Across bloomberg hd, the idea of europe with 0 inflation or deflation right now underscoring where we are. We will have that as our single best chart this morning. Right now we need our single best news. Here is vonnie quinn. Vonnie rising 0 , a scary proposition. Thesenate make sharing Senate Making sure the u. S. Will not default on its debt. Of 80ases budget caps billion over two years. Hascentral bank of japan kept its Monetary Policy unchanged even though inflation is not going above the 2 target. Oil prices fell in december for the second straight month. More than a dozen countries are wrapping up the most ambitious attempt yet to end syria civil war. John kerry was one of those trying to broker an end. Attempts to find a political solution has have been stepped up. After aees are dead boat trying to reach turkey sank overnight. The rescue came one day after the countrys coast guard rescue 242 refugees after sinking. View when says 400,000 migrants, many of them from syria, have reached by see this year. Chinas territorial claims have been challenge for the second time this year. A u. S. Navy ship sailed into the 12miles own around chinas manmade islands earlier this week. One of those islands may soon be the base for an airfield. A Retail Group Says americans will spend 6. 9 billion on halloween. Tom are you kidding . Upnie the cost of candy is 4. 2 . That is sugar, i believe. Trickortreaters will be gathering goodies tomorrow night. Tom i have been ordered to go as a panda. Bamboo. , it is like whole foods had a thing of bamboo for me to chew on. Vonnie scary, tom. Tom let me do a data check and get to our chart. Tim craig joining us from asia. Right to the dollarrenminbi, if you would. On a friday, this is what gets your attention. Usdc ny, 6. 31 handle. That is strengthening in the chinese yuan. Here is what you need to know. A managed currency china gives it up. Appreciation d valuation, appreciation the biggest move since 2005 of you on strength today. Vonnie we are getting all those headlines. Offering up lots more. Tom there it is, off the bloomberg terminal. Yenone the surprising husband. Tim, what is the free trade zone in shanghai . Prada storehe and the chanel store put together . The shanghai freetrade zone is an experiment that was out some time ago, back quarters ago, and there have been various experiments that have been put in place through the freetrade zone, a lot of them financial reform, and the issue that came out today was a nod that they will allow domestic investors to have more freedom to buy overseas assets. Funny as it is, if you think about that, in and of itself, that was just more outflow, which would be negative for the yuan, but the idea is this is all part of financial reform, currency reform, which gives the ,mf reason to put it in the fcr which will create more demand for the yuan. A dumbt me ask you question for friday morning, and you are into saturday in china. Has there d valuation been successful . The devaluation has been a longterm managed weakening. If you go back to where this started a couple of months ago, it is only 1. 9 . Backwardsce rallied 1. 9. It has been marginal at most. We think over the course of the next several years you will see more weakening, but it is not going to be a devaluation of 20 or 30 . Tom what will you focus on this week . Us athe core for Bloomberg Intelligence is thinking about the big document that will come. Case so far got a that emphasizes things Like Technology and innovation, environmental protection, the , ining shift in the economy manufacturing to consumption. Figureill be a much seven documents that will come out over the next week or 10 days, and that is what we are looking to get our hands on, to see what is the more precise blueprint that takes off from the third plenum a couple of years ago. Tom tim craighead, thank you so much for staying around in hong kong. Bring up that chart again. This chart is so gorgeous. George got tears in his eyes looking at it. 2005 ofession from china depreciation do you notice how the red line goes through the middle blue circle . Euclidean god. Right through the second appreciation. Wells fargo, and he tears up like i do. Can they manage their future through their currency . George i think they are doing a pretty good job of it so far. If you look back over the course of the summer, the big swoon in stocks was really led by the downtrend in fears about growth out of china. The market seems to be clawing , backrom those concerns up to where we started. The currency is starting to rebalance, and other markets are leveling out as well. To take your allocation of credit markets in the United States take it abroad. When people like you throw out this word liquidity, whether it is china or japan, or the challenges that europe faces in central banking is liquidity and issue . Is the oil in the engine an issue . George liquidity is an issue especially in credit markets. That is what Central Banks are trying to do, lubricate the system, accelerate the flow of money. The central bank in the u. S. Has been successful in doing that. They were able to kick up bond market activity, loan activity that filters through to the economy. The ecb is trying to do it. The bank of japan is trying to do it repeatedly. The chinese are doing it as well with more cutting rates rather than qe. But the cumulative effect of all of this liquidity is that it creates dollars and currencies that are being pushed back into the private sector. That is what we focused on, is how does that impact the ,orporate sector in the u. S. What are companies doing with it, and where does that money ultimately go . When i look at what is happening with credit, the last five years, an explosion in dollardenominated debt, i see if we are i wonder about to experience a boom in euro denominated debt. Is that the space you see in the credit market . Markets havet different leads and lags. The european credit zone is probably six to 12 