>> the bank of england says all major u.k. banks are 2015 stress tests. it may force banks to set aside more capital in march. -- capital hits a three year low. commodities brace for more pain. for 2015, theonth dollar index retreats for the first time in five days. a busy morning for the city of london. a busy morning for me and tom

keene. good morning. -- it is on that your screen. to 10.7%.s rate falls you are back to 10.7%. that is a loose labor market. a lot of moving parts and then on to paris on friday. and then the meeting of the mayors in paris. let's get to vonnie quinn. vonnie: good morning. we begin with russia. call for ated a one-on-one meeting. that turkey shot down warplane, there cannot be a talk

about a coalition. david cameron has called for a vote tomorrow on extending british airstrikes into the islamic state. order the wouldn't attacks unless he knew he could win a vote. that has led to a split. jeremy corbyn opposes the attacks. other members are in favor. -- adding new screening requirements for 38 countries to come to the u.s. without a visa. includessays that radicalized europeans who could make their way to the u.s.. minister isme telling people, come to paris. it is perfectly safe here. torres to come to the city of light and spent the money. deployed soldiers around paris. --beijing, the worst

attendance of the year is allowing some parents to keep their children at home. you can get these stories today at the new bloomberg.com. tom: let me get a data check. currencies -- the 10 year yield has done nothing for 10 months. lots of talk about parity. here.ities are boring bloomberg screen. >> it really is. tom: that is all equity. it is. switch of the board, excite tom keene.

u.s. two year is approaching 1%, that is what is driving the u.s. dollar at the moment. at 45, theyrude is are waiting on thursday. >> the u.s. economy has already peaked. that is according to our next guest, marios maratheftis. he will talk about the 2016 economic outlook. the china data is overdone? think it is overdone, it is looking pretty at all. marios: when you look at the way the markets are behaving. they are consistent with a hot landing in china. and when you focus on manufacturing in china, they do say it is soft. but it shouldn't be a surprise. china is rebalancing and services are becoming more important.

tom: let's talk about your expertise. the emerging markets, are they going to have a knocked down affect to mario draghi and janet yellen? do we need to worry about emerging markets? no, not at all. i think the problems facing mario draghi is domestic. i even think the problems in the united states are u.s. problems. so i don't think emerging markets are cause for concern. they are growing their wealth and they are faster than global growth. they are growing faster than all of the countries you have u.k.,ned -- the u.s., europe and japan. according to mario draghi, the economy is ok. would you just said was completely the opposite. is he wrong or is the message

there for a reason? marios: the message is probably there for a reason. of the rightll things, he has been doing the right things for years now. . expect him to continue it is the policy. i expect him to add to -- this isthe right policy but he doing the right thing for his economy. jonathan: you expect him to do what everyone else wants them to do. and is itdeposit rate -- get the enough to dollar to pop? parity inthink the the first quarter of next year, the weakness is factored in. to go, we little more will see the importance of the euro in the first quarter and then you will see some gradual recovery. what you do so well are the

adjacencies of the debate. in --an ferro and i were who is going to blink next year? through in thenk tell last january. who is going to be in the swiss move,al bank in 2016 and based off all these elephants in the room? expect -- to be on a broader recovery after the first quarter of next year. so you are not calling for dollar strength? foros: we are calling dollar strength in the first quarter of next year but we don't expect the fed to go to beyond that, we will see the recovery. a lot of the impact on emerging markets has already taken place. currencies in emerging markets have weakened in anticipation. tom keene raises an interesting point. currency wars next year.

we are looking at a dollar and a yen, a boj that has run out of space on the balance sheet. is this a central bank that has already done too much? limit and theis a problem that we have in the world is inadequate demand, slow growth, it cannot be solved the central bank. central banks are doing everything they can and they are running out of room. they cannot solve their problem. this is the case all over the world. , and correcte here me if i am wrong, is a cautious view. we have had to fly to of u.s. equities. you have the same tone -- be cautious next year. on growtham cautious and the economy. it will be flat gross with low inflation and it will be better

for markets because they are two things that sparked -- that spooks the markets in 2015. the concerns with china making a hot landing and the concerns over the fed hiking. i think these two factors have run their course. quickly, how will the united arab emirates do with sustaining the oil? marios: i think they have to slow down. spending from the government will be less in 2016. ft, they lost 10% of their sovereign assets. marios: i also think the liquidity will tighten as governments use their deposits to fund their spending. overall, we are projecting slower growth. we are positive with oil prices.

so that should lead to a better 2017. in 2017, welready can barely get to friday. coming up, we have brendan greeley in a discussion with the -- jack lew. that is at 9:00 in new york and 2:00 in london. ♪

tom: good morning everyone, this is "bloomberg surveillance," in london. we say good morning to you. early morning in new york. speaking of new york, here is a vonnie quinn. to of uk's biggest banks

will not have to raise additional capital, that is from the latest stress tests with the bank of england. they did fall short in some areas. this was the second public stress test. in china, and other signs the economy is slowing down. chinese manufacturing has slowed to the lowest level in years. china's services sector has shown more strength. thecuts are on the way in morgan stanley's fixed income unit. they may come up to one fourth of their staff. they say that revenue fell 42%. that is the latest bloomberg business flash. jonathan: vonnie quinn, thank you very much. brewing on the sidelines and the relationship between russia and turkey has deteriorated after turkey shot down a russian plane violating its airspace. president obama met with the

russian president putin earlier and hans nichols joins us now in paris. 150 globalt over leaders into one city, it will ever be just one thing. hans: it is dominating a lot of the sideline conversations. what you do to bring together a coalition and also about the broader issue of terrorism. at thed a meeting here u.s. embassy in paris and they all seem focused on finding language that the escalates the tension with russia. here is what we heard from laterally are putin last night. this is what he said after the meeting with barack obama. was shothat the bomber down by turkey military, what kind of broad coalition can we talk about? find -- they seem

