tom: credit suisse traders back to a 1992 valuation, taking significant loss on "existing positions." mark carney is not janet yellen. the bank of england will delay and delay and delay. and oil is more than the sum of its pipelines. good morning, everyone. this is bloomberg "surveillance," live from new york. thursday, february 4. i'm tom keene. with me in london is caroline hyde. good morning, caroline. the bank of england today -- any fireworks?

caroline: at incwe want to get perspective, tom. we want to get the idea that this extraordinary volatility -- oil prices, stocks following eike a lost puppy -- will we se what is happening in the markets reflect on the overall economy? the eu cutting growth figures for gdp -- that is a market d circumstance. tom: i'm bringing in vonnie quinn before she does the news. it really shows the growth tension. vonnie: and the inflation forecast, cut by half. that is a huge move. also assuming brent crude at $35.80 per barrel, down from $42.50 per barrel. tom: and this set that up perfectly this morning. we will look at the bank of england, announcements coming out, and david rosenberg will

join us in the next hour. he is adamant that deflation fears are overdone. right now we need to check up with the news. vonnie: the euro strengthening. days after they began the syrian peace talks, geneva has been suspended. againste major progress rebel held areas, backed by russian airstrikes. says syria talks will resume in three weeks. meanwhile, david cameron has plans for today's a summit in london. he will continue his push to renegotiate the uk's membership in the european union. he is taking support for a draft compromise from the european commission president. julian assange may surrender tomorrow, after being holed up in ecuador's embassy in london for more than three years. he says he will surrender if the

united nations panel says he has not been arbitrarily detained. he wants to avoid extradition to sweden. he fears it could lead to standing trial in the u.s. for leaking classified documents. hillary clinton and bernie sanders tried to establish with progressives last night. they appeared separately at a town hall meeting in new hampshire, six days before the primary. sanders says clinton is closer to a moderate than a progressive. clinton defended herself, saying she is a progressive who likes to get things done. polls show sanders leaving in new hampshire. the state of florida has declared a health emergency in four counties over the zika virus. nine cases have been detected in florida. emergency order allows the state agriculture department to use mosquito spray more in those areas. s 24 hours a day in 150 bureaus around the world. tom: the eu has some substantial

reports on other nations -- 6.5%.at si all of that is off the challenges we have seen in hydrocarbon. equities, bonds, currencies, commodities. another good day. yields are in. aro elevated this morning, breakout valuation. on the next screen. the vix coming in, german two-year with that 0.50 yield. -- really focus on the yen 117.72. caroline. caroline: let's check out on the stoxx 600. put this in perspective -- we lost 950 billion euros from the initial valuation. so far this year we are making up some of those losses. and thatde up 1.2%,

rebound is continuing. ahead of super thursday, the pound is trading stronger. we are seeing that little bit of liftoff in anticipation. will we see a more hawkish note? tom: let's go to the bloomberg terminal. instead of francine lacqua -- this is not a normal bank report. this is credit suisse, back three decades, with the advent flows of the great swiss bank. here is the total failure of the recent business plan, and the new leg down to 1982 valuations. -- 1992 valuations. that sets up the drama in zurich. i saw wells fargo coming out -- we will show that later -- denied the report that they were interested in parts of this beleaguered bank. francine: yeah. it's not funny, but let's put it in perspective. credit suisse says they had a huge loss.

every single division is a little worse than expected in pretax. it's the investment bank people are worried about, so there are questions -- did the ceo do enough? the strategy that he presented in october may not go far enough, and a lot of investors are saying they may not be there target. this is something that he -- he says they will meet their target goals, despite the very volatile environment. >> no question. global markets and investment banking -- they are the ones we control the least. of commentary on the fed that i did not give a profit target. that was because we are volatile. saying he did not want to give up targets because he wants to keep the investment bank, and he wants to be able to move things around. i also asked him about bonuses.

11% overall, 30% in the investment bank. policies. also made it is a tough cocktail -- francine: by how much? and forotal was 11%, the divisions that are underperforming, by more than 30%. tom, when i say let's keep things in perspective, yes, it wasn't a good earnings report -- it was pretty terrible. analysts are saying they may do some kitchen sinking. he's remaining optimistic. he says he will accelerate with everything, but they may not trust him after all. in his previouseo life. tom: i featured in the opening the idea of trading losses. was this about the weakness across all sectors, or was it bined with a lousy

trading performance? tom.ine: it was both, when you look at the investment bank of credit suisse, he tried to realign it, didn't restructure it far enough. when you look at the turmoil that they had in income, this was a very tricky environment. analysts agree that this is not geared to do this kind of thing and deal with this kind of volatility. i know you are mentioning wells fargo -- he wants to just give part of the investment bank away, and certainly that is what some investors are hoping, that he seems to say -- look, i need this bank, because that is how i track clients in asia. vonnie: frenzy, give us a -- francine, give us a sense of your speaking with him. there's words saying you should have preannounced this, the loss is so huge. whether get a sense of

he felt he should have said this earlier than the day of reckoning? is difficult to say. i certainly didn't ask him. he said this is what we reported, this is earnings. he also took a lot of provisions for things that could go bad in the future. i saw a call of saying, look, you should have preannounced this. it goes back to the point that analyst investors, a lot of people i have been speaking to, just want to know about what kind of person this new ceo is. nine months into the job and they're still trying to figure out how he sees the world and how he sees credit suisse. caroline: a picture being painted similar to ubs. great to have you with us, and thank you very much, bearing the cold in switzerland. a fantastic interview with the ceo of credit suisse. let's bring in our guest for the area, jupiter asset manager. thank you for joining us.

