Transcripts For BLOOMBERG Countdown 20161014

Welcome to bloomberg day break europe. m anna edwards. Manus five years have been defeated, we went behind the data and had a look at a couple of different things. 5, 6, 7. Line, b. T. B. The blue line shows were expanding. Eres a satellite out there, two billion observations, so this space view of whats really going on in the economy. You may be trading less with china but the cost of goods in china is rising. Thats the key message over the past 24 hours. Anna yesterday we were worried about china, today seems to be about stabilization in china. You can see how this better data in china is having an impact. Its bouncing up. 4 . Thats the china story as is the sell were selling of the yen down around a third of a percent. Yesterday the yen was up on concern of export, today the yen s dun buzz of stabilization. Manus everyone comes up with the cliche, its more about Dollar Strength than yen weakness but these two indicators are about a proclivity for risk. The thai bhat there, it advances 1. 6 , the most since 2013. Its headed for its biggest gain in a year following the death of the king. Its all about royal transition an thats likely to be smooth. Anna and crudup by bnt 6 . Saw an increase in nationwide inventory but in new york its outweighing that. China is seeing its first nflation, p. P. I. Rose. 1 for the First Time Since december. Manus steven is stand big in hong kong. What does the ending of Producer Price inflation mean for chinas recovery. Steven it is an indication that indeed theres been a pickup of course in Global Economy prices. The last time we had inflation at the factory gate basically wholesale prices was in january of 2012. That deflationnary trend basically coincided with that slump in commodity prices. What weve seen over the course of this year is that deflation abating. It was almost a foregone conclusion that at some time, probably by the end of the year, we would tip into inflation. It came earlier than expected. Thats good for corporate profitability, also corporations ability to pay down their debt loads. And look, it is a sign of stabilization in this economy and also shows that the attacking of authorities, the overcapacity issues, in particular in copper and coal, is starting to work. Anna we got some news on c. P. I. As well. What significance do we attach to Consumer Price inpolice station . Steven. 1. 9 , we were expecting 1. 6 and in the previous month, august, it was 1. 3 . Its pretty benign c. P. I. Inflation. The government target for the year is 3 so theyre still well below that. This was seasonal price adjustment, vegetable prices were were higher. I wouldnt read too much into the 1. 9 . Its still within the tolerable range of authority. Its all about toleration. Thank you for the latest updates. Lets get the bloomberg first news. Roslyn is with us today. A banker says hes worried about potential policies that would have distorted effects depending on the outcome of the vote. Harker did however support a rate hibling in september. Hike in september. Scotlands minister says a Scottish Independence referendum ill next week if she feels the countrys interests were not being protected in talks. Julia may fired back that the question of undependence was settled in 2014. Prime minister supra said the country is honoring its commitment and expects and demands the same of partner. Meanwhile, they said the current government is incompetent and is calling for an early election. I think right now we clearly have the most incompetent government weve seen over the past years a government that is truly not committed to implementing real reform, does not have the capacity for real fsment, cannot lead taos a path that will break the cycle of recession and deflation, thats why were calling for an every election. I understand that every time people hear about the potential of an election in greece, they d tend to get quite skeptical. We have a clear lead in the poll well, can win this election, and i think greece will have a much better government if that were to happen. Rosalind singapores economy contracted sharply in the Third Quarter, the latest sign its struggling. A big miss after analysts estimated zero change. Its been under pressure since last year because of weaker trade and lower energy prices. And thailand is beginning a year of mourning for the worlds longest reigning monarch. The king died yesterday at the age of 8. The government also signaled that his only son will take the throne. The monarch was a symbol of nity in a country rocked by 10 coups in his time. This has bloomberg. Anna and manu sumbings. Anna lets get the latest, tell us about the mergers in china and the latest out of china. Also just keeping an eye on other things the pound under pressure once again, down by nearly a half percent this morning. More on that. But tell us whats happening in asia right now. Well, its been a little bit of that uncertainty taken out of the market. Were seing a little more conviction coming thru in late trade to round out the trading week. Seing the regional index pear back some of its weekly losses, though it still will thend week in the red. The thailand market up 4 at the moment. This is its biggest rally we have seen since july, 20136789 you are also seeing some upside coming thru in hong kong on the back of that china p. P. I. This is the first gain weve actually seen in hong kong all week. Certainly seeing some of the stocks that have been heavily thought of. Casinos regain manager ground. China is being sold off down. 5 . Certainly that p. P. I. Number hasnt given too much of a boost to equities but this is a market hats done better than most. We are seeing some weakness in the yen. Australia closing flat there a good pickup coming through in korea as well. A little more of a boost to the index. Manus thank you very much. Of ve miranda, head research. We want to talk about the data first of all. Yesterday it was much more surprise over the trade data. Today we know its costing more to produce. We did the satellite reading. This is btv 567. That gives me a bit of heart about china in terms of the satellite reading across the whole of china, a strong