>> headed for another week of heavy losses, approaching their territory. crude claims its latest victim. almost $5 million off the shale operation. and goldman settles, the bank will pay more than $5 billion to resolve a probe into the handling of mortgage-backed securities. ♪ manus: welcome to countdown. it is friday morning.
i am manus cranny. roaring in the woods, coming across the equity markets this morning. this is the performance on the shanghai composite, year to date. down eight team .9%, the worst literally index, anywhere around the world. nevermind the bloomberg terminal. down over 8% this week. we are heading towards their territory for the longest losing streak since october of last year. despite the jump in a credit numbers in shanghai this morning. yuan purchasethe getting a record. they doubled to 700 billion in december. in terms of the rest of the risk markets, money coming out of equities and oil. let us take you to the other markets. this is how you are trading day is shaking up. real going into the yen,
concern that it is rising against all 31 currencies across the world, even though governor kuroda said they are ready to do more with a lot more. the third weeks of losses, down 8% on the crude. as i ran gets back in the market, we take a look at those very shortly grade we are seeing a real sort of pressure on these markets this friday morning. let us get the first word. nejra: goldman sachs has agreed to settle a u.s. probe to the handling of mortgage-backed securities for about $5.1 billion. that would cut fourth-quarter profit. a closes out a year of record legal litigation costs. expected to take a write-down of $4.9 billion on the value of its u.s. shale assets. cutting capital expenditures as it grapples with a slide in oil prices. the next safeguard against the
collapse may be to abandon its decade-old pledge to maintain or raise its dividend. china's view of credit surged the most since june, as companies increased borrowing on the corporate market. yuan into 1.8 trillion december. that underscores a shift away on reliance on the state for funding in the world's second-largest economy. and chinese dots are headed for a third week of losses, sending the shanghai composite to a four-month low grade and lost more than 17% so far this year, amid lingering concerns about the government's ability to manage the economic slowdown and evaluation. that is your first word news. for more on those great, customers can head to top go. is standing ingles the bear market territory. take us to the interesting moves.
david: i think what is also astounding about that is just how quickly we got here. i mean, normally, a downturn takes anywhere from six months to three weeks -- three weeks from late december, just before christmas, to get to these levels. turned out ok. we had a bit of a tailwind from wall street on thursday, midmorning here in asia, things started to turn grade the japanese yen was really the measure of risk aversion, it was weaker. it is now stronger, as you just showed. of 1% rated this to give you an indication of where he are at the moment, we are pushing towards fresh three-year loans. putting that into context with the last time asian shares were at these levels was right before japan embarq on the economics, right before this multi tiered equity bull run. we have really come back quite a lot in just the last 10 days or so.
nine days out of the last 10, asian equities are falling. we have a few bright spots here, but these are the markets that matter -- the big ones: you have the most. i think what we are seating is that some of them after the pickup good names. valuations, at these levels, that is when you see by ends. but the problem is people are selling on the value, which does not give a good indication of risk appetite. again, another down day. back to you. manus: david, thank you. let us get to one of our top story this morning, the oil rights claims another victim. having to make a heavy write-down on u.s. shale assets. with more on the story, caroline hyde. caroline: as if it could not get any worse, the commodities slumped hurting you on the metals front, and while it is the biggest international investor in u.s. shale, having $5 billion into
terms of a write-down on u.s. shale assets. this is also seeing a cut, we are seeing investment under review. this asset for $20 billion in 2011, now worth just eckstein billion dollars. clearly, chelating to $8.7 billion across the board. this is a whole array of woe. you have the deadly down breach in brazil. the company's top earner, remember, slumping for three quarters since 2011 in oil price. that has to hurt. now oil is some $31 a barrel, no wonder they are feeling impairment during the big question, manus, will they have to cut their dividend? when it no longer be progressive? analysts said we could see it halved. manus: not the only ones feeling the pain. caroline: exactly right.
they are putting a freeze on the pay, and we had the likes of the trading house in japan taking a hefty write-down to its nickel assets. also, the pain is widespread. we know that this oil selloff actually is dragging every sector down. that is the tail wagging the dog that is the market. all companies and analysts starting to recalibrate where they see earnings are actually going to go. there you have citigroup cutting s&p 500 and the earning outlook for 2016. he is the chief u.s. equity strategist. 150sees the s&p 500 now at 2 by the end of this year. that is up 12%, but it is a 2% decrease in what was thought grade he thought the s&p 500 would rise 14%. 12%ave come up to
increases. he is also saying that profits are not going to be nearly as improved as they were before. manus: yesterday was israel going down, caroline, thank you very much. let us bring our guest host for the next 45 minutes. he is chris wiley them of the cio. let us talk about this story. it opens up the much more expensive discussion now, which is our progressive dividend policies which something that have to be laid to rest in the interim period for real for the miners? chris: the thing about dividends, once you get progressive policy called into doubt, when you start to get being talked about in the market, there is a strong tendency for it to become a self-fulfilling prophecy. a disrespected in the share price that it gets reflected in the share price. and if it is not supporting the
dividend, and this case is in question anyway, there comes a point when the management of the companies look at the yields and say what is the point of sustaining this dividend? the market is not rewarding us for it. let us cut the dividend's/ s. goesometimes, share price up when the dividends are cut because there is that relief at the moment has passed. manus: do you think that 2016 inl be a fat year for miners terms of dividends? chris: i would say that were it not for the case that someone could have said that in 2014 and 2015. having said that, i think the stars are beginning to a line. capitulation,tain and i think that the way in which the oil price is behaving, it has some of those characteristics of a one-way trade. that normally occurs just before the floor is finally found.
