engine runs high after turkey downs a russian jet. manus: markets stabilize. turkey's main index continues to slide. francine: the statements of george osborne, plans to deliver more homes. u.k. homebuilders getting a boost this morning. welcome to "the pulse." we are live from london. i'm francine lacqua. manus: i am manus cranny.
the downing of a russian fighter jet threatens to undermine efforts for a united front against islamic state. president obama, chancellor merkel, and nato have called for a de-escalation of tensions between russia and turkey. francine: erdogan said no one can expect turkey to not react to violations. turkey has no intent to escalate the situation. manus: let's bring in andrew. great to have you back with us this morning. we just heard from erdogan. francine and i did a double take . there's the line. erdogan doesn't want to escalate the situation. president who is absolutely prepared to saber rattle against the russians. >> you can take it two ways. the glass half-full is that we've had 24 hours now without another major incident, which is
certainly wasn't clear yesterday morning when markets tanked. nobody was talking about invoking nato article five. the glass half empty is the rhetorical escalation continues to rise. despite what erdogan said this morning, he did take a couple swipes at russia. russia deployed a cruiser in the mediterranean. russia said it would shoot down any threats to its assets and said all its bombers would be accompanied by fighter jets now. there's a lot that can go wrong. francine: i know a lot can go wrong, but in the next 40 hours, it doesn't escalate, are we in the clear? still don't think that anybody's talking about some direct military confrontation. we had reports that there was bombing in areas controlled by turkmen who are loyal to turkey.
that is kind of a hit maybe at a turkish proxy. but it is not direct. as long as we don't see another incident in the coming hours, days, it will probably be asymmetrical. we had russia say it found listeria in turkish chicken and will ban all turkish chicken exports. there's a lot of economic ground. the 10,000 turks on vacation right now -- 10,000 russians on vacation in turkey, there's a lot of other routes russia could take. manus: merkel this morning saying the world needs to join together to fight islamic state, but she also said every country has the right to defend its territory. that echoes what obama said. it doesn't sound as if nato has any appetite to kowtow completely to putin at this stage. >> but if the russian version of
events is that the plane never went into syrian airspace, if it did venture into syrian airspace, it would have been there for only seconds. au are talking about warplane. it wouldn't have been there very long. i think as you alluded to before, this still is a big international effort to try and diffuse this. francine: andrew, thanks so much. andrew gordon, bloomberg managing editor. residents have woken to a city back in operation. francine: the terror alert remains at its highest level. jones hayden joins us now. i guess the mood is extremely cautious. it is back to business, but they still haven't caught that terror suspect. >> right. we still have the highest terror alert here. the main terror suspect is still
on the loose. -- theay, the prosser prosecutor put out an international warrant for another suspect who was seen driving to paris before the attacks. the investigation is going on. the subway is starting to reopen. the schools are reopening. we have a sense of back to business over here. i think people are focusing on that. there, butis still things are starting to operate the way they are supposed to again. manus: the latest on the investigation, what progress? this is a city which has been in lockdown. the whole focus was on delivering in this investigation. what news have we got so far this morning? >> late yesterday, they charged another person with complicity in the paris attacks. now there's five people that the belgian police have charged with
taking part in some way in those attacks. the main suspect is still at large. they seem to be getting closer. they put out an arrest warrant for this other accomplice yesterday. they seem to be making progress. i think the mood is one of positiveness and things seem to be going ahead. nothing has happened. we haven't had any other specific scares or alerts. it seems like things are steady at this point. the terror alert is going to remain at least until next monday. we will see how things develop. francine: jones, thank you so much. manus: here's a look at what else is on our radar. the swiss unit of deutsche bank has agreed to pay $31 million to escape prosecutors and in a u.s. investigation into banks that helped americans evade taxes. deutsche was ordered a record
$2.5 billion for its role in breaking libor. francine: shares in abengoa have been suspended on the major stock exchange until 11:00 a.m. this morning. credit has sought protection proceedings after it pulled out of a plan to invest in the company. manus: the ufo union which represents lufthansa common crews says it is canceling flights strikes. flight attendants and pilots are fighting plans to develop the euro wings division into a low-cost arm. ufo said an agreement must be reached by december 2. francine: next, we are live in westminster as george osborne prepares to make his spending pitch to the u.k. ♪
manus: welcome back. this is "the pulse." we are live on bloomberg tv and radio. here in london, the chancellor delivers the first autumn statement since the conservatives took office as a majority government. anna edwards is live in westminster. what can we expect at 12:30? the builders are cracking this morning. anna: thanks very much, manus.
