>> the beginning of the end. the fed tapers by $10 billion, but there is a pledge to keep rates at historic lows. that has sent stocks rallying around the world. aab soars as the swedish company's fighter jets >> chosen over boeing's. russia's president said the $15 billion package was not about expanding putin's sphere of influence.

good morning, everybody. welcome to "the pulse" live from bloomberg's european headquarters in london. i'm guy johnson. francine is off today. she is in italy. she will be back tomorrow. the markets are surging. we have seen a positive reaction in stocks to the news out of the federal reserve last night. we are up nicely across the board. some markets up well over 1.5%. london up nearly 1%. gold has been under pressure. that has certainly been the story of the morning. let's show you what is going on some of the other asset classes. gold at 1205. we'll deal with the foreign exchange markets later on. the yen certainly fascinating. let's get details of what we lernt last night. seems like we could be in for a positive taper, a dovish taper,

a bullish taper. hans nichols joins us. he spent years in washington covering all kinds of things there. what do we get? >> we get that ben bernanke finally hit one out of the park. his last at-bat. we have a slow taper. he has finally convinced markets that tapering does not mean tightening. they are going to keep low interest rates. the key changes they made in terms of the policy decision is they will keep unemployment, the when term rates well past unemployment dips below that 6.5% level. >> we certainly have not given up. nothing we did today was intended to reduce accommodation. we'll still buy assets at a high level and increase our balance sheet and hold on to those assets. we strengthened our guidance to

make clear that we expect to keep rates low. >> they are going to be increasing the balance sheet. at the end of quantitative easing if you take the stedge of $10 billion a month, you get to about a 4.5 trillion balance sheet at the end of 2014. then we talk about how they unwind it and that is a fun conversation as well. guy? >> it is like the whole challenge really is laid out in front of us. presumably bernanke and yellen joined at the hip on this one? >> all we have is bernanke's word for it but so far his word looks pretty good. he says that janet yellen is with him and they are committed to this idea that the data will driver the decision. have a listen. >> if incoming information supports further progress toward ts objectives, the committee is likely to reduce the pace in monthly purchases in further measured steps in future

meetings. asset purchases are not on a preset course. >> guy, inflation is the new data point. the sound you're hearing across trading floors is traders switching their cal ders to look at when the commerce department reports inflation opposed to jobs numbers. >> hans nichols, thank you very much indeed. our international correspondent. saab shares are taking off this morning. the swedish company's stock up more than 30% at the open of trade because it has been beaten boeing and rafael combat over brazil politics or spying could be to blame. itthe saab gripen beats out, would seem. up the most we have ever seen.

currently trading up about 23%. it snatches that deal, 36 jet fighters going to brazil's air force worth $4.5 billion over the next decade. now it is a strong buy. the order that brazil has placed has doubled saab's order backlog and will work as a door opener on other contracts. this is the sort of thing that boeing has lost out on. fascinating reason to why it has lost out. down to politics. the spying incident. of course it was alleged that the u.s. was spying on the razilian government. this is an t said affront. the defense minister himself seems to be saying not quite true. >> yeah.

the -- seen as being a real frontrunner. everybody i was talking to said it is almost a done deal. it all happened so quickly. the lowing problem looks like we can draw a line back to the n.s.a. >> that's why many are saying it is definitely because of the spying scandal and they don't feel they can trust united states anymore and it is a slap on the wrist. brazil is spending $8.6 billion per year over the next two decades. is any of that going to go to u.s. companies? certainly the defense minister said no, the reason we chose saab is because of the performance and cost. saab has always said they are a less costly, more reliable alternative and there is a willingness to transfer technology.

there is more politics to this one than meets the eye. >> it has politics written all over it. caroline hyde on the story coming out of brazil. a couple of pharmaceutical deals out. bayer has agreed to buy algeta or $2.9 billion. astrazeneca buying bristol meyers. research across a series of major sectors. let's start with bayer. this fits the bill. they have done a series of acquisitions which this looks pretty much in context. >> it certainly fits the bill. it is actually one of the largest deals they have done in the past quite a few years. you look at the table, you find this is about the fifth largest

deal they have done. it is actually the biggest drug deal they have done. there has been some deals on the chemical side but not on the drug side for quite a while. >> that is an easy deal to understand. >> this is -- they are in the diabetes business. that is a growing area. we all know that. it is an epidemic affecting everybody in the world from china to the united states. it is a good area to be in this terms of the growth potentially. however there is a lot of competition. it is where they have half of their business. they are buying the bristol meyers half. .hese are troubled assets they are taking a $1.7 billion charge.

they paid $3.4 billion for that. this deal -- this half is about the same sort of number that they are paying for. that has got some issues. another product that is part of this package, you know, it has lost its lead in the u.s. it is going to be potentially second in the u.s. market. so we have some issues with the number of products in this portfolio. it will be interesting to see how this pans out in the end. >> cool. you'll provide plenty more analysis. what else is on our radar screen this morning? the russian president vladimir putin is speaking at his annual conference in moscow. he said the bailout is spurred on desire to help a partner. it is not linked to the ukraine's twalks the european union. a fund manager has been onvicted of insider trading.

michael steinberg agreed to plead guilty last month. e.u. ministers reached a deal on how the handle the bailout of banks that get into trouble. we'll have more on this story later on in the program. as we head into break, the unit eads is about to launch the mission from french guyana. you're looking at live pictures. we'll be back in two minutes. ♪

>> you are looking at live pictures of soyes flight launching off from french guyana. this is a space telescope that will reveal things about the universe that are going to be absolutely incredible.

this is a platform thas going to be able to see -- that is going to be able to see further and in more detail than we have ever been able to see in the milky way. it will map out the milky way and plot all kinds of objects that we have never been able to see before. once in orbit which will be a pening in a few minutes, series of key bolt also need to fire to shield the satellite from the sun's rays allowing it to become cool. the next hour is probably the most critical in the process. live pictures coming to you from french guyana. it is a pretty clear morning out there. if you poke your head out to window here in london, you might be able to see it going overhead, if you can open the window, that is. let's return to another liftoff of kinds that we have seen over the last 24 hours.

