Of course youre looking at the lire in turkey. Tom we start with american job economy. What i noticed by the time were done with surveillance we may get to a 3 yield on the u. S. 30year bond and would be a big deal showing the higher yearold environment and the optimism about september. Francine looking at the u. K. Manufacturing data we had from this country an hour ago and made it that more interesting that we hope to understand better how mark carney looks at inflation and thats superthursday this thursday. Tom did you survive halloween . Francine i did survive. I didnt dress up. Im so european. Tom i went as david gura. Francine lets get to david here with bloombergs first news. David . David a surprise win for president erdogan. His party defied the polls and swept back into office in the parliamentary elections and strengthens erdogans 13year grip in power and the majority gained in the elections they lost and turkeys benchmark index rose 5 . There was another surprise, euro area manufacturing increased this month according to research from market economics, the purchasing manager index unexpectedly rose and German Companies did better than forecast and manufacturing grew in all countries except for greece. Angela marckell faces more internal problems over the refugee crisis. Merkels Coalition Government couldnt come up with a position on how to deal with the biggest influx of refugees since world war ii. Merkel contends germany cannot close the door to migrants and as many as millions may arrive in the country this year. Experts say theres little doubt a russian jet that crashed in egypt broke up in the sky. Wreckage of the airbus 321 was scattered across a wide area of egypt and the Sinai Peninsula. All 224 people onboard were killed. Theyll look at the possibility of an onboard bomb or structural failure. And japan and south korea have agreed to speed up talks in one of the biggest issues that they have. There was a meeting in seoul and abe said hed seek an issue to korean sex slaves the japanese soldiers took in world war ii and south korea demanded they accept greater responsibility. Thats the bloomberg first word news. Tom . Tom let me do a data check. Turkish real moving, the euro up fractional, the eurodollar is fractional, 110. 06. The nymex crude, we saw elevated oil last week, back and fourth, 45. 90 on american oil. The vix is where it is, the punch bowl is full, one of our themes this week, 15. 07 with the dow dashing not near 18,000 but will take it. And very quickly to the 30year bond and then the lire. There is the bond, 2. 96 all of a sudden gets my attention for a dash. That 280 on turkish lire over to the bloomberg terminal. This is where slope matters. Heres the abrupt collapse of the lire 20 years ago, 15 years ago and then heres the success of the government with the devalueation and the new leg up is that weakness, new weakness in the challenges of islamist turkey with the erdogan victory and turn it around with trength. Policy by devaluation. Right now we have an important guest to get us started for the week. Francine we do and i like your chart there. If you look at the moving average, we had a brilliant note that said others see the lire climbing 2. 8 . Tom look at that chart francine im not sure why they are so optimistic. Lets bring in our guest for the hour. James, great to have you on the program. James happy to be here. Francine well talk china and u. K. When you look at turkey and see the lira soaring so much, what underpins it is people want stability. And there is so much concern how you see a country with concern about muslims and political stability. James and what will be the terms in Central Banks and i suspect well have easier policy than would be reasonably suspected if the Turkish Central Bank were generally independent. I think the political impacts would be higher. To me i expect shortterm strength for the turkish lira but be troubled on a 310 month view. Francine because of the central bank . Weve seen in the past mr. Erdogan trying to get as much power as he can but doesnt have the outright number of people to change the substitution to making it a oneman show. James increasing political influence on central banking and the emerging market will have to an tricky and difficult one. To me the shortterm rally will present a better selling opportunity and building a foundation for longterm progress. Tom james q good morning. Love having you starting us for the week here. Is turkey an emerging market . James to me it certainly is, an emerging market because of the deficit challenges it faces in common with so many other emerging economies. Very hard to argue its stock markets and Financial Markets are genuinely developed. Tom if mr. Erdogan is reaffirmed as the leader of turkey, can he be proactive about dragging turkey into nato and what shift will you see him dialogue with this victory for mr. Erdogan [james less european in his perspective and on the other hand, it is clear, longterm Financial Health of turkey is very dependent on it becoming a genuine part of the European Union. Francine gentlemen, you look at emerging markets, how does turkey stack up to others . Brazil is a mess, if you get russia, the price of oil is hurting the economy and inflation is high. James turkey is the more vulnerable emerging economy because of the deficit challenges and the ongoing weakness of the turkish lira will be a significant challenge for Global Investors want toing put money into turkey. Francine is there a single best emerging market you like exposure to or either direct or to companies who sell it. James i want to be in an emerging market for what they do best and see excellent Longterm Technology bets in asia and would be a buyer of taiwan semi and hunhai precision and are companies that demonstrated longterm deflation and make money. Tom well show the chart of euro lira and theres dollar lira in the rest of it as well. How