>> good morning, you are watching "bloomberg markets european open." i'm guy johnson. hurricane warning. the payrolls will be affected by harvey and irma. is the market out of position if the number beats the low expectations? fights or flights?

relocating out of catalonia. will this be enough to get the catalans to back down? the pound extends is a drop. to sterling upside right now? we will find out in just a moment. less than half an hour to go before european trading starts. to be a day about waiting for payroll numbers to come out later on. what is happening with the ibex? yesterday up 2.5%. today it will be down 0.6. there are some expectations that monday morning we will get news from the catalan authorities. we will see how people will see how people hedge their bets going into the weekend. anything could change in the situation.

you can see the move on the spanish ibex up 2.51%. you are seeing rate cut expectation coming in. that is taking the shine off of the aussie dollar. today is about two things. one is the payroll story and how asymmetric the response could be around that. the other is what is happening with the pound. the political story is being dominated by may's future. first word news update with juliette saly. juliette: spanish prime minister joy will convene his cabinet. to minority government

international condemnation and inflamed the separatist cause. they risk economic isolation if they push forward with independents. president trump has offered cryptic remarks well posing for photos with military leaders, saying gathering might is the calm before the storm. do you know what this represents? it is the calm before the storm. >> what is the storm? factoriesgerman rebounded in a sign that europe's largest economy will sustain its robust growth. inflation rose 3.6% after a revised decline of 4.1% in july.

it is the biggest increase since december. which hastorm nate shuttered gas platforms in the gulf of mexico continue to head north. it latest forecast path has scraping the s of mexico's yucatan and it's a lot. fromy come ashore anywhere louisiana to florida's panhandle. theresa may is facing growing demands to quit as prime minister after a colleague announced he is running a campaign to oust her. he has a list of colleagues who want to choose a new leader of the party after may failed to win a majority. the list is growing and includes five cabinet ministers as well as tories from both sides of the brexit debate. the saudi king brought 1500 and his own carpets on

his visit to russia. of the leader , and steppedlaying out onto a special escalator he travels with. it malfunctioned halfway down and he had to walk the rest of the day. global news powered by 2700 journalists and analysts across 120 countries. guy: thank you, juliet. u.s. dollar is on a tear. is like watching paint dry, but it is moving higher. that is undeniable. it is poised for its fourth weekly winning streak. there, it isns out trading above the average for the first time since march. we'll talk about the payrolls later. up in an asymmetry.

treasuries and the dollar are likely to ignore up -- a miss. you could get a big move, and asymmetric move if we see the numbers beating expectations. i want to show you this chart as well. the move index. this is treasury volatility, just starting to tick up. should bething we paying attention to. how asymmetric could the response be to this number? mark: very much so on the dollar. certainly bad data will be dismissed because of the hurricane impact, whereas if we get good data it is in line with expectations. proves,et will go, this

this is enhanced because the short-term market, the speculators, the position is very skewed. we've made a technical break of the moving average. these are really fragile. you have to assume the dollar bears are hoping for a shock because of the hurricane. if they don't get it, people will be chasing to cover their positions. if we were to see a number that gets close to beating expectations, on orders of magnitude, what could it mean for the dollar? talking about is the dollar being on a tear. in the context of low volatility, this has been a reasonably sustained move. you could get a 1% move, but it will follow through next week.

goingill set the momentum into next week. there will be a narrative that the u.s. can cope with hurricanes. equities are at record highs. the dollar is doing well. in that is likely to hike december. there might be a new fed chair. surprise, there could be sustained momentum of the dollar that could follow through to next week. betreasuries, there might some friction around the 2.45% 10 year yields because there is a lot of exposure. those contracts expire at the end of the month before the next fed meeting. i read your coverage this morning on the pound.

