anna: hollande heads to moscow. this as russia starts trade retaliation against turkey. metals bounce. copper, nickel, and zinc climb. and, rabbits out of the hat. what can the european central bank do to prevent the euro bounce? we will hear from the ecb vice president. welcome to the program. welcome to "the pulse." i'm anna edwards in for francine lacqua

and manus cranny. french president hollande heads to russia today to enlist the help of president putin against islamic state, a task made more complicated by turkey's downing of a russian jet. hollande urged angela merkel to step up germany's government been to the cause. ryan chilcote is in moscow for us. things have changed a lot since hollande first planned his trip to russia. update us. russia's spat with turkey is only growing. russia today announcing new restrictions on turkish imports. there is some talk that they could go after food imports. it looks like they are going after industrial goods like detergent, some food imports. this after many russian tour operators canceled packages for russian tourists to turkey. turkey is the biggest destination for russian tourists

outside the former soviet union. this is a trade response, not a military response. if you look at the ruble today, you see something interesting. thisuble down just a cad morning, but so is oil. you look at the last five days, what you saw for the first four of them is oil going up in part because of the geopolitical risk on the table because of this incident, the downing of that jet, and the ruble going down. what we have now is more a normal situation. the ruble and the oil price moving in the same direction. is just a little bit of the geopolitical premium baked into the oil price the last couple days. that seems to have come off the table a bit. people thinking that maybe cooler heads will prevail. anna: the market reaction looking fairly complex. hans, did president hollande

manage to extract any pledges from the german chancellor? are we talking about any kind of big change in german foreign policy? hans: it seemed as though angela merkel was open to the idea of doing something additionally. she pledged that she will listen to mr. hollande. i heard a hint of potentially shifting her views. >> terrorism is our common enemy. it is our common task to fight it. the islamic state can't be convinced with words. she's leaving the door open to potentially committing german troops to something to combat isis in syria and iraq. they have said they are going to contribute more troops in mali. they are part of the mission there. in some ways, it's a big bridge to cross. it would mark a seachange in

german politics if there were some military commitment to a middle east campaign. what we have so far is that germany is providing weapons to the kurds. there's quite a bit of domestic opposition to further encroachment. merkel seems open to it. she's going to listen to mr. hollande. anna: something that president hollande must be mindful of, his finance minister in france, saying that it's possible the terror attacks could affect french growth. give us the details. we saw it come through in the pmi numbers. it looked like france was tapering a little bit because of the effect on the hospitality industry. what we have is the french state saying that this could impact our ability to have growth. already, last week, france made it clear that they are going to do what it takes to have security above the stability

pact. looks like brussels is going to give them the green light. all the signaling from brussels is that they are likely to give france some sort of dispensation. it doesn't seem like that will run a of the brussels rules. we do have to monitor what this is going to do to french recovery. last quarter, they were at hero .3% growth. this is not exactly a resilient or robust economy. anna: thank you. hans nichols and ryan chilcote. a chilly looking moscow this morning. how are the markets reacting? we are now joined by brown and shipley's chief investment officer. great to see you. let's put this conversation into a market context. is this guiding your thought patterns? is guiding thought patterns for the past 15 years. opinion, then our

geopolitical risk is already priced into the markets. the u.k. is a great example. if i take the 10-year yield, and on top of that i've got a --rting yield on the auction you have some real growth in dividends. 6.5% against historical levels, that shows that some of these risks are priced in. anna: where does it go from here? long the tailhow is, if we see other terror attacks, that is completely unpredictable. >> it is unpredictable, but what we tend to find in these incidences is it involves a redistribution of wealth. you may see some payment in the tourism or leisure sectors. that is offset with additional spending on home services and defense. anna: the comment by the french finance minister saying that it

