tv On the Move Bloomberg August 1, 2016 2:30am-4:01am EDT
breaking the bank. other lenders prove more resilient. investors give their verdict in 13 minutes. fascinating moves coming from the futures market. all lot of optimism. risk on sentiment. on the of more than 1% open. giving positive exertion, numbers coming from china. we are up 1.25%. money is looking towards what is happening in the manufacturing in the u.k. we are seeing across the board a movement into some of the riskier assets. dollar a story of weakness. a currencies have been rising higher. the dollar down versus the south korean won. dollar weakness. we are banking on less chance of a rate hike.
keep an eye on oil across the board as well. brent crude up week 2%. money still moving out of the japanese bond market at the moment on the back of less thought that bond buying will go forward interview. they did not start to buy more government debt. let us get to your bloomberg first news. investors are underestimating how many times the u.s. central bank will raise interest rates this year and rightf they are probably about the pace being slower than previously not so says william dudley. investors but the chances of a rate hike i the end of the year at roughly one in three. and in the next year, only slightly better than even. ridingll merge its business with didi.
they say the new company will be valued at $35 billion. uber will continue to operate its own app in china for now. in the u.k. are set to shrink to the lowest in more than a decade as weaker economic prospects following the brexit vote dampen demands. total lending to companies will 1.6% nextore than year and another 1% in 2018. the outlook is a picture of doom that may prompt the bank of england to add stimulus this week. global news 24 hours a day powered by our 2600 journalists in more than 120 news bureaus around the world. you can find more stories on the bloomberg at top . caroline: let us turn to the corporate today. heineken has reported profit that beat analysts estimates. year on year profit margin expansion. the world's third-largest
12.6%, 1.7 billion euros. let us head out to amsterdam where we are joined by the cfo, laurence debroux. give us a sense of where we see the outperformance. we saw strength in asia and america. laurence: good morning. the really good news is that we saw a lot of strength in a number of our emerging markets. mexico,alking about which really delivered a very good performance on volume and pricing and vietnam which delivered a stunning performance again. with our tiger branch. and affordable premium brand continuing to fly. when you add other emerging markets that are more challenging, it shows the relevance of having a global portfolio. people were not expecting this
much -- the resilience and the strength of europe. the market has done well in europe. you see the conversation around beer happening in countries like france which is not traditionally a beer market. you inphics are against most countries in europe and the pressure on price is there but you can get people interested in products. qualityit is the trend, , talking about the products, you bring people to quality. that is good in terms of volume as well as on revenue. that is less pricing power. caroline: talk to us about the affects of the currency when .hen -- currency winds are likely tots be exposed if we see a ramp up in the u.s. dollar.
how were the headwinds affecting you? laurence: that is the story that will continue for the whole year and what you are already seeing is the impact in the first half. we see the impact on the second half will be larger than the first half. also because we get into the edging is fading away. that is factoring into the guidance we are giving. line, we only own a little more than half of the company. a significant operation for heineken but the less net impact is not that high. and the mexican peso as well and the u.k. pound which is playing a role. what you do see is definitely an impact from the emergency -- the emerging currencies. the good news of the end of the first half is paradoxically, the
devaluation of the nara, it is still early days but there are signs that it is bringing more liquidity into the market and that is what his next needs in africa. manus: let us pick up and continue with that currencies team. -- currency theme. you put on the books post june the 23rd. have you added to the edging on the pond? laurence: as you know there are two types of impact and the impacts are linked to exporting in hard currencies. on this, we are hedged for the full gear and also into 2017 as well. then you have the transitional into youranslating
currency of reporting and for us that is the euro and for that we do not hedge. we have given an estimate. if you take the rate today and you prolong them until the end of the year, what will the impact be? we say it would be at about 200 million euro impact on our operating profit as we translate operating profit in the various currencies into the euro. talking specifically about the u.k. pound, we are pretty much hedged for the full year. manus: let us talk about the biggest deal in your industry that everyone has been watching. bed -- ab inbev and as a.b. miller. what is the biggest threat for them in terms of margins? what assets do you hope to get your hands on? will we see more m&a? m&aence: i don't comment on
for other people or heineken. manus: this is one of the biggest repetitive threats to your business -- competitive threats to your business. you must have a position. laurence: our perspective is that we are a global business but we are also a very local business. we compete market by market. we provide the consumer with a great experience and a great product. it is market by market competition. when you look at the markets that are being combined in that merger, there are very few markets where the two of them were present. we were competing with sab nigeria and that continues under their new name. it continues in mexico as well. this is a huge and powerful company of course what we do believe that our strategy is still perfectly relevant of market, an market i
great experience for the consumer and being excellent at what we are doing. us the desire to be even better. caroline: heineken cfo. fantastic for you to be a part of us. here is what is coming up on the show next. we're talking about european banks. they were scrutinized but they fared better than expected. then come at we look at the stocks to watch ahead of this monday morning. banks and brewers. do not doubt the fed. the september hike is very much in play. this is bloomberg. ♪
manus: 7:43 a.m. here in london. let us get a bloomberg business flash. juliette saly is in hong kong. juliette: uber will merge its china business with didi according to people familiar with the matter. the new company will be valued at $35 million. uber will continue to run its own apple in china for now. sony shares have risen after a surprise first-quarter profit has been posted of $205 million.