months behind the u. S. Now. We have seen a substantial increase in corporate borrowing in the u. S. , and i think it is reasonable to assume that corporate borrowing ticks up in europe as we go forward, pushing down yields, encouraging lending has been a tenant of what the ecb has been trying to do. We have seen some of that come through as Economic Activity picks up. The need or desire to leverage up those earnings is going to increase. Corporate europe will start to borrow more as we go into next year. That youcompanies speak to, where they thinking about the supply issue in the u. S. And are they looking at europe . Is that something that you are seeing with those corporate at the moment . George u. S. Companies, very much so. If you look at the pattern of issuance this year, there has been a tremendous amount of eurodenominated that issued by u. S. Domiciled companies. That was a pattern that was quite significant earlier this year. It slowed down a bit, but it is relatively attractive. That is particularly true for international companies, for global companies. Ande multicurrency revenues liabilities, tapping the euro market i think has proven to be a pretty attractive source of funding for them. And a way to diversify their traditional u. S. Denominated debt. The wells fargo column, the 10year yield, year out where is the 10 year yield . 4 . 5 . George not quite. By the end of next year we are around 2. 5 , 2. 6 . Tom good luck with that. We have heard that before. We have to look at International Economics and relations today with the news out of japan, and of course out of china. Coming up from washington, ian bremmers Eurasia Group nicholas will join us. We will talk about truly a surprise key announcement out of the chinese. Vonnie quinn in new york. Jon ferro in london. Bloomberg surveillance. Jon this is bloomberg surveillance. Im Jonathan Ferro from london, tom keene in new york. This is the Bloomberg Business flash with vonnie quinn. Vonnie beer drinkers are apparently going for more expensive brands. Premium beers are better than expected. A proposed takeover of sab miller by and has buy in bed by inof sab miller bev. And a dispute about the future of air Traffic Control. Membership ended its in america. The group wants to privatize air Traffic Control powers. Everyone. Morning, upstream, downstream, you know it is about hydrocarbons and makes for great cocktail conversation. There is a reality to knowing what youre talking about. Has spent many years diving into not only the this ise minutia exxon in his report this morning. But also what they are doing within the dynamic of upstream and downstream. We are caught midstream with Peter Pulikkan with Bloomberg Intelligence. Downstream is where all the glory is right now. You and i know that always ends in tears. Are we going to have overproduction, a screwup in refineries again . Peter there is definitely a possibility for that. The refining business has been bolstering all of these businesses. Will really see pain is in the upstream business. That is where these companies have a massive funding gap. For several years their operational fences and cap their operational expenses and capex have been more than their balance flow. Tom where is exxon, down to the littlest guy you know, going to adjust their Balance Sheet . Peter march of what happens with the bike refinancing from the rollovers . The Bank Refinancing from the rollovers . They have great assets in terms of reserves, and a lot of these loans are based on reservebased lending. The smaller players are cut from followthrough. You will start to see the pain increase. We did not see it this time around, but coming into 2016, these companies are reaching the end of their rope. Jon i want to go really big picture and go back to 12 months ago, a shift in shenzhen from saudi arabia and opec to say we one volume, we want to keep it, we do not care what happens with price over the next several years. Is that strategy in place still, or is it too early to say it is failing . Peter i would actually say it is succeeding. Essentially what they are trying to do is push out higher cost offshorend expensive bases. What they are doing is working. Where they miscalculated is that it is taking longer for them to push these players out of the market. December 4 is the next opec meeting. We will find out whether they are going to cut production. My bet is that they continue with existing strategy and produce at current levels are higher. Jon to your point then, it is happening in a longer timeframe inn expected 60 crude is the projections and that is what they are shaping Balance Sheets around. I recently saw an imf report saying that saudi arabia has five years left of low oil prices essentially. Five years since they fix this problem. But the reality is there is very low debt to gdp. What you will see is the weaker players in opec get hit first. Countries like venezuela. Do not do buy or sell with Bloomberg Intelligence. But let rake a rule today. Sweeney is not watching he is watching duke football. Here, twoe down standard deviations down. Is this a general statement about big oil so you do not end up in the timeout chair . Almost aok at this as generational opportunity to climb on board the oil . Peter i do think in this downturn if you think about what this downturn resembles in terms of analog, it is 1985. What happened in a can a five was similar to this. In these prolonged downturns, potential lost decades, where you want to be is exxon, chevron , and those kinds of players. Tom gracefully he got out of that. , we will discuss Balance Sheets with the former president of shell oil. He says things that would get him in trouble if he were still running shell oil. That is at 10 00 a. M. This morning out of new york. Jon ferro is in london, i am in new york with vonnie quinn. We will talk about Interest Rates later in the hour. This is bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. Futures are quiet