>> countdown to the front, investors retreat from commodities ahead of an expected rate out from the central bank. prudence and divergence. rbs has returned to profit with an exclusive interview, -- ross mcewan says the restructuring of the investment bank has been well advanced. they will return a profit within four years. the marketries, surges as summa house in the markets. a bows to the

markets. tom is in dubai. we will talk oil and commodities. >> tom will check out the oil industry in person today i guess. we are also keeping an eye on personal since 2014 at the last star wars newly came out in 2005. we have been waiting longer for our first set of movement since our star wars movie and we get both. peter: i would love to see a correlation -- >> i would love to see a correlation. we also have michael from the eurozone, better than i expected. this will fuel a little relief that industrial production for the month of october for the eurozone is 0.6%. we are seeing the dollar is lower. the price of oil, that feeds into inflation. at least, expectations that there will be lower inflation. here is vonnie quinn.

officialnd an egyptian says there is no sign of terrorism so far in the october crash of a russian airliner. the nation's chief investigator reported preliminary results of the crash probe. he says there is no hint of an illegal terrorist act. the investigation is not complete. russia has said and expose of device was placed on the airliner. all 220 four people on board were killed when the plane went down in the sinai. . a big defeat for france's far right national france party. the leader helps to build on historic election results. instead, the party failed to win any regional semis and yesterday's run off. they want tougher immigration policies and france and want to leave the euro area. japan, and germany are among the 18 nations who will work together to build national carbon markets. this according to a new zealand government. those markets are designed to speed the pace of emission reductions called for under the new climate change agreement.

it allows patients to cooperate pledges on limiting emissions. a cold wave is likely to clear up the smog. authorities issued the lowest level alert over the weekend. last week, for the first time, beijing issued its most severe smog warning. factory production was limited, so was driving. top democrat in new york who want to bar known or suspected terrorists from buying guns. andrew cuomo is behind the effort. he wants to add the governments terror watch list for criteria used for fun back run checks. you can get more on these and other background stories at the new bloomberg.com. this is your data check on monday morning. two days away from the fed. s&pave a look at what futures are doing, as you can see, they are sorry up. this is the same that we see in european stocks. 1.6..s. 10 year at

with a lot of calls from deutsche bank and ups. the day of divergence is that number. crude, $35.43. this has huge implications for how central banks view the risk of low inflation. this is what we are seeing in european stocks. european stocks are on the high side. basically, commodities are and somee brunt investors are anxious about the fed. we also have to look at the gbp-usd, inflation worries are already coming to inflation as we look at oil. crude oil at 35.41. the fed anxiety and the market anxiety, we have one man, george magnus, the senior and dependent economic advisor. great to have you on the program. when you look at the markets and you will at how to play the markets, is everything already priced in? orge: never say never, but

this has to be one of the most flat changes in monetary policy that we can remember. you would have thought that markets have had a lot of opportunity to accommodate or acclimatize to the idea that a change in policy regime is coming. one thing the markets are not good at doing always, and maybe not this time, either, is anticipating where this is leading. none of us really know. maybe even the federal market committee itself doesn't really have a strong idea. francine: you mean in terms of interest rates. george: in terms of how far and how fast the process -- people will call it mars is -- monetization. i prefer to call it the reduction of monetary commoditization. the mix and not so scary. -- makes it not so scary. the market expectation of the

federal funds rate was around 90 basis points by the end of next year. the federal market -- the federal reserve governors expectation for slightly higher rates. that is going to be the key. i don't think 25 basis points if that is what they do on wednesday is your there. -- is here or there. francine: she was seeing the markets are too complacent. if you look at 3rd avenue, all of these pockets of small crashes, fractures in the markets, investors are taking them on board. there is so much debt, especially by energy companies in emerging markets that even a small fed hike could derail them. george: we have to this thing which we think the economic impact will be and what the financing impact will be. the finance impact could easily be more significant. this is, after all, a regime

change, in funding and financing that has been in situ since the financial crisis. we have had a bit of a warning about that during the last week from the mutual fund shutdown. closing redemptions on high-yield. going on since june. it has accelerated in the contagion has been spreading in the market. since the beginning of november. it is quite likely that the shakeup in finance markets might be more dramatic than i think it will be for the economy. this is mike in new york, since the financial crisis, we have a number of central banks raise rates and then have to resort -- reversed themselves. fed officials have said we can do that, but is there a financial cost? is there a market and economic cost if they make a policy mistake and then have to reverse themselves? what is the danger here? george: i suppose the biggest

anger is an embarrassment. -- biggest danger is in person. you are quite right. countries have central banks that have raised interest rates since 2011 only to cut them again, and in some cases, introduce negative rates. the federal reserve doesn't want to be among that group of countries. my feeling is, my judgment is, that i don't think it will be. the cost of making a major policy error like that would be significant. i think we would find out pretty soon if not in the first 25 basis points, the second move. if it look like automobile loans and the impact of that change in monetary policy on finance markets produced strong negative feedback through the economy, i think they would look

silly. mike: what is the cost benefit analysis? we willple are saying see much faster inflation in 2016. you mentioned be fed wanting to get some margins in case we go into a downturn to be able to cut rates. when you weigh the two sides, which side is the risk come down higher on? george: it depends on your point of view. otherure there will be people but diametrically opposite views to me. it is about rocks and hard places. on the one hand, the backdrop against which the federal reserve as inspector to raise interest rates is quite unusual rateny tightening more raising environment that we have seen in the last 50 years. on the other hand, the excesses in some financial markets, particularly in junk bonds which is current and topical, his very familiar.

the idea of using interest-rate as a part of a toolkit for financial stability purposes is quite genuine. there is no reason why the central bank shouldn't do that. think they look like they are picking their moment, they think the economy can withstand it, notwithstanding low inflation and so on. it is a balance on it is judgment. francine: speaking of emission -- of munition for a future downturn, how far lower the you expect the projections to roll? will there be any surprise? george: i don't think so. projections as they stand now exactly year on stellar. -- aren't exact the american have been you know

trundling along at two point 25% for quite some time -- 2.25%. is convinced that that is the underlying case. will we: george, hear of janet yellen for quantifying of gradual? or will that be a guessing game? george: i have set on this program and elsewhere that the spirit with which they have for raising interest rates is like this. francine: we didn't catch it on camera. you have to do it again. george: ok, it is like this. i am exciting -- the language will be important, as always. it is my hunch and other yellens view that janet will say it is the right time to do this and these are the reasons why ends we are going to -- the essence of the message will be data dependent and will be slow.

