manus: europe follows asia into the red over concerns over the health of the chinese economy. another suitor for syngenta. maker jumpssticide on talks of a takeover. european growth concerns. german and french gdp piles pressure on mariota reiki to boost stimulus -- on mario draghi to boost stimulus. you are welcome. this is "the pulse" live from

bloomberg's headquarters in london. i am manus cranny. time for another reading of growth in the eurozone. italy this time. disappointed in terms of estimates. growth comes in quarter on quarter at 0.2%. that after after we had the french and german numbers come in, a lackluster set of numbers. the italian economy grows at 0.2%. this is super friday in terms of the overall performance. one people say is good. but let's get out to mark barton with breaking news. mark: breaking news from iea. it's on oil. this is the international energy agency. it says oil stockpiles have 3ollen, have risen to billion barrels because of strong production and opec and elsewhere, deepening the rout in prices. prices have fallen by 40% to

the low 40's because of this, this movement by opec to sustain production and keep market share, the behest of the falling oil price. this massive cushion has inflated record supplies from saudi arabia as world fuel demand rose at the fastest pace in five years. that is not a good story for the oil price. manus: thank you very much. let's get back to the gdp numbers. in under an hour, we will get the whole of the eurozone, but france and germany have reported gdp numbers of 0.3%. hans, mediocre. my last guest said, you are getting giddy over 0.3% is pathetic for us all. not you, but we are all getting

excited about 0.3%. italy disappoints. hans: denmark also disappointed. they came in at 0.1%. what we have is a story that we have been telling for two years, middling growth. take a look what is happening in germany. it is down 0.3%. on the upside you can say there is a lot of negative outside external events for germany. at the start of it you had greece, then the slowdown in china. at the end we had the volkswagen scandal. that did not seem to affect a that heavily. germany does not give us a breakdown by sector whether it is consumer spending, exports. the agency did give us some hints. they suggested this was driven by consumer spending in germany. fromcould b e a play consumers who feel richer because of the oil affect. we did hear from a logistics, a

company that does three ourt of four shipping containers. exports, when we get the details it will not look right. france also came in on the middling side. let's bring it down to where their sectors grew. 0.4% increase on consumer spending. big reception inventories. the negative side -- 0.7% on the downside for exports. the export story and france holds true for the export story in germany, it could look like a not great quarter for germany. manus: that possibly is the understatement of the week. heat,u switching on the hans nichols, and berlin? hans: not yet. but we have had a warm fall/ autumn here. you say autumn, i say fall. manus: you have got to hold onto

some of the old phrases. you will not go completely european just yet. manus: we spoke exclusively to thateo of wpp who told us businesses need to adjust expectations when it comes to economic growth. >> the world is going to grow at 4% nominal, 3.5% real. we just have to get used to it. 6% nominal growth is not going to come back. we are positioning our business for that. manus: four, we are joined -- for more we are joined by a chief strategist. listening to hans, the data, i suppose it is warm. martin crystallized it beautifully. pre-lehman growth numbers. are you worried? >> i think it is hard not to be

worried as the data has come in soft, not just this morning that recently from china some of the data is below expectations we also need to take a step back and think if we think about long-term, average global growth, the last 30 years has averaged 3.5% real. so that would be an average environment. so, i think we need to look at this in the context of many markets that are priced for extremely weak growth for long time. in that case, maybe the low growthents or may not be quite as bad. manus: what we dealing with is 8, 9 years of 0% interest rates. we have short memories. we are reflective of these boom years of 2007. these are the near term memory. the benchmark is all wrong. >> it is. even just in the post crisis period, we generalize this has all been bad, we have had some big swings in inflation. in 2010, the market was convinced that said was going to

hike rates within 6-12 months. so, look, i think this is something where investors need to keep a little bit of intellectual flexibility. i think we need to keep an open mind when it comes to some of this incoming data on growth and inflation. and i think inflation, especially, given how effective it has been by these huge swings in commodity prices, i think inflation could surprise the market a bit by moving to the upside simply as some of these huge year-over-year declines in oil prices -- exactly. manus: and that would the early for many. although what we saw yesterday was draghi warning us about core inflation. suddenly they're all interested in the core. they make me laugh. for 20 years nobody cares about the core. arwhat does it mean for you? are we in a dis-inflationary environment? what does it mean to? >> the core inflation data has looked a bit better. in the eurozone, i t has

been ticking higher. cpi in japan has also been ticking higher. related by another year in japan caret i have to take the counter side of what you say. >> we look at the inflation in the eurozone as a 0 number, it does suggest deflationary environment. i think initially the market suggest things are a little bit more normal. manus: so, i have got more money in my pocket and the u.k. my wages have gone up. in europe i am paying less to heat the house this winter and paying 0% to buy a new car. it is not all bad. >> we think about deflation as a 100% bad thing, but it is not.

there are elements of deflation which can be positive supply shocks. chi perpetual in your car. cheaper to heat your home. -- cheaper petrol in your car. one of the reasons we see very strong consumer trends and the u.s., in the eurozone, in the u.k. is the fact that, yes, the export side of the economy has been hurt really hard by these declines in commodity prices, this weakness in global trade, but consumers are doing ok. manus: ecb at christmas time, will he go and how much and in what way? >> we think they will ease policy, cut the deposit rate by 10 basis points. they will increase the pace of q.e. i think this is a very unique meeting and the sense that this is the first one we can remember in some time where the best outcome for the market, for, y,y, stocks generall might be they do not do anything. we have been in this environment for so long were you want this

reflexive response. if we think about the challenges the market has faced over the last few months, there have been huge challenges coming from the strong dollar. it has driven down commodities, stressed emergenc emerging mark. given the data in the eurozone is ok, maybe a week or euro would do more harm than good. manus: sit back, relax, have a coffee. you will get more out of the chief asset strategist for morgan stanley. bloombergces say -- sources says that the chinese company is in talks to buy syngenta. the deal would be the largest acquisition by a chinese company of the european target. bloomberg commodity index has purged some of its earlier losses after falling to lowest levels since 1999. chinese stocks have also dropped the most in six weeks, weight down by oil companies.

