♪ >> it is the waiting game. investors brace and head of today's federal reserve policy statement. economists look for rate hike clues. apple upgrade. the tech giant forecast record holiday sales. fueled by the iphone as it beat third-quarter estimates. these ok. volkswagen unveils its first third-quarter loss in more than 15 years. morning. this is bloomberg surveillance. i am jonathan ferro in london. tom keene in your.

is it the non-decision. is that how it should look at it? tom: that is what i am hearing from my colleague. mike will be in washington at 2:00 p.m.. everybody looking for to december 16. some of the challenges. you see it in the red headline. the norwegian sovereign wealth fund. the -4% return showing the challenges of working across assets. jonathan: it is remarkably difficult for the norwegian sovereign wealth fund. we will be talking about the carpet number of the bit later. for now, let's get the bloomberg -- >> volkswagen is feeling the pain. vw posted a 3.9 billion loss in their third-quarter. its first loss in 15 years. -- german automaker has had has said expectations will be

lower than they were a year ago. it is cost vw $7.4 billion which is more than the company originally set aside. barclays has gone to the u.s. for its next ceo. jes staley will take over. at one time, he was considered a likely successor. three much ago, barclays fired its chief executive. chairman wanted to cut cost and double darkly's share price in the next four years. federal reserve policymakers start their two-day meeting today. no chance of a interest rate increase. they now cap on the fed delaying until next year. economic data has been mixed. inbers and jobs all came lower than expected. on capitol hill, republicans joined democrats in the house to

preside over the export/import bank. financing companies overseas sales. mitch mcconnell says he will not allow a vote on the bill. it could be added as an amendment. german airfields built by the notches is given a new lease on life. s is given athe nazi new lease on life. tempelhof was closed in 2008. tom: a fed data check. more bustling than the quiet that we usually see. futures up 4% right now. the equities grinding higher. euro-dollar just churns. 110.44. we watching oil very carefully. print yesterday.

this is oil just soggy along with the commodities. euro sterling, jon ferro i am doing this for you. maybe some of the you -- maybe some of the nuances. , theerman two-year sterling shows a strength. a template for the fed meeting. i did commodities instead. this is animal spirit, nominal gdp with a 10 year moving average. this is just before the crisis. the 10 year moving average is down 39%. people feelthing vonnie even if they cannot articulate it. it is not only the united states that throughout europe. -- the decline in animal spirit.

vonnie: one central bank move. tom: john, i say this is a challenge that only that we see with economics but jon ferro it is a challenge within big banking as well. animal spirit, the nominal gdp out there. it is less there than it was a year ago. toathan: he comes down leadership. the news this morning, barclays naming former j.p. morgan chase senior banker, jes staley as the ceo. joining us now, stephen morris of a bloomberg news. i am calling this the worst kept secret in the city of london. no surprise. when does he get to work? what is the first thing we expect them to do? said that he is going to continue shrinking the investment bank which is flying in the face of what a lot of people expected when this was announced. he is planning to reset the banks relationship with

investors. cannot emphasize enough how key regulators work in this whole process. steven explained that process. explain why it is so difficult to get this through. stephen: in 2012 he was there. he preferred candidate. politically was not acceptable at the time. last tuesday, after two to three hours of grilling, exploring who he was, where he sees the bank has now been in to announce them today. i am sure he emphasized how good a relationship he wanted to develop. the glassine -- jonathan: i have seen so many convicting reports. bob diamond, but -- bob diamond, -- is that the important part of this? stephen: running not only the

investment bank but asset manager. it is terms of style. to say that he is much more collaborative. thingsot going to force down on people. he is going to try and bring them along with him. i anticipate that play well with the barclays board and the regulators. , axelan: joining us now merk. we're talking about barclays. the federal reserve a little bit later trying to deal with the legacy of the financial crisis. -- tom keene ang night calling this the fed nondecision. -- axel: china for today has been looking just fine. there is a nonzero chance that they will move. i am not predicting that they will. what they are looking for is the

happy market we have right now. they have it. reverse, because i don't think it was china they cost it in the first place. jonathan: the market does not think this evening is a live meeting. has the federal reserve gone wrong with the committee tatian? -- with their communication? tol: a central bank has provide guidance. dependent fed is the one that reads the leaves. the fed is chased by the markets. the market does not like that. i don't think that is going to change, because that is the sort of framework that janet yellen has. tom: most of our audience understands that. give us an update. given the disinflation we have

seen, given the struggle we have seen, what would be the appropriate model that ecb should follow? the same they should've followed since 2008. a good long-term strategy. we have to stop reading tea leaves. we have to stop solving the problem of the day and looking at the longer-term issues. we need to provide an environment that is predictable. we don't have that. we have one where everybody is chasing central banks. we have an environment of currency wars. that volatility is what to spike again. the only way to get away from tom: saw thesign article, the bank of italy with negative interest rates. axel merk when i look at

negative interest rates, an indicator of a topsy-turvy world. how urgent is the chronic since we are in three years in the merck economics? axel: we are distorting asset prices. that cannot be good for long-term economic growth. where complaining where long-term rates -- people don't invest for the long-term. people make shorter and shorter investments. that is unhealthy for long-term growth. we are popping asset bubbles. the fed is trying to extricate itself. that is why they cannot move away. the same thing will happen with a finally raise rates in december or march. volatility will spike. risk premium will rise again. that is just the nature of the beast. the markets are risky. you can cover it up or pegida,