having said that, you know, one of the problems we have got is that the oil store is full. there is nowhere for people who want to come in and take a punch, by the oil and sell it later at a high price. they have nowhere to put it. manus: hold that thought. that brings us right into our morning must-read. this is for our viewers and those at the terminal. it makes sense for the ipo. this is andrew logan, one of the think tanks -- a not-for-profit think tank. the most obvious way to read it is that they are starting to see the writing on the wall. the age of oil is coming to an end. they are looking to cash out while they can. his refers to the saudi-iran ipo talk around that. oil, itead the notes on
is always -- it is interesting. you use the word recapitulation again. fromon would be the theme andrew logan. but i think of norway, andrew dabi. incrediblender pressure. how much repatriation of funds is part of the equity move in 2016? chris: it is a big issue, a slow-moving story. which is out there, but very difficult to quantify. it is all happening under the radar. it is definitely one of those things which is influencing the market. i put it all under the heading of the unintended consequence of the oil price fall. a fall in oil prices is generally seen as a good thing, particularly for western economies, the most indebted ones. i think everyone understood that. but an ever falling oil price, down to potentially a rational
level, has unintended consequences. one of them now is the shift in savings around the world. so clearly, the savings glut that had been in the oil producers being reallocated. in the long-term, that might be a good thing. but in the interim period, it is directed. manus: it will pay through. pay drop, there is also the through the american consumer. and to industry. that will come through. we can get through the bigger causes when we come back. that is chris wylie. credit, a surge in new does little to reassure investors in china. the shanghai selloff continues. are you? ♪
nearly 6:15 in london. let us get the bloomberg business flash. : an expected take to take a write-down of nearly $4.9 billion on the shale assets. they're cutting capital expenditures as it grapples with a slide in oil. the collapse may be to abandon its decade pledge to maintain or raise dividends. goldman sachs has agreed to settle a u.s. pro into the handling of mortgage backed securities for about $5.1 billion. that would cut fourth-quarter profit i about $5 billion, closing out a record year for legal costs. syngenta has thrown support behind a potential deal with china national chemical. the board met this week, and voted in favor of pursuing advanced takeover talks. china last month made an offer,
$48 billion. that is your bloomberg business flash. manus: china has a new measure of credit, the most since june of last year grade this, as companies increased borrowing on the corporate bond market, away from the state banks for funding. good news, some would say great let us get to hong kong. scott is standing by. what do these numbers tell us about the economy, does it give us hope? malcolm: it certainly does that. it is a bit of a mixed signal. there is a big surge in the aggregate, the broader measure very encouraging. by a big surge in banking, showing that the demand for credit is out there, especially the non-state backed corporate. he also saw a big rise in corporate bond sales, and that went through last year grade corporate moving away from the
state banks, looking to markets finance operations. there are good signs. there was continued reluctance, it seems, the part of the big banks to lend. loanssaw on the new yuan come a bit of an miss from what economists were forecasting. in that context, it makes some kind of sense, given that the government is looking to cut back on some of the overcapacity in the economy. in its own line with what they are trying to get rid of zombie companies. that means it could continue to rise. manus collegiate gdp numbers next week. what is the consensus view? malcolm: that 6.9% is in contrast to the stock market, which would indicate things are really falling apart. 6.9% for the full year, that is a steady bit lower from the previous year grade no panic yet, the fourth quarter number also expected at 6.9%.
manus: malcolm, thank you very much. is still with us. trying to look at china, and we talk about it on a daily basis, here we are. which is the real economy, credit is jumping by the most in's last year. ok, the new loans were not as good as they thought. you have the hysteria of market and the real economy. what are you convinced about in china? chris: i am pretty convinced that i do not trust many of the statistics coming out of china. the more official, the less i trust them. i think this question about credit, neatly summarizes the slightly schizophrenic attitude of markets to china at the moment. china isd, the bind then. on the one hand, because of the concerns about growth, people are reaching for the old remedies -- which are get the economy a boost, give it a bump in credit. is that-term story
there has been too much credit creation, too much surplus capacity. which is not productive in earning a decent rate of return. reaching incremental units of credit, you have less umph provided to the economy. you have this conflict tween the drug,term clamor for the and the long-term cold turkey. which the economy needs to go through. manus: i found it fascinating, onberry return to growth mainland china. i know it is not the best we all cannot afford a burberry trench coat. i cannot. the markets are looking at 16%. i am wondering, our job is to look through the tea leaves. what is that i you about china story? chris: it tells you that short-term the bad news is getting reflected in the forecast. and i think that is -- no doubt
we will get onto the broader discussion about what is going on in the markets -- but it kind of epitomizes the point that we may be starting to approach. just in the short-term, people are probably overshooting the mark in terms of how bad things are. manus: that is the theme that is coming through from a whole variety of managers. we have global earnings downgraded from this bad in seven years. most since 2009, i wonder -- in my well, the buy side tea, is not to read the leaves. but also to look at the market as a mechanism, looking at sentiment in the marketplace. canmarket tends to be -- it only think about one thing at one time. at the moment, we latched onto this very bearish perspective.
look, if their stuff going on at the moment which is concerning? you know, is it going to be a case of one leads? absolutely not read this needs to be worked through. and i don't think right now it is as bad as people are starting to discount rate everything you say, though, about the earnings backdrop is correct, of course. understood and known about, in the pipeline for a long time. it is heavily influenced by what is going in for the commodity sector. manus: a healthy adjustment, you have been on a rocking chair for equity markets -- 0%. it is natural, healthy, disconcerting for my pension fund, but it is healthy. chris: disconcerting -- i have been using that word. healthy, potentially, as well. it certainly raises
expectations. and we always go through this process when these things happen, which is that people start one set of assumptions, then it moved to another. and a mechanism for reflecting that is price. down, are coming expectations are being lowered. eventually, they get to a place where the expectations are less realistic. actually, they are too low and we overshoot them. the markets will then rally. manus: the u.s. recession, the highest since 2011, the median credibility of the u.s. recession jumped to 19% on the bloomberg server, the highest since 2013. would you join the chorus or stand apart? chris: the biggest risk factor at the moment is a u.s. recession. when i say risk factor i mean that something that is not couldtly priced in, but become priced in. if it did, it would change those expectations and prices. right now, is it likely? no.
it is still only a 19% probability. manus: stay with me. chris wylie, cio. now, here's a name for you -- annie leibovitz. one is a global icon, the other is a global bank read the photographer has been 10 citiesed to visit over 12 months. i had the opportunity to speak to her about her role models in business and politics. annie: it shows how diverse women are. know,e imagery that, you have not seen before. globalk up with the iconic photography? >> they came to me, they can to my office in their suits. you always suspicious, know, in my work for vanity fair and vouge.
