Skip to main content

tv   On the Move  Bloomberg  March 11, 2016 2:30am-4:01am EST

2:30 am
change the way you experience tv with x1 from xfinity. >> is welcome to "on the move". preliminary.m. in we are counting it down to the european open which is half an hour away. here is what we are watching. draghi switching strategies. will this new plan work? we're going to discuss that. ddifferent cap as -- path as raghi.
2:31 am
kuroda versus draghi. the pboc hikes its yuan reference rate. global equities continue to track the chinese currency. we will track that correlation. a nice charts. that will be coming up later. in the battle of the charts which i feel fairly confident about this morning. this move by draghi is significant. he says that channel is not working and we will try something different. not: it is clear he does have that much effect on the currency other than moving it out. the euro holding its strength. what will that do for the banks? will that be their lifeline. we have a lot to discuss this morning. some of this will be reaction to draghi and what he did and what he will plan to do next. guy: we will kick that around. some great conversations coming
2:32 am
up. we less than half an hour away in the european equity market. i bring you a new function. thatis a first thing bloomberg customers should look at first thing in the morning. -- it is ais a board heat map on steroids. this is showing you the moves seen around the world. it is not a simple percentage of move. ctx on the move. quite aggressively this morning. on the far side, the german dax does not often move by 2.31%. the brighter the red the more the move. i have to say some fairly interesting stories going on around the world. if you can indulge me for a moment. what we are seeing this morning.
2:33 am
the big move of yesterday in european equities following the disagreement about draghi -- was it a good thing or a bad thing? european stocks are pulled higher by a around 2%. hans: getting back to that correlation story coming you see hot go higher, and the red burning on your new function. i will be sure to use it. take a look at what is happening. the asia-pacific index is up. we are holding on to the game. u.s. dollar-yen. wti today, is up 2.35%. we have a bullish oil story. jan sure you want has erased its decline for the year. erased its has
2:34 am
decline for the year. largely to eight euro rally and the dollar decline overnight. j.p. morgan is cutting several emerging market credit traders. --lapsing oil prices inch -- the cutsslowdown also follow several defections earlier this month. david cameron has risked dragging mark carney deeper into the highly charged debate as to whether britain should lead the european union. -- mark carney is theaving the eu biggest loss of british stability.
2:35 am
hans: we did have mario draghi delivering interest rate cuts, more bond purchases and a possible bond subsidy. the announcement sent the euro on a roller coaster ride. it traded decidedly higher in the wake of his actions. here is everything you need to know about his comments. >> taking into account the current outlook for price stability, the governing council expects the ecb rate to remain at present or lower levels for an extended time frame. the risk to the outlook remains tilted to the downside. they are related to the heightened unsecured -- uncertainties in the global economy as well as to broader
2:36 am
geopolitical risks. this broad pattern is also reflected in the march 2016 ecb stock market projections for the euro area which foresee annual hi cb inflation at 0.1% in 2016. 1.3% in 2017. and 1.6% in 2018. from today's perspective, and taking into account the support of our measures to growth and inflation, we do not anticipate that it will be necessary to reduce rates further. it is true that some of the measures have obviously spilled over onto the foreign exchange market. hans: that one word for you come up capitulation. i will twin that with currency. currency capitulation from mario draghi. with theink he is done
2:37 am
currency. he decided it does not work. he has moved into the carney camp. europe with a wave of money. that is the date. gig.he he is pivoting away from focus on the fx channel. opportunityrate the to spend some of that money and get the economy going. what did you make of draghi? >> a very comprehensive and smart move because he was addressing the issue of negative interest rate from the banking sector. what is more interesting is the markets reaction. is tellings reaction you that investors are questioning the real impact of
2:38 am
