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tv   The Pulse  Bloomberg  May 9, 2016 4:00am-5:01am EDT

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saudi appoint a new oil chief. will they reach a new record for output? brexit baffled. david cameron says leaving the eu puts fundamental national interest at risk. we will hear from boris johnson later this morning. and thousands protest in athens after the national creditors meeting in brussels. in greece braces for another summer of discontent.
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welcome to "the pulse." i am mark barton. francine is at covering london city week. she will be hosting a panel on the economy with vito constantia . and charles evans. you can see that here live on bloomberg just after 10:00 a.m.. let's check in on the markets after two weeks of decline, stocks of open higher helped in part by the stronger oil price. up by onelondon are third of 1%. the pound is lower against the dollar. growth forecast will be published on thursday as with the latest u.k. interest-rate
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decision. is up by 0.9% at $45.78. let's hit the latest bloomberg first word news. is here.ic >> crude prices are on the rise after wildfires in canada knocked out more than $1 million a day of production. the company is's biggest energy and have declared force majeure on supplies from the region. that's a provision protecting companies from contracts a go unfulfilled for reasons beyond their control. german factory orders picked up in march a strong local trade helped upset a low end domestic demand. orders rose 1.9%. the reading which is typically volatile compares with the median estimate with an increase of 0.6%. china has reported in modest
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stabilization exports as well as the first back-to-back gain in foreign reserves in two years. the world's largest currency board rose $70 to three point two $2 trillion in april. the data suggest that the economy is studying amid slowing growth. china's meet leading communist party mouthpiece has a knowledge the risks associate with the risk of debt. miss at high leverages the original sin that leads to risk in the foreign exchange market, stocks, bonds, real estate and bank credit. the article that started on page one of the paper seven nation needed to face up to its nonperforming loans. 's mostf the world influential bond investors and the head of the new york fed are signaling that the u.s. central bank is on course to raise interest rates even after poor interest-rate job data -- poor april job data.
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despite the u.s. only adding 160,000 jobs last month short of the 200,000 that have been projected. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. you can find more stories on that bloomberg at top . saudi shakeup. the nation has a new oil minister policy and market share is likely to stay the same. the newly appointed khaled a close ally of the deputy crown prince. tonn kerry -- he has vowed maintain policy. how meaningful is the change? he's maintaining oil policy as it is. it's a shift in personnel but not an policy. you have to see how that the
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saudi's react to global market conditions as we move forward from today. mark: how does this fit into the greater overhaul of saudi arabia? >> it does significantly. to us twice spoken and has indicated he would like to wean the country from oil and is taking steps to do that. he has discussed oil policy, he has a new cabinet in place and this is all moving forward and his idea of where it will be envision 20 30. what we need see now is how they address the economic issues confronting the country. >> it's not going to be a straightforward transition, is it? >> no. the transition and personnel is the easy part. it's the addressing of the slower economic growth to get saudis working. it's one thing to have people in
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new positions and energized ministries but they still have to address the fundamental challenges that the economy faces with low oil prices. as i mentioned earlier the slowing economic growth that has accompanied that. >> thank you for joining us. let's bring in the bloomberg news him a managing editor for energy and commodities. he's been part of the wallpaper for two decades. >> it's a huge change for everyone involved in opec. he's really been a fixture of the global oil scene. the man is 80 years old but i think it's still quite a shock for a lot of people. >> but does the new minister really change policy is glenn was saying, probably not? >> there is a lot of continuity here. ali al-naimi has been for 30 years and has risen to the top and taken his next step to oil minister.
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i don't think there is a massive but a new person always to jews its style and maybe eventually substance. i think he's obviously close to the deputy crown prince and will reflect those imperatives. >> does that mean he'll take a tougher line with his opec colleagues some say he was close to a deal with russia in doha -- hist the prince was image was waiting in the background and that could have swayed it. >> that's right. there's no about that his intervention was one of the reasons why the deal didn't happen. but don't forget that the architect of this whole oil policy that saudi arabia has of maximizing the market share -- he was the guy who put it into place in november, 2014. i think continuity is the watchword here.
