This is an emerging discussion, and it like every other combination moves right into the search for nominal gdp. This is directly linked to the world of janet, mario draghi, mark carney, and everyone else in the economics game. When in doubt, merge. Francine investors seem to like this because both stocks are up. Lets get the bloomberg first word with caroline hyde. Caroline thank you. Financial authorities have identified the third attacker from harris. They say is a man who left from syria in 2013. All attackers were killed. Two detonated suicide vest and a third was shot. The u. S. , congress is trying to increase security in the wake of the recent terror attacks. The house overwhelmingly voted to bar people from visiting from iraq and syria in a program that allows visa free entry. Iraqi forces have made a breakthrough in their fight to recapture a key capital of the Islamic State. They say they have regained control of the section of the city of ramadi. Iraqi forces are getting air support and training from the u. S. Beijing raising hopes that china will come up with a fix for pollution. The alarm raised to the highest level. The schools,losed shops, and factories imposed restrictions on driving. They say they will eliminate capacity to try and reduce pollution. Inland, more Severe Weather is in store for cities hit hard last week. The forecast calls for rain and wind with gusts up to 70 miles per hour. Last week, more than 13 inches of rain fell in a 24 hour period. These ande on other breaking stories, go to bloomberg. Com. Tom . Tom . Thank you so much. Much talk today on the dow and dupont mergers. All of that is tied into the data. Lets look at equities bonds and currencies. Onfrancine mentioned, a bid commodities. The euro is dashing the hopes of the parity. Jawdropping, and now a nice rebound after the carnage. Onto the second board. From 15 up to 17, brent crude back about 40, copper i put in there because you go from 240 206. Even copper is getting a bid, and some of the currencies dont react to the commodity rebound. As we is 17. 02, weaker, saw the South African rand breakout to new weakness as well. Francine we also looked at the brazilian. Theres a lot going on. This is my data set. I wanted to show you european stocks, i wanted to show you earlier gaining. Basically commodity producers extending their lowest level in six years. If you look at the various commodities, crude you can see gaining a touch. Tom, i think you bring us to the terminal. Tom we will go to the terminal now. This has to do with dow. Nightmare. We will have a lot of coverage for you today not only on this merger but the why across all of Corporate America and as you bring it over into economics. This is americas animal spirit, our nominal gdp just after world war ii, the volatility of 1947. Heres the deflation of the eisenhower era, and here is the boom in the money illusion of nominal gdp. This is the growth to borrow with. We all grew up and down we go. What dow and dupont and every other company is dealing with is very little growth out there. Did you like how i got Stephen Colbert in their . We do it all here. Francine and you had animal spirit, Stephen Colbert. Colbert is an animal spirit of himself. Francine [laughter] lets bring in our managing editor for more. Aaron, when you look at this, talk us through what we are expecting. Theyre merging and splitting to create value, which is why those stock prices are often pretried. Thats right. We are getting a merger of two giant Companies Worth 60 billion. The Chemical Companies and the crop science. What you create is the worlds secondbiggest Chemical Company and the worlds biggest crop science and feed company, bigger than monsanto. You create a behemoth that would then split up to focus on their strengths, which are what we talked about, and split off the less centralized point, ando toms going back to his nominal gdp chart, this is often because we are awash with cash. Thats right. We have seen multiple megadeals, pharma deals, and now this. What we are seeing is companies can get cheap financing. They also want to be able to cut costs. You can get synergies, cut costs, help on investments. Tom aaron, here is what we are living in in december of 2015. Showsinancial times 85,000 jobs. Nice job coming in with the camera. Twoan stanley, these chemical giants, they have 116,000 bodies. How many will go . Well, that remains to be seen, but there is no doubt there will be a lot of job cuts. It doesnt matter what industry we are looking at. Its all about costcutting and that will hit jobs. It is unavoidable. Tom can i be a cynical as possible . Is it about these guys who cant make their mega bonuses, so they are merging to discover growth . So they can get paid . Its fair to say that both of them know they cannot stick to the status quo, so they need to find a solution. They have been under Major Pressure from activists, and they know they have to act. By doing that, this merger can are investors, look, we going to do a make a deal and create a strong company, and lets be honest, whichever executive leaves, they are going to get a nice paycheck. But at the end of the day it is about reacting to investor pressure, shareholder pressure, showing them they have a plan to get out of this phase. Tom francine, i think its time for surveillance gossip was she shown the door because she couldnt do this deal . You know all the gossip. I think she went out the victor and left. So why did she leave in the end . When ed took over there were a lot of big questions. He hasnt waited long. A lot of people thought he would review the business. A couple months later he is getting close to announcing a