china is said to be planning a merger in a deal that would $100ine assets worth billion. rise.factories tough talk. the e.u. president says any brexit we be painful for britain as he stresses europe's red line. hello, tomorrow. francine lacqua is live from the

science and tech global summit in paris, bringing you the former french economy minister. this is bloomberg "surveillance ." i'm anna edwards. we have a great three hours lined up for you. before we begin, a reminder that at (;30 bring you our weekly next?" brexit, what's the europeaneave union and many contributions from francine at the tech conference. hello tomorrow. plenty more from her as we go through the day. a look at here we are at the early stage of the european trading day. one hour into trading. risk onp by 0.9%, a attitude to markets. the chinese data yesterday was gloomy. today a different

picture. e.m. markets in asia and into the european equity session. we see less appetite for the japanese yen. the pound is under pressure hovering around the 1.22 mark all morning. more tough talk from the e.u. president. no cake, only salt and vinegar. $51.00 ade up above barrel. harker says uncertainty stemming from the presidential election may be an argument for delaying a rate increase. he says he is worried about potential policies. harker did support a rate hike in september. minister saysirst she will publish a draft

independence referendum bill next week. the publication of the bill does not mean an imminent vote. theresa mayon for fired back saying the question of independence had been settled in 2014. singapore's economy contracted sharply in the third quarter. 4.1% from the previous three months, a big miss after analysts' estimates. has been under pressure because of weaker trade and lower energy prices. thailand is beginning a year of world's longest reigning monarch. the king died yesterday at the age of 88. his son will take the throne. years, makingfor limited public appearances and spending most of the time in the hospital. global news 24 hours a day powered by 2600 journalists in

120. countries. better data out of china if you like a little bit of inflation. that is the case. this chart shows you the ppi and cpi story. it has been almost five years since you have seen this blue line. this is the ppi, since we have seen that and positive territory. could that bring more inflation for some of the markets that china exports to? global story. on the domestic demand situation, there is lots to talk about with regards to what this tells you about the china story. would speak to enda curran from hong kong. talk us through the latest data we have on china. enda: good morning. this is quite a result for them today. moving in thes right direction but it got into positive territory quicker than expected. for company profits

and also good for company servicing debt. also reflects some success on the supply-side reforms story. the government have been talking about shutting down mines and and they are doing so. there is a lot more work to be done if this move into positive territory is to be sustained, they will have to tackle much steel.nier areas such as it will be much harder than the coal sector. we are heading to a very important political year in china next year. there is no guarantee that this will be sustainable without further painful reforms. perhaps we seem some businesses being put together as well. that is another fashionable thing to be doing in china right now. we have another story that china itslanning a mega merger in

chemical sector. what do we know about that deal? enda: we are seeing some gradual reforms happening. we know that this is a priority of the government. today, our colleagues have reported on this, potential major merger in the chemical sector. i think analyst way to see in terms of the devil in the detail. will a merger such as this allow room for private competition, will it allow room for foreign competitors? management of these companies be taken away from the party central control system? the indications are that are minimal so far. all indications are that the government is talking about strengthening their grip. bit, butform, bit by there is a long way to go before we have a shakeup of the state owned sector in china.

anna: thank you very much, joining us with the latest on china. let's turn our focus united states. janet yellen as a keynote speaker at a conference hosted by the federal reserve bank in boston. let's bring in my guest. brenton brown, chief economist at mitsubishi usj securities.i know you are preoccupied by the politics that relates to the markets. you talked about how populism is uel.f you see a link between what we andseeing from the fed monetary policy and what that is done to the distribution of assets across america and the rise of populism. interested to see where that populism is finding its roots in the spectrum of u.s. politics. >> very much the wealth gains generated by the q.e. and monetary policy, together with

productivity and investment spending, outcome, which means low standard of living containing, that has been a powerful cocktail for producing populism as we've seen with the trump and bernie sanders phenomena. may: at the moment, trump have gained support from that particular development and the link to the fed, but it's not doing them any good in the pool. clinton gaining on trump. the's the market view of election as we stand right now? what does a clinton win due to the dollar? brendan: the key is not a clinton win, but what is going to happen to the house and senate. if we see the republicans losing their majority in the senate and also in the house, then we really are looking at a quite unrestricted clinton administration. in terms of the fed, that outco

