Surveillance. Withuy johnson in london tom keene in new york. I heard you on the radio this morning. You sounded good. Good, you let me know what was going on. You sounded great today. Guy i feel a warm glow of appreciation. Today feels like a weird day. Is adding stimulus. Oil seems to be stabilizing. What seems to be going on . Clumsy tuesday. We have oil on a bid but we have smart guests to get us forward. John silvia will be joining us in the hour. Guy looking for to that. Lets get everybody up to speed. Vonnie the white house is calling the killing of six u. S. Soldiers in afghanistan cowardly. They were killed yesterday while on patrol. They were targeted by a suicide bomber on a motorcycle. The taliban claimed responsibility. Two other u. S. Service members and an American Contractor were hurt. Of tech raises the Number Service person killed this year in afghanistan to 21. The versatility is confirmed in the china landslide. Rescuers pulled a body from the pile of rubble. As many as 81 people are still missing and some may still be trapped under 30 feet of mud. Buildings were damaged or destroyed. A manmade pile of debris triggered the landslide on sunday. A human rights lawyer will be freed. He received his sentence yesterday in court. He criticized the communist party. He wont go to prison but he may no longer act as law. President obama plans to host a u. N. Summit on the refugee crisis. The u. S. Ambassador to the United Nations says he wants to push other countries and the private sector to increase the amount of humanitarian aid. Ford and google could mean that they will be the first to put a driverless car on the road. A top google official has said that the company aims to put an Autonomous Car on the market within five years. Google has hundreds of people working on the project in detroit. Executive the forward the ford executive to head the program. And triumph for spacex. The rocket return to space returned from space safely. Orbitlcon nine went into and the tramp for elon musk comes months after the explosion of the unmanned cargo rocket last year. That is the first word news. You everybody take shots at on musk and i have questions about what he is doing but this is technology advancing. Vonnie the next frontier. I want to pound through the data check. We have an important guest. Not much going on in the markets. It is always news when there is nothing going on. While gets a bit. 34 handle yesterday. Lets keep this short. To. 95 . Ield back royale is up. Were talking about the turkish lira today as well. Guy the turkish lira is certainly on the agenda. , u. S. Futureser and fair rally on the terminal telling me we are down on the s p. The Australian Dollar is reacting to the story, the turkish lira is weaker going into the Rate Decision. And the eurodollar is trading up by 1 10 of 1 . Tom the correlation with the liquidity over to the bloomberg terminal, we keep it simple. Our Commodity Index is on the chart. Year twor chart of the months ago because this is the chart of the year. Eisenhower, 1956, down we go. China boom. Lehman brothers low. Getreally wonder, when we down here, does it extrapolate out . Vonnie exactly, how far does this continue . Tom Industrial Metals all and all. Of course we see carbons. Today, that chart is the chart of the year. Guy it is. If you take one chart away from the year, it will be that one. That leaves us on to the next story. Chinas leaders have been signaling that they will take steps to support growth fiscalng widening the deficit and stimulating the housing market. Lets get a sense of what has been said. Nic joins us now. Thatis an annual meeting takes place. What did they say . Rare that the Chinese Government actually telegraphs its policies for the year ahead. They are saying is that they will step on the gas. They will lobby deficit to get bigger and they will use a more flexible policy. We interpret that to mean more interest cuts. Full steam ahead. They will really try to stick to the target for next year. Guy what does this mean for the growth . The switch from an industrial policy to a serverside policy . Tell us what we can read between the lines . i think the big conclusion there is that we are not there yet. The government has raised a lot of concern about the new normal of stable growth, growth that depends on consumers and not infrastructure investment. The latest amon makes it clear that high target is important to them. And if the target is and managed properly, theyre going to keep pumping in liquidity. And adding to the deficit. Tom i like how you call that manage. Lets bring up the chart on the chinese equity market. Up 60 or so from the green circle. It is called the alive cat bounce. Nick clearly, whenever the market goes a little bit down, the government has shown itself very willing to get involved. Ban can ban companies, stateowned companies from selling shares. So they have a great deal of control. You pick the chinese stock market in your 401 k . Nick definitely not. This is not a market for value investors. Tom there a good. Investment advice from nick wadhams this morning. Guy lets bring another voice in. Joining us is marvin barth. Good morning. Lets talk a little bit more about china. The chinese are going to manage this story. Of the going to use all levers at their disposal to make sure that we dont get a significant falling off the cliff. The last couple of days have seen the currency stabilize a little bit. Can we expect these wider process to include the continuation of the d. C. Creation of the depreciation . Is the we think that likely case. Especially against the dollar. They do have a mini depreciation. And they said look, Going Forward, they will move towards a focus on the Real Effective Exchange rate. That is going to mean that it will depreciate. We have been forecasting that dollar will go to six 80. By the next year. We see upside risk to that. They are trying to manage the economy. We