Welcome to the pulse. We are live from london. Im manus cranny. Lets get into those numbers with mark. Mark, it is a mess on the composite and a miss on the services. Mark interesting because growth momentum in the euro area could pick up this month after new orders rose at the quickest pace in a year according to the latest market economic data. The purchasing Managers Index gauging Economic Activity in the from 53. 6 in september. That is below the october 23 estimate of 54. It is well above the 50 mark that divides expansion from contraction, and a measure of new order growth rose to 53. 6 from 53. 3. This confirms the euro Area Recovery is proving resilient to a slowdown in emerging markets despite this slide in Energy Prices and a stronger euro dampening inflation. The ecb will decide in december to its it needs to add qe program. Mario draghi spoke yesterday in frankfurt saying they will look at the need to stimulate stimulus. Growth momentum could pick up after new orders rose in october at the quickest face in half a year. Giving the ecb Something Else to consider. Manus mark, im just looking at the headlines here. Weve got iceland going the opposite direction to the rest of the world. Take us into that. Mark thats right, manus. As we discussed the ecb loosening policy, possibly printing more money or buying more bonds or extending its qe program, getting some breaking news that icelands central bank is raising its sevenday term deposit rate to 5. 75 from 5. 5 . The central bank has changed its benchmark to it is an example of a central bank that is actually raising rates, which is a rarity. Manus mark, thanks for the roundup on the data and the latest headlines on the terminal. The scandal widens for volkswagen as the company says it has found faulty emissions readings for the first time in petrol powered cars. Shares taking a dive this morning on the back of the news. Porsche said it is halting some sales of a model criticized by u. S. Regulators. Hans nichols is standing by in berlin. Take us through the latest twist. Part of this is their own investigation. The second part is driven by the epa. Big the part on the engines is epadriven. That involves the porsche. What we learned last night is because of volkswagens own internal investigation, they found Carbon Dioxide irregularities in some 800,000 the eccles. This could have some overlap with the 11 million diesel engines. You mentioned petrol. As we say, gas, in the states. Volkswagen says that is really just a fraction. This mostly has to do with the engines that are giving them all this trouble. Here are the models that are going to the affected. Volkswagen, the polo, the gulf, the passat. On the audi side, the aone, the a3. Monteith mueller, the new ceo, comes from porsche. Heres what he said when they announced these regularities. Beginning, i set out to completely clear up this situation. , butis a painful process there is no alternative. This is volkswagen trying to come clean with what they know and get it out there and take the hit. They said this could have Economic Impact of 2 billion euros. On the porsche side of things, we dont have a lot of clarity. The epa says 10,000 the a goals including the porsche that has that three liter engine could be affected. Volkswagen is disputing this. They say they will work with regulators to clarify the matter. Yesterday evening, porsche north 2014,a took off the lot 2015, and 2016 cayennes. Those models are not available stateside. Manus as you say, hans, almost like a double punch. Lets talk about the u. S. That vw did a lot better than anticipated. Is that discounts, incentives . Hans we dont know why they are up 0. 24 . We dont know that audi is up we do know that audi is up 17 . Overall, sales are very impressive in the states. General motors, 17 increase. Overall, the states is on track to have about 18. 2 Million Units sold this year. You see a very strong recovery in the states. Volkswagen didnt lose year on year, but they didnt gain share. Manus hans, thank you very much. Theres a lot going on in the auto world. Lets bring in our next guest, the head of global Auto Research at the Investment Bank ever core. Great to have you back with us. I told you you would be back. It didnt take that long. Weve got the emissions scandal in petrol. We also got porsche in play. Where should our focus the . Is it the expansion into 800,000 cars or is it porsche . I think the u. S. Investigation is a bigger issue. You have the regulator, the epa, jason volkswagen, porsche, audi. They are all denying it. The additional 800,000 cars that vw has discovered themselves, they said they might find more cars. This is coming clean with yourself. They admit that theyve been lying again. But i think its serious, whats going