shutine: turkey says it down the russian jet near the border with syria after pilots ignored violent -- pilots ignored warnings that it was violating airspace. schools and subways have remained closed for an extra day. low andouches a 10 year the commodity crunch continues to bite. the morning, this is "bloomberg surveillance," i am francine lacqua with tom keene. implications could be quite big

and this could be an embarrassment to vladimir putin. tom: no question. there are many countries involved and we had a meeting with the market reaction and we do have some stability out. this is happening in the last half an hour. francine: again, we need to see and wehese pilots are did see market reaction but we saw it off-site. let's get the first word news with vonnie quinn. turkey says it has shot down a russian warplane we're syrian forces have been fighting rebels. turkish tv shows video of a plane bursting into flame and then crashing. the pilot ejected from the plane. they say that the pilot was warned 10 times in five minutes that it was violating airspace and it ignored.

turkey has previously warned russia about its planes crossing over into turkish territory. the terror alert in brussels has been extended for a week. officials are still warning that islamic state terrorists plan to attack highly populated areas like shopping malls. cities subway at school systems will gradually start to reopening -- start to reopen. they are still searching for a man involved in the paris attacks. it is day two of the tour of france's president. cameron ando david today, he speaks with president obama in washington. he will then go talk with vladimir putin. meanwhile, the terrorist attacks have affected the tourist plans in paris. there is a 25% jump in

cancellations a week after the attack. most of the cancellations are coming from the u.s., spain and germany. -- economic sanctions against russia until january. there has been little progress in implementing this years ukraine he's agreement. get more on these stories at the new bloomberg.com. tom: let's go to the data before we get to ryan chilcote. futures are -11. crude oil found a bid and it is the first time i have seen oil move, because of international events. screen, we have a 100 print on the x y. this is off the turkish news. francine, what you have?

i have the -- that drop significantly after the news of the downing of the plane. as we try to figure out what -- russia's next move will be. this little thing could turn out to be quite a big thing. tom: this is a good litmus paper. let me go to the terminal and show some of the mining carnage. , back here isre the theme of low. we have taken a new leg down. it is beginning to do and off the chart analysis. we are down, according to some analysts. elegant rightery

here, showing that further. that further commodity damage. francine, get us going in the headlines with the turkey downing the russian judge. francine: turkey is saying it shot down the russian warplane near the border with syria. let's get to ryan chilcote. to figurell trying out exactly the people involved, right? theyse we don't know if landed and it will have huge implications. that what we know is turkey says it has downed a russian jet in syrian skies. that appears to be close to a fact. the russians have confirmed that a plane has gone down. we know that this plane would have two pilots and we know that both of these pilots ejected and we are now hearing from a turkish television station that one of the fighters on the

turkmena leader of the resistance says they captured one of the two russian pilots. at this point, what happens with that one pilot that has been captured? and where is the second pilot? how is vladimir putin, obviously other than looking for the pilot, how will he react? francine: this is an embarrassment. because there have been issues in the past where they have warned russia to stay out of the airways. but this is the first time that we have seen them take down the played. the big news from a geopolitical perspective is that we know both pilots had an opportunity to inject before the plane was shot down. part is that we hear the russians have a rescue operation under way and that one of their pilots may have captured. pilot toens with the they don't recover, that is the

big issue. is he released to the russians? francine: it brings back memories of the jordanian pilot that was captured and burned alive in a cage. and that was a big turn in geopolitics. group,et to the eurasia when you see and follow these things with us, is your that we haveught to wait to see how vladimir putin actually sees this? or do you think they will find compromise? >> this is a big problem. ultimately, you have turkey looking to insert itself into this conversation, it feels an interest in syria are not being recognized. presidentdamant that assad needs to go. they are not happy about the andicans funding the kurds

using those forces to fight back rebel groups. -- all ofbe honest, the interests in europe are driving them to accommodations. turkey saying hold on, we also have leverage over the situation. you need to take notice. russia not simply driving this conversation. is anyone surprised? in all of the interviews that francine and i have done over the last few weeks, we talk about the tensions on orders, country a, country c. is anyone surprised that this occurred? mij: no, not really. we know that there has been a , and we know that

there are large radical islamic communities in large parts of the country so it does not, as a surprise. morning,y's move this it has reasserted its interest and its voice into the dynamic that is happening on its doorstep. tom: there is a blur of headlines, one of them is on the twitter. obviously, vladimir putin will speak at some point. what will you listen for from vladimir putin? : i think it is of course, observe,needs to russia is regarding what turkey has done -- was that plane in turkish airspace? -- and say that it is not the case? which story and narrative does to, see willedence

give some indication about how difficult this conversation this how difficult- this conversation between turkey and russia will be. in syria.is situation francine: thank you so much. let's get to the guest host for the hour, john bilton. he is head of j.p. morgan asset management. it is great to have you on the program. how do you look at risk? we have the downing of the russian jet. some of pulling back the losses. but it is difficult to see the endgame. how do you look at it? john: ultimately, you have to with a knee-jerk reaction and how it changes the calculus in a long-term. this morning we were coming into a lackluster case, there is

softness in asia and the u.s. yesterday so this has given a bit more of a risk town to the day. ultimately, after the tragic events in paris and the threats from the islamic state in brussels, this is a factor that investors are having to calculate. in the longer run, it brings us into the events of this morning. how does putin respond to the threat? anything that's a just there was itecently cohesive response, is a conflict zone and it is uncertain, things come together a bit more, that would galvanize investors to suggest that russia and nato can work together to fight the islamic state. i think if there is a disagreement, then there is a sense of geopolitical risk. tom: it is always good to speak