do currencies play in their investment. Should they worry about currency movements as they look abroad to the philippines or south africa . James i definitely think they should because its easy to lose as much on the currency as you might gain on the underlying investments. The currency issue is part and parcel of the investment decision. Will tom with euro sterling, how do you field in making money with a currency play in Equity Investment abroad . James there are some economists where hedging the currency is extremely chief and very effective. Here in london we can hedge cable at sterling dollar very effectively and same with the euro against the pound. Very easy to hedge, take the risks off and move on. Nondeliverable currency such as the taiwanese dollar, much more tricky. Francine on the pound dollar we have u. K. Manufacturing unexpectedly accelerating and we happen to find out more of mark carneys thinking thursday but your gut feeling is what, a hike happens sooner than expected . James i suspect mr. Carney would want the u. S. To take the first step and i think he recognizes the u. K. Economy when all is said and done is small and needs to be a follower rather than a leader. Tom what portion do we need to have emerging markets, do you weight it to a portion or to turkey right now . James im interested in trying to find great Quality Companies and if you said what might i ook at in turkey it would be the ford motif and makes the white van, extremely run j. V. And would do well from the weaker lira. Tom mr. Bevan will be with us through the hour and we have a killer chart for you today. Hes not discontent with emerging markets but we look at globalization and misdiscontent. Coming up, the Nobel Laureate from Columbia University will join us, out with a new look, rewriting the rules of american economy. Francine lacqua in london, im tom keene. Bloomberg surveillance. Tom this is caroline hydes summer place and goes there a couple times a year over the winter. He bosferus in istanbul. Francine lacqua spent time there last year. In inistanbul, the most important election there. We need an important business flash. Heres david. David more problem for volkswagen. The german automaker failed to tell u. S. Regulators about one death and three injuries involving its vehicles and has to do with a database made to save lives. It will have an audit on safety reporting laws. Manufacturing still has not bottomed out. Chinas official purchasing Managers Index was unchanged in october. Manufacturing has been battered by falling demand around the world and deflationary pressures at home. Europes biggest bank hsbc posted Third Quarter profit bigger than expected. Hsbc cut costs, especially those related to fines and legal settlements. The bank unveiled a plan in june to close money losing businesses and cut as many as 25,000 jobs. Thats the Bloomberg Business flash. Francine, i know you have more on this. Francine we do. One of the big top stories is bloombergs biggest bank. Lets bring in the u. K. s biggest banking reporter and james beva nsks. Thank for you joining us. If you look at hsbc, the big question, and it is will they leave the u. K. . Why should we take them more seriously now than four years ago . Steven hsbc has really stalled to put pressure on the government to get concessions from them in terms of taxation and the regulatory structure. We are noticing an internal change from their c. E. O. Coming through and they got concessions on taxation and recently just heard from the bank of england and will have much more control over their legally separated fenced u. K. Retail subsidiary. If anything they might be leaning authorize staying though the deadline will be pushed to next year. Francine on the profits, a lot of the revenue came from the fact they had left litigation charges. Thats a good thing. But it doesnt mean the business is strong. They were able to cut costs significantly . Stephen they were and at the first half they took a 1. 3 billion charge for exchange rigging and had to compensate customers for insurance they didnt need. And lloyd took pound of that. But we are seeing its kind of a lack of misconduct where there are some slightly worrying signs in terms of revenue and loan growth. Francine what do you think of hsbc, its still one of the biggest banks in the world. The c. O. Unveiled a threeyear Strategic Plan in june. Theyre delivering. James i was expecting more on delivery relative to the 10 points in the plan. I suppose you could say the good news was the capital ratio figure was better than expected and is good news with the revenue numbers because at the end of the day we need growth and you can only get so far by cutting costs and the revenue numbers i thought were quite off. Tom i find interesting the operating incough hsbc versus jp morgan, 20 billion in shanghai banking and 32 billion, a lot more for jp morgan. And yet the employees are flipped. Jp morgan has 235,000 and hsbc has not less but more employees. Is the real story here massive job cuts to come . Stephen were not sure about further job cuts now. Where the job cuts will come is from the u. K. And europe and mexico and turkey and potentially in the u. S. They are actually putting 4,000 more people in china, hsbc, and are really doubling down over there. Tom they have to sell off the other banks ala what Deutsche Bank is doing is resize their ratios with other banks, right . Stephen hsbc started to boost employees without looking so much at how profitable the businesses were and when you started to see a slowdown come through they had to look long and hard at their cost face. Tom what i would point out is they cant let steve major go. He wrote the Research Report the last week or two. They cant let steve major go. Im editorializing. Fope you heard it from tom keene, james, when you look at the banks, a lot of the european banks and a lot of bigger investment banks are