and e.m. earnings start to recover. what we like in e.m. is we think the earnings have bottomed and will start to recover. >> we're going to talk a lot more e.m. particularly russian coming up in the show. you're staying with us, mark. get your questions to mark here. their e-mail address is streetsignseurope@cnbc.com. >> you can tweet us directly. >> we're going for a quick break. as european leaders gather, donald tusk says it's time to face the reality of a pro-brexit world. >> the discussion i can start here today with a kind of blissful conviction that nothing is wrong. okay. yep. stirred it... mm-hmm. drowned it again... mm-hmm. and now just feel if it's cold. yeah. cool. [camera shutter clicks] [whistling a tune] smokey just gave me a bear hug. i know. i already posted it. everyone thought i was crazy to open a hotel here. everyone said it's so hard to be a musician, but i can't imagine doing anything else. now that the train makes it easier to get here, the neighborhood is really changing. i'm always hopping on the train, running al

i do not think e.m.rsified as an investment as it was 20 years ago because all markets are so closely correlated. whenpically go down markets go down, and we typically go down more -- we go .p more when markets go up but i do not think you get much diversification safety out of emerging-market equity these days. end,high-yield at the long positive yields -- for many people, that is positive. kit juckes said that there will be blood on the dance floor even if you do view that as positive. how close are you looking at the bond markets, and how deadly will it be for the likes of inequities? all, we were not particularly surprised that the ecb did not do anything yesterday. we do expect them to extend their qe program beyond march of 2017 eventually, but we thought that would be announced later in the year. what we are focusing on above all is e.m. bonds as opposed to u.s. bonds. u.s. bonds are going to remain relatively well bid. inflation is still relatively low. the fed will move at the end of the year. b

'm going to e.m. >> absolutely not. there's a chronic shortage of the growth tourist that we used to join in the emerging market. so my clients are growth tourists. they come from the united states. they come from japan, europe and thaw may emerging markets for higher growth. you have higher earnings growth. adrian: what's turning are outpacing developmental markets. the market bottomed six months ago. and you're seeing net revisions that turned positive. that's very fundamental story. but there aren't the growth tourist there. people are watching these markets going up on very low volumes. just to throw out a statistic here, in the three years to the taper tantrum that was some $385 billion of money going into open-ended e.m. funds, if you look at it today, it's minus $85 billion. so you have a fundamental story in e.m., which is not correlated to u.s. i.s.m., the problems with european manufacturing. it's the fact that we have real interest rates falling in e.m. we've got past the problem of declining energy prices, w

so many e.m.eir basis in commodities, and commodity prices have been so weak now for less two years and continue to show no sign of life. emerging markets in general are in a delicate state. there are exceptions. countries like china, for example. producers, itity is particularly difficult. e.m. exico is a proxy for here is a chart for mexico. this long slope matters and shows the success of mexico, peso stability in light blue. they want to avoid the brutal move indicating the red box back in 1994-1995. how do they do that? are you optimistic they can avoid the brutal moves of the past? carl: we have to see some economic action in mexico right now. we have to see some consolidation on the part of the government, new economic policies, some stimulus. mexico is adjusting to commodity price declines and a slower growth than the u.s. would like to see. it is about politics, too. guy: i hope you can see this, but i have a chart on my bloomberg showing the highball, the hong kong equivalent to libor. a

the ironic thing is that banks -- thanks to the e.m. rally, e.m. governments have been issuing more debt. if anything, the borrowing levels have increased over the past few months. and yet, when it comes to portfolio managers, they don't seem that worried about it. it only seems like some analysts that are sounding any concern about that. guy: crazy, great stuff. tracy joining us out of abu dhabi. fascinating the moves in the emerging markets. we will be talking much more about the central banks in the developed world. there is little consensus on what the boj will do on wednesday. some investors are even closing out there dollar-yen positions. details are next. this is bloomberg. ♪ caroline: welcome back to on the move. 52 minutes into your trading day. we are a percentage point higher on the stoxx 100. -- stoxx 600. argentina holds a monetary conference today. tomorrow i'm a more central bankers. the fed and the boj kick off their policy meetings and wednesday we get the results of those meetings followed by press conferences. first the boj and t

