Wednesday session. We are one hour is today. There is the stoxx 600 down by 1 3 of 1 . The third continuous decline. A while. Ain in the highest in 15 years. Loafers, handbags contribute into it. 2 . October, its up by as we approach the december fed meeting, many expecting, there. S 70 probability ofa a hike u. S. Crude stockpiles expanded it prefersays freezing output at current levels rather than cutting production. Lets get to my first wonderful chart of the day. Its all about volatility expectations. Uge. Ss asset gagu as you can see, it has fallen to the lowest level since 2014. Are investors getting too comfortable . Making some nervous threats from washington to beijing. The uncertainty about the u. S. President ial vote has diminished. Investors are coming to terms with the potential rate hike and december. Its possible investors are too nervous to make any big bets. What a wonderful chart. Lets get to bloomberg first word news. Thank you so much. In extended fell trading after a reported its first annual sales declined since 2001. And forecast sales for the last threemonth of 2016 that were barely higher than analysts estimates. Investors expected the iphone maker to take advantage of the galaxy note 7 problems. Beleaguered Deutsche Bank is said to be considering not paying bonuses in cash in a bid to boost n investor and r confidence. The Supervisory Board meets later today. Although no final decision is expected. A spokesman for Deutsche Bank declined to comment. Bad times lie ahead for bond holders and rising inflation and deficits conspired to drive down Interest Rates. At a conference yesterday, the double line capital ceo says we are in the eye of a hurricane for the next 34 years. Out. 2018, 2019, 2020, look he recommended investors reduce exposure to securities and said sabres savers emerging markets debt. Is bloomberg. Sterling recovering from its lowest level since the flash r bank of England Governor Mark carney said it were limits to officials willingness to look beyond it overshoot of inflation targets. That judgment is a judgment about the optimal tradeoff, a judgment we have to make on the basis of the agreement letter. Shere are limits to the mpc willingness to look through an overshoot of inflation. Mark the Morgan Stanley chief executive says his bank will be forced to move some employees out of london as a result of the brexit vote. Theres nothing good about brexit. Inloved the rule of law england, we love our folks working in london. You have all the eate ecosystem, it is all there. Rtered we will have to have a headquarters in europe in addition. We will probably have to have more capital and liquidity trapped in those legal entities. None of this is good. Mark carney suggesting there are limits to the boes willingness to look beyond the overshoot of inflation targets which brings me to the breakeven rate, the difference between the 10year and the inflation which has been rising substantially on the back of sterlindecline does that tell us that investors are expecting too much from the boe when it comes to stimulus . Certainly goty put out a state by guidance by mark carney and other mpc members that next weeks report would trigger a further stimulus, possibly an extension of the quantitative easing pro gram. Me ist that at a ti unlikely. It is much more likely if they are going to have another go at monetary stimulus, and bear in mind, there is significant diminishing marginal returns of doing it now, that is more likely to be in the february Inflation Report because that will be the time ahead of triggering article 50. Ist symbolic gesture which what the monetary stimulus will be as much more likely than right now when it is not needed based on the factors we have seen mark what we are going to see in tomorrow and the gdp report, which should see growth of what . Not as weak as many were anticipating. A lot of businesses have looked at the rather confusing picture from the political, political in the u. K. A lot of our plans will remain on adjusted until we get clarity. That comes across strongly. They are as uncertain as the rest of the investor community. Not materially to push the u. K. Economy into contraction. Mark the other question carney faced what she dos was about his future and he dodged. Hes due to make a decision by the end of the year. L may is keen for him to stay. Is it too early to make a guess, whether he will stay beyond 2018 or not . If he doesnt what sort of knock to markets with every . My view is that he will stay but my view has been weekend, as we see a series of politicians michael govepress, will, the x education secretary and attack the distributional impacts of quantitative easing and low and negative Interest Rates. In terms of what carney said, he made it a personal decision, rather than talking about him being influenced by the noise in the political sphere or brexit. In terms of the Succession Plan there are a lot of unknown quantities on the mpc that could take mark carneys place. Ndrew bailey ben broadbent. Hes going back to the lsc. There are unknown quantities for markets. Expect sterling, there was a surprise announcement he was going to leave, would be skewed to the downside. Mark i started with this wonderful Merrill Lynch chart which shows muted volatility across all asset classes. Lowest since 2014. What does it tell us . It has been quite a long run since the referendum vote in the u. K. In terms of, we know what terms of december is a key month in terms of the follow from the u. S. President ial election, but then the question over whether the ecb will extend his Quantitative Easing Program that has been uncertainty over that. Most investors have positioned themselves ahead of that, a lot of the cross asset swings that we saw during the summer have actually left the marketplace and people sitting on their hands waiting for further signals of what the trajectory looks like from Central Banks and governments. Mark summit french, the chief economist. Stay with us on surveillance. Plenty coming up. Draghis suspense. Cb hits back at critics that the negative rate policy once again asking governments to pick up the slack. Deutsche bank consider striking the cash bonuses. The chief executive of Banca Monte Paschi gives us more details and an exclusive interview. We will bring you the morning spanking is and why apple cant wait for christmas the morning banking news. The First Sales Decline since 2011 and hopes for a return to Revenue Growth over the holiday period. This is bloomberg. Im mark barton in london. Lets get to the Bloomberg Business flash. Lloyds has pointed a fifth has poised to the 15 decline. Pretax profit fell to 811 Million Pounds as the largest Mortgage Lender took a 1 billion charge to compensate customers who were wrongly sold loan insurance. The bank has taken more than 17 billion pounds and chargers for payment protection insurance over the past five years. More than any other major british lender. Santander says that profit was little changed, beating estimates for the three months through september. Net income rose 0. 9 . Third quarter profit has tumbled 21 at airbus, earnings before interest and tax excluding onetime items went to 171 million euros. As it addressed production delays on its latest wide body models. Swedens wallenberg dynasty has tightened his grip over erickson by moving a trusted executive to lead the embattled Network Equipment maker. The former ceo, the wallenberg publicly traded investment company, will take the numeral on gender 16. January 16. Ericssons shares are trading higher this morning. That is the Bloomberg Business flash. Me negative rates for slow growth. Mario draghi hitting back at the Central Bank Critics once again calling on governments to do their part if Interest Rates are to move higher. Ghi longterm Interest Rates have been on a downward trend across the Global Economy for the better part of the last 30 years. So, the second letter of actions we need if we want Interest Rates at higher levels are those that can raise the national rate. Policiesires some that can address the root causes of access saving overinvestment. In other words, fiscal and structural policies. Mark what does europe need . Summit french as here. Simon french is here. Is europe listening . Draghi keeps banging the same drama again and again the same drum. Outn he put a lot of data the support of the stuff that he goes on time and time again at the press conference particularly the impact on financial institutions, but also the offsetting impact that that has had in terms of household forbtedness and the costs non financial institution. It was in tune with what mark carney was saying. Whether the eurozone is actually listening, it is a moot point. The fiscal trajectory goes neutral next year but theres no opening of the floodgates regarding particular the one major economy they could do it, germany. Critically going to into election year. Politics is overwriting economics. Structural reforms, a mixed scorecard. There are countries doing a better than others but all of them mindful of the difficult political backdrop to doing labor market reforms, the kind of nittygritty that is behind that big statement. The elephant in the room for mario draghi is the euro, the european single currency, should be broken up into a tighter knit northern core. He cant say that. That is the problem that every single public has. It is a solution he cannot speak about. Mark investors expecting more stimulus and december, whether it is extended or he pumps it it, but probably an extension. They didnt talk about extending. They didnt talk about tapering. It only a matter of weeks . Simon i think he will offer more after the december meeting but he is trying to keep that open for as long as possible to keep the feet to the fire around Structural Reforms and fiscal stimulus. Of echoes with the german members of the European Governing Council looking to encouraging ecb also to be less stimulative, to encourage the reforms and the sudden peripheries as they see it as necessary to convert and for moving the eurozone from an optimal currency area. Gamesare a lot of playing going on. Ultimately i think he will relent in december. Mark draghi says inflation will move towards the target before he thinks the time he leaves in 2019. Economists are not so sure it will hit just below 2 before the. , there islections only a small window before inflation starts moving up. Simon you have to take these inflation forecast with the pinch of salt. But there are powerful bass effects given we had such strong suppressants of inflation through commodities, through fluctuations and demographic changes. We will start clearly the ind quicker will unw than the demographics. These are all factors that will make the window close quickly. And every single time we provide monetary stimulus, it just buys more time but a diminishing amount of time. Mark this sis a chart i made a long time ago but it shows you where the euro was draghi first announced q. E. Last year. More q. E. Were at 109. I am looking at our fx forecast function. The median forecast is for 110. And 109 in the First Quarter of next year. Is parity out of the question . Simon everyone has parity six months ago. The end of that chart does show fall. Rly precipitous there are factors globally from the yuan and closer to home with sterling, the downward pressure on the euro should not be as material going forward. But it is interesting this is a positive from draghi the principal impact in q. E. Driving growth in the eurozone was from export led recovery in the early part of 20132014, 2015. The credit lending channel is starting to push corporate activity, the reduction in real Interest Rates starting to generate growth that is not dependent on a we currently. The to the french economist at panmure gordon. All those quiet on the volatility front ahead of the u. S. Elections. We have that chart next. This is boomer. Bloomberg. Mark this is surveillance. Lockers. The metal to bonds slowing to a crawl, visiting glows and volatility that have not been seen since 24. The quiet just before the u. S. Election has alarmed the cadre of market watches. Risks exist. Coinciding with a reduction and uncertainty when it comes to u. S. Politics, the odds of a Hillary Clinton victory are close to the highest on record at 86. 5 , according to forecast 538. Simon french is still with us. This is a chart which can lead into a nice chat about inflation and how Inflation Expectations are rising, and investors preparing for that, simon, because this is tips, treasury inflation protected securities which are outperforming securities and the s p 500. This is been normalized at 100. The white line is the tips line up by 7 . Are we finally gaining traction when it comes to inflation in the United States, or not . Simon cyclically yes. Structurally no. Drivers ofral i lower inflation and lower neutral rate of interest continue. Cyclical factors, the near full employment of the u. S. Economy there is some underemployment in there but those base effects from a low oil prices which will peak in january and february of 2017 because you will have the oneyear anniversary of 27 oil. That really is why people are looking at tips as just performing to the upside versus low balled expectations. Mark this is the spread between the u. S. Two year and the u. K. Two year. Werea t the widest sense may 2000. Does that reflects the policy diversions between the two countries . Are we on in december . Mark i think we are now. Simon there has been enough data suggest there has been positive manufacturing not just in the u. S. But globally this week. We have the services pmi out earlier this afternoon. Mark Consumer Confidence underperformed. Then the only fly in ointment for the fed is the labor market indicators data which has been in negative territory three of the last four months. But i think they have guided markets to a likelihood of almost three quarters of a december increase and they will be reluctant, short of a strong reversal, makrk up next, money in the bank. Deutsche bank sets you weigh alternatives this bonus season. This is bloomberg. Mark lets get the bloomberg first word news. Apple shares fell in extended trade after the worlds most valuable Company Reported its first annual sales declined since 2001 and forecast sales for the last three months of 2016 that were barely higher than analyst estimates. Investors had expected the iphone maker to take advantage of Samsung Galaxy note seven problems and issue a more robust holiday sales forecast. Is keen Prime Minister for mark carney to stay at the bank of englands and has fought to smooth over misunderstanding according to officials. They say within hours she criticized his Monetary Policy in her conservative Conference Speech this month, her Office Limited the damage five reassuring him the words were expressed clumsy. Role ins been an active her statements on the economy, a bank of england spokesperson declined to comment. Bad times lie ahead for bondholders as rising inflation and researching deficits conspired to drive up Interest Rates according to jeffrey speaking at a conference double linehe capital ceo said we are in the eye of a hurricane or the next company 18,r years 2019, 20 20, look out and recommended that investors reduce exposure to longer duration securities and favors emerging market debt. Global news 24 hours a day powered by more than 2600 and analyst in more than 120 countries. This is bloomberg. Mark shares in europe sold most troubled baker, he spoke to her european daybreak team. Our european daybreak team. Furthernk there will be consolidation in the italian markets although it is a process which would probably take slightly longer than expected. As far as european consolidation on the retail commercial banking environment, i think it will be more difficult. Where do you see opportunities to consolidate in italy . The types of businesses that should belong together . Within the financial services, more on the Asset Management side. Retail coremercial business on the commercial retail core business, the headline. One of the light from mario draghi dutch lions from mario complainingo stop about negative Interest Rates, what would you say to him about that argument . My advice to him would be to make sure Everything Everything each of us is doing you could not take more negative rates . Not good for the banking businesses but you need to look after the macro environment and therefore some of the decisions which have been taken towards this direction. You anticipate more easing from the European Central banking . Know, factoring conservative macro interest environment which is negative Interest Rates throughout the three year plan. Mark simon french still with us. And Michael Moore joining us. Love this chart. Paschi oversold, overbought come in one week. I wild ride. Why have we seen such volatility in the share price in recent days . Optimismve seen some around the plan and Capital Raising but all