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mark: what does it mean for the oil price? we are at mid 40's now. >> the oil price now is don it by supply constraints in the market. these fires and canada have taken $1 million per day out of the north american market which is a drop large amount driving prices higher and that's to existing method nigeria whether blowing up pipelines again with the economic collapse is taking its toll on production. that's what interesting that we are seeing supply constraints elsewhere that's one reason to suspect that saudi arabia production will continue to creep up and will set a new record. iraq and in the meantime, just keeps pumping and tries to reach its targets? east producers across the board are putting more oil into the market. iran's oil production is coming back fat much faster than many predicted and saudi arabia we expect to see a new record above
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10 million barrels per day the summer. the middle east producers are really winning from this. >> does that mean a freeze is not going to happen? >> that isn't a need for a freeze right now. >> is there a level? at what point do shale producers start -- stop returning. >> that's can be one of the most interesting things to watch. it's of analysts would say above $50 that you see some of the shale barrels come into the market but this is untested territory. we never been in a boom and shell production before so it will be of a vital interest analyst to see how quickly those barrels come back. >> will kennedy in london. stay with the pulse, coming up plenty. including carney, lagarde, cameron, and johnson. we will look at the big hitters speaking out this week on the junet debate, plus is
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line. the little charts of the rate rise next month. bill gross disagrees. we will ask who is right and where next for the global financial services industry. francine lacqua is live at the start of london's conference.
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mark: that skip the bloomberg business flash.
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here is nejra cehic. -- toal has agreed to buy expand its clean energy operation. the offer represents a 40% premium. nickel and lithium batteries for industries including transportation and civil and military electronics. the owner of the world's biggest shipping line says negative interest rates are hurting the industry by delaying a badly consolidation.f the ceo says that the monetary policy environment means consolidation to be much slower because it's easy for banks to keep week shipping companies above water. it's the latest example how they are distorting markets and potentially slowing growth. jaguar land rover has reported an 11% decline in sales. the jaguar brand saw sales jump
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almost 50% on demand for its new sedan. >> the airbag recall may increase to 118.5 million worldwide. that's after last week's order by u.s. regulators compounded the biggest safety crisis in the history of the auto industry. the expansions may result in $6.2 billion of additional cost. disney new shanghai theme park is proving popular even before its official opening. they held a trial run ahead of the launch and pulled and tens of thousands of fans. disney is hoping the 5'5" billion-dollar resort hope it cap into china's glowing middle-class which is the bloomberg business class. >> let's talk brexit. mr. david cameron has evoked memories of wartime leaders winston churchill. in a speech and at persuading britain's to vote against leaving the union. he said the u.k. is more secure and prosperous in the eu.
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>> the united kingdom is stronger, safer and better off by remaining a member of the european union. >> better off, certainly. we're part of a single market of 500 million people which britain helped to create. our goods and services which account for 80% of our economy can trade freely by right. mark: let's welcome our guest in fixed incomethe investor of j.p. morgan asset management, nicholas, thank you for joining us today. untilhan two months to go the referendum. the early market jitters have passed but if you look at the chart over my shoulder its neck and neck. 41-40 when you look at that name. andundecideds could sway it
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accountability pushes it in favor of the remain cap but market concerns have eased from those heightened levels in mid february. >> i think they have. eight weeks to go or something until the vote. a lot could happen then and there will be a lot more debate. the market will be a lot more excited as we get closer to the actual event. mark: how does that affect bond investors. initially we saw flows out of that now we saw flows back into that. how are the next few months going to pan out? >> there will be a huge beneficiary whatever. reality is that what bond investors do is take a step back. you look at the growth conditions in the inflation conditions and they are absent. this isn't a brexit comment but the u.k. is slowing when you look in virtually every economic indicator.
