tv On the Move Bloomberg January 7, 2016 2:30am-4:01am EST
anna: we are counting down to the european open. i am anna edwards along with jonathan ferro. 2:30 in newoo -- york. circuit breakers halt trading for the second time this week. regulators hold an emergency meeting but make no decision on action. oil falling to $30 a barrel as brent dips below 2004 lows. marks & spencer steps down as ceo.
retail sales once again blamed on unseasonably warm winter weather. blame the weather seems to be the scene -- theme here in the u.s. as well. anna: we have heard this weather cited as the reason for a number of global retailers having trouble. it was a very warm year. so perhaps they do have reason. we heard from marks & spencer on that subject. but we have to -- we have to talk about china. we heard patrick talking about a lack of handholding i the chinese authorities in doing whatever it is they are trying to do with their currency. we heard from nick wadhams as well in beijing. he said they botched this u.n. devaluation. we need to understand better what they are trying to do. the pboc were being accused of the same thing in august. we have the nervousness at the start of 2015 in the pboc says we will cut it by the most since
august. that fuels any uncertainty that already exists. as someone tweeted me this morning, if you were 13 minutes late to trading, you missed the whole day. anna: there goes the whole of thursday's trading day and that is having repercussions across a number of asset classes. whether you look at oil getting weaker -- all of these asset classes are being impacted. we'll will have plenty of these conversation throughout program stop for now let's get the word with caroline hyde. the worst start for chinese markets in two decades shows no signs of letting up. almost $640 billion were wiped off the stock market in 15 minutes. our bloomberg source says the securities regulator has called an emergency meeting but no decision has been made. is chinese economic slowdown among the reasons given by the world's bank for cutting the
global growth forecast. the 2016 growth will be just 2.9%. down from a 3.3% projection in june. we will be speaking to the bloomberg economist -- the federal reserve decision to raise interest rates was a close call for some policymakers. that is according to minutes from the last month's meeting. extended losses following the lowest close in seven years as chinese central bank weakens the currency rate. something like $30 in the next few days. marks & spencer's chief executive mark boland is to retire all stop he will be succeeded by steve ro who is currently the executive director of general merchandise. it came at the same time as third quarter like for like sales declined 5.8%, much worse
than analyst estimates of the 2% fall. at how the look futures are shaping up less than half an hour to go until the start of the european equity trading day. you can tell there is a lot going on we haven't mentioned the fed. this is the picture acquires -- across european equity features and we are expecting to see something negative. the ftse 100 down by one pay 8%. the cac 40 down by 2.7%. those are the losses we should be seeing at the start of the trading day. on the back of what china did with its currency. jon: we switch up the boards and have a look at the fx market. the epicenter once again is that yuan. and the pboc cutting the daily reference rate by the most since august. whether it is warranted or not, that is fueling the nervousness
this morning. the euro dollar is at $1.08, almost flat. 4.5%.dle down another the april 2004 low and copper week for a second straight day. all of this feeding into a choppy session insider -- china. the worst start for chinese markets in two decades shows no signs of letting up. the chinese csi index plunged 7.2% he for trading was halted automatically by circuit breakers. less than 30 minutes in. let's go to hong kong where the asia fx editor is standing by. robin, the chinese equity markets will always take the majority of the headlines but for the global market it is about the currency. talk to me about what is driving policy and whether this is a bit
of a mistake at the moment. heard people talk about this, i read headlines how this is a baffling decision. i think their intentions are pretty clear. what they are trying to do is narrow the gap between the onshore and offshore yuan rates. the offshore yuan trades at a discount so when this was announced today we had the offshore yuan -- the gap at about 2%. after the weekend it went up to 2.9%. then the pboc stepped in and intervened the currency and the gap is now 1.3%. their intentions are pretty clear. they want to narrow the gap. the methods they are using, the fact they are not communicating with the market, the fact they are leaving everybody guessing is causing all sorts of turmoil in asia and around the world. they areyou think that
trying to narrow the gap and get to a certain destination? are they just letting the markets in hong kong take the lead? are they following the hong kong market? do they have an end destination? announced -- they have said a few times that what they want to do is see a convergence in the rates. this is really important to the pboc. you have people in hong kong buying the currency and selling it in shanghai. there is a lot of hot money flowing in and out of the nation. goal isthat there and to create as little a difference between the currencies as possible all stop today what they did was brought down the onshore currencies 0.6%. at the same time they step into the offshore market and pushed up the offshore currencies. i think their goal is to narrow the difference.