a loss was expected. strength in its playstation division outweighed the impact of the earthquake which shut its main manufacturing site. fallen again after the hit game pokemon go dropped from the top of the app downloading charts in japan. the biggest decline in more than two decades. while pokemon go has been a social phenomenon, the tokyo-based company says it does not expect a major earnings boost from the apple. panasonic shares have plunged in tokyo after it were worded worse than it acted first-quarter earnings on friday. net income fell 64%. the firm says it plans to sell nearly $4 billion in bonds. it has hired several banks to look into the sale of 5, 7, and 10 year notes. one of china's most takeover hungry groups is scaling back. has snapped up
assets in the last few years but is now getting focused on being leaner. believe we have ample capability to get investment-grade ratings. we invest strategically and tactically. that is your bloomberg business flash. juliet, fascinating stories out there. i want to give you a check in on what is happening with the futures market. we are ramping up into the open. stress test that breezed a sigh of relief into the market. a number of improved, the likes of deutsche bank. 1.2% uptick on the euro stocks. ftse 100 up. barclays also seemingly able to manage -- seemingly able to improve somewhat.
dax, up 1.1%. look out for deutsche bank as they do manage to improve their ratio on the back of those stress test results. better than it was last year. so says citigroup. interesting groups as we build up to a crescendo at the open. the manufacturing data out of china may be helping. manus: it could have been worse. up banks are indicating 2%-3%. we will discuss that they are not created equal. let us turn our attention to policy, federal reserve in particular in focus. robert kaplan has spoken. the central bank is staying away from policy divergence. >> to be a central banker in the u.s. today you have to think globally. it is not optional.
what happens today for example in china which is why i am here visiting, can it transmit through the underlying economy is also very quickly through the financial markets as we saw in january and february when turmoil here transmitted to global tightening conditions. we have to be aware of policy divergence and also what is going on around the world. in a more global world, it can moret the united states quickly. that has to be a key part of our job even though our primary responsibility is to be central-bank are to the u.s. -- central banker to the u.s. we are minutes away from the start of your trading day. we are looking at the potential for corporate movers. heineken, we will have their numbers. the banks will be in focus. euro stoxx 50 up over 1%. frankfurt is indicated up over 1%. stocks to watch -- all eyes on
point 319. currency policy approach is the right one. the smb is always weighing the cost of benefits of intervention. the balance sheet is big enough. it still has room to intervene. this is thomas jordan, chair of the smb in a panel discussion stating again that more intervention. something the swiss do on a regular basis. littleket perhaps with a less aggression than some other central bankers. caroline: exactly right. monetary policy has been feeding into the overall banking story. germany's two largest banks, deutsche bank and -- we saw the ratio fall on fridays stress test results. while both did better than the last test in 2014, analysts
still voice their concerns regarding the resilience. let us had out to frankfurt. there joined by the head of bank research. let us start with germany and the deutsche bank. there is some improvement. citigroup noticing that at the moment. it is still at the lower end of the spectrum when it comes to the stress tests. >> i don't think that was really a big surprise. we all knew deutsche bank is light on capital. there was a bit of a relief that we now have seen that they passed the stress tests so there is no immediate cause for action. that was a bit of a relief but still not a very impressive results. i would agree with that. caroline: 7.8%. better but still not the top performer certainly with the german banks. the worst performer, the one company that clearly failed the
test. where do you see this company going? where will the capital raising help? that will be a bit of a stretch. the first ring they need to do mpl's and thethe announced they would do that. they need private capital for the mezzanine parts. maybe once that is done they can present a new convincing strategy and september. the would really resolve biggest basket case among the european banks and that would also probably help the sector. basket caseiggest in european banks. some people are suggesting that we are in for a new wave of rating. do you expect that to be the case? i am looking at coco's -- they