this is story that the world markets have been waiting for. the fed's decision to begin scaling back its record stimulus program. chairman ben bernanke bern said they would keep rates low well fast unemployment threshold of 6.9%. joining us is mitsubishi's global head of market research. good morning, derek. >> appropriate pictures there. we have liftoff finally. how should we read what the fed has told us? >> well, what the fed has told us is that based on the current pace of removal of asset purchases we'll be in q.e. mode for most of next year. there is a lot of celebration about this wonderful forward guidance by the fed and risk appetite is growing stronger. the word could become meaningless very, very quickly. the only real credible element

of forward guide sans the action of the fed and the fact that they are telling us q.e. is continuing on for most of 2014. that is an important aspect. in england, forward guide sans much more difficult. they finished asset purchases last year. the e.c.b. forward guide sans not credible. >> money is pretty hard to understand. talk is a lot more difficult. and we're going to be dealing with yellen so we have to learn a little bit about her communication style. she has been running the communication strategy. are we in for a more volatile period then? >> you'll probably hear this a lot. if you go obviously at the 10 billion pace, we're through until the end of next year. it was notable if there is an implicit bias in the speed of removal of quantitative easing,

it is a bias towards speeding up. bernanke said if the economy improves, we can speed it up and if it disappoints we'll pause. there is an implicit bias there. >> they have been forced to backtrack before. when the economic data has oftened. teetering on a deflationary shock rather than inflationary shock. that is a significant risk. >> sure. there is a risk absolutely that they could slow. in terms of inflation. i think there is a danger here. any economist will tell you that inflation reading today is telling you where the economy was maybe 18 months ago or even two years ago. there is a danger we make the same mistake that was made in 2003 and 2004. that is when ben bernanke got

his name of helicopter ben. there was a great fear of deflation in the u.s. economy. they actually cut rates in 2003. of course the activity data was picking up. essentially the concerns of the deflation back then were wrong. they have to look at the activity data. to date it is clearly picking up. >> when you look at the implication s of this for other central banks, what are they? ben bernanke has an effect well beyond the shores to have united states and the e.c.b. has got to be looking at this. the dollar reaction hasn't been that strong. draghi has to be nervous about that. he will be hoping the dollar is surging. >> as i have said here before, the direction of the dollar is not just about fed policy. it is about how other central banks respond. the dxy is nearly at 80.

we're in the middle. >> where does it go? >> you have to pick and choose. euro/dollar, i would say forget about it. traders and investors are tiredor trying to take a position there. nobody wants to sell euro. i can't remember the last trader i met who made money out of selling the euro. what i would look at is for example, one interesting aspect today is if you look at asia, their markets portland well part from china -- performed well, apart from china. it looks like what happened in the summertime. there is a risk there that maybe commodity currencies come under greater pressure as the markets start to focus on potential risks over the short-term on what's happening to china.

i would look at aussie/dollar. they are looking at all of the flows. we're at a record deficit in canada because bond inflows to canada have dried up while we have a current deficit. there is a lot to argue for the dollar to continue moving higher. especially if the china story were to reverberate. >> short-term funding for the china money markets. liquidity is becoming an issue for them. they are becoming concerned. >> sure. they don't want to see a repeat of what happened in the summertime. they are going to try to deal with that more proactively. certainly that could help ease concerns. but no doubt, we're in a situation where yields are moving higher there. that could result in some concerns over growth going forward. >> bernanke has to be sitting there this morning when he wakes

up thinking finally i got this one right. the fed is going to take a great deal of comfort from that. do you think the market reaction is going to feed back into a further acceleration of q.e. ? the fact that we can do it and nobody is freaking out and it seems to be a fairly calm reaction or positive reaction means that we can get it done more quickly than anticipated? >> yeah, o i do think so. the reason they have gone today is they realize that tapering is not tightening have sunk into the markets and they were comfortable doing it. i would not be surprised if the pace picks up. they have been ultracautious. don't forget in the summertime they said tapering would be finished when the unemployment rate got to 7%. we just started. once the pace picks up, forward guidance, verbal forward guidance becomes less credible and inevitably at some point next year, i think the two-year

yield in the u.s. is going to start moving higher. >> derek, thank you very much indeed. always a pleasure to speak with you. as we head into break, let's take a look at how the fed's move has impacted the markets. we have seen a positive reaction pretty much across the board this morning as you can see. a sea of green. gold touched 500 earlier on. not a huge amount of reaction. there is gold. below 1,200. gold has been under pressure for quite sometime. we're going to take a break and be back in a couple of minutes. ♪

>> good morning, everybody. welcome back. you're watching "the pulse" live on bloomberg television, radio and on your tablet and phone. let's look at the hot shots on this thursday morning. in sydney, australia. the sights at st. mary's cathedral. lights illuminating the church to celebrate the christmas season. the light show will continue daily until christmas day. clowns marching through mexico city. e event is part of an annual

pilgrimage to give thanks to the patron saints. the school established in 2002 has grown into a countrywide program, teaches kids to become leaders and pretty good jugglers by the looks of things. -- ine hyde juggling ling all the stories you need to know. >> he has had a bit of a trick. ben bernanke managing to taper and convince the markets that he won't tighten. stoxx 600 currently up. united states stocks at record highs. every single industry group is gliming as i speak. rates will remain near zero even if we see unemployment fall below 6.5%. barclays says look for $10 billion to come out in stimulus

each month. rate also not rise until mid 2015. that is why we're seeing such jubilation in the markets. yields creeping higher for the united states. up four basis points. 1.6%. remember, u.s. rates overall, if you're going to see less purchasing of the bonds by the government, we'll see yields edging that much higher as bond prices fall. we're seeing more buoyancy in the markets. the u.k. as well seeing bond markets fall. yields, borrowing costs rise. the dollar is on the rise. 1.3670 across the board, the dollar is strengthening. that is going to be the tale of the next year. stimulation has tended to keep the dollar lower. back to you. >> thank you very much indeed. as we head to break, time for the pulse number. $2.3 million.

stradivarius ch a violin sold for at auction. we'll see you in a moment. ♪ . .

