tv Bloomberg Daybreak Americas Bloomberg October 13, 2016 7:00am-10:01am EDT
"bloomberg daybreak." alix steel is off today. and market check -- futures negative here in the united states, down 94 on the dow. concern over china. that reignites. mining stocks getting crushed this morning. switch on the board. turning to the fx market, a stronger dollar story, with the dollar index kissing a seven-month high. david: here is what you need to know. china's exports dropped the most since february, raising more questions about a possible slowdown in the world's second-largest economy as the u.s. federal reserve moves closer to raising interest rates. the challenge to brexit in the u.k. high court begins today. a judge is hearing arguments that prime minister theresa may does not have the authority to trigger article be on her own, without an act of parliament. john stumpf, who built wells fargo into the world's most valuable bank, stepped down as chairman and ceo following
public outcry over millions of fraudulent accounts open for customers who never asked for them. he faced a barrage of calls for change over the last several weeks. >> i am fully accountable for unethical sales practices in our retail banking business, and i am fully committed to fixing this issue. >> he needs to be held accountable, as does the rest of his senior management.
jonathan: just the beginning of the process. >> i do not know if it will be enough for the people of the u.s. i think there is a divergent views between the regular way customers believe and what we are seeing from analysts and investors. as you know, we do have earnings tomorrow morning, 8:00 a.m.. we will have a chance to ask them a little bit more about what they have to say. jonathan: the man over, is he the right man for the role? >> that is a question. the board is investigating what accountability measures need to be taken, calling back more money, maybe a less senior manager. suasionyou do have some of that desire to have him out. he was part of the operating committee for a little bit at least. he did oversee the woman who was the head of community banking. i think there are a lot of questions on the lower
management levels as well. jonathan: we have seen banks go through scandals before and ceo 's stay in position. why didn't it happen here? >> at is a great question. i would love to get answers, and that is what we are working on. announcement, he was very adamant that this was a decision that mr. stumpf came to himself. he was the one who brought this to the board. he was not fired. he was not pushed out. that is something he is really saying in terms of the bank moving on. but in terms of all of those sort of deliberations, why now, all we can think about is what happened with congress. maybe he did not want to get on a call tomorrow and say, i am going to try to move forward. maybe he did not want to take questions. we do not know yet. andd: that is laura kelly, the banking world is reeling after news of the shakeup at wells fargo. talk about what happened and what it means. if intervening editor at
bloomberg tv has written extensively on the banking industry. and on the phone from london, chris wheeler, atlantic equities. we have this earnings call tomorrow for wells fargo. what would you ask on that call? chris: good morning, first of all. the thing i would ask first of the importantg on thing from the investor perspective. what do you think this is going to do to your earnings profile over the two years? one has to assume that the level of cross-selling that is taking place within the bank, which has been a major driver, has fallen quite sharply, because clearly longerre not only no incentivized, but they must be really nervous about compliance issues of doing any cross-selling. you have to add, what is the impact on wholesale banking and the very high-profile moves by the state of california, illinois, and chicago? that is the first question. david: i believe this broke september 8. they have had some time now. do you think they have read -- real data on how this might have affected or not affected their core business and retail?
chris: i think it will have initial data. i think the staff reaction, which is the important thing -- the staff who are selling the products, it pretty well happened instantaneously. clearly, you are going to be uncomfortable doing anything really might suddenly find you are joining the ranks of 3500 employees who were let go, apparently, for being involved. you are right it is going to be a longer story in terms of how it plays out. i think there will be some data available. is some history for the banks going to various crises and various scandals. it has not necessarily meant the ceo goes. we saw diamond go at barclays after the libor scandal. jamie dimon stayed through the london whale story. what you think this time the ceo made a move? >> i believe warren buffett had a big hand in this behind-the-scenes, the largest shareholder, and has been for some time. generally, when the oracle of omaha speaks, people listen. number two, i think this goes to
culture. there has been a big effort, even though it is sort of sub rosa, by the general reserve bank of new york to change wall street culture. they have had three years where -- conferences on this topic often these things are held behind closed doors. the desire to change wall street culture is genuine. and i think wells fargo and the ceo got caught up in this. when you have 5300 people behaving this way, and they are all fired, it goes to culture. the london whale, you could talk about it, j.p. morgan really going to culture a little bit. this seemed like an isolated group of people behaving in a strange way. when you have 5300 people, you are talking about a cultural imperative at a bank. john stumpf himself said, i have to be held accountable. i am accountable. this is the ultimate act of account ability. david: there is a lot we do not know.
there is an independent investigation. we do not know the results. do we have any sense of whether there may be another shoe to drop? is there more than we know thus far? chris: i want to add i think the reason john is gone is the fact that most of the other scandals over the last eight or nine years have been predominantly institutional scandals, institutional investors hurt rather than individuals on the street. i think this is why this is such a different situation. main street,an on not the man on wall street who has been hurt. in terms of where we go from here, tim sloan is a really capable banker. a great track record. he have to bear in mind he was the chief administrative officer and head of hr when a lot of these filings were taking place. as you know, a lot of these filings are now being questioned. second thing is, he was cfo immediately after that, and one must believe he was involved in trying to deal with this whole issue. i think wells fargo has a tight management team and it is natural that he should step up. but it is also pretty clear that
it is difficult to say he is totally distanced from this issue. jonathan: to the point, this is a main street issue, and we have seen politics revolve around wall street banking. are we going to see much closer scrutiny of main street banking in the united states, and will it be much more politicized? bill: i am not sure. chris is right that this is a main street incident, trying to peoplesmall retail -- who have small retail accounts. on the other hand, there have been other issues with retail banking back in 2007 and 2008, with robo signing and foreclosing on homes. those are retail issues too. --ody's hence roles for that nobody's heads rolled for that. this is a cultural issue. when you have 5300 people, it is a pervasive problem. it is what people are being rewarded to do. clearly, there was a flaw in our
ward system and what people were motivated to do. there had to be accountability. even hundred $85 million is chump change as far as things go. obviously, the outcry was far more, because it affected -- it was cultural. it was culturally pervasive. as much as they try to deny that, it was obvious. make a powerful point. it is the number of employees involved. thanks so much to chris wheeler of atlantic equities from london, and bill cohen, who will be staying with us for more. let's get an update on headlines outside the business world. return to emma chandra for first word news. hillary clinton holds a nine point lead over donald trump in pennsylvania, and his crushing him in the philadelphia suburbs. it gives clinton a lead of 51% to 42%. early swelled to 28 percentage points in suburban counties that
were once reliably republican. more than 80% of those voters said they are bothered by a 2005 video in which trump is for discussing women integrating terms. 22-year-old syrian man suspected of planning an islamic extremist bombing attack took his own life in his jail cell. he was being checked on hourly but was not considered an acute seer -- acute suicide risk. talked security official says the death will make the investigation into whether he had accomplices in the plot more difficult. the suspect reportedly strangled himself with his sure just 15 minutes after he had last been checked. the british territory of bermuda is hunkering down as hurricane nicole rapidly strengthens into a category four storm. the u.s. national hurricane center called nicole extremely dangerous. it is urging those on the tiny island in the northern atlantic to prepare for powerful rain and winds. the storm is packing sustained winds of 130 mph.
local news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. jonathan: thank you very much. want to whip you through some stock markets in europe. deutsche bank trading soccer today. the bank set to introduce a hiring freeze. the ceo looking to cut costs. this morning, the stock down 2.5%. the minors weaker. the headline -- exports out of china softer. the readthrough is maybe a weaker economy. that stabilization over the last months starting to destabilize. to wrap things up, a fascinating story with unilever. the volume of goods sold in the third-quarter a little bit softer. a dispute over supplies with tesco in there as well. a slumping pound. unilever want to put up prices. tesco said no way. unilever down 2.5%. -- a judgeit exit will he arguments prime minister
david: this is bloomberg. brexit remains in the spotlight today as the u.k. or in minister, boris johnson, testifies in parliament, and arguments begin in the high whether london over prime minister chorizo has the authority to trigger article 50 without an act of parliament. we turn to simon kennedy from our headquarters in london. of the two, boris johnson and the high court, which is more important? simon: i think boris johnson will move away from the spotlight and the folks will be
on the court. boris johnson, big cheerleader for brexit, talking about the opportunities that will come britton's way, and the doom will soon pass. for johnson and the government, the bigger test will be in the courts, a challenge to theresa may's ability to invoke article 50, which obviously sets two years of negotiations up. whether she can do that on her own or whether it requires an act of parliament. of analysts is, this will not stop brexit, but might slow it down a little bit. david: explain the high court action to an american lawyer, because we find this puzzling. we are used to taking to our supreme court issues like this, like who would be the president in 2000. we are not used to seeing england put it to the court to decide whether the people or parliament get to decide. is this possible? simon: it is eminently plausible and the judge said he will make a decision by the end of the year.