you don't have much positive to say, do you? mark: no. filled, what i'm seeing in the pound is a consensus that it is looking bad at the moment. goals are saying we see a negative story. catch? the there must be a reason why this is going to rally. i could not find out reason. it looks like such bad news. the story is fundamentally negative. the brexit story is negative. now we have a terrible domestic situation. every factor is negative for sterling. maybe it will go to a consensus but it is not there yet. sterling will have a tough day and into the weekend. the we can press will continue this negative narrative on theresa may after the tory

conference. guy: thank you, have a great weekend. , bloomberge strategist. next we will speak to claudio albrecht. what did this deal? we will find out we come back. ♪

guy: 7:42. here's a bloomberg business flash with juliette saly. juliette: catalonia's biggest banks are getting closer to leading the politically volatile region. a declaration of independence would prompt them to forfeit profits. according to a person familiar to the martyr, the bank's board no one waser -- available to comment on the meeting. tinto, the company has been

speaking with buyers in northern france. they have an annual production of 270,000 metric tons. regulators in europe and asia are investigating over the transfer of $1.4 billion to singapore before new transparency rules were introduced. the bank notified regulators after employees raised questions about the timing of the transaction, and whether the funds had been properly vetted. they declined to comment. casino operators in china -- mainland tourist arrivals fell 1.5% over the four days of the holiday.

that is your bloomberg business flash. guy: thank you. mark cudmore with the more complex comes as the world's generics base pressures on small deals. this is been the focus of some interest when it comes to private equity. let's talk to the ceo, mark claudio albrecht. claudia, i read some interviews you have done. how do the top line moving? claudio: thank you for having

me. line, stada is a great company. there will be new product launches and also an expansion geographically. guy: you talk about it being a no-brainer, how easy is that going to be? we know stada well. , we knoween working where the letters are. it is not that easy. we are a highly regulated industry. everything can change in the products cost. it has to do with the regulation difference. guy: quite difficult in reality.

line.ve to move the top you're going to try to migrate the business into other areas. the generics business faces increasing pressure. how exactly does that work? there is a new generation of products for we see more improvements in europe and the u.s.. it is more complex than chemical generics. it is more costly. there is a higher risk. easy, but iat believe the future for all the generic companies has to be similar. drugs generated from living organisms, when you look at this industry and talk about the migration where you will go

from basic chemical engineering into biochemical end of the spectrum, how big a challenge is that? is that the biggest challenge the industry faces? is regulation the biggest challenge? one does not go without the other. we have to learn how to develop these products. that is a new field, a new area. we have see how we sell this product. it requires scientific detailing. it is highly regulated. are also lagging behind the business. we are waiting for clarity on what is needed for approval on some of these products. you worked during the due given theprocess,

whates you talked about, can this business kick out? if you look at the health care system in general, one of the big challenges will be the financing of fewer -- financing of cure. answer,one part of the how to find the cure. perspective is quite bright. in the future we will see growing and penetrating the different markets in europe at higher rates. guy: that's interesting. you paid a decent price for this business.

indicated, they were doing due diligence on the business. expectations,heir the general partners in terms of what they are looking at from this business? changes,in to make big you have to drive the top line and bottom line. what rate of return are they looking for? claudio: it is too early to say. where in the process of establishing a new business plan. stada has been analyzed very thoroughly at the beginning. i believe the future is definitely bright. it is definitely positive. is, how long does it take to get this all working? we are a very regulated industry. changes take some time.

ishink the future for stada very bright. guy: you talk about the fact that could take time. goesrmal portfolio company five to seven years, do you expect it to take longer? no, that is the time it will take, even a little less, between three and five years to get changes working. i can't say anything about the holding period. in order to make significant changes in a pharmaceutical company, you should look at the timeframe of three to five years. claudio albrecht, ceo, stada arzneimittel. we haven't easyjet update.

we will talk about that as well. the open is now eight minutes away. this is bloomberg. ♪

guy: five minutes to go until the market opens. easyjet's guiding toward the top end of the range. interesting given the turbulence we are seeing right now. we have seen businesses go under

in the last few weeks. the yields are rising at this point. you see prices are picking up as a result of these failures. plus, what is happening with the ryanair story as well. keep an eye what is going on with the catalan banks. they're trying to make a decision based on what the political story is going to look like. it will be interesting to see how the market positions itself with the catalan story potentially throwing out some outcomes. the other stock we are watching is crh. crhgrove is the business was pointing itself towards. there is now a competing offer coming through for that business. that may change the mix a little bit.

to excuse the concrete pond. -- concrete pun. this is bloomberg. ♪

guy: minutes until cash opens. things to pay attention to, spain is front and center. it looks like the ibex is going to open software this morning. dayid have a 2.5 of yesterday. softer today, down by half of 1%. well, i will as show you a chart of what is happening with sterling right now. it could be a factor about how the ftse is going to trade. clearly a factor for later on his clearly discussed. just ignore a bad number but we have a strong number can really enforce what the fed is going to do this year and next year.

