Transcripts For BLOOMBERG Countdown 20151119

First of all, i will show you what has been going on with oil. This is the story. What does this signal about the Global Economy . We down stopped the level, but are very close to it. The sense of the market is, this is a done deal. This was a meeting that took place before the last payroll data. It seems to secure the idea in the market that we are pretty much there for with the december hike. Not much of a move in the qs in the u. S. We will talk about the spread in germany. We will speak to jim mccarthy has the Company Releases its latest earnings. Will talk to the cfo. What is happening with china. What is going on with the german economy. S there a fallout story minutes from the october meeting. That showed a rate hike would be considered at the next meeting. We break down the unusually direct signal from washington. Minutes confirm the market that fed officials will be have to talked out of a december move, rather than talked into it. The minutes show they wanted to send a signal that a rate increase is possible provided that unanticipated shocks do not impact the economic outlook. There are three camps. Conditions for a move had already been met. Most participants estimated their criteria could be met in december. Some felt the data would show a rate increase was oriented, but that was three weeks ago before the strong october payroll report. Of feday, a host officials said they are looking forward to a december move. It will be appropriate to raise rates. Argued, the economy can handle a small move. Bill dudley said, a vote for higher rates is good news. That is a good thing, not a bad thing. It is a sign the economy is returning to health and the Federal Reserve is getting closer to sustaining our move. The of session about when the fed is raising rates. Staff presented evidence of a neutral rate that will encourage maximum job growth. It might be much lower than the past. A very different cycle this time around. Lets find out how asia has been trading. Reporter good morning, guy. Thoserkets in asia liked information from the october fed meeting. The bank of japan policy decision today. The Monetary Policy, i should say, unchanged. Also japan comes through with a surprise trade surplus. Positive news on that front of lifting japanese equities. Three of has a strong session 1 . Ing higher than 1 3 of banks ins from the hong kong. It was australia that took the cake today. Rally coming big from australian equities today. Australia closed over one hour ago. Will it be paying out a dividend in the wake of the fallout of this mine disaster in brazil . It says it will not risk its a Balance Sheet to do so. Also in the region, when macau said it will delay its latest casino. Pretty unchanged in hong kong. Is biggest news in taiwan the broader index. This gain in the Malaysian Ringgit shows that we are seeing Risk Appetite back and this region. It is rising the most in one theh up by 1. 4 against dollar. Guy thank you very much. Lets go to tokyo, where we have same as the Monetary Policy unchanged despite the fact we are back in two a recession. Said theal Bank Japanese economy is continuing to recover moderately. Scheider joins us now. Are they waiting to get the fed out of the way before they take action at the boj . Y they are discounting some of the data we saw on monday that indicated japan was in a recession in the third quarter, given the Second Quarter was also contraction. There has are saying been pick up in the Fourth Quarter. Even though there was weakness in the economy, they are saying, lets wait and see. The governor said before that the inflation price trend was improving. They want to give it more time, i think. We will hear from governor crowder within the hour. It will be interesting to see what clues he gives us. Guy looking through the recent given that japan is back into a recession, when you look at what they are paying attention to, what are they not paying attention to . How is the data likely to evolve . Price trendflation has been something they have had their eye closely on. Governor kuroda has said it is improving. Thats will be one of the points they will look at. One of the concerns has been about business spending. Businesses investing in the economy, both in terms of Capital Investment and in wages. Those were week in the third those where weak in the third quarter. They will be looking at Fourth Quarter data to see if that improves. I think economists are split. Half of the economists in our theyy said they expect dont expect it in the foreseeable future. They are waiting to see what the boj will do as well. Keenly are anticipating to see what will come out. Thank you very much, indeed. On. Et ecb accounts later itll be interesting to see what is going on in that central bank as well. Chief joined by the european economist. Jamie. Tart with you, we have had the boj doing nothing, maybe waiting for the fed. Tghhe fed has a signaled that te december meeting is on the books. Members were willing to liberate in december. Now we have informal reports, so nothing has changed. The bank of japan is interesting. They are in recession. You are much more likely to find yourself in recession. Is it a big deal . Probably not. The fact is, inflation will pick up slowly in japan. That is due to the effect of oil. Inflation is still below target. Guy do you agree with that . Will he fed have to be talked out of it . That is a good way of putting it. The measures he is likely looking at is not headline inflation. Excluding food, which is not current at all. It does exclude food and fuel prices. Trajectories are upwards. The ecb is going to and he will have to follow suit. He will have to allow it to fall and perhaps, push it even lower. Guy the boj will perhaps go big. The spread is widening. Some of the market is already priced in. We underestimating how big that spread widening will be . It depends on the trajectory of the rate hiking the fed puts in place. The fundamentals beneath it suggest that the widening could be why do. The fundamentals are the u. S. Economy uniquely. There is no new normal for the u. S. Economy. The yield environment would have likely expected the financial prices even earlier than that. There is nothing to see here. That is unique to the u. S. Muchlower price rates and lower yields. Guy the u. S. Could be back in recession within two years. Of course it could be. Guy when we look at what is happening with the fed, the letsof the rates now assume december is a done deal. Maybe we need to start lessening regarding theons rate hike and the gaps. What should our expectations be . We have do a to december to find out what they will do. The feeling is, the rate will be low in the u. S. Demographic effects are still pushing down. The u. S. Has more leverage than it did in the precrisis decade. Market istually, the a little bit too low. Rates will go up eventually. On the showed side, the do it. Ot they may go under that. 23they do that, the next years are up. You are creating and other Financial Market potential crisis down the line. It is very similar to the one that happened in 2008. Guy you dont want to be short into a bear market early. Bothu want to be riding sides of that. You get all of the asset prices, equity prices, all of it. We saw it before. The overextension of houses, of banks. Guy how long does that last . Two or three years. And after that, we have another problem. The reason they are able to go under is because inflation will be flattened. Exporting deflation around the world. If that leads the fed into an era, we will unlock the same processes we saw. Guy thank you very much, indeed. Our chief Bloomberg Intelligence will stay with us. We have plenty to discuss ahead. Lets talk about your day ahead. The accounts of the ecbs latest policy meeting. There is no such thing as too much fed speak the fed. Speaks on fischer takes the stage later tonight. 