give us a sense -- you are swiss. you know what it is like, you know the bank well. when you came on with deutsche bank before, you said they are underperforming. when you look at credit suisse, trading at its worst since 1992, should they have preannounced this? >> we know what the requirements are in this regard, but i think perhaps the environment is a bit weaker than we thought. the kitchen sinking elements may come into play here, when you look at the magnitude of the miss this morning. i can't really answer your question on whether they should have preannounced, but obviously it is not a good day for swiss banks. tom: when you look at the swiss banks and the makeup, i interested in the politics involved. the swiss national bank, the swiss regulators, and

adversaries of credit suisse, the tough decisions to be made -- are they in the same bed? think, if i understand your managementhe -- at a level, i think there is some doubt on whether they want to keep the investment bank or not, whether they can still generate capital for the foreseeable future. unfortunately, the market is telling us that things will be more difficult going forward, and perhaps with the volatility that we are seeing so far this year, it will probably push the management of credit suisse to take a more drastic decision regarding the investment bank. tom: let's go from zurich to london. break in with an observation and question, caroline. caroline: one of the things that struck me this morning is the

fact that he is optimistic. he says this means that they will accelerate restructuring. is the market not seeing this -- if you are an investor, and i'm not sure -- i'm not sure it will make this target. i'm just going to switch my money to ubs. >> yes. i didn't get the end of your question, sorry. francine: the question -- if you are an investor and you look at this report, would you just think, i'm going to just jump into ubs, because i understand the strategy better? >> it's difficult to say here. problem is that we withoing into a new year some volatility. 5, one cannot

believe the targets for the next three years set by the management, with the help of investment banks. now that we're already seeing quite a difficult january, and the market down we have seen in a high-yield markets as we close the fourth quarter, the contribution for investment banking going into the second half of 2016 is obviously in doubt, and that is what investors are telling us with the share price fall. caroline: a great day to have a swiss man in the office with us to be discussing the fallout that is credit suisse. we will look at the decisions they have to make. coming up next, we will be theing ahead to speaking to ceo of daimler, about global growth concerns.

how much the slowdown in china is hitting his business. stay with us. ♪

tom: good morning, everyone. bloomberg "surveillance." david rosenberg in the next hour. bank of england coming up today. and we are looking with francine lacqua in zurich about the debacle of credit suisse, the shocking report this morning. right now, a shocking business flash with vonnie quinn. vonnie: thanks. daimler is forecasting only slight gains in revenue and profit after a record performance in 2015. the company sees slower growth in two of its biggest markets, china and the u.s. olvingr big recall inv

takata airbags. oyota is recalling millions of vehicles because they can explode. so far, 24 million vehicles have been recalled. the european commission has cut the growth forecast this year, predicting the economy will grow 1.8%, down 1/10 of a percentage point. plus, economists warn that inflation woul will be much lower than expected. pretty big drop down from 1%, caroline. caroline: indeed. phenomenal moves across the market this morning, and still with us is the jupiter asset manager. we discussed credit suisse and the debacle there, the let's talk about the market. oil continuing to be the lead here, and the market following.

today we have central bankers in action. we have the u.k., the likes of the government and the bank of england, discussing how much the volatility in the market is spilling into the economy. are we about to see an economic impact? are think the central banks obviously fighting each other to a certain extent behind-the-scenes. they are trying to bring the currency down to be more competitive, and that will continue. we saw japan's latest moves in negative rates. the oil price is a problem of oversupply. once the supply is clear, the reason behind this weakness -- we could see some rebound. but obviously, the deflationary pressures are there. caroline: i want to bring up the fact that you mentioned the bank of japan. we have already seen negative interest rates this affecting the japanese yen. we have erased all the weakness

-- there is a great note on the bloomberg terminal today. they're trying to paint the picture that the currency wars can be nasty and don't always have a winner when they are waged with increasingly negative rates, a nuclear option, the evil of one. are of these currency wars failing to work? quite clearly the yen is no stronger than it was before friday. >> japan is bizarre. negative rates are fine there. that's pushing the bank to do something with the excess capital. but there is no demand for loans. what are they going to do with it? they need to move it around, jgbs or realmore estate. it's the same kind of plan that

other central banks have when they announced negative rates, especially in europe. if we went into negative rates, it would be slow growth, because there is demand for. it would be cheaper for corporates to borrow, and second have a positive impact. japan is still relatively perplexed on the endgame there. tom: guy de blonay. hour, david rosenberg with the shift on inflation. a year-and-a-half ago, he reaffirmed the inflation. not a clear and present danger, but the inflation we are living with. from london, from new york, stay with us. ♪

tom: good morning, everyone. caroline hyde in london, either in new york. -- i'm in new york. 99.24% percent is looking north to new hampshire. now, the morning must-read. vonnie: i thought we on the job before friday -- we are looking at boe today and the whole week is full of stuff.

one writer says that although the markets have been conditioned to expect repeated liquidity, what they need is saysmentals that -- he that the labor market needs three areas of strengths and gain 150,000 jobs are more. --: and it would also send part of the anger on that political trail is a lot of people are not enjoying the economy. vonnie: and the subcomponent and services was lower, still an expansion territory, but there are some signs -- tom: can i give a shout out for his new book? author of "the only game in town." it's actually in english. it. got game theory in

vonnie: very readable. under 400 pages. tom: we need a fight that a change in our analysis of the bank of england. their operative economic word is delay. we'll speak with deutsche bank's chief united kingdom economist, george buckley. thrilled to have him stop by to see what the house of connie will do. arney willse of conni do. a comfortable but not breakout bid. i'm calving the cranes in london. caroline hyde is the only one who can afford a house of the united kingdom. stay with us. ♪

tom: in the apparent quiet, here is what you need to know. yen, 117.57. complete reversal of what we saw

from the bank of japan for our five trading days ago. let's get to the first word with vonnie quinn. vonnie: thank you. the militant group that once sheltered osama bin laden wants to crush the islamic state in afghanistan, according to its postman. leaders of the taliban have given up negotiating with the islamic state and want to prevent it from getting any power. they called to the group "a scruffy and uncouth production." in greece, workers are holding a one-day strike agains alexis tsipras's pension reforms plan. his proposal called for higher taxes to draw on the pension deficit. protesters say it will cripple small businesses and the self-employed. in germany, the city of cologne is trying to prevent a repeat of the mass sexual assault that happened on new year's eve. the five-day carnival festival begins today.