copper futures are trading near six-year low. london's most expensive homes have slumped in value. as the higher sales techcrunch to man -- sales tax crimps demand. even as overall prices in london rose. there if you own houses over 5 million pounds. coming up, quite possible. those are the words of the fed official about the potential for a hike in next months meeting. we are going to talk fed talk next. ♪

a simple and prudent approach to current policy is to move the policy settings closer to normal levels now that the goals of been attained. there is no reason to continue to experiment with extreme policy settings. >> successive rounds of quantitative easing have had little or no effect. that is consistent with the data. little or no effect apart from potential signaling that it provided regarding the fomc's outlook for future policy setting. >> inflation expectations are under downward pressure. ofe survey measures

long-term inflation expectations are at the low end of the ranges we have seen in recent years. the there those were is fed voi -- various fed voices. when will the fed tighten? december 66%. the probably in europe that we go for an easing is locked in at 1997. 1994? anybody going for 1994? andrew, when you look and listen to the voices that we heard yesterday, help me whether i have got it right, taken everybody, look, buckle up we are going for lift off. panicking a stop crying at the back because it is not going to be aggressive. >> that is exactly right. the fed has signaled it was to get off the zero. the data has been good enough to

get them there. that has been our view at morgan stanley for some time that they will hike in december. they have been clear they want to move at a moderate pace. this is going to be a much slower hiking cycle than previous cycles. one might reference the dollar's effects are playing a much bigger role this time around than other cycles. in past hiking cycles, the dollar has weakened after the first hike. you might not get that this time, considering how different u.s. monetary policy is from others around the globe. is, look, weat might hike and it is not going to be aggressive. that carries through in the dollar may not be there. talk to me about equities and credit. we have had a significant turnaround in the beginning of the fourth quarter in terms of equities. credit. the bond markets of 2.3%. our markets priced for hikes? >> i think they are. one, when you talk to investors they would like to get this process started. they would like to stop talking about theday of the first hike

and talk more about the pace. the pace should be slow. if you look at credit markets, something that has been holding spreads back has been the low level of yields in the u.s. if you're going to rise those yields modestly you can bring in more buyers of bonds, given that the yield on the bond will be higher and more attractive. i think the equity markets, i think good is good. the fed is going to be hiking if the data is better. they have been very clear that they are data dependent. and i think equities will take comfort from the world being more normal. if the fed is not able to keep hiking, that will be bad for investing. i think you want a few more hikes with better data. manus: when the hikes come, as an equity investor, you would have to say, this is good news. banks are probably rasping at the door for tha higher rate. equities would say to me things are getting better.

although, if you look at nordstrom's numbers from yesterday, the one thing that tells -- they were pretty appalling. the consumer is under a bit of a pressure in the u.s. that is the only thing that would worry me, which is economically, the broad swipe is we are paying more in the u.s. more americans skip the chip to the mall. -- the trip to the mall. >> the consumer has more money, wage growth is there, the house is worth more, the balance sheet looks and better shape. but in the aftermath of the crisis, they are not showing the level of exuberance they saw last time. in some ways that is a bad thing. in other ways you can argue that is a good thing. we are not repeating the mistakes we saw in 2005, 2006 and 2007 were buying houses on credit cards. look, i think if we take a step back for stocks and what a fed hike means, a lot of these companies and issuing all this

debt we have seen issued over three years have termed out their funding and are not going to immediate feel the effects, the higher cost of a rate hike because they have lots in longer owing. i think companies will be able to weather higher interest rates pretty well. manus: stay with me. the asset strategist at morgan stanley coming up on "the pulse ," sowing the seeds of a possible deal. chem china is said to be in talks to acquire syngenta. that is our bloomberg exclusive scoop coming up next. ♪

manus: it is friday. chem china is in talks to buy the pesticide maker syngenta. , syngenta giving some of it back. nejra: absolutely. the shares have risen 11.3% on the news that chem china and syngenta are in talks for a deal. the offer from chem china for share,a was 449 francs a valuing the company at $42 billion. syngenta has rejected this offer saying it is too low and cited regulatory risks. earlier this year, it rejected a $47 billion offer from monsanto.

the question is how high is chem china going to have to go to seal this deal? we're told the companies are still in talks. we could see an agreement within a matter of weeks. manus: thank you very much. syngentatest deal in with china. chinese banks -- troubled loans billion, more than the entire gdp of sweden. let's cross to beijing and our bureau chief. this is almost like day two in the sort of the tragedy that is china. yesterday was about the known data. today it is about bad loans. nick: that's right. the issue here is that it is not so much that the banks are in trouble. these are massive banks. some of the biggest in the world, state-owned banks. they will be doing fine. what does it say about companies and their ability to service their debt? as bad loan numbers rise of the

banks, it really gives you a picture of how much chinese companies are struggling to pay broaderir debt amid the economic slowdown. the issue to note is that we are below 2%.ks, bad loan that is the official number. this is really a sort of mystery meat statistic. we do not know what is in it. it could be as high as 5% if we count loans at risk. there is a question of how this is defined, which suggest the picture is worse than we are seeing from the stata. -- this data. manus: thank you very much. rew back into the conversation. the morgan stanley chief asset strategist. there are different things at play here. when i look at china in the lending data, that was pretty bad. when i look at the bad loan data , i'm getting more word. andrew: china is interesting in a couple of ways. first is, i think if you had to