could have an impact on french growth. i suppose there are offsets. there's the government spending on defense and further contributions to the economy from migrants and refugees. >> and let's not forget that consumers tend to be resilient in the face of terrorism threats. you look at previous events. people look at their values and say, we won't be beaten down. they make an extra effort to live the life they always have. anna: thank you. is on a look at what else our radar this thursday morning. creditors of the troubled spanish renewable energy company abengoa are facing tough choices, having to decide whether to dump their holdings in the firm. that is as abengoa teeters on the brink of becoming spain's biggest corporate bankruptcy. the euro hit a seven-month low against the dollar as investors speculate the european central

bank will expand stimulus. the currency is heading for its biggest monthly decline against the greenback since march. the fed considers raising interest rates for the first time in almost a decade. president obama told americans preparing for thanksgiving holiday that there's no sign of a credible terror plot in the united states. he added that the u.s. is stepping up security in the wake of the deadly paris attacks. >> right now, we know of no specific and credible intelligence indicating a plot on the homeland. let me remind the people of what our coalition is doing to destroy these terrorists. so far, military and our partners have conducted more airstrikes against isis strongholds. those airstrikes have taken out key leaders and taken back territory in iraq and syria. up next, the euro slumps

as stimulus expectations grow. what will the european central bank do? we hear from the european central bank vice president. ♪

anna: welcome back. you are watching "the pulse." mounting that the ecb will expand stimulus next

week. the main central-bank event takes place on december 12. a majority of analysts expect a rate hike from the fed. hans nichols set down with the ecb vice president, vitor constancio, for an exclusive interview. hello again. talk us through the thinking. how worried is the ecb about what the fed might or might not do? the sequencing of that is that we have the ecb is going first, then the fed. when you watch their body language, they are not necessarily concerned about an initial fed hike. they are concerned about multiple fed hikes. the ecb is concerned about what multiple fed hikes could do to emerging markets and how that would affect the slowdown in europe. he didn't seem, mr. constancio, that concerned about it.

extentemarkable to what expect thatms to the fed is going to increase. listen to how mr. constancio put it. mr. constancio: we don't expect that the effect of the increase in rates in the u.s. will have a contagion in europe. the situation of our economies is different. the fundamentals are different. the monetary policies are different. they will become even more different after that decision. the markets understand that. hans: we were talking about potential risks, potential shocks to the system. mr. constancio seemed more about another terror attack in europe than the geopolitical risk between turkey and russia.

,hey are concerned about shocks but in terms of an initial fed hike, it seems as if the markets are expecting that. they want to see how that filters through emerging markets. anna: after you met with vitor constancio, you made your way to the bundesbank. not a long drive i understand, but different views. hans: it seems like a different world. whatonversation was about a low interest rate environment will do. are you forcing smaller and medium-sized banks to chase profit in other ways when they can't get it through more traditional ones? when we talked about what the fed might do, they indicated to me that emerging market central bankers just want the fed to make a decision. hear, and i'm talking to the governors of these emerging markets, there are several who say there are

negatives with this cloud of uncertainty in monetary policy. so it's not that easy and clear-cut. one thing is very clear about the u.s. interest rates. since the middle of 2013, when the tapering began from former chairman bernanke, the market was realizing that something is changing. happens, it would not be a big surprise. markets had enough time to think about how to position themselves. hans: i was struck by the different views you get from the bundesbank and the ecb. they have different agendas. the bundesbank wants to make sure the german banks stay healthy. the ecb wants to see overall growth in the euro zone. they do have slightly different agendas. where do you think the coffee is

better, the ecb or the bundesbank? anna: you are going to offend somebody with your answer. i'm not going to guess. you have to declare your hand. hans: it is clearly the ecb. we have an italian running the ecb. i will say that the meatballs they served at the bundesbank were acceptable. the germans have everyone beat on the meatballs, but for coffee, i'm going with the ecb. , other central bankers are available. thanks. brown shipley's chief investment officer is still with us. let's discuss these interesting views around central banks. 1994,the first time since we have big central banks, not the ecb versus the fed, but the first time since then, we have big central banks heading in opposite directions on monetary policy. >> it is a reflection of the

