Transcripts For BLOOMBERG Bloomberg Surveillance 20151117

Tom keene in new york. Equities are focusing on m a. Tom yesterday, markets were subdued. A continued slowdown off of thursday or friday. Maybe off the reality of how entrenched europe will be. The photo at the beginning of the show of the two chambers of the french government meeting with mr. Hollande was quite something. Francine it was. Now the shift we see towards russia may happen in the next couple weeks if not earlier. At least they have a common fight. Investorhe german zew expectations, and little less than we were hoping. Lets get news. A second day, french planes attacked Islamic State targets in syria. The french say they destroyed a command center and training site, part of frances response to fridays attack. Francois hollande is calling for a u. S. Russian alliance to defeat Islamic State. Them and alliances needed to destroy the terrorists. President obama has rolled out the possibility of sending Ground Troops to syria and iraq, calling it a serious mistake i will commit the u. S. To a longterm occupation. The u. K. Will double the amount of money it spends against cyber wise pair chancellor of the exchequer George Osborne will spend almost 3 billion to counter Islamic States use of the internet. Plans to create a vladimirce. Russias putin says a terror attack was behind the crash of the russian plane in egypt. Utin met with russia security service, who told them a bomb drawdown the plane. Trying to close its southern border over cuban refugees. Costa rica has given cubans transit refugees. They are hoping to make their way to the u. S. Nicaraguan troops fired tear gas at refugees trying to enter from costa rica. Get more at li keqiang. Get more at bloomberg. Com. Tom ive got two boards. Equities, bonds, currencies, and commodities. 18. 16, s p futures up. Weaker,the lead story, no doubt off the news from friends and around europe. Nymex holds its own. Eurodollar again. German 10 years 0. 53. German twoyear,. 38 when i walked in. Copper, copper, couple. Francine that is what i picked up as well. It is a dollar story. Is it Euro Weakness or Dollar Strength . Copper plunging to the lowest entered a price since 2009 because we are concerned about china and the impact of the fed. It is a dollarthe stocks are hi. Tom we need to bring. Urveillance to a halt there is francine saying we are in london, the London Metals Exchange. Bring up my second screen, this is based august this is the chicago statistic. Terminal, the United Kingdom, germany, and france. U. K. Booming, france better than germany and something changes in 2007. I do not want to fold this too much into the terror friday. U. K. Continues up. Germany with the weak euro boom, france goes nowhere. Tom it will be interesting to see how defense spending, ignoring the euro area will affect this. Friends going nowhere for a good eight years. Francine the french Prime Minister manuel valls said Francois Hollande will meet president obama in washington and Vladimir Putin next week in moscow. Overnight strikes destroyed Islamic States command center in raqqa, Northern Syria. Acrosshave made raids france and belgium where fridays attacks on paris are said to have been organized. Lets cross to guy johnson in paris. What have we heard . The Prime Minister talking tough and says there will be retaliation. Guy absolutely. From defenseoting to offense. That is what we have seen over the last toy for hours. Raids in Northern Syria by french jets backed up by u. S. Intelligence. The Prime Minister saying do not worry about the money, we are to spend whatever it takes to get this done. Whatever rules brussels thinks it can impose on the french economy, do not worry about it. We will have additional customs, additional prison guards. Make sure we have those people in place so we can take the fight to i. S. Weve seen john kerry meeting the president at the palace. We continue to your talk about the relationship between russia, the u. S. And france. France wants to put itself in the center. We are going to see meetings in washington and moscow to back that up. Thecine if you look at investigation, there is manhunt looking for the perpetrators. We do not know how many individuals were involved. Parallel to this we have geopolitics. Tell us about the extract. Guy airstrikes are part and parcel, you are going to see more and more of this type of attack being pursued not only by the french but by other spirit we heard from the u. K. Over the last 48 hours. A desire to do more there at downing street. Remember, the russians are conducting airstrikes of their own. This morning we seen the russian president coming out and confirming that we did see a bomb found in the jet is pivotal. It does seem to be coming together to a Single Coalition that Francois Hollande is talking about. Francine thank you. Lets go to hans in brussels. France has said it will breach its eu spending budget. We want to focus on the terror attacks. A lot of investigation is ongoing in belgium. Hans we had seven detention saturday. Two people have been charged and five let go. The roundups they did yesterday did not yield any one. Most recently, belgian tv is Salah Abdeslam has been seen nervous soccer stadium where they canceled the match tonight. Belgium and friends on the same page . Was the backandforth between the group of concerned individuals . Hans belgium may be a step their on accelerating response. You have not had a state of emergency and you do not have a Prime Minister seeking the kind of enhanced powers Francois Hollande as but theres is a recognition that there is a problem here similar to the problem in paris. Francine thank you. Hans nichols in brussels and guy johnson in paris. Joining us is Eurasia Groups Research Associate Charles Lichfield. Great to have you. Theres a manhunt going. The geopolitics is the most interesting bit as World Leaders. Ome together russia saying it is a terrorist attack that brought the plane down. Doesnt mean we are going to get a russiau. S. Europe axis to fight i. S. Charles eventually may be. It is very difficult between western capitals and moscow. The priority now is to deal with isis and we all have the same interest. Francine if there was ever going to be rapprochement, we cover this day in and day out, it is very strange relations with russia but if there was ever a common cause, this could be it. Charles isis the tax paris and moscow indiscriminately, well, russian citizens. This could be a situation where they form a united front. Tom we begin to see markets move with a stronger dollar and weaker euro. As a point where they dovetail into each other. The political and economic debate. Are we there yet or does that await for 2016 . Charles the political and economic debate are not exactly on the same tracks. The political debate has taken priority now. Youve had president hollande saying theres a security pact that supersedes the stability pact in the eurozone. I think you will see friends borrowing more to keep up with all its spending on domestic security and also on foreign intervention. Tom none of that can be surprising. You and ian bremmer go backandforth, what part of to whereould we look the