to need to find a way for turkey to say sorry without actually saying sorry. president obama expressed his condolences. gatehan: how bad can this -- this get? how big is the consequence? hans: we won't know until we get to the winter and then we have a gas discussion. that is always a discussion with from anyto paloma see country that receives gas or a pipeline goes through from russia to those countries. that is what i will be looking for. ukraineno tensions in and there is no movement there. is being better enforced. the sanctions against russia expire at the end of january. there is always a chance that you could use those two and reduce tensions that way. tom: you are good at the pulse

of the back room. vladimir putin and barack obama made the appropriate photo opportunities to get the appropriate headline. i don't care about that. what is the backstory? hans: we don't know. all we have are the two photos that show a frosty conversation. we have the white house saying they got mixed messages from the they arend that actually still bombing opposition groups that could pave the way for post president assad russia. we also have the u.s. side. usually it is the russian side that is negative and it is u.s. putting the gloss on it. this time it is reversed but i don't know what to read into that. i can take you beyond the flipping of the script. helicopter pade is ok. thank you so much. we are bringing the "bloomberg

usveillance" helicopter with to move around paris. to be serious about this for a with the currents going on in paris, oil has moved off the geopolitics. why is that? not, it seems that the positive apply is still the driver. the dynamics are changing rapidly. we are in a supply crunch to the end of next year. tom: less supply? marios: yes. and we thinklining it is going to decline further in 2016. wherean: where is to -- is supply declining? marios: in the u.s. -- jonathan: i am looking at the

numbers, where are they? marios: the big difference with weak oil prices this time to 1996, 1990 eight, there isher. the bring this up later in -- who tied my bowtie? this looks terrible. so you are saying that they are going to rebound. looking at $55 a barrel, that is a tradable move? marios: yes. we have seen it go higher than that. we have 75 average price for the fourth quarter of next year. tom: do you do that so you can get a table in dubai? marios: not even that gets me a table in dubai. [laughter] watching this

believes you that we will get back to 75. it will happen in a short time, very fast. significante a price squeeze, it is already happening. once the inventory is topping out, that his let me will see if gain momentum. francine and i will be broadcasting from paris at the climate conference this friday. by then, there will be a real tone of will this be another copenhagen or cap they get something done? frommberg surveillance" paris on friday. ♪

jonathan: good morning from the city of london, i am jonathan ferro with tom keene. decision. the ecb this is your morning must read. pressure building for mario draghi to act, if he resists these pressures, he risks dismantling a central bank confidence bubble that is key to europe's growth strategy. this is really key. tom: i totally agree. the idea here of the new economics, it goes back to hundred-500-1000 years. the confidence trick. the unlimitedas

bond buying program where he didn't even need to buy a single bond. marios: this is important to deliver. thatve to remind ourselves we are not going to solve the problem. the right policy is crucial because the wrong policy would make things watch -- things much worse. doing the right things but all of the right things. jonathan: what a are the right things? 2015.d date is september how long does this go on for. tom: but then he has to open his mouth. jonathan: he has to do something. consensus -- everyone says we are pricing it in. 0.03%. we are pricing in

go up to 70 al month and that is positive but i want to highlight the importance of these policies. he is anchoring expectations. we had good swedish to gdp yesterday. why the emergency? is he still propping up the debris from 2008? marios: i think you have to think banks. we are starting from an incredibly low base. growth in europe is not incredibly even. there are still magic numbers with employment in europe. tom:'s italy still in a recession? hinged to they is

floor with growth. we have been stuck at zero for to long. the longer we stay, the harder it is to get away. that is the essence. bad news. jonathan ferro is here with us, francine lacqua is off. citigroup,joined by with the likelihood about global recession. we will go to mario draghi at the ecb. bloomberg radio from new york and washington and san francisco in the bay area and worldwide on bloomberg radio plus. good morning. ♪

tom: good morning everyone, "bloomberg surveillance," we say good morning to you.

draghiwaiting for mario and a big announcement on thursday. here with the first word news is vonnie quinn. vonnie: vladimir putin painted a picture of his meeting with barack obama at the white house didn't see it to same way. they say they have an understanding of what needs to be done in syria. the white house said that barack obama stressed that president assad cannot stay in power. the russians are still attacking legitimate opposition forces. in london, the house of commons will vote tomorrow on expanding tradition attacks on the islamic state. david cameron called for the it has led to a split in the labor opposition party. partysenior labour members are in a very. the talks in paris are

highlighting a major split in europe. western europe is accelerating its response -- but eastern europe say that they should keep mines open for decades. the country that has become the world's worst polluter wants money to solve the problem. indonesia's problem comes from burning forests. the country says it needs $4 billion with international help, it could restore those forests. a college student has been threatened with -- has been charged with threatening to kill white men at a university. a 21-year-old made the threat after the release of a video showing the chicago police officer shooting a teenager. you can get more on these stories coming up on bloomberg.com. tom: thank you.

we do have continued slowdown. we have our chief asia correspondent. what is different this time around? what is different with the character and decline? good morning, with some respects, the numbers are disappointing. have a manufacturing sector and underscoring the showmy, numbers today things not getting much worse. and that is what people are clinging to. we know that manufacturing is weak. look at the service side of things. theo pick up going on in real estate sector. things are not getting better but they are not getting worse. year,head into the new there is hope it will gain traction in the first quarter.

