Lets get straight to one of our top stories of the day. Volkswagen shares gaining this morning. Europes largest carmaker reported a Third Quarter profit that surged past estimates. Hans nichols has the details. These numbers are so good there can only be one explanation. Ths secretlyyourt learned to drive and are buying volkswagens on the sly. They are up 16 . You see a huge increase in analyst expectations. When you look at profit margin , it isvolkswagen brand 2. 3 . The goal is to get all the way to 6 . Last year, they were 2. 9 . They have high labor costs, especially in germany. Look at the cost per worker per hour. You see a huge difference, almost double in germany. Day in their biggest factory. We will have a look at that later on in the show. Im really looking forward to it. You talked about some of the brands. Ou mentioned audi n china andaudi i skoda as well. Part of this is a general recovery of the auto situation on the continent. Overall, it has been a pretty good story on the auto sector stabilizing in europe. Folks like and has global ambitions. Isy want to take over toyota the worlds number one auto manufacturer. They are getting close there. When we looked at this the same time last year, they were more than 200,000 vehicles short. They look to be pretty close. We will see whether or not they can surpass them. They both want to do 10 million vehicles. Big ambitions, big numbers, we will see if they get there. Looks look at banks. Barclays said thirdquarter profits unexpectedly rose. Is the reorientation of the business working for the chief executive officer . That has beenews much welcomed. He is a man who came from retail and is taking the bank back to retail and it is working. The transformation teams to be reaping dividends. The positives are fewer impairments. The u. K. Economy gave it a bit of a boost. They also have a statement about the powerhouse of corporate and personal banking. They are trying to show that this is where the focus, this is where they want the money to be coming from. Profit in that unit is up 11 . There was a disappointing element. Investment banking was completely ugly. Equities down 25 . Less advisory is going on, less debt underwriting. They also took their charges in the Investment Banking unit. , wefx investigations understood that we could be getting near a settlement with the regulator here as soon as next month. Barclays has set aside 500 million pounds. That is a handset that settlement could be near. They could get a hit in terms of ppi. Lehmand get again from assets. A gain from lehman assets. The leverage ratio for barclays looks a little bit weak. You are right. 3. 5 now. Went through the European Bank stress test. What about the u. K. . A lot of countries are deciding they want tougher requirements than europe already has in place. There are chances that the leverage ratio might be higher than 3. 5 . It could be as high as even 5 . Morgan stanley has done the math and they say if the bank of want all thewe u. K. Banks to have Capital Requirements meeting 5 leverage ratios, that would mean a capital shortfall for barclays. Than itsbe far worse competitors. How would they meet that for the capital shortfall . They would have to raise it, wouldnt they . That is the question. They could get the money from selling off assets. They have already sold shares last year. Worth. Lion pounds they do not want to do that again. They probably would have to come up with more money. Asset, manyghted feel they have already done enough to meet for the Capital Requirements. It is going to be interesting how the markets react tomorrow when we get there from the bank of england. 2 00 p. M. Tomorrow. It is the rendezvous. It is. Thank you very much. Its thirds concluded round of bond buying, bringing the Central Banks historic asset buying program to an end. The focus for investors turns to when the fed will begin its first Interest Rate hike. The central bank has bought more than 3 trillion in assets. 120 . P 500 has risen brazil boosted Interest Rates sooner than investors anticipated. Afterve comes two days the president posner wrote reelection which triggered a selloff in assets president s narrow reelection, which triggered a selloff in assets. Europes secondlargest airline says profits will be hurt by a sharp increase in pension costs. Strikes a wave of panic this year. Later, we will be speaking to ansas ceo. Lufth the next generation cruiseship into in two southampton southampton. Welcome back to the pulse. We are live on bloomberg television. The Federal Reserve has ended its third round of quantitative easing. The focus for investors is for when the central bank will increase or have its first Interest Rate hike. Thank you so much for joining us, charles. This was not much of a surprise. The surprise was mainly that we were not expecting to see something more on the hawkish side. We were expecting something more neutral or on the dovish side. , we got an upgrade in the labor market assessment. We got a change in some of the other language. They