miners brace for more pain. anglo american dropping to an all-time low. the bloomberg commodity index hits a 1999 low. we are going to look at the applications of 40 bucks a barrel on oil and iron ore. and china's trade slump. export slide for a fifth straight months and imports decline for a record 13 straight months. good morning. this is of course bloomberg "surveillance" i'm guy johnson in london.

with tom keene in new york. there has been a change in the landscape in the last two days. what i liked his we are going to talk to a smart set of people through all of "surveillance" this morning. they will join us later on radio. we have got doug of isi in this hour. and paul gate of sanford bernstein in our next hour. smart experts on this commodity implosion. guy: setting you up for what is turned out to be an interesting tuesday morning. all those guys coming up. let's get you the bloomberg news. nejra: thanks, guy. china's trade slump just keeps getting worse. chinese exports fell in november for the fifth months in a row. and the drop in imports has now hit a record 13 months. the trade data comes a week after reports show china's factory conditions fell to their weakest level in more than three years.

for the first time authorities in beijing have raised an air pollution alert to the highest level. by one measure this mauga seven times the level considered dangerous to help it beijing has suspended schools, restricted car travel and banned outdoor barbecuing. republican president of candidates are denouncing donald migrantsall to ban to the u.s. trump says the u.s. cannot be the victims of "horrendous attacks by people who believe only in jihad." venezuela, opponents won a majority in the congress for the first time in 16 years. venezuela is suffering through an unprecedented recession. but modero remains president.

you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. tom: thank you so much. futures -- let's talk about three more. guy johnson has a smarter board than i do. equities, bonds, currencies, they are -- commodities but there is curve flattening it is beginning to creep in. hydrocarbon at currencies. there is oil with that shocking 37 handle. american oil. brent crude front and center to get a 39 print on brent crude would be game changes. let's go to the second board if we could. 15.84. dollar-canada weaker. in mexico this is important. mexico broke yesterday. and we get out near 17.

there's brent crude. 41.11. guy what do you have? guy: here are other numbers. europe trading lower this morning. down by .7%. it is mainly the minors. there are the basic resources sectors down 4%. a bunch of stocks in that sector down. we get new some glencore later on this week. the norwegian currency very much relying on what happens with the oil trade. we are down at levels we have not seen since 1992. brent's trading lower. the ruble is under pressure. tom: here is a partial score. guy johnson one, tom keene zero. johnson winning with a noki staki, inside european baseball. let's go to the terminal. i do not have the terminal. we will show you how you do that. i go -- for those of you with a terminal -- i can come right back here to the german

two-year, i want to show where we are at the negative yield. this is a german dead-cat bounce . this is off draghi the other day. still veryds negative showing some of the work that janet yellen has to do december 16. guy: let's talk to the global head of fx strategy at bnp pari bas. the foreign-exchange the commodities collapse we are seeing. >> this is a big thing for us as well in foreign-exchange land. the key thing we would say is that the big four losers are the commodities. the australian dollar, new zealand dollar, canadian dollar and norwegian krone. i think the one we are focusing on is short aussie verus the u.s.

istralia's biggest export iron or. all of these looking surprisingly overvalued above 72 cents. particularly against a resurgent u.s. dollars. so our top tarrade in this environment a short us trillion dollar. guy: can we think more about how readnflation story will into central-bank policy. it is going to provide clarity and understanding about what the real economy looks like -- that is going to be difficult to work through. because commodities are still falling. that affect is being narrowed and narrowed. that is going to have affects not only on what is happening with the -- but have consumer countries and everywhere else. >> that is a good point to the starting point has got to be the fed, because the fed and the thank everyone are the two central banks we are expecting to hike. if there is a slowdown, we think it will come through with the u.s. i think it is going to take a

little bit of time to come through because we are getting very, very clear guidance from fed members that they are ready to hike in december. i do not think that is going to derail the fed timing. what it may do is put more pressure on the central banks that are easing to ease further. clearly the ecb. i would definitely focus on those commodities again. i think it means reserve bank of australia, bank of kennedy. canada.bank of tom: if you look at the dollar, if i run partial differentials, is this about dollar dynamics versus other currencies? steven: i think it very much is that case. policy diversions is certainly what we have been focusing on. interesting is for a lot of this year the policy diversions has actually been coming from the other central banks easing, because we

had disappointment coming from the fed. we thought they would go in june. then it was september. finally now it is december. but if this is the real situation, which we think it is, i think dollar strength is going to start to be the driver of this rather than euro weakness and yen weakness. tom: i look at the trade weighted dollar. let's look at the all in dollar. this includes china. , pricelation-adjusted adjusted broad dollar. you can see how far we are back to that 2001-2002 peak. steve, as a general rule, does bnp paribas suggest we are going to reach the peaks of the dollar of the late 1990's? steven: we think we are going to see the dollar continue to rally. a key number we are focusing on is parity. we think we go back to parity in generally speaking, we think that trend of the dollar continued to move higher is very much in line with our view at bnp paribas.

guy: the consensus is we are going to see more and more from draghi. he is going to continue to work his way through the monetary policy took book. why should he do that? should the key point we focus on is not growth but inflation. this is a key differentiator. growth in the eurozone actually is ok. it is not terrible. it is inflation that is the problem, and particularly falling expectations. to answer your question specifically, why should he do it? it is going to be dependent on what happens to inflation. if they continue to remain low and there is a risk oil even lower, that's going to put more pressure to do more. guy: we will leave it there. thank you very much. coming up on bloomberg, we take you live to paris for an interview with the ceo of schneider electric. cop21g us from the

conference. this is bloomberg "surveillance" streaming on your tablet and on your phone and on bloomberg.com. ♪

tom: good morning, everyone. it is gorgeous in new york. some smart articles everywhere this morning on the warmth across the united states. chicago in the 50's. fog is a serious issue in chicago. greg jarrett saying san francisco with substantial fog. the answer is for those of you worldwide, america is warm. some of the energy stored. let's get right now to our bloomberg business flash in london. nejra: thanks, tom. global mining company anglo

american is scrapping its dividend for the first time since 2009. anglo has been hit hard by the slumping commodities. the company will suspend dividends for the second half of this year and all of 2016. the four today, shares had fallen 69%. -- before today. oil is trading near its nose level -- its lowest level in 16 years. under speculation that it global oil what will process. opec has given up a strategy of limiting output to control prices. and it turns out that japan's economy has actually avoided a recession. revised figures show the japanese economy expanded in the third quarter. government of prime minister shinzo abe is expected to come up with extra fiscal spending packages this months. that is the bloomberg business flash. guy: thanks very much. let's turn to energy and its impact on the climate. talks in paris on climate change are in their second win.

