Transcripts For BLOOMBERG Bloomberg Surveillance 20151118

Paris suburb that will impact the political. Tom many headlines from germany as they consider what to do. I know youre going to Brendan Greeley in a moment. Andbackdrop is markets softer commodities. Francine dollar higher, euro weaker. In paris have launched a raid aimed at capturing the suspected leader of last weeks attacks. Two people were killed and five were arrested. It is not known if the elected ringleader was among them. Who died had a suicide vest. Police believe one person is pulled up in an apartment. 2 air france flights were diverted after the airline received threats, one from Atlantic City and one from washington was diverted to halifax, canada. No threat was found on either flight. David cameron making the case for extending airstrikes from iraq to syria. Cameron says britain needs time to target the head of the snake and bomb Islamic State targets at their syrian base. Wants. Stmas he expandingd a vote on rates. The oecd wants to scale back power plants run on coal. The generators are among the biggest sources of emissions blamed for rising temperatures. In maella, and the president is backing an effort to settle a dispute with china through arbitration. China claims 80 of the south china sea, disputed by vietnam and other countries. Get more on these breaking stories at the new bloomberg. Com. Tom lets do a data check. We want to get to paris. The s p futures negative two, that does not tell the story. You are seeing new lows and weakness in commodities. Oil is fragile, 41. 26. Some data on the markets right now, im looking at the vix, 18. 6. At commodities right now. The german commodities, full faith and credit, 0. 38. Really showing the tension in europe. Goldman sachs is out with an aggressive note saying lower prices are in store. 209. 40 on chicago copper. Dollarrenminbi shows the depreciation in the yuan. The commodity story is really continuing this morning. Francine there is overlap between your data port and my data board. Zinc dropping to the lowest levels ins 2009 because of concerns about chinese demand. Thisentioned renminbi, but is the dollar trading at its strongest and more than a decade. That is our data check. Francine s tom stunning news on zinc and copper. Lets move over to the bloomberg terminal. Heads up to Michael Purves s. Currencywith asian strength. Drill is simple, down we go with a new leg down. Beginning to test core weakness in asia. Interesting to see how currencies react after the fomc meetings today. It is not in a vacuum of euro and japan. We have to go to paris. Manhunt, there is a the rate is ongoing. 2 people have been killed and five have been arrested at the raid targeting the suspected mastermind of last weeks attacks. Brendan greeley joins us from paris. Its a developing story and it is difficult to know what is going on because we also want to protect the officers involved. What are you hearing on the ground . I can give you a sense operation. E of the until an hour ago, regular French Police were keeping a quarter of two blocks outside where im standing. Behind me, you have regular police they have locked down an area that would otherwise be a busy pedestrian zone. Father in, you have a special terrorist unit. Official photographers are being led through the police cordon, that could suggest the operation is winding down pick conflicting reports, residents are kept ou we aref the area where in some of them left to go to work, this is a suburb of paris, they have not been let back in. They are trying to figure out what has happened. Francine it is difficult to know what this moment. The question everybody wants answered, this is the victims families, viewers, and political fronts, was the person who mapped out the attacks, . Caught . Too early to tell. Brendan we do not know. A sense of where everything is it we are not far from the stade de france. Ino not believe he was france until that was released this morning. The person believed to have planned the attacks, a 28yearold belgian, abdelhamid abaaoud, we know he was the target of this raid. We do not know whether he is among the 2 killed or 5 taken into custody. Cordon is is the here, weve seen photographers move in but theres no sense it is over whether able to tell us what is happening. Francine Brendan Greeley on the ground in the paris suburb of saintdenis. The manhunt is ongoing. Our guest host for the hour is jane foley from rabbo national, senior currency strategist. When we look at france and what the fed may or may not be about to do, we are thinking about the tragic loss of human life. How much of an impact will the attacks or any terrorist around the world have on the feds thinking and therefore on currencies . We are more resilient than we were six years ago. Couplever the last years, many geopolitical events have not had the Market Impact you would have seen several years ago. A couple years ago there was an argument that that was because ve of cheap money, liquidity numbing investors reactions. Potentially but is still the same. A lot of cheap money. We do have the fed potentially about to tighten policy. Even when the fed does hike Interest Rates in december, Interest Rates will be very low. Francine the probability of a hike has risen 66 for a hike in december. What does eurodollar do . Is it priced in or are we going to see parity . Jane i think this is about what happens after december. Assuming we get a hike in december, it is likely the fed will come out with a dovish message. We look at data in the u. S. , cpi data yesterday, wage inflation, is all very moderate. The dollar has already rallied significantly over the last year and half. The dollar has tightened monetary conditions, meaning theres less work for the fed to do. If we get this relatively cautious message for the fed after a december hike, it could be that a lot of hawkish and bullish sentiment on the dollar could be pared back. Tom wonderful to have you. Im curious at what you do at rabobank, where is euro positioning right now . We saw euro sterling at 0. 70. Wheres the bet on eurodollar parity . Is there enough bets that if they are wrong, we drive through parity . Jane i think parity is farther away now if you look at the spot data. The reason for that is partially what i have been mentioning, it is possible we will get a nonhawkish message from the fed which could dampen going long. The ecb is likely to be very dovish. Dollary get euro Downside Momentum if the market is not going to carry on tom this is critical, do you see any history in your reading that a central bank can aggressively and purposefully we can a currency . That is a lot harder to do than to talk about, isnt it . Jane it is. Side ofcy is only one the coin. At the start of the year, euro dollar fell aggressively but the market was ramping up dollar longs. Theres another side to this. If you think about what the euro became at the start of the year, it became a funded currency because of low Interest Rates. This has the upside of a carry trade that only works when appetite is elevated. Thehe start of the year market was happy to build up aro shorts and moved to higher risk currency. Is it going to be the same now when we have concerns about china and geopolitical concerns . That is not clear. If the market is not want to take up a carry trade, it is difficult. Tom they will not. Jane foley with rabobank. In our next hour, roger bootle will dovetail in the discussion of economics, finance and International Relations. Give you the immediacy from paris, Brendan Greeley is an saintdenis. From london and new york, bloomberg surveillance. Francine bloomberg surveillance you are looking at live pictures from saintdenis, parisian suburb. Akilled and 5 arrested in predawn raid targeting the suspected architect of the attacks friday. Its a raid, a manhunt. We seem to have some forensic up at theaving shown scene. We were not seeing those people in white suits a couple minutes ago. It is ongoing and we do not know the details. The police will not tell us for security reasons and we do not know who were in the apartments. Barclays is preparing to settle an investigation into gging,cy ri expecting to pay 100 Million Dollars to new york banking regulators having to do with currency trading. Barclays has paid already to a variety of regulators. In china, new home prices fewersed in 27 cities, 12 than september. China is trying to revive the Residential Market with Interest Rate cuts and fewer mortgage restrictions. Monsanto considering whether to make another bid for syngenta. Syngenta rejected an offer valued at 47 billion dollars and is in talks to the acquired by China National chemical. Printing . Francine thank you. The aftermath of europes worst bloodshed in a decade, rebuilding and relationship with russia has been a part of the wests response to the widening reach of Islamic State. What could be the new bond between russia and france and what could that mean for the approach to the war in syria . Lets bring in bloombergs executive editor for international government. Also with us is jane foley of rabobank. We are trying to figure out if this is a real rapprochement or if it is more style over substance. Characterize it as a marriage of convenience. Russia and the west are never going to be 100 percent allies, especially with everything in ukraine. You are seeing a realignment of interests similar to what we saw in the aftermath of 9 11. Russia and the west realized that they do have their differences but when it comes to terrorism and islamic extremism and when it comes to having a stable middle east, their interests are very much aligned. It is a marriage of convenience within that relatively narrow area. Tom within your reporting and jims reporting out of brussels, is there any sense of nato becoming engaged in this . Is it every nation for itself . John what we might see down the line is if they were able to do something coordinated under the auspices of nato, that could help on the legal side of things. For now it is going to be every nation for itself but increasingly coordinating attacks. We had an interesting report out of the middle east that suggested the air raids on raqqa are starting to have an impact. There are reports that the families of Islamic State leaders are increasingly leaving raqqa and heading towards mosul the heavy bombardment over the is having impact on Islamic State headquarters. Francine is it too early to talk about sanctions being as we see this rapprochement or marriage of convenience . John it is a little early. We spoke with a french official yesterday who told us that the conversations about syria are being kept apart from the conversations on ukraine. That is how the french see it and certainly the russians are not talking about that either. Down the line there might be an understanding that at some point next year, the sanctions could be ratcheted back. Sanctions are not on the table right now. Tom an update on the relationship between hollande, merkel and friends and germany . John france and germany stand sidebyside on this. Was interesting last night, we saw the soccer game in hanover abandoned. Abandonedt was because of intelligence the German Security forces received from france to lookbe interesting at what sort of help france asked for. Yesterday they invoked an eu defense clause which, in theory, we could see if friends decided to pull troops out of mali t help with france, we could see other eu nations supporting french operations outside the eus borders. Very much shoulder to shoulder. Tom thanks to your Team European wide helping us with this. This is the single most important person to speak of of our finance link to economics, randall krasner, former governor of the fed with the Business School in chicago. On Bloomberg Markets and the 10 00 hour. Stay with us, bloomberg surveillance. Tom good morning. Bloomberg surveillance, an International Good morning from around the world. New york city, a beautiful morning. Finally some seasonal temperatures after a perfect spectacular october. A really interesting and important must read. Heres francine. On japan . Francine yes. It is the article in bloomberg view. It is actually about abenomics womanomics. I now understand the Strongest Force behind the push to hire is women, not abe, democracy. He goes on to say if you are a woman in japan, theres no language barrier. Abe is known as a conservative and conservatives usually support, i guess, traditional gender roles. It has may be something that will change japanese thinking. Jane foley from rabobank is here. When you look at womenomics, what abe is trying to push to spur inflation and growth, how much can we infer whether abenomics will work . Womenomics has to work first. Jane jane this comes back to structural reform, abe has said we need more women. He has tried to push that. Theres been a cultural resistance. Perhaps in japan more than other countries. If you look at the Unemployment Rate in japan, there are signs that we could be reaching tightening in the labor force. One of the reasons for that, japan is aging population. They are running into problems with workers retiring. It seems natural. You can import workers or you can hire women. Tom russells work at the New York Times five years ago, is italy the new japan . Worry that Southern Europe has the demographic challenges of japan . Jane i believe italy has the worth birth worst birth rate in europe. Its aging demographic is intensifying. Of italy. The whole in some areas it is more than others. In some areas, farmland is being overtaken by forests. Young people are not there to take over the farms. Tom the headline is, this is a discussion in america. Francine i do not know the birth rate in america. In italy, it is 1. 