oil at $60 a barrel. the united arab emirates says opec won't cut output even if prices plummet to $40. the stare down between opec and shale production continues. i'm looking at futures markets. euro stoxx future is pretty much dead flat. dax futures, about 0.1% higher. let's get straight to the market open. >> we have had technical issues in terms of futures markets in europe, so that has discombobulated some of the market opens. you are looking lower in london, down 0.4%. global equities lost $1.2 trillion in value. that momentum continues this morning. volatility rose. yields on treasuries also rose.

emerging markets are touching 10-month lows. a little bit of a mixed picture. what is driving the dax, siemens. there is a deal to be done. i will talk to you about that in a moment. by 1.24%. the oil market is beginning to stabilize. that is going to be interesting in terms of whether we are basing out lower level positioning in the futures market. it suggests that the number of people betting against crude is declining. up by 0.23%. barrett up by 0.4%. we have a report out in the u.k. , london house prices plunged. losing the froth, is what they say.

2014 was a year of house gains. next year, you will see between 1% and 3%. nationwide, you are making a to 5% gain next year. up 0.75%.rent, opec is going to be very reluctant to do anything on the oil price even if it careens toward $40. technik is a french oil services company. they are abandoning their potential takeover for cgg. stock up 6.92%. they have walked away from that. theythe irish builder, have made an announcement. they have sold concrete assets in the u.k. and the u.s.

they are taking just over 300 million pounds. the ceo, all part of his much bigger strategy in terms of divesting small non-core units. >> thank you very much, manus cranny. a couple of minutes into the markets open, ftse 100 down about 0.1%. let's take you to one of our top stories. a landslide victory for japanese prime minister shinzo abe. abe's coalition took more than two thirds of japan's lower house. joining us now for more is james, japan economy editor at bloomberg. what can we expect from abe's government? he had the referendum on abenomics. it seems to have gotten the stamp of approval. said last night, the first priority is going to be the economy. we are seeing stimulus spending.

they economy fell into recession in the second and third quarter. the government is putting together a $25 billion stimulus package. trying to stimulate spending, stimulate consumption. people have seen their income hit by not only the sales tax rise, but the inflation. next year, we will be seeing the deliberations for next year. that would have happened without the election anyway. the government was talking about a stimulus package. the deliberations for the budget, deliberations on cutting taxes, all these things have been postponed for three weeks by having this election campaign. >> on the surface of it, if this was a referendum for abenomics, he got the vote. the turnout, and ugly turnout. japan pretty much stayed at home. what do you make of that? people.ent to the

he said he was going to the people to get their agreement that japan's government should postpone the second part of the sales tax rise. to april 2017 it because he said the economy wasn't ready to cope with a 10% consumption tax. many otherso motivations for the election. as you say, the turnout was so low. electorate the bothered to show up and vote. as you said before, the lowest in japan's postwar history. won two thirds of the seats in the lower house. other people in the opposition say, you may have won the lower seats, but only half of the japanese people bothered to vote. i'm sure he will take it as a

resounding mandate. resounding as the headline number may make it look. >> james, thank you very much for your insight. for an investor's take on this, i'm going to bring in the chief investment officer at london capital, where he helps oversee $4 billion in assets. great to see you. this was the referendum for abenomics. .andslide victory the turnout, not exactly a ringing endorsement. >> i think it was a strong negative endorsement. us, andry clear that to perhaps we have a western take, but you look at what is going on in japan, it never ceases to amaze how badly they can take positions. they are tweeting a symptom as a disease. they are treating low inflation

as the root cause of problems. there are many countries which have had systemic low inflation. there,blem is never -- you see an average worker in japan with higher inflation rates, higher consumption taxes, no prospect of a better future. if you transfer wealth from that consumer into a corporate sector which has structural problems with high leverage and low return on equity, it really doesn't spell good things for japanese assets. pau, you say the problems are structural, not cyclical. what are they doing with monetary policy? >> because that is all they know how to do. understand that status quo in japan is very difficult to disrupt. , that thery clear

bank of japan will have no other option but to continue with the monetizing. it is difficult to predict when that will happen. happen when the holders of that will have to say, this is no longer worth it. i don't see that happening in the short term. there is still too much domestic holding. the potential growth trend for japan looking at the amount of work force and the productivity, is on the way down. >> let's take it outside japan. now experiencing similar problems to japan. disinflation, china exporting deflation, isn't that another tied they've got to fight? >> to some extent, yes. there are similarities. there are also differences.

waye is a difference in the business is conducted in other areas of the world. your return on assets in japan is quite lower than other regions. thisave the potential for company to be unproductive. japan also has the most closed economy in terms of attraction of foreign labor as well as incorporation of women into the labor force. that really does create structural inability to get out of your hole. of thet in other areas world, you can change your demographic. year, a lot of a the outlooks i read call for a rate hike. i want to get to a quote from paul krugman, talking about, when push comes to shove, it is a pretty weak economy. we don't see any inflation. ratessk is, if we raise and it turns out we are mistaken, then the risk is huge.

as we go into this year, as we look at this week, we could see a shift of emphasis away from the labor market to the fact that inflation is quite low. >> we will probably see a combination. you will see in the u.s. the start of a normalization come summertime. they will make a very compelling very gradually increase rates. the main message from the fed is going to be, yes, unemployment still we are%, but facing many pressures from inflation. important, your long-term trend of growth is above where you are at at the moment. the total about of debt in the system is sufficiently high. you, asnal question to we go into next year and so many of these calls short

euro-dollar, short treasuries, are predicated on the federal reserve next year, is there a big risk that may not come about at all? >> yes. these kind of binary bets always have a big risk. everybody is on one side of the trade. it will not take a lot. a lot of people have lost a lot of money in shorting treasuries. the next equivalent could be, everybody is short the euro. that, make sure that those who do that, make sure they limit that exposure. it can well become the widow trade, just like shorting japanese yen. >> pau morilla-giner of london and capital stays with us. there is one stock on the move. look at greg's. full-year profit ahead of analyst estimates.

stock is up almost 4%. up next, we talk oil. opec says they can handle $40 oil as they try to shake out the competition. more on the commodity war that could cost billions after the break. here is a picture of the markets right now. ftse 100 opened lower. turning around, up 0.25%. plenty to discuss. we will do that in two. ♪

>> welcome back. about 10 minutes into the trading session, 15 minutes actually. the ftse 100 is trading a little bit higher. the commodity markets dominating the headlines. you can see why. 45% from theound highs hit in june. the stunning collapse in the price of oil, an expensive one for oil producers, but not expensive enough apparently for opec to cut output. nergynited emirates eme ministers had not even a drop to $40 a barrel would spur a cut. are we now to believe these guys won't cut production even if oil hits $40?

>> if you believe the oil minister. he does speak usually on not just the behalf of the uae, but the gulf countries. that is an important faction within the cartel and usually is in sync with what the saudi's belief. he probably wouldn't have made those comments if he thought the saudi's would object. he said they are not targeting a price. $60, $40, all fine with them because the market is going to stabilize. what he didn't say is that is because they are targeting shale producers. they can afford a lower price. production costs in places like saudi arabia, the gulf, they need more for their budgets but they also have trillions of dollars of reserves to get them through this. it is possible they are prepared to go that low. -- if were the your oil you were the oil minister of the somethingdo would be

to include in your repertoire as well. >> thank you very much. i'm going to bring in pau morilla-giner to continue this conversation. opec are playing a very good game of looking strategic. things, when i look at how high u.s. oil lostction is, have opec the ability to influence prices? >> i think so. arabialy unless saudi decided to complete this market, they do have that trump card. otherwise, opec, they no longer control the market. there is too much supply, especially wti oil in the u.s., for opec to know they can affect that. they know that prices are on the way down. let's not shoot ourselves in the foot. we are selling at not only a lower price, but less amount.

also, it is a waiting game. they know that as long as they can continue this expanded period of low prices, the u.s. will see the supply responding to that. it becomes not very productive to keep pumping those 1600 oil rigs. they can wait a little bit and the stronger the position goes as they wait, and at the same time they recognize that they are no longer -- >> i'm looking at brand. a little bit of a rebound. below $60.irmly there is a huge flashing light in commodity markets. we've seen a stunning collapse in the price of oil. there isn't a huge red flashing light everywhere. there is concern about how the dominoes fall from commodities, to credit, to equities. is that a concern you share? >> it is not. when you look at the net effect of sustained lower oil prices,

it should be a positive. there is a significant boost to consumer power in the western world. perhaps the not so good news is that low oil prices can potentially spark some geopolitical instability in the middle east, which is the last thing we need. ultimately, i wouldn't say that sustainable prices for the global economy should be very bad news. >> the economy is one thing. the markets never really reflect what is going on in the economy. when you see the energy sector making up 15% of junk bonds, surely there's going to be a reflection from commodities into going, and surely that is to have impact elsewhere as well. , ithe problem of high yield can be a problem, the last few years have seen a yield

has been where debt issued at low cost, etc. i think it is very much contained to that area of the market. we might see high yields as rates go up, but for the moment, there has been a lot of threat on those areas, but this is a very contained area. we will talk about high yield as, this was irrational exuberance. too much supply and not a lot of discretion. months,ext six to 12 the problems with the energy-related high-yield -- >> than you think it will be contained. you think the drop in the oil price is good for the global economy. if i'm looking at treasuries, yields have been tracking the following energy prices lower. global lowflation environment.

is that the wrong move if you are bullish on growth? >> i'm very bullish on growth. prices have a positive bounce on growth. having said that, i'm very concerned with overall levels of growth. what matters most for growth is how much debt you have in the system. actually, i would say in the u.s., probably for the next month, you are just above long-term trend growth. be very wary of stronger dollar. be very wary of higher wages. in the rest of the world, be very concerned -- europe is getting worse and worse. oil --bly, low >> there is a deep side. pau morilla-giner, thank you very much for joining us this morning. let's get back to one of the top stories dominating the news. the holdhave escaped

of a gun man in a cafe in sydney. the australian prime minister is since said the motive political. we are live in sydney, next. ♪

>> welcome back. it was meant to be a day focused on the budget in sydney. instead it is the site of an armed standoff between police

and a gunman. what is the latest? >> we have had an update from the deputy police commissioner of new south wales. calm,s really called for and also said that police are very closely monitoring social media outlets. there have been a number of alleged demands from the gun man leaked from the hostages that are being released to media. catherine byrne as indicated they don't want to enter into what the gun man is asking for. ,t is not helpful for anyone nor is it helpful for them to comment on what hostages remain in that cafe. five have either escaped or been released. we had three out at around 3:00 escapedd another two at about 5:00 p.m. at this point, that main

precinct does remain under police locked down. police are negotiating with that gun man that we don't know how many police are -- how many hostages are left in the cafe. >> thank you very much for the update. we will bring you updates on the .atest on the situation coming up, we had to tokyo for a reaction as prime minister shinzo abe wins big. what is next on the agenda? stay tuned for that. as we had to the break, here is a picture of the markets. we are up here in london. the moves in emerging markets, the thai stock index down 7.5%. you see some pain in the currency markets. emerging markets as well. the indonesian rupiah hitting some big lows. concerns we saw

last week in the european equity markets carrying over to asia. if you want to talk markets, you know where i am. on the move is back in two. ♪

>> welcome back. i'm jonathan ferro in london. 30 minutes into the trading day, this is how markets are trading. the ftse 100 up by 0.2%. the stoxx 600, a little bit of a rebound. last week, ugly. european stocks down. the collapse in the oil price feeding into a collapse in energy stock prices. yes which one has the biggest rebound today. it is oil and gas. let's get to caroline hyde. >> oil and gas, top of the leaderboard. currently up almost 9%.

m&a is off the table. they are not splashing their cash. akin november, they offered 1.5 billion euros to cgg. biggestis the services company in europe. they were offering money to buy up cgg. this company said, we don't like your offer. look how much they have fallen today on the back of this. this is clearly the biggest fall since 1999.k all this related to the fact that m&a is off the agenda. clearly the volatility in the oil price also added to some of the concerns surrounding that deal. not to mention that the board didn't want to go ahead of it. it is a season to be jolly. let's talk greggs. it is currently trading at a record high today.

684, we are up 4%. its numbers look pretty delicious. like for like sales up almost 5% in the last six months. they say, we are doing so well, we are going to beat the profit forecasts. at the moment, analysts think they will have about a 52 million pound pretax profit. greggs thinks it will go higher. back to you. >> is that a pun? top headlines at bloomberg. a gunman has taken several hostages at a cafe in sydney. five hostages have fled from the cafe as an armed standoff with police and her's its 10th hour. a black flag with the islamic creed has been shown in the window of the cafe. prime minister tony abbott says the gunman's motive is political. the united arab emirates says opec will not cut output even if

oil drops to $40 a barrel. the energy minister says the 30 million barrel a day target agreed in november will remain unchanged for now. says themember sate market will stabilize itself and current projections do not justify an emergency meeting. japanese prime minister shinzo abe strengthened his mandate, sweeping an early election. abe's coalition took more than two thirds of japan's lower house. the landslide victory was won with the lowest voter turnout in the postwar era. this mode for abenomics, that historically low turnout may point to a disillusioned voter base. the prime minister maintains that the benefits of abenomics has yet to come. joining us now to continue the conversation is the managing director and head of japan equity research at j.p. morgan

securities. he joins us from tokyo. when i look at the outcome of the election, what takes your attention, the fact that he got a sweeping win with the fact that most of japan state at home? the key issue is that they've got control of power. they've got a two thirds supermajority. parliamentary proceedings are going to be controlled by prime minister abe and that is what investors need. you do need to see a japan that has stable government. nothing weird, nothing erotic is going to be happening -- nothing erratic is going to be happening. >> when i look at the private sector, i looked at the survey this morning, abe winning the election, not winning the confidence of the manufacturers. the story? >> it is interesting because you get the confidence level subdued among the large manufacturers.

non-manufacturers actually show a nice uplift, which is really what you want. most importantly, you're getting business investment expenditure beginning to improve. for all intents and purposes, you do have a green light for japan to pull out of recession. >> a place where you've got significant conviction is 2015. year for be a strong risk assets in japan. you're are looking for the nikkei to hit 20,000. we are at 17,000 now. what is underpinning that move? >> very simple, you are going to have earnings, earnings, earnings. corporate japan has restructured. they have dissolved and cut their costs. they've increased overseas exposure. only ate japan spends the beginning of a profit revolution. you are going to get steadfast increases in profit earnings

throughout 2015. it will be the year that japan hits and escape velocity. >> you talked about increasing foreign exposure. you didn't talk about increasing domestic exposure. that points to weakness domestically, no? >> interestingly, it does not. you do have one thing going here in japan, which is a steady tightening of the labor market. last year, the unions asked for a 1% increase. they got 0.8%. next year, they are asking for 2%. they are likely to get about 1.8%. that is what investors need to watch. me to be right on the bullish japan thesis, you need wage growth beginning to accelerate so that mr. and mrs. wattana bay can have more spending power. >> right now, i'm looking at an equity market that is up 70%.

i'm looking at a financial cycle that appears to have leaked from the business cycle. is that tightness in the labor market resulting in higher wages, doesn't that mean the bank of japan has to step off the gas? >> the bank of japan has delivered. the halloween surprise, the big thatka, it is very clear throughout the next nine to 12 months, the bank of japan is going to be one of the most stimulative central banks. eventually, in 2016, 2017, is going to come. standing ate are the end of 2014. the economy fell back into recession. the counter policy has been taken. now is the time to prepare for a fantastic 2015. upwe see once again stocks

