Higher in terms of commodities. Copper up. 4 . Euro pretty much flat after a bit more hawkish. Hinting we could see a rate hike this year. We see 50 chance of a rate hike. Lets have a look at the equity markets. So much corporate news. Airbus up 3. 5 . Third quarter profit up 12 . They are going to increase the amount they are producing in terms of a320. Bnp paribas up 3 as well. Profits gain. Bullish on Investment Banking. We can raise our market share, they say. Renault up 3 as well. Confirming higher margins. Get this raising the outlook for europe and france in terms of the market for cars and demand. Jonathan thank you very much. Decent numbers out there this morning. 2 . Tse 100 up by the cac up. No halloween surprises from the boj as governor kuroda bets japans will hit its inflation target. China gets rid of its controversial one child policy and shares and charge related stocks soar. Later, a monster october. Forrap up a bad month equities. For its best month since 2009. No change from the boj. It kept policy unchanged. Lets bring in Jodi Schneider in tokyo. What are we to make of the comments this morning . The strongest signal was delaying the inflation target. Is that we should take notice of this morning . Jodi yes. There are few things to watch. First of all, honestly they did stimulus, butr by moving the inflation target, hes saying he thinks were going to make it. The reason for not making the inflation target. They were low, and that is what was causing them not to hit that 2 target. He also said this doesnt mean they will not take action in future. All eyes are on november 18 and 19 when the board meets again. Anathan you and i spoke couple weeks ago and there was this difference between expectations, international and japan and domestic expectations. Going for it in the coming months, what are we expecting of the boj, and what are the data points we should be looking at . Jodi i think first of all the fact that the u. S. And the ecb as you had just mentioned say they may act, i think that has to be part of the equation here. Bighey think theyre trading partners are going to act, that may be a reason to put this off somewhat. Wthey are looking at december in the u. S. Ua would think there would have to be part of the equation. Governor kuroda likes surprises. Who year, among economists bloomberg surveyed, more than people thought he was going to ease. Herefore, the lack of surprise may have something to do with this. He clearly defended the decision at a press conference this afternoon not to ease at this time. Jonathan Jodi Schneider, thank you very much for joining us. Lets bring in the head of global effects strategy at unicredit. Have you with us this point. The boj does nothing. We have a split between expectations abroad and expectations within japan. What do think push them over the line to do nothing . In terms of expectations, i think it was extremely difficult to read the bank of japan because there is a massive difference between what these guys ought to do and what these guys are going to do. The assessment of japanese and development, both on the activity and the inflation front, have been very much removed from reality. Kept on saying Inflation Expectations are rising from the longerterm perspective. I dont see that in the numbers. As businessas well investment is really struggling. But as i said it is really hard to read them. But the the fact they do not move right now does not lower the chances they will do it sometime over the next two months. Jonathan we always less than ask the question if we are reaching the tipping point. When you look at the boj, they own half of the etf market. Are we at the point where the boj realizes, starts think about whether doing more is affecting us all . I think we are definitely reaching this point. Been relying on Central Banks largess to ignore economic fundamentals. The thing which i think which was a just and for the bank of japan is that they decided to look to the impact on oil price on inflation numbers, unlike the ecb. I think it was a smart move in that the ecb itself has put itself in a precarious position by deciding to link its policy to what is happening on the oil market. Jonathan if i go back to the ecb press conference, listening to president draghi he said inflation shaped by oil. This is a very different approach. Is it the right approach . I dont know. We will find out. I honestly dont know if it is the right approach. First of all, i absolutely agree Monetary Policy has its limitations. It cannot work by itself. As far as the ecb is concerned, the real thing is the Exchange Rate, to be honest. As far as the Monetary Policy stimulus in japan is concerned initially we have to agree, i thought myself, is it working or not working . I came to the conclusion that at the beginning it started working, Inflation Expectations started picking up. That came to an end when the consumption tax hike was incremented. You need some sort of coordination from a fiscal front as well. Jonathan when i listen to you and read your research, i get the feeling from you that we are about to enter this new phase of the Global Economy for financial markets. Realization that Central Banks flyingboost growth solo. When that kicks into markets, the full ask is going to be quite bad. I think we are closer. When you look at the Global Economic its weaking. In europe, we are focusing on support from the ecb, but the reality is that growth is slowing everywhere in the world. The factd to that that Central Banks are probably reaching the limits of what they can do in order to support the financiald the markets, yes, we are close to a tipping point, which might be negative. Lets reminder cells in the u. S. , over the last five years, we had growth of 6 per annum. While the s p was running a doubledigit per annum. 2 was coming from Share Buybacks. Jonathan you and i talk stocks after the break. Dollaryen breaks down below 1. 21. How much downside is in that currency . I dont think there is a lot of downside. We may see the yet strengthening over the short term. This is not going to be material or sustainable. I stand by my view. Japan remains a mess. Jonathan we will leave it there. They are both going to stay with us. A beat at bnp paribas. Well look at how frances largest bank group profit by 40 . That is next. Jonathan good morning and welcome back to bloomberg tv. Jonathan live from the city of london. The ftse up by 3 points. This month the biggest month of gains since july 2009. A lot of top stories. Caroline im talking leading the charge on the stock 600, up 11 . Surging more than 12 . The reason . Its managing to make the best of a difficult situation. They are managing to improve profitability, up despite sales on the downside. Keeping their full year guidance for a slight decline. Remember, this is a company heavily exposed to russia. And russia has been an area of concern. The economic challenges continue. It used to be 40 of their sales. Now just 20 . But europe and north america are looking strong. Theyve got positive economic trends. Material costs on the downside. That helps them. Productivity is off by up by 5 . Bad situation. Managing to sustain profitability. Meanwhile, loreal down 3 . This is the face cream, shampoo, missed forecast. Up3. 