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tv   Countdown  Bloomberg  January 16, 2015 1:00am-3:01am EST

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>> asian stocks slide as a surprise move to lift the currency cap on the swiss franc rattles markets around the world. >> bp's for the gulf of mexico oil spill is going down. u.s. judge cut the fine based on a lower spill calculation. >> from the imf, christine lagarde lower oil prices will not be enough to stimulate global growth. >> despite the boost and despite stronger u.s. growth, we see the global recovery continuing to
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face a very strong head wind. >> two suspected terrorists are killed in a raid by belgian police. the threat level has been raised across the country. >> welcome to "countdown." the oscar nominations are up. "bird man" and the "grand budapest hotel" top the list. >> the swiss national bank lifts the cap against the euro. >> japanese stocks have been falling as the yen traded at its strongest in three months against the euro on increased demand. sovereign bonds and gold hit
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near four-month highs. this was frank is trading at close to parity with the euro. >> the country's government warned about the impact of the s&p decision on exports and tourism. shares in swiss exporters went down. the swatch ceo describes the action as a tsunami about to hit the swiss economy. for more on the ramifications and the impact we go live to hans nichols. we are hearing many industry voices talking about this. analysts and the markets were blindsided. >> that was the whole point. the swiss national bank president said that surprise was a key element but it is not playing out well in switzerland.
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this has a picture of thomas jordan and it says, on his knees before the speculators. that captures the mood here not just in switzerland but also for holidaymakers. about half of the conversations were about how the vacation just got 20% more expensive. you look at what the frank appreciated against the euro. it ended up 23 percent after jumping 41%. it was up 21%. this handled some 1.4 trillion dollars in trades. they said individual clients have lost $225 million and they need to pay back back. yes, you saw action on euro-dollar, on swiss euro. take a look at from the emerging
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market currencies, especially in eastern europe. you saw some of those currencies down almost 20%. he said the decision has been a surprise for the markets. you cannot do it in any other way. we came to the conclusion that it was not a sustainable policy. what is happening terms of the currency market and also what is happening when you come down to the actual swiss economy is. on a personal note if you are going to doorposts, johnnie walker blue at the belvedere, 36 euros to days ago, today, 41 euros. the price went up on that. no one will be drinking this on the set. >> we will be checking your expenses.
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there are big moments in fx history. the tequila crisis in 1994. how does this rank? there are some great headlines that go with this in terms of the unit in proportion of history. >> it is clear that this is one for the history books. she and the crisis, that was the depreciation. here, we have got an appreciation. the only thing that comes close was the japan hedge fund crisis. one quick thing we should look at, the price of oil and also the price at the pump. that will be my morning tasks to figure out whether cast stores here in switzerland have adjusted their price to reflect the appreciation. >> thanks for that roundup. >> let's move on. it is not been a great week for the banking sector there.
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adding to the concerns of poor results from the fourth quarter. caroline, good morning. so, how troubled a start to the 19 -- to the earnings season? >> you are looking at the three biggest banks, all have reported so far. we had citigroup and bank of america, j.p. morgan. when you are looking at the trading revenue, down 23%. this has been the worst combined since 2011. the reason is fixed income, currencies, and commodities slumping some 23% in terms of trading. we actually saw a bit of a pickup in equity trading. it is the wrong type of volatility. >> i have heard it all. >> what they want is consistent volatility, and f to get people
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trading a little bit, to be thinking i want to be making moves in currencies i want to be taking in the credit markets. some of the cfo's are quite phenomenal. this means, interest rates rising it and you get clients to coming more active. what you don't want is it spreads widening significantly. you don't want bond underwriting no longer happening. we are seeing sovereign debt collapsing prices rising. this has been difficult. it drives people to the sidelines, nobody is able to take abuse. you have volatility not of the right sort. what do you do when this was frank is at 41%? think back to the fourth quarter. you had oil prices wanting to the lowest since 2009.
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interest rates fell the most in two years. credit spreads widening on the grower cost of high-yield goods. then you have market volatility, the new initial share sales. citigroup profits fell 86% after revenue dropped by 16%. fixed income currencies drop by quarter. today, we will get goldman sachs. again, it is exposure to the credit market. the only ray of light >> what about the compensation word? >> will bonuses take a hit? >> citigroup has said is a understand from people familiar they were just cut by 5-10%.
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jpmorgan down by 15%. goldman sachs will hold it steady. they did well 21% higher. they got 21% on the market share. they pay out about 4/10 of all of their revenue as bonuses. europe, it will be interesting because what is happening there is the fines that many of these banks have taken. many did fx rigging, that is ubs, that is rbs hsbc. all likely to take away some of the bonuses to help pay for the fines. i'm afraid your bonus is likely to go down. if you are in different sectors it will be a different turn of events. mna, you might see it go up about a quarter. the capital markets, up 39%.
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if you have been in fx, you're likely to see your bonus down 43%. >> thank you very much. >> let's look at some of the other stories we are following. bp has been told by u.s. judge will face a maximum fine of $13.7 billion. the figure is based on a ruling that the oil giant dump 3.2 million barrels into the sea, a quarter less than the government captivated. >> a start warning for christine lagarde on prospects of the world's economy. she says that an unemployment are weighing on many countries and the covering in the u.s. and lower crude prices might not be enough to stimulate global growth. >> the oil price and the u.s. growth are not a cure to deep-seated weaknesses elsewhere. too many countries are way down by at least two factors.
