To reposition . Member ask the board lorenzo if they are consolidating fast enough. Half an hour away from the open of market, where do we think the start is going to take us . Everyone is going to sit on their hands. 180 is the figure we are looking for. You can see the calculation takes us towards half a percent higher. That is what you want to do first thing. Lets take you. President Vladimir Putin has struck a conciliatory tone. The territorial dispute has prevented them from signing it world war ii peace treaty. He told john nichols weight resolving the cant should be part of setting the stage to develop a longterm relationship. Trade andt territories. The problem of a peace treaty like toan, we would find a solution to this problem with their japanese friends. Tune in to watch our exclusive interview and dont miss our special report on monday. The cleveland fed president said there is a compelling case for raising Interest Rates with the u. S. Economy approaching the target on employment and inflation. She declined to say when she believes a hike would be necessary. Heldext policy meeting is september 20 and 21st. Florida is being hit by its first hurricane since 2005. It has reached 80 Miles Per Hour making a category one hurricane. It has been expected to cross georgia and the carolinas. Futures surged to a fiveweek high as the storm neared the sunshine state. Space x rocket has exploded on the launch pad in florida, the second loss in a little more than a year. It halted an initiative to spread across africa. It was being fueled for a launch at Cape Canaveral tomorrow. The rocket and its cargo were destroyed. This is bloomberg. Thank you very much. Lets get back to one of the big subjects of the day. Our putin interview is dominating coverage. Lets talk about the great rate debate. Sounding off on ultralow Interest Rates. John kicked it off by saying it is a headache for every european bank. Skepticism very clear. , the rates are now path is blocked. Rates are at zero. They can sink into negative. I was skeptical about negative rates. They do more harm than good. The view. View. Took a different were in a world where they seem to work. One of the most interesting developments i have seen in theory is a paper that said they work to a certain point and then they become counterproductive. Which point does it become counterproductive . Lets ask our next guest. E is the current chairman he joins us this morning. Good morning to you. Which side of the fence do you said on . Are you saying negative rates may or may not work at Different Levels or are you with those who say they are not working . Banker, i certainly dont like negative rates. But if you look at the broader picture, they are reflection of an excessive saving of investment. Its difficult to see, to have higher rates. It would lead to lower growth. It is clear we may have to deal with the consequences of these low rates which will continue for some time on the Banking System. We have to think of how to absorb these negative effects the world is just not able to admit Monetary Policy is no longer delivering. Whered you think we are in the journey we are taking. How far down it are we . Without other policies doing their part it is more difficult to achieve its goal. What does it mean . It should stop doing what it is . Oing and should just wait and not try to do all it can . Should it confront the political authorities. I think it is not obvious to me even if policy is having less and less effectiveness it should just stop doing what it is mandated. Achieve to try to inflation at 2 . But it is fair to say you are getting less bang for your buck with every turn we make. Draghi isnk mario beginning to run out of options . He is struggling to find the bonds to buy. Options hey, various is confronted with. Mindneed to make up their what is more effective. Dates of to extend the the deadlines for the purchase of assets. They need to extend the limits of each issue. They have to do a series of things. They need to make up their minds. Let me turn to what is happening in the banking landscape. Coming outmments suggesting europe has too many mags and we need to consolidate rapidly. Would you share that view as well frankly what we have seen since the crisis, if we compare u. S. And europe, larger banks are getting bigger and bigger. European banks are getting smaller and smaller. I think this leads to the conclusion that the Banking System in europe is fragmented. We need more consolidation across borders. Thats the most important one. Regulators should ask why these are not happening. Maybe there is something in the Regulatory Framework making the relation more difficult. This is not good in the end. They need banks in europe which are able to serve them as well as the world. That point. To the trend has been the bulk of the Banking Sector. Trunk itlot of emerges. What is it you think this has turned us against that . Now, notational Banks International banks. In a low interest environment, if you think about the enough its of consolidation , the obvious one is costcutting. It is easier to find synergy and costcutting if you have national consolidation. I think you may need to look for different synergies which are more difficult. Do you think it should be removed from the city of london . That is not an issue for me to decide. Its going to be difficult for london to keep it unless it has an agreement concerning european passports. This is one of the things that will have to be brought back to Continental Europe i imagine. Im just observing. We will observe and we will watch. Can i ask what city you think will become the new city . We are watching around year a. Saying, and live with us. Most financial centers, in it couldr in paris, all depend on how the negotiation will go. Will remain attractive. There we European Centers fighting for that. Paris will be one of those. About of the points was the Capital Market union men a larger Capital Market sector for the eu in the ability to compete. He said if reg happens its going to take a long time for that Capital Market to be created. Give us your sense of the timeline for creating Capital Markets. We agree in theory. They will help europe absorb shocks. It will take time. It will take even more time. These uncertainties will not get out of the way. We have to be pragmatic. Europe will remain a financial based on credit. We have to realize that. That is a different system from the u. S. It in the sameat way. That is the big discussion that will have to take place among the regulators. Capital markets union is a good idea that it will take a long time to implement. If we get 180,000 on u. S. Payroll do you think we can guarantee a rate hike . I am struck that everything data. S on one single week after week. I think market should be given more of a medium perspective of where our rates go. Independent of each single number. I think there is too much focus on one single data. Two weeks from now there is another. E should look through the data the health of the u. S. Economy is better than we thought. It can support a second rate rise. We were in the same situation in the u. S. Economy went for it and there was no problem. Thank you for your time. I know you have a panel you have to attend. We are pleased you spent so much time with us this morning. Thank you very much indeed. Next, jobs we are discussing in the united states. What number will convince the market they will hike this year . Then it is the market open. A big week for banking. We speak to a former member. A likely third election in one year. Tune in all day to watch our interview with the russian president. We will get his thoughts on oil and the u. S. Elections. Stay tuned for that. We will hear from him next. This is bloomberg. Welcome back. Vladimir putin suggests compromise and a longrunning dispute with japan as he prepares to meet the japanese president s. Their nations have been in dispute. In a rare interview with bloomberg, he spoke of a potential deal. We dont trade in territories. The problem of the peace treaty of japan, we would very much like to find a solution to this problem with our japanese friends. Surprisingly it was by the supreme soviet and the japanese parliament. To japanese side refused appeal to it. Several years ago japanese courts return to a discussion of this topic. We did that. In the past couple of years, not by our initiative but by the japanese side, these conflicts were frozen. But now our partners are showing a willingness to have a discussion. We are talking about not an exchange, we are talking about finding a solution. Are you as close to a deal now as you have been since the 1960s . Think so. Dialogue. E begun a work. L step up their this will always be a topic of discussion for the russian president. Im sure they will discuss this topic. But in order to resolve it it should be very well thought through. Tune in all day to watch our interview with the russian president. We will get his thoughts on the u. S. Election and many other topics. Dont miss our special report. That conversation is going to be played out in full. This is bloomberg. 7 53. Lets talk about the things we should be focusing on. Heard from a number of bankers as well. Stocks have been on the move. Take a look at what has been happening with union credit. All of these stocks have been jumping sharply. Deutsche bank will have a big week. Good morning. Battered. Ve been out marketstrip perception. We have reached a bottom for the year can european Banking Sector . Valuations, it is attractive. Relative. Uite as we are in a different world. , we sawresting contrast Interest Rates rising. You are going to get some income. You dont see that in europe. On outlook depends restructuring and reform. Time need big consolidation. Is that going to happen . It is a nice one recently. A real expectation they will push through a significant structural reform. Stay with us. We will talk about the payroll number. It is the market open. We are minutes away. We will see a mildly positive start up by around a third. The open is next. We are four minutes away. This is bloomberg. Guy youre watching on the move. I am guy johnson. We are here in london and moments away from the start of european trading. Here is your morning brief. Putinn president vladimir tells bloomberg he is confident russia will reach a deal to free oil supplies and now jeers. Well have much more on that. 180,000 jobs. This employment number could cement a fed hike this year. Is the market really ready to reposition . Third time lucky. Spain may be heading for its third ballot in a year. Long can this nation to nation afford to float ungoverned . The marketsng for to get going to equity markets we are going to see a positive. Tart by. 1 the Market Makers getting going. It is an ongoing payroll day. The market is opening in positive territory. We will see what the others will do and see what is happening around the continent. London is up. 2 . It is payrolls day, remember that. It is likely to mean like volume. Uropean markets opening up this is the breakdown in the stoxx 600. Netherlands doing reasonably well. Belgium trading higher. You got a positive performance around the continent. That is not the ftse, that is the breakdown in the stoxx 600. Lets see what is happening with the mrr. This exit this down and shows you what is happening. Mx actual leading the chart amex actual leading the charge. Spain, portugal trading down. Carnival down as well. 1. 