terrorists could strike next . Do you have a set of nations that are most vulnerable . Charles everyone is at risk but isis logic,follow as far as bad as possible, they will want to attack the country that is the most vulnerable or the politician or later in the most vulnerable situation to have the most maximum impact. That is german chancellor angela merkel. She is attached and a lot of her and legitimacyal to the migrant crisis and welcoming syrian refugees. Any hint that opening the borders undermines the security of german citizens will severely damage her chancellorship. I think isis understands that and the germans are being careful about that. Tom Charles Lichfield with our briefing. Thank you to our guests yesterday, particularly richard haas of the council on foreign relations. Ian bremmer, of course, from Eurasia Group. House andhatham mohamed elerian. Bringing it over to banking and the challenge of Central Banks in our next hour, we bring you William Rhodes of citibank. The challenges and perspectives of the economics and bankings andurope into political terror tragedy. From paris, london, and new york, bloomberg surveillance. Tom good morning. The euro 1. 06. In new york, a stronger u. S. Dollar. A run for 100 on the dollar index. Market Movement Today that we did not see yesterday. Now, much in the news. Heres vonnie quinn. Vonnie Foreign Companies scrapping corporate event in paris following the attacks. Among those airbnb who have canceled or curtailed events. A survey by the Business Coalition found 20 of companies will probably cancel some trips to france. Volkswagen feeling more aftershocks from the emissions testing scandal. volkswagens market share fell 1 in october, the first full month of sales since the scandal became public. Vw sales declined while overall car sales in europe or up. John malone. Is extending his empire Liberty Global agreed to buy cable and Wireless Communications for 5. 3 billion. Last year, cable and wireless received more than half its revenue from panama and the caribbean. The cable cowboy at it again, following an acquisition in london and the netherlands. He is the largest now by subscribers. Francine we really have to talk about m a. A guest last week was saying she was worried that all the money leads to megamergers. This is our morning must listen. We spoke to the ceo of cable and wireless, phil bentley. He spoke on the advantages of the plan to merge with Liberty Global. We are joining forces with Liberty Global, the Largest International cable player in the world. They bring in a lot of content, scale. I think it will be good for our people. They can develop more in the region. I think it will be good for our customers and our u. K. Channels. Weve seen the market cap go on the. 1 billion to 3. 6 back of this deal. Tom a ceo tom a ceo francine a ceo trying to wrap rally the troops. They also bought virgin media and there were huge executive changes. Liberty global ones to bring their own people from the states. Vonnie we will have to wait and see what happens. To be comingng from abroad, the u. S. Is no longer in the growth strategy. This is a quadruple play, internet, pay tv, wireless and wireline. Caribbean countries will be looking for Regulatory Approval but that will not be a problem. Tom thank you. This morning, Neil Ferguson from harvard. He will have a perspective on what Democratic Institutions do on what richard housecalls retail terror. 7 00 worldwide this morning. Stay with us on bloomberg surveillance. Francine 4 days after the attacks in paris, the flowers keep piling up as mourners bring flowers to one of the bars and restaurants affected by the horrible tax. Attacks,ke of the European Airline and transport stocks have been hit. The longterm impact as security wraps up across europe, or is it . Transports correspondent Terry Lundgren joins us to explain. Look at security concerns, the impact is. Hortlived kari when you look at British Airways after the 2005 attack in london, the yields were actually up that quarter. 9 11 was a more prolonged period of depression for the airlines. Seems like Airline Stocks are up and everyone seems to be tom . The is heathrow, cdg, other 4 airports francine has tattooed on her brain, are they terror targets . Kari it may be extreme to say that they are places where you need to have a high level of security. We saw Prime Minister David Cameron saying theyre are going to be increasing aviation security. And his casesting, he was saying theyre going to be putting people outside of europe, say in Northern Africa or the middle east. And that way extending the borders. Tom tell us about air france, the worlds worst frequentflier program. I, make light of it but this is deadly serious. Is very serious but after attacks like this, people still want to travel. Air france, Charles De Gaulle airport, their hub, they are telling passengers to come an extra hour in advance. Its just additional headache for passengers going out of the air france airport. Tom to toms earlier question about where the hotbedis, we have no idea of where the terrorists strike next. Our surveillance, intelligence and how important is security at airports but also stadiums . Charles very important. They might not necessarily airports, you see them attacking softer targets because what they want to signal as they are targeting anyone on the street. Not Business Travelers, tourists, journalists who make cartoons, anyone. The symbol behind the softer targets as they will keep security tight at airports. Tom who has stronger intelligence . Are we going to see Intelligence Services were closer . There is a high degree of cooperation, it is a case of things getting through the net. Very extensive surveillance measures which they are trying to make more official. Exist and have the capacity to look into peoples communications. They want to make sure theres some sort of transparency to what they are doing. Obviously with the limitation to you cannot let the terrorists know. Tom francine coming up next, geoffrey yu joins us from london about the state of abenomics. Looking at yen and dollar. Is it Euro Weakness or dollar yen . Geoffrey yu can weigh in. Tom markets adjust to the tragedy in paris. We will get to currencies in a moment. Hong kong watching their bloomberg terminals. Heres vonnie quinn. Vonnie french warplanes struck Islamic State targets in syria for a second day. Hollande says only a Worldwide Coalition can defeat isis. Hollande is calling for the u. S. And russia to join together. Issaid a global effort needed to destroy the biggest terrorist fact be the world has ever known. In russia, Vladimir Putin vowing revenge for the plane crash in egypt. Putin says abomb was responsible. Traces of foreignmade explosives or discovered in the wreckage. The cia denouncing what he calls handwringing over spying. Nt john brennan says leaks about surveillance programs have made it harder to track down Islamic State militants. He stops short of asking for new restrictions. New york is preparing as though it is the next target, according to commissioner bill bratton. New yorks Police Department has deploy a team of 500 officers to be a Rapid Response team in case of an