>> an ocean apart -- the fed in the ecb are set to go their separate ways. draghi tells the risks are clearly visible. modi goes to downing street. india's prime minister makes his first visit to the u.k. he is looking to lure more british cash to india. and uncontained failure. rolls-royce shares sink the most in 15 years, this after issuing

a profit warning on declining demand for business jet engines. good morning -- this is bloomberg's "surveillance." i'm guy johnson in london with tom keene in new york. good morning, tom. is: what's got me going rolls-royce -- we are seeing this across many industries, but it started yesterday with macy's in new york, truly disappointing. then it comes over to this rolls-royce, the engine maker. there is a set of corporate pauses, and that is what is got my attention. guy: we'll talk more about that later. tom, we have a great show lined up. let's get to the first word -- vonnie quinn is in new york. vonnie: good morning. in iraq, kurdish fighters tried to retake his many cities -- retake sinjar. the major objective of the assault is to cut off isis supply lines. last year they surrounded the city.

it led to the first u.s. airstrikes. the next round of talks on syria's civil war resume saturday in vienna, and russia is proposing a political transition that would last up to 18 months. according to a proposal obtained by bloomberg, russia wants backing to carry out air stri kes. ise say russian intervention aimed at pumping up bashar al-assad. leaders are pushing back against the european union's plan to cut down on immigration. northern eu leaders offered sanctuary, but only if they agreed to take back more people. african leaders say european leaders should make it easier for their people to live and work there. willeece, alexis tsipras be on the other side of the barricades. a general strike is expected to bring greece to a standstill.

unions are protesting his tax hike. he says he has no choice in order to get a european bailout. and a warning from mario draghi, who says the likelihood of inflation returning to the ecb has declined. he says economic risks arising. policy makers are debating whether to increase the stimulus programs at their meeting next month. more on these and other breaking stories 24 hours a day at bloomberg.com. that is what stanley fischer will be talking about in terms of the federal reserve. tom: and i walked in and there was the euro plunging off the draghi comments. this morning, it is a real nuance. yield, the euro is fascinating. 106ation going from south off the draghi comments. the backdrop is commodity

weakness. let's go on to the second board if we could. -- vix 16.06 for francine lacqua. she is on a "surveillance" calls green, greeounded in iceland. negative number on the germany two-year. let's wander over to the bloomberg terminal. vonnie will help me with this. american confidence in the bloomberg confidence index. i've given it to everyone in the control room -- even build my got it. here's the confidence back, when we felt richard happy -- down we go, then back to where we are supposed to feel good. do we feel good? vonnie: briefly.

tom: it is a value judgment. but anyway, we are back to where we are supposed to be. yes, this is great! i don't know if we feel like that. guy johnson, that's us. guy: so you have a bug, you are now sending francine back to us so we can catch it. tom: i am down for the count next monday. [laughter] guy: will see how virulent it is. let's bring in our guest host with a clean bill of health. the global market strategist at jpmorgan. good morning. draghi is out this morning -- the tone is very negative. is more qe in december a done deal? >> it seems more and more likely. implicitly, the ecb has recognized the inflation forecast since september, 2016 with the next dictation of 1.2%.

that is way below the target. they recognize that they have to do more to support a european recovery to revise inflation. i guess it is more and more likely and we have to recognize that the ecb has already done some technical adjustment. they can represent up to 30%. they have extended the qe programs and we have some corporate names. we seework in assets, some improvement already over december. one of the issues that the ecb faces in europe is the lack of cross-border loans, which could be improved for better regulation in europe. guy: why is not everyone on board with this? but itmbers are great, doesn't sound completely on

board -- the other northern european ecb guys are not on board with it. if you look at it from their point of view, it is a done deal. all options are open. vincent: all options are open, but it is data dependent. we must look how inflation involves. there are a few positive signs and europe -- signs in europe which may delay qe. guy: the probability is rising. tom: pushing against that, as you note, the idea of a europe that is doing better -- we see that across the corporate space, but the latest news froom rolls-royce is a little bit soggy. intapose for us the good europe -- better business, should i buy europe stocks -- with the reality of a new lull in the german yield. they seem like two separate worlds. i am on the indeed,

field all the time and traveling in europe every week. i see good improvement in europe on several fronts. europeeveryone bet on for its capacity to reflate itself, but what we have seen today is that the best contribution to growth has been domestic demand. you see that in retail sales, you see that in voter registration, and credit demand, in credit origination. you see some improvement -- you see also that the unemployment rate is decreasing, even in countries which were reluctant -- which are difficult. you have to consider an indicator of a country like france when you see the small business sentiment is improving. tom: and guy, this is the heart of the matter -- do we look at the monetary movement of

reflation, or do we look at the real economy side of it? that is pretty much a debate into 2016. is it about a real economy or about the financial and monetary shenanigans that are going on? guy: i think it's probably a little bit of both. the real economy continues to suffer. the lending story is getting better, but here's the thing. europe is not growing quick enough. it has not got that kind of velocity in need to get out of the recession. that is what needs to happen and that is why monetary policy isn't enough. vincent, where is the jumpstart to get out of the new mediocre? vincent: if you look at 2016, i am rather optimistic, and i believe 1.5% growth is achievable in europe. boasts thate -- it

it punishes local investors, obliging to take more risk in the economy. if we have the current qe in place already -- we have to continue, referring to the old-time product market reform. to improve growth potential in the coming years. takenk a lot of measure in the periphery to improve labor markets, you must know that in europe, in most countries contrary to the u.k. and u.s., we have a rather inflexible job market and it is difficult to lay off people, therefore companies are not keen to hire. we have also heard you mentioned fiscal stimulus, something which will come in the coming months. we discussed the very beginning of the european commission, the juncker plan, of 300 billion. it's not the game changer but you have reform qe and fiscal

stimulus. this all combined with the rather -- tom: vinencent from jpmorgan. we will truly look at the market and dive into the fixed income dynamics. julian emmanuelle of ubs, this is a great pairing to make you smarter and give you a brief on these markets. i looking at oil, 43.01. stay with us. ♪

