francine: countdown to the fed. the dollar gains while emerging-market stocks slump for next week's pivotal fomc rate decision. mystery in shanghai. reports say that the billionaire chairman has gone missing. shares are halted. divisions remain for a climate change deal. there is still no agreement on financing pollution cuts and long-term goals. good morning, this is "surveillance." tom, we both have an iron ore chart. we are looking at the markets ahead of the said. tom: it is coming up later,

commodities are on the move. but i would focus on is this exhaustion at the end of the year, where people are saying when does this stop? there is no indication that it will stop this morning. francine: there is no indication and they are looking for the fed. tom: they're looking for the fed. michael mckee will join us. i don't know how the fed links then with iron oil -- links in with iron ore. francine: and currency traders have been burned on the back of it. let's get to the first word with nejra cehic. nejra: in paris, the climate change conference has been extended by at least one more day. the talks have been sent to end frenchut the foreign minister there are a number of issues to be resolved, among them, how rich nations will pay to help clean up the air. put off aron has decision on whether to allow

another runway at heathrow airport. there won't be another decision until the next election. the british government says there needs to be more research on the environmental impact. tomorrow. arabia there will be female candidates in a national election for the first time. 1000 women are running in 84 municipalities. mber numbers outnu female voters by 10 to one. hostages have been rescued from boko haram insurgents. they have been trying to impose islamic law i in northeastern nigeria. often calleds the chinese warren buffett is missing. in sociale reached, media messages say he was seen with police at the shanghai airport, posting bond. trading shares were suspended.

more than 30 senior executives of chinese companies have gone missing or face government probes this year. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. tom? tom: thank you so much. less get the day started with the data check. futures,and i got some the 10 year yield hasn't done anything. nymexade a run at 1.10, crude 36.49. right to the next board, if you would. vix 19.34, that is a change over the week, angst in the market. 30.t crude will under francine and i are looking at iron ore. francine, the hydrocarbon currencies unwinding canada and mexico nicely. francine: yeah, and on the back

of iron ore, chinese fuel production data is coming out tomorrow morning, so watch out for that. european stocks falling for a fourth day. the selloff seems to worsening, before the fed next wednesday. then we also have to check yen. we have seen a weaker yen this morning that boosted japanese shares. tom: this is one of my most famous charts. this is oil, an approximate foration adjustment, rising incomes. it's an approximation. this is the first time i have ever said this. we are back to 1970, richard nixon. here is the long-term decline in oil, up the first leg of opec, second leg of opec. here is when my dad bought that vw rabbit. this is what everyone in the middle east members, the 1986 collapse. lower for longer, and we are now

down, adjusted for inflation, below where we were in 1970. i honestly thought we would never say we are living in the time of nixon. francine: possibly the new normal. there are a lot of things to look at with that. ia report saying the oil glut will probably last until the end of 2016. joining us is our guest ghost of the hour, larry hathaway. we need to talk said, we need to talk oil, we need to talk yields. how concerned are you that it will be a continuation of the last three months? a lot of pressure in commodities, a lot of pressure on oil as opec keeps on pumping. larry: on the commodity side i think there is continuation. first of all it is about technology, about the advent of

bringing oil out of places we didn't think were accessible before. it's also a supply said story in terms of iran's reemergence in the oil market. those two factors contribute to one further issue, which is the cartels work when they have power, but in this world, the power of opec, to be the swing producer, from that perspective, it seems to be pretty intact. this is about supply. there is very little to do with demand. francine: this is longer-term. what happens december 17, the day after the fed? emerging markets are lower in anticipation. will we see a shock? we have been prepared for this, but the markets may not have in enough -- have been enough. larry: how does the fed articulate what it has done, and given the uncertainties, given the fact that the fed has ms.

communicated over the last -- has miscommunicated over the last 3, 4 months, recent difficulties. the fed, i think, will stay on message. they are data dependent, not reprogramming the future path for short-term interest rates. the day is an issue on of the fed rate hike, i think it will be that the fed is going to potentially face some challenges in terms of short-term volatility as it uses new tools to guide fed fund rates to their new target. the operational side might be the hidden challenge around the rate increase. tom: larry, you are good at the geek questions. where does the curve flattening -- i have a number of e-mails, they watch every second and they need to get a life -- i look at the spread, and i'm sorry, the

flattening -- is that stagnation? is that recession? which is it? larry: i'm not so sure right now that we have to be too concerned about curve flattening. the ecb's actions, that it has easingd to do more, the that is likely to come in some emerging economies, all those things will contribute to the change in yield. the curve is likely to be a bit flatter, but not necessarily an indicator of the u.s. business cycle. the thirst for yields still exists in this low interest rate world. tom: we will dazzle him with two charts. here's iron ore. bring it up, if you would. iron ore further off a cliff with an elegant moving average. we go away from the lehman low. the reaction is the weaker you

uan. the ruble is something. this is a quarterly chart on dollar-ruble. the old circle is quarterly piece. we have absolutely blown through this. i don't care what anybody says, at some point the south african rand, russian ruble, chinese yuan, turkish lira, those are thing that stands in janet yellen can't ignore. francine: as a fund to, the south african rand has just extended losses. tom: see how we do that? that is incredible. francine: you are on it. when you look at what's the rand has done, the rand yesterday was a watershed moment, that they have almost lost faith. is that fair? larry: i think it is fair, at least for now. they certainly have great doubts.

previously, some internal politics of south africa didn't really touch the two key institutions they have faith in, mainly institutions like the central bank. that is now in question, and we are seeing it play out. i would say that i don't know if this is an issue for the fed. the weakness we are seeing, or the movements we are seeing in currency markets are much more idiosyncratic. whether it is political risk in south africa, for policy risk. we are seeing weakness where there are problems in the commodity space. turkey, it hasen been relatively more stable. necessarily a u.s. interest rate or u.s. dollar move that is precipitating some of this. charts, wewo of his are expecting an interstate decision. is it too early to get into russia? larry: i think it is.

