>> giving russia the cold shoulder. investors say it poses the biggest risk in world markets. russia's economy struggles. we will look at what it means for prime minister shinzo abe. activists troubled look at the megadeals in the drug world. >> welcome to "the pulse." i am francine lacqua.

leave this from the g-8 deciliters from the julie -- leaders from the g 20 summit are heading home. the a lot of attention on the summit on vladimir putin. we heard tough talk from a number of his world leaders. tell us about it. >> he would've been expecting a cold recession even though the weather was extremely warm and the other g-20 leaders did not disappoint. the first day of the summit on saturday, tony abbott, the australian prime minister, hosted a barbecue. vladimir putin dying along. alone.d the canadian prime minister with his hand extended a he said, "i guess i will shake your hand, but i have one thing to tell you. get out of ukraine."

littleend up leaving a early although his reasons had to do more with biology than diplomacy. this is what he had to say. >> it takes nine hours to fly from here and nine more hours to moscow. on monday, have to be in the office. hours ofintreau-5 sleep -- i need 4-5 hours of sleep and i went up to tony abbott and i think our work is done and successfully. >> no one is reading too much into his early departure. to be fair, president obama of the united states left only a couple of hours after president putin, francine. leaders -- that would explain why he had to leave early. the leaders agreed on a growth target of 2.1% by 2018.

very ambitious, is it achievable? a gulf betweenys words and deeds and these type of summits. growth bytage points 2018. the imf and oac will be reviewing the progress and they say, yes, it is achievable, provided all of the policies we discuss over the weekend actually get implemented. that is when the hurdles begin. and the australian prime minister, tony abbott, was complained with the other leaders he is having troubles. budget was presented away back in may and here we are in november and very simple things like a seven dollar charge to go and see the doctor has not been passed by the senate. japan hasr news and fallen into recession, surprising everybody. month, the- next

g-20 leadership in turkey. they said they will put economic growth on the back burner and it will be climate change. 2018, a long coat -- a long way. perhaps the growth target is achievable, francine. would say optimist that. paul allen covered the g-20. day --p question of the what would you have said to vladimir putin if you had met him? tweeted me. i know what ryan chilcote would've said. he would've said vodka. it comes as investors turn a cold shoulder on russia. 52% chose the russia/ukraine conflict as the greatest threat according to a bloomberg global poll. brian chilcote joins dutch ryan chilcote joins me. will we see more sanctions?

>> we will see more sanctions. the meeting began a few moments ago. it is a question of what kind of sanctions we will see. we were told they will be personal. an expansion of the left of individuals such as travel bans and asset freezes and specifically, we expect the eu deems connected to those november 2 elections that took place in the east of the country and people the eu deems as having a role in preparing those to the list. will he go beyond that? will the people within the president's inner circle? business people? you were talking about danger from russia as something the ukrainian president has been hitting on. where he settled right now the east of ukraine is the most dangerous place on earth and it is more of a direct dan isis -- more cigarette than isis and it appears to the -- and it is more of a threat than isis.

to be economicng sanctions, will have to wait. given the frosting perception that guzan got, would you say the crisis is getting worse? >> i think it is getting worse. when he is mocked by saying i do not know why the president broke his warships, yes, you know, when you have relations that acrimonious. it looks like many leaders are expected to step beyond where you can have reconciliation. in addition, we have fresh out.matic breaking the russians announcing they kicked out a number of polish diplomats and they say it is retaliation for the polls kicking out some of their diplomats. in addition, russia's added a german diplomat. the german foreign minister

arriving in russia tomorrow to contain negotiations and they will be discussed ukraine. the most important thing is some criticism right after the summit ended from the russian president directed at the ukrainian president. cutting offhim for the east of the country financially. he made the decision in state company should pull out in the banks will not be allowed to service 3 million people. the russian president said it is it responsible. that is escalation in my eyes. >> ryan chilcote with the very latest on ukraine and russia. from diplomacy to the market impact of the crisis. investors see it as the greatest risk to the market. the ruble has slumped 31% against the dollar. costa joins us. give me a sense of how serious this is. it has been flagged as the bigs risk to investors.

what does it mean from affects point of view? are two points to highlight. number one, this sanction rublely impacting the performance and the second point is the level. going back to the second point, level when it comes to how we trade in general has so far been very limited. when it comes to the level of the internalization of the noise and sanctions and russia, this is putting a lot of pressure on the ruble. bonds ruble assets, the and equities as well. sanctions as long as stay on course, you do not need to see a stiffening of sanctions. as long as they stay on the

table, you will be very difficult to see a report rebound. >> how concerned are you given that the ruble, in the room of politics afc wild-card, being vladimir putin -- in the real of politicsm and you have a wild card, being vladimir putin. >> yes, absolutely. a lot of volatility. believe that can in the kremlin can be in general , there is volatility of the actions imposed by the kremlin overtime. but in general, you have to look at things and take a step back and look at things from their perspective. ukraine is a cushion for russia. kremlin has a very clear mandate to keep the

volatility on easter ukraine and keep the destabilizing on track in order to keep his buffer, ukraine as a buffer, between the west, nato, and russia itself. it is very difficult to believe it will back off from this agenda. we will probably -- [indiscernible] still a variable of fear and risk in the markets and glaring. i honestly believe after the end hashe day, the central-bank been a lot more liberal on the fx. .e would probably be continuing we're probably looking at a much weaker ruble from the current levels. >> give me a sense of what your favorite trade this. we have the unexpected news on

japan. strength will really surprise the market in the next six months. cycle has nots finished yet. that is the one of our report. has further to go. we do like the dollar. currency like the hungarian or the polish, given that we still it could ber and trading a lot lower here in a couple of months. your perspective on what comes out of ecb in terms of the dollars, we believe the diversions between u.s. and europe will provide further room for the dollar downside. we believe in terms [indiscernible] the stories are quite different. we do not let ruble. we do not like ruble bonds.