it is a test of the law and of theresa may's top lawyers. her attorney general is leading the push for her in the court. she argues in her -- her lawyers have argued, and david cameron's lawyers argued before the referendum, that the prime minister can introduce article 50. some lawmakers remember that parliament here was very much more anti-brexit than pre-brexit. mp's did not necessarily represent what their constituents were saying or thinking. the idea being that if they have a say, maybe the chances to do rail it, although most analysts do not think it is likely. itmaybe the chance to derail , although most analysts do not think it is lightly. jonathan: most headlines are not about the court case. they are about marmite. those outside the u.k. and australia -- marmite is a spread a lot of the brits put on toast. unilever want to put up prices, and tesco have said no. now there is this dispute and
you cannot get marmite online. i joke, but it is a serious story in the u.k. has brexit finally hit the shopping shelves and finally got real? joining us is the global investment ceo with over half $1 trillion of assets under management. he has more to worry about than marmite. you have to wonder whether it is starting to filter through to main street in a significant way now that they are finally feeling the bike of what is happening. >> absolutely. the chicks are coming home to roost. we had a honeymoon over the summer, people saying maybe brexit is not so bad. then we had the conservative party conference and the comments made by government ministers including the p.m.. no sterling is in freefall. a lot of goods on the shelves will get more expensive. for the next that community, theresa may -- they are worried about their status in spain, and what happens to their health care, the pensions. estimates from the treasury now say that the cost of brexit
could be 66 billion. who knows. could be much more than that. if you look at economic purchasing power, the economy of it has been hit more than just 56 billions. jonathan: is this rish politics fundamentally? -- is this reshaping politics fundamentally? poll shift,pinion and that has not been the case so far. vote, leading up to the notorious predictions there would be recession. it did not happen, and therewith he on mr. carney because it was not happening. are we back to anticipating recession in the u.k.? >> a little bit. one reason nothing has happened is, we do not know yet what is going to be negotiated. single be part of the market? will we have a preferential trade deal? will we be able to access the financial services market? these questions have not been answered. once article 50 is triggered and we know which way the negotiations are going, i expect it to be very difficult.
i think companies will start to actually pull some of the investment from the u.k. jonathan: let's talk about investors and whether they pull from the u.k. you oversee a big part olio, a lot -- a big portfolio, a lot of assets. the headline over the last year has been a record high holding a foreign investors of the gilt market. are we beginning to see foreign investors dumped guilt? sterling was always going to be the first casualty. i talked about that before the referendum. that is something investors can easily pull. it is just financial wealth. that is my sterling is weak. is much infrastructure more difficult and long-term, and that is why we have not seen that yet. clearly, the government has got to be worried about this. p.m. has reason the backpedaled on her comments at the conservative party conference and talked about giving britain the best possible access to the single market, whatever that may need.
jonathan: from new york city, i am jonathan ferro. in china, exports dropping the most since february last month. that is according to the customs and ministration. the current does not sleep. our asia correspondent joins us from hong kong. walk us through the numbers. >> good morning. a pretty soft reading from china today. a reminder of the challenges still facing china's economy even after a few months of stability. we saw a drop in shipments to
key markets like europe, the u.k., the u.s. on the import side, we are a weakness in terms of components, which suggests china's order book is not getting full for the month ahead. , the dip takeaway is in trade comes even after the fall in the yuan, suggesting china is not getting much bang for its buck for currency weakness, which makes the question -- will policymakers -- and let the yuan weaken further in a home to stoke demand for exports? no guarantee that will work, but a temptation. on the other side, they have to battle capital outflows. they do not want the currency to go to week. a real balancing act, china trying to get off the ground. they want to keep the economy going. they are probably tempted to weaken the rnc but do not want to trigger capital flight at the same time. david: and, thanks for joining us. ran, things for joining us. the flipside of the
story of the weakening yuan is the strengthening dollar, and why that is. it takes us back to the fed and what we saw and of those minutes yesterday. what is your take away from that? andreas: what i take away is that the fed feels it needs to raise rates, probably, this year. think the fed is behind the curve. that is clearly not the case for the bank of japan or europe or china, where the economies are much sought year and the problems are much deeper. the differential expectation is moving in favor of the dollar. we will see dollar strength against sterling and probably the euro as well, against the renminbi. the big unknown is the outcome of the u.s. election. if there were to be a trump election victory, which is i guess unlikely according to the recent polls, but still a possibility, there will be quite a lot of market turmoil, and it would put the fed on hold for more time. jonathan: how do you express
that in your portfolio currently? andreas: we do not think about that too much. we try to figure out the longer-term trends. currency, obviously short sterling. some of the high yields and corporate's are quite attractive, some of the emerging markets and long duration assets, and the illiquid space. jonathan: the short sterling trade -- we have had a weaker pound. from your perspective, what is the downside on cable currently? how low can this go? andreas: i think some market participants are starting to talk about cable but -- cable going to one. we talked about that 30 years ago, and we could go there again. if you look at charts, there is no support whatsoever that you go there. david: the longer term trend on the dollar -- even if the fed says we are going to hike, we are going to stretch out 17, 18. how do you project that? andreas: i predict it is going to continue somewhat. the u.s. economy looks to be the strongest of the major blocks. that is going to be reflected in
the differential that will support the dollar going forward. jonathan: it has been fantastic to have you with us, over from europe. the ceo and global cio of allianz. mrs. clinton holds a commanding lead over donald trump in pennsylvania. the results of our exclusive bloomberg politics poll, coming up next. in the market, a bit of a risk in tone, specifically equities. future softer, down 97 on the dow. some weakness in london with the ftse down 0.8%. the commodity producers, a good move to the downside, on the back of a downside surprise out of china, with exports to the most in seven months. ♪
in the s&p 500. downside on chinese markets, moving the equity market down, particularly in europe. in the fx market, the dollar was the story. dollar index climbing to a seven-month high. we have come back just a little bit. a stronger japanese yen as we 1074.at emma: here is what you need to know this hour. john stumpf, who built wells fargo into the world's most viable bank, stepped down as ceo, without cry over millions of fraudulent accounts open for customers who never asked for them. china's exports jumped -- dropped the most since february, leading to questions about a possible slowdown in the world's second largest economy. this is the u.s. federal reserve moves closer to raising rates. the challenge to brexit in the u.k. high court begins today. a judge of the arguments that prime minster theresa may does
not have the authority to trigger article 50 on her own without an act of parliament. that is what you need to know this hour. david: it is now 26 days before that election. according to a bloomberg poll, hillary clinton has a nine point lead in the critical state of pennsylvania. the bad news does not stop there for republican donald trump. trump is learning to clinton in philadelphia supporters -- philadelphia suburbs. joining us is megan murray, washington bureau chief. this poll out this morning. tell us why these numbers are important. megan: stunning numbers, particularly in those philadelphia suburbs. those are traditionally republican-leaning suburbs, when you talk to people about -- you talk about bucks county, montgomery county, chester county, in the philadelphia suburbs. where they go is usually a good indicator of the national race as a whole. another stunning factor we should mention here is that hillary clinton is doing well across all demographics in the suburbs.
it is not just women, not just college-educated voters. she is also doing well in what we see as trump strongholds, white working-class men. david: this whole as i understand was taken after the tape came out over the weekend. how much of a factor was that tape in what the voters had to say? megan: it is a big factor. 80% of people surveyed in this thiswere disturbed by video with these incredibly aggressive comments. it has been replayed over and over. obviously in the ensuing days, we have had not only this turmoil across the republican party -- very senior figures urged mr. trump to get off the ticket. we have also seen over the past 24 hours more women come forward and say that they were treated badly, that mr. trump had missed behavior towards them in his past. those things are all waiting on the minds, and we should emphasize not just women. this is also on the mind of male voters. david: if this was any other presidential election and the candidate saw the numbers we are showing, that campaign would be
scurrying to redo their strategy. but the reports i have seen out of the trump campaign is he is more intent on his strategy. he thinks he is doing it right. megan: we have a great story from josh green looking at how they are doubling down on this strategy. this is a single not strategy focused on the base. focus on the basal moore and hope that somehow you are going to magically get a greater number people to show up than any of the polls, national and statewide, are currently showing. it could be that the polls are wrong. dramaticbe there is a underrepresentation in our current polling about the number of people who are going to turn out on election day. conversely, a dramatic overestimation of the number of people who are going to turn out for hillary clinton. right now, that is not being modeled in. his ceiling is in the low 40's, maybe 40%. you do not win a national election with 40%. you will have to get more people over to his side, or all the numbers are wrong. david: what are the chances his
strategy is twofold? get out my base, and keep her base away. i will turn voters off so much that only my people will show up. megan: it is possible with this strategy he does suppress turnout because people who do not know about the clintons' p ast suddenly say, i am turned off. there is the flipside possibility that going hard with personal, vicious attacks motivates her supporters, get some of those people waiting on the sidelines, active bernie sanders supporters, to say, i am going out for her. latinos, african-americans, that obama coalition, youth voters that have not had the enthusiasm -- there is one way to build enthusiasm, and that is people thinking a bully is picking on hillary clinton. david: that is megan murphy, our washington bureau chief. one of the things hanging over hillary clinton has been accusations that she is too close to wall street. having taken hundreds of thousands of dollars for private speeches given to audiences at big banks, she has done her best
to keep those are marks out of the public eye, but we have access to what wikileaks claims are the prepared text of some of those remarks. attempted to separate herself from wall street through the election. bill cohen has gone over those remarks in a recent article in "vanity fair." bill cohen joins us now to go over this piece. joins us to go over this piece. bill: there is only snippets. this comes from an 80 page memo that was given to john podesta, which sort of outlines some of the comments she had made from her speeches. let us presume they are the worst comments she made, because that is why they made it into the memo. if these are the worst comments to deutsche bank and goldman i thought -- i have been
trying to figure this out for months. what could she have said to goldman sachs? what was goldman sachs paying her $225,000 to hear? i thought maybe she had said something about world leaders that was embarrassing to her. she had been secretary of state and did not want to go public. but you read these snippets from the speeches and you say, ok. she understands how wall street works. she understands how it needs to be regulated properly. she understands how important the capital markets are to the proper functioning of our economy. she perhaps even understands the pendulum of anger toward wall street has flown too far and we are hurting ourselves. when the remark -- larry summers talks about secular stagnation at 2%, in march but that is because wall street's hands are tied behind its back, and regulators are punishing wall street for its bad behavior as opposed to the justice department, and that does not
work. she is nuanced in her understanding about that, which i found fairly shocking, as i would've thought she would be pandering, but she was not. jonathan: donald trump says he is not releasing tax reforms -- tax returns, and we say there must be something bad. the same with this. why didn't she just released the transcript? why didn't she do it? bill: that is one of the things i explored in this piece. why is she so paranoid? if she really has nothing to hide -- and these are very frank and honest and intelligent remarks she is making. why not just get it out there? some people say it is because no other presidential candidate has been asked to release any speeches they have been giving. well, a lot of things happened that there is no precedent for. donald trump will not release his tax returns even the presidential candidates have been doing that for a long time. i do not understand why she did not do it.
