tv On the Move Bloomberg August 8, 2016 2:30am-4:01am EDT
day, 2600 journalists and analysts in more than 120 countries. david: let's focus on the key dates today. china's exports remaining sluggish. deteriorated to 12.5%. big --o to hong kong and get behind this data. what are the key takeaways from this number? it is a soft number. the import side of things we are seeing their which doesn't bode well for the economy. at the same time there are some
caveats. exports are holding up quite well. quite nice.or is cheaper priceser for commodities brings down the imports as well. when you figure a 22% drop, some of that might down -- be down to the commodity moved in prices. china's economy remains. guy: give me some numbers on the imports. essentially, and a lot of it is reflecting the correction and
commodity prices. we need to remember the big fall. some demand. we see imports from korea down. in some respects it speaks global demand. surprising impact under a week demand for sore. under the pbc question i guess it is a debate. there's a view coming out of beijing that rates have been cold enough. credit to where the economy needs them most? targeted stimulus
scheme to try to get the money rather than wasting ammunition on interest. great stuff as always. thank you very much. let's bring our guests out of hong kong. he managed -- manages $3.4 billion in assets. good morning to you. what is your take? the chinese economy is really getting to's death struggling to gain traction domestically. the imports are falling a lot faster than the exports. i think it is time for the authorities and china -- we should look forward to a quarter-point cut in the interest rates. thelar to what we saw in first quarter of this year.
then it abated in the second quarter. guy: the authorities are seeming to signal they don't get the bang for their buck. that there is enough liquidity in the system. what does industry monetary policy mean when it comes to the pbc? china they have been gradually easing. from the chinese point of view if they inject too much liquidity and you get a bubble which gets bigger. so it needs to be more targeted. so much -- so far much of the credit expansion -- it is going to the bigger companies which are not very productive. i think it is much more about coming out of the shadow banking
and into -- money is falling through the banking side of the equation. caroline: seems as you want more targeted, fiscal potentially. bloomberg is seeming to appreciate. how much will authorities allow this depreciation continue on the export numbers in the long-term? i think the exchange rate is always on the cards. i think it is going to be a gradual process. it's not that chinese exports are not compatible. economy is in a sure growth -- slow growth there is little that the chinese exports
can respond to right now. the current surplus has continued to be quite robust. all those indicate that there is devaluationa sharp in the u.n. that is a slow transition. lot as thexpect a process continues. where are the capital exports in china ? also the fiscal side there's a lot for the chinese to continue to celery that. the budget deficit are quite low to the rest of the world. again, they have room to probably increase quite sharply and i think over the coming weeks we will see that is how they will respond.
the monetary conditions are not that tyra now. they are quite relaxed and loose. they need to be loose even further. up next, payrolls pushing deep dollar hide. we will discuss what it means to ae said in a possibility of -- and the possibility of a hike. the u.k. has opened a investigation into fraud, bribery, and corruption. this is bloomberg.
caroline: welcome back to on the move. a cloudy day here in berlin. 5%.futures market up now, let's get up to speed with the bloomberg business. the sfo has opened a criminal investigation into allegations of fraud and corruption. cooperating with its -- the south african discount retailer offering $64 per share.
the deal creates the largest betting company. -- really wants the jet founder to head the retailer's online division as part of the deal. the move could help walmart challenge amazon. that is your bloomberg business/. asian stocks are at a one-year high after the smi hit the 14th record of the year. that is after july payrolls by 250,000's this is how investors reacted.
