Skip to main content

tv   Countdown  Bloomberg  February 9, 2016 1:00am-2:31am EST

1:00 am
>> a selloff's red and japanese stocks plunge. -- a selloff risk and japanese stocks plunge. lenders can cover obligations. >> the finance minister tells bloomberg exclusively that the market perception of the nation is about to change. ♪ >> welcome to count down on a
1:01 am
volatile tuesday. >> it is 6:00 here and the markets are closing in japan and we have serious weakness. and thetocks are down bank risk is something we have in the context of deutsche bank. >> when was the last time that you saw them send a statement? torch paper ofa balance risk and this is comparing a raft of banks. of insuringhe cost against defaults. >> indeed. you have $102 billion worth of bank debt making investors
1:02 am
nervous around the market. we will get more context on that number and show you how it compares to others. we talked about weakness coming through and you can see some of the risk aversion coming with a strengthening in the yen and a stronger negative rate weakening the currency and a distant memory, it would seem, now. the bonds are negative for the first time ever. >> we have gone from negative rates in japan and the yields percent+++oints to
1:03 am
>> that was the yield. we want to remind you that we started this year at 3.2%. they seem more worried about the global picture. >> we have gold on the screen for the eighth day in the row -- and a row. -- in a row. you have money flying and it is definitely a risk. >> we have the news now. >> deutsche bank has become the largest lender to be compelled haveinsure investors they the capital to -- reassure investors that have the capital. prices tos the share plunge. setting fires and throwing bricks at the police.
1:04 am
over the holiday, it came as they had food stores. debt this year will mark a turnaround with a change in financial markets viewing the country. given real growth and more inflation that is beyond control, the dynamics are accelerating and this changes the perception of the markets. >> the italian minister is leaderson anti-european reaching a deal at a summit. backid it was his duty to
1:05 am
the british premiere and that it would be terrible for the you can. we have more than 150 news bureau from around the world. david english is standing by. asian context for us the liquidity. >> yes. i mean this risk began overnight for us and where you guys are. andxpanded into the session the nikkei is down by a similar margin and a few markets are open because of the lunar new year and they took it on the chin.
1:06 am
we actually saw an increase in demand and it was more than usual for this year, which underscores how bad the sentiment has become. , 30% of stocks are now at fresh 52-week lows. every single stock was down day whereit was a nothing mattered, really. now, another great story has inn the precipitous drop yields and that is how it looked to day. nearly half of the government debt is trading in the negatives. towards negative
1:07 am
basis points and it is quite a turnaround from a month back. >> thank you for joining us here from hong kong. the biggest lender in at least four years reassured investors they have cash. >> they say that they have more than sufficient means to pay coupons on the debt. let's get to hans nichols. this was a rather unique moment and there was a report that raised a spectre about the ability to pay. risk,s huge, in terms of isn't it? >> they question the ability to in 2017, if they
1:08 am
come in lower than expected or there are further litigation costs. we do not just know where they are going to be with the long-term litigation costs and hammeredhe stocks get yesterday and it is only trading atnk that is one third of the theoretical liquidation value. this shows deutsche bank in a class by itself and they put out a statement that said they have and oneapital to cover billion for 2016. for 2017, they said they have 4.3 billion, if the sale goes through and they are not additional litigation costs. this is a look at the lenders in
1:09 am
the stoxx 600 and they are down significantly. you see mario draghi save the euro. -- mario draghi say they would say the euro. it has gone down in a precipitous decline. highs gone of incredibly and is a leak of its own. there appears to be two stories here and a broader concern about .he banks in general islooks like deutsche bank taking the brunt of that. >> let's talk about the said bank ceos stepping down, having reached an agreement to step down, as of today. a change was made on the board
1:10 am
initiative. >> if you want to know how a ceo , michael is 52 years of age and has been there is the first of march. a total return to shareholders. peers forget about his and that is the epitaph. a 1% return. >> it will be presented as soon as possible. let's talk about the world. we have the chief economist joining us now. stresser illustration of in the markets and falling to another record. --an is the first negative economy to go into negative territory.