have rallied nearly 50% from their low point. do you expect more cocoa issuance? in terms of capital raising's, i do not think there are any immediate needs coming from the stress test. the results were pretty ok. saw not very good results from some of the banks but overall there is no real action needed. what wascoas, i think pretty important to realize is that in the stress test none of the cocoas would have been wiped out or converted into equity. layoffs another big support for the cocoa market. maybe we will see more issuance there and the banks will still need some to comply with the rules. tous: the whole objection this set of stress tests -- if we take the previous ones, they
were so easy for everyone to get through. one is dealing with an interest rate that does not exist. we are with a negative interest rate. that is a bit of a problem. what they did look at was a severe economic downturn, more toere than was realistic expect. what they should be looking at is what the negative interest rates due to the bank. this is something that the german regulator is very keen on. they will make a stress test for this. also probably put a bigger focus on this because the lower returns and lower revenue generation from the banks is a real problem for them to build capital. caroline: great to get your opinion. head of the european banking research. he will be speaking about the ramifications of interest rates
manus: good morning and welcome. this is "on the move." alongside me is caroline hyde. we are moments of a from the start of your european trading day and caroline, you have the morning brief. caroline: manus, i do. a mixed message. china's factory gauges. give a mixed message. -- wereathe the figures will bring the figures from france, italy, and germany during the show. for his managing its china business with the dominant business in the country.
wipes out in the latest dress test. -- latest stress test. ahead of that, the futures market is signaling a rebound come up .7%. the banks are doing better than expected in the stress tests that came at on friday. we are just six seconds into the open. wei, up and running. we are .1% up on the ftse 100. we are already in the green come up .3%. deutsche bank, called higher. it is still at the bottom end of the run when it comes to the stress situation, but better than last year. the cac 40 pushes up .7%, but keep an eye on socgen. they are one of the worst performers in the stress tests.
nejra is back from holiday. welcome back. nejra: i have got the imap up here. and how nice, i've been met with a sea of green, back from my holidays. we can see oil gaining after a couple bad days. and financial, closely behind, up .7%. in fact, every industry group it looks like is gaining on the stoxx 600. so, a strong start to the week. if we look at how the u.k. 10 year yield is doing, the gilt markets are just opening here. that is up just one basis point. we are at 68 basis points on the u.k. 10 year yield. let's look at the stocks we're watching this morning. i wanted to start with heineken because we got earnings today from the world's third biggest brewer that beat analyst estimates in the first half.
it also reiterated its forecast for your on your profit margin expansion and asia was a big part of the gains. now, i'm not sure about today's price because it was called higher by analysts but let's move on to the banks. ys, gaining here, even though it was one of the most 11 stressed banks. pitcher outperformed it. finally, i had to put banca monte pasche up there because it's capital was wiped out during those stress tests. guy: let's bring in our guest, the head of microstrategy. great to have you with me. ok, stress tests. was the ending really shopping there? -- really shopping there. hocking there?kin >> i think overall, the result
is positive because what you see is that there are some problems in some countries. there are problems in germany's. there are some problems in the u.k. but overall, the system is solid. is that there are some banks that have not restructured, but the contagion effect is not the one we had five years ago. now, the stress test covered 70% of assets over 50 banks across 15 countries. there were some small banks that were not covered, which are weak. but overall, across the large banks you've got only one that is really in trouble and a few that are still limping, but could get fixed. manus: caroline, you have got a bit of breaking news there? caroline: yes, we are looking at euronext. it seems to be hit by problems all of its own. they have trading issues once again.
