already? scott: it is on its way to closing. there are other countries where more mark --

obvious. in the u.s., it seems to be more clear. what draghi is struggling with is inflation continues to be relatively subdued. basicallynflation is a target. the underlying core inflation is low. i think the euro yesterday was that hei don't know delivered anything unusual in the meeting. opennk they left the door to potentially not ending the program in december, but i think by most analysts, they would suggest they will end it. one of the opportunities we look at in europe is btp's. they have come back over the last two weeks or three weeks since the beginning of august, but if you take a step back and look at btp rates on the year, they are 70 basis points higher with bund trades basically unchanged. when we look across the european landscape, etp spreads are an interesting opportunity for investors going forward. understandingmore

of what the government's intentions are in italy. they seem to be much more accepting of european rules, so as spreads compress, we to think that is an interesting opportunity. i have this chart handy year. -- nejra: i have this chart here. you are short french bonds and german bunds. bigt: there are two bank opportunities. one is the compression of btp spreads. in italy and the direction of the government -- obviously, it has been very volatile. the second is that german bund rates look too low. if you look at the spread setween treasuries and bund they are relatively low relative to, historic. if we look at what the ecb is telling us, they are not looking at -- the policies are in place to remove the accommodation.

they are nowhere near that same kind of aggressive path, but to me, with russia coming off, some pressure coming up -- pressure coming off, bund rates look low. long italy and short german rates. nejra: what about the u.k. then? i ask this because i keep asking people whether the market is actually too devilishly positioned compared to what we might get from the bank of england, particularly as bloomberg understands that mark carney has told senior government ministers that a no deal brexit would see interest rates rise faster than fall? scott: the u.k. is very interesting. there are two interesting opportunities, gilts and the pound. gilts have traded really well all things considered over the course of the year, and that is because the market is unsure that with brexit looming, policy can follow a normal reaction

function, which is to say it react to higher inflation, higher economic growth. obviously, the uncertainty around brexit has clouded the view of economic growth and has certainly had an impact on inflation despite the currencies cheapening as we saw after the initial brexit vote. a from a g perspectivei,lt -- gilt perspective, it is hard without clarity. the pound has more of a view around whether we will have a deal or no deal, but if we look at the pound's performance over the year, it is basically on par with the euro was suggests there pound.eal premium in the if you're going to take of you about brexit, the british pound is the better way to take the view. nejra: scott thiel stays with us. you can catch up on the bloomberg terminal. to tv and on the recommended time, you will see the best clips of our coverage this week. of course, you can watch all of

our shows on tv anytime you want. team.t, he had picked his we will take you through the changing of the guard. the u.s. ceo of bnp paribas joins us. this is bloomberg. ♪ ♪

nejra: 6:30 a.m. in london. let's take a look at what you should be watching today. mark carney is due to make his first speech since agreeing to extend his time at the central bank. there is a policy announcement. after the european close, we get a sovereign rating update for e.u -- thetfromt he e.u. >> with asian stocks at a two-year low in valuation, that is helping put a bid in the market. kospi up even higher than 1%, 1.2% this morning.

even though we have those economic data numbers in china, markets barely changed. for now, barely changed. australia a bit, also coming into the market. another things traders have had their eye on is the hurricane that hit the u.s. east coast. i want to take you into my terminal to show you what the path looks like. this is hur gilt. . i have charted its path. that's all i have here. you will see a lot of affects to soft commodities. in the carolinas, we have a lot of agriculture plants as well, so i want to show you what futures are doing. the second-biggest home to hogs in the u.s., so over here, you can see futures have jumped up as the hurricane has hit the east coast, but if history is any guide, we might get a bigger

boost to hog prices. we saw a big spike in prices. although we are starting from a higher base this time, manager sentiment is still pretty negative, so we might get a short cover in rally. you so much. first word news with juliette saly in singapore. juliette. chinese state media has warned the nation should not expect a quick resolution of its trade dispute with the united states. no sign that president donald trump has changed his thinking. an editorial in the global times said that while it is good to talk, china should be aware there may not be ideal anytime soon. the newspaper said washington is still taking a tough attitude. bank of england governor mark carney has told senior government ministers that a no deal brexit would probably see interest rates rise rather than fall. bloomberg has learned that