i cannot take the pictures i really want to take. i said would you consider doing and updating of this project? manus: do women have bigger and stronger role models now? annie: absolutely. it was interesting about sheryl sandberg. she sort of is helping people, helping women come along. different not that from me, in that respect. know, i felt sort of nervous about playing that role. how to help women go through the next step. it has a whole new kind of residents. many ceost know too of companies that come in and to set like that in a chair. manus: is america ready for a female president, annnie? annie: absolutely. hillary clinton, that is another
question. us it is almost like let elect hillary and move on. it is inevitable, the way obama was inevitable. she is going to present a whole other side of things. now, sheher experience is the best qualified for the president of the u.s. be socialuld it media hillary or the real woman, hiding behind the buffont? annie: i think you are seeing the real person. in the past, you would think some kind of strange hairdo. she does not kind of care about that stuff. he does not have the time. i think she is being a little bit more careful about how that is presented. manus: annie leibowitz there. .hat opened in east london
is 6:30 in london. 7:30 in brussels. let us get you up to speed in terms of the market, the shanghai composite to date, it is down. we are down 3.7%. we have dropped over 8% this week. the birds are calling. that is the model on my bloomberg terminal today. this is the shanghai composite, down so far in 2016, by eight team .16%. are headed for the longest losing streak since last year. the credit market jumps in china, that is not enough to get succor to the equity markets
story. what you are looking at is the flow of money into the yen. oil is down 8% this week. let it you the equity futures, drop and set for the lower yield. u.s. equity futures indicated lower. you have the dow down. are shifting gears here in the u.s. equity futures at the moment, on the back of the shanghai moves. let's get you up to date with the first word. nejra: china's broadest measure shows as companies increased borrowing on the corporate bond market. trillion rose to 1.8 yuan in december. that underscores a shift from the state in the world's second largest economy. ofected to take a write-down $4.9 billion on the value of u.s. shale assets, cutting capital expenditures as it grapples with a slide in oil. may be toity collapse
abandon its decade all pledge to raise the dividend. has agreedhs says it to settle a u.s. probe into his handling of mortgage backed securities for about $5.1 billion, that will cut fourth-quarter profits by about $1.5 billion. it closes a record fourth quarter for litigation. for more on those stories, terminal customers can head to top go. manus: let us turn our attention to one of the big stories, all about the car. the carmakers in the spotlight this morning with the markets reopened. they dropped as much as 22% and one juncture in trade yesterday. the main french competitor, citroen, believe the latest developer it hurts the industry reputation. problems involved in autoworkers, it is not good
news for the entire industry. but as soon as this is concerned, we have no problem. we want that to be really crystal-clear. we want -- we are owned by the government commission, our very first reserves. reserve was this absolutely correct. there was no request from our side. connan, othere companies suffered losses. this is about the risk to an industry. we saw drop by 23%, and rally of 50% on that drop. have these markets overreacted? caroline: i think that is the message the french government is trying to tell. you have to remember they have their own nearly 20%, on what happened on the market yesterday, it could jeopardize the french state plans to sell
or reduce this stake in renault. the economy minister and the environment minister try to reassure last night that -- it toin no way comparable volkswagen. retains trustd he in renault. the damage was done. and then concern by the company, more than 2.5 billion euros of the market value. and of course, the investigation continues. the french government plans to randomly pick as many as 100 vehicles, including french and foreign brands. t cars, only four renaul
have been tested for image and. as many as 25 will be tested next week. there could be a cloud hanging over the stock for quite some time. manus: caroline, thank you very much. in paris on the latest on the autos. breaking news across the terminals, this is in regards to the french company. they are unwinding on activision blizzard. this is one of the holdings. this is a stock to watch. automakers with caroline running us through that. gets $1.1 billion selling activision blizzard. keep an eye on those stocks at the start of trade read chris wylie is the cio over at corner broadly. at these quite
aggressive move just become another investigation now taking place in the auto industry. the autosat the -- were the seventh best performing. fiat up 35%, it is wiped out. tarreduys are getting with relatively the same volkswagen brush. here we are with a story in france again. how do i take exposure to the sector? they are not all equal, you do not have u.s. equity exposure. they do not have u.s. sales exposure. how do i differentiate? chris: well, when you look at the components of performance over the last year, i think there have been two stories at work. the first one has been about china demand, generally. strong market, position in china was seen as a good thing. clearly, people have moved from that.
that is now a source of concern. and in september of course, we had this additional factor -- that has led to the question whether you want any exposure to the u.s. market? that has created differentiation between the market manufacturers at the moment. something in their favor right now is that it does not tell diesel engines in the u.s.. it is not exposed to the litigation risk. that is a massive differentiation. because when you really look at this story, it is going to come down to compensation. the moment right now, it is difficult to see how that will arrive a significant way in europe. .s. of course, the u the different ballgame. we have seen the opening salvos. we only have to ask bp for how bad it can get for the share price. manus: and the volkswagen
probably read the second chapter on that. you will stay with me, chris. in the meantime, we take a look at the anniversary -- ira number this day very cleverly. and may not be much to everyone. but if you are watching the market, it was pretty hard to forget. mark: we will come back to the story a moment. we are getting details from the swiss national bank. the swiss lowering its key interest rate to -0.75%, down nearly 20% in the last few minutes. markets going to some really key levels, i'm being told. going absolutely berserk at the moment, trying to find the fall. down by 30%. manus: we will take this away, going more negative on the interest rate. that is not having the desired effect at this precise moment in time. mark: what is next? goingwhere is the franc
to settle? >> you have bank in switzerland to take your money? >> come on. for god's sake you have to do it yourself. >> is the swiss national bank finally waving the white flag? >> the markets were completely stunned by this. it will be a major deflationary shock to switzerland. even spreading into europe. manus: that was a year ago. i can officially tell you that. franc at the bank of exactly dropping the cap against the euro. has the doomsday scenario then exaggerated? catherine bosley, good day to you. how does this also mario look one year on? is it as bad, as
cataclysmic? we were trying to be measured. e: it seems like it has emerged with a black eye, doomed for massive recessions did not pan out. fourconomy is set to post year growth of almost 1%. and, yet, it does not look so bad. manus: and in terms of the swiss economy, we have spoken to a lot of ceos in terms of the impact we saw. we saw some job impact in the bank, some of the watchmakers under pressure. talk to me about the economy, and in terms of what ways it is recovering, taking hold of this issue. has,rine: domestic demand you know, then the sort of motor for the past year. real incomes benefiting some key imports for the lower price of oil.