imagine a structure that is almost perfect for extending and it isving a full cycle, china. the banks already have national control. you have a system where you are not reliant on foreign funding for your banking system. so the banks have the potential to keep rolling these loans recognitionay the of debts. as investors, do we want a lower bad loan number or higher? if you think about the problems in china, a lot of these are related to this division in the economy between the new economy that is doing well and an old economy that is suffering with too much capacity. you need to write off some loans and restructure industries. so far that has not been happening. manus: one of the things before let you go, i want to look at m&a. we look at sab miller, chem china, syngenta, is everybody so desperate to find growth? there is no material blockbuster growth. of growth,ntia

what do you do? go buy? andrew: i think it will continue to move higher in seymour late cycle behavior. this is pretty typical as revenue and earnings growth slows. has notings picture been quite so terrible if you look it energy and commodity sectors. but it is weak at 4%. companies are flush with cash and they have access to long-term financing. i think we will continue to see companies look for strategic activity. i think we have not yet hit the maybe kind of crazy aol-time warner type of obsesses of previous cycles, but i think it will continue. but i think we will continue to see more light cycle behavior in the m&a space in 2016. manus: always great to get your input into how to get a bit of perspective on these markets. the chief cross asset strategist at morgan stanley. what is up next on "the pulse"? here.o of telefonica is

join me for that after this very short break. ♪

♪ manus: welcome back to "the pulse." i am at manus cranny. here are top headlines. goldman sachs has demoted ford's 25 people, including a record portion of women to managing director. bloomberg sources say women accounted for 25% of the executives named this year. up from 20% in pages years -- in previous years. residences valued

at 25 million pounds fell 11.5% from a year earlier. european union president has spoken for the first time since receiving the list of demands from britain on eu membership. donald trump says it will be very difficult to convince every eu government to agree to terms and there is no verity that it will be achieved by the end of the year. >> the requests are tough. this is why the matter was so interesting. say it will be difficult to find [indiscernible] medical it will be difficult -- bewill be -- manus: it will

difficult news for the prime minister. martin stall spoke exclusively to bloomberg did -- bloomberg. trade -- our major investments are made in the new year. do our -- do i favor brexit? the answer is no. manus: time to talk telecoms. it is been quite a year with companies integrating different businesseshere at -- . lots of m&a on the landscape. it is ronan dunne. he and i will be attending the eye ibm later on. welcome. manus.thank you ?anus: are we better off everybody running towards -- ronan: in the this is market we

are fully integrated. in consumer, we take the view that customers want quality products of choice. champion.ocused we can give them best in class products. choice is what consumers are after. side isn the consumer all about mobile. i looked at the numbers earlier this week. we see them filling up 4g. where are we in terms of when that 4g rolls out, what do we want next? ronan: first thing is to finish the 4g rollout. -- 98% by the end of 2018. more people access the internet now in the u.k. on a mobile device.

we are already a mobile society here. the opportunity is to build more capacity. , we will be up to increase the capacity and speeds that we can offer it everybody can be always connected as they choose. matthew: let's talk about your business. you're going to continue to -- manus: let's talk about your business. you are going to continue to expand. trite, if you have to make a big call into rolling the dice. your confidence level will pass. ronan: we are confident that the deal will complete. it will protect competition in the u.k. we see people scaling up to deliver pain. what we want to do is to make sure the choice in the u.k. is

that people can have the best mobile service from the companies that are ranked number one and number two for customer satisfaction. having the scale to compete is critical. manus: if we look the landscape, were you surprised that they there wasn't anything for them to do. we were not surprised that the deal got cleared. the key is one of resources that needs to be distributed around the market to opportunityere is for competitive choice and mobile services. the focus should be on making sure that deal is being cleared. we continue to have a great mobile champion in the u.k. that is the opportunity that is afforded by putting them together. manus: the european regularly -- direct -- the european regulator

does not like this consolidation. that is going to be the challenge. ronan: some people have been making false comparisons to the denmark situation. a concentration that made of of the grouping and 40% of the spectrum. less than 50% of the customers only about 27% of the spectrum. that we are saying is the u.k. is different from denmark. the commissioner has said the same. i remain confident that this deal will go through. manus: another great line. this,fascinated by because it takes me back to the days when there was the monopoly. the re-monopolization in the u.k. and germany. any validation and that? ronan: one of the things that people forget is they had a mobile offering for the last 15

years. in that time, we have grown from 11 million customers to 25 million. they loot -- they grew less than one million estimates. our view is we are very happy to compete with a bte. manus: voice come out its very quickly in terms of pricing. when you and i got our first mobile phones to where we are now. that premium pricing and content and broadband, will it maintain? had the look at the market in terms of pricing? space, wethe mobile are say -- we're looking at mobiles dropping 70%. it makes our challenges a little the greater. that is one of the reasons i believe that having a strong mobile champion means customers

can see right through for products they want to buy. we are giving customers the opportunity to say we want a better mobile service and at a competitive price. the uk's prices are some of the lowest in the world. manus: you are confident that the deal will go through. if it did not go through, are you confident -- are the any of the parties that you would talk to? are there other buyers lined up? ronan: the first thing is to focus on the past. we are a growing business. the fastest growing telecommunications company in the u.k.. business.very viable we have an attractive business. manus: [indiscernible] -- ronan: ciber is

an issue. it has been for quite some time. the industry has been working for a number of years. we have a security advisory council where we sat yesterday to make sure we are not just doing every thing for ourselves, but we are making sure as an industry to protect people's information. manus: are you doing the closing's beach. -- are you doing the closing speech? ronan: it is a way for the irish aspirant to come together. two-way trade which is really important. a number of businesses raise money at these events. manus: i am doing the dragon's den, the sharks tank. i will see you later on. thank you for joining us on "the pulse." up, a huge moment for the u.k. that is what the indian prime current calls the

negotiations between the two countries. ♪

manus: and just prime minister -- and he is prime minister is that david cameron's residence today. modi ish to use -- mr.