1:11 am
how nervous are you this morning? >> good morning. is there a genuine reason for a new recession in the developed world? there is no visible reason for one. the fundamentals are not perfect. they are ok, more or less. does the market turmoil for the moderate economic recovery that we had at risk? the answer is that financial matters.-- turmoil despitekely that, nervous markets, the impact on the economy is modest. you have a tonnage company
1:12 am
with 11,000 trucks and, what this says to you is that it is a great barometer for recessions. is facingcular index a divorce between wall street, throckmorton street, and the reality between truckers and retailers. good and itt is confirms that, for all the times we have economic data until the end of last year, the western economies were doing ok with sustained moderate growth. this is the starting position and, more importantly, there is nothing that projected a serious
1:13 am
economic trouble to come and it does not mean that it will not have an impact. it probably will and it will be a modest impact. cash reservesore we have a lotnd of liquid reserves and we can weather the real economy and the financial storm better than the past. >> i'm grateful that you pointed out the most recent data. data is that the sale of heavy trucks are down and you are not worried because of a slump and we are talking
1:14 am
high levels, rather than the sky falling and. you have chart after chart for january and it looks a little falling.the sky is >> what we have is people like markets andnancial reacting with some cautions. volatility and it does not look like the start of a sinister trend. the uncertainty has an impact on the real economy and we will see this in data. this is probably not the start ona spiral that goes on and and brings us into recession.
1:15 am
then, it normalizes. about the markets and the reality and this is the and of insuring jpmorgan ofs is a torch paper 2007-2008. it is bring it out and not as bad as history and it is showing of on the right. >> let's take it out to maximum. this is right back at the zen ith. is it right back in the heart of the issue and we are seeing a rise in risk and this is what the negative feedback is. >> yes. of financial stress
1:16 am
is transmitted into the economy. behavior, inng terms of lending. it makes some economic impact. having said that, we now rely less on the banks van in the past, in the wake of a great real estate crash that we had. you need the banks more than now. >> thank you. rebuilding the reputation. public debt is a key to changing the perspectives on the economy. we bring you the exclusive interview.
1:17 am
1:18 am
1:19 am
>> welcome back.
1:20 am
it is 19 minutes past 7:00. let's get to bloomberg's is. operatorrgest tour rose 5.4% and the company despited the outlook, bookings being down for the summer. the oil giant reported 12 straight quarterly losses. replaced byl be myzales, a deputy finance desk minister. ihs, the have a further deal to stimulate asset values.
1:21 am
those are your bloomberg business news -- that is your bloomberg is this news. >> changing the financial market's perception in the country. >> they are speaking to bloomberg in an exclusive interview. >> surprised by the negative reaction the markets gave to the eu. >> i am not surprised. time, in many regulation did not allow them to reach an agreement with the commission and we have now reached an agreement and this is and we think we can obtain although some market reactions may be seen as negative, i also
1:22 am
have a lot of interest coming and ihe banking industry am confident that the instrument, combined with the measures to accelerate resolution, it will accelerate the market. >> can i ask about the bank where you are a shareholder? do you think it will be part of that solution and the banks will gather together? >> there are strong fundamentals npl. significant amount of confident a solution will the banking system >> do you seetage
1:23 am
a foreign investor coming to buy it? >> not opposed to. they makee problems is thetem has had resilience of the system overall and it is a surely voluntary comingith limitations from state aid regulations. joins us listen to the conversation. how she is the debt reduction? >> for they are tying government
1:24 am
, this would be the first time in eight years it would be part of the narrative and they are doing more to reform the government's of italy. -- the government of italy. and the provisions in november, did you learn about then particular european commission? it is a contentious issue. crucial issue and he from months going to and brussels, being told, "no." the government will soon present law speed up the process of measuresnd to bring that include more transparency
1:25 am
and speed of the litigation with the creditors who are trying to line of the battalion banking system. >> thank you for joining us. in -- ring back about banksncerns and the way the debt holders are being treated. aboutre concern sustainability at the periphery? the italian economy is in and employment is rising in the hotel and economy is growing with structural oforms and italy has dealt
1:26 am
credibility that resulted in a current rush away from risk. italy gets hurt. not very much. and thegovernments italy is on the good side, rather than the bad side. the political situation, is a greater concern and the government has to watch out that it does not, a environment of near panic, have arguments with a normal selloff and getting out of the periphery of the bond market. >> you need to get out of greek banks. you look at the greek positions. we have more to discuss up next.
