Transcripts For BLOOMBERG Countdown 20161005

Negotiations with the eu. Anna a very warm welcome to countdown everybody. Manus the torch paper of risk is back on the table. What do i mean . The damage is almost throwing fuel on the fire. European Central Banks considering winding down bond purchases before ending quantitative easing. Are they . They emailed a statement to say manus the story says they have not excluded suspending the past of the current sorry extending the current program, at the end date of march 2017, at the price of 480 billion euros per month. Not saying it is ending by giving us clues, talking through the officials at the ecb, how they will do it when they do it . This is when mario draghi said we do not have a conversation about quantitative easing. 0 . Yields back above this is the critical thing. Is it a push to steepen the yield curve . The euro would strengthen, if this is the case, if the european Central Banks are indeed generally considering how to change, how to change and take what bill gross said, you will hear more later, but what did he mean about shortening duration . According to the euro, structurally changed and rallied. Growth and shortened duration come on back above zero percent. That is the critical situation. Anna we have the asian programs talking about how we did see some sort of tapering at the ecb. And the conversation around increasing rates in the United States, what that might do to emerging markets. Let us bring up the risk radar because it shows you where we are on the emerging market story, in terms of what we have an talking about. We have a dollar index for you, near a twoweek high, around the rate increase. The work function the probability at 61 . Jobs on friday. Manus, we have a lack of talking. Manus and the dollar index is at the top. Twoweeksst saw high, oil restarting your dollar a little bit lower. Since we had the opec agreement, rallying by 10 . The stock price declining by barrels, now we have venezuela and nonopec 1. 2 Million Barrels of production pulled off the table. Anna in relation to those central banking stories in the fed and the ecb, gold was interesting. It was up this morning. But yesterday, futures dropped by the most in three years. Was this all because people asking questions about the Interest Rate . We have a great piece on the bloomberg best is actually look to india, what the Indian Central Bank did. Hawkish, thatt so could be the reason we saw that moving gold in session your lettuce to the bloomberg first word news. Heres david ingles. Officials say that the bank is likely to gradually wind down bond purchases before ending the program of quantitative easing. Now, they say that may happen at 10 billion euros per month. But the euro climbed to a three year high against the pound, as mario draghi says the ecb will continue until march or beyond. Lot saysoing a Deutsche Bank is dropping share price, saying the Interest Rate and policy in europe, it may help central bankers to reconsider the approach. He told Investment Conference in new york that you cannot see the pound, by killing the financial system. And one of theses Deutsche Bank reach shares of course are in 2016. Than 50 and the u. S. Vice president ial candidate attacked each other as they went head to head in their first and only debate. Tim kaine and donald trump, the taxes, and email controversy from Hillary Clinton and the role in business,. Governor pence i think he is a very fitting running mate for Hillary Clinton, because in the wake of a season where American Families are struggling in this economy under the weight of higher taxes and obamacare and the war on coal and the stifling avalanche of regulation coming out of this administration, Hillary Clinton and tim kaine want more of the same. Senator kaine we trust Hillary Clinton, my wife and i, with the most important thing. We have a son Detroit Point in the marine corps. We trust three clinton as commanderinchief. But the thought of donald trump as commanderinchief scares us to death. David International Monetary fund has a bit of the the outlook for the u. K. This year, after the u. K. Economy proved more resilient after the brexit vote. And the World Economic outlook, instead growth of 1. 8 , of the 1. 7 projected back in july. That would make the fastestgrowing economy in the g7. But the 27 forecast was cut from 1. 3 , noting estimates saying they attend on negotiations with the eu. The fund also feels the pound needs easing further to sustain the british economy. In the u. K. , the situation is uncertain. E and they have a very large current account deficit. It is unlikely that they can sustain the inward investment that has allowed them run that deficit, so there needs to be some adjustment of the Exchange Rate. And we have seen a starting to happen. Of course, as reality of brexit sinks in, as it has been doing this week, the currency is appreciating further married and it will depreciate further still. David the National Hurricane center has issued weather warnings for florida, as Hurricane Matthew is working the u. S. , having bashed the caribbean married hundred supply seven canceled. And thousands of passengers affected. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 100 20 countries. The find more stories on the bloomberg at top. I am david ingles. This is bloomberg. Manus david, thank you very a bit of breaking news. This is the netherlands deal, bidding for delta. A premium and . 