7 , but the estimates were for 4. 5 . Slowing a nation and latin america. Emerging market sales slowing for the second straight quarter. Loreal on the downside. Lastly, i want to leave you with bnp paribas up 3. . Really managing to impress the market. Equity, prime brokerage seeing an uptick uof 21 . They will make the most of their market share. As the rest of the market tends to ease off. Jonathan fascinating dynamic. I want to stick with bnp paribas. We sat down with the banks cfo. CapitalGlobal Markets are still doing well. When it comes to markets, there has been volatility, more uncertainty about Monetary Policy, but nevertheless, we have been working with to be wellposition to capture several clients, capture market share. As i said, our Global Market is up 6 . A Strong Performance in equities and good performance in credit in this environment. Jonathan that was the cfo of bnp paribas. Our guests are still with us. I was poring through your notes about equities. Avoid Investment Banks but these banks are changing. As cyclicalng to be as they have been . I think it is very much a question of picking the winners. Has beennp paribas doing well in particular because they are one of the strongest Balance Sheets in the sector. Also, also because they are looking at gravatt market shares from their competitors. I fyou compare them with Deutsche Bank, it is a good case in point that it is much more individualsifying, names rather than making a big claall in terms of sectors. Jonathan where are you positioned . We are positioned within the prefer thetor, we credit market because we believe the story of stronger Balance Sheet is still very much alive. On the equity side, we think this is a headwind for equity shoulders. Jonathan that is an interesting distention. Distinction. Low Economic Sensitivity they sound like the perfect stocks. Have plenty ofu health care stocks. Quite interesting to note within the internet sector that there is a lot more financial discipline in the sector. We had the first Share Buyback by google. We have amazon which is much more focused on delivery. Earnings rose. The projections have doubled this year. So i think this is where you can find some quality names with good Earnings Growth and above all, a limited sensitivity to the Economic Cycle which is weakening. To developo you want your sensitivity in terms of your portfolio more shifted towards the corporate and what is going to happen there or for the consumer . Im talking about technology. We want both. On the corporate side, there is a lot of m a to take advantage of. I think that merger is quite interesting. On the other hand, i think on the consumer side, you seem to have a lot of traction. The consumer has a limited amount of money to spend. You need to be able to identify where this money is going to go. It is not so much a question on relying on consumer spending, but to identify where this money is going to go. And i think the Online Retail versus brickandmortar retail is a classic case in point of where you can allocate your money. Jonathan the risk on sentiment of the last month. A huge months for october. How did you play october . We remain fairly cautious. We believe that central bankers have almost exhausted all their tricks and we might be left with treats, and we might be left with the tricks. You have to be cautious. We dont want to participate in a kind of risk on, bad news is good news rally. Jonathan the risk on, risk off in the equity market very similar to the fx market. I am talking about the euro. It has changed. What he or thoughts on it . The negative correlation between the eurodollar and risk is vanishing because the initial negative correlation was because of Global Equity investors anticipating q. E. One over the last month of last year and the beginning of this year. We are hedging, all the hedging their exposure, meaning they are taking negative bets. When equities are going up, thee was going down. When these people were on down their longer exposure, they were buying back their euros. Now they realize too much is in the price of it. Jonathan they are both going to stay with us. Next, chinas baby stocks boom. Shares surged after china scrapped its one child policy. More next. Morning. Good welcome back to bloomberg tv live from london. Good afternoon, hong kong. Focus of the segment. China is scrapping its one child policy. Nick joins us now for more. The market response, the Market Reaction to chinas move yesterday clearly playing down in hong kong and china. What do you make of the decision to allow families to have two children . Can lookl, i think you at it two ways. At a symbolic level, this removes a policy that was one of the most hated means of social control by the Chinese Government. So that is an encouraging to a lot of people who want to have two children. At the same time, they are maintaining those controls. There are not saying we are going to let you have as many kids as you want. We are saying you had one kid before. Now you can have two. The other question is that it is a childensive rto raise and education costs are so high. So, we are still waiting to see it is going to take a long time to see how much impact there will be. But analysts are forecasting in the neighborhood of between 3 a nd 8 million children every year. So, there will be quite a bump as it were in the number of children born. Jonathan the market is a marvel. The known stocks fly off the back of this. But the people that know china and know the culture are thinking about how embedded the one child policy has become. One person has called this the biggest contraceptive ever for any country. We expect a country develops. Do you think this moves the dial . Is it too little too late for chinas tomography demographics . Nick for so many years, the Chinese Government has ingrained in people the idea that really its too much of a burden to have more than one child. They saw this really as a key part of their propaganda efforts. If you go into some smaller villages and on billboards, whenever there is a picture of a family it will be the two parents and one child. So this is something that has become deeply ingrained as part of the chinese propaganda system, but when you look at those markets, you see there has been a huge bump. So there is an expectation there will be many more children. To have you with us to break down the historic move out of china. Lets welcome back in our guests. The kneejerk reaction by baby related stocks, that is the kneejerk reaction to the market. Your reaction . Also basically there are factors yes, its a very exaggerated move. We have absolutely no clue whether this relaxation will trigger a boom or burst in china. As was pointed out by you, the rising cost of living has been much more effective in cpaping the number of children in capping the number of children. More important, i think it will take a lot of time for this relaxation of the policy to have any meaningful impact. So, no, this is definitely not something you really want to implement in your portfolio. Jonathan a reallyally for the i on Dairy Products demand . How ridiculous is that . I do not think it is a lot ridiculous if you factor in the weakness priced in the kiwi. To me, the market looks for an excuse to go higher. Fxathan well talk more on after the break. Jean, thank you for joining us this morning. Next, we talk fx. Sees eurohy unicredit dollar at 1. 