>> today's numbers are strong all around. >> it's a solid number. >> it's a solid report. >> this month has shown some good games. >> people thought it would be around expectations. we are surprised. >> the recovery continues and the weakness we were concerned about inmate looks like it was a blip. >> not only is a strong report, the equity market is trading good news as a good news and the western markets are behaving as you would expect. i think you still focus on global conditions. >> that is what is holding them back. today's numbers tell you that there's a higher probability hike thiseds will year. >> i think going in front of an
election is pretty difficult. >> 22% for september is still low. i would put it that 40% to 45%. caroline: let's get more expert opinion to side of the hellenic. -- the side of the atlantic. that's what shows you the properly is climbing 47% for december. it is up from 37%. should it be higher than 50%? do you think you'll be a rate hike before december? shouldink the market really be prepared for a rate hike. the u.s. economy is in great shape. the capital spending is really the only negative. again, that is now stabilizing
and it is showing the first signs of a little bit of a turnaround as well. i think the ingredients are in place for a rate hike. ort likely december september. otheri think the is the flow of the -- we have the brexit situation. and theook at the risk rest of the emerging-market complex, we have had very good stability recovery. hopefully that will stabilize. we will probably no longer hold
it like it was the last couple of months. guy: let's talk about this event here. what is janet yellen going to say at that event? >> i think we should be expecting that the u.s. economy is in good shape. we are getting a situation where the wages show the signs of picking up because of tightness pretty slack has been taken out of the labor market. this is the lead indicator that the fed normally looks at. i think a lot of the domestic -- guy: is she going to give us a clear guidance at the end of the year we will likely get a hike? >> i think so. the market is waiting for some real solid guidance from the fed. this is probably the key. is still below 50%.
i expect it is going to continue to climb gently until we get to the jackson hall meeting. the fed couple of directors telling us about market underpricing. i think that the fed is guiding the market. we should of that into all caps relations. thank you very much. saying with this, minutes away from the open. we are -- we will look at the potential movers. this is bloomberg.
airbus and boeing are on a level playing field. boeing was struggling with the export import bank and now it appears that the airbus is struggling in europe as well. you can see how these two stocks are performing right now. the market is still stable but trouble is brewing. we could see german markets up a form the futures market. interesting we have seen these two companies failing to raise money. in peru, a big round raised. traded on thef mid-cap in the dax.
it is spending big and getting in on mattresses. is usingion is what it to acquire mattress firm. let's talk about in a may. let's talk about how the world is working. may -- in -- >> some of the larger companies have raise funding in the market. we should expect that to actually happen in the u.s. and the u.k. as well. that is what really encourages the activity. -- ink there should be harder to it is a lot
guy: you're watching on the move. i'm got johnson. johnson. moments away from the start of european trading. caroline has her morning break. caroline: he's climbed to a one-year high. is a september hike from the fed really back in play? the president of turkey anti-coup protesters and says the death penalty will be back. an u.k. has opened
investigation into third-party use. picture's see what the is. friday a really solid session. let's show you where we are going. these are the three main industries. looking maybe to take if you points off. it is interesting to see how the airbus story filters through. there you see the cac is actually opening higher. the cac up by 2/10 of 1%. caring one financials friday of 4/10 of 1%.
germany coming in with a revised number. plus .8%. that has been good. a real driver in terms of the markets. you see i.t. also up 3/10 of 1%. a little bit less sobering on the consumer is these stocks markets.y and european both drops, getting demolished in the united states. equities are better did. he see the asian market rallying. -- canadaons hold -- valuationsd hold --can a valuations -- cann valuations hold valuations hold --
more, we've got the managing editor for global business. this is due to the export finance agencies earlier in the year. is there a much of a surprise? how damaging could this be? >> we have to look at it at different levels heard operationally it is not that much. 7%.us says only about -- no deliveries are in effect and that might explain why the stock is not down that much. , there is not disruption. a hugely, embarrassment for airbus. what it really said's -- sheds
businessis how do you in some of the less established markets? you don't have the infrastructure so you rely on these middlemen. nothing is illegal with that. the problem comes with airbus not fighting them properly to the government, to the regulators. are not anyr there kickbacks and that's where the problem arises. that is what the fs so will be looking at. guy: who is on the hook for this? john leavy is the one who flies into the markets. who is on the hook? d up thenk you've summe people who will face the tough questions. this is something that will play
out over a long time. the average length is 4-6 years. over withto get this as quickly as possible. toughree men will face questions and how they do business -- and how they do business -- and how they do business -- and how they do in how they do business. they chasen is did deals at the expense of clean business and that is a question that will be asked? n stays injohh whatonch -- company is people are asking per how much longer do you expect him to be in the business? wonder is this