30, over the price of yesterday evening. So, they have about a dozen proposals to discuss, using existing cash resources and an external debt. A bit of breaking news. Lets get to Juliette Saly with the asian market rep. Good day. Juliette good day to you comment. I guess as you were saying at the top, all about the central bank concerns, since of changing tide. Is this a policy of easy money, going to be over sooner than expected . We are seeing a lot of weakness coming through an emerging market currency, also bonds and stocks. You see that reflected here. On the other side of course, you have that stronger dollar sing the weaker yen boost Japanese Equities, the nikkei up for the third consecutive session, boosted by Strong Movement in stocks. Port up by 6 10 of 1 in late trade. And also called the rally in hong kong continuing as well, the hang seng up for a Third Session, and continuing is really solid rally we saw in hong kong equities outpacing the rate of the asian region over the last quarter. Australian open is in the red, of course a lot of the material players coming under pressure. And new zealand down by under 1 . We did see global dairy milk prices falling quite significantly at auction, so that had an impact on the key we and new zealand stock. His rendition you some of the stocks, as wed saw golden fall during session. You can see the big players up quite mythically in the sydney session. Certainly some riskoff, but that weaker yen boosting Japanese Equities today. Anna Juliette Saly with the details of the asian training day. And the chicago fed president says the next u. S. Move on rates will most likely happen in december. The nonvoting member is known as one of the most dovish fomc members. He says supporting the next hike not be an easy decision, and want to see solid evidence of inflation rising before making a call. Indeed, i would prefer that at the time we make the next move, fomc communications would also indicate that subsequent increases will depend on seeing such changes and inflation indicators. I believe this would help assure the public and the committee seeking conditions to support attaining our 2 inflation target sustainably, symmetrically, and sooner rather than later. Manus this comes as the imf has warned advanced economies will remain along a disappointingly low growth path. And the latest update to the World Economic outlook, the Organization Says rising political tensions over globalization are threatening to derail the world recovery. Global growth rate is 3. 4 . The imf struck a more positive note on the emerging world, however saying the larger markets will be exiting recession. G . joining us now, good to have you on the set. Lena, give us your thoughts on the fed as we continue to tune into the information we get on when we see the rate hike. Is your money on december . Lena my money is on december, yes. We have seen a subtle shift in the fed medication with the market, against the back of a market that is still not wholly convinced that a fed will be tightening this year. The probability of that fed future pricing has come up to about just over 60 , but it is still not anywhere near close enough, Strong Enough as it should be. And on the other hand, market have been doubting the feds protections that we will see two rate hikes next year. They have work to do in bridging the critical of the gap over messaging, but we have here is that while the fed does remain datadriven rather than datadependent, it has gravitated away from gdp topline payroll guidance to focusing on the balance of the main supply on the back of the economy. With the fed is saying is basically, look, there is room to raise higher. And the labor market and it is resilient, a more positive growth picture that we see already. That the current market rate is somewhat below the neutral rate, meeting there is somewhere for rates to rise before they possibly become anywhere close. Manus i think the latest from evans is perhaps to reconsider the note that they sent to the market, and terms of what they look at. I have one for you, lena. If youreof the day, out there on the bloomberg terminal, this is the Balance Sheet in purple. The white line is 10 year yield, 1. 8 . The bottom line is the flatline of course, extending the period of time. Never before has there been such a dovish hiking. It jpmorgan and Goldman Sachs all calling it, at 2 . Will be break out of this . Main theme of my research for the last decade has been lower for longer. In fact, it has been sort of a running joke in the office with clients that every, january since 2009, the consensus has been looking for higher fundraising you go lower. So, however, that is the structural Strategic Point of view. Tactically however, october is a month where we should see the switch from long and bonds to equities. And we are seeing it bottoming out in inflation. Manus what does that do, what is it take . Lena it has to steepen the yield curve. Manus, to your point, this is a month that has all of the ingredients. We have a more resilient Global Growth environment. We have inflation bottoming out with oil prices and opec, boosting the trade price war, signaled by the decision, providing some underlying structural support for oil prices. And we have valuation, negative yields negative yields in the market, and they are no longer the defensive strategy. They are the lower yield come ashore risk strategy. The imfteresting to see warning about the Political Risk global recovery. Others would add in the risks around low Interest Rate environment. Your increasingly think of an effect of companies trying to address this low for this long. Lena absolutely. One of the remarkable things is that on the street from this has not happened for this drive towards nationalization and antiglobalization is him protectionism. And all my clients have been doing the last three months is working with clients, preparing for the end of globalization. For, you know, stronger National Legal borders, and what that will have entree floated youre absolutely right. What we are seeing in europe with the shifting political sentiment, we are seeing in the runup to the president election in the u. S. , is the fact that antiestablishment voters are rising. And this is voting against trade. Manus there is a wonderful line in irish that takes me back, myself. Me, me, me. Talking about global trade, not me. [laughter] anna it is going to be a busy day. Let us see what is on the radar for us in your day ahead. At 9 30 am u. K. Time, monetary policies will turn to the september reading of the composite pmi. Manus chancellor Angela Merkel will speak to the economy at a trade and Services Economy in berlin. Anna and we get a read of u. S. Ahead ofte employment, that crucial friday payroll number. Coming up on countdown manus war of words, u. S. Vice president ial candidate go headtohead. This is their first and only debate. We are lied to the states with the latest. Anna and the ecb tells will gradually wind down bond purchases. Manus and google proposes to take on apple as it launches the pixel smartphone. This is bloomberg. Anna welcome back. This is countdown. 19 in london. 