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tv   On the Move  Bloomberg  August 26, 2016 2:30am-4:01am EDT

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manus: you are welcome to on the move. it is 7:30 here in london. it is 8:30 a.m. in frankfurt. where counting down to the start of it -- we are counting down to the trading day. here is what we are watching for you. full circle jackson hole. the fed, kaplan and george make their case for a rate hike ahead of yellen's big speech. the deflation situation. japanese consumer prices fall for the fifth straight month as treasurer mounts on the boj -- as pressure rounds on the boj.
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u.s. dealerships $1.2 billion. caroline: we are keeping a close eye on volkswagen as we see the dax open. futures lackluster ahead of jackson hole. check out my futures board on the bloomberg. see the cac 40 underperform, down by a quarter percent. on to the assets. manus: we will get into those assets. if you want to understand the limitations or the questions that are raised by the efficacy of stocks on behalf of your losstry, close to 3.9% from april to june. this is the japanese pension fund. what we have seen is the bank of japan involved in these markets. they will have taken an equitable loss. japan gpi have posted 3.9% loss
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between april and june as a stocks slump. the efficacy of negative rates on the bank of japan we will debate. let's check in on your markets. it is filler kill day for risk and volatility. it is jackson hole day. you have the emerging market index there. we are seeing this stock. overall we have lost 1%. we are stalling on the rally. jpmorgan volatility, fx volatility. the biggest monthly increase in september. you have dollar yen. it has been a skittish dollar. repeating thatan the u.s. central bank should raise their rates. the dollar yen, this is what the market is betting on. today you get jackson hole out of the way. next week you get jobs report out of the way.
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below that a break, 92.50. brent crude down .5%. notite mr. -- saying i do advocate a cut. hour.n oil in this next juliette saly standing by with bloomberg business flash. you.tte: manus, thank consumer prices have fallen for a fifth straight month in japan. underscoring the central banks struggle to bear inflation tour -- toward 2% target. -- the figures of the latest reading on the measure before the bank of japan governor and his board consider a possible policy revamp when they meet next month. russian president vladimir putin has ordered snapped military drills after angela merkel accused him of breaking international law in ukraine.
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she also said nato will defend member states against an attack. france try to progress as a filament of the treaty but the security situation in eastern ukraine worsens then the summer. every day people lose their lives on the contact line between ukraine and eastern ukraine, especially the ukrainian soldiers. you can imagine that in this situation it is difficult to lift the sanctions. of course, we are working on that. we spoke with with the russian and ukrainian president did we're in touch and i hope we will be up to present some progress to the european council. juliette: global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. bloomberg. caroline: juliette, thank you very much and we all know about it, fed policymakers have been making the case for a rate hike
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ahead of janet yellen's speech at jackson hole. >> the most recent meeting, i did express my view that i thought it was time to continue the process of normalization of interest rates it when i look at where we are with the job market, when a look at inflation , when i forecast for that, i think it is time to move. >> i hope that chair yellen walks away from these time-based forecast that we hear over again from the committee about how many inches rate increases are we going to see. this is not an effective way to communicate monetary policy. >> we said rates should be raised patiently and gradually. part of what i am thinking is the impact on the dollar potentially destabilizing the rest of the world. just tell me it doesn't mean we should raise rates. it should be patient and gradual. now,ine: joining us
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vincent chaigneau. what are you expecting in terms of volatility after she takes to the microphone? --cent: we are saying that volatility is falling quite sharply. --t is true in treasuries, if you look at the s&p, volatility has been putting that significantly. will ms. yellen shake things up? i am not sure. i think she will have a fairly balanced stance. she will reiterate that in the termterm, in the longer the fed will probably doesn't have a lot of work to do, because basically policy is not as accommodative as we believe. i'm afraid that if she has a fairly balanced hand, it could
