♪ >> december is alive, the fed's most powerful trio has spoken. around thes tumble world. it is super thursday and think of england investors look to governor carney for a rate hike. good morning, this is bloomberg "surveillance." i am francine lacqua in london with tom keene in new york. announcement.ant i noticed the 30 year bond in

the nine it states is trending 3.00%. in november? is that a live possibility? francine: in the u.k., that is unlikely. the debate is why would you not wait for the fed first? tom: i barely got any sleep so i am a dead possibility today. there is so much anticipation from tom keene about what mark carney will say. let's get to the bloomberg first word news. good morning. it is super tuesday for the bank of england. the minutes of its monetary policy meeting will be released. governor carney will release his final quarterly inflation report of the year. the possibility that upon caused

the crash of the russian airliner is putting a new focus on airline security in egypt. there was a security breach in may in the airport with a flight started. government forces are fighting --itants linked to you linked to the islamic state and the region. in russia, the first of the crash victims is laid to rest today. all 224 people on board were killed. survivors trapped in the rubble of a class pakistan building use their cell phones to call for help. more than 100 people were pulled from the wreckage of the factory. they fear the death toll could rise. some say the owner would not stop construction at the factory even though an earthquake cracked walls last week. secretary carter is visiting a

u.s. aircraft carrier in the south china sea. the carrier is stationed not far from artificial islands built by china. the u.s. does not recognize them as sovereign territory. carter will talk to asian defense ministers. world is watching prices during a four-day sale in new york city. 77 works were sold yesterday million,ht in $377 nearly beating expectations. tom: i'm trying to figure out the average price. are going to hang in a cheap nail salon, that is for sure. we have a pension for data checks. excuse the voice, i am under the weather.

2.23%.year yield the euro is weak or, the nymex 48.63.ith brent crude the is under, if you would, vix 15 points. one indication of the change is -- will be joined in the next hour with the correlations in the market. the bloomberg terminal, this is the most optimistic chart in the .orld as we know it the basic jobs claims adjusted for employment. a good story. there is an incredible lack of claims for unemployment. francine: it continues to fall. tom: it is extraordinary.

how constructive the claims short is, one of the major charts. that brings us to an esteemed guest on this carney day. francine: we're looking at him, your chart was great. wagel have charge for growth, especially in the private sector in the u.k. above 3%. the boe and its inflation report will be released today. .e are joined by george magnus it is great to have you on the program. the premise of what we are -- of what we are discussing is that the u.k. must give an indication that the hike will come before the market expects it, but after the fed, right? >> i imagine that it will be. unless there is something pressing we do not know about or

is revealed today in the statistics report. the danger is that the bank of .ngland could push up the pound and the sense that this would act as a depressing influence on the manufacturing sector in the economy. timely. be an there is no reason why the bank of england has to rush. today, make their expression very clear of what they think of the economy and what inflation will be. and actually leave no doubt or little doubt about the fact that a rate rise is coming, but not necessarily immediately. francine: what worries you the most about the u.k. economy? quite strong, if we hike before the fed that

could hike and to support sterling even more. mr. magnus: in terms of the outlook for the economy and 2016 and 2017, i'm not that worried. we could do with more balance between the household sector and the corporate investments. it would be appropriate for the government to change regulations gettingnments and companies to spend some of their cash piles. the referendum campaign is a big unknown, and that hangs over the economy like a block cloud. -- black clad. -- black cloud. tom: none of this is in the textbooks. with that, do you have the confidence that carney and yellen can exit this known world with stability? i don't have

confidence, and i'm sure that they don't either. in the context of janet yellen that must be looking at the possibility of an exit and raising interest rates like this . they kind of want to do it, but they are nervous of what the consequences might be -- as well they should. they are changing a monetary regime that has been in place for several years for a financial crisis. nonetheless, the term reducing the level of accommodation will be more common rather than monetary tightening. we're not talking about a tightening cycle yet. it is far too early. there's so much accommodation in the global monetary system lessening that is entirely appropriate. that is what they would like to -- my belief is that is what they're going to try to give. janet yellen already has. francine: let's get to central banker thatcentral

is having a tough job. no region rates at a record low. the oil slump is pummeling growth. let's get to the governor. thank you for joining us on surveillance. give us a sense of the probability you'll have to cut rates in the next 12 months. it is my intent today not to comment on that question. we're not commenting regarding future interest rates. our most recent interest-rate was from september. along that part we said that it , a 50% likelihood, of another cut during the first half of next year. i would underline

that as we saw in september, we were unlikely to have any change in the target rates today. is news on there both sides regarding interest-rate decisions. it was not a difficult decision today, or actually yesterday, to keep the target rate unchanged. francine: you are saying that you are sticking to what you said in september, a 50% chance of a rate cut in the next 12-months, through september. give us a sense how much weakness will hold you back from doing that. you mentioned developments, that is one factor that will put weight -- it mattered yesterday, and it will be an important channel coming into december. as you indicate, the krone has

weakenend. has there is other news that has isolated points in other directions. present a newot forecast. we come back to the old picture in our december report. notcine: that means you are confirming or denying what you said in september about the 50% chance? mr. olsen: i'm not confirming like acally, in a sense new interest rate forecast. i'm pointing to the most recent one that we have. then, i am adding that since been news onve both sides, pluses and minuses.