4. E tomorrowh ny on bloomberg surveillance. Francine looking at some live pictures of an evacuation by police in the saintdenis area of paris. Thats the area where police had been monitoring a situation with some people holed up in an apartment, possibly one of the ring masters of some of the crimes friday. Saintdenis is the area where the stade de france is. Are this is fluid, there conflicting headlines and we are careful about what we report. This is ongoing and hugely fluid around a perimeter, a cordoned off neighborhood. Tom six miles north of paris. Francine in the same area as stade de france. Brendan greeley is in that area. More updates from him in a little bit. Authorities found no evidence of bombs on board two air france flights from the u. S. To paris. Both were diverted after anonymous threats. Flight from los angeles landed in Salt Lake City and is on its way to france. The other flight from washington landed in halifax. For aaram is being blamed bond that killed 32 people in nigeria. The bomb exploded in yhola. In a sixople have died year uprising by islamic militants in nigeria. The worlds richest economies deliver a setback for the coal industry. The oecd delivered a setback. Bobby jindal says it is not his time. Hasrepublican governor dropped out of the president ial race. Averaging around 1 of republican primary voters. Get more at the new bloomberg. Com we are going back to you. Francine the german chancellor Angela Merkel will hold a special meeting on Security Issues today. That follows the cancellation of an international football, soccer, match scheduled for yesterday. Joining us for berlin is hans nichols. First of all, what is the security like . Youve just come back from brussels where you have been covering the fallout of the attacks. What does the security and germany feel like at the moment. Hans tighter than normal, not the level of brussels or paris. Frenchn front of the embassy, so there is security by our office. Elsewhere it is not as high. At the meeting right now, theres going to be a focus on finding information. Last night when they canceled the soccer match between germany and the netherlands, there was a warning that came from an outside security agency. When they were asked to get , they did not providing a lot of specifics. The have been a lot of calls in the german press for more answers on what the threat is and what the response is. I want to, excuse me francine go ahead. Rip up thegot to script. Lucky to have you with us as we look at International Relations. We need to look at the linkage and follow on to our Financial System. Hans nichols, weve just had the record of german paper. It harkens back to world war ii. Granted, a different set of economics. Believe the tensions we see in europe are not linked to the new drive to lower yields in germany. What does the german media and german financial Authorities Say about the new record low yields . Financial authorities are a little concerned about a potential bubble. If you want a read of that, listen to what you hear, listen to the diversions between the biggest bank, the bundesbank and youngs vitamin the mario draghi. D the the criticism of Angela Merkel has been quiet. The only criticism linking her refugee policy to the attacks in paris is from the finance minister of the state of bavaria. Was silenced by his party leader, who has been one of merkels biggest critics on refugees. Theres a concerted effort by the media and certainly in political circles not to link merkels migration policy and her refugee stands with the attacks in paris. We will see how long that is maintained. This is inside baseball that hans gives us from germany. Lets go over to the terminal and look at the quadratic nation of this chart. What jeanclaude trichet would say is we have lower negative yields before the zero mark. The real issue is curvature. Trish shea would say a prayer dont move trichet would say a brutal move. Is there a sense that the Financial System is going to ofze up or unravel because the Second Derivative in the negative Interest Rates . Are you mean the bonds reacting to the potential expansion of quantitative easing . Is that youthere are going to have a liquidity problem because there are not going to be enough bonds to buy up, especially german bonds. You run out of tape. Or by reality, the central bank cannot buy more german bonds, they have to buy italian or spanish bonds or bonds on the periphery. That will help those economies. Onetize fiscal policy countries like italy are going to be able to do more fiscal stimulus because they can sell their bonds so cheaply because there are not german bonds left to buy. Francine thank you, hans nichols. News,we just saw the germany selling the 2year note. 0. 38 , the lowest on record. Does that make you uneasy or are the yields in a bubble. We have qe, terror attacks. Angela merkels feature is also in question. Jane if you were to go back five or seven years and say we are going to have negative Interest Rates or even very low Interest Rates, i think we all would have thought we would have inflation or more growth and weve got low growth and no inflation. What will the monetary authorities do if this does not work . What does this mean for currencies . Does this mean they are going to keep pushing the theme of a currency war . Ultimately a zero sum game. Francine is in a bubble . Jane by definition, we can only really tell for sure afterwards. Certainly there is a feeling that we are potentially in a bubble and as hans mentioned, theres a lot of talk about property bubbles in germany. If we look at other countries including switzerland, sweden, australia, new zealand, yes, there are or have been property bubbles and this is a function of the same trend, which is cheap money. Jane foley from rabobank. We will be talking a little bit more about japan and abenomics. Lets look at live pictures from the parisian suburb of saintdenis. And fivee killed arrested in a predawn raid targeting the suspected architect of last weeks attacks. The situation is very fluid. We just heard from French Police that we do not know if the two main targets of the rate are among the suspects. They say the Police Operation is ongoing. More on that next. Tom good morning worldwide. Vonnie quinn in new york with me and Francine Lacqua in london. Friended me really is in paris. Brendan greeley is in paris. 7, people arrested, seems like old news. Vonnie the Police Operation is ongoing according to the paris prosecutors. Seven people arrested during a raid in saintdenis, about six miles north of paris where stade de france is and where people have been holed up. Tom this dovetails into what were seeing in germany. The new concerns in germany about Security Issues. Mr. Lavrov speaking earlier from russia on the need for a joint effort. Vonnie you are referring to some Football Games in hanover that chancellor merkel was going to go to as a symbol of not being afraid, they had to be canceled. Is commodityhat movement. Im glad jane foley is on set with us. Idea how iron or had plunged overnight. You cannot keep up with everything. I can say this because i finally learned it off the bloomberg terminal, iron ore took a leg down this morning. Francine nothing like the bloomberg terminal. I was looking at zinc and the fallout linked to Dollar Strength and the fed, its quite something. Tom does anyone realize what a small, shallow life we have. You are looking at zinc and i am looking at iron ore. Francine you are looking at it while you are at the Mandarin Oriental living a glamorous life. Glencore shares have fallen for 9 straight days. In london they are up after falling 30 . Joining as as walt kennedy, bloombergs managing editor. Chairmanparency, the of bloomberg lp is a senior independent nonexecutive director. Jane foley with us to start commodities. Ceos ivane glastonburys job at place or is it external factors . The strategy outlined to restructure the company, everyone he thinks is doing a good job. The slide and 6etals we are