70% through abe's tenure, so stocks are up here. fundamentals are still down here. you say fundamentals are going to catch up. how long does that disconnect play out? why are equities going to keep going higher? important, you've got the unemployment rate steadily declining. corporate japan has become one thehe most -- one of biggest job creation machines in 130,000 nonfarm jobs being created every month now. what matters for investors, remember, you do not invest in gdp. you do not invest in the economy per se. you invest in corporate earnings. corporate earnings are recovering very strongly. value, there the attraction, the performance is going to come from. >> let's pretend that everything

you talk about in the future comes true. let's say fundamentals in the japanese economy remains strong. let's say wages go higher. let's say the bank of japan is successful in creating inflation. if they are, what does that mean for the japanese government bond market? >> what it means for the government bond market is very simple. you've got a 10 year bond that asay is yielding below 0.5% the economic recovery unfolds, as the escape velocity from deflation starts to materialize, you are going to start to get a steeper yield curve. is this a crisis? absolutely not. time, that tax revenue generation is going to surprise on the upside. >> the tax revenue generation will be enough to displace the japanese central bank holding almost a fifth of the government

bond market? >> look, it is not going to happen from black to white, from the bank of japan today buying about 2.8 times the new issuance. they are not going to go from being big net buyers to be in big net sellers. it is going to be a gradual tapering process. you can worry about these things all day long, but the message that governor kuroda, the message that prime minister abe is sending is clear, this is coordinated government policy with one specific goal. that goal is to generate growth, to generate prosperity. why would i want to stand in the way? >> don't stand in the way. my question, with yields below 10-year, if the

bank of japan is successful in generating inflation, widely you think the pickup in yields will be orderly? it has been nothing of the sword when you look at the u.s. market. why would it be orderly in japan? point,s actually to your what you are seeing is, you are bond marketn the but in the foreign exchange market, that is where the adjustment is happening. about 40% down against the dollar. very important. the yen is down more than 65% against the roman be -- the renminbi. in my opinion, don't worry about the market. but the extreme trait -- the exchange rate, big adjustment happening. of an't there a risk significant overshooting dollar-yen? >> this is my biggest worry.

my biggest worry is that we get a dollar hyper cycle. if janet yellen gets this job right and you do start to ca money market curve in america, the spread between the overnight rate and the two-year rate widening out, wow. the dollar is going to be very strong and that would push enormous pressure on asia-pacific. >> what does that mean for your call on japanese equities next year? >> i'm happy on the japanese equity call. tohink earnings are going grow by 20%-20 5%. investor,ar-based you've got to hedge your currency. koll, thanks very much for joining us this morning. coming up, the shakeup in the u.k. telecom space.

we will dive into the sector after the break. ♪

>> welcome back. 8:45, time to talk about the u.k. mobile market. is a shakeup imminent with a deal between bp and either ee or 02? here with more is caroline hyde. could we find out this deal today?

everybody was talking about it last week. i was waiting this morning. it did not come. >> it could come as soon as today. i'm looking at this like a marriage at the moment. as the moree beautiful bride. she has far bigger customer base. they also been dating in the past. ee has been selling bt's broadband services and bt is selling some mobile offerings via ee. they have already been getting up the heat. but they've got a difficult family. has orange and digital telecom together. do you want to be negotiating with twop separate players -- two separate players? if orange would get out of the whole deal entirely, deutsche telekom would keep 50% of any

deal they strike. , this are looking at o2 is a far easier relationship. one parent, telefonica. telefonica wants to offload o2 because they want to get into brazil. if they do indeed take on o2, it is full circle. to telefonica and now they are looking to buy it back. going to take your marriage analogy and extended. ring, how big will this price tag be? >> if only i could get a ring that was potentially worth 9.4 billion pounds as we think might be the potential easy deal. come with a price tag of 11 billion pounds. this isn't cheap. bt has been splashing the cash.