that has been one of the factors that has helped us get weaker exports. however, there are some dark patches. industrialturing sector is having a bit of a tough time. and the consumer prices did post a big fall last year. it was actually their biggest fall since 1950. manus: thank you very much. jobus see what the snb there. impact that is the latest from switzerland. another rateberg cut is in the cards. ok, we do not appear to have that sound with us. i caught up with him either day. he said we are basically being told that the swiss franc is being overvalued. but they don't see further negative cuts on the way. chris wylie is still with us. a great deally do
with anniversaries here. here we are. this is a central bank that has grappled to do it itself. we have seen a plunge in terms of the currency moves to the euro. we have studied ourselves a little. the swiss national bank is the biggest party, offering huge losses on the reserve. the fed is a bigger question, is there more negative rates around the central bank system? i think that is the short answer grade we have already seen a sort of rerun of this with the ecb at the beginning of december. didn't we? manus: the market was underwhelmed at a lack of movement from the ecb. the swedes are ready to intervene. chris: and i think this will be interesting in the next few weeks. we might start to see more dovish intervention from central bankers.
and we have seen the opening shot of that in the u.s. i'm not surprised to see that ballard puts a halt on the interest rate. being given permission to go out -- he has been chosen, quite clearly. they want a hawk out there to start more dovish talks. and probably come it is the first step to taking some of those interest rises off the table. likewise, in japan, they had some of the first references to further policy intervention. and they knew how long before the ecb would get involved in the game. this is normally what happens when you see markets start to press about recession, these problems start to arise. then you get a policy response. in the old days, that would be a cut in interest rate. in these days, it is the deferred interest rate in the state, more qe in japan and europe. manus: chris wylie thank you so
goldman sachs has agreed to settle a u.s. probe into the handling of mortgage-backed securities for about $5.1 billion that will cut fourth-quarter profits by about $1.5 billion, closing out a record year of litigation costs. vivendi says it will get net proceeds of $1 billion for the share in activision blizzard. it sold the stake to an unnamed financial institution. it comes after shares of the videogame maker almost doubled in the last year. and that is your bloomberg business flash. for more, terminal customers can head to top go. manus: let us get you up to speed on the currency market, money flowing into the yen. you are seeing a real sort of move there the bottom of your screen. we will have that conversation just a moment. as angela merkel has a spot of supper with mario draghi, the bloomberg terminal story today
is that she will encourage him to reconsider this 0 buying level of rate. but it is all about the yen, rallying by about a quarter of 1%. it is the best against the dollar so far this year, up 2% against the japanese currency. more strength to come. one man that has a strong opinion, eisuke sakakibara, you may know him as mr. yen. , the day toibara you. let us talk about the yen strength. it is very strong. many are saying it is highly overbought and the stress times in the market. do you agree, is the yen overboard at this level? eisuke sakakibara: no, i don't think so. betweenprobably move 15-20. if anything, it will look like
115 downwards, rather than going back to the 120 level. so that in a time like this one, there is something to think about in the economy. yen is a safe currency. and it is continuing to happen. that do not think that will happen at this moment. has been. kuroda speaking earlier today, saying there is no plan, no need to change the policy. or that the 2% inflation target policy is not realistic, that japan would mostly make it to the target on time, given the drop in oil, the issues that we have around the globe. : i do notakibara think that this moment is realistic. would change at this moment, by saying that he
would stick to the 2% inflation target, that actually means that he would continue to aggressively ease of monetary policy. kuroda really believes the target of 2%. i know him very well. we used to have dinner together. he is very quite strategic. and what he is trying to do at this moment is to continue to ease monetary policy to help the japanese economy. magnificent and thinking about the reaching of the 2% target. he is really happy with a deflation rate. manus: what level provokes them to have to do that? one of his deputies said that everything is fine until we get around 110. what could it take to provoke the bank of japan to take more action? more volatility or a break higher for the yen? eisuke sakakibara: well, you
know, mr. kuroda would take further action towards the end of this year. one of the motivation of further easing the monetary policy is that the consumption tax. 8% told be raised from 10% in 2017. usually, when there is a consumption tax rate raised all we need to have some kind of slow down of the economy. he is thinking about that. he is probably trying to aggressively ease the monetary policy to help the japanese economy in 2017. so i would expect some kind of easing, once or twice this year. to cope with the impact in 2017. manus: what is the risk of a recession in japan? it narrowly missed the end of the third quarter. from what you are saying to me there, we are on a seesaw -- a knife and of risk?
the risk assessment in japan? eisuke sakakibara well, we did in 2014. growth rate when the consumption tax was raised from 5% to 8%. there is a possibility we will have mini-recession when the consumption tax is raised to 10%. da said, i am. kuro thinking about that. trying to help you japanese economy avoid the recession by aggressively easing monetary the end of this year or early next year. manus: when we look at what is happening in china and the shanghai composite down 17%, the yuan at a series of fixings. taking it to volatile levels that have unnerved the world, to
me what concerns you most about the chinese actions and the impact for the bank of japan? that bilateral trade is important. i ame sakakibara: yeah, somewhat concerned about the current state. downems to be slowing quite significantly. and the growth rate is probably not 7% or 6.8%, as the authorities said. 6%may be somewhat lower than or 7%. and i think that china is now moving from the high-growth .ommunity to stable growth that stable transition is always somewhat difficult. so that i see some kind of targets in the chinese economy. manus: devaluation in the yuan? will there be more devaluation from the chinese?
well, chineseara: use fairly tried to large floating reserves, so that privatization of the currency would be sort of some extent blocked by the chinese authority. but it is not unlikely that the yuan would go down further gradually. manus: we are also seeing the price of oil fall below $30. the federal reserve cannot yesterday saying that this could delay the inflation targets for the federal reserve. how concerned are you about the price of oil down your, $30, $20, some day $10. could it be a boost for japan? eisuke sakakibara: i am worried about the gradual decline of oil prices, as well.