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that's a good environment. brexit, the bank of england is down, not up. >> you really believe that question my >> global conditions. see with have in this year. we had a huge easing from the bank of japan. huge easing from the ecb. surprise cut from the reserve bank must really a week ago. so the u.k. starts a look a little like the odd man out. >> so we shouldn't put too much related on referendum slowdown concerns. there are other concerns which you say could and should select sway the bank of england. even if we do stay in the eu. >> the reality is that the u.k. is not an economic island. it's part of the global economy. when you look at what is happening to the global economy, it is slowing. ever -- other central banks
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recognize that and they have eased policy very aggressively this year and the reality is that there is probably more to go. >> are you just talking a interest rate cuts or is it a reappearance of unconventional measures. >> is probably all those things. there's a limit probably to how low interest rates can go how country does cover both central bankers are reducing interest rates for tops and never doubt the creativity of central bankers. the reality is it could be more qe or indeed other things. >> this week is the cause of the inflation report. this week the central bank announced its latest rate decision. some are saying we could see one or two votes -- or as you say a cut. what's important is how mark carney gets around this referendum. some say he's been too political, he says he hasn't. how is he going to try to debate the referendum.
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he will certainly be quizzed about it when it is such an uncertainty. >> the reality is that the bank of england publish that inflation report. it's a tremendous document and that's the economic rationale for whatever rate decision they made. underpins the forecast going forward. maybe the bank are lucky that may is an inflation report month and that will provide the economic evidence for the decision that they make. nicholas staying with us. up next, don't count out the fed. --nings from the world's world's most influential bond traders fall on deaf ears as u.s. rate hike expectations remain muted. should investors listen? ♪
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>> i'm not so sure that june is out. , weeard from stan fisher heard from williams in san francisco and they all seem to get it. they also to know that at some point they should be raising interest rates in order to preserve a semblance of profitability for savers and the like. the most influential bond investors as well as the head of the new york fed are signaling the u.s. central bank in on calls to raise rates but markets are not listening.
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despite those warnings from bill gross, mohamed el-erian and mark easel and william dudley. markets are pricing in a single fed rate hike this year and not until december. with me is the international chief investment officer at j.p. morgan asset management. 8% is june. 22% is july them a 35% in september. 37% november. 52% is when we go above 50%. are you more on the fed side or the market side? >> i'm with the market on this but i like the summers and i think they're high in terms of what their pricing in for a rate hike. >> if you think with the fed want to do every meeting has to be a live meeting. has to be too -- two way. they done the right thing. when you look at the trajectory
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of the economic data releases in the u.s. -- mark: the economy has been slowing for three quarters. >> they seem eager like bill gross. he verbalizes it well. they seem eager to get further away from zero. >> they do but that's only certain committee members. if a big committee there. not all numbers are equal there. so it comes back to the data releases. think of the justification for raising rates when an employment growth is lackluster. when economic growth is lackluster. it's not an obvious thing to do. >> wage growth picked up. in friday's jobs report. thing in the right direction on an annual basis. >> it's going in the right direction but it is still woefully low. if you think about where we are on the economic cycle it's closer to the end than the start.
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wage growth should be significantly starting -- stronger than now. mark: and yields at the beginning of the year forecast to be significantly higher than where they are now but on the 10 year we are at 1.77% where we finish the year. what is her u.s. bond strategy right now. >> 10 year treasury's finish the year in and run 1.5%. part of that is the back trough of we growth in week inflation. the other is that international backdrop. take every government bond in the world, rank them from high yield to your oleic -- low yield and 85% yield less than a 10 year treasury. internationally they look like a steel. >> and high yield is a message or banging as well on the european basis and in the u.s. as well for the >> high-yield looks great. in the u.s. part, he probably get rid of the energy. that's really a coal on the oil next but when you look
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energy its pricing in innings aggressively hire default rate. the real standout is in europe. when you look in europe, an economy growing ahead of the u.s., they have high-yield bond around 5% with good value. save your viewpoint for european peripherals because we will talk about greece in the next section. to the fed you are suggesting doesn't move. the bank of england you're suggesting could cut. the ecb carries on, the boj carries on. are we looking at a recession? >> in the next year or two. >> looking at two things. i signaling the body just outlined that in a convincing way. the second is yes. if you look at economist expectations of a recession in an run 20% now. as you look forward that probability will rise. let's face it, were closer to
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the end of this economic cycle than the beginning. >> will stay there. will come back to you. j.p. morgan asset management team. up next, the grace and good of the city with francine lacqua. the future of global banking. ♪
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[ soft music ] e.t. phone home. when you find something you love, you can never get enough of it.
