charles goodhart. we will get on to the boe, brexit and the fed. first things first. let's check in on these markets. after five days of losses, european stocks are swinging a touch. they are now down from 0.1%. 1.5%.cks down we did see quite a lot of movement in the last five days. dollar rising. oil holding, i wanted to show you the swiss franc versus the euro, 109.56. -- 1.0 956. let's get to the bloomberg first .ord news with nejra cehic nejra: hillary clinton has released a comprehensive disclosure about her health. it says she is recovering from pneumonia and all of her vital signs are normal. her condition became a potential election issue when she appeared to need help entering a car on sunday. the clinton campaign has criticized donald trump's disclosure about his own health. he went on daytime tv to provide a vague view of his physical condition. the u.k. government has approved a plan to build two nuclear reactors for 18 billion pounds in southwest england. reason they decided to review at the end of july casting doubt on a project approved by her predecessor, david cameron. they came amidst a concerned about the scale -- and whether chinese involvement was a security risk. volkswagen has lost market share in europe for the 12 month in a row. accounted carmaker for 26% of the region's car sales in august. that is down from 26.8% a year earlier. the fall in share comes after vw's admission last september on cheating on admissions test. -- on emissions test. -- he said it is the right thing to do and praised the company's transition to democracy as a good news story. -- 8.3 percent in 2017 making it the best performer in asia. ex when i visited -- >> when i visited as the first u.s. president to travel there, i could see the potential that was about to be unleashed. betterrepresented it than she did. nejra: global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am nejra cehic, this is bloomberg. francine. francine: equities in europe are lower this morning. the $2 trillion global selloff and car trading. investors are concerned that central banks are -- continuing to expand monetary policy. let's introduce our two great guests. charles great heart -- charles french --nd the simon and simon french. thank you for joining us. how do you explain volatility? the markets are latching on to what central bank for doing. they get freaked out. the only thing that investors want is volatility. charles: i don't know if they want to volatility. recognition that central banks are running out of ammunition. every time they try to expand, they actually are damaging the banks financial system by lowering their profitability. it is going nowhere. realizeshe market there is a need for reconsideration. a really department that she really important element of an -- a really important development where the bank of japan is doing a conference of reconsideration of the monetary policy. francine: next wednesday we'll hear from the boj and the fed later on. it is going to be tricky day in terms of volatility. charles koch today will be nothing compared to then. francine: i am not -- charles: today will be nothing compared to then. francine: i am not sure -- simon: i completely agree with what charles has said. the last two days have started to rattle investors. it was the decision by mario draghi to face down euros on finance ministers and say this fiscal stimulus that i have been talking about, before you get an extension of the qe ram -- qe program, you are going to need to prove that fiscal loosening is going to take place. hillary clinton's health and some people starting to look forward to what the applications of a chump white house. the probabilities rising at that. he remains an unknown quantity. charles: rather than he is an unknown quantity. [indiscernible] francine: it seems all of the concerns we have been talking just is anti-globalization a little bit like brexit is coming to the forefront. simon: he is a known quantity in terms of rhetoric. we don't have any track record of governance. his ability to cut a deal. is true to his rhetoric, his risk premium within all of that. in terms of looking forward to key federal reserve and bank of japan's decision rates, we are looking at whether there is any legacy -- the meeting that minister abe had with bernanke back in july talking about negative interest rates, talk about inflation targets, it is quite indicative where the japanese might go. francine: today is the anniversary of the lehman brothers collapse. what have we learned? charles: that we should never allow another collapse like that to happen again. it was a terrible mistake to allow it to happen. it changed everything. confidence in financial system disappeared. the confidence of the banks disappeared. everyone group -- everyone group -- it was a huge liquidity shock. francine: we have not really regained that confidence. charles: the banking system has not recovered. has been goingy very slowly, privy to the have a sector has been slow. a lot of things that the central banks have done have been harming the banks. simon: that is in that profit margins and particular european banking. u.s. and japanese markets have regained those markets indicating scarring in those markets to some. not necessarily in the lending behavior. the continuing overhang of the regulation is when the profit margins have not returned anything like that compared to 14%. francine: what is central banks to do in this environment? charles: they have to recognize the problem. until recently they have not recognized they were harming the system. , theg had this debate insurance companies and pension funds are in dire shape. simon: you are seeing the rhetoric starting to shift away from the labor market indicators which was dated dependency toward financial stability risks. the fact there is a normal spoke -- there is an enormous bubble in the market that could burst if central banks started to make policy based on what getting those financial stability risks