i think their goal is to punish speculators taking advantage of the difference in rates to make money for little effort. >> robin joining us there from hong kong. let's welcome our guest, jim bevin joins us now in the studio. great to have you here. let's talk about what the chinese are doing. there inobin gangly is asia saying he is very clear. they are trying to narrow the gap between the chinese currency measures. other investors we spoke to say there is a lack of handholding, they are not taking the markets with them or explaining what their intentions are. >> we sort of expect central banks to do this and golding and we know that gets them into trouble. one of the things central banks like doing is to keep the market on its toes and keep it guessing. if you said what is the big
picture move of course china wants to have a cheaper currency. when you have a climate or environment where there is excess global capacity, the only thing that you can do in the short term to reposition yourself is to have a cheaper currency. .hina once a cheaper currency jon: it's that market forces are pushing that yuan down anyway. and the chinese are doing this like it's a pressure valve. allowing the currency to depreciate. to that point -- i have a question to ask. the pboc are not holding people's hands. when you spend five minutes looking at china you can understand the motives and why they are doing it. what is the risk that the authorities will make a mistake. >> there are three critical risks. this protection of the implosion of the credit bubble that built up in the wake of the crisis and many people find it
extraordinary that there was one state of easing a developed markets that led to a credit bubble emerging in china. that needs to be deflated all stop we to be wary of how that will be deflated and how the pb seat will behave along the way. secondly is the property market. a huge excess of building property took place and where we see a widespread decline in property prices will clearly stretch the balance sheet and lead to potential disaster for the chinese economy. the third challenge inevitably is how will it all work for the system. i for one will be watching what happens to producer price index inflation if it turns deeply deflationary. for now i am going to be very interested in the practical steps that china takes to engineer more growth. i'm convinced we will see more government spending across because domestic demand from the
economies is weak and central banks are now pushing on a piece of string. jon: always great to get james insight. he will stay with us throughout the program. up next, crude crushed. oil in new york extending declines the lowest level since december 2003. it is brutal out there on the terminal. .rent crude at $32 a barrel wti at $32.14. >> fingers a stick and glued never works. what you need is
a lot of people are talking about the demand story especially on the back of that depreciating currency in china. is that the story this morning? it is still very much a supply issue. we know there has been an enormous impetus for consumers. the annualized benefit to the u.s. household is running at $100 billion. which has not realistically led to the locks people have on wallets. savings ratios have been rising. they been sold by the repair of balance sheets rather than the tools in the shops. until we see a material reduction supply it is hard to see a stabilization in the crude price. >> you could say this is in reaction to china. >> you think it is. we've also had that data out of cushing that shows we had those record inventory levels of a key point in the u.s. supply chain.
>> i think it is significantly about supply. central in terms of the broader commodities complex, particularly the metals. america is far more important when it comes to crude. manus: what to put you on the spot. there is a deal meant to be closed out by the end of this month with bg. if you are a shareholder would you be voting to that deal or against it. >> in concept i would vote for it but in pricing all the deals and at the moment we know that most of the deals at shell are predicated on the premise we will see crude prices around $60 per barrel and we are now living in a world where that looks very distant. if you said to me optimistically if i were an oil company what my eye pencil in as a price for crude later in the year i could get $45.
i could stretch to $50 if you told misapply it would be held back. i cannot get higher than that but all of the lands are assuming there would be a higher crude price. but sibley doesn't work. for me it remains a significant investment risk. >> when do we hear those oil majors that they will not pay their dividends all stop >> there is an interesting question as to what they are going to do. cutting is one. learning to live in a world of low prices and shrinking end amand as alternatives take over and become more protected it -- competitive is a huge strategic challenge. most of the companies have had a go and say it is about managing decline overall. i think it will be absolutely fascinating. at some point will be an enormous man of money for investors to make. >> he stays with us a little bit longer. let's get our morning must-read. billionaire george soros give up a warning.
he says global markets are facing a crisis and investors need to become schists. he added that china was struggling to face a new growth model and the currency devaluation is transferring problems to the rest of the world. for a long time we talked about china exporting deflation. globalave an integrated economy. for years it suited everybody's purpose. america wanted to spend more money than it had. wanted to increase capital to ensure houses could live beyond their means. that continued into the global financial crisis and the cash flow from the central banks went to china rather than the united states. we have this arrangement between central banks and governments and consumers and producers. this is just part of the parcel. jon: up next, we will look at the potential corporate movers
anna: you are looking at a live shot in london right now. globally equity markets on the back foot and the ftse 100 expected to open down by 2% at start of trade. that is seven minutes away from now. caroline hyde has a look at the stocks we are watching. among the marks and spencer's keep management line. >> keep an eye uncertain u.k. stocks. but started marks & spencer's because they could be relatively unchanged this morning.