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high debt, high unemployment. too many companies and households keep cutting back on investments and consumptions because they're concerned about the growth tomorrow. >> to suspected terrorists have been killed in a shootout with police. a third suspect has been arrested. police say the suspects were planning to serious attacks. the threat rubble has been raised. >> david cameron has arrived in washington for talks with president obama. cameron commented on the police raid on terror suspects and belgium. >> is still early days in terms of getting the information but it looks like another indication of the risk that we face from extremist terror in europe after the attacks in paris.
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now, we see this. this underlines that our intelligence and security agencies need to work together. we have to take all of the steps we can to be deceitful. >> if you want to buy some google glasses, it might be too late. they are phasing out their explorer program which made the glasses available to software developer. they said they are still committed to launching the smart glasses. >> time to let you know where we live in twitter. it will talk about this one. simon with our asian colleagues. they are to the dollar. >> i will be chatting about that.
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>> coming up on the program what is the real cost of crude oil's collapse? it is 9000 jobs. that story next.
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>> time for today's company news. the biggest oil services company plans to cut 5000 jobs. the company is trying to tackle "an uncertain environment" as the result of the crude prices. the cuts are the largest so far announced by an oil services company following a slide in prices. u.s. regulators imposed a record fine of 14.4 billion dollars on ubs' pulled. they are accused of failing to follow rules designed to protect stock rules executed fairly. the rapidfire orders can be used to rig markets. intel is forecasting disappointing revenue for the first quarter according to a statement released by the company.
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they are traveling to attract consumers with slim new laptops designed to compete with tablets and smart phones. shares fell 2.5% in after-hours trading. >> at skidmore on the swish national bank action. we are joined by chief currency strategist. but this in context, you look at the screen, they were talking about this yesterday. what went through your mind? give us the context of how you reacted. but the first thing to say is it always seemed clear that at some point, they would have to abandon the peg. however, yesterday definitely didn't seem like the day they were about to battle to the bank. they was bent a lot more time defending it. we were being told that this was
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a central bank policy. once we got through that original moment of what just happened, how far did that just moves, we got the point of why now? i'm still struggling with our question. i can see the broader context that says, ok there is european central bank meeting. maybe there is a sudden realization that there is going to be quantitative easing and the flow of money coming in but maybe there were domestic pressures. i don't know. it seemed to me to have been an ill judged move. error reporting volatility for people that borrowing swiss francs. that is not to say that they would not have been a huge move whatever they did but why not over the weekend? why not at least give people time to digest the news. it might have been 15-20% that
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maybe it have gotten to the point where -- >> it might not have gotten to 40%. >> what about the swiss reputation, is that on the line? i have read some scathing editorials. it is a reliable place to do business, where people know the rules of the game. the size of the shots is bonded to market. >> they've tried to pack the currency. they did this in the early 80's. i think that we could perhaps give them at least making the same mistakes. i think that it suggests that they're not the solid stable
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bank that we want. that is what yesterday felt like. even the press conference seems to be someone aaron. that suggests that perhaps that they were on the back than from the front. >> how is it going to unwind in the next couple of days? give us an idea of the ramifications of the currency market. the swiss franc rose against every currency. what does it mean for carry trade? what does it mean for emerging markets. >> i think there are several things. the first thing is that everyone will come to the conclusion that the s&p believes there is quantitative easing. they probably know better than most people's expectations will be rapidly moving towards. that seems to me part and parcel. there will be a clear focus on
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eastern europe. there's this was funded mortgage story. i think that cuts into question carry trade and general because people will be more risk-averse. we just had two of the largest in history over the course of the last four weeks. russia and now switzerland. that will make the point all too clearly about rising volatility. i think from that perspective we end up with a far more risk-averse environment. >> does this put more pressure on the bank of japan to contract? >> that is a very interesting point. one of the things we classically get with the carry trade is currencies like the yen starting to appreciate. that is what is happening right now. that is rooting pressure from the doj to go through further
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policy moves. in an environment where we have the inflation building, the yen is starting to appreciate. the kenexa put them in a situation where they feel they need to do more. >> did you ever see you would see the swiss franc listed along the russian ruble in the currencies that have moved as substantially? >> clearly not. i tried to get through and find a mainstream currency move. i could not. the largest iphone list 10% on a single day. >> how long will it intervene from here? it has been the euro, swiss franc type of intervention. what will it intervene in now? >> i think it will leave well alone. one of the issues is the size of
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the foreign exchange reserves. they have taken a huge hit on the value of those. adding to the foreign-exchange reserves which is what they will end up doing, i think it will prove to be politically fraught. >> simon, you will stay with us. we will talk about the ramifications of this on the dollar.
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>> welcome back. simon, just how bullish on the dollar does the move make you? looks first of all, it says that there is uncertainty in the system. this acts as the classic safe haven. we know that the ecb is going to do something dramatic. they are talking a second-half half rate cut. i think more broadly, it tells me the price movements might get far greater than they have been in recent times. i'm sticking with my call. given the fact, i do not think that is extreme. >> has the swiss bank lost its haven status or not? >> yes.
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>> thank you. >> coming up find out how the supermarket chain performed in the fourth quarter. we will be live in paris.
