francine: carney weighs in. the bank of england governor p ionts out the risks. meeting of the ecb 2015. with all of the new capital requirements on banks in europe, we see the ecb board chairs. this is bloomberg's " surveillance."

it seems the ecb is cornered because they have to remain credible. they have promised more. they can do three things to deliver. what will they do? tom: some early stage and's about what the ecb can do. guests as youreat know, mind up. let's get to the first world news. reporter: thank you. the european central bank has a challenge today. it has to be shown he is ready to use stimulus. he has said it is too early to decide whether to expand. meanwhile, the economist survey by bloomberg critics -- predicts the ecb will keep rates of the same.

china says they will invest more than $9 billion in the first nuclear power project in the u.k. chinese nuclear company is designing a future u.k. reactor. john boehner is being replaced by paul ryan. rayan says he wants to hear from the two other groups by the end of the week. hillary clinton will appear before the benghazi committee. this is regarding the attack in libya. republicans suggested the 's motivation is political. last month, is the hardest month of september. the average land and ocean temperature was 1.6 degrees

above the 20th century average. nine of the 10 warmest years on record have happened since 2002. tom: let's check on the equity bond currency commodities. not much going on. the dow is up 39. the euro-dollar is doing nothing for the 437th day in a row. what a stasis going into the ecb. we are not to the point that would get my attention yet. francine? francine: thank you. it is decision day for the ecb. the meeting is today in malta. most of the governing council has said it is too early to decide whether or not they should expand their $1.1 trillion program. we're live from malta.

if we look at when they started 10 months ago, the euro is back to the levels of pre-qe. what can we expect from draghi today? expectations in the market are clear. will expandthe ecb the qe. either by make the end it longer , or by increasing the pace of purchases. most members have said it is too early to decide and they need more information. said he is ready, there is little to expect today. francine: i guess he will be fielding a lot questions on whether qe is working. qe has worked in the past on the euro. he wanted a weaker euro and that is now no longer working.

draghi actually said qe is working better than expected. the ecb can point to the increased lending to the economy. it is easier for companies to borrow money. at the same time, prices are falling in the euro area. that is mostly because of oil. in ecb has its next forecast december. it wants to see signs that inflation is going up again. francine: thank you so much for now. he is covering that conference for us. central bank policy, john, when you think of it you look surprised. it isou look at the ecb, now, he saiddit

he is ready to do whatever it takes. now we are starting to question that. john: i think we should question it. he is walking into more and more opposition. the germans have started to walk out. too much qe means we have too many lazy companies in the economy. there talking a great deal more about the effect. that is happening across europe. more and actually easier credit conditions may make that worse and give the productivity problem in the eurozone more to bite on. it of no if they have much in the way of actions available. no matter what he says, nobody will take much notice of him. with not going to get away increasing it today or extending it. if he does extended or increase it, it will not have much impact. francine: in the past he said it would do whatever it takes. that worked. you have said, of course they can extended, or cut the deposit

rate. jon: it will have very little effect, compared to what was originally done. now, it will have little effect. nobody will take much notice of it. when i look at his inflation and deflation, i know it is different than the united states. do you assume for you and mario draghi that his inflation or deflation is now embedded? is there a permanence to it? jon: i don't know how permanent it is. it is supposed to generate inflation. we have not got it. that shows you the inherent weakness in the economies. people are not buying things. it is not enough demand. it may well be embedded for quite a long time. permanent is forever. for the next for years, i would not be surprised if we don't see any serious inflation at all. francine: what about the fx?

you said there would not be much of impact if are you draw the were to announce a lengthening or extension? the euro might move. jon: the eurozone remains a fragile economy with several of its participants barely growing at all. certainly, a drop in the euro would be very helpful to them. it does not seem actually able to generate that either. able to: he is not generate it because inflation is produced outside of the eurozone. his control is actually very little. what is the fair value for the euro-dollar? we were talking about -- what more can he do in the next two months? jon: if he wants to get the euro down, he has to persuade people that the ecb does not know what it is doing. they will lose confidence. it is a fairly unusual strategy.

it does work. i don't know what else he can do. he is extremely limited. they are at the lower bound. do quantitative easing. i cannot imagine the germans will let him do that. francine: we have to get to the bottom of why the euro is dropping. we speak exclusively to the ecb supervisory board chair, daniele nouy. you are watching bloomberg's " surveillance." ♪

tom: good morning everyone. this is "bloomberg surveillance ." we are watching malta, with an ecb meeting this morning. this is the german year negative. the ecb meeting later this morning. francine: thank you, tom. recall may be the most expensive recall ever. they have to bring the cars up to regulation. just part ofsts what vw will have to spend because they were caught tests.g on a missioemission audi is overtaken this year as the second-biggest carmaker.

valeant took investors on a wild ride. the research firm claims valeant was trying to create phantom sales. afterock price recovered this was proved to be erroneous. 2 millionn bought more shares. >> shares plunged as much as 40%. it was called the enron of big pharma. claims called citron's erroneous. he said, if there is one person i do not feel bad for, it is ill ask men. if i could switch bank accounts and hair with him, i would close out tomorrow.

