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

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thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. guy: welcome to "on the move." it is 7:30 in london. it is 8:30 in berlin. i am guy johnson alongside hans nichols. he is in germany, and this is what the pair of us are watching. yellen takes control. the fed chair sets risk assets higher as she puts the hawks back in their box. the question is, how long will they stay there? disappointing data. japan's industrial production plunges by the most since the 2011 earthquake. should abe have rolled out a
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supplementary budget? brazil's largest party pulls away from dilma rousseff's coalition. is impeachment all but certain? good morning, hans. -- front andnter center once again. there are a number of questions that surround that. does yellen have control, and where are the hawks? hans: if she doesn't have control, the markets to. that seems to be an interesting flip of the script, and we should also talk about brazil. i thought you were going to make the suggestion that you and i host this show from the beach. we are here in the dreary months of march, but i suspect you have other high-minded plans. guy: let's go. i think that is what we should be doing, get us going down there to brazil. i guess the second point in my mind about the fed -- brazilian beaches sound much more attractive -- let's talk about the fed.
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page, and youfed look at the speakers over the next few days. doves.e all for the next few days, the conversation is going to be dominated by the dubs. -- the doves. it's many days until we start to hear from the hawks. i think that really is going to be important for the way the markets trade. question is, will the markets listen to yellen? will that stay firmly planted in their cranium, or will they listen to these other fed members who are going to discount what yellen had to say? in a lot of ways, this is like when you and i talk in our editorial meetings. cleverp saying a lot of points, but you speak last. you have more sway. you have a deeper baritone. everyone listens to you. in this analogy, you are janet yellen. i am deadly.
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what you say matters. what i say doesn't. guy: i'm not entirely sure that fits together. yellen, baritone, i think that is not where she is speaking from. we will talk about what she sounds like a little bit later on. there's a good joke in my mind. let's leave that they're firmly. let's talk about the european open, i half an hour away. europeanee that the markets are likely to pop on the back of what yellen had to say. you have euro stocks up around 6/10 of one thing percent. a chart shows you that european equities are trapped in a range at the moment. maybe yellen can do what mario draghi can't. hans: that gets us into the equity story. is's take a look at what happening in japan. mostly positive in asian territory, but in japan, the topics is down. 1.13.ollar punch through take a look at the 10-year. 1.81.t about
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that's a remarkable low. let's get the bloomberg first word news from camus the ramanathan. kumutha: thank you. japan's industrial production has dropped the most since the march 2011 earthquake. that is as falling exports and a steal no explosion halted domestic car toyota.on at output plunged 6.2% in february after rising in january. brazil's embattled president has suffered a new blow ahead of the vote on her future with the country's biggest party leaving her coalition. the democratic movement party held six ministries in dilma rousseff's administration. she denies wrongdoing amid a corruption scandal that has reached the highest levels of government and business. a vote on her impeachment is expected in the middle of next month. shares in airbag maker takata have plunged after the japanese
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company is said to have estimated that a comprehensive callback of its airbag inflators would total $24 billion. the worst-case recall scenario would involve 287.5 million inflators. global news 24 hours a day powered by our 2400 journalists in more than 150 newsrooms around the world, and you can follow more stories on the bloomberg top . guy: yellen has insisted that interest rates will be raised at a cautious pace and one of her most detailed policy discussions. the fed chair gave investors a list of conditions they need to watch for future rate hikes. miss yellen: i consider it appropriate for the committee to proceed cautiously in adjusting policy. this caution is especially
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warranted, because with the federal funds rate so low, the fomc's ability to use conventional monetary policy to respond to economic disturbances is asymmetric. one must be careful to not overstate the asymmetries affecting monetary policy at the moment. even if the federal funds rate were to return to near zero, the fomc would still have considerable scope to provide additional accommodation. in the event oil prices were to fall again, either development could have adverse spillover effects to the rest of the economy. if such downside risk to the outlook were to materialize, they would likely slow u.s. economic activity to some extent. there is a consensus that china's economy will slow in the coming years as it transitions away from investment toward consumption and from exports
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toward domestic sources of growth. there is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. guy: fed chair janet yellen. guy:let's bring in our guest, stuart richardson, founding partner at rmg wealth management. you are a bit of a bear. corporate earnings are declining. economic growth is declining. global liquidity is tightening. none of those things are good. is yellen doing enough to get over some of those hurdles you mentioned? stuart: clearly, the markets took a positive tone from yellen's dovishness, but it's not going to change the bigger corporate or economic picture to any meaningful degree. i'm not quite sure what her
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message is. a year ago, she was talking about trying to normalize policy. now she is emphasizing the downside risks. she is trying to change her --sage, and i'm not sure why is she concerned about the downsides? is she concerned about the strong dollar? to me, she has been flipping her message a few times, and this has caused confusion about monetary policy. when we look at the bigger picture, we don't think the real economy is responding to the low bound or negative rates. how are they going to get growth going? her words don't tell me -- guy: you aren't buying it? stewart: i think you have to be fairlystewart: pragmatic that the market goes up. however, i don't think the language she used is good to have any meaningful impact on the economy. the corporate picture continues to deteriorate.
