ab&d revises its offer for sab miller. tesco turnaround. retailer reported a 69% plunge in first-half earnings but beat analyst estimates. japan teeters on the brink of recession. the bank of japan keeps monetary policy unchanged. a warm welcome.

this is "the pulse." sab miller shares have sure this surged this morning on back of the news that a anheuser bush has made a revised offer. two previous proposals were rejected. for more we are joined by our chief business correspondent. matt, want to go straight to do. saidwe sat down onset, he where is the stock trading? miller stock is trading below. surprised byte that, actually, because it seems like this is a deal that is coming together. we had a statement from altra sabmiller 20% of

saying that they would like the board to come to the table with ab inbev. a lot of investors are not convinced by the. manus: they have offered all cash on the table but there is a quirk in the deal as well. matt: there is a weird twist. they are offering 41% of sab shares in exchange for sort of funky restricted stock in ab in bev. what this is is an effort to try bevco over altrea and with a structure that is more tax efficient. clearly, this is intended for those two shareholders. a normalid say, should asset manager or anyone else want to take this restricted stock, that is their right to do so. i think they will take the cash

because the cash is worth more. the restricted stock is only worth 37 pounds pressure. -- per share. manus: let's bring in our guest, kevin. it has been a heck of a deal for dealmaking. this could bring $60 billion worth of debt in terms of bond issuance. what do you make of the proposal? what you make of the differential in terms of price? kevin: clearly the deal is good news for the markets and the markets need good news at the moment to stabilize them and increase m&a activities. even if some of the reasons for that increased m&a are in fact we are in a low growth world where companies are struggling to grow bottom line. and we also have deflation. i think it is good news for the market. the price differential clearly indicates that there is still some doubt as to whether this deal will get completed and what price. the bond issue is a very

interesting one. it will not be as easy to get a big bond issue away in this environment as it might have been a few months ago. clearly, bonds will have to be priced favorably. bond issuel, this will be bigger than what verizon did. dollar has been strong. is that part of the driver of this deal? kevin: i think so. manus: or is it about world emanation of beer -- world domination of beer sales? and bottom-line growth -- in a low growth and low-inflation world. it is about the slowdown in emerging markets, the stronger dollar, it is all of that. manus: it is interesting that sab came out a week earlier with a trade update. they specifically focused in on africa and indeed the emerging markets which is the deal for ab inbev.

tell me this, where are we on the trending business? we are going to see some competition over this. they are going to create the beer monster and the world. we heard the south african pension fund warned about the concern for them about this level of monopoly. matt: i think every antitrust agulator who can get piece of this will try to. beer is a consumer product. i do not think whether it is wouldcameron or trump want to be seen as allowing the price of beer tofor joe sixpack to go up. these are global regulators. what is the brazilian or venezuelan antitrust regular think of this? those are the questions on both sides of the deal are going to spend many, many billable hours trying to answer. manus: i love the word billable.

every lawyer, get ready. kevin, you're going to stay with me. dealsampbell, head of reporting. let's turn our attention to asia. the bank of japan has kept his stimuluscord on change. despite this second -- a recession could hit japan. kuruda,governor, defended his decision. good to see you this morning. what do we take away, because kuruda is saying they will do it every takes, i'm paraphrasing, to get to 2%. what does that mean? >> he seems to be pushing back somewhat against a further

easing later this month of the october 30 meeting. initially, there had been a thinking that there was, among economists, though there was going to be a further easing at the end of the month. now his comments seem to be walking back a little bit from that, indicating that it is very different situation than it was last year at this time. jodi, absolutely. a lot of people are speculating it is going to be the next meeting that we actually see the easing. shinzo abbétzu -- in our offices in new york. aggrandized in terms of abenomics. abe appoints a new demographics minister. this is just this morning to slow the population -- there are many issues facing.

it is structural change. that is the one thing the world wants to see is happening. where are we in that debate? jodi: well, so one of the thing the governor said in this press conference that ended a half hour ago was that he expects the wage growth that is going to be necessary for the growth that abe wants to occur. if that happens, that is going to be one of the big arrows in abe's quiver. the other thing that could help a lot is the talks that ended in atlanta on the transpacific trade agreement. be ratified.l to if that happens, that could help a lot. it would allow abe to go ahead with agricultural reforms and could extend the export market. that will not be in immediate source of growth. it will take a while for tpp to be ratified. manus: thank you very much for bringing us that update. dollar-yen trading a little bit

stronger there at 1.2002 this morning. in the meantime, the imf has cut its global growth forecast for this year. and next. fighting contagion from china slowdown. today, we learned that china's efforts to bolster their fragile currency may have come at a cost. the country's foreign exchange reserve fell by a record $180 billion after central bank sold off dollars to support the yuan. let's bring back in our guest. when we look at these stories this morning, one is a block western deal getting done. two is about central banks. will delay until march of next year. that seems to be building in case. bank of japan on hold for the moment and the bank of england restrained by the fact that the

fed has not gone. what you make of where we are in this central-bank debate? kevin: we are in a very difficult place for central banks. despite many years of zero interest rates and spiced -- and world aree., the struggling from an oversupply of goods and services in certain areas. that has created this global savings glut which is putting downward pressure on yields. it is difficult for central bankers and monetary policy to solve the world's problem which is one of lack of demand. nonetheless, central banks need to keep doing what they are doing. they need to keep monetary policy extremely connotative -- extremely accommodative. so, they need to continue to do their bit on monetary policy. manus: my simple view of this is, if the ecb and bank of

japan and china are ready to do more. it should be a boon time for the next six months in equities. or is that naïve? between morettle stimulus and the reality of contagion from china and the haveown that the imf warned. the holy grail is not there. those are the phrases from the imf. markets for the last two years have been boosted by liquidity, central-bank q.e. as well as the effects they were very cheap. the difficulty now is how much easingn central-banks' boost economic activities at a point where markets are more fully valued? key driver for markets has to be more earnings related and growth related and less about central bank liquidity. nonetheless, if such a banks remove liquidity to sooner do not keep creating it, that is going to be problematic when the next growth kicks in. manus: these markets are just

completely and utterly addicted to q.e. you are going to stay with me. a lot more to get through this morning. couple ofbring you a these top headlines we are getting through from norway. we are waiting to know just exactly where we are from a fiscal point to do in regards to the norwegian sovereign wealth fund. so far, the norwegian finance minister says they are going to 0.8%.e wealth tax to they are cutting income tax to 25% from 27%. they have negative rights under huge pressure from declining oil revenue. they are lowering vat. and they are lowering the tax rate from 27% to 25%. let's have a look at the norwegian krone against the dollar. we are waiting to get the breakdown in terms of where they are. 6 at theaining at 8.2 moment. a little bit of a move on the norwegian krone.

