Welcome to the pulse. We are live from london. Im manus cranny. Lets get into those numbers with mark. Mark, it is a mess on the composite and a miss on the services. Mark interesting because growth momentum in the euro area could pick up this month after new orders rose at the quickest pace in a year according to the latest market economic data. The purchasing Managers Index gauging Economic Activity in the from 53. 6 in september. That is below the october 23 estimate of 54. It is well above the 50 mark that divides expansion from contraction, and a measure of new order growth rose to 53. 6 from 53. 3. This confirms the euro Area Recovery is proving resilient to a slowdown in emerging markets despite this slide in Energy Prices and a stronger euro dampening inflation. The ecb will decide in december to its it needs to add qe program. Mario draghi spoke yesterday in frankfurt saying they will look at the need to stimulate stimulus. Growth momentum could pick up after new orders rose in october at the quickest face in half a year. Giving the ecb Something Else to consider. Manus mark, im just looking at the headlines here. Weve got iceland going the opposite direction to the rest of the world. Take us into that. Mark thats right, manus. As we discussed the ecb loosening policy, possibly printing more money or buying more bonds or extending its qe program, getting some breaking news that icelands central bank is raising its sevenday term deposit rate to 5. 75 from 5. 5 . The central bank has changed its benchmark to it is an example of a central bank that is actually raising rates, which is a rarity. Manus mark, thanks for the roundup on the data and the latest headlines on the terminal. The scandal widens for volkswagen as the company says it has found faulty emissions readings for the first time in petrol powered cars. Shares taking a dive this morning on the back of the news. Porsche said it is halting some sales of a model criticized by u. S. Regulators. Hans nichols is standing by in berlin. Take us through the latest twist. Part of this is their own investigation. The second part is driven by the epa. Big the part on the engines is epadriven. That involves the porsche. What we learned last night is because of volkswagens own internal investigation, they found Carbon Dioxide irregularities in some 800,000 the eccles. This could have some overlap with the 11 million diesel engines. You mentioned petrol. As we say, gas, in the states. Volkswagen says that is really just a fraction. This mostly has to do with the engines that are giving them all this trouble. Here are the models that are going to the affected. Volkswagen, the polo, the gulf, the passat. On the audi side, the aone, the a3. Monteith mueller, the new ceo, comes from porsche. Heres what he said when they announced these regularities. Beginning, i set out to completely clear up this situation. , butis a painful process there is no alternative. This is volkswagen trying to come clean with what they know and get it out there and take the hit. They said this could have Economic Impact of 2 billion euros. On the porsche side of things, we dont have a lot of clarity. The epa says 10,000 the a goals including the porsche that has that three liter engine could be affected. Volkswagen is disputing this. They say they will work with regulators to clarify the matter. Yesterday evening, porsche north 2014,a took off the lot 2015, and 2016 cayennes. Those models are not available stateside. Manus as you say, hans, almost like a double punch. Lets talk about the u. S. That vw did a lot better than anticipated. Is that discounts, incentives . Hans we dont know why they are up 0. 24 . We dont know that audi is up we do know that audi is up 17 . Overall, sales are very impressive in the states. General motors, 17 increase. Overall, the states is on track to have about 18. 2 Million Units sold this year. You see a very strong recovery in the states. Volkswagen didnt lose year on year, but they didnt gain share. Manus hans, thank you very much. Theres a lot going on in the auto world. Lets bring in our next guest, the head of global Auto Research at the Investment Bank ever core. Great to have you back with us. I told you you would be back. It didnt take that long. Weve got the emissions scandal in petrol. We also got porsche in play. Where should our focus the . Is it the expansion into 800,000 cars or is it porsche . I think the u. S. Investigation is a bigger issue. You have the regulator, the epa, jason volkswagen, porsche, audi. They are all denying it. The additional 800,000 cars that vw has discovered themselves, they said they might find more cars. This is coming clean with yourself. They admit that theyve been lying again. But i think its serious, whats going on in the u. S. Manus do you think in terms of the scale, the financial repercussions typically in most regions are higher than europe. Is that what you are concerned of . Are you concerned about brand dilution in the u. S. . Porsche is one of their premium brands. Vw is a mass product. Porsche is the premium. Arndt youre right. In the u. S. , the economic damage from being forced out of the market and consumers walking away over time is very significant. In addition, youre facing penalties and lawsuits which might be very severe. That is i think the markets biggest concern. In europe, i think the consumer is pretty sticky with volkswagen as a brand. I do appreciate that they are taking the action now, investigating. Manus Matthias Mueller ran porsche. Arndt i know that. Manus do you think hes a worried man . He ran it. Arndt hes obviously worried about everything that is going on within volkswagen. Theuldnt be surprised if board knew whats been going on. Different question whether they should have known. Manus i cannot get my head around the fact that a board might not know whats going on. Do you think that is truly beyond scandalous . Arndt i think the board should have known. Going back to the culture, nothing has been reported, the question hasnt been asked. On the three liter diesel engine, i think the devil is in the details. These devices, when did they kick in, when did they