efforts to curb greenhouse gases are getting a boost. caroline hyde is in paris for the cop 21 summit. schneider electric ceo joining her. over to you. caroline: jean-pascale tricoire joining me, ceo of schneider electric. barclays tell us you're going to be a big winner. it is all about energy efficiency, about automation, eight dollars trillion being invested. -- about $8 trillion being invested. jean-pascale: it is going to help us a lot because every speculate -- every technology. combinatione in the of intelligence, which is automation on energy technologies and energy efficiency in homes, buildings, industry and infrastructure. on what we see from the cop 2 1 is that the greenest and fastest way to generate green energy is to save energy. there is a big potential of efficiency building. the industry has also vast untapped potential.

ofoline: potential in terms how many millions and billions could be added to your revenues and five or 10 years time. jean-pascale: that is built inside her business. everything we do is around combining energy efficiency on growth -- to generate green growth for our company. so it is not that you can put just a simple digit on it. but what we see is that when we -- sell a system, and 80% of the cases customers are asking for efficiency. caroline: you are just come from hong kong. asia-pacific is your main area. china on red alert when it comes to beijing. how important is it that china is now embracing climate change and how much of your revenue will come from china? jean-pascal: china is the biggest population on earth. second largest economy in dollar terms. on the development has been so

fast, that china had a wall in terms of emissions and pollutions. china is very serious about resolving. china is our second largest country in our portfolio. we are working very closely with the government, with cities, wi th companies to reduce the impact of emissions on the impact of energy consumption. caroline: well your business grow their rather than shrink, given that we have china's economy in question? jean-pascal: you have to take a bit of perspective we know that china is going through what is called the new normal. an adjustment time after decades of very fast growth. so it is an adjustment that we of theing with the rest economy, with our china operation. i'm confident we are going to be back to a more -- as we go forward. caroline: thank you very much. jean-pascal tricoire here for a couple of days.

a french company basin within hong kong. asia pac their biggest growing area. thanks. back to you. guy: let's talk about that china story. to talk about how many americans are going to be going on holiday down under because the aussie dollar. we have got a currently at 72. spot 72. but you think it is going down to 62. steven: our medium term forecasting model signals that sometime next year aussie should trade towards six to two cents. there are two themes. first and foremost the u.s. dollar strength. the secondly, aussie has lagged. we had a big move in euro-dollar down to 1.04. aussie is above 72 cents. the key point is the change in the chinese economy. china is shifting from a

manufacturing-based economy to more of a service-based economy. that is not good news for commodity demand coming from china. and it is not good news for the big exporters like australia. we think the aussie dollar is going to take a big tumble over the next 12 months. the model signaling 16 to cents. tom: within that number -- we will try to get a chart up there -- bnp paribas with terrific tentacles and knowledge base and intelligence in china. how confident are you of the commodity and demand of china? what is our knowledge base of what china is actually doing that? elasticities of copper and other commodities. steven: a key point to focus on for australia is iron ore because it it is the demand for steel that is driving it. the point we would make is that china has actually been stockpiling a lot of iron ore for the last 12 months. that has been keeping the price relatively high.

so, the point we would make. it is actually less reliant on the outlook for chinese growth. but it's more a sense of supply and demand coming together because we think that stockpile is really going to prevent iron ore from rebounding. tom: stephen say well from bnp paribas. we want to make you better in commodities. paul date from bernstein will join us. before the douglas -- head of energy research really looking forward to speaking to doug about where we are with oil. guy johnson and tom keene. stay with us. ♪

hello, hong kong. you're looking at live pictures. i guy johnson in london with tom in new york. this, of course, is bloomberg "surveillance" on bloomberg television and bloomberg.com. let's stay in that part of the world. let's get more news on what is been happening in china. china's exports falling for a fifth straight months in november while the import slump extended to a record 13 months. joining us now enda curran are chief asia economics correspondents. data tell us about what is happening inside this economy? enda: good morning. it is a pretty disappointing end of the year. by this stage economies have been hoping to see a little bit of momentum, a turnaround after a year of -- a whole series of

other stimulus measures. by the government. it is not panning out. exports today told us that factors continue to struggle. they are stuck in deflation. that is the other problem. when you look at the export numbers, there is more disappointment under the hood because the u.s. market had been the one bright spot for chinese shipments this year. that is fallen away. u.s. shipments fell. eurozone shipments fell. the export stories adding to a soft overall picture. am: i look at the currency as litmus paper. i know that is not an accurate statement. but it is tuesday morning. bring it up. the china chart. we have massed evaluation. that is the vertical line with a weaker renminbi. then we have a surprise of and appreciation. now china managing your currency has depreciated, rather, on the currency out. is there a vector here? we look at the different houses

research, is there a vector of where renminbi is going? enda: i think the broad view among -- the broad view is that the pressure on the yuan is to go down. the question is whether or not the chinese authorities will let the yuan weaken over the coming months. we saw some weakness in recent days in hong kong, for example. one of the problems with china weterms of letting it yuan can is that it might trigger capital outflows paid they are boxed into a corner. might helpr a yuan exports. but it made trigger capital outflows. the weaker currency will not trigger global demand. buying chinese shipments. in the weaker yuan will not change that. guy: does the policy say the same?-- stay the the: by all accounts,

central bank has the often to cut rates further on the government has plenty of ammunition to pump stimulus. economist say that more is likely. tom: thank you very much. greatly appreciative from hong kong this morning. i think we go back to china in the next hour. bloomberg has mark trudeau. this is a day of initial restructuring within mining. we see it with rio tinto and anglo american. we will look at the industrial effects on number . don't forget on bloomberg "surveillance", later. stay with us even in hong kong's evening. ♪

tom: good morning. bloomberg "surveillance" oil captures a slight bit. a west texas 37.91 with features at -9 in the united states.