now,ine: thank you for george magnus is our guest for the hour. the president of the world bank at 6:00 in new york, 11:00 in london. that is on the crucial climate deal. the world bank, will this spur him to do more? this is "bloomberg surveillance" on bloomberg tv streaming on your tablet or your phone or at bloomberg.com. ♪

francine: this is bloomberg surveillance. yuan has fallen to a four-year low. this is seen as a sign that the banks will allow further decline. top bond investors are

protecting more carnage for junk-bond funds. week, the market urged 3rd avenue managers to freeze. up to 50% of junk-bond funds may have high withdrawals. they are at a six year low. the price of homes in central london will stagnate in the next year. that is according to property operator. the firm says that perspective i is priced out of london will look for properties farther away. the average price of a home in london is 940,000 u.s. dollars. that is bloomberg business flash. francine: that is depressing. $940,000. i do so much. the sinking to levels not seen since the financial crisis. we spoke with jonathan ferro and guy johnson about the challenges in this new low price and barbara. >> the low price of oil is a

challenge for oil-producing countries the world over, not just for scotland or the u.k.. first and foremost, we are working to support the industry as it seeks to increase efficiency, lower the cost of production, and we are remaining focused on on making sure we don't see early decommissioning in the north sea. francine: scotland is externally exposed to the price of oil in the north sea. ,iscussing those falling prices george magnus and stewart. when you look at oil, how difficult or how impossible is it to predict where goes next? >> it is very difficult. the one thing i would say, and we have priced the better stories out there so hopefully this has been priced in. the resurgence in iraq has been weston. -- priced in. with theened in rome libyan talks. it is early days, there is a long way to go, but i would pointing out that there are a million dollars of assets.

if they can organize them themselves and have a efficient exports, that would be the next strike on the oil market. barrels of million libyan oil like a come on the market straight away as they find an agreement? rt: we will see. francine: is it annexed or three or four dollars or less? stuart: it is hard to correlate fundamentals with price. this is a market driven on a scale outer member for many years. therefore, the idea that one million barrels equals a certain number of dollars per barrel is a hard cognition to make. ake: you mention this as sentiment driven market. what is driving the sentiment on brent right now? we are seeing west texas fall, the fractures still in the game. at some point, we have to hit the marginal cost of production. that.: you can go beyond here is the argument.

if you are a big energy company, you have lots of debt, you need that cash flow to keep paying off your debt, thing interest on it in the environment, would you carry on with low cost of production? probably, yes. now, it is an argument about timeframe. can you keep doing up for one quarter, two quarters a year? how long until the bank can pull the plug and that is the question to ask right now. francine: are you concerned about a possible further fall followed by a shock? unclearoment, it is what would cause a shock because there is so much supply, but pamper thebasically recovery in the world growth. george: it is always a possibility. to the extent that the oil market -- amongst its many influences is the geopolitical situation in the middle east. we all know it is unbreakable, volatile. there is a possibility that at happensnt, something

and suddenly there is a scramble saysak up whatever the iea , 3 billion barrel and injury -- inventory. thatadditional supplies may be forthcoming incremented from libya and iran and so on. i can't predicted. betweenddenly went from 25-$40 a barrel act up to $70 or $80, clearly, it would have a negative impact. for the time being, i agree with stuart. stuart: it is an interesting point. if you think about the conflict in the middle east, and there is still no premium in the oil price. george: something would have to disrupt flow. that is the issue. francine: think you so much. -- thank you so much. coming up next hour, we are joined by the president on the council of foreign relations

where we will continue the conversation on the middle east and libyan oil at 6 a.m. in new york, 11:00 a.m. in london. this is "bloomberg surveillance" where the conversation focuses on macro decisions during said week. we will be back in a minute. ♪

francine: it is time for the morning must listen. this is an exclusive interview with ross mcewan. he spoke to bloomberg and the

next was an interview. here is what he said. ross: what you have to realize, the marketplace is changing dramatically. you see all of these companies, changing, downsizing. they will have an impact on a moderation -- enumeration. i have become very pragmatic quite quickly on these issues. you need the right people in the right jobs and you need to pay them enough to actually get them to do the job. the thing that has been really important for our business is to build a culture of the organization that it is not about the money, it is about doing the right thing. francine: ross mcewan there. when you look at the bone of contention and all that has come up, it brings us back to what john kline deutsche said three weeks ago. george: ross mcewan said in a brief take comedy where the jumped out was culture.

-- the word that jumped out. nobody objects to the payment of bonuses if it is warranted by profitability, merit, and performance. what has gold us is the payment of bonuses as a right. it is my expectation that i will be paid a bonus and i will be disappointed if i don't. whether you are the ceo or a more lowly person in the organization, changing the culture is what is important. in that respect, to the extent that that is what john kline said, that is spot on. mike: isn't there a problem with the payment of lower bonuses? prices are sticky. this is a problem in london where prices are high. if people aren't getting paid, they are likely to see jobs moving out of the city. george: that is always a possibility. to be honest, the short answer is i don't think that is a reason that companies ought to

pay bonuses. opposite, they wouldn't be worrying people if they can pay them. they need to cut their cloth accordingly. to the extent that banks try to do too much -- it is beginning to change. ross mcewan's interview to just that. francine: thank you so much. a comes back to the culture. george magnus, stay with us. coming up in the next hour of "bloomberg surveillance," new york university's stern school of business, professor robert engle will talk about volatility at 6 a.m. in new york, 11:00 a.m. in london. this is bloomberg surveillance germen on your tablet, your phone, and bloomberg.com. ♪

michael: you are looking at hong kong.