on his first official trip to the u.k. pointed to the close ties between the two nations. nejra cehic has the details. nejra good to have -- nejra, good to see you. nejra: we are talking about 9 billion pounds. --king billion dollars deal $13 billion deal across the industries. not a bad number four modi's first visit to the u.k.. in terms of the deal with india, they are supposed to safeguard or create 2000 u.k. jobs. one of the key once is vodafone investing 1.3 again pounds in india. that seems like a five-year partnership. agreement on nuclear power plants and a deal to allow rupee

-- they focused on the ties between the u.k. and india. the u.k. is the biggest investor in india. india is the third against foreign investor in the u.k. after the u.s. and france. thanvests more in the u.k. the whole of the eu combined. it is quite a staggering fact really. in terms of trade between india and the u.k., it has been relatively flat over the last u.k. -- over the last decade. if you look the comparisons between the two visits, it highlights china's economic clout in comparison. checkers, looking in palace. it is all, knitting in a big event at wesley stadium later today. that and there on

importance of the trade between india and the u.k., we're joined .y karan bilimoria you were in the guildhall yesterday. the deal has been announced. they are in a step. this something cameron wants to build towards. this is the first visit by an indian prime minister in years. left.tony blair on my look at how much has changed in those nine years. really good news that prime minister modi is here in the u.k. to highlight the opportunities between the two countries. we keep hearing that the u.k. does more trade with belgium or ireland. that is not the end of it. what do we do together on a trade business and investment point of view bilaterally.

look at vodafone, they just announced more investment. you can drive -- you cannot drive down an indian road without seeing a jcb. in punjab and harry on a. --there is a lot of investment going into india. and the other way around. indian companies invest more in the u.k. then the whole of other eu countries combined. manus: where will these opportunities come? many would say the natural things you mentioned. also financially as well. this is about a changing landscape in terms of the ability. democracy --bust when modi was last in power it .as india's shining era

growth rates were hitting 10% and yet they were thrown out of government because the growth was not inclusive. we have these wonderful initiatives. digital india, clean india these are great initiatives. they have a target to increase toufacturing from 60% of gdp 25% of jews -- from 16% of gdp to 25% of gdp. not only will that deliver a lot of jobs, it will create exports. that's got huge potential for trade between india and the u.k. in itself. manus: there were a number of high visibility disagreements over tax. namely with vodafone. it looks as if we have passed through the peak this agreement in terms of tax. , how is thatman being perceived as opening up

india, making india more susceptible to british investors? andn: he spoke about tax concerns about tax. he tried to reassure that that was not going to be an issue going forward. he was dealing with the items that are still pending. indian taxes quite good. they are not that high. the corporation tax rates are pretty reasonable in global terms. from an investor point of view, ernst & young produced a report grow abouty, start, india. actually india is a highly attractive destination. number one in many rankings. mento you -- manus: you already produced there. the biggest say opportunities art deco karan: the biggest opportunities in india is the huge consumer market.

if you look the market, over 100 million people. the urbanization of india. hundreds of means of people moving to the city. you're talking about the middle classes in the next decade reaching 500 million people. the figures are staggering. the opportunities in the whoumer market itself -- are not doing as much as they could to go to india. this trip highlights that huge opportunity there is for british business in india. the mess is going back to india is i hope -- the messages going -- weo india is i hope have the best abilities in the world for creative industries. charta documents

going out to india. we are very proud of it. don't known here anything about mahatma gandhi. his an opportunity to teach our children about gandhi. the more lakes we may, the more prospects for our trading in business missions as well. manus: karen, thank you very much. karan bilimoria. next, is bigger better? the new ipad we will discuss. ♪

manus: welcome back to "the pulse." chart that actually matter. mark barton. marco the bloomberg commodity index which tracks 22 commodities earlier. get in here did have a look at the bloomberg commodity index. i have charted from 1999 to 2015 to show you where we have come from. it has to do with the higher dollar because of prospects of interest rate increase and the weaker chinese economic data. copper has fallen 4%. lowest level since 2009. we have gold following this week, lowest level since 2010. crude oil some 6% this week as

u.s. stockpiles expand. this index guide, fifth yearly drop. worst run ever. it is all doom and gloom in the commodities space. what about the equities space? this is the european stoxx 600 within your, the worst performing benchmark is portugal's psi index with a drop of 5%. we are still waiting for the president to tell us who will form the next administration and syngenta shares earlier. surging 11% today according to people with knowledge of the matter. china national chemical, otherwise known as cam china is in 41.7 billion franc offer syngenta has rejected it. it rejected monsanto earlier this year.

will come of it echo manus: market, -- of it? manus: mark, thank you. -- the apple pencil. the former ceo, steve jobs mark the idea -- mocked the idea of a stylus. the world has moved on. a of digital--the head of digital. he joins me now with the new ipad pro. >> you'll notice it is quite a bit larger. drew up thes i previous one. the ipad air which you will see is the height of the ipad air is widthme of the wit -- the of the ipad. this allows for some new features, and particular -- i

managed to load this page here. we could be looking at a very handy bloomberg story on the left-hand side. not in my price range. mento nor mine. onmaybe i am looking at maps the right-hand side. these are two apps running side-by-side. the addition of this keyboard. manus: i think the keyboard is pretty phenomenal. she brought me home one of the baby ipad heirs. i love this keyboard. >> this is one of the things that is become a new standard for these professional tablets. the microsoft surface pro also came out this week. also has a keyboard like this. this is creating a creating asp this is creating a bridge between the ipad air and the small portable notebooks like the macbooks. it is causing an interesting

conversation. which do you get? mexico i know which one i would love to be of to get. -- manus: i know which one i would love to be of to get. thank you so much. global surveillance with france. stay with bloomberg. ♪

francine: study but week. -- steady but weak. commodity crunch -- concern about chinese demands sincends markets sliding. and courting syngenta after walking away from monsanto. more on china's biggest ever european acquisition. good morning. with tomine lacqua