nejra: thanks, tom. vladimirme foe of putin is being summoned in a murder case. moscow officials want to question him about the killing of a siberian mayor 17 years ago. he was once russia's richest man and served 10 years in prison. he's now living in switzerland and his spokeswoman says he will not respond to the summons. the european union has moved to increase our security. the european parliament has agreed to new rules that would force businesses to strengthen their defense against hackers. companiesould require to report attacks. republicans are democrats are condemning donald trump's call for a ban on muslims entering the u.s. trump read his statement at a rally in south carolina. mr. trump: donald j trump is calling for a total shutdown of

muslims entering the united states until our country's representatives can figure out what that hell is going on. nejra: jeb bush cultural unhinged. another candidate, chris christie, said this is the kind of thing people say when they have no idea what they are talking about. on capitol hill, congress may have to extend friday's deadline ll that lets the government keeps spending or the talks are complicated by other negotiations on extending a package of tax breaks for small businesses. they may be extended another two years. in south africa's amputee olympian oscar pistorius is now free on bail. he will remain under house arrest while appealing his murder conviction for killing his girlfriend. last week, south africa supreme court of appeal overturned his lesser sentence and convicted him of murder. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. guy? much,hank you very

indeed. mark carney stuck in the middle of the global monetary policy game with the fed raising rates while the ecp internees to embrace stimulus. when will the boe raise rates? let's check in with ubs head of aywe rate strategy, steven s ell still with us. the data that caught my eye was the mortgage lending data. very strong from q1 to q3. you wonder if the bank of finland has the ability to manage this. >> they have tried in the past -- i >> you wonder if the bank of england has the ability to manage this. up from step overheating. the truth is, a lot of the data and the u.k. has been steady and strong for some considerable time with the exception of inflation, which is their main focus. but we do think they are looking at an economy which is going from strength to strength.

from a domestic point of view and they will need to respond at some point in the future. guy: is the market mispricing when the first rate hike is? are they closer to the fed or closer to the ecb, because the economy is warming up quickly? john: in a data sense, they are much closer to the fed. the unemployment rate for example is similar, wages -- a lot of the dynamics are similar. we think markets, pricing effects are not too late. it could come by the middle of next year. but we do need to see the fed go first. we do need to see domestic cpi pick up a little bit at least. and we do need to see the earnings data respond such that the bank of england is confident about the strength of the labor market. the if that all comes together, tom: there could be a first hike in the u.k.. tom: is your world correlated at all to the commodity implosion we are seeing? absolutely, it is.

we have seen the market ofectations about the timing that first hike, the markets inflation expectation measures and in line with oil commodity prices. but we have to consider when we have an economy like the u.k. where domestic growth is strong, where a fall in prices can have beneficial impacts in terms of real disposable income for consumers. we may well see a response as we go into the new year, stronger consumption. tom: guy johnson, i think this is incredibly important and there is a lack of it on the correlation of equities, bonds, currencies, commodities are the news is commodities but this goes over to everything else. whenit changes the curve it comes to went you expect on inflation story. england,e the bank of are you going to look through the commodity story and say it is going to -- i've got other things to worry about? housing market, wages starting to pick up.

there are some correlations but i think the bank has got a myriad of factors. to the point about the housing story, it is really beginning to get pretty hot in parts of the u.k. some incredible numbers. can they deal with that with macro prudential? i have my doubts. steven, theet's, pound is priced right, wrong at the moment, because if we are seeing a pickup in inflation because of the base effect, what do we do with that? if we are seeing housing prices pickup, are we going to see the bank raising rates sooner than we think? pound. we like the we think it is under price. the trade is not to buy the pound against the dollar appeared we like euro-sterling below 70. the key point is similar focus. we think the market is too late and pricing that start of the tightening cycle.

probably not pricing of fast enough. we also think may is the most likely time. is wage growth. it is picking up in the u.k. as long as the fed goes in december, we think the market will have to bring forward its timing from the bank of england and euro-will go down. tom: there are some of the movements that we see. what would you see in the real interest rate instrument area? john: essentially it is a sort of double story in the short term. the bank of the wind are aware of this. the likelihood is any rebound in cpi over the next year is going to be slower than i thought because of the latest downdrafts in these global prices. if you look at market expectations further out, the five years forward, inflation expectations gauge, for example,

it has held steady. it does suggest that through all that is going on in terms of commodity prices, the eurozone situation and so on, the markets still has faith in the bank of england in the medium-term. there is no sign of deflation expectations starting to grow at all. and therefore, the bank of england does have to look through any near-term weakness to think about where we may be heading and had off the risk of it over hitting over the two year area. tom: thank yo uso much. speaking of switzerland, and international glory on bloomberg "surveillance". green will be with us. and then a conversation with the former imf chief economist at one of his first interview since leaving the imf. this will be must listen worldwide. n.anchard after eichengree check out bloomberg radio plus. this is bloomberg "surveillance" ♪

morning. thank is so much for the social media and the bloomberg terminal messages we have received so much on our coverage of commodities. we do think it is an important moment. joiner blanchard will us. right now we are thrilled to you's ever ofe -- evercore's head research. what is the moment in energy, if you break 40 west texas, 38 down to 37, what is your message this morning? >> we think this is part of the

process. tough think opec had a decision last week. the reason why was because when fundamentals are improving and that their policies are working and that the current downturn has not really been long enough to -- listen to desired contributions from non opec. we think it will lead to higher prices. tom: on the way back to 50, to whatever, 65, can we spike down with a catharsis and then return, or is it a lower for a longer at a lower level? a well, we could spike to lower level. but let's not miss the forest for the trees. demand is recovery. 11 consecutive months. supplies collapsing. the growth rate has changed in the face of the euro. while it may take a little

longer, but we think we are going to see inventories drop by middle of 2016. tom: within this selection of hydrocarbon equities is it too early to begin acquiring shares? >> we don't think so. we upgraded the super majors after being on the sidelines among the go. gosh, why would we do that? there is a lot of bad news reflected. these stocks are trading a decade lows. 5% dividenda good yield. unless you are bullish on the stock market, would be a good offering. guy: can i ask you what is happening in credit? we have not seen what we expected. under your scenario, does that ever happened? >> it could. we will think the next quarter will be pretty rugged. you make a pretty good point. we're at the point where our