20. Jonathan welcome back to on the move. Im Jonathan Ferro live from london. 30 minutes into the trading day. Equity markets pushing hard. The ftse 100 marginally higher. The dax up. Ofuge month in the month october. The stoxx 600 poised for its julyst month since 2009. As the euro bears look ahead to more q. E. , and goldman has a parity call. My nesxxt guest speaks at fair value at 1. 20. Its worth to draw a distinction and reemphasize, a judgment that that is the fair value of euro dollar. Do we go anywhere near their given what we learned from last week . Fomrom a mediumterm perspective, yes. Our forecast is 1. 16. The next couple quarters we are probably going e, remain on the weak sid largely because people will be waiting to see exactly what draghi will deliver because he does have the habit of over delivering and surprising markets. But, you know, i have said this all along, as far as parity of. 9. There is nothing magic about these numbers. When you throw in a number of economists taking into account Interest Rate differentials, you cannot really come anywhere near close these numbers. Jonathan the fed. How do they play into all of this . The last couple days, does that change how you think about the fx market . Well, first of all, the fed has a mandate not related to the fx market. , it is one of the main arguments that we have held. The firstend of quarter of this year, there has been a significant decoupling between the rate market and the dollar in the sense that the rate differentials has remained between the u. S. And the rest of the world flat. Whereas, the dollar kept on surging up until april. It has depreciated since then. The main point is, whether these guys pull the trigger in december, at the end of the day we are talking about 25 basis points. It is totally irrelevant for the fx market. What is relevant is the path of the hiking cycle. I think in order to justify the dollar at current levels or higher you need to start pricing bya really aggressively hike the fed. Jonathan where will they max out on rates . I think its extremely difficult to call it now. I think, obviously, we can ve nture guesses until the end of 2017 that we are going to see a proximally 152 approximately 2175 of additional basis points. I think this is going too far appeared you have the domestic front. What is going to happen with oil prices. So, i think it is a very tough call. Jonathan we sit here in the city where the majority of the to the close to goes market. I look at cable. You talk about Market Expectations of the fed. The Federal Reserve has reshaped them. The bank of england nine months away, down the road. Do you think that is too far . What does that mean for the call on cable . It is extremely stretched. Both in terms of the relative fundamentals between the two countries and externally stretched if you look at the the since the bank of england became an independent central 1997, we have never seen such a wide time gap between the fed initiating a hiking cycle and the bank of england following. Week we aretnext going to get an inflationary report that is likely to be less dovish than people expect. So, one on account of fundamentals, two on account of what is priced in by the time gap between the lift off dates between the fed and the boe. As well as based on our fair value matter spirit we see cable fairly priced. We pursue depreciation in w e foresee depreciation. Jonathan does Governor Carney have a responsibility to bring the market back in next week . He does have a responsibility based on his mandate. To the extent that he sees the risks that are moving way too high against him. As long as the market keepson remaining so complacent, then obviously, he can use his mandate to basically communicate bitrate hiking is coming a earlier than people expect. Line for your one ca call is that the dollar is overvalued. As you look at that, how do i play that . No, i think one thing to look at is definitely cable. One of the things that should be slightly higher is cable. The other thing i would say that is that it is is extremely difficult to makea call now, because despite the overvaluation of the dollar, our main view is that this overvaluation was very slow because the other Central Banks will be pushing back to maintain their currencies. But i think personally that Commodity Currencies have priced too much. I see some upside in the mediumterm. Jonathan we base the fx market around maybe the dollar. Yuan strength is a most since 2005 in on shore trading. Is that another dynamic we need to look at, what happens with chinas currency . Its definitely part of the emerging markets slow down and the china slowdown. You see a reflection of what is going on in there. What do you think about the ecb . The biggest weight in the euro is the renminbi. It is difficult for them to affect anything by talking or by acting. We see it as a reflection of what is happening in emerging market growth, but not really, at least for the foreseeable future, relevant for the fx market. Jonathan great to have you with us this money. Head of fx strategy at unicredit. Up next. Its outlookates this morning. Find out why next. Jonathan welcome back to bloomberg tv. The banktories eight of japan its Monetary Policy unchanged. Governor kuroda postponed the banks timeframe for reaching a 2 inflation target. The u. S. Has avoided a debt senate with the approving a budget early this money. The measure prevents any Government Shutdown to march 2017 but lifts budget caps. Of infant formulas and toward producer have jumped in shanghai and hong kong after beijing said it will abandon its controversial one child policy. The Family Planning project has left china with a rapidly aging population and a shortage of workers and consumers. Raised itsab inbev fullyear Sales Outlook on stronger than expected sales. Caroline hydes been taking a closer look at the numbers. Caroline it is a friday. It is too early to think about your budweiser, your stella your later, becausear this is what is driving volumes for ab inbev. Help the when you have a huge of a neighboring. And 1. 