negative interest rates and all of this kind of nonconventional monetary tools of the real economy. what i think what was quite outlook he was the gave for inflation and growth which basically is showing that the policy does not work. hans: following on the idea that you cannot do the that much more in terms of the currency, when you look at the credit or get in general, it is clear that mario draghi what strategy credit supply. can you make an argument that there is not enough demand for credit and mario draghi does not have the leverage to affect that? >> that is a critical point not creating a demand for credit. that is absolutely of use. also like to share that i do not share your view. the negative interest
2:39 am
rate in the eurozone is still a way for him to address the currency channel. he said that this is a policy and he is aiming at synergies across the channels. he is firing on all cylinders. we saw yesterday that it took to peterfor the rally out. markets are further questioning what will be the ultimate outcome. guy: we will talk about why stocks are higher because they are bouncing back quite strongly. the banks -- we will talk about corporate credit in just a moment. i want to break for noise -- news on deutsche bank. poolche bank 2015, bonus
2:40 am
2.5 one billion. what was interesting was that banks have not sent out their bonus letters yet. we saw a banks rally yesterday. if you're getting some of that banksin bank stock, the that went up yesterday, that is not great news if you happen to be one of those bankers. we will continue the conversation. policymakers, the most splits on qe stimulus. how effective it will actually be? we will discuss that next. ♪
2:41 am
2:42 am
2:43 am
guy: 7:43 a.m. in london. you're looking at visibility, this morning is not your morning. very foggy. if you are flying, i would pay attention to that. druggies --
2:44 am
let us get a bloomberg business flash. and old mutual list has separated -- to boost growth. the terrorould be really completed by the end of 2018. i'm hundred 45 million pounds up from 4.8%. bp will not have to face lawsuits by energy and oil fields services companies are you they blinked energy groups for losses suffered from u.s. offshore jerking. that was one of the largest remaining categories of claims bp faced. the company has are ready paid out more than $54 million over the spill. deutsche bank is in talks with j.p. morgan, oldman's tax, and city group. -- citigroup. has solddeutsche bank about two thirds of the wants to last year and
2:45 am
sell the rest within the next few months. corporate debt staged the global rally. bond risk in the u.s. and europe dropped to its lowest level in at least a couple of months. let us bring back our guest. also joining us, simon cowell large. addition -- let us talk about why this is a game changer? >> up until now, we affect financials and covered on's. -- bonds. mario draghi has now included that. that is a game changer and we see that in the market reaction. a very sharp and dramatic tightening within investment grade and high-yield. therein lies the some of the issue or some of the questions going forward. adding $20 billion to your purchase program.
2:46 am
the potential for crowding out is quite significant and is causing a lot of debate in the market over the past 24 hours. we will see what that brings going forward. more questions than answers. guy: we need to get an understanding of how this will work. a fairly significant hit it -- hipivot. we don't understand the moves fully. >> an opportunity for investment managers. there will be a lot of impact on the credit market and there is a lot of asset generation possibilities. on the credit markets. which is great for us. the second question is is a great for the economy? to what extent will this kind of program be constrained by the regulatory environment which are still in the face of capital raising.
2:47 am
isn't that exactly what he is targeting? look at the curve of banks -- cost of capital. they have cheap money on the left-hand side and they have a problem with expensive money on the right-hand side. they have boxes because the will noty -- regulator allow them to sweep the money to the back. mario draghi's turn to get over the regulatory hurdle as well. >> he is trying but there are still some hurdles. the asset side of the bank balance sheet. to -- the balance sheet. a new regulatory system that was preventing them from doing a cleaning of the system. the second thing is he is dealing with a capital buffer and the roles of the regulatory system for the banks. and therefore the capacity to
2:48 am
articulate the tro with new regulatory constraints on the liability side of the banking system. it is far from granted that all of this kind of values constrained in roles will be articulating in a way that will meaningful help to pick up credit activity. guy: how long will it take the markets to figure this one out? >> we will rally through this quarter and probably the next quarter. the second half of the year is when we will start to unravel the implications to the economy. guy: there is still a lot to discuss. are -- i want to press that point. that he thinks mario draghi is not playing the currency. we are minutes away from the open.