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crash into mid-september. then we have a very month of september, a lot of risks. more in the second half of the year. manus: this repressed volatility , this is government bond policy. it is the tightest, the smallest range of this year. -- overt in mind, would the past decade jackson hole has only matter to the markets wants and that was when ben bernanke indicated more qe could would yellen teske. would yellen -- would yellen --? >> i am not so sure. -- she did at yellen not use exit hole to deliver a strong message. i'm not sure what she wants to do. -- butl probably discuss
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more the longer term outlook in terms of monetary policy framework. which really is -- jackson hole. can see how much the u.s. treasury curve has moved. we have seen yields come down on the backend. slightlyeen it move up . at the short end, what do you expect? your are advocating for a go to flat -- you are advocating for a go to flat. vincent: we have seen a lot of flooding already. that's a lot of flattening already. -- a lot of flattening already. the long end, i think, will be kept in check, because if the fed is more hawkish, risk asset will only be less buoyant. it depends on international
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conditions in the bond market. yields in japan and europe remain very low, then that tends to protect the long end of the curve. manus: vincent, i'm going to blow this up for you. with 10 year government paper comes to market, the 10 year has been very well received and bought by overseas central banks and institutions. the seven-year paper was a little bit less well received. the u.s. treasury bonds now stand on the global new stage as high-yield? vincent: yes, kind of. with is still risk treasuries if you fear a little bit of repricing of the fed, and maybe -- manus: maybe that is the reason for lack of performance in the
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-- end,nt: for the long yields are low in the u.s. but they are high compared to other jurisdictions, in particular europe and japan. you.: vincent, thank he stays with us for little while longer. caroline? -- from: the tune jackson hole economic symposium. patman andrd, robert dennis lockhart. will hear from jerome powell, member of the board of governance. helicopter ready? all eyes on kuroda as japan to cpi drops yet again. we take a closer look. plus -- we bring you the latest on the plans to cut costs. plus admissions impossible. vw's cost for settlements in the
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u.s. hits two point $5 billion as it struggles to deal with auto dealerships over the scandal it all of that ahead. this is bloomberg. ♪
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>> japan's core cpi has dropped again for the fifth consecutive months of decline. the data -- to find new ways to reach 2% inflation target. talk of helicopter money
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continues. joining us from tokyo to discuss the issue is jodi schneider, our editor on the north asia economy. jody, thank you for joining us and what can we expect from the bank of japan. there is this review. -- there's this review period. jodi: there's a lot more pressure now that we have seen week cpi data -- we have seen weak growth data. when the exports have been week -- when you take this whole picture together, that gives us a picture of very weak growth and all of this easing for the past three years not willing leading to that growth in the inflation target. that is what governor kuroda keep saying that we will act to go ahead and move toward that inflation target. that is leading people to think something is going to happen
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next month. also this conference of review, there has been appetite for easing from that. people think this review of the policies of the easing policies will -- there is a likelihood of more action at the meeting which the review will be announced. -- what onhe cpi earth do economists see the outlook going? will they be anywhere you the current target? or change the target come review? jodi: i don't see how they can get to the current number and not in the timeframe. they have reset the timeframe several times. 2018. economists do not know how they can get their. -- we are going to keep moving the goalposts. some wonder whether we are reaching limits to the easing,
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in terms of getting to that inflation goal. there is a lot of questions there, but there is a lot of anticipation that something will given at the meeting and every piece of data that comes out seems to port -- seems to point more toward that. manus: jodi schneider, editor on the north asian -- vincent chaigneau is still with me. every time we see a window of indication what is going on in japan, we question the efficacy of negative rates. a little bit of wallpaper. this shows the shadow rate. how is it transmitting to the real economy. the shadow rate is 4.5%. in europe, it is -6.46%. the transmission mechanism is working better in europe than japan. why would that be? is the efficacy of negative rates really at the edge? vincent: yes.