brokehanghai iron ore down to new weakness today. know the mining story, the manufacturing pmi story. yesterday, the imf put a rubber yuan on the u.n. -- on the . >> this is not going to be a game changer overnight. we will have a trickle-down effect. over time, it will lead to an increase in china that would add to the economy. this will be and i are playing of support that wasn't there before. going forward, this is for the tog-term china game plan modernize the economy. it is not going to change things overnight. tom: where are the capital flows right now? -- what isbeijing

the mood of the capital flows in this moment? i went say that the capital outflow story has eased somewhat. record outflow around august and september in the wake of the valuation at the stock market. it is still very fragile. we can see that in the levels of china's currency reserves which seem to have stabilized. they can also intervene in complicated ways. indications are that they have stabilized. tom: thank you so much. from hong kong. marios maratheftis is on the watch in dubai over the last decade. some of the flow money goes to dubai. what is the enthusiasm of chinese investment in the middle east? chinese investment has

been rising exponentially over the past 7-8 years. it will continue. china manufacturing is slowing down and the economy is slowing down. but let's not forget that this is an economy that is close to 7%, it is the second largest economy in the world. so the delta it creates for the rest of the world, it is more when china today in was growing in double digits. 6% is still decent growth, that is the theory. i keep asking this question, i haven't got a good response peers history tells me if you -- there is no historical example that you don't fall off the side in a terrible crash. why is china different? marios: china is slowing down on the backside of the credit room. ratios to keepg

growth close to 7% and they cannot cut to aggressively because they don't need another credit boom. ,ut china absolutely has debt it is high, but not much higher than other economies in other major countries. distinction is, in a domestic chinese economy, even they arere challenged still going to put money into the middle east. marios: china is a net capital exporter. they have to. a massivetill running -- on that basis, they will be exporting more capital the empty capital that comes in. that has been the case and it will continue to be the case. jonathan: the whole point about the middle east, fine, that is critical. but where does it go? does it go to the u.s.? marios: what you are seeing with the decline of foreign reserves is that less goes to the u.s. and more is exported elsewhere.

the one roadget initiative. china will be funding x matisse to the rest of asia over the next few years. it will be the biggest capital exporter in the world. ore when we say oh, iron hit a new low today. is likeour ordinance oh, so what. but what does it mean to you? it will take a while for the rest of the commodity world to rebound. we don't expect big rebounds in 2016. does it change the global economic outlook? not really. seen a recovery and when it comes to commodities, the to commodities that we must value our oil and gold. the fed hikes, we will see that as a buying opportunity. tom: marios maratheftis is here

with us. no one in investment management is in the world like martin gilbert. he is on the cover of the ft today. writing of the challenges with growth sovereign wealth funds. later today. ♪

jonathan: welcome back to "bloomberg surveillance," here are some of the great stories on bloomberg.com. the unemployment rate in italy fell to the lowest level since december 2012. --the tech, saying sons samsung's new leader is bringing

new leadership to the country and the tech is working with regulators after a heart attack compromise data. no credit card information was accessed but names, passwords and photos have been obtained. time to get to the morning movers. 100 is trading higher. -- trading higher after the bank of england passed all major u.k. banks in a stress test. the charter is up by 1%. lloyd is trading higher. barclays is the same. a critical part is not the stress test but what may happen in march and the introduction of a countercyclical buffer. they are being asked to put smoothore cash so you

out the peaks and troughs in the credit. tom: so it will be like the swiss? jonathan: in some ways yes, but not as extreme as the swiss. the countercyclical approach in the u.k. encroached a countercyclical growth in the europe. policy can make things worse on the way up and down. i would argue that monetary conditions all over the world in the u.s., europe, china -- the major economies -- are still very tight. when you look at growth and money supply data, it is not growing. have money supply and it is an growing. talkwhy does stand fisher about an old accommodating policy? interest rates are at zero, which would suggest that -- we had quantitative easing

which would suggest that it is easing. -- cash accumulated stayed with the banks. it did not find its way to the economy. so when you look at the broad money supply data, it is simply not growing. interest rates are not the goal. they are low but it is still tight. jonathan: this wasn't severe enough. i will go through some of the conditions. then a crudeth and price of $38 a barrel. we are almost there. a drop in the euro, around 20%. five dollarsest is below where we are. jonathan: precisely. you think these stress tests

are stressful enough? we see china growing at 2% we are in a global recession. that is some serious stress. the rest of it can be argued. -- are incredibly volatile. 10%-15% lower than where we are now. tom: you mentioned cyclical and countercyclical -- are we better now at adapting in europe and the complexities of europe in a macro credential way? marios: i am not too sure. we will have to wait and see until the next move. there is no growth and money supplies are not growing unemployment is high. the list of the worries is a big boom which we are not seeing. whenll have the best idea

the next boom comes and things begin to improve. jonathan: we have a guest here who says financial conditions aren't loose enough. this doesn't add up to me. tom keene. tom: it is almost like a loop -- a new low. jonathan: stay with us. coming up, the paypal ceo will join bloomberg markets. this is "bloomberg surveillance," jonathan ferro and tom keene. ♪

jonathan: good morning, this is ambloomberg surveillance," i jonathan ferro alongside tom keene. good morning vonnie quinn. vonnie: good morning. macau is down. that is the 18th straight decline now. stakes keeping high gamblers at home. morgan stanley is calling 2016 the year of the yen.

they say it will outshine the dollar in the foreign exchange unit. they say the yen will weaken more next year. the chinese consortium gets its foot in the door of british soccer. paying for a 30% stake in the holding company that owns manchester city. city years ago and has won two titles and is tied for first place this season. whoyou a man city or a man fan? italian and dad was i was born in the 1980's. i want to find out the manchester city equivalent in the nfl. who is a really bad team? tom: like the boston red sox? they come in and plug

loads of money, and then before you know it, they are the best team in the league. [laughter] maratheftis is here with us, he has fabulous experience in the middle east. for years, you have watched the ups and downs of what they do. i think of chris davidson, one of the great world authorities. was,ew book a year ago after the sheiks. what is going to happen after the sheiks? you look at the economy in our derby for 2016, you should expected to slow down. they cannot maintain current levels and they need to soften. liquidity will be tighter and production cannot keep rising the way it rose in 2015. geopolitics in the region are messy and we cannot forecast and