on in the u. S. Manus do you think in terms of the scale, the financial repercussions typically in most regions are higher than europe. Is that what you are concerned of . Are you concerned about brand dilution in the u. S. . Porsche is one of their premium brands. Vw is a mass product. Porsche is the premium. Arndt youre right. In the u. S. , the economic damage from being forced out of the market and consumers walking away over time is very significant. In addition, youre facing penalties and lawsuits which might be very severe. That is i think the markets biggest concern. In europe, i think the consumer is pretty sticky with volkswagen as a brand. I do appreciate that they are taking the action now, investigating. Manus Matthias Mueller ran porsche. Arndt i know that. Manus do you think hes a worried man . He ran it. Arndt hes obviously worried about everything that is going on within volkswagen. Theuldnt be surprised if board knew whats been going on. Different question whether they should have known. Manus i cannot get my head around the fact that a board might not know whats going on. Do you think that is truly beyond scandalous . Arndt i think the board should have known. Going back to the culture, nothing has been reported, the question hasnt been asked. On the three liter diesel engine, i think the devil is in the details. These devices, when did they kick in, when did they switch off . I think thats the reason why they are denying any wrongdoing. Me, they came straight out and they battered back against the epa. But youre fighting against the biggest regulator in the world, the epa. Manus talking about the u. S. , it is a market that just is a beast. Back toes, the best back in 15 years. Thats stormy. Arndt the underlying selling rate is about 13 higher. The market is very healthy. Weve seen that in margins at gm, ford. Demand up for jeep. Arndt they are in demand everywhere. People just love driving bigger cars, sitting up higher. Manus chelsea tractors. T, thank you very much as always for joining us. Lets get you up to speed with what else you need to know for wednesday. Hedge fund manager stan druck miler says there is divergence between Monetary Policy in the u. S. And europe. The founder of Capital Management also said stocks could be the subject of the next bearish trade for him. Bill gross says the Federal Reserve needs to switch strategies to boost the economy. According to gross, there are operation twists which involve buying longterm treasuries and shortterm notes which is not working. He recommends they do the opposite. Gross says central bankers must end their low rate of inflation prophecies policies. Holdings and its banking and insurers units have soared on their debut in tokyo. Groupss flocked to the 12 billion ipo. Units in the insurance closed almost 56 higher. Up next on the pulse, going live to tokyo for more on that blockbuster japan post ipo. Plus, later in the show, we will talk u. S. Policy. There she is, janet yellen. Key fed officials speaking today , ahead of fridays pivotal jobs report. Manus welcome back. This is the pulse. We are live on bloomberg tv, radio, streaming on bloomberg. Com. Japan post jumped at their debut in tokyo after investors flocked to the groups 12 billion ipo. The flotation is the biggest in the world this year, the largest in japan since 1987. For more, lets head over to tokyo where bloombergs japan and korea managing editor is standing by. Stockare quite phenomenal price moves. Oversubscribed, but even oversubscribed, this is stellar performance today. Exactly right. We knew that all three units were oversubscribed by between five and 15 times. We saw those prices rising in the market all last week. To see the kind of rises we saw today, we didnt even have trading for the first 30 minutes of the day because the offers were so lopsided. If you take all three market caps combined, ¥17. 5 trillion, it would be worth about the same as cisco systems. This is a huge deal for japan post and a huge deal for japan itself. Manus i think when you look at some of the numbers, just to visualize, 400,000 employees including their parttimers, just the scale of it is quite phenomenal. Weve got an article on the bloomberg terminal that says, should investors take their profit on day one . Do we think theres sustenance to these kind of returns . This is only a small portion of these companies theyve released into equity. Only 11 of each company is now owned by the public. It is a small portion. We looked at the top 10 ipos over the last few decades in japan and we found that on average, share prices rose by about 44 over 12 months and the gains were especially prominent among shares that had some statebacked element, which japan post has. The smart money says, hold onto