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laws about what both central banks can do from here. the july meeting of the boj raise more questions about that. the market was concluded that maybe the boj had run out of ammunition. this is not a good situation for the boj to be in. we want to fight the idea of the next meeting. what can they do? they can still cut rates. the impact on the currency has been questioned. there is a lot of residents at home that hurt the banks. there.s not i think what the boj should do is to look at -- basically announced measures that will help the banks and possibly support bank lending, including
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the banks that are close to the end of road will be shipped toward that. and toward the bank lending channel. caroline: where does begin go from here? could it hit the 100 mark before we see any significant action come from the boj? vincent: the market will test below 100.pushing we will see what they do. in the near term, yes. i think there is a downside. if risk conditions get shakier, which is possible if the fed is higher. -- a great idea yesterday with a buyer -- we want to buy that downside, because eventually the
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boj will have to fight this yen strength. manus: the party -- you do not use a multilateral intervention. you presume intervention and will come? what is the true point? -- what is the trigger point? vincent: we mentioned panic mode. we know that intervention doesn't work very well, at least not on a state basis. they will have to do something else. that would mean more easing. that is been the debate about helicopter money. manus: can you see the bank of japan going at it alone. -- alone? vincent: i doubt they would get much support from the international community. i'm afraid if you look at the big picture of the yen, it is
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not strong enough for core needed intervention. test for coordinated intervention. -- for coordinated intervention. think we are ready for coordinated intervention to fight yen strength. manus: one of those very pregnant moments there. pause.-- pregnant we have a lot more to get through. vincent chaigneau stays with us. caroline, what have we got? caroline: just spent -- just 10 minutes to go. we'll a get corporate movers in today's trading, including the french media company that reported earnings after close yesterday. this is bloomberg. ♪
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caroline: 8:53 in a beautiful berlin. it is going to be a toasty 30 degrees. we are less toasty on the futures market. , inre down across the board fact cautious trading ahead of the jackson hole speech come from janet yellen later today. let's look into a couple of
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stocks that be on the move. vivendi -- ack, french stock, vivendi. plus not looking so good right now. the tv unit remaining under pressure. second quarter profit percent. it promised they would cut costs. we have been keeping an eye on the french gdp, coming in flat again today. it stagnated in the second quarter. let's bring it close to berlin. i want to look at volkswagen because more money being splashed on the back of the diesel gate. volkswagen could be -- it is agreeing to pay 652 u.s. dealerships. the power maker $1.2 billion extra? that is what a person familiar is saying.
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there are still more cases to come could manus, let's big into some of these movers. let's big into that french data. we have seen stagnation in france. it will be interesting to get our guests take -- our guest's take? manus: what does it take to get ecb to move lower for rates? vincent: i don't know about stagnation. that gdp number in france was flat, but it was up 1.4% on the year. if you look at the details, consumer spending is more flat. that is a bit disappointing. i don't think that is a big change of trend. investment is still weak. [indiscernible] the missing link of that recovery. the recovery in europe has been ,n track, but the risk especially with brexit, there is a downside. the ecb needs to do more.
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manus: we will pick up that conversation after a very short break. the only market on the futures, flat. more to come on the market open this friday. this is bloomberg. ♪
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rishaad: good morning and welcome to "on the move." in sunny caroline hyde berlin. we are moments away from the start of the european trading day on jackson hole day. caroline has the morning brief. caroline: the hawks circled jackson hole. says they will make their cases for a rate hike before yellen's big speach t oday. japanese consumer prices fall for the fifth straight month as pressures mount for the boj. u.s.wagen is set to pay
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auto dealerships $1.2 billion. manus, cautious trading as those hawks circle. more voices coming in, saying we could see a rate hike. we are now seeing a 30% probability on the wii function on bloomberg. as we continue into the open, futures are flat thus far. digging into the stoxx 600 and the imap. i want to show you how we are opening on the regional basis. the u.k. is currently flat. western europe is down by just less than .1%. spain, as well as sweden. we have confirmation that gdp did beat quarter by quarter stagnation. let's get underneath the hood of all of this. gilts haveow you caku.k.
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opened. nejra: equity markets are opening right now. it looks like we are up one basis point or so on the 10 year yield. we are at 57 basis points on that. i have got the two day chart here, not a huge amount of movement. there is a lot of anticipation ahead of janet yellen's speech in these bond markets. she will be speaking at jackson hole later today. it is pretty much unchanged, 57 basis points. let's look at how the stock for performing on the different sectors. a bit of a mixed picture, seeing more red than green, of course. this is a little bit of a skew to the down side. health care stocks, down .4%. consumer staples, down .2%. you got utilities and materials
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as the best performers, but they are pretty much unchanged. i would not say they are gaining at the moment. in terms of stocks we are watching, i am starting with the thevivendi. we got these numbers after the close yesterday. it posted second-quarter earnings that missed the analyst estimates. vivendi is actually planning cost cuts of 300 million euros, moving 1.9% lower today. i also wanted to bring up volkswagen. basically, it's agreement to pay u.s. dealerships for losses cheating the diesel scheme will cost the carmaker $1.2 billion according to a familiar with the matter.
