Exchange. Its quiet in the markets. You are looking at euro sterling, how important those dynamics are. Are you making a prediction of parity . Francine we have a great story. This is not u. S. Versus europe, this is japan versus europe. David is in new york. David big job cuts are on the way at the british bank they will get 15,000 jobs after reporting a surprise loss. They will raise 5 billion in a write off. Reverseer is trying to costs. That russian plane that crashed in egypt had a prior damage linked to other crashes. In 2001, its great to its tail on a landing and needed to be repaired. It could lead to the sort of midair breakup that occurred on saturday. Part of the tail section was found away from the other wreckage, indicating that it had broken off. Bow tos refusing to pressure to shut the countrys borders. They are trying to figure what to do with refugees. They have taken up to one million refugees. She says closing the border with austria is not the issue. Oscar pistorius will know if he is going back to prison. The second bid to convict him is underway. He was convicted of the lesser charge of manslaughter. He was released under house arrest last month. The president says u. S. Ors will not be on the front lines in syria. The president spoke to nbc news. 50 special ops will go to syria. Its only an extension of what they are already doing. That is the first word news. Weve got auto sales coming up today. The jobs report is coming up. Other important labor day will predict zambia is out with Interest Rates earlier. They are really manipulating their rate. Futures are at negative three. Other than that, its quiet. For a weaker euro. I will look at dollar yen. He is writing about the future of japan. I thought that was very important reading overnight. Lets go to the bloomberg terminal right now. I did this just for you, francine. How many places can you look at swiss hungarian foreign. This is the stability of that experiment in Eastern Europe against switzerland from 1999 out to the beginning of the crisis. You have the strength of the swiss franc. Huge strength. You have the weakness of the hungarian. That brings the income destruction, the wealth destruction we are seeing with so many in Eastern Europe. I know we will get that later. Was that of steering up . Francine i dont think it was a sphere. Obscure. This is the message that whatever the Swiss National bank does, its containing the rise. They plan to cut 15,000 jobs by the end of 2018. The winters said the challenging firemen has led the bank to of disappointing performance. Joining this is edward. We will talk about it. Bench in ceo this charge for five months. These are legacy issues. How does he fix this . Hes got to address capital. That the been saying controls of the lending want there. Loans of been extended. They need to get to the bottom of that pretty quickly. What do they need to raise western Mark Francine you are our green has been too slow. He started in june. We have a Capital Raise today. He should have been more aggressive . It was clear at the very beginning. They needed to raise capital. Credit suisse has already gotten out of the gate and said we accept that we need to raise capital and we are moving quickly. She has been a lightning rod of criticism. I would suggest miss whitney nailed what we saw in global banking. You are our guy on this. You have a working number of the percent of job shrinkage . Globallymber of bodies that are going to go out of the banking business western mark . I think thats anybodys guess. Europe, the Business Model is completely challenged. Today, seeing tanks, ubs coming up with numbers and saying we think we can achieve this. I understand Morgan Stanley is going to lay no one off whatsoever because its such a well oiled machine. I was taken aback. 17 at Standard Chartered, thats a new percentage adjustment. Francine its huge. We keep forgetting that these hugeanks that have had share slides. They have half the value in two years. It was always going to be a radical decision. Job losses were expected. This is a bank that has been through a decade of growth and recordsetting property cheer. We are seeing that. It expanded. This is a natural retrenchment. You are one of the great thinkers. When you look at the banks, what they are doing is trying to look at the Macro Economy and say emerging markets are not where i am going to do as much money as i thought i was. Is this a bad move . Are you expecting emerging markets to come back . I think its still a very good one. To understand that many places have developed a significant credit cap. You look at the gross rate of credit and compare that to the longterm trend of credit green. This is what we saw in 1997. What we have now is a return back to the close rate area that means you need to look into the area from a debt perspective. We have to see where it has degenerated. What you do see in emerging markets is the corporate sector raising that. The corporate sector was increasing supplies. It was increasing capacity. The housing sector was using this to invest. Unsustainable. Lets say america is going to increase Interest Rates. You have to understand that this is part of what i call the the dollar bloc is 60 of the global economy. You have the core, the united states. The core has to run very low Interest Rates. Funding costs are way too low. You get a sharp extension of credit. Given all that, thank you pay and is not going to move at all. Tom had a great chart. Into the nextok months, you have to look at qe. Japan,mmunity outside they are following their traditional way of doing it. You see declining export growth. Inflation is low. Is easier than people think. There is a progress the country paidone in respect to. Dojs reactione is not as triggerhappy. They are focusing on fiscal policy. They have plans of 3 trillion. That is a substitute for monetary policy. Easy ecb with a more hawkish japan. Want to talk to you about negative Interest Rates later. Is your world stable right now . Expressedilibrium through a deep