to a chemistry major. tell me about the single digit world. nextur view forward for year a single digit of you? time it has been a long since i was a chemistry major so i will have to ask from an economic standpoint. but yes. that is why some of the events that we see today shape it. if you are looking over the next 12 months for the 6%, 7%, a -- we have just released the 15 year assumptions where we see equity providing a 7% return. so anything that dense the returns in the short run have a profound effect on that. so we are still in a low crunch world and that does matter, perhaps more than if we were in the early part. john bilton, thank you

so much. he will be with us for the better part of the hour. we do understand that one of the pilots may be dead. we will have plenty more throughout the day. brussels remains on a heightened state of alert. we will have the latest on that. this is lulu -- this is "bloomberg surveillance." ♪

everyone, fromng london and new york, this is "bloomberg surveillance," we bring you up to date with the russian pledge down near the syrian border. vonnie: that is right, it is down by the turkish military near the border after they said

it violated turkey's airspace. there were two pilots and one did manage to project. we are hearing from the turks that one is dead. the market did react by 1.5%. tom: the kremlin says the plane incident"very serious ." futuresotice that the will stabilize. francine, over to you. francine: i think you're right. they are trying to gather information. let's go back to the tape terror threat -- back to the terror threat. brussels is on lockdown. on day four. these schools are closed, the metro is closed. are there any talks of reopening? find balanceng to

by saying there is still a terrorist threat but they are starting to get back to normal? task thatthat is the we have here now. because the main suspect is still at large. and the prime minister last night said the threat remains. but at the same time, he said they are bringing extra relief city and they will be able to open the metro tomorrow. tomorrow morning, schools and the metro will be able to open but there will be extra security. there will be a step back towards normalcy. at the same time, the prime minister stresses that the threat level remains at the highest and he will keep it there until next monday. i understand why this is so difficult to capture this suspect but is it an embarrassment to the brussels and international authorities? jones: they don't like the criticism they have come under in terms of the surveillance.

they are trying to rectify the situation. they just don't want to make a mistake and that is why the balance comes in. at some point, people will start to get frustrated with the lockdown. and they are aware of that. they are trying to ease that as much as they can. , they can'tame time say everything is ok. because the suspect is still out there and the threat is still there. tom: we are very interested and we see the snark on twitter. how are people reacting to the decisions of brussels and the belgium government? jones: at this point they are being pretty patient and they know that the lockdown is going to end, most of it will end tomorrow, and they are ok with that. they have seen what is happened in paris and they don't want that to happen here. so they are being patient and

they assume the government has it under control. so far, it seems that they do. francine: all right, thank you so much. we will take a quick break and then when you up-to-date with the reaction to the fact that turkey has downed a russian warplane. we heard from the kremlin just a few moments ago. we will find out hopefully in the next couple of hours how vladimir putin sees this. they say they are trying to gather information. ♪

francine: bank of england governor mark carney -- treasury select committee today. euro, thatas hit 1.5 is a day low. he has been talking about macro potential. on the rates, he says they may be low. let's get to robert wood. john bilton is also with us. thank you for coming on and joining us. when you are expecting to hear mark carney, he is saying that the rates will go up too soon but they will go up? absolutely. he is obviously having to deal with the different views, they are being very dovish. so it is a tricky communication challenge so he does has -- he does have to walk that fine line.

lee andaken very dovish maybe it shouldn't have been quite that dovish. francine: he is saying the league -- saying the low rate environment is likely to remain for quite some time. this is it. this is him saying and remaining dovish. he has said for a long time that it will remain dovish. so even with rate hikes, they are going to stay very low. turn of thet the year, that looks to be and other statements that will fall by the wayside, just as these each last year, but that being said -- i don't think the bank of america -- bank of england will wait for the whole of the next year. -- i think summer next year is still on track. poors goodell ski has been

a harsh critic of austerity. the united states that we don't have dragged, do you have fiscal drag as a form of austerity at this moment in the united kingdom? robert: absolutely. austerity has been going on for five years and it will continue. osborne this week, he will update his plans for the next five years. so we are looking at a roughly -- over the gdp. interests keeping rates low. it will make the bank of england cautious. this is not near inflammation -- this is not new information for them. compare that to what even harris is concocting in the united states. in terms of growth, our

outlooks are similar with the u.s. and the united kingdom. the united kingdom lagged behind in the policy actions that it was taken but both have been more aggressive than the ecb. you can see that in the employment out turns. so you are looking at policies to remain at a loose which should keep the commie -- keep the economy taking over. was thank you so much, that robert wood with merrill lynch. up, we will talk about global economics and have much more on the shooting down of the russian jet over the syrian-turkish border. ♪

francine: welcome back, you are looking at live pictures from london. in one ofe sitting

these buildings, you would be looking at the deutsche bank, they are saying that the bankers are still learning too much and they want to cut down on the rewards. you would be quivering in your boots. let's get the bloomberg first word news. here is vonnie quinn. downe: turkey says it shot a russian warplane after the plane violated airspace. it happened on the border with northwestern syria. of the tv shows video plane bursting into flame and then crashing to earth. the tv report says the pilot ejected from the plane and were captured by troops in syria. the russian plane says it denies that they left the airspace. they received 10 warnings within five minutes. they are closely monitoring the turkish-russia incident. that is a turks report

says one of the pilots is dead. in belgium, the government is warning that the threat of a terrorist attack has not diminished. the alert has been extended into next year -- next week. there are plans to attack areas with lots of people. meanwhile, the lockdown in russell's will start to ease, starting tomorrow, the schools and subway system will reopen. a travel issue has been -- a travel warning has been issued to americans. americans are being urged to be careful when they use transportation networks or going to public places. france's president will be in washington today reading with president obama. he is seeking help in the fight against the islamic state. it is the second day in the drive to build an anti-terror coalition. yesterday he met with david cameron and tomorrow he will be in moscow talking with vladimir putin.