marc boland is one of the key areas to keep an eye on. the fact that after six years at the helm he will be retiring in april will stop but he is retiring to hand over the reins to steve rowe who is head of the general merchandise department. a lot of turning around to do because gm sales up 5.8%. worse thanh expected. we were estimating a 2% decline. food eked out growth amid a challenging market in the do talk up the oppressive nature of their trading and the fact that their margins continue to be on the upper side of the range because they managed to control costs. the fact that there will be a new change up ahead, we'll see how the market reacts. burberry is going to feel the effect of china today. we are expecting them to slump on the open. it is significantly exposed to china retailing. with the yuan weakness you turn it into pounds.
as with consumer concerns and slowing down of growth but there seems to be nervousness building into the market about the burberry results. merrill lynch saying they could fall down 3% on the like for like basis. and indeed burberry's on guidance. as another retailer today. how land on the other end of the specter -- spectrum. they are warning about footfall will stop sales rise 29% but they say they will see their pro--- full-year profit for the lower end of the range of market expectation. they warn that the streak is seeing fewer people striding the pavement. could this hurt, and. 20 to keep an eye on some of the airline. easyjet and ryanair coming out with traffic numbers. some city will rise above 1% because the traffic is pretty stellar considering the backlash and the concerns about terror attacks in france.
december lows rise overall for passengers in both airlines. back to you. caroline, thank you very much. a look at some of the things we should focus on. it will be interesting to see how anything related to the oil market reforms. how will that play out as caroline was saying for the airline and the oil majors. jon: it is quite a start to 2016. if anyone was nervous about china, even if you shouldn't be come a you're going to be because of the reaction by the pboc. a are allowing the currency to depreciate. that is the main point this morning, but it is making people nervous. there is a big thing for the market this morning. futures board up ahead of the open because it is not pretty. by 100 pointsower
manus: good morning and welcome to "on the move." we are moments away from the start of european trading. anna edwards has the morning brief. anna: china's turmoil. circuit breakers halt trading for the second time this week. regulators hold an emergency meeting but make no decision on action. crushed. analysts see oil falling to $30 a barrel as wpi sinks. to 2003 lows and the china slowdown, a downgrade their 2016 global growth forecast. jonathan: fresh commodity weakness with tt eyes going to fresh lows. 20 seconds away, futures much lower, dax down by 300 points.
what does it all mean for the open? caroline hyde has the market open. it tone: we are expecting drop across the board. this is risk aversion, pure and simple. $2 trillion of value erased from the market. that in perspective -- that is equivalent to 10 canadas of annual gdp. let's have a look at the crisis this morning. cac 40 driving a little bit lower, expecting money to leech of theseese -- out riskier assets. clearly, some concerns when it comes to equity trading. let's have a look at the other asset classes. brent, down 5%. oil taking a tumble as china acts not only to devalue the yuan but what it will spark in
chinese trading. 29 minutes of trading and those kick in. tradingall span on is really hurting market sentiment, oil down by some 5%. meanwhile, gold -- money moving into gold, up 3/10 of 1%. money is moving into sovereign debt at the moment. going into the united states and seeing yields down for a sixth straight day. .k. not up and running yet but germany down some for basis points. clearly, money moving in. let's have a look at the individual movers. view.bit of the luxury i want to see how some stocks are reacting. burberry fell almost 5%. we know the exposure to china. this is a company that went in very early, on the long-term bet
because of concerns about growth. but also concerns about their numbers. fiscal third-quarter january 14, bank of america merrill lynch already warning they could miss forecasts and their own guidance. down, after mark bullard says he is handling over the reins to the head of the merchandise department. he's been there 25 years. amid the christmas issues we are seeing downward trend in general merchandise. i wanted to get you this -- we are waiting for it to open. land, the low end of their profit guidance. anna: thank you. there isn't much rising in europe, but half of the stocks of the stoxx 600 are moving higher. let's get to haidi lun in hong kong. haidi: what an eventful day it
was in asia. the chinese markets, it wasn't a very long day. half an hour after the start of the session we had that trading halt, the circuit breaker mechanism kicking in for the rest of the day. we saw as a result relativity across the rest of asia, spilling over from the chinese market into alexa the nikkei 225, in particular going down by a strong yen as investors try to get back into safe havens, and that really drove the likes of exports and automakers lower. fairly extensive losses for both australia and the kiwis, two economies heavily exposed to china. as much as this is a story about chinese equity volatility, it really is the underlying factor of the chinese slowdown, the yuan devaluation, where that is going. we did have that yuan reference
right at the lowest since august last year when we had that shock devaluation. that has called into question where policy is going in terms of china. having said that, we did have some rare spots of green across the market, in particular gold miners are seeing a day of gains. gold climbed to two-month highs, safe haven driving that surge. sydney up. by 3% routhis commodities continues to drag with oil related stocks sinking, like rio tinto down by almost 5% today. jonathan: another rough session in asia has spilled through to the european session. 1.8%, not adown by single stock trading high. we will break all of this down through the next 60 minutes. first up, china turmoil. stocks are hoping for the second time in a week.
