>> china's official factory gauge jumps a two year high. the bank of japan pushes back the timing for its inflation goals, but keep the monetary policy unchanged. we hear from governor kuroda later this hour. babysitting the brexit. mark carney says he will stay at the bank of england until mid-2019. and hold up. three of the federal reserve's primary dealers ignore the bond market and say they will be no hike in 2016.

a very warm welcome to "bloomberg daybreak: europe." this tuesday morning on our flagship london show, i'm anna edwards. abnd manus cranny is with us from dubai. we have to start with talking about the chinese data. you can see the effect of that across the asian market session. yousef: the official factory gauge jumped to the highest 2014.since july we put this on a chart for you. the blue line is your official bmi, which beat expectations. he also added the the white line, that is your china manufacturing index. also quickly, nonmanufacturing pmi up. boding wellanna,

for the outlook for the fourth quarter. anna: you are getting excited about that small uptick. this chart goes back all the way until 2006, engaging the memory. but we will see what this data does to the pboc, and the deflat ionary impulse. let's have a look at the overnight action with manus cranny and the risk radar. manus: a very good day to you, anna. you have the msci. you have the markets in asia taking a nice relief rally. the pmi is on a two year high. global equities lost ground in october for the first time. everything is rising. oil prices are rising. the aussi dollar is strong. rba, run by the governor, leaves rates unchanged at 1.5%.

they are talking about a risk outweighsket, which o the cpi. the bank of japan leaves rates unchanged. 2% inflatione target will be met after governor kuroda's term. you have oil at the bottom, $47.10, up 0.5%. goldman sachs says if there is no opec deal, it is on the downside. the estimate for oil is up to $60. let's get across to the bloomberg first word with angie lau. angie: thanks, manus. destabilization of china's economy appears to be taking hold with pmi jumping to a two year high.

this top even the most optimistic estimates, but this could mean the central bank holds off further measures after keeping the key rate at a record low for more than a year. and the reserve rate of australia cakept interest rates unchanged, trying to avoid further escalating property prices and household debt. was held at 1.5%. and three of the federal reserve's primary dealers think the central bank will hold off on hiking rates until 2017. rbs and rbc warn the fed will hold until 2017. there is a 21% chance of a rate increase this year. and mark carney says he will stay on as governor of the bank of england until june 2019 to

help guide the u.k. through the brexit. hammondor philip welcome to the decision and the pound held gains. some lawmakers had criticized mark carney's economic warnings. and the white house has pushed back against accusations from some democrats that the fbi chief is interfering with a presidential election. president obama's spokesman said he would neither defend nor comey'sed jamee james decision. josh earnest says there is no reason to believe that comey is playing politics. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. you can find more stories on the bloomberg at top . lau and this is bloomberg. anna: thank you very much, angie. let's talk about what is

happening with sony. we have numbers coming through from the second quarter for sony. the operating profit missed estimates, but the second quarter net profits. we had 4.8 billion yen versus 43.6 billion eyen. that was a net profit. these apprise second quarter net surprise thuthe second quarter net profit. we broke down these numbers for you just yesterday around this time. more details from sony this morning. let's check out the latest market action in asia. we saw a lot going on in the asian session. --ot of change in terms not a lot of change in terms of central-bank policy. ofit was a boring day out decisions from central banks,

but when it comes to the investors having to digest data, a lot is going on, as you said. first of all, take a look at the region is the market is looking pretty mixed at the moment. the markets turned more positive 'ster china manufacturing data rose to the highest since july of 2014. the hang seng index is reversing five days of losses. a different story for the cospy. decisione rba rate again and nothing changed with the cash rate at 1.5%. 0.5%.x 100 losing their .5% another decision coming from the

boj. the nikkei now up 0.1%. they did lower their inflation forecasts. what is interesting is it was in firmly negative territory throughout the entire session boj'sen after thae policy decision was announced, it surged. now, it is closing, gaining .1% there. lots of movers, of course. you mentioned sony's earnings coming out. we had a lot of reaction from the tons of earnings reports coming out this week as well. thank you for joining us live from hong kong. let's get more on the bank of japan rate decision. the boj has left the policy rate unchanged. does governor kuroda, now not see the 2% target being met before april 2018. tokyo, thenow from

chief economist at japan macro advisors. great to see you both of you on the program this morning. if i could go to you first, are you surprised about the lack of reaction in the market, after the boj push that inflation target even further out into the future, and to some extent, beyond governor kuroda's tenure? >> i don't think the market was surprised. but i think i now, the market has a perfect understanding that the boj has a bias toward higher inflation. j should know that themselves. the market knows it very well. it is just a matter of time that the bank of japan will continue the expectation for the inflation target to be reached.

anna: how much credibility does the bank of japan's policy have? itave a chart here and basically points out the change in policy we have seen from the boj, how they are attempting now b aroundtheir 10 year jg the 0%. how do you rank their success with this policy? >> in terms of the bank of japan's credibility, credibility is weak at beswt. the boj is close to exhausting all the credibility they have. they have pretty much destroyed the credibility of the bank of japan. when you think about the bank of japan's inflation, they delayed it today. but when you think about the last two months, it has been positive. the commodity price is up and the yen is down.