issue these as an index layer. -- it should use as an index player. turkey, which is very high yield. onwhat about your take japan? the great financial experiment and not going as planned. >> he yes, a big financial experiment. the boj is giving time, the fight is still on and the dollar/yen levels from the point of potential for rebound and the japanese economy that came out overnight is clearly showing to us that in the boj should be forced to do a lot more going forward. the only acts traction to the dollar cycle. 15%,lieve it could go for 16% gains. trading you will be

and ofgher on the yen course, the lower yielding currencies can be the ones -- not in the high-yield. >> thank you. d of emergingea markets at citigroup. what else is on our radar. david cameron says the eurozone is teetering on a possible third recession. will stickd the u.k. to his economic plan and it must do all it can to protect itself from a global downturn. china open the landmark trade between a home called and shanghai stock exchange is and investors piled into the shares. it hit the trading by 2:00 p.m. local time. one of china's biggest today's so for a liberalizing its financial markets. making -- close to

buying a company. the deal could be announced as soon as today. it would have outlook and -- allergan. ating up, a closer look activis and allergan. we'll have a wide ranging conversation with a policymaker , andwas big about g-20 much, much more. state-owned. ♪

>> welcome back to "the pulse." time for company news. the chairman of a company said the bank needs to wait merger scenarios of other lenders. he said no one has submitted a merger proposal so far. a gapseeking to plug uncovered by european central bank stress test. deal tok has reached a begin selling mobile services to its customers in britain according to people familiar with the matter. an official announcement is planned as early as this week. sports director is looking to acquire all 50 l.a. fitness gyms afterwards put up or so last

week. according to the sunday express. the sports retailer already -- and50 and eggplants plans to expand to 200 sites. to one of the most contentious takeover battles, we go be close to having a winner for botox as it tries to, fight off a hostile bid. joining us caroline hyde. a deal with activis could change everything. >> the fight against the wrinkles is getting bigger and bigger. $20 billion. it could be the 30's and all of m&a so far this year if activis allergan goals for allergan. is a white knight situation. allergan has not wanted to be bought by the investor, bill ackman. a big corporations such as

allergan hooking up and going for a target that does not want to be bought. it is not want to be taken over. the research and spending, the same argument we heard from astrazeneca at the beginning of the year. it is all about a white knight coming to the rescue and that third-biggest deal. bit of flavor. it is about a rmb, that's why they are so resistant. raise their offer? >> it will be the key question. they believe they could come back to the table and they were willing to of their bid. many feel they can afford the extra. leveraged.very what it tends to do is use is useful tax structure. it is very minimal.

up andtends to be itself stop spending on are in the. &d.stop spending on r ackman,a plan b, bill an a tune of $18 billion in investment. it would be to beef up once more. it will be ackman and corporate working together and this team and they seem to have going. , thees if we hear the deal team that works well for actavis and allergan, going forward, pick reduce the cost and would be a much more stable environment.

>> carolina, thank you so much. there's a lot of m&a news especially in pharmaceutical. this is what i want to tell you about. buyingnnouncing it is the valve merck drug rights. it will cost about $650 million. it is once again a fight to get into oncology. the german company's move to get inore oncology and the u.s., terms of the agreement have financial, pfizer would pay as much as $2 billion to merck. it is one of the first of the deals. if it goes through, we they will pay extra. andill have the ceo with us around 10 minutes. do not mess with a great interview. coming up, the long call. -- long haul. love could boost

the economy by 300 million pounds a year. we will talk to the author very shortly. ♪

>> though russian market is down 20% this year. we will not sierra recovery next year. what is hurting us is the situation with russia. russia's one of our biggest markets. >> for now, we see big headwinds.

>> of course, everything has really been [indiscernible] in europe. them.try to stay close to the commitment with regard to our country. ceosat was european talking about the impact of the russia/ukraine crisis and what to do and had have had on their businesses. investors have voter russia as the biggest threat to global security. let's check in with the markets. our markets editor jonathan ferro has the latest. >> i got a promotion. it is great. i will get a downgrade once manus cranny is here. you have the ipaq down by toomer .6%. the ftse down by 1%. have the ipaq down by 1.6%. back in recession.

follows by aike recession. the nikkei is down by 3%. at 116.en stays prime minister david cameron warning of another global economic downturn. in sterling, of particular interest. we are near 12 month lows. down the -- down by 0.3%. hsbc pushed back their first fortune brands hike here in the u.k. for the first quarter from the first quarter of 2015. what happened to the race to be the first central-bank at everybody is pushing back. >> to why so much. the very latest on the markets. >> thank you so much. japan sinks and to recession. the fourth. we look at the political consequences of from mr. shinzo abe. we have a great interview with the ceo of merck after pfizer is

buying merck's cancer drug rights for $800 million. that interview is after the short break.

