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tv   Bloomberg  Bloomberg  November 16, 2015 12:30am-1:01am EST

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anna: welcome back. you are watching a special program from our london headquarters. it is half past 5:00 in london. let's go to paris now where guy johnson is standing by. guy: thank you very much indeed. let me bring you up to speed with the latest developments surrounding the paris attacks. french warplanes have been active in northern syria, bombing raids taking place overnight in the northern city of raqqa, and islamic state stronghold.
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officials say the attacks were ordered in syria. the islamic state says the operation was payback for france 's meadow -- military interventions in the middle east. brussels is the early focused of investigations as police say two of the attackers had links with the city. two rental cars from belgium were used in the attacks, and seven people have been the taint in connection with the investigation. and manhunt continues for salah abdeslam. police believe this 26-year-old man was involved in the attacks and consider him dangerous. the paris attacks are dominating the agenda of the g20 summit in turkey. president obama and putin talked one-on-one for more than an hour in turkey, and aides say syria was the main subject of the conversation.
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german chancellor angela merkel said refugees fleeing the conflict in syria must not be blamed for what happened in paris. let's get you the latest market reaction and get an understanding of how markets in europe will be reacting when they opened a little bit later. nejra cehic is standing by. we are seeing classic risk aversion across the markets. i'm going to start with the europe. that has dropped to a six-month low versus the dollar. there were some questions. analysts were split on how the euro might react to these attacks in paris. of late, they've had the tendency to act as a safe haven, but not today. it is down, erasing its first weekly gain in a month. where investors have been moving their money, into the traditional safe haven assets. yen, rising against
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its major peers. if you look at u.s. treasuries, advancing for a fifth day, the longest winning streak since july. we are seeing gold climbing for the first time in five days, up as much as 9/10 of 1%. brent crude is up more than one thing percent at the moment, although this morning, it's been shy of $45 a barrel. with crude oil, there's been a question over how that might move, but what is driving the geopolitical risk. .tse 100 risk, down 7/10 of 1% it looks like the equity markets in europe and the u.s. might open lower. back to you. thank you very much. you are up-to-date on what is happening with the markets from paris.
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let me hand it back to you. g20 summit go to the in turkey where the paris attacks have been dominating the conversation. ryan chilcote joins us. give us a sense of how this is -- has affected the political leaders and business leaders who have gathered there for the g20. >> it's really had a dramatic effect, most notably the french president is not here. as we gear up for the climate change talks in paris, it would be helpful to have him here. he's not here because of the attacks in paris. the host, the president of ,urkey, president erdogan deeply affected. turkey had its own terrorist attack a month ago in which more than 100 turks died. he canceled a cocktail ceremony, cocktail party he was supposed to attend. he band music. he began the g20 with a moment
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of silence. he has been speaking about the need to finally come together to fight terrorism and cooperate together. christine lagarde, i saw her at panel discussion. she talked about how she was disturbed by the events in paris, and she asked the people in the room to call anyone they know in france and express their sympathies. the lack of hope is fueling terrorism in places like paris. many of the leaders were just concerned about their own staff. have a listen. >> we not only work in paris. that is our headquarters. , and i'ml very struck
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actually canceling my trip to , going back on monday to join all of our teams, all of our staff. we have already secured where we work. we are taking strict measures. the most important thing is that we have to continue. life has to go on. we cannot let them beat us. let them make us go back with fear or disrupt our lives. ryan: we spoke with martin sorrell, the ceo of wpp. he was trying to verify if all of his staff were ok. and we spoke, one of the family paris, of an employee in 5000 employees in france, was still missing. he was very concerned about that. it has had a very powerful
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effect on both political and business leaders. anna: ryan, it's early to say, but what are the business people you are talking to saying about the effect on commerce? it sounds their concerns are much more short-term at this moment, but looking ahead? yeah, well martin sorrell talked about how this is going to rattle consumer confidence in france. he was concerned about that. he went as far as to say he's against the idea of the fed raising rates, and this is more of an argument. this adds to the argument of the fed not raising rates. it is true that western europe is becoming a more dangerous place. that is unsettling. there are so many things going on in that space. that was his contribution. we heard from other people , in talking about what it means for the airline industry -- i spoke with the largest shareholder in europe's largest and he was saying,