the i tagger's were described as north africans and arabs. the refugee crisis is on track for a new record. the german government says that 91,000 arrived in january, less than the number who came in december, but officials blame that on harsh weather. yesterday, angela merkel's can cabinet proposed tougher rules. another candidate has joined donald trump and accusing ted cruz of cheating to win the iowa caucus. and cruz were both competing for evangelical voters. global news, 24 hours per day. caroline? caroline: thank you. of course, lest we forget, it is super thursday. the bank of england will have the right decision and the inflationary report. for more, we will dig into it with deutsche bank's u.k. economist, and still with us is

the jeupiter asset fund manager. you are a phd holder in economics.talk to us about the economic ramifications of what we are seeing in the market. low oil price, concerns about market. how much will be here from the monetary policy committee about the effect of this on the u.k. economy? >> i think mr. carney and his team will sound very dovish when they give that press conference. the only thing we have to bear in mind is what does the fallen oil prices relative to the last inflation report? what does the market report, the fall in sterling? not over the next year -- we know that will be revised down -- but what does it do to inflation forecast two years ahead in three years ahead? that really gives the signal to the markets as to whether they believe the current profile for interest rates. caroline: we're expecting it to overshoot inflation, to get

above that 2% target rate. but this disconnect they are facing -- they need to sound a little more hawkish, because at the moment, the market thinks they will not get a rate hike until 2017. >> what you'll get is a dovish sounding mpc, but at the same time suggestions of an overshoot. as the bank always says, there is no mechanical link between what they say inflation will be in two or three years and the policy decision. that i suspect a modest overshoot, something just over 2%. tom: george, we talk in america about two americans associated with john edwards a long time ago. i'm assuming there were two united kingdoms. let's look at caroline hyde's reality, which is greater london real estate. caroline lives somewhere south of birmingham. she can't afford london. this is extraordinary -- this is

a long chart of greater london residential prices. up we go in the boom time, an anothed now another. how polarized is the united kingdom economy, as is the american economy? >> as you have seen from house prices, hugely polarized. with london and the rest of the country, prices are probably around 10% higher from where they were at the time of the precrisis. compare that to london, 50% higher. the reason for that difference is because all this foreign money is coming in. it's not being directed toward the region, it's being directed toward london. tom: well, within that, if i c ould, is mark carney and the bank of england -- are they the central banker to europe? is there so much money coming in that the bank of england has a special remit or position? england ise bank of

certainly an important decision-maker here and an inspiration for other central banks, for sure. but the idea here is that we're going to go into a dovish speech, generally speaking. but i don't think it will be as dovish as some are expecting. i think we will probably also have some comments on good bits of the economy. let's not forget that they have been week this month, and if you look at the relationship couldhe u.s. dollar, i see that on one side you have a currency that has been quite weak on potential brexit, on potential dovishness from the members, and on the other side, you have got a u.s. dollar that has been quite strong on the potential plan of four hikes,

and more the year after. at the end of the day, you have that readjustment that will come in a short while. vonnie: i just want to quote a then the test for governor carney, which confounded four main banks in the last two months, will arrive with the boe inflation report press conference today. theark carney's job to get market in line with bank of england inflation expectations, or is it to appease the market, potentially consider a cut? >> i think they need to look at two things. first of all, it is exceptionally difficult -- whatever the underlying -- foronomic conditions the bank of england to say that they will raise interest rates when inflation is so far below target. it's difficult to do that when you are writing letters simultaneously to explain why

you missed the target. what they need to do is look through the volatility that we see in things like oil prices, food prices, anything non-core. look where it might be in two or three years. that's the key issue. how much confidence do they have in their forecast, that it will be going toward 2% over the course of the period when all these volatility oil prices have passed? vonnie, weom and have been alight o talk of in terms of what david cameron can push for to maintain that the u.k. remains in the eu. where are we on the brexit risk pendulum swing? do you think the risk is less are now? say, but bit early to

it is certainly constructive. i certainly think that more has to be done, and at the end of the day, it will be good for the u.k. and for europe to have things more precise a a bit more substantialnd -- is a bit more substantive. caroline: thank you for all your perspective across the economy. hour, we in the next speak to none other than the ceo of daimler about all these concerns surrounding growth, surrounding china, and the ongoing emissions scandal. stay with us. ♪

caroline: welcome back. we're getting life pictures of angela merkel, leader of germany, discussing the crisis that is the syrian refugee crisis. she is saying there is no more time to lose in resolving the syria conflict. she is speaking here in london, saying she must work toward a cease-fire in syria. germany is hard hit by the immigration problem that has been felt throughout the eurozone. now let's bring it back home to george buckley, still with us from deutsche bank. he has been there since 1998. give us your perspective about what is happening with the eu growth perspective. but we getin that, the eu downgrading its forecast from 1.8% to 1.7%, but notably slashing inflation by half. how much of the inflation problem is it to eurozone, to the u.k. -- how much is that

driving? itquite a lot, and i think is worth bearing in mind that when you see lower forecasts for inflation it is likely to mean stronger growth, as long as core inflation is due to, for example, a supply driven impact. we've revised our forecast up toward the end of last year. certainly there are many more dark clouds on the horizon relative to what there were before, and also there are risks on the downside, particularly as you go toward the end of the year. we think growth will slow this year from a pace of 1.7% to less than 1.5%. we think there is a slowdown coming, but it is not a recession. caroline: let's take it out to zurich, with francine, where she has been breaking news with the chief executive of credit suisse. clearly the global perspective is spoken very much by him. must have questions for george buckley as well. francine: yeah. and i waso him,

asking about volatility -- he says nothing good will come out of 2016, you have to look longer-term. george, my question to you is when you look at the boj, the fed, what ceos are saying about volatility, there is almost no chance to be a we can increase interest rates, and i right? >> it seems like it is getting a lot more difficult, and the markets have been putting back many times the point at which we think it will raise interest rates. we put our forecast back to the end of this year, to november. but there is still clearly a risk that, yet again, something comes along to derail that expectation of a hike. recently, the market was looking at the start of 2018 for the third hike. a 30% chance of a cut in the meantime. you are right, the weakness we have seen in the u.s. concerns the lower oil price, reflective of something more weak in the

world economy. all of that is causing concerns about when any central bank may be able to raise rates. tom: you have a good first rate education, studying uncertainty up, down, and sideways. what is the level of uncertainty? when you go into a meeting, dealing with alan ruskin at deutsche bank talking about some form of plaza accord coming, what is the level of uncertainty that the team at deutsche bank sees? >> well, i cover u.k. specifically, and one of the biggest uncertainties, something a lot of our clients are talking to us about many times a week, is the issue of brexit. when you look at the numbers which tell you about political uncertainty in the u.k., they haven't really stepped up as much as we thought they might have done. that's despite the fact that a survey at the end of january told us that there was a four-point lead.