>> welcome back to "the pulse." i am francine lacqua. the british prime minister david cameron has warned instability in europe presents a risk to the u.k. economy. cameron said that eurozone is teetering on the brink of a recession and britain would continue to use the monetary policy to support growth without adding to borrowing or data. president barack obama has called the beheading of aid afct --eter kassig, an

act of pure evil. here's the sixth that he is a the sixth foreign -- if this is for there to be beheaded by isis. six -- heis a these sixth foreigner to be beheaded by isis. the nikkei closed down almost 3% on the news. , let's walkt japan on the economy editor for japan bloomberg. does it mean for i'm a nymex? -- four abenomics? advisers said it was a body blow for abenomics.

the sales tax increase has to be postponed and he is back in japan for the g-20 australia and have a press conference tomorrow and we'll talk about what will happen with sales tax. the heat and humidity will want to go to the people with his policy. to go to thets people with his policy. data, it means that the sales tax increase from next year, for next year will not happen. >> how is the economy looking for the third quarter? quarter, it third fell into a recession and what would seem for the fourth quarter. japanese companies are in a strong position. they have massive profits. and the third quarter, they had the massive profits, the highs and have ever had. bigger than the economy of

canada. if they do see a pickup in consumption and consumers are going to go out there and spend, companies are well-positioned to increase wages. but, so far there's not been any sign of it happening. >> to why so much. .ames mayger -- >> thank you so much. wrote the definitive book on japan's economic crisis in the 1990's and is the president of an institute. yunnan want to miss that very important interview coming up. one of our top stories. merck kgaa is one of the biggest movers on the stoxx 600. agreed to pay $800 million for the rights of a cancer drug being developed. us on thefor joining

phone. why were you seeking a partner for this medicine? >> partnerships -- good morning, first, to all of you. earlier that we would develop a pipeline and partnerships wherever it makes is a line of partnerships we have done in earlier stages and it is important and size and numbers and everything up to now. pfizer is a top company and great oncology presence, created oncology. it is not only about risk here but a knowledge sharing and getting a new platform for the patients as fast as possible to the market. what pfizer brings that you cannot achieve on your own, is extra knowledge or two heads were better than one? >> it is both.

pfizer brings knowledge in some areas in oncology we are making the necessary competence. and the other way around. -- one has a huge opportunity and many indications as some has the competence and others not. the same applies to countries and very strong and development and others are good. it is both. teaming and putting the financials together. 850hat we do with the million dollars in cash you will receive from the deal? >> as you may know, we have announced the intent to acquire a life science business over the next years. the priority will be leveraging. focus ont change the

the biotech business? atno, it does not change all. we are working in three business areas. life science business and health care business. tore are enough resources grow with all three business areas so there is no change in focus. you're strongay focus is really cancer treatment? three, two of the three areas where we focus on innovation as oncology. areas. one of the we focus and we have build expertise and products in the market. outside of the u.s. and we have 2 promising compounds and later stage development. one being part of the pfizer deal. sense of howe a

much consolidation you still expect within your industry. we talk about consolidation and m&a day in and day out. how far can it go and what play will merck play in all of this? remain on ouro own. us as a bite consolidator in the game. we believe as long as we managed to get innovation and to your business. you remain attractive as a partner for an event the players. mark does not play part of the team. a merck kgaa does not play part of the team. how far can it go? it is difficult to test from the outside. i believe it is the big players with a huge development and marketing capabilities and there is room for the smaller players

as long as the big players innovate and look at the right places in the market. will findthink you more deals like the one with pfizer going forward chris mark a new kind of benchmark? the deal is certainly a benchmark. noty knowledge, there's been a single compound and pharmaceutical history of this size. certainly, it is a benchmark deal. whether we can do more of that depends on what we have to offer. what ours again on research brings to the table. let me say this for the next year, i do not expect any [indiscernible] >> sir, to why so much. karl ludwig-kley, ceo of merck kgaa. conversation about all the things that matter. the russian crisis and much,

much more. ♪

>> welcome back to "the pulse." let's talk tech. a company is on track to launch 10 new companies.

hans nichols will discuss how the stored up is doing. rock internet reported its first ever result to dear -- today. what did you learn as mark critz and they are in expansionary mode and not in explanatory mode. -- >> what did you learn? expansionarye in mode and not inexplicable -- explanatory mode. they are starting another 10 this year. when we look at the numbers, what they gave us was in that are doing well. know wheret let us their portfolio companies are doing bad. they may be cherry picking the areers but they say they doing remarkably well. when you look at motor, their revenue, their revenue is up 111%. the same is true with a similar company in latin america and india. emerging marketsbets. --

it emerging markets bet. what a things is they will be first and then what have the -- what rocket things is that will be first. we need to dig in deeper and get better numbers from the company itself before we given aggregate picture. we have a bunch of piecemeal companies. sift through will numbers for us. hans nichols on rocket internet. the u.k. has a proven track worker for help with the tech startups get off the ground. the country could be better at nurturing according to a report out today that the shifting focus to scale up at gap could boost the economy by 200 billion pounds a year. joining us is the author of the report, an angel investor, adam posen and caroline.