for exchange market, is it stable or is there a cadence to it as you await her the news . You have a different volatility. I think it will increase. Coming back to your question, we are heading towards an environment of volatility. Emerging markets are far from complete. We called for an emerging market correction. It is playing out. We have limited links to go. The u. S. Is doing better economically, it wont mean higher rates. That is bad. America would not do better, that would be bad for emerging markets because they could not utilize excessive capacity. Both sides are under pressure. Francine very good. Tom we will continue with him throughout the hour. We need to say thank you as we see news is morning, difficult news. Weve got a treat for you. When james wales will join us, the pride of Auburn University. You know him from wikipedia. He is always controversy all. We will talk with him about what is changing his world and your world, that would be the Facebook News feed. This is bloomberg surveillance. Tom good morning, everyone. Its bloomberg surveillance. History oferesting sir. That shot is taken from the older part of zurich. That is across the river. Francine and are looking forward to thomas. Our business this morning. At volkswagen plans to environmental accusations. The equipment that alters omissions testing results. Activision is buying the maker of candy crush. They will pay a 5. 9 billion to king digital. They are the biggest videogame maker in the united states. Third quarter profit doubled it ubs. Yearsh back next ability target by year. The goal is 15 . Ups shook up its management ranks. They replaced the cfo. That is it. Tom i spend hours on call of duty. Dont let might see me. I am playing call of duty. During the show. There is another bank challenge. Francine this is my call of we spoke to the ceo talked about the challenging conditions facing the bank. The journey of growth and Wealth Creation is still intact. Its clearly more volatile. I feel very confident that we will continue to have a substantial start part of growth from asia. Its going to be a more challenging environment point forward. We are well prepared. Francine manus joins us. What is behind it . They have softened their target for profit ability. if you think about the news, but drives the numbers is a tax credit and the legal charges they are going to take. Wealth management, the core of established, it is the return on equity of 33 which brings me. He is resisted calls to destroy the investment bank. That posted the numbers. He has delayed that return on equity targets. Back to you. Manus, in terms of ubs , they started the so much quicker. Is there any place for a big Investment European Bank . Manus the debate is there would be consolidation. They say there is a place for a Super National bank. I think the critical thing is that the markets focus on is return on equity. That target they will make this year. We look a little bit further forward. Are you going to miss it or are you just delaying . The response will be to say wee are likely to beat believe the 10 will be beaten. We will be close to 15 . I think we are not delaying it. Our return on a be targets. I think targets are very important. Byse adjustments are driven external factors. Interest rates. they are 1. 9 trillion euros of negative Interest Rates in europe. That is an outlook that is 150 basis points below what everybody thinks. This is a reality check. Back to you. Francine we are behind a lot of the u. S. Ranks when you look at the maturity of the u. S. Banking model. We are trying to play asset during tom manus is out in the trenches listening to the message from ubs. I think this is a highly massaged message. They are going to come in and try to straighten out what seems to be the future which is wealth management. I dont know how that plays versus the u. S. Banks. There was a lot of mystery today. Francine i think you hit the nail on the head. Ubs came out with this model. When you see berkeley possibly allg same thing, they cant go for the same segment. Tom i think this bears a lot of scrutiny. Lets come back to this on banking and we will do that to the week. Coming up, the morning must listen. This is the one that conservatives love to hate. He has written a liberal manifesto that everyone must read cover to cover. We will do that next. Francine i am Francine Lacqua in london. The fog has left. We continue talking about the rexit. R of b mr. Osborne is giving his first wager speech today. Tom its a must listen. Yesterday, what a joy to talk with joe stiglitz. He is talking about the rules that were broken. These are the rules were broken decades ago and how we need to fix it now. Reached it would be best if we all got together and said lets rewrite the rules. Things of not gone well. Productivity has continued to grow since the 70s and wages have stagnated. That is very unusual historically. We rewrote the rules allowed that to happen. Tom its a blistering manifesto. There is one chart on the financial business and the growing size of finance within the world economy. Lets call it financial engineering. It sells a lot of bloomberg terminals. Francine this is the new normal, where you have a huge qe and you just think outside the box. He spoke on the turmoil that is out there. Coming up, jimmy wales of wikipedia. We will talk about mr. Zuckerberg newsfeed. Stay with us. Tom go rangers. New york city. That is so over. We say good morning in november. For the firsta, word news here is david gora. David a british bank will cut 15,000 jobs, standard will also raise money in charter. Theyre trying to fix problems caused by the ranks expansion in markets. George osborne is making his case and taking it to germany. He will push for closer integration that has caused strain between european nations. David cameron has promised there will be a referendum in the year by the end of 2017. The german Prime Minister will try to avoid a revolt over refugees. He is refusing to give in to pressure to close borders in the middle of the