cutting down that business to focus on a more retail side. We heard from Commerce Bank today and theyre training c. O. s and profits were up. James it demonstrates the lack of transparency. To me its all about reliability. Id rather pay more to own shares in wells fargo and jp morgan and own shares in investment banks such as Goldman Sachs and seen how much they spent on good quality i. T. And genuinely believe theyll be longterm winners. Stay there because well talk about china next. Coming up later on Bloomberg Markets well hear from the emerging Group Founder richard branson. Well talk about space and of course about airlines. They have a couple trains here in the u. K. And ask him whether he sees better business. That interview coming up at 10 00 a. M. In new york and 3 00 p. M. In london. This is bloomberg surveillance streaming on your tablet and phone and bloomberg. Com. Francine welcome back. This is bloomberg surveillance. And francine lacqua. Its a foggy london and you cant see st. Pauls. Usually this shows a picture of st. Pauls. Heathrow is canceling 10 of the flights. The fog is causing widespread transport problems. If youre meant to get on a flight, please call the airline or the airports. Tom keene is in new york. Time for my morning must read and from the Bloomberg ViewEditorial Board and is about china. That china stop focusing on their g. D. P. Target to focus on sustainable growth. The fixation on the growth target is a mistake for observers and chinas policymakers alakeeffect. Alike. This is about inflation. They stepped up efforts to averse the risk with a Interest Rate cut. When you look at deflation, how much do you measure it . This is chinas rising debt. Im going to put these two questions to james bevan from c. C. Direct. When you look at investors, are we focused too much on growth and should we instead be worrying about this chart which is deflation and debt . James i worry about all of these things. First, the chinese grade is not close to the official data and if you ask me to aggregate on how much growth there is in china, to me its about 3 . On the inflation front we know weve had c. P. I. , Consumer Price index inflation, less than 2 for 13 months. Much more worryingly, weve had negative inflation, in other words, deflation to reduce the price index level for 43 months. This is really toxic. And this december. The fact weve had 1. 5 trillion in new credit creators in the last 12 months and 10 million. In Growth Matters and deflation. Francine given the figures and how much theyre borrowing, youre right to mention the figures, outstanding borrowing and surged since 2008, why are we not worried about a credit crunch . James we should be worried about three bubbles that will have to be deflated and will be difficult to deflate safely. There is the credit bubble and the investment bubble and property bubble. Theyre all interconnected because the excess growth has gone to producing excess investment which has driven the consumer rate inflation and we need capacity reduced and genuine growth taking up that capacity and why growth is important. Francine we had a chart looking at the job market in china. If you look what we heard from the plight of lost weeks so weve gone from one child policy to a two child policy but how much does that spur consumption . James its important long term and will take years to feed through with a recognizable sense with regard to the impact on economy. Thom i like what we saw tom i like what we saw last week in china and im sure you were surprised by the news making ideas. What do you expect from the chinese leadership the next 12, the next 24 and for that matter the next 60 months. James i would say three things about china which always surprised me. One is that extraordinary to take a longer term view as we regard as normal in the west and is comforting in some sense. The second issue i think is very important is whenever i meet people who are within the chinese official operators, im amazed how competition and how capable and switched on they are. And that i think is a great source of confident. The first factor i think is critical is that they do recognize their role in the Global Economy and are extremely aware of the their impact on the policies in the rest of the world. Absolutely china will spend more money and continue to hes policy in order to ensure the landing is relatively soft. Tom the political idea of a generational sea change as well. James bevan will continuous. Our next hour, we link profits and revenues to the american economy. Steven whiting will join us, total chief strategist and well talk to him as well particularly as we begin to look to friday and the american jobs report. Thats an important one. With futures flat, stay with us. Oh, the mets. The mets. Tom good morming, everyone. Bloomberg surveillance. We have daylight savings time. I was going to swing forward and david gura said no, stupid, fall back. We welcome all of you not on daylight savings time in hong kong. You got an extra hour of sleep. For first word heres david gura. David were here on time, thats what matters. Angela merkel is battling over immigrants. More than a million may arrive and a meeting with Party Leaders failed to come up with a position they could agree on. A number of Coalition Members disagree with merkels decision on there shouldnt be caps on how many migrants germany will take in. A russian jet that crashed in egypt appears to have broken up in midair and wreckage was found in a large area of the Sinai Peninsula and all 224 people aboard the airbus 32 is were airbus 321. They are looking at a bomb on board or a technical reason. The republicans will be the Opposition Party on capitol hill. Paul ryan made the rounds on the talk shows and said republicans will be a more productive and open force and he promised to open a clear agenda on the economy, health care and Foreign Policy. Theres been a stun ago