megadeal. I think it is there was a lot of pressure. Francine and where does it leave the competitors . That leaves the competitors very nervous, in particular monsanto, which tried to do a big dale. Monsanto approach syngenta multiple times. Management managed to push them away, which cost the ceo his job. But that pressure has not gone away, and with is still being reported, it is only going to increase. As the spring monsanto back to the play, or the white knight out there, the chinese, were looking at the agenda. Guarantee you therell be more to drop. Francine out of the units that will be created, which one will have the most value . Is there a special segment within this industry that demands higher premiums . I think the most value will definitely be in terms of where the scale and cost cuts will be. The crop science, the agricultural products, the pesticides. There is no doubt that there is so much demand, and it is such a cyclical business and it is so global that if you can combine those, that will be the strongest. I think that is why investors are applauding. Tom we have to brush off our textbooks on to wobbly. Howe do have dow dupont, will the germans respond to this merger . Well that is always the milliondollar question. Usually germans take a lot of time to think things through before they pull the trigger, but you dont only have bsf, you have another big player. Everyone is going to crunch the numbers, look at strategies and ask themselves, doing need to do something now . If anything, the competitors will also be looking at if they will be splitting into 2, 3 parts, if they will kick off the smaller parts. Tom thank you so much. We got lucky. In our next hour, William Janeway will join us. This was not planned around dow dupont, but it is the perfect person to speak to today. No nominal gdp. The meeting continues. Francine welcome back. This is bloombergs surveillance. Im in london, tom is in new york. Beautiful pictures of hong kong. Look at that. We have that inflation data out of china, not great but better than expected. Lets get to the Bloomberg Business flash. Caroline it would be the largest deal ever in the chemical industry. Dow chemical is in the final stages of talks to merge with dupont. A deal may be announced this week. The company would break into two or three businesses because of regulatory and other issues. They have both faced pressure from activists. The price of oil has halted its decline. Crude has lost almost 9 in the last three days, at the lowest price of more than six years. Kindergarten is cutting its dividends so it can save cash. And china has cut the yuans reference right to the weakest since 2011. Speculation is that they are trying to release pent up depreciation pressure. Last month, chinas exports shrank, 7 from a year ago. That is the Bloomberg Business flash. Francine thank you. Sticking with china and Chinese Consumer inflation, cpi rising 1. 5 for the month of november. Lets bring in tom orlik, our chief asia economist. Right to speak to you. That news about the yuan what is more significant . So i think on inflation you have to break down monthly data from the bigger trend, the monthly data is better than expected. The bigger trend, china still has a problem with low inflation, deflation in the factory sector. I think the bigger focus of the markets is going to be what happened on the yuan. There was some cynicism before the imf decision , of you on the market that with reserve currency status in the back, china would immediately swing to yuan depreciation to support export competitiveness. I think it is too early to make a definitive judgment on that, but based on the last few days, we have seen progressive weakness of the you want, the central of the youan. It is a cynical view but it has a certain amount of validity. Francine so basically they are guiding it lower, before the fed acts. We still have six days to go. Are we going to get more in the next six days . I think there are two views on this, francine. The first vehicle that which i think you alluded to, is the central bank anticipates significant yuan depreciation pressure if the fed, as expected, lifts off on Interest Rates. They are trying to get a little ahead of the curve on that by allowing the yuan to fall ahead of the meeting, so it there is there is a much pressure after it. The second view is that this is the beginning of a much more significant shift, that because exports are shrinking and growth this week, because high debt is limiting the effectiveness of conventional Monetary Policy, limiting the effectiveness of Interest Rate cuts, this is the beginning of a sustained depreciation of the yuan as they attempt to rip up exports. Tom tom, id like to make a joke. Unfortunately, it is not funny. I have talked to many bloomberg employees who worked in china with kids and i go, how do you do it . Would you please tell our audience worldwide how you and your family are coping with the pollution of beijing . Have now, i think i you bring me bad luck, because ive ever the one time i was on surveillance in new york when it was also extremely bad. I think the answer is that when you look at television, it looks unbearable, but when you are in it, you live through it. People have air filters, people have masks, and life goes on. Its not going to be great for aging to be in it for beijing to be an international city, it is not great for pr, but life and the People Living here go on. Tom tom orlik, be safe. Im not amused to think it is really something to see. I have family members over there as well. You wonder how long the mask will work. Thank you so much. Francine, what an interesting story. The photos in