trading has been halted in all derivatives for the fifth morning. theirseem to have technical issues resolved, but trading has been halted in all derivatives products. ist i wanted to dig into th quantitive easing, and some of the negative repercussions of this. this is what is making the banks' lives so difficult. sure, some of them came out better than expected with the stress tests, but this low negative yield world is making it a very difficult area to invest in at the moment. >> remember, these stress tests are about solvency, when we talk about bank profitability. we still have to address a lot of things. obviously, it is good to have a positive solvency picture. it is good for credit, bank bonds, and for stocks. but in the long run, if interest
rates stay at zero or negative, things are going to have a harder time making money with ordinary business, which is lending. last week, the bank of japan assessingalked about the effectiveness of monetary policy, which means central bankers are starting to realize that negative interest rates are not that great for the transmission channel of credit for the lending channel. why? if thanks lose money lending, they may want to do other things , for example, purchasing sovereign bonds and government bonds. actually, negative interest rates are not that great. over time, they can have a self-defeating affect on lending . the is what we have been saying for a long time. i want to get your opinion here. the bank of monte paschi, obviously ubi up 5%. , upbank of monte paschi
10.25%. what are the nonperforming loans hoping to achieve? >> one of the big issues with nonperforming loans, particularly in some countries, is that the legal system is very slow. it takes seven years to recover credit. it is very hard to get seven-year credited is an investment. but if you look at the underl ine, you have property and real estate. so, there is a time issue, but if you solve that, if the government makes the right reforms to accelerate the recovery of credit, then, there is real value their. so, we are active there in the recovery of nonperforming loans, but we look at each credit on a one by one basis. manus: so, you are going to judge each of those individually in terms of the underlying assets. i am keen to get your view.
around the view that deutsche bank was going to have a tough time. we have rallied 15% since then. are you looking at coco's? you think they will be more issues? give us your take. we have a fund, but we have both in the macro fund over the past few weeks, which is the fund i am running. now, why? with this test, we know some banks will raise more equity. stress testn the will have to raise more equity, and that is positive for the credit -- guy: are those the three geographies you have been looking at? germany, the u.k., and italy? >> the of, these are
countries that still have trouble. on the other hand, spain came out very solid because they have done bank reforms. of the countries that were in, italy, the u.k., and germany have had some issues, and austria. but if they raise equity, the credit of the banks, the debt, is safer because there is a bigger cushion. overall, the market has rallied a lot, but there are still some banks they give you opportunities, like the commercial banks in the periphery. some of the large italian banks. some of the spanish banks, some of which are still very solid. the bank that lost less capital in the stress test, for example. caroline: what i loved in some of your notes, negative repercussions. you are talking there about the negative yields and how much that stopped banks wanting to lend. on the bloomberg, i am showing were negative yields are training at the moment.
yields are spiking higher in the japanese data because we don't see any quantitive easing, but globally, we are tracking lower on the global sovereign bond index. you talk about corporate zombies, about banks being copies as well. arm-- being zombies as well. >> we definitely need some consolidation. remember, the eurozone still has $31 trillion in bank assets. we need more bonds and more capital outputs to create a more resilient financial system. it is like riding a car with only one wheel. driving a car with four wheels is better. it is better if you have a spare tire. the financial system recovered a lot quicker thanks to that spare tire. in europe, we still don't have it. it is a critical thing to achieve for the european union
in the next year. um, in terms of the negative interest rates, i think -- we are starting to see a shift in policy. logic wouldional lo tell you that people would become more confident and spend when prices are pushed higher. agingen we have an population, people realize they have left returns on their savings. therefore, they save more, rather than spending more. there are a lot of self-defeating issues. also, as the prices go up, which reates inequality. i think central banks have realized it is better to normalize interest rates over time. and we need fiscal policy from governments, including germany, including the junker plan, which has been talked about a lot, but we have not seen much of it. caroline: i am loving the