5000 rounds were fired in the north of paris yesterday. We dont know if of the ring leader was amongst the dead. Coming up next, here on countdown. Guy it is 6 18 in london. Minutes from the fed october meeting confirmed that the conditions for a rate hike have been met, or likely will be met, by december. A rate increase is possible in the absence of any unanticipated shocks. Itsbank of japan has kept Monetary Policy unchanged, despite its economy sifting back into recession. The japanese recon a may continues to recover the japanese economy continues to recover moderately. Sources say advanced effect for pfizer to buy allergan. Talk about the ongoing terrorist situation in paris. A jet with polish tourists on emergencymade an landing in bulgaria due to the suspicion of a bomb being on board. The french president told a meeting of french mayors that he is forming a grand coalition to fight the terrorists. Gang was suggested the preparing for another attack. Hans has returned to the french capital. What have we learned from the authorities overnight . Hans we learned the extent of that police operation. What paris is waking up to is a only corporal run six can answer. Corporal forensics can ans wer. Was one of those killed the mastermind of the french attacks . They dont know how many bodies they actually recovered. The scene was so bloody. They eventually ended up arresting eight individuals. One thing that is clear is this terrorist cell was prepared for additional attacks. Was new terror cell neutralized and everything is leading us to believe, considering their weapons stockpile, their organization, and their commitment, that this team would have been able to carry out other attacks. Washington post is killed inthat he was the raids yesterday. We still dont know the saleh. Outs of a Security Service on alert in paris. There have been over 414 raids. 60 people have been arrested. The cityy much is returning to normal. I saw a child walking today care with his mother. It is still very much eight city on edge and in part because we authoritiesnor are saying, whether the alleged suspects have all been captured. Story isin tracks evolving in france. On one hand, we have the terrorist story. Syrianother, we have the refugee crisis. How is the latter being affected by the former . Hans well, we heard from Francois Hollande that they will except 30,000 refugees. Saysberg has a poll that 52 of americans dont want to accept the 10,000 refugees obama has pledged to accept. There will be a meeting in brussels tomorrow. We have heard from the polish side and this is a usedwest split. Some of the newer members are concerned about accepting these refugees. Guy thank you very much, hans. Meanwhile, russia has increasing confidence that a deal can be reached with the u. S. For a coordinated fight. Vladimir pugin says he sees greater cooperation across several fronts. We never turned our back on them. If our partners decided now is the time to change relations, we would only welcome that. I got the impression that on a technical level, there is a real interest in resume in working with us on a lot of different issues, from the economic and political, to security. Guy is this a complete change in the relationship . It is the beginning of a thaw. We cant go so far to say that the thaw is anywhere from complete. The russian president was saying, things are starting to look a little better. We see that when we look at the market. 4 . Ks are up one of the benchmark indexes is up 30 this year. You look at bond yields and earlier this month, they fell below 10 . They dropped to just around 9. 5 . Ed belowyear dropp 10 . Part of it is this political component. There are sanctions that have been imposed against russia because of ukraine. The thinking is, if russia cooperates with the west on isis in syria, you could see those sanctions eased. Idle think anybody expects them to be dropped. They will rally pretty hard. The other component to this, and i think it is the larger component, is equities and bonds have been underpriced recently. There is a lot of risk priced in there and there is a lot of bad priced in. Economy we are starting to see signs that the economy might turn around. The russian economy minister said he thinks the russian economy will contract by no more than 3. 7 . It isounds bad, but better than contracting 4. 1 , like it did last quarter, or 4. 6 , like it did in the first quarter. Maybe things are starting to come together for the russian market. Guy we will talk about oil a little later in the program. It is interesting. Believesius said he the change is sincere. We need to talk about oil. Wti are the implications of dropping below 40 . We are living in uncertain economic times. I know many people who saw a good portion of their hardearned wealth lost in the economic downturn. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Guy 6 30 in london. These are the stories you need to know. French musket is sick information found at the scene of yesterdays morning raonic suggest that the cure again that the terror gang was preparing another attack. Rounds. Ound the 5000 police found 5000 rounds. Say they do not know if you was killed. Some report they suggest he was. Minutes from the Federal Reserves meeting revealed that most possibly the conditions for a rate hike have been met or are likely to be met by december. That was before the strong jobs number we got it a rate increase is possible. As predicted, the bank of japan has kept Monetary Policy unchanged. This is a bank says its record bank easing measures have gone into effect and the japanese economy it continues to recover. Jeff japan posted its third ever surplus in months. Square raised with shares offered at nine dollars each. It was a similar story for match group. That prices at the lower end of the range. The two Companies Make their debut in new york later today. Bloomberg forces say pfizer is in talks to buy elegant to buy allergan. Lets get details from nejra cehic. We could see an agreement as early as monday here it monday. As 3kes botox for as much we wouldhe very be talking about pharmas biggest deal ever. Also the biggest deal in and it in any industry this year. Deals already surpassing last years record of 220 billion. What pfizer has to gain is it would allow it to strengthen its brandname business. It could help it split the business into two. This is key, it