1 19 where the hang seng is up. Let us get the first word flash with david ingles. David thanks, anna. Google is a marking on a wholesale revamping of the phone strategy, debuting a pair of handsets that will go headtohead with the iphone for the first time. The pixel in the larger pixel, and it was engineered and tested inhouse. They feature a virtual camera, and the first to post androids new operating system. Taiwan will build a new central smartphone, assembling apple with something of a rewrite in strategy, whose own branded phone once actually claimed 90 of the smartphone market. Sales plunged 70 in the last five years. Now, written crashing out of the european Single Market could cost banks and associated businesses almost 40 billion pounds in lost revenue. That is according to a report in the u. K. The report warns that almost 70,000 jobs and 10 billion pounds are at risk. That is according to people familiar with the matter. And that is your Bloomberg Business flash. Manus david, thank you very much. Now, the u. S. Vice president of candidates have attacked each other as they went head to head in their first and only debate while tim kaine slammed the donald trump on his taxes, mike clintonsn hillary email controversy and americas role in syria. Wake of pence in the the season where American Families are struggling in this economy, under the weight of higher taxes and obamacare and the war on coal and the stifling avalanche of regulation coming out of this administration, Hillary Clinton and tim kaine want more of the same. Senator kaine we trust Hillary Clinton. My wife and i, we trust her with the most important thing. Son the floyd in the marines right now. And the thought of donald trump as commanderinchief scares us to death. Anna the debate to place in farmville, in virginia. Joins us. Kevin, good to see you. Was there an obvious winner . Who came out on top . Kevin well, i think all of the strategist i talked with including the democrats and republicans point to a victory for governor mike pence. Here is why. He delivered a much more measured performance. He also was able to attack tim kaine and Hillary Clinton in particular on the clinton foundation, as well as her time at the state department. Now, that being said, tim kaine did try to get under mike pences skin. He interrupted him frequently, more than 50 times throughout the 90 minute debate. But he also did something else. He tried to get mike pence to defend the Donald Trumps most controversial rhetoric. Something that mike pence did not do. And he is already facing criticism for it today. Manus kevin, thank you very much. Kevin in farmville, in virginia. G economics is still with us. And a donald Trump Victory, it to be back to when this country voted for brexit. This is the night the market voted yes on abrasive victory. Should we begin to prepare . The risk reversal suggests that people are prepared to pay for call options street should we prepare for brexit, should we prepare for a risk moment of a donald Trump Victory . Lena the possibility of a market shock in the final quarter of this year, whether it is due to a Trump Victory, which i think is underpriced, or due to negative results in europe or another antiglobalization antiestablishment vote is very strong. And the fact that the yen broke 100 on brexit, and the market is still i think underweight on yen, in terms of valuation, it shows that really the dollaryen Exchange Rate has become a lightning bolt for globalization. And of course, political polarization, the rise of extreme candidates and extreme ws on the ground has become something i think we should be getting used to in 2017. Anna a lot of the polling does not so much in between the candidates, yet you say the markets are underpricing a truck victory, despite what we saw in the u. K. And the surprises that can be delivered in terms of certain more popular sides of politics. While using markets are underpricing it . Lena the u. S. Election in terms of the brexit vote the chances of seeing a sharp, riskoff move should be some in that investors are preparing right now married the reason why we are not seeing this right now is because it is hard to imagine the cultural clash embedded in both economic terms, in this preelection sort of debate. And that is to the extent that clinton or the remain campaigners in the day represented the liberal middleclass that bought into the globalization dream a decade ago, they are now facing the rising voices of those who have lost out on globalization. Global result of weak growth and rising inequality means that this is a movement that will only gain momentum, not something that is here now. Manus let turn back to markets. Trump, if he exceeds to the goes these, if he white house, he would have the power to nominate a new fed chair and a new vice chair. The fed could materially change 2018. Lena absolutely, yes. Manus more hawkish, excuse me. Lena more hawkish, absolutely. The donald Trump Victory scenario will be one of the stronger growth in the shortterm, but stronger inflation and a much higher debt profile for the u. S. And that is because of the and asive tax stimulus spending stimulus that donald trump is talking about. But also, because of the fact that we are probably going to see a weaker dollar, as some of the protectionist trade tariffs he talked about increase. Domestic and imported goods. So, the result will be a weaker, in the real growth environment over time. But in the short term, the inflation will be on the fed to counterbalance. Anna and the imf warning about tariffs, the longterm growth potential. Lena stays with us. Up next, is europe ready for the tantrum . The central bank will gradually wind down bond purchases when it decides it wants to end qe. We discussed back, next. This is bloomberg. Manus you are looking at shots of the imperial palace in tokyo. Dollaryen again on the move, 102. 