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who is in charge? is it yellen or the data? she made it clear that she is looking at a raft of global data. is she calling the shots, or is the data calling the shots? stewart: i think that is part of the confusion. realistically, she should have been tightening policy much more than a year ago. the fact that they got to the first rate rise in december, the u.s. domestic economy was weakening by that time, and of course, we had global concerns spilling into q1 this year. when she says she is data-dependent, her two main mandates, she has met those mandates, and here she is, giving us increase dovish commentary on her policy stance. some people say that she is still data-dependent. some people are saying, she is looking at the markets and saying, we cannot allow the markets to go down.
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there's a concern that they are just reacting to the data d 'jour. unfortunately, i don't think she is in charge. guy: let's put this all together. don't fight the fed, is a refrain we hear quite a lot.you are fairly bearish at the moment . you are concerned about what is going on p review can argue that well. is, as my question is, how do you position yourself for this negative frame of mind you've head at the same time as looking at the various markets that may benefit? give me the portfolio strategy based around your bearishness. stewart: in terms of when we look at the u.s. economy, the data continues to be disappointing. when we take the dovish fed on us of that, it's easier for to have a more positive view on u.s. fixed-income. they are probably not going to
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be raising rates for maybe this whole year, but also at the longer end, we see 1.8% -- guy: buy or sell that? stewart: we are long. to put the nuance on this, when we look at mispriced assets, there's a chance they are going to be mispriced. the biggest miss price is probably in europe. we have european exposure, because we think and a soft global environment with the fed following an easy policy, with a pick up of germany or france, it's pretty attractive. that is one way to play it. you don't take a big directional bet, which would be against the fed. to be pragmatic, you can't fight the fed too hard. long u.s. over europe makes sense. in terms of trying to fight the fed, this is hard work, but there are times in the cycle when it is right to fight the central bank.
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2001-2003, or in 2008 when the fed was, cut, cut, cut -- there are times to fight the fed. u.s.e last 12-18 months, equities have gone nowhere despite a continually easy fed. to us, this looks like a topping process than consolidation. equity valuations look so high. this is not an environment where equities would normally be performing well, but they still get periods of support from central banks. if that support is taken away, the downside would be pretty big in particular for u.s. equities. it's about trying to play the risk-reward. the risk on the downside looks pretty large. guy: asymmetric risks. draghi is going to be buying more dummies on friday. up next, japan suffers a big drop in industrial production.
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just a blip, or is it a sign of weakness? we are live in tokyo to find out what is behind the decline. ♪
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guy: hans: welcome back to "on the move." i am hans nichols in berlin. japan's industrial production slumped 6.2% in february.it's the biggest drop in output since the earthquake in march 2011. let's get more with jodi schneider who is in tokyo. thank you for joining us. explain this decline for us. what is behind it? jodi: february had a couple obviously notere expected. there was a big one that there was a steel mill explosion that caused toyota to halt its the mystic production of automobiles. -- domestic production of automobiles. that was a factor in this. there are other factors that
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give cause for concern about the path forward. there have been five months now of smaller than expected and and also, wets, have sluggish domestic demand. you add all of that up, and it was not a good figure in february and one that was worse than forecast. guy: put this into the context of abe's decision. are there questions being asked about whether that was a mistake? jodi: i think there is some debate about this. the real debate is, will this be a quarter where there is another contraction? to last quarter of 2015, the economy contracted. if there's a contraction in the economy we are about -- in the quarter we are about to end, that would be a recession. it would be six quarters of contraction. that is a concern. china and with
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china's slowing economy, they are japan's largest trading partner, so that is a concern. the question is, how does this play out with the other economic data we have been receiving? there are some economists who say they expect a pickup in industrial production next month, that the orders are looking better in march and april, but clearly, the path with the exports is worrisome. hopefully, we don't have to wait until next month to talk to you again, but we will come back to you. i have some breaking news for you. metro ag, the german cash and carry supermarket, they are ,lanning to split their company creating two independently listed companies. that is all we have now on that matter. when we talk about metro, we're talking about consumer products.