5 growth in volume. That is stripping out m a affects and foreign currency effects, we see 1. 5 growth. It was a beat. They are managing to see growth in mexico double digit growth. Latin america, the south area doing well. And we are seeing u. S. Outperform as well. Notably, it is about going premium. The more expensive brands. Morea and goose island, premium labels are driving revenue higher. Organic revenue up 7. 9 . So good, they are raising their forecast. Revenue is going to grow faster than inflation this year. Much optimism coming from ab inbev. There is all some some downsides and headwinds when you dig into the overall report. We see no Industry Growth in china. They are saying theyre going to outperform the rest of the industry, but china is weak. They are not seeing any growth this year. Also, they have some of their lower end areas not performing. Bud light, rita, even though they try to spice things up with a few flavors, not selling as well. This is all happening in the United States. Brazil, unfavorable macroeconomic trends. The consumer is not buying. You have got inflation rampant and brazil. In brazil. But you have to focus in on the big deal. Are they talking about the deal with sab miller . They pushed out the deadline for the formal offer. The offer is for 44 pounds per share. The formal deadline extended to november 4. The reason . To get shareholders on board. Ab inbevs chief executives flying out to south africa to try to woo them. Ensure they get the goahead. The it is president ial politics season. Jonathan i look at my bloomberg terminal. I look at the size of the deals. It is huge. Then it became increasingly politicized and people expected to hear less about it. Every singlesfeed morning and it seems another deal is on the horizon. I think we have an interesting dynamic. If you look at the last few months of the nasdaq 5 technology we have seen stocks sinking. One of the major complaints has been assets have been very expensive. Those assets are getting cheaper. We may see another round of dealmaking as some of those targets in that 1 billion Biotech Company or 5 billion, 10 billion, all the sudden those look more affordable from the perspective of an acquirer. They are remembering back in june when their stocks were at an all time high. Wait, we are not going to self or so cheap sell for so cheap. Of looks a new round by companies that were not quite as affordable a few months ago. Jonathan drew armstrong. Thank you for joining us. Next up, a monster month. October had more treats centrics for the market. We break down the banner months it is october next. Good morning. Welcome back to on the move. Here are bloombergs top stories. Loreal reported Third Quarter revenues yesterday that missed estimates. Toe for like sales dropped 3. 7 percent as the companys Luxury Division was hit by the slowdown in asia. Shares are lower today. Thirdp has reported quarter profits. The company saw net income dropped 62 in the period. And bnp paribas has reported Third Quarter profit up 14 . Net income climbed to 1. 83 billion euros. The banks cfo says it is ready to take it market share in Investment Banking. Now lets get to the chart that matter this week. It was all about the fed. Thefomc hinted at possibility of hiking rates in december. And play. 15 back take a look at expectations for a rate rise a foreign after the meeting, a dramatic change. Shares. A looks at they spiked after china announced its change to its one child policy. A jump in share prices, and Deutsche Bank dipped. Shares fell as the plan to imise profit failed to press. A monster month for october. The biggest months of gains since july 2009. Guy, it kind of takes a gear, flip it year, flip it on its head. A repeat of that Going Forward . Guy we had august and september. Point, we were going to we have become less stressed about what china is doing. We figured out more what the fed is doing. We have a greater understanding of all the things that freaked us out at the end of the summer and into september. We are getting a better handle on those. Jonathan 6. 9 . Fantastic for china. Look at what is happening with the Federal Reserve. Guy i think we are doing closer to it. We wont figure it out until the fed has figured out. The communication. Is getting easier to cover hand i think the market is understanding the pricing mechanism better. The fed and the market we are getting a meeting of minds, at least. It could be december, it could be next year. We still dont know that yet. Jonathan another little bit, another ingredient to this rally has been the ecb stepping in and going into a meeting with such a high bar and still managing to over deliver without actually initiating any moves or changes in policy. When we going to december, you and i are going to be sitting there in frankfurt at the ecb talking about that meeting. President draghi, speak to anyone in london, frank for, renowned for over delivery. Guy i think he has over delivered already. What i think is interesting as well is the compare and contrast the trina contrast between the boj and ecb. The ecb went before the fed. The boj has gone after. I think they are on the same page roughly but it relates back to the middle, what is happening with the fed. Draghi has over delivered, maybe over probably than what he had to. We will see whether he follows through with that. Jonathan factoring in the fed. Adding the boj and the comments from kuroda. Kuroda looking through energy prices. President draghi saying no, the oil price matters to Inflation Expectations. That is a different approach from the two Central Banks. Guy it is. Concerned always been about the second year affect the story. Looking at where inflation is going. The reason is you are going to get the wage settlement. That is true of japan but it is true in europe. If you start to get those wage settlements based on the low inflation number, the secondround effects start to get embedded and it starts to become more self filling. Jonathan good to have you with us this money. We should do more of this. Thank you very much for joining us. You know where i am on twitter. Equity markets, we wrap it. October on a little bit a high. The ftse 100 up 2 points. But a monster month for october, heading for the biggest months of gains since july 2009. For me and the team at bloomberg, best of luck for the rest of your day. Number surveillance i bl oomberg surveillance is up next. Tom keene on the other side of this break. Tim kuroda holds fire. The b. O. J. Sticks to its policy the current policy can boost prices. The japanese yen strengthenings. Aby boomers. Monster month. Good morning. His is surveillance. Tom keene, the other half of the market saw it coming. Tom the china bombshell