we will bring those headlines to you. let's get you up to speed with thisest of our pulse radar wednesday. tesco has reported earnings that beat analyst estimates. the troubled supermarket chain saw operating profit in the u.k. in ireland fall 69%. but that was better than the 130.5 million pounds that were anticipated. the ceo also warned never say never. new chairman of vw says he intends to begin recalls in january. dded that he hopes that all cars will be repaired by the end of next year. ioil is headed for his longest rally in six months. fell in theiles world's biggest consumer and the energy information

administration, they increase their forecast for 2015 global oil demand. samsung shares have surged after profit beat estimates on higher component sales. chips, displays have become central to reviving the company's fortunes as galaxy smartphones have struggled to compete with the iphone. the weaker korean currency helped to boost component sales. china may be losing its interest in taco bell. they were expected at 10% jump in china sales but they only rose by 2%. brands plunging. it has revamped its menus, but it is still struggling to recover from avian flu outbreak. radarose are your main points. let's tell you what else is coming up on "the pulse." . ceos deadline day for vw's

to tell german regulators how he plans to get the company back on the road. we are going to discuss that next. ♪

manus: volkswagen says the of 2.8 millionny

vehicles will start in january. let's turn our attention to hans nichols. when we hear mueller talking you read the bloomberg story and it is about the opulence of what this brand does when knitting gauges with it buyer -- it engages with buyers. will it be cutbacks of extravagances or job loss? xi jingping hans: volkswagen recall that investment in r&d. is insisting them a lot be any job losses. you get a slightly different view from the ceo. he's clearly warning of pain. here is a quote. review all planned investments and what is not absolutely vital will be canceled or delayed. i will be completely clear. this will not be painless." volkswagen as a company has way more employees than toyota which

roughly has the same sales, 10 million units a year. volkswagen has 600,000 employees. potential areas of cutbacks with they arets -- thinking of investing another $1 billion in mexico. that could be off. executive bonuses will be difficult to push through. the labor union leader was talking about how the will not be personal cutbacks before executive onus is our trimmed. and then you look at what they spend on r&d, 17.4. their r&d budget. you mentioned opulence. r&d budget is the same as ford and general motors combined. more than apple and google together. so clearly, they spend a lot on r&d. they've always one to move forward. it is a company that had incredible growth. now they will have to trim their sales, take a look at everything they invest in. manus: thank you very much.

six years as a journalist, i'm trying to understand what opulence really is. hans, thank very much. i want to get out to mark. response from sabmiller to the inbev offer. cash offer.unds very the inbev offer substantially undervalues the company. board will meet formally to consider the proposal, but message seems to be, you need to offer more. as you know, they have already rejected two offers to the tune of 38 pounds and 40 pounds. the first formal offer from ab 44%v had them at 42.15, a premium to the sabmiller stock price on september 15.

has said this bid substantially undervalues the offer. it says there is no certainty and offer will be made. and it said inbev has made opportunistic conditional proposals. i think the most interesting thing about this is the current share price because the market seems to take the view of sabmiller, because shares are at 37.04. a company iswhen trading well below and offer price, it tells you investors are not believe right now that ahead.al is going to go but this deal substantially undervalues the company, so says sabmiller. manus: thanks for giving us an update on the beginnings of that deal. let's focus here in the u.k. david cameron, he's going to set

rules changes to planning later today to encourage house builders to deliver more homes to young people. in a speech to the conservative party's annual conference, mr. cameron is expected to say, i believe we can make this era, a defining decade. the turnaround decade. that is the branding the tories are putting on this, one which people will look back on and say, that is the time when the tide turned. let's bring in bloomberg's london bureau chief simon kennedy. the branding at its best. he wants the decade to be the decade he grew and he delivered something for those people who are living with their parents. simon: and building his legacy. he won the election in may.

he'll step down by 2020. he is looking to flesh out his thecy and -- the things government has been slow on an encouraging homebuilding. he is going to try to write that wrong and in doing so, hoping to add to his legacy. manus: in terms of the proposal, 200,000 starter homes. let's bring it up. these are the house builders. what i want to know from you, house builders had a phenomenal run in 2015. when you hear this kind of proposal, and it is a proposal, talk, deliver is different. what does it mean to you when you hear this proposal that has come through this afternoon? kevin: from a market perspective we have been positive on house builders for some time. there are strong tailwinds to the industries, whether it is

low interest rates, improving credit and lending, whether it is improved activity as was her -- as a result of consumers having more confident to invest and buy houses. those tailwinds of changing anytime soon. but as you say, house builders have already enjoyed spectacular gains over the past 12 months or so. therfore, those rate of gains moving forward will be more muted. low interest rates are here for a long time, and consumers are benefiting from modest wage growth. manus: it is about dealing -- i see the line from cameron. next five years we will show the deep problems in our society are not inevitable." that is quite a warning shot. elsewhere in the speech, he speaks of the workers in their 20's and 30's waking up in their childhood bedrooms. he's looking to activate the economy of a generation that is,