1:27 am
the entire minister voices support for david cameron. our guess is there is a chance the u.k. will leave the eu.
1:28 am
1:29 am
1:30 am
anchor: it is time to check in with njera. climbing. yen is they have pushed the yield on japan's tenure field below zero for the first time. that is an unprecedented low for a g7 economy. deutsche bank has become the largest lender in at least four tors to feel compelled reassure investors and employees that it has enough cash to pay debt.
1:31 am
they are protecting the debt a gainst defaults. rioters have set fire and thrown break the police in hong kong, closing one of the city's busiest subway stations. the clash over the chinese new year holiday. toice fired warning shots contain protesters. oural news is powered by many journalists around the world. manus, anna? anna: we have numbers reported ahead of where the analysts had estimated they would come in. we have talk about job cuts. they cannot disclose the number of job cuts. they are in talks with unions on the reductions.
1:32 am
manus: they are going to pay dividends at 2.93% a share. the estimate was for three euros a share. options forsidering the generic business. the are in a real state of reconsidering what they are doing with of the business and how they take it forward. let's check out what is happening with these markets. caroline hyde has been pouring over details for us. caroline: it is dragging overall world stock's lower. no industry group is spared. every single one is in the red. the oldo show you wha world index. you are seeing it on the brink of a bear market.
1:33 am
we're so close to 20% of our previous high that we reached in may of last year. we are now 18.5% clone war. we have seen that spiked low continue to fall on the brink of a bear market. also, we have been talking all morning about the move into the japanese bond market. i wanted to show you the volatility on the japanese bond market. as we say, it is below zero on the tenure debt. that is unprecedented for the g7 country. we can see bond volatility really spike. we are at 3%. this is an interesting chart. it is tracking the prize volatility over the next six 60 days. it has sort to 3%. clearly, we have seen the continued volatility in the chinese market. manus: we have default risk rising and deutsche bank issuing
1:34 am
a denial in terms of their ability to meet their payments. anna: it is the first time we have seen such a global bank have two its investor base and employees. -- first time we have seen a global bank have to calm its investor base and employees. all these banks are spiking higher. this is your overall index at the cost of insuring the banking debt. you are seeing it fly through the roof at the moment. this is rather named. that is the index you can go out there and search for the substance general five-year. that is where you want to be searching for. overall, we have seen the cost of insuring of the highest since march of 2013.