that you cannot take risk away. -- you can cover it up or patch you cannot take risk away. jonathan: how as it investors should we prepare for that? axel: people have been looking at the glass being half full. look at it going to as things coming crashing down. it is not just jump on deals that have to come back up. everything being equal, they want asset prices. people are going so worrying that -- remember, people have not been rebalancing. if you have a traditional 60/40 portfolio, people have not rebalance. , that hasople do that to weigh on asset prices. the fed being the biggest elephant out there will change the way people think. they don't want to change, that

is white every time they that's that is why every time they take a step, they will step backwards. jonathan: in the city of london, there is a sense of perception that the fed is following the market, it is not leading the market. is that the sense on wall street now? tom: always the fed can surprise. of the federal reserve system is that it always surprises. i cannot remember a day like today where nothing is expected. it would be a perfect day for janet yellen and the vice chairman fisher to surprise the world. we will see at 2:00 p.m. today. i will be here with michael mckee here in washington. axel: it would make perfect reason. the reasons they did not hike are gone.

i do think there is a more than zero chance. if you look the market expectations, there is zero. it is still possible. a bloomberg surveillance exclusive, axel merk agrees with me. jonathan: axel merk, tom keene are going to be with us. we will be speaking with formal secretary general of nato about the syria crisis and mounting conflict in south china sea. that is six clock a.m. in new york -- that is 6:00 a.m. in new york. ♪

tom: good morning everyone. bloomberg surveillance. the morning to all of you watching in south africa.

cape town dealing with the challenges of the south african rand. the mining community challenged along with oil lower prices. we are challenged to do anything. we get to a very busy news morning. quinn. vonnie vonnie: written is given the the top two brewers have a week to work out the merger. anheuser-busch have until november 4 to make a formal offer. biggestlunge as low as oil company, statoil, missed estimates. the covenant was better since 2009 -- the company was battered by lower oil prices. we are going to be joined by statoil scipio -- statoil ceo

later this hour. automaker has posted a quarterly loss. vw boss the $.9 billion. lost $3.9 billion. jonathan: big story this morning here in europe. for more let's bring in hans nichols. we were expecting the first quarterly loss in 15 years. a series of negative headlines. run through them for me. about 200s: it was million less than it estimated. the expected profit to be hit. the stock is trading up this morning. here is the good news, they increased provisions, not that much. volkswagenty at the brand is up 3%.

a compassg to have call with but he is miller -- with mattias moeller. at this point, i get to play my favorite segment, stop tom keene. planeoes angela merkel's and president obama's air force one have in common? tom: i have no idea. hans: they are both for engine planes. -- they are both watch her engine planes. -- they are both four engine planes. matthias muller will be on board as well a bloomberg reporter. i want to find out what sort of explanation he gives angela merkel on what volkswagen is doing to clean up its mess. it is going to happen at 35,000 feet.

tom: hans nichols, thank you very much. with futures up three. dow futures up 15. we have much more to talk about. a smart morning read. jon ferro with that important interview on oil in the next hour. kate moore will join us. we would talk to her about a single digit world. it is a bloomberg surveillance. ♪

♪ jonathan: good morning. this is bloomberg surveillance. i am jonathan ferro and the city of london. gray skies. tom, we do not do seasons. tom: it is gorgeous. look forward to being there with you and francine lacqua. here is the morning must-read. it is from steven roach. dr. roach of yale, formally morgan stanley. the recognizing the drivers of these development. a chronic shortfall of aggregate demand and a deflationary profusion of technological innovations and new supply chains, the fed continues to minimize the deflationary impact of global forces. this is absolutely must read. agree or disagree.

-- jonro, a makepeace .erro, a meant peace why are central bankers so reluctant to bring in? is it fear that dominates our thinking? axel: they are out of tools. they do not know what to do. they have been doing so many thanks, it doesn't quite work. if you are faced with a credit bust -- janet yellen talks about the unemployed which is a huge lagging indicator. they are lacking guidance. they want to increase interest rates. none of that is going to make a difference. 10 rogue off of harvard say the same thing. do not raise rates unless you really see something going off, including financial instability.

what would happen if janet yellen stunned the world with a one-off rate increase. not what everyone would expect. what is the going well in the risk on environment would reverse. rallyingr has been when risk was on. i would not count on the dollar rallying. i think the dollar would plunge. the euro being a funding currency may well increase. a lot of things that people are todicting are not going happen. thesecourtesy of devotions -- of these that the central banks have created. jonathan: the riksbank, gdp running at about 3%. they are expanding she week. what is happening? axel: they are scared of their currency being too strong here it they throw everything at it.

centralthe key thing is banks are looking at headline inflation. in onxcuse to go all weakening the currency is going to fizzle out. u-turn they have to do a . they are doubling down. in the next couple of months, these banks are going to blink. this swiss are a prime candidate. axel merk is good to stay with us. we are going to have a special program on the fed decision. this is bloomberg surveillance. good morning. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. 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. ♪ the biggests pollution issue in the world? i was surprised to read about it. indonesia fires. they blow north to singapore.