the millennials feel they have missed out on whatever recovery there has been since the 2009 recession. the millennials feels they have missed out more than most. -- i don't know if they are all running for david cameron's job. let's listen to the defense of theresa may on the integration concern. >> there are concerns if you have uncontrolled immigration, that can affect wagers at the lower end of the scale. that has a real effect on people. also, i think the points she makes that we have to train and skill our own people better so that it can take on the jobs that are dynamic economy is creating. above all, where i agree with her, is look, if you want to build a cohesive integrated company, which we do, yes, you need immigration. and britain is the old one of

the most successful multiracial, multi-phase democracies anywhere in the world, but you need to do it on the basis of immigration, yes, but controlled immigration. manus: this is timely, because the possibility of what he has got to deliver in his discussions with europe, the pressure is beginning to come to the four. are two things going on. one is the european debate. many in manchester would have liked more details and what he wants from europe. brussels would like more details. there was a bit of jostling of the prime minister in the hopes that the debate will come to the front and center. who knows what he might have up his sleeve? and the second one seen here is one of leadership. theresa may coming from the right on immigration. george osborne on monday speaking about his vision. manus: i'm going to have to cut you off. i want to bring you some breaking news.

abu dhabi said to explore asset sales after slumping oil prices. saudi arabia, we note that the junctions are what they have been doing. abu dhabi is set to explore asset sales after a slump in oil prices. ♪

thes: some data across in terminal on u.k. industrial production. it has risen by 1% for the month of august. analysts surveyed by bloomberg .3% increase. a on the headline basis, industrial output has beaten expectations. a rebound experienced boosted by gas extraction and the best month for transport equipment since 2011. total production increasing by 1%. fasterturing gaining than the predicted .5%. day before the bank of england releases its latest

interest rate decision, and policymakers are expected to keep borrowing costs at a record low. let's move on to the markets. quite an astonishing few hours. the country world indexes rising for a six-day, its longest winning streak since the end of april. asian stocks are rising for the six-day. and european stocks are rising the longest day, winning streak in four months. the biggest news on a macro level came from the back of japan. this is dollar-yen. the yen rising after the boj decided to keep interest rates unchanged. what is interesting is that 2/3 of economists surveyed by bloomberg's do believe the boj will loosen policy, add to their bond purchasing program at the end of october. that is when the update their outlook for inflation. so the yen is rising. crude oil is rising for a fourth day. that is the best run since april.

was aboveime, oil $50 a barrel was july 21. i have got to get to sabmiller, because it is trading below the .15inbev offer price of 4015 that tells us investors cannot believe this is a valid bid. the company says it undervalues the company. manus: let's get you up to speed with our top headlines. it's receivedsaid a revised takeover offer from anheuser-busch inbev. "it undervalues the company. the offer for the london-based 69 billionorth pounds. the imf has cut its global growth forecast for this year and next, citing contagion from china slowdown and the knock on effect for commodities.

today, we learned that china's efforts to bolster its fragile currency have come at a cost. the country's foreign exchange reserves fell by $180 billion during the last quarter. after the central bank sold off dollars to support the yuan. a germanoss at vw told newspaper that he intends to begin recalls and january. ars affected by the emissions cheating scandal will be repaired by the end of next year. samsung shares are up 8% at the 200 after9most since the south korean.company posted earnings that beat estimates with profits surging . look, caroline hyde is at the touchscreen. it is all about the chips. caroline: it blew me away. 8% higher, the biggest move since 2009. and looking at the prophet move. more phenomenal. profits surging 80% for samsung.

sales up with 7.5%. low. coming off a we have got to remember that. the reason a lot of this profit is looking so phenomenal, the dollar. dollar strength really did help . thes the chips and component unit that really benefits from this fx push highers, because they are priced in dollars. hichips priced in dollars. you are seeing arm holdings rise. they design some of the chips. it makes semi-conductors. these are just put them in a numbers from samsung. they are not actually complete, full version that we get later in the month. according to estimates, we think the chip area, is up 54%. get this. the displays, the fact that they

can reduce these other phones are 11 fold in terms of profitability. what a.ramp-up . this is because samsung can dine out and everyone else's growth. a's designed chips for apple nd other makers. they areanaging -- more.ng to sell meanwhile , not quite so beneficial when you are looking at the smartphone. we are estimating there was a 24% pickup in smartphone profitability. remember, competition is there. iphone 6, 6 plus, they unveiled to record sales. plus noty sx and sx faring so well. they had to bring down the price point for the s6. and market share being eroded by cheaper version sold in china. nevertheless, they are picking up from the low base. i want to show you, how do we

put this in perspective? the share roller coaster at samsung. this is still 6% lower on the year. we have seen phenomenal market erosion in terms of value since april. $27 billion of value has been removed from samsung since its peak. yes, they rally today, but still, this has been a very poor ride for samsung and their shareholders. what many want to see is shareholder value but the odd share buyback. that is what investors want to see. they are placed by the fact that the dollar helped their private -- their profit. manus: caroline hyde on the latest from samsung. creditors are threatening to

torpedo his plan to restructure russianlion of bonds in standard bank. he spoke exclusively to ryan chilcote. russian standards bank, try and put this in context. there are lots of banks in russia that had been under pressure. we know the commodity and the currency start. ryan: it's best known for russian standard vodka, the second-biggest vodka producer in the world after diageo. russian standard bank, his bank, is also big. it's the second-biggest issuer of credit cards inside russia. what do vodka and banking have in common? they are consumer facing. consumers are hurting. i talked about the state of affairs at the bank. this portfolio of

credits, which we are living in totally different times. we do not have much people, many people to offer credit today. ago,usly, like three years two years ago, we do not expect all these things coming together. so the bank was in investment mood with a lot of sophisticated projects. ourthese together affected performance. ryan: i know that neither you nor russian standard are affected by sanctions but they have an impact on the banking sector. what is it? >> mostly, we are also affected. mostly in the area of funding. cost of funding for the banks including russian standard grew up dramatically. ryan: is that a bigger problem than the lower oil price? >> it is just direct effects.

oil price is somehow connected with inflation. cost of funding just quickly yourted, the cost of products in the bank. ryan: he's looking to restructure $550 million worth of bonds. that by my count would be one of the biggest proposals for a restructuring from a russian corporate yet. certainly, that i can remember. it is a pretty big deal. manus: bond restructurings are alsways difficult. take me behind the scenes in this particular one. how is it going? where are we in the progress of this restructuring? ryan: this comes to head a week from friday, the 16th, is when the creditors will vote on his proposal. so far, his proposal is not going well. that's is why he spoke with us for the first time. andants to go out there

basically is telling a group of bondholders who say they have 20% of the vote, you know what? saying of the vote and they're are going to reject this offer. i am ready to talk that i cannot do much better. right now he is offering them 10 cents on the dollar. the remaining 90 cents would get restructure into bonds. the rebel bond holder group, they're saying that is not enough. are you kidding? he's lowballing us. they want to see him put more skin in a game, put more money in the bank and they want to see a better offer. there is room for negotiation, but he says he is restricted because he is also waiting for his aunt to get recapitalize by russia's central bank. and he said anything he does with the private creditors would have to be approved by the russian central bank. manus: thank you very much. always a good back story with you. the russian

renegotiations. coming up on "the pulse," could it be time for the world bank to face the challenge? we will speak to a former governor on south africa central-bank. and stay tuned for that. what is going to happen next for the rand? ♪

manus: this is "the pulse" live

from our london headquarters. top headlines. the e.u. is beginning of operation to intercept boat smuggling refugees across the mediterranean. naval vessels will be able to board and divert vessels suspected of being used for human trafficking. china may be losing his taste for kfc and taco bell. analysts were expecting a 10% jump in china sales, but they only rose by 2%. brandares in yum! plunging. the revamped menus have not worked to attract customers. still struggling to recover from an avian flu outbreak at one of its suppliers. microsoft has unveiled a new product, including three new smartphones. and a tablet. month after saying it would scale back plans for new phones. the ceo outlined his aspirations

for microsoft at the large eve nt. >> our mission at microsoft is to empower every person and every organization on the planet to achieve more. is unique about microsoft is captured and emanates from this mission. we make things that help you make things. and make things happen. brazil, russia, india and area -- the bric country home to 40% of the world populations. how do those countries is sustained growth? our next guest was the eighth governor of south africa central-bank and the first black south african to hold the office. he is now the nonexecutive director of bric new development bank. tito, great to have you back in studio.

theito: i must say i like studio. manus: you have dealt with many crises. state of is in a crisis over china. how does that play out for south africa? it is putting a lot of pressure on growth and the currency. give me your take. has become an important partner for south africa. in fact, the overall trade figures show that asia is an important trading partner for south africa, more than europe. and therefore, whatever goes on serious, andery very important to south africa. so, slowing down of growth in china, slowing down of command, of commodities by china means south african commodities exports will be affected. manus: $45 billion. in 2014. that is the risk.

that is a big risk and i think we should be concerned that the slowdown -- iron ore, i was trying to stock up on iron ore mining company. we have got the material in the ground but we cannot take it out because the price of iron ore has collapsed. manus: that has collapsed. we will get to minors in a moment. i want to get in on the rand. record lows against the dollar. the real juxtaposition for the central bank right now, left rat es unchanged at 6%. the currency is getting crushed. is the worst over for the rand or is the worst to come? tito: i'm very concerned about what is happening with the exchange rate, but central bankers do not have a target level. manus: you're going to say that central bankers to not talk about currency. you can talk about a bit is the worst to come? tito: i think there is some difficulties in the immediate

short-term. but i expect a rebound, particularly when you look at the technical sectors. the current account deficit is a percentage of gdp. it is around 2.1%. so that is a good indicator of what is a likely, automatic stabilizer. in fact, the weaker exchange rate, for some reason, is also good for rand price exports, which will have an impact on the balance of payments and have an impact on exchange rates. i think it is true, in all honesty, that what happens to the u.s. interest rates cycle will have an impact as well and the exchange rate opponents in south africa. we are watching with bated breath what happens there. manus: two things. do you believe that the fed will hold out till march? will it be later than you

perhaps anticipated? are you surprised we have not seen a rate hike thus far? very look, i am disappointed with the communication strategy of the fed, to be honest. i think they have been missed communicating with the market, giving the market different interpretations of what is happening. that is not good central-bank it. therefore, i agree with goldman going to be a hold until march, but the communication is bad. manus: the institution you just left left rates unchanged at 6%. 13.46 at the moment on dollar-rand. is this trade around the 14 for a time. there is no choice they have got to raise rates. tito: i think they have been been boxed in badly. i feel sorry for my colleagues. on one hand, the exchange rate

is weak. inflation, which they are targeting, is around 5% thereabouts. their policy rate is around 5.75% thereabouts. they are in a bind. the government finances are worsening, which is not good for them. they are in a bind, really. they will have to bite the bullet at some stage. manus: i have got your opinion. nigeria, got capital controls. they got slammed on the currency. maye are some noises, they consider his position. should they remove capital controls? tito: i think will be good to have a conversation with the governor of the bank of nigeria, to share my expenses with him. it is a bad idea to try masive currency interventions. it does not work. we have learned the hard way in

south africa. even this country, the u.k., learned the hard way -- currency interventions hardly work. clear,rks very producible market economy -- very well-balanced balance of payment positions. the production side of the economy must work. corruption must be fought again. honest, the nigerian economy at the moment is suffered because of the low oil prices. manus: five got to let you go. what you make of ireland's chances in the match? tito: i think the springboks and the ir have to resolve many historical issuesis. but we will have a good game. manus: good man. we love to have you in the office. the former governor of the south

african central. an optimistic for his team's chances in rugby. tesco's earnings have beaten analysts estimates but the operating profit is still declining. the number, quite shocking. fell by 69%. 166 million pounds. let's dig into the numbers. the ceo has sent some warning shots across the markets bow. the lady who has been taking a look at the shares price is caroline hyde. what do you make of the numbers? when you read the banner headline -- 70% drop in operating profit. my gosh, what is happening? but it was better than expected. caroline: this is a company that is try to re-stabilize itself. it is still the number one player in the u.k. in profit but it is still better than expected. and the like for like sales are showing an improvement. the second quarter was better than the first was better than

the fourth quarter. still al negative -- all negative but the size of the negative number is smaller. we are down 1% for u.k. in ireland. it was down 5% this time last year. it is getting better. they are cutting prices, volumes are getting better. they are managing to sell more products. it's a price war that is continuing to hurt them. their sa -- no sale of dunhumby. manus: they sold some korean assets. 4 billion pounds. everybody said that dunhumby was worth 2 billion. caroline: they were not managing to get that price. manus: this is about holding onto big data. that is the critical point. caroline: they just decided, this is a profitable business. we can make this work. it's the analytics behind the club card.