i think there was some enthusiasm around the possibility that the geopolitical environment would ease sanctions pressure on russia, allowing investors to move back. that is probably premature, and challenges with turkey have clothes that. tom: larry hathaway with us for the hour. whatg up in our next hour, a perfect time to talk to martin sorrell, ceo of wpp. martin sorrell on the end of the conglomerate. does he have relationships with the dow, with dupont? i'm sure he'll have relationships with ei. stay with us. ♪

tom: good morning, everyone. if you are just joining us, commodities have the attention of london. no theatrics like margin calls. nevertheless, just wait until commodities continues. we are thrilled you are with us. right now, our bloomberg business flash. nejra: thanks, tom. standard chartered raised more than $5 billion today, about 97% of the shareholders exercising their right to buy stock. that is seen as a vote of confidence in the plan to turn around standard chartered. he is cutting 15,000 jobs. shares of macau casinos fell in asia today. for hong kong newspaper reports that china will crack down on the use of illegal devices. thes seen as a way to limit illicit money channeled through casinos. the biggest deal ever in the chemical industry is expected to

become official today, according to people familiar with the matter. dow chemical in dupont plant to announce a merger, which would then split into three separate businesses -- agriculture, specialty chemicals, and commodity chemicals. investors have been demanding a breakup o. francine? francine: thank you so much. quite a lot of m&a -- let's turn to the international energy agency, for global oil surplus will persist. . we are joined by our chief energy correspondent. when you look at the iea report, they are saying that the supply remain very heavy until 2016. opec keeps on pumping. javier: effectively. until now we were looking at the glut in the first half of 20 16th as we were going into the second half of next year, we will see the market balancing.

what they are saying now is that the glut will continue till the end of 2016. thatews for oil companies, demand growth that until now has been very strong and has compensated for the overproduction from opec, is beginning to slow down. we are not contracting but it is a slowing down. the are to see signs of that across the world. it's not only the u.s. and europe, but also in emerging markets, and that is bad news for oil prices. francine: what does it mean for the other commodities? they are vastly different in supply and demand issues. javier: we don't see much difference between oil and other commodities. overproduction, a big increase in production, with a lot of investment over the last few years, for prices were very high. that production is coming into the market, just as we have a slowdown in demand. i need to ask a

difficult question. we are rationalizing the price of oil. javier, led to go to you first. what is new, other than it just keeps eroding away? javier: what is new is that we see oil companies getting very defensive into 2016. we have seen over the last two days announcements of big spending cuts for 2016, and also big spending cuts for conoco. we are beginning to see oil companies prepare for a difficult 2016. the dividends is probably what will follow. tom: i get the dividend idea. larry, you took your pht out of the university of oil in often. -- in austin. you get humility about how oil markets clear. clueless in. how did that -- clue us in. how do they clear? larry: you cited earlier this

morning that sharp climb in price in the mid-1980's. it made student housing cheaper but it was a difficult time. they clear by going through these very difficult adjustment faces. market is traditionally very much a boom bust cycle. largely going to have to come as adjustment from the supply-side. thatense of the market is it is falling. tom: francine, the research paper of the week was carol weinberg, who said that the benefit to the consumer is completely overwhelmed by the declining income affect. that is what we are wit witnessing right now. francine: and the flip side of the coin, and we have jon ferro writing the pessimistic guide to 2016, and he looks at a potential oil shock. write?erro can

francine: and my question is that we talk about oil down on a daily basis, but what if we had a big spike like in the 1970's? msrry: a spike of see unlikely without a major disruption to supply. that they concern at the moment is that price declines that are required to clear the market could definitely introduce a great deal of financial stress. we are seeing it already in high-yield, as rising defaults in that space. they can also spread into the emerging universe. it is a balance of payments issue, and from that perspective that is the real risk. tom: javier blas, thank you so much. really appreciate your briefing through the weekend as we watch glencore react. we will continue with lawrence hathaway. coming up, we are thrilled to

double barrel for you. sorrell.e with martin thrilled about our next hour -- stay with us. ♪

francine: welcome back. "surveillance" on bloomberg tv and streaming on bloomberg.com. this is the time for our morning chose --, and we

we are talking about marine le pen talking about the president of france. i can't tell you how significant this is, first of all because he did very well in the first round of the regional election. next sunday we go to the second round. if you look at the polls, she may gain ground. it is unlikely that she will win as many elections. herhas a softer look thean father, which makes her -- tom: is there an urban, rural angle here? francine: there is, like there always is, when you look at trump and the far right. it's easier for it to rise in less urban populations than in cities, where you are used to more diverse, ethnic communities.

tom: will it rip france apart? what i can't get a hand on -- under a bridge today, i saw all the different parties and candidates. does this rip france apart? francine: it will rip it apart if she gave a lot of traction, and this has huge invocations for investment, for the social fabric of society. but if she doesn't get anywhere, in the nation will come a little closer together. larry, how do you view this? this is obviously a political risk. tom is asking if it rips france apart. i'm an investor. how can i see it? larry: typically what happens is d, it tended pen die to bring together the middle to vote against the right. there are still going to be some elements of that, and the polls would suggest that she will make as much ground as perhaps might be indicated in the first round,

which still makes her a very long shot in terms of the next president of france. i think for investors, probably the focus is not so much on france per se and this particular issue, for what it means for europe. in terms of pulling things apart, it is more europe that is being pulled apart than it is france. tom: larry hathaway with us. coming up on bloomberg radio, we will continue discussions on economics. bloomberg radio, worldwide. don't forget, bloomberg asia, becoming bloomberg europe. stay with us. ♪

francine: welcome back, this is bloomberg "surveillance." look at hong kong as we prepare for the end-of-the-year holiday season. talking will be celebrating.