francine, come at us from zurich. you have been an expert on brexit -- give us an update. ofncine: well, we have a lot -- there is a much bigger chance of the u.k. staying in the eu than scotland staying in great britain. a privately, when you speak to a lot of -- but previously, when you speak to ceos, they say there is always a 50-50 chance. we haven't really started the campaigning. you don't want for it to be a political message. do you think 50-50 for brexit is too much? >> 50-50? i think it probably is. i suspect it is more likely that we remain in. a draftmr. cameron has

document which allows him to take it to the country to have an early referendum. the fact that he can do an early referendum, and obviously the talk is about the 23rd of june, will limit the amount of time where investors from overseas think about whether they want to redirect their investment somewhere else, because of the concerns that we might not be in the eu in a few years time. an early referendum based on this deal will be very helpful, because it will limit the knock on effect. tom: george buckley will stay with us as we go to the bank of england. we will turn to oil next. a global perspective from an american experts. stephen schwartz is encyclopedic of the dynamics of hydrocarbon in america. looking forward to this. this morning, from zurich, from london, from new york, stay with

us. ♪

tom: so much going on this morning, whether it is the bank of england announcement, the credit suisse bombshell in zurich, and we will get to that in a bit. right now, our bloomberg

business flash with vonnie quinn. vonnie: thank you. shares of credit suisse fell to their lowest level since 1991, posting its biggest quarterly loss in seven years. $5.8 billion of loss. most of that comes from goodwill impairments. two investments sank in divisions. they plan to cut 4000 jobs and save half $1 billion per year. fourth-quarter profits plunged 44% in shell, hit hard by the big drop in oil prices. they are betting that their $50 billion acquisition of bg group will help. nd, after a career spanning six decades, one men may call it quits -- redstone. he stepped down as chairman of cbf and may give out the executive chairmanship of viacom and comedy central.

that is our bloomberg business flash. his daughter believes whoever succeeds him should not be a trustee. tom: we saw this written up in the new york times. a great scale -- 29 years with viacom, 26 years with cbs. i love them michael nathanson quote, a catalyst. "the catalyst for the great media roll up a lot of people have been expecting." vonnie: a huge question mark over this company. tom: viacom shares rose 9%. we will have much more on that, chairman emeritus. right now he is chairman emeritus of short report. , let me cut to the chase. on a global basis, a u.s. basis,

what has changed in the microeconomics of last 14 days. >> essentially it is not even the last 14 days, it is the last theours, with destruction of the u.s. dollar that sent oil prices rocketing higher. over the broader term, we now have the appended introduction of post sanction oil introduction. what this means on a global between the chasm arab sunni side of opec and the iranian shia side, and how they will jockey for market share with demand growth -- or i should say, the lack of demand growth -- that will come out of asia. go 30 orn january, we 29, up to some real resistance at 33 or 34. you say it is a dollar move, not an oil-based move. do you still say short on oil? >> you do at this point. it's too hard to make a bullish

case for oil, especially with where we are in the year. it's february. we are starting the peak turnaround season, the maintenance season. the only guys in the world that have to buy crude oil, the refinery, are buying fewer barrels because they are in turn around, getting ready for the summer. demand is extraordinarily weak. juxtapose that with supply. here in the united states, the, rmabulls have been telling us that it will go into collapse. the crude oil production today is stronger than it was 12 months ago. we have lagging economies around the globe, supply that is not being pared back, and we have questionable demand -- vonnie: it's about to be cut back even further. the latest supplier says that

there are more job cuts on the way. at west point will supply -- at what point will we see a turnaround? >> at this point, it is not going to happen in 2016, because now it is a race. we have falling demand. we have a situation in asia. we have a situation not just in oil but all the industrial commodities. we have had a complete collapse of the complex. this is -- and i have been saying it for the past year -- the canary in the coal mine. we do not get a collapse of industrial commodity prices because something is right with the global economy. something is extremely wrong. we're getting signals from china, from japan. we are getting signals here in the unit date that something is not right. it's a race between demand falling and supply being cut back, and right now demand is weighing, and i expect it will continue to win out. tom: thank you so much.

i believe i heard oil. caroline? caroline: we still have george buckley -- is it right, there fore, that there is something wrong with the economy? we have showell, bp, that is a getting consumers spending? >> one of the last inflation reports, the bank of england looks at what was driving oil prices. what caused the fall we have seen? they broke it down into demand and supply factors. they said it was roughly equal, maybe a bit more supply the demand. if there is more supply, it is good news for consumers and western economies. we do still export oil, but not as much of it. that is good for consumers and good for the economy. youif it is demand related, have to factor in the fact that weaker demand globally will also

have a negative impact of setting that positive impact for oil. it's important that when you look at any market, you have got to look at why it happened. tom: george, thank you so much. you have to come on when i'm over there. george buckley. just before the bank of england. coming up, he is always looking into his engineering future. dieter zetsche. we will talk about his search for a positive, free cash flow. much more between the war between mercedes and daimler. this is bloomberg "surveillance." ♪ . .

tom: the world is awash in deflation lori. -- worry.