keene in new york. breaking news out of the eurozone. the gdp figure we knew was in line with expectations, overall means we are not growing as much as we were hoping, and we are still seeing lackluster growth from china, and that is filtering third germany -- through germany. tom: they get to this sense of the challenges. mr. carney and mr. draghi -- it is very hard to do the ballet of quantitive easing given the lack of real demand. francine: exactly. and how can they counter deflationary pressure? let's get the first word news. vonnie: thank you. an islamic state executioner may be dead after being targeted by a drone. officials say they were aiming

for "jihadi john," seen beheading captives and videos. sources there is a high degree of certainty he was killed. the hellfire missiles were launched toward the islamic state. john was shown in videos released by the militants beheading a half dozen hostages. the u.s. and its allies are stepping up attacks on oil fields. airstrikes that started the year and a half ago haven't stopped them from producing and selling oil. the u.s. says it generates millions for the islamic state throughout eastern syria. on another front, kurds are reporting a victory over the militants today. are in control of

sinjar in northwest iraq. for the first time in a half century, myanmar is ruled by a civilian government. the opposition was confirmed are in control of sinjar intoday to be the majorin parliament, empowering them to name the president. kept underreate was house arrest for 15 years. india's prime minister has a full agenda as he continues his visit to the u.k. he will soon meets the queen. they finalize a series of technology investment ingredients for india. it has prompted demonstrations, protesters saying he failed to stop religious protests in india. you can get more on this at the new bloomberg.com. tom: thanks so much. we calculate gdp differently in the united states than erurope. the statistic out is 6.6%

tom:year-over-year. francine, i don't see that it moves the markets all that much. currencies and commodities, disassociated from the excitement of yesterday, the euro will little bit stronger, nymex showing the ugliness in commodities. a brick under 41 would be a huge deal but we are nowhere near that. 18.37 showing the ugliness we saw inequities yesterday. then copper, copper, copper, and iron ore continue to dissent this morning. -.36%rman two-year earlier ias well. francine, you have another look at europe this morning. francine: on the back of this data check, you can look at crude oil during an 18 month low and the oil flow from opec is at

the highest level in at least a decade. trillion dollar question -- european stocks slid for the first time in three days, and it wasn't terrible. it's pretty much in line but it is a little bit lower. tom: let's go to the terminal. london, stream back to copper adjusted for inflation -- year is the long-term inflation in disinflation in metals. here's the china boom, the crisis. this is a long chart so what is critical here is this curve. this curve is a huge deal. this is called convexity or accellration. francine: it will be interesting to see it go back to lows since before the financial crisis. tom: it is a sobering chart. we will continue to look at europe -- francine, what we have? francine: it is all linked.

let's get back to the euro area gdp numbers and get straight to berlin. joining us as hans nichols. halpenny, from bank of tokyo mitsubishi. hans, talk us through the numbers. hans: well, but we see on the periphery -- the numbers are a little bit worse, spain gaming cayman better than expected. this is soggy, middling. that you want to look at what's happening in france. france actually breaks down there gdp numbers faster than germany -- it's a little embarrassing for german efficiency, but in france we get a read on what's happening. .3% up on consumer spending, .7% oninventory, and -.7% exports. if that holds true for germany, germany could be in for more difficult numbers down the line.

here is my story pitch. canal, in tomel and i see how many ships are heading from the european union to russia. it will be our own economic indicator. pubill spend our date iy in a and watch them go by. francine: and get a little bit of work in their. when you look at the impact on -- china is moving, or trying to. is germany the one that will lose the most, if they don't transfer to a consumption led economy? hans: yes and no, right? what we seen on the auto side of the story, china hasn't fallen off the cliff. when you look at other middle step companies that are exporting to other industries in china, they are hurt. one thing to note -- gdp will

filter through want to unemployment. the key thing to look at is the cpi and we had not had much movement. tom: let's get your reading on germany -- if we get euro parity, will we just get a weaker euro? what will that really do to the german economy? hans: well, that will give the workers may be a little bit more purchasing power in terms of what they are doing domestically, because they will be focused on the wage side. internationally, you will see less spending. german tourists going to new york will feel as wealthy. i did just look at the numbers -- i have exciting news. the price of peppers are up 40%. potatoes, up 31%. heating oil, down 25%. milk, down 12%. potato crisps and sticks, down 12%. but the overall price of potatoes is up anyone percent. puzzle me that one.

tom: this is what happens any go to the london school of economics. you lose it on friday. francine: i like that salad is going to go up if i go to france, because of inflation. that brings us back to the real people. this is what we do here. thank you so much. derek help any was not -- derek halpeenny was not expecting to talk about iceberg lettuce. derek: i will have to -- francine: it must filter through. when you look at these figures, it alreadyis priced in? mario draghi said so much -- he will act if gdp gets much worse. derek: well, firstly, yes. it is priced. we have had another very strong

message that we dipped briefly and we shot up at the end of the day. we saw the opposing forces of the monetary divergence play on the downside. the one risk factor that can scuttle that move is risk aversion. we had a negative equity day yesterday. i think that will filter through. a positioning perspective, yes, the central banks are encouraging to go for it, but ultimately it is volatile. that strategy doesn't work. tom: i want to get in front of what we will talk to you about later in the hour -- how do you express trade now? what is the best way to play that in currency? is a mexican peso, aussie/ which is the way to go? well, i would

personally take a look at the aussie dollar. we had a good jobs report this week, the aussie dollar raising up, not playing as expected. but i think you have to keep a close eye in terms of the situation in australia, and the commodity story is there to see well, down 15%. that to me, if it continues, will become the dominant factor for the rba. tom: that's what i thought you were going to go. derek, copper and iron ore -- in our next hour, luigi zengales will join us from chicago, one of the arch voices on capitalism in the united states. a terrific new read.