u.s. companies are spending more on financing activities than at any point since 1998. we think consolidation is ahead. and part of the reason is because of the intense credit conditions that are likely to involve -- to evolve. tom: i'm going to say "the wall street journal" a photograph of anadarko, the explorer, looking to africa to find new oil. do they have the spirit to keep their budgets going right now? >> we don't think that they do. we also think that additional downward revisions to budgets are ahead. companies have not performed well. business models are being called into question. we think the consolidation is ahead. hadkly, if we did consolidation that would lead to a different posture from opec because it would lead to more growth in non opec supply. supply from north america would be low. guy: what happens to rusher in

this scenario? what goes for putin here? what does he look like in 2016 with his oil price? not going to be any easier. and russia has been surprising this year. the production is up over 1 %. there has been growth, but it is not the kind of growth that you want. after having said that, their production is going to decline next year. and it is - -there's going to be weakness in kazakhstan. union will notet be able to make much of a contribution on supply. s absolute carnage in the master limited partnerships. investment securities, they bundled cash flows -- a drug for retirees. the retirees are getting crushed. what should they do? areell, those stocks proxies for production growth in north america and production growth has declined a bit. but we believe we are going to riseorth american supply

over the 2016, 2017, 2018 timeframe. there is going to be rough seas over the immediate term. tom: where will we see balance adjustment? we begin to see that with the independent drillers and the majors? >> we think it is under way today. the current quarter is going to be rugged with brent around $40. these companies will be cutting back capital expenditures. they are cutting back operating costs are the big oil companies are doing that to defend the dividend. tom: doug, they do so much. d hyman on with us. i want to see doug terreson and ed hyman on together. that would be fun to have them talk about energy and the overall economy. we have another one that knows a little bit more about commodities than we do. there are plenty of smart

people in this building and this is one of them. bringing it back to the oil price. looking at the commodity story broadway, i think we are trying to -- everybody is trying to figure out, where does the price go from here? when you talk to people, how wide is the dispersion? >> i would save you look at the forecast on the terminal right now you would assume the market is quite bullish. the lowest forecast we have four q1 is $43 a barrel. not gonergue they have away to adjusting their forecast, because if you look at that forecast over the last year, it is steadily dropping every time. they are always lagging behind the market. to answer the question, though, where we are seeing $10 a barrel previously, is there any reason why it cannot go there? hard to tell. if you look at the fundamentals, you would argue it has to be above the cost of production. guy: can i relate the quality story with the miners? one of the big input cost to the

mining sector is the price of filling up one of those massive chunks of fuel. as oil continues to drift lawyer, does that mean actually that the base -- as the oil continues to just lower -- >> i think so. if you look at the big companies, they have been doing supposedly the right things in terms of cutting spending. in terms of spending and dividend and reducing dividends. they are trying to shore up their balance sheets. if you are small mining company, and expiration company, you have limited options. to some extent you either keep going and hope your banks keep finding that, or you go -- blow up. tom: stewart, within the commodity moment we are in, what do the research houses say about this time is different? is it just china's is the difference between the other three and four meltdowns you and i have seen? stuart: yes. i think that is a big factor. the other thing to remember is llat we have a 10-year bu

marketing commodities. that led to trillions of dollars being spent on new mines, new pipelines and new wells. a lot of that is coming to fruition. that is going to take several years to work its way out of the system. which is why you're seeing clots all around her china does not help but that is not the only started-- you are seeing gluts all around. guy: when does the commodity story come to fortune? -- to fruition. stuart: so long as the banks are prepared to keep finding it. if you are a bank, do you want to own a copper mile, and oil well, i would imagine it is the last thing you would want to do. under that scenario, you would imagine they will continue to be quite gentle with their -- guy: so, they will not do it forever? stuart: no. guy: when does that moment,? stuart: too question. -- good question. i cannot answer that. tom: stuart cannot answer that question on went? stuart: no. shocking, isn't it?

i can't predict what the world investment is going to be. tom: what good are you? thank you so much. coming up on bloomberg , the industrial impact of the commodity meltdown. mark trudeu. futures -10. down futures -79. it is bloomberg "surveillance" ♪

good morning. bloomberg "surveillance" we are washing commodities this morning. 37.92 on american west texas -- we are washing commodities this morning. right now a bloomberg business flash. nejra: thanks, tom. the biggest fear of british banks is not regulation or a slow the economy according to a study by price waterhouse cooper, cyber crime topped the list. bank says there is the potential for a hacker to bring down a financial institution. toll brother says quarter to profit -- quarterly profit

rose. earnings missed estimates. toll expanded in california and new york. and nike has signed lebron james to an unprecedented lifetime contract. terms of the deal were not announced but a sports agent estimates it could be worth up to $500 million. james' deal could be similar to michael jordan. jordan was the ceo of nike's jordan brand. that is the bloomberg business flash. tom: thank you so much. ok, folks, let's look at the hydrocarbon move. this is the mexican peso adjacent to the united states, clearly. mexicanchart of depreciation. you have a problem when the currency that gets this far away from the regression. square least means. there it is, 1, 2. now again, mexican peso with weakness. steven saywell with us.

we see it in south african rand, mexican peso. the chart is ugly. what will be the response of these nations? the key point we would highlight here is the real theme is dollar appreciation. so, whether you are south africa or mexico or korea or the eurozone, you have to live with that. and certainly we're in uncharted territory here. the u.s. is hiking. closeuld argue the uk's behind but other major central banks, particularly the ecb, are years behind. this dollar strength is really something that lots of central banks are going to have to try and deal with. e're seeing integration -- intervention in asia. guy: dollar, south african rand is at a level we have not seen since 1971. gives you an idea of the time length we are talking about.

