You are welcome. This is the pulse. Where life from bloombergs European Headquarters. Wellp, what we have we have a feast. We hear from the former cochief executive of Deutsche Bank as he is interviewed by john micklethwait. In about a halfhour, i am going be speaking from the speaking to vittorio grilli. We have an actionpacked the pulse for you. Thatgross who predicted u. S. Equities have another 10 to fall. Another leg lower. Investors should sickout the current volatility. There is no doubt that there was full of tilting which indicates there is a move in markets. Investors should continue to have a risk off posture. What does that mean . That could mean larger amounts of cash. That could mean Higher Quality investments. In terms of bond market, more treasuries and more duration than you normally would. Manus that comes as Goldman Sachs warns there is a chance that Federal Reserve will delay well into 2016 or later. Factoryoured german data printing this morning. Markets digesting this. We have seen a little bit of a pause in some of these equity markets. Lets bring in mark barton. It looks like germany is on the sign mark it is interesting seeing european stocks decline. Theal stocks as measured by country world index, rising for five days. We have the s p 500 rise for five days. Which is the longest stretch since december. Chance that the fed will delay well into next year or even later. Lets have a look at how this effect this is affecting emerging markets. This is indonesia, it is rising the most since may 2012. On the inception on the assumption that the feds will leave rates low. Economy andinese stopping Commodity Prices. Overseaspletons 30 funds. He says the recent selloffs have opened up opportunities not seen for decades. That is a big call. This is the bank of america, Merrill Lynch market risk index. This is an index that checks volatility across equities, rates, currencies and commodities. It is falling. Volatility is falling for the fourth day since midseptember. The threeyear high on september 4. The chicago board option volatility index has fallen for five days. Big, because a monday, a closed below 20 for the first time in over 30 days. Run above lengthy is that level since 2012. Have a look at this. German factory orders. Do you want to see a volatile index . This is factory orders going back from 2000. That is shows that shows how volatile it is. Yes, it it fell by 8 . Benefitingmand is the record employment. Wages and low inflation. Quite a chart here, manus. That is how you put manus that is a put volatility in a chart. Six brokers accused of alleged libel the benchmark market rate is behind trillions of dollars of financial deals. Caroline hyde has been following this. This is a trial that will be closely watched. Years after the investigations began at two months after the first conviction, we now have it evolving from traders to brokers. Six traders have been accused of rigging liber rigging libor. Linked to the japanese yen. They are being accused of working with the man who has just been convicted. That is thomas haze. He has been that is been tom hays. Sentenced to 14 years. Are the in between guys. These are the middlemen. They were accused of using their influence to procure favorable submissions for the traits they aligned themselves with. For the trades they allowed that they aligned themselves with. Understand colin goodman, all these brokers. Meanwhile james go more in terry Going Forward to face the court. Facing decades of jail time. All of them have pleaded not guilty thus far. Lets look at what will face them when they walk into court. We see the trial is taking place there. It could last almost three months. We are going to see 12 jurors have to reap through all of this testimony for the next three months. 9thorities have billion worth. Brokerages, related to these individuals, they have faced crimes already. This is going to keep on snowboarding. Snowballing. We have seen one conviction, six more go today to the london court. There are 11 former traders scheduled to stand trial in january. This is just dollar and again related libel. The next wave of charges we are expecting. It is round two. Back to you. Manus caroline hyde, thank you very much. Let each of to speed with the rest of our radar on the pulse. Interest has left rates unchanged for the aussie dollar, reported the biggest drop among currency among major currencies last quarter. A weaker outlook from its key trading partner, china. They kept the cash rates at a record low of 2 . That was predicted by market economists. Shell says it is pulling out all stops, safeguarded dividends, and a world where Oil Prices Remain lower for longer. Europes Biggest Oil Company is also protecting its plan to buy back shares. Those are your main headlines this morning. Just want to bring you a little bit of breaking news. This comes from opec. They are in disarray. The market is in a cycle. Opec and not opec nations must cooperate to remove the overhang. Those are a few breaking lines from opec. It is bloombergs most influential. Mr. S handed over to micklethwait. We have to ask ourselves is the world moving at a different pace than we thought week then we thought it would back of the answer is not really. The weak payroll numbers last friday, u. S. Growth estimates according to most , not muchstill remain has changed. Right here in europe, good news. Very slow cyclical recovery. Growth estimates have been marked up from where they would have been six to seven months ago. The picture for asia is more complex. China, you are going to have questions. There has been turbulence, very significant volatility. Affected. Th i would still say chinese numbers look more or less in line with where they would have been. Aty look better than it has any point in the last 12 months. The rest of the emerging markets are a worry. A combination of plunging Commodity Prices, slower funds, out of p. M. Out