70 degrees, 21 celsius. 58 overnight. you to fall, like new york. -- it is like new york. let's get to bloomberg first word news. there is not says sign a terrorist act brought down a russian jetliner in october. a statement out today indicates this is in the final conclusion of investigators. russia has said that a bomb brought down the plane. all two and 24 people on board were killed. concerned that the crash was killed by -- perpetrated by terrorism led to the evacuation of thousands of tourists from egypt. thousands of filipinos are fleeing the country as a powerful typhoon hits the country's eastern islands. it is bringing arching ftse surges. bringing 13 foot sea surges. they will develop international carbon markets. among those taking part, the u.s., germany, and japan. this, theyt part of

plan to great the largest carbon market by 2017. in brazil, thousands of protesters to the street to demonstrate against the president. he faces impeachment proceedings over allegations of corruption. brazil is in its worst recession in 20 years. republican presidential candidate donald trump and ben carson are not happy with the idea of a convention next summer. they hope that reports of republican officials contenting nomination as he gets the number of delegates is incorrect. carson says the convention and lessening his impact. you can get more on these and more stories 24 hours a day at the new bloomberg.com. vonnie quinn in new york. over the weekend, representatives from over 195 nations reach an agreement to lower the warming of the planets in the top 21 conferences in

paris. the limerick conferences were met by -- the landmark conference was met by cheers from hundreds of delegates. matt campbell joins us with the winners and losers. if you look at the agreement, it seems that within hours, people tried to downplay it. there is nothing binding about it. matt: there is not much binding about this. they shouldn't be left unsaid that there are a enormous amounts of work to be done and there could be backsliding. big landmark.lly this was by far the most global -- ambitious global deal ever. from the european union, china, the u.s.. this is quite serious. on economies and businesses will be real, even if there is some backsliding down the road. francine: what does it mean for businesses? i love the way you put it on the headline on bloomberg.com. tt: there will be a premium charged if you want to be in the

fossil fuel business, and environment a premium. we have a carbon price in the eu that is a very flawed system. large parts of north america are going to a carbon price. there were more of that -- there will be more of that in china. what this means is that investment flows to where they wanted to flow, renewables. if you look at the power sector, 65% of investments will go into renewables over the next 40 years. no one is turning out the lights at exxon mobil, bp anytime soon. you'll probably going to see a progressive shift of the capital , those investor dollars toward renewable. severne: china is going the about this and setting its own targets for 2017. differ fromna benefits we will see from this? matt: in china, there is a different situation in that this is still a developing country to some extent. a very large amount of coal is

comes -- consumed there every year. the chinese leadership has signaled they do want to be ambitious on this. part of that is simply popular demand. china is not a democracy, but there is some demand a public pressure. what we have seen in beijing in terms of smog and pollution, smog and climate change are not the same thing, but there is a real environmental consciousness. chinese havet, the figured out this is an area of competitive advantage for them, potentially. create a world leading industry in solar, wind, energy efficiency. otherhave seen in so many industries, when the chinese government thinks there is an industrial position to be carved out, they can act decisively to do so. mike: is this an effort that has to be compelled? if i'm an american ceo, i am thinking the president brings back this treaty but congress is controlled by republicans who don't believe in it and they may not pass anything that will force me as a corporate leader to act. am i going to act? is there a payoff to me?

matt: there were a couple of things to note there. one is that president obama was careful to structure the u.s. commitment in a way that he argues does not require congressional ratification. that is the first thing. the second thing is that it was amazing to see at the summit in paris the presence from big business. not just european or asian business, but american businesses. dupont, monsanto, kellogg. dozens of other large american companies all their, all saying they want to do what is necessary and in some cases, they see opportunities to make money. dupont makes temples were solar panels. there are lots of other examples -- they make chemicals for solar panels. the opinion is not as monolithic as some people think. francine: how much will it catalyze in terms of investments? my question for georgia's with the price of dollar -- oil at $34 is does this not delay investment catalysts?

matt: it is not easy and cheap also feels don't help. they were counting on the price of oil would turn people off of fossil feels. we won't get that. you need the incentive to come from the regulatory side. francine: oil is not going anywhere? george: first of all, there is an issue with what is not to like. the first issue is this addresses a problem that humanity has to be concerned about. the second is that this will take a long time, as you say, but over 20 years, 25 years, developing a new energy infrastructure, renewables is a powerful catalyst for sustainable growth. headwind includes cheap fossil fuel. that could be a problem. it would be a problem in terms of delaying or leading to a more protracted change. ,he pressure that you allude to

internalized pressure from the corporate side, in particular, could be quite strong regardless. francine: thank you so much. matt campbell, a reporter at large, and george magnus stays with us. coming up next, we hear from the president of the world bank. we will ask him about how much more financing the world bank will do in green energy projects good that is at 6 p.m. in new york, 11:00 a.m. in london. -- 6:00 a.m. in new york. this is bloomberg surveillance. ♪

francine: welcome back, this is this is "bloomberg surveillance ." let me tell you folks, it is pretty cold. in new york, it is pretty warm. only go to tom keene, he is in dubai, it is even warmer.

he is looking at the holiday season so it had to be called. on to warmer fields, the south second president is the finance minister in four days after criticism from business groups. we are joined by bloomberg's executive editor for ,nternational government jon ferro. when you look at what jacobson did on thursday, it was a monday mental mistake and the markets told him so. he appointed that -- he appointed a guy that no one knew and had very little to do with markets. this is the short run, unsustainable. in fact, this morning, we ran a story on the bloomberg terminal that talks about how it wasn't just how the investors came calling but prominent members of the business community who discussed with him over the

weekend make clear to him that this is something that had to change. it was the business community as much as the global investment immunity that was her -- community that was responsible. francine: what is jacob zuma's track record like? on friday, investors were saying this is a watershed moment. he discounted the so much. he had to reset because the markets were so violent. -- he miscalculated so much. questions about his ability to run an economy that has been struggling. south africa is a developing economy a has its own problems. if you look at management of the company and the power utilities have been run over the past few years, if you look at how have been run. if you look at allegations of corruption directed at prominent members of the ruling class, it is clear that has -- he has a's serious perception. it was a watershed moment.