attack. Aniladent obama is in thm with an advantage he has not had in the past, the transpacific trade deal is the centerpiece of for asia. Ents policy it may give leverage against china when it comes to disputes over the South China Sea. Get breaking stories at bloomberg. Com. We saw the increased presence yesterday in midtown manhattan. I was by the french consulate on 5th avenue and there was a presence there, as well as the media and the remembrances on the sidewalk of fifth avenue. As well. It is here and a lot of french schools and consulates. That theres a huge manhunt. We do not know how many people were involved in have to keep in eye on that. We focus on business and fx, joining us is geoffrey yu, senior Foreign Exchange strategist. I want to start with yen. I made you a chart. , shinzo look at yen abe took office three years ago. He put policies in place to make in the hopekened companies would boost spending and workers paychecks, that has not worked. Geoffrey increasingly people are asking when will patients run out patience run out . Do you buy or sell yen . Then confidence will be lost and there will be a repatriation of assets from overseas. If they lose monetary and fiscal credibility, then we worry about the change. What is thencine point of trying to weaken yen further . No other way. E is if you do not have the base of fax from higher wages or anything, it still has to happen. With Global Demand suffering, theres not any other alternative. To dovetail Foreign Exchange the political economics of euro. Euro weakening today. Can government leaders will a currency weaker . Can mr. Hollande, miss merkel, Prime Minister cameron, can we adjust our economics or help our fight against terror with a weaker euro . Geoffrey right now, governments are trying to stay away from Monetary Policy. Look at what Francois Hollande announced yesterday in terms of fiscal spending. The notion they are not going to look at budget rules right now, bring the army back to 2007 levels. This is fiscal loosening on top of the fiscal loosening anticipated all over the eurozone. For germany they will look at the humanitarian issues. This is positive for the eurozone. May be able be positive for the euro, too. They are transferring their policies to the currency. Tom help us with the dynamic of the euro and sterling. Francine follows this every five minutes. If we get a print of the zero point 69, what does not signify to see ever weaker euro against sterling . Be more pbl we would concerned because they will be so far off their inflation target. Fore will be some demand the u. K. Before the eu referendum. If anything, that drags back the Monetary Policy normalization outlook. Francine are we sure this is Euro Weakness against the dollar, not Dollar Strength . We have inflation forecast and that would feed into the view we are ready for a hike. Towards i would lean Dollar Strength comedy fed seemed certain about normalization. They risk credibility damage if they do not. On the euro alone, due to fiscalnal stimulus and loosening, the u. S. Needs it less. Francine Jonathan Ferro went to frankfurt yesterday speaking to a chief economist. He says Inflation Expectations are a concern because they are dealing crying. D anchoring. You have to and your expectations remain anchored. Francine what does that mean . We spend the last because we keep telling us that inflation is staying as it is . Ffrey inflation an Inflation Expectation is generated by a couple things. That is the main thing the ecb wants to push back against and a weaker euro helps. For germany, you are export the mentioned it export dependent. Tom it is so important on copper. Global demand weakening. Lagardes new mediocre. Watching the copper implosion. What does switzerland think about copper weaker . Geoffrey copper is one of the metals on which probably globalely reflects supply and demand, especially after the copy carry copper carry trades are being unwound. Source ofthe marginal demand from base metals growth. For germany, if you want to rely on em demand for experts, that does not work anymore. Tom my gut reaction is to go chilean peso. How do i play copper with weaker emergingmarket currencies . Is it through july . Chile is the most direct but you want to be careful when the currency under shoots. Then youve got to look for the correlations, look at australia, South African rand. Francine when you look at Global Demand for growth, it gives the indication of how concerned investors are about china. How much do you worry about risks in the Global Economy for 2016 . Geoffrey i would be worried looking at it in a european context. There is not much appetite for consuming more. A lot of countries are depending on exports. Germany especially. Offtions on russia may come but we are not sure. At thee when you look geopolitical risks, what impact do they have on currency . Geoffrey it is difficult and if we have large events such as this, kneejerk reactions such yen, ashe dollar o r you hate to say this, the market seems to be inured to this. If there are longterm consequences, the currencies will reflect that. Tom geoffrey yu with ubs and Charles Lichfield. The starwood merger with marriott, they think marriott stalls starwood. Internationals ceo thisloomberg tom good morning. Bloomberg surveillance, we continue to cover belgium and paris, the rest of europe. Thember of people still on loose after a night of roundups across all of france. New york adjusts to markets moving as well and we adjust to morning movers. Francine we have commodities and it is on copper. Copper pledging to the lowest injured eight price since may 2009. Oil flirting with 40 a barrel for the First Time Since august. The bloomberg Commodity Index at its lowest level since 1999. For more, lets bring in coffee a javier blatt. How much does this have to do with the price of the dollar. Javier it is very much related to the fact that the market and the slowdown in chinese Economic Growth in 2016 is going to have a big effect. China accounts for 50 of global copper demand. Less for oil, china represents about 10 of global oil demand. Other factors are at play in the oil market. That is why we do not have oil prices as we have with copper. A copper lets look at chart. When you look at copper prices, theres been a steady decline. Is there a support level at some point. Probably yes, but the support is going to be much lower. 