in this hour, david rosenberg on america's clear and present deflation. yen's strength confounds kuroda. craters.t suisse our friends a look while is in zürich. good morning, everyone. this is "bloomberg surveillance," live from our world had orders in new york, this thursday, february 4. i'm tom keene standing guard in .ondon with carolyn is this a snooze or what? carolyn: we want to get reaction to wear reflation is going -- where inflation is going. tom: it was amazing to see, and davidnd rosenberg --

rosenberg will push against that. here is vonnie quinn. vonnie: thank you very much. hillary clinton and bernie sanders try to establish themselves as progressive last night. if separately at a town hall meeting in new hampshire six days before the primary there. clinton is closer to being a moderate than a progressive. clinton defended herself saying she is a progressive who likes to get things done. sanders is leading in new hampshire. cost on reducing the so-called cadillac bite. both employers and unions have complained. the tax will not be imposed until 2020. the state of florida is declaring a health emergency in four counties over the zika virus. nine cases in florida. the emergency order allows the -- e a judge in philadelphia says a sexual assault case against the

cosby can go forward. that it can go forward. and julian assange has been holed up in ecuador for more than three years. he said he will surrender to police if they rule against him. tofears that could lead standing trial in the united states for leaking classified documents. global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world. i have vonnie quinn. tom: let's folded in with our data check, equities, bonds, currencies, commodities. it is real simple, folks, down at the bottom, nymex crude, you just heard stephen schork say it is the dollar. weaker dollar, stronger oil. heat describes much of the move

-- he describes much of the move. 1.65.ix $2 $1.1751 onen, dollar-yen pushes against kuroda and abe. we are up just .3%, oil and gas leaving the charge today. we are also seeing the pound ahead of that meeting of course. midday we get reaction from the bank of england. rates onpecting hold your meanwhile, credit squeeze, check it out, down by 11% after they have a huge loss, $5.8 billion loss overall. the it is not all bad for bank. sure, they are down 21%, but ing

outperforming, up 11%. tom: thank you so much. this is going to be a fun and interesting interview. he is an icon will for the american and global automotive business. from stuttgart, germany, he celebrated his 40th anniversary with daimler, the chief executive officer dieter zetsche. dieter, wonderful to have you with us. let me talk car models. i have a sense you're are in the process of making a better mercedes than five years or 10 years ago. how far along in the process are bmw?s you compete with dieter: well, obviously, when i set the target of mercedes-benz 2020 to be the number one premier manufacturer in volume and earnings, we had a long way to go. last year, we passed one of the -- in volume for the fi

in volume. for the first three quarters, we passed both in all ability. the reason is a great running which is meeting -- a great product, which is meeting the heart of the customers. tom: right. dieter: therefore, i very confident that we will continue with our momentum and continue to be successful. we aree of the things hearing here interview after interview is the distinction of price dynamics versus unit to nymex at the revenue -- unit dynamics at the revenue line. how critical is china for you to sustain unit growth? well, we had an unbelievable year last year in an almost flat market -- at least the first nine months of the year. we grew more than 35%. january is another remarkable month for us as far as momentum is concerned.

officials expect the market altogether to grow about 8%. i'm sure we can do significantly better than that. tom: i like to hear that number. it will be interesting to see how you do with the chinese economy and the dynamic spirit let's turn to the financials if we could. aknow there is an idea of free cash flow, but you are running consistently negative free cash flow as you invest for the future. when do you rotate from massive overinvestment for the future into generating a legitimate positive free cash flow? obviously we increased our free clas cash flow in way 15 over 2014 on an ongoing business basis by about -- in 2015 over 2014 on an ongoing business basis. we had more than $500 billion in free cash flow, so i do believe it is the right thing to have much more free cash flow than

needed for the dividend. at the same time, we have there liquidity positions, so i think it is our task to invest our money to make it work to the future and to future growth, and that is exactly what we're going to do. tom: art at ever written a note on the constructive momentum of mercedes. what is the message to her sadie's employees and management to again provide the section with the m w -- to mercedes employees and management to again provide the competition with bmw? dieter: keep the ball afloat, continue the great and hard work, focus on products as long as we continue to build the best products. we will be the best company, and i'm very sure that is exactly what we do. tom: i am not going to ask you the last time you made a plane flight to detroit. you are living on a plane years

ago. what have you learned about detroit and american automaking? 's ford, particularly general motors, the scene of manufacturing? what you learned about automa -- auto manufacturing? dieter: first of all, continuing in the past never lead to two a good forecast. in theber when people industry crisis told her colleagues in detroit mainly what to do, if they would have followed this recipe is, they would not be where they are today, so successful. breath anda long sustainable strategies and follow that consistently, and then we will have success. that definitely applies to us. tom: i have got to ask you the delacorte question after 40

years on the watch -- is there a retirement plan for you? are you going to go out in the mercedes casket? that must be a well-built casket. one certainlytter is not my plan. but the board has to decide. they will discuss it in the near future. i like my job, and i think we are doing well. caroline: mr. zetsche, you have industry targets that you hit. is 2015 as good as it gets? because you are guiding lower for 2016. ll, we said we expect to get better in 2016, and i am very much convinced that this will happen. the first role, as you can see, is the general results in sales, which are extremely promising.

a lot of momentum on the mercedes side continues. it is providing tailwind. we are very confident for the development of our company in 2016. caroline: how confident are you in your industry? the volkswagen scandal regarding diesel continues to swell. how much is a boost for electric cars going forward? ramifications? dieter: overall, our sales are moving from record to record. there are rates for diesels within these sales, and that is relevant. it has not changed at all. this applies to the u.s. as well, but of course the take rate was small before. we do not see from a customer active in the impact -- customer perspective any impact. industry altogether can recover

credibility, which obviously has been questioned by these events you are referring to. tom: one final question if we could. uber is taking over the world. in europe, mercedes dominates in the luxury category. can you do that in america? can you put a mercedes and every uber driver together in the united states? cars weree first uber mercedes, so why not? tom: all right, dieter zetsche, thank you so much, 40 years with one company. a few people can say that as well. rooting for the montréal canadiens. they completely collapsed. has inflation. david rosenberg with us, and we will talk to him about the collapse in deflation. he says forget about it, there is inflation in new america. stay with us. "bloomberg surveillance." ♪

breaking news in the entertainment business. vonnie: lions gate entertainment has reached out and acquired starz after lions gate had already acquired a stake in starz. guess who controls starz's voting shares? john malone. it will be very beneficial to and both companies if the merger were to go ahead. it would lower taxes. and my brain-dead that i do not even know what starz is? tom: it is -- vonnie: it is a media content