david cameron hints that parliament may vote next week on whether the u.k. -- should start bombing syria. jeremy corbyn was elected partly because of his opposing -- opposition to involvement of the british forces. you can get more on these and other breaking stories at the new bloomberg.com. tom: thanks so much. on economics and international relations, thank you very much. bring up the map. 240 is the border, some miles from syria and turkey is to the north. it is very important that this crash occurred near the mediterranean, in the more populated area. the russian military is between damascus and the coast. we have an expert joining us right now.

what will be the response of vladimir putin? what do you suggest he will say? and what will he do? >> it is hard to tell at this point. the first thing they will do is automatically denied that this aircraft was within turkish airspace. i think we can expect those denials to continue even if it turns out to be that it did crash inside turkey. that will be automatic. but the key thing is that this should not, as a surprise because turkey has firm rules of engagement with airspace violations. ande have been well-known this is not the first time in crash has been on because. tom: we know this and we have seen this coming, particularly in conversations with the former commander of nato. when experts look at this, what is the nuance or the feature of the new russia as they are in the eastern mediterranean? what is the distinction? >> a point that is demonstrated

by this should down this morning, it is very different from the other end of the earth with the lacks respect of the airspace. they do not have the same well have a ties response that turkey does. so in some respects, these are the rules of the game play used -- rules of the game played. this would become runcible in moscow. this need not necessarily rise to the rapid reaction that people are worrying about. francine: what are the chances of retaliation? the number one gas supplier to turkey. they could retaliate with a gas point of view. there are many ways russia could exert pressure on turkey that aren't related to

a military response. however, it will depend on how the true story comes out. we have to remember that a lot andhe details are not out the reporting is in the early stages. it is unreliable. francine: yet, this is a huge embarrassment for vladimir putin. >> potentially, yes. that again, it depends on what the facts are and how it plays out. there is a long history of russian aircraft not being particularly careful about straying across borders. if you put that together with the known turkish response, which has been demonstrated not just with syrian aircraft but also going further back, against greek aircraft, this should, knows a prize. about theme relationship. is writing in the

new york times today and he measures his response against the reaction of the kurds. tell us about that border? my area is much more russia then turkey. tom: i understand that. but what does chatham house say? about the relationship? >> i'm sorry, i cannot answer that question. tom: ok, that is fair. francine: thank you very much. we are looking at the geopolitics of everything and we mustn't forget the market repercussions. and what this means when you look at the reaction, and when you look at turkey specifically. let's get back to the guest host, john bilton. the first movement

in bond yields, and with the ra, this has a reaction of its own. is the firstis test. the markets responded fairly positively when the uncertainty around the election was removed. good rally in turkish socks. since then it has drifted. obviously, it is a question. about where the bank rates go and over what the authorities will claim for the business and the outlook in turkey. so investors are looking for stability and some source of direction. this does keep them on the sidelines. it is not something that is upfront negative but it will keep those who have been eyeing turkish -- eyeing turkey cautiously, it will keep them on the sidelines. dollar, weg at the

have seen a major weakness off the news. as now we have moved back up to the weakness in turkey. jump in. vonnie: the prime minister has -- a meetingsident with the president to consider new cabinet members. give us the view on jpmorgan of the emerging markets for next year. are you overweight? with the opportunity of these challenges? john: right now we have to look significantaving structural challenges. there is debt load that has been built up. 2007, and thatm is still a major issue. as we are coming towards the end of a developed market overhang, we're entering an emerging

market debt overhang. we are still somewhat cautious with emerging markets. said, we know that some of the evaluation is starting to clear. so on a longer view, potentially, we are entering a time where it would be well worth starting to cast the rule over it. but right now, we remain modestly underweight. john bilton with jpmorgan. now pulling the markets back again, the futures are at -10. he is on a trip to speak to his allies. will be with president obama today. then he will see president putin next week. what an interesting international relation. francine look what is in london, i am in new york. this is "bloomberg surveillance." ♪

francine: this is "bloomberg i am in london as tom keene is in new york. it is time for my morning must read. mark champion writes that it is if the first casualty of war, the second is common sense. he is talking about the possibility of europe closing borders. but now with the geopolitics coming back into question, the french president is seeing barack obama, the russian jet being down in turkey, what does that mean? -- has been covering all of these political issues. theagain, it seems like

french president is a diplomat. is in h interest to try to get some sort of agreement from barack obama and vladimir putin. the problem is, before this plane was shot down, we heard it was unlikely that we would have any real intelligence sharing or coordination between the u.s. and russia. the most you could hope for is dividing up territories and saying that russia would be responsible for bombing this part and the americans and the french for the other part. i want to go back to august, because remember when we spent all of the time in brussels? with the a mistrial warships. had to do with ukraine. so there is a relationship between france and russia, especially on military matters. thisine: when you look at

russian warplane being downed, where does the french president stand on this? how much more difficult is his job now that we have a nato country involved in the conflict? : they haven't always gone along with nato missions. heads of statee or ceos, the first rule is to gather all of the information. the french president may get a briefing from barack obama, he will probably have good intelligence. -- wewill look to say will look to see what they say after their statement. then, crucially, he comes to berlin and then on thursday, he is going to moscow for meeting with vladimir putin. so in some ways, he can be a carrier pigeon for sensitive data. tom: what news flow does the