overall, the picture, as regards the interest rate setting, is relatively balanced. how did the latest ecb and bank signals affect your thinking? as a small open economy, our interest rates is influenced abroad. thanks to cameron we have in the euro area and our neighboring country of sweden, the expected target rates, influenced by the signals, have been reduced. there are similar market expectations in the u.k., the u.s. -- are relatively unchanged

compared to the picture we saw in september. average, the picture is slightly up with an interest rate hike internationally. it is postponed further. francine: are you more inclined to do qe before hitting the zero bound on rates takata encouraged to what? francine: re: more inclined to do qe? the executive board has the power to decide on our target rate. to movee not considered or jump to zero. we are very much aware of what is happening abroad. we are well prepared. decisions, that

is not on our table, so far. , thanke: oeystein olsen you for joining us. the norwegian central banker. joinednext hour we are pierre moscovic. ♪

tom: good morning. bloomberg "surveillance." jobs day tomorrow. data, eight: 30 a.m., new york time. right now, in london, it is francine the quad. francine: it is super thursday. we get inflation, the votes, and

we are watching the pound. well mark carney do a janet yellen? we're back with george magness, the advisor to ubs. when you look at markcarney, we ll it the trio to say yes that september is a real possibility. what are you expecting from the bank of england? i was looking at february as the ultimate time to hike rates? mr. magnus: that is my view, but i don't know if mark carney and want to give that. do i know that for sure? no. on the empirical evidence from his behavior and comments in the past. the bank's comments and assessment of the economy. things which we keep. from central bankers, actually,

the fed has vacillated a little centralcold, low bankers, including mario draghi and the governor of the bank of england has expressed shock from the outside -- china and emerging markets. tom: that is the shock. central bankers looking for control. where are we on the affected mr. carney or janet yellen's actions with the real economy? what will they do to the real economy with any policy shift that they might make? mr. magnus: my hunch is that actually the initial move from not have awill genetic effect on the real economy. giganticot have a effect on the real economy. the start of an interest rate rising or interest rates cycle,

which go substantially further than anyone thinks at this point in time. would becase, that rapidly discounted into bond yields, credit spreads, and so on. that could be damaging. i do not think that will happen, particularly given the inflation environment for now looks to be so well contained. i do not think it is a restraint on the beginning of the rising interest rate cycle. we will see. i actually believed over the next couple of years we may be surprised by inflation -- not hyperinflation, but on the upside. at the time being it is contained. george magness with us for the hour. next we look at the equity markets. the vix 15. we need wisdom from brian belski.

stay with us. francine lacqua in london. i am tom keene in new york. it is bloomberg "surveillance." ♪

tom: good morning. bloomberg "surveillance." oft is a gorgeous shot london. printing the choir is waiting for the sun. it is scheduled for sometime in november. we're looking for inflation. what an announcement that shows

where we are right now? francine: if you are an investor you should take note and be more nervous. cutting the growth, but also inflation is lower. this as an ecb decision looms. it veryaghi has put clearly that he probably wants to lower at the december meeting. that's get to george magnus. and you look at the growth inflation forecast, what the commission is saying -- 1% inflation for 2016, this points to a trend that could quickly spiral to deflation. it could, but i don't think it is. provided that we don't see another similar collapse in oil prices that we had this time last year, over the winter the headline inflation will creep of. the core rate is steady at 1%.

from the point of view of the ecb that is disappointing, they only have one thing to do. the growth forecast for last year was 1.8%. there are problems. countries have had big exposure to emerging countries. yesterday or today we saw german forrs for september weak the third consecutive month. those doing a bottom selling will feel the pinch, that the low inflation is key. they are thinking about december. tom: do you think that this .ombo is not euros gliosis it is something else besides the cyclical challenges of your put the double digit unemployment,

the usual stuff we have known for decades -- why is this different? mr. magnus: i'm not sure it is. taking aalking about slightly more -- i am talking slightly more optimistic view on the cycle in europe over the next 12 to 15 months. the key problem is the paralysis of budgetary policy, the decline and weakness and low levels of capital investments. these are big problems that have not been solved. tom: maybe we will crowbar that's on china at of george as well. james grant will be with bloomberg television in the next hour. ♪

tom: good morning. bill gross on bloomberg "surveillance" tomorrow. we will look at his perspective

linking fed action with what we see in the job market. bill gross is a live possibility tomorrow. new york looking gorgeous. i am still trying to get used to what time of day i am that. the firstnn nailed it day. she has her bloomberg first word. now we arers from expected to hear that they give england's latest policy decision on interest rates and quantitive easing. governor carney will present his final inflation report of the year, and of the minutes of the monetary policy meeting will be released at 7:00 p.m. eastern -- at 7:00 eastern. a major break with the nation strict drug laws. those should be eased to defuse violence. since the government cracked down nine years ago, 25,000 have

vanished in drug-related violence. international experts try to figure out why a russian airliner crashed, and the first of the victims is laid to rest. in thehed on saturday egyptian desert. all 200 24 people on board were killed. there was aation bomb on the airplane, the security officer at the airport where the flight started has been fired. the associated press disapproves iraq and rebels in syria. airstrikes have done little to retake territory. facebook demonstrating an ability to make money and a willingness to spend it. taking aim at new scientific initiatives, including virtual reality. >> we think that gaming will be

the most obvious market. there are around 200 million or 250 million people who have either an xbox, playstation, or wii. we think they will be very excited about the is beer answers have with virtual reality. ofnie: there is a revenue $4.5 billion. they are 33% for the year. you can get more at the new bloomberg.com. you have more on facebook? francine: to discuss the nature of facebook we have mark hawtin, who manages their start technology. it is great to have you on the program. a lot of people have been liking this. when technology company say the market will be this, facebook is