1000e to go below the mark. Where we have to look at prices is all the way down to the levels of 20082009. The market is still way above that. Tom i love how you go to the 3000 London Metals Exchange level. How exposed are the Balance Sheets and shortterm liquidity . I do not mean to cast aspersions on neville or glencore . Just as a general statement, how fragile are they . Four trading houses, the big problem in the sector is there a big producer of copper. They produce very little copper. Lower prices benefit some of the trading houses because it means a lower liquidity retirement liquidity requirement. Glencore is massive on copper. We will see a very careful thecore trying to raise quicker the better to regain confidence. Weve seen glencore trading below one pound for the First Time Since big problems earlier this year. They are in trouble. When you do a global show, sometimes you do not know who gets the next question. Looking at u. S. And im looking at london because it is a bigger market. When you look at the steady decline, how concerned are you china slowdown. We are not really seeing it because there is so much government support, but the demand is not there. Javier fair the first time, the industry is looking at potential. I emphasize potential. That is something most corporate traders have never seen in their life. They have seen china always doing quite well. This is the biggest change in the corporate industry in the Corporate Trading market. For the first time, the confidence in the market is that beijing will be able to resolve trouble. In previous locations, everyone assumed that if chinas economic slowdown was there, china would be able to intervene in the economy. Raiseave not been able to the economy as they have in the past. We mentioned copper, is there a support level where they will start to cut down investments enough to support the price . Geoffrey if you look at , then iies in general would say the supply and demand dynamic will kick in as supply begins to shrink. China, we face a recessionary situation in china. It is going to be all guns blazing. Right now they are trying to achieve the right mix and rebalancing. Making sure it does not go lower. That is painful but are we in a doomsday scenario, probably not. In the roome amazon is brazil. Do you have a price on real where things unravel . 4 . 4. 25 . 5 per dollar . Where is your Tipping Point that signals and stability. Hasfrey the Tipping Point always been a psychological level. You have to ask what other level the Domestic Financing situation will be no longer sustainable. And mexico, sometimes they canadian dollar, you have to look at the fed. For 100 basisgo points or Something Like that, that will be very painful indeed. Tom geoffrey yu and Charles Lichfield with us. We will continue tonight, an interview with republican president ial candidate, the governor of florida, jeb bush. With all due respect at 5 00 p. M. Paris, london, and new york. This is bloomberg surveillance. Francine the chancellor of the action speaking at the chancellor of the exchequer speaking, George Osborne saying the u. K. Will double funding for cyber defenses as europe braces for further attacks from islamist extremists. With this is Charles Lichfield, lead analyst for france from Eurasia Group and geoffrey yu from ubs. When you look at these statements, how important is it that we use ciber, fending off cyberattacks or ciber to understand where the money is coming from. Very important. If you think about the u. K. Position in the Global Economy and how much the u. K. Economy depends on i. T. , a transaction hub, for instance, any situation where an attack, whether from a government or Nongovernment Organization would wipe out transaction records would be catastrophic. Francine how much do we know about the vulnerability of our Cyber Attacks coming from radical islamist extremists . Charles we can certainly do more. The u. K. Is familiar with the threat it faces and it has devices it can use to defend iself, but it is tier 2, it not there with the u. S. , russia and china. All of this plays into the countrys budget. France is now ripping apart the budget to look at ways to fund and renew defense spending. It will beting interesting to see whether these areas will be offset by cuts in other areas. Francine how do the terror attacks play into the Brexit Debate and how do you model a possible u. K. Exit from the eu . Geoffrey 10 could translate to options prices and now we need to up that a bit. Its through open borders. That is something the u. K. Electorate has been skeptical about and one cornerstone of the european union. If the antieu groups can link the two, this might strengthen calls for an exit. Tom the negative yield story in denmark, switzerland as well, the two year yield drives to yu, you have a tattoo of the german twoyear. We are right at the zero bound lower in 2014 with a new leg down this morning. Is this because of a fear proxy on terror or is this because of the macro economics of mario draghi or is it both . Geoffrey it is a combination but it is a fear of demand never. Eturning japan like scenario, perennial low growth and low inflation. The terror attacks just making things worse. Francine, when geoffrey yu says perennial low growth, does that mean euro sclerosis . Francine it means francine will be bringing you up to date with what is going on in europe. Belownflation staying zero for a second month in october. , it seems that the boe is itching to hike rates. This makes it more difficult. Theyrey even though lowered their Exchange Rate forecast, they lowered their forecast for 2017 as well. Asing stronger Exchange Rate a head wind. Wage growth is picking up but we need to see that on a sustained rate. Tom francine what does it mean for pounds . Geoffrey i still think there is a value in cable. Eurosterling, below 71 or 70 even is not going to be acceptable. Give us a timeline, there is a manhunt continuing. We need to find a solution with syria and it is World Leaders that may find something at the next summit. Geoffrey there was a summit going on in vienna. It has already shown that there is some cooperation possible. In the next six months the objective is to arrive at a situation where you have isis. Urrounded and the next 18 months to think about a political transition. Francine thank you, Charles Lichfield and geoffrey yu from ubs. From william hear rhodes at 6 00 a. M. In new york and 11 00 a. M. In london. I leave you in the hands of Jonathan Ferro and see you tomorrow. We continue the conversation on business, economics and finance. Tom futures advance up 10, dow futures of 85. Off the yen, 1. 2423 bloomberg terminal. Stay with us. Hour,hodes in our next and of course, we will return to paris. Good morning. X, Vladimir Putin thousand revenge. The french conduct 128 raids. Market adjusts to european contraction. America they brace for the mystery known as holiday shopping. Depot report,me home depot at any moment. Good morning, everyone. This is bloomberg surveillance. On tom keene. Quickly in london, jon ferro joining us. Yesterday, muted market reaction. Today we get much more on a possible european quota. The trend is really the store this morning. In the commodity market, the slow grind lower. That continued. Fresh sixyear low. Tom right now on the earnings front, they are a bellwether for the United States of america. Home depot just reported. To buyt an eight foot four at home depot. They beat samestore sales, revenue, and on the bottom line as well. At year earnings forecast 5. 36. More information on that. Where i go is nominal gdp, like samestore sales, 5. 