francine: a deadlock ends in turkey. ,he party space back into power sending the lira and stocks forward. manus: hsbc reports a bigger than expected that he to percent jump in profit. decision on moving its headquarters may not come until 2016. francine: china's contraction. .mi data says a slowdown ♪ francine: welcome to "the pulse." i am francine lacqua.

manus: i am manus cranny. be coming in at 52.3. a little bit better number from germany. there is the euro. draghi said over the weekend that the decision was an open terms of whether they would do qe. these are the numbers. francine: he gave a great interview. when you look at the area of manufacturing, that data was weaker. it is not germany that is driving this. france picking up a little bit. are ones saying you dollar 10. manus: the ak party swept back into office. his party has now regained the

parliamentary majority lost five months ago. this get to tom mackenzie who is in istanbul. tom, give us the details. manus, there was widespread shock and surprise last night when these results came through it they were gathering -- they were gatherings of happy ak party members. kurds are unhappy at these results. beatingarty found it the forecast by the polls. they won that majority. they wanted easily. they even pullback votes from the hdp party. they were forced into coalition talks. -- it is ardogan

gamble that spain off. since june, we have seen tensions and violence. we have seen the truce breakdown, leading to a number of deaths. we have seen bombings blamed on the islamic state. one bombing in anchorage -- and -- a blackoutg for pro-kurdish parties. werek party and earn a one .- and urdu want the question is what is next? what does it mean for the constitution. it was key. president are to want wanted to change the constitution to give him a zynga style power. willie still push ahead echo the economic challenges, the lyrical

challenges and the divisions that need to be healed. the investors we have spoken to today say watch out, it is not such a pretty picture. there are huge challenges ahead. a lot more to look for guys. investors, they need to be brave. tom, thank you very much. tom mackenzie on the bank. patrick armstrong joins us. he has to manage over one billion pounds and assets. great to have you on the program. went to talk china and some of the pmi figures that we've had in europe. let's start with turkey. if you listen to what tom mackenzie was saying, it seems we have a clear when. it is a very difficult situation.

patrick: it is a difficult situation. you got majority government which is good news, but there is nothing compelling in turkey that is making me put my capital in their right now. surge,in terms of this not enough to join you when. -- draw you in. he calls on the world to respect the turkey elections. the entire world must respect the ak party. patrick: i don't think it is the best time to look at emerging markets. that is negative news. the commodity exports have a lot of issues. stay away from companies that are exporting commodities. from countries that are exporting commodities.

francine: will come back to china. overall, to the turkish elections show us we are vulnerable as investors? we have elections in the states echo we have elections coming up in france. patrick: i don't think that is a fair conclusion. united states, it will be made up as a big story. it is something you want to be wary of. was probably an example of that. overall, most countries are tracking along. whoever is in power is next -- is not going to make a meaningful difference. let's getre the -- you up to speed on what else is on our radar. francine: china's yuan retreated the strongest since the august

level. the official pmi reading was unchanged. , making a third straight month of contraction. in marked -- manus: hsbc beat estimates. europe's largest bank reported 32% gain in third-quarter profits. a decision on whether to move its domicile may not come until next year. shares climbed slightly. francine: ryanair's profit jumped. it attracted a record number of summer bookings. for your earnings will be at the profits range. linger.uestions where do they headquarter?

andre going to dig deeper why the lender may say goodbye to london. ♪

francine: welcome back to "the pulse." a very soggy monday morning. this fog is -- causing widespread cancellations. i am off to the airport after this show. i could be stuck for quite some time. hsbc is reporting a gain. francine: pretax profits jumped. for more on this we are joined by richard. patrick armstrong as to what the. richard, what exactly did we learn echo what are the drivers did we learn? what are the drivers behind these numbers? richard: it was a very clean quarter. a year ago there was a lot more in terms of u.k. customers

addressing it it was a lot lower this time. we are seeing costs come in quite good. they are reducing cost at the bank? revenue has fallen but the cost could take an upset. -- this story is about cost-cutting. down not tooks much of the earnings. what is happening in china and the numbers in china. it is a reasonable set of numbers. that means the dividend is sustainable. 615 year yield -- 6.5 year yield at hsbc. -- francine: are they any was serious this time that they may leave?