maybe so she could say, i have been forced to do it, and i told you so. why go through all this? when a user brainpower for something else as opposed to trying to combat my people are not doing things out when people want them. i do not understand it. david: the 80 page memo, having looked at it -- they wrote an 80 page memo. what sets of proportionality is there in the campaign? they should be focusing on other things like jobs, the economy, global growth, and tax reform. what does it say about how the campaign is working? bill: it is very insular. we know that. it is very guarded, very protective. she is cautious about everything. she has got to be. she was probably the most unlucky politician in 2008, running into what became the barack obama phenomenon. she is probably as lucky as any politician can imagine. if it were not for what donald trump has been up to, this would be very big news. if you are hillary
clinton running against donald trump, what do you do? bill: everything you have been doing so far. in three weeks, she will be president of the united states, is my prediction. really out there on a limb. i think she just keeps staying the course. david: what does it mean for the house and senate? bill: that is obviously more complicated. people have been saying charles schumer is want to be the next majority leader of the senate. that seems likely. because of what donald trump -- david: with whom she has a good relationship. she was the junior senator to his senior senator. bill: i think if the house stays in public and hands, there will be deals made, and that will be good for the american economy. david: thanks for being here, bill. jonathan: coming up, the u.s. dollar contains strength in the fx market, became the rally continue? capturing the stories in the market -- futures negative and stocks down in europe. the downside for chinese exports.
the story i want to talk about is on the following chart. is the dollar stronger, sure. but the chinese currency is weak. weakening the daily reference rate for a seventh day in a row. that is the longer -- the longest run of weakening reference rates, going all the way back to january. deutsche bank getting super bearish. a quiet storm, david, brewing in the fx market. more on that story, next. ♪
i am emma chandra. coming up, more on john stumpf's resignation with john peabody of compass point. time for other stories making headlines this hour. u.s. demanding that a resolution of an insider trading case includes a temporary suspension from the hedge fund industry, according to people familiar with the matter, who said the s.e.c. forced him on a deal that would require payment of penalties in addition to the penalties. cooperman denies wrongdoing. to make embarking on an across-the-board hiring freeze according to people familiar with the matter. ceo john cryan tries to lower costs to shore up investor confidence. the hiring freeze is set to be effective immediately and would affect all divisions of germany's largest lender. the u.s. consumer product safety commission expanding a samsung
recall of smartphones. this increases the number of devices that could be returned to 9.1 million. all owners will be able to exchange their devices for another samsung smartphone. or they could receive a refund under the approved plan by the cpsc. that is your bloomberg business flash. david: i got it all. time to focus on the fed. today we will hear from philadelphia fed president patrick harper on the economic outlook, and tonight federal reserve bank minneapolis president speaks at a town hall forum in montana. 's fedollows yesterday minutes which say we need a rate hike fairly soon. what struck me -- i want to know what struck you -- we have a strong the we should move right away, and some people holding back. there is some disagreement on the fed. >> that disagreement is a good thing. this agreement does not always have to be bad. it looks like they are locked
and loaded to go in december. you have the three dissenters, which i have always argued -- bank president's dissent. that is what they are supposed to do. two of the three are not -- of the three dissenters -- are not going to be voting until 2019. -- 2018 and 2019. that is a long way away. you make your statement while you can. i suspect that -- that is what is at play here. david: and if they do raise in december, which i think is at 67%, something like that. will they get dissent from the other direction, saying we should not have done it, or does it matter? rich: i think the doves will join the chorus and will sing as one unit. you have to remember that there is a lot of -- just because they
are ready to go in december, that does not mean they will have to pull the trigger. a lot can happen. if a major market disturbance outlook,ffense the maybe a bank situation or something that happens in the financial system that leaves a question to the financial system , or economic conditions , theyorate noticeably will put the gun back in the holster and postpone that. right now, it looks like they are going. you are probably going to get a rate hike in december. jonathan: that tells us every meeting is live and they do not watch the politics. they look at the data. why has the market got november 17 and december triple that. but does not make sense if every meeting is live and they do not look at the politics. rich: the market is smarter than
the fed. the market knows what is at play. they know that historically the fed sidesteps anything with respect to politics. they want to be seen as neutral or nonpolitical. the market knows. just because you say something does not make it correct, does not make it the way it is going to be. i think the market pretty much knows that, yes, every meeting is live. they have to say that. because arguably, it is. like december, this is what we are getting in december. we have the two speakers today, today and this evening -- they are nonvoters. i do not see too much coming out of there. parker is probably the more important, more significt of the two. he will be voting next year, so he will have some -- you want to see what he has to say. jonathan: chair yellen speaks at the boston fed conference and
friday. what is the objective for her? keep things very vague like she has done all year? rich: i say she is going to have to keep it vague. i think she is going to support the argument that it looks like a december rate hike is in the cards, unless of course some major economic and/or financial market -- i do not want to say significantt some -- something trips of that situation. andt of time between now december. jonathan: great to have you with us. bloomberg intelligence's economist here in new york. -- 40 minutesk away from the open. futures soft again. by 12 points on the s&p 500. of chinese exports shaking of this market a little bit. in the fx market yesterday, the story, dollar strength, coming
jonathan: from new york city, i am jonathan ferro. dollar strengthen the last 24 hours. index kissed a seven-month high as the fed edges toward hiking rates for the first time potentially in a year. by the bank of america merrill lynch gkn fx strategist. thank you for coming on the program. dollar strength yesterday -- what are the headwinds to more dollar strength as you see things developing? >> i think you step back and look at where the dollar has been stressed. it has been improving.
the possibility of bed rate hikes has been -- fed rate hikes has been increasing into december. one key driver is the political element. we are seeing widening in the polls for a clinton lead. there have been negative views from the trump campaign. the alleviation of risk premium is obviously the key driver. looking forward, if you are asking what could be the headwinds -- the headwind could be if the polls tighten up, if there is more significant momentum behind donald trump. that leads to a broader volatile market environment. jonathan: looking at the potential for president trump, i'm looking at what it means for the fx market. this the stimulus usually means dollar strength. if it induces a bout of risk aversion -- and you can take a view on either side -- risk aversion typically means dollar strength. why would this mean dollar weakness? >> the initial reaction would probably be the dollar coming under pressure on a trump
victory, because there is a host of uncertainties. fenton is a known quantity. we pretty much know what her stances. donald trump has obviously been -- is an unknown political quantity. looking forward, i would agree with you. the capacity for a large stimulus program, in line with what we saw in the reagan administration, with paul volcker hiking rates through 1984, would be a dollar positive. jonathan: look at the potential downside for the cable rate, the pouncey merely has no resistance to the downside. how low can it go? >> we have looked at various idiosyncratic prices in sterling . it is the 14th anniversary of the u.k. bailed out by the imf. there was the sterling crisis and the 2008 financial crisis. on all three occasions, the average peak to trough decline in cable was 30%. we are about 19% of the way
through. that is not a suggestion that it will fall by 30%. the risk to the downside to our forecast, if you project the average monthly decline in cable of about 1.5%, the average since july -- that would take cable quite cleanly to 1.05 by the end of next year, which was the 1985 low. take a very simple observation of what has been happening in the u.k. over the last several years, the pound hit a high in 2007. people coming and doing a ton of shopping. the account deficit got worse even then. why do we think coming from 1.80 down to 1.20, the current account deficit has not improved? why has it not improved? >> we simply do not think it will. the construction of that current account deficit is queued to income imbalances. this has been driving the deficit. unless we see a significant
adjustment in the rate of return of u.k. assets versus foreign assets, we doubt there will be meaningful improvement in the current account deficit. jonathan: great to have you with us. fantastic insight coming out of think america merrill lynch. 10 fx strategist. david: reports the king of thailand has died. this is a very important event in thailand. the king is a very important figure in the country. he has rained for 70 years, after the death of his brother in 1946. joining us now is david tweed from hong kong. we have just received this news. what do we know about it? david t: we know, as you were saying, that the thai king is an extremely important person in thailand, absolutely revered by thai people. during the seven decades, he has been an absolute symbol of unity. during that period, there has been a lot of political change in thailand. numerousen 10 coups,
for ministers. what we are really looking at is a handover of a succession to the designated successor, the crown prince, 64-year-old crown await further news from the royal palace about exactly what is going to happen there. ofathan: david tweed out hong kong. fantastic to have you with us. thailand's king has died after reign of sevena decades. you can see mourners in bangkok. ♪
to bloomberg daybreak. alix steel is off today. the markets look like this. futures are up 93 on the down. a three-month low for european equities. chinese exports slump the most in seven months. the bond market, treasury lower yesterday. now they come lower in terms of yield. 175 on the 10 year. china's exports dropped the most since february, raising questions about a slowdown in numeral world's second largest economy, this is the u.s. federal reserve moves closer to raising rates. a judge is hearing arguments that prime minister theresa may doesn't not have the authority to trigger article 50 on her own without an act of parliament. the john stumpf step down as chairman and ceo, vowing to public outcry over millions of fraudulent accounts open for
customers who never asked for them. stunt faced a barrage of calls at the bank over the last several weeks. i am fully accountable for all unethical sales practices in our retail banking business and am fully committed to fixing the issue. to be held accountable, as does the rest of his senior management. to keepld not be aiming your job and keep working in the millions in bonuses. >> when you're in current type of activity and then the leadership does not assume responsibility, you did not care about your employees. the ceo and the board were aware of this for four years. this is not an example of too big to manage. this went bad management. i know we have a lot of wrongs to write, and we have a lot of work to do, there is no question about that. jonathan: bad management, according to neel kashkari.