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we are keeping an eye on that stock as well. manus: thank you. we are looking at cable. we have rallied over 1% this week. what i have got for you is life after brexit. this is what i have found. this is the performance. the blue line is inflation linked to government bonds. the white line is british government gilts. gilts have delivered 10%. are you ready for more inflation? this market seems to be ready for more inflation. have they got it right? >> i have but to say, we have been keener on inflation projects overall globally because of the shift of the fed and the talk about the need to keep rates lower for longer. the creative thinking at the bog. -- at the boj.
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before our favorite market there had a pick up in u.s. inflation, in wages in par ticular. the u.k. lenders have also been very much in favor. is, we see what i think sterling this week. probably, that will take some heat off of the u.k. labor market, but eventually, we will be selling cable and u.k. lenders should continue to do very well. caroline: give us a sense of your view on boe policy and the desire to purchase bonds. quantitive easing is a struggle. will it continue to be a struggle? >> well, yes. the long end of the curve in the u.k. is very well supported
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and there will be ongoing questions each time the bank of england operations are not fully covered, or when the coverage ratio is not very high. i think that is going to be an ongoing discussion. maybe, we will see some heat off that market when we get expansion from the government, which is something i will be expecting this autumn. manus: nejra joins us now with a chart on european markets. and bonds, if i'm not mistaken. nejra: what i have done here is track the german tenure bond yield since 2015. the 10 year yield has not been above zero since about mid july. we brought this up because we had interesting comments from one of our bloomberg first word strategists, who is saying the bonds could selloff, pushing
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yields above zero briefly because investor positioning in euro rate volatility is somewhat reminiscent of a move seen ahead of april 2015, which is right about here on the chart. that was known as the bund tantrum. the bund skew has been rich hening ahead of yellen's speech. if you look at the second chart i have got ready, what this shows, you could argue, is perhaps, we are not going to see a bund route, because this eurozone inflation gauge -- i have showed you the euro inflation swap -- this has barely moved since the ecb meet ing. we are near a record low on this. typically, it is a gauge of price growth expectations, a key component in valuations. this could be the market that bulls aren bund
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protected. caroline: thank you very much. is it yields up, or yields down? >> well, we have been bullish for a long time. and i have to say, near-term, we are getting a bit more cautious. seasonals are not very good for the first couple weeks of september. you've got a lot of supply coming up in early september and you could see a little bit of spillover from repricing of the fed. we are a bit more cautious near-term. that said, idol think we are going to face another tantrum, as we had -- i don't think we are going to face another tantrum, as we had in spring 2015. i don't think the market is crowded today as it was at the time. manus: and of course next week,
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we have got 30 billion euros coming into the market from spain, germany, and france. that could cheapen it up a little bit in terms of the asset. this is something we have been debating throughout the week. with that kind of supply coming into the market, does that continue to expand? when you look at spain and italy, where do you think the real risk is? is it within the spanish government, or the referendum in italy? >> know, the focus is on italy right now. there are some hopes that spain will get to govern in autumn. in italy, there are lingering concerns about the referendum. we do not have that date yet. there are concerns about the banking sector and the procrastination around that. so, yes, we see further widening there, potentially. manus: how wide could that get?
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and italy over portugal you say as well? >> italy over spain and portugal over spain. italy, octoberor portugal. those decisions will be very important. portugal, -- for portugal, if they are downgraded and are moved to junk, there will be huge consequences. italy,e: cautious on cautious on portugal, cautious on germany in terms of your loans. let's make money. where should we be moving to in terms of where it will tighten up over the next week or so? >> as i said, we like flat tenors iteners in the u.s. we still like spain.
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i believe the strong performance of spain against germany will probably run out of steam, but there is still potential. in europe, spain is still a favorite. we have enjoyed europe, that is more a protection. but i think you need to have those in the portfolios right now. manus: with that, thank you for sharing your thoughts with caroline and myself. ofcent chaigneau, head fixed income at societe g enerale. up next, problems at uber. we get into that conversation. caroline? caroline: yes, is it more of a minus for vivendi?
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we bring you the latest on the group's plans to cut costs. breeze.freeze is not will iran join the party? all of that ahead. stick with us. this is bloomberg. ♪
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caroline: 30 minutes into your trading day. welcome back to "on the move." let's check in on the mrr function.