french president need to state his case. and thethe tragedy people being killed, what does he need? say: he needs russia to that this was a mistake and four vladimir putin not to take this as an insult to russian military sources that a plane was shot out of the sky. they need to minimize the extent to which this is an american plane that shot down a russian plane -- this is a nato plane that shut down a russian plane. they need to say this is a misunderstanding. is a misunderstanding, it is easier for the putin -- for putin to move to the american side. that allows for a coordinated response. tom: thank you so much. the futures are at negative nine. it was -11 earlier. a lot of news this morning. part of that will be with barack

obama and the french president, they will hold a news conference. bloomberg television will have that for you later today. stay with us, this is "bloomberg surveillance." ♪

tom: good morning. there is a russian plane down in the western border of syria. let's go to the headlines. the latest is a recap of what has been happening in the past hour. that plane was downed at the turkish military. 10 warningsy gave in the space of five minutes. both of the pilots managed to eject, one of the pilots died and one of them was taken. right now we have russian lawmakers making headlines saying the crash will worsen areas -- will worsen conflict in the area. russia is saying that they should evacuate citizens from turkey. we will keep an eye on this. let's get to other news.

there is widespread abuse and forced labor in thailand, especially in the seafood industry. theeu has threatened to ban product if they don't improve regulations. allergan is putting pressure on -- about taxes. they are really incorporating in a lower tax country. and that calls for tax reform. that is the bloomberg business flash. francine: thank you so much. it is time for the morning movers. commodities are low, lower than yesterday. just -- isus is our our guest host. this is john bilton. note, is there a technical support on some level?

or will we just see this crunch down? >> it is hard to tell. what we saw yesterday in the oil market was telling. what we had was a statement from it was the same as what we heard before. and we did have a huge rally. it tells you how short the market is. that can tell you with the opec meeting coming up. people are pretty jumpy. and you do see those dramatic moves. so that doesn't answer your question. so it doesn't get better until something happens with the dollar? yes, because then we get something with theed. thatuld be argued actually, you make the influx reaction. golden you look at the market, there is a school of thought that says we may get a rally in gold. tom: what do you know about

reports of steel or about iron ore. excepteveryone is stable iron ore. tell me about the dynamics of steel from asia? stuart: there are two big issues. one is that we have a clear it is incredibly bearish. it is a market controlled by a handful of companies. in that scenario, you would expect isis to drop. , but itill a commodity is not as profitable as it was a year ago. it is still making money. you are seeing this huge growth in exports of steel, that has caused problems in the u.s. and europe. this a trade call war, but there are rumblings about trade. john bilton has to deal

with this day today at jpmorgan. of the about the idea opportunities to be had? are commodities one big trap? now, it is hard to see whether there is good news out there. do we have an inventory problem? the fact of the matter is, demand is changing. growth is sluggish and so the market response will be slow. we have to work through the inventory. that means the prices are cap out. and then with iron ore and other metals, china is changing the shape of the economy and they are moving from resources towards services. i do doesn't matter how low the iron ore price goes, supply has to get cut down. i guess investment will be cut down? and as it gets cut down, is there not a danger with

shock ofes, and the commodities with what happened with oil 30 years ago? does that keep them for a longer time? a 10 year we take view, we see a 3% annualized return. that is probably down for the next couple of years and then it will gradually rise. the difference is, even as commodity prices rise, we don't have another country like china coming in with massive demand for commodities. another potentially see -- kicking off in the next decade or so. but it won't be anywhere like as powerful as the last one. we talk about commodities as a broad index. is some argument for looking at some of the particular parts of the particularly-

where sales have remained strong. based metals, we remain pretty bearish on. tom: which country do i look at four copper? if i want to study supply and demand, which nation do i look at? stuart: that is an interesting one. at chile.y look the saudi arabia of copper. will bear down on their costs. as a consequence, we will see as much coming out of there as before. the answer is obvious but you do have to look at it, it is china. this is an economy that is changing pretty rapidly and it is moving from some heavy industry to a consumer-based one. what does that mean for copper?

not using it with the same intensity as five years ago. francine: thank you so much. we have to update you with what is happening in turkey. we know that it shot down a russian warplane. that was near the syrian border. we are waiting for the facts. what we do know is that the russian defense ministry is that the jet was in syrian airspace, something that is turkey does -- something that turkey is disputing. they say they warned them 10 times in five minutes. we will have plenty more news on that. we will also talk about the possible fallout. surveillance," will continue. ♪

am: turkey shoots down russian military jet on or about

the syrian border. the pilots were warned 10 times over five minutes. markets plunged than stabilize, weaker in the last 15 minutes. commodities find a modest bid. iron ore and german yields descend to record lows. and presidents hollande and obama have a lot to talk about face-to-face about president putin. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york on tuesday, november 24. i'm tom. francine likewise in london. we heard from a kremlin spokesperson saying this was a serious incident, but they are trying to gather information and we're trying to do the same. the russian defense ministry is saying that the jet was in syrian airspace. other, wehing to the will understand what vladimir putin's possible response can

be. tom: here's vonnie quinn with headlines. vonnie: turkey is saying it shut down -- it shot down a russian airplane that violated its airspace. russia quickly denied that it had crossed into turkey's skies. video shows the plane bursting into flames and crashing. russia says it was brought down by artillery. f-16's jetsits fired at it. the two-man crew parachuted to the ground after ejecting. syria innt jets to late september, saying it was targeting islamic state, but the u.s. says they are helping syrian troops fight rebels. francois hollande is trying to persuade world powers to step up the fight against the militants. he met yesterday with british

prime minister camera. he has meetings later this week with vladimir putin and angela merkel. hearing another attack by islamic state, belgian officials a week to the terror alerts there. islamic state to responsibility for the attack, which killed 130 people. the european union will extend economic sanctions against russia for the next six months. that is according to european diplomats. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. tom: a data check here. we were grim early in the news that we came back nicely. we rotate back down again. futures -11, dow futures -83. the 10-year yield in a little bit. 1.257.yen is a proxy,

francine? francine: there was a lot of risk aversion. we were actually strengthening, the dollar-yen emerging. this was risk on play, and then micex indexmy se in russia. we do not know how vladimir putin will take this and if retaliation will come. : this is the imports of turkey right now. the basic idea here is, here is turkey and the major importers with the huge impact as we have known for years. russia, not surprisingly, and china with lesser visibility. over aany other exports diversified turkish economy. we spoke with anders martinez on mali and western africa with the

same reach an perspective this morning, andrew barton, a managing editor of international government, joining us on the european region. what has changed for vladimir putin? andrew: i think a lot has changed. you saw that immediately when we had the report of the jet coming down. we had every market around the world reacting to the emerging markets, treasuries. it had repercussions around the world. ,s francine hinted at earlier the next question is, how does putin react? he is in sochi today. he is meeting with king abdulla, coincidentally. heis calling an emergent -- has to respond to an emergency meeting.

tom: tell us about the allied structure of turkey. who are turkey's allies? andrew: it could not be more complicated. a thin diagram tried to explain everything, it would be an absolute mess. what is important is we still do not know where the pilots are. we are hearing that they may a militia up with fighting with turkey. if that is the case, that would be good because they are a proxy that they have control or have links with. if the pilots are with some other group, things could get much messier. but in terms of on the ground, we do not know yet where the pilots are. francine: this of course is an embarrassment for vladimir putin, and also tensions between

russia and turkey have not been great. what would be an elegant way for vladimir putin to not retaliate and come out of this? we are still hearing from the defense ministry of russia saying it was in syrian airspace. this is crucial. andrew: we may not see retaliation. we will see a response. vladimir putin has to respond. as you said, it is slightly embarrassing. if they were shot down by f-16's as opposed to on the ground, it will be worse. if it turns out they were over turkey, he still has to respond but the behavior might be more restrained. if it turns out they were taken down over syria or if something happens to the pilots, we will see russia retaliate in some way. but i think it will be asymmetrical. we will not have any direct military confrontation. turkey is a part of nato and it will get messy.

turkey has links with the kurds. we might see russia make things difficult there. if you drilled down, nearly all of the $25 million in imports is energy, so he could make life difficult there. and turkey has interest in azerbaijan, and russia could hit on turkish interests there. francine: bottom line, this could be a serious incident because turkey is nato and russia is not. andrew: it is a very serious incident. these things can take on lives of their own. to try toare going defuse the situation very quickly. nato has come out with no comments. they want to find out what is going on. turkey has said we did not know it was russian. we warned it, they did not listen. now the ball is in vladimir putin's court.

barden with bloomberg news. look at the strategy involved here in bonds. these are exogenous shocks. what is the underlying endogenous reality for bond investors in the united states? >> for bond investors, either corporate or treasury in the u.s., this has little impact in the long-term. ultimately we have to get the facts first before we can see what is going to be the response and will there be a military response. if that is the case, treasuries are likely to do reasonably well over the short-term. but in the more medium-term, we are going to be looking at gdp and the data that comes out later today. -- cine: what about the vonnie: what about the impact on --

ira: it is not only a safe haven but what is the likely economic response to do this, and will the ecb take further action? the ecb was on the verge of taking further quantitative easing action anyway, so this might push them to do a little bit more to ensure that confidence isn't struck. investor if you are an and you see something like this of this magnitude with a plane being downed and people are trying to figure out what it means and you see the market going in one direction, which is risk on, do you have an automatic instinct to say buy in? what is the long-term goal? react to every single headline when especially before you have all the facts -- we do not even know all the response

from russia or nato or more regionally from turkey and syria because of an incident like this. tom: it will be great to have you and richard clarida together in the next hour. the spread market that we do not talk about enough -- have you seen it that polarize before? it has gotten polarized or more polarized in the past, and usually either during recessions or when -- tom: does this signal a recession right now? ira: the market is very concerned with market revenues. even high-quality corporate bonds have widened quite a lot in the last year, and that is a bit concerning. tom: headlines this morning of the loan market. bonds, bills, notes and everybody likes senior loans 18 months ago. shock?gile is that to a

ira: it depends on the companies and things like liquidity. liquidity is not as good as it used to be, but there are very good companies and very good investments. one thing that happened with the loan market is a lot of people purchased loans hoping that the fed would hike rates sooner than they have. because of that, people were a little bit disappointed that these floating rate instruments, the senior loans, have not gone up quite a much -- have not gone up quite as much. tom: coming up, what a treat -- ira jersey with richard clarida of pimco. were -11. they improved to negative five. we are now at -10, a little bit of a downturn with the yen 1.2253. stay with us. "bloomberg surveillance."

♪

francine: welcome back. it has shot down a russian warplanes near the syrian border. the russian defense ministry is denying that. they say the su 24 jet was in syrian airspace. this is important because it is an embarrassment for vladimir putin, and depending on the facts, it will possibly make him give a response or not. we are not sure if retaliation is in the cards, but a response will be. that's get to the bloomberg business flash with vonnie quinn. vonnie: apple is planning to launch its electronic payment system in china by february. apple pay has deals with china's four big state-run banks.

the onset interest rates will be raised deck's month are rising. futures contracts show traders think there is a 74% chance the fed will act during its december meeting. japan is looking to enter the international market for satellite launches. its first rocket carrying commercial payload launched into space this week. tom: everybody wants a rocket. vonnie: and everybody wants drones. i was reading another report about drones. tom: we have dueling presidents today, don't we echo -- don't wait? stoffer francois hollande is with president obama. kevin is reporting from washington. lots to talk about today. the most recent headlines probably will make it in there as well. what will come out of this meeting between francis that's

between francois hollande and president obama? comes two weeks after the devastating terror attacks and as a modern coalition of international countries are discussing the best way to take on the isis terrorists. president obama has been reluctant to provide ground troops, u.s. ground troops overseas, but they do want to extend the coalition and increase air strikes. all of those options are going to be discussed today. tom: i have seen about 14 views on what the president will say to president hollande. what is the view from the white house, the message they would like to send to the president and to the french people? : the first is that the u.s. remain steadfastly behind the french people, and the second is that all options are on the table. at this moment, u.s. ground troops are now part of that equation. vonnie: russian sanctions is part of the leverage, maybe the only leverage that the leaders have. what would be the message from

obama to hollande? kevin: the reports are the details of the plane crash are still coming out, still emerging. clearly that is going to be a topic of discussion as well. he is set to meet later this week with vladimir putin himself. there are a lot of varying parts in that regard, but at the end of the day, president obama is facing criticism not just from republican presidential candidates for his strategy on isis, but also from the american people. polls suggest the american people do not necessarily think he has an adequate strategy in dealing with the isis terrorists. tom: kevin, thank you so much. kevin cirilli with us.

the turkish prime minister holding a press conference as well. the headlines come in very quickly. we have heard a minimal nato response yet to the shooting down of the plane. we will continue our discussion. richard clarida and ira jersey with us. good morning. ♪

francine: in the last half hour we heard from a kremlin spokesperson saying this is a serious incident. we are now hearing from turkish officials. jett of all, this russian

was downed new the syrian border. the turkish official says they were warned many times. they also say they did not heed the warnings, and that -- tom, every word that is said is extremely important in this new world of diplomacy. tom: my word for the morning is "then." put up the headline about heeding warnings. it is the first headline that is sequential of what radar and different instruments will use right now. aircraft did not heed warnings not heedircraft did warnings, then flew over turkish airspace. that is an important headline, no question about it. we are waiting to hear from mr. putin. now we go to vonnie quinn. vonnie: i thought we would have a look at a "morning must-read," this time from "the telegraph."

a frequent guest on the show writing about saudi and it's deep pockets. similarwe have heard things from daniel yergin in the past. but we are reading here as well that lots of things are being considered, including structural reform in saudi arabia. so in the future this will not be a problem. tom: yes, from the saudi optimist. ira jersey is with us this morning, with oppenheimer funds. is -- todience that it our audience that is saying i learned on friday where molly is and i learned about the length of the syrian border this morning -- how do you look at

that as a backdrop? do you ignore it? a variety of reasons, we have felt that turkey was at risk. there are obviously a lot of politics going on in a place like turkey. you have to pick your spots. for example, i think one of the things that could very well, out inthis is more risk-off things like foreign exchange, particularly in emerging market countries. we have not been investing their with our international bond fund for quite some time. an issue could be even with the euro because of the fact that this is a nato-member state. tom: remember that oppenheimer funds has a wonderful elation ship with "surveillance" and all of bloomberg. your track record has been stellar. my experience with international it isment is not -- is, not what you do, it is what you

do not do. what are you not doing right now? not we do not any -- we do own any foreign exchange in emerging markets. even with some of the angst over the international situation right now, we think the federal reserve is going to hike, so that means that the dollar is likely to appreciate a little bit more and continue the long bull run that the dollar has been on. now, it is probably coming to an end. we think over the next 12 to 18 months you will see the top in the dollar, but for the moment you probably want to continue -- you want to belong dollars. francine: how much of it is already priced in yakima we have talked about it for so many much -- how much of it is already priced in? we have talked about it for so many months. ira: things like confidence shock from international events like what is going on in turkey and syria is likely to mean that

other central banks will continue to be easing. it is both sides of the equation . who is easy, who is tightening? we have talked about diversions for a year-and-a-half, but it has not been realized. come december, we could see real leverage virgins and monetary policy. even though it is mostly priced in, we do not think it is 100% priced in. of: some of the nuances economics, investment, and finance that we like to bring you on "bloomberg surveillance." what a match -- ira jersey with richard clarida of pimco. theill speak on the fed and exogenous shocks of the pimm: world. stay with us. "bloomberg surveillance." ♪

tom: good morning, everyone. it is a beautiful new york this thanksgiving week. the holiday is upon us in full force. tulsyey with-- dana

a report on -- right now with international relations with our news this morning, here is vonnie quinn. vonnie: turkey says it warned a russian warplanes 10 times in five minutes before shooting it down. turkey says it violated its airspace near the border with syria. russia denies it crossed into turkey's skies. russia says the plane was brought down by artillery. turkey says an f-16 jet brought it down. crew is seen on video parachuting to the ground. turkey shot down a russian drone recently. syria sent warplanes to saying it was fighting isis. inncois hollande is

washington today. he will meet this morning with president obama. he wants to build a coalition against the militants who took responsibility for the paris attacks. he met yesterday with british prime minister david cameron. cameron says parliament in britain could vote next week to let british jets attack islamic state targets in syria. in belgium, it is extending its state of high alert for another week as police search for a suspect linked to the parents attack. the lockout will be easing starting tomorrow as schools and subways are reopened. areicans traveling overseas being warned by the state department. the government says terrorist groups are likely to be planning attacks in several regions. americans are being urged to be careful in public and when using transportation. you can get news to four hours a day at the new bloomberg.com. tom: what a treat this is. is with us from oppenheimer. from pimco, richard clarida joins us.

he is the senior economist from columbia university, a frequent guest. plothave the best dot- chart. professor -- certitude in the longer run, certitude in 2018, and absolutely no clue in 2017. how are we going to get out in 24 months? richard: there is a range of opinion on this. tell us-- the dots something. the fed wants a gradual liftoff. hikes a year over the next couple of years, getting the funds rate up to 2% at some time before the end of 2017. the rational out was laid out in minutes last week. like measuredds

in alan greenspan. the way he said "measured." richard: this is basically every other meeting. vonnie: how high will they hike it? at the most, four, i would say. ira: i do nothing 10 year bonds and 30 year bonds have to go down in price very much. if they do go at this extremely slow pace, actually if you look at where the market is pricing, they are not even pricing for four hikes next year. it is only three hikes in calendar 2016. tom: how does the market desk at the new york fed affect this transaction, this trajectory? richard: essentially that will be two rates to follow. the fed pays on access reserves, and then there will be this new reverse repo rate.

look at the interest on reserves in the reverse repo rate. francine: what are you expecting to hear from janet yellen in december? fine balance to say we are hiking if she does hike, but this year it will be subdued. it will be all in the language on how bondholders read what you think she will do in 2016. richard: the message thus far is do not pay attention to the first hike. she will say pay attention to the liftoff path. it is going to be very gradual. managee trying to expectations in emerging markets, the bond market, and equities. it is a very gradual liftoff. i think the curve is going to reflect -- if they lift off according to that path, we will get some flattening because the spread between 10-year bonds and cash is 200 basis points, and

ultimately it will be about half of that. vonnie: i was going to follow up with ira. when the composition changes, do we have a new picture we have to deal with? ira: i don't think so. once they start hiking, there will be a hiking regime. the pace of that will be different. i agree with richard that we will get some flattening of the curve, and we have already seen a lot of that. two-yearg year -- will flatten it probably a bit more. how much volatility will there be? volatility right now -- implied volatility in the market is very low interest rates. that kind of does not make a lot of sense if the fed is going to hike and then stopped and no one knows what is going to happen. there will be a lot intraday volatility. tom: this is what we heard from bill dudley. the agitation is as important as the migration, isn't it? richard: that is a great quote.

tom: i just invented that. richard: the challenge for the fed is on the one hand they are saying every meeting is live, on the other hand they are saying they will probably skip a lot of meetings. people criticize greenspan, but themeasure-pay strategy had result of suppressing volatility. the every meeting is live regime will probably increase volatility. tom: this goes to your foundational monetary research. -yen today -- bring it up again -- obviously this is off a downed jet over syria. there is some noise, but that is a long way from abenomics. how does a stronger dollar and a weaker yen and other currencies play into our monetary dynamics? to me is thatays there is a limit to how hawkish this fed can get. prices the fed hikes much more rapidly than those

dots are pricing in. i think the stronger dollar impact inflation and exports, and that attenuates their ability to move on a hawkish path. that has pretty big market implications, because if the fed continues to hike, that means inflation is not going up. that means longer-term interest rates, 10-year notes and 30 year bonds, will not necessarily go up much in yields. -plot looks like a food order. vonnie: i cannot even keep up with these things. going to askas about mario draghi. i am not sure what he is having for dinner, he will have a tough time if the fed hikes. richard, if you look at government yields that are negative territory, the total theerday has wheels and --

total yesterday has risen to $2 trillion. this is one third of securities. richard: surprising compared to what we would have thought 10 years ago, how many yields and how far out can be negative in the eurozone. it reflects the fact that mario draghi is pursuing an aggressive strategy to bring up inflation. i think the eurozone is in a better place now than it was several years ago. they want to avoid a flechette. -- they want to avoid inflation. two economicds, perspectives. where is the tipping point on a two-year yield. two-year yieldhe would be a good number. richard: i would agree with that, broadly. tom: you are now -- you are not allowed to agree. it is tuesday.

richard: there is probably more of the risk next year that because of the inflation data rebounding and because of the every meeting is live, there is more of a risk next year that we get hawkish surprises that will have to be attenuated. tom: this is what it is about, vonnie. this is very cool. richard clarida and ira jersey with us, and we are looking at market futures, negative eight. the discussion will continue this morning. kostin coming up in the 9:00 hour. ♪

tom: much breaking news. this not from syria or turkey. this is from fort hood. diede: four people have

from the helicopter crash at fort hood. it is a statement from the fort hood public affairs office. the helicopter crashed yesterday evening around 5:49 in the northeast portion of the texas military force. out,and as well, tiffany's moving over to economics. their same-store sales, that speaks volumes. vonnie: global sales up 1%. they missed estimates as well. japan sales looks pretty good, but that is about the only thing we can say in terms of good news out of tiffany's. they are cutting their forecast as well. a guest joins us on the downing of the jet. what will you listen for from president putin? and presidentment putin will speak. what will you listen for? >> i will listen to what the turks have to say because they were the first to break the news.

i think the russian ministry of defense and russian officials are stunned by these developments. they certainly do not want any complications with turkey, and complications are coming to them , and very hard. you wrote an article on rush' possibilities. will russian military invention continue after today? let's bring this up to date? will russian military intervention change in syria with the downing of one of their jets? -- : they pavel: they have to. it is only the first of disasters and probably more to come because it is very easy to predict setbacks and disasters for this intervention. it was so poorly planned and so rashly executed. i thought it was more

of a technical failure because crashes thisn summer. i think they lost eight planes. the problems on the border with turkey are also very clear. from the very beginning of the intervention there were violations. there were exchanges of international signals of bombing of their own targets. it grows repeatedly. i think at least now russia has to show their real intentions to , ofs on the targets of isis the real enemy, at not the bombing of anything that looks interesting from the point of view from the air, from a tactical point of view. we are also hearing that nato ambassadors are meeting at 5:00 p.m. in brussels. what you are saying is what a

lot of guests have been saying -- we have to wait for the facts and understand what vladimir putin will do and how he will see this. from a simplistic point of view, he either retaliates or backs down. what do you think he will do? he will backk down. he cannot go into a confrontation with turkey. turkey for russia is a very important and particular partner. he values his relations with erdogan. he will downplay and explain it away through all sorts of technical misunderstandings. tom: you wrote a chapter for ken pollack -- "moscow does not believe in change." what will be they mistakes that united states and russia have to overcome?