also the decline of other natural resources prices. this is the plus for the japanese economy. because as an importer of oil and resources, and the medium term, that would have a major rally in the economy, securely damaging the countries like russia and brazil. that the short run is a benefit to the japanese economy, and the medium to long term, it is a problem for the world economy, as well as the japanese economy. , formerisuke sakakibara japanese fights minister of finance. thank you for joining us this morning. what you have next? i keep telling you about the birds. they are banging on the drums, certainly when it comes to the shanghai composite being down
manus: shanghai selloff. the chinese stocks head for another week of heavy losses after bear market territory. crude claims its latest victim. dht will take a write-down of almost $4 billion on a shell operation. oil falls again. settles.an the bank will pay more than $5 billion to resolve a probe into its handling of mortgage backed securities. welcome to "countdown." let's get into where these equity markets are going to open
for today. we have got futures indicated lower. the shanghai is down by almost 7%. andon manages to eke out opening rotation. .5%, shanghai down by over 3%. european equity markets are under pressure. now they are paying the penalty -- will dividends sustain? that is all to play by london. we are in a bear market. i told you they were calling. what we have is a bear market in the shanghai market. let me bring you -- we were down by 8% on the week. we are seeing a real tough time here in terms of the year today performance on the shanghai composite. across the, a red
bloomberg terminal. let's bring in george magnus, my guest for the next 30 minutes. george, i get enthusiastic and almost hysterical -- but are we in a bear market in china? should i be worried? >> yeah, you should. i've said this before. last august, and since the beginning of this year, it is a bit worrying what is going on in shanghai, specifically what we are talking about here. the chinese stock market isn't that important to china, and it is not that important to global markets either. manus: that is why i'm saying should i be worried. >> what you should be worried about is what it's a manifestation of. what is a manifestation of, two things we should feel quite concerned about. one is we don't really understand whether the chinese authorities do have a grip on what's going on in their financial markets and in their economy. that creates uncertainty,
because you want to know that the guys in charge got a hand. the second thing, what it reflects much more significantly is concerns and financial markets about currency rather than about the stock market. they are intimately related, but it is about capital slide. it is not about portfolio reallocation. a lot of people are looking at it as divesting their assets abroad. in the about confidence policymakers and the economy. that really is of concern. manus: which takes me to the store we have on the terminal today. the pboc's yuan purchase heads for a record. the central banks foreign exchange tumbled by 708 billion, yuan $100 billion. theyhe whole of last year, dropped by 2.2 trillion. you are looking at a colossal
play in december. >> yeah. for the year as a whole -- and it was amplified in december -- but for the year as a whole, the pboc law something like $510 billion in reserves. if you think about the surplus which china earns on its current accounts and trade transactions and the small positive balance investment, it must have been close to $1 trillion of l flow last year, not all of which was capital slide, but a rising proportion during the year almost certainly was. that is pretty serious. manus: if i said to you what were the indicators that you would look at as your headlights for 2016, is that going to be one of them? >> yeah. this is a vicious circle, really, of capital flight currency depreciation and weak economies, lack of confidence in
policymaking. me, ort clear to increasingly to a lot of people, how that vicious circle is going to be broken. manus: george come stay with me. -- george, stay with me. i want to get to david ingles. david? david: we entered a bear market for the shanghai composite, a formality, but what is striking is how quickly we have reentered that bear market for the shanghai composite. what i have is a six-month chart. if you measure it from december 22, just over three weeks ago, that is a 20% drop. formality, but what is really concerning here is not so much the markets. the shanghai composite in stock market tends to move different from what is happening on the ground. it tends to move up in tandem with asian equities. but what is concerning, and the
reason we are seeing nine out of the last 10 sessions declining, is a concern from foreign investors over the ability of chinese regulators to deal with their new normal. we haven't seen this amount of outflow. can they manage this last leg of opening up this capital while maintaining civility? what we are seeing when it comes to currency at the moment isn't looking like this, the third straight weekly decline for emerging markets. a fresh three-year low. it hasn't been the best start to the year. there is the understatement on bloomberg tv. david ingles, thank you. george, what is your target on shanghai? >> august last year, i said 2500. i still think it is going there. manus: stay with me. let's get to caroline hyde with the first word. caroline: thank you. china's broadest measure of new credit has searched the most
since june, as companies increased borrowing on the corporate bond market. financing rose to 1.8 trillion yuan or $276 billion. that underscores a shift away from reliance on state back to banks for funding and in the world's second-largest economy. a write-down of $4.9 billion on the value of its u.s. shale assets. the company is cutting capital expenditures as it grapples with a slide in oil prices. may need to abandon its decades-old pledge to maintain or raise its dividends. has agreedhs says it to settle u.s. probes into its handling of mortgage backed securities for about $5.1 billion. that will cut the bank's fourth-quarter profit by $1.5 billion. a close as a year of record legal in litigation. litigation.of
manus: thank you very much. george magnus is still with us. at the start of this morning i said -- a shanghai falling despite credit jumping the most since june of last year. it wasn't as good as the market had thought. is that a moment of good cheer? it's not really going to stay. people are saying that this is a good indicator, a baseline in terms of our assumptions. >> temporarily. on the fastgouging credit growth is helping to a degree to stabilize the economy a little bit, but of course it is part of the problem. last year, 2015, the amount of credit in the economy rose by about 20%, 25% of national income. the narrative is that china's credit binge in 2008 and 2009
hasn't really finished. if anything, it is getting worse, because the authorities are kind of reluctant to do too reform terms of economic because of the slow down, and their alliance on credit, which is very reminiscent of what western countries did in the 2000s, is leading them down a bad path. manus: that -- in my mind, if that was a credit bubble in 2008, reform because of the slow down, here s overhangs,n 2015, bubbles, those are the words that come to mind. we are nowhere near a deflation of this economy. >> well, in a sense, what we should have seen, and what i thought a lot of us thought woud happen, was a deleveraging cycle. it is not happening.