the bank of japan should be revising up the inflation target, but instead it went down. shows that the bank of japan has been obviously biased in its inflation outlook. manus: hold that thought. jeremy stretch, let's bring you into the conversation. the bank of japan should be raising its inflation target, takuji says. the market is reducing the net long positions in the yen are they. understanding the inflation targets, and help us through the market position at the moment? >> i think it is true we have seen the markets maintaining long positions for quite some time. that is really due to the broader market uncertainty. i would agree with your previous commentator that the credibility of the bank of japan has been compromised of late. i think there is no great surprise that the bank of japan has pushed out the timing of the

meeting of the inflation profile. it is more than likely trying to find the pot of gold at the end of the rainbow. i think that is going to be the scenario that will remain in play over the tenure of mr. kuroda and beyond. the elusive inflation target will be some way into the distance, out into 2019. yousef: what do you expect from the numbers coming out later today? and what will that tell us, in terms of future policy? >> that will be fascinating, in terms of how that relates to the yield curve control target. clearly we are still in the very early stages of that. it will be interesting to see if we can gain any inference from the details to see if they are going to try to adapt the purchasing patent to allow that 10 year rate around that 0% target.

of course, it is still relatively fresh and new and markets are trying to interpret how that will work overtime. kuji, the boj was surprised how businesses and individuals in japan did not react the way they expected to the stimulus that boj had put into the market. how do we break this deflation ary mindset that seems to grip the japanese, even in the face of all the stimulus that has been thrown into the market? there are still expectations that deflation will continue. >> well, i think we should never underestimate the intelligence of the crowd. in general, the people know best. our market actually can judge forecasts the best. so, i think the fact that japan's population, in general,

remains optimistic shows how little credibility japanese policymakers have had thus far. 4. had a good start in 201 2014, when they made a mistake of raising the tax rate, i think the boj have been going down. and i think the people are correct in predicting deflation in the future. manus: takuji, i have got the demographics in terms of cross borders. peersis lagging its g-7 considerably. but our story says they are opening the door to foreign workers. is this part of the answer for the bank of japan? opening the doors to immigration and abenomics. >> i agree with the conclusion. i think that the expectation

that the japanese population will keep shrinking, the working population will keep shrinking, that idea is a fairly strong be present to the future outlook. it is true japan should do something about immigration. hether the current government is actually doing it, i actually don't think so. they are talking about it, but maybe a couple hundred more, maybe a couple thousand more immigrants, but that does not really help. manus: that is not really help. takuji okubo, thank you for joining us. jeremy stretch will stay with u s. some of the highlights for your day ahead. in less than an hour, we get a snapshot from the oil majors with bp and shell delivering their numbers. it is the third-quarter earnings. back to the banks. and then in one hour, it is the manufacturing pmi from the u.k. anna: a lot to look forward to. coming up, a bull in a china

shop. beijing's manufacturing pmi soars to a two year high. staying until we leave, mark carney says he will remain at the boe until mid-2019, putting an end to speculation over his future. we get in to that story. yousef: three of the federal reserve's primarily dealers say there will not be a rate hike until 2017. stay tuned. this is bloomberg. ♪

yousef: you are looking at a live shot of victory harbor. the weather seems decent. the hang seng is trading up over 1%. nus forross over to ma more on the china story. manus: china's official factory

gauge is the highest since july 2014, suggesting that the economy is stabilizing. the non manufacturing pmi increased to almost the highest level in a year. chief asiani is our correspondent. stimulus works, edna. edna: it is very good news, manus. the narrative now that chinese companies are heading into firmer ground. we saw ppi pull out of deflation. now we are starting to see that flow through the pmi side. this is adjusting a fairly healthy pipeline. but there are some words of caution too of course. some of this reflects the

commodities. we know on the external side, it is still weak for china. fallts continue to and you only have to look at some of the challenges in europe and some of the headwinds coming from there to suggest that the continue to be headwinds for china's exports. china's factories are in a better space, but it is hard to say the are completely out of the woods just yet. manus: a weaker currency has not really delivered what you traditionally with think. talk to me about the rebalancing story because the services is the number we should be focused on. >> absolutely. if you look at the service side and the consumption side, they are the fastest drivers for china's economy. that rebalancing is happening. the service sector is looking quite resilient. the problem is, that side of things is still a long way off in the oil economy as china

starts to shift away from jet fuel to more modern services. even though the transition is happening, they are a long way off from being able to drive china's economy. there are positives there, but the transition still has a long way to go. anna: thank you very much, edna curren. still with us in the studio, jeremy stretch. jeremy, this chart shows the uptick in thee pmi's. we were talking about the services story. is this something to get excited about than, in terms of where the global story goes, where chinese growth goes? >> i would because is about getting too excited, but perhaps a little more optimistic. yes, the improvement is encouraging.