improvement anytime soon. everyone is speaking about a guest at 8:00, arguably the most important wall street interview of the day, martin gilbert. dialing margin and asking for their money back. prices whereoil they are, you can't bet against it. for the saudi budget to break even, you need oil prices close to $95. saudi arabia will still be running a budget deficit. the current account is still important. and that is not optimistic because the price for the current account is close to $70 a barrel. weif we do see $75 before hit the end of the year, there could be more accumulation of

foreign assets for the saudi arabians. it will moderately improved to words the end of 2016. tom: i can't believe it will go from $40 to $70. jonathan: quite clearly there are budgets here that will feel the pain. the portfolio flow interests me. it also interest me that they have to budget at $90. it is the amount of welfare. are they still feeling ok? marios: the people are feeling ok. the government is running the deficit. doom and gloom because they have been accumulating savings during the good times. forget about foreign reserves. $360at local banks around billion. so they can finance the deficit

for a short here and they have no debt. tom: i sat in a restaurant in dubai one million years ago and you turn to me and showed me all the cranes and they were vacant. tell us about the vibrancy of dubai. it as the, we know hugely successful emirates air. but there has to be more? marios: absolutely. a went through a downtown -- downturn in 2009. i think the growth will be slower along with everyone else in the region. but it is a hub. it is a service hub and a port hub. africa, middle east and the model is sustainable and it is a success story. it will go through its ups and downs in the cycle. bexpect the success story to

in 2016. vonnie: we are looking for a jobs report on friday. what are you looking for? anything that could change their mind about a hike? the fed has more or less promised us a december hike. the u.s. economy is strong as we speak. it will make it possible for the fed to hike. we also see the u.s. economy hitting its peak. significant deceleration into next year. it will only be around 1.6%. it will limit the ability of the fed to hike aggressively. we see a hike in december, a hike in march and that is it. that is a shallow hiking cycle. it is for confidence in emerging markets. we also think they will be

forced to cut interest rates once again before the year ends. with the economy peaking at slowing down, it is way too optimistic. vonnie: how significant is the potential for another recession? marios: there is the potential for a shadow recession in 2017. things are slowing down and with rates moving higher, i think there is a risk that we could have a shallow recession in 2017. did we just hear him say that janet yellen will cut interest rates? jonathan: did you hear that? i heard that? why hike rates anyway? marios: i don't think they should be to begin with. it would be better for the u.s. economy to not hike rates.

we would be better if the fed revised the target to 3% and make it clear for markets before we see the inflation. tom: we will continue this discussion in dubai. marios maratheftis from standard chartered bank. theng up, we will come from paris climate talks. in newll be around 8:25 york. we continue another hour from "bloomberg surveillance." tom keene at jonathan ferro. good morning. ♪

tom: the new mediocre. q.e. infinity. the hallways of paris stay warm as turkey and russia give each other the culturally. obama and putin huddle. and open me first. each is a pickup truck and every american driveway. good morning, everyone. this is bloomberg "surveillance" live from our world headquarters in london. it is tuesday, december 1. vonnie quinn and new york. with me, jon ferro. an important news on brazil. new levels of ugly. expected to be ugly quarter on quarter. -1.2%. the guys on wall street, they like the year on year -- brutal. tom: you wonder what it will do to dollar-real, when we get

traded. we wonder if we get a test of that here in the morning. here is vonnie quinn. vonnie: thanks. president obama trying to cool off the heat between russia and turkey. the president met in paris with turkish leader erdogan. turkey shot down a russian warplane last week. president obama is urging turkey and russia to focus on fighting islamic state. instead of each other. askingameron is parliament to vote tomorrow on using british airpower against islamic state in syria. cameron has said he would not order the attacks unless he knew it would win the house of commons. jeremy corbyn opposes the attacks but some members of the labour party are in favor. freee many soldiers are today after being held hostage in syria by a group linked to al qaeda. they were released near the border town where they were captured. more than a year ago.

lebanon is swapping some prisoners to the militants. worked outrom qatar the deal. the u.s. is making it tougher to enter the country. the government is adding requirements to a program that lets people from 38 countries enter the u.s. without visas. the white house says it is aimed at radicalized europeans who have traveled to syria and could make their way to the united states. worst pollution of the year is forcing some parents in beijing to keep their children at home. asendance was optional today most schools and city officials impose limits on factory outputs inthe country. to get more on these and other stories 24 hours a day at number.c-- at bloomberg.com. tom: the timing of that with the paris talks is unreal. vonnie: a couple of great offense. -- op-ed. david brooks. talking about this paris meeting in the various different things it brings up, including an op ed about how west virginia is

suffering from the closure of es.d tom: we will be in paris on friday to advance the discussion particular with mayors of cities around the world. my people talk to jon ferro's people. i get one board. euro, nowhere near the parity watch. commodities are very fragile. iron ore closing ugly in asia. jonathan: around $40 metric a ton. llar.ooking at euro do up by 40climbing points as the banks leading gains. switch of the board quickly. the bond market, all the headlines. the german two year yield, negative. a fresh all-time -- tom: is there a margin call in copper? we think of the london metals

exchange. i have not heard margin calls come up yet. jonathan: there have been some margin calls and commodity fund. tom: he's going nuts on the phone with his commodities broker. jonathan: there has not been a panic that you always going to have the margin calls for some of the players. you're seeing the likes of glencore get into trouble. in the ftsel page day on noble group. they think their accounting is ok in a few people are going, maybe not. what we know is that we have someone who is clear thinking. rbc, royalord at bank of canada. he joins us this morning. let me cut to the chase. will mario draghi move markets on thursday? will definitely move the market. question is will he surprise to the upside? expectations running quite high. is this time going to be really different? are the markets going to move in

the other directions? beneaths he want a euro parity. bankers never admit that. peter: richard not the ecb. theot one needele in compass and that is what we are targeted having said that, he has alluded to a weaker euro is going to help. jonathan: how disease apprise the market thursday? please tell me -- how does he surprise the market thursday? peter: i think he will cut by 20. i think that. even that is more or less priced in. if you asked me for the hypothetical, deeper rate cuts are possible. you had the intro here. q.e. infinity. i do not think it is very likely. some people think that is a possibility. and there is always the probable rabbit he can pull out of the hat. ecb told me we were there, -2%.