seeing, zinc a yerar low. Falling. And thats keep falling is where they share prices are in the spotlight. Meanine what does it Going Forward . We have to see the sale of the agricultural unit and what they do with the debt cutting plan. Will the agricultural sale is a complicated deal. We do not expect to see it next year. Mean it is important to see how much money they will raise. People are talking in excess of 4 billion. Tom i use the word hydronic, billiton,ncy, bhp copper, zinc, there is hope to the acceleration lower. The history is that is not pretty. What will executivesit is imporh do . L good question. Glencore has cut the dividend. If it keeps happening, the dividends are going to come into focus at other big mining companies. I think the dividend is likely to be cut and that has been signaled. Rio in good shape. If this continues, especially iron ore, dividends look for a response. Francine i am not sure quadratic is a curve, i think it is an equation. Lets get jane foleys view. Jane seems like there is a similarity with miners and oil. There is an oversupply and job losses but we are still seeing the australians and brazilians shipping iron ore in huge quantities to try and keep the unit prices up. China is still absorbing huge amounts of these quantities. Does that mean we are going to have more job losses . Will the difference between oil and iron ore, oil sub 40 is not terribly profitable. They are stillo, making money even at lower prices. What they are doing is squeezing out of the market. The supply is relentless. Will kennedy, thank you. We can chat about this all we want. We have no respect for gary shilling, with us tomorrow. Inflation andon disinflation. This is a critical time. Six cut tomorrow. Features 4, dow futures 31. Francine getting some news from the parisian raid. These are live pictures from saintdenis, where Brendan Greeley is on the ground. A lot of reports saying the operation may be over. We have to confirm that. What do we know . R newsroom in paris has that confirmation from the french spokesperson for the French Interior ministry. The raid is over. We are seeing in the pedestrian zone a little more police activity. It had been deserted until a second ago. Half an hour ago, they let official photographers, not press photographers through, suggesting they were looking at the scene. 7 people are arrested and being held in the town hall in saintdenis, they have not been taken into paris. Two people have been killed. We do not have confirmation whether any of those people iis abdelhamid abaaoud, he was the target of the operation. Am very quickly, is there sense that this is the final moment or is this just a spot on the way of days and weeks of Police Action . Thates a sense france is at war. The thing that struck me coming in here is that the outer cordon is held by regular army units. The reason they are here is because france is in an official state of emergency. When you talk to anyone in paris, they say france is a country at war. There is not a sense here the sense here is, i was told yesterday, that the age of indifference is over is what one person told me on the streets. France has to care about this all the time. People in saintdenis are surprised and did not expected here. One person told me it is a tough neighborhood but did not see this coming. Tom Brendan Greeley from saintdenis. A busy morning. Company makingh a push into the u. S. Market for industrial gases. 10. 3ing to buy airgas for billion dollars. That presents a 50 premium to airgas 20 to effort price. Airgas is used in welding and health care. U. S. Prosecutors have targeted executives at j. P. Morgan and royal bank of scotland in a criminal investigation. The unnamed executives are accused of selling flawed Mortgage Securities before the financial crisis. Prosecutors are trying to see if the bank is ignored earnings. That is our Bloomberg Business flash. Tom jane foley of rabobank with Francine Lacqua in london. Exjapan, i at asia see the currency war. Can you describe the weakness in adxy, the asian dollar index. Jane some are linked to commodities. A lot of these dragged lower. Japan, another weak currency. Perhaps it is quite interesting at this point to look at the renminbi. In the last few years we have the renminbi relatively strong. Pulled up by the de facto dollar peg. Against a, country which has been slowing you have weak inflation. If that was the eurozone or japan, we would have to weaker currency. Yet weve had a relatively strong renminbi. Does that mean the renminbi is going to weaken . Tom you are reading my script, you got to stop looking at my notes in new york. And i at yuanrenminbi see a devaluation and a managed depreciation, 78 days in a row of depreciation. Does beijing joined the currency work . Ar . W jane the Market Reaction when they did the evaluation august 11 was huge and it had an impact on risk appetite. China supported the currency. If you look at the data over the next few months, they be that is going to tell a story. If we carry on getting weak data from china, if we keep getting weak inflationary pressures, maybe they will concentrate on the currency. Francine do we think the pboc will push for reform or do what andfed has drafted, qe getting Interest Rates to the zero bound . Jane if they were to allow more folks building in the currency, that is what they did in august. This isnt linked with the imf, the imf allowing it to be within to the imf, the imf allowing it to be within a reserve currency status. The imf wants china to be more flexible. Moreng it lower would give stimulus to china but it would be detrimental to some of the trading partners of china, who would feel on the other side of that. Not an easy balance for china. Francine as a final thought, fxt is your favorite pairing . Jane probably eurosterling. A big story. Francine linked to brexit . Jane boe and ecb. Francine what is your call . Jane i think it will go lower, mark carney does not want it to sink too far, too fast. Francine a high pound is probably his biggest headache at the moment. Jane foley from rabobank. I dont know how the diversions between the ecb and fx pairing . Jane probably eurosterling. A big story. Francine linked to boe is playing out in the states pit we boe official saying we have to look through the price shocks. Tom the basic idea, they like to look through the price shocks. That ban that banner on the german negative yield was something. A really good time to speak to roger bootle from Capital Economics across global wall street. The door of our World Headquarters in new york. We speak to him in the next hour. Euro 1. 