we will discuss the rout. then oil slide deepens. analysts see crude at $30 for barrel -- what call is that? wti at a 2003 level. later, the china slowdown ways on the world bank forecasts. the downgrade. we will speak to the economists who wrote the report. ♪ the emergency meeting has been the worst start to the chinese market in decades and shows no signs of letting up, training in the $6.6 trillion market as circuit breakers halt in the first half hour of trading, less than 30 minutes. let's go out to hong kong where robin gangly is standing by. you and i spoke earlier in the week and we talked about the amount of retail investors in this market. how significant is that when we just gravitate constantly toward this 7% circuit break every
time it trades lower? >> i think it is pretty significant. in a market where you have 80% of the investors as individuals, or when the market slides they want to get out as soon as possible. on the other hand, when it starts to rise, they come in hordes. you're not necessarily looking at a group of investors, making huge bond decisions, so that creates a lot of instability and problems for the market. far less considered decisions than a bank or institution. that is a source of concern. anna: robin, what do we want to hear from the chinese regulators next? do we want to hear about more control to prevent falls, or do we want to hear about less control? >> the thing is that this has been a rocky start to the year for people, including me, who
hang on every word that the chinese regulators don't say. we have had a lot of criticism over the past few weeks, this week especially, on how they should be far more transparent. what they're doing with the yuan now is what is driving this turmoil in chinese markets. if they could communicate a little better, say, hey, we are saying it again, what we plan to do is narrow the difference between the offshore currency, the onshore currency, create more stability, then investors may look at this in an entirely different point of view, but these guys are trying to clean up the market and leave it far more stable, bring down the risk. so transparency, but i'm not quite sure that it will come anytime soon. anna: hold my breath, then. robin in hong kong. let's welcome back james bevan. james, when you see the types of losses on european markets like this morning, down around 2.5%,
the ftse one of the better performers down by 1.9%, is that overdone? are we too fearful of what happens in the chinese stock market, when maybe we shouldn't? james: i think the key issue for investors right now is whether we are facing another panic, if we are in an extended bull market, or are we are beginning to see the first times we will experience in a bear? i think that we need to see overvalued markets, and we need to see a structural shift in the way that markets operate. i don't think that markets are sufficiently overpriced to justify anything more. to me, prices will come back up, and we will reach new highs. a lot of viewers think i have lost the plot, but this is an environment where it is clear that u.s. stocks are on crazy multiples but let's unpack the
math. amazons, netflix -- if you take the compressed oil stocks, which look at expenses because earnings have fallen more than prices, the consumer discretionary stocks are delivering very strong growth. i reckon that the ford multiple, 14.5 times earnings. it is very low interest rates. to me, this is a panic attack in what will still be a bull market. jonathan: you are in the preservation business and you talk about people waking up to see the likes of anglo america down 9%, the biggest loser this morning. where is the opportunity for you at the moment? james: if you want me to name sectors, i would say global pharmaceuticals. well-positioned to generate cash for investors. valuations are remarkably low and the context of that resilient performance.
and long-term investors will begin to look at some of the great long-term stocks that have been marked down very heavily. i will be looking at rio and bhp, not because one wants to catch it, but because valuations -- at some point, you should be thinking about committing capital. anna: what do you buy, then, in this environment? you have a talking about buying from airline stocks, and with oil prices continuing to fall -- >> of course. lower oil prices mean higher margin. there is no evidence at the moment that the global political tension a lot of people worry about are affecting the behavior of people wanting to fly. therefore we are seeing reasonable volume. we see constrained capacity. we see lower cost. we can expect better profits numbers in due course. jonathan: what does all this
mean for the bond market when we wake up in 2016? is that story going to play out this year? james: i think the u.s. 10 year yield will oscillate between 2% and 2.5%. it will be quite noisy but it won't be as disastrous as some suggest. my reasoning there that we will have continued low inflation for an extended period, and the ichoring rate of cash -- don't subscribe to the view that we are likely to have four hikes this year. jonathan: james bevan. he will stay with us. 11 minutes into the session, and it is not too pretty for european equity. ftse down by 2%. up next, we continue the conversation with james bevan and get his top plays for 2016. ftse down 118 points. good morning. ♪
jonathan: good morning to all of you in the city of london, and good morning across europe. 14 minutes into the session, not pretty. blanket red. equities down. caroline hyde has your bloomberg first word. caroline: oil has expended losses to 2003 letters. they weakened the daily reference and analysts see brent crude slumping to $30 in the next 10 days. ubs season oversupply pushing prices even lower.
china's stock regulator held an emergency meeting today during the worst day for chinese market with no sign of letting up. trading was halted for the second time in four days after almost $640 billion was wet from the stock market in just 15 minutes. it was halted by automatic circuit breakers in the first half hour of trading. the china economic slowdown is one reason to give the world back to cutting global growth forecast. they announced that growth will be lower than projected. we will be speaking to the world bank economist at 8:30 u.k. time. mark boland is to retire. he will be succeeded by steve rowe. the announcement came at the declined 5.8%,ey worse than analysts
estimated. anna: james bevan. we were just talking about the retail sector, so let's mention it. markets are performing quite well. a very mixed bag of numbers coming through, despite the very negative initial headline. -- sore trading weaker tell me about this. i know this is one of your core calls. james: to me, looking through the rubble of fiscal markets, one learns two things -- what will drive long-term profits and are we getting better entry level in price securing. is a classic case of a company whose long-term structural story remains intact. the weaker the share price goes, the better opportunity for the long-term. jonathan: question for you. i had a conversation with an economist about crude this morning that says $32 is great
for the economy and great for the consumer. as amanda manages money, did you see that oil dividend going into the pockets of consumers, spending it on retail? in the u.s., the story has not played out in the way many people think it would. -- people thought it would. thes: to be candid, evidence thus far is that the u.s. consumer wants to save the money rather than spend. the most recent high-frequency surveys are ambiguous. mastercard numbers suggested there was an increase, they confidence over the christmas period. i think it is way too early to judge. i think what is clear is that at the moment there is not a sufficient groundswell of overall demand to drive up crude appetiten is there a on the supply side. i think prices will drift, and in this environment there is significant uncertainty.
uncertainty stops people sending money. i also anticipate that we are going to have to face up to reality is of high levels of global -- th have never resolveda. we will have lower for longer interest rates, which is why i have not subscribed to the view that it will be aggressive. we will have continued low inflation, a great buying opportunity for long-term growth stories. i will be looking to buy global class pharmaceuticals, airline carriers, and i would also be those will gear for a resurgence in europe. toa: another way you want play a recovery in europe as a spanking stocks, but you expect lower for longer. do you not see some of those banks requiring a higher interest rate? james: i think markets would do much better with a steeper yield cut. to me, this is an issue of fear
being removed, greater comfort. reduction in capacity. i'd say an easier regulatory environment that many are worrying about. jonathan: james bevan. always great to have your insight, thank you. up next, the oil slide deepens. crew touches a 2003 low and the china rout rattles the commodity market. 19 minutes into the session, equities lower. ftse down by 2%. ♪
jonathan: good morning and welcome back. the headline in europe, 22 minutes of the session, equities lower, dax down by almost 3%. the big headline in the u.s. -- wti crushing lower to a 2003 low. anna? losses following the lowest close in seven years. see brent crude slipping to $30 in the next 10 days. meanwhile, ubs season oversupply pushing it even lower. let's get more with our oil strategist, julian lee. thanks for joining us. how much is this to do with china and what they are doing with their currency, and how much is this about the same old supply concern? >> i think we have had two or
three things that have negatively impacted oil in the last 24 hours. we had the inventory data out of the united states yesterday, which although it showed a significant rise in crude oil in inventories, it showed a huge rise in gasoline stockpiles and a big increase in middle this once. i think that raises fears about demand growth in the united states going forward. hard on the heels of that came which hasut of china, reinforced fears about demand growth and what this means is that there are mounting worries . added to that, we have had the imf downgraded gdp growth -- w orld bank, for 2016. all of this is painting a negative picture this year, and that is fading into worries that
at oversupply that was at least 2 million barrels per day in the fourth quarter of last year will persist. jonathan: julian, only have seen is being cut, but we haven't really seen total production roll over in a significant way. what is clear is that the fundamentals of future production have been hit. when does that actually bite? >> well, i think the shale oil producers are starting to face an immediate oil price, a real oil price rather than the hedge price they enjoyed for much of the period of last year. one can see that starting to hit sooner rather than later. borrowing will start to be reevaluated around about the end of the first quarter. will they be able to maintain their current borrowing, which
is supporting their operation? if we start seeing borrowing limits reduced, we may well see a much steeper impact in the second quarter of this year. oil people are talking about, a decline in production in the u.s. somewhere in the region of half a million barrels a day, that may just offset the incremental supply from iran that we are expecting perhaps as early as the end of next month. and that will not rebalance the market. anna: as far as calls we have heard from various analysts -- 3:30, they were talking about $30 a barrel, but we are almost there. wti at 72, 42. not that far to fall. >> it's not. and a basket of cruises even closer.