guy: welcome back. you are looking at live pictures coming to us from athens, the square in front of the greek parliament with the two main unions demonstrating again

against the austerity that they hope the syriza government would get rid of. reality is slightly different -- they are not happy and they want changes. i suspect we will be looking at pictures like this from quite some time. let's get the bloomberg business flash -- here is vonnie quinn. vonnie: from one strike to another -- the strike by flight toendants forcing lufthansa canc more flights today affecting more than 100,000 passengers. it is set to last through tomorrow. are protestingts their policy on pay, pension benefits, and retirement age. in london, shares of glencore dropped for the first time in a month. the commodity trader is down 6% today. it is the worst performer in the ftse 100, falling 67%. falls in commodity prices have cut profits and investors are concerned that they won't be able to pay down $30 billion in debt. narendra modi will become the

first indian prime minister to visit the u.k. in a most a decade. the u.k. is the largest investor in india. they invest more in the u.k. than the rest of the eu combined. guy, you have more on the visit. guy: i certainly do. bloomberg's executive editor for international government joins us now. he has got a pretty packed show. what are the highlights? if i am a businesswoman, what are the highlights? joel: first off, it is important to make the point that it doesn't quite have the same economic superpower clout that we saw with president xi's, visit, but it is not peanuts. one of the things we're looking at is something between him and

jets and more trainer civil nuclear cooperation. also we expect something on how london can help mumbai in the bond market. well it doesn't have the same clout as china we still expect a lot. guy: so it's a different kind of relationship. the u.k. has a mixed relationship with india. it is a company that has had difficulties -- so how good is the relationship on a score of one to 10? orthis a good relationship, trying to resuscitate it? john: it is really all about trade. that is one of the key priorities of the a ministration. particular --e in cameron and osborne in particular are keen to deepen it, so we will hear a lot more about how they want these trips going forward. tom: you and i know that mr.

modi had the mother of all honeymoons when he took over. there were elections in the recent weeks that were challenging. what is the backing that he has in india as he comes to the united kingdom? john: i think you're right -- the actions were a pretty big disappointment. he needs as much support from the regions as he possibly can to push through his economic reform agenda, which was currently stymied in the indian parliament. coming off that, we are seeing the first signs of discontent within his party. he won a massive landslide election, but as we are seeing myanmar,esia and me o it is hard to transform that into tangible form. tom: give us an update on what

ability to transport economic growth and capitalism from a district, in this case north of bombay, to all of india -- it is assassinating a generational experiment. what is the report card? john: i think it is pretty mixed right now. we certainly can say that modi has been a failure since he came in -- but there has that some modest reform. people have been looking at him to implement a uniform sales tax across all of india. i think the number of different sales taxes that businesses have to cope with in india is up into the hundreds. and this was the main flagship reform he wanted to get through parliament in the last session i was stymied in the upper house controlled by the opposition. it is pretty mixed. tom: thank you so much.

folks, we look at the span of the century of an indian prime minister having lunch with the queen. we will have an 8:00 a.m. breakfast with ron perlman. he will be on bloomberg this morning, on the pulse of new york city. much to do with m&a and the state of american finance. stay with us. ♪

london,i'm guy johnson in

this is bloomberg "surveillance." you are looking at a wide shot of the city of london. slightly better day than it has been. tom: come on, guy, i can see blue sky! that is the first blue sky we have seen, so no francine lacqua can go home! guy: now that you have given her your bug, you are sending her back. tom: it looks like a turner painting. guy: there may be some smoke in the background. there was a huge fire this morning just around the corner from our office. we had tons of fire engines. you can't quite see it against the gray. right. let's get to the morning must reads. this is mine of the morning. while china's large captive market of airlines offers a commercial safety net, it is also dampening incentive danger innovate.

the wrong point -- way to take off. the point i would like to make is yeah, they haven't got it wrong, they haven't got it the way they want to. it will get certified elsewhere. airbus's first aircraft that it ever produced in 1972, that didn't get sold very well, and it just got sold to domestic carriers. this is how you start the long journey. this is how you get up the value chain. this is how you start to make a difference in terms of your economy. still with us from jpmorgan -- china's economy is a no-brainer. they have got to start producing more value, get into the services sector, and this is the way you do it. vincent: definitely.

you have no chinese companies in the fortune ranking. they have to climb the value chain, and we clearly see this happening. there is clearly a new china which is unfolding at the moment, and from an investment point of view it is quite interesting. this type of example really strengthens the case for investors in china. -- china is one of the few places where -- tom: where's john norman on this? i know there are eight medieval states of jpmorgan -- there is a devaluation of the chinese, blue circles a blue circle, then they had a modest appreciation. we turned around. is the yuan, is it the new tool to solve china's problem? vincent: i don't think so. or at least maybe not in the way that people expect. we do not expect massive valuation in the coming months,

for the simple reason that what china tried to achieve is to get a reserve ands they may still get to they objective. the imf will decide whether or not it will be included. so far, the first signs are quite positive. even the u.s. seems to be open for this. what you can expect after that, in the next month in 2016, central banks and pensions -- tom: we will come back. k when ibm was real. good morning. ♪

tom: it is a retailers new york city -- macy's with a bombshell yesterday, really underperforming in the third quarter. asre is a lot to explain,

i'm sure the ceo will. new york city starts with a tepid holiday season. we will see where we are in a few weeks. right now, we need our bloomberg first word. vonnie: thank you so much. kurdish fighters have launched a major offensive against the islamic state, attacking the city of sin jajar. the major objective is to cut off isis supply lines. last year they overran sin jar, and soon afterwards the u.s. began airstrikes. the european union wants to count down to migration -- africa thinks they are going to far. africa hasmalta -- to agree to take back more people who are legally settled in europe after leaders say europe should make it easier for people to lived there. --e eu recommends that ma

israel's prime minister benjamin netanyahu called the move typical. myanmar's army has agreed to respect the outcome of the country's election and says all the national league for democracy is on track to oust the current party. the army refused to accept the results. billionaire money manager last nighten -- accepted more than $47 billion after the sale of contemporary art in new york. you can get more on the stories and other breaking news at the new bloomberg.com. there are mixed results but cohen to say -- stephen

has been a vital link in the art market. some people buy and hold it forever but this guy is really establishing -- whenever anyone thinks of him, establishing the vitality -- i love your warhol, vonnie. vonnie: in my dreams. tom: in my dreams, too. but not in guy's dreams. uy what you like. tom: we call that geese overwater in america. guy: let's move on and talk about the fed. fed is pricing in the 68% chance of a move in december. today we will hear from janet yellen and several presidents. what is the corporate world seeing in this?