biggest refugee crisis since world war ii. Germany will take in as many as one Million People this year. The u. S. Stop the flow of millions of dollars to iraq this summer. All of this is according to the wall street journal. The dollars are flowing again after the iraqi officials agreed to put in tighter officials. Volkswagen is cooperating with thecials over saying Environmental Protection agency says that those with larger also cheated, the w is rejecting those claims. Tom thank you so much. Here is the pop quiz. Where is the risk free rate . Everything centers off its anchor of the riskfree rate. I dont know where it is. Hans redeker doesnt know where it is. Hans, i have never seen it before. What is going to happen when we migrate from negative rates into positive territory and reestablish a true riskfree rate . There has been a debt buildup and you are increasing funding costs. Long, whenns of a you look into a euro denominator, that is still 2. 5 trillion euros. So if youre normalizing Interest Rates, you have certain stress points for those areas. In you have Robbie Feldman asia. What an advantage. When i see the debt buildup in china and for much of the tiger the tighter economies,if your environment, that could change. But the more important point i would like to raise here is the difference between the core and the peripheral of the dollar bloc. You have too much capacity, too much debt, and therefore funding costs in the core does matter. Not going to be a small event as many people are suggesting. Would turn against those people who say that we have a thereforehike, and the u. S. Dollar is going to sell off, i cannot believe that. The environment is so much different. I can give you two numbers. Now 9. 6 trillion out of the united states. Francine we have to give a shout out to hans redeker. He comes out every week over whether the fed will raise the rate. The u. S. Economists to be fair. Tom wait, wait. Hans redeker had nothing to do with this. Lets get that clear. Hans absolutely. Lets get that clear. Francine its the house. It is the house. A one house person. I like unity. Hans actually, we are known for unity. Francine when you say that this will be bigger than the market expects, so what we have. We have a fed rate hike and what happens . Markets dont get that they are looking at a rate hike . Hans there are two other factors there which make a difference to 2004. You had emerging markets with a higher return of investment. Now they are lousy. Secondly, there was a low term premium historically. So that means when you raise the front end of the market you cannot have lower bond yields. Bond yields will rise. And then you have to think about how that impacts emerging markets. We have to analyze that and what we found out is that it does matter in respect to finding funding conditions for emerging markets. If the return of investment is lousy, then you have to pick up the market or the alternative to that is to write it on. Francine lets get back to negative rates in europe. Does that terrify you . I have a great inflation chart. Mario draghi has been in charge for two years. You can cb redline on the chart, it is the average of inflation. He having a tougher time . Or do we need to give him another four years . Hans no, you would say if it is his fault, you cannot accuse him of that. The europeanng central bank as a totally different one. We came out of where we had built up gigantic Balance Sheets in the peripheral of europe. And that is now creating deflation. That has caused a credit multiplier. You cannot accuse mario draghi. But tell me how you have stability within switzerland as we go through a sovereign full faith in credit deleveraging . Hans you are absolutely right. Am much closer to what mr. Stieglitz has to say. But this is force used for funding purposes. But the Balance Sheet of swiss banks became too big and therefore you have to move close to parity. Land, it can create a significant problem. Therefore, the process of normalizing is so much more difficult than the process of adding liquidity to the market. Tom thank you so much. What a treat this is. Will be here later today. Mr. Nt to talk to him about packard. What a time to talk to him. With a new Business Plan in hp. Look for that later today. Francine welcome back, this is bloomberg surveillance, i am in london and tom keene is in new york city. It is a good time to reflect on what chinas president has been saying. Policymakers will accept Slower Growth but not much slower than 6. 5 that we have had so far. So what that means is what we are trying to figure out. The vw scandal is widening. They have widen the estigation to include saying that they have altered their system. Hans redeker has joining us from berlin. Whethero soon to say volkswagen will survive this . We have new allegations from the epa. What theyre saying is that the software they installed, while they were at adequately describe to regulators, they didnt violate the standards in the same way that the other devices on the other volkswagens did. I think we are in a dispute over what they were saying in their application process to the epa to make sure they get certification to be sold in the united states. Only about 10,000 vehicles are affected. Affected, and up until this point, they had not been. Earnings thiswith morning. A little bit better than they expected. In china, they were lagging. Hans right. They have a new offering for consumers in china. China is at 25 for the year. Right now, bmw looks like they will be in first place for the luxury auto title. But they do have a lot of new models that is popular and the slowdown has not affected your cds in china. Thank you so much. I have two hans. When you look at when the scandal first broke, people said it might have an impact on europe. The safety image that it had might lose out. Are we still in danger of seeing that a fact . Hans it is the only going to take some time, but i think that be that what i am focusing on with this is it may be a changing in the way that transportat