that was below $32 on monday. i haven't seen yesterday's price yet, but that is going to be much closer to $30 a barrel. anna: julian, thank you very much. julian lee, joining us to talk oil. the world bank has downgraded the global growth outlook in a new report out today. we will get details of that report from one of the authors, one of the key messages coming through around emerging markets and how strong or weak they are going to be, particularly around the brick economies, india providing something of a relative bright spot. let's have a look at what's happening in the equity markets. a bad time for anyone. stoxx down by 2.5%, ftse, dax, cac, all weaker on the back of what happened in china. ♪
jonathan: good morning and welcome back. 30 minutes into the session, not pretty. another ugly session at the start of trade. the dax is down by 3%, a proxy in europe to play the china story. it is all about china. dollar-yuan climbs higher, the pboc cutting the most since august. if you are already nervous about china you are even more nervous. yuan att is, dollar-you wan 6.34. wti at the lowest since 2003. copper weaker, down by 2.73%.
let's send it out to caroline hyde with the top stories in the stock market. caroline: no wonder we are seeing miners, oil companies, the worst performers -- every single industry group is falling on the benchmark. only about six or seven are in the green. i'm focusing on a couple but first let's get to the worst performer. pgf is currently trading at its lowest since 2011, the biggest slump since 2011 as well,.down by 13% this is a -- as well. this is a company that does consulting, anything to be hurting. analysts are planning for lower activity levels. they are cutting costs and looking to cut their investment as well. this is paying the oil area, and no surprise when you have wti branch down. meanwhile, let's focus on some
bright spots. pandora is one of the best performers, up 3%, at a record high. jewelry is what this company makes and we are seeing a 40% growth in revenue for 2015. they had a stellar christmas run, and this is the stock to be at. meanwhile, spencers is in the green after that big news that mark boland, after six years at the helm, is taking the exit. hands it over to stephen rowe. the general merchandise is a painful place for m&s. but the bright spot is that margins are looking much better. they seem to be doing well in profits if not sales. anna. anna: thank you. the world bank has downgraded the global growth outlook for this year. its global economic prospect report, released today,
highlights the global growth is projected to edge up, but at a slower pace than previously envisioned. let's welcome the report possibly offer. very good to have you. let the ask you about this cut to global growth you brought about with this latest report. when you look at what we are seeing in chinese markets since the start of this year, a great deal of new information to digest. how much of a downside risk is there to your forecast? year,5 was a difficult especially for emerging and developing countries. 2016 is said to be challenging also. china is undergoing a gradual slowdown. it is growing as expected and is in line with the tensions. in our viewhere is a low probability risk that there is a sharper than expected slowdown in china. the key risk to global growth is that if there is a slowdown in emerging markets -- not just one, but a series -- that will have knock on effects.
especially if it was ca combined with other. turmoils -- other turmoils. jonathan: markets seem to be pricing in a lot of fear about what is going to happen in em. what is your big concern about what is happening with emerging markets? is going to be challenging for emerging markets. we do expect a recovery to continue in advance markets, however commodity prices are not going to pick up strongly. they will remain low. persist.oing to many emerging markets are exporters of metals, energy, agriculture. they will continue to struggle to adjust to local monetary prices. anna: speaking of commodity prices, are you making guesses about where they go in
your research? are you suggesting stabilization, and if so, at what level? since you wrote this report you have a considerably weaker view. >> it's a sin was that commodity prices remain low. really, the supply conditions are in place to remain ample. it's not just energy, it's also metals coming off 2011 peaks. we don't expect the prices to return to their earlier peaks until the end of the decade. jonathan: for those waking up this morning, we will go straight to that headline in the fx market. the at the exchange rate, yuan and the pboc that cut the reference rate. as you look at that, is that the cause of the depreciation that concerns you or the consequences of it? >> the authorities are clearly monitoring the stock market, the foreign exchange market very carefully. the stock market correction of last year gives us some guidance to what one might expect for this year also.