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let's check out the stoxx 600. amex, really wheeling ahead. the engineering group in the united kingdom up four percentage points. morgan stanley says it will get into a buy. gamalto, also doing very well. we are seeing this securities software company's profits rise 506 million euros. they firm their margins. in the red, h&m. this used to be on the back of a cut from hsbc on this particular stock. ratings from the analysts. but now, let's dig into your bloomberg first word news. reporter: the world's biggest pension fund posted a $52 billion loss last quarter. it fell 3.9% in the three months. the stocks tumbled and the ye
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n surged, blocking all investment gains. consumer prices have fallen for a fifth straight month in japan, underscoring the central bank's struggle. fellike's -- july's cpi by an estimated 1.5%. before the bank of japan oda will meet next month. russian president putin has ordered snap military drills after angela merkel accused him of breaking international law in ukraine. germany and france are trying to progress in fulfillment of the treaties, but the security situation worsens
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during the summer. everyday, people lose their lives on the contact line between ukraine and eastern ukraine, especially the ukrainian soldiers. you can imagine the in this situation, it is politically very difficult to lift the sanctions. of course, we are working with that. we spoke with the russian and ukrainian president. we are in touch and i hope we will be able to progress some progress -- i hope we will be able to present some progress. global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. this is bloomberg. manus: thank you. vivendi has missed estimates for second-quarter earnings thanks in part to the weak performance. adjusted net income fell 1.3% at 187 million euros. let's get more on the report. we are standing by in paris. how have the changes in the market actually affected
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vivendi? >> this is a very difficult time. these have like growing competition from online platforms, or from other players. subscribers losing recently, just in the last six months. they have lost nearly 300,000 subscribers. now they have about 8.2 million in france. chairman ise, the trying to aggressively overturn and make it breakeven. byy want to cut costs 300 million euros. that will involve of course, program cuts. some of these programs are very expensive. we have seen this aggressive very recently.
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we have seen presenters, for example, going to different channels. so, this is what they are now trying to do in order to make th e company breakeven in a couple of years time. caroline: we will keep a close eye on that. the shares are trading lower this morning. thank you. let's stick to the corporate front. it has been a week of dealmaking for volkswagen. first, it was the dispute between car suppliers, which ended on tuesday. they announced a deal of 652 u.s. dealerships to purchase back defective car parts. this agreement will cost vw about $1.2 billion. the head of bloomberg's auto coverage is here. the 1.2 billion euro price tag, how does that fit into the scheme of things?
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>> $1.2 billion is a relatively small amount in the total cost of the scandal so far. volkswagen has set aside 18 billion euros. in that sense, it is relatively small, but on the other hand, it is a pretty important step for volkswagen to take a step forward because they need dealers on their side to make a go of it in the u.s. manus: could this agreement be a turning point for vw's sales strategy in the u.s.? could this be the turning point in the u.s. for them? >> well, yeah. business has been a sore spot for volkswagen for many years. they are resetting their u.s. business. the steelers have said that volkswagen have promised them or models, which lay have lacked in the u.s. space, for instance
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suv's. they have also promised to lower their prices. volkswagen, in the past, they thought they could gain premium prices. they thought their german engineering prowess would give them higher transaction price value. it has not really panned out because they have not really provided the kinds of cars americans like to buy. above all, that is suv's. if they come around with that, if they get dealers on board, if they reset their pricing, they have a chance to do something in the u.s. market. caroline: notable if you dig into the bloomberg terminal. you can see they have got less than a 2% market share in the u.s. at the moment. thank you very much indeed. warming up to a freeze. what would this take to convince iran?
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that is up next. this is bloomberg. ♪
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manus: 8:23 in london and 9:23 in berlin. saudi arabia's energy mnister said an oil output freeze would be positive for the market after wouldrt that iran participate in the informal opec talks next month.