reading in terms of growth, in complement to the official p. M. I. Im afraid were slightly more pessimistic. We believe its a temporary reprove. If you look at the prepreeve. Coal has been a factor in this. Its not underlying demand. Similarly steel, iron ore, up about 40 . Thats a lot of supply side reform. What youre seeing now is people are picking up on the manufacturing side, particularly in the steel which explains some of that. But the concern for us is to is demand is not there so if you look at the export demand, which we didnt see coming through yesterday, and also the underlying domestic demand, the really weird thing about china at the moment is theres not a lot of activity in the Real Estate Construction side and also a lot of Manufacturing Companies are not. So activity levels are actually quite weak and some of this is, it looks good on a sort of yearonyear basis but if youre looking longer term, this is more like a temporary respite rather than a longterm solving. Anna any policymakers and retailers and others around europe and elsewhere in developed markets who are looking for more of an inflationary force to come from somewhere in the global trade universe, they shouldnt get too excited about what were seeing. Aside from tell and steel, youve still got deflationnary prices in some of the other subindy cease. Coal, theyre now taking measures to try to curbing curb the coal price and increasing supply. Youre going to see coal prices, steel price moderation as well. Then suddenly, could be back in 2017. The problem is not solved. Manus another thing you talk about is debt. I thought wed take a little bit of a look. I want to see how klossal a bubble im looking how colossal a double im looking at. We took u. S. Corporate debt and chinese corporate debt, and this is the chinese one. Slightly more prolific in the writing of debt. Total debt over the past 10 years grownly 465 . This is a global headache isnt it . Everyone knows that this is an issue. And china is actually doing something to taking some of that down 165 . Theyre taking sort of local government which used to be classed as corporate debt onto the fiscal Balance Sheet that changes that. And to be honest at the moment arguably the big concern is household debt. The amount of mortgages. That was over 50 of the lending. In the year to date. Ure actually getting a manus a real bubble. Youre getting a mortgage bubble at the moment. The s. O. E. Debt is back sfwoipped the government. It creates a bit of a problem, you know, causes some of the deflation, youve got too much money in the economy. But in terms of it being a crisis, which everyone looks for, when is china, when is it going to crash . Thats not really a concern. Mortgage lending would be. Anna let me ask you about mortgage lend, youve just come back from china and you were talking to people at the forefront of that sector. Whats your concern around the real Estate Section in china we have this fantastic bubble going on in tier one and tier two cities. Normally you expect six to nine months later construction to start again. Then youd bh in this wonderful upswing and we could buy into commodities, and go across the value chain. Elevate right at the end. Whereas the even though prices are going up so thats a sign of too much liquidity, youre not seing the Construction Companies Start Building again. Construction is pretty weak. And its almost like people dont quite believe whats happening. So they dont think theres going to be demand in 18, 24 months time. So theyre not starting new homes. Manus before we let you go, theres a planned mega merger. What does that say to you . So earlier this week, there was a big speech, covered widely about creating National Champions, stateowned National Champions and global champions. So it used to be that china would have companies that would compete against each other in the domestic market, whereas now its how can china compete in global markets. This would obviously then be, talking 100 billion merger that would be quite a giant in the Global Chemical space and the sort of Chinese National champion there and thats part of the, were probably going to see more of these mega mergers in the future. Maybe a bit more french. Mirandaing thank you for joining us. Fwd to get your insights on a day when theres lts to talk about. New day ahead, looks like this. 9 30 a. M. U. K. Time, bnk of england publishes its conditions and survey. The b. O. E. Goes on tour after a series of public events, the central bank can better serve society. And theyll hold a plennary session with business leaders. Anna that happens at 2 30. This evening, any clues on the next rate hike . Fed chair janet yellen will speak at the 60th annual conference in boston. Coming up, billionaire solidarity. Donald trump supporter will burr ross helps shed some light on the candidates tax plan and says a recession is coming. More on this. Manus over in a flash, could be he end of the road for a man who allegedly duped the futures mark from his bedroom in london. The d getting some e. P. B. Has failed. Youre looking at a glorious shot across hong kong harbor there, very lovely day. Not like a british autumn at all. 119. Just gone giants two chemical re looking to merge. Kem china agreed to buy another company for 43 billion in a deal that needs regulatory approval. The government body did not reply to a request for comment. H. P. Plans to cut 3,000 to 4,000 jobs over the next three to four years. The c. E. O. Is looking to bring slumping market for computers and printers. The companys share slipped in extended trading following the announcement. And some warned that the overheating samsung warned that the overheating phone crisis will cost over the next three quarters. Its doubling the recall of the note7 in the u. S. To almost two million devices. Samsung already cut its Third Quarter operating profit by 2 billion after ending note 7 roduction. Anna rosalind, thank you. The billionaire distress debt investor and trump supporter will burr ross says he expects a recession, especially if Hillary Clinton is elected. We at some point probably within the next 18 months are likely to go into a recession. Especially, frankly, if