time. the u.k. is not far behind. it took them a number of years to bring the ecb into the quantitative easing. qe was absolutely required. you have no real private sector money creation. the public sector had to step in to offset the price deflation. it is almost as if the market feels this is normal. in our view, we think that all central banks, the ecb or the fed, they are behind the curve when it comes to inflation. because of their model of ,nflation, because they waited they are too far behind the curve. they've set off a bunch of asset price inflation complexes. we think 18 months or two years down the line, you will see a rise in inflation. anna: widely you think that when we continue to have conversations about whether

china is going to keep exporting deflation? >> inflation always will be a monetary phenomenon. during the years 2011-2013, there was no real money supply growth, but the u.s. banking system is now growing 8% year on year. , that moneyof that has to go somewhere. nowasset price inflation is seeing some real-world economic activity. you have recovery in the property market and construction sectors. that asset price inflation cascades out into real-world inflation. anna: we talked to some commentators who say the fed might move in december, but whenever they start to move, they are not going to go very high. the cycle is going to the a low one. you are saying the fed is going to be behind the curve and need

to catch up. that's what they ought to do. i suspect they won't actually do that. consequence, inflation will run above target for a prolonged period of time. in the next 10 years, we expect equities to give you about 8.5%. where inflation is 5% year on year. the alternative is you hold a t-bond with or yields of half a percent or 2%. that is an absolute catastrophe. anna: kevin, thank you very much. kevin stays with us. up next, the shanghai stock exchange turns 25. what return would you have got if you invested their a quarter-century ago?

you would have to have a very long-term investment horizon. we will tell you next. and very happy thanksgiving to our american viewers. u.s. markets are closed for the holiday. yesterday, president obama part in a turkey as is typical. obama cracked a joke to his daughters during the ceremony. i don't know if they left or not. he pardoned abe the turkey. we leave you with these pictures. ♪

anna: welcome back to "the pulse ." the shanghai stock exchange is celebrating today, marking 25 years since its launch. how would you have done if you put your money in china rather than the s&p? despite this year's $5 trillion rout, you'd be sitting on a gain of three point 5000%. 5000%. -- 3 you would have to have a long horizon for that investment. it would have paid off. >> you should have a long horizon.

it is not about what will happen next month. it is about what will happen the next 5-10 years. don't expect to make money in three months time. anticipate to make money in five and 10 years time. that is the view investors should have. in mind, you are not too worried about china at the moment. >> if you look at what is happening in china, it is what similar -- it is quite similar inwhat happened in the u.k. 1979. they are allowing more market forces to take effect. they will go through the same trials and tribulations we went through in the western world. there will be these growing look at a 5, you 10, 15, 20-year view, you will make stronger returns. anna: this is a different time horizon. i spoke to ubs, their emerging markets guy.

he was talking about how the rest of the global economy is levered to old china. although it might make sense to buy into the old china story, the rest of the globe suffers because of this gearing into that china old growth story. >> you hit the nail on the head. they analyzed by extrapolation. they look at what happened and extrapolate that out into the future. believe the rotation is taking place within the economy. you would have seen more and terms ofng through in service. unfortunately, the book commodities industry -- the commodities industry is oversupply.

anna: do investors do that too much, look at what happens now and assume that will continue and build models and valuations? >> far too much. different types of expectations. there's rational expectations, .nalyzing information then there's adaptive expectations. you extrapolate what has happened. there's far too many investors who rely on adaptive expectations. anna: what time horizon do you have for china? >> at least five years. ok, kevin, thank you very much. program, metals bounce. copper, nickel, and zinc all showing gains today on news out of china. it has to do with whether the chinese might introduce some kind of probe. that has pushed metals prices higher in shanghai and that fed through into some of the

european trading as well. doing athe miners little moving on the back of that. this is a look at london. we will leave you that shot for just a moment. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around.