see a lot of Downside Risk to that. They have done an amazing job of managing the economy over the but the problems are getting much more severe. And more difficult. The size of it is larger and it is more complex. That means there are more risks. Go for a minute where are the known unknowns . Think there are Big Questions on both. The biggest unknowns are associated with how china is going to handle this policy. And in particular, how they will open the economy as they have suggested. And have the sdr basket they are moving towards opening the economy. That is opening a whole can of forms. We see this in every other economy. You get to the stage and you open up the capital accounts, that is when you run into potential problems. And we dont know how big they might be. Discount, we shouldnt the risks from the fed side as well. One of the things we have talked before about is the idea of miss inflation. That there is no inflation. This is what we heard about from janet yellen and that is what could posh the fed off the projected dots. Tom what is your yuan call . Where are you . Marvin we are at 6. 80 at the end of the year. We see significant upside risks to that. Tom we have the bowtie turvey derby. Very few people could pull that off. Knot. At his not as my professional versus amateur. Marvin my daughter claims i look like a clown. Tom it is gorgeous. It is 19th century. Can you see a difference . And amateur. Hour, johnn the next silvia is joining us, an important interview with the chief economist from wells fargo. Guy welcome back, you are watching bloomberg surveillance. Not looking christmasy, it looks springlike because it is so warm. This is bloomberg surveillance. You up to speed with what you need to know. Here is vonnie can vonnie quinn. Chinese leaders say they will take more steps to stimulate growth. They are trying to put a floor under the company slowdown. The Central Economic conference said that Monetary Policy must be more flexible. Nd fiscal policy more forceful carlos slim had the worst year according to the bloomberg index. He lost about the size of the hunters economy. Giants arecations headed for their biggest decline since 2008. He is now the worlds fifth richest person. Bank has identified as much as 4 billion in suspicious transactions related to its russian operations. People familiar with the banks tell bloomberg that the account is in addition to 6 billion in trade that are under examination. 10halflife as much as million in trade that may not have been vetted for Money Laundering. That is our Bloomberg Business flash. Lets get more on the Deutsche Bank story. How egregious are these transactions . They are just being investigated at the moment but they do look suspicious. Jonathan this isnt a new story. They were talking about this on the Second Quarter called. There is a of press conference coverage. To 4crease in scope billion, that is the big question. Is this about Money Laundering and does this become a sanctions violation . Standard chartered in the past beenaid a solidifying and required to implement a lot of new compliance steps internally, some of which have failed. So this is a very big issue. I dont think this is big news yet because the investigation will continue for a while. Guy how does it end . Fine at someh a point and with new requirements and a 35year time of steps for the banks. Look at Deutsche Bank and they go from 9 billion u. S. Dollars of operating income and you tell me, down to the vicinity of 4 billion . This is an ever smaller and smaller and cooperation. Would you explain where Deutsche Bank will be in 12 months or five years . They will continue to try to be the Investment Banking champion of europe. The retail approach has been dismissed and they are shrinking while they focus on fixed income and commodities. They have increased their capital position. They have been widely flagged as the last man standing. Tom to your work and the work , sheer,r of many others will be european banks do better against the two big to fail american banks . Jonathan i think market share wise, it is difficult to argue why they would. It was lending and that was the fixed income opportunity. It hasnt happened, two thirds of u. S. Corporate is funded by the debt capital market. It is one third in europe. It was supposed to shift. Talking about the European Opportunity but those numbers havent changed. Until that changes, i dont think it will happen. Tyce, thank you so much. Have Chris Perrone chris tom 70 degrees tomorrow. It is beginning to look a lot like christmas. It is warm here and in london. Nobody needs a winter coat. I overdressed this morning, im sorry. 70 degrees tomorrow in evil new york city. Here is the morning mustread. Piece want to bring out a that is in the telegraph this morning. I have seen similar pieces elsewhere. , the quote atin the beginning of this caught my eye. Spain risks months of political paralysis and a corrosive showdown with germany over fiscal austerity after insurgent movements smashed the traditional twoparty system leaving the country almost ungovernable. I want to take a look at a chart sidebyside. It shows you how expensive spain is getting versus italy. Spain has been getting a little bit on the wrong side of this one for a while. When you are in the green it means it is expensive over italy. Barth is still with us to talk about this. Are we overdoing the spain risk . You have a smile on your face. [laughter] i cant believe youd even suggest such a thing. I think it is. At the end of the day, spain is borrowing tenure on one dollar 78. The funding cost is still very low. As your chart showed, the spreads have been wider earlier this year. We have seen increase in the increased because of uncertainty. We will try to go through a time to see how someone will form a minority government but there is no other path and the key message is that there isnt a clear path for the radical markets to take heart of that. Guy do you think there will be an issue with that first is issue with that versus germany . Marvin their growth is looking affluent. 