2:49 am
the potential corporate movers including old mutual. after announcing plans to split up the business along with its annual earnings. ♪
2:50 am
2:51 am
2:52 am
guy: it is 7:51 a.m. in london. hans nichols, you have had some interesting ones this week. we will kick out an interesting one. this is the correlation. huge fixing today. highest fixing in four months from the chinese. this is a risk on sentiment story. here is the white line. as you can see, it has been tracking lower. a nice little bounce. 2015 into 2016. here is the chinese currency. look at the correlation between those two. almost lockstep. if you're looking at a proxy to determine where you think the risk on sentiment story is, i
2:53 am
say look no further than the chinese currency. hans: the only problem with that is that you can have a lot of interventions in the chinese currency. i don't necessarily filter through to the other indices. i won't be all that critical. i want to talk about oil. when we listen to what mario draghi had to say, the most interesting thing was the revision expectations. for 2016, he brought it down to 0.1. in part because of oil. we have the cost of breakeven. what it takes to get oil out of the ground, shale oil in the states. don't worry about the colors. take a look at how the trend is going. 2013 is expensive. 2014 a little bit cheaper and 2015 even cheaper. if the saudi's try to test the theoretical price of oil, the technology is bracing it out. for oil, we will have a low
2:54 am
inflationary environment. draghi's inflation expectations may get to be revised again. guy: it gets lower and lower. it is continuing to step lower and lower. it will be interesting to see how the saudi's ultimately react. realizeld say that they the price of oil will be low for a very long time. we will put a judges have to on you. what are the charts telling you? is one better than the other? >> you want like might answer. like might answer. what is happening in the chinese isrency and the oil price showing you what is happening on the global liquidity seen. they all are based on the outlook of china. they are linked to the liquidity
2:55 am
phenomenon. lower oil price ax as a drain on liquidity and markets are stressed by the lower chinese currency. it is also a reflection on the monetary policy. guy: let us call that a draw. caroline hyde tell us the stories to watch. caroline: it south african trade. split apart of the u.k.-based south african integrated company financial services. we got a pop in trading out of south africa. old mutual separating out it's units. -- its units. up old mutual about four points. semiconductors. look out for chipmakers. apple will be bringing out it's smaller iphone and a new ipad
2:56 am
which will help the smartphone chipmakers today. watch for that today. guy: the open is next. features are higher. european stocks look like they will bounce. ♪
2:57 am
2:58 am
v
2:59 am
guy: good morning. you're watching "on the move". i am alongside hans nichols who is over in berlin. we are moments away from the start of european trading. mario draghi switches tactics. its firepower on the domestic credit channel rather than the euro. will it work? a different path as mario draghi signals he is done with cutting rates. boj to go further into negative territory. risk on. the pboc hikes its yuan reference heights. this morning, european stocks
3:00 am
are higher. hans: they are called higher. futures box. fair value check. when .8. 1.4 for the cac and the dax is up 1.6%. lettuce head out to caroline hyde. we end with a bit of a bank. can we make up for what we saw in terms of the concerns. is it turning the attention away from the euro exchange rate on to credit getting into the system and onto protecting the banking system overall. the priorities of mario draghi. ftse 100 surging up more anon t. mutualmpany -- old splitting up. not one single stock falling. everything is on the rise. the miners are outperforming. let us check across the asset
3:01 am
classes. euro, still going lower. after the search we saw yesterday. when .11. putting it into perspective, what amazing moves we saw overall on the euro. significant moves because of what has been going on with mario draghi and the ecb. concerns that we will not see further interest rate cuts going further. tracking and holding. we're down about .2 of 1%. imaginationps, the shown by mario draghi that means money comes out of gold. risk on appetite. money coming out of this safe haven and going into metals. moreve the yuan rising than it has in the last four months. stocks on. money coming out of the havens
3:02 am
and going into the bond market. will see more bond purchases and corporate that coming from the ecb as well but yields continue to fall in german 10 year. because of the 10 basis points move by portuguese debt. money moving into the peripheral debt market and going into the periphery of europe. a friday feeling about mutual -- up 3%. south african and london-based. overall, this is a u.k. asset-based company. it will be split up. semiconductors. look out for the chipmakers. apple has announced it will be releasing a new product range. we are starting to see a benefit to those chipmakers. weatherspoon.
3:03 am
doing verypoon is well on the back of the results. of 3.7%. the chairman tim martin says he faces a brexit. let me take you back to the markets and show you what is happening. financials leading the charge this morning. highest with the capital cost leading the charge. the financials are up. that is the big chunk. top right-hand side. around 230. that is where the real benefit is being felt this morning. taking you to this new fantastic function that we have. the dashboard of what is moving around the world. we are seeing some decent outside moves. this -- these are outside moves
3:04 am
that you would normally expect. in terms ofoard what we are seeing this morning on the markets. interesting market open this morning. a pop to the upside. what is going on behind you? hans: a quick update on the situation here in berlin. you can see the brandenburg gate behind me. the u.s. embassy is on one side. you are seeing footage of a suitcase that was outside the the markett before opened. we heard a pop here in the studio. right before that, we saw a robotic device had out there. the square is in lockdown. sittingn our studios above the square. that is the view you see now outside the window. there may be two dozen police officer standing around the perimeter. it does not appear to be that
3:05 am
much of the situation but we do want to bring everyone up to speed. it is a suitcase outside the u.s. embassy in berlin moments ago. there is a controlled explosion revealing and knocking that suitcase to what we see right now. returning to markets. mario draghi's rates deepened below zero. let us see how the banks will be affected by this further negative environment. us,king exclusively to barclays weighed in on us. markets are having some difficult times of adjusting to what has happened to commodity prices, oil in particular. what is going on in china has had a big impact. slow growth is a challenge to the market. inflation expectations are .ncredibly slow -- low leading some central banks to think about negative interest rates. this is unchartered territory.