for the anc to turn to the prominent members -- for them to have to sit down with zuma and explain this to him over the weekend, that is not something we see often. francine: how much was the move in the rand exacerbated by the fact that we have a fed interest rate decision this week. there must be some nervousness by south africans. john: opposite, this is happening at the worst time. policy mistakes like this are never, when it comes to the finance ministry, there is never a good timing for it, that there is so much volatility in the markets at the moment. the other important point to bear in mind is that the moves we saw in the rand when there was relatively little liquidity. that was also responsible for

the wild moves that we saw in the rand. francine: george, look at that. that is the movement in the rand since 2010. we see it going back up a little bit. this is basically a rand that is slowing in decline. how much of that has to do with the fed and how much of that has to do with the inability of south africa? george: you could draw that kind of chart for a number of emerging countries. it underscores or references the question we just had. what the fed is doing is exacerbatingnd nervousness about emerging market currencies. the chart demonstrates there is something fundamental going on in this particular case about south africa. it is not just about the commodity cycle although that is important.

it is also about governance which john was referring to. you have the same thing going on in brazil. is anvernance issue overlay. it didn't just happen randomly. the governance issue is coming to light at the end of a period of high growth. and a numberrica of other emerging countries are in a growth hiatus of uncertain duration. we don't know how long it will go on for. governmentines in and in governance come to light as they have been in this way. >> that is a good point for next year, as well. if you look at what is happened over the next -- the last five years, there has been an upsurge in geo political risk. the impact has been dampened by ultralow fed interest rate. now, as volatility increases, you don't have that protection anymore. in a way, you will see politics

and geopolitics driving markets a lot more than perhaps they have done over the last few years. ore: a question for john george, south africa is a commodity currency country and yet, with oil prices tanking, they have inflation rising and the central bank has been raising interest rates. how do they manage that? seen from thehave chart, the way you manage it. it necessitates quite a significant adjustment in the economy. some sort of devaluation has to happen. if you don't have a fixed country as companies in the eurozone do, you have to change your price and cost structure. the easiest way to do that is by an external devaluation or depreciation which is what is happening here. the only way you can live with mantra ofrough this structural reform which is try to become competitive in the things you do and try to change

the diversification of your economy. i was in johannesburg about three or four months ago. , business people were talking to me they're not so much about gold or commodity how backwardsut and coming forward the document was in terms of coming up with a structural change and trying to allow the country to become competitive in other areas. francine: thank you so much, george magnus stayed with us for the hour. have a great interview coming up tomorrow. this is on bloomberg surveillance, and exclusive conversation with the former u.s. treasury secretary larry summers. tom keene is in dubai. he is the one who coined secular stagnation. writing about the fact that he is worried that continued weakness in the economy will .ead to success of rate hikes we have larry summers view a day before the fed gets to rate

hike. that is tomorrow at 10:00 a.m. in london. you can follow us on your tv, tablet or bloomberg.com. ♪

vonnie: let's get our latest bloomberg business flash. women working in london's financial district is expecting onus is half as large as men get. this is according to ashley morrison. women are exciting a $25,000, men expect twice as much. one reason is positions with a high bonus payout are dominated by men. naturale of national -- gas in the u.s. has fallen to the lowest level in 14 years. among the reasons, supply is large and wild weather at the start of the heating season. in china, the pure two. lender once known as blue fax is at $18 billion, a 5% stake of $1 billion. the company recently changed its name to lu.com it is the leader in the market in which bars.

get matched with investors -- borrowers get match with investors. francine: 3rd avenue management has taken the bond market with its announcement it will freeze redemptions in one of its highest yielding funds. must-read.s he writes the greater the asset class, the higher the risk of spillovers to other types of investments starting with asset classes. george magnus is still with us. when you look at the risks of liquidity out there, this came a couple of months before lehman brothers and was a canary in the coal mine. that would be the pessimistic view. george: this is something which the imf and other central banks have been warning about for some time in their financial stability reports. bond market liquidity, where

there to be a wave of redemptions, would be quite problematic. we have seen the last week $3.5 billion from high-yield funds. potentially, we don't really know where this is going to go. the proof of the pudding would how investment management companies deal with what might be a wave of redemption, liquidations now. francine: how bad could this get? i know this is just early days, but this could be a sign of mourning, it feels like markets are complacent. george: they definitely shouldn't be. if you look at the way in which the junk bond, let's call a straight a speed. the way in which the junk bond market has grown -- let's call a spade, one point trillion market, if you add on leverage loans, 1.2 5 trillion, there are a lot of bonds at risk. it is not just oil and gas and mining companies.

that is a substantial chunk of the market, but we have seen in late november and december a contagion as it seeps out into other sectors. it is basically exposing some of the fault lines as to why companies were able to do these things in the last five or six years. mike: we have a second fund that is also suspending reductions, stone alliance. you have to now. that is forcing credit to swap as investors price in the risk of additional defaults. i am wondering what the macro impact of that is. will its low corporate activity going into next year as people are afraid to invest in high-yield? i spoke before and we were talking about the fed, rocks and hard places. this is another rock and a hard place. don't and wend, we shouldn't interfere with processes under which investors lose money if things go awry. that is business. on the other hand, if the consequence of untoward

turbulence in financial markets spills over into the real economy as you have indicated a concernen that is a that the fed and other central bank's would have. energy, thatn of is baked in the cake. there is nothing that policymakers can do about that. what we would be concerned about is it the contagion got to the point where it went beyond cds and credit products and spilled over into equities and the real -- the normal companies and their capital spending programs. that is something we would have to watch carefully. i am not overly worried about this at this point other than in the energy sector which we will know about. definitely a space to be watching out. ofncine: is the next round bank refinancing -- refinancing

telling a lot, will that also feedback into the high-yield market? could we see a good performance of oil and gas companies when it comes to refinancing? george: credit agencies, as far as i'm aware, and a lot of practitioners basically say apart from the energy sector in the mining sector, that the refinancing conditions in the market are still in a reasonably good -- they don't have sour expectations in the new year. they would say that, wouldn't they? i think we just have to see how far this goes. -- we shouldn't panic about the fact that some financial turbulence is going to immediately lead to armageddon in the way that it did in 2007, 2008. this is not the same, in my opinion. certainly, we don't see the kind of systemic problems with leverage.