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change the way you experience tv with xfinity x1. mark: welcome to "the pulse." i'm mark barton. let's get the bloomberg first word news. here's nejra cehic. nejra: saudi arabia's new oil minister says the kingdom will probably keep producing crude at near record levels as the world's largest exporter sticks with a policy of defending market share. the chairman of the state producer saudi aramco took over from long-standing oil minister this weekend.
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crude prices on the rise after wildfires in canada's oilsands region knocked out more than a million barrels a day in production. the country's biggest energy companies have declared force majeure on supplies from the region. that protects companies from liability of contracts that go unfulfilled. german factory orders picked up in march, as strong global trade in domestict a lull demand. orders rose 1.9% from the prior month. the reading which is typically volatile compares with an estimate of 0.6% in a bloomberg survey. china has reported a modest stabilization in exports as well as the first back-to-back gain in foreign reserves in years. $7 billiony or grows in april. dana suggests the economy is studying amid slowing growth.
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global news 24 hours in a powered by 2400 journalists in more than 150 news bureaus around the world. mark: thank you. london's conference gets underway this morning with the future of the world financial markets top of the agenda. francine lacqua is there with a guest. francine: thank you so much, mark. we will be talking to charles evans of the fed. to say that pleased the global chief economist at hsbc joins us to talk about monetary policy. joiningu so much for us. are we finally going to have diverging economic policy? is the fed ready to raise rates? >> the fed has already raised rates once. the question is about how much more can it raise them and over what pace. i think it is aware of the risks
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associated with raising rates for the rest of the world. we've had fed governors over the there'ssuggesting that still the possibility on the table, but we've got several weeks to go, another set of payrolls, and there are risks out there. francine: it is unclear whether june is a live meeting or not. mohamed el-erian saying the markets are not taking it seriously enough. only's a 10% probability that something will happen in june. does it make sense, raising in june given that we have the u.k. referendum just a couple days after? janet: the referendum is one factor that could potentially impact on markets if there were a vote to leave. i think we need to bear in mind, they made it very clear, they are looking at global data. that means u.s. labor market data and u.s. inflation data,
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global activity data, global financial markets, and the exchange rate. if we get to june and the dollar is where it is today, and none of those potential risks have destabilized financial markets, the fed could still raise rates. what happens to emerging markets? say that market expectations of a rate rise aren't adjusted and so the market is taken by surprise. are we seeing huge outflows? it is unlikely that the markets have not priced in a rate rise. if the data has not steered the markets in that direction, it would be very unlikely that we would get a kind of bank of japan style from the fed in june. francine: you mentioned boj. what will they do? it seems that monetary policy in asia seems to be working better,
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at least they are trying to be more experimental. still in asia, there is scope for easing. now that expectations on the fed have been scaled back, we still think there's further scope for rate cuts. we had one from the reserve bank of australia. we could even get one from korea. as far as what the bank of japan does, they surprise with negative rates. they surprise by doing nothing at the april meeting. we still think the bank of japan could deliver more easing. francine: what is the biggest risk out there, monetary policy mishap or china? janet: there are always lots of risks. i think the fed is going to tread very cautiously. they see what happens to every central bank that tries to and has ended up having to reverse policy.
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the fed doesn't want to make a policy ever. they are always going to err on the side of caution. as far as china is concerned, that was a risk over the last six to nine months, particularly the chinese currency. seen chinaly, we've does still have some conventional stimulus. some stabilization in the china data, though the trade date of this morning was disappointing, but we are seeing infrastructure investing pickup. the question is still, is it short term or setting up further problems down the road? francine: china, what is the in game for the pboc? could we see a world where they put as much stimulus and go to the zero bound on interest rates? not forecasting that china goes toward the zero bound. it is not just about the policy side.