well get to this a moment. It sets up for an interesting International Surveillance this morning. Jonathan looking forward to it, tom keene. Now lets get to the bloomberg first word news. The central bank will not add stimulus for now. The bank of japan kept its Monetary Policy unchanged even though inflation is profing the 2 target. Core prices fell in september for the second straight month. The senate worked through the potential debt missed budget caps leading to an increase in spending over two years. In vienna, diplomats are wrapping up an attempt to end a fouryear civil war. Secretary of state john kerry was among those trying to broker an end to the table. For the first time, saudi arabia and iran sat at the same table. In china, germanys chancellor Angela Merkel met with human rights activists. They said situations there have gotten worse in the last three years. Merkel is trying to strengthen trade ties with the worlds second largest economy. Meanwhile in yuan rose today by the most since march. Chinas central bank is considering a Trial Program to let individual chinese directly buy overseas assets. Tom Important News in the pharmaceutical soap opera known s valiant. An offshoot standalone distributor, three of the major Employee Health drug kind of people, they walked away overnight from working with them so valiant falls on the sword now. That is reel soup and a mess. Maybe well get clarity around 9 00 a. M. This morning. They will term the relationship with philidor. It is sort of interesting and central bank today. 14. 16. Hat gets your attention. Dollar yuan. Lets go to the china news. Well touch on in this morning. 6. 32 is a huge deal on yuan. This is an appreciating yuan. Lets go right to that on the bloomberg terminal this morning. This is devaluation, the weakness of the chinese yuan. A policy prescription by beijing that didnt work out. Appreciation. Nowa an abrupt appreciation over the chinese currency through the recent strength all of this because of this free trade zone bringing business to china. It is fascinating. Everything in china seems to be moving to a under floating regime, whether it is the Exchange Rate or number of children or the growth rate. Tom two children or less. You can go for 1. 75 children depending on the tuition billings. The answer is two children or one free trade zone in shanghai. We dont mean to make light of the raging debate. Wonderful coverage over the last few days on this one child or two Children Policy. Jon that is pretty much it. Bank of japan keeps the Central Bank News going. Jonathan it really does, tom. What was fascinating about that meeting is domestic japan didnt see internationally. The headline this morning, no change from the b. O. J. Their central bank declining to step up monetary stimulus. Kuroda betting the current level is enough to hit the inflation target of 2 at the end of next year. We talked about that distinction between what the domestic investored expected. What is the view from you . One thing i want to emphasize is this policy Board Meeting was we think the shortest policy Board Meeting in more than a decade. More than two years going back to 2003. That tells you they did not spend a lot of time debating about what to do about the macro economy. I think there may have been political consideration. When they walked into that room, they knew they were not going to do anything. Jonathan the other read across from this, you the idea you meet it later and are going to do nothing to get there, nothing extra at least, is patience now the word for b. O. J. . Does this tell us anything about what they might do in the coming month . I think that is exactly right. It is very much wait and see. Keep in mind if the fed hikes rates in december as many think that will do a lot for japan. That will push the dollar up. It will weaken the yen, which i think japan wants to see but at the same time japan cannot be seen to be engineering the weak yen or it jeopardizes the deal. I think japan wants twhooze the fed does in december before it does anything else. Tom all central bankers are waiting for the central banker of the world to act. What are the ramifications to japan if yellen does a mark carney and delays again . What are the ramifications of a pau pause into 2016 . I think things would be very grim in that case. I think japan is betting on the fed taking action. Japan has been helped by china, pboc cut rates for the sixth time friday. That is 20 of japans export market. China is japan is getting some help from china as it waits for the fed. Jonathan great to have you with us to break down the moves. Tom keene, im so excited for the next hour. Joining us now is the chairman over the official monetary and Financial Institutions forum advisory board. Great to have you with us. I look at the news or the nonnews from the b. O. J. This morning. There is a Bigger Picture for you to delve deep into. The b. O. J. That has done so much. Are we reaching that limit at that point . I think the world has changed very fundamentally from what it used to be when these policies were devised. Inflation expectation, all that. It was six or seven years of flooding the world with money. If inflation doesnt go up, cant we just abandon it for the time being . And said that now is world has changed and the by money supply. Some other thing like you mentioned. My own position is that we are in the downward phase of the cycle. We are going to be with low inflation and low growth for the foreseeable future. Jonathan can you listen to this . This is vital. We were talking yesterday about the economic models of old. Talking about fighting the wars of old with the same ammunition. Does that picture affect what the Federal Reserve does . What they want to get off zero . Tom they want to get off zero for a set of reasons. Jon, i have my well warn copy f marksist revenge here. This is one of my two books to read. This and peter bernsteins against the gods. What i want to know from you right now, if the central bank model is broken, where do we do from your classic short century into a new century . What is the new century economic model snr for the time being until we get the next bunch of innovations, were waiting for that. Think were going find that demography is an important actor. 