the south korean -- business was thought the jewel in the crown for the international. business. this is why many are looking to dave lewis and hear him say never say never to a rights issue. manus: that was the one thing that caught my eye. i have to do more shopping and their west kensington branch. not yet. caroline hyde on the tesco store. let's switch gears. sovereign wealth funds are dominating at the headlines. if it's not norway, it is what the saudis are doing. abu dhabi is reviewing its latest state on companies -- state-owned companies. let's bring in bloomberg's middle east finance reporter matthew martin. good day to you. tell me what this story is from

abu dhabi? they will look at their state holdings. we expect some developments. -- some developments. -- divestments. matthew: edward abbey created a lot of these companies when there is a lot of money being thrown off from the oil -- abu dhabi created a lot of these companies then. there is pressure to create wealth for the rainy day times for when oil prices are falling. we are seeing the oil prices have fallen, and so awful dobby is looking at where that they can transfer some of these assets into cash. manus: when we talk about assets, everybody knows what qa tar holds. of british companies and buildings. talk about abu dhabi. i know the investment authority. , that think of abu dhabi

is what i think of. talk about these kind of investments we could see release value for them. matthew: a whole host. their identities -- which have set up a joint venture with g.e. intended to: best into the middle east -- intended to coinvest and create jobs. now this is being downsized quite significantly now that g.e. is exiting a lot of the financing business. there is a loss of -- also a lot of investments done in the energy and petrochemicals and oil industries around the globe. those assets are starting to be looked at. a lot of these were very inflated prices. now, of course, the energy industry is in distress. manus: thank you. matthew martin, r bloomberg

middle east finance reporter. dig up the details on this deal. that is it from me for this hour of "the pulse." for our viewers, second hour of "the pulse" is on the way. ♪

>> sabmiller says it is not enough after ab inbev offers shareholders $104 billion to buy the company. getting vw back on the road. paid by theix cars admissions scandal by the end of next year. fire.g the oj keeps monetary policy unchanged. ♪ >> welcome to "the pulse."

we are in bloomberg's european headquarters in london. i am guy johnson. with me is manus cranny and tom keene. have indonesia, malaysia, these are singles of a calm and emerging-market. maybe it is one big short cover, maybe it has to do with francine the club being in lima, peru. whatever it is, the emerging markets, good news this morning. the oil story, is at the center? do you think that is behind this , or do you think that is a derivative effect? tom: i would say it is a derivative effect and a sigh of relief. gloomy everything was so in emerging markets.

francine lacqua went to the it stopped.ima and she single-handedly turned emerging markets around with her appearance in peru. tom, we are back later. the big story driving equity markets, sabmiller says that a revised acquisition proposal from ab inbev "substantially undervalues" the brewer. morning that this previous and former proposals were it. we are joined by consumers reporter thomas buckley. we are also joined by the chief cross-asset strategist at war against him. i've had lots of thoughts on this this morning. is it a done deal? does it look like a done deal? boths: i think that

statements from the company this data theyed light on are keen to move forward with a proposal. pounds, it8 billion is interesting, that that substantially undervalues the brewer. it does not seem to have reached an agreement yet. it is interesting to see old ultraia. to see feel like whatf is happening, this bounceback, there was a huge deal which may or may not substantially undervalued the business. coupleomeone earlier, a of people, say we were ringing

the bell, and this was as good as it was going to get. have furtherw we to go. we can see more aggressive dealmaking before the cycle ins. the dollarvalu -- value of global m&a is back up. that is a percentage of the global market value. we want to get back to equivalent peak levels. second element is the financing environment as attractive for corporates, and there is the ability to put that through. how much of the meeting of these two successful companies is due to easy money? >> it is hard to ignore the fact that the cost of debt capital is low. how corporates look at it after a tax return basis. we see that even as investment

grade markets in the u.s. have widened. the yield of those deals has been attractive. issuers have been able to do large volumes at higher prices. the financing environment is still such that we think the m&a cycle can continue and we are not at the top. b?: what is plan if you could not get the deals done, and some are not getting done, how are the company -- what does the company that is trying to take cost value out do? the m&a is a result of the weaker growth environment we are in. it is the path companies go on when they cannot grow organically, or at least that is the case in many cases. from an equity perspective the

largest overweight's in europe are baking and energy, to margins aree below historical averages. there is a market for organically improving businesses, whether then further growth being dependent on m&a. guy: thank you very much. let's switch gears to talk about volkswagen vw. 2.8 million diesel recall in germany will start in january. it starts a path of pain. hans nichols joins us number one. there are conflicting reports. hans: we hear from the labor union representative on the work council on the board that he does not want to see job losses. he thinks they can withstand this without

substantial job losses. they say it will mean pain, that may or may not mean job losses. mr. mueller said they will look at all planned investments, and what is not vital will be canceled or delays speaking to 20,000 workers yesterday. he said he would be completely clear: this will not be painless. a budget approved by the board last november, they are going through it seeing what is vital and essential. they could trim back a billion euro investment in a mexican plant. then you look at what they spent , 17.4 billion euros. same as volkswagen. -- are biggerl costs than what other auto companies spend, 16%.