earlier i spoke to the ceo of the engineering giant that is siemens. he said just get on with it. and the uncertainty. -- en the uncertaintyd. >> do it and move on. it, in and out debate about is it going to happen or not happen, why is it and why is it not -- the talks, the hawks -- it is not helpful for business leaders to make long-term decisions. make a cleare her, statement and move forward. guy: when i first spoke to him, i wouldn't want to answer that question -- but this time i think he was keen to get the view out. vincent is still right -- is he right? he needs visibility and clarity. he needs an understanding of what the backdrop is going to

be. should yelle just get on with itn? vincent: i believe so. we also need clarity, even for an asset class which might be hurt in emerging markets. you have heard emerging markets that they werea asking for clarity about the rate hike. it should take place -- the sooner the better. from a u.s. perspective, when you look at the data with unemployment rate way below the 50 year average, you start to see some wage pressure. time for u.s. perspective to rebuild this ammunition stock, so your enemies know to rebuild your economy. guy: do you think the fed has done more damage than good? do you think he is right?

it is data dependent and we live in a world of high-frequency data. i want toes in a -- have a relationship with my customers that will last 20 years. vincent: looking back in september, we have to acknowledgment there were a lot of reasons not to hike rates. the instability around financial markets, the concerns around china, were all good reasons to wait. the fed is note, really under pressure from an inflation perspective. core inflation is at 1.8%. it is not that they are in a hurry to do something. but no, the market has so ilized somewhat, believe it is a better environment to do it. it will come as a surprise for a lot of investors. tom: i think seven said speakers

today -- fed speakers today. what will you listen for? what will you listen for from bill dudley of the new york fed? vincent: well clearly, some further indication that december looks more and more likely. but the data has a better consensus, because you still see a lot of volatility in this fed's fomc member forecast. i look for a consensus in the review on the health of the u.s. economy, and their attention from the right perspective. more importantly, we'll focus on the effects -- i believe that is part of the issue, through the fed balance sheet. part of the monetization process will take place through the balance sheet as well.

that is also something i will look into further, which might have a bigger impact. tom: i agree. vincent with jpmorgan. fiscer, vice chairman and a lot of speakers coming up. i will be with bill dudley, chair yellen speaking, bullard will not the sent. he still has not explained the st. louis cardinals. stay with us in london. we get your morning started. ♪

tom: again in the news --

athens. strike, buteneral much more importantly, there is the first of a series of cash calls by their beleaguered banking businesses. the national bank of greece begins a book building process. what that means is they are looking for international investors. butgs are not heating up, pay attention to athens -- and what a gorgeous shot. pay attention to athens. there is a morning mover today. let's jet over to guy johnson. guy: rolls-royce, the jet engine maker -- and uncontained failure. the company has said next year's earnings will be hit by a $90 million had when. we are joined now, talking to us -- you mucst be watching the stock closely. he is looking at this business

-- can we call this a kitchen sink? use trying to get all the bad news out there? >> think that is what people said in july when the cfo did his conclusions. this is a conclusion based on the work done in the last three months, and i think it continues. the company will tell you that this reflects the market outlook. guy: i'm curious about what he is saying. they were talking on the call this morning about the idea that they are not going to see the service revenue, the power by the hour, coming from large bodies. to what extent is this a reflection of what we heard from delta, where they were talking about this glut of wide bodies? are they talking about the same thing? >> i think they are, guy, actually. i believe the big one is a 777,

the name mentioned by delta. there are some engines on the old 777 and those things are sitting in the desert and not generating sales. tom: the financial times today with a nice one pager on what didn't happen that dubai. it is basically an airline recession -- do you buy the idea that commercial airlines are at capacity of brand spanking new machines, and that we need some form of slowdown? >> not quite. i think the capacity has been reasonably controlled in this upturn, mostly because boeing and airbus has been supply constrained. had issues in terms of supply chains and that has been a mixed blessing. it has protected them from over producing. tom: if you were to have coffee

with me and guy johnson at one of those hoity-toity coffiee would you say is the distinction between a rolls-royce engine and a ge engine? >> one has got the rolls-royce badge and the other has a ge badge. tom: thank you! that's really all it is, isn't it? is that a commodity item? >> those companies would be very upset, tom, with you calling these highly engineered pieces of machinery commodity items, but at the end of the day, what is the difference between a ferrari and porsche? tom: i will put that on twitter. it's incredibly important to understand -- the pros look at an airplane as to engines with a hunk of aluminum strapped to it. they look at a totally differently. that was fantastic. thanks to our team.

on bloomberg later today, and on the pluse of the world of ron perlman. he will join us -- looking forward to that conversation. stay with us. it's bloomberg "surveillance." ♪ ♪

guy: welcome back. this is bloomberg "surveillance." you are looking at live pictures of hong kong. it has been a busy day over there. plenty to talk about coming out of asia. the australians probably have the biggest surprise with that huge jobs number, sending the aussie soaring. let's get more with the bloomberg business flash. vonnie: siemens is raising its dividend as it announced a $3.2 billion share buyback over the next three years. no growth inng 2016 profit margins. the ceo has been trying to streamline processes at the company, which is 348,000 employees.