you have Hillary Clinton elected and she increases taxes. But with or without that, were at great risk of going into recession. Manus in minneapolis, fed president Neil Kashkari says hes not forecasting a recession. But he expects u. S. Growth to be sluggish. Were joined by a tpwhrobal strategist. Will burr ross calling for possibly a recession in 18 months. Kashkari poopoos it but is less inclined toward that whats the possibility of clin if clinton wins that we have a recession in the United States of america . She can be more aggressive with policy changes generally if they win back the house at the same time. Its not just the presidency. That knot withstand, the biggest feature of this Economic Cycle in the u. S. Is that its trundling along. Its more marathon runner than sprinter, this one. Theres not a lot that suggests the cycle is going to be brought down because it hasnt got any of the excesses youd expect. We dont have sufficient acceleration in wage growth or inflation to make the fed tighten policy aggressively, which eat into the profit cycle and gets companies to fire people and stop investing which they havent even been doing much anyway my sense is this is a cycle that can, having failed to hit the highs, a i void the lows for a while yet. Anna some are saying, it may be prudent to wait until the election. Somebody in the fed making a connection between Monetary Policy and politics, at least in the fact that there are big political events taking place, which seems sensible. So the market isnt expecting a november move but are expecting a december move. How important do you think that is . Everything about the fed is about being willing to delay rather than be gung ho. I do always think that theyre very easy to put off acting because they think the risks, sort of the dangers of being too late are much, much lower than the dangers of being too fast. So if theyre weak, they wont go. Anna others are making the case if you wait too long, you have to hike too fast and thats caused problems in the past. I think thats right. I was wondering if they were saying that to each other or to us when i read them. But i came out of those minutes think, the labor market has ightened in the sense that the Unemployment Rate is trending lower, wage growth is trending higher, not very fast at all. If you continue proproject those forward you say, we should probably be getting on with it. We could get to a difficult position if this were to accelerate. Its pretty marginal. Its all pretty marginal. I think the biggest deal is about china this week and what they do in terms of inflation. The great export trade. Lets talk bond markets. 10 years, four month high yesterday before the chinese data came out. What happens next . There seems to be just the goifpk the unpacking of this global bond market bit. I think if you started from the investor side, weve had a period where rates would never go up, inflation would never come back in any way, shape, or form. Growth was going to be weaker for a period of time. People were buying dureation, buying bonds, putting getting something with more yield than shortterm instruments in any country. All those arguments got more and more tired. I think weve had certainly a little bit of inflation in some places. I mean a little. A little wage growth. A little bit of yes, rates will go up. But more than anything else, fatigue in the sense that what are you looking to get more of . Why are you investing zero yields in europe if rates arent going to go more negative . If really Central Banks are increasingly reluctant to push rates further down. If actually the next thing that happens is that at some point the pace of bond buying in europe slows and we get rate rises in the u. S. , what are you in this for and how much money is now in this . Things will never, ever, ever get any better. Anna going back to where we started on politics, do you have any a different call for when it goes, for example, based on who wins . I think if you were to see a complete change in politics, where the democrats had complete control, they can have more democrat policies in place and im not sure thats something the bond market would particularly welcome. But one of the beauties of u. S. Financial system, it doesnt change things that dramatically. Anna thank you. Manus were going to talk about the london base flash crash trader. Anna welcome back, everybody. He against the yen, 104. 03. People worrying about the china, lets worry about china after the p. P. I. Number. 2 30 in tokyo, 6 30 in london. A new edition of day break is now available on bloomberg and your mobile. Lets look at some of the top stories. Manus, we start with chemistry. Hem china and symnochem. Its not clear how this would ffect chinas acquisition of chemensa. Manus she referred back to the speech at the start of the week in terms of china rising. Certainly this whole space this whole chemical space has become so focused. 2016 has been the year of that. Lets talk about the bank of england. Governor mark carney and his Deputy Governor host a series of events across central england, theyll meet Business People and teachers to reassure that the bank can offer stability as the pound plummeted. If you keep an eye on cable, again this morning in asian trade, a couple of notes coming back from a number of banks it ng about the liability ffers the economy. Marmite wars. Anna marmite has never been so relevant as a global news story. See net inflows in the current quarter. Manus its all about markets. Lets go to guy johnson. Good day to you. Guy lets talk about whats happening in markets. The ftse is likely to open higher. The rest of the continental markets are likely to open lower. If you want to know why, go look at sterling crosses. The story of the week to my mind is the yield spread differential thats noy now emerging between europe and the United States. You can see whats happened with treasury yields this week. Just continuing to push up and i think that is going to be a thing we need to run with. I know youll talk about that a little bit more. You want another derivative of that, its whats happening with eurodollar. Ere trading at 1. 