let's get to the first word, here's nejra cehic. nejra: the climate change talks in paris will be running into overtime. france's foreign minister says he will present a final draft tomorrow instead of today, when the conferences were scheduled to end. the bush haters trying to overcome disagreements on who will pay and shifting to clean energy. been putting has off this decisions is 2012, now he will decide whether to add another runway at heathrow airport next year. the government says more time is needed for environmental studies. the chambers of commerce called it gutless. migrants inlion beijing will get a new chance of gaining residency status, giving them access to services like health care and public schools. this city has a permanent population of more than 20 million. you can get more on these and other breaking stories 24 hours

a day at the new bloomberg.com. francine? francine: thank you so much. breaking news out of the russian central bank. it's left its interest rates on hold. the ruble, if we get that chart up, is extending its third week of decline as oil slides below $40 per barrel. tos had prompted economists say that the central bank would not do anything. tom, i know you are looking at the ruble chart, and it is hand-in-hand with oil, but that central bank governor leaving interest rates unchanged. tom: there is a rule that at some point foreign-exchange overcomes all. it is the litmus paper for vladimir putin. we'll get a compare and contrast i am a couple minutes -- i in a coupl in a couple minutes but i would suggest that the ruble move is a huge deal, something that cannot be ignored. francine: you are right, and if

you look at the longer-term implications over the last three weeks, russia's currency has fallen some 7.2%. you will have more on that next, but first the cup 21 climate talks have been extended at least one more day as world leaders attempt to finalize the landmark deal. with us to discuss the latest is bloomberg's caroline hyde. we are 24 hours away. we still don't have an agreement on finance, on how you share the burden, or the targets. the crucial topics that everyone was fighting over when the talks started almost two weeks ago. when i came in at 6:00 a.m. gmt, the sofas were littered with people sleeping, covered in suit jackets, because talks had only broken up an hour before. they had gone through the night trying to iron out at least 50 areas of disagreement over the language. it's ambition and it's cold, hard cash. how do you monitor, how do you

validate the pledges already made by 180 countries, and have you strengthen them? how do you ensure we keep on working at reducing emissions? big disagreements between china and the u.s., and then there is also disagreement between the two key oppositions in india about how do you finance it. how do you get $100 billion from the developed world to the developing world? shouldn't arab nations we helping? let's face it, they are not so developing anymore. francine: given what you have said, if we do get an agreement, is it going to be a really watered-down agreement? caroline: this is what everyone is worrying about, that there to the too much give in likes of india that doesn't want to be financially at risk, we don't want to be cutting down on coal use quite as quickly as had been anticipated.

but i think the foreign minister is really trying to push this over the line. november, these talks started under the cloud that was the ism, and many want to see success, including obama. tom: caroline hyde, thank you so much. sum upow, we need to what we have seen in cop21 on energy, and we dovetail that with the images we saw a earlier this week from beijing. is with the council on foreign relations, authoritative on asia and energy, and we are thrilled that he is with us. michael, by all means necessary is your book. what are the necessary means beijing needs to do to begin to address their horrific pollution? mr. levy: beijing is facing a huge challenge because of this pollution.

it is a political challenge, and the climate talks here have done -- dovetail was what the world and needed to see. that the technical solutions are there. they have been there for years. that they challenge for beijing and a lot of other countries is actually getting these into practice. it would be a win-win if beijing could clean up its air, if delhi could clean up its air. the policies, the legal systems aren't able to make companies and municipalities and states comply with the rules that they already have. this is the big challenge. we often think of these talks about getting countries to wants to be more ambitious. it is also about getting them to follow through. wencine: but at the moment don't even have a delegation coming together, saying how ambitious they want to be. this is the first truly global deal. are we going to see some kind of

signing, even if it is weak? shocked if would be the parties walked away from paris without a deal. they have too much staked on this, politically, at home. if there was no deal, leaders like president obama would have more political trouble selling their domestic climate actions. i expect there to be some sort of deal, but the big questions are around transparency, around how we come back to this over the years and update it. ideally we have something that sets in place a process for the stope so that we fighting over the fundamentals and start focusing on what we do. tom: michael, it is a weekend that will be sobering over the collapse of oil prices. i remember a conference you did with edward morris on born relations. you could have heard a pin drop. it wasn't about the obvious china or texas or north dakota. what does the collapse of $35

per barrel mean for indonesia, as an example? mr. levi: this is massive for countries that are transitioning, like indonesia, from being an exporter to an importer. for indonesia, this created an opportunity to cut subsidies. for every country in the world, the collapse in oil prices is massively consequential, and it is a good reminder that while the climate talks here are one piece of what drives the equation when it comes to the actualductions, market forces and technological forces often massively dominate that. i wrote another piece last week arguing that it is this collision of what is happening in the oil market and what is happening in the climate space that could really revolutionize what we have going on in energy markets. we can't keep each of these in their own little boxes anymore. francine: larry, michael is

making the point that we don't know how much information there will be to disclose what various countries are doing. how do you look at it from a finance perspective? sustainable finance could be a potentially good investment if we have an agreement. larry: an agreement is one thing is even sustainable finance surely part of the solution, but ultimately one of the big challenges we will face is the price of fossil fuels. inevitably, the demand will want to go up. the current it should really take right now is for countries to begin to impose taxes at a time when prices are declining. consumers won't feel so much paid, but it -- so much pain, but it is a key ingredient. location here is key. it is one thing politically to be seen as on the same page, it is another thing to follow through. intomichael, when you go 2016, what are you going to talk about?

you guys are encyclopedic on this. what should we focus on, given -- we are going to get a handle and we are going? mr. levi: so i am focused on what countries are doing on the ground to follow through and how they are reacting on the policy front to the price of oil. we have seen the market response so far to the price of oil, but pricescally, when oil have collapsed, policymakers have become less ambitious on things like fuel economy standards, on support for next generation lower carbon technology, and that is compounded. we saw in the mid-1980's with the relaxation of fuel economy standards. you could see it in the coming years if oil prices stay low. with that policy impact that goes back through markets i am looking for in the next year to. -- year or two.