what has changed in the last year? peter: a brilliant question. this is probably one of the most powerful things that draghi has done. he has pulled out that lower bound -- and he's replaced it with an explanation on real interest rates. tom: to show you where we are moving, this is totally obscure. i look at the 15 year swiss as an oddity of negative yields. this morning new lows. 8%.o positive, 0.0 we are down from 2115 goto 10 to 8. jonathan: the swiss curve. can the bund curve start to look like that? the pointghi makes repeatedly -- for him what counts as real interest rates. real interest rates minus inflation expectations. as long as inflation expectations are down --

tom: this is critical. this goes strictly to america. if you have an embedded disinflation and outright deflation, what mr. draghi is suggesting is these nations have to reflate their budgets. there is no political will in matter, thefor that united states to reflate fiscal policy, is ther? exactly the not same point -- but another critical point. fiscal policy so far in europe has been heavily austere. but now what we are seeing, not really by design, is that this is changing a little bit. the refugee crisis is one element. so, that's changing the game. but i think you're absolutely right. what we do not have here is everyone going, full throttle. let's move it up here. but a little bit easing on the fiscal side. jonathan: hardly anyone spoke to me about this -- the resistance at the ecb. is he going to get some on thursday? peter: within the council?

of course, the will be some. they are never named but i would recommend usual suspects. jonathan: can they ship the policy anymore? seen anyoneyou really that came out forcibly pounding the table? tom: we need to talk about america right now. at last guest we had standard chartered outrageously cautious view on the kennedy -- the american economy. the assumption is we are the locomotive in american everybody else the hell twith it. do you have the optimism that america can develop trended gdp? peter: you just mentioned, tom. he must've had them on the show. mosts probably one of optimistic guys out there. when you look at the arguments he brings to the table, i think it makes a lot of sense. you have the labor market that

is pretty tight . will see wage inflation creeping in. when you mention with market expectations -- tom: what makes the conversation show which is pro-s and violenty disagree. jonathan: you're saying trying to find to economists that agree with each other. tom: there is a huge polarity. jonathan: such a binary view of what is happening. peter: you have two economists and three opinions. tom: where are you on the dollar? that. not sure about euro when you match against theeuro. what you have is the euro is weak. you budget. , there is a possibility we touch parity. tom: mark chandler says we go through to 0.90 even closer. that is the debate as we go into believe isd 2016 i what next year is. coming up on bloomberg ,

without question the global wall street interview of the day. he is on the front pages of the newspapers. martin gilbert, the beleaguered -- sovereign wealth funds are darling -- dialing 1-800 gilbert. and important interview with martin gilbert. ♪

good morning. this is bloomberg "surveillance" . i'm jonathan ferro long son tom king in london. good morning to waking up on wall street. let's get to vonnie quinn. vonnie: thank you so much. britain's major lender's are getting passing marks from the bank of england. they cleared stress tests. the tests are -- at morgan the way

stanley's fixed-income unit. the bank may cut 1/4 of its s taff. trading revenue fell 42%. and even though internet buying is soaring, the average amount americans spend online and some categories fell during black friday weekend. more people have mobile devices smaller face -- place orders. cyber monday expected to be the biggest online shopping day ever according to some of the analysts. sales. with are out.s are carmakers profiting for more vehicles sold? suv's drivingd off lots in record numbers but are carmakers celebrating? keith: they absolutely are because this is profitable prosperity. they are experiencing.

we are approaching a record in auto sales. we could topple the record that was set in 2017 -- set in 2000. it should be another strong mud. vonnie: they do have to offer rebates and 0% financing to get the buyers in. keith: they have increased rebates by 6% over last year. they have not increased and to the levels we saw in the bad old days when they give up all their profits just move the metal. there is a lot of activity. carmakers really take advantage of the black friday period. it is not just for retailers anymore. and they do a lot of business in the months of november. has been the fallout from all of the recalls and the problem cars? i we seen consumers changing their habits at all? keith: we are seeing them shy away from volkswagen. sales should be down noticeably. it will be the first full month after the whole diesel-gate

controversy. so that has caused a move away from that brand. we're certainly not seeing a move away from gm or toyota which were the other brands affected by recalls in the last few years. tom: for a good couple years, how old is the fleet? we used to say the fleet was 30 years old, 11 years old. do we have a more modern fleet now? after all would think these minds of cars that have been sold, we would, but you still have cars that are a decade old on the road. we are still getting replacement demand going on. i think there are other drivers, but that is part of it. the cars have changed so much over the last 10 years. that is heart of what draws people in. there's a lot more technology. they are really connected cars. and that is what people want. vonnie: how much higher can we go? what are analysts saying? keith: we could be at a pace of 18.2 million, that would

match last month's pace. we are starting to see productions -- projections in the 18 million range which is on tried territory. -- untrod territory. vonnie: as we head towards the paris climate change conference anc, what can we tell about consumer choice? are they more worried about fuel economy or pollution? keith: as gas prices in the united states have gone down $2 .00 a gallon. suv sales have skyrocketed. car sales, the regular family sedan, down 5%. hybrid sales down. what americans consumers are saying is bigger is better. tom: terrific conversation. greatly appreciate it from detroit as we see all the different auto industry. michael mckee will have that on bloomberg radio coming up as well. 18 million is just extraordinaire. 16 million was the benchmark.