company. piñata in rosenberg, 2014, sacrilege. inflation over deflation, and he sustains with after we will talk about central banking with david rosenberg. chart of the week. bring it up right now. this is from the bank of alanna, a calculation of tightening outside of what central banks do pure in 103 basis points of side fund from the index. that is a brilliant chart. what does it signal? david: between the run-up in the last couple of months and debt across capital, that the markets are doing a lot of the jobs for the fed already in terms of tightening up financials. when the fed raises rates, this is what you accomplished. this the reason why markets are increasingly pricing out the fed is that between what the equity markets and debt markets are doing, the outlook for the economy will be pretty soft

based on the tightening we have seen in the past. vonnie: charles schwab yesterday said the financial conditions allows the fed to become more dovish, and it goes back-and-forth. david: of course, as the markets them back and financial conditions ease, then the fed is back into play. this is exactly what happened toward the last year. the fed to pass in september because financial conditions were doing the job for them. then things appeared to be better. in december, they race rates, and now we are back in september.e there is a relationship between the market in effect, the fed in the market or it i would suggest three months from now, as credits start to tighten and equity markets go back to their old highs, the fed will take another kick of the can. by the markets will dictate what the fed does. there is no question about that. tom: carolyn high, please.

hyde, jump in here, please. is it still laughing, or the economy starting to feel the heat? are we seeing the impact in the markets? david: there is no question that the economy has slowed down in the fourth quarter. i think the first quarter has got some question marks in front of it, but between what is happening on capital spending, which is softening, and inventory withdrawal, and the fact about net exports because of the weakness in the economy, emerging asia, is offsetting whatever goodness we are seeing on the consumer or the healthy market. so we are left with an economy right now that is only growing 2%. there is no question of the economy here -- i am not a fan at all of the reception view. i think that is hyperbole at best. but the economy right now is a challenge. tom: you have had a lot of

criticism for this. if you look at the economy as a whole, can you take the luxury of discarding that international component that is so lousy and say hey, it is good, it is better, it is ok? which is it? david: it is a really bifurcated economy right now. look, before quarter was very weak, but i think you want to take a little bit of a birds eye view of what is happened to the u.s. economy. last year, you look at the domestic segments of the economy, say consumer spending and housing together, they go over 3% in real terms. it was the best year for consumer spending since 2005 if you average out the four quarters, when we were at the peak of the credit boom. i'll must laugh at people who say oh, well, consumers are not spending. the problem is that businesses now are frozen in time. we have met x boards that are very weak -- we have net exports

that are very weak. i think it is offsetting the business sector. back.ll right, let's come david rosenberg with us. terrific chart on the split between the bifurcation, as he says, between the service sector and goods-producing america. coming up tomorrow, allen's that zetner way out front. that is pretty cool. "bloomberg surveillance tomorrow is jobs day. -- tomorrow's jobs day. "bloomberg surveillance." ♪

caroline: welcome back to "bloomberg surveillance." a rather gray morning on the markets. the markets are looking a little greener. swissa down day for stocks, largely because of credit suisse, a loss of $5.8 billion. zürich forcqua is in us. francine, you have got the morning must-listen for us. francine: yeah, i do, caroline. i hear something that basically talks about the correlation between oil and markets. he tried to put a positive spin on what we will see in the next 12 months because he says the real economy due to lack of inflation is much healthier than

we think, so with thinks the correlation between the oil markets and the market in general is just unfair. >> the economy is ok, and markets are not. we really have a disconnect between what we've seen in the real economy if you look at the u.s., so you know, the low oil consumer.ood for most of gdp is consumer -- is consumption. consumer feels good. thiam, i know a lot of ceo's are not looking at the volatility having an impact on their bottom line. at some point, the psychologies of these markets also will impact how much we spend. tom: let's look at a quote that really stunned me. this came across bloomberg i think at 3:00 a.m. this morning. this is from laura keller.

company fargo and spokesman denied that the lender was in discussions with credit suisse to buy a major portion of the swiss banks businesses. there is no truth to the rumor according to italy's wilkinson. -- elise wilkinson." how much do they want to be like ubs? francine: they want to be like ubs, that is very clear. they want to manage the wealthy of asia's money. it is very difficult how you structure the investment bank. main concern. mentioned the rumor yesterday with wells fargo and the investment bank, and actually on the back of that, the share price of credit suisse was up 5%, and then it fell a little bit overnight.

investors were already looking for something a little bit more drastic. continues.llet francine lacqua in zürich, caroline hyde in london. this is an interesting interview appeared i had to look at the textbook on quantitative finance to speak with jerome schneider, head of short-term portfolio management at pimco. forget about it. he is the repo guy at pimco. that is all you need to know. from new york, from london, from zürich this morning, stay with us with futures up 6 cured we have david rosenberg. it is "bloomberg surveillance." ♪

caroline: welcome back to "bloomberg surveillance." stocks are up .2%, coming off of a high in oil and gas companies, leading the charge. up .3%.ns,

more of a roller coaster ride yesterday on the back of that services day. meanwhile, brent going into the red. stronger than before the boj announced its stimulus. we're seeing it now the dollar lower, japanese yen on the up, $117.55. much,: thank you so caroline. the syria peace talks ended just days after they began. they made progress is against rebel held areas. russia has rejected demands to stop the bombings. the talks will resume in three weeks to meanwhile, british prime minister david cameron has plans for today's summit on aid to syria. cameron is seeking support for a

draft compromise from the european commission's president. germany took in more than one million refugees last year, and it is on track for that many after just one month of this year. germany says more than 91,000 asylum-seekers arrived in january. officials blame that on harsh winter weather. yesterday, german chancellor and merkel's -- angela talked about asylum-seekers. alexis tsipras' pension reform plans. his proposal called for higher taxes. protesters say that will cripple small businesses and the self-employed. and another republican presidential candidate is joining donald trump and accusing ted cruz of cheating to win the iowa caucuses. ben carson complains about speculation that cruz would drop out. global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus

around the world. i am vonnie quinn. euro.we may get a $1.12 it is amazing. real dollar weakness. thanks to stephen schork for corn that out there this is the manager of the year selected by morningstar -- that is the author if you are in the mutual fund business. yet he manages a part of the world that nobody pays attention to. it is not the foundation of the investment financial system. bedrocke absolute tha that we live in. jerome schneider drank the kool-aid out at pennsylvania and nyu stern. he is a 2015 morningstar fixed manager. congratulations. do they call you up like the nobel prize and wake you up at 3:00 in the morning? jerome: we get up at 3:00 in the morning anyway. early mornings are no surprise. we didn't get the call about halfway through our day, but we