anna: welcome back to "the pulse ." i'm anna edwards. here are bloomberg's top headlines. president obama told americans preparing for the thanksgiving holiday that there is no sign of a terror plot in the united states. he added that the u.s. is stepping up security in the wake of the deadly paris attacks. ande know of no specific credible intelligence indicating a plot on the homeland. let me remind the american people of what our coalition is doing to destroy these

terrorists. so far, our military and our partners have conducted more than 8000 airstrikes. those airstrikes along with the efforts of our partners on the ground have taken out key leaders and taken back territory in both iraq and syria. anna: francois hollande will meet russian president vladimir putin in moscow later for talks on tackling the threat posed by islamic state. it comes after the french leader pressed angela merkel for a greater anti-terror commitment from germany. the french finance minister said it is possible the terror attacks could affect french growth. u.k. prime minister david cameron will today urged parliament to back his plan to extend british bombing attacks on islamic state in syria. it is likely to split the conservative party and opposition. posedn told mps that i.s. a clear danger to the united

kingdom. now, let's get a look at the markets. mark barton has the charts that matter. mark: happy birthday, shanghai stock exchange. 25 years old today, 25 years young. on its birthday, the composite fell for the first time in three days. forget the last 25 years. what a year 2015 has been. the longest ever bull market ended on june 29. it lasted 935 days. what follows was one of china's shortest ever bear markets. the index rose to a seven-year high on june 12. it has fallen by 29%. that is the equivalent of $1.7 trillion of value. the aussie dollar falling today. one of the big performers on a global basis against the dollar this month. the nation's capital's investment fell last quarter.

capital expenditure sinking 9.2%. spendings by firm in mining and other industries slumped. the data comes after a quote tuesday night from the governor of the central bank in australia. he said markets should chill out on prospects for another rate cut. his advice to economists was, we've got christmas. we should just chill out. come back in february and see what the data says. that is what the data is saying. business investment is slumping. interest rates in australia held at a record low 2%. look at the price of crude. dipping today after a three-day winning run. between gains and losses today after the biggest three-day advance in a month. to u.s. count has dropped the lowest level since june 2010. idled mores have

than half the country's rigs. u.s. stockpiles rose for a knife straight week -- rose for a ninth straight week. quite a busy week for oil. venezuela warning that oil prices may drop as low as the mid-20's. opec meets next week. saudi arabia reiterating this week it is committed to working to achieving a balancing of the market. crude in the last 12 months down by 42%. anna: mark, thank you very much. here's another one. low for longer, the message from rio tinto's ceo. he says there's a couple years of hard times had right for copper. >> i think it's important to step back and look at the big

picture here. we are bullish about the long-term fundamentals. there is no doubt in our minds that there will be a long-term demand for copper. .ome of the commodities in the short term, there is some volatility in the market place. someolatility is driven by drivers. there is clearly a slowdown in china. as we say, china is transitioning from the old economy to the new economy. this creates some pressure on the prices. is uncertaintyr about what may happen in the u.s. in the coming weeks. the last sentiment is, some players are thinking some position in copper in some other areas. we have a situation where

volatility in the market placed the price under pressure. we take a long-term perspective. what is really important is what we do in the current environment. anna: that is the rio tinto view. industrial metals have surged after chinese regulators were considering a probe into shortselling on local exchanges. nickel gained as much as 3.9%. copper and sink also rally. caroline hyde has the details. good news for the metal investors. caroline: rio tinto bullish in the long-term. it does seem to be on speculation of what's happening in china. it is the industry talking. isunderstand that china basically going to the regulators, the agency, the national development and reform commission, saying, first of all, look into shortselling of metals.

us., help some of these metals. they are looking for them to buy nickel and aluminum. nickel potentially raining back production. a bit of a perfect storm brewing. as we know, this is just reported at the moment. anna: the logic is that if there are fewer bearish bets, the price goes higher. caroline: exactly. that's why you are seeing a pop across the board and so many u.k. listed companies getting a surge higher. anna: but not all of them. caroline: bhp billiton we saw a drop in asia. it is down lower in the united kingdom as well. this seems to be on the back of you an investigation. we know of that appalling disaster in brazil. it is the biggest mining disaster in history. . deadly mine spill in brazil

-- the dams burst. in floods toxic water. they did not do enough to prevent harm. we've already heard from bhp billiton this morning, saying, we respect the u.n. open yet but they say there's no danger to human health. overall, we are getting from the u.n. that this is a disaster. what will be the ramifications for the companies behind this? great tragedy. they now have to work out what they have to do. caroline, thank you very much. caroline hyde on the metals. up next, property problem. conservative candidate for the mayor of london tells us about his plans to tackle the housing crisis.

