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tv   The Pulse  Bloomberg  February 5, 2016 4:00am-5:01am EST

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guy: job state usa. we did the first beta of 2016. the dollar index heading for its worst weekly close since 2009. a miss at bnp europe's second-biggest bank reports a decline in profit. we hear from the cfo. exit risk. a new poll shows the eu camp for david cameron makes a case for reforms over in poland. ♪ guy: welcome to the pulse.
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where life from europeans equity headquarters. reasonably benign. why is that? we have payrolls coming up later. we also saw a fairly spectacular close yesterday. italy some of the mining stocks. 58 point 97 is where we are trading -- 5897 is where we are trading right now. bnp paribas a big weight in that market. some of the big mining stocks are up 20%. down to the dollar i think. let's take a look at what the dollar is doing right now. what other assets we need to focus in on. but what he we get is been for the greenback. down by over 1%. but that number and go see bloomberg. that is what is worrying draghi. sterling, that is the cable rate.
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the bigger move yesterday in euro sterling. come as a result of which, pick your pair when you want to see the move. what you need to know for this morning. nejra cehic? nejra: saudi arabia's foreign minister has told number that low oil prices and strange budget will not derail the top -- the country's budget -- the country's ambition here it -- ambition. >> you have to do what you have to do to protect your interests. oil should not be a factor. ordersgerman factory fell more than anticipated in the severed. from the prior month. it is the sign that a global trade slowdown maybe resending
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parts of -- maybe restraining parts of europe's largest economy. bnp paribas shares are rising after the french pledge to pledge to overhaul the bank. by aower profit was fueled goodwill write-down. bg group has set fourth-quarter profits have dropped. that income fell to four to $23 million, beating analyst estimates. global news, 24 hours a day, powered by our 2400 journalists. from the bloomberg first for desk, i am nejra cehic. -- a more dovish federal reserve. a number of fed speakers reiterated the magic words, patients. site away from committing to a change.
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>> how should a day -- incorporate these recent developments? at this point, i view them as posing some risks but i believe it is premature to change my modal outlook. >> i want to say one word about the united states. it has a special responsibility. --it normalizes it normalizes its monetary policy. that mobilization can be a source of significant spillovers and spill backs. it is critically important that the federal reserve continues to do this in a well communicated manner. by chair indicated yelling to do it on an evidence-based method.
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guy: christine lagarde did not have the seat -- did not have a seat on the fmo see. they are talking about that we need to see an evidence-based approach to policy. is a.s. jobs number conversation we need to get into. rob carnell joins us now. how important is the payroll data today. how does it compare to yellen delivering testimony next tuesday? rob: it is important. it was looking as if it was not important a couple weeks ago. a very weak gdp data that we had a week or so ago. this is the coming quite important. there are questions we have about the u.s. which is is the u.s. heading to a recession? no economist is going to go out and say for sure it is.
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the labor market is one of these. that starts to turn down, they might be serious problems. guy: the data looking good. what really caught my eye this non-manufacturing and the fact that the nonmanufacturing is looking like it is going to turn down. rob: if you can look at the u.s. economy in say overall it looks relatively strong. it is a very weak manufacturing sector. things are not holding together as well as they should be. genericade that statement that overall the u.s. economy look strong here it -- economy looks strong. fed is a difficulty for the if they go down the diagram root, they are going to get a summer dollar. they're going to smash through parity.
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they're going to kick the legs out from under the economy. they have to think what are they going to do? guy: how can they communicate that? rob: trying to overcome indicate is the biggest problem. you come up with all of these diagrams. it is very hard because the data tends to whip around. if you remember all of these ford geithner's comments that we got from various central bankers from around the world. it happened to the next within three months and they do not do why. let's let the market work it out. we are not stupid. individually, i might be. look at the data in figure out for ourselves what is going on. guy: has the dollar priced no
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rate hikes this year? bob: it probably has a bit -- rob: it has a bit of a chance. guy: when he gets so the shot down, does the dollar fog? or is that assumption already built-in? rob: we have been looking at this diagram thinking really? it doesn't make any sense echo it hasn't made sense for a long time. the knology and that the central banks still has influence in terms of market. dollar what the economy needs? rob: i think stability is what the global economy needs. embarking on another round of qe in march or the fed pulling back. all of this is not helping to create that stability that we
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need. i generally thought it was a good thing when the fed started to hike rates. we come out of this era what the only thing we could do was drive asset prices higher. more credit come more debt, let's get things moving. i thought it was a good thing, normalization would imply stability. guy: this was just started with their reserves. we can say that chart. it is quite stunning. you get that stability will kind of ripple effects do we not see? does oil go a little bit higher? we do not get the selling that we're getting after the big sovereign wealth fund. rob: there is a lot of moving parts. china, let's not forget that. they are deadly part of that. if the -- they are definitely a part of that.