how big could this become? >> obviously, if there is truth the company has been manufacturing revenues, it will not be the first time it has happened and it probably won't be the last time. and of course, it is an issue. the company has the heavenly vehemently -- see hi denied it. francine: do you think there will be an investigation? >> there has to be an investigation. somebody has stepped in. they have to say, we have looked at the numbers and are comfortable with them. withey are working distributors. you move the inventory off the company to another place to another subgroup or sub entity. something like that. is this business as usual within

pharmacy, or do you detect there is something different this time? sam: it could be business as usual. the reality is not many pharma companies only outlets. you really have to look at the details to see whether -- the companies say they did not. they cap inventory for when they were actually -- they kept and venturi for when they were actually prescribed. and what i would suggest, this goes back decades within the pharmaceutical business. across the midwest there was the same issue. how and when do you account for the revenues? the unit product that is up top. that is the debate mr. ackman is having with the citron critics. francine: that is actually one of the points that was made.

pharma is not lacking in intelligence or creative accounting. i don't think tom, that this is the end to the distribution chain type of misleading being done here. it looks like they have consolidated a company that they have not yet bought. that is allowed under the accounting rules in some situations. it seems strange that they have not announced a clearly. tom: i think this is very important. revenue recognition differs country to country. youin your experience, do see a distinction between canadian revenue recognition and what we have in the u.s. or u.k., or germany? is there something uniquely canadian here? jon: i don't think so. i think the rules are very much the same as they are anywhere in the eu. the rules are slightly different

but they do not bear on the kind of things we are talking about here. francine: you were talking to carson last week when tom was in london. this is a short activist investor. andrew left is making these accusations. we are not familiar with these kinds of people in europe. are they good for the industry? >> whenever you create debate that is based on some level of truth and healthy and lively, that is good. it is important that there are people who do these kinds of investigations. a lot of times analyst will do it. that is rare nowadays. it does happen and it is healthy. making ite not up, it will be good for the market. i don't know how many people know around the table, but jon is one of the original investors in the pharmaceutical company shire. they are in the same business.

francine: thank you so much. as long as it is not made up, it is probably healthy for the industry and the pharma sector. we speak exclusively to the ecb board chair, daniele nouy. that is coming up next. ♪

tom: new york celebrates the amazing mets.

it is not that the mets won, it is that they won big. one of the baseballs launched into deep centerfield in chicago. it is still up in the air he ball was hit so hard by the new york mets. believe it. it is a happy new york. let's go to francine lacqua. she is a very important guest. it is daniele nouy, the supervisory board chair of the ecb. this is a huge job. .ou regulate supervising we have talked about changes. we have talked about the investment banks being entrenched here in europe. are you concerned that this puts us in a position where we are giving freelance to the u.s.? daniele nouy: i think that is a

bit extreme as a position. in thesee some reform european investment banks. there are years when the u.s. are gaining market shares. wherewill be other years the european banks will be able to gain market shares. francine: what is the biggest threat for european banks of the moment? why have we been so late in getting our acting order? daniele nouy: obviously, we took a bit our time for the facing the newor phasing in regulations. biggest: what is the risk facing european banks right now? daniele nouy: the economic

situation is not as good as we would like to see. the level of interest rates is edging the profitability of the number of banks. i would say the number of banks is large. there are many provisions to be made. they are edging the profitability as well. francine: we just got over a huge european crisis, which is greece. how do you prepare for the next one? daniele nouy: we can be positive. we can consider that the work that has been done to get through this crisis has been a field test for us for future crises. i think we are well prepared. francine: when you look at

landscaping, how much consolidation will we see, either internally or cross order? daniele nouy: i think it will make it easier and more interesting to consolidate a banking system. take a little bit of time, for sure. that arehe constraints edging the profitability of incentivizeks will banks to move in certain situations. francine: overall, what is a specific challenge for you in the next 12 months. you're in charge of the backdrop of european markets. is there something we have to get exactly right? is it leverage ratios? is it the smaller banks that are

not systemic, but are important. : regarding the small and medium-sized banks, the full of the mentation of the new roles that have been decided are important. we have set up perimeters for the global systemic bank. these will be implemented. francine: thank you so much for joining us on "bloomberg surveillance." ♪

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what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. ♪ tom: good morning. bloomberg "surveillance." singapore, if you go to raffle's

bar you can have a general and tonic without air-conditioning. the they say it is like 1930's or 1940's, they are not kidding. i had a jenin tonic at raffle's and it was 142. let's go back to our bloomberg second, third, or fourth word news. are biddingomists on a program. ecb president mario draghi spoke to reporters. to show that his ready to increase the bank's buying program without panicking investors concerned about the eurozone economy. a economist predict the ecb will keep interest rates unchanged today. john kerry is in berlin to quell the violence between israelis and palestinians. he is meeting with prime minister netanyahu. saying that both side should tone down the rhetoric.

on saturday he will meet with the palestinian leader and the jordanian king. on capitol hill, republicans of clear the way for paul ryan to become the next bigger of the house. antiestablishment conservatives voted to give ryan their support. the freedom caucus is the same one that forced john to resign. ryan asked for unified republican backing before agreeing to run for the job. president obama is pushing congress to give puerto rico power to forgive its debt through bankruptcy. protection is available to american territories. the island is $73 billion in debt and cash is drying up. london, real estate agents expect prices to spike. there is a shortage of homes. mortgage rates are down. the average cost of a london home is $808,000.

are you experiencing that in london? francine: it is painful. this goes to the heart of the political situation. is that more expensive than manhattan? vonnie: we don't buy homes in manhattan. that londonuggest is worse. from what i observed in the week that we shared in london, your london has more of a foreign money inflows and even new york city. this is a huge issue worldwide. the megacities. cqua cities, la places you want to live, it is ugly. ofncine: you have a lot chinese money, we have a lot of european, especially with the crisis. the grexit. on therney did a speech u.k. and the relationship it has with the eu. the point i want to make is that we need to take this seriously.