delivering, so far. because it has focused on the right order on the right things. there was a long time when they generated no revenue because they were focused on building the network. then, the engagement comes next. finally, the monetization follows as a matter of course. they are having so much success in generating revenue. sure george is on facebook, and agrees they were not quick enough to be on mobile, and now they have reversed that. mr. hawtin: they have done extremely well in their move to mobile. this beauty of moved to that platform has been astonishing. it is about providing the users on what they want. they're are focused on all of the steps with great precision. mentioned the basic

idea of n squared. facebook is the mother of all n squared network systems. how can there be any competition whatsoever? mr. hawtin: it is hard to see in a competition now. there are now a billion daily users. 100 67 daily north american users. you almost get to two thirds or three quarters of the american population -- all of the north american population using facebook daily. tom: mobile is 40%. only taking a miniscule amount of revenue. what will be the rate of change to get mobile to get its fair share of the ad pie? they will take time. it is heavily under index.

20% of time consumed on media is on mobile. if you index more evenly across the different media, you could see facebook with multiple existing revenue, not only a percentage increase. francine: is it still good value? we talk about -- are you on facebook? i know tom keene is every day, are you? tom: pretty much, yeah. francine: i know you are, to .ontinue the conversation if valuation is still pretty cheap. it is 30 times earnings-per-share. mr. hawtin: it has an earnings growth rate in excess of that. i can see that earnings growth rate continuing for some time. the easy money has probably been made, but as a core growth holding with opportunity. mr. magnus: what do think the particular sensitivities might be?

mr. hawtin: i think they're going fast enough that the macro does not play to greater parole. role.y two great of a that, clearly, is an issue. i think it could be regulation. that could become an issue. i do not see anything that will derail the kind of prime case. tom: why don't they buy twitter? everybody raise their hand, how many people hate the heart on twitter? ie -- the heart, vonn francine: there's a way of changing it. eru can even put little be kansan center of the heart. tom: friday think i would want to do that? francine: little martini glasses.

bring this back to an adult conversation. twitter has an overlay like instagram. mr. hawtin: why do they need twitter? in a wonder take all the world, why would a network with one point 5 billion users want to acquire a network with 300 million? i was going to talk about instagram. instagram is very popular. how do you monetize on instagram? with video ads. one interesting thing is 8 billion videos are up from 5 billion the previous quarter. it is still small compared to youtube, but the potential is enormous. they are going after youtube next. that burberryay combining from three brands into one, a little is an instagram push.

there are so important on instagram they have to get down to a focus, burberry. francine: you are seeing more fashion houses here like dolce and kaman him. they use instagram, and snapchat. the question is, how do people make money out of that? mike, thank you. tom: we will continue this through the day on bloomberg television and radio. rum cornell, the former physicist turned economist robert ingle will talk to us about linkages and correlations in the new volatile market. francine lacqua in london, i am tom keene in new york. ♪

francine: welcome back. this is bloomberg "surveillance." i am francine lacqua in london. mark carney will deliver his super thursday. we are expecting rate decisions, how they voted, we will be looking for hints on when the rate hike will con. -- will come. tom: there is a textbook that have to do with physics, then of theas halladay out university of pittsburgh. he memorized all of this. he was a giant of newtonian mechanics. one day he decided he was bored and turned to economics and moved to the university of san diego. then got a nobel prize in the agitation within the markets. now new york university's director of volatility institute. you do not look at agitation or

volatility like mere mortals. when we report the vix, what do we get wrong? mr. engle: it is the volatility of the s&p 500. eligibility is in different asset and asset classes moved together. it is not such a bad idea to only report the vix. everybody turn to you and said, what have we learned about correlation? the vix at 20. we are in a complacent range you the vix, but what have gotten wiser on through the financial crisis of how the different assets poorly? the correlations have changed it during the financial crisis. correlations moved everything went down

together. since the financial crisis, -- tom: do we go down together, or can the regulation in washington dampen the robert engle world? washingtoni think has dampened the risk of another financial crisis. we monitor that all the time. we watch what is happening all to thee world capitalization of the financial sector. at least in the u.s. we see a lot of improvements, which i think we should be happy about. doingne: you have him extensive research on the implications of volatility on china, which was ranked number one in global systemic risk one year ago. it dropped off, then it is back on. how much do you worry about the chinese banks? mr. engle: i worry a lot. the trend is shocking. it has been increasing the

capital needs of the chinese state-owned banks. they have been increasing steadily since the financial crisis. .hina is loaded with debt it is being issued back-and-forth between the tanks and state owned enterprises, municipal governments. many of these are not very creditworthy anymore. yet, everything is guaranteed by the government. do not see it as a big risk, but the stock market does not see the banks as that good of an investment. francine: we have a great story on the bloomberg terminal talking about fathom and their predictions -- saying that there is a bear case for china. saying that the doc is at risk of following the fed to zero rate. i've not seen the

story you're talking about. struggling with a whole marriott of questions at the same time. the financial sector is one, but they have the state owned enterprises, which are underperforming. the capital is not being allocated well. they have shadow banking which is growing rapidly to fill the gap. then environmental and trade issues. china has lots of resources that can move fast, because they have a government that is fully in control, but they have a lot of problems. your colleague at san diego -- all of our world, it is based on the gaussian construct, the bell curve. we do not live in a bell curve world. a bell curve world, about the worried