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there were be less tennessee -- there will be less tendency to write down their fx reserves. the confidence starts to come back. it is everyone's fog. no one is guilt free in this. everyone is trying to -- growth at all cost. sometimes you kind of let things go their own way. guy: what does throw to make of this? -- what does kuroda think of this? rob: they have come out and say that's their come out and said they will do whatever it takes. we have seen the downside of a weaker yen. it is a large proportion of your population in japan is reliant on imports. it is food. on au're on a pension
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fixed income, that is not helping you. we cannot all have a weaker currency. it does not help everyone here is -- does not help everyone. guy: rob carnell. we'll bring you the u.s. jobs data later today. 190,000 jobs is the estimate that we have. 1:30 p.m. figure at u.k. time. david cameron heads to poland. one poll puts the exit option in the lead. bnp coming a big bank to miss estimates. plus, european president obama talking tax proposal for $10 a a chilly reception. we look at his plans next. ♪
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guy: 14 minutes past the hour. welcome back. david cameron is in warsaw for talks on a draft deal with the european union. he seeks to overcome hostility to this proposal to cut benefits to easton european in the u.k. -- eastern europeans and the u.k. excimer he struck -- in the
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u.k. he struck a surprisingly conciliatory tone. now will the new draft deal to be enough to invent a brexit? a new poll has 45% of the population in favor of leaving the eu. this is the most important bit, 19% still undecided. that could breathe importance. mark carney refused to diverge details on a brexit. he throws the question on british business and the pound. there is not yet a big risk andium built into business household confidence around the referendum. we do see in the exchange rate been somet there has buying of protection around the
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referendum. you see it in the ski is. see it in the skews in the options markets. they have moved notably since december, consistent with the existence of a referendum. forecast fore a sterling. we do not have a forecast for sterling in the event on which we are not conditioning our forecast. guy: week probably do have a forecast -- we probably do have a forecast. rob carnell still with us. is the market right to start seeking protection? pricing cuts in the bank given the brexit risks that now exist? rob: it is probably a step too far. take all, we have to polls with a pinch of salt to a
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couple of weeks ago, it looked like trump would win in iowa. guy: we have some history with the last general election. rob: it is not going to be decided until we have the vote. me as an orderes of magnitude. different in terms of what is happening. this is a once in a generation vote that will have sizable impacts in the u.k. and the rest of europe. you need to start maybe looking after your business. rob: yeah you do. there is a sense of denial about all of this. we will still be using the euro and it will all be fine. i don't think this is grabbed people yet. you like using it. it is not so bad.
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to -- ithink we have is still cold and dark. we forget that europe is quite cold -- is quite close to us. guy: don't you think the closeness is a problem. rob: migration is something that is a big problem all throughout europe. the u.k. does not stand alone in this. guy: will i need to price and risk in the eurozone? rob: that is not happening. we can make a big deal out of exit. in 12 must, will be talking nexus or a whole bunch of other exits. europe is challenged. it is creaking quite hard. people are not content with how things are. set -- the source of changes
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that david cameron is trying to get them to vote for. -- guy: the next thing would be carting raising rates? is an island in a very big world. guy: if you make the argument that there is going to be a to, andon and a run-up once you get through that, a global return. you don't worry about the things , do you then get a honeymoon period. is that the opportunity that carney should take? rob: you make a very persuasive case. pmi tends to be on the lumpy side. thatinly the possibility
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you could get what you describe. guy: then flash -- economy could cold with it at that point? bob: i don't think it code-5 basis point interest rate hike is going to derail the economy. there is -- there are many thanks that carney doesn't have much control of. guy: oil goes up. let's see that back into the u.k. equation. rob: the whole dollar and oil thing is not a driver here. if oil is going up, the chances of risk sentiment is improving. inflation will go. doesn't need to go up that much as long as stocks fog, inflation will go up.
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had he keep making the case of additional easing? at least u.k. is leaning in the direction of a hike. they haven't done that yet. the u.s. has already done one. they are all on the same boat. the policy action as well. what are we to make of it? guy: thank you very much. rob carnell. thank you for joining us. -- we'lltal now joint have more on that story in today's news. ♪
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guy: 25 minutes past the hour. you're watching the pulse. let's get to bloomberg's business flash with nejra cehic. nejra: arcelomittal out shares have fallen sharply after the world's biggest feel maker announced plans to raise $3 billion from investors. they are selling a $1 billion stake as part of its efforts to ride out and industry slump. toyota has raised its profit so .- profit forecasts that puts it on track to become the first japanese company to top three chilean yen. -- ¥3 trillion. linkedin is taking a hit and trade.