they do talk from time to time we have to get to grips with overcapacity and allow but i think the reliance on credit is quite a thing.us as the loan to deposit ratio and banking system continues to rise and the capital slide is important, because i've capital leaves china, the funding position of banks -- because as capital leaves china, it becomes more stressful. i'm not saying this will happen in the next six months. i fully expected not to happen in six months. but i think over the next year or two, we will be getting closer to something we would call a credit crisis. manus: george, stay with me. george magnus. let's get into the car sales. they were supposed to take the headlines at 7:00 a.m. the shanghai composite trumped it. registrations.u
the previous numbers were around 30.7%. let's get to hans nichols, because the interesting story is belied by the global headline. it is of course the volkswagen numbers, hans, isn't it? dropped to 25.5%. hans: and that number, when you look at the market share, is even more stark when you do the month on month. the month of december, 22.2% in terms of market share. just a couple of months ago, they were 26%. this is the first time volkswagen has lost market share since 2007. we have to say, overall the market is healthy. we see a great year, the best since 2009. 14.2 million is the annualized number. and take a look at individual markets. spain is up almost 20% year on year. italy up 15%.
the other companies, biggest auto markets -- france at 6%, u.k. up 6%. manus, overlaid onto all this, we will see how the market reacts today. last night in berlin and paris, the french government officials saying that the market is overreacting. there may not be a problem here. manus: well, let's go to the reports. thanks for breaking the numbers down for us. let's bring you a quick check on markets. shanghai composite enters their territory. george magnus is my guest. itey are still calling a 2500. skimming the 20% levels. 23.77%. let's look at u.s. equity futures, also very much under pressure. the hawk tells the dovish tale
has agreedhs says it to settle a u.s. probe into its handling of mortgage backed securities for about $5.1 billion. it would cut their fourth quarter profits by $1.5 billion. it closes a year of record litigation. of $1.1 billion from the sale of activision blizzard shares. any sold their 5.7% stake to unnamed financial institution. it comes after shares almost doubled in the past year. for more on all those stories, you can go to the terminal. manus: take me through the market, because there has been some pretty significant moves. caroline: there have been. asia is in the red at the moment across the board. australian stocks you want to has an eye on, because bhp managed to gain a little bit,
but not because of any good news. it's negative news with bhp, the pain of the commodity rout. alsoumber one miner happens to be the biggest shale.s investor in u.s. oil is, down sub $31 -- oil is down, sub $31 per barrel. they are cutting their count on the shale unit from 7% to 5%, and their investment and development plans are under review as well. the key issue is the last point on that screen -- the dividend. iwill the dividend remain the same or improve? analysts are already jumping the gun, saying they think that the bhp billiton could slash its dividend by half. course, you are talking me through those moves in australia -- billiton isn't
alone, are they? caroline: they are certainly not. there has been a wave of negative news, with rio tinto saying pay is on freeze. you have japanese conglomerates having to take a charge on its nickel holdings in madagascar. and this is widespread. this is in just about the commodities sector. this is wreaking havoc across so many industry groups, because oil has become the tail that market. we are seeing analysts downgrading earnings potential and the outlook of the s&p 500, all because of lower oil prices. the lead strategist of u.s. equities, tobias look a ebkovich, downgrading his outlook by 2%. 12%,, he sees a rally of
but he is more bearish than his peers. the likes of bank of america and barclays all see a 14% uptick. it looks as though we are starting to see the knock on effects of lower commodities, as though we haven't seen enough already. a selloff to the turn of ne of e bear market for shanghai. across the board, a selloff of 70% in europe stocks. looks as though it is really starting to crimp the outlook for analyst. s&p 500 downgraded, and earnings outlook. in august, the rout seemed to be fixed by better-than-expected earnings results, and suddenly we are seeing far more downgrades, the most downgrades versus upgrades since 2009. manus: thank you very much. i want to bring some breaking news to our viewers. producer oil and gas sees a net loss in the third quarter of 2 billion rubles. the estimate was a loss of 17.6
billion rubles. the company returned to positive free cash flow in the third quarter after negative free cash flow in the second quarter. huge questions in terms of sustainability, and we are seeing a whole host of issues going on. we are also seeing some news come through on bp. this is their 12.5 billion pound acquisition of ee, the mobile business, given the final approval by the competition watchdog in the united kingdom. we broke that yesterday with anna, a critically important deal for bp. the question is what happens next in terms of competition in that space. the merger is not expected to result in substantial lessening of competition. let's bring back in our guest host, george magnus.
he's still with me. i want to return to be story caroline took us through. this is the reality, bhp spent $20 billion on these assets. they are now worth $16 billion. they've had to take the right down. does this throw into question the ability to sustain their dividend? we have a survey that says it will be up 50%. >> well, such is the shock. n don't know billito specifically -- manus: it is more question of dividend policy. >> yeah. the interesting thing from my perspective, and i am thinking macro, is the cutbacks in capital spending. obviously the declining, the fall in prices in the entire commodity complex, particularly on oil, is clearly torpedoed
cash flows into these energy conglomerates. you'd expect to see quite a lot of income stress, and many that transfers into the balance sheet. but the cutbacks in is where all it all is where all th is. manus: oil is at the top of our news, and you get freshfaced analysts who say $20 oil, $10 oil. there are very few people raving bullish nose on oil. my question is this. i' the consumerm. i'm benefiting. there is a line on the bloomberg terminal that says, net, it is going to be good news for all of us. it'll see through. -- it'll feed through.
what should i be worried about in terms of oil? what is it saying to me? >> it's curious. the lower oil prices go, the worst the news is. but by the same corollary, he would say let's get oil prices back to $100 as quickly as possible, which is abject nonsense. i just think the focus is exclusively now on the downside, on the losers. it's on the companies, the commodity exporting countries. but you are quite right. it does have a positive, real income effect for most people. it will act as a stimulus to company investment. energy,r the cost of the greater the likelihood that nonenergy companies will boost their investment overtime. but i think we will have to wait for the shock to be absorbed, and clearly that is not yet. have to be a we
bit worried when you get statements from rio or whoever about difficulties of their situations. but the neck or economic consequences of this -- give it some months -- manus: when does the accelerator effect kick in? is it months, six months? is there are lots of moving parts, and the positive effect on, let's say, oil consumers, households, filling your car up for half the cost, the positive effects are -- they don't exist in a vacuum. we know emerging countries are in a lot of trouble, china is in a lot of trouble. deflationary shocks are things we all can worry about, the yuan fall -- manus: what worries you the most?