carney told them that crashing out without an agreement would lead to the fall in the pound and higher tariffs, pushing inflation higher. he suggested that would make it harder to cut borrowing costs to support the economy as the boe did in the aftermath of the brexit vote in 2016. in the united states, a new book claimed that gary cohn backed dealings with the scandal hits malaysian state while executives questioned -- who questioned the transactions were sidelined. whoauthors say gary cohn, went to become donald trump's director of economic council, supported the potentially lucrative line of business that some of it top asia-based bankers were developing in malaysia. he did not immediately respond to a request for comment. judiciary democrat dianne feinstein has notified the fbi about unspecified information she received about

u.s. supreme court nominee brett kavanaugh. the fbi said it received the information last night and included it part of judge kavanaugh's background file understand i procedures. -- under standard procedures. they contended feinstein's move was done to undermine the confirmation. global news 24 hours a day, on , air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: juliette saly in singapore. thank you so much. one of the most read stories on the bloomberg terminal overnight, goldman sachs says bankers are taking over the firm. executives rose through dealmaking unit. david solomon named john waldron to be the firm's next president and chief operating officer, the second-most powerful position in the bank. another executive, stephen, was ed to become ceo.

solomon dispatched the current cfo back to the trading division, making him the third bank's largest unit by revenue. sticking with the u.s., what happened to inflation? americans paid much less for some goods and services. the slowdown follows a surprise decline in producer prices, suggesting little urgency for the federal reserve to speed up the pace of interest rate hikes. oftt thiel, deputy cio income is still with us. this is not the fed them -- preferred inflation measure. it came in better than expected. when you balanced those two bits of data, what did that tell you? scott: the fed is on a relatively preset course for the remaining part of this year, and if you look at the inflation profile in the u.s., although it is strong, it not accelerating at a dramatic rates, so that gives them time to reflect upon the economic activity on the base of inflation.

the report had some particular it is related to it, but more generally on trend, inflation is relatively close to target. for the fed, it is an interesting time because they have raised the rate quite a bit over the last several years. and in our view, as they approach the end of this year, they may become a little bit more reflective upon not only the rate of change, but also the level of the fed funds rate. and so, you know, as we talked about earlier, kind of income or the intermediate part of the u.s. yield curve, getting close to 3%, looks like an interesting opportunity for investors because if the fed were to be a little bit more sanguine about the rate of rate hikes or if inflation were continuing to not , it looks too much very attractive. nejra: are we focusing too much on the tour rate? i ask because there is a column on the bloomberg where columnists is saying the debate

this is the bigger picture, which is it is better to let economic conditions determine it. scott: there is much debate about its even within the fed itself, and i think what we look at is the pace of change of economic growth, of labor growth, of inflation. and what we would kill say is that although, obviously, much it isccommodative -- still growing. the output gap is closing. wages are rising. unemployment is falling. i think it is for the fed to try and understand how all those pieces fit together. neutralup with an exact rates is difficult. the fed debates it internally. nejra: some have said to me that what could happen is we see the hikes expected this year and if there is pauses an escalation in the trade war. and blackrock, you are focusing much more on the internal dynamics of the u.s. economy rather than the trade war.

scott: it's interesting because dragging was asked about trade wars. what he said is we cannot -- we do not guess what is going to happen. right? we look at factually what is happening. we cannot make a forecast about whether tariffs go up or down. we look at what is actually happening. policymakers have to take that approach. you have to be cautious of the fact that there is a trade tension out there. there is tension in emerging markets. but really what matters ultimately for policy is the fundamental direction of the u.s. economy. that has obviously been very strong, but we have still yet not really seen a huge passed through to inflation, so for the fed, more so than trade tensions, more so than emerging markets, it is really what is happening at the fundamentals in the economy and why is inflation being bunch more subdued in the sport -- much more subdued than it has previously? that is what is at the heart of the policy, so when we look in the future, past

