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tv   Countdown  Bloomberg  September 23, 2015 1:00am-3:01am EDT

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>> manufacturing slowdown, chinese pmi slips to a six-year low. speech in thet will xi jinping says china deliver strong growth and will not the value currency to boost exports. theheir future hangs in balance as the executive committee meets today. guy: welcome to "countdown." anna: it is 6:00 in the morning. we had disappointing data from china.
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that is weighing on the minds of movement in the commodities. guy: yesterday's equity session was not good. the u.s. session was not particularly good. this data has had a negative impact. i want to show you copper. is this the bottom? i don't know. commodity prices are being hit hard. that is the copper price over the last couple of days. the china story is front and center. , this is remind you volkswagen, this value destruction is amazing. it has been a negative you're already, i will move my computer -- look at the value destruction. yesterday it was down 50%, today we are well over that. anna: it has lost a third of its value.
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investors that have some kind of within theiry portfolios are asking questions. guy: i think anyone with a benchmark in their portfolio is asking serious questions. let's talk about the market, we some negative data out of china. david is in hong kong with more. david: absolutely. the day started out, quite shaky, and then midmorning we got that tmi data from china. we get the official numbers in about a week. we will see the difference between what we got this morning and the one in a week. it will depend on what happens this last week. expectations were higher than that. 47.
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that is the lowest reading in more than six years. has the economy bottomed out? maybe not yet. that is how asia looks today, the damage is about two point 6% or 2.7%. if you take a look at futures on the nikkei 225, that opens tomorrow. the latest futures -- the 650est for october was down point. inare seeing similar losses hong kong, which is just getting out of the lunch break. the shanghai composite is leading. if you want to cut into cross sector groups, biggest losers -- resources are down 2.7%. oil and gas are down 2.7%.
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the financials are down 2.7%. there is one stock story i want to mention, remember the stock rescue fund that china is limited -- implemented? there was news this morning, sources are telling bloomberg, down 7% today. the brokerage may have legally profited from a stock rescue fund. essentially using advanced knowledge to put in a trade that would benefit the firm. that being said, no comment from the regulator or broker. we have yet to receive the formal inquiry. the shares are being pummeled. i will leave it there for now. about 2-3 hours left in trading. let's hope things get better.
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anna: thank you very much. we are getting breaking news on it beinga lot of talked about. caroline: they are making a purchase to the tune of 1.6 billion pounds. closed a consolidator of life insurance books. , theyocus on the u.k. swiss are looking towards our showers -- shores of the moment. they expect returns to exceed the new business profitability targets at the moment. they see operational capital and asset management synergies. unwound,als being insurance not going for the u.k.
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based rsa insurance. that deal was pulled off of the table on monday. today, a deal is going through, guardianto buy financial for 1.6 billion pounds. anna: hurricane season peaks with these losses. perhaps some of these insurers are looking for that. guy: an interesting link to the fed and qe. the amount of money pouring into the sector right now as it is attracted by the yields available in the insurance sector. i suspect we will hear more about this. let's move on and get back to one of our biggest stories, china. we saw pmi data out from china early. the manufacturing sector fell to the lowest level in 6.5 years. intelligent chief
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asian correspondent tom is with us. what is the story being told by this number? tom: it is a bad number. as you mentioned, it is the lowest reading since the beginning of 2009, the depths of the financial crisis. is the third month in a row a decline from a peak of 49 in june. what it suggests is that china's stimulus continues to fail to gain traction on the manufacturing sector. anna: what does this tell us about where china is going in relation to the fed? china weakness is a critical reason why the fed decided to not increase interest rates. does this number tell us anything? great think that is a point. janet yellen specifically cited
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concerns about china as one of the main factors which kept the fed on hold in their september meeting. the big concern for the fed is of world shaking financial turbulence that we saw from the collapse in the shanghai equity market and the surprise move by the pboc in august. this pmi data is clearly not on the same order of magnitude. at the same time, if this weakls a run of week -- data ahead of the fed's october meeting, that will be a factor which cancels janet yellen to exercise caution. guy: thank you. beganpresident xi jinping a weeklong visit to the united states. he spoke to a gathering of business leaders including bill
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gates, xi jinping said china will maintain strain -- stronger -- strong growth. >> given the economic and financial situation at home and abroad, there is no basis for continuous depreciation of the r&b. we have the exchange rate decided by market the buy and demand and allow the r&b to flow both ways. we are against a currency war. we will not lower the r&b rates to boost exports. anna: david joins us with more. words oni jinping's face value? david: the president of mexico once said they defended their currency like a dog, and the following week he valued.
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in this case when he brings up the similar talks about no further devaluations and puts it right in the middle of a policy speech and tells that two american business leaders, i think we have to believe him. especially when he says that the reason for the currency devaluation was to allow more flexibly and -- flex ability and market-based forces to move the currency. at this stage i think we can be sure that they will not have more devaluation in the near future. guy: devaluation is one of the market -- factors that the markets pay attention to. what do you have to say about that? anid: it was in -- incredibly wide-ranging speech. he mentioned every concern on the stock market. he said one of the roles of the state was to use its invisible
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diffuse go in and panic. at the moment he said, the chinese stock market is on a basis of self recovery. it is hovering around 3000. what we will see if they wind back -- is a wind back. anna: what about economic reform? david: exactly. what he said about economic reform, this is something china wants to do. it wants to introduce more resources,cation of market determined allocation of resources, he said once they find that arrow they will keep going. no change. always a feature of a relationship conversation between the u.s. and china post snowden, that is something high
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on the agenda. when he talks about it, does he talk about it in the same language that the u.s. authorities talk about it? david: one of the things i thought was interesting in terms of the speech today, and in terms of breaking news was the fact he talked about having a high level dialogue on the issue. remember xi jinping has put himself in charge of the commission to be responsible for all of china's cyber policy. here it seems like he is putting his repetition on the line. the question is who will be involved in that cyber dialogue? what will be the agenda? he seems to think it will have cheap -- teeth. we will have to see what happens at the end of the week. house of cards have anything to do with this trip?