3:06 am
how the financial markets will respond -- we just don't know what will happen. the markets will be challenging this year. the banking industry is so much stronger now than it was in 2008. the capital levels are completely different. the liquidity levels are completely different. we have such a more robust banking industry than we did back then. it is a safer group of banks dealing with a challenging market. >> negative interest rates are a reality. it on a limited scale. negative interest rates are essentially only on excess reserves. the adjust rates for the consumer, across the banking industry itself are still positive. we have a long way to go from being a disruptive influence in the banking industry. hans: let us digest those comments with our guest. -- with our guests. when you hear what the banks are
3:07 am
saying that the low interest rate is part of the problem but just part of the challenging environment, how much sway to the have with the mario draghi's of the world and is the ecb listening to the complaints of the bankers? >> the banking sector is not the main focus of central bankers. they have tried to preserve them fx of theecond monetary policy but what they are really trying to focus on is the deflationary pressure around the world. we have seen how the bank of japan has tried a multitier system in order to protect the banks. moverday, we saw a smart to try to address these kinds of consequences. i think that what the central banks have in mind is not to -- thenks per se but to
3:08 am
deflationary pressure and credit market overall or the entire economy. guy: a conflicting transition method. there could be a bottleneck in the transition mechanism after which the monetary policy cannot find his way to the real economy. bankers don't even know where they are going. they probably learn as they implement new measures. guy: we have a great survey out on what kuroda will do next. saying that.is not he says i will try something else. to manage.aghi has criticizing the negative interest rates. i think he was throwing a bone by saying we will stay where the -- where we are for the time being. i think the reaction from the market is interesting. we have not seen capitulation.
3:09 am
for the nexting kind of steroid injection. when mario draghi made the first announcement, everyone was happy. but he also said that we would wait. there will be a waiting time. and then everyone said it was terrible. i think it is a sign of a healthy markets. we have not seen capitulation. for this reason, all agility stays with us. att is obvious when you look the market reaction from the last two days. yo-yo,oing back to the mario draghi moment as in the toy. when we see what he did with the euro and when we see -- earlier, you said you did not think mario draghi had given up on a low exchange rate. what he did a year ago, was that intentional or a misfire? why did he not just answer that question differently? >> first of all, we are entering
3:10 am
in terms touchy times of guiding currencies because -- it was obvious we had some currency disorder. many countries want to have a weaker currency. what we have seen coming out of china is probably making the more complex. it is significant that when you look at japan, they are not happy with the strength of the yen but at the other hand, they have to maintain a fine line between the kind of turmoil of the currency market and what they would like for their own markets. increasing the negative interest rates to -0.4% is in my view still intended as weakening the currency because when you look currencies of other such as in switzerland, negative currencies going deeper into negative territory has been
3:11 am
successful in weakening the currency. the main transmission channel we have seen from negative interest rates has actually been on the currency. i don't think that if you are completely writing off the currency element you would have had this kind of decision on the negative interest rates. guy: how will the corporate sector react to this? we know the market reaction. how do you think the corporate sector will react? is ease thes doing financing conditions. we will have some kind of affect on the credit market. that will help to a certain extent the corporate sector. tol it be sufficient reignite some kind of credit growth? guy: if i am an sme in italy can i go to the bank and will them money cost me less and be more freely available today versus yesterday? >> that is far from granted.