10 we have seen a move this week. Theyll the spread across the atlantic is something well focus on a great deal next week as we get into what we have to hear from them. Today we hear from yellen for the so the spread is going to be an interesting one. I want to wrap up on the tissue the thing i think is interesting, the whole sort of yieldproxy story, the bond proxy story for equity markets is an ongoing theme. A little twist over the last few months. That is stock repurchasers in the s p 500 relative to high yield divey stocks, stocks that pay a high divey, were see manager repurchases relative to high dividend stocks. Thats interesting in the way the timing of the market works right now. Back to you. Anna guy, thank you very much. And things you need to know. The man accused of duping the c. M. E. Group futures market gets his last chance today to fight a ruling forcing him to be extradited to the u. S. Manus the socalled flash crash trader allegedly made as much as 40 million in trofts profits, often working from his bedroom in west london. Joining us is our bloomberg enforcement investigative reporter, suzy. Whats going to happen today at the hearing . Its his last chance to ask the court to pay. English laws changed about 18 months ago so whether than having an automatic right to appeal, a lower court is ruling he should be extradited and he has to seek permission ching thats a twostage process, he was denied on the first stage, he can renew that orally which hell do today. Ann namplet whats the possible outcomes then . Its viewed as an uphill bat frl here because his application was denied. Thats a decision taken by a judge. Today it would have to be a real point of law that hed got wrong for that to be returned. Its still possible that it could be and then hell be gip the chance to appeal but its an uphill battle. Manus why do you think this case has become so well nationally, but globally as well, its a benchmark reference case now. I think People Struggle to comprehend how a lone day trader got caught up in this. We see cases against traders, investment banks, who have access to incredible technology. Resources. But a lone day trader working from his bedroom in london allegedly making 40 million in profits how does that work . If he even did do the crimes hes accused of, People Struggle to comprehend how somebody could execute that. Anna thank you for bringing us up to date on that. Ell see what happens. Manus scotlands first minister said shell publish a draft Scottish Independence referendum bill next week if she doesnt feel her countrys interests are being protected. Anna that doesnt mean a imminent vote. A spokeswoman for theresa may said the question of independence had been set nled 2014. What do you make of this latest salvo from the s. N. P. , a bluff or something very real that markets need to take note of . They dont need to take note of it right now. Shed like another referendum for a reason. Not surprising position and i dont think anybody though shed put this to bed. Anna. There will be another vote at some point. If theres an opportunity. Frankly, the fact that she can reasonably claim that most of scotland wanted to stay in the wrurepeen union and were leaving gives her a reason. But the economics of it, i think most people are aware of, with the oil price here, and the economy where it is, i think that the economic damage that splitting up the u. K. Does now to scotland would win over voters again this time. So shell put the market down and get a vote one day. Manus lets talk about the bank of england. Theyre trying to reassure people on the pound . Because the market doesnt seem to be that believing on the bank of england. What ive got for you here, these are costs and i looked at this. The bank of england is spending 1 billion, spent 1 billion on company debt since the end of september. They are running through the money fast and furious. But borrowing price, borrowing costs are rising. Whats the bank of england going to be able to do to stymy any further drop in snerling not much. The first thing at this point is to welcome this, say weve got a terms of trade coming because were damaging our relationship with our biggest trading partner its going to be real. Were slowing the economy down. Weve cut rates. And the pound is doing its job as a shock absorber. Its not too bad. I think what he has to avoid is there is a point where we say every morning, hands down, its good for u. K. , ftse is up today. You get to a much more toxic relationship where the pound is not correlating with Interest Rates. Its not lower Interest Rate expectations weakening the pound. Its a weakened pound driving up expectations. At that point theres a risk premium on u. K. Assets and the ftse is going down when the pound is falling. That becomes a much more toxic environment. Manus there is a break even. This destructive relationship already exists, i would say. Exists, at this point. Its in place to go up. The bank of england will tell people, a temporary rise in inflation wont bother. But a 70 basis point rise in 10year expectations, compound that through your 10 years, thats a lot of increase in prices. Anna thats one big marmite effect. Stagflation light . Would you call it that . Its not much inflation even at that level. But the economy is going to be weak. I think what youre supposed to do as a policymake is say, if its stagflation light, thats not the end of the world. Were supposed to look through the current rise in inflation and keep policy and offset the effect of the uncertainty on the economy. If the currency spins out of control, it gets much, much harder. You could see the bank of england intervening to stop it dropping . I never remember them intervening. But i think mark carneys life becomes much more uncomfortable 120erling gets back below and youll see people like me. Anna well be back with more in a little while. Manus the first hello tomorrow global summit begins today in paris. Its science and technology, they attend a twoday event aimed at bringing new innovations to the market. Anna we have the Founding Partner and chairman of sycamore Asset Management who will be joining the event. He joins us from paris. Great to see you on the