>> the feeling from the management team is a they are wedded to china. they are excited about that part of the world. them whether the bank makes that decision. a big call to make. they are pivoting toward the region. investing when i just billion dollars in that part of the world. a venture ind china today. they are going forward in that region. doesn't it make sense for the headquarters to be there? that is+++

for the headquarters to be there. that is a big call. there is push back for them to consider. manus: manus: -- manus: we were talking about deutsche bank. when you look at the whole landscape, the value of ubs's top -- is at the top of the free. when you look at the -- how does hsbc fit into that? richard: hsbc is a value play. it is a you play. i do not expect the share price to spike up. it is a safe bank. it's got very good lending requirements. it is a safe yield play. accounts receivable, financing are a big part of its revenue. francine: what would you buy overall, patrick? had some news over their retrenchment of a lot of the investment banks. patrick: all of the european banks are cheap to very cheap. you're going to be in an environment where you do have a higher yield curve. there is none of that happening. you are seeing the banks put on earnings that are reasonable.

commerzbank reported earnings. , it is not an incredible environment for them. it is and it reads -- it is a reasonable environment for them. manus: we are waiting to hear what we've have from stash what we have from standard chartered. was low rate environment everything a lot of analysts built their models on. that is not necessarily going to happen. that is getting delayed in terms of perception all of the time. that isis something being pushed into next year. that is damaging for the big u.k. retail banks that have large mortgage operations. you are going to have very cheap rates on those loans. you do not make much money in that world.

for hsbc, the interest rate in the u.s. is a bigger call for them. they would get a big uptake on their loans. thecine: patrick, one of other things, talking about banking, and another heart of the world -- greece. we now know how much they need in terms of capital. it makes the set -- it makes the financial system a little bit better yet we have a figure. they're looking to recapitalize. it is a chapter that can now be close -- it is a chapter they can now close. patrick: the amount, 14 billion euros, is not a shocking number. you can see some shocking number that people cannot expect. something is probably that can be expected. hopefully we're moving on and closing the door.

in terms of the concept for greece, would you be tempted to take a small portfolio and buy some equity if there is an opportunity? patrick: i think the market cap billion. it is a punt. .ou could probably do ok but do you want to own a company that is nationalized? francine: pesek on strong stays with us -- part -- patrick armstrong stays with us. manus: the largest economy. where life to beijing. -- we are live to beijing. next on the pulse. ♪

francine: welcome back to the pulse. streaming on your tablet, phone and bloomberg.com. manus: we have eurozone pmi numbers. mark is going to break them down. mark: we had manufacturing in the eurozone. unexpectedly accelerating in october. german companies fared better than reported according to economics. we have the pmi index for the 52.3 fromising to

52.0 and september. that exceeds an estimate for an unchanged reading. the 50 mark that divides expansion and contraction. the manufacturing accelerated and they and australia netherlands. all nations except greece. someptick should provide consolation for policymakers who are going to be concerned about weak global trade. it might be too small to put the region on a more solid footing. we need to dig deeper. employment growth was the weakest since february. at the same time, new orders increased at the fastest pace in 18 months. that is keeping pressure on manufacturers. have a look at the euro rising for the third day today. -- commentsm the

from mariota draghi when he suggested the ecb is still open for adding further statement -- further stimulus. unexpectedly accelerating in october. manus: sticking with manufacturing, let's talk about china and their manufacturing data. a third consecutive month of contraction. let's bring in tom orlik. the dates you. when you look at the china data, i'm saying data -- i'm seeing data saying stability. tom: that is right. the manufacturing sector continues to suffer. perhaps it is not suffering quite as much in october as it was in previous months. of acombined with signs modest re-acceleration and loan