of e. M. And back into the u. S. Japan, ex u. S. , ex asia. Every so part of the gdp. There are concerns. Brazil, russia, south africa, turkey. There are a number of countries with lower Commodity Prices and the outflow funds. They will represent a challenge. How far do you think the worry will go . Which unnerve you . Not as bad as the asian crisis in the late 1990s. Fundamentally differents fundamentally different. Sovereign indebtedness a lot lower. Look toward emerging market corporates. They borrowed a lot of money. Too much in dollars . Since the crisis, we have seen a 50 jump in the borrowing by corporate, or in hard currency. A lot of that has come from emerging. It is europe. A lot of that is emerging markets. Now some of these corporates have hedged it. They have done had flows theyve done inflows. You borrow in dollars, invested domestically, and i think were going to get next line written theave commodity and maybe they didnt have as good as management. U the last five years have been kind. ,nd number of factors in play very cheap funding. Surging Commodity Prices, rapid chinese growth. They have used that to shore up their Balance Sheet. I would say there will be some which will struggle. John we will come back to india in the end. We were talking earlier, you talk about these idiosyncratic events. Things like glencore, volkswagen. There are these things that seem to be unnerving markets. Is it a case that each one of those is different echo or is different . Or is there a common theme . Hu idiosyncratic does not have a common theme. , you have equity violations that had double. That had doubled. Ou had term premium at times like that, when you get idiosyncratic events, that is when you get the 20 , 30 , 40 drop and the 50 bounce back. John you have been a banker for a long time. Have you seen anything or Something Like glencore has happened before . I think it is off a broader theme in markets, where we are poised for much higher volatility. John what is behind that . Anshu it is a confluence of three factors. Qe, the single most important thing. Everything out forget everything else. U. S. Growth is going to be slower. Equity market rally is all about Interest Rates. Produced a very rapid increase in the price. Secondly, we should decompose i thinkese risk youll find a dramatic shift. Banks own far fewer assets. They should and they do. 40 fewer. Retail has been pushed out of deposits and savings. That manifests itself in a dramatic jump in etf, three times. , high yield and so on. The shadow Banking Sector has grown by 20 to 25 . That shift means the way information now hits markets, and the way it is processed will be different. John you said, it is good that banks do not own as much do. I can see that is true from the point of view of leverage. Many institutions are not. , it doesnt that were you a bit . This is a Different Group of people moaning people owning risky assets . Shu there are two strong camps of opinion. First and foremost, banks owned way too many assets versus their 2007. Base circuit no debate about that. That is what led to financial crisis in 2008. One that became potentially paralyzing. It is appropriate that banks have raised a ton of equity. That is a good thing. The most skeptical analysts are now willing to concede that even if we get a large deal, the odds that we will get a Large Department taking systemic bank and the kind of trouble that multiple , against that you have to weigh the fact that processd banks would information very differently. Perhaps, some segments of the. Ew on this you can see what happens when you get large concentrations of retail ownership. John you mean very rapid pullbacks. People will jump out of assets quickly. Anshu the utility function tends to be different. John what happens behind all of those numbers . Where did you worry about that . Point there are three aspects. Are two ways to look at it. In my mind, if you combine that risk rhenium has dropped genetically in the past few years. Different owned by a group of investors now. There is concentration among the investors as well. When we talk about the buy side. There are many fewer Asset Managers and the used to be. It means when they make decisions, markets will move an awful long way. Jonathan you think they need to be regulated in the same way banks are . Anshu i think it is a very different industry in the banking industry. The third factor is the Liquidity Division function. In my mind, and this is where the debate lies, you have seen academics say we have studied the debt the data and we have seen no difference. Areas, whichtain are more Exchange Traded dominant, such as equities, or maybe even foreignexchange, markets have been more efficient and more liquid than they were in the last decade. This is simply not true for many aspects of that market. At highyield debt, we have talked about emerging markets. The risktaking capability of banks have diminished. The risktaking desire of those banks have diminished as well. When you talk about what i worry about, i do worry about a combination of very tight credit stress. By retailship investors sometimes without a clear understanding of how much liquidity they can expect. In my opinion, and impaired ability on the part of banks to provide liquidity. I think we could get some reasonably high volatility. Saying there is reduced liquidity and bond markets. That makes them more risky. at the same time, we have seen Significant Growth in volumes. John do you think that is regulators . Fault . Anshu i am pointing out a combination of factors it could represent risk and volatility here to of which we have seen. I dont want to be overly alarming. The overall picture looks good. How can it not with Interest Rates near zero. Global growth is not the worry. Fundamentally, credit markets are fine. The microstructure of credit and Market Mechanisms do need more change. John if there is a change if there is a problem, there could thereh more difficulty if is reduced liquidity, there is nothing to deal with these problems. U the liquidity has simply shifted. The buy side will step up and provide liquidity. As a market dictation or, there are two things, one, the buy side doesnt have the same contract as dealers do. Dealers are required to provide liquidity. Secondly, it tends to act slower and more deliberate. The possibility of multiple standard deviation moves on the fundamental new development, we have seen it already. The back 12 months. The flash crash. This was bank the swiss bank valuations. We have had examples already. Yieldsnt seen high truly tested yet. John if you add about some of , isnthyield markets that the companies in would were you most . Anshu develop markets have widened significantly. Have not seen a true test of those markets. I worry that we could get john on the question of the latest, you were gentlemanly with the way you looked at them. Who put the pressure on banks to fall back out of this. S them a interposition the risk in the system the question is where do you want to put it . It was in the publicly owned taking sector in 2008. It created the outcome of that. Made, buthave been that is not what you want the risk to sit. Where is it sitting now . And what with the fault line be in the next 12 to 18 months . , a way of dealing this. That have gotten so large they could cause trouble by themselves. U i think it is wrong to blame any particular instrument. Etfs have democratized investment. They give retail access to Asset Classes which in the past, you need to be a large sophisticated investor to leverage loans, high yields, especially at a time when overnight deposit rates have gone to zero. Giving investors access to all of these markets with daily liquidity, you can open a newspaper, you can see where you are trading. There is a reason why they have rocketed as much as they have. My concern would be the presumption of liquidity in these instruments. It has to be clearly understood by both sides. Just because youve got more etfs jonathan money market funds suddenly were not as liquid as everyone expected. the world has moved a long way. Theme, if you want to take moment in the 2000 a crisis which really concern me, that would be in the top five. You knew what was going to come next. Todayt see the situation nearly as alarming. Yes, the presumption of liquidity may be greater than reality. John i want to ask you about such a bank. What are you proudest up . And what you most regret . Bank in juneed the 1995. I was a very prestigious but predominantly german institution. A decade and a half later, it was competing with the best in the world, and asia, in the u. S. That is a largely organic transformation. Likes of which i would challenge you to put forward. Everyone at Deutsche Bank is proud of what it took to achieve that. Regret would be not transferring that the regret would be not transferring that. There is a variety of reasons why that is taking place. It has struggled. Investorsel as though demanded too much of banks . Were regulators the ones who pulled you win on that . Who pulled you in on that . Anshu you have an economy in europe which has not grown as rapidly as the u. S. On the continent there is excess of Retail Banking capabilities, unless the u. S. Where consolidation has not yet happened. Low Interest Rates takeaway profitability. Frankly, like all things, it will end. The sector will recover. John you look at these new organizations coming out of silicon valley, how big a challenge to they pose to banks in the future . Is it a good thing or bad thing . Anshu definitely a good thing. The first thing i would point out is how remarkably undisrupted banking is compared to other professions. I look at music. In the last decade, these we have regulation in the bank. Howunderlying theme is tough regulation has been for banking. There is a big moat around the Financial Service industry. Taking deposits means bringing with it a whole series of competitions. That has kept Tech Companies at bay. In my opinion that phase is coming to an end. Dramatic changes in technology, computing big data are two that i would single out. Changes in bio behavior here it behavior. My friend does all of his banking on the phone. I think that is the case for most people. Significanty Capital Investment going into that as well. In the next five to 10 years, youll see a dramatic change. Jonathan is it payments . Foreignexchange . Anshu take a bank and slice it. Banks provide network, brute force infrastructure services. They provide deep relationship advice. They do really context things. Say a lot of vanilla particularly lending in payments, are right. Jonathan in which ways . John in what ways . Manus if you want to live. That, go to the biggest regret is not realizing the transformation he achieved with the institution. Of retail an excess institutions. More of that on live go. More of that to come. Here is your top headlines. German factory orders unexpectedly fell in august. Europes largest economy is vulnerable to weaker growth from china and other emerging markets. Is it just in seasonal swings . It dropped 1. 8 . Economists expected a rise. Classes would in the investorsies should set up the current volatility. That comes as Goldman Sachs warns the Federal Reserve plans and interest crate increase for 2016 or later. Hartford may justify policymakers australia has left Interest Rate unchanged after the aussie dollar reported the biggest drop among major currencies last all. The impact of lower Commodity Prices and a weaker outlook in its key trading partner. Says it has kept the cash rate at a record low of 2 . The currency fell almost 9 between june and september. The trial of six people accused of trying to fix the libel rate begins today. Conspiredmed that the with another who was jailed in august. Trillions ofph dollars in financial deals. Blo