to the market. The big news, rending the renminbi moves are in washington moves as well. It must be time for the morning mustread from vonnie quinn. Vonnie i get them morning mustread from the financial times. Bush talks about paul ryan he, too, believes in fairer taxes and regulation and rejects subsidies for corporate entrance. Saying paul ryan is making republicans look a little bit better, and there is a potential solution in terms of a wide spectrum of social and economic ideas. Tom i am looking at the cover of the new york times. I thought his suit had a little bit of lantus to read in it from game of thrones. Basically the guy is working in total chaos, right . Vonnie exactly. It looks like there might be some kind of way forward. Through some kind of tax overhaul. Tom he was in front of a railroad car like four years ago, and he is a guy who likes big plans. He likes a plan. How do you do a plan . Yeah, it is a great read. At least he can improve the republicans image and not go with the moral or grassy the moral orthodoxy. Here is jackc idea kemp was from another time and place, from another gop politics. Vonnie exactly. George, it is into the markets that we are basically going to have the not going to have the show not that we might have had. George it is one more concern that has faded away. There is a little bit of anxiety about it, a little bit of talk, but it proves to be a lot of nothing in the end. And the market is Getting Better looking through these political concerns. Maybe someday it proves to be a legitimate issue. But for now, it is one more minor blip on the road of markets. Tom we are going to come back with george bory from wells fargo. What do you want, folks . I cannot talk any day of the week as well. We will have an important conversation on a most interesting rate environment. And Nicholas Consonery will join us on the bombshell news out of china over the last 48 hours. Worldwide from new york and london, bloomberg surveillance. Jon this is bloomberg surveillance. Im Jonathan Ferro, with tom keene in new york. That morning to vonnie quinn with your first word news. Vonnie another deadly attack reported in syria. Opposition activists say at least 40 people were killed when government missiles hit in a suburb. More than one dozen countries are meeting to get meeting today in vienna. Secretary of state john kerry is taking part. For the first time, so are saudi arabia and iran. A consultant working to improve u. S. Iranian relations has been arrested. Is awaitingt in sentences awaiting sentencing. Approval onve final the spending and debt deals. It boosts spending and ends turmoil among House Republicans per japans interbank says there is no need to add stimulus to the economy. At the same time, the bank has postponed its timeframe for weakening 2 inflation. A champion is taking his final bow tomorrow. The triple crown winner will retire from racing but not from ernie. He could bring in from earning. Those are the top headlines. Tom i do not know much about the breeders cup. Aded papadopoulos will join us David Papadopoulos will join us from bloomberg radio. He can lighten my wallet like nobody. We have breaking news, and this from russia. A bit of a surprise jon ferro, the ruble dances. Russians do not cut rates. It stays stable here. I am taken by the headlines on inflation as well. Jon i am trying to think through it. Clearly she wants a little bit of space left. There was concern that they wanted to cut rates. The Central Bank Governor did not discuss it at that point. Russia as we are on well. We go to american banking, and this is the merger derby everybody has been waiting for. Keycorp an interesting Regional Bank turnaround through the financial crisis. The Buffalo Sabres lost to the Pittsburgh Penguins less like. Keycorp the buy first niagara. It is a 4 billion transaction. Gerard capitals chirag saiddy of rbc markets has we go back to china within the news flow. Nicholas consonery holds News Conference calls. What a plenum. I thought i would be boring i thought it would be boring, but i was wrong. The idea of china shifting, whether it is two children, one children, or whether it is a freetrade zone in shanghai it is about the people of china at the end of the day. What do these announcements signal to the demographics in the sense of the scale of the people of china . Nicholas we have an indication that this administration is truly a reform oriented administration. The plenum reinforced that. The onechild policy relaxation is a piece of that. Clearly this government is trying to be more proactive when they think about the challenges they face over the longer term, and the demographics is a big piece of that story. 6. 5 how critical is that gdp level to the politics of beijing . Nicholas i do not think it is that critical. The economy is growing well below the 8 redline that everyone said if you grow less than 8 , china will have massive falloutment and a huge with instability. I do not think we have that. Jon 6. 5 is not a low growth environment. Highercoming off a space. In the years to come, a lot of people are concerned about the 6. 5 annual growth target concern is there is no room for error at all. Can they achieve that and reform at the same time over the next five years . Nicholas i think there is some room for flexibility around those numbers. The government is trying to single that directly to signal that directly. Now they call the targets around 6. 5 or 7 . I think there is a recognition in beijing that for Slower Growth structurally, it is unavoidable. I am not so worried about the tradeoff between reform and growth. I think they can manage it and focus on a reform agenda right now. Jon the people that dig through the headlines this week see all these marginal tweets, from big things to little things. What stood out to you out of these meetings in beijing . The onechild policy relaxation was not surprising. It has been in the works for years. I am focused on