>> good morning, everybody. you are watching "the pulse" live in london. i'm guy johnson. francine lacqua off today. these are the top headlines. the federal reserve is trimming its monthly bond purchases to $85 billion. inis the first step unwinding the historic stimulus that was first put in place during the financial crisis. is likely to stay low well pass the time that unemployment drops below 6.5%.

bank is looking to cut costs. investment bankers could receive bonuses. sales people could get cuts of around two percent. finance ministers from the european union have delivered an agreement for paling banks -- failing banks. they will pledge to develop a fund tofor failing banks. and they agreed on cost-sharing procedures. let's talk about the story, and how it has been progressing with david tweed who joins us from berlin. up,, merkel said, hurry but the criticism is ringing in everybody's ears. draghi criticism. if you look at the way they are structured, the european banking

resolution mechanism, it looks clunky. let me tell you how it is supposed to work. the european central bank in its role as the single supervisor is supposed to identify a bank that is having problems. it goes to the banking resolution authority, which then decides what to do. if the resolution authority wants to wind it up, it lets the european commission know. if the european commission does not agree with that course of a ction, then it goes to the council of ministers. that is suppose to only take 24 hours. maybe 100 people involved in that process. it looks extremely clanky, and difficult to administer. the other problem is that this entire resolution fund does not have a backstop for 10 years. if a bank needs money, where will it come from? the national governments will have to stump up the cash. that does not break the

government bank they were trying to break. focuses on market this, it will be interesting. leaders are getting together in brussels today and tomorrow. merkel has been talking about where the eu goes next. what implications are her comments going to have on the conversations these guys will have in brussels? >> the thing to focus on is a german proposal about greater integration. they call it contractual agreements -- arrangements. member states will have to agree uh, certain reforms or certain targets to make their economy more competitive. merkel said there might be 10 of them. one of them am a she said, they could agree three percent of the be spent onp to research and development. the question is -- you can sign up for these contractual arrangements.

will there be some sort of financial incentive? angela merkel says that potentially there could be. that will be discussed today. we will get more about it certainly tonight. and i will bring you more of the flavor of those talks tomorrow. >> thank you very much, indeed. go further east. president putin is holding its annual press conference in moscow and talking about everything from edward snowden to the reason why he is lending $15 billion to the ukraine. >> he made two points. one, that russia is not opposed to ukraine entering into a free- trade pact with the eu. but also saying, and this is done that had ukraine last month, russia would've been forced to defend its market. an interesting statement. he also said that russia's $15 bailout -- $15 billion bailout was heard --

to help there ukrainian economy. he pointed out that the ukraine and russia has a special relationship that goes back more than a millennium. he's trying to dispel this view that he is just made a geopolitical play by buying a satellite state. and two trying to block ukraine from join the european union. so that is where we are right now. >> he's also been making some moves totally, hopefully to take the temperature a little lower, when it comes to the politics surrounding the winter games. 50 days away. it is one of his key projects. talk to us about how much it means to him. >> i've been there. i was in sochi. subtropical climate on the black sea. you can get from the beach to the slopes of the caucasus mountains in 30 minutes. the eyes of the world have been

on russia in the run-up to the games for all of the wrong reasons. one of the issues is the white house coming out the day before yesterday in saying that president obama is unlikely to attend the event himself. and instead has appointed billie jean king, who won 39 grand head of the co0- delegation. she was one of the first athletes in the world to announce that she was gay. that is seen as a snub and an expression of disapproval for russia's anti-gay laws. putin said he wanted to defend russia for what he sees as western quasi-values. welcome to putin 3.0. he has been in office for 13 years. this might be political grandstanding. >> always. thank you very much, indeed. ryan chilcote. maybepany news, eads catching a break after a difficult month art by job cuts.

airbus winning an order from air asia x yesterday. caroline has all the details. how many planes is tony fernandez by? >> 25. the cost of $6 billion. of course, once again, benefiting from the -- the go rowhth in asia. in five years alone, 1000 aircraft have been bought by southeast asian companies. is where the growth is going to be. we will see passengers of 30%, mainly from the middle east and asia. and certainly we will seek airbus feeling pleased about his early christmas present. >> it is a nice christmas gift for us. manila.planes from

last year we order just before christmas 130 plans. >> airasia x being the long-haul unit of the discount planes. >> we try to get out of tony what he actually spent on these planes. let's talk about what his plans are. he's asia-focused. he owns kpr. what are his plans? any chance he will look at europe? >> he likes europe. he is focused very much on asia. he likes india. he did get his finger burn. ed. he foldout -- pulled out in the first half of 2012. he blamed the age of the planes. now with new ones under his belt, he has your opinion sites. -- has europe in his sites. >> are major points are in asia.

we have hardly touched india. we have more in china, japan, korea, australia, the middle east. but definitely we want to come back to europe. and it is a massive opportunity for us to exploit europe, which is not far away. >> yet more competition for the likes of iag and lufthansa and norwegian air shuttle. they are the only discount air shuttle that flies to asia. >> let's stay with eads. its space unit has just launched the gaia mission from french guiana. this was the live pictures we're looking at earlier of the aircraft that lifted off from french guiana. whwaat is it going to do? it will provide 3d mapping of the stars with the largest camera ever made for space mission. it could change the way we look at the universe. >> if you've been shopping for a

new camera or phone, you know your megapixels. check this out. this is a 1 billion pixel camera. this camera will be able to spot celestial objects 400,000 fai nter than the human eye can see. >> if you are to put one year on the moon, from the earth we could see it with gaia. it's a hell of a technology. it is the eyes of the universe. >> the structure was built using silicon carbide. it's all part of the gaia mission to create 3d mapping of the stars. in 1989, the european space agency launched the first experiment to map 100,000 stars. after seven years in the making,

eads' space unit wants to go much further. stars, from which we will have plenty of data about their speed, their heat, their age, and maybe even some of the planets, which are revolving around them. >> the missions cost is estimated to be close to one billion euros. it's clearly worth it. are expecting to capture 1 billion stars. 1 euro per star. >> it will monitor the stars for the next five years, with a promise to change the way we look into the night sky forever. break,w as we head into let's cast our eyes skyward, because that is the way that the european markets are operating this morning in reaction to the fed. ging following a

pattern to what we have seen overnight in asia following the fed's decision, u.s. markets are up as well. "the pulse" will be back in a few minutes' time. ♪