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david: he really played to the american audience. -- or references of him jerking rokita in cuba -- drinking no egos in cuba. cards had nothing to do with power plays. people worried this was him playing our politics and going after certain factions. what he is saying here is, this is a wide corruption campaign, we are going after the flies and the tigers, everyone is included. adam: -- anna: thank you. a southern accent would've added something. we need to talk about what is coming up. it is a busy day on the macro front. we get euro area pmi's.
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france, 8:00 a.m.. 8:30.k. and germany data the eurozone data out at 9:00. central-bank meetings today. bloomberg speaking exclusively to the government council at 10:00 u.k. time. anna: we are also speaking to mario draghi who is speaking at a quarterly hearing of the european parliament at 2:00. the bank of england governor speaks on the u.k. labor market at 5:00 p.m.. guy: we are watching for news from volkswagen's meeting today. we think this is the executive committee meeting. we think it will be this evening. we are watching to see what happens there.
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it could be a difficult day. another. stock has apologizes -- will it be enough to contain the scandal and save his that is best position -- save his position. sorry we have disappointed the trust, i apologize to the customers, authorities, and everyone associated with our business. ♪
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anna: welcome back. it is 6:18 in london. here are the stories you need to know. guy: more evidence that the slowdown in china's economy has sent shares lower this morning. the manufacturing sector fell to the lowest in six and a half years. anna: the chinese president did
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his best to talk up the country's economy in the first major event in the u.s.. xi jinping emphasized the government determination to maintain stable economic growth will reforming markets. ceo's jobolkswagen hangs in the balance today. the executive committee of the world as carmaker meets today. the key question is how much he knew about the scheme designed to dupe u.s. regulars and drivers about the amount of .ollution made by volkswagens anna: european carmakers have all been hit, share prices coming under a great deal of pressure. this ceo weighed in on what the crisis means for the industry. >> today there is doubt existing.
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that -- the focus is on one company. i am sure you will see in the next few hours, statements made by every carmaker, each one stating the conditions of their own companies. it should be up to him every single member of the association to make their own statement about what they are practicing, and what kind of devices they have and technology. this is more of an issue for every manufacturer. i think all of the -- most of the companies are in order. i think every company has a challenge, we try to face that in the most truthful way possible. it is time, look them a moving all the time. every country and region has its own testing. carmakers have to adapt. we have to make adaptations in the most apparent and truthful
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way. at the same time, technology is moving a lot, a lot of things are possible which were not possible if years ago. which is it -- what is important for the industry is to give visibility that would has to come -- about what has to come. guy: hans nichols joins us live from berlin. hans, he works for the business for 34 years, he is part of the business, he is embedded. we have a series of key meetings over the next few days, by the end of the week will he still be ceo? hans: that is the question everyone is asking. know is really need to what those five board members of the executive committee of the supervisory board remember -- normally they are six, in this case there are five. you have to know what direction they are heading. a local paper actually reported
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that last night the executive committee met. this morning there reporting -- we confirmed that part, this learning they are reporting that dr.winterkorn has lost the support of some members of his board. they are suggesting that he will no longer be ceo at the end of the week. when i listened to dr. winterkorn yesterday, in that statement he made, it sounded like a ceo who is fighting for his job. he has to convince a couple of key members. the controlling stake of the porsche family is on their. has those atswagen work or right councils, they have a lot of power. the primehere is minister, he in some ways has been making the most critical comments saying that dr. winterkorn has a lot of
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explaining to do. facedil winterkorn questions about his leadership. the board rally quickly, it did not happen this time. guy: thank you. anna: let's get more on this developing story. we are joined by greg archer. it is great to have you on the program. thoughts on how much the questions being raised by volkswagen, what does this mean for europe? greg: i think they are the tip of the iceberg here in europe. we have seen a similar, big gap between it -- official test results which happen in a laboratory and the ways that cars actually perform on the road in terms of nitrogen oxide emissions.
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a study last week showed that one in 10 new european diesel cars were meeting the new regulations. every vehicle should have met it on the first of september. some vehicles were producing substantially more pollution. we are talking about 10 or 20 times. the question is therefore, how are these vehicles passing laboratory tests whethey perform so poorly on the road? surprised if we do not see over the next few days and months, more ofufacturers having me kinds devices -- these kinds of devices. guy: if that is the case, and we are dealing with millions of cars, what should be the correct response? the pollution produced by these diesel engines is a major issue for european governments. what response should those governments generates as a result?
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greg: the pollution generated is leading to the premature deaths of over half a million europeans every year. it is costing the economy nearly a trillion euros. certainly in the u.k., they recently said that 80% of the problem in cities was coming from diesels. the diesel engine is a huge contributor to a massive public health crisis in europe. the response from governments is clear, and indeed from the european commission. we need to have a thorough investigation to identify all of the ways in which these devices are being used. all of the manufacturers using them, they may not be limited just to diesel cars. we need an existing testing system tightened up. in europe, we do not test the same cars that people actually buy. tests are unrepresentative
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of the way the cars are driven on the road. the people to do the testing are paid for by the manufacturers. we need an independent regulatory in europe like the u.s.. this is the reason that the u.s. authorities identified the problem. in europe we sell 50 times more vehicles, but it was not found here. anna: who are you calling on to take action? greg: it has to be a lead from the european commission. they have the responsibility to bring forward new regulations as part of the system of approval for which all vehicles are checked. they are the people that must first catch it. it is a responsibility for the car industry as well. volkswagen has actually been very open since the initial disclosure. i would like to see other parts of the car industry the as open
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-- be as open, a gal is the fact that they are using these technologies. then we can begin to move on without the problem. guy: thank you. we will take a break and see when a moment. -- and see you in a moment. ♪
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guy: it is 6:30 in london, these are the stories you need to know. anna: more evidence that the slowdown in china's economy has said asian shares lower. the manufacturing sector fell to the lowest in six and a half years of underscoring the challenges facing the nation factories -- nation's factories. is ishe chinese president expected to talk up his economy in his first major speech. he spoke to a gathering of business leaders in seattle.