rather than the underlying cyclical performance. francine: simon and charles, thank you so much. both stay with us. they are with us for the outward. stay with "the pulse." as the swiss national bank hold steady, look ahead to today's announcement. bondwe seen the biggest bubble in recent memory? have both resident so candidates seek to persuade voters about the health? will talk about more on the race for the white house. this is bloomberg. ♪ francine: now it is six weeks since the bank of england livered a stronger response to brexit the many economists had forecast. boe policy makers having to assess whether the outlook calls for a change of strategy. manus, good morning to you. what are we expecting today? the market is not expecting anything more to medic from the bank of england. that was the real force sledgehammer that they pulled out. quantitative easing, buying corporate bonds, term lending for the banks. the question is this when it comes to their minutes, will the majority of the bank of england for rate cutse and 2016? -- in 2016? the parliamentarians are choosing -- it is all about the data. i got off with ross walker this morning and he says we are fundamentally misguided. what i might talking about? the on the planet numbers. unemployment at an 11 -- the unemployment numbers. unemployment at an 11 year low. he talks about the potential for unemployment heading 5.8%. this misguided view of the data that we have, unemployment does that play into the view needed that we need that much stimulus. that institution bailed out northern rock. this institution some would say has a responsibility to help the politicians to a certain extent, but hand over at a later stage. -- nobody knows what shape .rexit -- what the impact is francine: there is a lot that we do not know at what do we know about sterling and where he can go from here? -- where it can go from here? manus: there is a great deal .nknown and there is an article it talks about the pound, the drop in the pound being some kind of savior. is it really? yes, it hasn't dropped. get ready for another 13% drop in sterling. the question is did the bank of england take definitive action? nine years ago, nor -- northern rock was a dead. we don't know where the data is gone to drop. to that extent, more pressure will come on the currency. one of your guests is talking about the bubble to end all bubbles. the darling of the bond market, the question is is that one of the biggest bubbles of them all? could that just be the japanese? biscuit- francine: thoughts from charles goodhart, former member of the bank of england -- let's get thoughts from charles goodhart, former member of the bank of england. what would you be saying now? >> nothing. they did as much as they could last time. then the data get better. knows indicated, no one what is going to happen in the foreign exchange market. now is the time to sit tight and wait. francine: until what? charles: that is one of the problems did people are talking about moving back to november. it is clear that policy is shifting from monetary to fiscal. fiscal policy is going to be driving the economy. they are not going to know next week in november what it is going to be doing. but otheror will know members will not. only one of nine will have any inkling of what is coming. that means they will be in trouble in trying to decide what to do in november, because the key element of policy -- there are a lot of people who are saying the next date when they are going to do anything and who knows which way will be february. francine: will it be fair to say that mark carney has a pretty firm hand? people tend to follow what he wants? charles: they've got their own view. francine: when it comes to voting -- charles: the externals are there. to be independent and have their own views and defend their own views. i don't think you can assume mark says a jump and they ask how much higher. forbesdid not -- simon: did not agree with the whole package. throughline from here the next decision from the bank of england which current sterling market is still pricing in a further cut. i think that q1 timetable is the right time if they are going to go again, because that is the timetable that governors -- the governments are working toward. one of the reasons we are seeing some of the micro data coming .ut is things have changed if governments are working towards q1 which seems to be a timetable to europe. the government seems to be around, they will want a stimulus budget in march. they may want the bank of england to provide some support. if it doesn't get replicated in terms of the shock value triggered afterwards. francine: simon in the last couple of weeks, the couple of the big banks pulled away from the call for recession in the u.k. where do you stand? a recession coming but not in the horizon of the next six months. when those houses were forecasting that, david cameron said we are going to trigger austerity on the 24th of june and therefore the damage from the material comes much closer. some of them kick nine to 12 months to the right. your timetable for the economic , that is whenme you start to get a material impact on the u.k. economy. likeine: when would you article 50 to be triggered? charles: there is a bubble -- francine: in terms of forecasting -- if you leave a political from a numbers point of view, how difficult is it for a new pc number two forecast what the u.k. will go through until you start negotiating? is it better to start -- to not start negotiating? charles koch in some ways it is better to not start negotiating, and -- charles: in some ways it is better to not start negotiating. that note -- that way you know where you are. it is ok to be in the figures for the time, because what has come back with decisions. there is always a long lag between decisions to build a new plant and stuff happening on the ground. people work to jump to the that the economy was going to fall off the edge of this cliff. that was never going to