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this isn't going to shake his determination to increase his stake. he still believes in travel. people will shake this off and continue to do that. he said they need travel like food. i had a very interesting conversation with the chief executive of turkish airlines. these guys really are at the forefront of studying this kind of stuff. they actively, he told me, study how terrorism affects their airline. they fly to a lot of hot spots. he said, of course it has an effect. have a listen. it affects the airline. it affects business. it affects tourism, and egypt's tourism will be battered a lot by what happened with the russian aircraft. ryan: here is the key thing, he said. if there are repeated ask of terrorism, what they have seen over the years -- they have seen this time and time again --
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tourism comes back in the matter of a couple months. it is only when the airlines themselves are targeted, like in the case of egypt, or you get repeated acts of terrorism, that it really shakes the consumer. perhaps a little bit of a surprising picture from the ceo of one of europe's largest airlines. anna: ryan, thank you very much. i'm sure those who belong in the tourism industry in paris or hoping people's memories are short. the conversation for another day perhaps. joining us on the line from brussels, we are joined by mark peavy knee, a former eu ambassador to turkey and syria. thank you for joining us. as former eu ambassador to turkey and syria, how will this change relations between the eu and turkey? mark: i think we have now a the middle east
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war has come to the eu. attacks,ame knife rifle attacks, car bombs. for the first time on european soil, we are seeing multiple suicide bombers. this is entirely new. are shocked.eople the belgian connection is not new. have a war from within. it is triggered by people in syria. some people may have come from syria through turkey, but we have many people in france, in belgium, and elsewhere who have gone and come back to syria, to and from syria, via turkey. the reinforcement of security measures will affect the relationship with turkey. this has been discussed yesterday already, and this is now going to be a very big factor.
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so far, turkey was perhaps less active against islamic state, and certainly not totally sealing the border. this is going to be a huge request from the europeans on turkey. anna: you are talking to us from brussels, marc, and you mentioned the belgian connection. explain that belgian connection to us and paint a picture of the mood in brussels right now. marc: well, people are in shock here too. the belgian connection was known in the sense that it is much easier here than it is in france to procure weapons, and especially assault weapons. we have seen that connection in the january attack in paris before, and there was, of course, the terrible attack on the jewish museum last year. now what we are seeing is it's not only a connection. it seems to operate as a base. planning may have been done
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here. targets may have been chosen here, and of course, a lot of people have gone through the border. the immediate effect is that you more important cooperation between france and belgium. a meeting ofu have the interior ministers of the eu to look at various measures, restrictions on travel, certainly weapons legislation, and certainly also the infamous on passenger records. this has been in discussion for years, and we are nowhere near it now. it will have to happen. anna: what do you think the impact will be longer-term on the arrangements around europe? politically, the schengen treaty is now under immense pressure from politicians in
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several eu countries. of course, it's not going to disappear overnight, because there are immense economic benefits, as we know. trade and tourism is promoted by the schengen agreement. it will be, unsustainable for governments like france, for example, not to take any measures. also, remember very soon after the paris attacks when france i think itborder, was within two hours or so, one terrorist was intercepted at the border, so that will probably remain for a while. maybe other countries in the eu will take security measures. anna: thank you very much for joining us, the former eu ambassador to turkey and syria joining us on the line from
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brussels. let's cross to dubai and speak to and to bargain, bloomberg's managing editor for international government. he joins us from dubai. good to see you. what has the reaction been in the middle east, and what role can the nations of the middle east play? a complicated question, i guess. today, you were showing images of landmarks around the world let-up with colors -- lit up with colors of the french flag. that in dubai. leaders across the region have expressed their condolences. what is a little more unclear is what exactly can be done. if you look around the region, saudi arabia and yemen are involved. saudi arabia and the uae are involved in their own war in yemen. egypt just had its own terrorist attack. iraq is basically begging for financial assistance, and is dealing with its own war, and