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a lot of what is happening at the moment is putting a floor under the growth slowdown, while they put in place a lot of structural reforms. some of those are in the financial sector. we are seeing progress on the rmb. we still need to see restructuring of state owned enterprises. we need to see welfare reform coming through. the pboc may have to do more, but at this point, further modest easing coming through from the pboc. francine: janet henry from hsbc. mark, back to you. janet and i have to go on the panel where with all be -- where -- we willjoined by talk about the impact of negative rates on countries that have put him through. mark: looking forward to that panel. we will speak to you later. up next, china's stocks capping their biggest two-day lost since
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april. what is spooking investors in the world second against economy? ♪
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a bit of a rally going on in germany. the dax is up by 1.4%. gain int a 1.5% stockholm. let's get to the bloomberg. nejra: we are seeing european stocks rebounding, looking at the stoxx 600, rebounding from
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their worst week since the february selloff. on at the600 up bang moment. it is tech and health-care stocks leading the gains. most industry groups are heading higher. the one that isn't is commodity producers, the worst performers. this is after we've seen losses in metals prices. look at what is happening to copper. this has been driven by china's imports in copper slumping from the previous month. the copper price to its lowest in almost a month, extending its worst weekly slide since november. one analyst saying metals are in large-scale correction after a recent rally. the shanghai composite has suffered its biggest two-day loss in 10 weeks, its lowest close since march 11. this is on that disappointing trade data that we got out of
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the weekend. fellts in dollar terms 1.8% in april while imports dropped for the 18th month in a row. the people's daily talked about the country's rising debt. a lot concerns fueling the selloff in china. mark: thanks. nicholas gartside, j.p. morgan asset management, that is something you can't get away from, is it? nicholas: when you look at china, they are in this period of readjustment, trying to shift from infrastructure heavy to a consumer heavy economy. that partly explains that huge rise in debt. that has to be managed. it is probably a more longer-term problem. mark: how concerned should we be by today's trading data, imports and exports declining? is the economy stabilizing? nicholas: the economy is
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stabilizing but at a much lower rate of growth. in reality, it is a reflection on global conditions as opposed to conditions within china itself. china needs global growth. it is a very export-driven economy. without global growth, it becomes quite tricky. you are suggesting, global growth isn't firing on all cylinders. nicholas: global growth doesn't bail them out at the moment. pick any country in the world and it is either in recession or very slow growth. ultimately, china will have to fire its own internal engine. they are just some ways from making that readjustment. ultimately china wants to look like the u.s. economy or the u.k. economy which is built on consumers. navigating that transition takes a while. mark: in the meantime, the japanese are pausing for the
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time being. time just a matter of before they press the unorthodox button once again? nicholas: we must give credit to the bank of japan. the moves they took in january were simply extraordinary in terms of the amount of stimulus they provided. maybe the market was just a little bit ahead of itself, expecting such powerful action so soon. the next meeting is the one that is in play. what the bank of japan did was downgrade their own growth and inflation forecast. they've really set the market up for some more easing. mark: do you expect that easing to weaken the yen? to, but: it is likely in essence, it is relative to what happens elsewhere. one of the big changes we've
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seen recently is europe. europe is a beacon in the global economy, a standout in terms of economic growth. maybe it is more japanese yen weakness relative to the euro. mark: does europe remain the beacon? one quarterly growth rate of 0.6% doesn't make a summer. nicholas: it doesn't, but he wrote is -- pick your number, 6, 12, 9 months, behind the u.s. in terms of where it is in the economic cycle. ecb easing happened much later than easing in the u.s. or the u.k. europe is seeing the fruits of that easing now. the ecb probably eased more later this year as well. mark: nicolas, stay there. more in a second. up next, thousands demonstrated in greece as the government considers pension and tax reform. will the changes be enough to
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appease the country's creditors? we are live in athens, next. ♪
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mark: let's get the bloomberg business flash. to buytotal has agreed
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french battery maker safed in a 959 euro deal. offer50 euro a share represents an almost 40% premium to saft's closing price. the owner of the world's biggest shipping line says negative interest rates are hurting the industry by delaying consolidation. the ceo of moeller-maersk said the environment means that consolidation will be much slower because it is easy for banks to keep week shipping companies above water. an example of how negative interest rate are distorting markets. disney's new shanghai theme park is proving popular the for its official opening. the company held a trial run and pulled in tens of thousands of fans. disney is hoping the resort will help it tap into china's growing middle class. that is the bloomberg business flash.