2018 and 2019, we would get some idea that they may reflect on the amount of rate hikes that have been delivered given that the inflation profile -- given the economic statistics. i think it is about fundamentals more than it is about turmoil and emerging markets. nejra: given everything you have said about what you think the ,ed would or should be doing the two-year yield at .276, has back onto far to the upside? has happenedk what is the rate for investors has changed dramatically, so before, we had 50 basis points. we now have 2.3%. -- 2.75%. strategy is around increasing portfolio.n the it is much more attractive than they have been in the past. callu know, it's hard to whether that is the top or the bottom. it's interesting. if you go further afield to a

five-year, it's even more attractive. offer ishat yield on something that fixed income investors should take advantage of. there are many ways to do that. whether we increase more or not has yet to be seen, but at least, given how much we have increased and the rain that is available, that's very attractive. nejra: attractive in even shorter maturities. we were talking earlier about the demand for cash. people see that as a diversifier to u.s. equities. scott: that is about the risk free rate. investors again looking at shorter maturity strategies. nejra: scott thiel staying with us. theontinue to look back on collapse of lehman brothers. the defining moment of the worst financial crisis in almost one century. discusses challenges deutsche bank faced in the aftermath of the meltdown. we tried very hard, and organically, i am at saying we were not successful. we moved from a very low

$4 billion into 2011, so it is a fantastic achievement, but it was very difficult to grow organically because of the competitive situation, and there was not too many opportunities to buy into the market before the financial crisis. it then changed when postbank or others became available, and we did that immediately, but you also see, and other banks, that acquisition is not all. retail very challenging market, and that is why even my previous answers -- seven years tolier -- that the only way a larger scale is going into investment banking, and that was, you know, a lot of people applauded that. time got lauded at the saying you are the only one who

made it. deutsche bank got into the global investment banking in a short period time, and that was a huge achievement. then of course in the financial crisis, which we went through without any major loss, contrary to jpmorgan or ubs, societe generale, and we did not need any money from the government, but then later on, we had legal risks. not as big as some of our competitors. also has to beit explained. unfortunately, we did not have, you know, many court rulings on that. towas settlements in order come a you know, keep everything quiet. but i think the u.s. played really hard ball. not only with the european banks, even more so with the u.s. banks, and you know, when

barack obama came into power, he email.he sent an i remember the last sentence. "join me in fighting." that was very much the attitude at the time. betterm get disciplined and let them pay for it. and that was the attitude. nejra: that was former deutsche bank's ceo josef ackermann speaking with guy johnson. we continue our coverage to mark a decade since the collapse of lehman brothers. where the vulnerabilities still remain and where will the next crisis come from? jim martin joins me after 7:00 a.m. u.k. time. this is bloomberg. ♪

>> 10 years ago, i was a trader at lehman brothers in london.

in late 2007, it really became clear that we were heading towards some sort of financial crisis. i was naive and up to think that lehman brothers is probably the safest bank or one of the safer banks. i think i was brainwashed into lehman brothers. my first full-time job out of university, and i really enjoyed it. the atmosphere was very good. in the summer of 2008, the started -- it started to become this idea that the reality was different to what management or possibly presenting to us, and the situation was much more dire. so on friday the 12th, i was flying to budapest for a work conference in hungary. there were some other junior salespeople and traders there from lehman brothers, and i remember assuring them on that saturday night, look them is absolutely fine. look,rst-case scenario -- it is absolutely fine. worst-case scenario, we get

taken over by bank of america. there was no idea that monday we would have no employer, no option, and no way out. on sunday, i flew to is some will and i remember -- istanbul. lehman brothers to file for bankruptcy in the morning on the tv. i turn on my blackberry in shock and i got all these messages from people from the new york -- from new york. it's been great working with you. see you on the other side. i was like i think i just lost my job. i really thought there was no chance that lehman brothers would be allowed to fall. i became much more cynical about the global financial system after that. i never got back into the lehman brothers office again after september 12, so it was actually a colleague who had to bring a ox for me. i never got to do that. history rhymes. it does not repeat. do i think we will get another lehman brothers going down? systematic bank.

will we get another financial crisis, yes, probably. it is like the 1929 great depression, the great collapse. after the roaring 20's, people got so excited that everyone got caught up in the greed. as long as humans dominate the financial markets, which they still do, i think we will get financial crises. bloomberg mliv strategist and former lehman brothers trader, mark cudmore, walking us through the collapse of the wall street giant. and by the way, if you want to read a selection of columns on the bloomberg, you can go to nibb opinion. there are a number there. chan, aus now is edward banking partner, and scott thiel. gentlemen, great to have you both with us for this discussion. let me just start with you on banks because a lot of people