seem to be dismissing the impact on inflation, saying that we know inflation will be weaker, but we are not concerned. Stronger growth will bring inflation in line with target. The probability of having inflation below 2 is another they aresign that giving to policy normalization. Inflation has been under shooting. Just focus on core inflation. That is basically what the statement told us. Headline will be weak, but we know it. It is an external shock. Core will be more german by what is happening driven by what is happening in the domestic economy and that is what we want to focus on. Is it surprising that they didnt talk more about the weakening World Economy . Surprising and not at the same time. The u. S. Economy is a big, closed economy. Exports and imports are still a of theiry small share economy. They need to focus on the domestic side more than the external side. So what will be set on those issues in the minutes . That is where we could have more detail. The 1 trillion question Interest Rates rise when . It has changed since yesterday . It changed a week ago. We pushed it a bit from june. It is extremely good defendant, dependent, data obviously. You are in identity dependent we are in a data dependent modd. Od. Is that a little dangerous . Communication is not as clear as the markets hope. You can also have a always have a temporary shock that the markets will overreact to one bad number. It will be important what fed officials are telling us. I would focus mainly on core members like janet yellen. We want to listen to the core members. The margins also bring a different angle to the discussions. Forhat is your main concern the u. S. . Is there one thing that looks weaker . Which talked about wage growth. Construction . I think wage is probably key. Construction and housing, we know it has been on the weaker side. There are some tentative positive signs. The recent market volatility brought lower market rates to the u. S. That should be positive for housing. We have strong consumer confidence. We have a period of the year that does not have a big impact on housing. But as we get into the spring season, it might have to bring more activity into the housing market. If we get continued stability, that would be a positive. We have the u. S. Definitely giving strong indications that it will normalize. The ecb, not so. The bank of england, a little bit more sketchy on what they can do. Jugglee trying to overheated property markets. Where do you see currencies going and will the fed tolerate a higher dollar . Stronger u. S. F a dollar is still intact. It is the only central bank that is ready to increase rates. I dont think we are at the regime where we were in september. We are more in a gradual appreciation. That is something they would be more comfortable with. You think . It seems the fed does not want it and they will start doing something about it. Comments theyhe were probably scared about the speed at which the adjustment happened. The sharp increase. Yes. If you see the appreciation over three months or six months, i dont think we will have as many comments on the currency. In the went so quick space of a couple of weeks and that is where policymakers start to be concerned because the economy does not have the time to adjust to the new shock. How are you looking at the ecb . Is somethingpe that should be welcome for a lot of exporting companies. The growth side of the exports and also for the , it will help to drive inflation higher. Currency is not the solution to european problems. It used to be. [laughter] before we had a joint currency. Now, not so much. The impact is not big enough. Thank you so much. Lets get you some company news. The World Biggest eyewear maker has seen to chief executives resign in the past two months. Shell posted thirdquarter profits that rose, beating estimates. Europes Biggest Oil Company announced that the former dupont ceo will become the chairman next year. A narrower loss for the third catellucent. L they are europes Largest Network equipment vendor. Has cutp, lufthansa 2015 profit forecasts. Find out why and we will speak to the ceo later in the pulse. Welcome back to the pulse. Television andrg streaming on your tablet and phone and bloomberg. Com. Plantrlds biggest auto will be more efficient. Hans nichols spent a day on the assembly line. 40 million volkswagens and counting. 6. 5 thousand square kilometers. It is so big, most workers have a bike to get around. Size does not always mean economies of scale. Volkswagens want to raise profit margin by 2017. The last two years, we started to completely rebuild our plant. Downxpenditure goes because we have spent a lot of money in the past to have the highest flexibility we can have. What the company says is unique is the assembly line. You have six different versions and you can swap them out depending on demand. We are the only manufacturer which is able to produce with very high flexibility, bumper behind bumper. Efficiency is never the wrong way. These are self driving engines. They will know when to stop rightabout here stop, about here. We are right at the marriage the union happens between the engine below and the body of the car. For their wedding night, im going to give them a little privacy. Germany and forces breaks and they also enforce music. The question for management is how to enforce efficiency in a factory so big it has its own rules. Into theichols riding factory. Lets check on the markets. There was a lot for investors to digest. Very busy 24 hours. The last 20 minutes have taken a leg lower for mainland europe. As i look at london, down by 0. 