program. Thank you for joining us. What are the most exciting opportunities for you in technology at the moment . Where would you like to be investing . Hello anna, hello tomorrow. The future is happening here in paris today. And yesterday. For two days. Its very exciting. What we are looking at from sycamores standpoint is we want to invest in the future of technology. And so we launched two funds last year, impact funds, one which is called sycamore eco solution. On ecological transitioning. The other is called sycamore happy at work. I wear the pin here, sycamore happy at work. On u. N. Capital. So we firmly believe that we need to invest now in new technology to have a better future. Manus lauren its manus alongside anna here. This is a coalescing of minds and investors and a whole host of people coming together. Give me a sense, will business get done today . Will there be a marriage of capital with ideas . Is this the seed bed for real business . Yeah, sure. Ts its real business. Tonight theyre going to be, the prizes that will be given to new technology, we as sponsor on water and water treatment. I cannot give you the name yet but you will have the name tonight at 7 00. Anna ok, well look out for that. In the wake of the brexit vote, where excites you most in the technology speas . You said tomorrow is happening in paris right now. Were interested in paris, are you interested also in dublin, in berlin an other places in europe . Sure, its not paris, no. Its happening here in paris today but no, no. Its europe. Brexit or not brexit, its happening all over the world. Its just the fact that its in paris today but no, no. The Technology Space is vibrating all over the world, no. Manus you obviously mentioned social Responsibility Investment Fund in terms of social responsibility investing, i want to get a sense of the momentum behind that. Thats a definite change in investors attitude. How big can that sector become . Social responsibility investing . Its beyond social responsibility, what we believe is if you give responsibility to your employees, you have better productivity, you have less accident at work, and all this brings better resulters in company. So its just that taking care of your employees is better for your for your growth, for your productivity and at the end of the day for the results of the company. Anna i mentioned brexit, i wonder if you could give me your attitude toward investing in the u. K. Do you want to decrease investments in the u. K. Or does the weakness in the pound provide extra incentive . No, no. We are still so we invest on the pan european basis and we are still looking at companies in the u. K. , brexit or not brexit. Of course we have to take care of the currency but we dont we dont believe that the brexit will have a huge impact on a shortterm basis. Theresa may pushed the button before march of next year, normally she has a deal s to formalize with the european union, im sure it will take six, seven, eight, 10 years. Because its so complicated so integrated today that i dont see how we can reach a deal within two years. Manus we want to get your opinion, youre going into an Election Year next year in france. We have sarkozy, lupin, the risks are rising on the political front for france. International investors may perceive. How do you perceive the olitical risk in france . The Political Risk is is spread all over europe. Before france you have italy in december, then you have germany, also you have elections in in france in may. There is rising populism as you know. All over the world. In the u. S. Of course. And there is a risk in france ith lupin, who might very well be the first tissue on the first round of the election. So who will be in front of her, i dont know yet. But i hope it will be somebody on the right side. Anna thank you very much. Sycamore asset manager Founding Partner joining us from paris. Manus coming up, the e. T. B. s mario has been ineffective, we have more from that. Anna hedging bets. How much did julys heavy jut flow for the Largest Publicly Traded Hedge Fund at man group . Manus plus u. S. Financials report Third Quarter earnings today. We take a look ahead at some of the key reports. Anna welcome back, this is day break europe. 1 50 in the morning if youre in new york. Futures suggest were not going very far, very fast in equity trading. A lot could happen between now and then, lets get the latest. Anna, china is planning to merge with another chemical giant, chemchina. Bloomberg has been told that the deal is subject to change before any official announcements. Chemchina had agreed to buy another company for 43 billion in a deal that needs regulatory approval. The Government Official in charge did not respond to requests for comment. H. P. Plans to cut 3,000 o4,000 jobs other the next three years. Theyre focusing on reinventioned amid a slumping mark for personal computers and printers. The companys shares slipped as much as 1. 8 pnth in extended trading following the announcement. And some warned that the overheating samsung has warned that the overheating phone crisis will cost 3. 4 billion over the next two quarters. Its also doubling the recall of the note in the u. S. To almost two million devices. Samsung already cut its thirt quarter operating profits by 2 billion this week after ending note7 production. Manus thank you very much, Rosalind Chen there. Columbia universitys president told bloomberg that e. U. s hard stance on brexit could soften. I think the initial reaction which was, we were going to be very, very tough, unless were tough, other countries will leave, is not the reaction that will set in over time. Anna nobel prize recipient for Economic Science ss said Central Bank Policy has reached a limit and gave his opinion on the effectiveness of the e. C. B. The European Central bank has failed. Its done more than any other you know, they said theyll do whatever it takes, theyve done a lot but the danger of the single mandate was edd so clearly in 2011 when truchet, then head of the e. C. B. , raised Interest Rates twice as europe was going into a deep double dip recession. Nus listening to Joseph Stieglitz there, what i want to show you is negative