at the time the authorities took decisive action to calm the this marketreally, doesn't have the deep roots of a real economy. only 10%-12% of households are in the stock market. at the time, we didn't see that big impact on the real economy. but we would be concerned if we saw a sharp slowdown. anna: so the fact that we are seeing the chinese government devalue their currency, some suggest this raises fears about how weak the chinese economy is. you don't think the chinese government knows more than anybody else, and is weakening its currency? >> it's likely a reflection of their intention to move to an exchange rate, so now in december, the exchange rate went up, and the you boot depreciated -- and the yuan depreciated. it reflects underlying pressure. jonathan: as you look at the global economy, and we talked about em in china, do you think
the u.s. can do the heavy lifting? >> the u.s. is clearly expected to pick up, and the recovery is among the most robust among small countries. however, we have yet to see how it deals with tightening monetary policy, and how much the dollar appreciates. the dollar appreciation ways on exports, and that has an impact on growth. but yes, we do expect a pickup in growth in the u.s. anna: thank you very much for joining us. great to get the details. the lead author of the world bank global economic prospects. up next, we will talk about retail. whether the unseasonably warm weater hits retailers. ♪
jonathan: good morning and welcome back. clouds over the city and european equity markets. 40 minutes into the session, the dax down by 3.2%. it really is difficult to pick out a single headline of this market. the south african rand at a record low, wti price factoring in the lowest oil price since 2003. caroline hyde is trying to wrap it all up. caroline: get a shot, thank you. morgan stanley has announced an executive shakeup. the man who led the retail brokerage exits as another i
nameds resident -- is named president. fund -- the spokesman declined to comment. an insurance company falls below its 2013 price. netflix shares jumped more than 9% as its online streaming service went live in 130 new countries. netflix was the best-performing stock in the u.s., after getting more than 130%. that's your bloomberg business flash. anna: breaking news coming through on barclays. they plan to close most of their sssh equities busine in asia as they are pushing through cost cutting, according to people familiar with the matter.
50% of the positions and asian equities may be eliminated. the move comes in light of the slowing chinese economy. pressure is on the stock market and this is a business that has been trying to retrench its investment banking operations for a long time. 8:41. coming up, let's talk about retail. after a slight drop, shares are trading up on the news that the ceo mark bolin will retire in april. in as it was made after the company reported a worse than expected slump in closing sales. joining us now is andrea felson. great to have you. after almost six years in the job, he is going. a bit of surprise to the market, but shares are trading higher. >> yes. bollins had a mixed relationship with the city. made some moves on profit margins that he hasn't managed to get sales in the right direction, and really, for the last couple years, the
writing has been on the wall, because sales -- home furnishings just don't seem to be going in the right direction. jonathan: andrea, let's wrap it all up. we have had the retailers of the u.k., m&s had some dreadful closing numbers. can you really dig into the numbers and find out how much it was? >> clearly, there was an impact from the weather. s are worse than forecasted, but i don't think you can blame it all on the weather. particularly m&s, they just can't seem to go in the right direction. there are improvements in some of the clothing ranges. there are parts of the range that are just stubbornly weak, and the new chief executive really needs to get to grip with the range, particularly the women's clothing, because that
is still the poorest of their business. jonathan: andrea, thank you very much. breaking news. for those of you monitoring the situation in china, you will be talking about what happens to china fx reserves. at the end of september, they were at the $.3 trillion. -- at $3.3 trillion. anna, this is interesting. andfx reserves are dropping a lot of people will be talking about how much influence the chinese are having on the onshore rate to stem the decline. they are selling down treasuries. i would make is that to see that convergence between the onshore and offshore rate, they will have to stop doing that to some extent. but at this point -- but it does point to the fact that they are using fx to reserve the decline. x reserve number at $3.3 trillion, less than
where it was estimated. perhaps one of the reasons why they are allowing the currency to slip a little bit, they had to spend a great deal of money trying to prop it up. we saw the first-ever annual decline in the fx stockpile. they had to sell so much of that for them to prop up the currency. this very much ties into where we started the morning, devaluation of the chinese currency, intervention -- what looked like intervention -- in the offshore market over in hong kong, to try and stop it from getting too weak. this is a very topical issue -- how week do they want their currency to get? how much convergence to they want to see between those two measures? jonathan: let's get some of the market boards up. 45 minutes of the session, equities much lower. the dax off by 3.27%. the fx market is all about china, dollar-yuan, the pboc cutting reference rates by the most since august.