what we have is they will put their technical fix, and if it is approved will have a schedule for the recall. then, tom, we will have testimony on capitol hill. tom: i know you drive a ford mustang around berlin, but have we seen a demonstrable unit volkswagenonly on but across all of the vw groups? have sales tangibly suffered? hans: the most recent numbers we have are down 9.1% in japan. in italy they were down 1.4% last month. fiat chrysler is up 24% in italy last month. compared to their main of fiat,r, the old co they look to be profiting with

cash for clunkers or cash for volkswagen vehicles. guy: let's bring in our guest. we are beginning to understand some of the parameters surrounding the vw story. from an investment perspective there?y on loans are out how many questions do we need to be getting answers to? vw coming out with a fix. what do we need to know? andrew: whether it is , a single company story or broader and more systemic. the way that you have seen markets treated, in credit, is certainly more videos syncretic. that this is an issue focused on volkswagen. that is ament manageable issue. european stocks can rally and confidence can come back as long as it is contained. tom: you can not use six

syllable words on bloomberg "surveillance." too much for is this early in the morning. we talk about bw, what are the correlations in the world right now? andrew: what is interesting is how much oil has been driving and behind a lot of market moves. this has been the case for some time. you saw the spiral when you had week oil prices driving higher, bondices yields lower. i think any investor looking at the pattern -- higher credit spreads, lower inflation expectations and bond yields, it is scary. what is interesting is 2

factors, oil prices starting to bounce. it has been more stable. the drivers of oil weakness look different from the clients we have seen in the last decade or 2. in our view this is supplied driven weakness in crude, not demand driven weakness in oil. yesterday some of the guys in the oil industry, shell, talking about a big spike. i want to get your take on that. andrew sheets from morgan stanley will stay with us. let's get to manus cranny. the big retail story in the united kingdom. beatngs for the u.k. estimates. and profit in a u.k. ireland for 9%, 166 million pounds.

restructuring its alliance as the company seeks to contain the french government influence over the party. the joint venture was created when it was on the verge of bankruptcy. nissan has become more profitable and is now worth twice as much as the french carmaker. u.s. industry data shows that crude stockpiles fell in the world's biggest consumer, and if the energy information increased its forecast for global demand. shares surged after they beat estimates on higher sales. central to reviving the company's fortunes. the galaxy smartphones have struggled to compete with iphone. helped to currency boost component sales. but taco be losing,

bell and can't see were expecting a 10% jump, but they only rose 2%. yum has revamped its menus, but it is struggling to recover from an avian flu outbreak and a food quality scandal at one of its major suppliers. guy: next, as the specter of recession haunts japan the boj holds fire. what are kuroda's breaking points. the economist of citigroup speaks to bloomberg. and an hour later we will hear from the former u.s. treasury secretary. you do not want to miss it on bloomberg tv. ♪

guy: welcome to "the pulse." kept itsof japan record stimulus unchanged despite speculation on further stimulus. are these assigns of a recession in japan. kuroda defended the decision. let's go to tokyo. doj toll it take for the act? what information do they need to see to pull the trigger? >> there is a lot of worry about

the economy and signals of a recession that the economy may already be in a recession. pressor kuroda, and his conference this afternoon, tried to put out flames and said that he does not see the inflation trend this year being the same as last year when he led the drive to using. he led a divided boj to using. that could be a signal he is not for easing at this point. he said things could change. on october 30 we will be looking at divided economists. people seem to think using is needed, and others say it will not happen yet and maybe not until next year. moredo we need to see fiscal action before the monetary policy story follows

through? jodi: that is what everyone is looking at. growth is needed for it to work. we have not seen wage growth, the kind of investment by corporations. they have record profits, but have not been investing in wages. through this is what everyone is watching. to is abenomics going succeed, where's the growth going to come from? rhoda says he expects wage growth to happen, and that would be good for abenomics. the other good thing for abenomics is the trade agreement, the ttp, that was agreed to in atlanta. they need to ratify the agreement, but that could help theto make reforms in

agriculture sector and an expansion of exports. update.nk you for the let's continue the conversation. to wrap the ideas back in. one of the other things that corroded talks about is the 10% target and how it is variable and dependent on the price of oil. shell talked yesterday about the possibility of a spike. what would it do to help monetary policy works in japan and how will it affect central banks? seeing isat we are the headline effects, the correlation in japan has been stronger, and rightfully so, oil prices has given a misleading view. if oil prices move up, inflation expectations in the market have higher to move. we are looking at the lowest

expected inflation in the u.s. that has room to move, but kuroda is doing the right thing looking through the. inflation is rising enough to keep them from using further. sit, ism where you currency depreciation the only path that mr. abe has? andrew: we don't think so. we think this is a key part of our case for why we like japanese stocks. it is not because we expect the yen to weaken. most people see the japanese market as something you only buy when the yen is going to go weaker. is probably the cheapest currency in the g 10 on the purchasing power parity or effective exchange rates.

secondly, we have had an interesting test case from january to july of this year, where the japanese market did was stable.e yen japanese companies are improving margins, restructuring, focusing on cleaning up their businesses in a way they have not done for some time. guy: we will carry on the conversation. next, find out why david cameron wants to make this the turnaround decade. plan to do it? we will talk the u.k. when we return. ♪

guy: welcome back. david cameron will set out changes to planning rules to encourage delivering more homes for young people. this as his government promised a speech to the conservative party's conference in manchester cameron said "i believe we can make this year ra -- these 2010s -- a defining decade for our decade. the turnaround

one which people will look back on and say: that's the time when the tide turned." how will home builders and home about this? how would the conservative party's faithful feel about this? andrew: home builders had a great run up this year. one of the problems identified is the lack of home building in the country and what david cameron will also talk about his people in their 20's and 30's that are waking up in their childhood bedrooms, going to work and say goodbye to mom your they are trying to deliver a promise that they will have housing. you want to add politics, create fresh voters for his party when he steps down. thisin terms of where