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iran has been accelerating the level of oil production since sanctions were lifted in january. they could support a freeze. >> if you look carefully at his comments, he is saying, we would support a freeze, but there are two caveats. he says, we will listen to what our colleagues have to say, and we will look to -- look forward to listening to what they have to offer. and then it gets back to april when the saudi's said they would agree to a freeze and the iranians said they would not. he is not advocating for a cut. in general, he does not the any need for any significant intervention. i think what the saudi oil minister does feel is if they
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are going to th get together next month, they are going to do something. he gets the idea, if opec gets together, it is meaningful if you want to be a cartel to act like a cartel. if some countries want a fr eeze, he does not think it will change much. we had a beautiful pie chart showing the breakdown of opec. they about are the competition coming from iran? >> i think they are always a little bit concerned. the iranians are pumping as much oil as they are, about 3.7 million barrels each day. but generally speaking, he is concerned from an oil market perspective. when i spoke to him in june, he was talking about how we are seeing the inventories in the net of states come down -- in the united states come down a
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little bit. the inventory have fallen about to present sinc -- the inventories have fallen 2% since then. many of the oil ministers are happy with the direction in terms of the drawdown of inventories. so, he is a little bit concerned anians, but he is equally concerned about the russians and everybody else, but mostly concerned about the direction we can see of the market. manus: ryan chilcote, good to have you here. ryan is back in the house. we will talk a lot more about russia. "oned tuned here on "th the move." you do not want to miss our new weekly show. what is next for brexit? we bring you all of the news around the u.k.'s vote to
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leave the eu. and every friday, it is francine lacqua on "the pulse." this is bloomberg. ♪
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the move" 30 minutes into your trading day. it is a beautiful day. only miners are in the green on a sectorial basis, but the other 18 are in the red. yourac 40 it's up by .4%, major that is underperforming. now, let's dig into the stock stories. what are you watching, nejra? nejra: i am watching one of the biggest gainers on the stoxx 600 this morning. it is gemalto. we did get numbers yesterday, but that ceo has been speaking
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today on a conference call, and also to an edwards earlier this morning on "countdown," basically saying gemalto could reach the 2017 revenues target early. the market is still slowing, but not as fast as in the first half. the 2017 profit from the operations target is maintained. there have been talks about gemalto's offering, the ceo saying it is an industrial solution. then, we can see volkswagen rising, perhaps because of the latest supplement we heard -- because of the latest settlement we heard about yesterday removing part of the headache. a person familiar with the matter, saying it will cost the carmaker about $1.2 billion, but i guess it is progress in some ways.
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of course, we did get numbers from vivendi after the close yesterday, the second quarter missing. but mediaset has been caught up in this because vivendi has had a war of words with this italian company. this is after vivendi pulled out of an eight year deal with mediaset. mediaset, saying that vivendi includes information without confirmation. pi has japan's core c dropped again, marking the fifth consecutive month of declines. the data puts more pressure on the bank of japan to find new 2%s to reach that elusive inflation target. they talk of helicopter money continues. during us now is the executive director. thank you very much for joining us.
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thee ever wanted personification of the challenges that negative interest rates have not delivered, we have it in the data. cpi is down for the fifth month in a row. our negative rates still a fell a policy? -- still a valid policy? >> good morning and thank you for having me. i would politely disagree with your argument that negative rates do not work. if anything, what has failed in japan is the non-introduction of negative rates. remember that in january when the bank of japan introduced rate iscalled -0.1 -- this so-called -0.1% rate. japan does not have a negative rate policy.
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i think that is basically part of the problem. caroline: you also outline in your notes that potentially, we could see more coming in terms of clarity of where they are going, in terms of their communication. i want to focus on a bloomberg scream i have right now. you are saying that we should follow sweden, but i don't know if sweden has worked that well. i'm going to show you how interest rates have been slashed by sweden. cpi is still well off the 2% target. is that not the fear for japan? they clearly tell people what their communication, what their policy is, but still, the market is not buy it. >> well, i think in the case of sweden, the cpi numbers, there is a general problem worldwide. if it was up to me and some other colleagues that call themselves market monitors, you would do away with this cpi targeting thing altogether and go straight to nominal gdp
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targeting. if you look at nominal gdp in sweden, he will say more successful picture for the swedish economy. and for japan, i think the best thing they could do would be to scrap the cpi target. there are also several different sets of people looking, so it is completely confusing. very specifica number. target that one and you will have a much easier time convincing everybody. if we look at sweden and japan from this perspective, both countries would be looking a lot better than if he just looked at cpi. -- than if you just looked at cpi. manus: i want to go back, and it is a slight challenge, you have challenged that negative rates have delivered. i would point out a piece from bloomberg this morning, which is not necessarily my own academic thinking. we have a chart for our viewers,
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which unfortunately, you can't actually see on your end, but it talks about the shadow rate in japan as being -4.65% and that of europe as being -4.64%. it is more effective in europe that has been in japan sir, i would challenge you to say that japan is tired of extreme measures, whether it is quantitive easing or stock buying. there is a weariness of policy. there is a policy fatigue in japan and it is not working. >> well, you know, to a degree i would agree with that statement. there is certainly policy fatigue and this is something that boj itself is happy to admit, that there is an entrenched inflationary mindset in japan, which is closely correlated to this petite you are mentioning -- this fatigue you are mentioning.