stay with us. ♪

tom: good morning, everyone. thrilled you're with us. new york city aware of commodities. noble group cfo in singapore is out the door yesterday. moment.get the bhp in a here's vonnie quinn. hoping forthansa is a return to almost normal operations tomorrow after the conclusion of its longest ever strike. 2000 canceled flights. they dropped more than 900 connections today, bringing the total number of cancellations to 4700.

oil stockpiles have gone to a record of 3 billion barrels which could deepen the rise in prices. strong production is expected in opec and elsewhere. apple is bailing on beat music, trying to steer users to its own prescription service. acquired beats in 2014. this is our bloomberg business flash. francine: thank you. let's continue our conversation on commodities with our chief energy correspondent, along with derek halpenny. how much does this have to do with the movement of the dollar and with actual concern about 2016 growth? javier: i think the dollar has a headwind that is increasing

rates and that traditionally means weaker commodity prices. china is the biggest concern, and no other market is more important for the big miners. i was talking yesterday with the ceo of noble group, and he said that every steel mill in china is moochins losing $60 pe. don't need to be an expert -- tom: javier, i'm sure you talk to the leadership of noble group yesterday to inform people that this is a country everyone in the commodities space is watching. are we at the tipping point now? if you use iron ore as a proxy, or if you use an 8.8% dividend, if you look at some of these implosions that we are seeing, is the tipping point now or is

the tipping point to come when we see balance sheet adjustments? javier: i think we are getting very close to that tipping point. the market is really signaling that. if you look at the dividend of the big mining companies, particularly anglo-american, it is more than 12%. that is a stock that investors are largely betting will have to make an adjustment on the balance sheet. in the mining sector we are getting very close to the tipping point. tom: i look at what you will watch over the weekend -- copper and iron ore implode. industrial metals disassociate from the financials, or is there a correlation right now? areer: i think the metals more closely looking at china. if you think about copper, 50% of the demand is coming from china. in the case of oil is only 10%. the industrial metals are more closely related to china and

that is the reason we have seen the biggest drop in prices, although not on agricultural commodities are energy. francine: what does that mean for investors? tom -- he has a great bhp chart showing the cuts, that this puts every commodity player under pressure to keep the dividend. derek: for sure. i think inevitably going forward, there has got to be the globalrenchment, fallout still has ahead. tom: that is an extraordinary statement, that the global fallout still lies ahead. javier, when you talk to all your sources at bloomberg news, when do we see what derek and i are waiting for, which is the balance sheet adjustment? i can get a straight answer. javier: ic cannot, either. but i am looking at the beginning of next year, when we are going to see the crunch.

lowre going to see commodity prices particularly in the oil industry, and we will see the big oil companies and miners that will have to go to their investments. we will have to make further cuts in capital expenditures, and i think some companies are going to have to be very close to investors, saying that the dividend is at risk. francine: if you look at the large reduction in investment, are we concerned that three years down the line, the prices shoot up? derek: commodity prices? well, of course, in terms of scuttling a recovery, you have to assume. but i don't think you should necessarily assume that. there has to be an adjustment. pricewise, we are a good way through the price adjustment. in terms of our forecast and commodity relations, we have the recovery and those affects currencies the second half of

next year. francine: thank you so much. later today, emily chang brings us an interview with cisco's ceo. we will be talking retail. that is on bloomberg at 9:00 a.m.. "surveillance," streaming on your tablet, your phone, and bloomberg.com. ♪

tom: good morning, everyone.

iron ore on the move. the bloomberg commodity indexes very nasty. it's a little bit elevated this morning. isry elevated as well vonnie quinn. vonnie: a new op-ed writer. president obama has taken to writing op-ed's. today, it's in the "financial times," in its fascinating in terms of timing. thatresident is writing america cannot be the only voice. "americans cannot be the sole engine of global growth. other countries will have to step up. if the world relies excessively on the american consumer it will jeopardize sustainability of the global recovery." it's interesting that he is lecturing the brits and europeans, because some of the examples you cite ars are non sequiturs. he cites the bipartisan budget agreement as an example of

something that is good for the world. as if it was easy. he talks about bringing more affordable education to the masses -- europe has been at the forefront -- tom: do you think he writes these? vonnie: i do. guy francine: being lectured by americans. this is saying, you should get your assets in order. derek: i could go back to the 1990's -- that would be broadly along the lines of what president obama is saying here. to be honest, i think he does have him right in saying this. what i think is criminal in terms of what's happening in europe is the fiscal inflexibility that i think is borne out at the moment of the lack of recovery of the eurozone.

germany's constitutional constraints in terms of limiting its ability to implement fiscal stimulus is a very deflationary element of the situation in the eurozone. francine: we have heard them making noise about china -- this time, barack obama is holding back? thank you so much. we will talk about brexit coming up later today. we will hear from a leading energy expert about the swelling oil -- that is a 9:00 a.m. in new york. this is bloomberg "surveillance," where the conversation is on finance, business, and economics. ♪

tom: things have changed for hong kong after two days of commodity implosion, iron ore again down off the chinese well, copper weak as

and business decisions wrapped around the change of commodity price. right now, let's get to our global first word. vonnie: by u.s. drone may have killed a notorious islamic state executioner. the pentagon says the airstrike yesterday targeted his vehicles. forces say there is a high degree of certainty he was killed. the hellfire missiles were launched toward the islamic state. john" was joan and videos released by the militants beheading hostages. the coalition is aiming to hit islamic state in the oil fields controlled by the militants, now a primary target of airstrikes. it has yet to stop the militants from producing and selling oil. they say it generates $40 million per month for them. the u.s. initiates another close military encounter with china. officials say a pair of b-52s