we had polls, thanks telling investors to wake up this is a real risk. the u.k. may actually exit the eu. >> they goes both ways. we talking about trying to get out of the eu, or not, with a background of mr. cameron delivering a package of improvements. no one has a clue what that package of improvements will have in it. thecine: what do you think chance is that they will leave the eu? is it 30? that is already high. mr. moulton: i think it is 50. there are actions that can be taken in europe and the u.k. that would make a difference. if the europeans are telling the brits that they won't get anything, they will come out. tom: will you explain for an american audience jon moulton

what will happen the next day britain leaves the eu? i am lost. so is everybody. don't feel picks on. the reality could he could be anywhere from total chaos to absolutely fine. tom: do you the evening before the euro all hell was going to break loose, and nothing happened. thatine: i like the way tom keene is telling me to take this seriously. i live in this country. i don't know how you model a u.k. brexit. tom: let's bring in someone from island to make us all smarter. i'm wondering what mario draghi's input was. i'm sorry, mark carney's. forade a speech and pushed no brexit. will it have an impact? actually.n: he didn't

it was a classic bureaucratic speech full of ifs, boats, and ends. and ands.ts, that have had some benefits. it is had some detriments. the whole subject is very complicated. some things about having a single market are good. thethe intrusive nature of highly regulated market that is emerging is bad. how you get that balance right is difficult, and no one knows how it will play out over the next few months. francine: this is a political situation? it would have been very easy to let the greek banks and country code. at the end of the day, angela merkel, francois hollande, and the other prime ministers will decide if they are willing to give cameron enough for he comes

back home and says this is a victory and we can stay. the end of the day if cameron arrives with an attractive enough basket of wins we will stay. if he comes with nothing, there's a good chance we will come out. francine: will the backbone of europe at the moment leave london if we exit the eu? london is expensive. mr. moulton: it is expensive but has a fantastic pool of talent. the eu is making it harder for banks to operate in london and anywhere else. i don't think the banks will run away. europe on a very hostile place, the banks will likely leave. if we simply leave europe and have a friendly free trade arrangement, keep air traffic control in place, nothing will happen. francine: jon moulton on the risks of a brexit.

next, the refugee crisis. this is bloomberg "surveillance." on your tablet, phones, and bloomberg.com. ♪

♪ tom: it is bloomberg "surveillance." to those ofmorning you watching and london, and across all of europe and america. let's go to francine the choir in london. break-ins,espite service delays, and disruptions from europe's migrant crisis, good thirdhad a quarter.

is the increase sustainable? joining me from paris is the eurotunnel ceo, jacques gounon. how do you see the refugee crisis? how much of a disruption? it is a human story, but looking at it from a business perspective how much of a disruption will it be for eurotunnel? mr. gounon: there is a general crisis with my grandpa in europe. the market has been infected. quarter, our yield is increasing and our revenue was up 3%. from our own perspective, there are small disruptions, but we have the full support of the british and french governments. due to the support we are confident. francine: what is most affected his freight trains. have you had customer saying they would be looking at

alternative routes. it would be longer, boat or air would be more -- if you longer, i am talking about boats. or air would be more expensive. mr. gounon: that is true, trains , but that isected marginal traffic. trains are success with new routes to the south of france for tourists. all in all, a growth of 2% of traffic we can say there is no significant impact on the high-speed train and no impact in our own business. francine: we were talking in a heated discussion about the brexit and whether it will impact this country if the u.k. decides to leave the eu. that will have an impact on eurotunnel. mr. gounon: yes.

say the brexit is neutral. as we are reinforcing presently border control and the border transporter i think the brexit could generate more traffic europe.that and that could be positive, but that is due to the fact that there is a unique monopoly on the market. it is hard to see how that would have a much impact on you. essential revenues have not been hit, there has been customer disruption, people spending a long time getting through the tunnel. has that not affected you at all? could be anyt

transport mode. when you have a flight there could be disruptions due to weather conditions. and you have a train you can have disruptions. there is a decrease in traffic of 10.5%, and we are growing by 3%. we have a broader force of police around the terminal to make sure the migrant issue is pushed out of our scope. mr. moulton: he would have done better if they had been no migrants, i am sure. francine: a little, but i guess that is perception. thank you. now to your last point, they would have done better. how much does the refugee crisis play into the british psyche when they vote on the eu referendum? mr. moulton: a lot. it is a popular subject. people in the u.k. are more at a

populous level anti-immigrant in most other countries in europe. they have a hell of an argument about there is no question political will against large-scale immigration is very strong. tom: within that, jon moulton, the political will that you see stay to thatn we economic migrants and refugees add to nominal gdp over the long-term, and many of the nations desperately need that population growth? mr. moulton: i agree entirely. the population is viewed as a group. we need talented all over europe. there are demographic problems all over europe. germany needs lots of young bright people. it is getting them. if you look back in 10 years, this influx of refugees will be a positive. in the meantime there are social -- as, a law to present it

lot of resentment, and i'm sure there will be violence and unpleasantness. gueste have the perfect to synthesize what we will see from mario draghi. robert sinche will join us from the bank of america. we may even talk i sake with him. we will threaten to do that. i is bloomberg "surveillance." ♪

tom: good thursday morning in london, new york, bloomberg "surveillance." sweep by the new york mets. let's go to our business flash with vonnie quinn. volkswagen will repair the most expensive recall ever. they have to bring the cars into compliance with pollution regulations. some work may have to be done in special shops set up for the purpose. this is only part of what volkswagen will have to spend after being caught cheating on emissions tests. mercedes is up, thanks to record sales. set to overtake