0672. We continue with the news from paris as well. Brendan greeley from paris. Stay with us. Tom gunfire, dead and wounded , fullys this morning circled. A terrorist tourist. German yields continue to dissent. Copper and sync and iron ore signal a slowdown. Letse new normal call it crossasset volatility. Good morning, everyone. This is bloomberg surveillance. Im tom keene. Term terrorist tourist is off the facebook page. Someone is o at large right now. Francine we do not know if the operation or the investigation has finished. It has implication for the fed. We will focus on the geopolitics and the raid, and we are focusing on fed. Germanydlines out of and france, we will give those to you through the hours. We begin in paris where Officials Say there is a raid that targeted an Apartment Building in the paris suburbs. Police were hunting for the mastermind of the attack but do not know if he is among the suspects being held. Two people were killed during the raid, a woman wearing an explosive vest triggered it and killed herself as officers closed in. There may still be someone hiding in the apartment. We will have a live report from paris in a moment. Two flights were diverted after air france received threats. One left Salt Lake City after leaving washington after leaving los angeles. Blamed for a being bomb that killed 32 people in nigeria. It exploded last night in an eastern city. 80 were wounded. In manila, president obama says old steps are needed to ease tensions in the south china sea. The president is backing the separatist territorial this new the separatist territorial dispute with china. Trumps lead in New Hampshire is widening. A survey shows him leading the republican president ial field with 22 percent. Ben carson and marco rubio at 11 . Within threelled Percentage Points of trump in the state last month. Lowes has reported earnings. Come sales were up 4. 6 . You can get these and other breaking story cop sales were up 4. 6 . You can get these and other breaking stories 24 hours a day at bloomberg. Com. Maybe not as famous as hewlettpackard, but a storied name in semiconductors. This is a 2 billion, 2. 4 billion cash transaction. That is different than what we saw with the ginormous marriottstar would deal the other day. Industry after industry after industry, as semiconductors roll up, fairchild in at 8 . That is a romantic name back to , 1957. R of the ity lets do a data check. Francine and i are all over commodities this morning. You do not see it on the at 41. 28 perh oil barrel. Lets rip up the script here. Do not show asia dx why. Lets show the dont show the asia dxy. Spent three storage looking at quadratic charts, and he notices that as ugly, ugly as well. We have to go to Brendan Greeley for an update. The news flow extraordinary out of paris. North of paris, the stadium. Rented really, good morning. Brendan good morning, tom. Seven people are being arrested, d in city hall in sand any in a workingclass neighborhood. 23 of the people who live here come from outside the e. U. People are surprised to discover, this morning at 4 25 they heard shots. They were told by police to stay inside. There the next two hours, was sporadic gunfire, two more explosions, and we know that two people have been killed, five policemen injured. A police dog was killed and several people are in custody. We have been told by the Paris Prosecutors Office that the operation is over. At theot know whether hamid butte was part of the attacks. Tom . Francine i am going to take it from here. We have been watching these pictures with you all day. With heavily armed police, military. No how smooth it was . This at the end of the day will have an impact on Francois Hollande puppy on Francois Hollandes popularity on the political front. Brendan we do know that the president was monitoring it all night. Wassportation to the city stopped last night. This is a massive operation. We have French Regular Army soldiers five blocks outside here. We have the french regular police behind me. I cannot tell you that it went smoothly. I cannot i can tell you that it was massive. Tom Brendan Greeley, thank you so much, as the church bell chimes 11 00. The basilica, north of the stadium again. Francine obviously the basilica, named after the patients in of paris. Thrilled to bring you tomorrow joseph nine of harvard university, and roger bootle of Capital Economics. It is an exclusive and mustread for all of europe and, for that matter, global wall street. Roger bootle writing for the telegraph. His book, the trouble. Right now we have got to talk about what you and i learned in mathematics, which is quadratics in the negative space do not work. What we are seeing with negative yields, going down near its new lows, this is not in the textbooks. How do we unwind from these difficult tests . Iner i think it is actually the textbooks, as it should be. Weve had brushes with the sort of thing before, but york right youre quite right, nothing on the scale. It is a clear indication of how daft Economic Conditions are and how scared investors are. They do not know where to put aeir money, and to accept negative you like this tells you that investors are really scared. In four or five sources. Ofre seems to be a consensus how messed up europe is financially and economically. But absolutely no polarity, even, on what to do about it. There is a cacophony of theories. Am i right . Roger you are partly right. There is a disagreement between skeptics like myself and ambrose, by the way, who think we do know the answer that is to say, break up the euro and those for whom that is completely unacceptable. Tom is this the periphery leaves, or the developed nations say, no, we are going it alone . Roger it would be more comfortable if germany left. The European Union has been a complete disaster for the european economy. It becomes pretty clear after the euro was formed, not just weaker countries spain, italy, greece but france has to about it, too. Francine there you have it, tom. I am glad that you have roger bootle with you in new york. The big concern for the eurozone is schengen. Can we make it work . Roger it is a disaster. If you look back at the history of the e. U. , from a british perspective it is a strange combination. It is a combination of the trivial, the banal, the ridiculous. Things like trying to get hairdressers to stop wearing high heels at work. The record says that when those really big things come along, actually the e. U. Decides on something that is really a disaster. I do not see how schengen in its current form can survive. Francine you would be militant in asking this country, the u. K. , to leave the e. U. How many people do you think think like you in london . Roger i do not think i would call myself a militant. Im not expecting very much. You are quite right in saying that i expect to be voting to come out, and i expect to tell other people that is what i think we should do. Withif the solution here the eurosceptics and the hour are the conrad at an and the Helmut Schmidts . I see this going on a week by week basis ad hoc, am i right . Would have people said that mrs. Merkel was a giant figure. Tom things change. Roger if you were to be critical of mrs. Merkel, you would say whatever her good points and there are quite a few she does not really show a lot of leadership. She waits to see which way the wind is blowing, and when she thinks she knows which way, she jumps on that bandwagon. On the migration crisis, she seems to have made a bit of a mess of it. Tom we have time for one more question. Give me a score on Prime Minister cameron right now. Last week he was giving a speech every six minutes. Well ine is doing difficult circumstances. Politically for him it is extremely difficult. Tom lets come back. Roger bootle is with us from Capital Economics, and writing from the telegraph as well. He is apologizing because he mixed his metaphors. That is a bloomberg surveillance exclusive. We do that each and every day. We are on all that we are honored to bring you tomorrow ye from harvard university. Stay with us. Bloomberg surveillance. Francine welcome back. From theot an update interior minister and the french prosecutor, the paris prosecutor. The we know on the raid in paris suburb, they are still tracking the identity of those arrested are we do not know all of the numbers. We are hoping to get briefed on this shortly, but we understand that seven people have been arrested. We do not know whether the masterminds that plot of the terror attacks friday were in saintdenis. In d lets get to the Bloomberg Business flash with vonnie quinn. Is consideringo making another bid for attention to. Give space to a slow selling model. Mkz will be unveiled today in los angeles. Says theyork Times Company aims for evaluation of 4 billion. The ride hailing startup is. Alued at 500 million that tom have you ever seen a lift lyft . Vonnie the snapshot valuation is down about 2. 