>> good morning, everybody. you are watching "the pulse" live from london headquarters. president obama is set to sign another budget that will avoid

another government shutdown. hans nichols has covered the white house for several administrations. let's figure out the history of all of this. hans, what does it mean in terms of what happens over the next few months? because this is just one part of the puzzle. >> it is. this budget deal was born more of fatigue, fatigue about a variety of fights than any sort of serious coming together, consensus in washington about constraining short-term or long- term spending. we are going to have certainty for the next two years. that is what business has been clamoring for. and you have and the next year about $1 trillion in spending, billionup from $970 from the year before. and it unwinds half of the sequester. so the cuts will not be as deep this year. but do not think this is a stimulative plan. there are still going to be cuts.

there is no new money. what you have over the long term is a deal to cut some $23 billion over 10 years. yes, it is cause for optimism, but when you look at the source of that it is not like any coming together between the two parties. this is fatigue. they basically decided to fight another day. guy? >> another day. let's talk about the debt ceiling. we'll fatigue work its magic in that same scenario? the dynamic in the challenge with the debt ceiling, it was extended until february 7, is that there are fewer votes for this budget deal in the senate. their only nine senate republicans that crossed over, and the house is 83% of house republicans that voted for it. what you have is the big fight on the debt ceiling in february germinating in the senate in part he cut some leaders there, mitch mcconnell, are facing tea party challenges. look for them to extract some sort of concessions from obama,

not because they want the concessions, but they need to prove to conservatives that they are serious about putting up a fight daily, monthly, weekly. that means you could have more uncertainty around the debt ceiling. guy? >> thank you very much, indeed. let's stay with the u.s. theme. the time for tapering has arrived. the fed has taken its first step towards unwinding its record stimulus program. joining us now to discuss what happens next is our chief economist bill, back in the summer, we were all freaked out. since then, the fed has communicated, and it has finally sunk in. when he pulled the trigger on the taper, the market reaction was positive. >> very much so. from may to october, was will we, will we? the only thing that everybody knew is that tapering was not tightening. be.as as clear as he could

i think it was a brilliant statement, a brilliant move. i was figuring 15%. as you said, we have to start sometime. last night was the best time to start because the simple fact now we have a 10 day holiday, so we can really see what is happening. the market reaction has been what everybody expected. positive for equities. the dollar slightly improved. we are seeing a continuing hit with commodity markets. even the market was looking for this -- how will it affect emerging markets? and that is what we will have to look at their the first and for a second quarter. >> the market reaction has been pretty calm. you would've thought that would spur the fed into thinking, beat has market reaction has been holding you back. now that the market can digest what we're doing, we can get on with it and probably accelerate it. >> the key thing that everybody was worried about as sonon as it happens, the 10-year will go to three percent. now at 2.88.

we have seen no major backup, in the 10-year. seen,ly thing we have which is positive for the rest of the world, we are now seeing the treasury spread against most of the other world bond markets the widest it's been since 2007. bill, thank you very much, indeed for your time. from markets.com. coming up, with wrapping paper like this, who needs to get? we are joined by the cofounder of the company who helps save trees this christmas. the european space agency launched the highly anticipated gaia mission in the last hour. this was a live shot we brought you just a few minutes ago here on "the pulse." mapping of the stars of the largest camera ever made first baseman should. ♪

mission. space ♪

>> good morning. welcome back. we are on the radio and streaming on your tablet, phone, and bloomberg.com. francine is on assignment in italy today. she is looking at handbags at fendi. this is the new energy storage

we are dealing with today. the holiday season means gifts, and with that in my house comes a lot of wasted wrapping paper. millions of cut down trees. a company is looking to reduce all of that waste with predictable paper. we are joined by one of its cofounders. itki, this almost looks like is one of those stockings. put me through what the context is. >> good morning, guy. fabricrange of giftwrap. to give people a viable alternative to paper, wasteful paper that is disposable and often ends up in landfill. paper, looks like paper. it's had a rough build. it's reusable. have a try.

>> let's try and unwrap it. i've got to undo here. so how did you come up with a concept? >> my sister-in-law and i, louise, spent lots of christmases together. we have close families, and we have children, growing families. and so that pile of rubbish was getting bigger and bigger each year. >> massive. thate number of bin liners were filled at the end, and we are not very good at saving it. we do try, and the children ripped it very quickly. and we are at the stage in our lives where we wanted to do something that would leave a good mark behind us. we were both professionals, working hard and wanted to spend more time with our families. the two elements came together, and the pile of waste needed to

be sorted. >> basically i can take this -- somebody get a shot of this -- which is a piece of the materials that is crinkly. and once my kids have unwrapped this and use it agian next year. >> in your bottom drawer. what is happened quite nicely is that we had paper and then gift bags came along. bags paved the way. to be reused. notrtunately, gift bags do last as long as fabric, but they said in the bottom drawer and you reuse them. so the concept is there in people's minds. also, the price point is there. there was a shift from sheet to wrapping paper to get bags about ago, and that meant that customers were happy to pay more because they had something that was reusable. we have now gone on and taken it a step further. one of the in

bigger department stores in the u.k. where next? >> we are looking at other department stores in the u.k., and looking at the u.s. >> wow, i love it. thank you very much, indeed. joining us on a completely different way of looking at christmas. you have lots of kids and you will be joining us in the next hour. this is a great idea. >> it is. are you going to raft my -- wrap my gift in it? we will think a lot about the fed tapering during the second hour of "the pulse." we have not seen any taper tension in global equity markets. we will also focus on putin's press conference in moscow. he likes the press conference. it is still going. we will have more details on that, of course. >> as we head into break,

3,2, 1, liftoff. the european space unit has launched the gaia mission with a 3d camera. ♪