one of your interesting lines i read this morning was the idea that as the oil price falls, that is going to accelerate the dollar move to the upside. i think this is a key point that may be missed somewhat in the markets. it is going to be very difficult to derail what the fed is doing. aledfed has singled -- sign there is strongly it is going to high. you have very different situations. you mentioned south africa. it is a commodity-based economy. what the lower commodity prices mean is that there is going to be increased pressure on these central banks to ease. another good example is in norway. we think they are going to ease in december. but we're even more comfortable with that call given what is happened -- tom: right. but, very quickly, isn't that a wealth reduction for south africa or even for mexico or brazil? this is killing to their balance sheets away from exporters, right? steven: i think you could argue

that is the case. but i think the point is it is very difficult for them to do much about it. i think this is a trend that i has breen going on for quite some time and it will continue on. since november when we got those payrolls, it is clear what is going to happen next. tom: a true briefing this way to get us started. he is with bnp paribas. coming up, we will talk about a slower american economy. the commodity knock on effect. later this morning, our guests. bloomberg "surveillance" on radio. stay with us. ♪

tom: welcome to fantasy land company as iron ore and -- rio

capex.uts , theyats and republicans scream as donald trump screams "keep the muslims out." hillary calls trump divisive. and on america posner non-recession, recession, lakshman achuthan. "bloomberg surveillance." we are live from our world headquarters in new york. jon ferro is in london. what have you learned in the last 24 hours? jon: what we thought was cheap is not necessarily cheap. trying to figure this out. we do not know where the bottom as, and you know what? went on think we will know for quite some time yet. it is a big deal. us onaul gate will join

the state of write-downs and balance sheet adjustments. right now, our first word news this morning from london. 's call to banp muslims from entering the u.s. is being widely been announced, even by fellow republicans. jeb bush calls him unhinged, john kasich said it is an example for why he is unsuited for the presidency. the shooters in the california massacre practiced firing their guns at ranges in the los angeles area, according to the fbi. authorities say the couple went shooting days before the attack in san bernardino that killed 14 people. transatlantic flight got diverted to canada overnight after the carrier received a threat. the jet was headed from san francisco to paris but landed in montreal.

two air france flights were diverted last month because of bomb threats. a south african court rented bail to oscar pistorius -- granted bail to oscar pistorius but he will remain under house arrest or he faces 15 years in prison in the shooting death of his girlfriend. chinese exports fell in november for the fifth straight month, at ae drop in import is now record 13 months. the report shows china fund's factory conditions at their weakest level in more than three years. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. thank you so much. breaking news on home depot. the forwardm guidance. this is been one of the major success stories in american retailing, distant from the other challenges through do you want to make money in stocks? home depot, 10 year track record, 15.7% per year.

for -- i need often.fours i am going right to the euro, guy johnson. nymex crude getting a bid after the carnage of yesterday. onto your screen, please. guy: let's talk about how it is rippling through these markets. you can see it clearly. down .6 of 1%. trading at lowe's that we have not seen since 1992. brent bouncing back a little bit. the focus necessarily today, but commodities are really front and center. really showing the beleaguered oil economy of norway and the relative strengths seen in sweden. let's move over to the bloomberg terminal, the two-year yield.

laxman i caps on, i'm going to bring you in here. down we go, and that is really all mario draghi did. you have to put these things in scale, don't you? global storys is a of lower and lower real rates because growth is getting lower and lower and lower and lower. -term trend growth. this is the rub. everything else we are talking about, these gyrations of recent data, is happening with that backdrop. tom: there is a backdrop off the bloomberg terminal. there was silence. think of lawrence summers talking about secular stagnation . push against larry summers p review are an inherent optimist. is he on that there is secular stagnation?

-- hman co. i think he is making excellent point. cycles do turn. if i want to look for the optimistic side, there will be upturns. we had one in 2014. at the end of 2014 come that was about as good as it gets. and all this year, in 2015, we have been dispiriting what he would call a cyclical slowdown. slowdown.shorter term all of the major metrics of the economy, including jobs growth, have been slowing this year. that that is happening on top of the points that summers is reiterating on secular stagnation is really the rub. you have long-term decline with a cyclical slowdown on top. researchhave a cycle analysis that is different than many people out there, but the language you use is very vector-based. you call for a pronounced, pervasive, and persistent way. lakshman: we are looking at a

cyclical turn. we are trying to see, is it noise or not? every month you get the latest data, and because it is the latest and it is fresh, someone thinks it says something new. it often does not. is there a pronounced, pervasive, persistent move in the data? last month's jobs data was better than expected. but if you step back, you say payroll jobs growth year-over-year at a 17-month low. so if you look at the vector of jobs growth, we are in a slowdown. year over year gdp growth is in a one -- is in a low. europe, as goes at is is it is doing, it is slowing. why is mario draghi doing what he is doing? if you look at the vector of growth, it is slowing. home depot is a good discounter. withis that enough

mechanics this morning? guy: i am there. is the commodity downtrodden -- is the commodity down drop that we are seeing a leading indicator? lakshman: i would say it is a short leading indicator. you're dealing with a cyclical downturn in demand. look at global trade. everyplace you look, everybody is having a tough time trading, which is why people take turns areuating their -- we also i think in the wake of overreaction in a way to the global financial crisis. everybody freaked out. there was a lot of stimulus of all kinds. the chinese did not want to lose that battle, and they invested in capacity like nobody else. here we are seeing the aftermath of that.

, and is a huge oversupply many of those initial reactions to the global financial crisis have run their course, and we are dealing with picking up the pieces here. so even though some short leading indicators, you see some isn's starting to ounce all over the bottom and term up -- and turn up, you might get some short cyclical demand in some areas, but it is being overwhelmed by the oversupply. guy: talk to me about what is happening. where in the market is the pivot point? we are trying to see where the credit has fully bottomed out yet. where are the real stresses being felt in the global economy? lakshman: well, i think an interesting point is the the fundamentals, we do not have any strong upturn hearing on the markets, when you

use the word markets, a lot may depend on the next chapter of stimulus. you have mario draghi front and center at the moment. we will turn our eyes to the fed on the 16th, 17 -- seven years to the day that they hit interest rates they will try to come off of them. the question very much will be what is the pace afterwards. how persistent and pervasive and pronounced will be be rate hike cycle -- will be the rate hike cycle? given everything we are seeing, not so much. tom: iron ore out of shanghai, and there's also singapore. i have not figured it out yet. we showed this chart a couple of times in the last couple of days. you and i have seen a number of commodity cycle breakups. equities are different than bonds, bonds are different than currencies, and then there is commodities, which is a balance sheet adjustment. what does your cycle research