i don't really know how to predict that. i just think that some companies will clearly run into trouble, but at the moment, i wouldn't expected to be a generic issue. francine: thank you so much for joining us today. georgene would describe as a delight so it was a great hour. up next, the foreign president of the council on foreign relations will be with us for the hour. this, of course, is as oil is around $35. to slide is expected continue to tom keene is in dubai. he won't have time to check out oil field, but he will have an important conversation with larry summers later on. bloomberg surveillance continues on bloomberg tv streaming on your ipad. ♪

francine: count to the -- countdown to the fed.

prudence and divergence. commodity contagion. bearish bets climb to an all-time high. and an imperfect deal for climate change. the agreement outlined on saturday will require $16.5 trillion and an overhaul. good morning. this is "bloomberg surveillance ." i'm francine lacqua in london. michael mckee is in new york. two days away from the fed, the only game in town. michael: the question is, does it spillover? does it affect? we have more high-yield funds that go under because of what happens, or do we get through this very smoothly? it is going to be a very interesting week. francine: third avenue, you're absolutely right. those two is something that people say we should be a little less compliant on the markets. it's good to the bloomberg first word news. vonnie: an egyptian official

says there is no sign of terrorism in the crash of a russian airliner. it is reported preliminary results of the crash probe show there is no hint of an illegal or terrorist act but that the investigation is not complete. russia has said an explosive device was placed on the airliner. all 225 people on board were killed october 21 when it went down in the sinai. yesterday near the greek islands in the aegean sea, relations russia targeted a turkish ship. thousands of filipinos are fleeing their homes as a powerful time who -- as a powerful tie -- as a powerful typhoon hits the eastern islands. notions will try to speed up the pace of emissions reductions under the new -- 18 nations will

try to speed up the pace of emissions reductions. germany, thepart, u.s., and japan. now with a 10 point lead in iowa where presidential voting begins seven weeks from now. a repulsive republic -- in a poll of republican voters, ted cruz is backed by 31%. you can get more on these and other breaking stories 24 hours of the new bloomberg.com. francine? francine: vonnie quinn there in new york. this is what you need to know about the data. if you look at the s&p's futures, the rupee in stocks, they are gaining as we speak. you can see the 10-year yield, 2.16. euro-dollar, this is where divergence comes into place. crude oil -- tom keene is in new york -- 35.34.

this is a picture for the european stocks. euro overall climbing from 3.8% this month. .atch for the bank of england mark carney is worried that we will have lower inflation for longer on the back of the oil price. tom keene is in dubai. welcome to the show. well, good morning. it is good to be with you from dubai. they are looking and oil further descending this morning. that is one of the themes we will talk about with lawrence summers, former secretary-treasurer of the united states. has truly been at the front and center of our debate on the economy. i do not know how secular stagnation is different from the new mediocre. francine: i am really excited about your interview, tom. about how insight

he's thinking about the fed. tom: i think he is with willem buiter and ken rogoff. there was some rumbling over the weekend over one and done and why they are doing this. certainly, as you see, wait iron ore, way to oil prices, not down to record lows in gold. to oil this, wait morning. getting everybody's attention moving into wednesday. francine: tom keene from dubai for the next couple of days. the latest data out of china shows stabilization, clearing the potential hurdle from the u.s. federal reserve's. this week, bloomberg's munley china -- monthly china track showed a best reading since june. joining us to shed light on on all this, enda curran from hong kong. doing you to stop looking at this data on a weekly -- do we need to stop looking at this

date on a weekly basis and look at the big picture? this is an economy that is going to go through huge transformations? enda: the bigger picture is that the world's second garza, me through a huge transition. second largest economy is going through a huge transition. we are seeing some of the weasition from the kened data. it is showing that at least in the area of transition it is working, but it still has some distance to go. that is where we are picking up with the data. can we say that the world's second-biggest economy stabilizing, and is it stabilizing at 5% growth or is it still at 6%? enda: the consensus is that it will struggle to get to 7%.

where it ends up in 2015, we do not know for sure. one thing that we do know is we have had a whole plethora of fiscal stimulus measures by the government, designed to get credit on the economy. all that has taken some time to gain traction. that has disappointed policy makers and analysts. now we are seeing some signs of stability, that perhaps the calmly stabilizes now -- perhaps the economy stabilizes now. francine: thank you so much, enda curran. it is important when you look at research notes, saying that we could see a fed like situation, where interest rates go in europe and china. here with us with more on china is richard haass. great to have you on the program. we have so much to talk about, but let's kick it off with china. if the last 11 months taught us short china is that

is volatile, but for the moment it is stable. on the: it is stable surface, but none of us can know what is going on under the surface. it is premature to talk about the stability of the economy. even more it is premature to speak about the stability of the society. given what is going on with the anticorruption campaign, which is bringing in many targets. you have talked about the economic transition. i think there is a lot of things that play in china, and i do not know any real china expert who speaks with real confidence about what china looks like five to 10 years out. of the questions, now that we have had a couple of years from this chinese leadership, is what we think of their expertise. time, the metric was the top-down management system would enable them to get through anything, but now there are

questions being raised about their competence. richard: you had all the market swings, which elicited the questions that you are saying. the most interesting to say about the chinese leadership is not one of confidence, it is concentration. this is one of the most leadership since deng xiaoping. tom: ambassador haass, good morning. tom keene from dubai. if i see oil declining as it is today, iron ore declining as well, to move from china to the middle east, are these nations that -- is their fiscal situation a threat with these new lows and oil? know, youom, as you have saudi arabia and others beginning to have to go into debt markets. there is no threat anytime soon for the oil-rich city states,

plus saudi arabia. i think they are ok. they are in some ways more of a threat. i think the countries of the middle east have a lot of threats. i would be much more worried isis, goods like old-fashioned sorts of threats. within the international relations of the region, it is striking to fly in here and go through the mediterranean and cut through egypt. you have to take a big u-turn because some of the threats that are out there west of cairo. tell me about from egypt west. look at libya. give us an update on the stability of libya and algeria. richard: libya i think is a much bigger question. over the weekend there was news about the peace talks having a little more promise. i would not bet the farm on it. libya has become something of a multiple classic failed state. it is decentralized.