61 , the Energy Company is under pressure on that particular index. Brent is taking some pain this year. Oil is lower from the june highs. The big one yesterday was the Federal Reserve. The statement was taken to be a little bit more hawkish. The concern that some people expected to be there was not. 4 10 today. Down by is theeresting thing politics versus the monetary policy. Not very pretty. German unemployment, a decrease there. We were expecting an increase. What does that mean for german fiscal policy . Strong, Approval Rating is strong, that means fiscal policy may stay the course. Coming up, hightech on the high seas. The first ever smart ship pulls into court port. Welcome back to the pulse. Live from london. These are some of our top stories. The fed has concluded its third round of bond buying, bringing the historic Asset Purchase Program known as quantitative easing to an end. Now the focus turns to when the fed will begin their first Interest Rate hike. The fed has bought more than 3 trillion in assets. Brazils central bank boosted Interest Rates sooner than anticipated. They raise to the benchmark rate by 0. 25 two days after the president s reelection which triggered a selloff in assets. Spanish Economic Growth slowed in the Third Quarter. Gdp rose 0. 5 . Officials also released a separate report showing that Consumer Prices fell 0. 2 from a year ago. Lets look at the seas. The worlds first ever smart ship made her maiden voyage. Smart shipbeans sailed from germany to southampton. The chief executive officer joins us live from southampton. Great to have you on the program. Let me just get out of the way. How is your booking looking like . Have you had any cancellations because people fear the risk of ebola on cruise ships . The fear is much bigger than the reality, as most of the experts are saying. We have not had a big impact yet. As common sense prevails and as the authorities, despite some missteps in the beginning come again control of this, we are looking pretty good going forward. We dont think this will have a big impact. You have a little bit of an impact . Some roots are affected more than others . No, i think we are feeling quite comfortable about the way people have reacted to it. We worry about people overreacting and fear becoming more important than facts, but i think the facts are prevailing. We feel pretty confident going forward. This is the most technologically advanced about. Boat. It is unprecedented in terms of connectivity. How much did it cost to build such a thing . As you point out, the connectivity is something that is unheard of. When we get over into the area of the united states, this will have more bandwidth than every other cruise ship combined. That bandwidth gives us the capability of putting on just an enormous amount of new capabilities in terms of simplifying the process from checking in to how you choose individual activities on board. Toare using the technology basically make the experience that much easier. Im actually amazed. We talk so much about technology. Is this driven by the fact that passengers were asking for more technology or is this you saying, i think this is what people will want . , one of the things is im very much taken by henry fords quote, if i ask people what they wanted, they would have given me a faster horse. Our job is to anticipate what people will want and that is what we have tried to do. Is askingobody that these things, but we can see that if we provide them, they will like it. We are already seeing that. The reaction from the people we have showed it to already has been overwhelming. We are anticipating the need and satisfying it before they realize they have it. That is part of what we do in our business. When did you Start Building it . It is really quite visionary. It is a trend that is just starting now. If you had started building this , it mustve been a long time ago when you first had the idea of saying, this is what people will want. Are you appealing to a younger crowd . Yes, it takes a long time. Technology is supposed to make life easier, but it doesnt make it easier for the people who have to create it. We decided we wanted to use the technology to make this a better product about 2. 