tom: thank you so much. can't say enough about his book, my book of the year a few years ago. we have books coming up in an hour or so. coming up in our next hour, we will bring you big wind, martin saw real taking l'oreal. andill talk to sorrell prasad. ♪

francine: welcome back, this is bloomberg "surveillance." we focus on the conversation on commodities and currencies. a lot of them are moving this morning. we had the central bank of russia keeping rates

unchanged, and the ran fallingd for the first time in a long time. it seems as though there is a watershed moment. larry hathaway is still with us. we have a great story on the terminal, saying december is turning into a cruel month for traders, counting on cuts in interest rates to drive down currencies. currencies are messy at the moment. are.: they certainly year. been a tough trends that didn't sustain have been reversed and caused all sorts of problems for momentum. i'm not sure we will see much difference going forward. the reality is that what the fed is going to do was largely priced into the market place . we are seeing idiosyncratic moves, some are political. it will be hard to think about

generalized big currency moves the way we have. tom: let's go to the bloomberg terminal. everybody has got to understand, francine and i are dumb until we see the chart. here is the rand. rand, andafrican here's the recent spike. if you go back to the beginning of the lehman lows, here is the ruvell. ruble. you can see how much weaker it is compared to the rand. i had no idea the carnage of the russian ruble versus the rand. francine: that is incredible. christmas is coming early. tom: is that a gorgeous chart question mark it is gorgeous. francine: it is. and you were saying that it is screaming janet yellen but if individual the

challenges, the ruble links to oil in south africa also. tom: yeah. i just think the market vigilantes are taking over. as the fat out front of the market or are the market currencies out in front of the fed? i can't figure it out. larry: i disagree here. i don't think this is a big-time said move. we have euro-dollar trading below 1.10, having come up from 1.05. this is not a generalized move of dollar appreciation that will be linked to the fed, nor is it necessarily a story where there is universal pressure across this complex of currencies, fixed income, the way we have seen during periods of previous fed fright episodes. by sense here is that this is really about some individual stress cases. commodities are coming home to roost. this is less about the fed and more about underlying fundamentals. francine: the ruble at 69.9. is there going to be more intervention?

larry: there are times when intervention are credible, but in the case of russia it is not particularly credible. russia can't impact the price of oil, and russia is not in a position where the interest rate hikes or intervention would be seen as consistent with its domestic economic fundamentals, mainly a recession that they hope is bottoming. from that perspective, moves to tighten monetary policy in russia would be seen through by the markets. the currency will probably have to find a floor on its own, and it's not clear we are there yet. francine: larry hathaway. qe, if you look at euro and they are on the rise, and it doesn't look like the two central banks are doing qe or cutting interest rates. stay with "surveillance." our conversation focuses on business, finance, and macroeconomics. ♪

tom: the last movie i saw before the rig short was "gone with the wind," so what do i know? joe morgan at "the wall street

journal" nailed it, calls "the big short" an absolute triumph. he says the collateral tragedy is the story. i can't say enough about this movie. if you are part of global wall street or are married or whatever to anybody involved with global wall street, you must see this movie for its language. these four guys, brad pitt and the rest, absolutely nailed the cadence and pace of language of the street. it is every bit as good as "moneyball >." this is enough to make anybody who has ever lost money die. right now to our bloomberg business flash, here is nejra. nejra: dow chemical and dupont plan to announce the biggest m&a deal ever today, according to people familiar with the matter. amount of but it

would eventually be split into three units. activist investors have been pushing them to break up. oil is heading for its worst week since march, the dow was down almost 9% this week and the oil surplus will last until at least late next year due to falling demand and opec's decision to maximize output. brent crude is hovering around $40 per barrel, the lowest since the financial crisis. the 1956 ferrari is the most expensive of 2016. it went to $28 million in new york last night. while it was the top price of the year, it fell $10 million short of the all-time record, set by another ferrari last year. meanwhile, a 1962 aston martin went for more than $50 million, the most ever for a british car. francine? francine: thank you so much. the color of the year.

if you are still looking for a book to read, the former bank of england governor mervyn king and ben bernanke'snd memoir called "the courage to act." we're joined by bloomberg's london bureau chief, and larry hathaway is still with us. next year i want to see your car of the year. in terms of books -- one, butke was number the trend over the last couple years, the rise of robots show that people are continually interested in technology and the effect on economies. dig down to the numbers to find out what is coming. francine: this is big data. he spoke to ceos, to the chief

investment officer's, to prime minister's. they want to understand better as they prepare for next year. simon: absolutely. the rise of the robots talks about the challenges people will face as we become an increasingly automated world -- francine: automated! simon: jobs that were once privy for humans have turned into robots. anchors? and news tom: it's a fabulous list. simon, congratulations. you see so many booklets and you ask if any of these are about them. a smar tlist. my book of the year is "hubris." simon, what i love about this book is the first 100 pages. he gives you and me a clinic on economic history. in his primal scream for

humility after the blowup that we see. i thought -- it is a little it,, but the beginning of not that you would ever be at a cocktail party, that you are at a cocktail party and someone goes, how did this happen? and he nails that in the first 100 pages. simon: it's certainly the theme of the financial crisis. last year the book that was trying was tim geithner to look back at the crisis. bernanke has joined bookshelves with that. maybe next year we will get over the crisis. we will have a new crisis. tom: the world of international economics -- currencies unravel. you have got to be kidding me that janet yellen can ignore international events. how can she? simon: there is a 17% probability today that she will ignore th international

events, and certainly emerging markets are in a position, a much better position than a couple years ago. a couple months ago in lima, emerging markets were asking the fed to get on with it. the suspicion of markets is that janet yellen will hike for the first time in nine years. tom: this is what happens. five and kennedy comes on in the ruble crashes. this is the russian ruble moments ago crashing, right up to 70. they are really going through a 70 ruvell. simon will have to work all weekend. francine: baby putin will read the book of the year. for next you prepare year? larry: a good book to repair is "misbehaving" by richard taylor. it's an impact on all the things we have here. how do you prepare for

directionless markets? we are over the big data plays inequities and currencies. fixed income might be a little more interesting, but i think it is a story about relative value. i think it is about directionless markets. tom: larry, thank you so much. simon kennedy, find me a good book on cricket, i still don't get it. we will leave it at that. as we leave you in this hour, markets are plunging, futures just collapsed, we see yields come in. a new slow here at 6:00 a.m. in new york. west texas, 36.26, the ruble implodes. stay with us. ♪

cannotl and iron ore find a bid this morning as

companies and government search for a plan. the russian ruble moments ago tests to 70 levels. there is little to no growth. in this hour, sir martin sorrell's on the end of the conglomerate. we consider not a hard landing but a new mediocre landing. good morning, everyone. this is "bloomberg surveillance ." francine, moments ago we saw markets really unravel. vonnie: yes, -- yes, we are looking at commodities but currencies are playing out for the moment. it all ties back to oil. tom: we will get that through in our data check. right now, friday's first word news. >> thanks, tom. negotiators in paris are getting another day to work out a global warming agreement. the climate change conference had been scheduled to amd today. making deeper -- two end today.