1 . That is the gloom we have seen, like marriott having to mate with starwood or whatever it is called. The starwood Revenue Growth is lousy. You do not see that. Vonnie Housing Trends are continuing to improve, and this is being affected on the hardliners. It is talking about a 2 billion buyback, home depot, benefiting the earnings there. We will continue to give you headlines. Tom vonnie quinn has much other news. Vonnie significant steps against Islamic State after the paris attacks. John kerry met with french president Francois Hollande in paris. He says even after the aftermath of the attacks, progress is being made against the militants. John kerry they have taken out three quarters of the border in syria is under control. We will be taking steps to close the last portion. There is a Clear Strategy in place, and stepbystep i am confident. Is still tense after the attacks on friday. Two suspects are still on the run. A command center and a training site were destroyed. Vladimir putin says terrorists caused the crash of the Russian Airliner in egypt. A homemade bomb was planted on the jet. Russia is offering a 50 million reward to find out who did it. All 224 people on board were killed. Britain will double its spending to fight cyber terrorism. Socalled cyber force is planned, including an institute for coding. You can get news 24 hours a day on the new bloomberg. Com. Good nominal gdp number let me do a data check. Equities, bonds, currencies, commodities. Lets race through this because we have a smart chart to get our discussion going. The euro is weaker, 1. 07 becomes a 1. 06. Oil churning, copper rebounding off an ugly early United States morning. We go to guy johnson in france, where it hasnt happened. Three lines the United Kingdom in red, germany in yellow, france in white. Great goingoing back 20 years. They are doing better. Germany is behind, and then roars with german manufacturing. Here is what did not happen. France flat out did not happen, with flat per capita gdp. We need to get up to date on what is happening here. Guy johnson in paris before we get to the minutia of the morning, what is it about poverty and a lack of hope,hether in brussels or paris about a lack of economic prospects. What have you learned in the last 24 hours about the desperation of so many in paris . Guy france has had a problem that his date back to the 1970s. It is just becoming a that has dated back to the 1970s. It is just becoming a new phenomenon. It is part of this community that will continue to be problematic for france. This is an argument that is being made the Muslim Population comes mainly from north africa, whereas the u. K. Population comes from south asia. It is a different mix. Maybe the north africans have more of an affinity for what is happening in syria, and there is a different relationship that exists there. Tom i hear of 100 and some raids. What is the character of the raids across the republic of france . Guy france is trying to get offense, and you see this across everything at the moment. The raids are carrying on. They are trying to get information, to understand who knew what when, and how the attacks were carried out. Those raids are being mirrored in brussels. Nichols is reporting on what is going on over there. They are trying to get intelligence and gather information and trying to understand how this attack happened, and maybe trying to prevent the next one. They are taking the fight to i. S. As well with the raids overnight. They are trying to go from defense to offense, taking the fight to i. S. , and that is why the coalition will be important as well. Jon it is jonathan here in london. An Important Economic Development the french government has dismissed budget deficit targets. They are focused on spending, security spending. How does that develop from here . What they are saying is we will spend whatever it takes. We do not really care what is happening with the stability pact. The number next year was meant that,3. 3 , the year after 2. 7 . Those numbers are not going to be hit. Will be more policeman, more prison guards, more officials in point by the french, and i think we will see that mirrored elsewhere as well. We also see that from David Cameron. If you are a cynical person that was an easy decision to make for the french. They are already up against it economically. The fact that they can say there are a bunch of reasons why we will blow these numbers, it works at the l is a at the elysees palace. Tom guy johnson, thank you so much. Mr. Johnson will continue through the week. Yesterday we did so much on International Relations, and thanks particularly to ian bremmer for coming to us from the philippines. Today he is not in the philippines, but he has been there many times. We tilt away from International Relations and dovetail to International Banking and the struggles particularly of european banking. William rose has a storied career with citibank. Bankingritten on global and speaks not only to movers and shakers but bankers trying wonderful to have you on short notice today. There has been any number of articles about how european banking cannot keep up with United States banking. They now have a distraction terror, france off a normal budget to a we are at war budget. William after the great recession, the u. S. Banks recapitalized, cut down their problem loans, and took necessary steps where possible to reduce Balance Sheets and got their act together quickly, whereas the european banks, most of them did not. We are seeing examples of that with these changes in some of the european banks. The most prominent being the Deutsche Bank rate but also Credit Suisse is doing this. You see it at barclays, really across the board. Tom you did not mention a french bank. Socgen. Np paribas and cover for us the nature of french banking and how they compete with the names you mentioned Deutsche Bank of london and frankfurt and also barclays in england. How does france compete in banking . Bigiam you have three International Banks socgen, bnp paribas, which is the largest french bank along with credit agricole. They are all very international. Tom can they compete with london . After this terror attack, can paris rebuild and compete with london . William they are very competitive, particularly socgen and bnp paribas. Vonnie i want to point out that this is a personal gift of nicolas sarkozy. William it is an officer of the french legion. The last act of Nicolas Sarkozys finance minister was to give me this award, so i cherish it. We have to remember that our oldest ally is france. If it had not been for france, we had we would not have beaten the british at yorktown. Go into december, and native people expect a deposit rate cut further into native territory. For many people that is a tax on the banking system. At the moment we have not seen any undetected any unintended consequences. Do you expect to see them . William i would be surprised if the ecb does not increase in some fashion or other quantitative easing, given on given what has gone on in europe. I was concerned that we were not getting growth in europe. Unemployment rates are still very high in the eurozone, and , particularly youth unemployment is extremely high in france, somewhere on the order of 25 . When i talked last year and asked what the biggest thing a problem was, he mentioned in a probably meant he mentioned unemployment. Tom we will continue through the hour with bill rhodes. Coming up, jon pharaoh in london. I am in new york. Good morning. Tom good morning, everyone. Hansvoices on europe, and nichols