say about how commodities find the bottom? ,akshman: you are going to need first, as i said, you have a huge oversupply, maybe from the misallocation of capital be really low after the global financial crisis. is aboutcal demand trying to bottom here. i am afraid to longer leading indicators of global industrial growth are not turning up, and that has me a little worried next year. tom: this is a special treat for guy johnson. we will bring this up on the bloomberg terminal. this is back to the 1990's, the collapse of central banking in sweden. down we go. guy johnson, here is what you brought up, beleaguered norway and a stronger sweden. here is one measurement between the baltic states and scandinavia. guy: you are exposed to these

commodities. have you fully felt the impact? in the last hour, you said watch the aussie, it is going down. we're not there yet. we still have much further to travel. that is why i am interested in what we talking about right now. the dollar is, not going to collapse right here, it does not seem. i do not want to make a prediction of a currency because that is very dangerous, but it looks like the dollar is holding up. that will impact these prices. when you look at oil, it is tough to see in this chart, but the stability in oil prices are at relatively high levels, from 2011 to 2013. that may have given us a false sense of calm there. tom: lakshman achuthan on is with us. coming up on bloomberg radio, we're thrilled to bring up economics.

barry eichengreen and olivier blanchard. ♪

guy: welcome back. you are watching "surveillance." the city of london in front of st. paul's cathedral. it is probably drizzling. you are watching "bloomberg surveillance." let's get you to the bloomberg business flash. >> a consumer group says t-mobile's popular advertising campaign is deceptive. new york's attorney general is looking into the complaint.

critics say most t-mobile customers are locked into loans after buying phones. t-mobile's chief stands by the ads pimco named ben bernanke lead its advisory board. added british prime minister gordon brown is a global advisor. oil is trading at its lowest level in more than six years today. after prices fell more than 5% yesterday. analysts think the coil -- think -- global oil glut tom: thank you so much. the.us, watchmen after we look at consumption. fischer and you talk about perhaps eventually. adverb.double we are all perhaps eventually on the american consumer. lakshman: he was referring to

broadcasting utility growth, which is hard. tom: that is not so comforting. tom:what do you see within your cycle research? we have something , the leadingcs indicator of consumer spending. it is slowing. it is growing, but the growth rate is slower. it has been doing that for most of the year. the odds are, when we look at the vector of how the consumer is doing, the consumer is slowing. that does not bode terribly well for holiday sales. on top of that, you have a pretty big inventory build that is being talked about in many of the businesses around the country. as a result, promotional sales. you are going to see -- tom: i saw 80% off around the corner here in new york yesterday. lakshman: what kind of discount

gets your attention? depot knocks the cover off because they are a great discounter. tom: what is the new productivity? perhaps eventually? perhaps eventually. they are more persistent than that, to use another p. productivity growth has been running up about half a percent. demographic growth is running around half a percent or when you get all the mumbo-jumbo out of the way, it is productivity growth plus demographics that gives you the growth rate of your overall economy over time, and that adds up to 1%. everyone is pretending it is closer to 2 or 3. that is where the fed is starting to recognize, if you look at them, they are saying

real rates are going to stay low. this is the so-called new normal , is the other term out there that we are having to deal with. on top of that, we have a slowdown. guy: "perhaps eventually." i am trying to make a decision about my company. how will i get it through? what will it take to get investment spending back up again? we are not seeing it here in the u k or in europe. what is it like in the states? what will change the story? lakshman: nothing soon. perhaps eventually stays intact. the inventory bill tells the people may have been too optimistic about how soon eventually was. you have an inventory build. meanwhile, sales, the actual action was slowing since 2014. look at all the major accounts from all the big countries around the world. it is difficult export.

when your policy is let's keep interest rates low or add qe to pull demand forward, eventually there is not that much left in the near-term future. tom: would have olivier blanchard coming up later. i want you to review how he was dead on of the need to reflate. he was way out front of every other frontline economist in saying this is slow, this is a new lower terminal value and we need to reflate the economy. is that even feasible today after what we have seen with abenomics? lakshman: i think that is an open question. while we may have some good intentions, obviously, policy makers are trying to get things going, doing all these extraordinary things, even more than what japan did. look at the end result. it is still slowing. when you go back to -- yes, he was on port -- he was on point and trying to reflate. you go back to the basic

ingredients. productivity growth for the entire working population, and demographics. how do you change those? if you can change the vector on those, you can solve the problem. tom: this is breaking news from citigroup, and edward morse, the backdrop, the buiter call on a global recession. the saudi arabian opec .attle will be a one at best. not changing but a risk to the downside on the $60 terminal value. we will have much more on this. do not forget, paul gates will join us from sanford bernstein here in a bit. dow futures at -90. 37.94.xas intermediate, stay with us, worldwide.

♪

tom: the morning, everyone. "bloomberg surveillance." guy johnson in london, and i am tom keene in new york. this is from the associated press article written last night, from nancy more wits of nyu. she is an expert. i am not.

i mean, somebody showed up at the boat, right? lakshman: my dad came over in the 1960 plus. -- in the 1960's. there is a heritage here of immigrants coming to let's go back to the beginning of this debate. 1790, here is george washington in newport, rhode island. if you have never been there, go there. it is still there, the truro synagogue. tom: i am going to assume there are some bad hindus out there? lakshman: there are some bad

apples everywhere, but this country obviously is a nation of immigrants, and i am going to go full circle and go back to economics. we are talking about long-term decline in trend growth, and the ingredients are productivity growth and demographics. the united states, relative to europe or japan, where they really have kind of -- tom: limitations. lakshman: immigration is giving us about a half a percent stronger demographics growth than other major countries, and that is a positive for our current economic outlook. tom: we will come back. lakshman achuthan is with us. futures -12. good morning. ♪ sure, tv has evolved over the years.

it's gotten squarer. brighter. bigger. it's gotten thinner. even curvier. but what's next?

