Guy good morning. You are watching the pulse. We are right here in london. Im guy johnson. Europes Biggest Investment Bank, germanys biggest bank is racing for its biggest loss and a decade. Deutsche bank could scrap its dividend. Its boosting reserves for legal costs. Sounds like a bad thing. Ryan chilcote here with the details. We got a lot of bad news. It sounds really terrible. But stock is up. What is going on . Ryan the Immediate Reaction was negative. The stock is up. There is a giant competition going on. The balls the balls on the up. K the stock now why . A lot of people saying we thought when they did this announcement we were going to get a Capital Increase. The fact that the dividend is going to take a hit, is a do it is a positive. It increases the likelihood of a Capital Increase down the road. Analysts whonty of think a Capital Increase could happen here it happen. Ryan the second issue is take everything that was happening in the statement to the side, look at pretax profit. It is either smack in line with slightly thing guy performing ok. Ceo gives his new strategic reveal, what we see here is direction. Maybe some conviction. Maybeularly indicating postbank, more conviction on the scale. Indicating indicated by the right down. More conviction on what they want to do with their chinese bank that they have a stake in. This is a big flat that thats a big flag that this may be up for sale. This is something the market has greeted. Very negative. People starting to absorb this and the shares are up. This is a new boss. They tend to come in and look at the business and say i am not quite sure about the bayou of that. There is a about the price of that. Shares were down 515 . Since he took the helm and its a bank. He compared that to the european banking index. Is he has outperformed a poorly performing banking sector. Guy ryan chilcote. German imports slumped the most since 2009 recession. Foreign sales declined 5. 2 . Economists had expected a fall of 0. 9 . Largestsign that euros economy is vulnerable to risks. From critically emanating weakness in china. Week, lets find out what has been going on. Were coming back after a week. The rest of the world back in party mode. Has there been a change in sentiment . Good morning. I dont think any major changes. A little bit of catchup. With seen a rally in shanghai. The fundamental story has not changed. German exports, not the story coming out of china. It is a slowing economy. Heading into a very big week for Economic Data out of china. We are going to get trade numbers, inflation numbers, gdp numbers. It will give us the good read on what the economy has been doing during the month of september. Next fiveyear economic plan for china. The president will unveil it. Days in terms of getting a gauge on where chinas economy is at. Guy in terms of the currency story, we have seen the gains. Indonesia where a number of markets, there may be they may be more easy eric. You can relate it back to some of the big themes. Enda we saw big selloffs in asia and indonesia. Indonesia has rebounded pretty sharply. We see Fund Managers saying they are buying indonesian currencies. As long as Growth Continues to slow. As long as Commodity Prices remain make, it is hard to call a big turning point for some of those emerging markets in asia. Guy . Guy thank you very much indeed. Enda curran, joining us out of hong kong. Abby lynch joins us. Got data out of germany this morning that is bleak. Much does this undermined the long europe case that so many people have got built into their portfolios. Abby it weakens it. If you dont go long europe, where do you go . The world as a whole is pretty challenging. U. S. Data suggest the u. S. Economy is slowing sharply. Heading down towards a recession. Europe, at least things are leaning forward very slowly. The lazy trade of long europe is being hit quite hard on folk quite hard by focusing on germany. Much of the trade is a further expectation of qe . Abby markets have seen what qe did. If we look at the unemployment europe,flation data in that will say that mr. Draghi needs to do more. Stock prices go up. I think we will see more qe from mr. Draghi before next year. Guy any opportunity to go further in . Selectica be selective. Look at the fundamentals of the businesses you are buying it try to understand how resilient is this to an economic slowdown in america come out in asia. America, out in asia. Volkswagen is a goodbye even if we get qe. Investors do the homework. Not notng go simply go lets by an index. Are a lot of european outperforming the index. Bounced over the last few days. If they start chasing that benchmark, what is the possibility of a short squeeze around that sort of space . House set up are we for a squeeze . How set up are we for a squeeze . Underweight energy and material. Think if we see that, it will be a shortterm pay grade. The fundamentals are still pretty negative. We are seeing gdp growth slimming down globally. Opec thato sign from they want to cut supply. U. S. Supply may be rolling over. Still quite slowly. Weakrices likely to remain and that is bad news. Majors a starting on a daily basis. Guy he will be back later. Lets take a look at what is on our radar. Top u. S. Official will tell lawmakers that he was first made noncomplianceions issue in the spring of 2014. He was alerted after the. Ublication of a study brazils audit court has voted to reject the president s 14 account. It says the government used maneuvers and noted to hide a budget deficit. To hide a budget deficit. It will come as the democratic president ial frontrunner unveils what she terms risky wall street savior. The u. K. Telecom watchdog has turned down the merger. Ceo says that deal could lead to high prices for customers. It would be unlikely to have any positive impact. In a submission profits made by pts open reach. Coming up on the pulse, what will the bank of england say about the global