takes the political gravity, are , oramping out in the middle are conservatives doing something with the political room they have? simon: he is building. on monday he talked about the devolution of the city, policies have been labor manifested, fill what jeremy corbyn has moved away from. you have doors johnson speaking as -- boris johnson speaking as well. there are all trying to jostle their way. david cameron is saying he is still relevant and he has a vision. can watch david cameron's speech on bloomberg /ive go and bloomberg.com livestream. we will talk about what is happening with samsung, the

shares surging. the strong dollar really having a big impact on this business. we will discuss that affect when we return. ♪

guy: welcome back. we are live from bloomberg's european headquarters in london. with me as manus cranny and tom keene. lacqua is in peru. let's look at the markets with mark barton. the longest winning streaks since april. of emerging market stocks arising for the sixth day. european stocks are up for

a fourth day. global central banks will keep monetary policy loose to combat -- interesting data from germany, production unexpectedly dropping 1.2 percent in august, confirmation and is feeling the effects of weaker of emerging market demand, the drop in factory orders. u.k. production rose more than eight economist's estimates. the biggest month or transport 2011.ent since sabmiller shares are rising, that not as much as some might have expected. 36 pounds 69. it has rejected a 42 pound offers saying it is

substantially undervalued the 42.15 pounds, 15 pence more than the original offer that was rejected on october five. tesco, earlier shares were trading lower by 3.7% after it abandoned the sale of its data analytics unit, and that is raising concern it will need to resort to a capital increase to reduce its 21.9 billion pound debt. the seconds fell in quarter. this has to be the currency of the day. yesterday we talked about the moneys surging against the dollar. the malaysian money rose as much as 5% against the dollar. the dollar is falling against

the malaysian ringgit. thebiggest decline from height of the asian financial crisis in 19 98 after the company reported its biggest trade surplus in nine months. crude prices climbing. this currency sank in the third quarter life 14% against the dollar. the price of crude, it is rising for a fourth consecutive day, the longest winning streak since april, up 1.8%. it has not closed above $50 since july 21, industry figures show rootstock pile fell in the u.s. ahead of government data later today. emerging markets are rallying. you very much. mr. barton on the rallying emerging markets. let's find out the top stories you need to be aware of. manus: let's kick it off with

sabmiller. a revised takeover offer from anheuser-busch, inbev, undervalues the company. the offer for the london-based brewer is worth $1.4 billion. were former proposals rejected. the bank of japan kept its record stimulus unchanged at rumorsanged amid recession will force them to act at the end of the month. german production unexpectedly fell in august. factories dropped one point 2%, missing estimates for an increase. germany is grappling with a slowdown in china and other key markets for exports. the new boss at the w told a german newspaper that he intends to bacon recalls in january. mueller expects all cars

affected by the admissions scandal will be repaired by next year. samsung sales jumped 7% after they beat analysts estimates. let's get over to caroline. caroline: this is the biggest years, we have seen in 6 the prophet was even more of a ramp-up. 80% search. no wonder we saw by of stocks. sales up 7.5 percent. a better quarter. these are preliminary numbers from samsung. it seems it is the strength of the dollar that is helping. on the dollar against south korea. sales in chips and components, priced in dollars, you convert that into south korean won and it is more bang for your buck. chip, the displays that they make for other phone companies, for apple, and theper companies like

chinese manufacturers that are eating away from the market shares from the bottom of samsung. is estimated and surged 54% in chips. and 11 fold increase in display units. it is not as pretty if you are looking at the smartphone side. unlike chips, priced in dollars and ramping up their bottom line, you are zynga smartphone up 24%. the cost of making the product is in dollars. you are selling it in the local currency. you are saying a ramp-up in competition. you have to remind yourself, the alex he phones -- the galaxy phones, were they flying off the shelves? no. they had to drop the price of

their flagship phone. average $600s an average selling price and samsung is just $200. that is why we are seeing a slowdown. high -- wen it as have seen it tumble in market violation since mid april. they lost 27 alien dollars worth of market capital since april. guy: thank you very much. andrew sheets is with us. samsung is benefiting -- getting the benefits with what is happening with the dollar. how much is the dollar going to get mentioned? andrew: you always have the dynamic that when the dollar t is an excuse, but when it helps you it will work into stronger operating conditions anyway.

it emphasizes a divide between developing and emerging-market companies. you have markets that can capture currency effects, and those that sell into e.m. and are more exposed. we continue to see dividing performance, and this is a reason why i think that we will see some emerging market bounces, but better performance in the sectors of the european companies. that might be where investors want to focus. sectors that have sold off significantly. anything with e.m. exposure in europe has been shunned, but the stocks may benefit as the currency effects come through. see with ao you multinational and transnational companies? we love globalization, but with all of the morgan stanley research, and francine lacqua in for real, what does the new multinational look like?

where will companies like samsung be in five years? andrew: i think they multinational model is facing challenges. tom: i agree. andrew: on the industrial side we are seeing conglomerates seeing slimmed down. the trend is moving away from the "we do everything" model and focusing on single industries where people have an advantage. that trend in morgan stanley's of view is that can continue. equity market and diversification. they would rather split into areas that are easier for investors to focus on. tom: i was suggest this would be the theme of davos. know andrew sheets cannot talk individually about companies, that is not part of the strategy game, but i thought the dupont news was stunning and goes

mr. sheets' view that big conglomerates are done and everyone will go it alone division division. guy: it will be interesting what happens next. you get the sense at the moment that there is the possibility of a squeeze to the upside. i wonder if that noise disappears if we have stocks to the upside. i wonder if we will be at that point in dollars. youioning the fact that have a feed-through into em itcks, european stocks, could be magnified. it will be fascinating to see if that is short-term noise, suddenly you are being rewarded for that em exposure. tom: i was reading the financial terms of the market down to 3.1 percent markdown in gdp. what is the morgan stanley

global equity call? onthere a global call extracting ourselves from five years of emerging-market slowdowns? torew: i think we are trying look at the e.m. slowdown story as a story that has been happening for some time. particularly violent recently. emerging markets have been underperforming since 2011, commodity prices have been underperforming since 2011. it is a development we have to take in turn. global equity market forecasts have been 3.1%. we have been where the imf is for 2015. if we think of global equities in that context we are looking for in preferred markets, what we think is cheapest relative to local government bonds, that are relatively early in the corporate restructuring cycle.