5 years ago. That is when we coined the term the smart ship. That is when we started this process. By the way, the process is not going to end today. Our mantra is continuous improvement. We keep working on it. This is a breakthrough level of technology. Take a few months before we see what more we can do to make it even better. Do you think you are appealing to a younger clientele . Im sorry. I didnt hear that. Are you appealing to younger people . Oh, im sorry. Yes, one of the key aspects of the ship is the appeal to the millennials. The average age of our cruiser is only 45 years old and we want to continue to attract the millennials, the family business. Frankly, they just demand connectivity, ease of operation. That was one of the driving factors for adding all of this technology. Talk to me about your strategy overall. You were talking a couple of stopago how you have to giving lastminute discounts. What is the next challenge over the next 12 months . Our challenge is always to overcome the erroneous impressions about cruising. Which has sohis, many activities on board, the northstar will take you up to the heights of a 30 story plex where youea can learn to do trapeze work and going bumper cars, all of those things help us overcome the old myths of cruising, which helps us expand our market. We need to continue to grow. We need to continue to overcome costs. The cruise is a tremendous value. It is better than any comparable value in the vacation industry. We would like it to be little less wonderful a value, but still good a value. How difficult is it to hold onto your prices . Our prices continue to rise. This year, we are at record levels of yield. We have already indicated that we think we will do even better next year. Great to speak to you, richard, on this very exciting day. The chairman and ceo of royal caribbean. Cut its 2015 forecast for operating profit as weaker Economic Growth ways on ticket prices. On snaggle says the numbers. Numbers. Ichols has the they wanted a 2 billion profit margin for 2015. Now they expected to be significantly higher than the one billion euros they did last year. This does not factor in all the cost associated with the strike. For this year, that is 170 Million Euros. It is just backward looking. We have no idea how they will write down any cost associated with additional strains. By no means as their labor situation secure. Here is what carsten spohr, the a conference call. These are tense times in an airline industry. The Third Quarter was no walk in the park. Their big rival as a number for how much their strike cost them. It was 330 Million Euros in the quarter. One final note about the profit warning from lufthansa. This is really about Macro Economic themes. It is not necessarily entirely strike. Pension costs, are going to be higher and they are going to get dinged on that as well. How much of this profit warning has to do with what you were mentioning, strikes, labor problems, and how much does it have to do with the Global Outlook . It seems like this is mostly Global Outlook, which is why we are mostly in unknown unknown territory. 2015sts predicted that none be 1. 5 7 billion, but have factored in what labor costs are going to be. No one knows how much they are going to lose from the strikes. They get the situation resolved, they are going to have to book more charges and the rest of 2014 and into 2015. Thank you so much. Coming up, it is all about oil. Reason tothere is no worry about the prices. We will discuss after the break. Welcome back to the pulse. Lets get on to oil. Shell presented or earnings that Beat Estimates despite lower oil prices. We have so much to talk about when it comes to oil price. Talk to me about shell. Falling. Tion is Capital Investment is falling. What they have managed to do is take some costs out and started up new fields, particularly deep water fields. These are fields in nigeria, gulf of mexico, malaysia. They are adding new production that is offsetting some of the declines in more mature areas. They are highermargin barrels which is helping them out. Talk to me about the price of oil, which is one of the unknowns. Some people are seeing thickets he a crash from this point because there is too much oil out there. Where is the demand going to come from . China is probably not going to happen. Chinas economy is not going to me Central Government forecasts for this year. If it is not going to be some it is not demanded, going to be supplied. You look for the marginal producer, u. S. Oil for the canadians. Or the canadians. Have we seen any production cuts . It certainly does not look like it. The price has stabilized. If you look at the discounts of the differentials, those have held steady or declined a little bit. Even that is signaling that there is still plenty of oil coming from those places. So what is going to happen . [laughter] i know it is a difficult question. Does it need to go even lower . , the energykets markets continue to push until they see somebody scream uncle, basically. It does not look like that has happened. You havent seen any type of recovery. Maybe it will take another push lower to test the producers and see how much pain they are willing to take. It is a question of who will blink first. Thats exactly right. How does shelf