his last air show? he's getting to an age where people might think it's time to hand off the baton to somebody else, but in many ways he also seems irreplaceable inside the company and are googly the most successful salesman on the planet. he sold more equipment than any other human being. to follow him will be very difficult. we can probably see a gradual handover in the next couple of years unless there is a more .irect link they been able to get out of these things in the past and it him orer really effected anyone else. without knowing the results, i don't think this will effect his retirement planning. guy: boeing has had its problems
and that's a totally separate issue. can we extend this into the whole of the industry? you are trying to sell planes in one of the most difficult places in the world and it's the only way to do it. >> that's true. they both rely and similar structures. a proudly the u.s. rules are much tougher than in europe and troubleng, they've had getting export financing set up. the playing field is somewhat leveled out. , and this case the companies themselves, can step in themselves easily and guarantee these deals. should financing dry up going forward -- we have been through ofses where 20% to 30%
finances were needed to get over the line. should we come to that again it will be a greater problem for some of these companies where things are cheap and readily available. guy: thank you for joining us on the airbus story this morning. financing a deal is one of those big stories we have been talking about for quite some time. you is thatll to the cost of capital is so low. he said brexit has helped me. it has driven down the costs of financing. so cheap right now. exit a world in which cheap.ng is still it is available to the
participants who really need it in order for the economy to grow. conditionmain in that simply because we have a lack of capital spending. industries,he main they are absent simply because they are restructuring that part of the economy globally, that is. so, creating growth is getting more difficult because a lot of the players are already indebted in a gets very hard to increase your growth when it is so high. all they can do is measure the availability of credit. thes plentiful so should need for the capital spending cycle arise, it is going to ignite quickly. what they're saying -- seeing is
the early signs of destabilization. , trade andtime financing will be readily available so that anyone that wants it can get access to that very quickly indeed. it is not going to change for some time. the inflation is absent from the equation right now. caroline: if you're looking at , the u.s. looking strong. interestingly for the month of june, industrial production up. ? w are you looking at the eu have you been worried?
>> yes, but remember it is going to be quite long. probably another 2.5 years as a minimum. we are not in a position to form a clear view, but on the consumption cycle and more important on the capital spending cycle, there is going to be some slowdown. i think the transfer of jobs into europe is a very long-term process. in that sense, i think we have a prolonged. of uncertainty. there's going to be slowdowns but nothing dramatic. more importantly, it shows the .onsumption the first thing politicians have to do is to try to use some clarity in order to stabilize.
>> it is a summary. it doesn't identify the member in question but some of the highlights were one member said that the idea that policy is reaching its limits or could reach limits should be rejected. another said that given the very germanic and powerful tool that the bank of japan has used in recent years than a more detailed acclamation of what the doj's thinking needs to be done and that is of course the review that you are mentioning that will take place the next meeting in september. stimulus.more bets on moving away from monetary policy on the moment. there's been some breaking headlines. the emperor relating -- he might a statement
be thinking of stepping down. what does that mean for japan as a whole? videoery unusual statement. only the second one he has ever made. he was very careful not to use a timeline for when he might step down, but he certainly left that impression, saying that given his health, he was afraid that he may not be able to continue to carry out his duties in the same kind of way. prince, whohe crown is 56 would take over. very interesting. --re was no application avocation. out careful not to say that -- say that. wasnature of the dress about his thinking of unleashing at some point. tokyo aning us out of
-- what kind of policies do you expect out of japan? japan has provided volatility. this is a really interesting. it has been getting lower and lower. that has been largely due to things that have been happening to the euro. but the yen has been one of the exceptions. it is getting crushed. does that continue the japanese story? ashok: i think we should expect it to come down because the global financial system has been flooded with liquidity. every time there is any height .nd volatility you get a gain it is been difficult and a lot of the markets for the short
side of the equation simply isause the tie of liquidity too strong. we have seen the levels in the uppity market continue to come down. we have seen them come down in the commodity market. i think it is a byproduct of what is happening. central banksthe around the world. as long as we have a loose monetary policy, expected volatilities to come down even though the markets are still expensive. of course, one of the big drivers is the change in corporate earnings. we have had different ones over the last 12-18 months. that is bottoming out. again, that is going to continue to help the volatility remained
caroline: welcome back to "on the move." stocks have been in the green. the job numbers feeling appetite today. that is your out performer. led by the minors, banks, insurance sectors today. what is performing the best? underlying profit falling to 47 million euros. get itexpect nonetheless higher in the stock market. notably, -- see it's interesting to