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it looks like metro wants to have a slightly different exposure. guy: it's interesting. maybe you get the feeling that the market isn't fallowing the stock well, and maybe they can get more value out of it. it is a theme running through a number of businesses as they try to extract value. you look at some of the hotel companies. tet's bring in stewar richardson. i want to take you'd back to japan. japanese stocks, cheap, not cheap? this looks like it is the yen trade to me. if the yen goes up, the stock goes down. t: that feels like exactly what has happened here. japanese stocks were relatively cheap a couple years ago. we had a push-up due to abenomics. abenomics is just not delivering here. , that part ofform the three arrows, we haven't seen major changes, so it looks
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like the policy is about weakening the yen. that came crashing down when the yen strengthened on the back of the bank of japan's move negative. there's quite a bit of expectation that something may happen. you are thinking, they are going to offset this, because they raised taxes, and it was a shock to the economy. what is going to kickstart this growth spurt in japan? we are not sure. when you look at the demographics, this is going to be difficult. just what as demographically challenged economy does. it's about how they can make a real difference. clearly, negative rates are a big concern for domestic people in japan. it's just not working here. yet when we see a downturn in when we see equity markets underperform, there's going to be the call for more negative rates. the central bank is in a doom
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loop when things don't go right, they do what is not worse. it's a stream macro battle. hans: speaking of that doom loop, if we can extrapolate that to what is happening in the eurozone, japan can't get this right with negative rates, and does that mean that rocky -- dra ghi's experiment is doomed to fail? stewart: at the moment, we've got the economy that has been slowing the last couple quarters. the real economy is growing at just over 1%. months.had qe for 12 we have had negative rates for longer, and yet lending is barely picking up.the economy is not picking up. many economies in europe have deteriorating months. demographics. productivity has not been kicking in at all. a debate about,
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what can the central bank policy do for the economy? there's a case to be made this is bad for savers, bad in terms of creative, district of growth. if we have this easy policy, we keep this hanging over. we are beginning to go into the where people are questioning central bank policies. are they good or bad for the economy? guy: if you look at japan, look , agingdemographics population. they are in a situation where they have a high savings rate, negative rates. what happens, is in japan more important than what happens in the united states? --e those sabers start savers start spending this wave of money into the global economy, i'm wondering what kind of impact that will have. stewart: in japan, most of the savings sit within the corporate
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sector, not the household sector. guy: the household sector is still pretty high. stewart: i thought it was a lot lower. savesas a country still or that capital does flow out -- still saves. that capital does flow out throughout the world. when we look at this picture of global savings, is there a savings glut? the savings glut comes from central banks printing currency. all it is doing is chasing asset prices around. when it comes to individuals, we all have different plans from central banks. if we are getting more towards retirement, we're not going to speculate on equities. we want safe income. central banks are forcing people to abdicate to assets they wouldn't normally go to.
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this is opening up a broader debate about what are the longer-term goals of central banking and are the current policies able to meet those goals. i think we are able to say no here. hans: now it's time for the battle of the charts. first, may i compliment you on your time, and second, may i tell you --\ [laughter] both going to be showing on our screen here, i'm going to weedy and old lead -- talk about palm oil. up is the price of palm oil, a good commodity indicator. because of dry weather, we had el niño -- you are seeing palm will get more expensive. the white line is grapeseed oil. that is falling in line, chasing what you see with palm seed oil. it gives you a sense that these two commodities are moving in tandem. it's the entire commodities story. what are we talking about today?
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commodities, a weaker dollar. it's all correlated even though guy himself cooks with olive oil. guy: i'm a big fan of all of trees -- olive fields. this is my chart of the morning. i have flipped around the offshore yuan and u.s. dollar, and as you can see, we have seen this depreciation that came through in august and this the offshoref rates. my point is, if you look at the yuan basket, it's crossed over. shows that think, the chinese authorities may be doing some sort of stealth devaluation, but because the headlines are grabbed by what happens with the u.s. dollar, nobody is noticing. you have 10 seconds to come up with a winner. [laughter] stewart: in terms of market impact, i would have to go for the yuan chart.