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missing analyst estimates. the professional social network is facing a slowdown in sales. >> our strategy in 2016 will increasingly focused on in our set of high values, high-impact initiatives with a goal of strengthening across our entire fully of this is. our roadmap will be supported by simplicity, organization and investment impact. nejra: that is your bloomberg business flash. guy? guy: let's check the markets. sessionsingly, a quiet the last two days have seen incredible volatility. this today's session on the u.k. miners. today, 5926 is where the london market is. back liking a little bit, cac up. let's take a look at the other board. brent trading softer.
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they'll index trading higher. given back a huge amount of ground this week. that is rippling into all of these other asset classes, including the miner which is what we are going to be talking about next.
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guy: welcome back. you're watching "the pulse." i'm guy johnson. let's get the bloomberg first word news with nejra cehic. nejra: german factory orders fell more than anticipated in december. orders dropped 0.7% from the prior month. it is a sign that a global trade slowdown may be restraining parts of europe's weakest economy. bnp paribas shares are rising after the french lender pledged to overhaul its investment bank.
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the gains came even as the bank posted fourth-quarter net income , belowmillion euros analyst estimates. bg group has said fourth-quarter profits dropped 54% following oil's decline. adjusted net incomes fell to $423 million, beating analyst estimates though. switzerland's foreign-currency reserves rose 3% to 575.4 billion francs in january, hitting a record high after getting a boost by the swiss franc dropping against the euro and dollar. that has stoked speculation the snb might be intervening. global news 24 hours a day powered by our journalists around the world from the bloomberg first word desk. guy: thanks very much. the dollar, worst week since
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2009. let's check on the markets with mark barton. this -- other againstthat its major peers over the last week. the new zealand dollar, 3.6%, the danish krone, so on and so forth. only a few currencies have actually fallen against the dollar. it is the worst week for the dollar against 10 of its leading peers since 2009. let's not forget, it has jumped by 20% since june 2014. the euro headed for its biggest weekly gain against the dollar since 2011. draghip over 5% since implemented stimulus. the yen is on track for its biggest weekly gain since 2009. those central banks that have done something recently or pledged to do something have seen their currencies rise. it is becoming more difficult to
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dbase your currency in this difficult financial market volatility time. a fed president said she does continue to see the u.s. economy warrant gradual rate increases after this turbulent spurt. we've got the jobs report. they expect to figure in the region of 190,000. want to show you what's happening to japan'. the yield falling to a new record low today of 0.25%. it is the lowest g-7 bond yield when it comes to the 10-year. the yield on the bank of america index of sovereign bonds has dropped to 1.33%, the lowest on record. the best-performing sovereign bond market, it is the u.k. down to 10-year is
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1.84%, within 50 basis points of that record low it saw in 2012. the rate quickly, arcelor mittal shares were down as much as 10.5%. they are now down a mere 5.7%. it is planning to raise $3 million from investors as it seeks to ride out a slump. there you go. guy: thanks, mark. stock was up 10% yesterday. a little bit of a drop this morning. the biggest two-date other drop and's march. -- two-take dollar drop since march. jesse joins us now. what happened yesterday afternoon, jesse? >> wild times in the mining sector react the levels of volatility are largely unprecedented. anglo american up 20%. guy: these are daily moves.