lenovo posted a second-quarter loss that was smaller than expected, reporting stronger sales and more cost cuts in its smartphone business. the smartphone unit is set to turn around the motorola brand. apple is talking to banks about creating its own mobile to mobile pay system. the system would allow users to send money directly to each other from their phones. it would be a rival to paypal's platform. that is our bloomberg business flash. tom: this is not apple pay, this is like being a bank. vonnie: yes, this is a transfer system. tom: why not? do you have the new phone yet? vonnie: i do not. i have a rental system. i got an e-mail -- "dad, i need a new phone." ok, let's get back to business. this is important. this is a jaw-dropping,

eye-opener report, and we are have the head of macro research at barclays adhere. i'm sorry, it's the barclays mediocre -- that is what you are writing about. why is it mediocre next year? is it about lagarde? about the two big drivers of financial markets for the last five years. one being china the growth engine of the world, the fed always bailing you out. both factors are now changed. tom: we go into december here with lower rates, draghi speaking today, but everyone is looking at commodities. copper breaking up to new recent lows, where do we find a bid on commodities? close to are pretty force forming a bottom on oil. copper

is as good and we think it still has another 5% or 10% to go. the key is how quickly -- tom: ok, of the idea that we need balance sheet adjustment and commodity companies -- what do your mining experts say about clearing the balance sheets? ajay: they agree -- they think that there is still room to go, can that is one of the reason why the mining sector is still another six to nine months at least before we see more stable agendas. a non-eurozone investor, how problematic is the week eurozone going to be? how much will that deduct from the bottom line when i look at my portfolio performance? ajay: we are actually -- we think it drops as much as $.95 to the dollar.

europeannt to buy assets, there is still room for owning -- i think what you are supposed to do is to make sure you are not exposed. vonnie: you are now head of macro research a barclays. what do you make of this back up in u.s. yields? ajay: i wouldn't be terribly concerned. even as the fed starts to go longer writes, we still have a hard time going to 60. the key is inflation. of monetaryyears policy we still have 1.3% inflation. tom: but ajay, you have been a good sport about this for years -- hsbc has a polar opposite call, it you both look for low rates. how do you get strong euro at hsbc and weak euro at barclays? what is the distinction, the polarity between those two calls? ajay: probably the two biggest

differences i suspect are that we think that europe can grow at and we- they can grow, think that the ecb will go in the opposite direction of the fed for a long time. that is a weak euro. contrasts compare and the view from barclays and jpmorgan. vincent is still with us. the call there is be nervous about non-euro investors, because the currency is going to depreciate. how hard a cell are european assets going to be? you listed a whole range of factors that will drive the european economy. but if i am an excel investor, am i going to be able to get that? vincent: there is lower pressure on the euro, and it will diverge with the u.s. which will decrease pressure on the euro.

i believe that the dollar rally is already halfway in terms of magnitude. have a less strong view -- there is definitely room for further weakness. - believe that european - at jpmorgan. we continue to overlay european accents. not all sectors or companies are doing well. we have seen some which are clearly weaker. but if you look at the underlying story of europe, domestic demand is improving, credit demand is improving. this is beneficiary for small cap in europe. it is typically an environment where you want to invest in banks. there are still many opportunities in europe.

tom: i want to get back to the distinction of the equity market. we talk about cross assets, but at the end of the day, what will support stocks next year if we assume a barclays mediocre? where do i get equities to pop? ajay: you will have a hard time getting equities to pop on the dollar basis. tom: so your headline is it is a single digit world. ajay: absolutely. 2015 was a single digit world. tom: you see it, the next year there is the continuance -- ajay: absolutely, and that is the start of a new trend. tom: is it likely that they don't raise december? ajay: i think it is very, very unlikely that they don't. tom: what will you listen for from bill dudley today? ajay: data dependency -- ident think he will upset it. he will continue to hike rates. vonnie: we will talk to bobby

fischer. how monetaryabout policy in fact inflation. -- policy affects inflation. ajay: he is more aggressive in terms of hiking. remain, that tone will but -- tom: what is the linkage of markets versus the fed? are they ahead or behind? ajay: at this point, the next few hikes will not surprised the markets. the key points, two or three down the road. markets are setting the pace. tom: thank you so much. the new mediocre -- an important report. guy, this was a great hour, a great perspective. guy: yeah, absolutely. you want to be figuring out exactly what makes the market -- if thek the dollar

dollar strengthened significantly it will change the inflation for a lot of people. tom: we have another hour coming up. julian emmanuelle of ubs will join us. this is a great blending of equity and derivatives into the overarching view. this is good preparation for bill dudley. look to bloomberg worldwide for headlines from mr. dudley's speech. futures at -2%. i am watching commodities, commodities, commodities. west texas intermediate at 248. that is a beautiful shot of the chrysler building and the empire state building. good morning. ♪

mario draghi adjust

expectations. the german to yield the yield grinds further. the chinese financial engine stalled. an sumner redstone at 92. he looks ahead. good morning, everyone. this is bloomberg "surveillance" live from our world headquarters in new york. thursday, november 12. l dudley speaks in new york today. i'm tom keene. guy johnson in london. we look at the important comments draghi made. to me, it was a surprise. in my right? -- am i right? guy: he was dovish than people were thinking. he would like to see this q.e. extension come through by year end. broadly, the core six that make up the ecb, they are on board with this. tom: hsbc looking strong. euro barclays disagrees looking

for euro to po.95. we need no disagreement. here is bonnie quintet vonnie: the euro still holding on above 1.07. city is in northwest iraq. islamic state overran the city last year and that is where -- forced thousands of people to flee. negotiations about serious civil war will restart saturday in vienna. a copy ofobtained russia's latest proposal. russia wants u.n. backing to carry out airstrikes against islamic state. the u.s. and its allies says the real purpose is to support the syrian president. african leaders are pushing it back against the european union's plans to slow migration. e.u. leaders meeting in malta rica, butore -- to aftic only if african nations take

back more people. african leaders say europe could make it easier for people to live and work there. the greek unions that the prime minister and power on the opposite side of the barricades today. they called a general strike. the unions are protesting tax increases and pay cuts ordered by alexis tsipras. the prime minister says the moves were needed to get european bailout money. we are looking at live pictures strike greek workers on in athens. you can get more on knees and breaking stories at the bloomberg.com. tom: this is like a theme of the week. we have portugal for one reason, spain for another. and now greece. jeremy this following corbyn selection and britain. it is all over europe at the moment. tom: what is the new new in gre ece? guy: forget what is happening in these pictures. that is totally irrelevant. what is really critical with greece is getting the banks