that is a concern and you see it reflected in the equity market, specifically for the dax, which seems to be the proxy for whatever happens in china. let's have a look at the fx market. lower,lar-yuan pushing and you see reflected in dollar-yen. that's not just a safe haven trade. we spoke to a lot of strategists, and that stronger japanese yen is a reflection of the depreciation in the yuan. that is where we see the stronger japanese yen. that is the story there. also we are talking about crude this morning as wti slip to the lowest levels of 2003. what does that mean for the fed? that's up next. what some policy makers are saying about their decision last month to raise rates. we will talk central banks, next. bridge crew down by 3.7%. good morning. ♪
jonathan: good morning and welcome back. 49 minutes into the session. let's get you updated on the markets. stock 600 down by 2.9%, dax down by 3.36%, ftse down by 2.5%. miners on the ftse down by 155 points. the concern is china. switch of the board. pboc concerned about the country and the fx rates, refusing to take much notice, cutting the yuan reference rate by the most fuelinggust,
nervousness that already exists about the underlying economy. yollar-yuan pushes higher, up b 5/10 of 1%. brent crude. and yourst consumer forecast is depreciating -- p eople will start wondering what you are in for. that's not just a supply story this morning. down another 3.83%, brent crude at 92 wti, the lowest since 2003. that your update on the market. here's a look ahead to what's coming up in the day. no shortage of eurozone economic data for this morning, consumer confidence numbers at 10:00 a.m., unemployment coming at the same time. retail sales are also coming up at to :00 a.m. u.k. time. we are really going to get a grip on the state of the european consumer. anna? the federal reserve's
decision to raise interest rates last month was a close call for some policymakers, according to minutes from the last months fomc meeting. they show some were worried about too low-inflation. joining us now is richard you. good to see -- richard jones. good to see you. the decision was an animus. -- was unanimous. >> i think there was really a heightened concern about the fed being able to reach the inflation goal. and i think the interesting thing from the minutes last night was that the two things that they highlighted as a concern for them in reaching the inflation target were strong dollar and weaker oil and commodities. since that fed meeting, the we knowp about 1%, and what has happened in oil and commodities. e concerns that they
highlighted last month are actually coming to fruition. you can see where would have been a close call for them. what if wemyself, hadn't had that fed meeting in the middle of december, but rather january? with that decision has been different, given the dynamics? jonathan: as we look out to the rest of the year, the federal reserve is looking for interest rate hikes. stanley fisher would call it the ballpark goal of our. -- of four. is a going to be another year where the fed is wrong in the market is right? >> well of the first week is anything to go by, i think the fed will gravitate toward the market. it's early days, and i think there are a lot of things that could happen, but the first indications this year that the market once again is probably on point and the dots will have to gravitate. anna: how nervous are you about what you'd see in -- what you
market?he chinese we spent a lot of time in august talking about how much we need to divorce what's happening in the chinese stock market versus the real chinese economy, and working out how much read across there was. are we still going to be dealing with that? do we need to still put china in some sort of box, say that it's not as great as we thought? >> a, it's too soon to tell. if august was a one-off and we didn't have a we had this week, we start to feel a little more comfortable. but i think the initial slide in equities in china was partly due to the fact that the pmi numbers really weren't brilliant. some people, argue that we have a stabilization but at low levels. there's some sort of disconnect between the real economy and what's going on, i don't think that' investors are
seeing that. just from a macro perspective i think it makes people nervous, and when investors are nervous they acted defensively. jonathan: another thing that makes people nervous if the communication policy of the pboc, if there even is one. back in 1984, when the federal reserve didn't have a statement, they worked so hard on communication -- policymakers trying to communicate with the federal reserve is going to do. sometimes it is overkill. other people would say it helps. has the pboc got this right, wrong? >> remember, the one thing we need to remember about the pboc, they will do things their way for what they see as best for their economy. maybe set here and say, the communication strategy is a what it should be, but the ecb communication strategy has been criticized, same thing with the bank of england, same thing with the fed. the bank of china isn't alone in
facing these criticisms, and i think central bankers do what they think is best. it's not always the right thing, but at the end of the day, i think the pboc is doing what they think is best. anna: how week do you think they want their currency to be? i noticed that goldman sachs said yesterday they didn't see much more downside for the chinese currency. what is your expectation? >> i expect that whatever the numbers going to be, and i have no reason to doubt that 10% is a reasonable number, they will want to smooth that process. they don't want to happen to quickly, they don't wanted to happen in a way where they don't feel they are in control. they will smooth the process, do it in an incremental way. they did some in august and some now. perhaps they will do more in a few months. anna: richard, thanks for joining us. richard jones. jon, let's go to you.
european stocks extending their drop. jonathan: another remarkable downon, 55 minutes in, dax by 3.7%. just another morning about china, and this is a trading off the back of whatever happens in shanghai, this is off the back with the pboc cutting the reference rate by the most since august. it's fueling concerns once again, isn't it? anna: when you put in the circuit breakers, things that are supposed to calm nerves, make people feel better and less nervous about what is going on. the same week they brought those in, that level of nervousness reached new heights. jonathan: absolutely, and you see that affecting the amount of retail money in the market. i'll tell you the story in the commodity market this morning. brent crude down by 4%, wti at 32.56. that is a 2003 low. stay with bloomberg. "the pulse" is coming up next.