nobody ever thought. jonathan: the european car sales have picked up months on months as well. room,ephant in the credit. you get a breakdown of consumer credit and the united states, have a look at auto sales. it's absolutely -- tom: there is no question the catalyst or the jumpstart was you could go out and get a three or four year auto loan. housing is waiting for looser credit. jonathan: one of the reason the european market car market held of fif is credit. tom: the tracks is the other big story. we did not touch on that would keith. it's amazing america's fixation on bigger cars. vonnie, i know you drive a hummer. it is amazing how people have gone back to big cars. vonnie: i would be devastated about my humm.er

we have this idea that europeans are more advanced when it comes to things like recycling and driving greener cars. can you tell us more than anecdotally if that's true? jonathan: what i can tell you is there are more previous -- pri uses sold per square-mile in san francisco than london. tom: we have results through the morning. michael mckee on bloomberg radio. counting us up to 18 million units. an important interview -- brendan greeley will speak to jack lew, the treasury secretary. jack lew on the terrorist attacks in paris. stay with us. bloomberg "surveillance". ♪

jonathan: welcome to bloomberg "surveillance". here are some of the great stories you can check out on bloomberg.com. according to credit suisse, russia's budget revenue is suffering because of the ruple. the currency is overvalued. unit may havel found a buyer. one offer is being considered. menus in new york. new york city's new role requiring restaurant chains to post warnings over high sodium dishes is facing backlash by the national restaurant association. they have banned trans fat and required menus to list calories. tom: shake shack to suffer.

the line out the door is only two football fields long. a little bit. it is amazing to see how the restaurants are going back to basic foods. i don't see much more ladee dah. there are less micro portions. jonathan: i went out to eat last time with tom keene. tom: david brooks always interesting. addressing paris. the meetings. it is a very nuanced essay. here is a bit. "you are asking richer countries to pay hundreds in "reparations" to india and such places they can go on to burn mountains of coal and take away american jobs. and you're asking for all this top-down course into a last a century without any enforcement mechanism." a real wake-up call from mr.

brooks. i thought it was actually very fair and balanced. he really understands we have got to do something. but economic growth and th tangibleof it ise a risk. how do you link the debate over carmen and -- over climate and carbon to christine lagarde's new mediocre. nothing, growth is going to be very weak. how you actually do it, friendly, i don't know if i would. tom: this is tens of points. degrees means by some definition there is a lessening of growth. fascinatingere is a thing about this stranded asset. . if you do put a limit on carbon emissions, there is going to be a huge chunk of assets that these energies, these extraction

businesses will not be able to burn. that is going to have a big impact. that is jobs. that is output. peter: that is the second point you are raising is not only the absolute level of growth, but if you put some of these mechanisms in, they're going to be some industries that will benefit when others want. it is also redistribution. is different given a new mediocre or a global recession versus a paris in 2006 which was a boom economy. we are not there now. peter: no, absolutely not. when you look at what happened over the last couple years, when you look at most expectations, it's not likely that growth is going to be going back close to where we were in 2006. tom: jon ferro, in the papers this morning, india and mr. modi saying, wait a minute. we have to grow. donathan: he wrote an op-e this week.

the bottom line -- the industrialized nations. you have had your time. we still need to grope it we have got a decision between the green world that you may all want -- we still have to grow. tom: everybody is pivoting around president obama. they are pivoting around the adult in the dialog for both developed and less-developed nations is america. jonathan: how timely is that live shot of beijing? tom: i agree. the beijing shot could not have come at a better time. coming up later today, the president will speak in paris at the cop21 climate talks. francine and i move on to paris on friday. good morning. ♪ sure, tv has evolved over the years.

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for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. tom: from london, bloomberg "surveillance". a beautiful -- a rainy new york is what we call it today. i told vonnie i would not come back until the new york rangers

won. i'll be back next monday. >> that is a relief on so many counts. president obama is trying to heatedf -- cool off the dispute between russia and turkey. the president met with turkish leader erogan. president obama is urging turkey and russia to focus on flight -- on fighting islamic state. president obama: we all have a common enemy. and that is isis. i want to make sure we focus on that threat and we remain focused on the need to bring about some sort of political resolution in syria. the crisis erected last week when turkey shot down of russian warplane. the european union unveiled new aid today. $370 million is being pumped into a trust fund. the money will go to help 1.5 million refugees. turkey is now housing more refugees in any country in the world. a u.s. marine is found guilty of

murder in the philippines. a court convicted joseph pemberton of killing a filipina woman last year after discovering she was transgendered. he was sentenced to 6-12 years in prison. investigators in indonesia -- an air asia flight last year and on pilot error. peopleh killing all 162 on board. investigators say a rcrack caused the rudder system to fail. the country that has become the world's worst polluter in recent months wants money to solve the problem. most of india solution comes from burning -- replaced by plantations destroying forest s. get more on these and other breaking stories 24 hours a day at the new bloomberg.com. tom: i was reading today,

brookings institution work out of washington. they highlighted indonesia and the challenges they have with those fires, trying to get to some form of a better climate change economy. vonnie: it is very difficult. the president of the copenhagen consensus center saying the paris treaty could cost $1 trillion a year. the richer countries need to spend more on research in order to help the poor countries. tom: country by country, among ae 190 countries, each as different story. we are thrilled to bring in christopher watley, our chief market strategist. longview economic was smart in chart . i want to start with the idea which we are hearing from houses and i have never heard this in all my years of so many people in cash. joke, double leverage. pros like you are finding value in cash. >> we have seen all assets going up broadly speaking on the back

of cheap money, lots of q.e. out of the fed. we are now in a situation where we see an economy in the u.s. that is overstretched and got some access. and needs a small recession. without q.e., without the fed having your back, cash is a better alternative. tom: how board. jonathan: there seems to be two camps. one concerned about aggressive repricing. the other guys want to take advantage of some liquidity. some big flash crash moves. which one is it for you? asset in the camp that prices are overpriced. we need markets to go down. we need them to clear. and a recovery to come through at the other side of that. if i look at the u.s. corporate stressed.'s -- stretched.