25. No harm in having a quick look at the u. S. Consumer. A very interesting corner a various terrain a very interesting quarter. We have had a very fascinating few days because last week we saw all of the Department Stores reporting woeful quarters. At this point we are seeing the , walmartovement stores having a better quarter. Maybe starting with some the homeimprovement retailers. We have a mixed view on the u. S. Consumer because it looks like apparel suffered a little bit. It was not down quite, there was some disinflation on clothing prices. That could be attributable to some warmer weather. Tom it was almost each company had its own little story. I was stunned when i looked at the target chart. The fact is, target you can criticize this, they do this wrong, they do that wrong and the answer is, this thing has been a moonshot. Kill for a stock chart like that. Vonnie if we can pull up the some depot chart or the lowe chart we had earlier look at that chart. Home depot really knocking it out of the park. The housing improvement is now getting broader. We are looking at lower price points. Hat is the story for lowes when it comes to discounters, walmart surprised. It is showing a little improvement already in terms of what investment has made. I have a dumb question, francine. Do you even have this conversation in london . I was thinking of this story, thinking of your retail store this morning when i was coming in. How do we make it resonate with a global audience . Yes, you mentioned all the talk about some of the other big retailers. I think it goes back to a macro story. So inflation is low, wage growth is picking up a bit. But the one i am watching out for his amazon because this is cross borders, a truly Global Retail store. We know they are targeting for the holiday season, to get your packages to you sooner. That will be a big difference. Watch the share price of amazon after the holiday season. It is not that concerned about making a profit, whether where these traditional retailers are still trying to get differentiated from each other. Putting investment to technology, instead of doing that, walmart should be doing what it is best that and making its prices lower. Lets see what happens in the next couple of years if people are loyal customers. Coming up, our guest will be discussing emerging markets. That is at 8 00 a. M. In new york in 1 00 p. M. In london. The conversation focuses on business, economics, and finance. Francine welcome back. We are looking at live pictures from paris. You can seeng at forensic officers and police. We do not know who is in custody. We do not know how many people are in custody, but we are hoping for a live update from officials involved very shortly. It is time for the morning must listen. Vonnie we decided to take something from with all due respect. Responsediscussing the in the u. S. To the refugee crisis. Jeb bush we have systems in place. If there is any kind of concern, we should allow people in. I do not think we should eliminate our support for refugees. It has been a global tradition in our country. Including muslim refugees . The answer is not to ban people from coming. The answer is to lead to resolve the problem in syria. That is the ultimate answer. That is my focus. That was jeb bush on with last night. This is a hot button issue on both sides of the atlantic. You said months ago Angela Merkel may have made a mistake with the refugee crisis. What is the response to be . Roger jeb bush is right about military tradition. However, it is hardly about numbers. In germany, Angela Merkel has opened the doors to one million refugees this year alone. One million. Large a that is far too figure. America and britain in countries like this cannot solve this. About thiss charming and you have this in your research 1950 seven, i mentioned fairchild. Some i conducted. 1957, the bridge over the river quiet with the bridge over i with obiwan kenobi. People from rome or milan would never go to london, but that is a different story now. All these rules are changed. Roger the key thing is the extension of the union. When the union was founded in withwith six countries, less than 200 million people, and now it is 500 million people, and the union has been extended into former communist countries in Eastern Europe any of the not that developed that has been the killer blow. You cannot carry on with the same union in all these countries. Number . T is the is the total. Six tom Francine Lacqua, we really want to drive this to the migration and immigration problem we have in europe as well. Tonight on with all due respect, you just heard from governor bush. Tonight, lindsey graham, truly one of the most interesting inple in Public Service america. Lindsey graham, with all due respect, tonight. Look at that look for that in the 5 00 p. M. Hour. Stay with us. Bloomberg surveillance. 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. Tom good morning, everyone. Bloomberg surveillance peter a gorgeous morning here, looking over new jersey. Down there by the freedom tower, camp goldman sachs. They were out with an important call on apple computer. I still call it apple computer. Excuse me, vonnie. Goldman says forget about it. They asked my children, who all want new iphones. Goldman put apple on their conviction by list. Right now we are convicted to go to our firstword news. Here is vonnie quinn. Vonnie we are getting breaking news on conagra. Officials in paris say a raid netted seven more suspects in the paris attacks. It is not known if the alleged mastermind was captured. Officials say two people were killed during the raid. One of them a woman who triggered an explosive vest she was wearing. Several officers were hurt. A loud explosion was heard in the streets nearby while the suspects were rounded up. President obama says the attack on the russian jetliner in egypt could change the approach to the Islamic State. s focus has said russia on syria has been helping bashar alassad. With slow ratings and very , bobby jindal has ended his president ial bid. You can get more on these and other breaking stories 24 hours a day at the new bloomberg. Com. Back to the conagra news. Deal, history big in the making particularly for the