the luxury stocks this morning as well, some of the gaming casino stocks, the numbers were not quite as good as anticipated. let's turn our attention to the market open. these are the numbers where watching, keep eye on the ibex. 75, 72ding north of pretty quickly. the ftse 100 the main dish and the -- the main beneficiary of what we are going to say. me getx is expected, let my laptop so you can see the numbers. you can see what is happening with the ibex. we break up with the individual names look like in a moment. here's manus cranny. manus: european stocks up three quarters of 1% this week. ,ou can see basic resources they synchronize the global

growth story. 5.25%, you are seeing this momentum build. financials are flat, the catalonian risk to a certain extent. let's see what happens next. the bottom of your screen you have the sterling. a lovely place this morning, it might be looking messy on the euro but british politics are messier. breaking about the 100 day moving average. that lovely chart on twitter talking about when mark carney spoke, a point sterling. explicit guidance, that does not seem to have done enough to move sterling this morning. the sterling is going to be a critically important barometer. can he challenge teresa's maze leadership -- may's leadership? when it comes to germany, a nice

set of numbers. a volatile set of numbers, 3.6%. you 64.92.showing this is the deepest relative to the s&p 500 and that guy shows value. much more any bubbles and since you are seeing the dax trade at the deepest discount relative to the s&p 500. credit suisse and society, i know, off by nearly 40% this year. do you want to be long at europe? a view on the gilt market. well -- where will the money go if there is a challenge to theresa may? we go into this twilight zone challenges theresa may,

would that invoke a rally in sterling, there is somebody who has a very strong mandate to negotiate to the united kingdom moment.he leader at the 138.market trades at the theresa may challenge, who might take over? prefer,ds which you whether it be boris johnson, or maybe even mr. hammond. i will leave you with those thoughts. i am off to digital radio. >> but get back to the market open and talk about what is happening. number of stocks you want to focus on here. a percentage change, crh certainly weakening on the back that it is like there could be a

contested bid for ash grove. certainly something the market has been watching. charter looks like it could be softer. the bottom you have easyjet down by 1.25. i'm going to change this into index points. what i want to show you is what is happening with spanish banks. softer by 1.25. santander trading softer as well. that is where you're seeing the story coming through. the banks are down. that is the story that you are pricing in. points, hsbcndex credit suisse around .5%. wedit suisse up by .29%.

will watch and see what the payroll will deliver later on. proves. jobs report may more useful as the impacts of hurricane harvey and irma. this is where you get interesting. expecting an 80,000 increase in september payrolls. the six month moving average. it may not be an untold the later in the month. state data investors can make full sentiment. in some ways, good morning. the dollar and the treasury markets -- the dollar has two free swing today. it is to do with the hurricanes. we can deal with hurricanes but we can really move on. the dollar incrementally keeps going.

>> the market is pricing at last month, the bond markets say something to the fact that the underlying economy is better than people thought. the hurricane affect will provide a excuse depending which side of the aisle your cast. from our perspective what is we areting here is pma's -- the isn --the the pmi's are not following that trend. there is a large gap between the two. it is unreasonable. they say we are an expansionary territory and they should be raising rates faster. >> you have a 60 print on manufacturing. >> always this -- always with these things, we don't trade a single data point. you're looking at the underlying

characteristics. has statedonomy stronger than anticipated. is how see through here quickly you remove this punchbowl and whether they are pricing under the rate rise this year. more important is what happens with the removal and how much of the role they instigate. they started to give early signals. the market has not really caught on to how important this is. banks, the fedf could monitor where liquidity is in the u.s. system. because of dodd-frank and others, a lot has moved up to other parts of the economy. secondary and tertiary. we have the auto loans and leverage in there. that is still bubbling below the surface. our concern is the potential credit crisis that comes this partss driven into shery

of the market. they are not as clear as they were last time. looking very carefully. loans being issued again. previous credit crunch. the worst news is somebody says the liquidity is there to help you out in a crisis. term, there is light flashing. andet can't stay irrational can behave badly for a very long time. up quite a decent turn of trading the last phase. maybe the fed it does get more aggressive. phase could be a strong one. >> classically, the peak of the bull market is a blowout. think -- look, if you

wanted to say how you put together a thesis, lots of evidence to justify that position. fedhare your view that the has been measured. most central banks realize they left the punchbowl out. they will have to remove it more slowly than they would like. the critical fact is what happens with underlying inflation. they are all looking, the bank of england and ecb, to follow the trends in terms of starting to reduce qe or increase rates. >> escon for the states. incredibly easy. where do you see this going? this is the dollar. movingturned but it is the average. it has been through that.