loonier contested islands in the south china sea. chinese ground controllers responded with a verbal warning. a navy ship drew close to the island last month. the u.s. does not recognize them as sovereign territory. you can get more on these 24 hours a day at the new bloomberg.com. francine: think you so much. downing street where david cameron is talking about "jihadi john." >> we have been working with the united states, literally around the clock, to track and down. ins is a combined effort, the contribution of both our countries was essential. anwasi is a barbaric murderer. he was shown in the sickening videos of the beheading of british aide workers. you posted not going in serious threat to innocent civilians, not only in syria, but around the world and in the united

kingdom, too. executioner, leave and let us never forget that he killed many, many muslims, too. he was intent on murdering many more people. so this was an act of self-defense. it was the right thing to do. today, i want to thank the united states, the united kingdom has no better friend or ally. and i want to pay tribute to all those professionals in our own security and intelligence agencies and armed forces for the extraordinary work they do on behalf of our country. on this, as so often, they have been working hand in glove with their american colleagues. we are proud of them. if this airstrike was successful -- and we still await confirmation -- it would be a strike at the heart of isil. it will demonstrate to those who would do britain, our people, and our allies harm -- we have a

long reach. we have unwavering determination. and we never forget about our citizens. continues.isil posed britain and our allies will not rest until we have the needed this evil terrorist death cult and the poisonous ideology on which it feeds. today, though, my thoughts and the thoughts of our country are with the families of those who were so brutally murdered. japanese citizens, american workerists, and aide abdul raman. and of course our own citizens, aide works david haines and allen hemming. nothing will bring back david and allen. their courage and selflessness stand in stark contrast to the empty callousness of their

murderers. their friends and their families should be proud of them, as we are. they were the best of british, and they will be remembered long after the murderers of isil our forgotten. thank you. francine: that was david cameron in front of 10 downing street. tom, when you look at the words of prime minister cameron, it was very clear he was talking about the rapprochement, the fact that the u.k. has no better friend than the u.s. the applications for foreign policy in the middle east because of the airstrike -- i would imagine it's a little bit limited, but it is certainly a home victory for david cameron. tom: not only that, but the symbolism it brings in the new technology, the drones being the ultimate surgical strike. what a former nato supreme commander told us many times is

that there is no substitute for the blunt force of boots on the ground. may be the next step here in moving from drones and tactical attacks like this to the tactical of aircraft is to end up with some form of legal presence, either on the ground in syria. but far more we hear, tangentially in turkey. francine: tom, it was interesting listening to prime minister cameron. 's words were few and very well chosen. it was interesting that he named some of the hostages that he had executed. i say this is something that he wants to show the british public, that they can feel safe, and if they don't feel safe, he is there to take care of them. i think he is speaking to a very british public. i don't how it will play out in the u.s. tom: i think the distinction is that in the u.s. it is more removed than europe. the tensions with europe and the

new refugees really brings an immediacy to the unknowable that can come from the islamic state across europe. across theare that atlantic, and maybe that is the key distinction that president obama and prime minister cameron have to face. francine: yes, but very important that this was a us-led airstrike. talkingbe right back, more about foreign policy and the implications for the middle east, and of course the currencies, commodities, and equities. ♪

tom: the rangers win big. new york wakes up to a nice win

by the new york rangers. getting into the season -- it is november. of interest hereafter what we saw with the mets. good morning to all of you in new york. let's get to our business flash. here's vonnie quinn. at restaurants in china grew an estimated 5% in china. established kfc restaurants rose 10% but overall results were hampered by a 9% drop at pizza hut. casters expected growth by 4% in china. china stock exchanges are as there is ang rebound in the equity gauge. they will be raised from 50% to 100% beginning november 23. the shanghai composite climbed 22%. china's national chemical

corporations are trying to buy syngenta. they would mark the largest acquisition by a chinese company of the european target. they value syngenta at about $42 billion, but syngenta is saying no for now, citing regulatory risk. that is our bloomberg business flash. e, you have more on syngenta. francine: this is a great story. let's look at the share price moves -- this is two and a half months after it fended off a monsanto bid. where does that leave monsanto? if you are a player and you are still negotiating, do you want to go with china? quoted, so it is probably an all-cash offer. if you have been negotiating for a couple of years and you ask someone with a huge wad of cash -- you hope to hear more from

monsanto. 10: the history for us is years ago -- the bush administration called it quiet, is not supportive, of a chinese interest in the california oil company, and the congress went appropriately mental and it never happened. who will go mental in europe over syngenta? francine: they were citing regulatory risks. the added layer to this is often that this -- in the u.s., you fought against chinese acquisitions. this could be the biggest chinese acquisition of a european company. we understand that this will be the basis for discussion. we don't know if syngenta is concerned about regulation or price, but they are talking from here, but it doesn't mean it is a done deal. tom: which institution pushes

back in europe? this is one of the distinctions of the united states versus europe. is a brussels, is of zurich? -- is it brusselsis it zurich? who pushes back? francine: you also have politicians that way into the debate. we have leaders in europe that say -- do we really want something that may be considered a european jewel, with security implications, being taken over by someone from another country, which is less transparent? regulation in brussels, than individual regulations -- we still have our individual countries, but look for a possible backlash. the rhetoric -- these people are evil. that is the history of europe. vonnie: this particular transaction has so far cost one ceo his job.

the monsanto takeover failed, he had to resign. now we have an interim ceo. tom: month sent outright to buy syngenta? vonnie: and the ceo had to resign because shareholders were unhappy. tom: ok. very good. he was just 40 some billion. it has taken us weeks, months to get him out of therapy over italian football. luigi zingales will join us. that we have been looking forward to this -- the author of a terrific new book, the valu e of austerity. ♪

francine: here are some of the great stories you can check out on bloomberg.com. for the first time in two decades, the u.s. chamber of commerce is taking business leaders to argentina, and global

hedge funds are already snapping up their assets. solar power could be getting cheaper. the price of the main ingredient in solar cells have dropped to a record low. and amazon is taking on u.k. grocers. introducing their amazon pantry service starting today, a grocery delivery service. host get back to our guest from bank of tokyo mitsubishi. the boj sits in the middle -- it has been throwing everything it can at the economy. we are expecting a boj decision. will he get or stimulus? derek: they will stay put. the real issue was back in the second meeting of october, when there was speculation of doing more. what i think was very clear than was that there was a preference to extend further into the future the timeframe of reaching the 2%.