pavel: that is very unclear. think it was explained in no uncertain terms to vladimir putin what is expected from them in order to make the cooperation workable. what is happening in fact does not really fit at all into that beginning of understanding that was shaping up. tom: very good. thrilled to have you on in short notice today. pavel baev with the brookings institution. president hollande is in washington and will meet with president obama. we will bring you that press conference later this morning. this is "bloomberg surveillance." ♪

tom: if you are just joining us this morning, risk-off this morning, off the headlines of the downing of a russian jet by turkey. tiffany is reporting earnings this morning, down 2% premarket. is strong,rticular

but everywhere else is pretty weak. forecasts and also revising earnings items. , -- japan cop sales comp sales, 24. are you kidding me? i have never seen that number. i think stephanie ruhle has every tea bracelet. she has a whole brace of them. let me do a forex reports of stuff can figure out if she can -- so steph can figure out if she can buy the next tiffany china. deal, stronger as well. the euro-dollar, 1.0644. ," david

westin joins us. david: we will continue to report on how the world is reacting to the attacks in paris, from syria to washington, president hollande and president obama. we will follow up on our interview with governor dan -- and also talking about what it means for the big banks and we will be talking about carl icahn, who has big stakes in xerox and aig. we look forward to joining you this morning. right now we continue, ira jersey with oppenheimer funds. richard clarida with pimco as well. we are talking about stability and agitation. ida, the fed has to work within the international continuum and they did that the last time around. why won't they do that in december? richard: i think that their view is they do not see a replay of august. if there is an unforeseen event,

that will impact. i do not think there is any possible u.s. data that keeps them off a hike in december. barring a replay of an unforeseen event, they are good. but as we said in an earlier segment, they will be conscious of the dollar, and the dollar impacts their inflation and demand view. that is a factor. francine: i was going to ask you about the dollar because we were breaking tiffany's saying they need to stick with their forecast. the dollar a part of story, that it will impact imports. is there a dollar level that the fed will back down, that it cannot tolerate because it starts to hurt the u.s. economy directly echo richard: i do not think there is any exact level. a 10% move in the dollar shaves a half a percentage point off growth for two years. one reason it will grow two

instead of three is because of the effects of the strong dollar today. the dollar in 2016 will impact the fed's rate hike path. ira: i think one of the things about the dollar's move with the fed hike is that it actually helps other countries and other economies more than it hurts the u.s. the u.s. is a relatively closed economy impaired to a lot of trading partners. so i think if this helps europe, if this helps emerging markets, if it helps countries like brazil, that is better overall we markets than really do have another 5% or 10%. el-erian talks about unknown unknowns. the unknown now is commodities. can you correlate commodities over a central bank rate policy? richard: you can correlate in

the past when there have been rate hikes, especially when the fed has been aggressively hiking lower inflation. tom: but that is not the case now. richard: it is not the case now. my view is more broadly a slowdown in global demand over the past year. tom: do you have to adjust basis points lower in the yield structure because of commodities? ira: i think you do. one of the things that you have to talk about here, we are talking about the fed hiking from zero to something other than zero. we are not saying the fed will hike from here to 4%, and they are not even saying that. we have to adjust our thinking a little bit here. i think stan fischer said at one point that when we hike initially we will go from an incredibly easy monetary policy to also an incredibly easy monetary policy. this is from zero to something a little bit more than

zero, but this comes at a time when central banks to not have control on inflation. we always think about inflation in terms of 1980's style inflation. 4% inflation for consumers is normal. if you go back through history, 200 or 300 years of history, the 1970's and 1980's was the unusual period of time. 2% inflation is not particularly low, but not particularly high. should we expect 2% inflation? that is a reasonable outcome. if you look at where the core pc is managed, on the lower side of not near it is also zero. if you take out energy prices from most inflation indicators, inflation is not running particularly low. richard: in our own analysis, we see headline seen -- we see had -- the story in the u.s. next

year will not be a deflation story. ira: and that is if oil stays the same. do not have to have oil going up $20 to get inflation going up at the headline level, just a little bit. tom: gentlemen, thank you so much. ira jersey with ivan hiebert funds -- ira jersey with oppenheimer funds, and richard clarida with pimco. he has the mother of all dot -plot charts. 4000 dots on it. it is very cool. "bloomberg surveillance -- "bloomberg ," some television. and we continue the headlines from russia, turkey, and syria. ♪

. .

david: the syrian conflict escalates. turkey says it shot down a russian warplane after the pilot ignored warnings. xerox and is taking

aig, and has requested major changes in both. and the force maybe with us. retailers attempt to cash in on the hype around the new "star wars," movie. welcome to "bloomberg go," i'm david westin. stephanie: i'm stephanie ruhle. i try not to agree with tom keene as much as possible, but he was right, walk, don't run. outstanding. anchor isanger is -- megan murphy. we have a lot to cover here, but we are also following breaking news. turkish forces shot at a russian warplane knew the border with -- near the border with northwesrn