yield. The e. C. B. Is getting priced out, its almost priced itself out of the work it wants to do in term os Government Bond yield. What happens next for the e. C. B. . Is it prepostrause to think about tapering . Anna a lot of Government Bonds they cant buy and now other bonds they cant buy. Theyre looking for Imaginative Solutions they can mess around with the rules about what they buy enough to carry on for a number of months and keep going. So theyre not completely out of ammunition but thats papering over the cracks. Thats me the problem. Firstly, has any of this done very much to support loan growth in the underlying economy . And does doing more from here make much difference . I think thats a concern. Are they out of ammunition or do they node to think differently . More loan programs, three to infinity and lets find ways of t money to europe where they need help. They cant get the economy to accelerate to a growth rate thats going to get the Unemployment Rate down and solve the social issues, and hes crying out for help from politicians every time i hear him speak at this point in time. And im just trying to find a way to eke out a little bit more accommodation here. Theres not hes not going to materially change the outlook with e. C. B. Policy. Anna what do you see most with regard to e. C. B. , i heard talk that e. U. Could rally on, im not sure if its specifically against the dollar. Pick eurodollar or eurosterling. Eurosterling is up front and personal for those of us who move around europe. Thats personal. Eurodollar, euro is in a difficult place. Possibly euroyen the way to get the biggest move if the euro were to strengthen. European investors are shoveling money at an unprecedented rate out of europe into foreign markets because hes crowded investors out of the bond market successfully. ,or a while that weakening euro for the last year, their shoveling money out of europe on the back of the policies and keeping us in a range. Today we might get eurodollar from 1. 10 to 1. 08. 1. 30something is more likely than parity now. If you have any hope for this outflow the euro goes higher fast. That i think is terrible for europe. But the currency would be yen strength bbing. Manus when does eurosterling hit parity . Only if theres a flash rally in the euro, not because of anything we do here. Anna still to come, more from the hello tomorrow global summit, including interviews with the former French Economy minister, emmanuel marcon. More coming up, this is bloomberg. Manus deflation defeated. For theprices rise first time in almost five years, showing further signs of utilization in the worlds secondbiggest economy. Dear prudence, Philadelphia Fed president , said it may be wise for the to wait for the u. S. Election before raising rates. U. S. Lenders are set to report their sixth quarter of falling earnings. Jpmorgan, wells fargo, and citigroup all report later today. Hello tomorrow. From a science and tech global summit in paris. Bringing interviews with ceos, investors, and the former French Economy minister. Welcome to bloomberg daybreak. I am manus cranny. Anna and im anna edwards. We have september car sales rising by 7. 3 to 1. 5 million vehicles. Whats good about overall headline and tell you what has been happening. Vw failed to end their europes market share declined a year after the crisis. The market gained. Declining market share. Vw is still a feature. The industry total is 1. 5 billion cars. That data coming through this morning from a ce. Vw losing market share in europe for the 13th consecutive month. This is a reminder of the scandal. We also heard numbers from man group, the hedge fund manager. Telling us this money may have entered into a packed to buy a holding company. Thatlto suns management is 1. 7 billion. Funds under management has gone up 6 . Is 2. 5p net inflow billion. Returning almost 3 in the fourth quarter. Fundis going to hedge research, the numbers coming from the largest optically traded hedge fund. Manus lets get into the markets opening. We have a relief rally in some ways. That big piece of china data has come a shifted the thinking of the market. Im talking about the ppi, the end of deflation. It was plus. 1 . U. K. Futures rising. Yesterday we saw the minors rising. Cpi rose. Yesterday was about trade. The cost of producing goods is rising. That was the great negative export that china had sent to the world. How is that translating to risk . Take a look this is in terms of the currency markets and commodity, except for cable. 12203, down. That has been the last hour and a half in asian trade. They said the critical level is below 120. Issue anden the whole picks. U n picks. Anna pbi comes out of china. Ppi comes out of china. Increasing after the king announcer 2 death kin gs death. We understand they want to repurchase shares. Think the buyback story has been a big driver in the u. S. Trade again, sticking to form. Lets take a look at bond markets. The u. S. Treasury markets hit a fourmonth high yesterday. That has begun to turn around on the back of this potential shift in terms of global deflation. Miranda was with us this morning. Yields Government Bond 1. 76 . The 10 year benchmarks could be something to keep an eye on. Anna she did not think that pickup would be sustainable. She said things it could be shortlived. Lets go to first world news. s president saidnnouncer 2 there was an argument for delaying a rate increase. He said he is worried about potential policies that would have distorted effects. This depends on the outcome of the vote. He did support a rate hike in september. She says that she will publicly draft the sod it Scottish Independence referendum bill. The bill does not mean an imminent vote. A spokesperson immediately fired back saying question of independence had been settled in 2014. Minister, Alexis Tsipras says the country is honoring its commitments and it expects and events the same of their partners. Speaking at a conference he also said his government will fight heart hard with upcoming talks on labor response. The Opposition Leader told bloomberg the current government is incompetent and is calling for an early election. We clearly have the most incompetent governor government we have seen in the past years, truly not commended to implement a reform. They do not have the capacity to affect investments, and cannot lead us to a path that will break the vicious cycle of recession. That is why we are calling for an overly early election. I understand every time people here about the potential of an election in greece they tend to be skeptical. We can win this election. I think greece will have a better government. Economyngapores contracted sharply in the latest quarter, a sign it is struggling. Gdp fell 4. 