Welcome to the pulse. Im Francine Lacqua. Lets get straight out to guy johnson live from my cap headquarters with some very exclusive interviews. This is the companys ceo. Guy, over to you. Guy thank you indeed, francine. Welcome to icaps charity day. Raised 8 they million. It is a colorful affair. I feel massively underdressed. The good news is that Michael Spencer is also in his suit. Good morning to you. 8 million last year. Million pounds u. S. El 180 million dollars. Slightly is marketdependent, isnt it . Your sense for this year . Michael sounds good here. Listen, i dont control that, but our clients support us very generously. Start to the good day. Lets hope it continues. Ways, you are changing the nature of your business. You are going electronic. What is happening . Michael charity day will definitely continue. Month that weast are selling our and tile our entire global voice business. We will remain the brand name will change. Executive will move on. It is very important to me. He said it was his honor and privilege to continue. [indiscernible] charity day will be twice as large next year. The ceo will do a brilliant job. I will be running the electronics business. But it wont be the same atmosphere. This is something we started in 1993 when the firm was literally 100 odd people. It was an idea then. It has continued to work every year. London, butusly in they will be doing the same thing in new york and in sao paulo and rio. Guy theres a Competition Among the guys to have the best outfit . I can see one behind you. Hes smiling at me now. It has been an incredible year for your business. So much change has happened. Do you think there is still more . Michael over several years, ive said that the global voice brokering business next year will be 30 years. We started with four people. Now, nearly 5000. [inaudible] the merger will mean that there are now three global voice brokering firms of which i cap will be the largest firm. I think consolidation in that space is over. We havent decided. [inaudible] namedy who comes up with a for the new icap [inaudible] a case of very fine red wine from france will be there gift. Guy probably cheaper than paying a branding company. Michael and more fun. If youve got any good ideas, email me with your ideas. You will win a case of very fine line. Guy im sure ive got a few ideas in the back of my head. You say you are not done. Can you explain a little bit for me . Ld you ever see [inaudible] michael we are still building our voice brokering business. Started as a icap technology asset. [inaudible] we invested over one billion pounds over those businesses. They are now worth several times that. The Technology Part of the business is where im going to focus my time. There is a lot going on. Im going to grow it organically. It just wont be as noisy as this. Guy a couple of quick questions. [inaudible] michael yes. I think the fed has to raise rates. If they dont do it now, when are they ever going to do it . The backdrop is as good as it could get. They should get it over now. Guy which way does oil go from here . Michael i think it could go down. I think the chinese economy is going to continue to underperform and that will affect not just oil but other commodities as well. Iran tor, we expect come back. Saudi arabia continues to pump aggressively. Going to become an exporter. I can see oil going down below 30. Guy have you made up your mind as to whether your business will [inaudible] michael we are a global firm. We have offices in 64 countries. New york and london are pretty similar. London and new york are the hubs. I think we would be better off if we stay in europe. I personally havent maned my mind up. Guy michael, thank you very much indeed for inviting us. I hope the day goes really well. Michael spencer, the ceo of icap. Maybe we should be thinking about that new name. Francine, back to you. Francine guy johnson there with the ceo of icap. In the meantime, heres a look at what else is on our radar. Bloomberg sources say dow chemical is in late stage talks to merge with dupont in what would be the largest deal in the chemical industry. An agreement could be announced as soon as this week. The companyrger, would break into two or three businesses because of regulatory issues. Chinas consumer inflation beat estimates. Cbi in November Rose 1. 5 year on year. The Producer Price index fell, extending declines. Yahoo shares surged in extended trading after a source said the will spin off its stake in alibaba. Norways Sovereign Wealth Fund says it has recovered from the losses it suffered in the second and third quarters. The ceo said the fund has been dramatically changing its portfolio. If you look at the big picture, the fund has been reducing dramatically. Next, Oil Bounces Back from a sixyear low. We talk about the new reality of a Lower Oil Price for gulf states. Think that the right price [indiscernible] we are cash neutral. I think the right price is not just the right price for us. It is the right price for the industry and for the producing country. Francine that was the ceo of eni talking about the breakeven oil price. This is a picture of crude at the moment. Low, butf the sixyear very close to that. Nymex at 38. The printing the plunging price of oil has been hitting the gulf states. Bank borrowing costs are up. Nation Gulf Cooperation Council is home to around 29 of the worlds oil reserves. Lets bring in our middle east editor, elliott kotkin. Give us the details. How bad is it for these countries . Elliott we talk a lot about the burgeoning budget deficits, many of these countries having to cut back spending in the face of these low oil prices. There are other aspects as well. If you look at the stock market, this is an interesting place to look to see how these gulf countries and Oil Producers are being hit so hard. Abu dhabi, one of the richest gulf countries, is particular being hard hit. It is categorized as an emerging market. Markets, developed emerging markets, and frontier markets. Alou. He is home to about 6 of the worlds oil reserved. It is being treated more harshly than frontier markets, which are considered the riskiest. This is share prices relative to earnings. Abu dhabi stocks are trading at a lower valuation than frontier markets. They are trading at 8. 