you have competing groups and malicious. -- you have competing groups and militias. the egyptians have been distracted by the security challenge p one of the consequences is they have not been able to play existing role -- to play a significant role with syria or iraq. i do not think libya comes together politically or physically on the ground for years or conceivably decades to come. the changes that are underway in ouch area and some of the other countries of northern africa are not nearly as polarized or dramatic, but i think you have to take a step back and say that all of these countries are going to be politically, economically, as well as in the security well -- as well as in the security realm, challenged. this really is the new normal for this part of the world. haass, the newrd normal. if we do get an agreement, how

much pressure will that put on declining oil markets. richard: even if you get a mccord, it does not translate into ground-level stability. it could be the kind of stability you get from 36,000 feet. oil coming back on stream would be gradual. it would be a couple hundred thousand barrels a day. in an oil market the scale, i think it is basically in the noise. francine: richard haass, thank you so much. coming up, we will hear from president of the world bank. that is a 6:30 a.m. in new york, 11:30 a.m. in london. president what he makes of those figures. ♪

tom: good morning, everyone. " fromberg surveillance new york, london, and dubai this morning. larry summers will be with me. right now on this monday morning, our business flash. she is back. here is vonnie quinn. vonnie: and you are gone, tom. bond fund sets the market rally last week caused a freezing redemptions. the chief financial officer says up to 15% of funds may face high withdrawals. the missing chinese tycoon resurfaces today, nearly four days after officials of his conglomerate lost contact with him. he was seen with police after he disappeared. his company says he is assisting a corruption investigation. disney is taking hollywood by

storm tonight. it is the premiere of the new "star wars" movie. a stretch of hollywood is closed for "the force awakens" opening in three theaters. it opens nationwide on friday. are -- the market still has plenty about this first pricing cycle in six years. michael mckee, old questions thatresurface on friday percolated sometime back and will come to the surface again. they raise rates? we talked friday about the mechanics of this and how difficult it will be. peter pan taught us you need a little pixie dust and you have to believe in order to get rates higher. that is what we are seeing in the money markets, where this will play out first. if you take a look -- if you take a look at libor, commercial paper, you will see they have already priced in a rate move.

they have gone up dramatically in the last couple of weeks. you can see the red line is where they were disappointed. they went up and back down again in september, but now they have gone back up significantly. they believe that the fed is going to do this. francine: so that is domestically what we are going to look for. are we going to look for turmoil externally? emerging markets? michael: definitely you're going to look for it, but what is the impact? thet of that has to do with dollar, which has stopped strengthening. it has gone down the last couple of weeks. economic historians say that is the pattern. the fed hasee times begun rate tightening, we have seen a dollar strengthen and weaken after its. francine: i want to bring you breaking news out of south africa. this is an amazing story. the second finance minister four days. investors proved to be one of south africa's president's tough

political opponents. charge daysknown in ago and the markets tanked. he had to reverse that. we are hearing from the former south african finance minister, who is now the new finance minister, and he says the expenditure ceiling is sacrosanct. he talks about the financial state being a risk, but it seems that he has a firm situation, or a firm handle on the situation. this guy knows exactly what he is doing, which is why the markets have applauded the fact that he was named finance minister. the rand shot up 6.8% today. falling below $35 a barrel for the first time since february of 2009. when you look at the price of oil, this goes back to what happens in the gcc countries where you are. these are extraordinary

moves. michael mckee, with your reading over the weekend, are these brutal moves? within the world of jean-claude these brutal moves in hydrocarbons and iron ore? to me they are. michael: they have been brutal moves, but there playing out over a long enough period of time that the fed feels it is a manageable situation. in augustwhat we saw when the chinese revalued and there was an immediate dominoes falling through the market. this has been going on for some time. it is not going to derail the fed at this point. tom: i find it absolutely -- the, the speed of speed that oil is moving. francine: i do not know whether that has an impact some of the price of oil still 40% of cost are airlines. i do not know effectives you a little bit of a refund on your ticket.

you had a redeye overnight. you are absolutely right. when you look at wti crude, this has been a gradual move, but then you move the technical support at a time that we look at libya increasing the supply side. haass, give us an update on this. i sat in your offices on park avenue eight months ago with edward morse and others, talking about oil. we are worsek that off because of the speed of this move. richard: the other day we had the head of the international agency speak on the international council of foreign relations. this low oil price is not an exception. he was not saying how low they $35, but he is saying this is their planning horizon not just for months but for years. it is because the technology continues to push more and more online.gas

you have low growth, which is keeping the down. opec is essentially now more something of history than reality, so you add all this up. why should anyone think this is going to be anything but oil prices that are low or even lower for some time to come? tom: let's continue this discussion from new york and london and dubai, with the collapse in oil, under $35 a barrel in west texas intermediate. withl speak tomorrow lawrence summers, the former secretary of the treasury here in dubai. we will speak on his theme of secular stagnation. stay with us. with richard haass, the council on foreign relations, it is "bloomberg surveillance." ♪

vonnie: welcome back to aloomberg surveillance." third high yield fund is shutting. lucinda's capital partners. it was formed by -- it is liquidating its entire portfolio, nine hundred million dollars to investors that month. -- the two it was main investment vehicles have been on track for a second straight year of negative and 1.4%down 1.9% respectively. that is the third high yield fund, and i believe you have more now with our morning must-read. michael: we learned over the weekend that donald trump has been endorsed by the american n

azi party. is this what we have come to? timothy egan writes -- vonnie: paul krugman had an interesting piece over the weekend as well, that what is wrong with the gop is the contenders from the old school, the non--tom contenders are the faithful not carrying at the moment. they are not so concerned about the intricacies. they are just downtrodden and they need some of these -- michael: richard haass, do you

worry about american society, the way the campaign is going? richard: the short answer is, you would have to be in denial if you did not worry about american society. there is a large number of people who are not succeeding, given some of the demands of a global economy. in particular, they do not have the education that will see them through their entire lives third one of the things we have got to get better about his lifelong learning. we cannot have such a frontloaded education system. michael: richard haass from the council on foreign relations or he is still with us, and up next we will be joined by world bank president jim yong kim, to talk about the climate change agreement. this is "bloomberg surveillance ." ♪ the only way to get better is to challenge yourself,