-- sherry and caroline hyde. you say it gets much more difficult to bring these companies into full powerhouses? u.k. versailles has gotten so good at starting up companies, we passed the number of startups than they have in the u.s., for example. to get them into larger aspanies, we do not get quite as many. my report looks at whether or of skillu did close gap, what will be the benefit in terms of jobs and wealth. they are incredible. from three different organizations and verified 1000 times. what we news is we know need to do to grow the smaller companies from larger ones. world,ed from around the 20 different countries, about the things you need to do to ease the growing pains of countries as they growth from 50

employees to 100 employees to 500 to 1000. when you ask the companies what they need, they say we cannot accept the customer orders because we cannot find people to work for us. there are 990,000 open jobs in the u.k. today. largely from the scale of companies. if they gold hire, find somebody to fill the open jobs, they could fill more customer orders. if we wanted to get companies as big as google or apple, we would help them in this country and the next country. be as big as google or apple, we need to sell across borders. we have identified things we have to do to have leaders of businesses expand into other countries as well. it's not rocket science. there are tried and true messages matt heads of how to do it. we know what -- tried-and-true

methods of how to do it. we know what we need to do. >> is it about how do you get the leadership? identifying the problems, give us a sense. we neednd the long run, to make sure enough broad population from colleges and universities have the right skill sets. is 1 million and will increase to 2 million and that's not the right direction. and in the short term, we can have executive education courses, flexible forces that seem to do the trick. we could try them here. we have tried them in a few places and they work well. also in the short term, getting theseso we can help people accept their customer orders. they have the orders and they cannot accept them on a short-term basis. they take people from other countries. there are 9000 of the scale of

companies and they can be identified by how fast they are getting new customer orders. ,ot someone claiming to grow how many customer orders and did you have last year? you grow at 20%? not in an idea stage. they are three years into executing great products and we need to guide them into a few extra countries, a little more easily. >> sherry, you have identified 900 companies. >> 9000. lot ofctually have a angel investors, call the program saying i am looking for the next big thing. ?s there a theme simple ideas? execution? genius ideas we never thought of was mark what is hot? >> the 9000 companies have been identified by their customers because the orders have been growing by 20%.

you are all over the country. we looked at the science companies, growing on average 90% per year, not 20%. we looked at 50 signs companies and they are a turnover group from 600 million to $1.3 billion last year. this is researching just looking at data on private companies already in the u.k. >> what products are they coming up with? ip.roducts protected by intellectual property. they work in one country. you have to get them into a lot of other countries. if they work here and are in demand, it's likely they will be in demand in other countries. how do we help those leaders who might be inexperienced learn how to do it fast? there are only 9000. we can identify who they are and with other -- and with better accuracy. peopleave a lot of

watching want to invest in these companies. >> set -- science and tech is great. >> valuation? >> i think david -- valuation, you have to look at the value add, the fundamentals behind the company. , i invest in them as an angel last week and they passed $1 billion market cap. they have a fundamentally great product. and a lot of people using mip using get. it is very scalable. -- and a lot of people use it and like using it. house prices -- >> the data technology companies? >> and he excite me you are seeing -- are there any other companies doing it really well without the help of the government? >> there are companies door really well. one has reached $1 billion and

that is quite good. even the london stock exchange talks about and they did the results last week at 18% and they passed $1 billion in market cap. they are scale up. we should shift the conversation from small or medium or large to growing or shrinking. more customersns like it and wanting more which is good on a fundamental basis. if they are shrinking, you need to ask, will they be around in the next 10 years? our next jobs come from a jobs less than five years old. gdp comes from companies that do not exist 15 years ago. ,f we highlight the company's it will be easier for the universities to invite these leaders on two campuses, so the students can see the jobs created for them for when they graduate. that would be a great thing,

making the connection. celebrate the heroes who are going to companies. >> you have a few of those coming on today. give us the names of companies. ode, a greatostc success story. etts, a luxury company. operations all across the world. they have grown and successfully scaling across borders. them, i think to they will talk about what it is like to expand rapidly and how difficult it is to get it does skills to join them in the first them tod b, to train serve 50% new customers and this year and a year after and the year after. it is very rapidly changing environment, as a business leader, you have to continually train and help your staff and

your leadership. it is changing every day. it is a good situation. outdoor a google never complained about wondering how they can serve their customers. -- apple and google never complain about wondering how they can serve their customers. we need to concentrate on that and before long, we will be there. chris sherry, thank you so much. thank youry couto, very much. the carmaker will call is new car -- will it live up to its name? stay with us. ♪

>> welcome back to "the pulse." streaming on your phone and your tablet and bloomberg.com. toyota has named its new view -- car -- which means the future.

honda has an introduction of its fuel cell vehicle in 2016. the company's president said it needs more time because of the complexity of technology. is pushinginister for more clean energy. he also invited g-20 countries to invite -- to invest in india. he said it should be a primary goal to the global economy. for those on bloomberg radio, the first word is next. for our viewers, a second hour of "the pulse." we will be talking to adam posen and will be talking about japan and russia. it takes us to our twitter question of the day -- what would you have said to vladimir putin if you had met him at the -- g 20 summit?

some of them have been belligerent. give us your thoughts. i will see you in a couple of minutes. ♪

giving russia the cold shoulder. posesisis with ukraine the biggest security risk to world markets. the japanese economy struggles to shake the sales task boost. we ask adam posen what this means for prime minister abe. andill also talk g-20 central banks. good morning to our viewers in europe.

in asia.ing to those welcome to those just waking up in the u.s. i'm francine lacqua. this is "the pulse." putin received a chilly reception from world leaders at the g-20 meeting. the standoff comes as investors are turning a cold shoulder on a russia. shows that the russia-ukraine conflict is the greatest threat to global markets. according to a bloomberg poll. in brussels, foreign minister's are set to discuss expanding sanctions. ryan chilcote joins us. will has extra sanctions? >> we well. what they are going to be is personal sanctions. an expansion of the list of subject to travel bans and asset freezes.

what we are not going to get our economic sanctions. we will have to wait until december 18 when eu heads of state gather. perhaps because he recognizes that there is a fatigue on the crisis, we heard the ukrainian president saying the east of ukraine is the most dangerous place on the planet. has thousandss, of troops bear. this is a more dangerous situation then isis. he is trying to galvanize support for sanctions. >> given the reception vladimir putin had at the g-20, is the crisis ex escalating? >> the fact that you have the british prime minister mocking the russians. the diplomatic that between russia and eu companies is

deepening. russia announcing they have kicked out several polish diplomats. last week they kicked out a german diplomat. the german foreign minister is on his way to moscow. -- criticismom the responding to president poroshenko's decision to cut the east of the country off financially. all of this indicates escalation cards.he >> thank you so much. ryan chilcote with the latest. that brings us to our twitter question. what what you have said to vladimir putin if you had met him at g-20 summit? .flacqua joining us is a bloomberg view, w columnist. what would you have said to putin? >> nothing much that world

leaders could actually say to putin meaningfully. in a situation where putin is denying that russia is involved in the ukraine situation, talking to him is extremely difficult. they do not really have a common language that they can speak about this crisis. so it is not a matter of saying anything to him. they are reduced to making symbolic and demonstrative moves. >> despite the criticisms, vladimir putin appears to be relaxed. you say that this is his game, trying to appear relaxed or even .riendly possiblecould be two

explanations. one is that he is trying not to tension. trying to be more mature, almost , then the western leaders who and who are him obviously irritated with him. explanation comes from psychology research. people who get rejected sometimes will try to behave in a friendly manner, a more open manner. in hopes that they will be orepted back into the club by a group of people who have rejected them. be in a way extending his hand to them with this relaxed behavior. and refusing to open link notice that he is being humiliated. that hethat is a sign

is hoping that he will be accepted again and this will blow over. >> it is a tricky question. with vladimir putin has a future? russia as a country cannot but have a future. it is the biggest country in the world. it has been around for a while. there is no reason to believe that anything is going to happen to russia. it has been there since at least the 10th century. it is going to be around. russia, that is a trickier question. there are certain political and economic threats to it that might tell us that putin's future is limited.

just like the soviet union was not forever, this regime is going to fall, too. question is whether the regime that will replace it will be any better or in fact will it be worse? >> a fair question. thank you, leonid bershidsky in berlin. let's stay on russia and bring in our next guest. president of the peterson and aute for economics former policymaker at the bank of england. adam posen will stay with us for the whole hour. right to have you. russia is the greatest unknown. is a wildcard. he seems to has laid out his vision a couple of days ago. what do the markets need to make out of this? he wants russia as a global powerhouse but is going about it in the wrong ways.

>> except for the one card he has to play is military strength. from a selfish point of view he has got something. it is up to the u.s. and european governments to convince him that even though that seems like it is an advantage, it is not going to get far. you mentioned the worldview he set out, one of the keys is the collapse of the ruble. the sanctions are starting to bite. i don't know why he is suddenly admitting that. the pressure is on and it will continue to hurt him. >> it seems that the more the pressure is on, the more belligerent he talks. how you play a crisis is to show how tough you are and bringing just in to brisbane case. >> it can go badly. the flights over the u.k. antisubmarine -- and the submarine near sweden. saber rattling of the kind we have not seen for decades.

nato is strong. poland and the countries on the eastern border have a nato guarantee. ukraine is reason to be scared. russia-ukraine expert argues, the economics of the russian regime are completely failed. gazprom is not competitive. nothing is being invested. small business is getting killed. even the people around putin to have benefited are losing in the current situation. warone piece of the cold that is applicable is if europe and the u.s. stand our ground, russia does not have a strong hand. >> do we need more sanctions? the russian economy is on its knees. >> it is important and there is good reason for the oil price to be down. it is not a manipulation of the market for it to be down. there is also a virtue in

foreign policy terms and in credibility terms for the west to say we are not just going to hims of the the w oil market, we will go to intentionality. >> you are sure it's whims? i don't want to go down the conspiracy theories -- you need tonow why make it more complicated. china is down. new finds. there is always a surprise. i'm not saying i can predict it. you can rationalize it without any weird factors. >> a fair point. in our bloomberg poll comedy markets and investors point to the russia-ukraine crisis as the thing that they fear the most. there seems to be other very worrying things out there. >> one of the things looking back at the last 20 years, including 9/11, when geopolitics gets serious it trumps

everything else. it has to get truly over before it directly affects more than the land involved. i feel terrible for the people of ukraine. some of the bordering countries. the effect on the global economy is not going to be that great. has small financial ties. ukraine is tiny. there are other things people can worry about with having to put that in. >> what is your number one worry? >> the combined slowdown in china and japan. i think we will talk about that later. i was surprised and disappointed quarterly numbers out of japan. i expected a downturn but nothing as bad as this. >> gives me a flavor. this is the biggest financial experiment. can we say it did not work? >> we cannot.

i understand why people would react that way. i think it is unreasonable to judge that after two quarters. >> we'll take a short break. of the peterson institute for international economics. japan unexpectedly slips into recession again. the fourth in five years. what it means for prime minister shinzo abe. ♪

>> welcome back. let's check in on the currency markets. watching the yen as japan unexpectedly enters a recession. this is as japan has sell the impact of the april sales task been -- sales task boost. will minister shinzo abe probably put off the tax hike scheduled for october 2015. a move that people have said it will trigger an election next month. let's bring in adam posen, he wrote the definitive book on japan's economic crisis in the 1990's. president of the peterson institute. asking if this is the great financial experiment

that went wrong. eu said we should not judge too quickly. how much time are you getting to abenomics? surprised by it being this negative in this quarter. at a japan where employment is up, unemployment is down. you are looking at a japan where inflation is up from where it was. where inflation expectations are up. the abe the things that government and the bank of japan are doing, particularly the increased female labor force participation. mark appel kidded is the -- more complicated is the tax hike issue. the least bad option is to go ahead with it. some people i agree with are saying they should put it off.

>> go ahead with it in 2015? >> yes. but there are people who say we should put it off. it is reasonable to argue either way. the reason i would argue for continuing is because it is not argentine or greece. zhejiang of japan -- the bank of japan can't control it for a few years. the uncertainty of the fiscal situation is for real. because there are no foreign debt holders of japanese bonds, you are reneging on your own people. in some ways that is in advantage. it is a disadvantage because if you default you are not getting rid of anything. there is enough room in japan, the share of the economy devoted to taxes is relatively low. at some point, you need to increase the value added tax. do you do it or do you wait? the rest of the world is slowing

down. that is a stronger argument to wait. still ans this is economy that is going to return to growth probably next quarter. that is still at relatively own unemployment by its own as well as global standards. and still once to spread out the consumption hikes that are necessary. i say do it now but he is going to postpone. >> you are confident that this is going to work in the longer term. that the government has the situation at hand, they are throwing everything at it. yet the markets seem to be disappointed every two weeks when we have a move on dollar-yen. is this an unsophisticated market? >> it is somewhere in between. the expectations were too high. that is in part the abe government's own fault, they set targets like 2% inflation of 2015 that were not realistic.

there is still some legitimate uncertainty as the election, soon to be election, will show, over everything abe is going to do. policy ande boj's the work on women's employment but there is work they have not gone through. there are tax issues. liberalization of agriculture to keep japan moving forward in trade talks. the worker participation, not just female but there has been flexibility. that is important if you compare into labor market quorums italy or portugal or greece. >> which are nonexistent. >> that is one of the third arrow components. agree.er components, i >> why are they delayed? >> it is a political decision by the abe government. one would hope that with the

mandate they have they would push some things through. >> if they go through snap thetions, we expect them in next month. will that strengthen his position to strengthen the third arrow? >> on the one hand, he is almost certain to lose seat. to ldp is almost certain lose seats, if anything to its .oalition partner they are more elects -- they are more against some things abe wants to do. in the other sense, it is him ng i still have a big majority. the thing to remember is his main agenda at now is not so much about economics. the economics is a means to an end. japan canres about is stand up to china. the next steps for his

government are constitutional reform towards greater military capabilities. turning back on the nuclear power. not saycut is, i would it is by the side, but it is less important than those two to the abe government. you are much more nuanced. havex months, if we do not a significant improvement or at least something more concrete in terms of the third arrow being beefed up, then when you say this is not working? >> i suggested that if they postpone the tax hike that the markets might actually be hit badly. i markets i mean yen and equities. capable of japan is controlling be gdp market for now. i may be wrong and people may

seek short-term growth. they are postponing and so their markets go up. should focuspeople on is whether it is working. the way you will know is if inflation does not start an upward trend again in the next six months, well past 1.5% at an annualized rate. it will be a failure if there is failsther report and abe to deliver the agricultural reform for trade talks. you get to that point and i am not sure what is there. >> you look at japan and we fret we will become that next japan. are there any lessons we can take? >> this is the unfortunate thing about the timing of japan falling behind on reforms. i would have liked to have been able to say combining fiscal and monetary, it is all good. i still think that is the right interpretation but there will be plenty of people who say see,

this did not work. it is important to remember that -- this is part of the reason i'm in favor of not postponing the tax cut in japan -- things are better in japan than most of europe. the unemployment rate is a fraction of that in most of europe. the average growth rate is as good or better as most of europe. real wages are climbing slightly but not down 30% like southern europe. so sure the europeans are not worse off than japan, at least southern europe. >> adam posen, president of the peterson institute for international economics and mpc number stays with us. we will talk about the germans and the ecb, next. ♪

time for today's new energy headlines. toyota has named it fuel cell car mirai. it means future in japanese. the car can travel 300 miles with a hydrogen tank that can be refilled and five minutes. many battery operated cars travel fewer than 100 miles on a charge. honda has a delayed the introduction of its fuel cell vehicle to 2016. the carted to unveil next year. the company says it needs more

time. and if prime minister is pushing for more clean energy research. narendra modi has proposed a center for clean energy are indeed. inviting the g-20 countries to invest in india has energy sector. ♪

>> welcome back to "the pulse." european bloomberg's headquarters in london. i'm francine lacqua. david cameron has warned that instability in europe presents a risk to the u.k. economy. cameron says the euro zone teetering on the brink of a used recession and what monetary policy to support growth. called thea has

beheading of u.s. aid worker peter kassig n act of evil. a video shows the severed head who converted to islam and took the name abdul-rahman kassig. by sixth foreigner executed islamic state. japan felt the impact of an april sales top spin, gdp -- april sales tax boost. the report likely guarantees that prime minister shinzo abe postpone another increase. jonathan ferro has more. >> a lot of moving parts. let me give you the state of play for equity markets. losses on the ibex. .6% in italy. in frankfurt, down by .5 percent. ftse lower as well.

goldman sachs are cutting their price target for tesco to 155 pence. tesco is lower. the overriding theme driving is japaneses lower gdp. the third largest economy in the world -- in recession. some question marks. not enough hike, qe to stimulate the economy. a question mark for the .urozone, slipping to 1.2491 board members at the ecb questioning the policies of the bank of japan and whether qe has worked. theoretically, the ecb could buy sovereign bonds. he really did say that. you're a dollar at session lows. 1.5627.,

you do not trade the pound. let's say you have savings -- cover your ears. hsbc pushing back there call for the first hike from the bank of england to the first quarter of 20 16. 12 months later than forecast. barclays pushing their called back to q3 from q1 next year / . pushing back the forecast for the first hike of the bank of england. thank you so much. the awaited hong kong-shanghai exchange opens for business. one of the boldest moves by chinese government to liberalize capital markets. >> china is opening its doors to the outside world. the shanghai-hong kong trading leak unlocks a $4.2 trillion market of foreign investors. previously been off limits for all but eight select

group of professional money managers. and they had to stick to quote us. anyone with a hong kong brokerage account can buy hong kong listed equities. chinese stock markets have rallied. is expected to turn shanghai into an international financial center. investors are betting on similar links with london and paris. adam posen is back with us. in terms of what we are seeing overall. i told you that a bloomberg poll tells us investors are worried about putin. you are worried about china. >> if i'm choosing what to worried about. there is a chance of putin causing trouble but the slowdown in china is for real. i don't think it is going to last very long. good.fundamentals are

in china grows at 6% instead of 8%, it is a big effect on the world. worries you in europe? we talk about the euro and the reforms that we have not pushed through in southern europe. the u.k., it is going great until they decide to possibly exit the eu. a horribleld be mistake. that is going to be visit discussion for the next year or two. they are dragging this out, it is going to cast a polymer for the u.k. economy. it is an unfortunate way to do things. road.s two years down the there is a worry that germany is not doing well. that france and the netherlands are going to do worse. france surprised us with its latest gdp. i call friends the mumbled be -- i call friends the mumble -- i call france the mumble bee.

is authern europe, greece slight positive. because the ecb is still holding back, it is getting bad momentum. >> if we go back to the u.k. a lot of people ask if it would be that bad if the u.k. were to leave the eu? corporationsial being here in london. what they flee? where would they go? >> it is less about that. there would be some flight. 12% or 10% of the u.k. economy is financial services, manufacturing. and a lot of that is premised on exporting to the eu. the u.k. economy, the first cut comes out to wash or slightly negative on the direct production aspect. it is broader. it is that the u.k. seizes to be

a voice in european affairs. it means it is more uncertain. the impact of u.k. policy is more vulnerable. it is a smaller country. own are trying to cut their standards. imagine the u.s. and the eu conclude a trade investment partnership. >> where is the u.k.? >> right. they have to accept whatever the eu and the u.s. do. and i think it is contrary to the spirit. what has made it u.k. great, we saw this in the referendum with scotland, is being integrated and open. >> this is something that has been mind-boggling. the same guys that were telling scotland lot to leave -- not to leave are calling for this referendum. u.k.ver chances of the leaving the eu?

>> just as with the scottish referendum, i think it is sufficiently bad. in multiple ways. it is sufficiently likely that we have to take this as a huge threat. allnd it repugnant that parties, particularly the conservative, but all parties are catering to the small minded . ventures. it is a betrayal of the u.k.'s best interests. >> talk to me about the bank of england. you were involved as in mpc member for years. carney's communication skills. set ofrnor carney has a reforms underway. he is going to make a bunch of proposals soon. i think -- there is stuff about forecasting.

when i was there they did a bad job. they continue to do a bad job. >> does the central bank ever doing good job? >> people are presuming too much accuracy. in 2002-2006 it was accurate because it was a randomly happy period in the world economy. on the communication, governor away from theed forward guidance he and his colleagues had put out there and said it is going to be data driven. i wish he took a page from and greenspan, not every time he opens his mouth he has to send a clear message. because then it looks like he is changing his mind. there is a reason we have become more transparent but not every time he gives a speech does he have to tell everybody where he's going. sees this inflationary risks. do you think that should be his main concern?

aswhen we look at the u.k. the new chief economist of the bank of england has said, the real question is productivity growth. while we are seeing growth without seeing a productivity growth. i remain an optimist. i think a lot of that is a service have the, what looks like no productivity growth is just slow growth and you will overshoot when growth comes back. we have seen data revisions up. i think that has to be the big question. secondary to that is wage growth. which is politically very important. that is a global issue. in the u.s., the u.k., japan, europe -- nobody is getting wage growth even when there is growth. >> wendy you expect rate hikes in the u.k.? i thought ever going to move in february. >> that has been pushed back >>

because the slowdown in the euro area and the slowdown in london prices. i think they would wisely push it back. the nonsense that was coming from a few people about wage rises has been shown to beat nonsense. i assume they skip made because the election. the question is do they do it in june? assuming there is no big news on the economy between now and then. or they do it in august. all the risk is pushing it back further. i don't think there is much to accelerate it. of get more bad news out europe. >> push it forward to august? >> i'm saying the risk would be to push it back more. i would still think it is going to be june, july, august. all the risks are pushing it back more. >> house prices is a conundrum.

part of themuch recovery. at the same time, they make it difficult for londoners to afford houses. how do you temper that? the bank of england is trying to put measures in place. it is working somewhat but it is a difficult balance. first, there is what the bank of england is concerned about, financial stability. bubble, is their leverage that could be disruptive? they are making progress. >> we have a bubble. difficult to argue the contrary for london. >> i agree. not every bubble has the same effect on the economy. if this is a bubble where it is a bunch of foreigners paying cash and it is not leveraging your banking system, it is with in onhan leveraged banking system. there is a housing policy issue that is the chancellor's

business. multiples such crazy of incomes to live in london and the southeast, are we building and a policy? shouldn't he coalition had done this stuff about planning that they promised before the last election. can they jumpstart housing supply? that is a set of issues but that is not financial. >> thank you so much. we will talk about more about central banks. adam posen stays with us. in two minutes. ♪

>> welcome back to "the pulse." adam posen is still with us. let's turn to central-bank policy ahead of mario draghi's speech today. the million-dollar question is how do we deal with central-bank divergence? >> it is a very rare situation that we did not have central-bank divergence. until 2000 eight, central-bank divergence was all of the time. traders saying oh my god, if anything, this should be good. you should actually be able to make money now. we have to think about two things. the first is sorting through is going which way.

if the fed and bank of england are going one way, the ecb and bank of japan are going another way. china is on the brink. the swiss national bank has to maintain where they are. there's a lot going on. the second thing is what means they are using. one thing that has been revealed is for a lot of situations buying and selling treasuries is not enough. for the ecb it is getting into covered bonds and abs. to have gone out the yield curve. do they get into other things. couple dimensions. >> overall, are we asking ourselves how do you exit? if you look at the bank of england and the fed, now they are unwinding but they have to get rid of the stuff. >> they do not have to get rid of all the stuff. if anything, the bank of england is more likely to get rid of

stuff than the fed. the bank of england has basically and indemnity. if they lose money on paper when they sell off bonds, they are not going to be charged for it. in the u.s., the fed is under attack from congress. from the right as well as the left. there are threats. that means the fed does not want to sell on anything. >> at some point they will. >> if they want to tighten, the bank of england can combine raising rates with a measured selloff and they will preannounced a multi-month selloff. in the fed's case, if you cannot sell off, you have to raise rates higher and faster to get the same effect. >> when you talked about the ecb , you said quantitative easing, god willing. is it still unclear about mario draghi's powers because of the

german government saying you cannot do this? choosing powers, he is not to. in the ecb, you can make decisions by vote. , thehave enough votes governing council except for the german member would vote for doing it. i think mario draghi has decided maybe it is not like brown versus board of education in the supreme court, you have to have an an and animus vote. he wants it to be 20-3 and not 12-8. you could hold the vote this month. you could decide to go ahead. it is a question of at what point do you think he -- at what point he thinks he gets three negative votes. >> do you think it is the right decision? >> absolutely. let me be clear. i think it is the right decision to go ahead now. i think waiting is betraying the

political independence of the ecb. for all the talk from germany, the idea that one country and a couple friends gets to block the majority vote is wrong. >> it is my understanding that the germans talk tough but then angela merkel will give her consent. is she waiting for that kind of implicit consent? he shouldtom line is not have to. in any other situation. imagine if it was the french government or the spanish government. was watchingess and saying we want them to tighten rates but we are waiting for francois hollande to give consent. people would be out to burn the down/ >> > but they have the money. >> they are not actually giving

anyone the money. the mandate is to decrease inflation. they are betraying their mandate and betraying the processes. >> why is he doing this? to encourage angela merkel's country to spend more? >> i think they are waiting for german approval. i cannot read into mr. draghi's head. there are people who think we have to hold back to introduce more structural reform. we tried that for the last two years, it failed. now, the consequence is that a number of us forecast of such a policy are coming to pass. he is waiting instead to see, you have another few months of terrible numbers and that helps you swing votes. >> trying to get political backing. think it would be the right

thing to do in terms of following the ecb's mandate. the ranking for the european economy. the right thing according to the ecb's own laws. for them to call a vote. >> we have to wrap this up. you are concerned europe is worse off than japan. >> on average it is heading that way. it has been that way and i think it will continue. it is misleading. i care about japan. europe is bad on its own terms. what was supposed to be delivered by the policies pursued has not been delivered. we have neither seen a return to growth in a consistent way in or stability nor lots of reform. if you are a reasonable public servant, that is time to rethink. >> adam posen, president of the peterson institute for

international economics and former mpc member at the bank of england. botox up, a $64 billion deal could send off a hostile takeover. details after the break. ♪

>> welcome back. let's check on the currency markets. the yen strengthening after falling to a seven-year

low. as demand for safer assets increased. showingrt this morning japan's economy sank into a recession. 116.ck take on dollar-yen, 28. we are joined by hans nichols. activists may be near a deal to buy allergan. >> it would value allergan at $64 billion. what happens when valeant wakes up? valeant goingis to try to increase their share? it might be announced today. speaks later on. i just spoke to adam posen. he says mario draghi showed stop blessing.r german

>> he's got to get his speech. economists think he will get to where he needs to get to with asset purchases. >> that is it for "the pulse." see you tomorrow. have a great afternoon. ♪

is "bloomberg surveillance." >> vladimir putin is pouting. the october surprise has turned

into a november route. the economy unexpectedly fell into a recession in the third quarter. opec prepares to beat, but is it prepared to deal. the price of oil continues to drop. it is now every petro state for itself. good morning. this is "bloomberg surveillance ." this is monday, november 17. i am not tom keene. i am brendan greeley. haveeene and scarlet fu left me to the tender mercies of stephanie ruhle. topet's get you to the headlines. i am not sure if you did all your homework. i'm here to help. let's get started. an unpleasant surprise for the world pot third-largest economy. fell into actedly recession last quarter. gdp fell at an annual rate of 1.6%. that is the second quarter in a row the