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tv   Bloomberg Surveillance  Bloomberg  September 19, 2016 5:00am-7:01am EDT

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francine: central banks crunch time. investors here from the boj and fed this week as policymakers decide on the next move. the overnight interbank yuan rate surges and hong kong. -- the london mayor stresses the importance of its access to the single market in an interview with tom keene. this is surveillance. there is a lot going on this week. first of all congratulations on a great interview with sullied
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con. who is find those devices in new york. tom: the mayor of london had trouble getting around new york as the mayor was multiple -- was occupied with multiple blasts good new york begins its biggest week of the year with police in full investigation mode. the global message is this is all about all of manhattan, and then over west into new jersey. it will be interesting to see where the police stand in their investigation as we move through monday. . francine: this is because the yuan general a simile starts today. you have all of the world leaders the sending on new york. taylor: another xmas of device went off overnight in the new york -- another explosive device went off overnight in new york. injured.s
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this is all happening the day after a bomb exploded in your city could more than two dozen people were injured. a second device was found nearby according to the associated press. five people are being questioned. all of this happening as the united nations general assembly opens today. the cease-fire and syria is going shaky because tests in syria is growing shaky because of a number of attacks -- in syria is a growing shaky because of a number of attacks. the u.s. says it regrets the attack. there has been another setback for angela merkel's regional elections. the social democrats lost support and elections. their combined vote share fell about a quarter. the anti-emigration alternative for germany siphoned off the vote. the mayor of london says the british government is trying to boost confidence in the wake of
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vote.exit >> my advice is a sense of calm. let's make sure the teams are ready to understand in relation to the best deal from the eu. let's make sure we negotiate the best deal. be more than will two years to get the right deal. let's reassure. >> there'll be more interview with him coming up. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am taylor raikes, this is bloomberg. i don't know any equivalent in the united states to mayor con. it was remarkable, not only the discussion on him selling london but his comments on mr. trump and having mr. trump over to his house. i thought it was amazing.
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francine: i think it was great you talk about trump. he is a child of diversity. he seems like someone who is trying to do his best. when you look at his background, it is refreshing, especially at a time where brexit happened, i would argue that this is the person that london needs to lead it, because he shows london is open to endeavors. tom: he throughout the first ball to the mets twins game. done that ball -- he she did better than i would've done. let's do a full battle on the data check to set up monday. equity bonds currencies commodities and nice pop to the market with the euro weaker dollar stronger. it catches a bid after a lovely three days. -- after an ugly three days. sterling with a modest 129 handle early this morning. francine?
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francine: top, this is my data ,oard, european stocks gained argues that it is all about the boj. forget the fed and less they hike. crude oil, will get down to that a little bit later on. this is hibor a little bit like libor what it is in hong kong. the mostn hong kong since january. there is speculation that china's central bank was fighting to -- tom: let's set up wednesday with the fed and the big of japan and they are linked to the wish of the strut a million times. can we go with each fed meeting -- here we go with each fed meeting. we see where we are on the two year yield. the major messages in the center of the screen in that rollover of the circles over the recent
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1, 2, 3, 4, fed meetings and some of that is due to the economic malaise. tom, i also had something that i had to work on. if you look at the terminal, it was the correlation between vicks and yen. you can see that correlation is not as correlated as used to. that chart very shortly. joining us now for the hour, chiefbevan, he is economist at hsbc. thank you so much for joining us. james, if you look at the boj and the fed, it is an awkward timing. the boj on the morning of wednesday and the fed later on. boj becauseould be if you look at traders, they don't know to think. james: the boj looks limited room for maneuver. he would have to come up with a new storyboard for next march
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because the amounts of government bonds that he is going to want to purchase is running dry. yet we don't see -- i am quite bearish. paul: we don't think we are going to see a lot from the bank of japan did there is a lot of expectation around the idea that they might deliver various things to it will be similar to more of the same, that we think more asset purchase expanding the range of which they are preparing to buy. also potentially we think there could be another cut on rates. they could not a little bit off. we don't think there will be a big move. we don't think there is a bazooka coming. that is what the market is looking for. francine: what if they come back and say you know what we have done so far? the negative rates are just not working. step? market a worse
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paul: are they going to review and come to the conclusion that what they delivered has not worked? are they going to reassure us that what they have been delivering has gradually been working? they need to do a little bit more the same but it is going to deliver the inflation they are expecting. that is in more likely pat. -- more likely pat. tom: james, i want to talk about sterling with the 129 print for a cup of coffee pit we ended , is thisth saudi oil linked to the two central-bank meetings on wednesday? is there another story? james: i think there is a story about relative weakness of sterling, therefore i would expect sterling dollars to get around to around 120 to 125. continued sterling weakness.