theory based on the assumption of a gaussian bell curve world? why are we fully ourselves? mr. engle: we don't build our models based on the gaussian curve. far is not done with gaussian, sometimes, but at best it is not. measure of the risks over the next short interval. really, the risks we worry about our longer intervals. makeorried that the banks risky decisions based on short-term risks, when they should use measures -- should jamieeline dimon or the new manager of deutsche bank hughes to capture that risk, that timeline? mr. engle: it should be at least year, five years -- long-term risk measures. even though risks have come down

now, we cannot say they will stay down. they may do back up again. you need a decision process taking that into account. we do that through stress tests, but we are only scratching the surface on how to do that well. ?om: why do you learn var so you know it doesn't work. from new york university. coming up tomorrow on bloomberg "surveillance", from the new york school of economics, dylan bauder will be joined -- willem buiter will join us in the 6:00 hour. ♪

tom: good morning. bloomberg "surveillance." right now, and business flash with vonnie quinn. vonnie: thank you. the european commission cuts its euro area growth inflation outlook for next year because of my challenging global commissions and lower oil prices . also, a weaker euro. -- but that is down from

a projection of one point 9% in may. the recovery is resting on unprecedented stimulus by the ecb who releases fresh predictions in-depth e -- fresh predictions in december. overcoming a slum in trading revenue. the bank says that ned income climbed $1.2 billion, beating estimates. michael o'leary is learning that it comes with rewards. become at least 500 million dollars richer, with a three .8% stake in ryan and, which had a 5% since the beginning of the week. he raised $1.3 billion fortune in 2015.umped that is the business flash.

francine: let's talk about u.s. jobs. report but payrolls the potential of moving the tectonic plates of global rates. that's get back to george magnus, a senior adviser to ubs. we have the payroll figures tomorrow. what we heard from janet yellen, what we heard from sandy fisher, and all points to a fed rate unless september, something huge happens. mr. magnus: have 2 more job reports before the december meeting. the one that we get tomorrow, and the november report. there is a crumbling in either report, i think that is what is coming. francine: at the world is ready? mr. magnus: we don't know that.

francine: we should be. mr. magnus: people keep going on , the risks on emerging markets from china, the imf talked at great length about the racing company debt it emerging companies, more and more of which is in bonds and u.s. dollar denominated. the dollar will go up. interest rates are translated along the yield curve. it is not share the world is prepared. they would be less prepared if the third set on its hands for too much longer. tom: let's talk about aggregation. guys like you, going back to when you were at westminster, deal with a big aggregation. we shouldested that break it apart and look at micro economics, the individual cities, etc.

how a part is the united kingdom, the united states, as ?e go to this jobs day how apart are the haves and have-nots? mr. magnus: there is that dichotomy. it is ubiquitous. the trouble is from the point of view of policymaking, i'm not sure that we understand how we can incorporate that into policy , macroeconomic policy, which deals with aggregates. we are talking about the jobs report tomorrow. not small, but a classic example. what is going on underneath headline numbers of job creation and unemployment rates to do with workforce participation, not just the different genders cover but geographically as well. tourist isstion as a

can the united kingdom survive a prosperous london? thehey comes almost like gilded age within london and the rest of the united kingdom, doesn't it? mr. magnus: people have spoken a little in the past about a return to the city states of the medieval times where venice an otherwisewel in what it used to be before it was called italy. it is a big problem. i think the regional imbalance within the nation that we have here has been around for a long time. the vast majority of our gdp and concentrated in london and the southeast. the government, to its credit, has a policy of trying to rebalance that. whether they have the right

tools to do that is a moot point, but at least there is an awareness, which is appropriate. francine: george magnus, a special advisor to ubs. bloomberg "surveillance" continues on bloomberg tv, your tablet, your phone, and bloomberg.com. it is bank of england day. we get the inflation report, the boat, and many are saying there is a little risk of having that on hold. clues ono have more whether they will be able to raise gradually. "surveillance" continues after this. ♪

♪ tom: market connie will not send a letter to the queen and the

governor will send it janet yellen a message on inflation. mark zuckerberg is once and for as out of the dorm room facebook looks more like google every day. the dow was 18,000, back in the most loved bull market in the history of the universe. good morning everyone, this is "bloomberg surveillance." it is thursday, november 5. we have bank of england coming up that it will be nice to talk about the dow at 18000 and what the ftse and the dax are doing. everybody is making money. it's the most unloved thing of ever seen. francine: we are looking at everything as one. we have jobs asia tomorrow. we have to link that to what we -- we have just data tomorrow. tom: i remember when the headlines came across the

terminal the last time and mr. carney said there is no inflation. what will we see later this morning? it is super thursday for the bank of england. it announced its latest decision on interest rates and monetary easing. governor mark carney will present his final report of this year. the announcement is expected one hour from now. 3 million more migrants are expected to reach europe before the end of next year. that is the latest projection. a surge would deepen in the crisis already overwhelming border points and services across the nations. many of the emigrants are fleeing civil war. six in 10 of those surveyed by the associated press disapproved of the president's strategy for fighting isis. airstrikes this started late

last year have done little. things could turn tense when the british prime minister talks about the crash of the russian jet with the egyptian prime minister. a bomb could have brought down the airbus and egyptian officials have not reacted saying it's an accident. security in the sinai is titans. -- is tightening. george bush's father is revealing what he think's about the architects of the iraq war. he talks about his son and vice president in a new biography and says that dick cheney has his own empire. he called donald rumsfeld arrogant. george bush has said he never consulted his father before going to war in iraq. to get more and these and breaking stories, go to bloomberg.com. tom: this is a data check --