it in with fit in with shell some of its major competitors . They are up a little bit this year. Bp is down. Exxon is down. Chevron is down. The one thing i guess we are still expecting is the arctic. It is probably not the right time to really bank on that part of the world, but this is still a big unknown . That is a very longterm question. That is 10 years away. Shell has not even begun to drill yet. It will be another 510 years away from producing even if they are allowed to. , lets bring in the oil and money conference from london. Give us a sense of what you are seeing on the oil markets. We were talking about supply constraints. It is difficult to put a price. What do you see the challenges for the industry . Good morning. The keys for the industry today are threefold. Economics. We see a decline of prices associated with an increase in the cost of the resources. The second is shortage. Human capital intensive industry. People. To recruit more it is a big challenge going forward. Is on thechallenge license to operate. In terms of education, industry whereure, and countries we are finding oil, particularly in africa. To what extent is gas a game changer . To what extent is Unconventional Oil a game changer . They are two different games. We have a game in gas. Unconventional represents 50 of the resources in gas. The economics to produce today are here to stay. Oil is a very different story. We see the same costs decrease when we apply the same technology. The supply is a tiny part of the resource liquidity. It competes with many other sources of supply, like conventional, and it is really too early to say whether Unconventional Oil will be as big as it is for gas. What would be the potential impact on the market of the u. S. Exports . Market participants are concerned that the u. S. Could take a step back and not put anything on the markets for at least a couple of years. Gas will have an impact on the market. Is a lot of resources to produce at an economic price. The u. S. Will be able to benefit. There are many issues around permitting for energy exporting. In terms of resources, it can play an important role. Is a global commodity and now there are many prices to oil. In the u. S. , the oil price can change. On the Refining Capacity nearby, the transport costs are becoming a huge issue. We see a lot of disparity in prices. It is changing. We see different prices for gas and a divergence of prices for oil. That is different than what we have seen up until now. Thank you so much for all of that. Lets have a look at some of the commodity prices. We have been talking about oil all week. Something has to give. Lets have a look at what oil has done over the last couple of months. We may be looking at a crash like we did 25 years ago, one analyst said. Certainly, there is too much production out there. Opec talk to reporters yesterday. They are not ready to cut production. So who will cut production if we dont see a further fall in oil price for the moment . This is the picture for oil over the past year. Started to kick off mid august. We will be back in just a couple of minutes. We have plenty of results to go through. I will see you in a minute. Welcome back. Credit isar tax expected to be cut by 2017 unless Congress Acts soon. Investment credits may drop to 10 . The Solar Industry is pushing to extend the current benefits and some companies depend on the benefit for profits. May add as much as 20 gigawatts and maintain momentum into next year. Twiceis set to produce the amount of wind power as europe. Edison has arranged a loan to develop a power plant in chile. Sunedison is the best performing Solar Company this year. Lets have a look at some of the european stocks. It is something we have been watching out for allday. We had a lot of corporate results to watch out for. We also have the fed. We are seeing a little bit of a reversal. European stocks are now retreating, a racing earlier gains. Erasing earlier gains. Lets have a look at the individual stocks. Barclays is one we have to watch out for. Profit came in better than expected. There was a little bit of what investors are looking out for, how much fines will they have to pay up after all of those investigations . For those listening on bloomberg radio, the first word is up next. This is what we will be talking about. We have a great interview coming up with the lufthansa chief executive officer. We will be speaking about ferrari being spun off. In the meantime, follow me on twitter. The fed action. Markets move. Life after quantitative easing. She does davenport. Politicians seek the midterm vote. Juan, they go in search of economic stability. Good morning, everyone. It is bloomberg surveillance. Im tom kean. Tom keene. Lets go right to our top headlines. The Federal Reserve ending quantitative easing. That the, the fact economy is on the health of our said the economy does not need the help anymore. I think they will be quite measured when they start raising rates. My guess is that it would be in the second half of next year