slowdown . After the break. Guy 50 minutes 15 minutes past the hour. We are on the radio, we are streaming on bloomberg. Com. Lets switch our attention to highyield bond markets. Goldman sachs is issuing investors at a conference in london. Manus cranny is there. Manus, over to you. Manus guy, thank you very much. Is the european leverage conference. Dennis, welcome to bloomberg. Had aghyield market has fairly tough quarter. Pastsimply, has the worst or we should just or should we expect another punch . To think about what we have seen over the last couple of years. Yields that have been offered to investors have been very tight. A number of people were calling for some type of correction, asking questions about whether credit has become too tightly price. Some of the correction that we have seen in the third quarter. As we look at some of the performances, energy down. This goes back to your view on Global Growth. To the issueck which is china. What is your perspective . You got nearly 500 issuers and clients. What are they saying in terms of those industries . Over the last number of years we have seen a number of issues that have faced equity investors. China slowdown, commodity rice trends. Commodity price trends. They have wrestled their way through those issues and not been overly disturbed. With those type of sectors, that in therted to impact financial grade markets. We are seeing an impact translate into the leverage finance market. Manus the issue has gone on. Worlds the Interest Rate 1. 7 trillion was issued over the last five years. Denis they have been very prudently managing their capital structures. They as low as they were, went out and refinance all their debt. Extended their maturities. Now the question for them as what are they going to use that money for . The mindset has shifted from being very defensive to a bit more aggressive, more m a activity. They look to access the markets to do strategic activity. Question, weher were chatting about this. I said this to peter oppenheimer. Biggesten is one of the bond issuers here in europe. And theon or the event reverberations into your own perspective me your on what that event has done to highyield . Denis bury different as you think about it very different as you think about it. Remindern serves as a that within investors portfolios, they are taking credit risks. A lot of them are two quick to ignore or brush over some of the risks. In the noninvestment grade states, investors would be saying if Something Like this can happen to volkswagen, maybe we should take a careful look at our portfolio and figure out if we have certain exposures that we have not been thinking about. Up, part ofto wrap the discussion, where does highyield fit into the store at . What can he do . What is your perspective . Denis where europe goes from , availability of capital is critical to european companies. The noninvestment grade space what we have seen is much more Institutional Capital and Capital Market access. For is a good thing european corporates. We are bullish. More europeans will be able to take advantage of it. Coleman, guy back to you in the studio. Cranny at the conference. The imf director has told bloomberg he thinks u. S. Federal reserve should wait for the right moment before raising rates. I dont agree that the jesuit strategy for the fed. The fed needs to do what is right when it is right. In terms of price inflation, you can see the conditions are there now for the fed to increase Interest Rates. Our recommendation is for the fed to wait until there are tangible signs that inflation is really rising. Guy back in europe, we get notes from the policy meeting. The bank of england will give its decision on Interest Rates. Jamie murray is our head chief economist. Thee, the market is pricing first rate increase. Well carney try to disabuse the market of that idea . Jamie the u. K. Is running out of slack. Wage pressure is building. Inflation, we look at it on a monthly basis. We are seeing inflation at 1 in january. There is some signs of inflation. Guy why is the market wrong . Jamie this is connected to what economist think. It is because economists are focused on slack. We have had a persistent number of socks. Number of shocks. I think markets are focused on , ent inflation guy when you build it into your models when you see the first rate hike coming . Jamie early next year. The risk is the bank of england has very rarely led a global Interest Rate hike. It tends to be the fed the started. Given that next year is electionyear in the states, unless the fed goes in december, that could mean the fed is then stymied until 2017. The bank would then have to say we need to do something and go first. That is something that is going to be weighing in their minds. If cc months is the wrong number, what is the right number . Jamie it could be february. Murray, thank you. Lets move on to another big story. The head of volkswagen in the United States will turn to it a congressional meeting in the United States today. Affect ion may lets go to berlin. Hans nichols is in there. What did they know . Hans here is what volkswagen has said. Michael horn said he was made aware in the spring of 2014 of possible noncompliance on emissions. In 2014, i was informed that the technical teams had a specific plan for remedy to bring the vehicles into compliance and they were engaged with the agencies about the process. Volkswagen spokesperson said they did not know that he did not know the company had software a device, that is at the center of this scandal. We have testimony from the environment to Protection Agency officials. They will be telling the committee that the fines that they assess will be determined on what they think the economic benefits that volkswagen derived from it. Here is what theyre going to say. To assess pursue appropriate measures. Hearta will look at the that the pollution caused. How much harm there was. Volkswagen