your shares for now and see how high they go. Theres a lot of potential for restructuring and efficiency now that japan post is having to answer to shareholders for the first time. Smart brian, we like money and smart ceos and smart managing editors. Thanks for the update. For more, lets bring in manish singh. He joins us now. Phenomenal ipo. What do you make of it . What is the scale of what we are seeing . Manish i look at it at two points of view. One from japan post. They have a deposit and they put half of that in government bonds. Once japan post becomes a privatized company, they would be moving out most likely. That is good for abenomics. Second is on the point of japanese people who have been [indiscernible] number, they had Financial Assets worth 1. 7 quadrillion yen. Almost half of that is in cash and deposits. Done, what this has japan post has done, it has opened the eyes again. Ntt, thatisited was back in 1987. It is really sparking the equity appetite in japan. Manish change of nature as well. Take more risk. It helps abenomics because the Monetary Policy transmission doesnt bode very well if theres no multiplier effect. If banks can just take deposits and give little return to investors, that is going to have a much better effect on the economy. Manus that is a heck of a reach. Manish if you combine all the branches of the other banks, they are a few thousand. They are really big in japan. Weve got china talking to taiwan. Weve got china talking to korea. Weve got china talking to japan. Im trying to find the right word. Inthis a growth of china terms of its position . Manish for the First Time Since 1949, taiwan and china are going to have a conversation. We saw the handshaking between china, japan, and korea. The biggest thing is going to be what imf is to consider. That changes a lot of things. Internationalization of rmb. It goes well with the silk road fund that china is publishing. More than that, i would say it wont be big in terms of capital flow immediately, but the symbolism of it is very important. Which not soion long ago, the gdp was not much greater than netherlands. Now, in one year, they produce the same amount of gdp. Still the yuan, you would say the yuan moves lower. But this is something that is naturally going to happen. Manish i think that the gdp growth is not going to be over 7 . We saw the fifth plenum. The assertion was that gdp will be 6. 5 . An . Us target on yu stick with me. You are here for the next 40 minutes. Druckenmiller bets against the euro. What is behind the call and his investing strategy in the eurozone . Thats next. Stan druckenmiller says hes shortly euro and stocks could be next. The founder who led soros back in 1992 pointed to a divergence between policy of the fed and that of the ecb and said president draghi pretty much announced and easing. Lets bring my guest host for this hour, manish singh, head of investments across bridge capital, into this conversation. Druckenmiller said, i had a short position. He thinks, when you talk about the currency, they go in cycles of 23 years. He would say theyve had a timeout on the euro. Would you concur with that . Manish i think i would and i think either is a short bias. Draghi repeated that yesterday. We lets also remember that leg isee the dollar not going to the as strong. We had a good auto sales number, but also, i dont see that youre going to have a much greater u. S. Number. Look at the gdp numbers. That doesnt tell you the dollar leg is going to push much higher. The weakness is going to come from the euro leg. Look that weakness, do i at the exporters in europe . It has been a lot of positioning about domestic focused growth in europe versus the equities with exposure to e. M. Euro isi think the suffering from the same thing, very slow growth. Given that you had weakness in china, that didnt help you. Im far more positive on china data. Manufacturing, but other stocks as well. Consumer stocks, you pick based growth, you see gdp weakness in the stocks, stocks have been oversold. Manus stay with me. We are going to talk about the fan. We got the triptych speaking today. Weve got a lot more to get through. Manish singh, head of investments at cross bridge capital. Up next, watching pmi out of the u. K. Last piece ofe data before the bank of englands super thursday. We are to bring you those figures. Its a little bit gray outside. Mark expecting Services Data from the u. K. Now. Looks Like Services growth accelerated in october after slumping to the worst performance in 2. 5 years the previous month. To 54. 9 activity rose from 53. 3. That doesnt regain all the ground lost in september. It does the the forecast of economists for a reading of 54. 5. The market also says that along with its construction and manufacturing reports, the economy grew at a 0. 6 pace at the start of the fourth quarter, faster than the previous three months, when the economy grew by 0. 5 . Employment is also rising. Whats interesting about this is it comes after manufacturing reports from market earlier this week showed the biggest growth in 16 months. This ahead of tomorrows quarterly Inflation Report from the bank of england where it announces its latest rate decision. Fascinating time for the u. K. Economy. Frome market pushes back when it thinks the bank of england will raise rates, economists are more bullish, forecasting a rate rise in the Second Quarter of next year. Food for thought for the bank of england tomorrow. Manus absolutely. The stars are aligning for pushing the bank of england to have to go earlier than the fed. Data aheadthe big for the bank of england, super thursday. Mark will be outside the bank of england tomorrow. Stateside, we are watching out for adp and the jobs figure on friday. We will also be on centralbank watch as the fed reserve chair janet yellen testifies before the House Financial Services committee on capitol hill. The official public is regulation, but the lawmakers are free to ask her anything. New york fed president William Dudley also holds a briefing in new york and fed vice chair Stanley Fischer will speak in d. C. Lets get thoughts from manish singh, head of investments at cross bridge capital. To said that you will like see them defend the fed. Why do you think they need to defend things . Manish there has been a lot of criticism about whether qe was the right thing to do. Keep people into jobs and to keep prices stable. I think they have succeeded in a big way. If you expect 5. 1 is the employment rate where they should start raising things, if unemployment is falling, what does it tell you . Theres more slack in the economy. Think theyve made a mistake they have given too much guidance. That part i think things have gone wrong. Now, i would say they are truly datadependent. There are signs of inflation, they are going to raise rates. The fed has done its job. It is debatable whether qe benefited. Perhaps it has. That is debatable. Manus there is this debate that janet yellen has 6 million reasons not to raise rates, the people who dropped out of the employment race, those people who want a second job. Theres a social conscious with yellen that is beyond data. Manish possibly. Ive never spoken to janet yellen. To ben bernanke. He was saying the u. S. Needs 80,000 jobs per month to keep unemployment stable. Expect that the numbers are going to get better. There is a big question how the fed moves, but if i can make one bad gdpnt, weve had for the last three or four years. Weve said the alina affect has a positive impact on inflation. We will see if that prepares the ground for the fed to raise rates. Im not very sure they will be able to raise rates. But if we have a decent number and decent china data leading to positive gdp impact, then maybe you will have some cover for the fed to raise rates. Manus theres the probabilities. Still at 5050 for a rate hike in december. Will they go . I know you say it is utterly datadependent. The world cant be disappointed again, can it . Manish it can. The only reason i think they would go is that the fed has boxed themselves into a corner. [indiscernible] then perhaps they will. That is the only reason i can see. Changed fromng has when they didnt raise in september. Manus lets get into the market. I have this great graphic about s p valuations. If you were worried in august, you should be worried now again. The fiveyear chart shows that s p valuations, trading just under 19, back at the levels we saw in august. We are just prepared to pay up, arent we . Is the u. S. Overvalued . Manish if you look at the short term, it is being driven by liquidity. You had a 10 fall. Byot of it was driven selling equities. If you look at what has happened now, all the short term momentum , they are looking positive. Maybe they will all load up again. If you are trading the market, then you have to be careful about not looking only at valuation, but you have to look at liquidity as well. On that basis, [indiscernible] manus lets talk about the earnings season. Companies the 500 s p have reported earnings. 80 of the earnings are in the door. 65 have beat in terms of earning per share. Only 30 have beaten in terms of sales. We bought a car, we are paying a cheap mortgage in the u. S. , where do you see the opportunity to invest . Manish fermi its health care, technology, financials. Manus rates arent rising quickly, so i question financials. Manish you are right. But im just looking at how undervalued some of these stocks are. That is the reason you are picking this. If you are building a portfolio with a 12month horizon in mind, then you have to look at some of these valuations. Care is alth phenomenal story at the moment. The valiant story, whats going scene, how doa you look at the whole pharma and health area . Manish despite all these negative views we have had, if you look at health care as a sector, earnings were up 15 or 18 . Theres real delivery of earnings from these companies. You have to be careful about individual names. There are many which have not done very well and some stocks, like valiant, what is going to happen with that . At big pharma majors, i still hold pfizer, but i believe these big pharma more aes which are marketing company, they have some questions to answer. Manus theres a punch. Just a couple weeks ago, 9 billion went off. Google and apple, are you in awe of apple . Manish amazon, google, and apple. These are the three stocks i hold in portfolio and i like. Sector, mobile sector is not doing very well. You had negative earnings on the sector as a whole. Amazon,gle, apple, negative. Go into individual stocks where they have an advantage in the field, then you do well. Stan druckenmiller last night defended amazon and compared it to what is happening with ibm. That is a fascinating story. You have some new Age Companies like netflix where you have a completely different model of how to watch tv. You only need the power of three in this world. Indeed, theye, and are about to reopen brickandmortar stores. Who would have thought of that . Manish singh, great to have you with us this morning. Now, here are the other main stories, top headlines on the pulse. Indias central governor says the nation will reach its 2017 inflation target. Speaking with the bloomberg editor in chief, he added that he sees the ruby as an investment currency and said india would be less reliant on moves in the u. S. Dollar. Fed core shares surging after the minor captives fullyear profit for cap on stronger trading. The company outlined a goal to trim debt by the end of the year. Vw says an extra 800,000 vehicles may be involved in another emissions scandal. That as the german carmaker found faulty emissions ratings in petrol the uncles. Volkswagen shares currently trading down almost 8. 5 . Whats up next in the pulse . Hoping for a profit. Can the Worlds Largest developer of Bitcoin Software make a return . I will ask the ceo of block chain. Manus welcome back. Fromis the pulse live bloombergs European Headquarters in london. Lets talk bitcoin. The Virtual Currency has been on a winning streak in recent days. Holders have had to endure a volatile ride. Lets go live to the dublin web summit where we can speak to the ceo of a leading Global Developer of Bitcoin Software. It is peter smith of blockchain. He joins us now. We are just showing the resurgence, maybe the fairway to talk about bitcoin. Any reason we are seeing such a dramatic turnaround in the currency . Peter sure. Maniaast year, you saw a or over exuberance around where the ecosystem was at. The price got kind of overbought and the market corrected that. In the last year or so, a lot of infrastructure has been built. We have added millions of users. Transactions on a daily basis have tripled. A lot of the runup is attributed to the positive effects of the last 612 months. Manus talk about the technology. In many ways, thats the essence of blockchain. Opposition that the Technology Behind bitcoin is going to take off exponentially versus bitcoin. I wonder where you stand in that debate given that you are so wholly committed as we know to bitcoin. Just give me your perspective on that. Start with the macro from the Company Perspective and then dig in. At a high level, blockchain is the only major Bitcoin Company to reach scale that hasnt participated in the price speculation at all. We dont sell bitcoin. You cant by bitcoin via us. Make the software that makes the ecosystem possible. On a technology level, bitcoin is a computer protocol. Then you have bitcoins, the little tokens of value, then something that facebook has started talking about, the idea of the block chain, which is what our company is named after. Manus you just touched on that. There was a mckinsey report block chain process, or the technology in terms of potentially increasing profits by 30 . Are you talking to any of the banks . Have you had conversations with any of the banks . Am i going to see your technology replicated in an Investment Bank, in a retail bank . Peter i think its an incredible moment of opportunity. Weve probably engaged with every major bank in the western hemisphere. 2015 would have been a year that the industry built a lot of infrastructure. I think 2016 will be the year of big partnerships. Manus who are you close to signing a deal with . American, european, or british . Peter i think the banks in new york are probably at the forefront of adopting new and exciting technology. Right behind that is london. Manus would that be an Investment Bank in wall street or a retail bank in the United States of america . Lets break news here. Who are you going to do a deal with . Peter you should know better than most the kind of confidentiality agreement these partnerships operate under. Manus do you think Investment Banks are more open to this technology . More open to embracing your technology than retail . Its actually commercial banks and insurers. We are also seeing a little bit of competition for funding. Are you raising any new funds . What is the appetite from the Capital Community to invest more capital with you . Any plans . Peter we are one of the few companies in the Bitcoin Space that have reached profitability before we raised capital. About 11 months ago, we raised the largest single in the industry. We are incredibly well capitalized today. Theres been a lot of interest. I think we are going to hold on until we get a strong partner. I think that will probably be a 2016 issue. Ask moste question i ceos in your business, how much are you spending as a percentage of revenue on protecting us from hacking, protecting your business from hacking . Engineering is one of the biggest parts of our engineering team. It is also one of the Biggest Challenges a company faces. Probably since we started in their view, we started this interview, someone has tried to breach my account, send me a fishing request. That is something you learn as an organization to combat. We pay some fantastic internal researchers and higher external firms on a routine basis to try to penetrate our systems as well. Manus peter, great to have you with me this morning. Sorry we couldnt discern which bank you are about to deal with, but we will get there. Peter smith of blockchain. Now, where are we going to go . Coming up, iceland comes in from the cold. Why it is getting ready to say goodbye, au revoir, to capital controls. Earlier, iceland raised its benchmark Interest Rate to 5. 75 . The country is moving closer to ending capital controls. Bloombergs Tom Mackenzie discovered on a recent trip to the country, the measures have also caused distortion. Tom its a new dawn for iceland, a country moving to rest itself from capital controls that have been credited with saving it from financial meltdown. Tove taken small steps start investing outside of the economy. We need to lift also the domestic economy. Combine right now, the countrys economy is growing. It has been helped by a booming tourism industry, with more than one million visitors expected in 2015. The Fishery Sector is also doing well, benefiting from a weaker krone and robust european demand. Against that backdrop, the government is taking steps to in the restrictions, to free up the economy and reopen the doors to foreign investment. I would like to see this happen much earlier, but it is a really a complicated issue. Tom capital controls which stopped capital outflows and helped stabilize the currency have created distortions. Investment funds have pumped their money out,capital soon, they will e maybe we are not going to be able to own our own apartment. That is going to be a shock. Risks to lifting capital controls. No one is quite sure how removing the controls will impact the historically volatile krone. Businesses,andic lifting the restrictions cant come soon enough. I understood. We need to have them. But we need to have a plan to get out of them. What is the next step . Tom most agree that capital controls need to be eased. Just by how quickly and how much could prove crucial. Manus lets get a little bit more from the market. The very start of the show, the icelandic raised Interest Rates again. They are preparing for stepping out of these capital controls. Mark have a look at the msci emerging market index. It shows the appetite for risk. The msci is rising for a fourth consecutive day. It has risen to a threemonth high. Based on the assumption that china will stabilize its economy. This is vw shares today, the preferred shares taking a turn for the worst, sinking the most since september. It admitted finding faulty emissions ratings in gasoline cars. Japan post insurance soaring 56 . What a day in japan. Manus nobody can pack more into 60 seconds of tv than mark barton. , itthe rest of our viewers is surveillance with jon ferro and tom keene. Manus the scandal defense. Vw has faulty omissions reading in petrol powered engines. The economic risk. Debuting in tokyo trading. Retail investors blocked. Taking guidance. The pboc unintentionally starts a spike in asian stock markets by publishing fivemonthold comments by its