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tv   Countdown  Bloomberg  March 10, 2016 1:00am-2:31am EST

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anna: decision day for mario draghi. considering the president's arsenal. european volatility jumps ahead of the news. with aland cuts, surprise rate reduction, the key iwi tumbles-- the k and bonds soar. surge, signs of stability? or signs of distortion? [laughter] ♪ anna: welcome to the program.
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this is countdown to live from london. it is just after 6:00 here in london. we knew that today was good to be all about central banks. we thought we would focus more on the ecb. turns out, we have surprise out of new zealand. the surprise rate cuts from the new zealand bank, what did to the government bond two-year yields, currency falling as a result of the surprising move. thethe central bank cites global economy for doing this, further easing may be needed to meet weakness in the economy. it is ecb day, and we have people focused even more so on that scene. let us check in on the radar. one central banker decided not to give further stimulus to markets, it was the south korean central bank. the south korean currency is increasing after the bank of korea gave no change to its interest rates, against all 31
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major peers this morning. at this in on oil prices, at 38.21 on nymex. but that was after some real strength yesterday, the wdi up by 4.9% in yesterday's session in new york. and because of the ecb data, let us check out what is happening with the euro as well. you just had it on your screen. if we can bring back the currency just a show you what is happening with the euro, a little bit more volatility in that currency. thewe are at 1.0978 against dollar. it city bloomberg first word news. priceschina's consumer jumped in february, driven higher by food costs over the new year. pricese 2.3% as food surged by 7.3%. the producer price index fell almost 5%, extending declines to a record 48 months in a row.
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policy divergence between the federal reserve and other central banks may continue longer than bond traders expected. so says goldman sachs. investors say the policy divergence is unsustainable, but they have not found much historical support for that suspicion. -- that decision. the head of volkswagen has quit. the 54-year-old came the brand's u.s. ceo in 2014. the improved relations so much, that when the emissions scandal broke him to stay. he will be replaced. has backed the campaign for britain to stay in the european union, saying brexit would be a disaster for the u.k. the academic leads more than 150 vote to calling for a remain. that was a letter in the times newspaper. professor hawking says it would severely hamper research in the
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u.k., as many are recruited from europe. a good friend of the salomon brothers has died at the age of 86. he returned the firm to one most profitable investment banks. he was deposed after a 1991 trading scandal. his son said he died of pneumonia. powered by 2400 journalists in more than 150 bureaus around the world. you can find more stories on the bloomberg. anna? anna: thank you very much. let us check what the asian markets are doing. david is joining us from hong kong. the market positive across the asian sessions, real surprise coming from particularly new zealand. really wokeis what us up out of the gates, quite a surprise. you got it talking about that. let me get started with that. kiwi dollar, measuring from
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here, that is about a 2% drop their in the dollar. the other may position we had here in asia was the south korean central bank. they basically stayed put, you are looking at strength and the currency, or a drop in the dollar of about 1%. but that aside, this whispered pretty much a strong dollar story. dollar index for you, this is what you want to focus on the moment. this also shows you investors being cautiously optimistic. that is the best way to describe what is happening now. ahead of mario draghi taking the spotlight, headline numbers were up by half of 1%. but a lot of that is just really down to the session we are seeing in tokyo, closing up shop. 1.3%, that is down to the weaker japanese yen. mixed, fairly indecisive. i should also note that volumes are very, very thin.
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in that respect, you do understand why someone for the big funds are not exactly deploying cash. i think the surprise comes in the form of easing, not so much if they will do it or not. very quickly to add, down 1%. shanghai down 8/10 of 1%. we get cpi data which shows an acceleration of 2.3% for the month. anna? anna: david, thank you there in hong kong. we are going to be hearing from the european central bank later. the president, mario draghi, takes center stage later today as he speaks to stave off inflation in the european area. just three months ago, sold off in the wake of a stimulus package on the ecb. let us get more with the head of western european central banks, paul gordon. paul, great to see you. investors and economists are pretty keyed up for today's announcement.
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what are we expecting? anticipationtense i think would be the phrase, at least for those people who care about these things. as david just noted, more about the form of easing, rather than if it would happen. the deposit rate is fully priced in by investors. that would take the deposit rate two minus 0.4%. imagine that? they're also looking for some form of addition to the bond purchase program, qe, maybe 10 billion euros extra ar month. you see measures go in tandem, plus perhaps there is something else -- more long-term loans, more favorable terms. something we haven't even thought of yet. the key here is prices are falling again, the euro -0.2%.on was the concern this is entrenched
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in the economy, people do not spend. and you end up in a inflationary spiral. the ecb must diverge that. anna: something to get into. thatanghai, they agreed monetary policy is taking too much of a burden. governments need to do more. what might mario draghi do? i asked him, how creative can the ecb get? what can they do to really kickstart the euro zone inflation picture. he said nothing. we need to hear from governments. paul: this is a really powerful argument. a huge burden has fallen on central banks. as you know, the g20 said that could be too much. they need to start using fiscal space where they have a, that is the line that mario draghi used, and he will use again today. government, that is highly unlikely. one thing mario draghi needs to keep in his armory is the pledge that the ecb will do whatever it takes.
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still having room to act, he is going to stress that. one has to imagine that he will politely lambaste the government , not putting through structural reforms, not using fiscal space. this is a cyclical recovery. if those measures are not taken, it will remain cyclical. that means a few years down the line, we are back where we started. anna: thank you very much, paul gordon, head of bloomberg's central banks. joining us in the studio fabio balboni. great to see you this morning. give us your thoughts then on was and remains can do in this environment covers of what government can do. manyard from mario draghi times, as paul said, about what governments need to do. do we have a balance of expectations a little wrong? fabio: particularly recently, mario draghi has been more vocal about the need for governments to do the right type of spending, as well as recently talked more about the need for
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more investment in the euro zone. unfortunately, i think we got ourselves into a worry with a central banks having some sort of race to the bottom, bitterly now with the negative rates. -- particularly now with a negative rates. we have to keep in mind that the ecb qe has held a lot of the government, letting it spend more. france, italy, there has been a message of fiscal possibility, compared to what the country had a few months ago. that have to be taken into account. you need to spend money in the right way. they need to boost the economy. the need to spend on education, research and development. these are things that can lead to inflation and domestic demand going forward. anna: there has been inflation under the radar perhaps. focusing on what the ecb is youly to do, fabio, talk about the yield floor on the assets they can purchase. saying they cannot buy anything that yields less than -0.3%. at the moment on the deposit
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rate on them i get rid of that. and give themselves some wiggle room. enabling them to buy some assets. even then, you do not think they are going to be able to increase doing.unt of qe they are there is the assets available. fabio: mario draghi has made it clear. he doesn't want to be in a position where the technical constraints are binding, for him to expand qe in the future. that is why we are looking at dropping the yield, expanding the limit for the non-cap bonds. looking at the meeting, keeping in mind of context, growth is fine by eurozone standards. ed about thei expansion. some countries are worried about that. is not theret qe forever. that is something that will be a worry to some members of the ecb. and finally, the reason that the oil price is actually increasing significantly, bouncing back since the ecb forecast.
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for one, that is very different from december. mario draghi will have to say there is possibly some upside risk for inflation. so we just do not think it is the time yet for the ecb to be able, and for mario draghi, to convince the big expansion of monetary policy. anna: you have the five-year eurozone expectation chart here. which he likes to cites. what do we learn from the last minute? december caught many in the markets offguard, didn't it? it seems in some cases, some members of the board were not worried about this point in market. and we need turnover that, don't we, when excitations are high? fabio: there is a willingness up as central banks to show that expectations are high from the market. unfortunately, we know that in reality, particularly the exchange rate, the exchange rate matters. imports, exports, the ecb will
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be very cautious about having another december type of disappointment. the depreciation of the euro, they will put increasing pressure in the future. that is why, for example, we think they will not cut the deposit rate. that seems to be where really there is the least political resistance within the council. so they will take a look at the market reaction, and they will try to deliver at least enough to keep the exchange rate downward on the trajectory. it is very important. anna: a number of banking voices have been speaking out against negative interest rates. reallye on this channel, speaking out against them, saying that they damage profitability and do all kinds of other negative things to the resident economy. is that something the ecb cares about? or do they have to get on this anyway? said inario draghi january that he does not care about bank profitability. and unfortunately, at the same
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time, the ecb is asking banks to go out and led to the real economy. we know that is a problem. the vice president has said that they need to take some actions. for example, we think the one possibility is the introduction of the two-tier system, what they do in switzerland and japan. i think there you have to be careful, though. in my mind, this can be a little bit of a red herring. we look at the reserves in the euro zone, these are mostly in german and french banks. reserveshe two-tier will have that on that side. and reserve charts, is a chart is too much, it is a problem. people will not sell you the bond. but on the lending site, it is periphery.n the rive as a result of the more negative those banks are going to suffer a lot from the margins. for example, from that
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perspective, we know it is quite at the extreme end of the spectrum. but they will have more effective payment to the banks to lend to the economist. anna: fabio, thank you for joining us. he stays on the program. we haven't talking about it already. there is one event we are watching keenly today, we get a rate decision from the european central bank. and all the details with that, of course. the big question is for investors, how will mario draghi ease expectations? we will have more from the press conference at 1:30 u.k. time . for theflation rises most since 2014, as many feast over the lunar new year. that is coming up. ♪
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anna: welcome back. 6:18 in london.
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let us get the bloomberg business/. nejra: nasdaq has agreed to buy deutsche security exchange for $1.1 billion. capitalizing it to the top of the u.s. market. it could help deutsche with other acquisitions, as the company is in merger talks with the london stock exchange group. major banks from outside america, including hsbc and deutsche bank, are pushing back against the fed proposal and limiting roles to end too big to fail. they say they are burdensome for the world's biggest lender. the roles would need an extra layer of debt available to be wiped out in a crisis. that is on top of securities as total losses. no lack of interest in barclays seeking a stake in south africa's third-largest lender. the announced plans last week to reduce its 62.3% holdings to
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less than 20%. >> i think week keep emphasizing there will be things regulars look at, the long-term stability in the bank. you want someone who is a long-term investment, who is stable. and i think those are the things that regulators, and ourselves and management, look at. nejra: we will be speaking live to barclays ceo here on bloomberg. and that is your bloomberg business/. thanks very much. let us turn our attention to china, consumer prices rose last month since the first time in 2014. the biggest rise in inflation pushas the lunar new year food prices higher, as non-food prices remain tepid. n joins us. good to see you. is this increase in cbi sustainable? with a lot of data in february, there is a one-off factor.
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enda: good morning. indeed, all about the chinese new year. as the consumers rush to get the pork and vegetables in time for the celebration. there is also quite a cold snap in january during that time. all told, will have to look at the number. it is a typical effect we see every year around the chinese new year. china is struggling with the same kind of low inflation problem and the rest of the world is struggling with. low oil prices. the problem of week demand. maybe there are some elements of silver lining on the side of things, showing the deflation there is maybe flatlining. that is one thing to take away from it, i guess, anna. anna: is it too early to get excited about the flatlining? people look at that and talk about factory gate rises in china, how that export deflation to the rest of the world. i think so. the commodity price impact of what is happening as well, we will probably have to look through them.
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that is the case with all the chinese data, as you know, we have to wait to get a decent read on how things are going. but notwithstanding, it has been a pretty miserable picture there. over 40 months of deflation, that means higher costs, higher interest rates. in that environment, companies do not want to hire or expand. that is a real problem for the chinese authorities. they need to break that. one of the things they have been urged to do is of course restructure a heavy industrial sector that is owned by the state, and the oil oversupply. that is one way they might get a curb on deflation. anna: thank you very much. asning us from hong kong, always. let us bring back into the conversation fabio balboni. from a european perspective, that number, could it be reasonable? we have a chart here that shows mppui, this goes back around fie years. it shows that it might be
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bottoming out. is this a deflation trough? that matters for the rest of the world, in terms of how we see this deflationary environment passed on. come on thecularly manufacturing side, there is very little inflation. if we look across europe, sweden is the best example, the economy is strong. but there is very little inflation. bad news, asinly the correspondent said. when we look at the strength on inflation,k there on they are sort of in the service sector, creating that wage growth. and that is where we particularly see the potential of the ecb, wages increasing as the slack in the economy is reduced. or are we looking at a downward trend in wages? that is really at the heart of the ecb concerns today. anna: they will be. sticking with china for a
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moment, every now and then, we get them to into kind of gloomy thoughts about where the chinese economy is. many people tell us where they economy is, relative to history. then you get reminded just how big this economy is. we have a great chart that shows how three of china's provinces andmake up the economies emerging-market asia. quite a phenomenal achievement. i was reminded early on today that china is still increasing its share of global trade. this remains an enormous powerhouse for the glow. it is just not growing as fast. what is your expectation for growth? fabio: over the weekend, we saw more fiscal sinless. we were expecting that. we thought more would come on the monetary side. yes, the economy is slowing. but it is not a hard line. we continue to expect growth in the region, a little bit above 6.5%. there is a change in the growth patterns, and that matters. what we are thinking about the past investments, investment in
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china used to grow in double-digit figures. an investment accounts for about 25% of investment. as you move towards an economy that is more based on services, consumption, you will see a slowdown in some of these elements. some of the trade has been repatriated, so it generates less trade. all these elements affect global growth. as you said, we are not looking at a hard line. china will continue to grow. thinke gdp is 40%, so we the space is there to do more with the infrastructure -- investments that should keep the economy afloat. anna: not like movies, you do not worry about the debt. what is the european growth story than? a lot of people look at germany to see how quickly the slowdown is increasing in the euro zone. and we have the numbers from germany that have a much better estimate. fabio: when we look at the
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impact of china, germany is the most exposed european country to china -- about 6.5% of the exports. but those exports do not go to consumption, most are intermediate capital goods. so their monastery affected by a slowdown in the china economy. they are mostly reexported somewhere else. that is something that has to be taken into account when we look at the impact of a possible slowdown of the chinese economy, on europe. and that is just a concern about the possibility that, for currencya weaker ria' -- it is quite limited in terms of the possible negative implication on eurozone inflation. anna: fabio, thank you for joining us. great to see you. fabio balboni, european economist at hsbc. a look at what we are elected to hear later, and indeed the chinese growth story. 6:26 in london. 7:26 in paris. up next on the program, we are talking shop.
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it is a big day for retail earnings, we have numbers from hugo boss in the fashion industry. and we have the retail space, a big deal with amazon. how important is that? we will have analysis, next. ♪
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. welcome back. this is countdown. 6:30 in london. 1:30 in the morning if you are watching in new york. futures currently pointing a little bit higher, as new york trade, when we eventually get there. let us get the bloomberg first were news. nejra: china's consumer prices jumped by the most since mid-2014 february, driven higher by food costs for the lunar new year. as food prices surged 7.3%. the price index fell almost 5%, extending a decline to a record 48 month in a row. the new zealand dollar has
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tumbled after the central bank cut interest rates to a new low of 2.25%. the economists have come under fire. meanwhile, the korean currency has strengthened, after the interest rate was stay. economists were concerned that a cut could rise capital outflows. the man who led a volkswagen american business through the quit.ons scandal has michael moore is said to believe in by mutual agreement. he came aboard in january 2014. he improved dealer relations so much that when the commissions scandal came through, they lobby for him to stay. saying his removal would be catastrophic. he will be replaced for now. thehen hawking has backed campaign for britain to stay in the european union. saying that rates it would be a disaster for u.k. science the academic leads more than 150
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fellows calling for a vote. that is from the times november. fetzer hawking said that leaving the eu would severely affect research in the u.k., as many young scientists are now recruited from europe. global news 24 hours a day, power by journalists in 150 bureaus around the world. you can find more stories on the bloomberg. anna: thank you very much. breaking news, news coming out of the french supermarket chain. brazil, somesed on 50% of their business coming from brazil. they are telling us that the operating income is in line with estimates of 2.4 5 billion euros. that is exactly what the estimate was. it did a little bit lighter than analysts had been going for, the estimate was 74 euros a share. in terms of the investment, there is a big long-term reinterpretation story. that is focusing on the core business back in france. they are planning 2.6 billion
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euros in 2016. but on the other side of the balance sheet, they are going to parison free cash flow in 16. a quick word on industrial gases, over in germany, the business reported numbers -- they see a challenging 2016 ahead. or early dropping because of the oil impact. the gas supplier is seeking to raise the earnings, they say, warning that they could drop. e says the engineering has been hurt my lower oil and gas demand. let us leave that there, and the back to retailers. we have these numbers out, and we also have confirmation from hugo boss and they are cutting back in china. and we get morrison numbers thereon. let us talk to bloomberg intelligence senior retail analyst charles allen. charles, good to see. let us start with the dividend. there is the big long-term change story going on at carre four.
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charles: essentially, he is really shaken the company. taken a back to basics. this is a theme throughout european food retailing, just get back to ace the old retail. cut back the range. and focus on stores that you want to shop in. anna: so they are reviving the french hypermarket model? charles: they're doing a lot of things in france. it is really multichannel, so they are advising the market. but they are, and the other end of the scale, making big efforts in convenience stores. we bought a business that they used to own, the stores in a big, and there is revival there. that one of the factors that has sort of held back off its a little bit in 2015, and what we should be looking for a revival in 2016. anna: they are talking this a company that specializes in shopping vendors.
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apparently, talking about waiting for the right moment to ipo. too early to speculate on the timing of the ipo. a lot still going on. brazil still of a focus in the business. charles: essentially, you have a hypermarket. and around it, you have a shopping center. and there is a potential to monetize the shopping centers around it. four is a mean, carre sort of hybrid cash and carry in brazil is proving in tougher times. but as far as shareholders are concerned, the big difference is the currency bouncing little bit. we also saw a bounce in share price. anna: we will look ahead to those numbers out today. that big deal with amazon, of course, since their shares surging. trolls allen, joining us from bloomberg intelligence. dollar,new zealand
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reserve bank governor graham wheeler signals further easing may be needed, amid expectations of stubbornly weak inflation. for more, we are joined by michael. said it wasand bank not in a hurry to hike five weeks ago. things have really changed now. not as cutting interest rates, but about how more could come? michael: not in a hurry to hike. ease, butgoing to they were in no hurry to do so. and in five weeks, they come out and out effectively ease rates. that took the markets back a bit. so people have been hunting for what changed in the interim period. basically, the consensus seems to be that the global economy has taken to the worst, but most domestically, new zealand's inflation expectation fell to a 22-year low. as we all know, and i think you
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saw in europe and elsewhere in the developed world, once expectations start to fall, they are really are really difficult to budge. i think that is what prodded them into action, even though it was totally unexpected. they decided they just cannot allow that to fall too low. anna: that very much on the mind of the european central bank today, as well. but auckland has been seeing big gains in recent years. problem fora policymakers with this move? michael: it is a, it. about one third of the 4.5 million people that live there. and house prices have been rocketing. in recent months, it's sort of steady. and asset prices have been something that new zealand policymakers worry about getting too much, that is why they held off on the rate cut. the thing is is that auckland has stabilized. unusually, we have this
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cascading effect. the prices i need to get going in other areas. in wellington, for example, where public price has been stagnant for several years, they are now offering to see growth. other regional areas as well. but auckland itself does seem to have calmed. but the inflation expectation for overwritten. anna: thanks very much for joining us, michael. asian economy editor michael heath joining us with the latest on new zealand. let us stick with the european banking thing. mario draghi makes a rate decision, i year and a day since the unprecedented bond buying program. what could the effect be for other central banks? joining us now is bloomberg quino.ord's kristine central banks are many watching what is happening with the ecb. for better orave, worse, have to follow of the ecb is doing in terms of policy direction. which of the central banks are
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we watching, the other negatives? kristine: denmark, sweden, switzerland -- they have shown a tendency to either react or preempt ecb policy. definitely be on guard for any measures today. anna: something immediate or do we wait for the normal date in the diary, when several bank is set and they move? kristine: no one is really calling for any immediate action. but definitely, they will be watching for the next meeting, coming up for these other central banks following the ecb. and that will probably give them an opportunity to respond, after day. anna: good morning to you. do you think we're going to see further moves into negative territory from others and banks around eurozone? talking about the swedes for example. >> it is difficult not to. they knew we would be more surprised. if it moves today, you have to react to that at some point.
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your currency is going to come under pressure. you're going to suffer in the economy-since. you have to move. the ecb data is a tough one for mario draghi. doesn't make any difference to him? i think that is something the other central banks will be watching carefully. this experiment, this move into deeper and deeper negative rates, does it make a difference? anna: you describe how we had the worst seat in the house. e: we will have to make investment decisions on the bank of it, it is a tough environment for him. tough environment generally, where you get your returns from? and how do you get the ricotta me moving again? it is tough. populargative rates not with everybody. central banks like you to come under pressure to not do this, not go further negative because of the big voices in the banking sector, for example, calling on them not to do it. in switzerland, very forceful saying this will lead to lending
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behavior than they do not like. : we have had central-bank come out, and it definitely diluted to being aware. the risk probability, they also emphasized that they are first in priceost interested stability. the same for the ecb, or the other bank, they have a very firm commitment to the inflation target. so it does seem they are aware. but they have a bigger priority at the moment. anna: away from the negative interest rate story, there is a lot of story about what they might decide to go about and by in the boj. there's a lot of talk about whether the europeans for bank might add more to the shopping list, talking about going out and buying oil. he is not think it will happen. but it could be a possibility. you could argue the case for doing it. how creative you think he will be today?
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luke: don't bet against mario draghi being created. he is very good at doing stimulation for the economy, then doing qe bigger than expected. whether it is today, i'm not sure he will, but what could he do? helicopter money has to be on the board at some point. how you do that? how do you commence spenders to spend that money, to get the economy going? will he expand the public purchase program? probably. maybe make it more broad innocence that the sovereignty combined, but will he go to credit? seems unlikely. helicopter money, even if the central bank were to announce such a policy, they would not call it that. when itld it look like flashes across the bloomberg? luke: for the ecb, that is really hard to do. the german bank would be at horror at the very thought of it. they have to call it something
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very different. what he is possibly trying to do is to push the physical button. instead of doing it himself, try to get the government to do it. make it very clear to them that they have to take responsibility. that is the vocals simulation we will get from mario draghi. how the talked about central banks might respond, getting into negative territory. what about elsewhere? we have been surprised the with four hours by what the european -- the new zealand central bank has done. does this have the feeling of a currency war? leaders get together at g20 and promised not to engage in some kind of currency war, but is that one of the motivations? kristine: central banks around the world are concerned about exchange rates. as is not really a new thing. it is something that all central banks will be watching. of course, if you are a small open economy like new zealand for instance, you would definitely be watching for a global policy development. and we also had analysts flagged
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the bank of japan and the people's bank of china as interesting banks to watch. that makes a lot of sense, given that they have recently provided policy support themselves. banks in are central the world's second and third largest economy. definitely be on guard" is a monetary policy. anna: caught offguard by what is you and set overnight? have been looking for reaction on policymakers. whether it would be new zealand or the bank of australia copy thought it might be there first. new zealand is a bit of us apprised, to be honest. not a lot of reaction from the locals, you see on your screen, it has come down a long way. but australian 10-year has hardly changed this morning. anna: a lot of reaction in the assets, rather than elsewhere. thank you very much. luke hickmore stays with us. aquino, thank you. the central bank denies it. battledthe nation's
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reserves, in the struggle for growth in egypt. ♪
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welcome back. 6:47 in london. let us get the bloomberg business with nara check it. nejra: buying the international securities change from a cap holding it to the top of the u.s. options market. the transaction could help deutsche fun another acquisition with the frankfurt-based company is in merger talks with the london stock exchange group. major banks from outside america, including hsbc and deutsche bank, are pushing back against the federal proposal on rules designed to and so-called too to fail. they say there are burdensome, unfair to the biggest lenders. foreigne proposal, banks affected would need an extra layer of debt available to
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be wiped out in a crisis, on top of securities qualifying as total loss absorbing. barclays says there is no lack of interest for buyers seeking a stake in south africa's third-largest lender. a comes after the parent company announced plans to reduce its holdings, less than 20%. >> i think we keep emphasizing that there is would be a lot involved. some of the things we think regulars will look at is the long-term stability. we will want someone who has a long-term investment, it was stable. i think those are the type of things regulators, and financial management, will look at. nejra: we will be speaking live to the barclays ceo here on bloomberg. and that is your bloomberg business/. anna: thanks very much. egypt is preparing to start loan talks with the international monetary fund. that is according to a senior energy official. it comes as the most populous arab nation looks to tackle a dollars sorted that has been
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weighing on the growth. we have more with elliott. elliott, the to see you. it would not be the first time egypt and the imf got together to talk about loans. elliott: it would not. ousted, theywas were never finalized. this time could be different, not least because the state of the egyptian economy finds itself in a much store a situation that was back then. we're talking about an economy with higher inflation, a double-digit deficit. you have tourism, one of the mainstays of the economy, being decimated as result of the russian airliner downing over the sinai. allies have aid from the in the gulf, and those have meant that there is now a dollar shortage in egypt as well. that has given rise to a black market for dollars. and it also means that egypt now only has three months worth of
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foreign reserves, enough to cover three months worth of imports. all of it sort of makes for a pretty unhealthy cocktai for the egyptian economy, which might benefit from a shot in the arm by the imf. anna: if indeed they get that shot in the arm, what might and egypt imf deal look like? elliott: the central bank has the night that egypt has already prepared for talks with the imf. in fact for the central bank governor being quoted in the central press sing that egypt cannot overcome the current crisis. invocation being that it will overcome on its own. but the imf says it has not been approached, but it is ready to help. is the imf in the situations a bit of a gatekeeper. they come in with alone loan, in exchange for certain policies on behalf of the egyptians. and i can often unlock the doors to other aid agencies providing more aid as well. in hopes that that would boost
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investor confidence and to perhaps a boost growth as well, and that budget deficit. some ofs artie taken the measures that might be demanded by the imf agreement, such as curbing fuel subsidies. talkinglready been about flexible exchange rates, certainly with the imf loan, egypt may be more disposed to do something like that with the egyptian pound. then would be without it. for now, it is a case of watching the space. anna: elliott got team joining us. editor there. let us bring luke hickmore, senior investment manager at aberdeen. given your focus on credit markets, a really interesting story on bloomberg is morning, talking about goldman sachs advised the client. they are saying policy divergent is back on buried for little while, we have an questioning whether we were really see policy divergence across the atlantic for example. they factor in three fed increase interest rates in 2016.
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would you agree? maybewe would see one, two. i would like to see three. we need to see rates higher in the u.s. making theduals wrong rate environment, we've also seen a really big improvement in the economic data, compared to what people expect. it is a most moving in the opposite direction of europe. but three is too much. one, definitely. two, maybe. anna: we have a chart that shows the extent of the governance and policy. goldman sachs projections, compared back to history, all the way back to 1980. where in history, how big it looks, and in the words of goldman sachs, it is not implausible by historic standards. is it something that would worry you intrinsically, if we had this big divergent policy? luke: not particularly.
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you have to look at what you are investing in. there is a relative thing here, interest inatile european companies. it is a fairly close economy. i don't think it matters too much if it is divergent with european policy. matters is mario draghi getting right today, and the fed actually recognizing they have the response ability to save, as well as investors. anna: on the bloomberg, 72.7% ability of a hike by the end of this year. so the markets, since the middle of february, when were very nervous about the global growth story, they are more common now. factoring in more rate hikes on the fed. luke: and we have a lot of policy that is going to impact the timing of whatever they do decide to do a rate hike. clearly, they wait until a stable period economically and politically. intentionally, in the summer. you will see 60% in september,
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maybe 40% in june. that seems a little late. if we will rise, maybe in the june area. march seems off the cards. anna: are you investing around the policy divergence in the atlantic? luke: we are short sterling versus the dollar. that is more about the strength of the u.s. economy and the other two. that is a very easy trade at the moment, one you can continue to do. the u.s. credit market is starting to look attractive. leverett has gone up, yes. but actually, the economy is improving. wages are improving. employment is better. you see the stuff coming through there. ann which of the bracketsa incorporate investments are you looking at? some are looking at junk. they see some of the names that have been tarnished as junk. what is your view on junk versus investment-grade? luke: you want the market you
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have the most in fiction about. high yield is an attractive place to be in the u.s. however once you quality adjusted high-yield in the u.s. it is the lower quality market and say the european high-yield market. i actually prefer the european high-yield to u.s. high-yield, the u.s. investment grade compared to the european. anna: shorting the pound versus the dollar, is that a brexit call? luke: it is not actually. it is more about the relative growth rates between the u.k. in u.s. i think brexit is a very hard thing to have. anna: thank you very much for joining us, lou. senior asset manager at aberdeen. up next the program, moments from speaking to the ceo mark wilson. a lot to talk about the insolvency ratio. having been implement it by europe, what will he have to say for the first time on that subject? consolidate and talking about
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brexit, that might come up in conversation as well. let us have a quick look at what new york looks like at the very early trading day. it just coming up at 7:00 here. just after 2:00 in new york. ♪
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. anna: decision day for draghi. investors consider the ecb
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+++ bows to global easing pressure with a surprise weight reduction. the kiwi dollar tumbles. chinese inflation jumps, rising the most since 2014 as food prices surge. welcome to "countdown," i'm anna edwards. let's have a look at where the futures are this morning in this early stage of the trading day. futures around europe just opening up, fairly flat, a slight positive bias. the ftse up by around 1/10 of a percent, but really not much in terms of thos what we are expecting to see. breaking news -- morrison's numbers. we're getting details of that business and how they are performing. four-year growth profit 1600 million pounds. u.k.'s fourth largest supermarket chain. the executive has only been in the job around a year. a former tesco executive sold and h theas greed -- and has agreed to a deal with, sending shares of soaring. what they have to tell us this morning is 50 million pounds to
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100 million pounds of incremental pretax profit. they are focusing on the dividend, which came in in line with estimates. that was exactly what the estimate was. we'll leave morrison's for a moment. let's get the numbers out of a viva. the measure of profitability in the part of their business -- a key question is how that would be impacted. which isidend is up, something that the management has told us they are going to do. the dividend is at 20.8 pence per share. ratio -- and i said this before the break -- it is our first look, coming up at 180%, a measure of capital that they
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have to decide to reduce the chance of insolvency, something stipulated by the eu and implemented from the beginning across the european union. it will be interesting to talk abouto the ceo of aviva shortly. let's get to caroline hyde, poring over the details from home retail. caroline: good morning. the chief executive in his statement pointing out that home retail is boosting. this is the owner of argoth and homebase. argoth is being looked at by sainsbury's. it seems to have a downward trajectory, down 1.1%. the estimate would be an improvement in like for like sales. andthe margin has improved, it's up 75 basis points. they blame what they call
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cannibalization impacts. meanwhile, homebase like for like sales up 3.3%, but it was a poor picture, down 225 basis points. do see saying that they pretax profit of 93 million pounds. the year in cash is significantly stronger, but overall it seems to be a miss. anna: let's cast the net wider. you also have the first news. caroline: i do. china's consumer price has jumped by the most since 2014, driven higher by food costs. cpi rose 2.3% as food prices surged. the producer price index fell almost 5%, extending its decline. nce, sodiverges
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says goldman sachs. analysts say they see it as unsustainable, but goldman hasn't found much historical support for that opinion. volkswagen led vonnie through the emissions scandal has unexpectedly quit. he became the u.s. chief executive in january, 2014 and improved the relations so much that when the emissions scandal came to light, independent retailers ordered him to stay, saying his removal would be "catastrophic." hawking has backed the campaign for britain to stay in the european union, saying brexit would be "disastrous." the academic leaves 150 sellers at cambridge. says it woulding severely affects researching the
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u.k. and many young scientists are recruited from europe. former salomon brothers boss has died at the age of 86. he was proclaimed the king of street and 95. -- atin 1995. his son said he died in hospital from pneumonia. global news, 24 hours a day. you can find more stories from bloomberg. anna: thanks. let's check in on the live market action in asia. david ingles has the details. david: thanks. we're injuring the last -- we are entering the last few hours of trading. some are already shut. we have a few hours left for southeast asia. i think what is ironic about today is that it's a very data
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heavy session, but not very exciting. the headline is we are up 4/10 of 1% overall, but you take japan out of the equation and you take some of these energy stocks out of the equation, they gains practically disappear, just to give you a sense of where the heavy lifting is coming from. volumes are quite thin. in that sense, investors are a little cautiously optimistic, holding some of their bullets ahead of mr. draghi's moment. that's the story across the equity markets. what's interesting are the big moves in the currency space. we have been talking about this all day. it's a surprise move that will take it down further. that's a move in the kiwi dollar. we're looking at record low yields for the new zealand
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government. the other news we have in asia -- bank of korea on hold. the currency is strengthening and yields are on the way up, firming up at 1% against the u.s. dollar. 1200 at the moment. quickly, let me show you where the bond markets are. we had a bond auction in japan -- $22 billion for the five-year bonds. it drew a record low average y -.142%. that investors think yields in japan will continue to fall further and further and further below zero. negative interest rates abound. thank you. talking of negative interest rates, it is decision day for druggie.
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-- fo rdraghi. aghi go will resident druggi a year and a day since it started its unprecedented bond buying program. it is still struggling to reach its inflation goals. here is what some experts expect. >> the ecb will probably shy from being too aggressive in cutting the rate. we are only looking for a 10 basis point cut. where they can help is by crediting, potentially through purchases of investment and corporate credit, or a further bold revision of the banking sector. >> fairly small, but in the direction of evening by the ecb. i would argue for the most part it is very priced in. investorsk that relying on the ecb and interest-rate changes at the to six economic
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problems, to restructure an economy, to give the consumers and businesses spending again, is a big mistake. anna: let's get to analysis. the head of fx strategists joins us now. good morning. expectations are high. your expectations are even higher than the consensus. you expect 20 basis points, is that right? >> we spen expect several measu- one is 20 basis points. anna: why not 10/ ? >> we think they will go down the route of bank of japan and introduce tiering. it limits the damage of the financial sector and means they can get away with a much bigger rate cut. we think it will also increase the asset purchase program. we also think that we can extend the timing of the purchase program. anna: do you think there are enough assets around for them to buy? do you see the assets they need
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to buy being freely available for the ecb? they have a lot of restrictions on what they can buy. >> that was one of the reasons we called for that 10 billion increase -- scarcity. they have a few options to alleviate this. one is to delegate the purchases that can be made down to the national central bank level, to free up and allow the purchase for that decision to be taken by national central banks, the risk at a national level. so there are still a few options to alleviate the scarcity. anna: is that going to be the rabbit in the hat for you? >> we think the repo rate will be the main focus. it will be a little bit of volatility around the announcement, because if we seea a repo rate, that is announced before the press conference. there may be some confusion
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about limitation of tiering; they would have to wait until the press conference to get the full details. anna: this chart really illustrates the challenge mario draghi faces, the five-year inflation. the reason we show this measure, of course, is because mario draghi likes to reference this one. this is the fall we have seen in inflation expectations since october, continuing. it did bounce. does that significant or not? >> in terms of the fall -- it's and this period of inflation expectations declining is where growth has been quite good. we had monetary stimulus and fiscal stimulus come through. the eurozone growth is looking ok. in the rights
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direction, but we need to see more growth from the eurozone. they will probably need some reform in order to get inflation expectations -- anna: are negative interest rates the right policy tool to fight week monetary prices? >> we think negative interest rates have been beaten up too much. we think they are an effective policy tool, effective at moving the exchange rate. that has been somewhat distorted since the bank of japan got negative rates. but ultimately, we think this is the right tool. anna: thank you very much. michael stays with us. up next, a food frenzy. china's inflation rises the most since 2014 as millions feast over the lunar new year, but is that rise sustainable? ♪
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anna: welcome back. this is "countdown." you here in london, 8:16 if are watching in frankfurt. let's get the bloomberg business flash of caroline. caroline: thank you. an international security exchange for $1.1 billion, catapulting into the top of the u.s. options market. the transaction could help them fund another acquisition. banks from outside america, including hsbc and deutsche bank, are pushing back against the fed's proposal of implementing rules for too big to fail. they say they are burdensome and unfair to the world's biggest lenders. u.s. units under the proposal would need a next her layer of debt available to be wiped out in a crisis on top of securities qualifying a total loss. there is noica says
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lack of interest from buyers seeking a state in their third-largest lender. it comes after the parent company last week announced plans to reduce its holding to less than 20%. would keep emphasizing that there can be a lot of play in gold. even if you want somebody who is a stable investor -- be's -- wehey will will be speaking live to barclays investor today, here on bloomberg. after bloomberg business flash. anna: thanks very much. china's consumer prices jumped by the most since 2014, driven higher by food costs over the lunar new year. cpi rose 2.3% from a year earlier as food prices surged. the producer price index fell almost 5%, extending declines to
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a record 48 months in a row. some people are asking whether that number has softened. let's bring in michael. michael, through which len do you yous this data -- through which lens do you view this data? it is difficult to make out, given the distortions of february. and the ppi number -- some people are talking how it could have blossomed. >> we would discount that because of the season, the lunar new year. on ppi, it is reflecting the structure of this issue, overcapacity. it's going to take time to solve the amount of capacity. ppi might rebound because of basic facts, but will remain low. anna: so some people are asking whether it is bottoming out, whether we have seen the deflation, and this is what matters to the rest of the world -- china exporting deflationary
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impulses around the world. this deflation story, you don't see any an end to that? >> no -- i was in asia on a tour last week, and there is a lot of focus on the admi renminbi exchange rates. the central banks want to keep it stable on a basket basis, but markets are still focusing very much on the dollar-pmi exchange rate. the outlook for the dollar is still very important for how people perceive the depreciation pressures. anna: are you expecting the chinese to devalue ther currencyir -- devalue their currency further? people are suggesting that because the dollar is rising the might have to weaken chinese currency against the dollar so it doesn't strengthen again. that's what they said they want to ensure. >> exactly. it makes a complicated
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situation, where if the dollar does start to strengthen once again, dollar-renminbi needs to move higher again to keep it stable. but if we have that situation now, market dissidents are going to view the rise as a depreciation of the renminbi, which could lead to more outflows from china, and that is a concern for the pboc. anna: thank you very much for joining us. let's move on. aviva has released 2015 earnings and operating profit. the 2.6 7 billion pounds. let's speak to the company's ceo, joining us live from to bloomberg offices in london. good to have you -- thank you for joining us. i want to start with a solvency number you presented to the market. could you give us any context around that? how volatile you see that number being, how it compares to its peers?
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>> good morning, anna. the solvency has been a big overhang for the market. all insurance companies. the top end of the range. it's nonvolatile much at all until the market volatility. it will probably begun gone from one of the worst balance sheets in the markets. that's a pretty good outcome. caroline: you have given us an update on your dividend, up 15% this morning. what is your dividend policy from here? dividend is up 15%, 38% over the past two years. we wanted to get to a two to one ratio. there's still a bit to go. if you look at the results today, it is about growth and
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stability against volatility. operating profits are up 20%, the combined ratio of the insurance business is the best result for nine years. up businessf management business and investors had a pretty good performance, up 33%, and passing a key milestone of 100 million pounds to 105 million pounds. right across the board, these numbers are ahead of consensus with a highly satisfactory year. anna: you are clearly pleased with the ratio, the combined ratio delivering today. what can you tell us about the impact of the floods earlier this year in the u.k.? how is that impacted the number? >> well, it cost us the little over 150 million pounds. of the worst floods in the last 100 years. nevertheless, it was the best
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year, still quite an adequate outcome. anna: in terms of the pensions industry and the u.k., we are looking ahead to a budget. there has plenty of talk about whether we might see big changes to pension again. this chancellor has already change the environment considerably. what would you call him the chancellor to do this time around? >> well, there is a lot of speculation, isn't there? if the speculation is accurate, i think the chancellor will be saying he is taking the pragmatic approach, saying the savings rate sis too low. if you2008 is to love -- can't do anything that reduces it further, if the speculation theigh that is goodt, and future might need tweaking. i'm sure he'll consult
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widely. our main business, the u.k. life business, we have one in fourpensions in the u.k. -- one in four pensions in the u.k. we have a target of 225 million in savings. we are three quarters of the way there. we've also said we are going to take out an extra billion from that over the next three years, over and above what we would normally do. that deal has been everything we would hope it could be and more. anna: on the subject of brexit, which is very topical, your chairman was one who signed the letter in support of staying in the eu. explain your enthusiasm for staying in. is it to do with market
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volatility, or is it to do with strategy and business opportunity? think -- i think the chairman made our position clear. what we have said is that we think the u.k. is better in the -- we think the eu was better with the u.k. anna: ok. and we sit here today -- i know you are in london and i'm in london -- the ecb meets today. mark any message for mario draghi -- do you want to see an end to the negative interest rate policy? >> well, it is going to be interesting to see if mario draghi does whatever it takes. less time he disappointed, and we are probably expecting a ten basis point reduction and another 10 billion in qe. as a company, it doesn't affect us too much. we are not that volatile
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sensitive because our back book is extraordinarily well-managed, and our new business sales don't have high guarantees. anna: thank you so much. thank you. mark wilton, the ceo of aviva. ♪
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hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business.
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. guy: welcome to "on the move." i'm guy johnson, alongside hans nichols in berlin. what are we watching? willd ra draghi disappointed mat again? investors betting on a deposit breakup, but how will the ecb help the banks? don't that against central bank divergence. goldman sachs is on a different path, seeing oil widen. and the kiwi cut -- new zealand central bank


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