some haze in singapore. i'm not saying it is from the fires and indonesia. we welcome all of you worldwide to bloomberg surveillance. right now, we need the first word from our first word desk. here is vonnie quinn. diesel scandal has rocked the w's bottom line. lostst in the thick -- vw 3.9 billion in the third quarter. so far, the cheating scandal has caused -- has cost them. it will costeve him $22 billion. american is the name to run the uk's largest -- the uk's second-largest bank. staley spent years at j.p. morgan. antonywill replace jenkins who was fired three

months ago. barclays face misconduct. has not raised interest rates since 2006. the forecast calls for policymakers to hold off again today. bond traders betting there will not be another rate hike until sometime next year. since the fed met last month, economic indicators mixed numbers of jobs. and retail jobs all worse than expected. a hush money case after he was accused to refusing to pay someone to hide misconduct. the press reported that misconduct involved sexual back when he was dating -- back when he was a high school coach. jonathan: apple investors care about one thing, holiday season and how many iphones that apple

sell. how is the world's second-largest economy? pelham smithers, great to have you with us. tim cook says everything is fine. is it fine for apple and not everyone else? pelham: he said anything was fine and numbers were delivered. courseestion marks of about how things will turn out this quarter. there are advantages in those numbers like there were no china sales one year ago. overall, he gave numbers. the issues now get pushed into the next quarter but as we get into the 2016 and perhaps there will be another look from samsung. in 2006, it was ipod inc.. the bad taste that lingers, that

fuels that. in the months to come it is not a problem. when does it become a problem that this company is only iphone inc. pelham: the cannibalization of iphones. they took away cameras. impinging on ipads and stuff like that. if we get into a situation where they are three products of any size, smart phones, tvs and pcs, howe are trying to work out to deal with a third. as when a look at the aspects of this cash java not. 82 billion, 100 29 billion. one is a 55 billion. we added another 50 billion, pelham, and the time it took me to recharge my iphone. this thing missed money. are you surprised we not -- we did not see --

pelham: they tend to announce a different times of the year. the cash is piling up. i'm sure there will be a shareholder the when not if. tom: is apple a blue-chip stock? enterprise,d building up their ibm cisco. is this a blue-chip stock? pelham: it is the bluest of the blue-chip. it enjoys wonderful margins. it has a dominant product. is to onem it faces of where does it go next? tom: yes. within the gloom and microanalysis of product cycles with apple, i was blown away by the margin expansion which was not trivial.

also by the bills of cash. walkingoking for him around in a gaze in central park southwest. i cannot find mr. icon. he has to love the cash bill. jonathan: the average selling price. quite the fx impact. i think that is important. apple is a proxy for anything. do you look to apple the same as china does as a proxy for what is going on in the world? aixa: is there a time that the market is winter selloff on good news? time thats there a the market is going to sell off on good news? i think companies are going to selloff more on good news. if apple is a vulnerable, that is a symptom.

have been exiting very well. jonathan: a very interesting dynamic in the chinese market. what is the store their? >> -- they had a minor upgrade, the me foresee. they have been absent from the high-profile launch market. , whether orhe cycle not they will have one out before february. that's the key factors. is apple is winning market share and taking away from everyone knows. tom: d still call it a double-digit grower or is it so big now? they weighed into a single digit growth which is fine. are they big to add on growth?

pelham: it is china, india, indonesia, vietnam. you are going down the risk curve on that story. these are areas, if you say i had an exciting stop that is big in this area, you would be nervous. apple is big in this area. tom: do you have an iwatch, pelham? pelham: i have a pulsar. axle probably wears an austrian watch. you don't have an iwatch, do you? axel: i don't. the youngsters in silicon valley do not wear watches. jon ferro works on the weekend, he doesn't show up in the office when i'm there.

jonathan: you touch on important point. no one knows who has an apple watch. why don't they tell us? pelham: they have 4 million units. and they don't know if that is good or bad. 4 million is not bad. such thatrelaunch was people were talking 30 to four were talking 30 million to 40 million a year. they are carefully stepping away from the story. jonathan: pelham, thank you for joining us. brian cornell speaks about the company's turnaround strategy. look out for that. this is bloomberg surveillance on bloomberg television, your television your tablet, your phone. and bloomberg.com. ♪

>> i know more about the kansas city royals now than i did 24 hours ago. what a game last night. caught about 3:00 a.m. in the morning. of mets lose the first game what is about to be a fan tablets world series. city versus the new york mets near laguardia airport. right now, very important in london. axel merk is with our jon ferro. gold is up, down. here, axel merk is wonderful and trying to sort out the emotion of the economic

reality. maybe it's the bull market or maybe it is both. his gold enable market? -- s it axel: in the long run, i do not think the bull market has been broken. clearly it is been down from its peak. to answer that question. tom: candy demand dynamic of asia -- can the demand dynamic of asia, is that enough to keep of thest to keep gold bid long-term? axel: i think demand is going to come from the u.s. remember the fed is all but promising to be behind the curve. growth,economic inflation goes back to normal. the rates are going to be less than normal. that is a promise. i don't think we are going to be able to afford positive interest

rates in the long run. i think that is an environment that u.s. investors are looking at as well. jonathan: axle, every morning, i look at the bond market, the periphery. i look at a couple of fx pairs. i do not goal -- i do not go to gold. with his gold to you about anything? axel: the beauty is it doesn't have any correlation. in the talk -- in the short-term, it can be correlated. this is an environment where central banks have inflated. if i think ag crash maybe possible. if you want something that has a low correlation and a positive return expectation, gold has that low correlation. always worried about the positive return because it is a brick that pays nothing. given that we have these low

real interest rates, i think it the case can be made it can be diversified. diminishes the whole reason to hold it. it is a snowball effect. when you look at the amount of easing throughout 2015, we are trading below 2015. axel: what hasn't diminished? stocks have this minute -- stocks have diminished. gold has it changed over thousands of years. tom: that is where i want to go. run the video again. this is a great video. this is alix steel visiting some gold mine in south africa. alix steel is brave. this is north of cape town. she is in there throwing the gold bar around. that is very cool. when alix steel goes

to a gold place, it is still a limited supply, isn't it? axel: of course it is. a goldng to go and visit mine and report whether there is less or more gold in there. it is not economical for some companies to go -- remind them. two mine them. that is going to create volatility as well. stays at one of those corners with looking of the park with the gold stacked up around the bed. that is what he is really doing. jonathan: axel merk, that is a good point. do we know how much supply is? tom: good question. that gold insee general is moving to asia.