analogies, with punctures and spare tires. we will be talking about how the financial policies are trying to pump them up at the moment. alberto gallo, sticking with us. coming up, don't doubt the fed. we hear a september hike is very much in play. after the bank of japan disappointed investors on friday, can prime minister abe make up the difference with his 28 trillion yen stimulus plan? finally, uber hitches a $28 billion ride with didi. this is bloomberg. ♪
manus: welcome back. it is 8:14 on monday morning. the whole of europe as a little bit of a better bid. european stocks are gaining. chin a is in pause mode. you have the fed pushed into a holding pattern again as the probability of a rate hike on the back of weak gdp numbers did not do anything. and we saw those stress tests. banks thisbout the morning. caroline: it really is, manus. the second-best performer on the
industry groups today. in fact, every industry group on the stoxx 600 is rising, but the banks are some of the top performers, as well as the miners. interestingly, the leader of the pack is a portuguese bank, when the stress test did not actually analyze portuguese banks. look at monte paschi, moving 6% higher. hoping the capital raise will indeed help his company whether tehe storm. was tellingto gallo us, we need to see consolidation. keep an eye on some of the key banking stocks. we know some of this has been affected by monetary policy and we are sticking with that theme next. manus: absolutely, let's turn our attention to the fed. william dudley says he would not rule out hiking rates this year. he said "it is premature to rule out further monetary tightening
this year." speaking to bloomberg in china, the president of the dallas fed, robert kaplan, he stuck to a similar tone. >> i think september is very much on the table. but i think we will have to see how events unfold. so, it is too soon to jump to a conclusion on that. one of the things i have learned as a central banker, you have got to be patient. and we have got time to make a judgment between now and the september meeting and they want to take advantage of that time. we have two job reports between now and then and i want to get the benefit of the information before commenting. manus: meanwhile, the u.s. tenure futures have risen the most since december of 2012, the sign that the rallies have succeeded. i am just looking at this. you have got kaplan and deadly udley, both trying to shift
our thoughts on rate hikes. this is the dollar and the probability of a rate hike. the market says there will be no rate hike until september of next year. early dislocated? -- are we dislocated. are we really that far apart between the fed and ourselves? >> they are pricing some probability, about 4% of a hike in december. i think we are getting towards a point of complacency in the bond market in general with very low yields across the world. unfortunately, part of this is because, even if the fed is trying to lean against this bond bubble, there is every other central bank in the world that is easing. you got the boj, that has already. some more using. -- that is already done some more easing. last, you got more ecb qe to be
discussed in september. every other central bank in the world is easing. the balance sheet of all of them together is a lot bigger than the fed. they delivered because the have bond markets. but they cannot lean against everyone else. so, we are still in a downward pressure for bond yields and for rates. unfortunately, this leaves very little for investors. we are starting to have areas of the bond market that are effectively, in a bubble. you are buying because yields would be tighter, not because there is value. sooner or later, this ends badly. it will not end badly in one week, but it will not end well. caroline: where is it wrong to have been going into? emerging markets, clearly exposed to what the u.s. federal reserve does. we are positioned very
closely on the dollar duration, because that is where we have some better growth. so, even though everyone is looking for a safe haven, buying treasuries, buy low volatility equities, so, bond-like stocks. or even high yield bonds in the u.s. energy prices can still go down. oil is just a little bit over $40. we sell what happened earlier this year and last year when oil dropped. what happened earlier this year and last year when oil dropped. the u.s. energy sector is still in the doldrums. we have some countries which are energy sensitive, oil exporters, or commodity exporters. so, these china satellites and energy exporters are still vulnerable. they have rallied a lot, but we are avoiding them. we focus on countries which have a diversified growth model.
they don't only export energy. think about sri lanka, export tea. chinaina was part of the train. these are countries that people usually don't look at, but they are a lot more resilient if you have an energy shock. they are not one trick ponies that focus only on energy. the countries that focus only on energy will have trouble, including some of the middle eastern countries. saudi arabia for one, which has to restructure their growth model. manus: alberto gallo, staying with us. up next, waiting for abe. after the bank of japan disappointed investors on friday, cam prime minister abe make up the difference? we discuss that next. this is bloomberg. ♪
caroline: welcome back to "on the move." we are talking about japan now because prime minister abe's stimulus plan to revive the sluggish japanese economy has set him on a path. the nation's market crashed in 1990. details of the plan will be announced tomorrow. investors were disappointed by the last action of the bank of japan on friday. the yen decidedly stronger since friday's stimulus disappointment. yields as well are spiking. manus: speaking to me this
r. yen, and he says the announcement will not have a major impact. >> it has all been incorporated in the markets. so, when the announcement takes place, i don't think it will any ofmajor impact on the market. rate willlar slowly appreciate. is joiningrto gallo us now. ibara, great value for money. and abenomics is not broken, a lot of stimulus is already in the price. my question to you is, this fiscal stimulus, could this be the vanguard for global policy
response? >> i think there is a slow shift in the understanding of policy. in the beginning, after the crisis, people thought -- central bankers thought qe would solve everything and that is what they told investors. the ecb was a little more honest, and the bank of japan also said qe. all the economic problems you have. that is not true. qe has put us in an infinite qe trap, and it is starting to have negative effects on the economy. negative interest rates push banks to be more conservative, push people to save more rather than spend more. now, central banks have understood that there are some collateral effects. and what we are trying to do is to have more fiscal policy, governments taking some of the burden. monetary policy should not be the only game in town. so, you have some spending. and the spending is to go to everyone, not just to the people
with asset. qe only benefited rich people because they had assets already, not young people or part people. if you great infrastructure investments and -- if you create infrastructure investments and jobs, consumers will feel like they are in better shape, and they will then, spend less. you need to create a long-term sustainable prospect for people. if you are just spending and splurging money, people know the government is indebted and the save martmore. consumers are smarter than central bankers think. but we are near a shift. we can have itin the u.s. after elections. hopefully this shifts some of the weight from central banks and will help qe to work, finally. manus: i like that line, "consumers are smarter than
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♪ to the couch where you at? ♪ ♪ show me the latest medal count♪ ♪xfinity's where it's at. ♪ welcome to it all. comcast nbcuniversal is proud to bring you coverage of the rio olympic games. "on the move." click welcome back to 30 minutes -- >> welcome back to "on the move." every industry group dating on the stoxx 600. ftse 100 up .6%. cac 40 trading higher. nejra, yet the breakdown. nejra: caroline, we have been talking a lot about banks. i want to go against the grain and show you one of the biggest italian leaders have been leading european banks hire as these test results show most of the tanks are at a
-- aal level of capital few look at the list of the most stressed banks, ref eisen comes in first. looking at heineken, profit heat analyst estimates. i guess the reason we are seeing heineken fall at the moment is of a reported sales growth that missed expectations. key regions like africa, russia and the middle east, the ceo said the brewer might cut jobs and investments in africa and the middle east. i am looking at morrison's. all of these three are some the worst performers on the stoxx 600. more since down 2.7% -- morrison's down 2.7%. it cut 80% of the process of 1045 products -- it cut 18% of the process -- of the products
of 1045 products. caroline: the price war goes on in the u.k. banking error. uber has announced it will merge , the leading taxi hailing service in china. it is estimated to be $35 billion. let's get out to lulu chen out in hong kong. -- $35r, the chinese billion. is it over calling it quits? -- is it uber calling it quits? debate on whether they want to call it a merger or acquisition. it does look like an acquisition where dd will be buying uber china and merging into the same entities. uber china will be taking a 20% stake. that is the amount of share
their asking for. didi will be investing $1 billion into the global entity. caroline: it seems to be being interpreted by others that this is basically uber holding up his hands and reeling -- realizing it could not win this competition. your travis, the chief executive -- what is driving this for uber? lulu: that is true. if you listen to him a year ago, travis was saying this is the most important global market. what our sources have been telling us is the investors behind uber and didi have been pushing the deal. it has been a battle for both companies.
$2r wasting more than billion in china. it has been a battle of capital, subsidies. very heavily subsidizing both companies. just a week ago, the chinese government issued a new -- theyon, legalizing have been subsidizing rise at a cost lower than -- at a price lower than costs. that has to stop. the business model there than pushing for probably will become to an end. -- business model they have been pushing for probably will come to an end. caroline: it seems you cannot beat them, you have to join them. lulu chen in hong kong. thank you very much indeed couldn't manus, you have breaking news out of asia. manus: a little bit of news from mitsubishi.