would allow it to relocate outside of the u. S. For tax purposes. This is a process known as capital and version. Capital and version. The treasury in a letter this week basically said it is reviewing ways to address overseas acquisitions and plans to issue guidance later. The u. S. Treasury does not have the power to block an inversion. That could have applications because we could see pfizer not wanting to offer so high a price, or it may want to pull out altogether. At inhe treasury looked version year, we did see a handful of deals impacted. Back to you. Guy narrowed, thank you very much nejra take you very much. Governor kuroda is speaking. He says it is working in japan. Well get more details as we work our way through. I want to talk about this next chart, oil. Yesterday moving sub 40. Data shows crude stockpiles expended for an eight week. There is a lot of oil floating around the world. Futures fell below 40 a barrel. We have not seen that since august. Opec is confident the market will stabilize itself did lets get more now with bloombergs chief correspondent. There is all lot there is a lot of oil out there. 30 billion barrels of oil floating. If you were to put all of that oil into a supertanker, the line would stretch. It gets very close. [indiscernible] saudi could stop producing for the next several months. This policy of opec, it has created a massive glut that is going to take a lot of time to get through. What are the fundamentals . What are people saying within the market . Javier supply is ahead of demand. We are beginning to see the fed science that these policy of opec is beginning to have its intended impact. This is the center of the shale boom in the united states. It posted its first decline. Since 2004. There is a time that desk this is a sign that low prices are beginning to affect production. The problem is this is too much oil. We are beginning to see the border of the market. Will not be in till well it will not be until well into 2016 guy governor kuroda speaking. Erik britton with us. What is the biggest factor in terms of hitting the target at the moment . Is a commodities and the input story . Maybe currency effects to come. Ecb and the bank of japan doing much more qe or china. Those may be to come. At the moment, the pressures are coming from oil prices. Price inommodity expectation is inflation, not deflation. It causes inflation. The consequent since that is your crowding in more demand,. Ore spending, more wealth t leads to summer guy erik it can be spread over one year, two years. It means higher inflation. Guy guys, i will leave it there. Lets continue the discussion on commodities. London shareholders meet in london today. Proceed with a deeply discounted for more, lets get andre. Bloombergs what are we talking about . Andre good morning. London shareholders are getting together. They are voting on 770 million refinancing package. That will unlock the remainder of the amounts in cash. Guy how do we think is going to go . Entree it is difficult to tell. Among the major shareholders, [indiscernible] only they said they are not in support of this office refinancing wreckage. Refinancing package. What is interesting is all of londons large shareholders are fairly new shareholders. They all bought in during the course of this year while london share prices were under pressure. There are shareholders who and will stay in the company. Guy deep value. Thisoes longman look after how does lonmin look after this. Andre what they are try to do is buckle up for the next four years while they expect platinum to stay low. Platinum prices to recover at some point. They need a revised business plan. They need that plan to work flawlessly. They cannot afford any of the interruptions that we have seen over the past year. While this is the first step alcee and lonmin. Guy entree, we will leave you there. Lets andre, we will leave you there. The rand hitting a record low against the dollar this month. How fast will that happen . For the rand, this is joe bank decision, put it all together. What happens next . What we are seeing is the rand reached a record low this month. 14 rand to the dollar mark. That alone made put some pressure on the economy to hike rates from 6 . What we are seeing is because of the week growth data we have been getting, were looking at the mining numbers, the manufacturing numbers not coming in as strong as we would like. That is going to be a key factor that the south African Central Bank will be looking at. Guy one of the things we will that theng is the idea electors see story is going to improve. When he saw that disappointing data coming out of the mining sector, as we start to see that recovery, maybe that will start to get better as well. Definitely. Factorsn as one of the that the central bank has highlighted having kurt killed economic growth. We have seen the growth number forecast. N from 1. 5 the finance ministers this week have said that even though the rand has been week, it doesnt mean we will see much of a shock when the state possibly hikes rates in december. The possible rate hike by the fed is already priced into the currency. Possibly trying to reassure people and the markets that the rand is volatile and it may not have a shock reaction to a possible rate hike. Guy do you could d discrete with that do you disagree with that . Erik possibly. It depends critically on what the trajectory of the rate hikes are. Thats still in question. If they go with the dots, i dont think that is priced into the dollar, not yet. I think in the case of south africa, they are in a double bind. They have very weak growth in a very volatile currency on the other hand. You want to listen to support the economy. Break, the market is going to stay the same. Guy it cancels the other out. Erik the unlike factor in that is the undermining the growth in all commodity markets. Lunch supplies, including south africa. That is what is pushing their growth down and created concerns about the volatility of their currency. It is a difficult situation for policymakers. Guy erik, we will be back with you. We are watching out for that South African decision later. Talking of Central Banks, were getting commentary from baroda from kuroda. Ministerhe prime talking to the aipac leaders. Closeieves that japan is to ending deflation. That youre looking at live pictures come from the egg of japan press conference. From the bank of japan press conference. Enemy causedmmon the west relationship with president clinton. What does it mean with president putin. What does it mean . Well discuss that next. Guy 6 47 in london. Here are the stories you need to know. Minutes from the Federal Reserve meeting reveals that most participants agree to conditions for a rate hike have either been by or likely to happen december. This is before the strong jobs number we got in october. A rate increase as possible in the absence of any unanticipated shocks. Governor kuroda is speaking over at the bank of japan. Says itsl bank record easing measures are having the intended effects and the japanese economy continues to recover moderately. Those are live pictures. Youre watching him speak or