it.hear that, you see you hear it in the stories. gold is moving east. it is always moving to where the wealth is. emigrants take their coins and taken to the coin dealer. coin giller sells him back to the place of origin because they always get more money for them -- he coin dealer sells them back to the place of origin because they always get more money for them here at tom: -- them. tom: do you buy it? --l: jonathan: tom keene, axel merk, always fun. statoil, the ceo will be joining

us. this is bloomberg surveillance. stay with us. good morning. ♪

♪ tom: good morning everyone. bloomberg surveillance. it is fed day.

what we will see at the fed. everybody saying it is a non-meeting. i will be there as well at 2:00 p.m. sign futures up 23. a business flash. here is vonnie quinn. monaco -- vonnie: pulling the plug on an oil project in canada. shell says it could not compete in its portfolio. it walked away from it arctic drilling project. another projecting record holiday. upgrading from older models or switching over from android phones. -- a biggulators takeover in the drug business. influenceboost its and pharmacy benefit managers.

regulators are concerned that -- retail manager tom: you wonder how he can go through in terms of overlapping scores. vonnie: wayne reed has doubled up. all of these pharmacies -- duane reade has already been doubled up. gdp.with nominal it feels like the time of andrew mellon. yesterday, as you go to london, jon ferro with a -- with an important interview on oil. jonathan: know his biggest company -- biggest oil company, statoil stepping up. i am very pleased to say, ceo, etc..is statoil to have you with us.

it is the new reality. the next but you to predict oil prices. what are they at this point. -- what are they at this point? r: it is a very low point in the cycle when it comes to oil price. there is volatility. we suspect the current low price environment that could sustain for some time. that is the assumption. at your: when i look business planning, you're determined to maintain the dividend. i wonder if that is a short-term plan that sacrifices other things. --t is the trade-off flacco trade-off? down capex.ve taken

we are making them more resilient. dividend policy remains firm. dividend isant that moving with the oil price. it is consistent through the oil price cycle. we are committed to our dividend policy. oil gas prices -- jonathan: price a very big headline. your basic assumptions on the priced as, are they the gas market as well? dar: you look at the european market. they are put under pressure from asia. [indiscernible] we will headtime toward a more robust

[indiscernible] you can see resilient levels of production. tom: you have a relationship with global oil. how do you expect your american and other majors to adapt and adjust to a new lower terminal value for oil? basically, what will exxon mobil do? what would be your guess? eldar: the oil industry has a fundamental issue on cost. that is not sustainable. we have increased complexity. too much cost to this. the whole industry needs to unwind this complexity and start anding more fundamentally simply reduce the crawlspace. do that in a sustainable way.

that is the basic approach we are taking and the whole industry should take. tom: how many bodies will go out the door? how many bodies on a percentage basis will be shown the door? 5%? is it 20% over the next five years? eldar: i cannot give you numbers. when it comes to statoil, we are reducing the staff by approximately 20% from 2013 until the end of 2016. we are right in the middle of that process. that is what i can say about that. jonathan: where are we in the m&a cycle? placeonly think of one where m&a was taking place this year. where are we? dar: i think we see opportunities in assets out there.

sufficientlyen attractive. price is reflecting the current price environment. if this situation persists, you might see more distress. there could be more attractive for the coffers and their balance sheet. jonathan: thank you for joining us this morning from oslo. axel merk.hanks to more bloomberg surveillance coming up. later today is fed decision day. ♪

tom: as chair yellen and the fed holding not meaning -- a

non-meeting, it is 50 days until his december 16. yields grind ever lower. equities grind ever higher. president carter and dr. kissinger think demand of -- think demand of white house syrian strategy. good luck with that. good morning, everyone. this is "bloomberg surveillance ." in london is jon ferro. italy with negative interest rates. is it good that they have negative interest rates or bad? jon: it is good for them, good for the vix. great for the finances, but what it points to, that is what it is important. it points to an ecb that will do a whole lot more. because the economy is fragile and inflation is nowhere. yields,lower italian the 10-year german yield, 0.442

percent. right now stunning headlines here is vonnie quinn. vw posted a loss of $3.9 billion in the third quarter. that is its first loss in 15 years. full-yearmpany says earnings will be significantly lower than last year. the scandal has already cost the vw.arly -- has already cost pw faces repair and legal expenses for using the software to trick solution tests. barclays is going to america to find its new teeth. fired anthony jenkins three months ago. onley will take over december 1. iran is being invited to join talks on the crisis in syria. -- the u.s. will

meet with russian and european leaders. iran is officials admit needed to defuse the crisis. federal reserve policymakers wrap up their meeting today. bond traders are betting there is no chance interest rates will be raised. they are now counting on the fed delaying a rate increase until next year. policymakers are reviewing mixed u.s. economic data, retail sales, and manufacturing have all been weaker than expected. the first game of the world series turns into a game and half. kansas city battled the mets for beforeurs, 14 innings, the royals tied it. but then the winning run was hosner.n by

kansas cityire royals field was having snacks. they were exhausted. foodsad so many diamond snacks that diamond foods decided to have a merger today. diamond foods, once we had a football game with every diamond foods snacks. they make peanuts and stuff. merger, another merger, a small one. goodbyecornflakes said to that transaction. let's look at the markets. it is a backdrop to what we see in washington. nobody cares. 10-year yield, 2%, give or take a little bit. 2.04%. yield, it is a nobody-cares said meeting. nymex crude, and little south. -- nymex crude, a little south.