growth that we have seen coming through the data in the last few months is what is prompting hopes that chinese economy can find a tenuous. eriod of hope. francine: what does it mean for policymakers going forward? do they want to see more? in athey are going to be wait and see. -- in a wait and see period. we have's debts we have had six cuts in interest rates. had six cuts and interest rates. all of that, while it is taking time to show up in the real economy, but where it is already showing up is in low numbers. numbers.an

in china, there is a close relationship between what happens with lending and what happens in the real economy. our expectation and today's pmi data supports this argument. we are going to start seeing more stability coming through toward the end of 2015. that could give china's central-bank confidence to take a breather and its easing cycle. manus: tom, great work. pesek armstrong is the with us. you mentioned china at the top. would bementioning you quite keen in getting involved in china. i'm still surprised. you go for china. killed: the commodities russia, israel. it is quite reasonable in terms of currency.

people were panicking in august about the movers. the dollar was 2.3%. that is quite a stable emerging market currency. it is great to hear to get involved with china. we've done a graphic. that is going to -- from all china to new china. have a look at this graphic that we have prepared. what we've got is a rebalancing. rebalancing.he -- this is from one of their reviews from goldman sachs. you can see a leap in terms of participation. patrick: by all of the little baby companies. [laughter]

it is going to go down instead of going up. it is the new companies that is coming in, those are the more expensive companies. preferred the oils, the telecoms, the banks. the oils, the telecoms, the banks. francine: anything in health care? patrick: i don't know anything about chinese health care. francine: what i'm try to understand, you don't hate china , compared to other emerging markets. as an outside investor, how much do you make on your folio in china you go -- china? chinak: i am playing through the perspective of companies that have been hurt

from their exposure to china. i think my portfolio has a great market share. manus: patrick, thank you. you're good to stay with us after this very short break. are going to stay with us after this very short break. ♪

. manus: the manufacturing deluge continues, getting a break in data from the u.k. get ready for this one, guys. u.k. manufacturing growth unexpectedly accel breakthroughed -- accelerated to the fastest in 16 months. new markets searched and -- surged and the economics say it is bucking the downward trend starting the year on a strong footing and the manufacturing index rising from 51.5 from a 51.8 in september beating

economist forecast for an easing of 51.3. and this report indicates the economy is defining headwinds from emerging markets and maintaining some momentum and also may reinforce the view of some of the bank of england officials who say the economy is strong enough to warrant a rate increase soon. of course we have the latest decision from the bank of england on thursday and it's super thursday this week, guys, with the rate decision, the minutes from the rate meeting and of course the quarterly inflation report as well. fascinating piece of data coming after stronger data out of the euro zone, and dates out of china which shows a contraction. look how sterling is doing against the basket of currencies. this is on the bloomberg correlation weighted indices. this was not expected. we expected the index to fall to the walker since april of 2013. it's done the opposite. sterling is rising. the bank of england doesn't

want the pound to be too strong because it has an affect on import prices and pushes import prices low and inflation in the u.k. is currently at zero. but what a piece of data, surprising all the economists by bloomberg prior to the release of its data. manus: mark, thanks very much, breaking with the latest. let's bring in patrick armstrong. cracking manufacturing data. patrick: very strong here. manus: that's a big surprise. could that change -- one piece of data, what does it do to change the thinking on the back of england as we have one dissenter at the moment. patrick: one piece won't change anything but perhaps a trend in stronger data and puts the b.o.e. in play for maybe a q-2 revise next year. francine: does it change the way you look at your portfolio? patrick: this number won't. very good news for sterling. francine: what if we have another hawk?