i think clearly, it is a legacy of some of the stimulus mergers we have seen. it does bode well for 2017. we are cautiously optimistic that global activity in 2017 will be moderately firmer than in 2016, but we are still talking no more than 3% of the global perspective. china is playing its part and we are seeing that flow reorientation. -- that slow reorientation. yousef: what are some of the key risks to the chinese economy? >> there are always inherent risks. but the growth will alleviate some of the pressure. the nonperforming loans and the question marks of the banking system will remain. but if we can see a stronger foundation of growth, that reduces some of the risk parameters, meaning they are less likely to see those

crystallization problems occurring, particularly in terms of nonperforming loans. if debt is under control and we do not see a dialing back in terms of state financing, we should be mindful of the risks, but not overplaying them. manus: sometimes you talk about the outflows. the capital outflows are the highest since january. capital outflows, what risk does that delivered to the yu an, in your opinion? >> that is an ongoing discussion point. when i was talking to investors in canada last week, that topic came up regularly. it will be a case that those outflows will continue over the medium run. investors are continuing to look for opportunities elsewhere. as we have seen, a gradual loosening within the chinese regimne, that does allow a

leakage of capital out of the system. that does suggest that in the short term, this will continue a little further. so, the depreciation in the cut against the dollar and on the trade weighted basis, it still has a little further to run. i think that will help alleviate some of the economic stresses as well. because a relatively cheap currency will provide a degree of export stimulus. i think we are talking about an outflow, but not a flood at this particular junction. anna: with the yuan, you don't think we are talking about a flood. this compares the yuan against the dollar. clearly, the weakness in the 16.n was quite clear in 200 is that your view? or are you looking at a different basket? >> i think that is correct and in a sense, everybody continues

-yuan,us on the dollar which is often a reflection on both currencies. the u.s. dollar has been depreciating as markets expect the probability of a rate hike before the end of the year. clearly, we are reflecting something similar in the d ollar's performance in q3 and q4. in trade weighted terms, the impact on the currencies are much less pronounced because we can see pressure in other currencies. yousef: there is a lot of satisfaction of the performance has been slightly better than expected. what will be the catalyst for further upside in the chinese economy, or is it just holding on to the best you can get? >> i think we have to be careful with assuming we will see an acceleration. i think it will be a case of maintaining the momentum we have now. you look at the

trend we have seen over the first three quarters, very stable. i think that will be maintained into 2017. yousef: up next, seeking an orderly transition. we will get you the full story. this is bloomberg. ♪

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with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. anna: welcome back, everybody. this is "bloomberg daybreak: europe." :04.okyo,1 not a great deal of movement in japanese yen, despite that the boj pushed back again on wednesday expect to get the inflation targets. but that is what we see at the moment, 104.6. manus, we have a new edition of "daybreak." manus: it is on your bloomberg, on your mobile. let's take a look at some of the top stories. we kick it off. china powers ahead.

it is the cover story. another strong reading. we have just been talking to edna about the pmi manufacturing and nonmanufacturing. they both jumped. both beat the estimates. it is what you and yousef looked at the top of the show. i think that factory outlook is looking to be the most expansionary in two years. is depreciation in the yuan, it enough to drive that market and those exports ahead? yousef, it is a little bit of manufacturing in the u.k. yousef: absolutely. today's reading could reveal the influence of the weaker pound. from 55.4sus is 54.5 in september. you can expect a slowing in domestic numbers. anna: we focused on the bank of japan, which left policy unchanged, but delayed the projected timing for reaching the inflation target beyond governor kuroda's term.

these are live shots from japan. the governor of the bank of japan, giving his press conference, which we will be monitoring through the next half hour or hour or so. 104.78 is where we trade on dollar-yen heading into this press conference. now, what happened in the overnight asian session? asian-pacific stocks have ended their worst month since may. but they got a nice jump at the start. nejra now joins us. nejra: we are starting november on a high. global equities lost ground for the first time since june. this is the chart i wanted to highlight for you. 2016, october, in right here at the end, the worst month for asian-pacific shares since may. the asian pacific index, gaining

for a second day, reversing earlier losses largely, better than expected pmi data out of china. that is causing the hang seng index and the shanghai composite both to rise for the first time in at least a week. and industrial metals are rising as well. apper and nickel up for seventh day. zinc, which is already the best performing metal of this year, climbing to a fresh five-year high in shanghai. moving on to a commodity currency, the aussi dollar. you could be forgiving that ng with thinking this was only because of the china data released today. inflation is expected to pick up and the aussi dollar is headed for its biggest gain in two

weeks. this is the reaction of the dollar-yen post that rate decision, delaying the timing for the inflation goal. dollar-yen unchanged, though the yen is near a three-month well. this was the least anticipated boj meeting of the year. this is what it looks like if you look at the reaction in the dollar-yen. look how little it reacted compared to previous boj meetings. one of the big drivers of this , the fed. yousef:ark carney says he will stay as the governor of the bank of england until may 2019 to help guide the economy through brexit. it ends months of speculation about the canadian's future. philip hammond welcomed the decision. sterling was the world's worst-performing currency in october, trailing 150 peers for the first time. the pound posted its biggest