that expectation outperforming. -- yields last tenure bonds a negative. something that hasn't happened since the financial crisis. explain what's going on with the mechanics. japanese --hat the which means they will by the u.s. bonds and they will convert the yen in two dollars and leave it locked in so that when they get the bonds back, the flow comes in the same exchange where
they pulled. forproblem is the cost hedging that currency risk is -- has been rising steadily as the dollar has increased and that is widening out the yield advantage that you get from treasury. that would be beyond the 10 year sector. fascinating's really. everyone thought the u.s. treasury market was a no-brainer. when you compare it to japan or europe, it seems that is not the case. saying there is a bubble. could we see a bubble? that is the risk. we see morgan stanley talking about this phenomenon. japanese or european can either
take on without an unhedged for looking for bonds and yields elsewhere. mean stocks are alternative assets. either way, it raises the question of whether u.s. yields can go further from here. guy: u.s. investors are suffering the same problem? >> yes. in europe we have the negative yield. the way manage -- people manage currency risk is takingyield awe yield advantage of the treasury. guy: up next, millions take to the streets in a sample. capital punishment could be the next tool in his crackdown
welcome back to "on the move." stoxx 600 being led by the minors. we are up 0.3%. ftse 100 up 0.4%. dax, trading up 0.7%. the cac being pulled a little bit down. have a look at my screen. bloomberg mrr function digs into the individual movers. one of your laggards is airbus. 2% to 3% lower. airbus trading lower, the
reason, because overall it is being investigated by the united kingdom. it is a criminal investigation. they did flag the u.k. regulators that there had been potential misstatements in emissions. airbus gets cut lower. on the downside is also hugo boss, down 3.3%. outlooks had revenue downgraded on friday. now they are getting cut to a cell. 10% now, really starting to outperform the markets, this company sees underlying profit fall. they see second-quarter revenue missing. but overall, the stock surges. interesting times, guy. guy: it is. let's talk turkey now. president erdogan has told a crowd of millions the nation will continue its battle against those seeking to undermine the government.
evaluatingcurrently the nation's credit rating. standard & poor's cut its rating on turkey deeper into junk territory. let's bring in our guest, peter, emerging market strategist at nomura. let's go with the political story. how will investors react to what they saw over the weekend? millions taking to the streets cementing support around erdogan. aroundwe have seen unity the parties. what we are waiting to see now is what happens next on policy, constitution, how the other parties respond to that, a potential referendum on the constitution, on the death penalty issue as well, which is so important for relations with the eu and the u.s. think we don't truly know the
direction the country is going in. the banking sector looks ok. we are waiting to see how persistent the recent pickup in inflation is. peter,e: how important, is the relationship between the eu and turkey? we heard over the weekend in germany plenty of politicians saying they are frustrated with the policy merkel has implemented. a survey showing that most germans would like that repealed. is that a key concern? for investors, there's been a long-term convergence of the narrative around turkey. the narrative has been around adopting european norms. you are going through the motions of opening chapters, dealing with issues around the judiciary. i think that has been an important anchor in turkey.
even on the u.s. side, i think a lot of investors from the u.s. into turkey have seen that is somewhat of an anchor. as you highlight, the two-way relationship has not been easy through the refugee crisis. we've only just seen a couple months of that deal in place in starting to work. i think it is going to be quite a testing time. guy: let's talk about structural reform. excluding the politics of the coup, the politics surrounding her to one, if you look at the politics of structural reform, how it will happen, where are we with what turkey needs to do? for does it need to deliver investors to be interested in this? peter: growth is quite high. 4%, ifd be about 3.5%, you hadn't had the shock of the coup. we are thinking probably around 3% for the year as a whole.
it can attract growth. what it needs on top of things that we trust, like fiscal consolidation, keeping debt to gdp down, some of those factors that never really come through, like building refining capacity. petrol is a big skew in the current account, moving the current account back over the long term. those issues have always been a source of vulnerability. where we trusted the air to want government is around things like investment into infrastructure, big plans, whether it is a bridge, airport, things like that. that has been a very important part of the message as well. there has been a lot of focus on infrastructure. it is those details that feed into the vulnerability in current account issues. caroline: peter, what are investors and clients asking you
in terms of the asset base? is it credit, equities, where are they feeling the most advantageous place to put your money, or the most risky? peter: in this global environment, that is quite a difficult question. the real challenge here is with a potential downgrade by moody's coming in 60 days time. people don't want to be that far off index. people are in the risk loving environment. people have gone back from maybe inside underway turkey to being more neutrally waited for bond indices in particular. i think that creates a real challenge. the reading issue is a little too far away. i think that means there will be quite a lot of shock if moody's downgrades. we are seeing a lot of caution from people sitting quite close to neutral. guy: peter, stay with us. we need to talk about another problem.