are obviously very excited. tom: 90 basis points, which in your game is a huge amount of money. i want to get into a serious is this with you and david rosenberg about where is the rate?e-rate? -- risk-free do you know where it is right now? guest: there are two components. policy at the bottom ends, currently 25 basis points. most importantly, though, key bills are really the risk the rate at this time as people look for shelter. they yield less than 20 basis points or so at this current point in time here for that purpose, it is still a risk-free rate. tom: are your yields on official because of the close of money now or expected to come in from abroad from negative interest rates? rates will beend structural, and that is

important whether you are institutional or a retail investor. the main focus point is that rate yields, whether it is from a bank deposit or otherwise will remain suppressed because of that function. there ar is so much demand that there is not room to get to the near-zero bound. we have looked at the drop. what does that say for you? jerome: expectations of the fed rate hike are off the table. but more importantly, the global financial conditions are weighing on the global markets. you see that every morning when we come in. what we have to think about our ways to safeguard that capital. the costs to safeguard, while prudent, has remained at near zero yield. that might be safe for the for seeable future. for investors, what we need to be focused on is avoid volatility most importantly. fromility has been coming

interest-rate exposure, and we have seen that. earlier this year, it had to do with the prospect of rate hikes. now has to do with global financial conditions weighing on markets, which is bringing rates lower. but that volatility is very challenging at this point. tom: david, a question please for mr. schneider. you are living at 35,000 feet. this guy is landing at 147 feet, to enter 16 miles an hour in a 777. a question for a guy in a short-term. david: you take a look at the short-term and the short-term interest rates, but if you are an equity fund manager and are looking at an appropriate risk-free rate, what is the appropriate duration? what is the appropriate interest rate across the return spectrum we should be looking at? are we seeing a real risk-free rate? to 10%.when be close the question i would ask is long-duration, what is the

appropriate risk-free rate? jerome: the appropriate risk-free rate will probably be the 10-year at this point in time, but the focal point of this point -- and we have to focus on this -- is an equity manager is very opposite of their structure, the volatility of the market. so basically as they look at the portfolio composition, they need to scale it down. this goes for retail investors as well. tom: good. for a retail investor as well, they need to think about that cash components, and it basically comes from an apathetic allocation of cash afterthought to really a cognizant asset allocation. tom: caroline, this is a fabulous interview. we have yet to talk about any greek letters. i think it is a triumph. talk about alpha-beta epsilon and theta. caroline: i will not test you to save them all back again.

jerome, you need to diversify, unit two makes all of this volatility -- where are we under-invested at this moment? where should investors be looking in terms of actively managed funds? jerome: one thing investors the to focus on is cash allocations for years has been an afterthought. it is thought to money market funds. for that time, you got a positive real return, after-inflation return. that is not necessarily going to be a basis going forward. we talk to clients, retail and institutional, corporate tax treasurers, etc., they are all really focused on the fact that cash allocations have increased 30% or to 10% to really 40%. as a result, we need to focus on how to put up money to work, earning not just zero but 100 basis points and may slightly stepsy taking incremental outside the money market spectrum. in doing so, there is a balance, a trade off. it you are able to garner some liquidity premiums and most importantly earn income to

preserve that capital not only in nominal sense but a real sense. jerome, does that way on u.s. treasury's? -- what we will .ee is diversions the u.s., we continue to focus on data dependency. has indicated they will tread water further. vonnie: what is your call? jerome: they will probably do some modest expectation of easing in march. we need to focus on specifically those focus on higher volatility situations, which is basically everyone, focusing on the data. the fed has become very clear -- the fed will be a key focal points with tomorrow's numbers weighing on us. you make actual progress and start getting up at 3:30 or 4:00 it's out of 3:00 a.m. jerome: at pimco, we get up really early. jeromengratulations, schneider in the short-term space at pimco. coming up, arguably the most

important conversation for global wall street critic christopher wheeler of atlantic equities on the immense and new challenges that credits weeks of zürich has this morning with francine lacqua in europe, caroline hyde in london. this is "bloomberg surveillance." ♪

good morning, everyone. "bloomberg surveillance." it has become important for american banking as well, the troubles of credit suisse in zürich. it helps to have francine lacqua it is or it. francine, -- in zürich. francine, the story changed. credite: yes, because suisse came out with earnings worth than expected. what analysts are not pointing

to is the fact that citigroup put out a note saying they may not hit their target. i asked tidjane thiam. tidjane: we are the reference in asia in terms of the integration. it is important to me to accelerate this. it is working. what we need to do? we need to fix it elsewhere. francine: so you can see that thiam explaining that although he is rationalizing the investment bank, that if his way to getting more age and wealth -- asian wealth to invest with him. let's get to chris wheeler. great to have you on the program. with a share price down 12%, due analysts and investors not believe the ceo would he says he will reach those targets in 2018? christopher: i think the ceo is

still in a honeymoon period. he has a great record in a number of different industries and roles he has had. he hasblem is a demanding target stared what we have seen as investment banking revenues outside of perhaps asia just being very weak indeed. yes to face perhaps a new time which means he will have to make deeper cut in the investment bank to really -- if you want to see the wealth management performance shine through and perhaps his asian or performance shine through as one division. they are alsos, saying look, we had ubs, but actually some investors actually go with ubs because he has been in the job for longer, his strategy is much clearer. suisse'sis why credit share prices under pressure today? christopher: yes, ubs of

dramatic action in 2012 to try to right size the bank, particularly around the fixed income space. they did not have great wealth management over some he fourth quarter, but we know those businesses will come back. it is a matter of blips rather than having to adjust we completely do structure of industry. tom: chris, the headline on bloomberg this morning, which is always rate are all from a little bit of banking experience, the ceo saying "there is very little goodwill left." it is about $9 billion, which is chump change. what is the urgency for the d swissational bank an regulators to get this ship righted? christopher: this is interesting, tom, because we go back after the crisis, obviously it was ubs that if the problem, and the swiss national bank did an enormous amount of work to get that work sorted out. credit suisse was the poster child care they had a great 2009. things have gone wrong because

they did not perhaps make the next changes that we see in these types of markets. you are right -- the swiss regulators will be all over it to say let's make sure we get to being you back to being a national icon. tom: do you have an actual book value or share price, which is the tip .4 zürich in the city of london? it has gone i think through it for the moment. this is not reflect the underlying franchise in wealth management. some the has to be done and the rest of the business make sure they actually reveal just how strong the businesses are and the value that is there fo shareholders. another guest was on the call, and he says credit suisse should have preannounced it. do you agree with that sentiment? and will we see another fund rate from credit suisse? christopher: in terms of the preannouncement, the swiss regulators are pretty robust.