a fall from grace. why now? know whyt know if we now. we know monday is when he started to talk to the board. wednesday is when he gave a short letter to them saying i resign and that is when the board approved the new ceo. big scandal, makes sense that the ceo steps aside. historically on wall street that has not always been the case. writing the parallels to the other banks and ceos that have departed? >> we don't have an instance where we had a retail scandal. we have had mortgages affecting people in the u.s. but no ceo resigning over the mortgage candle, a prime. lots of them are in front of congress but none had to resign. this is the number three big ceo from a bank, number three biggest in the u.s. by assets.
when i was looking through to figure out if there were other ceos that had resigned in a quick manner, i was looking back and seeing the crimp and it 2012. the day after he was on an earnings call announcing a surprise beat, so it is a little bit of a different situation. investors are a little unsure of why this happened. i read about, there were some poor disputes, so is a little bit different, but maybe we should be grateful john stumpf did not go on the call and then immediately announce that i was gone. that would start the investors even more. david: thank you. the banking world is reeling over this shakeup at wells fargo. to talk about what this means, we are joined by charles peabody from compass point.
what does this mean for investors, people who are depositors at wells fargo, what does it mean for them? >> we have a phenomenal analyst who looks at washington policy closely, so i will share some of his thoughts. essentially, the departure of stumpf probably satisfies lawmakers in a near-term, particularly given that in their attention will turn to the campaign trail. but there are some issues that will continue to play the industry and the pursuit more on the regulatory and judicial side pane one of those is cross-selling practices. that will remain in the limelight. the other is compensation and pay packages. breaking up the big banks, something that we think probably does not have likes to run with. earnings, wells has
been in a transition mode this year, most big banks will not have earnings in the third quarter that will be particularly bad were good -- or good. the real issue going forward is how much damage has been done to brand and what- sort of lost business is going to affect their 2017 earnings? let's talk about how much damage has been done to the brand. earnings, 11 times north of 14 a year ago. how long will it take wells fargo to get over this reputational issue, to reclaim that multiple once again? >> that is what we are trying to get our arms around, what kind of fundamental earnings damage has been done. i don't think we will know that until well into 2017. the near-term management -- new managements tend to come in and try to tank a quarter, but a the
fourth quarter, to set up for a better year. but i don't than they know the extent of the damages yet. people like the state treasurer of california publicly said the stepping down of stumpf was not a prerequisite to them doing business. there were other things that they need to do. david: these cross-selling practices at the retail bank, which is at the core of wells fargo -- either they did not matter at all, or they did matter to the success of the business. could this affect their ability to compete and win in the retail space? i think there is going to be an impact. they are going to probably lose some share on the retail space to either the local banks or stronger national banks like u.s. bancorp. what surprised a lot of us was,
while we were focused on the retail bank, where the potential damage was, the more visible damages were occurring in the investment and corporate bank. jonathan: that raises the question why mr. sloan is taking over. we are up over 1%, hardly a big convention to the upside. to turn will it take things around, should they have looked outside for a replacement? our washington policy view is that mr. sloan has been -- has had a long and permanent career at wells fargo, so his assent may not appease the political process. i would point out mr. sloan is primarily involved with the corporate bank, not the retail bank. although in 2015, he had somebody reporting to him when he became president. so there are still some unknowns
about what the political process -- how the political process will take place with respect to his appointment. moving now more toward the judicial and regulatory policies that will affect this company and therefore with the earnings are going to be in terms of how the stock trades. other do we know what banks have had these cross-selling initiatives, whether they have problems as well? >> cross-selling has been prevalent throughout the industry. there are criminal investigations going on right now into the sales practices at other organizations. i am not bring up anything new. has had somehase investigation into the sales practices of its mutual funds. this whole bulk management area which has been full of cross-selling, particularly mortgages,ing, jumbo
that area is right for why i sayion which is we are moving more into the regulatory and judicial aspect of this phase. we are going to see scrutiny and some fallout. by the way, i would also point out, wells fargo has a significant wealth management operation. any time they get into a organization, they look a different corners. it will be interesting to see what services given the news on morgan stanley and the investigation, see if there is anything at wells. david: thanks very much, charlie peabody. now let's get an update on what is happening outside of the business world. thailand,g of bhumibol adulyadej, has died. the king's health had been closely watched as of late with
rumors swirling on social media and prompting a statement from the pragmatist or. the king was revered by many of his countrymen, viewed as a unifying president during his seven-decade rain. clinton.s., hillary holds a point lead over donald trump in pennsylvania and is crushing him in the philadelphia suburbs, according to a new bloomberg poll. clinton's leads wells to 28 percentage points in suburban counties that were once reliably republican. more than 80% of those voting say they were bothered by a 2005 video in which donald trump is heard degrading women. bob dylan has been named the winner of the nobel peace prize in literature. cited hish academy effort to create poetic expressions.
global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm emma chandra. david: you got my attention with that bob dylan announcement. i was not expecting that. time to get a check on some of the stocks on the move this morning. julie hyman? bill toe have to watch air this morning. the company's earnings beating estimates, just turned negative, however. it had been trading positively. on the one hand, the company said cuts in capacity helped to prop up fares, but passenger unit revenues fell in the next quarter as capacity goes back up. that is putting pressure on the shares. we are watching ebay as well. the company selling 5.5 million shares in mercado libre.
it is the largest online marketplace in latin america, and ebay is expected to raise about $1 billion from the sale. you see them down about 6%, ebay getting a bit of a pop. fallout from the china news, exports fall the most in seven months, how is that being felt in equity markets? materials shares are depended in part on chinese demand. copper, gold, alcoa trading lower this morning. we will be watching them this morning as we get into the regular cash session. whathan: that is exactly we will be talking about next, china trade losing some steam. nickel and other industrial metlas losing some steam. this is bloomberg. ♪
david: this is bloomberg. i'm david westin. china export numbers fell 10% in dollar numbers and even when cech elated in the chinese yuan, they fell 5.6%. joining us now is righteous go blanche, head of derivatives at bank of america merrill lynch. tell me how important these china numbers are, what do they mean for the larger commodities business? >> i think it is a bit of a soft patch. if you look at the china numbers domestically in recent months they have been pretty good. good car sales, reasonable credit expansion. we have had a sizable pickup. i'm not terribly worried. china's growth has been maybe
above what people expected in the past few months, so maybe we will slow down here, but overall we are constructive. emerging markets, as long as the fed does not hike rates aggressively, emerging markets will be fine. there is liquidity in the system and we think money needs to flow through credit channels into the emerging consumers, which are the ones that are buying the commodities. jonathan: let's talk about how you get a read on china. crude oil imports hit a record because of a new strategic reserve that becomes operational. how deep it a read on fundamental commodities within china? >> there is implied data for the demand rate. you can look at crude runs, exports of petroleum products out of china. you can look at different numbers. you can also look at car sales, which are an important indicator , as well as air traffic in china.
all of those figures are generally positive. i have not terribly worried about china at this stage. we saw back ine february, that was concerning, a big increase in capital outflows out of china. that is what got people anxious. negative rates in japan, however, put a hold on those capital outflows. the government was able to expand credit domestically and get care -- car sales backup. i still think it's a country that has a lot of growth to deliver at the consumer level. maybe some -- not so much at the skyscraper level. 1/8ainly, china consumes the oil that the average american consumes. there is brewed to grow on the energy space, maybe less so on the metals and mining space. economy grews dramatically based on export
largely and then they consumed a lot of commodities to make those exports. as they shift to an internally motivated economy, and they consume as many or more commodities internally as they were exporting? there is certainly a good export growth story out of china but he also have to look at the domestic story. a tremendous amount of info structure spending -- infrastructure spending. export story in china, joining the debbie to in 2000, but there is also a strong domestic story. there is a lot more cars being sold in china every month than in the u.s.. 15 years ago, it was a tiny fraction. my point is the economy has been growing for a long time and i think there is a large .anufacturing base there is a service sector picking up, too. the issue is productivity is
going down and growth is shifting. jonathan: you mentioned the right story and the spillover into the fx channel. stronger dollar, weaker u.n.. this is not getting much attention and it is a substantially weaker chinese currency. what is the fee threw two commodities? say, last year, we had the biggest household income gain in america in half a century. but we also have the biggest collapse in oil prices in three decades, one of the biggest drops in inflation ever, and the biggest dollar rally in 35 years. the biggest beneficiary turned out to be the american middle class. if you are sitting at the fed and you say, at what pace do we hike rates -- it is clear that that is moving to hiking rates -- i think that is what will hurt the emerging markets, if the fed decides to hike faster
because domestic inflation is picking up at a faster clip than anticipated. to me that is the real channel. i think there is a lot of leverage out in the system. we have seen a selloff in rates in the recent days which has affected the gold market heavily. a question of how the u.s. picture shapes up. anything, we have seen good performance and emerging-market bonds, which to me are a signal is still holding up well and the consumer is doing well. i think there is room for commodities to perform well over the next few months. oil, commodities, if the fed does not hike too fast. blanche thankco you. oil hold study around $50 a barrel.