tell me, look, banks are in a better position right now. are they? edward: they are. what has happened over the last 10 years is that there has been of regulation affecting just about every aspect of a bank's existence. they hold about three times more equity capital than they did 10 years ago. they are smaller than they were. arguably safer. get intoey were to trouble, there are the policy tools that should help at least save at least some of them. thea: let me ask you about capital. today, the weighted average tangible ratio, the sixth largest u.s. banks, 7.7%. that is more than twice what they had on the eve of the crisis, granted, but it is still down from 8.3% in december 2015. some people would argue that by any reasonable measure, this is not enough. edward: and that's right. lots ofe's

commentators and policymakers who would like that to be a lot hider. even a percent. there are those -- 8%. those arguing for higher. the calibration is a debate that has not settled yet, because on the one hand, you have the balance safety. more capital would make a bank failure. never -- a big safer. nevertheless, you have to foster an environment where they can continue to be entrepreneurial and innovative in providing banking services without running a horrible risk. it is a difficult balance to drop. investors and the banking system, there are interesting opportunities that came out of this push to have a safer banking system. we look very closely at the capital structure, so bonds with more equity and the scoop on fixed, and there are interesting opportunities across the spectrum. you have rates plus 1% to plus 4% across the spectrum.

you have geographical diversity is, european banks, u.s. banks, etc. it's think for investors, an interesting opportunities that to look at investing across bank capital structures as a result of banks trying to be more secure with the ratios. investorstt, are better at assessing risk now than they were previously? scott: are they better? i think there has been a renewed focus since the financial crisis on credit work of individual institutions, right? so there is a lot of work that was spent on analyzing individual banks downs sheets and being very selective about the names that you buy. there are obviously a lot of products that are indexed products that give you a little bit of every single name, but what i think one of the lessons from lehman brothers is you need and deep do wide investing, which is to look across the opportunities set, and when you find something, really drill down into the

actual credit quality of the investment. i think that has been more pervasive across the investment environment, but again, you know, you can still get swept up by investor sentiment about the segment you have about greed, for example, but it is really, i think, one of the lessons learned is you really need to do the credit work. nejra: do your homework. regulation picture and how that has developed since the financial crisis -- have regulators got far enough to protect us from the next crisis? edward: that is quite a difficult judgment. there is just a lot of regulation out there. it is complex. it is overlapping. and you have different regulations aimed at the same policy objectives. i think, fundamentally, at the end of the day, you can forensically un-pick what happened at lehman's, address every aspect of that. what that does not overcome, if you were faced with a lehman- like situation tomorrow, it is a

very chaotic process. it's difficult to convey to people the chaos there was at that period in time, and that ,reeds a lack of confidence which actually is more damaging than whatever policies you might have to resolve the situation, and i think the other factor to bring in -- because people asking what happens if lehman's happens again? -- actually, it is difficult to compare like for like. interest rates are at an historic low. it is difficult to see what the policy stimulus reaction would be in this climate. that isnd one thing different is the leverage in terms of where it is, right? scott, corporate leverage seems to be more of an issue now whereas bad then, it was more about consumer leverage. when you look at the debt picture, what does that tell you about where the next crisis can come from? scott: if you look up a

structure product, asset-backed securities, backed by real assets or consumer activity, obviously, the deleveraging, the consumer, and a healthy state of the u.s. economy from a fundamental perspective -- employment, the economy -- those things are obviously very strong, so from a fundamental perspective, particularly at a consumer level -- although having seen some real averaging -- the over -- summary leverage releveraging. we are in a different policy framework that we were in 2008, so it's important to keep in mind that rates are still very low. they arerozone, negative. so the balance sheet of central banks, although at some degree now coming down, is still very big. investors needgs to think about is what could the policy response be in the environment where rates are

still very low and balance sheets are still very big? i think it is an important -- veryonfidence is very -- a important factor. we are at a very different policy perspective than we were in 2008. that is a very important point. nejra: where could the next crisis come from? scott: i think that it is hard to say, but what i would say is are investors still overexcited about the low level of spreads. nejra: ed? edward: i wonder whether it might be in the shadow banking system. we just do not what is there -- we just do not know what is there. nejra: thank you to ed chan and scott thiel, joining us from blackrock for the hour. edward will be continuing the conversation with us on bloomberg radio. coming up, we won't wrap up the latest rate decisions and look ahead to russia and later than that, we will get jeff bezos's thoughts on the media versus trump. in full. air

lots to talk about with central banks and emerging markets, coming up. this is bloomberg. ♪ ♪ this isn't just any moving day.