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mark: here are some highlights for your week ahead. eurozone finance ministers holding meaning over releasing more aid to greece. tomorrow, the west virginia democratic and republican primaries. wednesday sees brazil's lower house of congress vote on the impeachment of president rousseff. thursday, a bank of england rate decision and quarterly inflation report. u.s. retail and consumer data. in athens this weekend over pension reforms for greece. it comes as the imf and euro area finance ministers are donating possible debt relief measures. let's get straight to athens and speak to vassilis karamanis. just explain the significance of today's meeting. >> hi, mark. first is we're going to determine whether there is any
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progress to get greek debt relief. the finance minister will try to assess whether his european peers are meaningfully looking to offer some debt repro filing on greece. the second issue is whether greece will be asked to legislate a set of contingency measures around 3.5 billion euros on top of the 5.4 billion euros that are already passed through legislation in the greek parliament. given that the greek parliament is already crossing many redlines, finance ministers have said that it is almost impossible for the current government to legislate this safety net of measures. he will try to convince his peers to have the safety to be implemented if the first set of measures is proved ineffective. whether creditors will ask for that to be legislated, maybe the
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current coalition government will be under greater duress. mark: does that mean we could be facing another referendum or election? greeceould be back to are too. it is possible. i don't expect today's meeting to have any sort of agreement. we are looking towards may 24. the thing is, if we don't get a may, given end of that europe goes into brexit mode, maybe the greece problem will roll down to july, where greece has payment needs that it can't meet without disbursement of further financial aid. there could be a repeat of last , whatevera in july this government will surprise us once more. mark: thanks for joining us, vassilis karamanis in athens.
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gartside, chief income officer at j.p. morgan asset management, joins us. this is the greek 10-year on my chart. approaching we were 13% levels. levels spike was the 37% of 2011, 2012. don't seem to be reacting as they did back then. are we immune to greece, dare i say it? nicholas: i think markets are a lot more immune to greece. when you look at the stock of private public hands or hands, it is a lot lower than it was. if you look at things like the banking system, greece has a lot less interlinked than it was in 2011 and 2012. greece is a lot more revamped
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certainly than in previous years. mark: would you expect a deal to be reached in the imf? it clearly is at odds with some other creditors. will a deal be reached by july when the payment is due to the ecb? nicholas: when you look at the history of greek negotiations, they seem to be always played out in public. they seem to be fairly protracted. they always go to the wire. may may deadline -- a deadline probably isn't realistic. outquite sure it will play right to the wire in july. mark: you like a referral government debt. is greece including on that or are we focusing on spain and portugal? nicholas: we are mostly forecast -- focused on spain, portugal,
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italy. when you look at those countries, you've got a few support systems. on a relative basis, they have positive yields in a market worth 30% to 40 present of government bonds have a negative yield. spain and you look at italy in particular, they are economic success stories. spain one of the fastest-growing economies in europe. that has a budget deficit is the envy of europe. mark: it has a debt load though that is and the envy of your. nicholas: and we will see how that is reconciled. is theortant thing deficit is very low. underpinning all those countries, the ecb are buying bonds every day. mark: so we shouldn't worry about spanish election. spanish has stayed relatively the fact that of
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spain hasn't had a properly functioning government since the election in december. nicholas: when you look at the performance of the spanish economy, it is stellar. outside of ireland, the strongest growing eurozone country this year. the other part of it is what the ecb are doing. you've got net negative supply this year. the ecb is sucking these bonds out of the market. 1% by thed easily be end of the year. fixednicholas gartside, income cio at j.p. morgan asset management. "surveillance" is next. tom keene is in new york. francine will be hosting a panel on the global economy with the ecb vice president and the president of the federal reserve bank of chicago, charles evans. that is at 10 past the hour. european stocks have opened the monday session higher after two
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weeks of losses. it is sunny in london. i don't think it is going to last. ♪
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tom: names making news in the news this morning. the great divide over what the fed will do. erik nielsen and unicredit on janet yellen, central-banker to the world. china talk the talk of a weaker yen and yuan. and a generational change in riyadh. the mystery that is saudi arabia's new oil policy. good morning. "his is bloomberg "surveillance from new york. '


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