congress is racing the clock to pass a spending bill on a tax package. government funding expires tonight admit night. the senate passed a six-day extension yesterday. the house is expected to follow suit today. a group of syrians are spending their first day in canada. --overnment plane for 163 prime minister justin trudeau 500vowed to resettle -- a former oklahoma city police officer could spend the rest of his life in prison. a jury convicted daniel holdsclaw of sexually assaulting eight women while on duty. it is not an isolated case. tomorrow, women

will run and vote for office for the first time. women are still not allowed to drive and they must get permission from a male relative to travel alone overseas. you can get more on these and other breaking stories 24 hours a day on a new bloomberg.com. tom: thank you so much. they'd on the move. let's look at equities, bonds, currencies, commodities. futures were flat. forget about it. -14. critically, 10-year yield, this is not happen in the last couple of days. euro at little bit elevated. earlier, made a dash at 35. i'm still not used to that quote. what do you have? francine: we look at european stocks extending the lowest level on the two weeks. weaker yen, but keep an

eye on that as well. tom: i am going to cancel the terminal chart to get to sir martin sorrell. earlier this week, shock and all if we get stronger yen out of this commodity turmoil. it is wonderful to have with us before the holidays sir martin sorrell, not only with wpp. martin: you should be in our business. flattery. tom: do you represent any oil companies? martin: yes, we do. tom: what do you do for an oil executive? obviously, expenditure is constrained in most of the commodity companies. doware going to come onto

and dupont, expenditures being constrained. but when they split into three, if they split into three, they will probably have to invest, even in the b2b area. branding and identity. what is interesting -- i believe the clients are faced with low real gdp growth and low nominal growth. next year will be no different, and that is the new normal. very little inflation, very little pricing power. therefore, they are focused on cost. one of the ways they are looking at new opportunities for cost reduction is through new acquisition -- the $4 trillion or whatever it is of m&a activity, record levels, is indicative of the fact that they are looking at new ways of getting tom: -- tom:-- of getting -- tom: sir martin is going to call on three new companies. francine, pick it up. francine: i also noticed he

dodged your question on oil to get straight to the politics. martin: i am not dodging the question. oil companies are under pressure and are looking closely at costs and expenses, at most -- as most of the commodities companies are. what is generally happening, it is pretty tough. francine: if you look at you are a, because great benchmark to understand whether world economy is going -- what will be the strongest industry next year, apart from politics? g.rtin: we still see fmc we still see the financial services industry. we still see capital consumer goods, autos being relatively strong. all of this is relative. the average growth will probably be around 4.5%, according to

group them -- to group m in nominal terms. at the end of the day, we are forecasting -- not forecasting -- we are doing our budgets, and as i speak we will finish later this weekend into next week. we see growth next year of being in revenues around 4% or 5% and net sales -- what we call net sales, which is probably a more accurate description of what is going on in the business, over 3%. similar to this year. we will get margin expansion next year of about 30 basis points, and that translates, when you put it together with acquisitions -- tom: enough of the ceo blather. we need a victory lap now.

l'oreal, it is a victory for you. what is the name of the company you stole it from? gamble thisocter & week as well. i want you to explain to all of our audience how you guys take l'oreal, lancome, maybelline, and the rest, and how you win that account. is that smoke and mirrors? martin: differentiation is about talent, pricing as well, what increasingly about technology, data, and content. you have a very best people, making sure you are as efficient as you can be. , andwe do in programmatic agnostic platform in terms of where clients spent. in data, and last but not least, content. tom: how many people were

involved? use it there, mr. martin sorrell, on some island say pute and you everyman on it. on many people were in winning that account? martin: i would say a couple hundred. tom: about a hundred people. martin: a couple hundred people. you are talking about a very sophisticated account in a very sophisticated market. we are talking about l'oreal in the context of the u.s. and north america. francine: did you have to call the ceo? martin: l'oreal is organized regionally, and we were in close communications with the ceo of the americas. tom: what will you do for them? you give me all this techno mumbo-jumbo. which supermodel are you going to hire?

martin: i am not. in advance of your wedding on christmas day, i am not. a little bittalk about politics and we talked about the u.s. presidential election. this goes straight to your bottom line. there is still so much concerned about -- so much concern about world growth. what is the worst-case scenario? martin: i do not think we will be in recession, but we will see a continuation of what we term the new normal. i think corporation since 2008 have changed their psyche or their point of view. they have gone much more conservative. if anybody comes on to your program and starts talking about revenue synergies, you laugh. that is really what it is about, how you get growth out of these things, not how you cut costs. but you take the cost synergies, tax them, and if it is graded in

the -- greater than the premium, great deal. if it is less than the premium, it is a lousy deal. that is the wrong way to look at that. it is about revenues and being more efficient. i see no reason for 2016 to be different one way or the other, ind or bad, to what we saw 2015. i think it is going to continue into 2017 and 2018. regionally, i think china gets better in time. obviously, a lot of uncertainty still. india is still strong, russia is a challenge. , in two years? martin: next year will be pretty molotov -- next year will be pretty volatile. but i think in the next two or three years we will see later strength. tom: martin sorrell with us for the hour. we are thrilled to bring in

eswar prasad. this is going to be fabulous. later on china. so martin sorrell and eswar prasad. the future of a not hard landing but maybe a new mediocre. stay with us. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua in london, with tom keene in new york. let's get to the bloomberg business flash. >> the biggest deal ever in the chemical industry could become official today. thou and upon plan to announce a merger. the combined company would be split into three businesses. investors in both companies have been demanding breakups. oil is having for its worst week