audi as the second biggest luxury carmaker. pharmaceutical company valeant took investors on a wild ride, shares falling 40% after a research firm claimed value was trying to create false sales and falls revenues. stock recovered slightly after valeant called the report erroneous. took the opportunity to buy 2 million more shares. that is the bloomberg business flash. acqua in london and jon moulton with better capital. they are, aes were lack of gdp, to me that falls to a new form of new normal rate of return. i'm always asking, where is the real internal rate of return going forward? institutions seem

to be generally happy with talking about rates somewhere between 7% or 8%. safe positions. if they get 12% at a private equity nowadays they are quite smug. tom: i like the differentiation between 7% and 12%. within this new private equity world, to make that differential happen it will lower set structure. do you need to lengthen the time frame of your investments? mr. moulton: you certainly do. that is continuously happening. the timescale now for a private equity investment is more like seven years rather than three years. it is a long run. francine: there's nothing to buy? mr. moulton: there are deals being done, they are just pricey. when the stock market dropped this spring private equity prices didn't fall at all.

prices are higher than they were in 2007 as an operating profit. dissimilar are not to 2007, and in a low growth economy that means you will get lower returns. francine: looking at those areiples, investments saying that as an opportunity but steel is something you don't want to touch. mr. moulton: steel is a turnaround, which i don't enjoy. i look for situations. i have invested in perfumes, waste disposal and electronics. not a lot in common. of being tactical, everyone is in love with technology and finding the next facebook or whatever. would you suggest there is value to be found in restructuring and enhancing boring industrial companies? mr. moulton: there always is.

the problem at the moment is the low rates of what is called clearance -- companies not being allowed or pushed to go bust because of low interest rates and the habit of banks not having enough provisions. francine: are you looking to exit in a of your investments at the moment or in the near future? mr. moulton: yes. vonnie: which for example? it is private equity for reason. we keep our heads down on our portfolio. we are public company and i cannot talk about it. vonnie: the steelworkers, do they think cheaper chinese steel will affect britain, is the number correct? mr. moulton: it is too low. the outcome might be twice that. the industry has gotten small. i think there are 30,000 jobs in total. in primary steel

production in the u.k., i can't imagine why they are doing it. we have high labor, energy, transport, and environmental costs. you have a wall of cheap chinese steel to compete with. it is hard. people who make things out of steel, they have a reason to the basics of steel production are about to be a gone industry in the u.k.. we started the conversation talking about central banks and interest rates. given what you have just said you will find value or companies to turn around. interest rates in the u.k. will go up, is that 2017? mr. moulton: you have been asking me this question for six years and there is never a good answer. they must. the basics of having an economy around central banks and low interest rates is harmful and that is beginning to be visible. francine: he will find companies

that you like. my main business activity relies on the existence of bad managers. companies,ts running replacing idiots with sensible plans is a good activity of the confined the targets. francine: targets will be six months after we have the first interest rate? mr. moulton: quite quick. banks will begin to unload. 6%, the level of corporate failure would go by factor of 4 or 10. make of the you cost-cutting? yesterday in francine's interview with the new head of credit suites, and it was written up in the ft, when you see everyone cutting costs and doing synergy, what does that signal to you the size every one cannot find new revenue growth? mr. moulton: it doesn't signal much at all.

in the u.k. we have suffered extensively from low business investment, because people didn't have the confidence about increased demand, and that slow down our recovery. i do not think there is confidence in demand anywhere, and it shows in the deflation numbers. the absence of inflation reflects a weakness in demand. should we have stimulus? is your number one request of mr. draghi to have a stimulus in the ecb? my personal opinion is i wish he would vanish. i would rather see the markets running the economy then mr. draghi. tom: we appreciate it. private equity. we focus on central banks around the world. frontline, the european central bank's robert sinche will join us. .e will bring alessio de longis

he is with oppenheimer funds. they do a lot with bloomberg "surveillance." oppenheimer funds has a sterling track record in international investment. we will beat alessio de longis to death on where to place money in emerging markets and developed economies. futures are up seven, dow futures up 41, the german to -- german two-year yield suggesting the challenges that mario draghi faces. stay with us, bloomberg "surveillance." ♪

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tom: complexity is the word of the day. mario draghi considers a new dose of quantitative easing. the ecb needs inflation. revenue recognition is a bit off as valeant plunges. ackman acquires more shares. the vice president won't run. he changes the political calculus for hillary clinton and the gop. we're live from world headquarters in new york. it is thursday, october 22. inh me is francine lacqua london. will you listen for in the press conference later this morning governor draghi? to thee: i will listen insiders trying to grill him on whether the ecb is cornered. he has talked about doing what it takes. the euro is back to levels pre- tv when we had deflation concerns in europe and we are not growing as much.