monthly decline versus the dollar since the eu referendum in june, amid speculation that the government is heading for a hard brexit, where unfettered access to the single market is sacrificed for immigration controls. still with us is jeremy stretch. with everything that is happening, how do you trade sterling? >> certainly, it has been a pretty wild ride. clearly, there are still inherent downside risks. we anticipate we are likely to go lower before we finally reach a trough, as far as sterling is concerned. in the context and the backwash of the brexit debate, we are looking at the data closely and trying to influence and determine how impactful this slide in sterling has been in terms of trying to provide something that this for the manufacturing sector. yousef: jeremy, the

manufacturing sector, in terms of altering the economy, some say mark carney did the right thing. as you get into 2017, we have been discussing this through the last couple of shows, next to the market is pricing in a hike. do you join that family that they will be left with no option other than hikes? >> now, i do think so. i think the bank will look for the inherent inflationary pressures that are going to be evident due to the impact of the slide in sterling. as long as the bank can consider those influences being one off, they will not be driving inflation expectations substantially higher. i don't think the bank will be looking to adjust policy in terms of timing in 2017. i think policy will remain easy. i think the bank will hope we do see a trough in sterling late

this year and early next year as we start to get into the negotiation process. that will alleviate inflation pressure through 2018 and 2019. so, a spike in cpi, but not a retracted move higher, which will cause the bank of england to be impacted in terms of policy. anna: jeremy, i just wanted to bring to your attention, an article overnight, talking about mark carney. he says mark carney is unequivocally not responsible for the slowing of the u.k. economy and the fall in the pound. quite the contrary, he almost single-handedly turned around the collapse in output. far from harming britain, mark carney has been the country's savior. very much a man who is supportive of what mark carney has been doing and he drew greatest tension between what the bank of england did and what the government and politicians did in the immediate aftermath

of the brexit vote. how much do you think the pound actually moves longer-term on this carney story? on the one hand, it is just one person. but on the other, do you read a lot into the concerns about politics and how that is influencing the bank of england? >> if we go back to june 24, there was a real political vacuum. that was one of the influences that was clearly beneficial of the bank of england. stability that mark carney provided in the immediate aftermath clearly was encouraging for the u.k. i would say, taking david blanchflower's comments at face value. the further amplified sterling activity as lifted the perception of the bank of england being compromised. we only have to go back to 1997.

we are not actually talking about age and history. it might feel like that, but the bank of england has only been independent for less than 20 years. it did feel as though that independence has been compromised over the last month, which has caused a degree of consternation. the central banks globally have been set free. they have been provided with independence over the last generation or so. if there was the perception that there would be increasing political interference, that underlines pressure points which have been compromising the asset market. if we are moving away from that, or if we can downplay some of those factors, will that turn it around in the short-term? probably not. yousef: jeremy, you are staying with us. let's recap some of the lines coming through from the crest press conference with

the bank of japan. governor kuroda adds that the financial environment is very much accommodative and the 2% inflation target is likely to be reached around fiscal 2018. kuroda, adding the delay timing for the 2% goal is on the back of weak price expectations. also now, watching the effects of the u.s. presidential race, anna. anna: fascinating stuff coming through from governor kuroda as the boj pushes back that inflation date, the date they get to their target. gears and's shift talk about the fed. you have three federal reserve primary dealers who think the federal reserve will hold off on hiking ranks until 2017. rbs believend they will hold off. that, despite the improving economic data and the hawkish tone from the officials.

implies 71% probability of a chance of a hike this year. you have the market said on to 71%. -- you have the market set on 71%. three primary dealers kicking back against consensus. jeremy, do you disagree with that? this is the dollar strength story that we have. is december locked in? >> i cannot speak for the reasoning of those three primary dealers to change or have a different assumption, but certainly we have been assuming that the fed would hike in december. i think there are obvious parallels. we have been dreading those inallels through q3 and q4, terms of the interpretation of the u.s. dollar getting a bid. we have seen a number of coursenities over the of the last couple years, which

have really meant that the fed has held rates far lower than perhaps is appropriate for the duration of the economic cycle. i think the market would read it rather negatively if the fed desists from policy change at this juncture. there is one obvious wildcard which we cannot avoid. that is the upcoming presidential election. clearly, if that results in a differential path for u.s. politics, i think the policy a look for the fed does change. but all things being equal, i think it is still the case that december remains on the card and that is very much up in the air. anna: this puts a number of central banks in the same picture. it's not at 2%. it is at 1.2%, but it is moving upward. what does this tell us? the move in inflation, and given we looked at chinese pmi, and what that means for ppi, how

quickly will the fed move with further rate hikes after december, and where will it end? because that seems to be the much bigger question. >> i think we will find that the federal reserve in 2017 will move very slowly. we are seeing a rotation in the voter base in the fed. in 2016, we find more hawkish bias. next year we could move in the opposite direction. the sense, that underlines fact that the federal reserve is moving cautiously. i think the fed will learn from the mistake of being a little bit too aggressive in terms of the language as we came into 2016, talking about four hikes from stanley fischer. i don't think he wishes to repeat that. i think we are talking about two rate hikes at most. i think we are ultimately on a path where we are trying to get neutral rates to somewhere in the region of 2% on a nominal basis. in terms of real rates, if you are trying to target 2% cpi,

almost at 0%. yousef: what could become a headache for the fed are the risks outside u.s. borders. on paper, the fed is only supposed to look at domestic variables, but the complexity of the global economy means you have to keep that in mind. what could derail the fed's decision-making here? >> of course the fed has a twin mandate, but it cannot ignore what is going on globally. we saw that in september of last year when the federal reserve looked at external factors, resisting from a rate hike. clearly, in terms of the external risks, if the chinese recovery story is not as durable the brexits, or story, could make it much more difficult for the federal reserve to continue to tighten policy. yes, we are cautiously more optimistic about the global economy in 2017.