listen to questions right now. France plus get a say information found at the scene of yesterdays rate suggest that the terrorist thing that terrorist gang that struck paris last week was preparing another attack. Roundsscovered 5000 during yesterdays raid. Police dont know if he was killed or not. The scene was chaotic, hence the delay in finding out. Lets talk about the russian story we discussed early on. Could the situation in paris change the nature of relationships with the west and russia . Russia says it is confident a deal can be reached with the west against the islamic state, andy paving the way what is becoming an increasingly cold war. Ood morning otilia are we reading too much into this relationship . Otilia not really. Russia will certainly seek to trade the situation in such a way did it would bring it out from isolation by the west. The situation in paris is conducive to portraying russias situation is very similar to france. We have seen resident couldnt ordering president putin ordering [indiscernible] to create a situation in which russia is taking is taken on board as an ally rather than an adversary. Will this only apply to the story surrounding i. S. . Or will this go further . Otilia this will depend on how all sides are affected by the relationship. Insia makes the wider gain terms of connecting all different interests that they ukraine ia, it in syria, in ukraine. Cautious will the eu countries and the usb the u. S. Be in regard . Guy what does it mean for the ukraine . There are certain interest that russia and the u. N. And u. S. Have in both syria and ukraine. On the side of russia, this would be letting ukraine girl to just you came ukraine go to samee with the u. K. Case in case of syria. We are looking at the nonnegotiable aim. At the same time, perhaps the longterm settlement is something that the details can be negotiated. How geared is the russian economy to any small improvement in the section story . Easing, what would be the next economic affect . Otilia one thing to keep in mind is the sanctions are not the only negative aspect that has been influencing russians economy over the past year and a half. Has even more great affect on the russian economy. I would warn against overestimating the immediate effect of any sanctions easing. However, there are looking for increasing prospects of sanctions being eased, probably not listed but probably not lifted, but potential easing of sanctions. Sometime early next year. Probablyase, we will looking at marginal changes. But it is quite likely the technology and Defense Sector are much more sticky. , joining us onnd this born of relations. Makes a good point, the sanctions are one story, the oil is a much bigger story. Erik some of that is in the power of obama and the americans. This is an interesting story which is not much talked about. Obama looking at that low oil price, it is good for the u. S. Economy. Lower oil prices supports growth in the u. S. How would he do that . By supporting your shale industry. If you can plays car, that is a much bigger deal for putin. The question of what happens to the oil price is important for russia. Obama has some of that in his power. Later as we start to work toward the end of the month. Lets talk about ecb. We could to minutes we get the minutes later. This is the ecbs Balance Sheet over the last five years. You can see this huge surge we saw and then this the scaling of that Balance Sheet it where beginning to ramp up again. This trajectory is up and quite we areively. Erik seeing an upward trajectory it we think that is going to increase. We think it ought to. Qe. And different the difference would be i would change my mind from being a longterm euro area air which i currently am to longterm if a different type of qe came in to play. If you could somehow use qe two start effectively neutralize that debt. Guy realistically . Erik realistically, i dont think that is good to happen. Guy how much more room is there . Erik i think you can get back to those levels and beyond. We think about the Global Central Bank Balance Sheet positions. He u. S. Has stopped increasing start to decrease. They may start to run off those assets. The euroere to occur, area could step in and pick up the slack. Guy what does that do to the euro . Erik it is down now. It comes back to the critical question, where will fes follow the market will the feds follow the market . Some of the additional qe that we are expecting from jockey is priced in already from draghi is priced in already. Guy thank you for joining us here at up next, earnings. We are going to speak to Kristin Kreuk a little later in the program. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Guy the faintest fed the latest fed minutes suggested december is going to see liftoff for u. S. Rates. The bank of japan keeps monetary stimulus unchanged despite the recession, it said its record easing measures are working. French police say they do not know if the ringleader behind wasatrocities seen friday killed in yesterday mornings rate. Where live in the french capital with the latest. Good morning. Welcome to count down. The me tell you how european markets are going to open up. 8 euro stocks is up by continental markets are rallying. But he looks like a bit of a lag off. Footsie looks like a little bit of a lag off. It looks like were going to get a nearly 1 move higher. How does that compare to what we saw in asia . Lets find out. Juliette we have had a good thursday here in asia. We are seeing the shanghai market just closed up by 1. 5 . We are seeing hong kong still trading up by. 5 in the last hour. It was a great day. Korea closing higher. With a two to five having a positive session, up right over 1 . Export companies are likely to shop. Of course as you have mentioned, we had the bank of japan decision today. No change to their Monetary Policy there. Says thatster abe japan is close to ending deflation. Governor kuroda speaking currently saying he expects in japan to increase here it we have seen the yen strength and. Austria had a very solid session. P much the regional standout. Pretty much the regional standout. Theres been a lot more Risk Appetite in the region. Every sector moving higher. Boeing gas up 2 . Have a look at some of those big movers. Agm. Ld its there was a question on whether or not it was going to pay a dividend. Endless saying bhp saying it wont be risking its Balance Sheet. Softbank came under selling pressure in japan. Some analysts saying it has a stop capping the market for cash. The Malaysian Ringgit having its biggest jump in a month here at that means investors also willing to get into risky assets. It rejected japanese yen, it is strengthening their. The dollar, weaker. The yen up a third of 1 . Speaks currently this afternoon. Guy . Guy Juliette Saly Juliette Saly in hong kong. They has been speaking of the economy. Bojs keeping much of the policy unchanged. Ryan, lets talk about some of the details. What does the policy trajectory look like . Are they waiting for the fed . I think it is true that there are waiting for the fed. One thing governor kuroda said is he would like to see an increase