since march. futures are down almost 9% this week. the price of crude is the lowest since the financial crisis. the surplus could last through late next year. missing --ett is china's warren buffett is missing. folks at international -- china is in the midst of a corruption crackdown. several executives have vanished since stocks plunged in june. that is the latest bloomberg business flash. native 14, dowe futures -134. rather than the usual blah blah blah, we thought we would have an adult conversation about what the toolbox actually looks like. this is an adult conversation. take notes. there will be a pop quiz monday morning at 5:00 a.m. michael mckee is here. michael: the question people are asking is not whether the fed

will raise interest rates, but whether they can raise interest rate. let me call up a chart. about zero rates, but we are not at zero rates. the fed targets a range of zero to 25 basis points, and that is what the effective rate is right now. right in the middle, about 13 basis points. what happens if the fed raises that range from 25 to 50? the assumption is we will see rates go up 25 basis points, it will trade in the middle of the 35, 37 basisabout points. the question is, can they hit that yellow line? a number of people in the markets think they cannot. because of the way the fed fund market trades, they will not be able to get to 25 basis point. the zeroe are near

bound, and then when we reveal, and they hope to get to that yellow line, the markets are really in charge, not janet yellen? michael: it is the federal home loan bank boards, banks that are really in charge. on thispays interest reserves, but they are not eligible. so they lend their money out into the fed funds market, which is why you see a 13-basis point level there. the fed cannot raise rates a full 25 basis points, and if people start to worry about what happens with the fed and whether they have lost control of interest rates, we could have a real problem. tom: francine, this is the problem. mike passed a course on money and banking and i did not. that is why michael mckee is so good at this. ask a smarter question than me. francine: i like the idea that we are doing a pop quiz on monday. michael, when you look away from the conversation that you just

had about whether they can, is there still concern on the markets that if they raised by 25 basis points -- and let's say they can do it -- the next year there is a chance they may reverse it? michael: there is the feeling that they will, but that is not the formal best. -- the formal bet. people are really taking it as a given that the u.s. economy is going to continue to expand into 2016. it might take and blacks want to change their mind. tom: the black swan, martin sorrell knows well, could be business investment. how does this fold into the animal spirit of let's build a new factory, let's build a new skyscraper? terrorist events, they feed into that uncertainty as well. , sitting ontitudes

your latest figure of $7 trillion net cash, relatively on , beinged balance sheets unable to bring it home because of tax policy -- i think the environment is one of uncertainty. gray swans, black swans, whatever. people are unwilling to commit. michael: one of the arguments for the fed doing this is that it will raise confidence. martin: i think the u.s. recovery continues, but it is still pretty fragile. i think the u.k. is now more into electoral cycles. it will continue to be good weather to -- it will continue to be good relative to other cycles. it will recover or strengthen again in 2018 or 2019. western europe is improving. germany is very strong, german

exporters are very strong. spain is recovering. we have the elections in france, which i think are increasing uncertainty. we have the greg did vote coming up maybe next year. -- we have the greg sit -- the grexotit vote coming up maybe next year. all of these things mean greater uncertainty. francine: we will talk about heathrow next. greater uncertainty -- this is 10%, 15% probability. we have m&a at a record. martin: m&a is about cost reduction. costpeople talk about is synergies, but i really wish you would talk about revenue synergies. when sab miller gets together , think $200 million for

every leader in terms of increased profitability. francine: but my question is, what will it take? martin: this is really important. companies will only win by growing the top line. the biggest determinant of total shareholder return is like the like store growth. real like to like topline growth. that is the biggest determinant. tom: we are going to come back with sir martin sorrell. i am going to flunk the pop quiz on monday. i give up. martin: legal and general will drop. tom: we have commercials, sir martin. come on. michael mckee, thank you so much per it on bloomberg radio today. he would only come on if the packers did good. we will talk international value. really looking forward to that conversation. ,hat is on bloomberg radio

digitally and worldwide. futures have deteriorated -15. stay with us. ♪

everyone.morning, friday morning and the markets deteriorate. how about a morning must-read? i want to do that right now, on productivity. barry eichengreen was on bloomberg radio early this week. productivity --

tom: this is a brilliant, brilliant essay, where barry eichengreen folds in lawrence summers of harvard. cannot convey enough, this is the must-read to get the weekend started. facebook, 12,000 jobs, dow chemical, 53,000 jobs. it does not compute. a lot of people are going to be out of work. martin: i agree with that, and i think technology -- there is a big question mark whether technology adds or subtracts from employment. admit it, buto one of the competitive channels a few months ago -- tom: excuse me -- a 3-d print of a sports

car took 12 hours. everything was 3-d printed except for the wheels and the seats. so when you think about that and the impact of 3-d printing and robotics is having on there is a, reduction in employment in the longer term. tom: i have been talking about united kingdom, what daniel yergin talked about for two hours. with martin sorrell, we have time left over. francine lacqua wants to talk about heathrow. we are going to do that. our major airports, whether it is dubai or heathrow. also, julian emanuel will join us from ubs. oil, 36.34. ♪ 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. "bloomberg surveillance." everyone is long in new york. not the big short, it is a small

long right now. the we need to get to our first word news. is warning putin that any threat to russian forces in syria will be eliminated. he spoke today in the defense and said that russian's -- russia space in syria has been beefed up -- russia's base in syria has been beefed up with more planes and weapons. -- werethe captives in military men. the climate change talks in paris are going into overtime. the conference was supposed to end today, but the french foreign minister will present a final draft of the agreement tomorrow. diplomats from 200 companies that from 200 countries are -- the big short opens today in u.s. theaters. christian bale, ryan gosling, play investors who

saw it coming but strike it risked desperate strike it rich. tom: thank you so much. sir martin sorrell with us. i saw the movie a couple of weeks ago. i am not a movie guy, but they capture the language of wall street. martin: beautifully. a rave review today in "the wall street journal." i would think you would like to see it so you can see what everybody does to your stock. martin: absolutely. i will see it as soon as possible. tom: it is not "talladega nights," for those of you who remember that. martin: greed is good? much greed is so good, it is the courage to have a black swan opinion. martin: the courage to take risks. tom: the courage to take risks,

and measured, smaller risks as well. in china, there is a lot of different opinions with very little recent conversation. martin sorrell spent a lot of time in china. too, asarying -- so, eswar prasad war prosodic he has given us a terrific perspective in 2015 on implosion. what is the level of collapse in china right now? eswar: i would not call it a collapse. the high-frequency data that we focus on, things like iron ore consumption, it is all about manufacturing -- the manufacturing part of the economy, which is certainly not doing well. consumption is not doing well, but it is not all that news. tom: the government in control, in the broad sense of valuation, depreciation of the currency. we have this executive who goes missing overnight.