with an important voice from latvia with perspective of europe as we look at the terror in paris and the effect across all of europe. Hans dial me right back. My phone just dropped. Tom we have some technical difficulty there. Set up for us bill rhodes set up for us, bill rhodes, mr. Pruden, the photo of president obama and president putin speaking with each other. If he takes crimea and everything around it, ukraine has to be front and center. Bill i think people are forgetting about the ukraine and talking about concentrating on isis. Certainly mr. Pruden has been talking about a grand alliance. Putin hasly mr. Been talking about a grand alliance. The difference is Francois Hollande was always pushing hard for bush are alassad to go. I think he will put that aside to get an alliance between the unitedsia, and states. This sort of makes Vladimir Putin stay. This makes Vladimir Putins day. Tom here is hans nichols with a special guest. Cons tom, thank you very much. Vicee joined by the president of the european commission, valdis dombrovskis. We have heard rules on what will constitute an unusual event. This terrorism constitute an unusual event enough to break the budget rules . Valdis first of all, let me the security of the citizens in france and europe is our top priority. Not draw any budgetary conclusions at this the budget opinion we were issuing in the case of france was not taken into consideration in the course of events. See the budgetary equences and how hans what about countries applying for exceptions because of refugees . Do they get a pass . Valdis well, so far again, some further difficulties out of brussels. We continue with bill rhodes. The 17 nations, it is not the United States. Where would you suggest we will see coalition and cohesion as europe looks at terror . Bill first of all, one has to think about this refugee problem. Overlayu are going to the refugee problem right onto what we observed . Bill yes, because it is a problem that mrs. Merkel did not envision would be the problem it is today. That, one of the terrorists came in from syria. Tom with a bad passport. Bill exactly. This gives strength to the opposition in reaching europe in eastern europe. Polls have said that the government will renege on their promise to allow some of these refugees in, and there is a lot easternition throughout europe, the members of the e. U. Taking refugees. All of this has to be taken together. Do you see jon, any cohesion over there . As mr. Talks about cohesion, did you observe any overnight . Jon , what i do see is a propaganda effort. Increase the propaganda effort to turn people against refugees. Bill rhodes, that is an creamy that is increasingly important. They want europe to turn against refugees because that fuels their own efforts. Is that the risk that we run at this point, that we fall for the propaganda effort, and fragmentation between various countries and economies continues . Bill i think all of this adds to the fragmentation europe is going through. I think they really need to get their act together now more than ever on what they are going to do with the refugee problem. Tom 20 seconds. Bill rhodes, what would henry this structureth given this terror . Bill he would try to get everyone together, like a congress of vienna type of situation. Tom i like that idea. Bill rhodes, brilliant. We will continue the discussion on dr. Kissinger and his solutions. Dr. Ferguson out with that important first volume history on kissinger, the idealist. All of that coming up in the 7 00 hour. Stay with us. This is bloomberg surveillance. Good morning. Tom good morning, everyone. Bloomberg surveillance. London today, we just heard reaction from mr. Osborne on Cyber Security and cyber terror, and of course the news out of paris. In london, and some jon ferro is with us with the morning mustread. Jon a you have the echo tire Jonathan Ferro. Im straight off a flight from frankfurt, germany. Jonathan ferro. I am straight off a flight from frankfurt, germany. Inflation expectations, they might deanchor. What we have seen recently is that the signs of a turning point in underlying inflation, measures of underlying inflation, the signs of a turning point have weakened a little bit. We have to look at that. So there are a number of things that we are going to look at. ,t is not only looking at pmi confidence indicators only. It will be more holistic. I think the narc its i think the markets know what i mean. See in the reaction in the euro, with the bond market as well. Let me take you inside the ecb. It is not the headline installation number, it is the Inflation Expectation. The longer we stay down at zero, the increasing likelihood that lower inflation becomes embedded into the economy. That is a big issue for them at the moment. Tom i look at this debate bill rhodes with us, bill dudley speaking at the Economic Club of new york, talking about those Inflation Expectations in the Forward Guidance of janet yellen. How about the Forward Guidance of mario draghi . Im sorry, these events into france must filter into the ecb dialogue. Bill with a continued routing of commodities, oil and gas in particular, oil dropping below 40 and some people think it even goes to 30 ed is right most of the time. I have followed him closely, traveled with him. Tom that was a shameless plug by bill rhodes of citigroup. Did you see the way he did that . Bill i think he is setting people up for an increase in action in december on quantitative easing. Ferro, how do you see mario draghi adjusting . Jon the bottom line is not what happens with qe, it is what happens with the positive rate. We thought that was. 6 . Now we know it can go lower. The outstanding for the quest the f standing question for the the outstanding question for the market next month is how much lower. A one point 05 print on a weaker euro would be something for the market to a that too. Where we are later this evening is watching with all due respect. Jeb bush has been everywhere in the media. Now he will finally get some tough questions, tonight at 5 00 p. M. They will tear him to shreds. Stay with us. Bloomberg surveillance. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Jon this is bloomberg surveillance. Im Jonathan Ferro. Here are some of the Great Stories you can check out on bloomberg. Com. London home prices the average home in london in the third quarter, a record 158,000. Yes, really. , a stock and cash deal valued at 5. 