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guy: i think that is the right choice. stewart: yuan is a macro driver. ♪
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guy: good morning and welcome to "on the move." we are right here in the city of london, alongside hans nichols in berlin. we are moments away from the start of european trading, and here's your morning brief. yellen takes control. the fed chairs is recess gets are higher; she puts the horse back in the box. the question is, how long will they stay there? disappointing data. japan's industrial production plunges by the most is 2011, when the earthquake happened. shinzo abe has ruled out a company to rebut it. and brazil's largest party pulls away from the ruling coalition. is an impeachment now all but certain? hans: neither of us know the
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answer, but we do know that the markets will open. we see the cac 40, the dax pointing upward, ftse down. let's head over to the touchscreen for the european open with narrow change. -- with nejra cehic. nejra: we start with the dollar; this is the currency we have been watching post yellen speech. a dovish yen meant a drop in the dollar. we are seeing it holding its losses, down almost 2/10 of 1% after it had its biggest loss in the week yesterday. crude oil is interesting because we saw that drop after yellen spoke as well, that it is rebounding as well. wti up 1.2%; some of that rebound down to that weaker dollar. asia, a mixed trade in japanese stocks falling on the industrial production data, also on a stronger yen, but shares gaining in china. in europe, futures were pointing
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up across the board, and we are seeing gains. ftse up more than 1%, dax us, cac 40 up. there are a number of stocks that we are watching this morning; let's see how they are performing at the open. autostarted with because of that news from takata. japan shares plunged in after a comprehensive callback of its airbag inflator's, according to a person familiar with the matter, a total of $24 billion. eing shares gain a little off the back of that, up 1.2%. n newsg at airbus, down o from a competitor. boeing says it plans to cut 4000 jobs from its commercial airplanes division. this is part of a broader effort
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to reduce competition from airbus, and airbus shares are dropping on the back of that news. premier foods was up as much as 15% by some analysts, but we aren't seeing it move at the moment. what happens here is that the u.s. process has made a third approach, stepping off its efforts to win over this british company. do keep an eye on that stock as the trade continues to settle. guy: let me pick it up; thank you. let's take you to the stoxx 600, a breakdown of the sectors. what kind of rotation are we feeling? financials are high, but the real gain is unsurprising, given what yellen debt overnight. energy stocks higher, material stocks higher, we're seeing the dollar down, metals, energy, etc. trading higher. unicredit is the stock to keep an eye on.
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we're rotating out of the areas we have been rotating into. health care is at the bottom, utilities, consumer staples. they aren't getting the pickup. what is getting the pickup are exactly those stocks related to what's happening with the dollar. nejra was talking about airbus and boeing -- airbus is a company that makes planes in euros and sells them in dollars; that's a negative correlation. hans: ye. i think it is clear the correlations we are seeing now, especially those commodity exporting companies doing well. on the flipside, the euro denominated companies and countries. letmove on's to a different count -- let's move on. takata estimates a worst-case recall scenario will cost about $24 billion, according to a person familiar with the matter. that means great reporting here on bloomberg -- shares plummet just before the close, falling nearly 20%. we spoke to our asia car editor,
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craig trudeau. akata portraying it? >> this is a figure that has evaded the market, and it has been such a complicated recall -- driver-side airbags, passenger-side airbags, some cars that have takata airbags on both side or one side. it is hard to get your hands on how big of an issue this is. this is a significant number here from the company; a person familiar with the matter tells trillionu said, ¥2.7 comes out to about $24 billion. the total number of airbag inflator is affected could be 287.5 million. in terms ofceiling how big of an issue this could be for the company. hans: craig the market clearly
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missed crisis, one. they didn't have a clue as to how bad this number really is. my question -- are they kitchen sinking this number? is this as big as it will get? >> well, just because of how complicated this has been, it has been something you haven't seen a whole lot of research reports on, with the exception of an excellent one done last month by jefferies. their numbers were fairly close to this. i think they may have guessed something a little bit short in terms of the number of airbags that could be potentially affected, so their figure was about $7 billion less, but really, that doesn't matter in the grand scheme of things when you look at takata's balance sheet. if this worst-case scenario comes to pass, it will overwhelm the company, regardless of the negotiations that go on between takata and the automakers, which
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is an important point to keep in mind. the figure may not actually be one that it will face on its own. this is a figure that is coming out because the company is in talks with automakers about how to split this up. we will be coming back to you on more news with this. thanks for joining us. guy, this is a german company, and it has a consumer electronics division and also a shopping division. the stock is up almost 10% on the news that they plan to us do is split. they want and media division in the wholesale food division. if you like the grocery side, you have time to invest. if you think there is unlocked value in the media side, when you see me trudge over their buying more and more electronics that i somehow managed to destroy rather quickly, that you're safe bet. that is what i go with. you probably have some ideas on this as well, so let's head back to london.
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guy: i guess my question for stewart is that unrealized value in europe. you look at a number of these companies that are breaking themselves up, trying to extract value, thinking that the market doesn't understand their business model. are we underestimating europe right now? trading at a pretty big stretch versus u.s. valuations, but people aren't flocking to buy european stocks. >> clearly, valuation is at a discount. i would rather be hunting for bargains in europe as opposed to the u.s., where i think over valuations are broad. the problem with europe is everyone floated into europe on the back of promises from draghi. share price performance, and the problem here is from january last year europe has not performed at all. just before the launch of qe, we go up, and now we come down.