will not be asking for certification of their diesel vehicles in the states. That is another development. Yesterday, they submitted their plan for a fix to german authorities. Is if ifirst reaction have a diesel vw, im going to be thinking about the value is less. Is that the case . Hans it depends on who you are buying it from. It takes a look at what dealers are selling volkswagen four. They are being sold at a discount. They are down 10 . Websites,to trader people there show barely any moves. Hasnt taken a huge hit. You and i have a different approach. Youll be worried about the value of your vehicle. I dontexcited know what the right word is. Isnow i have something that not exact the street legal and i feel a little dangerous. Guy we need to have a Big Conversation after this program program. Cles, hans nichols our international correspondent. Up next, the governor of South African banks, well hear from him next. We are going to talk about deutsche next. The stock prices trading high. Let me know. You will find me on twitter. Maybe these numbers are not quite as bad as they look. Welcome back. Youre watching the pulse. These are the Bloomberg Top headlines. Deutsche bank is bracing for its worst result in at least a decade. The bank faces a 6. 2 billion euro loss in the First Quarter after writing down the value of its biggest divisions. The company is also boosting litigation reserves and may cancel this years dividend. That sounds like bad news. The stock is trading higher. The breakup. To have done the Chinese Markets a world of good. Marketing shanghai and shenzhen have surged after the golden week holiday. Additional government efforts to boost the markets are helping too. Policymakers are increasing targeted stimulus. Predicted both the start and that the of chinas equity boom says that investors should use the rally to sell. He reckons the shanghai composite must fall another 18 before its cheap enough to buy. Volkswagens top u. S. Official will tell lawmakers later that he was first made aware of a possible emissions noncompliance issue with the companys diesel engines in spring 2014. Michael on will say that he was alerted to the publication of a study which found diesel models passatvw jetta and emitted more pollution under driving missions than allowed under emissions standards. Enc surged 8 in extended trading overnight as it is said to be in talks with pc maker dell over a possible combination of the companies. Emc has a market valuation of almost 50 million. Dell was taken private back in 2013. What the markets are doing, whats going on . Mark barton, over to you. Mark the rally has peter. That rally in the msci saw a gain of 8 , the biggest rally for four years, that sixday rally. Emerging market asian stocks fluctuated between gains and losses. Stocksn fluctuating as well. Look at the shanghai composite. It rose by 3 today. Theres some disappointment that china didnt rise more. , the China Hong Kong enterprises index, actually surged 11 in its biggest sinceay advanced april. These two indices, the shanghai ,omposite and the hang seng they were the worst performers in the world in the third and 28 sinking 29 respectively after china devalued its currency. Have a look at one of the commodities im focusing on. Silver, the precious metal, the fiveday rally has come to an end. This is a onemonth chart. I brought up silver because weve got the minutes from the september Federal Reserve policy meeting released later. Any indication as to when the fed will hike rates will certainly impact the path of silver. Silver of course doesnt pay interest and doesnt pay dividends. If the fed indicates its going to hike rates soon, that could dent the pathway of silvers advance. Silver has rebounded 11 since hitting a sixyear low in august. Interestingly, the precious metal, i looked earlier, which is little changed in 2015, its the secondbest performer in the bloomberg Commodity Index after cover. That you didnt know that. Lets finish with Deutsche Bank. Getting close. Have a look at the Deutsche Bank intraday chart. Yes, we know its the biggest loss in over a decade. The company may cut its dividend. Whats interesting is the shares were down 3 , they rose as much as 3 . We are looking ahead to the strategy 2020 update on october 29. There was no Capital Increase today. Some say if he was going to introduce a Capital Increase, he would have done it today. Others are saying the biggest loss in 10 years could be a sign of management willingness to dispense with cost bank and the more decisive on strategy in the future. Haveche bank shares rebounded. There you go. Guy mark, thank you very much indeed. Getting close to the worlds finance chief and central bankers gathered for an imf summit. Top of the agenda is the timing of a rate hike from the u. S. Federal reserve. This amid a sluggish global economy. Francine lacqua caught up with the governor of the south African Reserve bank and unsurprisingly, you could say, the fed was at the forefront of his concerns. The job is tough. Ou get complicated i think that we all would like to know what the fed is going to do. The question is, when will that hike take place . When that hike takes place, how does it affect emerging market economies, and a country like south africa . We think this impact would take place. First, the resizing of South African assets. This is taken mainly through the Exchange Rates market. What we have seen is that capital had been flowing not just out of emerging markets, also flowing out of emerging market funds. The Fund Managers have experienced an outflow. The second is growth. To the extent that the fed hikes rates because the u. S. Economy is strong, that is good for the global economy. Of course, if they delay, it makes your job a little easier. Do you think its easier for the fed to delay . Uncertainty is not good for anyone. If it doesnt follow that the fed moves, that the uncertainty is gone.