one of the things i think is that we are in an environment where you compare the previous business cycle. even if you drill down, going to be a great discussion, i could well imagine this business cycle is going to last another two or three years. tom: oil related into the dollar. let's bring up the chart. if we could. we have a brent crude boom forever. we have the challenge of 2008. down, down we go. you are in the longer can. how low is low? peter: i don't see why we can't touch 30 are lower, particularly if we are right about demand. also, china -- china is the other side of the biggest credit boom any economy has seen relative to gdp. only yesterday we are looking at the indebtedness which is up three times in five years. fromiron ore is d-link oil. jonathan: 40 minutes ago we had

a guest. and one was optimistic about the u.s.. one very negative about the u.s. if you look at things, i wonder where we see the aggressive repricing in which asset class? do you see it in rates, and fixed income or equities? peter: i'm more worried about equities. bonds may go down in the selloff. the price will go down. the yield potentially go up. the biggest buyers have been the emerging markets. it's an unusual environment. tom: let's bring up, where we are on the clock on "surveillance" mary or draghi. we will have full coverage thursday of what the statement and changes are -- for mario draghi. at the press conference. some of that will be dollar reaction. let's bring up the dollar right now. and the idea of the plaza court off to the left. a five year moving average

peaking 2002. chris, let me start with you. do we see an extended dollar strength? chris: i think we are in a five-year dollar bull run. which may sound perverse. i think we need a big pause next year. if i think about the world structurally, the guys have done most of the healing is the u.s. economy and most of the deterioration is emerging markets. so if i think in that -- think the dollar stay strong. it is one of the few things we can agree on. probably not necessarily against the euro. if you look emerging-market currencies, it will stay strong. tom: these are some of the nuances that are great. michael pervis suggest watch asia xy. jonathan: the critical part of the fx market, so far the dollar

has been the pressure valve for everyone else. yellend chair janet continue to tolerate that? >> i think it is one and done. because the dollar question is too much. you are right. we live in a structural world that is deflationary. we are putting all that pressure on the u.s. economy, and that is part of the reason we are heading towards recession. tom: the great call of the last seven years has been disinflation. there is a search for growth. where will it come from? asi see this u.s. recession a smaller version of the second half than the first one. if we get the other side of it, we might be able to start normalizing u.s. monetary policy and normalizing productivity growth. which really is what it's all about. and that is where i think long-term growth can come from. but it is not going to be easy. you have to clean out more access. tom: and we have to clean out more excess in europe. is that right? jonathan: are you talking about

spare capacity in europe? there is plenty of that. global profitst have been flat for four years. this is a shockingly bad quality global recovery. tom: a lot of different opinions as we come to london with bloomberg "surveillance" on where will we be six months for no. hotels will be full. lowes chief executive officer. look for that in the 7:00 hour. jon ferro and tom keene in london. this is bloomberg "surveillance" . good morning. ♪

jonathan: good morning. this is bloomberg "surveillance" i'm jonathan ferro long sign tom keene. good morning, washington, d.c. .s. treasury secretary jack lew

coming up later this morning. for now, let's get the bloomberg business flash. vonnie: thank you so much. -- patrolling will have to pay$160 million in its role in the 2010 gulf of mexico oil spill. the u.s. government asset anadarko be fined $1 billion. nissan was to increase its stake in the french automaker renault. it was to weaken the french government's influence over the automaker's allies. board metsaying its the issue. apple plans to drop the headphone jacks. be replaced with a type that plug into the lighting jack you will be able to use

over headphones but using an adapter. all the more for you to buy, tom. tom: yeah. duringhere on set breaks doing this with my apple, my things. vonnie: you would still be able to hear the music. presumably, and improvement. tom: they are going to fix something so we need to buy another one. that is what i know for certain. single best chart right now. we might as well do brazil. it is a confirmation of all that we have known. the commodity boom over. resilient gdp, jon ferro, what a success to the 1990's. it ended, we came back with a vengeance. jonathan: an example of a country that is everything china does not want to be. chasing growth for growth's sake without reforms. look at the credit boom in brazil over the last decade. looki go to my guest, you

at that chart -- brazil, do you think it is going to get worse before they get better, considering you also have an economy, and a fiscal policy that cannot run countercyclical to that downturn because there is pressure on the budget? >> i think there are a lot of problems in brazil. it is all of the above. i think it is very challenging. it is an economy that has never really -- tom: is it discrete or contained or does it have a contagion effect? >> it is a big economy. normally you would say of an economy that size, fifth biggestin the world, that would have a contagion effect. tom: there is a believe it can be separate. >> it may be. there is always a believe, that's right. whether it is brazil or the other emerging markets it is hard to say. there is a lot of debt in these places. tom: peter, have you seen a good study on black markets. brazil is one big black market. almost like a two tier system.

they have to normalize that pickpeter: can i throw one comment in? you mentioned contagion. it is not necessarily from the trade link but you look at the way south america is going in general, none of these economies is in great shape for not necessarily because brazil is bad but it is an impact. causes that are impacting -- tom: you did the internet story at business.com. credit suisse talking about an overpriced ruvell, someone like it overpriced real in brazil. jonathan: we talk about transmission mechanisms. the dominant one has been through the commodity market. the question i keep asking is at what point do we see it to the credit market? >> i'll answer your question -- but let me stress this point. are seeingyou through the commodity markets not only on russia, brazil, or

have gotat you see, we the opec meeting on friday. a lot of these guys sitting around the table. they are under in a moments -- an enormous amount of stress. the oil price is down. they a future budgets to fund and they cannot. >> it is not just those prices where there is contagion, it is in the global industrial cycle. a lot has fed these commodity producers. tom: will the markets move on december 16? that is a money question. as you mentioned, one and done is your house view. so, everything is done. there is a press conference. we know she is going to make news at the press conference, but is it all priced in? i don't buy it for a minute. >> the one is pretty much priced in. we are pricing in a quite a lot after december next year. i think we need to price some of that out. i think there will be some movement, probably the dollar.