switch off . I think thats the reason why they are denying any wrongdoing. Me, they came straight out and they battered back against the epa. But youre fighting against the biggest regulator in the world, the epa. Manus talking about the u. S. , it is a market that just is a beast. Back toes, the best back in 15 years. Thats stormy. Arndt the underlying selling rate is about 13 higher. The market is very healthy. Weve seen that in margins at gm, ford. Demand up for jeep. Arndt they are in demand everywhere. People just love driving bigger cars, sitting up higher. Manus chelsea tractors. T, thank you very much as always for joining us. Lets get you up to speed with what else you need to know for wednesday. Hedge fund manager stan druck miler says there is divergence between Monetary Policy in the u. S. And europe. The founder of Capital Management also said stocks could be the subject of the next bearish trade for him. Bill gross says the Federal Reserve needs to switch strategies to boost the economy. According to gross, there are operation twists which involve buying longterm treasuries and shortterm notes which is not working. He recommends they do the opposite. Gross says central bankers must end their low rate of inflation prophecies policies. Holdings and its banking and insurers units have soared on their debut in tokyo. Groupss flocked to the 12 billion ipo. Units in the insurance closed almost 56 higher. Up next on the pulse, going live to tokyo for more on that blockbuster japan post ipo. Plus, later in the show, we will talk u. S. Policy. There she is, janet yellen. Key fed officials speaking today , ahead of fridays pivotal jobs report. Manus welcome back. This is the pulse. We are live on bloomberg tv, radio, streaming on bloomberg. Com. Japan post jumped at their debut in tokyo after investors flocked to the groups 12 billion ipo. The flotation is the biggest in the world this year, the largest in japan since 1987. For more, lets head over to tokyo where bloombergs japan and korea managing editor is standing by. Stockare quite phenomenal price moves. Oversubscribed, but even oversubscribed, this is stellar performance today. Exactly right. We knew that all three units were oversubscribed by between five and 15 times. We saw those prices rising in the market all last week. To see the kind of rises we saw today, we didnt even have trading for the first 30 minutes of the day because the offers were so lopsided. If you take all three market caps combined, ¥17. 5 trillion, it would be worth about the same as cisco systems. This is a huge deal for japan post and a huge deal for japan itself. Manus i think when you look at some of the numbers, just to visualize, 400,000 employees including their parttimers, just the scale of it is quite phenomenal. Weve got an article on the bloomberg terminal that says, should investors take their profit on day one . Do we think theres sustenance to these kind of returns . This is only a small portion of these companies theyve released into equity. Only 11 of each company is now owned by the public. It is a small portion. We looked at the top 10 ipos over the last few decades in japan and we found that on average, share prices rose by about 44 over 12 months and the gains were especially prominent among shares that had some statebacked element, which japan post has. The smart money says, hold onto your shares for now and see how high they go. Theres a lot of potential for restructuring and efficiency now that japan post is having to answer to shareholders for the first time. Smart brian, we like money and smart ceos and smart managing editors. Thanks for the update. For more, lets bring in manish singh. He joins us now. Phenomenal ipo. What do you make of it . What is the scale of what we are seeing . Manish i look at it at two points of view. One from japan post. They have a deposit and they put half of that in government bonds. Once japan post becomes a privatized company, they would be moving out most likely. That is good for abenomics. Second is on the point of japanese people who have been [indiscernible] number, they had Financial Assets worth 1. 7 quadrillion yen. Almost half of that is in cash and deposits. Done, what this has japan post has done, it has opened the eyes again. Ntt, thatisited was back in 1987. It is really sparking the equity appetite in japan. Manish change of nature as well. Take more risk. It helps abenomics because the Monetary Policy transmission doesnt bode very well if theres no multiplier effect. If banks can just take deposits and give little return to investors, that is going to have a much better effect on the economy. Manus that is a heck of a reach. Manish if you combine all the branches of the other banks, they are a few thousand. They are really big in japan. Weve got china talking to taiwan. Weve got china talking to korea. Weve got china talking to japan. Im trying to find the right word. Inthis a growth of china terms of its position . Manish for the First Time Since 1949, taiwan and china are going to have a conversation. We saw the handshaking between china, japan, and korea. The biggest thing is going to be what imf is to consider. That changes a lot of things. Internationalization of rmb. It goes well with the silk road fund that china is publishing. More than that, i would say it wont be big in terms of capital flow immediately, but the symbolism of it is very important. Which not soion long ago, the gdp was not much greater than netherlands. Now, in one year, they produce the same amount of gdp. Still the yuan, you would say the yuan moves lower. But this is something that is naturally going to happen. Manish i think that the gdp growth is not going to be over 7 . We saw the fifth plenum. The assertion was that gdp will be 6. 