if it is a sign of economic strength from the u. S. Japan that is a welcome thing. The takeaway is this recession is unlike the last one being blamed on external demand. We saw that in the export data today. It felt for the first time in more than a year. Mr. Kuroda test on that in his comments. Kuroda touched on that in his comments. I think we are seeing more bojle in japan saying the could be finished with its round of easing. It is 46 0 sink of the economists saying that. Guy brian fowler joining us from tokyo. Lets talk about what is happening in the u. K. The company will raise its interim dividend by 10 . It sounds pretty confident. Jim mccarthy is the companys ceo. He joins us this morning here on bloomberg. Good morning. You are raising your targets as well in the u. K. By 40 to 1400. . S that of the acquisition or is that your broader aspiration . Jim it is the broader aspiration for the business. The acquisition at 250 stores to our thousand store target. Some growth left of course in the store states. When we compound those two, that gives us a new number, including ireland with 1000 forged stores. Lots more with 1400 stores. This trajectory look like . What the new plan looks like. How planned are how far are you going to take his is this . Jim down land is growing. Pound the land is growing. Our organic program will continue. 50 stores a year in the u. K. Another 10 or so in ireland each year. We have a test in spain. We have nine stores currently. Our ambition is not only around the u. K. And ireland but mainland europe. We have ambitious growth. We aim to deliver. Guy how for tile is europe at the moment. How fertile is a europe at the moment . Jim we believe there is an opportunity. Poundland. Ar to theres nothing like that in europe. The spanish trial is designed to determine that the spanish consumer loves the amazing value we deliver. Once we have done that, eight more months to run, we have providing that trial is successful, we would turn our attention to other markets in europe. You back closer to home. The National Living wage, how will that affect you . How are you planning for it . Wage is National Living going to have an impact on our wage bill. From april next year, it rises to seven pounds 20. Have a number of opportunities to mitigate that cost. Including operational efficiency. We are trialing self checkouts at the moment. Shelf ready packaging. Isy 6 of our product delivered with shelf ready packaging. Around in thes million. R about 4 to 18ter five years, 17 million. Guy there is a price war underway in the u. K. Supermarket sector. Thatare the prospects of how does that feedback into your business . Do you think it is going to get even deeper . What do you see in the inflationary outlook story . Jim i think retailers are responding to consumer demands. They are very competitive at the moment. We have had competition for many years. This is more intense. Share try to gain market or preserve their own market share. Poundland is centered itself on delivering amazing value every day. As long as the value differentiation is maintained, we are in a good position to manage that. We see everybody to be honest as competition. We really concentrate on doing what we do best which is providing amazing value every day. Over 3000 products. Q3ou talk about 23 being highly volatile. What is driving that . Jim the main cause of the moment of the volatility is it way consumers are shopping and behaving. We have not seen the shape of this before as we approach the christmas spirit. Is main reason for that black friday is coming. It is a very big event. They are waiting and saving their pennies to gain some bargains. We expect that when that we arelar event participating in that ourselves in a small way for the first time. To behaveconsumers normally and to spend well through to christmas and have a really good christmas. We think it is that. We have flight that because it is a shame that we have not seen before in my tenure. Guy jim, always a pleasure. Thank you for taking the time. Mccarthy, poundland ceo. Lets talk about the day ahead. We get the count for the ecbs latest meeting. Denniso much lockhart will speak on the u. S. Economy. Chair, feds vice chair will take the chair and san francisco. After the break, well talk to guido kerkhoff. That conversation coming up next. Guy 7 14 in london. Here are the stories you need to know. Minutes from the Federal Reserve october meeting reveals the most positive conditions for a rate hike are likely to have been met by december. Strong jobsre the number we saw in october. A rate increase is possible in the absence of any quote unanticipated shocks. The bank of japan has kept Monetary Policy unchanged, despite recession. The governor speaking right now as you can see. He says the record easing measures are having the intended effect and the japanese economy continues to recover moderately. [indiscernible] bloomberg sources say pfizer is. N talks to buy allergan that would value the botox maker at 150 billion. This can be drug industrys biggest ever deal. President along president along the he is planning a grand coalition to fight the islamic state. Information found it yesterday seen found at yesterday lets get details. Hans nichols is in the french capital. What did we learn . Learned in rome there is a potential terrorist threat it gives the fbi here you a sense that all of europe is on edge. Two potential suspects still at large. What we learned from that briefing yesterday by the french meancutor is that adil a he organized and designed this attack. They dont know if his body was a monk the two mangled corpses was among the two mangled corpses that was found. The Washington Post is reporting according to people familiar is dead. Abu mahmoud we know that a female suicide bomber took her own life. What is also clear from the french prosecutor is this was a terror cell and was planning and capable of additional attacks. Guy how does this affect the wider story . How does this affect the refugee story . He says he plans on accepting the refugees. He will be getting a vote later today in the National Assembly about expanded powers. Conversation the shift genetically. There is a new poll out from bloomberg saying 52 of theondents want to accept refugees that the Obama Administration has pledged to take. His efforts in syria. Try to impress at the u. S. President that the challenge in syria that is causing potential violence needs to be addressed immediately and urgently. I, one other note, interior ministers will be gathering in brussels. We could have another aboution about it how it is going to be modified. Line to eastwest fault make sure the free flow of good commerce stays intact. We did hear from the bank of the ying he thought guy thank you very much indeed. Bloomberg sources say pfizer is in talks to buy allergan. It could be the biggest deal ever. Never change has more details. Nejra cehic has more details. Nejra we could see details as soon as monday. Pfizer is in advance talk to buy allergan forasmuch as 380 a share. At deal would value allergan 150 billion. Making it the drug industrys biggest deal ever. The biggest