american midwest and agriculture. Vonnie the activists had some kind of a role in this. Two publicinto companies. The Consumer Brand will be renamed Conagra Brands and will be headquartered in chicago. Tom bring it over here. Everybody talks about conagra as some romantic thing. This is what it is about. It is about people with potatoes in their hands. This is going to become one of the two spinoff companies. For those who grew up in the midwest, unlike me did you grow up in the midwest . Vonnie the midwest of somewhere. Francine, you have a lot of refugees and economic migrants. Francine we do, and the refugee crisis is possibly playing into the economic recovery of europe. My question to roger bootle, we just saw the breaking news about conagra. We see everyday a lot of m a the adverse effects to this cheap money worldwide, roger. We are concerned about the m a deals in europe that may not be supported by anything. Do you think we are in a bubble by territory gekko i am also thinking about all this m a. Roger i do not think we are in a bubble really. If you look back at decades, they are always imperious with a burst of m a activity that is excessive. My own view is that low Interest Rates are doing more damage than all this money created by qe. If you ask yourself where are the signs of distortions in the markets, there are some. I think in london it is commercial property, Residential Property looking rather choppy rather toppy. Francine how do we do with inflation or the lack of inflation . To Central Banks have the power to take that on . Roger i think we will see when the Oil Prices Drop out of annual comparisons, we will see things move up in the u. S. And britain. The country that is different is japan. There they have a serious problem. We see with conagra and every other transaction, fairchild semiconductor, rolls ups roll ups in the industry. Lets go buy something. That speaks of Andrew Mellon in the 1930s, and we know where that ended. Do you have any concern that the effervescence of m a and finance leads to bad societal outcomes like what we witnessed in previous decades . Roger i am concerned about that, but i think it is a question of what the alternative is. Does that mean we should jack up Interest Rates to a large degree . I do not think one and done will be enough. The fed made a mistake by not raising rates in september. I hope they will raise them next month and carry on raising them gently. The centralo is bank that is getting it most right . I know we are talking about divergence. Who is the central banker that you have the most confidence in . In thei think circumstances, the fed is doing a reasonable job. I hope that we will see fed rates rise soon. If we do not see that, it will be different. If fed rates do not go up, i will start to get a bit worried. Clearly mario draghi and the ecb is extremely weak. Francine thomas very keen to talk about inflation and the Immigration Crisis in europe. How do you see that tie in with the pressure that Angela Merkel is in, one of the most popular european politicians, and her spearheading getting more refugees. How does that impact with centralbank action . Roger it does not feel as though the economic eventual impact is that big, and i suppose directly it is not that big. But the political impact is absolutely huge. Expect the National Fronts position to be strengthened, and in britain i political implications are massive. Tom the basic idea i have mithin the a. L. Sm the ils framework the chronic a challenge the chronic challenge it brings a new lower terminal rate has to have an effect on the banking system, the Financial System, on the animal spirit or lack thereof to invest. Got some Serious Problems in the west, in business. A critical issue, the lack of willingness to investment. A critical issue, the lack of willingness to invest. Got something to do with a fundamental lack of confidence about where the World Economy is going, as well as the way Corporate Executives are rewarded. Tom you really think it has to do with Corporate Executives . Roger it has to. Tom roger bootle is with us, from Capital Economics. They have their seminar in new york. Paul ashworth will be with dr. Bootle as well. Coming up, an important time to onak with Tobias Levkovich the migration of the income state in corporate america. Look for that in the 8 00 hour. From london, from new york, bloomberg surveillance. Francine welcome back. You are looking at live pictures of the area, the perimeter that was secured earlier today in a raid. You can see heavily armed police are there are a number of ambulances. We are waiting for the number of people arrested, or the number of people killed. We do not have a full update, but we understand that the operation is over but the investigation is ongoing. We will have plenty more news as soon as we get this. Lets get to the Bloomberg Business flash. Vonnie more consolidation ahead in the chips business, fairchild being bought for 2. 4 billion. The deal creates a leader in the Power Semiconductor market worth 5 billion. Es follows home depot with thirdquarter earnings. Capitalists who cofounded linkedin sees a trend in private startups. Bloomberg news is told that those valuations will not hold up when the company goes public. In some ways we are in a bubble, in some ways we are not. The key thing is that it tends to be a private market double, and a private market bubble does not have as much of an impact. It is not something that when you hearken back to 2000, 2001, you worry about quite as much. Hoffman thinks fewer than half of the startups will thrive, maybe even survive. By squareought on going public, about a third less than its last round. Tom stop what you are doing and listen to mr. Hoffman. That was an important interview. Im also thrilled that the single best chart. , we did thenutt single best chart. He does all sorts of work in volatility. Lets bring up the single best chart right now. It is out of brutal volatility. Commodities,berg from a finance basis, a really cool index. Off we go. Lehman plunge, crisis. We come roaring back, and then we rolled over into a new widening volatility that is two standard deviations, 95. 