3:12 am
we have not yet seen compelling evidence that the negative interest rates can actually be passed to the customers. on the contrary, what we have seen sometimes like in switzerland -- not so much for corporate but for the mortgage markers, rates going up to compensate for negative interest rates. control he is aiming at addressing this problem but we are in extraordinary territory. no one of us, not even mario draghi can know for certain what is going to happen in the coming months. guy: thank you so much for your time and your thoughts. up next, we have merkel's refugee policy facing its first real electoral test. three german states both this week and as the chancellor's party falls behind in key regions. details and analysis, coming up
3:13 am
next. ♪
3:14 am
3:15 am
guy: 15 minutes into the session. london looking lovely. foggy. the outlook is clear to the upside. ng.kets are rallyi banks are very much on the front foot post the ecb announcement yesterday. jan sure you on has
3:16 am
erased -- the onshore yuan has erased its decline for the year. it surprised australian and new zealand banking group's and the senior strategist putting it down largely to a euro rally and dollar decline overnight. jp morgan is cutting several emerging market traders. collapsing oil prices and china's economic slowdown have hammered the bonds of emerging market companies and countries over the past year. the cuts follow several defections earlier this month. david cameron has risked dragging mark carney deeply in to the debate of whether britain should leave the european union. bank of england governor mark carney says leaving the eu is the biggest domestic risk to financial stability. that is what the u.k. prime minister wrote on twitter.
3:17 am
some members of parliament attacked the governor for showing bias in favor of staying in the eu during a heated parliamentary hearing. you can find more stories on the bloomberg -- bloomberg top . hans: we do have more stories here in berlin. angela merkel faces her first real test on immigration when three german states go to the polls. i am joined by tony. take us through where you see this going. the core of germany's growth engine. what does it mean for merkel and what does it tell us about her popularity? >> 20% of the german electorate is in play on sunday. the cdu has been leading support. mrs. merkel's party. it has been bleeding support. a fair share of it has been going to the alternative for germany.
3:18 am
the party that has been campaigning against immigration and it has gotten a real lift from the refugee crisis. hans: campaigning against immigration with some controversial language at times. around theg went media about one of their leaders saying that we should be ready to shoot at refugees at the border if they tried to cross illegally as a last resort. you get the idea. let me jump in. let us say that that kind of language in this kind of politics works for those campaigning against merkel. what happens post that? what is the next story? ofthe thing they can be sure is that she will face of a lot more criticism for her refugee policy. we know what her policy has been. it has been widely revealed. to maintain europe
3:19 am
open borders. she is looking to turkey to help stem the flow of refugees from syria and elsewhere. that whole construct will come under fire especially from inside her party block if the party does badly in all three of these elections on sunday. hans: i want to keep up this graphic. .he cdu's at 28% this is their core. you have the greens leading. is it that bad for merkel? what is the best argument for merkel not having a problem? that there is no one there to challenge her or there is no clear way out of this refugee story without her at the helm? >> it is part of all of that. we know two things. convincedy convict -- a first dance. she has told people on the campaign trail as much. we have spoken to a number of people who are close to her. she is not sincerely only
3:20 am
politicking. at work.eal conviction she is not going to backtrack. the other thing is that the critics inside her party, they have been growing and growing louder that there is no new leader or no one who could galvanize the opposition to her inside her own party. she is still the parties best bet in the next national election which is about 18 months away. there is no one challenging her for this, not now anyway. an interesting dynamic inside the cdu. we always thank you for your analysis. i am glad our viewers get a little bit of your insight. apple's short interest tumbles the lowest in almost four years. most highly world's
3:21 am
capitalized company. that is coming up next. ♪
3:22 am
3:23 am
guy: welcome back. you're watching "on the move". banks are leading. we are on the front foot. let us talk about apple shares which have fallen from their february 2015 p amid concerns that the iphone growth is stalling bringing short interest down with it. are we about to see a
3:24 am
bit of a rebound as they unleash more products? we understand on march the 21st we will be getting a smaller iphone. a four inch iphone. fiveame size as the iphone with all of the power of the iphone 6. not a game changer. the same as what we are getting more ipads as well. interestingly since we have seen ipads for eight straight quarters. we are getting a new product array. march the 21st, the day before we have the california trial. the start of the hearings in california of the u.s. government versus apple. trying to inject a different dialogue into the apple story. short interest have come down for apple. the lowest amount of bearish bets against apple stock since april 2012. shares have been smashed. done about 18% in the last 12 months. we are potentially starting to
3:25 am
see that all of the bad news is priced in. the slowing iphone market is priced in. there is hope they can inject some interesting products that people will want to go out and buy. notably, they can focus more on the business segment with their tablet. g -- guy: now a smaller tablet. hans: they make great skipping stones. i will show you how to do it sometime. you need a clear, flat pond. if things are bad for apple, how that are they for samsung? song galaxy ssame seven is coming on sale. reports that it is not selling quite as well as had been hoped. divergeall trying to themselves from simply being smartphones. the devices you can get with it. the camera they unveiled.