crude oil right now in the u.s. is 34 dollars. this is the most optimistic chart i can come up with. this is claims adjusted for growth of america's employment. we have never been here in a gazillion years. the volatility of the 70's and 80's and we come down through the recession and there is the crisis. vonnie: claims have continued to outperform. tom: it's extraordinary. an important correction -- i am getting hammered because i cannot l pronounce francineacroix's last name. we'll discuss this over drinks. we are going to the saint regis

hotel and i will pronounce it correctly. thank you for that important tweet. belsky is with us looking at the linkage of what the fed and the bank of england does and his optimism on the equity markets. at of a sudden, where 18,000. >> i think people are still in the bunker. becauseinteresting time we talk a lot about hockey. one of the terms is hockey is chirping. i think the fed has heard a lot of chirping. they hear the ecb saying we will do more and then they hear china say the same thing. we think the fed wanted to raise

rates in october but they knew they made a mistake at the prior meeting so they did not do it. this is human behavior. mark carney came out last time with one headline that said there is no inflation. what's different now? >> someone has to take the leap of faith? tom: who is it? >> it will probably be the u.s. think that the fed should have raised rates from an investment strategy standpoint because things are getting better. let's start the trend for the economy to improve. whether it happens in december or the early part of next year is a moot point. tom: mark carney cannot lead. he would make history if he led. francine: i think you are right. the eu moves before the fed, that would be completely different.

when you look at linkage of the bank of england and the fed, is there a concern that if they delay and you believe that janet yellen should have gone in september, if they delay more, is there a risk of rates rising rapidly than we think? >> i think it's more about what she says and how she says it and what is the message in the first part of next year. we think it would be good if she raises rates in december. everybody seems to think that will be the case. i think it will be all about the messaging. fast, we willoo have some worries with respect to aggression. we have reared an entire generation of investors and all they knows to buy stocks. if you pull the skittles away from the kids, that will be a problem. think it's the first rate hike, it's all about the

messaging between the first and second and third. the kids are the market and we have a similar feeling as the bank of england as you look at what mark carney has to do. we have almost reversed it. it's not really filtering through the real economy. u.k., why are they still at low interest rates? right, especially where the sterling is compared to the euro and in canada. it's starting to get more expensive. -- it's a race to the finish to see who will be first. our bet is it will be the u.s. it would be history of marconi set the pace. tom: -- it would be history if mark carney set the pace. buybacks are a form of financial engineering and are

mostly less productive. you defend buybacks as a cash return to shareholders. why are buybacks a good thing where we are now? >> at the end of the day, you can streamline where the shares are outstanding and it proves that corporations are being prudent with their sources of cash. this will be a moot point over the next 35 -- 3-5 years. they will borrow money to buy back stock so this is going away. is part of the cycle. as rates rise, we will see more dividends increase and more m&a activity and by the way, capital expenditures increase? tom: do you see an indication of that? there was the idea that yes, we will see capex kick in. since 2008, there has been the notion of the manufacturing resonance -- renaissance.

cheap money, low interest rates is not going to incentivize a company to add jobs. it will be tax change on the corporate side and repatriation. we think we will see that in 2017 and 2018. francine: there is an argument that says week interest rates have spurred m&a and a lot of these mergers don't make much sense but because there is so much money, that's what spurs them and they will unravel when that ends. >> that's a nice point but that is more headlines great if you look at the percentage of companies that haven't bought out relative to other prior cycles, will like the notion activity is picking when the market is peaking. there is nowhere near the league we saw in 2007. in 2000, the majority of m&a being done was done with stock and now we see majority of cash and that is very meaningful. tom: the minnesota vikings are

why? what a success, >> they've got it>> great defense. tom: there you go with your minnesota update. francine, you needed that. she knows nothing about the minnesota vikings. we will be joined by the citigroup chief economist tomorrow. he is stuck with a call of a probability and a likelihood of goal -- of global recession. he will defend the slowdown tomorrow. stay with us," bloomberg surveillance." ♪

the tenure bond.

signal whatd chairman yellen and mark carney will do. it's too early, 48 minutes mark connie will speak. craft counts berkshire hathaway is its largest shareholder in his closing seven factories to cut costs. the move's rendition to the 2500 job cuts announced in august. a spokesman says the reductions will take place over the next 12-24 months. xp is says it is agreed to acquire home away for 3.9 billion dollars. it will pay $38.31 per share. home away hopes the deal will bolster its position in the marketplace fending off

competition from air bnd. -- bnb. facebook reported third-quarter revenue of 4.5 billion dollars beating estimates. is $.57. facebook says there are now more than one billion people checking on other people and checking status updates. that sounds creepy. we are with brian belski. the earningsout report and they would talk about organic revenue growth. that's what you do inside the company, like a nominal gdp proxy. will we see a non-growth in organic revenue? >> in totality yes, but what we have seen in earnings so far, there almost through the third

quarter, and is very selective. we think even the fact that 55% of revenue come from andrnational and the second third quarter are slow, there's no surprise. the next phase of the bull market, it will be all about -- growth in revenues and growth in earnings so the valuation argument that everybody is making will be moot. tom: thank you so much for your comments yesterday on our single best chart on the animal spirits of the united states and europe. that's brings us to our next guest. francine: let's talk about the animal spirit in the eu. the european commission cut their inflation outlook for next year. it has been cut to 1% and the commission has been saying there are more challenging global conditions and this is because of lower oil prices impacting

inflation. get straight to the commissioner from paris, one of the authors of the report. thank you for joining us. you look at the report that the commission put out, you are from brussels, thank you for correcting that, when you look at the report, how concerned are you about inflation and growth in doesn't it mean that overall, we will have to see more fiscal expansion in the euro area next year? that today id say presented the forecast with good news. the economy remains on recovery course. 1.6the eurozone, it will be and 1.9 for year the following year. it could be 2% in 2017. as far as inflation, we think core inflation is getting stronger.