♪

anna: welcome back. some breaking news for you. we were expecting david cameron, we are expecting him to speak later in the house of commons about the serious situation. he's published the case for syria strikes as the british

government is calling it. he says that the u.k. caps on product -- can't subcontract security to other nations. he says that 800 britons are of a security concern. they have traveled to syria. he's putting his case to parliament. forants to gain support extending the u.k. bombing activity. he wants that to be expanded and go into syria. he was defeated in an attempt to get approval from parliament to do that a couple years ago. he has been keen to make sure he doesn't put this to another vote until he knows he's going to get the support of lawmakers. the opposition labor party, we will wait to see what they say. cameron going on to say that assad of syria has driven support for i.s. through his actions. sticking with the u.k., u.k. chancellor of the exchequer

george osborne reversed plans to cut incomes for people on low pay and found money for the police service. this is parliament's reaction as he announced his u-turn on tax credits. >> i've listened to the concerns. i understand them. because i've been able to announce an improvement in the public finances, the simplest things to do is to avoid them altogether. [jeers] is that the means tax credit thresholds remain unchanged. anna: the u.k. government has also announced increased homeownership in london by expanding its help to buy scheme in a city where average homes now cost more than half a million pounds. conservative candidate for mayor zac goldsmith was behind the plan. we spoke to him following the

government's announcement. awaythink it is far and the biggest issue in london. the london helped to buy helped a lot of people who couldn't otherwise achieve homeownership. there's a lot more to be done. anna: in a city where the average selling price is over 500,000 pounds, is this going to make a dent? do we need something more radical? >> we do. this is a 40% loan interest free for five years. it is only part of it. the chancellor also spoke about starter homes and the next mayor is going to have to do a lot to create affordable rent. a lot of people aren't poor enough to qualify for housing a veryh, and there's large group in the middle. young professionals who rely on affordable rent.

anna: it must be good when you are running to be the next mayor of london to have friends in high places to deliver this kind of policy. >> the thing about london, is that we depend disproportionately on central government. line in the job description of any mayor of london is getting a good deal from government. continue to do it as mayor if elected. anna: george osborne had to back away from some of the plans he had around tax credits today. was that expected by everybody? >> i don't think anybody expected the outcome we got today. times thatlenty of he's shown that he is someone who listens to the arguments. the same is true for the police funding. we have an absolute connection. no one expected that.

i think that this is a good reflection on the chancellor's who will hear the argument. zac goldsmith speaking to me outside the houses of parliament. those are our top stories in the u.k. here are some more bloomberg top headlines this morning. the australian dollar dipped after business investment for the last quarter fell by the most on record. capital expenditure was down by 9.2%. the news may increase pressure on the rba for further rate cuts. the shanghai stock exchange is celebrating today, marking 25 years since its launch. it has gained more than 350 0% since then but it hasn't been a smooth ride. it was at the center of this year's $5 trillion equity rout.

creditors of abengoa are facing tough choices, having to decide whether to dump their holdings in the firm. abengoa teeters on the brink of becoming spain's biggest corporate bankruptcy. let's stick with that story. roderigo joins us now from madrid on that. good to see you again. how much trouble is abengoa in? >> a lot of trouble. so are its creditors. the company has 9 billion in debt roughly and about four months to try to find a solution and reach an agreement with their investors. there's a lot of money. this is one of the most traded bonds in european corporate. there's a lot of people who could suffer a big hit if a solution isn't found. 9 billion is not anything double to center on. these conversations have already taken some time. what is the possibility of the