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guy: we get more information on friday. i want to show you this charge here. europe is in a bit of a funk . this is the stoxx 600; a big downdraft coming through in january. we're calling this trading range now, and i'm wondering, what is it going to take to get u.s. investors convinced they should put their money back to work year, to get people around the world saying, actually, this should be popping higher? i'm just wondering if it's a suggestion or problem. >> our view would be in terms of it is more of a problem. but thisnice rally, has been seen in all risk asset classes, starting with that big rally in oil. there are similar rallies that appear to be feeling. there is a strong correlation between oil -- and even yesterday, when we saw that dovish yellen, it could go up. we worry a number of risk assets
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are topping out. maybe we break through the bottomless range in europe and that is another sign of failure. it comes back to what will encourage people to invest in europe. at the moment, we have problems from a geopolitical point of view, worrying about the migration crisis. and some think they don't need to invest in europe. when you think about companies that are changing in the world today, they don't reside in europe, they reside in the u.s.. the u.s. has dynamism but their prices are so expensive. in europe, they haven't got the dynamism, and that will encourage people to look elsewhere. hans: the metro news shows us that a ceo can send a stock upward by 10%. when you look at how cheap money is -- they are getting money for free, no interest rates. when you look at the free cash out there, are you thinking that ceos are going to be feeling m&a g?nger, and a pan
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-- m&a pang? >> this is the we have seen in the u.s. for the last year or two -- this pickup in m&a. a lot of the cash we put into the u.s. system is used for corporate buyback. and clearly, that is a potential in europe. excited, we need to see more than just financial engineering. if you play financial engineering as a trade on the back of central banks, at the moment, we aren't seeing the whole process in place for more than 18 months, and there is no pickup in the real economy. if we look at the corporate expectorant, it has been deteriorating. we thought that would be the same in q1 this year. the question is how much do you treat the quality of earnings or financial engineering versus the quality of earnings from proper economic growth. i think this is where big
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investors look around and say, we need to see something extra besides financial engineering, and this is a problem where we can squeeze more performance, whether it's through changing the structure of the company or through simple buybacks. but we need to see some dynamic movement in europe. guy: get the top line moving. we will talk about that more and a moment. we'll talk about draghi's big push this morning. mario draghi said that plenty of debt is available to buy. investors -- we will talk about their view. that story, next. ♪
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guy: welcome back. you are watching "on the move." i'm guy johnson in london; hans nichols in berlin. stocks flying on the backs of yellen. let's get you the first word news. mutha: japan's industrial production has dropped the most since the march 2011 earthquake as falling exports sat demand and exposure halted domestic action at toyota. outputs plunged 6.2% in february after rising in january. economists surveyed forecasted a drop.
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brazil's embattled president got a new blow about her future with the country's biggest party leaving her coalition. amid aies any wrongdoing corruption scandal that has reached the highest levels of government and business. vote on her impeachment is expected in the middle of next month. shares in takata plunged in tokyo trade after the japanese company is said to have estimated that a comprehensive callback of its airbag inflator billion,total $24 according to a person familiar familiar with the matter. it would involve over 200 million airbag inflator's. -- airbag inflators. you can find more stories on bloomberg at top . guy: thank you.a
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as draghi wants to increase his bond buying program, he may be in for a shock. investors could pay higher demand for government bonds, with suppliers unable to keep up. some of uri europe's biggest banks are heading even lower. our guest is still with us. the issue is that we will see the ecb broadening out the amount they are buying, either the quantity is going to go up or he is not by incorporates. it's all going to be focused. >> quite. they announced they were going to increase by 20 billion euros in april, and they said they would buy corporate debt for the first time. but those two things are happening at the same time. we won't get to corporate until later in the quarter. there is a disconnect, which could really have the government bond market, or rather boost it up.
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what we keep hearing from the german central bankers is that you are creating all kinds of asset bubbles, you are creating problems when you have interest rates this low. what do you see happening out there in terms of enough road to run on? are there enough bonds out there? >> they will find bonds, but we are talking about a huge amount of purchases, and it is getting bigger as of april. when the market is in selling that much. we've seen some estimates have a negative supply of 123 billion euros. it's really not the kind of thing it is going to be easy for the market to take down. guy: you were talking about the fact that we have treasuries trading at 1.8. you see yields going lower. if you look at the spread between treasuries, it is looking stretched.
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how much lower do you think bunds will go versus treasuries? how big that spread get? >> we could concentrate on long u.s. to five-year, where you have new differentials. if you look at the german curve, -35, and we -50 to have the deposit rate at -.4. there's a bit of a floor being approached now. that will be a little bit further, but you are talking about 13 basis points already. this is extraordinarily low. it's interesting that the ecb has distorted the bond market, not just germany but elsewhere, and that will probably continue. markets is not pricing, this is central-bank distortion. when that happens, they try to
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step back from their policy so something untoward will happen. you could play the game short-term but you have to have an exit strategy. we know people can see rapid movements -- just a year ago, the tenure bundesbank was at 1%. it's a very dangerous game we play. guy: two things. what is liquidity like in the market? and our people thinking a tenure negative in germany? >> liquidity isn't brilliant, particularly. the fact that it starts on friday could be interesting. ks, theple -- the ban number one dealers of german debt, they're not ruling out negative rates. guy: wow. ok. are people talking about comparisons with japan? we saw what happened with the really superlong data, which has
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been quite volatile. are we going to see that replicated in germany? >> i don't think it'll go that far, but it is a precedent now. we've got yields that low now. guy: yeah. don't exclude anything. thank you very much. lucy meakin. stewart, great to have you. the chief investment officer at rng. up next, the world's longest-running bull market remains stubbornly buoyant. we will take you to malaysia. the ftse, are chart of the hour. ♪
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guy: welcome back. breaking news for you, just announced on twitter. foxconn is confirming it will now acquire sharp. the will they won't they conversation has been going on for quite some time, but it looks as if we have their twitter feed, suggesting it will happen. done.al does seem to be we will get more details. we will bring them to you. in the meantime, our chart of the hour, and nejra cehic. are charging in malaysia. nejra: it is a pretty simple
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chart, but what it shows is pretty stunning. it is showing you the longest bull market in the world. ex that malaysia, the ind has more than doubled since it's 2008 lows, and it hasn't succumbed in that period to a 20% drop. energy exports have been dropping, the prime minister is battling corruption allegations, and corporate profits are weakening. the reason behind this -- one thing's valuation. that indexes trading near its cheapest relative to global equities in the most in a decade. also it has the lowest volatility among the region's markets. one many manager described it -- one money manager described it as thing boring ais beautiful. hans: i fall short on both of those.
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you sit next to me at a cocktail party and you will be asleep before your second martini. my question is coming from foreign or domestic investors. nejra: the short answer is both. but if we let the latest data from february, what it shows is that domestic institutional funds accounted for almost half the total market value on malaysian stocks compared with 29% of foreign funds. the country's pension fund has been supporting demand for equities with sure purchases, but the key thing is that this year we have been seeing foreign investors returning. you have another chart there -- two for the price of one -- p showing that foreign funds po ured $1.1 billion into malaysia, topping south korea and southeast asian markets. the report also shows that inflows were this month are at their highest since april 2013. year, whenafter last
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we saw the biggest outflow for foreign funds since 2008. foreign investors coming back in; the equity market supported already by domestic investors and by the pension fund. that said, investors are concerned about malaysia's stock benchmark. they are concerned about rising costs and slowing economic growth weighing on company earnings. and also the issue of inflation. in january it accelerated at the fastest pace since tweet 14, and there is that issue of crude falling. at the moment, it seems that investor demand is buoyant. guy: people are presumably doing this -- if you take a look at the currency, the dollar versus the -- you can see the sharp upswing. and maybe that is going to roll over, but that may have been a factor, whether people have been doing this on a hedge basis. but you can have a fantastic bull run. right.
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great stuff, thank you. we will talk about another emerging market when we come back, brazil. the president losing a key ally. is an impeachment almost certain? we will talk about that next. ♪
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guy: welcome back. you're watching "on the move." how are things looking? let me show you numbers. as you can see european markets are on the upside. goingnors, the oil stocks to be affected by janet yellen's decision. a bit more dovish than the market anticipated. as a result of which, we are trading up nicely on many of these markets. just for these european stocks. which stocks are moving the markets? nejra cehic is here. nejra: the biggest gainer on the stoxx 600, it is metro. the german retailer up a .5%.
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.his is -- up 8.5% this is a move that will separate markets and cash and carry market. no final decision has been made that the split should take place by the middle of next year. metro says in a statement today. supermarket operations would be spun off. the stock jumped 10% in frankfurt. eight -- up 8% on the news. significant gains this morning after the u.s. by processor mccormick -- this company stepping up its efforts to win .f the owner -- when the owner airbus a little lower. one of the biggest lower -- one of the biggest losers on the stoxx 600. this is after it's competitor
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boeing plant -- announced that it plans to cut 4000 jobs by midyear. that is an effort to reduce cost because of competition from airbus. hans: moving on to brazil, the largest political party has abandoned the ruling coalition, further weakening the government. a fresh blow to rousseff. bloombergs emerging-market managing editor justin carrigan joins us from the by. you've got sand in to buy and brazil. you have -- you know emerging-market so well. tell us what the next step is. justin: the next step is a meeting today of the progressive , on whetherer party they will stay in the government are not following the decision yesterday.
