A huge Police Operation reports this morning that one of the men suspected of carrying out yesterdays attack as surrendered and is in custody. He has been named as an 18yearold. French Police Released pictures of the two still at large. 12 people died in the attack. Overnight, police have been searching the building in the northeastern city of rimes 90 miles from the french capital. Police have not released details. France remains in the highest state of terror alert. Francois hollande is holding an emergency Cabinet Meeting this morning. There will be a national day of mourning. Our International Correspondent hans nichols is on the ground in paris. Good morning. What is the latest update on the search . The latest update is that the searches ongoing. This is very much a city and a country not only in search for two suspects but in search for answers. How did this happen . How did two french nationals, 32 and 34, how do they become radicalized . We do know that the younger brother was arrested in 2004 in connection with potentially recruiting jihadis to fight in iraq. At the time he told his lawyer that he was delivering pieces that this was a young man is urgent and self. The question is how did he and his brother become radicalized . What was that transformation . When you look at the bullet spread i am standing right outside the office when you look at the bullet spreads, you see they are in tight formation, in clear indication that they may have had military training. The question is where do they train and when . It is estimated that 1000 french citizens or residents have been fighting in syria and or iraq. The other side of the story is the search for political answers, for sociological answers. Vigils are gathering all across paris. This is a city that is resolved and resilient, and continuing with life as usual. There is a heavy police presence. We heard yesterday from the president that he will be having a moment of silence later on today. Lets have a listen to what he said yesterday. Today it is the entire republic that was attacked. The republic is the freedom of speech, the republic is the culture, the creation, pluralism, democracy. This was the target. The ideal of peace and justice that france carries out everywhere on the international scene. This message of peace and tolerance that we also defend with our soldiers to fight against terrorism and fundamentalism. It is a national day of mourning, and as the search goes on, the political search will continue. Hans can you describe the mood in paris . It is a mixture of grieving and anger but resolve, there were makeshift vigils. In berlin and london we saw an outpouring. Already this has been taken over by politics. Marine le pen weight in. Listen to what she had to say. The objective of these barbaric acts is to terrorize, paralyze through fear, to subjugate or to censor. Undoubtedly, this attack that traumatized the nation there is there. It is my responsibility to say this must be overcome in to say this attack must liberate us in the face of islamic fundamentalism. We must not stay quiet and we must speak up about what happened. We must not be frightened of words. This terrorist act was a denial. In attending some of those vigils, i stopped by. It is remarkable how quickly this has shifted to a political debate. There is a very frank, open, and robust conversation about what may have to be done. Also what it means to have a free press in the west. It will continue as the search for the subjects goes on. Thank you. Our International Correspondent hans nichols, in paris. For more analysis of the terrorist attack, we are joined by Pauline Neville jones. He is currently a member of the u. K. Parliamentary National Security committee. Thank you so much for coming in. Lots to talk about in terms of the political and geopolitical application. Sticking with the security angle, take us behind the scenes. Tell us what is happening across europe, across france, in terms of the security. They will be encin close touch with each other. One thing you have to guard against is any followup action. They will be vigilant, they will be looking for the possibility of copycat action. They will be briefing their political masters. That has already happened in the u. K. And will happen again today. They will be looking to see what further security measures need to be taken. If we see extra vigilance on the street today it will be a direct conflict. All those things we put in place. It is partly reassurance but also partly to make sure it is possible to safeguard against this kind of attack. Safeguarding we are going to have a meeting with the cabinet. Give us a sense you have been involved in times of heightened tension give us a sense of what will be involved, what kind of issues will be raised. There is obviously a high state of alert and a day of national mourning. There will be the formal and procedural side how do we handle this as a nation . How do we give due prominence to the act, but also create a situation in which it is handled properly . The church will be involved. The other side is the immediate. What how much do we know by the fugitives . What do we know about their escape . Are we able to chase them . What are we doing what are they doing . They may intend to get out of to get out of the country. They may have planned a rou te. There are some areas that are pretty porous not difficult to get across that they had to. If they got helpers what kind of assistance might they have outside the immediate terrace area immediate terraceparis area . And what kind of cooperation might they need . That is part of the urgent to talk. The other thing they will want to prevent them doing anything else. One of the things they might attempt to do is go out in a blaze of glory. Can you give us a sense, pauline, of how difficult it is from an antiterrorism standpoint to guard against these lone wolf