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>> good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." goldman shuffles the pack. david solomon names dealmakers as three top executives. the firm's next president and ceo out. -- coo. the russian central bank is expected to follow the ecb and boe in holding rates steady after turkeys hike. carney's warning. the bank of england governor is said to warn ministers a no deal brexit could cause higher rates along with a 35% plunge in prices.

>> good morning, everyone. welcome to daybreak europe. let's take a look at how european equity markets might open in just under an hour. is a positive picture in futures. europe could end the week on a high. we saw touch of weakness on the stoxx 600. we see a second day of gains in asian equities. ftse 100 and dax and cac 40 futures pointing higher by about 0.4%. take a look at what is happening in fixed income. we got that cpi inflation out of the u.s. yesterday. that played through into the dollar. scott thiel from blackrock reason wet was the saw euro strength rather than mario draghi's press conference. looking at the 10 year yield, we are dead flat steady at 2.97%.

that is reflected in the futures picture. if we look at how the european bond markets might move, we have the cash market opening right now, not a lot seems to be happening in the futures market in terms of that btp-bund spread. scott thiel seeing opportunities in btp's. we are focusing on emerging markets. the turkish lira adjusting as much as 5% after we got that rate hike. 620 five basis points more than people were expecting from the turkish central bank. more than most people were expecting. that already fading today. juliette saly in singapore. juliette: in the united states, hurricane florence has hit the north carolina coast. the full effects are still to come. hurricane force winds and

torrential rain have crashed into waterfront towns as florence is set to make landfall. more than 1000 flights have been canceled. duke energy says 3 million people could lose power. the total bill for damage could reach $20 billion. at the same time, the philippines is thunderstorm alert before a superstorm hits land. 824,000 people may have to be evacuated. businesses have closed. to packm is forecast maximum winds at the equivalent of 173 miles per hour with gusts as a strong us to hundred seven miles per hour. chinese state media has warned the nation should not expect a quick resolution of its trade dispute with the united states. there have been no signs president donald trump has changed his thinking. an editorial said china should be aware there may not be a deal anytime soon.

the newspaper said washington is still taking a tough attitude. bank of england governor mark carney has told senior government ministers a no deal brexit would see interest rates rise rather than fall. bloomberg has learned carney told those present that crashing out without an agreement would lead to a fall in the pound, pushing inflation higher. he suggested that would make it harder to cut borrowing costs to support the economy as the boe did in the aftermath of the brexit vote. goldman sachs investment bankers are completing a takeover of their own firm. three of the most important roles will now be held by executives who rose through the dealmaking unit, overhauling the top of the company that has been a wall street powerhouse for years. john waldron will be the next president and chief operating officer. the second powerful position in the bank.

uber's ceo has said the company will spend more than $150 million in canada to support driverless car research. he also said the company has to demonstrate its path to profitability in what he sees as a multi-trillion dollar industry. >> now in urban environments we think we can build our host of services that essentially replace all of these use cases of the car. this is ultimately a $6 trillion industry we are going after. juliette: global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in .ore than 120 countries you can find more stories on the bloomberg at top . let's get a check of asian markets, finishing up the week with sophie kamaruddin in hong kong. >> happy friday. it is a welcome field of green. stocks extending a rally.

we are seeing one blip on the map. the philippines off by 0.7% as it braces for that super typhoon. elsewhere, tech and maals leading that rally. samsung, the biggest boost to the kospi, adding 1.4%. the nikkei closed above 23,000 points. in hong kong we are seeing its best rally since may 2016. chinese stocks have turned around. the csi adding 0.5%. the mainland as well as hong kong. chinese electric car stocks. let's check on one of the players that is jumping. it is set for the best jump nio surged iner new york. makers afterinery comments on economic growth and

inflation look more confident. taipei, largan precision growing. iphone sales will continue growing into 2019. nejra: thank you so much. russia's central bank may take a leap from turkey by defying government pressure. economists expect them to stay in neutral mode. while the key mode may be held at two point 75%, policymakers could strike a hawkish tone after the bank of england voted to keep rates unchanged and the ecb decision to cut down bond buying on thursday. joining us now is the senior economist at vanguard asset services. it is great to have you with us. a lot of central-bank news flow this week. let's start with turkey. that was quite a surprise to the