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it took them 10 minutes to decide to leave. doesn't pick -- it doesn't. the progressive party -- it does appear that the progressive party will go the same way. hans: if there'll was to be an impeachment, how quickly could come? -- if there was to be an impeachment, how quickly could come? justin: voting sometime in april. a two thirds majority to put the process through to the senate. we will likely get a vote in the senate in may. we are going to see that play out over the next week. there will be a lot of jockeying and moving. starting toelements slip away. there are some twists and turns yet, but we seem to be entering
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the final phase of this whole aside a. we have a couple of months -- this whole saga. hans: think he so much for updating us. -- thank you so much for updating us. let's get more on brazil. morning. it looks increasingly like an impeachment is becoming the most certain bet. markets are priced a lot of this in already. once we get to the reality of that situation, how do investors react? >> we are already in the reality. as the gentleman said, it will probably take a couple of months . a little bit more than a couple of months if you look into the schedule of all of the phases of the impeachment process. days and weeks on each
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of these steps. if you go to the limit, in terms of if the government wants to allow you to -- allow you the total limit, we might stretch ourselves over until september or october. in general, the position has been very positive. the markets have taken the likelihood of impeachment as the green flag to finally increase the position. that goes to equities where we have an explosive rally over the past month and a half. in the fixed income side, we have been given with massive real rates in brazil. the trade for the best -- the past two years never really worked out really well.
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risk, nof headline pitfalls by the other central banks. now the trade is happening. investors are in this position where they prefer to increase the position now, rather than taking profits. buyingt be the case of the rumor and not -- and selling the fact. this might be the case to step back and reassess, because this economy is still suffering from massive richard b she and. it goes from the inflation side -- massive retribution. a goes from the inflation side. going to be very difficult from the social point of view. to highlightwant that. .et's talk about what happened
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it is better to travel than arrive. the vice president takes over and we end up with a guy that may or may not be tainted with some of the same scandal. walk us through the post rousseff era. is it a significant improvement from an economic point of view? call -- luis: there will be no caretaker government. there are questions around that because the key is challenging them. if we go down, you go down with us. this is another topic. we will be leading into a caretaker government. the problem is the ability to act on the physical side -- the fiscal side. change the structure that is there now.
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rebounding from the very depressed [indiscernible] i do think economic paralysis might not be the state we are in now. it might be the state we are leading into if the impeachment materializes. that is my main fear. ability and willingness of foreign investments to add to the positions. hans: normally when i asked questions about brazil, i am asking for tablet device. you have me thinking about the calendar. should investors set out the next two or three months? wait for this to sort itself out? now if you have an inkling of where this might be going? luis: that is a good question.
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different investors have risk tolerance. , it came fromgo other investments to it over investment status. , bige in the process returns to some of the real money. at which point will they pull the trigger and say i have had enough of this rally? let us now take a step back. i don't think we are there yet. [indiscernible] the generates more toward 80% to 90%. i do think that investors will take a step back and look at the micro picture. guy: we are in a situation where
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clearly the market is dominated by the fed at how much are we seeing in brazil is down to what is happening with the fed? i was seeing the rand popping a little bit. another economy that is suffering as well. --t kind of segmented for me segment it for me. luis: we had a note saying we are getting properly bullish. i would say on and after mission temporary of this bullishness on our side is based on the markets. backpedaling, the ecb emphasizing more on the doves stance. productione ip and hitting another step down. boj might be doing something more. we are having the fed which was the divergent central-bank bringing its policy
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to a convergence stance into the g3. getting more dovish. of a hike inodds 2016. tidesence, the rising lift all boats. steady.ats are not that for short-term environment, -- especially the high-yielding once. guy: thank you very much indeed for your time. working our way through the brazil trade. luis costa joining us. talking of kicking things, we are getting news coming out of -- sharp has agreed to that formal offer. this is coming from japanese television. sharpks like there's a shortly.taking place
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hans: we preview the wrath of chinese bank earnings which are due out this morning. where live in hong kong next. -- we are live in hong kong next. ♪
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guy: we are 44 minutes into the equity markets session. equity markets are up. , the minors and oil stocks are really rising up
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today.. -- rising up the fed quite dovish. let's get you caught up, here is a's first word news with kumutha ramanathan. kumutha: -- the german retailer says it will transfer its full sail into business into a separate entity while its consumer electronic branch will remain a part of the ag listing. neither board will make a decision on the the merger -- emerger. mccormick made an approach -- they are prepared to -- after the british owner of mr. kipling cake. shares are's trading -- shares are trading higher after that