19451970 not because of good fiscal policy but because of good demographics. In 1990 we didnt quite make it. Japan is largely demographics. Tom im going to rip up the script here, jon ferro. Help me out here. If we have a new demographics and a new economy, how do we eak to the right, who is antekensian . Jonathan how do you speak to the right who are also antiimmigration. That is the solution to the demographics problem. Absolutely. Allot of people are saying that the extra boost the economy got is more because we had more people working in the in the economy. Productivity it is the growth of the labor force. Europe right now should find a way to have accommodating those migrants in some creative way. Right now, people are still worrying about, you know, antti inflation from the 1980s and 1990s. The world is somewhere else. Jonathan Central Banks he is here with us for the next hour. Here on bloomberg surveillance. Later on the bloomberg market day, former president of shell reacts to this weeks energy earnings. Dont miss that. This is bloomberg surveillance. Good morning to you all. Jonathan good morning. This is surveillance worldwide. Im Jonathan Ferro in london. Tom keene with me in new york. Drew, put the news in perspective for us. What does it tell us about the atest story in the saga of the last fortnight . They had very close ties with the pharmacy. It was nearly an ownership arrangement with this company, philidor. Philidor had been aggressively pushing some of the drugs that valeant sells. Getting them to doctors. Getting the insurance restrictions. It was part of valeants business. As it happened and as we broke news last night, philidor is doing things like when an ininsurer would reject a prescription in the United States they would shop it around to different pharmacies trying again and again to get these drugs reimbursed. It looks like fraudulent behavior. The stock tanked after hours last night after several difficult weeks. Because of this alignment. Now they say they are cutting ties with philidor completely after spending 100 million. Jonathan is this an acknowledgment this morning that they were wrong about philidor . I think this is definitely an acknowledgment that whatever this company was doing for them in terms of benefiting their business, it is not worth it. We have seen valeants market wiped out by the tune of 10 difficult. Whatever they were 10 billion. Tom what will you listen from the main croo today . What will you as the expert listen for . Ackmonman has a call at 9 00 a. M. New york time today. He has been a huge booster of valeant and last night we had this news break and you had to wonder after ackman scheduled this call. I have a feeling maybe there were some calls made last night over this. It put bill ackman, one of valeants biggest investors. It put investors in this company in an exceptionally difficult position. Tom you were wonderful yesterday giving us perspective on dublin and pfizer and aler began. Alergan . I think one of the things that we were talking about a little bit earlier this morning was the politics in the United States. Drug companies because of actions like valeant has have been under a huge amount of scrutiny in the middle of a president ial campaign. Now pfizer is talking about picking up and shifting its tax address. You have people like Hillary Clinton and Bernie Sanders saying please dont do this. It is disloyal to the United States to be liing for tax purposes. They are in a real difficult m a deal. Tom maybe valeant will take out pfizer and well all go home happy. Coming up, well speak to him about the greater issues, comments on refugees in europe and then we turn to china. Nicholas will join us. An important discussion. A china truly out of the in transition. From london, from new york, this friday, bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance in new york city. A beautiful day. Halloween is on saturday. So there will be trick or treating friday. Trick or treating saturday. Right now, what are you going as . A what . She is going as thor or Something Like that. It is always trick or treat here on surveillance. Appear to be going for more expensive brands. Imbev raised its fullyear revenue forecast. They make budweiser. A proposed takeover value at 106 billion. Frances largest bank b. N. P. Paribas better than forecast. Tougher capital rules are making some trading activities less profitable. When it comes to markets it is true this thr has been more volatility and uncertainty about Monetary Policy. As you know, we have been working with ocip to be well positioned to capture market share. Thats basically what we have been doing. Global markets up 6 . Strong performance in equities and good performance particularly in credit. Some of the new regulations are harsh and are pushing some banks to exit businesses. That is our latest Bloomberg Business flash. Jon, more on the banks in london. Jonathan i do. Thank you very much. There is a bank called r. B. S. That has kept richard of bloomberg news, our banking reporter very, very busy. Richard, this question doesnt just go to r. B. S. It goes to the whole banking sector. When does the bad news end . Things are getting a lot better for the banking second sector but you have to remember it is still seven years since the financial crisis and were still talking about these problems. Lloyds Banking Group perhaps the most progressed here. Barclays turning itself around. Hsbc likewise. Its problem is idiosyncratic. There is still a lot of work to do. Jonathan the Investment Bank lost almost double as the trouble continues. European banks pulling back. Who steps in . The u. S. Investment banks obviously that have been in the u. K. And Bloomberg European for a long time. They are getting more and more prominent now on deals. We see them on everything. You see Deutsche Bank cutting back. Credit suisse. Royal bank of scotland is going to be tiny by the time it is done with the Investment Bank. Jonathan you talk about fighting last decades war. I wonder what it means looking the other way . Looking forward. One of the Big Questions is the bank an obsolete business . You know the standard kind of bank we used to have retail depositors whose money you went d and lots of other development on the i. T. Front. Do people actually need that kind of bank anymore . Will we have new forms of banking . Which would award this all that real estate and you could bank out of whoy not . Why not . I think there is going to be a ig innovation in banking and it may be a different bank. Jonathan the banking system, the banking model involved. Maybe it is dead. Tom you wonder where the destruction is. We will continue the economic discussion. We do finance investment and International Relations. But as we decide today on monday, Joseph Stiglitz will oin us at columbia university. This is bloomberg surveillance on a friday from london and from a beautiful new york. Tom breaking news. What isnt recalled . Is there a car that is not recalled . 