do they have control of the system, not of beijing? as marco -- eswar: what they want to do is move to a smaller market, while maintaining controls. the tension comes out in strange ways. the good point is that the chinese government still has a fair amount of room in terms of monitoring fiscal policy. if the growth slows down a lot, they are doing financial reforms at least slowly, but in a haphazard way. -- thelement strategy implementation strategy leaves a lot to be desired, but their heart is in a lot -- but their heart is in the right place. the services sector, the labor market, i think the imbalance is a problem right now. martin: what is the real great -- what is the real rate of growth for china right now, in

terms of gdp? eswar: if they do it by going back to the old playbook, it will be good for them. tom: francine, did you see how putefully professor prasad sir martin in his place? francine, jump in with a question. francine: when you look at the way -- when you look away from the world of economics and finance, how much do we know about how china operates? a lot of the magazines overnight a company has lost contact with its chief executive. if you look at this, how do you trade on an? to play the china growth story through the equity

market has always been a risky proposition. this is the fundamental issue about china. you want to have a start market -- you want to have a stock market that is working very well, but you do not have a good auditing system, you do not have transparency. to do that with the right intentions, fighting against corruption, but all of these forces are coming together , and then we steve -- and then we see strange things, like the chairman disappearing. there is another thing, the chinese expansion overseas by other companies. "conglomerate"rd in relation to the dow. i would call it conglomerate expansion in unrelated sectors. we see a rash of external investment, and close on is a good example of it -- in a number of industries. can companies control, manage

that expansion? it seems to be higgledy-piggledy growth. lenovo hiring has been very focused. in very different sectors, and the growth has looked illogical. eswar: there is reason to be concerned because the chinese government has been pushing corporations and households to take money out of the country because they want foreign exchange to be held by the people. corporateod governance and control, you have the phenomenon that you mentioned. some companies are getting a right, some are getting it very wrong. tom: as we like to perform on "surveillance," particularly for the u.s. audience, higgledy-piggledy -- 1998 is when he got his first cosmetics account. francine: so very british.

there is a more immediate problem with china, which is bad loans. we heard today that a developer from one of these so-called ghost towns in china, is saying they are struggling to repay bonds. are we going to see more defaults in the coming weeks and months? eswar: i think we will, and to some extent that is what the government wants, more market discipline. economy and the people that are not used to discipline, that are used to having the government backstop anything that goes wrong. speech -- itrogoff is a solution with every actor involved, that we have chinese depreciation. eswar: i think there will be some depreciation. rapid depreciation and capital outflows for the right reason, being merged with capital flight for the wrong reasons. that sets off a very unstable

dynamic. the curious thing is that the mainr-renminbi is not the point. tom: what should we look at? weight of the dollar in the basket is about 99%. the dollar has appreciated by 12%, 13% since last year. that is what they need to get away from, because even if the renminbi depreciate by another 5% to 10% relative to the dollar, it is still stronger than virtually every other trading partner country. tom: thank you so much, professor eswar prasad. coming up on "bloomberg surveillance," on monday we will look at the world of international relations and update with richard haass, the ambassador on the council of foreign relations. futures -13, dow futures -128. ♪

francine: this is "bloomberg surveillance." we have no decision on heathrow. that would be critical to the city's expansion, but also pollution control. let's first of all get to the bloomberg business flash. >> dow and dupont are expected to announce a merger today, the biggest ever seen in the chemicals industry. sources say the combined company would be split into three units. activist investors are pressuring dow and dupont to break up. ford will invest 400 billion dollars into electric vehicles, adding 13 electric models to its lineup by 2020. low gas prices are hurting sales of hybrid cars. is the 290 mm.

it was auctioned off last night for 28 million dollars. that is the bloomberg business flash. tom: we have breaking news on dow or this is not about dupont and it is confusing because everybody is waiting for those headlines. to dow an interior deal chemical with glassworks. the symbol is glw of elmira, new york. this is restructuring dow, corning. dow corning is having a lot to do with the glass quality that you see on every single smart phone out there. the headquarters will remain in auburn, michigan. i want to make clear this breaking news on restructuring is precursor to any announcement we would see on dupont and dow. we do not see that at this time. it is time for our single best chart. eswar prasad is with us from cornell, answer martin sorrell.

you are the one that is going to know the math. this is a stunning chart. it is u.s. animal spirit, topline gdp, and france's animal spirit normalized back a good 35 years. i boxed in the french malaise here, and without question, as we know, where the english would fix this -- sir martin, we go to on the economics of this. let's talk about the emotion of what they need to get right in paris to be like new york, to be like london. or is that the wrong question? difficult forery a foreign -- martin: it is very difficult for a foreigner to comment on the u.s. or on france. having said that, there is no doubt that if i look at our business, we are still

restructuring our western european, continental european business eight years after, or whatever it is. in america, we had restructured our business by the midpoint, so about june, second quarter of 2009. there is something structurally inefficient and structurally difficult, the frictional costs are very significant. there are lots of stories i could tell you about france, where we have great tom: difficulty. francine -- where we have great difficulty. tom: francine, i know you want to jump into this. you circled over the north sea your last flight into heathrow, right? francine: to tod's point, that the english would fix it, this is the only country that is taking a huge risk by putting a referendum on whether they should be in the you -- in the e.u.