bt already dominates the landline space. they've also been particularly impressive when it comes to broadband. they've been investing. they now dominate the u.k. also, they've got tv. they've been buying some of the sports rights. they want to add mobile to that. to make sure that you and i don't start hopping between various offerings. we won't leave bt to try sky. they want to lock us in by offering all four things. the ceo has really been driving this. what is going to be interesting is what happens with the other players. o2, what is now becoming clear is we could see , they couldampal

be looking to buy whoever is left on the shelf. >> more consolidation. everyone hide is very excited. still to come, russia's most famous dissident spoke exclusively to bloomberg. he told us putin could be toppled in 10 years time. stay tuned. ♪

>> welcome back.

time to talk a little bit about russia. channeling vladimir lenin -- or putin? from the homewn where the leader of the bolshevik revolution planned the overthrow of russia's tsarist regime, russia's most famous aboutent is talking another revolution. he was once russia's richest before spending a decade in prison and moving to switzerland. >> i can say that there is a 50% chance putin -- regime will be overthrown in 10 years and the likelihood he will be replaced by a european government, 50%. the likelihood of success in the next decade is about 25%. those are decent odds. >> you talk a lot about russia post-vladimir putin.

you said that the first government will need to be a temporary government and not a democratic government, that you are prepared to lead. explain that. >> unfortunately, it is obvious that the current regime can't be changed through democratic elections because everything putin has done has been aimed at preventing a transfer of power. it is pretty clear, when the government changes, it won't change as a result of democratic elections. it is the sole duty of the toernment, in addition maintaining stability, to carry out fair and honest elections. >> you've really thought this through. how much time the you spend thinking about revolution in russia? >> i'm not sure we need to be

talking about a revolution. i'm talking about changing the government in russia. i spent about five years on that collectively, because thinking about it in prison really helped me distract myself from my personal fate. thinking philosophically, thinking about global issues, .riting out of 10 years in prison, i spent about five on that. >> ryan chilcote joins us now for more. tell us more about khodorkovsky himself. this was russia's richest. then he spent a decade in prison. where is he now? busy right now thinking about change in russia. he remains very opposed to president putin. , he told me he still has $100 million, but he has become a very patient guy. he heard him talk about how

spent a lot of time in prison thinking about political philosophy. i think that helped him. clearly, his time in prison engendered this ability to be very patient. >> he is talking about putin being betrayed by members of the inner circle. what are the odds of that happening? >> there are no signs of that whatsoever at the moment. it appears that he has nothing other than unwavering support. why wouldn't he? his ratings are at an all-time high. though khodorkovsky would tell you that is partly because russians are so supportive of what has happened with the annexation of crimea. he points out that that euphoria will recede and people will have to deal with the economic problems. he doesn't think that is long-winded. go back to 1917 and the russian revolution, who saw that

coming? it was a localized bread riot ne of theto o largest revolutions in the 20th century. >> what did he make of the plummeting oil price? >> he kind of downplayed that. a lot of people think, forget the sanctions, it is the oil price that is going to put pressure on putin. the government has been clear, they need $90 a barrel. khodorkovsky just things it on putinore pressure in the short term. in case he makes any other mistakes. is not price in itself enough to actually bring him down. it is going to take something more than that. he said it is going to take a black swan event. >> the russian ruble in a world of pain. he for we go, i want to show you some emerging-market currencies. the indonesian rupiah down almost 2%.

that is the picture in emerging-market currencies. here is a picture of the general equity markets. the ftse 100 up 0.4%. the pulse is up next. ♪

>> crisis. cindy is in shock. minister gets a new mandate to drive home abenomics. cracks and, the uae energy minister says opec won't cut output even if prices drop the $40 a barrel. watching "the pulse." >>