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very interesting negative correlation between shifts in the oil price and dollar. i expect their relationship to remain strong. i am expecting in global terms, sideways movement in the oil price and dollar. tom: let's bring up the sterling chart. this is where james bevan is mentioning the yellow circle. that is the migration into the vicinity of 120 out of the middle of next year. hsbc with that i lie or call -- that outlier call 110. what it comes up to is a shock. new york has had a shock with these awnings you wonder -- with these of bombings. james, what do you think? james: i am worried about global markets at the moment. i fear significant gaps between expectations and reality in terms of the numbers that are coming through. negative surprises have
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delivered four unpleasant markdowns in the last five years. we are going to have another one at around 10%. tom: what is the shock out of asia? paul: we are not forecasting in a shock out of asia in the scheme of things did we think the asia story is holding together well. we still have birth in china holding up pretty well. the bank of japan is in focus this week. i don't think it is going to be a big deal at i don't think they are going to deliver a big change. francine: let me bring you over to the number of terminal. this is symptomatic of what we are seeing at the boj. the blue line is the volatility index. the white line yen-dollar rate. you can see the currency trading with the volatility index and you can see the correlation. ises, are you concerned this
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a symptom of what we are seeing in europe? means that people worry about what central banks can do especially when it comes to negative territory. james: we are increases in savings, both over here but also in japan. we will see more of that and the yen strength is precisely what japan does not want to achieve as a result of this policy. if you said to me what would be better for the global economy, i am not sure i would share the point of view. i think it would be smart for the japan to try negative rates. we have been at this for a long time, it is not working and we need to step back from quantitative easing. they will not do that does they'll be too big of a wrench. i am thrilled to tebow the of you here to get started on this monday. we will continue in our next hour on american capitalism, on
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the elections from chicago, luigi zingales, throw to have a men. int's thrilled to have him -- thrilled to have him in. if you have to drive two blocks in midtown at 11:00 a.m. this morning, get out and walk. from new york, this is bloomberg. ♪
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francine: this is bloomberg surveillance. tom keene is a new york. let's get to the bloomberg business flash. taylor cone in china warning indicator for stress has risen to a record according to the bank for international settlement, china's credit and gdp groep -- gdp gap is at 30%.
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in bigger ratio can signal that credit growth is excessive and a bust may be looming good japanese and back supplier is moving ahead with an auction of the company. it is behind the auto industry's biggest recall ever according to people familiar with the matter. possible buyers include kyle i'll group -- included carlyle group. bidders have been asked to submit proposals by early next week. samsung's exploding smartphone battery crisis again with a rush to beat the iphone according people familiar with the matter. samsung sped up the launch of the galaxy note seven after hearing that the next iphone would not have any major inventions. just days after the samsung device made its debut, there were reports that the batteries were bursting into flames. samsung plans to recall all 2.5 million note seven's. that is your bloomberg business flash. francine: the overnight -- search the most since january
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and china's credit binge could lead to a financial bust. for more we are joined by enda curran. great to have you on the program. what did we learn today? intervention from the chinese? enda: good morning. we can't say for sure that it is but it bears all the hallmarks of a slap on the risk from beijing on those traders risks. beijing was going to let the currency we can once they got through the g-20. the narrative has been once china got over g-20, they would let the currency start to weaken. of course, the suspicions that the bank is going to make it much more expensive to borrow in hong kong did they did it back in january. -- in hong kong. they did it back in january. imf --ina goes into the
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maybe that could be a hurdle for china allowing currency to weaken. it is still want to watch as we go forward. francine: how much of this is to discourage short positions on the currency? and how much of this is related to the fed on wednesday macro enda: -- on the -- on to the fed on wednesday? andreas: it was quite effective in curbing and you want in hong kong. it scared a lot of position out of the market. every reason is suggested, a lot of people lost money betting on bearish positions on you one. china has been lucky with the feds dovish turn. if the fed was going to come up with hawkish terms, that would put downward pressure on the --n and aside -- on china's and china's central bank. tom: a momentous monday before
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central-bank meetings. the statistic of 6.71% of gdp growth. beijing's got the best growth known to mankind. what is the quality of their 6.7% economic growth? that is the big debate that china has traded economic growth for rising inequality. the other point is it gdp is based on cheap credit. the chinese storing up bigger problems later down the line. what we do know is the narrative in china is the monetary stabilizing had very rocky beginnings at the start of the year. there is a feeling that china cannot continue to pursue the cheap credit and kicking the can around the road testing the can down the road -- kicking the can down the road. tom: we still have james bevan with us.
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paul, your shop has been wonderful on low interest rates. 110 sterling as well to give us how you fold the hsbc caution on global growth into what we see in asia which is the locomotive of economic growth? paul: china's growth is slowing down and we are doing with that. it was inevitable that it would slow to a degree. the point is the one that in the made that the timely indicators are looking -- we have seen better numbers on the investment side. that transition that china is trying to make from a more construction lead story to a more services led economy, there is evidence that is underway. one of the things we have been pointing out recently is you are seeing signs of reform, particularly in the commodities space.
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a pullback in chinese production of high cost iron ore. thoseand of course provisions they put in place. these are reform measures. it is happening to a degree. tom: what is your industrial commodity called? if you look at a chart of commodity inflation, it seems like we are starting again the long-term structural deflation and commodities. where are you on that -- and commodities, where are you on that call? paul: we build very low levels of commodity prices and we think they got to such low levels that you are starting to see a bit of a pullback. u.s. shale production in the oil market and that has lifted the oil price to a degree. you have seen signs of that in the middle space.
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in the middle space in china itself which is where the reform is. that is evidence that reform is going on. commodity prices are passed the trough. francine: paul and james, thank you so much. this is a picture for european and asian stocks. overall they are on the rise. the equity index futures rebounding. oil a little bit off. dollar tree treating and you this ish more -- guvi bloomberg.