2. 6 growthting over the next year. The economy still seems to be doing well and that is helping them. In terms of increased fiscal revenues and putting them back on a sustainable pass. But is not positive news relative to what we thought at the beginning of the year when it look like was potentially going to be a force in government, not as bad as what could have been. Tom quickly, is it all clear for greece as we go into next year . Marvin i dont think it is ever all clear. A country that is highly indebted and has its own political issues always done is effectively kick the can down the road. Wew that there is the know that there is going to be change. Tom i dont give a dam about greece. I just want to stay employed until may. John silvia is with us. He had a miserable year. John silvia on the American Economy. Tom iron ore did better over the next couple of days. A better price and chinese equities are doing better. There is gorgeous hong kong. Lets get you to the first word news. Vonnie talks aiming to find it and to serious deadly civil and civil war will restart this month. Geneva andather in the peace proposal was crafted by russia. It doesnt mention what to be done about the syrian president. Russia backs him. To host aobama plans u. S. Summit on the global refugee crisis. The u. S. Ambassador to the United Nations says he wants other countries and the private sector to increase aid. Their population has grown to more than 60 million people. Americans were killed yesterday by suicide bomber in afghanistan. Two other servicemembers and a contractor were hurt. The attack raises the number of serviceman killed this year in afghanistan to 21. The man accused of buying rifles used by the San Bernardino killers is being held without bail. A judge ruled yesterday that Enrique Marquez was a threat to the community. Prosecutors say he illegally bought the assault rifles used by the shooters in the San Bernardino attack that left 14 people dead. A murder charge will be filed against the woman accused of ramming her car into a group of pedestrians in las vegas. The 24yearold intentionally drove her car into a crowd along the las vegas strip. The District Attorney says she could also face multiple counts of attempted murder. Fo and googlerd could mean that they will be the first to put a self driving car on the road. They will announce the partnership next month. A top google official has said the company aims to put an Autonomous Car on the market within five years. There are hundreds of people working on the project in detroit and california. That is the first word news. Guy thank you very much. Lets talk about commodities. We may be in the sin bin but we are not out of the game. What is the story Going Forward . We do think that to the 16 will be a difficult year for the commodities markets. Forstill looks oversupplied most of the year. But we are looking for u. S. Contraction and supply to start to take a serious toll on the surplus that is there. By about the middle of the year. Guy there is a lack between everything else. Michael i would say oil looks like the best position even though we do still see h one as being difficult. And then last is the cold. Tom good morning. We are thrilled to have you on. A minsky is doing the killer spreadsheets on supply and demand. Wrong, itt russia so was breathtaking. What is the greatest uncertainty in supply dynamics on your spreadsheet . Certainly, we do think about where we might be getting it wrong. One of the things is, coming up the opec meeting, some people say that the Saudi Arabians could be looking at increasing their production. That would be a key risk for us at the moment. I dont see that as the central case. The only time that they have maximize production is when prices have been exceeding their target range to the upside whereas this is not the case now. Tom what is the certainty of the iranian throughput. Do you have a clue about what iran is going to do . Michael i think certainly the government estimates of one Million Barrels a day is high. We think they can get 300,000400,000 barrels a day in the initial stages but beyond that, they may well invest from outside and take outside expertise in order to take a number in order to make the most out of aging exports. Tom where did the markets clear . Can you give me a calendar date . Day, month, week, our . We do see almost the entire year of june then 16 being in oversupply. It will be difficult for inventories to draw down significantly until 2017. So we still see the risks to the downside. But it looks like i the middle of the year we could be getting the contraction in u. S. Supply, being quite significant. We look for that to be the main turning point for the market. Shouldats dollar number michael be plugging into the spreadsheet . Marvin swiss currency. Eurodollar, we have raised our nearterm forecast, 1. 03 by the middle of the year. We are still at. 95 by the end of the year and we are thinking of getting a deeper drop in the eurodollar because the ecb wont take as aggressive in action as we have expected. It looks like the dollar has topped out versus the yen. What number do you plug into what it costs into your spreadsheet . I want to know about the storage story. Michael i dont have an exact number for you but what is interesting to see is that the brent contango did reach the level that it needs to two incentivize floating storage in a q1 of this year and in august. But now when prices have gone troughs, these deepest is not high enough to incentivize floating storage. So there are two interpretations of that. The bearish interpretation is to say look, were not there yet. And the bullish interpretation is to say that actually, even though prices are lower than they were, the physical market isnt as weak as it was then and therefore it doe