see ae next two years, we very low oil prices which is strong for internal consumption. of course, it has to be controlled. we are going to have fiscal consolidation going on with a reduction of debt. we talked about that it is very difficult for the ecb to spur inflation. core inflation is going up a touch but every time you reduce it, it makes their job more difficult. what will it actually take as we move toward possible q from europe ande december? -- in december? the custom is to respect independence of the ecb. one thing i must say is that draghi drop -- mariano

does whatever it takes in order -- to sustain the growth in europe and control inflation. we will wait for the decisions and nothing relies on our forecast compared to the capacity of monetary policy of the union. i would say it's moderately good news. the recovery is there and it's due to a stronger structural reform in europe. it is also due to the fact that now the fiscal stance in europe is neutral. it was negative in the previous years. we see global growth is declining but emerging countries create some problems. many economies in europe are solid elements. it's amazing looking at the glass half full that we are six months from dealing with the greek crisis and nearly there in resolving it. what are the main unresolved

issues for the disbursement of the 2 billion euros to greece? spent two days in athens. thativered a key message this government is doing the job but there needs to be some milestones adopted. most of them are on track but a few of them have remained in discussion, technical discussion, with the imf and the ecb. monday when there is a meeting of the eurogroup, we will be able to assess the reforms are fully on track and then decide on the dispensation. we are moving step. yes, we are now out of the peak of the greek crisis. yes, we quote rate well with the government and our forecast shows there is also believe for greece to go back to growth in the second semester of 2016 and

to have 2.7% in 2017. delivered message i to my greek friends yesterday in the day before in the name of the commission. tom: good morning to you. when i look at your public service, i have to ask the question -- when you see the managerial transition at european banks like roy to bank and barclays, each and every other bank, is there a risk that europe takes on the anglo-saxon financial model? can france, germany or the rest of europe maintain the distinctive model as these new managers cut costs like jamie dimon in new york? i'm not in charge of the financial sector. what i see is that we now have a strong banking union. the mechanism is working well.

there are various models we use on our banks that work differently. financial sector is much stronger than it used to be. of course, there will need to be moves in the years to come. that's why this commission is working on that. it is proposing capital markets union in order to give direct access to capital for companies. tom: thank you so much. he manipulated his way around the question. that was very good. an important question on european versus north american banking. theng up, we will continue financial discussion from the massachusetts institute of technology and cit. they have shown him the door.

thain in the 9:00 hour, stay with us "bloomberg surveillance." ♪

tom: good morning, everyone. we have our morning must-read. vonnie: the current nobel laureate in economics corridors says -- he's talking about statistical object dividend.

ultimately, he comes down on the side of business as a good thing. we have to be careful because you made up point versus -- the aggregate versus the micro and they need to be good. he cites cbi as an example. tom: i think it's one of the most inspired awards in years as we question where we will be on the aggregate in the future. coming up, this dialogue will continue. james grant is looking for higher rates. it has not happened. he will be in the 7:00 a.m. hour , futures are up4," bloomberg surveillance." ♪

tom: make no. the last time they spoke, they stunned markets. will they do that in 30 minutes? the bank of england out with an

announcement. the headlines across the bloomberg terminal very carefully. important headlines including on governor carney. you said, 30 minutes from now expecting to hear the bank of england's -- the boe due to announce its views on quantitative easing and the quarterly inflation report. the final one of the year. of course, bloomberg will bring it to you as soon as it happens this morning at 7:00 eastern. the european union expect the refugee crisis to get much worse before it gets better. more.u. predicts 3 million migrants to reach europe before the end of next year. already overwhelming relief services. refuges have thought sanctuary this year. egypt's chief of civil aviation is saying today his country's airports comply with all international security standards. hat russianf t

airline after leaving an egyptian airport saturday is raising questions about security in egypt. the airport security chief and two officials were fired. britain is suspending flights into the region where the airbus went down, speculating a bomb brought onto the plane downed the airbus. egyptian officials call it an overreaction, saying it was an exit. egypt's president will discuss the crash in london with david cameron. higheston by mexico's court could move the country towards legalizing marijuana production. the ruling allows people to grow pot for their own use. activists say those losses should be eased. since the government crackdown nine years ago, 70,000 people have died and 25,000 more have vanished. you can get more on these and other breaking stories at the new bloomberg.com. all overe is silence

wall street and it every café in new york and london. equities confound. scarred it has been wrong a number of times but usually right in this great bull market with a resiliency and optimism. i'm getting back to doubt 18,000. where we going to be in two or three years? brian: higher. but we do think there is going to be some volatility with respect to the fed. we continue to believe that north american growth is going to set the pace for global growth. tom: within higher, is the mister. -- is the mystery. how do you tell an intermediate downturn in a belski bull market? is that pesky dust -- pixie dust? ian: we taught trying -- we call it trying to be too cute. in august we made a

bullish call saying that the market would -- we normally do not make three or four months calls but at the end of the day our discipline said are 2250 target on the s&p 500 was a real target. when we manage portfolios and look at sector positioning and are targets for the s&p and the tsx in canada, we look 12-18 months. we believe the massive bearishness by clients, how far behind they were the benchmark, talking about muhammad ali in the rope without. -- a rope a dope. they're too young. we think this market goes higher because the game of catch up continues. tom: it is an unloved bull market. the laureate robert and many others say look at that chart. it tells me we have come a long way. how do you respond to that in

terms of what vonnie quinn should do with her 201k? 401k that is now a 0k, we have to start investing again. we have to buy quality companies. i think we are heading into a 1994-1988 market. we think equity income is going to be a major play -- tom: translate that. the investment world has done a great disservice to clients talking about fixed income in equities as the asset allocation stream. aboute to start thinking equity income replacing a lot of fixed income because of how dividends are growing. we think that is going to be a key point to overall asset allocations. what i would be telling you is that we are going to see -- this is what your question was -- we are going to see a cyclical bear market at some point, ok?

