welcome to "the pulse." i'm francine lacqua. let's get straight out to guy johnson live from my cap headquarters with some very exclusive interviews. this is the company's ceo. guy, over to you. guy: thank you indeed, francine. welcome to icap's charity day. raised $8 they million. it is a colorful affair. i feel massively underdressed. the good news is that michael spencer is also in his suit. good morning to you. $8 million last year. -- million pounds u.s.el: 180 million dollars. slightly is market-dependent, isn't it? your sense for this year? michael: sounds good here. listen, i don't control that, but our clients support us very generously. start to the good day. let's hope it continues. ways, you are changing the nature of your business. you are going electronic. what is happening? michael: charity day will definitely continue. month that weast are selling our and tile -- our entire global voice business. we will remain -- the brand name will change. executive will move on. it is very important to me. he said it was his honor and privilege to continue. [indiscernible] charity day will be twice as large next year. the ceo will do a brilliant job. i will be running the electronics business. but it won't be the same atmosphere. this is something we started in 1993 when the firm was literally 100 odd people. it was an idea then. it has continued to work every year. london, butusly in they will be doing the same thing in new york and in sao paulo and rio. guy: there's a competition among the guys to have the best outfit? i can see one behind you. he's smiling at me now. it has been an incredible year for your business. so much change has happened. do you think there is still more? michael: over several years, i've said that the global voice brokering business -- next year will be 30 years. we started with four people. now, nearly 5000. [inaudible] the merger will mean that there are now three global voice brokering firms of which i cap will be the largest firm. i think consolidation in that space is over. we haven't decided. [inaudible] namedy who comes up with a for the new icap -- [inaudible] a case of very fine red wine from france will be there gift. guy: probably cheaper than paying a branding company. michael: and more fun. if you've got any good ideas, e-mail me with your ideas. you will win a case of very fine line. guy: i'm sure i've got a few ideas in the back of my head. you say you are not done. can you explain a little bit for me? --ld you ever see [inaudible] michael: we are still building our voice brokering business. started as a icap technology asset. [inaudible] we invested over one billion pounds over those businesses. they are now worth several times that. the technology part of the business is where i'm going to focus my time. there is a lot going on. i'm going to grow it organically. it just won't be as noisy as this. guy: a couple of quick questions. [inaudible] michael: yes. i think the fed has to raise rates. if they don't do it now, when are they ever going to do it? the backdrop is as good as it could get. they should get it over now. guy: which way does oil go from here? michael: i think it could go down. i think the chinese economy is going to continue to underperform and that will affect not just oil but other commodities as well. iran tor, we expect come back. saudi arabia continues to pump aggressively. going to become an exporter. i can see oil going down below $30. guy: have you made up your mind as to whether your business will -- [inaudible] michael: we are a global firm. we have offices in 64 countries. new york and london are pretty similar. london and new york are the hubs. i think we would be better off if we stay in europe. i personally haven't maned my mind up. guy: michael, thank you very much indeed for inviting us. i hope the day goes really well. michael spencer, the ceo of icap. maybe we should be thinking about that new name. francine, back to you. francine: guy johnson there with the ceo of icap. in the meantime, here's a look at what else is on our radar. bloomberg sources say dow chemical is in late stage talks to merge with dupont in what would be the largest deal in the chemical industry. an agreement could be announced as soon as this week. the companyrger, would break into two or three businesses because of regulatory issues. china's consumer inflation beat estimates. cbi in november rose 1.5% year on year. the producer price index fell, extending declines. yahoo! shares surged in extended trading after a source said the will spin off its stake in alibaba. norway's sovereign wealth fund says it has recovered from the losses it suffered in the second and third quarters. the ceo said the fund has been dramatically changing its portfolio. if you look at the big picture, the fund has been reducing dramatically. next, oil bounces back from a six-year low. we talk about the new reality of a lower oil price for gulf states. ♪ think that the right price -- [indiscernible] we are cash neutral. i think the right price is not just the right price for us. it is the right price for the industry and for the producing country. francine: that was the ceo of eni talking about the breakeven oil price. this is a picture of crude at the moment. low, butf the six-year very close to that. nymex at $38. the printing -- the plunging price of oil has been hitting the gulf states. bank borrowing costs are up. nation gulf cooperation council is home to around 29% of the world's oil reserves. let's bring in our middle east editor, elliott kotkin. give us the details. how bad is it for these countries? elliott: we talk a lot about the burgeoning budget deficits, many of these countries having to cut back spending in the face of these low oil prices. there are other aspects as well. if you look at the stock market, this is an interesting place to look to see how these gulf countries and oil producers are being hit so hard. abu dhabi, one of the richest gulf countries, is particular being hard hit. it is categorized as an emerging market. markets, developed emerging markets, and frontier markets. alou. he is home to about 6% of the world's oil reserved. it is being treated more harshly than frontier markets, which are considered the riskiest. this is share prices relative to earnings. abu dhabi stocks are trading at a lower valuation than frontier markets. they are trading at 8.4 times projected earnings against 9.4 times in frontier markets. since the middle of last year, offt $200 billion wiped markets. we've seen volumes dwindling. saudi arabia a bit of an outlier. there volumes are actually up as well. we can see things happening on a daily basis. qatar stocks this morning reaching their lowest levels since 2013. they've said they are going to factor in a more conservative estimate for oil next year. real being devalued as well. some people will see this as a great opportunity to go in. just because something's cheap, doesn't necessarily mean it is good value for money. francine: elliott, thank you. for more, let's bring in kevin boscher. great to have you on the program. when you look at the price of oil, it is extremely difficult to forecast. you say it is between $30 and $80 in the next six months. do you try and forecast it or take it with a pinch of salt? kevin: we try not to forecast it, but we have a firm view. we understand why the oil price has fallen as much as it has. we don't see that changing anytime soon. francine: saudi arabia not cutting, shale gas, extra production from russia. kevin: it is a number of things. the world is growing well below its trend. the demand in emerging markets has fallen substantially. it is also a function of increased efficiency from the fracking industry in the u.s. at anies can produce oil lower price and be profitable. francine: but it is not a global recession we are staring at. kevin: not yet, but the risks are increasing. if you look at the low oil price, continuation of weak growth, bond spreads widening again in the corporate space, low government bond yields and yield curves flattening, and equity prices struggling to theret their old highs, are some signs that would lead us to conclude that the risks of recession are increasing. hence, we have to be careful. francine: if the risks are increasing that we may look at a global recession, then janet yellen should not raise interest rates. kevin: that is a tough one. i think this is her best chance to raise rates. the market has pretty much discounted it. the risk is they get it wrong. it is not so much the impact on the domestic u.s. economy. it is the impact on the external environment through the dollar. if it forces the dollar to have another spike higher, that will bring further problems for emerging markets and commodities . it does risk weakness outside the u.s., which through the dollar comes back into the u.s. activity. francine: 80% chance now that the fed will act in december. what happens if they don't? they want to normalize. if it is to bring interest rates back down if something big happens in the first quarter or second quarter of next year, why raise them in the first place? ,evin: i think the central bank like the bank of england and others, is in a difficult place. they don't want to be seen to be scaring the market in the belief that investors get spooked by something they may know that investors don't. on the other hand, they have to tread carefully. continues toonomy disappoint from a growth point of view. inflation continues to surprise on the downside. economye, the global remains fragile and vulnerable. it is a difficult balancing act. for us, it is not so much whether the fed do or don't go. we think the fed should go and markets are expecting that. i'm not so sure. i think they probably should wait. what is more important is the dovish message they send out about the pace of rate hikes moving forward. francine: all about gradual. let's see if the market gets the message. thanks so much. kevin boscher stays with me. we will be talking about china and m&a. n'sthe pboc cuts the yua reference rate, we look at what is next for china's currency with our beijing bureau chief. ♪ francine: welcome back. china's consumer inflation picked up last month. meanwhile, the country's central bank cut the yuan's reference rate. let's get the latest from malcom scott. malcolm, the story behind inflation is a little better than expected. malcolm: that's right. a stabilization in consumer prices, 1.5%, and a pickup from the previous month. the prices are still going backwards. -5.9%. it didn't get worse, but it isn't getting better. the hope is some of those big commodity falls start to wash through the system, things look better, we get some pricing power back into the economy. no immediate signs that is going to feed through into cpi. inflation is still running about half what the central bank would like. francine: where does the move on the yuan reference rate leave policy makers? how telling is it that this comes a week before the fed meets? malcolm: a week before the fed and also a week after the sdr vote. there was this push to keep the yuan steady against the u.s. dollar ahead of the vote of whether it should be considered a reserve currency. since then, there's been this shift. the market has been wanting to push the yuan lower. now the pboc has been incrementally setting its fixing a little lower each day. will they keep doing that? if you look at the export picture, declines for five months in a row. it should seem to suggest we need lower yuan, so perhaps there's some recognition ahead of the fed. especially if the u.s. dollar is going to kick higher. francine: malcolm, thank you so much for all that. malcom scott income come. let's get back to our guest host, kevin boscher. when you look at china, and we were talking about looking at a global recession, you say it is not your base scenario, but the odds of that becoming a reality are getting closer. how much do we read into the fact that inflation is not that bad, they've been importing commodities, things seem to the stabilizing? kevin: two very important message is come out of these figures. whether it is 1.4% or 1.5% cpi, that is still very low for an economy growing over 6%. the long-term trend is clear. china is still exporting deflation to the rest of the world. that is the first important message. the second is the currency aspect and what chinese authorities are doing with their currency. china needs a weaker currency alongside their fiscal stimulus and monetary stimulus to prevent a hard landing and help stabilize the economy. a cheaper, weaker currency is part of their plan. how they do that has very important implications for the global economy and financial markets. the fact that they've joined the imf's sdr is probably a positive in that it means they are likely to be a good corporate player and allow a gradual depreciation of the currency over the next 12-18 months. if for some reason that depreciation becomes more rapid, it is going to destabilize commodities and emerging markets further. it is going to possibly tip the global economy over the edge. francine: dow chemical and dupont may be looking at a merger. initial thoughts? kevin: it makes strategic sense. the chemicals industry, like most industrials, face falling revenues, cheaper prices, tougher regulatory environment, potentially increasing costs in the u.s. it is mainly a defensive measure. it is also probably taking advantage of bond yields while they remain relatively cheap. boscher, chief investment officer of brooks mcdonald. next, rising unemployment, inflation at 10% and a deep recession. what happened to brazil's economic miracle? ♪ francine: welcome back to "the pulse." i'm francine lacqua. let's get the bloomberg view with nejra cehic. nejra: chinese consumer inflation beat estimates. cbi in november rose 1.5% year on year. the producer price index fell 5.9%, extending declines. the people's bank of china had cut the yuan's reference rate to the weakest since 2011. that fueled speculation that the central bank is trying to release pressure before an expected increase in u.s. interest rates. morgan stanley has named alistair darling the u.k. chancellor during the financial crisis and former member of the british parliament to its board of directors. pimco said monday it was creating a new advisory board including ben bernanke and jean-claude trichet a. says donald has disqualified himself from the presidency. the republican front-runner said muslims should be barred from entering the u.s. after the attacks in paris and san bernardino. president obama's press secretary spoke out after the comments. >> the first thing a president does is to swear an oath to preserve, protect, and defend the constitution of the united states. what donald trump said yesterday disqualifies him from serving as president. candidates to stand by their pledge to support mr. trump, that disqualifies them. trump is refusing to back away from his remarks despite almost universal condemnation. manus: thank you -- francine: thank you so much. let's get to today's top market stories. mark, if you look at commodities, it is almost a race to see who is performing the worst. mark: it is. the worst performers on the ftse 100, both falling more than 70% this year. anglo, the slide yesterday hasn't seized. it is plunging today. half an hour ago, my narrative was going to be how global mining stocks have rebounded. but i'm a flayed the global world mining index, a gauge of 80 mining companies around the world, has fallen to a new low. this is a chart going back to the beginning of 2015. this gauge sank almost 4% on tuesday after weak china trade data. the data today wasn't as bad. demand is strengthening in the world second largest economy, but as you can see, minors falling today. the bloomberg commodity index is down to a fresh low. on the subject of china, the yuan has sunk to a new four- year low. intelligence says the pboc is doing is basically front running the federal reserve, preempting a perceived depreciation in the yuan when the fed is widely anticipated to raise rates next week. since china cut the reference rate by 1.8% on august 11, the yuan has fallen by 3.3%. part of that decline has been to do with its elevation as one of the reserve currencies. looking at the chemical industry, this is the last month. bsf was rising. it is now dipping. dow chemical and dupont are in talks to merge. it would be the world's biggest chemical company behind bsf germany's big chemical company. this part of the chemicals industry is on fire with m&a talk. monsanto has been interested in syngenta. chem china also. syngenta has told both those panies it is not interested. today, we are seeing these industry groups falling on the stoxx 600. we are not seeing that much impact on the helical sector. francine: mark, thank you so much. we understand that in pretrade both dupont and dow are gaining some 8%. we will give you that in a couple hours when the market opens. let's talk about south america's largest economy. brazil's supreme court has created an impeachment -- has halted the creation of an impeachment committee. i asked the mayor of rio de janeiro what he thought about impeachment. >> there's no reason for impeachment of the president. you have to have what we call a crime of responsibility. if she made some mistakes in economics, this and that, but she's a very honest person. francine: later this morning, we will get inflation numbers which are expected to show prices increasing, adding to brazil's gloomy economic picture. let's bring in our guest, anthony pereira. [indiscernible] he joins us now from london. thanks so much for joining us. impeachment needs to happen or not? what ever happened, we need to get over it. if this process continues, it just slows down the getting back to normal. anthony: the heart of this crisis is about governor ability. brazilianount on a president to produce a majority in congress and get things done. dilma, in the second term, hasn't been able to do that. the latest twist in the impeachment saga is just another symptom of that inability to create a majority in congress and get reforms done. uis, what is your take? well, the process has already started. we know that there will be many , and i in the court don't think that we're going to this ultimately sorted over the next couple of quarters. we could be still talking about impeachment by mid-next year. it is not that straightforward. -- iolleague mentioned fully agree with that. my fear and main concern is this political paralysis in the meantime we are still discussing the potential risks of impeachment. i do think that at this point, given how growth is brazil,forming in inflation is still study around without any measure in the congress to counter the fiscal underperformance, we could see a lot more. francine: we're looking at the charts. brazil inflation, the latest is 10%. you believe this will be resolved not before the middle of next year. does it mean that cpi is going to get much worse before it gets better? -- if you believe look at the breakdown, net exports as we all know, the commodities, the net exports are not helping. they are dragging growth. domestic consumption is still being retracted. the jobs are being slashed. there is contraction in the labor market. it is very difficult to see the light at the end of the tunnel when it comes to q1 or q2 dynamics. q1 in 2016 will show a lot of downside surprise to the market. anthony: i think luis is right, but i think she might be able to get this defeated in the lower house. in which case it doesn't go to the senate and she doesn't have to step down from the presidency. that is the best case scenario. francine: we are very big on charts here on bloomberg. we've got inflation charts and gdp charts. gdp has fallen off a cliff. what will it take for gdp to get better? she needs to almost stand down. anthony: i'm sure there's plenty of people in the markets who would prefer for her to stand down. she doesn't track me -- strike me as the type of politician who would resign. that might be the best case scenario for some people in the markets. given the fact that it would likely be a protracted struggle if the lower house did vote for the senate to impeach, it might be a less worse scenario for market actors just to let her see it through. , it seems that when you look at the economics and the fundamentals of brazil, it got bad quickly. the last couple quarters, even months, we saw this steep decline. if we look at trade relations with china, it had to do with global growth and the fact that they haven't implemented structural reforms to take advantage of it. luis: it is super important. brazil is part of this commodities complex. economies that rely massively on certain families of commodities. we know that brazil is doing relatively well in terms of grains exports, but the mining complex is definitely under a lot of pressure. iron ore is a very important product. that leads directly to china. the gentleman was mentioning the chinese, this low growth in chinese demand for commodities. i think the story continues. despite all the d stocking of these commodities, we are still seeing contraction in cpi. we are seeing a lot of dumping by chinese steel makers. outputinue to expand the despite shrinking margins. the story out of china is not constructive yet. we could be talking about a stabilization. generally speaking, china is not growing in a way that helps commodities anymore. seen hundreds of thousands of people taking to the streets in protest. are we going to see many more? there's still the scandal with petrobras. there's dilma rousseff. and the economics are terrible. anthony: hard to say. a lot of people thought, they will be even worse, even bigger protests during the world cup. we didn't see that. we saw a lower rate of protest. it is a possibility that the social situation is going to get worse, unemployment is going to get worse. there will be more tension and grievances on the part of the population. againstsee mobilization the political classes. against a lot -- a lot of the protests were very defeatist. they were against just about everything. it has been very difficult to predict. protest cycles are very quick now because of social media. they can burn out. the 2013 protests pretty much burned out by mid-july. luis, what does it mean for investors? is the real something you would stay away from? luis: i don't think you stay away from it. you should stay away from the back end of the curve. that has to do with fiscal sentiment. it is not necessarily a good moment. although i have to say that this is an economy that will probably continue in recession in 2016, at least in the first half. given that the front end of the curve is frightening so many, i investt makes sense to very strategically in the front end of the curve. in terms of currency, i think the real is not out of the woods. it should suffer a little more. about the is all commodities push and it is not helping. that will put a lot of pressure on the brazilian real. francine: thank you so much. anthony pereira and luis costa from citigroup. up next, scrapping the spinoff. is yahoo! ditching its plans to offload alibaba? the share price in premarket is up some 3%. plenty more on yahoo! and marissa mayer next. ♪ francine: welcome back to "the pulse." check this out. this is dupont and dow chemical gaining some 8% in premarket. we will get back to that in just a second. first we have the bloomberg first word news. a will a will be -- nejr be with the latest on this. apple suspending plans to offer television. we are looking at fed watch, brazil, and this make a deal. dow chemical is said to be in talks to merge with dupont in what would be the largest deal in the chemicals industry. is the biggest year for m&a about to get a lot bigger? joining us is the global deals managing editor. great to have you on the program. what is the rationale behind this deal? it seems that both sides like it. >> that's right. you know that over the last few weeks, months, the big six players want to do deals. everyone is talking to everyone. it looks like someone has pulled the trigger. it is the two big american players. they are number two in chemicals and number one in crop science and seeds. that is what these deals are about, cutting costs, synergies. francine: this is because of cheap money? we talk a lot about megamergers. a lot of times people say, megamergers are great as long as they are done for the right reason. you seem to say the rationale makes sense. >> there are a couple reasons why it is happening now. one, it is a cheap time to do it. interest rates are still low. the industry is under pressure. farmers are spending less on crop science. rmb costs are rising. -- r&d costs are rising. they need to get stronger and cut costs. in addition to that, according to people familiar, the two companies would combine and split into three entities so they can focus on their strength, crop science and seeds, and spin off or separate from plastics, which could lead to more m&a. francine: it is quite unusual. your job has changed significantly because now people look at companies and are trying to do exactly that. they would split after merging to create more shareholder value? >> that's right. they think that separately they would be valued higher by investors. a lot of these companies are moving away from the conglomerate structure. they can focus on the area where there's a lot of pressure. they can cut costs. they can get more global, which is a big part of this business. francine: where does it leave competitors? >> it leaves competitors very nervous. monsanto tried to buy syngenta and was rejected. the chinese were looking at syngenta. those things could come back. if competitors like syngenta, monsanto, they turned the corner and some of the biggest competitors are combining. they know they have to act. the pressure is going to come up. francine: this is megadeals for this year. >> it is. we surpassed the all-time record of 2007 a couple weeks ago after that pfizer-allergan deal. people thought that was the end. that is not the end. another big deal. it will be busy through the new year. francine: thanks for all of that. incredible deal if it goes through. yahoo! is scrapping plans to sell off its stake in alibaba. marissa mayer will have to turn to other strategies to return the company to growth, including spinoff of its internet businesses. tell us more about this. nejra: this really is a turn for marissa mayer. some would say it is b admission of defeat. back in january, she talked about spinning off the stake in alibaba, a stake worth more than $30 billion. what has happened since january is that mayer has come under pressure from investors concerned about the tax risks of the deal. now, according to a person familiar with the matter, yahoo! will look into a spinoff of its main internet business. if mayer is running out of options. sales are hovering at 2006 levels. the share price tumbled this year. investors are getting impatient. what you are seeing is this u-turn. interesting that it is such a big shift in strategy. you are thinking about a web business thinking about spinning off its main web business. francine: thank you so much. nejra cehic with the latest on yahoo!. next, john cryan calls out deutsche bank. germany's largest lender has been getting it wrong for a long time. details coming up next. ♪ francine: welcome back. let's get to one of our other top stories. john cryan has given commentary on germany's biggest lender. addressing an american audience, he said the thanks performance has missed -- the bank's performance has missed the mark for a long time. >> we've got to provide for everyone a vision of how the bank can be better. we've at least admitted that it needs to be better. it clearly hasn't performed for quite a long time. michas been an ende underperformer. francine: let's get to our international correspondent, hans nichols in berlin. to complaineemed about the cost of doing business in the u.s. hans: he said it is inconceivable to leave the u.s. because the pool is so big. your cost of business in the u.s. is much higher. they are not going to exit the u.s. that is the headline of the speech in new york. they are concerned about asia but they are not going to exit there either. francine: all right, hans, thank you so much for that very quick update. for those listening on bloomberg radio, "the first word" is next. for our viewers, it is "surveillance." i will be joined by tom keene in new york. ♪ francine: greater reality. as oil bounces back from a six-year low, the collapse of global mining stocks abates. china's inflation stabilizes cpi as stimulus helps to support demand. the pboc gets another rate cut before the fed meets next week. bloomberg sources say dow chemicals is an late stage talks to merge in what would be the industry's largest ever deal. good morning. i'm francine lacqua with tom keene. tom, happy wednesday. tom:

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