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>> just one day. even the majors are not immune to this. three reasons i think, the dollar weakness, oil price strength, and the short covering in stocks like anglo and glencore. there's some short covering there. let's not kid ourselves. they are still down 50%, 60% in the last six months. to your question on sustainability of this rally, there's a lot of concern from people i speak to that what happened yesterday doesn't reflect the underlying fundamentals. guy: where are we now with that? >> the key issue is oversupply. metal markets are still well oversupplied. there's gluts in copper, zinc, aluminum, and that is going to take years to unwind in some
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cases. the other reason is chinese demand is slowing. that is the key customer. still a big overriding concern. guy: you're getting on a flight tonight to cape town for the big mining conference. are people going to be talking about deals? are deals going to get done? >> i think so. i think the situation is right for consolidation. in years gone past, it has gone a bit quiet. given where we are in the cycle, a lot of people think m&a is just around the corner. depressed valuations, distressed sellers. anglo american is about to announce mine sales. they could shake out some of the crown jewels in the industry. guy: everyone has been resisting 70's. they may have to come to the markets. >> bhp and rio have been sitting
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on the sidelines, waiting for these talks of assets to pop up. a lot of people think we will start to see those assets change hands. >> who are you talking to? guy: any sources that are going to come on bloomberg television? >> i think so. guy: however to that. -- enjoy the trip on to a completely different subject. biggesthe world's toymakers have held talks about a possible merger. the two companies have held on and off discussions since hasbro approached mattel late last year. nejra cehic joins us with more on this story. thetentially huge deal for toy industry, a toy story perhaps. nejra: this is according to people familiar. we don't have details on how this deal could be structured. this could see two of the
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world's biggest toy companies coming together. hasbro, which makes my little whichnd furby, and mattel makes the likes of barbie and hot wheels. this would not be the first time that these companies have been talking about a deal. two decades ago, mattel withdrew a $5.2 billion offer for hasbro. if a deal succeeds, it would bring together mattel's strength in the girls category and hasbro's dominance over the boys. some are calling it a possible marriage between barbie and g.i. joe. the combined company would also be a stronger competitor to lego , which are based in denmark. this has been growing faster than its rivals. this merger could face a number of antitrust hurdles. even though the combined companies would have about 1/5 of the u.s. toy market, antitrust authorities have been growing increasingly aggressive
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over mergers wherein involves dominant players in an industry. look at the way they blocked comcast and time warner, electrolux and ge. the other concern is that we could see an objection from disney. disney has licensing rights to many toys linked to the films that it makes and this year, the licensing rights to disney's "frozen and open -- "frozen" and brands, that could go away if they end up merging. we could see disney standing in the way of the marriage of g.i. joe and barbie. guy: there's a "star wars" story in there as well. thank you very much indeed. nejra cehic joining us on this potential merger of toy stocks. bnp arrow all caps a bad week for banks. we bring you an interview with
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the cfo. that is next on "the pulse." ♪
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guy: welcome back. you're watching "the pulse." let's get you up to speed. here's nejra cehic. nejra: billionaire michael platt's blue crest capital management is being investigated by a u.s. regulator over possible conflicts posed by an internal fund. that is according to people with
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knowledge of the matter. the fcc is said to have started the probe -- the sec is said to have started the probe last year. arcelor mittal shares have fallen after the world's largest steel maker announced plans to raise $3 million from investors. the company is selling a $1 billion stake in a spanish auto-parts maker. toyota has raised its profit forecast after surging sales of a sport-utility vehicle. that puts it on track to become the first japanese company to top ¥3 trillion. linkedin is taking a hit in extended trades after the company forecast revenues about $3.6 billion this year, missing analyst estimates. the social network is facing a slowdown in sales of display advertising and marketing tools. 2016 willategy in
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increasingly focus on a narrower set of high-impact initiatives with the goal of driving leverage across our portfolio. a roadmap will be supported by greater emphasis on simplicity and ultimate roi and investment impacts. nejra: and that is the bloomberg business flash. guy: thanks. we've seen earnings misses from many corporate this week. oil companies are predictable. what has taken the market by surprise, you've seen this in the numbers this week, is the banking sector. it has been worse for the banks. the stock at 600 bank index is down. 19% year to date. we had another miss from france's biggest bank, bnp paribas. ubs reported a 47% drop in profit. yesterday, credit suisse tumbled to a two-decade low after a fourth-quarter loss of $5.8 billion.
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lowddition to the record interest rates and slumping commodities, 2016 has brought a fresh challenge. bloomberg spoke to the executives heading up some of these institutions about the impact that is having on their business. >> i think that when you look at the dynamics of the fourth order -- you can to our see a trend continuing. there is a high level of risk aversion. people are hefty with asset allocation in general. they are paralyzed by this high volatility. all the geopolitical and macroeconomic news they see -- >> we really have a disconnect between what we see in the real economy. if you look at the u.s., the lord oil price -- the lower oil price is good for consumers. it has put more money into the pockets of the consumer. the consumer feels good.
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>> if you look at things like the return on equity, it is standing this year at 10%, which would suggest that we would be trading at tangible book value of 60 euros per share. i think it is a good opportunity. guy: the cfo of bnp wrapping up that conversation. let's get back to deutsche bank. nick joins us now, out of frankfurt. amongst the banks who have been the biggest losers, walk us through the reasons why, and why the market has been caught maybe a little off guard. >> i think it's really a question of -- the banks are a proxy for the global economy in many ways. when you see the oil market hitting trading revenues, that hits the big investment banks. when you see entrepreneurs from emerging markets who don't want to be putting their money to
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that hits the wealth managers. that is the ubs and credit suisse's of this world. it is across the board that these banks are getting hit. those banks which are in the middle of their big overalls, deutsche bank and credit suisse especially, they are not in a position to go out and make the most of market opportunities. they are missing out. say, wens they might are dialing back our risk and this is what we need to be doing. still, this is really hurting revenues. i think investors have been shocked at the extent that revenues and earnings plunged at many of the banks. guy: that was interesting to see. people say, why don't you do what deutsche did? deutsche reported last weekend that kicked all this off. we are in the midst of overhaul.