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francine: this is bloomberg surveillance. i am francine lacqua in london and tom keene in new york. tom: michael mckee turning over to a no denver broncos. also watching the presidential race. there is a real new wants. michael: donald trump had by what conventional measures would call a bad weekend. his economic plan widely panned. joe stiglitz giving him an f on economics. no surprise there. it is an adult. that's it doesn't add up. -- it doesn't add up. his trade plan would cost 4 million jobs. friday he had a news conference which he used for an advertisement for his washington hotel. and then the whole thing when he reversed himself saying he lied
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about obama and the birth of thing. then friday he went out and said this arm hillary clinton's secret service. tom: is he running this campaign? or is he running to these two key officials? it there is no question he is running his campaign but they seem to be setting off his rough edges. a week from the today -- only from today, the debate is going to set the stage. tom: michael mckee with a quick update on the campaign. it is historic. ♪
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we will have an interview coming up. francine speaking with the mayor of london about the future of london. here is first word news. between a connection bomb in new york city and another bomb discovered overnight in new jersey. no one was hurt. this all comes a day after a bomb blew up in a chelsea neighborhood. another explosive device was found nearby, five people are being questioned. fbi is now investigating a .tabbing attack in him all islamic state has claimed responsibility. a newspaper report described the attacker as a somali who lived in the u.s. for 15 years.
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senators john mccain and jack reed want to limit the number of overseas.ship bishops have been criticized for reliability falls. in russia, vladimir putin is in the kids victory election. theas the first full since 2011 election led to huge and type putin -- anti-putin protests. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.
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i am taylor breaks. this is bloomberg. francine: thank you so much. more on the markets, more on central banks, more on what is happening on wednesday, probably the most important day of the calendar in a while. let's welcome back james. if you're positioned in the market for nothing much from doj and from the fed, there is still a big risk that you can be taken by surprise. >> i think there is more downside risk than upside. i think there is putting of room for disappointment. what is the one thing you think markets are too complacent about? >> i worry the markets are taking growth for granted and suddenly states are being
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supported and we will have sudden t translation of growth. the suggestion there has been an overstatement of the expectation. i worry there will be a markdown of expectation. tom: the world is terrible. you have been brilliant on have encourage to stay in the markets. ftse, it is the extraordinary, the gloom in the chart. can we actually breakout from those recent highs over 15 years on the ftse? we can, and we blow. i worry we have to have a correction first. i worry we have to have a correction first because too much is baked into the cake. i am however confident that, in due course, we will break out.
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maybe we will have a correction of a continued full market. tom: it comes from corrections -- which is it? >> i should say that we should expect earnings to remain in line with revenues. certainly there is a political risk. labor is awarded a slightly larger slice of the cake. toget reductions similar revenues. look toould really partial september and the idea .f units in pricing power i think it is fascinating to see what the unit dynamic is an all this disinflation out there in pricing. likeine: i wonder is, just
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central banks, everything mirrors itself. when you look at how companies are structured, is it very different because we had a different currency but also we have been through so much more pain in europe? >> when you say we have been through more pain, we have had economic pain. we did not have the corporate restructuring that the u.s. had very early. the u.s. structure was quick to cut cost and make sure they were better positioned. argued earlyanies -- there are relatively easy labor laws now. francine: i want to bring you to one of my morning must reads. this is a beautiful piece. the title really says it all.
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"said meeting should not obscure moment." big saying ases by policymakers venture deeper into unconventional policies, the importance of their approach could be exposed even more, triggering complex unexpected measures. they have a mandate the deep 2 and need a mandate -- to fulfill the mandate. >> it is absolutely written into the central banks that growth means inflation. other than times of war, it has deflation rather than inflation. in 1850 was bread
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greater than the price of bread to just prior than the first world war. that relates to a huge shift in the cost of production, efficiency gains, technology. the problem i have with the current surge of technology is this is an industrial revolution that will risk production. remember, during world war i, we were doing surveillance event, we do not go back to the the pulley on a quarter. ofe us your history productivity. why is our capital labor and productivity dynamics different now? forget about world war i. -- what is the
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difference? >> we undoubtedly have better practice to be when it comes to getting in touch with people. home.n't want at to all of which makes for a more important home life. worry, if you predicate future spending on the premise of 2% real economic , weth plus 2% inflation will not get anything like either of that magnitude. i swear i saw his grandfather dinner with sir
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thomas. he was there. it is the first time i hear tom shy away from looking back in the years to talk about productivity. i am surprised. tom: it is monday. >> we can say things and not removed.heads at: you do not work bloomberg. francine: well we look at history, are we too complacent and how we measure things in the past 15 years will be how we measure them going forward? >> it is clear that we need different metrics. it is the metrics of hard economics that pay the bills.
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wereally is important understand where growth is coming from. tom: wonderful with the historic. extremely important to the present and future interpretation of the markets. conversation on the capitalism of another time. the clear and present capitalism and a look to the future. this bloomberg.
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francine: this is bloomberg surveillance. middlet's go to the east. oil on the rise this morning.
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reports from algeria say that if they call a meeting .each a strategy opecwe are hearing is discusses the possibility of a meeting at a later date. what is going on? there seems to be a lot of ins and outs that oil investors are trying to figure out right now. if you take a look at the data that came out for the week before last, you can see that speculators pared back the long and short bets on the movements of oil. that is a relatively unusual occurrence. it suggests that no one knows
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what is going on right now. we see it go back and forth, back and forth. tom: i love the idea of a binary that. the binary that on surveillance grinding higher. other bed is collapsed on oil demand dynamics. i don't you are living in the land of oil supply. what do you see in international demand dynamics? is a reallyt excellent points. we have seen a couple of years talking about the supply side of oil. we hear a lot less about the demand side. people talk about still strong demand coming from india, china, but if we see that global economy slowed down and get the emerging market route coming back, the kind we thought the beginning of the year, that could definitely knock demand on
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its head. the key would be what happens to the developed market thanks. on that note, we have a doj meeting tomorrow and affect fed meeting. tom: we have shown this many times. we go on down to 29 and this tight range we are in. you are in the middle east. int is the level of sweat september 2016? can tell you, the consultants have been calls in. we're seeing more of a acceptance from government officials now. the major source of controversy is the opec production freeze. there are so quiet opinions that if you have a supply glut, the
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thing to do would be forced some higher cost competitors out of business. that is an unpopular opinion, but one that needs to be considered given we have the flattening of the cost curve that has changed the dynamics of the entire industry. francine: thank you so much. james is still with us. when you look at oil and the relation between opec and oil, it seems that for the moment, it is unlikely opec will freeze at this moment. just in case, they will not go below the amount it is at the moment. >> i would say that one needs to look at the issues on board. the producers are producing day.d 190,000 there'll's a
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that is a swing factor that is important. there is a bias down within pricing. as far as the investment implications, i see only two that investor should be considering right now. they will find it very hard to .ope on the services sector, i see possible over speculation. francine: if you look at bp, shell, why them? >> because of the cash flow characteristics, the discipline of investing. let me do a data check now.
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a lift to equities this morning. now.ix coming in watching sterling as well. this is bloomberg. ♪
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tom: a nice lift to the markets this morning. i am in new york. let's get to a monday bloomberg business flash. here is taylor. taylor: apple may not need the last american company facing the bill for back taxes in the european union. more than $14 billion were demanded in repayments from apple. ate job cuts are expected rolls-royce, a limited -- eliminating more than 200 positions from the management team. rolls-royce has been hurt by falling demand for engines and for servicing business jet turbines. housing prices in london rebounded this month after four straight months of decline.
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the average asking price was up 2% from august. that is according to a real estate website. still, prices in the most expensive districts are down 12% on the current year. that is the bloomberg business flash. francine: thank you so much. brexit,ote for you go round to your most important allies to try to .eassure investors the london mayor says that negotiate access to the single market is crucial if the city is to remain a financial hub. >> london is a powerhouse for the uk. the good news is even if you were in favor of brexit, if you want to be on the right side of history, it is in your interest to get the right deal with the eu.
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if we don't, it could lead to jobs leaving london. francine: before we go to our heeemed guest here, was convincing? this sounds like something that as london mayor, you have to say. did he believe it? obvious was the there. he was selling the city, as you need to do. he was checking the boxes. ,here is a little more to it and the backdrop is cotton in europe.- continental he has a unique vision. intoarents, immigrants london. he has a unique perspective on all that is going on in europe. uniquee: he does have a perspective and it is good to see it at their first mayor in london. carson, thank you for joining
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us. would you look at the task that is faced by theresa may and all the others, it is very unlikely, at this moment, if you actually believe what is suggested that we will have access to single markets. what will london become? >> unrestrained axis that they have as an eu member, ike that is to be unseen, totally unrealistic. into a question of the european side. you cannot give market access to a member who does not want to comply with freedom. dovetail in what is going on in the united kingdom with migration and refugees and your wonderful note on german elections. happening in german
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politics and how does that impact in london? >> there is this party that is anti-migration and advocate for germans to reconsider the relationship with the eu. who would ever do that. this is like the new normal. on what isputs light going on in european politics. pick and choose. francine: what is the big take away? it seems it means more moderate politicians will have to go voters.ese they will not take over. >> exactly, they will not take
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over. angela merkel and the german case is very good. as you say, the result is clearly that if they are not in government, there really constrained on what they can do on the european strange. tom: we have to get you on for longer next time. thank you so much. just brilliant, especially on tudor england. worldwide, this is bloomberg. ♪
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tom: the bank of japan and the federal reserve will act, or
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not, on wednesday. real doubt about our economic 2017. mrs. clinton and mr. trump agree on one thing. america needs economic growth. in this hour, on american new capitalism. good morning. we're live from our world headquarters in new york. me over theory to weekend where the votes, or non-votes, for merkel in germany. especially when you have general elections in germany next year, the same in france. what we understand this means is you will have more of this extreme agenda, or populism. of course, you will have to look at securing new york for the u.n. general assembly, still expected to begin this monday. tom: we will have the news here
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on the terrorist attacks in new york and bombings. taylor: another explosive device went over -- went off overnight in the new york-new jersey area. the device exploded while it was being examined by a robot, no one was injured. this all happened a day after a bomb exploded in new york city. more than two dozen people were injured. according to the associated press, five people are being question. all of this is as the united openss general assembly today. the cease-fire in syria is .rowing shaky a mistaken airstrike by us-led coalition forces killed 62 syrian government troops. the u.s. says it regrets the attack. there has been another setback for angela merkel in regional
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elections. they lost support in elections for berlin city council. the anti-immigration alternative for germany siphoned off votes. the maryland london says the british government should boost confidence in the brexit vote. the government calm.have a sense of that's make sure we negotiate the best talk. we should delay using article 50 for as long as we can. at the same time, let's reassure, reassure. taylor: there will be more of the interview coming up. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. tom: take you so much.
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of course, i misspoke there, speaking about bombings in london. it is just in, within the new york and new jersey evidence over the weekend, the divide rror.this word of te a real back-and-forth over how you define these bombings. francine: we do not know the perpetrators, who planted those bombs. not forget this may have an impact on the u.s. presidential race. anything could happen. tom: of course, and immediacy of the september choice six debate. equities up nicely. bit aftertting a three ugly days. i would note that sterling is a little bit soggy.
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francine: stocks rising around the world. they are rising in europe, getting 1%. rising commodity prices. the dollar weakening before meeting this week. -- you can see, crude oil, down -- i mean, up. this is important because you costs in hong kong to soar. look at the chart that matters for wednesday. special coverage on wednesday, myself, scarlet fu, and michael mckee. three fed meetings in the lower right. we will bring one of those circles appear for september 20 one. in the middle of the chart, the roll over in yields. the disappointment that we
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cannot stay on trend for higher yields. where we are in the central bank derby? francine: this is where we are on yen. yen regarded as a haven cannot be regarded as that. this is the blue line, the volatility index. shows that there is so much uncertainty over what the doj may pull out of its hat this week. constanto be the haven. now, investors don't know what to do. it is why you see correlation dropping. tom: very good here and we have some important events coming up including the fed in japan meetings on wednesday, and then the debate. then we go on into autumn.
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have you ever seen it like this? being from italy, as you study american history, what is it like to observe this presidential race and the oddity of our orthodox economic struggle >> i think this is what yogi bear used to do -- deja vu over again. quoting theod, yankees. it is deja vu. >> it seems familiar. i don't want to say i said it, but in my book and 2012, i say it. i saw a trend and understood that this leads to politicians like donald trump. an appeal tohave disgruntled people who do not trust experts. there is all this debate about hillary clinton being more of an
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expert than donald trump. people saved they do not trust her because she is a woman. i think people don't trust her because she is an expert. in this season, experts are out of fashion. tom: they are out of fashion, but can they create economic growth? i believe that is not the case. they do not create growth, do they? >> i think they create conditions for growth long-term. delusion that every politician sales, but it is not reality. was ine: when i strasburg, a lot of the noise you heard is because you have more extreme parties or extreme thinking, it will impact the way more moderate politicians gain popular appeal. >> i'm not sure.
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they need to explain better to people, but more importantly, they need to understand the reason of private, why people vote trump, and so on and so forth. otherend to talk to each and, at the end of the day, say, we are right and those people don't understand. why they don't understand is because they are not experts. there is a need to break this club. francine: who is worse off politically? is that the united states? i would argue that brexit is symptomatic rather than the cause. is that the european union or even japan? >> i do not know much about japan. it seems to me they are the worst least off at the moment. i think brexit might have some
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costs for great written, but it is manageable. tom: this is critical what you said. when i spoke to the mayor of london, i was critical of the who theresa may should speak to. who and europe is england supposed to speak to? >> angela merkel. she runs europe. whether you like it or not, that is the reality. she is the de facto president. tom: luigi just built his coffee. i don't mean to interrupt there, by think that is a crucial point. i don't know who they are talking to in europe, and luigi just answered for us. francine: she holds the purse strings. she has been at the forefront of thinking. as we saw on sunday, she is
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losing popularity. i want to bring in a morning must-read. this is from the school of public affairs and georgia. he writes, they are also more fragmented. he's talking about german politics. consequences is more challenging processes that lead to more frustration and further old protestg of parties. i would argue that is right for france, for italy, where we know it already had a very fragmented germany.nd right for what will be the political landscape 18 months from now? >> if i knew, i would be rich. the reality is after the brexit vote of no-confidence, you would have expected europe to react program toealistic
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go forward. certainly the meeting did not send this message. i think the election in germany weekends angela merkel, who is also the intellectual leader of europe, not just the de facto president. changet expect any major moving forward. of course, if you'd not move forward, there is a big risk they might go back. tom: that was the single message yesterday, the idea of let's get going. we will continue. .omorrow, richard haas he is only coming in because he cannot get anywhere in a busy new york tomorrow. richard haas, the council on foreign relations. worldwide, this is bloomberg. ♪
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francine: this is bloomberg surveillance. tom keene is in new york. let's get straight to some corporate news. let's get to the business flash. taylor: in china, a warning indicator has risen to a record. according to the bank of international settlements, the now 30%. a bigger ratio can indicate that a bust is looming. crisis exploding battery leads to a competition with the iphone. it made itster
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debut, there were reports that the batteries were bursting into flames. samsung now plans to replace all 2.5 million note sevens that have been sold. tom: thank you so much. it is wonderful to have megan murphy with us. what an interesting week. it has been trump, trump, trump. what is the clinton to do list for the debate? megan: she will be looking at her message, especially in light of what happened over the weekend. issue for her.ig herwants to get across positive message. her campaign has made the top that they have been very negative. week.he had a deplorable
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i see this everywhere. how do she get on from playing his game to being whoever she is or what she wants to be? megan: time and time again, she cannot get ahead of the news cycle. how is playing out for her is she loses the cycle every time. they say this is a bomb that went off in new york. yet, as time goes on, she gets out front. off-the-cuff. she has to fired up. francine: going back to the explosion of devices, donald
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tweet was think his 30 minutes earlier than the authorities. does that automatically boost him in popularity or is it counterintuitive? megan: while people say they are concerned about him being commander in chief, they trust him more on issues of national security. it has surprised a lot of people that he is fused as someone who would be better, more forceful, more harmful. him, getting on these kinds of issues -- even as impractical as a bombs saying that found in new york -- at the end of the day, among
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the people he is trying to persuade, we have seen that play well coming out in the polls. francine: of course, world leaders gathered at the united nations general assembly in new york. does that play with either candidate? will they meet with anyone? egan: stay will be meeting with a few people. there is no question that a big thing on their mind will be how they will deal with either candidacy, particularly a trump presidency. there will be questions of how real this actually is amongst an international population. economicere at the meeting -- all i could think about was the classic essay on mercantilism. when you hear donald trump's zero-sum economics, how do you adapt to what i will call a populist or neo-mercantilism? i think it is clear that
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anyone who tries to decide economics is a mercantilist. milton friedman was very famous and sing businessmen are so brilliant running their own business, but so an incompetent -- tom: it is a numerous goes on for america. ofp megan here on the idea note trade, no expansion, no outreach. >> i think it is much easier to explain that the idea of free trade. not surprisingly, it was the first idea to come out, making you rich by making everyone else poor. it is a zero-sum game. they think that a strong man like trump will allow them to get a larger slice of the pie.
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megan: let's look at the flipside of that. the democratic party with president obama has made a case for globalization. if you look at the net some of globalization, it may have not listed your boat, but it has lifted other boats and other economies to the question is can people really understand that concept? longer-term, the result is probably more of a net positive, it just may not be playing out in this cycle. >> in addition, we economists have been too cavalier saying the pie increases so everybody is better off. the majority -- for the majority of them, the pie is not increasing enough. i think the effort should be free trade on the time. ,hink about the size of the pie
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each piece, not just the total. tom: thank you so much. through the week, in washington and in new york. coming up, we will continue the discussion. how about this, the mayor of london with a discussion on donald trump. and, guess who is coming to dinner. with all due respect, 5:00, watch it. ♪
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♪ francine: this is bloomberg surveillance.
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i know you want to talk more about politics in the morning must-read. tom: we will do that. it is about fact checking. up -- this is a great essay. many voters willing to go along with the ride. so many of our authorities who should be calling out the lies inessainted by truth i themselves. tell me about fact checking in europe. how big of a deal is it? francine: it is a huge deal. sometimes it is a difficult thing to do. if you talk about brexit or the economic impact you have no control over, it is extremely difficult. thes always easier to have
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che give error, revolutionary attitude. the public really enjoys fact bending. that is something that has been part of the culture as well. it is not just one debate on september tweeze it. francine: three debates, isn't it? tom: that all. anyway, but come back. here.ortant interview stephen sable. this is bloomberg surveillance. ♪
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tom: good morning, "bloomberg surveillance." write -- let's get right to the first word news. taylor: authorities want to know
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if there's any connection between explosions in new york city and a bomb in new jersey. no one was hurt. after a happened a day bomb blew up in new york's chelsea neighborhood. more than two dozen people were wounded. wasther unexploded device found, five people are now being questioned. the fbi is investigating a stabbing attack in minneapolis is a possible terror attack. private security uniform stabbed and nine people before an off-duty police officer shot him to death. islamic state has claimed responsibility. a newspaper report described the attacker as a somalia who had lived in the u.s. for 15 years. british prime minister theresa may will urge the united nations general assembly to do more to control mass migration. space of the u.n. in new york tomorrow. she will argue that mass migration hurts the refugees and the country the answer.
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migrants should be encouraged to claim asylum the first six country they reach. global news, 24 hours a day, powered by more than 2600 and analysts in more than 120 countries. i'm taylor rick perry's -- i'm taylor riggs. fromine: let's get more enda curran. to predict difficult what will happen on wednesday. enda: it's difficult because of this meeting we will get a policy decision and an things havef how been traveling from the boj corner of view. they've been working on this, and their expected outline. that will base the judgment on their decision. overall senses an
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of the market is not expecting shock and all, but there could still be more policy depth and a deeper negative rate or perhaps changes to the tenure of the bonds they are buying. francine: i'm expecting that review and negative rates on wednesday? is there concern they abandon it completely? i don't know if it's worse to see the markets seeing it as negative or if they abandon and it's a waste of money. enda: it's unlikely they would abandon it. has been standing firm behind this. it's possible to some economists and they even cut a deeper and take other measures to mitigate the negative in your -- never to -- negative impacts. of japan might start buying short of data bonds and trying to even the yield curve because investors are losing in terms of the interest on offer. nothing is off the table, francine.
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clear innor has made the past he is willing to add more stimulus is the case is made. tom: we will know more when they releasetom: on wednesday. qs investors spends a lot of times looking at volatility. i love how your shop says low-vol is in the black. james: investors really are looking to try and have some federal capital appreciation. they're also looking for income. is the old strategy of going for utility stocks. it's a good strategy, but these days, you have to diversify into information technology and stable than others to be will try and find that income that everyone is so desperate for. but keep it in low volatility. we set ourselves up for an exactness shock. what is our nakedness to an exactness shock right now? james: people who are more
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excited about potential growth aspects. behink people are going to disappointed. banks have not set up to make that possible. people are are uncertain and stressed out. think he will have a big drawdown. francine: does it need a recession? -- does it mean a recession? james: i think those risks may look like an equity drawdown that could be extended if people are really concerned. 15% andu be down 10%, it's hard to know if that's going to be a recovery from here or is it going to be where that rubber band has gotten so tight
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that it snaps and people have negative feedback and negative concerns. i think that's quite possible. people need to be prepared for that after seven years of strong returns an extremely low volatility. i know you look more in the cross hairs between politics and economics, but when you look at volatility markets, they are so far ignoring any kind of political risk. what is that come back into play ? i'm surprised they ignore that risk. if trump is elected president, he might expand his policy because you might invest more in defense and we might have a bigger deficit. views with that. there's a lot of uncertainty about what's going to happen. this is why everyone is very cautious. bring up the chart of the next, we shown this with others, the long-term fixture. vix chart.
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it tells me if i'm hedging, i will pay a real price of we continue on this path. your house call is this doesn't change. you should be prepared for to change. what you see is low volatility in the people become by -- become concerned. to think theensive volatility is going to increase because you are paying a premium all the time for that insurance. that's what people don't want to do it. is there a other asset classes you can hedge that exposure? i'm a strong believer in defense of equities that have sustainable dividend growth. i think you get paid to wait for the volatility to come back. it's almost of the point of sharpe ratio. do you know the risk-free rate is in this quiet? we have that encourage all of our chicago mathematics? begi: it might well
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negative. in this moment, i think so. the market seems to suggest -- tom: that is was the opposing to suggest. they are not investing. luigi: yes, but they should. i think the have great opportunities and they should invest. why don't we see more investment giving -- given the cost of capitalization? something that confounds everyone. but the more central banks do, as aore you are expecting monument to spend, the more bad news you are expecting. we've seen higher dividends and increasing dividends, they realize it's hard to invest. maybe the best thing is to give shareholders back some of that capital. that's why they are trying to buy their stock back. that makes their earnings look but the otherre, reason is there so much
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uncertainty about what's going to happen. what is going to happen in terms of trade policy and their ability to have trade. tom: where does cash fit in to your strategy? timing, which is what this is about, is you want to hold cash. it's very unattractive. that's why we done so well with a lot of risk assets. i think the really, you're not -- you aret anything losing money and putting it in cash around the world. it encourages people to get into risk assets. tom: coming up, john herman. a careful look at the makeup of gdp. one quarter not bad, the next quarter, not that good. john terminated :00 -- john herman, at 8:00, to get your bloomberg morning started. ♪
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francine: this is "bloomberg surveillance," i'm francine lacqua. let's get to the bloomberg business flash with taylor riggs. taylor: apple may not be the last company facing a bill for back taxes in the european union. they may investigate other major u.s. companies. she demanded more than $14 billion in tax repayments from apple. more job cuts are on the way at jetstruggling british engine maker. they are eliminating more than 200 positions from his management team. the ceo wants to cut $260 million out of the budget by the end of next year.
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rolls-royce has been hurting by following demands for engines and by servicing is this jet turbines. housing prices in london rebounded this month after four straight months of declines. the average asking price and the british capital was up almost 2% from august to $825,000. that's according to the real estate website right move. prices in london's most expensive districts are down 12% in the last year. that is your bloomberg business flash. taylorriggs -- tom: riggs, thank you. we talked about any number of printable comments, but the one i found most interesting was the mayor of london on religion and intolerance. mentioned, on the diversity of it all. >> there are some people -- some
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on the right who say that western liberal values are not compatible with mainstream islam. as a that's nonsense. as it vertically possible to be a westerner there are tens of thousands of americans who are proud muslims. millions of proud brits, proud muslims. not perfect, there are challenges and issues. but giving the impression that muslims are not allowed in the usa, by giving the impression that being western is incompatible with being a muslim, your inadvertently playing into the hands of so-called isis. the usa has this remarkable history and legacy of being a beacon for tolerance, for diversity, for filling your dreams and your potential. why would you come at these difficult times in the world, give the impression you are closed? give the impression that muslims are not welcome. what sort of message does that send? i have friends and family in
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isrica, i know that america a fantastic country. i want to build bridges, not walls. tom: where would you take donald trump in your london? i would take into proud brits, proud muslims. challenges as in cities all of the world, where you have two or three generations of londoners living together side by side, not in silence, integrated. integrated lives, breaking bread together, falling in love with each other. --: the mayor of london francine, i have no idea the popularity of this majority vote as he became mayor of london. it's really extraordinary how this changed your politics. francine: this was a landslide victory. he was elected in may 2016. afterwards, when he was caution against is that
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inward looking some say even possibly racist vote. that's pregnant -- brexit, happened. thatopes of a london mayor is giving the u.s. lessons about what to do with donald trump. we had a similar vote based on the same fears. tom: luigi zingales with us. i'm too young to member the bias against italians in the united states of america. if you go back to the beginning of the last century, there was no difference between muslims and the italians in this analysis. the economic growth is at the end of the day, the great leavening that takes these racial and ethnic tones away. luigi: that is definitely the case. it's also a pecking order. at some point, when the irish and the italians and the hispanics. there's a pecking order in this sense.
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what's important, and the message we should send is there is discrimination. but this is a proud -- this is a ,ountry where if you work hard you can make the american dream come true. this is what italian mothers told to their children. italians were discriminated, but now, they're the head of the supreme court and large corporations. they are part of this country. francine: what does that tell us about the future of europe? and youforgotten that, talk about scrimmage against italians, and the states we have the same thing as the u.k. only 40, 50, 60 years ago. do we have to remind ourselves what history taught us? we become more welcoming for refugees. dangereurope has a big to remind people of history. history is not that great. the history of division
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intentions. if you keep that way, this division of tension brought us to world wars. in your study of american history, you address which system is better at doing this? a parliamentary system with 5, 6, 7, 8 parties voting in germany, with a more two-party system of the united states. which works better? luigi: i think it's important to have a president that is elected by everyone. the problem with europe, there's a president is not elected by everybody. of new york are back in the days, the governor of virginia, running the country. this is a recipe for disaster. the other states don't feel respected. tom: have you address the federalism in europe?
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the idea of alexander hamilton downtown, the hamilton of europe right now on my right is mr. younger? if that's the case, we are in deep trouble. tom: expand on that. if the we in trouble federalists of europe get their way? luigi: i do think there's a desire to put in common the debt. theright or wrong, putting, debt of the states. i was taken to fight the common war. in that sense, there was justification. today, there's no case in europe to consolidate the debt of different states. but most importantly, there is no case to move forward in the political game. " europe needs more than anything else is a president of europe. and respond to all countries, not just the biggest ones. tom: luigi zingales.
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much more talk about this morning. linda me do a day to check into the break, if i could. andeuropean data check francine is really focused on higher short-term rate. in china. this is bloomberg. ♪
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tom: wednesday, our special coverage of the bank of japan. francine and i will have that before you -- have that for you before the fed meeting. strongeris a churn, yen, the mexican peso takes a break from the brutal weakness and we saw last week. francine: coming up shortly, it's bloomberg "go." david in the studio in new york. are going to be looking forward to the bank of japan and the fed coming out on wednesday, figuring out what they were doing. we have rich clarida from pimco. the bank of japan story seems to
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be more testing at the moment because there are so many options they have opens them. we talk about with the possible consequent as will be, with respects to fx and we are joined by steven saywell and daragh maher. maher with that weak sterling cost as an outlier. it's a brexit changing call. david: he's long dollar against the call. tom: david westin, surviving michigan football this weekend. david: a win is a win for michigan these days. tom: david westin, thank you so much. the final moments with louise and dollars -- luigi zingales. i want to talk about this chronic nature of our problem. nine years ago financial crisis, what is the effect of just quarter after year after year of tepid economic growth?
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it adds up socially. luigi: absolutely. we know that the recovery is difficult. we hope that now we start to be passed that. has been mostowth sustained recently, it's been broader instead of lifting income of the lower part of the income distribution. i hope that we can turn the side after so many years and have a normal period. tom: for your moving averages 1.9% real gdp. this is from where we break decisively below the 3% level. we have a whole generation of young kids coming out of chicago, and they've never known normal. people talk of a new terminal value, which is subpar. where is that dynamism brandon
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phillips of columbia talked about nine years ago? where does that dynamism come from? aigi: it comes from new firms starting with new ideas. the trend starts in the united states have been down for a while. i think that's a key force that is missing from the equation. francine: what is the one thing we can be sure of? that we need to measure things different to get the right picture? don't like the idea that when you don't get the right number, you change the measure. think we should be consistent to see what's changing. it is true that part of the growth is population growth. if fertility is down and immigration is down. you don't get that boost. europe and japan don't grow much in part because you don't have an increase in the labor force. but the most worrisome part is permittivity growth is down. it's down in europe, it's down in the united states. i think that is where we need to work more.
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productivity comes renovation and creative disruption. i think the starting of new firms is a key factor in bringing that disruption to the market. tom: the key factor on a monday is you and i are having less today was begun ryan. -- with speaker ryan. speaking at the economic club of new york. at noon today. professor, thank you so much. tomorrow, the council on foreign relations. last to talk about, including adjusting back-and-forth to mr. trump and mr. putin. stay with us through the day. in new york, there is new york. ♪
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jonathan: investors count down
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to yellen and kuroda as the fed gives the latest decision. david: stocks rise around the world in the dollar weakens before central-bank policy meetings this week. alix: the bank for international settlements is once again sounding the alarm bell in china after a review shows the credit to gdp gap as well above financial risk levels. jonathan: a warm welcome to "bloomberg ." , live fromn ferro new york city. the overwhelming consensus is the boj is the bigger one, but no consensus as to what they are going to do. david: also, they have more options open. a lot of variables in this thing. they committed or interest in to see what's going to happen. alix: the super bowl of financial markets is wednesday. i don't watch football, but morgan stanley is out with a note today saying the yield curve in japan met stephen anymore. we've seen a 50% retracement from january levels. they don't want that mu o


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