we have a minute left, and it is the classic question. do you. recession, remotely worry about a u.s. recession? >> i worry about it, but i think the concern is exaggerated. what a lot of people are doing -- they are conflating the big shakeout you talked about, the bear market and stocks in china, and they are conflating financial asset adjustments with global recession. i don't believe we are going to go into a global recession. manus: at least we finish on a positive note. we can always rely on you for some clarity in these hazy moments. george, always great to get your input. ubs senior adviser, thank you for your time. "p next, the "on the move
jonathan: welcome to "on the move." london, counting you down to the open. here is your morning brief. markets have turned south. the shanghai composite has entered a bear market as the relief rally in the u.s. has proved short-lived. equities in europe and the u.s. lower. crude claims its latest victim. bhp will take a write-down of almost $5 billion on its shale operation. oil is down again. european car sales, though, are accelerating. december car sales were at 16%, the best year since 2009. however, the emissions scandal is widening as french authorities investigate
renault. plenty going on. let's get you the bloomberg first word with caroline hyde. caroline: good morning. the shanghai composite index has entered a bear market after a 20% drop from its high in december. the index is also lost 18% this year alone amid lingering concerns about the government's ability to manage economic slowdown. china's broadest measure of new credit surged almost since june as companies increase borrowing on the corporate bond market. financing rose to 1.8 trillion yuan. that underscores a shift away from the reliance on state act banks in the world's second-largest economy. bhp billiton expects to take a
righ write-down on its shale assets. the company is cutting capital expenditure as it grapples with a slide in oil prices. to's next safeguard may be abandon its decade-old pledge to maintain or raise its dividends. goldman sachs says it has agreed case for $5.1s. billion that will cut their fourth-quarter profits by $1.5 billion. it closes out the year of record legal litigation costs. guy, back to you. guy: thank you. but is taking a big hit, what i want to talk about is where we are going into the european open. at the moment, it looks like it will be slightly negative, but we are firming. futures are getting a little bit more positive. london looks like it will open absolutely flat, but the cac and dax are down.
the s&p futures have been down all morning. dow futures are down by 9/10 of 1%. that's the line there. it's a useful indicator heading in toward the open. let me talk you through some of the other things you need to know. the cac has gone against the dollar and the want to point that out -- brent trading at $30. 1.44.-cad at it's interesting to see that the market is looking at the yen repeatedly. how will the japanese authorities react, and in what form? are we going to see intervention, further action coming through from mr. kuroda? onshore, little movement. but chinese stocks are the focus of attention.
no doubt about that. they are heading for a third week of losses. shanghai is now in a bear market. this is data out earlier, showing the chinese broadest measure of currency. i think it is slightly misleading. there are a lot of negatives -- let's figure out what is going on. let's go to our economy team leader. data.deal with thiese the market is taking them as negative -- why? what are the negatives to come out of this? >> the stock market took it as negative, but who know what kind of stock market is moving these days. as for what's going on, you are right, there is a little bit for everyone. the overall number, the broadest measure goes up. up more than economists had forecast. a lot of borrowing their on the bond market. also it looks like a comeback for shadow banking, some of the
non-bank lending avenues. this is demand for credit that suggests corporates aren't looking as bad as they thought. on the downside, the bank lending was a bit muted, and loans missed estimates. we are looking at some sort of stabilization, in stark contrast to the stock market. guy: gdp is what are we up next. what are we expecting? >> we are expecting the grinds lowered to continue. also, 6.9% for the fourth quarter. a globalt disaster in context. many big economies would like 6.9%. that theproblem is is world is used to china growing 10%, so of course we are coming in lower, and there is this huge pile that has swelled over the
30 year expansion. 6.3%, enough to pay off past obligations. guy: great stuff. thank you very much. malcom scott out of hong kong. let's welcome the chief investment officer of global investments. $150 million under management. let's start off big picture. is the global economy in a recession? >> i think it is too early to say it is in a recession, we are simply slowing down. the world forecast came out two weeks ago, suggesting a slowdown. the reason is clearly that post financial crisis, the market s contributed to slow growth, and that is the drag we see -- guy: are we going there? >> in terms of recession? i think we are heading in that direction. say the jury is still
out. guy: where is the growth going to come from? >> that is the problem. i think it will eventually come from people benefiting from low oil prices. the u.s. is continuing to grow pretty strongly, although that is the expansion starting in 2009. slowdown, a slower period of growth. guy: the markets seem overly obsessed with the industrial sector. this is where the data are really negative. we are seeing what's happening in the commodity sector, a ripple effect and other spaces. are we ignoring the consumer at our peril? as you pointed out, there are some big positives out there for the consumer. supercheap credit, incredibly cheap gasoline. you can heat your house much more cheaply. netof these things are positives for the consumer, and in china, the consumer sector is getting into gear. >> yes.
you are quite right, there will be some benefits from lower oil prices. but obviously the problem in the u.s. and u.k. to some extent is that although the consumer is employed, they aren't growing. they still remember the financial crisis, so they are being very cautious. consumption may slow down. guy: you think consumption will slow? >> it may not grow as much as people think, despite the oil. guy: not as good. at what happens next -- we have got breaking news. a story that has been a long time coming out of hong kong. ge will be buying assets there for $4.5 billion. they have been after this deal, which fell apart earlier. it was originally scheduled to go with electrolux, but now it looks like they have a deal done
with a very happy man, i expect. stock later to see how that ripples. let's get back to our guest. we were talking about consumer, keen to offload. when you look at what is going to happen in 2016, where are the positives going to come from, that will get us out of the funk we have seen? is it going to be the earnings season, the m&a, the weakness we have been talking about? >> at the moment, open news is very pessimistic, and it is hard to see the bright spots. last year, if you look at the overall stock market, the big gains came from people who were playing on mergers and acquisitions. that may continue to be the case , because the number of industries -- we will still see consolidation and money is quite cheap. on a longer-term, bright spots will come from people looking to
win from lower oil prices. in a global sense, you have to look at countries like indonesia, india, benefiting very strongly from lower oil prices, who are not being affected so much for the global slowdown. guy: we will talk about em later on the program. next, hopes fade for global profit as global earnings downgrade outnumber upgrades the most since 2009. we will give you the details in just a moment. ♪
guy: welcome back, you are watching "on the move." we are heading toward the european equity market open. looks like it will be fairly flat. let's get you up to speed with what you need to know with caroline hyde in the bloomberg business flash. caroline: bhp billiton expects to take a right down to $4.9 billion in the value of its u.s. shale assets.