83. We have a new edition of daybreak available on your bloomberg and your mobile. Into. What you want to pop this is what is on the front story of the day, the cover story, which is i love that title. There is not a snowballs chance that i cannot end the next phrasebook locally. With the central bank chicago fed president Charles Evans saying the next move is letting have in december, but says supporting an next hike will not be an easy decision. And that he wants to see a solid evidence of inflation rising before he can make that call. Anna interesting you say that the lack of a chance in november because we had a couple of people saying they are always live. The nextdoor a picked by the daybreak team, the bloomberg scoop about the ecb. Telling bloomberg and the bank is likely to gradually wind down bond purchases before ending their program of quantitative easing. In sets that may happen of 10 billion euros a month, saying that they have made the decision to end qe, they could still extended beyond the march 2017 end date we currently have. But this is just some intimation about how they might choose to do it. And the consensus developing. Manus we will have a comment later. Focuses onybreak comments from the same bond undlachr, jeffery gardne says highlighting the negative Interest Rate policy in europe and the regions lenders. So, let us take a quick look. I think this is definitely a story. Anna the negative Interest Rate story seeing what we are in with the treasury. Manus when you have here is this decline. This is the zero bond in terms of Interest Rates on the bund. That circle was the last time we were at 0 . Thereis bloomberg scoop, talking about tapering. Suggested that this is taper tantrum, take two. Anna and we can see bill gross has shortened the duration as a result of the slurry. We have more comments coming up. This is a bond story we have been talking about. Lots of things on the move in the market. Dollar near a twoweek high. And in conjunction with all of these thoughts we are hearing from that officials about the possibility of rate hikes in december. We have a jobs report on friday. And the lack of appetite for emergingmarket assets, the korean won moving down. Manus keep an eye on global psychological barriers. Wrote. What sack so exit, a huge rush to the in terms of that trade. One of the biggest drops, down since september 20 13. I am flying blind. Anna yesterday, futures dropped the most in three years. I will fill and the like for you, manus. What was behind that . The typical logic says it was all about the fed and Interest Rates, but we have these piece that suggest you look at india because we have something of a surprise in the central bank in india yesterday. If they are not so hawkish in the future, if there is more inflation in the market, what does it do for the appetite for gold in the market . Manus gold, indeed. Want tothe bund market, watch on the opening. Steepening on the agenda. Let us talk about the egyptian pound. Slumping to a new record of the black market. For more, yousef gamal eldin joins us with a chart of the hour. Anna, a real foreigncurrency crunched in egypt, not just on the black market, but the nondeliverable forward on a 12 month basis. I have charted you out on the bloomberg. Just for additional context as to where we stand, i also put the egyptian pound spot rate. They had a sale of the central bank yesterday, and the rate remained unchanged. You can see what is fascinating is the disparity. And i have also highlighted for you in the circle there, that is the first time they moved on a valuation by 13 in march earlier in the year. Now, we have seen on the back of that is of course a lot of people moving their money into egyptian stocks egyptian fixed assets as well. ,and the financials feel that could happened as soon as this week. The big deal here . They need to make this happen, in the views of most economists and analysts we have been speaking to, in order to secure the 12 billion deal with the imf. This foreign currency crunch is very real. I was just in cairo a couple of weeks ago. A lot of the premium car brands have stop selling cars because of the lack of dollars in the market. Also, in terms of how institutions are positioning themselves on the egypt story, the latest news is barclays selling the egypt unit to the employees in some 56 branches. Also, quite a historic presence in the country, that is being wrapped up. And keep a close eye on the story for you. Manus no better man to keep an eye on that story. Ouref gamal eldin, Bloomberg Markets the least anchor. Let us travel back to the ecb. Officials told bloomberg that the bank is likely to gradually wind down bond purchases, before ending its program of quantitative easing. Anna a few clues how they might so,out of qe, when they do it may happen in sets of 10 billion euros a month. European bonds declined on the move, and the euro declined to a three year high against the pound. Of course, ecb president mario draghi has said that qe will continue until next march or beyond, if necessary. Manus that news has led to fund manager bill gross to switch his position on debt. Mindthis report put him in of 2013s infamous fed taper tantrum. Bill your article on bloomberg suggested that the purchase of 2017, soarch of perhaps they will, perhaps they will not. Word, that suggested the drop in treasury and 2013, big drop. So, the drop in the day come is a totally significant . Probably not. But it is a nice skew, causing me to basically reverse duration on long and short. Komiletill with us, lena va, g economic. It caused bill gross to shorten duration, and his exposure to the european bond market, how would you expect this type of news to play out . We have seen it on the market naturally. Lena this is where bond markets should be shortening duration, across the board. Market, ie eurozone think the storyline globally is one of increasing and negative yields qe, with respect to the ecb, one thing im worried that minutes will get in trouble, i will never be invited again manus two people on the show. Lena there is a sense the market i think under prices the physical constraints to the qe session. If we look at a strategically, you have to reasonably suspect that when the ecb does start tapering qe in the future, that this will happen very gradual, fairly well communicative. The fact this is coming out now, feds ownom the experience from the taper tantrum, one has to question why this kind of story is coming up now . And it does suggest there is a desire, starting admittedly with the boj over the summer, the qe forever trade is bankrupt. The ecb and Central Banks have realized negative rates are not an endgame, it is a dead end, particularly when it comes to European Bank assets. Manus this is jeffrey gundl achs point, taking the challenge really to mario draghi, showing the harm that negative rates have done to