they are getting quite excited about what we're going to hear from the chancellor about the housing sector. the big question involves the budget surplus. the chancellor is aiming for a budget surplus of 10 billion pounds by 2020. that is what he said last time we heard from him. will he stick to that? be broadlyng to about posterity. where is the nice going to fall? which departments are going to find those spending cuts to enable the chancellor to meet some of his deficit cutting targets? we will be focusing on where that night falls. might the police be in the frame? that could be controversial. we've heard about areas they want to spend money on. , 6sing, the health sector billion pounds this fiscal year. we've heard about the fence at well. they want a 30% increase in spending on counterterrorism.
stuffadline-grabbing could be around tax credits. that has been difficult for the chancellor. his plans in that area were kicked back by the house of lords. we will have to see what he delivers. we will be looking for him to surprise us as he usually does. francine: how much of this is political pitch? very political of course. everyone says this about every chancellor. particularly about george osborne. he enjoys more freedom because he's not in coalition government. not held back by his coalition partners. bear in mind, this is still a government with quite a small majority. they need to walk a careful line. he is still the bookmakers' favorite to take over from david cameron as the leader of the conservative party when that becomes necessary. he has, george osborne, has
recently had the battle with the house of lords to get his welfare cut plans through. that proved to be controversial. he's also had a bit of a falling out with junior doctors in the national health service. he wanted to change their contract. if he wants to look like more of a statement and less like a chancellor, that is something he will have to consider. he does have a big mandate for some of the changes he's bringing through. he would argue that he has a mandate for 12 billion pounds worth of welfare cuts. he's quite a master at taking the weak spots and the challenges from other parties and turning them into his policy. we will see whether he does that once again. francine: thank you so much. anna edwards will be speaking to the former shadow business secretary at 9:30. manus: a senior economist joins
us this morning. great to have you with us. today is nowhere near his target for this year. bloomberg intelligence ran some of the numbers. the target was to release white awayat -- to really swipe at overall borrowing. this is going to be a tough one, isn't it? >> it will be a tough one. the most important thing is to look for precedents. how he's maintained targets and not met targets. he will say we will see cuts of around 1% gdp per year. in reality, we are unlikely to see that. 2020, is surplus will be more a figment of imagination. francine: is that a good tactic? he talks tough, but then backs down. >> is it a sensible policy to go slow, yes. from george osborne's position, he's probably hoping to the
prime minister at some point. he has to be the economic maestro in order to do that. he has two sides of the political spectrum to appease. he needs to make sure the economy is doing quite well and the people rely on his welfare spending. at the same time, conservatives want to see the budget down. this time, they've got a majority on their own. , so debt low inflation payments are going to be lower. his index linked payments, he's going to make. he has got some assistance from this very lowflation this time, he does not have that excuse. the challenge is a political
one. the economy, i don't think will let him down. if anything, it will boost this challenge. francine: how do you think he will surprise us? is there something that many people aren't expecting? at the end of the day, when you look at mark carney or george osborne, they have a tight pact. is there anything george osborne can do today? >> i think the one thing he will be focusing on is the announcement about housing. we might see a rehashing of his pledges to cut corporation tax, raise minimum wage, to draw attention from the fact that he needs around 25% in day-to-day spending cuts, which you simply cannot get around. manus: these stocks have rocked all year. taylor wimpey up 4%. persimmon. these are builders in the u.k. the headline we are expecting is
that he's going to encourage the building of 400,000 homes, helped change the rules on help to buy and encourage developers. economist, this country is so dependent on housing, isn't it? >> yes. 100%. manus: the chancellor is going to go down in history as possibly the biggest bubble creator in the world. >> i wouldn't call him a bubble creator. the u.k. has a chronic supply issue. the mistake with help to buy was that they had a demand solution to a supply issue. there is a supply side issue to deal with. from a purely political this -- political perspective, steadily raising house prices is a good thing. it drives the wealth effect. to maximize those benefits, you need as many people as possible
to have houses. the problem is, we have structural issues with the housing market which limit the ability to draw supply. these big demand-side stimulus programs -- the target of 400,000 is what we are hearing. is there a great deal of promises and under delivery? interested tovery see how he plans to do it. manus: very political. >> there are issues. they have issues with labor supply, just getting bricks for example. there was a brick shortage two years ago. also, if you speak to certain bodies that deal with these problems, there's an issue with the house builders. there's a lack of available supply. before we can get a more flexible housing market, we need to have some consensus on the problem.