upside. we saw the lira's spike. we are already seeing that fate. what does that tell us about the invest ability of turkish assets? >> the central bank went further than the market anticipated, raising rates by slightly more. i think in the end the market is looking for even more. we have seen a substantial collapse in the currency this year in turkey. perhaps the central bank may need to raise rates even more. at the moment i think this is marginally a turkey, argentina, em story, even spilling out into other regions. the hike in turkey might be repeated in other spaces. >> we saw the ruble track the lira yesterday in the sense of moving along with it even though russia and turkey are very different propositions for investment and fundamentals, which does suggest to me, people

say you have got to be selected and you have got to differentiate. still, we do not see moves often going the same direction. for vanguard, how do you deal with that story in terms of how you would select emerging markets or not? emerging market portfolio managers have to look on a case-by-case basis. in general for investors who are selecting funds, you would categorize e.m. in one place. it is higher risk, high volatility, and offers a higher return in the long run. as an active portfolio manager, you have to look country by country at the vulnerability of an individual em to rising dollar, to that significant u.s. dollar exposure. nejra: you talk about the bloomberg dollar index heading for its worst week since february. we got that cpi print coming soft. euroove we had in the

according to blackrock was more to do with the dollar than mario draghi. if we are looking at the dollar and the impact on emerging markets, what is your view in terms of whether this is a buying opportunity in the end in a broadway? >> at the start of the year, emerging markets were overvalued in the equity space. after years of a bull market has been a bear market this year. e.m. has become relatively more attractive. you're going to see the u.s. equity market. broadly across equity markets, valuations are quite stretched. investors can expect lower returns over the next five years or so. you could possibly have a tilt. i do not know there is a substantial amount gain for e.m. over other parts of the equity markets. >> what part of the brought equity market would you prefer to look at? >> europe and the u.k. have been more attractive.

for some time we have seen the u.s. market really rallying. partly justified by earnings growth, but also a general expansion. i think the whole of the equity market is somewhat more risk than normal of a bear market in the next several years. >> we talked yesterday about the fact that goldman sachs sees a bear market on the s&p 500 if we get that imposition of 10% tariffs on all chinese goods. the risks are coming from what? a trade war something else? >> all of those economic stories pose risks to the equity market. in the end, a bear market is more likely there is a recession in the u.s.. in the next 12 months i think that is unlikely. to me, the story is about valuations. stretched evaluations mean it is much harder to see expansion. that is where the risks come from the next several years.

>> interesting also. there was a good piece on the bloomberg saying people are seeing the next recession hitting in 2020. that does not look as likely for you? >> in 2019 a recession is unlikely. we would need to be seeing signals -- >> 2020? >> 2020 is more likely. we have to wait and see. it is too far away. >> if we were to get that recession, what does that mean for the ecb? of theave seen this sort synchronization of global central-bank activity. the fed is much further ahead than other developed markets. the ecb may be at the beginning of raising rates. if there was an external shock from the united states, either a bear market or recession, the ecb would find it difficult to continue hiking. nejra: thanks so much to alexis gray, senior economist at

vanguard for joining us. if you have missed any of our lehman 10 years on interviews, head to the bloomberg. you can rewatch all of our shows as always on tv anytime you want. ♪ >> it would be an important element of the banking unit. >> when banks are selling half of their book value or less, that is telling you something about the underlying health of those institutions. that, ido not recognize

mistake make a serious area >> the downturn in be debt crisis will not be debt. it will also be pension obligations, health care obligations, unfunded obligation. >> we are doing a much better job of monitoring. we have much more in the commercial banking sector than the shadow banking sector. it does not suggest that if we had a big new shock we would not have contagion. >> the biggest issue for elected officials was too big to fail. how can we be sure we never have to put public money into banks or other financial institutions?

nejra: jeff bezos typically stays out of the political fray. chat at the economic club of washington, he said the president's vilification of media is dangerous. he sat down with david rubenstein. >> i will say this. it is a mistake for any elected official in my opinion -- i do not think this is a very out there opinion -- to attack media and journalists. [applause] it is an essential component of our democracy. there has never been -- i was going to say never been an elected official. no public figure who has ever liked their headlines. it is ok. it is part of the process. if you are the president of the united states were governor of a state, you do not take that job thinking you are not going to get scrutinized. you are going to get