1:35 am
clearly, the revenues are under pressure in the banking sector. manus: caroline hyde can be contacted at anytime today if you want to complete -- if you miss that. na: the first presidential primary in a the 2016 year takes place later today. party members will vote for their preferred candidate in new hampshire, also known as the granite state. manus: hans nichols is our former knic international correspondent. well, what we will get out of new hampshire is a narrowing of the field. it will be difficult for all
1:36 am
governors to make the case to stay on if they don't do well. on the republican side, it appears to be a race for second and third. republican trump is up in the polls. side, he willtic be looking at the margin of will be looking at the margin of victory that bernie sanders has. will sanders be able to translate all of this beyond new hampshire? that is one of the key questions. on the democratic side we are looking to see how broad sanders' support is and does it indicate the hillary clinton will have a difficult fight heading into march and april. anna: how do all the candidates feel going into this particular battle? hans: trump isn't shown at 30%, leading on the republican -- trump is shown at 30%, leading
1:37 am
on the republican side. rubio has had a tough couple days after that debate saturday night. he fell into the trap that he is cue.didate on auto he has held 76 town halls across the state. they take questions. 30 minutes, 60 minutes, 90 minutes. it is democracy at its finest, except for the fact that you have to drive a lot. snow for new hampshire is on the forecast. that could damper the turnouts. there is a question of what that trump'so for donald supporters. anna: no robotics auto cue rea
1:38 am
ding, i will have the know that. hans nichols joins us. let's continue to talk politics with a slightly different flavor. let's talk about u.k. politics and little bit. you talk about a 35% risk of brexit. i think it is quite fascinating, the number of people who don't know which where they will vote on this particular matter. when you look at the polls, it is easy to get yourself worked up and worried. many people do not know. >> there is a large number of "don't know's" and there is a little bit of a status quo bias. you don't have a clear reason to change the current situation. you may be inclined with a little risk aversion to vote to saytay. that is our basic bet. though the polls suggest it is even at the moment. probably, the u.k. will stay in.
1:39 am
the big risk is, if something happens in the meantime. the migrant crisis could get out of hand. wrong.erendum could go maus: anni and i were looking at this in the morning. is a risk of the acceleration of "don't knows." 20% are in is the "don't know" category. us: we are seeing a move here and that is the significant risk. i thought it was fascinating. it is not the there he supports. he said, oh no. europe is closed. is vote for brexit, europ ie
1:40 am
closed and he will not get a free trade agreement out of us guys. >> that is the risk part of the brexit. it would not be that you have brexit and you still stay in the biggest trading area of the world. negotiateld have to a deal and it is highly unlikely that in such a charged political situation, britain would get anything like what norway has. even the norway deal is worth for britain, far less attractive. if you are in, you can actually be heard in some of your concerns can be addressed. if you are out, there is the
1:41 am
reason to address the british concerns. anna: are you modeling this on what would happen on the rest of the eurozone? about atalking confidence shock, a credit shock, or any number of shocks. manus: they say credit would ramp up by 1%. this is the volatility. inside bloomberg today and you look at top u.k., the model anna says in terms of the schocks, we just don't know. this is the personification of risk. >> it is not easy to model that. we simply don't know what happens afterwards. that in itself is a big problem. we would have massive uncertainty.
1:42 am
if that were to happen in a situation like it now, where the markets are panicking anyway, that could be what will push the u.k. in a very serious recession. if overall markets are calm, the impact would be less. uncertainty is the first thing that what happened. it would be negative. britain mightal be getting afterwards would be hase than they feel burton now. there would be a negative impact on britain. i suppose we have to start thinking about what kind of impact the brexit conversation will have about monetary policy not just in the u.k., but in the eurozone. >> in britain, it would have to react significantly. as to the eurozone, what we have to see is whether there is a dispassionate about something similar happening to other
1:43 am
economies, which would be highly disruptive for the eurozone. therether after brexit, is a move to actually pull closer together now that we have it through. they could be strengthening the internal cohesion. followed and the political fallout for the eurozone could be minor. anna: that is a conversation for another time. thank you for joining us this morning. manus: up next, stocks fall literally off a cliff. 10 year yields that fault next to nothing for this g7 country. anna: we take you through all the latest market action for japan.