4 times projected earnings against 9. 4 times in frontier markets. Since the middle of last year, offt 200 billion wiped markets. Weve seen volumes dwindling. Saudi arabia a bit of an outlier. There volumes are actually up as well. We can see things happening on a daily basis. Qatar stocks this morning reaching their lowest levels since 2013. Theyve said they are going to factor in a more conservative estimate for oil next year. Real being devalued as well. Some people will see this as a great opportunity to go in. Just because somethings cheap, doesnt necessarily mean it is good value for money. Francine elliott, thank you. For more, lets bring in kevin boscher. Great to have you on the program. When you look at the price of oil, it is extremely difficult to forecast. You say it is between 30 and 80 in the next six months. Do you try and forecast it or take it with a pinch of salt . Kevin we try not to forecast it, but we have a firm view. We understand why the oil price has fallen as much as it has. We dont see that changing anytime soon. Francine saudi arabia not cutting, shale gas, extra production from russia. Kevin it is a number of things. The world is growing well below its trend. The demand in emerging markets has fallen substantially. It is also a function of increased efficiency from the fracking industry in the u. S. At anies can produce oil lower price and be profitable. Francine but it is not a global recession we are staring at. Kevin not yet, but the risks are increasing. If you look at the low oil price, continuation of weak growth, bond spreads widening again in the corporate space, low Government Bond yields and yield curves flattening, and equity prices struggling to theret their old highs, are some signs that would lead us to conclude that the risks of recession are increasing. Hence, we have to be careful. Francine if the risks are increasing that we may look at a global recession, then janet yellen should not raise Interest Rates. Kevin that is a tough one. I think this is her best chance to raise rates. The market has pretty much discounted it. The risk is they get it wrong. It is not so much the impact on the domestic u. S. Economy. It is the impact on the external environment through the dollar. If it forces the dollar to have another spike higher, that will bring further problems for emerging markets and commodities. It does risk weakness outside the u. S. , which through the dollar comes back into the u. S. Activity. Francine 80 chance now that the fed will act in december. What happens if they dont . They want to normalize. If it is to bring Interest Rates back down if Something Big happens in the First Quarter or Second Quarter of next year, why raise them in the first place . ,evin i think the central bank like the bank of england and others, is in a difficult place. They dont want to be seen to be scaring the market in the belief that investors get spooked by something they may know that investors dont. On the other hand, they have to tread carefully. Continues toonomy disappoint from a growth point of view. Inflation continues to surprise on the downside. Economye, the global remains fragile and vulnerable. It is a difficult balancing act. For us, it is not so much whether the fed do or dont go. We think the fed should go and markets are expecting that. Im not so sure. I think they probably should wait. What is more important is the dovish message they send out about the pace of rate hikes moving forward. Francine all about gradual. Lets see if the market gets the message. Thanks so much. Kevin boscher stays with me. We will be talking about china and m a. Nsthe pboc cuts the yua reference rate, we look at what is next for chinas currency with our beijing bureau chief. Francine welcome back. Chinas consumer inflation picked up last month. Meanwhile, the countrys Central Bank Cut the yuans reference rate. Lets get the latest from malcom scott. Malcolm, the story behind inflation is a little better than expected. Malcolm thats right. A stabilization in consumer prices, 1. 5 , and a pickup from the previous month. The prices are still going backwards. 5. 9 . It didnt get worse, but it isnt getting better. The hope is some of those big commodity falls start to wash through the system, things look better, we get some Pricing Power back into the economy. No immediate signs that is going to feed through into cpi. Inflation is still running about half what the central bank would like. Francine where does the move on the yuan reference rate leave policy makers . How telling is it that this comes a week before the fed meets . Malcolm a week before the fed and also a week after the sdr vote. There was this push to keep the yuan steady against the u. S. Dollar ahead of the vote of whether it should be considered a reserve currency. Since then, theres been this shift. The market has been wanting to push the yuan lower. Now the pboc has been incrementally setting its fixing a little lower each day. Will they keep doing that . If you look at the export picture, declines for five months in a row. It should seem to suggest we need lower yuan, so perhaps theres some recognition ahead of the fed. Especially if the u. S. Dollar is going to kick higher. Francine malcolm, thank you so much for all that. Malcom scott income come. Lets get back to our guest host, kevin boscher. When you look at china, and we were talking about looking at a global recession, you say it is not your base scenario, but the odds of that becoming a reality are getting closer. How much do we read into the fact that inflation is not that bad, theyve been importing commodities, things seem to the stabilizing . Kevin two very Important Message is come out of these figures. Whether it is 1. 