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the: shares are lower as chinese investigation revealed used knowledge to benefit the firm. guy: let's get you an update on the market. the story missing was volkswagen . that is a standout story, what else to we need to watch? caroline hyde is standing by. the call for calm from xi jinping is falling on deaf ears. lowest drop since concerns were first tightened. asian stocks are feeling he was of the fact that as you put it,
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the chinese manufacturing gauge, falling to the lowest since march 2009. it is in the real doldrums. clearly that is having a hamming fx on equities -- effect on equities. it is a down day for the united states. stocks volatility, the v here in europe, surging 19% yesterday. the fear index is on the upward trajectory, clearly volatility is front and center for investors as they try to protect themselves on the equity market. you are seeing a selloff and commodities. we saw that in the united states would be minors being hurt, today it flows through with copper down, off by 4%. olympic -- aluminum and oil is
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lower. citigroup still has further to go. glencore continuing to tumble. it is at a record low. anna: thank you. interior ministers have agreed to shelter 104,000 refugees from the middle east and africa. at the same time, syrian refugees are finding sanctuary in neighboring countries. for the most part they live in urban areas. a significant number live in refugee camps. we had this report from northern jordan. is the biggestit refugee camp in the middle east, the second biggest in the world. from this point you get a sense of how humongous this places. -- place is.
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unofficially, the number is thousands. each day about a dozen new babies are born here. the yuan refugee agency that runs this place comes then or million liters of water every day and spends about $36 million every year on running the place. when this was set up three years ago it was meant to be a temporary refuge for syrian fleeing the civil war to the north. looking around, it looks like it is becoming increasingly permanent. anna: for more on the refugee jones what has been the reaction to the agreement reached yesterday? that ane are satisfied agreement finally got reached. they had been talking about this since may in terms of how to deal with this growing number of
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refugees coming in. at the same time, there was a knowledge meant among the leaders last night that this was the sign of a drop in the bucket. this does not go anywhere near what they need to address the problems. they are looking at one million refugees a year coming into the eu. this agreement is only 120,000. , thosestern europe regions are having problems with this, are they going to comply? countriesre were four that objected to the agreement last night. germany and france and the oth western powers ran this through over the objections of four eastern countries including hungary, which is at the forefront of the crisis. legally they all have to comply with it. it couldbe in the courts for years.
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slovakia in particular said they will not comply, calling it unfair to those state. states.have to say -- we'll have to see what happens. anna: are european leaders expected to take further measures? meetingfter yesterday's of the interior ministers of the countries, they are meeting again today and brussels to address specifically migration issue. they hope to go further, now that they have an agreement on refugeestribution of within the eu, despite the objections of these four eastern countries. the leaders hope to go further and talk about how to reinforce the borders. they also want to do something about the countries of origin. they want to try to put together a package to keep the refugees from coming to europe in the first place.
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this is a much bigger, much harder problem to tackle. that is what they are hoping to do. at the same time, the leaders from slovakia, hungary, the czech republic will be voicing objections again about the agreement last night. we will see some more debate going into tonight. anna: thank you. there are a lot of pieces to put together. you have chinese data coming out. you have the chinese leader in the united states. pmi data coming out of europe later on. mario draghi is going to european parliament. you have the volkswagen scandal, crisis, call it what you will. let's link the dots. seriousness, there seems to be a series of events taking place at the moment which has a lot of people in the markets
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scratching our heads, trying to understand the ramifications. do is toou will try to -- i actually think you can go back to the late 1990's and see things that are similar. a strong dollar for a. of years -- four a time. a series of market crisis. market crisis comes along, the fed is more dovish, a major crisis comes along for a specific firm, that is 1998 all over. that is exactly the description of this year. the key points of 1998 was in fact the central bank was dovish. it seems to me that everything we are hearing right now suggests that is exactly what we will get.
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on friday thatd it feels as though the central bank is deeply worried about markets, do not want to rock the boat. --a: the fed put the concept central banks around the world, when times get tough there will be a backstop. you look at the history and you see parallels. does that mean as we look forward that monetary policy becomes increasingly creative and we see more and more dovish this from central bank. >> it is questionable. 1998, one of the risks is an asset bubble the -- building.
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i am not sure if we will see in the next year rate cuts going into negative rate. -- rates. you end up with boom bust cycle. larger --us comes its bust comes it is larger. what could central banks do that they have not already done? we have already gone to negative deposit rates in continental europe. even though negative deposit rates, the topic was mentioned. you do get the sense that there is still the possibility for the nations to follow. i suspect it is one and done. guy: we will talk about the automakers. do you think mario draghi is watching what is happening at volkswagen and worried?
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>> why wouldn't he? argue that the central bank should be indifferent to markets, but history says that they are not. therefore, it seems reasonable to assume that he will be watching what is happening there. he will be aware of the broader impacts this could have on market. -- markets. this could be the tip of the scandal, if that is true, do you want him to rock the boat. reiteratethey might lines. anna: does that mean we will see an expansion of qe? simon: i think the promise will be there. they need to do more. could we see something like this towards the end of next year? yes. a distal inflationary --
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this inflationary environment. anna: is it different than interest rate outlooks in the short-term, the only thing that matters? simon: if you look at what is over the last few days, you have seen a change in the behavior of the euro. every time we had risk off, greece or china, it was the funding currency of choice. this time around as the volkswagen scandal is going on, the risk aversion is hit. you see that and the further monetary policy. anna: thank you. chief currency strategist. guy: coming up, merkel pressures volkswagen to clean up. we will see you in a moment. ♪
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guy: it is 6:45 in london. here are the stories you need to know. anna: more evidence of the slowdown in china's economy has sent asia's shares lower. it underscores the challenges facing the nation's factories. guy: the chinese president did his best to talk up his countries economy in the first major event in his visit to the u.s.. he spoke to a gathering of business leaders in seattle. he emphasized his government determination to maintain stable economic growth. ceo winterkornn 's job hangs in the balance today over the scandal. face questions about how much he knew about a scheme
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designed to dupe u.s. relators and drivers about the amount of pollution from his cars. after those rebel -- revelations, merkel is pressing volkswagen to come clean. >> we need to have transparency from the company. the entire situation needs to be clarified. the minister of traffic is in close contact with volkswagen. i hope it is on the table as quickly as possible. guy: let's get more on this story, how volkswagen is affecting germany in the euro area. our chief economist is david powell, he joins us from bloomberg intelligence. good morning. explain to us, give us a sense of the auto industry and the relationship to germany. linkage --it is the
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is the linkage? >> it makes up for percent of gdp. in this nearly 20% of their exports. this -- four percent only is the direct value. that is not include suppliers. anna: if you're looking for the impact this has on germany's economy you have to make an assumption that this is a made in germany brand. how is the economy going to hold up against this? it is already dealing with a slowdown in china. >> the germany -- german economy has held up pretty well. the latest pmi survey shows that growth may accelerate in the third quarter. we will get the update this morning. things have not been so bad yet.
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a bigger problem has been a slowdown in russia. china,wdown in potentially could be a greater problem. guy: mario draghi will be on his feet later on talking to the parliament in brussels. you have already outlined the kind of figures we're talking about. into ecbthis factor thinking? >> my guess is the volkswagen scandal will not have an immediate impact. i think the economy is facing a slowdown, that has already been highlighted by the ecb. the probability and the direction of more asset purchases beyond september of next year, we're not there yet. -- whatmon come away in are your thoughts?
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simon: what about the french industry? anna: if we see this broaden. this were to spread to other car companies, that 4% is the entire car industry, not just volkswagen, the more that spreads, the more the problem. anna: thank you. environmentalists are taking stage -- environmental issues are taking stage with volkswagen. there is the climate change conference in paris. it is the duty of ceos to deliver policy that is socially and environmentally sponsored -- responsible. to make sureduty we are not driven by shareholders, but driven by the needs of consumers.
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guy: i think he was speaking before the scandal broke. we are not linking these stories. is downhe case that it to the ceo to take a responsible stance. let's broaden the conversation, we are joined by 10 from the bloomberg business from the bloomberg business site. is facing a boardroom showdown. -- ithey will be meeting was expected to rubberstamp his new contract, but clearly there is a big question over that will have -- whether that will happen. players from the family that runs volkswagen effectively. if you cannot convince them, he will struggle. if you was going to resign,
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he probably would have yesterday. clearly he probably said to the board, i am planning to stay. if the board feels otherwise, that is for them to decide. anna: we were talking up the parallels between this and other crises. we were talking yesterday about this and bp. defensey hired the same firm. guy: the parallels grow. sustainability investor struggling to work out -- we have some great stories about the sustainability investor whether or not this is something they can invest in. interesting, volkswagen's downfall came two weeks after he was ranked the most sustainable
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and auto companies. that is currently under review. plenty of people are trying to work out how this changes reception. become a feature of portfolios. tim: that was interesting because it talked about how the automakers, the first quarter this year was the best in 14 years. the wheels came off. guy: throughout this crisis, we have used the auto sector as a bellwether for understanding how the european economy is doing. we saw cash for clunkers. spain is continuing that. when you think about -- david was trying to drop the importance of this early on, can we underestimate the auto sector? u.k. has a big sector. simon: when you start talking about numbers like 4% of gdp that is absolutely astonishing.
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yes, we are seeing a radical turn around. andthink about the research develop it going into diesel production in the last 10-20 years. you look at the fact that diesel represents 50% of car sales in europe, it is an astonishing hit the european economy. it was become conversation we were having in the last day about -- it is interesting it is from the u.s. regulatory perspective. simon: -- tim: the most interesting thing from yesterday was it affected so many vehicles. the question is, where are the others? anna: they will come out of the woodwork. we just heard from volkswagen new zealand's posting on their website saying they cannot rule
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out the possibility that some of their cars are affected. guy: if you percent of the cars out there, is a diesel car that i have at home now worth signally less as a result -- does that affect my net worth? i am wondering how deeply this gets involved. eight 10,000 euro diesel seven --8,7.rth a, anna: they need to know the value of your car. jim: last night i was behind a bull's wagon --volkswagen diesel. do you think the amounts they have put aside will be anywhere near enough? tim: how could it be? ofa: i have seen estimates
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$19 billion, that is the epa. there could be lawsuits. it is the same with bp. there were estimates, they change. sam grobart, your colleague in the u.s. is not feeling as smug about his car choice. -- he is a new jersey volkswagen driver. anna: i think his car was featured in a report. he was so proud. his he was happy to feature volkswagen. i suspect we might not see it. tim, lovely to see you. simon from bank of new york mellon will stay with us. anna: we will take a short break on "countdown." challengeschina's
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are in full focus with xi jinping in the united states. stay tuned, we're live from beijing and hong kong when we return. ♪ ♪
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anna: manufacturing slowdown. chinese pmi sleep to a six-year low. guy: to comment carry on. the president of china says they will deliver strong growth and won't devalue its currency. anna: behind the wheel. futures hang in the balance of vw's executive committee. guy: welcome to countdown. anna: welcome to the second hour of the program. we had a bit of a focus on commodities this morning and the fallout from that pmi number from china having an impact on the commodities space and equity market.
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guy: this is copper getting hit once again. not great news if you are one of the big mining companies. let's quickly show you what is happening. the vw story -- this is the last year. this is the store you want to focus on down here. story, out about that let me quickly show you what is happening in advance of what we think will be a negative european open this morning. i will slide in the fair value calculations, so we can show you exactly what is going on. it looks like the euro stocks are negative again. the ftse will be down by 4/10 of 1%. more negative news from the equity fund. -- equity front. yesterday they were down 3%, 3.5%. the equity selloff we saw
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yesterday looks like it will continue. anna: and just as markets open up we will start to get the numbers. we will get another bit of data to added to the puzzle. how much is that slowdown in china weighing on the european economy. let's check in on how the asian market is doing. david? david: it is quite a painful session this wednesday. you look at every metric you can think of -- the dollar is stronger, the yen is stronger thatthe dollar, not to say these are the only weak spots in the market right now. that is how asia looks. we are counting down to the close, and some of these markets are just closing up shop. the hang seng in hong kong was down this much as 6% -- down as much as 6%.
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the shanghai composite is down 2%. that pmi data initial numbers, weak, clearly in contraction. if you look for u.s. quarter outputs, they are all showing a fairly steep decline. when the president started talking about will china devalue clearly, that 3% drop we saw from mid-august hasn't quite filtered through as far as this group of companies. what else are we following in asia? it should be interesting to see how japan plays catch-up when it opens up on thursday. i was looking at some of these futures contracts and we are down about 680 points on the nikkei 225. if things don't improve between
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now and when japan opens up tomorrow, the yen is much younger, so there is a lot of money flowing into safe haven assets. yells are coming back down. where those sessions investors would like to forget. anna: david, thank you. guy: let's talk about the pmi data. 6.5 year lows for what we saw out of china. sub 50. our chief asia economist is standing by in beijing. tom, a pretty grim number. what does this tell us? tom: i think the first thing it tells us, guy, is that all of the stimulus which china's government has thrown into the economy over the last year or so, cuts in interest rates, cuts and reserve requirement ratio, 3.2 trilliaon yuan, all of that
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so far hasn't gained traction. conditions in the factory sector continue to deteriorate. they are as bad now as they were in the first half of 2009. china weakness, then, has been critical for the fed's thinking. does this number tell us anything about how the fed is going to do the math around their interest rate calculations? tom: janet yellen was very clear in her press conference following last week's meeting that china was one of the considerations which caused the fed to keep interest rates zero. i think a concern for the fed is really the kind of world shaking event that we saw with the collapse of the shanghai market and the pboc's surprise move on
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the yuan. this kind of week number from the pmi is bad, but clearly it is not in the same order of magnitude as the shanghai equity collapse or the yuan devaluation. readingd, if this pmi is the first of a series of negative numbers that we get out of china between now and the fed 27-28, thenctober clearly the case that the fed should exercise caution, that they should stay on hold, would get stronger. anna: tom, thank you. guy: i just want to bring you breaking news that we have been waiting for -- we talked about yesterday. is in --xi jinping seattle, an area that is dominated by a couple companies, one of which is boeing. anna: he didn't just go for coffee. guy: he didn't.
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he is buying 300 aircrafts from beoinoeing. -- thennouncing that bulk of them are narrow bodies. i suspect that these are 737's. know whethering to there are new engine options. i haven't seen the list price, but it is going to be a fairly big number. the chinese are splashing the cash in america. anna: david tweed joins us now with the broader look at what this visit really means. we heard a lot about currency, didn't we, david? the fact that the chinese don't want to devalue their currency any further. do we take these words on face value with regards to the currency? david: i was just going to quickly comment on that boeing
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purchase, because this is part of the prerogative of the chinese government, to announce and sign off on all purchases, part of this drumbeat of news, part of this speech that he gave this morning in seattle, really trying to hit every single issue that seems to be a hot issue with the americans at the moment. and yes, you are right, the whole currency devaluation is an area where the u.s. wants insurance. is a credible? well, i think when zeb xi jinpig stands up in front of a group of u.s. business leaders and talks about how there is no further need to devalue the currency, he underlines the fact that he doesn't approve of currency wars and he is not going to devalue in order to boost exports. i think we have to take them at face value. it is not like the mexicans back in 1982 promising to defend their currency like a dog, been
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devalued 40% six months later. in this case, you have to give xi jinping the benefit of the doubt. avid, currency intervention is one thing and stock market intervention is another thing -- what have we learned? david: he had to talk about that as well. once again he turned the tables around and said, other countries do this. we have a responsibility to try and stop the mass panic in the market. yes we intervened,. we will use the invisible and visible hand. we will take steps to stabilize the market when it is needed and this is a market that needed analyzing. that was the message. anna: david tweed, thank you very much. nine minutes past 7:00 here in london. talking -- part of our currency was about xi jinping's promises about the currency. what do you think?
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comments xi jinping's that they don't want to devalue -- absolutely at face value. this is a nation that spent $93 billion officially in august, and by some estimates it is closer to 150 billion. that is an awful lot of money to take out of your reserves. it seems to me that if this downward pressure continues the chinese economy, and it seems reasonable to think that it will, given that the demand for commodities will continue to the decline, the rational thing for them to do is to step back and let market there' forcs take their course. why throw good money out? guy: you talked about the reserves and the reserve deterioration -- they are selling u.s. treasuries at the moment, selling fixed income
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assets. is that an anti-qe? what ist is -- interesting, you don't necessarily see that impacting markets, but nevertheless, that process should be there. it's another reason why the fed right now is being extremely cautious. you also have to be concerned about the rest of asia. if china does start to lower its currency again, which would seem to me to be perfectly rational, if they move into more of market-driven economy, that also gives iq for the rest of asia to weaken. what does that do for japan? a policy into this, that was specifically designed, albeit not officially, to weaken the yen? clinton praised them
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in the 1990's about how they handled it. say, i doave to think that china is entering into the currency war. anything, they have tried to keep their currency stronger and they probably should have been, given the underlying start for the economy. their natural tendency to try and keep the irrency stable in termni times of crisisn. -- stable in times of crisis. anna: simon, thank you. he stays with us. guy: the commodity story front has anter -- glencore small sign that the story is bottoming out -- we will talk
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about that later. let's talk about what has been happening in the united states, in seattle, with boeing. let's get more details. caroline hyde, what do we know? caroline: entirely different breaking news story, but still in the airline industry. this is bba, a u.k. based stock. --is flight support refueling, cargo handling. it is buying an asset from carlisle worth $2 billion. that is only worth $2 billion, it is buying a company of a similar size, -- they say it will provide significant synergy going forward but they will have to do a rights issue. a rightsng to be doing issue to the tune of almost 3/4 of one billion pounds.
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748 million pounds. they are selling shares to be able to purchase an asset from carlyle group. news aplenty in the airline space. watch out. guy: a lot to look out for this morning. anna: 14 minutes past 7:00. vw stocks have plunged 35% over the last two days, waiting 23 billion euros off its market value. the ceo apologizes, but will it be enough to contain the scandal and save his position? -- contain the scandal and save his position. ♪
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anna: welcome back. 17 minutes past 7:00 in london. here are the stories you need to know this morning. guy: more evidence that the slowdown in china's economy has sent asian shares lower this
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morning. chinese pmi data for the manufacturing sector fell to its lowest level in 6.5 years, underscoring the challenges facing the nation's factories. meanwhile, china has signed a deal to buy 300 aircrafts from boeing. it comes as their president is on a visit to the u.s.. last night, xi jinping addressed people in seattle to underscore his government's determination to maintain economic growth in china while reforming an open market. insider trading linked to the government. an initial chinese investigation shows the brokers used advanced knowledge of equities trade to benefit the firm. seven other company executives, including the president, are said to be under investigation. anna: after admitting to cheating on admissions test, vw's ceo faces a showdown with the carmakers management later today. hans nichols joins us.
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he has been following this story closely from berlin. hans, he has worked for vw for 34 years. he is very much part of the machinery of this business. is he going to keep his job? well, he has indicated that he will fight for his job. when he made the statement yesterday around 4:30, it was clearly someone that was planning for the future, racing for a showdown, talking about technical fixes. he is a ceo, but first even engineer. but he also made certain that video message to apologize. have a listen. without and that we have disappointed this trust. i apologize it all ways to our customers, the authorities, and everyone associated with our business. hans: the executives committee may be imminent -- that is according to a publication in hanover.
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they also reported last night -- and we have confirmed this -- that the supervisory board met volkswagensony, headquarters. that he will be replaced on friday. that is when the full board meets. i think is most immediate task, the meeting tonight, the executive committee, is to convince them that he controls a lot of the family money. volkswagen to have a strong worker counsel in the labor unions are involved. he will have to give is that labor union guy as well as stephan weil. he could be his biggest challenge, because he has been critical, commanding clarity. guy: this stock has lost nearly
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60%. part of that is china, part of that is the scandal. the chart makes a really grim reading. when they look for somebody, if they are to replace him, do they stay within the company? how does it work? hans: well, there are two names that we have, according to people familiar with the matter. porsche -- that is a profit center, an engine of growth. about a quarter of the volkswagen group profit comes from porsche. the other may we are hearing is in bmw.he had a long career there , he is almost the outside candidate. if you want an outside candidate to clean up the mess who was diessed at all, herbert maybe your guy. but porsche and volkswagen
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haven't been together that long, and in some ways porsche is also an outside candidate. another quick note -- volkswagen has hired kirkland and ellis, a u.s. law firm responsible for bp's settlement in their interactions with the u.s. government over the oil spill. anna: hans, thank you very much. hans nichols joining us from berlin. for more on the auto industry, j.p. morgan asset management chief investment officer, richard, joins us. simon is still with us. richard, good morning. thanks for coming in. you hold stock in the auto industry. not vw. but explain to us you're thinking about the car stocks you own. richard: from our point of view as investors, we overcomhave the
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andan and chinese stocks, this is mostly a problem for the europeans. aonically, it could be benefit to the korean companies, who could gain market share. but obviously it is a problem for the whole industry. guy: when you invest in a much canike kia, how you do about the engineering integrity, the products that they produce? you could look at a whole lot of metrics of the company, but can you get down to the granularity level? richard: well, it is very difficult as an investor, if you have companies that are dishonest. that theto assume testator they publish his real. we can to go down and do independent engineering verification of test data, and i
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think we start, particularly in emerging markets, with a healthy degree of skepticism about companies. but if you had said to me three or four days ago do you think volkswagen would have lied about it, i would have said no. you have to take some things on trust. anna: which are the sectors you favor right now, if auto is a little tricky? what is looking attractive? richard: well, the emerging markets are looking pretty challenged in general. we are going through period where growth is declining. companies that do have growth are more attractive. when you think about china, which is very topical at the moment, i think it is a big difference between old china, which is clearly decline, and new china, which is still doing pretty well. if you look at some of the internet companies in china, this whole idea of internet services -- i was envisioning recently, and it is really
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exciting to see what people can do on their smartphones nowadays. this kind of companies exposed to new china look interesting, but it is a tough environment. glencorestix upgraded from cell to hold -- from sell to hold. when do i look for the bottoming out of the commodity cycle? can i talk about that yet? so many of these economies are so heavily into the commodity story in the till it bottoms out you can't call it. clearly, they get cheaper. but the commodity prices fall. so their revenues fall. so they are going down together to a certain extent. i think it is hard to know when the bottomless. as you have seen that something like glencore, it can always drop, and particularly companies that have got debt, it can get
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very nasty. it is not an area we are heavily exposed. anna: any evidence of the commodity currencies you follow -- simon: i think the whole thing about commodities that is fascinating -- and particularly -- increasingly over the course of the last seven or eight years, commodities have played out in financial instruments. you start to see them come back. if we are going to be in an easier monetary policy environment over the course of the next few months, if we have a said that is pushing to make putmove, does that start to a basin commodities? not now, but maybe in a month or two. that is what happened in 1988. -- 1998. guy: the investor may have called it. anna: thank you. richard, simon.
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more on vw when we come back. merkel waited to the story. what does it mean for the german economy? ♪
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anna: welcome back. 7:30 in london. here are the stories you need to know. , the jobswagen's ceo in the balance. he will get a chance to make his case later, when the executive committee of the world's biggest carmaker meets. the key question is how much he designs, cheating on admissions tests. anna: more evidence of the slowdown in china's economy, asian shares lower this morning. china's pmi data fell to its lowest in six and a half years, underscoring the challenges
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facing the nation's factory. -- factories. guy: china has bought 300 aircrafts from boeing. the president is on his first state visit to the u.s.. use anght, xi jinping address in seattle to underscore his determination to maintain stable economic growth in china well reforming and opening up the markets. anna: let's check in on the asian market session. david ingles is standing by. there has been some pressure this morning -- what have you got for us? basically -- we were where we were. the damage is quite big, down 2.6%. if you look back to the start of the week, as the damage gets upsized, the third day of declines -- everything is falling today and the damage is much larger when you look at
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highly cyclical sectors. discretionary is getting whacked. you're also looking at oil and gas down 2.5%, basic materials, consumer goods, financials. howher indication of risk-averse the session is here in asia -- you look at the fx market, it is just one story. you have the dollar gaining against everything else except the japanese yen. that is the safe haven trade. everything else in asia from the , allget, the aussie dollar the rest are getting down. just to give you an example, the malaysian ringgit is at 4.35. that is a fresh, 17 year low for the malaysian ringgit. you guys are just talking about the flash pmi, the preliminary
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read of pmi out of china -- this is the first that has reacted. it is really looking at how it relates, the biggest trading partner in australia. we hope things get better. japan opens tomorrow and if things don't improve it will get whacked at the open. anna: david, thank you. david ingles in hong kong. guy: 27 minutes away from the european equity market open. let me show you how we anticipate things will get going. these gauges here were down by 1%. there has been some lost since then. paris has a similar story. germany will underperform again today. yesterday,down nearly 4% for some of these markets. it doesn't look like we will get a bounce this morning. anna: the german government has
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opened an investigation into bw after revelations that it cheated on admissions rules in the united states. angela merkel is pressing bw to come clean. we need to have full transparency from the company. the entire situation needs to be clarified. the minister of traffic is in close contact with. can, and i -- with folks lik volkswagen. let's get more on vw with our chief economist for the euro area. david, give is a sense -- vw was a massive company. a huge amount of value wiped off its share price. the car industry is extremely important for the german economy, 4% of gdp. that takes into account the direct contribution of the car industry or the indirect contribution.
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it is also germany's largest export product. they make up about 20% of exports. anna: it's just the car industry. it's not even the rest of the made in germany brands. that could broaden things further. how well has the german economy that holding up so far, when you consider that the chinese slowdown has already been thrown at it? david: germany goes through a. of -- germany goes three period of strength, growth accelerated in the second quarter, and latest business surveys suggest we may have some acceleration for the third quarter. we will get an update on that this morning when it is released. guy: a lot of headwind for mario draghi. he will be on his feet later on. the parliament in brussels -- what is he going to tell parliamentarians about what policy directions he is going to
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be taking? david: he will probably give them the same message to journalists, that the euro zone economy is proceeding well, though it faces some fats, particularly from the slowdown in emerging markets. he is not only talking what china here -- he is also talking about russia, which up till now has had a greater impact on the euro area economy because the slowdown has been so precipitous. he will also have his eye on china, because the potential for an impact is greater there. it is a larger trading partner than russia. anna: david, thank you very much. david powell. guy: let's get an investor's take on how we should to the world right now. joining us is the ceo of armstrong investments. good morning. i have money to invest -- what do i make of the world i see in front of me? draghi isowing down, on his feet talking about further extensions and qe. where do i take my money? >> vw, and not just vw, but the
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entire european car industry. what investors are thinking the intellectual property of folks lik volkswage. i think investors are waiting to see how the investigation will kiwi will havele a great impact on european equities. it will be shifted by different events from the elections to the chinese slowdown, and now not to mention the crisis with balance seekers. obviously, investors are very nervous to make any long calls. we need thetime, same equity market to be increasing. that makes jobs of acti active
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stock seekers more difficult. anna: would it be fair to see that what we see unfolding in vw -- ana: absolutely. it is not just the impact on those 11 million cars that volkswagen mentioned. there is also risk, impact on futures, the brand issue. insulates the impact is much larger. and this is one of the major car companies selling to the chinese markets, that comply with chinese environmental laws alongside bmw. the impact of european equities will be quite significant. guy: do we understand the ripple effect of this? you can take the w and look at its first division supply chain, you kind of feed it further down. you really spread yourself across the german economy. how quickly does that stuff show up in data? ana: well, there is a lag effect
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after a couple of months, until we see the entire impact. obviously the data already has been reflecting the whole slowdown, because we have the chinese slowdown, one of the main consumers of german cars, and now we have the whole community issue. so obviously, there will be a further impact. anna: as on investor, i'm sure you're looking where the line can be drawn. as it has been of the magnitude, the scope, the scale -- where and by whom -- that is when you can start to see if something has been on early tarnished. ana: there will be great buy opportunities. that he stocks have been undervalued and hopefully it will be an interesting hold. guy: when we look at more broadly the stories of the moment -- china is affecting a lot -- when you look at the commodity stocks again,
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absolutely smashed over the last year. when you are looking for value, where do you find it? ana: currently, we are not looking to invest in commodities. the chinese slowdown will further reflects itself on lower demand. commodity exporters will be suffering, we believe, over the next three to six months. redon't see any near futu rebound in the commodities market. oversupplied,een so we are staying away from long commodities. at the same time, u.s. interest rate decisions may have had some impact on emerging markets. anna: do you think we have a full idea of how weak the china story is right now? do you fully understand it? some people just look at the data, and it is missing estimates and that is not great, and the manufacturing sector is contracting -- obviously, we knew some slowdown was going to happen, and to some extent that has been dictated by the chinese
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leadership. others point to more anecdotal evidence around services, around the internet side of the economy, and say maybe the data isn't picking up the areas that are showing strength. is that an argument that holds water with you? ana: i think the main issue with the chinese gdp growth is when is the consumer going to start spending? when will it become a consumer-oriented economy as opposed to being an export driven one? they can implement the right i think they will start to see the kind of growth they're looking to build. guy: three, four years ago, height of the financial years, markets swung from one to the other. are we back in that, back in that kind of environment? it is soyou is that hard to make long calls, long strategies, starting
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opportunities -- anna: ana, thank you. she stays with us a little longer. as full flag and appoints u.s. lawyers to handle its schedule, will the ceo keep his job? and of course, we are looking ahead to german manufacturing pmi data, out a little bit later, following dismal numbers from china. ♪
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anna: welcome back. 7:45 in london. here are the stories you need to know. guy: evidence of the slowdown in china has sent asian shares lower this morning. china's pmi data fell to its lowest in six and a half years, underscoring the challenges facing the nation's factories. asian shares are down the most in the month. anna: meanwhile, china has signed a deal to buy 300
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aircrafts from boeing. it comes as the president is on his first state visit to the u.s.. xi jinping used his address to business leaders in seattle to underscore his government's determination to maintain stable economic growth in china while reforming into opening up the market. todayw shares are low after -- n initial investigation shows the brokerage used advanced knowledge to make trades that benefited the firm. ceo hangs in the balance today after the emissions of scandal. you will get a chance to make his case later today. the key question is how much he knew about the scheme designed to do auto regulators and drivers over the amount of pollution produced by the diesel engines. guy: we are getting french data
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coming out -- final readings of gdp showing the french economy continues to stagnate. there are some slight changes in terms of consumption and what is happening with the investment story, but nevertheless that we are not seeing is any kind of big bounce back. let's get an update on what's happening in the markets as we head toward the open. caroline hyde has the details. caroline: a down day. lower, theo manufacturing preliminary ships figure showing once again contraction. six months before we have seen any expansion. a down day across equity markets and we will focus on autos. hans nichols will bring you the updates but it really has dragged to the entire industry group lower. lowerill continue to sink , which was up by 11% on the stoxx 600 over the course of the last three days. vw is fighting for
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his career in front of the supervisory board. we would also like to see swiss remove a bit of m&a action. some private equity company selling out today -- swiss will be buying guardian financial, coming -- pumping significant amounts of money aviationso see bba could sell off today. they may be able to cough up $2 billion for carlyle group company. this is all about cargo movement and refueling, aviation management. they are coming together to build a bigger, more growth oriented company. lastly, i want to focus in on the miners. italy painful for them today. i am seeing calls for them to go lower, another record low in
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asia, 60% across the board at share prices. we will likely see glencore battered again after being down 10% yesterday. miners down on the poor chinese data. guy: thank you very much. let's turn our attention back to the w. , theying to deutsche bank are calling it, "an investor nightmare." hans nichols is our international correspondent in berlin. and investor nightmare, hans. hans: and a logistical nightmare, too. where you cover this? -- where do you cover this? here is what we know. hanover's local papers on front of this. -- is in front of this.
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they reported on the committee and it held last night, will take place again tonight ahead of the full committee on friday. what they also have -- the ceo has lost the support of some investors. his support among the board may be weaker, but overly that with this report from yesterday saying that on friday a switch was going to be made, the ceo replaced by the ceo of porsche. we also has an independent reporting, according to one person, that says that there are two other possible candidates. we will have to see how this all shakes out -- i suspect it will be a fast-moving day, sorting through what a lot of local papers will be reporting on. everyone is working their sources and we will be doing the same. anna: we will get important data out of germany today, partly?
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-- aren't we? they are connecting vw and the state of the auto sector in germany. the manufacturing sector is very much in the spotlight. hans: yeah, right. we will have services and manufacturing in that some ways this will give us a nap shot of the w. -- of vw. i am interested in whether or not it shows the continued diversion story. is muddling along well north of 50 and we have potential stagnation or slow down elsewhere in the eurozone, particularly france. , i am looking for the diversion story, but in a lot of ways, this is lacking, and the events that have taken place in the last 72 hours on folks flag and really is much more shocking and it will be reflected in the data. guy: thank you very much. and the data we will see. anna: let's talk again to the
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ceo of armstrong investment. we will get data on europe and it is a little bit backward looking. how are you nervous about europe at the moment? are you more nervous about the auto sector? or does your nervousness take a chinese form? ana: for us, it is a combination of factors. clearly china slowing down is not helping the migrant crisis. it is going to escalate. clearly, this auto sector is going to help the overall story. at the same time, there is still qe. there will be many undervalued opportunities over the next month. we think the story will turn into something more positive. draghi calls for qe --
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ana: not necessarily. there are different factors at the moment. but clearly, qe will be supporting the situation. anna: where do you stand on the fed, and what you think the fed is going to do next and when? december or not december? ana: the have seen that the fed doing nothing does not help investors with their confidence in the financial markets. at the same time, industrial production seems to be flowing in the u.s., and the stronger dollar would be of no help. the global slowdown is becoming more and more apparent. i cannot see how this said can not raise rates. anna: thank you very much. guy: mark barton is here. european equity markets are about to open. mark: good morning. the globalf decline,
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stock market is measured by the msci. if it is of the fed, it is china. the private manufacturing gauges slumping to the lowest since march, 2009. . in shares -- volkswagen shares, a third consecutive day of a climb? the board meeting kicks off today in the ceos fate hangs in the balance. overall, 20 billion euros of value has been wiped off in today's. -- in two days. fella bowman will join us. he is stepping down from his position as the cap the smith industries. it was founded in 1851, a global technology company with presence and precision instruments, oil and gas equipment, and medical devices. profit is up by 3% and it is making a big push into china. one of the questions i will be asking mr. bowman is about that portion to china.
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a wise move, given the deterioration in the world's's second-biggest economy. anna: thank you very much. mark barton with "on the move." things are moving. guy: they are. we will probably get a positive open, only just. a bit of green on the screen in terms of fair value calculations. it has been a down day for european stocks but it looks like we may open on the front foot. we are looking forward to his interview. anna: mario draghi will be speaking later on today. what will we hear about what they will do? mark barton is up next. ♪
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mark: good morning and welcome to "on the move." let's get straight to your morning brief. manufacturing slowdown, chinese pmi continued its contraction streak. asian stocks feel the pain. the chinese buying spree, the nation will buy 300 boeing aircraft. topident xi jingping tells executives in the u.s. that china is open for business. chief executive martrin
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winterkorn's future is in the .alance at volkswagen let's have a quick peek at what futures are indicating. futures a little lower, caroline is here with the touchscreen. caroline: after the worst three-day rout cents august and we were concerned about china's growth trajectory, it is really started to ramp up the heat back then. market back in bear territory. we are waiting to see how french pmi data breaks later today. to be contraction once again for manufacturing. it could be an improvement for services as well as rising when you look at services.


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