the company is cutting capital expenditure as it grapples with the slide in oil prices. its next safeguard against the commodities collapse may be to abandon its decade-old pledge to maintain or raise its dividend. goldman sachs says it has agreed to settle a u.s. probe into its handling of mortgage-backed 45 $.1 billion. that would cut their fourth-quarter profit i $1.5 billion. it closes a year of record legal and litigation costs. also likens market share has fallen for the first time since 2007. kate accounted for 24.8% of new cars sold in the region last year compared to 25.5% in 2014. the emissions rigging scandals deters potential buyers. get net proceeds of $1.1 billion from the sale of shares in activision blizzard. the company says it sold it remaining stake in the u.s. video games maker to an unnamed
financial institution. the move comes after shares of activision blizzard almost doubled in the past year. that is your bloomberg business flash. guy: thank you very much indeed, caroline. it is time for your morning must-read. global earnings downgrades haven't been this bad in seven years. a selloff that has a race 2.5 years of gains, $14 trillion from global stocks are on the brink of a bear market. at leased earnings at this point stood out as a potential bright spot. expectations. expectations.up let's welcome back the chief investment officer at capital global investment. up till now -- we see this time and time again -- where companies have come through and
got over a very low bar, but at least they have done that, and that provided us with the reason to get back into the market. we saw it late last year and we have the buybacks as well. are we running out of steam on that story? >> you should look at the last four or five quarters in the u.s.. the earnings has always been about cutting costs and boosting bottom line, but on the top line of revenues, they are consistently failing to be as an asset class and sector. the problem with cutting costs is there a point where you can't keep doing it, you need to have revenue growth. if the economy is slowing, it is going to become even tougher are companies to fight against that. we saw that last year in the ofse that there was a lot consolidation because people were thinking assets were cheap and it was the only way to grow revenue. guy: so where in the stock market universe -- we can take
out costs, store it, deal with that, but where am i going to get topline growth? >> i think it is difficult right now to see that. you have to try and focus on industries which may see some benefits from whatever growth there is, and it is difficult to see. guy: are there any? >> it is difficult to see. guy: any that you would look toward? >> i think we have to be very defensive. we are looking at consumer staples. utilities, things which are defensive as one can be and still be in the equity asset class. guy: the market is getting very tight, very narrow in terms of the stocks. >> we saw that last year, the second half of last year. a lot of commentators were pointing to the fact that leadership was very concentrated, that stocks were going up even though the market was riding. five technology stocks
were going up, and the rest of the market was liking. -- was lagging. guy: do i need to worry about buybacks? that has been a big factor in lifting asset prices, cheap credit. >> companies have been buying back stock because money was cheap. at the same time, they were struggling and still raising debt and using at least part of the proceeds to buy back stock. obviously that is going to continue. guy: there are a few people out there saying this is a great opportunity. stocks are down. the economic data still looks like the fed will raise rates. the economy is on a decent ejector he. why am i not taking the opportunity to buy stocks? >> there are some opportunities, but it has to be in a defensive sector. the only argument that bulls are using right now is that this doesn't feel like the top of a
bull market. normally you would see a lot of excessive optimism, you would hear about retail investors coming in, and it doesn't feel like that. we haven't had a bull market since 2009. there have been skeptics all the way. that is the only reason. but if you look at the number, it is clearly looking very difficult. overvalued. what we had is six or seven years of zero interest rates, and that has pushed a lot of asset prices up. and it is not looking cheap. evaluations are high and earnings are going to slow down. it is hard to see a rally. guy: stay with us. sanji shah. plenty more to discuss. we need to talk about the commodities sector. also, we are a couple minutes away from the open. movers, onerporate
guy: welcome back, you are watching "on the move." seven minutes till the equity open. let's talk about the stocks we need to be watching. caroline: let's have a look at the mining stocks, because overall they will be affected. there are calls that miners at fault 1% to 2% across the board. bhp billiton is an interesting one, with news of that write-down -- close to $5 billion. could it get any worse? you are exposed to iron ore selloff, and now oil is going to fix you. -- to vex you. they are invested in u.s. shale,
and with oil prices through the falloor, they will have to takea big write-downs on that $20 billion purchase from 2011. they are taking a $5 billion post-tax rate down. so to is arms holdings. this is going over from news that the biggest chipmaker in the world warning of the global slowdown, saying that pc sales are slowing, china is slowing, and they are worried about a soccer star to 2016. armre likely to see holdings under pressure. guy: thank you very much. some of the stocks you need to paying attention to. i missed a question. talk to me a little bit about regulators and bt. what is going on ee? caroline: apparently, bp's
not going toe is crimp competition in any way, shape, or form, according to cma. the regulator is saying that actually bp got the go ahead with the purchase. they announced a new chief executive to take the helm after the step aside amidst the m&a deal. we are likely to see a new chief commercial officer take the helm. they get the go-ahead, bp therefore set to rise on the open as the megadeal we saw so many of last year comes to fruition. the u.k. regulator gives it the thumbs up. caroline, thank you. let me show you what is happening. four minutes away from the equity market open. we saw quite a decent move earlier on in this pair. we have retraced a little bit of
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welcome to "on the move." here is your morning brief. the shanghai composite has ket as relief in the u.s. proves short-lived. bring crude has claimed its latest victim. php will lose $5 million on its share operations. the european car sales have accelerated. december car sales were the best since 2009. have seen european
numbers as we come into the open. we will look at some of the key stock sorties. -- watch reno at the get-go. let's check in with caroline hyde. caroline: if we do not manage to erase this week's losses we are in track for half a percentage point lower with the stoxx 600 this week. there has been three weeks of declines. the ftse 100 is showing that slight risk aversion down by 1/10 of 1%. the cac 40 has a similar move. this is not nearly as bad as the futures that were painted. at the moment, we are still showing overall red on the board when it comes to equities. wme