for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. tand that's what we're doings to chat xfinity.rself, 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. tom: good morning, everyone. i am watching nobel group out of singapore. they are watching as well in hong kong. many of the trading houses challenged, not like what we are

seeing in the minors this morning. but really commodities are front and center with any discussion, and that includes in the evening of hong kong. in london, let's get to first word news with -- let's get to first word news. >> the european parliament agreed to new worlds -- to new rules. the rules would require companies such as google and amazon's report attacks. republicans and democrats alike are condemning donald trump's call for a ban on entering the u.s. trump: donald j trump is calling for a total and complete shutdown of muslims entering the united states until our country's representatives can figure out what the hell is going on. jeb bush called him unhinged. chris christie called it the kind of thing people say when they have no idea what they are

talking about. a longtime foe of the vladimir putin is being summoned in a murder case. moscow officials want to question him about the killing of a siberian man 17 years ago. once russia's richest man, he served 10 years in prison. the obamacare deadline for getting coverage is january 31. the penalty has been waived previously, but federal officials say the rule will now as $325, or defined 2% of household income, whichever is higher. are likets of portland creeks after the city's wettest week ever. forecasters say will not stop until the end of the week. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. thank you very much.

sharetake a look at the price, record low this morning. mining analyst paul gait is with me. is this what capitulation look like? paul: it is getting pre-close to it. it was this big diversified thing when it was listed in 2003. it is now moving down to just 20 operating mines in the portfolio, and it is going to try to sell the rest. it willnnot sell them, be closed. like the first sign of capitulation perhaps in mining. lakshman: there are 2 -- guy: there are two options here.

paul: it is still the first scenario. then -- a number of mining companies see in the longer-term demand will recover in the longer-term. trouble is the market is looking at the here and now, looking at the current supply to balance, and it wants to see a reduction in volume coming out of the mining companies. mining companies voluntarily move with market forces. they recognize what the market is trying to price in, and they take a lot out of the market themselves. or finally the decision will be taken out of the hands of the current executives of mining companies and will be forced on them by a credit event, and we will see the banks taking over the running of these companies. it will happen one of those two ways. problem is, if i am sitting on the other side of the table, why do i want to buy now? paul: this is why we have seen some of the private equity companies talking about buying

asset classes. they have been keeping their powder dry. what they see is commodity prices continuing to decline. why should they want to step in ahead of the commodity price decline? you need really stability in the commodity price so that buyers and sellers can agree on fair value. theers are still with glorious 2011-2012 firmly in their minds. we have this valuation gap that makes it harder to sell the assets. refused to sell at a higher price because you have always had a greater value expectation, and the reality is that you have left it to bank late. the you brilliantly explain as beleaguered. have they become complacent? exception of the

gold companies, most of these guys do not want to take a directional commodity bet in the form of hedging. one of the reasons is the correlation we have seen between the price of production -- i'm sorry, the cost of production and the commodity price itself. they are afraid that as you hedge out, you fix that and increase the leverage to the commodity price. so we have not really seen hedging. it is really a behavioral response, that they have a dislike of taking it out of the these commodity prices are insane. tom: to my opening comments, which i'm sure you did not hear, the idea of fantasyland is quoted by rio tinto's executive. theirid they implode on own rhetoric? the rhetoric is irresponsible if you are a member of the board or shareholders. paul: for us it is incredible. we put out a note in the middle

of the year that if you take out the iron ore -- we have just seen the iron ore price continue to fall as everybody refuses to take capacity off the market. give ironh, you can ore away. the one thing you cannot do is push your operating costs to zero. sooner or later, no matter how low cost you are as an operator, the price will take all of your operating profit away from you. even at a company like rio tinto , and indeed, bhp billiton, you have a significant amount of debt. has $25 billion or $26 billion of debt. even on the low side, it begins to bite. guy: i will last a question that i did not get an answer to earlier. if you get a credit event, how quickly does it come? are the banks panicking as well as the commodity guys?

where is the point of pain here? paul: one of the things that we have seen, banks are paradoxically willing to support a number of these so-called zombie minds -- so-called zombie mines. why are they doing that? paul: people still have this opera optimistic -- have this overoptimistic demand-side mindset. in the short-term you're hoping that someone else takes the time -- takes a turn back so you do not have to. investment is lack of responsibility for mall of the agents involved. tom: paul, thank you so much for coming into our london office today. we want to bring you the experts on this commodity implosion. we have a wonderful treat for you next. she is going to be on bloomberg radio -- he is going to be on

bloomberg radio. next, barry eichengreen on the ambiguities and the challenges the nations in the emerging market face. on "bloomberg surveillance." it is a beautiful morning in washington. ♪

guy: this is "bloomberg surveillance." i'm guy johnson with tom keene. let's get to your bloomberg business flash. withxico plans to go ahead tariffs of a quarter billion dollars on u.s. goods. lets canada put $780 million in tariffs on u.s.

goods, but canada has not said whether it will do so. toll brothers says prices -- profits rose. is kindling a slightly bigger level of its tablet. it uses a lower level of blue light so that users will not be kept awake at night. that is the bloomberg business flash. tom: thank you so much. lakshman achuthan is with us. now we have a real treat for you. our guest has parachuted in from berkeley. he got in a little early. barry eichengreen joins us it he will be on bloomberg radio before of olivier blanc chart -- before olivier blanchard later. let's bring up the single best chart for our three esteemed guests in new york.

it is my chart of the year, which is inflation-adjusted commodities. the idea here, the long-term deflation and commodities, that barry eichengreen wrote about, up, up we go. brian, let me begin with you. can you begin to nibble in mining and hydrocarbons? what do you do when the value traps that much of a value or a trap? brian: it is a difficult call. you have the world's largest suppliers in the u.s. and the middle east with an uncertain outlook, and the demand look is very difficult. we a clear bridge have had a hard time going all in on energy, or as you mentioned, the miners. you are truly one of the world's experts on the dynamics of the responsiveness of commodities. does janet yellen underestimate the impact of commodities?