1 from the previous three months. A big mess after analyst estimated zero change. Growth in the economy has been under pressure since last year because of weaker trade in lower energy prices. Thailand is beginning a year of mourning for the worlds longest reigning monarch. The king died yesterday at 88 years old. The government said his only son will take the throne. Monarch was a symbol of unity in a country rocked by ten coups in his seven decade reign. He spent most of his time in the hospital. Global news 24 hours a day. Analyst in more than 120 countries. You can find more stories on our bloomberg app. Much. Thank you very how could i possibly get that the wrong way . Juliet, take it away on the market. Nikkei up. Juliet it is risk on. More than yesterday. That ppi number coming through out of china giving a boost to stocks in hong kong. You also have the tie up announced between side of kim and china national. Youre seeing risk on coming in those Energy Players in hong kong. Its the worst weekly loss in a month. The regional index also in decline. And shanghai there has been a dip in stocks. They close down 2 10 of 1 . It was up 1. 5 over the course of the week. They played catchup following the closure during golden week. Out to end the week, but over the week they have done quite well. , the yen weekend against the dollar. We have seen a little weakness coming through in australia and taiwan. This is one of the markets you want to look at, the thailand market up by 4. 2 . Uncertainty taken out of investor concern. That is the biggest rally we have seen since 2013. Back. Ai baht also coming it is up. 33 . Week. Been an interesting anna thank you. Lets talk more about this chinese data. China has seen its First Factory gate inflation and a must five years. A yeare 0. 1 from earlier in september, the first gain since january 2014. Manus lets go to tom, standing by in beijing. What is driving this momentum in terms of the ppi . It is a oneoff . Is it sustainable . Certainlynk there is some sort of volatile aspects. International oil prices are a big part. They are looking more resilient. Also positive domestic stories to be told. Demand is stronger. The government has made some progress in closing excess capacity in steel, coal, and other important sectors. These are supporting secular producerwards firmer prices. chinas economy is broadly positive. They will expect higher profits, were seeing stronger industrial profits. With higher profits, the corporate sector they will still face a debt mountain, but it could be less daunting to climb. Anna cpi is up as well . Threatinflation rebuilding . Food prices are the dominant factor with china and there is volatility they had a dip in august. Now we are seeing food prices back in september. That is the main factor behind the slightly higher cpi number. We also saw nonfood prices firming. That is positive for china. It goes slightly more resilient domestic demand. It eases fears about a japan style reflation. Manus thank you. Lets bring our global strategist back in. Ppi, do you expect another value devaluation . What is the least costly option for the chinese . A policy that is controlled devaluation of their currency delivering that tpi inflation when they get above zero. The currency is weaker. The commodity is higher up. I am sure they will continue and managed depreciation of the currency. Im much happier face because it is going well. Indicatedtsche bank another 7 lower in the next two years. That sounds like a hefty move. Is that more or less than your opinion . That is more than i would have thought. I think 10 would do quite a lot to get the capacity back. In the u. K. They dont want to lose control. A controlled depreciation that does not ruin global relations. It stops. The currency in real terms gained huge amounts in the last decade. It is slowly giving back some of those gains which helped. This is a controlled movement. Policymakers do not want big shocks. Anna watching closely will be the u. S. , japanese, and other emerging market economies in asia. A note from city today talking about how more you on weakening could trigger selling. Yuan is a big part of the basket. Let alone what it does to korea, malaysia, taiwan and so on. Slowly,as it is going and stealth depreciation, it does not rock markets that much. , if you turn around and say, we look at the dollaryen as being a big important thing for the u. S. Frankly, mexico, canada, and china are half of the trade basket of the u. S. Dollar. Manus we have used this a few will useyou see who currency, it is the u. S. , japan, and south korea woodys trading koreaonships south with these relationships. Slow,urrency war it is challenging devaluation. Move. T is a controlled case, yound chinas see an appreciation over 40 years, you are allowed to give some back. Why . kit the u. S. Has seen their currency depreciate a lot. A 20 appreciation is the same as a 2 rate hike. Ift china does, particularly this turns into weakness for the yen, if it moves back about 110, particularly if the Canadian Dollar weakens and so on, at some point it goes back through. And then it is another cap on the u. S. Interest rates. Getsorst outcome is it all a little bit out of control. 