recapitalize, getting real money back into the economy. that is pivotal right now. you are going to get noise. what you need is action. and that is on the banking sector. tom: totally agree with that assessment. we are going to keep it short this morning because we have got two important guests. the euro at 1.07. commodities, commodities, commodities as well. atl linking in to whta mr. draghi sees. this is the most important chart in the world right now. this is a german path -- negative yields and we have taken a new leg down. you have got a negative convexity within a negative space. a negative negative convexity on the german two-year now. vonnie: even as u.s. yields get

up to six -- hat i get my dolla dollar in my every time i say convexity. julian emanuel is at ubs. he describes the thoughtful analysis of his notes. russ koesterich will join us a little bit later. what a wonderful intellectual, ater -- do you look as discretewo year to europe or does it say something about the rest of lagarde's new mediocre? julian: it says something about the biggest issue facing markets -- diversions and economic performance, this diversions in asset prices and rats around the world -- and rates around the world. even though the implied probability is 68% for the fed in december, the commodity markets are going to bounce back. tom: you are dead on about this.

how do you strap the commodity ghakness over to the tou decision that these fed speakers today have? who's out front? julian: mario draghi. draghi is taking out insurance against the potential for the start -- that's right. tom: this is critical. s,en you see copper at new low what does it signal to the union bank of switzerland? still do not have transparency. we may never into how china is going to land. are we going to stay 6%? what does 2017 hold? that is really the issue. guy: let me jump in. what is the number on euro -dollar that draghi would like to see? julian: uh, i don't know that he's concentrating on par but what he wants to see is just a

stability in december as we g et to this change in fed policy that is nine years in the making. guy: is q.e. in europe working and should we have more of it? julian: i think it is working. our economists are looking for 1.8% growth next year. i think what you're seeing on the corporate side is the beginnings of my profit recovery but it is a drawn out process. eceiously, as we see in gre today, and portugal, their issues. there have been issues. there are going to be issues. where are you looking as a barometer than for how the u.s. cycle is going to continue? are you looking at corporate's, spreads? ian: it is really a combination. for the most part, we would like to see interest rates start to firm up, obviously here and globally. and you can't overstate the

importance of how the markets react to the beginning of the fed rate hike cycle. it is entirely possible, although we do not see discrete signs, that the economy could accelerate because -- tom: the banner is the where the market vigilantes. the fact is in the last 48 hours, the markets are speaking the fed speakers speak as we dash 30 some days out to this fed meeting. if you get commodities on another 2% in a blended basis, the commodity index, what is chair yellen supposed to do with that? point, at this particular given the last jobs report, it is going to be difficult not to hike. tom: i do not want to be a bear of gloo -- bearer of gloom. i'm sorry, you get a 39 handle on west texas intermediate and that changes the central bank

dialogue by definition. an: i think it has more of affect on your side of the pond because of the way we tax this. then you start to set all kinds of things off that. let me ask you a question about certainty. siemens to the ceo of later on. i asked him what he would say to yellen. his message was, get on with it. i cannot deal with all of this uncertainty. what happens after the first hike? communicate to the corporate sector about what the path of rates is going to look like? stayn: they are going to consistent with this message of data dependency but i go back to your notion of certainty and it is very, very important for markets, particularly in an environment of higher volatility started are in now that in august. we expect that to continue. when you have the removal of uncertainty, markets liekke that. tom: how do you told that into

equities? do you agree it is a single-digit role for next are? are markets in the u.s. disconnected from across assets of a? -- debate? a certain extent they are because the economies are out of sync. we are still positive in 2016. tom: you are still on board? julian: we are. it is going to be a more difficult ride. both risk and reward have increased. tom: iw ould suggest on the bloomberg terminal, all the fed speakers today, they probably are aware of that statistic. n gets the headline. james bell it, still getting -- his st. louis cardinals. lacker will descend from richmond. and bill dudley will be greeted at lunch at the economic club of new york. sam fisher speaking tonight. stay with us. bloomberg "surveillance" ♪

this is bloomberg "surveillance" i'm guy johnson with tom keene. that is london, look. a fairly bright day. is as good as it gets. going to rain tomorrow, folks. let's get more on the bloomberg business news. vonnie: just foggy. that lufthansa strike will ground 100,000 passengers again today. the airline is canceling 1000 flights. the walkout by flight attendants is in its seventh day. rolls-royce says next years earnings will take a hit of $1 billion above warnings price. the problem? fallin demand forg jet engines.

and walmart is trying to take the friendly out of black friday. stores will open thanksgiving night. buster bargains are being dropped and says sale items will be available online as well as in stores. the facthis goes to that we buy everything on discount now. verylowest and the highest. burberry surprising on the upside. h&m not opening on thanksgiving. there is something going on in this holiday season. this is very cool. you are going to go to paul sweeney and viacom. mr. redstone at 92. vonnie: we looking for viacom earnings. paul sweeney has been following a rocky mount for media stocks. it may show ad revenue slowing again. problems with all of its various, you know, the skinny bondage challenge -- bundle challenge.