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in january, what happened was, as i suggested earlier, there was just a hint that they might eventually introduce really negative interest rates. there is resistance from the banking system, which is rather conservative compared to europe. it could do with breaking up of the larger conglomerates. that would be my take. but i think for starters, they really need to clarify that they are not backing off of their inflation targets for their goals, and as a mentioned earlier, in my book, they should really switch to nominal gdp targeting. it would make life easy or for everybody. manus: i am curious to see. we had the pension fund in japan having its worst fiscal year, losing nearly $52 billion in the second quarter. this is where the real backlash begins.
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your currency is not lower, the global pension fund in japan is losing money, and this is really where the potential for political backlash, or social backlash, i think, begins to spark. when you see your pension fund taking a pasting like that, again, the worst year after the financial crisis, could it be the beginning of the real -- never mind the real economy -- but where the real people of japan backlash aggressively? >> again, i think there is certainly a risk that people misunderstand this policy and there is also some fear mongering with regards to negative interest rate policies. of course, it does not look good when in any fiscal year, a pension fund reports financial losses, but you would have to look at the longer-term picture. as a matter of fact, i was just looking at returns from a japanese perspective, so from
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the perspective of currency hedged to the yen, typically what a japanese pension fund does. and their bond holdings have soared since the introduction of the tiny hint of a negative interest rate. bonds have soared from a japanese perspective, and even foreign bonds have been very profitable for japanese pension funds. i think going forward, the numbers are likely to improve, despite the weakness in the stock market we have seen in recent months in japan. again, the boj needs to continue path. re-flationary if they do not go ahead with this policy and admit defeat after the review in september, then japan will have difficulties. but for the time being, the jury
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is still out from a monetary policy perspective. caroline: kuroda is going to be in jackson hole this weekend. we are likely to see more swirlings of and regarding helicopter money. is helicopter money already there? nact inoo difficult to eanc plain sight because of the legal changes that are necessary? >> i think helicopter money is a little bit unhelpful because there are legal implications in some countries. in japan, the view from mr. kuroda is that it is legal. but it is unnecessary. japan just needs to follow the example from sweden, which is a european country with laws not very different from other eu country's laws, and they have been able to pursue a negative interest rate policy and communicate clearly they are on an easing path, you and those some growth indicators are improving.
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so, i think they still have a lot of room to be very easy without going into helicopter money discussions. caroline: no more negatives. thank you for joining us live from hong kong. manus: caroline, we are going to repair for the german chancellor's whistele stop tour. this is bloomberg. ♪
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manus: this is "on the move." it is 8:43 in london. we of the bloomberg business flash. reporter: thank you. volkswagen's agreement to pay will.s. auto dealerships cost about $1.2 billion. that is according to a person familiar with the matter. that will raise volkswagen's sentiment to resolve the u.s. lawsuit to $16.5 billion. e-mail, the carmaker is still facing possible criminal charges and invester claims. vivendi posted second-quarter earnings that missed analyst estimate. they continue to lose money in france. the media company thought adjusted net income fall 3.1% to 187 million euros.