me means virtually no prospect of any reform. all we have been hearing over the last few years, republicans pushing for fed reform, all of that we can dismiss altogether. you would've thought the reaction of markets to that, the idea there was going to be a clinton presidency able to nesians wouldhe keyn be a negative prospect for the dollar. but we are not seeing that. markets are focusing on a december rate hike. but, of course, we are looking at historic events in the united states -- the collapse of the republican party. t short-term position taken, how vulnerable is that december call, expectation of a rate hike? brendan: i do not think is vulnerable to data. data has a lot of white noise. we've a situation in a rate hike

would not take place, if you have a market crash between now and that time. fpom caon the bloomberg -- we can zoom in, the chart of the financial condition. how tight tdo you see policy getting, how tight is policy already because of what we have seen in the united states in the dollar? describe in any conventional sense financial conditions and united states and even if oney easy, looks is that a few counters to that. that's fairly technical. overall, the financial conditions are very easy. remains asstion mark always, where are we and what milton friedman describes as the point of no return?

we had very frothy asset markets going on for a long time. we have reached the point where fed action to bring back financial stability does risk catapulting us into this financial crash or cooldown. and we may be at that point of no return. anna: do you think we are heading to the u.s. recession? specifically of clinton was elected. not going to be a direct result of the election, but the big unknown, the catalyst into any recession will be pullback in asset markets. anna: thank you very much. brandon brown, the chief economist at mitsubishi stays with us. we will bring you live coverage of janet yellen's speech in boston. at 6:30 p.m. london time. stay with "surveillance." plenty coming up, including the view from france. we speak to the former economy minister about brexit. francine is live in paris. hard brexit or no brexit, take

your pick. the stark warning from the e.u. president. in our brexit show, we will have the latest news on the u.k.'s european exit and will speak to the ceo of l'oreal. this is bloomberg. ♪

the best prospect of those in being able to do that is if we get fed normalization. anna: what about the euro and how it performs from here? i read ubs was saying that the euro would rally on the taper talk. we ran this story some weeks ago suggesting that when the time comes to end the bond buying program that will be some tapering. do you think that that's what he would like to do? brendan: i think that tapering is what draghi would like to do.

i do not see that being a big story for euro. the only situation is where the dollar would be strong anyhow. it is not an independent story. we have toh more focus on the german political in europe,e risks particularly the italian elections that will be close to thoughts and december. that is a risk one has to look at very carefully. ed always says it has nothing to do with politics. independence. brendan: i think we have seen to seeof the draghi ecb that italy focuses in on his thinking in every way. the italian referendum coming in the short-term, is the focus for the ecb. you for your thoughts. brendan brown, the chief economist at mitsubishi securities. up next, francine speaks to emmanuel macron. this is bloomberg.

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's anna: let's get to francine lacqua in paris with a special guest. francine: i'm very pleased to welcome to the program, emmanuel macron, the former french theomy minister and now head of political party. what have you learned since you left office and started this movement? >> i'm happy to be with you. i have spent a lot of time on the ground on the country and we launched a new initiative thousands of people, we get to see and listen to french people during weeks and weeks to understand the critical issues and problems in order to build a program.

not to push new propositions but to listen to the people first. why? thes -- the gap you have, encreasing gap youu hav between people and politicians. when you look at the brexit and the american campaign there is a feeling of politicians -- yes, n o more propose anything is a solution to day-to-day life and to people. so, what i'm trying to do is to build two things. first, a vision and to build a common vision with the people of my movement to say, " what is our position for europe?" innovation. open society. i think a leader has to provide a clear vision. i'm to listen to people about day-to-day life, what about the