>> the beginning of the end. the fed papers by $10 billion a month but pledges to keep rates at historic lows, sees stocks surging around the world. >> america may be paying the price for the nsa spying scn andal. >> plus, astrazeneca will pay more than $4 billion to buy a bristol-myers. thw e two companies joint venture. good morning to our viewers in europe. good evening to those in asia, and a very warm welcome to those

waking up in the united states. i am guy johnson. >> thi s is "the pulse" live from london. >> to the financial markets. why are we going there? we are seeing a bit of a reaction to the fed news overnight. the stoxx 600 up by 1.4%. asia did well, following the wall street reaction. tapering has finally come along. >> let's bring in hans nichols. did ben bernanke did forward guidance right this time? global equity markets seem to be dancing duties to right now. >> dancing to his christmas tune, indeed, anna. he did seem to successfully decoupled this idea of tapering and tightening. the taper has begun, but he has convinced investors that will not lead to automatic tightening. is key indicator here -- it almost more inflation based than the unemployment rate, because

they will keep interest rates thee to zero well past unemployment rate hits that 6.5% threshold. let's have a listen. >> we are certainly not giving up. we intend to maintain a highly, they've policy. nothing that we did today was intended to reduce accommodation. we will still be buying assets ate, andh rea increasing our balance sheet in holding onto assets. we strengthened our guidance today to make clear that we expect to keep rates low well beyond the point that unemployment hits 6.5%. >> we have ben bernanke's word for it. janet yellen agrees to ritchie supports it. what we have is $5 billion less bonds last month. on bondsses each month and mortgage-backed securities. that puts you down the end of 2014 as having close to $4.5 trillion on the fed balance sheet. then the question becomes -- how do you unwind that without creating havoc in the market, and if short-term interest rates

still are close to zero, might there be other asset bubbles? those are the conversations happening on trading floors all across the world this morning. >> hans, what does janet yellen -- she will be taking over the chairmanship of the fed fairly shortly -- what does she make of all of this? does she have any flexibility? ben bernanke,om and this appears he has built consensus. he would build a great deal of consensus and he govern by consensus. willorthstar for the fed be the data. listen to how ben bernanke said, this is all data dependent. >> if incoming information supports the committee's expectation of further progress towards its objectives, the committee is likely to reduce the pace of monthly purchases and further measures steps in future meetings. however, the process will be delivered and dated tha dependent. >> so the key theme here, the

change from the october meeting, then they said they will keep interest rates at least as long as, and now it is well past. here is my shorthand. i am going to keep my christmas tree up at least as long as there is snow on the ground. or i am going to keep my christmas tree up well past there is snow on the ground. guys, which way is my christmas tree going to stay up longer? >> this is like one of those really awful math questions. you have to read it five times. guy to deliberate long and hard about the state of your christmas tree. i don't know if it is snowing. i feel like i am not prepared. >> i'm assuming it is not. maybe that is an indication of how long the christmas tree may remain. >> maybe the christmas tree is not up yet because it is not snowing yet. that is the trouble with for guidance. -- with forward guidance. >> snow is the unemployment rate. >> we get that. >> sorry.

let's go somewhere more serious. isi'm not sure that necessarily going to happen. president putin is holding his annual press conference and talking about everything from edwards snowden for reasons why he lent $15 billion to the ukraine. >> he has not answered hans' question. thempeace activists, 30 of currently in russian jails, they may fall under an amnesty program according to president putin. he made that announcement. saidhis is important -- he russia will continue to defend companies that are developing the arctic shelf. in pussy riot that is russian jails may also fall under this amnesty program. that could go some ways of lowering the temperature in relations between russia and western europe. western europe being very critical of those arrests. along with them, but potentially

tens of thousands of russian prisoners set to be released. the russia president saying that the amnesty program forward. >> i think these are live pictures. that appears to be a woman holding a cuddly toy. can you explain this? >> we have reached that stage of the press conference. >> you know, these press conferences are an annual event. they are somewhat serious, though many would say they are managed. so some of the questions are actually planted. it is a light affair. you may get some critical questions. i do not want to rule that out, but it goes on for 4.5 hours on average. that is what he did last year. his record is four hours and 40 minutes. and his record of number of questions answered is 106. so it is entirely likely that over the course of that time we will hear him talk about an awful lot, including, i guess,

teddy bears. >> ok, let's talk about one of his pet projects, which i'm sure part of the releases today have been targeted towards. 50 days to sochi. >> an extraordinary place, because it has a subtropical climate. the shore is 30 minutes from the slopes of the caucasus mountains. fair to say that russia has been in the eyes of the world -- the eyes of the world have been on russia for all the wrong reason, namely the white house saying president obama is highly unlikely to go. e likely, saying that that delegation from the billiell be co-headed by jean king, one of the first athletes to publicly announce that she is gay. that is an expression of the the anti-approval of gay laws in russia. president prudent in this long press conference even talking about the issue of conservative values, saying that he's trying

to defend russia from western quality values. -- quasi values. he says that liberal ideas degrades to societies. he has been in power for 13 years. he may be in power for another decade. what we might be seeing is putin 3.0 at this point. toarly, trying position russia as the guardian of the concert -- of conservatism with him is ahead. >> thank you, ryan chilcote. >> now a case of politics billing into the business world. allege d u.s. spying may have cost boeing a $4.5 billion deal in brazil. us with thens details. this has to do with brazil's latest jetfighter orders. >> it does. saab won the order for 36 jet fighters, earning them $4.5

billion over the next 10 years. many questioning why boeing lost. is it because it is a lack of trust created by the spying scandal. u.s.ed of course that the spied on the brazilian government. reports that the national security agency intercepted the president communications with staff. the president of brazil called it "an affront." and she called off her visit to washington. does that mean that it is? spillinginto the corporate worldis she being reticent to take on the assets of boeing, and going for a swedish company? saab share up the most on record. the defense minister has not been explicit about whether this decision is linked to the spying scandal. >> the defense minister himself has said the cause of the performance and the cost of

aircraft. and because of the willingness technology.ransfer that is why they won out over boeing. saab has tried to make itself out as a less costly, more reliable alternative. and a french company was also overlooked. and saab has made inroads in south africa, thailand, and hungry. -- and hungary. and there is the question of boeing was overlooked largely because of politics. >> here's what else is on our radar this thursday morning. astrazeneca has agreed to buy or not-- bristol-myers stake. the company agreed to pay $4.3 billion to purchase personal's share -- bristol's share. bristol is focusing on other disease areas. bayer has agreed to buy a

company for $2.9 billion. they will partner on a prostate cancer medicine. bayer will get control of the drug and the radiation therapy. the european space agency has launched the gaia mission today from french guiana. the goal is 3d mapping of the stars. with the largest camera ever made for space mission, gaia is embarking on a five-year mission. >> markets move on the fed taper. a global strategist joins us. fed has wh yhey he says the won the international -- intellectual battle with the markets. ♪

>> the product that we offer is the same worldwide. do the best coffee in the world. it is certain that asia will become one of the largest coffee consuming regions in the world, because coffee consumption grows proportionately with the increase of disposable income.