jonathan: from new york city, this is bloomberg. holding at $50 a barrel after the u.s. showing an increase in stock piles. still want us to make sense of headis francisco blanch, of derivatives research at bank of america merrill lynch. i will be the cynic around the table and say they all want a job on the price higher. ultimately, they moment really implement whatever they agree in the coming months, will they? think they will, i think the pressure in saudi arabia in recent months has really grown to do something about the oil market. anyone looking at opec thinking
it is about saudi arabia, they have pressure coming from the current account position, pressure in the financial sector, pressure at the government level, they have to do something. they have acknowledged that in the last couple of weeks. they have injected liquidity into the banking system and they have also tried to put opec back together. the rest of opec joins aggressively or not doesn't matter. as long as the rest of opec goes along with it, i think we will get to a higher price. do you see a situation where the sound is cut and iran is allowed to bump up to 4 million barrels a day in production? >> i think iran will grow a little bit by not by much. sanctions have been removed as it relates to the nuclear deal. a lot of other issues related to iran that will keep it from gathering foreign investments. it is not that easy to work with
iran. u.s. companies are going there, european companies may feel threatened by the challenge in u.s. courts. there is a big legal issue of working in a run, which i don't think will be easily overcome. saudi may need a oil price up, but beyond that they have russia and sale -- shale. do they have it within their power to get the price up? >> russia has been actively involved in the negotiations. trying to bring saudi and iran to the table. and mr. putin himself came out this week in istanbul saying russia is supportive of the deal. david: although first to said freeze or cut, and then just freeze. >> i think it is all about posture. one announcement before the opec reading, we put on a title saying the oil price war was over.
the answer is pretty clear, you want a higher price. and they have done the numbers, they will try to have some degree of cartel. let the marginal barrels come from shale at $60. jonathan: francisco blanch, always appreciate your time. wti at $50.40. clinton-trump poll. donald trump is losing in a major state. more on that next. ♪
chinese exports in seven months. a risk off tone across the board. the dax down by 1.45. yields lower by two basis points on the u.s. two-year. the jobless numbers are dropping now. david: 246,000. a little bit better than expected. not bad news. jonathan: the lowest for the year was 248. this is coming in better than anticipated. can you spell forthe employment? jonathan: i can. how about wage increases? that is the situation with the economics and the markets. let's get to julie hyman with stock movers. julie: deutsche bank ceo john
cryan instituting a hiring freeze effective immediately in an effort to continue to not just sure up the balance sheet but also investor confidence in deutsche bank. it does not afraid to be doing the trick. there is a risk of 10 or the board here. we are seeing those shares selloff by 3%. bring it over to u.s. banks, the big news there is that john stumpf is out as the ceo of wells fargo to be replaced by tim sloan, the chief operating officer. those shares are higher but otherwise we have a downdraft in the banks. we are also seeing a little bit of a decrease in yields after the recent run-up. jpmorgan, bank of america, citigroup all down. jpmorgan also reporting its numbers tomorrow. marianne vacations, the spinoff that is just the timeshare
business, that company on with numbers and they are not good. earnings per share coming out at $.96, missing the $1.15 analysts were estimating. the company also saying rental revenue is down in particular at a san diego property. shares off 8.5%. david: thank you. we aren't we six days away from the presidential election. according to a bloomberg poll out today, hillary clinton as a nine-point lead in pennsylvania. the challenges do not stop there for donald trump. he is losing in the film -- philadelphia suburbs 59% to 31%. joining us now is our clinical reporter steven yaccino. why are the suburb so important? are a lot of voters that live there and these are the swing suburbs of pennsylvania. in the western part of the state you have a lot of republican voters. in the cities and philadelphia proper you have a lot of democratic voters.
winning the suburbs by this margin with take a lot of pressure off the clinton campaign to turn out some of the less reliable voters in the obama coalition inside the city. she is blowing donald trump out of the water in these suburbs and that is why her margin is so large. david: is this important because pennsylvania is essential to a victory or because it says something about the rest of the country? >> his path to 270 electoral votes without pennsylvania is much harder. , if he loses that, he has to pick up three or four other states that he would not otherwise have to win. it just makes his path more difficult. david: what does this tell us about women voters? they are very much in the forefront between this tape that came out, and then now accusing bill clinton of doing similar things. >> women are a big group.
particular, among this group, 60% or so back to hillary clinton. suburban women are identifying with this message that the clinton campaign is pushing. these videos have done damage to donald trump. we are seeing that play out in the polls. any evidencehave that bringing up a bill clinton issue is having backfire that may neutralize the effect? this in the debate the other night and thought it worked. in his mind, a lot of republicans leaving his support, calling for his -- for him to get out of the race. then he went on stage and brought those women into the room, talked about bill's infidelity on stage. it is true, those calls for him to get out of the race subsided, if not stopped. so he sees this as a strategy to counteract these allegations, the campaign message against him
also, to moneyt the campaign in the coming days. it is going to get nasty. david: going to get? >> it is going to get worse. donald trump knows the nastier it gets another more voters stay home because they are sick and tired of politics. david: steven yaccino, our bloomberg politics reporter. a version of politics, the mexican peso has fallen 10% this year versus the dollar probably over concern from a trump victory in november. emerging markets had at blackrock is with us this morning. he served more than 14 years in the mexican administering to finance. welcome back to the program. be mexican peso, it seems to
a tracking mechanism for donald trump's success. what is going on with the mexican peso? there are several factors. clearly, the u.s. election is a big factor. what donald trump has been ,rguing against, nafta, trade those are things that mexico has invested significantly over the stands to be affected in a big way. there are other macro economic factors at play. there is the deterioration of public finances in mexico. there is a current account that has been widening, notwithstanding the low levels of growth. you need a lower currency to basically help you to rebalance the economy. jonathan: is mr. trump doing mexicans a favor at this point? mind, thing to have in and excessive volatile currency is not good for decision-making on investment and consumption. i would say in general the
negative perceptions that a weak currency generates in the overall population is not good. areourse, mexican goods cheaper and that helps eventually. but when you have this type of potential shock, the u.s. election, you want that to pass and then reassess what the economic landscape is in order to calibrate the policy response. mexican authorities have been trying to deal with that. many people talk about the comparative benefits of investing in emerging markets versus developed markets. it strikes me as hard to reconcile what is happening with international trade and the rhetoric around that em and at the same time outperforms. the same time gm outperforms. , andade will deteriorate the leaders will be more vocal
about international trade, how do em assets continue to perform? >> i think all of these things that have been good for emerging markets, trade, integration him a globalization -- there have been huge benefits for the global economy because of that. but suddenly we are finding that these basic concepts have turned very toxic politically. that is not a good thing for the world. for traded not to continue links not for trade to continue deepening, and the other would be to face a retracement in trade. inflectionare at an point because the global economy has exploited most of the benefits you can have from lowering tariffs. at this point, it would be hard
to have those against. at the same time, you have this rhetoric around the world against these very things that have made the world more prosperous, and that cannot be a good thing for the global economy or emerging markets. david: international trade grew on the back of u.s. leadership after world war ii. who will lead for trade liberalization now? clinton islary elected, it is not going to come from western europe. where will it come from? one can be very negative around what is happening because it is mostly happening through developed markets. we were all relying on those concepts in the leadership, countries like the u.s., u.k., and now suddenly you are seeing a shift in a different direction. one important thing to watch is what china does. for the most part, china has
riding the rest in world and trade integration as a way to generate asperity. another they were deployed the multilateral strategy with more confidence we see a backlash. however china responds will ultimately be a determining factor for the global economy. gnathan: anyone invested in 10, advice for them as they invest in sterling? >> there is an important message here. emerging market policy market reaction is always a function of short-term microeconomic equilibrium. something that many developed market leaders should have in mind. jonathan: great to have you here. speaking of the u.s. blood of a situation, some headlines coming from the philadelphia fed president, saying the u.s. economy has room to run but immigration is critical to continuing growth.