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turkey, which is the best place of all, at best has dual interests and has had some kurdish pkk targets. it's a bit of a conundrum for the west. somethingt to do about the islamic state, who can you count on in the region? that's an open question. anna: what is the conclusion you've come to about the islamic state's capabilities after what we saw in paris? what has changed in that respect? andrew: what has changed is pretty obvious. if you step back a little bit, we had the bombings in ankara. we had the bombing over sinai. we had the bombing in beirut, and now paris, and they have all been attributed to the islamic state or claimed by the islamic state, so obviously, the group's capabilities have grown. at the same time, it suffered serious setbacks in syria and the middle east with the loss of
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sinjar this week where they found mass graves of yazidis. the group has gone from establishing its own caliphate, as it were, in syria and iraq, to being on the back foot, suffering losses. ande this is lashing out, some people are saying it's a sign of weakness. it could be a bit of both. anna: what is next for the war in syria? to the talks in vienna give you hope about diplomacy, or do you see what the french are doing overnight with the intensification of bombings and reached the opposite conclusion? -- reach the opposite conclusion? andrew: the talks in vienna exceeded everyone's expectations. certainly a week before them, we have had these things for five years, and nobody was expecting much. they came out with some concrete steps. we will have to see how much will be accomplished. those were big steps. those were easy steps.
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now we have to decide, who are the legitimate opposition? who are terrorists that everyone can agree on? those are big questions. what are we going to see in the short-term? we saw it last night. we saw hollande follow-through through on his promise to bomb the islamic state in raqqa. we will probably see a lot more of that, and medium to longer term, you've seen the questions about whether troops on the ground or needed -- are needed. i don't think that has been defined yet. we had that meeting between obama and proven where they spoke for 45 minutes, -- putin where they spoke for 45 minutes. anna: thank you very much, andrew barden joining us from dubai. 6:47ime in london is 5:47, you're watching in paris. french warplanes have bombed targets in the northern syrian city of raqqa, and islamic state
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stronghold. officials say friday's attacks in paris were ordered from syria. the islamic state says the operation was payback for france's military operations in the middle east. the head of the imf christine lagarde said her staff had recommended the chinese currency be added to the special join bright market. standard chartered estimates the move would yield was in $1 trillion to chinese assets in the next five years. japan is officially back in recession that came after its economy. contracted in the third quarter and investment fell. gross domestic product declined an annualized 0.8%. a 2%mists estimated decline. let's get more on that story. we are joined by bloomberg's jodi schneider who is in tokyo for us. what were the key factors in this worse than expected gdp reading? jodi: the business investment
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number was a big part of it. it was down 1.3% from the previous quarter, and that shows companies are not investing in the economy, even though they had record stockpiles of cash, and many of them, very strong stock market returns. shrunk, whichso is another big factor in the decline. anna: is the recession expected to be long-lasting? this has been for four or five years, the second since abe took charge. jodi: right, the second during abenomics. it's actually not. there seems to be a number of indicators that show e economists that this could be a short recession. we could be showing growth again in the quarter in which we are in, especially if the u.s. and europe recoveries continue. one of the interesting factors is that inventories, even though they shrunk in the quarter, and that did not help gdp, the fact
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that companies are using up things in their warehouses and things that they've stockpiled could be a good sign, meaning they will have to produce more going forward. anna: indeed. there were some silver linings come even though this was considerably worse than expected. what does it do to the debate around abenomics? does it tell us anything about how successful it is proving to be, and what does it mean for quantitative easing in japan? jodi: this obviously is not good news for prime minister abe. he is all about growth and wanting businesses to invest, and they are clearly not doing that. however, it gives them a chance to do more stimulus. the bank of japan meets later this week, and they could have further easing, although do not necessarily expect that. they are indicating they are looking for an inflation target, and they are pretty happy with the movement towards that target. it's an open question whether the bank of japan will act later this week.