expectation, and what about the ideas about solutions? for me, if we want to -- politics today, you have to mix both of them, vision and pragmatism and open innovation with people. find a middle of the roadway to make politics in france and e urope and was to speak about bureaucratic stuff absolutely without any relation with day-to-day life of people. francine: give me something concrete. if you were in charge today, what was the one thing you would change straightaway? >> for me, and we are building a program, so i do not want to disclose everything right now, first, you have to reshape the socioeconomic model to provide much more, to be much more innovation friendly and provide individual security. want tocretely, what i

promote is a society where e individual rights for training, for health care and so on. and not right basicallys that are monitored by large structures and much more flexibility on the ground. rules to be negotiated -- and no more by law, because it is too rigid. more individual protections for people. so, that's a win-win deal i will propose. for real estate and housing, what i will propose is not a huge policy at the national level but to say we have 15, 16 we perfectly note where you very ambitious program to provide housing, especially in the critical cities. so, we will completely change

the rights, accelerate the timeframe for this program to reluaunch a new housing program for the middle class. say,kind of very, i would very pragmatic stuff in order to make more economy -- and provide protection. i do believe that a lot of people and citizens have a role to play. what i want to build is not just government andhe a program for politicians, but it is also program for citizens. because you have -- francine: is the program that you want to become president of the republic of france? >> it's too early because i do not want to create that as a show. if we are in a situation, we do not expect anything. what i want to do now is to build a vision, to finalize that form, to gather people.

today, i have 88,000 members in my party. i'm neck and neck with the socialist party. i'm brand-new, seven months old. francine: when will you decide if you are running or not? >> i think the critical question will be decided by december or january. francine: can folks get back jobs because of brexit? >> i do believe that. i do believe that france has a be much more tractive today for people, for business by simple find a lot of laws, by streamlining the organization and brexit could be a possibility for france. it depends on two things. first, our ability to provide a very attractive package. actual compliance to commitment. and second, we have to monitor

the brexit. i'm extremely attached to -- i d o respect the british vote. i do respect the agenda defined by the british prime minister but at the same time, the worst thing would be to have a sort of weakmean, weak europe and european union. francine: when you say strict approach, that means if they do not give anything on immigration, if they take control of immigration, and means they will lose single access to single market? it's impossible to have the best of the two worlds. francine: they are either in or out. thef you want to be part of single market, you have to contribute to the budget. access to the

single market as a passport, you can have this sort of new organization. do you want just a trade relationship? ok, so it will be something like canada. do you want something like switzerland? they contribute to the european budget. we have to fdefine together. i don't want a stalemate approach where the brits will have the best of the two worlds. otherwise it will be a big incentive for the other members of the club to leave or to kill the european idea. because the european idea is based on common responsibility and solidarity. for me, that is a critical point when you speak about immigration. everybody has to contribute. it is impossible to leave the burden to some members. we have to organize it in an appropriate approach dealt by the commission but everybody has to take its own part of the burden. that is part of the e.u. francine: do you think that

europe will become smaller and for five years? the e.u.? >> my approach is slightly different. what i propose to say, we need to restore two things with a e.u. democracy and 70. the -- and sovereignty. when you speak about energy and defense and security and so on. he, sovereignty is not about t national level. that is the big mistake by the brexit. second, democracy. it is impossible to go the next step forward for the e.u. jets with a member of the club and just with the leaders. -- just with a member of the club. this system is completely rotten. proposes to say during 6-8 months, let's organize democracy debates in the 27 countries, organized by a small team. francine: referendums? >> not a referendum.

referendum is just yes or no. people are more sophisticated than that. which kind of europe do you want? as a citizen, i want to participate in the debate. i do not want to be submitted for europe and say the end of the day, yes or no. no, i want to vote -- not the popular vote. something we will organize. you can make it partly with the digital. but people have their own view on that. they have their own solution. they are able to say, i am not just for o r against europe. i'm for more europe in this field. i want to say to you, europe is not the appropriate answer in my daily life for that. s organize a national debate during 6-8 months just to have a strategic document for, be submitteds to to the convention at the