how gold will that be? the euro changing from parity to a stronger euro. they need that now. what we need on a thursday morning is our first work news with vonnie quinn. vonnie: we have been saying, the head of the central bank is facing a challenge. he has said that it is too early to say the bond buying program. bank predicted that the will keep interest rates unchanged. the decision is expected at seven: 45 eastern. china's visit in britain is a boost for the chinese nuclear energy. favorite to now the be this bigger of the house. republicans picked up the

support of one conservative voting bloc. he wants to hear from to others. house leadership voting is scheduled next week. hillary clinton starts her appearance before the house benghazi committee. republicans will focus on her actions as secretary of state during the attack on a diplomatic post in libya three years ago. she will be under pressure. republicans are saying the renovations are mostly political. for the first time in 15 years, the mets are in the world series. swept the cubs last night in chicago with an 8-3 victory. it is the fifth national league in history. three games-to going back. and i'm agenda that it doesn't matter. the mets did not have time in the regular season. the photograph on your

desk. it is very good. mets fever in new york city. we will touch on that through "surveillance." data check. equities, bonds, currencies. it is very dead. futures up seven,. futures up 44, the euro has not moved in three weeks. it is at the 113 level. 113.16. this is a little soggy, it bears watching for. 45. 69. it is down a little bit. the german two-year yield to something mario draghi is looking at, it is a litmus paper for the system. 0.26 shelling disinflation. let's go to canada. the drugstore, mr. ackman -- mr. ackman buying valiant. here's the moonshot. very nicely back.

i plunge yesterday, but i'm interested to see where it goes. do the citron allegations when the day? it shouldn't be hard to figure it out. tom: it is revenue recognition. a couple of phone calls. now, legendary robert sinche is with us. and alessio de longis joins us. revenue recognition is a big deal. pharmaceutical companies all over the world have an inventory and move it out to distributors and sub companies. every nation has different revenue recognition, don't they? mr. sinche: every nation has recognition and that they specialize in core industries. in the global computing world, that revenue pie may shift

quickly from one side of the world to the other. in that sense the context on why we put so much attention on currency wars. even the small price changes from the pricing standpoint, rather than the current standpoint can shift the revenue pie quickly around the world. tom: diminished earnings, we are seeing the currency effect is greater. does that continue into 2016? continues for it u.s. companies. in emerging markets, when you think about the currency movement on a day-to-day week to week basis, for a come any it is year over year comparisons for earnings movement. it takes a long time for these currencies to filter through. tom: the valeant story is not something that has to do with currencies. it is fascinating in the

legitimate debate on how you account for pharmaceutical revenues. theie: this is sort of special look. this is why people are making comparisons with enron, if it is legal or not. tom: you're not going to get these guys to -- inche is going to say this is not my area and alessio de longis is going to say, can you say compliance attorney? vonnie: low revenue targets will continue? we feel so.s: we think the slowdown in the u.s. has some more to go. the cycle.he peak of we are not ready to make a sustained move lower. the chances of a meaningful re-acceleration seems slim. if you add the dollar in the

pipeline, that takes a while to even filter through. we feel that in earnings and revenues we will have acceleration from here. francine, let's talk about the ecb. francine: let's look at the macro concerns. .his is a question for rob it had the credibility issue at the moment, but the more qe that europe has, where does it go? it has not moved, the euro. the positive effect is practically nonexistent? is sinche: i think it interesting that the ecb has obviously put constraints on its own activity on what it can do and invest in. i thought it was interesting in germany.d minus

the ecb can buy securities whose yields are lower than the deposit rate, which is -.2. there's a part of the bond cannot buyhe ecb because yields are too low, especially the german yield curve here that lets constraints on the amount of qe they can do. i think that the thought of them announcing additional qe, because they are struggling to do it they have, and the program goes for never 11 months, i do not see them taking a definitive action now. francine: if you look at what the ecb can do, and it can be in a month or two, they have three options. extend, expand, or cut. of all those: options, the most likely signal is on the extension. and then eventually tweaks in the poll probably. the deposit rate is third down

the road, the least likely. at this point is is the most disruptive. here's an interesting twist, it is absolutely correct we should look at bond yields. if you look at the euro we are conditions that are higher today than in the initial qe if you look at the economy side and the bank lending surveys, the circulation of monetary easing has taken place. what is interesting about today's conference is that mario draghi will put more seensize that you have improvements, or will he put emphasis on the financial conditions in the market that seem to suggest we are tighter than before? tom: part of that is lack of inflation in europe. let's bring up the inflation chart. this goes off of south africa, and a movable

force, south africa had to react to a lack of growth. disinflation tells me there is a lack of potential growth in europe? there is good and bad deflation. core inflation in the eurozone is under 1%, 1.9% now, which is sluggish. -1/10, and aation, lot of that is energy prices. that is a phenomenon. we are seeing consumers in the eurozone are fairly robust by european standards. over twowth is percent, that is good for european standards. are seeing this effect of qe and the effect of lower energy prices. european growth by european standards isn't a bad, 1.5% might be slightly above potential.

tom: some of the debates in potential as we go into the press conference. we will continue with robert sinche and alessio de longis. the conversation with the chief executive officer of one of the most interesting companies in america, eli lily of indianapolis will join us with challenges taste going forward. stay with us, bloomberg "surveillance." ♪

♪ tom: good new york mets morning. from the home of the new york mets. even vonnie quinn loves baseball. even me. top sales estimates in the third the forecasting

growth for the largest maker of cantor drugs. they will also have more competition for older drugs. a financial crisis leader is retiring. he is stepping down after leading the lender for five years. he will be succeeded by l&l energy. withe going head-to-head another company. youtube is unveiling a paid video subscription service. be $10 a month, the goal is to persuade people getay for something they for free by removing ads. google is looking to become profitable. tom: i did not mean to cast doubts on your baseball, i know you are diehard. vonnie: i did to some regular season games. tom: right now let's go to washington.