4 or 1. 5 cpi, that is still very low for an economy growing over 6 . The longterm trend is clear. China is still exporting deflation to the rest of the world. That is the first Important Message. The second is the currency aspect and what chinese authorities are doing with their currency. China needs a weaker currency alongside their fiscal stimulus and monetary stimulus to prevent a hard landing and help stabilize the economy. A cheaper, weaker currency is part of their plan. How they do that has very important implications for the Global Economy and financial markets. The fact that theyve joined the imfs sdr is probably a positive in that it means they are likely to be a good corporate player and allow a gradual depreciation of the currency over the next 1218 months. If for some reason that depreciation becomes more rapid, it is going to destabilize commodities and emerging markets further. It is going to possibly tip the Global Economy over the edge. Francine dow chemical and dupont may be looking at a merger. Initial thoughts . Kevin it makes strategic sense. The chemicals industry, like most industrials, face falling revenues, cheaper prices, tougher regulatory environment, potentially increasing costs in the u. S. It is mainly a defensive measure. It is also probably taking advantage of bond yields while they remain relatively cheap. Boscher, chief Investment Officer of brooks mcdonald. Next, rising unemployment, inflation at 10 and a deep recession. What happened to brazils economic miracle . Francine welcome back to the pulse. Im Francine Lacqua. Lets get the Bloomberg View with nejra cehic. Nejra Chinese Consumer inflation beat estimates. Cbi in November Rose 1. 5 year on year. The Producer Price index fell 5. 9 , extending declines. The peoples bank of china had cut the yuans reference rate to the weakest since 2011. That fueled speculation that the central bank is trying to release pressure before an expected increase in u. S. Interest rates. Morgan stanley has named Alistair Darling the u. K. Chancellor during the financial crisis and former member of the British Parliament to its board of directors. Pimco said monday it was creating a new Advisory Board including ben bernanke and jeanclaude trichet a. Says donald has disqualified himself from the presidency. The republican frontrunner said muslims should be barred from entering the u. S. After the attacks in paris and san bernardino. President obamas press secretary spoke out after the comments. The first thing a president does is to swear an oath to preserve, protect, and defend the constitution of the united states. What donald trump said yesterday disqualifies him from serving as president. Candidates to stand by their pledge to support mr. Trump, that disqualifies them. Trump is refusing to back away from his remarks despite almost universal condemnation. Manus thank you francine thank you so much. Lets get to todays top market stories. Mark, if you look at commodities, it is almost a race to see who is performing the worst. Mark it is. The worst performers on the ftse 100, both falling more than 70 this year. Anglo, the slide yesterday hasnt seized. It is plunging today. Half an hour ago, my narrative was going to be how Global Mining stocks have rebounded. But im a flayed the global world mining index, a gauge of 80 Mining Companies around the world, has fallen to a new low. This is a chart going back to the beginning of 2015. This gauge sank almost 4 on tuesday after weak china trade data. The data today wasnt as bad. Demand is strengthening in the world second largest economy, but as you can see, minors falling today. The bloomberg Commodity Index is down to a fresh low. On the subject of china, the yuan has sunk to a new four year low. Intelligence says the pboc is doing is basically front running the federal reserve, preempting a perceived depreciation in the yuan when the fed is widely anticipated to raise rates next week. Since china cut the reference rate by 1. 8 on august 11, the yuan has fallen by 3. 3 . Part of that decline has been to do with its elevation as one of the reserve currencies. Looking at the chemical industry, this is the last month. Bsf was rising. It is now dipping. Dow chemical and dupont are in talks to merge. It would be the worlds biggest Chemical Company behind bsf germanys big Chemical Company. This part of the chemicals industry is on fire with m a talk. Monsanto has been interested in syngenta. Chem china also. Syngenta has told both those panies it is not interested. Today, we are seeing these Industry Groups falling on the stoxx 600. We are not seeing that much impact on the helical sector. Francine mark, thank you so much. We understand that in pretrade both dupont and dow are gaining some 8 . We will give you that in a couple hours when the market opens. Lets talk about south americas largest economy. Brazils Supreme Court has created an impeachment has halted the creation of an impeachment committee. I asked the mayor of Rio De Janeiro what he thought about impeachment. Theres no reason for impeachment of the president. You have to have what we call a crime of responsibility. If she made some mistakes in economics, this and that, but shes a very honest person. Francine later this morning, we will get Inflation Numbers which are expected to show prices increasing, adding to brazils gloomy economic picture. Lets bring in our guest, anthony pereira. [indiscernible] he joins us now from london. Thanks so much for j