it is drip drip trip higher but it is going there. do you see momentum for the dollar? >> in the short term partly because of all the things we just talked about. havingly, donald trump been positive when he won the election for the dollar. turning into eight liability in the sense that republicans are not hitting anything done. it is not happening in the states and realistically house republicans thought only a few months left to do something to actually support the election campaign. that reelection party is in earnest next year. they need to do something between now and the year and to have success as a collective and being in charge of the u.s. economy. the other point to bear in mind broke through the

1993 low. if we talk about complacency, that is the one thing why -- guy: people are trying to get a yield kick by doing what they are doing in the vix. it has proven to be the right trade. a symptom ofecome what is happening here. >> what i am saying is all those things to talk about, the bull trade is continuous between greed and fear. when completely gets -- we are iny gets in, the twilight zone yes. there is a degree of complacency. the careful we are not an over levered business model. >> absolutely. absolutely. he is the london asset management, going to stay with us later today. --y cohn is the direction

director of the council at 2:30 p.m.. tois also on the short list be the next fed a chair. always an interesting conversation. spain's big squeeze steps up the pressure on the separatists. live to barcelona next. this is bloomberg.

guy: welcome back.

if you are watching the market open. innospec down. they're not down a lot. volatility recently high given the story that has happened there. mariano rajoy convening his cabinet later today as the political squeeze on the separate government. it certainly heightens. risks economic damage and european isolation if he pushes ahead with plans to declare independence unilaterally. barcelona on maria today at the latest you what can we expect from this meeting later on? >> good morning. the government is going to use this as a final warning. their message is going to be crystal clear. talks, you have to do it now. no more warnings. ae government also preparing decree that is going to make it easier in the age of the

corporate world to shed quarters for companies based here to someone else in spain. you're going to be able to do it. your concern about political insurgency, the governor -- the government will make it easier for you to move in spain. >> this is a real pressure point right now. may moveg they headquarters. how does that change sentiment? >> that is key. the banks came under intense pressure at the start of the week. those reports they're going to move headquarters. this is not one of the big banks. in a context where your margins are being squeezed, it is difficult to make process. the last thing you need is political uncertainty. they confirmed we are moving away. this is a big bank.

the largest bank in spain. hold a meetingto today where they announced they are also moving. want to send this message to the market that the matter what happens we are still going to be a financial institution backed up that is going to be remaining in the euro. earlier in the show, ibex 35 company would considering moving their headquarters. now they are denied this. you very much indeed. plenty of coverage coming up over the weekend into monday right here on bloomberg. great coverage being generated. the banks as we have indicated art trading softer this morning. year, thetors this trump reflation trade was not going to work. they piled in. the dollar certainly helping kick that trade.

they seem wary of the political story in europe. how do you think mobile investors will be looking at the >> the nationals --vor -- nasa list server faded.list fervor has it is rational for financial institutions to actually find themselves ahead by relocating headquarters into spain. funding is they'll the amount through the financial isis. exactly the same conversation taking place. you buy yourself whether it is a hedge. depending on how the brexit talks come out. hotheads where dialogue was had. both sides have covered themselves in glory. what you want to see is a meeting behind closed doors to see if they can flesh out

agreements. we will buy ourselves an option to relocate headquarters and it is not an issue. let's aboutntly, the spanish issue and more to do with germany. had, merkelyou have is an incredibly strong position. see managed to secure the spd. that has allowed her to do whatever she felt necessary to keep the economy on track. last weekend was a big change. stimulates a proposition going forward -- yes she will get the free market. you can put a positive spin on it but it does change something. nationalism is on the table in europe. germany, france, holland, and spain all sharing this issue. question,ur original

rational behavior goes out the window. is -- ecb isw-up making it very clear. mood musicvement -- we hear is we hear is we're going to roll this slowly. your point in the program, they are looking at this and thinking actually, we are not going to make any risks. this is going to be a lower for longer. the path is going to be credit with flats. i would be fascinated to know whether or not the ecb trading team has looks at the situation. not there whether or is this huge put their which means the politics is relevant. >> the markets are not getting worried about it. they have the backing of the key clinical decision makers in europe.