>> welcome back. you are watching "the pulse" live from bloomberg european headquarters in london. what has market reaction been to the fed? to be honest, not that dramatic. we have seen very little movement in terms of fixed income. equities have been the story. a bigger reaction in the yen. euro-dollar, not budging verym much. godld had a 1.20 touch a little bit earlier on. our next guest told bloomberg

recently, a few days ago, that he would be stunned if the fed policymakers voted to begin tapering be for the new year. he said he wanted it to be happened. he joins us from soc-gen. not a bad thing. >> i did not think they would do it until the end of the year. and may be part of the equity market reaction needs to be seen within that context. fed policyate around should remember the fact that it is an economy with nominal growth over 3%, rates at zero, and a loss of bond buying. the taper does not change that. from 85 to 75, the balance sheet is growing pretty quickly. >> if you look at the level of issuance, maybe you need to take that into account, too. >> so it will go down in the history books as the day went the direction of travel turned for fed policy, and the easiest monetary policy anywhere on

record in modern times began to unwound, but that is a million miles from tightening monetary policy. the trajectory from here, the fact that we had a positive market reaction, liquidity is probably a factor, but nevertheless, we have not seen the catastrophe we would've had if we had done this in the middle of the summer means that maybe the fed can think more clearly about this and accelerate the process. >> i think the game plan is to in by another $10 billion january and keep on going. there are eight meetings next year. >> do the math. >> exactly. that will not slow and less things go wrong. they would pick it up if things went very well. the big test is what happens with the economic data. we're back to that. strong numbers in the first quarter next year and the second quarter, we will see treasury yields break out of their ranges. 10-year yields move to 3.5%.

that would be better for the dollar. middle of next year. the story of next year is, if the economy accelerates, looks as if that is more likely than not, if the economy accelerates, i think people will start questioning the timing of the first hike, but even more the pace at which they hike after that. how fast you get from here to 3%. >> what lessons can mark carney teach janet yellen? >> you have to be very careful not to tie it around too many ribbons of precision. the foreign guidance wrapped around an unemployment rate in the u.k. is backfiring, and you need. to be very careful you want maximum degrees of freedom. if you want interest rates to say -- to stay low. >> will draghi be cheering this decision? >> like anything that normalizes

the world, humanlike growth in the u.s. and he would like them to raise rates and get the euro down. euro-dollar is not going anywhere very fast. much as it would be nice, probably all we have done is increase the likelihood that the top for euro in this cycle is the side of 1.40. it will not change my view that we will be at 1.20 in three to five years. >> the yen? >> the yen is moving faster. it tracks with 10-year yields. stopped as they stopped. dollar-yen is going to 1.15 at the backend of 2015, longer- term. short yen is a popular trade. it will not be a straight line affair, either. yen weakness is the main part of abenomics that they will try to deliver. >> one thing that the fed said that was interesting is talking

about that if the data works, they will pause the tape her. he did not say they would restart q.e. or increase the number. is that significant? >> i think that is sensible. if the economy shows weaker data, they are still doing $75 billion a month. in extremist, they can accelerate. not growingmy is very fast, we're seeing 1.7% annual employment growth month after month. there is a gary good -- very , there is uncertainty about whether we can get an acceleration above 2%. they might re-accelerate q.e. if you head towards the bottom of browth and -- growth and head towards recession. it is hard to see how that could happen. thank you very much, indeed.

>> coming up on "the pulse", christmas comes early for airbus. a big break for eads in a month marred by job cuts. that story later this hour. ♪

>> welcome back to "the pulse" live from our european headquarters in london. oogle declining to renew a deal with in israeli translation babylon, the shares of the company plunged. it is this this business is completely different. ourmiller lite -- middle east expert has more from the tel aviv stock exchange. >> i have the chief executive with me. nice to have you with us once more. we were talking about babylon shares. they plunged after google declined to renew their deal. you insist that investors were misinformed. >> y eses.

thanks for having me again. we provide a platform for publishers to help them distribute and analyze their products. we help them make money, get more traffic, and we help them analyze data so they can improve their performance. some of those things, some of those products we use and be anything. it is a platform, not a product heard in regards to our partnerships, we are very happy. with google, yahoo!, bing and ask, and we expect them to continue for a long time. >> where do you think babylon went wrong? >> i am not going to comment on other people's companies. the people have some issues and i feel for them. but i'm focused on us and building perion into a billion- dollar company in israel. >> you said last time we spoke that you were hoping to hit that target within three to five

years. are you sticking with that? >> certainly sticking with that, because i do not want to give investors more than i already said. i think it is doable within the next three to five years. i hope we can beat that timeframe. >> a lot of people are familiar with their products, but that is a small part of your business. where do you see the most growth coming from? >> the most growth coming from today is the evolution of what we were. with incredimail we realize that the bigger opportunity is to people grow their business mobile and online and the desktop. it gives us this unbelievable flat form, for managing of apps like incredimail. we gave the opportunity for growth is surrounding publishers with a full solution -- analytics, modernization,

distribution -- and taking that to mobile and tablets. coming up, >> that deal will close in january. how long before you look up for further acquisitions? >> first i will start with the first acquisition. we were set to close in early january. we are excited. the new perion. we will reach for the top as we go forward. number one. number two, we expect more acquisitions. i do not think we will do a big one quite so soon. but as we look at the platform, we have to fill out some holes with regards to how we move our business forward. with regards to going forward on being acquired. our business is focusing on israel. >> we wish you the best of luck. the ceo of perion. i'll hand it back to you in london. >> thank you very much. >> coming up, christmas comes early for airbus, but the news may not be good for european carriers. >> as we head to break, here is

another look at how markets are moving on the fed decision to taper. they did give is that news yesterday. european stocks are trading higher. ♪

you you cannot get rich by writing checks to yourself. i do not think the problem in the west is that we have not spent enough. our problem is we need more business investment. we need to export things the rest of the world wants to buy. these are our challenges. >> that was george osborne speaking to charlie rose on the growth versus debt reduction debate. you can watch the full interview on bloomberg.com. and you can catch charlie rose weeknights at 5 a.m. and 10:00 p.m. uk time.

