Will the move restore confidence in what was one of the worlds most valuable banks . Lets get the first word news. Sincenas exports drop february. Pressure on the one. Chairmango ceo and john stumpf has stepped down. Public outcry over accounts. He helped build the firm into the worlds most valuable bank h rockets driven by profits driven by crossselling. Kim snow will become ceo. Croatias president says the departure britains departure from the European Union on affected trading block. The country will remain anchored to europe. It is for you to decide whether it will be a soft or hard brexit that i would assume that the connections will remain very close area. U. K. Housing market strengthened after the shock of brexit faded. That is according to the Royal Institution that says values also continue to decline in central london. Incur government Prime Minister cut short the provincial trip to return to bangkok saying he was prepared for an audience with the crown prince. Concern over the monarch has coincided with the stock market. Global news, 24 hours a day powered by 2600 journalists in over 120 countries. This is bloomberg. Lets have a look at what is happening to markets today. The biggest fall since september 26. Stocks falling for the sixth they. 1 decline today. The big news is that of china which is why we are seeing the dollar fall, the yen rise. Most,exports dropping the Global Demand remaining tepid. 1. 74 yesterday, it rose to the. Ighest since june the fed last meeting revealed a close call during those discussions and nymex crude below 50. Grew and differences emerge between opec over how members will share outlook cost. One chart i want to show you on the back of that china data. This is a breakdown of china exports i the region. This is the portion of the short chart. , exports to korea as well. Exports to the eu falling 9. 8 . That is the purple heart. 10 downments sliding 8. 1 . One commentator saying falling exports to the eu and u. K. Suggest a Downside Risk to China Economic recovery for brexit. Something we will be talking about with our guest. A close call. The feds minutes have given severals insight into several voting to hold rates last month. Indicated it would be appropriate to raise rates relatively soon. Pricing at nearly 70 chance of a hike in december. Is it a done deal . If not, what could stop them. Lets introduce our guest for today. President of emerging markets at ubs. 70 rate hike in september, is that what you are thinking . We think it is when they will go. As the a done last year, they have been given guidance in calendar terms. What is different from last year, the markets are not pricing in as much as it is to next year. Last year it was a two and a half percent price hike. Now it is less than half a percent hike for next year. Continue, they will need to reprice as well. We think december is is december iss on the cards. The probably not is a consensus about where we go and what sort of path we take from there on in. We might want to leave it for several quarters. We do not need to. Inflation is not screaming high. Sales slightly coming off, they dont need to fight. They want to go despite that as the minutes suggested. Given that information, i think what may be priced in for next year may be too low. When the fed did in december, it was pricing at 2. 5 hike. Next year will be quite interesting. That presents interesting risks for the market. Mark can emerging markets withstand a rate hike . Withstand it in terms of january mayhem, i do not think you are likely to see this in kind of mayhem or is no doubt that emerging markets this year have limited from several one offs. Oil prices nearly doubling and china giving a credit impulse almost like 2012. When we speak about pressures, i dont think we can go back to january kind of levels. I dont see the floor dropping off. Well promised another january. I think that would have to be one of the issues that does it. 25 billion, 150 billion a month. I think we are some distance from that in a big collapsing Commodity Prices. This is the wonderful nature of the bloomberg terminal, i want to get this chart. Talking about capital outflows. This is the chart. One which is the yellow line, dollar one, and capital outflow. When the dollar rise, capital outflows increase when the dollar doesnt perform so well you do not see such a large decline in capital outflows. These sorts of levels here were not as bad as those. Can we go back to those decemberjanuary levels . You saw athat time lot of Chinese Companies paying down external debt. China has a finite amount of dollar externals and it has been down pay down a considerable sum. To see continuing capital fight. That could intensify but i do not think the market will worry as much about the stability in the next three to month six months. That does not mean the market is pricing it correctly. The yellowis line, has been depreciating. What is priced into the forwards market is much too little. Priced in today and going back to january is a see forwardu can driven being under pressure. Chart, has continued to go forward in pricing much less than what they have in december and i think that is wrong. The other markets will take interest as well. To take notice there from here to an absolute meltdown in emerging markets we will come back to china in a second. Stay with bloomberg surveillance. China coming up including exports dropping 10 . We analyze what that means for the world secondbiggest economy. We trade growth. And eightxit president ial race. Our markets pricing with correctly . We will discuss and is the u. K. , weign secretary johnson will bring you that live. Could brexit be delayed up to a year . They with us. This is bloomberg. Lets get the Bloomberg Business flash. Government has you know and from 401 k plans. That could send a signal to other banks. Rbs