be the case. it is going to be a slow drag. i disagree with simon. i don't think that triggering article 50 will be a trigger for anything really much. for the majority of people, to ask somebody in derby what this triggering article 50 mean, they won't have the first idea. decisions is already there. i don't think the trigger will -- article 50 will do that much. it is going to be a slow burn. simon: my only response to that is there is a necessary trade-off between migration control and free market access. article 50 will provide some clarity on where the u.k. wants to go. -- cine: yet charles: we already know that. we have no idea at all where we will end up. francine: will get an indication -- we will get more of an indication. maybe if it gets triggered, they tell us their position. will have plenty more on that when we get the u.k. data -- we will have plenty more on that when we get the u.k. data. -- up next, are we seeing the biggest bond doubles in recent memory? that is the view of charles goodhart. this is bloomberg. ♪ francine: are we seeing the biggest bond double in recent memory? we should be very scared says charles goodhart, former member of the boe. charles and simon french, i want to show you our chart of the hour. this is it. $13.6 trillion treasury market. here you can see the spread between five-year and 30 year bonds. for nine straight days of traders gaining confidence, the federal reserve will keep interest rates on hold. charles, and a bubble. -- in a bubble. we have known this. does the bond bubble burst? charles: if i could time this sort of thing, i would not be here. i would be sitting in a yacht in the mediterranean. nobody can time these. francine: you don't have a yacht? i am disappointed. [laughter] francine: does it have to do with the fed does? charles: it has been pushed up. it is been pushed up by central banks buying every bond they can find. they have been more than covering the deficit. there is a portion of the federal government bonds the end than buying that have been huge. they have rigged the market. francine: when you look at the bond bubble or distortion, what does it mean for -- we're seeing note inflation -- we're seeing no inflation. simon: their price for -- it .oesn't require much upside the labor market changes in the power of labor to start every price that. the way the ship to scale of these things make systemically risky which is where charles is heading. it is the scale of growth in these funds that provides a lot of the risks that are changing the rhetoric. francine: simon french and professor goodhart stay with us for another half hour. we'll have a retail data. better-than-expected u.k. data. what will retail sales -- this is bloomberg. ♪ hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. ♪ francine: welcome to the pulse." i am francine lacqua. that's but the pound up for you at 132.37 -- let's put the pound of for you, 132 .37. the impact or no impact of brexit. retail sales excluding fuel, at 5.9%, better than expected. month on month excluding auto fuel, down 0.3%. that is better than expected because we were expecting a -.0 set -- .7% figure. we had a lot of the numbers from the previous month revised upwards. for the moment, simon was reminded me we had some figures. retail sales started than economists had expected. first let's get to bloomberg first word news with nejra cehic. ." nejra:a -- hi nejra hillary clinton has released a conference of exposure about her health. all of her vital signs are normal. her medical condition became a potential issue when she appeared to need help entering a car on sunday. the clinton campaign has criticized donald trump's disclosure about his health. he went on daytime tv to provide a view of his physical condition. the first details he is offered since december. u.k. government has approved a plan to build does go nuclear reactors in southwest england. theresa may decided to review at the end of july, casting doubt on a project approved by david cameron. that came amid concerns about scale of public subsidies for the plant and whether chinese involvement was a security risk. lost market share in europe for the 12 month in a row. according to the european automobile manufacturers association, the german carmaker accounted for 26% of the region's car sales in august, down from 26.8% a year earlier. it comes after vw's admission last september to cheating on emissions tests. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. cehic.jra this is bloomberg. francine: the u.k. economy has delivered a series of beats since the brexit vote, jobs to manufacturing services. the numbers have been better than expected. was behind this bounce? slumpch does the pounds have to do with this? charles goodhart and simon french. u.k. retail sales less than economists forecast in august. this suggests that confidence from the consumer is resilient. charles, first of all, is this surprising, given nothing has happened on brexit yet. it felt like business as usual. charles: i think that most economists have been surprised how steady it has been. i think they were wrong to believe that the momentum of the economy -- which was quite strong going into the brexit vote -- would simply collapse off the edge of a cliff. the economy has doing this has been doing better than people have thought. long may it last. francine: it doesn't mean that brexit won't have an impact. did we miscalculate how people reacted? simon: i believe we miscalculated when the initial pmi's came out, the sox factor -- the shock factor. the momentum going in in terms of unsecured lending going north of 9% which is a decent indicator of where retail sales will go, disposable income still benefiting from low petrol prices. all of these things pushed disposable income to levels we have not really seen since the fall of financial crisis. --put the u.k. consumer you've got the factors to allow consumers to go out and keep spending. the cpi, the inflation numbers that we've got early