i would not be standing here criticizing them. it was surprising, i should say, the underlying loss. i think in terms of where does he go on capital, my sense is that it is not just capital but leverage, and i suspect a bit like deutsche bank,, they know they cannot go for yet another capital rate, unless the government is telling them you must do it. they will rebuild the ball, slip the balance sheet further. tom: chris, the last time there was a european bank merger, napoleon was retreating from moscow. i jest, but not by much. who will take them out, and what will be the european support for that? christopher: european or any big bank mergers are highly unlikely in the near-term. i think the regulators are still trying to make sure we do not get bigger banks, but the longer this goes on, the more tricky it becomes, and the question is again -- wealth

management is a very important business, but it is a confidence business. tom: thank you. christopher: you have to provide confidence not just about your wealth management business but the whole institution. chris, when you look at the investment bank, you say deeper cuts, and given what you just said, we also had that rumor yesterday that wells fargo could buy a large chunk of the investment bank of credit suisse. the ceo of chris wiese assessed the ceo of credit suisse says no, he is not for sale. christopher: i cover wells fargo very closely. i do not think he says it is not for sale. he said we still need a robust and healthy investment bank. we are at the stage -- at the moment, you know, they are arranging to pass their wealth management business onto wells fargo in the united states.

it is a lossmaking business. ceo of we will see the credits we say i need shift off my balance sheet some of these businesses. kind of arrangement to shrink that balance sheet into focus again on the wealth management business, which is a great business. tom: chris, you assume i am old enough to remember credit suisse. chris wheeler, go away. christopher: [laughs] tom: we will come back with david rosenberg and jerome schneider, looking at service sector inflation tomorrow from the union bank of switzerland, george magnus will join us. we will talk to him about the view from 60,000 feet. this is "bloomberg surveillance." ♪

for aet's have a yen forex report, it is about the japanese yen today, $117.67, destroys what mr. kuroda one to do. brazilian real on a tear. that is our forex report today. how about our single best chart

rosenberg,david jerome schneider from pimco as well. this of the chart you are living. the redline line is cpi inflation. the white line is service sector. david rosenberg, you call for this. service sector inflation is on a tear, isn't it? just theat line is level, but if you look at the year-over-year trends, it is running close to 3%. everybody has got this deflationary mindset because you cannot really see services, right? whether it is entertainment, health care, rent -- you cannot see it. but you go to your bloomberg machine, oh, well, you can see the price of cocoa, copper, it,e, you can see it, feel touch it, and all of these commodity prices are going down, celebrity has a deflationary view. but remember, the u.s. economy is dominated by services. vonnie: but jerome, it is the

fed's job to look at what to react to, right? jerome: sure, and what they will look at his job creation, wage inflation, and while the month-to-month indicators might have been flat last month, the year-over-year indicators are actually pretty impressive, so there is probably a little more positive than negative. vonnie: so, david, it is the rate pressures that are not native. david: hold on. firstly, average hourly earnings is one barometer, and it is not accelerating sharply. but this time last year, unilever costs, which are productivity adjusted inflation, running 1% year-over-year. notice up to 3%. i would ask the viewers with all due respect to the commodity complex, which has been a fundamental downtrend, how are we going to get deflation in the united states when you have 3% growth in your labor costs, you have almost 9% growth in bank

credit, and we take a look at what is happening in the service sector -- tom: so what do stanley fischer and janet yellen do, jerome? did they go to the rosenberg service sector? do they measure for some or do they measure for china? jerome: it is not about china. they have to look at the whole gamut. do they have to be in a hurry to raise rates? absolutely not. they are on hold for the for seeable future. tom: are you managing for a negative real rate right now? do you take the coupon in your world of short-term paper? is it a real rate that is ugly? you take away whatever is the inflation number you are working with. jerome: we're thinking about a thisive zero real rate at time. for investors, that is obviously weighing on them, even the inflation is very modest. our goal is to help protect that capital at that point in time by helping produce not only positive nominal returns but positive real returns. one of the things, getting back

to david's point, it is sort of ok, but investors are -- the fedthe fact does, policymakers do, so as asy become data dependent, managers, practitioners and the monetary policy arena, they really focus on that, and it will become a real-time dynamic. the market should not expect that in th and be entirely dismissive. is sayingldman sachs we are under pricing at the moment the risk of a right hike from the federal reserve. when will we have one? will it be this year? david: well, most likely, but it is not really time-dependent. it is more situation appeared the that already showed his hand. in september, they thought they were going to go. of global a period market turbulence. in the turbulence subsides, we

have peace and quiet, tranquility in the markets, and they go in december. now we are in a period that you can hardly argue is tranquil. i think the fed is on hold. if we go to a period by spring or summer where things have calmed down globally in terms of the markets, then they will go in raise rates again. so it is not time-dependent. it is not even data dependent. it is more situational in terms of what the market will be doing globally. tom: ok, david rosenberg of gluskin sheff, jerome schneider, congratulations again at taking the morningstar trophy. tomorrow, we have lined up a wonderful set of guests. and george magnus among the assembled. ♪

from london tos moment from now, the bank of london is out with its latest forecasts. swiss bank and blues.

credit suisse posted its biggest loss in seven years, and shares fall to the lowest in a quarter century. we will be hearing from the bank's ceo. and it is the end of an era in media. sumner redstone calls it quits at cbs. ♪ welcome. you are watching "bloomberg ." i am stephanie ruhle. my partner, david westin, is out this week. corey johnson joins me. johnson joins me. cory: yes.