i am going to get carl riccadonna fired up. carl riccadonna is with us today, and also kate moore. the animal spirit of the nation -- here is the 10 year moving average. we are down 39% in our nominal gdp in 2006 before the crisis, and we have gone whammo on nominal gdp during we begin with carl riccadonna and kate moore. does anybody at the fair -- at the fed care about the animal spirit of the country echo carl: absolutely. we see the growth heads downshift. the question is whether that is a new normal or a long and enduring hangover after the financial crisis. i believe it is the latter, but animal cares about the spirits because this is relevant in two regards. employers are cautious after the events of late summer, reining in the pace of hiring. that is a ticking time bomb for

other parts of the economy. households are registering the downshift in hiring, and they have reduced animal spirits as reflected in the latest consumer confidence report yesterday and also in the latest retail sales results. tom: kate moore, i learned in a finance book that nominal gdp directly affect equity prices. do we need to dampen expectations? kit: absolutely. -- kate cap absolutely. with the newnation normal. we have to think a lot about the demographics. the developed world versus the emerging world as we look forward over the next five to 10 years. you mentioned consumer confidence had a little bit in terms of how companies are spending and hiring. tom: or lack thereof. kate: the messages we are not giving you a big broad plan for investment over the next couple of quarters, we are bringing

down expectations for sales. ferro, when we were in. close, that was the major -- when we were in java posts -- when we were in davos, that was the plan. jon:. riccadonna, there is a huge divide between what the market expects and what the mpc and the bank of england wants them to expect. on the radar,ing that 2015, as far as the markets are concerned, is a no go? carl: that is absolutely on the radar of the fed. i do not think they necessarily need to address it today but the fed is cautious not to shock financial markets. today a no-go meeting -- the real question will be how strongly they defend december liftoff. the fed has the signal that they have a strong attention to get off the zero in december. the data certainly has not

cooperated. my expectation is that it will be either march of next year or possibly q2. there is a holy trinity of data that the fed is watching and they will not move until this has been satisfied. those three things in the trinity are gas prices have to stabilize at least two dollars per gallon or better, meaning oil above $40 per barrel. beber two, job gains have to 150 to 175 per month. and factories have to stabilize. kate: three things i did not hear were china, europe, and global financial conditions. carl: they are all part of the holy trinity. you are right, they should be paying attention to gas prices and the consumer and the labor market. but i worry that they have shifted their focus externally to stuff they cannot forecast or control, and therefore get

themselves into a position where they cannot move. tom: agreed. they are out of control. said, rule one is when nobody expects anything, surprised the world. a fed meetingeen where they are better set up to surprise. should they sing coombe by or go to the capitals hockey game? carl: they had better sing kumbaya and thing -- and keep things calm. she does not want to surprise the world, and all the fed needs to do is adjust to the economic tone. is the samero, this discussion mark carney is having, isn't it? jon: it absolutely is. carney is talking about decisions coming into sharper relief at the end of the year. it market does not buy it or

despite him saying again and again, we will be making a decision very soon. saying we were very close, it is coming. so whysaw it then, should we expect it now? has the fed and federal reserve to medications lost the market? is anyone listening? carl: they have not lost the market. are not meeting the preconditions the fed needs to liftoff. vonnie: so the fed does not look to the market to see how to act? this it varies from parts year. since the normalization talk was introduced, we have wondered this. you financial conditions really stop the fed from losing in september? if that is the case, then the market is leading the fed. vonnie: market participants and financial conditions -- there is a slight difference, right?

not going to be bullied by what the markets are pricing in, that they have to respond to the economic consequences of the financial tightening that kate highlighted . look to the extreme by the time of the september meeting. 82%indices have recovered of the ground that was lost. tom: to pick on somebody at harvard -- it is a school in debate-- the nominal gdp , i do not see anybody paying attention to a traditional metric. they have not. carl: they are watching the traditional models, and every cycle is different in the models have to between. -- have to be tweaked. we are seeing wage pressure reaction consistent with prior cycles, which means something is different this time around. 10-year moving average -- on nominal gdp -- is 3.7%.

that explains bernie sanders, donald trump, dr. carson, and the rest of them. it is a country flat on its back. , isn't euro-sclerosis it? kate: i don't think so. demographicg it on challenges. if we get this income credit growth and risk-taking after what we have gone through with the global financial crisis -- officially we are still in december. realistically, we think the first quarter is highly probable. tom: carl riccadonna, thank you so much. vonnie: the 10-year yield at 1.75%. tom: is equity going to keep grinding higher? kate: i think it could. we have seen short interest, and the skew is in favor of a grind

higher. tom: that was a moment there. "skew." later today, we have a special fed decision. mark crumpton, tom keene. and kathleen hays as well. the fed decision. carl riccadonna will be in the bloomberg crypt looking at the data. stay with us. ♪

jon: good morning. this is "bloomberg surveillance ." i am jonathan ferro in london. but i want to be there indicate town, south africa. vonnie: britain is getting the world possible egg's brewers