bank is covering politics through thick and thin. derek, it is great to have you with us. i was taken by the press conference last night. people said that when joe biden in the building he is allowed and hase is loud passion and emotion. what you take from his change in town yesterday? it was interesting. they saw the announcement no biting would speak in the rose garden in 10 minutes with obama by his side, we said he is done. you don't announce for president that way. you saw joe biden who is putting the capstone on his career. he is talking about things he wants to do in the twilight. he says he will stay silent, that this is a guy who was living a going out speech that

sounded like a speech he would have given if you had actually run. it was an interesting capstone. this is a guy who is known to wear his heart on his sleeve. francine: there are things he doesn't agree with hillary with and says he won't stay silent. will this hurt hillary's campaign? derek: i would be surprised if joe biden is not on her side, unless there's some crazy slip up in her campaign. i think that you could actually hear that joe biden went out of his way to make reference to his enemy's line. it is a veiled shot. i don't know that his camp was happy the way he got bracketed, probably some raw feelings. canhe end of the day, time heal these things, and so can the campaign. francine: in europe, we have then focusing that that leaves the democrats without an obvious backup plan is this clinton gets

drawn into the scandal over her private e-mail. derek: you're not feeling the burn? bernie sanders. he is the alternative. folks, butuple other right now this is a two horse race. you look at the polls, and they are close in new hampshire. everywhere else can hillary clinton has a double-digit lead. she is the favorite at this point. joe biden was running a close third two sanders in the polls, but a lot of people thought he had the juice to get ahead. hillary clinton is the prohibitive for runner at this point. she has a moment today in front of the benghazi committee. it will be the super bowl of american politics this year. hillary clinton is your front runner now. derek wallbank in washington. i thought it was something yesterday to see the vice president. you wonder, is he going out,

waiting for four years, it was something. i was surprised. there is vice president biden yesterday. kellye next hour, gary has been running a company for years. we will get perspective. stay with us, bloomberg "surveillance." ♪

tom: good morning. bloomberg "surveillance."

london, a beautiful london as the city of weeks. the ecb meeting and an important press conference. what a conflict situation we have in europe. a morning must-read. vonnie quinn has one. some central bank somewhere will change policy. it is likely the continued gradual hearing of the u.s. economy will pull yields in one hand, and the ecb balance operations will pull and the other. the result will be greater volatility within an expanded trading range. we will see range bound. he said the extended outlook is much murkier. it is a spread relationship, a comparison between two years. this is robert sinche's wheelhouse. how would you compare to year in the u.s. with two-year in germany.

mr. sinche: markets that have been influenced by outside factors. the fed has ended qe and we are getting normalization in the u.s. yield curve, but we aren't there yet. inn we get normalization europe, particularly germany, that could take some time. as europeanassume yields someday get back to normal, that they get back with glideity and some form of path, or does it have to be a junk condition from a negative space? jumpinche: it won't be a condition until the central bank is out of the market. they're there for 11 months under the current program. it is another couple of years before we get normalization in europe. the account long it has taken the fed to normalize. tom: it is a critical question. mr. sinche: in april we saw a mp in deals.

in general, those can be short-lived. the forces remain for those to trade in lockstep for a while. in my opinion, and interesting perspective, all of the textbooks were based on economy debt being able to leverage, lever up. we are in a leveraging world where the u.s. and eurozone are deleveraging, or at a minimum not be able to add new leverage. when yields to part from each other and the currency adjusts to reflect the adjustment, the currency provides the feedback loop to the economy. you aren'tows down, able to have leverage to offset the euro appreciation. if bond yields all versus the u.s. and the dollar appreciates, and the u.s. economy cannot leverage to offset that slow down, you will get a slowdown in the reverse. you see how this lockstep between the two is even more dramatic in deleveraging. lackanimal spirit or the

thereof as we deleverage. this gets back to the nominal gdp issue. francine: to your point that you are making, some ring that was on bloomberg view, they're saying that this will lead to greater volatility within an expanded trading range for yield treasuries. i think that is an appropriate translation of the economic situation i described. you could have an expanded trading range. advantage of either market to break away on a trend basis, absolutely. francine: what do you buy in this environment? mr. de longis: if you're able to identify the trading range, it is a comfortable environment, so fade the in that you rallies, and by the loss. whether that is in the spread

market or in the euro. otherwise, we've seen this year trends have manifested more and emerging markets, and the smaller markets. tom: welcome back. and robertlongis sinche. we'll get ups to speed about being in the market, the courage it takes to be in the market, buffeted by economics. stay with us with robert sinche and alessio de longis. this is bloomberg surveillance. dell futures up 45. looking at the yen, 119 .71. stay with us.

i just had a horrible nightmare. my company's entire network went down, and i was home in bed, unaware. but that would never happen. comcast business monitors my company's network 24 hours a day and calls and e-mails me if something, like this scary storm, takes it offline. so i can rest easy. what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. a liereaking news on really with a conversation with the ceo leader on bloomberg "go."

they face a lot of generic in new drug dynamics. they have an 80 percent gap. they come in on target. it is almost like a bank stock in regards to that. they are lifting their guidance into next year. you can see the stock is up 2% hear their chief executive officer, i spoke to john lechleiter, he will be on bloomberg "go." let's continue with our news. here's vonnie quinn. market ratings. many economists think the european central bank will ramp up its stimulus program. the question is win. mario draghi will make an announcement in an hour. he wants to not make investors worry about the economy. of killing a new york city police officer is held without they'll. the officer was killed in a

shootout. 4 city police officers have been killed in less than a year. paul ryan is on the path to become speaker of the house. the wisconsin republican picked up the support of the freedom caucus last night. the house will hold its leadership vote next week. president obama wants puerto rico to reduce its debt. his asking congress to change the bankruptcy law, saying they need protection that is not available to american territories now. the island has a $73 billion debt. the first nine months of 2015 were the hottest since 1880. last month was the hottest it to number ever -- hottest september ever. nine of the 10 warmest years on records have happened since 2002. i credit the mets. everything is a little warmer. tom: you really wonder where this is going.