deal in and in in any industry this year. Been surpassing last billion. Cord of 220 what pfizer has to gain is strengthening its brandname business. Allergan is the maker of the botox. That could help to split its ins is eventually into two. Version. This is key because this could turn out to be a sticking point. The Treasury Department says in a letter that it is reviewing ways to address overseas acquisitions and plans to issue guidance later this week. We can see a tightening of those rules on tax in version. The u. S. Treasury doesnt have the power to block any inversion. It could decrease economic benefits of the deal. That could mean that pfizer may not want to offer as much and we could see the deal falls through altogether. Where seen this issue with the u. S. Treasury clapping down on tax and version being a problem in the past. The purchase of shire, blaming treasury rules for that. That could be the biggest stick is the biggest sticking point. Echo lets go to germany. Guy lets go to germany. Profit rising at the german still maker steelmaker. Lets talk about the earnings and where joined by guido kerkhoff. Good morning. A pleasure to have you with us. The markets are reading this as a cautious statement it is that caution due to the slowdown in china . Talk us through what you see in the world. All we have to see two things in it. 1. 6 to 1. 9. Driven by our impact program. We want to realize additional proficiencies. If we have the same economic circumstances as we have this year, we are on track to improve the company and work towards guidance that we want to achieve. Are furtherillion stabilized in our p l. The price pressure we see on the steel currently, we are not sure it is going to last. What the impact for the coming year will be. Same situation to a certain degree in brazil where the Economic Situation is still not in good shape and spreads have come down. This is why we think these market defects has to be recognized going forward. Guy could you breakout china for me in more detail. E have talked in the past how are those two parts of the Company Performing . If you look at the engine and parts of the business, well see we will continue to improve our margin in our elevator business. We have announced we want to to 0. 7 . The margin where we do see some effects of the volkswagen crisis. We see want to stabilize our earnings. The same is true for industrial solutions. Surroundingsee economic environment where we see have thats where we have seen some weakening. Our engineering business, we are progressing our measures. On the steel side, the same is true if we take a look at our plus side. The imports are coming and the price levels are lower. This is what we have to reflect. Guy we have a little bit of a problem with the sound. Can you be more specific on the vw side . How much exposure do you have . How much visibility do we have in terms of how that relationship is go to proceed . Guido i think volkswagen is one of our biggest customers that we do have. You have to split a little bit in the facts to see volkswagen. Coming out of the diesel things that we see is no real factor in europe. The volumes we are selling and ordering are about the same. We dont see any effects so far here. Ist volkswagen has announced they want to go in procurement to reduce the cost on their base and therefore we might see some pressure here on that part. On the other hand, what we see in china is volkswagen is losing market share. This is something we have to reflect as well. Especially in our components business. Stabilizing or a further slight increase. Aboutour ceo talking Balance Sheet needs. How do those needs it results . Are we looking at new equity . How does that story resolve itself if you do have Balance Sheet needs . Guido thank you for the question, because i can state we do not see any need for further Capital Increase. There always been rumors around that. I can clearly say this is not needed in our case. Level of below 10 at 9. 3 , we are at the weaker part if you comparisons to other companies. If you see our trajectory, we have significantly strengthened our Balance Sheet and therefore a lot more robust than in the last two years. , but is no current need still compared to others, we have to improve further, with no Capital Increase required. Guy is that why we see the dividend little bit shyer . Walk us through that. Guido i am not sure that it is shy. Take a look at our income. If you look at the net income, it increased by 36 . We say we dont give out any guidance for our dividend on ratios. We think it is too early. Far if we goy forward, not enough. We want to continue to develop it. Given the element we have seen, i think it is in line. Guy guido, a great pleasure to speak to you. Guido kerkhoff, ceo. I want to take you to manila. The protests that we have seen earlier on. Getting ready to generate a little bit. They are beginning to get a little bit violent. Well come back with the story. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. French prosecutors say information found at the scene of yesterdays raid suggests the terror gang which struck paris friday was preparing another attack. At least two people were killed and eight more arrested. The suspected ringleader, abdelhamid abaaoud, is not amongst those detained. The least know if he was one of those killed. They are still examining the scene and the bodies. The bank of japan has kept its Monetary Policy unchanged despite the economy slipping back into reception into recession. The bank says its easing measures are having the intended effect. Japan posted its first trade surplus in seven months. Two American Companies have priced their ipos. 240in processors raising billion. Shares offered at nine dollars each. For the similar story owner of dating sites and apps such as tender and okcupid. That priced at the lower end of the range. The Companies Make their debut in new york later today. We are just under half an hour away from the open in europe. Let me show you what the futures are telling us. It is a reasonably positive start. This is the euro stoxx up by 0. 9 . Ftse called up by 0. 