1 million large, g. M. Will recall 1 million vehicles. I love this. Oil drip issues. That describes my first eight cars. You know, the screw and the i had a barracuda with a teflon ring that never worked. It was in the driveway. It sort of looked like the shape of madagascar. It is going to be some buick regal pontiac and grand prix. Tom Everybody Knows i drive a rambler from 1954 or 1955. All i can say is it has never been recalled. In japan, the central bank has decided there is no need to add stimulus to the economy. At the same time the bank of japan has again postponed its time frame for reaching 2 inflation. The main price gauge has fallen for two months in a row. Congress has averted what could be a catastrophic default on u. S. Debt. The measure boosts spending on defense and domestic programs. For the second time this week, chinas territorial claims in the South China Sea have been challenged. There are complaints of chinas bid to assert control over one of the worlds busiest water ways. U. S. Warships sailed into the man made island in the South China Sea. Another american is reportedly under arrest in iran. He is in a tehran prison. He is a scholar and consultant who worked to improve relations. He is the fourth american arrested there in recent month s. And investigators are trying to figure out why a passenger jet caught fire as it prepared to take off from fort lauderdale, florida. The 767 was taxiing out to the runway when the engine caught fire. The Passengers Evacuated using slides. One person was seriously hurt. Tom do you get frequent flyer miles on aerodynamic . I dont know if you want to ever fly again if you had to use the emergency slide. Jonathan i have to find a segue transition towards china. The historic move to go from a one child follows a two child policy and then this morning we learned Chinas Central Bank will look at starting a Trial Program to allow domestic individuals to directly buy overseas assets. Still with us is the chairman o have official Monetary Forum advisory board. If i put the two reforms together, which one would get your attention . Yesterdays or this mornings . This mornings without any doubt. Ina has got to if were going to get this taken seriously, it has to move to ully open capital count. The resistance is part of the older generation. They have to allow the citizens to go all foreign assets and allow money to come in and out. Unless they can do that, the world will not trust them. Jonathan what is the tradeoff for the government, the leadership in china . Well, you know, the chinese balance has shifted drastically. A lot of capital being exports out of china. And also the chinese citizens would want to escape the financial suppression which has been going on and they would want to hold assets so i think china is at at last last going to transit to a proper market economy. Slowly and painfully. Hat is what it is doing. I learned the same thing about the children. Let them have how many children they want. Stop messing about. Jonathan i looked this up, yesterday. You know the affection we have for jonathan spence. As everybody does with his classic the search for modern china. This is the terrifying part of the 1980s. 16. 4 million women underwent sterilizeation. Every chinese man and woman was bound into a chain of command from house to house. Can they move to the definition of capitalism . I think it is trying desperately to move. T is really interesting. Its great powers and am gigs bigs to be counted as a reserve currency. Has fostered it into more capitalism than it ever wanted to begin with. If you want to be taken seriously, you have to have free choice for the consumers. All of those things. That package china is reluctantly accepting. If it doesnt, it wont regain power. Tom you have just described mr. Mo dinners dems a very populated india. Does someone need to emulate a two children or three Children Policy . Is there any value to what china has done for four decades . They never had a successful child restriction policy. 75 below 35 years old. The youngest population going. India already has it built in. What china is trying to get to. Indias problem is can they with good education. Can they have good infrastructure and then realize the potential there is in the indian population. Tom india, a very, very different demographics picture. Also culturely. When you look at china and you look at the decades and the tragedies that tom keene just described the that onechild policy, how deeply embedded is that now in Chinese Culture . When you speak to the chinese, do they want more kids even though they are allowed . Of course they want more kids. Even under the very tough regime, there were people cheating. All kind s of cheating was going on. I think chinese like all other asian cultures want children. Jonathan come keen, that is tom keene, that is bottom line, they want children. You should just expect a lower birthrate. Going from the one child policy to two child policy. Tom i think the greater demographics in the historical moment that we observed yesterday is tangible. Were going to come back and talk about a lot of themes but an nt to know do you have opt noism shift china must make optimism of the shift china must make . I have some doubt bus if the ordeal generation gets out of the way fast, china can do it. Chinas Younger Generation can do it. The older people are holding it ack. Tom were going to come back and in our next hour well talk on banking as well. Well speak with nicholas of eurasias group as well. He would like to look at the humility and the hubris of our time. Jon ferro is in london. Im in new york. Stay with us. This is bloomberg surveillance. Jonathan this is bloomberg surveillance. Im Jonathan Ferro in london ith tom keene in new york. Tom were going to do the new ook in our next section. We have touched on it through the hour. No one but no one forecast the collapse to have soviet system, socialism is a doctrine of optimism. Socialisms eclipse is the end of hope. It really alludes to our emotional politics in the middle east now. We all have a hope for a strategy on syria. Whether it is Henry Kissinger or president jimmy carter. There is a search for a strategy, a new strategy on the middle east. What will you advocate for Prime Minister cameron . Well, i have been saying for sometime that the problem of syria and the problem of iran, iraq, the problem of israel, palestine are interconnected problems, all created by the collapse of the empire 100 years ago. The british and the french drew the boundaries in the sand. All of that is unraveling now. What we need is an overall conference. Not just syria. There is a syria problem. There is an israel palestine problem. It is not going tosoever it. To solve it. People dont even know what happened. Tom exactly. They dont even know the history. You came to the dock bombay with your family truly a refugee. You saw india and pakistan torn apart in im guessing 1947. How do we piece together a middle east. Are good borders the only solution . For me what is more nteresting is that the have dissolved. For example, how can you create a good if you preserve the borders . You really have to rethink a lot of those problems. Kurdistan has and parts of iraq nd turkey. I think what the great powers and all the middle eastern people have to get together and talk this