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

london, from new york, and from dubai to let's get to our monday business flash with vonnie quinn. vonnie: the kremlin is not commenting on a report out of egypt saying there is no time -- no sign of terrorism in the crash of a russian airliner. preliminary reports say there are no hints of an illegal or terrorist act. russia has said i'm explosive device was placed on the airliner. claimedstate responsibility. authorities are investigating vandalism at two california mosques as hate crimes. ,he mosques were spray-painted and a device that would look like a hand grenade was left on one site. hillary clinton has solidified her lead over bernie sanders in iowa, according to a poll. she has a lead. 42-37 in anust

earlier october poll. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. francine: thank you so much. it was an historic agreement over the weekend, representatives from over 195 nations reaching an agreement to lower the warming of the planet at the cop21 conference in paris. the deal required $16.5 trillion of investments. let's bring in world bank president jim yong kim. dr. kim, great to have you on the program. how does this paris deal change the landscape, not only for bankers but for markets and companies? jim: i think the signal is just as strong as it possibly could be. i have been in this business working in the u.n. and the world bank for a long time now, and it is so rare that 196 countries can come together and agree on something. what is important is we went in with our fingers crossed, hoping

there would be an agreement. but this agreement went far beyond what any of us had hoped. this is as powerful a signal as anyone could send, that we are serious about capping climate change. francine: what sort of development should we be looking at for the financial markets? what we are going to see is a strong commitment now to find low carbon solutions to solving just about any kind of problem. let me give you one example. to a has committed national carbon trading program by 2017. the day that happens -- and we know it will because president xi said it will -- that will be the largest carbon market in the world. francine: i have to cut you off. we will come back to you in a couple minutes, but we have breaking news from china. vonnie: it is from the u.s., francie. rubbermaid and

jarden. we will have more on that in a few moments. francine: let's continue the important conversation we were having with the world bank president. we were talking about carbon capture, mr. kim. we were talking about how you expect developments to take place in financial markets. does this deal change anything for you? jim: absolutely. up atbition was scaled this historic meeting. so now we are not just shooting for two degrees celsius, we are shooting for as much as 1.5 degrees celsius. we have to get much more serious everywhere we work about finding low carbon solutions. our investments in renewable energy have to go up. we have to find ways of making deals around geothermal energy, around hydroelectric power.

of veryll be a lot powerful economic opportunities, investment opportunities for the private sector. all over the world you see companies moving in that direction, postponement of entirer has moved the company in that direction. gas companies of europe are rethinking how to make their businesses so they are part of this low carbon future. tom: it is a wonderful step from copenhagen. what do you mean to get to next -- what do you need to get to the next step, and do you need crisis like the pollution in beijing to drive the conversation forward? jim: there is no question that the fact that the red alert happened right during the meeting had an impact. the other thing that had a big of at was a representative small island, developing countries, the marshall islands

in particular, leaving a conversation that said this is real today. it is not something that is going to happen in the future, it is happening right now. we are facing extinction as nationstates. the crisis is ongoing, and that is a big part of what pushed it over. also, the science is much more powerful than it was even a couple of years ago. the science is better now than even a few years ago, that this is real and happening faster than we thought. tom: i would agree with you that the science is much better. tell me about the politics right now, and what does this meeting and future meetings mean for the oil states such as abu dhabi? jim: you know, there is no question that fossil fuels will be part of the transition. it will be part of the movement toward a low-carbon future. we cannot stop using fossil fuels now, but what we are hoping for, it seems like the

carbon trading scheme in china and a growing movement to put a price on carbon, because we know that when you put carbon in the air, it does exact a price. it does cost us to do that. as carbon pricing gains momentum, the market forces will align very powerfully, and every producer of oil and gas is going to have to face that reality. as i said, it is not something that will be cutoff immediately, but every country in the world has to think about this low carbon future, even the gulf countries. kim, when we looked at some of the figures -- the figures we-- need to respond to climate change -- what do you make of those numbers? will that put a huge strain on the world economy echo jim: just to put it in clear perspective, by 2030 there is about $90 trillion worth of infrastructure

that we have to build. all of that infrastructure has to be climate resilient, climate smart. it has to be done with respect to this agreement. developmentabout aid. one of the things that happened during these talks is that this is not about grants coming from rich countries to poor countries. we have to get creative. what we need to do is to use our capital more creatively so that you've we can use donor assistance or concession alone as risk capital for major construction projects that will be climate smart, that will be the wave of the future. i think there are real opportunities for investors in this climate smart future, but they have got to become literate. they have to understand what this deal means, and they have got to understand the opportunities that come out of it. i really believe there will be tremendous opportunities, but the fact that 196 countries that

have a hard time agreeing on anything agreed on this extremely ambitious plan, it means that everyone has got to become climate literate right now. francine: thank you so much. jim yongk president kim. officials and businesses are trying to downplay the impact of the deal. michael? michael: richard haass is the president of the council on foreign relations, a longtime washington hand dealing with these countries all over the world. the cynic in me government -- the cynic in me says governments are likely to follow through less. saysrd: the skeptic in me not so fast. we will know a lot more in five years. which is the first grading point, if you will. this is an aspirational agreement. what you have our country saying this is our best effort, our hope. some of them are very vague.

china is not saying where they will be in 2030. india is not that far along. betweenbest, the gap the goal, which is 1.5 degrees celsius and the current trajectory is more than twice that. so right now there is a major shortfall between where countries are and where they say they need to be. all of that -- these are soft commitments. the language is aspirational. we will just have to see how this plays out. michael: will this be driven more by economics than anything else, than any treaty? the chinese had to do something because people do not want to go to work when they cannot breathe. richard: in china posco is driven by politics. one of the most widely misunderstood gauges in china, people wake up and see the quality of the air. powerful political tool about losing performance and legitimacy. but india is the other way. you have 300 million people or