i would not be surprised if the dollar peaked on the press conference or announcements. jonathan: that is the exact call i heard from thhsbc. tom: i am glad you bring this up. steve major with the headline yield. a 1.5% 10-year that is very different than the optimism i hear from tom pros celli. >> when you look at what the market prices is already substantially below where the dot plots are. the market is not going to disregard the fed. but we already have incorporated -- [all talking at once] >> i'm not even sure the fed believes them. tom: there was a chart of six-month of dot plots. they looked like one of those psychological tests francine lacqua made me take but worse. coming up on bloomberg radio, a conversation with citigroup.

he made a lot of headlines with the global recession call. changing it from likelihood to to 32.it 0 -- stay with us. jon ferro and tom keene. bloomberg "surveillance" ♪

tom: good morning, everyone. jon ferro in our team in london will have ecb coverage. hans nichols involved in that as well. that is in two days. right now the foreign exchange markets churn. - have no idea why i have euro sterling of their. why is it 70 pence? jonathan: that's the threshold for governor mark carney. when we inch towards 70 pence -- tom: stronger sterling, weaker euro. jonathan: that's a something about persistent strength. don perspective on our foreign-exchange report. right now we will switch to equity markets. theequity markets -- will equity markets matter? peter knows nothing about the equity markets. filter ally tries to

this mumbo-jumbo. why are equities immune from all the worry and challenges we have? >> i would not say they are immune. they peaked in the middle of this year. global markets have peace. the u.s. markets often peak later in a bear market. we saw that in 2007. there is plenty of indicators are already in a bear market. that is logical. we have taken away the sugar high. i think we have got the economic pressure. tom: a strong and market down 13%. i got that off the bloomberg terminal. jonathan: in this world of record low interest rates, low bond yields, surely that supports the equity market to some extent? >> that is not a new story. what we have actually had is fed tightening for 18 months. tapering its tightening could you look at shadow fed funds rate has gone from -3 to zero. we have had 300 basis point of

tightening. plus the dollar. joke about your wonderful skills. within the equity markets, there is a dilution that central bankers are holding it up. analystsy are saying, no. cash flow is legitimate. >> first of all, obviously, the central bank had a finger in the pie. one of the things it that is crystal clear, if you have low interest rate and future earnings a new discount them at a lower rate, -- tom: are we going to take the cfa exams this weekend. tothe second thing, more your point, if you break down the performance of equity markets, there is an element of buying back shares. but there is an element of legitimate earnings in there. i certainly would not dispute that. talkingctivity we were about earlier -- globally terrible. what drives earnings growth?

productivity, more people employed. we have almost employed everyone and productivity is terrible. tom: bring up the downed chart. this is the most extraordinary u.s. market we have seen before. i'm going to call this the most unloved bull market ever. i look at the sustained fuel there. and house after house was at the minimum it is a low single-digit world. actuarially that does not work for our retirement plan. >> yeah. it is far worse than that. you can take that whole story one step further into bonds and look at all these european insurers that are gearing three for -- that are guaranteeing 3% growth. there are a lot of things going on that you not make sense. the equity market this high is another reflection of cheap money and what i call for naturalization of the system. the bull market has been on because money has been cheap. money is no longer as cheap as it was. that is the key there. g question.it

there is no way i'm letting you leave without asking you this question. everything you're told me tells me you think low rates is a problem. why? >> i think actually -- it is a 20 year story. w sincead rates too lo 1997. when america, the fed responded to global deflationary shocks with low rates domestically. they have been doing that for 20 years in my opinion. and they cause a lot of problems. they do not great quality productivity, proven global growth. what they do create is indebtedness. debt for one dollar of growth the cycle. you cannot do that forever. that is simple maths. vonnie: president obama wrote an op-ed saying that the rest of the world should expect to depend on the american consumer this time around. can we at all depend on the american sumer or is that not -- that american consumer? >> that is a terrific question because that is one of the optimist's great argument is we are now going to switch -- the

u.s. consumer. if i think of the u.s. consumer in comparison to the late 1990's. in the late 1990's, the u.s. consumer was deleveraging and wage inflation was good. today, it is deleveraging. productivity is terrible. i think it is unlikely. it is very interesting what we are seeing on this thanksgiving season. it looks to me as if it is coming out disappointing or in line with low expectations. the consumer is not spending. he's saving. 340than: iron ore output at million tons versus 340 previously. we are talking about $40 iron ore. they keep on pulling. tom: this goes back to clearing markets. what we've been waiting for eight years to clear markets. what are we waiting for? 0n balance sheet adjustment. balancece juice --

sheets are adjusting. you're talking about deleveraging. that is one of the reason why we are growing at low levels. it is going to continue. frankly, i think, glass half full, half empty. we havevironment where to do love her, growth is not going to be as high. - in which we have to delever. tom: this was a day of fabulous nced thoughts. a lot of fun. thank you so much. we will do this again. brendan greeley, we will do it again. an important interview with jack lew, the treasury secretary. look for that later today across all of bloomberg media. stay with us from london. bloomberg "surveillance" ♪

stephanie: woody economy looks like, and what carl icahn is up to. we will be speaking with jim fix.

building a healthier workplace. the ceo mark tells us how he is trying to do it. and brazil's incredibly shrinking economy. expected, are than drop-off in demand and a corruption scandal that caused political gridlock. ♪ stephanie: welcome. it's tuesday morning. we are in new york city, you are watching "bloomberg go." i'm stephanie ruhle. david: we want to welcome jim tisch, the president and ceo of lows. stephanie: no tie? business casual jim tisch. casual, suit,ess dress shirt, just no time. stephanie: