tv On the Move Bloomberg February 17, 2016 2:30am-4:01am EST
guy: welcome to "on the move." 7:30 in london. we are counting you down to the european open. here is what we are watching. now for the hard part -- the oil story is fascinating today. you have the deal between saudi and russia, but now we move on aq, the two ir countries that want to raise output this year. this is the tricky negotiation. than me to talk about china's credit crisis. what is happening inside the credit story? npl's are searching, people are paying attention. to what we now know is that the chinese are saying we will make it easier, not harder, for banks to lend. then me get to the restructure of that business, trying to raise.
that is the game at the moment -- fascinating to hear what they said yesterday. we will come back to that in a moment. first up, let's get you up to speed with caroline hyde. caroline: thank you. brent crude has risen ahead of a meeting between iraq and iran in to ron later -- in tehran later. the saudi oil minister described it as the beginning of a process. iran's oil chief will meet his venezuelan counterpart. david cameron has edged closer to membership of the european union. with the u.k. prime minister to in brussels next month, he won the backing of angela merkel. the dutch prime minister, the holder of the eu rotating presidency, also agrees that "there was a good basis for a deal." president barack obama says donald trump won't be elected president. he also said the republican primary campaign has alarmed or
in audiences, who expect the u.s. to lead the world. >> i continue to believe that mr. trump will not be president. and the reason is because i have a lot of faith in the american. -- in the american people. they recognize that being president is a serious job. show or hosting a talk a reality show. it's not promotion. it's not marketing. it's hard. caroline: back to you. guy: thank you. we're 20 minutes away from the european cash open. let me show you what we think is going to happen at the open. go to the terminal and check out the futures box. you get this error number value, which has faded. you get a better number as we start to evolve toward the opening and as you can see we
are fading a little bit. the london market looks like it will be in positive territory, but the cac into dax look flat if not negative. let me show you some of the other factors we are watching -- unsurprisingly, you see what happens with the yen. it seems to be a lockstep reaction. oil has the market uninspired and it has negotiated the qatari and saudi russia talks. another factor, rising this morning, back above 1200. let me take you back to that oil story. brent crude has had an interesting few sessions, but it is kind of holding ground as we head into a meeting between iraq and iran in tehran later. russia's deal to freeze production yesterday in what the
saudi oil minister described as of a good the beginning of a process." let's get more wood elliott gotkine. is iraq more likely to get involved then iran? yes, that would certainly seem to be the case. iran is already pumping 4 itlion barrels per day, bso would be the more likely of them to be persuaded. noting thatorth iraq and iran are both looking to reduce production. they just came back in from the cold after having sanctions lifted. they were not a able to lift as and it they wanted, would seem incredibly unlikely that the irradiance are -- that iranians will want to
pull back after just having them lifted. we weren't expecting much between russia and the saudis, but they agreed to freeze outputs a long as everyone else does. perhaps we'll to look at this with oil barrels half full rather than half-empty. guy: depending on your point of view. elliott, thank you. elliott gotkine joining us on the oil story. -- yogi, youcome said you see the price of bottoming out. how long is the bottoming a process? how long will we have these low prices? >> i think $30-30 five dollars for a while. obviously we have had issues around supply, the demand has also grown by 3 million barrels per day. so this is consistent with a recession environment, the beginning of global growth.
you have got gdp is growing 2.9%, the u.s. growing at 2.4%, china growing at 6.8% as well. things are looking quite reasonable. the announcement yesterday, very interesting news, and very positive for oil markets. it provided some stability and calm to the market, which is very much needed. guy: the markets -- yeah, great, you will freeze, but you will freeze all the way appear. the markets are definitely seeing this as a supply story. it is not as if they are cutting. >> they are not cutting. supply has increased 5 million barrels per day over the last few years. --y will go all the way back i think it is very much a u.s. dollar story. the u.s. dollar is significantly overvalued, 40% overvalued versus the euro, 7% versus the yen. we expect to see dollar weakness going forward. if you see dollar weakness, you will start seeing oil and
commodities trade higher and emerging markets trade higher. positioned market upside?arp rise to the everybody i have talked to suggests that we will remain at a low level for quite some time. if you are contrary and trying to think -- if you are a contrarian, you are looking at how the market is set up, and the possibility of it eating squeeze looks real. >> i think that risk is significantly increased. you go out futures, for the year and are up $50 per barrel. but the market is telling you that oil will trade higher -- it is just a matter of -- guy: not much. >> we will stay between $30-30 five dollars, but the big market $35.30-30 fiv guy: the market is not pricing
anything for quite some time. >> absolutely. you go back to december, they were talking about four rate hikes. the probability of a rate hike by the end of the year -- the market is starting to price in no rate hikes going forward. the domestic story is still improving, but the dollar has weakened somewhat over the past four weeks. we actually think it has more to go. guy: how far does it go? >> we think it could go toward ppp levels. i see it moving toward 120 in a meaningful way. ppp levels are down at 104 for the yen, and it could have quite an impact on oil prices. guy: we need to talk about that 120 call and see what draghi does. yogi is going to stay with us. up next, it is time for a central banker strike.
guy: welcome back. let's get the bloomberg business flash. caroline: thank you. a 32% drop in fourth-quarter profits as regulatory costs rose. net income declined to 272 million euros compared with 400 billion euros a year ago. abn is a state-controlled dutch lender. stakesle, selling back in more than three dozen regional banks to free up capital. it will ensure that they can offer an all cash dividend as soon as this year. they beat estimates and posted a 28% increase in quarter profits. $12 billion in bonds to return capital to shareholders. the move accounted for more than half of the $27 billion raised yesterday,'s second-biggest day for debt sales this year.
-- the second-biggest day for debt sales this year. guy? guy: thank you, caroline. as we await the minutes from january's fomc meeting, we know for a number of voices that the one that stood out had less to do with central banks then something else. but significant progress has been made to strengthen the financial system i believe it did not go far enough. i believe the biggest banks are still too big to fail and continue to pose an ongoing large risked our economy,. guy: are we fighting the last war? that brings us to our morning must-read, from the opinion pages of the wall street journal. "time for a central banker strike."
yogi.bring in our they still fighting the last conflict? they are looking at the banking sector and regulating pretty heavy. they have negative interest rates, more qe. all of this is refocus on what we had yesterday, not tomorrow. >> agreed. and growth has to be financed and it is being financed by fiscal spending and bank lending. those are the two areas that we need to focus on in order to stimulate growth going forward, which then translates into earnings. central banks playing around with monetary policy, with all the credibility issues they currently have and the way they
have changing strategies and policies and with elections in the backdrop, it seems to be adding to the confusion. i think banks are in much better the 2008n they were in crisis. guy: the market has beaten them to help. what is that about? >> some of it is being in a low interest rate environment, some of it is exposure to the oil sector. of course they are going to forget to be beaten up, but as it improves, as rate increase, as the dollar starts to weaken and we see oil prices improve, osha do quite well. -- those should do quite well. as you quite rarely say, they are beaten up at the moment. guy: so you would be happy to buy into european names, trading at book value? >> i think this is an interesting level to start building exposure, because they
are so beaten up. i would say, across the whole industry, i wouldn't take any specific name. i would like to be more diversified. but it's not surprising that they have been beaten up before. guy: your sense is that central banks are making this worse, not better. >> i think they are struggling to get things right. quantity of using has been done and it has helped, but you now need to focus on making sure banks -- guy: are negative rates bad news? >> they are at the moment. they can't lend. guy: you talked before about euro-dollar going up through the 120 level. last night our guest was saying that if inflation is slower, it should be unhurried. theentioned a moment ago fact that the fed isn't pricing to anything this year. we've seen some pricing of that,
but not, in your mind. all of it how quickly does this story developed? how quickly do you see the dollar coming down? >> i think we will see the dollar weakened quite significantly, because it is so overvalued. it makes no sense. the u.s. interest rate hikes were driven by domestic story, not by geopolitical events around the world, and domestically, the u.s. is looking ok. this is an ok environment for domestic u.s. in the run-up to an election. if you are of the view that the u.s. is fine, you will start to see some weakness going forward. guy: to many people, that sounds so counterintuitive. u.s. doing great, rates stay low. >> the u.s. dollar will continue to weaken on the basis of the rates not going up as quickly as everyone thought. that is the thesis.