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news. steeler selling its division. the metal producing arm of india's biggest coned armor says global horse -- biggest conglomerate says trading conditions in britain and europe has rapidly deteriorated. they had to close plants in the -- last year as china's surged to an all-time high. chinese bank earnings are due out this morning and shares in hong kong hit higher after one of the biggest state lenders reported overnight. let's get up to bloomberg intelligence senior analyst, francis chan, who is in hong kong. do you see any positives from the results? seen it come in better than expected in the fourth quarter. this isd only a 31%
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more than the industrywide average. another national bank has shown a similar trend. --h a development guy: let's talk about credit growth and what is happening with the real economy and its relationship with the banking sector. long growth. -- loan growth. what are we going to get? >> we believe long growth -- loan growth may happen in the coming three quarters, just because the latest national people's congress, the government has reiterated -- at the same time, i want to bring to bring to focus -- bring to -- writing off a lot of
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debt. that is why we see the balance lower. at the same time, the banks [indiscernible] advocated by the regulator. while this might not be a good thing that the sector, [indiscernible] looking toward more data. thank you very much. francis chan on what is happening with the chinese banks. taipei.ake you to sharp.eover of we will bring you that live. looks like the number of what the offer is. it was around ¥100 billion. it looks like it is the number. a fairly genetic announcement that that deal is back on -- a fairly dramatic announcement that that deal is back on it
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looks like sharp is going to be acquired. that deal does look like it is going to go through at this price. hans: it looks like it is going to be that lower price. ¥90 billion -- $90 billion if i am the might have to write. ,et's move back to janet yellen how it helped drive the dollar since 2010.orst day coming up next. ♪
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guy: welcome back. let's talk about the numbers. let's put the numbers up on what we are doing with european equities. the latest on this deal. you are seeing the minors being big. nevertheless, this is a fed trade that we are seeing at the moment. details that they are going to be picked up around ¥100 billion. we will bring you the details as we continue to work our way through that press conference that is taken place in taipei at the stock exchange. in the meantime, hans, i think we should talk about what happens for the rest of the day.
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hans: we have a busy day. at 10:00 u.k. time, we have the eurozone consumer confidence figures to look at. u.s. mortgage applications. an hour later by eu inflation that that we watched so closely to figure out what draghi's next ise is good richard jones -- . richard jones is going to be talk about what the fed's next move our -- next moves are. we are seeing the story play out here in europe right now. how much gas this yellen give the global economy? does it run out as soon as the hawk starts speaking? richard: at think the important thing to start with is her comments yesterday should not have been too surprising. . think they were consistent also consistent with what she said to congress. given the hawkish commentary we have had from other fed members from the last meeting, i think
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she was quite certain with the point she was making. the fed will continue to be more dovish than a lot of market commentary. also will be more dovish than what the fomc is saying. guy: let's talk about that kind of relationship. payrolls friday. you talk fed into the bloomberg. dudley. that is the first real hawk that we get. that is not for the next few days. talk me through the next few days. how are they going to vision themselves. what number are they looking for their? ere?ooking for thr what is the trade? >> they have had a good run. i think there will be some profits there. with the death
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speaking -- with the dove speaking, i think we will see consolidation in the news that we have seen in the direct wake up yellen yesterday. it will be interesting to see what she has to say as well. hans: your year is much more tuned to a central bankers are actually saying. yellen is looking at international metrics, namely the rise of oil. when you look to see what data sets she will consider, which ones are they? what is going to be driving the data side from her equation echo richard: -- equation? richard: what she is acknowledging is as good as the , the u.s.my is doing economy will not be immune from some of the international
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headwinds that are emerging from europe, japan, china and what just china.g is when she is saying is that the u.s. is not operating in a vacuum. -- china. what she is saying is that the u.s. is not operating in a vacuum. the chair is comfortable with that posture. guy: draghi broadens out the bond buying story in your. -- in europe. it is going to be an interesting end of the week. richard, thank you very much indeed. richard jones joining us. to continue the story about what technology. with it looks like this press conference is going to bring details. i guess the story is we are going to continue to see the
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best story working its way through. we will let that next team take over that. the pulse is up next with francine lacqua. from hans and i, it is been an interesting day already. i'm sure it is going to continue. enjoy it. ♪
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francine: caution on rate hikes as chair yellen strikes a dovish tone. debt and no dividends. china's largest bank has come to an -- as the traded deepens, we look at reforms. rousseff's power slips away good -- slips away. also coming up it is the auto industry's eggs recall ever. airbag -- industries airbag recall ever. -- the auto industry's biggest recall ever. ♪

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