1:44 am
we move into the european session and then further on into the u.s. session as well. it does not look like there has been a line drawn in the sand. ♪
1:45 am
1:46 am
1:47 am
anna: welcome back. this is "countdown." let's get to the bloomberg's nest flash. beaten on first quarter revenue. -- chewy has risen on first quarter revenue. they severed a record decline in demands in turkey. bust.y go
1:48 am
a supply glut punishes revenues. a further cache would stimulate deals. the world's largest producer of platinum said it will place all expansion projects on hold. anglo american has written down mi operations by millions of dollars. all of oury much put growth capital projects on hold. we can't one project in execution. we have taken a look at that and had a look at the cash outflow and said, in this current environment, the market doesn't really need additional nuances. we have said we will put that project on hold until 2017. nejra: that is your bloomberg business flash. you v let's talk
1:49 am
about volatilityery much. -- thank you very much. let's talk about volatility. anna: just today we have seen nikkeipics in the dropped by 10%. we have seen negative territory for the first time with a g7 country. let's get to tokyo now to talk to brian. a lot of focus is on europe right now, regarding the banks. reporter: analysts are saying we were looking at what looked like panic conditions in the market today. on the one hand, you saw a massive demand for assets like gold rising above $1200 for the first time since june. the highest to
1:50 am
since november of late 2014. on the other hand, the losses werea across the board. this was led primarily by the exporters. they were suffering from global .alaise and concerns manus: where does this leave policy makers? is this markets push and policymakers to never ending qe nirvana? know, i think that may have something to do with the fact that banks were leading today. i think people in the market are concerned that once having adopted a negative rate policy, th e boj could be testing the limits to go further. it is a most like people on most like people in the market are
1:51 am
scared of their own shadows. just the idea that the boj could make further negative rates is scaring people when it comes to banks. we did have officials coming out and talking about currencies. it was a very choreographed situation. ministryng officials were talking about the rough conditions and the market. we did not quite have threats for intervention, but it was a half step towards that. anna: thank you for joining us from tokyo. manus: we talked about the continuing signs of distress. that is obviously key to the markets, the health of the global economy. so, let's bring in our next guest. i cut myself short there for a moment. he is the global head and
1:52 am
billion pounds. we have covered deutsche bank issuing statements. we have talked about the ratcheting hire of default costs for banks. are you worried about risk and markets? guest: as a portfolio manager, you lifve in a constant state of paranoia. the wording about everything and nothing to some extent. the key thing you must do is focus on your medium to long term horizons and not get caught up in all of the interday volatility. anna: we were talking before. -- the talking about losses we have seen day today on these equity markets are not severe enough.
1:53 am
euro stocks. the manus: that was yesterday alone. anna: it closed just shy of 3.9%. guest: i think if you looked at some of those small moves, they are probably 1.5%. going to find it very difficult to add value in these particular markets. you have to stick to your two to earee ya investment. we were talking about a global manufacturing recession. there is no doubt about it. this is your world bond. let's drive those over. i did ask about those yesterday. mode ise risk off
1:54 am
showing pretty stellar returns for the bond markets. this is where money is flowing to. you have seen record low deals in japan. in japan, we have seen one year lows in the u.s. this risk off mode, do you believe in it or adjust your portfolios to take more bonds into the portfolio? expectations are fairly anchored. are fairlyectations anchored. with any context of any portfolio, you have to ensure you have diversification and a but view of the world, likewise, you have other positions in your portfolio that will protect you during periods of volatility and periods when you are simply wrong on your outlook. we don't know what the future
1:55 am
will actually bring. most fund managers would hate to admit that. you have to construct a portfolio that still works reasonably well, even when you are wrong. that is one of the key things to keep in mind when you are looking at bond markets, and at equity and fx markets. sometimes we believe that the status quo we are in is normal. what we forget is we are in an unprecedented period of monetary experiment. manus: is it to be argued that the fed is in a different mode? every central bank is at a different position. is this the beginning of a bubble bursting in terms of equities? is that a fair assessment? guest: when you look at asset prices to include equities, to include bonds, to include commodities, one of the things people have become accustomed to of unprecedented
1:56 am
levels of volatility, which were almost too low. whereou have a period you don't have significant equity market corrections for a significant length of time, when they do start, people panic. they have lost accustomed that used to be more prevalent. anna: now, we seem nervous about the banking sector. what will they be nervous about next? guest: investors are always nervous. manus: smart investors are always a nervous. guest: and the investor should be nervous and when you should be nervoureally worried. high yield forhike yield for us. we called it moderate yield. the issue there is the high yield is a little bit skewed.