at 188.9 billion. ¥225 billion. this is the latest breaking news from mitsubishi. they're keeping it full-year net income target intact, ¥850 billion. they will pay a full-year dividend of ¥18. that is a pretty big mess for mitsubishi that's pretty big mess for mitsubishi -- pretty miss for mitsubishi. patient pmi. they headed in opposite measures , both gauges suggest deterioration in china's manufacturing sector. he is with us.
when we look at the china story, it is amazing how china has taken a backseat. -- backseat in terms of our risks. here we are, it looks like is there a case for more stimulus from china? >> there is a case but there is no money, because if you think -- it is not that much. a lot of people talk about chinese reserves. if you look at the gross number, you are talking about 30% of gdp grew -- of gdp. in reality, if you think about how this money has been spent in the last eight years, china -- while other countries were deleveraging, china was pushing the fiscal stimulus. .hey doubled private debt they increased private debt even more the last six months. if you think about this money, where it has been invested,
there is over investment, overcapacity. there is losses here it and banks -- there is losses. document the losses of the banks, the appeals in china, .ouble digits, 10% to 15% the banking system is two times gdp. unit with numbers which are very close. if you're one of the 10 people in china who knows the real numbers, we have some estimates. -- then you know you cannot go and splurge. you are going to have many stimulus. whenever there is a slowdown, you are going to have a little bit of stimulus. manus: you have run your numbers. everybody else is trying to good what kind of slowed him desk slowdown in china would precipitate it will impact -- slowdown in china would precipitate a real impact? the run rate of growth
is lower than 6%. the question is how do you get their? there is a faction in the party that wants to do more stimulus, short-term, but a little bit shortsighted because they have already committed a lot of debt. there is another part of the party that wants to do more comediesto state own -- state owned companies. productsh management where other people have invested. we are thinking about -- our view is of a soft landing. a lot of people think about the china bubble bursting. it is wrong, because the chinese people have a lot of savings. they are still -- even if -- there is a lot of private wealth that can be reinvested in the country. the industrial part of china, commodity consumption and a demand, that is going to be week
again. jenna consumes half of the worlds metals. -- china consumes half of the worlds metals. jobs in theat have trade, chinese industrialization of the last 10 years, they do not diversify the growth mark. over the past 25 years, exports .rom china grew from 3% to 33% it takes a lot of time to readjust your folio to become so dependent that at some point china does not want your metals. cargo -- caroline: give us your and a-- a depreciation willingness by china to let the currency we can on whether it will remain strong -- currency can -- next line >> the market was work -- the market was worried about
last year. whether we'll see a depreciation, it will depend on politics. in a base case, where going to have a democratic when, will have a controlled depreciation that you have a republican when, you'll have a more aggressive depreciation because the republican candidate has a very and tenderness -- antagonistic stance with china. the reaction can be harsh. debt that china borrowed is depreciation. manus: it is great to get your perspective on the world. thank you for joining us. we got a little bit more. next, you know what caroline? white hundred carried away? caroline: it is london. we hear from the ceo -- indian corporate the becomes the first
soon enough. let's get out to the bloomberg business flash with juliette saly. .uliette: caroline, thank you sony shares have risen after the company posted a surprise first million.rofit of $25 analysts we surveyed were expecting a $380 million loss. -- the main manufacturing site, the digital camera image. nintendo fell in tokyo after the hit game pokemon go dropped. last week shares posted their biggest decline in more than two decades. while pokemon go has been a social phenomenon, the company says it doesn't expect a major earnings boost from the app. that is your bloomberg business flash. caroline: juliette, thank you very much. there is a very busy week ahead for the market. today we continue to get the pmi manufacturing data out of the
eurozone. we are minutes away from the italian number coming out. 51,ave seen manufacturing and the u.k. comes out at 9:30 abeid details from shinzo -- stimulus plan. thursday, bank of england releasing a rate decision and a rate cut from the central bank. they'll be the first in seven years. it is payrolls friday. the u.s. is expected to have added 175,000 jobs in the month of july. manus: where have had that breaking numbers from the pmi .hat comes in at 51 -- 51.2 the survey was for 52.5. this goes to the very heart of the issue in terms of why you have nonperforming loans -- a tough economic environment. pmi comes in -- it is still expanding, but it is less than the market had anticipated.