attacks, people who are motivated by the Islamic State . I think they are the most difficult. This is not a lone wolf attack like what we saw with rigby. There were two individuals involved. Done, as far as i can tell, planned. It didnt require an enormous amount of planning. The thing about this attack is that it has been very wellplanned. It hasnt been done overnight. On the other hand, it may have been done reasonably quickly. It involves people in the same family. Do they need to communicate by telephone . No. Electronically, any traces at all . No. They cant put this kind of operation together they can put this kind of operation together. I dont know that they were in the french armed forces, but they have been active. We ask the question what did the police know and where should they have been . France has been on alert for something to happen for many months. We have seen is make videos seen i. S. Make videos but failing that, calling on people to make acts of violence. Will they increase it will be interesting to see what kind of who claims and on what basis. Part of the propaganda in particular, it is media savvy. They have been encouraging this kind of behavior and they will seek profit for this brutal act. Pauline neville jones, former u. K. Secretary and counterterrorism minister. Thank you for joining us and giving us your insight. Lets turn our attention from the terrorist acts in paris to our top corporate story of the day tesco and the problems it is facing. A strategy update to come as well. Caroline, the ceo what is on his plate . What is at the top of the agenda . An awful lot. Not only unveiling sales, but a new strategy. Dave lewis earned himself the nickname drastic dave due to his overhaul. Will he be drastic today . Many think he wants to attack three key priorities improving competitiveness, the Balance Sheet, and rebuilding trust. In terms of competitiveness, we have already seen some numbers. They will be cutting prices on average by 25 over 400 products. This price wars building in the u. K. How far will he go in terms of investment in prices, given that has two Key Competitors are investing 1 billion . Also, is when drastic comes into play when looking at the Balance Sheet. Tesco is not concerned about its debt rating could it fall into junk territory . How do they shore up their Balance Sheet . They could sell assets. Already there are reports that they could sell their tv streaming business for 5 Million Pounds. Tescobank, their Asia Business the analysis behind club cards. There are also things they could sell in terms of their Pension Scheme. That would be relatively drastic. There could be changes to their supply chain but most of all, what everyone will be looking out for is the cell of new shares. That would shore up the Balance Sheet that many people think that is a needed. In terms of trust, it is all about getting more staff in and hiring a new ceo. It is Building Confidence in terms of that supply chains of that we never, ever see a statement of profit like we saw at the end of last year. Caroline, lets see what mr. Lewis is up to. He was here in london. I think you can probably guess what the most popular subject matter today is, the one that is trending the most. Jesuicharlie. Let us know what you are following today. Coming up, most recent minutes from the fed. Optimism about the u. S. Economy and worry about inflation being too low. Will the fed raise rates . We will ask Morgan Stanleys lets turn to the u. S. There are suggestions that a rate rise will be likely. We are joined by Morgan Stanleys head of global currency strategy. Hi. One of the surprising elements of the minutes was that a number of participants were worried about inflation undershooting the feds targets. With inflation well below the feds target of 2 , can the fed really hike Interest Rates possibly around midyear . It looks like it is well it is going to hike in the First Quarter of 2016. In that sense, we are very comfortable with this. We think the undershoot of inflation is a very important thing for us, for the central bank. The other thing about potential debates of Inflation Expectations we are coming out for a of a huge economic slump. You do not want to low inflation rate that could reduce the escape velocity. That means that that will come late to hike rates. Then they may go at a quicker pace. There has been this debate about, going now, flatten the profile out i think that is not going to happen. What you will have is lets develop the escape velocity, make sure the economy is borrowing, make sure wages are increasing, that you can be assured that it is not going to lead to a second round of fact, taking core inflation levels lower. Then when you see wages increasing, when you see core inflation going in the right direction, then the fed is going to act. But that will be timeconsuming. I noticed this morning that you are absolutely g3 currency. These are three ostensibly long dollar trades. I guess it was in november i was emphasizing that, too. What you have to see here is that this is not about the u. S. Dollar in light of policy. What you have to see is that there are growth differentials. To say that is what fx traders have to look for . It is a gross differential and you have to look into debt. In 2005, a where the u. S. Dollar had a very brief one year rally, and emerging markets continue to perform in that year the dollar denominated by about 300 billion. That makes the difference. That level in dollars around along u. S. Dollar story for much longer than you may think. Thank you. It will talk to hans when we come back about the risks of political fragmentation. We will be back with more on countdown to. Welcome back to countdown. The Morgan Stanley head of global effects has let us try to digest what we saw in paris and what it means for risk. Do we see a heightened risk of political fragmentation in europe . Is that the implication . I certainly think so. Political fragmentation is the main risk for euro business. Parties there are far right and far lefts. There is going to be further fragmentation. When you see the current debate about greece what may happen after a new government comes in to greece the political wars are completely justified and maybe they are would talk to any government they went right off the greek debt. That is something to look at. The restructuring of europe is under german guidance auto liberalism. Call it autoliberalism. It is about market and it is about law. You candidate if it is a successful law or not but the germans dont want to change it. If greece comes in and says i want to negotiate, and greece a successful and if greece is successful, others will ask for the same. The Currency Union would convert into something else. The alternative is that germany is going to stand very firm. The greeks are talking about, well, we can really negotiate. All of a sudden you have two positions which do not understand each other and you would have an exit. Nobody wants it but all of us like a sleepwalking situation. I hope that everything i could see us the second most likely situation, auto liberalism goes out the window. We have this weakness in the european economy. We are restructuring, we have rear rates being negative. You have fiscal multipliers always operating far above 1. That means if we are getting into fiscal looseness for a. , you are getting for ap period, that leaves an impression. They could temporarily rebound but only to fall much faster. Thank you very much for coming in today. Head of global effects strategy at Morgan Stanley. Coming up, france begins a day of mourning. The manhunt in france continues. 6 30 this thursday morning. This is countdown. The dollar is the story. The fed minutes really set the tone, which is that the Federal Reserve stay focused on the core inflation rates. The market believes it will get a raise hike this year. The dollar index is training in a manner we havent seen since 1998. We just had a conversation with Morgan Stanley, telling us clearly that no rate hike in the United States until the First Quarter of 2016. Why is it trading like 1988 . There was an oil collapse and a falling commodities, a recession and the russian events are reminiscent of that. Period. Lets have a look at the euro. We made a new nineyear loan. Low. 11802. Back in 2014 they said it would drop to 1. 20. By the end of 2016, the median forecast was and that is pretty much where it is. The bank of new zealand says the dollar appreciation is the cause of their strategy. These are bloombergs top headlines. France will observe a national day of mourning in the aftermath of yesterday positive ys terrorist attacks. One of the suspects has surrendered and is in custody. A massive manhunt continues for the other two. French police have released pictures. They are still at large and thought to be armed. The Federal Reserve held a Market Committee meeting. They revealed agreements among the committee that the u. S. Economy will continue to grow, but some members have concerns that inflation could persistently remain below their 2 target. Janet yellens said in a statement that an Interest Rate increase is unlikely before the april meeting. David cameron and Angela Merkel are speaking in london at a joint press conference both condemning the terrorist attacks. Cameron said the problems in relationships with europe can be solved. Merkel said she wanted to see the u. K. Remained part of a strong and successful europe and that she supports keeping greece and the eurozone. Tesco will be updating the market on its turnaround strategy at 7 00 london time. Bloomberg has been taking a look at the scale of the task ahead for tescos cheat executive. Chief executive. Tesco became britains biggest retailer in 1985 stop the next 17 years saw huge expansion, both at home and abroad. As well as grocery stores, the country launched a bank a network, and a record label. But in 2013, tescos fortunes began to slide. Annual profits were down for the first time in 20 years, and they began to trim the fat of its global business. 2014 began badly. The Company Issued a profit warning. Following another warning in july boss that clark is removed. He is replaced by dave lewis. Tesco says it plans to slash its dividends by 75 , and shares plummet wiping 1. 3 billion pounds off the companys value. Then, the bombshell. Tesco overstated profit by 250 Million Pounds. For executives are suspended. Four executives are suspended. Tesco issued a fourth profit warning, saying trading revenue will be halfabillionaire is less than it predicted. Wielding wringing the details of that strategy update just after the top of the hour at 7 00 london time in roughly 25 minutes. Lets return to paris. The youngest suspect in the shooting has surrendered himself to police. Hans nichols is on the ground in paris. Hans what do we know so far . You know that the search continues for the two other suspects, a 34yearold and a 32yearold. That is what the focus is on. This is a city in search of those two men. Also a search for answers. How into french nationals who by all the accounts grow up here become radicalized and militarized . Right behind is the office that was the focus of this attack. What you see there and when you look at the spread, clearly, it may indicate that they had some military training. Some thousand french citizens are estimated to have fought or have gone to syria and iraq. That is another side of the question how did this happen . What is next . We know that the 32yearold has been in and out of risen and was convicted and it out of prison. Somewhere along the line authorities lost track of him. They will be a moment of silence at noon today. France was a long talked about Francois Hollande talked yesterday about the need for French Society to persevere. Today it is the entire