that does not derail our call which is been in place for several years that the united states stock market is within a 15-20 bull market, secular bull market. we need to control the lead of this. at the end of the day, that is going to be the next great entry point in this bull market. vonnie: driven by what? if you see indices going higher, where will interest rates be? brian: we have forgotten the circle of life. stocks go up, earnings go up, interest rates go up. we think that is what happens. at the end of the day, assets run and three cycles. the reactionary, the acceptance, and the euphoria stage. the acceptance stage where we start to see multiple flatten out in revenue and earnings growth. we think that is the second half of 2016 into 2017 as we start to see manufacturing, onshoring, companies growing again and we

finally start to see some fiscal responsibly government. we have not seen that. all we've seen as monetary response. francine: so you're basing there is no hard-line from china? because if emerging markets fall of the cliff again or of china is growing at 3.5% instead of 6% that that will impact u.s. companies, how much they earn and it will impact the dow and the s&p. the broken record. this is not about china. china is in a 3-5-year process of taking down its capacity. just like america did during its lost decade between 2000 and 2009. this is about a streamlined scarcity proposal in america that has not grown and has not spent money. by the way, we are still the largest economy in the world. we have forgotten about that. tom: i do not agree but i'm going to listen to belski. which sector gives best value within growth right now? brian: financials.

financials and then financials. tom: what kind of financials? brian: we think the big banks with scale because we believe wealth management is going to drive revenues and growth for the financial industry. tom: swiss wealth management or u.s. wealth management. brian: north american wealth management. what about regional banks? as interest rates go up, -- these are companies that are exquisitely managed. tom: we see double-digit dividend growth. brian: yes. the other party want to think about is technology because technology is going to make everything run. look at facebook earnings. look at how one we a-- we are becoming more and more streamlined. over the next five years, definitely financials and technology. tom: bmo capital markets. the montréal canadiens have 147

in a row or something like that in the national hockey league. ofan loves those bank montréal seats in toronto. night when the leafs win a game finally. coming up on radio -- howard ward will continue his discussion. he has been dead on about forget about the gloom crew. you can't win if you are not playing. i liked that idea. that is original. stay with us -- bloomberg "surveillance" ♪

vonnie: this is bloomberg "surveillance" francine: you're looking at live pictures from the bank of england. thatdecision and the vote

goes with it in 20 minutes. is it the right decision to keep rates on hold? we will get any close from mark carney. first, though, let's get to bloomberg business flash. vonnie: we are beginning with german factory orders down for the third straight month in september. revenues come amid a slump in demand for investment goods, highlighting increasing risk for europe's largest economy. orders just -- adjusted for seasonal rate, fell 1.7% in august. toyota says profit increased 13% in the latest quarter. results were listed by a weaker yen ahead of an overhaul of product lineup. net income at toyota in line with estimates. the automaker also maintained its full year profit forecast. and china's commerce regulator

will investigate competition accusations against alibaba. a rival of the e-commerce giant claims alibaba is pressuring merchants to shun competing platforms. jd's complaint comes before next week's crucial single state promotion. -- single's day promotion. and that is the bloomberg business flash. tom: very good. in important conversation and a political football loan as the affordable care act and what we do about the actions that have been taken out of. obamacare he is the chief executive officer of evergreen health. we cathcch up every six months or so. he actually try to help people confused and impoverished looking for better health care. he joins us today. peter,i look at kentucky as one example.

i believe it has really struggled with how to do this for poor people. what have you learned in two years? peter: the exchange works must better now than it did the first year. both in the federal exchange and at the state exchange levels. and kentucky is an example of an exchange that worked very well. it actually became a political electionwith bevin's a couple days ago but kentucky's exchanges one of the few that worked well at the beginning to allow people who have subsidies under the affordable care act to sign up. maryland exchange did very poorly. the federal exchange as many people remember did very poorly. it is now doing well. tom: guys look at you as the helping leftist m.d., the poor. you're taking the money from the tax payers or whatever the stereotype is. don't agree that with you the benefit you have given to society. peter: we run a health

insurance cooperatives that is up against the big guys, the blues, the aetnas, the uniteds. we have been providing great covers to 25,000 members now, many of whom have subsidies through the informal care act that have kept people healthier and have actually decreased health care costs. for example, in our primary care offices, we have decreased the unnecessary emergency room visits by 10%, which save society money as well as keeps people healthier. tom: i believe we can count accurately emergency room visits as well. will will you be and where obamacare be in five years? peter: good question. it depends on the presidential election coming up this next year. if hillary clinton wins, i think the a formal care act continues exactly as is now. maybe some tweaks if they allow the bill to be reopened. if a republican wins, i think it