what we looking for viacom today? >> viacom has been under pressure. the media stocks over the last couple months have been under pressure with concerns about advertising, concerns about -- and v viacom's ground zero. they have had real ratings problems, challenges across a number of the cable networks, which translates into a weaker advertising trend. it is something they have been working through for over a year. the brighter spot for them has been there -- the cable companies are still paying viacom for their cable networks but investors on that score will be looking at a renewal discussion coming up with dish networks. it has 14 million can scrubbers. that will be a make or break these of news -- it has 14 million subscribers. vonnie: this is a binary view. they are all dying or they are not dying at all. slowing?utting to be a is going

steady trend. in the second quarter on the f 20%.stocks, sawed of a concern this might be quicker than we thought. i think it is going to be a slower leak. tom: in some ways, the last hurrah for mr. redstone. 92. out of the picture. here is a guy on a austan who has managed a career, grievously injured by byrnes in 1979 -- -- a guy from boston. fought back from that accident and he built viacom. i have to ask the rude question with respect for mr. redstone, did he not exit early enough? paul: it is interesting. he has billed to strong companies -- viacom and cbs. two stronguilt companies. his strategy is to put in place a strong management team. those teams have built the companies, grown the companies. over the last 4, 5, 6 years since its separation. mr.the question is when

redstone passes, what happens? the control passes to a trust. in a media world where there is a lot of consolidation -- tom: is that it is that it's for the o ther -- an advantage for the others? stableit is a much more situation. this is something that five, shareholders will have to deal with some time in the relatively near future. e ownership of these two companies. thisif you were to break up, if you were to atomize it and look at all of the constituent parts of it, what is working? what is good inside this company? are two main businesses -- one is their cable networks business which has been the real revenue and cash flow driver. lots of very strong brands mtv, nickelodeon, comedy central. all of those networks are now

dealing with some ratings challenges. so the question is -- what are the value of those cable networks in a world of 500 channels? the second business is their paramount film studio, which has been a very strong studio. and so, there are two big drivers. in a world where there is likely to be more consolidation in media, at&t and directv, time warner being sold. the expectation is if there were going to be an event in terms of asset sales, viacom, there is a lot of value there. vonnie: nickelodeon suffering with its children ceiling going down because of netflix. john malone is looking abroad. does viacom need to look abroad? paul: they bought a television network in the u.k. last year. like a lot of big u.s. media companies, they think a lot of the growth will come outside of north america. tom: how is apple tv doing? paul: there is nothing there at

the moment. there really is not an apple tv service to compete with. if in fact they do decide to get into the business, that will be a game changer. tom: paul sweeney, thank you for the briefing. delicate comments on mr. redstone. with straight talk on the state of business in new york. his revlon. from new york city, in london, it is bloomberg "surveillance" ♪

here are some of the great stories you can check out right now to on bloomberg.com. productionndustrial fell more than forecast in may raise whic mh concerns for policymakers about the economic outlook. the credit score homeowners need to qualify for assistance. the largest solar rooftop provider may lower the eco score requirement to below 650. and the world's largest banks have agreed to rewrite joins of dollars of financial contracts, as regulators are mounting pressure to ensure lender's can fail without bringing down the global economy. right. it is time for the morning must-read. 've chosen my morning must-read from the national times. it is to do with modi's visit to britain and turkey for his make in india campaign. but there are certain problems

as we were talking about. fault, rathers than nestlé's, the moral for growth economies is this -- if the rewards for coming to your country have fallen, you must reduce the risk, too." between tax authorities in india, food inspectors, local bureaucrats, it is not easy even for an established multinational like nestle which has been on the stock exchange since 1968 to actually run through the labyrinth of problems that -- tom: i totally agree with this. this is a new thing. in johnson, mr. modi is london today. what is the message he will give? it is not about noodles, is it? guy: a kind of his, tom. he's promised this general tax. tries to like nestle

do business in india and it has a series of tax authorities it has to deal with. he has promised that he is going to unify that tax story so companies to -- can not have to deal with so much bureaucracy. businessof seasoned leaders will ask them, when are we going to see some of this? what are you going to deliver on some of those amazing promise that you said we would be able to use to come into your country and produce a little bit more wealth. tle's stock price dropped to 20% on the noodle scandal. it has turned out to be nothing. there was no problem. but there was a rumor put out they had been poisoned. they just got noodles back on the shelf. is the worldl getting freer in terms of trade? ia may be a case specifically because the bureaucracy really does is set up roadblocks that are unique to india. this protectionists

type sentiment that has been going on over the last several years in the wake of the financial crisis of the because, and again as we see it with the diversions of economies, people are worried about protecting their own. and obviously, that is part of the rhetoric we see in the republican debates as well. tom: i go over to the important thing and this is yahoo! you can barely see this. what's actually an instant ramen? every starving kid has a love affair with ramen noodles. you look at them and go, what in my eating? vonnie: yeah. julian: college food. vonnie: it is a bigger issue. nestlé employees 7000 people in india. right, guy? this is a problem that modi has address when he talks to the prime minister. guy: yeah. putthis is the strategy he

in place, the idea we can get the stay working and working for business. can he scale that to the rest of india? can he reduce the bureaucracy and stop problems like the one you're talking about? can he scale some of the good work you did before and make it written large across the whole of india? that is the challenge is where his rockstar status has come from. he has to deliver on that now i think. tom: really smart morning must-read from vonnie quinn. russ koesterich will join us from black rock. we will talk to him about the greater structure. i do want to point out glencore with the commodity weakness is below one pence. that is, below one. we will come back on that. 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. guy: you are watching , guyeillance" with myself johnson, and tom keene in the arcade you're looking at greekes in athens where

unions have called a general strike, a 24 hour strike. a lot of sound and. . the real action is where mario draghi is talking about the greek banks. he said they are in the process of raising private funds. the cavity shortfalls are being addressed -- the capital shortfalls are being addressed. he did not say the banks were closed to collapse. they were back in the summer. that is when the action was centered back in the square. vonnie: thank you so much. speaking of diniz, the postal workers union has endorsed bernie sanders -- speaking of unions. kurdish fighters are attacking isis in iraq. is to cutobjective the militant supply lines. it forced thousands to flee and led to the start of us-led airstrikes. investigators in ohio will start

recovering parts from the crash of a business jet trying to unravel the cause. experts are puzzled because there was no distress call. nine people on board were killed tuesday when the a plane hit an apartment house landing in akron. the medal of honor will be awarded today to a retired army captain who tackled the suicide bomber in afghanistan. 32-year-old goldberg is credited with saving a dozen soldiers. the former track star was critically wounded but he learned to walk again after 33 operations. bernie sanders getting his endorsement. american postal workers is backing his democratic presidential bid. has 200,000 members. you can get more on these and other breaking news at the bloomberg.com. unions so much more powerful and bigger and europe that they are powerful elections in the u.s.. tom: this is not my morning must read. it may be tomorrow.