central bank. You cannot state of faltering economy with one clear poster child for it, and that is Deutsche Banks stock prices. He says mario draghi, put your house in order. Lena absolutely. The remarkable thing as this is the first banking crisis of the qe era, the early part of the climate, what2009 to do with liquidity on the liability side . Markets needing a liquid problem. Liquidity problems have now moved to the asset side of the Balance Sheet with dealing with one thing, probability. Flat yield curves, becoming synonymous with credit accounts, inefficient Monetary Policy stimulus. And the destruction of capital means that the very transmission mechanism that is supposed to work to channel into the real economy is now going into the reverse. Now, that is not endgame strategy. It is a dead end. Anna do you have sympathy with mario draghi when he says they need to address, if there is a problem it is not due to negative Interest Rate, that pushing it to the fore, but he is not to blame for the problems of the European Banking sector . Look at the german banks and the rest of the European Banks. Lena systemic problems require systemic solutions. Manus you know what i did get prepared for this morning . You know lena is coming in. You have to dig deep. Have a look at this. Negative yields on eastern europe. The amount of negative yields on eastern europe, there you go. Poland, slovakia, romania. 8. 3 billion. I put it to you, this is the greatest bubble of all. Lena it is the greatest bubble heard you should be plenty for early retirement if youre a bond investor. This is a great example of newborn talent, especially for entrepreneurial areas. Really, there is no negative yield advantage. Looking at the portfolio and capital highyield instructions through the banking shock, negative yields are a deadend. Elsewhere, given that you are asking how long Central Banks, not just in europe with the ecb, but the fat how long they will remain, as supporting the market as they are now . Where are the rest markets . Lena i think it is extraordinary that the qe forever is coming from the two of the inflation curves. But to directly answer your question, where the market is least priced in, the u. S. Because of the potential impact that a Trump Victory would have on the steepening of the curve, to a weaker Growth Profile overtime and also through a higher inflation figure. And risk of demonization. Manus lena stays with us. Anna singapores Property Market seeing the longest poorly losing streak on record, however indonesian billionaire says he wants to see further declines before he will consider buying in. We need 10 . [laughter] then i think , there are many. Indonesia recently implement it a very ambitious tax amnesty program. Do you think it is on the right track . And how successful do you think it can be . In the past, because of the political uncertainty, uncertainty because of the economy in indonesia, so indonesia they have a very big underclass economy. So many businesses do not go into this tax system. The weaknesss is of the indonesia economy. And then, i would like to say indonesia will be very fortunate to have such a good president. Very importantis decision, to benefit the people, to the country, to the government. Taxuse after that, so our base will be increased so big. And then, after that, the government with a taxable income, very haslinda there is a chinese saying, one in which you included in your book, that wealth does not pass three generations. Right now, you have your grandson, the thirdgeneration. How do you view the future of the company . Well, the family of the company did not alert about the changing of the technology. They are not alert about the changing of the political situation. And the economic situation. And then, theyre going to be fairly haslinda you are one of the richest men in indonesia. Ford says you are worth about 2. 2 billion. Is that an under estimate of chinese wealth . Not so good. [laughter] haslinda over or under estimation . It is under estimation . A little bit. Manus that was the founder and chairman speaking to our Southeast Asia correspondent, Haslinda Amin. Coming up, is it smooth sailing . Anna the imf cuts the forecast for 2016, saying the estimates depend on new negotiations for the eu. We get into that story. Manus and lowcost competitors mounting pressure on tesco. Can Sales Volumes get the numbers back on track . We break a number that 7 00 a. M. Anna bill gross has been watching his bloomberg, reverting positions at the report of the ecb would likely down bond purchases, before he clears its qe program. We have that story. This is bloomberg. Anna welcome back. This is countdown. 1 49 the morning in new york. Fairly flat at the start of the u. S. Equity trading day. Things looking flat to negative on those u. S. Futures right now. Let us to the bloomberg flash. Anna, google is embarking on a wholesale rebound, debuting a pair of handsets that will go headtohead with the iphone for the first time. The pixel in the larger pixel xl were conceptualized, design, engineer, tested inhouse. They feature a virtual assistant, flashy camera features, and the first to boast androids new operating system. On that note, htc will be building the new phones. They will assemble the iphone, something a strategy for htc, zone branded phones if youre a member, once claimed 90 of the market. And they plunged 17 in the past five years. And that is your Bloomberg Business flash. Anna, manus . Up thetheresa may wraps conservative Party Conference today. Her comments there on the weekend all about article 50, triggering article 50, sending the pound down there anna meanwhile, the imf has cut the Growth Outlook to 1. 1 , from 1. 3 . It said the last estimate depends on smooth negotiations with the eu. Manus meanwhile, a report by the group city u. K. Said that britain crashing out of the Single Market could boost the banks, associate businesses, could cost banks and associated businesses almost 40 Million Pounds in lost revenue. Warns that 70,000 jobs and 10 billion pounds are at risk from a socalled hard brexit, according to two people familiar with the contacts. Anna still in the studio, lena from g . Give us your thoughts on we have heard from the conservative party, and the events that are taking place in berlin this week. Does the brexit seem harder than you had expected . And what are the implications for the u. K. . Lena welcome, anna, as you know with policy, always to streams of medication and the actual imitation of it. What theyod is that have done an extremely difficult situation of defining and a possible balance of domestic security and policy, also between the u. K. Position in the world, that is thriving with antiglobalization forces. And of course, a more country agnostic eu postbrexit, that is not keen to be housing. Now, it is good that we have some clarity now, with respect processormal legal from the withdrawl will happen next year. That means that probably the eu will lose the breakup will happen, by the First Quarter of 2019. With respect to business implication and the fact of the public financing, it has yet to be seen, to materialize. So far, have seen behavioral impacts before and after the referendum. Anna should the focus right now be on making sure there is no cliff edge . There is no fall out of the eu into no mans land. Try to get into place some sort of temporary arrangement to cushion between leaving the eu and whatever future trade arrangement exists . Lena this is a great point. Absolutely. I think the actual negotiation on withdrawal and creating a new eu relationship will take a decade or more. What is important to years or so, if a reach a transitional arrangement that ensures there is no cliff edge, no shortterm crossborder trade or capital flow obstruction happening, that is the beginning of anna when it hits midnight. Is one perception youre looking at stirling for the 1985 low. Have a look. 40. 22. I have tenure inflation swaps and the u. K. , over european counterparts. And that is blowing out. This sterling is causing quite an immense problem. Bloomberg,have a have a look. Swaps arising, inflation rising, and i want to get your inflation view. This is the heat map. This is where we go next. Where are we in the great debate . Inflation is rising. Sterling is dropping like a stone. Do gilts steepen . Lena manus, this is one goodlooking chart. Manus only for you. Lena thank you. [laughter] my advice, fourth quarter, keep calm and buying sterling denominated. Because brexit has been an unexpected gift for the u. K. , that is to import currency deflation in a world of competitive devaluation. Extenthink that to the that is important, more of a small, limited global inflation premium in favor of the u. K. And that means a steeper yield curve, in addition to the growth and uncertainty and the possible structural impact from the fact that we will probably lose whatever agreement the government reaches with the eu. We will lose for access to the Single Market. And that means higher cost of business in the u. K. , and capital flows. So there will be an impact on growth that will lead to a structural gap on borrowing, by the treasury. Anna what do you expect the treasury to announce on the autumn statement . A long way off. But that seems to be the next big day in the calendar in terms of what we might actually learn something about how the treasury can cushion the u. K. From what lies ahead . Lena we heard from a new chancellor phil hammond this week. He said that the treasury is preparing for a growth shock, of a kind. Do expect some volatility in investment. And the reality as we countdown down to raise it, it does hurt early next year. So, translating and preparing for what i am really happy to hear there seems to be a inft in policy dynamics 2017, away from monetary activism towards fiscal activism. Which will be a good thing for the economy. Lena, thanks a lot. Of . Jeffrey gundlach,s comments. Mbers. Scos nu this is bloomberg. Manus is europe set for a temper tantrum . The central bank will publicly lying down bond purchases will probably wind down bond purchases. It has caused me to reverse positions in terms of being longduration. Manus chicago fed president says he expects the hike before the end of the year. He wants to see more explicit communication around conditions being met for future moves. The imf upgrades the outlook for the u. K. This year but downgrades it for 2017 and says estimates depend on a smooth negotiation with the eu. Manus welcome to countdown. I am manus cranny. Anna i am anna edwards. Were getting pretty numbers for the giant of the u. K. 596 million giving guidance on capex. The focus has been on recovering the Sales Numbers in the u. K. Comparable sales growth coming in at 0. 6 . Margins andound the to deliver three point desperate percent to 4 profit margin by 2019. That operating profit number, 596 Million Pounds. One thing i am not seeing that will be coming through the release will be any reference to the pension deficit. Morgan stanley was estimating this may have increased by 3 billion pounds. Not alone in being a big u. K. Corporate. We will talk about that more. This is something the market was fixed on. A lot of questions as to whether the recovery we have seen in sales will mark a stage one as stage one of dave lewiss recovery. Business that has delivered some stability by dave lewis cutting prices. Improving customer service. Ll of this amid a price war they are facing cost pressures. Putting some pressure on Company Stocks at tesco. I mentioned the issues around the pension. Were hearing news of a further operating cost reduction. 1. 5 billion pounds they are mentioning this morning. Opened,esco when they lets talk about the equity markets when they opened lets talk about the equity markets. Backlash against negative yields. We have the bloomberg scoop to talk more with our guest. The ecb is considering tapering their Quantitative Easing Program before it ends. You got morning on negative rates youve got warning on the negative rates. You have the fed with mr. Evans from chicago talking about favoring a hike at the end of this year. It is over 60 now. There is not a snowballs chance of a november hike. European equities set for a lower open. Oil is back in the trend. Anna pension deficit, tesco, 5. 9 billion pounds. Lets throw up the risk radar. The continuing talks that we are getting from those at the fed around where policy next goes. Setting mines on the possible increase in Interest Rates setting mine closing the day out flat. The korean won you can see down against the dollar by. 5 . Manus lets talk about gold. The biggest oneday drop since december 2013. Where does that take us . The downside risk. Gold investors raced to the exit and the biggest slump since the 13. Oil is up nearly 1 . Slump since 2013. Oil is up nearly 1 . Anna some of the data suggesting that stockpiles are falling in the u. S. Lets get the bloomberg first word news with david ingles. David ecb officials have told bloomberg the bank is likely to wind down bond purchases before ending its program of quantitative easing. Europeanpen bonds declined on that news. Ecb president mario draghi has said that qb will continue until next march or beyond if necessary. That qe will continue until in next march or beyond if necessary. Says it may help prop central bankers to reconsider their approach until the conference in new york. Noted to clear host to children for this. The banks stock rose. Shares are down 60 in 2016. 2016. Down 16 in bys president ial candidates attacked each other as they went headtohead in the only debate Vice President ial candidates attacked each other as they went headtohead in their only debate. Very fitting running for Hillary Clinton, because in the wake of a season where American Families are struggling under the weight of higher taxes and obamacare and the stifling avalanche of regulation, Hillary Clinton and tim kaine want more of the same. We trust the Hillary Clinton, my wife and i, the most important thing with our life it would have a son deployed overseas and the war right now. The thought of donald trump as commanderinchief scares us. David the International Monetary fund has become the thest forecaster after the economy after the economy proved more resilient. That would make it the fastestgrowing economy in the g7. Estimates depend upon a smooth negotiation with the eu. The pound will weaken further to sustain the economy. For the u. K. , the situation is quite uncertain. They have a very large deficit. It is unlikely they consisting the flows of inward investment that have allowed them to run that deficit. There needs to be an adjustment to the Exchange Rate. We are seeing that starting to happen. Brexitreality of the sinks in, the currency is depreciating further. It could depreciate further still. David the National Hurricane center has issued warnings for florida as Hurricane Matthew heads toward the United States having last the caribbean. Flights have been canceled since the storm. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. I am david ingles. Anna. Manus. Manus thank you very much. Lets check in with the markets. Juliette saly is standing by. How is it looking in asia . Juliette a little bit of a mixed picture. If you have a look at the emerging market index, you can see weakness coming through, down by 3 . We are seeing down by. 3 . We are seeing bonds selling off today. Central makes maybe less accommodating Central Banks may be less accommodating. Elsewhere you got japan still rallying because the dollar is stronger. That means a weaker yen and stronger japanese exports stocks. You can that is its Third Session of gains could hong kong continuing on its fall like rally. You can see a lot of those Energy Players doing well on that rebound and oil. The rebound has played quite a blip quite a bit of havoc. We can have a look at the malaysian ringgit, down by. 33 . The new Zealand Dollar continuing its decline. The kiwi off by. 4 against the u. S. Dollar. This is in response to the auction of global new zealands biggest export. Inkness coming through currencies but we have seen some upside and hong kong and japan upside in hong kong and japan. Anna the Federal Reserve bank of chicago resident Charles Evans says the next u. S. Move on rates will happy will happen in december. The nonvoting member is known as the most dovish of fomc members. Manus he says supporting the next hike will not be a test will be an will not be an easy decision. Works i prefer at prefer at the time we make our next move, it will indicate that increases will depend on seeing such changes. This would help assure the public that the committee is sinking financial conditions its seeking financial conditions to support our target sustainably and sooner rather than later. Anna this comes as the imf warns that advanced economies in the latest update, the Organization Says rising political tensions over globalization are threatening to derail the world recovery. Manus april 2017, Global Growth rate the imf struck a positive note on the emerging growth. At large and markets are seeing recession seeking exiting recession. Ceo the debate, the backlash to negative rates. The u. S. Never went there. They are line they are lining up. This is the longest and most dovish hike in history. Is in january, everyone was expecting the fed it to follow its ford gains and focus on more domestic issues. Suddenly it became much more internationalist. I will think they will be blamed to the strength of the dollar or other currencies, sterling and zero. They will be looking at the international nature. We are expecting Interest Rates to go up. The u. S. Economy can sustain it. Cautious and believing what the fed says because they have this form of changing the story. They have been watching their broader picture. Anna does go up in december . Euan we do think it will go up in december but it will be small. We think it is exaggerated movements exaggerated reactions to tiny movements. Anna what does that do for your appetite for emerging market assets . If you think rates are going higher, what does that do . , the the day we see a move emerging market assets will respond negatively because there is a kneejerk reaction. If you look at the emerging markets, those are really the only parts of the world where bond yields are offering real returns. Bond yields are higher than inflation. That sets the valuations for the global markets. They are likely to get stronger growth in other parts of the world. The question for me in the mediumterm is are the fed going to make a colossal policy mistake and keep rates up to much. Rates up to much . We believe it is happening in the u. S. Hey are unlikely to do that the u. S. Can sustain substantial Interest Rate rise rises. Manus weve got a chart, the s p 500. October has been the strongest month of returns for the past 25 years. Typically you get moves, 1 . 929, 1987 october 2008, i can remember that one. Where are you in terms of your exposure and taking additional exposure to u. S. Equities . Do you take money off the table between now and christmas . Euan we have been preferring managed markets to the u. S. To the u. S. This is positive of the global equities. If youre positive, you have to be constructive about the u. S. Equity market. We are. We think there are other markets that are more interesting. On the volatility this month, the directionality we have seen, we have been declining been with declining Interest Rates. You have volatility, you tend to get the biggest moves in the direction the tide is moving. Anna we saw a big move in gold yesterday. Met manus 1300. Euan there is an element of gold buying that is driven by a believe that quantitive easing in Central Banks creating lots of paper money next goal attractive, because you have got to work hard and mine for it. Any talk of papering will have a negative consequence for gold. I think we are at a we are at an inflation point. Central banks have not changed their mindset. They are like to they have the but they have like to devalue their way. I feel gold has a reasonable future. The fact that it doesnt have any carry is less of a problem. Munro stays with us on the program. Manus we are going to talk about theresa may next. She prefers to close out the conservative Party Conference having sent the pound to a 31 year low with her article 50 comments. It is not going away. We are going to talk about that. This is bloomberg. Anna welcome back. This is countdown. A lovely shot of london. The pound at 127. 29. Not quite where it was last week. Here is Juliette Saly. Juliette thank you. Google is embarking on a host revamp of its mobile phone strategy. It will go headtohead with iphone for the first time. The pixel in larger are the first phones conceptualized, engineered and tested inhouse. Features flashy camera and a first two most and george new and george new operating system. Iphone. Bling the it is something of a rewind and strategy for htcs own randa phones once claimed 9 10 of the global market. The sales have plunged 70 in the last five years. Singapores Property Market is witnessing its biggest fall in seven years and its longest quarterly losing streak on record. The indonesian billionaire is one of its biggest Real Estate Investors in Southeast Asia. Singapore is still too expensive. He told our Southeast Asian correspondent Haslinda Amin that prices must come down further. Go down to 20 and i see there are many [indiscernible] juliette that is your Bloomberg Business flash. Manus theresa may wraps up the conservative Party Conference later today. Her comments over the weekend all about triggering article 50 might end of march next year. That sent the pound to a 31 year low. And it says that estimate depends on smooth negotiations with the eu. Manus every port by the lobby group, the city of u. K. Says britain crashing out of the Single Market could cause banks almost 40 billion pounds in lost revenue. The study warns of almost 70,000 jobs are at risk of a so called hard brexit. That is according to two people familiar. You dontet like the pound much even after where it has fallen over the last few days. How low does it go . How do you reflect that in your portfolio . Euan it is moving in the right direction in terms of what we were expecting following brexit. A lot of people are looking at the level of the equity market at record highs. I wish that was based on the positive prospects for the u. K. Economy. I suspect this is the translation affect before earnings being translated back into eight weaker pound. The weaker pound is helping the picture for u. K. Equities. It will also help u. K. Export better, but the uncertainty is significant and inward investment is likely to be damaged over the next two years. We do expect the pound we are not surprised to see the pound at this low level. It could go further. Manus can i pick up on that thing. This is the ftse 100, 250 and three 350. More domestic focused markets have improved as well and sick patient. The consumer has not been battered as much as we thought. The 250 is above the brexit level. Does that challenge what you just said . Are the markets ahead of your thinking . Apologies, your thinking is more head of the markets . Euan sometimes the market is ahead of my thinking. More than half of the voting public voted for brexit. The consumer doesnt necessary think they have done it damage to the kid economy. We are not seeing the weakness come through done damage to the u. K. Economy. We are not seeing the weakness come through. We are is not were seeing a retreat from investment. We had a chat on the show, i was pointing out that u. K. Gdp just 17 iss investment. 17 is investment. I think that is still a realistic prospect. The investment side is at risk. Philip headmans comments around Philip Hammonds comments around increasing the fiscal side. We need something that i have been calling for. I will become more optimistic about the prospect of the u. K. Economy, if not the pound, if we do decide to pull that trigger. Anna do you think the andngement, should the u. K. Eu in an interim after march 2017 has been found . Is that where the focus needs to fall . Euan i suppose it does. Our politicians are saying we will not accept anything that is worse than what we had. That implies that someone knows has to accept something that is worse than what they had. A sort of question about who has the most power in this negotiation. My view is we will have to make if we want to improve our control of immigration, we will have to make some negative compromises on trade. Where we land, i am unwilling to predict. Just a very uncertainty will have consequences on investment unless the government steps in and it will have consequent is for the currency. Anna thank you so much. Euan munro at aveva investors. Stock, 20 to 25 higher on the capital futures market. Anna m a in the dutch. Well keep an eye on the way the european markets open up when we get there. On the move is up next. Guy welcome to on the move, 7 30 in london. I am guy johnson alongside Caroline Hyde who is in frankfurt. What are we watching . Europes taper tantrum. Is the market miss reading the ecbs intentions . The physique hangs on the heads of history the ftse hangs on the edge of history. Traders way a hard brexit. We are points away from a bizarre alltime