representative could not be reached for comment and the Labor Department did not immediately respond to requests. Union credit will boost capital by selling 20 of its stake. It is the it is set to raise 550 million euros. The remaining 55 holding will be locked up for a year. Products vanity from vanish from its online store. Britains biggest supermarket over risingilever prices. And the brexit book. It aims to have results soon. Growthr reported sales increased demand in its ranks in europe over the net summer. That is the Bloomberg Business flash. Exports most extempore last month, shipments dropping 10 from the yearearlier according to a customs administration. How do we read this data . Good morning. I think it is a soft reading on chinas economy by all accounts and brings a sharp end to a few months of stabilization. We are seeing a big dip in shipments to keep markets like the u. S. , like europe and of course that does not bode well Going Forward. On the import side, a concern because china buys a lot of components to ship to the world. Less, itis buying suggests exports will continue week. A pretty soft reading on the china trade story today. It is the worlds biggest secondbiggest economy. 60 low against the dollar. To what extent is it helping exports . Economic theory would teach you that they would get a reasonable dividend from a weakening exchange rate. They are not getting much bang for the buck and when the yen as it did, itch did not put a rock under exports. What it does suggest Going Forward, the pressure of the yuan will be downward. Because chinas economy continues to slow and face challenges as it makes the transition. Change drivers. Factors, a fed rate hike. Hikes and the prodollar story, the one going downwards. A weakening currency might help exporters in china and, but also encourage money to leave the country and that is not what authorities want. Cheers. Thanks for joining us. This is the reason. Weak exports is the reason china is levering up as quickly as it is. This is the reason they cannot take the foot off the pedal in terms of boosting the Housing Market because that is what they had in growth. This week trade data in china is not just a china issue. This is for the whole world. It is because the relationship between trade and growth is fundamentally broken. You are seeing much weaker trade for the same level of growth. Willmeans that china probably see weaker trade for some time. That means that the risks from trade move elsewhere in the economy. Equilibrium in other parts. The decline is continued, how does it go . To 6. 85 byit goes the end of the year. He will continue to see depreciation. When you are not likely to see is a messy end anytime soon. On the next threeyear horizon, it is unlikely the chinese authorities let it go. Withwill be in control the currency devaluation of august 2, 2015. You will not see messy devaluation. You will not see 1997. The way it depreciates will be different than 2015. August 2015 was a step above. It has been depreciating at a slower pace and the pace can pick up, it will continue to depreciate that it will not fall , money markets wont choke up. Mark back to august 2015, another wonderful chart. Not booted difficult. , the white line is the dollaryou one and the second panel, the purple line and the s p 500. Currently equity is bottom. The vertical channel is august 2015. The yuan devaluation for markets dies. January 2015, the yuan was strong but markets traded in a sideway range. Yuan now is near a sixyear low. Against the dollar. Markets stabled. I like your charts. There is a great degree of complacency in some parts, especially emerging markets. They affect in asia, doesnt seem to be care about the way currency seems to go. They are not worried about competitive devaluation aspect. It is not pricing in mayhem. That is quite complacent and the , Commodity Prices are doing fine for now. U. S. Treasuries are backing up at low levels. The u. S. Is probably in all of these axes you are beginning to change. Is when i think the other places in asia and elsewhere will start paying attention. There is a degree of complacency. Showing thated by chart with highlighted the decline of exports to the eu and u. K. Does that highlight that brexit is having an impact . I think it does highlight that Political Risk is having an impact on economic risk. During that time, most factory owners declined considerably so it is reflecting a weak time in europe along with Political Risk. Make no mistake. What we are seeing in the world in terms of it having an impact on confidence in investment. The impact regulation has on how businesses are thinking investment and trade, would have an impact on the markets as well. Mark the glory for that chart goes to hillary clark. Our chart guru. Great chart. You stay with us. Up next, emerging markets. We will discuss a rocky week in south africa and Political Risks 4 00 p. M. Investors. This is bloomberg. I want to tell you it is vital that we do not raise Boris Johnson is testifying before the Foreign Affairs committee. , about brexit. The showdown between south africas president and the come , to appearminister on fraud charges. Tuesday it is down a further 1 . Em cross strategy. Many say this is a pretext to appoint a more pliant head of the treasury. How bad is that for south africa . South africa has plenty of project problems even before you have political issues. Markets pricing in south africa as junk. Not booted much Downside Risk in credit. Some of the structural problems will consist. For the bond markets, we will continue to see pressure. Mark this is a great chart. This shows even before he was charged. Overseas investors were selling the nations bonds at the fastest rate. Record flows in the first nine months but that turned a corner in october. Are we seeing a change here . I think you may see a