but this is a big deal. michael barone who owns the almanac of american politics has a truly important election year article in the journal on polling. it is simple -- gallup has thrown in the top it vonnie: saying it is so difficult to predict and predictions are so incorrect. especially this far out. what polls are interesting for this far out is to see what is on people's minds. tom: i will go for that. i am sorry, barone is and is something. we have given up on gaming the game. now we are going to game the game on economics, finance and investment. julian emanuel with us at ubs. we are thrilled to bring in russ koesterich of black to talk about the madness we are living in now. all i know is they have got 4290 on nynex. the german two-year at negative. that math does not work. where are we? rush: i think it is the combination. you mention german yields.

we know what happened to u.s. two-year yields. we always focus on the fed. if they go in december. but it is the secondary effect. you have got this to versions in rates which we saw earlier in the year leading to a stronger dollar. and that it has been a far bigger obstacle for u.s. stocks. the small rate rise i likely to be. -- is likely to be. barclays.e ubs and the basic theme is a single digit world. do you agree with that? russ: at least for u.s. stocks. you have two impediments -- valuations close to where they were at the spring. trailing earnings is not a good starting point. and second of all you have this down pressure on earnings which is coming from the stroller. -- the stronger dollar. there is no question currency is going to be a head wind in 2016. it is not going to be as much of a head wind as it was in 2015. but it is one of these things. johnson, the litmus

paper. you see that with a further depreciation of the chinese yuan . tom: guy guy: the rest of the world was currency to go down. draghi would like to see the euro go down from here. we live in a zero sum world to a certain extent. i would be interested to get your take on what, what kind of policy diversion are we going to end up with. what is the phone to that end up closing that? is it better growth in europe? worse growth in the united states? how does that balancing act end up rolling out? russ: european growth is probably one of the big keys. we have already established the conditions for high 2% growth rate we are looking for 2.8 and thousand 16 -- in 2016. you have got to start stabilizing. the issues in greece are going to be headwinds. but the earnings pictures is

turning around in your. guy: russ, let me get your take on this. how does a u.s. investor partake in that? how much -- how strong does the dollar go? i'm wondering, i'm wondering what the snapback factor looks like. and how u.s. investors partake in that. russ: there are a couple things. thinking about an overweight international development markets and overweight europe and japan. both of which are benefiting from a weak currency but from idiosyncratic factors. the key is that position needs to be partially or wholly hedged. having an instrument which neutralizes the fx volatility. in the absence of that, you can have a great year for european stocks as this year but wind up giving back to much -- tom: the arch moment here. you see it on twitter this

morning with many of these indicators but dissing up against resistance. you guys were for houses preaching stability. we understand your remit. a measure glide path. my audience does not feel that. they see oil, testing lows. we see copper, new lows. what is the potential instability that makes headlines like with ed morris, looking for oil to break down. what is that likely? can break down further. we are oversupplied now, we are in a slow goes environment. people get panicked about the notion of oil breaking down. oil breaking down as procyclical. it supports the u.s. consumer. there are pockets of high-yield. end of theis not the world. tom: we have a difference.

julian emanuel is with the sell side. russ koesterich is with the buy side. it is like star wars attack of the clones. i wish natalie portman was here. >> we all wish that. knowwhat it would like to is, as we go into 2016, as we test these different commodities, these different interest rates, the likelihood of a jump condition to instability. issue goes back to the currency. part of it is self-correcting because what happened this year is the dollar has done some of the work for the fed. the fed was supposed to have gone by now but there has been a de facto monetary tightening. that time is coming from the stronger dollar. it has come from wider credit spreads. tom: which means, i do not want you guys on the second we have to get jeffrey from ubs in lon don. russ koesterich and julian emanuel. we love doing this, folks.

we love that their houses let their people come on with frene mies. later on, do you think this will be interesting? international business machines. do you think you also talk about the cloud? maybe not. that is in the 7:00 hour. stay with us. bloomberg "surveillance" ♪

welcome back. you are watching "surveillance" i'm guy johnson in london. tom keene and new york. that is what london looks like

this morning. does not exactly look that great. we have got a bit of a situation around the bloomberg headquarters. major fire up the road. i'm not sure you can see the smoke but it was there earlier on. that is the story on our side of the atlantic. let's find out what is happening globally. vonnie: thank you so much. apple is talking with banks about creating a mobile to mobile pay system. the system would let users send money to others from their phones. that service would rival p aypal. all restaurants that were closed by an e. coli outbreak will be back in business today. were effective. 45 people were sickened and a dozen were hospitalized. glencore has dropped below a pound to share in london. trading for the first time in a months. the commodities trader is the worst performer this year in the ftse anindex.

falling commodity prices have cut prices. it is $30 billion in debt. pretty stunning. trading at 94 pence. tom: what is that? help me. pence, farthing, showing. -- shillings. guy: it has not been down this level for a while. commodities are under pressure. the correlation between glencore and the commodities price, the commodities basket is pretty close. you start to see with this -- weakness there. tom: i want to bring it over to the bloomberg terminal, guy johnson. here is copper. keith mccullough, thank you for know me about this. here is that drop off you see in copper. a tizzy to the rate of change -- it get you to the rate of change. the first and second derivatives really matter. everybody wants stability. draghi wants stability.

you know that is never what you get. russ: what draghi would like to see is a weaker euro. when you think about what is going to be the most effective transmission mechanism for the ecb --y ou want to unclog credit channels. getting the euro down is going to help the european economy. tom: what is the history of bankers jawboining a currency weaker? do they do it? julian: japan has done it for 25 years. it is effective for certain amount of time. what i will say is that if draghi has built a level of credibility over the last several years that is probably about as high as it gets at this point. there's some potential for success. tom: our single best chart. bring up this jewel. you have to have a killer single best chart. s&p 500. bill nye joined us yesterday.