that fervor is there. inhas reminded people europe, those who have felt it has gone away, yes i agree with you. i think draghi has the backing. he still will leave the pump there to make sure he sees significant inflation in europe you the question is, if others start moving elsewhere he may be forced to follow suit. remained strong despite changes we have seen. see where the international investors measure that concern thisgh the currency. guy: is the 10 year spread. see, it is going up. a three-month high. 189 basis points. london assets management is going to stick around.

bulls on parade. the s&p 500 on pace for the longest winning streak on record. to run out ofout steam and what does that mean for assets? you are about to get trampled. we talk about that next. this is bloomberg.

guy: welcome back. i was trying to figure out where exactly we broke in terms of low. we are pretty much shredding around at 9.23. let's talk about the s&p. it is the longest winning streak on record. it is here. you have not got red parts here. on on on on on. there were a bunch of things going on. this really does not tell the story because below it as you pointed out, brutal sector rotation. where is that sector rotation story? >> what is interesting is because of the strong economic data the classic value trade has come back on again as people feel -- if the economy is expanding companies have relatively high fixed costs.

they tended to perform best in that scenario. stronger than anticipated about economic data, those companies should do much better. we are seeing the market this by theing a lead -- led internet. it pricing power they have had. being replaced in the last month. ,he benefits of economic growth slightly higher than those operating the leverage, performing well. back to my point. what makes this nervous, it is different this time. one that is never used anymore. my thinking is to say it is logical those shares, economic growth is better. be careful when you add operational financial pressure when we see a rise in rates. you are having companies that have profit warnings.

manus: we will find out. the cio of london asset management. up next we are talking about the u.k.. this is bloomberg.

guy: payrolls below will be affected by harvey and irma. the number beat the low expectations. fight or flight? catalonia, a similar move as customers will accept. will it be enough to convince them to back down? busy weekend in barcelona. drop --d extends it it's drop. good morning. welcome. you're watching bloomberg markets. i am guy johnson. fromis a program but to bloomberg headquarters in london. 30 minutes into the trading day,

an interesting session i would argue. it is not immediately obvious why but there are so many crosscurrents at work here. not doing verys much. you have the ibex trading down. .hanks are under pressure the ftse 100 is up a little bit this morning. the pound story to factor in there. that's not really moving very much. 20 of things happening. we are trying to figure out exactly what is going to happen with the dollar next. the politics story is fascinating. lagarde talking about these issues. she says the front remains supportive. is bank of japan, she speaking ahead of the world bank meeting. policymakers on the right track. she makes difficult comments on the bank of england.

the uncertainty surrounding brexit. the bank of england, i don't want to be specific about the circumstances because it is an flux. the ecb is concerned and the bank of japan, we support continued monetary policy. week for been a bad the pageant. cable rate down by 2.8. certainly on course for the wished week since last week's flash crash. renewed speculation about a isrge for leadership you going to be interesting to see what the press makes of shenanigans being generated. leading the charge to oust the prime minister in the near term. the cio of royal london asset management.

the british political story, or they surely -- are the fixated with the pound? ,> brexit is at the forefront particularly for our clients overseas trying to understand the catalog as to why we didn't. transition seems to be a sensible way forward to manage a relatively smooth transition. it is slightly less of a concern. for them it is more in terms of engage u.k. chooses to and what has been alarming is the confrontational nature of the u.k.'s engagement with the european union. it was always going to start this way. the strongest card was to say you have to pay the bill before you leave.

we expected this to be the case. ultimately, time has elapsed. we should go to a point where we have thought where the bill might speak and to have a discussion of what that is. it is not sensible that one of our biggest trading partners, put the moves. >> brexit is a huge risk right now. i am trying to assess the risk for the u.k. for an international perspective. you have brexit and you just laid out the issues surrounding that. unknown, very difficult to figure out. history -- the history of political stories. you have to shorten the general election. you have to look very carefully at john mcdonald is saying. he could be the future chancellor.

jeremy corbyn is saying he could be the future prime minister. be think about the british you think about construction you start to think about a taxation theme. there is a whole bunch of things that are happening here. u.k. political turbulence must be putting people off or making them think of other strategies. >> the u.k. economy is performing much better than people expected. mark carney was making this point last week. actually, things seven more robust and anticipated. in movie made last year liquidity was not necessary. the two party conferences as to where we are, yes, in terms of till risk management they've certainly gone up.