european level to say, ok, are we ready to move forward in this direction? 10-12 pages. francine: to reform, basically? tofor me, beauty to say, how -- you need to say how to deliver on security and energy and digitally and how to do much more to have an actual tax and social convergence within the eurozone. because i think that is critical. are are you ready to create a eurozone budget, to have solidarity and responsibility? francine: and you think that the response of the more integration and not less integration? >> i think everyone would concur to say we need more integration. we need at least a new political vision because today there is a lack of political vision. on the basis of this document, that's have a common political endorsement. let's go to the referendum in the 27 countries with a new method, which is to say, if you thea vote at 65% in

country, we move for. if you vote no, you do not move ford but you do not block the other members. thing --he craziest and france did it 10 years ago and netherlands did it 10 years ago -- we blocks the others. those who wanted to move forward. today we are completely captured by the brexit vote. that's crazy because our system today as captured by those about your. what i want to do is have a much more democratic approach, a much more political approach to say we need more strategy, and a much more proactive approach to say, ok, you want to be part of this new club, go ahead. we don't block you. francine: thank you for joining us on bloomberg tv. we will have plenty more throughout the day. the ceo of l'oreal. later on.

love you,on't interesting words to end on. with emmanuel macron in paris. our weekly brexit show. i'm anna edwards. every friday we round up the conversations that will make you know what is next for britain and for europe. next?" " brexit, what's for roundup of the stories that matter the most, let's go to sebastian. tusk has: donald warned that divorce will be painful for britain. britain is set to lose the benefits of being a member of the single market if it continues to focus on curbing immigration. says she willn publish a scottish referendum bill next week if she feels that

her nations interest are not being protected. the publication does not mean imminent vote. mayokeswoman for theresa fired back saying that the question of independence had been settled in 2014. u.k. lawmakers approved an opposition labour party motion calling on the government to give parliament the right to examine its negotiating strategy. the decision does not give members of parliament the right to vote on the government's negotiating strategy. consideringrt is whether theresa may is allowed to activate -- without parliament approval. it would force the issue into the house of commons and the house of lord and delay the exit for a year. unilever and tesco result a the retailers online website. a window on pricing negotiations between supermarkets and vendors following the weakening of the pound. the bank of england said it has more than 1 billion pounds of

corporate bonds. purchases started on september 27. the bank of england already spent 10% of the budget and it tends to last 18 months as it tries to hold down corporate lowering -- borrowing costs. this is bloomberg. anna: thank you very much. breaking news. while we were speaking to the bank ofron, england and the survey said that mortgage demand fell significantly in the third quarter. they said both demand for prime -- lending decrease. lender's expected demand to increase in the fourth quarter. the availability of secured creditor household is unchanged. lots to discuss with our next guest. takebrexit or no brexit, your pick. that was the message from tusk

yesterday. in his speech, he signaled the process of disentangling may take longer than two years. let's welcome john -- head of rate strategy at ubs. let's start with the latest data and then we will broaden things to the politics. the bank of england saying that demand fell in the third quarter. the buy to let side of things fell the most, since the credit conditions survey, at least 2007. >> this is all tied up and the uncertainty that was triggered by the referendum result. in uncertain times, you do not get a tendency for people to increase their desire to borrow, to expose themselves to uncertainty, to circumstances. to a degree, i think this is unsurprising. we suspect we will see much more of it as the e.u. exit unfolds. anna: what do you think about the latest comments from donald only salt and,

vinegar. we get the tough talking from many in europe. quite struck by one of angela merkel's spokespersons talking about their will be no full access and a single market without full freedom of movement. does the truth lie in the word "full"? since the cremaster talked about the signaling of article 50, things have started to get more real on both sides -- since the prime minister has talked about the signaling of article 50. over times those position will change and they will edge towards each other. where they meet is the key in terms of the u.k.'s ongoing relationships but it is clear that at the start there will be a long way apart. anna: many in the business community are asking for details from the government. and how long we have this

uncertain picture is crucial to business. i wanted to show you this chart. vanishes.ective this is the rate at which u.k. corporate's can borrow. falling in the immediate aftermath of boe stimulus and rebounding as brexit concerns bill. that is not what mark carney wants. >> one of the reasons that they included corporate bonds in their purchases in this round of q.e. is because they need to ensure that corporate have access to attractive borrowing conditions. investing into uncertain times ahead. that is what you saw when you first started to fall. the rise in yields is related to the worries that the brexit process may prove contentious, acrimonious. that is not a nice environment for corporates to perform. and that justifies a rise in borrowing yields.