6 . Higher if you round. That is what we are expecting in europe when cash equity stock begins trading in a few minutes time. Minutes from the fed reveal that most participants agree the conditions for a rate hike have either been met or are likely to have been met by september by december. This comes from a meeting before we saw that strong payroll data. New york fed Vice President bill dudley says it should be close to impossible to shock anyone now with a rate hike. This is probably the most well advertised, discussed, thought about, mused over prospect of Monetary Policy in history. When we do begin, i dont think its going to be a huge surprise. Im not looking for a big reaction. If we raise interest rates, that is a good thing, not a bad thing. That is a sign the economy is returning to health. The fed is getting closer to achieving our dual mandate. I really amaid looking forward to that day when we begin to normalize Monetary Policy. I view it as a good thing. Guy despite being the most advertised rate hike, dudley did add the hike could provoke an unpredictable Market Reaction. We really dont know. Just look at the last few years. Weve had two episodes that were quite different. Chairman bernanke mused about reducing the pace of asset purchases. In the summer of 2013, the market really freaked out. When we got around to reducing the pace of asset purchases, it was a big yawn. I think that tells you, theres a pretty big span between what is likely to happen when we actually begin to normalize. Guy lets talk more about this. Us. At socgen joins we are also rejoined by economist jamie murray. In a situation where we know this rate hike is coming. Into it. Een talked do we fully understand Market Pricing . Does the market fully understand the implications of this . Amie there will still be some people who believe the fed wont hike. That will be priced out. We dont know how many of those people are out there. It is difficult to tell. We dont know exactly what the Market Reaction will be. Guy it has been heavily advertised. Jamie it has. You will still get something, im sure. Guy this was posed payroll data. These minutes. E minutes, it is clear that december is on. Why is there concern . Koko i think its interesting to see that the probability for a rate hike in december was 25 a few months ago and now its around 70 . Itself has been volatile. If you look at implied options, they are pricing somewhere around 2 for the currency, eurodollar. When it comes to the equities, they are supposed to move by 4 or 5 . [indiscernible] jamie from an economic standpoint, weve already seen the probability shift from 25 to 66 . The world is still spinning. Maybe it is not that bothered. Could the surprise come from what it says about the trajectory . Is that where the pricing volatility is going to emerge . Jamie that is i think the bigger risk. That is where you could see big changes. That would affect longterm rates as well as shortterm rates. Guy is the ecb sorry. Kokou the thing to point out as well is that it is probably not the first rate hike that matters. It is probably the second and third. Guy what do you think that is going to look like . Kokou pretty shallow. They know theres questions about the terminal rates of the u. S. Economy. There is no incentive, or marginal propensity, for the fed to do something drastic, given all the money they already put in the system. I think theyre going to be very cautious. Our expectation is for a rate hike next year. Guy if i look at the spread between where europe is and where the u. S. Is, and i look at the symmetry of risk and try to understand who is likely to provide the biggest price, is it likely to come from the ecb . The Balance Sheet is still not where it was in 2012. The market expects more, but how much more . Kokou the expectation is for a 10 basis point cut and an increase of the purchase from 60 billion euros to 70,000,000,00080,000,000,000. To 80 billion. I think the path of least resistance is for them to do a bit more and show they are committed to do whatever it takes to get inflation back up to longterm targets. The jamie, what are implications of going further . What are the implications in the structure of how this is going to work . Is the market going to sell bonds to the ecb . Is there going to be an availability of bonds in the future . How does this change the notion of the european bond market . Jamie there are bonds to buy. What matters kind of is that the posit rate. If they got rid of that rule, they would have 1. 8 trillion euros of bonds available for purchase. That would be universal bonds. They can cut the deposit rate a bit. That might expand that universe a bit too. If they want to increase the scope and size of asset purchases, they can start it now and take other adjustments, other measures later on. Just blue sky thinking, how blue sky do you think they will go . Until we see a change in the nature of qe jamie i dont think we will see a shift in the sort of asset they are buying. What i do think is it will be quite a big shift, a big policy change. I dont see this as some small, interact all incremental reaction to markets. This is about where the ecb is, where the european economy is, and how much slack is going to get taken up. Thing to add to this is the concept of Corporate Bond qe. Not just sovereign bonds. Think the biggest question here is the transmission mechanism. Theyve already done so much. I think the aim is to get corporates to invest in higher people and increased wages. In japan, this hasnt been the case. Those companies are behaving like u. S. Corporates, increasing share buyback. You have this disconnect about andMonetary Policy corporates. Guys leave it, we will there. Jamie merry, thank you very much. Kokou will stay with us. We are minutes from the start of european trading. Looks like it is going to the positive. A gray day in london but a green day on the markets. Here are the stories you need to know this morning. Minutes from the Federal Reserve october meeting revealed that most agree that conditions for a rate hike have either been met or are likely to have been met by december. That was before the strong jobs number we saw in october. The fomc says a rate increase is possible in the absence of any unanticipated shocks. The boj kept its Monetary Policy unchanged despite the economy slipping back into recession. The Central Bank Says its record easing measures are having the intended effect. Japan posted its first trade surplus in seven months. French prosecutors say information found at the scene of yesterdays raid suggests the terrorist gang was preparing another attack. At least two people were killed and eight arrested as police fired 5000 rounds during the operation. The suspected ringleader of fridays attacks, abdelhamid abaaoud, is not among those detained. Police say they dont know if he was one of those killed. We are minutes away from the start of equity trading. Nejra cehic has the stocks to watch. Nejra starting with this in group. Tyson group. It said it is going to increase its fullyear dividend by 36 . The german steelmaker has said monthsrose 26 in the 12 through september. The ceo is trying to turn the steelmaker into a more diverse industrial group. Weve heard some other steelmakers like our salama tile that they are coming under pressure because of a glut of steel from china. Theit rose, increased dividend. We could see that stock move. Keep an eye on pharma stocks. What weve heard is that pfizer is nearing an agreement to buy ergan to the tune of 150 billion. You want to keep an eye on stocks Like Astrazeneca and shire, because those companies have been targets in the past of potential takeovers. Big Pharma Companies have tried to move their domicile abroad to get tax benefits. Keep an eye on pharma stocks. Finally, invest tech. It owns a moneylender and manager in south africa and the u. K. Profit rose 15 after improved performance from its banking unit. Guy lets talk about the crude price. Oil fell to its lowest level in almost three months. Crude stockpiles expanding for an eighth week. We saw the price of wti down below 40 a barrel. You can see that move yesterday. We havent been that low since august. That came as the Energy Minister said opec is confident the market will stabilize itself. Weve heard that for a while. Lets get more with bloombergs chief energy correspondent. Also still with us, kokou. How significant is the move back below 40 . Quite significant. It is one of those psychological levels we have been watching closely. While the market is saying it will rebalance at some point, it has not yet reached that point. It has put too much oil into the market for the demand we have. About 1. 