you still face the problems that the current housing supply stock is facing. manus: we always got ministry of defense land. francine: one of the budgets that will probably get a little more love. thank you so much. manus: we will bring you full viewers onr our u.k. the way on the autumn statement. that is live at 12:30. francine: next, we talk travel. a beat for thomas cook as the company posts the first profit global years despite cutting of its underlying business. more on that next. ♪
francine: welcome back. spanish energy company abengoa is seeking credit protection after gone bari told out of a planned investment plan. manus: abengoa shares are currently suspended. for more, let's get to our spanish bureau chief, standing by. charles, good to see you. run us through the details. there's been questions about liquidity, cash management, so take us through this. that's right. this is the latest chapter in a
long agony for abengoa. it has been trying to raise funds all year. there have been persistent doubts about its ability to generate cash. it has been trying to raise capital. we saw the shares rally quite sharply over this month when it announced this rescue plan by a company called gone bari. it said it would invest 350 million euros to become the biggest investor in abengoa. the news is that that investment has been pulled. the conditions were not met according to gone bari. that deal is over. abengoa has taken the logical seekstep, to start -- to creditor protection. 350 million. i have to correct myself. i said 350 billion, which would be the size of the gdp of a small country. what does this tell us? when we saw the news, we were
concerned that other firms would follow suit. >> that is a very interesting question. i think abengoa probably is a case in itself. it is a story that has been unfolding over the last year or so. it does raise questions about spanish business conglomerates, many of which come from a family ownership background, which was the case with abengoa. it's a story about corporate governance, about overleveraged, about how these companies adapted to the modern world. i think there is a wider story in spain about that. there are many cases of ,amily-run companies in spain where probably some very hard questions should be asked about corporate governance. francine: -- manus: charles, thank you very
much. cook,ne: shares in thomas we were looking at those before. the second-largest tour operator. the company swings into profit despite geopolitics. caroline hyde is here. manus: stock is up 10%. they made a profit for the first time in how many years? caroline: five years. let me remind you of the doldrums this company was in. managedgreen, who banking salvation for this company, they managed to extend their credit and cut costs and bring this company back into the black. companies are still facing headwinds. they are talking within the statement about disruptions to some of the key areas they travel to. egypt being one of them. sharm el sheikh airport.