let's bring out alberto gallo. it is a big win. the bank of england is front and center. what kind of package to you think will get? a rate cut plus? alberto: more qe. this time probably focused on the corporate debt. sterling issued in across u.k. why? because the ecb is doing it. these measures buying assets linked -- more affect on the real economy. mark carney in the last speech he talked about being careful about the profitability of banks. i don't think they will cut rates too much. they will cut rates wanted to times and they will keep them positive. they will not go into negative territory.
if they going to negative territory, banks start lending less. that is self-defeating. also draghi started talk about -- there is a shift toward being very careful about the effects of negative interest rates. now central bankers know that it can create a qe drop. they prefer buying assets. even buying assets -- not the perfect measure. caroline: sticking with that, if you're looking at the yields, crushing low for the united kingdom despite losing some of the credit rating. how much has qe helped? yields are currently at record lows. when you're looking at the 10 year. -- really help the overall economy? alberto: quinn central banks
talk about this, the market moves earlier, that goes up with the fed and ecb. part of the action is already priced in. they will move even lower. you'll see a conversion of guilds toward the sovereign. the other thing that will move lower is sterling because it export valveajor and the major economy even though the u.k. is not really a net exporter. sterling can move still a lot lower. it is still fairly valued compared to slightly below the equilibrium, versus the dollar versus other currencies. it will move lower of the bank of england once it to move lower in an orderly way. onus: let's see what happens thursday. alberto gallo, portfolio battle -- fully manager at algebras, thank you for joining us.
france. 49.5, this is 51.5 in june. the estimate was for 51. were in contraction mode -- are in contraction mode in france. missed on the estimates. versus 52.9. 9.4 disappointing set of numbers -- -- my me, that is apologies, that is the wrong -- that is the russian index. let me correct myself. france manufacturing, 48.6. that comes in low -- that comes in below. the data i gave you previously was russia. caroline: let's have a look at how london is -- asian issue is post-brexit today. -- becomes the first indian
corporate to issue a reprieve to nominated bonds. joining us now is the killer --si, the ceo -- the kill nick kill -- denominated in their own foreign currency. is this because they are worried and rate hikes going forward? we see more issuance in their home currency here in london. >> good morning, today has been a landmark event for indian finance and the london stock exchange good for the for the first and ever and indian corporate has been allowed to issue an -- in indian rupees a bond. where proud they chose london. it is a trend you will see much more often because the reserve bank of india has been keen to raise finance to fund and perception investor into india but to do so anyway where they managed on exchange risk. him in london we have very deep
experience of working in local currency cap markets, we have the largest market outside of china. we have a lot of experience. ofery long tradition supporting him for such a finance. come --into a census to further issuances to come. caroline: is a going to be dominated by india and china. where's the competition versus london? >> india and china are two of the largest economies in the g-20. india is the fastest growing economy in the g-20 this year. china such as green finance is also a major source of issuance, you can see issuance coming from right across asia. a couple of weeks ago we posted a fund from vietnam which was
raising around a billion dollars investing in the viennese markets. london is a national center. a complementry timezone. we have strong revelatory integrity, adjusted by investors. that is the point of chairman made in a speech this morning. we have a long history of supporting local currency markets, being the largest foreign exchange in the world. manus: i like to broaden the conversation if i could to the heart of the issue facing the city and your own business. $900 billion a day has cleared in london. the french are making it very clear that clearinghouses can a longer be situated in france. the government of the back of france -- what are the risks here for your business post-brexit?
nikhil: what i say about the markets, i think that today we london.n that -- in where working in global markets, global multicurrency markets from currencies all around the world traded. that is what our major uses seek and that is what they -- they are able to do that efficiently and effectively in the chest the framework here. i cannot see anything really that would change that demand in the globaling environment, trading dollars, euro, yen. now rupee and remedy as well. manus: nikhil draghi--nikhil draghi thank you so much. caroline: it is coming ahead of estimates, 53.8, expensive for the german juggernaut. in asia number when it comes to
francine: don't rule out september. a rate hike is possible next month. markets underestimated the fed weekend. pesky watch out the letters stress tests. we'll talk to the director general of the country's banking association. they $5 billion deal with didi said to move -- set to merge with china's uber business. ♪ welcome to the