3:26 am
we saw at the congress in barcelona that we are saturated with telephones. the chinese product is eating away at products from samson. you need an integrated product. you need to be a services company. be: the reality story will that they will be the next great thing. the little boxes. caroline: you are vr with samson. someu already are with sam -- samsong. i can see hans nichols on.ing dvr on -- vr next, we will speak with
3:27 am
andrew wilson. yesterday'spact of ecb moves. ♪
3:28 am
3:29 am
3:30 am
30 minutes into the trading day. let us see how things are shaping up. interesting in this post a mario draghi world. taking back some of the losses we had yesterday. i show you where the games are. this is fairly interesting. what we are saying is unicredit in terms of sao paulo and some of the other banks. outhigher cost of lending to the sector are the ones that are making the gains this morning which seems consistent with what mario draghi is trying to deliver. the question we should ask ourselves is what did mario
3:31 am
draghi try to deliver yesterday? ons: we can have this debate whether or not he wanted to move the exchange rate or not. hans nichols seems to be doing mime now. let me play you some of the sound we got from yesterday to give us clues as to where some of the reactions as to what mario draghi had to say. a lot of people are still confused about monetary policy >>. they did the right thing. everything they can and it is targeted as narrowly as possible to where the problems are and where the mandate is now. >> the phase of using interest-rate as a tool has come to an end. mario draghi has given the signal that interest rates as a tool -- that the policy is exhausted. >> he's out the command that is
3:32 am
committed to continue to support his initial statement. he will do whatever it takes. there is only so much central bankers can do. we really need structured reform in europe. >> it shows clearly what mario draghi wanted to show which is the ecb is not out of instruments. they threw the kitchen sink out. we can wait to see what the impact will be. when the need came, he did it. shows they can do more than what we thought. ceo ofdrew wilson, goldman sachs asset management. surprise is what it is being described as by you guys. >> it is a comprehensive measure. he did greater quantitative easing. the purchasing of corporate bonds is a material change.
3:33 am
on three fronts he surprised the market. the surprise also with the market reaction. guy: why did it react the way it did? >> during the press conference, he indicated that was as far as they could go as far as interest rates. we saw the euro moving up. we saw equity markets swing from being positive to end the day down. guy: did the market get it wrong? mario draghi indicated he is done with the fx channel. now going to target the corporate sector in europe, smes by the banks because they need to be able to lend for the duration. this was a big pivot. that channel.rds the market reaction is that the exchange rate is down and then realizing that it is more
3:34 am
difficult. it also takes time. it does not happen instantly. process will be a longer, slower when and it is less certain as to whether there is demand for credit. the supply and availability aichi a -- of cheap fan mincing -- cheap financing is the issue. guy: why didn't the fx channel work? asdidn't get it down as far he would like and it was not what he was looking for in terms of the real economy. >> everyone is trying to get the exchange rate down. that is not possible. they did target the credit channel which is likely to be more effective but less certain and it will take time. markets want instant gratification. we will now have to wait and see
3:35 am
what will happen to the lending data to see if banks can channel the money where it needs to be such as the small and medium enterprises. nichols voice is excellent. hans: andrew, my first question for you was excellent but it will be lost to humanity. what i want to get at is whether or not goldman sachs is sticking to its euro parity call. a lot of us are not certain what mario draghi was trying to do with the currency. sachs asset management, our view is not so bearish on the euro. of 105re in the region or 150 is likely where we will trade in the next six months or so. we are locked in that range. if we see growth coming out of europe because of what has been happening in the credit channel, it is not impossible to see the euro trading back up at the top of that range.