3 billion. And 600 bottles of vintage champagne has been reserved for the country. It has become more sophisticated and expensive. Lets get to the top story with vonnie quinn. Vonnie no pallets of champagne here unfortunately. The u. S. And france are planning a significant response to the terror attacks carried out by Islamic State per john kerry met today with Francois Hollande in paris. He says the current strategy is working. John kerry we have gained more territory, dacia has has less territory. Communities in syria, three quarters of the border of Northern Syria is now under control. We will be working with turkey to close the last portion. Vonnie the french president will meet with president obama in washington in a week. The head of the cia is denouncing what he calls handwringing over intrusive government buying. He said leaks about the writ leaks about programs have demonstrators processing the shooting of a black man by demonstrators protesting the shooting of a black man by police. He was shot during a scuffle. He was wounded in the forehead and is on lifesupport. You can get these and other stories 24 hours a day on bloomberg. Com. Tom if you are concerned about terrorism in paris and in europe, this is the most important interview of the day. William murray served four decades, most critically with agency,ral intelligence and a tour of duty in paris after 9 11. Bill murray joins us from washington. Mr. Murray, we are honored to have you on today. I want you to take us inside what the french will do. How do they do what they do and not in pinch on a democratics mpinge on ai Democratic Society . Boko the first thing they will bill the first thing they will do is look at their education. It means they will try to produce a citizen whose views in with broad equate the french of revolution. French scholars, philosophers, etc. Will be looking at this to see where there will be failures in their own Education System and why they are failing to produce people who are content to be french citizens, or and are turning to adventurous matters elsewhere. Tom if you look at the partition of French Society, and as you mentioned, the secular moving forward through world war i, how is their cia different from ours . How is their fbi different from our fbi . Bill lets start with the latter part of the question. They used to have two internal bst. Ces, the rg and the they merged those a few years ago when sarkozy was president , into one new organization, called the dcri. They have a broader mandate and in fbi or even the mi five the u. K. And similar organizations elsewhere. They look at more than just questions of criminal activity or foreign activity or whatever. They look at a broad range of issues, including what is going on in their society. A way ofg used to have looking at political movements, political leaders, etc. All of that has been subsumed into the new organization. That organization comes directly under the authority of the minister of the interior. Its members, the people working in it, are part of the French Police services. Also, unlike other european unarmed, they have both police function as well as an intelligence function. Vonnie the french are particularly good at this. 20 years ago there was a series of metro attacks. Since then, what have the french done in order to combat these kinds of attacks . How are they better equipped than other countries . Bill i am not necessarily saying that they are better equipped. They have methods that are tried and true and tested, but they are swamped. They do not have the resources that they need. They do not have the number of people that they need. They do not have the systems in place that they need. They do not have the technology that they need because the size of the problem keeps growing. As the number of immigrants who are not happy with French Society keep growing, their budgets, the intelligence budgets have remained fairly static. Tom that would mean that Richard Haass here is Richard Haass riding writing at project syndicate. Tom bill murray, would you advise president obama, or for that matter, president hollande, formerly in hinging impinging democratic rights . Bill neither of them have asked my advice, so i would hesitate to give them advice. But i do not think that the answer to everything is to simply increase surveillance or decrease the rights of the citizens. I do think that we have we and the larger sense of National Intelligence agencies or Police Agencies have the methods and techniques that we need to investigate these movements and these activities. We just do not always have the people. That is particularly important when it comes to the level of training of the people. You do not produce somebody who is able to understand these movements, the religious aspects and social aspects of these movements. They are not born out of a bottle somewhere. You have to train people for a long period of time. It is difficult. The concepts are difficult to absorb for somebody with a western education, and the degree of marginalization felt by many of the people in france and in europe in general, and in the United States, many of these immigrants, is difficult for us to understand. Many of them do feel completely marginalized, and they feel like their only alternative is to strike out in a violent fashion. Is absolutely right. They are always going to go for the softest possible targets where there are the largest numbers of people. Tom bill murray, thank you so much. That was absolutely fabulous. Look for ambassador haass column today in project syndicate. Start , a nearly all a nearly all Stock Transaction for starwood. We continue with bill rhodes. Bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. A beautiful washington morning, and with it, important news. We are thrilled to have bill rhodes with us to speak on general electric. His teamlt and jettison a further amount of synchrony. It is exiting the rest of its Synchrony Financial stake , reducing eni by 65 billion. Tom jeff immelt with the persistency along with the rest of the stock as well. Rhodes, i am going to say you and Henry Kaufman basically predicted this. You said there would be banks that would be leaner financial companies, by ge financial, that would go somewhere else. Is the future of your banking the selling and shedding of assets . Is that Good Business within the general sense . Bill ge made a lot of sense the margins were very high. I think jeff immelt is looking at a new scenario, the new world that we are living in, and deciding that that capital can be better deployed in manufacturing and industry, and i think he is right. Tom he can give to john rice in his international shop, or go over to also or go over to alston. They do not have that luxury. They do not have an industrial backstop. Are you taken aback when you see 9 reductions by shedding of assets, whether it is hsbc, standard chartered, or measured reductions at the american banks . Where will jamie dimon, brian moynihan, and others be in five years . Bill they are trying to get down to their core businesses and make money. During this period, starting with the citibank travelers merger, everyone wanted to be in universal banking. Everyone wanted to be in onestop shopping, etc. , and the world has changed. The better indication is tom so a kid coming out of brown university, do you say follow my tracks into banking, or do you tell them to do Something Different . Do not tell them to go into tv and radio. Bill i will tell them to go into International Banking. Can anybody compete with jpmorgan within the International Expansion . Can citibank compete, or for that matter, the new barclays . Bill also you have john mcfarlane, the chairman, as a former citibanker. It will depend on how they manage their business. Leadership is everything, not only in finance, but in many instances. If you have the proper leadership, you can make money in the most difficult times. Tom