that provides the backdrop of the allowance of the federal reserve to push through with very moderate tightenings through next year, but we have to watch for those external fears. anna: jeremy stretch, thank you very much. coming up on the program, back to business. have earnings bottomed out for europe's oil makers. we have numbers at 7:00 u.k. time. we will have all of those details. oj remains the target for the 10 year government bond yields, but what about the inflation target? comments coming through from governor kuroda. plus, seeking an orderly transition. once labeled as the only adult in the room after brexit, mark carney now says he will stay until mid-2019. this is bloomberg. ♪

manus: we are just covering governor kuroda's news conference. hiseclines to comment on succession. his appointment as the bank of japan governor is up to the government. he declines to comment on reappointment. that is about the succession plan. the 2% inflation target will be reached probably by 2018. and there is of course, danger on the downside for the economy, etc. there is no discussion on the margin of the timing of the 2% target. so, that news conference is ongoing in japan. ahn has a business flash for us. reporter: october was a record month for dealmaking with almost off a trillion dollars

mergers and acquisitions announced globally. gez to combine its oil and gas division with baker hughes push the total to about $489 billion, the most for at least 12 years, topping the previous record of $471 billion in april of 2007. output deal to cut oil at a meeting this month is looking increasingly unlikely with prices in the low $40. that is according to analysts at goldman sachs. the cartel will meet in vienna to implement the first supply cuts in eight years, and get other producers from outside the group to join in on the action, including russia. barclay's decision to cut 25% of its london office space shows tenants will be in short supply. according to two people with knowledge of the matter, the

lender is seeking to lease offices to the u.k. government. a spokesman declined to comment. that is your bloomberg business flash. yousef: with crude holding losses near a one-month low , two of the world biggest oil companies will report earnings in a few minutes. to give you some context with how they have been performing, we have put up shell and pbp. they are the lines in blue and white. they have outperformed their other two peers so far. what are we looking for? in the case of shell and bp it is a them of lower oil prices -- it is a theme of lower oil prices. of $46 a barrel, suggesting more upstream losses.

bloomberg intelligence says shell should avoid a wide miss, like they had in the second quarter. the other thing we are watching is going to be the situation with net debt. the crfofo of shell said it woud go up before it goes down and it is already harboring close to the 30% ceiling, hovering around 28.1%. with bp, the situation is similar with weak third-quarter earnings. we will be looking for the production volumes in that quarter, which are expected to have come in lower f the back of seasonal maintenance and outage in the gulf of mexico. so, let's stay with oil, then. jeremy, what is your take on where oil prices are headed? >> i think there is a natural top because of the potential fall. supply could come back onto the

marketplace. it will be very difficult to see the price moving substantially higher, even if the opec producers can come to some kind of an agreement. there has been some kind of skepticism with regards to that particular deal, which has prompted prices to come back. i think we are broadly around a $45 to $55 range. much beyond that on the top side, it will be difficult to maintain. yes, there could be some outage or shock around $60, but i don't think we are likely to see that range. unless we see a materially wake eaker global demand backdrop, that will limit the downside back into the mid-$40. anna: the oil price is up a little bit, up .7% on wti compared to the close. we have a story on the bloomberg. goldman sachs says they think oil prices could fall into the

low $40 range. if we don't see some kind of opec agreement, with that agree with your assessment? >> i think a little bit higher. that is a broad range. if there was further news, i think you could see as loanw as $42 or $43, but i think that is a transitory scenario. that is not to say that we do not see short-term moves. clearly, i think the markets have baked a lot into the assumption that opec would come to some degree of a production ceiling. i think at best, it will have a relatively low expectation level into opec production deals. anna: manus? manus: i love that word, a lovely rich word, judicious. if you think about the fallout,

the bank of japan are talking about $55 to $60 in terms of their far term estimate on oil. i am looking at some of the currencies that will be impacted the most. thee stick around $50, does ruble drop? where does the fallout come? >> if we are going to have a lower oil price, that would have negative implications for those oil producers. i think you need to be careful about reading too much into the correlation between the oil price. those correlations were far higher at the beginning of the year and we have moved back to normal levels. the cad's performance will move back to rate expectations. clearly, currencies lieke the ruble could see some potential had went. potential headwinds.