5 . An . Us target on yu stick with me. You are here for the next 40 minutes. Druckenmiller bets against the euro. What is behind the call and his investing strategy in the eurozone . Thats next. Stan druckenmiller says hes shortly euro and stocks could be next. The founder who led soros back in 1992 pointed to a divergence between policy of the fed and that of the ecb and said president draghi pretty much announced and easing. Lets bring my guest host for this hour, manish singh, head of investments across bridge capital, into this conversation. Druckenmiller said, i had a short position. He thinks, when you talk about the currency, they go in cycles of 23 years. He would say theyve had a timeout on the euro. Would you concur with that . Manish i think i would and i think either is a short bias. Draghi repeated that yesterday. We lets also remember that leg isee the dollar not going to the as strong. We had a good auto sales number, but also, i dont see that youre going to have a much greater u. S. Number. Look at the gdp numbers. That doesnt tell you the dollar leg is going to push much higher. The weakness is going to come from the euro leg. Look that weakness, do i at the exporters in europe . It has been a lot of positioning about domestic focused growth in europe versus the equities with exposure to e. M. Euro isi think the suffering from the same thing, very slow growth. Given that you had weakness in china, that didnt help you. Im far more positive on china data. Manufacturing, but other stocks as well. Consumer stocks, you pick based growth, you see gdp weakness in the stocks, stocks have been oversold. Manus stay with me. We are going to talk about the fan. We got the triptych speaking today. Weve got a lot more to get through. Manish singh, head of investments at cross bridge capital. Up next, watching pmi out of the u. K. Last piece ofe data before the bank of englands super thursday. We are to bring you those figures. Its a little bit gray outside. Mark expecting Services Data from the u. K. Now. Looks Like Services growth accelerated in october after slumping to the worst performance in 2. 5 years the previous month. To 54. 9 activity rose from 53. 3. That doesnt regain all the ground lost in september. It does the the forecast of economists for a reading of 54. 5. The market also says that along with its construction and manufacturing reports, the economy grew at a 0. 6 pace at the start of the fourth quarter, faster than the previous three months, when the economy grew by 0. 5 . Employment is also rising. Whats interesting about this is it comes after manufacturing reports from market earlier this week showed the biggest growth in 16 months. This ahead of tomorrows quarterly Inflation Report from the bank of england where it announces its latest rate decision. Fascinating time for the u. K. Economy. Frome market pushes back when it thinks the bank of england will raise rates, economists are more bullish, forecasting a rate rise in the Second Quarter of next year. Food for thought for the bank of england tomorrow. Manus absolutely. The stars are aligning for pushing the bank of england to have to go earlier than the fed. Data aheadthe big for the bank of england, super thursday. Mark will be outside the bank of england tomorrow. Stateside, we are watching out for adp and the jobs figure on friday. We will also be on centralbank watch as the fed reserve chair janet yellen testifies before the House Financial Services committee on capitol hill. The official public is regulation, but the lawmakers are free to ask her anything. New york fed president William Dudley also holds a briefing in new york and fed vice chair Stanley Fischer will speak in d. C. Lets get thoughts from manish singh, head of investments at cross bridge capital. To said that you will like see them defend the fed. Why do you think they need to defend things . Manish there has been a lot of criticism about whether qe was the right thing to do. Keep people into jobs and to keep prices stable. I think they have succeeded in a big way. If you expect 5. 1 is the employment rate where they should start raising things, if unemployment is falling, what does it tell you . Theres more slack in the economy. Think theyve made a mistake they have given too much guidance. That part i think things have gone wrong. Now, i would say they are truly datadependent. There are signs of inflation, they are going to raise rates. The fed has done its job. It is debatable whether qe benefited. Perhaps it has. That is debatable. Manus there is this debate that janet yellen has 6 million reasons not to raise rates, the people who dropped out of the employment race, those people who want a second job. Theres a social conscious with yellen that is beyond data. Manish possibly. Ive never spoken to janet yellen. To ben bernanke. He was saying the u. S. Needs 80,000 jobs per month to keep unemployment stable. Expect that the numbers are going to get better. There is a big question how the fed moves, but if i can make one bad gdpnt, weve had for the last three or four years. Weve said the alina affect has a positive impact on inflation. We will see if that prepares the ground for the fed to raise rates. Im not very sure they will be able to raise rates. But if we have a decent number and decent china data leading to positive gdp impact, then maybe you will have some cover for the fed to raise rates. Manus theres the probabilities. Still at 5050 for a rate hike in december. Will they go . I know you say it is utterly datadependent. The world cant be disappointed again, can it . Manish it can. The only reason i think they would go is that the fed has boxed themselves into a corner. [indiscernible] then perhaps they will. That is the only reason i can see. Changed fromng has when they didnt raise in september. Manus lets get into the market. I have this great graphic about s p valuations. If you were worried in august, you should be worried now again. The fiveyear chart shows that s p valuations, trading just under 19, back at the levels we saw in august. We are just prepared to pay up, arent we . Is the u. S. Overvalued . Manish if you look at the short term, it is being driven by liquidity. You had a 10 fall. Byot of it was driven selling equities. If you look at what has happened now, all the short term momentum , they are looking positive. Maybe they will all load up again. If you are trading the market, then you have to be careful about not looking only at valuation, but you have to look at liquidity as well. On that basis,