on rates, we are starting to see some wage pressure. he sees the u.s. economy stronger in the second half, would not take any fomc meeting off the table. there is a message for the probability of november. david: pretty remarkable that the fed is weighing in on immigration. maybe they can give theresa may a call and give some advice. apple on track for its longest winning streak in two years. details of what is driving that stock. from new york, this is bloomberg. ♪
i am emma chandra in the hewlett-packard greenroom. in the next hour, mike mayo on the change in leadership at wells fargo. jonathan: from new york city, this is bloomberg. i'm jonathan ferro. apple shares have risen 7% over the past few trading days looking to be on their longest positivel trading track. at the moment we are at 117.34. one of the most profitable companies on the planet. at the beginning of the year we were having conversations about it fallen off the planet. now it is doing really well. people have seen plenty of tech companies at the top, nokia, motorola, that have obviously fallen a far distance. people were concerned about that. what has been driving the stock,
there has been a rereading that people think we are not in decline. valuation on the stock was low. even lower couple months ago. there was some feedback from wireless operators that initial orders from the iphone 7 and p lus were good. maybe there is some optimism that the company can grow. maybe not 30% from a few years ago, but growth at that rate is attractive. it is a re-rating on the margin from a pretty depressed position. the optimism for the year to come, we were told to wait for the iphone 8. should we be more optimistic about the 7? we should be. we will be getting some more data points in the next couple of weeks. operators will report the corner. you know they will be asked about this. people bringing back their samsung note 7, what are they buying, are they sticking with
android, or are they flipping over to ios? maybe sam son was the one they the other android phones, the consumer does not want. of thiss a student industry, how much of a body blow is this for samsung, and is there a possibility google could sneak in, does this give them an opportunity? >> i have never seen anything like it, so it is hard to relate to a past product were you literally stop ticking the phone. you would think if someone is in the android ecosystem buying that expensive on the phone, they have adopted android, they don't want to switch to ios. i don't expect a major shift because of this. overall, this is a brand issue. the people are concerned about the safety of these products, this helps apple. , we are seven or eight years long in the tooth now. people have generally picked their ecosystem.
it is hard to make major shifts for the high-end phones. jonathan: we have had conversations about the management of this company. questions about whether tim cook was the right man to lead the company. i said if they can return to growth, he is fine. the issue will be, if they were going to be in the second year of decline, there would be some questions about two years of decline, we have not seen any new products bringing us back to growth. that will start to bubble up those questions. getting some level of growth, even low single digits, people give them a longer timeframe to deliver on this very high r&d spending to deliver some additional products. david: if apple is going to sustain growth in the phone business, it has to go beyond the u.s. what are the international prospects for apple, looking better or worse? >> our biggest blind spot is china. the u.s. is still a primary
driver of what happens with growth and sales. europe is big for them, but china can be a massive swing factor one way or another. in recent years, they have been adding just efficient channels in china, and that always helps. adding stores helps your sales. china can be a blind spot for investors, if sales falloff there, more than the growth that we are seeing in the u.s. and europe to her is a potential risk for the stock. david: maybe not a coincidence, tim cook has been visiting. is always good for these companies to spend as much time there possible, given the great potential in the market. jonathan: apple will tell us it is not about the man but supply. the note 7 is off the shelves. if demand picks him, can they match with supply? >> there are phones today that are showing ship times in the u.s. at christmas. we are not far away where those pushed onto january, and now you're into the next quarter.
right now, the ship times have been longer than we have seen in the past to them your models. tighten uparting to a little bit, but if you want plus,otter phones, the 7 which is have a supply issue, in either version of black, you better put your order in now if you want before the end of the year. if they are delivering on some unit growth, investors will say not only are they delivering on growth in the december quarter but there is also some spillover into the march quarter. that is positive for how people perceive the growth ability for the company. jonathan: walter piecyk, thank you. let's get you up to speed on the news in the business world. here is emma chandra. emma: more pictures have emerged of what claims to be a samsung phone overheating. this was shot in south korea and appears to show smoke coming from a note 7.
in the u.s., sam son is sending flame resistant packaging to customers as the phones are being returned to retailers. the decision will have little impact on the business but it could send a signal to other banks and hedge funds with criminal records. an army is representative could not merely be reached for comment and the u.s. labor department did not respond to request. egypt has moved a step closer to securing a $12 million loan from the international monetary fund after receiving a $2 million deposit from saudi arabia. seeking $6 million from bilateral creditors to meet the conditions of the imf money. an official at the egyptian central bank refused to say when the cash arrived. that is your bloomberg is this flash. jonathan: next up, a battle of
jonathan: from new york city, i'm jonathan ferro. let's see what is coming up the rest of the day. in less than an hour we get a reading on the bloomberg consumer confidence index. patrick harker will speak on the economic outlook before the world affair counsel in philadelphia. tonight, neel kashkari speaks at a town hall for in montana. so much that is becoming up. of course it all concludes
tomorrow with the thatcher herself janet yellen. david: i know you are eager for all of it. time now for battle of the charts. we have julie hyman and lisa abramowicz going up against each other. julie, why don't you start. julie: maybe we should call it chat about the charts. lisa: no way, this is a battle. julie: there is an interesting chart. whether it is better is not for me to say. we have been talking about china, the fact that we have seen a decline in exports of 10%, watching the chinese currency as well because it's been depreciating. that is the yellow line, the dollar versus the chinese yuan. when it goes higher, that means the dollar is going lower. you have capital inflows and outflows from china. this is showing a lot of capital outflows that we have seen that currency depreciate more. not that we are seeing this
export decline, could you still see this kind of situation exacerbated? relevant for the united states as well because as we see the chinese currency weakened, the u.s. dollar is strengthening. this may prove to be challenging to some degree for the federal reserve when it comes to raising rates. will it be something of a restraint on the fed for example? lisa? lisa: i want to talk about a big mystery in the high-yield bond market. we are looking right now at the energy junk bond index for the u.s., that is the white line. that has been steadily rising. the blue wti oil prices. these are moving in absolute lockstep until about june this year, and all of a sudden massive diversion. energy junk bonds have continued to gain considerable amounts even as oil prices balance
between $40 and $50 a barrel. this makes me wonder when this rally is going to end in energy junk bonds. is this because central banks are determining it rather than the fundamentals? lisa: that is what some may say. this capital outflows turn is important but this one is really timely, so i will be going with lisa. coming up, more on our big story of the day. the wells fargo ceo stepping down. we are counting you down to the open in new york. futures are soft. this is bloomberg. ♪
bloomberg daybreak. i am jonathan ferro alongside david westin and jonathan -- alix steel. are soft. exports dropping in seven months. stocks go down globally. yields grinding lower throughout much of the session. 10 year yield down three basis points and the cable rates quite softer david:. let's turn to what you need to know besides the markets and that is china's exports. most sinceropped the february, raising new questions about possible slowdowns with the world's second-largest economy. the latest politics poll shows clinton holding a nine point lead in donald trump in pennsylvania. it is crunch time with just 26 days left. john stumpf, who built wells fargo stepped down as chairman and ceo, bowing to public outcry
for millions of fraudulent accounts. calls toa barrage of change the bank over the last several weeks. >> i am fully accountable for in unethical sales practices our retail banking business and i am fully committed to fixing this issue. >> he needs to be held accountable. you should not be able to keep your job and keep raking in the millions of dollars in bonuses. >> when you put $12 and our employees under that much siege and on the leadership doesn't assume responsibility, you didn't care about your employees. -- awareere of for years. >> i know right from wrong. we have a lot of wrongs to write and we have a lot of work to do. there is no question. >> more on him stepping down and what this means for the bank.
bloomberg banking reporter laura keller and michael regan, still with us. the market reaction is not a convincing jump to the upside. why aren't we seeing much conviction in this market off the back of this news? >> i wonder if we are not he is someone we are still trying to figure out what the new. -- what he knew. is he able to fix this? we may not know that until the board has investigated. an investigation going on right now and there may be other issues to drop. you can find other problems. sure they are looking at wells management and all sorts of different parts of the banks to see how pervasive was this cross-selling pressure.
the big question from a shareholder perspective is, how much damage to their business is going to be done long-term. that is an open question. wells fargo has traded at a premium valuation compared to other banks. a lot of that is considered because they are a safe bank, less risky. , if you look at their p divided by forecast earnings, there are questions about whether they would be able to sustain this earnings growth with that cross-selling culture. on the replacement, mr. sloan, the secession plan was there. why was he the right man for the job? >> he is the only one for this job. we are still trying to figure out if the board has considered anyone else but he was the person that, for shareholders, had already been crowned. consideredady been
more fearful because he may be considered there is more we need to be cautious about. if the board were not willing to name a person air apparent. david: if you are jamie dimon, do you recommend or do you say i could get dragged down with them? to wonder how strong you can defend the joint chairman ceo title after this. it is one of the things i would look at. very much.ks that is laura keller and michael regan joining us. still on wells fargo, mike mayo joins us. welcome back. you are a student of these banks. what is going on? >> what you had here was 34 days of misery for wells fargo. had thells fargo fad --
regulatory settlements, they struck out. this is some of the worst crisis management i have seen in my three decades of covering the banking industry. they were reactionary, they did callbacks, and they didn't intervene early enough. they knew about the problems since 2013 and didn't fix them in time. that, i think the change in ceo helps turn the page to a new chapter. the new chapter gives the new ceo, tim sloan a chance to try to make victory out of defeat. one millionmake phone calls, give $100 million extra. that will be $1000 per customer. let's have 100% accountability going ahead. david: so where is the leadership? is it going to come from tim
sloan or we have a new chairman now who was the ceo of general mills. where is the leadership going to come from? board, clearly, they didn't actually take this action. now, with the changes on the board, wells fargo is the only top 30 bank with both an independent chairman and an independent vice-chairman. we still think the heads of the hr and the corporate responsibility committees should be fired but you have changes at the top that are going to lead the way. come out you like to swinging on the earnings when they come around so what is the first question you throw at the new ceo? by the way, there have been no earnings calls for wall street analysts with wells fargo and that has been a big contrast. immediately, the first thing jamie dimon it was hold a conference call.
i don't have a chance to ask any questions of senior management. that is a microcosm of bad crisis management. i have a list of 16 questions that i prepared but some basic questions include why didn't they fix the problem when they found out? think,positive side, i what is the retention rate of those that were impacted by the cross-selling fiasco? i bet it is 90%, 95%, it could be even more. if a state with wells fargo, that would be some evidence that they succeeded. do want to know, what changes the new ceo, tim sloan, is likely to make. think is probable is streamlining of their distribution network. wells fargo promoted the head of digital deliveries to a level equal to the head of bands --
branch banking. do you really need 6000 branches? wells fargo still has 6000 branches. if you put a free line that would put less pressure on trying to squeeze blood from a stone. jpmorgan the likes of have done a positive job on loading up with new customers on the retail side. emerges that somehow these customers are going to go to elsewhere. in the u.k., deposits are very sticky. what of the others doing to attract that kind of thing to make it happen? these customers are very sticky. if you like, after your show, we will go to the branch downstairs. i have asked them what they think of wells fargo and they say they are not leaving because
the branch is convenient. so customers are very sticky. i don't think customers are leaving and on the positive side, wells fargo is bigger than anyone ceo. -- that is a good culture. it is a mistake but we have 5300 employees that were terminated. that is a big mistake. there's something broader than one bad apple in that. how do you route that out? they made some changes belatedly to eliminate product sales goals. cross-selling is fine if it is a result of their good service products and distribution. but they started with the goal of cross-selling which was completely wrong. you need more checks and balances, more ways to escalate once you see those. at the core, i think the wells
fargo approach could be successful. jonathan: i expect nothing less. mike mayo of c lsa. as we count you down, the futures are little bit softer. >> they are softer this morning and we've got them at the lowest since september 15. if the cache open is at this level it would take the october loss to down about 2%. elsewhere you have this risk sentiment by china. , via town being upgraded over bank of america as well as wells fargo because of valuation. is aalso cited that there lack of a permanent management team ahead of this possible deal with cbs. is being downgraded, analysts talking about a lack of catalysts in drug introduction and the failure of its deal.
that, as well, watching one. gopro is not currently shipping products through amazon. amazon is normally 12 to 14% of gopro's sales and management is calling it a distribution wrinkle and investors are selling. jonathan: 19 minutes until the open. let's bring you up to speed outside the business world. the island of bermuda hunkering down as hurricane nicole rapidly strengthens into a major category four storm. the national hurricane center calls nicole and extremely dangerous. packing sustained winds at 130 miles per hour. hillary clinton holds a nine point lead over donald trump in the state of pennsylvania and crushing him in the philadelphia suttles -- suburbs.
51% to 42% in a two way race. these are counties that were once reliably republican. they say they are bothered by a video in which trump referred to women in lewd and a grading terms. the king of thailand has died. on socials swirling media, even prompting a statement from the prime minister, he was considered a stabilizing figure by a nation hit off by political turmoil and multiple coups. he was the longest reigning monarch at 88 years old. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra and this is bloomberg. fomc revealeday's more hawkish fed. what this means for a rate hike with bob michael.
david: we've got a better look into the fed meeting last month when it released the minutes yesterday afternoon, washington time. there was a fair amount of disagreement among the members. we turn now to bob michele, thet manager and head of commodities group. let's go into the fomc. >> i think they are as confused as the rest of the markets. they are not sure what they should be looking at. of whether weure
are looking at over employment or underemployment. the end of the story is there isn't an awful lot of growth pressure. there isn't an awful lot of inflation pressure. it would be nice if we weren't near zero in interest rates and we could get to, say, 2% but it is going to be a very slow journey. we will likely do one or two hikes next year. david: what is going to happen and 17? people like pimco say two or three rate hikes. we are looking at one or two. we just don't see the inflationary or growth pressure. things on theat international horizon and you have brexit coming up next year and the italian referendum before that and then you look at the news out of china this morning where both exports and imports were down.
it is not a robust economy. the kind you would expect the fed to lean into. jonathan: we had the china scare turn out to be nothing. everyone freaks out about deutsche bank and everything comes down. ultimately, those reasons haven't developed into something fundamentally weighted in response to the u.s. economy. electionould a french or a german election or an italian referendum make a difference to the u.s. economy? why is this something so fundamental in their dashboard. >> did want to make a difference so long as we are drowning from the cash printed by the central banks. as long as they are bringing $200 billion a month and using that to buy bonds, corrections far and theng so
market is being trained to create volatility. let there occur some sort of selloff for backup and then use that as a buying opportunity. i think central banks have to dial down the level of accommodation. dependent.e are data we don't want politics too. but look at market pricing. they watch the politics or the market release and the data, is really conditioned by the federal reserve regardless of what the data is. they will back off as soon as just a little bit of confusion arises. don't we need to break that circuit? >> they have waffled back and fourth all year. in december, they were playing hardball about the normalization process and four rate hikes were priced in 2016.
then the market cratered and the central bank accommodations got thrown out. -- we got into the summer and it was a one-way trade. very low volatility after brexit and the referendum. we actually haven't had brexit yet. when the money came pouring back in, they created more two way uncertainties. trying to manage market expectations but i think the bottom line is they are going to be very patient. they can shop whatever data they want and represent it depending on whether they want more or less volatility. there is little reason for them fromcrease the rate past what they have told us. until other central bank style down how much they are printing, every backup is going to be a buying opportunity. michele will be
jonathan: this is bloomberg. i am jonathan ferro. eight minutes away from the cash open. down 100 points on the dow. one headline out there that has really pushed this story is chinese exports dropping the most in seven months. it is getting hit quite badly over in london. here is the tone of the bond market. a had a dollar index hit
seven-month high. the china story is front and center with exports dropping the most since february. --weakening demand, potty commodity is slumping on the news. michele, rick to have you with us. let's walk through things. all about the currency. but the currency has continued to weaken and people are more comfortable. make sense of that for me. understoodeveryone that coming out of the crisis, china did its job. that helped stabilize the global economy. a few years after that as you got into 2012, everyone started to look at the overextension of credit, the leveraging of the sovereign balance sheet. the ghost cities, the highway is
to know where. the property bubble that had been created. china has been struggling to ring that in and they have tried. they have tried creating a glide path lower in gdp. they tried stabilizing the bank system. last august, they tried on taking the currency to create capital flows into the country. had the reverse impact and created a pretty treacherous downfall. their response was to go back to the old tools and the infrastructure and to moderate the decline in the yuan. the big question has always been how far can they continue to do that? a worldastructure in awash in excess capacity is creating more excess capacity. if you look at export data and import data that came out this morning, you have to pause and think maybe they have reached a
limit. david: are they borrowing for growth? that is a great question. i would say yes, but when we gdpare -- compared debt to and compare it to the u.s. or europe or japan, there is a lot more leveraging that could happen. we are in a new world in terms of sovereign bar. is takingmmon sense hold. there is an understanding that they have to at least stabilize leverage, if not the lever. -- delever. jonathan: are we set up for a rerun of january? the fallout from the chinese currency, you know what happens then. >> i don't think so. i think the central banks remember last december and january. i think we are going to see the accommodation continue into the
first quarter. theyey dial it back and are openly second-guessing these policies, it is not like they are doing it in the next three or four months. jonathan: great to have you with us. bob michael -- bob michele of j.p. morgan asset management. counting you down to the soft open. s&p 500 futures -12. in the bond markets, yields grind lower on the 10 year. cable rate holding onto a 1.22. this is bloomberg. ♪
markets, -14 on the s&p 500. europe, lower for the third day. a three-month low on the back of a downsized out of china. the dollar kissing a seven-month high just yesterday. this is how we trade in the fx market. treasuries trade at 174 and crude just holding on. then they strip it back. pikachu's cheering notwithstanding, it looks like a downdraft in u.s. markets as well. that dropped that we saw in exports, the major interest in the u.s. is in declines accelerating. we will see if they match the magnitude of what we have seen in europe. the nasdaq down three quarters of 1%.
it has been interesting in recent days that the nasdaq has been leading both to the downside and upside. that appears to be true in today's session. let's get to the banks, particularly wells fargo. shares were up in premarket, no longer, however. we are seeing a pullback in wells fargo shares. tim sloan had been the chief operating officer. with john stumpf out, why aren't shares doing better? perhaps because investors are still concerned about information yet to come. wells fargo reporting earnings tomorrow as is j.p. morgan. bank of america also the lower part of this risk as bond deals are down. david: for more on wells fargo we are bringing in banking reporter laura keller. they have replaced john stumpf. but they have a lot in front of them still.
a lot of legal issues. prive lawsuits. how big is the problem? >> usually, the banks don't quantify what they are setting aside. the only way we can ascertain what they might be up for is to talk with litigation experts. left aarter, they had million dollars set aside. we think what analysts are asking now is how much are you going to put aside for this? were you doing that already this quarter or will you pass it a lot more out there? legal contingency had nothing to do with this. how much of a going to need? put aside some, it wouldn't have been very much. the find they had was 185 million. they are being investigated with the doj and the sec.
from both investors and employees. they probably should talk about it. we will have to see what exactly they are willing to disclose. david: even that will have possible effects on their business. i know that there is an earnings call tomorrow. >> i am not sure how they are going to quantify that themselves. they will look at the positive accounts, credit card accounts, but in terms of a dollar figure, they may not be able to prove that for anyone. david: that is laura keller. jonathan: we are three minutes in, down 6/10 of 1%. wells fargo reporting earnings tomorrow. disappointing for some with some companies actually saying the gross u.s. dollar has impacted their earnings for the third quarter. let's bring in bloomberg stoxx statusr and chief global
-- strategist michael purvis. the dollar story is on the agenda again. >> whether or not it is because they need a stick -- scapegoat or because the dollar is providing headwind is a little bit of both ways. but let's assume there is nothing the ferry is going on. -- nefarious going on. the dollar was at a high in january but when companies pay 27 conference calls this third quarter, it has been the most often cited in pediment to earnings growth. against the backdrop of the we are getting closer to the euro or maybe even positive euro growth, at the same time we have some of these issues in the past. that thereo know is is no real talk about oil anymore. nobody is talking about the pain
from that but the dollar is still there. environment where markets are going to get a hike. likelihood in december. will bemost people lended to more strength in the dollar so that is going to be key as we try to figure out witness earnings. how you: it is funny never put in a statement about dollar weakness. disclosure, we get the guests and they log into their own bloomberg terminal and mr. purvis comes along and gets really excited. should we be freaking out about dollar strength and what it means for the equity market? >> i wouldn't freak out. look at the dollar rally that drove down a huge chunk of earnings in 2015. it is part of the bellyaching.
hast of the dollar structural cabinet. if you look at differentials between the 10 year nominal rates and the 10 year boom rates, how important that has been to the euro or on the brakes a differential basis, -- can we see the chart? that green line is the euro on a but the green line is getting higher and the dollar is getting stronger and the red line is a differential on a 10 year. the question is, how much higher can that redline get and how much higher can the dollar get with nominal rates at crazy low levels? that spread used to be much closer to zero, just back in 2012.
it got blown out wide as the tenure boom yield went down. is ultimately going to be limited and we are going to see that massive shock we saw in 2014. does the what point stock market run out of excuses when it comes to earnings. >> it is oil, dollars, how about actually selling stuff? we are living in a low nominal gdp world. one of the current things is that inflation is starting to accelerate. that is part of this dollar strengthening story. there is also a good side of that. dollar bellyaching and we should also start seeing, if not in the actual results, at least a narrative that if inflation is picking up that means nominal gdp is picking up. >> if they come together.
>> what seems interesting to tie into this, that you wrote about yesterday, is this continuation that we have seen in the market where you saw stocks and bonds moving together. differential you were talking about, we basically had a market where you point out we are selling off on the yield aspect. this is basically your stocks bonds correlation. negative, they are strongly correlated. if i change this, i am looking at the s&p. if i change this to a high-yield it is not as strongly correlated. why is it so strong with the stock market? stock markete front, if you look at what happened after brexit, a 10 year yield after record lows. interest rates got crazy low.
the dollar moved but not that much. that was perfect for equities. with respect to high-yield, there is a lot of energy and that. -- in that. and such have been so defining for the big segment of that asset last. -- class. david: we are just about to go into earnings season, what are you looking towards as the big determinants? >> whether they can stop bellyaching over the dollar and see evidence that there is a catch up in their top line that matches a catch up in nominal ddp -- gdp. if we just have higher rates on the stronger dollar, in a pickup in revenue and earnings around
markets, on bloomberg private equity investor and trump advisor wilbur ross. jonathan: this is bloomberg. i am jonathan ferro. stocks moving lower throughout much of the session so far. we are down by 8/10 of 1%, almost across the board. the s&p 500 down by almost 19 points. yesterday we had a stronger dollar story. today, chinese exports collapsing. just a general risk, you see that captured in the u.s. equity market. let's head over to the nasdaq and check in with abigail doolittle. nasdaq now on pace for its worst week in five. gopro shares are lower. noteatively bearish
determined that the company had not been shipping to amazon. they planned to do so by the end of this month but this could have created some sort of an issue. on the been bearish shares of gopro for at least a year now. she sees more than 35% downside potential. this after the small-cap specialty preannounced the downside revenues by a much -- as much as 12%. what might stand up the most about insist therapeutic -- insys therapeutic might explain why stock is down. jonathan: delta stock down almost three or four percentage points today. the airline will keep a lid on growth next year as it seeks to shore up week affairs.
george, great to have you with us on the program. the numbers are largely a mine .ith dexcom -- expectation how do they solve that situation >>? that is the million-dollar question for the industry. we see delta throttling down growth, 1% for a few. the gdp is not much higher than that. the question is not even a question. they have to start cutting capacity to get fares to rise. fares are falling away due to they areon and basically getting back the gains they made for fuel. jonathan: classic demand supply situation. you hope the price sorts itself ut but is demand going to pick up in any way at all? >> delta is going to generate the
majority of their revenue off of the domestic market, as are all of the other u.s. airlines. we have a domestic economy that looks like it is moving toward one points x or 1.i percent growth. so you are starting to sort it out a bit that you are not sorting it out enough to get fares to rise. when there has been overcapacity in the industry and somebody dropping out, there has been consolidation. i am not saying delta is going to drop out but should we be looking for that at this point? as much as we are concerned that earnings looked like they popped in q2, these airlines are at record earnings. i don't think anybody is ready to drop out of this industry yet , so they are still making record profits. there is an incentive to keep adding and try to compete on buying back shares. is hard to see anybody dropping out.
jonathan: the big story last quarter was dominated by computer system disruption. have we got a number on that? is there any spillover from that? do have a number. i don't have it right at hand ont delta adjusted it away their results. the results are adjusted and i don't think there is much spillover. i think they are usually corrected within a couple of days. david: the other thing you see is cutting of fares. are we looking at that? >> we saw u.s. domestic fares down 5% for delta. i expected that would be more for the low-cost airlines. they are in the most competitive portion. unless we start to see them cut capacity, i think flyers can look to lower fares. david: george ferguson of
bloomberg intelligence. next hour is bloomberg markets. mark barton, what are we looking forward to? >> we are very happy to be haefele.to mark he will be followed by bruce bittles they -- bruce bittles. and robert baer has more than .100 billion of assets stock markets, he says, entering a small -- strong seasonal. the man who graded donald trump and as in economics, you know stiglitz, to talk elections in central banks and euro. what a show we have got for you in 12 minutes. david: now, markets. jonathan: 18 minutes in the
session, this is how things stand. we are up 130 on the dow. -18 points on the s&p 500. this taking up in the last 24 hours, it has been there for the last couple of months. a stronger dollar on the one side, stabilization is fine. then, today happened. experts -- exports down from china. that is the story. coming up, we talked politics, counting down to the race for the white house. donald trump is losing in a critical state. pennsylvania. details next, this is bloomberg. ♪
clinton has a nine point lead in the critical state of pennsylvania. the challenges don't stop there for donald trump. trump is losing in philadelphia's suburbs. joining us now is our policy reporter. there are a lot of polls showing the wrong direction for donald trump. what does he do? what he should do and what he is going to do our two different things. about our poll, not just suburban counties but the women in those counties are voting for hillary clinton over donald trump at city 7%. -- 67%. that is a telltale sign that suburban women are catching on to what donald trump is in right now. these are sticking, these videos, he is addressing that. instead of apologizing, he is
threatening to go nuclear on the clintons and their past. he scheduled an hour with sean hannity tonight in which i understand he is going to have some of the accusers of bill clinton on for an hour of television. >> that is his strategy, to muddy the waters, tit-for-tat, bring out accusations against bill clinton and he is going to bring them and threatened to do more if people accuse him. is, donald trump is going to be a counterpunch or. ifis going to try to, nothing else, make this race so negative people either tune the whole thing out or discount all of the talk of sexual impropriety because they don't know what to make sense of. he isan: increasingly,
running against his own party, people like paul ryan. we have a tape of what he said. >> if we had a little help from our very weak leadership, called republican leadership, we would be sailing like you never sailed before. these are weak people. david: the one thing donald trump is doing is running against washington. is there a chance that that could resonate with a lot of people who are sort of fed up? >> i think it does resonate with a lot of people. we have to understand that it wasn't too long ago that he was making the same argument but in a different way. "i am anying independent candidate and i can run and change the system." it is saying "i could be doing better if the republicans were behind me." he has been dropping in the polls. chances looked him. dim.ok
it is one of several excuses, that republicans are stopping me from doing better. this piece by piece picture of what his speech would be like november 8 and what he your would be like postelection. >> a lot of news to cover. thanks very much. jonathan? jonathan: a lot coming up today. a quick look at the trade diary coming up. patrick carter will speak on the economic outlook on the world affairs council in philadelphia. that comes at 12:15 eastern. neel neil cache sorry -- ka speaksshkari. more.oming up david: hasn't it worked in the
past? bigthan: december is the one. a rate hike potentially on the table, we hit a seven-month high on the dollar index. it feels like january. equity market, it looks like 26 minutes in, equities lower. down 167 on the dow, -23 on the s&p 500. the bond market yields grind low as well. treasuries, it is one today. crude just holding onto $50 a barrel. david westin and jonathan ferro, this is bloomberg. ♪
vonnie: from new york to zurich, covering stories out of the u.k., south africa, and china. getting spooked by disappointing data out of china. we will get reactions from wealth management global cio towards a four-week low now for equities. mark: deutsche bank chief executives looking forward to cutting costs and shoring up confidence that the lender can get back on its feet. vonnie: wells fargo's john stumpf bends to public outcry over accounting scandals. -- he steppeddown down effective immediately. vonnie: julie hyman has been watching everything.