all way through. This is going to be a problem which is now ready for solution and we have got to do it. While defeating isis. Jonathan you wonder whether the difference now is the lack of money. The lack of Economic Impact up until very recently has not been felt. Is that the reason and why this might change . Do we need to feel them before get the change . You know, i think one big issue is going to be the collapse of the oil price. You know . Saudi the difficulty arabia is face now for the first time. That is a fragile regime. They have to come to the table and secure their position. We really have all of this going on. You know, you need a vision on part of the great powers. Someone like jimmy carter has thought about it much more than any other current president or Prime Minister. Do we actually get a Big International confluence on the middle east . Jonathan the market and the eality of 50 crude. What pushes them to the table . Because at the moment they look reluctant. How many years before they come to the table to make that change that you describe is needed . Financially very sound but it has got 20 deficit. They have a g growing young population which has been spoiled. It is a good welfare state. They wont be able to afford that anymore. They should see signs they should do something now. Tom what projection would you like to see from washington . Whomever the next president is what it is appropriate new orld order for the u. S. . There is other International Relation themes. A t is the simple theme that republican or democrat can take in the next four years . I think they ought to really try and see whether they can get a news consideration of the many countries in the middle east. Israel, palestine. Syria, iraq, lebanon, kurdistan. Can we get them . Not as separate countries alone but as some sort of because we wont be able to solve the problems while the borders last. Iran is an arab country. Arab countries in the middle ast that might help us. Tom we will turn our attention to his wonderful new book on economic thought in the financial crisis. Well talk to him about his new book hubris. Well continue on american politics. Joseph stiglitz will join us. Well even talk about ymmetric information and epsilon and theta. Joseph stiglitz. Jonathan this is bloomberg surveillance. Im Jonathan Ferro from the city of london. Vonnie Third Quarter profit rose 12 at airbus. Aircraft deliveries rose and Research Costs fell. They will increase production on the a320. It plans to buy back more than 1 million worth of shares. A turn of events for philidor. Their Business Practices are under scrutiny for that way they sold drugs to valeant. This comes after the three largest pharmacy benefit managers moved to terminate philidor from their network. Shares of linkedinare gaining. They predict better than estimated revenue for the year. They fanned into education and business services. Tom there are 428 books on the financial crisis. Maybe 10, maybe 15 with some eal value to them. He has weighed in with his thoughts. It is a must read. It is called hubris. We can bring in our history of economic thought into what we have been through over the last seven, eight years. He is with the house of lords and the London School of economics for a number of years. If mervyn king was to read it, what would he take away . He would of course appreciate that we are talking about before. But i think hubris reminds us that we dont need a numeric economics. Numeric economics. If you look at history as well as economics together, then we ill be able to get out of this predicament and find the solution. M the reyault of paul krugman yearning for the day s of john hicks. We need to look back to krugmans simplicity . Do we need back further to Alfred Marshall or get back to 2006 . One thing i explain is why the whole model was taken apart. Why by other economists. We the model fell apart, ed to tom of course the backdrop of this is his fundamental belief that profits are what drives the system. Capitalism is about profits. You got to tell me, jon, how do you do profits amid deflation . I really dont see that . Jonathan how do you commit to the bond market tom exactly. Jonathan you reflect on the economies of old. Hubris is a great word. It describes investors now and the confidence they have in central bankers to solve their problems. Are they causing problems now as you look at the market . Inflation in the late 1930s. From 1939 until about 2005, i dont know, whatever it is. We had inflation as a big phenomenon of our life. Comes from ing inflation. Inflation is gone. And we really have need a very different strategy to look for returns in a world where there is no inflation. We never thought we would arrive here. We have arrived here and we still cant believe it. I never thought central bankers would be trying to get inflation up to 2 . Never in my living days. The world has changed. It is gone. Tom jonathan the elephant in the room as we discuss low inflation is what we have discussed the last 30 minutes. Temperature graph i guess. Tom you look at demographics to wrap up our conversation with you, we had an emotional conversation the day to have bombay bombings. As you described a child, a refugee. Have you been surprised by the scale to have refugees and economic migrants moving . Absolutely. But remember 1 3 of europe moved to north america in the 19th century. A lot of middle easterners moving and they want to move to europe. Europe will have to find a way to accommodate them. Because in a sense it will benefit europe more than it can do for the growth strategy. Jonathan very quickly. I want to draw a distinction in the importance over the u. K. Demographically and immigration. The case study that is the u. K. . Is it the right one . Is it the one that people should look at . Absolutely. Look at the u. K. There is a lot more population growth that has happened and the labor market is so flexible they have absorbed those people in employment. Jonathan privilege. A pleasure join us for the last 60 minutes. It is not over here on bloomberg tv. It continues on bloomberg television, your tablet, your phone and bloomberg. Com. More bloomberg surveillance coming up with me and tom keene in new york. Good morning. I, afterer dragh yelling, the bank of japan confronts the immovable force of deflation. Children, andwo one free trade zone. The you want surges this the yuan surges this morning. Hours ago, congress disposes of the budget measure. Now speaker ryan can go trickortreating. It morning, everyone. This is bloomberg surveillance tom live from new york. It is friday, october 30. Im tom keene. Jon ferro, International News overnight. Jon japan unchanged, on hold. We know that. A different approach to the word disinflation and the effects of energy. The transitory nature of it going into next year, and the ecb unwilling to do the same. Tom you