another week to work out their merger. sab miller asked and extent to the deadline. the beer make is say they need time for their $106 billion deal. hurt byngs was the oil prices since 2009. we just had an interview with .he ceo of statoil look at the bloomberg.com website to listen to that. volkswagen's omissions cheating scandal shows up in its bottom line. the company posted a third-quarter loss -- volkswagen's in emissions cheating scandal shows up in its bottom line. the company posted a third-quarter loss. tom: now we are going to look at apple. we have a single best chart on apple, which is about stock selection. apple up, ibm flat. paul sweeney is joining us from

bloomberg intelligence. what i noticed yesterday among age i norma's company is -- among a giant norma's company is enormous cash flows. isl: the challenge for them about 90% of the $200 billion in cash is overseas, which limits what they can do here. acquisitions,ut how to deploy it locally overseas. but if you are apple, every corner of the cash keeps coming in. tom: you and i were taught in tax breaks -- in tax book -- in textbooks -- what is the growth model of the financials that make stock prices move? if you are adigit? tech company, we have seen tremendous cash returns across the equity market. the media sector has been extraordinary in terms of buybacks and dividends. the technology sector is a different world.

returning cash to shareholders is a tacit admission that i am not a growth story anymore. tom: it is an incredible story. how do you play blue chips at jpmorgan private bank, which is the ultimate blue-chip shock -- the ultimate blue-chip stock? we are in a difficult situation if you are a company thinking about what to do with all the excess cash. they have been continuing to build their cashback files. if they pay back dividends, it does tell you the story that you do not see huge amounts of growth internally. seen apple within a zero interest rate environment, going into the market borrowing money to pay its dividend. it has been a strange story for the technology companies. one of the few areas we can find solid organic growth is in the tech sector. jon: they have not had to do

anything the -- anything with the money because they have had significant amounts of growth. the bottom line is that growth will come down. that is the point, that they are forced to do something more with the cash instead of giving it to buybacks and dividends. if they struggle to find the growth in the department, the research department of silicon valley, do they buy it on wall street? it is possible. the challenge for apple, all apple investors know what is the next act? if the iphone has been their growth driver, what will be there next growth driver? enough tooing to be fuel the next leg of growth of the apple story across the product portfolio? assuming the answer is yes, it brings back the question of what do you do with the cash. tom: twitter yesterday -- i

don't know what to do with it. should janet yellen and the fomc the kumbaya or go to penguins-capitals game? gimmick. paul: they had a good quarter for the third quarter. but it was overshadowed by the fact that user growth was disappointing and their guidance for the fourth order is disappointing. it shows investors that this is a weight-and-c story. d-see story. quarter of a trillion dollars sitting around doing nothing. on bloomberg this morning, we will switch to retail. cornell will talk about target. we will talk about walmart and everything to do about big-box. stay with us. "bloomberg surveillance." ♪

tom: welcome back to pleasantville. years,distance, in five every damped drugstore will be owned by one company. we can see it coming right now. it will all be just one big drugstore on every corner of beautiful new york city. that gets us to our morning must-read. this was a bit of a surprise yesterday. vonnie: it was an opportunistic surprise. walgreens buying rite aid.

a great piece appeared in bloomberg news -- and i quote -- $1 billion cheaper, although there was a premium. tom: it reminds me of the andrew mellon book of the 1930's when interest rates get so subdued, nominal gdp comes in, and all businesses can do to make the bonuses is to combine to create revenue. vonnie: this is not going to be look at very carefully, and cvs will be left in third place. tom: they will have to do something. kate moore, i know you cannot specifically comment on walgreens, but this is happening in every industry. kate: we will have the same

bricks and mortar on every street corner. there will be a wide array of variety and competitors online. that is what this is about, which is that more and more people are getting the delivery overnight of all of their regular essential goods. this is a change in the way people are behaving. tom: how do you play that for a portfolio? i went shopping last night and stood in line at a store, and it was appalling. it took at least three minutes to check out. vonnie: come on, tom. kate, how do you play as a portfolio type, this internet ofng -- this internetting our bricks and mortar? kate: we have to consider each of the different investors that we would consider investing in. privates are staying

for longer, growing their model, and gaining market share far before they are accepted in the public market. tom: you can only own so much amazon in your portfolio. changing your allocation slightly -- can you give us a quick tease? continually --t we are not completely changing our allocation. we are thinking long and hard about our return expectations for every asset class. we are not looking for a big bang up for 2016. tom: this is an important conversation, exceptionally timely. after dr. kissinger, after jimmy carter, rasmussen on syria. ♪

tom: good morning, everyone. "bloomberg surveillance." an important south side report, aggressively reaffirming general

motors over ford motor company. analyst calls their second model a bit flawed. i thought that was important right now. we get to our first word news in new york. here is vonnie quinn. vonnie: it has been nine years since the federal reserve raised interest rates, and forecasters do not expect that to change today. policymakers will wrap up their two-day meeting this afternoon. angela merkel will bring you the fed announcement -- and we will bring you the fed announcement this afternoon. for the first time in 15 years, volkswagen posted a loss. the automaker came up $3.9 billion short in the third quarter as the in missions -- as -- as the emis .sions cheating scandal

analysts think the problem will eventually cost three times that much. staley will take over at barclays december 1. he succeeds anthony jenkins at barclays. jenkins had been fired three months ago. a new report says many american schoolchildren are not making the grade. in the last two years, math scores fell among eighth-graders . reading rates were not much better. only one third of eighth-graders are considered proficient in math and reading. tom: an important interview now for all of you worldwide watching "bloomberg surveillance ." he has provided public service well in essence of 15 years. thers fogh rasmussen is prime minister of denmark, former secretary general of nato

, the north atlantic treaty organization. he joins us from boston. on syria, dr. kissinger has former president carter has as well. both are in search of a strategic mandate. what should that be as we address syria? anders: clearly a new strategy is needed, both on the political front and on the military front. politically, it is important to gather all major stakeholders in the region to try to find the political solution, and militarily more needs to be done to fight islamic state. tom: within that, you were looking for a united nations an institution such as the u.n. to provide organization here. it, dealing with

someone as so original as the islamic state? anders: no. when it comes to islam asked eight, a military solution -- when it comes to islam asked ic state, itislam is a military solution. that is why we need a reinforced fight and a coordinated fight .gainst islamic state this is also about showing to our partners in the region that the west is a credible and reliable partner. if the west is disengaged or is theeived to disengage, vacuum will be filled by the bad guys. anders, it is jonathan in london. we discussed how economic trouble was a response to foreign policy. is that situation over the month

after that discussion getting worse and not better? anders: it is absolutely getting worse. the whole situation is not only complex, but i would say a disaster. that is why we need a new strategy, both politically and militarily. vonnie: does that strategy mean allowing bashar al-assad to stay in power for the time being, or not? thats: it is clear to me cannot be seen as an integrated part of a long-term solution. short-term? about otherwise we will not have rush on board. anders: it may be that in the short term, the current government can be an interlocutory. it is important to understand that the whole thing started because of the cruelty of the

current regime, and any effort to protect and defend the assad regime will result in recruitment of fighters for the islamic state. that is why it can be seen as a part of a long-term sustainable solution in syria. ago we wouldhs have been discussing exclusively about ukraine and russia. as the situation with russia and syria -- is that diverting attention from the ukraine? and is that a big risk to the stability of the region at the moment? anders: it is clearly a risk. that is how the environment works. now attention has been moved away from eastern ukraine to the middle east. but it is very important to keep the problems in eastern ukraine

high on the international and because -- high on the international end because what is going on there is completely unacceptable. i imagine the challenges nato asked in the mediterranean, together with russia strategy in syria -- who leads this? needs to leadnk the situation given the fragility in europe? where does leadership come from? it is clear that when it comes to the middle east, we need to gather all major stakeholders. i really think the united states should show clear, determined leadership. otherwise, it is not possible to find a way forward. do you think nato needs to engage more fully with russia diplomatically again? it is also clear we cannot find a political solution to the problems in the middle

east without engaging russia. i would say it is also necessary -- butge iran, but it is both russia and iran need to demonstrate a more constructive approach. it is important they understand that they cannot both defend and protect assad and stop the bloodshed. on the contrary, any defense would fuel islamic state. tom: part of defending and protecting is the united states showing a flag in the south china sea. it has elements of 70 years ago as well. what is the appropriate way for the united states or nato and the west to show the flag versus china? anders: the situation in the south china sea is really a

matter of concern because this is about one of the fundamental principles in our global economy, namely keeping sea .anes open so i think it is important to demonstrate that we cannot assertivenessnese in the south china sea, and their attempts to control free, open, global sea lanes. it is important to demonstrate a firm stance so that china realizes that the only way forward for china is constructive cooperation within the current international system. tom: one final question, sir -- you started out your politics in the trenches of the danish parliament. what should the danish parliament or any parliament of europe do, given the scale of

refugees and economic migrants that you see today? anders: as regarding europe, i you -- doubt that many wide solution must be found. it is not sustainable to suspect a few european countries along the southern flank to absorb all those refugees. we need an e.u.-wide solution, and we also need to reinforce e.u.'sder control along external borders. in that respect, we need an e.u. solution. tom: thank you so much for joining us, anders fogh rasmussen, former secretary general of nato. janet yellen and her team meet in washington. we will consider the challenges

that sweden faces. this is an important interview. stephan inc. that is -- stay with us. from london and new york. our coverage at 2:00 p.m. this afternoon. this is "bloomberg surveillance." ♪

jon: good morning. i'm jonathan ferro. this is "bloomberg surveillance ." i am in london. tom keene is alongside me in new york. sweden's central-bank has released its latest, greatest decision, unchanged, to reveal a qe program. stefan ingvez joins us this

morning. you do not cover it up -- the importance of the exchange rate. my first question to you would be the expansion of the qe policy this morning. how much of that was a response to the ecb program last week? part of it is what we are doing on the new side because we have to be vigilant with what happens to the krone, and part of that is to make sure that by expanding our qe program, by creating clarity and going another six months until next summer with the qe, that makes it easy to understand what we want to achieve. jon: a number of years ago, paul krugman accused riksbank of -- they see gdp at 3% and they wonder why the central bank is being so aggressive. what is it about the fx channel

that is causing concern for you within the swedish economy, that is pushing the central bank to do more? stefan: if the exchange rate were to appreciate too quickly, that would mean it would be harder for us to get inflation up to around 2%. given that inflation has been lower for quite a while, we need to get inflation up to 2%. and then what happens to the exchange rate really matters. this, governor, is the idea of economists pushing markets or telling the yield curve what to do. tell me what you middle of the -- what humility and what model you have learned at the swedish bank. if the phillips curve model is old, what is the new one for you and your bank? things have been unusual in the past few years, so time will tell when things settle down what those new models will look like. manyntly we have to use