no, i think janet is well aware. in 2011, when they became concerned about inflation, strong commodity prices and raised rates at the wrong time. i think the fed learned that lesson long before, and the ecb has unfortunately learned it now. 's latesthman achuthan book is "hall of mirrors." what does it mean for americans? it is cheaper, right? it is cheaper and that is good news, but the problem is it is tough to make a buck at work. so when you have a little bit of a gift at the gas pump, it is offsetting the fact that your earnings are not doing that well. stepping back to look at the had a picture here, we global financial crisis and we tried to combat that. we did it with all kinds of things.

the chinese built a lot of stuff. they used a few years more cement than we used in the entire 20 century in the united states, to give you an idea of -- the capacity to when you have interest rates very low, then you are going to invest in capacity. you see the oil output, for example, from the u.s., from fracking, it is phenomenal what has been produced and the capacity that we have developed. all of that capacity is running smack into weak demand. it is probably not over. tom: guy johnson in london. guy: a question to barry. when you look at the problems various central banks face around the world and you look at the commodity story, mario draghi looks like he will be the big loser from what is happening with commodities. inflations getting up, and it seems to get harder on a day by day basis.

close is he, do you think echo barry: he has ways to go. thenterpretation is that problem in frankfurt is not resistance from the bundesbank, it is nottypical -- technical difficulties in the bond market. it is that the ecb is a very large supertanker to stay on theme, and it takes them a long time to turn the ship. guy: have we reached the point be going to would japan? barry: that would be good news because japan is coming out of its deflation and long slump. the problem of week commodity prices weighing on central-bank efforts to bring inflation up to 2% has been a problem in japan. it is the problem in europe now. guy: japan is coming out of it,

but it is after 20 years. the euro zone going into it. barry: it can be done more quickly, and we have to hope that mario draghi watches what mr. perot to has done. in what do you fold barry eichengreen has done? you are in the trenches. how do you take his work and other economists and folded in doclear bridge echo brian: i not envy his position or annie of that of the global macro. it is very difficult. fed,y response by the whether it was tarp, qe1, qe2, or qe3, is unprecedented. tom: how much of this is propping up your world? -- : brian: i do not think it is that stretched. the u.s. economy has grasped the

reality that qe is over, that probably in two weeks or less than that the fed will begin to raise rates. we think that the market will begin to get back to a pre-credit crisis sort of stance, where we are going to focus on valuations and fundamentals instead of having this backstopped u.s. equity market and the fed doing all it has done. tom: i just went back and read ken rogoff's magnificent paper, the anniversary paper of the late rudy dornbusch at m.i.t., and he came up with the word "overshooting." critically, can we begin to talk about a plaza accord dollar strength? barry: i think we could conceivably begin to talk about a plaza-style dollar problem. but not i think a plaza-style response. there is not agreement or willingness on how to respond here in the u.s. does not have the leverage over its european

partners, and japan, to respond the way we all did. tom: this is critically important. barry eichengreen is suggesting we could near attributes of a 1981 plaza accord dollar strength. is it because of dollar strength or currency war weakness among our trading partners? barry: it has to do with both. the dollar has strengthened very considerably over the last year, partly because of expectations about what will happen here. but equally, because people are waiting on the ecb and we are still waiting. if we get that kind of strength in the dollar, you look at the debt story and the emerging market, we are going to blow up before then, aren't we we do not know how successful they have been, but they have had a long time to prepare to square their books. i think there is still a scenario where people are

overreacting about how bad things will get in emerging markets. as the fed begins to lift off. tom: what a treat this is. lakshman achuthan is with us. , and barryame eichengreen is with us. with a continue conversation later with olivier blanchard as well. this day of debris within commodities. even copper a little south, and west tech is up. stay with us. "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." a quick forex report. chinese renminbi depreciates. devaluation appreciation -- give -- devaluation, appreciation, then devaluation. earlier,on mentioned the south african rand is simply on the edge of what steve hankey at johns hopkins talks about with substantial depreciation.

we go to "bloomberg ." david westin, what do you have? david: we have ceo day. we have the hay -- the ceo of discovery, hasbro, all to talk about their business is it we have the dean of the harvard business school with us. stephanie ruhle goes one-on-one on the basketball court with dwyane wade of the miami heat. that is it. tom: very good. david westin, thank you so much. this is a treat after what we angloernight after american and rio tinto overnight. brian angerame is with us. barry eichengreen was kind enough to come in early. and lakshman achuthan is driving the ship here. barry eichengreen's little book -- and i mean that with all good privilege" istant

a statement that america need not worry about china. but when you look at the exorbitant privilege of our dollar as the increaser of currency, is it under threat? not yet. over time perhaps, but nothing imminent. for the time being, it is getting very short-term playing a role in commodity price bloodbath. what could get interesting because it is so strong right now, based on the fed ending qe and the ecb, the diversions, the europeans and the japanese being more easy, a lot of it is predicated on this hope that growth is going to rebound. it did not rebound in the second half, so it is going to rebound sometime next year. hascyclical downturn that been going on all year is going to continue. it is not over. so what gets interesting as we move past december 16 is that

pace of the rate hike cycle. it does not look like that can happen. tom: barry, the pace is political as well read you have dovetailed politics and history. see marine le pen in france doing so well. that polarity in europe has to have your attention. barry: that polarity in europe is very disturbing indeed. the history of the 1930's suggests it flows directly from the length of the slump and the inability of separatist parties -- of separatist parties to respond, so disaffected voters look elsewhere. tom: guy, you are seeing that in the united kingdom as well. .uy: we are we are watching across the channel very carefully. this is the board of the day. is yet to befect

fully felt. that is what is happening with the mining sector over here on the london market this morning. look at those numbers. they are staggering. it is that capitulation. are we there yet? i think a lot of people are asking that this morning. tom: brian, are you brave enough to buy them? brian: not here. tom: thank you so much. barry will continue on bloomberg radio. , thank you as well. futures -110.ow stay with us. "bloomberg surveillance." ♪

>> rebranding general electric. ge wants to be known as a digital industrial company. we will talk to the vice chair for business innovation. david: welcome to bloomberg go. i'm david westin. stephanie: and i'm stephanie ruhle. were you up late last night? david: i was not. stephanie: it was a big night for the redskins. nick norrie a of the harvard business school is here. -- niche itin