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tv   The Pulse  Bloomberg  September 20, 2016 4:00am-5:01am EDT

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mark: trade cautiously. investors await the bank of japan and fed decision tomorrow. bnp bet on a shock hike. the debut. theresa may on the new brazilian migrationsays the -- takes center stage. bolstering the balance sheet. -- to securitize billions of dollars of corporate loans. ♪ mark: welcome to "the pulse."
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live from bloomberg's european headquarters. have a look at the markets on this tuesday session after the biggest rise yesterday since september 2. a choppy session for the stoxx 600. it was higher. it was lower. it came at the worst week for european stocks in over three months. we await the fed and boj. 10 year german yields are down by a couple of basis points. the yield is zero cents the ninth of september. that was the day it crossed the threshold for the first time since july. the dollar is down against the yen. the yen is set for three straight quarters of gains, the longest rally since 2011 in the wake of the boj's decision. to adopt negative rates in january. a big day for the boj tomorrow. nymex crude is down. oil declining on speculation of an oil glut being sustained amid
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rising supply from nigeria to the united states. let's get to bloomberg first word news with nejra cehic. nejra: authorities have charged a man responsible for the new york bomb attack. citizen andd u.s. afghanistan native was apprehended after a shootout with police. officials say they do not believe he operated as a part of a terrorist cell and are not seeking other suspects. rose bowlingllar the release of minutes from the rba's september meeting. the record low rates is helping the economy absorb the fall in investment. minutes show the new governor -- wells fargo ceo will tell congress later
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that the bank failed customers by reacting to slowly to find staff creating accounts without authorization. he will lay out an ideal timeline on how the bank dealt with it. it lost its title as the world's most viable bank to jpmorgan -- most valuable bank to jpmorgan. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am nejra cehic. mark: european stocks unchanged today ahead of the midweek central bank decisions. two of the federal reserve preferred bond trading partners are betting against their peers in the bond market by forecasting officials will raise rates tomorrow. joining us now is erik nielsen. how much a shock would it be if the feds raise rates? erik: huge. they have not hiked -- you have
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to go back a couple of decades to have them move against -- i think it is a done deal. mark: your view is september is off, november is off. december is the lawn? erik: -- december is on? erik: if trump were to win, i don't think they would go for september. the uncertainty he would inject is so big. i cannot see them hiking december if he wins. the opinion polls still have hillary. you started by saying maybe the fed was right and being so worried about the world . are you coming around to thinking? when you want is for the fed to explain.
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erik: what i try to say on sunday is my thinking has started to change. i have been very critical so far. they are way behind the curve. obsessed with this idea where -- they are starting with the impact of the global environment onto the u.s. increase on the global stage. mark: which we will come to in the next section. erik: if the world is this complicated, maybe they are right. mark: what would be the dream for you? erik: the dream would be for them to try to explain to the world whether they are [indiscernible] big issue. neutral rate is where we are now so there is no movement. or do they think the world is ok
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as indicated at the beginning of the year? mark: which can't do you think they are veering toward? erik: the former. mark: secular stagnation. erik: they're getting more nervous about the world. i think that is going to come down. as far as i can estimate, i think it was over three, because i don't see the world that bad. they are moving in that direction. they have always been 1% lower percent -- 1% lower. mark: the market is forecasting less than three hikes between now and 2018. is the market being too dovish? erik: i think they are. if that is true in the fed is world isen the whole one heck of a lot worse than any of us think. as indicated, --
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mark: with justifications for central-bank policy. we are going to focus more on the boj. it is a big one, isn't it? it is a big meeting. what is going to be that take away from the boj tomorrow? erik: my guess is they won't do anything at this stage. they have a real problem. there qe has not delivered anything. one of my colleagues who made a chart -- mark: it is a wonderful chart. erik: he says there is no correlation. i don't think negative territory is going to do a whole lot for them. nothing comes out this week, i think. a expert next move is -- is a big expansion. you got to realize the power of the central bank is not so big.
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it mark: -- so big. mark: plenty coming up today including theresa may and brazil's -- first view at general assembly. what is in store. such a bank lower as it is said to be working to secure $5 billion of corporate loans. why yellen may have to brace for attacks if she holds off a hike tomorrow. we are live in new york. this is bloomberg. ♪
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mark: i am mark barton. let's get to bloomberg business flash with nejra cehic. nejra: like so smithkline has -- ahead of its consumer health business to be his guest to be its new ceo. he would succeed -- when he retires he will join the board on january 1 and take up the ceo role at the end of march. moves means -- the move means just kate will be the only major pharmaceutical company with a female head. bayer is considering dropping the monsanto name. once the takeover is complete -- name, once the takeover is complete. they say the german company is considering the move to avoid selling its reputation. the ceo signals he is open to a change. bayer has raised its peak
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forecast by a third over 10 billion euros. some of the world's largest hedge funds are expanding in asia as they seek new areas of growth. they have incorporated units in singapore this year while asian hedge funds have not -- that have plagued the industry including china's sovereign wealth fund, betting they can beat rivals. that is the bloomberg business flash. mark. mark: the un's general assembly kicks off today with a strong emphasis on ending the global refugee crisis. is today a declaration was signed and world leaders including the greek prime minister and just delegates on the issue and the urgency of its implementation. it would not agree in today's
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declaration to replace dangerous if weion routes with -- do not accelerate the settlement of refugees to countries around the world that can host them, we will fail. , we will give space to nationalistic, xenophobic forces to show their face. moore,, andrew -- for moore, andrew barton joins us. what can we expect. -- expect? andrew: we can expect to big themes, the first will be big focused on refugees and -- a big focus on refugees and migration.
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tsipras is on the forefront of this. derailedissue that has european politics, bringing parties that were once on the friends to the very core. it is featured prominently in the u.s. election and is a subject that will dominate talks this week. one of the new faces that we will see, theresa may, -- we just had the brexit vote. she will be making her case there. israel and latin america we have had new presidents elected. they will come to try and read sure -- reassure investors and bring them back to latin america and mark: on those two points, there are newcomers to the general assembly, most notably brazil. theresa may, post-brexit. what will they be seeing from the meetings? and his kate -- in his
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case, he has been in power for a month. we had the impeachment of delma rousseffof dilma recently he is coming to reassure investors that we had this political transition in brazil. things are on track and try and reassure whereas may is coming a twofold message. one, the world needs to take control of migration. we are 60 years into this syrian civil war. we have had thousands of people die in the mediterranean. it is led to the brexit vote and she wants more action. brexit,r one is with she will be coming to try and attract investors and put to ease any concerns about the future of the u k. mark: andrew, thank you.
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the new brazilian president michelle tanner is expected to speak today at the un's general assembly. bloombergs erik schatzker caught up with them. you can see that here. that is in 45 minutes. do not miss that. and world leaders achieve unity at the gathering in new york? let's bring back erik nielsen who believes the globalization is a slippery slope and facing erosion you wrote i did not like what i see around the world today. globalization is the major power in raising trade barriers and the protection of the national champions. trump has moved within striking distance of winning the presidency. is this your number one where a global basis. erik: for sure. i have been referring to there has been a pick off and it has accelerated.
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--k: trade music should trade restrictions since 2008. have removed less than 400. g20 just as --y in addition, you have seen this step up in protecting europe. you are national champions. jack lew attacking europe whether europe is right or wrong. the u.s. is to come to the defense of a national champion is a bit peculiar. the biggest risk of all must be a trump presidency. , butnows what he will do if anything he is said so far it is, then symbolically a will to all from asia and europe. mark: our markets complacent when it comes to the placing of
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a trump presidency? erik: think the market has taken for granted that america is not that crazy good your opinion polls sold -- showed the detailed one. it he is not a probable winner. mark: it is higher now according to a bloomberg poll. erik: you saw it on monday after hillary had the health issue revealed. you saw markets start that week. people are starting to say just what would happen. now, twobility right thirds or there about an moving in the wrong direction or mark: what does this mean? that bank of america fund does that shock you that eu disintegration according to fund managers is the biggest risk out there right now?
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even comes above a trump presidency? i know you've got lots to think about. erik: i am not super surprised that is what people say but they are very wrong. it is what the media has been on because of brexit. people think about -- i think eu it isation is a risk, but not anything of the probability of a trump presidency. not nearly anything of the severity of what would happen. mark: will come back to this. -- we will come back to this. erik nielsen from unicredit hard brexit means heartbreak for europe's economy says the head of germany's e for -- germany's fifa. ♪
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mark: just looking at my bloomberg. i will explain why. the heart break from the eu market will hurt both the u k and the europe market. he told bloomberg that the block should offer the u k some leeway. >> i don't think is necessary to cut off the british financial services industry falling down the markets. it will be very difficult and thisf europe committed to point. if they said restrictions -- if
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they set restrictions on migration means no access to internal markets. we should not start negotiations in that way. mark: let's get to erik nielsen. this is the chart. this is the surprise index for the u k economy. a week or so ago, we were at the high for three years. it is a red -- is this a red herring when it comes to data? .learly the data has rebounded is it a red herring and that the real uncertainty is yet to be felt in the economy? erik: i think that is right. got two words right at the time. the impact on the economy will only be shown down the line. -- because there is no going witho are
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investment plans. you are holding back because you don't know what type of access to single markets you will have. we have as you talked about, the and uncountable risk these days. mark: your view is european immigration is good you cite a wonderful example. tell our viewers. slovakia versus the czech republic. much beatings so away on the eurozone. easy out greece and portugal are these examples -- you see how greece and portugal are these examples. if you look at the check republican and slovakia. since 2009 when they joined, slovakia has done better in terms of gdp growth than the czech republic.
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they have had less volatility on the courtly basis and annual basis. when the eurozone had some debt crisis, it was the czech republic that went into another recession and slovakia did not. --that was essentially should have been there to help them through but he did not at my point is, i am not saying the eurozone is better, but if you have broadly good policies like slovakia and czech then it helps. mark: to what extent will it help the u.k. economy through. there is another like to come. is that going to offset the negativity? erik: to an extent. global trade is not growing at all. we connect -- a weekend exchange rate is not going to give you a
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lot. it will help to some extent. by how much? i do not know. for the u.k., the u.k. is not a major economy in the world. it is bigger and there is more monetary leeway than the czech republic or denmark. in this global world, if you -- free capital movement, you don't have an independent monetary policy. that theonly so much flexibility of the bank of england can do for the u.k. mark: back to you in a minute. erik nielsen, thank you for joining us. up next, under pressure as deutsche bank is said to be seeking to securitize corporate loans worth billions of dollars. stay with us for more on that. this is bloomberg. ♪
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mark: welcome back to "the pulse." live from bloomberg's european headquarters in london, i am mark barton. let's get over to the bloomberg for an asset check. nejra: after we saw european stocks rise the most in two weeks yesterday we are pretty much unchanged on the stoxx 600. if i take you to the imap function, a bit of a mixed picture in terms of industry groups gaining and declining that it is energy stocks leading the decline on the lower oil price. first i want to talk about
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dollar-yen because it is the key trade ahead of the fed and boj meetings this week. a bit of a weaker dollar, stronger yen today. the yen is set for three strong quarters -- three quarters of gains, its longest rally since 2007. we are seeing dollar volatility increase but a lot of strategists are saying whatever the boj decides, it is the size of hawkishness or possible signs of hawkishness from the fed that would be the biggest threat to .he yen japan's currency has basically had a greater tendency to move with changes in u.s. moves. but this dollar-yen one month risk reversal, what is showing is the premium to sell dollars by yen has been increasing toward -- increasing. toward the end of the chart there's a bit of a bullish yen
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skew. the bank of japan is going to have to do something extraordinary to weaken the yen so is that weakness going to come from some fed hawkishness perhaps? a lot of questions. finally just wanted to show you what is happening in the oil market. we are seeing wti and brent lower today after the minister of state for petroleum in nigeria said that output is going to keep rising after government outreach and a cease-fire with militants .llowed production to restart we have the u.s. stockpile data coming in later and that is forecast to show an increase. mark: under pressure to bolster a bankance sheet, which is said to be working to securitize billions of dollars deutsche bank -- is said to be working to securitize billions of dollars. only five days ago i was talking
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with your colleague about and thec securitization return of these timebombs pre-crisis. now you are talking about synthetic clo's. is this going to boost deutsche bank's capital position? >> of course we saw the stock again under a little bit of pressure. a lot of strong analyst comments yesterday focusing on the weight, potential weight of the u.s. fine hanging over the bank, and that is where the focus remains. mark: it has done this for years, it has done this before. elisa: exactly, and the sheer scale of that potential is dominating. mark: you sort of implied you were talking about yesterday, it would be significantly
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undercapitalized even if the eventual settlement of the doj can be settled by its reserve. her mind is how much it has in reserve and what its capital position is. elisa: the bank of the moment has set aside around $6 billion for potential litigation and if this fine work to be shaved in half, that would probably soak up most of those reserves. this is not the only case weighing on the bank. the have other cases they are being probed for so analysts are crunching those numbers and trying to understand their capital position, how much would it be weekend. would it follow that fall below what regulators are asking? and how quickly with that bank take legal action. cryan has said he is not going to do.
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is that day fast approaching? clear once they have visibility on these amounts and will be easier to make that decision. as it stands, it is a little bit difficult to decide how much you are going to need. mark: when do you think we will have visibility? elisa: cryan has pledged to put the bulk of those legal issues behind the bank this year but it is art a getting to october so not much time left. mark: europe's banking mess, discuss. in a very short amount of time. erik: how much time do i have? .t is complicated i do not know if it is a mess. the big problem we have is the different banks have different issues. ,ou have deutsche bank's issue the issues we have at our place as an italian bank in pl's and what have you. different bits and pieces, so
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there is not one solution to all. every bank just has to work it out themselves. i have been writing what a bit about how much taxpayer money has bailed out banks in every european country apart from italy and france. fine, seems to be doing italy, the train left the station for them. you cannot realistically go back and have a public bailout. italian banks have a hard job ahead of them. back,g as gross comes this is the number one. mark: there is no growth in italy, is there? erik: a little bit, but that is right. it is not difficult to be a bank if the economy grows well. if it does not and if you have a monetary policy that has negative rate and a flat curve, and a regulator regime that asks questions and not accusations
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that you have to do this stress internally once a week or whatever, the tax on the system is huge. mark: what is the take away from the ecb meeting last week, that negative rights now in the eurozone were done and dusted? they decided to do nothing and are looking into the scarcity of bonds and report back at the end of the year. are we done with negative rates in the eurozone or not? .rik: we must be my take is that the ecb made a mistake by going negative. they adopted the idf from small countries who had done it to weaken their currency. and is what they had tried because they thought at that time in 2014 they could not do qe, they tried district. when it did not work enough they persuaded the germans and dig qe. now you cannot take it back but it is a tax on the banking system. for social reasons you are
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legally -- or for legal reasons you are not allowed to chart negative rates. it is a tax on the system that is already up to here in trouble. mark: monte paschi is at the core. role of dominoes it is the first domino, isn't it? elisa: and has been for a while. mark: you have a new ceo and like unicredit it is hoped the ceo will hasten action. elisa: i think in the case of monte paschi there was concern thehe investor base that incumbency or former ceo had been there far too long in terms of how many cash calls he had gone to the market with, so they needed a break to look to the future. still remains offloading a very large amount of bad loans and a very complex securitization between now and the end of the year that the company is targeting to complete. there is also the question of bringing in some
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bondholders to reduce the weight of the equity which of course also may reflect unicredit's access to market. we know unicredit is also working on a plan to offload various assets and tax investors for equity. at of demand for investors in italian banks. going to getnot any comment about unicredit, are we? erik: it is a great bank. we are supervised, and regulated. buy if cheap asset to you think about it. you never buy anything you think is going to be cheaper tomorrow. i think we have turned the corner at unicredit. i think for the banking system, there are some which it is difficult to see how to get through but for the major banks,
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but it will be a long and difficult road. mark: thank you. unicredit's global chief economist. up next, the boj's big day. kurodaroda -- cu roda -- 's policy announcement could steal the feds thunder. ♪
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mark: let's get the bloomberg
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first word news with nejra cehic. nejra: authorities have charged the man they believe responsible my the new york, attack, condo homage -- amman con brought me. he is facing five counts of attempted murder of a law enforcement officer. they do not believe he operated as part of a terrorist cell and are not actively seeking other suspects. the central bank left foreign costs unchanged saying the record low rate is helping the economy absorbed a fall in business. he paid tribute to glenn stevens, saying he made exceptional judgments during a challenging period. john stumpf will tell congress --t the bank's failed without authorization. he will say he is deeply sorry
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and layout a timeline showing how the bank will tackle misconduct. wells fargo's stocks have tumbled as a result. global news 24 hours a day powered by more than 2600 journalists and analysts and more than 120 countries, im nejra cehic. shares in tokyo rising, investors optimistic. will make its latest policy announcement tomorrow and the fed is in the spotlight for its decision. our next guest believes investors should focus on japan. brendan brown joins us. he said the strategies of currency devaluation and pumping up the stock market have suffered to pete -- suffered defeat. is it time for the boj to acknowledge it has limited -- reached the limit of its powers
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or time to double down? aredan: i think what we going to see in japan is pushing forward of the targets to a longer-term so they will talk about inflation target the met over a few years rather in terms of the next two. i do not see them doubling down because it is fairly clear to everyone including central bankers that you cannot win a currency war against the united states when the federal reserve is exploring its own put and keeping rates down. mark: what impact is tweaking the language had? they keep pushing the goal post when it comes to reaching the 2% target. by fiddling with the language, what does that achieve? brendan: i do not think much except self-preservation. mark: sustaining some sort of credibility. brendan: ultimately the key question in japan is going to be whether the government distances
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itself or has that can -- second thoughts about kuroda. mark: are we nearing that point? brendan: there is no indication but it may nonetheless happen within a two-year timetable. at isher aspect to look ultimately the success of this policy of driving down the yen and re-creating inflation does depend crucially on the u.s. environment. some say optimistically we will get a big capital outflow from japan to take advantage of better priced global markets. mark: so that is when it will happen? brendan: that is when it will happen. mark: he said we could be nearing the point when there is a u.s. recession. how does that play into the currency markets? brendan: a u.s. recession or asset price deflation would probably send the yen higher but in that process, japanese will see a buying opportunity in global markets and if the boj is following orders and revamping it further, you will get some
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sort of capital flight out of japan but that is not in the immediate. 22 the government losing confidence in the boj's theures, had -- pointing to government losing confidence in the boj's measures, how does kuroda make that clear to us? what are the implications? brendan: i think you would see that from intimations from politicians and rivalries within .he ldp ultimately central-bank policies do not change because of officials changing their mind. it comes because of wider lyrical forces and coming back to the federal reserve, i do not expect anything to come out of this meeting because essentially it is a pre-election meeting of an obama said. -- said. -- fed. mark: are you in the trump camp?
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it is a fed that has for rate loan -- rates low obama's purposes so if they do not hike tomorrow it could be under further criticism from the likes of donald trump. are you in that camp? brendan: in terms of interpreting what the fed is doing tomorrow i would be in that camp but the big question beyond that, if we do get to a trump presidency is how much of this is actually going to translate into new federal reserve asked and new -- acts and new officials running the fed. mark: what sort of monitoring of the fed might be necessary if donald trump had his way? brendan: the big question is how he is going to work with conservatives in congress who have been pushing for new federal reserve legislation for some time which would abolish the 2% inflation target, have more automatic rules. is trump going to come on board
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with some sort of coalition? the answer to that may not be until we have the next u.s. recession. mark: are we approaching a point, you have talked about the boj tweaking its inflation forecast. we discussed the idea of the 2% inflation goal of the fed being abolished. are we reaching a point where inflation targets have been by all the central banks closest to reaching them? brendan: that is a possible scenario but it will depend on 2% was very and the haphazard. the end of the 2% inflation standard will very much happen in some haphazard fashion. mark: coming back to the boj, the focal point is this comprehensive review where the boj essentially was analyzing the cost and benefits of its monetary policy. what is the outcome of this review going to be? brendan: it has to be over a
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longer time. which say that the review should be taking place in the democratic political system would be within the parliament inmore broadly legislative discussing with the central bank is up to. i do not expect a real debate within the central bank. mark: and the market reaction tomorrow, with the fed and the boj where is the yen going to be after tomorrow? brendan: i suspect the market reaction is happened but the climb of the end we have had in recent days is a technology. and the yield curve which has steep and in japan, is that carry on? curven: i think the yield is the crucial interest and as you have been seeing in japan and germany is some tendency for the long end to flickr some independence from central-bank action.
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i think that tendency will continue so i will expect to see long-term rate rises in japan and also in germany. mark: brendan, thank you for joining us. securitieswn, executive director and chief economist. whyin the firing line, yellen may have to brace for attack if she holds on for a rate hack. this is bloomberg -- a rate hike. ♪
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mark: i am mark barton in london. let's get to the bloomberg business flash. nejra: glaxosmithkline has presented -- walmsley will succeed at the head of the largest u.k. drugmaker and join the board on january 1. the move means gs k will be the only major company with a female head. bayer is considering dropping the monsanto name once the takeover is complete. they say the german company is considering the move to avoid selling its reputation. its reputation. bayer has increased the sales forecast by around one third two
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over 10 billion euros. largest hedgerld funds are expanding in asia as they seek new areas of growth. -- have howard incorporated units in singapore this year. while asian hedge one's this hedge funds -- some investors may increase holdings in the region betting they can beat rivals. that is the bloomberg business flash. mark: most economists expect the and let's goates to new york. our economics editor michael mckee. what is donald trump's main gripe with the fed? michael: it is hard to know exactly why he is so upset but he has been arguing that janet yellen is a handmaiden of president obama.
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tomorrow putshing the fed into the middle of the presidential race as they are going to release a new. plot. .- dot plot the crowd can argue they did nothing at tomorrow's meeting but they're going to raise rates in december and they held off just because of the election. mark: how have fed officials reacted to trump's charges? have never seen a fed officials say we are following politics. they try to keep it out of politics is much as possible. yellen might suggest november is a live meeting at nobody's going to believe that. they are not happy about this but there is not much they can do. mark: michael mckee in new york. thank you for joining us. "surveillance" is next.
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francine and tom keene are standing by and they kick off the conversation with neil dutta. this is bloomberg. ♪
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now, marketsdy for may and the newy as investors brazilian president attend the u.n. general assembly for the first time. bolstering the balance sheet, deutsche bank is said to be working to securitize billions of dollars of corporate loans. i am francine lacqua in new york with tom keene. we talked about the bank -- the bank of


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