400 million people who do not have daily access to electricity and massive growth hopes. india, dealing responsibly on the climate is for many indian leaders a luxury. they cannot afford it. and then what kind of development path for a country like india? michael: richard haass, stay there for the next five years and we will check in with you. coming up on "bloomberg surveillance," professor robert engle will join us on volatility , and, boy, are we going to have volatility this week. ,"loomberg surveillance streaming on your tablet, your phone, and bloomberg.com. ♪

francinevonnie: this is "bloombg surveillance." the consumer products industry -- rubbermaid is moving with jarden, for $30 billion. rubbermaid will own 55% of the combined company. the yuan it's a four-year low. itna's central bank says should -- gas is expected to drop below two dollars soon. the average price for a gallon nationwide is now $2.02. drivers are already paying that in several states. that is our latest bloomberg business flash. francine? francine: thank you so much. last week's volatility in the high-yield,ighted meaning it is a risky environment for a lot of investors out there. mom and el-erian writing in "--

mohamed el-erian writing in he doesrg view today," beinge interest rates raised on wednesday. and now our guest is with us. robert engle, great to have you on the program. are you worried about volatility , and what does this high-yield implosion indicate? richard -- robert: we saw it last week. in the run-up to the fed decision, i think a lot of pressures that were already building in the high yield bond market really came to a head on friday, and we had a pretty big bloodbath with what happened. so i kind of think that this is -- this is like a tv crime scene rerun, so we have the young

attorney janet yellen fighting with the mafia, and just before she goes to court they try to scare her. they throw everything they can at her. this is "the godfather" with the horse's head of the bed? robert: exactly. i think the rate hike is going to happen. obviously the people who run the funds are not trying to deliberately scare janet yellen. how much of a systemic problem is this, compared with the 2007 run-up to 2008? people are making that comparison -- bnp paribas, bear stearns -- to this. robert: we saw a jump of the vix on friday. some bond funds went up more than that. tinybigger scale, this is compared to what happened in the financial crisis. mean,ot think that -- i

what really brought the financial crisis into our living room was the fact that the banks were all undercapitalized. they are much better capitalized now than they were at that point. i think this is just credit spreads were a little low given some of the economic fundamentals that were going on. given the market liquidity we are seeing, you're not expecting this to be contagious, or you are not expecting extended contagion to come from these fund closures? robert: i don't think so. we are respecting to see a modest rise in treasuries, and probably a little more of a rise in credit spreads. think this is going to be a big contagion to the rest of the market. engle, you are --

you came up with it a wild back. are the models that chair yellen is working with -- are they too --plex, or is the real feher or is the real fear that they are too simple? seems: well, it always like we are in uncharted territory, but i think that is still true. we have been following unconventional monetary policy for six years now, and i do not think you can expect the model to give very precise answers as to what is really going to happen. we are talking about raising rates on wednesday even though there is not inflation, and that is probably something we have not done before. we are talking about raising rates at the time when the rest of the world is actually lowering rates. that is again something that i

think is difficult to do, and i do not think any model can give you very much confidence about how to do that. francine: robert engle, thank you for that. ,"up on "bloomberg hunter harrison, at 8:00 a.m. in new york, 1:00 p.m. in london. this is "bloomberg surveillance ." the conversation focuses on economics and finance. ♪

vonnie: welcome back to "bloomberg surveillance." time for the forex report. out of south africa, the financement are -- the finance minister has been replaced once again. want to have a look at the dollar, because it is retracing some of its strength, as michael mckee was speaking out earlier ahead of the fed decision on wednesday. close to one point 10 for the euro -- close to 1.10 for the euro. the discount with the offshore

yuan is closing in. we are looking at a 2.2% discount offshore versus onshore. speaking to her party today, chancellor merkel will be speaking on the refugee crisis. the -- richard haass, president of the council on foreign relations, is with us. angela merkel is obviously throwing everything she has at this particular problem. she is the person of the year in of concern is it that the youth in the party are revolting in particular? richard: it is. she is also coming up against the informal 10 year rule where any leader in any democratic society, people get tired of you after 10 years. there is serious talk about who from within.

she knew she was taking this risk. one of the reasons i'm glad to see she is getting the credit, is she knew she was taking risks , and it is the rare political leader who does things out of principle. vonnie: should other leaders follow her example? large popular vote for french national that front national candidates. richard: the second round was much more stable. look at the cover of "the economist." there is something in the air. you see it in the united states come in europe, and around the world. the antiestablishment, populist edge. there are real losers as well as winners from globalization, from technological innovation. haass, as weor march 2-year-end, some of that disillusion is about lagarde's

new mediocre. do you have any concept or frame that we get back to normal growth, or is the new normal for richard haass this lower terminal value that continues that disillusionment? richard: i am actually an optimist on this. what keeps the united states back from where growth is domestic politics. if we had a more sensible fiscal policy, corporate tax policy, i do not see any reason the united states could not be growing 3.5%, 4%, what have you. i am against the idea that there is necessarily -- i know you will talk about it tomorrow with larry -- that there are structural reasons that would include higher rates of growth. when you look at what richard haass was talking about, the political turmoil and low growth, are the markets too complacent? richard: i actually am more -- moret: i am actually

sympathetic with the idea of low growth going forward. it is astonishing to see how not only corporations but also governments are unwilling to find investment projects that are worth doing at these low interest rates. you would think they would snap them up and jump into new government expenditures, and corporate investment. a slow that there is growth period that we can expect, and i really do not think the u.s. is likely to grow faster than its trading partners for any substantial period of time. but i would be happy if i am wrong. tom: robert engle, thank you so much, with no you're -- with new york university. really with the distinction of a debate with larry summers leaving the secular stagnation charge.

ambassador haass, thank you so much. we will continue the dialogue forward. join me anden will michael mckee. we will talk to him about the mystery of our productivity. tomorrow in the new york 5:00 a.m. hour, don't forget my conversation with lawrence summers. we will talk with larry summers about the issue of the moment. his debate over secular stagnation. from london, new york, and dubai -- again, let's watch oil through the morning. it is "bloomberg surveillance." good morning. ♪ the only way to get better is to challenge yourself,

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

jimmy dunn is here for the whole out. and no bank got a bigger government -- then the royal bank of scotland. we have venice was of a new with its ceo. have an exclusive interview with its ceo. david: welcome to "bloomberg ." i am david westin. stephanie: i'm stephanie ruhle. i love the high heel market, and it is getting killed today. i am very low. i am going to fix my chair, but while i do, we have two special guests with us. , and scott. we have to say -- notre dame.