99 . Get you some bond market data in just a moment. Ftse is now up. 4 . The real story for the bond market and the equity markets today is of course the payroll number. It comes out later. We will have plenty of coverage for you here on bloomberg. Economists expect strong support to show a gain of 140,000. It will fall in line with the average for 2016. Any sign of continued strength will enhance expectations for policy tightening from the data dependent fed. Your money, make a choice. Pay your money, make a choice. Joining us now to discuss this, Daniel Morris. Enough to lockt in a fed rate rise . Daniel we saw some increased pressure on wages with data this week with the provision. We expect to see that confirmed with what comes out today. Unemployment rates low 5 . That is indicating u. S. Economy near capacity. Labor market near full employment. It is telling the fed yes, we need to be in the mood to hike rates it unless we get a big shot, i do not see that changing. We also had a big recovery after several months. Always the dollar is the keeping. Is the key thing if Start Talking the rate rise, the dollar strengthened, that which pressure back on the economy. Have been through repeatedly over the last couple of years, it could repeat itself. By 25he fed raises rates basis points. I appreciate it is a big jump but nevertheless, is it more about the rates change and what we ultimately get to echo the market now knows the fed is going to move get to . The market now knows the fed is going to move very slowly. Daniel it is the terminal rate that matters. The real question here comes down to what is the potential growth rate of the u. S. Economy . Economy was permanently damaged by the crisis and the potential growth rate is under 2 , that tells you youre going to get inflationary pressures sooner. The fed is going to hike rates sooner than you expect. That is really what to determine is can the u. S. Get back to 2. 5 growth, in which case we can be fairly calm. Evidence thatle inflation is creeping back. You just run through a whole series of data and all of them, you would normally expect would be eating at fed capacity. There will be no output gap. The phillips curve should be working at all of these things are not working. Daniel that has been the case up to noun. How many times have we thought that inflation was just around the corner. By the same token, we dont want to get too complacent. If the potential capacity for the u. S. Economy is lower when inflation does start to accelerate, which it is going to at some point. It will happen and it could happen more quickly than it has been in the past. It doesnt look like it is going to be this month, but it will come. Guy there is a discussion that San Francisco is leading. The idea that we should be raising the inflation target. We should be a 3 . Maybe we should be at 4 . That discussion is knocking around academic circles. A break ofs take japan came out with their review this month and said we are going to set a 3 efficient target. The concern is they havent met the lower target that they have said so who would believe guy we are miles away we need to go for this. Daniel there is one credibility issue. They can set a higher target. It is risk damaging the confidence that people have in Central Banks. Jackson hole, what is interesting is how little that was discussed. Yellen focus more on the nearterm economy. Agree it is something that should be discussed. To make this happen daniel it is a very defensible did position defensible position that things need to change. Guy the markets need to be given a longterm view of rates. By raising the target, what you would do is to mitigate that we are is communicate that we are prepared to accept more inflation. When inflation comes, we are not going to act. That has been the tacit communication that has come through. How does the market the fed and other Central Banks deliver that can indication . What you really want to be looking at is the inflation expectation. They have been come down even though you have had a rise in inflation pressures in the u. S. That is the disconnect have been worrying about. If changing the tone could change that, i am sure they would do it. The we believe payroll number is a useful guide the debate is not about employment. It is something very prevalent here in the u. K. , yes, youve got a job, but that job is fragile and just about makes the numbers you need to make, and you are living close to the edge. It is reverberating around the planet, certainly in the developed world. Is the payroll number that useful of a guide . Is are so terrified of what around the next corner that youre not compared to spend decentyoure not getting wage growth. The headline number does not deliver that. Daniel if you would get the unemployment rate, it is not enough to say underemployment rate is still elevated. The dispersion between the wage growth at the lower end of the spectrum there are still a lot of challenges of the next resident of the u. S. Needs to address. There is a lot of structural issues facing the u. S. , japan, europe that are still there. I think is understandable i think it is understandable that for large swath of the population guy guy when the fed look at desk fed looks at that kind of debate do you think it is absorbing that calculation . Daniel mandate is for full employment. If you get a configuration between the president and congress after the election in november, that is a little more progressive, a little more thinking about what they can do to change the economy to make it better interagency and to raise wages. Guy Daniel Morris joining us from b. N. P. Paribas. He is going to stay with us. We got more of an exclusive interview with the russian president. His thoughts on the ruble. Dont miss our special report on monday at 5 00 p. M. U. K. Time. Coming up next, no joy for rat rajoy. Four we are going to take a closer look at that story. Clambering back. Oil stays in territory after its biggest fourday drop since february. All of that ahead. This is bloomberg. Guy 11 minutes into the equity sessions in europe. This is the picture around the continent as you can see. Mildly positive. It is payrolls day. The market is going to wait and see and wait for the number to hit. At the moment, we have a fairly mixed market with low volume. Lets pick down from the stock point of view. Desolating the losers making the. Ame leading the losers nevertheless, it is payroll day. Here is the bloomberg first word news with kristine. Thanks guy. Clevelands fed president says there is a compelling case for gradually raising Interest Rates with the u. S. Economy approaching the centralbank target. She declined to say when precisely hikes would be necessary. The f moc holds his next