i think as well the comments up prime minister made about q.e. has started to affect judgment as to whether more q.e. in the future is going to be sanctioned. if it is seen as less likely, then the amount of corporate bonds that might be bought could be less. at breakevenu look expectations, inflation expectations going higher, because of the weakness in the pound, higow high do you think inflation goes? john: it is a moving target because sterling keeps falling and prices keep rising. that points to higher inflation over the next 2-3 years. cpi going above the bank of england started. where we disagree with market valuations is when you look further out, forward starting inflation expectations or yearar or 20 or 30 inflation expectations. there is no reason though should be rising just because inflation

may spike over the next three years. out, inflation is likely to be lower in our view. those year on year affects work out of the system. looking at sterling, it is weaker once again today. 1.2193. number you have in your mind where politicians react more or the bank of england does something? for: it is very difficult them to because we know what is driving this. it is a process that is started to move in next certainly forward. -- inexorably forward. own levels have their and we have seen in the past for politicians and central banks, they talk about the level of the currency can be dangerous and attract unwanted attention. we've obviously had a large decline since this time last year. down 20%. it may be justified by what is change for the u.k. in a relative context. could fall further, but perhaps

in a more orderly pace. anna: where does it go, the pound? john: 1.20 was our forecast so we're kind of there. the speed we got there suggested could go further. anna: is stagflation likely? is that a good description of where we are heading in the u.k.? john: i guess it is not a bad description because we think growth is going to slow and we think inflation is going to pick up. we're not looking for either a recession or a serious and sustained rise in inflation, gflation where real sta becomes a problem. it is going to be a temporary issue, for sure, and one that means more monetary stimulus may well still be required. anna: the boe looks through that higher inflation? john: they did in 2009 when we had similar dynamics. they might. anna: thank you for joining us

today. on the program at bloomberg. up next, how are europe's biggest companies preparing for brexit? francine lacqua will be speaking to the chief executive of the cosmetics giant l'oreal. this is bloomberg. ♪

anna: let's move beyond the politics and consider what brexit could mean for europe's biggest company. francine lacqua is at the hello tomorrow business summit in paris with a guest. francine: thank you so much. we are delighted to be in paris. we're talking about startups and innovation. at a great conference with 2000 participants. i'm pleased to welcome i

next guest, jean paul agon , the ceo of l'oreal. how would you say we are growing? you are great barometer of how the world is growing. people buy cosmetics in bad times and good times. how is business overall? jean paul agon: business is pretty good. i have to say, of course, there are parts of the world where it is easier and parts where it's more difficult. it is pretty good. the market is growing steadily. of course, new markets are pulling the growth, but also, we see some good dynamic in the u.s., in some countries in western european all in all, it is positive. francine: last time we spoke you are talking about 3-d printing and about skin. now you're talking about implants. how much is that part of your strategy? jean paul agon innovation: is the name of the game in our

industry, in the beauty industry. every year, more than 15% of the products we sell are new. so, to gain market share, to grow, to create new markets, innovation is critical. that is why we are here. that is why we are partners with technology,s in and by the way, many of these ideas here are very close to a type of new business we have in the beauty industry. francine: give me the latest thing you think will work and find their way to consumers? jean paul agon: there are many things and some of them are secret, by the way. i could not elaborate too much. you are talking about 3-d printing. hair 3-d printing. it sounds crazy, but it is going to be probably possible. forthere'll be fantastic

hair extensions, for many new applications we see coming. francine: in what countries or regions are you under pressure to cut costs or to not raise prices? jean paul agon: depends. it is very linked to inflation. usually, we do not really increase prices. because it is not, when we launch a product, it is supposed to be launched at the right price. no inflationis anymore, we do not have any reason to increase the price. the only country where it is necessary to increase prices is where there is strong inflation like in some countries of latin america, like russia. so there you have to do it because your costs are also under pressure. francine: will you raise prices in the u.k. because of brexit? jean paul agon: we did not raise any price of the u.k.