30 seconds later we have risked golf. Anna we were talking yesterday about whether the china story come if we do see further weakening, whether that makes it back onto the fed rate. It doesnt seem to bother the fed as much. Kit it would have to change quite a lot. There is a general sense from china that at the expense of a lot more credit growth, they have slowed the pace of economic slowdown, they have managed to weaken the currency of little bit. They got rid of deflation. We know that is a temporary solution. It is separate for one year or so, but they bought this economic situation. Anna thank you. Next, do not buy on the profits come of this quarter from u. S. Lenders numbers from wells fargo, jpmorgan, and atlantic equities. This is bloomberg. Plaques 8 00 a. M. In dubai. Two hours away from the opening. Were seeing people start to talk about the beginning of changes in the region. Where singh analysts already pinpointing anna welcome back, this is daybreak, europe. 121. 90 for the pound. Down. 5 against the u. S. Dollar. Lets talk about the banking sector. Less than vintage u. S. Earnings season, company in the s p 500 reporting falling earnings. Manus it comes after u. S. Stocks had one of their worst starts since the bull market began in 2009. Today she financials take center stage. Jpmorgan, wells fargo, and citigroup. Anna wells fargo crossselling scandal is not expected to have an impact on earnings for this time. Jpmorgan and citigroup are supposed to indicate gains. Manus they next guest will speak about management. It is Chris Wheeler from atlantic equities. It is deja vu. We will talk about Deutsche Bank in a moment, and perhaps capping the recruitment. It is fixed income, it will save the world. This is fixed income trading, i am facetious. Equities, will fixed income come to the savior of the q3 earnings . I think it will. Clearly it was week last year. Equities with strong this time last year because we had that sort of lockdown in august and a recovery in september. This time around we have seen much Better Stories around fixed income. We had volatility around foreignexchange. That is good for fixed income businesses. Equities there have been a downward appeal. We got a seasonal decline we normally get, which is quite nice, last year we did not get that because it was a wilder ride. Anna we did not see a lot of buybacks from u. S. Banks this quarter, how does that fit with limitations as opposed by stress tests . There will be plenty of buybacks, clearly the u. S. Banks they had their results in june, they were all generally given an uplifting amount of buybacks. Theyre all approaching 80 of their earnings being given back to shareholders. Dividends and buybacks. Quite frankly in most cases they are still juicing their liquidated assets if they get rid of legacy mortgages and Investment Banking editions. Manus typically before i get on a plane you and i catch up. We talk about dividends, this is the one that caught annas eye. The correlation between jpmorgan, and all around, the correlation 2year note. You need a shift from the fed. You need a demonstrative shift in the yield curve to shift gears for the banks. That is right. One has to be careful. There is the myth of the fact win rates go up thanks will fly. There is the reality, earnings will get a push. The problem with the additional incoming income, is how much of that disappears as it gets down to the tax credit. More importantly is the rate go up, bad debts will go up. We have had a lot of recoveries coming through. Bad debt charges or low. They will pick up. When the banks the things will move at the end of the day. Anna what is your impression of the brexit . Oliver wyman has done a lot of research on why they think that banking jobs will be lost in london. They were saying they do not think it will go to frankfurt or paris, but a lot of u. S. Banks will give up on europe and go back to new york. I think it will be a mixture. I think some banks will move people in particular cities. Some cities are important because they have clients. Some of it will go back to new york. I think, i had a debate with a wellknown commentator the day after brexit. He said it is tell something ping. Something tub thum i think that is said. One manager said the city will stay as a center, but it will lose the extent of their leadership. I think that is the problem. Manus i know your domain is u. S. Focused. I cannot not involve you in the story. There may be a hiring freeze. It is interesting, people might poohpooh that. Other banks are suggesting nearly 2. 5 billion potential he is a savior on the smith. Every move counts. That is right. The problem is, i have worked in enough big investment banks to know, you say, we desperately need this person to go someplace else. I think in a way a hiring freeze makes people more creative. They say, lets look at the revenue and the cost involved. Lets make sure we actually want the body to come in. In the frenetic world of Investment Banking, people do not always think in more detail about what they should be doing. They think, lets fill the gap. I think in his perspective, he has to keep taking. It is like your colleagues, the small steps to show he is making progress. Getting back to a platform where he can make decent returns. Anna ing moving jobs to london. Perhaps they are moving being lured by a cheaper pound. It is attracting a few jobs. In tens, rather than thousands. Where do we stand on the recruitment . Are the u. S. Banks recruiting . Barclays had a bit of a freeze as well. They did. When we look at Goldman Sachs figures next tuesday, you will see an uptick in staff numbers. They have been cutting and cutting, but guess what, we have gone through the graduate recruitment round. They had 4000 recruits joined the bank. We still have young people coming in at the bottom, that is essential for any institution, even bloomberg. Slowly get all the old people out. Oh people like me move on. I think that is important. I think no bank is blind enough to not realize the importance of that process. Anna thank you. A look ahead to what we can expect from the u. S. Banks and beyond. Manus that does it from us on daybreak, europe. The european open is of next up next, this is bloomberg. Good morning, welcome, you are watching bloomberg markets. I am guy johnson, i am along with caroline hyde. Heres what were watching. Manufactured inflation, chinese ppi turns volatile for the First Time Since 2012, is it just a blip. Chemical experiment, china is said to line a combination between kim china and another company. What does this experiment with