ba and easyjet say they are not going to service sharm el sheikh. in january, there was a russian passenger jet that was downed. thomas cook took a hit. also, they are not able to use tunisia anymore. we've seen terrorism threats escalating in that country. the headwinds are plenty. overall, this company is managing to see a real pickup in the u.k., in germany. they are managing to see some growth despite these ongoing headwinds. paris, that too making some travel issues, putting it in focus. overall, this company managing to give up a profit. francine: thank you so much, caroline hyde with the latest on the travel sector. manus: you are in for a little relief. next, we are going back to westminster where we are
welcome back to "the pulse" live from bloomberg's european headquarters in london. manus: now for your top headlines. prosecutors in paris say the alleged ringleader of the terror attacks blew himself up in the french capital. the second attack was planned for november 18 or 19. abaaoud was killed during a police raid on the morning of the 18th. francine: new surveys suggest
the chinese economy is showing a muted response to monetary and fiscal feeding -- easing. a sentiment indicator dropped sharply from october. cook has swung into profit for the first time in five years, beating analyst estimates. europe's second-biggest tour operator also said it sees an encouraging start the next year. thomas cook shares are flying this morning, up 9.6%. francine: that's talk about russia and turkey. has been looking at which companies could be affected if relations worsen between the two nations. nejra: thanks, fran. the ties between these two countries are strong. both of them have a lot to lose. source of the biggest turkey's imports last year,
surpassing china. some 12% of all tourists to turkey were from russia last year. a lot of companies could be affected, most of all in the oil and gas sector and also in airlines. ,f you look at guest from turkey relies on russia for about half its natural gas supply. zprom as much as $10 billion last year. you could see an impact on the stock prices of rosneft and lukoil too. on the turkish side, i did a bit of digging, looked at equities. this search showed eight turkish companies that report getting revenue from russia. to all of them are required specify their geographical breakdown. 1.2% andived between 26% of their revenue from russia, with the biggest of those being a holding company.
manus: thank you very much. nejra cehic on the market reaction to what has gone down over the past 24 hours. francine: let's chart the rest of the markets with mark barton. mark: look at the turkish stock market, the russian stock market . they were the two worst performing global markets yesterday. russia falling the most since september 1. the istanbul index sinking 4.4%. turkish stocks are fluctuating today. this is a three-day chart. the chart has been falling for three days. the turkish benchmark is down by 4.5% in three days. it is down 139 points today. russian stocks have risen as much as 1.6%. jra told us everything we know about the ties between the
two countries. iron ore today slumping to a record low. look at that. iron slumping to its lowest level since 2008. output cuts to china steel mills hurting demand. china accounts for about half of global steel output. iron ore is used to make steel. mining companies like bhp billiton continuing to expand low-cost iron ore supplies. this is the global benchmark. 62% contentwith delivered to qingdao. its thirdrack for straight annual drop. that is the record. shares up after positive earnings today. positive earnings in five years thanks to domestic demand. the biggest gainer on the stoxx
600. it is seeing turbulence in some of its markets. the company says the new fiscal year got off to a good start with encouraging bookings for winter and summer travel. it has had to whether those terror attacks in tunisia. political and financial turmoil in greece. earlier this month, it evacuated customers from greece after that suspected bomb brought down a russian airliner. at 10:00 london time, the ecb releases its financial stability review. interesting comments from mr. stiglitz earlier, joseph stiglitz they nobel prize-winning economist. he said that when mario draghi said he will do whatever it over, that only papered the cracks caused by the faulty design of the currency bloc. was savedaid europe by draghi's statement. call "ahat i confidence trick."