meetings are coming up on climate change. there is, every 30 days, we talk about this is the warmest. oppenheimer funds, terrific work on international investments, and robert sinche -- a former goldman hamilton colleague. he did not wear a mask. mr. sinche: i did early in the process. tom: we have been going all week on this with masks and goalies. let's go to the bloomberg terminal and look at an exceptionally smart chart. -- robert sinche took five days in the plaza. up here thewe come rubin strong dollar. , roberts it take sinche, for us to get up to plaza or rubin like levels, again? mr. sinche: it would take

aggressive moves by the fed, number one. number two, significant devaluation of the chinese currency. and you look at the trade with the dollar, china is a part of that. it will be difficult to achieve. has notal, the dollar improved dramatically relative to the long-term trend. it probably has more upside as we go forward. this is a function of how quickly the fed normalizes policy. tom: how do you respond to political economists who suggest a strong currency is a stumble of a strong nation. do you buy that idea? historically, that is the case. a strong currency versus an

aggressively overvalued perspective currency. in the 2 peaks you have seen historically, there was a speculative movement in the dollar that pushed it into seriously overvalued territory. .om: i love this chart inflation and price adjusted real trade-weighted value. can barely contain herself. what is important is the emerging markets weren't involved here. they played in here. in south africa, yesterday, we saw they have to adapt to what is going on in the united states . how will the community adapt to a stronger dollar? mr. de longis: with pain. a large part of the economy is -- a large part of the economy is dollarized. space ande sovereign corporate space. when you have a strong dollar and a week local currency -- in the developed world that is a good thing in the sense that it eventually filters through

younue, export growth, and have the ability to rebalance. and emerging markets, that is not the case. if you have a large dollar denominated debt a weaker currency puts you in trouble. you can get out of that problem with increased revenue. tom: you just described brazil, right? mr. sinche: brazil, indonesia -- oppenheimer funds, pulled disclosure, i do work with oppenheimer funds, what you do have a track record that gets people's attention. how can you be in brazil, intonation, and malaysia are given the dollar challenges they have? to managegis: you try it by opportunistically hedging the currency. in emerging markets, even the high level of interest rates, makes it a difficult proposition. variedre 2 approaches from an allocation standpoint,

we carry an underway to emerging equities in the long-term. we have had it for a while and hold it at the moment. besides that, you delegate to your own stock figures to your own managers, the ability to navigate through the problem and pick the good companies, regardless of them being downsized in the market. tom: in the old days, and emerging-market investor bought the telephone company and worried about nothing else. now it is more sophisticated. emerging markets in the next section. francine: you were talking about the dollar rising, it has to rise against something. i question to bob, if you look at what qe is doing, or mario draghi is or expected to do achilles, if you look at japan -- if we have more qe in japan and not europe, does that not

automatically bring the dollar higher no matter what the fed does? mr. sinche: you can obviously see further action. in the case of japan we have had a big part of the adjustment process. we have had a significant move in the end. something in the 120-125 range is where we will settle. in terms of the dollar, we had expectations the ecb would adopt qe, and expectations the fed would hike. the euro/dollar was down to 105. as the rates keep getting pushed 1.15 we had it into a trading range. we have a narrow wedge going on. and declining resistance. extending those 2 trend lines they meet in december. the euro/dollar is a coiled spring. it is getting a narrower trading

range. the fed will make the determination as to which way the euro/dollar moves. that analysisstop in december like we did a couple of weeks ago? mr. sinche: yes. tom: it makes me you're in for greece once again. robert sinche and alessio de longis. will beat to death december and the fed meeting, just kidding. dow futures up 55. stay with us, bloomberg "surveillance." ♪

♪ francine: welcome back. bloomberg "surveillance."

coming up in an hour, the bloomberg rate survey -- rate decision. europe back to pre-level qe levels. the eurozone recovery is fragile . these are questions mario draghi will be fielding after we get the rate decision later. the single best chart. tom: let's go to something from rbs. alessio de longis, this is an emerging market debt that can help. confluence of a u.s., china, and u.k. to a certain level. the tone is how the u.k. came in, the austerity. china is at a dead expansion. the u.s. is doing what we are doing, thank you paul ryan. emerging markets have lifted a little. you mentioned earlier the idea of emerging markets having a thenrent that dynamic

developed countries. how important is that? mr. de longis: extremely important. something to look at deceiving. when you look at the emerging average, you can take looks so low, what's the problem, this is a measure of total debt to gdp on a trend of justice basis. i like to do trend this, because the trend cycle goes on a seven to 10 year trend. you can appreciate the overshooting and undershooting around the trend when you do -trend.- de we saw the shock in south africa, it is not out to record weakness, but at some point governments have to break whether it is debt or real economy issues. brazil recently -- mr. sinche: i think one of the

issues that we face is in emerging markets where they have had high yields. , that encourages in the higher-yielding countries, companies within those countries to issue dollar-debt. the yield advantage is a tremendously lower cost. that gets them in trouble in the currency moves and it feeds on itself. that is what we saw in brazil. to buy thes a market dollar-debt paper? vonnie: is there? in some cases there is, in some cases there absolutely isn't. have problems in malaysia, which country will be the first to fall in the libya, no effect? mr. sinche: the first was brazil. the currency became parabolic. it did come back below 4, but you have to wonder how long that