welcome back to "the pulse" live from london. i'm anna edwards. it is time to look at the other top headlines. finance ministers have delivered an agreement on how to deal with failing banks. they have place to create a 55 industry resolution fund over the next decade. they also backed the idea of creating an agency to handle failing banks and agreed on cost-sharing. the ukrainian president is speaking in the ukraine on television. the president says the russian bailout deal was not politically motivated, and he still wants three-way talks with russia and the eu. tosident obama is expected sign the first bipartisan budget deal from a divided congress in 27 years. the senate cleared the $1 trillion measure with a solid majority. it reduces spending cuts imposed under sequestration and lowers the u.s. deficit.

to.king of that topic, over >> let's talk more about the budget. ofy know the inner workings capitol hill. hans nichols is our international correspondent. so progress, but how much? >> they have shown they are really good at cutting the low hanging fruit. it is the first time we've had notin 27 years, and that is insignificant. but overall, with the budget does is basically unwinds half of those automatic budget cuts, this week are station -- the sequestration. $23 10 years, it cuts billion. in includes the fees on airline passengers. you saw the merkel budget with the autobahn fees. this is america's version of that -- [inaudible]

the structural deficit problems with any of the entitlement programs. social security, medicare and medicaid. i do not want to dismiss this because it does represent a coming together of parties. nine senate democrats voted for it. it flew through the house. it means it is born of fatigue, and both sides may want to fight on other issues down the line, and there will probably be plenty of opportunities for that. >> we may get a few of those in february. what is the word on the debt ceiling? >> the dynamic on the debt ceiling, february 7 it runs out. republicans probably they are indicating they will not litigate again. they had such a good few cycles, a brilliant six weeks, two months of negative news on obamacare. what they do not want to do is shoot themselves in the foot again. they may choose to litigate on spending. they are going to try to extract something. mitch mcconnell is the senate

minority leader. they will want to extract something for the debt ceiling. it is just a question of whether or not obama will hold the line against erie it is another opportunity for a fight. markets will not like it. for the next 16 months, there may be smooth sailing. >> looking forward to a bit of smooth sailing. hans nichols, our international correspondent. >> from smooth sailing to clear have had. -- clear air ahead. eads may be clearing. airbus won a sizable order from air asia x. caroline has the details. how big a deal is this? >> $6 billion. 25 a-330's. this is what will be delivered come 2015. it is the long haul unit of a budget airline in asia. it is amazing the benefits that are being reaped by the airline d growths from the rapi

we're seeing in the asia- pacific. in fact, 1000 new aircraft in the five years have been ordered in southeast asia alone. it was a nice present for this time of the year. >> yeah, it is a nice christmas 330, fromus with 25 2- an airline which is used to it. last year they ordered just before christmas 100 planes. >> certainly, we know that they will be done by 2015. so you're bigger ones that can carry more fuel or more passengers and more fuel- efficient shorter ones. >> and this is a company that has tried and abandoned long haul, low post into europe. could they be coming back? >> interesting. tony fernandez had his hands burnt in europe. 2012 was a rough ride. he exited because his aircraft

were not fuel-efficient enough. make enoughe to profits, he says. his eyes are still firmly on asia, but maybe slightly europe. >> our major points are in asia. we still have hardly touched india. we have got china. japan, korea, australia, the middle east, but definitely we want to come back to your. -- to europe. there is a massive opportunity for us to exploit europe, which is not far away. we interview the norwegian air shuttle earlier this month. they are the only discount airline operating from europe to asia. >> it is interesting how these new aircraft and more efficient aircraft are changing the economics of that long haul, low-cost flying model. that was company news. let's turn our attention to the markets. manus has the latest.

>> it is the morning after the night before, the equity markets onm to be have evened well this first and from the federal reserve, a $10 billion cut in q.e. a soupcon of what may come in2014. november, these markets have dropped by 2%. there is some reprieve to the extent that we were so well guided that tapering was coming, that it was down to timing. the question you need to ask is this is the european equity market. the next move will be the trading ranges that you see in u.s. treasuries. this is the 10-year government bond. yields are dropping. that is probably to be taking quite well at the moment. su treasury yields are dropping. european equities are playing catch-up.

this is day one of the full acknowledgment of what is happening at the federal reserve. .8% on thep, down by s&p 500. yields are falling on treasuries, equities taking the news quite well. american equities dropping ever so slightly, but you begin to understand the concept and the dynamic of taper and the challenge for the world when you cross not onto to the dollar, but when you look at emerging markets. now, this is south korean won. it is the biggest drop since july. ok? you then look at the indonesian rupiah. and you also have similar kinds of moves there. so where we are seeing the immediacy of taper is in emerging market currencies and equity space. less so in european and american equities. let's see what the day brings. >> in 20 minutes, "surveillance" takes to the airwaves.

tom, what will you be looking at? >> after yesterday's historic meeting, it was a surprise. they tapered or the markets moved. we saw sterling move as well. we have two wonderful guests. together on surveillance for the entire hour, peter orzag and mario gibelli, the value investor. orzag, his work at the office of management and budget. of politics into finance and investment for 2015. we will take a look at nike. i woulds that you or not buy. they are 100 gagillion shoes that you where to be cool? >> do you not do that, tom? >> i just don't think they go with my bowtie. >> no, they are made for walking, i heard. >> sure, anna.

>> tom will be back at the top of the hour. >> we have coming up for you sooner than that, you are looking at live pictures, the russian president holding his news conference. he's been talking about what has been happening in the ukraine. what is incredible about this news conference, that in order to attract his attention, the journalists are holding up placards with their station or publications name on it. it is a press conference structure i have never seen before. there is one of them. we will dig into the story a little bit more, what putin has been saying. chris weafer coming up next on "the pulse." ♪

>> welcome back. live from our european headquarters in london. company news. the european space agency has launched the gaia mission from french guiana. the goal is 3d maapinpping of te stars. with the largest camera ever made for a space shuttle. saab has big now going at $4.5 billion deal. supply 36 jet fighters for brazil's air force. the move comes as the president says u.s. spying on her government is an affront to her country. citigroup's bonuses for investment bankers will be little changed over last year's. u.s. bankers looking to cut costs.