he said there will be nothing behind that assertion. he goes on to say there's a real risk. the likely they muddle through is very high. joseph stiglitz has spoken. manus: mark, thank you very much. mark barton charting the markets. let's get to anna. she is standing by. chuka umunna. anna, take it away. anna: thanks very much. let's get straight to our guest, mr. chuka umunna, former shadow business secretary. thanks for joining us. let's talk a little bit about the big picture here. we are wondering whether george osborne is going to step away from this commitment to create a 10 billion pounds surplus by 2020. is that going to be one of the big focuses? mr. umunna: that will be a focus. we've got a situation in the
u.k. where the public have been offered this ridiculous choice between, if i was to compare it, taking a shower in scalding hot water or in ice cold water. you've got george osborne saying that any deviation from his plan would lead to the u.k. economy becoming like greece, and you have some commentators in this country saying we don't need to do anything. of course the truth is, that's and absurd proposition. he's got to strike a balance between fiscal responsibility and ensuring that we protect public services, we don't hit the vulnerable, and we don't attackingault of measures like investment in r&d and innovation which are going ,o help us grow the economy which will reduce the debt in the future. anna: it sounds as if you find
yourself somewhere between george osborne and john mcdonnell. mr. umunna: i don't agree with what george has done. earlier this year, he had a fiscal charter which committed him to getting to a surplus. bythe current budget, 2019-2020, he's changed the position with the more recent charter to bring capital within that. i think that is stupid. it is absurd to bring capital in that straitjacket when you can borrow at historically low levels. what is the result of what he is doing? because we have a number of protected departments in the u.k., overseas development spending, national health service, parts of the education budget, it means there are much greater cuts in the unprotected departments, including the business department in the u.k.,
which is looking at perhaps losing a third of its budget. cuts toing to see community colleges, further education. it is going to be the end of that sector as we know it. we are going to be seeing mass closures of our colleges. what is the point of that? we have a big skills gap. we don't have enough people with qualifications that investors want to see companies taking on. anna: i was talking to the british chambers of commerce. they were saying the skills gap needs to be spent on. they want to create millions more in prejudices -- millions more apprentices. mr. umunna: i don't know how they will do that if they don't have the education sector to support that. the real problem we got here is there not enough higher-level apprenticeships. what the government has done in order to win the arms race in
the numbers of apprenticeships is just relabeling other training that you would never think of as an apprenticeship. it is not just skills. i talked about investment in r&d and innovation. we got the biggest, and i can't deficit we have seen since the 1830's according to the last report. it looks like we are probably going to see mass cutting of investment in export promotion, u.k. trade and investment, when we've got to reduce our trade deficit. this is speculation. that is why you invited me on, to ponder what's going to come. frankly, if he sticks within this straitjacket, i'm not sure how he can do anything otherwise. i'm not denying the need to reduce our deficit. this year, we will be paying over 30 billion to those who
hold u.k. government debt. you've got to deal with that. to freezeo need capital within your straitjacket. you can reduce the deficit on a more sensible course. you are not cutting off your nose to spite your face. anna: today, we are talking about the budget. tomorrow, the action will be around the subject of syria. david cameron will be here trying to put his case for why the u.k. should get in more involved in fighting i.s. in syria. theyyou be told which way want you to vote? the leader of your party has very set views on it. mr. umunna: the short answer is, i don't know. i hope there will be a free vote so labor mps can vote with their conscience. this is a moral issue. usually, there's a consensus in the parliamentary parties.
anna: will you vote with david cameron? mr. umunna: it depends. i want to know the legal basis be acting.uld we from thethe lessons disastrous intervention in iraq, we need to make sure we know what the plans are for reconstruction and development after. anna: chuka umunna, thank you for joining us. george osborne speaks at 12:30. chuka umunna, the former shadow secretary joining us on the green. francine: thank you so much. up next, the u.s., germany, and nato call for calm. we get a view on the tension between russia and turkey. ♪
francine: welcome back to "the pulse." manus: time for top headlines. tunisia has declared a state of emergency after 12 people were killed when a bus was struck by a bomb in the capital. 17 more were injured in what is thought to have been a suicide attack. an overnight curfew has been imposed. francine: schools and the subway in brussels are reopening today. the belgian capital has been on lock down since saturday over threat of a major terror attack. the city remains on the highest level of security alert.
anus: belgium has issued arrest warrant for a new suspect in the paris attacks. authorities announced a manhunt for the 30-year-old mohammed abrini. he was seen driving a car between brussels and paris two days before the shooting and the bombings. francine: president obama and nato have called for a de-escalation of tensions between turkey and russia after the downing of a russian fighter them undermined efforts for a united front against islamic state. president putin has called the incident a stab in the back. manus: the situation remains tense. chancellor angela merkel weighed in on the situation. she told turkish president erdogan to do everything possible to cut the tension. for more, let's bring in the principal russian analyst. thanks for coming in.
obama said they've got the right to defend themselves. merkel said they've got the right to defend themselves. however it doesn't look as if nato want to go head-to-head with putin on this. that's important to note turkey hasn't invoked article five of nato at this point. they are consulting with nato. this isn't at the point of nato-russia confrontation. what this is is the culmination e've observed ever since the start of the ukraine crisis. a russian policy of more aggressively probing and penetrating nato airspace in the baltics. even my own country of ireland has had one or two incidents of this kind. up until now, most have ignored this. the turks made it very clear in october as russia's operations in syria started to ramp up that
they were extremely displeased by these penetrations of airspace and if they continued, that they would respond. that has tragically led to the loss of life of one of the pilots. francine: is anyone in the wrong in this? the u.s. is saying, the planes may be in turkish airspace. do we need to forget who is in the wrong and move on or have resolution? does somebody need to apologize? i'm not sure what the next step is. >> it would be extremely surprising to see either side issue an apology. what we would expect to see is something more along the lines of what is playing out right now. statements while his spokesmen are saying, that doesn't mean we're going to do anything militarily. there is talk of vague consequences but no indication of what those will be. the turks are saying, we are simply defending our airspace.
there may be some space-saving statement. nobody wants to back down, but nobody wants to escalate either. manus: we try to take many big incidences and convert that into rom ae look at it f market perspective. there was a view piece written this morning, what comes next is a test of maturity. for us to interpret the de-escalation, how does that look? de-escalation look and sound like to you? >> one of the things you could see is, you've already seen calls between the american and russian air forces to make sure they stay out of each other's way. you might see something like that between turkey and russia but done without a lot of fanfare. at the moment, the problem is that putin made the statement
yesterday and the propaganda machine around him -- these are serious consequences and also back." of "stab in the this is trending on twitter. there was a banner on russian news. this is very emotive language. francine: of course when you look at politicians, there's the message that they are trying to ram back home and the political stage. stabbing in the back, is it so that vladimir putin -- is it more? >> i think this is more of the actual statement that he made. it was probably driven to a degree by emotion. the rage on his face was quite visible when you look at this video. but if we look at it in the round, it is more a case of, at what point does the propaganda get ahead of the leader?
at what point do the russian population say, we've been stabbed in the back by the turks, so what are we going to do in response to this? our suspicion would be that in the plenty of areas south caucasus, in the middle east, where russian and turkish intelligence compete. the significant consequences that putin speaks of maybe something grim in that gray world. something that we never really hear about. it is a tricky situation right now. our suspicion would be that both sides just quietly forget about this or it's not really raised too much after a couple of days of saber rattling. manus: thank you very much. next, we take a look at how european markets have reacted to the attention between turkey and russia. ♪
francine: welcome back to "the pulse" live on bloomberg tv and radio. manus: japan announced new draft measures to give abenomics a boost and try to revive the economy. they include raising wages, more support for low income pensioners, and lowering the corporate tax rate. francine: bloomberg looks at
abenomics and why the prime minister thinks more needs to be done. when shinzo of a began his second term as prime minister, his biggest challenge was an economy that had been stagnating for years and which was still reeling from the devastating earthquake 18 months earlier. he also needed to tackle japan's aging and shrinking ovulation. abenomics included unprecedented monetary easing, greater government spending, and the regulation to give business a lift. andstors welcomed the plan the benchmark topix index has almost doubled since then. an also push ahead with unpopular sales tax hike to try to reduce japan's debt burden, making it the heaviest in the world. that sent the economy into
recession in the second quarter of last year. a second batch of arrows was announced in september. to achieve a gdp target of $5 trillion. investors in japan are still awaiting signs of improvement. let's just bring you a quick update on the equity markets. a lot is being driven in london by thomas cook. a rally all the way around the equity markets. the stoxx 600 up 1%. francine: we also had breaking news from volkswagen. this goes back to the probe that we had over the last six weeks, maybe two months. vw saying that it will recall some of the diesel cars. they are probing into engine manipulation and that is still ongoing. this was started two months ago. manus: eight employees have been suspended.
♪ francine: tensions still run a high 24 hours after turkey downed a russian jet. angela merkel is combing the situation. stocksn and russian recoup some losses while turkey's main index continues to slide. good morning. this is "bloomberg surveillance." in london.ne lacqua tom keene in new york. m: