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tv   On the Move  Bloomberg  November 12, 2015 3:00am-4:01am EST

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that's what we are watching this morning. 8:30 will be mario draghi. european markets are just getting underway. let's get across to nejra. we saw theerday biggest rebound in two weeks -- are we going to see that again today? we have mario draghi stealing thunder, speaking in brussels later on in the show. all eyes will be on this trade, the euro-dollar, at the moment trading flat, but we know the power that this man has, and recently a survey by barclays showed this was the most the ecb was more important to it then the fed policy. we could see the two central banks diverging on monetary policy, a key thing to watch. let's see how the equity markets are opening -- slightly lower at
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the moment, cac 40 down, ftse off by just under 2/10 of 1%, still waiting for the dax to open. we are not seeing that optimism we were seeing in the markets yesterday at the moment. i want to show you the main stocks we are watching, starting with siemens. fourth-quarter profit was a beat, and what we heard is that the company will raise the dividend, also announcing its second share buyback since the ceo took the helm two years ago, as he expects no broken 2016 profit margins. rolls-royce -- we aren't seeing in move yet, but profit this year will be at the lower end of the range than forecast because of additional headwinds in the aerospace and marine market. sharply weaker demand is forecast. finally, burberry -- this was a profit the first-half
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after the company had been cutting cost, because the challenge it has been facing mainly in china. that led it to have this profit warning last month, shares dropping the most in three years. we see them up a bit today on that beat and the news about the cost cuts. manus: thank you very much. that's what's happening on the markets. what's happening in today's show? the siemens ceo doubles down. europe's biggest engineering company in tha announces a buyb. cuts toerry beat cost offset slow revenue growth at the luxury goods maker. and details from draghi -- we hear from the ecb president in just under 30 minutes. let's turn our attention to the
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top story -- siemens has raised the dividend and announced a 3 billion euros share buyback plan. that came as they beat estimates. earlier, we spoke to the ceo, and here is what his take on the earnings was. >> let the market decide on whether this is true or not and we will see about the share price, where the markets his is the t shareholders and not so much the management. if it was the management, we delivered what we promised. we have been one of the very few companies in the states who has been keeping their guidance, their initial guidance, all the deteriorating economic environments. i think it has done well but the shareholders will decide. manus: hugs nichols is standing by in berlin. hans, when you listen to joe kaiser, what was your take?
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it wasn't racy with the u.s. recovery,? was it hans: no. he clearly wasn't banking that much on the recovery, although they are saying their orders will be better next year even though they expect revenue to be flat. the main take away for me was that he was looking for the market to validates this. i just saw it was up almost 2%. not sure if that has changed in the last 20 seconds i have been talking to you, that they are getting some sort of validation from the market. they do, though, have profit margins in the 10% range. joe kaiser wants to make his company more profitable, compete with ge and abb,. -- and abb, and that has been a challenge. they have talked about more efficiency, so we heard a very confident ceo, but who overall,
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aside from that dividend increase and the stock buyback, when you look at actual sales, their profit margin is basically in the middling phase. manus: han thank you very muchs,. -- hans, thank you very much. i want to bring our viewers breaking news from china. everybody perplexed about the reality. this is about new loans from the banking system to the market. 513.6 billiont yuan. the estimate was 800 billion yuan. aggregate financing -- 476.7 billion yuan. the estimate was for over one trillion. whatever way you break these numbers down, they are the reality of the rebalancing in china. it is about the real reality of what's going on, and that will be one of the drivers within china. the people's bank of china --
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they are reiterating that new the aggregate financing comes in way below even that lowest estimate of 476 billion. eye on how then market interprets that data. the rest of the day -- what's in play? mario draghi is that to take central stage of the european parliament. investors will be looking for clues as to whether the ecb is its stimulus program as the fed is expected to hike rates. it would mark the first time since 1994 when there was a monetary policy divergence. back then, what was happening? where were you? janet yellen was teaching in the university, mario draghi was a civil servant. urother the ecb nor the e existed.
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the benchmark rate was set by germany. the fed boosted its benchmark rate while the bundestag cut. so will we return to the 1990's? the better man to answer that question. welcome.f ubs -- let's get into what we were doing in the 1990's. time,having a ripping learning how to trade commodities. bonds markets is what i traded aggressively. this is a fascinating period in terms of our interpretation of where we go. it will dictate the dollar, on flattening in the yield market. your take -- will we diverge? >> well, the economies are diverging. averagedded last month,
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earnings increasing the highest since the crisis. the fed's hands are somewhat tied. markets are pricing in a definite rate hike in december, and interestingly, the decision by the fed to increase interest rates -- perhaps also that will tie the hands of the ecb. ld where the currency, the euro dollar is weakening on the fed ishere of acting because the u.s. economy is stronger and you have additional demand from what europe is producing -- it is not exactly a set of circumstances which indicates the ecb should go further. manus: everybody is speculating what the ecb will do, whether it is more negative interest rates and going beyond government bonds -- you sound slightly hesitant in terms of the aggressiveness. simon: if they are to extend
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qe, and wextend think they will, but against the backdrop of the fed, the case for further qe is more questionable. manus: i broke some headlines on new loans growth, significantly below of the estimates were. ironically, it was china that caused a frenzy in the late summer and over the third quarter, and many people said that frenzy has a base and would allow the federal reserve to get off zero. that kind is new data, financing data, any initial response? simon: well it is well below expectations, but i look at the weekend traded, 10%, a huge fall under expectations,
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acted 2008 levels in terms of growth. -- the chinesen economy is slowing. you have a random data points like retail sales that bucks the trend, but broadly, that has been disappointing. we had an interesting dinner last night -- a bunch of clients and some of the best hedge fund investors from across the world. lots of great debate about a whole range of issues, making one real confusion about what the key policy goal of the current leadership in china is. is it about growth? is it about reform? cracking down on corruption? manus: causing them to press the positron on their investments? doesn't stop them from making investments? simon: at the moment, they are not making investments percent. manus: simon, you are with me
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for the next 30 minutes. let's talk rolls-royce. 17.77%, 548.5. that is quite a dramatic fall, rolls-royce warning of 2016 had eadwinds ahead. more after the break. ♪
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manus: these are your top
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stories. that profitsays will be at the lower end of the range forecast. the engine and turbine maker also sees sharply weaker demand for next year, after what it calls additional had in the aerospace and marine markets. shares have fallen by over 15% this day. the australian dollar jumping after unemployment fell below 6%. the company is adding 59,000 jobs in october, almost four times the estimate. australiae bank of does not need to further cut its already record low interest rates. traders shouldnd bet that the federal reserve will meet its goals for quicker inflation. the breakeven rate has rebounded from a six-year low in ittember, and they say should keep climbing before
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stabilizing. measure of newt credit fell in october. it is adding to evidence that six central bank interest rate cuts in a year have inspired substantial pickup. let's get straight to our beijing bureau chief. set of bad data -- what is your take away? here well, the big issue is how much of a mess this was. the survey was for over one trillion yuan, so when you miss by half, that is a pretty big sign that analysts, economists, people involved in the surveys are misjudging the direction of the economy or overestimating how healthy it is. this clearly shows that there is a lot of caution and anxiety about extending new loans. broadly, six interest rate cuts in a year and the
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numbers have not really rebounded. that really tells you something about the government, the fact that these efforts to stimulate the economy just aren't working, and they may need to do more. manus: in terms of the ability to do more, we have seen six rate cuts in the past 12 months. some reserve requirement cuts. and many move on the currency. what is the feeling of what they do next? obviously they want to get into this special drawing rights from the irs. -- imf. is a fiscal, monetary? what are your analysts telling you? manus: well, -- nick: well, the big one is the interest rates. globally, china's interest rate is currently at a benchmark of 4.25%. there is a lot they can do their. what they are worried about is that old line that warren buffett gave -- when you throw too much money from helicopters,
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at some point you will see adverse effects. the question is if they really step on the gas, are they going to be creating a monster or creating problems that they can solve later on? what they are hoping to do is to tap the accelerator, take little stimulus numbers, but really over slamming it down and stimulating the economy and flooding it with new money. that is the tension we are seeing right now. manus: nick, thank you very much. we know what to do with the extra money -- spend it on alibaba. simon is still with me. simon, you and i touched on the data, and i asked to is that stopping investors -- give me the feedback on that. i think it is fascinating what you said to me in the break. simon: first of all, there is confusion about what the prime directive of the leadership is. i think that is echoed in the
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comments -- incremental stimulus, adverse reform, crackdown on corruption -- what is the focus? the second was prevalent last night -- a common view of further commentr currency depreciation. there are people who believe we will see a 10% appreciation post inclusion. there, perversely, there was a remember, thew -- last time they did a one-off depreciation, and another one off, and another, it was always 3% lower. that's not going to change the move with respect to the chinese economy. conversely, a significant could move with respect to competitiveness and help boost exports. manus: that kind of move would be quite anti-everything the imf
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would want them to do. simon: in terms of greater flexibility and in terms of greater convertibility -- obviou s it is not great, if you have a start depreciation. i should clarify -- manus: it's -- simon: much more modest 4% appreciation, but a very prevalent view. manus: the ramifications of that kind of move, and i know compliance will be all over both parties -- that is a feedback loop. there is real money at play. the ramifications of all of this in terms of emerging markets -- are we at the beginning of the third leg lower? simon: i don't think so. we have been under emerging markets for an extended period of time, responding to economic growth, earnings growth,
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disappointment with respect to policy and reforms in the emerging markets. we have taken that position off and valuations got to the point, where on a risk-adjusted basis we can't warrant using a limited risk budget. it is not to say we think things are rosy, but valuations have reached structural levels. manus: you are staying with me for the next part of the show. simon smiles from ubs. because weloomberg, will be going live to the european parliament briefing from mario draghi. he will be taking questions on ecb monetary policy. this is one of the speeches that takes them back to 2012 when he was in london, do whatever it takes to save the euro. first up, a quick chat about rolls-royce. the main stocks you want to watch. stay with us. ♪
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manus: this is "on the move." rolls-royce is getting hammered this morning, down 19% in london trading after issuing a profit warning for 2016. nejra has the details. this is certainly a big warning from rolls-royce. nejra: absolutely, and the stock has been battered, down
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as much as 22%. this is after it said that profit this year would be at the forecast of the range, by the company as it raises additional headwind in the aerospace and marine markets. marine markets have been challenged because of lower oil prices. it also said it will have sharply weaker demand for 2016, and that next year's earnings will be hit by 650 million pounds worth of headwinds. has beenfter the ceo reviewing the businesses. he is taking over in july and said he will reintroduce a wide ranging restructuring program to try and deliver savings as high as 200 million pounds a year. it is really the profit warning that has been hitting the stock today. details of that plan to simplify will come later this month on november 24. on the other hand, we have had
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burberry earnings as well -- first-half profit was actually a beat. this was largely on cost cuts rather than improving sales. we have seen the shares move higher, up about 1% at the moment, as 2.5% today. the big challenge for burberry still remains china, 30% of its revenue comes from chinese consumers. the problem is they are now shopping more in japan, more in europe to benefit from weaker currency. manus: thanks for wrapping those stocks up. simon is still with us. a proper warning from rolls-royce, burberry talking about the migrant luxury travel. ab inbev, the deal is underway. m&a -- let's cover that. give me your perspective on m&a in these markets. simon: hedge funds are creating interest rates from our clients. there is a focus their. -- there.
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it is definitely something we find attractive. it isn't just how large the overall poll of m&a is, year to date, comparing with a record. how big these deals have been. -- wen point, the example had 54 deals more than that and we have had eight mega 50 billion plus steals. this is huge. what it is leading to is extended,, widen spreads 10% on average across the board. --us: we will get you ahead anything previewing that? any big thought for 2016? simon: we can't run a year ahead -- [laughter] simon: we thought he will have more of the same. with global growth relatively new to this, equities being the
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asset class disu jour. manus: up next, mario draghi is going to speak. ♪
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manus: climate manus cranny in london, -- i'm manus cranny in london, and this is "on the move." we are waiting for mario draghi to speak at the european parliament. starting inower, two big stories. you have repsol with the quarterly earnings miss on the back of oil prices. nejra was telling you about rolls-royce and what is taking ast market really down, 17% they profit warn. that does very little to balance the dividend and buyback. the declinecks on
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-- let's switch it up and have a look at the foreign exchange exposures. everything really dominated by the dollar, which had some slippage yesterday, and the aussie dollar is cranking it up. unemployment rates unexpectedly fell in october. by 58,000 -- the estimate was for 15,000. traders are cutting back their bets that the aussies will raise rates. euro-dollar is at 107.41. we are waiting to see what mario draghi has got to say. hasn't been taken yet from the ecb on what to do next month. euro-sterling -- the pound has been d strengthening through the week, job figures the lowest since 2008. a bit of a shift coming through. making a little
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more hawkish. is obviously the clear issue we want to keep an eye on. the downside risks are clearly visible in terms of what's going on. let's actually go to ryan now. manus.eah, we have been looking at the numbers for sab miller that came out earlier today. the shares are active here in london. the interesting one, primarily because of ab inbev and sab miller being the target of that acquisition, the biggest ever in the brewing industry. you can see this in the share price today -- we are ok. if you strip out the half billion dollar currency hit that sab miller is going to take, the pretax profit was up for 5%
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globally for sab miller, and in particular one of the things ab inbev will be reassured by is that growth in africa was up 11%. let's not forget that one of the reasons ab inbev is so interested is because they want to expand their footprint in africa, and 11% growth gives you an indication of the promise of africa as a place for investing. other than that, the profit margin will be a little bit of concern to both investors and ab inbev. it took a little bit of a hit at 23%, whereas if you look at operating margin for ab inbev, where they are cost-cutting rottweilers, it is well above 30%. if they do get the regulatory approvals over the next nine months, then maybe they can take care of that problem themselves. manus: thank you. let's bring you some of the headlines coming from mario draghi. he is addressing the parliament
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-- euro-dollar is moving at 107.17. mario draghi says a couple key lines, which are certainly worth keeping an eye on. he says that the economic downsides are clearly visible. inflation dynamics have somewhat weakened. these are statements that he is making in the parliament in brussels. euro-dollar spiked lower on these -- let's just have a look at the euro-dollar one-day trade. 107.21 is where we are -- mario draghi said recovery is progressing moderately, and that inflation has signs of core -- core inflation has signs of sustained turnaround. a very clear line in terms of the economic growth. the ecb will re-examine the degree of accommodation in december. we have heard that line before. i was saying last night that in
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the figure -- the decision isn't taken, and that the debate is open. euro-dollar at 107.20. we are dropping away. qe will run past september of 2016 is needed to achieve the inflation goals. these are breaking news headlines from mario draghi at the european union, that see we will -- that qe will run past 2016 if needed for the inflation goal. as we get more of these headlines we will bring them to you. let's get to our top stories. rwe, germany's largest producer, said profit will meet annual forecast after a nine-month earnings fell by 29%. in terms of net income we will see 1.1 billion euros and 1.3 billion euros. the german engineering giant has raised its dividends and
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announced a 3 billion euro shift buyback plan. that came as the third-quarter profit beat estimates. joe kaiser says he expects growth in 2016 margins. as costor burberry, savings help to the luxury goods maker slow offshore revenue growth. the ceo is consolidating products under one label as they grapple the sluggish demand in china. let's get to some of those top stories. nejra is watching some of the main stocks on the move. nejra: i will start with the biggest loser on the stoxx 600, down as much as 22% -- that is rolls-royce, the second-biggest maker of jet engines in the world. it has a profit warning pushing the stock down. the company says that the 2016 profits will be her by a 650 million pound headwind, i demand
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for business jet engines and services and wide-body models. that stock is one we are very much watching. siemens is up today after the ceo raised the dividends and announced a second share buyback to be taken as the helm of the company. --ects no growth in 2016 finally, bae systems. this stock gained on an announcement of job cuts. they say they are cutting jobs the fighterut of jet which has been weighing on earnings this year. manus: thank you very much. let's recap some of the headlines coming from mario draghi, who was in france, where he is testifying. the downside risk to the economics of europe are clearly visible. inflation dynamics are somewhat weakened. , signs of core
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inflation sustained to turn around. this is a critical point, because a target of inflation is 2%. let's have a look at euro-dollar. a very initial spike. core inflation is going to be a sustained a turnaround and ecb will re-examine the degree of accommodation. will run past september, 2016, if needed, for an inflation goal, and more work is still needed on the economic monetary union. more to come after this very short break. ♪
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manus: i'm manus cranny in london. the risks are clearly visible. downside risks, that is, for the economy in europe. mario draghi is in front of the european parliament, for he is testifying. those risks are clearly visible -- let's listen in. >> the ecb's accountability to you, the european parliament, is a central counterpart to the ecb's independence. and transparency is a precondition for your holding us to account. you're aware, following the public access request last week, released diaries of all members of the ecb's executive board, including my own for the period
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to july, 2015.14 but we will not stop there. starting next february, we will publish these diaries on a monthly basis. natural that some of you will raise questions with regards to the meetings i colleagues and i have had. after all, the whole point of publishing the diaries is to give the public a new, better understanding of with whom we are interacting. but let me be very clear. -- we have still had a clear role, we do not discuss information in known public meetings. for our monetary policy to be effective, however, it is important to meet market
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participants and also to hear their views. remarks,emainder of my i will mainly talk about two issues. first, our current economic outlook, in the upcoming reassessment of it at our december meeting, and second, as requested by coordinators, the macroeconomic adjustment program over the last half decade and the ecb's role in them. developmentsonomic in our monetary policy. confirms that the recovering data in the euro area is progressing modestly. so far, economic activity in the euro area has shown some degree of resilience in the face of external influences that tend to weaken demand. while external demand has
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receded, euro area exports, market shares have increased. the lower cost of energy and our monetary policy measures are supporting consumption and increasingly new capital formation. risks stemmingde from global growth and trade are clearly visible. moreover, inflation dynamics have somewhat weekend, mainly due to lower oil prices and the delayed effects of the stronger euro exchange rates seen earlier in this year. in addition, price pressures such as polluter prices remain very subdued. size of a sustained turnaround in core inflation has somewhat weakened. recovery will
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gradually strengthened the impulse underlying inflation process, the protracted economic weakness of the past years continues to weigh on nominal wage growth. this could moderate price pressures as we move forward. perspective, this suggests that a sustained normalization could take longer than we anticipated in march when we first appraised the overall impact of our measures. we will closely monitor the risks to price ability and thoroughly access the strengths and persistence of the factors that has lowered the return of inflation to levels below but close to 2%. at are december monetary policy meeting, we will re-examine the degree of monetary policy accommodation. input thee as one
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euro system staff projections we will receive in december. another input will be the work of our staff in consultation with the euro system committees on monetary policy stimulus that has been achieved so far, and the range of instruments available in case more accommodation should be seen as necessary. conclude that our medium-term price ability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained. consistent with our forward guidance, the asset purchase program is considered to be a particularly powerful and flexible instrument. saidct, we have always
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that our purchases would run 2016 in caseber, we do not see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below book close to 2% over the medium-term. other instruments could also be activated to strengthen the impact of the purchase program is necessary. topic,come to the second the ecb and the macroeconomic adjustment programs. topic thatturn to a the chair has asked me specifically to address, namely the macroeconomic adjustment programs and the ecb's role in their negotiation and monitoring . carre spoke on this topic here last year, so i will be brief.
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of course we can discuss more on the q&a session if you wish. to understand our role in the program work, want is to recall the initial conditions in which the program set up was established. there was no10, framework in place at the european level to negotiate in monitor adjustment programs. member stateson, turned to the imf and the commission for help, and they also asked the ecb to contribute its expertise at the time when europe needed it most. codified in the esm treaty, and by the code -- the ecjs in the confirmed its legality. in line with this, the ecb has
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since provided its advice and programs in five member states. we should not forget that the respective national governments are responsible for program implementation. the final responsibility for the program design and the disbursement of financial assistance lies with the eurogroup. 2010, three countries have now successfully concluded their programs. ireland is a particularly good example of how such programs can deliver the necessary adjustment and restore financial sustainability, economic competitiveness, and fiscal sustainability. it has shown that a country which takes strong ownership of its program can come out of it with the robust growth and a more stable financial system,
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and that eventually employment will also rebound. that theno doubt adjustment process was painful, but we should keep in mind that the adjustment would have caused -- costicant significantly more hardship in the absence of financial assistance. the programs had to address macroeconomic imbalances which had accumulated over several years in the run up risis oftenssi reflecting misguided economic policies,. as we have said before, don't blame the fire damage on the fire brigade. throughout the programs in ireland and elsewhere, the ecb has played the role assigned to it down to the treaty, to be the central bank for the euro area
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and to provide liquidity to financial institutions, including those in program countries, when warranted. ittimes, this made necessary for us to consider the progress of a program implementation when deciding on provisions of further liquidity, if the domestic financial sector was intimately linked to program success. we did so in full accordance with our rules and legal framework and in full independence. ireland,the case for and this continues to be the case for greece and cyprus. please allow me to conclude. five years ago, the program framework came to life. part of our path
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towards a german economic and monetary union to integrate. mechanism andlity the related program work fully into the legal framework of the european union. we again called for this most recently defined presence report, and what is even more important is that we take decisive steps to avoid a member state needing a program in the first place. that is why completing the anking union and embarking on new economic convergence process towards more resilient economies and achieving a fiscal union ensures both fiscal sustainability and fiscal stabilization, and they are all crucial to providing a long-term vision of where the european monetary union is leading. the commission package adopted three weeks ago is a first step in this direction, but more will
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need to follow. thank you for your attention, and i are looking forward to your questions. thank you very much. we can start with the questions. the first speaker is mr. brian hayes. it gives me also the opportunity that there will be isthat the speakers -- this and to the very important point, that the ecb president made about the accountability of the ecb to the european parliament. would also be an
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opportunity to address this all irish that colleagues have been made aware -- time in the frame of the balance, the monetary dialogue that must addressed other points. >> thank you, indeed, mr. president, for facilitating this opportunity for us to put these questions. president draghi, you are welcome, and i recognize --manus -- manus: that was mario draghi making a number of statements in terms of policy and how he sees the word. we return to that as the q&a picks up through the next 30 minutes. in the meantime, let's welcome richard johnson for the first word. nothing terribly new. richard: no, i would say it is a continuation of what we heard after the governing council meeting.
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i think what was interesting is that we had the comments overnight -- heus: the comments where said the decision hasn't been taken. richard: correct. draghi didn't commit but i thought it was a fairly dovish testimony. gone from 10 basis point deposit rate cuts in december being almost priced, to now where we are fully priced for that. if you look at the curve on the ecb data, the only swaps were pricing in another 10 basis point by september next year. participants,et there is a lot of easing coming before the end of the year. manus: i don't know whether you heard the conversation i was having with simon -- he said that if the said goes -- if the sed goes, it puts lesch
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pressure on the ecb. richard: druggie will know -- druggie wilaghi will know. does he risk disappointing the market and relying on the fed when he has come out and said that there is a lot of downside risk? i think he acts independently and does what he thinks is best and lets the fed get on with their business. manus: richard, you will join me in the next hour. stay on set and get a coffee. we have a commercial break to go through. in the meantime, join me on twitter. i have a couple big stories. aretwo key focuses rolls-royce with profit warnings, and the heavy industrial side talking about the potential for job cuts. jobs as production is
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slowing. undoubtedly the news of "on the move" has been mario draghi's rather dovish view. stay tuned. ♪
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president draghi tells european parliament that the risk to the economy are visible. the euro weakens against the dollar. rolls-royce plunges. shares sink 15%. after the engine maker has a profit warning on the climbing demand for business jet engines. and earnings beat in a buyback. lehman's shares rise -- as it plans a $3 billion buyback. siemens shares rise as the


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