manus: we have this graphic from last week, the right-hand side are most hawkish and mccafferty over there on the wheel. and on the other side you have andrew howl who is doves beat all doves kind of thing. this is my favorite graphic in the past 10 days and my bank of england meter. what does it take to shift the dial? patrick: inflation would be good to see but don't think it will happen soon. francine: coming from where? patrick: central banks need to monitor stimulus and you may see the e.c.b. step in as the fed starts its rate cycle and will really push extension and enhancement of the q.e. we have in the you're so zone. francine: how much do you worry about the strength in pound and the referendum? you look at your portfolio and how much exposure to you -- do you have to the country? patrick: continental europe is cheaper on an equity

perspective and the euro versus the dollar and the sterling is the middle ground. the fed raises first and the bank of england. while e.c.b. will extend the q.e.. manus: you took some profit on one of your positions and we move into the december fed meeting you don't think we get more volatility into the close? patrick: we put on the short vix when people were panicking and it fell 20% after we took it off. he vix has fallen low. this is negative bond. of rillion euros, a third the bond market. this is a huge issue for draghi and the market and the fund managers. patrick: i suppose draghi is creating it with the e.c.b. buying bonds and the 0% rate

policy and created the phenomenon of negative interest rates. it's not a healthy long-term or an aequilibrium environment but the trust we need and this monitor stimulus creates some inflationary hope anyway. francine: patrick, thanks for all of that. investment manager and chief investment manager at patrick armstrong. now let's get to one of our top stories, turkey, the r.k. party swept back into power with the surprise election victory and boosting stocks and the lira higher. for more our reporter tom mckenzie joins us from istanbul. this is a vote on security, right? there was a huge gamble taken in june and there's been so much commotion that people wanted someone they trusted and could keep a handle on the situation. tom: absolutely, francine.

the political victory of president erdogan. he pulled it off despite the pollsters and analysts and has the 49% at least and 4.5 million more votes than he got in june when the a.k. party lost their majority and had to go in coalition talks and those collapsesed and president erd ogan made the election a gamble and there is a turbulent time with greece and the truce between ankara and there's been deaths on both sides and bombings blamed on the islamic state killing 130 people and there's been a widespread media crackdown as well and then of course we have the economic challenges but yes, security was played up byered began -- erdogan.gan --

and how will they get growth up past 3%. i'm joined by the chief economist for the finance bank and very well placed to answer some of these questions. how do the results from yesterday change your economic forecast and calculations? >> not the results themselves but the truce that will be made in the coming days and will be more important in shaping the macroforecast for everybody. they can either decide they are now safe and secure in their position in power and can adopt a more inclusive, unifying approach and would be obviously market positive and positive for the growth and everything. or they can decide that while the existing policies have been awarded by the electorate so we should carry on with the existing policies and those policies have been an insistence on executive presidency, an aggressive foreign policy stance, a

hard-liner stance against kurds domestically, continuous calls on the central bank for lower interest rates, and in general erosion weakening of the checks and balances in the turkish political system. none of these are market positives. if the a.k.p. would choose the first approach we would expect the positive sentiment in turkish markets to be longer lived but the risk is they will be emboldened to choose a second approach in which case i think the positive sentiment would be rather short-lived. tom: we talked to other investors about the looming fed question and what it means for turkish assets and also their foreign funding. tell me how crucial it is for turkey as we look ahead? inan: it is very crucial and can't be underestimated and overstated. is a son is that turkey foreign country and has to rely on other people's savings to

finance its growth rate and when financing is not forthcoming, turkey obviously will face difficulties in funding its growth model. the issue is that even in the best of domestic scenarios in turkey, having posted large current account deficits for the past several years, turkey will be vulnerable to a tightening of the global monetary conditions by the fed or a reversal of the emerging market sentiment because of other issues like china maybe. so even in the best of domestic scenarios, turkey would still be fragile but if the a.k.p. took the more hostile approach, then the risks will be much more sure. tom: we touched on the economic risks, the political risks, you're concerned about the breakdown in the truce with kurdish militants. where can we go from here? is it likely they will sit down and talk peace again? inan: it remains to be seen. the a.k.p. and turkish side

will have more incentive to sit down and talk because both sides know the counterparties will be and their reaction functions would be so there might be a case for talking further. and then again a.k.p. might be emboldened by the large kurdish dominated regions of turkey and feel they can just cut out the h.d.p. and go along with the process. that's a more complicated issue and in that case i don't think the peace process will proceed significantly from here. tom: thank you very much, inan demir, the chief economist giving some insight after the election results here in turkey. guys, back to you. manus: great reporting and great interview there, speaking to the chief economist in inistanbul. great shot. i'd love to be down there. a little bit of sunshine on the banks, having a great day. francine: let's move to the airline.

we spoke to the c.e.o. of ryanair. we'll bring you that conversation next.

manus: welcome back to the pulse, live from the european headquarters in london. francine: let's get a quick check on sterl. we saw a pretty big move after we had that better than expected manufacturing data out of the u.k. this week we get -- it's super thursday so we get to understand their thinking

better on inflation. we'll see whether mark carney says anything on strength of pound. this will be a problem for this country as we go forward. the higher it goes, it makes exports that little bit more expensive to pan off. you see 1.5483 and does it bring forward the rate hike. but we hope to understand. one sort of data won't move the leverage you have but it is super thursday and we'll be covering that live from outside the bank of england. estimate is cost related to fines and legal sentiments declined and europe's largest bank reported a 32% gain in profit. it's also been said they haven't made a decision on its domicile this year. francine: shares in minor

london are lower after the world's third biggest platinum producer said it would take record impairment charge and would be more than $2 billion for the full year. manus: russian aviation directors say the plane that crashed appears to have broken up midair, spreading debris over more than eight kilometers. the jet crashed after leaving sharm shake. egypt -- sharma shake. francine: euros must be raised in fresh capital and comes after taxpayers face the cost of damage for the six months of wrangling between the nation's government and creditors. the four banks have until friday to submit we capitalization plans to the .c.b. supervisory arm. prices down and passengers up

after we spoke to ryanair c.e.o. >> we're planning to drive down our shares by 4% in the fourth quarter and means good news for consumers and bad news for the competition and hope we get there. what will cause that decline is our capacity is going up 32% in the quarter when we're trying. despite the events we'll see strong performance in the summer months because there isn't that much net capacity in europe but the winter will be weaker and in the past number of years when we were grounding aircraft in the winter, we're essentially grounding nothing other than what we need for maintenance and we expanded and opened four bases and adding 120 new routes and growing very strongly in a market where increasingly thanks to me being nicer to people millions of customers want to fly ryan pir. -- ryanair.

manus: our aviation correspondent carry london. when you listen to what o'leary is saying, they're adding capacity and getting ready to not go in a price war because he didn't use that phrase himself but readying himself for action. carrie: they'll be adding 28 new planes over the winter and looking at a note this morning saying ryanair will be the fastest growing airline in the world over this winter period. they're pushing ahead, plowing ahead and add to this you have the fuel prices dropping which means other airlines are feeling comfortable in pushing ahead in capacity when maybe they'd be retrenching a little bit. but all of this led to what he led, the 4% in drop of average prices in q-4 but ryanair feels they can win over passengers and continue to gain market share. francine: the share price is off, is that because michael already said that winter bookings look a little tougher than the summer bookings? kari: it's concern about softness over the winter period.

there is a lot of concern about the extra capacity in the market and how that will pay out in terms of wild and prices and whether the airlines will be able to be asparuhovityable. the summer period was the bumper year for the airlines and made a lot of money and the reason they did that is because capacity was flat and they're plowing ahead and that makes people nervous. manus: every morning i get out of bed, always getting better. that's the slogan of ryanair. always getting better. this is ryanair. i love what he said. if he'd been to a business school and been nice to customers he would have done it a long, long time ago but always getting better is his program. are we reaching peak, always getting better? kari: i think one of the things in terms of just for a customer is you'll be getting on ryan airplanes that are new and will have this lovely new interior, all the crew will have new uniforms.

i think as a customer when you come on the plane will be something very visual and you'll see. some of that, you have to wonder if it isn't going to start waning a little bit and people are just going to start getting used to it, not thinking about the past. some of those memories may be receding in the past. francine: when you look at airlines overall, will there be an impact from the terrible crash we saw over the weekend? kari: we'll have to wait to see what comes out of it and what's in the black box. any incident like this, if you're somebody a little nervous or a fearful flier, you'll think a little bit. it was interesting what michael o'leary was saying, he said sometimes people who used to maybe take a trip to morocco or egypt might actually be thinking about traveling closer to home. but these are horrible incidents and hope they don't happen again. manus: thank you very much, kari london.

francine: next we give you a preview what to watch the rest of the week. first week of november including bank of england's super thursday and u.s. jobs day.

francine: welcome back to "the pulse." streaming on your tablet and phone and also bloomberg.com. manus: it will be a busy week. the first week, trading week of

november, u.b.s. reports third quarter earnings tomorrow. 'm off to zurich where we'll speak to sergio. francine: i'm looking forward to the interview. we saw so many banks retrenching here in europe. it's almost a free lunch for the u.s. manus: the question for him, is this your golden opportunity to build on everyone else's dismay or take more for the bankers? you want to keep the key wealth managers. you've got to cough up, sergio? francine: all about bonuses. tuesday we get the inflation report and will be interesting to put in context after we had the u.k. manufacturing growing at the fastest pace in more than a year. again, what we hope we have a look inside mark carney's thinking, right, with inflation expectations and whether the number we had today makes a difference on where he sees the first rate hike in quite some time. manus: there's a lovely article

on bloomberg.com and he said when we might expect to see some different thinking from the the bank of england but he has flip-flopped and builds up to friday, the jobs report, the big one of them all and we're looking for, i suppose really, some would say this is the last ment of clarity for the fomc before they make their final decision for the year in terms of the unemployment numbers. that will be one to play for all eyes then on nonforeign payrolls. francine: a lot of f.x. to watch. mark barton has the latest. mark: the best month for global stocks for four years to be precise. it's all down to the china manufacturing data, both private and the official gauge so the industry is still contracting. have a look at the shares listed in hong kong.

china listed shares in hmong dodge. it's -- hong kong. it's a five-day chart. this index jumped 11% in october, best performance since april and the benchmark was the seventh best performer in the world out of 93 tracked by bloomberg. but a bit of reality check after the industry, the chinese manufacturing industry contracted in october. want to have a look what's happening to the lire. what a day after the a.k. party swept into power ending five months of political gridlock. the lire rising the most since 2008 after this surprising election result. back in june the party was co-founded by the president erdogan lost the majority for the first time since 2002 and that uncertainty led to the lira sinking to a record low and the dollar against the lira in september and things have

changed by a result of the election but the lire sunk by 7% the worst year since 2007. i want to finish with the euro guides against the dollar. not only today have we had better than expected manufacturing data out of the euro zone, manufacturing unexpectedly accelerating in october. interesting comments from mr. draghi speaking to the italian newspaper over the weekend where he said it's still an open question whether adding further stimulus will be necessary. less than two weeks ago he signaled in malta at the last e.c.b. meeting that rates or stimulus would be increased in december. the euro rises for a third day after those comments. quite a change of tone from mr. draghi. manus: wrapping up all the news on the market and what happened next. "surveillance" is up next. francine: bloomberg is the first word for our radio listeners is up next. it is indeed surveillance. join me and tom kean in new york. this is what we'll be talking

about, china and the pound and what we saw in turkey with great guests coming up. one of my guests is james and he'll give you a lowdown on what stocks he thinks he is buying and selling off as we count down to super thursday.

francine: strong majority in turkey, president erdogan's party sweeping back in power. the lire soars as people ask for stability. banking beat, the e.c.b. reports better than expected profits and investors await whether hsbc will move abroad. the official p.m.i. data shows a slowdown and what does it mean for world growth as we await u.s. jobs later this week. good morning, this is bloomberg's "surveillance" with tom