higher, led by commerzbank, deutsche bank, thyssenkrupp. looks like there's risk appetite on the next. let's get more into the bloomberg business news. here's rishaad salamat. that theairbus saying u.k. fraud office has opened a criminal investigation into allegations of fraud, bribery, and corruption. the plane maker says it is cooperating with the probe. international has agreed to buy mattress firm holding. cash,ng $64 a share in more than double friday's closing price for this houston based business. this would create the world's largest betting company. walmart aims to close a $3 billion acquisition of e-commerce startup jet.com. they've told us at bloomberg lmart wants to head
the retailer's online division at part of the deal. this would tap into proprietary technology and consumer data. hong kong's bitcoin trader has finished a review of the hack and said that clients will lose 36% of their deposits. the exchange will over tokens that may be redeemed for shares in its parent company. it says it will open with limited functionality in the next day or two. the accent bitcoins down more than 20%. that is your bloomberg business flash. guy: thanks. jacob zuma says he will listen weakters after the anc's performance in elections following a series of corruption scandals. let's bring in our guest, peter attard montalto, senior market strategist at nomura.
we talked about turkey before. turkey has growth. s.a. has no growth. its problems are laid bare. how problematic is the ability -- how big a problem is it for this country to generate any structural reform when the anc has the political problems it has? peter: that is the point, what do they do next? [indiscernible] i think the real thing we have to think about is, the internal policy contradicts within the anc. even if you strip away the politics, there are fundamental disagreements as to what direction policy should go in. do we want looser labor laws? that is just one example. there are still so many contradictions bouncing back to buying, growth policy, and introspection.
it is still going to be really difficult. now all eyes will focus on this elective conference. 's number one challenge is going to be to get his successor elected in december next year, probably his ex-wife or someone like that within his faction in the anc and that is going to come down the issues we've had. i think it's going to be a really difficult environment to see structural reforms coming forward and that is what investors were looking for. guy: so it gets worse? peter: we just don't have enough of a shock from this event to bounce us into a position where there's true structural reform. we are around the bottom, if you like. that is what the imf has been next twoing for the years, three years. even if they did do the right policies, it would take some time. i think we are going to be stuck
in this world of slowly grinding higher unemployment. that is going to lead to some changes in the long run politically. i think there's just such a focus on politics, it is not the environment for getting structural reform. caroline: we are just seeing that the south african rand continues to outperform, leading the charge today. we are seeing some recite in terms of the currency, but what about the companies? today we hear that steinhoff is making a $2.4 billion acquisition in the united states, wanting to diversify. is this the way the company is going to be looking now why we've got concerns about unemployment? that is not a new story. last year, there were 45 billion rand of outflows from the country, people investing abroad , deals like steinhoff now
coming this morning. i think the real concern is that you are not going to generate domestic growth without domestic companies investing on shore. a lot of vilification goes on with foreign investors, but we want the same things the local companies want. we want structural reforms around the labor market. there's uncertainty around regulations and policies as well. all those same issues are driving south african companies to invest offshore. guy: talking about two or three years ago, it was just when the fed was starting to think about raising rates, and he was very nervous about it. he's gone out of office and back into office subsequent to that. how difficult would it be for him if we were to see the fed go in december? peter: i think the difference now is that a fed december hike is so well telegraphed.