the paper this morning or something. Are something. Francine that is. In this is why it is so important that we do get a climate deal in paris. The chinese that were backpedaling on this just six years ago are now spearheading a movement because they are concerned about social revolt. Lets get back to currencies. With us is Morgan Stanleys global head of affect strategies. Great to have you on the program. We are talking about the yuan and china. If you look at what the pboc is trying to do, is this a stress test . Well, one point is very clear, that the dollar is strong, and with the u. S. Dollar strong we have to focus on the adjustment of the dollarhuman being to the upside. The big question is what is happening to the trade weighted index. Of the remedy, excuse me. Renminbi, excuse me. We have a period before the inclusion where the renminbi was a little stronger. They are going to keep the Exchange Rate and trade rate stable, but because we believe that the u. S. Dollar generally has Something Like 12 , 13 , you write as well allow the dollarrenminbi going to a higher level. We want to see this policy wherech on the agenda on Monetary Policy in china comes in, so if you are keeping the Exchange Rate too strong, if you protect an Exchange Rate level, than it either means you run to tighten monetary conditions or alternatively you are reducing your currency reserves, and that is we have to focus on. Francine they do so much for now. Hans redeker. Our guest host for the hour. Ridge out, the ceo of tim energy will join us. That is at six clock a. M. , this is bloomberg surveillance. Tom there is so much going on this december 9. A busy morning. Yahoo last night really pushed back against Marissa Mayer. More on that through the hour. Bombshell, all of that wrapped around economics. What a privilege for Michael Mckee and i yesterday to speak with Olivier Bouchard out of mit. I caught up with him, formerly with the imf, where he changed world economics, no question. We spoke to professor borchard about his thoughts of a potential fed rate rise. When you start increasing Interest Rates, there are long dynamics. The Interest Rate doesnt affect activity are spending overnight, it takes a year, year and a half for the effect to be large. You have to start before its too late. You have to start early, which is difficult for all these wesons, even when increase the rate we are still very far from the rate we would end up. Lanchardfessor blondb on why fed tightening may be shortlived. Hans redeker has to be in the trenches of this. This if you were to write morning on what happens after december 16, what would it be . Think it is a very specific situation. When you look at u. S. Profitability cycle, it is very unusual that the fed is hiking Interest Rates. Quarter profit abilities are declining. I think that the fed is at the right time to hike but it has come at a significant price, at the cost of the potential slowdown in the economy later. Tom a potential slowdown, and shout out to your colleague who absolutely nailed the dynamic on this fed call. What will this mean for mario draghi . Mark carney and others are already saying it is one and done. I think that we are going to see a prolonged period of interestrate divergence. If that means that the fed is going to hike, remember that after the first rate hike, the market is only price for half rate hikes. What is more important is the messages we are getting elsewhere. Tom hans, we are going to come back. Hans redeker. Coming up, Danielle Juergen out of Bloomberg Radio. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Francine welcome back. This is bloomberg surveillance. A rearview from the millennium bridge. Its sunny, folks. Lets get to the bloomberg first word news. Caroline thank you. Brazil, a Supreme Court justice has halted the creation of the congressional impeachment committee. The panel was to decide whether to open impeachment proceedings against the president. They must beaid chosen by Party Leaders and elected in an open vote. In paris, the third gunman has then identified. Authorities say he was a 23yearold from strasburg who left in 2013 to join the Islamic State. Two of the three attackers kill themselves with suicide vest, the third was shot. 90 people were killed at the music hall. The u. S. , they are tightening visa requirements following recent terror attacks. They are barring people traveling to iraq and syria in the last five years. Plus, all 38 countries in the program will have to issue passports containing biometric information. Russia says it has deployed a new Cruise Missile to attack the Islamic State in syria. The Defense Ministry released a video showing missiles being fired from a submarine in the mediterranean. The video could not be independently verified. Vice President Joe Biden says that if donald trump wins the nomination for president , he would be easily defeated by Hillary Clinton in the general election. In an interview, he said that clinton wins in a wa but his comments are notlk, an endorsement. You can get more on these and other breaking stories at the new bloomberg. Com. Francine . Francine thank you. There is no let up in the flood of oil. So is this the new normal . Still with us is hence redeker, and we will check in with the barclays head of commodities research. Thank you both. Thanks for sticking around. You are look at oil, one of the most bullish forecast is out there. 68 by the Fourth Quarter of next year. Why . If you look at the consensus of analysts forecast, you look where the forward curve is. I think most analysts do believe that this is not a stable equilibrium, and prices have to head of eventually. The question