in the week. it tells us what inflation is coming down the track in terms of costs, the producer price index was up your on year. -- was up year on year. you start to see the consumer getting shocked by that, particularly if wages remain around the 2% levels. retail sales start to be damaged. we still got a rocky road ahead. francine: we've got to remember it was a significant jump in pound. a lot of these sales could come from travelers. charles: it is not only the pound. all of the tests in paris and france, a lot of tourists went to the u.k. thinking it was a rather sacred place. tourism did play a considerable role in maintaining the impetus of consumption. the real test is going to be when the prices go up, is whether the labor is going to demand and get higher wages to offset that. francine: will we? tricky at the moment. charles: with unemployment having come down, they will begin to be in a stronger position than they have been in the past. we might get a slightly higher wage. that has been remarkable conspicuous the fact that it has not happened yet. quite why labor has been toothless so far. we don't really know. simon: we don't know. we simply don't know whether it rose in bargaining power, a long-term trend is -- has altered the ability in responding to sharper ticks in inflation in terms of the ability to replicate. those,o see a return to 2009 to 2014 when real wages fell in the u.k.. at the macro level, that's quite healthy. it doesn't necessarily help in terms of overall consumption feeding into gdp. expecting --t he that charles is talking about? charles: infrastructure investment. francine: that takes five to 10 years? charles: some of the big projects do. it is the smaller stuff, repair of the roads, bridges. it is stuff, high maintenance that has not been done. repair the schools. there is an awful lot of repair that could be done. simon: housebuilding -- we are building 140,000 houses a year in the u.k. there is a potential for a large social housing program which we have not seen in this country for years. it doesn't -- it isn't clear that the government would support that. there is also the element of the treasuries at an official level are very skeptical of the ability of the u.k. economy to have shovel ready projects to deliver infrastructure spending as a fiscal stimulus tool to try and manage. francine: we were on the air here together, remember? with the former chief of staff of george osborne good he was physically saying two years ago they looked at this. it would have given this it would not have given the immediate effect -- it would not have given the immediate effect. simon: he was spot on. he wants to target the simple things like pothole replacements. there are things that could happen within a matter of weeks and months that triggers the public sector spending feeding into the macro economy fairly quickly. charles: it is going to be investment. we are going to invest to make a better, faster growing u.k. that will be the thing. that is what he will do. i think there's a good chance it will work. francine: all right. charles and simon, thank you for now. stay with bloomberg. plenty coming up including holding pattern while europe shares surge for direction after a five-day selloff amid central-bank uncertainty. we'll bring you all the market moves. juncker doubles down on his -- the plan for europe and the campaign trail today. can she recover a lead over chop? this is bloomberg -- over trump? this is bloomberg. ♪ francine: markets wavering at the moment. let's head to the bloomberg with mark barton. mark: earlier we were down for the six consecutive day. .1%.e up now, just by love this chart. the extra yield, investors demand to on 30 year rather than five-year u.s. security which is a measure of the yield curve increased for an 11th straight day, the longest streak since 2012. fed is maturities as the seen as potentially stoking inflation which will afflict -- which will affect a longer end of the. the spread between five and 30 year yields is rebounding after contracting since the first quarter of 2015. today it is at 125 basis points. the last time the yield curve is steep and this quickly was back in august 2012. primary dealers were uploading billions in bonds to the fed, a part of its bond buying program good in the wake of today's summer than expected u.k. sales will look atht we this city economic surprise index for the u.k. which measures the extent to which a data is beating economists forecast above zero tells you it is beating forecasts. we were roughly at zero when the referendum took place on june 23. we went up to a two-year high only a week or so ago. we have come down a bit. it went above the zero level which tells us data is beating economists forecast. this is our wonderful work function. looks at the november meeting of the boe which is the next quarterly inflation report. the probability of a cut is 14%. it week ago, we were looking at 20%. 30%.onth ago, two months ago, 35%. a few months ago, 15%. 18 months ago, there was an -- there was an 88% of ability of a bank of england rate hike. how things have changed. francine: things have changed, and yet they have met. if you are an investor, let's turn to just jean-claude juncker has doubled down on his program. is it time for governments to step in? still, simon french. thank you for sticking around. let me kick it off with you. i was in stratford. i was briefed by the commission. i heard about this plan, they told me how they managed to spend 110 billion euros and i had no idea. i had no idea where the money had gone to. spending money, fiscal , actually reach any? butles: it is a good idea they have not done nearly as much as they set out or they will do. francine: why? charles: it is probably that these plants take an awful long time -- these plans take an awful long time. you have a project that takes a long time to get through. also it is facing a great deal of political uncertainties. they don't really know where they