1:57 am
anna: thank you for joining us this morning, peter fitzgerald. stay with us. manus: up next, we will talk about germany. it is under pressure. ♪
1:58 am
1:59 am
2:00 am
manus: japanese stocks plunge, as the 10 year yield is negative for the first time ever. reassureders shareholders they can cover their obligations. manus: the market perception of the nation is about to change. welcome to "coutndown."
2:01 am
i am manus cranny. anna: i am an edwards. -- i am anna edwards. we have an expectation of a rise of 1.5%. manus: this is actually a redlabeled headline. everybody isst as trying to assess or over dramatize the global yield. let's check in. we have smashed up equity markets in terms of the japanese market. this is how your trading day is shaping up. we have got declines in the european equity market. you saw a real pressure there. this is industrial production data. it will certainly add to that
2:02 am
negative -- nervousople are enough about the environment and the banking sector in germany. this chart shows the cost of insuring against defaults. the deutsche bank was forced to come out with a statement last night insuring investors they had enough cash to pay their debt. manus: this is the deutsche bank costs on the far right. if we look at the costs, this is per $10 million of the company debt. here is where we are. eye ofople would say the the storm of the tragedy was back there in 2011. you begin to understand that we are only at the birthing stage of riskk. that is what this market is
2:03 am
telling you in terms of the ballooning costs of bank debt. anna: this statement came out from deutsche bank. of thosed to raise 2% losses, but still ended up down by 8%. a snapshots give you of the rest of your risk markets. volatility is back at rates you have not seen since 2013. anna: 10 year yields are going negative for the first time. that is the story now. let's get to the bloomberg first word news. caroline: the yen is at the highest since november 2014. rs have growing fea about a global slowdown. japan's 10 year yields are
2:04 am
negative for the first time. rioters set fire and threw bricks at police and hong kong at one of the busiest subway stations. the clash came as police closed down illegal food stores. police fired warning shots to contain the protesters. the italian prime minister is betting on david cameron. he sees european union leaders -- reaching a brexit deal. he said it was his duty to back t david cameron. this is powered by more than 150 bureaus around theth
2:05 am
world. david.let's get out to david: i think the understatement of the year. you look at where markets are at the moment and there are just a few markets open in asia. fortunately, those markets are trading lower. wif you told me one month ago that the dollar yen would be $1.14, i would not do in the head. we are making our way back towards $1.15. down 5%. every single stock, except two are lower. i was looking at the bloomberg terminal earlier and i think that is the most red i have seen the terminal come out with. out,this hue does come
2:06 am
you know it is pretty bad. we all know that below zero for the first time with ten year yields. we are in fact, pushing further below zero as the market opens up. it is certainly a funny world we live in. have overshot the downside, yet again. anna: thank you very much, david inglis. manus: anna told you at the start of the program that they became the biggest lender in four years to reassure investors they have enough cash to pay its debts. anna: they say they have more than significant means to pay their debts. let's get dupont's michael's in berlin with more details. -- let's get to hans nichols in berlin with more details. what triggered this move?
2:07 am
hans: it was simon davidson, an questioned if deutsche bank could pay their debts. deutsche bank said they have enough cash for 2016 and 2017. what is clear is that their shares have taken a battering. deutsche bank is all the way down at 1/3 of its theoretical value. there have been some banks that were hit recently here. other banks are close to half of that. deutsche bank is in a league of its own. the stoxx 600 has taken a battering down almost to 2012 levels. draghi talked about doing what it takes to save the euro. deutsche bank said they were down as much as 10% after this announcement, but stocks surged 2%.
2:08 am
they said they had enough money to cover 2016 in tier one coupons, which are due in april. they said in 2017, to have enough for 4.3 billion dollars. all of that is contingent upon their not being more headwind costs. they are up by more than 50% just this year. look at the cost of insuring deutsche bank debt compared to the cost that other banks are facing. everyone is up, but known as quite as high as deutsche bank. is,s: the burning question will deutsche bank have to raise capital? hans: he has ruled that out on several locations. in 2012, you saw u.s. banks that needed to raise capital. right now the line from deutsche
2:09 am
bank is that they don't need it. we will see how much longer that holds out or whether or not there is a question of markets overshooting. there might be a correction to the correction. hans.thanks you, pete fitzgerald joins us. it is great to see you. thoughts on the last 24 hours. it has been a big 24 hours for credit analysts. we have had talk about deutsche bank. this has put these concerned credit to the front and center. guest: the specter of u.s. rates is going higher again. you get into a much more
2:10 am
idiosyncratic approach about how do analyze risk. it can become much more important. manus: a busy day. i want to bring one of the functions we use on bloomberg. this is about monitoring are looking at the default costs. atve got investment grade the top. and then we moved over to high yield. >> we called the moderate yield. talk is through this risk. risk.k us through this >> we have seen the relative i.t., versus high yield.
2:11 am
again, it is a question that you have to ask yourself with of the portfolio. do i put money to work? there is to money to be put to work in this market. it is a question of allocating that cash. it also depends on your view going forward as to how bad this could get before the correction. view the do you banking sector at the moment? is this a general concern for you? thet: since 2008, regulatory overhang and pressure against banks has been overwhelming and kept us away from that sector, particularly when looking at equities. to makethey do manage
2:12 am
significant profits, regulators will find ways to make sure the prophet does not go to the shareholders. does noture the profit go to the shareholders. if you look at the credit markets, there was a bold series of new instruments that were introduced in at the years following the banking crisis, which really have not been tested. >> the contingent, convertible bonds that were there to boost your capital. guest: these are risky instruments. investors can lose their capital if the bank needed a boost of capital. and freely, what we are seeing is this is a untested market. people are unsure exactly how it will work. the intervention by portuguese authorities in one of their domestic banks has created more confusion in this area. the marketa period
2:13 am
needs to work through to ascertain how these instruments will behave in stressed environments. manus: i have gone into the, gone into your domain. this talks about u.s. company default risks. one of the big issues is this. it takes me back to 2007. we can see contagion from the bottom up. that is perhaps, what the market is worried about. we can see the 30 most risky debt profiles. the worry from the market is that you get this contagion. guest: absolutely. it is an untested market. it is an asset class designed to fail. starthere he is, if you getting coupon suspension with in that asset class, what the bottom line looks like. the one thing you need to take into consideration is big liquidity -- is of the liquidity
2:14 am
of the market. in the regulatory environment, investors are concerned that they are not there to pick up and t up inventory. the banks can't step forward. anna: this is set apart from previous bouts of nervousness. we always have this change in the regulatory environment, as simon points out. that could lead to lower levels in liquidity. there are many reasons why you can compared what is happening now to 2007. >> you need to have a high respect for history no matter what you do. an investorrn to and say, i built a great portfolio, don't worry. you have to hold a portfolio that is where he of historical
2:15 am
events, but you have to overlay qualitative judgment as well. manus: thank you very much. the careful what you say to the regulators. anna: up next, good current central bank policy make the economy more volatile than it was in 2007? will you might think so and we thanks solliam white and we will speak to him. ♪
2:16 am
2:17 am
2:18 am
anna: welcome back. let's get to the bloomberg business flash. caroline: beaten on
2:19 am
first-quarter revenues. the company has confirmed its outlook, despite suffering a record decline in thdemand. the mexican oil giant has reported 12 straight quarterly losses. the 41-year-old who took over will be replaced by jose antonio gonzalez. he is a harvard trained economist. about 150 oil and gas companies tracked by ihs may go bust. says further shakeups would help stimulate deals that have been on hold because buyers and sellers have disagreed on asset values. that is your bloomberg business flash. viewers ups get our
2:20 am
to speed. european futures indicated lower. this rut is worsening. it sped up into the u.s. and carried into asia. 50% intocks rose by 2016. have expressions of a risk going through in the bond markets. basisp is down by four points. we are down by 1.7% with the u.s. ten year. we are just completing the picture with what is happening in germany and italy, painting a different picture for the eurozone. that is a picture of the markets right now. current central bank policy could make the global economy
2:21 am
more vulnerable than it was in 2007. it is used on a false beliefs on the thought o our next guest. .e joins ous now william, great to have you here on the program. i want to ask you about this great experimentation we have seen with qe. does this leave us in in a safer position as compared to 2007? i just read that you think otherwise. >> i do think otherwise. i am not sure that the policies --t have been foll followed there is absolutely no question that what the central bankers did was appropriate to get the markets operating again after the crisis. more recently, the objective of that policy changed.
2:22 am
it is trying to stimulate aggregate demand. is honest truth is that it not capable of doing that in a sustainable way in the circumstances. we are even more interviews circumstances -- we are even more into these circumstances today. the debt levels were 210% of gdp. that was in 2007. those debt levels have risen to 150% of gdp today. if people thought we were in a e-leveraging, we have not even seen it started yet. kevin issue out here. -- we have an issue out here. the accumulation of debt has been a byproduct of the accumulation of debt. in a certain sense, monetary policy has helped, but it has
2:23 am
also gone in the opposite direction. that came one thing through was debt forgiveness. there needs to be a radical re-think in terms of debt. you have mentioned the debt levels. would that be a paradigm shift, that forgiveness? >> yes and no. i am speaking for myself, not the oecd. wrote a book called "debt, the first 5000 years." it goes all the way back to the samaritans. ebts grow too large to be serviced, they have to be forgiven. the alternative -- and people have known this for decades -- the longer that you put this thee thing off,t the smaller
2:24 am
amount of money you will recover. the question is, do you want $.50 for the dollar, or do you want nothing? we have to do more serious thinking about that. what are the things people are thinking about at the moment? ratesegative interest seem to be the solution du jour. we have a quarter of the world's gdp in countries where we have negative interest rates. what is that due to the global economy? illiam: the honest truth is nobody really knows. the thing about these experiments is they are experiments. we have no historical precedent for this behavior at all, ever. the answer is, we don't know. to give you once ball example, the general idea is if you charge negative interest rates
2:25 am
that somehow this will translate into lower lending rates and for stimulus for the economy. you have to remember that these lower rates are squeezing bank profits. this is something we don't want in the circumstances. we want them to make more money so they can build up capital buffers. what are the banks going to do? they could lower the deposit rates for customers. there are then worries about people taking money out. the other alternative is to raise the rate you charge people. that is the exact opposite of the purpose for which the policy was intended. i repeat, this was all experimental. i am rather skeptical. rket seems to be rather skeptical as well in terms of the residual impact of zero percentage rates. if you had to advocate a radical thought for growth, if
2:26 am
the zero rates and negative rates want to do it, what would it be? william: i would say those who have fiscal room to maneuver should use it. there has to be more attention paid to wage growth. spending has been too low. when need much more public infrastructure, which is an asset to go with the government liability. we need more systematic approaches to debt reduction. we need a lot more structural reform to get that low hanging fruit to allow the economy to grow faster and allow debt service to be more easily managed. anna: it is a life long list, but an easily understandable list. william, thank you. that will do it for "countdown." "on the move" is next.
2:27 am
they will be focused on what is a negative session in asia, and then, in twonto europ. e. ♪
2:28 am
2:29 am
2:30 am
"onthan: welcome to on th the move." we are counting down to the european open. i'm guy johnson alongside jonathan ferro. jonathan: it's not often deutsche bank has to come out and say -- that is executive what has happened. deutsche bank has to reassure investors after the death gets pummeled. guy: are the banks feeling the pain? that is another question we need to ask. we will be talking about what happened to japan overnight, the tenure going negative. that is a significant move. stocks down over 5%, the


info Stream Only

Uploaded by TV Archive on