guy: 7:51 london. let's get your stocks you need to watch ahead of the open with caroline hyde. caroline: credit agricole is one to watch, because it is beaten in terms of its earnings estimates. notably, they are restructuring this bank, and many are looking for the stock to rise. this is a function that takes into what the earnings features are. look at e.m. if you look at any stock -- this is what we had over the course of 2015. 3.5 billion euros brought in, 882 million over the fourth quarter.
beatis a 27% increase, a in terms of earnings. you have to keep an eye closely in terms of what they are doing, in terms of selling so many regional bank stakes. 18 billion euro restructuring. the french regulators say they very favorably welcome this deal. we just heard this restructuring could be coming. they will likely rise up today as credit agricole is one to watch. meanwhile, keep an eye on the holders of totale. totale is likely to sing today -- why? because this shareholder is the fourth and biggest institutional shareholder of totale, selling a stake. .7% after shares rallied some
10% over the course of just a few days, maybe just cashing in on the recent share uptick. it was a brutal time for this oil company. bank of america merrill lynch are joint owners on the deal, and they are being offered at a slight discount. total, and keep an eye on schneider electric. schneider electric sales beat analyst estimates -- look at the share price over the last 12 months, they have been hammered. we are likely to see a bit of a biggestfor the world maker of low to medium voltage equipment. a 7% profit but still hammered. guy: low to medium voltage. thank you. caroline is talking about the fact that total's fourth biggest
shareholder is dropping stock. you like to buy those stocks right now. >> they are massively beaten up. you look at numbers and you see revenues and earnings down. this is a great time to be picking up -- guy: the banks are trading on .6 and you think they will trade higher. how long do you think i am going to be in this highly volatile environment, which is difficult to judge? how long will i have to hold these to make decent money? >> i think you are a long-term investor, not trading. you are looking to buy these names and hold them for years. i see some very good valuations if you believe the equity markets will trade higher, which we do believe. it's bounce to come down -- that is inevitable. but we are also comfortable with it when you buy those valuations. guy: line-up the mining sector? -- why not the mining sector?
that should push up the other commodities. >> absolutely. the same argument still applies. i suspect you could get exposure to that sector through emerging markets rather than specific -- guy: do you think we will get more clarity because we will understand the price dynamics better? oil is kind of a function of story. you can lump metals and put them in the field, but the legacy effect is much larger. >> of course it is. you're always buying futures contracts. but i think the oil story is so clearly defined by what is going on supply market, by what is going on in the u.s. -- for investors, it is quite an easy asset class to follow. guy: thank you very much. we're approaching the market open, four minutes away.
guy: you are watching "on the move." we are moments away from the start of european trading. the crude conundrum as russia and saudi arabia agreed to freeze assets. negotiations take place today in tehran. credit creaking in china. a surge in a new lending gives investors pause. european futures are higher here in europe.
shanghai is up 1%. the nikkei is down as the yen rises. let's talk about the opening here in europe. let's get to the cash open with caroline hyde. caroline: it was a down day for europe. disappointment for saudi arabia and russia with that oil deal. we were just talking about concerns and china. worryis a lot of regarding the debts in china. the markets are brushing it off a little bit when it comes to the equity open in europe. we see a rebound in commodities. gold seems to be going lower. we have seen gold prices pick up at the moment. higherjust 2/10 of 1% with equities. this is the tail wagging the
rest of the markets. rent is down by 3/10 of 1%. we are at $30 overall, but there has been disappointment about what the opec countries and non-opec countries are willing to do to reign back in supplies. c has been increasing their market shares. there are concerns there. what will happen with iran and iraq. risk aversion is playing into some of the usual concerns. gold is up 9/10 of 1%. rebound ase the yen well. the dollar is down and the yen is higher. let's look at the debt side of the equation as well. we have seen yields come back down. fed minutes are up today.