5 years into this new policy, the clear scenario is too much supply. The demand is doing very well. But still, inventories continue to build. Guy you have some great figures about inventories. About 3 billion barrels of inventory. To give you a sense, you have to put all those inventories in a supertanker, then put one supertanker after another, the line you get will stretch all the way to edinburgh. It gets really in the suburbs. That is what the market needs to go through. We will still need to go through that level of inventory. Put a cap on prices for many months to come. Guy oil, one asset. How does that feed back into the other assets . Russia, the u. S. , a big factor as well. Herent oil to stay down for a while, dont we . Kokou i think its a cause and consequence relationship. L ismately, lower oi good. It forces the central bank to pump more liquidity as they try to increase inflation expectations. I think it is good for asset prices because you have the central bank looking at prices and you have the oil price that is low the cause of access market with ahe very low demand overall. It is an interesting positive feedback loop. Guy can i draw a line between Lower Oil Prices and higher equities in europe . Kokou yes, effectively. For inflation to go up, you need higher oil prices. Otherwise, you have the central bank continuing to bump liquidity. Guy that should be good for equities as well, shouldnt it . Kokou absolutely. They ultimately look at inflation numbers. Inflation numbers are connected to the oil price. Ultimately, the liquidity will still be there and the oil price will recover. I think the big picture is that the oil price is sending its signal for Central Banks to have policy,ing monetary which bodes well for equities. Guy lets talk about the supply side. The big surprise for everybody has been the fact that u. S. Shale has not died out yet. We are expecting the move for opec to bring prices down was going to derail the shale boom very early. That was a surprise. It didnt happen. We are beginning to see the first signals that shale production in the u. S. Is beginning to decline. This big shale province at the center of the boom in the united states, Oil Production in september went down for the First Time Since 2004. 11 years ago is when the boom in u. S. Production started. This opec policy is beginning to work, but it has taken a yearandahalf. That in sixting months, it will kill shale. They are just beginning to hit shale and it has probably taken double, maybe three times longer than opec was thinking. Guy weve been discussing a lot this morning, russia, and talking about the effects of the relationship post paris attacks and what effect that could have on the russian economy. Oil is the biggest factor for putin. You could see a geopolitical link to this as well. Absolutely, but the question , many were has been expecting that russian Oil Production would come down. What has happened has been exactly the opposite. Russia has been able to increase production. Russia is producing almost 11 Million Barrels a day. Obviously, what would be the best scenario for putin, that russia continues ramping up production and the tension in the middle east pushes prices higher. He gets the production and he gets higher prices. Some think that is exactly what hes trying to do in syria. Im a bit more naive. But certainly, not a bad thing in moscow. Kokou one thing i will add is the sort of supply and demand reaction. The lower the oil price goes, the more supply you see. A lot of these exporters have a budget in dollars. It is an interesting counterintuitive reaction. Two quick figures. Last year, opec, 1 trillion selling oil. This year, it is going to earn about 550 billion. Guy thank you very much indeed. Fascinating conversation. Kokou and javier. Equities are about to open. What are you watching, jon . Jonathan what a remarkable conversation. Im going to be talking to the global cohead of m a at j. P. Morgan about the biggest year of m a since 2007. My question, where was energy in all of that . Where was the commodities story . Didnt develop the way many people anticipated. The other story, weve got to wait through the central bank speak. The fomc are doing their best to corrupt what we could call a dovish hike. I just dont get it. When they say that Downside Risk abroad has diminished, have they really . I spoke to the ecb. The only thing that has diminished is a market that isnt freaking out anymore about china. That could be temporary. Does that mean a change at the Federal Reserve . You could get even more confused. Recession, low inflation, and a boj that says stimulus is working. I will ask the guests. Guy my argument to that would be, we are in a situation where the fed has a significantly higher tolerance to those external factors then maybe the abc the ecb does. Jonathan we are talking about Downside Risk abroad. It is about Downside Risk. Theyve either increased or diminished. You cant have one central bank that says they increased and another central bank that says they diminished. It is a view on china, a view on the world. It is either fragile or not. Guy looking forward to that conversation. Cash equities about to open in europe. Looks like we are to have a higher open. The euro stoxx called up by about 0. 9 according to our calculation. Plenty more still to talk about. We have a busy day on bloomberg television. Jon ferro is up next. We will see you tomorrow. Have a good day. Jonathan good morning. Welcome to on the move. Moments away from the start of european trading. Lets get straight to your morning brief. The hawks are in. The latest Federal Reserve minutes suggest liftoff is looming. The center of gravity shifts toward december. The bank of japan keeps monetary stimulus unchanged despite recession and weak inflation. Kuroda says stimulus is working. Crude Oil Trades Near a threemonth low after wti falls below 40 a barrel. Should producers brace for more pain . Those three stories dominating the next 60 minutes. Futures in london higher. 36 points. Tures up nejra cehic has your market open. Nejra that potential december rate hike from the fed looking just as likely after those minutes. Still pricing in that 66 probability of that happening. The key things were the statements that it would be a gradual pace of increases. You called it a dovish hike. It seems thats the way markets are interpreting it as well. Lets take a look at equity markets. Asia open higher. Starting to look at what europe is going to do too. Ftse 100 up almost 0. 5 . Still waiting for the dax to open. Prettyequities close flat earlier. Dax up 0. 9 . Let me show you the dollar