martin: and we have the danish as well. francine: when you look at the talks, thepansion u.k. business has responded furiously to what we heard yesterday, that the decision on the third runway will be delayed 2016. was it right or wrong to delay? martin: it was wrong to delay. from a political point of view, you have a mayoral election, and both political candidates are against it. goldsmith has threatened to resign. one of his close associates said he might even resign if the decision was delayed. the environmental issue in terms of -- and with cop21 going on, it is very top of mind with the electorate, so it is political and environmental. but we have to get airport capacity up. andannot see to frankfurt paris the way that we are. ei: this is the merger of

punt and company with dow chemical. i can honestly say in my lifetime -- with ei to pot and coming with dow chemical. i can honestly say i would never the keyi would -- headline, to combine a merger of equals. that is where it will go. mr. breen comes in after coleman is out at dupont he will be the chief executive officer of the combined company. this is an all-stock merger. that used to be a big deal in the accounting of yesteryear, maybe less so now. sir martin, every time i see a merger of equals, all my radar goes up. that is baloney. martin: i do not know about baloney. are they going to split it into three? tom: there it is right now.

dow-dupont to be in three. there is the first phrase -- dow-dupont is the first time i have seen that. the social issue that you are referring to is not so important because they split it into three. there will be several -- there will be separate managements, and it will be specialty chemicals, commodities, and it will be the third piece as well. sir martin, this is to basically unlock shareholder value because the two companies were not working as such. said unlock value. it is $3 billion of synergies they have been referring to, francine. you are going to evaluate this, ax that figure, work out multiple, and if it is bigger than the apply premium -- tom: right at the top of the

press release goes to write where you were. "highly synergistic wouldction." eswar prasad throw chalk at the board if anybody in his classroom said that. francine, highly synergistic transaction. francine: and the basic deal, it splitre getting into three companies. this is a crowded space, materials science. when you look at valuations, it will be very interesting which one will come out a higher premium. suchasic idea is you have huge conglomerates, that if you split them, if you merge and split them into companies that are much more niche, that shareholders better understand what they do, and it gives it more of a sense of purpose. that is themartin: theory. we will see how it plays out in

the long term. if you look at our own industry, i hate it when tom or others or you call us a conglomerate. i think we are relatively on advertising and marketing services businesses. wonder is a conglomerate. these are companies that spread into often unrelated areas. this goes back to at&t when i was in business school. catherine was adamant these 1930's,ions reek of the and at some point they cannot be good for business. dennis said yesterday that he has no idea how this benefits agricultural business. are these mergers and combinations given -- are these mergers and combinations nothing

more than a return to the late 1930's? eswar: i think the concern for emerging markets, it is being done for the right reasons. everyone of these murders will have to ask a question -- if two parts are not working very well, putting the two of them is not necessarily a good solution. martin: split them into three. that is slightly different. eswar: that makes a lot more sense. martin: here, to come back to tom's point, the merger of equals will work. tom: here is the single most important word in this press release. i love how at the bottom they put the advisors, the credit for the big short. lazard, morgan stanley, all the usual victims. goldman sachs -- what a surprise. the two lead names on this transaction are kline and company, and mr. altman's

evercore. it is not goldman sachs and morgan stanley leading the beauty list. it is kline and company, lazard, and evercore. that is a changed world. martin kaymer we have seen boutique investment banks. boutique god, the investment banks are driving the bus. martin: that is not quite true. , goldman, j.p. morgan chase, morgan stanley, they dominate. but you are right. , ceo's looklook for for advice and independent advice, and the boutique banks have carved out a niche in that area, too. it is a bit like our business. you have the big holding companies. tom: are you a publicist? martin: we have --

call pubs, i publicists trying to get together. it did not work out because of social issues. if it was social issues that stopped it, the two ceo's should have stepped to one side. , it'd benefited shareholders and clients like they said it did, they should have stepped aside. wherere we in a world publicists -- martin: there is a serious point here. given low gdp growth, lack of pricing power, focus on costs, you will see clients, media owners, and agencies more consolidation. in this world of slow growth, that is what people look for. tom: the other idea here is the cornell -- does cornell merge

with dartmouth? francine: i do have breaking news. chargeis saying that the will be $780 million. we now have confirmation from dupont that we will see about 10% of jobs affected at their own business. tom: they like to keep that single digit. that is a bold idea on their part, to go double digit. usually that number goes up, as we all know. my head is spinning. futures, -16 let's bring in jeffrey mccracken. he wrote our lead story. we are getting him lined up here as we see this announcement. if you are just joining us, it is dow-dupont, and dow chemical is a commodity chemical company with dupont the miracle of science being more specialty chemical. francine? francine: this is a merger we

have been talking about for a couple of days because we had that initial scoop, dupont and dow chemical combining. you are asking whether this is a merger of equals p they will merge and separate into public companies. and 10% of the jobs at dupont will be affected. tom: jeff mccracken is joining us now. it isn't it -- why is downdupont, and not dupontdow? jeff: the ceo tried to do this for years and years and got pushed back by dupont. edward breen was interested in doing the deal. tom: i would think carl icahn and dan loeb and the others would be having cocktails tonight at a new swank place over on 50 7th avenue. what did you learn this year

about activists joining megamergers like this? jeff: the question is whether they have hit a peak. i am not sure you could do much better. i am sure they would like to make your money a little faster. it looked like he had a loss here with dupont. he tried to run on a proxy in may and lost it but in the end, he got largely what he wanted. he got the companies to merge. it broke into three companies that the investors will love. they will be very pure and very focused. francine: what happened to the rivals? jeff: the big question is there is a yearly pn coveney called -- there is a european company called syngenta. china has made a bid for syngenta .

?ho will buy syngenta clearly they are under pressure. the question is whether they will step up. tom: jeffrey mccracken, thank you so much. we will let you get back to our reporting. also look to bloomberg view and bloomberg ad fly for commentary and analysis in this historic moment for american industry. truly remarkable to see this merger. tom: just think what impact -- martin: just think what impact this will have. tom: we will continue this on bloomberg surveillance at bloomberg go. stay with us. 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. stephanie: we have breaking news. dupont and dow have combined in a merger. ford doubling down on electric cars. it is tripling the size of its

lineup. we will speak with the ceo. and will congress come to the rescue? time is running out for lawmakers to help puerto rico avoid a major default. stephanie: happy friday. i'm stephanie ruhle. you are watching what i think is going to be a very big day on "bloomberg surveillance -- on "bloomberg ." tomdavid: i am david westin. stephanie: we have a lot of news this morning. david: just announced, dow chemical and dupont are combining in what will be the largest deal in chemical history. they will break apart into three