where there is more self-help that can happen. and those that have sold off the most in the recent weaknesses, those are europe and japan. that is where we are recommending investors added exposure in the current environment. we think those 2 markets will outperform the u.s. is there a better opportunity to get into those markets down the road? like if oil comes back sharply. it feels like everyone is out of position. if you get a spike in oil, everyone is the wrong way around on that trade. andrew: the fundamentals in aem are very challenged. this is something that hans and the team have talked about. on thursday they changed their view on emerging-market currencies, they think it will rally. that is not because they woke up one day and thought problems in the emerging markets were gone. they may have to address that in

december or january. our positive view on the market depends on the global economy continuing to recover and not injuring a global recession. emerging markets are still going through a difficult adjustment phase, and it remains to be seen. guy: thank you. we will take a break. next, the reality of $50 oil. force theslumped may interest big you bake to be broken. that is next. ♪

>> you see a pickup in the u.s. and euro area. japan had a strong q1 showing that is beginning to look wobbly. economies have .eterogeneity there are commodity exporters. canada, norway, australia are facing headwinds. guy: headwinds. economisthe irs chief with his thoughts on the world economy. the imf downgraded its forecast for global growth yesterday. he talked about norway. norway's minority government will spend billions of dollars

in its oil wealth next year. $830 billion sovereign wealth fund. nordic economy expert joins us on the phone. this was not meant to happen for a few more generations, but the price of oil is having an impact. this is the reaction. >> exactly. the fund was set up to save for future generations. it seems that has come for norway. 50, a price of oil around thepressures to keep welfare state going, and pressures to save the economy from the oil slump, the norwegian finance minister will toome the first next year actually make withdrawals from the fund. guy: how does that work? how do you withdraw from a sovereign wealth fund?

jonas: i don't think they have ever done it. they will have to figure out how to do it. a half hourthe fund ago. --gets 200 billion world it gets 200 billion in dividends. it does not actually have to sell any assets, but it can quickly siphon that off to the government that needs it. it does promote and present challenges for the fund, because the fund has generally used large inflows what it wants to buy asset classes or real estate. it is looking to get into infrastructure. any shift in the fund will become more difficult. potentially, if the government's need for oil money keeps increasing and the fund keeps posting limited returns, potentially the

government could overwhelm the current fund and the fund would be forced to offload assets. that is probably not going to happen next year or in the next couple of years. who knows with the current state of the oil market. guy: what number are they plugging into their model? there is a model somewhere that the government is using. what figures are they plugging in? brent crudesee averaging $15 a barrel, this year and next year. and then rising slightly in 2017. theyding to those models, are seeing oil investments on the off shore falling for three consecutive years. we have already suffered job losses in the oil industry almost up to 30,000 workers. -- it is pay up

time for the government, now. guy: thank you. on what therom oslo government is doing in norway. statese the gcc beginning to have similar conversations out of abu dhabi out of the uae. you have the chinese spending reserves to support what they are doing. , and thean inverse qe impact on the quiddity feeding through into the wider story? andrew: we're trying to think of this in 2 ways. the first is that any selling that we do see out of sovereign entities or a reduction i'm a body, if that is going to support local economies -- or a ying, if that is going to support local economies, that could be worse for premiums, but it could be

good for market growth. the world needs government demand to pick up and fill that gap. the more macro implications are the question of why do the dollars sit there in the first place? the dollar stood in fx reserves and sovereign wealth funds because the u.s. has run a iticit, importing more than exports, that means dollars and up outside the u.s. and have to go somewhere. they either need to come back into the u.s. as demands, or they need to buy u.s. assets. the dollar's exist outside of the u.s., the west does not look like it will run a surplus is a time soon. even if china reduces its foreign currency reserves, the dollars still exist. that is something the market sometimes overlooks, like the dollars disappear. that is not the case.

the chinese reserves, we can see an indication, i think the media has been inflammatory -- we see a rollover in chinese reserves. it, do youuse believe the numbers that we see about reserves nation, tidenation, tidenation? we know what they have in the piggy -- about reserves nation, ?o nation, to nation do we know what they have in the piggy bank? torew: it is reasonable think those large fx reserves exist, because demand from emerging markets, from oil exporting companies i not been high enough in the last 10-20 years. these are reflecting structural trends that have existed for toe time that will continue

exist. we are seeing some adjustment, but the reserves are still much larger than they were 5-10 years ago. what toll to come, watch. we will get citigroup's take on the oil industry. tom keene has special guests. we will find out who they are. details, next. ♪

guy: welcome back. it has been a busy morning. we are not done yet, are we? there is a lot of going on. we have a wonderful our coming up. citigroup,r from tobias levkovich, we did that because it is the opening day of hockey with the rangers playing the backlog's, -- playing the blackhawks. oil, adjusted for inflation and the rising wealth of our global economy back 60 years. andre back to 1970's oil, tobias levkovich, wilem buiter, and ed morse from citigroup coming up next. guy: we will take a break.

plenty of corporate news to deal with. we will take a break. "surveillance" is up next. bloomberg television continues. if you want to follow-up on twitter, that is where you will find me. ♪

tom: the crisis over.

america is not part of a global retention -- of a global recession. oil is above $50 a barrel. vladimir putin's ruble is stronger. in this hour, willem buiter, ed morse, and tobias levkovich of citigroup. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene with vonnie quinn and guy johnson. this could be a six hour program this morning. cameron will be speaking soon on the e.u. brief us on what you think you will hear from mr. cameron. nominally, he is going to be talking about houses and the fact that the u.k. needs to build a lot more houses. also any hint about a referendum membership is going