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>> you are watching "countdown." some relief for the ethics trade. they risk focusing on the swiss franc. so, yesterday, the swiss franc surged in value of nearly 41%. we have reprised some of that surge. we've come back to this parity level. today, we have seen this was
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frank fall and the euro rise. likewise, on sterling volatility. volatility rose near sevenfold yesterday on euros swiss. the question is that you have euro yen at the bottom of the screen. we just had a conversation with the and wine melon. could the swiss national bank's action by abandoning the peg to the euro and going for deeper more negative interest rates could it force the jacob -- the bank of japan into doing more easing? one has left the party and that was the swiss national bank. the korean won is rising by over one and a quarter percent. the south korean won is up. bonds are making record lows. people are looking for a new haven. the haven status of switzerland
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is gone. when you ask so dysfunctionally in market as they did yesterday, you can see money going into korean bonds. also, i note from credit agricole, this will help the global environment and asian economies, such as korea. so, money going in. a direct result of the oil story improving for them" at the end of the week, there you go looking for haven, 1.9 7% record flows. >> these are the top headlines. belgian authorities say they have prevented a possible major attack. police carried out an anti-terror raid. two suspected terrorists were killed in a shootout and a third was arrested. the group does not appear to be linked with the perpetrators of last week's charlie and go shooting in france. a but cameron has arrived in washington for talks with president obama. the two leaders are expected to
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announce plans to launch cyber work aims to help launch cyber security and the joint cyber cell. the banks in new york and london will be involved in the work amy. cameron is stressing the importance of cooperation between intelligence agencies. >> there is a broad agreement that we need to have the powers to intercept mutations between terrorists. that is what america does today. that is what britain does today, we share the intelligence information. this has saved countless lives, not just in britain and america but in another countries. >> staying in washington, the imf managing director christine lagarde has warned that the positive impact of low oil prices will not be enough to stimulate global close in the year ahead. >> despite the boost from oil prices, and despite stronger u.s. growth, we see the global
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recovery continuing to face a very strong head wind. >> bp has been told by u.s. judge that it will face a maximum fine of 13 points seven billion dollars in the gulf of mexico spill. this is based on a rolling that they jumped 3.2 million barrels into the sea. >> just have some breaking news from car for him at the biggest retailer. that quarter sales narrowly beat 22.6 billion euros. analyst estimated 22.5. the operating income bank in line with 2.3 8 billion euro estimate. third quarter friday sales just a smidgen below estimates. analysts estimating 10.56 billion euros. that's comes some reaction to
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those numbers. we are joined in paris. what is the take away? >> good morning. so, what we can say is that the performance, and america was enough to compensate for some weak demand in europe and in china. if you look at france, they have half of their sales in france. 1.9% organic growth in the fourth quarter. however, the bigger hypermarkets did not go as well. we have sales down 7% in the fourth quarter. in foreign markets, there is really good performance in argentina. we have organic sales of more than 30% in the fourth quarter. brazil, the second-biggest market after france.
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brazil, where they are boosting investments they are teaming up with local businessmen to improve the relationship. pretty bullish on brazil. china the performance in china was a pretty weak forecast. they are getting in the fourth quarter, held by 5.3%. >> thank you. reacting to sales figures from france's biggest retailer. >> this week, the help of the analysis from our bloomberg intelligence team. we are looking at the future of the banking industry. fortuitous timing for you to be here. credit suisse, ubs saying, a lot of people writing up notes. a lot of people saying they will get hit by 15%. in up bankers intelligent mind,
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where we looking? >> in terms of ubs and credit suisse, one of the biggest issues is book value. so, when this was frank was very strong, as a reserve, you have to take a hit on your currencies , you have a lot of u.s. business. one can happen is the book value got hit quite hard. the flipside is the dollar derived business is worth more in swiss francs. i think in terms of what they've done, it was quite clearly telling that the euro is going to the weaker and the cost to the central bank of defending the 1.2 cap is too much to bear at the moment. i think it sends a very strong signal about where one of the leading central banks thinks it is going. >> is could have some interesting implications. >> we know in hungry we have massive problems with foreign currency lending that the
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regulator had to step in on. poland, a third mortgages are denominated in swiss francs. the cost of honoring your interest burden has gone up massively. we saw numbers from the central bank talking about 10, $15 billion, if they have to go through some form of her dress. poland and the swiss banks are the two most hard hit. >> what can the ecb do to prompt eurozone thanks to lend and support growth in the region? >> to be honest, probably not much more than what they are doing. this has injected several hundred billion. the asset purchase program has not done very much so far. a big program of more than 500 billion. don't forget, this also means the yields remain lower which is
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bad for interest income for banks. lots of the quiddity, a darkening outlook for the economy. why would you want to lend when it is very unclear with greece and gdp is falling? why would you find? >> new capital rules have been brought in for many banks. this seems to be all kinds of different players. where are the european banks set? >> in terms of total loss, the 30 biggest banks in the world here are the new rules. we want an awful lot more capital, if we get in trouble we can bail him. the hsbc chairman said, 300 billion euros over the next three years that the european banks need to issues. they have got more work to do. obviously, we saw surprise in market with a seven and a half billion capital raise. they were lower. again, it has just made the
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market think is the regulator asking for more? for the european banks, last year was all about stress tests and capital. this year, is still about capital. it is about figuring out where your business model needs to go because revenues are still tough. we have seen the results from jpmorgan down. >> i just open the story in front of me and you've hit the nail on the head. commodities and currencies which is very important for names like credit suisse, barclays like standard chartered. that has been the worst year since 2000 and 11. this is going to be a bloodletting. >> a lot of inflation. the issue is managing bank compensation rates or getting
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them normalized. i suppose in the absence of any sort of clear growth spots there will be more cost management and that is revenue. >> will this be the big elephant in the room? >> this risk isn't going to go away. we know that has been hit. that is affecting off compensation. these investigations will go on and on and on. >> thank you very much for joining us this morning. join our conversation. what are you guys on? >> plenty of news about the swiss. >> this was frank has lost it safe haven status. >> he joins the group of
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currency strategists calling for parity on euro-dollar. >> volatility is the enemy of the currency. >> good volatility, not bad volatility. >> coming up, will qe be announced next week? our next guest think so. stay tuned for the conversation.
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>> as we turn to today's top story, the market reaction to the surprise move by lifting the cap on the swiss franc. thanks for joining us. in an era when central banks they telegraph their intentions. in an era of fort guidance, should it have given us a hint? that they're going to do this big move? >> that kind of move needs to be sudden. no indication. if you signal your intention, you will have investors coming in against the floor. the s&p would've had to
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intervene. the floor would have broken on its own, instead of having a concerted decision which would have been costly for the central bank. >> this was frank has lost its safe haven status an odd thing to say when it went up so much. what is your verdict in terms of the way the market views this was frank? >> investors will think twice before investing in this was franc. they were not prepared for a break of the floor and has substantial loss yesterday. they're looking twice at taking new risk in the swiss fanc. it could play in the hand of the s&p which means that there would be less pressure on the currency. -- it would play in the hand of the snb, which means there would
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be less pressure on the currency. >> discuss the swiss currency and its relationship done with europe. >> it will be complicated. it is hard to understand why the central bank would allow its currency to appreciate so much. we had up to 35% yesterday. >> did they underestimate the whiplash? >> i think they had a good idea of what would happen. they wanted to clear the fx market, making sure all of the downside positions were removed. the economic side is their best probably. yes, the currency will appreciate what at least we are bit freer to have it. if we continue to have negative rates, it might help to generate
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some outflows. the question is how much of that money is sticking? how much will stay in switzerland. it is hard to say that those deposits will move out. >> are they the cleanest in the world? >> probably not. that is a reason why they are probably in switzerland. how was the snb vp feeling today? that was two or three days ago. how does he feel, as this goes to the credibility question. reliability, credibility. the words that you associate. has damaged his reputation taken place? >> i would say, yes, because the
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market did not understand the policy. as a policy maker, you cannot preempt or signal. >> two days ago, the snb reaffirmed it was a pillar of policy. you would assume that it would stay for now. >> understand the point but again, as i was saying, when you change a currency from having a panic or a floor, if you revamp then you are signaling it will drop and you will have some much pressure on your currency that the cost of intervening will be much higher for you. it was the right thing for him to do. is it the right thing to signal to the markets? it would have probably been better not to say anything. how is the question formulated? it needs to stick.
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>> a difficult one. how strong those the swiss franc get from here? part of the rationale for doing this was that this was bank was saying they don't need the peg so much. what do you make of that? how strong will this was frank the? >> if we look against the u.s. dollar, there is a monetary policy divergence story, you have the fed turning towards monetizing this policy. you will have the swiss snb being very accommodative. against the euro, that is where it might be more difficult. you have very high expectations that the ecb will start qe or announce qe at its meeting next
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thursday. so, that puts some pressure on the swiss franc. it is a matter of how much the snb is willing to cut more. again, given the move yesterday given that a lot of investors have been burnt, they may not be that keen on going again. the likelihood of euro-swiss moving further lower, could be limited by that. >> charles, thank you for joining us. >> coming up, we will be looking at our favorite stories from bloomberg's digital app which includes a trip to the movies. "birdman" and "budapest" flying high in the nominations.
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>> welcome back to "countdown." let's look at the top six. we are sticking with the swiss theme. they have a great "bloomberg view" piece talking about if you are shocked about what happened to the swiss franc, blame
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europe. much of this is due to the abject failure of european leaders to revive their sinking economy. interestingly, they lay a lot of blame at the foot of germany. germany has forced too much austerity on the weakest, not invested enough themselves. they have been too opposed to quantitative easing and too slow to force the banking sector to recognize losses. not much reform on the eurozone periphery. >> swiss bankers are celebrating the euro slide. we can bring you a little bit more. the s&p decision to remove key pillars support for the euro reducing the odds that the slide will accelerate. the euro cannot find a friend for love or money.
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i think the interesting line is that the biggest buyer of the euro was the snb. option traders are paying large. the snb's euro holdings when up -- went up. >> "birdman" which is the michael keaton film, and "grand budapest hotel" with nine oscar nominations. the contention came in this film called "selma" nominated for best picture but no black actors were nominated in major categories. the director many think that she would have been that should have been nominated. she would have been the first black woman to have been nominated for director.
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a bit contentious. >> now, "countdown" continues in the next hour. stay with us for more conversations about switzerland and a lot more. ♪
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lift the cap on the swiss franc rattles markets. >> bp's bill for the gulf of mexico oil spill may be coming down, the maximum fine being cut based on a lower spill calculation. >> a warning on prospects for the world economy. lower oil prices will not be enough to stimulate global growth. >> despite the boost from oil prices, and despite a stronger u.s. growth we see the global recovery continuing to face a
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very strong headwind. >> two suspected terrorists are killed in a raid by belgian police. the threat level has been raised across the country. >> welcome back to "countdown." >> we are just getting some breaking news. 7:00 here in london, the eu publishing details in the amazon luxembourg tax deal, the so-called sweetheart deal. the tax deal may have breached oecd rules, according to the e.u. the sweetheart deal between luxembourg and amazon is back in the spotlight as the e.u. has
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been planning to release its findings from the probe. this comes from a nonconfidential letter. the key question the investigation is trying to answer is whether amazon unfairly shifted profit from parts of the e.u. into luxembourg. october 7, they started the investigation. most of the profits that amazon makes in europe are recorded in luxembourg, but not necessarily tax there because of a 2003 tax ruling that is still in place. the european commission was probing narrowly. previously, they were probing apple, starbucks. since then, they have brought in this to cover many multinationals in different parts of europe. this could have some implications for other businesses, or just be related to amazon. on a political level, this could have fallout because this has
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cast a shadow over the early tenure of the new european commission. he has had 19 years as prime minister of luxembourg. he has said he has had no involvement in crafting this deal between amazon and luxembourg. interesting to see if anything the e.u. says today gets closer to what he says. the luxembourg tax deal with amazon may breach oecd rules. >> european car sales rose last year for the first time in seven years. big news. registrations increased 5.4% to 13 million cars, a gain of 2% from pugeot to 6% by renault. growth last year was pushed by
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renault's discount brand, vw's value-oriented vehicles. the economics are still stalling. as a result, automakers are widening price cuts in the final months of last year to stimulate demand. switzerland's currency shock continues to rattle the markets. the fallout by the surprise move by the swiss bank to lift its cap on the swiss franc against the euro continues to play out. >> japanese stocks dropped on increased demand for haven assets. global sovereign bond yields fell to a record low. the swiss franc is trading at close to parity with the euro today. >> the country's government warned about the impact on
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exports and poor is him. -- on exports and tourism. swatch's ceo described it as a suit nominee that it -- as a tsunami that is about to hit the economy. we have been talking about the economic impact and the surprise. this is a surprise move by the snb, getting everyone off guard, analysts, ceos, not anybody expecting this. >> no one was come in large part because if they had information they could have gone to jail with clear insider trading. everybody is reacting to what thomas jordan did yesterday. here is the quote, "on his knees before the speculators." in zürich, they're talking about
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the fx exposure, the currency markets. second with this will mean for the larger swiss economy. all papers, up market downmarket, are warning about potential layoffs. they are talking about shortened work days. the papers are littered with examples of potential layoffs goes exporters can no longer be competitive. yesterday, the euro and swiss franc appreciated 23% against the euro also moving against the dollar. a huge move. we are also looking at other currencies. especially for those in eastern europe. those who have mortgages potentially that were taken out in swiss francs. then we get to the question of who is going to fail and who is going to owe. one trading house says 1.4 trillion in the last quarter and 225 million and outstanding
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bets to be covered. we have had one trading house that will go out of business. there was an element of surprise . that is clearly what the swiss national bank president wanted to do. one thing to look at from yesterday, one thing to focus on, what happens today to the euro dollar. the swiss national bank may have been just about the only people out there buying up dollars before yesterday. we will see how strong demand is through the day. >> the euro-dollar trading at 1.1642. the biggest buyer in town has left, but i'm sure that mario draghi is not wailing at the breakfast table this morning. talk to me about where this fits in history. you have depreciation and small appreciation relatively speaking. >> yeah, in general, you compare
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this with the mexican peso those were in the 50%, 40% range, all depreciations. we are talking about appreciation at the 20% level. manis, as you will know from this part of town, you can often buy coffee in euros. i'm going to see if i can purchase a cappuccino in euros. if i have to do the conversion in swiss francs, i will let you know how much more i had to pay. >> i know a couple of guys in some nice coffee bars. >> go forward, turn right, you will come to a square, hans. >> that does not seem fair. >> a u.s. judge has ruled that during the gulf of mexico oil rig disaster, less oil spilled than the u.s. government believed, cutting the possible
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fine to a lower level. here is caroline hyde. what is the maximum? >> $13.7 billion is the maximum fine, and the maximum amount therefore of barrels of oil spilled said the judge, was three point 2 million barrels, a quarter less than the u.s. government had originally thought. the judge says the u.s. government has got it wrong. i think 3.2 billion barrels of oil went into the sea, a dramatic oil spill in 2010. interesting comments coming from all professor from the university of michigan saying that today's ruling is a major victory for bp and reduces by billions their potential liability. bp was more optimistic. they thought it was 40% less into the sea than the u.s. government felt. it is a bit of a ray of light. >> this is about closing off one
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of the biggest issues. this sets the scene for next week's trial. >> the trial starts next week in new orleans. the question is will the judge now set the maximum amount of fines, will he say yes, $13.7 billion is what i want. that is based on $4500 barrels per oil spilled, which is with the clearn water act allows you to be fined. after the spill, he was free him and against of bp saying it was gross negligence. that is why they find them in a such a large extent. they said you are largely two thirds responsible for this. the other players responsible where transocean, about one third responsible, and halliburton. now we will see exactly how much money the judge wants for the u.s. government.
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bp has already set aside $43 billion in charges to cover the costs. only 3.5 billion dollars of that is for potential. this is far more than they have set aside. >> i remember when the size of the fines facing the business drove the share price, but now that we are in a bear market other things are going on. the effect of the weaker oil price, what a could be having on the sector. >> dramatic cuts being made by u.s. oil companies. slumber shall numbers a is cutting 9000 jobs. that is 7% of their workforce. they did double their workforce after the last decade, so they are cutting back all of the ramp up in the oil market. some of the stats, energy
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companies have cut spending 35% this year in the united states according to her report. the number of u.s. rigs will fall 43%. 750 going in the u.s. this year. this is a amazing move. >> caroline hyde. >> some of the stories we are following -- a stark warning from the imf managing director christine lagarde on the world economy. she says that debt and unemployment is weighing on economies and that crude prices may not be enough to stimulate growth. >> the oil prices in u.s. growth are not a cure to the weaknesses we see elsewhere. too many countries are way down -- weighed down by legacies of the financial crisis, high debt high unemployment. too many companies keep cutting
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back on investment and consumption today because they are concerned about the world tomorrow. >> two suspected terrorists have been killed in a shootout with the police in belgium. a third suspect has been arrested. the police say the suspects were planning "serious attacks." the threat level has been raised across belgium. >> british prime minister david cameron arrived in washington for talks with president obama. security and intelligence are on the agenda. cameron commented on the police raid in belgium. >> it is still early in terms of getting the information, but it looks like yet another implication of the risk that we face from islamist extremist terrorists after the attacks in paris and the events in america, now this. it just underlines that security agencies and intelligence agencies need to work closely
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and remain extremely vigilant to beat this evil. >> if you want to buy google glasses, the company is phasing out its explorer program which made them available. google is still committed to launching the smart glasses for consumers. >> follow us on twitter, let us know what you are watching, what you are thinking. join the conversation. all five of europe's biggest auto markets expanded. as a whole, european auto markets expanded for the first time since 2007. what have you been up to question mark -- what have you been up to? >> i am about to put out a story on twitter. >> coming up -- analysts, they
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roll their eyes when stephen major forecast last year the bond markets would fall but he was one of the few interest rate grew ruse to make the correct call on treasury yields. now he is to find consensus once again. what is that break of trend? listen to the man himself, steven major joins us after the break. ♪
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>> first. bloomberg. >> time for today's company news. the world's largest oil services company plans to cut 9000 jobs. they are trying to tackle "uncertain environment" as a result of slumping crude prices. oil is headed for its lowest weekly decline since 1980 six. u.s. regulators imposed a record fine of 14 point $4 billion on ubs, for failing to follow rules designed to ensure that stock trades are executed fairly. the sec has been cracking down on high-frequency trading abuses and allegations rapidfire orders can be used to move the markets.
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disappointing earnings for the first quarter. the world's largest maker of pc chips struggling to attract consumers with slim new laptops and smart. shares of intel fell 2.5% in after-hours trading. >> the swiss stoner that rattled markets, let's talk with steven major, from hsbc. yields continue to reach record lows. >> it is not a happy new year for some. they may have started the year short of bonds. many real money, asset manager type start the year thinking that it has to rise, so they go short bonds. in fact, they are just fueling the rally we are watching. i think there is a structural
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shortage of dollars out there for a number of reasons. we know that many emerging market corporate's have been issuing an dollars, which creates a short in the dollar. we know that people are underweight duration. >> what does that mean? >> underweight duration means to be at the neutral level where they are not affected by market moves. they are betting basically that yields go up. if yields don't go up, they lose money. that helps drive the rally. >> and you are betting that yields come down. >> yes. >> and what are you saying about the fed moving interest rates? >> the risk globally as the fed delays the first hike. i think they need to hike for a number of reasons, some of which are technical, but they will try to administer a lift off later this year. but it has been delayed. if the yield on dollars is so
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much more than on the euro, swiss franc, the yen, inevitably money flows into the dollars. the world has changed from just a month ago. a month ago, the swiss went negative. >> and here we are a month later. >> further negative. >> will going more negative help them save? that is the double punch, balancing the cap against europe and then this meager move negative two more negative. is it any use? >> i think be very tricky for a few weeks because we will discover who was short swiss franc's obviously some people that borrowed for mortgages all sorts of things will come out in the wash. whether it's almost the problem or not, i cannot say. inflation was already too low. now we are strengthening the frank and the inflation pressure
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is more downward. it will take some months. whether it works or not, i'm skeptical. >> steven major did something weird in 2014. a very popular story that we wrote here on bloomberg news in the past week. i will tell you after the break what weird thing he did. >> he is not weird. ♪
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>> welcome back.
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we are still with steven major. warren buffett something one time said something like when the tide goes out, you see who is wearing swim trunks and who is naked. does that mean for the swiss franc? >> it could affect mortgages. just imagine if you are in france or a euro country and you have a lot of business in swiss franc. that is repriced. that will take some time to come through when the accounting. meanwhile, everybody will rush around to resolve these problems. causes a great deal of uncertainty. it tells you that it is not what you think in the central bankers do not have that much control over banks. and they can get it wrong. so the issue of whether they know everything that they are doing when everything is calm
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and under control. >> subjectively, did they get it wrong? >> i suppose the answer is yes. but in their defense, they did not know that we would have this full-blown eurozone crisis, the oil price cutting in half in a few months, the deflation. in their defense -- they got it wrong given what we know, but these things that have happened are completely off-the-wall. >> you made the big call, steven . last year you got the bond market right. tell us something that we don't know about 2015 that we will look back on and pat you on the back. >> once again, people are looking for higher yields and it will not happen. the circumstances have changed. the values today are rich compared with what we thought a year ago. but the world's changed. we have deflation in large parts
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of the world -- switzerland, japan, eurozone, they all have zero negative growth. >> steven major, thank you for joining us. ♪
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>> friday morning in london, the currency, the swiss franc gained against all major global currencies, the biggest move in any currency since brandon woods. euro/swiss franc coming back, so the swiss franc is declining the euro gaining. we are trying to find what i
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would call an equilibrium of where that should be. the swiss national bank said they abandoned the cap, by surprise. the pound in the swiss franc on the move. you're seeing the turnaround, from the momentum of gaining yesterday, actually dropping a little bit now. it rose sevenfold yesterday. the consensus seems to be that if the swiss bank steps back from defending the currency, nobody left to buy the euro could it mean the bank of japan has to come out with another force of quantitative easing. how about the a korean currency as people abandon the safety this bill in the -- the safety, the stability of the swiss franc.