is replaced and repealed. tom: if you had a cup of coffee with the new republican governor eventtucky, what a rare that is, what would you tell him to convince him to push against her critics? peter: i would absolutely encourage him to expand medicaid to cover those who are uninsured, who are of low income. and i would encourage him strongly to continue the kentucky health exchange which has worked very well and for a relatively poor state in appalachia they have done well at getting your people covered. when you have access to health care, you're more likely to have healthy population which will save you, mr. governor bevins. tom: what we love about you is he actually do medicine. tell us about what you have learned with be a formal care act and obstetrics? are we having a healthier birth process for impoverished people in baltimore? think, that has not changed with the affordable

care act because of you are pregnant, you're eligible for medicaid before the informal care act. so there was decent access to affordable care, of structured care before. so that is one area we have not seen a difference. inhave seen a difference getting people medicines they need and controlling chronic conditions, because a big problem with health care costs in america is 5% of people cost 50% of the medical spend. diseaseshat is chronic that were not well controlled. with the affordable care act and more access to insurance, people are getting the medications they need. so chronic conditions are being much better controlled which saves money in the short run and the long run and keeps people healthier and keeps them from tipping into negative consequences of their condition. tom: thank you very much. in baltimore with evergreen health cooperative. i hope that was an a-political update with all the mail we get. right now we have photos.

some geopolitical photos. yesterday russian president vladimir putin and thousands of russians celebrated national unity day and moscow. the day marks the anniversary of the 1612 uprising that ended polish occupancy. st. petersburg canceled the city morning the victims of saturday's plane crash. theakes the top spot on seventh annual ranking of the world's most powerful people. the third in a row for putin. francine: i do. this one is quite weird. 200 illustrated apples. the kind you eat were created and were given out as gifts to the 196 guests attending the top 21 -- conference in paris. the apple show the portrait of francois hollande. a sticker was applied to the apples that protects them from the sun creating the image.

maybe we should do the same for "surveillance" it is not really stay very long but you are not wasting. vonnie: it is a little bit weird biting into somebody's face and profile. -- in profile. our top top photo. nothing says fine art like a painting of cats. sotheby's is the largest and most extensive -- expensive cat painting. i am not kidding you. there are 350 cats belonging to the person who commissioned this photo. tom: did laura chapman by this? -- buy this? vonnie: i thought it was garfield. tom: i thought laura chapman. i saw her yesterday on the phone. vonnie: do want to guess how many cats are in the photograph? 42. i object on the behalf of laura chapman. francine: i object as well. it is hemingway that had more cats and the same with the

chinese artists. arts and cats go hand in hand. vonnie: follow the twitter account for many cat pictures. tom: oh, no. tomorrow, citigroup chief economist will join us. an interesting conversation. this will be interesting after what we have seen in 11 minutes from mark carney. stay with us on economics. investment in international relations. bloomberg "surveillance" ♪

good morning, everyone. a gorgeous new york. i cannot begin to convey the level of september in new york on this first week of november. eousity defined. let's have a lovely forex report. dollar-yen near point of 1.22 weaker yen, weaker euro. getting near the 98 print.

that is a big deal. 100 print would be huge. i throw gold in for the foreign exchange correlation crew. gold.0 print on it would test support within the bear market on gold. reporte are on our forex this morning. francine: a lot of stuff. banks,king at central the jobs data. tomorrow, looking at corporate news. coming up shortly it is bloomberg and steph, we have lots going on on your show today. stephanie: first of all, it is matt miller's birthday. we are going to have a party up in here. we are going to kick it off. jim grant is in the house. we will be getting the rate decision out of the boe. we know jim grant luster frown on the fed. we will also speaking to a sports guy you kno ww well. the ceo of id this. -- adidas. tom: thank you so much.

stephanie: you're right, tom today, gorgeous. tom: we brought this up for brian belsky because it is on bonds. we like to confound the equity guys. this is the plot of the steepness of the yield curve. no gross writing that we need is steeper yield curve. mark carney totally focused on not having a flatter curve. the dynamics between the difference of the two year yi eld and the 10-year is important. it fulton to the equity market. do you want a steep curve? brian: i think we want to steeper yield curve overall. tom: your financials would make money. they are making

money right now based on how they cut cost. the next play -- financials have underperformed since the second half of 2009. so, at the end of the day, we need to see a steeper yield curve where yields are going up, and that would tell you the economy is improving. tom: thank you so much. ncine, we are five minutes away. francine: five minutes away from that boe decision. it will be about the clues, about when the first rate hike will come. we have a deluge of things coming out of the bank of england. we have the vote. it can sway very quickly. i'm more interested in the inflation forecast and how they coreze it going up but insulation, whether that filters through wage growth and the fact that we are still able to -- compete in the u.k. tom: what is the level of dissent that governor carney

faces today? francine: that the last vote it was 8-1. it is critical to see if mark carney is voting for a rate hike . it is probable at the next one a lot of the board members will go with him. tom: very good. bloomberg as we give you coverage, particular important headlines that go across. thank to brian belski of bmo capital markets. we continue bloomberg bloomberg "surveillance" aboutl mckee is ramped up the bank of england. stay with us from new york and cloudy london. bloomberg "surveillance" ♪

in moments, the bank of england will announce whether they will raise rates for the first time in 8 years. stimulus efforts

are paying off. it stock market enters a bull market. jobs as iting focuses on a turnaround. we will speak with the company's ceo. welcome to bloomberg i'm stephanie ruhle. david: i'm david westin. a big morning for the central bank of england. stephanie: and moments we will get the news -- we got it right now. we are going to send you, hold on, to the birthday boy. 42 today. matt million. -- miller. matt: the bank of england is leaving the rate unchanged, 0.5% it is cutting its forecast of first half cpi. it says the pound is going to continue in its impact on