are going in the euro. they don't know whether they want to go for greater fiscal remuneration. they don't know if they want to go in the opposite direction. it is all rather sad really. francine: it is a little said. -- a little sad. jean-claude yogurt saying yesterday that -- jean-claude juncker saying yesterday it is an existential question. monetary to complete -- a significant degree of physical easing. -- of physical easing. in the famous words of juncker we don't know how to do it and get reelected and therefore they do not have the political support. when you break that down across 28 crutches, that's 28 countries, not that material compared to big economies. all of the eyes are putting in germany in that regard. the best thing that juncker can do is spend time with anglo merkel trying to -- angela merkel trying to get those pursestrings lucent. -- pursestrings loosened. --ncine: do we write off even if the commission is negotiating with governments, we don't know who is going to be in charge. troicki i think that -- charles: i think there's going to be a lot of lyrical uncertainty. -- be a lot of political uncertainty. it is going to be 18 months in which the policy is going to dominate. that is going to make it more difficult for triggering article 50. who we are going to be negotiating with. .hat is going to be changing simon: the existential crisis is monetary union was in visits, they stood to be first of three stats. they have to start addressing the question on whether the euro is superfluous in an environment where electorates around the eurozone are saying we don't section that. therefore, we are not sure that the upside associated with the union will ever be achieved. therefore do we want phase one to continue in perpetuity. that is the existential crisis. francine: it certainly is. up, we'll both candidates in the u.s. go public about their health to prove they are in good shape for the presidential race? we will discuss that next. this is bloomberg. ♪ francine: i am francine lacqua in london. next line less." get to bloomberg first word with nejra cehic. nejra: meanwhile chairman resigned and an expected move it really joint bank of america -- an unexpected move. grilli joins bank of america. says he will waste no time in pushing through a merger with -- siri told bloomberg he has learned from the billions of dollars lost in previous drawn up mergers and complicated deals. >> integration is going really well. [indiscernible] speed and pragmatism. we have made all of the roadmap decisions in the first 90 days. we are in execution mode. where they are overlaps in the portfolio. nejra: that is the bloomberg business flash. francine: hillary clinton and donald trump are both determined to prove they are physically fit for the race to the white house after suffering a battle with pneumonia, the democratic candidate is -- trump went on a tv show to talk about his health. for more, michael mckee joins us from new york. they revealed their health. when are we talking policies? michael: that is an interesting question. it does seem obsessive in the u.s. these are two of the oldest candidates we have ever had and one would like to know they would be around in the next four years. hillary clinton updated yesterday on her health. contractedstated she pneumonia. she is taking an antibiotic, b-12 shots and is recovering nicely. we got a data dump on other information about her, including her blood pressure which is 100 over 65. .hey did not release her weight we did note this we do know that she suffers from allergies. hyperthyroidism, the body doesn't produce enough of the thyroid gland -- the thyroid gland does not produce enough. that is common in older women. she did have that concussion a couple of years ago. we do not know as much about donald trump. has beengh she criticized for her health condition, he hasn't said much about his he went on dr. oz yesterday -- about his. he went on dr. oz yesterday. he says he takes his that to lower his blood cholesterol. given his height in the u.s. would make them mildly obese. we will find out more today. francine: this would be funny, but this is not funny because this is for real. have you seen anything like it echo michael: we have not seen anything like it. in she is done resting is getting back out on the trail and she does need to because her polls are going down. in the letter noted that she is in excellent mental health. francine: michael mckee in new york. it is laughable, except it is not because it is the most powerful person on earth that they are about to elect. is there a ripoff if donald trump gets in? we lost the usual metrics. brexit,did vote for america could vote for trump. almost certain is the majority of white voters in america will vote for donald trump. i think that is an indication like andpublic do not are very upset about the way that the economy and politics have gone over the last 10 to 20 years. francine: what does a donald trump presidency mean for world growth? changingthink it is the attitude toward free trade which is not something just out of the trump label. it could've been from the bernie sanders playbook. hillary clinton has been more aggressive on that than expected . it casts is a shadow -- it casts a shadow over the free trade agreement and whether they can survive in a trump presidency. i don't think they can. simon french, charles goodhart, thank you so much. i will be joined by tom keene in new york. we will be going through your market analysis and we will talk macro policies. this is bloomberg. ♪ ♪ francine: taking a breather. little change after five day selloff. policy running out of options? the bank of england expected to halt rates after a similar hike in august. and a doctor's note, will it be enough to put hillary clinton's campaign back on track after her recent illness. francine lacqua in london, tom keene in new york. we are seeing gains after the selloff for five days.

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