of course, some people have been hedgethe long ruble as a proxy for some uncertainties in the election. we need to see how some of those variables play out, but if oil is lower for longer, then the will be less impetus for some of those oil rich producers. anna: jeremy stretch, very good to see you. theef and manus, let's end hour by recapping some of what we heard from governor kuroda. he has been giving his customary press conference for the boj. he spoke about interest-rate policy and other assets earlier on. he is saying fiscal monitoring measures have a synergy affect. he declined to comment on reappointment, saying it is a government matter. abutment of the -- appointment

of the boj governor is up to the government. they did shift out the data with which they will meet those inflation targets. you can follow all of that on top live . this is bloomberg. ♪

yousef: asian stocks reversed losses. fixture keepive the pboc on hold? pushes back,apan timing for its inflation goal but keeps its monetary policy unchanged. we hear from governor kuroda later in this hour. babysitting the brexit. atk carney says he will stay the boe until mid-2019 to see through britain's exit from the european union. hold up. three of the federal reserve's primary dealers ignore the bond markets and say there will be no hike in 2016.

welcome to "bloomberg daybreak: europe," our flagship morning show. i am yousef gamal el-din along with anna edwards and manus cranny. the oil majors today, third quarter with your shareholder. you have a dividend of $.47. the markets had an estimate of $.47. when it comes to the numbers, this is the big one. it comes in at $2.79 billion. the estimate was for $1.79 billion. the dividend in line. in terms of capital expenditure and investment. $7.7 billion. the downstream and upstream, let

us talk about the business side of shell on the downstream that has a profit of just over 2.08 billion. the adjusted profit, by the way you can follow these results. everybody is on top. looking at these numbers. the cash flow from operations comes in at $8.5 billion. the downstream profit, $2.08 billion. the oil and gas output, 3.6 million barrels. i am looking at the initial reaction. editor,er, our managing one driver, oil and gas production was 200,000 barrels a day higher than the analyst had expected. shell capital investment, $7.7 billion. anna? beat against the estimates for shell and bp. bp third quarter adjusting a

profit coming in at $933 million. that is ahead of the estimates at $719 million. them details on the capital creditor plans and the amount of production we have seen in the third quarter. oil 110 million barrels of -- 2000 100 million barrels of oil equivalent. 2110 million barrels of oil equivalent. 48.95 on the oil price. reduced the size of projects and tried everything and anything to try a lower cost. we'll see what they have to say about the dividend. third quarter dividend of $.10

per share. that is where a lot of the focus for analysts will be. they previously said they intended to trim capital spending to less than $17 billion this year. they are telling us third quarter was 3.7 billion. we are doing the math behind the scenes. we need to take a look at the opening up of the market. new coming in the oil majors. yousef: we are looking for a slightly higher picture for the euro stocks, up 0.5%. ar the 100 set to open at 0.25% higher. anna: measures the strength we have seen in the asian markets. chinese data in particular. manus: absolutely. strength from china, nice energy numbers from shell and bp. two-year high on the pmi's, uptick in the index, up by 0.3%. mr. low, running the rba, talking about the risk of a

brisk housing market out wearing the consumer price index. when in three chance of a 2017 cut of the aussie dollar. dollar-yen moving, kuroda did not move dollar-yen at all. he did not talk about his succession plan. he batted the heavy inflation target up to 2018. brent up 0.5% to $50. you have national inventories at 1.5 million barrels and goldmans reckoned $40 on the downside. if the opec deal fails, they say that is diminishing. bank of japan leading with this one. the bank of japan reckoned oil will rise from $55 to $60 a barrel toward the end of the full-year 2018. let us get into our bloomberg first word bulletin.

some of the major headlines we have got for you today. let us take a look at that. stabilization of the china economy. it appears to be taking hold. pmiofficial manufacturing jump into a two-year high. october meeting of 51.2. it tops most optimistic estimates. the central bank holds off on future measures after keeping its key rate at a record low for more than a year. the bank of japan sees inflation slowing in the coming fiscal year. one point 5%. that is down from 1.7%. the board voted to maintain the targets for controlling short-term and long-term rates and the asset purchase program. did expect noity change, but that was after the bank of japan reset its monetary program in september. the rba is up. the reserve bank of australia

has kept rate unchanged. signals come from philip lowe, prepared to tolerate week inflation to prevent further escalating property prices and household debt. by 22 of theicted economists we we spoke to. central bank will hold off on hiking rates until 2017. the, rbc, rbs, believe policymakers will stand pat but this week and next month at the fomc meeting. a hawkish tone from the officials on futures. they imply more than 71% chance of a rate increase this year. carney says he'll say as governor of the bank of england until june 2019. to help guide the uk economy through brexit. hammond came to the

-- welcome to the decision. the pound had initially a bit of a spike, it is reconsidering its position at the moment. policy makers criticized carney in the run-up to the referendum. the white house pushed back against accusations that some democrats, that the fbi chief is interfering with the election.al president obama the spokesperson said they would either defendant nor criticize james comey's decision to disclose hillary clinton females. there was no reason to believe he was playing politics. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries and you can find more stories if you go to bloomberg top . anna: let us check out the light tarket action -- live marke action. let us give more details with who has the market

update for us. shery: anna, definitely. china's pmi data, becoming a bit of a bright line for markets across asia because they opened the session on a negative tone but then after the pmi data of these forecasts we thought manufacturing pmi just rising to the highest level since july 2014 for the october data we saw. the shanghai and long thing data turned positive. hang sengd -- hon data turned positive. a different story for the market in south korea though. unchanged, closed but after some negative sentiment from export gary shilling experts again -- export data showing exports again. unchanged ateft a record low of 1.5%, as expected.