will last with continued problems in terms of the economy. unemployment is picking up. there are political issues. that is the one that has been in the headlines and will likely stay there. looking out emerging markets, we call it bundles. in brazil there is a president ave andhey could h impeachment. it is different in russia. mr. sinche: russia does not have a president that is about to be in peach -- thought to be impeached. performs player big part. if there are reforms, that could bring in and turn on capital. if that brings it in an external capital, that can moderate some of the problems with the current deficit and stabilize the environment. where you find problems are countries that have current

account deficits. if they don't have structural reforms, reasons for private capital to come into the country, that is when you see the downward spiral. as things get worse, capital moves out, that is what we saw in brazil. top photos. vonnie quinn has those. these are difficult? 20,000 economic migrants in jordan colder weather and crossed into so many of from -- crossed into slovenia from croatia. the migrants want to continue to austria and germany. the slovenian government pleaded for reinforcement. desperately sad pictures. tom: the scale is unreal. vonnie: francine, you have the second photo? francine: in this country they were so much focus about diplomacy that continues in the u.k..

cameron and president xi. they will cooperate in trad and investment. what has been playing out in the tabloid press, is the fact that there is a lot of events for the bowing toster in china's supremacy when there are so many questions on human rights and the way they do things. vonnie: it is fascinating to see the diplomatic efforts. the mets are going to the world series. they beat the chicago cubs. a four-game sweep. a wipeout. i can't they get any more names. daniel murphy, the m.v.p., hit his seventh home run of the postseason. they now have to wait. they will either be in kansas or toronto. it is great for baseball.

i've had fun watching. they hit the ball so hard. there were a few meatballs. one of them is still over lake michigan. there was a line drive i thought was going to wound a center fielder. not on the mets, royals, or blue jays -- it is on dow chemicals. it is an interesting corporate story. buried in the press release is a revenue change of 16%. that het correct to say hefighting for his life, but is coming in with a nicer earnings pot. on a topline, the price is already seeing sales without chemicals at 12.4. 3.6%, people are

happy with the bottom line. all, it is interesting to see how this company adapts to shareholders and forward pressure. the dow is out with a good report this morning. the european central bank president, mario draghi, will speak at 8:30 in new york. we will go headline by headline through the headlines to keep you abreast of what it means for europe and global markets as well. in london, francine lacqua. i am in new york. in the distance a golden mets-like sunrise. it is bloomberg "surveillance." ♪

tom: good morning. bloomberg "surveillance." washington without joe biden in the race is a different washington. that would have been fun, mr. vice president, change her mind. you are allowed. whether republican or democrat, joe biden would have made it more lively. a for exchange report. , it is deadly out

there. the dow is down one night 9.75.75 -- 11 the euro/yen, no one cares. dollar/zar,anded the cross rate. this is south africa. -- the south african rand. now to a business flash. let's go to vonnie quinn. the recallkswagen, of another million cars might be the most expensive. they must comply with pollution standards. special shops could do the work. the repair car searches pod of what they have to pay for. repair costs are just

part of what they have to pay for. is poised to overtake audi is the world's second-biggest luxury carmaker. drug shares rose 40% after research company claim that valiant was trying to create phantom sales and false revenues. shares rose slightly after valiant called the report of erroneous. bill ackman bought 2 million more shares. you'rell ackman, if watching, come on the show and we will have an adult conversation about revenue recognition. i love that he stepped in. vonnie: he ponied up the money. on, let's get bill accounting at 5:00 or 6:00 a.m. that works. a little bit of our earnings, dow chemical is riding

the ship. eli lilly is challenged by this drug, that drug, and the other -- i cannot pronounce any. this is important. i am in a 20 one k with a double leverage cash fund. for everyone else there is u.s. investment and foreign investment. robert sinche and alessio de longis. i believe 20 years ago it was --e in a carefully mean carefully manage balance portfolio should have 10% emerging market. how does one decide how much you have an international markets? mr. de longis: if you go by market caps you can follow the idea. emerging markets in the index are 8% or 9%. you need to own more. to be over, not everyone can be

market -- said,: as francine they're not above anymore. they may be at one point. francine: we are 45 for 50 minutes from the ecb decision. what do you ask mario draghi? you ask him where is inflation? issue for: the real the ecb is the constraints they have on implementing what they have announced. i think it is about one third of the german bund market. yielding below the deposit rate constrains them going forward. the issue is not the intentions of the ecb, but what are the constraints? what can they do in terms of adding eligible securities, changing their own regulations to implement this policy, and what do they hope to achieve through the policy? viewed as the solution,

but it has to be a transmission mechanism. is amechanism for the ecb weaker currency, but they're having trouble getting it. tom: thank you so much this morning. we have an important decision by the european central bank. it meant's complexity. every nuance will matter, i usually don't say that. look for that is 7:40 five, 12:45 in london. michael mckee will keep this debate going forward on bloomberg radio and bloomberg "go." good morning. ♪

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>> markets wait to see if the ecb president will add more stimulus. morell talk earnings and with the ceos of wells fargo,

southwest airlines and eli lilly. ricole in paradise, puerto six bankruptcy. -- seeks bankruptcy. ♪ stephanie: welcome to bloomberg go. >> we have a big program. explain while they did and did not do. stephanie: we have eli lilly, dow chemical, southwest airlines, united and continental. one thing, how about the new york mets? >> sorry, chicago. stephanie: the mets suite you -- sweat you