the evolution. of course, for some of our products, the cost will increase importedause they are from other parts of the world but we are going to be very cautious. we want to respect our customers. so, we got to do that very, we're going to do that very wisely. francine: and this was always the case, was it yesterday when you woke up? jean paul agon: no, it was always the case. i was in the u.k. a few weeks ago. and we discussed it. we realized -- the most important thing is to have a long-term respect for relationship with your customers, consumers. and so, ok, consumers in the their faultot if our cause of increasing because of the pound devaluation. we have to look for the long-term and be cautious. francine: in terms of your products, do you have high and, medium and more mass markets.

which ones are doing best? jean paul agon: i would say that right now the four parts are doing very well. the part that is doing better is the luxury. t everywhererue, it is true in the u.s. and china and true with europe. luxury doing very well but our mass market division is really accelerating. also everywhere. re balancedch mo activity that we have now between the different divisions. francine: does that surprise you, or was it always natural hedging? jean paul agon: you're right. it's a balancing act. for us, the fact that we are o different markets and different channels and different divisions has always been a very important element of l'oreal, because it gives us this balance. and this capacity to grow whatever happens.

because every year there is something wrong happening somewhere. but because we are a very global company, in countries, activities, price points, alli in all, we can manage steady growth. francine: talk to me about your partners and innovation or your startups? did you try and buy them when it is proven that what they do works? jean paul agon: we try to do everything. we try first to spot at the very early stage startups like we do here. we held them. sometimes we partner with them, because some of their inventions can be useful for us, either in r&d or products or whatever. in other cases, we have a factory in london where we identify startups in the beauty industry. so then we can take some shares and help them to grow.

or sometimes when they are bought,-- being sometimes we acquire them. o, it is a very open system -- ecosystem. what is true is that innovation is so important. and startups have never -- role ino important a innovation. for us, innovation can come from outside as long as it comes. that because the consumer is more sophisticated or more demanding? it is alsogon: because technology is changing a lot everything. technology is changing the beauty industry, like it is changing every other industry. so, it does not look like a because you would think that beauty products is simple. but some application, like electric -- new technology for products are important, too. so, we want to be at l'oreal, the company were technology is

used. francine: thank you so much for giving us some of your time today. have a great hello summit. throughout the day we will have plenty more, of course, from the summit in paris. we'll also talk to the founder of -- anna: thank you very much. francine lacqua with the l'oreal coe. fascinating comments on the brexit. they're going to be cautious about raising prices. european stocks rebound as china data eases global growth worries. we check in on the live market action next. this is bloomberg. ♪

higher inks are europe this morning. let's head to mark barton for the market check. he's very excited about chinese inflation. priceshina factory gate rising for the first time since 2012, gaining 0.1% in september. a source of inflationary pressure. this is a correlation between developed bonds and develop stocks. .50.

since 2013, it is quite a rarity, stocks and bonds moving up in lockstep. risen ineven rate has the u.k. to the highest level since 2014 -- the break even rate has risen. nextis the outlook for the 10 years, weak sterling pushing up expectations to 3% over the 10-year horizon. this is a lovely chart showing how the ecb is starting to price itself out of the corporate bond market, yields on bonds from various corporate entities already dropping below the threshold of -.4%. anna: stay with "surveillance." plenty more coming up. we are live in paris. francine and tom up next. this is bloomberg. ♪

francine: china is said to be

planning a megamerger in a deal that would combine assets worth $100 billion. deflation defeated. china's factory gate prices rise for the first time, showing further signs of stabilization in the world's second-biggest economy. and hello, tomorrow. the science and tech summit in paris, bringing interviews with investors and inventors. i'm francine lacqua. tom is in new york. we have an interesting day ahead of us because of megamergers, that we need to put the focus on france. tom: and i see that. catherine mann will join us in a bit, but when everything is said and done, finally a quiet day in the markets. francine: yeah, for now. then we will see what else we will get in the next couple hours. the markets opened an hour ago.