3:36 am
until we see that, and it will rangesme, trading somewhere between 100 five and 150 is most likely. hans: is it fair to call it helicopter money? worth more nuanced than that? that?t more nuanced than >> it is more nuanced. it is much more nuanced they will have to work bank by bank to look at their own lending books to see how to pass along the lower costs of borrowing. it is a more subtle policy. but don't forget the breath -- breadth of that policy. there also an understanding from mario draghi that there is a regulatory story he has to tackle here as well. that we have boxed banks ability to lend.
3:37 am
they are struggling to move the 3-4 segment to the story and lend it out. it is part of doing these moves to provide certainties for banks that they have that on lend itthey can and potentially taking down that rate. that is a huge incentive. tos will encourage banks lend money. the question will come down to whether there is demand for the credit. guy: how does this get inflation higher? >> through growth. their own forecast is to still have inflation be very low. it will take a long time to get into laois and back to the target. guy: how long? >> two years.
3:38 am
i think 15 years is too pessimistic. very hard to say. 2018their own forecast for still had inflation below 2%. we are looking out for a number of years now. guy: bloomberg has done a poll. it is based on the boj. the response to that is that the boj goes further into negative territory. why are the ecb and the boj on different paths? >> i'm not sure we would agree with that poll. mario draghi and the ecb have been more creative and what they did yesterday and perhaps the boj will take some of that playbook. wass clear the pain that caused to the financial sector in japan. i am not sure we will see the boj move rates especially to the negative. guy: if i am an investor. >> corporate bonds. corporate spreads.
3:39 am
we would say that is supportive for those kinds of risk assets. the ecb is buying there. -- is buying them. my better in quite it -- in credit that i am in equity? >> we saw a big bounce this morning. both credit and equity should do well off the back of this because it is very supportive to risk assets. guy: andrew wilson. thank you. we continue to see the consequences of a brexit on markets. policies tohree hedge portfolios. ♪
3:40 am
3:41 am
3:42 am
guy: welcome back. hans: let us get the bloomberg business flash. has cut itsche bank bonus pool by 11% after rising legal expenses hurt earnings last year and the bank warned that volatility in financial markets need to the first quarter of this year may be challenging. the company will pay 2.41 euros in onus is down from 2.7 one billion in 2014. old mutual is to separate its emerging markets am a asset management unit to boost growth and unlock value.
3:43 am
the move should be completed by the end of 2018. that came as the firm posted a net income of 945 million pounds. bp will not have to face lawsuits by energy or oil field services. they had blinked the energy group for losses suffered during the ban on u.s. offshore drilling imposed at the gulf of mexico oil spill. the last remaining categories of claims that bp faced. the company has already paid out more than $55 billion over the spill. let us turn our attention to the u.k. and the question of brexit. speaking to bloomberg in an exclusive interview. britain leaving the eu what impact the banking sector. >> we will suffer because our customers will suffer in the u.k. we are a u.k. bank. weide the united kingdom
3:44 am
will be fight but if our clients suffer we will suffer and so we have made the recommendation that the u.k. stay inside european union. hans: i like how he hedged that. ontill say that our play brexit, that we by frankfurt real estate and that is bad for barclays. we would never get that kind of investment tips on live television. guy: we need to discuss that further. frankfurt real estate. let's talk about what we think. let us get our review from paris. maybe we should by paris real estate. hans: let us had to paris. we can't afford paris. underperforms would be limited. the head of european equity strategy. so much for joining us. walk us through how you see the world from paris.
3:45 am
see that there is some support from the central banks. we feel that if there is still europe, we still have some positive news coming. guy: in terms of how i should position myself, the u.k. is a weird set up markets. you have a u.k. market and an international financial sector and an international market here as well. when i look at the u.k., how easy is it to tease apart u.k. specific assets from the global the fact that these assets are domiciled in london. and the index0 are not linked to the u.k. economy. it is very positive and telling.
3:46 am
in december, our u.k. equities and our european allocation. theind a lot of value in u.k. equity market which is trading at very low price to book, 1.6. very low compared to average and high in terms of dividend yields. the second thing is that you have a lot of commodities. the differentre entities across the world, the ftse 100 is one of the most exposed to commodities with 19% of the index exposed to oil and gas. reasons, theese coalition between the u.k. economy and the ftse 100 is not so clear. we are more positive on the u.k. stocks. saying, youu were need to be looking for stocks.
3:47 am
if i am looking for long sure strategy, i am looking or socks that are sensitive and insensitive to what sterling is doing. favor the exporters and particularly -- is putting pressure on the euro. go for some industry. this is the strategy we put in place and we will be more cautious on it u.k. domestic oriented companies. because of weaker consumer confidence. hans: you walked us through what you think the ftse will do in the variety of brexit scenarios. you can overlay that on what could potentially happen to the dax. tell us how it affects paris.
3:48 am
the big corporate's in paris if there is a brexit on june 23. brexit wouldof the be a risk not only for the u.k. but also for a global view. european stocks will also fall. -- wee say is that given think. european shares -- we will have some volatility around and uncertainty. you have to keep in mind that the u.k. is the first trade partner for the euro area. a brexit would bring a lot of uncertainty and bring a lot of volatility to eurozone shares. invest i don't have to
3:49 am
in the u.k., if i don't have any particular skin in the game, should i stay away for the next six months? if you really focus on sterling-based assets. i think we can see some weakening between now and the day of the referendum. in the currency. that will be quite positive for the stacks. that is the strategy i would recommend to put in place over the next three months. guy: thank you. hans: it will be fascinating watching those currency moves ahead of the referendum. draghi makeso waves across the currency market, we look at how this is all going to play out for the euro and the johnson-guy vacation strategies for the
3:50 am
summer. that is coming up next. ♪
3:51 am
3:52 am
guy: floodgate to start the morning in london. sunny now. markets on the front foot, banks leading the charge. i want to show you this charge. this is where we started worrying about deutsche bank. about here at the beginning of the year. a huge spike up.
3:53 am
we have seen that come down and then you get the last push lower , back to where we started and that is what mario draghi delivered overnight. bank stocks on the front foot this morning. the bank cd extra worry as well looking more positive. it will take the market a little while to figure out exactly what mario draghi did yesterday and even longer to figure out if it will work. also take policy makers and politicians a while. we have heard from the dutch foreign minister. itgave an interview saying is getting more difficult for the ecb to reach their price stability target. mario draghi has a task but it is difficult. he did sound an alarm that i'm expecting we will hear from here in germany which is it is difficult for all of those pensions out there to turn a profit when you have this low market. we will get that italian industrial production. follow by the u.k. trade data half an hour later. at 1:00 p.m., we will get
3:54 am
russian -- they are releasing their industry figures. let us bring in richard jones. fx strategist for bloomberg first word. richard, explain why the market -- we have equity markets heading up. they look positive but the euro is going in the other direction. is this the decoupling that we can live within the eurozone? >> it is too soon to rush to judgment. we had a sharp fall yesterday followed by a sharp spike and now we are starting to drift lower in the euro-dollar. it will take into next week until we get a real sense regarding the longer implications. guy: walk me through what happened yesterday. this was the last couple of days. here is the ecb press conference. this is what the euro zone did, it's reaction.
3:55 am
is going on on trading desks as this is happening? >> the sharp fall in the immediate aftermath of the announcement was intuitive. that is what everyone expected. mario draghi is aggressive. and then, as soon as he suggested that for now rates are as low as they are going to go, there was a sharp turnaround. we drifted sideways for a while. today, investors are realizing -- this was some big measures we did yesterday. i think it will be into next week until we fully digest the implications for the currency. mario draghi has done this before. , he they first enacted qe said we were at the lower bounce. then they changed at that. a rated be that we get cut further down the road but for now they are on hold. hans: i love this idea that it will take a week to digest what
3:56 am
mario draghi said. and watchrs go back it the press conference to look for clues or heads or is it -- or hints. or is it the market waiting? >> there are so many moving parts to what they did yesterday. it will take a wild to digest it. the knee-jerk reaction down and be explained by a lack of liquidity or other reasons. it will take a wild to digest all of this. and how long it will take to have an effect. stay with bloomberg television. we will be speaking to norway's finance minister. that is coming up in the next hour. we're looking forward to that conversation. from hans nichols and myself, that is it for "on the move".
3:57 am
equity markets back on the front foot thanks -- banks leading the charge. have a great morning and a great weekend. ♪
3:58 am
3:59 am
4:00 am
francine: banks lead the rebound and european stocks after currency volatility as markets digest the ecb stimulus package. i.e.a. releases its monthly report. we speak to the norwegian foreign minister. 11%/che bank slashes -- by . talent?s retain so, welcome to "the pulse" live

11 Views

info Stream Only

Uploaded by TV Archive on