spanish government lending support to salvage this business? difficult knight is a one. the white knight that showed up after three or four months of trying to find one pulled out the day before yesterday. the government is the big question mark. some have said they are concerned and attentive. the energy minister today said exactly that. he also added that this is not a time for the government to step in. it seems unlikely the government would want to come out and support a company with so much debt right before they go to the polls. anna: abengoa has a 40% stake in a u.s. business. where does that leave that company? that company has a larger market cap then abengoa does now. >> it does and it has a much more solid business model. unlike abengoa, who has to build

their own projects, abengoa only manages products that have been built. it is easier to monetize. abengoa is seeking to sell its stake there or find some other solution for it. they have been trying to do something for a few months already. now, it may come down to a buy or sell, which may not be ideal. anna: ok, thanks for joining us. up next on the program, all about the ecb. draghi needs to come up with something to surprise traders next week or risk a rebound in the euro. what are the options on the table? ♪

anna: welcome back. ." are watching "the pulse here are bloomberg top headlines. president obama told americans preparing for the thanksgiving holiday that there was no sign of a credible terror plot in the u.s. he added that the u.s. is stepping up security. >> right now, we know of no specific and credible intelligence indicating a plot on the homeland. let me remind the american people what our coalition is doing to destroy these terrorists. so far, our military and our

partners have conducted more than 8000 airstrikes. those airstrikes have along with the efforts of our partners on the ground taken out key leaders and taken back territory in iraq and syria. anna: francois hollande will meet russian president vladimir putin in moscow later for talks on tackling the threat posed by islamic state. the french leader yesterday rest angela merkel for a greater anti-terror commitment from germany. saidrench finance minister the attacks could affect growth in france. david cameron will today urged parliament to back his plan to extend british bombing attacks on islamic state in syria. it is likely to split the conservative and labor parties. that assad has driven support for i.s. through his

actions. we are still expecting him to speak in around 40 minutes time. the euro has hit a seven-month low against the dollar. investors speculate the european central bank will expand stimulus. the currency is headed for its biggest monthly decline against the greenback since march. the fed considers raising interest rates. let's bring into the conversation richard jones from bloomberg's "first word." what are we expecting from draghi? >> i think it's interesting. the timing is very important. ever since draghi testified to the european parliament, the market has been expecting a 10-basis point cut next week. over the past 24 hours or so, odds of a bigger deposit rate cut have jumped. we are looking at a 90% chance of 15 basis points next week. i think by the time they meet

next month -- sorry, in january, there will be 20 basis points of cumulative easing priced in. i think the market is looking towards a deposit rate cut. extension, perhaps expansion of qe. perhaps both. i'm of the opinion that they might keep a little bit of powder dry for january. let's see what the fed does. let's see what the reaction is to that. what would constitute a surprise from the ecb? there's a lot of expectation that they will do something significant in december. beto me, the surprise would possibly a negative surprise, which is to say they do a deposit rate cut and very little on the qe side. the risk is the euro bounces from its current lower levels perhaps up to 1.09, 1.10 versus the dollar.

this won't necessarily be the end of the world for the ecb. they don't want absolute freefall. investors you told you will get a chance between now and the end of next year, to sell euro at 1.09 or 1.10, they would be very happy. and what would the implications before the euro? some people are talking about parity. if we do see that kind of negative surprise from mario draghi, if he doesn't deliver on qe, the risk is the euro bounces. up toi said, if we get 1.09, 1.10, you will find a lot of sellers. it should probably cap the euro's assent, which i expect the ecb is banking on. if it does happen and we don't get a pullback after the bounce, if they save something for

january, then they've got a bit of powder dry. anna: thank you for giving us your thoughts. richard jones joining us from "bloomberg first word." up next is surveillance. it is thanksgiving in the united states. i'm off to enjoy some turkey. ♪

francine: francois hollande meets with vladimir putin. the european central bank due to prevent a eu ro bounce? good morning. this is bloomberg "surveillance" . i'm francine lacqua in london with guy johnson. i sound like tom keene.