bigger thege Going Forward if South African rand continues to decline. After five years of significant depreciation which actually hasnt meant to much for south africas exports. Structurally you have an economy that remains high. Some downside but it remains high. Where growth is extremely weak and unemployment is extremely high. Investors can lose some of their confidence in the economy. The currency can come under pressure pressure and the if thist does, Political Risk begins to increase in south africa, all of the money that has come in this year is at risk. You. We will come back to head across strategy at ubs. Underpriced risk. Fears of a hard brexit. A close president ial race. Globalizationst could rule the markets. This is bloomberg. The reminder that foreign minister Boris Johnson is testifying before the Foreign Affair Committee in the u. K. He said that the loss of ufj u. K. Influence in the world is being reversed. We will continue to bring that headline as they occur. Lets get the first word news. Air is sebastian. Sincenas exports drop february. The yuan has hit a six year low. Reports below expectations in september. Wells fargo ceo john stumpf stepped down after public outcry of think it counts Bank Accounts opened by employees. Selling strategy at the center of the scandal. Tim stone will become the ceo. President said the you ks departure from the European Union will not destroy the countries ties with the blocks. It will remain anchored in europe. I suppose it is for you to decide whether it will be a hard brexit. I would assume the connections will remain close. Global news 24 hours a day powered by 2600 journalists in more than 120 countries. This is bloomberg. Mark we trade, fears of a hard brexit. Analysts from the imf to wall street warning against a backlash against globalization. They say if you get one, we could rule the Financial Markets. Our investors pricing in the risk. What is ahead we have the head of cross strategy. We said he says we are not seeing the destruction very what is happening on the globalization from . I think this is one of the biggest risks for the global economy. Go fed cycle can come and but over the last 20 years, Financial Markets have benefited and economies have benefited massively from the global world. If you take a longterm picture from the industrial revolution, which you could say was the beginning of the modern trading era. You see three phases of trading. You seetening out a flattening out. Rain shadow of that recent success. More recently, the last couple of years tell us that it is not just a slowdown, there is a modest reversal. That needs to be stopped because if that does not happen, that fundamentally compromises many economies. Weak growth is leading to an increase in leverages, the Housing Market, and that will mean Financial Stability in three years. Mark why the reversal, the flatlining . Slightly more than half of that is demand. Investment is week. Lets not think cyclical. This has been an issue for 15 years. One of Larry Summers points on stagnation. The other issues are structural. China. Globalizing shrinking. Declining in a cyclical fashion. Investment declining to a slower level but the texture of investment is changing. You are moving from manufacturing and construction investment to Services Investment which are much less trade in tents. China is one of the reasons. Global value is one of the reasons and at the margins an increase in protectionism. Institutions were extremely friendly to trade in the past 20 years. That has begun to change. Mark what does that mean for our folios in this new reality . Most models are going to be wrong because they assume as a parameter that global trade in relation to global gdp is the same. You were speaking with hong kong and he said japan has depreciated. Which hasnt had an impact on exports. That is why it hasnt had an impact. Because globalization is slowing down. The pace you will be able to sell it other countries, is not currency, but how much they are importing. If they are importing less than output, your currency needs to go further. Rand is cheap, it is giving you the wrong signal. The mediumterm earnings risk is a huge risk. Said,come statement, as i you lever out the Balance Sheet and that becomes a Balance Sheet problem in the next three years. Massive credit explosion because of globalization plateauing now but this is the template. This is where we are heading in emerging markets. You will have a Balance Sheet problem. Most are on the Balance Sheet, i. E. Debt. Favor is not as much in or havent been in favor as one big bet on the m debt. If globalization does not pick up, if you see global trade being weak for a long time, those will affect the Balance Sheet. , which could do all sorts of miracles but this is the one we chose. Dollar emerging markets. All 24 major ones in 20 2016. Look at the top four or five. It tells a very clear story. They are all not a beacon for producers. I think importantly, from a big credit impulse from china. The Housing Market doing extremely well. 40 and china continuing one of the things we saw in china today was still strong commodity. That is still going on. Can you expect metal prices to continue to go up should oil prices stream high . In both cases, not much more output room here. Commodity prices will go up for a long time, especially metal prices will begin to be tested and with that some of these currencies will come in to pressure. The rand already is and others might. Mark the so down 9 . Being deemed a trump proxy hasnt it . It is more than that. Mexico has been under pressure for a long time. Over alook at the chart 25 year. , it is a 45 degrees line. It has had structural weakness for a long time. It has been exacerbated by the recent political you have not seen volatility rise anywhere as much as the mexicans. I worry that m