and you see that in the most difficult times, ge doing better than good, shifting to an industrial company. Topave industriallevel photos today as well. We have not had top photos, it feels like, in ages. Vonnie it has been a couple of weeks. Ge is up 3 in the premarket. We start with a volunteer firefighter who received a full face burned, receiving what is being called the most extensive face transplant to date. A 26hour surgery, more than 100 doctors and staff involved. Was injured after a rip after a roof collapsed on him. He received a full scout, face, ears, upper and lower eyelids. How amazing is that . Tom thank you for bringing that to us. Absolutely extraordinary. Vonnie i think you have our second top photo, jon. Jon from india, there have been more than 70 deaths after flooding rains. The air force is rescuing and evacuating people. Tremendous rainfall, just tragic, tragic pictures right there. Tom what else do we have . Vonnie president obama has arrived in manila, philippines, for the aipac threedave visit. Threeday visit. The filipinowith president as well as members of the pacific alliance. The filipino president expects to discuss tensions in the South China Sea and military operations. Tom the South China Sea is percolating. Vonnie i am not sure what they can do as a team to combat chinas moves, but at least they can discuss it and make it public. Tom it is some form of a pivot overtaking news in europe trip coming up on bloomberg television, this is an exceptionally important moment for ben pickens, the nations advocate for natural gas. Oil move south. Boone pickens at 10 00 today. Stay with us. Copper. Bloomberg surveillance. Jon good morning from the city of london and to the people of paris. This is bloomberg surveillance. On Jonathan Ferro, alongside tom keene in new york. Time for the business flash with vonnie quinn. Vonnie is survived by a business a survey by a Business Travel group airbnb and other groups have changed plans. Automakers fared worse. Is still the top seller in europe with one fourth of the market. Buying cablel is and wireless can medications for 5. 3 billion. Cable and Wireless Communications for 5. 3 billion. Tom thank you so much. Quickly on Foreign Exchange, an important report today. To euro moves, 1. 07 down 1. 06. We had lows earlier this morning, eurosterling, 0. 69 level. I want to notice as well the chilean peso. We were talking about the copper impact that you have in peru and chile. That is something we do not normally show, the chilean peso hammered for their reliance on copper. David westin, what you have this morning on bloomberg . Have mohamed elerian, and arnie sorensen, talking acquisition for starwood yesterday. It for bloomberg switch over to copper. I want to go to the single best chart now. Oil, oil, oil. Deflation in inflationadjusted copper. Up we go, lehman brothers, and down we go. Look at that quadratic move. This that curve over with that blue line in copper shows the tension that we see out there right now in copper. We need to speak to an expert on ,etals and mining and on copper their responsiveness. What is the number one thing i need to know about the Endless Supply of copper being produced . Number one, in china, demand is down for copper. It is just flat down to we have the electricity demand up from china less like, down again. Exports down, construction down. On the other side, the miners think nothing is wrong. Rio tinto came out yesterday and said nothing is wrong with china. Copper supply is up 6 . The only thing that can move when supply is up and demand is down his price, and christ is getting and price is getting crushed. Tom went to the Balance Sheets of copper suppliers adjust . The price of copper has to get low enough. Tom are we there . Buyers have said we could take a lot more pain in this marketplace. Adjust to what . If you want to adjust supply, you adjust to what . Ideally, you know what demand is. The problem is, you nobody nobody knows what demand is in china. We do not know how much they are consuming. Are we close to the understanding of demand in china . It is a lot less than what we thought. A lot of the copper that china brought in they did not use, they used it as a financial transaction tool. It can be very large, and that is the next shoe to drop in copper demand. As the u. S. Raises interest rates, as the ui maybe comes under some pressure and as the chinese lower the interest rates, all of the things that any the ability to hold commodity, be in oil, gold, copper, is starting to unwind, cting theis impa marketplace. Jon going forward, i know what is happening in the last couple of years with copper. We know the supply story. You come back down to another asset class . Is the dollar driving copper more than anything . It is the perfect storm against base metals and particularly copper. You have the dollar, soft demand, and the thirdquarter numbers are up 6 year on year. Until then, there will be all sorts of problems. Tom can you correlate copper over to oil . They are not consuming copper, they are not consuming oil. It is one big base demand. The financial crisis, china came to our rescue. We need to come to chinas rescue now. Tom what a success story, santiago has been. Bill i think the description we just heard on china is exactly correct. And i think we have more downside to go, and the companies are going to have to adjust. Youron chicago, where is price . The cost curve is only about 1. 50. Tom jon ferro, this is pretty important to see one dollar 50 cents. That goes to the idea of melanie. Own to 4000 that is where the the idea of lme down to 4000. By the commodity market over the last couple of years, what is really going to interest me is when we see it in the credit channel. We have not seen that yet, and when we do, that can be the really frightening stuff. Bill i think you will see it in mention only i think you will see it eventually. My point that i think all of the major Financial Institutions have to put more emphasis on Risk Management because with all of this liquidity around the last couple of years, we have seen this reach for yield, this search for yield. Those institutions that have really worked on their Risk Management will come out well. Those that do not will have a problem. You soll rhodes, thank much, as always. Ken hoffman, thank you for the briefing. 1. 50 is my number of the day on the cost for copper. Jon ferro, thank you, coming back from pharaoh coming back from frankfort on the overnight flight. Coming up, we will continue our discussion on bloomberg radio. This is bloomberg surveillance. Thank you for being with us this morning. Stephanie dont count out the brakes. Mohamed elerian on why you should get markets another look. Gives markets another look. Happy tuesday morning. Welcome to bloomberg go. Im stephanie ruhle. David im david weston. Stephanie i spent all afternoon yesterday at the robin hood investment conference. David you got some fascinating interviews. Stephanie i think we will get some right here next to us. David Shannon Pettypiece is here. It must be a retail day. And an exciting new addition to bloomberg. Stephanie our new announcement gadfly comes out today. Weve got l