different tools in order to get inflation up to 2%. tom: there is a history of the early 1990's with your banks, and many of our viewers and asteners do not know, it is time of courage to buy your bank. what is your prescription right now for not only your bank but draghi and chair yellen and so forth. what is your prescription to start growth? stefan: i do not give prescriptions to others. i do the best i can within the swedish economy, and our main objective is to get inflation up to 2%. we think we will be successful in doing that in the course of 2016. jon: as you look at the impact in the fx market, this morning, are you concerned about the diminishing effect that more

monetary policy stimulus is happening on the exchange rate going forward? what is your response to the market not having ammunition? we have talked about this morning is that it is important to us that the exchange rate does not appreciate too quickly. time, with the swedish economy doing quite well compared to other countries, one would expect the exchange rate to appreciate over time. what is important to us is that it is a gradual process. increased asset purchases, where do you see monetary policy headed? where do you see the point at which the negative interest rate can at least decrease negatively, if you like? stefan: once we get back in an environment where things normalized -- because it is highly unusual to have a growth rate around 3% and a negative policy rate -- but in due course, when locally things

normalize, we will normalize. vonnie: 2016, 2017? stefan: it will take a few years. 2016, 2017.ng about jon: when you look at financial stability, the concern with sweden is that it is a hot property market and an incredibly low interest rate. do you still consider that someone else's problem, and do you worry that it will become that is a very serious still am a that we need to do with the best that we can, and so far not enough has been done to cool down the property market. that will cause us problems in due course. we really need to have it dealt with. to nine months ago, we had a conversation and you told me there was no flaw for rates. everyone assumes there must be a flaw. experimenting.

as you look at rates, the negative -0.35, how much lower can they go? how much space do you have? stefan: we do have more space. -.35 if we need to do that. but then one needs to be mindful of the fact that i am not talking about a negative rate. i am talking above the qe program that we have put in place. so presently, monetary policy does not consist of a whole toolbox doing many different things at the same time. do you worry about running out of assets, and would you experiment with the bond market? i do not worry about running out of assets. so far the qe program that we have executed in the course of this year has worked, as far as

i can judge, really well. we think the same thing will happen in the course of the next six months or so. that is not a concern of ours. jon: governor stefan ingvez, thank you very much for joining us. central banks in focus this morning and throughout the day. later today, 2:00 p.m. in new york, 6:00 p.m. in london, we will watch out for the fed decision. this is "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." tom keene. jon ferro in london this morning. the forex report -- euro-dollar aghiell, in from the dr announcement from a few weeks ago. a beautiful new york this morning. let's get to business news. here is vonnie quinn. vonnie: a takeover today by the second-biggest nation of -- the second-biggest maker of salty snacks. -- ond thin

walgreens' takeover of rite aid might raise eyebrows among regulators. it would combine america's second and third largest pharmacy chains. the federal trade commission will look at whether it complies with antitrust laws. apple's quarterly earnings beat estimates per that is the latest number business news. tom: the margin expansion i thought was terrific. vonnie: i think investors were looking at these prices outside. tom: paul sweeney with some good work on that earlier. right now, kate moore is with us from jpmorgan by the bank. -- from j.p. morgan private bank. a simple metric we need to

put more money aside. kate: you mean save more. that would make sense if you were getting something off your savings account. we have been talking about the fed and policy so far this morning. the real question is, do we believe policy rates will go higher and that deposit rates will go higher with it? in the near term, allowing us to save more money to go we need to be very -- to save more money? tom: everybody says rationalize, yet the price goes down and yield goes up and it gets ugly. we have learned that time after time. kate: being short duration is been a painful call for many people, ourselves included, over the last couple of years. we did our global cio off-site. i learned that there are very few people out there, whether it is academics or anyone we brought in externally, willing to stick their neck out and become with a big -- and come up

with a big contrary and call. tom: this is the inflation-adjusted dow jones -- 3, 2, 1 -- the inflation-adjusted dow jones industrial average. everybody said the same thing in the gloom of 2009, 2010. you have this great double-digit market. kate: it is possible it could happen again. the one thing that we also talked about earlier this morning is the animal spirit. this is the thing i keep getting hung up on. as much as i get more constructive on equities, it has been trust rating with sales growth, frustrated with the capex attention. until we can get the momentum and feel like they have clarity, i wonder if we will be in single digits. vonnie: so you are positioning for the year-end at the moment. it is early than you -- is

earlier than usual. why is that? kate: given the amount of policy guidance we have had so far into the third quarter at the beginning of the fourth quarter, we are now in a place where we have to think about how we want to finish out our portfolios for 2016. sometimes you can make it into the last round of policy meetings before you can do that, but this year it feels that is happening sooner. thank you for the perspective on the italian yield low, negative, stunning. "bloomberg " is next on bloomberg television worldwide. "bloomberg surveillance" is on radio. and tomorrow, i get to take part. yes! ♪

♪ tales of true companies. track, targets back on the discounters talk strategy

heading into the crucial holiday season. wagen feeling the burn from the emissions scandal. vw's chief says it is strong enough to overcome it. ♪ stephanie: welcome to "bloomberg ," i'm feeling pretty excited. david: we have a really important show today, and a great guest. brian is a terrific leader in retail, but is also a mets fan. brian: it was a late night. david: a record for the world series. stephanie: there is still hope. david: let's start with the first word with vonnie quinn. bonnie: if you hours from