we have the asx 200 just lose about 0.5%. the nikkei changed from negative to positive and then it ended 0.1%.y up the boj left the positiv policy stance unchanged. we had the government of haruhiko kuroda speaking at a press conference in the afternoon saying that fiscal and monetary measures have synergy. he did not go into details about succession plans for the boj, but suffice it to say, whatever the boj is doing now, it does not really have that much of an impact as it did in the early days of kuroda's 10 year. not much movement in the dollar yen today, now trading at 104.91. that is shery ahn in hong kong. that is get more on the bank of japan rate decision. the boj had left policy unchanged while cutting its

inflation forecast for the next fiscal year. governor kuroda sees the 2% target not being met. we are now joined from tokyo by managing editor. with the boj pushing back its inflation forecast, why didn't they step up stimulus today? chris: well, to an extent of what we are seeing, the bank of japan's forecast is catching up with the comprehensive review that they did last time around. if you remember back in september, they undertook this comprehensive review of how their policy was working, whether they needed to make some changes, which they did. they shifted away from the singular focus on quantitative easing on bond buying and shifted to what most people view as a much more sustainable

the yieldof targeting curve and not focusing on a preset amount of bond purchases .very month with a set at that time was, "look, we need to consider that it is taking longer than we anticipated to get to our 2% inflation target. inflation expectations have been very, very depressed in japan for such a long time, it is just making it tougher for us to get to that target." they are essentially incorporating that review into their forecast and we are seeing a downward revision in the price increases that they see for the next few years. anstey, thank you so much. let us bring in our special guest, david bloom, global head of currency strategy at hsbc. welcome to the show.

good to see you. credibility of the bank of japan is shot, and that is what the last test told us in the 6:00 a.m. show. what does it take to move dollar-yen? before, yes,id: and now, yes. that is quite correct. manus: you are going for 95 by the end of the year? david: yeah, no problem. and this is not working. we can see it is not working. monetary policy is not making old people young. that is amazing. i mean, they just discovered such a thing. they are missing the inflation target, really. x trillion did not work. we have had great experiment and his massive boost, and it failed and now we are back to the drawing board. ofgot back the fair value 95. that interesting i thought

the boj in its report, it has been looking into the successes and failures of its policy to date, and talks about how japanese businesses and japanese individuals have not adjusted their inflation at locations in the way the boj thought they would have done. the deflationary mindset is much more deeply, you know, ingrained , than they had previously expected. what is your advice for changing that deflationary mindset? david: we have got an aging population with a demographically challenged population. the whole society is undergoing change. the monetary policy cannot change. when i we going to get it through our heads that fiscal and monetary policy is not the solution to all problems and every time that we find the solution, you know what we think? we did not do enough. anna: is impossible to advise anybody on how you get rid of a deflationary mindset? is there anything you can do? david: you have seen japan. the answer is no.

they have taught us over the last 20 years and trillions and trillions of yen that they cannot get out of it. ae deflationary world is deflationary environment and it is not that japan cannot get out of it, the big question is, are we going into it in the west? that is why bond yields are the way they are. people are telling us this is the year of inflation. what are they smoking? this is a deflationary world. a world in which on yields are going to remain low for a long time and there is no monetary or fiscal policy which will get us out of it. sorry. there is my example right there. yousef: david, we have seen political disarray go way beyond emerging-market borders. we have seen it in south africa and turkey and also gridlocked in europe and the u.s. as well. how are you factoring that in? that: my new theory is currencies are made up of three from parts. a cyclical part, the weakest. sales, abc index, all the stuff

we get every day. gdp is,ctural part, the the current account deficit, budget deficits. third, politics. that is where we have seen the big moves. brexit in uk. andourse, the concern is, did not even mention south africa and turkey there, will the dollar become a political currency? we'll find out next week, wednesday. keep watching the show to find out the answer. that is the thing. all at six is the new economics. manus: politics is the new economics. the yuan, nice numbers this morning. what tolerance is it, david, in terms of the next move for the yuan? the aussie dollar is busy. well, actually, it is pretty boring.

violence insex and currencies, look elsewhere. there is lots going on. randre talking about in turkey. opnus: ok, give me your t one. david: i did not they get off asia. the renminbi is slowly depreciating at very slowly, everyone knows that. it is quite clear where it is going. other currencies are very exciting and there is lots going on. the renminbi, euro-dollar, those are the currencies that are boring, but boring is good because that takes you into emerging markets. anna: we all need a bit of boring, perhaps. what is not boring is prices in china. the number seems to have moved. the uptick in ppi that we got at the last reading, you dismiss

the idea that we are going back to a deflationary world -- a refaltionary world. it has already been in a much for eight years. maybe, let us think about that, whether we are or are not becoming a japan. of course ppr picks up. that is commodity prices which have picked up. consumer price inflation is suddenly going to pick up? look at that, flat as a pancake. ppr always moves -- no, i do not think so. it has peeked around that level. it might have got a little bit higher, but it is peaking. it does not mean you can get the process through. you know what, that is november. people are going to do the euro hit documents and say net here is inflation. they do it every year and fall flat on a faces.