6 , or whatever, off the volatility drift. Wider. Hings are getting dean that chart in commodities come if you look at that , did i do ok did i do ok . Dean you did. Things are flowing back into Corporate Credit. bring up that chart again. I want to extrapolate this over to negative yields. I want to extrapolated over to the vix, which is churning and churning. How do you play this, or do you get under the desk . Dean the very first principle is the dollar today is worth more than a dollar in a year, and that is the negative yield. Tom that is the popeye theory, the wendys hamburger theory . Dean the diversions are significant. We think that the distress and Corporate Bonds i was just in chicago and i came back particularly bearish. I listened to what the folks on the Corporate Credit side are telling me, and the illiquidity is so substantial, so consistently cited as a risk, and the distress, the implied defaults coming through the fire spreads, i do not think are 16 in an a sweaty 2016 s p. Francine when you look at what is going on in china, when you look at the lack of investment, would you expect the volatility from commodities to stabilize, or the price of some commodities to go back up . Do we wait a couple of years until investment gets pulled out so much that there is not enough demand . Dean this is the important issue. Right now you are seeing investors in the previous commodity cycle stepping back. It is that credit provision that folks are wondering in other words, the company that has done well in the commodity super cycle, if they are starved of credit because investors are pulling back and worried that the continued declines in Commodity Prices are going to make it worse, then you have something that is a bit more selffulfilling. I would tie it back ultimately to the fed because a lot of these commodities are priced in u. S. Dollars. The stronger dollar is not just stronger against the euro, but against these things that are marked in dollars things like commodities, steel and so forth. A great chart. Ad when you look at these commodities, the six and sevenyear lows that we saw in is it links toh the dollar and how much is it linked to china . That chinaslear investment cycle was so substantial, it was the driving force of this super cycle. So i think it is a combination of both. dean curnutt and markets dean curnutt in markets, and trade by trade roger, to your view at 60,000 feet dean curnutt talks about implied illiquidity and an implied future of asset writedowns. They are implied the moment they happen, arent they . Roger do not forget the Interest Rate increases are largely in the market. Tom you believe that . Janet yellens december increase roger as long as the fed does not surprise people, i do not think it will cause mayhem. If things start going up in the eurozone there will be a serious shock, but we are not expecting that. Finale will have one more conversation. Dean curnutt is with us as well. Coming up tomorrow on bloomberg surveillance, we are thrilled to bring you joseph nye from harvard university. We will have a conversation with him on the International Relations with europe. His on his new book, optimism on america. Stay with us. Bloomberg surveillance. Francine the paris mayor speaking in paris. We are following the developments in paris very closely. There she is you can see that she is speaking to an assembly of people or the french president , Francois Hollande, is also there. We have been following very closely those developments, as very heavily armed police are r ing a neighbor are aiding a neighborhood to find the mastermind of the terrorist attacks. Tom we will continue with our coverage this morning. In foreign exchange, not all that much going on. The euro showing remarkable 1. 0664,us resistance, nicely above parity. Eurosterling, a stronger sterling yesterday. Lastker renminbi over the number of days. Bloomberg will continue the dialogue this morning. David westin joins us now. David we will continue the discussion about the aftermath in paris, unpacking the interview with jeb bush that our colleagues had yesterday, talking about the aftermath, particularly what it means for syria. We are also joined by the high rights,oner of human how much more difficult the prince of jordans job is after the attacks. And we will of course have target earnings coming up. That will be the discussion of retail with the former head of bloomingdales, michael bloom. All here on bloomberg surveillance. The with roger bootle on set and dean curnett. It is volatility, the way we use it. Every we use the vix as a measure of volatility. Fair measure. It speaks of a couple of different things. The vix is measuring the cost of hedging. Is an important measure metric you want to Pay Attention to. The volatility of the vix, there ix. An index called the vv in august it reached an alltime high. It went from 15 to 40 in the course of three days. That is symptomatic about something with a Financial System where we are prone to offsites of vicious ness. Have what chairman greenspan would call a quiet essence. Is our economics having a new volatility . Roger in some ways what we have not done because it is very moderate is the growth rate. We do need something volatile. We need output to be shooting up. I am concerned about this, very concerned about it. If you look at the amount of prodding that has been done by Central Banks and governments, it is striking how comparatively weak the economy zahra. When you look at europe comparatively weak the economies are. There is just simply no nominal gdp. Francine there is not, tom. You are absolutely right. There is the impact of spending, and then we are helped by low inflation. Talkingx that dean was about my question is, when you look at volatility in different Asset Classes, we had a great bloomberg chart talking about volatility on currencies. If you play that compared to commodities, what is the most volatile asset class out there . Dean it is the junk part of the credit market, the different Asset Classes that reflect the most distress in that, and i would also say crude. You are looking at volatility of about 40 . These are extremely elevated option prices. If crude goes up, that has tremendous implications for things like Ray Kay Hagan even like breakeven inflation. That will absolutely flowthrough to Corporate Credit. Spread market showing that new low price and oil, or does it adjust . Dean it certainly reflects a lot of distress. But even if crude goes sideways, and this is based on a significant survey of people that are trading Corporate Credit if crude goes sideways, if these other Commodity Prices go sideways, there is more distress. Tom does crude help out europe . It has got to. Has been growing this year, faster than it has done in quite a while. One of the reasons is simply much lower oil prices. Go back to going to paris right now. We have more live images as well. The story intruding by the moment, and we need to bring you as much as we can. The climate talks are coming up in a number of weeks. President hollande will address the french mayors here in a moment. This is a recent film that we have from north of paris. And again, it is an ongoing story. We have had headlines across bloomberg, above same the knee above saintdenis and the stadium. They are working on cleaning up the site, but that is very fluid and we will have that for you in the next hour as well. Roger bootle, thank you so much. Congratulations on your work with Capital Economics. What next for the Global Economy . Dean curnutt, thank you very much. That was a very geeky moment with dean curnutt as well. Bloomberg is up next on bloomberg television. We will continue on Bloomberg Radio with bloomberg surveillance. Good morning. David high drama in paris, police stage an ambush. Europes opendoor policy is under fire, we will discuss solutions today. The new insider traders, hacker steal information from bank computers then sell it. David welcome to bloomberg. Stephanie i was at the robinson conference. These of the Biggest Hedge Fund managers in the world. We have been talking about how we have not really seen a market attacks in the france. More investors were simply holding tight, or sitting in cash. That is surprising. Stephanie were they talking about paris at all . Stephanie they really werent talking about paris, but there