they are pushing away from a rate increase later in the year. germany yields are coming down two basis pionts. how is that opening on the back of those numbers, up almost 5%? they are restructuring the business. a big shareholder is selling, gbo. storebrand is up 1.6%. they promise dividends, but not until next year. guy: but that you what the flow looks like in europe this morning between the sectors. the market is definitely on safer ground this morning, were looking for safety. industrials and health care are all rising. energy financials are down at the bottom. you can see the two red elements on the wheel. that is the energy sector. that is where the weakness is.
let's talk more about the banks. a bleak. -- a bleak period for european banks. look at the super sector. joining us now is jonathan tice. let's talk about what has happened this year, jonathan. it has been a year in which the market has looked to the banks and said, we are worried about your trading positions, high yields, regulations. take that apart for me. >> we have got revenue pressure and negative rates. that makes that harder. reu have also got the case whe you can do all you want to cut it. they have increased their cost
energies by 10%. this is offset by the increasing compliance number s this year. you have got a couple hundred billion of energy loan exposures, where the european banks are being very sanguine at the moments about their approach to provisioning. we know the u.s. is going to restate reserves and they will be lower. the market is expecting higher provisions. said, we have got some things trading. jonathan: if you are looking for a metric to decide how these things are trading, you look at agricole this morning. you look at what happened with deutsche bank. you look at the punishment that was taken there.
is that the metric analysts are looking for most closely? what is the deciding factor? >> the moment we have very high dividend yields as well. we have banks that are comfortably above their returning capsule. a lot of the ratios are being driven by optimization. it is not growth and retained earnings. it is not high-quality, but they are relatively safe with well-capitalized banks. credit agricole finally is removing part of their switch. in 2001 about that. they are finally addressing it, 15 years later. we want good capitalization with capital returns. guy: you are happy to pick up them all. you just go all in. >> i think the thing that is
driving our decision is about dividend yields and restructuring. it is very hard to take concentrated risk and actually get it right. we have very complex stories. there is a lot going on with sbc tosingle bank from h boot to bank and what we have seen -- from the hsbc to k, and we have seen the same with french banks. guy: you just addressed a little bit -- let's take a step back and look at what is happening here. .6 for the banking sector here in europe. we were hit during the financial crisis. returnhave to remember, equities have gone up because of
these known and unknowns. at the moment, it is of the upper end of the range i have been watching for the last 15 or 20 years. it is 12% or 13%. some of the banks have 18%. do they need to raise capital? certainly, we are at the lower end of evaluations. guy: how much money needs to be raised? >> i think if anything, the regulators will continue to take a step back. there is a big difference between enough capital and things like liquidity. liquidity is clearly what spooked the market. their ability to buy back some of this is not the same as capital or the same as solvency. we have to be very careful to follow liquidity. if liquidity comes the problem, then we have a problem again. we have got the liquidity coverage ratios.
are in a relatively decent place. that said, we still have to refinance. that going tois cost? the addresses revenue line. it is not without risk, but i think look at it he and a solvency at the moment -- but i think liquidity and solvency of the moment, investors will be a lot happier. this is a gradual process of building exposure. some of these banks are doing really well and have done well for decades. guy: thank you for joining us. hassium at that management will stay with us. we're live in hong kong next for a breakdown, regarding how worried we should actually be. ♪
9/10y stocks are down by of 1%. that is the element of red in the wheel over there. here is bloomberg first world news. nejra: little change in brent crude before a meeting in tehran later. this comes after russia and 70 arabia agreed to freeze production yesterday -- and saudi arabia agreed to freeze production yesterday. the oil minister will meet his venezuelan counterpart. kashkari has called for greater regulation of u.s. banks. he let the bailout program for some of america's largest lenders. he opposed the idea breaking them up. >> significant progress has been made to strengthen the financial system. i believe the act did not go far enough. i believe the biggest banks are
still too big to fail and continue to pose a large risk to our economy. anna: david cameron has edged closer to securing a overhaul with the u.k. prime minister due in brussels tomorrow. he won the backing of german chancellor angela merkel. rk also agreed there was a good faith deal. glencore has a new evolving credit facility to replace its $8.4 billion loan. the commodity company received commitments in the first phase of syndication, an increase of almost $3 billion above existing levels. glenn care shares have the rally -- glencore shares have rallied 13% this year after plunging in 2015. guy: thank you. let's talk about chinese
markets. people are becoming worried about the credit story in china. plenty of voices around the world are worried about rising npl's. you look at some of these numbers and you begin to worry. the reaction function from the chinese seems to be, "don't worry about it, we will let the chinese banks lend a little bit more." >> absolutely. i think china is in much better shape than everybody realizes. the economy is still growing at 6.8%. this is a $10.3 trillion economy. actually doing very interesting things and there are positive things happening in china we can take comfort from. we have bond issuances in europe. that is perceived as positive.
and of course, from a currency perspective and a exchange perspective you can actually see markets open up. this allows investment from hong kong into the mainland and from the mainland back into hong kong. this is all about liberalizing the markets and is positive news for china. the big issue for china is they picked the wrong currency. they are moving in that direction. >> you can't help but think that there is a massive devaluation that will happen at some stage going forward. this is what we have to be concerned about. but actually, china is in good shape. a weakening currency is great for the domestic economy. they are changing into a domestic economy and that is positive. guy: he says china is in good shape. let's talk about the credit
story in more detail. new loans at the start of the year are fueling concerns that credit growth is filing up s&p is worried that this will put pressure on the country's credit ratings. richard frost is here. walk us through the mechanics of what we see this week. the reaction function that is happening around the world. >> as you said, on monday we had terrible trade figures. then, we had new loans. january came out yesterday. we saw an incredible surge in new loans. it was easily the biggest on record. this country says it is trying to do leverage and is still dealing with the fallout of the huge credit them back in 2009 in the wake of the global financial crisis. some people pointed to the fact that january is typically
the strongest month for new lending. two schools of thought. one is that the government is trying to prime the economy and do that through new lending. the other concern is they are trying to rein in lending, but they are failing to control banks as a result of deregulation. it is not clear which of those is the worst outlook. too early at this point to discern whether this is going to be a trend going forward. guy: how worried are people about the rising npl story? and our chinese authorities reacting correctly to that concern? >> npl's have risen to the highest in at least a number of years. it isou look at it,
relatively low for banks. few people believe those figures. there are estimates. commerzbank is talking about how many banks have been trying to get around the crackdowns, funneling loans into other ways to avoid that and not really provisioning. this could lead to a debt bond further down. senseeeds into the that the government is trying to rein in this lending. there are many creative ways we have seen worldwide to get around government restrictions. guy: richard frost joining us out of hong kong with that stor y. let's talk a little bit more about this with yogi you are concerned about china, but we have a story.
that levels are getting back -- debt levels are getting back up to those ratios and that should be a warning signal. yogi: the quality of the lending is very important, but bank lending is crucial to gdp growth. lending is not a freebie. it has to be financed. this is a way to stimulate growth over the long-term. and of course, thanks will make good loans -- banks will make good loans and they will make loans that are not so good. businesses will fail, but that is part of the cycle of growth in an economy. thenot so concerned about numbers. they are increasing, but you would expect that if they are lending money out. what is happening with the german utility company says it
is proposing a $.13 dividend per share. the stock is falling pretty sharply on the back of that. let me see if i can get that function up for you and show you what is going on. this is the picture. let me drop it onto the terminal for you. share prices have been falling for quite some time. let me she what has been happening for the session chart. that is the impact of cutting a dividend. that is the big concern for so many investors out there. they talk about whether some of these are sustainable. rwe is down by 1.5% this morning. >> that is not great news. are is not why they reducing the dividend yield. they are sending it.
it goes back to why we would endorse buying more broadly across the market. how much work are you doing at the moment? you are looking at sectors, ok not specific stocks, but looking at sectors. how critical is it that the dividend is well covered? how high on the list of priorities is it? >> it is very high on that last. but when comparing it to bond yields and what cash rates are actually being paid, the caveat is we are looking to buy these and hold them over the long-term. this is a three-month trade. we are not traders or speculators. if we can get a good yield on our investment and some wo-five yearswth t out, it will be worth it. guy: theoretically, that should
be risk-free. have used the the relationship -- how do you see the relationship? you are making money on the bonds. >> it is being driven by volatility and everybody is concerned about the short-term. that is why we are making money on bonds. we are not fully invested 100%, but we are slowly increasing exposure on the back of valuation. guy: a good point to leave it on. thank you very much for your thoughts this morning. take a look will at why goldman sachs is supporting a freeze in oil production. ♪
guy: welcome back. you are watching "on the move." goldman sachs is warning that the freeze in oil production won't help the price of oil caroline: little impact is what they are expecting. why are you freezing when you have near record outputs? we need a cut and this is what this chart tells you. we have a great function you can find on the terminal. bloomberg total opec production output. this chart shows you how much opec, as an institution, has been ramping up their overall
output. i think we have to be careful of what we have written on the side here. actually, it is about 33,000 on the left-hand access there. it is showing you how much opec is producing at the moment. how much is iran producing? this is the orange line. this has saying a downward -- this has seen a downward trend to the tune of 2600. guy: now they are back in the market. question is, why would they want to go back to sanctions? caroline: we have to question whether iran or iraq will take part in this freeze at all? we can see why iran would not want to. they have seen a deteriorating amount of production. meanwhile, opec is freezing at high levels. cut would have been better for the market.
guy: welcome back. we are 30 minutes into the trading session. this is a picture around europe. most of the markets are up 1/2 of 1%. let's show you what is happening in oil. this is a five day chart of brent. the breaking news we brought you yesterday, what was happening with the secret talks. they did not have a positive impact on the market. look at the selloff we saw yesterday. here to discuss the latest round robin of negotiations we are seeing down there in the gulf, is an analyst at barclays. good morning. a bit of a nonevent in some
ways. up, but iturned turned out to be the equivalent of someone calling for a cease fire when they are running out of ammo. producers are producing close to their peak. they are calling to decrease their output. it does not look like much has changed, except for as we just mentioned earlier, crystallizing what they have been doing so far. guy: we are going to continue pumping a fairly elevated levels. >> the only small difference is that if people expected saudi arabia to go further from here, that cannot be channeled. on aagreement still hinges huge contingency. iran and iraq are not part of the deal yet.
guy: why would they not do it? you look at their production and you could understand why they would not want to join the deal. >> iran has said specifically, we need to get back to pre-sanction levels for me agree to anything. madeything, iran had statements saying they were exporting at 1.3 million barrels. byy plan to do 1.5 million march 20. it is very unlikely that we will see iran join in for a freeze. iraq, possibly. they have been shipping out record volumes of crude and they are reaching physical limitations on the infrastructure side. possibly, iraq could join. there is a better likelihood than iran, but i would still say
it is very uncertain. guy: read between the lines for me. what is actually happening? >> in a way, the saudi stance has changed a bit. we see a bit of stabilization and markets. given the gloomy picture of demand as well, to really get a levelsloor at these they do need to do something. against the other producers, russia etc., agree with them. -- all we have got is something that is about even. look at the banking sector. >> that is possibly why they would have agreed to the freeze. barrel yout $50 a are starting to get the damage.
they are showing the data start to weaken. production will start to see a softening as well in the next few months. the other angle at the moment is demand. was the growth story last year, but this year it is looking a bit lackluster. --e for gasoline and diesel both for gasoline and diesel. that is a worry as well. guy: has this deal interest the idea of two way risks the market? does this start to change or thinking -- your thinking? >> wti moreso than brent. stocks are very close to breaking storage. i think the excitement is piling
in. guy: those this reduce the volatility? -- does this reduce the volatility? >> we don't think the volatility is going to freeze. there is very unstable equilibrium in the markets. they are waiting for a single from producers in saudi arabia and the relatively is here to stay. down to the storage story, as much as anything else? can start toyou get a lot of price movement surrounding that. >> in the u.s. we are having a storage issue now. timeframe ishe wti widening. now that u.s. refineries are now paring back, given economic margins falling and demands
falling, we might see that speed up initially. on the other side, which is brent, their spread is not that bad. $.75 per share. it is a tale of two. -- let'ss talk talk about the dollar. we look at the work function o bloomberg. you start is the weakening in the dollar. how does that change your model? >> that changes it from a few perspectives. this could mean currencies might get a breather. this countries that are importing crude also get a bit of support from the currency side. the supply-side is interesting.
a stronger dollar means that other producers, such as venezuela and russia, the cost of production gets insulated. they are sending in a dollars. that changes the dynamic in a sense. i think the fact that we may not get the extended dollar rally as , it could help oil as a supporting factor. we see these correlations between oil and the dollar come on and off. with see the strongest correlation come through with demands concerns. we're somewhere in the middle of the moment. a few weeks ago the correlations were strong when demand was a concern. again, the supply-side is getting more headlines.
-- a 42% drop.orted the net income declined. abn is a state-owned dutch lender that returned to the market in november. credit agricole says it will send back stocks to free up capital. the bank beat estimates and posted a 28% increase in foreign profits. apple has sold $12 billion worth of bonds to return capital to shareholders. $23ve counter for half of billion raised yesterday. frozen amide was concerns regarding the health of the global economy. deal with made a china's ok air. there is an option to purchase eight more.
the country is set to become the world's largest aerospace market in the next two decades. stake on theywood global financial crisis was of course, "the big short." it is telling a story of investors when everyone else was blind. you can read the story of the traders who bought what everyone else started selling. the story is called "the big long." good morning. congratulations, a fantastic story. these are a bunch of traders who when everyone else was running as far as they could from the abs market decided, there was some value here. >> > after the financial crisis and departments said, abs is toxic. we don't want anything to do
with it. but these guys, having spent 10 years in the market trading bonds every day, looked at the price and said, this is crazy. we should by this. they did not buy it for the bank. they instead come up audit for themselves -- they instead bought it for themselves. guy: will was this called? >> their best trade was granite trades. however, the bombs themselves did very -- the bonds themselves did very well in the end. guy: of story makes a nice point, which is, how to you by this stuff? you can figure this stuff out when you have bloomberg in front of you. when you are sitting at home, you need a vehicle to get into these trades. how easy is it to get that done? >> it is virtually impossible. the abs market is designed for
institutional investors. if you are a retail investor, it is essentially impossible to get in. these guys were buying as retail investors even though they were professionals. they would call up their broker and say, i would like to buy triple b granite bonds, please. the anonymous call center with say, you want to buy what? usually, they would be selling on their hsbc shares. guy: just in terms of the ability -- some people watch this and think, i could've done this. because of the way the trade worked, th elot came down from 1/10 of00,000 down to that. >> retail investors are not prohibited by law from investing
in these things. the market is designed so the minimum denomination is 100,000 pounds, which is a lot of money to invest on your own. 20 price falls as demonically of the dead, it became 10,000 pounds. these guys have their on money and they invested together. guy: they basically figured out what was happening in the states was not going to happen here. the european banks expected the same thing to happen over here and reacted in the same way. the u.k. housing market, there was not the same spike, there was not the same number of closures. i would not say the market was rocksolid, but it came out a lot better than the u.s. market did. guy: a fantastic story. check it out. it is right there at the top. up next, everything you need to
needed the charge. currently update percent right now. -- it is currently up 8% right now. this is a big power company, the maker of medium to low voltage equipment. 7%.s is up profit is down 28%. they are worried about the euro strength eating into their margins. billion buyback. that is double the pace of the buyback with the last year. schneider electric does well on the back of that. they will be paying a dividend. they are suspending dividends on their shares after a 2015 loss. ..1 billion euros they are also seeing it on
hundred million euro write out on taxes. they are trying to decommission the nuclear plant. bic is notsociety doing so well. the reason the chief executive is bidding farewell. meanwhile, the role of chairman and ceo will be combined. they are also warning us about some concerns going forward. 3.4 posted a dividend of euros per share. they are worried about the macroeconomic disruption. guy: eu leaders are prepared to go to brussels. there has been little sign of
progress so far. big divides still remain. hans nichols is in berlin. talk to me about the spread between the brits and everybody else. hans: in terms of the distance people me to walk, everyone is going to need to go an extra mile. that is obviously a metaphor, but when we talk about the distances, there could be an additional hurdle, the european parliament. yesterday, david cameron met with mr. schultz. promised they would move as quickly as possible on this, but could not guarantee that any they would support the deal. that threw up another roadblock, the parliament could veto whatever they decide. else that could have veto power over this deal he is trying to broker. just a quick recap.
we don't have a lot of progress from yesterday. there was not progress on the banking issue between the u.k., france, and germany. the u.k. wants to have a little bit of autonomy. we have no progress on the east-west issue. we have five eastern european states that are coming down hard on the immigration issue. on the migration benefits issue, it is bleeding into this conversation in berlin across all of europe. overnight we had the austrian interior minister saying that ohey are going to direc create 12 checkpoints on the border. this is a problem for angela merkel. we talked about this a little but yesterday. the extent to which this summit is being previewed to germany as a refugee summit. in the u.k. press, it seems they are talking about it as a brexit summit.
it almost seems as we are talking about two different summits. guy: the story in brussels is always one of deal getting done. where does the duke it done at this stage? hans: it gets done at the 11th hour. it seems like all of the inertia is for a deal, to give cameron something. we could potentially have a very late night thursday night in brussels and have something done. it seems everyone has coalesced around the idea that this february 18 and february 19 summit is going to be determinative. they are going to want to find a deal. look, if you still see them and there at midnight, that is generally a good sign. if they break up before or right after dinner, that means we could have another summit ocmi n the line, but no deal will be created that this summit. you very muchnk
indeed. that is towards the end of the week. let's talk about the day ahead. we have u.k. jobs data, followed by housing data. and then, the fed releases minutes from the january meeting. we discussed the u.s. economic outlook tonight as well. joining us now to look ahead to the fed minutes. let's first of all deal with what is happening in the u.k. right now. this is one of the critical metrics you look for. we leasin -- are guessing at data? >> it is very important, especially given cafferty's comments. he changed his vote east on the fact that he does not see the wage pressures materializing. this is someone who has voted
for an immediate rate rise six or seven times. if that is what he sees, then it is an important piece of data. there are a lot of things weighing on the u.k. right now. e hasnk the u.k. rates curv reacted in a way that does not point to any near-term inflation fears. you can see the pounds selling off on bloomberg. you think that has more to do with brexit than the forthcoming data. >> i think on your chart, starting with -- guy: that was yesterday. >> what we have seen is a repricing of u.k. rate expectations and a repricing in general of easier monetary policy in the g10. i think brexit is becoming real now.
the negotiations have started. are we going to have a deal, army not going to have a deal? the campaign is going to start quickly. it goes from something in the future to something immediate and i think markets are reacting. the minutes will be interesting. i think we kind of know what they will say. i think they may have tipped thiereir hands regarding the tye of tone we will hear from the fed. they are pointing to headwinds and saying, we might have to go slowly on rate rises, which is in contrast to what we heard two months ago. it is looking very likely that we might not see anything in 2016. guy: richard jones joining us from bloomberg first word. let's leave you ahead of that data coming out of the u.k.