i'm not political expert but in terms of a market perspective , it hasrobabilities gone up last week. guy: would it be a mistake to raise them at this point? >> if we look at where we are. my point earlier about the bank not being on conference of of where leverage is in the system. very disciplined about banks and bank lending. very tight controls about over leverage there. in terms of where that is coming effect in markets are the ones we should be most concerned about at this point in time. >> thank you so much for spending so much time with us this morning. the royal asset management. there is a bunch of functions i would advise you to move.

stories running the jobs support. is tv function as well right here. there you go. this is the show. you have got this sidebar here where you can find the question using the iv. jobs or weather report. we take a look on the ongoing impacts of harvey and irma. how should you be reading this report? we talk about that next. this is bloomberg.

guy: we await the release of the payroll later on. let's get a first word news updates. this is sebastian. convening his cabinet today as the political squeeze on the separatist movement titans. his minority government is low to risk a repeat of sunday. it drew international condemnation and inflamed the theratist cause you president risks economic damage and european isolation if he pushes ahead. u.s. president donald trump has offered critic remarks while

posing for photos with military leaders saying the gathering might demonstrate the calm before the storm. the white house state dining room ahead of a dinner including a range of national security issues. represents -- [indiscernible] the calm before the storm. reporter: rebounding in august, the largest economy is set to sustain growth. all this adjusted for seasonal swing, rising 3.6% after a decline of 0.4% in july. the biggest increase since september. tropical storm nate has already shattered platforms in the gulf of mexico, continuing to head north in the coming days. the latest forecast has it scraping the eastern half of mexico's yucatan peninsula becoming a hurricane. come ashore anywhere

from louisiana to florida's panhandle. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. guy? guy: u.s. employers probably headed to the list numbers of employers in six months. they expect and 80,000 increase in payroll. meanwhile, the president john williams has said that employment and higher inflation will allow for another rate hike in the future. the market at december now. , goodief economist morning. >> good morning. >> today is an easy one in so many ways. 80,000. got less than 80,000. the market is going to go. pretty easy. >> a week number of to noise. >> what does it say about a positive number? what happens with a 120? >> an upside surprise. we had to force change our

monthly model to get a number near the consensus, 80,000. there are other indicators pointing to. >> worcester the mednax around us. averagesree-month 185,000. i assembling this looks good. still failed to breach the 300 k level. we have had 130 straight weeks of low layoffs. some of the data points to a better than 80,000 payroll print. guy: let's say we get even 100. let's talk about the asymmetry of the risk at this issue. the dollar has been grinding higher. janet talons terms, watching paint dry. if i get a decent prints today, how could the dollar cap higher? >> longer-term him a what is not

priced in. continued strong payroll growth. that will drive the unemployed rate lower. below 4% next year. >> it will. it can historically tends to work better when you are for-5%. when you lower the implement rate it gets super. we will be right in that region. if you have a hand on the implement rate you have wage growth. that is a scenario where the fed is hiking in september and they are hiking to or three times next year. i think that is where interest rates adjust in the dollar rally. you can see on the wirp function on your bloomberg, we are therefore december. we are really not there -- there for december. we are not there yet. >> inflation is backward looking in our opinion. cbe,ook at core cpi, core you are comforted that inflation

has been virtually nonexistent and you think that will continue. i think that is what is priced in. they've been wrong for the last three years, they will be wrong next year as well. fed --e in charge at the tell me who is going to be in charge at the fed? if we get the growth forecast correct, inflation correct, here is what we think is an appropriate level overnight rates. they have deviated from that. today is a weird one because we have got the hurricane effect. it is also pricing all who will be the next fed chair. int is putting your finger the air and trying to figure out where the wind is blowing. accurately theow treasury market is right now. trying to surround who

will be the next fed chair. then you have the whole hurricane story. we are starting to see the move index higher. volatility beginning to creep up. could it creep up significantly because the market is all over the place in terms of the pricing mechanism. >> the long run, too few priced in. too little information -- inflation. the front end has move -- move -- room to move up. that is the risk to the treasury. >> the dollar is not the price. >> the dollar is under price. to be forces, three big forces. the lack of inflation led to diminished expectations by the fed. that helped weaken the dollar and the lack of progress in washington. today's nothing has been done on economic policy. our view is all those things, the risk is in the other direction for the next 6-12

months. treasuries beginning to spread a little bit. we are trading 189. we have been as high as 235. nevertheless, do you expect a spread between the u.s. and germany to continue to widen or do you think if we get a move in the treasury the gravitational effect is going to drag everybody along with that? risk for global developed markets is all in the same direction. u.s.rgent i made about the curve i think applies to germans. the front end is too low given the comic environment and probably too little inflation. guy: it has pushed low because of the ecb. --balance of risks, cut that that risk could be to the upside in german yields.