we have two remarkably similar bear markets resulted. they were ugly. you have got the carter malaise of the 1970's. and you go way back to the guadalcanal bottom in 1942. russ koesterich, i mean, this is an optimistic chart. but we are right at the to be top -- tippy top. how do you respond to people who say, now what? russ: it is different. this all run continuing, the silver lining, we have had a strange recovering where it has been shallow. tom: 2001. russ: the differences we are in the back half of this bull market. you do different things in the back half. it is more about niche exposures, security selection. it is less about the easy ride we have had with beta over the last six years. vonnie: do you look for companies that are going to continue to buy back stock's, ex energy?

russ: there are a couple things. one is more of an emphasis on quality and we have seen deterioration in the credit space. the other is what you don't do. momentum works well and environment of low and stable volatility. if volatility is higher on the back half of this bull market, that is an environment you want to think about bringing down some of that momentum exposure. guy: russ, how does this story work? you have had problem's we have had since 2007 in the developed markets. talking about the markets in the developing world. does one echo the other? does that pull more money back into the developed markets? how does that work? russ: you have been losing money and emerging markets for four or five years. this is the most hated asset class. part of what is occurring is

emerging markets are slowing down. we are not seeing the stellar growth rates you had five years ago. and you had a tremendous buildup of debt in china. just as the developed world went through deleveraging, you have to expect a similar experience in other countries. tom: we have fancy greek letter. gama, vega, beta, let's talk alpha with julian emanuel. alpha's sexy. you don't do that in a single digit world. julian: it is more important in a single digit world, because there are lots of potholes. the question is if we are not going to have a cyclical re-acceleration in 2016, and that obvious we -- the commodity market. tom: individual selection matters. what is your individual selection? julian: cash. we like company with cash. tom: you're in cahs. sh.

where are you? where are you in terms of security? he's in cash. russ: i would say stocks with cash. of secular growth, technology, health care, it is thinking about where you can get high-yield.lect tom: two different opinions. tomorrow we get a wonderful set of economics. arch american capitalist. i don't know how he does that growing up in italy/ then a conversation with adair turner, one of the great ourleman of thought on financial crisis. he will join us in new york tomorrow. stay with us. ♪

tom: it is the most nuanced market. yen does not tell anything. euro at 1.0711. a weaker euro. you just heard russ koesterich say, mario draghi wants a weaker euro. strong yen, weak euro.

we're watching dxy. a print of 100 would be newsmaking. there's the forex report. coming up shortly, bloomberg david westin darkened the door the smarty. tell us about it. what do you have? david: where going to pick up or your left off. continuing the conversation you have been having on "surveillance" about draghi, and we the market reacting to it will talk about retail in united states. walmart will tell us about their plans for the christmas season. more broadly talking about some early indications about how well or maybe not so well retail might go in the holiday season. we have three important guests. legendarymisano, the former head of ibm, talking about global leadership in the business community. we will be joined by kevin -- the former fed governor. ,nd we will have ron perelman one of the most respected investors around your he will talk about the opportunities he

sees as well as his approach to philanthropy. we have all of that on bloomberg tom: david westin, thank you so much. greatly appreciate that. , we havejulian emanuel been having a spirited discussion about where we are with some nice distances of opinion between these two important strategist. down tot does come stability, the glide path -- one of my great themes as i do not know for my textbooks when you are energy negative yield space or just low yields. if you go back to normality with stability or do you just assume instable times. russ: you have to assume instability for the time being. the biggest question is is there going to be a cyclical recovery at all in 2016? tom: how does blackrock adjust their portfolios? can you manage high your yields or do you do it by reallocation

versus managing a specific fixed income portfolio? russ: higher real yields are not the equitynell for market. in a fixed-income portfolio, you have to adjust, think about the balance with the credit exposure. i think the hard thing for a lot of people is we have never been in this environment before. tom: go ahead, please. we were you mentioned, never supposed to have negative real yields could you look at the european yield curve, they dominate a few years out. that is a very different situation. tom: there is the equity view. guy johnson, you look at the vix well under 20 right now. down at the 16 level. not below a 12. some psspikes. to me, wildly asymmetric and less informative here. guy: i think we are in a weird world. are we getting back to a risk on , risk off?

perspective, we are being pulled around by central banks by the nose. tom: that is the heart of the matter. julian: central banks have blunted the transmission mechanism of asset prices. for us, that is why we think we have shifted to a higher volatility world of three years of relative calm. vonnie: russ, you are not that concerned about volatility. russ: volatility is going to be a reality. we have been in an environment which has been unusual. as the fed starts to pull away, that is going to change. it goes back to my comment about security selection. it is not the broad base that is going to carry you. within high-yield, they're different pockets, opportunities within telecom. but you have to be selective. there are places with materials, energy -- we want to be more cautious. it goes back to the point, can

you find over and undervalued companies or issues in the bond market rather than having a broad exposure? tom: what do you hear from your hydrocarbon experts? what does ubs say about the microeconomics of oil? bumpn: we are going to along the bottom for quite some time and some time in the third or fourth quarter next year, supply and demand is going to come back. .uss: i agree for the time being we are oversupplied. you had a surge of production in iraq, libya and russia. tom: for everybody in the rack, 2015 has been decidedly -- in iraq, 2015 has been decidedly a year of humility. vonnie: viacom - a slight miss. earnings-per-share. 1.54. a small miss in terms of revenue. and trading in the market. five cam had been up by -- viacom had been up by 2%.

tom: 2.1 billion return to shareholders. i love how they drop into their, r, hits like henry danger on nickelodeon. usb does not do that -- ubs does not do that. vonnie: as forecast, that will probably be taken as something good. tom: they lead. i love this, they lead with a quote from mr. redstone. create thetinues to most compelling entertainment content in the world." great show. bloomberg is next on bloomberg television. good morning. ♪

talks itrio draghi european parliament. more dovish warnings from the ecb. what it takes to lead and a global economy. we talk with former ibm ceo samuel palmisano.

holidayunveils its strategy. but there are some warning signs about retail. is it going to be a green christmas? welcome to bloomberg this is stephanie ruhle. we're going to get through this, stephanie. >> i'm stephanie ruhle. stephanie: i'm not ron burgundy. we have a great group of people to help us because clearly i need it. are we going to have ourselves a merry little christmas? brendan greeley is here. for christmas, i will have to get you a blazer. a woman