the fed is slightly behind the curve. there is less shock on the yen than when you have that conversation before. still, that kind of environment is going to focus attention back on domestic idiosyncrasies. why the rand is doing so well is the market is looking for carry. the market doesn't want to think about domestic idiosyncrasies. it wants to see the opposition taking a bigger share. downgrades are probably still on december.om s&p in hasn't really changed after these elections, i think, given that focus on politics that is still going to be there. ultimately it is about delivery of structural reform, which investors were hoping he would be able to do. he hasn't had a magic wand. it is reliant on policy leadership from jacob zuma. still a lot of conflict within
government. i think it speaks to what goes on in government that there are people who don't care about investment grade. i don't think of it as this issue to be focused on, secret ratings agencies run by the cia. i think there isn't the right policy mindset and cohesion. even ignoring jacob zuma. caroline: you say that the politicians within south africa possibly don't care about the investment grade. do investors care about the investment grade? we talked about how turkey might not be that poorly impacted. what about assets in south africa? do they get bid up in the search for yield even if there is this pendulum concern of a rate downgrade? peter: turkey already has one sub investment grade from s&p and moody's is going to join. africa is still a medium run story on that index loss.
that, for s&p, is going at the end of next year. reforms thatng for don't come. i think investors' time horizons have shifted so much shorter. it has shifted so much shorter, to a three-month time, that people can't see beyond that. what is the risk to owning south african 10-years? 8.56% percent is quite a yield. into --emember, going last year, -- [indiscernible] now they are back to neutral. the risk that is there is that you get rating downgrades, shocks to the system, political,
maybe another kevin it reshuffled. a lack of reform coming through, a lack of growth coming through. given how flat the yield curve is, you don't get that much carry. you can see now that the rate hike is coming, you have a bit of risk on that front as well. if you look in a very short time horizon, there is not that much risk. guy: peter, great to see you. seniorttard montalto, emerging markets strategist at nomura. up next, is shown making a comeback? shalel talk about oil and when we come back. this is bloomberg. ♪
caroline: welcome back to "on the move." donald trump will try to get his campaign back on track with a speech on economic policy later today. tomorrow, turkish president putin inisits vladimir st. petersburg. jumping ahead to friday, investors will be looking for clues on the fed right path when we get u.s. retail sales. on oil.ping an eye wti crude has been holding above $40. yousef gamal el-din joins us now with a chart of the hour. i've been very interested in
some of the movements. what have you got for us? >> last week, there was so much talk among oil analysts that the bear market didn't have any legs. it did make a bit of a recovery. the latest sets of data clouds that outlook. we've put this chart together that shows what happens with the baker hughes index. u.s. producers have been adding to their fleet. they've done that for the sixth straight week. it is the longest set of gains since august 28. u.s. producers are comfortable bringing those rigs tackle online in the current price environment. it is a little tricky. it comes just off the back of u.s. oil production decreasing for the first time in four weeks. the other signal apart from this chart that i want to share with you is data from the cftc which shows that hedge funds are going all in in terms of their short positions. we are talking the most since
data collection began on that front, going back to 2006. definitely a lot of doubt as to how much of a rebound we are going to see in those oil prices. guy: thanks very much indeed. yousef gamal el-din of bloomberg markets middle east joining us on the oil story. let's carry on the conversation, seeing oil trade up around 1% higher. the president of opec saying the price decline is temporary. for more on that, we are joined by bloomberg's head of european energy coverage. opec saying they are in constant elaborations on stabilizing the market. tell me what that means. >> it is august. it is quiet. people are starting to think about what happens in autumn. enoughr $40 is not good for a number of oil producers. there's a meeting of the global oil ministers in september. people are starting to think,
will that be a forum to resume talks between opec and non-opec producers which broke down in april? so far, people are not warming to the idea. we suspect there are suggestions coming from latin america. we will see what develops. caroline: it's interesting that we are seeing what we heard from yousef as well, a ramp up in bearish bets, a record amount. the blue line, we see it surging higher versus the white line. butprices still falling, taking out a little bit today. is there potential for a short squeeze here? talking to people in the market, ish on where oil
prices go? >> there a seasonal thing here. typically at the end of summer, people shut down refineries in september and that cuts demand for oil temporarily. we've seen oil prices fall in each of the last five septembers. of course, you've also got the prospect of higher interest rates in the u.s. mightare reasons people want to pile on bearish bets, we remain vulnerable. guy: in terms of balancing those factors out, how significant is the fed factor in that? >> it is hard to say. typically, the dollar and oil will move in opposite directions. it is not something that people are really focused on in the conversations we are having. you can see a combination of that monetary policy combined