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the vendee also plans to cut costs by 300 million euros. banks mightsed end up with a status more like that of their swiss counterparts. banksture for british will be "dependent on the model of relationships the united kingdom intends to keep with the eu." thretheresa may will fight for the city to retain passporting rights. announcing the security of its cardiac devices in an effort company's deriaail the purges. about the >> is appears to be a company that for years, has put
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patientsbefore when it comes to cyber security. we think it is important that users are told the risks. we think there is a good chance they are about to lose half of its revenue due to device recalls. you'd' --hink saint jude says the allegations are completely not true. caroline: closer to home angela merkel is tripping around warsaw today on the last stop of a busy tour. yesterday,n estonia saying they could overcome britain's decision to leave the eu. germannow joined by our
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editor for bloomberg news. what she really trying to hook in on this tour? >> she is really trying to map out where the eu goes from here, which of course, is a process that is only starting now. you have also had the summer break in europe, which traditionally means downtime. today, she is meeting four eastern european leaders of eu countries, many of whom are euro skeptical. they also do not agree with her on immigration. so, apart from trying to sound out countries you know, about where they stand, it is also bringing out some of the differences that clearly are there and i have always been there in the eu. these are all factors that have to be addressed. manus: tony, where do we go from here. the state election is just one week away. and then, you have a special post brexit eu summit in
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bratislava. where do we go from here? >> the state election is not looking great for merkel. an anti-immigration party has germany.wer in they are going to do pretty well, with probably about 20% of that vote. merkel's electoral district is near this area. this is not going to be a boost for her. she and the other 26 eu leaders, k., countries minus the u.s are only starting the conversation about where the eu heads from here. does it become more integrated, plus integrated, where does brussels fit in? all of this stuff is putting everything in place. caroline: it will be a
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fascinating way to see how we ramp up into an electoral season. ththank you. up next, the battle of the charts. we compare two charts we have created and get behind the market trends. manus versus me. this is bloomberg. ♪
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manus: the judge is in the hou
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se. richard jones is on set. it is the battle of the charts. what is going on in the market? stocks versus sentiment. or interest, which is in the blue -- short interest, which is in the blue line. it has been declining since february of this year. down she goes. but on the counter side of that, bnp paribas is on a 10 month high. equities, is it the most unloved rally in the world? bnp paribas rises to a 10 month high. jackson hole doesn't spark an equity market rally. hole has only moved the market once, 2010. caroline: i'm going to hopefully, see you and raise you, manus. i am talking my brexit from the
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u.k. and how much the market is moving away. the correlation used to be so intertwined. this, on the top line, is how 50 performed. meanwhile, we have seen a surge on the ftse 100. the green chart below shows you that 30 day correlation between europe and the ftse 100. it is at its lowest in more than a year. brexit's fairwell correlation. britain moves away from the stock performance, manus. richard, tell us who wins. richard: well, i have to say. both of you have excellent charts. you have not made it easy for me. i love manus choosing the panic index. manus: it is the personification of my mind in a friday. [laughter]
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evocative, is very but i'm going to have to go with caroline because i am impressed with brexit and the long-term implications. manus: i object! richard: so, by a very thin margin, i choose caroline's chart. manus: caroline, he is just crawling back up here. my should we care about jackson hole? -- why should we care about jackson hole? richard: i think today is important because we have not heard much from janet yellen this year. the good folks of bloomberg intelligence have told us that outside of press conferences we have only heard from her twice this year, far below the average. we have heard so much more from other fed people. investors want to hear from the chair.
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that is why today will be as closely watched as we anticipate. caroline: have you been surprised by how hawkish we have heard some of those other fed statements hb become? we've already heard from the likes of kaplan, and some other names. there are a few things that have surprised me, caroline. one, the hawks' headlines have grabbed peoples' attention. when you read the details in the pages, it is more balanced than the headlines suggest. it looks to me like they are really trying to key up december. i think september might be one meeting too son. but the probabilities of december are edging up. manus: let's have a look at the bond market because bonds trump equities, right? deep down you believe that.
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you can't say it out loud, but i can't. bond traders are not that nervous because the bandwidth of traits on volatility is as narrow as it has been for the whole of 2016. i would maintain that the bond market is ready for a hawkish yellen. richard: i think you are right, but the bets are she will not be hawkish. she will be balanced. the headlines we have seen from other fed officials have been hawkish. manus: maybe she is getting ready for the potential to disappoint. richard: potentially, but it is all upin the air. i have read stuff that says she will be dovish, stuff that she is going to be hawkish. air.t is all up in the manus: backlash, whiplash, we will be reading all of the lashes on m monday. richard jones, thank you.
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caroline: bring on monday and of course, bring on the rest of the interviews we have for you. fed officials galore. this is bloomberg. ♪
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speech,: janet yellen but other retreats. the market awaits clues on the u.s. interest rates. investors increase the odds of a september rate hike to 32%. we've had hawkish hints from policymakers at jackson hole. gainsonsumer confidence the most in three years after a post brexit low. we will break it all down in this week's brexit show. welcome to "the pulse


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