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anna: thank you for joining us, jodi schneider joining us from tokyo. let's stay in asia with the news over the weekend that china's imf'ss set to join the exquisite club of reserve currencies. staff have recommended that the yuan be included in the drawing rights currency market, along said the euro, the pound, and the yen. let's get more from beijing. tom, too good to see you. this news broke late on friday in european time. is the move likely to be seen as significant? is it's going to result in a significant volume of funds flowing into china? tom: that is the big question. the interesting thing about the imf decision is it doesn't necessarily drive any shift in fund flows. central banks don't have to move funds into yuan. i think the argument rather is that this is going to be a catalyst, a moment where managers of global foreign-exchange reserves, big
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bond funds, corporate treasuries , marie the currency composition of their fund and think if they need a little bit more of a currency whose economy has such a large weight in the global economy, and where yields look attractive relative to low returns available in the u.s., major european countries, and japan. anna: what does this mean for the perception of china as an investment destination right now ? will this override managers' concerns about risks in the chinese growth story? tom: i think that's another key question. i think structurally on a long-term time horizon, there's a case for moving more funds into china to reflect china's weight in the global economy. i think the big question is, is this the right moment? one of the big stories for china this year has been the rise and sudden fall of the equity market , perception that investors are
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heavy-handed in their attempts to stabilize the market. as we push into the final months of the year, there are concerns about a bubble in the bond market, very low yield spreads, rising leverage, and concern the bond market is expensive and isn't pricing in the risk that is in china's economy. if you look at the cnh, the offshore yuan, which gives us the clearest read on what the markets are thinking, the first reaction we have seen today is for the cnh to weaken slightly against the dollar. that's just an early reaction from the market, but it certainly doesn't suggest that fund managers are going to be moving aggressively into the yuan. anna: thanks for joining us, tomanna: orlik. let's bring in sony kapoor. we've just been talking about the global economy, the japanese and chinese situations. how will we weigh geopolitics into the current situation?
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will it depend on whether we see ground troops into syria, whether we see that kind of engagement with the syrian story from the west, and what are the chances for you? sony: i think the chances of ground troops going and has significantly increased. exactly what the composition will be, the terms in which they will engage, that is unknown, as well as the timing. i terms of the economics, think the impact of the intervention in syria on the global economy from simply an economics percent of is going to be limited. -- perspective is going to be limited. perception of our global risks ally and the relative balance between powers in the middle east, that might have some macro impacts. there are bigger macro threats to the global economy, the deflationary threat, quantitative easing, which is firing and every major economy around the world, becoming less and less effective, including in
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the eurozone, for example, the fact that with the chinese inclusion in the sdr, there's going to be a potential scramble for safe chinese assets, which are not necessarily in great supply. we have huge liquid government bond markets in the eurozone and japanese yen, but not so much in the chinese yuan. that rebalancing your analysts or talking about, where the strong economic case for greater exposure to future chinese growth, the assets one would go in for to get exposure would be different compared to rebalancing reserves. anna: it's interesting to look at the yields. it's interesting to see how high the yields are on chinese government debt, compared to western counterparts. in terms of what this does for the global macro story, do you think that the ecb will have to do more than it previously thought as a result of what could be a retrenchment in parts of the eurozone economy as a
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result? sony: yes. signs are very clear that the ecb does intend to do more. whether this means going further into negative interest rate territory or changing the composition of the quantitative easing it is doing, it's potentially going to be both. whether this will have a big impact or not, i think the answer is it's unlikely to have a major impact, but much more it would be some sort of fiscal policy intervention, some intervention around spending or investment in particular. here, the plan that there is going to be investment, partly to compensate for years of underinvestment, that hasn't quite taken off. anna: some say a lot of money is going to be spent on security and not on the fiscal side. sony: if it's going to be on security, that can provide stimulus.
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accommodating refugees, some of the spending will have a mildly expansionary effect. anna: thank you very much for joiningus, sony kapoor us. we will be back after a short break. plenty more from paris. ♪ . you used to sleep like a champ.
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anna: stocks in u.s. equities features decline. is,ce takes the fight to launching airstrikes and syria. european police have belgian born suspect. return to recession. japan's third quarter contracts by more than expected. what is next for all they not mix -- all they know mix -- abenomics? ♪ anna: i am anna edwards.


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