this is an environment where europe is doing better than anytime in the past 10 years from our estimation. the u.s. economic cycle will continue another to, three years. no recession on the horizon in our opinion. that is a good environment for the emerging world. two inches of global growth which are surprised. guy: does the dollar take the edge off? >> it depends on the magnitude of the move and the duration. if it is too quickly. certainly like we saw in 2014 into 15. that does have a negative impact. i think it grinds higher. that will be fine for the emerging world. guy: the rate of change. when it comes to the treasury story, the rate is important. portfolio. a bond if it rolls fully i'm fine. i roll things on and that is a

good environment. that is a bit of a problem quickly. are we going to get the grinds or brief periods in which we get marketing and pricing quickly? >> i think what the market is pricing is not what we foresee in the forecast. talking to investors in europe the big worry is not so much a repricing of the front end or of government bond yields. many clients are positioned for that, thinking about that. that will not so much be a risk. clients would welcome higher yield. the question is credit spreads. credit sector is it overused by monetary policy? is very potential for widening, that is the fear -- is there a potential for widening? as long as the u.s. cycle continues europe improves. you don't have a recession. i don't think you have a dramatic widening events.

i think bond investors even with a red pickup in 10 year treasuries, bond investors will do well. guy: thank you for stopping by to see us. the head of the payroll numbers later on. cio of the cap: ron will be joining us for an exclusive interview at 3:30 u.k. time. remember we will be talking to gary cohn later on. we get his take on the payrolls. where he sits on the fed is an interesting conversation. stepping up production, running shoes at speed. catching up to the biggest competitor, details next.

guy: welcome back. what is happening with spanish government bonds, you are seeing a yields spike up. this is the last few sessions you can see yields came down as well. use have seen it yields coming down. the market became less concerned about the catalan issue this morning. weekend which is going to throw up who knows what, i think maybe a little steepening. selling is coming back into the market in the head of the weekend. who knows?

let's talk about what is going to happen for the rest of the day. the bank of england chief economist is going to be speaking at 1:00 u.k. time. rates are priced in, one hike from the bank. later, thed a half coverage is going to be expensive. greatng you want, so many functions around all of this. the numbers also work -- worth taking a look at. spain, saudi arabia, and the united states. so much to talk about surrounding those three countries. let's get back and talk about what is happening with spain growing tensions after catalonia's legal -- illegal independence vote. the europe edition of business week. the angry spain divide. the prime minister is holding a cabinet meeting today in catalonia. the biggest banks now considering leaving the region. inside, a feature on how the

companies working to revolutionize its running shoes by creating speed factories. these are based closest to domestic markets. more on this story. let's bring in david. david, what is the speed factory and what does it take to operate and generate that? >> what they are trying to do is pick a page from h&m and those fast fashion companies by getting closer to the consumer. they have two of these, one just opened in the last few days in a german city which is near munich. another one outside of atlanta. they are trying to reengineer the design of the shoe to make them more -- able to produce them much faster. this changes the

relationship with the customers? >> absolutely. to bee trying to get -- more responsive to what customers want. h&m they aree discovering there is a hot model. they wanted and they wanted now. making shoes is surprisingly slow. thought of course they can make a shoe in a day. it is not true. it takes about two-three months to manufacture one pair of shoes. what happens is they get all of the parts, they manufactured the oles in one country, ship them to another country, stitched in china, it is an incredibly complicated process. the they have some behind process and they can make everything from start to finish in one day. guy: i look forward to reading it with a great deal of

interest. i have read it, but i assume everyone else's. up next is bloomberg's surveillance. this is bloomberg.

♪ francine: it is jobs date in america. how much can meet test can be read into today's numbers? -- how much can we read into today's numbers? the catalonia crisis. banks signaled they may quit the region. quitsa may faces demand to as a next cabinet member since he is building support for a campaign to oust her as the pound we can. good morning. this is "bloomberg surveillance