sales people will get cuts of2%. two major purchases in the pharma sector. bayer is buying a partner. and astrazeneca will pay for bristol-myers stake in a joint diabetes venture. ouring us is a guest from bloomberg industries team. sam, good morning. let's start with what has been going on with bayer. you have been digging to the numbers all morning. >> we just went back and since we last spoke and looked at the valuation of the deal. it is not yet report any revenues because they have only just been launched. they seem to be a lot more positive about the product compared to the consensus numbers. they are calling it over $1 billion in sales, and that is not what we are seeing.

every quarter, this is just launched, so they have some visibility. whether they know something that is push them hard to do this, i do not know. the point is interesting, if you look out to 2015, based on the numbers we have today in the consensus numbers, this puts it on at 19 times ebitda. line with what some competitive deals that we have found suggested its value it should be -- should be. >> unremarkable, this transaction? >> it is remarkable to the point that bayer does not do this. it's all cash. no contingent value rights. >> ok, done deal. let's talk about the astrazeneca transaction. mean, if you look at that deal, it is something they had to do. they are in that space already here they have made the bed. they are taking the rest of the

half. the point about this whole thing is that these are not assets without trouble. you look at the lead product. these treatments are for diabetes. by injection. or all oral drugs. they've had a tough time in the markets. it is a difficult product to handle and inject. $1.7ey have taken a billion charge, relative to the expectations they had for the product. the question is, will it perform better going forward, despite the fact they are getting competition from eli lilly injectables? side, the oral drug johnson & johnson his first. >> i will look forward to hearing those answers. sam, thank you very much,

indeed. anna, back over to you. >> vladimir putin is hosting a news conference this morning. 50 days before the winter olympics in sochi. chris weafer joins us to discuss the president's political strategy ahead of the games. he is a senior partner at macro advisory. he's worked in russia for 15 years. a lot of the western press coverage ahead of the winter olympics has been around human rights, around gay rights and freedom of speech. how will this play out as we build up to the winter olympics? yeah, the government is actively trying to defuse these issues. you have heard in the last couple days, the greenpeace protesters will benefit from the amnesty. they will be released from russia in the next couple days. sochi itself, russia has

said it will have a soft touch in terms of any protests, anti- gay legislation protests. protexst set aside a area. the whole emphasis from the russian side will be to try and mitigate any potential ope that thes and h focus is very much on the games. >> also, the decision by russia to give $15 billion of aid to ukraine in to them a preferential rate on their gas. motivatedhat this is by fraternal ties. he says there is nothing against joiningnd the ukraine together. what do you think motivated russia? >> the two factors.

the ukrainian economy is in recession this year. givenhink had russia not this aid package to ukraine, the situation would've deteriorated and russia could have ended up in a conflict situation over gas contracts. and that would have been pretty bad in terms of ongoing publicity for russia. the more important reason is, of course, about the customs unions. the president's ambition to build up the customs union, which now rings together belarus, kazakhstan, and russia. next year, armenia and kurdistan will join. it is clear that the president wants the ukraine as part of this customs union and develop that into a eurasia union. >> what is the economic priority for the russian government? what should it be? union,it be the customs

tackling corruption, a more business friendly investment climate? what is the secret? >> i think the customs union is a more longer-term project. right now the priority for the reversent is to try and this sharp decline we have seen in the economy this year. at the start of this year, the expectation is that the economy would grow at 3%. now we are lucky to get 1.3%. the next couple of months for sure, the government's attention will definitely be on sochi. once it is finished, we spec to see a strong focus on the economy, a very -- strong debate over what to do. we already are hearing from different sides, from the theomy minister, and central bank. it is quite clear that come spri ng, the government will have to

put in place of fiscal stimulus in order to boost confidence and restore growth to a higher level. keyeah, absolutely the priority for the government will be on the economy. >> chris weafer, senior partner at macro advisory. coming up, can nike do it? they report results after the close of trade and investors are looking for sneaked up sneaker sales. ♪

>> good morning, everybody. the fed story was something that we were, we were expecting us some point, whether it was december, january, february, take your pick. the process is underway. currency markets are beginning to adjust. the majors not seeing much movement. last few hours has been rising against the u.s. dollar, but the commodity story is front and center. gold has been under pressure. watch what happens with china this morning. pboc saying that it is adding short-term funding markets to improve liquidity. 2014.ems for >> let's get out to hans nichols. he is back with us to look at what you need to know for the

rest of the trading day. nike earnings out later on today. >> nike is an exciting one ke is the fifth company, there are four others that correlate better with gdp. if you want a sneak peek at a look at those earnings. guy and i can reminisce about our favorite sports stars in our childhood. >> you know me so well. look, not. let's talk a little bit about the budget. sign on the dotted line. what next? >> then we have about a six week pause, and then we fight over the debt ceiling. it is low hanging fruit. nothing serious on long-term entitlements. it does trim spending. it does a little bit to unwind the sequester here than we have another fight on the debt ceiling. then after that, it looks like most of the fiscal fight could

be over. abouthey will fight immigration. but the fiscal fights after you get to the debt ceiling could be done. >> not much of a taper tension going on on european equity markets today. more the taper t, perhaps. -- taper tango. >> not will have to get something about argentine wheat prices. ben bernanke successfully decoupled tightening and the taper. low interest rates as far as the eye can see. long paste 2015, unemployment at 6.5%. >> thank you very much. hans nichols. >> european leaders are gathering in brussels over the next 24 hours. i wonder what they will be doing. >> not a tango. >> let's take a quick look at

the markets. european markets are reacting to what we saw overnight for wall street. "the pulse" will be back tomorrow. "surveillance" is next. ♪ . .

this is "bloomberg surveillance." and yell andke surprise markets -- they taper. equities search, the dollar, too. there is too much information.

we are up to our eyeballs and a digital, and now facebook wants to give you a video ads. his aira is wearing jordan retro 11 gammas. limit one per chimney. good morning, everyone. this is "bloomberg surveillance." it is thursday, december 19. i am tom keene joining me, scarlet fu, a. steele, alix steel is here. good morning. >> good morning, tom. we will start with china. .hort-term liquidity operations staying in the region, new zealand's economic growth accelerated to the fastest pace in almost four years. deftly good news there. economic data here in a u.s. -- it is thursday, so we get initial jobless claims 8:30 a.m., 9:45 a.m. bloomberg consumer connc