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people often like to think these things are kind of short-term. but as you and i listened to john cryer last week, my sense was that he was saying this is going to be fairly grim. >> absolutely. especially for deutsche bank and credit suisse, who will be taking charge to restructure their business this year. i was speaking to an investor yesterday who was saying, all the internal targets these banks have set themselves, they can basically write them off. the first quarter is going to be nasty. the shock may last into the second and third. it is a question of waiting until after the summer holidays when investors come back. that is maybe when it can catch up a little bit. still, the year is not going to be pretty. nick, always a pleasure. thanks for your time.
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let's bring in james ferguson. good morning to you. is there any reason to buy the banks? they look horrible. as nick was saying, 2016 looks miserable. >> depends where the banks are. guy: european banks. >> the problem with european banks is, they've opted for the kind of japanese-style slowburn resolution of their crisis. some of the commentaries are saying, where does this come from? i read one thing earlier this week, that it looks even worse maybe than 2008. it is the same thing. what banks have to do when they haven't got enough capital is stretch the time period out. what happened last year was that they closed the funding gap to zero for the first time. now, the banks can't be tipped over by a liquidity crisis. move the can kind of
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recognition front and center. we are getting this bigger appearance of losses. cryanhould guys like john go out and raise money? he's resisting the temptation. should that be the logical thing? -- theou can raise money problem with banks raising money is that it is almost impossible when you need to raise money. the traditional way is through retained earnings. if you want to look at the state of the banking system, you could look at pre-provision earnings. what the banks have to do is use most of these, or retain most of these earnings, to absorb the losses. guy: they are going to miss out on opportunities. on the broader sense, we are heading to a capital markets union in europe. you look at deutsche's trading numbers, they've got a bond that is coming down.
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there's risk officers tapping them on the shoulders and going, you can't do that. they are missing out on some potential to make money. >> yes. some of it is voluntary by the banks. they are de-risking. the riskier your assets are, the higher the pay. you are seeing a contraction on that front. you are also getting the regulator sticking his or her foot in and making sure the banks properly hold enough capital against each and every activity, which is making some trading activities look impossibly expensive. guy: can they get through it in the timelines they are talking about? can they redo credit suisse? can they fixed deutsche? >> historically speaking, the average time these things take is about 5.5 to six years. europe is going slowly. you can do these things in this
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amount of time. but i think one should be prepared for more like three or four years than one or two. guy: we will have to leave it there. thank you very much indeed. proposes a $10 a barrel tax on oil. we breakdown whether this is viable when we return. ♪
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guy: welcome back. you are watching "the pulse." we're live on bloomberg television. president obama will propose a $10 a barrel tax on oil in his next budget plan. the proposal is designed to fund transportation and climate initiatives. it has received a chilly reception in the republican-controlled congress. let's get out to on's nichols. he joins us now out of germany. what is he doing? hans: think of this as aspirational and a way of president obama to insert himself into this presidential campaign and debate to follow him. aspiration only, you always put things in your budget you want. in the past, there's been a tax on luxury airplanes, on jet fuel. this is a way for obama to throw some scraps to his base. it allows obama to insert
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himself into the race to succeed him. we will see where hillary clinton and bernie sanders come out on this. he wants to have another 300 and dollars over 10 years for clean transportation. also unclear, how you are going to levy this on american oil producers. is it an import tax? big questions there. one thing on roads and bridges in the states, the average gasoline tax in the states nationally is about $.50. the oecd averages $2.36. if you drive through illinois and missouri, lower taxes in missouri. of fascinatingll facts that i hope never to use. hans nichols joining us out of berlin. quick look at the markets before we go. session inet-ish advance of what is going to
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happen with the payrolls. the fireworks start a little bit later. we will have plenty of coverage coming up later. that's it for now. "surveillance" is next. ♪
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>> it is jobs day in america. the back drop global slowdown. later, bill gross, jim glassman in this hour, george magnus of u.b.s. the dollar weakens this week. will global leaders meet at the plaza hotel sometime this decade? and there is a football game this weekend. did you know that? money will be minted. good morning, everyone. "bloomberg surveillance." it's friday, february 5. i'm tom keene with caroline hyde in london. jobs day in america, but after the week a


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