right now, e.m. is in good shape. market etf has $23 billion this year. 47 of them this tells me it is institutional advisors and retail jumping in. emerging markets have benefited. they see something to the tune of $20 billion come out because that trade is not working. e.m. is down. >> what does this tell you that investors think about today's jobs report? >> not this year? >> it is tough to say. it would not go up today and we would not see spy up today. >> and you have been looking at high. what can you tell us about that? >> i have used this phrase all the time. when the cat is away, the mice will play. the fed being the cat and the mice going into hyg. it has taken inflows since the jackson hole speech. no problems, all clear on the western front. >> the hawkish comments have had no impact whatsoever. >> not yet. matt: but we do see selling in bonds. >> mostly hyg, there is confidence in the economy being good enough. the goldilocks then, it keeps going on. >> thank you so much. matt: for bloomberg intelligence

and g10, whether it is brexit, localized e.m. risk, or the elections.et closer to the elections, clearly we are going to see more noise. it will probably keep things choppy. but i think it is a sign of the cycle in the market; everyone is quite cautious, even if they are optimistic, and i think that means a lot of these moves can continue to grind on. the rally can probably continue. francine: this is my chart of the hour. i did this for you. it's basically showing the dollar-yen, 12 months moving average. this is what we have seen in green, crossing below 24, forming a so-called death cross. itt this usually means, marks the long-term e.m. strength. is that right? >> i wouldn't necessarily equate it with a death cross, but when i look at dollar-yen, it really comes down to the monetary policy angle with the fed in the boj. that is probably the biggest driver from 2012. we have significant yen weakness. and now everyone is asking the question, what more is the boj going to do? i can't see them doing that much. i just think that means the yen will contin

e.m.being overbought and paul mcnamara follows this closely. rem bonds still attractive and which are the better investment at these prices? paul: i think they are still attractive. remains a very solid story and we think growth is going to pick up. they do not have as much debt as the developed world and it has got yield and growth in a world with neither. there is an awful lot of money coming into the asset class, especially into etf's which makes us a little bit nervous because those are the sort of funds that can be forced sellers if we get a correction. they do not hold a lot of cash. they are kind of mechanical vehicles. e.m. debt, especially hard currency , i do not think is sufficiently liquid to make etf's an ideal investment vehicle for those. we prefer e.m. debt because it has more growth and more yield but it is understandable that people are sticking with what they perceive as the safer part, which is the hard currency. david: emerging markets covers a lot of different countri

what is really interesting about e.m., why i keep talking about e.m. owning story is turning around. it is a story coming off extremely low levels of e.m. because very cheap, very quickly. therefore you need to be early. david: where do you want to go in e.m.? ben: i think you need to get as cyclical as you can. we are coming off the bottom. russia, brazil, turkey, south africa, maybe some of the places most under owned, most depressed. alix: do if we see risk permeating the market -- if we see risk premeeting the market, what is the correct -- e.m. are u.s. or your connect these? pullback for global equities between here and year end. i am saying we are vulnerable to something. we have had eight pullbacks since 2009. you look at what has driven them off, completely different. it could be anything. what do you do? you buy emerging markets. i think it is your opportunity to buy yen. alix: hedging is hard when you wind up having the defensive stocks. where do you go for safety like treasuries? how do you hedge them on that risk? ben: i think these high d

we always need to look forward in e.m. 17% financials, 15% energy and materials.re the sectors of the beginning of the movement in emerging markets. where are the changes we see happening in emerging markets? and market of 8000 stocks 700 are represented in the average benchmark, so you really need to go beyond just one minor on e.m. you need to victimize sectors and the right country. >> which countries and which csector? sheila: india. the passage of the gst shows that modi still has some power and momentum behind his reforms. it is still one of the biggest changes in india since the 1990's. >> what do you perceive the asian markets? sheila: at the end of the day, people will still look towards china. it is the huge impact in the room. when you think about what is going on in china, the shift is never an easy one. when you think about that and the size of the chinese economy, what has been done is actually quite remarkable. people will want to buy take -- watch tick by tick. those are key factors for the impact on the overall markets within asia. there.heila pat

i looked at my screen before the debate and e.m. was down in asia by about .4%.middle of the night it was up .7%. -- i'm noteral sense saying it is right, but a good performance by senator clinton in the debate has allowed people to take on more risk. i guess that has to mean that in the event of a republican victory you would get to selling pressure in the ge -- in the e.m. generally. not to anyone country, as investors turned more cautious. the sheer uncertainty about how some of these trade policies could play out, because they will be quite damaging for the global economy overall. whether or not that will happen seems rather unlikely. head of global emerging markets strategies, thank you much. >> coming up less my debate drew record ratings. a demand letter has correctly corrected every presidential election outcome since -- ♪ ♪ this is "bloomberg markets." it is time for the bloomberg business flash. the race is on to get more people hoped on amazon and head of the holidays and music seems to be the latest lore. according to a person familiar with plants, am

low yields are pushing money back into e.m.py there is something better coming from the fundamental side. nejra: luis oganes, jpmorgan's global head of emerging-market research. thank you. manus: let's talk about italy now. the bank of monte pasche has ousted viola. italy is trying to avoid a bailout. we are now joined from milan. look, is this a huge surprise. hasbank of monte pasche been battered from a variety of directions. are we surprised. is it going to hurt the plan to save them from a bailout? >> i would say, 80% to 90% surprised. if you remember, back at the end of august, after the news came out that mr. viola was under investigation by prosecutors in relation to basically, the previous management's handling of derivative transactions, the bank came out and strongly supported them. there was a statement from the chairman of the bank, saying they had complete confidence in them and they did not expect any change in his position. less than one month later, he is gone. as you mentioned, at the top of the segment, i thin

general with the recovery in e.m.past couple of months, it means we have seen quite a strong rally. if you look at the msci emerging market index, that is up 17% year to date. rallye that with the 8% in the developed market nation index. quite a strong discrepancy there . but it is actually in bonds that we see the most enthusiasm from investors. if you look at emerging market bonds, take a look at turkey's most increasing debt. we have seen $600 million worth of dollars flowing into that asset class since june. and's despite the coup debt ongoing drama. if you look at russian credit default swaps, those are at a two-year low. the riskif you look at premiums that investors ask for to hold emerging market debt compared to something like u.s. treasuries, they are currently at 175 aces points, compared to 462 basis points earlier in the year one we had that big selloff. it is a stark turnaround. rally: you mentioned the in emerging markets. where is the unease going to come from, in terms of all this unwinding, any time

showing when the fed funds futures tend to move in the direction of the hike, that's usually bad for e.mties. the question is whether or not we keep this sort of global to taunt that investors -- global detente or whether the fed starts to feel uncomfortable on its inflation mandate in particular. yousef: in your view, what does this mean for investors? how does this come back to my money? tracy: we knew we were going to have that busy september month. i don't think anyone was expecting it to be quite as dramatic as it has been. it's difficult overstate how dramatic that bond selloff has been and its impact on the rest of the world. we seen equity volatility come back off the back of that. the vix is up. if you look at the bank of america financial stress, index it had -- stress index, it had one of its biggest moves this month. we've been complaining about the lack of all agility. august was incredibly -- of volatility. august was incredibly dull. is this the right kind of volatility you want coming back to the markets? investors take a goldilocks view when it comes to volatility. they

things in the last few years including the decline in oil prices, the surge in the dollar because of e.mwered inflation in the u.s. and lower oil prices. now that oil prices have probably bottomed out, then headline inflation will start to pick up. central banks are hoping inflation expectations will rebound on that as well. david: are markets as sensitive to central-bank statements as they were a year ago? richard: that is a great point. i think they are less sensitive, because to be honest, the fed has been all over the map. markets essentially are now in a mode to ignore the fed, largely. not completely, but now you are looking at low rates, support of monetary policies and markets spend less time trying to reverse engineer fed statements. jonathan: to quote you, yellen has been rather passive at times. if you lose the market and you are the federal reserve and you desperately want to do something, how dangerous is that? david: i think it is dangerous. i think the fact markets are doing well by ignoring the fed may feel good in the short run. but it's not a good strategy to take the o

well, one of the shorts would probably be things like the dollar, swiss franc, moving into yen trades, e.m. currencies. mexico, high risk. we think this blast we've seen recently is not going to hold up and when people start realizing the fed is not going to do anything and we're in that sort of goldilocks position where low interest rates, low growth are going to keep central banks conservative, we'll see it come down significantly. >> can i ask you about the snb. is it fair to say the snb is reacting to the other at this point? >> it could be. if they were trying to set policy, they would probably get washed over. so i think by standing aside and understanding the capabilities, that's critical. i think what's also noticeable is their communication strategy is very tighter than what we see in the feds especially where every fed member is coming out and pushing their ideas and getting interpreted by the market and causing significantly rogue volatility out of nowhere and extremely disruptive. the snb is much more conservative and has been -- you know, they haven't had a significant policy

does e.m. offer that hedge? he travels around the world looking for opportunities. does e.m.orrelated asset class? >> if you look at emerging markets in the past decade, you had emergency markets --emerging markets consistently perform. now they have started to outperform since then. at the aggregate level, i agree that the cross assets are very high, but you do find a lot of -- you see massive differentiation between countries. agree that central-bank policy in general, when you have too much liquidity, it elevates all asset prices, but in emerging markets, if you look -- a big factor that has played a role of late has been politics in emerging markets. which are the countries that are outperforming this year? it is those countries were new leaders are coming to power. countries where you have seen reform take place. latin america has all of a sudden come back in fashion. --brazil, peru, argentina you are seeing new leadership come to par promising economic change and reforms. if you look back at what is happening in asia, countries like indonesia, we have seen a pickup in t

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this is e.m. msci in the white. me to change the duration on this chart. why? are overweight emerging markets both in equities and local currency debt . it is something we have been overweight for the beginning of the year. i think that rally is interesting. one needs to put it into context of what has happened over the last i've years. manus: that is what we have done here. peter: there is scope for that gap to narrow to a large degree. we would say this is the beginning of a turning point for emerging markets relative to development. can i ask about that dropping the bid? peter: i think it is rare when you continue to see markets rallying. you can see a sideways movement in developed markets, which are dominant in the u.s. anna: do you see a pickup in global trade amongst that? the politics of global trade are tricky at the moment. peter: politics are always tricky. they are more difficult to figure out than the economies. we do say that markets have priced in a lot of monetary easing but not any economic recovery at all. the pessimism that one can see is pal

full disclosure, she is exceptionally negative on the political economic mix of e.m.s they look at flat trading. you see it within the u.s. trade statistics. , in the last two seconds come i decided to show you yields and the pressure between banks and mario draghi appeared i was going to show you oil. forget oil. this is bigger given what we heard from commerzbank. --light of japanese yields, and white is japanese yields, the u.k. and purple. the problem is that for the banks, and this is the market's most influential summit yesterday, they say we are hurting because of negative rates. mario draghi saying, guys, fix your model. it is not my fault you are not doing well. commerzbank saying we will suspend dividends and cut 9600 jobs. going through the commerzbank headlines. we have more from bloomberg news reporter, and an expert on fx strategy. that there would be job losses. are you surprised that the share price is actually gaining? have no, i think investors wanted a new strategy from the new ceo, and they want cost cuts, they want a simpler bank. that seems to be

are because a strong come cheap dollar through the fed trying to raise rates does not bode well for e.mtable. david: what countries are you looking at? >> emerging-market asia is exciting. it has held up well with china slowing down and stabilizing. latin america is maybe too soon especially since the growth we saw and a lot of the outperformance of that market came from multiple expansion. thank you very much. coming up we will hear what they had of the largest public a traded fund thinks of deutsche bank. and the ceo of mangrove. this is bloomberg. ♪ vonnie: welcome back to bloomberg markets. the markets.ck to concerns about lenders securely in germany. we sat down for game -- an interview with the mangrove ceo. aboutnks the concerns europe's banks may be overblown. >> a think the next big shot for markets is the one big shock. i think the world is looking at the european banks and wondering if there is a crisis. capital to look at the banks have today, you have to look at the way they change the line germany such as the senior debt becomes equity if there's any sort of banking crisis

really gets my attention as a proxy for e.m. combined with the american election. francine: tom, this is my data board. i have to look at the banks. down 1.4%. deutsche bank down 6.6% after the dodge asked for $14 billion -- the d.o.j. asked for $14 billion. this is a claim they say they will not pay for. they do have to raise capital if they pay somewhere near that mount. very quickly some of the main movers. tom: nice second chart from francine. is that in euros? rancine: it is in euros. 21 euro cents a share. tom: not centimes? trey: the old french franc, tom. tom: i learned something today from francine. very, very cool. let's help you with the many faces of inflation. the white line c.p.i.. the yellow sideline core. oil is rolled over. there we are. the red line is a 2% level that everybody blathers on about and then those three circles over there are only a few of the many inflations from the top. service sector inflation. well over 3%, francine, what is in our mailbox? maybe that is the rent in london. the green one is my favorite. cleveland c.p.i., a little

in fx was in e.m. we have seen that kind of pattern.that the trump story of the political uncertainty and the fed uncertainty, it is hard to know how much of that selloff has been japanese oriented. david: what does hsbc want -- jonathan: what does hsbc want to see? >> i'm struggling. [laughter] >> i'm hesitating. the ultimate thing is helicopter money, but they are so far away from that the moment. i think that is improbable. if they expanded the etf program. they did it in a piecemeal way the last timeout. honestly, i don't see it. you are either selling dollar-yen or you are selling the rally. jonathan: in your years of covering central banks, i can't think of a single news conference i've been in where the overall consensus has been this is a big one to watch, but there is zero consent this on what is to come. couldld be an easing, it be a hold, what does that save a communication coming from the boj? >> part of it is the review. corona has placed a premium on kuroda has-- placed a premium on surprised. the boj were the first ones t

alan: you probably want the e.m.hey would be responses but if the fed does as probability suggests, i think it will be a down response and they will get on to bigger things. monday's debate is big. david: great having you here this morning, alan ruskin, thank you so much for being here. don't miss our special coverage of the fed decision starting today at 1:00 p.m. eastern. coming up, john stumpf was grilled yesterday in washington demanding to pay back money. at how hard is it for banks to claw back money? this is bloomberg. ♪ alix: i am alix steel here in the hewlett-packard enterprise greenroom. coming up, the european commissioner for competition. do not miss that interview. ♪ jonathan: from new york city, this is "bloomberg ." stocks are positive in new york. the s&p 500 up nine points. nasdaq wherehe abigail doolittle is standing by with the movers. abigail: after yesterday's biotech rally, we have remnants of the rally with -- trading higher here on the open. this, after gaining 13% yesterday. the fuel for

emerging markets in ,he sense that the appetite from a japanese point, there was a flood of money into e.m of japan or as a result of japan buying mostly treasuries and fixed income investors buying emerging markets. that is more the flow we have seen. one investor crowds out the other. with this repricing of the jgb curve, some may stay and you may get some weakness in emerging-market yields. we see them as value creation opportunities because again, if we are right we do not see this bears deepening being much more severe. we still believe these are normal corrections like the ones we had in march last year went bunds sold off. we remain generally in the low yield environment, low growth, low inflation or the scarcity of safe assets is compelling so the demand of the private sector remains there to support treasury yields globally. david: when you go into emerging markets, you have geopolitical risk that varies among emerging markets. where do you find that risk appealing or acceptable, and where do you get nervous? alessio: the geopolitical risk is particularly priced and valuations of

liquid,e of the most high beta, e.m. currency. the trump -- with the itmp presidency -- he says really is about to rape you about their trade deficit, as well as foreign and direct investment. about 40% of investment into mexico has come from the u.s. since 2010. it could have severe impact on the economy and the dollar-peso. dollar-peso.st the you also have the new zealand dollar moving higher, as well. it has a developed risk on fx. david: alix, thank you. the first debate between hillary clinton and donald trump presented a start contrast between the two candidates. it devolved into an exchange of acquisition -- of blame. president obama and hillary clinton crated a vacuum in iraq. once they got in, the way they got out was a disaster. isis was then formed. ms. clinton: donald trump supported the invasion of iraq. that was proved over and over again. the larger point -- he says this madeantly, george w. bush the agreement about win american when american troops would leave iraq. not obama. mr. trump: after the election, later."

falling further and further behind because they're competing with china, with india, with the rest of the e.mncomes for the households of america are down 20% if you count inflation. i would get rid of the fed's 2% target. secondly, it is crushing savers. in fly-over america, they don't save very much. they can't. they don't have the discretionary income, but what they do save is worth nothing today because that free money goes to wall street. savererize being destroyed. i would say the heart of the problem is the federal reserve. >> lightning round. >> you don't look like elizabeth warren, but you sound like elizabeth warren. >> donald trump is more likely to take on wall street than hillary. after all, hillary was for sweet nothings and gets $700,000 a speech. hillary thinks the fed is doing a wonderful thing and that janet yellen is an american hero. >> are you in favor of raising the minimum wage? >> i think it would be a mistake in a world of robotics where you would destroy millions of low-wage entry jobs. good you want to help low-wage people, you improve the earned income tax credit.