they are going to do it this year and fall flat on their face. anna: david is not buying it. david: not at all, sorry. yousef: we'll get back to that just a second. [laughter] yousef: switch gears to mark carney, who says he will say as the governor of the bank of england until mid-2019 to guide the economy through brexit. it ends months of speculation about the canadian's future. philip hammond welcomes the decision and the pound held gains. anna: sterling was the world worst-performing currency in october. the first sign of how brexit will look you merge in the last month. david bloom is still with us and we look forward to his thoughts on all things related to brexit. david, where are you on the pound against the dollar? david: we did 120 for quite a while. happens with

currency forecasts. you can be wrong for years, but only right for a very small amount of time. that is just my job. we are went 10 for next year. sterling, we are at parity. my euro sterling parity is already right. [laughter] anna: absolutely. manus, we will see what it was like in manus as he arrived in dubai. extensive fore me, so i hope my bloomberg doesn't mind my expenses check. david, we are already at parity. is staying to babysit brexit. now that we know he is staying for the interim of exit, what does he do with his mpc. i have been looking at this in terms of the hawks and doves. do you expect more dissent to come on the m.v.p.? david: the most import thing was to come was to see stability so the margaret might have said --

the market did not hound him out of his job. it doesn't matter anymore. carney is a there until 2018, longer than most of us will probably survive this market anyway. i am not particularly worried. what i said about the uk is the cyclical structure and political, the uk has gone from a highly cyclical currency to a structural and political one. the biggest deficit in the world. politics that are totally uncertain and of course the currency has got to adjust downward to take care of that. anna: more thoughts from you on mark carney. in 2019, if the negotiations are started march 2017, and we have two years, he could be leading just after the end of those to your negotiations. that does not seem like a much calmer time that in the midst of it? david: that is the point.

we don't have the worry about the mpc. the structure is independent. people are worried about the independent, that has been pushed away into the monograph and we can forget about that. now, we can concentrate on -- anna: it shows he is writing to the political challenge -- rising to the political challenge? david: we have to get to article 50. carney is going to be there. the independence is rock tight. we are going onto the court cases everyone is focusing on in the market, whether this legal challenge is going to get through article 50 in parliament. it these are back to the big issues again. yousef: back to the political considerations, i am looking at awc rs function on the -- wcrs function on the bloomberg. rand?s your call on the david: we are very bullish on

the rand? yousef: how can you be bullish with the -- david: what is going on? it is emerging markets, not luck. you told me brexit, tell me something new. yousef: that is the whole point. david: no, it isn't. it is actually less elevated. miranda absolutely plummets. -- the rand absolutely plummets. you do not get paid anywhere between 7% and 12% because they like you. they are paying you that because of the inherent risk. the biggestne of budget deficits in the world. a big political problem. for that, we give you a big, fat doughnut. in emerging markets, you get paid for the risk and the risks in south africa are known risks. manus: those are the known risks.

i was looking this morning. we are seeing it emerging markets in terms of their sovereign credit rating cuts, the fastest pace in nine years. you are looking at, what, for g7 downgrade this year, second-1995? since 1995? talk to me about your favorite, your mexican peso? your trump-o-meter? david: firstly, i want to correct you. there is political risk in my home country, the united kingdom. yes, there is. anyway, you must remember that there are fantastic china numbers. china is recovering and stabilizing. euro-dollar is very stable. dollar-yen is a stable. volatility is lower.

there is a compression of bond yields, inflation expectations in the e.m. come down, and carrying e.m. is the thing to buy. mexico is the big one. everyone is watching it. winds,tell you, if trump my e.m. bullishness will be slapped down. ns, my e.m.rump bullishness will be slapped down. i think, if you looked at the china numbers you are telling me about, commodity prices are going up and stabilizing, what is not to like? it is performed beautifully against all these things you are saying because they are offering me the kinds of returns i need in this environment to buy emerging markets. anna: me ask you a little bit about the pound? i am trying not to segue. you cannot help it sometimes with the volatility. i listened to another of

conversations recently from those really interested in the manufacturing sector in the uk who have finally been pushing the case that maybe we should not be in the sbr or have reserved currency status, maybe that is historically less overvaluation in the pound and we should leave that behind to help manufacturing in the uk. is that hold any water? david: this is not about sterling. maybe if we were addressing victorian costumes and came here -- we are not in reserve currency. the reserves help central banks in sterling mark carney. is not a reserve currency, not even the euro. look, the fall in sterling is part of the process that you're talking about. yes, you must not think the fall in sterling is something negative. it is a necessary adjustment for the new political order we are reaching. manus: we have got to draw a line under a there. that is a necessary adjustment.

a line from david bloom. that is it from anna, yousef of, and myself down here in dubai. the market is going to be focused on shell. bp, profits down by 49%. this is bloomberg. ♪

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public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. anchor: good morning. welcome. you are watching bloomberg markets. it this is the european open. i am guy johnson a longtime caroline hyde. what are we watching this tuesday morning? shell. the third-quarter profit comes in, $1 billion better than expected. startsld up as the fed its new vendor meeting.