scrutinized. it is healthy. somebody -- what the president should say is, this is right, this is good, i am glad i am being scrutinized. but it is really dangerous to demonize the media. it is dangerous to call the media lowlifes. it is dangerous to say they are the enemy of the people. we live in a society where it's not just the laws of the land that protect us. we have freedom of press. but what -- it is also the social norms that protect us. it works because we believe those words on that piece of paper. every time you attack that, you are eroding a little bit around the edges. i do not want to be dramatic. we are so robust in this country. the media is going to be fine. by the way, marty baron would

say, iu, he will always say myself when i meet with journalists at the washington post -- marty says the administration may be at war with us. we are not at war with the administration. just do the work. just do the work. that is marty's thing. [applause] >> i did not mention the president but you mentioned the president. have you met the president? >> he was a lawyer, wasn't he? [laughter] >> you have met the president. does he call you for lunch? >> i will keep my conversations with the president to myself. but yes, i have had a couple. >> this does not make you think you want the job yourself, right? >> are you asking me if i would run for president? >> yes.

run.will be your vp if you nejra: that was jeff bezos speaking to david rubenstein. you can watch the rest on the david rubenstein show on bloomberg television. u.k., judy to the webster for your numbers just came out. comparable sales were up. stockg us from the london exchange is the chairman and founder of j.d. witherspoon. great to have you on the show. that four-year adjusted pretax number coming in line. the revenue a little bit softer. why was that? we have sold a few pubs over the last few years. sales are unusual high -- unusually higher than overall sales.

overall we are happy with the way sales are going. onwhat has been the impact sourcing products from abroad in terms of the weakness we have seen in sterling? hasn't had any impact? >> not too much. bit,ound has fluctuated a which does have an effect on input costs. we have not noticed anything too bad in recent years. it was posted 2009 when the pound went down more than it has recently. sense thatore marked that was survivable. a floating currency is a good thing. it is an automatic stabilizer. you have far more problems when you link currencies together, as they found in greece and spain. we have seen strength in sterling this week on optimism we could get a withdrawal deal,

mid-november. will we get a withdrawal deal with the eu in your view? >> i hope not. i think a deal is a bad thing. i think the eu is a protectionist organization with thousands of -- with terrorist that push prices up -- tariffs that push prices up. if we embrace free trade like new zealand and switzerland, prices will go down. we can avoid paying to the eu. we can have control of our own fishing areas. i think we will be in a much stronger position on a free-trade basis, which some people call no deal. nejra: what about the free movement of people and the people you employ? outside the eu, it's

perfectly possible to have a reasonable immigration policy. two thirds of the immigrants to the u.k. come from outside the eu. i do believe in immigration. countries like america, australia, new zealand, have done very well because the have a fairly liberal immigration policy and we should too. you do not need an elected -- unelected president's in the eu to decide what your policy should be. our problem is immigration controlled by people in the eu. nejra: you're getting rid of eu products including gator meister. ermeister. are there more cuts coming? >> that eu was only 7% of the world is it has these high tariff barriers. once we leave the eu it is

inevitable that imports and trade will look around the rest of the world. we are just doing that for some products and finding the number two brand in the united hates -- the united states we are adopting here, the number one brandy in australia. looking around the world for new product is a good thing to do. junker hasounger -- provoked us and we are finding stuff out there. nejra: finding good stuff out there in terms of product, what about pompous? are you planning to acquire more locations then you are selling? >> yes. up a few toopened many pubs in the aftermath of the last recession in smaller towns. there are quite a few towns where we opened a second or third pub and we should not have

done so. we are trying to open around a dozen this year. , juste 900 pubs already under 900. less openings than in the past. we have gone from one to 900. we have to start colonizing australia or america if we want to match starbucks and mcdonald's. nejra: thank you so much for joining us. chairman and founder of j.d. weatherspoon. let's get a check on the markets. before a second the of gains in the asian session, ending the we got a high. europe could end the week on a high as well. euro stoxx 50 futures higher by 3/10 of a percent. we are just over 30 minutes away from the open. the 10-year btp yield not doing much today. we have recently seen that btp-bund spread tightening little bit.

how much of the euro was to do with a weaker dollar? the bloomberg dollar index for with its work -- worst week. the european open is up next. ♪

>> welcome to bloomberg markets the european open. i am anna edwards alongside matt miller in berlin. stocks extending their bounce back today with european futures pointing to a positive open. cash traded less than 30 minutes away. anna: the u.s. prepares for widespread destruction from hurricane florence, now a category one storm.