rather than implement further stimulus. it is clear that there is a growing reluctance within the boj to be acting at this stage. i think we will have to see some notable changes in the assumptions are dynamics of the market. francine: what does it mean for the yen? derek: if you look at the dollar yen, it appears to be a gradual move higher, but i have a different view. elementshere are some of change taking place that are beginning to support the japanese yen, the biggest being that we have had this absolutely huge expansion in japan's current surface, and that is on its way back to 3%, 4% of gdp. that means that the bar for the yen to depreciate has been raised. we need to see that exporting of capital, and i think that thatting of capital,

diversification is unlikely to process as we go forward, and therefore the surplus on the currency count could become a more supportive feature. tom: i totally agree, that the flows matter. let's talk about the obvious adjacency of korea. the yen we can this year has pushed the korean won, i'd say, 80% back to where was before the financial crisis of the late 1990's. that's strong korean currency, it has to be killing korea. does japan responded that, or do they ignore it? derek: well, i think they basically ignore it. i think there is an element of the boj coming out with the well-known rasher from central banks which is similar to elsewhere, that they are implementing policies domestically to target inflation, and despite the

complaints that have been there since we have this massive devaluation, i don't think it will play out. we how is stable -- those two big about the depreciation -- tom: can we have a third about? that is the money question. derek: my answer is -- if they try it, the fallout in effects would be much more limited. and i think it would perhaps be foolish. from evaluations perspective, dollar-yen at the moment and our metric is about 7% overvalued. every period over the last 25 years and that has happened, it has retraced. tom: exactly. let's transition here to the commodities space. fully we have seen in the last 48 hours -- derek, what is another move by brazilian real? what does it signal to, say,

mexico? these are currencies even down in canada that are being buffeted by these commodity moves. derek: they are, but having said that, what impresses me since the fed speculation has intensified is that these currencies, the turkish lira is another one, the mexican peso, they have recovered quite notably from the weak points. suggests, perhaps, certainly the speed of the move post china devaluation, and we have or we are reaching valuation levels that just that the speed of depreciation going forward will be less troublesome for global financial market conditions. i must say, we are expecting dollar-real to move back, but domestically on the political side, there has been some improvement that is discouraging. this week, for example, we had

that repatriation bill passed through congress. finally some progress in terms of getting to a primary budgets ar surplus. i think that is encouraging. francine: when you look at higher-yielding currencies, they are less attractive to investors. are you definitely expecting a hike in december? derek: definitely expecting a hike. that is close to a done deal unless there is some catastrophic event or a terrible jobs report at the beginning of december. but there was an article today, in terms of the attraction of the carry trade, and i must agree with the general gist of the article, which is that the conditions of renewed carry, i don't think, are obvious at the moment. we will see this divergence that is taking place, but if you go back to the last time one dollar-yen between 2005 and

2007, the spreads worth 300 basis points -- francine: no longer. you don't play carrie -- you choose the dollar case-by-case, in are forecast 2016, in our forecast for the broad-based dollar rally is nearly behind us. we are choosing our currencies carefully and we do see depreciation in certain currencies, but not across the board, as i just mentioned. tom: derek, i listen carefully to build dudley. he mentioned twice, not once but twice, the arch cannon that monetary policy works with one in variable lags. that means to me instability. can the other cast of thousands -- can they get this done over the next couple years with

stability and less variability? derek: it's going to be a very, very tough job. what i noticed from yesterday is that there is already of very focused emphasis -- already a very focused emphasis in regards to what happens after december. dudley was talking about the fact that the current level of interest rates, although at zero, may be more restrictive than the markets currently think, in other words implying that the key grace will be much, much lower. tom: and that was the first half of his speech. i was thunderstruck when he mentioned forward guidance of less value away from the zero bound. with you translate that for me? is that mean michael mckee doesn't get to go to anymore press conferences? [laughter] derek: given that the fed hasn't raised rates since 2006, the

forward guidance is important because the markets are so nervous about the first move. the point being made is that if the markets see conditions are generally ok, then they will perhaps become less concerned. i have to say, the most important communication at the dots, andthe fed perhaps that is what they will use on the 16th of december. rates for 2016 is lowered even further, implying three rate raises. tom: there is nothing like talking about the dots. francine: i like the.. dots.ike the the only way to combat inflation is with radical new ideas. do you think that central banks have a holding pattern to deal with this?

derek: i am not so sure, to be honest. i still think that we need a bit of time. if you remember in the period after the crisis, when china implemented this fiscal stimulus program, commodities when soaring through the roof and we had concerns about inflation. i think we are getting the reversal of that. i think we need a bit longer time to see whether it is something more problematic that needs more radical thinking. francine: radical thinking is what we do. thank you so much. "surveillance" continues on bloomberg tv and on your ipad. we will speak to luigi's and dollars, coming up next.

tom: iron ore and copper continue their dissent --

their descent. macy's-nordstrom's. for retail america, maybe one answer -- do not open for thanksgiving. hour, luigi zingales and at their turner. good morning, everyone. it is "bloomberg surveillance." it is friday the 13th. i'm tom keene. francine lacqua is in london. how was your trip back? francine: it was nice. tom: it is superstitious, friday the 13th. francine: in italy, it is the 17th. we are looking at lackluster growth in china, france, germany. what does it mean? possibly external stimulus. barack obama with an opinion piece on it. it will be interesting to see whether people accuse each other. tom: we a