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the bottom markets in korea are at record lows. credit agricole saying that the drop in oil prices will be a boost to economies, driving the korean won higher and the dollar lower. >> belgian authorities say they prevented a possible major attack as they carried out a terror raid. two suspected terrorists were killed in the shootout, a third arrested. police in berlin have arrested two people. british prime minister david cameron has arrived in washington for talks with president obama. they are expected to announce plans to stage cyber war games to help improve on mine security and the launch of a joint cyber cell to share information. cameron is stressing the importance of cooperation between intelligence agencies. >> there is a broad agreement
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that we need to have the powers in this agreement to intercept communications with terrace. that is what britain does today, what america does today. we share the intelligence information, and this has saved countless lives not just in britain and america but other countries as well. >> imf managing director christine lagarde has warned the positive impact of low oil prices will not be enough to stimulate global growth in the year ahead. >> despite the boost from oil prices, and despite a stronger u.s. growth we see the global recovery continuing to face a very strong headwind. >> bp has been told by a u.s. judge they will face a maximum fine of $13.7 billion for the gulf of mexico oil spill in 2010, based on a rolling --
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based on a rolling they dumped 3.2 billion barrels of oil into the sea come a quarter less than originally calculated by the government. >> let's get an outlook into the commodities market. a bear market in oil, our next guest says despite the recent fall, long-term prices and prospects of copper are good. paul gates joins us now on the set. thank you for coming in. while the prospects solid for copper? remind us of the links that exist between copper in oil prices. >> the main link between copper and oil is the fact that these all, just moving trucks is a huge cost of production. as oil prices fall, we see a natural fall on the cost of production of copper. what we are seeing in the markets at the moment is an attempt to make sure the correlation that has existed
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between oil and copper is preserved. at least in the immediate short-term. the last thing the market is trying to stimulate is more copper coming to the market. it is trying to do quite the opposite in the immediate short-term, hence the prices falling. >> investors are worried that miners will bigger margins to work in getting more copper out of the ground. >> essentially that is the economic calls. people are looking at the oil price fall as the chilean peso weakens the copper market expands. if you just hold the u.s. dollar price of copper constant, that is normally a signal to increase production. but we don't need increased production, at least not over the next year. wound we look at the media more longer-term prospects of the copper market, two years, three years out, there is a growing since we are moving into a structural deficit. we have depletion of some of these old minds, we have this
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underlying decline in deposits. the simple fact is the last 10 years the copper industry has been high grading its deposits and sooner or later you have to pay the piper. >> there is a story on bloomberg that says commodity prices have cycles. then we have these longer a exciting times. we have seen commodities -- oil, copper, all of these taking commodities back to 2002 levels. are we about to enter a new normal of lower base metal prices? >> if we look at base metals no. if we take copper is a prime example, over the last 20 years, copper has traded an average of 50% premium at the marginal cost of production. it is only tested that price three times in the last 20 years. it only did so for an average of four months. look at the other commodities,
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thermal, coal, maybe iron ore there is a much more pronounced example of that kind of cycle. what you need to do is not incentivize mines but infrastructure. but once you have built the for structure, you can always find the commodities to through it which is why you tend to get the more she waited cycle. >> one of the facts that i came up with earlier is that copper has a masters in economics. copper, aluminum, zinc, lead copper has a phd in economics. is the base metal space telling us something about the world economy? >> i think it is telling us two things broadly deflationary pressures across the board, and the others the prospects of a strong dollar. both of those are being discounted at the moment. those factors rather than the supply demand fundamentals, as you allude to, nickel despite
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being a day deficit is also coming under pressure, which speaks strongly to it being a cost-benefit and dollar effect. >> so it's not actually a good gauge of global demand if you're worried about where commodity prices go cousin of low demand. that is not what we are seeing here. >> i think in the immediate short-term, we are seeing concerns over demand. at the same time, longer-term prospects for it, i think it is all most unthinkable that we see this as a middle that goes structurally against demand growth. china has a much lower level of installed copper consumption than any of the major developed economies comes something like 20% the low level -- 20% the level of the u.s. or japan. it is still accumulating with some of these base metals. >> talking about the magnificent seven, what are they, who owns it? >> three guys own it.
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>> what about diamonds? >> essentially what we're looking at is the concentration of the diamond supply in the hands of essentially two agents, the russian producer that owns three of the largest mines, and then you have debeers that owns the other three. these are huge diamond deposits. what we are highlighting is this an elegant dish -- oligarchy market. you have seen some people talk about this newfound love of diamonds. >> they are just so sparkly paul. paul gait senior analyst at sanford bernstein. >> the diamond mines are worth some $20 billion.
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follow us on twitter. >> coming up the day that investors will never forget. ♪
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>> first. bloomberg. >> time for today's bar charts,
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the day's was investors will never forget. where were you one thursday january 15, when the swiss national bank ended the euro-frank c cap? i want to look at the impact on the benchmark swiss market index. this is a one-day chart. in the 90 minutes running up to the snb announcement, swiss stocks were trading higher, up as much as 9%. -- up as much as .9%. look at the cliff. then there was a two-hour 13.7% decline, the biggest since records began in july 1988.
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from 11:30, the low, over the next five hours, to the right hand corner of the screen, it recovered 5% of the losses still ending the day down 8.7%, its biggest drop since october 16 1989. here is the killer stat -- in one day, 100 billion swiss francs, that is $115 billion have been wiped out. there have in 20 stocks on the smi. a large part of the day, all 20 traded lower after the snb announcement. at the close, only one stock finished the day higher, rising 1%. out of switzerland's biggest three companies novartis 9% lower, they lost 23 billion swiss francs in value. rauch, 8% lower, losing 15 billion swiss franc's of market
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value. the stock that fell the most though, was swatch group, plummeting 16%, its biggest fall ever, losing 4 billion swiss francs of valuation. i want to finish with the words of the chief executive officer of swatch group, who commented on the snb moved to remove the euro0-franc cap. "words fail may. this is a tsunami for the swiss franc, tourism, and the entire country." january 15, the day that's was investors will never forget. >> i'm sure there are a few swiss exporters who will not forget either.
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letting the currency off the leash means that your money will not go nearly as far as it did before and switzerland, sad news if you're off to the world economic for men dollars -- world economic forum in davos next week. >> spending franks will cost you even more now. the central bank just relaxed its cap value, which in terms has made the currency soar. here in the resort town of davos preparing for its busiest day of the year with the world economic forum, they should expect to break the bank. these earrings at a little jew ler cost 5000 francs. the sudden jump threatens to make it event that already costs a small fortune to attend even more exclusive. while that is no major problem
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for the world elite, the local residents have the rest of the year to worry about it. >> we are shocked and a little scared because if you work in the export industry, you could work with this, but the toursim,ism it is much more now coming here. >> in dollars, the seven day pass has a 13% increase. >> why should a german come to davos when he can go to austria without exchanging his money? >> that is accurate to the buying. they will stay away now more than before. >> switzerland is already one of the world's most expensive countries thanks to tight regulations and high labor
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costs. the residence of davos may have to put their faith in the enduring beauty of the mountains in which their town lies. >> you are looking at a live shot of london, the equity markets set to open in under 30 minutes. the markets will give back some value, the futures indicate slightly lower. this is the best week for equities since 2013. ♪
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>> welcome back. a preview of what is happening today. the head of global fx strategy joins us. hi, marshall. only one story in town, the swiss national bank and what it did yesterday. only a couple days ago the snb's vp reaffirm the cap as a pillar of policy. what happened yesterday? >> well, it really calls into question, how much can we believe central banks? you are right, three years they have been saying this is a cornerstone of the policy blah blah blah, and then finally they say, what's, we change our mind. you look at traders and people increasing their swiss franc positions, yeah, it's a disaster. it is an earthquake. calm land just opens up and
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swallows up your house. 34 standardization mo -- 34 standard deviation move. >> at one point against the close, they were up against every major currency in the world. the reverse has happened today the euro move, half of it has come back. where and when do we settle starting with the euro? >> that's a very interesting question. there was a study done back in october where they try to look at options to see what the fair value of the euro-swiss would be if there were no floor. they decided the market was estimating 101 to 119, and that is basically where it settled. i think it is near for value
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but of course nobody really knows. there is a lot of disagreement. disagreement is when you get trading, when one person think the value should be something else. it will take some time. obviously the swiss national bank was saying the market tends to overshoot in its initial reaction and it was quite a bit extreme. it could settle around this level, maybe a little higher. it is still grossly overvalued on the purchasing power basis but that was never a good way of evaluating currencies on the short term. >> will we get support for the funding currencies, the yen, the euro of the world. and on the flipside, will we see depreciation pressure on the high-yielding currencies? >> well, no, i think one of the things that happened in one of the reasons about the move is a lot of people or using the swiss franc is a funding currency. it was quite a one-way bet.
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yet now that they may have close that temporarily, i think people will just roll them into euros, and that will be one of the reasons why the euro will be weakening essentially against the swiss franc. because that is going to be defending -- the funding currency of choice, where there is more opportunity for future easing. the bank of japan has already shown their hand. they are not going to be easing anymore in the near future, but the euro is where there is possibility of more change for the worse from a currency perspective. i think they will use the euro as a funding currency. some of the carry trades, like the indian rupee, sound very good right now. >> s did thenb -- did the snb get a wink from the ecb? are we now expecting something big, big big?
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>> of course they don't consult with me before they make these moves, but central bankers talk to each other. it would be quite natural for them to know what was happening ahead of time. but i think even if they did not know, they could suspect at some point there would be quantitative easing, at some point the euro will be weaker, and at some point it's going to be overwhelmed and tired of buying all these euros. but yes, there is an expectation there will be a very serious announcement next week. >> quickly, marshall, is the endgame in all of this high the dollar -- buy the dollar? >> yes, because they are still going to be intervening in the market, just not in the swiss so they may be selling some euros. if they are intervening, they will be buying dollars. they are being replaced by a big
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higher of dollars. i think it is negative for the euro-dollar and another reason why it should appreciate. >> marshall, thank you very much. "on the move" is next. ♪
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>> good morning and welcome to "on the move." moments away from the market open, we will be live from zürich. for now, straight to the morning brief. the day after the swiss national bank shocks the global markets by unexpectedly scrapping the fr anc cap against the euro, the difficulty ahead. brokers take the yearly pain and losses mount. the largest u.s. fx brokerage says that client debts exceeded capital rules.
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concerns about mortgages in countries from poland to hungary nominated in swiss francs. that is one of the things we are watching this morning. that is the big story the last one he four hours, the snb. future markets a little lower the dax futures off, the euro stoxx 50 futures lower. manus cranny has the open at the touchscreen. all about the swiss franc again. >> it is all about franc power, the unadulterated, unabashed moment where the central banks said we will not be constrained by buying euros. they left the euro buying party, 40% move higher in swiss francs, a retracement. iron fx, we just had a conversation with mark barton talking about parity level.


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